Global Research - Kuwait
Gulf Insurance Company
Omar M. El-Quqa, CFA
Executive Vice President
omar@global.com.kw
Phone No:(965) 2400551 Ext.104
Shailesh Dash, CFA
Head of Research
shaileshdash@global.com.kw
Phone No:(965) 2400551 Ext.196
Dinker G Mattam
Financial Analyst
dmattam@global.com.kw
Phone No:(965) 2400551 Ext.254
Pravin Bokade
Financial Analyst
pravin@global.com.kw
Phone No:(965) 2400551 Ext.229
Chandresh Bhatt
Financial Analyst
cbhatt@global.com.kw
Phone No:(965) 2400551 Ext.270
Research Update
Reuters Code
GINS.KW July, 2004
Listing
Kuwait Stock Exchange BUY
Current Price
500 fils
InvestmentSummary
● Gulf Insurance Company (GIC) has outperformed our projections in Jun ’02
update, owing to the higher growth in life insurance segment and higher investment
income. However, its underwriting profits were slightly lower than our projections,
due to the substantial drop in commission income. The share price has given a
compounded average return of 10.1%, since our last update, in which we had given
a buy recommendation.
● GIC is the 11th largest insurance company in Middle East, and aims at being in the
top five in a few years.
● Hardening rates for general insurance segments and high growth in the life
insurance segment helped GIC grow its premium income by 16.6% to KD31.07mn
($105.35mn) in ’03. The company outperformed industry growth for the property
segment, as it was chosen to lead the insurance policies of Kuwait Petroleum
Corporation and its subsidiaries.
● A decline in loss ratios to 47% from 53% and higher investment income in ’03 helped
the company grow its profits before extraordinary income by 59% to KD5.48mn
($18.57mn). Shareholder’s surplus in ’03 grew by an impressive 31.3% to KD53.4mn.
● However, the company was hit by lower investment income in the first quarter of
’04, as the profit grew by just 11.6% to KD1.6mn. Profitability improvement in
’03, as well as in the first quarter of ’04 was aided by an increase in retention rates.
● Going forward , we expect high growth rates in the life segment, especially in
health insurance. GIC being the leader, is expected to benefit largely from this.
● We do not expect commission rates to decline further from the current levels. This,
along with good investment environment should drive the profit growth for
companies in Kuwait.
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● Though the risk associated with the assumption of profit growth for the companies
in Kuwait is high due to high exposure to equity investments, we believe that GIC
would take adequate steps to alleviate the uncertainties, considering its past record.
● We expect the profits to grow at a CAGR of 14% in the next three years, and the
ROE to improve to 13.9% from 11.7% currently.
● The share is currently trading at a price of 500fils, which is the same level as that of
an year back. The volume of shares traded in ’03 was 23.3mn, which implies a yearly
share turnover of 20.6%. As can be seen, the stock has below average liquidity.
● The share is trading at P/BV of 1.3, which is slightly lower than the industry
average of 1.4. Insurance sector underperformed the overall market in ’03.
However, with its high dividend yield and expansion of life and health insurance,
we expect the sector to get re-rated.
● Based on the embedded value method and relative valuations, we have arrived at a
fair value of 563, which is at a premium of 12.6% to the current share price of
500fils. We maintain our ‘buy’ recommendation on the stock.

GIC at a glance
Price as on Jul 3rd, ‘04 Shares in Issue Market Cap (KD) 52-week range
(fils) (as on 3rd July ‘04)
500 113,100,000 56,550,000 450-600 fils
Premium
Year Net Profit EPS BVPS ROE P/E P/BV
income
KD’000 KD ‘000 fils fils
2005F 37,565 7,350 65.0 506.8 13.1% 7.8 1.0
2004F 34,284 6,429 56.8 487.2 11.9% 9.0 1.0
2003A 31,074 5,479 50.1 487.9 11.7% 10.8 1.1
2002A 26,657 5,003 45.7 371.1 13.1% 10.0 1.2
*Historical P/E & P/BV multiples pertain to respective year-end prices, while those for future years are based on
market price in the Kuwait Stock Exchange as on July 3rd, 2004.
Source : GIC &’Global’ Research

Share Price Performance Chart

Index GIC share price (KD) 0.7000

230

0.6000

180
0.5000

130
0.4000

80
0.3000

30 0.2000
Jun-01 Nov-01 Apr-02 Sep-02 Feb-03 Jul-03 Dec-03 May-04

General Index Insurance Index GULF INS.

Source: KSE, Global Research

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GIC’s Operational Performance Review ('03-'04)

Since the past few years, Gulf Insurance Company (GIC) had embarked on an Through its expansions
in the region, and high
expansion policy which helped it become a regional player, and compete successfully growth in the life
business, GIC aims at
with others in the Kuwaiti market. Currently, GIC has controlling stakes in two foreign being in the top five in
Middle East.
companies. It has 90% stake in Saudi Pearl Insurance Company (SPIC) incorporated in
Bahrain, and 51% stake in Fajr Al Gulf Insurance and Reinsurance Company (FGIC)
in Lebanon. FGIC had sales of around $10mn in ’03, which is expected to grow by
5-10% this year. Almost the same level of revenues are expected to be generated from
SPIC. Due to the change in legislations, GIC would be floating a new company in
Saudi Arabia, which is expected to take over the business of SPIC.

Being a regional player helped GIC consolidate its position as the leading player among
the national insurance companies in Kuwait, in terms of the premiums written. It is
currently the 11th largest in Middle East, and aims at being in the top 5 in a few years.
Lately, the business volume enhanced considerably as GIC was chosen to lead the
insurance policy of Kuwait Petroleum Corporation and all its subsidiaries. This marks an
expansion of the clientele, which already includes large companies like Kuwait Airways.

Apart from the expansion of the client base, GIC’s focus on medical insurance has a
major bearing on its growth. Medical insurance in Kuwait grew by 51% to KD8.6mn
in ’03, over the previous year. GIC is the leading private medical insurance provider in
the country. The company has its medical insurance business well-organized, and has
already developed and implemented the system of medical cards for the insured. It
expects private medical insurance to be an attractive area, and anticipates the evolution
of an organized system, with third party agents becoming a part of it. Medical
insurance, along with traditional life insurance, marks the high growth areas for the
company. In ’03, the company had around KD5mn premiums from group life
insurance policies and KD2mn from individual policies. GIC takes active care in
keeping the average age of the insured low, which is currently around 35. The
company has a sales force strength of 125 in the life and medical segment, and wrote
3,300 policies in 2003.

