His Highness Sheikh Nawaf Al-Ahmad Al-Jaber Al-Sabah Crown … · 2017-08-16 · 30/3/2016 Talal...

His Highness SheikhSabah Al-Ahmad Al-Jaber Al-Sabah

Emir of Kuwait

His Highness SheikhNawaf Al-Ahmad Al-Jaber Al-Sabah

Crown Prince of the State of Kuwait

1Kuwait Insurance Company S.A.K.P

Kuwait Insurance Company S.A.K.P Kuwait

Annual Report2016

2 Kuwait Insurance Company S.A.K.P


Mr. Ali Morad Yousef Behbehani Chairman

Mr. Talal Mohammad Redha Behbehani Vice-Chairman

Mr. Manaf Mohammad Ahmad Al Hamad Member

Dr. Ali Hamad Al Bahar Member

Mr. Prasanna Dattaray Hardikar Member

Mr. Abdulghani Mohammad Saleh Behbehani Member

Mr. Barrak Abdulmohsen Al Sabeeh Member

Mr. Sami Sharif Chief Executive Officer

Board Members


Board of Directors Report 7

Corporate Governance Report 9

Statement of Financial Position 29

Statement of Income 30

Statement of Comprehensive Income 31

Statement of Changes in Equity 32

Statement of Cash Flows 33

Notes to the Financial Statements 34

Independent Auditor’s Report 59

C o n t e n t s


Board of Directors Report


Board of Directors Report

Dear Shareholders,

We are pleased to present to you our report on the business and activities of the Company for the year ended 31.12.2016. The total underwritten premiums for the year amounted to KD 37,040,510 compared to KD 37,148,558 last year which shows a narrow decline of KD 108,048 equal to 0.29%. Total operating revenue for this year amounted to KD 23,529,071 compared to KD 24,137,157 for the previous year which showed a decrease of KD 608,086 equal to 2.5%.

The net earned premiums for the current year amounted to KD 19,618,468 compared to KD 19,835,706 for the previous year while the commissions earned from reinsurers this year was KD 3,056,255 compared to KD 3,312,775 last year. Other operating revenue sums up to KD 854,348 compared to KD 988,676 last year.

Investment revenue amounted to KD 4,529,289 for this year compared to KD 4,137,407 for the previous year, which shows an increase of KD 391,882 which is approximately 9.5%. The drop in the prices of some of the securities in the Kuwait Stock Exchange in 2016 has had a negative effect on investment returns. After the evaluation of investments the unrealized losses for this year was (KD 8,785,481) against (KD 734,088) for the previous year, which resulted in no profit for this year.

However, this year the shareholders’ equity amounted to KD 58,954,785 compared to KD 57,504,124 for the previous year, which shows an increase of KD 1,450,661 which is equal to 2.5%.

The liquidity ratio was also very high in 2016. This year the fixed deposits, cash and cash equivalents increased to KD 46,873,801 from KD 43,312,460 of the previous year. This displays a difference of KD 3,561,341 which is an increase by 8.22%.

The following is a brief outline of the global and local economic situations:

The most significant agreement among OPEC members was a reduction in the production of 1.2 million barrels per day (bpd) which soared the prices of the crude oil. Regarding the performance of the US economy, which is the largest in the world, it improved later in the year after a slowdown in the beginning of the year. In December, the Federal Reserve decided to raise the interest rates for the first time in 2016.

In the local market and after the rise in oil prices, the government reduced the deficit in the state budget for 2016/2017 from about 12.2 Billions of Kuwait Dinar to about 9.5 billions of Kuwaiti Dinar.

Kuwait Stock Exchange (KSE) recorded a series of sharp declines in its three indices, but managed to offset those losses at the end of the year. The Price Index showed a rise of 2.37% and the Weighted Indices decreased by 0.42% and KSX 15 by 1.71%.

With regard to Reinsurance, there has been a drop in the reinsurance premiums for the year 2016, which can be blamed due to the global crisis that discouraged the market. Furthermore, it is to be noted that in the course of last few years, there has been a steady rise in the number of claims triggered by natural events and 2016 had witnessed some major events like Hailstorms in USA, Fire forest in Canada, Earthquakes & typhoons in Japan and Floods in France and India which has caused havoc for the insurers. There have also been above-average number of mid-sized natural events which has affected the results of the reinsurance treaties. Other factors like slow pace of economic growth and fall in oil prices in Middle East has also led to moderate contraction in the premium booked in the year as well as compromising investment projects. Despite of all these issues, the Reinsurance market will still prolong to be a soft market which is poised to last


much longer for many years. In fact, all the direct insurers have renewed their reinsurance programs without much problem.

Reinsurers are currently facing an extremely competitive market and businesses are being written highly selectively. It is also worthwhile to mention that cyber risks and terrorism covers are gaining more publicity compared to the Mergers & Acquisitions and this trend is expected to increase in the future.

The realized losses for the current year amounted to KD(594,689) against KD 5,690,993 profits for the previous year. By deducting these losses from the previous year’s profits brought forward which is equal to KD 4,976,545, the net distributable profit available is KD 4,381,856.

We, therefore, recommend the General Assembly to approve the distribution of the cash dividends at the rate of 20% or 20 fils per share for a total of KD 3,695,990 after neutralizing the Treasury shares and maintaining the balance of KD 685,866 for the upcoming year.

The Board of Directors undertakes the soundness and integrity of the financial statements related to the Company’s activity for 2016.

The Corporate Governance Report for the year 2016, which also includes the Remunerations Report, has been presented separately in this report.

The following is a statement of the (loss) and distribution of profits:

Net (Loss) during 2016 (594,689)

Profit brought forward from last year 4,976,545

Total Profit available for distribution 4,381,856

Distributed as follows:

1% share of the KFAS -

2.5% National Labour Support Tax -

1% Zakat -

Directors’ Remuneration -

Cash Dividend to Shareholders (20%) 3,695,990

Profit carried forward to the following year 685,866

4,381,856 4,381,856

Ali Morad Behbehani Chairman of Board of Directors


Corporate Governance Report 2016


Kuwait Insurance Company (“KIC”) strives to instill solid corporate governance principles in its business environment to meet supervisory and regulatory requirements and to ensure safeguarding the rights of all stakeholders.

The Governance report of the Company includes the following rules in accordance with CMA instructions:

Rule I: Establishing a Balanced Board Composition

Rule II: Appropriate Allocation of the Roles and Responsibilities

Rule III: Recruiting Highly Qualified Candidates for Members of the Board of Directors and the Executive Management.

Rule IV: Safeguarding the Integrity of Financial Reporting

Rule V: Setting Sound Systems for Risk Management and Internal Control

Rule VI: Promoting Code of Conduct and Ethical Standards

Rule VII: Timely and High Quality Disclosure and Transparency

Rule VIII: Respecting the Rights of Shareholders

Rule IX: Recognizing the Role of the Stakeholders

Rule X: Encourage and Enhance Performance

Rule XI: Focusing on the Importance of Corporate Social Responsibility


Rule I Establishing a Balanced Board Composition

• Summary of Composition of the Board of Directors. The board of directors is composed as follows:

The composition of the Board of Directors of Kuwait Insurance Company is characterized by integrity and diplomacy which commensurate with the nature and business of the Company. The majority of the Board Members are non-executive members. It consists of seven non – executive members three among them are independent members.

KIC Board of Directors consists of seven members elected by the Company’s General Meeting for a period of three years. The structure of the Board of Directors is collectively marked by diverse experiences, qualifications and knowledge in the insurance sector, including familiarity with legal aspects, governance, internal control and risk management, financial and economic management as well as strategic planning.

The table below demonstrates the qualifications and practical experience of the members of the Board of Directors and the date of their membership, as well as the qualifications of the board secretary and the date of his appointment:

• Summary on the formation of the Board of Directors:

Name

Member category (Executive, non-

executive/ Independent)

Board Secretary

Qualifications & Practical Experience

Date of Election /Appointment

of the Board Secretary

Ali Morad Behbehani ChairmanNon - Executive

Bachelor of Arts- English Language & EducationBoard member of National Industries Company. Board member of Gulf Bank

30/3/2016

Talal Mohamed Reda Yusuf Behbehani

Vice ChairmanNon- Executive

Bachelor of Arts- English Language Board member of Aayan Leasing & Investment Company. Board Chairman of Al- Ahli Bank of Kuwait

30/3/2016

Dr. Ali Hamad Al-Bahar Independent Board Member

Doctorate of Philosophy in Insurance Board Member of Kuwait Reinsurance Company

Ex. Positions: Chief Executive Officer of Kuwait Insurance CompanyChairman of the Kuwait Insurance Union

30/3/2016

Manaf Mohamed Ahmad Al-Hamad

Independent Board Member

Master of Business AdministrationAl Sagar Shipping Company Delta Group Company for Technical EquipmentEssence Group Company for Aviation Services

30/3/2016

Abdulghani Mohammad Saleh Behbehani

Non- Executive Board Member

Bachelor of Science - Mechanical EngineeringVice Chairman of Noor Financial Investment CompanyMember of Al Ahli Bank of Kuwait

30/3/2016

Barrak Abdulmohsen Al-Sabeeh

Independent Board Member

Bachelor of Science - Industrial EngineeringChairman of ALAFCO CompanyMember of Kuwait Insurance UnionMember of Complaints Committee, Public–Private Partnership Bureau

12/4/2016


Name

Member category (Executive, non-

executive/ Independent)

Board Secretary

Qualifications & Practical Experience

Date of Election /Appointment

of the Board Secretary

Prasanna Dattatray Hardikar

Non- Executive Board Member

Bachelor of CommerceBoard member of Al- Ahli Bank of Kuwait Board member of Al- Ahli Bank of Egypt

30/3/2016

Khaled Abdul Aziz Soliman Al- Merikhi Member

Master of Business AdministrationMember of the Board of Directors- Boubyan Petrochemicals CompanyVice Chairman- Al Soor Finance Company

2016/3/30

Ahmad Shamlan Al Bahar Board SecretaryBachelor of Science- Civil EngineeringDeputy CEO from 2001 to April 2016 Acting CEO from April 2016 to 15/9/2016

From 11/3/2014

– 11/8/2016

Meshari Abdulrazzaq Al-Nisf Board Secretary Bachelor of Science – Electrical Engineering

Master of Business Administration- Finance Major From

11/8/2016

Mr. Ahmad Shamlan Al Bahar resigned from his position as acting Chief Executive Officer and Board Secretary with effect from 5/ 9/2016.

Summary of the Company’s Board MeetingsMeetings of the Board of Directors in 2016

First: Meeting of the ex- Board before elections

Member Meeting No. 1 held on 15/2/2016

Late Mr. Mohamed Saleh Behbehani (Board Chairman)

Suleiman Khaled Al-Ghanim (Vice Chairman) a

Ali Morad Behbehani (Member) a

Fouad Abdul Rehman AL Bahar (Member)

Talal Reda Mohamed Behbehani (Member) a

Jassim Mostafa Boodai (Member) a

Manaf Mohamed Al-Hamad (Member) a

Dr. Ali Hamad AL Bahar ( Member & Chief Executive Officer) a

Ahmad Shamlan Al Bahar (Deputy Chief Executive Officer and Board Secretary) a


Second: Meeting of Elected Board in the General Meeting held on 30/3/2016

Member

Meeting No. 2

held on 30/3/2016

Meeting No. 3

held on 12/4/2016

Meeting No.4

held on 2/5/.2016

Meeting No. 5

held on 11/5/2016

Meeting No. 6 held

on 9/6/2016

Meeting No. 7

held on 11/8/2016

Meeting No. 8

held on 10/11/2016

Number of meetings held

before and after elected board

1) Ali Morad Behbehani (Chairman) a a a a a a a 8

2) Talal Mohamed Reda Yusuf Behbehani a a a a a a a 8

3) Dr. Ali Hamad Al-Bahar (Independent member) a a a a a a a 8

4) Manaf Mohamed Ahmad Al-Hamad (Independent member)

a a a a a 6

5) Abdulghani Mohammad Saleh Behbehani (Member) a a a a a a a 7

6) Barrak Abdulmohsen AlSabeeh (Independent member)

a a a a 4

7) Prasanna Dattatray Hardikar (Member) a a a a a a a 7

8) Khaled Abdul Aziz Soliman Al- Merikhi (Resigned on 3/4/2016)

a 1

9) Ahmad Shamlan Al Bahar (Board Secretary) a a a a a 5

10) Meshari Abdulrazzaq Al-Nisf a a 2

Mr. Khaled Abdul Aziz Suleiman Al- Merikhi resigned from the Board on 3/4/2016 and Mr. Barrak Abdulmohsen AlSabeeh joined the Board as a substitute.

Dr. Ali Hamad Al-Bahar resigned from his position as the Chief Executive Officer with effect from 13/4/2016.

• Summary on applying registration and coordination requirements and keeping the minutes of the Board meetings

KIC has firm belief in the importance of coordinating and maintaining the minutes of the Board meetings. Therefore, the Company has approved the appointment of the Board Secretary. The duties of the Board Secretary includes maintaining a special register where the minutes of the Board meeting are recorded serially. The minutes indicate the year, venue, date, commencement and conclusion time of the meetings. Apart from these the minutes also include the discussions, deliberations and also the voting processes. The Board Secretary also classifies and archives the same to facilitate and to ensure easy reference.


