MILLI REASURANS ANNUAL REPORT 2018

(Convenience translation of a report and unconsolidated financial statements originally issued in Turkish) INDEPENDENT AUDITOR’S REPORT To the General Assembly of Millî Reasürans Türk Anonim Şirketi A) Report on the Audit of the Unconsolidated Financial Statements 1) Opinion We have audited the unconsolidated financial statements of Millî Reasürans Türk Anonim Şirketi (the Company), which comprise the unconsolidated statement of financial position as at December 31, 2018, and the unconsolidated statement of income, unconsolidated statement of changes in equity and unconsolidated statement of cash flows for the year then ended, and notes to the unconsolidated financial statements, including a summary of significant accounting policies. In our opinion, the accompanying unconsolidated financial statements present fairly, in all material respects, the unconsolidated financial position of the Company as at December 31, 2018, and its unconsolidated financial performance and its unconsolidated cash flows for the year then ended in accordance with the prevailing accounting principles and standards as per the insurance legislation and Turkish Financial Reporting Standards decree for the matters not regulated by insurance legislation; “Insurance Accounting and Financial Reporting Legislation”. 2) Basis for Opinion We conducted our audit in accordance with Independent Auditing Standards (InAS) which are part of the Turkish Auditing Standards as issued by the Public Oversight Accounting and Auditing Standards Authority of Turkey (POA). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Unconsolidated Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics for Independent Auditors (Code of Ethics) as issued by the POA, and we have fulfilled our other ethical responsibilities in accordance with the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 3) Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the unconsolidated financial statements of the current period. These matters were addressed in the context of our audit of the unconsolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matter How our audit addressed the key audit matter Estimates and assumptions used in calculation of insurance contract liabilities As of December 31, 2018, the Company has insurance liabilities of TL 1.842.662.679 representing 49% of the Company’s total liabilities. The Company made net provision of TL 1.159.082.038 for the future outstanding claims for insurance contracts. In the calculation of Incurred But Not Reported (IBNR) claims provisions (net negative amount of TL 174.500.673) which is accounted under the outstanding claims reserves, the Company Management has used the actuarial assumptions and estimates detailed in note 2 and 17. Uncertainty of estimation and management judgment containing, IBNR calculations has been considered as a key audit matter. We have performed the audit procedures related the actuarial assumptions which disclosed in the Note 2 and 17 together with the actuary auditor who is part of our audit team. These procedures are primarily intended to assess whether the estimates and methods that used in the calculation of the outstanding claims reserve by the Company are appropriate. In this context, we have performed the audit procedures related to the recording the Company’s incurred outstanding claims; performed the analytical review the incurred case files which selected randomly; have performed the audit procedures related to the completeness of the data used in the correct calculation of insurance contract liabilities; assessed the convenience of the IBNR calculation method used by the Company for each line of businesses both the relevant claim characteristics and the Company’s claim history; performed the recalculation procedure on the amount of IBNR calculated by the Company; reviewed the claim analyzes made by the Company’s actuary and questioned these analyzes in terms of suitability and consistency of both legislation and Company past experience; assessed whether the explanation in the notes of the financial statements are sufficient. Millî Reasürans Annual Report 2018 Unconsolidated Financial Statements and Independent Auditors’ Report / 83