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Chairman's Report

Dear Shareholders,

On  behalf  of   the  Board  of  Directors, I   would   like   to   present   the  Financial  Statements,
Auditors Report and Corporate Governance Report for the year 2008.

Economic Environment

2008  was  another  year  of  exceptional  economic  growth  for  Oman  facilitated  by  higher oil
prices  and  prudent  economic  and  monetary  policies  of  the  government.  Nominal  GDP  is
estimated  to  have  grown  40%  on  the  back  of  record oil realization at US$95 per barrel and
a strong 26.7% growth in non-oil sector. The surplus for 2008 has been estimated at RO 3.5 bn against budgeted deficit of RO 400 mn. The trickle down impact on the economy is already being witnessed and in turn increasing business opportunities for your company. Oman continues to be lauded by various international agencies for its corporate governance, economic and monetary policies. International agencies like S&P and Moody’s have reaffirmed Oman’s ratings signifying a stable outlook of the economy.

Insurance Market

Oman Insurance business volume grew during 2008 however the market continues to be extremely competitive with increasing number of new entrants. A number of regulatory changes were introduced during 2008, key among them are Unified Motor Policy and Minor Road Traffic Accident procedure.

Company Performance

The company achieved a record top line of RO 25.31 million as against RO 17.80 million during the previous year. However the overall results were impacted by two key factors:

a) Substantial Investment losses due to downturn in Global Economy (though the company’s investment outperformed the MSM Index) and

b) Increase in motor claims due to introduction of Minor Road Traffic Accident procedure.

Considering the results the board has decided not to recommend any dividend for the year 2008. The strategy of expanding into Retail segment during 2008 resulted in a wider geographic reach catering to a larger segment of population in major Wilayats all across Oman. The company achieved an Omanisation percentage of about 70% which is far in excess of prescribed statutory limit.

Strategy

The strategy for the Company for the year is the ability to continue its operations in the coming period and to ‘Grow profitably’ and continue offering quality service to the customers.

Acknowledgement

On behalf of the Board of Directors, I wish to express our sincere gratitude to His Majesty Sultan Qaboos Bin Said for his wise and visionary leadership that has been the key to our economic progress and for presence of a conducive business environment.

We wish to thank the Capital Market Authority, Government bodies and Ministry Departments for their guidance and support.

We also thank all our customers, business partners and Reinsurers for their support and confidence in our company.

We wish to convey our appreciation to the Management and Staff of Al Ahlia for their contributions.

KHALID HILAL AL MAAWALI
CHAIRMAN