Rule IIAppropriate Allocation of the Roles and Responsibilities

• A statement illustrating that the Company has set clear policy that identifies the roles, responsibilities and duties for each member of the board and executive management as well as the authorities and powers authorized to the executive management

During 2016, the Company developed and reviewed policies, regulations and job descriptions that describe the roles and responsibilities of the executive management and the Board of Directors. These include the following:

1. Setting job descriptions for members of the Board and Executive Management.

2. Redesigning the delegation of authorities matrix for the Executive Management.

3. Reviewing the policies and procedures that clearly identify the tasks and responsibilities of the Board of Directors and the Executive Management reflecting a balance of authorities and separation of powers between the Executive Management and Board of Directors.

• Achievements of the Board of Directors in 2016

The Board of Directors has successfully accomplished the following in implementing corporate governance system: -

1. Approving updated Policies and Procedures for the application of corporate governance rules.

2. Overseeing the activities of the Company’s business through regular meetings with the Executive Management and discussing the results of the Company’s business through periodic reports.

3. Reviewing and updating Corporate governance policies and procedures in accordance with the Company’s organizational Structure and to keep pace with leading international corporate governance practices.

4. Performing corporate governance self-assessment across the Company and identifying aspects that require development.

5. Reviewing the periodic reports and recommendations of the Audit Committee, the Nomination and Remuneration Committee, Risk Management Committee

6. Conducting a review and assessment of the efficiency of the Board and Committees of the Board as well as performing a self-assessment for the Board members

7. Recomposing the Committees of the Board of Directors and reassigning positions in the Board

8. Reappointing the Chief Executive Officer for the Company.

9. Approving the financial and operational powers of the Chief Executive Officer “CEO”.

10. Enforcing the Company’s corporate governance system, approving corporate governance manual and continuous emphasis on identifying sound corporate governance practices across the Company by reviewing the methods that confirm applying professional standards and corporate values as per the Charter of Professional Conduct & Ethics.


• A statement about implementing the requirements of the board commitment for forming specialized independent committees and stating details of each Committee

Within the framework of the advanced role undertaken by the Board of Directors in respect of oversight, strategic planning, corporate governance, risk management and regulatory controls the Company, board Committees have been formed to undertake their functions efficiently and effectively. The Board committees are as follows:

Board of Directors

Risk Management Committee Audit Committee Nomination & Remuneration Committee

Board Secretary

1. Board Audit Committee

The Board of Directors carefully performs their duties concerning supervision on the quality and integrity of the accounting practices, audit and internal control. Therefore, the Board Audit Committee was composed on 2/5/2016 in accordance with the regulatory and supervisory requirements.

The Committee undertakes a supervisory role supporting the Board of Directors in controlling and supervising the efficiency and independence of internal and external audits of the Company in addition to overseeing the preparation of periodic financial statements and Internal Control Review reports.

Audit Committee’s roles and achievements during 2016 were as follows:

1. Giving recommendation to the Board of Directors about the appointment of the chief internal auditor and determining his remuneration.

2. Reviewing the organizational structure of the Internal Audit Department.

3. Reviewing the job description, the rules and responsibilities of Internal Audit Department.

4. Reviewing the interim financial statements and recommending the Board of Directors for the approval.

5. Reviewing the Policies & Procedures Manual of Internal Audit Department.

6. Reviewing the action plan of the Internal Audit Department.

7. Reviewing and approving the risk assessment-based action plan of the Internal Audit Department.

8. Assigning an independent audit firm to prepare a report on the adequacy of the internal control systems (ICR) applicable in the Company.

9. Preparing the annual report of the Board Audit Committee for presentation at the General Meeting.


• Members of the Committee

Name Position Academic Qualifications and practical experience

Election/ Appointment of

the Secretary

Dr. Ali Hamad Al Bahar Committee Chairman

Doctorate of Philosophy in Insurance 30/3/2016

Barrak Abdulmohsen AlSabeeh MemberBachelor of Industrial Engineering 12/4/2016

Prasanna Dattatray Hardikar Member Bachelor of Commerce 30/3/2016

• Summary of the Board Audit Committee’s Meetings

First: Meetings of previous Board before Elections

Member’s Name Meeting No. 1 held on 15/2/2016

Jassim Mostafa Boodai – Committee Chairman aSulieman Khaled AlGhunaim (Member) aTalal Mohamed Reda Behbehani (Member) aAhmad Shamlan AlBahar (Board Secretary) a

Second: Audit Committee Meetings 2016– Board Member elected on 30/3/2016

Member

Meeting No. 2

held on 4/5/2016

Meeting No. 3

held on 8/8/2016

Meeting No. 4 held on

19/10/.2016


10/11/2016

No. of meetings

1. Dr. Ali Hamad Al Bahar (Committee Chairman) a a a a 4

2. Barrak Abdulmohsen AlSabeeh (Member) a a 2

3. Prasanna Dattatray Hardikar (Member) a a a a 4

4. Ahmad Shamlan Al Bahar (Acting CEO and Board Secretary) a a 2

Meshari Abdul Razzaq AL Nisf (Board Secretary) a a 2

2. Risk Management Committee

The Board of Directors strive to improve the key operations of the Company. Therefore, a Board Risk Management Committee was established for a tenure of three years. The Board has set clear roles and responsibilities for the Committee by setting and approving Risk Committee Charter. The Risk committee initiated its mission and meetings even before the official implementation of the corporate governance rules issued by the Capital Market Authority(CMA) acknowledging the significance of this committee.

After re-election of the Board of Directors, the Committee was recomposed and three meetings were held during the year. The Committee functions were reorganized in the Third Quarter of 2016 (Official implementation of the corporate governance instructions issued by CMA). The Committee has approved an external independent consultancy firm for supporting Risk Management across the Company.


The Committee assists the Board of Directors in performing its responsibilities for risk management by monitoring and assessment of the risk framework, risk appetite and risk strategy in light of the Company’s overall strategy.

Risk Committee’s roles and achievements during 2016 were as follows:

1. Review the organizational structure of the Risk Management Department;

2. Review the job description, roles and responsibilities of Risk Management Department;

3. Review the risk management policies;

4. Review the overall framework of risk assessment and management.

5. Recommend setting the risk management strategy, risk appetite and presenting the same to the Committee in the beginning of 2017.

• Members of the Risk Committee

Name Position Academic Qualifications and practical experience

Election/ Appointment of

the Secretary

Prasanna Dattatray Hardikar Committee Chairman Bachelor of Commerce 30/3/2016

Dr. Ali Hamad Al Bahar (Committee Chairman) Member Philosophy Doctorate in Insurance 30/3/2016

Barrak Abdulmohsen AlSabeeh Member Bachelor of Industrial Engineering 12/4/2016

• Summary of Risk Committee Meetings :



Jassim Mostafa Boodai – Committee Chairman aSulieman Khaled AlGhunaim (Member) aTalal Mohamed Reda Behbehani (Member) aAhmad Shamlan AlBahar (Board Secretary) a

Second: Risk Committee Meetings 2016– Board Member elected on 30/3/2016

Member Meeting No.

2 held on 4/5/2016


19/10/2016

No. of meetings

1. Prasanna Dattatray Hardikar (Chairman) a a 2

2. Dr. Ali Hamad Al Bahar (Member) a a 2

3. Barrak Abdulmohsen AlSabeeh (Member) a a 2

3. Nomination & Remuneration Committee

The Board Nomination & Remuneration Committee was composed for a period of three years. The primary role of the members of the committee was to set criteria for the nomination of Board Members and to set up a mechanism for remuneration assessment.


The Committee is responsible for making recommendations about appointing the members of the Board of Directors and re-election at the General Meeting, in addition to annual self-assessment of the performance of the Board members. The Committee is also responsible for reviewing the remuneration of the Board members and executive management in accordance with the Company’s long-term objectives.

Committee’s roles and achievements during 2016 were as follows:

1. Setting an induction program for members of the Board of Directors and Executive Management.

.. Reviewing the criteria for selecting the Board members and the Executive Management and recommending approval.

3. Reviewing the process of the Board and Executive Management member’s assessment and recommending approval.

4. Developing job descriptions for the board members.

5. Conducting interviews for the candidates to the positions of senior management and recommending appointment of qualified candidates.

6. Conducting self – assessment for the board of directors.

7. Reviewing the overall framework of remuneration packages to the members of the Board.

Summary of Nomination & Remuneration Committee Meetings before the elections of the Board of Directors:



Manaf Mohamed Al Hamad a

Ali Morad Yusuf Behebani a

Fouad Abdul Rehaman Al Bahar

Ahmad Shamalan AlBahar (Board Secretary) a

Second: Nomination & Remuneration Committee Meetings 2016– Board Member elected on 30/3/2016


Ali Morad Yusuf Behebhani a

Manaf Mohamed Al Hamad a

Abdul Ghani Mohamed Saleh Behebhani a

Barrak Abdulmohsen AlSabeeh (Member) a

• A statement on applying the requirements that enable members of the Board of Directors to get information and data accurately and in a timely manner: -

Board of Directors cares to ensures provision of all required information and data accurately and in a timely manner. Therefore the Company has approved reports matrix that defines the responsibilities of preparation, review, approval and regularity. This process allows the board members to obtain information and data accurately and on timely manner.


Rule IIIRecruit Highly Qualified Candidates for the Members of the Board of

Directors and the Executive Management

• A brief summary about the requirements for the formation of the Nomination & Remuneration Committee.

In compliance with CMA instructions, the Company has formed the Nomination & Remuneration Committee to recommend the appointment of the members of the Board of Directors and their re-nomination in the General Meeting, as well as conducting the self - assessment of the performance of the Board members. The Committee is also responsible for assessing the remuneration package of the Board members and Executive Management in accordance with the Company’s long-term objectives.

The Charter of the Nomination & Remuneration Committee describes all the conditions and requirements of the formation of the Committee in accordance with corporate governance rules as set out in the Executive Bylaws of the Capital Markets Authority in respect of the membership conditions, term and all other requirements.

• Report on the remunerations granted to members of the Board of Directors and Executive Management.

First: bonuses and incentive system for the members of the Board of Directors and Executive Management

KIC applies a firm framework for calculation of bonuses and incentives to members of the Board of Directors and Executive Management. Incentives scheme framework applies the principle of equal opportunities and transparency. It links rewards and incentives to performance assessment levels across the company as well as individual’s performance. The Company is keen to adopt leading practices in linking rewards to corporate performance levels over long term by connecting performance to achieving the company’s strategic goals and the levels of risk exposure.

Second: Details of the Members of the Board and Executive Management’s remuneration packages such as cash, benefits and privileges and analysis of remuneration categories.

A. Remunerations to members of the Board of Directors

• No remunerations were paid to the Board of Directors as the Company’s results did not allow such payment.

B. Remunerations to Committees of the Board of Directors

Fixed remuneration category

(KD)

Variable remuneration category

(KD)

Total annual remuneration and benefits

(KD)

Zero KD 98,000 KD 98,000


C. Remunerations to the Vice Chairman of the Board of Directors of KD 14,500 in consideration of overall supervision and following up executive roles in the Company.

D. Remunerations to the executive management, including the CEO and CEO’s Assistants:


(KD)


(KD)


(KD)

KD 261,030 KD 49,025 KD 310,055

Third: Remunerations given to CEO and executive management members who obtained the highest amount from the company including the Chief Financial Officer “CFO”


(KD)


(KD)


(KD)

KD 285,030 KD 55,025 KD 340,055

Fourth: Any other remuneration given directly or indirectly by the company or its Subsidiary Companies. (Not Applicable)

Fifth: Any substantial deviations from remuneration policy approved by Board of Directors. (There were no substantial deviations)

Rule IVSafegaurding the Integrity of Financial Reporting

• Written undertakings by the Board of Directors and Executive Management about soundness and integrity of financial reporting

To ensure the integrity of financial reporting, the Executive Management has provided a written undertaking to the Board of Directors that the financial reports were presented properly and fairly and that it reviewed all financial aspects of the Company in accordance with the International Accounting Standards approved by CMA. In addition to the above, the annual report presented to the shareholders by the Board of Directors includes an undertaking about the soundness and integrity of all financial statements and reports. This aims at strengthening or promoting the principle of accountability, whether management accountability before the Board of Directors, or Board of Directors accountability before shareholders.

• A statement on Implementing Audit Committee Formation Requirements

Kuwait Insurance Company in its endeavor to comply with the CMA regulations has formed a Board Audit Committee. The Committee is responsible for assisting the Board of Directors in performing its obligations with regard to overseeing the quality and integrity of the accounting practices, auditing and internal controls, risk management framework, financial reports, general framework of corporate governance and the Company’s relationship with external auditors.


It should be taken into account that the roles and responsibilities of the Committee and all conditions relating to its formation have been defined in the Audit Committee charter approved by the Board of Directors.

In case of conflict between the recommendations of the Audit Committee and the decisions of the Board of Directors, a statement illustrating and explaining the recommendations and the reason(s) for Board of Directors’ decision for non- compliance should be included.

In compliance with the highest standards of transparency, the Company has developed a process that ensures, in case of, conflict between the recommendations of the Audit Committee and the decisions of the Board of Directors in respect of the external auditors and the internal auditors, the Board of Directors in such conflict case shall include in its corporate governance report, a statement detailing clearly these recommendations and the reason(s) for the Board of Directors’ decision for non- compliance.

