MILLI REASURANS ANNUAL REPORT 2018

Millî Reasürans Türk Anonim Şirketi NOTES TO THE CONSOLIDATED 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) The Company accounted for employee severance indemnities using actuarial method in compliance with the TAS 19 - Employee Benefits . The major actuarial assumptions used in the calculation of the total liability as of December 31, 2018 and 2017 are as follows: December 31, 2018 December 31, 2017 Discount rate 4,22% 4,21-4,25% Expected rate of salary/limit increase 11,30% 6,00-7,00% Estimated employee turnover rate 2,00-3,29% 2,00-3,27% The above expected rate of salary/limit increase is determined according to the annual inflation expectations of the government. Other benefits The Group has provided for undiscounted short-term employee benefits earned during the year as per services rendered in compliance with TAS 19 in the accompanying financial statements. 2.20 Provisions A provision is made for an existing obligation resulting from past events if it is probable that the commitment will be settled and a reliable estimate can be made of the amount of the obligation. Provisions are calculated based on the best estimates of management on the expenses to incur as of the reporting date and, if material, such expenses are discounted to their present values. If the amount is not reliably estimated and there is no probability of cash outflow from the Group to settle the liability, the related liability is considered as “contingent” and disclosed in the notes to the financial statements. A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. Contingent assets are not recognized in financial statements since this may result in the recognition of income that may never be realized. Contingent assets are assessed continually to ensure that developments are appropriately reflected in the financial statements. If it has become virtually certain that an inflow of economic benefits will arise, the asset and the related income are recognized in the financial statements of the period in which the change occurs. If an inflow of economic benefits has become probable, the Group discloses the contingent asset. 2.21 Revenue recognition Written premiums Written premiums represent premiums taken from insurance and reinsurance companies as a reinsurance company. Premiums ceded to retrocession companies are accounted as “written premiums, ceded” in the profit or loss statement. Written premiums are recorded upon the receipt of quarterly statements of accounts from ceding companies in treaties whereas facultative accounts are registered upon the receipt of monthly payrolls. Claims paid Claims paid represent payments of the Group as a reinsurance company when risks taken from insurance and reinsurance companies are realized. Claims are recognized as expense upon the receipt of notifications. Notifications have not specific periods and depend on the initiative of the insurance and reinsurance companies. Claims are recognized as expense as they are paid. Outstanding claims reserve is provided for both reported unpaid claims at period- end and incurred but not reported claims. Reinsurer’s shares of claims paid and outstanding claims reserve are off-set against these reserves. Subrogation, salvage and quasi income According to the Circular 2010/13 dated September 20, 2010; the Company may account for income accrual for subrogation receivables without any voucher after the completion of the claim payments made to the insurer. If the amount cannot be collected from the counterparty insurance company, the Company provides provision for uncollected amounts due for six months. If the counter party is not an insurance Company, the provision is provided after four months. As at the reporting date, in accordance with the related circular the Company provided TL 53.427.320 (December 31, 2017: TL 47.325.075) subrogation receivables and recorded TL 60.020.233 (December 31, 2017: TL 50.653.264) (Note 12) net subrogation and salvage receivables under receivables from main operations. The Company provided allowance for uncollected subrogation receivables amounting to TL 16.172.744 (December 31, 2017: TL 8.337.019) (Note 12) in accordance with circular. Millî Reasürans Annual Report 2018 190 / Consolidated Financial Statements and Independent Auditors’ Report