GIC has further expansion plans for its distribution network and manpower. The
company plans to open more branches in residential areas, and enhance servicing
through short messaging service (sms). Distribution through internet is not a focus
area, as the management does not perceive this to be an effective system, citing its lack
of success internationally. However, the management believes that GIC is way ahead
of others on the IT front. The company has tied up with Wipro, a leading IT company

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in India, for its customer service cell, which is expected to be operational soon. It also
has plans of starting a call centre. On the manpower front, the company aims at
recruiting 12-15 qualified Kuwaitis, and giving them training in different areas.
Overall, GIC has ambitious expansion plans in order to further consolidate its position
in an industry, which is still at a virgin stage in this area.

Industry

Update('03-'04)
Rates continued to harden Global scenario: Insurance industry has revived from the difficult times that it went
in ‘03, as globally,
companies faced a through in the initial years of this decade. Due to lower levels of investment returns
shortage of risk capital
compared to last decade, insurance companies faced a severe shortage of risk capital,
and in turn the ability to write more. This capacity shortage coupled with robust
demand resulted in an increase in rates over the last two years.

Substantial improvement in rates, particularly in industrial lines helped the growth in

premiums of non life business in '03. This hard market is expected to last until at least '05.
However, property claims have been high in '03. Higher losses are driven by increasingly
densely populated areas, higher concentrations of insured values, and the development of
endangered zones, according to a review published by Swiss Re. In the case of life
segment, the business is still going through hard times, though recent improvements in
investment conditions and the successful efforts to cut costs have brought improvements.

Scenario in Kuwait: Year ‘03 has been a good one for the insurance industry in
Kuwait, thanks to the economic upturn and fewer unexpected debacles. GDP at
constant prices grew at 14.2%, which is substantially higher than that in the previous
years, primarily due to the growth in oil sector. Higher growth in the economy
results in higher disposable income, which in turn augurs well for the demand of
insurance products, especially life insurance, which is a quasi-savings product.

Table 1: Trend in direct premiums written in Kuwait

(in KD mn) 1999 2000 2001 2002 2003 CAGR (4 yr)
Casualty 31.0 33.4 34.6 44.3 54.9 15.4%
Marine & Aviation 9.2 10.0 13.5 12.6 14.7 12.4%
Property 9.2 10.5 10.2 15.1 13.5 10.1%
Life 10.3 12.7 18.2 22.6 26.6 26.8%
Total 59.7 66.6 76.5 94.6 109.7 16.4%
Source: Ministry of commerce and industry

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Total premiums written has grown at a rate of 16.0% and 23.7% in 2003 and 2002
respectively. As can be seen from the table, the main contributors to this growth have
been the life insurance segment and the accident insurance segment. Apart from the
high growth in premiums, relatively lower level of claims also helped insurance
companies in Kuwait record a better performance in '03.

Table 2: Trend in claims paid

(in KD mn) 1999 2000 2001 2002 2003
Casualty 20.2 22.7 22.1 21.6 24.3
Marine & Aviation 3.5 108.0 5.4 2.7 3.2
Property 5.0 6.2 49.4 74.1 18.1
Life 5.3 5.8 6.6 6.7 8.5
Total 33.9 142.7 83.5 105.1 54.1
Source: Ministry of commerce and industry

As can be seen from the table, total claims paid almost halved in '03, which mainly In ‘03, companies in
Kuwait were blessed
owed to the abnormally high claims in the property segment in the previous year. A with good economic
conditions and lower
look at the movement in the loss ratios shows the effect of the high growth in claims
premiums, and a decline in claims paid in '03. It may be noted that loss ratio continues
to be the highest for the property segment.

Table 3: Loss ratios (in %)

2000 2001 2002 2003
Casualty 68 64 49 44
Marine & Aviation 1080 40 21 22
Property 59 484 491 134
Life 46 36 30 32
Total 214 109 111 49
Source: Ministry of commerce and industry, Global Research

Companies can take better advantage of a declining trend in claims, by reinsuring

lesser. Insurance companies in Kuwait have been proactive on this count, as the
average retention rates increased to 40% in '03 from 34% in '02. Companies, in general
retain more, or take more risk in the accident and life insurance segments, since major
debacles that can dramatically increase the loss ratios more often happen in marine &
aviation and property insurance segments.

Life insurance segment: As already mentioned before, life segment has been growing
at a relatively higher rate in Kuwait, albeit from a low base. Even though the share of life

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insurance segment in total premiums increased from 13.5% in ’97 to 24.2% in ’03, it is
still substantially lower than in many other developed countries. The high growth
achieved has been mainly due to the increasing popularity of medical insurance in the
country. Gross premiums medical segment grew to kd8.6mn in ‘03 from kd5.7mn in ‘02.

Life segment continues In terms of profitability, average loss ratio in the last four years has been the lowest for
to be highly profitable,
though the scenario the life segment (see table 3). The segment saw profitability improvement in '03, due to
might change with the
increasing share of the achievement of critical size, in turn alleviating risks. This could also have been the
medical insurance outcome of focus on lowering the average age of policyholders, and maintaining a
better mix of group and individual policyholders. However, an increasing share of
medical insurance, which has relatively higher loss ratios would have a negative effect
on the overall profitability in life segment. Currently, the companies are helped to
some extent, as the medical insurance industry is at a nascent stage, and the systems for
efficient tracking of claims in government hospitals are not yet in place. However, a
more efficient system would entail higher claims for those insurance companies, that
have major exposures to government medical insurance.

Life insurance industry in Kuwait is expected to continue its rate of growth in the
future as well, especially due to the reforms in the government-offered welfare
services, which would tilt to private sector the responsibility to manage investments
and retirement benefits for the population. The share of the life insurance segment in
Kuwait is substantially lower than that in mature markets where it is around 60%. In
terms of life premiums per head, $31 in Kuwait is abysmally low compared to the
world average of $235, which implies good potential for growth in this segment.

General insurance (non life): General insurance includes accident, marine &
aviation and property sub-segments.

Table 4: Mix of sub segments in general insurance, and their growth rates
Premiums as a proportion of Growth in ‘03
general insurance premiums
Accidents 66.1% 23.9%
Marine and Aviation 17.7% 16.7%
Property 16.2% -10.6%
Source: Ministry of commerce and industry, Global Research

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As can be seen, growth has been good except in the property segment. Negative growth
in the property segment is the result of an unfavourable risk-reward scenario existing in
this segment. Though rates have improved after the debacles concerning Ahmadi and
KOC refineries, they are still not high enough to compensate for the associated high
risk. Similar is the case with motor insurance, with loss ratios ranging at levels as high
as 150%. However, there has been good growth in premium income from the accidents
segment, due to an increase in selling of comprehensive coverage products and
accident medical coverage products. Marine and aviation segment too has been
growing at respectable rates since the 9/11 debacle, boosted by an increase in the rates.

