Digital everywhere, Anadolu Sigorta for everyone
2017
Annual Report
Anadolu Sigorta 2017 Annual Report 1 General Information
Contents
General Information 1 The Company’s Transactions with the Risk Group 37 Corporate Profile, Our Vision, Our Mission, Our Financial Status 40 Corporate Values 4 Summary Report by the Board of Directors 40 Milestones from the History of Anadolu Sigorta 6 Financial Information and Indicators 42 Message from the Chairman 10 2017 Economic Overview 46 Message from the CEO 14 Overview of the World and Turkish Insurance The Organization, Capital and Shareholder Industries and Future Outlook 49 Structure of the Company 18 Developments and Changes in Legislation 52 Organization Chart 18 An Assessment of Anadolu Sigorta in 2017 56 Capital and Shareholder Structure 19 Assessment of the Company Capital and Disclosures on Preferred Shares 19 Comments 75 Governing Body, Executives and the Number of Profit Distribution Policy 76 Employees 20 Risks and an Assessment by the Board of Directors 20 Governing Body 77 Declarations of Independence by Independent Members of the Board of Directors 23 Risk Management Policies Adhered to by Types of Risks 77 Executive Committee 24 Activities of the Committee of Early Heads of Units Under the Internal Systems 26 Determination of Risk 80 Average Number of Employees by Categories During the Reporting Period 26 Other Matters and Financial Financial Affairs and Actuarial Unit Managers 27 Statements 82 Independent Auditor’s Report Related to Financial Rights Provided to the Annual Report 82 Members of the Governing Body An Assessment of the Board Directors by the and Executives 27 Corporate Governance Committee 83 Research and Development Disclosure Policy 85 Activities of the Company 30 Corporate Governance Principles Compliance Report 88 Research and Development Pertaining to New Services and Business Activities 30 Committees Operating Within Anadolu Sigorta and an Assessment by the Board of Directors 98 Company Activities and Major An Assessment of the Operation of the Developments in Activities 31 Independent Audit Firm in 2017 Activity 2017-2018 Primary Goals, Policies 31 Period via the Audit Committee 102 Information on the Company’s Investments 31 Human Resources Practices at Anadolu Sigorta 103 Internal Control System and Internal Audit Agenda of the Annual General Assembly Activities 32 Meeting 104 An Assessment of 2017 by the Board 2017 Profit Distribution Proposal 105 of Inspectors 32 2017 Profit Distribution Table 106 Internal Control System and an Assessment 2017 Annual Report Compliance Statement 107 by the Governing Body 33 Detailed Income Statement 108 Information on Associates 34 31 December 2017 Unconsolidated Financial Repurchased Own Shares by the Company 34 Statements Together with Independent Disclosures Concerning Special Audit and Auditors’ Report Thereon 111 Public Audit 34 Information on Consolidated Subsidiaries 198 Lawsuits Filed Against the Company and 31 December 2017 Consolidated Financial Potential Results 34 Statements Together with Independent Disclosure of Administrative or Judicial Sanctions Auditors’ Report Thereon 199 Against the Company and/or Board of Directors An Assessment of Financial Standing, Members 34 Profitability and Solvency 286 Assessment of Prior Period Targets and General Information on Financial Structure 287 Assembly Decisions 34 Summary Financial Information for the Last Expenses Incurred in Relation to Donations and 5 Years Including the Reporting Period 288 Grants and Social Responsibility Projects 34 Information for Investors 288 Commitment to Social Responsibility 35 General Information
Anadolu Anonim Türk Sigorta Şirketi Middle Black Sea Regional Branch 2017 Annual Report Kılıçdede Mah. Ülkem Sok. No: 8-A/7 İlkadım 55060 Samsun Corporate Title Tel: +90 850 744 0 744 Anadolu Anonim Türk Sigorta Şirketi Fax: +90 850 744 0 750 E-mali: [email protected] Website www.anadolusigorta.com.tr Southern Anatolia Regional Branch Reşatbey Mah. 62029. Sok. No: 16/A Anadolu Sigorta Trade Registration No Seyhan 01120 Adana 4593/557 Tel: +90 850 744 0 744 Fax: +90 850 744 0 746 Directory E-mali: [email protected] Head Office Central Anatolia Regional Branch Rüzgarlıbahçe Mah. Kavak Sok. No: 31 Cinnah Cad. Farabi Sok. No: 43 Kavacık 34805 İstanbul Kavaklıdere 06690 Ankara Tel: +90 850 744 0 744 Tel: +90 850 744 0 744 Fax: +90 850 744 0 745 Fax: +90 850 744 0 749 E-mali: [email protected] E-mali: [email protected] İstanbul Regional Branch Black Sea Regional Branch Levent Mah. Meltem Sok. No: 10 Karşıyaka Mah. 4 Nolu Sok. No: 479 İş Kuleleri Kule: 2 Kat: 8 Ortahisar 61040 Trabzon 34330 Beşiktaş İstanbul Tel: +90 850 744 0 744 Tel: +90 850 744 0 744 Fax: +90 850 744 0 751 Fax: +90 850 744 0 753 E-mali: [email protected] E-mali: [email protected] Marmara Regional Branch Kadıköy Regional Branch Odunluk Mah. Akademi Cad. Küçükbakkalköy Mah. Vedat Günyol Cad. 20/11 Zeno İş Merkezi A Blok No: 10/5 34750 Ataşehir Nilüfer 16110 Bursa Tel: +90 850 744 0 744 Tel: +90 850 744 0 744 Fax: +90 850 744 0 754 Fax: +90 850 744 0 748 E-mali: [email protected] E-mali: [email protected] Mediterranean Regional Branch TRNC Branch Konyaaltı Cad. No: 78 Memduh Asaf Sok. 8 Muratpaşa 07050 Antalya Köşklüçiftlik Lefkoşa/TRNC Tel: +90 850 744 0 744 Tel: +90 392 227 95 95 Fax: +90 850 744 0 752 Fax: +90 392 227 95 96 E-mali: [email protected] E-mali: [email protected] Western Anatolia Regional Branch Gaziantep Sales Office Atatürk Cad. No: 92 İncilipınar Mah. Gazi Muhtar Paşa Bulvarı Anadolu Sigorta Binası 2 36017 Sok. Kepkepzade Park iş Merkezi Pasaport Konak 35210 İzmir C Blok No: 6/10 Tel: +90 850 744 0 744 Şehitkamil Gaziantep Fax: +90 850 744 0 747 Fax: +90 850 744 0 755 E-mali: [email protected] E-mali: [email protected]
Previous years’ annual reports of Anadolu Sigorta
Anadolu Sigorta 2017 Annual Report 1 2 Anadolu Sigorta 2017 Annual Report We carried out our first Hackathon on 18 & 19 November.
150 Contestants applied to take part in the Hackathon.
Anadolu Sigorta 2017 Annual Report 3 General Corporate Profile, Our Vision, Our Mission, Our Corporate Values Information
Corporate Profile, Our Vision, Our Mission, Our Corporate Values
Engaged in all non-life branches, i.e. fire, marine, accident, engineering, agriculture, legal protection, personal accident, illness/health and credit and bonding, Anadolu Sigorta will keep contributing to the advancement of the insurance business in Turkey, guided by its mission and vision.
Corporate Profile vehicle liability with TL 1,342 million, followed by the motor vehicles branch In 2017, Anadolu Sigorta expanded with TL 953 million in 2017. Trailing its total premium production by 4.2% these two branches, in order, were year-on-year to TL 4,671 million fire and natural disasters with TL 814 and controlled an 11.8% share of million, illness/health with TL 538 the overall market among non-life million, general losses with TL 414 companies. million and general liability with TL 181 million. Anadolu Sigorta pursues its operations 11.8% via nine regional branches across Turkey’s first national insurance the nation and one branch in the company and the pioneer in the sector, Anadolu Sigorta Turkish Republic of Northern Cyprus. Anadolu Sigorta will keep contributing controlled an The number of employees on the to the advancement of the insurance 11.8% share company’s payroll averaged 1,200 in business in Turkey in the light of its of the overall 2017. mission and vision, and further build market among on its solid position in the industry non-life Anadolu Sigorta registered its highest on the back of its powerful digital companies. premium production in the motor insurance initiative.
4 Anadolu Sigorta 2017 Annual Report Our Vision
• To make Anadolu Sigorta the insurance brand preferred by everyone who needs insurance. • To achieve a strength that makes it a reference point in the worldwide insurance industry as well.
Our Mission
In keeping with the deeply-rooted, pioneering, honest, and solid corporate values of Anadolu Sigorta to: • Lead the sector, • Help create a broad public awareness of insurance in Turkey, • Implement a customer-focused approach to service, • Increase our financial strength to international standards, • Enhance the value of our company.
Our Corporate Values
A Company Pioneership Integrity Powerful Structure Entrenched In It has a stable financial • Pioneer in creating • It has ethical merits; History power; product; • It fulfills its promises • It was founded in • Pioneer in service; definitely; • It has an extended accordance with the • Pioneer in • It inheres in and efficient service instructions given technology; transparency as network; by Mustafa Kemal • With its self-renewing principle; • It has a sophisticated Atatürk. ability preserves its • It never abandons and high qualified • It is Turkey’s first pioneering position; human values. human source; national insurance • It plays a pioneering • It gains power from company. role in social the synergy created • It has a powerful responsibility. by İşbank. corporate structure built on its knowledge of insurance accumulated through the years.
Anadolu Sigorta 2017 Annual Report 5 General Milestones from the History of Anadolu Sigorta Information
Milestones from the History of Anadolu Sigorta
Founded in 1925 as Turkey’s first national insurance company, Anadolu Sigorta has been pursuing operations, aware of its role as the pioneer of the Turkish insurance industry for 92 years. 2007 Anadolu Sigorta became the first company in the Turkish insurance business to exceed USD 1 billion in premium production.
1925 1986 Anadolu Sigorta was founded on April 1st Representing a new branch in the at the initiative of Atatürk and under Turkish insurance business, “Electronic the leadership of İşbank, Turkey’s first Equipment Insurance” was first started national bank. by Anadolu Sigorta. 1961 1987 The first data processing system was set Activities commenced in the agricultural up. insurance branch. 1925 1975 1991 Being the leader of national insurance The life branch was transferred to Anadolu Sigorta since the onset of the Turkish Republic, Anadolu Hayat Sigorta, a newly-formed was founded at Anadolu Sigorta celebrated its 50th life insurer as required by law. anniversary. the initiative of 1993 1983 Atatürk. Extending administrative and technical “Blue Insurance” policies marking the assistance to Günay Anadolu Sigorta, introduction of comprehensive insurance founded and started to operate in system in Turkey and offering 17 types Azerbaijan, Anadolu Sigorta became the of cover were put on sale for the first first Turkish insurance company to set time. up an international operation. 1984 1996 Highly acclaimed by the public and Policies in legal protection insurance the sector, “Insurance of the Future”, branch, another first in our country, were the most comprehensive life policy written. ever offered in Turkey until then, was introduced.
6 Anadolu Sigorta 2017 Annual Report 1997 2002 2006 Aiming to make the most of the A brand-new era began with the The company maintained its sectoral possibilities offered by IT, a “Recon “Maximum Service in Insurance” leadership in premium production for Project” was launched. Services were concept. The company introduced the the fifth consecutive year and realized made more efficient and productive with service philosophy under one title that it a premium production in excess of TL 1 the inclusion of all services and agencies has possessed since its foundation, and billion, undersigning yet another historic in the data processing network with once again became the author of a first result in the history of the Turkish online and real‑time systems. in the sector. insurance industry. 1999 2004 2007 In order to provide the fastest and Voted as “the most satisfactory The sector’s unrelenting champion in most comprehensive service to its insurance company with its products premium production for the last six policyholders in the aftermath of the and services”, Anadolu Sigorta received years, Anadolu Sigorta became the first disastrous earthquake of 17 August, the the Active Academy Private Customer insurance company in Turkey to exceed company worked round the clock to Satisfaction Award in Insurance. The the USD 1 billion threshold in total provide uninterrupted service. company expanded its service range premium production. by taking over the health branch from 2001 Anadolu Hayat Emeklilik, which the After providing service for over five company was required by law to give decades, the company was relocated up. Anadolu Sigorta was awarded its from its building in Karaköy to İş Towers, ISO 9001: 2000 Quality Management 2017 where it would be together with İşbank System certification, an endorsement Anadolu Sigorta subsidiaries. proving that the company’s quality management system complies with reached the TL 4.7 international standards. billion mark in total premium production.
2013 The Company relocated its Head Office units to its new modern building.
2008 Planned within the frame of the C2C 2013 change program, the first set of changes Anadolu Sigorta launched the C2C Anadolu Sigorta relocated to is new head was put into life. (Closer to Customer) change program office in Kavacık-İstanbul. whereby all business processes are The company launched its new social 2015 reviewed and revised. While the responsibility project, “Bir Usta Bin Usta” company increased its profitability (From One Master to One Thousand), While celebrating its 90th anniversary, through sustainable growth strategy, it thus contributing to revitalize vanishing the company launched its revamped also received Active Academy Private professions in Anatolia. website. Customer Satisfaction Award in 2012 2017 Insurance for the fifth consecutive time. The company received four International Total premium production hit TL 4.7 2010 award with its social responsibility billion. The company celebrated its 85th project, and its 2011 Annual Report Anadolu Sigorta doubled its net profit anniversary. for the period to TL 184 million while posting an RoE of 11.2%.
Anadolu Sigorta 2017 Annual Report 7 8 Anadolu Sigorta 2017 Annual Report Quick payment via Sigortam Cepte for claims up to TL 1,000
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Anadolu Sigorta 2017 Annual Report 9 General Message from the Chairman Information
Message from the Chairman
We regard every one of our policyholders, who have been a part of our success story of 92 years and who inspired us, a member of Anadolu Sigorta family, and we carefully plan our efforts along this line.
2017 has been the scene to macroeconomic the European Central Bank (ECB) passed a improvement across the world. decision to reduce its asset-buying program and took its first step towards monetary policy During 2017, monetary policies pursued by the normalization. Bank of Japan (BoJ), on the central banks of developed countries continued other hand, kept its loose monetary policy to set the course of financial markets. The US implementation unchanged, and continued to Federal Reserve (the Fed) carried on with rate extend support to the economy. hikes initiated by late 2016, and increased the rates three times during 2017, each time In 2017, acceleration in economic growth in by 25 bps, in line with the projections; the developed countries has been noteworthy. interest rate was raised to 1.25-1.50% band While the US economy kept growing despite at the end of the year. The Fed also started the uncertainties stemming from the policies balance sheet reduction as of October 2017. of the new US administration justifying a new Having launched extraordinarily loose monetary global environment prediction, the labor market policy implementations relatively later than approached full employment level. Inflation, on the central banks of other developed countries, the other hand, still floats below the 2% target.
10 Anadolu Sigorta 2017 Annual Report In spite of the cracks in the EU formation economic activity has also been a factor that became evident with the so- in increased prices. However, below- called Brexit, i.e. UK’s exit from the projected performance of economic European Union (EU), coupled with activity in China put a downward push the heavy election program, countries on oil prices. Other commodity prices in the European region showed also display an upturn. relative recuperation. While the rate of unemployment registered a marked decline in the last quarter of the year,
The Turkish economy grew by 11.1% on an annual basis in the third quarter of 2017, and ranked at the top among OECD and G20 countries.
inflation rate accelerated. Defying the The Turkish economy draws attention political events that negatively affected with its growth that transcended the the risk appetite for the Eurozone, the projections. EUR/USD parity adopted an uptrend The Turkish economy grew by 11.1% stimulated by the weakened US dollar on an annual basis in the third quarter combined with the positive outlook of of 2017; while this growth performance the economic activity in the Eurozone. that outdid the projections went down During 2017 when growth performance in the records as the highest growth of developing countries also backed data for the past 6 years, Turkey ranked global economic activity, continued at the top among OECD (Organization high level of global risk appetite that for Economic Cooperation and picked up after the first quarter added Development) and G20 countries. momentum to capital inflows to The main contributors to this result developing countries. included the revived domestic demand On the other hand, the effects of China’s by virtue of tax reductions granted on economic rebalancing and the course furniture and white goods in a bid to of oil and commodity prices have also enliven the economy, KKDF-backed been visible on the global outlook. While loans practically serving as lifeline concerns of supply surplus persisted, to SMEs, and increased employment extended duration of oil producing owing to the employment mobilization. countries’ decision to cut output Growth received significant support propped the upward move of oil prices; from private consumption outlays and the positive development of global machinery & equipment investments. In the first nine months of the year,
Anadolu Sigorta 2017 Annual Report 11 General Message from the Chairman Information
Message from the Chairman
In the coming years, we are anticipating that the sector’s potential will turn into growth at a faster pace and the insurance business will enter a rapid, stable growth path.
cumulative growth rate was registered as 7.4%. Altered risk outlook in the world adds to the Accordingly, it is estimated that the Turkish importance of insurance. economy will end 2017 with a growth rate of 2017 saw three of the most powerful hurricanes above 6%. in the US, the first time in history to feature In terms of macroeconomic variables, inflation multiple Category 5 hurricanes in the same remains our soft belly. The CPI, after floating year, and hail and flood disasters that hit high since the start of the year, was 11.92% on our country at short intervals. The increased an annual basis, completing the year in double intensity and frequency of meteorological digits for the first time since 2011. While phenomena are scientifically explained as a this led to high interest rates, on one hand, it consequence of global climate change. reminds the fact that focus must be placed 2017 has been an active year not only in terms particularly on structural issues in order to take of natural disasters but also of manmade inflation under control, on the other. damages. Manmade damages to date, such as Despite increased export performance, higher terrorist acts, chemical explosions and severe energy prices, course of gold trade, and strong fires, could be usually classified under such domestic demand resulted in faster growth of branches as liability, fire and engineering. imports in 2017. As current deficit sustained its However, the fact that the cyber attacks negative course, the rise in foreign trade deficit in 2017 are not covered under any classic has been telling on the expansion of the current reinsurance branch despite the major economic deficit. The ratio of current deficit to GDP is loss they caused revealed a striking fact. As estimated to have gone up to the order of 4.5% a result of these events, there has been an in 2017. unprecedented rise in demand for insurance providing cover against cyber risks. In this Settling down of the chaos in Syria and the respect, 2017 also stands out as the birth Middle East and mitigation of geopolitical year of an evolution bearing a very significant and political risks pose priority for Turkey potential for the insurance business. in the period ahead. The steps that gain the foreground in the restrengthening of economy The development of the sector will continue include sustained momentum in the increase in at an increased speed in our country. private investments and industrial production In the coming years, we are anticipating that in order for growth composition to shift in the sector’s potential will turn into growth at a favor of investments and exports, acceleration faster pace and the insurance business will enter of exports in parallel with the recovery in EU a rapid, stable growth path. The prerequisites economies, and on another front, winning the for this development include increased struggle against inflation to return to single- disposable income per capita, an economically digit figures, and balancing exchange rates. We stronger population that is demographically believe from the bottom of our hearts that our young, and enhanced awareness of insurance country’s efforts to reach a more affluent future ownership. will not remain unreciprocated by virtue of the reflex our country acquired against crises and shocks, and her internal dynamics.
12 Anadolu Sigorta 2017 Annual Report Projects for raising awareness of the main pillars of being accessible, our insurance to be co-executed by the perspective targeting constant change, government and insurance companies our strict adherence to principles such contribute to creating societal awareness as transparency, respect, discipline and and the sector’s development. Anadolu integrity, and our reliability. Sigorta carries on with its customer- As we underline once again that we oriented proactive initiatives that will always stand by our policyholders will support enhanced awareness of with our service and business model insurance and flourished insured base designed to realize our promise “never through printed and social media. lose” drawing on our strong financial
Our approach to be able to respond to growing needs and produce innovative solutions therefor in line with the advances in technology put us one step ahead of our peers.
We believe that, beyond our structure, competent human resource, commercial achievements, owning our and effective delivery channels being one people and values played a very big of the sector’s leading companies, we part in reaching our current position. would like to extend our thanks to our colleagues, business partners, delivery We regard every one of our channels with whom we have been policyholders, who have been a part striving to achieve this goal, and to our of our success story of 92 years and policyholders and all our shareholders who inspired us, a member of Anadolu who have been giving us strength with Sigorta family, and we carefully plan their constantly growing trust. our efforts along this line. Gaining an insight into our customers’ needs, Sincerely, ensuring satisfaction of our policyholders at every phase of product and service delivery, and seeking and valuing their opinions make up our working principles. Our approach to be able to respond to growing needs and produce innovative solutions therefor in line with the advances in technology put us one step ahead of our peers. Caner Çimenbiçer Chairman of the Board of Directors In addition, the long-lived relationship we have built with our customers rise on
Anadolu Sigorta 2017 Annual Report 13 General Message from the CEO Information
Message from the CEO
In 2017, we secured an above- the-market growth alongside high increase in profitability.
The insurance industry maintains its stable Although premium production shows steady growth. expansion, the production figure of USD 10 billion and its ratio to GDP that stands at 1.3% Our industry ended 2017 posting a premium are still very low compared to other emerging production of TL 39 billion 711 million, up 12% countries. This, however, also represents an year-on-year. From this perspective, we can opportunity. Our country presents significant suggest that it has been an exceptional year opportunities with her high economic growth, for our sector, which had registered an average demographic characteristics and changing annual growth rate of 15.3% over the last sociocultural structure. decade. We secured an above-the-market growth This modest increase in premiums was mainly alongside high increase in profitability. the result of the price cap implementation in traffic insurance. In fact, traffic insurance Our Company increased its premium premiums had already adopted a downtrend production by 4.2% year-on-year to TL 4 and the price cap implementation served to billion 671 million. While the highest premium shorten this process. generator was the Motor Vehicles Liability branch with TL 1 billion 342 million, it was followed by Motor Vehicles with TL 953 million,
14 Anadolu Sigorta 2017 Annual Report At Anadolu Sigorta, we consider digitalization as a multi-faceted holistic strategy in terms of products, services, channels and business models.
Fire and Natural Disasters with TL 814 alongside. With a 109.6% rise, we have million, and Illness/Health with TL 538 more than doubled our net profit from million. TL 88 million in 2016 to TL 184.2 million in 2017. Our financial performance While Anadolu Sigorta ranked second reflected also upon the prices of our among non-life companies with a shares traded on the exchange. While market share of 11.8%, it was the BIST-100 index increased by 47% during sector’s leader in Motor Own Damage, 2017, Anadolu Sigorta stock went up by Watercraft, Motor Vehicles, Fire and 61% and reached a market capitalization Natural Disasters, and General Liability of TL 1,550,000,000. branches. We have accelerated the steps we take During 2017, we introduced six new products for our policyholders. We in digital insurance. have drawn intense interest from our At Anadolu Sigorta, we consider customers with “Full Maintenance digitalization as a multi-faceted holistic Traffic Insurance” in traffic insurance, strategy in terms of products, services, “Economical Motor Own Damage channels and business models. Insurance” and “Volkswagen Motor Own Damage Insurance” in motor own Our digitization efforts progress on damage, “Mehmetçik Complementary two main axes: digitalization of the Health Insurance for the Turkish Army” Company’s own business processes in illness/health, “Common Area Package and digitalization of relations with the Insurance” for shared living spaces like policyholders. The steps Anadolu Sigorta housing compounds and apartment takes towards digitalization are intended buildings and managers’ responsibilities, to maximize the productivity of all our and “Individual Cyber Security existing channels and to enable our Insurance”, a first in our country against policyholders to access our products cyber threats. and services in the fastest and the most efficient way. Anadolu Sigorta digital We outgrew the market average, while platforms are designed to deliver the securing high increase in profitability best customer experience, irrespective
Anadolu Sigorta 2017 Annual Report 15 General Message from the CEO Information
Message from the CEO
Anadolu Sigorta digital platforms are designed to deliver the best customer experience.
of the channel through which the product is 2017 also saw Anadolu Sigorta Hackathon sold. For this purpose, we are integrating our take place, which we regard as a significant digital platforms with the innovations and event that will contribute to our digital improvements we make in our call center transformation journey. implementations. Organized on 18-19 November at our Head More importantly, we regard digitalization as a Office with the aim of making life easier in the journey to be made together with our agents. insurance business, Anadolu Sigorta Hackathon With the Digital Agency Platform (DAP) Project, received nearly 150 individual applications for we have enabled 24/7 online sales of retail participation. Based on the presentations made insurance products by Anadolu Sigorta agencies to the jury following the competition that has via their respective web pages that will run over welcome new digital technology projects, the the cloud technology. projects were scored according to “innovation”, “creativity” and “feasibility” criteria. From Furthermore, we began incorporating artificial among 14 teams formed by participants to intelligence and robot technology in our compete in the Hackathon, the ones that processes at a greater extent. ASLI has been ranked in the top three also received prize our first application in this area. ASLI is an RPA money. (Robotic Process Automation) robot and began taking over the operational workload of our We are providing Anadolu Sigorta assurance agencies. Presently identifying the motor own against cyber risks, as well. damage policies of our agencies with imminent renewal dates and creating proposals in advance Insurance policies to be developed against for them, ASLI’s job description will expand and cyber risks are a hot topic both nationally evolve from standard tasks to smart ones in and internationally. Appearing as one of the future, relying on its underlying analytical the negative outcomes of technology and structure. digitalization, cyber risks threat individuals, as well as organizations, and the dimensions of On the customer side, we have updated losses resulting from cyber attacks grow by the Sigortam Cepte, our basic mobile application, day. During 2017, we have developed the first with the addition of features aimed at user- cyber security package for individuals based on friendliness. Turbo Jet, the claims application the increased importance of this matter. The we developed within this frame, represents a “Individual Cyber Security Policy” enables taking first in our country. With this application, our proactive measure against potential losses policyholders, who report their glass, machinery stemming from cyber crimes and provides legal breakdown and electronic appliance damages protection in a number of aspects. covered in their policies via “Sigortam Cepte”, are provided with the opportunity to receive Standing out with its comprehensive coverage, their claims payments up to TL 1,000 within 5 our Individual Cyber Security Insurance policy seconds following their claims notification. We entails expert advisory for curing the possible are targeting to further expand the scope of this damages suffered by reason of cyber risks and practice in 2018. legal protection coverage, along with dark web scan that helps our policyholders protect
16 Anadolu Sigorta 2017 Annual Report We will keep contributing to building a better future for us all.
themselves against personal data theft We extend our thanks to all our and cyber attacks. stakeholders who contributed to our achievements. We have left behind eight years in our project “Bir Usta Bin Usta” (One Also in the period ahead, we will Master, Thousand Masters). keep pushing the limits of our own achievements and contributing to In its eighth year, the project “Bir Usta building a better future for us all in Bin Usta” (One Master, Thousand the light of our deep-rooted corporate Masters) continued to revive vanishing principles and values. I would like to crafts and to train the skilled masters of thank our employees who join us in the future. A total of 90 masters-to-be our commitment to sign our name from five cities and five crafts covered under new achievements, İşbank, in the 2017 program of the project bank branches that make up our successfully completed the training that bank insurance network, our agents, lasted 3 to 6 months and qualified to get our policyholders and all our other their certificates. stakeholders. Within the scope of the project that is honored with numerous awards in the national and international arena, 40 vocational training courses were held over eight years and 750 masters-to- be were given training; at graduation, course participants received their course completion certificates approved by the Ministry of National Education and endorsing their status as master İlhami Koç students. CEO
Anadolu Sigorta 2017 Annual Report 17 General Capital and Shareholder Structure Information Organization Chart
Organization Chart
Board of Directors
Coordination Department to the Corporate Governance Committee Board of Directors
Audit Committee Board of Auditors
Early Determination of Risk Committee
Chief Executive Officer İlhami Koç
Risk Management and Internal Control Department
1st Deputy Chief Deputy Chief Executive Deputy Chief Executive Deputy Chief Executive Deputy Chief Executive Deputy Chief Executive Executive M. Metin Oğuz M. Levent Sönmez Erdinç Gökalp Fatih Gören Mehmet Abacı Filiz Tiryakioğlu
Agency Relations Claims Information Motor Insurance Corporate Insurance Actuarial and Sales Management Technologies Department Department Department Management Department Department Labor Law Department Adviser Ömer Ekmekçi Quality Legal Information and Bank Insurance Health Insurance Marine Management Affairs & Communication Department Department Insurance Department Systems Subrogation Technologies Solution Department Department Development Legal Department Consultant Samim Ünan Human Marketing Accounting Project and Change Resources Health Claims and Customer Reinsurance and Finance Management and Training Department Management Department Department Department Department Department
Procurement, Corporate Regional Offices Non-Motor Risk Engineering Support and Communication Claims Department Construction Department Southern Anatolia Department Department Western Anatolia Marmara Central Anatolia Middle Black Sea Liability, Aviation and Motor Corporate Black Sea Data Analysis Special Risks Insurance Claims Strategy and Mediterranean and Management Department Department Performance İstanbul Reporting Management Kadıköy Department
TRNC Branch Fire and Engineering Insurance Department
18 Anadolu Sigorta 2017 Annual Report The Organization, Capital and Shareholder Structure of the Company Capital and Shareholder Structure Disclosures on Preferred Shares
Capital and Shareholder Structure
48% of the shares of Anadolu Sigorta, a subsidiary of İşbank, are quoted on Borsa İstanbul (BIST) Star Market.
Shareholder Structure (%)
42.7 57.3* Others Millî Reasürans T.A.Ş.
* 5.3% shares were acquired from Borsa İstanbul.
Disclosures on Preferred Shares No more preferred shares remained following the amendment to the Articles of Incorporation registered by the company on 11 April 2013. Capital Increases and Their Sources There were no capital increases in 2017. Changes in the Articles of Association during 2017 No changes were made to the company’s articles of association during 2017.
Ratings Financial Strength Fitch Ratings Rating Outlook IFS BBB- Negative National IFS AA+(tur) Negative Corporate Governance Rating SAHA Kurumsal Derecelendirme Hizmetleri A.Ş. Rating Corporate Governance Rating Note 9.30
Anadolu Sigorta 2017 Annual Report 19 General Governing Body, Executives and the Number of Employees Information Board of Directors
Board of Directors
1 2 3
4 5 6
1 Caner Çimenbiçer 7 Kemal Emre Sayar Chairman Director
2 Hakan Aran 8 Prof. Savaş Taşkent Deputy Chairman Director (Independent)
3 İlhami Koç 9 Cengiz Tezel CEO and Director Director
4 Kubilay Aykol 10 Assoc. Prof. Atakan Yalçın Director Director (Independent)
5 Ömer Faruk Cengiz 11 Hasan Hulki Yalçın Director Director
6 Hafız Ekrem Kürkçü Director
20 Anadolu Sigorta 2017 Annual Report 7 8 9
10 11
Information on Board Meetings Held in 2017 Fiscal Year During 2017, Board of Directors of Anadolu Sigorta met 12 times and held its 1225nd meeting at the end of the year. Topics discussed in the meetings generally consist of the reports by the Board of Directors Committees and by the Board of Inspectors, executive reports, proposals laid down by the Head Office for approval, informative memos, and working study reports that deal with the bank insurance activities. In addition, other topics raised by the members and not covered in the agenda are also discussed. Nine meetings were held where full participation could not be achieved due to members’ justified excuses. In three of these meetings, a total of 9 members were absent, whereas six meetings were held with the absence of one member in each. The Chairman’s invitation letter and files related to the agenda items are distributed to the members five days in advance of the meeting date. Ayşen Aygül Board of Directors Reporter
Anadolu Sigorta 2017 Annual Report 21 General Governing Body, Executives and the Number of Employees Information Board of Directors
Board of Directors
Caner Çimenbiçer in 2007. He promoted to group manager position in Chairman the Retail Banking Marketing, unit of Micro Individual Born in 1952, Bursa, Caner Çimenbiçer graduated from Segment. Mr. Aykol was elected an Auditor at Anadolu the Business Administration department of the Faculty Sigorta on 29 March 2010, and then a Board Director on of Administrative Sciences at Middle East Technical 27 March 2013. University in 1973. He started his professional career Ömer Faruk Cengiz at Koç-Burroughs the same year. He joined İşbank in Director 1974 as an assistant inspector trainee on the Board of Born in 1974, Ankara, Ömer Faruk Cengiz graduated Inspectors. After holding various positions in the Bank, he from the Public Administration Department of Faculty of was appointed as Senior Executive Vice President in 1998, Political Science at Ankara University in 1998. He started and elected as Board of Directors member from 2005 his career as an assistant credit specialist at Konya to 2008 and the Chairman of the Board from 2008 to Branch of İşbank in 1999, where he later functioned 2011. Appointed as the Chairman and Managing Director as credit specialist at Büşan/Konya Branch, assistant of Anadolu Sigorta on 1 April 2011, Çimenbiçer was regional director at Commercial Banking Sales Division of afterwards elected as the Chairman, on 25 March 2014. Kayseri Regional Directorate, manager of Kahramanmaraş Caner Çimenbiçer served in various companies in the Branch, Gaziantep District Sales Director, and manager past ten years. Mr. Çimenbiçer was the Chairman of the of Konya Commercial Branch. On 27 April 2017, he Board at İzmir Demir Çelik Sanayi A.Ş. (1999-2005), Petrol was appointed as the head of SME Banking Division. Ofisi A.Ş. (2000-2005) and Petrol Ofisi Alternatif Yakıtlar Mr. Cengiz was named a Board Director of Anadolu Toptan Satış A.Ş. (2005). He was Deputy Chairman at Sigorta on 12 June 2017. Erk Petrol Yatırımları A.Ş. (2003-2005), and Petrol Ofisi Gaz İletim A.Ş. (2005), Board member at Avea İletişim Hafız Ekrem Kürkçü Hizmetleri A.Ş. (2003-2005) and Chairman of the Board Director at Milli Reasürans T.A.Ş. (2008-2009). Mr. Çimenbiçer was 1966, İstanbul. Ekrem Kürkçü graduated from Uludağ elected the Chairman and Executive Board Director at University/Education Faculty. He started his career as Anadolu Sigorta on 1 April 2014, and then the Chairman officer at Is Bank Harbiye Branch. He was promoted to on 25 March 2014. Section Head and Sub Manager between 1995-2005 at Hakan Aran Beyoğlu Branch, Assistant Manager between 2005-2008 Deputy Chairman at Central Operations Division. He was promoted to Unit Manager the same year. Effective from September Born in 1968, Antakya, Hakan Aran graduated from 2008 he became Division Manager at Foreign Trade the Middle East Technical University, Department of and Commercial Loans Operations Division. Mr. Kürkçü Computer Engineering in 1990. He started his career was elected a Board Director at Anadolu Sigorta on at İbank as a Software Specialist the same year, and 24 March 2015. completed his MBA dissertation on Process Management and a Model on Information Technologies Supporting Kemal Emre Sayar Customer-Centric Approach to Banking at Baskent Director University, Institute of Social Sciences, Business 1976, Ankara. A graduate of Industrial Engineering Administration Department between 2002 and 2003. Department of the Middle East Technical University, After working as a Software Development Manager Kemal Emre Sayar completed the graduate programs from 2005 until 2008, he was appointed Deputy CEO on Information Technologies in Management(MS) at on 17 July 2008 at İşbank, a position he still holds. Sabancı University, and on Economics and Finance(MA) Representing Turkey on MasterCard Technology Advisory at Boğaziçi University. He started his career in 1999 as Board, Mr. Aran currently serves as the chairman of the an assistant internal auditor for Türkiye İş Bankası A.Ş. boards of directors of İşbank Russia, SoftTech A.Ş., İşNet Following his service at Change Management and Strategy A.Ş., Erişim A.Ş. and LiveWell A.Ş. companies, and as & Corporate Performance Management departments, he Deputy Chairman of İşBank AG. was appointed to Subsidiaries Department, where he still İlhami Koç works as Unit Manager. Mr. Sayar was elected a Board CEO and Director Director at Anadolu Sigorta on 26 November 2015. He is also a Board Director at Milli Re and Anadolu Hayat Born in 1963, Mr. İlhami Koç graduated from Ankara Emeklilik. University, Department of International Relations in 1986 and started his career at İşbank as Assistant Auditor. Prof. Savaş Taşkent In 1994, he was appointed as the Vice President in the Director (Independent) Securities Department of İşbank. Following the foundation Born in İstanbul, 1943, Prof. Savaş Taşkent graduated of Is Investment, he was appointed as the Head of from Faculty of Law at İstanbul University. He started Capital Markets and Portfolio Management in 1997. In his academic career in 1971 as an assistant in the 2001, İlhami Koç moved to Is Private Equity as the CEO. Department of Law of the Faculty of Basic Sciences In 2002, he became the CEO of Is Investment. Mr. Koç at İstanbul Technical University. He received his Ph.D. was promoted as the Deputy Chief Executive of İşbank degree from the Faculty of Law of İstanbul University in 2013. In 2014, he was elected as the Chairman of the and became assistant professor at İstanbul Technical TCMA and became a Board Member at Borsa Istanbul. University, Faculty of Management and associate As of 14 November 2016, he was appointed to Anadolu professor in the Department of Labour and Social Sigorta as CEO. Security Law and professor in 1990 in the same faculty. Kubilay Aykol He also served as Deputy Dean and Vice Rector in the Director same university. In 1982 and in 1987, he undertook research studies abroad (at the Universities of Erlangen Born in 1974, Bolu. Kubilay Aykol graduated from and Heidelberg). Writing many articles and books on the Middle East Technical University (Faculty of Economics subject of labor law, he made translations from German and Administrative Sciences) department of Business law into Turkish. Prof. Taşkent served also as the Head Administration. He began his career in 1997 at Türkiye of Major Discipline of Law at the Faculty of Business İş Bankası, as assistant inspector at Bank’s Board Administration of İstanbul Technical University. He Member of Inspectors. He was appointed Merter branch superannuated on 12 January 2010 and then continued as branch manager position. He become an assistant to lecture “Labor Law” and “Enterprise Law”. He was manager in Retail Banking Marketing Department appointed to Counselor position to Rector, regarding
22 Anadolu Sigorta 2017 Annual Report Governing Body, Executives and the Number of Employees Board of Directors Declarations of Independence by Independent Members of the Board of Directors
law affairs as of November 2013. Between 1 April Assoc. Prof. Atakan Yalçın - 19 September he served as the Dean of the Gedik Director (Independent) University Economic, Administrative and Social Sciences Born in 1971, İstanbul, Associate Professor Atakan Yalçın is Faculty. Prof. Taşkent currently works freelance at the on the faculty of School of Economics and Administrative Taşkent Law and Consultancy company. Apart from these, Sciences at Özyeğin University. He previously was on the Prof. Taşkent served as a Counselor to the Minister at the faculty of Koç University and has held visiting positions at Ministry of Labor and Social Security between the years Brandeis University and Boston College. Assoc. Prof. Yalçın 1991-2000 and he attended the ILO Conference held in received an MBA degree from Cox School of Business Geneva as the Counselor to the Government during the at Southern Methodist University in 1996, and a Ph.D. years 1991-2003. He was elected to İşbank’s Board in degree in finance from Carroll School of Management 2005, 2008 and 2011 respectively. He was also appointed at Boston College in 2002. Assoc. Prof. Yalçın has taught as a member of the Audit Committee in March, 2008, courses in Investment Management, Derivatives Securities the TRNC Internal Systems Committee in June, 2009, and Financial Management. His research interest is in and the Corporate Governance Committee in February, empirical asset pricing and empirical aspects of financial 2013 at İşbank. Taşkent left his position at İşbank as of economics. His work has been published in such journals March 2014. Prof. Taşkent was elected a Board Director at as the Journal of Empirical Finance, Journal of Banking and Anadolu Sigorta on 16 April 2014. Finance, Journal of Financial Research, Quarterly Review Cengiz Tezel of Economics and Finance, and the Journal of Marketing. Director Assoc. Prof. Yalçın is a member of the American Finance 1962, Antalya. Cengiz Tezel has graduated from Freie Association, Western Finance Association, Financial Universität of Berlin, Germany and has a diploma in Management Association and the CFA Institute. Assoc. Business Administration. His professional career has Prof. Yalçın was elected a Board Director at Anadolu started at İşbank in 1986, as a team member at Berlin Sigorta on 27 March 2013. Branch. He has become Money Market Dealer and Hasan Hulki Yalçın International Bond dealer at Head Office Ankara in 1991, Director Assistant Manager responsible for Treasury at Isbank Born in 1964, Ankara, Hasan Hulki Yalçın holds a degree in GmbH Head Office Frankfurt/Main in 1995, Assistant Economics from the Middle East Technical University and Manager at Isbank GmbH Frankfurt/Main Branch in a Master’s Degree in International Banking and Finance 1998, Assistant Manager, responsible for Investment from the University of Birmingham (UK). After serving in Banking, Investment Funds & Public Relations at Isbank various positions and capacities with İşbank for fourteen GmbH Head Office Frankfurt/Main in 2006, Assistant years, he joined Milli Re in 2003 and subsequently took Manager responsible for Retail Banking at Balmumcu part in a number of professional training programs abroad. Branch in 2007, Assistant Manager responsible for Retail He has been appointed to Milli Re as a member of Board Banking at Galata Branch in 2008, Branch Manager at of Directors and General Manager on 16 January 2009. Arapcamii Branch in 2008 and Branch Manager at İşbank Hasan Hulki Yalçın is also serving as a member of Board of Multinationals Branch (Corporate Branch) in 2012. He Directors in the Association of the Insurance Association currently holds this position. Mr. Tezel was elected a Board of Turkey. Mr. Yalçın was elected a Board Director at Director at Anadolu Sigorta on 24 March 2015. Anadolu Sigorta on 24 March 2011.
Declarations of Independence by Independent Members of the Board of Directors 2 March 2017 To: Anadolu Anonim Türk Sigorta Şirketi Corporate Governance Committee I hereby declare that I satisfy the criteria of independence pursuant to applicable legislation within the framework of the criteria covered in the Communiqué on the Determination and Implementation of Corporate Governance Principles, and submit my candidacy as an independent member of the Board of Directors of Anadolu Anonim Türk Sigorta Şirketi. Yours sincerely,
Prof. Savaş Taşkent
2 March 2017 To: Anadolu Anonim Türk Sigorta Şirketi Corporate Governance Committee I hereby declare that I satisfy the criteria of independence pursuant to applicable legislation within the framework of the criteria covered in the Communiqué on the Determination and Implementation of Corporate Governance Principles, and submit my candidacy as an independent member of the Board of Directors of Anadolu Anonim Türk Sigorta Şirketi. Yours sincerely,
Assoc. Prof. Atakan Yalçın
Anadolu Sigorta 2017 Annual Report 23 General Governing Body, Executives and the Number of Employees Information Executive Committee
Executive Committee
1 2 3
4 5 6
7
1 İlhami Koç 5 Erdinç Gökalp CEO Deputy Chief Executive
2 Filiz Tiryakioğlu 6 Fatih Gören 1st Deputy Chief Executive Deputy Chief Executive
3 Mehmet Metin Oğuz 7 Mehmet Abacı Deputy Chief Executive Deputy Chief Executive
4 M. Levent Sönmez Deputy Chief Executive
24 Anadolu Sigorta 2017 Annual Report İlhami Koç till 30 April 1996. He subsequently rose to Specialist CEO position on 1 March 1994, Chief Superintendent position Born in 1963, Mr. İlhami Koç graduated from Ankara on 1 May 1996, Assistant Manager on 1 October 1997, University, Department of International Relations and Manager on 1 May 1999. M. Levent Sönmez has in 1986 and started his career at İşbank as Assistant become Bakırköy Regional Manager on 1 June 2002 and Auditor. In 1994, he was appointed as the Vice President Kadıköy Regional Manager on 1 August 2004. He has in the Securities Department of İşbank. Following the been appointed as Deputy Chief Executive Officer on foundation of Is Investment, he was appointed as the 1 February 2008. Head of Capital Markets and Portfolio Management in 1997. In 2001, İlhami Koç moved to Is Private Equity as Erdinç Gökalp the CEO. In 2002, he became the CEO of Is Investment. Deputy Chief Executive Mr. Koç was promoted as the Deputy Chief Executive of Actuarial Department İşbank in 2013. In 2014, he was elected as the Chairman Quality Management Systems Department of the TCMA and became a Board Member at Borsa Reinsurance Department İstanbul. As of 14 November 2016, he was appointed to Procurement and Construction Department Anadolu Sigorta as CEO. Data Analysis and Management Reporting Department Born on 26 July 1967 in Ankara, Erdinç Gökalp graduated Filiz Tiryakioğlu from Kuleli Military High School and Turkish Military 1st Deputy Chief Executive Academy, Department of Business Administration. He Agency Relations and Sales Management Department then got his master’s degree in insurance from Marmara Bank Insurance Department University, Institute of Banking and Insurance. During Human Resources and Training Department his employment with Anadolu Sigorta, he earned Corporate Communication Department the Atatürk scholarship granted by TSB (Insurance Corporate Strategy and Performance Management Association of Turkey) and pursued his studies abroad. Born on 26 June 1967 in İstanbul, Filiz Tiryakioğlu Having started his career at Anadolu Sigorta as Specialist graduated from Anadolu University, Faculty of Business at the Marketing Department on 1 May 1991, Erdinç Administration, Department of Business Administration. Gökalp was appointed to the Reinsurance Department She started her career at Anadolu Sigorta as a Clerk at on 23 September 1991, rose to senior specialist position the Fire Department on 16 September 1985. She rose and continued working till 30 April 1996 with the same to Assistant Superintendent at the same department title. He promoted to Chief Superintendent position on 1 January 1990. She was appointed to the Claims on 1 May 1996 and to Assistant Manager position on Department on 1 February 1993 as Superintendent, 1 October 1997, he was appointed to the Marketing then rose to Chief Superintendent on 1 May 1996, Department. Erdinç Gökalp was appointed to the and Assistant Manager on 1 March 1998 at the same Accident Department on 26 December 1997 with the department. She became a Manager at the Training same title. He rose to the position of Manager and was Department on 1 June 2000 and was then appointed assigned to the Reinsurance Department on 1 July 2001. as the Human Resources and Training Manager on Erdinç Gökalp has been appointed as Deputy Chief 1 August 2004. She was appointed as Deputy Chief Executive Officer on 1 February 2008. Executive Officer on 1 February 2008 and 1st Deputy Chief Executive on 25 December 2013. Fatih Gören Deputy Chief Executive Mehmet Metin Oğuz Claims Management Department Deputy Chief Executive Legal Affairs & Subrogation Department Regional Offices Accounting and Finance Department TRNC Branch Motor Claims Department Motor Insurance Department Non-Motor Claims Department Health Insurance Department Born on 11 November 1969 in Ankara, Fatih Gören Health Claims Department graduated from Ankara University, Faculty of Political Born on 4 April 1959 in Çanakkale, M. Metin Oğuz Sciences, Department of International Relations. graduated from Middle East Technical University, He worked as a Specialist at Retail Banking and Faculty of Arts and Sciences, Department of Physics Agricultural Loans Departments at Ziraat Bank between and Mathematics, and holds a master’s degree from 1991 and 1994. Having joined Anadolu Sigorta as Marmara University Institute of Banking and Insurance, an Assistant Inspector on the Board of Inspectors Department of Insurance. M. Metin Oğuz began his on 1 November 1994, Fatih Gören rose to Senior career at Anadolu Sigorta as a Clerk in the Accident Assistant Inspector on 1 November 1997 and grade Department on 16 October 1985 and subsequently 3 Inspector on 1 November 1998. He was appointed rose to Assistant Superintendent on 1 February 1989, as Assistant Manager to the Accounting and Finance Superintendent on 1 February 1992, Chief Department on 1 June 2000, where he was promoted Superintendent on 1 February 1995, Assistant Manager to Manager position on 1 August 2004. Fatih Gören has on 1 May 1997, Manager on 1 March 1998, and Motor been appointed as Deputy Chief Executive Officer on Insurance Manager on 1 June 2002. Having served in the 1 February 2008. last position until 31 July 2004, M. Metin Oğuz became a Deputy Chief Executive Officer on 1 August 2004. Mehmet Abacı Deputy Chief Executive M. Levent Sönmez Information Technologies Department Deputy Chief Executive Information and Communication Technologies Software Marketing and Customer Management Department Development Department Corporate Insurance Department Project and Change Management Department Marine Insurance Department Born in 1967 in Ankara. Mehmet Abacı, graduated Risk Engineering Department from the Department of Metallurgical and Materials Liability Aviation and Special Risks Insurance Department Engineering, Faculty of Engineering at Middle East Fire and Engineering Insurance Department Technical University in 1991. Starting his professional Born on 22 June 1962 in Ankara, M. Levent Sönmez career at İşbank IT Department, as a Software Specialist graduated from İstanbul Technical University, Faculty the same year, Mehmet Abacı, was appointed as of Maritime Studies, Department of Marine Engineering Assistant Manager in 1999, and Unit Manager in 2004. in 1985, got his master’s degree in “Contemporary He was promoted as Deputy Chief Executive Officer at Management Techniques” from Marmara University SoftTech in 2008, and became Solution Development & Maine University and completed the “SITC (Swiss Manager and Project & Change Manager at İşbank in Re) Marine Insurance” program. Having participated 2010 and in 2011 respectively. Mehmet Abacı was in various training programs in Turkey and abroad, M. appointed as Deputy Chief Executive Officer of SoftTech Levent Sönmez also holds “Chartered Insurance Institute/ for a second term, on 1 January 2011. As of June 2012, London Dip. CII” degree. He started his career at Anadolu he took office at Anadolu Sigorta as Deputy Chief Sigorta as a Specialist at the Marine Department on Executive Officer. 1 May 1991 and continued working with same title
Anadolu Sigorta 2017 Annual Report 25 General Governing Body, Executives and the Number of Employees Information Heads of Units Under the Internal Systems Average Number of Employees by Categories During the Reporting Period
Heads of Units Under the Internal Systems
Dr. İbrahim Erdem Esenkaya Ömer Altun Chairman of the Board of Inspectors Risk Management and Internal Born in 1969 in İstanbul. İbrahim Control Manager Erdem Esenkaya graduated from Born in 1970 in Malatya. Ömer İstanbul University, Faculty of Altun graduated from Hacettepe Political Sciences, Department of University, Faculty of Science, Public Administration. He then Department of Statistics. He began completed a master’s degree his career at Anadolu Sigorta without dissertation in the graduate as a Clerk at the Accounting program for the Management of and Finance Department Financial Institutions at İstanbul on 1 May 1997, where he University, Faculty of Business subsequently rose to Specialist Administration, Institute of position on 1 February 1998 and Business Administration. He earned continued working with same his master’s degree in Business title till 30 November 2005 and Management and Organization, then he rose to Assistant Manager and his doctorate degree in position on 1 December 2005. Accounting and Auditing from On 1 February 2008, Ömer Altun the Institute of Social Sciences at has been appointed as a Manager the same university. He continues to the Risk Management and his academic career as assistant Actuarial Department, which was professor at İstanbul Esenyurt renamed to Risk Management University. He started his career and Internal Control Department at Anadolu Sigorta as an Assistant within the scope of the Inspector at the Board of Inspectors restructuring of internal systems on 1 May 1995 and continued till organization. 31 May 2001. He was appointed to the Accounting and Finance Department on 1 June 2001 as an Assistant Manager and to Internal Audit Department on 1 January 2005 as a Manager. İbrahim Erdem Esenkaya has been appointed as the Chairman of the Board of Inspectors on 1 June 2007.
Average Number of Employees by Categories During the Reporting Period
Average number of employees by categories during the reporting period is as follows:
2017 Senior level managers 7 Managers 38 Consultants 2 Middle level managers 171 Specialists/Officers/Other employees 982 Total 1,200
26 Anadolu Sigorta 2017 Annual Report Financial Affairs and Actuarial Unit Managers Financial Rights Provided to the Members of the Governing Body and Executives
Financial Affairs and Actuarial Unit Managers
Murat Tetik Taylan Matkap Accounting and Financial Affairs Appointed Actuary/Manager Manager Born in 1978 in Antakya, Taylan Born in 1968 in Eskişehir, Murat Matkap graduated from Ankara Tetik graduated from İstanbul University, Department of University, Business Administration Statistics and completed his Department (English) and started master’s degree in the Department his career in our company on of Actuarial Science and Finance 1 May 1997 as an Assistant at Boston University. He is Inspector on the Board of currently pursuing his doctorate Inspectors. He was promoted studies at İstanbul University, to Senior Assistant Inspector on Department of Labor Economics 1 May 2000, to Class III Inspector and Industrial Relations. He started on 1 June 2001, to Class II his career at Anadolu Sigorta on Inspector on 1 June 2003, and to 1 December 2008 in appointed Vice Chairman of the Board of actuary/manager position at the Inspectors on 1 August 2004. He Actuarial Consultancy Unit, and was appointed as an Assistant he has been transferred to the Manager to the Accounting and Actuarial Department with the Financial Affairs Department on same title on 28 February 2011. 1 January 2005, where he rose During 2008-2016, in tandem with to the position of Manager on his post as the Secretary General 1 February 2008. He is a member in of the Actuarial Society of Turkey, the Insurance Association of Turkey Taylan Matkap was responsible for Financial Accounting Inspection and improving the relations with the Research Committee. Actuarial Association of Europe (AAE) and the International Actuarial Association (IAA) on behalf of the Society. Taylan Matkap is also a member of Institute of Actuaries in Belgium (IA|BE).
Financial Rights Provided to the Members of the Governing Body and Executives
Financial Rights In the fiscal year ended on 31 December 2017, TL 7,399,606 in total has been provided in remunerations and similar benefits to the governing body and senior executives such as the Chief Executive Officer and Deputy Chief Executive Officers. Further details are presented in the relevant section of financial notes. Other Means The expenses incurred for the members of the company’s governing body and senior executives under other means such as business related entertainment and travels amounted to TL 397 thousand.
Anadolu Sigorta 2017 Annual Report 27 28 Anadolu Sigorta 2017 Annual Report We have introduced Turkey’s first individual package insurance against cyber risks
We are providing expert consultancy and legal protection coverage for cyber risks.
Anadolu Sigorta 2017 Annual Report 29 Research and Research and Development Pertaining to New Services and Business Activities Development Activities of the Company
Research and Development Pertaining to New Services and Business Activities
In a bid to increase product diversity and appointment creation within the scope of VIP respond to demands for different assurance assistance service and viewing the hospitals needs, “Common Area Package Insurance”, and pharmacies nearest the users’ locations “Volkswagen Motor Own Damage Insurance”, are added as new functions to Sigortam Cepte “Economical Motor Own Damage Insurance”, application. “Full Maintenance Traffic Insurance”, In line with the objective of speeding up claims “Mehmetçik Complementary Health Insurance processes and enhance customer satisfaction, for the Turkish Army” and “Individual Cyber “No Touch” application went live, which Security Insurance”, a first in the sector, have allows settlement of fire and engineering been launched. Home Package and Compulsory claims within set amounts in 24 hours the Earthquake Insurance products started to latest, subject to surveyor’s ascertainment and be issued from the new policy management approval. In addition, via the so-called “Turbo platform, ASOS. Jet” application, which is a first in Turkey, To mitigate operational workload and offer once the notification information and photo uninterrupted service to policyholders of of the invoice are uploaded to Sigortam Cepte commodity marine insurance, the most application for policyholders and damages comprehensive certificate program available in that conform to certain criteria, the claim is the industry has been introduced. instantly handled by artificial intelligence and the payment can be made to the policyholder’s A brand new visual design was prepared and bank account within approximately 5 seconds. related system changes were performed in order to standardize secure saving from the In order to better manage the intensity caused number of pages and simplification of the by hail/flood damages that occurred during policy printouts. the reporting period, agreements were made
“No Touch” with new suppliers in addition to existing Digital Agency Platform (DAP), which is repair centers, and Anadolu Sigorta Hail Repair designed to allow agencies to carry out policy Centers started operations in İstanbul and sales via their own web pages, went live and Mersin. was put to use for our agencies. A project was initiated aimed at more effective Introduced for allowing agencies to easily management of our claims and legal processes. perform a number of day-to-day transactions from a single screen, Asenta platform was Operational processes, which were handled enriched with new products, cross-selling, via email between regional branches and premium calculation and comparison agencies and which could not be measured and capabilities. monitored, were redesigned, and a workflow application called PAS was developed and rolled An incentive and compensation management over across all regional branches. system was put into use for managing and more effective monitoring of campaigns Analysis, feasibility and coordination work directed towards our delivery channels, their were carried out to determine the processes integration with other systems and automation that can run within the scope of Robotic “No Touch” of processes that were previously handled Process Automation (RPA). Analysis, design and application manually. launch phases were completed for Motor Own Damage renewal process. went live for Work was carried out to improve user settlement of experience on digital channels; within this The new reinsurance application (ART) went frame, frontends of our applications were live following development and testing. claims within upgraded in view of current design principles. Risk engineering application, which is developed 24 hours Personal health insurance policies can now for effective monitoring of risk analysis maximum. be issued using our digital channels with the processes, started to be used across the “My Policy is Ready” application. “Bireysel Company, including all sales departments. Şube”, “Ofisim Cepte” and “Sigortam Cepte” applications give access to coverage limits, used and remaining limits and similar information related to health insurance policies. In addition,
30 Anadolu Sigorta 2017 Annual Report Company 2017-2018 Primary Goals, Policies Activities Information on the Company’s Investments and Major Developments in Activities 2017-2018 Primary Goals, Policies
Being Turkey’s deepest‐rooted and most usage ratios of our mobile applications by experienced insurance company, our vision our customers and our business partners, and is defined as being the brand preferred by we will continue to upgrade existing services. everyone who needs insurance, and our Addition of new products to digital channels mission is spelled out as helping create a broad and investing in technology and business awareness of insurance in our country, leading models that will facilitate transacting and the sector, and enhancing the value of our interacting of all our business partners and company. especially our agencies via digital channels are In keeping with this vision and mission, securing inevitable requirements of our day. a successful performance that is also reflected Non-life insurance sector places much on the financial results amid the fiercely emphasis on the language to be used with the competitive environment of the insurance insurable audience and customers. The tone sector is an inevitable necessity in order to of the messages conveyed is also crucial with maintain our solid financial strength. To achieve respect to correct perception of insurance this goal, sustainable technical profitability and leveraging the credibility of the sector. and increased market share are targeted to A powerful brand reputation is directly be attained in 2018 on the back of a delicate linked to positive perception of our brand by balance between growth and profitability. our target audiences. For this purpose, we In view of the existing risks and forecasts in will uninterruptedly carry on with product relation to the national economy, priority will and service communication initiatives. The be given to efficiency while adhering to growth communication maintained on all media where targets, utmost sensitivity will be exercised in our policyholders and target audiences have risk selection and correct pricing will not be a presence positions Anadolu Sigorta as an compromised. Furthermore, processes will be accessible, consumer-friendly company that simplified in order to increase the speed and is a benchmark in its own field. In addition to productivity of operations, and technology these efforts, our brand reputation is further automation that will secure higher productivity strengthened through media relations, risk will be introduced on one hand, while communication, reputation management and targets will be tracked carefully, employing social responsibility initiatives contributing performance and budget management value to the community. methods, on the other. Possessing a talented, highly motivated In the period ahead, compulsory insurance workforce that efficiently uses technology introduced by the government and insurance will be one of the most critical success factors receiving government support are anticipated in the medium term. To further leverage the to keep driving the industry. Although the Company’s overall business performance and digital arrangements introduced by the regulatory to be able to proactively follow up the trends authority in compulsory traffic insurance, particularly in the digitalizing world, it is crucial the most commonly known product in the to attract highly qualified employees to our industry which is also responsible for a Company. We will be attaching even more substantial portion of premium production, importance to this topic in the future, while have somewhat cutback the premiums that employer brand initiatives will be carried out have adopted an uptrend in the previous years, and weight will be given to efforts to be a it is an absolute necessity for the industry to company that is preferred at a much higher generate sustainable and reasonable technical extent by the candidates. profit in order for it to maintain solid reserves in this branch that has been basically set up for We will keep the public interest. Information on concentrating One of our strategic goals is to develop the Company’s new products and services directed at on digital fulfilling the changing needs of the insurable insurance. audience. Within this scope, we will continue Investments in 2018, as we did in 2017, to introduce The company’s outlays in 2017 amounted new and innovative products, and highlight to USD 10.2 million for projects carried out differentiated price and service levels for for revising basic insurance implementations, customers paying regard to current economic enhancing operational efficiency within the conditions and risks. scope of the company’s information and communication technology investments. Digital insurance will remain as another topic These projects are detailed under the heading of focus for us. Use of digital tools and digital “Research and Development Activities of the business models are anticipated to persist in Company”. the insurance industry. Hence, we will keep developing functions that will increase the
Anadolu Sigorta 2017 Annual Report 31 Company Internal Control System and Internal Audit Activities Activities An Assessment of 2017 by the Board of Inspectors and Major Developments in Activities An Assessment of 2017 by the Board of Inspectors
Pursuant to the Regulation on the Internal of efforts to further expand and strengthen the Systems of Insurance and Reinsurance and central auditing of agencies and to create early Pension Companies, the internal audit activity warning systems that correctly identify and at our company is carried out by the Board of reveal the risk elements in advance. Inspectors reporting to our company’s Board of In 2017, 33 studies were completed: 12 Directors. The Board of Directors reviewed and investigations, 12 examinations and 9 other acquainted itself with the 2017 Activity Report studies. of the Board of Inspectors. As of year-end 2017, the Board of Inspectors In 2017, 28 headquarters units, 9 regional was staffed by 15 board members consisting branches and 1 branch adding up to 38 of inspectors and assistant inspectors. With units in total were audited and the resulting the aim to support professional development determinations and assessments were reported. of the Board members and to expand their Initiated in order to monitor the extent at professional knowledge, their participation which the audited units fulfill the requirements in various seminars, meetings and training of the reports resulting from the audits programs in Turkey and abroad have been conducted, follow-up audits continued to be facilitated. In this frame, efforts were carried carried out in 2017. A total of 24 follow-up on also in 2017 so that the members of audits were conducted during 2017, 10 of the Board of Inspectors obtain nationally which resulted from 2016 audits. and internationally recognized professional certificates. Auditing of agencies persisted pursuant to the Regulation on the Internal Systems of Insurance Developments are carefully monitored to and Reinsurance and Pension Companies during ensure that the audits conducted and the 2017, and 971 agencies were audited, and the reports subsequently issued take account of results were reported. the “International Standards for Internal Audit”, are risk-focused, provide assurance for risk On the other hand, based on Articles 16/1 and management and contribute added value to our 17/2 of the Regulation on the Internal Systems company and necessary revisions and changes of Insurance and Reinsurance and Pension are made accordingly. Companies, audits were conducted at all of the agencies that remain after eliminating The Board of Inspectors will keep carrying those that were dissolved during the reporting out the activities within the context of the period from the 2,410 agencies that were listed internal audit program prepared, as well as in the audit programs approved by the Board other activities outside of this scope, based on of Directors and planned to be audited in the the fundamental approach for maximizing the 2015-2017 period. benefits expected from internal auditing. In line with the experiences derived from agency audits, agencies were continued to be assessed through scoring based on the financial data for the past three years, within the frame
32 Anadolu Sigorta 2017 Annual Report Internal Control System and Internal Audit Activities Internal Control System and an Assessment by the Governing Body
Internal Control System and an Assessment by the Governing Body
Pursuant to the provisions of the “Regulation (machinery breakdown, human errors, theft, on the Internal Systems of Insurance, fire, explosion, state of war, sabotage, natural Reinsurance and Pension Companies” enforced disasters, terrorist acts, power outages, etc.) upon its publication in the Official Gazette and the losses resulting therefrom, the Business issue 26913 dated 21 June 2008, the Risk Continuity Management System has been Management and Internal Control Department set up to recover as quickly as possible from was set up in a structure so as to be conducted the interruption caused by such perils and to and administered directly by the CEO, and enable resumption of key activities. Within the vested in the powers and responsibilities that scope of the Business Continuity Management will allow the Department to assess the risk System, Headquarters Emergency Response exposure and internal control environment in Plan, IT Continuity Plan, Business Continuity an independent/impartial and effective fashion. Management System Guidelines, Business The Board Director responsible for Internal Continuity Plan and Incident Management Systems is also responsible toward the Board of Plan were drawn up and published on the Directors for the formation of the Department Electronic Document Management System. The and ensuring, monitoring and coordinating its operability of the said plans is tested at certain operability, adequacy and effectiveness. intervals. The duties, powers and responsibilities of the It was targeted to secure alignment with COBIT individuals charged with the operation and (Control Objectives for Information and Related activities of the Internal Control system, and Technology) in the execution of information for conducting the activities are defined in the systems processes and functions, and the relevant Operating Guidelines released. The relevant project launched was finalized as at internal control system is set up as a separate year-end 2012. The following headings were mechanism independent from the internal addressed under the COBIT Alignment Project audit system, based on applicable legislation for Information Technology Governance and and numerous references available in national Information Technology Processes: and international literature. • Devising the Information Technology (IT) Governance Model Centralized internal control activities do • Creating the Governance Processes not eliminate or modify, in part or in whole, • Formulating the IT Service Development the relevant operational and supervisory Processes responsibilities of the employees who are in • Developing the IT Service Delivery and charge of conducting and/or managing these Operation Processes activities. The Board of Inspectors separately • Creating the IT Support Processes oversees the effectiveness and adequacy of the • IT Audit Management. internal control system. Accordingly, the Information Systems Within the scope of establishing an effective Management Committee was set up, which internal control system that is aligned with will report directly to the Executive Board the nature, complexity and risk structure of and will be responsible for IT strategy and the company’s operations; duly and efficiently steering activities. The Information Systems managing, mitigating and controlling the risks Management Committee was established with involved in the company’s operations; and the purpose of managing information systems employing a risk-focused approach to the in alignment with the company’s strategic conduct and management of review, control, goals, establishing the policies, procedures and monitoring, assessment and reporting activities processes for ensuring information security, concerning the activities of the company’s and efficiently managing the risks arising from units, all of the company’s key processes the use of information systems. Basically the were schematized, and risk-control matrixes Committee defines, assesses and reports on detailing the control points were prepared, thus the risks arising from the use of information completing the system documentation. systems; creates the guidelines for the management of these risks, establishes and A Contingency Action and Funding Plan has monitors relevant controls. been designed, which specifies the actions to be taken in the event of a liquidity crisis sustained It has been considered that the internal control by the company due to negative market policies and procedures introduced and the movements beyond its control, unexpected internal control activities carried out are aligned macroeconomic events, catastrophic or big- with the company’s nature, the complexity of ticket claims payments and other reasons. its operations and risk structure, and possesses the minimum elements of an efficient internal With the aim to prevent the company’s control system. exposure to various perils of differing scales
Anadolu Sigorta 2017 Annual Report 33 Company Information on Associates Activities Repurchased Own Shares by the Company and Major Disclosures Concerning Special Audit and Public Audit Developments Lawsuits Filed Against the Company and Potential Results in Activities Disclosure of Administrative or Judicial Sanctions Against the Company and/or Board of Directors Members Assessment of Prior Period Targets and General Assembly Decisions Expenses Incurred in Relation to Donations and Grants and Social Responsibility Projects
financial statements annually, as well Information on as consolidation audits performed by Assessment İşbank at the end of first and third Associates quarters of the year. Due to being an of Prior Period associate of the Bank, the company is The de facto scope of Anadolu Hayat also subject to the annual information Targets and Emeklilik A.Ş. covers engaging in systems audits banks conduct at their individual or group private pension consolidated entities. General activities; setting up pension funds in this framework; creating fund bylaws Our Company is subjected to audit for the funds to be set up; executing by the Undersecretariat of Treasury, Assembly pension contracts, annuity contracts, Insurance Supervision Board under the portfolio management contracts, insurance legislation. Decisions custody agreements with the custodian for safekeeping of fund assets; and All decisions adopted in the Annual offering individual or group life or whole Lawsuits Filed General Assembly meeting held on life insurance policies and accident Against the 24 March 2017 have been carried out. policies in connection therewith, as well Our company acts on the principle of as all sorts of life policies, and carrying providing quality service and it has out reinsurance operations in relation Company preserved its leading position in terms thereto. and Potential of market share in line with its targets The company has 20% stakeholding in by furthering innovation and customer- Anadolu Hayat Emeklilik A.Ş. Results orientation concepts. 31 December Book Value Shareholding Lawsuits brought against the company Expenses 2017 (TL) (%) and their possible results are presented Anadolu under the heading “42 - Risks” in the Incurred in Hayat notes to the financial statements. Emeklilik Relation to A.Ş. 689,720,000 20.0% Disclosure of Donations Repurchased Administrative and Grants Own Shares by or Judicial and Social the Company Sanctions Responsibility None. Against the Projects Company Disclosures Our company acts in awareness of its social responsibility and spent and/or Board TL 872 thousand during the reporting Concerning period. The activities carried out within of Directors the frame of social responsibility Special Audit are detailed under the heading and Public Members “Commitment to Social Responsibility”. During 2017, there were no penalties Audit and/or sanctions of material nature imposed against the company and/or The company undergoes independent Board of Directors members on account audits conducted by the independent of acts in violation of the legislation. audit firm, Güney Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik Anonim Şirketi (Ernst&Young) on its semi-annual financial statements at six-month intervals and on its annual
34 Anadolu Sigorta 2017 Annual Report Expenses Incurred in Relation to Donations and Grants and Social Responsibility Projects Commitment to Social Responsibility
Commitment to Social Responsibility
Offering service to its policyholders based on its vision summed up in the motto “Never Lose”, Anadolu Sigorta launched “Bir Usta Bin Usta” (One Master, Thousand Masters), its long-lived social responsibility project, in 2010 that marked the Company’s 85th anniversary.
