INSPIRING OPPORTUNITIES

Transcription

1 PROSPECTUS الشركة العمانية القطرية للتا مين Oman Qatar Insurance Company SECURITY. STABILITY. STRENGTH. INSPIRING OPPORTUNITIES Initial Public Offering of 25,000,000 Shares at a price of Bzs 160 per Offer Share Offer Opens 6 September 2017 Offer Closes 5 October 2017 (Comprising a nominal value of Bzs 100 per Share, premium of Bzs 58 per Offer Share and Offer Expenses of Bzs 2 per Offer Share) Lead Issue Manager & Financial Advisor Legal Advisor Marketing Advisor Collecting Banks

2

3 His Majesty Sultan Qaboos Bin Said

4 Oman Qatar Insurance Company SAOG (Under Transformation) (P.O. Box 3660, Ruwi 112, Sultanate of Oman.) Tel: , Fax: PROSPECTUS Public Offer of 25,000,000 Offer Shares Offer Price: Bzs 160 per Offer Share (Comprising a nominal value of Bzs 100 per Offer Share, premium of Bzs 58 per Offer Share and Offer Expenses of Bzs 2 per Offer Share) SUBSCRIPTION PERIOD Subscription Opens: 6 th September 2017; Subscription Closes: 5 th October 2017 LEAD ISSUE MANAGER AND FINANCIAL ADVISOR Ubhar Capital SAOC P.O. Box 1137, P.C. 111, C.P.O., Sultanate of Oman. Tel: Fax: LEGAL ADVISOR Curtis, Mallet-Prevost, Colt & Mosle LLP P.O. Box 1803, P.C. 114, Sultanate of Oman Tel: Fax: COLLECTING BANKS This Prospectus has been prepared in accordance with the requirements prescribed by the CMA. This is an unofficial English translation of the Prospectus prepared in Arabic and approved by the CMA in accordance with Administrative Decision no. E/54/2017 dated 29 August The CMA assumes no responsibility for the accuracy and adequacy of the statements and information contained in this Prospectus nor will it have any liability for any damage or loss resulting from the reliance upon or use of any part of the same by any person. This Prospectus does not constitute an offer to sell or an invitation by or on behalf of the Company to subscribe to any of the Shares in any jurisdiction outside of Oman where such distribution is, or may be, unlawful. 2

5 IMPORTANT NOTICE TO INVESTORS All prospective Applicants are advised to read this notice The objective of this Prospectus is to present material information that may assist Prospective Applicants to make an appropriate and informed decision as to whether or not to invest in the Offer Shares. This Prospectus includes all material information and data and does not contain any misleading information or omit any material information that would have a positive or negative impact on the decision of whether or not to invest in the Offer Shares. The Directors of the Company are jointly and severally responsible for the integrity and adequacy of the information contained in, and confirm that to their knowledge appropriate due diligence has been conducted in the preparation of, this Prospectus and further confirm that no material information has been omitted, the omission of which would render this Prospectus misleading. All Prospective Applicants should examine and carefully review this Prospectus in order to decide whether it would be appropriate to invest in the Offer Shares by taking into consideration all the information contained in this Prospectus in its proper context. Prospective Applicants should not consider this Prospectus as a recommendation by the Company, the Directors, the Issue Manager or the Legal Advisor to buy the Shares. Every prospective Applicant shall bear the responsibility of obtaining independent professional advice on the investment in the Offer Shares and shall conduct independent evaluation of the information and assumptions contained herein using appropriate analysis or projections. No person has been authorized to make any statements or provide information in relation to the Company or the Offer Shares other than the persons whose names are indicated in this Prospectus to do so. Where any person makes any statement or provides information it should not be taken as authorized by the Company, the Issue Manager or the Legal Advisor. 3

6 FORWARD LOOKING STATEMENT This Prospectus contains statements that constitute statements relating to intentions, future acts and events. Such statements are generally classified as forward-looking statements and involve known and unknown risks, uncertainties and other important factors that could cause those future acts, events and circumstances to materially differ from the way implicitly portrayed within this Prospectus. The use of any of the words aim, anticipate, continue, estimate, objective, plan, schedule, intend, expect, may, will, project, propose, should, believe will continue, will pursue and similar expressions are intended to identify forward-looking statements. These forward-looking statements are not historical facts but reflect current expectations regarding future results or events and are based on various estimates, factors and assumptions. The Company believes the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct. Moreover, forward-looking statements involve inherent risks and uncertainties and speak only as at the date they are made and should not be relied upon as representing the Company s estimates as of any subsequent date. The Company cautions prospective Applicants that a number of important factors could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements. These factors include, but are not limited to, the following: Level of demand for the Company s products and services; The competitive environment; the potential increase in number of competitors; Regulatory, legal and fiscal developments; Fluctuations in foreign exchange rates, equity prices or other rates or prices; The inability to estimate future performance; The performance of the Omani economy; Inability to successfully implement its strategy, growth and expansion plans; and Other factors described under the chapter Risk Factors in this Prospectus. The Company cannot provide any assurance that forward-looking statements will materialize. The Company, the Issue Manager and the Legal Advisors and any of their respective affiliates disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise unless required by Applicable Law. For a description of material factors that could cause the Company s actual results to differ materially from the forwardlooking statements in this Prospectus, see the chapter titled Risk Factors of this Prospectus. The risk factors described in this Prospectus are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in the forward-looking statements. After listing on the MSM, the Company will adhere to the disclosure rules and regulations of the CMA, which includes making timely disclosure in relation to the Company s financial results. The Company advises prospective Applicants and the Shareholders to track any information or announcements made by it after listing through the MSM website at 4

7 PRESENTATION OF FINANCIAL AND OTHER INFORMATION Financial Data: This Prospectus includes certain projections. The projections are based on the expectations of external conditions and events relating to the Company, the competitive environment in Oman and the industry in which the Company operates. These projections are forward-looking statements that involve inherent risks and uncertainties. Prospective Applicants are cautioned that a number of important factors could cause actual results or outcomes relating to the Company to differ materially from those expected in these projections. In addition, the Issue Manager has not independently verified any of the projections and financial/ other data prepared by the Directors. Please see the chapter Risk Factors. The Company s Financial Year commences on January 1 and ends on December 31 of each year. In this Prospectus, any discrepancy between the total and the sum of the relevant amounts listed is due to rounding. Currency of Presentation: All references to RO are to Omani Rial, the official currency of Oman. The Omani Rial is pegged to the U.S. Dollar and the pegged exchange rate is RO 1 = US Dollar RO 1 is composed of 1,000 Bzs. Summary or Extracts of Documents: Any summaries of documents or extracts of documents contained in the Prospectus should not be relied upon as being comprehensive statements in respect of such documents. Industry and Market Data: Industry and market data in this Prospectus has been obtained from third parties or from public sources such as websites and publications. Neither the Directors of the Company, the Issue Manager nor the Legal Advisor have independently verified any of the data from third party sources referred to in this Prospectus or ascertained the underlying assumptions relied upon by such sources. In addition, the Issue Manager or the Legal Advisor have not independently verified any of the industry data or other sources referred to in this document. Therefore, its accuracy and completeness is not guaranteed and its reliability cannot be assured. The extent to which the Industry and Market data used in this Prospectus is meaningful depends on the reader s familiarity with and understanding of the methodologies used in compiling such data. 5

8 ADDITIONAL POINTS TO BE NOTED Scope of Information: The information contained in this Prospectus is intended to provide a prospective Applicant with adequate information relating to the investment opportunity and background information on the IPO referred to in this Prospectus. However, this Prospectus does not necessarily contain all the information that a prospective Applicant may consider material. The content of this Prospectus is not to be construed as legal, business or tax advice. Each prospective Applicant should consult his own lawyer, financial adviser or tax adviser for legal, financial or tax advice in relation to any subscription, purchase or proposed subscription or purchase of the Shares. Investor Due Diligence: Prior to making any decision as to whether to subscribe for the Shares, prospective Applicants should read this Prospectus in its entirety. In making an investment decision, prospective Applicants must rely upon their own examination of the terms of this Prospectus and the risks involved in making an investment. Equity Risk: All equity investments carry market risks to varying degrees. The value of any security can fall as well as rise depending on the market conditions. Prospective Applicants should read the chapter related to Risk Factors of this Prospectus. Restrictions on Distribution of this Prospectus: The distribution of this Prospectus and the Offer Shares may, in certain jurisdictions, be restricted by law or may be subject to prior regulatory approvals. This Prospectus does not constitute an offer to sell or an invitation by or on behalf of the Company to subscribe to any of the Offer Shares in any jurisdiction outside of Oman where such offer or invitation would be unlawful. This Prospectus may not be distributed in any jurisdiction where such distribution is, or may be, unlawful. The Company, the Issue Manager, the Legal Advisor and the Collecting Banks require persons into whose possession this Prospectus comes to inform themselves of and observe, all such restrictions. None of the Company, the Issue Manager, the Legal Advisor or the Collecting Banks accept any legal responsibility for any violation of any such restrictions on the sale, offer to sell or solicitation to subscribe for Offer Shares by any person, whether or not a prospective Applicant, in any jurisdiction outside Oman where such sale, offer to sell or solicitation to subscribe would be unlawful. Restrictions on use of Information Contained in this Prospectus: The information contained in this Prospectus may not be published, duplicated, copied or disclosed in whole or in part or otherwise used for any purpose other than in connection with the Offer, without the prior written approval of the Company and the Issue Manager. Disclaimer of Implied Warranties: Except as required under Applicable Law no representation or warranty, express or implied, is given by the Company, the Issue Manager, the Legal Advisor or the Collecting Banks, or any of their respective directors, managers, accountants, lawyers, employees or any other person as to the completeness of the contents of this Prospectus; or of the projections included within; or of any other document or information supplied at any time in connection with the Offer; or that any such document has remained unchanged after the issue thereof. 6

9 TABLE OF CONTENTS IMPORTANT NOTICE TO INVESTORS 3 FORWARD LOOKING STATEMENT 4 PRESENTATION OF FINANCIAL AND OTHER INFORMATION 5 ADDITIONAL POINTS TO BE NOTED 6 TABLE OF CONTENTS 7 1. ABBREVIATIONS AND DEFINITIONS 8 2. OFFER SUMMARY ESTIMATED OFFER EXPENSES PURPOSE OF THE OFFER AND USE OF OFFER PROCEEDS OBJECTS AND APPROVALS SHAREHOLDING DETAILS OMAN ECONOMIC OUTLOOK OMAN INSURANCE SECTOR OVERVIEW DESCRIPTION OF THE COMPANY AND BUSINESS OVERVIEW RISK FACTORS SOURCES OF FINANCING HISTORICAL FINANCIAL STATEMENTS PROJECTED FINANCIAL STATEMENTS AUDITED FINANCIAL STATEMENT FOR THE PERIOD ENDED 31 ST MARCH 2017 (FIRST QUARTER) UNAUDITED FINANCIAL RESULTS FOR THE 6 MONTHS PERIOD ENDED 30 TH JUNE DIVIDEND POLICY VALUATION AND PRICE JUSTIFICATION RELATED PARTY TRANSACTIONS AND MATERIAL CONTRACTS CORPORATE GOVERNANCE RIGHTS AND LIABILITIES OF SHAREHOLDERS SUBSCRIPTION CONDITIONS AND PROCEDURES UNDERTAKINGS 208 7

10 1. ABBREVIATIONS AND DEFINITIONS AGM Applicable Law Applicant Application Application Form Application Money Annual General Meeting of the Shareholders Applicable laws and regulations in Oman Eligible person who applies for the Offer Shares pursuant to the terms of this Prospectus The Application Form duly filled and submitted to the Collecting Bank(s) together with the Application Money as specified in the Chapter Subscription Conditions and Procedures of this Prospectus The printed application form to be used to apply for the Offer Shares pursuant to the terms of this Prospectus. These forms will be available at the branches of the Collecting Banks The Application Money is equal to the amount in Omani Rials, equal to the number of Shares applied multiplied by the Offer Price per Share. Articles This amount has to be paid by an Applicant at the time of submission of his/her duly completed Application Form as specified in the Chapter Subscription Conditions and Procedures of this Prospectus. The Company s Articles of Association (as amended from time to time) as approved by the CMA and registered with the MOCI Baiza(s)/Bzs One thousandth of an Omani Rial (Bzs 1,000 = RO 1) Board CAGR Capital Market Law CCL CEO Chairman CMA Code Collecting Bank(s) Company or OQIC CPI DCF Directors EGM Executive Regulations Financial Year The Board of Directors of the Company elected and holding office in accordance with the Articles, the CCL, the Code and the Rules and Conditions for Election of Directors of Public Joint Stock Companies (Ministerial Decision 137/2002, as amended) Compound annual growth rate The Capital Market Law of Oman promulgated by Royal Decree Number 80/98 (as amended) The Commercial Companies Law of Oman promulgated by Royal Decree 4/74 (as amended) The Chief Executive Officer of the Company The Chairman of the Board The Capital Market Authority of Oman The CMA Code of Corporate Governance for SAOGs issued by circular 1/2003 (as amended) The banks appointed to receive the Applications during the Subscription Period Oman Qatar Insurance Company SAOG (Under Transformation) Consumer price index Discounted cash flow methodology for valuation The directors of the Company Extraordinary general meeting of the Shareholders Executive Regulations of the Capital Market Law (as amended) issued vide Administrative Decision No.1/2009 of the CMA The period of twelve months starting on January 1 and ending on December 31 of that particular year 8

11 GCC GDP Government IFRS Independent Director Insurance Law IPO Subscription Period Issue Manager Legal Advisor Management MCD MENA MOCI MSM OGM Offer Offer Closing Date Offer Opening Date Offer Price Offer Proceeds Offer Shares Prospectus Rial or RO SAOG Selling Shareholders Shares Shareholders Takaful The Gulf Cooperation Council which is composed of Oman, United Arab Emirates, Saudi Arabia, Qatar, Bahrain and Kuwait Gross domestic product The Government of Oman International Financial Reporting Standards As defined in the Code The Insurance Law, promulgated by Royal Decree 12/79 as amended and decisions and regulations made pursuant thereto Initial public offer of the Offer Shares The period between the Offer Opening Date and the Offer Closing Date inclusive of both days during which an Applicant can submit an Application Form Ubhar Capital SAOC (or U Capital) Curtis, Mallet-Prevost, Colt & Mosle LLP The senior management of the Company Muscat Clearing and Depository Company SAOC Middle East North Africa The Ministry of Commerce and Industry of Oman Muscat Securities Market Ordinary General Meeting of the Shareholders The offer to the public through this Prospectus of the Offer Shares The closing date of the Offer, which is described in the Chapter Subscription Conditions and Procedures of this Prospectus The opening date of the Offer, which is described in the Chapter Subscription Conditions and Procedures of this Prospectus The price at which each of the Offer Shares is being offered for subscription through this Prospectus The proceeds of the Offer The Shares being offered through this Prospectus This prospectus for the IPO of the Offer Shares The lawful currency of the Sultanate of Oman Omani Public Joint Stock Company The shareholders who are offering their shares as per details provided in Chapter 6 - Shareholding Details of this document The equity shares of the Company The shareholders of the Company as registered with the MCD (from time to time). Details of current Shareholders provided in the chapter Shareholding Details An agreement between a group of participants to support one another jointly for losses arising from specified risks in accordance with the rules and principles of Islamic Shari'a 9

12 2. OFFER SUMMARY Name of the company Commercial registration no Date of registration 21st July 2004 Address Duration Authorized share capital of the Company Paid-up Share capital of the Company (before the Offer) Shares offered for subscription Name of Pre-IPO Shareholders and number of Shares held Offer Price Purpose of Offer (Use of Offer Proceeds) Persons eligible to subscribe for the Offer Oman Qatar Insurance Company SAOG (under transformation) (the Company) P.O. Box 3660, Ruwi 112, Sultanate of Oman, Tel; , Fax: Unlimited RO 20,000,000 divided into 200,000,000 Shares of nominal value of Bzs 100 each. RO. 10,000,000 divided into 100,000,000 Shares of nominal value of RO each that have been subscribed and paid in full. As part of the IPO process, the Company has split the Shares to a nominal value of Bzs 100 per Share, resulting in a pre-ipo equity capital of 100,000,000 Shares. 25,000,000 Shares of nominal value Bzs 100 each, representing 25% of the post offer capital of the Company. # Name 1 Qatar Insurance Company S.A.Q. 2 Al Hosn Investment Company SAOC 3 Mr. Khalifa Abdulla Turki Al -Subaey Subscription Opening Date 6 th September 2017 Subscription Closing Date 5 th October 2017 Expected listing date on MSM 19 th October 2017 Number of Shares held before the transformation (nominal value Bzs 100 per Share) Percentage holding 69,998, % 30,000, % 2, % Total 100,000, % Bzs 160 per Share; comprising a nominal value of Bzs 100 per Share, share premium of Bzs 58 per Share and offer expenses of Bzs 2 per Share. The Company is undertaking the Offer to convert the Company from an SAOC to an SAOG and thereby meet the requirements set out in the Insurance Law. The Offer will be open to Omani and non-omani individuals and juristic persons, who have their accounts with the MCD, as on the date and / or during the Subscription Period. 10