While the overall effect of rates, and the trend in claim levels was favourable in '03, Though lower
commissions from
companies were adversely affected on the commission front. Higher claims, and reinsurers affected the
performance, this was
restrictions on risk exposures for the global insurers led to an exodus of reinsurers. more than compensated
This gave an opportunity for reinsurance companies to lower commissions and demand by higher investment
returns
more for reinsuring. Lower commissions meant lower income for the insurance
companies, as they were not able to undertake a compensatory cut in the commissions
paid, due to the unrelenting competition.

Though commission levels had an adverse impact on profitability, these were

overshadowed by the effect of booming equity markets. The average return from
equity markets in GCC countries was 52.2% in '03. This has come as a bonanza, as the
insurance companies in GCC have relatively higher exposure to equity markets than
those in other markets. In short, ’03 has been a good year for the insurance
companies in Kuwait, owing to good growth in premium income, lower loss ratios,
and high returns from investments.

Competitive Scenario: GIC faces competition not only from national companies, but National companies
have outperformed in
also from regional companies and foreign companies operating in Kuwait. However, terms of growth, and
have caught up with
in the past, national companies have comfortably outperformed others, in terms of the others in terms of
premium income growth. National companies have increased their market share from profitability

77.4% in ’97 to 86.2% in ’03, while both regional companies and foreign companies
evenly lost their market share. In particular, the market share of the foreign companies
in life segment declined from 26.5% in ’97 to 12.4% in ’03. On the profitability front,
national companies have improved dramatically in ’03, to be in line with others, after
being underperformers in the past.

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Chart 1: Trends in loss ratios of insurance companies operating in Kuwait

250% Loss ratio Trends in loss ratios

200%

150%

100%

50%

0%
1999 2000 2001 2002 2003

National companies Arabian companies Foreign companies

Source: Ministry of commerce and industry, Global Research

Within the national companies, we have observed that Takaful (Islamic insurance)
companies are gradually making their mark. The combined gross premium income for
both the Takaful companies was KD12.6mn, which formed 12.3% of the total premium
income of national companies. Both the Takaful companies recorded technical profits
in ’03, with the First Takaful Company having an impressive technical profit margin of
7.66%. At the net profit level too, both the companies are already out of red in ’03.
Going forward, we believe that the Takaful companies would continue to increase its
market share, most of which would be through business from new customers,
especially in niche areas, rather than cannibalising on the current business of other
national companies.

Outlook
We expect the various factors given below to act favourably towards reasonable growth
in all segments.
● Increased stability in Iraq and reconstruction.
● Execution of many projects, which were postponed earlier, especially in the energy
sector-upgrading of refineries.
● Expansion in new suburbs.
● Increased awareness-the number of players have doubled in the last 2-3 years.
● Potential areas like covering the risk of professionals like doctors and lawyers
remain untouched. These are not mandatory in Kuwait.
● Only 5% of the property is insured in Kuwait. It is not mandatory here, as in many
other countries.
● Rates in Kuwait are expected to harden further due to the demand from new
projects and hardening of the reinsurance prices.

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Apart from these, we expect high growth particularly in the medical insurance segment,
due to this now being compulsory for all expatriates. The number of expatriates in
Kuwait is expected to increase at a high rate. However, the growth in medical
insurance segment also depends on the pace at which the companies would be able to
set up organised systems to coordinate with hospitals.

With the market presenting adequate opportunities, number of players would also Reasonable growth
expected across
increase. Two more Islamic insurance companies would be operational soon in Kuwait. segments, larger players
to benefit from
However, we do not expect competitive pressures in the industry to increase, as we regulatory changes
anticipate an increase in prudence dictated by regulations, in line with what is
happening in the other markets of Middle East. Changes like an increase in minimum
capital required, solvency margin, amount of bank guarantees, more rigid investment
procedures and management requirements would make life difficult for many of the
smaller players, thus favouring larger companies like GIC.

However, on income from investments, we do not expect the companies to have as

good a time, as they had in '03. An increase in interest rates in the US would cause a
similar movement in GCC markets too, which would have its impact on the insurance
companies, especially in the short term, as the valuations of their debt investments
would take a hit. An increase in the interest rates at the short end, without a
commensurate increase at the longer end of the yield curve would have the worst
effect, as surrenders would increase and spread margins would come under pressure.

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GIC’s Financial Performance Review ('03-'04)

Steady premium growth: Gross premiums for GIC grew by 16.6% to KD31.07mn in
’03. This was lower compared to the CAGR of 19% in the last 5 years. Growth was
evenly distributed across segments, with the accident segment recording the highest
growth of 20.8%. Growth from the life segment tapered down to 14.4% after
consecutive growth, at rates exceeding 50% in the last three years. Comparing with
other companies in Kuwait, we have observed that, GIC has been more consistent in
terms of growth across segments.

Chart 2: GIC’s growth in various segments in ’03 compared to other companies

Growth comparison
75.0%

50.0%

25.0%

0.0%

-25.0%
Life Casualty Property Marine and Total
-50.0%
GIC AAIC KIC Warba BKIC

Source: Company reports

Note: BKIC is not into life insurance business. Casualty segment for BKIC includes only motor, while property
includes fire & general. In the case of AAIC, KIC and Warba, property segment here represents fire.

GIC outperformed GIC has been an average performer in almost all the segments except the property
within the property
segment in ‘03, thanks segment, in which it had the highest growth. This was the result of the company being
to the KPC deal
chosen to lead the insurance policy of the properties of KPC and its subsidiaries.
Moreover, the company was the only one to extend insurance coverage for war risks,
both during and after the US military operations in Iraq.

Steady growth across segments, better economic scenario and hardening rates
allowed GIC to expose itself to a higher risk, increasing its retention rates to 46%
from 39% last year. This was in line with the trend in the industry. Another reason
for the companies reducing the reinsurance cover was healthier loss ratios compared
to the previous years.

In ’03, GIC reduced its Healthier loss ratios: Overall loss ratio for GIC declined to 47% in ’03 from 53% last
loss ratio, which is one
of the lowest in last 10 year. This year, along with the year ’01, had the lowest loss ratio for the company in
years

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the last ten years. In fact all the four Kuwait based companies had a better year, in
terms of loss ratio. GIC’s policy of reinsuring most of the premiums from property and
marine & aviation had helped the company record very low loss ratios over the years,
even when the industry as a whole incurred high losses in the property segment. This
trend continued in ’03 too, as these two segments have been the most profitable for the
company. It can be seen from the chart below that GIC is the second best performer
among the listed companies in terms of loss ratio.

