Dear Shareholders,

The business year 2006 was difficult yet "AL MASHREK" has proved its worth in generating technical profits even in the most unusual of circumstances.

The political unrest prevailing in Lebanon since 2005 has introduced macro economic strains. While the economy was set to record 4% economic growth, the July 2006 war events came to shatter all hopes and inflict severe direct physical losses and more significantly loss of economic opportunities. It was also disappointing that the war aftermath did not result in an internal political consolidation leaving the arena open to fundamental political disputes. The international community seemed generous in promising economic aid particularly during the Paris III conference yet there was no tangible effect felt during 2006.

"AL MASHREK" did not sustain any significant loss as a direct consequence of the July 2006 war events. The company had not suffered any casualty to its human capital or its assets. The underwriting policy was restrictive in allowing war and political risks cover thereby not exposing the company's technical result to unusual losses.

On the other hand, "AL MASHREK" was subjected to indirect economic loss particular to the insurance sector. While its turnover and premium collections were affected as a natural result of the war situation and shrinking economic activity, it still had to serve its usual commitments of settling reported insurance claims promptly as well as standing and operational charges including fiscal duties as if in normal circumstances. This had its effects on solvency and "AL MASHREK" has successfully dealt with the situation without jeopardizing any of its customer or suppliers relations.

Implementation of insurance regulatory requirements legally disputed by ACAL and requiring unreasonable increase of technical provisions was not a positive contributor to the company's net income for the year 2006. Yet, this aspect has further strengthened the company's balance sheet which now contains a wider financial cushion exceeding USD 7.5 million.

At the end of a difficult year, the good news is that "AL MASHREK" recorded 9% growth in its productivity. The company's financial statements at the 2006 year end will show you that growth was coupled with "AL MASHREK"'s tradition of maintaining technical profits driven underwriting over the widest product mix available in our market which resulted in acquiring a high quality portfolio. The adverse effects of the poor political and economic situations in 2006 were translated in an unusual increase in financial charges. The overall outcome was a remarkable 6% return on equity.

"AL MASHREK" acknowledges the relentless efforts of its staff and management in sustaining the crisis witnessed in the year 2006 and maintained the company's proven record since 1962 of being able to generate wealth irrespective of circumstances. This could not have been achieved without the active support of our most valuable partners: our Reinsurers, our Brokers & Agents and our Clients to whom we remain grateful.

We envisage a bright future for "AL MASHREK". I have high hopes and commitments for the years 2007 and 2008. I plan to further consolidate our position within the Lebanese insurance market and promote sufficient resources for profitable expansion locally and into other jurisdictions. Taken from our long tradition and ambitions for a lucrative future, I give you our corporate Vision which will guide our future path.

Ladies and Gentlemen, I am convinced that "AL MASHREK" is set for a prosperous future.

Sincerely,
Abraham Matossian
Chairman of the Board of Directors