His Highness Sheikh Nawaf Al-Ahmad Al-Jaber Al-Sabah. His Highness Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah. Crown Prince of the State of Kuwait

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2 His Highness Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah Emir of Kuwait His Highness Sheikh Nawaf Al-Ahmad Al-Jaber Al-Sabah Crown Prince of the State of Kuwait

3 Kuwait Insurance Company S.A.K.P 1 Kuwait Insurance Company S.A.K.P Kuwait Annual Report 2016

4 2 Kuwait Insurance Company S.A.K.P

5 Kuwait Insurance Company S.A.K.P 3 Board Members Mr. Ali Morad Yousef Behbehani Chairman Mr. Talal Mohammad Redha Behbehani Vice-Chairman Mr. Manaf Mohammad Ahmad Al Hamad Member Dr. Ali Hamad Al Bahar Member Mr. Prasanna Dattaray Hardikar Member Mr. Abdulghani Mohammad Saleh Behbehani Member Mr. Barrak Abdulmohsen Al Sabeeh Member Mr. Sami Sharif Chief Executive Officer

6 4 Kuwait Insurance Company S.A.K.P

7 Kuwait Insurance Company S.A.K.P 5 C o n t e n t s Board of Directors Report 7 Corporate Governance Report 9 Statement of Financial Position 29 Statement of Income 30 Statement of Comprehensive Income 31 Statement of Changes in Equity 32 Statement of Cash Flows 33 Notes to the Financial Statements 34 Independent Auditor s Report 59

8 6 Kuwait Insurance Company S.A.K.P Board of Directors Report

9 Kuwait Insurance Company S.A.K.P 7 Board of Directors Report Dear Shareholders, We are pleased to present to you our report on the business and activities of the Company for the year ended The total underwritten premiums for the year amounted to KD 37,040,510 compared to KD 37,148,558 last year which shows a narrow decline of KD 108,048 equal to 0.29%. Total operating revenue for this year amounted to KD 23,529,071 compared to KD 24,137,157 for the previous year which showed a decrease of KD 608,086 equal to 2.5%. The net earned premiums for the current year amounted to KD 19,618,468 compared to KD 19,835,706 for the previous year while the commissions earned from reinsurers this year was KD 3,056,255 compared to KD 3,312,775 last year. Other operating revenue sums up to KD 854,348 compared to KD 988,676 last year. Investment revenue amounted to KD 4,529,289 for this year compared to KD 4,137,407 for the previous year, which shows an increase of KD 391,882 which is approximately 9.5%. The drop in the prices of some of the securities in the Kuwait Stock Exchange in 2016 has had a negative effect on investment returns. After the evaluation of investments the unrealized losses for this year was (KD 8,785,481) against (KD 734,088) for the previous year, which resulted in no profit for this year. However, this year the shareholders equity amounted to KD 58,954,785 compared to KD 57,504,124 for the previous year, which shows an increase of KD 1,450,661 which is equal to 2.5%. The liquidity ratio was also very high in This year the fixed deposits, cash and cash equivalents increased to KD 46,873,801 from KD 43,312,460 of the previous year. This displays a difference of KD 3,561,341 which is an increase by 8.22%. The following is a brief outline of the global and local economic situations: The most significant agreement among OPEC members was a reduction in the production of 1.2 million barrels per day (bpd) which soared the prices of the crude oil. Regarding the performance of the US economy, which is the largest in the world, it improved later in the year after a slowdown in the beginning of the year. In December, the Federal Reserve decided to raise the interest rates for the first time in In the local market and after the rise in oil prices, the government reduced the deficit in the state budget for 2016/2017 from about 12.2 Billions of Kuwait Dinar to about 9.5 billions of Kuwaiti Dinar. Kuwait Stock Exchange (KSE) recorded a series of sharp declines in its three indices, but managed to offset those losses at the end of the year. The Price Index showed a rise of 2.37% and the Weighted Indices decreased by 0.42% and KSX 15 by 1.71%. With regard to Reinsurance, there has been a drop in the reinsurance premiums for the year 2016, which can be blamed due to the global crisis that discouraged the market. Furthermore, it is to be noted that in the course of last few years, there has been a steady rise in the number of claims triggered by natural events and 2016 had witnessed some major events like Hailstorms in USA, Fire forest in Canada, Earthquakes & typhoons in Japan and Floods in France and India which has caused havoc for the insurers. There have also been above-average number of mid-sized natural events which has affected the results of the reinsurance treaties. Other factors like slow pace of economic growth and fall in oil prices in Middle East has also led to moderate contraction in the premium booked in the year as well as compromising investment projects. Despite of all these issues, the Reinsurance market will still prolong to be a soft market which is poised to last