Chart 3: Comparison of GIC’s loss ratios in different segments with other

companies in ‘03
Loss Ratios
100.0%

80.0%

60.0%

40.0%

20.0%

0.0%
Life Casualty Property Marine and Total
Aviation
-20.0%

GIC AAIC KIC Warba BKIC

Source: Company reports, Global Research

Though there has been an industry-wide reduction in loss ratios, companies were Reduction in commission
revenues had a major
adversely affected by the reduction in commissions by reinsurance companies. For adverse effect on GIC’s
profitability
GIC, net commissions as a percentage of gross premiums declined to 1.4% from 2.5%
last year. This is substantially lower than the corresponding value of around 10%, that
the company enjoyed in the last decade. The corresponding figure for AAIC is 7.7% in
’03, helped by its lower retention ratio. Apart from this, GIC is also a marginal
underperformer, in terms of the efficiency in keeping the general and management
expenses (GME) low. In ’03, GME was 11.8% of gross premiums written for GIC,
while the corresponding average for all the Kuwaiti insurance companies was 10.4%.

Technical profit margin remains flat: The effect of lower received commissions and GIC has the second
highest underwriting
marginally higher expenses were compensated by the lower loss ratios. GIC recorded profit margins among
the national companies
an technical profit of KD2.68mn in ‘03, 17.6% higher than that of last year. Technical
profit margins remained flat at 8.6%, which is the second highest among the companies
in Kuwait. However, GIC along with AAIC, did not have an improvement in technical
profitability, as shown below. It should be noted that a KD2.01mn increase in life
mathematical reserves has substantially pulled down the technical profits.

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Chart 4: Technical profit margins across companies

14.0%
as a % of Gross Premium Technical Profit Margins
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
Warba GIC AAIC KIC

2002 2003

Source: Gulf Insurance Company

As is the case with all Robust investment returns: Though underwriting profitability remained flat,
national companies,
GIC’s profits were excellent returns from investments helped GIC to move into much healthier stage in
boosted by the high
investment income in ‘03 terms of the shareholders’ surplus. The company had a return of 25.7% in ’03,
compared to 13% last year. This has been a universal phenomenon as seen in the chart
below, thanks to the appreciation in equity markets.

Chart 5: Investment returns in ’03 for insurance companies in Kuwait

Return
60.0%
45.7%
40.0%

25.7% 23.6% 22.6% 21.3%

20.0%

0.0%
Warba GIC AAIC KIC BKIC
Returns are calculated taking into account the change in fair value of securities available for sale
Source: Company reports, Global Research

GIC’s exposure to equities was more than 50% of the total investments excluding
associated companies. This is substantially higher than the equity weighting of around
15% maintained by global companies. This denotes a risk for the company, considering
that the GCC markets have already showed signs of weakness in ’04.

However, in ’03, better investment returns, coupled with lower loss ratios helped the
company record profits of KD5.48mn, which is 9.5% higher than last year. Adjusting for

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the compensation received in ‘02 for the losses due to Iraq invasion, the profit growth is a
high 59.3%.

Risk analysis: GIC has always been a steady performer, and there has been relatively
lower variability in the growth rate of premium income in the past. Further, the
company adopts a conservative approach by reinsuring most of the property segment,
which had the biggest variability of claims in the past. As a result, low loss ratios had
been maintained, even when the industry suffered extremely high losses in some
segments. Loss ratios of GIC has been in the range of 47%-61% in the last five years.

Apart from the operational front, the company is also in a comfortable position on GIC has a conservative
approach towards
the liquidity front. It has adequate reserves too, with technical reserves comfortably retention of risk and
maintaining of reserves
exceeding the gross premium written in ’03. Policyholders’ surplus increased by
31.3% in ’03 to KD53.4mn. Based on the minimal volatility on the operational front,
and comfortable liquidity and reserve position, we categorise the risk of the
investment in the company to be of below average nature. However, it should be
noted that relatively higher exposure to equities presents the risk of value erosion of
investments.

Interim results: In the March ’04 ending quarter, gross premium income grew by Low investment income
pulled down the profit
12.7%, over the similar period last year to KD12.15mn. Net revenue increase has growth in the 1st
quarter of ’04
been uniform across segments, except the property segment, which remained flat.
Overall loss ratios remained the same, as an increase of profitability from marine and
aviation segment was offset by a decline the accident and property segment.
Underwriting profits increased by 49.6% in the quarter. However, net profit margins
remained flat due to lower returns from investments in this quarter. Return from
investments in the quarter was negative, due to the erosion in the value of equity
investments held

Table 5: Financial performance for quarter ending March ‘04

(in KD mn) Quarter ending Quarter ending % change

March ‘03 March ‘04
Gross premiums written 10.786 12.155 12.7%
Retention rates 35.6% 45.1% -
Loss ratio 38.4% 40.2% -
Underwriting profits 0.473 0.708 49.6%
Return on investments* 16.3% -27.3% -
Net profits 1.522 1.699 11.6%
Policyholders’ surplus 44.820 39.195 14.3%
*annualized, including the change in fair value of the ‘available for sale’ investments
Source: Company results, Global Research

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Valuation

We believe that statutory cash flow accounting does little to show how an insurance
company’s management creates economic value. It looks at the past performance rather
than the future potential. For valuation purposes past performance is just one of the
indicators, as the insurance company would have to work in a very dynamic and ever
changingscenarios.

Most of the research houses use different methodologies to calculate the value of an
insurance company, as its operations assume significant difference from the normal
manufacturing and service sector companies. We have used Embedded Value, used
by insurers and investors worldwide, to value insurance companies. Embedded value
(EV) comprises net asset value, and the estimated value of current in-force business.
In our calculation we have used the estimated value of the current in-force business
only for the life insurance segment, because it is relatively too low for the non-life
insurance companies. Life companies sell long-term contracts from which the
company will derive profits in the future, in turn building up a profitable book of
in-force business.

For practical purposes, we have estimated the in-force value by calculating the profit
margin being earned on the mathematical reserves and estimating the average duration of
the in-force portfolio.
● Since data on the average duration is not available, we have assumed it to be 10 years.
● We have assumed the net margin earned on the mathematical reserves to be 1%, as it
is very difficult to estimate, and is not mentioned in the annual reports.
For the sake of comparability we would be using the same duration and net margin for all
the insurance companies in Kuwait, till they start publishing their embedded values.

Despite the highly subjective nature of an embedded-value estimate, comparison of a

company’s embedded value across years will give a good indication of the value added
by management during the period under review, provided the underlying assumptions
do not change. Embedded value is also useful to compare the track records of two
companies’ management teams, again provided that the comparison relies on the same
key assumptions.

Further, the fair value is based on comparing the company’s ROE with its cost of
capital to generate an appropriate embedded value projected forward by 12 months.
Share price target =(Embedded value per share)*(ROE/COC)

14 Gulf Insurance Company Research Update

Global Research - Kuwait Global Investment House

Return on Equity (ROE): We have calculated the ROE for each of the next three
years (2004-2006), and generated an average over this period. For GIC we arrived at an
average ROE of 13.0%, based on the key assumptions given below.

