Chairman’s Message

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Dear Shareholders,
Challenges and Indicators On behalf of the Board of Directors of the Group, I would like to welcome you and to express my pleasure to present to you the 52nd annual report of the Group which includes an overview of the most important achievements, local and global significant events that the Group’s operations was affected by it during the financial year ended December 31, 2015. Year 2015 was a hard year for investors in all fields , emerging markets equity and its currencies were at its worst and developed markets equity were not better off, and the same with commodity markets that overshadowed by the sharp and persistent decline in oil prices. Alone, the US dollar index benefited from the markets awaited to raise the US interest rate which was achieved in December 16, 2015. The US dollar ended the year 2015 on a gain of more than 9% against a basket of major currencies.
2015 departed, leaving behind some changes and severe losses in Kuwait’s Stock Exchange index; notably the capital value losses with 12% which settled at 26.2 Billion KD compared with 29.7 Billion KD at end of 2014. The three indexes recorded sharp declines during a difficult year for Kuwait Financial Market while the most important index which measures the performance of the top 15 Kuwaiti Listed Companies in terms of liquidity and market capitalization declined with 15% achieving losses with 160 points to settle at 900 points (100 points less than the level of index launched in May 2013) and the weighted index declined with 13% with losses of 57 points and settling at 381 points retreating from 438 points and speculative momentum is no longer the market driver as in the past since the price index declined with 14% and settled at level of 5,615 points falling from 6,535 points with losses of 920 points, considering the liquidity that realistically reflects the market’s performance; it declined in 2015 with 36% reaching 3.9 Billion KD declining from 6.1 Billion KD. Several factors have combined with each other and resulted into these sharp declines in stock market indices, most notably:

  • Kuwaiti oil barrel declined with 46% during 2015, where the barrel began in the range of $ 50 and ended at the range of $ 27.
  • Optional withdrawal for many Kuwaiti companies from the Kuwait Stock Exchange.
  • Kuwait’s Central Bank decision of raising the discount rate for Kuwaiti Dinar from 2% to 2.25% with increase of 25bps, which came quickly following the decision of US Federal Reserve.


GCC market’s performance were not better than Kuwait’s market during 2015, where the Saudi market closed at level of 6,859 points decline alling with 17.7% and with decline in trading values with 20%, Qatar market also declined with 14.95% and with decline in trading values with 50%, Bahrain market settled at level of 1,216 points decline with 14.8% but with increase in trading values with 253%, Muscat market ended year 2015 at level of 5,406 points with decline of 14.8% but trading values increased with 286%, and in Dubai the market index achieved 3,151 points with decline of 16.5% and trading values increased with 232%, Abu Dhabi index recorded the lowest index decline with decline of 5.1% where it settled at 4,297 points but the trading values increased with 248%. The Arab Monetary Fund has announced in the monitoring of performance of the Arab stock markets in 2015 that these markets together lost about 143.6 billion dollars of their market value, which represents 12% of this value to arrive at the end of December 2015 to 1059.5 billion dollars, and the decline in world oil prices was the most prominent factor in the decline in the performance of Arab stock markets during 2015, especially in the oil-exporting Arab countries. With regard to precious metals; investors showed interest in selling the yellow metal, which decline with 10% this year due to fears that the raise of US interest rates might decrease the attractiveness of gold, which does not generate interest, and other precious metals have been affected from the strength of the dollar and the decline in the gold prices where silver ended the year with decline around 11%, while platinum tended to decline 27% to record its worst annual performance since 2008 and palladium was the worst performer among precious metals with annual losses of up to 31%.



Absolute Commitment To The Regulatory Requirements and Legislation


2015 witnessed the release of a number of laws and resolutions that are closely related to our business, summarized as follows:-

  • Law No. (22) of 2015 amending some provisions of Law No. (7) of 2010 on the establishment of the Capital Markets Authority and regulating the activity of the securities dated 04/05/2015.
  • Resolution No. (72) for the year 2015 concerning the issuance of the executive regulations of Law No. (7) of 2010 on the establishment of the Capital Markets Authority and regulating the activity of securities.
  • Decree No. (78) for the year 2015 issuing the executive regulations of Law No. (116) for the year 2014 on the partnership between the public and private sectors.
  • Ministerial Decree No. (48) for the year 2015 on the initial guiding instructions to apply the requirements of the law, “FATCA” in Kuwait.
  • Law (109) for the year 2015 to approve the agreement between the Government of the State of Kuwait and the Government of the United States to improve international tax compliance and the application of tax compliance for foreign accounts Law “FATCA”.
  • Law No. (63) for the year 2015 on combating Information Technology Crimes.
  • Tender No. 16/2015/2016 concerning providing health insurance coverage for retired citizens in accordance with law No. (114) for the year 2014.
  • Ministerial Decree No. (149) for the year 2015 concerning organizing the profession of insurance brokers, reinsurance brokers and insurance agents.
  • Ministerial Decree No. (158) for the year 2015 concerning branches of foreign insurance companies.
  • Ministerial Decree No. (1767) of 2015 concerning the amendment of some provisions of Ministerial Decree No.(1976/81) with executive regulations for traffic law and its amendments.

