MILLI RE 2020 ANNUAL REPORT

Activities and Major Developments Related to Activities General Information Financial Rights Provided to the Members of the Governing Body and Senior Executives Research & Development Activities 46 Milli Re Annual Report 2020 2020 has been a year during which the Covid‑19 pandemic domineered the economic and social life all around the world. As a result of the events that ensued the worldwide spread of the coronavirus that emerged in China’s Wuhan city in December 2019, the World Health Organization (WHO) declared it a pandemic on 11 March 2020. 2020 has been the scene to the combat against the destructive effects of the pandemic, along with the volatilities that impacted the global financial markets starting from the preceding year. International trade, tourism, and capital flows particularly to emerging countries painted a negative picture for the most part of the year. As the first shock was overcome in the aftermath of the monetary and fiscal policy measures implemented, the declined case numbers and normalization steps taken towards the summer supported the recovery of economic activity. The relative recovery of the global economy in the third quarter continued at a decelerating pace in the last quarter of 2020 as a consequence of the restrictions imposed in connection with the aggravated Covid‑19 pandemic. Avoidance of total lockdowns by countries as opposed to what they had done in the initial stage of the pandemic and the positive performance of China that serves as the engine of external trade kept the deceleration in growth at a limited rate as compared to the second quarter. Vaccine development efforts have been another factor that turned the expectations for the positive. However, the case numbers that picked up once again towards the last quarter of the year indicated at the high risks that put pressure on the medium‑term outlook until the pandemic is taken under control completely. Apart from the pandemic, as the recent vulnerabilities in international trade and investment relations persisted, the US presidential elections and the post‑Brexit trade deal negotiations took up an important place on the global political agenda. The US Federal Reserve System (the Fed) sustained its support to the economy at an increasing rate. The US Federal Reserve System (the Fed) implemented its first rate cut without waiting for its ordinary monetary policy meeting since 2008. Decreasing the policy rate by 150 bps in total, the Fed brought it down to the 0‑0.25% interval from the 1.50‑1.75% range in March. Having announced unlimited amount of bond purchases, the Fed also collaborated with the other central banks to increase global USD liquidity through the swap line and repo transactions. The US economy suffered a 5% contraction in the first quarter of 2020, followed by a record‑high shrinkage of 31.7% in the second quarter. Floating at its lowest levels of the past 50 years before the pandemic, the unemployment rate shot up to its historic‑high at 14.7% in April. Economic activity recuperated in June with the help of the normalization steps, and the US economy achieved 33.1% growth in the third quarter. The European Central Bank (ECB) announced strong monetary incentives throughout 2020. The European Central Bank (ECB) did not make any changes in its monetary policy in 2020 and kept its policy rate and deposits rate fixed at 0% and ‑0.50%, respectively. Having announced strong monetary incentives throughout 2020, the ECB sustained its support by increasing its Pandemic Emergency Purchase Plan (PPEP) that envisages purchasing private sector and public debt securities by EUR 500 billion in the last month of the year. In addition to that, the ECB set up a repo facility for providing Euro liquidity to non‑euro area central banks against adequate collateral. ECB will presumably not make any changes in interest rates and carry on with its asset buying program in 2021. Although the Euro Zone economy displayed a rapid growth rate of 12.5% in the third quarter after shrinking by 3.7% and 11.7% in the first and second quarters of 2020, it continued to contract on an annual basis. The vulnerability that resulted in the Euro Zone economy from the pandemic became visible particularly in demand indicators. Pointing at deflation since August, the increase in the annual consumer prices index was realized as ‑0.3% also in November. Economic Outlook Although having suffered a drastic contraction in the second quarter of 2020 in connection with the negative effects caused by the pandemic, the Turkish economy embarked upon a strong recovery period in the third quarter of the year.