Offering service to its policyholders based on were carried out and nearly 750 masters-to-be its vision summed up in the motto “Never were trained since the launch of our project “Bir Lose”, Anadolu Sigorta launched “Bir Usta Bin Usta Bin Usta”. Usta” (One Master, Thousand Masters), its While students, teachers, sculptors, painters, long-lived social responsibility project, in 2010 art teachers, animators, researchers, officers, that marked the Company’s 85th anniversary. housewives, and retirees take place among the The objective of the project is to focus the trainees, all participants who have successfully public attention on vanishing crafts and local completed the courses received a certificate of values, to help revive these crafts and let attendance. From 2012 onwards, the trainees professional craftsmen and artisans pass on have also received a certificate approved by the their experiences to the future. Ministry of National Education.
50 crafts The project made its debut with a press The topics of the project’s 2018 edition will conference held on 10 June 2010. During the consist of bagpipe making in Artvin, evil course of the project, which is carried out eye amulet making in İzmir, book binding in under the technical advisory of the Ministry of İstanbul, linen weaving in Kastamonu and tile Culture, Directorate General of Research and making in Kütahya. Training, the Ministry of Culture proposes cities and city-specific crafts that are about to vanish, A special collaboration is also carried out with İz identifies the nongovernmental organizations TV, a documentary channel, within the scope of (NGOs) that will assist in successful the project. Starting from 2010, İz TV has been management of the project in the related cities, producing the documentaries of project cities and guides Provincial Directorates of Culture. and photographing the course process in each city, which are built into an archive. Vocational courses that last 3 to 6 months are organized in identified cities; course durations Accessible by visitors in the digital world on Under the project depend on the time necessary to teach the the website at www.birustabinusta.com.tr, the “Bir Usta Bin Usta” specific craft. During the training, all necessary project’s website covers various information technical and practical information are from course announcements to contact details (One Master, conveyed to participants. for current programs, details about the master trainers and the monthly schedules of ongoing Thousand Masters) Within the scope of the project, 15 to 20 programs. it is targeted trainees receive training for each craft. The project derives its name from the target of to train 1,000 training 1,000 prospective masters in 50 crafts masters-to-be in over the course of 10 years. With its 8th edition 50 crafts. held in 2017, a total of 40 different courses
Anadolu Sigorta 2017 Annual Report 35 Company Expenses Incurred in Relation to Donations and Grants and Social Responsibility Projects Activities Commitment to Social Responsibility and Major Developments in Activities Commitment to Social Responsibility 750 masters The cities and crafts covered under the project Traditional Silver Threading in Bartın, Stringed “Bir Usta Bin Usta” since 2010 are presented Puppet Making in Istanbul, and Wooden below: Walking Cane Making of Devrek in Zonguldak. 2010: Karagöz (Turkish shadow play) 2016: Wood Carving in Adana, Kamancheh Figuration in Bursa, Meerschaum Carving in Making in Trabzon, Felt-Making in Konya, Eskisehir, Edirnekâri Art (traditional painting Hot Glass-making in Istanbul, and Weaving in and varnishing of wood or leather) in Edirne, Poyralı Village in Kırklareli. Kutnu (traditional silk-based cloth) Weaving in Gaziantep, and Kazaziye (traditional jewelry 2017: Handmade Soap Making in Balıkesir, made with threads of gold or silver) in Trabzon. Local Buldan Cloth Weaving in Denizli, Local Şile Cloth Making in İstanbul, Zili Handweaving 2011: Kargı Cloth Weaving in Çorum, Silk in Taşkale - Karaman, Model Ship Making in Weaving in Hatay, Stone Working in Mardin, Sinop. Bone Combs in Sivas and Savatlı Silver Work in Van. Under the project, informative trips are being organized for media members since 2010. 2012: Mother of Pearl Inlaying in Ankara, Rug Media trips to selected provinces covered the and Carpetbag Weaving in Kars, Glassblowing courses offered in Edirne in 2010, Mardin in in Mugla, Earthenware Pottery in Nevsehir and 2011, Nevşehir in 2012, Rize in 2013, Şanlıurfa Within the scope Woodblock Printing (on cotton or silk) in Tokat. in 2014, Bartın in 2015, Adana in 2016, and Sinop in 2017. of our project 2013: Wood Carving in Kahramanmaras, “Bir Usta Bin Traditional Carpet Weaving of Gördes in Anadolu Sigorta collaborates with TURMEPA Usta” (One Manisa, Needlepoint Art of Namrun in Mersin, (Turkish Marine Environment Protection Hand Weaving of Karacakılavuz in Tekirdag and Association) to prevent marine pollution and Master, Thousand Basketry in Rize. to contribute to the combat against pollution. Masters), a total Based on the protocol with TURMEPA, the 2014: Tile Working in Çanakkale, Oltu Stone Association that spends efforts to clean the of 40 different Working in Erzurum, Art of Leather-Made courses were held marine environment in Turkey receives a Accessories in Isparta, Art of Felt-Made share from the revenues generated by the and nearly 750 Accessories in Izmir, and Amber Working in insurance coverage sold to any type of vessel. masters-to-be Sanlıurfa. The protocol for this cooperation was signed in were trained as at 2015: Local Damal Doll Making in Ardahan, 2010. year-end 2017. Traditional Accordion Boot Making in Aydın,
36 Anadolu Sigorta 2017 Annual Report The Company’s Transactions with the Risk Group
The Company’s Transactions with the Risk Group
Within the framework of the applicable Commercial transactions the company realized provisions of the Turkish Commercial Code with its controlling shareholder and other (TCC), our company is a subsidiary of İşbank Group Companies during 2017, which are Group. Pursuant to Article 199 of the TCC, detailed in the report, fall within the company’s the company’s Board of Directors presented field of activity and were carried out on an the declaration below in the conclusion of arm’s length basis. In all of the transactions the affiliation report issued in relation to its the company realized in 2017 fiscal year with relations with the controlling company or an the controlling company and its affiliates, affiliate thereof: any and all legal acts carried out in favor of the controlling company or its affiliate with During 2017 fiscal year, between our company guidance from the controlling company, and and our principal shareholder Türkiye İş Bankası any and all actions taken or avoided in favor of A.Ş. and/or other ‘Group Companies’, there is the controlling company or its affiliates in 2017 no; have been reviewed according to the conditions • transfer of receivables, payables or assets, and circumstances known to us. We hereby declare that our company did not sustain any • legal transaction that may result in an such loss on account of any transaction arising obligation, such as furnishing surety, according to conditions and circumstances guarantee or endorsement, known in relation to 2017 fiscal year. • legal transaction that may result in transfer The company’s transactions of a material of profit. nature with the related parties during 2017 are presented in Note no. 45 under the notes to the financial statements in the present report.
Anadolu Sigorta 2017 Annual Report 37 38 Anadolu Sigorta 2017 Annual Report Our mobile application Sigortam Cepte enables getting quotations and purchasing policies
With the Digital Agency Project (DAP), we are enabling our agencies to carry out online sales
6,519,094 Number of total viewings of Anadolu Sigorta website in 2017
Anadolu Sigorta 2017 Annual Report 39 Financial Summary Report by the Board of Directors Status
Summary Report by the Board of Directors
Dear shareholders expected to increase. According to the October edition of the World Economic Outlook by Before presenting the 2017 financial statement the IMF, Eurozone growth is anticipated to figures covering the company’s 92nd year of recuperate and strengthen this year. Growth operation for your approval and comments, projection for Eurozone was raised by 0.4 points we deem it useful to recap the changes to 2.1% for 2017, and by 0.3 points to 1.9% and developments in economic life and the for 2018. Higher growth in 2017 stemmed insurance sector. from accelerated exports in conjunction with While 2017 started with numerous expanded global trade, increased domestic uncertainties, the highlights of the year demand, supportive financial circumstances, included developments related to the Brexit and mitigated political risks and uncertainties. process, economy and monetary policies of the Having outgrown the estimates with a rate Fed and the ECB, the election climate in Europe, of 6.8% in the last quarter of 2016 driven by geopolitical developments and the course of oil enlarged credit volume and increased public prices. In its World Economic Outlook update expenditures, the Chinese economy made a released in October, the IMF revised its global positive start to 2017, as well, and grew by growth estimate as 3.6% for 2017 and 3.7% for 6.9%. While the Chinese economy registered 2018, stating that upswing continued in global a 6.8% expansion in the third quarter of the economy. Noting that many countries might reporting period, given the strong GDP data, it be exposed to downside risks in the medium is inferred that this economy will grow faster term despite diminished short-term risks in the than estimates in 2017. world economy, the report listed low inflation in developed countries, financial fluctuations In their latest economic outlook reports, the in emerging market economies, faster-than- IMF and the OECD stated that although short- anticipated tightening of global financial term risks diminished, many countries might be conditions, and protective policies among the exposed to downside risks in the medium term. said risks. Despite various negative events, the Turkish Having slowed down in the last quarter of economy ended 2016 with 3.2% growth, 2016, the growth in US economy adopted a and sustained its upward momentum to recovery trend upon Trump’s inauguration successfully register growth rates of 5.2% in January, and following introduction of and 5.1% in the first two quarters of 2017, protective measures along this line. Having respectively. In the third quarter of the year, grown 1.4% as of the first quarter, the US the rate of increase soared to 11.1%, making economy produced its highest performance Turkey the fastest growing country in the since 2015 and expanded 3.1%, before world. The “Medium Term Program 2018- registering an above-expectations growth rate 2020” released by the Ministry of Development of 3.0% in the third quarter, although having projected growth as 5.5% for year-end 2017 somewhat declined. In the October update of and predicted that the same rate of 5.5% its World Economic Outlook, the IMF projected would be reproduced in 2018. growth rates of 2.2% and 2.3% for 2017 and Standing at 8.53% in 2016, CPI reached 2018, respectively, for the USA. 11.92% in 2017, pushed up also by the global While the IMF anticipates economic indicators and geopolitical developments. Particularly for 2017 for the Eurozone to be similar to those in the fourth quarter of the year, consumer for 2016, inflation and economic performance inflation went up on a quarterly basis due to recovered faster than expected in the first the rise in basic goods, food and energy group quarter of the year; employment is also inflation despite the limited decline in the
40 Anadolu Sigorta 2017 Annual Report annual inflation on the services group. to USD 300 million, there has been an motor TPL segment that makes up a The inflation that highly outdid the unprecedented surge in demands for substantial portion of this branch, on projections in the last quarter of 2017 insurance providing cover against cyber the other hand, the loss figure went up led the CBRT to increase its year-end risks. In this respect, 2017 stands out as to TL 240 million. Motor vehicles (own 2018 consumer inflation projection the birth year of an evolution bearing damage) branch, i.e. the other motor announced as 7% to 7.9% in its October a very significant potential for the vehicle insurance branch, registered Inflation Report. insurance business. a technical profit of TL 253 million. Following motor own damage, the high Drawing the attention is the The decline in mergers and acquisitions profit generators in the industry were, unemployment rate, which displayed since 2017 indicates that the industry in order, accident with TL 533 million, an uptrend from the second quarter is displaying a gradually weaker illness/health with TL 301 million, of 2016 due to the weak performance performance both in terms of growth general losses with TL 237 million, and of economic growth following global and profitability. One other reason marine with 144 million. Technical uncertainties and the abominable coup behind this decline arises as the profit figure for all branches combined attempt in our country, and which increased political uncertainties across was TL 1,660 million. Nonetheless, the declined in the three quarters that the world. Two important reasons that effect of the amount of TL 2,149 million followed. The decline was driven by add to this uncertainty can be cited as needs to be taken into account, which the relatively high growth performance the fact that the Lloyd’s market stayed was transferred from financial accounts attained in the first quarter of 2017 out of the borders of the European to the industry’s financial statements. and employment incentives. Having Union with the Brexit, and that the At the bottom line, non-life segment exhibited a consistent downtrend elections in Germany, being one of the booked a profit of TL 1,748 million through 2017, the unemployment rate biggest economies in Europe, produced gross, and a profit of TL 1,220 million fell down to 10.3% in October 2017. an outcome disallowing the formation net after taxes and other liabilities in its of a powerful administration in that Parallel to the increasing growth financial statements for the first nine country. rate in the world economy, 2.3% months of 2017. rise in worldwide non-life insurance Total premium production by the Looking at our company’s financial premiums in 2016 went up to 3% in insurance sector in our country went standing and operating results, our 2017. Following suit of 2017, global up 15% year-over-year to TL 46 billion assets grew by 17.7% year-to-year premium increase is anticipated to 552 million in 2017. The price cap to TL 7,032 million, while premium occur in the region of 3% also in 2018 implementation that went live for traffic production went up by 4.2% in the and 2019. However, technical results insurance on 12 April 2017 has been same period to TL 4,671 million. Our gradually worsen around the world influential upon the decelerated growth company also preserved its second place due to increasing competition, and rate of the sector, which had expanded in terms of market share in the non-life the low interest rate environment and by 30.5% in the previous year. Upon segment on the back of the premium low investment income decrease the the enforcement of the price cap, traffic growth it has achieved during 2016. profitability of the insurance industry. branch premium production including Motor vehicle liability branch claimed green cards could inch up by a mere For years, the reinsurance sector has the biggest share of our total premium 0.3% year-over-year in 2017. According striven to resist the constant downtrend production with 28.7%. This was to 2017 data, the real growth rate of the of prices, but reversal of this trend has followed, in order, by motor vehicles overall industry is in the order of 2.7%. been evasive. However, the cat losses branch with 20.4%, fire and natural In this period, non-life branches got paid by the insurance industry as a disasters branch with 17.4%, and illness/ 85.3% share out of the total production result of the destructive impact of three health branch with 11.5%. In 2017, the with TL 39 billion 708 million, whereas Category 5 hurricanes that took place Company booked a profit of TL 236.8 life insurance had 14.7% share with in 2017 amounted to USD 136 billion. million gross, up 113%, and TL 184.2 TL 6 billion 844 million. In 2017, In line with these disasters, reinsurance million net, up 109.6%, owing to the nominal growth in non-life branches prices that had adopted a downturn improvement in the fire and natural was 12.0%, barely equaling the inflation for the past five years registered a rise disasters and general losses branches in rate, whereas real growth was a very across the world in 2018 renewals. the technical division, combined with low 0.1%. In view of the Fed’s policies, Nonetheless, the price increase was the recovery that resulted from the the credit bubble in China, the fragility restricted due to the fact that the introduction of the risky insurance pool in the world economy created by the reinsurance supply was still high in in the traffic branch and the positive Brexit process, and the expanding view of the solid capitalization of the effect of the developments in financial current deficit owing to the two-digit insurance industry and the effect of markets to financial accounts. pressure from the inflation side, the pension funds. insurance industry is anticipated to end In 2018, our Company targets For the world insurance business, 2017 2018 with a growth rate of around 16%. to maintain and further improve has been a year of heightened focus its production and profitability Based on the data for the first nine on protection against cyber risks. The performance, remaining strictly adhered months of 2017 for the non-life Wannacry attack in May and other to leadership, innovation and customer- segment, motor vehicle liability branch cyber attacks that followed caused focus concepts. that represents the largest portion of big-ticket economic losses. While the the industry’s market share posted a losses sustained by some companies technical loss of TL 122 million. In the due to NotPetya virus attack amounted
Anadolu Sigorta 2017 Annual Report 41 Financial Financial Information and Indicators Status
Financial Information and Indicators
Anadolu Sigorta posted a net profit of TL 184.2 million on its 2017 operations, up by 109.6% year-to- year.
Financial Highlights (TL thousand) 2017 2016 Total Premium Production 4,671,410 4,484,060 Total Assets 7,032,315 5,974,173 Claims Paid 2,755,951 2,236,015 Paid‑in Capital 500,000 500,000 Shareholders’ Equity 1,639,021 1,223,180 Pretax Profit/Loss 236,833 111,184 Net Profit/Loss 184,197 87,867
Capital Adequacy Ratios 2017 2016 Premiums Received/Shareholders’ Equity 2.85 3.67 Shareholders’ Equity/Total Assets 0.23 0.20 Shareholders’ Equity/Technical Provisions 0.37 0.31
Asset Quality and Liquidity Ratios 2017 2016 Liquid Assets/Total Assets 0.66 0.66 Current Ratio 1.18 1.16 Liquidity Ratio 1.31 1.39 Premium and Reinsurance Receivables/Total Assets 0.16 0.17 Receivables from Agencies/Shareholders’ Equity 0.54 0.65
Operational Ratios 2017 2016 Retention Ratio (*) 0.70 0.77 Claims Payment Ratio 0.46 0.47
Profitability Ratios 2017 2016 Loss/Premium Ratio 0.85 0.83 Cost Ratio 0.23 0.24 Combined Ratio (Loss/Premium Ratio+Cost Ratio) 1.08 1.07 Pretax Profit/Premiums Received 0.05 0.02 Financial Profit (Gross) (**)/Premiums Received (*) 0.10 0.07 Technical Profit/Premiums Received 0.06 0.04
(*) Including premiums transferred to the Social Security Institution
(**) In the calculation of the financial profit, investment income that has been transferred from the non-technical division to the technical division was excluded.
42 Anadolu Sigorta 2017 Annual Report Total assets of Anadolu Sigorta grew by 17.7% 17.7% in 2017 and surpassed TL 7 billion.
Having expanded 34% in 2017, total shareholders’ equity reached TL 1.7 34.0% billion.
Total Assets (TL thousand) Shareholders’ Equity (TL thousand)
7,032,315 1,639,021
5,974,173 1,223,180
2016 2017 2016 2017
Claims Paid (TL thousand) Net Profit/Loss (TL thousand)
2,755,951 184,197
2,236,015
87,867
2016 2017 2016 2017
Anadolu Sigorta 2017 Annual Report 43 Financial Financial Information and Indicators Status
Financial Information and Indicators
Total premium production reached TL 4.7 billion in 2017, up 4.2%.
Premium Growth Rate (%)
32.7 29.8
16 12.7 7.6 6 5.4 2.4
Accident Illness/ Motor Aircraft Watercraft Marine Fire and General Health Vehicles Natural Losses Disasters
44 Anadolu Sigorta 2017 Annual Report Premium Production (TL thousand) 2017 2016 Premium Production (TL thousand) Accident 153,170 132,021 Illness/Health 538,272 405,694 Motor Vehicles 953,043 899,455 4,671,410 4,484,060 Aircraft 26,964 26,322 Watercraft 88,823 78,783 Marine 86,394 81,973 Fire and Natural Disasters 813,574 755,997 General Losses 413,927 318,983 Motor Vehicles Liability 1,342,497 1,580,540 Aircraft Liability 35,655 33,702 General Liability 181,015 140,549 Credit 2,671 1,554 Bonding 166 0 Financial Losses 25,490 19,226 Legal Protection 9,750 9,261 2016 2017 Total 4,671,410 4,484,060
71.9
32.6 28.8
5.8 5.3 4.2 0
Aircraft General Credit Bonding Financial Legal Total Liability Liability Losses Protection
-15.1 Motor Vehicle Liability
Anadolu Sigorta 2017 Annual Report 45 Financial Financial Information and Indicators Status 2017 Economic Overview
2017 Economic Overview
While 2017 started with numerous uncertainties, the highlights of the year included developments related to the Brexit process, economy and monetary policies of the Fed and ECB, the election climate in Europe, geopolitical developments and the course of oil prices.
THE WORLD ECONOMY
Growth (%) 2016 2017 (E) 2018 (P) Global 3.2 3.7 3.9 Developed Economies 1.7 2.3 2.3 USA 1.5 2.3 2.7 Eurozone 1.8 2.4 2.2 Japan 0.9 1.8 1.2 Developing Countries 4.4 4.7 4.9 China 6.7 6.8 6.6
3.6% Brazil -3.5 1.1 1.9 Turkey 3.2 5.1 3.5 Source: IMF World Economic Outlook, October 2017/January 2018 (E): Estimated, (P): Projected While 2017 started with numerous Having slowed down in the last quarter of uncertainties, the highlights of the year 2016, the growth in US economy adopted a included developments related to the Brexit recovery trend upon Trump’s inauguration on process, economy and monetary policies of the January 20th, and following introduction of Fed and ECB, the election climate in Europe, protective measures along this line. The new In its Economic geopolitical developments and the course of administration decided to renegotiate NAFTA, Outlook oil prices. In its Economic Outlook released the free trade agreement, and to exit Trans- in November 2017, the OECD reported its Pacific Partnership. Having grown 1.4% as of released in anticipation of slow recovery for the global the first quarter, the US economy produced its November economy, projecting a growth rate of 3.6% highest performance since 2015 and expanded 2017, the OECD in 2017 and 3.7% in 2018. The IMF, on the 3.1%, before registering an above-expectations other hand, revised its global growth estimate growth rate of 3.0% in the third quarter, projected a upwards for the first time in the past six years, although having somewhat declined. In the growth rate of projecting 3.5% for 2017 and 3.8% for 2018 in October update of its World Economic Outlook, its World Economic Outlook published in April, the IMF projected growth rates of 2.2% and 3.6% in 2017. and revised growth rates for 2017 and 2018 2.3% for 2017 and 2018, respectively, for the as 3.6% and 3.7%, respectively, in the October USA. update, stating that upswing continued in In its meeting of September 20th, the Fed global economy. resolved to keep the interest rate in the 1.00%-
46 Anadolu Sigorta 2017 Annual Report In the third quarter of the year, the rate of increase soared to 11.1%, making Turkey the fastest 11.1% growing country in the world.
1.25% band and announced that it would start period, given the strong GDP data, it is inferred balance sheet reduction program in October. that this economy will grow faster than Mentioning that the strengthening in the labor estimates in 2017. market and the upswing in economic activity In their latest economic outlook reports, the were moderate, it was stated that the natural IMF and the OECD stated that although short- disasters that occurred might negatively affect term risks diminished, many countries might be this activity in the short term, but that impact exposed to downside risks in the medium term. would remain restricted in the long term. THE TURKISH ECONOMY While the IMF anticipates economic indicators for 2017 for the Eurozone to be similar to those Despite various negative events, the Turkish for 2016, inflation and economic performance economy ended 2016 with 3.2% growth, recovered faster than expected in the first and sustained its upward momentum to quarter of the year; employment is also successfully register growth rates of 5.2% expected to increase. As the manufacturing and 5.1% in the first two quarters of 2017, industry PMI increased to 56.8 in the first respectively. In the third quarter of the year, quarter, the PMI data in the four major the rate of increase soared to 11.1%, making economies of the Eurozone is also giving out Turkey the fastest growing country in the positive signals. According to the October world. The “Medium Term Program 2018- edition of the World Economic Outlook by 2020” released by the Ministry of Development the IMF, Eurozone growth is anticipated to projected growth as 5.5% for year-end 2017 recuperate and strengthen this year. Growth
5.1% and predicted that the same rate of 5.5% projection for Eurozone was raised by 0.4 points would be reproduced in 2018. to 2.1% for 2017, and by 0.3 points to 1.9% for 2018. Higher growth in 2017 stemmed In the World Economic Outlook published from accelerated exports in conjunction with in October, the IMF pointed out that the expanded global trade, increased domestic Turkish economy recovered faster than demand, supportive financial circumstances, anticipations thanks to the strong domestic and mitigated political risks and uncertainties. and external demand, and presented a more optimistic scenario versus its previous report. Having pursued a downtrend throughout 2016, Accordingly, the IMF revised its growth rate In the World the EUR/USD parity closed 2017 at 1.1972 also for 2017 from 2.5% to 5.1%. While 2.6% Economic due to the effect of increased political risks higher growth rate draws the attention as the Outlook including the political uncertainty in Germany, most significant positive revision in the report, the deadlock that came in the first chapter of 2018 growth projection for Turkey, which was published in the UK’s negotiations with the EU for exiting 3.3% previously, was updated as 3.5%. The October, the membership, and declaration of independence OECD expressed similar opinions with the by the autonomous region of Catalonia in IMF in its Economic Outlook dated November IMF revised the Spain. 2017, and revised its growth projection for Turkey as 6.1% and 4.9% for 2017 and 2018, growth rate Having outgrown the estimates with a rate respectively. While the OECD’s latest report of 6.8% in the last quarter of 2016 driven by of the Turkish underlined that the expansionary fiscal policy enlarged credit volume and increased public and revived exports have been influential economy for expenditures, the Chinese economy made a on the 6.1% growth of 2017, reference was positive start to 2017, as well, and grew by 2017 to 5.1%. made to plans to reduce financial incentives 6.9%. in 2018, and it was noted that consumer While the Chinese economy registered a 6.8% and investor confidence would be critical for expansion in the third quarter of the reporting maintaining growth momentum. On the other PROJECTIONS OF MTP AND INTERNATIONAL FINANCIAL INSTITUTIONS FOR TURKEY FOR THE PERIOD 2017-2019 Growth GDP (%) Inflation Rate (%) Current Deficit (%) Unemployment (%) YEARS MTP(*) IMF OECD MTP IMF OECD MTP IMF OECD MTP IMF OECD 2017 5.5 5.1 6.1 9.5 10.9 10.7 4.6 4.6 4 10.8 10.9 11.1 2018 5.5 3.5 4.9 7 9.3 9.9 4.3 4.6 4.9 10.5 11.2 11 2019 5.5 - 4.7 6 - 8.9 4.1 - 5.4 9.9 - 11.3 (*) Medium Term Program (**) The World Bank’s estimates are not included since its up-to-date report is not available.
Anadolu Sigorta 2017 Annual Report 47 Financial Financial Information and Indicators Status 2017 Economic Overview
2017 Economic Overview
hand, the report stressed that Turkey still had with 12.8%, BIST 100 index, defying all these high current deficit, and that it would create negative indicators, rose in line with the external financing need. It was also noted that uptrend in global markets, and closed 2017 in the Credit Guarantee Fund financially relieved the order of 115 thousand points. companies with high indebtedness, but that On the other hand, the negative state of the this might be a temporary situation. current account balance persisted due to the Standing at 8.53% in 2016, CPI was 11.92% at foreign trade deficit, the adverse effect of year-end 2017. In its World Economic Outlook terrorism and geopolitical events on our fragile published in October, the IMF revised Turkey’s economy, external dependence in energy inflation estimates downwards from 11.5% consumption, and volatility in exchange rates. to 10.9% for 2017 and from 11.0% to 9.3% According to November 2017 data, current for 2018. The report of October 2017 stated deficit expanded by USD 1.9 billion year-over- that the rise in inflation was driven by the year, and amounted to USD 4.2 billion. As a depreciated Turkish lira, and inflation would result, 12-month current deficit was registered continue to stay above 5% in the periods as USD 43.7 billion. ahead. The OECD, on the other hand, voiced According to the medium term program parallel views with the IMF and noted that released by the government, the ratio of disinflation did not seem likely in the short current deficit to national income is predicted term in Turkey. OECD projected inflation to be in the order of 4.6% in 2017 and 4.3% in rates for 2017 and 2018 as 10.7% and 9.9%, 2018. While the IMF stated in its latest report respectively, in Turkey. that the ratio of current deficit to GDP would The national economy started 2017 with a be 4.6% in 2017 and 2018, the OECD projected baggage packed with uncertainties hovering 4% and 4.9 for 2017 and 2018, respectively. over the economy policies to be pursued by In its report dated November 2017, the OECD the Trump administration, and in turn, the remarked that the external funding need was monetary policy to be implemented by the close to 25% of the GDP and underlined that Fed which remained unclear, developments Turkey did not have difficulty in rolling over triggered by Brexit, volatilities in the oil market, this external debt, but needed to endure higher and downgraded rating of Turkey by Fitch and costs as compared with the previous years. S&P, all of which increased the volatility in 11.92% During the same timeframe, annual imports exchange rates. In an attempt to preclude the figure was USD 169.0 billion, while exports same, the CBRT was compelled to implement were worth USD 115.1 billion. The greatest tight monetary policy, and began funding contributors to exports in this period have been the market by way of the upper band of the the automotive industry and machinery, as was corridor and late liquidity window. Increasing the case in previous years. In a repeat of last the overnight lending rate, which is the upper year’s performance, imports of intermediate band of the corridor, by 75 bps to 9.25%, the goods accounted for the highest ratio within CBRT raised the late liquidity window rate our total imports figure with 73.9%, while it by 100 bps at once to 11%. Hence, average slimmed down by 6.5% year-over-year. weighted funding cost, which was 8.3% at the end of 2016, picked up by 200 bps and climbed Seasonally adjusted unemployment rate The CPI figure stood at to 10.3% at the end of January. decreased somewhat in the first half of 2017 with the positive impact lent by growth. Based 11.92% as at year-end During the course of the year, the CBRT on TurkStat’s data published in October 2017, 2017. pursued a monetary tightening policy through rate of unemployment was down by 1.5 points small rate hikes. After the little increases to 10.3%. In the same period, the rate of labor made during the year, the Bank raised the late force participation went up by 1.1 points to liquidity window rate by 50 basis points to 53.7% while the rate of employment was 48%. 12.75% on December 14th. Notwithstanding, IMF and OECD estimates for the 2017 ratio of the Turkish currency continued to depreciate. unemployment to labor force were 10.9% and As the visa crisis between the US and Turkey 11.1%, respectively. and the issues experienced with the EU countries led to deteriorated risk perception for Turkey, the USD/TL exchange rate went up to 3.90 and EUR/TL rate to 4.50. While the interest rate on the two-year benchmark bond climbed to its highest since June 2009
48 Anadolu Sigorta 2017 Annual Report Financial Information and Indicators Overview of the World and Turkish Insurance Industries and Future Outlook
Overview of the World and Turkish Insurance Industries and Future Outlook
Non-life insurance industry is anticipated to remain below the overall economic growth rates and to expand by 2.5% in 2017 and in 2018.
THE WORLD INSURANCE INDUSTRY and Maria, for the first time in history. Initial surveys show that Hurricane Harvey caused Non-life insurance industry is anticipated to insured losses of USD 24.5 billion in the first remain below the overall economic growth 8 months of 2017, whereas damages caused rates and to expand by 2.5% in 2017 and in by Irma are estimated around USD 55 billion. 2018. Profitability estimates also lag behind the These major climate-related disasters were expectations as they did last year. Technical accompanied by three major earthquakes results gradually get worse around the world in Mexico in September, the strongest one due to increasing competition, and low interest of which measured 8.1. While the financial environment and low investment income implication of these earthquakes, which also led decrease the profitability of the insurance to a high death toll, is yet to be determined, it industry.
40% is anticipated in the order of billions of dollars. The main factor allowing insurers to maintain Big reinsurance companies not only booked price competition despite lower profitability is losses in their Q3 balance sheets one after the the reinsurance costs, which slumped by 40% other as a result of this series of disasters, but over the past decade. Declined reinsurance some of them also announced that the said costs resulted from high capital supply, driven losses would result in a capital decline. Major by alternative reinsurance solutions, which reinsurers announced that they anticipate are also fed by mutual funds, and the absence reinsurance prices to pick up, let alone cessation The reinsurance of catastrophe losses that would significantly of the downturn. Some reinsurers even stated affect costs since 2011. that this increase should cover the entire costs slumped industry, including the countries and insurers As a moderate hurricane season had been unaffected by the hurricane losses. As the by 40% over the predicted for 2017 at the onset of the combined result of all these, reinsurance prices year, prices in the reinsurance industry past decade. are anticipated to go up by 5% to 15%, while were anticipated to be low as in preceding it still remains unclear whether this rise will be years. However, abnormal rises in seawater specific to certain regions and companies, or temperatures in the north hemisphere with whether it will be comprehensive. the arrival of the summer caused elevating the predictions initially to “above moderate” and 2017 has been an eccentric year not only in then to “high”. After that start, the hurricane terms of natural disasters, but also of manmade season ended with devastating damages in damages. Manmade damages to date, such as the Caribbean and the USA caused by three terrorist acts, chemical explosions and severe Category 1 hurricanes, namely Harvey, Irma fires, could be usually classified under such
Anadolu Sigorta 2017 Annual Report 49 Financial Financial Information and Indicators Status Overview of the World and Turkish Insurance Industries and Future Outlook
Overview of the World and Turkish Insurance Industries and Future Outlook
branches as liability, fire and engineering. THE TURKISH INSURANCE INDUSTRY However, the Wannacry cyber attack that Total premium production by the overall sector took place on 12 May 2017 and NotPetya that went up 15% year-over-year to TL 46,552 followed soon afterwards have been dissimilar million in 2017. A significant contributor to the in that they were not covered under any classic industry’s growth in this period has been the reinsurance branch despite the major economic Compulsory Auto Enrolment Pension System loss they caused. While the losses sustained that came into force as of 01 January 2017. by some companies due to NotPetya virus According to December 2017 data, the real attack amounted to USD 300 million, there has growth rate of the overall industry was been an unprecedented surge in demands for 2.7%. In this period, non-life branches got insurance providing cover against cyber risks. 85.3% share out of the total production with TL 39,708 million, whereas life insurance had 14.7% share with TL 6,844 million. As at end- December, nominal growth in non-life branches was 12.0%. Despite entailing a number of unknowns, 2018 is anticipated to see the insurance industry grow around 16%.
2017/12 2016/12 Premium Production Premium Production Change Branch Production (TL) Share% Production (TL) Share% (%) Accident 1,682,318,452 4.2 1,431,582,588 4.0 17.5 Illness/Health 5,026,464,106 12.7 4,226,078,010 11.9 19.0 Motor Vehicles 6,916,180,532 17.4 6,170,691,462 17.4 12.1 Motor Own Damage 6,916,180,532 17.4 6,170,691,462 17.4 12.1 Rail Vehicles 11,068 0.0 11,068 0.0 0.0
15% Aircraft 114,153,481 0.3 105,544,386 0.3 8.2 Watercraft 218,148,439 0.6 177,523,623 0.5 22.9 Marine 651,957,892 1.6 549,455,622 1.6 18.7 Fire and Natural Disasters 5,745,990,852 14.5 4,827,636,262 13.6 19.0 General Losses 4,355,445,077 11.0 3,498,930,670 9.9 24.5 Motor Vehicle Liability 13,042,053,210 32.8 12,931,210,415 36.5 0.9 Motor Vehicle TPL 12,475,773,706 31.4 12,433,651,634 35.1 0.3 Total premium Aircraft Liability 131,775,217 0.3 128,611,351 0.4 2.5 production Watercraft Liability 26,402,168 0.1 22,117,064 0.1 19.4 by the overall General Liability 1,023,855,057 2.6 816,065,370 2.3 25.5 sector went up Credit 173,718,087 0.4 171,623,322 0.5 1.2 15% year-over- Fidelity 50,021,130 0.1 30,392,023 0.1 64.6 year in 2017. Financial Losses 325,760,102 0.8 234,860,838 0.7 38.7 Legal Protection 225,033,131 0.6 123,119,421 0.3 82.8 Support 1,318,624 0.0 2,535,191 0.0 -48.0 Total Non-Life 39,710,606,624 85.3 35,447,988,684 87.6 12.0 Total Life 6,844,082,921 14.7 5,038,808,257 12.4 35.8 Grand Total 46,554,689,545 100.0 40,486,796,941 100.0 15.0 Source: Insurance Association of Turkey
50 Anadolu Sigorta 2017 Annual Report Based on non-life segment data for the premiums and claims pertaining to motor TPL first nine months of 2017, motor vehicle policies falling under the pool will be made liability branch that represents the largest in two phases. 50% of the premiums and portion of the industry’s market share posted claims will be shared equally by all insurance TL 122 million in technical loss, which shows companies; remaining 50% will be shared permanence. In the motor TPL segment pro rata the share they get from the traffic that makes up a substantial portion of this motor TPL insurance premiums for the last 3 branch, the loss figure was TL 239 million. years. This implementation is anticipated to Motor vehicles (own damage) branch, i.e. contribute positively to the industry. the other motor vehicle insurance branch, In order to eliminate the problems resulting registered a technical profit of TL 252 million. from non-issuance of Compulsory Medical Following motor own damage, the highest Malpractice Liability policies, the Sector profit generators in the industry were, in order, Announcement concerning Compulsory Medical accident with TL 532 million, and illness/ Malpractice Liability Insurance no. 2017/04 health with TL 301 million. Technical profit published by the Undersecretariat of Treasury figure for all branches combined was TL 1,660 set out the principles for sharing premiums and million. Nonetheless, the effect of the amount claims based on Article 12-1 of the Insurance of TL 2,148 million needs to be taken into Law no. 5684 and within the scope of the account, which was transferred from financial approval dated 05 September 2017 no. 22863 accounts to the industry’s financial statements. received from the Office of Deputy Prime At the bottom line, non-life segment booked Minister. It has been decided that the necessary 16% a profit of TL 1,747 million gross, and a profit procedures related to such sharing be handled of TL 1,219 million net with the effect of taxes by Güneş Sigorta A.Ş. According to 6-month and other liabilities in its financial statements data in 2017, the industry posted a loss of for the first nine months of 2017. TL 55 million in the said branch, 36% or TL 20.5 With the Regulation Amending the Regulation million of which pertains to our Company. on Tariff Implementation Principles in Upon the pool system’s launch, our Company’s Compulsory Motor TPL Insurance, which was share in relation to the relevant branch was 2018 is published in the Official Gazette issue 30121 disclosed as 19.18% for 2017. It is considered dated 11 July 2017, “Risky Insureds Pool” was that our technical loss in medical malpractice anticipated set up for high frequency level and/or vehicle branch will decrease with this implementation. to see the groups effective 12 April 2017. Sharing of insurance industry grow around 16%.
Anadolu Sigorta 2017 Annual Report 51 Financial Financial Information and Indicators Status Developments and Changes in Legislation
Developments and Changes in Legislation
Summary information about the key changes in the legislation published during 2017, which concern the Company’s operations and operating results, are presented below. Regulations Legislation Publication Content Date Regulation on Operating 20.9.2017 The regulation sets out the operating principles and Principles and Procedures procedures for participation insurance business with of Participation Insurance regard to the functioning, development, and healthy Companies (20.09.2017) monitoring of participation insurance, for ensuring the system’s reliability, and for safeguarding the rights and interests of participants. The regulation states that the management model needs to guarantee that the risk fund duly fulfills its obligations to participants and to ensure survival of the risk fund. It also mentions that the company acting as the risk fund manager is liable to ensure that each product offered in participation insurance segment is correctly priced for each risk without needing to borrow from the risk fund at any time. Furthermore, it is also said that in the event the risk fund fails to fulfill its legal and administrative obligations and that the reinsurance or participation reinsurance obtained fails to suffice, the company may cover the deficit by way of liquidity and the amount transferred to the risk fund may be covered from the positive balance accumulated in the fund in the future. Circulars Circular on Compulsory 10.4.2017 Upon its assessment of Compulsory Motor TPL Motor TPL Insurance Insurance, the Undersecretariat decided to enforce Premiums (2017/1) various principles and procedures governing compulsory motor TPL insurance, which would be implemented between 12 April 2017 and 31 December 2017, taking into consideration the mandatory nature of the said insurance and the need to keep the premiums at affordable levels for the insured, and based on the provisions of applicable legislation and within the frame of the approval no. 10271 dated 10 April 2017 from the Office of the Deputy Prime Minister. Accordingly, premium amounts to be set for Level 4 on the basis of each vehicle type must not exceed the premium amounts set by the Undersecretariat, and premium amounts to be applied to other levels must not exceed the discount/increase rates to be applied to Level 4 premium amounts declared by the Undersecretariat. Circular on Minimum 18.04.2017 As per Article 12-3 of the regulation concerning Survey Fees Tariff appointment of insurance surveyors, the Applicable for Insurance Undersecretariat set a fee tariff for branches other other than Motor Vehicle than motor vehicle insurance. Insurance (2017/3) Circular on the List of 11.05.2017 The said circular covers the list of reinsurers satisfying Reinsurance Companies financial and technical qualification criteria, which is Satisfying Financial and prepared by the Undersecretariat. Technical Criteria (2017/4)
52 Anadolu Sigorta 2017 Annual Report Circular on E-Application to 19.07.2017 The circular covers the arrangements regarding Insurance System (2017/5) the principles and procedures for applications to be forwarded by applicants through Insurance E-Application System (the System) via E-Government to related institutions (insurance and pension companies and other in-scope entities engaged in activities within the scope of insurance business). Accordingly, the application is directly forwarded to the related institution through the system. Within 15 days, the related institution is required to upload its letter in response to the system, which should be addressed to the applicant, cover the name(s), surname(s) and title(s) of individuals having signature power, and their signature(s). The related institution should also indicate subject matter of the application on the “list of application topics” available in the system, which should form the basis of reporting to be made as per Article 12-2 of the Regulation. Circular Amending the 24.08.2017 Article 1 of the Circular no. 2017/1 dated Circular no. 2017/1 dated 10.04.2017 on Compulsory Motor TPL Insurance 10.04.2017 on Compulsory Premiums has been amended as follows: “Premium Motor TPL Insurance amounts to be set for Level 4 on the basis of each Premiums (2017/6) vehicle type by insurers possessing license in the relevant branch must not exceed the premium amounts given in the table shown in the Circular. Maximum premium amounts in that table shall be increased by 1.5% monthly (based on the maximum premium amounts of the previous month) starting from September 2017.” Circular Amending the 15.09.2017 Article 1 of the Circular (2016/22) on Discounting Circular no. 2016/22 on Net Cash Flows from Outstanding Claims Provisions Discounting Net Cash Flows has been amended as follows: “Companies are Arising from Outstanding allowed to discount net cash flows to be generated Claims Provisions (2017/7) by outstanding claims provisions that they calculate and set aside in accordance with insurance legislation according to the following principles. However, discounts are obligatory in General Liability and Motor TPL branches.” Circular on the 01.11.2017 The Regulation on Tariff Implementation Implementation of Principles for Compulsory Motor TPL Insurance Compulsory Motor TPL (the Regulation) published in the Official Gazette Insurance (2017/8) issue 26582 dated 14 July 2017 sets out the basic principles regarding the issuance of compulsory motor TPL (traffic) insurance policies, the determination of their grades, discount and increase entitlement as per the grade they belong to, early termination and premium refunds, as well as principles to be implemented in certain cases giving rise to hesitations in practice. The said principles relate to policy issuance, establishing the policy to be taken as reference in determining the grades and the exercise of entitlement to discount/increase, early termination of the policy and premium refunds. Circular on Participation 01.11.2017 The Circular sets out the principles for calculation of Shares to be Transferred to participation shares to be transferred to Assurance Assurance Account (2017/9) Account in Motor TPL Insurance policies to be issued for passenger cars class. Accordingly, the fixed amount for the policy owner is TL 6. The fixed amount for the insurer will be determined according to the table given in the circular based on the Capital Adequacy Ratio as of the policy issue date communicated to the Undersecretariat within the frame of the Communiqué on Measurement and Evaluation of Capital Adequacy for Insurance, Reinsurance and Private Pension Companies.
Anadolu Sigorta 2017 Annual Report 53 Financial Financial Information and Indicators Status Developments and Changes in Legislation
Developments and Changes in Legislation
Circular regarding the 01.11.2017 Based on Article 98 of the Road Traffic Law amended Implementation of by Law no 6111 published in the Official Gazette the Regulation on the dated 25 February 2011, costs of healthcare services Procedures and Principles offered to victims in connection with traffic accidents for Collection of Healthcare are being covered by the Social Security Institution Costs Provided to Victims (the Institution), upon which the Institution is in connection with Traffic reimbursed by insurance companies and the Assurance Accidents (2017/10) Account. The said circular sets out the details about reimbursement, and principles and procedures for collection of healthcare costs provided to victims in connection with traffic accidents. Circular on the 01.11.2017 Article 7-1 of the Regulation stipulates that the Implementation of the Assurance Account must be notified 30 days prior Regulation on Compulsory to the policy expiration date that the Insurance Insurance Tracking Information and Monitoring Center (the Center) (2017/11) insurance cover will expire for Hazardous Materials and Hazardous Waste TPL Insurance, LPG Liability Insurance, Compulsory Personal Accident Insurance for Mine Workers and Compulsory Motor TPL Insurance policies. Furthermore, according to the circular, unearned premiums shall be returned without any deductions in cases where the obligation to obtain compulsory insurance has ceased to exist, such as discontinuation of operations or revocation of operation license, and provided further that the same is documented by the insurance owner. Circular on Incorrect 01.11.2017 The circular sets out the principles to be followed Insurance Practices during the notification of data concerning “faulty (2017/12) insurance practices” and “insurance fraud”, which are kept in the central database set up under the name SİSBİS (Insurance Abuses Information Sharing System) at the Insurance Information and Monitoring Center (the Center) pursuant to Article 12 of the Regulation on the Determination, Notification, Recording of Incorrect Insurance Practices, and Fighting Against Them (the Regulation), which are obtained from third parties and insurers, and which enable systematic risk assessment, and principles to be followed during the evaluation of these notifications and procedures related to existing SİSBİS records. Accordingly, SİSBİS allows real and legal persons to report cases suspected to be insurance abuses via the website at www.sbm.org.tr. At the Center, a unit that reports directly to the Center Director performs the necessary examinations and assessments pursuant to Article 14 of the Regulation. Application for correction of the record is conveyed by the Center to the entity making the assessment on the record within one business day in secure electronic environment, upon which the relevant entity will make the justified explanation regarding the record to the Center within seven business days. The related entity may request an additional time of 7 days maximum just for once and by disclosing the grounds for such request. The entity creating the relevant record may delete the record on SİBSİS by specifying the grounds along with the above mentioned explanation.
54 Anadolu Sigorta 2017 Annual Report Circular on the 01.11.2017 The circular sets out the principles to be applied Implementation of for Compulsory Hazardous Materials and Compulsory Hazardous Hazardous Waste TPL Insurance to be obtained Materials and Hazardous for the activities listed under Article 2 of the Waste TPL Insurance Minister of Councils decision no. 2010/190 dated (2017/13) 11 March 2010 on “Liability Insurance to be Obtained for Hazardous Materials” (the Decision). Accordingly, insurance can be obtained for the activities listed in the Decision with a single or separate policy(ies). Insured activity (e.g. storage, manufacturing) and materials (e.g. liquefied petroleum gases, compressed natural gas or air gas) must be explicitly specified on the policies as they are written in the Decision. Lack of a license for the activities listed in the decision does not prejudice the existence of insurance cover, whether there is an insurance contract or not. Sector Announcements Sector Announcement for 10.04.2017 Termination of compulsory Motor TPL contracts are Termination of Compulsory linked to the following principles: Motor TPL Insurance * If the operator changes, then the compulsory Contracts (2017/1) Motor TPL insurance contract is terminated within the frame of the procedures and principles stipulated by legislation. * Public institutions may terminate compulsory Motor TPL contracts for the purpose of maturity consolidation/matching. * Quotations may not be given for operators, which currently have compulsory Motor TPL contracts as displayed on the websites of insurance companies and Insurance Information and Monitoring Center. * However, quotations can be given and duplicate contracts can be issued for the new contract period on the websites of insurance companies and the Center from 30 days in advance of the expiration date of existing compulsory Motor TPL contracts. Sector Announcement 06.09.2017 The announcement states that Compulsory Liability on Compulsory Liability Insurance of Medical Malpractice policies issued Insurance of Medical as of 1 July 2017 are in-scope and transactions Malpractice (2017/4) related to these principles will be handled by an “Assessment Committee” made up of three people consisting of a representative each from the Undersecretariat of Treasury, Insurance Association of Turkey, and the company assigned with the management of premium and loss sharing process.
Anadolu Sigorta 2017 Annual Report 55 Financial Financial Information and Indicators Status An Assessment of Anadolu Sigorta in 2017
An Assessment of Anadolu Sigorta in 2017
Premium Production (TL thousand) 953,043 899,455 813,574 755,997 538,272 413,927 405,694 318,983 153,170 132,021 81,973 78,783 88,823 86,394 26,964 26,322
Accident Illness/ Motor Aircraft Watercraft Marine Fire and General Health Vehicles Natural Losses Disasters
Breakdown of Premium Production by Branches (%)
20.4 17.4
11.5
3.3 1.9 1.8 0.6
Accident Illness/ Motor Aircraft Watercraft Marine Fire and Health Vehicles Natural Disasters
56 Anadolu Sigorta 2017 Annual Report Anadolu Sigorta is an insurer active in non-life Activities) received in the amount of TL 377 branches, which include accident, illness/health, million, total premium production came to motor vehicles, aircraft, watercraft, marine, fire TL 4,671 million. and natural disasters, general losses, motor vehicle With 28.7%, motor vehicle liability branch liability, aircraft liability, general liability, credit, commands the biggest share of the total portfolio. bonding, financial losses and legal protection. This is followed by motor vehicle, fire and natural Premium Production and Technical Results disasters, and illness/health branches.
In 2017, direct premium production of Anadolu Sigorta reached TL 4,294 million; including the reinsurance premiums (Risky Insureds Pool, Medical Insurance Pool, Claims of Treaty 4,671,410 4,484,060 1,580,540 1,342,497 181,015 140,549 2,671 33,702 35,655 0 166 25,490 9,261 9,750 1,554 19,226
Motor Aircraft General Credit Bonding Financial Legal Total Vehicle Liability Liability Losses Protection Liability
28.7
8.9
3.9
0.8 0.1 0.5 0.2 General Motor Aircraft General Credit Bonding Financial Legal Losses Vehicle Liability Liability Losses Protection Liability
Anadolu Sigorta 2017 Annual Report 57 Financial Financial Information and Indicators Status An Assessment of Anadolu Sigorta in 2017
An Assessment of Anadolu Sigorta in 2017
Accident
Premium production in the accident branch was up 16.0% year-on-year and amounted to TL 153,170 thousand in 2017. Claims paid in this branch totaled TL 31,626 thousand. Although premium growth rate was not high, the loss/premium ratio that came to 19.9% helped the accident branch book a technical profit that augmented by 92.8% annually to TL 96,062 thousand in 2017.
Premium Production (TL thousand) Claims Paid (TL thousand)
153,170 31,626
132,021 24,271
2016 2017 2016 2017
Claims Ratio (%) Technical Profitability Ratio (%)
30.10 62.70
19.90 37.70
2016 2017 2016 2017
58 Anadolu Sigorta 2017 Annual Report Illness/Health
In 2017, premium production in the illness/health branch grew 32.7% year- on-year and amounted to TL 538,272 thousand, while claims paid totaled TL 409,591 thousand. After posting a technical profit of TL 2,294 thousand in 2016, the illness/health branch carried on with its positive performance in 2017 and ended the year with a technical profit of TL 9,183 thousand.
Premium Production (TL thousand) Claims Paid (TL thousand)
538,272 409,591
321,245 405,694
2016 2017 2016 2017
Claims Ratio (%) Technical Profitability Ratio (%)
85.50 1.70 81.40
0.60
2016 2017 2016 2017
Anadolu Sigorta 2017 Annual Report 59 Financial Financial Information and Indicators Status An Assessment of Anadolu Sigorta in 2017
An Assessment of Anadolu Sigorta in 2017
Motor Vehicles
Premium production on motor vehicles insurance went up by 6.0% year-on- year, amounting to TL 953,043 thousand in 2017. Claims paid in this branch in the same period went up by 14% to TL 700,099 thousand. After posting a technical profit of TL 63,461 thousand in 2016, the branch registered a technical profit of TL 73,009 thousand in 2017, up by 15.0% annually.
Premium Production (TL thousand) Claims Paid (TL thousand)
953,043 700,099 899,455 614,146
2016 2017 2016 2017
Claims Ratio (%) Technical Profitability Ratio (%)
76.30 7.70 69.70 7.10
2016 2017 2016 2017
60 Anadolu Sigorta 2017 Annual Report Aircraft
Premium production on aircraft insurance was worth TL 29,964 thousand while claims paid amounted to TL 158,916 thousand. After posting a technical profit in 2016, the aircraft branch booked a net loss of TL 4,774 thousand in 2017.
Premium Production (TL thousand) Claims Paid (TL thousand)
26,964 158,916 26,322
9,039
2016 2017 2016 2017
Claims Ratio (%) Technical Profitability Ratio (%)
353.70 29.20
21.10 -17.70 2016 2017 2016 2017
Anadolu Sigorta 2017 Annual Report 61 Financial Financial Information and Indicators Status An Assessment of Anadolu Sigorta in 2017
An Assessment of Anadolu Sigorta in 2017
Watercraft
In 2017, watercraft insurance premium production picked up by 12.7% year- on-year and amounted to TL 88,823 thousand. Claims paid in this branch went up from TL 36,240 thousand in 2016 to TL 67,619 thousand in 2017. After posting a technical profit of TL 10,558 thousand in 2016, the watercraft branch booked a technical loss of TL 2,368 thousand in the reporting period.
Premium Production (TL thousand) Claims Paid (TL thousand)
88,823 67,619 78,783
36,240
2016 2017 2016 2017
Claims Ratio (%) Technical Profitability Ratio (%)
128.10 13.40
65.00
-2.70 2016 2017 2016 2017
62 Anadolu Sigorta 2017 Annual Report Marine
During 2017, premium production in the marine branch rose by 5.4% to TL 86,394 thousand while claims paid amounted to TL 35,419 thousand. Technical profit was TL 29,259 thousand in 2017, which is 22.0% higher than it was in 2016.
Premium Production (TL thousand) Claims Paid (TL thousand)
86,394 35,419 81,973
19,680
2016 2017 2016 2017
Claims Ratio (%) Technical Profitability Ratio (%)
52.20 33.90
29.20
34.30
2016 2017 2016 2017
Anadolu Sigorta 2017 Annual Report 63 Financial Financial Information and Indicators Status An Assessment of Anadolu Sigorta in 2017
An Assessment of Anadolu Sigorta in 2017
Fire and Natural Disasters
Premium production on fire and natural disasters insurance policies was up 7.6% in 2017 and reached TL 813,574 thousand while claims paid amounted to TL 381,298 thousand. Having posted a technical loss of TL 12,146 thousand in 2016, fire and natural disasters branch displayed a positive performance in 2017 and booked a technical profit of TL 20,915 thousand.
Premium Production (TL thousand) Claims Paid (TL thousand)
813,574 381,298 755,997
303,054
2016 2017 2016 2017
Claims Ratio (%) Technical Profitability Ratio (%)
77.10 2.60 72.20
-1.60 2016 2017 2016 2017
64 Anadolu Sigorta 2017 Annual Report General Losses
During 2017, premium production on general losses insurance was up by 29.8% and amounted to TL 413,927 thousand. With the positive impact of the loss/ premium ratio coupled with growth, the branch upped its technical profit from TL 1,147 thousand in 2016 to TL 30,023 thousand in 2017.
Premium Production (TL thousand) Claims Paid (TL thousand)
413,927 199,891 188,702
318,983
2016 2017 2016 2017
Claims Ratio (%) Technical Profitability Ratio (%)
81.00 7.30 77.70
0.40
2016 2017 2016 2017
Anadolu Sigorta 2017 Annual Report 65 Financial Financial Information and Indicators Status An Assessment of Anadolu Sigorta in 2017
An Assessment of Anadolu Sigorta in 2017
Motor Vehicles Liability
Premium production on motor vehicle liability insurance, which is responsible for the highest share in the Company’s total premium production, declined by 15.1% in 2017 to TL 1,342,497 thousand, while claims paid amounted to TL 695,071 thousand. Technical profit in this branch, which was TL 27,569 thousand at year-end 2016, augmented by 110.5% in 2017 to TL 58,034 thousand. While the branch ceded premiums in the amount of TL 262,609,121 to the Risky Insureds Pool from the date the Pool became active until the end of 2017, i.e. between 12 April 2017 and 31 December 2017, the premiums taken over from the Pool amounted to TL 88,411,932.
Premium Production (TL thousand) Claims Paid (TL thousand)
1,580,540 695,071 663,669 1,342,497
2016 2017 2016 2017
Claims Ratio (%) Technical Profitability Ratio (%)
91.60 4.30 88.60
1.70
2016 2017 2016 2017
66 Anadolu Sigorta 2017 Annual Report Aircraft Liability
Premium production in the aircraft liability branch was TL 35,655 thousand in 2017, up by 5.8%. The technical profit in this branch amounted to TL 3,783 thousand corresponding to a technical profitability of 10.6%.