Stability and Expansion

Regarding the events and developments in the Group, the year 2015 was as an extension of previous years full of achievements which can be summarized as follows:-

  • Continuing our interest in regional expansions by acquiring 49% of the Algerian General Insurance , 2A’s Share Capital where its Share Capital amounted 2 billion Algerian Dinars.
  • Strengthen the capital of subsidiaries and affiliates of our Group where the share capital of Buruj Cooperative Insurance Company raised from 130 million Saudi Riyals to 250 million Saudi Riyals, and increasing the share capital of Arab Misr Insurance Group by 9.375%, and increasing the share capital of Dar Es Salam Insurance Company - Iraq by 10%, which increases the capital efficiency of those companies.
  • Our subsidiary company Egyptian Life Takaful Insurance Company had obtained a credit rating from Standard & Poor’s for the first time with rating of B+ with a stable outlook, which considered an approach for all the Group companies, and by that the Egyptian Life Takaful Insurance Company joins each of Bahrain Kuwait Insurance Company, Arab Orient Insurance Company, Gulf Insurance and Reinsurance Company and Arab Misr Insurance Group in obtaining a rating from international agencies.
  • Starting in the fourth program to prepare future leaders where there are now thirteen Kuwaitis holders of modern higher qualifications in various fields needed by the group and currently engaged in specialized training courses to qualify these young people in a scientific manner to participate in the technical, financial and administrative Group’s operation.
  • The Group’s bid has been accepted in the tender related to providing health insurance for retired citizens in accordance with law No. (114) for the year 2014.
  • Achieving double growth rates according to our expectations where net underwriting income increased 44.1%, and net profit increased by 17.4% ..... etc.
  • Tender No. 16/2015/2016 concerning providing health insurance coverage for retired citizens in accordance with law No. (114) for the year 2014.
  • Ministerial Decree No. (149) for the year 2015 concerning organizing the profession of insurance brokers, reinsurance brokers and insurance agents.
  • Ministerial Decree No. (158) for the year 2015 concerning branches of foreign insurance companies.
  • Ministerial Decree No. (1767) of 2015 concerning the amendment of some provisions of Ministerial Decree No.(1976/81) with executive regulations for traffic law and its amendments.

Positive and strong results


The positive financial results achieved by your Group this year demonstrates unequivocally good achievements, which were represented as follows:-

  • 7.1 % Growth in written premiums to reach KD 185,916,313
  • 10.8 % Growth in earned premiums to reach KD 99,544,445
  • 44.1% Growth in net underwriting income to reach KD 12,312,571
  • 6.4% Growth in shareholders’ equity to reach KD 89,582,977
  • 5.5% Growth in net technical reserves to reach KD 112,678,013
  • 6.1 % Growth in total assets to reach KD 368,424,457
  • 17.4 % Growth in net profit to reach KD 14,089,207


The following are additional details of the Group’s financial results during year 2015:

First: Non-Life Insurance Operations:


Marine and Aviation Operations

Gross written premiums increased from KD 8,491,058 to KD 8,787,667 with KD 296,609 despite the drop in oil prices and the shrinking in international trading activity but the net profit was affected with the intense competition between companies and decreased with 9.7% and amount of KD 194,987 to reach KD 1,821,123.


Motor Operations

A significant improvement occurs to the motor business both in terms of premiums written which increased from KD 37,871,945 to KD 42,624,770 and in the amount of KD 4,752,825 and 12.5% growth rate, as well as with respect to profitability which sharply increased from KD 170,706 to KD 1,904,802 amounted KD 1,734,096 with a rate of 1015.8%, and we hope to continue our well performance in this important type of insurance.


Property Operations

Although premiums written increased in a limited way from KD 24,210,975 to KD 24,779,026 amounted KD 568,051 and by a limited growth rate of 2.3%, however, the net underwriting profit significantly increased from KD 490,449 to KD 916.196 amounted KD 425.747 and growth rate of 86.8%.


Contracting and Engineering Operations

This branch realized acceptable increase in both written premiums which increased from KD 11,855,667 to KD 13,818,369 and in the amount of KD 1,962,702 and rate of 16.6%, and net underwriting profit which increased from KD 614,456 to KD 740,223 and in the amount of KD 125,767 KD and rate of 20.5%.


General Accident Operations

This branch continued to achieve good growth rates, where premiums written increased from KD 12,035,773 to KD 12,809,921 amounted KD 774,148 at the rate of 6.4%, while net underwriting profit increased from KD 2,509,048 to KD 2,939,582 amounted KD 430,534 with growth rate of 17.2% compared to the previous year.


Second: Life and Medical Operations:


Life Operations

This line of business achieved growth in both premiums volume and underwriting profits where premiums increased from KD 18,917,511 to KD 19,786,622 amounted KD 869,111 and rate of 4.6% and net underwriting profits increased from KD 352,696 to KD 828,703 amounted KD 476,007 and rate of 135%.