Table 6: Assumptions made in projections to arrive at average ROE

‘04 ‘05 ‘06
Growth in Gross premium income
-Life 15.0% 12.5% 10.0%
-Accidents and Marine & Aviation 10% y-o-y
-Property 0% (unbalanced risk-reward scenario)
Retention rate Same as that in ’03 in each segment
Provision for unexpired risk Lower than in ’03 as it was abnormally high
Net commissions Remain at the same levels*
Claims paid Remain same as a % of premium written
Cancellations in life segments 4% of the life premiums
Increase in life mathematical reserves 15% of life premiums; to reduce to 12.5% from ‘05
Net income from investment activities 6.9% of the average invested assets
Growth in invested assets 11% 8% 8%
Assets To remain in line with the past, as a % of revenues
*already at extremely low levels, not expected to decline further

Cost of Capital (CoC): We have taken the Cost of capital (COC) at 6.0% percentage We have arrived at an
average ROE of 13%,
points above the local risk-free rate, currently at 3.25% (chosen based on the yield on and have assumed cost
of capital of 9.25%
KIBOR). Considering that insurance companies in Kuwait are extremely comfortable
in terms of liquidity and are conservative on building reserves, we have assumed a risk
premium in line with the banking sector. Globally, research houses have increased risk
premiums on the sector after the 9-11 incident. But we believe that the external factors
have little consequence for the Kuwaiti insurance companies, whose businesses are
mostly in the local markets and are reinsured to a large extent. The only way the
changes in the world insurance markets would affect Kuwaiti insurance companies
would be their commission income.

However, on a conservative approach to valuation, we have not taken into account the
value of whatever future business is generated, as we consider insurance business to be
very different from other businesses. Any major catastrophe or default on the part of
the reinsurer would affect its profitability substantially.

Gulf Insurance Company Research Update 15

Global Research - Kuwait Global Investment House

Embedded Value for GIC

Table 7: Embedded value calculation
Three Months Ended March 31, ‘04 (in KD)
Stated shareholders' funds 44,820,382
Less: Dividend -
Less: Goodwill 1,075,558
Net Asset Value 43,744,824
In force value (Life Insurance) 663,000
Net asset plus in force value 44,407,824
Embedded Value per share (fils) 393
Fair value (based on embedded value) – fils 550

In-force Value Calculations (in KD)

Technical Yield on Technical Duration to maturity In force value

Reserves* Reserves (Years)
6,630,000 1.0% 10 663,000
*Only for life

Relative valuation:
Table 8: Comparable valuations of companies listed in Kuwait
P/BV* ROE (%)**

Gulf Insurance Company 1.3 12

Al Alheia Insurance Company 1.2 15
Kuwait Insurance Company 1.4 26
Warba Insurance Company 1.4 22
Bahrain Kuwait Insurance Company 1.6 9
Industry average 1.4 17
*based on adjusted book value at quarter ending Mar ‘04
**for the year ‘03
Source: Company reports, Global research

GIC’s market valuations are almost in line with the industry as seen in the table.
Applying the industry average P/BV to our projections for GIC, we arrive at a
2004 fair value of 612, which is at a premium of 22.6% to the current market
price.

Going forward, notwithstanding its small size, the market offers opportunities for
healthy growth, due to the extremely low penetrations in life segment. Relatively
low retention rates offer scope to increase exposure to risk, thus enhancing

16 Gulf Insurance Company Research Update

Global Research - Kuwait Global Investment House

growth. Loss ratios have been on the decline, and are expected to remain stable,
save for any unforeseen incidents or calamities.
Being the largest national insurance company and the second most profitable in
Kuwait, we believe that GIC deserves valuations higher than the average industry
valuations. Moreover, GIC has been a steady performer in the past even in
difficult circumstances, thanks to a conservative approach towards retention of
risk. Through our valuation based on the embedded value method and relative
valuations, we arrived at a fair value of 563, which is at a premium of 12.6% to
the current share price of 500fils. Based on both embedded value based valuation
and relative valuation, we recommend a ‘buy’ on the stock.

Gulf Insurance Company Research Update 17

 GULF INSURANCE COMPANY K.S.C.
Operating Statement
Amount in Kuwaiti Dinar 1999 2000 2001 2002 2003 2004 2005 2006

Gross Premium Written 13,791,541 15,722,705 20,811,285 26,657,343 31,073,587 34,284,468 37,565,459 40,834,988
Net Premium Written 5,708,371 5,695,170 8,441,941 10,506,686 14,337,964 16,033,085 17,776,023 19,522,456
Net premiums earned 5,303,371 5,865,796 8,202,532 10,290,339 13,487,606 15,270,817 17,129,077 19,018,318
Net Commission received 1,143,396 1,735,929 1,105,682 667,217 434,569 446,183 455,723 462,821
Policy isssuance fees 729,768 542,720 635,202 643,720 744,784 855,000 960,690 1,065,403
Claims incurred (2,964,208) (3,580,350) (3,850,766) (5,484,548) (6,344,207) (7,557,923) (8,379,921) (9,206,220)
Increase in life mathematical reserves (125,000) (17,843) (1,130,000) (500,000) (2,010,000) (2,037,358) (1,910,023) (2,101,025)

18
Increase in additional reserves - - - - (350,000) - - -
Maturity and cancellations of life policies (260,901) (340,769) (312,269) (692,396) (168,920) (543,295) (611,207) (672,328)
Underwriting/Selling/General Expenses (1,823,329) (2,314,829) (2,759,021) (2,970,412) (3,674,955) (4,036,852) (4,420,756) (4,816,565)
Gross Profit from all Departments 2,003,097 1,890,654 1,891,360 1,953,920 2,118,877 2,396,571 3,223,581 3,750,403
Other miscallaneous income 57,761 77,346 26,785 44,376 29,793 29,793 29,793 29,793
General & Admn. Expenses (Unallocated) (393,303) (385,194) (405,343) (473,511) (596,328) (651,405) (713,744) (775,865)
Operating Profit 1,667,555 1,582,806 1,512,802 1,524,785 1,552,342 1,774,959 2,539,630 3,004,331
Exchange differences (29,851) (12,902) (35,505) (1,701) (15,144) - - -
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Sundry Income (unallocated) - - - - - - - -

