THE IIA IN SPAIN. IMPLEMENTING AN EFFICIENT AND EFFECTIVE INTERNAL

AUDIT FUNCTIONMalta – October 26th , 2011

MFIAMalta Forum for Internal Auditors

I. The IIA in Spain

II. Key factor for implementing an efficient and effective Internal Audit function

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I.The IIA in Spain

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2011…IIA SPAIN AT A GLANCE

Members:- 2.500 members- 185 corporate members

Integrated and aligned with IIA Global:- 9th Institute in the world- 5th Institute in Europe- One Spanish member on IIA Board

Founded in 1983

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OUR MEMBERS OUR CORE VALUE

Public Sector 5% Banking &

Financial Services 26%

Insurance 15%

Telecom 7%

Retail& Consumer 6%

Energy& Utilities 8%

Construction & Infraestructures 8%

Consultancy Services 8%

Pharmaceutical Quemicals 3%

Others 11%

Transports 11%

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Excellence Institute Management

Profession´s voice and reference

Continuous improvement of products

and services

Strengthening membership and profession

HOW WE WORK – OUR STRATEGIC PLAN

Service to members

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Our services

Know How

Know Who

CertificationsTechnical PublicationsWeb Site

SeminarsAnnual ConferenceChief Audit Executives MeetingsIndustries MeetingsBreakfast Meetings

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OUR SERVICES

KNOW HOW

Certificacions to improve the profession:

- Certified Internal Auditor CIA 500 CIAs in Spain

- Quality assesment QA 40 IA departments in Spain

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PUBLICATIONS Pure Know How helps Know who. We use it to enhance networking among members through special meetings at which we introduce the new publications.

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OUR SERVICES

• One of our main missions, to improve professionalism

• Helps to share values• Helps members in their ethical

commitment of keeping updated.• More than 50 seminars of 5 to 37 hours

Meet the two expectations: know how & know who

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EventsMeet the two expectations:

know how & know who

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ADVOCACY EFFORTS• May 2006: Unified Code, issued by the Spanish Market

Regulator• Comply or explain• Existance of an internal audit function• Internal auditor defined as Top Management

• Since May 2009, IIA members participate actively in the TASK FORCE crreated by the Spanish Market Regulator for internal control over finantial reporting

• IIA Spain received by His Majesty the king of Spain Juan Carlos I

• IIA Spain to organize European Conference 2011

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II.Key factor for implementing an efficient and effective Internal Audit function

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(1) Non financial entities (car dealerships, retail chains, etc,)

SPAIN OTHER COUNTRIES TOTAL

NUMBER OF COUNTRIES

EMPLOYEES

MAPFRE NETWORK

BANK BRANCHES

DISTRIBUTION AGREEMENTS(1)

BROKERS

1 42 43

16,680

20,064 36,744

3,226 2,125 5,351

1,201 6,1244,923

819 1,057 1,876

22,326 47,649 69,975

INTERNATIONAL PRESENCE

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(1) Includes: Life technical reserves, mutual and pension funds(2) Includes minority interests

2010 2009

CONSOLIDATED REVENUES 20,470,8 18,830,4

FUNDS UNDER MANAGEMENT (1) 28,118,6 24,130,5

GROSS RESULT 1,431,0 1,446,2

NET RESULT 933,5 926,8

TOTAL EQUITY (2) 7,795,8 7,093,8

TOTAL ASSETS 48,672,3 43,105,8

S&P RATING AA AA

Million Euros

KEY FIGURES

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Million Euros

2,323

YEAR REVENUES ASSETS GROSS RESULT EMPLOYEES

1986 434 706 251989 1,214 1,989 49 3,8691992 2,419 3,769 37 5,5281995 3,249 6,879 203 11,2921998 4,546 9,669 178 15,2192001 8,933 19,276 316 16,7562004 10,756 31,482 847 19,9202007 14,866 37,627 1,366 30,6152010 20,471 48,672 1,431 36,744

HISTORIC EVOLUTION 1986-2010

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GOVERNANCE FRAMEWORK: structure

BOARD OF DIRECTORS

Executive Committee

Delegatecommittees

Highest-ranking management and supervisory body

Coordination and supervision of strategic, operational and business affairs of MAPFRE

AUDIT

APPOINTMENTS & REMUNERATION

COMPLIANCE

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SHAREHOLDER STRUCTUREFundación MAPFRE: 64.65%BFA (CAJA MADRID): 14.99%Free Float: 20.36%

ORGANIZATIONAL CHART

HOW DOES THE INTERNAL AUDIT FUNCTION ADD VALUE TO MAPFRE?