10 8 Kuwait Insurance Company S.A.K.P much longer for many years. In fact, all the direct insurers have renewed their reinsurance programs without much problem. Reinsurers are currently facing an extremely competitive market and businesses are being written highly selectively. It is also worthwhile to mention that cyber risks and terrorism covers are gaining more publicity compared to the Mergers & Acquisitions and this trend is expected to increase in the future. The realized losses for the current year amounted to KD(594,689) against KD 5,690,993 profits for the previous year. By deducting these losses from the previous year s profits brought forward which is equal to KD 4,976,545, the net distributable profit available is KD 4,381,856. We, therefore, recommend the General Assembly to approve the distribution of the cash dividends at the rate of 20% or 20 fils per share for a total of KD 3,695,990 after neutralizing the Treasury shares and maintaining the balance of KD 685,866 for the upcoming year. The Board of Directors undertakes the soundness and integrity of the financial statements related to the Company s activity for The Corporate Governance Report for the year 2016, which also includes the Remunerations Report, has been presented separately in this report. The following is a statement of the (loss) and distribution of profits: Net (Loss) during 2016 (594,689) Profit brought forward from last year 4,976,545 Total Profit available for distribution 4,381,856 Distributed as follows: 1% share of the KFAS - 2.5% National Labour Support Tax - 1% Zakat - Directors Remuneration - Cash Dividend to Shareholders (20%) 3,695,990 Profit carried forward to the following year 685,866 4,381,856 4,381,856 Ali Morad Behbehani Chairman of Board of Directors

11 Kuwait Insurance Company S.A.K.P 9 Corporate Governance Report 2016

12 10 Kuwait Insurance Company S.A.K.P Kuwait Insurance Company ( KIC ) strives to instill solid corporate governance principles in its business environment to meet supervisory and regulatory requirements and to ensure safeguarding the rights of all stakeholders. The Governance report of the Company includes the following rules in accordance with CMA instructions: Rule I: Establishing a Balanced Board Composition Rule II: Rule III: Rule IV: Appropriate Allocation of the Roles and Responsibilities Recruiting Highly Qualified Candidates for Members of the Board of Directors and the Executive Management. Safeguarding the Integrity of Financial Reporting Rule V: Setting Sound Systems for Risk Management and Internal Control Rule VI: Promoting Code of Conduct and Ethical Standards Rule VII: Timely and High Quality Disclosure and Transparency Rule VIII: Respecting the Rights of Shareholders Rule IX: Recognizing the Role of the Stakeholders Rule X: Encourage and Enhance Performance Rule XI: Focusing on the Importance of Corporate Social Responsibility

13 Kuwait Insurance Company S.A.K.P 11 Rule I Establishing a Balanced Board Composition Summary of Composition of the Board of Directors. The board of directors is composed as follows: The composition of the Board of Directors of Kuwait Insurance Company is characterized by integrity and diplomacy which commensurate with the nature and business of the Company. The majority of the Board Members are non-executive members. It consists of seven non executive members three among them are independent members. KIC Board of Directors consists of seven members elected by the Company s General Meeting for a period of three years. The structure of the Board of Directors is collectively marked by diverse experiences, qualifications and knowledge in the insurance sector, including familiarity with legal aspects, governance, internal control and risk management, financial and economic management as well as strategic planning. The table below demonstrates the qualifications and practical experience of the members of the Board of Directors and the date of their membership, as well as the qualifications of the board secretary and the date of his appointment: Summary on the formation of the Board of Directors: Name Member category (Executive, nonexecutive/ Independent) Board Secretary Qualifications & Practical Experience Date of Election /Appointment of the Board Secretary Ali Morad Behbehani Chairman Non - Executive Bachelor of Arts- English Language & Education Board member of National Industries Company. Board member of Gulf Bank 30/3/2016 Talal Mohamed Reda Yusuf Behbehani Vice Chairman Non- Executive Bachelor of Arts- English Language Board member of Aayan Leasing & Investment Company. Board Chairman of Al- Ahli Bank of Kuwait 30/3/2016 Dr. Ali Hamad Al-Bahar Independent Board Member Doctorate of Philosophy in Insurance Board Member of Kuwait Reinsurance Company Ex. Positions: Chief Executive Officer of Kuwait Insurance Company Chairman of the Kuwait Insurance Union 30/3/2016 Manaf Mohamed Ahmad Al-Hamad Independent Board Member Master of Business Administration Al Sagar Shipping Company Delta Group Company for Technical Equipment Essence Group Company for Aviation Services 30/3/2016 Abdulghani Mohammad Saleh Behbehani Non- Executive Board Member Bachelor of Science - Mechanical Engineering Vice Chairman of Noor Financial Investment Company Member of Al Ahli Bank of Kuwait 30/3/2016 Barrak Abdulmohsen Al-Sabeeh Independent Board Member Bachelor of Science - Industrial Engineering Chairman of ALAFCO Company Member of Kuwait Insurance UnionMember of Complaints Committee, Public Private Partnership Bureau 12/4/2016

14 12 Kuwait Insurance Company S.A.K.P Name Member category (Executive, nonexecutive/ Independent) Board Secretary Qualifications & Practical Experience Date of Election /Appointment of the Board Secretary Prasanna Dattatray Hardikar Non- Executive Board Member Bachelor of Commerce Board member of Al- Ahli Bank of Kuwait Board member of Al- Ahli Bank of Egypt 30/3/2016 Khaled Abdul Aziz Soliman Al- Merikhi Member Master of Business Administration Member of the Board of Directors- Boubyan Petrochemicals Company Vice Chairman- Al Soor Finance Company 2016/3/30 Ahmad Shamlan Al Bahar Board Secretary Bachelor of Science- Civil Engineering Deputy CEO from 2001 to April 2016 Acting CEO from April 2016 to 15/9/2016 From 11/3/ /8/2016 Meshari Abdulrazzaq Al-Nisf Board Secretary Bachelor of Science Electrical Engineering Master of Business Administration- Finance Major From 11/8/2016 Mr. Ahmad Shamlan Al Bahar resigned from his position as acting Chief Executive Officer and Board Secretary with effect from 5/ 9/2016. Summary of the Company s Board Meetings Meetings of the Board of Directors in 2016 First: Meeting of the ex- Board before elections Member Meeting No. 1 held on 15/2/2016 Late Mr. Mohamed Saleh Behbehani (Board Chairman) Suleiman Khaled Al-Ghanim (Vice Chairman) Ali Morad Behbehani (Member) a a Fouad Abdul Rehman AL Bahar (Member) Talal Reda Mohamed Behbehani (Member) Jassim Mostafa Boodai (Member) Manaf Mohamed Al-Hamad (Member) Dr. Ali Hamad AL Bahar ( Member & Chief Executive Officer) Ahmad Shamlan Al Bahar (Deputy Chief Executive Officer and Board Secretary) a a a a a