Premium Production (TL thousand) Claims Paid (TL thousand)
35,655 25,717 33,702
1,334
2016 2017 2016 2017
Claims Ratio (%) Technical Profitability Ratio (%)
43.00 10.60
8.40
-1.10 2016 2017 2016 2017
Anadolu Sigorta 2017 Annual Report 67 Financial Financial Information and Indicators Status An Assessment of Anadolu Sigorta in 2017
An Assessment of Anadolu Sigorta in 2017
General Liability
During 2017, general liability insurance premium production grew 28.8% and amounted to TL 181,015 thousand. While claims paid went up by 11.0% year-on-year to TL 43,562 thousand, the branch closed the year with a technical loss of TL 35,166 thousand. While the branch ceded premiums in the amount of TL 11,165,518 to the Medical Insurance Pool from the date the Pool became active until the end of 2017, i.e. between 1 July 2017 and 31 December 2017, the premiums taken over from the Pool amounted to TL 6,311,451.
Premium Production (TL thousand) Claims Paid (TL thousand)
181,015 43,562 39,256
140,549
2016 2017 2016 2017
Claims Ratio (%) Technical Profitability Ratio (%)
164.40
131.70
-19.40
-23.80 2016 2017 2016 2017
68 Anadolu Sigorta 2017 Annual Report Credit
The credit insurance branch realized a premium production of TL 2,671 thousand in 2017, and booked a technical profitability of 33.3%, translating into a technical profit figure of TL 890 thousand on its 2017 operations.
Premium Production (TL thousand) Claims Paid (TL thousand)
2,671 2,915
1,554
270
2016 2017 2016 2017
Claims Ratio (%) Technical Profitability Ratio (%)
56.10 159.30
33.30
-7.10 2016 2017 2016 2017
Anadolu Sigorta 2017 Annual Report 69 Financial Financial Information and Indicators Status An Assessment of Anadolu Sigorta in 2017
An Assessment of Anadolu Sigorta in 2017
Bonding
Premium production in the bonding branch, where production started during 2017, was worth TL 166 thousand, while no claims were paid. The technical profit in this branch was TL 2 thousand at the end of the reporting period, which corresponded to a technical profitability of 1%.
Premium Production (TL thousand) Technical Profitability Ratio (%)
166 1
0 0 2016 2017 2016 2017
70 Anadolu Sigorta 2017 Annual Report Financial Losses
Premium production in the financial losses branch totaled TL 25,490 thousand in 2017 and claims paid were worth TL 15,335 thousand. The financial losses branch posted a technical profit of TL 2,801 thousand at the end of the reporting period.
Premium Production (TL thousand) Claims Paid (TL thousand)
25,490 15,335
19,226
4,359
2016 2017 2016 2017
Claims Ratio (%) Technical Profitability Ratio (%)
70.80 12.60
11.00
30.60
2016 2017 2016 2017
Anadolu Sigorta 2017 Annual Report 71 Financial Financial Information and Indicators Status An Assessment of Anadolu Sigorta in 2017
An Assessment of Anadolu Sigorta in 2017
Legal Protection
Premium production in the legal protection branch stood at TL 9,750 thousand in 2017. The branch attained a profitability of 112.6% in 2017 for a technical profit of TL 10,976 thousand.
Premium Production (TL thousand) Claims Paid (TL thousand)
9,750 9,261 99 82
2016 2017 2016 2017
Claims Ratio (%) Technical Profitability Ratio (%)
1.70 112.60
96.40
-4.90 2016 2017 2016 2017
72 Anadolu Sigorta 2017 Annual Report Total
Anadolu Sigorta’s total premium production in 2017 was up 4.2% and reached TL 4,671,410 thousand, while claims paid grew by 23.3% to TL 2,755,951 thousand. As a result of the 1.6-point rise in loss/premium ratio, coupled with the strong impact of the income transferred from the financial division, the technical profit figure surged by 85.7% to TL 292,629 thousand.
Premium Production (TL thousand) Claims Paid (TL thousand)
4,671,410 2,755,951 4,484,060
2,236,015
2016 2017 2016 2017
Claims Ratio (%) Technical Profitability Ratio (%)
80.10 81.70 6.30
3.50
2016 2017 2016 2017
Anadolu Sigorta 2017 Annual Report 73 Financial Financial Information and Indicators Status An Assessment of Anadolu Sigorta in 2017
An Assessment of Anadolu Sigorta in 2017
Investment Income thousand remaining outside these amounts consists of income generated by the sale of Investment income grew by 76.3% to reach financial assets subject to repo trading. TL 859,808 thousand in 2017. The “financial investments valuation account”, The company, in 2017, derived TL 182,283 which consists of valuation income derived thousand as interest income on time from all equities, bills and bonds, mutual fund deposits, TL 33,357 thousand from the sale of shares, repo trading, and fixed-term deposits, government securities and private sector bonds, amounted to TL 52,103 thousand. and TL 12,962 thousand in dividend income from equities. The company booked currency translation gains in the amount of TL 430,646 thousand, A total of TL 26,474 thousand was booked most of which was derived in connection as income on sales of financial investments with SWAP transactions, while income from during the reporting period. TL 454 thousand derivatives were worth TL 90,116 thousand of this was from the sale of bills and bonds, in 2017. Income from Anadolu Sigorta’s while TL 13,719 thousand was from the sale of equity participations amounted to TL 28,000 equities, and TL 9,236 thousand was from the thousand. sale of mutual funds. The portion of TL 3,065 Investment Income (TL thousand) 2017 2016 Change (%) Income from Financial Investments 228,602 255,571 -10.6 Revenues from the Sales of Financial Investments 26,474 11,588 128.5 Valuation of Financial Investments 52,103 48,436 7.6 FX Gains 430,646 134,101 221.1 Dividend from Affiliates 28,000 24,000 16.7 Income from Real Estate 3,867 9,599 -59.7 Income from Derivatives 90,116 4,432 1,933.3 Other Investments 0 0 - Total 859,808 487,727 76.3
76.3% Investment Expenses in Financial Statements that went into effect on 1 January 2008. Other significant amounts Anadolu Sigorta’s investment expenses apart from this item within investment increased 74.2% to TL 879,646 thousand expenses included FX losses in the amount of in 2017. The biggest component of this TL 112,535 thousand, most of which was linked figure consisted of TL 542,114 thousand in to SWAP transactions as mentioned under investment income that was transferred to the investment income, losses from derivatives technical division, which was calculated based in the amount of TL 179,274 thousand, and on the Undersecretariat of Treasury Circular depreciation expenses in the amount of on the Procedures and Principles of Keys Used TL 28,081 thousand. During 2017, investment Investments Expenses (TL thousand) 2017 2016 Change (%) income went Investment Management Expenses (incl. interests) -385 -756 -49.1 up by 76.3% Devaluation of Investments -1,118 -1,644 -32.0 Loss from the Sales of Financial Investments -16,138 -15,270 5.7 to TL 859,808 Investment Expenses Transferred to the Technical Division -542,114 -379,849 42.7 thousand. Loss from Derivative Products -179,274 -3,616 4,857.2 FX Losses -112,535 -76,942 46.3 Depreciation Expenses -28,081 -27,016 3.9 Total -879,646 -505,094 74.2
74 Anadolu Sigorta 2017 Annual Report Financial Information and Indicators An Assessment of Anadolu Sigorta in 2017 Assessment of the Company Capital and Comments
Revenues, Income, Expenses and Losses from contributor to this account balance stems Other Operations from a TL 32,319 thousand charge against the reserves account, while the deferred tax assets The “revenues, income, expenses and losses account created a income effect of TL 5,702 from other operations” account stood at thousand. TL 35,958 thousand at year-end 2017. A major Revenues, Income, Expenses and Losses from Other Operations 2017 2016 Change (%) Provisions -32,319 -38,095 -15.2 Rediscounts -11,903 493 -2,516.4 Deferred Tax Asset Income 5,702 7,161 -20.4 Other Revenues and Income 2,772 3,179 -12.8 Other Expenses and Losses -210 -1,750 -88.0 Total -35,958 -29,013 23.9 Operating Results Key ratios concerning the company’s performance are shown in the chart below along with prior- year results for comparison. 2017 2016 Technical Profitability Ratio 6.3% 3.5% Claims Ratio 81.7% 80.1% Return on Equity 11.2% 7.2% Return on Assets 2.6% 1.5%
2017 2016 Change (%) Technical Division Balance 292,629 157,564 85.7 Investment Income 859,808 487,727 76.3 Investment Expenses -879,646 -505,094 74.2 Revenues, Income, Expenses and Losses from Other Operations -35,958 -29,013 23.9 11.2% Total 236,833 111,184 113.0 Income/Loss (Gross) 236,833 111,184 113.0 Tax Provisions -52,637 -23,317 Income/Loss (Net) 184,197 87,867 109.6 In 2018, the insurance industry is anticipated to Assessment of the Company keep growing, even though the rate of growth will be below the projections depending on the Capital and Comments implications of the geopolitical developments The key considerations that the companies in that took place by late 2016 and during the insurance sector will face in the years ahead In 2017, RoE 2017 in the world and in our country upon will be the satisfaction of potential capital rose to 11.2%. the economy. The Company’s goal will be to requirements that might arise in line with secure increased production in real terms and attain a sustainable profit, by further leveraging growth, and due management of the capital. the concepts of quality service, leadership, When planning for growth and profitability innovation and customer focus. Technical targets, Anadolu Sigorta observes capital needs results will be monitored closely, targeting as well. Attention is paid to ensure that the to increase technical profitability through company capital is at adequate level, taking improving loss premium ratios particularly in into consideration the regulatory requirements. unprofitable branches. In striving to achieve its Information on capital adequacy is presented in strategic goals, the company aims to further the relevant section of the notes to the financial increase its brand equity while continuing to statements. offer its services to the policyholders with strict adherence to its quality service concept as it has always done.
Anadolu Sigorta 2017 Annual Report 75 Financial Profit Distribution Policy Status
Profit Distribution Policy
The Profit Distribution Policy approved at the Dividend distribution formalities and processes 2013 Annual General Assembly convened on are carried out so as to be completed by no 25 March 2014 later than the end of the fiscal year in which the General Assembly Meeting is convened. The company’s profit distribution principles for shareholders and other people participating Pursuant to the company’s Articles of in the profit are governed by the applicable Incorporation, our employees are paid dividends requirements of the Turkish Commercial Code, up to three times of their salaries, which, in the Capital Market legislation and our Articles of aggregate, must not be in excess of 3% of the Incorporation. amount remaining after the first dividend is set aside. The dividend distribution proposals presented by the Board of Directors for the approval of The company may distribute advances on the General Assembly are prepared in a manner dividends in accordance with the principles to preserve the delicate balance between and procedures set forth in the Capital Market the expectations of our shareholders and the legislation. company’s need to grow, and taking into There are no preference shares in the company. consideration future expectations regarding the company’s operations, capital adequacy targets No founder’s bonus certificates are given, nor and the conditions prevailing in capital markets, are dividends paid to the members of the Board as well as the profitability of the company. Directors. The profit distribution policy espoused by the Board of Directors is based on the principle of proposing to the General Assembly the distribution of at least 30% of the net distributable profit for the period as bonus shares and/or in cash. In the event that the net distributable profit for the period calculated based on the legal records remains below 5% of the company’s paid-in capital, the Board of Directors may propose to the General Assembly that no dividends be distributed.
76 Anadolu Sigorta 2017 Annual Report Risks and an Risk Management Policies Adhered to by Types of Risks Assessment by the Governing Body
Risk Management Policies Adhered to by Types of Risks
The company’s risk policies and related Utmost attention is paid to maintaining a implementation procedures include written cash position in foreign currency for potential standards devised and enforced by the Board catastrophic risks equivalent to the lower limit of Directors and implemented by senior of excess of loss agreements, as well as known management. liabilities for any given period. Determined and enforced by the Board of The Board of Directors, taking into account Directors in parallel with international practices long-term strategies, equity capabilities, on the basis of insurance underwriting risk, returns to be derived and general economic credit risk, market risk, operational risk and expectations, sets the company’s risk tolerance, the risk of use of the company’s services which is then expressed in terms of risk limits. for laundering proceeds from crime and for In line with the procedures set in the Policies financing terrorism, these are general standards and in view of the market conditions in the that define the organization and scope of the relevant period, the Risk Management and risk management function, risk measurement Internal Control Department reports violations procedures, the duties and responsibilities of of limits submitted to the CEO and the Board the company’s Risk Management Committee, of Directors. as well as the procedures for determining risk Senior Management is responsible for limits, actions to be taken in possible limit implementation of Risk Management Policies. violations, and the compulsory approvals and For purposes of ensuring compliance with confirmations that are required to be given in policies, Senior Management means the CEO, various cases and circumstances. Deputy Chief Executive Officers, and relevant Besides insurance underwriting, credit, market Unit Managers and Regional Managers. On and operational risks, other risks can result the other hand, all authorized employees from the reciprocal and successive interaction performing the transactions regarded as a part of these risks. Therefore, an integrated of risk management processes are individually consideration should be adopted for all risk responsible for the accuracy and reliability of elements stemming from assets and liabilities all kinds of data and information they provide positions. The company’s basic strategy in relation to their respective jobs within the with respect to the distribution of long-term process, which form the basis of the making of assets and liabilities is to ensure consistency decisions. between assets and liabilities at optimum 1- Insurance Underwriting Risk Policy liquidity risk level so as to support the objective of maximizing returns. Accordingly, utmost Insurance underwriting risk is defined as a risk importance is given to the following points: that might arise from failure to correctly and effectively implement the insurance technique The basic objective of the company’s activity in within the process of turning coverage the money and capital markets is to generate provision for natural risks which are not known maximum possible return at a specified risk certainly if they will occur and for risks which level. The priorities in asset investments are, in are known for sure to occur but are unknown order of precedence, safe investment, liquidity time-wise into sustainable commercial and return. earnings. The scope of Insurance Underwriting When investing assets, the company takes into Risk Policies consists of the conditions and price account market and liquidity risks, portfolio of the coverage to be provided for the risk; the concentration risk, payables in high amounts principles applied in determining which of the such as known or foreseeable advance taxes, coverages provided will be ceded up to what corporate taxes, reinsurer payments and claims amounts and to whom in the case of risks payments, as well as receivables from insurance decided to be transferred; conducting effective activity. monitoring of risk portfolio loss frequency so Through scenario analyses and stress tests, the as to allow formulation of fitting reinsurance assets portfolio is exposed to various shocks strategies at sufficient frequency, and related and tested with respect to interest rates, monitoring and reporting system. exchange rates and share certificate prices. Management of insurance underwriting risk These tests are conducted at quarterly intervals is based on the principle of forming the risk at a minimum. portfolio with risks that represent a low
Anadolu Sigorta 2017 Annual Report 77 Risks and an Risk Management Policies Adhered to by Types of Risks Assessment by the Governing Body
Risk Management Policies Adhered to by Types of Risks
potential to cause loss. In order to avoid poor A credit risk scoring system used, which risk selection and incorrect pricing of insurance has the capability to be made use of in the policies and to create accurate reinsurance management of credit risk and decision- policies, effective monitoring is carried out making, to enable monitoring risk on the basis on loss frequency and loss severity of the of counterparties, to take notice of expected risk portfolio. The risk portfolio is separately and unexpected losses, and to allow for making overseen on the basis of agents, industry, the decisions based not only on the return branches, regions, brands, models, tariffs, derived or anticipated to be derived from the products, customers and other parameters. counterparty at any time, but also on the risk A comprehensive insurance underwriting underwritten. The risks of counterparties are risk reporting system is used to ensure regularly reported by the Risk Management and measurement of loss performance, oversee Internal Control Department to the CEO and compliance with applicable legislation and the Board of Directors. The Risk Management ensure reporting on the effectiveness of and Internal Control Department is also insurance underwriting risk controls. The risk of responsible for undertaking daily follow-up of the portfolio is regularly reported by executive regional, sectoral and market trends that have departments and the Risk Management and an actual or possible impact on the company’s Internal Control Department to the CEO and credit risk, and for reporting the results to the the Board of Directors. CEO and the Board of Directors. 2- Credit Risk Policy 3- Market Risk Policy Credit risk means the possibility of the Market Risk means the risk of loss in the value company’s sustaining loss due to failure on of the company’s placements in financial the part of policyholders, agents, reinsurers, borrowing instruments whose return is linked to fronting companies, coinsurers, and other interest rate; stock, other investment securities, parties to partially or totally fulfill their all FX or FX-indexed assets and liabilities in or obligations towards the company. It also off the balance sheet, derivative agreements indicates to the loss of market capitalization based on the said instruments, which loss might caused by the deterioration in the financial result from the volatilities in interest rates, standing of companies with which there stock prices and exchange rates. are subsidiary or affiliate relationships. The The basic and ultimate purpose of the Credit Risk Policy sets out the procedures and company’s activities in money and capital responsibilities related to the management, markets is to generate returns. The basis of control and monitoring of credit risk, as well as Market Risk policies is to measure, report and matters in relation to credit risk limits. keep under control the risk that the company is Early identification and definition of issues exposed to by reason of such activity. The top are of the essence for effective management priority is to ensure that the company’s Market of credit risk. For this purpose early warning Risk exposure is within the limits stipulated signals are determined; these are indicators by applicable legislation and is compliant with pointing at cases that will adversely influence the company’s risk appetite. In market risk the credit risk and lead to a credit risk that management, risk appetite is expressed in terms is above the company’s risk tolerance. For of market risk limits assigned to the executive insurance brokers, these are declined collection fund management unit and the contracted ratios, reduced production performances, asset management companies. Market risk slackened discipline in conforming to company limits are categorized into two groups: limits guidelines, and other data from intelligence. set employing the value at risk method, and For Reinsurance companies and counterparties, limits determined based on the ratio of each these cover all kinds of data and information group of investment securities to the total obtained in relation to negative ratings and portfolio and shareholders’ equity. The Risk developments. It is the duty and responsibility Management and Internal Control Department of executive units to obtain data and and executive fund management unit closely information in relation to credit risk. All kinds of and constantly monitor limit violations. In case information obtained are urgently considered limits are exceeded, the amount at which a within the frame of decision-making, limit is exceeded and its reasons are reported to monitoring, reporting and auditing processes. the CEO and the Board of Directors, along with
78 Anadolu Sigorta 2017 Annual Report the assessments of the executive body. If limit to risks that the company may be exposed to violations are above the ratios or durations set in relation to its activities. Effectiveness and by the Board of Directors, necessary action is adequacy of existing or subsequently developed determined by the Board of Directors. controls, and the implementation of action Market risk is calculated employing plans adopted in this regard are evaluated in internationally accepted statistical methods. coordination with the Risk Management and Since these calculations cover risk prediction Internal Control Department and the Board of for the following days, the accuracy of Inspectors. The Risk Management and Internal predictions are compared subsequently with Control Department monitors all operational actual values and monitored on a daily basis. risks that the company may be exposed to On the other hand, the portfolio is tested under during the course of its activities, and regularly different scenarios for determining the effects reports on the same to the CEO and the Board of occurrences, which pose a low probability of Directors. in terms of occurrence, but big volume in 5- Policy for Combating the Legalization terms of loss. The assessments, which include (Laundering) of Proceeds from Crime and the possible mismatches among types and Financing of Terrorism maturities of the company’s assets and This policy is intended to define, rate, monitor, liabilities, are regularly reported in detail to the assess and mitigate the risks the company CEO and the Board of Directors. is exposed to with respect to the use of the 4- Operational Risk Policy insurance service offered by the company in Operational risk is defined as any risk other laundering proceeds from crime or financing of than absolute insurance underwriting, credit terrorism. The ultimate goal can be achieved and market risks which might occur in the by effectively monitoring and supervising organization, business continuity, insufficient customers and transactions in full compliance or inoperative business processes, technology, with the applicable legislation and regulations. human resource, underperformance by The overall scope of the policy covers the individuals, administrative mistakes, activities centrally executed for defining, unfortunate events, misconduct, accident and measuring, monitoring, controlling and fraud, systems or external factors, legislation, reporting the risks that the company is management and business environment, and exposed to for reasons of the use of the which might cause physical or reputational loss insurance service offered by the company in to the company. laundering proceeds from crime or in financing Limits are introduced for potential operational of terrorism, or the company’s failure to fully risks that might arise during the activities comply with the liabilities imposed by the Law based on the “Company Risk Catalogue,” which no 5549 on Prevention of Laundering Proceeds is the basic document used in defining and from Crime and by related regulations and classifying all risks that may be faced with. communiqués. The Risk Catalogue is updated in parallel with The basic strategy of the company to achieve the changing conditions. “Self-Assessment the ultimate goal is to carefully plan, conduct Methodology” is used in the identification of and manage risk management activities operational risks. In this method, the risks in independently, impartially, purposefully, relation to activities conducted are exposed productively and efficiently, employing a risk- with the involvement of the personnel focused approach and in line with applicable performing the job. legislation and internationally accepted Qualitative and quantitative methods are used principles and standards. The basic principle jointly in the measurement and evaluation of in achieving this goal is to employ the most operational risk. The measurement process advanced tools and methods that are available uses data obtained from “impact - likelihood and possible to be used. Findings from risk analysis”, “control culture profile surveys” management, monitoring and control activities and internal and external “loss database.” are regularly reported to the Board of Directors When managing operational risk, efforts are by the Board Director who is delegated by the spent to develop controls to eliminate or Board of Directors in respect of this matter. mitigate the possibility of sustaining loss due
Anadolu Sigorta 2017 Annual Report 79 Risks and an Activities of the Committee of Early Determination of Risk Assessment by the Governing Body
Activities of the Committee of Early Determination of Risk
Pursuant to the provisions of the Communiqué It is well known that macroeconomic risks Serial: IV No: 56 on the Determination and and financial stability risks mostly result from Implementation of Corporate Governance global developments, as well as national Principles enforced upon its publication developments, in outward-oriented economies in the Official Gazette issue 28158 dated with a broad current deficit such as Turkey. 30 December 2011, it has been decided to set The key factors that fueled macrofinancial up a Committee of Early Determination of Risk risks particularly in recent years have been as of 27 February 2012. The committee will be the sudden changes in risk perceptions in responsible for carrying out all relevant works conjunction with the weak global economic and efforts for the early determination of risks outlook and the extremely volatile capital that might endanger the existence, progress flows. Although the global economic and survival of the company, implementation outlook is strengthening in general terms, of measures and remedies against identified geopolitical and political risks in particular risks, and management of the risk. keep pressuring growth. In this respect, the risks and uncertainties facing the growth of all The committee makes an assessment of the developing economies in general can be listed situation in its bimonthly reports submitted to as follows: the Board of Directors; the said report is also shared with the statutory auditor. • Geopolitical risks originating in North Korea and the Middle East, Risk Management Activities and Risk Assessment • Political crises taking place due to elections and referendums being carried The company’s risk exposure is monitored, out in different regions, assessed and controlled individually under the categories of insurance underwriting risk, • The rising protectionism tendency in credit risk, market risk and operational risk. foreign trade, The risk exposure arising out of the use of the • The uncertainties hovering over the course company’s insurance services for laundering of negotiations initiated for the Britain’s proceeds from crime or for financing terrorism, exit from the European Union, or out of failure to achieve full compliance with the obligations imposed by the Law no 5549 on • The Fed’s decisions regarding the Prevention of Laundering Proceeds from Crime monetary policy and potential effects and by related regulations and communiqués thereof on developing economies. is addressed independently from other types of These risks raise question marks about the risks as per the applicable legislation. sustainability of the liveliness observed in the When the company’s risk exposure is assessed markets, and keep the overall economic growth with respect to the magnitude of potential from realizing its true potential. impact of those risks; the effects of global, It is witnessed that the Turkish economy is national and near geography developments displaying a more positive performance as upon the technical and financial performance, compared with the previous year as a result the potential earthquake in İstanbul, and low of the steps taken to boost domestic demand. technical profitability gain the foreground. However, it is common knowledge that the When the company’s risk exposure is Turkish economy suffers from a stability assessed with respect to the magnitude of problem, stemming from its structure that is potential impact of those risks, the effects of unable to attain growth without producing developments in global and national economy current deficit, and is fragile in the face of upon the technical and financial performance, interrupted capital inflows. The financing of the potential earthquake in İstanbul, and low growth will continue to constitute a critical technical profitability come to the fore. agenda item for the Turkish economy.
80 Anadolu Sigorta 2017 Annual Report During 2018, the Fed’s decisions, geopolitical Although it is not deemed vital when a concerns, tensions with the USA and the EU potential earthquake in İstanbul is considered countries, domestic political agenda and the individually, a Contingency Action and Funding war and armed conflict in our near geography Plan and a Business Continuity Plan have might obviously lead to volatile periods in been formulated for the management of economy. Such a conjuncture might easily pave potential market, credit and operational risks the way for potentially significant deviations in that might be triggered simultaneously by various economic parameters, including credit such an earthquake and are likely to increase rates, loan utilization, housing and car sales, substantially. The operability of these plans is which are interrelated with the production tested at regular intervals. performance of the insurance industry. The Low operating profitability is at the top of the prevalent anticipation is that there will not be risk elements that are critical for the company, any evident rise or fall specific to any branch in which is the case also for all companies in the the overall demand for insurance in 2018. sector that are engaged in non-life branches. The compensation amounts that might result This predicament that results from excessive from earthquakes and other catastrophe risks price competition and prevents accumulation that exceed the upper limits of various existing of capital is anticipated to disappear gradually, agreements are of a nature that might lead the in parallel with the future depth to be achieved company to suffer losses of a magnitude that by the Turkish insurance industry. Another cannot be made up for in a typical operating expectation is that the problem of technical year. Modeling software is used to determine profitability will be mitigated significantly the magnitude of an earthquake in İstanbul and by the contribution to be lent to operational the potential losses that would arise therefrom, efficiency by company-wide projects conducted and the potential margin of error incorporated within the frame of a comprehensive in such software is also taken into consideration transformation program. when determining the final protection level. On the other hand, scenario analysis are employed to establish some uncertainties that cannot be calculated by modeling programs, such as personal injury, motor own damage claims, tsunami, post-earthquake fire, changes in our protection level due to volatile exchange rates, inflation, high level coverage in conjunction with loss of profit, and a portfolio that expands during the course of the year, whereas a certain safety margin is allowed for some other uncertainties. It is considered that the total amount of protection the company obtains for catastrophe risks is sufficient for a 1000-year earthquake, which is the minimum model according to the Reinsurance Strategy.
Anadolu Sigorta 2017 Annual Report 81 Other Matters Independent Auditor’s Report Related to Annual Report and Financial Statements
Convenience Translation into English of the Independent Auditor’s Report Related to Annual Report Originally Issued in Turkish
Güney Bağımsız Denetim ve Tel: +90 212 315 3000 SMMM A.Ş. Fax: +90 212 230 8291 Eski Büyükdere Cad. Orjin Maslak ey.com No: 27 Maslak, Sarıyer 34398 Ticaret Sicil No: 479920 İstanbul - Turkey Mersis No: 0-4350-3032-6000017
To the Shareholders of Anadolu Anonim Türk Sigorta Şirketi 1) Opinion We have audited the annual report of Anadolu Anonim Türk Sigorta Şirketi (“the Company) for the period of January 1 – December 31, 2017. In our opinion, the consolidated and unconsolidated financial information provided in the annual report of the Board of Directors and the discussions made by the Board of Directors on the situation of the Company are presented fairly and consistent, in all material respects, with the audited full set consolidated and unconsolidated financial statements and the information we obtained during the audit. 2) Basis for Opinion We conducted our audit in accordance with standards on auditing as issued by the Capital Markets Board of Turkey and 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 Annual Report 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) Our Auditor’s Opinion on the Full Set Financial Statements We have expressed an unqualified opinion in our auditor’s report dated January 29, 2018 on the full set consolidated and unconsolidated financial statements of the Company for the period of January 1 – December 31, 2017. 4) The Responsibility of the Board of Directors on the Annual Report In accordance with Articles 514 and 516 of the Turkish Commercial Code 6102 (“TCC”), the provisions of the Communiqué II-14.1 on the Principles of Financial Reporting In Capital Markets” (“the Communiqué”) of the Capital Market Board (“CMB”) and the Communiqué on Individual Retirement Saving and Investment System” (“Communiqué”) issued on 7 August 2007 dated and 26606 numbered, the management of the Company is responsible for the following items: a) Preparation of the annual report within the first three months following the balance sheet date and submission of the annual report to the general assembly. b) Preparation and fair presentation of the annual report; reflecting the operations of the Company for the year, along with its financial position in a correct, complete, straightforward, true and honest manner. In this report, the financial position is assessed according to the consolidated and unconsolidated financial statements. The development of the Company and the potential risks to be encountered are also noted in the report. The evaluation of the board of directors is also included in this report. c) The annual report also includes the matters below: • Subsequent events occurred after the end of the fiscal year which have significance, • The research and development activities of the Company, • Financial benefits such as salaries and bonuses paid to the board members and to those charged governance, allowances, travel, accommodation and representation expenses, financial aids and aids in kind, insurances and similar deposits. When preparing the annual report, the board of directors takes into account the secondary legislative arrangements published by the Ministry of Customs and Trade and related institutions. 5) Auditor’s Responsibilities for the Audit of the Annual Report Our aim is to express an opinion, based on the independent audit we have performed on the annual report in accordance with provisions of the Turkish Commercial Code and the Communiqué, on whether the consolidated and unconsolidated financial information provided in this annual report and the discussions of the Board of Directors are presented fairly and consistent with the Company’s audited consolidated and unconsolidated financial statements and to prepare a report including our opinion. The independent audit we have performed is conducted in accordance with InAS and the standards on auditing as issued by the Capital Markets Board of Turkey. These standards require compliance with ethical provisions and the independent audit to be planned and performed to obtain reasonable assurance on whether the consolidated and unconsolidated financial information provided in the annual report and the discussions of the Board of Directors are free from material misstatement and consistent with the consolidated and unconsolidated financial statements. The name of the engagement partner who supervised and concluded this audit is Seda Akkuş Tecer. Güney Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik Anonim Şirketi A member firm of Ernst & Young Global Limited
February 28, 2018 İstanbul, Türkiye
82 Anadolu Sigorta 2017 Annual Report Other Matters An Assessment of the Board Directors by the Corporate Governance Committee and Financial Statements
An Assessment of the Board Directors by the Corporate Governance Committee
Apart from the CEO, the Board of Directors which the General Assembly is authorized as consists of non-executive members. per the law and the Articles of Incorporation. Chairman of the Board and CEO functions are Without prejudice to the duties and powers carried out by different individuals. that cannot be delegated as set out in Article 375 of the Turkish Commercial Code and in Taking into consideration that there are no other articles, the Board of Directors may non-corporate ultimate shareholders with delegate management, in part of in whole, by a controlling interest in our company, it is way of an internal bylaws in accordance with thought that the Board Directors naturally Article 367 of the Turkish Commercial Code. possess the advantage to act independently and therefore, to be impartial in their decisions, The Board of Directors fulfills its responsibilities upholding the interests of our company and remaining outside the scope of its basic stakeholders above everything else. functions taking into consideration the opinions and recommendations of executive bodies and The Board of Directors meets regularly and at committees. Such responsibilities include, but least monthly as pre-scheduled, and at any are not limited to the following: time as and when deemed necessary. The Board of Directors met 12 times in 2017. The Board • Approving the company’s annual budget and Directors, in principle, attend every meeting. business plans, Care is paid to determine the Board meeting • Preparing the company’s annual reports and date during the immediately preceding finalizing the same to be presented to the meeting, followed by written invitation. It General Assembly, is intended to set the meeting date so as to • Ensuring that the General Assemblies are allow all Directors to participate, and save for held in compliance with the legislation and unforeseeable exceptional events, the Board the company’s Articles of Incorporation, meetings are held with the participation of all • Taking necessary action in relation to Directors. General Assembly decisions, • Approving the executives’ career plans and The Board meeting agenda is determined by rewarding provided to them, the Chairman of the Board of Directors in line with the proposals of the CEO and the Board • Determining the company’s policies about Directors. Shareholders, stakeholders and Public Relations, Utmost care is paid to ensure that the • Determining the company’s disclosure information and documents about the topics policy, covered in the Board meeting agenda are made • Setting the codes of ethics for the company available for the examination of the Directors and its employees, at least five days in advance, and when such • Establishing the operating principles of timing cannot be met, efforts are spent to committees; ensuring their efficient and ensure equal flow of information to the Board productive functioning, Directors. • Taking necessary action so as to ensure the Each Director is entitled to one vote and none company’s organizational structure responds has weighted vote or affirmative/negative to current circumstances, vetoing rights. • Examining the activities of former boards of Pursuant to the Articles of Incorporation, the directors. Board of Directors convenes on the basis of The Board of Directors consists of eleven absolute majority and makes decisions with the Directors, which number enables efficient absolute majority of Directors present in the organization of the activities of the Board. Two meeting. independent Directors serve on the company’s Board of Directors. Pursuant to the company’s Articles of Incorporation; Although there are no set rules on non- independent Directors’ undertaking other duties The Board of Directors is authorized to pass outside the company, the Directors do not have decisions on any and all acts and transactions any other duties apart from their natural duties that are necessary for the achievement of the in the entities they represent and from those in company’s operating scope, save for those for the establishments owned by the entities they
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An Assessment of the Board Directors by the Corporate Governance Committee
represent. Yet, Board Directors devote sufficient Directors just starting to serve on the Board are amount of time for company affairs, and offered an orientation program covering the exercise their powers prudently and within the following at a minimum: frame of good faith, possessing all necessary • Introduction with our executives and visits knowledge to ensure full performance of the to the company’s units, duty. • The CVs and performance assessments of Past experiences, and outside positions held, our executives, if any, of the independent Board Directors are • Strategic goals, current status and issues of disclosed in their résumés and presented on our the company, website and in our annual report. • Market share, financial structure and When fulfilling its decision-making function, performance indicators of the company. the Board of Directors acts on the basic Pursuant to legislation, general managers of consideration of: insurance companies must have graduated from a four-year university minimum, and • Maximizing the fair value of the company, have at least ten years experience in any one • Pursuing the company operations so as to of insurance, banking, economy, business ensure long-term and stable earnings for our management, accounting, law, finance, Shareholders, mathematics, statistics or engineering fields. • Maintaining the delicate balance between More than half of the Board Directors must the Shareholders and the company’s need have graduated from a four-year university to grow. minimum, and have knowledge and experience In the formation of the Board of Directors, care in at least one of the fields mentioned above. is given to; The Directors possess these qualifications and • Ensure that the nominees are present in the have; meeting at the time of election to the seats on the Board of Directors, • Satisfactory knowledge and skills in banking • Inform the Shareholders about the and insurance business, nominees, • The skill to read and analyze financial • Allow Shareholders to ask questions to the statements and reports, nominees, • Basic knowledge about the legal regulations • Inform the Shareholders, during the General governing our company, and about general Assemblies, on other companies on the market circumstances, boards of which Director nominees serve • The will and the opportunity to regularly and on the compliance or non-compliance attend the Board meetings for the period of to internal regulations set exclusively on this time for which they are elected to serve. topic. The Board of Directors adopted the necessary measures for preventing undisclosed information and/or trade secrets from being disseminated out of the company.
Fatih Gören Kemal Emre Sayar Deputy Chief Executive and Board Director and Member of the Corporate Governance Committee Member of the Corporate Governance Committee
Hasan Hulki Yalçın Prof. Savaş Taşkent Board Director and Board Director and Member of the Corporate Governance Committee Head of the Corporate Governance Committee
84 Anadolu Sigorta 2017 Annual Report Disclosure Policy
Disclosure Policy
Disclosure policy of our company, approved by Authorization and Responsibility the Board of Directors, is described herein. The Board of Directors is responsible and Any modification thereto, including the authorized for preparation, monitoring, justification will also be disclosed to public after auditing and improvement of public disclosure it is approved by the Board of Directors. policy of our company. Directors in charge of financial management and reporting General Framework and Investor Relations Department have Anadolu Anonim Türk Sigorta Şirketi fulfills its been appointed for the responsibility of obligations of public disclosure of financial and conducting and coordination of disclosure other type of information as required mainly by function under the policy. The officials of the the Law on Insurances and relevant regulations mentioned department perform their duties hereunder and Capital Markets Legislation, in coordination with the Audit Committee, Turkish Commercial Code and the legislation Corporate Governance Committee and the governing the Istanbul Stock Exchange (BIST), Board of Directors. through which our shares were listed and Public Disclosure Operations and Methods exchanged, in line with the generally accepted and Instruments Used accounting principles and corporate governance principles; therefore, it follows a detailed public Public Disclosure operations and methods and disclosure policy. instruments used for these operations under the legislation on insurances, Capital Markets Main purpose of the disclosure policy is Legislation, Turkish Commercial Code and other to ensure true, complete, convenient, less relevant legislation are described below: costly, understandable and fair conveyance of necessary information and disclosures, Financial statements and notes and other than those classified as trade secret, to explanations thereof for each quarter, which shareholders, investors, employees, clients, are Prepared in accordance with the legislation creditors, reinsurers and other concerned issued by the Undersecretary of Treasury, parties. Directorate General of Insurance and Capital Markets Board and signed with an attestation Having an active approach for the adoption by the Committee Members in charge of and implementation of Corporate Governance Audit and the Director General or Directors Principles, our company attaches utmost care in charge of financial reporting, and external for compliance with the requirements of the audit reports, issued annually semi-annually relevant legislation and best international are published on our website and reported to practices with respect to public disclosure. the Public Disclosure Platform (PDP) within Anadolu Anonim Türk Sigorta Şirketi Disclosure its legal deadline. Furthermore, our company Policy has been prepared within the scope of issues financial statements for each quarter above principles and put into practice after its and upload them to the portal managed by the approval by the Board of Directors. Undersecretary of Treasury and convey most Anadolu Anonim Türk Sigorta Şirketi uses Public of these statements also to the Turkish Insurers Disclosure Platform (PDP), Central Registry Union (TIU) for informative reasons. Institution (E-Company), Electronic General Disclosures for special cases, which must be Assembly System (EGAS), national/local notified pursuant to the Capital Markets Board newspapers, Turkey’s Trade Registry Journal (CMB) legislation, are notified to PDP within its and company’s official website for informing legal deadline. Disclosures for special cases are the public. published on the company website of Anadolu Sigorta on the next business day at the latest following the public disclosure and stays on the website for a duration of 5 years.
Anadolu Sigorta 2017 Annual Report 85 Other Disclosure Policy Matters and Financial Statements
Disclosure Policy
For the purpose of ensuring the confidentiality Press statements to printed and visual media during the time until the public disclosure may be made by the Chairman of the Board, of special cases, persons who have access to the Director General or its Deputy or other insider information are informed about the officials assigned by them. News about our requirements stemming from the relevant company published on national or international legislation. As for those who may have access media are followed by a professional media to insider information through the service monitoring agency. Therefore, in case of a supplied from them, their contracts include a necessity of a disclosure for special case, which clause of confidentiality. On the other hand, must be notified pursuant to the relevant Anadolu Sigorta carefully complies with the legislation, necessary briefing is made on the legislative requirements imposed by the Law subject gathering the departmental information on Insurance No. 5684 and relevant legislation from concerned departments. requiring the safekeeping the customers’ When making a statement to press on news secrets and not disclosing them to parties and talks, which are not classified as a special other than those who are explicitly authorized case disclosure by a legislation, type and by the law. This requirement binds not only content of the statement are defined according the Anadolu Sigorta employees but also the to certain factors such as the news’ feature, size employees of the companies through which the of the target audience of the media, whether company gets support services. the news affect the company reputation. In accordance with the legislation and If these news and rumors inherit a matter the provisions of the Company Charter, which requires the company to make a public announcements and notifications for changes disclosure, a special case disclosure is then to the Company Charter, General Assembly made in line with the provisions of relevant meetings, capital raise, reporting of year-end legislation. financial statements are given on the TTRJ International and national investor meetings and national newspapers. Documents and and road-shows are used to convey information information about the General Assembly are to shareholders and to other concerned parties. delivered to shareholders through Electronic These meetings and visits which were organized General Assembly System in line with the and managed by Investor Relations Department provisions of the Turkish Commercial Code. are sometimes attended by Director General, Each year before the General Assembly Directors in charge of financial management meeting, annual activity report, in line with and reporting and the personnel of the Investor the relevant legislation, is presented for the Relations Department. Where needed, the examination of shareholders with a view size of these contact teams may be enlarged. too include all necessary information and To ensure that all market participants are descriptions and is published on our website simultaneously and equally informed, the (Both in Turkish and in English) and reported reports and presentations disclosed during the to PDP. When requested, this report may be introductory and information meetings held obtained in print from our Investor Relations with investors are published on the company Department. website under the Investor Relations Section. Regular meetings and briefings are not part Investor Relations Department delivers via of our policy. Instead, where requested or e-mail necessary information, mainly financial needed to respond to questions raised by the statements, to shareholders, national and press members, press releases are made on the international investors and to those companies printed and visual media. which releases research reports on our company.
86 Anadolu Sigorta 2017 Annual Report Investor Relations Section of the official In addition to Members of the Board, Director website of our company (www.anadolusigorta. General and Deputy Director Generals, com.tr) includes detailed information and managers of certain departments, who data on our company. This section is managed have access to all information regarding and kept up-to-date by the Investor Relations the Company and who are entitled to take Department. All questions sent by all administrative decisions on matters such as stakeholders via e-mail, regular mail, phone, active-passive structure, profit-loss, cash-flow, etc. are answered at the shortest delay under strategic targets, (decisions, which may affect the coordination of the Investor Relations these matters at macro level) have also been Department. determined as persons with administrative responsibility. Other Notifications Official Website of Anadolu Sigorta: www. Notifications other than above are disclosed anadolusigorta.com.tr to public with signature of the officials whose power of signature was indicated in the Our company’s official website is actively company’s certificate of signature. used for informing the public and disclosure. The website includes all information and Forecasts data envisaged by the Corporate Governance In case of disclosure of forecasts for the Principles and Regulatory Authorities in Turkish company, which may affect the investor and English. This website is always kept decisions, the Board of Directors, Director updated with due care. General or other officials assigned by the E-Company platform may also be used in latter make necessary disclosures via Public communication with shareholders, a platform Disclosure Platform, activity reports or other which was established within Central Registry means defined by the legislation. In case of Institution in accordance with pursuant to the a significant difference between the issues provisions of Turkish Commercial Code on disclosed earlier and realizations, a statement websites, which can be accessed through “Bilgi may be released according to relevant Toplum Hizmetleri” link. Documents indicated legislation. in the relevant legislation can be accessed Defining the Persons with Administrative through this platform. Responsibility Persons with administrative responsibility are the members of the Board of Directors and those, who are not a member of the Board, yet, have regular access to internal information of our company, directly or indirectly, and who are entitled to take administrative decisions which may affect the future development and commercial ends of our company. Therefore, in defining the persons with administrative responsibility, the duties of the persons in the Company organization and the nature of the information which may be accessed by these persons are taken into account.
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Corporate Governance Principles Compliance Report
PART I - STATEMENT OF COMPLIANCE WITH Our company does not have a specific policy CORPORATE GOVERNANCE PRINCIPLES for the number of woman members on the Board of Directors. Our company firmly believes that Corporate Governance Principles are as critical as financial The principles that are not yet implemented, performance, and that putting these principles which are exceptional, have not led to any into practice bears utmost importance both for conflict of interest among the stakeholders to the development of national and international date. capital markets and for the best interests of our No changes were made to the company’s company. Articles of Incorporation at the Annual General Our company implements the principles Assembly Meeting convened on 24 March 2017 that are set as compulsory principles by the in accordance with the provisions of the Turkish Corporate Governance Communiqué Serial: Commercial Code no. 6102. II-17.1. The assessment and determinations of the level Within this context, the company’s Articles of compliance achieved by our company to the of Incorporation do not cover provisions corporate governance principles, and opinions stipulating; regarding the scope of the compliance level and ideas on its qualitative improvement are Stakeholder participation in the company’s presented below. management, PART II - SHAREHOLDERS Expansion of the scope of minority rights beyond the provisions of applicable legislation. 2.1 Shareholder Relations Department Hence, minority rights are not represented on An Investor Relations Unit has been set up in the Board of Directors. the company in 2005. Messrs. Fatih Gören, Murat Tetik, Barış Hüseyin Şafak, and Serkan Since the company’s Articles of Incorporation Ayvaz have been serving in the Investor do not include a provision about making Relations Unit. donations, the company does not have a donations policy. Amendment of our Articles The head of the unit is Mr. Fatih Gören, Deputy of Incorporation so as to allow donations Chief Executive, who also serves as a member within the frame of the CMB legislation has of the Corporate Governance Committee. also been submitted for the approval of related Contact information for our employees working authorities. in this unit is as follows.
Name Title Phone No E-Mail Mr. Fatih Gören Deputy Chief Executive +90 850 744 00 55 [email protected] Mr. Murat Tetik Manager +90 850 744 02 55 [email protected] Mr. Barış H. Şafak Supervisor +90 850 744 02 54 [email protected] Mr. Serkan Ayvaz Specialist +90 850 744 03 59 [email protected]
This unit plays an active part in the protection In essence, the Investor Relations Department of shareholding rights and facilitates their works to; exercise, mainly regarding the right to obtain · Ensure maintenance of the records about and review information, and establishes the Shareholders in a healthy, secure and up-to- communication between the Board of Directors date manner, and shareholders. All of the employees serving in the Investor Relations Department possess · Respond to the Shareholders’ and potential the required licenses. investors’ written information requests about the company, apart from those The Investor Relations Department reports its that are not publicly disclosed, are of a activities to the Board of Directors four times a confidential and/or commercial secret year, on a quarterly basis. nature,
88 Anadolu Sigorta 2017 Annual Report · Make available to the shareholders 2.2 Shareholders’ Exercise of Their maintaining the confidentiality of trade such information and disclosures that Right to Obtain Information secrets and/or undisclosed information. may have an effect on the exercise of All information queries of our shareholding rights on the company It is believed that all information Shareholders are answered, apart website in an up-to-date manner necessary for healthy exercise of from those that are trade secrets or Shareholders’ rights is made available Ensure that the General Assembly undisclosed information. to our Shareholders on our website, in Meetings are convened in accordance our annual report and material event Information requests received from with the applicable legislation, the disclosures in general, and through our shareholders are addressed by our Articles of Incorporation and other individual queries, in particular. employees in the shareholder relations internal regulations, unit, and are prudently responded to The Shareholders’ queries in relation to Prepare the documents the Shareholders in a timely, accurate and complete the legal and commercial relationships could make use of in the General manner, on condition that trade secrets between our company and the real Assembly, and confidential information shall be persons or legal entities with which protected. our company is directly or indirectly · Ensure that the results of the associated in terms of capital, voting are recorded and the reports Information on the topics our management or auditing are also thereon are communicated to the Shareholders frequently need and fulfilled to the extent permitted by the Shareholders, developments that might affect the applicable legislation. exercise of their rights are posted · Observe and monitor the fulfillment in English and Turkish languages All information that might affect the of all liabilities arising from the on our website accessible at www. Shareholders’ exercise of their rights capital market legislation, including anadolusigorta.com.tr. is made available to the same on our all requirements in relation to Internet site in an updated manner, with corporate governance and public Pursuant to applicable legislation, a view to expand their right of obtaining disclosure, minority Shareholders are entitled information. to request the General Assembly to · Ensure representation of our appoint a special auditor for examining 2.3 Information About General company in investor relations certain events. Assembly Meetings meetings organized in Turkey or abroad by international In 2017, our Shareholders did not In 2017, one General Assembly meeting establishments through participation request appointment of a special was convened which was the 2016 in such events, auditor from the General Assembly of Annual General Assembly meeting held Shareholders. on 24 March 2017. · Prepare the presentation materials to be used in meetings. Our Articles of Incorporation contain The said meeting was held with no provisions stipulating the request the participation of Shareholders In 2017, all verbal and written for appointment of a special auditor as representing 79.5% or a portion of information queries received from an individual right. On the other hand, TL 397.1 million of our paid-in capital of researchers and our investors in each shareholder’s request to have a TL 500 million. relation to our company and/or to special auditor appointed is reserved, publicly disclosed financial statement While the company’s Board Directors, provided that such shareholder satisfies results were answered. Requests for other relevant individuals, officials and the requirements under Article 438 of meetings received during the reporting auditors responsible for drawing up the the TCC. period from national and international financial statements, an official from the investment companies were accepted In view of the fact that the General Independent Audit Company auditing and necessary information was provided. Assembly of Shareholders must honor the financial statements of the company During 2017, the company participated the request for the appointment of and some employees participated in the in 3 investor conferences and 44 a special auditor pursuant to the meeting, other stakeholders or media investor meetings, 22 of them being legislation and that such request representatives did not attend the with foreign investment companies. constitutes one of the exceptions meeting. In these meetings, presentations were to the principle of adherence to the The announcement on the meeting made on our sector and our company, meeting agenda, it is assessed that invitation including the meeting place, and the investors’ questions were the stipulation of the request for the date, hour, agenda, and a specimen of a answered. appointment of a special auditor as proxy statement was published at least an individual right in the Articles of three weeks prior to the meeting date Incorporation will be considered in the in the Turkish Trade Registry Gazette, future depending on the developments, Posta and Habertürk daily newspapers, based on the concern that in practice it at www.anadolusigorta.com.tr, Central might lead to problems with respect to
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Corporate Governance Principles Compliance Report
Registry Agency (CRA) and Public Disclosure agencies that govern the company; the relevant Platform (in Turkish: KAP). Board of Directors decision, if the agenda covers changes to the Articles of Incorporation and the Care is taken that General Assembly former and new versions thereof. announcements cover: During 2017, neither the shareholders · The meeting date and hour possessing management control, nor Board · The meeting place, Directors, nor senior executives, nor their spouses or relatives by blood or marriage unto · Agenda, the second degree engaged in any transactions, · Necessary information about the agenda on their own or other’s behalf, that might lead items, to a conflict of interest with the company and/or its subsidiaries. If such a transaction is · Former and current versions of the planned, then prior approval shall be sought amended article(s) as approved by the and information shall be provided at the related authorities, if the agenda covers General Assembly meetings. any amendments to the Articles of Incorporation, In the event that transactions, for which the affirmative votes of the majority of · The body making the invitation, independent Board Directors are required and · The reason for postponement of the the approval of which has been referred to original meeting and the meeting quorum the general assembly by reason of dissenting for the current one, if the General votes cast, information shall be provided on Assembly is summoned to reconvene upon the General Assembly decision regarding the postponement of the original one for any actions taken in relation to such transactions. reason, During 2017, there were no transactions that had not been approved by the majority of · In ordinary meeting announcements, the independent Board Directors. address at which the annual report, financial statements, and other documents related to To facilitate participation in the General the General Assembly can be examined. Assemblies, utmost attention is paid to fully comply with the points stipulated by Financial statements and reports including the legislation, and it is believed that our the annual report; informative documents shareholders are not faced with any difficulties on the General Assembly meeting agenda with regard to participation in General items for which there was a need, and other Assemblies. To date, no notifications to the documents underlying the agenda items; the contrary were received from our Shareholders, latest version of the Articles of Incorporation either. and the amendment text, if applicable, and the grounds therefor, shall be made available at The shareholders were informed that the the company headquarters and branches for company did not make any charitable review by our shareholders from the date of donations or grants during the reporting period the announcement summoning the General under a specific agenda item at the General Assembly. Assembly Meeting. All information and documents related to the Minutes of the General Assembly meeting are General Assembly meeting are also accessible delivered to the shareholders upon conclusion on the company website at the address www. of the meeting, and are made available in anadolusigorta.com.tr. The following are also Turkish and English languages for electronic posted on the company website: total number access at our website at www.anadolusigorta. of shares reflecting the company’s shareholding com.tr, in order to keep non-participating structure and voting rights; grounds for the shareholders informed. dismissal or substitution of Board Director(s) In the preparation of the General Assembly and information on individuals to be nominated agenda, care is paid to include each proposal to the seats on the Board of Directors, if the under a separate heading, to word the agenda General Assembly meeting agenda contains such headings clearly and in a manner to avoid dismissal, substitution and/or election; additional different interpretations, and not to insert any items requested to be incorporated in the agenda items like “others” or “various” as also agenda by shareholders, Capital Markets Board prohibited by the applicable legislation. (CMB) and/or other government authorities and
90 Anadolu Sigorta 2017 Annual Report For Shareholders who will have Directors, authorized employees 10. Designation of the independent themselves represented in the General responsible for the preparation of audit firm Assemblies in proxy, a specimen of a financial statements and auditors, 11. Presentation of information on the proxy statement is publicized along with and other relevant people to offer donations and grants made during the the meeting announcements, and is also explanations on the agenda topics that reporting period made available to Shareholders on the are of specialty spend their best efforts electronic medium. to be present in the meeting. No agenda items have been proposed by our shareholders during the meeting. Topics that are communicated by our In General Assemblies, each agenda shareholders to the company’s Investor item is voted individually, and for Minutes of the General Assemblies Relations Unit, which they would the avoidance of doubt in relation to are accessible in electronic medium in like to be included in the agenda, are voting results, the votes are counted Turkish and English languages at the considered by the Board of Directors in and the results are announced to website at www.anadolusigorta.com.tr the preparation of the agenda. the Shareholders before the General or in written form. Assembly is concluded. Pursuant to the applicable legislation 2.4 Voting Rights and Minority Rights and to the Articles of Incorporation, At the Annual General Assembly held on ordinary general assembly must be held 24 March 2017, shareholders ratified all The company’s capital is divided into within three months following the end of the agenda items below unanimously 50,000,000,000 shares each with a value of each fiscal year. or by majority of votes: of TL 0.01 and entitling their holders to one vote. In line with our Articles of Incorporation, 1. Opening, election of the Presiding General Assemblies are held in the place Board and authorization of the Presiding There are no cross-shareholding where our company headquarters is Board to sign the minutes of the Annual interests between any Shareholder and located and at a venue that will enable General Assembly the company. participation by all our Shareholders. 2. Presentation of and discussion on the The company’s Articles of Incorporation Total number of votes that may be Board of Directors’ 2016 Activity Report, do not set the minority rights to be less cast during the General Assembly is and presentation of the Independent than one twentieth of the capital. classified on the basis of Shareholders Audit Report for 2016 fiscal year Minority shares are not represented in and provided to the Shareholders at the 3. Reading out the main headings our Board of Directors, which is elected beginning of the meeting by means of of 2016 financial statements; their under the discretion of the General their insertion in the list of attendants. deliberation and approval Assembly. Questions posed by our Shareholders 4. Presentation of information that There are no upper limits with regard to the Board of Directors are answered, Mr. Hasan Hulki Yalçın, member of to the number of votes that our provided that such questions are the Company’s Board of Directors, Shareholders are allowed to cast in the essential for exercise of shareholder continues to serve as a Board member General Assemblies. rights and are not trade secrets. and General Manager of Milli Re, our No shares are privileged in terms of The General Assembly Chairman chairs Company’s principal shareholder, under voting. the meeting efficiently and in a manner the principle no 1.3.6 of the CMB to ensure that Shareholders can exercise Corporate Governance Principles, Voting right arises at the time the share their rights. is acquired and there are no provisions 5. Individual acquittal of Board Directors stipulating exercise of the voting right Care is taken to answer every question 6. Information on dividend distribution after lapse of a certain period of time raised during the General Assembly policy and approval of profit distribution after the date of acquisition. by the shareholders during the same proposal updated in accordance with meeting. If the question raised is Our Articles of Incorporation contain no the sector announcement issued by the not relevant to the agenda or is provisions preventing non-Shareholders Undersecretariat of Treasury, too comprehensive to be answered from casting votes in proxy in the promptly, then the Investor Relations 7. Election of the Board Directors and capacity of representatives. Department provides written answers determination of their terms of office Shareholders may exercise their within no later than 15 days. All voting rights personally in the General questions raised during the General 8. Authorizing the Board Directors to perform the transactions specified in Assemblies or via a third party that may Assembly Meeting and the answers or may not be a Shareholder. provided thereto are publicly disclosed Articles 395 and 396 of the Turkish on the company’s website within 30 Commercial Code Each real person Shareholder is days following the date of the General 9. Determination of remuneration for represented in the General Assemblies Assembly, the latest. the members of the Board of Directors by one person only; in the case that legal entity Shareholders are
Anadolu Sigorta 2017 Annual Report 91 Other Corporate Governance Principles Compliance Report Matters and Financial Statements
Corporate Governance Principles Compliance Report
represented by several people, only one may Cash dividends in the amount of TL 30 million cast votes. The person empowered to vote is were paid out in 2017. named in the certificate of authority. 2.6 Transfer of Shares 2.5 Entitlement to Dividends The company’s Articles of Incorporation The important aspects covered in the contain no provisions restricting the transfer of company’s Dividend Distribution Policy are shareholding interests. presented below. The said policy is presented All our Shareholders are treated equally, in the General Assembly Meeting for the including minority and foreign Shareholders. information of shareholders, and published in the company’s annual reports and posted on PART III - PUBLIC DISCLOSURE AND the corporate website. TRANSPARENCY The company’s Articles of Incorporation 3.1 Company Internet Site and Its Content set forth it as a principle to distribute first dividends out of the distributable profit in The company has an Internet site prepared in the ratio to be set by the General Assembly Turkish and English languages, accessible at in accordance with the Capital Markets Board the address www.anadolusigorta.com.tr. The requirements. company website is actively used in providing information and public disclosure. Dividend distribution proposals laid down for the approval of the General Assembly The company website features the information by the Board of Directors are formulated so and data stipulated by the Corporate as to preserve the delicate balance between Governance Principles and regulatory the expectations of our Shareholders and the authorities. company’s need to grow, and paying due regard Attention is paid to comments and suggestions to the future expectations for the company’s received via our website and are taken into operations, capital adequacy targets and the consideration at the company. Care is paid to prevailing conditions in the capital markets, as keep the website up-to-date. well as the profitability of the company. The company’s letterhead contains the website In the event that the Board of Directors address. proposes against distributing profit to the General Assembly, the reasons therefor and 3.2 Annual Report information on the use of retained earnings The company’s annual reports are prepared in shall be presented to the shareholders during sufficient detail to cover the information listed the General Assembly. The same will also be in Corporate Governance Principles. included in the annual report and posted on the corporate website. The annual activity report is prepared by the Board of Directors and incorporates the The dividend policy espoused by the Board of declaration that financial statements present Directors is based on the principle of proposing a true and fair view of the company’s financial to the General Assembly the distribution of at status and that the company achieved full least 30% of the net distributable period profit compliance with the legislation. as bonus shares or in cash. PART IV - STAKEHOLDERS No shares are privileged in terms of getting share from the profit. 4.1 Keeping Stakeholders Informed No founder’s bonus certificates are given, nor In matters concerning our Shareholders, are dividends paid to the Board Directors. employees, creditors, customers, suppliers, various NGOs, the Government and potential Pursuant to the Articles of Incorporation, our investors that might consider investing in our employees are paid dividends up to three times company, i.e. the stakeholders, care is taken to of their salaries maximum from the amount provide information in writing and to base the remaining after the first dividend is set aside. relations with such parties on written contracts Care is paid to effect the dividend payments as as much as possible (through electronic mail, soon as possible, taking into consideration the corporate website, Public Disclosure Platform). time stipulated by the legislation.
92 Anadolu Sigorta 2017 Annual Report In cases where the rights of stakeholders In decisions on training, transfer and Within the frame of its commitment are not regulated by the legislation promotion, objective data are used and to social responsibility, our company or contractually, the interests of the the company’s interests are observed as extends support to education, academic stakeholders are protected within the much as possible. activities, sports organizations, and framework of the rules of good faith cultural and artistic events. Through Training plans are formulated aimed at and to the extent permitted by the the “One Master, Thousand Masters” developing our employees’ knowledge company’s facilities, observing the social responsibility project launched and skills. company’s credibility at the same time. in 2010 and currently in progress, it is The necessary structure is in place to Company employees are members intended to focus the public attention enable stakeholders to report such of the Bank and Insurance Employees on vanishing vocations and local values, transactions of the company that are Union. and to help revive them. contradictory to the legislation or are unethical. Safe working environment and PART V - BOARD OF DIRECTORS conditions are provided for our 5.1 Structure and Formation of the 4.2 Stakeholder Participation in employees; work is undertaken to Board of Directors Management improve these conditions depending on social and technological necessities. While the Articles of Incorporation The company’s Board of Directors is composed of eleven members so as contain no provisions on stakeholder Decisions made in relation to our to enable our Board Directors to work participation in the company’s employees or developments concerning efficiently and constructively, make management, the company’s internal them are shared with the employees. regulations cover practices to this end. decisions swiftly and rationally, and Measures are adopted to prevent organize the formation and activities of An employee proposal guideline has discrimination on the basis of race, the committees efficiently. been formulated. Proposals that are religion, language and sex among the Résumés of our Board Directors are innovative and aimed at improvement employees, to ensure human rights are published on the corporate website and are assessed within the framework of respected and to protect the employees in our annual report. this guideline and put into life across the against internal physical, mental and company. emotional abuse. Taking into consideration that there are no non-corporate ultimate Stakeholders’ opinions and complaints The company does not appoint a Shareholders with a controlling interest are followed up on by the Audit representative to carry out the relations in the company, it is thought that the Committee. with our employees. Yet, there are union Board Directors all naturally possess representatives who are designated by Agencies Meetings, İşbank Branches the advantage to act independently, the Union of Banking and Insurance Meetings and Managers Meetings and therefore, to be impartial in their Workers organized at our company are held, where the stakeholders, i.e. decisions, upholding the interests of our from amongst our headquarters and employees and suppliers, share their company and the stakeholders above regional branch employees to handle opinions. everything else. the relations with employees. 4.3 Human Resources Policy There are two independent members on The employee Compensation Policy is the Board of Directors. The independent The basic principles of the company’s posted on the corporate website. Board Directors have not served as human resources policy are stated No complaints have been received members for more than six years in the below. on account of discrimination among past ten years. Term of office for all Job descriptions and distributions, along company employees. Board Directors is one year. with the performance criteria are set 4.4 Codes of Ethics and Social The Corporate Governance Committee, by the company management and Responsibility functioning as the Nomination announced to the employees. Hiring Committee, prepares reports on activities are based on the principle of Codes of ethics setting out the whether all nominees to serve as giving equal opportunities to people of professional ethics that the company independent Board members satisfy the equal qualities. Criteria for hiring are put and its employees are required to abide independence criteria, which are then into writing on the basis of titles and are by when performing their activities presented to the Board of Directors. followed in practice. within the existing laws and regulations is posted on the corporate website. Independent Board Directors fulfill Succession planning is made to identify the independence criteria published the new managers to be appointed in Attention is paid that the projects in the relevant legislation, and their cases where it is predicted that changes offered with cover are in compliance declarations of independence have in a managerial position will cause with the applicable environmental been duly received and incorporated in hitches in the management of the safety and public health legislation. the annual report. No instances took company.
