Report from the Audit Committee

Purpose

The Audit Committee (the Committee) makes recommendations on the reporting, control and compliance aspects of the directors’ and the Group’s responsibilities, providing independent monitoring, guidance and challenge to executive management in these areas. Its aim is to ensure that high standards of corporate reporting, controls and compliance are achieved, in the belief that excellence in these areas enhances the effectiveness, and reduces the risks, of the business.

Membership

The following have been members of the Committee during the year and up to the date of this report: Mr Buchanan (chairman of the Committee), Mr Davey, Mr Joslin and Mr Mylvaganam. In addition, Lord Stewartby was a member of the Committee until his retirement from the Board on 25 May 2006.

All of the members of the Committee were at all times classified by the Board as independent. Throughout the year there have been a number of members with recent and relevant financial experience, including Mr Buchanan and Mr Joslin.

The Chairman of the Company, the Group Chief Executive and the Finance Director usually attend the Committee’s meetings, as does the head of Internal Audit and, since the role was created during 2006, the Chief Risk Officer.

At least once a year the Committee meets, both on its own and with the external auditors, without any executive management present. The Committee also meets privately with the head of Internal Audit, who has a private line of communication with the Committee Chairman.

Terms of reference

The terms of reference of the Committee, which is a joint committee of the Boards of the Company and its principal UK operating subsidiary, Audit Underwriting Limited (AUL), enable it to take an independent view of the appropriateness of the Group’s accounting policies and practices. It also considers the appointment and fees (both audit and non-audit) of the external auditors, who have unrestricted access to it, and monitors the Group’s compliance, internal control and risk management procedures. The Committee’s terms of reference, which take full account of the Smith Report on the role of audit committees, are available in the ‘Corporate Governance’ section of ‘Investor Relations’ on the Company’s website or from the Company Secretary.

Meetings

The Committee meets a minimum of four times a year. It met five times during 2006 (2005: four), when attendance by committee members was as follows:

Audit Committee attendance 2006

	Number of Committee member meetings attended
N J C Buchanan	5
R H Davey	4
R S Joslin	5
R W Mylvaganam	4
Lord Stewartby (retired 25 May 2006 – maximum possible meetings 1)	1
Average % attendance	90%

Activities

In addition to reviewing the Company’s interim and preliminary results statements and its Annual Report, the Committee reviewed and reported to the Board on: the managed syndicate’s Annual Report; the external auditors’ engagement and service plan; the plans, work undertaken and recommendations made during the year by the Group’s Internal Audit department, including reports on the systems set up in the new Amlin Bermuda Ltd business; the external auditors’ independence and the extent and reasons for them providing non-audit services (a breakdown of the fees for which is set out in note 11 to the Accounts); the Group’s ‘whistle blowing’ procedures; and other related matters. Reports were received from the external auditors in respect of each set of financial statements, highlighting the material judgemental areas, which were then discussed by the Committee with executive management and the auditors at the relevant Committee meeting.

A special meeting was held to consider AUL’s Individual Capital Assessment report prior to its submission to Lloyd’s in September 2006.

Procedures were operated throughout the year for the approval of any appointments of the external auditors (or its associated entities) to provide non-audit services. The Committee remained satisfied that the provision of such non-audit services by Deloitte & Touche LLP has not compromised the auditors’ impartiality or independence.

Details of the Committee’s role regarding internal control issues are set out in the ‘Accountability and internal control’ section of the Board corporate governance statement.

The Committee monitored the Group’s compliance with Financial Services Authority, Lloyd’s and other regulatory requirements and recommendations. Reports to the Committee included summaries of the findings of internal audit reports, enabling members of the Committee to question the executive responsible for internal audit on such reports and to monitor the measures taken by management to respond to issues raised. The Committee also considered and approved management’s proposals for a separation of the internal audit and compliance functions, which involved compliance becoming part of an expanded Risk Assessment and Monitoring department under the Chief Risk Officer, and Internal Audit becoming a stand-alone function.

During the year the Committee conducted a self-evaluation of its composition, procedures, contribution and effectiveness, the conclusions of which were agreed and reported to the Board in November 2006.

By Order of the Board, on the recommendation of its Audit Committee

C C T Pender Secretary
2 March 2007

© Copyright Amlin 2006