15 Kuwait Insurance Company S.A.K.P 13 Second: Meeting of Elected Board in the General Meeting held on 30/3/2016 Member Meeting No. 2 held on 30/3/2016 Meeting No. 3 held on 12/4/2016 Meeting No.4 held on 2/5/.2016 Meeting No. 5 held on 11/5/2016 Meeting No. 6 held on 9/6/2016 Meeting No. 7 held on 11/8/2016 Meeting No. 8 held on 10/11/2016 Number of meetings held before and after elected board 1) Ali Morad Behbehani (Chairman) a a a a a a a 8 2) Talal Mohamed Reda Yusuf Behbehani a a a a a a a 8 3) Dr. Ali Hamad Al-Bahar (Independent member) a a a a a a a 8 4) Manaf Mohamed Ahmad Al-Hamad a a a a a 6 (Independent member) 5) Abdulghani Mohammad Saleh Behbehani (Member) a a a a a a a 7 6) Barrak Abdulmohsen AlSabeeh a a a a 4 (Independent member) 7) Prasanna Dattatray Hardikar (Member) a a a a a a a 7 8) Khaled Abdul Aziz Soliman Al- Merikhi a 1 (Resigned on 3/4/2016) 9) Ahmad Shamlan Al Bahar (Board Secretary) a a a a a 5 10) Meshari Abdulrazzaq Al-Nisf a a 2 Mr. Khaled Abdul Aziz Suleiman Al- Merikhi resigned from the Board on 3/4/2016 and Mr. Barrak Abdulmohsen AlSabeeh joined the Board as a substitute. Dr. Ali Hamad Al-Bahar resigned from his position as the Chief Executive Officer with effect from 13/4/2016. Summary on applying registration and coordination requirements and keeping the minutes of the Board meetings KIC has firm belief in the importance of coordinating and maintaining the minutes of the Board meetings. Therefore, the Company has approved the appointment of the Board Secretary. The duties of the Board Secretary includes maintaining a special register where the minutes of the Board meeting are recorded serially. The minutes indicate the year, venue, date, commencement and conclusion time of the meetings. Apart from these the minutes also include the discussions, deliberations and also the voting processes. The Board Secretary also classifies and archives the same to facilitate and to ensure easy reference.

16 14 Kuwait Insurance Company S.A.K.P Rule II Appropriate Allocation of the Roles and Responsibilities A statement illustrating that the Company has set clear policy that identifies the roles, responsibilities and duties for each member of the board and executive management as well as the authorities and powers authorized to the executive management During 2016, the Company developed and reviewed policies, regulations and job descriptions that describe the roles and responsibilities of the executive management and the Board of Directors. These include the following: 1. Setting job descriptions for members of the Board and Executive Management. 2. Redesigning the delegation of authorities matrix for the Executive Management. 3. Reviewing the policies and procedures that clearly identify the tasks and responsibilities of the Board of Directors and the Executive Management reflecting a balance of authorities and separation of powers between the Executive Management and Board of Directors. Achievements of the Board of Directors in 2016 The Board of Directors has successfully accomplished the following in implementing corporate governance system: - 1. Approving updated Policies and Procedures for the application of corporate governance rules. 2. Overseeing the activities of the Company s business through regular meetings with the Executive Management and discussing the results of the Company s business through periodic reports. 3. Reviewing and updating Corporate governance policies and procedures in accordance with the Company s organizational Structure and to keep pace with leading international corporate governance practices. 4. Performing corporate governance self-assessment across the Company and identifying aspects that require development. 5. Reviewing the periodic reports and recommendations of the Audit Committee, the Nomination and Remuneration Committee, Risk Management Committee 6. Conducting a review and assessment of the efficiency of the Board and Committees of the Board as well as performing a self-assessment for the Board members 7. Recomposing the Committees of the Board of Directors and reassigning positions in the Board 8. Reappointing the Chief Executive Officer for the Company. 9. Approving the financial and operational powers of the Chief Executive Officer CEO. 10. Enforcing the Company s corporate governance system, approving corporate governance manual and continuous emphasis on identifying sound corporate governance practices across the Company by reviewing the methods that confirm applying professional standards and corporate values as per the Charter of Professional Conduct & Ethics.

