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 74 Milli Re Annual Report 2020 Report by the Board of Directors Distinguished Shareholders, We respectfully present the balance sheet, income statement, profit distribution statement, statement of changes in equity, and the cash flow statement showing the results achieved in 2020, marking the Company’s 92 nd year of operation, for the assessment and approval of the Esteemed Assembly. These documents are prepared in line with the provisions of applicable legislation and the principles and guidelines set out by the Republic of Turkey Ministry of Treasury and Finance. After the deceleration in 2019, as a result of the precautions taken in order to control the Covid‑19 pandemic, the world economy has come to a standstill in 2020 and the global growth outlook deteriorated remarkably. The monetary and fiscal policy measures taken by the countries helped recuperating the initial shock, the decreasing number of cases as well as the normalization steps taken towards summer promoted the recovery in economic activities while the vaccine development studies had been another factor promoting positive expectations. Yet, the total number of cases going up once again in the last quarter of the year pointed out to the risks which could put pressure on medium‑term outlook until the pandemic is completely under control. With the impact of the crisis observed in the second half of 2020 and in 2021 as a result of the pandemic, the substantial increase in developing countries’ need for external financing as well as these countries with high debt ratio going through a crisis and facing greater burden during the mentioned period, stood out as other factors which could negatively impact the global economic risk outlook. In 2020, in addition to the uncertainties regarding the protective trade policies, geopolitical developments had an influence on the global economic activity as well. U.S. Presidential Elections which took place in the second half of the year and the developments related to the trade deal which will govern the post‑Brexit economic relationships between EU and England were the main items on global political agenda. Although international organizations forecasted world economy to grow by 3% in 2020, with the impact of the pandemic, they revised their estimates to around 3.5% contraction. For 2021, with the contribution of base effect, they projected global economy to grow by 5.5%. Even though Turkey’s economy made a strong start to 2020, in line with the global trends considering the impacts of the pandemic, it lost momentum and current account balance deteriorated as a result of the contraction in the tourism sector. Contracting sharply in the second quarter, with the help of monetary and economic measures taken, the economy showed a quick recovery in the third quarter and the annual growth rate has been registered as 6.7% for the mentioned period. The CBRT which took a supportive position in the first half of 2020 as a response to the economic weakening, gradually stepped back considering the rising risks with respect to the inflation outlook and started to implement tight monetary policy. The total cost of the natural catastrophes to the global economy was around USD 210 billion in 2020. As a result of the global insured losses which went up to USD 82 billion by increasing 57% on an annual basis, 2020 has been the fifth costliest year on record for the industry. While great portion of the natural disasters affected many developing countries in Asia, where the insurance penetration remains very low and were caused by secondary perils such as hail, flood and wildfire which are not as widely insured as hurricane, only 40% of the global losses were insured. In 2020, which witnessed the most active Atlantic hurricane season ever in history with record breaking number of events, majority of the global industry losses amounting to USD 67 billion, emanated from the natural disasters which occurred in U.S. On the other hand, severe weather conditions prevailed during the first half of the year in Europe and Winter storm Sabine, which affected Germany, Austria, Switzerland, France, United Kingdom and Ireland stood out as one of the costliest events for the insurance industry. Asia has been impacted by devastating natural disasters in 2020 as well; Cyclone Amphan which stroke India and Bangladesh destroyed more than 3 million houses and caused heavy damages to infrastructure and agricultural fields. However, due to the low insurance penetration, the insured losses remained to be very limited. In China, massive flood incidences have been recorded as a result of the monsoon rains and also the Meiyu front which brought along torrential seasonal rainfalls. Considering its social and economic disruptions, the Covid‑19 pandemic, which is described to be the biggest challenge humanity faced since Second World War, has undoubtedly been the hottest topic in 2020 for the insurance and reinsurance industry as well. Even though total insured losses amounted to only USD 29.5 billion by the end of 2020; due to the reasons such as the ongoing lawsuits regarding business interruption claims as well as the unforeseeable duration of the pandemic, it’s expected that the pandemic related losses will take a while to fully develop and the total insured loss amount would exceed USD 100 billion. Total reinsurance capital, including alternative capital, which declined in the first quarter of the year, showed a recovery in the following period and reached 2019 year‑end figure of USD 625 billion by the end of third quarter 2020. In addition to the large losses recorded in recent years, the pressure on alternative capital investors due to the uncertainty caused by the Covid‑19 pandemic as well as the issues such as climate change, catastrophe model credibility and deterioration of the losses stood out as important factors affecting the appetite of investors.