Anadolu Sigorta 2017 Annual Report 93 Other Corporate Governance Principles Compliance Report Matters and Financial Statements
Corporate Governance Principles Compliance Report
place during the reporting period, which would Apart from the CEO, the Board of Directors compromise independence. If an instance consists of non-executive members. Chairman compromising independence arises, then the of the Board and CEO functions are carried out independent Board Director shall present such by different individuals. change immediately to the Board of Directors Information about our Board Directors is to be disclosed to the public. In such a case, presented below. the Board Director who loses his independence shall resign as a matter of principle.
Executive / Non- Title Held in Professional Name Title Degree Executive Entity Worked the Entity Experience Caner Çimenbiçer Chairman Bachelor’s Faculty of Non- - - 43 years Administrative Sciences Executive Hakan Aran Deputy Bachelor’s Faculty of Non- Türkiye İş Bankası Deputy Chief 27 years Chairman Engineering Executive A.Ş./In-Group Executive Officer İlhami Koç Member and Bachelor’s Faculty of Executive Anadolu CEO 31 years CEO Political Sciences AnonimTürk Sigorta Şirketi Kubilay Aykol Member Bachelor’s Faculty of Non- Türkiye İş Bankası Section 20 years Administrative Sciences Executive A.Ş./In-Group Manager Ömer Faruk Cengiz Member Bachelor’s Faculty of Non- Türkiye İş Bankası Section 18 years Administrative Sciences Executive A.Ş./In-Group Manager Hafız Ekrem Kürkçü Member Bachelor’s Faculty of Non- Türkiye İş Bankası Section 24 years Education Executive A.Ş./In-Group Manager Kemal Emre Sayar Member Master’s Faculty of Non- Türkiye İş Bankası Unit 18 years Engineering Executive A.Ş./In-Group Manager Cengiz Tezel Member Master’s Business Non- Türkiye İş Bankası Branch 26 years Administration Executive A.Ş./In-Group Manager Hasan Hulki Yalçın Member Master’s Banking & Non- Milli Reasürans CEO 28 years Finance Executive T.A.Ş./In-Group Prof. Savaş Taşkent Independent Bachelor’s Faculty Non- - - 46 years Member of Economics and Executive Administrative Sciences Assoc. Prof. Atakan Independent Master’s Faculty of Non- Özyeğin Faculty 17 years Yalçın Member Engineering Executive University/Non- Member Group
When fulfilling its decision-making function, In the formation of the Board of Directors, care the Board of Directors acts on the basic is given to; considerations of; Ensure the attendance of nominees to the Maximizing the fair value of the company, meeting during the election to the seats on the Board of Directors, Execution of company operations so as to ensure long-term and stable earnings for our Inform the Shareholders about the nominees, Shareholders, Allow Shareholders to ask questions to the Maintaining the delicate balance between the nominees. Shareholders and the company’s need to grow. Our Board of Directors takes care to hold regular monthly meetings. Approval of the majority of independent Board Directors is sought for the Board of Directors decisions pertaining to all kinds
94 Anadolu Sigorta 2017 Annual Report of the company’s transactions with Past experiences, and outside positions topics covered in the Board meeting related parties of material nature as held, if any, of the independent Board agenda are made available for the specified in the Corporate Governance Directors are disclosed in their résumés examination of the Directors at least Principles Communiqué, to company and presented on our website and in our five days in advance, and when such transactions of an ongoing nature, annual report. timing cannot be met, efforts are spent to purchases/disposals of a material to ensure equal flow of information to 5.2 Operating Principles of the Board nature, and to furnishing guarantee, the Board Directors. of Directors pledge and mortgage in favor of third Each Director is entitled to one vote and parties. If majority of the independent The Board meeting agenda is none has weighted vote or affirmative/ Board Directors do not approve the determined by the Chairman of the negative vetoing rights. transaction, this is publicly disclosed, Board of Directors in line with the providing adequate information on proposals of the CEO and the Board The Board of Directors convenes on the the transaction within the frame of Directors. basis of majority of its full membership public disclosure requirements. If the and decisions are passed with the The Board of Directors met twelve times transaction in question is a related party majority of Directors present in the in 2017. transaction or a material purchase/ meeting. disposal, then it is also laid down for the Care is paid to determine the meeting The company’s Board Directors are approval of the General Assembly. The date so as to allow all Directors to insured with an annual coverage of matter is decided in the said General participate. Save for unforeseeable USD 75 million against the risk of loss Assembly meetings through voting exceptional events, the Board meetings they may cause to the company due to where the parties to the transaction are held with the participation of all their fault in the performance of their and their respective related parties Directors. may not cast votes, thus involving duties. Attention is given to set the Board other shareholders in such decisions 5.3 Numbers, Structures and meeting date during the immediately at the General Assembly. Meeting Independence of Committees within preceding meeting, followed by written quorum shall not be sought for General the Board of Directors Assembly meetings that will be held invitation. There is an Audit Committee, a for circumstances specified in this The existing secretariat responsible Corporate Governance Committee and article. Decisions are made with the for execution of the Board a Committee of Early Determination of simple majority of those eligible to cast activities, keeping the Directors and Risk in our company. votes. Board of Directors and General auditors informed, and establishing Assembly decisions passed in violation communication with them was Owing to the structure of the Board of the principles herein shall be null and transformed into Board of Directors of Directors, Corporate Governance void. Reporting Unit in 2005. Committee also fulfills the functions of Nomination Committee and There are no administrative or judicial The Board of Directors decisions Remuneration Committee. sanctions imposed against the company passed in 2017 were adopted with or the members of the governing body. the unanimous votes of the members There are two non-executive There are no woman members on our present in those meetings. Board Directors in each one of the Committees. Board of Directors, nor is there a policy The Board of Directors holds its first on this matter. meeting preferably on the date the As a matter of principle, Board Although there are no set rules on non- same is elected. Directors do not undertake roles in several committees. However, since independent Directors’ undertaking During the first meeting, the chairman all members of the Audit Committee other duties outside the company, and the deputy chairman of the board and the chairman of the Corporate the Directors do not have any other are elected, and decisions are made on Governance Committee must be duties apart from their natural duties the job distribution and establishment elected from amongst independent in the entities they work for and from of committees. those in the establishments owned by Board Directors, our independent the entities they work for. Yet, Board Board Directors, in principle, attend Board Directors serve on two different Directors devote sufficient amount of every meeting. committees. time for company affairs, and exercise The Board of Directors takes care to The Corporate Governance Committee their powers prudently and within meet regularly and at least monthly as establishes whether the corporate the frame of good faith, possessing pre-scheduled, and at any time as and governance principles are implemented all necessary knowledge to ensure full when deemed necessary. in the company, as well as the grounds performance of the duty. for non-implementation, if applicable; Utmost care is paid to ensure that the identifies conflicts of interest, if any, information and documents about the arising from failure to fully comply
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Corporate Governance Principles Compliance Report
with these principles, and presents proposals managing the risks. The committee reviews the to the Board of Directors for the improvement risk management systems at least once a year. of relevant practices. The committee also Prof. Savaş Taşkent, Mr. Hasan Hulki Yalçın, works to create a transparent system regarding Kemal Emre Sayar and Mr. Fatih Gören serve identification, assessment, training and on the company’s Corporate Governance rewarding of nominees eligible for the Board Committee. The Committee is headed by of Directors, and to establish related policies Prof. Turkay Berksoy. and strategies. The Corporate Governance Committee develops proposals regarding the Prof. Savaş Taşkent functions as the head of numbers of the members of the Board of the Audit Committee, and Assoc. Prof. Atakan Directors and executives. It is also charged with Yalçın as its member. establishing and overseeing the approaches, principles and practices in relation to the The Committee of Early Determination of Risk performance evaluation, career planning and is headed by Assoc. Prof. Atakan Yalçın, where rewarding of Board Directors and executives. Hakan Aran serves as a member. The committee performs the activities specified All members of the Audit Committee and the in the Compensation Policy and coordinates the heads of other committees are elected from activities of the Investor Relations Department. amongst independent Board Directors. The Audit Committee oversees the The company’s CEO does not serve on any operation and efficiency of the company’s committee. accounting system, public disclosure of financial information, independent auditing, Structures and operating principles of internal control and internal audit systems. committees have been put into writing and The committee supervises the selection of posted on our company website. the independent audit firm, preparation of Taking into consideration that there are no independent audit contracts and initiation of non-corporate ultimate Shareholders with independent audit process, and every phase a controlling interest in the company, it is of the work carried out by the independent thought that the Board Directors all naturally audit firm. The Audit Committee determines possess the advantage to act independently, the independent audit firm from which the and therefore, to be impartial in their decisions. company will procure services and the services to be supplied therefrom, and submits the same 5.4 Risk Management and Internal Control for the approval of the Board of Directors. Mechanism The Audit Committee assesses the conformity Set up in 2006 in order to restructure the risk of annual and interim financial statements management systems and processes, the Risk to be publicly disclosed to the accounting Management Department’s activities were principles pursued by the company, as well expanded in scope to cover internal control as their accuracy and fairness, and reports its activities within the frame of the provisions written assessments to the Board of Directors, of the “Regulation on the Internal Systems of by incorporating the opinions of the company’s Insurance, Reinsurance and Pension Companies” responsible managers and of the independent published in the Official Gazette issue 26913 audit firm. dated 21 June 2008. Along the same line, the Department was renamed to Risk Management In 2017, the Audit Committee met six times, and Internal Control Department. recorded the outcomes of the meetings in minutes and submitted the decisions adopted The primary objectives of the Department’s to the Board of Directors. The said decisions activities are as follows: reported that the financial statements were · Measure, assess and control risks examined, and that they were deemed fit for independently from executive units, public disclosure. · Protect company assets, The Committee of Early Determination of Risk is responsible for efforts aimed at · Ensure efficient and effective execution of early detection of risks that might endanger activities in line with the Law and other the existence, progress and survival of the applicable legislation, internal policies and company; ensuring adoption of necessary guidelines, as well as customary insurance measures in relation to the identified risks, and practices,
96 Anadolu Sigorta 2017 Annual Report · Guarantee the reliability, integrity And its mission as: 5.6 Financial Rights and timely availability of the “In keeping with the deeply-rooted, Aggregate of the salaries and similar accounting and financial reporting pioneering, honest and solid corporate benefits provided to the company’s system. values of Anadolu Sigorta, to lead the Board Directors and senior executives The basic strategy directed towards sector, to help create a broad public are disclosed in the notes to the the ultimate goal is to carefully plan, awareness of insurance in Turkey, financial statements and thereby, conduct and manage risk management to implement a customer-focused incorporated in our annual report. They and internal control activities approach to service, to increase our are also posted on the corporate website independently, impartially, purposefully, financial strength to international and publicly disclosed. effectively and efficiently, employing standards, to enhance the value of our With a view to giving the shareholders a risk-focused approach and within company.” the chance to voice their comments, the frame of applicable legislation and Our company’s vision and mission the remuneration principles for the internationally accepted principles are publicly disclosed on our website Board Directors are presented as a and standards. The basic principle in accessible at www.anadolusigorta.com. separate item for the information of achieving this goal is to employ the tr. shareholders. The remuneration policy most advanced tools and methods that developed for the company’s managers are available and possible to use. Our strategic goals are set by our and employees at any level is put executives with a keen eye on The activities of the Department are into writing, presented to the General competitive conditions, general administered directly by the CEO. The Assembly for information, and is economic conjuncture, overall Board Director responsible for Internal published on the company website. expectations in national and Systems is also responsible toward the international financial markets, and Stock options or payment plans based Board of Directors for the formation the company’s medium and long-term on the company’s performance are of the Department and ensuring, targets. used in the remuneration of our Board monitoring and coordinating its Directors, including the independent operability, adequacy and effectiveness. Strategies and targets proposed Board Directors. Nonetheless, it is are negotiated comprehensively by All outcomes obtained by examining believed that the remuneration of the Board of Directors on a broad the risks independently from executive independent Board Directors is at perspective. functions are regularly reported by a level that will not prejudice their the Department to the Board Director Actualizations in relation to approved independence. responsible for Internal Systems, to the strategies and targets are reviewed The Board Directors and senior CEO and the Board of Directors. during Board meetings and monthly executives have never utilized, directly within the scope of the assessment of The Board of Directors oversees the or indirectly, cash or non-cash loans company operations, financial structure efficiency of the risk management and from the company, nor did the company and performance level. internal control mechanism via the lent money or gave suretyship or company’s Board of Inspectors. In principle, the Board of Directors provided any similar guarantee to any meets monthly in order to efficiently Board Director or senior executive. 5.5 Strategic Goals of the Company and continuously fulfills its monitoring The company’s vision is set as: and supervision function. ”To make our company the insurance In the meetings, the basic topics of brand preferred by everyone who needs assessment are the company activities, insurance, and to achieve a strength approved annual budget and target that makes it a reference point in the realizations, the company’s place worldwide insurance industry as well.” in the sector, financial structure and performance level, reporting, and compliance of operations to international standards.
Anadolu Sigorta 2017 Annual Report 97 Other Committees Operating Within Anadolu Sigorta and an Assessment by the Board of Directors Matters and Financial Statements
Committees Operating Within Anadolu Sigorta and an Assessment by the Board of Directors
In order to ensure that the Board of Directors independent directors. Non-director individuals, duly performs its duties and responsibilities, who have expertise in their respective fields, an Audit Committee, Committee of Early can be members of the committee. Determination of Risk, and Corporate If the number of committee members elected Governance Committee were set up at from among Board Directors is two, then both the company. The Corporate Governance of them must be non-executive directors; Committee also fulfills the functions of the if such number is greater than two, then Nomination Committee and Remuneration the majority of the members must be non- Committee. executive directors. The CEO may not serve on The Board of Directors makes all kinds of this committee. resources and support available necessary The Investor Relations Managers must be a for the performance of their duties by the full-time employee of the company and must committees. The committees hold meetings at be assigned as a member of the Corporate the frequency deemed necessary for ensuring Governance Committee. efficiency of their activities and specified in their respective operating principles, and submit A member’s term of office on the Corporate the reports covering information about their Governance Committee is terminated when activities and meeting outcomes to the Board his/her term of office on the Board of Directors of Directors. expires or upon a decision to such effect by the Board of Directors. The objectives, formations, operating principles and procedures, and activities of our Operating Procedures and Principles committees are described below. • The Corporate Governance Committee CORPORATE GOVERNANCE COMMITTEE holds at least four meetings a year, which must take place at least on a quarterly Head of Committee: Prof. Savaş Taşkent basis. Member: Hasan Hulki Yalçın • Committee meetings are held with the Member: Kemal Emre Sayar attendance of all its members and decisions are passed with the votes of the majority of Member: Fatih Gören members in attendance. Objective • The committee shall keep a resolution book, in which the decisions, assigned a Overseeing compliance of the company with sequence number, will be entered. corporate governance principles, undertaking • The committee shall enter the conclusions improvement efforts thereon, and submitting reached in a meeting in the minutes, and proposals to the Board of Directors. submit the assessments made and decisions Formation passed, along with the grounds therefor, in a written report to the Board of Directors The Corporate Governance Committee was set within no later than one month following up upon approval by the Board of Directors’ the relevant committee meeting. decision no. 5508 dated 10 March 2005. The • Committee decisions shall take effect upon provisions governing the formation, principles approval of the Board of Directors. and procedures and activities of the committee • The committee shall forthwith present have been based on the Corporate Governance its determinations, assessments and Communiqué issued by the Capital Markets suggestions in relation to its duties and Board of Turkey (CMB) and put into force with scope of responsibilities in writing to the the Board of Directors decision no. 06838 dated Board of Directors. 26 June 2014. These provisions are carried out • The committee may invite the individuals it by the Board of Directors. deems necessary to its meetings and seek The committee consists of a minimum of two their opinions. members to be elected from among directors • Investor Relations Unit/Department shall and the Investor Relations Manager. determine the meeting agenda of the The members will elect the head of the committee, make the invitations to the committee from among themselves. The meeting, establish communication with head of the committee is elected from among committee members, keep the book of resolutions, and handle other secretarial
98 Anadolu Sigorta 2017 Annual Report tasks for the committee. or revision of the company’s • The committee’s duties and • As the committee fulfills its disclosure policy, and presents the responsibilities with respect to functions, the Board of Directors same to the Board of Directors. remuneration are presented below: shall make all necessary resources The committee reviews that • Setting and overseeing the and support available. the Disclosure Policy covers the principles, criteria and practices • The committee may seek minimum content as stipulated by applicable for the remuneration of independent expert opinion upon the legislation with respect to the Board directors and executives with approval of the Board of Directors company’s communication with administrative responsibility, taking on matters that call for expertise stakeholders, as well as the scope, into consideration the company’s and the committee deems necessary quality, consistency and accuracy long-term targets; in relation to its activities. The cost of documents, presentations and • Presenting its suggestions regarding of the consultancy service needed explanations prepared by the the remuneration to be paid to by the committee shall be borne by company for informative purposes, Board directors and executives with the company. and oversees that the same are administrative responsibility, which • Committee members shall observe developed in accordance with the will be determined in view of the the principles of independence and Disclosure Policy; extent the remuneration criteria impartiality when performing their • Carries out activities to ensure that have been achieved; duties. the corporate governance culture • Developing suggestions and Activities is established within the company, assessments for the formulation and is espoused by managers and and revision of the company’s • The committee carries out the employees working at any level. remuneration policy, which sets out following activities with respect to The committee follows up the the remuneration principles for the corporate governance: developments related to corporate Board directors and executives with • Establishes whether the corporate governance in and out of Turkey and administrative responsibility, and governance principles are examines their possible implications presenting its opinions to the Board implemented in the company, for the company. of Directors. as well as the grounds for non- The duties of the Nomination and The Corporate Governance Committee implementation, if applicable; Remuneration Committees shall be shall fulfill other duties and identifies conflicts of interest, if any, fulfilled by the Corporate Governance responsibilities to be assigned to it by arising from failure to fully comply Committee, until these committees the Board of Directors in relation to its with these principles, and presents shall have been set up. field of activity. proposals to the Board of Directors for the improvement of corporate The committee’s duties and AUDIT COMMITTEE governance practices; responsibilities with respect to nomination are presented below: Head of Committee: Prof. Savaş Taşkent • Oversees the activities of the company’s Investor Relations • Works to create a transparent Member: Assoc. Prof. Atakan Yalçın Department. Within this context, system regarding identification, Objective the committee sets and regularly assessment, training and rewarding reviews the basic principles for the of nominees eligible for the Board of Overseeing the operation and company’s communication with Directors and managerial positions efficiency of the company’s accounting investors; with administrative responsibility, system, public disclosure of financial • Works in cooperation with the and establishes related policies and information, independent auditing Investor Relations Department to strategies; of the company and internal control present suggested improvements for • Regularly evaluates the structure system. ensuring efficient communication and efficiency of the Board Formation between the company and investors, of Directors and presents its and elimination and resolution of suggestions for possible revisions to The Audit Committee was set up upon potential conflicts to the Board of the Board of Directors; approval by the Board of Directors’ Directors; • The committee is charged with decision no. 5317 dated 26 June 2003. • Reviews the company’s Corporate performing the duties set out The provisions governing the principles Governance Compliance Report in the legislation concerning and procedures and activities of the before it is published within the the nomination of independent committee have been based on the company’s Annual Report, and members to the Board of Directors, Corporate Governance Communiqué presents its comments to the Board which are announced every year by issued by the Capital Markets Board of Directors; the Board and which are compulsory of Turkey (CMB) and put into force • Makes proposals and assessments to be implemented by the group to with the Board of Directors decision regarding the determination which the company is affiliated. no. 06839 dated 26 June 2014. These
Anadolu Sigorta 2017 Annual Report 99 Other Committees Operating Within Anadolu Sigorta and an Assessment by the Board of Directors Matters and Financial Statements
Committees Operating Within Anadolu Sigorta and an Assessment by the Board of Directors
provisions are carried out by the Board of • Board of Inspectors/Audit Department Directors. shall determine the meeting agenda of the committee, make the invitations to the The committee consists of a minimum of two meeting, establish communication with members to be elected from among the Board committee members, keep the book of of Directors members. resolutions, and handle other secretarial The members will elect the head of the tasks for the committee. committee from among themselves. • As the committee fulfills its functions, the Board of Directors shall make all necessary All members of the committee are elected from resources and support available. among independent directors. • The committee may seek independent To the extent possible, at least one member of expert opinion upon approval of the the Audit Committee should preferably have Board of Directors on matters that call minimum five years of experience in audit/ for expertise and the committee deems accounting and finance. necessary in relation to its activities. The cost of the consultancy service needed A member’s term of office on the Audit by the committee shall be borne by the Committee is terminated when his/her term company. of office on the Board of Directors expires or upon a decision to such effect by the Board of • Committee members shall observe the Directors. principles of independence and impartiality when performing their duties. Operating Procedures and Principles Activities • The committee holds at least four meetings In essence, the Audit Committee; a year, which must take place at least on a quarterly basis. • Oversees the operation and efficiency • Committee meetings are held with the of the company’s accounting system, attendance of all its members and decisions public disclosure of financial information, are passed with the votes of the majority of independent auditing, internal control and members in attendance. internal audit systems; • The committee shall keep a resolution • Supervises the selection of the independent book, in which the decisions, assigned a audit firm, preparation of independent audit sequence number, will be entered. contracts and initiation of independent audit process, and every phase of the work • The committee shall enter the conclusions carried out by the independent audit firm; reached in a meeting in the minutes, and submit the assessments made and decisions • Determines the independent audit firm passed, along with the grounds therefor, in from which the company will procure a written report to the Board of Directors services and the services to be supplied within no later than one month following therefrom, and submits the same for the the relevant committee meeting. approval of the Board of Directors; • Committee decisions shall take effect upon • Establishes the methods and criteria for approval of the Board of Directors. the handling and resolution of complaints received by the company in relation • The committee shall forthwith present to the company’s accounting, internal its determinations, assessments and control and internal audit systems and its suggestions in relation to its duties and independent audit; and for addressing the scope of responsibilities in writing to the company employees’ notifications about Board of Directors. the company’s accounting and independent • The committee’s activities and meeting audit within the frame of confidentiality results shall be described in the annual principle; report. The annual report shall also • Assesses the conformity of annual and specify the number of written reports the interim financial statements to be publicly committee submitted to the Board of disclosed to the accounting principles Directors during the fiscal year. pursued by the company, as well as • The committee may invite the individuals it their accuracy and fairness, and reports deems necessary to its meetings and seek its written assessments to the Board their opinions.
100 Anadolu Sigorta 2017 Annual Report of Directors, by incorporating If the committee is formed of two • As the committee fulfills its the opinions of the company’s members, then both of them must be functions, the Board of Directors responsible managers and of the non-executive directors; if such number shall make all necessary resources independent audit firm. is greater than two, then the majority and support available. The Audit Committee shall fulfill other of the members must be non-executive • The committee may seek duties and responsibilities to be assigned directors. The CEO may not serve on independent expert opinion upon to it by the Board of Directors in relation this committee. approval of the Board of Directors to its field of activity. A member’s term of office on the on matters that call for expertise and the committee deems necessary COMMITTEE OF EARLY committee is terminated when his/her in relation to its activities. The cost DETERMINATION OF RISK term of office on the Board of Directors expires or upon a decision to such effect of the consultancy service needed Head of Committee: Assoc. Prof. Atakan by the Board of Directors. by the committee shall be borne by Yalçın the company. Operating Procedures and Principles Committee members shall observe Member: Hakan Aran • The committee holds at least four the principles of independence and Objective meetings a year, which must take impartiality when performing their duties. Managing the risks that might threaten place at least on a quarterly basis. the existence, progress and survival of • Committee meetings are held with Activities the company. the attendance of all its members and decisions are passed with the The Committee of Early Determination Formation votes of the majority of members in of Risk: The Committee of Early Determination attendance. • Works to early detect the risks of Risk was set up as a result of • The committee shall keep a that might endanger the existence, the discussion of the General resolution book, in which the progress and survival of the Directorate proposal no. 3550 dated decisions, assigned a sequence company, to ensure necessary 24 February 2012, pursuant to Article number, will be entered. measures are adopted in relation to 4.5.1 of the Communiqué Serial:IV-56 • The committee shall enter the the identified risks, and to manage on Determination and Implementation conclusions reached in a meeting the risk; of Corporate Governance Principles in the minutes, and submit the • Informs the Board of Directors enforced upon its publication in the assessments made and decisions of its opinions and comments in Official Gazette issue 28158, dated passed, along with the grounds writing regarding the creation and 30 December 2011. The provisions therefor, in a written report to the development of the company’s governing the formation, principles Board of Directors within no later risk management system which and procedures and activities of than one month following the will be aimed at minimizing the the committee have been based on relevant committee meeting. impact of risks that might affect the Article 378 of the Turkish Commercial • Committee decisions shall take shareholders in particular and all Code and the Corporate Governance effect upon approval of the Board of stakeholders in general; Communiqué issued by the Capital Directors. • Reviews the company’s risk Markets Board of Turkey (CMB) and put • The committee shall forthwith management systems at least on an into force with the Board of Directors present its determinations, annual basis; decision no. 06840 dated 26 June 2014. assessments and suggestions in • Oversees that risk management They are carried out by the Board of relation to its duties and scope of practices are carried out in Directors. responsibilities in writing to the accordance with the decisions of The committee consists of a minimum Board of Directors. the Board of Directors and the of two members to be elected from • The committee may invite the committee; among the Board directors. individuals it deems necessary to its • Reviews the determinations and meetings and seek their opinions. assessments about risk management The members shall elect the head of the • Risk Management Unit/Department that will be incorporated in the committee from among themselves. The shall determine the meeting company’s annual report. head of the committee shall be elected agenda of the committee, make from among independent directors. The Committee of Early Determination the invitations to the meeting, Non-director individuals, who have of Risk fulfills other duties and establish communication with expertise in their respective fields, can responsibilities to be assigned to it by committee members, keep the book be members of the committee. the Board of Directors in relation to its of resolutions, and handle other field of activity. secretarial tasks for the committee.
Anadolu Sigorta 2017 Annual Report 101 Other An Assessment of the Operation of the Independent Audit Firm in 2017 Activity Period via Matters and the Audit Committee Financial Statements
An Assessment of the Operation of the Independent Audit Firm in 2017 Activity Period via the Audit Committee
Formation and Independence of the no fees are paid to these firms, apart from Independent (External) Audit Firm the reasonable audit fee at current market conditions. Periodic financial statements and their footnotes are prepared in a manner to The factors that contribute to the independence represent the actual financial status and within of the firms we obtain independent audit the framework of existing legislation and service from are the existence of our Audit insurance business accounting standards. They Committee, the efficient accounting and are subjected to independent auditing and internal audit system in place at the company, publicly disclosed at time intervals stipulated by and strongly established ethical rules attaching the legislation. importance to correct public disclosures. The independent audit firm we work with Independent conduct of the external auditing is alternated at certain intervals, and an of our company testifies to the accuracy and independent audit firm is selected for a veracity of our financial statements in the face maximum of 7 fiscal years for regular and/or of the public, and is perceived as guarantee special audit. At least two years are allowed to by our Shareholders. The independent opinion pass before re-signing a regular and/or special of the external auditor further strengthens audit contract with the same independent audit our company’s corporate image in that firm. they enhance the reliability of our financial statements. Having made it a principle to External auditing of our company is conducted undertake public disclosure and to assure in a fully independent manner, and the transparency in line with its ethical values, external auditor performs the relevant tasks our company earns the trust of its investors adhering strictly to the principles of accuracy, by giving importance to independence of the professional integrity and straightforwardness, external auditor, and therefore, aims to serve without being involved in any conflicts of the development of national economy by interests that might restrict its independence. contributing to accumulation of capital. The external auditor auditing our company acts independently and also refrains from any activity that might lead third parties to doubt its independence. No service is obtained, directly or indirectly from the firms we obtain independent audit service, save for the audit service itself, and
Assoc. Prof. Atakan Yalçın Prof. Savaş Taşkent Member of the Audit Committee Head of the Audit Committee Human Resources Practices at Anadolu Sigorta
102 Anadolu Sigorta 2017 Annual Report Human Resources Practices at Anadolu Sigorta
Human Resources Practices at Anadolu Sigorta
Human Resources Policy our employees at any level who join us and Our company is proud to be the first national become a member of our team in line with the insurance company in Turkey, established competencies they need to acquire to further in 1925 at the directives of Mustafa Kemal their careers, as well as their existing skills. Atatürk. Ever since its establishment, our Performance Management company has continuously grown and Our employees are evaluated twice a year in developed and has been recognized and line with specific performance criteria. The acknowledged as the grande école of the content of such evaluation varies depending Turkish insurance industry. on the competence requirements on the basis Utmost importance is given to our employees of job families. On the basis of the results of as they are the ones to undertake the biggest these performance evaluations, an employee’s duty in carrying out our company’s key policies. training needs are identified and a career plan For this reason, the primary goal of our human is developed. resources policies and practices is to identify Job Guarantee our company’s needs for personnel in line with its objectives and strategies and assist the Our employees enjoy a substantial degree creation of human resources that are open to of job guarantee within the framework of change and are focused on continuous success unionization composed by the Union and our by recruiting high-quality people, motivating company. them, evaluating their performance, and Compensation Policy encouraging interaction and communication Our employees’ salaries are adjusted in among individuals and groups. accordance with the terms of a collective Career Development bargaining agreement that is renewed every Various career paths within the frame of two years and with annual or semi-annual job families are available at the company. raises based on current conditions. Employees recruited into any job family and In addition to their salaries, employees receive level have the opportunity to advance to senior extensive fringe benefits as well. management positions in the company. Social Benefits Our company’s human resources strategy Our company’s employees are entitled to a is defined as “Creating the organizational variety of social rights and benefits in keeping climate conducive to promoting creativity with current conditions. The healthcare costs and innovation directed at ensuring customer of our employees and their dependant family satisfaction, and establishing a culture of members are covered by our company under superior performance supporting employees’ its Healthcare Assistance Regulations. All our development. In keeping with this strategy, personnel are able to fulfill all their healthcare employees successfully completing the training needs free of charge through the company’s and development plans designed for the outsourced healthcare system. Employees are relative job families can advance to a higher provided with free transportation services to level, if they display the performance and and from work and with lunches as well. capabilities required for the relevant level in the Retirement Benefits predetermined time. Our employees are covered by two private When rising to the specialist position, pension funds that have been set up in employees take the promotion exam that accordance with the company’s special status. differs according to the job families and The pensions paid by these funds enable former positions, and thus undergo assessment of employees to enjoy a good standard of living their qualification for the technical know-how during their retirement years. and competence levels required by the related position. Training Our employees in specialist position, which is Competency-based training programs and the midpoint for all of our positions, are offered technical and professional trainings required by dual career paths, which give the option of our employees’ jobs are provided in line with advancing as a manager or a specialist in the their career progression plans. relevant field. Career paths at this level are Training has special importance at Anadolu shaped and supported within the scope of the Sigorta owing to the fact that our company is company’s Development Center Initiative. an organization that fills managerial positions The initiative that assesses managerial and from within. Therefore, orientation program specialist competencies provides our employees and professional training provided to new- with personalized development plans, while hires are followed by necessary planning for supporting them with various resources, improving their managerial skills, thereby readying them for the next level. A number extending the necessary support to our of training opportunities are provided to employees.
Anadolu Sigorta 2017 Annual Report 103 Other Agenda of the Annual General Assembly Meeting Matters and Financial Statements
Agenda of the Annual General Assembly Meeting
ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ AGENDA OF THE ANNUAL GENERAL ASSEMBLY DATED 24 MARCH 2018 1. Opening, election of the Presiding Board and authorization of the Presiding Board to sign the minutes of the Annual General Assembly 2. Presentation of and discussion on the Board of Directors’ 2017 Activity Report, and presentation of the Independent Audit Report for 2017 fiscal year 3. Review, deliberation and ratification of 2017 financial statements 4. Information on matters falling under principle no. 1.3.6 of the CMB’s Corporate Governance Principles, 5. Approval of the membership of the individual elected, as per Article 363 of the Turkish Commercial Code, to the seat vacated on the Board of Directors during the reporting period 6. Individual acquittal of Board Directors 7. Information on dividend distribution policy and decision on profit distribution prepared by the Board of Directors 8. Laying down the amendment of “Article 3 – The Company’s Object and Scope” and “Article 6 – Capital” of the Company’s Articles of Incorporation for approval of the General Assembly, 9. Election of the Board Directors and determination of their terms of office 10. Authorizing the Board Directors to perform the transactions specified in Articles 395 and 396 of the Turkish Commercial Code 11. Determination of remuneration for the members of the Board of Directors 12. Designation of the independent audit firm 13. Presentation of information on the donations and grants made during the reporting period 14. Ratification of the limit on donations intended to be made in 2018
104 Anadolu Sigorta 2017 Annual Report 2017 Profit Distribution Proposal
2017 Profit Distribution Proposal
The dividend distribution proposal prepared within the frame of the company’s Dividend Distribution Policy and submitted for the approval of the General Assembly is presented below: Our company booked a net profit for the current period of TL 184,196,626 on its 2017 operations. The company’s legal records show TL 188,196,626 as profit for the period, which is the abovementioned amount plus TL 4,000,000 in provision set aside under the Turkish Accounting Standard no. 19 “Employee Benefits” taking into consideration the fact that a portion of the net profit for the fiscal year is distributed as dividends to personnel under Article 58 of the company’s Articles of Incorporation. In the Capital Markets Board of Turkey (CMB) meeting of 27 January 2010, it has been resolved that companies obliged to draw up consolidated financial statements should compute the net distributable profit taking into account the net profits for the period descending in the consolidated financial statements that will be drawn up and publicly disclosed as per the Communiqué II-14.1 on Principles of Financial Reporting in the Capital Market, provided that the net distributable profit can be covered from the sources reflected in their legal records. After consolidation of Anadolu Hayat Emeklilik A.Ş. and after adding the dividends to employees, for which a provision is set aside, a consolidated net profit of TL 205,514,988 arises. Accordingly, it is proposed as follows: • TL 9,409,831, which is 5% of the net profit figure that arises according to legal records, be set aside as general legal reserves, • TL 60,000,000, which is 30.6% of TL 196,105,157 that is the amount remaining according to the CMB, be distributed as first dividend to shareholders • TL 4,083,155 be set aside as dividend to employees as per the Articles of Incorporation, • TL 11,470,364 be set aside as statutory reserves as per the Articles of Incorporation, • TL 3,908,316, which is calculated as 10% of the portion of the aggregate of all dividends distributed that exceed 5% of the company’s paid-in capital, be added to general legal reserves, • TL 99,324,961 (based on legal records) that remains after the items mentioned above be allocated to extraordinary reserves, and Dividend payout be initiated on 28 March 2017, if profit distribution proposal is approved.
Anadolu Sigorta 2017 Annual Report 105 Other 2017 Profit Distribution Table Matters and Financial Statements
2017 Profit Distribution Table
ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ 2017 PROFIT DISTRIBUTION PROPOSAL (TL) 1. Paid-in/Issued Capital 500,000,000 2. General Legal Reserves (according to legal records) 42,470,727 If there are privileges for distribution of profits according to the Articles of Incorporation, information on such privileges None Based on Based on Legal CMB Records 3. Profit for the Period (*) 258,151,501 240,833,139 4. Taxes Payable (-) (52,636,513) (52,636,513) 5. Net Profit for the Period (=) 205,514,988 188,196,626 6. Losses in Prior Years (-) - - 7. General Legal Reserves (-) 9,409,831 9,409,831 8. NET DISTRIBUTABLE PROFIT FOR THE PERIOD (=) 196,105,157 178,786,795 9. Donations during the Year (+) - 10. Net Distributable Profit for the Period Including Donations 196,105,157 11. First Dividend to Shareholder - Cash 60,000,000 - Bonus Shares - - Total 60,000,000 12. Dividends Distributed to Owners of Privileged Shares - 13. Other Dividends Distributed (to Board Members, Employees, etc.) 4,083,155 14. Dividends Distributed to Owners of Redeemed Shares - 15. Second Dividend to Shareholders - 16. General Legal Reserves 3,908,316 17. Statutory Reserves 11,470,364 11,470,364 18. Special Reserves - - 19. EXTRAORDINARY RESERVES 116,643,323 99,324,961 20. Other Resources to be Distributed - Prior Year Profit - Extraordinary Reserves - Other Distributable Reserves Pursuant to the Law and the Articles of Incorporation
DIVIDEND RATIO CHART TOTAL DIVIDENDS DISTRIBUTED/NET DIVIDENDS PER SHARE WITH TOTAL DIVIDENDS DISTRIBUTED DISTRIBUTABLE (***) A NOMINAL VALUE OF TL 1 NET PROFIT FOR THE PERIOD CASH (TL) BONUS (TL) RATIO (%) AMOUNT (TL) RATIO (%) TOTAL 51,000,000 0 26.01% 0.102 10.20%
TOTAL DIVIDENDS DISTRIBUTED/NET DIVIDENDS PER SHARE WITH TOTAL DIVIDENDS DISTRIBUTED DISTRIBUTABLE A NOMINAL VALUE OF TL 1 GROSS PROFIT FOR THE PERIOD CASH (TL) BONUS (TL) RATIO (%) AMOUNT (TL) RATIO (%) TOTAL 60,000,000 0 30.60% 0.12 12.00%
(*) Profit for the period ended 31 December 2017 plus TL 4,000,000, which is the provision set aside for dividends to employees pursuant to TAS 19. (**) As a result of profit distribution, TL 99,324,961 will be taken into consideration as extraordinary reserves, which is calculated according to legal records. (***) 15% income tax deduction will not be applied to cash dividend payouts made to resident companies.
106 Anadolu Sigorta 2017 Annual Report 2017 Annual Report Compliance Statement
2017 Annual Report Compliance Statement
Our company’s 2017 Annual Report has been drawn up within the frame of the principles and procedures set forth in the Regulation on the Financial Structures of Insurance, Reinsurance and Pension Companies, which went into force upon its publication in the Official Gazette issue 26606 dated 7 August 2007.
Murat Tetik Fatih Gören İlhami Koç Caner Çimenbiçer Accounting and Financial Deputy Chief Chief Executive Chairman Affairs Manager Executive Officer Officer
Anadolu Sigorta 2017 Annual Report 107 Other Detailed Income Statement Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Detailed Income Statement
Fire and Natural Motor Vehicles Aircraft General Financial Legal Explanation Accident Illness/Health Motor Vehicles Aircrafts Watercrafts Marine Disasters General Losses Liability Liability Liability Credit Bonding Losses Protection Total I-TECHNICAL PART A- Non-Life Technical Income 167,129,014 507,840,278 1,025,322,891 3,243,497 28,163,019 72,237,560 404,003,590 188,040,576 1,370,381,372 6,754,906 119,574,713 776,785 0 5,749,378 13,628,545 3,912,846,125 1- Earned Premiums (Net of Reinsurer Share) 119,350,965 453,813,682 893,389,313 1,985,719 24,855,892 53,329,457 336,807,420 159,611,167 1,176,156,608 4,840,577 84,961,056 710,141 0 4,135,839 9,436,291 3,323,384,125 1-1. Premiums (Net of Reinsurer Share) 127,019,212 507,872,802 946,461,755 5,156,003 31,240,644 58,641,077 353,802,944 166,538,525 951,627,236 4,870,741 104,618,283 154,178 0 5,232,999 9,750,326 3,272,986,725 1.2- Change in Unearned Premium Provisions (Net of Reinsurers Shares and Reserves Carried Forward) (+/-) -7,535,286 -54,059,120 -53,072,442 -811,603 -3,533,887 -5,311,620 -16,995,525 -6,927,358 240,638,398 -30,164 -1,885,604 -8,568 0 -1,097,160 -314,035 89,056,025 1.3- Changes in Unexpired Risk Reserves (Net of Reinsurer Share and Reserves Carried Forward)(+/-) -132,961 0 0 0 0 0 0 0 -16,109,025 0 0 0 0 0 0 -16,241,986 1.4- Changes in Ongoing Risk Reserves (Net of Reinsurer Share and Reserves Carried Forward)(+/-) 0 0 0 -2,358,681 -2,850,865 0 0 0 0 0 -17,771,624 564,531 0 0 0 -22,416,639 2- Investment Income Transferred from Non-Technical Divisions 47,084,999 53,688,727 117,754,773 1,257,777 3,172,146 16,576,262 62,586,334 25,263,187 176,551,276 1,914,327 30,392,947 65,951 0 1,613,537 4,192,252 542,114,497 3- Other Technical Income 1,117 337,870 5,931,814 1 15,213 8,368 195,658 31,591 76,305 1 6,912 693 0 2 2 6,605,545 4- Accrued Salvage and Subrogation Income 691,933 0 8,246,992 0 119,769 2,323,473 4,414,179 3,134,631 17,597,183 0 4,213,797 0 0 0 0 40,741,957 B- Non-Life Technical Expense (-) -71,067,147 -498,656,825 -952,314,143 -8,017,577 -30,531,367 -42,978,663 -383,089,087 -158,017,392 -1,312,347,667 -2,971,912 -154,740,295 113,411 1,650 -2,947,792 -2,652,156 -3,620,216,963 1- Realized Claims (Net of Reinsurer Share) -23,768,075 -388,086,803 -681,929,328 -7,023,886 -31,843,936 -27,851,757 -243,279,304 -124,088,509 -1,041,617,898 -2,079,372 -139,659,340 50,252 0 -2,928,944 -158,422 -2,714,265,323 1.1- Claims Paid (Net of Reinsurer Share) -21,789,422 -384,049,901 -674,882,626 -2,255,177 -23,924,690 -20,411,061 -209,459,709 -110,983,204 -668,494,191 -455,707 -34,522,694 -2,074 0 -1,511,680 -81,688 -2,152,823,823 1.2- Changes in Outstanding Claims Provisions (Net of Reinsurer Share and Reserves Carried Forward) (+/-) -1,978,653 -4,036,902 -7,046,702 -4,768,709 -7,919,247 -7,440,697 -33,819,595 -13,105,306 -373,123,707 -1,623,665 -105,136,645 52,325 0 -1,417,264 -76,734 -561,441,500 2- Changes in Bonus and Discount Provisions (Net of Reinsurer Share and Reserves Carried Forward) (+/-) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 3- Changes in Other Technical Reserves (Net of Reinsurer Share and Reserves Carried Forward) (+/-) -1,908,643 0 -5,511,788 0 0 0 -20,970,727 -2,638,784 0 0 0 -18,501 0 -462,961 0 -31,511,404 4- Operating Expenses (-) -42,346,258 -95,005,660 -206,518,178 -985,305 1,569,776 -14,966,434 -104,082,654 -29,857,209 -246,840,165 -889,579 -14,063,585 83,217 1,650 500,568 -2,428,926 -755,828,741 5- Other Technical Expenses -3,044,173 -15,564,363 -58,354,849 -8,385 -257,207 -160,472 -14,756,402 -1,432,890 -23,889,604 -2,961 -1,017,370 -1,556 0 -56,455 -64,808 -118,611,495 C- Non Life Technical Profit (A-B) 96,061,866 9,183,453 73,008,748 -4,774,080 -2,368,349 29,258,897 20,914,504 30,023,184 58,033,705 3,782,994 -35,165,582 890,196 1,650 2,801,586 10,976,390 292,629,162 II- NON TECHNICAL PART C- Non Life Technical Profit (A-B) 292,629,162 J- Total Technical Profit (C) 292,629,162 K- Investment Income 858,629,794 1- Income from Financial Investments 228,602,158 2- Income from Sales of Financial Assets 26,473,764 3- Revaluation of Financial Assets 52,102,926 4- Foreign Exchange Gains 430,645,835 5- Dividend Income from Affiliates 28,000,000 6- Income form Subsidiaries and Joint Ventures 0 7- Real Estate Income 2,688,983 8- Income from Derivative Instruments 90,116,129 9- Other Investments 0 10- Investment Income transferred from Life Technical Division 0 1- Investment Management Expenses (including interest) (-) -385,326 2- Valuation Allowance of Investments (-) -1,118,002 3- Losses On Sales of Investments (-) -16,137,959 4- Investment Income Transferred to Non - Life Technical Division (-) -542,114,497 5- Losses from Derivative Instruments (-) -179,274,294 6- Foreign Exchange Losses (-) -112,534,636 7- Depreciation Expenses (-) -28,081,017 8- Other Investment Expenses (-) 0 M- Income and Expenses (+/-) -34,177,153 1- Reserves (Provisions) Account (+/-) -32,318,934 2- Rediscount Account (+/-) -11,903,019 3- Mandatory Earthquake Insurance Account (+/-) 0 5- Deferred Tax Asset Accounts (+/-) 5,702,299 6- Deferred Tax Liability Expense (+/-) 0 7- Other Income and Revenues 2,771,738 8- Other Expense and Losses (-) -210,311 9- Prior Period Income 0 10- Prior Period Losses (-) 0 N- Net Profit/(Loss) 184,196,626 1- Profit/(Loss) Before Tax 236,833,139 2- Taxes Provisions (-) -52,636,513 3- Net Profit (Loss) after Tax 184,196,626 4- Inflation Adjustment Account (+/-)
108 Anadolu Sigorta 2017 Annual Report Fire and Natural Motor Vehicles Aircraft General Financial Legal Explanation Accident Illness/Health Motor Vehicles Aircrafts Watercrafts Marine Disasters General Losses Liability Liability Liability Credit Bonding Losses Protection Total I-TECHNICAL PART A- Non-Life Technical Income 167,129,014 507,840,278 1,025,322,891 3,243,497 28,163,019 72,237,560 404,003,590 188,040,576 1,370,381,372 6,754,906 119,574,713 776,785 0 5,749,378 13,628,545 3,912,846,125 1- Earned Premiums (Net of Reinsurer Share) 119,350,965 453,813,682 893,389,313 1,985,719 24,855,892 53,329,457 336,807,420 159,611,167 1,176,156,608 4,840,577 84,961,056 710,141 0 4,135,839 9,436,291 3,323,384,125 1-1. Premiums (Net of Reinsurer Share) 127,019,212 507,872,802 946,461,755 5,156,003 31,240,644 58,641,077 353,802,944 166,538,525 951,627,236 4,870,741 104,618,283 154,178 0 5,232,999 9,750,326 3,272,986,725 1.2- Change in Unearned Premium Provisions (Net of Reinsurers Shares and Reserves Carried Forward) (+/-) -7,535,286 -54,059,120 -53,072,442 -811,603 -3,533,887 -5,311,620 -16,995,525 -6,927,358 240,638,398 -30,164 -1,885,604 -8,568 0 -1,097,160 -314,035 89,056,025 1.3- Changes in Unexpired Risk Reserves (Net of Reinsurer Share and Reserves Carried Forward)(+/-) -132,961 0 0 0 0 0 0 0 -16,109,025 0 0 0 0 0 0 -16,241,986 1.4- Changes in Ongoing Risk Reserves (Net of Reinsurer Share and Reserves Carried Forward)(+/-) 0 0 0 -2,358,681 -2,850,865 0 0 0 0 0 -17,771,624 564,531 0 0 0 -22,416,639 2- Investment Income Transferred from Non-Technical Divisions 47,084,999 53,688,727 117,754,773 1,257,777 3,172,146 16,576,262 62,586,334 25,263,187 176,551,276 1,914,327 30,392,947 65,951 0 1,613,537 4,192,252 542,114,497 3- Other Technical Income 1,117 337,870 5,931,814 1 15,213 8,368 195,658 31,591 76,305 1 6,912 693 0 2 2 6,605,545 4- Accrued Salvage and Subrogation Income 691,933 0 8,246,992 0 119,769 2,323,473 4,414,179 3,134,631 17,597,183 0 4,213,797 0 0 0 0 40,741,957 B- Non-Life Technical Expense (-) -71,067,147 -498,656,825 -952,314,143 -8,017,577 -30,531,367 -42,978,663 -383,089,087 -158,017,392 -1,312,347,667 -2,971,912 -154,740,295 113,411 1,650 -2,947,792 -2,652,156 -3,620,216,963 1- Realized Claims (Net of Reinsurer Share) -23,768,075 -388,086,803 -681,929,328 -7,023,886 -31,843,936 -27,851,757 -243,279,304 -124,088,509 -1,041,617,898 -2,079,372 -139,659,340 50,252 0 -2,928,944 -158,422 -2,714,265,323 1.1- Claims Paid (Net of Reinsurer Share) -21,789,422 -384,049,901 -674,882,626 -2,255,177 -23,924,690 -20,411,061 -209,459,709 -110,983,204 -668,494,191 -455,707 -34,522,694 -2,074 0 -1,511,680 -81,688 -2,152,823,823 1.2- Changes in Outstanding Claims Provisions (Net of Reinsurer Share and Reserves Carried Forward) (+/-) -1,978,653 -4,036,902 -7,046,702 -4,768,709 -7,919,247 -7,440,697 -33,819,595 -13,105,306 -373,123,707 -1,623,665 -105,136,645 52,325 0 -1,417,264 -76,734 -561,441,500 2- Changes in Bonus and Discount Provisions (Net of Reinsurer Share and Reserves Carried Forward) (+/-) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 3- Changes in Other Technical Reserves (Net of Reinsurer Share and Reserves Carried Forward) (+/-) -1,908,643 0 -5,511,788 0 0 0 -20,970,727 -2,638,784 0 0 0 -18,501 0 -462,961 0 -31,511,404 4- Operating Expenses (-) -42,346,258 -95,005,660 -206,518,178 -985,305 1,569,776 -14,966,434 -104,082,654 -29,857,209 -246,840,165 -889,579 -14,063,585 83,217 1,650 500,568 -2,428,926 -755,828,741 5- Other Technical Expenses -3,044,173 -15,564,363 -58,354,849 -8,385 -257,207 -160,472 -14,756,402 -1,432,890 -23,889,604 -2,961 -1,017,370 -1,556 0 -56,455 -64,808 -118,611,495 C- Non Life Technical Profit (A-B) 96,061,866 9,183,453 73,008,748 -4,774,080 -2,368,349 29,258,897 20,914,504 30,023,184 58,033,705 3,782,994 -35,165,582 890,196 1,650 2,801,586 10,976,390 292,629,162 II- NON TECHNICAL PART C- Non Life Technical Profit (A-B) 292,629,162 J- Total Technical Profit (C) 292,629,162 K- Investment Income 858,629,794 1- Income from Financial Investments 228,602,158 2- Income from Sales of Financial Assets 26,473,764 3- Revaluation of Financial Assets 52,102,926 4- Foreign Exchange Gains 430,645,835 5- Dividend Income from Affiliates 28,000,000 6- Income form Subsidiaries and Joint Ventures 0 7- Real Estate Income 2,688,983 8- Income from Derivative Instruments 90,116,129 9- Other Investments 0 10- Investment Income transferred from Life Technical Division 0 1- Investment Management Expenses (including interest) (-) -385,326 2- Valuation Allowance of Investments (-) -1,118,002 3- Losses On Sales of Investments (-) -16,137,959 4- Investment Income Transferred to Non - Life Technical Division (-) -542,114,497 5- Losses from Derivative Instruments (-) -179,274,294 6- Foreign Exchange Losses (-) -112,534,636 7- Depreciation Expenses (-) -28,081,017 8- Other Investment Expenses (-) 0 M- Income and Expenses (+/-) -34,177,153 1- Reserves (Provisions) Account (+/-) -32,318,934 2- Rediscount Account (+/-) -11,903,019 3- Mandatory Earthquake Insurance Account (+/-) 0 5- Deferred Tax Asset Accounts (+/-) 5,702,299 6- Deferred Tax Liability Expense (+/-) 0 7- Other Income and Revenues 2,771,738 8- Other Expense and Losses (-) -210,311 9- Prior Period Income 0 10- Prior Period Losses (-) 0 N- Net Profit/(Loss) 184,196,626 1- Profit/(Loss) Before Tax 236,833,139 2- Taxes Provisions (-) -52,636,513 3- Net Profit (Loss) after Tax 184,196,626 4- Inflation Adjustment Account (+/-)
Anadolu Sigorta 2017 Annual Report 109 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Unconsolidated Financial Statements as of December 31, 2017 together with the Independent Auditor’s Audit Report (Convenience Translation of Unconsolidated Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish)
110 Anadolu Sigorta 2017 Annual Report Independent Auditor’s Report
Güney Bağımsız Denetim ve Tel: +90 212 315 3000 SMMM A.Ş. Fax: +90 212 230 8291 Eski Büyükdere Cad. Orjin Maslak ey.com No: 27 Maslak, Sarıyer 34398 Ticaret Sicil No: 479920 İstanbul - Turkey Mersis No: 0-4350-3032-6000017
To the Board of Directors of Anadolu Anonim Türk Sigorta Şirketi
A) Report on the Audit of the Unconsolidated Financial Statements
1) Opinion
We have audited the unconsolidated financial statements of Anadolu Anonim Türk Sigorta Şirketi (the Company), which comprise the unconsolidated statement of financial position as at December 31, 2017, and the unconsolidated statement of comprehensive 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, 2017, 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 Accounting 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 standards on auditing as issued by the Capital Markets Board of Turkey and 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.
Anadolu Sigorta 2017 Annual Report 111 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements
Independent Auditor’s Report
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, 2017, the Company has insurance We have performed the audit procedures related the actuarial liabilities of TL 4.456.444.401 representing 83% of the assumptions which disclosed in the Note 2 and 17 together Company’s total liabilities. The Company made net provision with the actuary auditor who is part of our audit team. of TL 2.604.686.356 for the future outstanding claims for insurance contracts. In the calculation of Incurred But These procedures are primarily intended to assess whether Not Reported (IBNR) claims provisions (net amount of the estimates and methods that used in the calculation of the TL 1.438.700.495) which is accounted under the outstanding outstanding claims reserve by the Company are appropriate. claims reserves, the Company Management has used the In this context, we have performed the audit procedures actuarial assumptions and estimates detailed in note 2 and related to the recording the Company’s incurred outstanding 17. Uncertainty of estimation and management judgment claims; performed the analytical review the incurred case files containing, IBNR calculations has been considered as a key which selected randomly; obtained the signed lawyer letter audit matter. from the Company’s attorney for litigated case files; assessed the average claim amount and opening claim amounts determined by the Company’s actuary; 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.
112 Anadolu Sigorta 2017 Annual Report Independent Auditor’s Report
4) Other matter
The unconsolidated financial statements of the Company which were prepared in accordance with the accounting principles and standards in force as of December 31, 2016 were subject to full-scope audit by another independent audit firm. In their independent auditor’s report dated January 30, 2017, independent audit firm expressed unqualified opinion on the unconsolidated financial statements prepared at December 31, 2016.
5) Responsibilities of Management and Those Charged with Governance for the Unconsolidated Financial Statements
Management is responsible for the preparation and fair presentation of these unconsolidated financial statements in accordance with Insurance Accounting and Financial Reporting Legislation and designing, implementing and maintaining internal systems relevant to the preparation and fair presentation of the unconsolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the unconsolidated financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
6) Auditor’s Responsibilities for the Audit of the Unconsolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the unconsolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with InAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these unconsolidated financial statements.
Anadolu Sigorta 2017 Annual Report 113 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements
Independent Auditor’s Report
As part of an audit in accordance with InAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the unconsolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the unconsolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the unconsolidated financial statements, including the disclosures, and whether the unconsolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the unconsolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
114 Anadolu Sigorta 2017 Annual Report Independent Auditor’s Report
B) Report on Other Legal and Regulatory Requirements
1) Auditors’ report on Risk Management System and Committee prepared in accordance with paragraph 4 of Article 398 of Turkish Commercial Code (“TCC”) 6102 is submitted to the Board of Directors of the Company on January 29, 2018. 2) In accordance with paragraph 4 of Article 402 of the TCC, no significant matter has come to our attention that causes us to believe that the Company’s bookkeeping activities for the period 1 January - 31 December 2017 and financial statements are not in compliance with laws and provisions of the Company’s articles of association in relation to financial reporting. 3) In accordance with paragraph 4 of Article 402 of the TCC, the Board of Directors submitted to us the necessary explanations and provided required documents within the context of audit.
The name of the engagement partner who supervised and concluded this audit is Seda Akkuş Tecer.
Güney Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik Anonim Şirketi A member firm of Ernst & Young Global Limited
January 29, 2018 İstanbul, Türkiye
Anadolu Sigorta 2017 Annual Report 115 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Unconsolidated Financial Statements Prepared as of December 31, 2017
We confirm that the unconsolidated financial statements and related disclosures and notes for the six- months-period then ended as of December 31, 2017 which were prepared in accordance with the accounting principles and standards in force as per the regulations of T.C. Başbakanlık Hazine Müsteşarlığı are in compliance with the “Code Related to the Financial Reporting of Insurance, Reinsurance and Private Pension Companies” and the financial records of our Company.
İstanbul, January 29, 2018
İlhami KOÇ Fatih GÖREN Member of Board of Directors, Executive Vice President of Finance Chief Executive Officer
Murat TETİK Taylan MATKAP Accounting Actuary Reporting Manager
116 Anadolu Sigorta 2017 Annual Report Contents
PAGE BALANCE SHEET 118 STATEMENT OF INCOME 123 STATEMENT OF CHANGES IN EQUITY 126 STATEMENT OF CASH FLOW 128 STATEMENT OF PROFIT DISTRIBUTION 129 NOTES TO THE FINANCIAL STATEMENTS 130-196 NOTE 1 General information 130 NOTE 2 Summary of significant accounting policies 132 NOTE 3 Significant accounting estimates and requirements 154 NOTE 4 Management of insurance and financial risk 155 NOTE 5 Segment reporting 166 NOTE 6 Tangible assets 169 NOTE 7 Investment properties 170 NOTE 8 Intangible assets 171 NOTE 9 Investments in associates 172 NOTE 10 Reinsurance assets and liabilities 172 NOTE 11 Financial assets 173 NOTE 12 Loans and receivables 177 NOTE 13 Derivative financial instruments 178 NOTE 14 Cash and cash equivalents 179 NOTE 15 Equity 179 NOTE 16 Other reserves and equity component of discretionary participation feature 181 NOTE 17 Insurance contract liabilities and reinsurance assets 182 NOTE 18 Investment contract liabilities 186 NOTE 19 Trade and other payables and deferred income 186 NOTE 20 Financial liabilities 187 NOTE 21 Deferred tax 187 NOTE 22 Retirement benefit obligations 188 NOTE 23 Other liabilities and provisions 188 NOTE 24 Net insurance premium 189 NOTE 25 Fee revenue 189 NOTE 26 Investment income 189 NOTE 27 Net income accrual on financial assets 189 NOTE 28 Assets held at fair value through profit or loss 189 NOTE 29 Insurance rights and claims 189 NOTE 30 Investment contract benefits 189 NOTE 31 Other expenses 189 NOTE 32 Operating expenses 190 NOTE 33 Employee benefits expenses 190 NOTE 34 Financial costs 190 NOTE 35 Income tax 191 NOTE 36 Net foreign exchange gains 191 NOTE 37 Earnings per share 192 NOTE 38 Dividends per share 192 NOTE 39 Cash generated from operations 192 NOTE 40 Convertible bonds 192 NOTE 41 Redeemable preference shares 192 NOTE 42 Risks 192 NOTE 43 Commitments 193 NOTE 44 Business combinations 193 NOTE 45 Related party transactions 194 NOTE 46 Events after the reporting date 196 NOTE 47 Other 196
Anadolu Sigorta 2017 Annual Report 117 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Unconsolidated Balance Sheet As at December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
ASSETS Audited Audited Current Period Prior Period I- Current Assets Note December 31, 2017 December 31, 2016 A- Cash and Cash Equivalents 14 3.504.676.959 3.217.463.827 1- Cash 14 62.857 35.109 2- Cheques Received -- -- 3- Banks 14 3.105.334.647 2.795.907.111 4- Cheques Given and Payment Orders 14 (87.620) (82.544) 5- Bank Guaranteed Credit Card Receivables with Maturities Less Than Three Months 14 399.367.075 421.604.151 6- Other Cash and Cash Equivalents -- -- B- Financial Assets and Financial Investments with Risks on Policyholders 11 1.103.520.340 748.609.784 1- Available-for-Sale Financial Assets 11 755.985.190 605.652.540 2- Held to Maturity Investments 11 -- 15.172.182 3- Financial Assets Held for Trading 11 347.535.150 127.881.004 4- Loans and Receivables -- -- 5- Provision for Loans and Receivables -- -- 6- Financial Investments with Risks on Saving Life Policyholders -- -- 7- Company’s Own Equity Shares -- -- 8- İmpairment in Value of Financial Investments 11 -- (95.942) C- Receivables from Main Operations 12 1.178.955.084 1.048.793.865 1- Receivables from Insurance Operations 12 1.074.438.568 984.855.530 2- Provision for Receivables from Insurance Operations 2.21,12 (8.337.019) (8.836.586) 3- Receivables from Reinsurance Operations 12 83.203.501 60.170.605 4- Provision for Receivables from Reinsurance Operations -- -- 5- Cash Deposited to Insurance and Reinsurance Companies 12 29.650.034 12.604.316 6- Loans to the Policyholders -- -- 7- Provision for Loans to the Policyholders -- -- 8- Receivables from Individual Pension Operations -- -- 9- Doubtful Receivables from Main Operations 12 226.225.736 188.860.962 10- Provision for Doubtful Receivables from Main Operations 12 (226.225.736) (188.860.962) D- Due from Related Parties -- -- 1- Due from Shareholders -- -- 2- Due from Associates -- -- 3- Due from Subsidiaries -- -- 4- Due from Joint Ventures -- -- 5- Due from Personnel -- -- 6- Due from Other Related Parties -- -- 7- Rediscount on Receivables from Related Parties -- -- 8- Doubtful Receivables from Related Parties -- -- 9- Provision for Doubtful Receivables from Related Parties -- -- E- Other Receivables 12 19.018.462 13.790.959 1- Finance Lease Receivables -- -- 2- Unearned Finance Lease Interest Income -- -- 3- Deposits and Guarantees Given 15.198 334.577 4- Other Miscellaneous Receivables 19.003.264 13.456.382 5- Rediscount on Other Miscellaneous Receivables -- -- 6- Other Doubtful Receivables -- -- 7- Provision for Other Doubtful Receivables -- -- F- Prepaid Expenses and Income Accruals 339.189.524 320.408.039 1- Prepaid Expenses 17 319.260.853 316.049.141 2- Accrued Interest and Rent Income -- -- 3- Income Accruals 12 19.928.671 4.358.898 4- Other Prepaid Expenses -- -- G- Other Current Assets 1.170.397 13.587.216 1- Stocks to be Used in the Following Months 676.756 960.285 2- Prepaid Taxes and Funds 19 -- 12.441.095 3- Deferred Tax Assets -- -- 4- Job Advances 4.2,12 493.641 170.946 5- Advances Given to Personnel 12 -- 14.890 6- Inventory Count Differences -- -- 7- Other Miscellaneous Current Assets -- -- 8- Provision for Other Current Assets -- -- I- Total Current Assets 6.146.530.766 5.362.653.690 The accompanying notes are an integral part of these unconsolidated financial statements.
