Chairman’s Message
We commenced the year 2011 in a position of recovery and hope, although it was well-known that economic recovery was generally weak and imbalanced. Matters seemed easier to manage in terms of tackling excessive real estate debt in the US, correcting the financial standing of countries in the Eurozone, handling the capital flow migrating to emerging economies, or improving the regulation of the financial sector. However, as the year came closer to its close, economic recovery reached a period of stagnation in many developed economies, and some investors discovered the repercussions of a possible disintegration of the Eurozone that would make matters much worse than they were in 2008. As such, international stock markets lost around US$ 6.3 trillion in 2011, while talk of a financial crisis in the Eurozone echoed in the second half of the year, raising questions about the future of the world’s youngest common currency. The capital value of international stock markets dropped 12.1% to US$ 45.7 trillion, and the euro ended the year with the worse performance among the leading currencies after it began surrendering to the continent’s economic and financial problems in December. The euro had shown resilience throughout most of the year, disappointing hedge funds that had placed their bets on a sharper drop. However, it dropped to its lowest level in ten years against the yen and came close to its lowest level against the US dollar last year. Although the ‘S&P 500’ index remained stable in the past year, the ‘FTSE 100’ index fell 5.5% and the ‘FTSEurofirst 300’ index grouping Europe’s largest companies shed 11% due to losses in French and Italian shares. The ‘Morgan Stanley’ index for the five emerging markets also showed a drop, despite the strong growth in China and other emerging markets, while the Asian markets suffered the greatest blow after the Japanese ‘Nikkei’ index lost 17.3% throughout the year, the ‘Hang Seng’ index in Hong Kong lost 20%, and the Chinese ‘Shanghai’ stock exchange index lost 22%. Meanwhile, the German ‘DAX’ index saw losses of 15.4%, and in Paris, the ‘CAC’ index saw a drop of 17.8%. The two main indices trading in the Russian ruble and the US dollar fell 17% and 22% respectively. In the main European stock markets, the British ‘Financial Times’ index closed for the year with a loss of 5.7%.
In the Arabian Gulf, 2011 trading closed at Kuwait Stock Exchange (KSE) after outstanding events that led to record numbers that KSE had not witnessed in ten years, with the general index dropping to 5764 points, the lowest since August 2004 with loss of 16.4%. The overall value of daily trade dropped to KD 4.2 million in August, and by the end of year the capital value of KSE-listed companies came to KD 29.4 billion, at a drop of KD 7 billion or 19.2% from the previous year. KSE performance of the year could be described as one of great action for speculations, synchronizing with an absence of investment activity given the local and international pressures.
In financial markets of the member states of the Gulf Cooperation Council, the Bahrain Stock Exchange saw a sharp drop of 20.15%, followed by the Dubai Financial Market which shed 17%. The Muscat Securities Market fell 15.6%, while the Abu Dhabi Securities Exchange and the Saudi Stock Exchange lost 11.68% and 3.06% respectively. The Qatar Stock Exchange took a different track and registered a record increase at the beginning of the year after winning the bid as host for the World Cup 2022, and its index ended the year with an increase of 1.12%.
As for countries affected by the Arab Spring, the Egyptian Exchange closed the final trading session of the Revolution Year with capital losses of EGP 194.4 billion (US$ 32.24 billion), with its main index losing 49.3% amidst an unclear view of Egypt’s political and economic outlook after the January 25 revolution.
In terms of precious metals and oil, the price of gold ended the year with a gain of 10%, continuing its upward trend for the 11th consecutive year as demand for precious metals continued from investors who viewed precious metals as a safe investment. Given the European debt crisis and concerns over global growth, gold emerged as one of the best players in the basic commodities market. On the other hand, silver ended the year with its first loss in three years, dropping 9.5% after its price had almost doubled in 2010. Long-term contracts for US oil ended the year with a gain of US$ 7.45 or 8.2%, making this its third consecutive year on the upward trend, although the gains in 2010 came to 15%.
Meanwhile, the year saw some devastating natural disasters. An earthquake measuring 8.9 on the Richter scale shook the eastern coasts of Japan on March 11, 2011, triggering a tsunami in the Pacific Ocean. The destructive force left more than 1000 people dead or missing. The Sendai Airport was destructed, and the highest level of property damages was reported, where the infrastructure of oil and nuclear plants sustained damages and halted operations. A nuclear plant close to the area hit by the earthquake was closed down. The earthquake is the strongest to hit Japan since these natural disasters began being recorded 140 years ago.
For GIC, the year 2011 came to build on the achievements of previous years, bringing positive impact on the company’s track record and its results. Some of the developments of 2011 are:
Continuing to place emphasis on training by organizing training courses for employees in order to hone their technical, administrative and marketing skills
Improving GIC’s Standard & Poor’s rating to BBB+ with Positive Outlook, instead of Stable Outlook
Obtaining financial and credit ratings from A.M. Best – the international ratings company – as follows:
- GIC (Parent) A-, Stable Outlook
- BKIC A-, Stable Outlook
- GLIC A-, Stable Outlook
- AMIG B++, Stable Outlook
- AOIC B++, Stable Outlook
Acquiring a 51% stake in Dar Es-Salam Insurance – Iraq, thereby creating presence in the Iraqi market which has high population density and anticipated infrastructure operations Signing a contract with an international agency for placing a unified brand and corporate identity strategy for the GIC Group companies, with the aim of designing a trademark for the parent company and its subsidiaries
Restructuring the company’s investments following the best practice worldwide, thereby focusing on stable revenue tools with low risks
Our dear shareholders,
The positive results that your company has made this year clearly reflect our good achievements, namely the following:
- Growth in Gross Written Premiums by 11.8% to reach KD 133,872,324
- Growth in net technical reserves by 6.5% to reach KD 80,243,766
- Growth in underwriting results by 15.4% to reach KD 9,847,438
- Growth in the consolidated assets by 2.7% to reach KD 266,773,209
And as a result of the drop in stock market indices:
- Slide Down in net investment income by 31.6% to reach KD 2,758,479
- Slide Down in total cash & investments by 3.15% to reach KD 135,888,452
- Slide Down in shareholders' equity by 5.4% to reach KD 66,515,265
- Slide Down in net profit by 7.5% to reach KD 7,115,046
Additional details regarding company's operation during 2009 are listed here-below:
The following is a detailed look at the company’s business results in 2011.