17 Kuwait Insurance Company S.A.K.P 15 A statement about implementing the requirements of the board commitment for forming specialized independent committees and stating details of each Committee Within the framework of the advanced role undertaken by the Board of Directors in respect of oversight, strategic planning, corporate governance, risk management and regulatory controls the Company, board Committees have been formed to undertake their functions efficiently and effectively. The Board committees are as follows: Board Secretary Board of Directors Risk Management Committee Audit Committee Nomination & Remuneration Committee 1. Board Audit Committee The Board of Directors carefully performs their duties concerning supervision on the quality and integrity of the accounting practices, audit and internal control. Therefore, the Board Audit Committee was composed on 2/5/2016 in accordance with the regulatory and supervisory requirements. The Committee undertakes a supervisory role supporting the Board of Directors in controlling and supervising the efficiency and independence of internal and external audits of the Company in addition to overseeing the preparation of periodic financial statements and Internal Control Review reports. Audit Committee s roles and achievements during 2016 were as follows: 1. Giving recommendation to the Board of Directors about the appointment of the chief internal auditor and determining his remuneration. 2. Reviewing the organizational structure of the Internal Audit Department. 3. Reviewing the job description, the rules and responsibilities of Internal Audit Department. 4. Reviewing the interim financial statements and recommending the Board of Directors for the approval. 5. Reviewing the Policies & Procedures Manual of Internal Audit Department. 6. Reviewing the action plan of the Internal Audit Department. 7. Reviewing and approving the risk assessment-based action plan of the Internal Audit Department. 8. Assigning an independent audit firm to prepare a report on the adequacy of the internal control systems (ICR) applicable in the Company. 9. Preparing the annual report of the Board Audit Committee for presentation at the General Meeting.

18 16 Kuwait Insurance Company S.A.K.P Members of the Committee Name Position Academic Qualifications and practical experience Election/ Appointment of the Secretary Dr. Ali Hamad Al Bahar Committee Chairman Doctorate of Philosophy in Insurance 30/3/2016 Barrak Abdulmohsen AlSabeeh Member Bachelor of Industrial Engineering 12/4/2016 Prasanna Dattatray Hardikar Member Bachelor of Commerce 30/3/2016 Summary of the Board Audit Committee s Meetings First: Meetings of previous Board before Elections Member s Name Meeting No. 1 held on 15/2/2016 Jassim Mostafa Boodai Committee Chairman Sulieman Khaled AlGhunaim (Member) Talal Mohamed Reda Behbehani (Member) Ahmad Shamlan AlBahar (Board Secretary) Second: Audit Committee Meetings 2016 Board Member elected on 30/3/2016 a a a a Member Meeting No. 2 held on 4/5/2016 Meeting No. 3 held on 8/8/2016 Meeting No. 4 held on 19/10/.2016 Meeting No. 5 held on 10/11/2016 No. of meetings 1. Dr. Ali Hamad Al Bahar (Committee Chairman) a a a a 4 2. Barrak Abdulmohsen AlSabeeh (Member) a a 2 3. Prasanna Dattatray Hardikar (Member) a a a a 4 4. Ahmad Shamlan Al Bahar (Acting CEO and Board Secretary) a a 2 Meshari Abdul Razzaq AL Nisf (Board Secretary) a a 2 2. Risk Management Committee The Board of Directors strive to improve the key operations of the Company. Therefore, a Board Risk Management Committee was established for a tenure of three years. The Board has set clear roles and responsibilities for the Committee by setting and approving Risk Committee Charter. The Risk committee initiated its mission and meetings even before the official implementation of the corporate governance rules issued by the Capital Market Authority(CMA) acknowledging the significance of this committee. After re-election of the Board of Directors, the Committee was recomposed and three meetings were held during the year. The Committee functions were reorganized in the Third Quarter of 2016 (Official implementation of the corporate governance instructions issued by CMA). The Committee has approved an external independent consultancy firm for supporting Risk Management across the Company.

19 Kuwait Insurance Company S.A.K.P 17 The Committee assists the Board of Directors in performing its responsibilities for risk management by monitoring and assessment of the risk framework, risk appetite and risk strategy in light of the Company s overall strategy. Risk Committee s roles and achievements during 2016 were as follows: 1. Review the organizational structure of the Risk Management Department; 2. Review the job description, roles and responsibilities of Risk Management Department; 3. Review the risk management policies; 4. Review the overall framework of risk assessment and management. 5. Recommend setting the risk management strategy, risk appetite and presenting the same to the Committee in the beginning of Members of the Risk Committee Name Prasanna Dattatray Hardikar Dr. Ali Hamad Al Bahar (Committee Chairman) Position Committee Chairman Academic Qualifications and practical experience Election/ Appointment of the Secretary Bachelor of Commerce 30/3/2016 Member Philosophy Doctorate in Insurance 30/3/2016 Barrak Abdulmohsen AlSabeeh Member Bachelor of Industrial Engineering 12/4/2016 Summary of Risk Committee Meetings : First: Meetings of previous Board before Elections Member s Name Meeting No. 1 held on 15/2/2016 Jassim Mostafa Boodai Committee Chairman Sulieman Khaled AlGhunaim (Member) Talal Mohamed Reda Behbehani (Member) Ahmad Shamlan AlBahar (Board Secretary) Second: Risk Committee Meetings 2016 Board Member elected on 30/3/2016 Member Meeting No. 2 held on 4/5/2016 Meeting No. 3 held on 19/10/2016 a a a a No. of meetings 1. Prasanna Dattatray Hardikar (Chairman) 2 2. Dr. Ali Hamad Al Bahar (Member) 2 3. Barrak Abdulmohsen AlSabeeh (Member) 2 3. Nomination & Remuneration Committee The Board Nomination & Remuneration Committee was composed for a period of three years. The primary role of the members of the committee was to set criteria for the nomination of Board Members and to set up a mechanism for remuneration assessment.

