Letter from the Chairman

Dear Shareholder

I am pleased to present the Audit Committee report for the year ended 31 December 2014. This year’s report focuses on the work of the Committee during 2014 including the significant accounting issues considered by the Committee which are set out in the Significant accounting issues section.

The Committee is a senior Board committee and has ‘third line’ governance responsibilities which include the oversight of financial disclosures and corporate reporting. The primary responsibility of the Committee is to assist the Board in discharging its responsibilities with regards to monitoring the integrity of the group’s financial statements, the effectiveness of the internal control (including financial control) framework and the independence and objectivity of the internal and external auditors. As a Committee, we are also responsible for advising the Board on whether the annual report and accounts, taken as a whole, is fair, balanced and understandable and these considerations have been factored in to our year-end processes.

There have been a number of changes to the Committee’s composition during the year with the retirement of Mike Fairey and the appointments of Olaf Swantee and Liz Zlatkus adding important operational and financial experience. Maintaining a strong degree of financial literacy is a key consideration when appointing members.

All members of the Committee are independent non-executive directors and I am pleased to report that the Board and Committee’s own evaluations during the year found that the Committee has the knowledge and skills to effectively fulfil its responsibilities and that its performance during the year was effective.

Membership of the Committee is set out in the table below.



Julia Wilson

Committee member since 9 November 2011, Chair since 22 May 2013

Lindsay Tomlinson

Committee member since 31 July 2013

Lizabeth Zlatkus

Committee member since 1 May 2014

Olaf Swantee

Committee member since 8 December 2014

Other attendees at Committee meetings include: the group Chairman, group chief executive, group chief financial officer, group chief risk officer, group financial controller, group chief internal auditor, UK actuary and representatives of the external auditor, PricewaterhouseCoopers LLP.

During 2014, the Committee met five times and our time was split between interim and year-end financial reporting, monitoring and reviewing internal control procedures and reviewing the effectiveness and work of both the internal and external audit functions. Another major focus of the Committee this year has been the new disclosures in relation to economic capital and the Committee has worked closely with the Group Risk Committee in reviewing the risk-based capital model and the proposed disclosure.

The information on the following pages sets out in detail the activities of the Committee over the course of the year and I trust that you will find this report useful in understanding our work.

Signature Julia Wilson, Chairman of the Audit Committee (handwriting)

Julia Wilson