MAPFRE S.A.

DOMESTIC INSURANCE INTERNATIONAL INSURANCE GLOBAL BUSINESSES

MAPFREFAMILIAR

MAPFRE VIDA

MAPFREEMPRESAS

MAPFREAMÉRICA

MAPFRE INTERNACIONAL

MAPFRERE

MAPFREASISTENCIA

MAPFREGLOBAL RISKS

LEGAL DEPARTMENT INTERNAL AUDIT FINANCIAL AREA INVESTMENTS RESOURCES &

PROCUREMENT TECHNOLOGIES &

PROCEDURES

91.5%

100%

100%

88.9%

100%

100%

100%

100%

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Internal Audit Organizational Chart

MAPFRE FAMILIAR

IAU

INTERNATIONAL DIRECT

INSURANCE IAS

DIRECT INSURANCE

SPAIN IAS

Internal Audit Services

MAPFRE Internal Audit General Management

MAPFRE S.A. Board of Directors

CEO

Solvency II Deputy General Manager

MAPFRE Internal Audit Vice General Manager

IT Deputy General Manager

Audit Committee

MAPFRE EMPRESAS

IAU

MAPFRE VIDA IAU

MAPFRE ARGENTINA

IAU

IT IASGLOBAL BUSINESSES IAS

MAPFRE BRAZIL IAU

MAPFRE CHILE IAU

MAPFRE COLOMBIA

IAU

MAPFRE DOMINICAN

REPUBLIC IAU

MAPFRE AMERICA

CENTRAL IAU

MAPFRE MEXICO IAU

MAPFRE PERU IAU

MAPFRE PHILIPPINES

IAU

MAPFRE PORTUGAL

IAU

MAPFRE PUERTO RICO

IAU

MAPFRE TURKEY IAU

MAPFRE USA IAU

MAPFRE VENEZUELA

IAU

MAPFRE MALTA IAU

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INTERNAL AUDIT KEYS

2. Technology 3. Proximity to business1. Training

Total of 17,640 hours (average 2008-2010)

134 Hours a year per auditor (average 2008-2010)

The IAS’s and IAU’s are located in the Units

The IAU’s Managers abroad are NATIVE

Auditm@p

Auditm@p Report

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In addition to the formal aspects such as:

proper placement in the charthaving an Audit Charteretc…

there is a need for…

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INTERNAL AUDIT POLICIESIt is advisable that Internal Auditing defines policies that should be approved by the Board of Directors and the Audit Committee, where appropriate. These policies underscore its most important asset, i.e. its human resources. They shall be as follows:

• Selection.• Training.• Career Plan. • Remuneration.• Assessment.• Talent Retention.• Investment.

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SELECTION

• The requirements necessary to be an internal auditor must be stated in writing.

• Each organization must establish its own criteria.

• In MAPFRE

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SelectiongraduatesEnglish language proficiency, written and spokenfavorable report from the Psychology Department

TRAINING

• In order to produce reliable on high quality internal audit reports, it is essential that the Internal Audit has a training policy in place:

• In MAPFRE

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Total of 17,640 hours (average 2008-2010)

134 Hours a year per auditor (average 2008-2010)

CAREER PLAN

• Internal auditors shall be classified by categories.

• In order to have certainty in their careers the internal auditors must know which is the promotion criteria established by Internal Auditing.

• Internal Auditing might become a breeding ground for future directors of other areas within the organization.

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REMUNERATION

• Closely related to the career plan policy.

• The remuneration of auditors according to the category they belong to must be reported by writing.

• In order to implement this policy, the leadership skills of the CAE will be required to convince the organization of the sustainability and need thereof.

• Benchmarking research will be also convenient.

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ASSESSMENT

• The internal audit function evaluates:the activitiesproceduresprocessescontrolssystems of governance, etc…

but it must also be subject to assessment by the rest:the audit reportsthe internal auditorsthe Chief Audit Executive

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TALENT RETENTION

• Internal Auditing

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Area from which professionals are internally demanded to take on responsabilities in management areas

In order not to decapitalize Internal Auditing

A talent retention policy should be established to avoid imbalances whenever the internal auditors rotate

INVESTMENT

• Investment policy in place in order to be at the forefront of TECHNOLOGY.

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THANK YOU