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Insurance Australia Group to offer NZ$250M of subordinated notes

Insurance AustraliaGroup Ltd. will offer NZ$250million of unsecured subordinated notes to institutional and retailinvestors in New Zealand, with an option to increase the offering by NZ$100 millionin case of oversubscription.

The notes will have a face value and an issue price of NZ$1 eachand will mature on June 15, 2043. The interest rate will be fixed for the firstsix years, after which the rate will be a floating rate that is set at three-monthlyintervals to be equal to the margin and the applicable three-month bank bill rate.The indicative margin range will be 2.6% to 2.9% per year.

The company will announce the margin and initial interest ratebefore the opening date May 19.

Investors in the notes may also convert their holdings into companyshares if the notes are still outstanding nine years after the issue. IAG may alsoredeem the notes earlier, subject to regulatory approval.

Proceeds from the issuance will be used for general corporatepurposes.

Australia and New Zealand Banking Group Ltd. and Forsyth Barrare the joint lead managers, while Bank of New Zealand, Deutsche Craigs, MacquarieCapital (New Zealand) Ltd. and Westpac Banking Corp. were named co-managers.

As of May 6, US$1 was equivalentto NZ$1.46.