MILLIRE ENG2024

Board of Directors Report Esteemed Shareholders, We hereby present to our esteemed shareholders the Balance Sheet, Income Statement, Profit Distribution Statement, Statement of Changes in Equity, and Cash Flow Statement, which reflect the results achieved in 2024, our Company’s 96 th year of operation, and have been prepared in accordance with the applicable legislative provisions and the principles and regulations prescribed by the Republic of Türkiye Ministry of Treasury and Finance, for your review and approval. Despite regional disparities, 2024 marked a period of ongoing global economic recovery, with the tight monetary policies implemented since 2022 beginning to yield positive results in the fight against inflation. With inflation rates showing a downward trend, particularly in developed economies, it was noted that the ECB and the Fed started shifting toward interest rate cuts in the second half of the year. The enduring repercussions of the war between Russia and Ukraine, currently in its third year, alongside the heightened tensions in the Middle East and the potential for expansion, continue to pose geopolitical risks that disrupt the global economic outlook. On the other hand, protectionist policies increasingly supported by political leaderships, particularly in the United States, raise concerns for global trade and growth in the upcoming period. In the January 2025 update of the IMF’s World Economic Outlook Report, the global economy, which is estimated to have grown by 3.2% in 2024, is projected to grow by 3.3% in both 2025 and 2026, remaining below the 2000–2019 average of 3.7%. The IMF also projected a growth rate of 1.7% for advanced economies and 4.2% for emerging markets in 2024, with similar growth levels expected for both groups in 2025 and 2026. In 2024, the Turkish economy continued to be shaped by high inflation and the effects of the consequent tight monetary policy stance, which remained a key focus of the economic policy agenda. The economic policies enacted, coupled with the effects of declining demand, have led to a continuation of the slowdown that commenced in the second quarter of 2024 within the Turkish economy, extending into the third quarter. While GDP grew by 3.2% in the first nine months of the year, the contribution from private sector consumption on the expenditures side declined, whereas the positive impact of net external demand continued throughout the year. With the lagged effects of tight monetary policy, CPI entered a downward trend in the second half of the year and ended the year at 44.4%. The CBRT has kept the policy rate, which it raised to 50% in March 2024, unchanged until December, while taking steps towards simplification within the macroprudential framework. As inflation entered a downward trend following the easing of demand-driven pressures, the CBRT lowered the policy rate to 47.5% in its final meeting of the year and stated that it would maintain a data-driven and cautious approach in its rate decisions. The improvement in macro balances, stability in exchange rates, the upgrades in the credit ratings, and the decline in the country risk premium have, on the one hand, supported foreign capital inflows and, on the other hand, strengthened domestic residents’ preference for the Turkish lira. In this context, CBRT reserves have also displayed an upward trend starting from April. The foreign trade deficit continued to decline due to restrictions imposed on gold imports and the normalization in global energy prices, while the narrowing in the current account deficit persisted with the support of strong tourism revenues. The current account deficit/GDP ratio, which stood at 3.5% in 2023, fell below 1% in 2024. In 2025, the effects of protectionist policies and trade restrictions, coupled with the persistent contraction in the EU market, emerge as the key factors creating uncertainty surrounding our country’s exports. On the other hand, the potential risks associated with escalating geopolitical risks, particularly in our nearby geography, are contributing to heightened uncertainty regarding commodity and energy prices as well as supply chains. In 2024, as the adverse impacts of the climate crisis persisted, the global economic losses attributed to catastrophic events worldwide experienced a 7% annual decline, settling at a total of USD 368 billion. Insured catastrophe losses, however, significantly exceeded the 21 st -century average of USD 94 billion, surpassing the USD 100 billion threshold for the fifth consecutive year and reaching USD 145 billion in 2024. Although the global protection gap showed a relative improvement in 2024, when losses were mainly driven by severe weather events such as tropical cyclones, intense convective storms, and floods, the insurance coverage remained insufficient, with the insurance industry covering only 40% of the total economic loss. Despite the increase in global natural catastrophe losses, the technical results of reinsurers continued to improve in 2024 due to the positive effects of the significant price increases that have dominated the markets in recent years, as well as upward revisions in the retentions of the cedants. With the impact of increased investment income, the total amount of traditional and alternative reinsurance capital rose from USD 670 billion at the end of 2023 to USD 715 billion as of September 2024. Based on the year-end 2024 data released by the Insurance Association of Türkiye, the premium production of the Turkish insurance industry reached TL 838.5 billion, marking a nominal increase of 72.5% and a real increase of 19.5% compared to the previous year. Non-Life branches accounted for 88.1% of the sector’s total premium in 2024, with TL 738.5 billion in premium production and a nominal growth rate of 72% compared to 2023. The Life branch recorded a nominal growth of 76.2%, reaching TL 99.9 billion and representing an 11.9% share of total premium production. As in 2023, premiums produced under participation insurance accounted for approximately 5% of the sector’s total premium income in 2024. 80 MİLLİ RE