MILLIRE 2021 ANNUAL REPORT

NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 Millî Reasürans Türk Anonim Şirketi (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1) However, with the “Circular No. 2021/30 Amending the Circular No. 2016/22 on Discounting the Net Cash Flows Arising from Outstanding Claims” published on 30 December 2021, the rate used as 9% in the discounting of net cash flows is 14% as of December 31, 2021. arranged as In addition, according to the 13th article of the Circular no 2016/22, “The differences between the periods due to the change in the discount rate will be considered as a change in the estimation method, and the financial statements should be prepared within this framework and the effect of this change on the financial statements should be explained in the footnotes of the financial statements.” With the effect of the said regulation, the discount amount calculated as of December 31 2021 has increased by TL 77.595.800. As of the reporting date, as a result of actuarial chain ladder method; the Company except Singapore branch recorded 100% of additional negative IBNR amounting to TL 322.137.338 (December 31,2020: TL 296.857.614 negative IBNR) as outstanding claims reserve. As of the reporting date, TL 75.178.484 (December 31, 2020: TL 32.287.960) of IBNR provision is recorded for Singapore branch. 2.26 Mathematical reserves In accordance with the Communiqué on Technical Reserves, companies operating in life and non-life insurance branches are obliged to allocate adequate mathematical reserves based on actuarial basis to meet liabilities against policyholders and beneficiaries for long-term life, health and personal Casualty insurance contracts. Actuarial mathematical reserves, according to formulas and basis in approved technical basis of tariffs for over one year-length life insurance, are calculated by determining the difference between present value of liabilities that the Company meets in future and current value of premiums paid by policyholder in future (prospective method). Mathematical reserves are recorded based on the data sent by ceding companies. 2.27 Unexpired risk reserves In accordance with the Communiqué on Technical Reserves, while providing unearned premiums reserve, in each accounting period, the companies should perform adequacy test covering the preceding 12 months due to the probability that future claims and compensations of the outstanding policies may be in excess of the unearned premiums reserve already provided. In performing this test, it is required to multiply the unearned premiums reserve, net with the expected claim/premium ratio. Expected claim/premium ratio is calculated by dividing incurred losses (outstanding claims reserve, net at the end of the period + claims paid, net -outstanding claims reserve, net at the beginning of the period) to earned premiums (written premiums, net + unearned premiums reserve, net at the beginning of the period -unearned premiums reserve, net at the end of the period). According to the “Communiqué on Amendments to Communiqué on Technical Reserves for Insurance, Reinsurance and Pension Companies and the Related Assets That Should Be Invested Against Those Technical Reserves” published in Official Gazette no 28356 dated July 17, 2012; besides the net unexpired risk reserve detailed in the above, gross unexpired risk reserve is also calculated. The test is performed on main branch basis and in case where the net and gross expected claim/premium ratio is higher than 95%, reserve calculated by multiplying the exceeding portion of the expected claim/premium ratio with the unearned premiums reserve of that main branch is added to the reserves of that branch. Difference between the gross and net amount is represents reinsurer’s share. Premiums paid for non-proportional reinsurance agreements are considered as premiums ceded to the reinsurance firms. With the Circular 2017/7 announced by Republic of Turkey Ministry of Treasury and Finance regarding “the discount of net cash flow from outstanding claim files”. Since the discount of “Land Vehicle Liability” and “General Liability” branches have become compulsory, according to the Article 1 of the circular, this is considered as a change of accounting policies and financial statements have been retrospectively restated. Companies are able to discount net cash flow from outstanding claim files according to the methods outlined by the circular. However, with the “Circular No. 2021/30 Amending the Circular No. 2016/22 on Discounting the Net Cash Flows Arising from Outstanding Claims” published on December 30 2021, the rate used as 9% in the discounting of net cash flows is 14% as of December 31 2021. arranged as In addition, according to the 13th article of the Circular no 2016/22, “The differences between the periods due to the change in the discount rate will be considered as a change in the estimation method, and the financial statements should be prepared within this framework and the effect of this change on the financial statements should be explained in the footnotes of the financial statements.” With the effect of the said regulation, the discount amount calculated as of 31 December 2021 has increased by TL 77.595.800, and with the effect of this situation, the provision for continuing risks calculated in the “General Liability” branch has decreased by TL 37.773.902. 118 MİLLÎ REASÜRANS ANNUAL REPORT 2021 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