Doha Insurance Issues Explanatory Disclosure in Regards of Gulf Guarantees’ Branch in Qatar

August 27, 2018

Doha Insurance Group disclosed the status of the Gulf Warranties Company branch in Qatar. The disclosure includes the nature of the relationship between Doha Insurance Group and the aforementioned branch, as follows:

First - The nature of the relationship with Gulf Warranties:

·         Gulf Warranties L.L.C is a UAE-based company headquartered in Dubai and is wholly owned by the Arab Insurance Group (ARIG). The latter is a Bahraini shareholding company listed on the Bahrain and UAE stock exchange, and carries out reinsurance and other insurance services. The Gulf Warranties Company has branches outside the UAE that are spread across the GCC countries in Kuwait, Oman, Bahrain, Qatar and Jordan.

·         Doha Insurance Group has obtained the approval of Qatar Central Bank to allow Gulf Warranties Company to operate in the Qatari market and provide insurance services against car breakdowns, roadside assistance and alternative car services under the umbrella of Doha Insurance Group. In exchange, Doha Insurance Group holds 2.5% of total annual insurance premiums, plus a commission of 5%.

·         All employees in the Qatar branch of Gulf Warranties Company are under the sponsorship of Doha Insurance Group and are hired in accordance with prior arrangements with Gulf Warranties Head Quarter in Dubai for the purpose of facilitating their stay and enabling them to perform their duties in the State of Qatar. Therefore, Gulf Warranties Company is responsible for these employees financially and administratively, including the payment of their monthly salaries or any other financial dues.

Second - Recent developments:

·         On 13/8/2018 we received an email from the Gulf Warranties HQ in Dubai stating that they had sent a team to the branch of Qatar to inspect the branch's work. After the initial audit the team claimed they have uncovered the existence of various administrative and financial irregularities in the form of the provision of insurance at prices contrary to the approved price tables, undeclared collection of insurance premiums, and other irregularities resulting in discrepancies of QR3.7 million.

·         The Head Quarter in Dubai reported that they are in the process of appointing an independent auditing agency (Deloitte) to perform a Forensic Audit to the branch's operations and accounts to identify financial and administrative irregularities and collect the amounts of premiums that have not been announced to the head office, to initiate a lawsuit if necessary against the Director of the Branch (currently suspended from work), or other employees, to recover these amounts.

·         On 16/08/2018 Arab Insurance Group (ARIG) announced its semi-annual financial results for the period ended on June 30, 2018. The statements showed a net loss of about USD 22 million dues to, as declared, a provision of USD 21 million to deal with potential losses arising from alleged fraud committed by Gulf Warranties officers.

It should be noted that this announcement was issued without specifying the branches of the company that were affected by the alleged fraud, whether Qatar branch is among them, and what is the share of each branch.

Third - Ramifications on Doha Insurance Group’s financial statements:

In light of the current developments of the Gulf Warranties branch in Qatar, we believe that there is no impact on the financial statements of Doha Insurance Group and therefore on the current or future share price based on the following:

1)      The annual premiums of the Gulf Warranties branch in Qatar for 2017 is QR6 million, while Doha Insurance Group annual premiums for 2017 exceed QR580 million.

2)      Doha Insurance Group holds 2.5% of the total premiums of the Gulf Warranties branch in Qatar and 97.5% of the total premiums are repaid to Arab Insurance Group (ARIG), the latter is the sole owner of the whole Gulf Warranties Company.

3)      The allegation of fraud or other financial or administrative violations is attributed to the employees of Gulf Warranties, as Arab Insurance Group (ARIG) and Gulf Warranties Company announced, thus reinforcing the reality of the joint liability of both companies and therefore their legal responsibility towards affected parties or the insured for any claims for compensation either present or future.

We would like to inform you that Doha Insurance Group is planning meetings with the Arab Insurance Group (ARIG), as well as the headquarters of Gulf Warranties Company and all its branches as soon as possible, to consider ways to resolve outstanding problems and explore the future of the relationship between the concerned parties, namely the possibility of Gulf Warranties Company to continue operating in the Qatari market or seize its activities partially or in full. We insist that all parties answer for their responsibilities for the transactions that took place, and to appoint a new director of the Qatar branch.

We will provide you with the results of the audit, which will be conducted by Deloitte's office, commissioned by the Gulf Warranties Company. The results of this report will determine the follow-up tracks, including reporting to the official and regulatory authorities about its developments, and filing a lawsuit by the Gulf Warranties Company against its employees if necessary.

Finally, Doha Insurance Group confirms that it has taken precautionary measures at present to ensure the smooth functioning of the Gulf Warranties Branch in Qatar, including the activation of direct supervision and control over its performance.