20 18 Kuwait Insurance Company S.A.K.P The Committee is responsible for making recommendations about appointing the members of the Board of Directors and re-election at the General Meeting, in addition to annual self-assessment of the performance of the Board members. The Committee is also responsible for reviewing the remuneration of the Board members and executive management in accordance with the Company s long-term objectives. Committee s roles and achievements during 2016 were as follows: 1. Setting an induction program for members of the Board of Directors and Executive Management Reviewing the criteria for selecting the Board members and the Executive Management and recommending approval. 3. Reviewing the process of the Board and Executive Management member s assessment and recommending approval. 4. Developing job descriptions for the board members. 5. Conducting interviews for the candidates to the positions of senior management and recommending appointment of qualified candidates. 6. Conducting self assessment for the board of directors. 7. Reviewing the overall framework of remuneration packages to the members of the Board. Summary of Nomination & Remuneration Committee Meetings before the elections of the Board of Directors: First: Meetings of previous Board before Elections Member s Name Meeting No. 1 held on 15/2/2016 Manaf Mohamed Al Hamad Ali Morad Yusuf Behebani a a Fouad Abdul Rehaman Al Bahar Ahmad Shamalan AlBahar (Board Secretary) a Second: Nomination & Remuneration Committee Meetings 2016 Board Member elected on 30/3/2016 Member s Name Meeting No. 2 held on 3/7/2016 Ali Morad Yusuf Behebhani Manaf Mohamed Al Hamad Abdul Ghani Mohamed Saleh Behebhani Barrak Abdulmohsen AlSabeeh (Member) a a a a A statement on applying the requirements that enable members of the Board of Directors to get information and data accurately and in a timely manner: - Board of Directors cares to ensures provision of all required information and data accurately and in a timely manner. Therefore the Company has approved reports matrix that defines the responsibilities of preparation, review, approval and regularity. This process allows the board members to obtain information and data accurately and on timely manner.

21 Kuwait Insurance Company S.A.K.P 19 Rule III Recruit Highly Qualified Candidates for the Members of the Board of Directors and the Executive Management A brief summary about the requirements for the formation of the Nomination & Remuneration Committee. In compliance with CMA instructions, the Company has formed the Nomination & Remuneration Committee to recommend the appointment of the members of the Board of Directors and their renomination in the General Meeting, as well as conducting the self - assessment of the performance of the Board members. The Committee is also responsible for assessing the remuneration package of the Board members and Executive Management in accordance with the Company s long-term objectives. The Charter of the Nomination & Remuneration Committee describes all the conditions and requirements of the formation of the Committee in accordance with corporate governance rules as set out in the Executive Bylaws of the Capital Markets Authority in respect of the membership conditions, term and all other requirements. Report on the remunerations granted to members of the Board of Directors and Executive Management. First: bonuses and incentive system for the members of the Board of Directors and Executive Management KIC applies a firm framework for calculation of bonuses and incentives to members of the Board of Directors and Executive Management. Incentives scheme framework applies the principle of equal opportunities and transparency. It links rewards and incentives to performance assessment levels across the company as well as individual s performance. The Company is keen to adopt leading practices in linking rewards to corporate performance levels over long term by connecting performance to achieving the company s strategic goals and the levels of risk exposure. Second: Details of the Members of the Board and Executive Management s remuneration packages such as cash, benefits and privileges and analysis of remuneration categories. A. Remunerations to members of the Board of Directors No remunerations were paid to the Board of Directors as the Company s results did not allow such payment. B. Remunerations to Committees of the Board of Directors Fixed remuneration category (KD) Variable remuneration category (KD) Total annual remuneration and benefits (KD) Zero KD 98,000 KD 98,000

22 20 Kuwait Insurance Company S.A.K.P C. Remunerations to the Vice Chairman of the Board of Directors of KD 14,500 in consideration of overall supervision and following up executive roles in the Company. D. Remunerations to the executive management, including the CEO and CEO s Assistants: Fixed remuneration category (KD) Variable remuneration category (KD) Total annual remuneration and benefits (KD) KD 261,030 KD 49,025 KD 310,055 Third: Remunerations given to CEO and executive management members who obtained the highest amount from the company including the Chief Financial Officer CFO Fixed remuneration category (KD) Variable remuneration category (KD) Total annual remuneration and benefits (KD) KD 285,030 KD 55,025 KD 340,055 Fourth: Any other remuneration given directly or indirectly by the company or its Subsidiary Companies. (Not Applicable) Fifth: Any substantial deviations from remuneration policy approved by Board of Directors. (There were no substantial deviations) Rule IV Safegaurding the Integrity of Financial Reporting Written undertakings by the Board of Directors and Executive Management about soundness and integrity of financial reporting To ensure the integrity of financial reporting, the Executive Management has provided a written undertaking to the Board of Directors that the financial reports were presented properly and fairly and that it reviewed all financial aspects of the Company in accordance with the International Accounting Standards approved by CMA. In addition to the above, the annual report presented to the shareholders by the Board of Directors includes an undertaking about the soundness and integrity of all financial statements and reports. This aims at strengthening or promoting the principle of accountability, whether management accountability before the Board of Directors, or Board of Directors accountability before shareholders. A statement on Implementing Audit Committee Formation Requirements Kuwait Insurance Company in its endeavor to comply with the CMA regulations has formed a Board Audit Committee. The Committee is responsible for assisting the Board of Directors in performing its obligations with regard to overseeing the quality and integrity of the accounting practices, auditing and internal controls, risk management framework, financial reports, general framework of corporate governance and the Company s relationship with external auditors.