It should be noted that there was no conflict between the recommendations of the Audit Committee and the decisions of the Board of Directors in 2016.

• Ensuring the independence and impartiality of the external auditor.

The Board of Directors is keen to avoid potential conflict of interests. The Board Audit Committee ensures the independence and impartiality of the external auditor by setting standards and principles to assess its independence so that the Committee can recommend the Board of Directors on the appointment, re-appointment or replacement of the auditor.

Rule VSetting Sound Systems for Risk Management & Internal Control

• A brief summary about implementing the requirements for the formation of an independent department / office / unit for Risk Management

The Company firmly believes in the importance of having independent department for Risk Management. Therefore, The board of directors approved the appointment of Chief Risk Officer “CRO”. The CRO shall measure, monitor and mitigate all types of risks encountered by the Company. The Board of Directors also approved the engagement of an independent and specialist consultancy firm to provide technical support to the Chief Risk Officer.

Risk Management Department has full independence by directly reporting to the Board of Directors. This is clearly illustrated by the organizational structure approved by the Board of Directors, that the Company will have an independent unit/department of Risk. The Risk Management Department “RMD” is not assigned with any tasks related to the operating activities of the Company to enable RMD carry out its duties and responsibilities perfectly.

• Brief Summary about Implementing the requirements for the formation of Risk Committee.

The Board has formed a Board Risk Committee to meet all CMA requirements. The Board, inter alia, takes into account that the Board Chairman is not a member of the Committee. The roles


and responsibilities, membership term and Committee’s functioning have been defined in the Risk Committee Charter approved by the Board.

The Committee aims at improving the Board effective supervision by entrusting the Committee with the tasks related to all aspects of risk management, including, assisting the Board of Directors to identify and evaluate the Company’s acceptable risk level, and ensure that the Company does not exceed this level.

• Summary illustrating internal control systems

The Board of Directors strives to ensure adequacy and effectiveness of the internal control systems necessary to protect the Company’s business, ensure compliance with such systems and use internal controls as means that provide necessary protection for the Company against any internal or external risks. The Company is keen to have internal control over all its activities. The Company has set up independent control departments, including internal audit, compliance and risk management, all of which are reporting to the Board of Directors.

• A Brief Summary about implementing the requirements of the establishment of an independent department/ office/ unit for Internal Audit

In order to comply with the rules defined by the CMA, the Company has established a fully independent Internal Audit Department reporting to the Audit Committee and the Board of Directors. The Board has defined the roles and responsibilities of the Internal Audit Department. The Internal Audit Department is committed to implementing the plans and deals with an independent consultancy firm for providing internal audit services for supporting the Company.

Rule VIPromoting Code of Conduct and Ethical Standards

• Summary on Business Charter including Standards and Parameters for the Code of Conduct and Ethics

The key principles of the Business Charter are integrity, excellence, accountability and respect. The Company approved the business charter which was developed keeping in mind the best practices and professional conduct in this field. It is the duty of the shareholders and stakeholders to abide by the laws and rules mentioned in the business charter and to act in good faith for the best interests of the company. It also provides the opportunity to the members of the Board of Directors, Executive Management and staff to achieve the Company’s objectives.

The Company has prepared a set of policies and procedures that ensure the assets and resources of the Company are not misused for pursuing personal interests. Following is a brief summary of these principles:

Related Parties Transactions

Related Parties Transactions Policy describes guidelines on how to conduct and manage transactions with related parties, whether such transactions between the company and members of the Board of Directors or the Executive Management and employees.


Information Confidentiality & Security

Board of Directors, Executive Management and staff are committed to maintaining the confidentiality of information and data related to the Company. Policies and procedures have been set to avoid leakage of any insider information that will harm the interests of dealers with the Company.

Whistleblowing Policy

The whistleblowing policy provides all employees with a work environment marked with cooperation and transparency. The Company allows its staff to convey their concerns in respect of any irregularities or misconduct or ill practices to the Board of Directors. This process is undertaken within a framework that ensures maintaining the confidentiality and protection of the whistleblower and in conducting the necessary investigation and supervision of those issues.

• A summary of the policies and process for limiting conflict of interest

The Company tries to eliminate any potential conflicts of interest. Therefore, a policy for conflict of interest has been prepared. The policy sets guidelines for identifying, notifying, reporting, disclosing and preventing conflicts of potential interest or applying strict constraints for potential conflict of interest. The Company has developed appropriate procedures to detect significant conflicts of interest and to manage them effectively. It also ensures that the Board of Directors handle the current and potential conflicts of interest and take decisions in the best interests of the Company.

Rule VIITimely and High Quality Disclosure and Transparency

• A summary on applying processes for transparent and accurate disclosure that determine disclosure areas, fields and characteristics

The Company implements the disclosure and transparency policies and procedures and has full disclosure matrix that covers all information that should be disclosed to the Capital Markets Authority and other stakeholders in the Company. The Company’s website provides a clear and easy access to all dealers with the company, shareholders and the public for obtaining full and accurate information as well as disclosed information. Disclosure categories cover the following:

• Disclosure of material information;

• Disclosure of key shareholders 5% and over;

• Disclosure of interests;

• Disclosure of insiders list and updates to the list;

• Other releases

• Summary about applying disclosures register requirements for members of the Board and executive management

The Company keeps a register for disclosures for the members of the Board and Executive Management. The register is kept in the custody of the Board Secretary who periodically updates the register.


• A brief statement about applying the requirements for establishing Investors Affairs Unit

For its commitment to provide all information to current and potential investors, the Company has established a unit for organizing Investors Affairs. It is an independent unit reporting directly to the CEO. The Investors Affairs Unit is responsible for identifying key information to be provided to current shareholders of the Company and potential investors, dealing with shareholders and investors, and providing information on the company’s activities and financial position at the right time.

• Summary about development of the information technology infrastructure and its high reliability in the disclosures process

The Company has created an exclusive section for Corporate Governance in its website, which is used as a platform to communicate with a large number of shareholders, stakeholders and investors. The updated information is available on the website which will help the current and potential shareholders and investors to have access to their rights and evaluate the Company’s performance. The Company makes continuous efforts to update the disclosure process regularly.

Rule VIIIRespecting the Rights of Shareholders

• A Summary on applying the requirements of identifying and protecting general shareholders’ rights to ensure fair and equal treatment for all shareholders

Protecting shareholders rights is a key requirement stipulated by Corporate Governance rules and the Companies Law. The Company has made commitment to provide the highest level of transparency and equality standards in all current or potential transactions with shareholders. The Company has prepared a policy that ensures identification and protection of shareholders’ rights which is in accordance with the Company’s Articles of Association, policies, internal regulations, procedures and necessary controls. A sound governance system is in place to ensure that all shareholders have access to their rights in equal and fair manner without prejudice to laws, regulations, decisions and instructions. The Company also seeks to treat all shareholders; owners of the same type of equities on equal basis and without any discrimination.

• A Summary on creating a special register kept at the clearing agency as part of the requirements for ongoing follow-up of shareholders information

The Company performs ongoing follow up on all matters related to shareholders information. Therefore, it has created and maintained a special register which is kept at the clearing agency. The shareholders name, nationality, domicile and number of shares owned by each of them are recorded in the register. The register is updated to include any changes according to the information received by the Company or the clearing agency. Any concerned party is entitled to ask the Company or the clearing agency to provide him with information from that register.


• Summary on encouraging shareholders to participate and vote at the Company’s General Assembly Meetings

The Company is keen on facilitating and clarifying the role of shareholders in the General Assembly meetings. It has set up a process for voting and participating in the general assembly meetings, making it clear that shareholders are entitled to vote on the decisions at the meetings. This is an integral right of all the shareholders regardless of their different classes and levels as stipulated in the Company’s articles of association, memorandum of association and in the policy of protecting shareholders’ rights. The Company organizes public meetings for shareholders to enable them to participate effectively in the general assembly meetings and discuss items on the agenda. The Company is also keen to give access to shareholders to all the information in the Disclosures Register of the Board Members and the Executive Management.

Rule IXRecognizing the Role of the Stakeholders

• Brief Summary on the systems and policies that ensure protection and recognition of stakeholders rights

For its commitment to recognize and protect the rights of stakeholders, the Company has developed Stakeholders Protection Policy. This policy has been designed to ensure respect and protection of the stakeholders rights in accordance with the laws and regulations issued by the relevant regulatory authorities.

The objective of Stakeholder Rights Policy is to ensure respect and protection of the rights of the stakeholders in accordance with the relevant laws and regulations.

The Company has also protected the rights of all stakeholders and provided job stability and growth sustainability through good financial performance. Parties defined as stakeholders have been stated in the policy. The Company sets guidelines for how to protect stakeholders rights.

• Summary about encouraging stakeholders to participate in the follow-up of the Company’s various activities

Within its efforts towards protection of the stakeholders rights, The Board has identified the Company’s stakeholders as follows:

Ø Shareholders: Shareholders’ Rights Protection Policy has been developed as stipulated in law and regulations and as part of the Company’s corporate governance framework. In addition, effective communication with shareholders has been established to know their views on various matters about the Company.

Ø Regulators: The Company is committed to the laws, Executive Bylaws and instructions issued by CMA, Ministry of Commerce & Industry and any other relevant regulators. The Company is always keen on maintaining a good relationship with all the regulatory bodies. The Company cooperates with CMA and other relevant regulatory bodies during inspections and in providing information and data, books, records and tools and statistics upon request by the regulator’s representatives or by any regulating authorities like the CMA and relevant regulatory entities.


Ø Customers: The Company provides best services and products to its customers, regularly follows up on customers’ suggestions and complaints and enhances better communication with them through modern means of communication. This provides the customer an opportunity to access support from the company on time and quite easily. The Company applies the principle of participation and transparency with customers through obtaining their views and suggestions before launching any new product or project into the market. The Company monitors and analyses these views and prepares a report thereon to the concerned decision makers to take appropriate action in favor of our customers.

Ø Employees: Employing of national manpower and developing skills of the Company’s staff are top priority. The Company focuses on providing professional development opportunities and necessary training programs and makes effort to recruit and train best national calibers.

Rule XEncourage and Enhance Performance

• A summary on applying the requirements for developing mechanisms that allow the Board Members and Executive Management to attend Training Programs and Courses Regularly

Kuwait Insurance Company works on developing the skills of the members of the Board of Directors and Executive Management by developing mechanisms for training areas for them. The Board has approved induction programs for new members to ensure that they have clear understanding of the Company’s business and operations. Key areas of training to the board members are as follows:

• Anti - Money Laundering and Combating the Financing of Terrorism;

• Corporate Governance

• Risk Management

• Summary about the process of performance assessment of the Board of Directors collectively and the performance of each member of the Board and the Executive Management.

The Company has established systems and mechanisms to assess the performance of each member of the Board and the Executive Management on a regular basis through developing a set of performance measurement indicators linked to the extent of achieving the Company’s strategy and the adequacy of the internal control systems. During the year, self–assessments were undertaken for all the members of the Board of Directors, committees and the Board itself. The self-assessment results include a plan for developing the board activities and identifying development and training areas required for the members in 2017.

• Summary of the Board’s efforts for corporate Value Creation for employees in the Company through achieving strategic Objectives and improving performance rates.

The Board of Directors strives for creating corporate values across the Company in the short, medium and long term. Therefore, it approved Business Conduct Charter which confirms that there are in place means for applying such practices and compliance with the highest professional standards and corporate values. The Board has also sought link to commitment to the corporate values with the performance assessment rates of the Company’s employees to ensure achieving the Company’s strategic goals.


Rule XIFocusing on the Importance of Corporate Social Responsibility

• A summary on developing a policy that ensures balance between the Company’s goals and society goals

For its responsibility towards both the society and staff, Kuwait Insurance Company has set and approved a policy to ensure achieving the Company’s goals as well as society goals. The Company is committed to streamline its values and business strategy with the social and economic needs while offering needed support to the society to achieve business interests and social benefits in the long-term and ensure Company’s business continuity in a manner that mitigates harmful impact on society and the environment. The Company has developed strong foundations of effective framework for corporate social responsibility, including responsibilities towards society, environmental responsibilities, and responsibilities towards various segments of the society, stakeholders participation and staff development.

The company is also working on increasing the awareness of social responsibility among employees by increasing knowledge and awareness of the significance of corporate social responsibility programs. The Company has undertaken activities to develop knowledge related to corporate social responsibility among the staff which will in turn increase the profitability and enhance the reputation of the company.

• Summary about the programs and mechanisms helping to highlight the Company’s exerted efforts in the field of social work

During the year, the Company conducted a project for developing and supporting national labor as part of its social responsibility. This was embodied by holding several workshops and training courses to national fresh graduates in various technical issues with the aim of training and increasing the efficiency of those with caliber. Below are key subjects covered by the training and development programs:

• Corporate Governance

• Risk Management

• Technical workshops on managing insurance operations

During the year, the company was keen on coordinating with several universities in the State of Kuwait to attract national calibers with excellent academic qualifications to avail job opportunities under the training and development programs extended to national calibers.