Medical Operations

This dynamic and promising line of business achieved a significant increase in written premiums, which increased sharply from KD 60,219,426 to KD 63,309,938 amounted KD 3,090,512 and rate of 5.1%, as net underwriting profits increased from KD 2,391,559 to KD 3,161,942 amounted KD 770,383 and rate of 32.2%, after the improvement in the loss ratio for this line of business to reach 82% compared to 85.6% for the previous year.


GIG Financial Position and Investment Activities

By looking at the Group’s financial position in the end of year 2015, we can notice the following:-

  • Increase in the Group’s assets with amount of KD 21 ,205,126 and rate of 6.1%.
  • Increase in total investments and cash with amount of KD 2 ,279,734 and rate of 1.1%.
  • Increase in total equity with amount of KD 9,151,478 and rate of 9%.
  • Increase in shareholder’s equity with amount of KD 5 ,403,503 and rate of 6.4%.
  • Increase in the banks overdraft with amount of KD 4 ,849,565 and rate of 22.5%.
  • Increase in premiums received in advance with amount of KD 3,184,987 and rate of 418.3%.
  • Strengthen the technical reserves with amount of KD 5 ,895,359 and rate of 5.5%.

Overall, these are positive indicators showing the strength of the financial position of the Group.

With regard to investment activity and despite the sharp declines in the Arab and international capital markets this year, the group achieved a net investment income of KD 12,124,652, compared to KD 11,641,181 with an increase of KD 483,471 and rate of 4.2%, while the value of the investment portfolio reached KD 214,746,352 of which 57.1% bonds, cash and deposits with banks. Bank overdrafts reached KD 26,381,565 representing 23.75% of the total equity and 12.25% of the total investments, we should also note that the group continued to deduct 10% of the profit for the year to maximize statutory reserve and voluntary reserve which totaling as of 31/12/2015 KD 41,101,565 which is equivalent to 219.75% of the share capital (99.3% statutory reserve, 120.45% voluntary reserve).

Governance and Risk Management Cultur

There is no doubt that the success of Gulf Insurance Group in facing local and regional challenges, reflects the effectiveness of corporate governance and risk management applications adopted by the Group. Conservative policy pursued by Gulf Insurance Group and its wise management toward risks and strict corporate governance standards has led to protect the group from the repercussions of the political, economic and social developments. The principles of transparency, justice and responsibility remains on our top priority

The Board of Directors & The Executive Management

  • The board of directors consists of ten board members…… and the board of directors have five committees initiated from it, Board Executive and Investment Committee, Board Audit Committee, Board Risk Committee, Board Corporate Governance Committee and Board Nomination & Remuneration Committee.
  • The board of directors member’s remuneration for this year is KD 155,000 (2014: KD 155,000).
  • The amount of salaries and other short-term benefits and end of service benefits obtained by the executive management amounted to KD 944,534 compared to KD 1,101,049 in 2014.
  • The company allocated two cars for the services related to the board.
  • The Group and any of its subsidiaries were not imposed to any sanctions from the supervising authorities during the year 2015.

Recommendations and Suggestions

It is the pleasure of Board of Directors to recommend to your esteemed General Assembly to distribute the available profits for the financial year amounted in KD 36,160,907 in the following manner:KD 1,492,163 10 % for the statutory Reserve. KD 1,492,163 10% for the voluntary Reserve. KD 7,163,932 40% of the Share Capital as cash dividends 33% in previous year) taking into consideration the number of treasury shares at the time of the general assembly. The remaining amount KD 26,012,649 is to be retained forward to the next year.

Thanks and Appreciation at the end, and on behalf of the Members of the Board of Directors and its Executive Management, we would like to express our sincere appreciation to his highness the Amir, the Crown Prince, and to his highness the Prime Minister to their wise guidance of the state towards greater advancement, prosperity and stability. We would like also to take this opportunity to congratulate you and the Kuwaiti people on the National Celebrations of Independence and Liberation. We also would like to express our deepest appreciation to the Ministry of Commerce and Industry and its Department of Insurance Companies for their understanding to the situation of the local market and for seeking its best interests.

A thank also goes to the Ministry of Interior represented by the General Traffic Department for their constant efforts to improve the compulsory traffic accident insurance sector. We also would like to thank the Capital Markets Authority (CMA), of course, we also would like to deeply thank and appreciate our distinguished clients and as well as local and international reinsurers and insurance brokers for giving us their trust and constant support and cooperation. We also thank our management and employees for their great effort and dedication which contributed in achieving the targeted goals, and finally we thank Kuwait Projects Company (Holding), our largest shareholder and Fairfax Financial Holding Limited, our second largest shareholder for their constant cooperation and support. We hope that 2016 will see the achievement of the goals for which we aspire.

May peace and Allah’s mercy and blessings.

Farqad A. Al-Sane