In spite of the general shrinkage of most sectors of economy in the region, which includes the insurance sector as well, our company was able to record impressive results in 2009. The company is still leading the Bahraini market in terms of gross premium, even though the premium has declined by approximately 12% due to refund premium on a major project that was underwritten in Kuwait in the year 2008. The decline is partly also due to a fall in the exchange value of Kuwaiti Dinar by 7.5% in 2009. The reduction in gross premium did not, however, affect the gross earnings which showed a marked increase by approximately 14% whereas the loss ratio improved from 56% in the year 2008 to 53% in the year 2009. As a result of improvement in these two critical areas, the company has achieved a significant increase in underwriting profits by 27% from BD 3,038,966 in the year 2008 to BD 3,845,573in the year 2009.
As a result of the difficult economic situation which naturally involved the stock markets, the company’s income from investments has declined by approximately 22% as compared to that of last year. Even in the face of such a steep fall in investment income the company has registered a satisfactory increase in overall profit by 8% from BD 3,720,597 in the year 2008 to BD 4,029,223 in the year 2009.
Fire & General Accident
Gross premium of this department decreased by about 14% from BD 25,890,585 in the year 2008 to BD 22,356,940 in the year 2009 mainly due to accounting of refund premium following the cancellation of the ‘New refinery project’ in Kuwait which was insured in the year 2008. The fall is also attributable to an appreciable slowdown in contracting sector and a freeze of most developmental and infrastructure projects. Despite this fall in gross premium, the department’s gross earnings have increased from BD 4,818,120 in the year 2008 to BD 5,330,952 in the year 2009. Loss ratio of the department shows a steep fall from 58% in 2008 to 35% in 2009 which is, in large measure, due to reallocation of IBNR reserves based on the report of our actuarial consultants. These factors have resulted in a remarkable increase in underwriting profit by nearly 68%, from BD 1,531,355 in the year 2008 to BD 2,572,831 in the year 2009.
Marine
Performance of this department was severely affected by the slowdown of imports and exports. Gross premium declined by approximately 31% from BD 3,187,255 in the year 2008 to BD 2,186,786 in the year 2009 whereas the net profit decreased by 43% from BD 659,038 in the year 2008 to BD 374,017 in the year 2009.
Motor
In the context of increased frequency of accidents and the resultant claims, the company has been able to achieve a growth of 6% in the net profits from BD 848,573 in the year 2008 to BD 898,725 in the year 2009. During the year 2009 we made a comprehensive review of our pricing to gear the operations towards a reasonable underwriting profit. The gross premium income of the department increased by 6% from BD 6,903,390 in the year 2008 to BD 7,298,761 in the year 2009 and the net income from premium increased by 22% from BD 5,032,546 in the year 2008 to BD 6,161,927 in the year 2009. Net commission paid has decreased from BD 313,319 in the year 2008 to BD 237,976 in the year 2009. The reserve for IBNR was enhanced by BD 743,460 based on the report of our actuarial consultants.
Investment
Income from investments declined by approximately 22% from BD 1,234,550 in the year 2008 to BD 963,425 in the year 2009 due to low interest rates on term deposits and depleted dividend income. We have made an impairment provision of BD 308,817 to take into account the falling value of some of our investments.
Operating and General Expenses
Operating expenses show a very marginal increase of less than 1% from BD 2,764,081 in the year 2008 to BD 2,788,332 in the year 2009, as a result of continued restraint on expenses necessitated by the current state of regional economy. General expenses recorded an increase of about 41% from BD 552,919 in the year 2008 to BD 779,775 in the year 2009 principally as a result of the variation in the currency exchange rate of Kuwaiti Dinar and the provisions made for doubtful debts.
Development & Training
The company enhanced the coverage of its popular products so as to meet the changing needs of the clients. In Motor Department, Gold and Platinum covers have been introduced offering additional benefits that are not available in the standard policy. In the Fire & General Accident department, the company added ‘Emergency Assistance service’ to the Householders Comprehensive policies to differentiate our products from that of our competitors. As regards training, majority of the company’s employees have been deputed for in-house or external training courses in Insurance, Management, Accounting and Information technology.
Outlook for 2010
Forecasts from various external agencies indicate that the economies of the region should witness a slight growth in the year 2010. We expect that this growth will have a positive impact on the company’s performance. Towards the end of the year, the company has concluded, along with Gulf Insurance Company, Kuwait (holding company) and sister subsidiary companies, a combined Reinsurance treaty across all classes of business which gives us a much larger capacity, increased premium retention, and higher income. The company played a key role in steering the negotiations to obtain the best possible terms, widest coverage, minimal exclusions and several other advantages. It is hoped that this new treaty arrangement will contribute to achieving even better results in future.
In conclusion, on behalf of the executive management, I wish to recognize and thankfully acknowledge the continued support and encouragement from our business partners, shareholders, brokers and re-insurers. I would like to convey our gratitude to the Regulatory Authorities in the Kingdom of Bahrain and the State of Kuwait for their support and guidance. I would also like to thank the Chairman and members of the Board of Directors for their continued support and record my appreciation for the efforts put in by our employees at all levels to take the company forward on the path of progress.
Thank you.
Ebrahim Al Rayes
1 February 2010
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