First: Non-Life Insurance Operations
Marine and Aviation Insurance Department
Premiums written slide down by 5.3% equivalent to KD 534,127 to reach KD 9,543,783 because the fleet of Wataniya Airways was not renewed due to the halt of the company’s operations. The underwriting results of KD 1,353,688 was made, dropping by 8.5% or KD 124,962 from the previous year.Property Insurance Operations
Premiums written for property operations increased by KD 2,189,225 or 12.2% to stand at KD 20,201,180, while underwriting results came to KD 829,546 at Growth of KD 540,285 or 186.8% over the previous year.Motor Insurance Operations
Performance in Motor operations showed relative stability in 2011, with Gross Written Premiums increasing KD 148,851 or 0.5% over the previous year to stand at KD 28,583,366, recording underwriting results of KD 1,234,551. This is a drop of KD 257,594 or 17.25% from the previous year.Engineering Insurance Operations
These operations made results in 2011 that are almost equal to what was achieved in 2010, with Written Premiums coming to KD 11,389,002 with Growth of KD 3,123 from the previous year. Underwriting results increased to KD 712,922 with 28% Growth of KD 156.650 over the previous year.General Accident Insurance Operations
This showed stability during the year, with Premiums written increasing 4.2% or KD 360,860 to reach KD 8,998,247. Underwriting results increased to KD 1,971,682 at Growth of KD 148,646 or 8.2% from the previous year.Second: Life and Medical Insurance Operations
Life Insurance Operations
Gross Written Premiums increased by KD 2,212,323 to reach KD 12,760,364 compared to KD 10,548,041. However, underwriting results dropped by KD 2,572,521 or 94.1% to reach KD 162,379 due to the bad results of some contracts, which had a negative impact on these operations.Medical Insurance Operations
These operations had some positive results at all levels, as the Gross Written Premiums increased to KD 42,396,379 at Growth of KD 9,717,522 or 29.7% over the previous year. Underwriting results reached KD 3,582,670, a huge growth of 2118% or KD 3,421,163.GIC’s Financial Position and Investment Activities
The year 2011 began with the revolution in Tunisia, which ended the rule of Bin Ali and ignited Arab revolutions that followed in Egypt, Libya, Yemen and Syria. It also saw losses in Arab financial markets of approximately US$ 96 billion, including US$ 56 million suffered by the Gulf markets of which Kuwait alone lost US$ 26 billion. This was just part of the losses of the international financial markets, estimated at US$ 6.3 trillion. This is notwithstanding the financial crisis of the Eurozone and the unprecedented natural disasters of which the 8.9 quake that hit Japan was the most devastating, generating a tsunami in the Pacific Ocean and causing damages of approximately US$ 350 billion. Despite all of this, GIC’s financial postion and investment activities remained solid, where the consolidated assets increased by KD 6.4 million to reach KD 266.8 million. GIC supported policyholders rights by KD 4.9 million to reach KD 80.2 million. The drop in value of securities was of limited impact, where GIC’s investments and liquidity slide down only 3.1% to stand at KD 135.9 million, while total shareholder equity decreased slightly by 1% to reach KD 81.8 million. GIC continued to strengthen its financial Position by adding KD 752,568 to its statutory reserve, and the same amount to its voluntary reserve, so the total of both reserves being KD 31.5 million, which is equivalent to 177% of the company’s capital. GIC also continued to implement its regional expansion plans, by acquiring a 51% stake of Dar Al-Salam Insurance company - Iraq, thereby creating presence for GIC in this market.Recommendations
It is with pleasure that the Board of Directors recommend to the General Assembly for the distribution profits for the financial year which stand at KD 19,010,349 as follows:- KD 752,568 10% for statutory reserve
- KD 752,568 10% for volantry reserve
- KD 3,500,545 cash dividends to shareholders at 20 fils per share
- KD 890,663 Bonus shares to shareholders at 5 shares for every 100 shares
The remaining KD 13,114,005 is to be brought forward to the next year.
To conclude, and on behalf of the Members of the Board of Directors and the Executive Management, I would like to express sincere appreciation to H.H. the Amir, H.H. the Crown Prince, and to H.H. the Prime Minister for their wise guidance of the State towards greater advancement, prosperity and stability. We would also like to take this opportunity to congratulate you and the Kuwaiti people on the National Celebrations of Independence, Liberation and Accession to the Throne. We also express our thanks and appreciation to the Ministry of Commerce and Industry and its Department of Insurance Companies for understanding the situation of the local market and for seeking its best interests. A thank you 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 thank the Capital Markets Authority (CMA). Of course, we cannot forget to thank our great clients, 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 to achieving the targeted goals. And finally, we thank Kuwait Projects Company (Holding), our largest shareholder, and Fairfax Financial Holdings Limited, our second largest shareholder, for their constant cooperation and support. We hope that 2012 will see the achievement of the goals for which we aspire.
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