Statement of Financial Position 2016


Statement of Financial Position31 December 2016

(All amounts are in Kuwaiti Dinars)

Note 2016 2015

ASSETS

Property and equipment 3 1,363,077 1,509,118

Investment property 29,780 29,780

Loans secured by life insurance policies 260,300 290,078

Investments available for sale 4 62,062,079 63,393,170

Due from insurance and reinsurance companies 4,825,848 5,178,261

Reinsurance companies’ share of reserve for outstanding claims 30,365,962 29,555,834

Trade and other receivables 5 7,909,585 7,418,056

Fixed deposits with banks 6 42,342,492 40,281,259

Cash and cash equivalents 7 4,531,309 3,031,201

Total assets 153,690,432 150,686,757

EQUITY AND LIABILITIES

Equity

Share capital 8 19,404,000 19,404,000

Statutory reserve 8 9,702,000 9,702,000

Voluntary reserve 8 17,500,000 17,500,000

Treasury shares 9 (3,007,575) (3,007,575)

Change in fair value reserve 10,974,504 5,233,164

Retained earnings 4,381,856 8,672,535

Total equity 58,954,785 57,504,124

Liabilities

Technical reserves 10 76,522,322 75,366,577

Insurance and other payables 11 10,219,640 10,702,841

Due to insurance and reinsurance companies 7,993,685 7,113,215

Total liabilities 94,735,647 93,182,633

Total equity and liabilities 153,690,432 150,686,757

The accompanying notes form an integral part of these financial statements

Ali Morad Behbehani Talal Mohammed Reda Behbehani Sami Sharif

Chairman Vice-Chairman Chief Executive Officer


Statement of Income31 December 2016


Note 2016 2015

Revenue

Gross premium revenue 37,040,510 37,148,558

Premium ceded to reinsurers (17,308,219) (17,573,131)

Net premium revenue 19,732,291 19,575,427

Change in reserve for unexpired risks (113,823) 260,279

Premiums earned 19,618,468 19,835,706

Commission earned 3,056,255 3,312,775

Investment income 12 4,529,289 4,137,407

Other income 854,348 988,676

28,058,360 28,274,564

Expenses

Net incurred claims losses (9,104,542) (11,012,353)

Change in reserve for life insurance fund (1,799,319) (1,689,483)

Life insurance - expiry settlement (712,120) (697,682)

Life insurance - policies liquidated (268,802) (232,191)

Commissions paid (3,443,847) (3,419,261)

General and administrative expenses (4,438,635) (4,506,054)

Participants rights (100,303) 15,005

(19,867,568) (21,542,019)

Profit before provisions, contribution to taxes and remuneration 8,190,792 6,732,545

Impairment loss on investment securities (8,785,481) (734,088)

(Loss) / profit before taxes and remuneration (594,689) 5,998,457

Board of Directors remuneration - (56,000)

Kuwait Foundation for Advancement of Science (KFAS) - (59,985)

National Labour Support Tax - (136,771)

Zakat tax - (54,708)

Total contribution to taxes and remuneration - (307,464)

Net (loss) / profit for the year (594,689) 5,690,993

(Losses) / earnings per share (fils) 13 (3.22) 30.69



Statement of Comprehensive Income31 December 2016


2016 2015

Net (loss) / profit for the year (594,689) 5,690,993

Other comprehensive income items:

Items that are or may be reclassified subsequently to statement of income

Changes in fair value of investments available for sale (3,040,453) (4,983,660)

Transferred to statement of income on sale of investments available for sale (3,688) (310,234)

Impairment of investments available for sale 8,785,481 734,088

Other comprehensive income / (loss) for the year 5,741,340 (4,559,806)

Total comprehensive income for the year 5,146,651 1,131,187

The accompanying notes are an integral part of these financial statements

32 Kuwait Insurance Company S.A.K.PSt

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Statement of Cash FLows31 December 2016


Note 2016 2015Cash flows from operating activities

Net (loss) / profit for the year (594,689) 5,690,993Adjustments for:

Investment income 12 (4,529,289) (4,137,407)Depreciation 156,523 238,137Impairment loss on investment securities 8,785,481 734,088Staff terminal benefits 282,036 190,023Operating profit before working capital changes 4,100,062 2,715,834Decrease in due from insurance and reinsurance companies 352,413 11,128(Increase) / decrease in trade and other receivables (415,472) 1,527,276Increase in technical reserves 345,617 2,144,727(Decrease) / increase in Insurance and other payables (527,284) 374,660Increase in due to insurance and reinsurance companies 880,470 96,231Cash generated from operating activities 4,735,806 6,869,856Payment of staff terminal benefits (307,949) (75,839)Net cash generated from operating activities 4,427,857 6,794,017

Cash flows from investing activities

Paid for purchase of property and equipment (10,482) (92,093)Proceeds from sale of investments properties - 155,207Net movement of loans secured by life insurance policies 29,778 (60,058)Purchase of investments available for sale (1,754,437) (8,718,156)Proceeds from sale of investments available for sale 132,157 984,522Net movement in fixed deposits with banks (2,061,233) (5,333,325)Dividend received 3,303,503 3,004,875Interest received 1,058,959 767,114Net cash generated from / (used in) investing activities 698,245 (9,291,914)

Cash flows from financing activities

Dividends paid to shareholders (3,625,994) (3,725,091)Purchase of treasury shares - (330,606)Net cash used in financing activities (3,625,994) (4,055,697)

Net increase / (decrease) in cash and cash equivalents 1,500,108 (6,553,594)Cash and cash equivalents at beginning of the year 3,031,201 9,584,795Cash and cash equivalents at end of the year 7 4,531,309 3,031,201



Notes to the Financial Statements


Notes to the Financial Statements31 December 2016


1. Incorporation and objectives

Kuwait Insurance Company S.A.K.P, (the Company) is a Kuwaiti Public Shareholding Company established in Kuwait in 1960 by Amiri Decree No. 7 of 1960, and registered with the Ministry of Commerce in accordance with the Insurance Companies and Agent Law No. 24 of 1961 under Insurance license No. 1.

The objects of the Company are to underwrite life and non-life insurance risks such as fire, general accidents, marine and aviation, lend funds against life insurance policies; and to invest in permitted securities and real estate properties. The Company also engages in underwriting all types of risks under the Takaful insurance law.

The registered office of the Company is located at Kuwait Insurance Building, Abdullah Al-Salem Street, Kuwait. P.O. Box 769 Safat 13008, Kuwait. The Company has 13 branches in the State of Kuwait.

On 1 February 2016, the new Companies Law no. 1/2016 was published in the Official Gazette which is effective from 26 November 2012. According to the new law, the companies law no. 25 of 2012 and its amendments have been cancelled. The new Executive Regulations of Law No. 1 of 2016 was issued on 12 July 2016 and was published in the Official Gazette on 17 July 2016, which cancelled the Executive Regulations of Law No. 25 of 2012. Companies should make necessary arrangements to be in compliance with provisions of the new law within six months from the new executive regulations effective date.

These financial statements have been approved for issue by the Board of Directors on 14 February 2017, and are subject to shareholders’ approval at the annual general meeting.

2. Basis of preparation and significant accounting policies

2.1 Basis of preparation

These financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) issued by International Accounting Standards Board (IASB). These financial statements are prepared under the historical cost basis of measurement as modified by the revaluation of financial instruments classified as “available for sale”. The financial statements have been presented in Kuwaiti Dinar.

The preparation of financial statements in conformity with International Financial Reporting Standards requires management to make estimates and assumptions that may affect amounts reported in these financial statements, as actual results could differ from those estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting policies. The areas where estimates and assumptions are significant to the financial statements, or areas involving a higher degree of judgment, are disclosed in Note 20.


2.2 Application of new and revised International Financial Reporting Standards (IFRSs)

2.2.1 New and revised IFRSs applied with no material effect on the financial statements

The following new and revised IFRSs, which became effective for annual periods beginning on or after 1 January 2016, have been adopted in these financial statements. The application of these revised IFRSs has not had any material impact on the amounts reported for the current and prior years but may affect the accounting for future transactions or arrangements.

• Amendments to IAS 1 Presentation of Financial Statements relating to Disclosure initiative

• Amendments to IFRS 11 Joint arrangements relating to accounting for acquisitions of interests in joint operations

• Amendments to IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets relating to clarification of acceptable methods of depreciation and amortisation

• Amendments to IAS 16 Property, Plant and Equipment and IAS 41 Agriculture: Bearer Plants

• Amendments to IAS 27 Separate Financial Statements relating to accounting investments in subsidiaries, joint ventures and associates to be optionally accounted for using the equity method in separate financial statements

• Amendments to IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities and IAS 28 Investment in Associates and Joint Ventures relating to applying the consolidation exception for investment entities

• Annual Improvements to IFRSs 2012 – 2014 Cycle covering amendments to IFRS 5, IFRS 7, IAS 19 and IAS 34

2.2.2 New and revised IFRS in issue but not yet effective

The Company has not yet applied the following new and revised IFRSs that have been issued but are not yet effective:

New and revised IFRSs

• Annual Improvements to IFRS Standards 2014 – 2016 Cycle amending IFRS 1, IFRS 12 and IAS 28. The amendments to IFRS 1 and IAS 28 are effective for annual periods beginning on or after 1 January 2018, the amendment to IFRS 12 for annual periods beginning on or after 1 January 2017.

• Amendments to IAS 7 Statement of Cash Flows to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities. Effective for annual periods beginning on or after 1 January 2017.

• Amendments to IAS 40 Investment Property: Amends paragraph 57 to state that an entity shall transfer a property to, or from, investment property when, and only when, there is evidence of a change in use. A change of use occurs if property meets, or ceases to meet, the definition of investment property. A change in management’s intentions for the use of a property by itself does not constitute evidence of a change in use. The paragraph has been amended to state that the list of examples therein is non-exhaustive. Effective for annual periods beginning on or after 1 January 2018.

Notes to the Financial Statementsfor the year ended 31 December 2016

(All amounts are in Kuwaiti Dinars unless otherwise stated)


IFRS 9 Financial Instruments (revised versions in 2009, 2010, 2013 and 2014)

• The IFRS 9 in its final form is effective for annual periods beginning on or after 1 January 2018. IFRS 9 contains accounting requirements for financial instruments and replaces IAS 39 Financial Instruments: Recognition and Measurement. The standard contains requirements in the following areas:

• Classification and measurement: Financial assets are classified by reference to the business model within which they are held and their contractual cash flow characteristics. The 2014 version of IFRS 9 introduces a ‘fair value through other comprehensive income’ category for certain debt instruments. Financial liabilities are classified in a similar manner to under IAS 39, however there are differences in the requirements applying to the measurement of an entity’s own credit risk.

• Impairment: The 2014 version of IFRS 9 introduces an ‘expected credit loss’ model for the measurement of the impairment of financial assets, so it is no longer necessary for a credit event to have occurred before a credit loss is recognized.

• Hedge accounting: Introduces a new hedge accounting model that is designed to be more closely aligned with how entities undertake risk management activities when hedging financial and non-financial risk exposures.

• Derecognition: The requirements for the derecognition of financial assets and liabilities are carried forward from IAS 39.

• IFRS 15 Revenue from Contracts with Customers

• IFRS 15 was issued in May 2014, effective for annual periods beginning on or after 1 January 2018. IFRS 15 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. IFRS 15 will supersede the current revenue recognition guidance including IAS 18 Revenue, IAS 11 Construction Contracts and the related interpretations when it becomes effective.

• The core principle of IFRS 15 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

• IFRS 16 Leases

• IFRS 16 was issued on January 2016 with an effective date of annual periods beginning on or after 1 January 2019. IFRS 16 specifies how an IFRS reporter will recognise, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16’s approach to lessor accounting substantially unchanged from its predecessor, IAS 17.

• Amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures (2011) relating to the treatment of the sale or contribution of assets from an investor to its associate or joint venture. The effective date of these amendments are deferred indefinitely.

Management anticipates that these new standards, interpretations and amendments will be adopted in the Company’s financial statements as and when they are applicable and adoption

Notes to the Financial Statementsfor the year ended 31 December 2016(All amounts are in Kuwaiti Dinars unless otherwise stated)


of these new standards, interpretations and amendments, except for IFRS 9, IFRS 15 and IFRS 16, may have no material impact on the financial statements of the Company in the period of initial application.

The application of IFRS 15 and IFRS 9 may have significant impact on amounts reported and disclosures made in the Company’s financial statements in respect of revenue from contracts with customers and the Company’s financial assets and financial liabilities and the application of IFRS 16 may have significant impact on amounts reported and disclosures made in the Company’s financial statements in respect of its leases.

However, it is not practicable to provide a reasonable estimate of effects of the application of these standards until the Company performs a detailed review.

2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.3.1 Financial Instruments

Classification and measurement

The Company classifies financial assets as ‘loans and receivables’ and ‘available for sale’. Financial liabilities are classified as ‘other than at fair value through profit or loss’.

All financial instruments are initially recognized at fair value. Transaction costs are included only for those financial instruments not classified as ‘at fair value through profit or loss’.

Loans and receivables

These are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. These are subsequently measured and carried at amortized cost using the effective interest rate, less any provision for impairment. Loans and receivables include loans secured by life insurance policies, due from insurance and reinsurance companies, trade and other receivables, fixed deposits, cash and cash equivalents.

Available for sale

These are non-derivative financial assets not included in any of the above classifications and are principally those intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity, changes in interest rates or prices. These are subsequently measured and carried at fair value.