23 Kuwait Insurance Company S.A.K.P 21 It should be taken into account that the roles and responsibilities of the Committee and all conditions relating to its formation have been defined in the Audit Committee charter approved by the Board of Directors. In case of conflict between the recommendations of the Audit Committee and the decisions of the Board of Directors, a statement illustrating and explaining the recommendations and the reason(s) for Board of Directors decision for non- compliance should be included. In compliance with the highest standards of transparency, the Company has developed a process that ensures, in case of, conflict between the recommendations of the Audit Committee and the decisions of the Board of Directors in respect of the external auditors and the internal auditors, the Board of Directors in such conflict case shall include in its corporate governance report, a statement detailing clearly these recommendations and the reason(s) for the Board of Directors decision for non- compliance. It should be noted that there was no conflict between the recommendations of the Audit Committee and the decisions of the Board of Directors in Ensuring the independence and impartiality of the external auditor. The Board of Directors is keen to avoid potential conflict of interests. The Board Audit Committee ensures the independence and impartiality of the external auditor by setting standards and principles to assess its independence so that the Committee can recommend the Board of Directors on the appointment, re-appointment or replacement of the auditor. Rule V Setting Sound Systems for Risk Management & Internal Control A brief summary about implementing the requirements for the formation of an independent department / office / unit for Risk Management The Company firmly believes in the importance of having independent department for Risk Management. Therefore, The board of directors approved the appointment of Chief Risk Officer CRO. The CRO shall measure, monitor and mitigate all types of risks encountered by the Company. The Board of Directors also approved the engagement of an independent and specialist consultancy firm to provide technical support to the Chief Risk Officer. Risk Management Department has full independence by directly reporting to the Board of Directors. This is clearly illustrated by the organizational structure approved by the Board of Directors, that the Company will have an independent unit/department of Risk. The Risk Management Department RMD is not assigned with any tasks related to the operating activities of the Company to enable RMD carry out its duties and responsibilities perfectly. Brief Summary about Implementing the requirements for the formation of Risk Committee. The Board has formed a Board Risk Committee to meet all CMA requirements. The Board, inter alia, takes into account that the Board Chairman is not a member of the Committee. The roles

24 22 Kuwait Insurance Company S.A.K.P and responsibilities, membership term and Committee s functioning have been defined in the Risk Committee Charter approved by the Board. The Committee aims at improving the Board effective supervision by entrusting the Committee with the tasks related to all aspects of risk management, including, assisting the Board of Directors to identify and evaluate the Company s acceptable risk level, and ensure that the Company does not exceed this level. Summary illustrating internal control systems The Board of Directors strives to ensure adequacy and effectiveness of the internal control systems necessary to protect the Company s business, ensure compliance with such systems and use internal controls as means that provide necessary protection for the Company against any internal or external risks. The Company is keen to have internal control over all its activities. The Company has set up independent control departments, including internal audit, compliance and risk management, all of which are reporting to the Board of Directors. A Brief Summary about implementing the requirements of the establishment of an independent department/ office/ unit for Internal Audit In order to comply with the rules defined by the CMA, the Company has established a fully independent Internal Audit Department reporting to the Audit Committee and the Board of Directors. The Board has defined the roles and responsibilities of the Internal Audit Department. The Internal Audit Department is committed to implementing the plans and deals with an independent consultancy firm for providing internal audit services for supporting the Company. Rule VI Promoting Code of Conduct and Ethical Standards Summary on Business Charter including Standards and Parameters for the Code of Conduct and Ethics The key principles of the Business Charter are integrity, excellence, accountability and respect. The Company approved the business charter which was developed keeping in mind the best practices and professional conduct in this field. It is the duty of the shareholders and stakeholders to abide by the laws and rules mentioned in the business charter and to act in good faith for the best interests of the company. It also provides the opportunity to the members of the Board of Directors, Executive Management and staff to achieve the Company s objectives. The Company has prepared a set of policies and procedures that ensure the assets and resources of the Company are not misused for pursuing personal interests. Following is a brief summary of these principles: Related Parties Transactions Related Parties Transactions Policy describes guidelines on how to conduct and manage transactions with related parties, whether such transactions between the company and members of the Board of Directors or the Executive Management and employees.

