ESTUDIO ALERGOLÓGICO:

This has been my second year as Chairman of the Audit and Risk Committee (the “Committee”) and I would like to thank David Allvey, Chairman of the FLG Audit Committee (“FLG AC”), Derek Ross, Chairman of the FLG Board Risk and Compliance Committee (“BRCC”), my Committee colleagues and the hard-working finance and risk teams within ROL and FLG for their valued contribution to the work of the Committee. The terms of reference of the Committee have been approved by the Board and set out the Committee’s responsibility for supervising the integrity of the Group’s financial information and for overseeing the assessment of the adequacy of the Group’s financial controls and systems of risk management, which it assesses in line with the requirements of the UK Corporate Governance Code. All material controls,

including financial, operational, compliance controls and risk management systems fall within the Committee’s remit. The Committee’s terms of reference can be found on the Company’s website: www.resolution.gg

The composition of the Committee has not changed during the year. Committee meetings are scheduled eight times a year and additional meetings are held when necessary. For details of the number of meetings held during the year, and of directors’ attendance, see the table on page 87.

The UK Corporate Governance Code requires that at least one member of the Committee should have recent and relevant financial experience. Three members of the Committee, Phil Hodkinson, Mel Carvill and I fulfil this requirement. The terms of reference of the Committee have been approved by the Board and set out the Committee’s responsibility for supervising the integrity of the Group’s financial information and for overseeing the assessment of the adequacy of the Group’s financial controls and systems of risk management, which it assesses in line with the requirements of the UK Corporate Governance Code.

During the year, the Committee considered the following, among other matters at its meetings:

•IFRS 4 and Solvency II implementation;

•integration of the AXA UK Life Business and BHA;

•the financial and risk impact of FLG’s major outsourcing arrangements;

•setting of actuarial assumptions and bases;

•year end and half year reviews;

•reports from the Company’s auditors;

•Turnbull and FSA compliance;

•implementation of policies and internal training roll-out on the Bribery Act 2010;

•enhancing and quantifying the Group’s key financial risk appetite statements; and

•approval of various Group policies including data retention, change management, anti-financial crime and securities dealing.

The Committee meets with the Company’s auditors in private at least twice a year and, at each meeting with the auditors, there is an opportunity to address any concerns or outstanding matters not picked up at formal Committee meetings. The ROL Chief Financial Officer, ROL Chief Risk Officer and Group Internal Auditor routinely attend Committee meetings, and the FLG Chief Executive Officer, FLG Chief Financial Officer, FLG CRO, FLG Group Actuarial Director and other appropriate specialist functional heads attend meetings at my request. To further strengthen communication between the Committee, the FLG AC and the BRCC, members of the Committee regularly attend FLG AC and BRCC meetings. In addition, I have had meetings with both external and internal auditors on a regular basis. The Committee also had oversight of the processes by which the obligation of individual directors to ensure that the auditor was made aware of all relevant information in connection with its audit was satisfactorily discharged.

The Group has a policy on auditor independence including the use of the external auditor for non-audit services, which is reviewed regularly. The policy follows guidance, published by the Auditing Practices Board, on the acceptance of non-audit work by audit firms to address the risks, actual or perceived, to the independence of auditors. The policy specifies a number of permissible services which include due diligence associated with acquisitions, disposals and securitisations, control and assurance reviews and actuarial assistance. Notwithstanding the service being a permissible one, consideration is given to the skills and experience of the audit firm and whether these characteristics make the firm the most suitable supplier, as well as the nature of the work and the potential fee in relation to the total audit fee. All non-audit fees are subject to approval by the Chairman of the FLG AC, me as Committee chairman, or the Committee as a whole, depending on the level of the fee.

Corporate governance report continued

Fees paid to the auditor for audit related and non-audit related services are analysed in note 7b on page 139. The main non-audit related services provided by the Company’s auditor during the year were in respect of due diligence work for potential acquisitions and services as reporting accountants. The auditor was considered to be best placed to provide these services. The nature and level of all services provided by the external auditor is a factor taken into account by the Committee when it reviews the independence of the external auditor. The Company is committed to creating a culture of openness where all employees within the Group are able to communicate concerns freely, without fear of detrimental treatment. The framework for this mandate is contained within a whistleblowing policy which sets out the mechanism for implementation and reporting. This policy falls within the remit of the Committee. The Company has appointed an independent third party who will initially document any concerns raised in complete confidence. The individual can also report directly to specified personnel within the Group, should they feel that it is more appropriate. The monitoring of compliance with this policy has been delegated to ROL.

The Committee confirms that it received sufficient, reliable and timely information from management to enable it to fulfil its responsibilities. A member of the Committee will be available at the AGM to respond to any shareholder questions

on its activities.

Tim Wade

Chairman of the Audit and Risk Committee 26 March 2012

Overview

Business r

eview

Gover

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IFRS financial statements

MCEV financial statements