On behalf of the Board of Directors, it is my great pleasure to present to you the Annual Report of your Company for the year ended 31 December 2009.
The Gulf Arab markets have been affected to different degrees by the global economic meltdown which first became evident during the 3rd quarter of the year 2008. Our markets were also affected by frequent fluctuations in the price of crude oil. Although the effects of these factors were less severe in Bahrain and Kuwait as compared to other markets in the region, the downturn had inescapable effects on the insurance sector on operational and investment sides. The operational side of most insurance companies was severely affected due to a substantial fall of imports and exports and a slowdown in construction sector. On the investment side, the downward trend of the stock markets, the fall in profits of listed companies and low interest rates on bank deposits resulted in a fall in the investment income of the companies. Despite the situation described above, I am proud to state that your company has weathered the storm and turned out satisfactory overall results for the year 2009.
“Economic Vision 2030” launched by H.R.H. Prince Salman Bin Hamad Al Khalifa, Crown Prince of Kingdom of Bahrain, is expected to have a positive impact on the national economy. The vision aims to shift Bahrain’s economy built on oil wealth to one that is a productive, globally competitive economy. The execution of the vision is expected to benefit the insurance sector as well.
During the year 2009, your Company - in cooperation with the holding company, Gulf Insurance K.S.A. Kuwait and the sister subsidiaries - appointed a consultant to study the possibility of bringing the group companies under a unified reinsurance treaty arrangement. The goal of the study was to explore the various possibilities which would help improve volumes of retained business, improve reinsurance commission income, and achieve larger capacity to write business effective from 1 January 2010. I am hopeful that the unified treaty will have a positive effect on the company’s future performance.
Your Company has, during the year 2009, sponsored 66 candidates from within the ranks of employees to 43 Insurance, Management and Accountancy courses conducted by Bahrain Institute of Banking and Finance (BIBF). It is our firm belief that focused training would strengthen the capabilities of our employees and assist in maintaining the momentum of growth and consolidation. Bahraini nationals comprise 79% of all the employees of your company in Bahrain. In Kuwait too, our endeavour has been to employ nationals for most positions.
During the year, external actuarial consultants were engaged by your Company to carry out a comprehensive study of the Company’s technical reserves in line with the requirements of the regulators in the Kingdom of Bahrain. The report of the consultants was submitted to the regulators. Based on the recommendations of the consultants and following the directives of the Board of Directors, the company’s “Incurred But Not Reported (IBNR) claims reserves” were increased by 65% as compared to the reserves as at 31st December, 2008. The Company will continue to assess and support the reserves periodically to ensure healthy operations.
As regards the financial results, gross premium income shows a decline of 12%. This was to a large extent, caused by a major oil sector project that was insured by our Kuwait Office in the year 2008 but was called off by the principals during the year 2009. We were therefore compelled to account a substantial refund premium during the year. Notwithstanding the fall in the gross premium, I am happy to report that the net premium income has increased by 20%, and the underwriting profit has increased by 27%. Due to the factors touched upon in the second paragraph, the investment income suffered a fall by 22% largely due to additional impairment provisions that had to be made. Despite the decline of investment income, the overall net profit of the company has increased by 8%, which serves to endorse the underwriting strength of the company. Shareholders’ equity has increased from BD 24.1 million in 2008 to BD 24.4 million in 2009 while the book value per share has risen from 397 fils in 2008 to 402 fils in 2009. Earnings per share increased from 61 fils in 2008 to 66 fils in 2009 and the Current ratio shows an impressive increase from 1.888 in 2008 to 2.353 in 2009. Liquid funds recorded an increase from BD 24.2 Million in 2008 to BD 25.1 Million in 2009.
The total profit available for appropriation for the year 2009 is BD 5,758,926. The Board of Directors therefore proposes the following appropriations:
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| General reserve
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903,000
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| Proposed dividend - (22%) of the paid-up capital |
1,334,025 |
| Proposed bonus shares - (7.1944%) of the paid-up capital |
436,250 |
| Directors' remuneration |
132,000 |
| Donations |
50,000 |
| Retained earnings |
2,903,651 |
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During the year under review, an amount of BD 138,965 was paid to Directors towards remuneration, allowances and travel expenses.
I wish to express my sincere thanks and appreciation to all of you for your unstinted cooperation and support, and to our esteemed customers for their support and confidence in the Company and its services. I would like to express my sincere gratitude and appreciation to the management and staff for their continued hardwork, dedication and loyalty. I would also like to thank the broking firms and reinsurance companies for their cooperation and support.
I am thankful to His Majesty King Hamad bin Isa Al- Khalifa, the King of the Kingdom of Bahrain and His Highness Shaikh Sabah Al-Ahmed Al-Jaber Al-Sabah, the Amir of the State of Kuwait and the respective Governments, for their support and assistance to the insurance sector in both countries.
I would like to acknowledge with gratitude, the support given to our Company by all the official bodies in the Kingdom of Bahrain and the State of Kuwait. I wish to thank The Central Bank of Bahrain and Ministry of Commerce and Industry in the State of Kuwait and the Kingdom of Bahrain for their continuous support and guidance.
Thank you.
Abdulla Hassan Buhindi
1 February 2010
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