MILLIRE_2019_Annual Report

Milli Re Annual Report 2019 74 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 2019, marking the Company’s 91 st 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. The effects of deceleration in the momentum of the global economic activity beginning after the second quarter of 2018, continued to prevail in 2019. The year was marked with shrinking trade and industrial production volumes as well as expansionary measures implemented by central banks. The increased volatility in the global trade coupled with the rise of economic uncertainty led to a downward pressure on the global growth expectations; IMF adjusted its 2019 economic growth forecast as 2.9%, whilst the global growth rate for 2018 was 3.8%. While the signing of the Stage One of long negotiated trade deal between USA and China with the purpose of putting an end to the escalation of tensions, was expected to ease the uncertainty over both the developed and developing economies; President Donald Trump’s Impeachment hearings, Fed’s suspension of lowering interest rates, and legislative debates concerning personal data and technology remain to be potentially high-impact political developments for 2019. While Brexit, the most concerning issue for Europe throughout 2019, seem to be settled on a path following the elections in the UK, the stagnation in the European Union which struggles to achieve growth has deepened due to global outlook and change in demographics. As a result, the growth rate for the EU between 2020-2024 is estimated to be 1.4%. While increased tensions due to the trade wars and geopolitical disputes combined with deterioration in investment, manufacturing and trust indicators negatively impacted global growth; central banks of developed economies and monetary authorities of developing countries enacted loose monetary policies to break the downward growth trend. It is estimated that the lowering of interest rates trend lead by Brazil, Russia, China, India, and Turkey, while at a decelerating pace, would continue. In line with the developments of global economy, Turkey’s economy also began to contract starting from the last quarter of 2018 and into the first half 2019; nevertheless, following a positive trend and recovering faster than expected in the second half of 2019. Taking into account favourable global liquidity conditions created by expansionary monetary policies implemented by central banks of developed countries, Central Bank of Republic of Turkey’s (CBRT) started to cut interest rates in the second half of the year and along with the weak domestic demand observed over the past year, inflation followed a downward trend due to the relatively stable course of TL as well as the high base effect and the moderate pattern in commodity prices. In 2019, our country had an intense agenda in terms of politics and the geographical region it is located. When considered within the context of insurance and reinsurance, in 2019 global economy had been negatively affected by disasters with an amount of USD 150 billion of economic loss. While this loss amount was below the level of USD 160 billion recorded in the previous year; insured catastrophe losses decreased by 35% year-on-year to USD 52 billion from USD 80 billion. In addition to the fact that catastrophes affect many developing countries where the insurance penetrations are low; the amount related to the insured losses were well below the USD 65 billion average amount of the last decade, since a significant part of the damage was caused by floods which are not as widely covered as hurricanes. In 2019, Asia has been the most affected region by catastrophes. For the insurance industry, Hagibis and Faxai were the two costliest natural disasters which severely affected Japan by causing a total insured loss in the amount of USD 17 billion. After the beginning of the Pacific hurricane season of 2019; another major natural disaster occurring in the region was the Lekima Typhoon, which affected many regions of China. During the relatively mild Atlantic hurricane season, North America was affected by Hurricane Dorian. Since September, catastrophic bushfires have been taking place in Australia due to record temperature levels and intense drought; predominantly in Queensland, Victoria, Tasmania, South Australia, Western Australia and New South Wales regions the bushfires spread all over the country and 10.3 million hectares of land was burned to ashes. In Europe, caused by the severe weather conditions in the first half of the year, Hurricane Eberhard, which mostly affected Western and Central Europe on 10 to 11 March, was one of the costliest market losses recorded during the first half of 2019. REPORT BY THE BOARD OF DIRECTORS