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) For the years ended December 31, 2018 and 2017, salvage and subrogation collected are as follows: December 31, 2018 December 31, 2017 Land Vehicles 423.241.868 375.105.975 Land Vehicless Liability 17.588.788 13.422.397 Fire and Natural Disasters 5.764.609 4.521.486 Marine 1.825.561 1.485.087 Sea Vehicles 1.708.765 1.004.392 General Damages 539.786 307.007 General Liability 522.635 812.773 Credit 43.431 - Casualty 29.510 28.880 Legal Protection - 475 Financial Losses - 144.816 Total 451.264.953 396.833.288 As of December 31, 2018 and 2017, accrued subrogation and salvage income per branches is as follows: December 31, 2018 December 31, 2017 Land Vehicles 37.986.441 37.076.373 Land Vehicles Liability 14.347.839 5.926.818 Fire and Natural Disasters 4.819.028 1.321.152 General Damages 1.052.905 1.657.069 Marine 1.546.994 2.991.999 Casualty 232.209 1.544.801 Sea Vehicles 34.817 122.868 General Liability - 12.184 Total 60.020.233 50.653.264 Commission income and expenses As further disclosed in Note 2.24 - Reserve for unearned premiums , commissions paid to the insurance and reinsurance companies as a reinsurance company and the commissions received from the reinsurance companies are recognized over the life of the contract by deferring commission income and expenses within the calculation of reserve for unearned premiums for the policies produced before January 1, 2008 and recognizing deferred commission income and deferred commission expense in the financial statements for the policies produced after January 1, 2008. Interest income and expenses Interest income and expense are recognized using the effective interest method. The effective interest rate is the rate that exactly discounts the estimated future cash payments and receipts through the expected life of the financial asset or liability (or, where appropriate, a shorter period) to the carrying amount of the financial asset or liability. The effective interest rate is established on initial recognition of the financial asset and liability and is not revised subsequently. The calculation of the effective interest rate includes all fees and points paid or received transaction costs, and discounts or premiums that are an integral part of the effective interest rate. Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or liability except for the financial assets at fair value through profit or loss. Trading income/expense Trading income/expense includes gains and losses arising from disposals of financial assets held for trading purpose and available-for- sale financial assets. Trading income and trading expenses are recognized as “Income from disposal of financial assets” and “Loss from disposal of financial assets” in the accompanying consolidated financial statements. Millî Reasürans Annual Report 2018 Consolidated Financial Statements and Independent Auditors’ Report / 191