25 Kuwait Insurance Company S.A.K.P 23 Information Confidentiality & Security Board of Directors, Executive Management and staff are committed to maintaining the confidentiality of information and data related to the Company. Policies and procedures have been set to avoid leakage of any insider information that will harm the interests of dealers with the Company. Whistleblowing Policy The whistleblowing policy provides all employees with a work environment marked with cooperation and transparency. The Company allows its staff to convey their concerns in respect of any irregularities or misconduct or ill practices to the Board of Directors. This process is undertaken within a framework that ensures maintaining the confidentiality and protection of the whistleblower and in conducting the necessary investigation and supervision of those issues. A summary of the policies and process for limiting conflict of interest The Company tries to eliminate any potential conflicts of interest. Therefore, a policy for conflict of interest has been prepared. The policy sets guidelines for identifying, notifying, reporting, disclosing and preventing conflicts of potential interest or applying strict constraints for potential conflict of interest. The Company has developed appropriate procedures to detect significant conflicts of interest and to manage them effectively. It also ensures that the Board of Directors handle the current and potential conflicts of interest and take decisions in the best interests of the Company. Rule VII Timely and High Quality Disclosure and Transparency A summary on applying processes for transparent and accurate disclosure that determine disclosure areas, fields and characteristics The Company implements the disclosure and transparency policies and procedures and has full disclosure matrix that covers all information that should be disclosed to the Capital Markets Authority and other stakeholders in the Company. The Company s website provides a clear and easy access to all dealers with the company, shareholders and the public for obtaining full and accurate information as well as disclosed information. Disclosure categories cover the following: Disclosure of material information; Disclosure of key shareholders 5% and over; Disclosure of interests; Disclosure of insiders list and updates to the list; Other releases Summary about applying disclosures register requirements for members of the Board and executive management The Company keeps a register for disclosures for the members of the Board and Executive Management. The register is kept in the custody of the Board Secretary who periodically updates the register.

26 24 Kuwait Insurance Company S.A.K.P A brief statement about applying the requirements for establishing Investors Affairs Unit For its commitment to provide all information to current and potential investors, the Company has established a unit for organizing Investors Affairs. It is an independent unit reporting directly to the CEO. The Investors Affairs Unit is responsible for identifying key information to be provided to current shareholders of the Company and potential investors, dealing with shareholders and investors, and providing information on the company s activities and financial position at the right time. Summary about development of the information technology infrastructure and its high reliability in the disclosures process The Company has created an exclusive section for Corporate Governance in its website, which is used as a platform to communicate with a large number of shareholders, stakeholders and investors. The updated information is available on the website which will help the current and potential shareholders and investors to have access to their rights and evaluate the Company s performance. The Company makes continuous efforts to update the disclosure process regularly. Rule VIII Respecting the Rights of Shareholders A Summary on applying the requirements of identifying and protecting general shareholders rights to ensure fair and equal treatment for all shareholders Protecting shareholders rights is a key requirement stipulated by Corporate Governance rules and the Companies Law. The Company has made commitment to provide the highest level of transparency and equality standards in all current or potential transactions with shareholders. The Company has prepared a policy that ensures identification and protection of shareholders rights which is in accordance with the Company s Articles of Association, policies, internal regulations, procedures and necessary controls. A sound governance system is in place to ensure that all shareholders have access to their rights in equal and fair manner without prejudice to laws, regulations, decisions and instructions. The Company also seeks to treat all shareholders; owners of the same type of equities on equal basis and without any discrimination. A Summary on creating a special register kept at the clearing agency as part of the requirements for ongoing follow-up of shareholders information The Company performs ongoing follow up on all matters related to shareholders information. Therefore, it has created and maintained a special register which is kept at the clearing agency. The shareholders name, nationality, domicile and number of shares owned by each of them are recorded in the register. The register is updated to include any changes according to the information received by the Company or the clearing agency. Any concerned party is entitled to ask the Company or the clearing agency to provide him with information from that register.

27 Kuwait Insurance Company S.A.K.P 25 Summary on encouraging shareholders to participate and vote at the Company s General Assembly Meetings The Company is keen on facilitating and clarifying the role of shareholders in the General Assembly meetings. It has set up a process for voting and participating in the general assembly meetings, making it clear that shareholders are entitled to vote on the decisions at the meetings. This is an integral right of all the shareholders regardless of their different classes and levels as stipulated in the Company s articles of association, memorandum of association and in the policy of protecting shareholders rights. The Company organizes public meetings for shareholders to enable them to participate effectively in the general assembly meetings and discuss items on the agenda. The Company is also keen to give access to shareholders to all the information in the Disclosures Register of the Board Members and the Executive Management. Rule IX Recognizing the Role of the Stakeholders Brief Summary on the systems and policies that ensure protection and recognition of stakeholders rights For its commitment to recognize and protect the rights of stakeholders, the Company has developed Stakeholders Protection Policy. This policy has been designed to ensure respect and protection of the stakeholders rights in accordance with the laws and regulations issued by the relevant regulatory authorities. The objective of Stakeholder Rights Policy is to ensure respect and protection of the rights of the stakeholders in accordance with the relevant laws and regulations. The Company has also protected the rights of all stakeholders and provided job stability and growth sustainability through good financial performance. Parties defined as stakeholders have been stated in the policy. The Company sets guidelines for how to protect stakeholders rights. Summary about encouraging stakeholders to participate in the follow-up of the Company s various activities Within its efforts towards protection of the stakeholders rights, The Board has identified the Company s stakeholders as follows: Ø Shareholders: Shareholders Rights Protection Policy has been developed as stipulated in law and regulations and as part of the Company s corporate governance framework. In addition, effective communication with shareholders has been established to know their views on various matters about the Company. Ø Regulators: The Company is committed to the laws, Executive Bylaws and instructions issued by CMA, Ministry of Commerce & Industry and any other relevant regulators. The Company is always keen on maintaining a good relationship with all the regulatory bodies. The Company cooperates with CMA and other relevant regulatory bodies during inspections and in providing information and data, books, records and tools and statistics upon request by the regulator s representatives or by any regulating authorities like the CMA and relevant regulatory entities.