118 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Unconsolidated Balance Sheet As at December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
ASSETS Audited Audited Current Period Prior Period II- Non-Current Assets Note December 31, 2017 December 31, 2016 A- Receivables from Main Operations -- -- 1- Receivables from Insurance Operations -- -- 2- Provision for Receivables from Insurance Operations -- -- 3- Receivables from Reinsurance Operations -- -- 4- Provision for Receivables from Reinsurance Operations -- -- 5- Cash Deposited for Insurance and Reinsurance Companies -- -- 6- Loans to the Policyholders -- -- 7- Provision for Loans to the Policyholders -- -- 8- Receivables from Individual Pension Business -- -- 9- Doubtful Receivables from Main Operations -- -- 10- Provision for Doubtful Receivables from Main Operations -- -- B- Due from Related Parties -- -- 1- Due from Shareholders -- -- 2- Due from Associates -- -- 3- Due from Subsidiaries -- -- 4- Due from Joint Ventures -- -- 5- Due from Personnel -- -- 6- Due from Other Related Parties -- -- 7- Rediscount on Receivables from Related Parties -- -- 8- Doubtful Receivables from Related Parties -- -- 9- Provision for Doubtful Receivables from Related Parties -- -- C- Other Receivables 12 2.205.704 1.749.362 1- Finance Lease Receivables -- -- 2- Unearned Finance Lease Interest Income -- -- 3- Deposits and Guarantees Given 320.795 -- 4- Other Miscellaneous Receivables 2.129.835 2.129.835 5- Rediscount on Other Miscellaneous Receivables (244.926) (380.473) 6- Other Doubtful Receivables -- -- 7- Provision for Other Doubtful Receivables -- -- D- Financial Assets 9 689.720.000 427.420.000 1- Investments in Equity Shares -- -- 2- Investments in Associates 9 689.720.000 427.420.000 3- Capital Commitments to Associates -- -- 4- Investments in Subsidiaries -- -- 5- Capital Commitments to Subsidiaries -- -- 6- Investments in Joint Ventures -- -- 7- Capital Commitments to Joint Ventures -- -- 8- Financial Assets and Financial Investments with Risks on Policyholders -- -- 9- Other Financial Assets -- -- 10- Impairment in Value of Financial Assets -- -- E- Tangible Assets 6 103.881.659 102.689.754 1- Investment Properties 6,7 64.215.000 62.175.000 2- Impairment for Investment Properties -- -- 3- Owner Occupied Property 6 13.395.000 12.372.253 4- Machinery and Equipment 6 56.957.217 49.033.797 5- Furniture and Fixtures 6 13.993.498 13.717.551 6- Motor Vehicles 6 290.580 619.736 7- Other Tangible Assets (Including Leasehold Improvements) 6 23.486.838 22.982.418 8- Tangible Assets Acquired Through Finance Leases 6 3.858.074 3.868.337 9- Accumulated Depreciation 6 (72.314.548) (62.079.338) 10- Advances Paid for Tangible Assets (Including Construction in Progress) -- -- F- Intangible Assets 8 61.493.001 55.336.275 1- Rights -- -- 2- Goodwill 8 16.250.000 16.250.000 3- Pre-operating Expenses -- -- 4- Research and Development Costs -- -- 5- Other Intangible Assets 8 120.578.666 111.110.866 6- Accumulated Amortization 8 (100.337.251) (83.756.830) 7- Advances Paid for Intangible Assets 8 25.001.586 11.732.239 G- Prepaid Expenses and Income Accruals 17 6.639.202 6.211.364 1- Prepaid Expenses 17 6.639.202 6.211.364 2- Income Accruals -- -- 3- Other Prepaid Expenses and Income Accruals -- -- H- Other Non-Current Assets 21 21.844.260 18.112.832 1- Effective Foreign Currency Accounts -- -- 2- Foreign Currency Accounts -- -- 3- Stocks to be Used in the Following Years -- -- 4- Prepaid Taxes and Funds -- -- 5- Deferred Tax Assets 21 21.844.260 18.112.832 6- Other Miscellaneous Non-Current Assets -- -- 7- Amortization on Other Non-Current Assets -- -- 8- Provision for Other Non-Current Assets -- -- II- Total Non-Current Assets 885.783.826 611.519.587 TOTAL ASSETS 7.032.314.592 5.974.173.277 The accompanying notes are an integral part of these unconsolidated financial statements.
Anadolu Sigorta 2017 Annual Report 119 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Unconsolidated Balance Sheet As at December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
LIABILITIES Audited Audited Current Period Prior Period III- Short-Term Liabilities Note December 31, 2017 December 31, 2016 A- Financial Liabilities 20 110.802.339 134.413.473 1- Loans to Financial Institutions -- -- 2- Finance Lease Liabilities -- -- 3- Deferred Leasing Costs -- -- 4- Current Portion of Long Term Debts -- -- 5- Principal Instalments and Interests on Bonds Issued -- -- 6- Other Financial Assets Issued -- -- 7- Valuation Differences of Other Financial Assets Issued -- -- 8- Other Financial Liabilities 20 110.802.339 134.413.473 B- Payables Arising from Main Operations 19 492.116.005 449.205.545 1- Payables Due to Insurance Operations 19 311.777.242 300.768.948 2- Payables Due to Reinsurance Operations -- -- 3- Cash Deposited by Insurance and Reinsurance Companies 10,19 8.573.616 5.624.583 4- Payables Due to Individual Pension Operations -- -- 5- Payables Due to Other Main Operations 19 171.765.147 142.812.014 6- Rediscount on Payables from Other Main Operations -- -- C- Due to Related Parties 19 256.510 91.826 1- Due to Shareholders -- -- 2- Due to Associates 36.133 -- 3- Due to Subsidiaries -- -- 4- Due to Joint Ventures -- -- 5- Due to Personnel 220.377 91.826 6- Due to Other Related Parties -- -- D- Other Payables 19 113.563.203 82.609.754 1- Deposits and Guarantees Received 6.282.082 5.486.777 2- Medical Treatment Payables to Social Security Institution 31.604.313 32.500.031 3- Other Miscellaneous Payables 76.358.578 45.085.032 4- Discount on Other Miscellaneous Payables (681.770) (462.086) E- Insurance Technical Provisions 17 4.307.802.430 3.796.758.334 1- Reserve for Unearned Premiums - Net 17 1.680.134.904 1.752.948.944 2- Reserve for Unexpired Risks - Net 2.26,17 22.981.170 564.531 3- Mathematical Provisions - Net -- -- 4- Provision for Outstanding Claims - Net 4.1, 17 2.604.686.356 2.043.244.859 5- Provision for Bonus and Discounts - Net -- -- 6- Other Technical Provisions - Net -- -- F- Provisions for Taxes and Other Similar Obligations 19 50.750.268 39.526.586 1- Taxes and Funds Payable 39.563.475 36.548.188 2- Social Security Premiums Payable 3.464.617 2.978.398 3- Overdue, Deferred or By Instalment Taxes and Other Liabilities -- -- 4- Other Taxes and Similar Payables -- -- 5- Corporate Tax Payable 35 52.636.513 23.316.813 6- Prepaid Taxes and Other Liabilities Regarding Current Period Income 19 (44.914.337) (23.316.813) 7- Provisions for Other Taxes and Similar Liabilities -- -- G- Provisions for Other Risks -- -- 1- Provision for Employee Termination Benefits -- -- 2- Provision for Pension Fund Deficits -- -- 3- Provisions for Costs -- -- H- Deferred Income and Expense Accruals 146.541.875 112.331.397 1- Deferred Income 19 95.718.017 58.640.768 2- Expense Accruals 23 50.813.598 53.681.608 3- Other Deferred Income and Expense Accruals 10.260 9.021 I- Other Short-Term Liabilities 23 1.878.908 1.561.950 1- Deferred Tax Liabilities -- -- 2- Inventory Count Differences -- -- 3- Other Various Short-Term Liabilities 23 1.878.908 1.561.950 III - Total Short-Term Liabilities 5.223.711.538 4.616.498.865 The accompanying notes are an integral part of these unconsolidated financial statements.
120 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Unconsolidated Balance Sheet As at December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
LIABILITIES Audited Audited Current Period Prior Period IV- Long-Term Liabilities Note December 31, 2017 December 31, 2016 A- Financial Liabilities -- -- 1- Loans to Financial Institutions -- -- 2- Finance Lease Liabilities -- -- 3- Deferred Leasing Costs -- -- 4- Bonds Issued -- -- 5- Other Financial Assets Issued -- -- 6- Valuation Differences of Other Financial Assets Issued -- -- 7- Other Financial Liabilities -- -- B- Payables Arising from Main Operations -- -- 1- Payables Due to Insurance Operations -- -- 2- Payables Due to Reinsurance Operations -- -- 3- Cash Deposited by Insurance and Reinsurance Companies -- -- 4- Payables Due to Individual Pension Operations -- -- 5- Payables Due to Other Operations -- -- 6- Rediscount on Payables from Other Operations -- -- C- Due to Related Parties -- -- 1- Due to Shareholders -- -- 2- Due to Associates -- -- 3- Due to Subsidiaries -- -- 4- Due to Joint Ventures -- -- 5- Due to Personnel -- -- 6- Due to Other Related Parties -- -- D- Other Payables -- -- 1- Deposits and Guarantees Received -- -- 2- Medical Treatment Payables to Social Security Institution -- -- 3- Other Miscellaneous Payables -- -- 4- Discount on Other Miscellaneous Payables -- -- E-Insurance Technical Provisions 17 148.641.971 117.130.567 1- Reserve for Unearned Premiums - Net -- -- 2- Reserve for Unexpired Risks - Net -- -- 3- Mathematical Provisions - Net -- -- 4- Provision for Outstanding Claims - Net -- -- 5- Provision for Bonus and Discounts - Net -- -- 6- Other Technical Provisions - Net 17 148.641.971 117.130.567 F-Other Liabilities and Relevant Accruals -- -- 1- Other Liabilities -- -- 2- Overdue, Deferred or By Instalment Taxes and Other Liabilities -- -- 3- Other Liabilities and Expense Accruals -- -- G- Provisions for Other Risks 23 20.939.663 17.363.526 1- Provision for Employee Termination Benefits 23 20.939.663 17.363.526 2- Provision for Pension Fund Deficits -- -- H-Deferred Income and Expense Accruals -- -- 1- Deferred Income -- -- 2- Expense Accruals -- -- 3- Other Deferred Income and Expense Accruals -- -- I- Other Long-Term Liabilities -- -- 1- Deferred Tax Liabilities -- -- 2- Other Long-Term Liabilities -- -- IV- Total Long-Term Liabilities 169.581.634 134.494.093 The accompanying notes are an integral part of these unconsolidated financial statements.
Anadolu Sigorta 2017 Annual Report 121 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Unconsolidated Balance Sheet As at December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
EQUITY Audited Audited Current Period Prior Period V- Equity Note December 31, 2017 December 31, 2016 A- Paid in Capital 500.000.000 500.000.000 1- (Nominal) Capital 2.13,15 500.000.000 500.000.000 2- Unpaid Capital -- -- 3- Positive Capital Restatement Differences -- -- 4- Negative Capital Restatement Differences -- -- 5- Register in Progress Capital -- -- B- Capital Reserves 15 29.388.073 29.200.961 1- Share Premiums -- -- 2- Cancellation Profits of Equity Shares -- -- 3- Profit on Asset Sales That Will Be Transferred to Capital -- -- 4- Currency Translation Adjustments -- -- 5- Other Capital Reserves 15 29.388.073 29.200.961 C- Profit Reserves 893.834.794 574.510.108 1- Legal Reserves 15 42.470.727 37.374.983 2- Statutory Reserves 15 22.689.973 17.547.144 3- Extraordinary Reserves 15 158.692.234 113.109.908 4- Special Funds -- -- 5- Revaluation of Financial Assets 15 629.061.481 363.889.473 6- Other Profit Reserves 15 40.920.379 42.588.600 D- Retained Earnings 31.601.927 31.601.927 1- Retained Earnings 31.601.927 31.601.927 E- Accumulated Losses -- -- 1- Accumulated Losses -- -- F-Net Profit/(Loss) for the Period 184.196.626 87.867.323 1- Net Profit for the Period 184.196.626 87.852.229 2- Net Loss for the Period -- -- 3- Net Profit not Subject to Distribution 15 -- 15.094 V- Total Equity 1.639.021.420 1.223.180.319 TOTAL EQUITY AND LIABILITIES 7.032.314.592 5.974.173.277
The accompanying notes are an integral part of these unconsolidated financial statements.
122 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Unconsolidated Statement of Income For the Period Ended December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Audited Audited Current Period Prior Period I-TECHNICAL SECTION Note December 31, 2017 December 31, 2016 A- Non-Life Technical Income 3.912.846.125 3.567.233.863 1- Earned Premiums (Net of Reinsurer Share) 3.323.384.126 3.152.228.202 1.1- Written Premiums (Net of Reinsurer Share) 17 3.272.986.725 3.447.328.655 1.1.1- Written Premiums, gross 17 4.671.409.652 4.484.060.267 1.1.2- Written Premiums, ceded 10,17 (1.289.191.554) (885.937.607) 1.1.3- Premiums Transferred to Social Security Institutions 17 (109.231.373) (150.794.005) 1.2- Change in Reserve for Unearned Premiums (Net of Reinsurer Shares and Less the Amounts Carried Forward) 17,29 72.814.040 (301.021.136) 1.2.1- Reserve for Unearned Premiums, gross 17 (121.582.813) (379.537.942) 1.2.2- Reserve for Unearned Premiums, ceded 17 210.638.839 58.433.152 1.2.3 - Reserve for Unearned Premiums, Social Security Institution Share (16.241.986) 20.083.654 1.3- Change in Reserve for Unexpired Risks (Net of Reinsurer Share and Less the Amounts Carried Forward) 17,29 (22.416.639) 5.920.683 1.3.1- Reserve for Unexpired Risks, gross 17 (43.066.356) 14.511.470 1.3.2- Reserve for Unexpired Risks, ceded 17 20.649.717 (8.590.787) 2- Investment Income - Transferred from Non-Technical Section 542.114.497 379.849.157 3- Other Technical Income (Net of Reinsurer Share) 6.605.545 3.777.698 3.1- Other Technical Income, gross 6.605.545 3.777.698 3.2- Other Technical Income, ceded -- -- 4- Accrued Salvage and Subrogation Income 40.741.957 31.378.806 B - Non-Life Technical Expense (3.620.216.963) (3.409.670.050) 1- Incurred Losses (Net of Reinsurer Share) 17 (2.714.265.320) (2.525.353.872) 1.1- Claims Paid (Net of Reinsurer Share) 17,29 (2.152.823.823) (1.868.016.555) 1.1.1- Claims Paid, gross 17 (2.755.951.134) (2.236.015.308) 1.1.2- Claims Paid, ceded 10,17 603.127.311 367.998.753 1.2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward) 17,29 (561.441.497) (657.337.317) 1.2.1- Change in Provisions for Outstanding Claims, gross 17 (715.185.940) (651.278.718) 1.2.2- Change in Provisions for Outstanding Claims, ceded 17 153.744.443 (6.058.599) 2- Change in Provision for Bonus and Discounts (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- 2.1- Provision for Bonus and Discounts, gross -- -- 2.2- Provision for Bonus and Discounts, ceded -- -- 3- Change in Other Technical Reserves (Net of Reinsurer Share and Less the Amounts Carried Forward) 17,29 (31.511.404) (27.882.079) 4- Operating Expenses 32 (755.828.741) (742.546.739) 5- Change in Mathematical Provisions (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- 5.1- Change in Mathematical Provisions, gross -- -- 5.2 - Change in Mathematical Provisions, ceded -- -- 6- Change in Other Technical Provisions (Net of Reinsurer and Less the Amounts Carried Forward) 47 (118.611.498) (113.887.360) 6.1- Change in Other Technical Provisions, gross (121.529.377) (113.887.360) 6.2- Change in Other Technical Provisions, ceded 2.917.879 -- C- Net Technical Income-Non-Life (A - B) 292.629.162 157.563.813 D- Life Technical Income -- -- 1- Earned Premiums (Net of Reinsurer Share) -- -- 1.1- Written Premiums (Net of Reinsurer Share) -- -- 1.1.1- Written Premiums, gross -- -- 1.1.2- Written Premiums, ceded -- -- 1.2- Change in Reserve for Unearned Premiums (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- 1.2.1- Reserve for Unearned Premiums, gross -- -- 1.2.2- Reserve for Unearned Premiums, ceded -- -- 1.3- Change in Reserve for Unexpired Risks (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- 1.3.1- Reserve for Unexpired Risks, gross -- -- 1.3.2- Reserve for Unexpired Risks, ceded -- -- 2- Investment Income -- -- 3- Unrealized Gains on Investments -- -- 4- Other Technical Income (Net of Reinsurer Share) -- -- 4.1- Other Technical Income. gross -- -- 4.2- Other Technical Income. ceded -- -- 5- Accrued Salvage Income -- -- The accompanying notes are an integral part of these unconsolidated financial statements.
Anadolu Sigorta 2017 Annual Report 123 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Unconsolidated Statement of Income For the Period Ended December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Audited Audited Current Period Prior Period I-TECHNICAL SECTION Note December 31, 2017 December 31, 2016 E- Life Technical Expense -- -- 1- Incurred Losses (Net of Reinsurer Share) -- -- 1.1- Claims Paid (Net of Reinsurer Share) -- -- 1.1.1- Claims Paid, gross -- -- 1.1.2- Claims Paid, ceded -- -- 1.2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- 1.2.1- Change in Provisions for Outstanding Claims, gross -- -- 1.2.2- Change in Provisions for Outstanding Claims, ceded -- -- 2- Change in Provision for Bonus and Discounts (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- 2.1- Provision for Bonus and Discounts, gross -- -- 2.2- Provision for Bonus and Discounts, ceded -- -- 3- Change in Mathematical Provisions (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- 3.1- Change in Mathematical Provisions, gross -- -- 3.1.1- Change in Actuarial Mathematical Provisions, gross -- -- 3.1.2- Change in Profit Share Provisions (Provision for Financial Investments with Risks on Saving Life Policyholders), gross -- -- 3.2- Change in Mathematical Provisions, ceded -- -- 3.2.1- Change in Actuarial Mathematical Provisions, ceded -- -- 3.2.2- Change in Profit Share Provisions (Provision for Financial Investments with Risks on Saving Life Policyholders). ceded -- -- 4- Change in Other Technical Reserves (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- 5- Operating Expenses -- -- 6- Investment Expenses -- -- 7- Unrealized Losses on Investments -- -- 8- Investment Income Transferred to the Non-Life Technical Section -- -- F- Net Technical Income- Life (D - E) -- -- G- Pension Business Technical Income -- -- 1- Fund Management Income -- -- 2- Management Fee -- -- 3- Entrance Fee Income -- -- 4- Management Expense Charge in case of Suspension -- -- 5- Income from Private Service Charges -- -- 6- Increase in Value of Capital Allowances Given as Advance -- -- 7- Other Technical Expense -- -- H- Pension Business Technical Expense -- -- 1- Fund Management Expense -- -- 2- Decrease in Value of Capital Allowances Given as Advance -- -- 3- Operating Expenses -- -- 4- Other Technical Expenses -- -- I- Net Technical Income - Pension Business (G - H) -- --
The accompanying notes are an integral part of these unconsolidated financial statements.
124 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Unconsolidated Statement of Income For the Period Ended December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Audited Audited Current Period Prior Period II-NON-TECHNICAL SECTION Note December 31, 2017 December 31, 2016 C- Net Technical Income - Non-Life (A-B) 292.629.162 157.563.813 F- Net Technical Income - Life (D-E) -- -- I - Net Technical Income - Pension Business (G-H) -- -- J- Total Net Technical Income (C+F+I) 292.629.162 157.563.813 K- Investment Income 859.807.937 487.727.181 1- Income from Financial Assets 4.2 228.602.158 255.570.956 2- Income from Disposal of Financial Assets 4.2 26.473.764 11.587.624 3- Valuation of Financial Assets 4.2 52.102.926 48.436.306 4- Foreign Exchange Gains 4.2 430.645.835 134.101.122 5- Income from Associates 4.2 28.000.000 24.000.000 6- Income from Subsidiaries and Joint Ventures -- -- 7- Income from Property, Plant and Equipment 3.867.125 9.599.061 8- Income from Derivative Transactions 4.2 90.116.129 4.432.112 9- Other Investments -- -- 10- Income Transferred from Life Section -- -- L- Investment Expense (879.645.731) (505.094.199) 1- Investment Management Expenses (incl. interest) 4.2 (385.326) (756.432) 2- Diminution in Value of Investments 4.2 (1.118.002) (1.643.638) 3- Loss from Disposal of Financial Assets 4.2 (16.137.959) (15.270.224) 4- Investment Income Transferred to Non-Life Technical Section (542.114.497) (379.849.157) 5- Loss from Derivative Transactions 4.2 (179.274.294) (3.616.449) 6- Foreign Exchange Losses 4.2 (112.534.636) (76.942.491) 7- Depreciation and Amortization Expenses 6,8 (28.081.017) (27.015.808) 8- Other Investment Expenses -- -- M- Income and Expenses From Other and Extraordinary Operations (35.958.229) (29.012.659) 1- Provisions 47 (32.318.934) (38.095.225) 2- Rediscounts 47 (11.903.019) 492.592 3- Specified Insurance Accounts -- -- 4- Monetary Gains and Losses -- -- 5- Deferred Taxation (Deferred Tax Assets) 35 5.702.299 7.160.762 6- Deferred Taxation (Deferred Tax Liabilities) 35 -- -- 7- Other Income 2.771.738 3.179.411 8- Other Expenses and Losses (210.313) (1.750.199) 9- Prior Year’s Income -- -- 10- Prior Year’s Expenses and Losses -- -- N- Net Profit for the Period 184.196.626 87.867.323 1- Profit for the Period 236.833.139 111.184.136 2- Corporate Tax Provision and Other Fiscal Liabilities 35 (52.636.513) (23.316.813) 3- Net Profit for the Period 184.196.626 87.867.323 4- Monetary Gains and Losses -- --
The accompanying notes are an integral part of these unconsolidated financial statements.
Anadolu Sigorta 2017 Annual Report 125 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Unconsolidated Statement of Changes in Equity For the Period Ended December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Reviewed Statement of Changes in Equity - December 31, 2016 Own Shares Revaluation Currency Other Reserves Paid-in of the of Financial Inflation Translation Statutory and Retained Net Profit for Retained Note Capital Company Assets Adjustments Adjustments Legal Reserves Reserves Earnings the Year Earnings Total I- Balance at the end of the previous year - December 31, 2015 500.000.000 -- 430.663.565 -- -- 34.311.746 11.726.993 129.782.569 63.806.242 31.601.927 1.201.893.042 II- Change in Accounting Standards (*) ------III- Restated balances (I+II) - January 1, 2016 500.000.000 -- 430.663.565 -- -- 34.311.746 11.726.993 129.782.569 63.806.242 31.601.927 1.201.893.042 A- Capital increase (A1+A2) ------1- In cash ------2- From reserves ------B- Purchase of own shares ------C- Gains or losses that are not included in the statement of income ------(578.013) -- -- (578.013) D- Change in the value of financial assets 11,15 -- -- (66.774.092) ------772.059 -- -- (66.002.033) E- Currency translation adjustments ------F- Other gains or losses ------G- Inflation adjustment differences ------H- Net profit for the period ------87.867.323 -- 87.867.323 I - Dividends paid ------J - Transfers to reserves 15 ------3.063.237 5.820.151 54.922.854 (63.806.242) -- -- IV- Balance at the end of the period - December 31, 2016 500.000.000 -- 363.889.473 -- -- 37.374.983 17.547.144 184.899.469 87.867.323 31.601.927 1.223.180.319
Reviewed Statement of Changes in Equity - December 31, 2017 Own Shares Revaluation Currency Other Reserves Paid-in of the of Financial Inflation Translation Statutory and Retained Net Profit for Retained Note Capital Company Assets Adjustments Adjustments Legal Reserves Reserves Earnings the Year Earnings Total I - Balance at the end of the previous year - December 31, 2016 500.000.000 -- 363.889.473 -- -- 37.374.983 17.547.144 184.899.469 87.867.323 31.601.927 1.223.180.319 II - Change in Accounting Standards (*) ------III - Restated balances (I+II) - January 1, 2017 500.000.000 -- 363.889.473 -- -- 37.374.983 17.547.144 184.899.469 87.867.323 31.601.927 1.223.180.319 A- Capital increase (A1+A2) ------1- In cash ------2- From reserves ------B- Purchase of own shares ------C- Gains or losses that are not included in the statement of income ------(1.668.221) -- -- (1.668.221) D- Change in the value of financial assets 11,15 -- -- 265.172.008 ------172.018 -- -- 265.344.026 E- Currency translation adjustments ------F- Other gains or losses ------G- Inflation adjustment differences ------H- Net profit for the period ------184.196.626 -- 184.196.626 I - Dividends paid 2.23 ------(32.031.330) -- (32.031.330) J - Transfers to reserves 15 ------5.095.744 5.142.829 45.597.420 (55.835.993) -- -- IV - Balance at the end of the period - December 31, 2017 500.000.000 -- 629.061.481 -- -- 42.470.727 22.689.973 229.000.686 184.196.626 31.601.927 1.639.021.420
The accompanying notes are an integral part of these unconsolidated financial statements.
126 Anadolu Sigorta 2017 Annual Report Reviewed Statement of Changes in Equity - December 31, 2016 Own Shares Revaluation Currency Other Reserves Paid-in of the of Financial Inflation Translation Statutory and Retained Net Profit for Retained Note Capital Company Assets Adjustments Adjustments Legal Reserves Reserves Earnings the Year Earnings Total I- Balance at the end of the previous year - December 31, 2015 500.000.000 -- 430.663.565 -- -- 34.311.746 11.726.993 129.782.569 63.806.242 31.601.927 1.201.893.042 II- Change in Accounting Standards (*) ------III- Restated balances (I+II) - January 1, 2016 500.000.000 -- 430.663.565 -- -- 34.311.746 11.726.993 129.782.569 63.806.242 31.601.927 1.201.893.042 A- Capital increase (A1+A2) ------1- In cash ------2- From reserves ------B- Purchase of own shares ------C- Gains or losses that are not included in the statement of income ------(578.013) -- -- (578.013) D- Change in the value of financial assets 11,15 -- -- (66.774.092) ------772.059 -- -- (66.002.033) E- Currency translation adjustments ------F- Other gains or losses ------G- Inflation adjustment differences ------H- Net profit for the period ------87.867.323 -- 87.867.323 I - Dividends paid ------J - Transfers to reserves 15 ------3.063.237 5.820.151 54.922.854 (63.806.242) -- -- IV- Balance at the end of the period - December 31, 2016 500.000.000 -- 363.889.473 -- -- 37.374.983 17.547.144 184.899.469 87.867.323 31.601.927 1.223.180.319
Reviewed Statement of Changes in Equity - December 31, 2017 Own Shares Revaluation Currency Other Reserves Paid-in of the of Financial Inflation Translation Statutory and Retained Net Profit for Retained Note Capital Company Assets Adjustments Adjustments Legal Reserves Reserves Earnings the Year Earnings Total I - Balance at the end of the previous year - December 31, 2016 500.000.000 -- 363.889.473 -- -- 37.374.983 17.547.144 184.899.469 87.867.323 31.601.927 1.223.180.319 II - Change in Accounting Standards (*) ------III - Restated balances (I+II) - January 1, 2017 500.000.000 -- 363.889.473 -- -- 37.374.983 17.547.144 184.899.469 87.867.323 31.601.927 1.223.180.319 A- Capital increase (A1+A2) ------1- In cash ------2- From reserves ------B- Purchase of own shares ------C- Gains or losses that are not included in the statement of income ------(1.668.221) -- -- (1.668.221) D- Change in the value of financial assets 11,15 -- -- 265.172.008 ------172.018 -- -- 265.344.026 E- Currency translation adjustments ------F- Other gains or losses ------G- Inflation adjustment differences ------H- Net profit for the period ------184.196.626 -- 184.196.626 I - Dividends paid 2.23 ------(32.031.330) -- (32.031.330) J - Transfers to reserves 15 ------5.095.744 5.142.829 45.597.420 (55.835.993) -- -- IV - Balance at the end of the period - December 31, 2017 500.000.000 -- 629.061.481 -- -- 42.470.727 22.689.973 229.000.686 184.196.626 31.601.927 1.639.021.420
Anadolu Sigorta 2017 Annual Report 127 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Unconsolidated Statement of Changes in Equity for the Period Ended December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Reviewed Reviewed Current Period Prior Period Note December 31, 2017 December 31, 2016 A - Cash flows from operating activities 1- Cash provided from insurance activities 5.165.018.373 5.071.226.899 2- Cash provided from reinsurance activities -- -- 3- Cash provided from individual pension business -- -- 4- Cash used in insurance activities (4.966.891.348) (4.769.100.894) 5- Cash used in reinsurance activities (40.078.614) (5.462.509) 6- Cash used in individual pension business -- -- 7- Cash provided by operating activities 158.048.411 296.663.496 8- Interest paid -- -- 9- Income taxes paid 19 (32.473.242) 9.957.572 10- Other cash inflows 7.838.695 62.828.955 11- Other cash outflows (39.799.131) (100.587.197) 12-Net cash provided by operating activities 93.614.733 268.862.826 B - Cash flows from investing activities 1- Proceeds from disposal of tangible assets 400.469 8.091.520 2- Acquisition of tangible assets 6, 8 (35.515.713) (33.694.808) 3- Acquisition of financial assets 11 (909.864.560) (843.360.358) 4- Proceeds from disposal of financial assets 601.168.745 701.087.636 5- Interests received 247.825.764 383.365.799 6- Dividends received 28.000.000 20.000.000 7- Other cash inflows 508.056.272 131.467.603 8- Other cash outflows (269.463.796) (435.576.506) 9- Net cash provided by investing activities 170.607.181 (68.619.114) C- Cash flows from financing activities 1- Equity shares issued -- -- 2- Cash provided from loans and borrowings -- -- 3- Finance lease payments -- -- 4- Dividends paid 2.23 (32.031.330) -- 5- Other cash inflows -- -- 6- Other cash outflows -- -- 7- Net cash used in financing activities (32.031.330) -- D- Effect of exchange rate fluctuations on cash and cash equivalents 16.572.817 2.027.454 E- Net increase in cash and cash equivalents 248.763.401 202.271.166 F- Cash and cash equivalents at the beginning of the year 1.872.472.855 1.670.201.689 G- Cash and cash equivalents at the end of the year 14 2.121.236.256 1.872.472.855
The accompanying notes are an integral part of these unconsolidated financial statements.
128 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Unconsolidated Profıt Dıstrıbutıon For the Year Ended 31 December 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Audited Audited Current Period(**) Prior Period(***) Note December 31, 2017 3 December 31, 2016 I. PROFIT DISTRIBUTION 1.1. CURRENT YEAR PROFIT(*) 258.151.501 125.420.416 1.2. TAX AND FUNDS PAYABLE (52.636.513) (23.316.813) 1.2.1. Corporate Income Tax(Income Tax) 35 (52.636.513) (23.316.813) 1.2.2. Income tax deduction -- -- 1.2.3. Other taxes and Duties -- -- A NET PROFIT(1.1 - 1.2) 205.514.988 102.103.603 1.3. PREVIOUS PERIOD LOSSES (-) -- -- 1.4. FIRST LEGAL RESERVE 9.409.831 4.392.611 1.5. STATUTORY FUND (-) -- -- B NET PROFIT DISTRIBUTION [(A-(1.3 + 1.4 + 1.5)] 196.105.157 97.710.992 1.6. FIRST DIVIDEND TO SHAREHOLDERS (-) -- 30.000.000 1.6.1. Holders of shares -- 30.000.000 1.6.2. Holders of Preferred shares -- -- 1.6.3. Holders of Redeemed shares -- -- 1.6.4. Holders of Participation Bond -- -- 1.6.5. Holders of Profıt and Loss sharing certificate -- -- 1.7. DIVIDEND TO PERSONNEL (-) -- 2.031.330 1.8. DIVIDENDS TO BOARD OF DIRECTORS (-) -- -- 1.9. SECOND DIVIDEND TO SHAREHOLDERS (-) -- -- 1.9.1. Holders of shares -- -- 1.9.2. Holders of Preferred shares -- -- 1.9.3. Holders of Redeemed shares -- -- 1.9.4. Holders of Participation Bond -- -- 1.9.5. Holders of Profıt and Loss sharing certificate -- -- 1.10. SECOND LEGAL RESERVE (-) -- 703.133 1.11. STATUTORY RESERVES (-) -- 5.142.829 1.12. EXTRAORDINARY RESERVES -- 59.833.700 1.13. OTHER RESERVES -- -- 1.14. SPECIAL FUNDS -- -- II. DISTRIBUTION OF RESERVES -- -- 2.1. DISTRIBUTION OF RESERVES -- -- 2.2. SECOND LEGAL RESERVES (-) -- -- 2.3. COMMON SHARES (-) -- -- 2.3.1. Holders of shares -- -- 2.3.2 Holders of Preferred shares -- -- 2.3.3. Holders of Redeemed shares -- -- 2.3.4 Holders of Participation Bond -- -- 2.3.5 Holders of Profıt and Loss sharing certificate -- -- 2.4. DIVIDENDS TO PERSONNEL (-) -- -- 2.5. DIVIDENDS TO BOARD OF DIRECTORS (-) -- -- III. PROFIT PER SHARE -- -- 3.1. HOLDERS OF SHARES 0,00368 0,00176 3.2. HOLDERS OF SHARES (%) 0,368 0,176 3.3. HOLDERS OF PREFERRED SHARES -- -- 3.4. HOLDERS OF PREFERRED SHARES (%) -- -- IV. DIVIDEND PER SHARE -- -- 4.1. HOLDERS OF SHARES -- 0,0006 4.2. HOLDERS OF SHARES (%) -- 0,06 4.3. HOLDERS OF PREFERRED SHARES -- -- 4.4. HOLDERS OF PREFERRED SHARES (%) -- --
(*) According to the Law no. 13 of the Profit Share Annunciation which was announced in Capital Markets Board of Turkey’s weekly bulletin numbered 2014/2, which was then published in the official gazette on 23 January 2014, the profit shares have been divided according to consolidated surplus. Dividend to be paid to the personnel amounting to TL 4.000.000, which is set aside in accordance with TAS 19, has been added to the profit for the period as of December 31, 2017. (**) Profit distribution table has not been filled yet, due to profit distribution proposal for the year 2017 has not prepared by the Board of Directors. (***) The Figures of 2016 is filled with the data which is “According to Legal Records” belongs to the Profit Distribution.
The accompanying notes are an integral part of these unconsolidated financial statements.
Anadolu Sigorta 2017 Annual Report 129 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
1 General information
1.1 Name of the Company and the ultimate owner of the group
The shareholding structure of Anadolu Anonim Türk Sigorta Şirketi (“the Company”) is presented below. As of December 31, 2017, the shareholder having indirect control over the shares of Anadolu Anonim Türk Sigorta Şirketi (“the Company”) is Türkiye İş Bankası A.Ş. (“İş Bankası”). December 31, 2017 December 31, 2016 Shareholding Shareholding Shareholding Shareholding Name Amount (TL) Rate (%) Amount (TL) Rate (%)
Milli Reasürans T.A.Ş. 286.550.106 57,31 286.550.106 57,31 Other 213.449.894 42,69 213.449.894 42,69 Paid in Capital 500.000.000 100,00 500.000.000 100,00
1.2 Domicile and the legal structure of the Company, country and the address of the registered office (address of the operating centre if it is different from the registered office)
The Company was registered in Turkey and has the status of ‘Incorporated Company. The company address is “Rüzgarlıbahçe Mahallesi, Kavak Sokak, No: 31 34805 Kavacık/İstanbul”. Company has nine regional offices; two of them established in İstanbul and others established in Antalya, İzmir, Samsun, Adana, Ankara, Trabzon and Bursa, a sales centre in Gaziantep and a branch in Turkish Republic of Northern Cyprus.
1.3 Business of the Company
The Company operates in almost all non-life insurance branches consisting of mainly accident, health, motor vehicles, air vehicles, water vehicles, marine, fire and natural disasters, general loss, credit, financial losses, and legal protection.
As of December 31, 2017, the Company serves through, 2.215 authorized agencies and 99 unauthorized agencies (December 31, 2016: 2.458 authorized agencies and 98 unauthorized agencies) of which, 2.314 agencies (December 31, 2016: 2.556 authorized).
1.4 Description of the main operations of the Company
The Company conducts its operations in accordance with the Insurance Law No.5684 (the “Insurance Law”) issued in June 14, 2007 dated and 26552 numbered Official Gazette and the communiqués and other regulations in force issued by the Turkish Treasury based on the Insurance Law. The Company operates in insurance branches as mentioned above Note 1.3 Business of the Company.
The Company’s shares have been listed on the Istanbul Stock Exchange (“ISE”). The company operates based on its own specific laws and regulations in matters of establishment, auditing, supervision/oversight, accounting and financial reporting in accordance Capital Market Law No: 6362, part of VIII and paragraph of 5 of Article 136.
1.5 The average number of the personnel during the period in consideration of their categories
The average number of the personnel during the period in consideration of their categories is as follows: December 31, 2017 December 31, 2016
Senior level managers 7 7 Directors 38 38 Officers 2 3 Intermediate directors 171 163 Contracted personnel 982 952 Total 1.200 1.163
130 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
1.6 Wages and similar benefits provided to the senior management
For the period ended December 31, 2017, wages and similar benefits provided to the members of the board of directors is amounting to TL 1.561.811 (December 31, 2016: TL 1.306.590), executives TL 5.777.795 (December 31, 2016: TL 5.192.515).
1.7 Keys used in the distribution of investment income and operating expenses (personnel, administrative, research and development, marketing and selling, services rendered from third parties and other operating expenses) in the financial statements
Procedures and principles related to keys used in the financial statements of the companies are determined in accordance with the 4 January 2008 dated and 2008/1 numbered “Communiqué Related to the Procedures and Principles for the Keys Used in the Financial Statements Being Prepared In Accordance With Insurance Accounting Plan” issued by the Turkish Treasury.
In accordance with the above mentioned Communiqué, insurance companies are allowed to transfer technical section operating expense to insurance section through methods determined by Turkish Treasury or by the Company itself. Methods determined by the Company should be approved by the Turkish Treasury, Known and exactly distinguishable operating expenses are distributed to related branches directly, while operating expenses are distributed to the sub-branches in accordance with the average of 3 ratios calculated by dividing “number of the policies produced within the last three years”, “gross premium written within the last three years”, and “number of the claims reported within the last three years” to the “total number of the policies”, “total gross written premiums” and the “total number of the claims reported”, respectively.
Income from the assets invested against non-life technical provisions is transferred to technical section from non-technical section; remaining income is transferred to the non-technical section.
1.8 Information on the financial statements as to whether they comprise an individual company or a group of companies
The accompanying financial statements comprise only the unconsolidated financial information of the Company. As further discussed in note 2.2 - Consolidation, the Company has prepared additionally consolidated financial statements for the year ended December 31, 2017.
1.9 Name or other identity information about the reporting entity and the changes in this information after previous reporting date Trade name of the Company: Anadolu Anonim Türk Sigorta Şirketi Registered address of the head office: Rüzgarlıbahçe Mahallesi, Kavak Sokak, No: 31 34805 Kavacık/İstanbul The web page of the Company: www.anadolusigorta.com.tr
The information presented above has not any change since the end of the previous reporting period.
1.10 Events after the reporting date
After the balance sheet date, there has been no change in the company’s activities, the registration of these activities, the document structure and Company policies.
As of December 31, 2017, the unconsolidated financial statements prepared has been approved by the Board of Directors of the Company on January 29, 2018.
Anadolu Sigorta 2017 Annual Report 131 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
2 Summary of significant accounting policies
2.1 Basis of preparation
2.1.1 Information about the principles and the specific accounting policies used in the preparation of the financial statements
In accordance with Article 136(5) in Section VIII of the Capital Markets Law, numbered 6362 insurance companies have to comply with their own specific laws and regulations in matters of establishment, auditing, supervision/oversight, accounting and financial reporting. Therefore, the Company maintains its books of account and prepares its financial statements in accordance with the Turkish Accounting Standards (“TAS”), Turkish Financial Reporting Standards (“TFRS”), and other accounting and financial reporting principles, statements and guidance (collectively “the Reporting Standards”) in accordance with the “Communiqué Related to the Financial Reporting of Insurance, Reinsurance, and Individual Pension Companies” as promulgated by the Turkish Treasury based on Article 18 of the Insurance Law and Article 11 of the 4632 numbered Individual Pension Savings and Investment System Law (‘‘Individual Retirement Law’’).
According to numbered 4th related law Accounting for subsidiaries, associates, joint ventures is, consolidated financial statements, financial statements which disclosed public regulated by the Turkish Treasury.
The company prepare their financial statements are regulated in form and content ın order to compare the financial statements of prior period and with other companies according to “Communiqué on Presentation of Financial Statements “ which is published in the Official Gazette dated April 18, 2008 and numbered 26851.
The financial statements are prepared in accordance with the accounting and financial reporting regulations in force in accordance with the insurance legislation and the provisions of Turkish Accounting Standards on matters not regulated by them.
2.1.2 Other accounting policies appropriate for the understanding of the financial statements
Accounting in hyperinflationary countries
Financial statements of the Turkish entities have been restated for the changes in the general purchasing power of the Turkish Lira based on “TAS 29 - Financial Reporting in Hyperinflationary Economies” as of December 31, 2004. TAS 29 requires that financial statements prepared in the currency of a hyperinflationary economy be stated in terms of the measuring unit current at the reporting date, and that corresponding figures for previous years be restated in the same terms.
With respect to the declaration of the Turkish Treasury with the article dated April 4, 2005 and numbered 19387, financial statements as of December 31, 2004 are adjusted for the opening balances of 2005 in accordance with the section with respect to inflation accounting of the Capital Markets Board (“CMB”) Communiqué No: 25 of Series XI, “Communiqué on Accounting Standards in Capital Market” published in the Official Gazette dated January 15, 2003 and numbered 25290. Inflation accounting is no longer applied starting from January 1, 2005, in accordance with the same declaration of the Turkish Treasury. Accordingly, as of December 31, 2017, non-monetary assets and liabilities and items included in shareholders’ equity including paid-in capital recognized or recorded before December 31, 2004 in order to reflect inflation adjustments. Non-monetary assets and liabilities and items included in shareholders’ equity including paid-in capital recognized or recorded after December 31, 2004 are measured at their nominal values.
Other accounting policies
Information regarding other accounting polices is disclosed above in “Note 2.1.1 - Information about the principles and the specific accounting policies used in the preparation of the financial statements” and each under its own caption in the following sections of this report.
2.1.3 Valid and presentation currency
The accompanying unconsolidated financial statements are presented in TL, which is the Company’s functional currency.
2.1.4 Rounding scale of the amounts presented in the financial statements
Financial information presented in TL, has been rounded to the nearest TL values.
132 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
2.1.5 Basis of measurement used in the preparation of the financial statements
The accompanying financial statements are prepared on the historical cost basis as adjusted for the effects of inflation that lasted until December 31, 2004, except for the financial assets at fair value through profit or loss, available-for-sale financial assets, derivative financial instruments and associates which are measured at their fair values unless reliable measures are available.
2.1.6 Accounting policies, changes in accounting estimates and errors
No changes or errors have occured in the accounting policies for the current period.
Explanations on accounting estimates are given in the “Note 3” which is critical accounting estimates and judgments.
2.2 Consolidation
Circular Related to the Preparation of the Consolidated Financial Statements of Insurance, Reinsurance, and Individual Pension Companies” issued by the Turkish Treasury in the December 31, 2008 dated and 27097 numbered Official Gazette, has been in force since March 31, 2009. Accordingly, consolidated financial statements are also prepared using the equity method of accounting to consolidate the Company’s associate; Anadolu Hayat Emeklilik A.Ş. (“Anadolu Hayat”).
In the August 12, 2008 dated and 2008/36 numbered “Sector Announcement Related to the Accounting of Subsidiaries, Associates and Joint Ventures in the Stand Alone Financial Statements of Insurance, Reinsurance and Individual Pension Companies” of the Turkish Treasury, it is stated that although insurance, reinsurance and individual pension companies are exempted from TAS 27 - Consolidated and Separate Financial Statements, subsidiaries, associates and joint-ventures could be accounted in accordance with TAS 39 - Financial Instruments: Recognition and Measurement or at cost in accordance with the 37th paragraph of TAS 27 - Consolidated and Separate Financial Statements, Parallel to the related sector announcements mentioned above, as of the reporting date the Company has accounted for its associate at fair value based on quoted market price.
2.3 Segment reporting
An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company’s other components, whose operating results are reviewed regularly by the Board of Directors (being chief operating decision maker) to make decisions about resources allocated to each segment and assess its performance, and for which discrete financial information is available. Since the main economic environment, where the Company operates, is Turkey, a geographical segment reporting has not been presented. A business segment reporting of the Company is presented in Note 5 in accordance with TFRS 8- Operating Segments standard.
2.4 Foreign currency transactions
Transactions are recorded in TL, which is the Company’s functional currency. Transactions in foreign currencies are recorded at the rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at exchange rates ruling at the reporting date and foreign currency exchange differences are offset and all exchange differences are recognized in the statement of income.
Foreign currency exchange differences of unrecognized gains or losses arising from the difference between their fair value and the discounted values calculated per effective interest rate method of foreign currency available-for-sale financial assets are recorded in “Revaluation of financial assets” under equity and the realized gain or losses are recognized directly in the statement of income.
2.5 Tangible assets
Tangible assets of the Company are recorded at their historical costs that have been adjusted for the effects of inflation until the end of December 31, 2004. There have been no other inflationary adjustments for these tangible assets for the following years and therefore they have been recorded at their costs restated for the effects of inflation until December 31, 2004. Tangible assets that have been purchased after January 1, 2005 have been recorded at their costs after deducting any exchange rate differences and finance expenses.
Anadolu Sigorta 2017 Annual Report 133 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
The company has started to show based on the revaluation model by measuring over fair value as of the third quarter of the 2015 year by making changes in the use of the property which is measuring the cost model in the financial statements before.
Buildings for own use is recognized by fair value that determined in valuations made by independent valuation experts who have professional competency by reducing their following accumulated depreciation. Accumulated depreciation which is at the date of revaluation net of gross book value and net amount brought to values after revaluation.
Increase of revaluation results in the carrying value of use of land and building account in equity in the balance sheet under “Other Capital Account” as the net of tax effects. As a result of the evaluation of real estate an increase on the corresponding impairments are deducted from the fund; all other decrease are reflected the profit/loss account.
Gains/losses arising from the disposal of the tangible assets are calculated as the difference between the net carrying value and the proceeds from the disposal of related tangible assets and reflected to the statement of income of the related period.
Land is not depreciated to have indefinite life. Depreciation are allocated based on the useful life of tangible assets at cost or revalued amounts of tangible assets by using the straight-line method basis.
Maintenance and repair costs incurred in the ordinary course of the business are recorded as expense.
There are no pledges, mortgages and other encumbrances on tangible fixed assets.
There are no changes in accounting estimates that have significant effect on the current period or that are expected to have significant effect on the following periods.
Depreciation is recognized in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of tangible assets since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset.
Depreciation rates and estimated useful lives are as follows: Estimated Useful Depreciation Tangible Assets Lives (years) Rates (%) Buildings for own use 50 2,0 Machinery and equipment 3 - 16 6,3 - 33,3 Furniture and fixtures 4 - 16 6,3 - 25,0 Vehicles 5 20,0 Other tangible assets (including leasehold improvements) 5 - 10 10,0 - 20,0 Leased tangible assets 4 - 10 10,0 - 25,0
2.6 Investment properties
Investment properties are held either to earn rentals and/or for capital appreciation or for both.
In the event of investment property of first registration is measured on fair value including transaction costs after measured at cost. The changes which result of fair value valuation recognised in the income statement.
Any gains or losses on the retirement or disposal of an investment property are recognized in profit or loss in the period of retirement or disposal.
Investment properties are derecognized when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal.
The fair value on the date of change in the usage is considered as cost in the reclassification recognition when investment property that measured with fair value is reclassified as a tangible asset.
134 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
2.7 Intangible assets
The Company’s intangible assets consist of computer software, goodwill and advances paid for tangible assets.
Intangible assets are recorded at cost in compliance with “TAS 38 - Accounting for intangible assets”. The cost of the intangible assets purchased before December 31, 2004 are restated from the purchasing dates to December 31, 2004, the date the hyperinflationary period is considered to be ended. The intangible assets purchased after this date are recorded at their historical costs.
Amortization is charged on a straight-line basis over their estimated useful lives over the cost of the asset. The period of redemption of intangible assets is 3 to 15 years.
Goodwill represents the excess of the cost of an acquisition over the fair value of the Company’s share of the net identifiable assets of the acquired subsidiary/associate at the date of the acquisition. Goodwill on acquisitions of associates is included in ‘investments in associates’ and is tested for impairment as part of the overall balance. Separately recognized goodwill is tested annually for impairment and carried at cost less accumulated impairment losses, Impairment losses on goodwill are not reversed. Gain or losses on the disposal of an entity includes the carrying amount of goodwill relating to the entity disposed of.
For the purpose of impairment testing, goodwill is allocated to cash-generating units. The allocations made to those cash- generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arises.
The Company has acquired the health portfolio of Anadolu Hayat Emeklilik A.Ş. at August 31, 2004 with all of its rights and liabilities. The value at acquisition of the portfolio amounting to TL 16.250.000 is capitalized as goodwill by the Company.
2.8 Financial assets
A financial asset is any asset that is cash, an equity instrument of another entity, a contractual right to receive cash or another financial asset from another entity; or to exchange financial assets or financial liabilities with another entity under conditions that are potentially favourable to the entity.
Financial assets are classified in four categories; as financial assets held for trading, available-for-sale financial assets, held to maturity financial assets, and loans and receivables.
Financial assets at fair value through profit or loss are presented as financial assets held for trading in the accompanying financial statements and trading securities and derivatives are included in this category. Financial assets at fair value through profit or loss measured at their fair values and gain/loss arising due to changes in the fair values of related financial assets is recorded in profit/ loss. Interest income earned on trading purpose financial assets and the difference between their fair values and acquisition costs are recorded as interest income in the statement of income. In case of disposal of such financial assets before their maturities, the gains/losses on such disposal are recorded under trading income/losses. Accounting policies of derivatives are detailed in note 2.10 - Derivative financial instruments.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Company provides money, goods or services directly to a debtor with no intention of trading the receivable. Loans and receivables those are not interest earning are measured by discounting of future cash flows less impairment losses, and interest earning loans and receivables are measured at amortized cost less impairment losses.
Held to maturity financial assets are the financial assets with fixed maturities and fixed or pre-determined payment schedules that the Company has the intent and ability to hold until maturity, excluding loans and receivables. Subsequent to initial recognition, held to maturity financial assets and loans and receivables are measured at amortized cost using effective interest rate method less impairment losses, if any. The Company has no financial assets that are not allowed to be classified as held to maturity financial assets for two years due to the tainting rules applied for the breach of classification rules.
Available-for-sale financial assets are the financial assets other than assets held for trading purposes, held-to-maturity financial assets and loans and receivables.
Anadolu Sigorta 2017 Annual Report 135 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Available-for-sale financial assets are initially recorded at cost and subsequently measured at their fair values. Unrecognized gains or losses derived from the difference between their fair value and the discounted values calculated per effective interest rate method are recorded in “Revaluation of financial assets” under shareholders’ equity. Upon disposal, the realized gain or losses are recognized directly in the statement of income.
The determination of fair values of financial instruments not traded in an active market is determined by using valuation techniques. Observable market prices of the quoted financial instruments which are similar in terms of interest, maturity and other conditions are used in determining the fair value.
The Company has accounted equity shares classified as available-for-sale according to quoted market prices or dealer price quotations for financial instruments traded in active markets or according to cost less impairment losses for financial instruments not traded in active markets.
Securities are recognized and derecognized at the date of settlement.
Associates; shares of the associate of the Company; Anadolu Hayat Emeklilik A.Ş. are classified as available-for-sale financial assets in the financial statements and are recorded at their fair values since those shares are traded in an active market.
A financial asset is derecognized when the control over the contractual rights that comprise that asset is lost. This occurs when the rights are realized, expire or are surrendered.
2.9 Impairment on assets
Impairment on financial asset
Financial assets or group of financial assets are reviewed at each reporting date to determine whether there is objective evidence of impairment. If any such indication exists, the Company estimates the amount of impairment. A financial asset is impaired if, and only if, there is objective evidence that the expected future cash flows of financial asset or group of financial assets are adversely affected by an event(s) (“loss event(s)”) incurred subsequent to recognition. The losses expected to incur due to future events are not recognized even if the probability of loss is high.
Receivables are presented net of specific allowances for uncollectibility. Specific allowances are made against the carrying amounts of loans and receivables that are identified as being impaired based on regular reviews of outstanding balances to reduce these loans and receivable to their recoverable amounts.
The recoverable amount of an equity instrument is its fair value. The recoverable amount of debt instruments and purchased loans measured to fair value is calculated as the present value of the expected future cash flows discounted at the current market rate of interest.
An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized. For financial assets measured at amortized cost and available-for-sale financial assets that are debt securities, the reversal is recognized in the statement of operations. For available-for-sale financial assets that are equity securities, the reversal is recognized directly in equity.
Impairment on tangible and intangible assets
On each reporting date, the Company evaluates whether there is an indication of impairment of tangible and intangible assets. If there is an objective evidence of impairment, the asset’s recoverable amount is estimated in accordance with the “TAS 36 - Impairment of Assets” and if the recoverable amount is less than the carrying value of the related asset, a provision for impairment loss is made.
Rediscount and provision expenses of the period are detailed in Note 47
2.10 Derivative financial instruments
As of December 31, 2017, the Company’s the marketable securities in the trade book totals to TL 6.558.978 (December 31, 2016: TL 6.649.637). These securities also have derivate warranty and as of the report date have no express warranty (December 31, 2016: None).
136 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
As of December 31, 2017, the Company has accounted in income accruals and other financial liabilities amounting to TL 14.828.603 (December 31, 2016: None) that is increase in value and TL (8.167.487) (December 31, 2016: None) that is decrease in value respectively, due to forward foreign currency agreement.
Derivative instruments are treated as held for trading financial assets in compliance with the standard TAS 39 - Financial Instruments: Recognition and measurement.
Derivative financial instruments are initially recognized at their fair value.
The receivables and liabilities arising from the derivative transactions are recognized under the off-balance sheet accounts through the contract amounts.
Derivative financial instruments are subsequently remeasured at fair value and positive fair value differences are presented either as “financial assets held for trading” and negative fair value differences are presented as “other financial liabilities” in the accompanying financial statements. All unrealized gains and losses on these instruments are included in the statement of income.
2.11 Offsetting of financial assets
Financial assets and liabilities are offset and the net amount is presented in the balance sheet when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.
Income and expenses are presented on a net basis only when permitted by the Reporting Standards, or for gains and losses arising from a group of transactions resulting from the Company’s similar activities like trading transactions.
2.12 Cash and cash equivalents
Cash and cash equivalents, which is the basis for the preparation of the statement of cash flows includes cash on hand, cheques received, other cash and cash equivalents, demand deposits and time deposits at banks having an original maturity less than 3 months which are ready to be used by the Company or not blocked for any other purpose.
2.13 Share capital
The shareholder having indirect control over the shares of the Company is İş Bankası Group. The share capital and ownership structure of the Company as of December 31, 2017 and December 31, 2016 are as follows: December 31, 2017 December 31, 2016 Shareholding Shareholding Shareholding Shareholding Name Amount (TL) Rate (%) Amount (TL) Rate (%)
Milli Reasürans T.A.Ş. 286.550.106 57,31 286.550.106 57,31 Other 213.449.894 42,69 213.449.894 42,69 Paid in capital 500.000.000 100,00 500.000.000 100,00
Sources of capital increases during the period
The company has not performed capital increase as of December 31, 2017 (December 31, 2016: None).
Privileges on common shares representing share capital
As of December 31, 2017, the issued share capital of the Company is TL 500.000.000 (December 31, 2016: TL 500.000.000) and The Company unregistered Group 150 A shares which each of value is TL 1,5 as of April 11, 2013 in which approved in Main Article of the Company dated in April 11, 2013. The share capital of the Company consists of 50.000.000.000 (December 31, 2016: 50.000.000.000 shares) issued shares with TL 1 nominal value each.
Anadolu Sigorta 2017 Annual Report 137 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Registered capital system in the Company
The Company has accepted the registered capital system. As of December 31, 2017, the Company’s registered capital is TL 700.000.000 (December 31, 2016: TL 700.000.000).
Repurchased own shares by the Company
None.
2.14 Insurance and investments contracts - classification
An insurance contract is a contract under which the Company accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder. Insurance risk covers all risk except for financial risks. All premiums have been received within the coverage of insurance contracts recognized as revenue under the account caption “written premiums”.
Investment contracts are those contracts which transfer financial risk with no significant insurance risk. Financial risk is the risk of a possible future change in a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index or other variable, provided, that it is not specific to a party to the contract, in the case of a non-financial variable.
As of the reporting date, the Company does not have a contract which is classified as an investment contract.
2.15 Insurance contracts and investment contracts with discretionary participation feature
Discretionary participation feature within insurance contracts and investment contracts is the right to have following benefits in addition to the guaranteed benefits. (i) that are likely to comprise a significant portion of the total contractual benefits; (ii) whose amount or timing is contractually at the discretion of the Issuer; and (iii) that are contractually based on: (1) the performance of a specified pool of contracts or a specified type of contract; (2) realized and/or unrealized investments returns on a specified pool of assets held by the Issuer; or (3) the profit or loss of the Company, Fund or other entity that issues the contract.
As of the reporting date, the Company does not have any insurance or investment contracts that contain a discretionary participation feature.
2.16 Investment contracts without discretionary participation feature
As of the reporting date, the Company does not have any insurance contracts and investment contracts without discretionary participation feature.
2.17 Liabilities
Financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to another entity. Financial liabilities of the Company are measured at their discounted values. A financial liability is derecognized when it is extinguished.
138 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
2.18 Income taxes
Corporate tax
Statutory income is subject to corporate tax at 20%.(However, according to the Provisional Article 10 added to the Corporate Tax Law, the corporate tax rate of 20% is calculated as 22% for the corporate earnings for the fiscal periods starting in the related year for the institutions whose special accounting periods are assigned to the taxation periods of 2018, 2019 and 2020 will be implemented. This rate is applied to accounting income modified for certain exemptions (like dividend income) and deductions (like investment incentives), and additions for certain non-tax deductible expenses and allowances for tax purposes. If there is no dividend distribution planned, no further tax charges are made.
Dividends paid to the resident institutions and the institutions working through local offices or representatives are not subject to withholding tax. The withholding tax rate on the dividend payments other than the ones paid to the non-resident institutions generating income in Turkey through their operations or permanent representatives and the resident institutions is 15%. In applying the withholding tax rates on dividend payments to the non-resident institutions and the individuals, the withholding tax rates covered in the related Double Tax Treaty Agreements are taken into account. Appropriation of retained earnings to capital is not considered as profit distribution and therefore is not subject to withholding tax.
Prepaid taxes are calculated and paid at the rates valid for the earnings of the related years. The payments can be deducted from the annual corporate tax calculated for the whole year earnings.
In Turkey, there is no procedure for a final and definite agreement on tax assessments. Companies file their tax returns with their tax offices by the end of 25th of the fourth month following the close of the accounting period to which they relate. Tax returns are open for five years from the beginning of the year that follows the date of filing during which time the tax authorities have the right to audit tax returns, and the related accounting records on which they are based, and may issue re-assessments based on their findings.
Deferred taxes
In accordance with TAS 12 - Income taxes, deferred tax assets and liabilities are recognized on all taxable temporary differences arising between the carrying values of assets and liabilities in the financial statements and their corresponding balances considered in the calculation of the tax base, except for the differences not deductible for tax purposes and initial recognition of assets and liabilities which affect neither accounting nor taxable profit.
Deferred tax assets and liabilities are reported as net in the financial statements if, and only if, the Company has a legally enforceable right to offset current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity.
In case where gains/losses resulting from the subsequent measurement of the assets are recognized in the statement of income, then the related current and/or deferred tax effects are also recognized in the statement of income. On the other hand, if such gains/losses are recognized as an item under equity, then the related current and/or deferred tax effects are also recognized directly in the equity.
Transfer pricing
In Turkey, the transfer pricing provisions have been stated under the Article 13 of Corporate Tax Law with the heading of “disguised profit distribution via transfer pricing”. The General Communiqué on disguised profit distribution via Transfer Pricing, dated November 18, 2007 sets details about implementation.
If a taxpayer enters into transactions regarding sale or purchase of goods and services with related parties, where the prices are not set in accordance with arm’s length principle, then related profits are considered to be distributed in a disguised manner through transfer pricing. Such disguised profit distributions through transfer pricing are not accepted as tax deductible for corporate income tax purposes.
Anadolu Sigorta 2017 Annual Report 139 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
2.19 Employee benefits
Pension and other post-retirement obligations
A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee and his/her dependants will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.
Employees of the Company are the members of “Anadolu Anonim Türk Sigorta Şirketi Pension Fund” which is established in accordance with the temporary Article 20 of the Social Security Act No: 506. As per the temporary sub article No: 20 of the Article 73 of the Social Security Law, pension funds should be transferred to the Social Security Institution within three years after the publication of the a aforementioned Law published in the Official Gazette numbered 26870 and dated May 8, 2008. The related three-year transfer period has been prolonged for two years by the Cabinet decision, which was published on the Official Gazette dated April 9, 2011. Accordingly, the three-year period expired on May 8, 2011 was extended to the May 8, 2015.
The principles and applications of the transfer will be determined by the Decree of the Council of Ministers separately. Lastly, first paragraph of temporary 20th article of 5510 numbered Law, article 51 of the law regarding changing of several laws and delegated legislations and the law of occupational health and safety which are published in 23 April 2015 dated Official Gazette is changed as following; insurance and reinsurance companies, chambers of commerce, industry chambers, stock exchanges or which constitutes their union personnel and associates of funds “The Council is authorized to determine the date of transfer within the scope of article 20th of the law, 506 banks, insurance and reinsurance companies, chambers of commerce, industry chambers, stock exchanges or which constitutes their union personnel and associates of funds to the social security institution. The date of the transfer of the first paragraph of Article 4 of this law pension fund contributors as are considered insured”.
According to this arrangement the bank within the scope of Act 506, article No.20, insurance and reinsurance companies, chambers of commerce, industry chambers, stock exchanges or associations which constitute their union personnel and associates of funds are required to be transferred until 08.05.2015 to Social Security Administration, authority to determine the date of transfer is given the Council of Ministers thus the transfer of the funds has been postponed to an unknown date.