Any resultant unrealized gains and losses arising from changes in fair value are recognized in other comprehensive income and accumulated in change in fair value reserve in equity. When an available for sale asset is disposed off or is impaired, the related cumulative fair valuation changes earlier reported in other comprehensive income and accumulated in equity are transferred to the statement of income.

Financial liabilities

Financial liabilities are subsequently measured at amortized cost using the effective interest rate.

Recognition and de-recognition

A financial asset or a financial liability is recognized when the Company becomes a party to the contractual provisions of the instrument. A financial asset is derecognized when the contractual rights to the cash flows from the financial asset expire or when the Company has transferred




substantially all the risks and rewards of ownership or when it has neither transferred nor retained substantially all risks and rewards of ownership and it no longer has control over the asset or portion of the asset. If the Company has retained control, it shall continue to recognize the financial asset to the extent of its continuing involvement in the financial asset. A financial liability is derecognized when the obligation specified in the contract is discharged/ cancelled or expired.

All ‘regular way’ purchase and sale of financial assets are recognized using trade date accounting. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulations or conventions in the market place.

Fair values

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Impairment

A financial asset is impaired if its carrying amount is greater than its estimated recoverable amount. An assessment is made at each date of financial position date to determine whether there is objective evidence that a specified financial asset, or a group of similar financial assets, may be impaired.

In the case of financial assets classified as ‘available for sale’, a significant or prolonged decline in the fair value of assets below its cost is considered in determining whether the assets are impaired. If any such evidence exists for available for sale financial assets, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in the statement of income, is removed from shareholder’s equity and recognized in the statement of income. Impairment loss recognized in the statement of income on available for sale financial assets that are equity instruments are not subsequently reversed through the statement of income.

A credit risk provision for impairment of loans and receivables is established if there is objective evidence that the Company will not be able to collect all amounts due. The amount of the provision is the difference between the carrying amount and the recoverable amount, being the present value of expected future cash flows, discounted at the original effective rate of interest and the current contractual interest rate, for fixed and floating rate loans respectively.

2.3.2 Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset or settle the liability simultaneously.

2.3.3 Property and equipment

Property and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. These are depreciated on a straight line basis over their useful lives as follows:

Buildings 20 years

Equipment, Furniture and fixtures up to 3 years



Land is not depreciated. The carrying amount of property and equipment is reviewed periodically to determine whether there is any indication of impairment in its carrying value. If any such indication exists, an impairment loss, is recognised in the statement of income, being the difference between carrying value and the asset’s recoverable amount. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows.

2.3.4 Investment properties

Investment properties held by the Company are the properties held for capital appreciation or to earn rental income. Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investments properties are carried out at historical cost less accumulated impairment losses. Freehold land is not depreciated.

Investment properties are derecognized when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in the statement of income in the year of derecognition.

2.3.5 Cash and cash equivalents

Cash and cash equivalents comprise of cash in hand, current account and fixed deposits with banks, with maturities not exceeding three months from acquisition date.

2.3.6 Provisions for liabilities

Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events; and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made.

2.3.7 Employees terminal benefits

Provision is made for amounts payable under Kuwaiti labour law. This liability, which is unfunded, represents the amount payable to each employee as a result of voluntary and involuntary termination on the date of statement of financial position, and approximates the present value of this obligation.

2.3.8 Insurance payables

Reserve for outstanding claims

Provisions are recognized for reported claims, which are not settled on the date of statement of financial position based on internal and independent loss assessments, after deduction of expected salvage values and other recoveries.

Reserve for unexpired risks

General Insurance

This is computed at the rate of 40% of the net retained premiums for the Fire and General Accidents departments and 25% of the net retained premiums for the Marine and Aviation departments.

Life Insurance

Provisions for life insurance liabilities are recognised based on independent actuarial valuation.




Additional reserves

The Company estimates additional provisions for claims incurred but not reported (IBNR) at the date of statement of financial position based on historical loss ratios.

2.3.9 Treasury shares

The Company’s holding in its own shares is stated at the acquisition cost. These shares are not entitled to any cash dividend that the Board of Directors may propose.

2.3.10 Revenue recognition

Premiums are recognized as revenue annually and over the period of the cover. The portion of premiums that relates to unexpired risks at the date of statement of financial position is reported as reserve for unexpired risks or as unearned premium.

Gain on sales of investments is measured by the difference between the sales proceeds and the carrying amount of the investments at the date of disposals, and is recognized at the time of sale in the statement of income.

Dividend income is recognized when the right to receive payment is established and interest on fixed deposits are recognized on time proportion basis using effective interest rate.

Commission earned is recognized at the time insurance policies are ceded to other insurers.

Other income is recognized in accrual basis.

2.3.11 Contribution to taxes

Contribution to Kuwait Foundation for the Advancement of Sciences (KFAS)

The Company calculates KFAS at 1% of taxable profit for the year, in accordance with the calculation based on the Foundation’s Board of Directors resolution.

National Labour Support Tax (NLST)

The Company calculates NLST in accordance with Law No 19 of 2000 and the Ministry of Finance Resolution No. 24 of 2006 at 2.5% of taxable profit for the year.

Zakat

The Company calculates Zakat in accordance with Law No. 46 of 2006 and the Ministry of Finance resolution No 58 of 2007 at 1% of the taxable profit of the Company.

2.3.12 Foreign currency translation

The Company’s functional currency is the Kuwaiti Dinar. Transactions in foreign currencies are converted into Kuwaiti Dinars at the rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies outstanding at the date of statement of financial position are converted into Kuwaiti Dinar at the rates prevailing at the date of statement of financial position. Resulting gains or losses are taken to the statement of income.

Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing on the date when the fair value was determined. Translation difference on non-monetary items classified as at fair value through statement of income are reported as part of the fair value gain or loss in the statement of income whereas the translation difference on non-monetary items classified as available for sale financial assets are included in change in fair value reserve in the statement of comprehensive income.



2.3.13 Segment reporting

A segment is a distinguishable component of the Company that engages in business activities from which it earns revenues and incurs costs. The operating segments are used by the management of the Company to allocate resources and assess performance. Operating segments exhibiting similar economic characteristics, product and services, class of customers where appropriate are aggregated and reported as reportable segments.

3. Property and equipment

Land & buildings

Furniture &office

equipmentTotal

Cost As at 1 January 2015 4,319,335 1,740,162 6,059,497Additions - 92,093 92,093Disposals - (58,574) (58,574)As at 31 December 2015 4,319,335 1,773,681 6,093,016Additions - 10,482 10,482As at 31 December 2016 4,319,335 1,784,163 6,103,498Accumulated depreciationAs at 1 January 2015 2,664,174 1,740,161 4,404,335Charge for the year 146,044 92,093 238,137Disposals for the year - (58,574) (58,574)As at 31 December 2015 2,810,218 1,773,680 4,583,898Charge for the year 146,041 10,482 156,523As at 31 December 2016 2,956,259 1,784,162 4,740,421Net book valueAs at 31 December 2016 1,363,076 1 1,363,077As at 31 December 2015 1,509,117 1 1,509,118

Depreciation is included in general and administrative expenses in the statement of income.

4. Investments available for sale

2016 2015

Quoted shares 51,833,636 53,402,579Quoted debt instrument 6,453,891 6,094,896Unquoted shares 2,515,866 2,576,465Investment funds 1,258,686 1,319,230

62,062,079 63,393,170

Movements in investments available for sale:-

2016 2015

Opening balance 63,393,170 60,710,962Additions 1,754,437 8,718,156Disposals (45,075) (1,052,288)Changes in fair value (3,040,453) (4,983,660)Closing balance 62,062,079 63,393,170




Investments in quoted shares include shares with fair value of KD 4,224,000 as of 31 December 2016 (31 December 2015: KD 4,532,000) are under lien to Ministry of Commerce and Industry, Kuwait to comply with local insurance regulations.

5. Trade and other receivables

2016 2015Trade receivables 9,174,397 8,587,070Provision for doubtful debts (2,775,000) (2,575,000)

6,399,397 6,012,070

Accrued income 76,057 73,150Participation in Arab Syndicate Fund for War Risk Insurance 1,040,970 1,004,374

Other receivable 393,161 328,4627,909,585 7,418,056

6. Fixed deposits with banks

These represents deposits with local banks maturing in a period of more than three months from the date of placement.

The average effective interest rate on fixed deposits was 2.72% as at 31 December 2016 (31 December 2015: 2%).

Fixed deposits amounting to KD 19,925,000 are under lien to the Ministry of Commerce and Industry Kuwait, to comply with local insurance regulations (31 December 2015: KD 18,925,000).

7. Cash and cash equivalents

2016 2015

Cash on hand 112,421 6,512

Cash at banks 4,418,888 3,024,689

4,531,309 3,031,201

8. Share capital

The authorized, issued and fully paid-up capital is KD 19,404,000 divided into 194,040,000 shares with a nominal value of Kuwaiti fils 100 each and all shares are in cash.

Statutory reserve

The statutory reserve has reached 50% of the share capital and as permitted by the Articles of Association, the Company has discontinued appropriations to statutory reserve. This reserve is not available for distribution except for distribution of a maximum dividend up to 5% of share capital in years when the retained earnings are inadequate for this purpose.

Voluntary reserve

In accordance with the Company’s Articles of Association, 10% of net profit is to be transferred annually to the voluntary reserve. This reserve has been discontinued since 1998 based on a recommendation of the Board of Directors and approval of the shareholders.



Proposed dividend

On 14 February 2017, the Board of Directors has proposed a cash dividend of 20 fils per share for the year ended 31 December 2016 (31 December 2015: 20 fils per share). This is subject to the approval of the shareholders at the next annual general meeting.

9. Treasury shares

2016 2015

Number of treasury shares (Share) 9,240,510 9,240,510

% of treasury shares to issued shares 4.76 4.76

Cost of treasury shares 3,007,575 3,007,575

Market Value of treasury shares 2,356,330 2,818,356

The Company is committed to retain reserves and retained earnings equivalent to the treasury shares throughout the period, in which they are held by the Company, pursuant to the relevant instructions of the regulatory authorities. These shares are not pledged.




10.

Tech

nica

l res

erve

s

Tech

nica

l res

erve

s m

ovem

ents

by

segm

ent a

re a

s fo

llow

s:

Year

end

ed 3

1 D

ecem

ber 2

016

Mar

ine

and

avia

tion

Fire

Gen

eral

ac

cide

ntTa

kafu

lLi

feTo

tal

Gro

ss b

alan

ce a

t beg

inni

ng o

f the

yea

r4,

419,

203

5,59

0,99

940

,121

,564

710,

933

24,5

23,8

7875

,366

,577

Less

: Rei

nsur

ance

reco

vera

ble

(3,6

38,2

96)

(4,5

86,7

94)

(20,

097,

498)

(231

,865

)(1

,001

,381

)(2

9,55

5,83

4)

Net

bal

ance

at b

egin

ning

of t

he y

ear

780,

907

1,00

4,20

520

,024

,066

479,

068

23,5

22,4

9745

,810

,743

Net

cha

rge

/ (re

vers

ed) d

urin

g th

e ye

ar

86,5

3935

7,95

87,

406,

598

(136

,180

)3,

302,

769

11,0

17,6

84

Paid

dur

ing

the

year

(69,

422)

(54,

143)

(8,6

69,5

34)

(177

,944

)(1

,701

,024

)(1

0,67

2,06

7)

Net

bal

ance

at e

nd o

f the

yea

r79

8,02

41,

308,

020

18,7

61,1

3016

4,94

425

,124

,242

46,1

56,3

60

Add:

Rei

nsur

ance

reco

vera

ble

1,65

2,84

99,

711,

955

18,1

15,7

0351

,262

834,

193

30,3

65,9

62

Gro

ss b

alan

ce a

t end

of t

he y

ear

2,45

0,87

311

,019

,975

36,8

76,8

3321

6,20

625

,958

,435

76,5

22,3

22

Tech

nica

l res

erve

bre

akdo

wn

by ty

pes

of re

serv

es is

as

follo

ws:

Year

end

ed 3

1 D

ecem

ber 2

016

Mar

ine

and

avia

tion

Fire

Gen

eral

ac

cide

ntTa

kafu

lLi

feTo

tal

Out

stan

ding

rese

rve

incl

udin

g sh

are

of re

insu

ranc

e co

mpa

nies

1,81

8,22

410

,153

,220

28,9

43,7

2817

2,16

56,

255,

503

47,3

42,8

40

Une

xpire

d13

2,64

941

6,75

55,

233,

105

44,0

41-

5,82

6,55

0

Addi

tiona

l50

0,00

045

0,00

02,

700,

000

-45

0,00

04,

100,

000

Life

fund

--

--

19,2

52,9

3219

,252

,932

Tota

l Bal

ance

2,45

0,87

311

,019

,975

36,8

76,8

3321

6,20

625

,958

,435

76,5

22,3

22

Not

es to

the

Fina

ncia

l Sta

tem

ents

for t

he y

ear e

nded

31

Dec

embe

r 201

6(A

ll am

ount

s ar

e in

Kuw

aiti

Din

ars

unle

ss o

ther

wis

e st

ated

)


Tech

nica

l res

erve

s m

ovem

ents

by

segm

ent a

re a

s fo

llow

s:

