The mandate to conduct a feasibility study for the privatisation of regional carrier Gulf Air has been awarded to Gulf Investment Corporation (GIC), Gulf Investment Bank (GIB) and Chase Manhattan Bank. It is one of the first privatisation mandates awarded to banks in the GCC.

In a 16 May statement, the Kuwait-based GIC Group said the study was intended to define Gulf Air's objectives for privatisation and constraints on the programme. This will be followed by a legal review, valuation of Gulf Air's businesses, and a review of operational and financial structures. This is intended to arrive at an optimal capital structure and determine the percentage of equity to be offered to the public, GIC said.

An initial study will be completed by September, Chase vice-president and regional manager Mahmoud Difrawy says. Further work will then depend on shareholders' approval. Speaking in Al-Ain on 30 March, Gulf Air president Salim Bin Ali Assiyabi said a decision on privatisation would be taken at a meeting to be held in Bahrain in June (MEED 15:4:94, Bahrain). Gulf Air's privatisation was first proposed in 1991 but decisions have been regularly postponed since. Gulf Air is owned equally by the governments of Bahrain, Qatar, Oman and Abu Dhabi.

'The successful planning and implementation of the Gulf Air privatisation will go a long way in encouraging the GCC states to accelerate the privatisation programme currently under review in the region,' GIC vice-president Hisham Razzuqi said.

GIC has also worked on privatisation in Kuwait, where it was awarded a World Bank-financed advisory contract by the government. Chase is bringing expertise in aerospace financing, Difrawy says.

Improved reinsurance markets and enhanced investment income contributed to a 31 per cent rise in the profits of Arab Insurance Group (Arig) in 1993. The Bahrain-based regional insurance group announced a second successive profitable year at its annual meeting on 11 May.

Further growth is forecast for 1994 as Arig's reinsurance position strengthens. 'Both the parent company and the UK subsidiary have positioned themselves to take advantage of the opportunities made available by the withdrawal of many operators at regional and international levels,' the annual report by Arig's directors says.

Net profit rose to $6.7 million from $5.1 million in 1992. Gross premium income increased by 7 per cent to $228.4 million. Technical reserves amounted to $280.9 million at the end of 1993, up from $265.8 million in 1992 and equivalent to 1.81 times premiums earned in the year.

Increased profits were made despite problems in Arig's reinsurance business. General manager Nooruddin A Nooruddin said reinsurance was affected by the difficult conditions prevailing in 1991, especially in aviation and energy business.

Under Arig's accounting system, figures for 1993 include reinsurance results for the underwriting year to 31 December 1991, plus investment and other income and expenditure in the 1993 calendar year. The annual report and financial statements will be published in June.

'In 1991, premium rates were still under severe pressure and certain classes of business suffered numerous losses,' the directors' report says. These include typhoon Mireille in Japan, which Arig says caused considerable losses to the industry.

Arig is committing more resources to allow further growth and to reach what Nooruddin called 'a reasonable level of profitability for Arig in the medium term'. Business development 'will lead the company's planned regional expansion into life insurance and services for the Arab insurance industry', Nooruddin said.

By the end of 1994, the framework will be in place for Arig to implement its planned life insurance, direct insurance and insurance services markets (MEED 6:5:94).

Arig UK reported a large increase in premiums earned in 1993, its second full year of operation. The UK subsidiary's growth is on target, Arig says. The report says: 'It is expected that Arig UK will play a more pronounced role in the group's international reinsurance business in the future.'