Gulf Insurance Group: Insurance

GIG price & index relative performance Gulf Insurance Group market ratios THE COMPANY: Gulf Insurance Group (GIG) was established in 1962 as a Kuwaiti shareholding company and is listed on the Kuwait Stock Exchange with a market capitalisation of $330m. GIG is a market leader in Kuwait in terms of premiums written, both in life and nonlife. GIG provides innovative and comprehensive insurance solutions and covers a variety of risks related to motor, marine and aviation, property and casualty, and life and health insurance both in conventional and takaful, or Islamic insurance. Its major shareholders are Kuwait Projects (KIPCO) and Fairfax Financial Holdings. In 2010 KIPCO and Fairfax Financial Holdings announced an agreement to sell 39.2% of KIPCO’s share in GIG to Fairfax at a price of KD59.9m ($213.9m). Following the deal, KIPCO’s equity stake was reduced to 43%. GIG has grown from being a leading personal and commercial insurer in Kuwait to a regional insurance solutions provider in the MENA region. Its subsidiaries include: Gulf Life Insurance in Kuwait, Bahrain Kuwait Insurance in Bahrain, Arab Misr Insurance Group in Egypt, Syrian Kuwaiti Insurance in Syria, Fajr Al Gulf Insurance & Reinsurance in Lebanon, Arab Orient Insurance in Jordan and Egyptian Life Takaful in Egypt. GIG consolidated assets grew at a seven-year compound annual growth rate (CAGR) of 12% from 2005 to 2012 to record KD298m ($1.06bn) in December 2012. GIG has a solid financial standing stemming from a diversified investment portfolio valued at KD100m ($357.16m) and a cash-rich position, with a total cash balance of KD67m ($239.2m). GIG also has a solid shareholders’ equity base supported by the major shareholders and healthy profits. Shareholders’ equity grew by 10% from KD66.5m ($237.5m) in 2011 to KD72.9m ($260.3m) in 2012 fuelled by strong profits in 2012 and the distribution of 5% bonus shares. GIG’s consolidated assets increased 12% in 2012 to KD298.3m ($1.06bn), up from KD266.8m ($952.9m) at the end of 2011 on the back of growth in its insurance activities and investment portfolio; the group increased its ownership in ALARGAN International Real Estate to 19% by acquiring an additional stake of 6% and 20% equity interest in Alliance Insurance UAE for KD6.73m ($24.03m), increasing the value of investment in associates to KD21m ($75m) from KD13m ($46.6m) in 2011.

GIG has succeeded in delivering healthy and consistent profits to its shareholders over the last 15 years, with aggregate net profit generated over the period 1998-2012 recording KD116m ($414.3m). GIG delivered a yearly average return on average equity (ROAE) of 13.7% over the same period. From 2007-12, GIG grew its operations in line with its expansion strategy in the MENA region. The group posted a five-year CAGR of 14% in gross premiums written (GPW), reaching KD145.4m ($519.3m) in 2012, up from KD74m ($264.2m) in 2007. In 2012 GIG recorded 8.6% growth in GPW from KD133.9m ($478.2m) and 9.7% growth in net premiums written (NPW) to KD73.7m ($263.2m). Revenues grew 30% in 2012 to peak at KD93m ($332.1m) powered by the 16% increase in commission income, which recorded KD10.8m ($38.5m) along with the 7% growth in NPW to KD70m ($250m).

DEVELOPMENT STRATEGY: GIG had maintained its leadership position in Kuwait for the 12th consecutive year and ranked eighth among private insurers in the MENA region in terms of GPW. Through its subsidiaries, GIG remained a market leader in Bahrain, Jordan in terms of GPW and in Egypt in terms of technical profits. GIG obtained Standards & Poor’s interactive financial strength and long-term counterparty credit rating of A-/Stable outlook. GIG works extensively to develop marketing plans and launch new insurance products to serve the local markets’ needs and maintain financial strength and high credit rating for the group and its subsidiaries. The group’s management strives to achieve 7% growth in GPW in 2013 while most of its subsidiaries will likely continue to grow as pioneers in their markets. GIG will continue to seek the best investment opportunities to widen its expansion regionally as well as implement more efficient and effective enterprise risk management functions within the group.