MILLI RE 2020 ANNUAL REPORT

Financial Status Risks and Assessment of the Governing Body Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Consolidated Financial Statements Together with Independent Auditors’ Report Thereon 47 Milli Re Annual Report 2020 In the final days of the year, the UK and the European Union reached an agreement for the post‑Brexit trade deal, eliminating the associated vagueness surrounding the Euro Zone and global economies by early 2021. On another note, a relative betterment was observed in the confidence indices from December onwards with the assumption that the EU countries would reach vaccination at an earlier time than the rest of the world. The Chinese economy recaptured the pre‑pandemic growth levels in the last quarter of 2020. The world’s second largest economy, China did a better job of managing the pandemic than other economies, and sent out a positive message for 2021 by registering a growth rate at pre‑pandemic levels in the last quarter of 2020. Succeeding in quickly getting rid of the pandemic’s impacts amid an environment of sustained trade conflicts with the US, China will presumably record the highest growth of the past decade in 2021. It will possibly take some time to ease the tension in the China‑US relationships assuming that the newly established Biden administration after the US presidential elections will not make a change of policy soon. The world trade volume shrank in 2020. The world trade volume shrank by 7.2% year‑over‑year in real terms in the January‑September period of 2020. Lead indicators suggest that the recovery in the third quarter pursued a vulnerable course in the last quarter. 50.1 at the end of 2019, the manufacturing industry purchasing managers index (PMI) came to its lowest at 39.8 in April, subsequently recovering and reaching 53.7 in November 2020. The course of the pandemic negatively affected energy and commodity prices. Having averaged USD 64.3 in 2019, Brent crude oil price per barrel decreased from early 2020, carrying on with its decline until mid‑April, when it went below USD 16. Having recovered with a wavering pattern in the period that followed, crude oil price went over USD 50 as economic activity gathered speed on a global scale. The expansionary monetary policy implementations of the central banks of developed countries, coupled with the effect of the search for a safe harbor, drove the gold price per ounce above USD 2,000 in August. Gold prices decreased to some extent as the worries regarding the pandemic were alleviated with the positive news about vaccination and medication efforts in the following period. Falling commodity prices and the vulnerabilities in growth outlook put downward pressure on inflation. Having exceeded 2% in the US at 2019 year‑end, inflation plummeted in the initial stage of the pandemic, before registering 1.2% in November. In the same timeframe, annual inflation went down from 1.3% to ‑0.3% in the Euro Zone. In 2021, central banks of developed countries will likely continue to support economic activity. Global economy will possibly recover quickly in 2021 with the base effect created by 2020, but the pre‑pandemic levels will most likely remain elusive until 2022. The course of the said recovery will be presumably impacted by the extent of the widespread reach and success of vaccination once vaccine production reaches an adequate level for the whole world. In all likelihood, central banks of developed countries will continue to keep supporting economic activity in 2021; although that would provide a positive setting for emerging economies with respect to financing sources, country‑specific risks will seemingly be telling upon the direction of capital flows. The Turkish economy embarked upon a recovery process with the help of the fiscal supports provided. Although the Turkish economy contracted sharply in the second quarter of the year in connection with the negative effects of the pandemic, it entered into a strong recovery process in the third quarter of the year. With the help of the measures implemented by the Central Bank of the Republic of Turkey (CBRT), the Banking Regulation and Supervision Agency (BRSA), Turkish Treasury and the government for controlling and preventing the pandemic, Turkey gradually eliminated the effects of the coronavirus pandemic that started by early 2020, and carried on with its economic activities. Gross Domestic Product (GDP) expanded by 4.5% year‑over‑year in the first quarter of 2020, before suffering the most drastic contraction since the inception of the data with 10.3% in the second quarter of the year. With the 5.9% year‑over‑year increase in the fourth quarter, annual GDP growth came to 1.8% as compared to the previous year. After outperforming the projections in 2020, the Turkish economy’s growth might lose pace in the first quarter of 2021 with the effect of tightened financial conditions and increased restrictions.