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) In accordance with “Circular Related to Information on Calculation of Incurred But Not Reported Claims Reserve” and dated November 26, 2011, companies may decrease their outstanding claims reserve balances based on the winning ratio of the sub- branches calculated from the last five years claims. Winning ratio used for decrease in outstanding claims reserves could not exceed 25% (15% for the new sub-branches which do not have five year data). Based on the aforementioned regulation, the Company calculated winning ratio between 15%-25% from the last five year data set and TL 254.976.831 (December 31, 2017: TL 182.575.898) as IBNR and TL 40.568.170 (December 31, 2017: TL 30.415.385) as reinsurer’s share of IBNR is excluded from outstanding claims reserve balance. The calculated winning ratio of Anadolu Sigorta, the subsidiary of the Company as at 31 December 2017 is within 0%-100% range (December 31, 2017: 0%-100%). Winning ratios used in and amounts decreased from outstanding claims reserves are as follows: December 31, 2018 Branch Earnings Ratios Used Gross Amount Decreased Net Amount Decreased General Liability 25% 101.800.905 88.183.585 Land Vehicles Liability (MTPL) 11% 90.400.461 87.817.173 Fire and Natural Disasters 25% 34.151.960 17.293.818 Land Vehicles 25% 12.126.277 12.027.885 General Damages 25% 5.249.453 2.809.065 Marine 25% 5.321.412 2.115.594 Casualty 22% 3.468.583 2.178.506 Sea Vehicles 25% 1.734.746 1.260.001 Credit 25% 712.439 712.439 Legal Protection 25% 10.595 10.595 Total 254.976.831 214.408.661 December 31, 2017 Branch Earnings Ratios Used Gross Amount Decreased Net Amount Decreased General Liability 25% 74.714.664 65.998.305 Land Vehicles Liability (MTPL) 10% 62.120.743 61.236.662 Fire and Natural Disasters 25% 25.698.638 11.128.770 Land Vehicles 22% 8.048.030 7.958.337 General Damages 25% 4.214.820 1.646.063 Marine 25% 3.920.234 1.599.097 Casualty 21% 2.320.622 1.366.437 Sea Vehicles 25% 769.345 484.519 Credit 25% 726.931 726.931 Financial Losses 4% 38.485 12.006 Legal Protection 25% 3.386 3.386 Total 182.575.899 152.160.513 2.26 Mathematical reserves In accordance with the Communiqué on Technical Reserves, companies operating in life and non-life insurance branches are obliged to allocate adequate mathematical reserves based on actuarial basis to meet liabilities against policyholders and beneficiaries for long-term life, health and personal Casualty insurance contracts. Actuarial mathematical reserves, according to formulas and basis in approved technical basis of tariffs for over one year-length life insurance, are calculated by determining the difference between present value of liabilities that the Company meets in future and current value of premiums paid by policyholder in future (prospective method). Mathematical reserves are recorded based on the data sent by ceding companies. Millî Reasürans Annual Report 2018 196 / Consolidated Financial Statements and Independent Auditors’ Report