The application which containing temporary transfer provision on June 19, 2008 cancellation and cessation of claims by Republican People’s Party, it is rejected in accordance with the decision at the court’s meeting on March 30, 2011.
The cash value of the obligations of the pension fund for each member of the fund including members left the fund as of the transfer date will be calculated according to following assumptions: a) Technical deficit rate of 9,8% shall be used in the actuarial calculation of the value in cash, and. b) Gains and losses of the funds stems from benefits covered by the aforementioned Law taken into accounts to calculate present value of the obligations.
Employee termination benefits
In accordance with existing Turkish Labour Law, the Company is required to make lump-sum termination indemnities to each employee who has completed one year of service with the Company and whose employment is terminated due to retirement or for reasons other than resignation or misconduct. The amount payable for each year of service the employee union members; death, disability, retirement, pension bonding states is 60 days, ın other provinces it amounted 45 daily wages. In other employees, it is one month’s salary. The computation of the liability is based upon the retirement pay ceiling announced by the Government. The applicable ceiling amount as of December 31, 2017 is TL 4.732,48 (December 31, 2016: TL 4.426,16). In Accordance IAS 19 which published by Public Company Accounting Oversight Board(PCAOB) dated March 12, 2013 is about “Benefits Employee Accounting Standard” and defined by beginning from December 31, 2012 net defined benefit liability of the actuarial gains and losses arising on re-measurement should be recognized in other comprehensive income under shareholders’ equity and this effect should be applied retrospectively. The Company started to account current actuarial gains and losses under equity (other profit reserves) due to the fact that prior period actuarial gains and losses have remained below the materiality.
140 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
The Company accounted for employee severance indemnities using actuarial method in compliance with the TAS 19 - Employee Benefits, The major actuarial assumptions used in the calculation of the total liability as of December 31, 2017 and December 31, 2016 are as follows: December 31, 2017 December 31, 2016 Discount rate 4,21% 4,61% Expected rate of salary/limit increase 7,00% 5,83% Estimated employee turnover rate 3,27% 3,27%
Expected rate of salary/limit increase above was determined according to the government’s annual inflation forecasts.
Other benefits
The Company has provided for undiscounted short-term employee benefits earned during the period as per services rendered in compliance with TAS 19 in the accompanying financial statements.
2.20 Provisions
A provision is made for an existing obligation resulting from past events if it is probable that the commitment will be settled and a reliable estimate can be made of the amount of the obligation. Provisions are calculated based on the best estimates of management on the expenses to incur as of the reporting date and, if material, such expenses are discounted to their present values. If the amount is not reliably estimated and there is no probability of cash outflow from the Company to settle the liability, the related liability is considered as “contingent” and disclosed in the notes to the financial statements.
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company. Contingent assets are not recognized in financial statements since this may result in the recognition of income that may never be realized. Contingent assets are assessed continually to ensure that developments are appropriately reflected in the financial statements. If it has become virtually certain that an inflow of economic benefits will arise, the asset and the related income are recognized in the financial statements of the period in which the change occurs. If an inflow of economic benefits has become probable, the Company discloses the contingent asset.
2.21 Revenue recognition
Written premiums and claims paid
Written premiums represent premiums on policies written during the period net of taxes, premiums of the cancelled policies which were produced in prior periods and premium ceded to reinsurance companies,. Premiums ceded to reinsurance companies are accounted as “written premiums, ceded” in the statement of income.
Claims are recognized as expense as they are paid. Outstanding claims provision is provided for both reported unpaid claims at period-end and incurred but not reported claims. Reinsurer’s shares of claims paid and outstanding claims provisions are off-set against these reserves.
Subrogation, salvage and quasi income
According to the Circular 2010/13 dated September 20, 2010; the Company may account for income accrual for subrogation receivables without any voucher after the completion of the claim payments made to the insurer. If the amount cannot be collected from the counterparty insurance company, the Company provides provision for uncollected amounts due for six months. If the counter party is not an insurance Company, the provision is provided after four months. As of the reporting date, in accordance with the related circular the Company provided TL 47.325.075 (December 31, 2016: TL 43.739.284) subrogation receivables and recorded TL 50.653.264 (December 31, 2016: TL 47.016.782) (Note 12) net subrogation and salvage receivables under receivables from main operations. The Company provided allowance for uncollected subrogation receivables amounting to TL 8.337.019 (December 31, 2016: TL 8.836.586) (Note 12) in accordance with circular.
Anadolu Sigorta 2017 Annual Report 141 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
For the years ended December 31, 2017 and 2016, salvage and subrogation collected are as follows: December 31, 2017 December 31, 2016 Motor vehicles 375.105.975 341.775.724 Third party liability for motor vehicles (MTPL) 13.422.397 10.694.282 Fire and natural disaster 4.521.486 3.961.070 Marine 1.485.087 2.799.577 Water vehicles 1.004.392 10.222 General responsibility 812.773 103.795 General losses 307.007 313.114 Financial losses 144.816 -- Accident 28.880 21.706 Legal protection 475 529 Credit -- 467.351 Air crafts -- 10.588 Total 396.833.288 360.157.958
As of December 31, 2017 and December 31, 2016, accrued subrogation and salvage income per branches is as follows: December 31, 2017 December 31, 2016 Motor vehicles 37.076.373 37.302.823 Third party liability for motor vehicles (MTPL) 5.926.818 4.565.163 Fire and natural disaster 1.321.152 1.883.852 General losses 1.657.069 490.114 Marine 2.991.999 2.688.121 Accident 1.544.801 -- Water vehicles 122.868 78.448 General responsibility 12.184 8.261 Total 50.653.264 47.016.782
Commission income and expense
As further disclosed in Note 2.24 - Reserve for unearned premiums, commissions paid to the agencies related to the production of the insurance policies and the commissions received from the reinsurance firms related to the premiums ceded 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 expense
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.
142 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
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 unconsolidated financial statements.
Dividends
Dividend income is recognized when the Company’s right to receive payment is ascertained.
2.22 Leasing transactions
The maximum period of the lease contracts is 10 years. Tangible assets acquired by way of finance leases are recorded in tangible assets and the obligations under finance leases arising from the lease contracts are presented under “Finance Lease Payables” account in the financial statements. In the determination of the related asset and liability amounts, the lower of the fair value of the leased asset and the present value of leasing payments is considered. Financial costs on leasing agreements are expanded in lease periods at a fixed interest rate.
If there is impairment in the value of the assets obtained through finance lease and in the expected future benefits, the leased assets are measured at net realizable value. Depreciation for assets obtained through financial lease is calculated in the same manner as tangible assets.
Payments made under operating leases are recognized in the statement of income on a straight-line basis over the term of the lease.
2.23 Dividend distribution
Based on the guidelines and principals issued by the CMB dated January 27, 2010 for the distribution of dividends from the profit generated from operating activities in 2009, there is no requirement of minimum profit distribution for joint stock companies that are traded in the stock market and in this context, it has decided that dividend distribution will be performed in accordance with principles in Dividend Declaration numbered II-19.1 of the Board, clauses contained in the articles of association of the partnership and dividend policies which are disclosed the public of companies.
Additionally, as stated within the aforementioned decision of CMB, for entities required to prepare consolidated financial statements, it has been agreed upon to require the net distributed profit calculations to be performed on the net profit for the period as stated on the consolidated financial statements, so long that the distribution can be funded through statutory resources.
Board of Directors proposal which is related with distribution of the profits gained from the operations of the 2016 was approved unanimously in the framework of the General Assembly dated March 24, 2017.
Consequently, TL 30.000.000 of the distributable net profit of the period that is amounting to TL 83.459.618 which is remaining amount after deducting the legal reserve amounting to TL 4.392.611, distributed to shareholders as cash dividend since March 28, 2017. The Company distributed dividend amounting to TL 2.031.330 to its employee and reserved second legal reserve and statutory reserve amounting to TL 703.133 and TL 5.142.829 respectively. The remaining of the distributable net profit of the period which is amounting to TL 45.582.326 was transferred to extraordinary reserves (2016: There was no profit distribution.).
2.24 Reserve for unearned premiums
In accordance with the “Communiqué on Technical Reserves for Insurance, Reinsurance and Pension Companies and the Related Assets That Should Be Invested Against Those Technical Reserves” (“Communiqué on Technical Reserves”) which was issued in 26606 numbered and August 7, 2007 dated Official Gazette and put into effect starting from January 1, 2008, the reserve for unearned premiums represents the proportions of the gross premiums written without deductions of commission or any other allowance, in a period that relate to the period of risk subsequent to the reporting date for all short-term insurance policies. For marine cargo policies with indefinite expiration dates, 50% of the remaining portion of the premiums accrued in the last three months, less any commissions is also provided as unearned premium reserves.
Anadolu Sigorta 2017 Annual Report 143 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Reserve for unearned premiums is calculated for all insurance contracts except for the contracts for which the mathematical reserve is provided. Reserve for unearned premiums is also calculated for the annual premiums of the annually renewed long term insurance contracts.
Since the Communiqué on Technical Reserves was effective from January 1, 2008, the Turkish Treasury issued July 4, 2007 dated and 2007/3 numbered “Circular to Assure the Compliance of the Technical Reserves of Insurance, Reinsurance and Pension Companies With the Insurance Law No, 5684” (“Compliance Circular”) to regulate the technical provisions between the issuance date and enactment date of the Communiqué on Technical Reserves. In accordance with the Compliance Circular, it is stated that companies should consider earthquake premiums written after June 14, 2007 in the calculation of the reserve for unearned premiums while earthquake premiums were deducted in the calculation of the reserve for unearned premiums before. Accordingly, the Company has started to calculate reserve for unearned premiums for the earthquake premiums written after June 14, 2007, while the Company had not calculated reserve for unearned premiums for the earthquake premiums written before June 14, 2007.
According to the 2009/9 Numbered Circular Related to Application of Technical Reserves issued on March 27, 2009 which published by Undersecretariat of Treasury reserve for unearned premiums is calculated by taking into account that all polices become active at 12:00 at noon and end at 12:00 at noon.
According to the Communiqué on Technical Reserves, for the calculation of unearned premium reserves of foreign currency indexed insurance agreements, foreign currency selling exchange rates announced by Turkish Central Bank will be considered, unless there is a specified exchange rate in the agreement.
As of the reporting date, the Company has provided reserve for unearned premiums amounting to TL 2.349.673.619 (December 31, 2016: TL 2.228.090.805) and reinsurer share in reserve for unearned premiums amounting TL 610.721.482 (December 31, 2016: TL 400.082.643). Furthermore, reserve for unearned premiums includes Social Security Institution (“SSI”) share amounting to TL 58.817.233 (December 31, 2016: TL 75.059.218).
2.25 Provision for outstanding claims
Claims are recorded in the year in which they occur, based on reported claims or on the basis of estimates when not reported. Provision for outstanding claims represents the estimate of the total reported costs of notified claims on an individual case basis at the reporting date as well as the corresponding handling costs. Incurred but not reported claims (“IBNR”) are also provided.
Claims incurred before the accounting periods but reported subsequent to those dates are considered as incurred but not reported (“IBNR”) claims.
In accordance with December 5, 2014 dated and 2014/16 numbered “Circular for Provision for Outstanding Claims” of Turkish Treasury, by the Undersecretariat of Treasury the compensation that incurred but was not reported (IBNR) since January 1, 2015 is being calculated with the best of ability of the company’s actuary. The best estimate assumption is calculating the claims which will be paid in the future according to a model and assumption, and by utilizing the risk free return curves to calculate today’s value.
The methods, corrections, the suitable data and the growth factor choice and the intervention is being calculated by the company’s actuary using actuarial methods. According to Actuaries Regulations Law no. 11, an actuarial report has been sent the Undersecretariat of Treasury and these calculations are detailed there. Company’s actuary tests loss development factors with some methods by using software tools and then making some choices for actuarial analysis.
In the compulsory traffic branch the physical and bodily claims, and in the General Responsibility branch the Employer Third Party Liability, Compulsory Medical Malpractice, Professional Liability and other liability branches are being analysed separately.
As of December 31, 2017, the Company’s actuary has used 9% which is the latest statutory rate of interest in the Official Gazette for the discount process in accordance with “General Instructions Regarding The Cash Flow From Provision for Outstanding Claim And Their Discounts” which was published in June 10th, 2016 numbered 2016/22 which regulates the processes involving the discount of cash flow from provision for outstanding claim. As of December 31, 2017, Company has made a net discount of TL 608.482.096 (December 31, 2016: TL 483.203.785) in the calculation of the outstanding claims.
144 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
As of December 31, 2016, the Company has used the gradual transition curve which was published by the Undersecretariat of Treasury’s “General Instructions Regarding to the Changes in the General Instructions Regarding Provision for Outstanding Claim (2014/16)” which was published in February 29th, 2016 with the number 2016/11. The company has used these gradual transition curve with 100% accuracy and has reflected the calculations on the official statements as well as possible as of December 31, 2016 and the Company has continued the method exact same like prior year too as of December 31, 2017.
According to Provisional Article 12 of the Regulation on the Amendment of the Regulation on Tariff Implementation Principles in the Motor Vehicles Compulsory Third Party Liability Insurance, published in the Official Gazette dated July 11, 2017 and numbered 30121, high claim frequency level and/or vehicle groups the “Risk Insured Pool” has been announced.
In this context, the premiums and claims related to the traffic insurance policies issued within the scope of the pool starting on April 12, 2017 have started to be shared among insurance companies within the framework of the principles determined by the Undersecretariat of Turkish Motor Vehicle Office.
The company, after the change in legislation, by the Turkish Motor Vehicles office (TMTB) within the scope of monthly declarations, accounting records were created on premiums, claim and commission amounts transferred to the pool and transferred to the pool within the scope of the share, and also the receipt was made for the amounts for the period not yet communicated by the Turkish Motor Vehicles office.
In accordance with the Communiqué on the Amendment of the Communiqué on the Procedures and Principles of the Contribution of the Institution in the Compulsory Financial Liability Insurance for Medical Malpractice Law, published in the Official Gazette dated 7 October 2017 and numbered 30203, the Compulsory Financial Liability Insurance for Medical Malpractice the rules for premium and claim sharing have been established. The said transactions related to the sharing are decided to be managed by Güneş Sigorta, which has a licence for general liability insurance business.
The Company has provided provision for outstanding claims for unexpired claims that were accrued and accounted for but have not been paid in the previous accounting period or current period or if the amount has not been calculated, with the estimated amount and for the unreported claims.
Compensations that have been filed before the accounting period but have been notified after these dates are regarded as incurred but not reported (IBNR). Regulation Regarding the Amendment of the Regulation on the Technical Reserves of Insurance and Reinsurance Companies and Pension Funds and the Assets to be Invested in These Provisions “published in the Official Gazette dated 28 July 2010 and numbered 27655 and the” Circular on Outstanding Claims “dated 5 December 2014 and numbered 2014/16, the IBNR amount is calculated.
According to the Undersecretariat of Treasury ‘s circular dated December 5, 2014 and numbered 2014/16, best estimates are used to calculate incurred but not reported claims by the guidance of the Company’s appointed actuary since January 1, 2015.
The best estimate is based on the calculation of present value under certain models and assumptions of future claims using risk- free return curves at the time of the report. In the study based on the Standard Chain method, the combination of loss-premium and growth factor methods was taken into account. The selection of the data to be used is made by the company actuary using actuarial methods to correct the adjustment factors, to select the most appropriate method and development factors, and to intervene in the development factors. The company actuary tests the claim development factors with the response software for specific methods and then conducts actuarial analyzes and appropriate factor selection. These particulars are detailed in the actuarial report submitted to the Undersecretariat of Treasury pursuant to Article 11 of the Actuarial Regulation.
Anadolu Sigorta 2017 Annual Report 145 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
As of December 31, 2017 and December 31, 2016, IBNR amounts calculated by the Company actuary’s on the basis of branches are as follows: December 31, 2017 December 31, 2016 Gross Net Gross Net additional additional additional additional Branch provision provision provision provision Third party liability for motor vehicles (MTPL) 1.132.267.909 1.046.552.001 828.189.093 807.932.168 General liability 331.983.783 271.885.165 281.473.055 236.037.629 Voluntary financial liability 116.652.751 113.666.911 103.526.790 100.111.499 Fire and natural disasters 34.844.913 20.172.580 30.930.434 14.130.704 General losses 14.812.802 4.670.248 20.080.341 5.235.671 Accident 16.915.922 13.226.710 17.850.059 14.337.311 Air crafts liability 4.919.072 1.011.125 2.742.419 1.990.955 Air crafts 5.237.051 1.228.666 1.349.294 746.618 Water vehicles 7.729.096 2.988.830 4.272.746 1.700.070 Financial losses 1.019.382 406.545 2.788.702 422.443 Credit 526.262 526.262 201.350 201.350 Health 2.549.899 2.524.400 2.865.796 2.682.685 Legal protection 278.843 279.943 256.651 256.969 Marine (520.399) 1.015.647 (8.449.429) (3.611.541) Motor vehicles (42.055.210) (41.454.538) (56.742.609) (54.819.827) Total 1.627.162.076 1.438.700.495 1.231.334.692 1.127.354.704
In the compulsory traffic branch the physical and bodily claims, and in the General Responsibility branch the Employer Third Party Liability, Compulsory Medical Malpractice, Professional Liability and other liability branches are being analysed separately.
As of December 31, 2017, the Company’s actuary has used 9% which is the latest statutory rate of interest in the Official Gazette for the discount process in accordance with “General Instructions Regarding The Cash Flow From Provision for Outstanding Claim And Their Discounts” which was published in June 10th, 2016 numbered 2016/22 which regulates the processes involving the discount of cash flow from provision for outstanding claim.
As of December 31, 2016, the Company has used the gradual transition curve which was published by the Undersecretariat of Treasury’s “General Instructions Regarding to the Changes in the General Instructions Regarding Provision for Outstanding Claim (2014/16)” which was published in February 29th, 2016 with the number 2016/11. The company has used these gradual transition curve with 100% accuracy and has reflected the calculations on the official statements as well as possible as of December 31, 2016 and the Company has continued the method exact same like prior year too as of December 31, 2017.
According to Provisional Article 12 of the Regulation on the Amendment of the Regulation on Tariff Implementation Principles in the Motor Vehicles Compulsory Third Party Liability Insurance, published in the Official Gazette dated July 11, 2017 and numbered 30121, high claim frequency level and/or vehicle groups the “Risk Insured Pool” has been announced.
In this context, it began to be shared between insurance companies in the pool covered by premium and claims amounts related to issued motor vehicles compulsory third party liability insurance Turkey Motor Vehicle Bureau by the Undersecretariat determined by conformity to start since April 12, 2017.
The company, after changes in legislation, Turkey Motor Vehicle Bureau (TMTB) by the accounting records are created on the basis of the premiums, claims and commission amounts transferred to the pool within the scope of the monthly receipts that have been finalized and taken over from the pool within the scope of the share, and the financial statements are reflected by working on the amounts not yet transmitted by the deed TMTB.
In accordance with the Communiqué on the Amendment of the Communiqué on the Procedures and Principles of the Contribution of the Institution in the Compulsory Financial Liability Insurance for Medical Malpractice Law, published in the Official Gazette dated 7 October 2017 and numbered 30203, the Compulsory Financial Liability Insurance for Medical Malpractice the rules for premium and claim sharing have been established. The said transactions related to the sharing are decided to be managed by Güneş Sigorta, which has a licence for general liability insurance business.
146 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
In this context, premiums and claims related to the policies issued as of October 1, 2017 have been started to be allocated among the insurance companies within the framework of the principles determined by the Undersecretariat.
After the change in legislation, the accounting records are created on the basis of the premiums, claims and commission amounts transferred from the pool within the scope of the share transferred within the scope of the monthly declarations which are finalized by Güneş Sigorta A.Ş. and also the financial statements are reflected by the works related to the turnover not yet delivered.
As of 31 December 2017, the Company has outstanding claims provision amounting to TL 3.245.443.076 (31 December 2016: TL 2.530.257.134) and TL 640.756.720 outstanding claims provision reinsurer share (December 31, 2016: TL 487.012.274) in the consolidated financial statements.
The Company calculates net IBNR amount on branches basis; current reinsurance shares to reflect the effect of current reinsurance agreements.
According to the “Circular on the Explanation of the Notification of the Undersecretariat of Treasury on the Calculation of the Incurred But Not Reported (IBNR)” dated 26 November 2011 and numbered 2011/23, the companies are opened against the company in sub-branches according to the last five years’ (15% in the branches where there is no new five-year data and started the new activity) by calculating a win rate over the amounts of the cases by not exceeding 25% of the outstanding files accrued for the files in the trial period. In accordance with the related regulation, taking into consideration the earning ratios calculated by using the Company’s last five years’ filing dossier file, TL 182.575.898 (December 31, 2016: TL 170.861.245) and reinsurance share TL 30.415.385 (December 31, 2016: 25.166. TL 208) has been liquidated against provisions for outstanding claims.
As of December 31, 2017, the Company’s calculated earning rate is between 0% and 100% (December 312016: 0% - 100%). As of December 31, 2017 and December 31, 2016, the earning ratios and reduced amounts used in the branches are as follows: December 31, 2017 Earnings Gross Amount Net Amount Branch Ratios Used Decreased Decreased
General liability 25% 74.714.664 65.998.305 Third party liability for motor vehicles (MTPL) 10% 62.120.743 61.236.662 Fire and natural disasters 25% 25.698.638 11.128.770 Motor vehicles 22% 8.048.030 7.958.337 General losses 25% 4.214.820 1.646.063 Marine 25% 3.920.234 1.599.097 Accident 21% 2.320.622 1.366.437 Water 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 182.575.898 152.160.513
December 31, 2016 Earnings Gross Amount Net Amount Branch Ratios Used Decreased Decreased
General liability 25% 78.777.548 72.050.356 Third party liability for motor vehicles (MTPL) 11% 55.777.818 54.833.381 Fire and natural disasters 25% 21.068.122 9.042.415 Motor vehicles 25% 5.382.650 1.422.206 General losses 22% 5.296.987 5.210.113 Marine 25% 1.825.148 1.167.341 Accident 25% 1.308.549 851.196 Water vehicles 25% 708.020 422.494 Credit 25% 681.222 681.222 Financial losses 3% 30.283 9.415 Legal protection 25% 4.898 4.898 Total 170.861.245 145.695.037
Anadolu Sigorta 2017 Annual Report 147 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
2.26 Reserve for unexpired risks
In accordance with the Communiqué on Technical Reserves, while providing reserve for unearned premiums, in each accounting period, the companies should perform adequacy test covering the preceding 12 months due to the probability that future claims and compensations of the outstanding policies may be in excess of the reserve for unearned premiums already provided. In performing this test, it is required to multiply the reserve for unearned premiums, net with the expected claim/premium ratio. Expected claim/premium ratio is calculated by dividing incurred losses (provision for outstanding claims, net at the end of the period + claims paid, net - provision for outstanding claims, net at the beginning of the period) to earned premiums (written premiums, net + reserve for unearned premiums, net at the beginning of the period - reserve for unearned premiums, net at the end of the period). In the calculation of earned premiums; deferred commission expenses paid to the agencies and deferred commission income received from the reinsurance firms which were netted off from reserve for unearned premiums both at the beginning of the period and at the end of the period are not taken into consideration.
In accordance with Treasury circular numbered 2012/15, unexpired risk reserve started to be calculated over main branches as of December 31, 2012. The test is performed on branch basis and in case where the expected claim/premium ratio is higher than 95%, reserve calculated by multiplying the exceeding portion of the expected claim/premium ratio with the reserve for unearned premiums of that specific branch is added to the reserves of that branch. Accordingly, as of the reporting date, the Company has accounted for reserve for unexpired risk amounting to TL 47.086.775 (December 31, 2016: TL 4.020.419) and reinsurance share of reserve for unexpired risk amounting to TL 24.105.605 (December 31, 2016: TL 3.455.888) in the accompanying unconsolidated financial statements.
According to the Circular numbered 2015/30, the amount of the opening provision for outstanding claims which is determined unexpired risk reserve redefined in a manner consistent with the current period as of December 31, 2017.
According to the Circular numbered 2011/18 of the Undersecretariat of Treasury, the Company excluded both the premiums transferred to SSI and claims related to treatment costs from calculation of reserve for unexpired risks in Motor Third Party Liability, Compulsory Third Party Liability Insurance for Road Passenger Transportation and Compulsory Road Passenger Transportation Personal Accident branches.
According to Undersecretariat of Treasury’s 2016/37 numbered general instructions has remarked that the method below can be used to calculate the reserve for unexpired risks in motor vehicles, motor vehicle liability and general liability.
Turkish Treasury allows insurance companies with the circular 2016/37 to calculate their unexpired risks reserve on Motor Own Damage, Motor Third Party Liability (Compulsory and Facultative separately) and General Liability by considering only the last 4 accident quarters’ loss ratios. According to this new method, loss ratios exceeding 95% in 2016, 90% in 2017 and 85% in 2018 and later years, will be multiplied by unearned premiums reserve.
As of December 31, 2017, the Company has not used the method outlined in the 2016/37 numbered “General Instructions Regarding Reserve for Unexpired Risks” which was published in November 11, 2016.
2.27 Equalization provision
In accordance with the Communiqué on Technical Reserves put into effect starting from January 1, 2008, the companies should provide equalization provision in credit insurance and earthquake branches to equalize the fluctuations in future possible claims and for catastrophic risks. Equalization provision, started to be provided in 2008, is calculated as 12% of net premiums written in credit insurance and earthquake branches. In the calculation of net premiums, fees paid for un-proportional reinsurance agreements are considered as premiums ceded to the reinsurance firms. The companies should provide equalization provision up to reaching 150% of the highest premium amount written in a year within the last five years.
In case where claims incurred, the amounts below exemption limits as stated in the contracts and the share of the reinsurance firms cannot be deducted from equalization provisions. Claims payments are deducted from first year’s equalization provisions by first in first out method. Equalization provisions are presented under “other technical reserves” in the accompanying financial statements. As of the reporting date, the Company provided equalization provision amounting to TL 140.939.211 in the accompanying unconsolidated financial statements (December 31, 2016: TL 109.427.806).
148 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
2.28 Related parties
Parties are considered related to the Company if;
(a) directly, or indirectly through one or more intermediaries, the party: • controls, is controlled by, or is under common control with the Company (this includes parent, subsidiaries and fellow subsidiaries); • has an interest in the Company that gives it significant influence over the Company; or • has joint control over the Company; (b) the party is an associate of the Company; (c) the party is a joint venture in which the Company is a venturer; (d) the party is member of the key management personnel of the Company and its parent; (e) the party is a close member of the family of any individual referred to in (a) or (d); (f) the party is an entity that is controlled or significantly influenced by, or for which significant voting power in such entity resides with directly or indirectly, any individual referred to in (d) or (g) the party is a post-employment benefit plan for the benefit of employees of the Company, or of any entity that is a related party of the Company.
A related party transaction is a transfer of resources, services or obligations between related parties, regardless of whether a price is charged.
A number of transactions are entered into with related parties in the normal course of business.
2.29 Earnings per share
Earnings per share are determined by dividing the net income by the weighted average number of shares outstanding during the year attributable to the shareholders of the Company. In Turkey, companies can increase their share capital by making a pro-rata distribution of shares (“Bonus Shares”) to existing shareholders from retained earnings. For the purpose of earnings per share computations, such bonus shares issued are regarded as issued shares. Accordingly, the weighted average number of shares used in these calculations has been determined taking into account the retrospective effects of such stock distributions.
2.30 Events after the reporting date
Events after the reporting date that provide additional information about the Company’s position at the reporting dates (adjusting events) are reflected in the financial statements. Events after the reporting date that are not adjusting events are disclosed in the notes when material.
2.31 The new standards, amendments and interpretations
The accounting policies adopted in preparation of the interim financial statements as of December 31, 2017 are consistent with those of the previous financial year. There is no new and amended TFRS or TFRIC interpretation effective as of January 1, 2017. i) The new standards, amendments and interpretations which are effective as of January 1, 2017 are as follows:
TAS 7 Statement of Cash Flows (Amendments)
In December 2017, POA issued amendments to TAS 7 ‘Statement of Cash Flows’. The amendments are intended to clarify TAS 7 to improve information provided to users of financial statements about an entity’s financing activities. The improvements to disclosures require companies to provide information about changes in their financing liabilities. These amendments are to be applied for annual periods beginning on or after January 1, 2017 with earlier application permitted. When the Company first applies those amendments, it is not required to provide comparative information for preceding periods. The Company disclosed additional information in its annual consolidated financial statements for the year ended December 31, 2017.
Anadolu Sigorta 2017 Annual Report 149 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
TAS 12 Income Taxes: Recognition of Deferred Tax Assets for Unrealised Losses (Amendments)
In December 2017, POA issued amendments to TAS 12 Income Taxes. The amendments clarify how to account for deferred tax assets related to debt instruments measured at fair value. The amendments clarify the requirements on recognition of deferred tax assets for unrealised losses, to address diversity in practice. These amendments are to be retrospectively applied for annual periods beginning on or after January 1, 2017 with earlier application permitted. However, on initial application of the amendment, the change in the opening equity of the earliest comparative period may be recognised in opening retained earnings (or in another component of equity, as appropriate), without allocating the change between opening retained earnings and other components of equity. If the Company applies this relief, it shall disclose that fact.
Annual Improvements to IFRSs - 2014-2016 Cycle
The IASB issued Annual Improvements to IFRS Standards 2014-2016 Cycle, amending the following standards: • IFRS 1 First-time Adoption of International Financial Reporting Standards: This amendment deletes the short-term exemptions about some IFRS 7 disclosures, IAS 19 transition provisions and IFRS 10 Investment Entities. These amendments are to be applied for annual periods beginning on or after 1 January 2018. • IFRS 12 Disclosure of Interests in Other Entities: This amendment clarifies that an entity is not required to disclose summarised financial information for interests in subsidiaries, associates or joint ventures that is classified, or included in a disposal group that is classified, as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. These amendments are to be applied for annual periods beginning on or after 1 January 2017. • IAS 28 Investments in Associates and Joint Ventures: This amendment clarifies that the election to measure an investment in an associate or a joint venture held by, or indirectly through, a venture capital organisation or other qualifying entity at fair value through profit or loss applying IFRS 9 Financial Instruments is available for each associate or joint venture, at the initial recognition of the associate or joint venture. These amendments are to be applied for annual periods beginning on or after 1 January 2018. Earlier application is permitted.
The amendments are not applicable for the Company and will not have an impact on the financial position or performance of the Company. ii) Standards issued but not yet effective and not early adopted
Standards, interpretations and amendments to existing standards that are issued but not yet effective up to the date of issuance of the unconsolidated financial statements are as follows. The Company will make the necessary changes if not indicated otherwise, which will be affecting the unconsolidated financial statements and disclosures, when the new standards and interpretations become effective.
TFRS 15 Revenue from Contracts with Customers
In September 2016, POA issued TFRS 15 Revenue from Contracts with Customers. The new standard issued includes the clarifying amendments to IFRS 15 made by IASB in April 2016. The new five-step model in the standard provides the recognition and measurement requirements of revenue. The standard applies to revenue from contracts with customers and provides a model for the sale of some non-financial assets that are not an output of the entity’s ordinary activities (e.g., the sale of property, plant and equipment or intangibles). TFRS 15 effective date is January 1, 2018, with early adoption permitted. Entities will transition to the new standard following either a full retrospective approach or a modified retrospective approach. The modified retrospective approach would allow the standard to be applied beginning with the current period, with no restatement of the comparative periods, but additional disclosures are required. The Company is in the process of assessing the impact of the standard on financial position or performance of the Company.
150 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
TFRS 9 Financial Instruments
In January 2017, POA issued the final version of TFRS 9 Financial Instruments. The final version of TFRS 9 brings together all three aspects of the accounting for financial instruments project: classification and measurement, impairment and hedge accounting. TFRS 9 is built on a logical, single classification and measurement approach for financial assets that reflects the business model in which they are managed and their cash flow characteristics. Built upon this is a forward-looking expected credit loss model that will result in more timely recognition of loan losses and is a single model that is applicable to all financial instruments subject to impairment accounting. In addition, TFRS 9 addresses the so-called ‘own credit’ issue, whereby banks and others book gains through profit or loss as a result of the value of their own debt falling due to a decrease in credit worthiness when they have elected to measure that debt at fair value. The Standard also includes an improved hedge accounting model to better link the economics of risk management with its accounting treatment. TFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted by applying all requirements of the standard. Alternatively, entities may elect to early apply only the requirements for the presentation of gains and losses on financial liabilities designated as FVTPL without applying the other requirements in the standard. The Company has performed an impact assessment of TFRS 9. This assessment is based on currently available information and may be subject to changes arising from further detailed analyses or additional supportable information being made available to the Company in the future. The impact of standard on all three aspects of TFRS 9 is as follows:
Classification and Measurement of Financial Assets:
The Company does not expect a significant impact on its balance sheet or equity on applying the classification and measurement requirements of TFRS 9. It expects to continue measuring at fair value all financial assets currently held at fair value. Quoted equity shares currently held as available-for-sale with gains and losses recorded in OCI will, instead, be measured at fair value through profit or loss, which will increase volatility in recorded profit or loss.
Impairment:
IFRS 9 requires the Company to record expected credit losses on all of its debt securities, loans and trade receivables, either on a 12-month or lifetime basis. The Company will apply the simplified approach and record lifetime expected losses on all trade receivables.
Hedge accounting:
The Group determined that all existing hedge relationships that are currently designated in effective hedging relationships will continue to qualify for hedge accounting under TFRS 9. As TFRS 9 does not change the general principles of how an entity accounts for effective hedges, applying the hedging requirements of TFRS 9 will not have a significant impact on Group’s financial statements
TFRS 4 Insurance Contracts (Amendments)
In December 2017, POA issued amendments to TFRS 4 Insurance Contracts. The amendments introduce two approaches: an overlay approach and a deferral approach. The amended Standard will: • give all companies that issue insurance contracts the option to recognise in other comprehensive income, rather than profit or loss, the volatility that could arise when TFRS 9 Financial instruments is applied before the new insurance contracts Standard is issued; and • give companies whose activities are predominantly connected with insurance an optional temporary exemption from applying TFRS 9 Financial instruments until 2021. The entities that defer the application of TFRS 9 Financial instruments will continue to apply the existing financial instruments Standard-TAS 39.
These amendments are to be applied for annual periods beginning on or after 1 January 2018. Earlier application is permitted.
Anadolu Sigorta 2017 Annual Report 151 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
TFRIC 22 Foreign Currency Transactions and Advance Consideration
The interpretation issued by POA on December 2017 clarifies the accounting for transactions that include the receipt or payment of advance consideration in a foreign currency.
The Interpretation states that the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income is the date on which an entity initially recognises the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration. An entity is not required to apply this Interpretation to income taxes; or insurance contracts (including reinsurance contracts) it issues or reinsurance contracts that it holds.
The interpretation is effective for annual reporting periods beginning on or after 1 January 2018. Earlier application is permitted.
TFRS 2 Classification and Measurement of Share-based Payment Transactions (Amendments)
In December 2017, POA issued amendments to TFRS 2 Share-based Payment, clarifying how to account for certain types of share-based payment transactions. The amendments, provide requirements on the accounting for: a. the effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments; b. share-based payment transactions with a net settlement feature for withholding tax obligations; and c. a modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled.
These amendments are to be applied for annual periods beginning on or after 1 January 2018. Earlier application is permitted.
The Company is in the process of assessing the impact of the amendments on financial position or performance of the Company amendment are not applicable for the Company and will not have an impact on the financial position or performance of the Company.
Amendments to TAS 28 Investments in Associates and Joint Ventures (Amendments)
In December 2017, POA issued amendments to TAS 28 Investments in Associates and Joint Ventures. The amendments clarify that a company applies TFRS 9 Financial Instruments to long-term interests in an associate or joint venture that form part of the net investment in the associate or joint venture.
TFRS 9 Financial Instruments excludes interests in associates and joint ventures accounted for in accordance with TAS 28 Investments in Associates and Joint Ventures. In this amendment, POA clarified that the exclusion in TFRS 9 applies only to interests a company accounts for using the equity method. A company applies TFRS 9 to other interests in associates and joint ventures, including long-term interests to which the equity method is not applied and that, in substance, form part of the net investment in those associates and joint ventures.
The amendments are effective for annual periods beginning on or after 1 January 2019, with early application permitted.
The Company has performed a high-level impact assessment of Amendments. This preliminary assessment is based on currently available information and may be subject to changes arising from further detailed analyses or additional supportable information being made available to the Company in the future. Overall, the Company expects no significant impact on its balance sheet and equity. The Company is in the process of assessing the impact of the amendments on financial position or performance of the Company amendments are not applicable for the Company and will not have an impact on the financial position or performance of the Company.
TAS 40 Investment Property: Transfers of Investment Property (Amendments)
In December 2017, POA issued amendments to TAS 40 ‘Investment Property ‘. The amendments state that a change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. These amendments are to be applied for annual periods beginning on or after 1 January 2018. Earlier application is permitted.
152 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
iii) The new standards, amendments and interpretations that are issued by the International Accounting Standards Board (IASB) but not issued by Public Oversight Authority (POA)
The following standards, interpretations and amendments to existing IFRS standards are issued by the IASB but not yet effective up to the date of issuance of the financial statements. However, these standards, interpretations and amendments to existing IFRS standards are not yet adapted/issued by the POA, thus they do not constitute part of TFRS. The Company will make the necessary changes to its financial statements after the new standards and interpretations are issued and become effective under TFRS.
IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments)
In December 2015, the IASB postponed the effective date of this amendment indefinitely pending the outcome of its research project on the equity method of accounting. Early application of the amendments is still permitted.
Annual Improvements - 2010-2012 Cycle
IFRS 13 Fair Value Measurement
As clarified in the Basis for Conclusions short-term receivables and payables with no stated interest rates can be held at invoice amounts when the effect of discounting is immaterial. The amendment is effective immediately.
Annual Improvements - 2011-2013 Cycle
IFRS 16 Leases
The IASB has published a new standard, IFRS 16 ‘Leases’. The new standard brings most leases on-balance sheet for lessees under a single model, eliminating the distinction between operating and finance leases. Lessor accounting however remains largely unchanged and the distinction between operating and finance leases is retained. IFRS 16 supersedes IAS 17 ‘Leases’ and related interpretations and is effective for periods beginning on or after January 1, 2019, with earlier adoption permitted if IFRS 15 ‘Revenue from Contracts with Customers’ has also been applied. The Company is in the process of assessing the impact of the standard on financial position or performance of the Company.
IFRIC 23 Uncertainty over Income Tax Treatments
The interpretation clarifies how to apply the recognition and measurement requirements in “IAS 12 Income Taxes” when there is uncertainty over income tax treatments.
When there is uncertainty over income tax treatments, the interpretation addresses: (a) whether an entity considers uncertain tax treatments separately; (b) the assumptions an entity makes about the examination of tax treatments by taxation authorities; (c) how an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates; and (d) how an entity considers changes in facts and circumstances.
An entity shall apply this Interpretation for annual reporting periods beginning on or after 1 January 2019. Earlier application is permitted. If an entity applies this Interpretation for an earlier period, it shall disclose that fact. On initial application, an entity shall apply the interpretation either retrospectively applying IAS 8, or retrospectively with the cumulative effect of initially applying the Interpretation recognised at the date of initial application.
The Company is in the process of assessing the impact of the interpretation on financial position or performance of the Company.
Anadolu Sigorta 2017 Annual Report 153 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
IFRS 17 - The new Standard for insurance contracts
The IASB issued IFRS 17, a comprehensive new accounting standard for insurance contracts covering recognition and measurement, presentation and disclosure. IFRS 17 model combines a current balance sheet measurement of insurance contract liabilities with the recognition of profit over the period that services are provided. Certain changes in the estimates of future cash flows and the risk adjustment are also recognised over the period that services are provided. Entities will have an option to present the effect of changes in discount rates either in profit and loss or in OCI. The standard includes specific guidance on measurement and presentation for insurance contracts with participation features. IFRS 17 will become effective for annual reporting periods beginning on or after 1 January 2021; early application is permitted. The Company is in the process of assessing the impact of the standard on financial position or performance of the Company.
Prepayment Features with Negative Compensation (Amendments to IFRS 9)
In October 2017, the IASB issued minor amendments to IFRS 9 Financial Instruments to enable companies to measure some prepayable financial assets at amortised cost.
Applying IFRS 9, a company would measure a financial asset with so-called negative compensation at fair value through profit or loss. Applying the amendments, if a specific condition is met, entities will be able to measure at amortised cost some prepayable financial assets with so-called negative compensation.
The amendments are effective from annual periods beginning on or after 1 January 2019, with early application permitted.
Annual Improvements - 2015-2017 Cycle
In December 2017, the IASB announced Annual Improvements to IFRS Standards 2015-2017 Cycle, containing the following amendments to IFRSs: • IFRS 3 Business Combinations and IFRS 11 Joint Arrangements - The amendments to IFRS 3 clarify that when an entity obtains control of a business that is a joint operation, it remeasures previously held interests in that business. The amendments to IFRS 11 clarify that when an entity obtains joint control of a business that is a joint operation, the entity does not remeasure previously held interests in that business. • IAS 12 Income Taxes - The amendments clarify that all income tax consequences of dividends (i.e. distribution of profits) should be recognised in profit or loss, regardless of how the tax arises. • IAS 23 Borrowing Costs - The amendments clarify that if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalisation rate on general borrowings.
3 Significant accounting estimates and requirements
The notes given in this section are provided to addition/supplement the commentary on the management of insurance risk note 4.1 - Management of insurance risk and note 4.2 - Financial risk management.
The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected.
154 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
In particular, information about significant areas of estimation uncertainty and critical judgment in applying accounting policies that have the most significant effect on the amount recognized in the financial statements are described in the following notes:
Note 4.1 - Management of insurance risk Note 4.2 - Financial risk management Note 10 - Reinsurance assets/liabilities Note 11 - Financial assets Note 12 - Loans and receivables Note 17 - Insurance liabilities and reinsurance assets Note 17 - Deferred acquisition costs Note 19 - Trade and other payables, deferred income Note 21 - Deferred income taxes Note 23 - Provisions for other liabilities and charges
4 Management of insurance and financial risk
4.1 Management of insurance risk
Insurance risk is defined as coverage for exposures that exhibit a possibility of financial loss due to applying inappropriate and insufficient insurance techniques. Main reasons of insurance risk exposure result from the risk selection and inaccurate calculation of insurance coverage, policy terms and fee or inaccurate calculation of coverage portion kept within the company and coverage portion transfers to policyholders and transfer conditions.
Objective of managing risks arising from insurance contracts and policies used to minimize such risks
Potential risks that may be exposed in transactions are managed based on the requirements set out in the Company’s “Risk Management Policies” issued by the approval of the Board of Directors. The main objective of risk management policies is to determine the risk measurement, assessment, and control procedures and maintain consistency between the Company’s asset quality and limitations allowed by the insurance standards together with the Company’s risk tolerance of the accepted risk level assumed in return for a specific consideration. In this respect, instruments that are related to risk transfer, such as; insurance risk selection, risk quality follow-up by providing accurate and complete information, effective monitoring of level of claims by using risk portfolio claim frequency, treaties, facultative reinsurance contracts and coinsurance agreements, and risk management instruments, such as; risk limitations, are used in achieving the related objective.
Risk tolerance is determined by the Company’s Board of Directors by considering the Company’s long-term strategies, equity resources, potential returns and economical expectations, and it is presented by risk limitations. Authorization limitations during policy issuing include authorizations for risk acceptances granted based on geographical regions in relation to unacceptable special risks or pre-approved acceptable special risks, insurance coverage to agencies, district offices, technical offices, assistant general managers and top management in the policy issuance period and authorizations for claim payment granted to district offices, claim management administration, automobile claims administration and Claim Committee established by the managing director and assistant managing director in the claim payment period.
In any case, risk acceptance is based on technical income expectations under the precautionary principle. In determining insurance coverage, policy terms and fee, these expectations are based accordingly
It is essential that all the authorized personnel in charge of executing policy issuance transactions, which is the initial phase of insurance process, should ensure to gather or provide all the accurate and complete information to issue policies in order to obtain evidence on the acceptable risks that the Company can tolerate from the related insurance transactions. On the other hand, decision to be made on risk acceptance will be possible by transferring the coverage to the reinsurers and/or co-insurers and considering the terms of the insurance policy.
In order to avoid destructive losses over company’s financial structure, company transfers the exceeding portion of risks assumed over the Company’s risk tolerance and equity resources through treaties, facultative reinsurance contracts and coinsurance agreements to reinsurance and coinsurance companies. Insurance coverage and policy terms of reinsurance are determined by assessing the nature of each insurance branch.
Anadolu Sigorta 2017 Annual Report 155 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Insurance risks do not generally have significant unrecoverable losses in the course of ordinary transactions, except for risks associated with earthquake and other catastrophic risks. Therefore, there is a high sensitivity to earthquake and catastrophic risks.
The case of potential claims’ arising from earthquake and other catastrophic risks exceeding the maximum limit of the excess of loss agreements, such risks are treated as the primary insurance risks and are managed based on the precautionary principle. Maximum limit of excess of loss agreements is determined based on the worst case scenario on the possibility of an earthquake that Istanbul might be exposed to in terms of its severity and any potential losses incurred in accordance with the generally accepted international earthquake models. The total amount of protection for catastrophic risks of the company is identified taking into the compensation amount for an earthquake will occur in a 1000 years.
Insurance risk concentration
The Company’s gross and net insurance risk concentrations (net of reinsurer share) in terms of insurance branches are summarized as below: Total claims liability (*) Gross total Reinsurance share of Net total December 31, 2017 claims liability total claims liability claims liability Motor vehicles liability (MTPL) 1.703.454.177 (91.899.001) 1.611.555.176 General liability 608.167.498 (126.031.645) 482.135.853 Fire and natural disasters 377.218.223 (171.884.480) 205.333.743 General losses 165.931.149 (101.645.108) 64.286.041 Motor vehicles 142.322.531 (7.870.986) 134.451.545 Water vehicles 40.980.920 (18.378.585) 22.602.335 Marine 35.495.591 (14.745.963) 20.749.628 Accident 41.324.839 (11.250.978) 30.073.861 Financial losses 10.877.792 (8.194.132) 2.683.660 Air crafts liability 58.009.302 (46.083.877) 11.925.425 Air crafts 49.750.517 (42.391.076) 7.359.441 Health 9.119.780 (249.390) 8.870.390 Credit 2.452.500 (132.447) 2.320.053 Legal protection 338.257 948 339.205 Total 3.245.443.076 (640.756.720) 2.604.686.356
Total claims liability (*) Gross total Reinsurance share of Net total December 31, 2016 claims liability total claims liability claims liability Motor vehicles liability (MTPL) 1.264.364.997 (25.933.527) 1.238.431.470 General liability 488.244.066 (111.244.859) 376.999.207 Fire and natural disasters 325.217.969 (153.703.822) 171.514.147 General losses 151.128.531 (99.947.796) 51.180.735 Motor vehicles 126.343.879 1.060.964 127.404.843 Marine 37.492.291 (24.183.360) 13.308.931 Accident 36.067.400 (7.972.192) 28.095.208 Air crafts liability 35.072.041 (24.770.280) 10.301.761 Water vehicles 31.629.823 (16.946.735) 14.683.088 Financial losses 15.356.973 (14.090.576) 1.266.397 Air crafts 8.603.509 (6.012.777) 2.590.732 Credit 5.412.219 (3.039.839) 2.372.380 Health 5.061.186 (227.697) 4.833.489 Legal protection 262.250 221 262.471 Total 2.530.257.134 (487.012.275) 2.043.244.859
(*) Total claims liability includes outstanding claims reserve (excluding contingent amounts deducted from claims reserve determined by winning probability) and incurred but not reported claims.
156 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Gross and net insurance risk concentrations of the insurance contracts (net of reinsurer share) based on geographical regions are summarized as below: Total claims liability (*) Gross total Reinsurance share of Net total December 31, 2017 claims liability total claims liability claims liability
Turkey 2.165.208.839 407.915.926 1.757.292.913 Europe 136.593.544 112.059.173 24.534.371 America 935.716 751.334 184.382 Africa 39.888.256 33.834.113 6.054.143 Asia 3.586.319 3.018.414 567.905 Total 2.346.212.674 557.578.960 1.788.633.714
Total claims liability (*) Gross total Reinsurance share of Net total December 31, 2017 claims liability total claims liability claims liability
Marmara Region 888.877.514 200.116.838 688.760.676 Middle Anatolian Region 346.514.938 43.519.951 302.994.987 Aegean Region 232.261.711 23.513.374 208.748.337 Mediterranean Region 218.303.191 49.125.995 169.177.196 South East Anatolian Region 145.061.923 15.446.122 129.615.801 Black Sea Region 160.724.197 52.685.372 108.038.825 East Anatolian Region 173.465.365 23.508.274 149.957.091 Total 2.165.208.839 407.915.926 1.757.292.913
(*) Total claims liability includes estimated compensation indemnity for realized claims. Gross incurred but not reported claims amounting to TL 1.627.162.076, outstanding claims of treaty activities which could not be distributed to geographical regions amounting to TL 171.367.335, discount of outstanding claim reserves amounting to TL (716.723.111), and the potential income deducted from the outstanding claims processed in the case amounting to TL (182.575.898) are excluded from the table.
Total claims liability (*) Gross total Reinsurance share of Net total December 31, 2016 claims liability total claims liability claims liability
Turkey 1.970.302.437 (492.193.691) 1.478.108.746 Europe 369.432 (13.174) 356.258 Africa 3.266 -- 3.266 Asia 499.630 (1.088) 498.542 Total 1.971.174.765 (492.207.953) 1.478.966.812
Total claims liability (*) Gross total Reinsurance share of Net total December 31, 2016 claims liability total claims liability claims liability
Marmara Region 1.684.106.253 (455.240.487) 1.228.865.766 Middle Anatolian Region 74.439.694 (3.516.290) 70.923.404 Aegean Region 58.354.851 (1.722.600) 56.632.251 Mediterranean Region 49.799.759 (4.489.755) 45.310.004 Black Sea Region 38.363.932 (13.035.965) 25.327.967 East Anatolian Region 32.851.506 (8.172.880) 24.678.626 South East Anatolian Region 32.386.442 (6.015.714) 26.370.728 Total 1.970.302.437 (492.193.691) 1.478.108.746
(*) Total claims liability includes estimated compensation indemnity for realized claims. Gross incurred but not reported claims amounting to TL 1.231.334.692, provision for outstanding claims of discount amount TL (569.691.609), outstanding claims of treaty activities which could not be distributed to geographical regions amounting to TL 68.300.531 and the potential income deducted from the outstanding claims processed in the case amounting to TL (170.861.245) are excluded from the table.
Anadolu Sigorta 2017 Annual Report 157 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Given insurance collateral amounts in respect to branches December 31, 2017 December 31, 2016
Motor vehicles liability (MTPL) 5.265.078.838.278 5.583.713.745.062 Fire and natural disasters 135.608.274.423 127.483.898.693 Health 103.781.728.941 126.422.487.105 Accident 118.199.306.463 111.234.472.203 General liability 59.897.144.573 59.272.513.598 General losses 59.224.580.559 54.169.810.431 Motor vehicles 48.781.635.664 50.018.215.060 Marine 16.963.726.644 15.833.370.275 Air crafts liability 5.854.747.561 5.169.788.401 Legal protection 4.438.225.143 4.997.047.631 Water vehicles 2.330.774.067 2.323.062.746 Financial losses 750.973.356 692.634.277 Aircrafts 644.430.596 680.104.955 Total(*) 5.821.554.386.268 6.142.011.150.437
(*) Net amount which deducted share of reinsurance and social security
4.2 Management of financial risk
Introduction and overview
This note presents information about the Company’s exposure to each of the below risks, the Company’s objectives, policies and processes for measuring and managing risk, and the Company’s management of capital. The Company has exposure to the following risks from its use of financial instruments: • credit risk • liquidity risk • market risk
The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. Duties and responsibilities of the Risk Management and Internal Control Department include design and implementation of risk management system and identification and implementation of risk management policies. It is also responsible for ensuring that the Company implements all necessary risk management techniques. Activities of the Risk Management and Internal Control Department are managed directly by General Manager. The Board of Directors monitors the effectiveness of the risk management system through the internal audit department.
Risk management policies and guidelines are set by the Board of Directors and applied by the top management. These policies include organisation and scope of the risk management function, risk measurement and assessment methods, duties and responsibilities of the Board of Directors, top management and all of the employees, procedures followed in the case of limit extension and compulsory approval and confirmation processes for certain situations.
Credit risk
Credit risk is most simply defined as the potential that a bank borrower or counterparty will fail to meet its obligations in accordance with agreed terms. The balance sheet items that the Company is exposed to credit risks are as follows: • Cash at banks • Other cash and cash equivalents • Available for sale financial assets (except equity-shares) • Financial assets held for trading (except equity-shares) • Held to maturity financial asset • Premium receivables from policyholders
158 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
• Receivables from intermediaries (agencies) • Receivables from reinsurance companies related to commissions and claims paid • Reinsurance shares of insurance liability • Receivables from related parties • Other receivables
Reinsurance contracts are the most common method to manage insurance risk. The contract does not, however, discharge the Company’s liability as the primary insurer. If a reinsurer fails to pay a claim for any reason, the Company remains liable for the payment to the policyholder. The creditworthiness of reinsurers is considered on an annual basis by reviewing their financial strength prior to finalization of the reinsurance contract.
Net book value of the assets that is exposed to credit risk is shown in the table below. December 31, 2017 December 31, 2016
Cash and cash equivalents (Note 14) 3.504.701.722 3.217.511.262 Receivables from main operations (Note 12) 1.178.955.084 1.048.793.865 Financial assets (Note 11) (*) 943.438.187 606.134.613 Reinsurer share in provision for outstanding claims (Note 10), (Note 17) 640.756.720 487.012.275 Other receivables (Note 12) 21.224.166 15.540.321 Prepaid taxes and funds (Note 19) -- 12.441.095 Other prepaid expenses (Note 12) 19.928.671 4.358.898 Other miscellaneous current assets (Note 12) 493.641 185.836 Total 6.309.498.191 5.391.978.165
(*) Equity shares amounting to TL 160.082.153 are not included (December 31, 2016: TL 142.475.171).
As of December 31, 2017 and December 31, 2016, the aging of the receivables from main operations is as follows: December 31, 2017 December 31, 2016 Gross Amount Provision Gross Amount Provision
Not past due 969.119.015 -- 829.900.876 -- Past due 0-30 days 150.529.379 (1.992.510) 151.599.029 (1.730.318) Past due 31-60 days 23.807.314 (1.486.876) 29.458.231 (1.895.127) Past due 61-90 days 27.290.704 (1.783.910) 23.833.891 (1.305.330) More than 90 days (*) 242.771.427 (229.299.459) 211.699.386 (192.766.773) Total (**) 1.413.517.839 (234.562.755) 1.246.491.413 (197.697.548)
(*) As per the February 3, 2005 dated and B.02.1.HM.O.SGM.0.3.1/01/05 numbered Circular issued by the Turkish Treasury, in case where subrogation is subject to claim/legal action, related subrogation amount is recognized as doubtful receivables and allowance for doubtful receivables is provided by the same amount in the financial statements. Related amounts are presented in “More than 90 days” line in the above table. (**) The balance of receivables from insurance operations presented in the financial statements amounting to TL 1.132.422.784 (December 31, 2016: TL 1.083.664.376) includes the receivables that are the amount collected by intermediaries but it has not transferred yet to the Company, amounting to TL 123.963.051 (December 31, 2016: TL 115.810.255) and the subrogation and salvage receivables amounting to TL 43.566.966 (December 31, 2016: TL 47.016.782). Subrogation receivables having past over 4 months for individuals and 6 months for legal entities but not transferred to legal follow-up amounting to TL 8.307.569 (December 31, 2016: TL 8.836.586) are excluded from the table.
The movements of the allowances for receivables from main operations during the period are as follows: December 31, 2017 December 31, 2016
Provision for receivables from insurance operations at the beginning of the period 188.860.962 150.758.235 Provision for receivables provided for subrogation - salvage receivables during the period (Note 47) 36.875.264 35.926.722 Provision for losses provided during the period (Note 47) 1.079.389 2.758.273 Collections during the period (589.879) (582.268) Provision for receivables from insurance operations at the end of the period 226.225.736 188.860.962
Anadolu Sigorta 2017 Annual Report 159 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulty in raising funds to meet cash commitments associated with financial instruments.
Management of the liquidity risk
The Company considers the maturity match between asset and liabilities for the purpose of avoiding liquidity risk and ensure that it will always have sufficient liquidity to meet its liabilities when due.
Maturity distribution of monetary assets and liabilities:
December 31, 2017 Net book value Up to 1 month 1 to 3 months 3 to 6 months 6 to 12 months Over 1 year Unallocated
Cash and cash equivalents 3.504.676.959 1.278.672.658 1.065.357.964 1.143.525.416 -- -- 17.120.921 Financial assets 1.103.520.340 23.241.814 6.072.043 3.093.332 1.821.088 407.099.010 662.193.053 Receivables from main operations 1.178.955.084 117.654.370 450.131.408 417.658.801 174.723.436 18.787.069 -- Other receivables 21.224.166 13.589.698 400.486 1.671.027 3.342.053 2.205.704 15.198 Income accruals 19.928.671 2.369.468 4.094.659 12.584.727 -- -- 879.817 Total monetary assets 5.828.305.220 1.435.528.008 1.526.056.560 1.578.533.303 179.886.577 428.091.783 680.208.989
Financial liabilities 110.802.339 108.072.424 -- 2.729.915 ------Payables arising from main operations 492.116.005 171.765.145 71.399.133 89.189.977 159.761.750 -- -- Other liabilities 113.563.203 61.896.745 45.384.376 -- -- 6.282.082 -- Insurance technical provisions (*) 2.604.686.356 190.530.133 381.060.259 226.832.656 287.309.067 1.518.954.241 -- Provisions for taxes and other similar obligations 50.750.268 50.750.268 ------Provisions for other risks and expense accruals 73.632.169 3.843.837 14.223.446 -- 29.067.524 3.678.792 22.818.570 Total monetary liabilities 3.445.550.340 586.858.552 512.067.214 318.752.548 476.138.341 1.528.915.115 22.818.570
(*) Provision for outstanding claims is presented as short term liabilities in the accompanying unconsolidated financial statements whereas maturity distribution is presented according to projected payment dated in the above table.
December 31, 2016 Net book value Up to 1 month 1 to 3 months 3 to 6 months 6 to 12 months Over 1 year Unallocated
Cash and cash equivalents 3.217.463.827 1.695.918.178 1.052.403.773 454.921.081 -- -- 14.220.795 Financial assets 748.609.784 19.480.516 9.725.366 21.774.982 13.892.056 355.823.150 327.913.714 Receivables from main operations 1.048.793.865 96.847.623 439.570.619 401.277.310 99.198.545 11.899.768 -- Other receivables 15.540.321 7.183.518 1.386.489 1.628.792 3.257.583 1.749.362 334.577 Income accruals 4.358.898 129.269 ------4.229.629 Total monetary assets 5.034.766.695 1.819.559.104 1.503.086.247 879.602.165 116.348.184 369.472.280 346.698.715
Financial liabilities 134.413.473 134.413.473 ------Payables arising from main operations 449.205.545 142.812.014 -- 49.905.834 256.487.697 -- -- Other liabilities 82.609.754 31.378.830 45.744.147 -- -- 5.486.777 -- Insurance technical provisions (*) 2.043.244.859 160.120.169 320.240.339 180.809.484 214.124.793 1.167.950.074 -- Provisions for taxes and other similar obligations 39.526.586 39.526.586 ------Provisions for other risks and expense accruals 72.607.084 304.120 29.886.473 20.109.362 -- 3.381.653 18.925.476 Total monetary liabilities 2.821.607.301 508.555.192 395.870.959 250.824.680 470.612.490 1.176.818.504 18.925.476
(*) Provision for outstanding claims is presented as short term liabilities in the accompanying unconsolidated financial statements whereas maturity distribution is presented according to projected payment dated in the above table.
160 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Market risk
Market risk is the risk that changes in market prices, such as interest rates, foreign exchange rates and credit spreads will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return on risk.
Currency risk
The Company is exposed to currency risk through insurance and reinsurance transactions in foreign currencies.
Foreign exchange gains and losses arising from foreign currency transactions are recorded at transaction dates. At the end of the periods, foreign currency assets and liabilities evaluated by the Central Bank of the Republic of Turkey’s spot purchase rates and the differences arising from foreign currency rates are recorded as foreign exchange gain or loss in the statement of income.
The Company’s exposure to foreign currency risk is as follows: Other December 31, 2017 US Dollar Euro currencies Total
Receivables from main operations 229.328.864 97.458.592 3.500.750 330.288.206 Financial assets 133.672.721 17.439.313 -- 151.112.034 Cash and cash equivalents(*) 141.033.816 38.172.274 2.134.826 181.340.916 Total foreign currency assets 504.035.401 153.070.179 5.635.576 662.741.156
Insurance technical provisions 259.112.932 71.877.478 5.412.663 336.403.073 Payables arising from main operations 126.151.525 27.613.966 351.643 154.117.134 Total foreign currency liabilities 385.264.457 99.491.444 5.764.306 490.520.207
Net financial position 118.770.944 53.578.735 (128.730) 172.220.949
(*) The currency risk table are not included the amount of foreign currency forward transaction TL 1.844.825.014 located in the cash and cash equivalents.
Other December 31, 2016 US Dollar Euro currencies Total
Receivables from main operations 105.568.670 31.585.213 2.162.747 139.316.630 Financial assets 127.861.783 11.880.374 -- 139.742.157 Cash and cash equivalents 239.406.323 73.168.517 2.884.461 315.459.301 Total foreign currency assets 472.836.776 116.634.104 5.047.208 594.518.088
Insurance technical provisions 165.014.054 52.038.624 79.122 217.131.800 Payables arising from main operations 179.845.158 50.177.535 915.993 230.938.686 Total foreign currency liabilities 344.859.212 102.216.159 995.115 448.070.486
Net financial position 127.977.564 14.417.945 4.052.093 146.447.602
TL equivalents of the related monetary amounts denominated in foreign currencies are presented in the above table.
If technical provision denominated in any currency not specified, ıt is evaluated are evaluated by the Central Bank of the Republic of Turkey’s spot sales rates as of December 31, 2017 (December 31, 2016: spot sales rate) and Foreign currency transactions are recorded at the foreign exchange rates ruling at the dates of the transactions and foreign currency denominated monetary items are evaluated by the Central Bank of the Republic of Turkey’s spot purchase rates as at December 31, 2017 (December 31, 2016: spot purchase rate).