Net Income from Investment Activities 2,802,903 2,648,316 3,226,037 3,078,806 4,469,396 5,097,313 5,506,137 5,880,557
Amortisation of Goodwill (12,011) (29,251) (33,507) (40,997) (56,620) (56,620) (56,620)
Provision for doubtful debt (50,915) (50,789) (382,950) (902,163) (172,447) (45,398) (258,844) (259,444)
Profit before Minority interest 4,389,692 4,155,420 4,291,133 3,666,220 5,793,150 6,770,254 7,730,303 8,568,825
Minority interest (2,389) (2,685) (27,135) (56,893) (67,703) (77,303) (85,688)
Profit after Minority interest 4,389,692 4,153,031 4,288,448 3,639,085 5,736,257 6,702,551 7,653,000 8,483,136
Contribution to KFAS (82,679) (83,061) (85,769) (52,022) (57,362) (60,596) (69,180) (76,677)
National Labour Support Tax (99,931) (83,060) (135,639) (148,375) (169,620) (188,176)
Board of Directors Remuneration (64,000) (64,000) (64,000) (64,000) (64,000) (64,000) (64,000) (64,000)
Profit from ordinary activities 4,243,013 4,005,970 4,038,748 3,440,003 5,479,256 6,429,580 7,350,201 8,154,284
Extraordinary Items 1,563,089 - - - -
Net profit attributable to shareholders 4,243,013 4,005,970 4,038,748 5,003,092 5,479,256 6,429,580 7,350,201 8,154,284
P&L Appropriation Account:
Op Balance of Retained Earnings 3,306,987 4,461,206 4,580,090 5,948,455 6,449,627 6,713,270 7,169,046 7,915,772
Adjustments (134,064)
Net Profit for the year 4,243,013 4,005,970 4,038,748 5,003,092 5,479,256 6,429,580 7,350,201 8,154,284
Trfr to Statutory Reserve 413,397 415,303 428,845 520,217 547,926 642,958 735,020 815,428
Trfr to Voluntary Reserve 413,397 415,303 428,845 520,217 547,926 642,958 735,020 815,428
Dividend 2,262,000 2,800,760 2,999,970 3,503,360 4,160,240 4,750,200 5,202,600 5,881,200
Sale of available for sale investments 1,321,341 41,874 40,479 62,311 69,166 74,699
Cl Balance of Retained Earnings 4,461,206 4,580,090 5,948,455 6,449,627 6,713,270 7,169,046 7,915,772 8,632,698

Gulf Insurance Research Update

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 GULF INSURANCE COMPANY K.S.C.
Balance Sheet
Amount in Kuwaiti Dinar 1999 2000 2001 2002 2003 2004 2005 2006

Assets:
Bank & cash equivalents 147,040 166,437 468,443 639,383 835,111 426,574 373,749 228,395
Premiums receivable 3,351,429 6,160,295 7,530,622 6,596,842 8,213,935 9,051,100 9,917,281 10,780,437
Insurance,reinsurance companies & brokers 1,043,663 1,730,013 1,679,598 2,107,933 4,070,441 3,435,369 3,756,546 4,083,499
Provision for doubtful debts (2,254,162) (2,104,463) (2,563,100) (2,676,652) (2,722,050) (2,980,894) (3,240,338)
Reinsurance recoverable on outstanding claims 37,285,618 24,849,395 25,375,053 21,620,082 23,535,015 25,675,138 28,011,890
Insured debts receivable 254,832 300,142 54,832 350,730 338,597 440,593 488,351 530,855
Other Current Assets 1,046,203 1,274,928 821,076 580,338 2,231,823 1,988,459 2,178,797 2,368,429
Total Current Assets 5,843,167 44,663,271 33,299,503 33,087,179 34,633,337 36,155,059 39,408,968 42,763,166

Total Investments 40,970,460 43,676,221 46,289,589 54,245,339 69,836,598 76,922,687 82,643,093 88,821,132
- Fixed & Bank Deposits 15,309,115 12,996,683 6,165,797 8,734,793 9,606,415 10,663,121 11,516,170 12,437,464
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Gulf Insurance Research Update

- T-Bills & Bonds 3,500,000 6,500,000 11,513,300 11,656,100 12,960,000 14,385,600 15,536,448 16,779,364
- Investments available for sale 19,506,695 19,670,366 18,424,656 23,982,826 31,155,727 34,582,857 37,349,486 40,337,444
- Loan to life policy holders 429,586 401,005 401,649 85,865 92,863 103,078 111,324 120,230
- Investment Properties 826,960 808,350 784,486 774,768 84,320 93,595 101,083 109,169
- Investment held for trading 1,398,104 3,299,817 8,999,701 8,054,987 10,519,665 11,676,828 12,610,974 13,619,852
- Investments in associate companies 956,000 5,417,608 5,417,608 5,417,608 5,417,608
Goodwill-gross 600,870 600,870 600,870 1,132,398 1,132,398 1,132,398 1,132,398
Already amortised 12,011 41,262 74,769 115,766 172,386 229,006 285,626
Goodwill-Net 588,859 559,608 526,101 1,016,632 960,012 903,392 846,772
Gross fixed assets 4,558,826 5,402,016 5,556,545 5,755,411 6,701,310 7,405,445 8,114,139 8,820,357
Less: accumulated depreciation 2,730,429 3,018,125 3,234,548 3,485,694 4,143,140 4,489,527 4,870,891 5,285,448
Net fixed assets 1,828,397 2,383,891 2,321,997 2,269,717 2,558,170 2,915,919 3,243,248 3,534,910
Total Assets 48,642,024 91,312,242 82,470,697 90,128,336 108,044,737 116,953,677 126,198,702 135,965,981

Liabilities:
Insurance,reinsurance companies & brokers 2,165,775 3,374,637 3,967,712 4,344,287 7,050,395 7,711,234 8,447,558 9,252,468
Premiums received in advance 908,100 963,045 1,045,858 1,619,122 1,731,435 2,014,622 2,216,362 2,409,264
Sundry creditors,accruals,income received in 1,480,463 3,028,404 1,918,064 1,729,973 2,359,730 2,635,241 2,908,712 3,186,142
advance and unclaimed dividends
Due to Banks 56,873 - - - - - -
Other current liabilities 1,659,182 2,168,332 2,248,083 2,476,180 3,332,768 3,883,613 4,244,897 4,614,354
Total Current Liabilities 6,277,520 9,655,291 9,243,717 10,233,562 14,538,328 16,308,709 17,881,529 19,526,228

19
Global Investment House
20
GULF INSURANCE COMPANY K.S.C.
Balance Sheet
Amount in Kuwaiti Dinar 1999 2000 2001 2002 2003 2004 2005 2006

Technical Reserves 10,170,396 48,098,637 37,170,858 38,889,488 39,265,089 44,594,253 49,972,388 55,661,498
Reserve for unexpired risks 2,675,000 2,679,827 2,920,186 3,124,530 4,464,671 5,226,939 5,873,885 6,378,023
Life mathematical reserve 1,625,000 1,645,000 2,775,000 3,275,000 5,285,000 7,322,358 9,232,381 11,333,407
Outstanding claims reserve 3,720,396 41,623,810 29,325,672 30,339,958 27,015,418 29,544,956 32,366,123 35,450,069
Additional Reserve 2,150,000 2,150,000 2,150,000 2,150,000 2,500,000 2,500,000 2,500,000 2,500,000
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Minority Interest 410,912 414,653 375,115 886,310 954,013 1,031,316 1,117,004

