MILLI REASURANS ANNUAL REPORT 2018

Millî Reasürans Türk Anonim Şirketi NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2018 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1) Branches December 31, 2017 Gross total claims liability (*) Reinsurance share of total claims liability Net total claims liability Fire and natural disasters 251.570.409 (14.778.916) 236.791.493 General Damages 161.603.161 (866.648) 160.736.513 Land vehicles liability (MTPL) 68.157.854 (95.695) 68.062.159 General liabilities 27.973.013 (2.071.703) 25.901.310 Sea Vehicles 27.563.445 (2.556.755) 25.006.690 Casualty 19.910.650 (14.060) 19.896.590 Marine 21.112.608 (1.730.232) 19.382.376 Land vehicles 16.847.694 (205.655) 16.642.039 Life 15.010.302 (585.759) 14.424.543 Health 4.788.316 - 4.788.316 Financial losses 582.126 - 582.126 Fidelity Guarantees 399.558 - 399.558 Air Vehicless 344.783 - 344.783 Credit 154.741 - 154.741 Legal protection 176 - 176 Sea Vehicles Liability (12.340) - (12.340) Total 616.006.496 (22.905.423) 593.101.073 (*) Total claims liability includes outstanding claims reserve (paid). Effects of the changes in assumptions used in the measurement of insurance assets and liabilities showing the effect of each change separately that has significant effect on financial statements In the current year, there are no material changes in the assumptions of measurement of insurance assets and liabilities. 4.2 Management of financial risk Introduction and overview This note presents information about the Company’s exposure to each of the below risks, the Company’s objectives, policies and processes for measuring and managing risk, and the Company’s management of capital. The Company has exposure to the following risks from its use of financial instruments: -- credit risk -- liquidity risk -- market risk The Company is subject to credit risk, market risk (foreign currency risk, interest rate risk and price risk in relation with financial investments) and liquidity risk due to assets and liabilities. The Company’s exposure to each of the above risks is assessed according to “Application Principles in Respect of Risk Limits”. The Company monitors its receivables by obtaining comprehensive information about the debtors and debtors’ activities. The risk over investment portfolio is managed by measuring and reporting the market risk daily, reassessing the results validity and applying different scenario analyses. The Company’s exposure to each of the above risks is measured by Internal Control and Risk Management Service independently, reported to Board of Directors and units of İş Bankası through the Risk Committee. Credit risk Credit risk is the risk of financial loss to the Company if counterparties (parties issued financial instrument, insurance companies, reinsurance companies and other debtors) having business relationship with the Company fails to meet its contractual obligations. The Company manages this credit risk by regularly assessing reliability of the counterparties. Millî Reasürans Annual Report 2018 Unconsolidated Financial Statements and Independent Auditors’ Report / 125