MILLI REASURANS ANNUAL REPORT 2018

Milli Re Annual Report 2018 Financial Status / 53 Cat Excess of Loss purchase for 2019 was determined on the basis of aggregates in Euro terms, cat model results in the context of generic development in exposures against depreciation of TL, as well as growth expectations for individual portfolios. Under these circumstances, a number of buyers reduced the vertical cover they were buying and/ or restructured their programmes in order to optimise reinsurance costs. Meanwhile, there was even increased tendency of multinational groups centralizing their reinsurance purchase by combining Turkey with other regions in order to reduce their costs. Total Cat Excess of Loss protection purchased by the Turkish market excluding TCIP and Milli Re was Euro 4.1 billion, reduced by 29% for 2019 in line with the 27% decline in earthquake exposures in Euro terms vis-à-vis 2018. In this context, Cat Excess of Loss programmes for the Turkish insurance market generally saw risk adjusted rate increases up to 10%. In 2019, Milli Re has around 8% involvement across the market. Composition of Milli Re’s local portfolio differs significantly from that of Turkish Non-Life market. Largest contributors to premium income in the Turkish market are Land Vehicles Liability and Land Vehicles (Motor Own Damage), as well as Agriculture and Health. While these lines generate 66% of the total Non-Life market premium, they account only for 9% in Milli Re’s local portfolio reflecting the conservative approach under the current market conditions, hence the limited appetite. Accordingly, implications of the recent developments in Land Vehicles Liability and Land Vehicles insurances which cover 31% and 16% of Non-Life premium production and substantial premium and loss increases in Agriculture remain limited in Milli Re’s local portfolio. On the other hand, due to the widespread utilisation of proportional treaties in lines such as Fire and Natural Disasters, Engineering and General Liability, cessions to reinsurance remain quite high. Given current market share in proportional treaties, any development in these lines is more readily reflected to Milli Re’s local portfolio. High level of outstanding losses in Fire and Natural Disasters, Engineering and General Liability and the increase in the amount of paid claims in Fire and Natural Disasters and Engineering in comparison with the previous year, led to deterioration in the loss ratio of related branches and Milli Re in these lines. On the other hand, with the real growth in Fire and Natural Disasters and Engineering premiums, which constitute more than 70% of the local premium income and the income transferred from non-technical operations, Milli Re’s local portfolio was able to complete 2018 with a technical profit of TL 126 million. Local Premium by Lines of Business Share (%) Fire 47 Engineering 26 Marine 6 General Liability 5 Agriculture 4 Land Vehicles Liability 3 Other * 3 Personal Accident 2 Life 2 Land Vehicles 1 Health 1 Total 100 * Credit, Legal Protection, Air Vehicles, Plate Glass, Air Vehicles Liability, Fidelity Guarantee Local Portfolio 2018 2017 2016 2015 2014 Premium (TL) 911,044,062 818,143,937 698,726,549 739,801,769 721,053,209 Share in Total Premium (%) 69.0 75.4 75.1 74.2 75.3