Owner's Equity:
paid-up equity capital 11,310,000 11,310,000 11,310,000 11,310,000 11,310,000 11,310,000 11,310,000 11,310,000
Share remium reserve 3,600,000 3,600,000 3,600,000 3,600,000 3,600,000 3,600,000
Statutory reserve 9,844,912 10,260,215 7,089,060 7,609,277 8,157,203 8,800,161 9,535,181 10,350,609
Voluntary reserve 7,200,942 7,616,245 8,045,090 8,565,307 9,113,233 9,756,191 10,491,211 11,306,639
Retained earnings 4,205,487 4,580,090 5,948,455 6,449,627 6,713,270 7,169,046 7,915,772 8,632,698
Cumulative Change in Fair Value 741,118 4,218,427 15,698,990 15,698,990 15,698,990 15,698,990
Foreign currency translation adjustment 6,744 12,622 (17,591) (40,647) (40,647) (40,647) (40,647)
Treasury stocks (367,232) (625,892) (1,104,876) (1,104,876) (1,197,039) (1,197,039) (1,197,039) (1,197,039)
Total Shareholder's Equity 32,194,108 33,147,402 35,641,469 40,630,171 53,355,010 55,096,702 57,313,469 59,661,251

Total Liabilities 48,642,024 91,312,242 82,470,697 90,128,336 108,044,737 116,953,677 126,198,702 135,965,981

Gulf Insurance Research Update

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 CASH FLOW STATEMENT GULF INSURANCE COMPANY K.S.C.
Amount in Kuwaiti Dinar 2000 2001 2002 2003 2004 2005 2006
Operating
Operating Activities (a) 1,663,256 1,344,992 920,425 1,757,784 2,121,346 2,920,995 3,418,888
Net Profit (before KFAS & BoD payments & min. int) 4,153,031 4,288,448 3,639,085 5,736,257 6,702,551 7,653,000 8,483,136
Depreciation 208,585 241,925 299,504 393,033 346,387 381,365 414,557
Amortisation of Goodwill 12,011 29,251 33,507 40,997 56,620 56,620 56,620
Minority interest 2,389 2,685 27,135 56,893 67,703 77,303 85,688
Net investment income (2,712,760) (3,217,317) (3,078,806) (4,469,396) (5,097,313) (5,506,137) (5,880,557)
Provision for doubtful debts 45,398 258,844 259,444
Changes in operating Assets & Liabilities (b) 2,084,678 2,708,164 2,428,397 2,340,455 3,966,725 2,451,232 2,565,933
Dec/(inc) in accounts receivable (128,170) (1,274,716) 613,352 (3,453,916) (202,093) (1,187,358) (1,190,109)
Dec/(Inc.) in receivables from reinsurance cos. 429,248 643,490 (525,657) 3,754,971 (1,914,933) (2,140,123) (2,336,751)
Dec/ (inc) in other debit balances 62,915 476,083 419,106 (1,478,555) 141,368 (238,096) (232,137)
Dec/(inc) in Investments held for trading (824,055) (1,104,493) (1,157,163) (934,146) (1,008,878)
Inc/(dec) in payables to reinsurance co. - 376,575 2,706,108 660,839 736,324 804,910
Inc/(dec) in technical reserves (72,135) 1,508,444 1,718,629 375,601 5,329,164 5,378,135 5,689,109
Inc./(dec) in accounts payable 1,407,074 (1,110,340) (188,091) 629,757 275,511 273,471 277,430
Inc./(dec) in other credit balances 330,801 2,382,390 265,274 798,669 550,845 361,284 369,457
Inc. in premiums received in advance 54,945 82,813 573,264 112,313 283,187 201,740 192,902
BoD Remuneration ( c) (64,000) (64,000) (64,000) (64,000) (64,000) (64,000) (64,000)
KFAS Payment (d) (144,815) (85,769) (52,022) (60,596) (69,180) (76,677)
National labour tax paid (99,931) (83,060) (148,375) (169,620) (188,176)
Total Operating 3,683,934 3,844,341 3,099,122 3,899,157 5,815,100 5,069,427 5,655,968
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Gulf Insurance Research Update

Extraordinary Items - - 1,563,089 - - - -
Net cash from operating 3,683,934 3,844,341 4,662,211 3,899,157 5,815,100 5,069,427 5,655,968

Investing
Capex ( e) (296,626) (180,299) (262,323) (431,562) (704,135) (708,694) (706,218)
Net Change in Equity Investments (2,359,738) (4,454,174) (731,351) 4,796,657 (3,364,819) (2,697,463) (2,913,260)
Purchase of investments in associate companies (4,461,608) - - -
Acquisition of subsidiaries (380,380) (787,179) - - -
Net Change in property investments 23,864 (9,275) (7,488) (8,087)
Dec/(Inc) in T-bills and bonds (142,400) (1,303,900) (1,425,600) (1,150,848) (1,242,916)
Loans secured by life insurance policies 315,784 (6,998) (10,215) (8,246) (8,906)
Net change in time and call deposits (1,871,881) 10,657,089
Interest received 481,482 3,307 895,583 849,563
Dividends received 269,144 227,143
Net change in other investments (1,852,125) (4,290,065)
Investment income received* 1,415,183 2,028,085 1,304,994 2,101,507 5,097,313 5,506,137 5,880,557
Total Investing (4,864,085) 3,787,807 1,649,431 983,623 (416,731) 933,398 1,001,171

Financing
Dividend Paid (2,782,978) (2,968,082) (3,474,820) (4,160,240) (4,750,200) (5,202,600) (5,881,200)
Purchase of treasury shares (258,660) (478,984) - (92,163) - - -
Movement of minority interest (66,673) 454,302 - - -
Total Financing (3,041,638) (3,447,066) (3,541,493) (3,798,101) (4,750,200) (5,202,600) (5,881,200)
Foreign currency translation adjustments (30,213) (17,329) 0 0 0
Net Change in Cash (4,221,78) 4,185,082 2,739,936 1,067,350 648,169 800,225 775,939
Net Cash at the beginning 6,670,947 2,449,158 6,634,240 9,374,176 10,441,526 11,089,695 11,889,920
Net Cash at the end 2,449,158 6,634,240 9,374,176 10,441,526 11,089,695 11,889,920 12,665,859
Gross Cash Flow (a+c+d) 1,599,256 1,136,177 770,656 1,641,762 1,996,750 2,920,995 3,418,888

21
Free Cash Flow (a+b+c+d+e) 3,387,308 3,664,042 2,936,730 3,550,655 5,259,339 4,530,353 5,137,926
Global Investment House