13 Prohibitions on subscription Minimum limit for the subscription under one (1) Application Maximum limit for the subscription under one (1) Application Proposed allotment The following prohibitions apply to the Offer: Sole proprietorship establishments cannot apply for the Shares. However, the owners of sole proprietorship establishments may submit Applications in their personal names. Multiple Applications are not permitted. An Applicant may not submit more than one Application. Joint Applications are not permitted (i.e. Applications made in the name of more than one person, including Applications made on behalf of legal heirs). These Applications should only be made in their personal names. Trust accounts cannot apply for the Shares. Brokers shall advise their clients to subscribe in their personal names. All Applications falling in any of above categories will be rejected without notifying the Applicant. Category I: 1,000 Shares and in multiples of 100 Shares thereafter. Category II: 100,100 Shares and in multiples of 100 Shares thereafter Category I: 100,000 Shares. Category II: 2,500,000 Shares, which is 10% of the total Offer Shares. In case of over-subscription of the Offer, the eligible Applications shall be segregated into two categories and the Offer Shares will be allotted among the eligible Applicants, as follows: Category I: 16,250,000 Shares, being 65% of the Offer Shares, will be allocated on a pro-rata basis to Applicants applying for 100,000 Shares or less. Category II: 8,750,000 being 35% of the Offer Shares, will be allocated on a pro-rata basis to Applicants applying for 100,100 Shares or more. The CMA, in co-ordination with the Issue Manager, will finalise the actual basis of allocation. The CMA may decide to allocate a minimum number of Offer Shares equally to all eligible Applicants, taking into consideration the small subscribers, and the remaining Offer Shares shall be distributed on a pro-rata basis. Any under-subscription in any category shall be carried over to the other category as described in more detail in the Chapter Subscription Conditions and Procedures of this Prospectus. If the Offer Shares are not fully subscribed, the Selling Shareholders shall retain the unsubscribed Offer Shares. The Company will, in consultation with the CMA, agree on a suitable course of action regarding the unsubscribed shares. Financial Advisor & Issue Manager Total foreign ownership of the Company following the IPO cannot exceed 70% of the paid up share capital of the Company. It should be noted that pursuant to Ministerial Decision 205/2007 issued by the former Ministry of National Economy, all GCC individuals and juristic persons are treated as Omani nationals and juristic persons in respect of ownership of shares of companies in Oman. Ubhar Capital SAOC PO Box 1137, P.C. 111, C.P.O., Sultanate of Oman. Tel: , Fax: ubhar-corporatefinance@u-capital.net Website: 11

14 Legal Advisor Curtis, Mallet-Prevost, Colt & Mosle LLP P.O. Box 1803, P.C. 114, Sultanate of Oman Tel: Fax: Collecting Banks 1. Bank Dhofar SAOG 2. National Bank of Oman SAOG 3. Oman Arab Bank SAOC Statutory Auditors 2016 KPMG PO Box 641, PC 112 Sultanate of Oman Tel: , Fax: Website: From 2017 Ernst & Young 3rd Floor, Ernst & Young Building, PO Box 1750, PC 112, Muscat, Sultanate of Oman, Office: Fax: , Muscat, Oman Website: Reporting Accountants Registration and Transfer Agent Marketing Advisor From 2012 to 2015 Deloitte & Touche (M.E.) & Co. LLC PO Box 258, PC 112 Sultanate of Oman Ph.: ; Fax: Web: Deloitte & Touche (M.E.) & Co. LLC PO Box 258, PC 112 Sultanate of Oman Ph.: ; Fax: Web: Muscat Clearing and Depository Co. SAOC PO Box 952, PC 112, Ruwi, Sultanate of Oman Tel: , Fax: Website : OHI LEO BURNETT PO Box 889, PC 100, Sultanate of Oman Tel: Website: 12

15 3. ESTIMATED OFFER EXPENSES The following are the details of estimated Offer expenses: Related Expenses Amount (RO) Issue Manager, Financial Advisor and Legal Advisor fees 82,500 Reporting Accountant fees 17,750 Collecting Banks fees 27,000 CMA & MCD fees 25,000 Printing, marketing, advertising & publicity expenses 45,000 Miscellaneous expenses 25,750 Total 223,000 Offer expenses to be collected at Bzs 2 per Offer Share 50,000 Difference between amount to be collected towards expenses and estimated Offer expenses 173,000 The above are indicative estimates only and may differ from actual Offer expenses. If all Offer Shares are subscribed for, the estimated expenses are expected to be about 4% of the Offer size. The total Offer expenses will be partially met out of the amount collected towards Offer expenses. Any Offer expense in excess of the amount collected will be borne by the Selling Shareholders. If the actual Offer expenses are less than the amount collected from the successful Applicants, the surplus will be retained by the Company and credited to its reserves. 13

16 4. PURPOSE OF THE OFFER AND USE OF OFFER PROCEEDS 4.1. Purpose of the Offer The purpose of the Offer is to transform the Company from an SAOC to an SAOG and list the Shares on MSM, as approved by an EGM held on 6th July, The Insurance Law, requires insurance companies to have a minimum paid up capital of RO 10 million and to be publicly listed by 17th August 2017 in compliance with the requirements of Royal Decree No. 39/2014, which requires licensed insurance companies to become public shareholding companies. Please refer to the related risk factor under Para Delay in conversion to SAOG entity and listing of the Shares in the MSM in the Chapter Risk Factors 4.2. Use of Offer Proceeds The Offer Proceeds (including the premium and excluding amount collected towards offer expenses) will be remitted in full to the Selling Shareholders on listing of the Offer Shares in MSM. Therefore, the Company will not receive any amount other than the amount collected towards Offer expense. If the actual Offer expenses are less than the amount collected from the successful Applicants, the surplus will be retained by the Company and credited to its reserves. 14

17 5. OBJECTS AND APPROVALS 5.1. The Company s Objects As per the Articles, the objectives of the Company are: The object of the Company is to practice Insurance of all types as licensed and Investment of the capital and assets excluding banking business. In order to realize its object, the Company may perform the following activities: 1. Life Insurance. 2. General Insurance: a) Industrial insurance. b) Liability insurance. c) Land, air and transport insurance. d) Car insurance. e) Financial loss insurance. f) Personal accident insurance. g) Insurance on belongings. h) Marine hull insurance. i) Fidelity insurance. j) Travel insurance. k) Insurance for construction projects such as roads. l) Health insurance. m) Any other types of insurance not mentioned above. 3. To contract with lessees, borrowers, annual salary earners or others. To establish, collect, prepare and pay the funds allocated for depreciation of the debentures, to renew these assets, deposit capital to use its proceeds, or for any other financial reserves, whether it is a lump sum or paid in instalments or others, and clearance according to any terms and conditions agreed upon. 4. To purchase, deal in or lend against movable and immovable assets to which perpetual benefits are attached, or any other benefits whether they are absolute, temporary or estimated, and whether they are limited or permanent. To acquire, lend, use, annul, write off any guarantee, donation or contract that the Company issued, made, performed or participated therein. 5. To reinsure or secure a guarantee for all risks, and perform all types of reinsurance or counter insurance related to any of the Company s activities. 6. To give to any class or section of those dealing with the Company, rights in a financial reserve or other company accounts, or any right to share the profit or profits of any specific branch or section of the company s business or any privileges, interests or special benefits. 7. To lend and loan funds with or without collateral, including lending funds on the policies issued by the company, and under its liability; and to use any part of the Company s funds to buy, cancel, pay off, or release of any policy, contract or liability. 8. To pay, settle, and reconcile any claim against the Company that may be appropriate to pay, settle or reconcile, or resort to arbitration or any other usage or custom. 9. To borrow and acquire funds for the Company s purposes and to insure that in the manner it deems appropriate whether by the issuance of mortgages, privileges, or bonds covered wholly or partly by the company funds, assets or projects. The above does not limit the means of borrowing, or the absolute authority vested in the Company according to the terms and procedures. 10. To acquire or undertake all or part of the business and properties or liabilities of any individual or entity engaged in any sort of business that the Company has the right to do, or making the assets suitable for the purposes of the Company. 11. To establish a regular partnership or any other arrangement to share the profits, or mutual benefits, or in a cooperation and other common privileges with any individual or entity who performs or intends to perform any work or transaction 15

18 that the company has the right to do or perform, or work for direct or indirect benefits; to lend funds, guarantee contracts or otherwise assist any individual or entity. To purchase shares or bonds in any entity, and to sell, carry, reissue the same with or without guarantee, and deal in them in any way within the purposes and goals of the Company. 12. To enter into arrangements with the government, municipalities, official or local authorities or others to acquire the rights, privileges and benefits that might assist in realizing its goals or part thereof. 13. To have capacity to acquire or dispose of movable and immovable assets, or any other privileges it deems necessary or suitable for the nature of its business, and register ownership in its name with the official departments; to invest directly or by lease or in any other way. 14. To sell any of its projects, assets, properties or replace, or lease against rental amounts or percentage fee or part of the profits or deal with them in any way the company deems appropriate, especially shares or debentures or other bonds of any other company. 15. To issue, withdraw, accept, endorse, or deal in any other way in drafts, negotiable instruments, bills of lading, and other negotiated instruments or other commercial bills. 16. To perform all transactions, enter into all contracts, and take all actions deemed necessary and appropriate to realize and facilitate its goals on the terms and conditions it so decides. Generally, the Company shall be permitted to do whatever is necessary to achieve objectives for which it is established and the Company shall not be restricted in its objectives unless it cannot perform the same without contravening the laws of the Sultanate of Oman or these Articles of Association or decisions taken during its General Meetings Permits and Licenses The Company holds the following material registrations, permits and licenses: Ministry of Commerce and Industry: Commercial Registration Commercial Registration Number: Registered Headquarters: Muscat Governorate / Muttrah Postal Address: PO Box: 3660, PC 112 Date of Registration: 21st July 2004 Expiry Date: 20th July 2019 Duration: Unlimited The Company is registered with the MOCI with the following activities: - Life insurance - Other kinds of insurance Capital Market Authority (CMA): Insurance License The CMA is the relevant authority, which regulates and licenses insurance related activities in Oman. The Company is required to obtain and maintain licenses from the CMA to carry on its insurance business. The Company holds license from the CMA as follows: License License Number Expiry Date General Insurance 32/IN 20 th June 2019 Life Assurance 32 IN 20 th June 2019 The Company intends to seek and obtain renewal of the above license as and when it falls due for renewal. 16

19 Oman Chamber of Commerce & Industry: Membership Registration Number: 1453 Grade: Excellent Expiry Date: 3rd August The Articles of Association A copy of the Articles of Association (Articles) is available for perusal at the office of the Company located at Shop No: 57, Building No: 978, Way No: 2716, Plot No: 37, Block No: 127, CBD Bank Area, Muscat, Sultanate Oman, Muscat during business hours Approval to float 25% shares in the IPO The CMA advised the Company in a letter dated 5th July 2017 that the CMA has no-objection to the Company offering 25% of its share capital for public subscription instead of 40% as would otherwise be required under Article 61 of the CCL. The CMA also advised that in the event of the Company proposes an increase in the equity capital in the future, the Company may consider such an increase through an IPO and not through a rights issue Resolutions Passed by the Company The Shareholders passed the following resolutions in their EGM held on 6th July Approved the increase in authorized share capital of the Company from RO 5,000,000 to RO 20,000, Approved the change in nominal value of the Company s shares from RO 1 to 100 Bzs (One Hundred Baizas) for each share. 3. Approved the increase of the number of Board of Directors from 6 members to 7 members and amended the Articles of Association accordingly. 4. Approved and adopted the amended Articles of Association of the Company in conformity with the requirements of the CMA. 5. Approved the conversion of the Company from an SAOC to an SAOG through an IPO of Shares and listing on the MSM. 6. Approved the offer to the public of 25,000,000 Shares of the Company being 25% of the post IPO share capital of the Company, subject to the approval by the Capital Market Authority. Any two (2) members of the Board are authorized to approve the price at which shares are to be offered for sale through initial public offering. 7. Approved the appointment of Curtis, Mallet-Prevost, Colt & Mosle LLP as legal advisors to the Company for the IPO. 8. Approved the appointment of Ubhar Capital SAOC as the Financial Advisor and Issue Manager for the IPO. 9. Approved the appointment of Deloitte & Touche (M.E.) & Co. LLC as the reporting accountants for the IPO. 10. Authorized any two (2) of, the Board of Directors of the Company, acting jointly, to carry out the following matters: a. To approve and sign on behalf of the Board of Directors and the Company the prospectus and other documents relating to the IPO; b. To do all other acts, sign all documents and file and register any documents with any relevant authority and obtain consents and approvals on behalf of the Company which may be deemed appropriate or necessary in connection with the IPO including listing of the Company s shares on the Muscat Securities Market; 11. Approved ratifying all actions taken or delegated by the Board in relation to the IPO prior to the date of the EGM Continuing Obligations In accordance with the CCL, all existing obligations of the Company, prior to its transformation to an SOAG shall continue in the SAOG. 17

20 6. SHAREHOLDING DETAILS 6.1. Shareholding as at Incorporation as an SAOC The entire capital of RO. 5,000,000 at incorporation was subscribed for in cash by the shareholders listed in the table below. No. Shareholder s name Nationality Number of Shares held of nominal value of RO. 1 each % of total Aggregate nominal value (RO) 1 Qatar Insurance Company S.A.Q Qatari 2,750, ,750,000 2 Saud Bahwan Group L.L.C Omani 1,750, ,750,000 3 Mustafa Sultan Enterprises L.L.C Omani 250, ,000 4 Jawad Sultan International L.L.C Omani 250, ,000 Total 5,000, % 5,000, Subsequent changes to shareholding after incorporation In the year 2009 Al Hosn Investment SAOC entered into agreement with QIC to hold 30% shareholding in OQIC. Accordingly, Saud Bahwan Group L.L.C, Mustafa Sultan Enterprises L.L.C and Jawad Sultan International L.L.C sold their shares to QIC and Al Hosn and Mr. Khalifa Abdulla Turki. Al Subaey as detailed below: Seller Name Number of shares sold Saud Bahwan Group L.L.C 1,750,000 Mustafa Sultan Enterprises L.L.C 250,000 Jawad Sultan International L.L.C 250,000 Total 2,250,000 Buyer Name Number of shares purchased Qatar Insurance Company S.A.Q 749,900 Al Hosn Investment Company SAOC 1,500,000 Mr. Khalifa Abdulla Turki. Al Subaey 100 Total 2,250,000 After registration of shares dated 12th January 2010 following was the shareholding of the Company: No. Shareholder s name Nationality Number of Shares held of nominal value of RO. 1 each % of total Aggregate nominal value (RO) 1 Qatar Insurance Company S.A.Q Qatari 3,499, ,499,900 2 Al Hosn Investment Company SAOC Omani 1,500, ,500,000 3 Mr. Khalifa Abdulla Turki. Al Subaey Qatari Total 5,000, % 5,000, Total Shares at the time of incorporation of the Company was RO. 5,000,000 Shares. 2. Thereafter, in 2017, the equity capital was increased to RO. 10,000,000 partly through additional capital raise from the existing shareholders by Rights Issue at nominal value and partly from converting the retained earnings) Bonus Shares). 18

21 The Company converted an amount of RO 1 million from retained earnings through issue of bonus shares on a pro rata basis to the Shareholders thereby increasing the paid up capital to RO 6 million. This was approved at the Ordinary General Meeting of the Shareholders held on 6th July In the same Ordinary General Meeting, the Shareholders also approved an increase of the issued share capital of the Company from RO 6 million to RO 10 million by issuing 40,000,000 new shares as a Rights Issue to existing shareholders at an issue price of RO per Share being the nominal value of each share after the share split, on pro-rata basis to existing shareholders of the Company. The capital increase was completed on 11th July The table below details the increase in share capital of the Company from the date of incorporation and until the date of issuance of the prospectus: Capital No. of Shares Nominal value (RO.) Amount (RO.) Authorized capital at incorporation 5,000, ,000,000 Paid up share capital at incorporation 5,000, ,000,000 Paid up share capital in December ,000, ,000,000 Authorized capital at July 2017 (after the share split) 200,000, ,000,000 Capitalisation of retained earnings in July ,000, ,000,000 Rights Issue in July 2017 at nominal value of Bzs 100 per share to existing shareholders 40,000, ,000,000 Paid up Equity capital in July 2017 and as of date 100,000, * 10,000,000 * Nominal value being changed to Bzs 100 per share after the IPO EGM held on 6 th July Current Shareholders of the Company (before transformation to SAOG) No. Name of the shareholder Nationality Number of Shares held of nominal value of Bzs 100 each % of total 1 Qatar Insurance Company S.A.Q. Qatar 69,998, % 2 Al Hosn Investment Company SAOC Oman 30,000, % 3 Mr. Khalifa Abdulla Turki Al-Subaey Qatar 2, % Total 100,000, % 6.4. Shares being sold through the Offer by the Selling Shareholders No. Name of the shareholder Number of Shares held pre- IPO (nominal value Bzs 100 per Share) Number of Shares being sold though the Offer (nominal value Bzs 100 per Share) 1 Qatar Insurance Company S.A.Q. 69,998,000 17,499,500 2 Al Hosn Investment Company SAOC 30,000,000 7,500,000 3 Mr. Khalifa Abdulla Turki Al -Subaey 2, Total 100,000,000 25,000,000 19