Year

end

ed 3

1 D

ecem

ber 2

015

Mar

ine

and

avia

tion

Fire

Gen

eral

ac

cide

ntTa

kafu

lLi

feTo

tal

Gro

ss b

alan

ce a

t beg

inni

ng o

f the

yea

r4,

160,

343

25,2

31,0

1231

,635

,027

656,

680

22,7

46,0

8884

,429

,150

Less

: Rei

nsur

ance

reco

vera

ble

(3,3

99,7

20)

(24,

162,

975)

(12,

168,

952)

(45,

512)

(985

,975

)(4

0,76

3,13

4)

Net

bal

ance

at b

egin

ning

of t

he y

ear

760,

623

1,06

8,03

719

,466

,075

611,

168

21,7

60,1

1343

,666

,016

Net

cha

rge

durin

g th

e ye

ar

63,3

2320

,411

8,80

9,68

516

9,20

23,

378,

936

12,4

41,5

57

Paid

dur

ing

the

year

(43,

039)

(84,

243)

(8,2

51,6

94)

(301

,302

)(1

,616

,552

)(1

0,29

6,83

0)

Net

bal

ance

at e

nd o

f the

yea

r78

0,90

71,

004,

205

20,0

24,0

6647

9,06

823

,522

,497

45,8

10,7

43

Add:

Rei

nsur

ance

reco

vera

ble

3,63

8,29

64,

586,

794

20,0

97,4

9823

1,86

51,

001,

381

29,5

55,8

34

Gro

ss b

alan

ce a

t end

of t

he y

ear

4,41

9,20

35,

590,

999

40,1

21,5

6471

0,93

324

,523

,878

75,3

66,5

77

Tech

nica

l res

erve

bre

akdo

wn

by ty

pes o

f res

erve

s is a

s fol

low

s:

Year

end

ed 3

1 D

ecem

ber 2

015

Mar

ine

and

avia

tion

Fire

Gen

eral

ac

cide

ntTa

kafu

lLi

feTo

tal

Out

stan

ding

rese

rve

incl

udin

g sh

are

of re

insu

ranc

e co

mpa

nies

3,79

9,17

14,

894,

183

32,1

64,1

8562

2,43

36,

620,

265

48,1

00,2

37

Une

xpire

d12

0,03

224

6,81

65,

257,

379

88,5

00-

5,71

2,72

7

Addi

tiona

l50

0,00

045

0,00

02,

700,

000

-45

0,00

04,

100,

000

Life

fund

--

-17

,453

,613

17,4

53,6

13

Tota

l Bal

ance

4,41

9,20

35,

590,

999

40,1

21,5

6471

0,93

324

,523

,878

75,3

66,5

77

Not

es to

the

Fina

ncia

l Sta

tem

ents

for t

he y

ear e

nded

31

Dec

embe

r 201

6(A

ll am

ount

s ar

e in

Kuw

aiti

Din

ars

unle

ss o

ther

wis

e st

ated

)


11. Insurance and other payables

2016 2015

Insurance payables 2,847,509 2,705,350

Unearned premiums 589,537 1,081,155

Reserve for reinsurance premium ceded 805,340 713,877

Dividends payable 177,530 107,534

Staff payables and others 2,267,892 2,366,615

Staff terminal benefits 2,253,533 2,279,446

Reserve for Arab Syndicate Fund for War Risk Insurance 1,040,970 1,004,374

Board of directors remuneration - 56,000

Kuwait Foundation for Advancement of Sciences (KFAS) - 59,985

National Labour Support tax - 136,771

Zakat tax - 54,708

Due to policy holders 237,329 137,026

10,219,640 10,702,841

Due to policy holders represents 50% (2015: 50%) of the net surplus from Takaful insurance business appropriated to the policy holders and is subject to the approval from Sharia Board.

12. Investment income

2016 2015

Realized gain from sale of investments 90,770 292,268Cash dividends 3,379,560 3,078,025Interest income 1,058,959 767,114

4,529,289 4,137,407

13. (Losses) / earning per share

(Losses) / earning per share is calculated by dividing net (loss) / profit for the year by the weighted average number of ordinary shares after deduction of treasury shares, as follows:

2016 2015

Net (loss) / profit for the year (594,689) 5,690,993Weighted average number of issued shares (share) 184,799,490 185,446,553(Losses) / earning per share (fils) (3.22) 30.69

14. Staff Costs

General and administrative expenses include staff costs of KD 2,826,923 (31 December 2015 - KD 2,777,028). As of 31 December 2016, the Company had 218 employees (31 December 2015: 234 employees).



15. Segmental analysis

The Company has five principal reportable segments as follows:

• Marine and aviation

Insurance against risks related to goods transportation and different types of marine and aviation vessels.

• Fire

Insurance against fire for different types of buildings, stores, industrial risks, oil and gas industry.

• General accident

Insurance against risks of contractors, machinery and computer damages and cessation of work; insurance cover for cash, bonds, fidelity, professional risks, work accidents, civil responsibility and motor vehicles.

• Life insurance

Life insurance cover for individuals and groups and medical insurance cover.

• Takaful

Insurance against all type of risk under Takaful insurance law.

Investment activities are not considered as a segment by itself. Assets and liabilities are not allocated to the Company’s segments except for those related to the life insurance and Takaful insurance segment.




Info

rmat

ion

on th

e Co

mpa

ny’s

prin

cipa

l rep

orta

ble

segm

ents

are

as

follo

ws:

Stat

emen

t of I

ncom

e

Year

end

ed 3

1 D

ecem

ber 2

016

Mar

ine

&

avia

tion

Fire

Gen

eral

ac

cide

ntLi

feTa

kafu

lU

nallo

cate

d it

ems

Tota

l

Reve

nue

Gro

ss p

rem

ium

reve

nue

2,49

2,95

36,

399,

000

21,1

48,6

446,

821,

220

178,

693

-37

,040

,510

Prem

ium

ced

ed to

rein

sure

rs(1

,962

,356

)(5

,357

,112

)(8

,065

,882

)(1

,851

,995

)(7

0,87

4)-

(17,

308,

219)

Net

pre

miu

ms

reve

nue

530,

597

1,04

1,88

813

,082

,762

4,96

9,22

510

7,81

9-

19,7

32,2

91

Chan

ges

in re

serv

e fo

r une

xpire

d ris

ks(1

2,61

7)(1

69,9

39)

24,2

74-

44,4

59-

(113

,823

)

Prem

ium

s ea

rned

517,

980

871,

949

13,1

07,0

364,

969,

225

152,

278

-19

,618

,468

Com

mis

sion

s ea

rned

701,

690

605,

996

1,66

7,34

570

,134

11,0

90-

3,05

6,25

5

Inve

stm

ent i

ncom

e-

--

424,

394

22,7

604,

082,

135

4,52

9,28

9

Oth

er in

com

e6,

774

(591

)79

4,04

216

,651

4,49

832

,974

854,

348

1,22

6,44

41,

477,

354

15,5

68,4

235,

480,

404

190,

626

4,11

5,10

928

,058

,360

Expe

nses

Net

incu

rred

cla

ims

(73,

922)

(188

,019

)(7

,430

,872

)(1

,503

,450

)91

,721

-(9

,104

,542

)

Chan

ges

in re

serv

e fo

r life

insu

ranc

e fu

nd-

--

(1,7

99,3

19)

--

(1,7

99,3

19)

Life

insu

ranc

e –

Expi

ry s

ettle

men

t-

--

(712

,120

)-

-(7

12,1

20)

Life

insu

ranc

e –

Polic

ies

liqui

date

d-

--

(268

,802

)-

-(2

68,8

02)

Com

mis

sion

s pa

id(1

69,4

01)

(400

,101

)(2

,660

,728

)(1

93,8

70)

(19,

747)

-(3

,443

,847

)

Gen

eral

and

adm

inis

trat

ive

expe

nses

(523

,234

)(4

61,6

77)

(1,4

77,3

65)

(702

,843

)(6

1,99

4)(1

,211

,522

)(4

,438

,635

)

Part

icip

ants

righ

ts

--

--

(100

,303

)-

(100

,303

)

Impa

irmen

t los

s on

inve

stm

ent s

ecur

ities

--

--

-(8

,785

,481

)(8

,785

,481

)

(766

,557

)(1

,049

,797

)(1

1,56

8,96

5)(5

,180

,404

)(9

0,32

3)(9

,997

,003

)(2

8,65

3,04

9)

Net

pro

fit /

(loss

) for

the

year

459,

887

427,

557

3,99

9,45

830

0,00

010

0,30

3(5

,881

,894

)(5

94,6

89)

Not

es to

the

Fina

ncia

l Sta

tem

ents

for t

he y

ear e

nded

31

Dec

embe

r 201

6(A

ll am

ount

s ar

e in

Kuw

aiti

Din

ars

unle

ss o

ther

wis

e st

ated

)


Yea

r end

ed 3

1 D

ecem

ber 2

015

Mar

ine

&

avia

tion

Fire

Gen

eral

ac

cide

ntLi

feTa

kafu

lU

nallo

cate

d it

ems

Tota

l

Reve

nue

Gro

ss p

rem

ium

reve

nue

2,63

2,02

96,

196,

245

20,9

24,2

377,

059,

589

336,

458

-37

,148

,558

Prem

ium

ced

ed to

rein

sure

rs(2

,151

,903

)(5

,579

,204

)(7

,780

,790

)(1

,947

,086

)(1

14,1

48)

-(1

7,57

3,13

1)

Net

pre

miu

ms

reve

nue

480,

126

617,

041

13,1

43,4

475,

112,

503

222,

310

-19

,575

,427

Chan

ges

in re

serv

e fo

r une

xpire

d ris

ks45

4(2

8,69

7)25

6,04

7-

32,4

75-

260,

279

Prem

ium

s ea

rned

480,

580

588,

344

13,3

99,4

945,

112,

503

254,

785

-19

,835

,706

Com

mis

sion

s ea

rned

714,

162

727,

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1,77

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181

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stm

ent i

ncom

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--

403,

745

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com

e6,

351

760

851,

385

(66,

828)

5,99

419

1,01

498

8,67

6

1,20

1,09

31,

316,

130

16,0

27,1

905,

531,

100

292,

223

3,90

6,82

828

,274

,564

Expe

nses

Net

incu

rred

cla

ims

(63,

777)

8,28

6(9

,065

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serv

e fo

r life

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ry s

ettle

men

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(697

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97,6

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Life

insu

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Polic

ies

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date

d-

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(232

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)-

-(2

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Com

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sion

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id(1

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68)

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,706

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(36,

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ts

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15,0

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ecur

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--

--

-(7

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88)

(734

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)

BOD

rem

uner

atio

n-

--

--

(56,

000)

(56,

000)

Cont

ribut

ion

to K

uwai

t fou

ndat

ion

for

adva

ncem

ent o

f Sci

ence

(KFA

S)

--

--

-(5

9,98

5)(5

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Nat

iona

l Lab

our S

uppo

rt ta

x-

--

--

(136

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)(1

36,7

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t tax

--

--

-(5

4,70

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(746

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(13,

265,

858)

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31,1

00)

(307

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)(2

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)(2

2,58

3,57

1)

Net

pro

fit /

(loss

) for

the

year

454,

462

551,

664

2,76

1,33

230

0,00

0(1

5,00

5)1,

638,

540

5,69

0,99

3

Not

es to

the

Fina

ncia

l Sta

tem

ents

for t

he y

ear e

nded

31

Dec

embe

r 201

6(A

ll am

ount

s ar

e in

Kuw

aiti

Din

ars

unle

ss o

ther

wis

e st

ated

)


Segment assets and liabilities

Statement of financial position as of 31 December 2016 Life Takaful General

Insurance Total

Assets

Property and equipment - - 1,363,077 1,363,077

Investment property - - 29,780 29,780

Loans secured by life insurance policies 260,300 - - 260,300

Investments available for sale 3,300,000 - 58,762,079 62,062,079

Due from insurance and reinsurance companies 198,150 101,895 4,525,803 4,825,848Reinsurance companies’ share of reserve for outstanding claims 834,193 51,262 29,480,507 30,365,962

Trade and other receivables 752,087 21,211 7,136,287 7,909,585

Fixed deposits with banks 12,700,000 1,012,514 28,629,978 42,342,492

Cash and cash equivalents 638,250 115,210 3,777,849 4,531,309

Total assets 18,682,980 1,302,092 133,705,360 153,690,432

Liabilities

Technical reserve 25,958,435 216,206 50,347,681 76,522,322Insurance and other payables 945,408 291,305 8,982,927 10,219,640Due to Insurance and reinsurance companies 318 145,934 7,847,433 7,993,685Total liabilities 26,904,161 653,445 67,178,041 94,735,647

Statement of financial position as of 31 December 2015 Life Takaful General

Insurance Total

Assets

Property and equipment - - 1,509,118 1,509,118Investment property - - 29,780 29,780Loans secured by life insurance policies 290,078 - - 290,078Investments available for sale 3,300,000 - 60,093,170 63,393,170Due from insurance and reinsurance companies 122,162 91,626 4,964,473 5,178,261Reinsurance companies’ share of reserve for outstanding claims 1,001,381 231,865 28,322,588 29,555,834

Trade and other receivables 540,388 21,017 6,856,651 7,418,056

Fixed deposits with banks 12,700,000 1,009,808 26,571,451 40,281,259

Cash and cash equivalents 450,362 500,736 2,080,103 3,031,201

Total assets 18,404,371 1,855,052 130,427,334 150,686,757

Liabilities

Technical reserve 24,523,878 710,933 50,131,766 75,366,577

Insurance and other payables 885,139 689,864 9,127,838 10,702,841

Due to Insurance and reinsurance companies 3,272 203,579 6,906,364 7,113,215

Total liabilities 25,412,289 1,604,376 66,165,968 93,182,633



16. Insurance Risk Management

The Company issues contracts that assumes insurance risk. This section summarizes these risks and the way the Company manages them.

