MILLIRE 2021 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 50 MİLLİ RE ANNUAL REPORT 2021 rate fluctuations and inflation, increases in the frequency of losses and the relative decline in treaty premiums in hard currency against Euro denominated treaty limits caused some deterioration in the treaty results, leading to a further decrease in the appetite of the global reinsurers for proportional agreements and the continuation of “customer- oriented” and differential approaches. Milli Re provides capacity to 23 companies that utilized proportional treaties following 2022 renewals, leading 18 bouquets and having a 27% market share. Majority of the companies operating in the industry continued to protect their risk portfolios by proportional treaties in 2022. Milli Re participates in the programs of six of the eight companies that utilize excess of loss agreements to cover their risk portfolios. Premium income ceded to proportional agreements in which Milli Re participates is expected to grow by 34% in 2022. While part of this increase emanates from new clients and business written from new treaties, it is also anticipated that economic developments, market dynamics and the possible effect of exchange rate and inflation movements will reflect on proportional treaty premiums especially in Fire and Engineering. The dominance of Property in the premium distribution of proportional reinsurance treaties increased slightly. The split of proportional treaty premium across the market is as follows: Property 59%, Engineering 21%, Marine 10.5% and Non-Motor Accident 9.5%. Coverage provided by catastrophe excess of loss programs for 2022 was determined to reflect the changes in each company’s exposures and model results, currency movements and anticipated growth in portfolios. Several programs were restructured and optimized in consideration of the deductible levels and vertical coverage against exchange rate movements, as well as cost. Significant depreciation of the Turkish lira in the last quarter against the predominant currency Euro in excess of loss programs, led to a sharp drop premium income in Euro terms, also causing major variations across the market in exchange rate forecasts used for exposure assessment, modeling, structuring and pricing. Total premium paid to reinsurers increased by about 10% nominally as a result of slightly higher catastrophe coverage purchased compared to the previous year. Wide discrepancy in selected exchange rates across the market complicated the determination of a reliable risk-adjusted movement. Nonetheless, barring variations among specific programs and layers, it can be suggested that the risk-adjusted rate increase was up to 5% on a general basis. Although the placement of excess of loss programs was more difficult than previous renewals, it was still faster and smoother compared to proportional treaties. Milli Re’s involvement in catastrophe excess of loss programs in 2022 renewals is 9%. The split of Milli Re’s domestic premium income differs significantly from that of market Non-Life premiums. Largest contributors to revenue in the Turkish insurance market are Agriculture and Health insurances, as well as Land Vehicles Compulsory Liability and Land Vehicles (Casco). Whilst the share of these lines in the Non-Life premium of the sector stands at 50%, they account only for 7% in Milli Re’s local portfolio, reflecting the conservative approach under the current conditions and the limited appetite of Milli Re. For this reason, the developments in Land Vehicles Compulsory Liability and Land Vehicles Insurances, which generate 27% and 16% of the market Non-Life premium respectively, and substantial premium and loss increases in Agriculture have limited impact on our local portfolio. On the other hand, market developments in Fire and Natural Catastrophe Perils, Engineering, General Liability and Marine where most companies utilize proportional reinsurance for protecting their risk portfolios, are evidently translated to Milli Re’s local portfolio. TURKISH REINSURANCE MARKET AND MİLLİ RE TL 248.2 million In 2021, our domestic portfolio generated TL 248.2 million technical profit.