22 6.5. Post Offer Equity Structure After the IPO, the issued and paid up share capital of the Company will continue to be RO 10,000,000. No. Name of the shareholder Nationality Number of Shares held of nominal value of Bzs 100 each Aggregate nominal value (RO) % of post- IPO capital 1 Qatar Insurance Company S.A.Q. Qatar 52,498,500 5,249, % 2 Al Hosn Investment Company SAOC Oman 22,500,000 2,250, % 3 Mr. Khalifa Abdulla Turki Al -Subaey Qatar 1, % Sub-total 75,000,000 7,500, % 4 Public 25,000,000 2,500, % Total 100,000,000 10,000, % Lock-up Period - Exemption from the applicability of Article 77 of the CCL Article 77 of the CCL restricts the founders of a public joint stock company from disposing of their shares in such company, before it has published two balance sheets for two consecutive financial years, starting from the date of commencement of actual production or actual business by the company. Since the company has met the requirements of Article 77 of the Commercial Companies Law and has worked for more than three years and submitted financial statements after the actual business started, there is no restriction on the founding members from disposing of their shares in the company after listing Shareholders Voting Rights After the IPO and transformation into an SAOG, the issued and paid up share capital of the Company will be RO 10,000,000 divided into 100,000,000 Shares with a nominal value of Bzs 100 each. Each Share will carry the right to one vote at a general meeting of the Company. Following the IPO, the pre-ipo Shareholders will hold 75,000,000 Shares (assuming full subscription to the Offer by the Applicants) which will have one vote per Share, the same as other Shares offered to the public. The pre-ipo Shareholders will effectively have 75% of the voting rights following the IPO. Of this, the shareholding of Qatar Insurance Company will be 52.5% of the total equity and accordingly, the Company will continue to be a subsidiary of Qatar Insurance Company S.A.Q Overview of the Main Shareholders Qatar Insurance Company S.A.Q. Qatar Insurance Company (QIC) is a publicly listed composite insurer, with a consistent performance history of over 50 years and a global underwriting footprint. Founded in 1964, QIC was the first domestic insurance company in the State of Qatar. Today, QIC is the market leader in Qatar and a dominant insurer in the GCC and MENA region. QIC is one of the highest rated insurers in the Gulf region with a rating of A/Stable from Standard & Poor s (report dated 20th June 2017) and A (Stable) from A.M. Best (report dated 23rd December 2016). In terms of profitability and market capitalization, QIC is also the largest insurance company in the MENA region. QIC s gross underwriting premium for the year 2016 was QAR 9.9 billion with an underwriting result of QAR 844 million and a net profit of QAR 1,052 million. It is listed on the Qatar Exchange and has a market capitalization of over USD 5 billion. Over the last 50 years, QIC has successfully transitioned from a domestic insurance company into a regional operation with companies and branches in various GCC countries and has now transformed into a group of companies with an international reach. 20

23 An overview of QIC s development over the years is pictured below: 1964 QIC established 1968 QIC Dubai branch established 1986 New Management, New Vision 1990 Premium Income reached QAR 100 million 1994 LNG came to Qatar & QIC was the insurer of choice 2000 Declaration of our Millennium Vision 2002 QIC Abu Dhabi branch opened 2012 Qatar Re opened branches in Zurich & Bermuda & a representative office in London A.M. Best Rating obtained Q Life & Medical Insurance Company LLC established 2009 Q-Re, our specialist reinsurance company established 2008 Qatar Insurance Group established 2007 QIC International established 2006 Premium Income crossed QAR 1 billion 2004 Oman Qatar Insurance Co. established QIC established branch in Kuwait 2003 Standard & Poor s rating obtained 2013 Premium Income crossed US$ 1 billion 2014 QIC established QIC Europe Ltd (QEL) Antares Acquisition Net profit crossed QAR 1 billion 2014 QIC s 50th Anniversary 2014 QLM established a Branch in Labuan, Malaysia 2015 Qatar Re opened a representative office in Singapore & a branch office in Dubai Qatar Re relocated to Bermuda Antares Asia a Lloyd s Asia Platform was estd. in Singapore 2015 Qatar Re ranked amongst global top 50 reinsurers 2015 Gross written premium (GWP) crossed USD 2 billion for the full year Qatar Re ranked 35th amongst Antares top 50 global joined reinsurers the Lloyd s China platform in Shanghai 2016 Gross written premium (GWP) crossed QAR 9.9 billion for the full year 2016 QIC Group is a well-diversified multi-pillar business set-up. Direct Insurance Specialty Insurance Life & Medical Reinsurance Asset Management Real Estate QIC Antares Qatar Life & Medical Qatar Re QIC Management QIC Real Estate 21

24 QIC enjoys a dominant position in the MENA region, as depicted below: Regional comparision (FY 2015) in QAR million 30,000 25,000 24,108 20,000 15,000 10,000 5, ,000 8,347 1,044 11,232 7, ,666 2, ,108 3, ,365 3,885 5,554 2,269 5,974 7, ,790 2, , QIC Tawuniya Orient Oman Ins. Co Med Gulf ADNIC Bupa Arabia Gulf Ins. Co. Salama Total Assets Gross premium Net profit QIC Domestic and regional Dominant market share in Qatar and ahead of its peers in MENA Significant growth potential in rapidly growing MENA insurance markets QIC domestic/regional GWP USD 804 million Qatar Re Ranked 35 th amongst top 50 global reinsurers Aspires to become a Top 10 reinsurer by 2025 Continues to expand geographically and by line of business Qatar Re GWP USD 1.24 billion Antares Established as independent Managing Agent at Lloyd s, the world s global insurance and reinsurance market of choice Ranks no. 32 within Lloyd s by GWP Synergies with QIC have potential to enhance growth QIC Group Aspires to become a Top 50 international composite insurance group Well diversified by geography, lines of business and sectors Ranked 109 worldwide by market cap Antares GWP USD 453 million QIC Group GWP USD 2.72 billion Additional information on the company can be accessed through its website, 22

25 Al Hosn Investment Company SAOC Al-Hosn Investment Company S.A.O.C (HIC), is a closed stock investment company established in 2007, and located in the Sultanate of Oman. It is a partnership between Qatar Holding, a subsidiary of Qatar Investment Authority, and Oman Investment Fund, a sovereign wealth fund of the Sultanate of Oman. Each of the company s two shareholders hold 50% of the share capital. HIC s investment strategy focuses on investments in the Sultanate of Oman and in other GCC countries. HIC investments target vital economic sectors including healthcare, education, aquaculture, industrial and manufacturing, telecom / media / technology. Additionally, HIC may consider other growth sectors, on a case by case basis. HIC currently focuses on Private Equity and Venture Capital Investments. HIC adds value to its investee companies by building on its shareholder s strength, internal expertise and network of external professional consultants. 23

26 7. OMAN ECONOMIC OUTLOOK 7.1. Background Strategically positioned at the crossroads of Asia and Europe, Oman has historically been a center of trade and commerce. With a population of approximately 4.45 million as on December 2016, spread over a land area of 309,500 square km, Oman is a country with stable political, economic and social systems. The country has created a strong infrastructure, healthcare, communication, international trade network and advanced transportation systems on the backbone of a flourishing oil-based economy. The continued focus of the Government to diversify the economy and gradually reduce its dependence on oil, has witnessed a steady growth of the non-oil sectors. Currently, according to the data published by the National Centre for Statistics & Information, petroleum activities contributed about 27% of the Gross Domestic Product ( GDP ) at current market prices in The Omani Rial is pegged to the U.S. Dollar at a fixed exchange rate of 1 RO = US$ Economy Global growth in 2016 was the weakest since , owing to a challenging first half marked initially by turmoil in world financial markets. General improvement got under way around mid-year. As per IMF World Economic Outlook, the global economic landscape started to shift in the second half of Developments since mid-2016 indicate somewhat greater growth momentum in 2017 in a number of important economies. IMF projects that world growth will pick up from in 2017 and 2018, while at the same time, it sees a wider dispersion of risks that are still tilted to the downside. IMF s central projection is that global growth will rise to a rate of 3.4 % in 2017 and 3.6 % in 2018, from a 2016 rate of 3.1%. Oil prices remain the key driver of the outlook for MENA oil exporters given their high dependence on hydrocarbon budget revenues and exports. Having hit a 10-year low of less than $30 a barrel in January 2016, oil prices have staged a partial recovery to about $50 - $55 a barrel. As per IMF s Regional Economic Outlook: Middle East and Central Asia Update, oil prices are assumed to average $43 a barrel in 2016 and $51 a barrel in However, considerable uncertainty surrounds the oil price outlook on both the downside and upside, resulting from the global growth risks, sharp swings in the amount of oil supply outages, and ongoing consolidation and efficiency gains in the U.S. shale oil industry. Apart from oil prices, the region s economic growth has been adversely impacted by regional conflicts such as the ongoing wars in countries such as Syria, Iraq and Libya. The sharp and sustained decline in oil prices since mid-2014 has put significant pressures on the economy of Oman. However, the economy has withstood the pressures without much damage. This has been possible because of the high fiscal buffers, high capital requirements with the commercial banks and low level of government debt. Nevertheless, the prevailing global economic conditions and diminished fiscal space in oil exporting countries including Oman are a cause of some concern. As a results of the twin deficits (budget and current account) since 2015 and the subsequent rating downgrades, Oman has introduced fiscal reforms in order to consolidate its fiscal position in the medium term. Oman s net government debt is relatively small and remains manageable although the IMF predicts that this will deteriorate further in the coming years. This may require significant reduction in current spending, an increase in oil prices in the short to medium term, strengthening of the institutions and restructuring of the economy in the long run. The government has taken some important steps to mitigate the adverse impact of the decline in oil revenue. These include cuts in subsidies, wages and benefits, defense and capital investments. Also, the government plans to introduce Value Added Tax and may increase the corporate income tax rate. These measures along with the drawing down of reserves and additional borrowings both domestically and in the international market are expected to improve the financial stability of the country. 24

27 Oman - Oil production and Oil prices Daily Average Oil Production ( 000) Min. Barrels International Crude Oil Prices WTI (NYMEX) Price $48.28 Brent Crude Oil (ICE)- $ CL*1: 48:28 Vol: CB*1: 52:53 Vol: th August th August 2017 Source: Oman 2016 economic performance Low level of oil prices during the past couple of years has raised several challenges to the Omani economy which impacted overall economic activity. Preliminary national accounts data for Oman indicate that the nominal GDP declined by 5.1% in 2016 over the previous year. The decline was reflected primarily in the petroleum sector with a fall of 23.7% and a marginal gain of 0.6% in the non-petroleum sector. While manufacturing and wholesale and retail trade were adversely affected, value addition showed positive growth mainly in construction, agriculture and fishing, real estate services and financial services. Average annual inflation based on CPI for the Sultanate during January to April 2017 stood at 2.19% mainly due to revision in energy prices, transport costs, education and other user fees. The fiscal gap widened during the year and the government took several measures to augment non-oil revenues and rationalized government spending, apart from stepping up external borrowings. (Source: CBO Monthly Statistical Bulletin, May 2017) The country s total revenue for 2016 was RO 7.61 billion, while total public expenditure touched RO billion of which investment expenditure in 2016 was RO 2.79 billion. Of the total revenue, RO 3.65 billion came from net oil revenue. The average price of Oman Crude declined by 28.9 per cent to $40.1 per barrel in 2016 from $56.5 a barrel in the previous year. This is against an assumed price of $45 per barrel for calculating budget revenue. Oman s budget deficit at the end 25

28 of 2016 stood at RO 5.5 billion as falling crude oil export revenues affected the fiscal balance. This is much higher than the budget proposal of RO 3.3 billion for Oman s crude oil production during 2016 increased by 2.7% to million barrels from million barrels in The Omani crude oil price averaged US$ 40.1 per barrel during 2016 as compared to US$ 56.5 during 2015 and US$ per barrel during The daily average production of crude oil increased to 1,004.3 thousand barrels during 2016 from thousand barrels in 2015 and thousand barrels during Total petroleum activities as a percentage of GDP stood at about 27% in 2016 and accounted for about 68% of total government revenues and about 59% of total merchandise exports during (Source: National Centre for Statistics & Information, Monthly Statistical Bulletin-May 2017) Structure of Gross Domestic Product 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 34% 27% 8% 9% 8% 8% 13% 15% 41% 37% Total Petrolum Sctivities Construction Wholesale & Retail Trade Public Administration & Defence Other Activities The Sultanate has been taking major measures to strengthen its non-oil sectors, especially the industrial and mining sectors, as part of its diversification programs. The country s national initiative for diversification Tanfeedh is also taking several major initiatives to attract both foreign and local private investment to sustain economic growth. Oman Budget Oman s 2017 budget has been carefully crafted keeping in view the oil prices and the geo political situation. It is expected that the Government might revisit the budget mid-year keeping in view the oil prices. The budget this year is in stark contrast from the previous year s budget as this year government has increased fees and royalties, introduced new taxation of goods such as tobacco and alcohol, and changes to fees charged for hiring foreign workers. Decreased expenses and reduced the subsidy on fuel and electricity. However, government is expected to continue the projects, which are deemed essential for diversification. On the inflation front, it is likely to start picking on the back of increase in local fuel and utility prices. The exchange rate is expected to remain stable as long as the Government manages its balance of payment through successful sourcing of funding. Built on an estimated $45 a barrel with 970,000 barrels per day of oil production, the total budgeted revenue is RO 8.7 billion which is 1.16% higher than the budgeted revenue last year and 18.4% higher than the actual estimated revenue of In terms of breakup, oil constitutes majority of the earnings at 51% followed by revenue from non-oil sources at 29.8% and the last by gas at 19.1%. Gas revenue for the year 2017 has been budgeted higher by 4.4% to RO 1.66 billion compared to RO 1.59 billion in This is the highest ever budgeted gas revenue and the major thrust will come when the Khazzan Gas Project will start gas delivery this year in last quarter of Further it is expected that the revenue from gas sources would be even higher when the project shows a full year of operation in Non-oil budgeted revenues (mainly taxes, fees, investment returns and capital repayments) stand at RO 2.59 billion, almost equal to the 2015 budgeted figures. 26 Total budgeted expenditure stands at RO 11.7 billion in 2017 which is 1.7% lower than the budgeted spending of last year and 7.5% lower than the actual expenditure of RO billion in The expenditure is divided into current expenditure (72.7%), investment expenditure (22.8%), participation, and other expenses (4.6%). Current expenditure is approximately close to the budgeted revenues at 98%. Fiscal and external breakeven oil price for 2017 estimated by IMF as per their October 2016 report stand at US$ 79.4/barrel and US$ 81.3/barrel, respectively

29 The government expects its budget deficit to drop to RO 3 billion in 2017, a decline of 9% and 43.4% from the 2016 budgeted and 2016 actual respectively. The budget deficit is projected at 12% of nominal gross domestic production and 11% of real gross domestic production for The deficit would be funded through net foreign borrowings of RO 2.1 billion, net local borrowings of RO 0.40 billion and the rest mounting to RO 0.50 billion from reserves. While historically actual expenses have surpassed the budgeted ones over the period , the actual deficit for 2017 is expected to be close to the budgeted figure. (Source: U Capital Research) Oman credit rating Oman has a long term credit rating of BB+ by Standard & Poor s with a negative outlook, Baa2 -Negative by Moody s Investor Services and BBB (stable) by Fitch. Moody s have downgraded Oman by a total of three notches during 2016 and once in 2017, reflecting the highly negative impact of the structural shift to lower oil prices on the country s government finances, balance-of-payments position, and economic performance. Despite oil prices stabilizing at higher levels, Moody s expect that economic, fiscal and external challenges will persist over the coming 12 to 18 months. S&P have downgraded Oman s rating in May 2017 as the ratings agency estimates that Oman s fiscal and current account deficits were higher in 2016 than it had anticipated, and GDP per capita lower. S&P expects large current account deficits above ten per cent of GDP in 2017 and 2018, before they gradually decline to six per cent of GDP in 2019 and The negative outlook reflects the potential for Oman s income level to weaken and for its fiscal and external positions to deteriorate, which could lead to further lowering of the rating Key Economic Indicators * 2016 ** GDP at current price (RO billion) Population mid year (million) Oil production (million barrels) Oil and gas sector as % of GDP 52% 51% 47% 33% 27% Share of Oil Revenues in Total Government Revenue 86% 84% 72% 79% 68% Annual Inflation (%) 2.9% 1.1% 1.0% 0.1% 1.1% MSM total market capitalization (RO billion) MSM 30 Share Price Index 5, , , , * Provisional ** Preliminary Source: NCSI -Monthly Statistical Bulletins 27