Insurance risk

The risk under any one insurance contract is the possibility that the insured event occurs and the uncertainty of the amount of the resulting claim. By the very nature of an insurance contract, this risk is random and therefore unpredictable.

The principal risk that the Company faces under its insurance contracts is that the actual claims and benefit payments exceed the carrying amount of the insurance liabilities. This could occur because the frequency or severity of claims and benefits are greater than estimated. Insurance events are random and the actual number and amount of claims and benefits will vary from year to year.

The Company manages these risks through its underwriting strategy, adequate reinsurance arrangements and proactive claims handling.

Sources of uncertainty in the estimation of future claim payments

Non life

Claims are payable on a claims-occurrence basis. The Company is liable for all insured events that occurred during the term of the contract, even if the loss is discovered after the end of the contract term. As a result, liability claims are settled over a long period of time and an element of the claims provision relates to incurred but not reported claims (IBNR). There are several variables that affect the amount and timing of cash flows from these contracts. These mainly relate to the inherent risks of the business activities carried out by individual contract holders and the risk management procedures they adopted.

The estimated cost of claims includes direct expenses to be incurred in settling claims, net of the expected subrogation value and other recoveries. The Company takes all reasonable steps to ensure that it has appropriate information regarding its claims exposures. However, given the uncertainty in establishing claims provisions, it is likely that the final outcome will prove to be different from the original liability established. The liability for these contracts comprise a provision for IBNR, a provision for reported claims not yet paid and a provision for unexpired risks at the statement of financial position date.

In estimating the liability for the cost of reported claims not yet paid the Company considers any information available from loss adjusters and information on the cost of settling claims with similar characteristics in previous periods. Large claims are assessed on a case-by-case basis or projected separately.

Life

Uncertainty in the estimation of future benefit payments and premium receipts for life insurance contracts arises from the unpredictability of overall levels of mortality, health and the variability in contract holder behaviour.

The Company uses an actuarial valuation to determine reserve estimate for life insurance contracts. For health and disability insurance covers there is no need to estimate mortality rates or morbidity rates for future years because these contracts have short duration and the claims are payable on a claims-occurrence basis. These insurance contracts are exposed to similar risks of uncertainty in the estimation of future claim payments as non life insurance contracts and are managed in a similar manner.




17. Fair value estimation

The fair value for the financial assets and financial liabilities are determined as follows:

• Level one: Quoted prices in active markets for identical financial instruments.

• Level two: Quoted prices in an active market for similar instruments. Quoted prices for identical assets or liabilities in the market that is not active. Inputs other than quoted prices that is observable for assets or liabilities.

• Level three: Inputs for the assets or liabilities that are not based on observable market data.

The table below gives information about how the fair values of the financial assets are determined:

Fair value of the Company’s financial assets that are measured at fair value on a recurring basis.

Fair value as atFair

value hierarchy

Valuation technique(s)

and Key input(s)

Significant unobservable

input(s)

Relationship of unobservable

inputs to fair value

Financial assets 31/12/16 31/12/15

Investments available for sale

- Quoted Shares and debt instruments 58,287,527 59,497,475 1 Last bid price - -

- Investment Funds 1,258,686 1,319,230 2 Net assets value - -

Unquoted Shares 2,515,866 2,576,465 3

Peer market price to book value of similar companies in the same industry

Peer market price to book value factor and discount for lack of market availability.

Changes in market multiple and discount rate will result change in fair values

During the year, there were no transfers between the levels.

The following table shows a reconciliation of the opening and closing amount of level 3 investments available for sale which are recorded at fair value:

At the beginning of

the year

Net gains recorded in

the statement of income

Net gain/ (losses) recorded in the

statement of comprehensive

income

Net purchases, transfers, sales

and settlements

At the end of the year

Investments available for sale:

Unquoted shares

31 December 2016 2,576,465 - (60,599) - 2,515,866

31 December 2015 2,955,880 (77,488) (283,249) (18,678) 2,576,465

The fair value of financial assets and financial liabilities that are not measured at fair value on a recurring basis approximately equals their carrying values.



18. Financial Risk Management

The Company is exposed to a variety of financial risks, through its financial assets, financial liabilities, reinsurance assets and insurance liabilities. The most important components of this financial risk are credit risk, market risk and liquidity risk. In particular, the key financial risk is that the Company’s investment proceeds may not be sufficient to fund the obligation arising from its underwritings. The Company’s risk management is conducted by its senior management in accordance with policies approved by the Board of Directors. The various risks that the Company is exposed to and the processes in place to manage those risks are described below.

Credit Risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The financial assets, other than investments in equities are exposed to credit risk. The assets value presented in the statement of financial position represent the maximum level exposed to those risks. The Company seeks to mitigate this risk by dealing with credit worthy parties including banks, financial institutions, insurance and reinsurance companies and non-concentration of its assets with one counter party.

The maximum exposure to credit risk as of the date of statement of financial position is given below.

2016 2015

Loans secured by life insurance policies 260,300 290,078

Due from insurance and reinsurance companies 4,825,848 5,178,261

Trade and other receivables 6,868,615 6,413,682

Fixed deposits with banks 42,342,492 40,281,259

Cash and cash equivalents 4,531,309 3,031,201

58,828,564 55,194,481

Due from insurance and reinsurance companies represent amounts receivable from reinsurance claims net of premium on policies ceded. These are due from local and international companies of repute which have a track record of settling debts.

Trade and other receivables primarily represent amounts due against premiums for policies underwritten by the Company. These are generally due for payment within a period of one month from the date of issue of the policy. The Company is selective in extending credit facilities to its customers and has a good track record of collecting its debts. Furthermore, credit risk with respect to receivables is limited due to dispersion across large number of customers.

At 31 December 2016, trade receivables of KD 2,253,977 (31 December 2015 – KD 1,700,053) are neither past due nor impaired and KD 4,145,420 (31 December 2015 – KD 4,312,017) are past due. Out of the past due receivables KD 2,778,772 is due for a period of one month to six months (31 December 2015 – KD 2,824,087) and KD 1,366,648 is due for a period of 6 months to one year (31 December 2015 – KD 1,487,930) and KD 2,775,000 is due for more than one year (31 December 2015 – KD 2,575,000).

The Company made provision of KD 2,775,000 (31 December 2015 - KD 2,575,000) against past due receivable. The Company believes that the balance amount of trade receivables can be recovered. The other classes of financials assets are not impaired.




Deposits are placed with banks which have been given high rating by reputed international rating agencies category (A). These deposits mature within a maximum period of 6 months from the date of this financial statements.

Market Risk

Market risk is the risk that an enterprise may incur financial losses due to adverse movements in market price of investments or interest rates and foreign currency rates.

(a) Foreign Currency Risk

Foreign currency risk is represented in the exposure to changing currency exchange rates that may adversely affect the Company’s cash flows or the value of assets and liabilities in foreign currencies. The Company is exposed to foreign currency risk primarily from its foreign currency denominated investments and its dues from/to re-insurance counterparties. The Company seeks to mitigate this risk by dealing in stable currencies such as US Dollars, Euro and Sterling Pounds and monitoring its currency position on a regular basis.

The following are the Company’s significant net exposures denominated in foreign currency represented in equivalent Kuwaiti Dinar.

Surplus / (deficit)

2016 2015

US Dollar 6,686,916 5,019,245

Sterling Pound (269,537) (327,927)

Euro 104,263 71,451

Saudi Riyal 320,194 319,692

UAE Dirham 90,602 80,468

Australian Dollar 13,513 12,579

Bahrain Dinar 377,434 406,177

Other Currencies 728,421 766,811

8,051,806 6,348,496

The net impact on profit and equity if, as of 31 December 2016, Kuwait Dinars had strengthened against the US Dollar by 5%, is shown below:

Impact on profit Impact on equity

As at 31 December 2016 (51,664) 386,010

As at 31 December 2015 (121,712) 372,674

(b) Interest rate risk

Interest rate risk is the risk that the fair value or cash flows of an interest bearing financial instrument will fluctuate because of changes in market interest rates. The Company does not have significant exposures to interest rate risks as its interest earning assets are on short term fixed rates of interest and its exposure to interest bearing liabilities are not significant.



(c) Equity Price risk

This is the risk that the value of financial instruments will fluctuate as a result of changes in market prices, caused by factors specific to the instrument or its issuer or factors affecting all instruments traded in the market. The Company is exposed to equity price risk from investments held by the Company and classified as “available for sale”. The Company’s investments are primarily exposed to the Kuwait Stock Exchange index.

To manage its price risk arising from investments in equity securities, the Company invests in a diversified portfolio of securities. Diversification of the portfolio is done in accordance with the limits set by the Company. The Board of Directors constantly monitors the exposures and provides directions to manage risks and maximize profits.

At 31 December 2016, if the Kuwait Stock Exchange index had changed by 5%, the equity of the Company would have changed by KD 1,877,887 (31 December 2015 - KD 1,914,173).

Liquidity Risk

It is the risk that the Company may not be able to meet its financial obligations as they fall due. The policy of the Company is to ensure that sufficient liquidity is available at all times to meet contractual obligations, including loss claims. To manage liquidity risk the Company maintains sufficient cash and marketable securities, having adequate amount of credit facilities and investing in securities which can be easily closed out. The Company also has the option to raise additional capital to meet funding requirements.

The Company’s contractual liabilities as of 31 December 2016 mature over a period of one year.

19. Capital Risk Management

The Company’s objectives when managing capital are

• To ensure adequate funds are available to underwrite risks and maintain investor, creditor and market conditions;

• To make available funds for future development of the business;

• To safeguard the Company’s ability to continue as a going concern so that it can continue to operate;

• To provide adequate return to shareholders and benefits to its other shareholders.

The Board of Directors constantly monitors the capital structure of the Company with a view to ensuring that a balance is maintained between returns and risk. The management ensures that the Company is not geared beyond acceptable limits. For this purpose, the Company may adjust the amount of dividend payable to its shareholders, issue new shares or sell assets to reduce debt.

Furthermore in order to protect against the impact of large claims and catastrophes, the Company is required under law to maintain technical reserves depending on the exposure to various types of underwriting exposures. The details of this reserve are given in Note No. 10.

Under local regulations, the Company places some of its investments securities and bank deposits under lien to the regulator. The amount of securities and deposits to be placed under lien is determined as a percentage of direct premium, received during the year for all the segments other than life insurance segment.




Regarding life insurance segment, the amount to be placed under lien is determined at 100% of the liability, as ascertained by an actuarial valuation at the end of the year. The extent of lien on investments and fixed deposits is given in Note No. 4 and 6.

20. Critical accounting estimates and judgments

The Company makes estimates and assumptions that may affect amounts reported in these financial statements. Estimates are revised if changes occur in the circumstances on which the estimate was based. The areas where estimates and assumptions are significant to the financial statements, or areas involving a higher degree of judgment, are:

Judgments

In the process of applying the Company’s accounting policies which are described in note 2, management has made the following judgments that have the most significant effect on the mounts recognized in the financial statements.

Classification of financial instruments

On acquisition of a financial instrument, the Company’s management decides its classification. In making that judgment the Company considers the primary purpose for which it is acquired and how it intends to manage and report its performance. Such judgment determines whether it is subsequently measured at fair value or at amortized cost.

Financial instruments carried at amortized cost

The effective yield method of calculating the amortized cost of a financial instrument involves the estimation of future cash flows through the expected life of the instrument.

Estimates and Assumptions

The key assumptions concerning the future and other key sources of estimating uncertainty at the end of the reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Impairment of financial assets

The Company reviews financial assets at each statement of financial position date to assess whether a provision for impairment loss should be recognized in the Statement of Income. The process for estimating the amount of an impairment loss involves considerable judgment by the management with respect to the estimation of future cash flows. Such estimates and assumptions are also based on several other factors involving varying degrees of judgment and uncertainty.

Provision for outstanding claims

Considerable judgment by management is required in the estimation of amounts due to contract holders arising from claims made under insurance contracts. Further information on the basis of estimation and significant assumptions, made by the Company are given in Note No. 16 of these financial statements.

Life

Uncertainty is the estimation of future benefits payments and premiums receipts for life insurance contracts arises from the unpredictability of overall levels of mortality, health and variability in contract holder behavior.