*all inclusive for the projected years

 RATIO ANALYSIS GULF INSURANCE COMPANY K.S.C.
1999 2000 2001 2002 2003 2004 2005 2006

Investment type as a % of invested assets

- Fixed & Bank Deposits 37.4% 29.8% 13.3% 16.1% 13.8% 13.9% 13.9% 14.0%
- T-Bills & Bonds 8.5% 14.9% 24.9% 21.5% 18.6% 18.7% 18.8% 18.9%
- Available for sale (mostly equity) 47.6% 45.0% 39.8% 44.2% 44.6% 45.0% 45.2% 45.4%
- Loan to life policy holders 1.0% 0.9% 0.9% 0.2% 0.1% 0.1% 0.1% 0.1%
- Investment Properties 2.0% 1.9% 1.7% 1.4% 0.1% 0.1% 0.1% 0.1%
- Investment held for trading (mostly equity) 3.4% 7.6% 19.4% 14.8% 15.1% 15.2% 15.3% 15.3%
- In associated companies 0.0% 0.0% 0.0% 1.8% 7.8% 7.0% 6.6% 6.1%

22
Investment Returns % Average Invested Assets
- Net Investment Return 7.2% 6.3% 8.8% 13.0% 25.7% 6.9% 6.9% 6.9%

Liquidity Ratios
- Current Liquidity 267% 80% 107% 115% 127% 125% 121% 117%
- Overall Liquidity 296% 157% 176% 182% 198% 189% 183% 178%
- Liquid Assets to technical reserves 404% 91% 126% 139% 166% 161% 155% 150%
- Invested Assets as a % of Assets 84% 48% 56% 60% 65% 66% 65% 65%
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Profitability Analysis
- Combined Ratio 67.8% 71.2% 66.5% 75.2% 69.6% 71.9% 71.2% 70.7%
- Retention rate 41.4% 36.2% 40.6% 39.4% 46.1% 46.8% 47.3% 47.8%
- Loss Ratio 55.9% 61.0% 46.9% 53.3% 47.0% 49.5% 48.9% 48.4%
- Expense Ratio 11.9% 10.2% 19.6% 21.9% 22.6% 22.4% 22.3% 22.3%
- Net Income to NPW 74.3% 70.3% 47.8% 47.6% 38.2% 40.1% 41.3% 41.8%
- Net income after taxes to avg. Total Assets 8.9% 5.7% 4.6% 5.8% 5.5% 5.7% 6.0% 6.2%
- Return on avg. Shareholders' equity (ROE) 13.5% 12.3% 11.7% 13.1% 11.7% 11.9% 13.1% 13.9%

Capitalisation/ Leverage Tests

- GPW to Policyholders' Surplus (PHS) 0.43 0.47 0.58 0.66 0.58 0.62 0.66 0.68
- Technical Reserves to PHS 0.32 1.45 1.04 0.96 0.74 0.81 0.87 0.93
- Technical Reserves to GPW 0.74 3.06 1.79 1.46 1.26 1.30 1.33 1.36
- Financial leverage (current liability to total Capital) 0.19 0.29 0.26 0.25 0.27 0.30 0.31 0.33

Ratio's Used for Valuation

- Dividend Payout 70% 75% 87% 83% 87% 81% 80% 80%
- EPS (fils) 35.3 36.0 36.7 45.7 50.1 56.8 65.0 72.1
- Book Value Per Share (fils) 284.7 297.5 323.5 371.1 487.9 487.2 506.8 527.5
-P/E 9.1 8.1 8.7 10.0 10.8 9.0 7.8 7.1
-P/BV 1.1 1.0 1.0 1.2 1.1 1.0 1.0 1.0

Product Breakdown
- Life 16% 22% 32% 39% 38% 40% 41% 41%

Gulf Insurance Research Update

Global Investment House

- Non Life 84% 78% 68% 61% 62% 60% 59% 59%
Global Research - Kuwait Global Investment House

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Gulf Insurance Company Research Update 23

Global Research - Kuwait Global Investment House

The following is a comprehensive list of disclosures which may or may not apply to all our
researches. Only the relevant disclosures which apply to this particular research has been mentioned
in the table below under the heading of disclosure.

Disclosure Checklist
Company Recommendation Ticker Price Disclosure

Gulf Insurance BUY GINS.KW 500 fils 1,10

Company

1. Global Investment House did not receive and will not receive any compensation from the
company or anyone else for the preparation of this report.
2. The company being researched holds more than 5% stake in Global Investment House.
3. Global Investment House makes a market in securities issued by this company.
4. Global Investment House acts as a corporate broker or sponsor to this company.
5. The author of or an individual who assisted in the preparation of this report (or a member of
his/her household) has a direct ownership position in securities issued by this company.
6. An employee of Global Investment House serves on the board of directors of this company.
7. Within the past year , Global Investment House has managed or co-managed a public offering for
this company, for which it received fees.
8. Global Investment House has received compensation from this company for the provision of
investment banking or financial advisory services within the past year.
9. Global Investment House expects to receive or intends to seek compensation for investment
banking services from this company in the next three month.
10. Please see special footnote below for other relevant disclosures.

This material was produced by Global Investment House KSCC (‘Global’),a firm regulated by the Central Bank of
Kuwait. This document is not to be used or considered as an offer to sell or a solicitation of an offer to buy any
securities.Global may, from time to time,to the extent ermitted by law,participate or invest in other financing
transactions with the issuers of the securities (‘securities’),perform services for or solicit business from such
issuer,and/or have a position or effect transactions in the securities or options thereof.Global may,to the extent
permitted by applicable Kuwaiti law or other applicable law or regulation,effect transactions in the securities before
this material is published to recipients.
Information and opinions contained herein have been compiled or arrived by Global from sources believed to be
reliable, but Global has not independently verified the contents of this document.Accordingly,no representation or
warranty,express or implied,is made as to and no reliance should be placed on the fairness,accuracy,completeness or
correctness of the information and opinions contained in this document.Global accepts no liability for any loss
arising from the use of this document or its contents or otherwise arising in connection therewith.This document is not
to be relied upon or used in substitution for the exercise of independent judgement.Global shall have no responsibility
or liability whatsoever in respect of any inac-curacy in or ommission from this or any other document prepared by
Global for,or sent by Global to any person and any such person shall be responsible for conducting his own
investigation and analysis of the information contained or referred to in this document and of evaluating the merits
and risks involved in the securities forming the subject matter of this or other such document.
Opinions and estimates constitute our judgment and are subject to change without prior notice.Past performance is
not indicative of future results.This document does not constitute an offer or invitation to subscribe for or purchase
any securities,and neither this document nor anything contained herein shall form the basis of any contract or
commitment what so ever.It is being furnished to you solely for your information and may not be reproduced or
redistributed to any other person.
Neither this report nor any copy hereof may be distributed in any jurisdiction outside Kuwait where its distribution may be
restricted by law.Persons who receive this report should make themselves aware of and adhere to any such restrictions. By
accepting this report you agree to be bound by the foregoing limitations.

24 Gulf Insurance Company Research Update