Kipco has a business model founded on a conservative financial approach that seeks to manage its debt effectively, allied to a disciplined investment strategy. The company insists its core operations maintain strict liquidity and has introduced cost savings across the group.

As the financial climate worsened in the final quarter of 2008, it moved to ensure that its core portfolio companies’ good operating results would be used to protect future income streams.

The company is Moody’s highest-rated private corporate business in the Mena region and also boasts BBB+ scores from ratings agency Standard & Poor’s.

Its $2bn Euro Medium Term Note (EMTN) programme, on which Moody’s assigned Baa1/Prime-2 ratings in September 2008, forms an essential component of its effort to manage its liabilities. Kipco’s debt-to-market value leverage was 19 per cent in the first half of 2009, comfortably within Moody’s 25 per cent ceiling for the rating.

But the company is still sensitive to the economic downturn. In September, Moody’s changed its ratings outlook to negative from stable, reflecting a deterioration in the credit quality of some of its core subsidiaries, notably Burgan Bank, whose rating has been downgraded to A2 from A1 in response to the weakening credit and market conditions in Kuwait over the past 12 months.

Moody’s says Kipco’s creditworthiness is strengthened by a supportive long-term strategic shareholder, Al-Futtooh Holding Company, an investment vehicle associated with the two sons of Kuwait’s ruler Emir Sheikh Sabah al-Ahmad al-Jabbar al-Sabah. This entity controls 50.2 per cent of the company’s equity.

Kipco is confident of meeting its target of doubling its profits for 2009 from KD24.1m in 2008, a difficult year in which Gulf Insurance Company profits decreased by 90 per cent to KD4m.

But the bank reported strong half-year figures for 2009, with revenues of KD78.4m, operating profit of KD57.3m and a net profit of KD12.5m. This half-year result puts it on track to post end-of-year profits at the same level or higher than in 2008. Operating profit was KD125m at the end of last year.

Kipco’s Mena business focus is astute, given the regional economic and demographic dynamic of cash-rich, young consumers. As markets from Morocco to Iraq dismantle investment barriers, experienced and liquid Gulf firms like Kipco are poised to capitalise on the growth potential of markets such as insurance and retail banking, which are still largely untapped.