28 26 Kuwait Insurance Company S.A.K.P Ø Customers: The Company provides best services and products to its customers, regularly follows up on customers suggestions and complaints and enhances better communication with them through modern means of communication. This provides the customer an opportunity to access support from the company on time and quite easily. The Company applies the principle of participation and transparency with customers through obtaining their views and suggestions before launching any new product or project into the market. The Company monitors and analyses these views and prepares a report thereon to the concerned decision makers to take appropriate action in favor of our customers. Ø Employees: Employing of national manpower and developing skills of the Company s staff are top priority. The Company focuses on providing professional development opportunities and necessary training programs and makes effort to recruit and train best national calibers. Rule X Encourage and Enhance Performance A summary on applying the requirements for developing mechanisms that allow the Board Members and Executive Management to attend Training Programs and Courses Regularly Kuwait Insurance Company works on developing the skills of the members of the Board of Directors and Executive Management by developing mechanisms for training areas for them. The Board has approved induction programs for new members to ensure that they have clear understanding of the Company s business and operations. Key areas of training to the board members are as follows: Anti - Money Laundering and Combating the Financing of Terrorism; Corporate Governance Risk Management Summary about the process of performance assessment of the Board of Directors collectively and the performance of each member of the Board and the Executive Management. The Company has established systems and mechanisms to assess the performance of each member of the Board and the Executive Management on a regular basis through developing a set of performance measurement indicators linked to the extent of achieving the Company s strategy and the adequacy of the internal control systems. During the year, self assessments were undertaken for all the members of the Board of Directors, committees and the Board itself. The selfassessment results include a plan for developing the board activities and identifying development and training areas required for the members in Summary of the Board s efforts for corporate Value Creation for employees in the Company through achieving strategic Objectives and improving performance rates. The Board of Directors strives for creating corporate values across the Company in the short, medium and long term. Therefore, it approved Business Conduct Charter which confirms that there are in place means for applying such practices and compliance with the highest professional standards and corporate values. The Board has also sought link to commitment to the corporate values with the performance assessment rates of the Company s employees to ensure achieving the Company s strategic goals.

29 Kuwait Insurance Company S.A.K.P 27 Rule XI Focusing on the Importance of Corporate Social Responsibility A summary on developing a policy that ensures balance between the Company s goals and society goals For its responsibility towards both the society and staff, Kuwait Insurance Company has set and approved a policy to ensure achieving the Company s goals as well as society goals. The Company is committed to streamline its values and business strategy with the social and economic needs while offering needed support to the society to achieve business interests and social benefits in the long-term and ensure Company s business continuity in a manner that mitigates harmful impact on society and the environment. The Company has developed strong foundations of effective framework for corporate social responsibility, including responsibilities towards society, environmental responsibilities, and responsibilities towards various segments of the society, stakeholders participation and staff development. The company is also working on increasing the awareness of social responsibility among employees by increasing knowledge and awareness of the significance of corporate social responsibility programs. The Company has undertaken activities to develop knowledge related to corporate social responsibility among the staff which will in turn increase the profitability and enhance the reputation of the company. Summary about the programs and mechanisms helping to highlight the Company s exerted efforts in the field of social work During the year, the Company conducted a project for developing and supporting national labor as part of its social responsibility. This was embodied by holding several workshops and training courses to national fresh graduates in various technical issues with the aim of training and increasing the efficiency of those with caliber. Below are key subjects covered by the training and development programs: Corporate Governance Risk Management Technical workshops on managing insurance operations During the year, the company was keen on coordinating with several universities in the State of Kuwait to attract national calibers with excellent academic qualifications to avail job opportunities under the training and development programs extended to national calibers.

30 28 Kuwait Insurance Company S.A.K.P Statement of Financial Position 2016

31 Kuwait Insurance Company S.A.K.P 29 Statement of Financial Position 31 December 2016 (All amounts are in Kuwaiti Dinars) Note ASSETS Property and equipment 3 1,363,077 1,509,118 Investment property 29,780 29,780 Loans secured by life insurance policies 260, ,078 Investments available for sale 4 62,062,079 63,393,170 Due from insurance and reinsurance companies 4,825,848 5,178,261 Reinsurance companies share of reserve for outstanding claims 30,365,962 29,555,834 Trade and other receivables 5 7,909,585 7,418,056 Fixed deposits with banks 6 42,342,492 40,281,259 Cash and cash equivalents 7 4,531,309 3,031,201 Total assets 153,690, ,686,757 EQUITY AND LIABILITIES Equity Share capital 8 19,404,000 19,404,000 Statutory reserve 8 9,702,000 9,702,000 Voluntary reserve 8 17,500,000 17,500,000 Treasury shares 9 (3,007,575) (3,007,575) Change in fair value reserve 10,974,504 5,233,164 Retained earnings 4,381,856 8,672,535 Total equity 58,954,785 57,504,124 Liabilities Technical reserves 10 76,522,322 75,366,577 Insurance and other payables 11 10,219,640 10,702,841 Due to insurance and reinsurance companies 7,993,685 7,113,215 Total liabilities 94,735,647 93,182,633 Total equity and liabilities 153,690, ,686,757 The accompanying notes form an integral part of these financial statements Ali Morad Behbehani Talal Mohammed Reda Behbehani Sami Sharif Chairman Vice-Chairman Chief Executive Officer