30 8. OMAN INSURANCE SECTOR OVERVIEW Oman s insurance industry comprises of 22 insurance companies, including a reinsurer. Two of these entities are Takaful companies, which started operations in Insurance sector of Oman is dominated by the five insurance companies (4 national and one foreign) as they control roughly 60% of the gross written premiums of the sector. Their contribution in the Life and General insurance segments also stands at 60% each as well. The insurance market in the Sultanate has recorded reasonable growth rates despite the financial measures taken to mitigate the impact of the falling oil prices. Oman Oman Reinsurance Company Insurance Insurance Companies 2 2 Takaful Takaful Companies Companies Insurance Agents Ca Capital pital Market Authority ty Insurance Brokers Insurance Policy Holders Oman Oman Insurance Association Unified Unified Bureau Bureau for for Orange Card Source: CMA Of the 22 insurance companies (including one reinsurer), 11 are national companies (including two Takaful companies) and the other 10 are foreign companies. The table below shows the insurance companies that operate in Oman. # Name of company (in alphabetical order) Name of company (in alphabetical order) 28 National Companies Foreign Companies 1 Al Ahlia Insurance 12 AIG MEA Limited 2 Al Madina Takaful 13 Arab Orient Insurance 3 Arabia Falcon Insurance 14 Axa Insurance 4 Dhofar Insurance 15 Iran Insurance 5 Muscat Insurance 16 Life Insurance Corporation International 6 Muscat Life Insurance 17 Metlife Alico Insurance 7 National Life and General Insurance 18 Oman Insurance 8 Oman & Qatar Insurance 19 Saudi Arabian Insurance 9 Oman United Insurance 20 The New India Assurance 10 Takaful Oman 21 Zurich Middle East Insurance 11 Vision Insurance

31 Sector performance The industry has grown at a CAGR of 9.6% during with its total gross written premiums (GWP) reaching the mark of RO million (USD 1.17 billion) in Insurance segments such as engineering, construction, medical, and real estate have experienced good growth. Third-party motor liability as well as the launch of two Takaful companies have increased market awareness and the diversification of insurance products. Oman Insurance Penetration % 1.19% 1.09% 1.11% 1.65% 1.61% % 1.6% 1.4% 1.2% 1.0% Oman GDP (OMR bn) Oman GWP (OMR bn) Penetration Source: NCSI, CMA & U Capital Oman Insurance Density Insurance Density (OMR) In 2016, insurance penetration (Premium underwritten/ GDP) in Oman was about 1.61% (life insurance penetration was 0.24% and non-life insurance penetration was 1.37%). Similarly, insurance density (premium underwritten/population) was RO 98.9 (USD 258) in Oman. Life insurance penetration levels remain very low in Oman. However, the rise of the affluent and middle class with more purchasing power, a growing awareness of insurance products and the advent of sharia-compliant life insurance products are expected to bolster the life insurance penetration rates in Oman in the long run. The non-life insurance segment has been growing at a considerable pace when compared with the life insurance segment. The non-life insurance segment has benefited from the strong momentum in construction, infrastructure and growth in motor segment. Life & Non-Life Insurance Penetration 1.50% 1.45% 1.37% 1.20% 0.95% 0.97% 1.06% 1.14% 0.90% Life Non-Life 0.60% 0.30% 0.14% 0.14% 0.12% 0.13% 0.20% 0.24% 0.00% Source: CMA The market for medical insurance is growing in Oman, especially after the expatriate population moved out of government hospitals to private health centers. This is one of the growth areas for insurance companies. Further, as per press reports, health insurance cover may be made compulsory for all private-sector workers by If this materializes, insurance companies in the Sultanate will reap benefit from the opportunity that opens up. Additionally, this move will also promote healthy competition amongst the medical insurance providers. This initiative is also expected to reduce the healthcare burden of the government. Gross Direct Written Premiums of Insurance Companies The gross direct written premiums of insurance business increased by 1.85% to reach RO million in 2016 compared to RO million in The gross direct premiums of general insurance declined by 1.7% in 2016 to reach RO million compared to RO 389 million in While the gross direct premiums of life insurance increased by 27.7% to reach RO 67.6 million in 2015 compared to RO 53 million in

32 General insurance Life insurance Total Source: CMA Gross direct premiums (OMR mn) The 1.8% growth seen in 2016 in the gross direct premiums was spurred mainly by the 27.7% increase in Life Insurance and 13.2% increase in Health Insurance, as these two sectors constitute 42.5% of the total gross direct premiums. Gross Direct Premiums Gross Direct Premiums Health 23% Other Other 6% Life 4% Life 12% 15% Health 26% Liability 3% Engineering 5% Marine 3% Motor 37% Property 11% Liability 3% Engineering 4% Marine 3% Property 10% Motor 35% Source: CMA Claims Paid claims by the insurance companies have continued to grow. Overall paid claims grew at a CAGR of 9% during Life insurance segment and non-life insurance segment claims grew by a CAGR of 1% and 10.4% respectively during Total paid claims in 2016 have decreases by 8% compared to 2015 to RO million in 2016 compared to RO million in Financial data indicates the decrease was due to the fall in total paid claims of general insurance business by 10% to RO million compared to RO million in Paid claims for life insurance business have increased by 11% in 2016 from RO million to RO million. Total Paid Claims (OMR mn) Foreign National CAGR -5.4% CAGR -10.2% Life General CAGR -10.4% CAGR -1.0% 30 - Source: CMA

33 It is noteworthy that motor insurance represents the highest percentage in claims paid by national and foreign insurers in 2016 at 41% and 53% respectively followed by health insurance which witnessed an increase by 30% in Retention & Loss Ratio of Insurance Companies Retention ratio is one of the important aspects in an insurance company and is calculated as the amount of premium an insurance company retains as a proportion of the total gross premium. Retention ratio of insurance companies in 2016 was about 57% compared to 56% in The retention ratio for national insurance companies in 2016 was about 52% compared to 51% in Retention ratio for foreign insurance companies is much higher at 70% in 2016, as against 72% in 2015 to. As for retention ratio by type, retention was highest in the motor business at 83% followed by health and life insurance. Retention Ratio (%) National companies Foreign companies Total Life 34.0% 33.6% 68.4% 65.8% 47.4% 53.6% Motor 84.6% 82.2% 91.7% 84.6% 86.7% 82.8% Property 4.9% 5.4% 27.0% 41.7% 10.1% 11.3% Marine 9.5% 10.4% 31.0% 36.0% 17.0% 18.7% Engineering 9.9% 27.2% 42.7% 41.2% 20.8% 31.4% Liability 33.0% 29.9% 55.3% 61.8% 39.8% 36.1% Health 54.3% 54.8% 84.2% 83.5% 57.6% 58.4% Source: CMA Loss ratio is also equally important for an insurance company. The loss ratio is the ratio of total losses paid out in claims divided by the total earned premiums. There was a rise in the net losses of national insurance companies in 2016 to about 71% as against 58% in Loss ratio of foreign insurance companies also increased in 2016 to 64%. Loss ratio is highest for motor insurance and health insurance. Loss Ratio National Foreign Total Motor - Comprehensive 69% 67% 63% 76% 67% 69% Motor - Third Party 79% 102% 123% 74% 86% 97% Property 11% 35% 15% 55% 12% 39% Marine 18% 29% 23% 32% 20% 30% Engineering 27% 40% 29% 44% 28% 41% Liability 12% 18% 18% 14% 14% 17% Health 82% 93% 83% 88% 82% 92% Source: CMA 31

34 Investment mix of Insurance Companies Total investments of insurance companies increased by 12% to RO million at the end of 2016 compared to RO million at the end of The total investments of national and foreign companies increased by 9% and 17% respectively. Investment Mix of General Insurance Co's Investment Mix of Life Insurance Co's Real Estate 7% Corporate Bonds 4% Government Bonds 2% Others 0% Secured by Insurance Policies 0% Corporate Bonds 11% Government Bonds 15% Others 1% Secured by Insurance Policies 0% Listed Shares 17% Cash & Deposits 70% Real Estate 0% Listed Shares 0% Cash & Deposits 73% Sourece: CMA Income from investments of insurance companies was RO million in 2016 compared to RO million in 2015 at 19%. Net Income of the Insurance Sector The net profit of insurance companies was RO 8.74 million in 2016 compared to RO million in (OMR mn) (5.0) (0.9) (1.8) Conventional National Insurance Co s Takaful Insurance Co s Foreign Insurance Co s Sourece: CMA Overall national companies (conventional and Takaful) witnessed a profit drop of 72% in 2016 to RO 3.4 million compared to RO 12.2 million in Within the national insurance companies, conventional insurance companies profit dropped by 60.4% while the losses of Takaful insurance companies almost doubled to RO 1.8 million in 2016 compared to RO 0.9 million in However, foreign companies reported a net income increase of 58% in 2016 to RO 5.3 million compared to RO 3.4 million in Omanization in Insurance Sector The insurance sector s target of Omanization stands at 65%. The number of employees of the insurance sector (insurance companies and brokers) in 2016 was 2543 of which 1695 were Omanis which is 67%. 32 Takaful Insurance in Oman Oman Takaful Insurance segment was formally launched in 2014, and currently, there are two firms operating in this segment. Gross direct premiums of Takaful insurance companies stood at RO million, an increase of 8.7% compared to RO 38.7 million in Takaful insurance represented 9% of the gross direct premiums of the total insurance industry in 2016.

35 Insurance Regulations The CMA is the regulator for the insurance sector in Oman since 2004 when the responsibilities of the insurance sector was transferred from the Ministry of Commerce and Industry to the Capital Market Authority. Since then the CMA has continued to pursue the development of the insurance sector and enhancing its role in serving the national economy of the country. The CMA has issued several laws and regulations, circulars and charters in order to ensure that the framework and legislation governing the Oman insurance industry is in line with global best practices and taking into account the requirements and specificities of the local market. Some of the main areas of development relate to the introduction of Takaful insurance, establishment of the first Omani company for re- insurance, amendments to the unified vehicle insurance policy, increased efforts to protect policyholders, development of national cadres working in the sector and upgrading of the systems and procedures of the sector. The CMA has also initiated steps to strengthen the financial strength of the insurance companies. Royal Decree No. 39/2014 was issued in 2014 promulgating provisions on the minimum limit for paid up capital of national insurance companies and branches of foreign companies operating in Oman to be RO 10 million which would boost the solvency of these companies. The amendment also provides that all insurance companies must be pubic companies. The companies were granted a three years grace period to adjust to the paid up capital and converting provisions. Growth Drivers of Insurance Industry in Oman Favorable demographics Demographics play a vital role in insurance demand generation. Oman population comprises two key segments- a steadily growing population, especially young citizens and a large expatriate base. Both of these are expected to contribute considerably to the demand for life and non-life insurance segments. Further, demand for insurance products is likely to grow with a changing landscape in the form of increasing urbanization, presenting the need to develop products that suit the changing lifestyle and demands. The country s population growth is also supported by its huge pool of expatriates, who are drawn to country for employment. New regulations in Oman require mandatory medical insurance for expatriates. Over the last couple of years, the medical insurance segment has become a major component of the overall insurance industry. Growth driven by economic diversification and infrastructure development The Oman economy continues to grow, supported by the focus on economic diversification and infrastructure development. Despite a sharp decline in oil prices, GDP at current prices in Oman is projected to grow, with subdued inflation. The insurance industry is highly correlated with the economic outlook, creating demand for insurance-related products. Oman is making progress in implementing its strategy to diversify away from the hydrocarbon sector, resulting in increased activity in other sectors such as manufacturing and services. Growth across such sectors is expected to present further opportunities for insurers. Regulatory developments Over the last few years, Oman insurance market has witnessed regulatory changes, with new regulations in areas such as minimum capital requirement, reserve calculations and reporting requirements. These regulatory initiatives are likely to drive growth of the insurance industry. Takaful Insurance increases its foothold The recent establishment of insurance firms complying with the Shariah (Islamic law), namely Takaful, offering non-life insurances, has created a new momentum in the market by generating new products. Since 2000, the Islamic insurance sector has been growing at more than 15% per annum. The demand for Islamic insurance products has grown over the past few years, particularly within the GCC, supported by demand for innovative and Shariah-compliant financial solutions. This demand has also resulted in the launching of new Islamic insurance products. Growing focus on SME development With Oman reiterating its interest in small and medium enterprises, recognizing their contribution to economic growth and employment generation, the country has developed programs to set up new units and support them. The Central Bank of Oman has mandated all banks operating in Oman to allocate at least five per cent of their total credit to SMEs. The rapidly growing SME sector in Oman presents a key opportunity for the insurers. 33

36 Sector performance in first quarter of 2017 The insurance sector companies recorded a growth of 3% in gross direct premium in the first quarter of 2017, reaching RO million as against RO 131 million for the same period of last year. This is considered as a reasonable growth rate in the light of the current economic situation and considering the financial measures undertaken to mitigate the impact of the falling oil prices which had an impact on the projects executed by the government and activities of the private sector. The increase in insurance premiums was spurred by a growth in individual life insurance products and health insurance products, which increased by 15%. Individual life insurance topped all insurance products with a 30% growth in the first quarter, supported by the requirement from borrowers for insuring their bank loans. Health insurance also recorded a good rate of growth in the first quarter, up by 26 per cent compared to the same period of 2016, which is an indication of increased awareness of the benefits of health insurance and the endeavours of individuals and institutions to obtain better standards of health care. There was a fall in the transport and liability insurance, motor comprehensive insurance and life group insurance by 33%, 31%, 11%, 9% and 3%, respectively as these types of insurance products were affected by the general reduction in government expenditure. On the other hand, engineering insurance products, which is related to projects and the risks of contractors, witnessed a 3% growth in the first quarter of this year, over the previous year. This insurance. The retention ratio of the sector was about 57% in the first quarter of Retention ratio for motor insurance (comprehensive and third party) was the highest at 87.7% for third party and 84.8% for comprehensive insurance. 34

37 9. DESCRIPTION OF THE COMPANY AND BUSINESS OVERVIEW 9.1. About the Company OQIC is a closely held joint stock company registered and incorporated in the Sultanate of Oman and started its operations from July The Company currently holds insurance license issued by the CMA. The Company provides general and life insurance under the license and is supported by reinsurance arrangements with well-known reinsurers. The Company is a subsidiary of Qatar Insurance Company S.A.Q. which holds 70% of the Company s equity prior to the IPO. The Company s Board of Directors includes well-recognized local and foreign representatives from both the public and private sectors. The Management is made up of qualified professionals with long experience both in local and international insurance markets Operations From incorporation until date, the Company has concentrated on the general insurance sector. Its operations have now spread across other sectors of insurance including life and medical. The Company operates branches at Al Khoudh, Amerat, Salalah, Sohar, North Al Gubrah, Al Khuwair- Oman Avenues Mall and Muttrah other than the head office in Muscat Organization Structure OQIC Organisational Structure Investment Committee Board of Directors Audit Committee CEO Finance Manager Compliance Officer Retail Manager Claims Manager (Motor) Claims Manager (Recovery & Legal) U/W Manager (P&C, Marine, Energy) Business Development Manager U/W Manager (Life & Medical) Relationship Manager (Govt. & HR) Complaints Officer Internal Auditor Asst.Finance Manager/Financ e Officer/Team Leader Asst.Retail Manager/Retail Officer/Team Leader Asst.Claims Manager/Claims Officer/Team Leader Asst.U/W Manager/U/W Officer/Team Leader Asst.U/W Manager/U/W Officer/Team Leader Asst. Manager/ Officer/Team Leader Senior Finance CSA/Finance CSA Senior Retail CSA/Retail CSA Senior Claims CSA/Claims CSA Senior U/W CSA/U/W CSA Senior U/W CSA/U/W CSA Senior CSA/CSA LEGEND SENIOR MANAGEMENT LEVEL MANAGEMENT LEVEL/ FUNCTIONAL HEADS SUPERVISORY LEVEL SUPPORT STAFF LEVEL INTERNAL AUDITOR BOARD OF DIRECTORS AUDIT & INVESTMENT COMMITTEE DATE: 1-Aug Products and Services The Company offers insurance products for both commercial business as well as individuals. The Company principally issues general insurance and life insurance products. Below is a brief description of each of the Company s products. 1. Personal Insurance i. Car insurance- comprehensive and third party insurance for vehicles. ii. Travel Insurance- covering medical expenses, baggage and travel expenses. iii. Home insurance- protecting home contents. 35

38 2. Business insurance i. Energy (Oil & Gas risks as well as power generation and water supply and production risks) ii. Property & Commercial (Engineering, Third Party Liabilities, Workmen s Compensation Insurance, General Accident Insurance). Property insurance covers capital assets against loss from fire, explosion, earthquake, storm, flood and other such risks including loss of revenue / gross profit following damage to the property covered. Engineering covers risks such as Contractor s All Risks Insurance, Erection All Risks Insurance, Contractor s Plant and Machinery Insurance, Machinery Breakdown Insurance, Machinery Breakdown Loss of Profits Insurance, Electronic Equipment Insurance, Deterioration of Stock Insurance, Boiler and Pressure Plant Insurance and Advanced Loss of Profit Insurance. Third Party liabilities include covers such as General Third Party Liability Insurance, Professional Indemnity Insurance and Directors & Officers Liability Insurance. Workmen s Compensation Insurance covers employees as per the provisions of Omani Labour Law covering work related accident and occupational diseases. iii. Marine & Aviation (Cargo, Marine liabilities, Hull insurance, General aviation and Airline) iv. Life & Medical (Group life, Group credit life, Credit life schemes, Family guard schemes, Critical illness plans and Comprehensive medical insurance cover). Group life is availed by employers to cover their employees and provides benefit in the event of employee s death, disability or illness. Credit life insurance is availed by lending institutions such as banks, and covers the borrower s liability to the lender, in the event of death of the borrower due to accidental, non-accidental or natural causes. v. Corporate travel & Fleet insurance Company s Underwriting business The Company s insurance operations are focused mainly on fire and general insurance which includes fire, engineering, energy, motor, general accident, medical insurance and third party liability. This accounted for about 94% of the Company s total Insurance premium revenue in 2016 (89% in 2015). Premium Income: The Company s performance over the last three years is depicted in the table below. Total Gross Direct Premium (RO) Product Sector Total OQIC Mkt Share Sector Total OQIC Mkt Share Sector Total OQIC Marine 15,414, , % 14,930, , % 14,169, , % Property 50,120,861 5,762, % 47,043,616 4,709, % 43,177,949 6,167, % Motors -Third Party 54,618,357 1,245, % 56,371,896 1,732, % 61,662,564 2,147, % Motors - Comprehensive 105,046,131 6,808, % 106,459,223 7,374, % 96,225,786 6,225, % Medical 82,957,333 1,003, % 107,878,857 1,258, % 121,415, , % Life - Individual 8,510, % 10,656, % 33,396, % Life - Group 28,032,381 1,135, % 38,431,587 1,704, % 30,779, , % Engineering 26,317,857 1,526, % 25,457,920 1,082, % 20,116,034 1,913, % Liability 10,608, , % 11,299,316 1,101, % 12,611,645 2,354, % Others 18,736, , % 27,648, , % 21,080, , % Total 400,362,355 19,494, % 446,176,939 19,963, % 454,635,689 21,381, % Source: OQIC Mkt Share 36