21. Related party transactions

In the ordinary course of business, the company has carried some transactions with related parties (i.e. shareholders, Board of Directors and key management personnel). The Company carried out transaction with related parties on term approved by management. Transactions with related parties are included in trade and other receivables note (5) and are subject to approval of Annual General Meeting for shareholders. The balances and transactions with related parties are as follows:

2016 2015

Transactions:

Gross premiums written 2,022,847 2,774,365

Claims paid 1,870,402 590,799

Balances:

Due from related parties 415,864 597,567

Key Management Remuneration 284,285 300,000




Independent Auditors’ Report to the Shareholders


INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS Kuwait Insurance Company S.A.KP..State of KuwaitReport on the Audit of the financial Statements

Opinion

We have audited the financial statements of Kuwait Insurance Company S.AK.P.. (the Company), which comprise the statement of financial position as at 31 December 2016, and the statement of income, statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at 31 December 2016, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs).

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISA) Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and informing our opinion there on, and we do not provide a separate opinion on these matters. The following are the key audit matters identified and how we addressed them in our audit:

Outstanding Insurance liabilities

As at 31 December 2016, the total technical reserves include outstanding claims reserve a mounted to KD 47,342840, (2015: KD 48,100,237) representing 62% of the total technical reserves.

The outstanding claims reserve covers the estimated amounts of settling all claims incurred but unpaid at the financial position date. This is considered to be a judgmental and complex due to the inherent uncertainty of estimating claims and whether customers will be awarded a lump sum claim or a periodic payment. The amounts involved are potentially significant and the application of accounting standards to determine the amount, if any, to be provided as provision for liability, is inherently subjective.

Refer to significant accounting policy 2.3.8, insurance risk management note16, critical accounting estimates and judgements note 20 and disclosure note10 to the financial statements.

In assessing the outstanding insurance liabilities, our audit procedures included the following:

• Testing the design, implementation and operating effectiveness of key controls over the underwriting, claims process and management’s assessment of the required reserve for claims and for updating this reserve as more information becomes available.


• We obtained audit evidence by checking samples of claims case reserves through comparing the estimated amount of the case reserve to appropriate documentation, such as reports from loss adjusters, which are qualified with sufficient and relevant experience in this profession.

Actuarial assumptions used in the valuation of life insurance liabilities

As at 31 December 2016, technical reserves include life actuary fund amounted to KD 19,252,932 (2015: KD 17,453,613) representing 25% of the total technical reserves.

This is an area that involves significant judgment over uncertain future outcomes, mainly the ultimate total settlement value of long-term policy holder liabilities. Economic assumptions, such as investment return and associated discount rates, and operating assumptions such as mortality (including consideration of policy holder behavior) are the key inputs used to estimate these long-term liabilities.

Refer to significant accounting policy 2.3.8, insurance risk management note 16, critical accounting estimates and judgements note 20 and disclosure note 10 to the financial statements.

In evaluating the valuation of life insurance liabilities, our audit procedures included the following:

• We obtained audit evidence in respect of understanding the key controls over the data collection and analysis, evaluated their design and implementation.

• We assessed qualification and experience of those involved in calculation of life insurance liabilities, including management’s expert who is licensed from internationally recognized bodies.

• We involved auditors’ specialist to review appropriateness of management’s expert estimates and assumptions.

Valuation and impairment of investments available for sale

As at 31 December 2016, investments available for sale amounting to KD 62,062،079 represent 40% of the total assets. These investments primarily comprised of investments in quoted equity and debt securities; representing 94% of the investment balance as at 31 December 2016. Investments available for sale also include unquoted equity securities and units investment funds.

Refer to significant accounting policy 2.3.1, fair value estimation 17, critical accounting estimates and judgements note 20 and disclosure note 4 to the financial statements.

Investments available for sale are measured at fair values with the corresponding fair value change recognized in other comprehensive income.

The valuation is performed by the Company using a fair value hierarchy:

• Level 1: Quoted prices in active markets for identical financial instruments.

• Level 2: Quoted prices in an active market for similar instruments. Quoted prices for identical assets or liabilities in the market that is not active. Inputs other than quoted prices that is observable for assets or liabilities.

• Level 3: Inputs for the assets or liabilities that are not based on observable market data.


The valuation of investment securities is inherently subjective, most predominantly for the instruments classified under level 2 and level 3, since these are value during inputs other than quoted prices in an active market.

In addition, the Company’s Management determines whether objective evidence of impairment exists for individual investments classified as available for sale. In these cases, the fair value cumulative change is transferred from other comprehensive income to the statement of income. Given the inherent subjectivity in the valuation of the instruments classified under level 2 and level 3 and in the assessment of impairment, we determined this to be a key audit matter. The investment securities classified under level 2 and level 3, amounted to KD 1,258,686 and KD 2,515,866 respectively as at 31 December 2016.

As part of our audit procedures, we have tested the level 1 fair valuations by comparing the fair values applied by the Company with publicly available market data. For all level 2 and level 3 valuations, we tested the appropriateness of the models used by the Company and there liability of the data that was used as input to these models. We also assessed the adequacy of the fair value disclosures in the financial statements.

In addition, we evaluated management’s assessment of indications of impairment and challenged management’s rationale for identifying significant and prolonged decline in the fair value of the security below its cost, and discussed this with the key management.

Other Information

Management is responsible for the other information. The other information comprises all information

included in the annual report other than the financial statements and our auditors’ report thereon. The

annual report for the year 2016 is expected to be made available to us after the date of this auditors’ report.

Our opinion on the financial statements does not cover the other information and we will not express any

form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information

identified above when it becomes available and, in doing so, consider whether the other information is

materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise

appears to be materially misstated.

When we read the annual report, if we conclude that there is a material misstatement therein, we are required

to communicate the matter to those charged with governance.

Responsibilities of Management and Those Charged With Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance

with IFRSs, and for such internal control as management determines is necessary to enable the preparation

of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Companys’ ability to

continue as a going concern, disclosing, as applicable, matters related to going concern and using the

going concern basis of accounting unless management either intends to liquidate the Company or to cease

operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for over seeing the Company’s financial reporting process.


Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys’ internal control.

• Evaluate the appropriateness of accounting policies used and there as on ableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained upto the date of our auditors’ report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the under lying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with the mall relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to out weigh the public interest benefits of such communication.


Report on Other Legal and Regulatory Requirements

Further more, in our opinion, proper books of account have been kept by the Company and the financial statements, together with the contents of the report of the Board of Directors relating to these financial statements, are in accordance there with. We further report that we obtained all the information and explanations that we required for the purpose of our audit and that the financial statements incorporate all information that is required by the Companies Law No. 1 of 2016, its executive regulations and of Law No. 24 of 1961, as amended, concerning insurance companies and insurance agents and its related regulations; and by the Company’s Memorandum of Incorporation and Articles of Association; as amended, that an inventory was duly carried out and that, to the best of our knowledge and belief, no material violation of Companies Law No. 1 of 2016, its executive regulations or of Law No. 24 of 1961, as amended or of the Memorandum of Incorporation and Articles of Association, as amended, have occurred during the financial year ended 31 December 2016 that might have had a material effect on the business of the Company or on its financial position.

Bader A. AI-Wazzan Licence No. 62A Deloille & Touche AI-Wazzan & Co.

Rabea Saa M-uhanna Licence No.152A Horwath AI-Muhanna & Co

Kuwait, 14 February 2017


Statistical statementPaid-up capital and capital reserves and net profits and cash dividends

Year Paid-up capital Capital Reserves Net profits Cash Dividends

Kuwait Dinar Kuwait Dinar Kuwait Dinar Kuwait Dinar

1961 150,000 3,500 18,500 15,000

1981 9,187,500 6,174,000 7,200,000 919,000

1985 16,000,000 10,956,000 4,500,000 3,200,000

1990/91 17,600,000 19,936,000 8,851,000 4,400,000

1992 17,600,000 21,588,000 6,520,000 4,400,000

1993 17,600,000 22,800,000 6,853,000 5,280,000

1994 17,600,000 22,800,000 6,681,000 5,280,000

1995 18,480,000 25,240,000 6,724,000 5,544,000

1996 18,480,000 26,240,000 11,096,000 7,392,000

1997 19,404,000 27,202,000 9,197,000 7,762,000

1998 19,404,000 27,202,000 3,681,000 4,851,000

1999 19,404,000 27,202,000 7,724,000 6,791,000

2000 19,404,000 27,202,000 6,025,000 5,821,000

2001 19,404,000 27,202,000 6,577,000 5,239,000

2002 19,404,000 27,202,000 3,633,000 5,239,000

2003 19,404,000 27,202,000 15,685,000 7,762,000

2004 19,404,000 27,202,000 11,126,000 9,702,000

2005 19,404,000 27,202,000 23,474,000 13,583,000

2006 19,404,000 27,202,000 4,853,000 11,642,000

2007 19,404,000 27,202,000 13,293,000 13,583,000

2008 19,404,000 27,202,000 2,946,000 5,821,000

2009 19,404,000 27,202,000 (6,235,000) 3,881,000

2010 19,404,000 27,202,000 3,897,000 3,881,000

2011 19,404,000 27,202,000 4,350,000 3,881,000

2012 19,404,000 27,202,000 3,911,000 3,881,000

2013 19,404,000 27,202,000 4,237,000 3,724,800

2014 19,404,000 27,202,000 5,148,000 3,715,424

2015 19,404,000 27,202,000 5,691,000 3,695,990

2016 19,404,000 27,202,000 (594,689) 3,695,990

• The increase in paid-up capital is due to the transfer of funds from the general reserve account, the distribution of dividend account and the distribution of bonus shares to the shareholders as per the resolutions of the general assembly. It is noted that the Company’s Capital was KD. 375,000.


Statistical statement (General Insurance)Premiums written and retained premiums and reserve for unexpired

risks and additional reserve

Year Premiums Premium retention Reserve for unexpired risks Additional reserve

Kuwait Dinar Kuwait Dinar Kuwait Dinar Kuwait Dinar

1961 157,000 68,000 22,000 6,000,000

1981 18,952,000 8,510,000 3,329,000 6,450,000

1985 19,053,000 704,000 2,781,000 6,800,000

1990/91 13,078,000 4,923,000 888,000 6,800,000

1992 9,124,000 2,571,000 1,013,000 6,800,000

1993 10,701,000 2,839,000 1,115,000 6,800,000

1994 10,908,000 2,990,000 1,170,000 6,800,000

1995 10,725,000 2,978,000 1,150,000 6,800,000

1996 17,245,000 7,853,000 2,883,000 6,800,000

1997 17,959,000 9,415,000 3,637,000 6,800,000

1998 18,944,000 9,845,000 3,950,000 6,800,000

1999 14,339,000 7,382,000 3,148,000 6,800,000

2000 12,925,000 5,267,000 2,038,000 6,120,000

2001 11,370,000 5,138,000 2,010,000 6,120,000

2002 12,862,000 5,890,000 2,318,000 6,120,000

2003 15,406,000 7,166,000 2,823,000 6,120,000

2004 17,252,000 8,451,000 3,329,000 6,120,000

2005 20,276,000 10,617,000 4,205,000 6,120,000

2006 22,865,000 12,132,000 4,808,000 6,120,000

2007 22,655,000 11,680,000 4,607,000 6,120,000

2008 22,244,000 11,666,000 4,602,000 6,120,000

2009 25,007,000 10,245,000 4,023,000 2,650,000

2010 25,593,000 11,162,000 4,406,000 2,650,000

2011 22,219,000 11,309,000 4,463,000 2,650,000

2012 27,368,000 11,909,000 4,696,000 2,650,000

2013 27,017,000 14,596,000 5,765,000 2,650,000

2014 28,376,000 14,811,000 5,852,000 3,650,000

2015 29,753,000 14,241,000 5,624,000 3,650,000

2016 30,041,000 14,655,000 5,783,000 3,650,000


Kuwait Insurance Company S.A.K.P

Shareholding public companyThe main center

IncludingManagement of life insurance and pension funds

and the Takaful insurance unit

Kuwait Insurance Company Building - Abdullah Al-Salem Street

Mailing Address: (769) - Safat - Postal code: 13008 - Kuwait

Fax: +965 - 22461855 / 22428530

Tel: 22420135 to 22420139 - from 22420021 to 22420028 - 1884433

E-mail:[email protected] website: www.kic-kw.com

Branches

Branches Address Telephone Fax

Ahmadi Ahmadi Cinema building - Ground Floor - Shop No. 6 +7

23981310

23984249

23983554

Al-Sawaber (Middle) Cement House Building - Al-Sawaber - Block (6) - Building (21)

22437501

22449799

22445323

Shuwaikh Industrial Area Head Office - Block (A) - Building 136 - St. 23 24816078

24835348

24819168

Besbhan industrial zone Head Office - Block 5 - Building 6 24711847

24719883

24737905

Third Shuwaikh Industrial Area

The Company building near the vegetable market shuwaikh Building 159 - Block (D)

24832435

24834152

24812697

Hawally Tunis Street Sarawi complex Opp. to Rehab complex

22615483

22615486

22615496

Al-Surra Surra Cooperative Society - Ground Floor 25348073 25316516

Fahaheel Mecca Street - Salman Al Daboos building 23926720

23926727

23926730

Salmiya Salem Al Mubarak Street 25750502

25746335

25750502

Farwaniya Main Street - opposite to Co-Operative society 24758679

24758689

24758673

Jahra Building 29 - Block 93 - Shop No. 1 + 2 24574491 24574482

Abu Faterah West Abu Faterah - Block Jawaher (A) Shop No. 18 25470035 25470036

The Traffic Department Kuwait Driving School 24813066 24816956

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