MILLI REASURANS ANNUAL REPORT 2018

Milli Re Annual Report 2018 Financial Status / 61 Eastern Europe Eastern Europe insurance market kept its balanced growth rate and was able to increase its premium income by 2% to EUR 18.7 billion in the first half of 2018. The largest contributions to the upswing trend were provided by Slovenia, the Czech Republic, Croatia, Latvia and Lithuania. Poland, the flagship of CEE market, and Romania were the two markets that had negative impact on the regional growth rate effectuated by depreciation of the local exchange rate against Euro. With the exception of Friederike cyclone that mainly hit France, Germany, Poland and Czech Republic, there were not any other major catastrophic events that affected CEE region and low insurance penetration rate in the region made the effect of the event on the catastrophe programmes relatively limited. While proportional programmes were renewed almost as expiry, due to the above mentioned reasons, rates of loss free catastrophe excess of loss treaties have decreased by 7.5%. In respect of risk excess of loss treaties, the rates of loss free programmes have been reduced by 6% and loss affected programmes faced rate increases between 2.5% and 7.5%. Russia The gross written premium production in the Russian market reached up to RUB 1,093 trillion (EUR 14.5 billion) in the first 10 months of 2018 registering a 13.65% growth compared to the same period of the previous year. Most significant contribution to this market growth came from life insurance with a year-on-year growth rate of 40.72% and its market share increased to almost 30%. Due to the regulatory changes made by The Central Bank of the Russian Federation in respect of capital adequacy, the number of the insurance companies in the country fell from 237 to 226 in the first half of 2018. Following to this development in the market, the share of the top 25 insurance companies increased to 84%. Due to the conflict between Russian Federation and Ukraine over Crimea Region, some Russian companies, banks and businesspeople were sanctioned by U.S.A. and many European countries. That also affected insurance market which resulted with the establishment of Russian National Reinsurance Company to reinsure sanctioned risks. RNRC having 10% compulsory cession has started accepting business from the market in 2017. The company strengthened its position in 2018 and started to seek opportunities outside Russia. Another very notable development is the merger of the Sogaz and VTB, two of the top three companies of the insurance sector in Russia. After the merger, it is forecasted that Sogaz’s market share might hit 20%. In 2018, there was no large catastrophe occurred and the risk losses were much more insignificant compared to 2017. Thus, loss affected programmes have seen only 6% rate increases while the rate decreases for the loss free programmes have reached to 15%. International Portfolio 2018 Results In order to diversify the portfolio in line with its profit-oriented and sustainable growth approach, Milli Re started to be more active in international reinsurance markets since 2006. International portfolio of the Company consists of business accepted from developing markets which incorporate General Acceptance business, Singapore Branch business, Pool (FAIR/ ECO/TRP) business, Turkish Republic of Northern Cyprus business and of business accepted from developed markets. A significant portion of the international portfolio is made up of General Acceptance business from countries that fall under the scope of FAIR Reinsurance Pool, which has been managed by Milli Re since its establishment in 1974. Additionally, having started its operations in 2008, Milli Re Singapore Branch continues to work efficiently in the Far East, a region which represents significant potential. In emerging markets, despite the factors such as excess reinsurance capacity, increasing competition environment, political instability and compulsory reinsurance cession to protect national markets, new accounts in line with our underwriting appetite were acquired in 2018 as the result of the strong relations built with our clients over the years as well as our high quality services. The business written from the emerging markets which currently represents 62% of the total international premium production attained a stable growth. 31% The share of international portfolio in Milli Re’s total premium reached to 31%.