39 The property, engineering and liability lines of business are the main areas where OQIC enjoys significant share of the Oman market. These three segments also account for about 49% of the total gross direct premium of the Company in Motor insurance accounted for 39% of the gross direct premium. Composition of Gross Direct Premium Composition of Gross Direct Premium Engineering 5% Liability 5% Others 3% Marine 2% Property 24% Liability 11% Others 3% Marine 2% Property 29% Life Group 9% Engineering 9% Medical 6% Motor Third Party 9% Life Group 4% Medical 3% Motor Third Party 10% Source: OQIC Motor Comprehensive 37% Motor Comprehensive 29% The Company s major clients include banks, companies from the oil and gas companies - for example, Abraj Energy Services LLC, Shinas Generating Company SAOC & SECPO III, Ad Dhahirah Generating Company SAOC & SECPO III, Power China (China), CB&I - CTCI B.V., BP EXPLORATION (EPSILON) LTD - OMAN BRANCH, Occidental Mukhaizna LLC, Occidental of Oman Inc, Oman oil company exploration and production LLC, Petroleum Development Oman (PDO) LLC, Oman Air, Oman Radio TV etc. Over the last three years, the Company has added several new clients, and thereby diversified the client portfolio. The concentration of insurance risk exposure is minimized by the implementation of the underwriting strategy of the Company, which attempts to ensure that the risks underwritten are well diversified across a large portfolio in terms of type, level of insured benefits, amount of risk, industry and geography. As the Company s entire business is within Sultanate of Oman, hence, the concentration of insurance risk is only within Sultanate of Oman. However, in certain cases, the Company writes business abroad for insurance of marine, cargo and aviation along with motor short term coverage within GCC. Claims: The insurance sector and the Company s trend in claims and loss ratio (the incurred losses (claims) in relation to the insurance premium) over the past 3 years is presented below., Loss Ratio Sector Company Marine 58% 12% 50% 58% 49% 20% Property 47% 53% 62% 8% 44% 60% Motor Comprehensive 62% 69% 70% 85% 82% 80% Motor Third Party 77% 93% 101% 0% 0% 0% Liability 31% 33% 41% 0% 1% 8% Engineering 19% 26% 42% 0% 53% 0% Health 77% 85% 91% 90% 108% 66% Others 38% 32% 31% 39% 48% 25% Total General 64% 74% 79% 80% 80% 76% 37

40 While the Company s loss ratio has been generally in line with that of the overall sector, it has been higher in the Motor and Health categories. However, in Health the position has shown an improvement in The Management believes that the claims ratio in general, is expected to improve further in the coming years. As at 31st December 2016, the net claims reported but unsettled was RO 5.15 million while claims incurred but not reported (IBNR) was RO 1.06 million, aggregating RO 6.21 million. Underwriting Results: The Company recorded underwriting profit of RO 1.55 million, RO 0.98 and RO 1.68 million in the years 2014, 2015 and 2016 respectively. The dip in the year 2015 was result of higher reserve creation for claims in motor by RO 1.1 million for better cushion and increase in losses in medical and life. However, the risk associated with medical and life are now being better managed with higher reinsurance arrangement with QLM, a life and medical insurance company from year Solvency Margin As per the Insurance Law and regulations, the Company is required to maintain a solvency margin, which is calculated at on an annual basis. In the event the Company fails to maintain the prescribed solvency margin then the Company will not be able declare dividend to the shareholders till such time the deficiency is corrected. As at 31st December 2016, the Company has maintained its surplus solvency margin at 394% (297% for the year 2015 and 350% for the year 2014) of minimum solvency margin required as per CMA which is better than what is prescribed by the CMA. It gives huge room for further increasing the underwriting capacity of company in coming years. Insurance Provisions and Reserves: As per the Insurance Law and regulations, the Company is required to create and maintain provisions for unexpired risks and for outstanding claims. Further, at the annual reporting date, the Company is required to transfer from its retained earnings to the emergency (contingency) reserve a minimum amount, calculated at 10% of the net outstanding claims for general insurance business and at 1% of the life insurance premiums for the year, until such reserve reaches an amount equal to the paid-up capital of the Company. The Company is not permitted to declare any dividend in the event there is a deficit in the emergency (contingency) reserve. Further, the reserve shall not be used unless by prior approval of the CMA. As per the Company s audited financial statements of 2016 and solvency calculations, the Company had assets which exceeded its liabilities, as per the requirements of the Insurance Law. The current solvency surplus margin at 394% of minimum solvency margin required as per CMA as at 31 December The Company expects that its present and projected reserves will enable it to meet the additional solvency requirements arising from the anticipated growth in the business of the Company. Further, the increased equity capital will further strengthen its balance sheet and facilitate further growth in the business of the Company. The Company projects it solvency margin to be around % in the projected period. The Company is required to submit to the CMA a report by its actuary, in the prescribed format, and in this regard, the Company has submitted Life insurance technical provisions report as of 31st December, 2016 to CMA. The major outtakes from the report are as follows: - The net technical provision was RO 1.07 million. - The total gross provisions for the year 2016 amount to RO 8,209,617 and the reinsurance asset is valued at RO 7,140, The main movements in technical provisions from the year 2015 are attributed to the following: The roll forward of the business, including lapses and maturities. Increase in the valuation mortality basis following the mortality analysis performed prior the year-end valuation Strengthening of the basis used for the derivations of the IBNR reserve As per a reserve review report prepared by an external actuary, as at 31st December 2016, overall the Company s provisions were found to be in line with the actuary s estimates on a net of reinsurance basis. As per the external actuary all the reserve of UPR, Outstanding claims as well as IBNR on net basis was in surplus of RO 521,000 in Audited Financial statement as on March 31st

41 The actuary has suggested following actuarial valuation technique for maintaining reserve in the books for all the lines which Company is looking into this direction Reinsurance Arrangements As a means of risk management and in order to minimize financial exposure from large claims the Company enters into agreements with reinsurers for reinsurance purposes. The Company, either directly or through a broker, enters into reinsurance agreements which details the conditions upon which the reinsurer would pay a share of the claims incurred by the Company against insurance policies issued by the Company to its policyholders. The reinsurer is paid a reinsurance premium by the Company, which is shown under Insurance premium ceded to reinsurers in the Company s income statement. The Company s net insurance premium revenue is after deduction of the ceded premium from the gross insurance premium revenue. The net insurance premium retained by the Company as a proportion of the overall premium is termed retention ratio and it indicates how much of the risk is being carried by the Company rather than being passed to reinsurers. Generally, while a higher retention ratio results in better profitability it also increases the risk exposure of the insurance company. Therefore, each company strikes a balance between the level of risk retained and net income. The Company s retention ratio has been in the range of about 45% to 55% in the past 3 years, which is lower than the overall industry which is about 55%. The Company predominantly covers risks which have very high sum insured and to mitigate these risks, it cedes higher portion to reinsurer, thus it has lower than average industry retention as a result of its prudent underwriting strategy. However, the increase in the Company s equity capital following the IPO, is expected to enable the Company step up its retention ratio. Retention Ratio Sector Company Sector Company Sector Company Marine 21.4% 13.0% 17.3% 12.6% 18.7% 20.5% Property 9.0% 2.5% 10.1% 2.1% 11.8% 2.4% Motors -Third Party 83.5% 92.6% 83.9% 91.9% 81.3% 97.6% Motors- Comprehensive 88.3% 97.6% 88.0% 98.2% 83.7% 96.4% Medical 51.0% 49.7% 57.0% 50.4% 58.6% 44.9% Life - Individual 73.7% NA 66.4% NA 63.9% NA Life - Group 32.2% 25.7% 37.2% 19.2% 37.0% 26.6% Engineering 23.1% 5.9% 20.3% 9.9% 18.4% 8.2% Liability 34.5% 23.2% 34.1% 22.4% 31.5% 12.5% Others 46.8% 26.4% 32.6% 28.2% 39.8% 38.1% Total 55.5% 47.5% 55.9% 52.4% 56.8% 44.5% As per the insurance law, the insurance company that issues the policy remains liable in the event the reinsurer fails to pay its share of the claim. In order to mitigate the risk of loss from such eventuality, the Company generally deals with only those reinsurers having a minimum rating of A- and also has a diversified list of reinsurers. Some of the Company s reinsurers are as follows Hannover Re ANV Syndicate (Lloyds) Swiss Re Transatlantic Re Catlin syndicate (Lloyds) XL Re Kiln Syndicate (Lloyds) QIC Group Ascot Syndicate (Lloyds) Aspen Re - UK Amlin Syndicate (Lloyds) Taiping Re Canopius Syndicate (Lloyds) Endurance Antares Syndicate (Lloyds) Korean Re Chaucer Syndicate (Lloyds) Helvetia The Company has a robust reinsurance strategy, which is being supervised by QIC Group reinsurance team for better management of risk profile of the company. The Company reinsurance strategy is aimed at covering the determining the 39

42 net risk to be retained, the types of reinsurance arrangements most appropriate to manage the risk exposure, the amount of reinsurance protection to be obtained, selection of a suitable panel of reinsurers and brokers taking into account factors such as the risk concentration, rating, quality and dependability and monitoring of the reinsurance programme. The Company s reinsurance strategy is reviewed annually by the Board and was last reviewed on June As required by the regulations, the reinsurance strategy is filed with the CMA on March of every year Marketing The Company operates through all the traditional channels (i.e. branches, brokers and agents, sales force) apart from its direct corporate clients, who are serviced by the head office. The Company currently has 7 registered branches as below, other than the head office in Muscat: Al Khawd, Muscat Amerat Salalah, Dhofar Muttrah, Muscat South Al Khuwair, Muscat Bait Al Falj, Muscat Sohar, North Al Batinah. The Company plans to open 2 more branches based on the feedback received from the marketing team. It has 6 agency arrangements and has a panel of approximately 30 brokers. Also the Company maintains relationships with organisations who refer customers to the Company. The Company also proposes to increase the number of sales force and increase it telesales staff to enhance the reach and sales of retail products. The Company has user friendly and efficient online portal for serving the needs of retail customers. In the commercial business sector, the Company usually tenders for contracts with its customers. The Company has strong relations with leading international reinsurance companies and leading insurance brokers in the sultanate and in GCC region which enables it to be in a position to receive notifications of any upcoming tender process Investment Portfolio The Company s investments portfolio comprises various asset classes (as required by the Insurance Law) as per the approved investment policy. Investments are made following the approval of investment committee of the Board based on the recommendations of the Management. Major investments in equities are held in a discretionary portfolio with external portfolio managers. The portfolio is managed by Qatar Economic Advisor, which is a 100% subsidiary of QIC group and is managed by leading investment professionals in the region. The performance of these portfolio managers are regularly reviewed by the Management and the Investment Committee. As required by the Insurance Law, at least 75% of the total investments of the Company are held within Oman. The following investment limits are also complied with: Asset class Limits (as % of total investment portfolio) Real estate Not more than 20% Bank deposits, cash Not less than 30% Local corporate bonds Not more than 30% Equities, mutual funds and shares of unlisted companies Not more than 40% 40

43 As per the Company s balance sheet as at 31st March 2017 and 30th June 2017, the investment portfolio of the Company was made up as follows: Investment category As on 31st March 2017 (audited) Amount (RO in million) % of total investments As on 30th June 2017 (unaudited) Amount (RO in million) % of total investments Property % % Deposits with banks and cash % % Bonds (Local and Foreign) % % Equity investments (Local and Foreign) % % TOTAL % % The Company does not have any real estate investments. The Company s equity investment comprises of 65% investments in Oman and less than 1% of the equity investment is in unquoted shares. In accordance with the Insurance Law, the Company has identified to the CMA certain bank deposits and investments at a total value of RO 13.4 million as at 31st December 2016 (2015- RO 11.1 million). The Company can transfer these assets only with the prior approval of the Capital Market Authority. Please also refer to the Para 10.8 Investment Risk in the Chapter Risk Factors for the risks arising from the Company s investment portfolio Management agreement with QIC Group The Company has entered into a management and operational services agreement dated 2nd January 2008, with QIC International LLC (QICI), a QIC Group company, whereby QICI has agreed to provide the following services against payment of annual fee. Management services covering preparation, review and approval of the annual business plan and financial budgets of the Company, appointment of key management personnel, approval of the dividend policy and remuneration policy (all subject to ratification by the Company s Board) and providing required operating manuals, policies and guidelines. Administrative and Operational services for providing support to the Company s operations such as underwriting, claim handling, reinsurance and reserving, including the related systems and procedures for the above. Other services such as risk management, compliance, internal audit, IT services, etc. These services can either be provided by QIC directly or by any of the Group entities. The agreement is to be effective until termination by either party. In consideration for the above services, the Company has agreed to pay QIC an annual fee of QR 75,000 (equivalent to RO 8,250) for management services and QR 175,000 (equivalent to RO 19,250) for the administrative and operational services in addition to reimbursement of all reasonable, dedicated, identifiable expenses incurred by QICI for carrying out its functions. QICI authorised its group entity, Qatar Insurance Group S.P.C. (QIG) to provide the services relating to risk management, compliance and internal audit. As per an agreement dated 1st January 2009 entered into between QIG and the Company, QIG will assist and provide services relating to the following: Internal Audit, including preparation of annual audit plan, conducting independent audits, preparation of audit reports and follow-up of audit issues, Compliance, including establishing adequate and effective compliance policies, procedures and controls, and carrying out periodic reviews and assessments. Risk management, including establishing appropriate risk management framework, policies, procedures and providing guidance on risk mitigation strategy. The agreement is to be effective until termination by either party. In consideration for the above services, the Company has agreed to pay QIG an annual fee of QR 393,280 (equivalent to RO 43,260) in addition to reimbursement of all reasonable, dedicated, identifiable expenses incurred by QIG for carrying out its functions. On conversion to an SAOG, the Company proposes to have the Internal Auditor as a full time employee of the Company as required by SAOG regulations and not utilize the services of QIC for carrying out the internal audit. Accordingly, the Company intends to suitably amend the management and operational services agreement to reflect the above. 41

44 Rating The Company is not rated by any insurance rating agency and instead relies on the rating of its parent, QIC which is one of the highest rated insurers in the Gulf region with a rating of A/Stable from Standard & Poor s (report dated 20th June 2017) and A (Stable) from A.M. Best (report dated 23rd December 2016) Manuals and Procedures The Company has in place certain manuals which govern its working practices in accordance with the requirements of the Code of Corporate Governance for Insurance Companies. The Company has in place the following manuals: Risk Sharing Policy Business Jurisdiction Policy Anti-Money Laundering & Combating Terrorist Financing Policy Compliance Policy Acceptable IT Usage Policy Information Systems Security Policy IT Systems Policy Entity IT Policy Record Maintenance & Destruction Policy Training & Competency Policy Receivable Management Systems & Procedures Manual Risk Management Systems & Procedures Manual Anti-Money Laundering & Combating Terrorist Financing Systems & Procedures Manual Compliance Systems & Procedures Manual Corporate Governance Systems & Procedures Manual Customer Care & Complaint Handling Systems & Procedures Manual Quality Management Systems Manual Administrative & Financial Authorities Manual Following its conversion to an SAOG, the Company, within a period of one year from such conversion, plans review its existing policies and manuals and adopt any new manuals as may be required by the CMA. Further it plans to have the following policies, manuals and procedures approved by its Board of Directors and adopted: Organisation structure clearly stating the hierarchy of staff, their respective powers and duties and the reporting structure. Delegation of powers to management and employees. Nomination, Sitting fees, remuneration and other benefits to the members of the Board and its sub committees and the basis of calculating such remuneration and/or benefits. Policies related to purchase and other transactions of the Company (procurement and contracts manual). Minimum information to be placed before the Board of Directors. Authorities, functions and responsibilities of the executive management and committees of the Board. Human resources policies covering compensation structure, appointment, development and training, promotion, cessation of services and other relevant aspects. Investment policy of the Company and the related procedures. Related party transactions Policies and procedures regarding disclosure of material information on time to the public, CMA and MSM including the procedures to classify/ identify the material information and the determination of the right of access to various officers. Internal code of conduct and ethics Such other issues as deemed necessary by the Board. 42

