Report of the Board Of Directors

The Board of Directors is pleased to present the 24th Annual Report of the company together with the Balance Sheet and the Statement of Income for the year ended 31st December, 2000.

Since it was entrusted to take charge and responsibilities of the management of the company, the new Board of Directors has focused on two main tasks:

First: to review the structure of the company in so far it meets the requirements of the industry, as well as to prepare it for the upcoming amendments in the insurance companies' law, currently undertaken by the ministry of Commerce.

Second: to enhance the relations with the insurance companies working in the Bahraini market, especially with our strategic partner, ARIG Life & General. The collaboration with which has resulted in establishing a medical and life insurance department in Al Ahlia, and designing programs of co-operation to market the life and medical products.

To comply with what is expected as amendments to the insurance companies' law, the Board of Directors is pursuing the policy adopted since 1997, to transfer the profits of each year to the Share Capital, so that it will meet the requirements of the law, once operative. Nevertheless, as a parallel plan in case we are not able to meet those requirement on time, the Board has explored possibilities of merger with another national company. This endeavor is continuing and any progress will be put before yourselves for appropriate decision.

With regards to restructuring the company and reinforcing it with qualified staff, the Board of Directors issued the necessary instruction to reshape the departments, re-distribute the responsibilities, reinforce the role of the Bahraini employees, as well as the revision of the internal rules and regulation wherever needed.

The number of national companies has increased during the year, by the formation of the Bahrain National Life Insurance Company, thus increasing the number to 10. Whereas, number of foreign companies has been reduced to 9, as one office stopped operations and transferred its portfolio to another company.

Competition in the market is continuing to further reduce the premium rates, which have reached a technically unacceptable levels. Low rates are seen by some to be for the benefit of the Insured. Whereas, they actually have negative impact on the quality of services provided by the companies, as they will prevent the recruitment of more employees, prejudice the program of Bahrainization and the spreading of awareness.

The number of brokers working on commission basis remained unchanged. Undoubtedly the presence of Brokers in the market is beneficial for the spreading of insurance awareness, and adding value to services provided by the insurance company, to their clients. However, their work should always be within the sound financial and professional guidelines, which are under consideration by the Bahrain Insurance Association.

The re-insurance market is experiencing a period of large excess in capacity that increased the competition in the market. Excepting Aviation insurance terms which have hardened due to the increase in accidents and heavy claims, the other risks are easily accepted regardless of the low rates applied.

As for local economy's performance, it is with regret to state that there was a stagnation and the prices in the stock market plunged, which necessitated the creation of a special provision in compliance with the accounting standards.

The gradual decrease in rates of interest by the end of the year which is likely to continue this year, will make the Board of Directors to reconsider its current investment policy, and look towards other instruments and markets where investments have better yield, and enjoy more stability.

Despite the unhealthy environment, your company continued to improve its performance and services, reinforce its position within the market, thereby achieving a profit of BD 418,415 for the year 2000 as against BD 408,075 achieved in the previous year. The Shareholders' equity increased from BD 2,401,553 to BD 2,797,968.

Though the total premium written during the year has shown a slight reduction of 2.8% over the previous year, yet the retained premium has increased from BD 906,560 to BD 1,018,682 or 12.3%. The net commission earned increased from BD 278,998 to BD 290,908 or 4.3%, and the ratio between net claims to net earnings has also improved from 71.3% in 1999 to 63.9% in 2000. However, the general and administration expenses together with the management expenses increased from BD 659,637 to BD 695,096 or 5.4%, which is mainly due to the studies made to explore avenues of increasing the capital, as well as the normal increases in the payroll.

As for the underwriting departments' net Technical Profit which is prior to making any account for the corporate expenses, I am pleased to report that the following results have been achieved: BD 159,174 in Fire & General Accident Dept; BD 67,145 in the Marine & Aviation, BD 173,979 in the Motor, and BD 3,789 in the newly established Medical and Life Dept.

The Board of Directors put special emphasis on the training of the Bahraini employees, by enrolling them in the various professional courses run by the Bahrain Institute for Banking and Finance. The Board of Directors was eager as and when possible to replace the non-Bahraini employees by Bahrainies of same qualification. The Bahrainization program continues.

The Board of Directors proposes to add BD 281,589 from the share premium account retained since 1982 to the profit of this year. The funds that can be transferred to the capital become BD 718,756 detained as follows:

	BD
Profit of the year:	418,415
Retained earnings from 1999	1999 18,752
Added from the share premium account	281,589
Total:	718,756

The Board of Directors proposes to a distribution of these funds as follows:

	BD
0% of the profit to transfer to the statutory reserve:	141,842
Director's remuneration:	22,000
Issue of bonus shares:	600,000
Retained earnings carried forward:	54,914
Total:	718,756

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 Organizations, 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.

Abdullatif M. Sharif Al Rayes
Chairman