Anadolu Sigorta 2017 Annual Report 161 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Exposure to currency risk
Foreign currency rates used for the translation of foreign currency denominated assets and liabilities as of December 31, 2017 and December 31, 2016 are as follows: US Dollar Euro
December 31, 2017 3,7719 4,5155 December 31, 2016 3,5192 3,7099
A 10 percent depreciation of the TL against the following currencies as of December 31, 2017 and December 31, 2016 would have increased or decreased equity and profit or loss (excluding tax effects) by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. In case of a 10 percent appreciation of the TL against the following currencies, the effect will be in opposite direction. December 31, 2017 December 31, 2016 Profit or loss Equity (*) Profit or loss Equity (*)
US Dollar 11.877.094 11.877.094 12.797.756 12.570.486 Euro 5.357.874 5.357.874 1.441.795 1.441.795 Other (12.270) (12.270) 405.209 405.209 Total, net 17.222.698 17.222.698 14.644.760 14.417.490
(*) Equity effect also includes profit or loss effect of 10% depreciation of TL against related currencies.
Exposure to interest rate risk
The principal risk to which non-trading portfolios are exposed is the risk of loss from fluctuations in the future cash flows or fair values of financial instrument because of a change in market interest rates. Interest rate risk is managed principally through monitoring interest rate gaps and by having pre-approved limits for repricing bands.
As of reporting date; the interest rate profile of the Company’s interest earning financial assets and interest bearing financial liabilities are detailed as below: December 31, 2017 December 31, 2016
Financial assets with fixed interest rates: Available for sale financial assets - Other (Note 11) 23.241.814 4.308.334 Cash at banks (Note 14)(*) 3.088.213.726 2.781.686.316 Other-financial liabilities (102.934.273) (134.413.473) Available for sale financial assets - Government bonds (Note 11) 237.576.200 267.176.904 Available for sale financial assets - Private debt securities (Note 11) 38.099.583 53.881.169 Cash deposited to insurance and reinsurance companies (Note 12) 29.650.034 12.604.316
Financial assets with variable interest rates: Available for sale financial assets - Government bonds (Note 11) 23.611.670 34.226.660 Available for sale financial assets - Private debt securities (Note 11) 118.798.021 45.017.578 Financial assets held for trading - Government bonds (Note 11) -- 913.243 Held to maturity investments - Government bonds (Note 11) -- 15.172.182
(*) Demand deposits amounting to TL 17.120.921 are not included (December 31, 2016: TL 14.220.795).
162 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Interest rate sensitivity of the financial instruments
Interest rate sensitivity of the statement of income is the effect of the assumed changes in interest rates on the fair values of financial assets at fair value through profit or loss and on the net interest income for the periods ended December 31, 2017 and December 31, 2016 of the floating rate non-trading financial assets and financial liabilities held at December 31, 2017 and December 31, 2016. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The table below demonstrating the effect of changes in interest rates on statement of income and equity excludes tax effects on related loss or income. Profit or loss Equity (*) December 31, 2017 100 bp increase 100 bp decrease 100 bp increase 100 bp decrease
Available for sale financial assets -- -- (7.104.540) 7.483.673 Total, net -- -- (7.104.540) 7.483.673
(*) Equity effect also includes profit or loss effect of assumed change in interest rates. Profit or loss Equity (*) December 31, 2016 100 bp increase 100 bp decrease 100 bp increase 100 bp decrease
Financial assets held for trading (6.560) 6.669 (6.560) 6.669 Available for sale financial assets -- -- (7.417.571) 7.837.571 Total, net (6.560) 6.669 (7.424.131) 7.844.240
(*) Equity effect also includes profit or loss effect of assumed change in interest rates.
Fair value information
The estimated fair values of financial instruments have been determined using available market information, and where they exist, appropriate valuation methodologies.
The Company has classified its financial assets as held for trading, available for sale or held to maturity. As of the reporting date, available for sale financial assets and financial assets held for trading are measured at their fair values based on their quoted prices or fair value information obtained from brokers in the accompanying unconsolidated financial statements. Equity shares not traded in active markets are measured at cost less impairment losses if any. As of December 31, 2017, the Company has no held to maturity investment measured at amortised cost calculating the effective interest method (December 31, 2016: TL 15.172.182 As of December 31, 2017 and December 31, 2016 the Company’s fair value classification of financial assets held to the maturity is 1. Level.
Management estimates that the fair value of other financial assets and liabilities are not materially different than their net book value.
Fair value sensitivity of the equity shares
Equity share price risk is the risk that the fair values of equity shares decrease as a result of the changes in the levels of equity shares indices and the value of equity shares.
The effect on income as a result of 10% change in the fair value of equity share instruments held as held for trading financial assets (traded at İstanbul Stock Exchange) due to a reasonably possible change in equity share indices, with all other variables held constant, is as follows (excluding tax effect): December 31, 2017 December 31, 2016 Profit or loss Equity (*) Profit or loss Equity (*)
Financial assets held for trading (4.834.620) (4.834.620) (3.778.444) (3.778.444) Available for sale financial assets -- (11.173.595) -- (10.469.073) Associates -- (68.972.000) -- (42.742.000) Total, net (4.834.620) (84.980.215) (3.778.444) (56.989.517)
(*) Equity effect also includes profit or loss effect of assumed change in interest rates.
Anadolu Sigorta 2017 Annual Report 163 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Classification of fair value measurements
TFRS 7 - Financial instruments: Disclosures requires the classification of fair value measurements into a fair value hierarchy by reference to the observability and significance of the inputs used in measuring fair value of financial instruments measured at fair value to be disclosed. This classification basically relies on whether the relevant inputs are observable or not. Observable inputs refer to the use of market data obtained from independent sources, whereas unobservable inputs refer to the use of predictions and assumptions about the market made by the Company. This distinction brings about a fair value measurement classification generally as follows:
Level 1: Fair value measurements using quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: Fair value measurements using inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices).
Level 3: Fair value measurements using inputs for the assets or liability that are not based on observable market data (unobservable inputs).
Classification requires the utilization of observable market data, if available.
The classification of fair value measurements of financial assets and liabilities measured at fair value is as follows: December 31, 2017 Level 1 Level 2 Level 3 Total
Financial assets: Associates (Note 9) 689.720.000 -- -- 689.720.000 Financial assets held for trading (Note 11) 123.087.098 224.448.052 -- 347.535.150 Available for sale financial assets (*) (Note 11) 468.301.161 219.514.315 67.311.993 755.127.469 Total financial assets 1.281.108.259 443.962.367 67.311.993 1.792.382.619
December 31, 2016 Level 1 Level 2 Level 3 Total
Financial assets: Associates (Note 9) 427.420.000 -- -- 427.420.000 Financial assets held for trading (Note 11) 67.520.258 60.360.746 -- 127.881.004 Available for sale financial assets (*) (Note 11) 382.417.739 159.492.559 62.944.793 604.855.091 Total financial assets 877.357.997 219.853.305 62.944.793 1.160.156.095
(*) As at December 31, 2017, equity shares that are not publicly traded and the determination of fair values could not be obtained reliably amounting to TL 857.721 have been measured at cost value (December 31, 2016: TL 701.507).
The following table shows the reconciliation of financial assets available for sales that are classified as fair value measurement Level 3: December 31, 2017 December 31, 2016
Financial assets available for sale beginning of the period 62.944.793 17.828.444 Addition 48.622.825 48.250.549 Disposal (44.466.936) (3.927.478) Capital increase by bonus issue 204.248 -- Revaluation 7.063 793.278 Financial assets available for sale ending of the period 67.311.993 62.944.793
164 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Gains and losses from financial assets Gains and losses recognized in the statement of income:: December 31, 2017 December 31, 2016
Interest income from bank deposits 190.737.844 251.980.134 Foreign exchange gains 430.645.835 134.101.122 Income from investments in associates 28.000.000 24.000.000 Income from debt securities classified as available-for-sale financial assets 40.204.760 30.555.552 Income from debt securities classified as trading financial assets 39.566 109.741 Income from debt securities classified as held to maturity financial investments 13.641 1.494.265 Income from equity shares classified as available-for-sale financial assets 12.510.285 11.944.564 Income from equity shares classified as trading financial assets 18.303.260 6.762.828 Income from investment funds as available for sale financial assets 7.118.861 2.497.586 Income from investment funds as trading financial assets 35.163.436 8.720.045 Income from derivative transactions 90.116.129 4.432.112 Other 3.087.195 1.530.171 Investment income 855.940.812 478.128.120
Loss from valuation of financial assets (1.118.002) (1.643.638) Foreign exchange losses (112.534.636) (76.942.491) Loss from derivative transactions (179.274.294) (3.616.449) Loss from disposal of financial assets (16.137.959) (15.270.224) Investment expenses - including interest (385.326) (756.432) Investment expenses (309.450.217) (98.229.234)
Financial gains and losses recognized in the statement of income, net 546.490.595 379.898.886
Financial gains and losses recognized in equity: December 31, 2017 December 31, 2016
Fair value changes in investments in associates (Note 15) 290.300.000 (47.860.000) Net gains transferred from statement of equity to the statement of income on disposal of available for sale financial assets (Note 15) (7.896.672) 4.104.171 Fair value changes in available-for-sale financial assets (Note 15) (17.231.320) (23.018.263) Gains and losses recognized in equity, net 265.172.008 (66.774.092)
Capital management
The Company’s capital management policies include the following: • To comply with the insurance capital requirements determined by the Turkish Treasury • To ensure the continuity of the Company’s activities within the framework of the Company’s continuity principle
In accordance with the “Communiqué on Measurement and Assessment of Capital Adequacy for Insurance, Reinsurance and Individual Pension Companies” issued by Turkish Treasury on January 19, 2008 dated and 26761 numbered; the Company measured its minimum capital requirement as TL 1.137.929.541 as of June 30, 2017. As of June 30, 2017, the capital amount of the Company presented in the unconsolidated financial statements are above the minimum capital requirement amounts calculated according to the communiqué.
Anadolu Sigorta 2017 Annual Report 165 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
5 Segment reporting
A segment is a distinguishable component of the Company that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.
Business segment
A business segment reporting of the Company is presented in accordance with TFRS 8 - Operating Segments standard in this section.
Insurance on Fire and Natural Disaster
Insurance on fire and natural disasters covers material damages occurred due to fire, lightening, explosion or smoke, steam and temperature resulted from fire, lightning and explosion up to insurance policy limits.
Insurance on Motor Third Party Liability
According to the Motorway Traffic Code numbered 2918, Motor Third Party Liability Insurance is covers vehicle owner’s legal liability for all bodily claims to third persons and financial claims to other vehicles.
Claims caused by the trailer or semi-trailers (included light trailers) or the vehicles pulled is covered by the insurance of the trailer. However, the trailers used for transportation of people should be included in an additional liability insurance in order to obtain coverage.
In order to reduce and prevent the claim in the accident happened, reasonable and necessary expenses of the policyholder is compensated by the Company. This insurance also covers unfair claims against the policyholders.
Insurance on Motor Vehicles
Insurance on motor vehicles covers the following dangers related with vehicles. It is possible to widen policy scope for accessories or audio, display and communication devices which are not included in standard version of the vehicle by specifying on the insurance policy. • Accident with the motorized or non-motorized vehicles which used in high-ways, • Crash with fixed or moving items without desire of the driver or accidents due to crash, capsize, fall or tumble, • The actions of third parties resulted from bad intention or mischief, • Burn, • Theft or attempted theft.
Insurance on Health
Insurance on health compensates treatment costs of illnesses or accidental injuries during the period of insurance and, if any, daily allowances in this general framework with special conditions up to the amount written in the policy. Geographical limits of the insurance are stated in the policy.
166 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Geographical segment
The main geographical segment which the Company operates is Turkey. Hence, the Company has not disclosed report on geographical segments.
Fire and Motor third Motor natural party liability Health vehicles disasters Other Unallocated Total
January 1 - December 31, 2017 1- Earned Premiums (Net of Reinsurer Share) 1.176.156.608 453.813.681 893.389.313 336.807.419 463.217.105 -- 3.323.384.126 1.1- Written Premiums (Net of Reinsurer Share) 951.627.235 507.872.801 946.461.755 353.802.944 513.221.990 -- 3.272.986.725 1.2- Change in Reserve for Unearned Premiums (Net of Reinsurer Shares and Less the Amounts Carried Forward) 224.529.373 (54.059.120) (53.072.442) (16.995.525) (27.588.246) -- 72.814.040 1.3- Change in Reserve for Unexpired Risks (Net of Reinsurer Share and Less the Amounts Carried Forward) ------(22.416.639) -- (22.416.639) 2- Other Technical Income (Net of Reinsurer Share) 76.305 337.870 5.931.814 195.658 63.898 -- 6.605.545 3- Accrued Salvage and Subrogation Income 17.597.183 -- 8.246.992 4.414.179 10.483.603 -- 40.741.957 Technical income (*) 1.193.830.096 454.151.551 907.568.119 341.417.256 473.764.606 -- 3.370.731.628
1- Incurred Losses (Net of Reinsurer Share) (1.041.617.897) (388.086.802) (681.929.327) (243.279.304) (359.351.990) -- (2.714.265.320) 1.1- Claims Paid (Net of Reinsurer Share) (668.494.190) (384.049.900) (674.882.625) (209.459.709) (215.937.399) -- (2.152.823.823) 1.2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward) (373.123.707) (4.036.902) (7.046.702) (33.819.595) (143.414.591) -- (561.441.497) 2- Change in Other Technical Reserves (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- (5.511.788) (20.970.727) (5.028.889) -- (31.511.404) 3- Operating Expenses (246.840.165) (95.005.660) (206.518.178) (104.082.654) (103.382.084) -- (755.828.741) 4- Other Technical Provisions (23.889.604) (15.564.363) (58.354.849) (14.756.402) (6.046.280) -- (118.611.498) Technical expense (1.312.347.666) (498.656.825) (952.314.142) (383.089.087) (473.809.243) -- (3.620.216.963)
Investment Income 859.807.937 859.807.937 Investment Expense (*) (337.531.234) (337.531.234) Other (**) (41.660.528) (41.660.528) Net income before tax 231.130.840
Income tax (46.934.214) (46.934.214)
Net income 184.196.626
(*) Investment income transferred to non-technical section from technical section amounting to TL 542.114.497 is not included. (**) Deferred tax income amounting TL 5.702.299 is presented as income tax.
Anadolu Sigorta 2017 Annual Report 167 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Fire and Motor third Motor natural party liability Health vehicles disasters Other Unallocated Total
January 1 - December 31, 2016 1- Earned Premiums (Net of Reinsurer Share) 1.227.755.087 344.782.017 885.913.041 274.182.843 419.595.214 -- 3.152.228.202 1.1- Written Premiums (Net of Reinsurer Share) 1.419.110.799 377.422.354 895.629.815 312.094.631 443.071.056 -- 3.447.328.655 1.2- Change in Reserve for Unearned Premiums (Net of Reinsurer Shares and Less the Amounts Carried Forward) (191.355.712) (32.640.337) (9.716.774) (37.911.788) (29.396.525) -- (301.021.136) 1.3- Change in Reserve for Unexpired Risks (Net of Reinsurer Share and Less the Amounts Carried Forward) ------5.920.683 -- 5.920.683 2- Other Technical Income (Net of Reinsurer Share) 47.999 218.979 3.528.594 (37.092) 19.218 -- 3.777.698 3- Accrued Salvage and Subrogation Income 18.638.929 -- 4.412.959 5.005.892 3.321.026 -- 31.378.806 Technical income (*) 1.246.442.015 345.000.996 893.854.594 279.151.643 422.935.458 -- 3.187.384.706
1- Incurred Losses (Net of Reinsurer Share) (1.124.709.925) (280.614.505) (617.259.111) (211.289.305) (291.481.026) -- (2.525.353.872) 1.1- Claims Paid (Net of Reinsurer Share) (660.042.471) (278.052.934) (612.141.869) (132.643.690) (185.135.591) -- (1.868.016.555) 1.2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward) (464.667.454) (2.561.571) (5.117.242) (78.645.615) (106.345.435) -- (657.337.317) 2- Change in Other Technical Reserves (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- (5.280.491) (18.587.421) (4.014.167) -- (27.882.079) 3- Operating Expenses (269.946.353) (73.163.671) (211.669.248) (84.373.193) (103.394.274) -- (742.546.739) 4- Other Technical Provisions (22.900.231) (9.950.488) (58.110.456) (16.389.358) (6.536.827) -- (113.887.360) Technical expense (1.417.556.509) (363.728.664) (892.319.306) (330.639.277) (405.426.294) -- (3.409.670.050)
Investment Income 487.727.181 487.727.181 Investment Expense (*) (125.245.042) (125.245.042) Other (**) (36.173.421) (36.173.421) Net income before tax 104.023.374
Income tax (16.156.051) (16.156.051)
Net income 87.867.323
(*) Investment income transferred to non-technical section from technical section amounting to TL 379.849.157 is not included. (**) Deferred tax income amounting TL 7.160.762 is presented as income tax.
168 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
6 Tangible assets
Movements in tangible assets in the period of January 1 - December 31, 2017 are presented below: January 1, Valuation December 31, 2017 Additions Disposal Differences 2017
Cost: Investment properties (Note 7) 62.175.000 39.136 -- 2.000.864 64.215.000 Buildings for own use 12.372.253 -- -- 1.022.747 13.395.000 Machinery and equipment 49.033.797 8.204.174 (280.754) -- 56.957.217 Furniture and fixtures 13.717.551 394.797 (118.850) -- 13.993.498 Motor vehicles 619.736 -- (329.156) -- 290.580 Other tangible assets (including leasehold improvements) 22.982.418 922.014 (417.594) -- 23.486.838 Leased tangible assets 3.868.337 -- (10.263) -- 3.858.074 164.769.092 9.560.121 (1.156.617) 3.023.611 176.196.207 Accumulated depreciation: Buildings for own use 58.683 109.441 -- (158.435) 9.689 Machinery and equipment 33.541.297 6.486.538 (270.968) -- 39.756.867 Furniture and fixtures 10.375.795 974.653 (117.718) -- 11.232.730 Motor vehicles 397.036 80.487 (255.072) -- 222.451 Other tangible assets (including leasehold improvements) 13.838.190 3.814.142 (417.595) -- 17.234.737 Leased tangible assets 3.868.337 -- (10.263) -- 3.858.074 62.079.338 11.465.261 (1.071.616) (158.435) 72.314.548
Net book value 102.689.754 103.881.659
The Company’s property for own use is valuated over fair value as of 2016 and 2015 year-end and subjected to valuation in this context. Expertise reports regarding this property are prepared by CMB licenced Property Valuation Company in December 2016. There is no any pledge over Company’s property for own use.
As of December 31, 2017 and December 31, 2016, property for own use’s fair value (except VAT) and net book value is as following: Net Book Value Net Book Value (December 31, (December 31, Landings and buildings for own use Expertise date Expertise value 2017) 2016)
İzmir Regional Office December 2017 7.500.000 7.494.105 8.669.647 Adana Regional Office December 2017 1.835.000 1.833.762 1.825.031 Lefkoşe Kıbrıs Branch December 2017 2.775.000 2.774.620 706.286 Adana Office December 2017 425.000 424.709 454.719 Others December 2017 860.000 858.115 657.887
Total 13.395.000 13.385.311 12.313.570
Anadolu Sigorta 2017 Annual Report 169 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Fair value measurement
Fair value of landings and buildings for own use is determined by equivalence value method. Fair value measurement of landings and buildings for own use those fair value is determined by equivalence value method is reclassified as Level 2.
Movements in tangible assets in the period of January 1 - December 31, 2016 are presented below: January 1, Valuation December 31, 2016 Additions Disposal Differences 2016
Cost: Investment properties (Note 7) 54.343.600 9.243 (65.000) 7.887.157 62.175.000 Buildings for own use 11.532.400 103.958 -- 735.895 12.372.253 Machinery and equipment 41.909.394 8.714.053 (1.589.650) -- 49.033.797 Furniture and fixtures 12.253.700 1.922.765 (458.914) -- 13.717.551 Motor vehicles 619.736 ------619.736 Other tangible assets (including leasehold improvements) 20.322.655 2.659.763 -- -- 22.982.418 Leased tangible assets 4.166.354 -- (298.017) -- 3.868.337 145.147.839 13.409.782 (2.411.581) 8.623.052 164.769.092 Accumulated depreciation: Buildings for own use 33.579 101.901 -- (76.798) 58.682 Machinery and equipment 29.623.190 5.481.559 (1.563.452) -- 33.541.297 Furniture and fixtures 9.976.214 842.285 (442.703) -- 10.375.796 Motor vehicles 280.232 116.804 -- -- 397.036 Other tangible assets (including leasehold improvements) 10.206.266 3.631.924 -- -- 13.838.190 Leased tangible assets 4.166.354 -- (298.017) -- 3.868.337 54.285.835 10.174.473 (2.304.172) (76.798) 62.079.338
Net book value 90.862.004 102.689.754
There is not any mortgage over tangible assets of the Company as of December 31, 2017 and 2016.
7 Investment properties
Additions and disposals for investment properties is given “6- Tangible Assets” note in table of current period movement of tangible assets.
Investment property is presented by fair value method as of December 31, 2017 and December 31, 2016 on balance sheet.
The Company’s investment property expertise report prepared by independent professional valuation specialists authorized by Capital Markets Board. As of December 31, 2017, the Company has gained the rent income from investment properties amounting to TL 1.866.261 (December 31, 2016: TL 1.695.904).
The expertise (excluding VAT) and net book values of investment properties are as follows on the basis of real estate. Expertise reports regarding these property is prepared by independent professional valuation specialists authorized by CMB in December 2017. There is no pledge on the real estates.
170 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Expertise and net book value Net book value Net book value Investment land and buildings December 31, 2017 December 31, 2016
Building/İzmir 31.500.000 29.325.000 Building/Mersin 19.300.000 19.500.000 Building/İzmir 10.500.000 10.400.000 Building/Bursa 2.220.000 2.140.000 Building/Adana 625.000 650.000 Other 70.000 160.000
Expertise and net book value 64.215.000 62.175.000
Fair value measurement
Fair value of investment property is determined by equivalence value method. Fair value measurement of investment property those fair value is determined by equivalence value method is reclassified as Level 2.
8 Intangible assets
Movements in intangible assets in the period of January 1 - December 31, 2017 are presented below: January 1, December 31, 2017 Additions Transfers Disposal 2017
Cost: Goodwill 16.250.000 ------16.250.000 Advances given for intangible assets 11.732.239 19.281.847 (6.012.500) -- 25.001.586 Other intangible assets 111.110.866 3.491.699 6.012.500 (36.399) 120.578.666 139.093.105 22.773.546 -- (36.399) 161.830.252 Accumulated amortization: Other intangible assets 83.756.830 16.615.756 -- (35.335) 100.337.251 83.756.830 16.615.756 -- (35.335) 100.337.251
Net book value 55.336.275 -- -- 61.493.001
Movements in tangible assets in the period of January 1 - December 31, 2016 are presented below: January 1, Transfers December 31, 2016 Additions Transfers Disposal 2016
Cost: Goodwill 16.250.000 ------16.250.000 Advances given for intangible assets 9.435.347 17.256.440 (14.959.548) -- 11.732.239 Other intangible assets 93.201.169 3.028.586 14.959.548 (78.437) 111.110.866 118.886.516 20.285.026 -- (78.437) 139.093.105 Accumulated amortization: Other intangible assets 66.877.216 16.938.782 -- (59.168) 83.756.830 66.877.216 16.938.782 -- (59.168) 83.756.830
Net book value 52.009.300 55.336.275
Anadolu Sigorta 2017 Annual Report 171 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
9 Investments in associates December 31, 2017 December 31, 2016 Net book Participation Net book Participation value rate value rate Anadolu Hayat Emeklilik A.Ş. 689.720.000 20,0% 427.420.000 20,0% Investments in associates, net 689.720.000 427.420.000
Total financial assets (Note 4.2) 689.720.000 427.420.000
Shareholders’ Retained Profit for the Audited or Name Total assets equity earnings period not Period Anadolu Hayat Emeklilik A.Ş. December 31, (consolidated) 17.884.757.726 934.122.932 102.405.178 226.591.810 Audited 2017
The Company has TL 28.000.000 of dividend income from subsidiaries.
10 Reinsurance assets and liabilities
As of December 31, 2017 and December 31, 2016, reinsurance assets and liabilities of the Company in accordance with existing reinsurance contracts are as follows: Reinsurance assets December 31, 2017 December 31, 2016
Provision for outstanding claims, ceded (Note 4.2), (Note 17) 640.756.720 487.012.275 Reserve for unearned premiums, ceded (Note 17) 610.721.482 400.082.643 Reserve for unexpired risks, ceded (Note 17) 24.105.605 3.455.888 Cash deposited to reinsurance companies (Note 12) 29.650.034 12.604.316 Reinsurers share in the provision for subrogation and salvage receivables 15.182 252.027 Commission income accrual from reinsurers -- -- Total 1.305.249.023 903.407.149
There is no impairment losses recognised for reinsurance assets. Reinsurance liabilities December 31, 2017 December 31, 2016
Payables to the reinsurers related to premiums written (Note 19) 267.629.697 259.564.344 Deferred commission income (Note 19) 95.718.017 58.640.768 Commission payables to the reinsurers related to written premiums (Note 23) -- 7.963.322 Cash deposited by reinsurance companies (Note 19) 8.573.616 5.624.583 Total 371.921.330 331.793.017
172 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Gains and losses recognized in the statement of income in accordance with existing reinsurance contracts are as follows: December 31, 2017 December 31, 2016
Premiums ceded during the period (Note 17) (1.289.191.554) (885.937.607) Reserve for unearned premiums, ceded at the beginning of the period (Note 17) (400.082.643) (341.649.490) Reserve for unearned premiums, ceded at the end of the period (Note 17) 610.721.482 400.082.643 Premiums earned, ceded (Note 17) (1.078.552.715) (827.504.454)
Claims paid, ceded during the period (Note 17) 603.127.311 367.998.753 Provision for outstanding claims, ceded at the beginning of the period (Note 17) (487.012.275) (493.070.874) Provision for outstanding claims, ceded at the end of the period (Note 17) 640.756.720 487.012.275 Claims incurred, ceded (Note 17) 756.871.756 361.940.154
Commission income accrued from reinsurers during the period 207.894.486 121.039.356 Deferred commission income at the beginning of the period 58.640.768 54.662.842 Deferred commission income at the end of the period (95.718.017) (58.640.768) Commission income earned from reinsurers 170.817.237 117.061.430
Commission debt accrued to reinsurers -- (7.963.322) Commission receivable accrued from reinsurers -- -- Total, net (150.863.722) (356.466.192)
The movement of commission debt as a result of reinsurance operations of the Company are as follows::
December 31, 2017 December 31, 2016
Commission debt accrued from reinsurers during the period (66.798.761) (51.849.653) Deferred commission debt at the beginning of the period (20.356.072) (14.509.831) Deferred comission debt at the end of the period 20.439.155 20.356.072 Commission debt from reinsurance operations (66.715.678) (46.003.412)
11 Financial assets
As of December 31, 2017 and December 31, 2016, financial assets of the Company are as follows: December 31, 2017 December 31, 2016
Available for sale financial assets 755.985.190 605.652.540 Financial assets held for trading 347.535.150 127.881.004 Held to maturity financial assets -- 15.172.182 Impairment loss on available for sale financial assets -- (95.942) Total 1.103.520.340 748.609.784
Anadolu Sigorta 2017 Annual Report 173 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
As of December 31, 2017 and December 31, 2016, the details of the Company’s available for sale financial assets are as follows: December 31, 2017 Nominal Fair Net book value Cost value value
Debt instruments: Government bonds - TL 199.959.655 191.554.949 194.168.489 194.168.489 Private sector bonds - TL 88.510.000 88.510.000 90.244.264 90.244.264 Issued by İş Gayrimenkul Yatırım Ortaklığı A.Ş. (Note 45) 15.000.000 15.000.000 15.302.769 15.302.769 Others 73.510.000 73.510.000 74.941.495 74.941.495 Government bonds - USD 62.613.540 71.044.346 67.019.381 67.019.381 Private sector bonds - USD 65.517.903 65.746.944 66.653.340 66.653.340 416.601.098 416.856.239 418.085.474 418.085.474
Other non-fixed income financial assets: Investment funds 7.931.904.848 200.280.307 226.163.762 226.163.762 Issued by İş Portföy Yönetimi A.Ş (Note 45) 7.931.904.848 200.280.307 226.163.762 226.163.762 Equity shares 73.877.269 89.082.777 111.735.954 111.735.954 Provision for losses on equity shares ------8.005.782.117 289.363.084 337.899.716 337.899.716
Total available for sale financial assets (Note 4.2) 8.422.383.215 706.219.323 755.985.190 755.985.190
December 31, 2016 Nominal Fair Net book value Cost value value
Debt instruments: Government bonds - TL 238.176.176 231.057.437 236.128.110 236.128.110 Private sector bonds - TL 35.580.000 35.580.863 36.312.418 36.312.418 Issued by İş Gayrimenkul Yatırım Ortaklığı A.Ş. (Note 45) 15.000.000 15.000.000 15.543.150 15.543.150 Others 20.580.000 20.580.863 20.769.268 20.769.268 Government bonds - USD 57.714.880 65.861.358 65.275.454 65.275.454 Private sector bonds - USD 61.656.384 61.591.055 62.586.329 62.586.329 Issued by Türkiye Sınai Kalkınma Bankası A.Ş. (Note 45) 6.897.632 6.985.364 7.050.254 7.050.254 Others 54.758.752 54.605.691 55.536.075 55.536.075 393.127.440 394.090.713 400.302.311 400.302.311
Other non-fixed income financial assets: Investment funds 2.196.392.646 91.851.625 100.563.559 100.563.559 Issued by İş Portföy Yönetimi A.Ş (Note 45) 2.196.392.646 91.851.625 100.563.559 100.563.559 Equity shares 66.438.199 79.353.281 104.786.670 104.786.670 Provision for losses on equity shares -- -- (95.942) (95.942) 2.262.830.845 171.204.906 205.254.287 205.254.287
Total available for sale financial assets (Note 4.2) 2.655.958.285 565.295.619 605.556.598 605.556.598
174 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
As of December 31, 2017 and December 31, 2016, financial assets held for trading of the Company are as follows: December 31, 2017 Nominal Fair Net book value Cost value value
Debt instruments: Other - TL -- 23.219.811 23.241.814 23.241.814 -- 23.219.811 23.241.814 23.241.814
Other non-fixed income financial assets: Investment funds 287.438.209 220.387.100 266.365.506 266.365.506 Issued by İş Portföy Yönetimi A.Ş. (Note 45) 287.348.078 212.583.100 248.926.193 248.926.193 Issued by İşbank AG (Note 45) 90.131 7.804.000 17.439.313 17.439.313 Equity shares 6.322.383 45.337.430 48.346.198 48.346.198 Derivatives -- 9.570.458 9.581.632 9.581.632 293.760.592 275.294.988 324.293.336 324.293.336
Total financial assets held for trading (Note 4.2) 293.760.592 298.514.799 347.535.150 347.535.150
December 31, 2016 Nominal Fair Net book value Cost value value
Debt instruments: Government bonds - TL 900.000 902.576 913.243 913.243 Other - TL 4.306.508 4.308.334 4.308.334 900.000 5.209.084 5.221.577 5.221.577 Other non-fixed income financial assets: Investment funds 3.099.336.845 55.064.774 78.225.348 78.225.348 Issued by İş Portföy Yönetimi A.Ş. (Note 45) 3.099.246.714 47.260.774 66.344.974 66.344.974 Issued by İşbank AG (Note 45) 90.131 7.804.000 11.880.374 11.880.374 Equity shares 12.318.597 37.936.869 37.784.443 37.784.443 Derivatives -- 6.646.566 6.649.636 6.649.636 3.111.655.442 99.648.209 122.659.427 122.659.427
Total financial assets held for trading (Note 4.2) 3.112.555.442 104.857.293 127.881.004 127.881.004
Anadolu Sigorta 2017 Annual Report 175 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
As of December 31, 2017 and December 31, 2016, financial assets held to maturity of the Company are as follows: December 31, 2017 Nominal Fair Net book value Cost value value
Debt instruments: Government bonds - TL ------Total financial assets held to maturity ------
December 31, 2016 Nominal Fair Net book value Cost value value
Debt instruments: Government bonds - TL 14.866.200 14.870.978 15.168.262 15.172.182 Total financial assets held to maturity 14.866.200 14.870.978 15.168.262 15.172.182
All debt instruments (financial assets held to maturity) presented above are publicly traded in stock markets.
As of December 31, 2017, equity shares classified as available for sale financial assets with a net book value of TL 1.516.374 are not publicly traded (December 31, 2016: TL 1.059.970).
There is no debt security issued during the period or issued before and paid during the period by the Company.
There is no financial asset that is overdue but not impaired among the Company’s financial investments portfolio. As of December 31, 2017, there is no impairment loss is recognised for equity shares classified as available for sale in the accompanying unconsolidated financial statements (December 31, 2016: TL 95.942).
Value increases in financial assets including equity shares classified as available for sale financial assets for the last 3 years (including tax effects): Year Change in value increase Total increase in value
2017 265.172.008 629.061.481 2016 (66.774.092) 363.889.473 2015 93.996.749 430.663.565
Movements of the financial assets during the period are presented below: December 31, 2017 Available for Held to Trading(*) sale maturity Total Balance at the beginning of the period 123.572.670 605.556.598 15.172.182 744.301.450 Acquisitions during the period 501.264.684 408.599.876 -- 909.864.560 Disposals (sale and redemption) (346.680.646) (319.441.107) (15.185.823) (681.307.576) Change in the fair value of financial assets (Note 15) 45.938.579 54.217.714 -- 100.156.293 Change in amortized cost of the financial assets -- -- 13.641 13.641 Bonus shares acquired 198.049 7.052.109 -- 7.250.158 Balance at the end of the period 324.293.336 755.985.190 -- 1.080.278.526
(*) The amount of other in financial assets held for trading to TL 23.241.814 (December 31, 2016: TL 4.308.334) are excluded.
176 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
December 31, 2016 Available for Held to Trading(*) sale maturity Total Balance at the beginning of the period 84.344.108 569.025.164 15.555.214 668.924.486 Acquisitions during the period 243.494.173 599.866.185 -- 843.360.358 Disposals (sale and redemption) (216.906.226) (626.556.811) (1.513.379) (844.976.416) Change in the fair value of financial assets (Note 15) 12.381.923 55.362.432 -- 67.744.355 Change in amortized cost of the financial assets -- -- 1.130.347 1.130.347 Bonus shares acquired 258.692 7.859.628 -- 8.118.320 Balance at the end of the period 123.572.670 605.556.598 15.172.182 744.301.450
(*) The amount of other in financial assets held for trading to TL 4.308.334 (December 31, 2015: TL 11.888.027) are excluded.
The detail of the financial assets given as a guarantee in favour of the Turkish Treasury for the insurance activities are as follows: December 31, 2017 Nominal Fair Net book value Cost value value
Held to maturity financial assets (Note 17) ------Total ------
December 31, 2016 Nominal Fair Net book value Cost value value
Held to maturity financial assets (Note 17) 14.866.200 14.870.978 15.168.262 15.172.182 Total 14.866.200 14.870.978 15.168.262 15.172.182
12 Loans and receivables December 31, 2017 December 31, 2016
Receivables from main operations (Note 4.2) 1.178.955.084 1.048.793.865 Other receivables (Note 4.2)(*) 21.224.166 15.540.321 Income accruals (Note 4.2), (Note 10) 19.928.671 4.358.898 Other current assets (Note 4.2) 493.641 185.836 Total 1.220.601.562 1.068.878.920
Short-term receivables 1.218.395.858 1.067.129.558 Long and medium-term receivables 2.205.704 1.749.362 Total 1.220.601.562 1.068.878.920
(*) As of December 31, 2017, other receivables amounting to TL 21.224.166 (December 31, 2016: TL 15.540.321) comprise of receivables from DASK and TARSİM amounting to TL 12.319.158 (December 31, 2016: TL 6.941.215) and other miscellaneous receivables amounting to TL 8.905.008 (December 31, 2016: TL 8.599.106).
Anadolu Sigorta 2017 Annual Report 177 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
As of December 31, 2017 and December 31, 2016, the details of the receivables from main operations are as follows: December 31, 2017 December 31, 2016
Receivables from agencies, brokers and intermediaries 884.442.432 786.165.652 Salvage and subrogation receivables 50.653.264 47.016.782 Receivables from policyholders 31.786.329 46.488.848 Long term receivable which is bank guarantee and three months credit card 107.556.543 105.184.248 Total receivables from insurance operations, net 1.074.438.568 984.855.530
Receivables from reinsurance operations 83.203.501 60.170.605 Cash deposited to insurance and reinsurance companies (Note 4.2), (Note 10) 29.650.034 12.604.316 Provisions for receivables from insurance operations - subrogation receivables (8.337.019) (8.836.586) Doubtful receivables from insurance operations - subrogation receivables 196.394.800 159.550.493 Provisions for doubtful receivables from insurance operations - subrogation receivables (Note 4.2) (196.394.800) (159.550.493) Doubtful receivables from main operations - premium receivables 29.830.936 29.310.469 Provisions for doubtful receivables from main operations - premium receivables ( Note 4.2) (29.830.936) (29.310.469) Receivables from main operations 1.178.955.084 1.048.793.865
As of December 31, 2017 and December 31, 2016, the details of mortgages and other guarantees for the Company’s receivables are presented below: December 31, 2017 December 31, 2016
Letters of guarantees 105.463.663 103.289.621 Mortgages notes 83.516.803 80.884.673 Other guarantees 50.299.983 47.293.518 Government bonds and treasury bills 3.028.656 2.902.263 Total 242.309.105 234.370.075
Provisions for overdue receivables and receivables not due yet a) Receivables under legal or administrative follow up (due): TL 29.830.936 (December 31, 2016: TL 29.310.469). b) Provision for subrogation receivables under legal or administrative follow up: TL 204.731.819 (December 31, 2016: TL 168.387.079).
The Company’s receivables from and payables to shareholders, associates and subsidiaries are detailed in note 45 - Related party transactions.
The details of the receivables and payables denominated in foreign currencies and foreign currency rates used for the translation are presented in Note 4.2- Financial risk management.
13 Derivative financial instruments
As of December 31, 2017, the Company has a derivative financial instruments recognized in the financial assets held for trading amounting to TL 9.581.631 (December 31, 2016: TL 6.649.637). As of December 31, 2017 the Company has express warranty in derivative instruments amounting to TL 5.818.015 (December 31, 2016: None).
As of December 31, 2017, the Company has accounted in income accruals and other financial liabilities amounting to TL 18.939.649 (December 31, 2016: None) that is increase in value and TL (7.868.067) (December 31, 2016: None) that is decrease in value respectively, due to forward foreign currency agreement.
178 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
14 Cash and cash equivalents
As of December 31, 2017 and December 31, 2016, the details of the cash and cash equivalents are as follows: December 31, 2017 December 31, 2016 At the end of the At the beginning At the end of the At the beginning period of the period period of the period
Cash on hand 62.857 35.109 35.109 18.864 Bank deposits 3.105.334.647 2.795.907.111 2.795.907.111 1.937.834.876 Cheques given and payment orders (87.620) (82.544) (82.544) (125.585) Bank guaranteed credit card receivables with maturities less than three months 399.367.075 421.604.151 421.604.151 367.176.057 Cash and cash equivalents in the balance sheet 3.504.676.959 3.217.463.827 3.217.463.827 2.304.904.212
Bank deposits - blocked (*) (Note 17) (483.582.942) (399.688.896) (399.688.896) (340.277.623) Time deposits with maturities longer than 3 months (894.215.799) (933.084.218) (933.084.218) (287.914.280) Interest accruals on banks deposits (5.641.962) (12.217.858) (12.217.858) (6.510.620) Cash and cash equivalents in the statement of cash flows 2.121.236.256 1.872.472.855 1.872.472.855 1.670.201.689
(*) As of December 31, 2017 and December 31, 2016, bank deposits in cash and cash equivalents has been kept in favour of the Turkish Treasury as a guarantee for the insurance activities.
As of December 31, 2017 and December 31, 2016, the details of the bank deposits are as follows: December 31, 2017 December 31, 2016
Foreign currency denominated bank deposits - time deposits 2.021.413.753 134.723.526 - demand deposits 4.690.121 4.564.342
Bank deposits in Turkish Lira - time deposits 1.066.799.973 2.646.962.790 - demand deposits 12.430.800 9.656.453 Bank deposits 3.105.334.647 2.795.907.111
15 Equity
Paid in capital
The shareholder having direct or indirect control over the shares of the Company is İş Bankası Group.
The Company does not increase its share capital in the current period.
As of December 31, 2017, the issued share capital of the Company is TL 500.000.000 (December 31, 2016: TL 500.000.000) and the Company unregistered Group 150 A shares which each of value is TL 1,5 as of April 11, 2013 in which approved in Main Article of the Company dated in April 11, 2013. The share capital of the Company consists of 50.000.000.000 (December 31, 2016: TL 50.000.000.000 shares) issued shares with TL 1 nominal value each.
Anadolu Sigorta 2017 Annual Report 179 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Other capital reserves
In accordance with tax legislation, 75% of profits from sales of participation shares and real states included in the assets of companies is exempt from corporate tax provided that it is classified under a special fund for full five years. The exempt gains cannot be transferred to another account other than a capital increase or cannot be withdrawn from the entity for five years. As of December 31, 2017, the tax exempt which obtained thanks to sale of participation shares and real estate in 2010, 2011, 2013, 2014, 2015 and 2016 years respectively, amounting to TL 8.081.516, TL 80.025, TL 647.763, TL 920.272, TL 2.541.500 and TL 15.094 is classified as other capital reserves. December 31, 2017 December 31, 2016
Other capital reserves at the beginning of the period 29.200.961 25.887.403 Transfer from profit 15.094 2.541.500 Use property revaluation fund(Note 6) 172.018 772.059 Other capital reserves at the end of the period 29.388.073 29.200.961
Legal reserves
The legal reserves consist of first and second legal reserves in accordance with the Turkish Commercial Code. The first legal reserve is appropriated out of the statutory profits at the rate of 5%, until the total reserve reaches a maximum of 20% of the entity’s share capital. The second legal reserve is appropriated at the rate of 10% of all distributions in excess of 5% of the entity’s share capital. The first and second legal reserves are not available for distribution unless they exceed 50% of the share capital, but may be used to absorb losses in the event that the general reserve is exhausted.
The movement of legal reserves are presented below: December 31, 2017 December 31, 2016
Legal reserves at the beginning of the period 37.374.983 34.311.746 Transfer from profit 5.095.744 3.063.237 Legal reserves at the end of the period 42.470.727 37.374.983
Extraordinary reserves
The movement of extraordinary reserves are presented below: December 31, 2017 December 31, 2016
Extraordinary reserves at the beginning of the period 113.109.908 60.728.553 Transfer from profit 45.582.326 52.381.355 Extraordinary reserves at the end of the period 158.692.234 113.109.908
Statutory reserves
The movement of statutory reserves are presented below: December 31, 2017 December 31, 2016
Statutory reserves at the beginning of the period 17.547.144 11.726.993 Transfer from profit 5.142.829 5.820.151 Statutory reserves at the end of the period 22.689.973 17.547.144
180 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Valuation of financial assets
The movements of valuation differences related available for sale financial assets and associates are presented below: December 31, 2017 December 31, 2016 Available for Available for sale financial sale financial assets Associates Total assets Associates Total Valuation difference at the beginning of the period 27.501.341 336.388.132 363.889.473 22.415.433 408.248.132 430.663.565
Change in the fair value 12.147.442 290.300.000 302.447.442 3.362.861 (47.860.000) (44.497.139) Net gains transferred to the statement of income (7.896.672) (28.000.000) (35.896.672) 4.104.171 (24.000.000) (19.895.829) Deferred tax effect (1.378.762) -- (1.378.762) (2.381.124) -- (2.381.124) Valuation difference at the end of the period 30.373.349 598.688.132 629.061.481 27.501.341 336.388.132 363.889.473
Other profit reserves
In accordance with the July 4, 2007 dated and 2007/3 numbered Compliance Circular issued by the Turkish Treasury, it was stated that the companies would not further provide earthquake provision for the year 2007. However, it was also stated that earthquake provisions provided in previous periods (earthquake provision in the financial statements as of December 31, 2006) should be transferred to the reserve accounts under equity in accordance with the 5th Temporary Article of the Insurance Law. The companies had to transfer total amount of provisions, including earthquake provisions reserved as of December 31, 2006 and related gains obtained from investment of these amounts, to the account called as “549.01 - transferred earthquake provisions” which would be opened as of September 1, 2007 within Uniform Chart of Account and the reserves amount should not be subject to dividend distribution or should not be transferred to other accounts.
Accordingly, the Company initially transferred total provisions amounting to TL 96.036.157 including earthquake provisions reserved as of December 31, 2006 and related gains obtained from investment of this amount, to the reserve accounts under equity, TL 51.846.111 of this amount is used for capital increase in 2010. As of December 31, 2017, accordance with IAS 19, to add the amount of actuarial loss and net profit of TL (1.668.221) defined remeasure net profit debt, the amount of new balance is TL 40.920.379.
Profit on assets sale that will be transferred to capital
In accordance with tax legislation, 75% of profits from sales of participation shares and real states included in the assets of companies is exempt from corporate tax provided that it is classified under a special fund for full five years. The exempt gains cannot be transferred to another account other than a capital increase or cannot be withdrawn from the entity for five years.
16 Other reserves and equity component of discretionary participation feature
As of December 31, 2017 and December 31, 2016, change in fair values of available-for-sale financial assets which is presented as “valuation of financial assets” and earthquake provisions provided in the previous years presented under “other profit reserves” are explained in detail in Note 15 - Equity above. As of December 31, 2017 and December 31, 2016, the Company does not hold any insurance or investment contracts which contain a discretionary participation feature.
Anadolu Sigorta 2017 Annual Report 181 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
17 Insurance contract liabilities and reinsurance assets
Estimation of the ultimate payment for the outstanding claims is one of the most important accounting assumptions of the Company. Estimation of the insurance contract liabilities contains several ambiguities by nature. The Company makes calculation of the related insurance technical provisions accordance with the Insurance Legislation and reflects them into financial statements as mentioned in Note 2 - Summary of significant accounting policy.
As of December 31, 2017 and December 31, 2016, technical reserves of the Company are as follows: December 31, 2017 December 31, 2016
Reserve for unearned premiums, gross 2.349.673.619 2.228.090.805 Reserve for unearned premiums, ceded (Note 10) (610.721.482) (400.082.643) Reserve for unearned premiums, SSI share (58.817.233) (75.059.218) Reserves for unearned premiums, net 1.680.134.904 1.752.948.944
Provision for outstanding claims, gross 3.245.443.076 2.530.257.134 Provision for outstanding claims, ceded (Note 10) (640.756.720) (487.012.275) Provision for outstanding claims, net 2.604.686.356 2.043.244.859
Gross of reserve for unexpired risk 47.086.775 4.020.419 Reinsurer’s share of the reserve for unexpired risk (24.105.605) (3.455.888) Provision unexpired risk reserve, net 22.981.170 564.531
Equalization provision, net 140.939.211 109.427.806 General provision, net (*) 7.702.760 7.702.761 Other technical provisions, net 148.641.971 117.130.567
Total technical provisions, net 4.456.444.401 3.913.888.901
Short-term 4.307.802.430 3.796.758.334 Medium and long-term 148.641.971 117.130.567 Total technical provisions, net 4.456.444.401 3.913.888.901
(*) It contains a provision which has been reflected in the prior financial statements amounting TL 7.702.761 due to the possible impact of adverse developments that may occur by company’s management.
As of December 31, 2017 and 2016, the movements of the insurance liabilities and related reinsurance assets are presented below: December 31, 2017 Reserve for unearned premiums Gross Ceded SSI share Net
Reserve for unearned premiums at the beginning of the period 2.228.090.805 (400.082.643) (75.059.218) 1.752.948.944 Premiums written during the period 4.671.409.652 (1.289.191.554) (109.231.373) 3.272.986.725 Premiums earned during the period (4.549.826.838) 1.078.552.715 125.473.358 (3.345.800.765) Reserve for unearned premiums at the end of the period 2.349.673.619 (610.721.482) (58.817.233) 1.680.134.904
182 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
December 31, 2016 Reserve for unearned premiums Gross Ceded SSI share Net
Reserve for unearned premiums at the beginning of the period 1.848.552.863 (341.649.490) (54.975.565) 1.451.927.808 Premiums written during the period 4.484.060.267 (885.937.607) (150.794.005) 3.447.328.655 Premiums earned during the period (4.104.522.325) 827.504.454 130.710.352 (3.146.307.519) Reserve for unearned premiums at the end of the period 2.228.090.805 (400.082.643) (75.059.218) 1.752.948.944
December 31, 2017 Provision for outstanding claims Gross Ceded Net
Provision for outstanding claims at the beginning of the period 2.530.257.134 (487.012.275) 2.043.244.859 Claims reported during the period and changes in the estimations of provisions for outstanding claims provided at the beginning of the period 3.471.137.076 (756.871.756) 2.714.265.320 Claims paid during the period (2.755.951.134) 603.127.311 (2.152.823.823) Provision for outstanding claims at the end of the period 3.245.443.076 (640.756.720) 2.604.686.356
December 31, 2016 Provision for outstanding claims Gross Ceded Net
Provision for outstanding claims at the beginning of the period 1.878.978.416 (493.070.874) 1.385.907.542 Claims reported during the period and changes in the estimations of provisions for outstanding claims provided at the beginning of the period 2.887.294.026 (361.940.154) 2.525.353.872 Claims paid during the period (2.236.015.308) 367.998.753 (1.868.016.555) Provision for outstanding claims at the end of the period 2.530.257.134 (487.012.275) 2.043.244.859
December 31, 2017 Reserve for unexpired risk Gross Ceded Net
Reserve for unexpired risk at the beginning of the period 4.020.419 (3.455.888) 564.531 Change in the reserve during the current period 43.066.356 (20.649.717) 22.416.639 Reserve for unexpired risk at the end of the period 47.086.775 (24.105.605) 22.981.170
December 31, 2016 Reserve for unexpired risk Gross Ceded Net
Reserve for unexpired risk at the beginning of the period 18.531.889 (12.046.675) 6.485.214 Change in the reserve during the current period (14.511.470) 8.590.787 (5.920.683) Reserve for unexpired risk at the end of the period 4.020.419 (3.455.888) 564.531
Reserve for equalization December 31, 2017 December 31, 2016
Reserve for equalization at the beginning of the period 109.427.807 81.545.728 Provision added during the period 31.511.404 27.882.079 Reserve for equalization at the end of the period 140.939.211 109.427.807
Anadolu Sigorta 2017 Annual Report 183 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Claim development tables
The basic assumption used in the estimation of provisions for outstanding claims is the Company’s past experience on claim developments. Judgment is used to assess the extent to which external factors such as judicial decisions and government legislation affect the estimates. The sensitivity of certain assumptions like legislative change, uncertainty in the estimation process, etc., is not possible to quantify. Furthermore, because of delays that arise between occurrence of a claim and its subsequent notification and eventual settlement, the outstanding claim provisions are not known with certainty at the reporting date. Consequently, the ultimate liabilities will vary as a result of subsequent developments. Differences resulting from reassessment of the ultimate liabilities are recognized in subsequent financial statements.
Development of insurance liabilities enables to measure the performance of the Company in estimation of its ultimate claim losses. The amounts presented on the top of the below tables show the changes in estimations of the Company for the claims in subsequent years after claim years. The amounts presented on the below of the below tables give the reconciliation of total liabilities with provision for outstanding claims presented in the accompanying financial statements. December 31, 2017 Claim year 2013 2014 2015 2016 2017 Total Claim year 1.298.328.138 1.781.130.181 2.285.927.435 2.452.778.738 3.147.733.176 10.965.897.668 1 year later 1.460.991.580 2.021.374.527 2.641.719.915 2.738.090.023 -- 8.862.176.045 2 years later 1.516.454.976 2.149.439.498 2.748.295.814 -- -- 6.414.190.288 3 years later 1.592.457.529 2.220.685.091 ------3.813.142.620 4 years later 1.637.662.009 ------1.637.662.009 Current estimate of cumulative claims 1.637.662.009 2.220.685.091 2.748.295.814 2.738.090.023 3.147.733.176 12.492.466.113 Cumulative payments to date 1.399.424.005 1.832.865.427 2.315.870.882 2.142.238.748 2.106.774.810 9.797.173.872 Provision recognized in the financial statements 238.238.004 387.819.664 432.424.932 595.851.275 1.040.958.366 2.695.292.241 Provision recognized in the financial statements before 2012 ------550.150.835 Total gross outstanding claims presented in the financial statements at the end of the period 3.245.443.076
December 31, 2016 Claim year 2012 2013 2014 2015 2016 Total Claim year 1.452.242.590 1.166.111.441 1.579.079.025 2.055.249.641 2.235.157.937 8.487.840.634 1 year later 1.500.150.686 1.236.902.235 1.727.739.052 2.308.062.195 -- 6.772.854.168 2 years later 1.566.813.592 1.288.090.450 1.854.104.401 -- -- 4.709.008.443 3 years later 1.640.873.624 1.364.239.034 ------3.005.112.658 4 years later 1.721.144.385 ------1.721.144.385 Current estimate of cumulative claims 1.721.144.385 1.364.239.034 1.854.104.401 2.308.062.195 2.235.157.937 9.482.707.952 Cumulative payments to date 1.447.075.951 1.159.147.418 1.506.060.346 1.838.890.991 1.357.809.330 7.308.984.036 Provision recognized in the financial statements 274.068.434 205.091.616 348.044.055 469.171.204 877.348.607 2.173.723.916 Provision recognized in the financial statements before 2011 ------356.533.218 Total gross outstanding claims presented in the financial statements at the end of the period 2.530.257.134
184 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Total amount of guarantee that should be provided by the Company for life and non-life branches and guarantees placed for the life and non-life branches in respect of related assets December 31, 2017 Amount be Net book provided (**) Provided (*) value Non-life: Bank deposits (Note 14) 483.372.018 483.582.942 Total 380.109.847 483.372.018 483.582.942
December 31, 2016 Amount be Net book provided (**) Provided (*) value Non-life: Bank deposits (Note 14) 398.452.370 399.688.896 Financial assets (*) (Note 11) 15.169.173 15.172.182 Total 359.073.153 413.621.543 414.861.078
(*) As of December 31, 2017 and December 31, 2016, government bonds and treasury bills are measured at daily official prices announced by the Central Bank of Turkey in accordance with the 6th Article of “Circular Related to the Financial Structure of Insurance, Reinsurance, and Private Pension Companies”. (**) “According to the 7th article of the “Circular Related to the Financial Structure of Insurance, Reinsurance, and Private Pension Companies” which regulates necessary guarantee amount, minimum guarantee fund for capital adequacy calculation period will be provided as a guarantee in two months following the calculation period. According to “Regulations Regarding to Capital Adequacy Measurement and Assessment of Insurance, Reinsurance, and Private Pension Companies”, companies must prepare their capital adequacy tables twice in a financial year at June and December periods and must sent capital adequacy tables to the Turkish Treasury Department within two months. Since the amounts that to be provided as of December 31, 2017 (December 31, 2016) will be through the calculated amounts as of June 30, 2017 (June 30, 2016), the settled amounts as of June is presented as “to be provided” amounts.
Company’s number of life insurance policies, additions, disposals during the period and the related mathematical reserves
None.
Distribution of new life insurance policyholders in terms of numbers and gross and net premiums as individual or group during the period
None.
Distribution of mathematical reserves for life insurance policyholders who left the Company’s portfolio as individual or group during the period
None.
Deferred commission expenses
The Company capitalizes commissions paid to the intermediaries related to policy production under short-term and long-term prepaid expenses. As of December 31, 2017, short-term prepaid expenses amounting to TL 319.260.853 (December 31, 2016: TL 316.049.141) consist of deferred commission expenses amounting to TL 281.971.139 (December 31, 2016: TL 286.562.140) and other prepaid expenses amounting to TL 37.289.714 (December 31, 2016: TL 29.487.001). Long-term prepaid expenses amounting TL 6.639.202 (December 31, 2016: TL 6.211.364) are composed of other prepaid expenses.
Anadolu Sigorta 2017 Annual Report 185 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
As of December 31, 2017 and December 31, 2016, the movements of deferred commission expenses are presented below: December 31, 2017 December 31, 2016
Deferred commission expenses at the beginning of the period 286.562.140 249.521.695 Commissions accrued during the period 618.327.570 635.988.592 Commissions expensed during the period (*) (622.893.317) (598.948.147) Deferred commission expenses at the end of the period 281.996.393 286.562.140
(*) Commission expense that accounted in reinsurance commissions are included
Individual pension funds
None.
18 Investment contract liabilities
None.
19 Trade and other payables and deferred income December 31, 2017 December 31, 2016
Financial liabilities 110.802.339 134.413.473 Payables arising from main operations 492.116.005 449.205.545 Other payables 113.563.203 82.609.754 Deferred commission income (Note 10) 95.718.017 58.640.768 Taxes and funds payable and other similar obligations 50.750.268 39.526.586 Trade payables to related parties 256.510 91.826 Total 863.206.342 764.487.952
Short-term liabilities 863.206.342 764.487.952 Medium and Long-term liabilities -- -- Total 863.206.342 764.487.952
As of December 31, 2017, other payables amounting to TL 113.563.203 (December 31, 2016: TL 82.609.754) consist of treatment cost payables to SSI amounting to TL 30.922.543 (December 31, 2016: TL 32.037.945), payables to Tarsim and DASK and outsourced benefits and services amounting to TL 76.358.578 (December 31, 2016: TL 45.085.032) and deposits and guarantees received amounting to TL 6.282.082 (December 31, 2016: TL 5.486.777).
The detail of payables arising from main operations of the Company as of December 31, 2017 and December 31, 2016 are as follows: December 31, 2017 December 31, 2016
Payables to reinsurance companies (Note 10) 267.629.697 259.564.344 Payables to agencies, brokers and intermediaries 44.147.545 41.204.604 Total payables arising from insurance operations 311.777.242 300.768.948
Payables arising from other operating activities 171.765.147 142.812.014 Cash deposited by insurance and reinsurance companies (Note 10) 8.573.616 5.624.583 Payables arising from main operations 492.116.005 449.205.545
186 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Corporate tax liabilities and prepaid taxes are disclosed below: December 31, 2017 December 31, 2016
Prepaid taxes 44.914.337 35.757.908 Provision of calculated corporate tax (52.636.513) (23.316.813) Corporate tax assets/(liabilities), net (7.722.176) 12.441.095
Total amount of investment incentives which will be benefited in current and forthcoming periods
None.
20 Financial liabilities
As of December 31, 2017, The Company has financial liabilities which is occurred repurchase agreement TL 164.422.009 (December 31, 2016: TL 134.413.473). Financial liabilities maturities are as follows: Maturity Date December 31, 2017 Maturity Date December 31, 2016
Jan 19, 2018 20.084.905 January 17, 2017 40.153.847 Jan 26, 2018 82.849.368 January 25, 2017 94.259.626 Net book value in balance sheet 102.934.273 134.413.473
As of December 31, 2017, the detail of the expense accrual arising from swap contracts amounting to TL 7.868.067 is disclosed at the Note 13.
21 Deferred tax
As of December 31, 2017 and December 31, 2016, deferred tax assets and liabilities are attributable to the following: December 31, 2017 December 31, 2016 Deferred tax Deferred tax assets/(liabilities) assets/(liabilities)
Equalization provision 21.889.262 16.304.668 Reserve for unexpired risk 5.055.857 112.906 Provisions for employee termination benefits and unused vacations 4.601.292 3.785.096 Provision for subrogation receivables 1.834.144 1.767.317 Other provision 8.667.322 9.064.233 TAS adjustment differences in depreciation (2.084.927) (3.139.467) Discount of receivables and payables 698.951 53.726 Valuation differences in financial assets (7.879.160) (3.157.357) Subrogation receivables from third parties (3.977.190) (3.356.747) Real estate valuation (6.961.291) (3.321.543) Deferred tax assets, net 21.844.260 18.112.832
As of December 31, 2017, the Company does not have deductible tax losses (December 31, 2016: None).
Anadolu Sigorta 2017 Annual Report 187 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
The movement of deferred tax assets table: December 31, 2017 December 31, 2016
Opening balance at 1 January 18.112.832 13.229.325 Recognised in profit or loss (Note 35) 5.702.299 7.160.762 Recognised in equity (Note 15) (1.970.871) (2.277.255) Deferred tax asset 21.844.260 18.112.832
22 Retirement benefit obligations
Employees of the Company are the members of “Anadolu Anonim Pension Fund” which is established in accordance with the temporary Article 20 of the Social Security Act No: 506. As per the temporary sub article No: 20 of the Article 73 of the Social Security Law, pension funds should be transferred to the Social Security Institution within three years after the publication of the a aforementioned Law published in the Official Gazette numbered 26870 and dated May 8, 2008. The related three-year transfer period has been prolonged for two years by the Cabinet decision, the three-year period was extended to the May 8, 2015.
April 23, 2015 dated Official Gazette is changed as following; insurance and reinsurance companies, chambers of commerce, industry chambers, stock exchanges or which constitutes their union personnel and associates of funds “The Council is authorized to determine the date of transfer within the scope of article 20th of the law, 506 banks, insurance and reinsurance companies, chambers of commerce, industry chambers, stock exchanges or which constitutes their union personnel and associates of funds to the social security institution. The date of the transfer of the first paragraph of Article 4 of this law pension fund contributors as are considered insured.
According to this arrangement the bank within the scope of Act 506, article No.20, insurance and reinsurance companies, chambers of commerce, industry chambers, stock exchanges or associations which constitute their union personnel and associates of funds are required to be transferred until May 8, 2015 to Social Security Administration, authority to determine the date of transfer is given the Council of Ministers thus the transfer of the funds has been postponed to an unknown date.
23 Other liabilities and provisions
As of December 31, 2017 and December 31, 2016; the details of the provisions for other risks are as follows: December 31, 2017 December 31, 2016
Provision for employee termination benefits 20.939.663 17.363.526 Provision for unused vacation pay liability 1.878.908 1.561.950 Total provision for other risks 22.818.571 18.925.476
December 31, 2017 December 31, 2016
Provision for agency award 11.338.826 11.375.000 Provision for guarantee account 12.218.859 15.111.473 Provision for employee bonus 19.000.000 12.000.000 Provision for sliding scale commission (Note 10) -- 7.963.322 Provision for traffic pool 3.843.808 -- Provision for excess of claim contract substitution Premium 733.286 -- Provision for bank expense -- 3.400.000 Invoice accrual 29 450.160 Provision for tax assessment (Note 42, (Note 47) 3.678.790 3.381.653 Prepaid income and expense accruals 50.813.598 53.681.608
188 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
The movements of provision for employee termination benefits during the period are presented below: December 31, 2017 December 31, 2016
Provision for employee termination benefits at the beginning of the period 17.363.526 15.244.930 Interest cost (Note 47) 1.859.469 1.631.955 Service cost (Note 47) 1.507.021 1.222.652 Payments made during the period (Note 47) (1.875.629) (1.458.528) Actuarial difference (Note 15) 2.085.276 722.517 Provision for employee termination benefits at the end of the period 20.939.663 17.363.526
24 Net insurance premium
Net insurance premium revenue is presented in detailed in the accompanying consolidated statement of income.