45 Reports and Submissions The Company regularly submits the following reports to the regulatory authorities as required by the regulations: 1. Monthly motor statistics to the CMA. 2. Quarterly business report to the CMA. 3. Quarterly investment report to the CMA. 4. Quarterly statistics to National Centre for Statistics and Information (NCSI). 5. Quarterly and annual report on income/ assets and liabilities in foreign countries to Central Bank of Oman. 6. Annual returns to the CMA (before 28th of February each year)- this includes audited financial statements, solvency ratios and the assets assigned to CMA. 7. Filing with CMA / MOCI of the audited financials, report of Corporate Governance, Director s report and the AGM Agenda (March of every year). 8. Filing with the NCSI details relating to the business, employees, investments, Company s assets & liabilities, etc. 9. Filing of annual income tax return with the Department of Taxation, Ministry of Finance. It maintains a separate ministerial returns to track the submission of the above documents to the CMA The Company has provided a bank guarantee deposit to the Capital Market Authority of RO 150,000 to comply with the requirements of the Insurance Companies Law of the Sultanate of Oman as well as a bank deposit to the Omani United Bureau for the Orange Card SAOC of RO 58,180. The Company has provided bank guarantee deposit of RO 223,380 in the normal course of business from which it is anticipated that no material liabilities will arise. The Company has complied with the insurance regulations of the CMA and there were no penalties or strictures imposed on the Company on any matter related to the Capital Markets during the year Information Technology (IT) and Financial Systems The Company utilizes the services of its parent QIC s centralized IT division for its business needs based on a defined service level agreement (SLA). QIC s centralized IT department is certified to ISO 27001:2013 standards. The services cover areas such as: o IT Application development o Application and database support o IT infrastructure and security support o IT helpdesk support The Company utilizes the IT infrastructure listed below. TYPE OF EQUIPMENT/ APPLICATION Anoud Retail Premia Purpose Online Retail Insurance Application (Web based) for retail insurance operations Insurance application for General insurance operations (Windows based) Application vendor Inhouse Developed Oracle 10G App server Exchange Mail Server Exchange Server Lync Intranet communication application Lync Server SME To access fileserver from the internet Cloud file manager Domain Controller Fileserver Authentication Server for Endpoints and Servers Shared stdrive to store official documents Additional Domain Controller Fileserver Further QIC group is in its second phase of digital transformation of MENA personal lines business model and have implemented a leading CRM system to better manage customer relationships. This digital transformation project will enable OQIC to generate new customers through online and affinity partners. It will further increase product density and improve operational efficiencies, which will ultimately enhance profitability. 43

46 Disaster Recovery and Business Continuity Plan The Company maintains a weekly back-up of its data at a professionally managed offsite location besides having a mirror server in Doha. This protects the Company s data and helps manage the risk in the event of an IT disaster. A disaster recovery plan is currently being formulated which will lay down the steps and measures to be taken to ensure quick recovery of IT systems if an IT disaster takes place Company Property Details The Company does not own any real estate property either freehold or leasehold Employees As at July 2017, the Company had 59 employees. There is no labour union at the Company. The Company s Omanization level was 66.1% as at 24th July Company is in process of hiring more Omani staff, which will increase its Omanisation % in excess of the minimum prescribed limit of 65% Risk Management Framework The primary objective of the Company s risk and financial management framework is to protect the Company s shareholders from events that hinder the sustainable achievement of the set financial performance objectives. The Company has established a risk management function with clear terms of reference from the Board of Directors, its committees and the associated executive management committees. This is supplemented with a clear organizational structure with documented delegated authorities and responsibilities from the Board of Directors to executive management committees and senior managers. A group risk management policy framework which sets out the risk profiles for the Company, risk management, control and business conduct standards for the Company s operations has been put in place Insurance The Company has insured its office equipment, furniture and fixtures and vehicles. It has also availed a Directors and Officers Liability Insurance at the group level for a total limit of USD 20 million apart from fidelity insurance, money insurance and public liability insurance Tax Status The Company s tax returns have been filed with Secretarial General of Taxation up to the year 2016 and tax assessment has been completed up to year The Management of the Company believes that additional taxes, if any, related to the open tax years would not be significant to the Company s financial position Claims, Litigations and Disputes The Company has in existence 5 premium recovery claims against previous agents, amounting to RO 175,193. As against this, the Company has created a claim reserve of RO 135,193 and hence any shortfall in recovery of the full amount claimed, is not expected to have a material financial impact on the Company. There are currently 19 pending motor cases which the Company regards as falling within the ordinary course of insurance business involving a total claim of RO 755,793. The Company is disputing the claim amounts at various legal forums and holds a claim reserve of RO 499,879. The Company confirms that reserves are made taking into account the instructing law firm s recommendation and are revised from time to time based on the development of the cases. Other than the above, the Company has 7 cases pertaining to general insurance involving a total claim amount of RO 457,527. As against this the Company holds a gross claim reserve of RO 252,000 and the Company s share of the claim reserve is RO 9, Internal Audit The Company currently utilizes the services of a centralized audit and compliance team that is based in its parent viz. QIC. It has registered with CMA one of the qualified personnel from central Audit and Compliance team as internal Auditor. The frequency and coverage of the audit varies every year, based on the risk assessment carried out. In 2016, the internal auditor has carried out 2 audits. 44

47 The coverage of the internal audit includes key areas such as underwriting, claims, finance and accounts operations (receivable, bank reconciliation, outstanding claims provision etc.), compliance to approved systems & procedures and identify any required control measures or improvement in overall operations. The reporting and follow up is conducted based on the following: Reporting: functional reporting to the audit committee and administrative reporting to Group Chief Audit Executive & EVP. Follow-up: report on follow-up is prepared and discussed with the audit committee of the Company on a regular basis. On conversion to an SAOG, the Company proposes to have the Internal Auditor as a full time employee of the Company as required by SAOG regulations and not utilize the services of QIC for carrying out the internal audit Compliance Officer and Board Secretary The Company has appointed Mr. Adil Manshuri as the compliance officer of the Company. Mr. Adil is a M.B.A. He will coordinate with the Management to ensure compliance with all relevant Applicable Laws. The Board secretary of the Company is Ms. Aisha H.L. Suwaidi Code of Corporate Governance for insurance companies The CMA has specified a Code of Corporate Governance for insurance companies in Oman. Public joint stock (SAOG) insurance companies listed on MSM are required to also comply with the provisions of the Code for Corporate Governance for MSM listed companies, where the same do not contradict the provisions of Code for insurance companies. Broadly, the Code for insurance companies covers aspects such as: 1) Composition of the Board and its sub committees; 2) Functions of the Board including: a) Approval of the annual corporate business plan, the annual risk assessment and management strategy, underwriting and pricing policy, reinsurance management strategy and investment management policy; b) Establishing the management structure and responsibilities; c) Establishing standards of customer services and fair dealings; d) Approving Information Technology systems; e) Overseeing policy and strategy implementation and operational performance; f) Establishing systems for internal controls, internal audit and code of corporate ethics; 3) Roles and responsibilities of the senior management; 4) Related party transactions; and 5) Report on Corporate Governance Code of conduct for insurance companies The CMA has set out a Code of Conduct for insurance business aimed at serving the customer in the most appropriate manner. The Company aims to ensure that its employees adhere to this code while conducting the Company s business Corporate Social Responsibility (CSR) The Company seeks to exercise its role as good citizen including mitigation of any adverse impact of its activities on the national economy, community or environment at large. The Company has adopted the CSR policy, which shall be approved by its Board. The executive management will set out a strategy or an annual plan, through which it will deliver the Company s CSR philosophy, policies, and community-based principles. The strategy or plan has at minimum outline the following items: a. Allocated budget. b. Available support and participation means. c. The values and principles which the Company seeks to disseminate through the different CSR activities. d. Community segments or social fields targeted by the Company. The Company s annual report shall contain a special report on CSR activities detailing such activities, expended amounts, and its impact and sustainability assessment. 45

48 Currently, the Company is contributing to deserving social causes. The Company participate in CSR activities through providing training to Omani youth and absorbing candidates after successful completion of their training period. Company time to time participate in public awareness campaign on Traffic safety and measures Performance and Key Achievements The Company s performance and key achievements over the last four years are highlighted below RO RO RO RO Insurance premium revenue 18,782,803 19,494,671 19,963,989 21,381,481 Net premium earned 8,363,188 9,145,086 9,741,057 10,289,636 Net underwriting results 2,621,636 1,552, ,532 1,680,811 Total income 3,902,252 3,029, ,660 2,525,345 Profit / (loss) for the year 1,893,080 1,014,170 (971,638) 718,705 Earnings / (loss) per share (Based on nominal value of RO 1/- per share) (0.194) Total assets 36,717,048 36,399,756 40,173,470 47,383,490 Share capital 5,000,000 5,000,000 5,000,000 5,000,000 Total equity 10,134,412 10,544,767 9,210,717 10,255,744 Net Assets per share The Company s insurance premium revenue has grown at a CAGR of 4.4% over the past 4 years and has registered positive net underwriting results over this period. The decline in the net underwriting result in 2015 was primarily result of increased reserve against motor claims by RO 1.1 million for better cushion and increased losses in medical and life in some of the accounts. This, combined with fall in value of the investment portfolio due to fall in market price (Impairment of equity investment of RO 1.03 million) resulted in a net loss for the year However, the risk associated with medical and life are now being better managed by QLM who is company s reinsurance group company partner and overall life and medical portfolio being scaled up significantly which will provide leverage in managing claims and TPA services which will provide better results from 2017 onwards. Movement in Unearned Premium Reserve (UPR): RO RO RO RO Insurance premium revenue 21,381,481 19,963,989 19,494,671 18,782,803 Insurance premium ceded to reinsurers (11,859,926) (9,506,764) (10,243,991) (9,747,212) Net insurance premium revenue 9,521,555 10,457,225 9,250,680 9,035,591 Movement in unexpired premium 768,081 (716,168) (105,594) (672,403) As per the Company s income statement, movement in unexpired premium which was negative for the years 2013 to 2015, became positive in This is attributed to the fall in net insurance premium income in The net premium income for the year ended 31st December 2016 was RO 9.52 million while for the year ended 31st December 2015 it was RO million, a reduction of RO 0.93 million. This is mainly due to the reduction in motor business from RO 9.1 million in 2015 to RO 8.3 million in 2016, which resulted in a release from the unexpired premium reserve (UPR) in Motor for RO 0.76 million. However, for the future years the Company expects the movement in unexpired premium to revert to the earlier trend and in the projected income statement for the years 2017 to 2021, it has projected this to be RO (485,000), RO (574,000), RO (1,137,000), RO (2,121,000) and RO (1,352,000) respectively. The Company maintains UPR reserve on net retention insurance premium on higher of 45% of net retention insurance premium as per guidance of CMA or 1/365 method. 46

49 Performance for the half year ended 30th June RO Projected 2017 full year (RO) Insurance Premium Revenue 13,334,403 27,182,000 Underwriting Results 975,742 2,554,202 Investment income/(loss)-net 1,045,929 1,695,122 Other Income 74, ,000 Expenses 2,096,187 4,339,324 (837,735) (1,796,500) Profit before taxation 1,258,452 2,602,824 Taxation (79,082) (267,100) Net Profit After Tax 1,179,370 2,335,724 Other Comprehensive Income Net Change in fair value of available for sale of financial assets (1,527,993) (800,000) Total comprehensive income for the period (348,623) 1,535,724 Key achievements over the past few years include 1. OQIC has made net profit since inception of company in the year 2004 till today except in the year of It is a great feat and speaks about the Company s prudent underwriting. 2. Despite slow down in the insurance sector, OQIC has navigated well and demonstrated a growth in GWP. 3. OQIC has managed a positive growth in net underwriting results in 2016 as compared to the fall in the previous years. 4. Distributed cash dividend in year 2013 and 2014 at 5% and 10% of Net profit of previous financial year respectively. 5. Increased reserves in the books of accounts for any contingencies. 6. OQIC has opened 2 new branches and is able to reach its customer more effectively. 7. Currently OQIC is the only insurer in the Sultanate to offer road assistance as part of motor insurance line 8. OQIC has developed a strong risk culture and governance with a rapidly evolving ERM framework 9. It has developed a well diversified portfolio with very low volatility 9.3. Company Highlights OQIC is a subsidiary of Qatar Insurance Company S.A.Q. which is the leading insurance group in the MENA region. This gives the Company a strong competitive advantage especially in terms of the Group reputation, the Group s strong credit rating and its global presence. The Company also avails the technical expertise of the Group such as in underwriting, reinsurance management, IT systems, risk controls and loss mitigation strategies apart from access to its highly experienced talent pool. The Company has a well developed distribution network across the Sultanate of Oman comprising: o Full Scale own branches: Currently company has 7 full scale branches beside corporate office in Muscat where all corporates products being offered. These branches offer retail products to customers like Motor TP & Comprehensive, Travel, PI and Home care. These branches are also equipped with fully trained staff for handling claims services. o Agency & Brokers Channels: Company has currently 6 agency branches in Sur, Muscat, Al Khoudh, Al Brakha, Sohar and Buraimi. Company has also about 30 brokers tie up for selling retail as well corporate products across the Sultanate. o Bank Assurance: Company has entered into bank assurance tie up with a leading bank in Oman for offering general as well as life insurance products across the Sultanate with the network of bank s branches throughout the Sultanate. It provides the Company a huge customer base to serve them efficiently. o Online: The Company has a state of the art user friendly online platform to offer retail products to customers for new as well as renewal of policies. Online business is catching up quickly in the Sultanate and it registered a high growth compared to the previous year. 47

50 o o Telesales: The Company has an efficient and professionally managed tele sales channels and call center to provide services to customers. The Company s sales staff can reach to customers at their convenient time and place and provide insurance products as well as provide claims related services. This gives comfort to customers though having personal relationship executives from the Company to provide them best services at their place. The call center has facility for inbound as well as outbound calls to serve customers in an efficient way. Affinity: The Company has entered into affinity programs with various large corporate clients in the Sultanate to offer them relevant insurance products at competitive price within their premises. Company will focus on this in future to strengthen their network and provide insurance products to a large customer base Future plans In current prevalent economic situation across the globe specially GCC and in the Sultanate of Oman, the Company will strive for bottom line driven growth which can be sustained in coming years as well as provide healthy top line growth. Company will emphasize on the following points to achieve its goal: Tapping opportunities in Oman Insurance industry growth: Currently, penetration of insurance industry in terms of GWP to GDP of Sultanate is very low in comparison to world average penetration. However, there is huge potential in Omani market as awareness in Omani population is growing about the various types of risk covers that are available. This will certainly drive insurance demand at higher growth in certain sector as Life and Medical, SME, Retail, Home and home contents etc. The Company expects to benefit from the overall growth in insurance industry. Focus on selective segment: The Company is continuously analyzing various product mix and its profitability and market trends. The thrust will be to focus on high profit segment products and its overall growth in the insurance portfolio. Retail lines will be the focus for the Company within the overall portfolio and within this, it will further select certain chosen customer segments in order to achieve better top line as well as bottom line growth. Similarly, Life and Medical portfolio are expected to be another driving force for the Company and it aims to come out as a strong player in this segment. Energy and construction segments are the Company s expertise and it intends to enlarge its foot print in these segments. Retention of Customer: Retention of customer is a key component for sustainable growth of the Company. The Company values its customers and is determined to provide the best of customer services. The Company not only aims for complete renewals of expiring policies but to also write additional new business with existing clients, especially with corporate clients. The Company has been able to maintain most of its major corporate clients in the last several years and expects to remain competitive in the market and offer quality services to its customers in order to retain their business as well as generate new lines of business from them. Security, Stability and Strength: OQIC is a member of QIC, a GCC leading insurance company with three S factors- security, stability and strength. OQIC derives these factors from QIC as well as from Al Hosn Investment company who is its local partner. The Company expects to gain from the substantial expertise of QIC in insurance underwriting, development of new products and reinsurance arrangement with strong rated companies in the world. This will help OQIC to become a leading insurance player in the Sultanate with above three S factors. Strong Network development: Company will focus on direct distribution of retail products through its own branches and kiosks. In the last one year, the Company has added three full scale branches to its network for better and efficient delivery of customer services. The Company has plans to open a few more branches/ kiosks in the current year and will strengthen its network in the next year too. The Company has very strong relationships with leading insurance brokers in the Sultanate and it expects to penetrate more accounts through them in the future time. Dedicated branches are providing efficient services to customers and more such branches will come up in the coming years. Telesales channels will play a pivotal role in reaching the customer directly and providing services at their doorstep. Company will also look for more bancassurance and financial company tie ups to increase its customer base. Cost optimization & efficiency: In the current economic situation and low crude oil prices in the region, cost efficiency is a very key component for maintaining the bottom line efficiency for companies. The Company has taken various measures in this regard and has restructured its operations. Each business vertical now has their own MENA region functional head from the QIC central team who focus on business development in the region and bring their expertise in underwriting and claims servicing which helps the local team substantially. The Company also derives the benefit of various shared services from QIC group such as Enterprises Risk Management, IT infrastructure and services, reinsurance arrangements etc. which not only gives OQIC benefit of services of international quality professionals but at the same time is at competitive cost. Strong Human Resources: For any organization s success its human resources is the main factor. OQIC has a talented and highly motivated team of professionals in all the verticals and they are the driving force for the Company. The Company places emphasis on overall training of its workforce and giving equal opportunities to all the staff

