Report of the Board Of Directors

The Board of Directors is pleased to present the 23rd Annual Report of the company together with the financial statements for the year ended 31st December, 1999.

No significant change had affected the insurance market in Bahrain during 1999 as compared to 1998, except for the merger that took place at the beginning of the year between the National Insurance Company and the Bahrain Insurance Company. The number of the insurance companies operating in the market remained unchanged.

Seven direct insurance companies are presently active in the Bahrain market together with ten branches or offices of Non-Bahraini companies and twenty-one insurance intermediaries taking the form of either individual proprietors or local and mixed companies. This prevailing market condition has resulted in high competition, leading to the deterioration of the rates to below technically acceptable levels. This situation can clearly be felt in the decrease of premium of the big business, mainly in aviation, due to the big underwriting capacity offered by the international markets, subsequent to the mergers and acquisitions that have taken place among the reinsurance companies and the brokers.

On the other hand, the economic and financial markets of the states of the Gulf Cooperation Council and the World markets in general are predisposed to witness an increase in their growth due to the realized increase in the oil prices during the second half of 1999. Consequently, it is expected that this growth will positively affect the economies of this region during the year 2000, which will also reflect positively on the local insurance markets of the region.

On the global scale, the recuperation of the Far-Eastern markets is a tangible sign. However, since the launch of the unified currency whose parity to the US dollars is still fluctuating, the European financial markets have experienced limited growth. This situation combined with stagnant interest rates on the bank deposits, gave the Board of Directors good reasons to divert a part of the portfolio to invest in bonds and investment funds within a calculated plan by which each investment offer is scrutinized separately restricting their action to the medium size risks to secure investments opportunities.

The Company continued to develop its market position and performance by utilizing all available tools such as improving the customer service. The company also continued, in cooperation with ARIG, to develop the medical insurance market in Bahrain. We have now established a web site on the Internet where the terms and conditions of insurance policies can be obtained.

Despite the many challenges faced by the Company, it is encouraging to note that the company has achieved a better result during 1999 than during the previous year 1998. The termination of cooperation between the national companies on the insurance of Government business, consequent to the merger of the National Insurance Co. and Bahrain Insurance Co., although resulted in decrease in gross premium underwritten, the profitability has actually increased. The net profit for the year stands at BD 408,075 which translates to 28 fils per share for the year 1999 as compared to BD 378,094 which translates to 26 fils per share for the year 1998. The shareholders equity has increased from BD 2,008,478 as at 31st December 1998 to BD 2,401,553 as at 31st December 1999.

The termination of agreement between the national companies to share the Government business has resulted in loss of gross premium of BD 636,328 and a consequent loss of the commission related thereto. Nevertheless, the company was able to compensate for that loss as the net operation income amounted to BD 344,787 for the year 1999, as against BD 269,444 for the year 1998. On the investment side, the credit goes to the Executive Committee whose supervision has lead to the improved income from investments of BD 356,571 for the year 1999, as against BD 312,782 for the year 1998 an increase of BD 43,789. Your company was holding a 25% share of the equity in Al Ahlia Saudi Insurance and Reinsurance Co., which was under runoff supervised by the management of your company. The said investment was fully provided for as lost over the past several years. The liquidation of this company has resulted in a final distribution of BD 114,991 received as your companys share, shown as income for this year.

Despite the decline in gross written premium, for the reason stated above, from BD 3,218,177 for the year 1998 to BD 2,576,845 for the year 1999, the net retained premium has actually increased from BD 762,196 for the year 1998 to BD 906,560 for the year 1999. The net claims incurred has also improved from BD 614,258 for the year 1998 to BD 590,184 for the year 1999, as did the loss ratio from 78% for the year 1998 to 71% for the year 1999. The management expenses together with general and administration expenses have declined from BD 679,614 for the year 1998 to BD 659,637 for the year 1999. This includes additional expenditure needed for the new computer.

The company continues to keep its focus on training of its Bahraini employees by enrolling them to the various professional courses run by the insurance department of the Bahrain Institute for Banking and Finance, and enabled many to obtain their Advanced Diploma in Insurance. The Bahrainization of the workforce has now reached 54% of the technical and managerial cadre.

The retained profits of BD 26,485 from the previous year together with the current years profits of BD 408,075, a sum of BD 434,560 is available for distribution, which the Board of Directors recommend to be appropriated as below:

	BD
10% transferred to Statutory Reserve	40,808
Directors Remuneration	15,000
Issue of Bonus shares	360,000
Retained profits carried forward	18,752
	434,560

The Directors on behalf of the shareholders, take this opportunity to express their gratitude and appreciation to His Highness Sheikh Hamad Bin Isa Al Khalifa, the Amir of the State of Bahrain, His Highness Sheikh Khalifa Bin Salman Al Khalifa, the Prime Minister of the State of Bahrain, His Highness Sheikh Salman Bin Hamad Al Khalifa, the Crown Prince of the State of Bahrain and Commander-in-Chief of the Bahrain Defence Force and His Excellency Ali Saleh Al Saleh, the Minister of Commerce for their patronage and constant support. They also express their thanks to all the Government Ministries and Organisations, private companies, as well as the valued individual customers. They also express their thanks to all members of the management and staff for their hard work and dedication.

Taqi Mohammed Al Baharna
Chairman of the Board of Directors