MILLIRE 2021 ANNUAL REPORT

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 Millî Reasürans Türk Anonim Şirketi (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1) (Currency: Turkish Lira (TL)) Republic of Turkey Ministry of Treasury and Finance has given permission the Company in order to calculate IBNR reserve for General Losses within two subbranches with the letter dated January 28, 2013 and numbered 24179134. As of December 31, 2021, and 2020, the Company recognised the amount that arose due to change in calculation method for IBNR on General Losses branch. With the Circular 2017/7 announced by the 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. As of 31 December 2021, the amounts found as a result of the relevant method change are reflected in the records. 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 31 December 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. As of 31 December 2021, Anadolu Sigorta calculated the net discount amount against outstanding claims as 2.264,265.104 TL (31 December 2020: 1.189.385.664 TL). If the discount rate was continued to be used as 9% without making the relevant change, it has been calculated that the net discount amount in the outstanding claims provision as of 31 December 2021 would have been TL 1.634.815.301. Added to the 13th article of the circular, “The positive difference that arises within the scope of changing the discount rate in this direction cannot be used for a year following the year in which the change was made.” Due to the statement, the positive difference of 629.449.804 TL in the discount amount as of 31 December 2021 cannot be used in profit distribution. As of the reporting date, as a result of actuarial chain ladder method; Milli Reasürans except Singapore branch recorded 100% of additional negative IBNR amounting to 322.137.338 (31 December 2020: TL 296.857.614 negative IBNR). As of the reporting date, TL 75.178.484 (31 December 2020: TL 32.287.960) of IBNR provision is recorded for Singapore branch. In accordance with “Circular Related to Information on Calculation of Incurred But Not Reported Claims Reserve” and dated November 26, 2011, companies may decrease their outstanding claims reserve balances based on the winning ratio of the sub-branches calculated from the last five years claims. Winning ratio used for decreasing in outstanding claims reserves could not exceed 25% (15% for the new sub-branches which do not have five year data). The company did not make any discounts regarding the claim files as of 31 December 2021 (31 December 2020: None). 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). 203 MİLLÎ REASÜRANS ANNUAL REPORT 2021 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