51 without any discrimination. Several of its staff are undergoing various university courses, insurance certification courses and attending various sponsored training programs. The Company has recently conducted a week long external training for all the staff and intends to organise more such training programs in the future. The Company believes in developing leaders from within the Company and more efforts will be made in this regard. The Company is also participating in sponsoring Omani youth to receive training under the CSR program of CMA and after completion of training, the candidates may be offered career opportunities in the Company. This demonstrates the Company s responsibility towards the society. Optimum Investment management: Company s investment portfolio has been managed by Qatar Economic Advisor (QEA) a separate entity under QIC group comprising a highly professional team that manages QIC group companies investment portfolio. The portfolio is being managed in compliance with CMA guidelines. OQIC has achieved robust investment yields over the years and expect QEA to manage the portfolio with efficiency and achieve the anticipated yield. Strengthening Technology: Technology is a new innovative driving force for the economy. Technology is an enabling platform for generating business growth with higher efficiency and lower cost. The Oman population is also exposed to this technology and in the coming years there will be more transactions on the online platforms. The Company has already developed a user-friendly online platform for purchasing new policies as well as for renewals. The Company will also launch an online claims portal in the Sultanate, which will allow customers to register their claims from any corner of the Sultanate. The QIC group is investing significant resources in developing digital technology for new age customer services and OQIC will also benefit from this investment in technology. Management believes in its strategy as well as in receiving the benefit of expertise from its parent company and with the guidance of its shareholders it expects to achieve its goals and generate consistent underwriting results in the coming future. 49

52 10. RISK FACTORS Prospective Applicants should carefully consider the risks described below in addition to all other information presented in this Prospectus, including the financial statements set out in this Prospectus, before deciding to purchase any of the Offer Shares. Forecasts are projections made by the Company based on best estimates and actual results might vary. Prospective Applicants should note the risks and mitigating factors mentioned below reflect the Company s opinion based on its current knowledge and the information currently available to it. Additional risks and uncertainties not presently known to the Company or the Company currently believes to be immaterial may also have a material adverse effect on the Company s financial condition or business success. The actual risks and the impact of such risks could be materially different from that mentioned herein and could have a material adverse effect on the Company s business, results of operations, financial condition and prospects and cause the market price of the Shares to fall significantly and the prospective Applicants to lose all or part of their investment. Unless otherwise stated in the risk factors set out below, the Company is unable to specify or quantify the financial or other risks mentioned therein Economic Growth and Oil Price The Company s performance and prospects are directly linked to economic growth and outlook. Oman s economic growth is significantly influenced by the price of oil and the buoyant oil price over the past years led to sustained growth of the economy. This has helped most sectors and businesses in Oman, including the insurance sector. However, the sharp decline in the oil price during the last two years poses a significant risk for the economy and in particular to the insurance sector and the Company. Further, geo political and security risks in the region also affect economic growth and could have a material adverse effect on the market of the Shares Demand The performance of the Company is directly linked to the level of economic activity in Oman and the resulting demand for insurance services. A fall in demand for insurance services due to economic downtrend or any other factor adversely affecting the economy could affect the performance of the Company. The Company offers various types of insurance products that cater to the requirements of the various sectors of the economy including the corporate and retail customers. Such a diversified mix of products as well as customers is expected to help the Company in managing the risk Insurance Risk The principal risk the Company faces under insurance contracts is that the actual claims and benefit payments or the timing thereof, differs from expectations. This is influenced by the frequency of claims, severity of claims, actual benefits paid and subsequent development of long-term claims. The Company manages the insurance risk through the careful selection and implementation of its underwriting strategy guidelines together with the adequate reinsurance arrangements and proactive claims handling. The objective of the Company is to ensure that sufficient reserves are available to cover these liabilities. The concentration of insurance risk exposure is mitigated by the implementation of the underwriting strategy of the Company, which attempts to ensure that the risks underwritten are well diversified across a large portfolio in terms of type, level of insured benefits, and amount of risk, industry and geography. Underwriting limits are in place to enforce risk selection criteria Business Risk The insurance business is subject to various risks that have a significant impact on the performance of the Company. Some of these risks include underwriting risk, operations risk, risk of frauds or errors, liquidity risk, interest rate risk, foreign exchange risk, failure of internal systems or equipment and data loss or manipulation. Operational risk is the risk of loss arising from system failure, human error, fraud or external events. When controls fail to perform, operational risks can cause damage to reputation, have legal or regulatory implications or can lead to financial loss. 50

53 Any unexpected or sustained adverse developments in these areas could adversely affect the performance and stability of the Company. Although the Company implements risk controls and loss mitigation strategies, it is not possible to eliminate entirely any of these or other operational risks. The Company has detailed systems and procedures manuals with effective segregation of duties, access controls, authorization and reconciliation procedures, staff training and assessment processes etc. with a compliance and internal audit framework. Business risks such as changes in environment, technology and the industry are monitored through the Company s strategic planning and budgeting process, which is guided by the Group Strategy team. The team has a streamlined and integrated approach to the development and execution of strategic initiatives. The strategy team have five primary objectives. Inorganic Growth: Plan, assist and deliver towards continuously growing the business inorganically Explore opportunities for organic growth Strategic partnerships / Joint ventures Performance improvement related strategic initiatives Executing miscellaneous initiatives such as credit rating advisory, investor relations services, etc Product Related Risk The Company offers a range of insurance products and the premiums payable for each product are decided by reference to estimates and forecasts. Any negative deviation of actual results from the estimates (such as higher than envisaged claims) could have a material adverse effect on the Company s business and operating results. The Company s parent QIC, is a leading global insurance company, with whom the Company has a management and operational services agreement, enabling it to benefit from QIC s technical expertise. This will assist the Company in managing these risks Adequacy of Provisions and Reserves The Company maintains provisions for claims, both reported as well as yet to be reported. The Company also uses a portion of its annual profit to build up its insurance reserves to cover potential future claims and liabilities. The Insurance Law stipulates the minimum amount of reserves that the Company is required to maintain which are based on the level of insurance business undertaken by the Company and estimates of the likely amount of claims. The actual claims or liabilities may turn out to be much higher than the provisions and, in such case, the Company s financial position and ability to pay dividends will be adversely affected. Further, non-adherence by the Company with the reserve requirements will restrict the Company s ability to take up additional business and may also lead to regulatory actions and penalties. The actuarial review report on the Company s technical reserves has suggested for adoption of actuarial techniques for estimating its technical provisions. The Company is looking for actuary based reserve valuation for both general and life business going forward Reinsurance Arrangements The Company has reinsurance arrangements with a number of reinsurers. This enables the Company to secure some protection against losses, to expand its underwriting capacity and to give some stability to its underwriting results. A significant portion of the reinsurance is effected under treaty, facultative and excess-of-loss reinsurance contracts. As at 31st December 2016, the reinsurers share of insurance contract liabilities of the Company was RO million (RO million as at 31st December 2015). However, the effectiveness of these arrangements depends on the acceptance and settlement of claims made on the reinsurers by the Company. While reinsurance is used to manage insurance risk, this does not discharge the Company s liability as primary insurer. Hence, the Company could be exposed to disputes on and defects in its contracts with its reinsurers, challenges to claims asserted against reinsurer and a possibility of default by its reinsurers which could have a material adverse effect on the Company s performance and profitability. Further, the Company is also exposed to credit risk relating to its reinsurers. To minimize its exposure to significant losses from reinsurer insolvencies, the Company evaluates the financial condition of its reinsurers and monitors concentration of credit risk arising from similar geographic regions, activities or economic characteristics of the reinsurers. The Company has a policy of dealing with reinsurers rated by S&P and A M Best. A number of the Company s reinsurance contracts include change of ownership provisions which could enable the reinsurer to terminate the reinsurance arrangement and reject claims following the IPO. Moreover, a number of these 51

54 contracts include provisions which are unclear or conflict with other provisions and which could therefore provide a basis upon which the reinsurer may reject claims. As the conversion of the Company to SAOG is on account of regulatory requirement and is applicable to all national insurance companies in Oman, the Company is of the view that such problems are not expected from the reinsurers. The reinsurance strategy followed by the Company has an influence on its overall level of underwriting as well as its net premium income. To the extent the reinsurance strategy is not effective in containing actual claims to within the envisaged net levels, this will adversely impact the Company s financial performance and financial position. Further, the availability of reinsurance and its size and cost are subject to prevailing market terms, which are beyond the control of the Company. Any change in the terms, including from those envisaged for the financial projections, will have an impact on the Company s performance and results. The Company is of the view that as a subsidiary of QIC it is well placed to manage such risks Investment Risk As with many insurance companies, a significant portion of the income and profits of the Company is derived from its investment portfolio, and therefore the Company s financial performance could be substantially affected by any decline in the performance of its investment portfolio. Such performance could be affected by a number of factors including economic conditions, market prices, interest rates, liquidity conditions, market sentiments as well as the effectiveness of the investment management. Further, the investment portfolio has to comply with the Insurance Law that place restrictions on the nature and pattern of investments and which can impact the return on investments. Usually a decline in stock market prices and/or an increase in interest rates adversely affects the investment return and profitability of insurance companies. The Company utilizes the services of Group investment managers, Qatar Economic Advisor (QEA), to manage its equity part of investment portfolio and accordingly, the return on these investments is determined largely by the effectiveness of these managers. QEA is a specialized asset management firm which has a professional team to manage QIC group companies investment portfolio. The Company s investment portfolio includes available-for-sale investments, a major portion of which are investments in quoted local and foreign equity securities. Following fall in the market value in some of the quoted securities, the Company recognized such fall under fair value changes which are accounted for in the income statement under other comprehensive expense (items that may be reclassified subsequently to profit & loss) and under fair value reserve in the balance sheet. The fair value reserve was RO (696,693) as at June 30, 2017 (negative balance), while the projected balance as at December 31, 2017 is RO 31,300 (positive balance). This implies that the Company has assumed that the investment portfolio will recover over the six month period (July-December 17) leading to appreciation in the value of the portfolio, which will result in improvement in fair value reserve by RO 727,993. In the event the equity markets do not recover by the end of 2017 as assumed by the Company, then the Company may need to make required provision in the income statement for the 6 months ending 31st December In such case, the Company s net income will be adversely impacted and the Company may not achieve the projected profit after tax for the year ending 31st December This in turn, will adversely affect the Company s ability to distribute the projected dividend as also the market price on the Shares. Further, the Company has estimated investment income of RO 1.7 million for the year 2017 keeping in view the Company s past performance and market conditions. The Company has realized an investment income of RO 1.05 Million as on 30th June 2017 and it has further assumed that at the end of the year 2017 investment income of RO 1.7 million can be achieved by increased income on its fixed income combined with improvement in equity market conditions. However, if the equity market conditions do not improve as envisaged above, then the projected investment income for 2017 might not be achieved and this can adversely affect the net profits, the amount available for distribution as dividend and the market value of the Shares Claims and Disputes The Company may face disputes with its customers regarding insurance claims which could include legal actions both by and against the Company. Some of these claims may result in the Company having to pay higher than envisaged compensation. This could impact the Company s operating results and profits. The Company has in place claim review policies to assess all new and ongoing claims, regular detailed review of claims handling procedures and frequent investigation of possible fraudulent claims to reduce the risk exposure of the Company. The Company further enforces a policy of actively managing and prompt pursuing of claims in order to reduce its exposure to unpredictable future development that can negatively impact the Company. 52

55 Catastrophic Risk Insurance activity is subject to the risk of substantial claims following catastrophic events. Therefore, any such event could lead to significant losses for insurance companies which will impact their performance and the market price of its Shares. The Company manages this risk through a suitable reinsurance strategy that seeks to limit the extent of loss in the event of a catastrophe Reliance on QIC Group The Company relies on its parent (a related party), the QIC group, for a number of services such as underwriting, reinsurance, internal audit, risk management and IT. Some of its staff, including the current CEO, have earlier worked in QIC. In the event QIC s support is no longer available or is reduced in the future for any reason, this may have a material adverse impact of the Company s performance and prospects The Company has entered into a management agreement with QIC Group, for which it paid a management fee of RO 25,000/- in Any substantial increase in the fee level or a change in terms may have an adverse impact on the Company s financial performance. Further, any inability or failure by QIC to provide these services could have a material adverse effect on the business and results of operations of the Company. The Company is a subsidiary of QIC and accordingly it enjoys the support of the QIC group. Any dilution of the equity stake of QIC in the Company may result in a lowering of QIC s interest in and commitment to the Company, which may have an adverse impact on the Company s performance and prospects. While the Company is currently a subsidiary of QIC, a reduction of their shareholding may lead to the Company no longer being its subsidiary. It may be noted that post IPO, there is no restriction on QIC with regard to disposal of its holding in the Company and there is no assurance that QIC will maintain its ownership level in the Company Market Size and Competition The insurance market in Oman is highly competitive with about 21 insurance companies operating in a fairly small market which exposes the Company to the risk that its revenues may not grow or be sustained at the projected levels. Further, this could also lead to greater price competition between the insurance companies which could adversely impact the profitability of the Company. If the Company is unable to compete effectively, its business growth and financial performance may be affected, together with the market price of the Shares. The Company has an experienced management team that is supported by the parent company QIC, through a management agreement. The Company believes that it is well placed to meet the competitive pressures Mid-market Position The Company is among the second tier of companies in the Oman insurance sector and as such may face challenges in competing with the larger, established players as well as from other smaller companies that are pursuing growth opportunities. The Company offers various types of insurance products that cater to the requirements of the various sectors of the economy including the corporate and retail customers. Such a diversified mix of products as well as customers is expected to help the Company in managing the risk Loss of Business The insurance policies issued by the Company are generally for a one-year period and are renewable annually. If the Company s customers do not renew their insurance policies, and shift their business to another company, this will adversely affect the Company s revenues and market share. The Company is placing emphasis on offering appropriate products that effectively meet the customer requirements at competitive rates. Further, it is also focusing on further improving its customer service as well as strengthening its technology platform that will enable it respond quickly to customer requirements. The Company expects such efforts to help it retain and grow its customer base Customer Concentration At 31st December 2016, 45 % of the Company s premium receivables were due from 5 customers and brokers. Therefore, if one or more of these customers shifts its business to another insurance company or finds itself in financial difficulties, this could have a significant adverse impact on the financial performance of the Company. 53

56 At 31 December 2016, 53% of the Company s dues from insurance and reinsurance receivable are due from five entities. If any of these entities does not pay, the profitability of the Company will be at risk given the exposure of the concentration. The Company monitors these on a regular basis and expects that its experienced management team has will enable it to manage such risks Receivables As the Company has significant balances (around RO 8.45 million as of 31st December 2016) due from customers, brokers, agents and reinsurance companies. Of this, RO 6.68 million was is receivable from policy holders, agents and brokers while RO 1.77 million is related to reinsurance receivables. Premiums and reinsurance receivable includes related party transactions of RO 1,150,068 (2015: RO 3,844). The Company is exposed to the risk of delays or defaults in collection of these receivables which could adversely affect the Company s operations and results. Overall, the Company has provided for RO 0.54 million as allowance for doubtful receivables in its books. The Company s premiums and insurance balance receivables as at 31st December 2016 includes debtors with a carrying amount of RO 3,151,899 which are past due and outstanding for more than 121 days (the amount under this category was RO 862,653 as at 31st December 2015). Further, there are amounts that are outstanding for more than 180 days and as per the Group receivables management policy the Company should have made provision at 50% of the amount for debts outstanding for between 180 to 365 days and 100% for those outstanding for more than 365 days. The shortfall in provision if the Company had applied the Group policy was RO 1.67 Million as at 31st December 2016 (RO 1.78 Million as at 31 March 2017). However, the Company s Audit Committee at the meeting on 9th August, 2017 passed the following resolution: The provision for bad debts as on April 2017 is reviewed and found adequate. No further bad debt provision is therefore required as on date. OQIC however must continue monitoring receivables and make provision on case to case basis. The Group Chief Audit Executive has stated that the Audit Committee of the Company reviewed the internal guideline requirement and agreed that the practice of making a final assessment based on likelihood of collection on case to case basis must not be overlooked before provision is finally made and has also confirmed that the internal audit finding regarding receivables management stands resolved and no further compliance action is required in this regard. Any undue delay in realisation of receivables may lead to the Company facing liquidity constraints that may increase the Company s financial expenses and also hinder its business operations. Further, if the Company is required to make provisions for or write-off receivables more than what has been anticipated, this will adversely impact its profits and ability to pay dividend as projected and also affect the market price of the Shares. These risks are monitored and managed by the experienced management team and is also reviewed periodically by the Audit and Risk Management Committee of the Company Short Track Record of Profits The Company s financial performance up to 2016 was inconsistent, with a fall in profit in 2014 and a net loss in However, in 2016 its financial performance has shown an improvement with a return to profits. The Company attributes this to the significant increase in its claims reserve during the year 2014 and year 2015 in its Motor line of business by RO 3.3 million (Year 2014 RO 2.2 million and year RO 1.1 million) which reduced underwriting margins in these years. However, this has also provided a sound reserve for the Company towards any contingencies. This is expected to pave the way for consistent underwriting performance in the future Manpower The Company is dependent on its experienced Board, Management and personnel for its performance. If the Company is not able to recruit additional qualified personnel as per its requirements or replace those who leave the Company, it could have a material adverse effect on the Company s operations, performance and financial condition, including the market price of the Shares. Further, the Company needs to engage Omani employees to maintain its Omanization targets. If the Company is not able to identify and recruit suitable Omani personnel, it could face action from the Ministry of Manpower. The Company currently has met the Omanisation requirements and expects to do so over the future Downgrade of Rating or adverse development relating to the Company s parent group The Company derives significant strength from the reputation and financial standing of its parent, the QIC Group. Any downgrade in the rating of the QIC Group and/ or any adverse development relating to the QIC Group may have a negative impact on the Company s business and performance. 54

