STATEMENT OF INCOME

Year ended 31 December 2005  

The attached notes form an integral part of these financial statements.

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STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

Year Ended 31 December 2005

* This item is net of reserve released on disposal of investments which is included under income from sale of investments.

The attached notes form an integral part of these financial statements.

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STATEMENT OF CASH FLOWS

Year Ended 31 December 2005

                                                                                                                                                   2005                                                       2004

                                                                                                                                                  QR                                                           QR   

OPERATING ACTIVITIES

The attached notes form an integral part of these financial statements.

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1          ACTIVITIES

Doha Insurance Company is a public shareholding company governed by the Amiri Decree No. 3 of 1999 promulgated on October 2, 1999 and is incorporated following the general assembly meeting held on July 4, 2000, the first day of operation for the Company.

The Company’s issued and fully paid capital is stated at QR. 127,240,000 divided into 12,724,000 shares of QR. 10 each.

The Company is engaged in the business of marine insurance, motors, fire, general and reinsurance.

2          ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS

In the current year, the Company has adopted all of new and revised Standards issued by the International Accounting Financial Reporting Standards Board (the IASB) that are relevant to its operations.  The adoption of these new and revised standards has only affected the presentation and disclosures of the company’s financial statements.

3          SIGNIFICANT ACCOUNTING POLICIES

a)    Basis of preparation:

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS).

b)    Accounting convention

The financial statements are prepared under the historical cost basis except for the measurement at fair value of available for sale investments. 

c)    Cash and cash equivalents

For the purpose of the cash flow statement, cash and cash equivalents consist of cash on hand, bank balances and short term deposits with banks maturing within 3 months.

             d)    Investments

                    Major investment categories include marketable equity securities, bonds and funds.

                    All investments are initially recognised at cost, being the fair value of the consideration given including acquisition charges associated with the investment.

                    The accounting policies for investments are as follows:

  (i)  Available for sale

                            After initial recognition, investments which are classified “available for sale” are remeasured at fair value.  The unrealised gains and losses on remeasurement to fair value are reported as a separate component of equity until the investment is sold, collected or otherwise disposed of, or the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is included in the statement of income for the year.

             (ii)  Held to maturity investment

                            Held to maturity investment are measured at amortized cost less provision for impairment in value.

                    (iii) Fair values

                            Fair values of investments quoted on recognised stock exchanges are determined by reference to their bid prices at the close of business at the balance sheet date.

e)    Insurance and other receivable balances

Insurance and other receivable balances are stated net of provision for doubtful debts. 

f)     Property and equipment and investment properties

Property and equipment and investment properties are stated at cost less accumulated depreciation.  Depreciation is provided on a straight line basis on all property and equipment and investment properties, other than freehold land which is determined to have an indefinite life.  The rates of depreciation are based upon the following estimated useful lives:

·         Investment properties                        -   20 years

·         Building                                                -   10 years

·         Furniture, fixtures and equipment     -   3 to 5 years

·         Motor vehicles                                    -   5 years

g)    Impairment

An assessment is made at each balance sheet date to determine whether there is objective evidence that an asset or group of assets may be impaired.  If such evidence exists, the estimated recoverable amount of that asset is determined and an impairment loss is recognized for the difference between the recoverable amount and the carrying amount.  Impairment losses are recognized in the statement of income.

h)    Liability adequacy test

       At each balance sheet date the Company assesses whether its recognized insurance liabilities are adequate using current estimates of future cash flows under its insurance contracts.  If that assessment shows that the carrying amount of its insurance liabilities is inadequate in the light of estimated future cash flows, the entire deficiency is immediately recognized in income.             

i)     Premium income

Premiums on insurance contracts are recognized as revenue (earned premiums) proportionally over the period of coverage.  The portion of premium received on in-force contracts that are related to unexpired risks at the balance sheet date is reported as the unearned premium liability.  Where the company carries no financial exposure to insurance risk, i.e. the full amount is re-insured, the premium received is netted off against the premium paid, and the net amount is reported as income.

j)     Reserve for unexpired risks

The reserve for unexpired risk represents the estimated portion of net premium income after deduction of the reinsurance share which relates to periods of insurance subsequent to the balance sheet date. The reserve is calculated at 40 percent of the net premium for all insurance classes except for marine insurance which is calculated at 25 percent.

k)   Commission earned and paid

Commissions earned and paid are recognised at the time policies are written.

l)     Provision for outstanding claims

Provision for outstanding claims is recognized at the date the claims are known and covers the liability for loss and loss adjustment expenses based on loss reports from independent loss adjusters and management best estimate.  The method for making such estimates and for establishing the resulting liability are continually reviewed.

m)   Interest income

Interest income is recognised on a time apportionment basis taking account of the principal invested and the interest rate applicable.

n)    Dividend income

Dividend income is recognised when received.

o)    Employee’s terminal benefits

Provision is made for amounts payable in respect of employee terminal benefits based on Qatar Labour Law and is calculated using the employee’s salary and period of service at the balance sheet date.

p)    Foreign currencies

Foreign currency transactions are recorded in Qatari Riyals at the rates of exchange prevailing at the date of each transaction.  Monetary assets and liabilities denominated in foreign currencies are translated to Qatari Riyals at the rate of exchange prevailing at the year end.  The resultant exchange differences are included in the statement of income.

q)    Comparative amounts

Certain of prior year amounts have been reclassified in order to conform with current year’s presentation.

4          CASH AND BANK BALANCES

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5          INVESTMENTS

The market value of held to maturity investments amounted to QR. 33,274,206 as of December 31, 2005 (2004: QR 34,761,719).  The Ras Laffan bills in US Dollar are held by the bank as security against term loans provided to the Company (Refer Note 10).

6          INSURANCE CONTRACT LIABILITIES AND RE-INSURANCE CONTRACT ASSETS                                    

7          INSURANCE AND OTHER RECEIVABLES                  

Accounts receivable comprise a large number of customers mainly within Qatar.  Three companies accounted for more 55% of receivable as of 31 December 2005 (Three companies accounted for more 60% as of 31 December 2004).

Accounts receivable are stated net of any required provision and are short term in nature, their fair value approximates carrying value.

8          INVESTMENT PROPERTIES                                            

At December 31, 2005, the fair value of investment properties as determined by an independent valuer was (QR. 66,507.010).

9          PROPERTY AND EQUIPMENT

                                                                                                                                   Wooden                Fixture and                                                      Motor                                                                    Office

                                                                     Land                  Buildings                 buildings                 furniture               Computers                 vehicles                                                            equipment                        Total 

                                                                      QR                        QR                              QR                          QR                            QR                              QR                                                                      QR                        QR