Doha Insurance Group has disclosed the relation with the Gulf Warranties Company – Qatar, as following: -
I. Nature of the Business Relationship:
- Gulf Warranties, LLC is a UAE-based company headquartered in Dubai, wholly owned by Arab Insurance Group (ARIG). ARIG is a Bahraini public shareholding company listed on the Bahrain and UAE stock exchanges that provides reinsurance and other insurance services. Gulf Warranties operates branches outside of the UAE spread across the GCC, which include Kuwait, Oman, Bahrain, and Qatar, in addition to Jordan.
- Doha Insurance Group obtained approval from the Qatar Central Bank, allowing Gulf Warranties to operate in the Qatari market under the umbrella of Doha Insurance Group, and to subsequently provide insurance services covering car breakdowns, roadside assistance, and replacement vehicles. Doha Insurance Group retains 2.5% of the total annual insurance premiums and is paid a 5% commission for all new business.
- All employees at the Qatar branch of Gulf Warranties are sponsored by Doha Insurance Group and are contracted in accordance with prior arrangements made with Gulf Warranties Home Office in Dubai. This is done to facilitate residency in Qatar, and to enable Qatar branch employees to perform their duties in the State of Qatar. Responsible for them financially and administratively, including the payment of their monthly salaries or any other financial dues, Gulf Warranties is ultimately responsible for their staff in Qatar. Accordingly, Gulf Warranties Home Office directs the disbursement of monthly salaries to its employees in Qatar, in addition to any other financial dues.
II. Recent developments:
- On 13/8/2018 Doha Insurance Group received an email from the Gulf Warranties Home Office in Dubai stating that it had dispatched a team to the Qatar branch to inspect the branch's business operations in Qatar. After the initial audit, Gulf Warranties Home Office discovered various administrative and financial irregularities at their Qatar branch. The irregularities discovered included insurance policies issued at prices contrary to pricing tables approved by Gulf Warranties, premiums collected but not reported to their Home Office in Dubai, and other violations that amount to approximately 3.7 million QAR in discrepancies.
- Gulf Warranties Home Office in Dubai advised us that they are in the process of appointing Deloitte as an independent auditor to perform a Forensic Audit on the Gulf Warranties Qatar branch's operations and accounts, to identify the financial and administrative irregularities, and to isolate premiums that have not been reported to Gulf Warranties home office. They also disclosed that they may take legal action against the former Director of the branch (currently suspended) and other associated staff if necessary to recover the amounts to be identified.
- On 16/08/2018 Arab Insurance Group (ARIG) announced in its semi-annual financial results ending June 30, 2018, that it had incurred a net loss of approximately 22 million US Dollars, mostly to be allocated toward 21 million US Dollars in provisions taken to address potential losses that may arise from the alleged fraud committed by Gulf Warranties staff.
We would like to note that the disclosure made by Gulf Warranties does not specify which branches of the company were affected by the alleged fraud, nor does it indicate whether the Qatar branch is among those affected, or what is the exposure to each branch.
III. Impact on Doha Insurance Group's Financial Statements: In light of the current information and developments at 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:
- The annual premiums earned by the Gulf Warranties branch in Qatar in 2017 was close to 6 million QAR, while the annual premiums earned BY Doha Insurance Group in 2017 exceeded 580 million QAR.
- Doha Insurance Group only retains 2.5% of the total premiums earned by the Gulf Warranties branch in Qatar. 97.5% of the total premiums are ceded to Arab Insurance Group (ARIG), and Gulf Warranties is a wholly owned subsidiary of ARIG.
- The allegations of fraud or other financial and administrative violations is attributed to Gulf Warranties and Arab Insurance Group (ARIG) as per their disclosures in relation their staff. De facto recognition and acceptance of joint responsibility between Gulf Warranties and its parent company ARIG is evident and reinforced by their recent disclosure. This necessitates legal coordination with the two companies to address any claims or requests for compensation by those affected, either in the present or in the future.
We would like to disclose that a meeting between Doha Insurance Group, Arab Insurance Group (ARIG), Gulf Warranties Home Office, and all regional branches of Gulf Warranties will be held as soon as possible to consider ways to resolve outstanding matters and potential problems. We intend to explore the future of the relationship between concerned parties, and to address Gulf Warranties’ business continuity in Qatar, mainly whether they intend to continue or to stop their operations in part or in full. We intend to address the responsibilities of each party for the questionable transactions that took place, and we will insist that Gulf Warranties and ARIG appoint a new director to head the Qatar branch.
We will provide you with the results of the audit and any findings once they are made available to us, which will be conducted by Deloitte and commissioned by the Gulf Warranties. The results of this audit will determine any future course of action, including reporting to official and regulatory authorities on future developments.
Finally, we would like to inform you that Doha Insurance Group has taken necessary precautionary measures at present to ensure the smooth functioning of the Gulf Warranties Branch in Qatar, including the active supervision and direct control over its business operations.