57 Exchange Rate Movement Any adverse movement in exchange rates could affect the financial performance of the Company and the market price of the Shares. The Company is exposed to foreign currency exchange rate risk as a portion of its investments as well as reinsurance premium and reinsurance receivables are denominated in US Dollar. In case the RO is unpegged from the US Dollar, this could expose the Company to additional risks Increase in taxes or introduction of new taxes Any increase in the corporate tax rate or imposition of new taxes or levies (such as withholding tax being made applicable to reinsurance premium payments or Value Added Tax, which is reported to be introduced in the near future) could have an adverse impact on the Company s business and performance Use of Estimates, Accounting Policy and International IFRS The preparation of the Company s financial statements requires the Management to make judgements, estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses, provisions and change in fair values for the relevant period. Estimates and underlying assumptions are reviewed periodically. Such estimates are necessarily based on assumptions about several factors involving varying, and possibly significant, degrees of judgement and uncertainty and actual results may differ from the Management s estimates resulting in future changes in estimated liabilities. Some such assumptions and estimates include impairment of financial assets and receivables, claim numbers, expected ultimate cost of claims reported, claims incurred but not reported, claim handling costs, claim inflation factors actuarial estimates of future benefit payments and premiums based on mortality, longevity and interest rates. Additional qualitative judgments are used to assess the extent to which past trends may not apply in the future, Further, changes to the Company s accounting policy including on account of changes in the IFRS or regulations, could impact the Company s financial statements and have a bearing on its ability to declare dividends. The Management anticipates that IFRS 15 and IFRS 9 will be adopted in the Company s financial statements for the annual year beginning 1st January 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. 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 Risks Relating to Fraud The Company is at risk from customers who misrepresent or fail to provide full disclosure in relation to the risk against which they are seeking cover before such cover is purchased, and from customers who fabricate claims and/or inflate the value of their claims. The Company, in common with other general insurance companies, is also at risk from its employees failing to follow procedures designed to prevent fraudulent activity, as well as from its agents fraudulent activity, such as falsifying policies or failing to remit premiums collected from customers on the Company s behalf. A failure to combat the risks of fraud effectively could adversely affect the profits of the Company as claims incidence and average claim payouts could increase. Further, such costs may have to be passed on to customers in the form of higher premium levels, which could result in a decrease in policy sales. The occurrence of any of these events could have a material adverse effect on the Company s business, reputation, financial condition, results of operations and cash flows. The Company has a risk management framework which seeks to reduce the business and financial impact of such risks IT and Data Disaster The Company relies on IT systems for critical elements of its business process, including, for example, entry and retrieval of individual risk details, premium claims and reinsurance processing, monitoring aggregate exposures and financial and regulatory reporting. The failure of IT systems could interrupt the Company s operations or materially affect its ability to conduct business. Material flaws or damage to the system, particularly if sustained or repeated, could result in the loss of existing or potential business relationships, compromise the Company s ability to pay claims in a timely manner and/or give rise to regulatory implications, which could result in a material adverse effect on the Company s reputation, financial condition and results of operations. The Company receives technology support from its parent company, which helps to manage these risks. In addition, the Company has a disaster recovery and business continuity plan to manage failures of its IT systems. 55

58 Force Majeure Any force majeure event such as acts of war, armed conflicts, blockades, acts of rebellion, riots, civil commotions, strikes, sabotage, terrorist acts, lightning, fires, floods, earthquakes, tsunamis, floods, storms, cyclones, typhoons, tornados or other natural calamities or acts of God could affect the Company s operations and financial position Regulatory Requirements The insurance sector is subject to a number of regulatory requirements and scrutiny. Changes in regulations such as the requirement for increased capital could affect shareholders returns. Further, non-compliance with regulations could lead to penal action from the regulator, which could adversely affect the Company s business and profits. Such action could also affect the Company s market standing and reputation. Any regulatory actions such as restrictions on insurance premium level or the terms of risk coverage may have an adverse impact on the Company s performance and prospects. Any adverse policy action or changes in regulations by the Government or its agencies, could affect the Company s business, profitability and financial position. Regulations that specifically apply to the Company s business include corporate existence & power and authority to conduct its business. The Company is subject to a varied and complex body of Applicable Laws that both public officials and private parties may seek to enforce. The Company conducts its business operations pursuant to several licenses and permits, including insurance license for carrying on its business. Such licenses and permits may be suspended, terminated or revoked if the Company does not comply with their respective requirements. The Company s business could also be adversely affected by changes in Applicable Law or in its interpretation. The imposition of fines or penalties, or the revocation or suspension of license, or permits, could have an adverse effect on the business and financial condition of the Company, including the market price of the Shares Delay in conversion to SAOG entity and listing of the Shares in the MSM As per the Insurance Law as amended, the Company is required to achieve a minimum paid-up capital of RO 10 million and complete its transformation to an SAOG entity and have its shares listed on the MSM by 17th August While the Company has already increased its paid-up capital to RO 10 million, the Company has not been able to complete its transformation to an SAOG and have its Shares listed on the MSM by the deadline. In the event the CMA or other relevant agencies impose any penalty or regulatory action against the Company for the delay, this is may have an adverse impact on the Company Corporate Governance As an SAOG, the Company is subject to significant corporate governance requirements. Any default in compliance could lead to regulatory action and / or penalties. Further, these requirements may require substantial time from the Management, which may affect the day-to-day business operations Risk Factors Relating to the Offer Shares No trading history: The Offer Shares will be listed on the MSM as per the timetable given in this Prospectus. There is no prior history of trading in the Shares. Share price fluctuation: After listing of the Offer Shares on the MSM, the price of the Offer Shares may fluctuate for various reasons and may go below the Offer Price. Liquidity: There are no guarantees that an active market will exist in the Offer Shares subsequent to the listing on the MSM. To that extent, Applicants face the risk of holding Offer Shares that may not be actively traded. Future increase of equity capital: The Company may in the future increase its equity capital through further issues of shares (either on a rights basis or otherwise). Such capital increases could affect the price of the Offer Shares on the MSM. Market fluctuations: Market fluctuations and other factors may adversely affect the trading price of the Offer Shares regardless of the actual operating performance of the Company. All equity investments carry market risks to varying degrees. The value of any security can fall as well as rise depending on market conditions. Dividend policy: Dividend payments are not guaranteed and the Board may decide, in its absolute discretion, at any time and for any reason, not to pay dividends. Any payment of future dividends will be made taking into account the sufficiency of distributable reserves and liquidity in order to ensure the Company s operational needs and/or business growth are not 56

59 limited by the unavailability of funds, as well as the Company s known contingencies and compliance with any funding facility covenants. Further, any dividend policy, to the extent implemented, will significantly restrict the Company s cash reserves and may adversely affect its ability to fund business requirements. As a result, the Company may be required to borrow additional money or raise capital by issuing equity securities, which may not be possible on attractive terms or at all. 57

60 11. SOURCES OF FINANCING Term Loans The Company has no term loans Other Facilities The Company has a bank guarantee facility from a local bank for an amount of RO 30,774 (223,380 as of 31st December 2016) which is secured by a lien on fixed deposit of the same amount maintained by the Company with the bank. The Company has no other credit facilities outstanding as of 30th April Status of Facilities As of 30th April 2017, the Company s outstanding loan facilities are as follows: Facility Bank borrowings Term Loan Performance Bonds Outstanding amount (RO million) Guarantees 30, Sources of Financing Nil Nil Nil Category as on 31 December 2016 RO 000 as on 31 December 2015 Liabilities arising from insurance contract 28,627,836 25,363,394 Due to reinsurers 4,363,231 2,609,096 Other liabilities and accruals 4,136,679 2,990,263 Total Liabilities 37,127,746 30,962,753 Equity capital 5,000,000 5,000,000 Legal reserve 561, ,620 Contingency reserve 3,003,643 2,396,426 Fair Value reserve 831, ,978 Retained earnings 859, ,693 Total equity 10,255,744 9,210,717 Total equity and liabilities 47,383,490 40,173,470 Total liabilities/ Shareholders equity As the Company will not receive the IPO proceeds, the Company s financial position is not expected to be impacted by the IPO. Further, the Company already has achieved the minimum capital requirement of RO 10 million. 58

61 12. HISTORICAL FINANCIAL STATEMENTS Certified summarized financial statements ( ) 59

62 60 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

63 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 61

64 62 Oman Qatar Insurance Company SAOG (Under transformation)

65 Oman Qatar Insurance Company SAOG (Under transformation) (Continued) 63

66 64 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

67 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 65

68 66 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

69 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 67

70 68 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

71 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 69

72 70 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

73 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 71

74 72 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

75 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 73

76 74 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

77 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 75

78 76 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

79 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 77

80 78 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

81 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 79

82 80 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

83 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 81

84 82 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

85 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 83

86 84 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

87 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 85

88 86 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

89 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 87

90 88 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

91 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 89

92 90 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

93 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) Operating Segments Segment statement of profit or loss and other comprehensive income Marine & aviation Fire & general Group and credit life Total RO RO RO RO RO RO RO RO RO RO RO RO RO RO RO RO Insurance premium revenue 561, , , ,439 20,008,573 17,771,624 17,780,830 17,204, ,770 1,704,830 1,135,129 1,192,821 21,381,481 19,963,989 19,494,671 18,782,803 Insurance premium ceded to reinsurers (445,920) (426,094) (503,516) (354,931) (10,829,615) (7,703,604) (8,897,286) (8,486,007) (584,391) (1,377,066) (843,189) (906,274) (11,859,926) (9,506,764) (10,243,991) (9,747,212) Net premium 115,218 61,441 75,196 30,508 9,178,958 10,068,020 8,883,544 8,718, , , , ,547 9,521,555 10,457,225 9,250,680 9,035,591 Movement in unexpired premium (24,000) (4,000) (17,299) 1, ,534 (525,999) (190,587) (556,575) 21,547 (186,169) 102,292 (117,114) 768,081 (716,168) (105,594) (672,403) Net premium earned 91,218 57,441 57,897 31,794 9,949,492 9,542,021 8,692,957 8,161, , , , ,433 10,289,636 9,741,057 9,145,086 8,363,188 Claims paid (276,925) (192,331) (86,443) (66,613) (9,090,342) (7,888,991) (7,117,963) (6,942,399) (1,873,592) (1,105,526) (648,877) (958,529) (11,240,859) (9,186,848) (7,853,283) (7,967,541) Reinsurers share of claims 256, ,309 79,573 53,642 1,972,428 1,511,183 2,421,145 1,025,885 1,537, , , ,499 3,766,872 2,445,803 3,077,770 1,936,026 Movement in outstanding claims 2,000 (2,200) (26,687) (2,182) (475,700) (1,254,800) (2,238,149) 716,299 (5,859) (41,058) (85,616) (48,416) (479,559) (1,298,058) (2,350,452) 665,701 Net commission (2,302) 36,957 29,403 31,339 (556,363) (671,234) (417,273) (359,719) (96,614) (86,145) (79,006) (47,358) (655,279) (720,422) (466,876) (375,738) Underwriting results 70,814 66,176 53,743 47,980 1,799,515 1,238,179 1,340,717 2,602,027 (189,518) (322,823) 157,785 (28,371) 1,680, ,532 1,552,245 2,621,636 Investment income 899, ,287 1,799,911 1,248,408 Impairment loss on available for sale investment (204,829) (1,032,051) (425,000) (78,680) Other income 149, , , ,888 Total income 2,525, ,660 3,029,285 3,902,252 General and administrative expenses (1,745,635) (1,895,771) (1,837,012) (1,780,450) Depreciation (31,732) (24,527) (18,104) (21,722) Profit / (loss) before taxation 747,978 (971,638) 1,174,169 2,100,080 Income tax expense (29,273) - (159,999) (207,000) Profit / (loss) for the year 718,705 (971,638) 1,014,170 1,893,080 Assets and liabilities of the Company are commonly used across the primary segments. 91

94 92 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

95 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 93

96 94 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

97 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 95

98 96 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

99 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 97

100 98 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

101 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 99

102 100 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

103 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 101

104 102 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

105 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 103

106 104 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

107 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 105

108 106 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

109 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 107

110 108 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

111 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 109

112 110 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

113 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 111

114 112 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

115 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 113

116 114 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

117 13. PROJECTED FINANCIAL STATEMENTS Certified financial projections (2017 to 2021) 115

118 116 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

119 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 117

120 118 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

121 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 119

122 120 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

123 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 121

124 122 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

125 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 123

126 124 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

127 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 125

128 126 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

129 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 127

130 128 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

131 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 129

132 130 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

133 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 131

134 132 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

135 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 133

136 134 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

137 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 135

138 136 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

139 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 137

140 138 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

141 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 139

142 140 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

143 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 141

144 142 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

145 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 143

146 144 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation)

147 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 145

148 14. AUDITED FINANCIAL STATEMENT FOR THE PERIOD ENDED 31ST MARCH 2017 (FIRST QUARTER) Audited financial statements 1st January 2017 to 31st March

149 OMAN QATAR INSURANCE COMPANY SAOC SAOG (Under transformation) Interim condensed report and financial statements For the period ended 31 March 2017 Registered address: P.O.Box 3660 Ruwi 112 Sultanate of Oman 147

150 148 Oman Qatar Insurance Company SAOG (Under transformation)

151 OMAN QATAR INSURANCE COMPANY SAOG (Under transformation) 149

152 150 Oman Qatar Insurance Company SAOG (Under transformation) (CONTINUED)

153 Oman Qatar Insurance Company SAOG (Under transformation) 151

154 152 Oman Qatar Insurance Company SAOG (Under transformation)

155 Oman Qatar Insurance Company SAOG (Under transformation) 153

156 154 Oman Qatar Insurance Company SAOG (Under transformation)

157 Oman Qatar Insurance Company SAOG (Under transformation) 155

158 156 Oman Qatar Insurance Company SAOG (Under transformation)

159 Oman Qatar Insurance Company SAOG (Under transformation) 157

160 158 Oman Qatar Insurance Company SAOG (Under transformation)

161 Oman Qatar Insurance Company SAOG (Under transformation) 159

162 160 Oman Qatar Insurance Company SAOG (Under transformation)

163 Oman Qatar Insurance Company SAOG (Under transformation) 161

164 162 Oman Qatar Insurance Company SAOG (Under transformation)

165 Oman Qatar Insurance Company SAOG (Under transformation) 163

166 164 Oman Qatar Insurance Company SAOG (Under transformation)

167 15. UNAUDITED FINANCIAL RESULTS FOR THE 6 MONTHS PERIOD ENDED 30TH JUNE 2017 Unaudited financial statements- 1st January 2017 to 30th June

168 OMAN QATAR INSURANCE COMPANY SAOC SAOG (Under transformation) Interim condensed financial statements For the period ended 30 June 2017 Registered address: P.O.Box 3660 Ruwi 112 Sultanate of Oman 166

169 Oman Qatar Insurance Company SAOG SAOC (Under transformation) Interim condensed financial statements For the period ended 30 June 2017 Contents Interim condensed statement of financial position Interim condensed statement of profit or loss and other comprehensive income Interim condensed statement of changes in equity Interim condensed statement of cash flows Notes to the Interim condensed financial statements Page Number

170 Oman Qatar Insurance Company SAOG SAOC (Under transformation) Interim condensed statement of financial position As at 30 June 2017 Notes 30 June 31 December (Unaudited) (Audited) RO RO ASSETS Cash and cash equivalents 3 2,985,175 2,385,008 Bank deposits 4 7,899,543 6,422,319 Premiums and reinsurance balances receivable 5 13,219,506 7,907,039 Reinsurers share of insurance contract liabilities 6 23,680,898 18,358,536 Other receivables and prepayments 7 356, ,646 Available-for-sale investments 8 9,947,857 12,724,958 Property and equipment 9 71,027 76,939 Total assets 58,160,101 48,448,445 EQUITY AND LIABILITIES Capital and reserves Share capital 12 5,000,000 5,000,000 Legal reserve 648, ,491 Contingency reserve 3,143,682 3,003,643 Fair value reserve (696,693) 831,300 Retained earnings 1,811, ,310 Total equity 9,907,121 10,255,744 Liabilities Liabilities arising from insurance contract 6 33,113,898 29,692,791 Due to reinsurers 10 9,028,409 4,363,231 Other liabilities and accruals 11 6,110,673 4,136,679 Total liabilities 48,252,980 38,192,701 Total equity and liabilities 58,160,101 48,448,445 The interim condensed financial statements were approved and authorized by the undersigned: 168 The attached notes 1 to 19 form part of these interim condensed financial statements. 1