25 Fee revenue
None.
26 Investment income
Investment income is presented in “Note 4.2 - Financial Risk Management”.
27 Net income accrual on financial assets
Net realized gains on financial assets are presented in “Note 4.2 - Financial Risk Management”.
28 Assets held at fair value through profit or loss
Presented in “Note 4.2 - Financial Risk Management”.
29 Insurance rights and claims Jan 1 - Jan 1 - December 31, 2017 December 31, 2016 Claims paid, net off reinsurers’ share 2.152.823.823 1.868.016.555 Changes in provision for unearned premiums, net off reinsurers’ share (72.814.040) 301.021.136 Changes in provision for outstanding claims, net off reinsurers’ share 561.441.497 657.337.317 Change in equalization provisions 31.511.404 27.882.079 Changes in reserve for unexpired risks, net off reinsurers’ share 22.416.639 (5.920.683) Total 2.695.379.323 2.848.336.404
30 Investment contract benefits
None.
31 Other expenses
The allocation of the expenses with respect to their nature or function is presented in Note 32 - Expenses by nature below.
Anadolu Sigorta 2017 Annual Report 189 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
32 Operating expenses
As of December 31, 2017 and 2016 the operating expenses are disclosed as follows: Jan 1 - Jan 1 - December 31, 2017 December 31, 2016
Commission expenses (Note 17) 556.177.638 552.860.702 Commissions to intermediaries accrued during the period (Note 17) 551.528.809 584.138.939 Change in deferred commission expenses (Note 17) 4.648.829 (31.278.237) Employee benefit expenses (Note 33) 156.330.645 135.568.643 Administration expenses 106.835.655 96.028.749 Advertising and marketing expenses 21.577.701 12.046.504 Outsourced benefits and services 19.008.661 17.100.159 Commission income from reinsurers (Note 10) (170.817.237) (117.061.430) Commission income from reinsurers accrued during the period (Note 10) (207.894.486) (121.039.356) Change in deferred commission income (Note 10) 37.077.249 3.977.926 Commission expenses (Note 17) 66.715.678 46.003.412 Commissions to intermediaries accrued during the period (Note 17) 66.798.761 51.849.653 Change in deferred commission expenses (Note 17) (83.083) (5.846.241) Total 755.828.741 742.546.739
33 Employee benefits expenses Jan 1 - Jan 1 - December 31, 2017 December 31, 2016
Wages and salaries 117.807.470 100.580.810 Insurance payments 25.664.469 23.319.112 Other 12.858.706 11.668.721 Total 156.330.645 135.568.643
34 Financial costs
Finance costs of the period are presented in “Note 4.2 - Financial Risk Management” above. There are no finance costs classified in production costs or capitalized on tangible assets. All financial costs are directly recognised as expense in the unconsolidated statement of income.
190 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
35 Income tax
Income tax expense items in the accompanying unconsolidated financial statements is as follows: Jan 1 - December 31, 2017 Jan 1 - December 31, 2016
Current tax expense provision: Corporate tax provision (52.636.513) (23.316.813) Deferred taxes: 7.054.855 1.769.959 Origination and reversal of temporary differences Total income tax expense recognised in profit or loss 5.702.299 7.160.762 Current tax expense provision: (39.879.359) (14.386.092)
For the period ended as of December 31, 2017 and 2016, a reconciliation of tax expense applicable to profit from operating activities before income tax at the statutory income tax rate to income tax expense at the Company’s effective income tax rate is as follows: December 31, 2017 December 31, 2016 Profit before tax(*) 224.075.985 Tax rate (%) 102.253.415 Tax rate (%) Taxes on income per statutory tax rate 44.815.197 20,00 20.450.683 20,00 Tax exempt income (7.256.991) (3,24) (5.444.143) (5,32) Non-deductible expenses 134.765 0,06 562.625 0,55 Other - tax rate change 2.186.388 0,98 (1.183.073) (1,16) Total tax income recognized in profit or loss 39.879.359 17,80 14.386.092 14,07
(*) The reversal of provision for Corporate Tax amounting to TL 7.054.855 (December 31, 2016: TL 1.769.959) is excluded.
36 Net foreign exchange gains
Net foreign exchange gains are presented in “Note 4.2 - Financial Risk Management” above.
Anadolu Sigorta 2017 Annual Report 191 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
37 Earnings per share
Earnings per share are calculated by dividing net profit of the period to the weighted average number of shares. Jan 1 - December 31, 2017 Jan 1 - December 31, 2016
Net profit/(loss) for the period 184.196.626 87.867.323 Weighted average number of shares 50.000.000.000 50.000.000.000 Earnings/loss per share (TL) 0,00368 0,00176
38 Dividends per share
Cash dividend paid amounting to TL 30.000.000 to shareholders during year of 2017 (December 31, 2016: Not paid).
39 Cash generated from operations
The cash flows from operating activities are presented in the accompanying consolidated statement of cash flows.
40 Convertible bonds
None.
41 Redeemable preference shares
None.
42 Risks
In the normal course of its operations, the Company is exposed to legal disputes, claims and challenges, which mainly stem from its insurance operations. The necessary income/expense accruals for the revocable cases against/on behalf of the Company are provided under provision for outstanding claims in the accompanying consolidated financial statements.
As of December 31, 2017, total amount of the claims that the Company face is TL 1.485.894.000 in gross (December 31, 2016: TL 1.189.434.000). The Company provided provision for outstanding claims in the consolidated financial statements by considering collateral amounts
As of December 31, 2017, ongoing law suits prosecuted by the Company against the third parties amounting TL 378.729.000 (December 31, 2016: TL 324.644.000)
192 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Anadolu Anonim Türk Sigorta Şirketi Mensupları Dayanışma Vakfı” was established by Anadolu Anonim Türk Sigorta Şirketi in accordance with the Turkish Commercial and Civil Laws which is examined by Tax Audit Committee inspectors due to the Company payments what are fulfilled obligations to the foundation owing to deed of the foundation and the related act. As a result of this investigation, an examination was reported for periods of 2007, 2008, 2009, 2010 and 2011.
The final legal process which is related the period of 2007 and 2008 is expected to result in the Company’s favour and the amount of provision TL 12.768.684 which was published on the Official Gazette dated November 12, 2014. December 2013 and after the condition of the provision is evaluated later ongoing development of the legal process. There is a provision amount of TL 3.678.791 (December 31, 2016: TL 3.381.653) related with this process. The Company has no revenue recognization resulting from the possibility of recovering tax auditing fees.
As a result of investigation conducted by the Ministry of Finance Tax Audit Board, tax penalty which is amount of TL 2.1 million(actual tax) and TL 3.1 million tax penalty is announced by reason to tax salvage operations not subject to the banking and insurance transactions. The amount of TL 10 million tax, TL 15 million tax penalty has been modified for the period of 2010, 2011 and 2012 in February 6, 2015. The Company do not make provision for this tax penalty because of considering the implementation of these financial statements in accordance with legislation. The Company has utilized the means put forward in the “Law Regarding Some Claims” which was published in the official gazette on August 19, 2016 with the number 6736. According to this, The Company has paid TL 6.990.560 on November 29, 2016 and as a result the assessment has ended.
43 Commitments
The details of the guarantees that are given by the Company for the operations in non-life branches are presented in Note 17.
The future aggregate minimum lease payments under operating leases for properties rented for use of head office and regional offices and motor vehicles rented for sales and marketing departments are as follows: December 31, 2017 December 31, 2016
Within one year 9.819.396 9.819.396 Between one to five years 15.967.534 15.967.534 Above 5 years 3.390.162 3.390.161 Total of minimum lease payments 29.177.092 29.177.091
44 Business combinations
None.
Anadolu Sigorta 2017 Annual Report 193 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
45 Related party transactions
The ultimate controlling party of the Company is İş Bankası Group and the groups having direct control over İş Bankası Group and the affiliates and associates of İş Bankası Group are defined as related parties of the Company.
3 The related party balances as of December 31, 2017 and December 31, 2016 are as follows: December 31, 2017 December 31, 2016
İş Bankası - cash at banks 383.020.397 420.916.548 Banks 383.020.397 420.916.548
Bonds issued by Is GYO (Note 11) 15.302.769 15.543.150 Bonds issued by Türkiye Sınai Kalkınma Bankası (Note 11) -- 7.050.254 Investment funds issued by İş Portföy Yönetimi A.Ş. (Note 11) 475.089.955 166.908.533 Investment funds founded by İşbank GmbH (Note 11) 17.439.313 11.880.374 Financial assets 507.832.037 201.382.311
İş Bankası - receivables stem from premiums written via the Bank 134.799.092 125.983.624 İş Bankası - credit card receivables 199.001.941 175.092.411 Maturities less than three months 166.384.069 147.055.139 Maturities more than three months 32.617.872 28.037.272 Receivables stems from premiums written via Şişecam Sigorta Aracılık Hiz. A.Ş. 4.773.567 6.182.414 Anadolu Hayat Emeklilik A.Ş. - premium receivables 796.230 1.312.576 Milli Reasürans T.A.Ş. - receivables from reinsurance operations 277 -- Receivables from main operations 339.371.107 308.571.025
Milli Reasürans T.A.Ş.- payables from reinsurance operations 12.104.550 18.534.868 İş Bankası - commission payables 3.962.974 7.016.739 Şişecam Sigorta Aracılık Hizmetleri A.Ş. - commission payables 554.498 399.796 Payables from main operations 16.622.022 25.951.403
No guarantees have been taken against receivables from related parties.
There are no doubtful receivables from shareholders, subsidiaries and joint ventures.
No guarantees, commitments, guarantee letters, advances and endorsements given in favour of shareholders, associates and subsidiaries.
194 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
The Company has accrued TL 41.644.894 premium (December 31, 2016: TL 55.341.331) for related party policies in 2017. The transactions with related parties during the period ended December 31, 2017 and 2016 are as follows: Jan 1 - Jan 1 - December 31, 2017 December 31, 2016
İş Bankası - premiums written via the Bank 601.172.759 502.036.843 Premiums written via Şişecam Sigorta Aracılık Hizmetleri A.Ş. 17.080.389 20.429.253 Anadolu Hayat Emeklilik A.Ş - premiums written 242.471 3.320.159 Milli Reasürans T.A.Ş. 552.278 476.544 Premiums written 619.047.897 526.262.799
Milli Reasürans T.A.Ş (128.809.219) (109.430.928) Premiums written, ceded (128.809.219) (109.430.928)
İş Bankası - interest income from deposits 39.277.987 80.428.531 İş Portföy Yönetimi - income from investment funds 9.235.579 3.361.480 İş Factoring A.Ş. - income from bonds -- 136.663 İş Gayrimenkul Yatırım Ortaklığı - income from bonds 1.990.500 1.949.520 İş Finansal Kiralama - income from bonds -- 440.160 Türkiye Sınai Kalkınma Bankası A.Ş.- income from bonds (Note 11) 169.859 260.427 Investment income 50.673.925 86.576.781
Türkiye İş Bankası A.Ş - commission expense (67.160.770) (59.382.880) Şişecam Sigorta Aracılık Hizmetleri A.Ş. - commission expense (3.389.113) (4.027.166) Milli Reasürans T.A.Ş- commission expense 29.289.903 23.205.177 Operating expenses, net (41.259.980) (40.204.869)
Anadolu Hayat ve Emeklilik A.Ş – rental income (189.356) (177.117) Other income (189.356) (177.117)
İş Merkezleri Yönetim ve İşletim A.Ş. - building service cost (5.418.690) (5.073.058) Anadolu Anonim Türk Sigorta Şirketi Memurları Emekli Sandığı Vakfı-Rent (3.381.423) (2.997.956) İş Portföy Yönetimi - management commission (293.093) (965.206) Yatırım Finansman Menkul Değerler - management commission (122.317) (51.884) Other expense (9.215.523) (9.088.104)
Anadolu Sigorta 2017 Annual Report 195 Other 31 December 2017 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Unconsolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
46 Events after the reporting date
Subsequent events are disclosed in Note 1.10 Events after the reporting date.
47 Other
Items and amounts classified under the “other” account in financial statements either exceeding 20% of the total amount of the group to which they relate or 5% of the total assets in the balance sheet
They are presented in the related notes above.
“Payables to employees and receivables from employees presented under accounts, “other receivables” and “other short or long term payables”, and which have balance more than 1% of the total assets
None.
Subrogation recorded in “Off-Balance Sheet Accounts”
None.
Real rights on properties and their values
None.
Explanatory note for the amounts and nature of previous years’ income and losses
None.
Information on other technical expenses items in income statement
The part amounting to TL 118.611.498 (December 31, 2016: TL 113.887.360) of other technical expenses in the statement of income amounting to TL 114.260.932 (December 31, 2016: TL 110.460.579) comprised of assistance services and their other technical expenses and cost of deferred.
For the periods ended December 31, 2017 and 2016, details of discount and provision expenses are as follows: Jan 1 - Jan 1 - Provision expenses December 31, 2017 December 31, 2016
Provisions no longer required income/(expense) 7.740.675 2.352.227 Provision expense for unused vacation (Note 23) (316.958) (69.241) Provision expense for employee termination benefits (Note 23) (1.490.861) (1.396.079) Provision expense for doubtful receivables (Note 4.2) (37.954.653) (38.684.995) Other provisions (297.137) (297.137) Provisions account (32.318.934) (38.095.225)
Jan 1 - Jan 1 - Rediscount expenses December 31, 2017 December 31, 2016
Rediscount income 16.755.442 21.046.365 Rediscount expense (28.658.461) (20.553.773) Total of rediscounts (11.903.019) 492.592
196 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Consolidated Financial Statements as of December 31, 2017 together with the Independent Auditor’s Audit Report (Convenience Translation of Unconsolidated Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish)
Anadolu Sigorta 2017 Annual Report 197 Other Matters and Financial Statements
Information on Consolidated Subsidiaries
ANADOLU HAYAT EMEKLİLİK A.Ş.
Offering service in private pension and life insurance segments, Anadolu Hayat Emeklilik was founded in 1990 as “Turkey’s first life insurance company”. The first and only publicly-traded pension company in Turkey, Anadolu Hayat Emeklilik is the largest company in the sector in terms of total funds attained in life insurance and private pension branches, while preserving its top spot with the number of participants achieved in the Private Pension System.
A subsidiary of İşbank, Anadolu Hayat Emeklilik’s shares are quoted on the Borsa Istanbul (BIST) Star Market under the symbol (ANHYT).
Headquartered in İstanbul, Anadolu Hayat Emeklilik brings its products to its customers via regional offices in İstanbul (3), Ankara (2), Adana, Antalya, Bursa, Trabzon, İzmir and Kocaeli, and a branch in the Turkish Republic of Northern Cyprus, direct sales force, and nearly 250 agencies.
Anadolu Hayat Emeklilik possesses the most extensive bank insurance network in Turkey. The company uses the branches in its bank insurance network, mainly the branches of İşbank, as a fundamental element of its service delivery.
Controlling a 8% share of the market with a premium production of TL 575 million in the life insurance branch, Anadolu Hayat Emeklilik retained its leadership by a large margin with total life insurance funds in excess of TL 1.7 billion.
According to the Pension Monitoring Center (PMC) data dated 29 December 2017, Anadolu Hayat Emeklilik achieved 28% growth in total funds (excluding auto-enrollment) in the twelve months to year-end 2017. Having reached TL 14,581 million in total funds including state contribution funds and 1,148,227 people in the number of participants, Anadolu Hayat Emeklilik is a leading player in the sector with respective market shares of 19% and 17% in total funds including state contribution funds and number of participants.
Total unconsolidated assets of Anadolu Hayat Emeklilik were up 24% year-to-year and reached TL 17,877 million at year- end 2017 Posting TL 280 million in net profit, the company successfully completed yet another year in terms of sustainable profitability.
198 Anadolu Sigorta 2017 Annual Report 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon
Independent Auditor’s Report
Güney Bağımsız Denetim ve Tel: +90 212 315 3000 SMMM A.Ş. Fax: +90 212 230 8291 Eski Büyükdere Cad. Orjin Maslak ey.com No: 27 Maslak, Sarıyer 34398 Ticaret Sicil No: 479920 İstanbul - Turkey Mersis No: 0-4350-3032-6000017
To the Board of Directors of Anadolu Anonim Türk Sigorta Şirketi
A) Report on the Audit of the Consolidated Financial Statements
1) Opinion
We have audited the consolidated financial statements of Anadolu Anonim Türk Sigorta Şirketi (the Company), which comprise the consolidated statement of financial position as at December 31, 2017, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at December 31, 2017, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with the prevailing accounting principles and standards as per the insurance legislation and Turkish Accounting 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 standards on auditing as issued by the Capital Markets Board of Turkey and 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 Consolidated 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.
Anadolu Sigorta 2017 Annual Report 199 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements
Independent Auditor’s Report
3) Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated 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, 2017, the Company has insurance We have performed the audit procedures related to the liabilities of TL 4.456.444.401 representing 83% of the actuarial assumptions which disclosed in the Note 2 and 17 Company’s total liabilities. The Company made net provision together with the actuary auditor who is part of our audit of TL 2.604.686.356 for the future outstanding claims team. for insurance contracts. In the calculation of Incurred But Not Reported (IBNR) claims provisions (net amount of These procedures are primarily intended to assess whether TL 1.438.700.495) which is accounted under the outstanding the estimates and methods that used in the calculation of the claims reserves, the Company Management has used the outstanding claims reserve by the Company are appropriate. actuarial assumptions and estimates detailed in note 2 and In this context, we have performed the audit procedures 17. Uncertainty of estimation and management judgment related to the recording the Company’s incurred outstanding containing, IBNR calculations has been considered as a key claims; performed the analytical review the incurred case files audit matter. which selected randomly; obtained the signed lawyer letter from the Company’s attorney for litigated case files; assessed the average claim amount and opening claim amounts determined by the Company’s actuary; 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 consolidated financial statements are sufficient.
200 Anadolu Sigorta 2017 Annual Report Independent Auditor’s Report
4) Other matter
The consolidated financial statements of the Company which were prepared in accordance with the accounting principles and standards in force as of December 31, 2016 were subject to full-scope audit by another independent audit firm. In their independent auditor’s report dated January 30, 2017, independent audit firm expressed unqualified opinion on the consolidated financial statements prepared at December 31, 2016.
5) Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Insurance Accounting and Financial Reporting Legislation and designing, implementing and maintaining internal systems relevant to the preparation and fair presentation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
6) Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with InAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
Anadolu Sigorta 2017 Annual Report 201 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements
Independent Auditor’s Report
As part of an audit in accordance with InAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Company audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
202 Anadolu Sigorta 2017 Annual Report Independent Auditor’s Report
B) Report on Other Legal and Regulatory Requirements
1) Auditors’ report on Risk Management System and Committee prepared in accordance with paragraph 4 of Article 398 of Turkish Commercial Code (“TCC”) 6102 is submitted to the Board of Directors of the Company on January 29, 2018. 2) In accordance with paragraph 4 of Article 402 of the TCC, no significant matter has come to our attention that causes us to believe that the Company’s bookkeeping activities for the period 1 January -December 31, 2017 and financial statements are not in compliance with laws and provisions of the Company’s articles of association in relation to financial reporting. 3) In accordance with paragraph 4 of Article 402 of the TCC, the Board of Directors submitted to us the necessary explanations and provided required documents within the context of audit.
The name of the engagement partner who supervised and concluded this audit is Seda Akkuş Tecer.
Güney Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik Anonim Şirketi A member firm of Ernst & Young Global Limited
January 29, 2018 İstanbul, Türkiye
Anadolu Sigorta 2017 Annual Report 203 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Consolidated Financial Statements Prepared as of December 31, 2017
We confirm that the consolidated financial statements and related disclosures and notes for the six- months-period then ended as of December 31, 2017 which were prepared in accordance with the accounting principles and standards in force as per the regulations of T.C. Başbakanlık Hazine Müsteşarlığı are in compliance with the “Code Related to the Financial Reporting of Insurance, Reinsurance and Private Pension Companies” and the financial records of our Company.
İstanbul, January 29, 2018
İlhami KOÇ Fatih GÖREN Member of Board of Directors, Executive Vice President of Finance Chief Executive Officer
Murat TETİK Taylan MATKAP Accounting Actuary Reporting Manager
204 Anadolu Sigorta 2017 Annual Report Contents
PAGE CONSOLIDATED BALANCE SHEET 206 CONSOLIDATED STATEMENT OF INCOME 211 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 214 CONSOLIDATED STATEMENT OF CASH FLOW 216 CONSOLIDATED STATEMENT OF PROFIT DISTRIBUTION 217 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 218-285 NOTE 1 General information 218 NOTE 2 Summary of significant accounting policies 220 NOTE 3 Significant accounting estimates and requirements 242 NOTE 4 Management of insurance and financial risk 243 NOTE 5 Segment reporting 254 NOTE 6 Tangible assets 257 NOTE 7 Investment properties 258 NOTE 8 Intangible assets 259 NOTE 9 Investments in associates 260 NOTE 10 Reinsurance assets and liabilities 260 NOTE 11 Financial assets 261 NOTE 12 Loans and receivables 265 NOTE 13 Derivative financial instruments 266 NOTE 14 Cash and cash equivalents 267 NOTE 15 Equity 267 NOTE 16 Other reserves and equity component of discretionary participation feature 269 NOTE 17 Insurance contract liabilities and reinsurance assets 270 NOTE 18 Investment contract liabilities 274 NOTE 19 Trade and other payables and deferred income 274 NOTE 20 Financial liabilities 275 NOTE 21 Deferred tax 276 NOTE 22 Retirement benefit obligations 276 NOTE 23 Other liabilities and provisions 277 NOTE 24 Net insurance premium 278 NOTE 25 Fee revenue 278 NOTE 26 Investment income 278 NOTE 27 Net income accrual on financial assets 278 NOTE 28 Assets held at fair value through profit or loss 278 NOTE 29 Insurance rights and claims 278 NOTE 30 Investment contract benefits 278 NOTE 31 Other expenses 278 NOTE 32 Operating expenses 279 NOTE 33 Employee benefits expenses 279 NOTE 34 Financial costs 279 NOTE 35 Income tax 280 NOTE 36 Net foreign exchange gains 280 NOTE 37 Earnings per share 281 NOTE 38 Dividends per share 281 NOTE 39 Cash generated from operations 281 NOTE 40 Convertible bonds 281 NOTE 41 Redeemable preference shares 281 NOTE 42 Risks 281 NOTE 43 Commitments 282 NOTE 44 Business combinations 283 NOTE 45 Related party transactions 283 NOTE 46 Events after the reporting date 285 NOTE 47 Other 285
Anadolu Sigorta 2017 Annual Report 205 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Consolidated Balance Sheet As at December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
ASSETS Audited Audited Current Period Prior Period I- Current Assets Note December 31, 2017 December 31, 2016 A- Cash and Cash Equivalents 14 3.504.676.959 3.217.463.827 1- Cash 14 62.857 35.109 2- Cheques Received -- -- 3- Banks 14 3.105.334.647 2.795.907.111 4- Cheques Given and Payment Orders 14 (87.620) (82.544) 5- Bank Guaranteed Credit Card Receivables with Maturities Less Than Three Months 14 399.367.075 421.604.151 6- Other Cash and Cash Equivalents -- -- B- Financial Assets and Financial Investments with Risks on Policyholders 11 1.103.520.340 748.609.784 1- Available-for-Sale Financial Assets 11 755.985.190 605.652.540 2- Held to Maturity Investments 11 -- 15.172.182 3- Financial Assets Held for Trading 11 347.535.150 127.881.004 4- Loans and Receivables -- -- 5- Provision for Loans and Receivables -- -- 6- Financial Investments with Risks on Saving Life Policyholders -- -- 7- Company’s Own Equity Shares -- -- 8- İmpairment in Value of Financial Investments 11 -- (95.942) C- Receivables from Main Operations 12 1.178.955.084 1.048.793.865 1- Receivables from Insurance Operations 12 1.074.438.568 984.855.530 2- Provision for Receivables from Insurance Operations 2.21,12 (8.337.019) (8.836.586) 3- Receivables from Reinsurance Operations 12 83.203.501 60.170.605 4- Provision for Receivables from Reinsurance Operations -- -- 5- Cash Deposited to Insurance and Reinsurance Companies 12 29.650.034 12.604.316 6- Loans to the Policyholders -- -- 7- Provision for Loans to the Policyholders -- -- 8- Receivables from Individual Pension Operations -- -- 9- Doubtful Receivables from Main Operations 12 226.225.736 188.860.962 10- Provision for Doubtful Receivables from Main Operations 12 (226.225.736) (188.860.962) D- Due from Related Parties -- -- 1- Due from Shareholders -- -- 2- Due from Associates -- -- 3- Due from Subsidiaries -- -- 4- Due from Joint Ventures -- -- 5- Due from Personnel -- -- 6- Due from Other Related Parties -- -- 7- Rediscount on Receivables from Related Parties -- -- 8- Doubtful Receivables from Related Parties -- -- 9- Provision for Doubtful Receivables from Related Parties -- -- E- Other Receivables 12 19.018.462 13.790.959 1- Finance Lease Receivables -- -- 2- Unearned Finance Lease Interest Income -- -- 3- Deposits and Guarantees Given 15.198 334.577 4- Other Miscellaneous Receivables 19.003.264 13.456.382 5- Rediscount on Other Miscellaneous Receivables -- -- 6- Other Doubtful Receivables -- -- 7- Provision for Other Doubtful Receivables -- -- F- Prepaid Expenses and Income Accruals 339.189.524 320.408.039 1- Prepaid Expenses 17 319.260.853 316.049.141 2- Accrued Interest and Rent Income -- -- 3- Income Accruals 12 19.928.671 4.358.898 4- Other Prepaid Expenses -- -- G- Other Current Assets 1.170.397 13.587.216 1- Stocks to be Used in the Following Months 676.756 960.285 2- Prepaid Taxes and Funds 19 -- 12.441.095 3- Deferred Tax Assets -- -- 4- Job Advances 12 493.641 170.946 5- Advances Given to Personnel 12 -- 14.890 6- Inventory Count Differences -- -- 7- Other Miscellaneous Current Assets -- -- 8- Provision for Other Current Assets -- -- I- Total Current Assets 6.146.530.766 5.362.653.690 The accompanying notes are an integral part of these unconsolidated financial statements.
206 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Consolidated Balance Sheet As at December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
ASSETS
Audited Audited Current Period Prior Period II- Non-Current Assets Note December 31, 2017 December 31, 2016 A- Receivables from Main Operations -- -- 1- Receivables from Insurance Operations -- -- 2- Provision for Receivables from Insurance Operations -- -- 3- Receivables from Reinsurance Operations -- -- 4- Provision for Receivables from Reinsurance Operations -- -- 5- Cash Deposited for Insurance and Reinsurance Companies -- -- 6- Loans to the Policyholders -- -- 7- Provision for Loans to the Policyholders -- -- 8- Receivables from Individual Pension Business -- -- 9- Doubtful Receivables from Main Operations -- -- 10- Provision for Doubtful Receivables from Main Operations -- -- B- Due from Related Parties -- -- 1- Due from Shareholders -- -- 2- Due from Associates -- -- 3- Due from Subsidiaries -- -- 4- Due from Joint Ventures -- -- 5- Due from Personnel -- -- 6- Due from Other Related Parties -- -- 7- Rediscount on Receivables from Related Parties -- -- 8- Doubtful Receivables from Related Parties -- -- 9- Provision for Doubtful Receivables from Related Parties -- -- C- Other Receivables 12 2.205.704 1.749.362 1- Finance Lease Receivables -- -- 2- Unearned Finance Lease Interest Income -- -- 3- Deposits and Guarantees Given 320.795 -- 4- Other Miscellaneous Receivables 2.129.835 2.129.835 5- Rediscount on Other Miscellaneous Receivables (244.926) (380.473) 6- Other Doubtful Receivables -- -- 7- Provision for Other Doubtful Receivables -- -- D- Financial Assets 9 186.824.586 173.328.875 1- Investments in Equity Shares -- -- 2- Investments in Associates 9 186.824.586 173.328.875 3- Capital Commitments to Associates -- -- 4- Investments in Subsidiaries -- -- 5- Capital Commitments to Subsidiaries -- -- 6- Investments in Joint Ventures -- -- 7- Capital Commitments to Joint Ventures -- -- 8- Financial Assets and Financial Investments with Risks on Policyholders -- -- 9- Other Financial Assets -- -- 10- Impairment in Value of Financial Assets -- -- E- Tangible Assets 6 103.881.659 102.689.754 1- Investment Properties 6,7 64.215.000 62.175.000 2- Impairment for Investment Properties -- -- 3- Owner Occupied Property 6 13.395.000 12.372.253 4- Machinery and Equipment 6 56.957.217 49.033.797 5- Furniture and Fixtures 6 13.993.498 13.717.551 6- Motor Vehicles 6 290.580 619.736 7- Other Tangible Assets (Including Leasehold Improvements) 6 23.486.838 22.982.418 8- Tangible Assets Acquired Through Finance Leases 6 3.858.074 3.868.337 9- Accumulated Depreciation 6 (72.314.548) (62.079.338) 10- Advances Paid for Tangible Assets (Including Construction in Progress) -- -- F- Intangible Assets 8 61.493.001 55.336.275 1- Rights -- -- 2- Goodwill 8 16.250.000 16.250.000 3- Pre-operating Expenses -- -- 4- Research and Development Costs -- -- 5- Other Intangible Assets 8 120.578.666 111.110.866 6- Accumulated Amortization 8 (100.337.251) (83.756.830) 7- Advances Paid for Intangible Assets 8 25.001.586 11.732.239 G- Prepaid Expenses and Income Accruals 17 6.639.202 6.211.364 1- Prepaid Expenses 17 6.639.202 6.211.364 2- Income Accruals -- -- 3- Other Prepaid Expenses and Income Accruals -- -- H- Other Non-Current Assets 21 21.844.260 18.112.832 1- Effective Foreign Currency Accounts -- -- 2- Foreign Currency Accounts -- -- 3- Stocks to be Used in the Following Years -- -- 4- Prepaid Taxes and Funds -- -- 5- Deferred Tax Assets 21 21.844.260 18.112.832 6- Other Miscellaneous Non-Current Assets -- -- 7- Amortization on Other Non-Current Assets -- -- 8- Provision for Other Non-Current Assets -- -- II- Total Non-Current Assets 382.888.412 357.428.462 TOTAL ASSETS 6.529.419.178 5.720.082.152 The accompanying notes are an integral part of these unconsolidated financial statements.
Anadolu Sigorta 2017 Annual Report 207 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Consolidated Balance Sheet As at December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
LIABILITIES Audited Audited Current Period Prior Period III- Short-Term Liabilities Note December 31, 2017 December 31, 2016 A- Financial Liabilities 20 110.802.339 134.413.473 1- Loans to Financial Institutions -- -- 2- Finance Lease Liabilities -- -- 3- Deferred Leasing Costs -- -- 4- Current Portion of Long Term Debts -- -- 5- Principal Instalments and Interests on Bonds Issued -- -- 6- Other Financial Assets Issued -- -- 7- Valuation Differences of Other Financial Assets Issued -- -- 8- Other Financial Liabilities 20 110.802.339 134.413.473 B- Payables Arising from Main Operations 19 492.116.005 449.205.545 1- Payables Due to Insurance Operations 19 311.777.242 300.768.948 2- Payables Due to Reinsurance Operations -- -- 3- Cash Deposited by Insurance and Reinsurance Companies 10,19 8.573.616 5.624.583 4- Payables Due to Individual Pension Operations -- -- 5- Payables Due to Other Main Operations 19 171.765.147 142.812.014 6- Rediscount on Payables from Other Main Operations -- -- C- Due to Related Parties 19 256.510 91.826 1- Due to Shareholders -- -- 2- Due to Associates 36.133 -- 3- Due to Subsidiaries -- -- 4- Due to Joint Ventures -- -- 5- Due to Personnel 220.377 91.826 6- Due to Other Related Parties -- -- D- Other Payables 19 113.563.203 82.609.754 1- Deposits and Guarantees Received 6.282.082 5.486.777 2- Medical Treatment Payables to Social Security Institution 31.604.313 32.500.031 3- Other Miscellaneous Payables 76.358.578 45.085.032 4- Discount on Other Miscellaneous Payables (681.770) (462.086) E- Insurance Technical Provisions 17 4.307.802.430 3.796.758.334 1- Reserve for Unearned Premiums - Net 17 1.680.134.904 1.752.948.944 2- Reserve for Unexpired Risks - Net 2.26,17 22.981.170 564.531 3- Mathematical Provisions - Net -- -- 4- Provision for Outstanding Claims - Net 4.1, 17 2.604.686.356 2.043.244.859 5- Provision for Bonus and Discounts - Net -- -- 6- Other Technical Provisions - Net -- -- F- Provisions for Taxes and Other Similar Obligations 19 50.750.268 39.526.586 1- Taxes and Funds Payable 39.563.475 36.548.188 2- Social Security Premiums Payable 3.464.617 2.978.398 3- Overdue, Deferred or By Instalment Taxes and Other Liabilities -- -- 4- Other Taxes and Similar Payables -- -- 5- Corporate Tax Payable 35 52.636.513 23.316.813 6- Prepaid Taxes and Other Liabilities Regarding Current Period Income (44.914.337) (23.316.813) 7- Provisions for Other Taxes and Similar Liabilities -- -- G- Provisions for Other Risks -- -- 1- Provision for Employee Termination Benefits -- -- 2- Provision for Pension Fund Deficits -- -- 3- Provisions for Costs -- -- H- Deferred Income and Expense Accruals 146.541.875 112.331.397 1- Deferred Income 19 95.718.017 58.640.768 2- Expense Accruals 23 50.813.598 53.681.608 3- Other Deferred Income and Expense Accruals 10.260 9.021 I- Other Short-Term Liabilities 23 1.878.908 1.561.950 1- Deferred Tax Liabilities -- -- 2- Inventory Count Differences -- -- 3- Other Various Short-Term Liabilities 23 1.878.908 1.561.950 III - Total Short-Term Liabilities 5.223.711.538 4.616.498.865 The accompanying notes are an integral part of these unconsolidated financial statements.
208 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Consolidated Balance Sheet As at December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
LIABILITIES Audited Audited Current Period Prior Period IV- Long-Term Liabilities Note December 31, 2017 December 31, 2016 A- Financial Liabilities -- -- 1- Loans to Financial Institutions -- -- 2- Finance Lease Liabilities -- -- 3- Deferred Leasing Costs -- -- 4- Bonds Issued -- -- 5- Other Financial Assets Issued -- -- 6- Valuation Differences of Other Financial Assets Issued -- -- 7- Other Financial Liabilities -- -- B- Payables Arising from Main Operations -- -- 1- Payables Due to Insurance Operations -- -- 2- Payables Due to Reinsurance Operations -- -- 3- Cash Deposited by Insurance and Reinsurance Companies -- -- 4- Payables Due to Individual Pension Operations -- -- 5- Payables Due to Other Operations -- -- 6- Rediscount on Payables from Other Operations -- -- C- Due to Related Parties -- -- 1- Due to Shareholders -- -- 2- Due to Associates -- -- 3- Due to Subsidiaries -- -- 4- Due to Joint Ventures -- -- 5- Due to Personnel -- -- 6- Due to Other Related Parties -- -- D- Other Payables -- -- 1- Deposits and Guarantees Received -- -- 2- Medical Treatment Payables to Social Security Institution -- -- 3- Other Miscellaneous Payables -- -- 4- Discount on Other Miscellaneous Payables -- -- E-Insurance Technical Provisions 17 148.641.971 117.130.567 1- Reserve for Unearned Premiums - Net -- -- 2- Reserve for Unexpired Risks - Net -- -- 3- Mathematical Provisions - Net -- -- 4- Provision for Outstanding Claims - Net -- -- 5- Provision for Bonus and Discounts - Net -- -- 6- Other Technical Provisions - Net 17 148.641.971 117.130.567 F-Other Liabilities and Relevant Accruals -- -- 1- Other Liabilities -- -- 2- Overdue, Deferred or By Instalment Taxes and Other Liabilities -- -- 3- Other Liabilities and Expense Accruals -- -- G- Provisions for Other Risks 23 20.939.663 17.363.526 1- Provision for Employee Termination Benefits 23 20.939.663 17.363.526 2- Provision for Pension Fund Deficits -- -- H-Deferred Income and Expense Accruals -- -- 1- Deferred Income -- -- 2- Expense Accruals -- -- 3- Other Deferred Income and Expense Accruals -- -- I- Other Long-Term Liabilities -- -- 1- Deferred Tax Liabilities -- -- 2- Other Long-Term Liabilities -- -- IV- Total Long-Term Liabilities 169.581.634 134.494.093
The accompanying notes are an integral part of these unconsolidated financial statements.
Anadolu Sigorta 2017 Annual Report 209 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Consolidated Balance Sheet As at December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
EQUITY Audited Audited Current Period Prior Period V- Equity Note December 31, 2017 December 31, 2016 A- Paid in Capital 500.000.000 500.000.000 1- (Nominal) Capital 2.13,15 500.000.000 500.000.000 2- Unpaid Capital -- -- 3- Positive Capital Restatement Differences -- -- 4- Negative Capital Restatement Differences -- -- 5- Register in Progress Capital -- -- B- Capital Reserves 15 29.388.073 29.200.961 1- Share Premiums -- -- 2- Cancellation Profits of Equity Shares -- -- 3- Profit on Asset Sales That Will Be Transferred to Capital -- -- 4- Currency Translation Adjustments -- -- 5- Other Capital Reserves 15 29.388.073 29.200.961 C- Profit Reserves 330.171.850 266.843.296 1- Legal Reserves 15 68.264.694 58.683.773 2- Statutory Reserves 15 25.840.740 17.811.508 3- Extraordinary Reserves 15 163.166.541 114.807.844 4- Special Funds -- -- 5- Revaluation of Financial Assets 15 32.328.394 32.954.142 6- Other Profit Reserves 15 40.571.481 42.586.029 D- Retained Earnings 75.051.095 70.926.240 1- Retained Earnings 75.051.095 70.926.240 E- Accumulated Losses -- -- 1- Accumulated Losses -- -- F-Net Profit/(Loss) for the Period 201.514.988 102.118.697 1- Net Profit for the Period 201.514.988 102.118.697 2- Net Loss for the Period -- -- 3- Net Profit not Subject to Distribution 15 -- 15.094 V- Total Equity 1.136.126.006 969.089.194 TOTAL EQUITY AND LIABILITIES 6.529.419.178 5.720.082.152
The accompanying notes are an integral part of these unconsolidated financial statements.
210 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Consolidated Statement of Income For the Period Ended December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Audited Audited Current Period Prior Period I-TECHNICAL SECTION Note December 31, 2017 December 31, 2016 A- Non-Life Technical Income 3.912.846.125 3.567.233.863 1- Earned Premiums (Net of Reinsurer Share) 3.323.384.126 3.152.228.202 1.1- Written Premiums (Net of Reinsurer Share) 17 3.272.986.725 3.447.328.655 1.1.1- Written Premiums, gross 17 4.671.409.652 4.484.060.267 1.1.2- Written Premiums, ceded 10,17 (1.289.191.554) (885.937.607) 1.1.3- Premiums Transferred to Social Security Institutions 17 (109.231.373) (150.794.005) 1.2- Change in Reserve for Unearned Premiums (Net of Reinsurer Shares and Less the Amounts Carried Forward) 17,29 72.814.040 (301.021.136) 1.2.1- Reserve for Unearned Premiums, gross 17 (121.582.813) (379.537.942) 1.2.2- Reserve for Unearned Premiums, ceded 17 210.638.839 58.433.152 1.2.3 - Reserve for Unearned Premiums, Social Security Institution Share (16.241.986) 20.083.654 1.3- Change in Reserve for Unexpired Risks (Net of Reinsurer Share and Less the Amounts Carried Forward) 17,29 (22.416.639) 5.920.683 1.3.1- Reserve for Unexpired Risks, gross 17 (43.066.356) 14.511.470 1.3.2- Reserve for Unexpired Risks, ceded 17 20.649.717 (8.590.787) 2- Investment Income - Transferred from Non-Technical Section 542.114.497 379.849.157 3- Other Technical Income (Net of Reinsurer Share) 6.605.545 3.777.698 3.1- Other Technical Income, gross 6.605.545 3.777.698 3.2- Other Technical Income, ceded -- -- 4- Accrued Salvage and Subrogation Income 40.741.957 31.378.806 B - Non-Life Technical Expense (3.620.216.963) (3.409.670.050) 1- Incurred Losses (Net of Reinsurer Share) 17 (2.714.265.320) (2.525.353.872) 1.1- Claims Paid (Net of Reinsurer Share) 17,29 (2.152.823.823) (1.868.016.555) 1.1.1- Claims Paid, gross 17 (2.755.951.134) (2.236.015.308) 1.1.2- Claims Paid, ceded 10,17 603.127.311 367.998.753 1.2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward) 17,29 (561.441.497) (657.337.317) 1.2.1- Change in Provisions for Outstanding Claims, gross 17 (715.185.940) (651.278.718) 1.2.2- Change in Provisions for Outstanding Claims, ceded 17 153.744.443 (6.058.599) 2- Change in Provision for Bonus and Discounts (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- 2.1- Provision for Bonus and Discounts, gross -- -- 2.2- Provision for Bonus and Discounts, ceded -- -- 3- Change in Other Technical Reserves (Net of Reinsurer Share and Less the Amounts Carried Forward) 17,29 (31.511.404) (27.882.079) 4- Operating Expenses 32 (755.828.741) (742.546.739) 5- Change in Mathematical Provisions (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- 5.1- Change in Mathematical Provisions, gross -- -- 5.2 - Change in Mathematical Provisions, ceded -- -- 6- Change in Other Technical Provisions (Net of Reinsurer and Less the Amounts Carried Forward) 47 (118.611.498) (113.887.360) 6.1- Change in Other Technical Provisions, gross (121.529.377) (113.887.360) 6.2- Change in Other Technical Provisions, ceded 2.917.879 -- C- Net Technical Income-Non-Life (A - B) 292.629.162 157.563.813 D- Life Technical Income -- -- 1- Earned Premiums (Net of Reinsurer Share) -- -- 1.1- Written Premiums (Net of Reinsurer Share) -- -- 1.1.1- Written Premiums, gross -- -- 1.1.2- Written Premiums, ceded -- -- 1.2- Change in Reserve for Unearned Premiums (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- 1.2.1- Reserve for Unearned Premiums, gross -- -- 1.2.2- Reserve for Unearned Premiums, ceded -- -- 1.3- Change in Reserve for Unexpired Risks (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- 1.3.1- Reserve for Unexpired Risks, gross -- -- 1.3.2- Reserve for Unexpired Risks, ceded -- -- 2- Investment Income -- -- 3- Unrealized Gains on Investments -- -- 4- Other Technical Income (Net of Reinsurer Share) -- -- 4.1- Other Technical Income. gross -- -- 4.2- Other Technical Income. ceded -- -- 5- Accrued Salvage Income -- --
The accompanying notes are an integral part of these unconsolidated financial statements.
Anadolu Sigorta 2017 Annual Report 211 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Consolidated Statement of Income For the Period Ended December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Audited Audited Current Period Prior Period I-TECHNICAL SECTION Note December 31, 2017 December 31, 2016 E- Life Technical Expense -- -- 1- Incurred Losses (Net of Reinsurer Share) -- -- 1.1- Claims Paid (Net of Reinsurer Share) -- -- 1.1.1- Claims Paid, gross -- -- 1.1.2- Claims Paid, ceded -- -- 1.2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- 1.2.1- Change in Provisions for Outstanding Claims, gross -- -- 1.2.2- Change in Provisions for Outstanding Claims, ceded -- -- 2- Change in Provision for Bonus and Discounts (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- 2.1- Provision for Bonus and Discounts, gross -- -- 2.2- Provision for Bonus and Discounts, ceded -- -- 3- Change in Mathematical Provisions (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- 3.1- Change in Mathematical Provisions, gross -- -- 3.1.1- Change in Actuarial Mathematical Provisions, gross -- -- 3.1.2- Change in Profit Share Provisions (Provision for Financial Investments with Risks on Saving Life Policyholders), gross -- -- 3.2- Change in Mathematical Provisions, ceded -- -- 3.2.1- Change in Actuarial Mathematical Provisions, ceded -- -- 3.2.2- Change in Profit Share Provisions (Provision for Financial Investments with Risks on Saving Life Policyholders). ceded -- -- 4- Change in Other Technical Reserves (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- 5- Operating Expenses -- -- 6- Investment Expenses -- -- 7- Unrealized Losses on Investments -- -- 8- Investment Income Transferred to the Non-Life Technical Section -- -- F- Net Technical Income- Life (D - E) -- -- G- Pension Business Technical Income -- -- 1- Fund Management Income -- -- 2- Management Fee -- -- 3- Entrance Fee Income -- -- 4- Management Expense Charge in case of Suspension -- -- 5- Income from Private Service Charges -- -- 6- Increase in Value of Capital Allowances Given as Advance -- -- 7- Other Technical Expense -- -- H- Pension Business Technical Expense -- -- 1- Fund Management Expense -- -- 2- Decrease in Value of Capital Allowances Given as Advance -- -- 3- Operating Expenses -- -- 4- Other Technical Expenses -- -- I- Net Technical Income - Pension Business (G - H) -- --
The accompanying notes are an integral part of these unconsolidated financial statements.
212 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Consolidated Statement of Income For the Period Ended December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Audited Audited Current Period Prior Period II-NON-TECHNICAL SECTION Note December 31, 2017 December 31, 2016 C- Net Technical Income - Non-Life (A-B) 292.629.162 157.563.813 F- Net Technical Income - Life (D-E) -- -- I - Net Technical Income - Pension Business (G-H) -- -- J- Total Net Technical Income (C+F+I) 292.629.162 157.563.813 K- Investment Income 877.126.299 501.978.555 1- Income from Financial Assets 4.2 228.602.158 255.570.956 2- Income from Disposal of Financial Assets 4.2 26.473.764 11.587.624 3- Valuation of Financial Assets 4.2 52.102.926 48.436.306 4- Foreign Exchange Gains 4.2 430.645.835 134.101.122 5- Income from Associates 4.2 45.318.362 38.251.374 6- Income from Subsidiaries and Joint Ventures -- -- 7- Income from Property, Plant and Equipment 3.867.125 9.599.061 8- Income from Derivative Transactions 4.2 90.116.129 4.432.112 9- Other Investments -- -- 10- Income Transferred from Life Section -- -- L- Investment Expense (879.645.731) (505.094.199) 1- Investment Management Expenses (incl. interest) 4.2 (385.326) (756.432) 2- Diminution in Value of Investments 4.2 (1.118.002) (1.643.638) 3- Loss from Disposal of Financial Assets 4.2 (16.137.959) (15.270.224) 4- Investment Income Transferred to Non-Life Technical Section (542.114.497) (379.849.157) 5- Loss from Derivative Transactions 4.2 (179.274.294) (3.616.449) 6- Foreign Exchange Losses 4.2 (112.534.636) (76.942.491) 7- Depreciation and Amortization Expenses 6,8 (28.081.017) (27.015.808) 8- Other Investment Expenses -- -- M- Income and Expenses From Other and Extraordinary Operations (35.958.229) (29.012.659) 1- Provisions 47 (32.318.934) (38.095.225) 2- Rediscounts 47 (11.903.019) 492.592 3- Specified Insurance Accounts -- -- 4- Monetary Gains and Losses -- -- 5- Deferred Taxation (Deferred Tax Assets) 35 5.702.299 7.160.762 6- Deferred Taxation (Deferred Tax Liabilities) 35 -- -- 7- Other Income 2.771.738 3.179.411 8- Other Expenses and Losses (210.313) (1.750.199) 9- Prior Year’s Income -- -- 10- Prior Year’s Expenses and Losses -- -- N- Net Profit for the Period 201.514.988 102.118.697 1- Profit for the Period 254.151.501 125.435.510 2- Corporate Tax Provision and Other Fiscal Liabilities 35 (52.636.513) (23.316.813) 3- Net Profit for the Period 201.514.988 102.118.697 4- Monetary Gains and Losses -- --
The accompanying notes are an integral part of these unconsolidated financial statements.
Anadolu Sigorta 2017 Annual Report 213 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Consolidated Statement of Changes in Equity For the Period Ended December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Reviewed Statement of Changes in Equity - December 31, 2016 Own Shares Revaluation Currency Other Reserves Paid-in of the of Financial Inflation Translation Statutory and Retained Net Profit for Retained Note Capital Company Assets Adjustments Adjustments Legal Reserves Reserves Earnings the Year Earnings Total I - Balance at the end of the previous year - December 31, 2015 500.000.000 -- 29.179.139 -- -- 52.415.164 11.788.629 130.024.580 74.982.806 64.827.919 863.218.237 II - Change in Accounting Standards(*) ------III - Restated balances (I+II) - January 1, 2016 500.000.000 -- 29.179.139 -- -- 52.415.164 11.788.629 130.024.580 74.982.806 64.827.919 863.218.237 A- Capital increase (A1+A2) ------1- In cash ------2- From reserves ------B- Purchase of own shares ------C- Gains or losses that are not included in the statement of income ------(794.801) -- -- (794.801) D- Change in the value of financial assets 11,15 -- -- 3.775.003 ------772.058 -- -- 4.547.061 E- Currency translation adjustments ------F- Other gains or losses ------G- Inflation adjustment differences ------H- Net profit for the period ------102.118.697 -- 102.118.697 I - Dividends paid ------J - Transfers to reserves 15 ------6.268.609 6.022.879 56.592.997 (74.982.806) 6.098.321 -- IV - Balance at the end of the period - December 31, 2016 500.000.000 -- 32.954.142 -- -- 58.683.773 17.811.508 186.594.834 102.118.697 70.926.240 969.089.194
Reviewed Statement of Changes in Equity - December 31, 2017 Own Shares Revaluation Currency Other Reserves Paid-in of the of Financial Inflation Translation Statutory and Retained Net Profit for Retained Note Capital Company Assets Adjustments Adjustments Legal Reserves Reserves Earnings the Year Earnings Total I - Balance at the end of the previous year - December 31, 2016 500.000.000 -- 32.954.142 -- -- 58.683.773 17.811.508 186.594.834 102.118.697 70.926.240 969.089.194 II - Change in Accounting Standards(*) ------III - Restated balances (I+II) - January 1, 2017 500.000.000 -- 32.954.142 -- -- 58.683.773 17.811.508 186.594.834 102.118.697 70.926.240 969.089.194 A- Capital increase (A1+A2) ------1- In cash ------2- From reserves ------B- Purchase of own shares ------C- Gains or losses that are not included in the statement of income ------(2.014.548) -- -- (2.014.548) D- Change in the value of financial assets 11,15 -- -- (625.748) ------172.018 -- -- (453.730) E- Currency translation adjustments ------F- Other gains or losses ------21.432 -- 21.432 G- Inflation adjustment differences ------H- Net profit for the period ------201.514.988 -- 201.514.988 I - Dividends paid 2.23 ------(32.031.330) -- (32.031.330) J - Transfers to reserves 15 ------9.580.921 8.029.232 48.373.791 (70.108.799) 4.124.855 -- IV - Balance at the end of the period - December 31, 2017 500.000.000 -- 32.328.394 -- -- 68.264.694 25.840.740 233.126.095 201.514.988 75.051.095 1.136.126.006
The accompanying notes are an integral part of these unconsolidated financial statements.
214 Anadolu Sigorta 2017 Annual Report Reviewed Statement of Changes in Equity - December 31, 2016 Own Shares Revaluation Currency Other Reserves Paid-in of the of Financial Inflation Translation Statutory and Retained Net Profit for Retained Note Capital Company Assets Adjustments Adjustments Legal Reserves Reserves Earnings the Year Earnings Total I - Balance at the end of the previous year - December 31, 2015 500.000.000 -- 29.179.139 -- -- 52.415.164 11.788.629 130.024.580 74.982.806 64.827.919 863.218.237 II - Change in Accounting Standards(*) ------III - Restated balances (I+II) - January 1, 2016 500.000.000 -- 29.179.139 -- -- 52.415.164 11.788.629 130.024.580 74.982.806 64.827.919 863.218.237 A- Capital increase (A1+A2) ------1- In cash ------2- From reserves ------B- Purchase of own shares ------C- Gains or losses that are not included in the statement of income ------(794.801) -- -- (794.801) D- Change in the value of financial assets 11,15 -- -- 3.775.003 ------772.058 -- -- 4.547.061 E- Currency translation adjustments ------F- Other gains or losses ------G- Inflation adjustment differences ------H- Net profit for the period ------102.118.697 -- 102.118.697 I - Dividends paid ------J - Transfers to reserves 15 ------6.268.609 6.022.879 56.592.997 (74.982.806) 6.098.321 -- IV - Balance at the end of the period - December 31, 2016 500.000.000 -- 32.954.142 -- -- 58.683.773 17.811.508 186.594.834 102.118.697 70.926.240 969.089.194
Reviewed Statement of Changes in Equity - December 31, 2017 Own Shares Revaluation Currency Other Reserves Paid-in of the of Financial Inflation Translation Statutory and Retained Net Profit for Retained Note Capital Company Assets Adjustments Adjustments Legal Reserves Reserves Earnings the Year Earnings Total I - Balance at the end of the previous year - December 31, 2016 500.000.000 -- 32.954.142 -- -- 58.683.773 17.811.508 186.594.834 102.118.697 70.926.240 969.089.194 II - Change in Accounting Standards(*) ------III - Restated balances (I+II) - January 1, 2017 500.000.000 -- 32.954.142 -- -- 58.683.773 17.811.508 186.594.834 102.118.697 70.926.240 969.089.194 A- Capital increase (A1+A2) ------1- In cash ------2- From reserves ------B- Purchase of own shares ------C- Gains or losses that are not included in the statement of income ------(2.014.548) -- -- (2.014.548) D- Change in the value of financial assets 11,15 -- -- (625.748) ------172.018 -- -- (453.730) E- Currency translation adjustments ------F- Other gains or losses ------21.432 -- 21.432 G- Inflation adjustment differences ------H- Net profit for the period ------201.514.988 -- 201.514.988 I - Dividends paid 2.23 ------(32.031.330) -- (32.031.330) J - Transfers to reserves 15 ------9.580.921 8.029.232 48.373.791 (70.108.799) 4.124.855 -- IV - Balance at the end of the period - December 31, 2017 500.000.000 -- 32.328.394 -- -- 68.264.694 25.840.740 233.126.095 201.514.988 75.051.095 1.136.126.006
Anadolu Sigorta 2017 Annual Report 215 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Consolidated Statement of Cash Flows For the Period Ended December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Audited Audited Current Period Prior Period Note December 31, 2017 December 31, 2016 A - Cash flows from operating activities 1- Cash provided from insurance activities 5.165.018.373 5.071.226.899 2- Cash provided from reinsurance activities -- -- 3- Cash provided from individual pension business -- -- 4- Cash used in insurance activities (4.966.891.348) (4.769.100.894) 5- Cash used in reinsurance activities (40.078.614) (5.462.509) 6- Cash used in individual pension business -- -- 7- Cash provided by operating activities 158.048.411 296.663.496 8- Interest paid -- -- 9- Income taxes paid 19 (32.473.242) 9.957.572 10- Other cash inflows 7.838.695 62.828.955 11- Other cash outflows (39.799.131) (100.587.197) 12-Net cash provided by operating activities 93.614.733 268.862.826 B - Cash flows from investing activities 1- Proceeds from disposal of tangible assets 400.469 8.091.520 2- Acquisition of tangible assets 6, 8 (35.515.713) (33.694.808) 3- Acquisition of financial assets 11 (909.864.560) (843.360.358) 4- Proceeds from disposal of financial assets 601.168.745 701.087.636 5- Interests received 247.825.764 383.365.799 6- Dividends received 28.000.000 20.000.000 7- Other cash inflows 508.056.272 131.467.603 8- Other cash outflows (269.463.796) (435.576.506) 9- Net cash provided by investing activities 170.607.181 (68.619.114) C- Cash flows from financing activities 1- Equity shares issued -- -- 2- Cash provided from loans and borrowings -- -- 3- Finance lease payments -- -- 4- Dividends paid 2.23 (32.031.330) -- 5- Other cash inflows -- -- 6- Other cash outflows -- -- 7- Net cash used in financing activities (32.031.330) -- D- Effect of exchange rate fluctuations on cash and cash equivalents 16.572.817 2.027.454 E- Net increase in cash and cash equivalents 248.763.401 202.271.166 F- Cash and cash equivalents at the beginning of the year 1.872.472.855 1.670.201.689 G- Cash and cash equivalents at the end of the year 14 2.121.236.256 1.872.472.855
The accompanying notes are an integral part of these unconsolidated financial statements.
216 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Consolidated Profıt Dıstrıbutıon For the Year Ended 31 December 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Audited Audited Prior Period(***) Current Period(**) December 31, Note December 31, 2017 2016 I. PROFIT DISTRIBUTION 1.1. CURRENT YEAR PROFIT(*) 258.151.501 125.420.416 1.2. TAX AND FUNDS PAYABLE (52.636.513) (23.316.813) 1.2.1. Corporate Income Tax(Income Tax) 35 (52.636.513) (23.316.813) 1.2.2. Income tax deduction -- -- 1.2.3. Other taxes and Duties -- -- A NET PROFIT(1.1 - 1.2) 205.514.988 102.103.603 1.3. PREVIOUS PERIOD LOSSES (-) -- -- 1.4. FIRST LEGAL RESERVE 9.409.831 4.392.611 1.5. STATUTORY FUND (-) -- -- B NET PROFIT DISTRIBUTION [(A-(1.3 + 1.4 + 1.5)] 196.105.157 97.710.992 1.6. FIRST DIVIDEND TO SHAREHOLDERS (-) -- 30.000.000 1.6.1. Holders of shares -- 30.000.000 1.6.2. Holders of Preferred shares -- -- 1.6.3. Holders of Redeemed shares -- -- 1.6.4. Holders of Participation Bond -- -- 1.6.5. Holders of Profıt and Loss sharing certificate -- -- 1.7. DIVIDEND TO PERSONNEL (-) -- 2.031.330 1.8. DIVIDENDS TO BOARD OF DIRECTORS (-) -- -- 1.9. SECOND DIVIDEND TO SHAREHOLDERS (-) -- -- 1.9.1. Holders of shares -- -- 1.9.2. Holders of Preferred shares -- -- 1.9.3. Holders of Redeemed shares -- -- 1.9.4. Holders of Participation Bond -- -- 1.9.5. Holders of Profıt and Loss sharing certificate -- -- 1.10. SECOND LEGAL RESERVE (-) -- 703.133 1.11. STATUTORY RESERVES (-) -- 5.142.829 1.12. EXTRAORDINARY RESERVES -- 59.833.700 1.13. OTHER RESERVES -- -- 1.14. SPECIAL FUNDS -- -- II. DISTRIBUTION OF RESERVES -- -- 2.1. DISTRIBUTION OF RESERVES -- -- 2.2. SECOND LEGAL RESERVES (-) -- -- 2.3. COMMON SHARES (-) -- -- 2.3.1. Holders of shares -- -- 2.3.2 Holders of Preferred shares -- -- 2.3.3. Holders of Redeemed shares -- -- 2.3.4 Holders of Participation Bond -- -- 2.3.5 Holders of Profıt and Loss sharing certificate -- -- 2.4. DIVIDENDS TO PERSONNEL (-) -- -- 2.5. DIVIDENDS TO BOARD OF DIRECTORS (-) -- -- III. PROFIT PER SHARE -- -- 3.1. HOLDERS OF SHARES 0,00368 0,00176 3.2. HOLDERS OF SHARES (%) 0,368 0,176 3.3. HOLDERS OF PREFERRED SHARES -- -- 3.4. HOLDERS OF PREFERRED SHARES (%) -- -- IV. DIVIDEND PER SHARE -- -- 4.1. HOLDERS OF SHARES -- 0,0006 4.2. HOLDERS OF SHARES (%) -- 0,06 4.3. HOLDERS OF PREFERRED SHARES -- -- 4.4. HOLDERS OF PREFERRED SHARES (%) -- --
(*) According to the Law no. 13 of the Profit Share Annunciation which was announced in Capital Markets Board of Turkey’s weekly bulletin numbered 2014/2, which was then published in the official gazette on 23 January 2014, the profit shares have been divided according to consolidated surplus. Dividend to be paid to the personnel amounting to TL 4.000.000, which is set aside in accordance with TAS 19, has been added to the profit for the period as of December 31, 2017. (**) Profit distribution table has not been filled yet, due to profit distribution proposal for the year 2017 has not prepared by the Board of Directors. (***) The Figures of 2016 is filled with the data which is “According to Legal Records” belongs to the Profit Distribution. The accompanying notes are an integral part of these unconsolidated financial statements.
Anadolu Sigorta 2017 Annual Report 217 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
1 General information
1.1 Name of the Company and the ultimate owner of the group
The shareholding structure of Anadolu Anonim Türk Sigorta Şirketi (“the Company”) is presented below. As of December 31, 2017, the shareholder having indirect control over the shares of Anadolu Anonim Türk Sigorta Şirketi (“the Company”) is Türkiye İş Bankası A.Ş. (“İş Bankası”). December 31, 2017 December 31, 2016 Shareholding Shareholding Rate Shareholding Shareholding Rate Name Amount (TL) (%) Amount (TL) (%)
Milli Reasürans T.A.Ş. 286.550.106 57,31 286.550.106 57,31 Other 213.449.894 42,69 213.449.894 42,69 Paid in Capital 500.000.000 100,00 500.000.000 100,00
1.2 Domicile and the legal structure of the Company, country and the address of the registered office (address of the operating centre if it is different from the registered office)
The Company was registered in Turkey and has the status of ‘Incorporated Company. The company address “Rüzgarlıbahçe Mahallesi, Kavak Sokak, No: 31 34805 Kavacık/İstanbul”. Company has nine regional offices; two of them established in İstanbul and others established in Antalya, İzmir, Samsun, Adana, Ankara, Trabzon and Bursa, a sales centre in Gaziantep and a branch in Turkish Republic of Northern Cyprus.
1.3 Business of the Company
The Company operates in almost all non-life insurance branches consisting of mainly accident, health, motor vehicles, air vehicles, water vehicles, marine, fire and natural disasters, general loss, credit, financial losses, and legal protection.
As of December 31, 2017, the Company serves through, 2.215 authorized agencies and 99 unauthorized agencies (December 31, 2016: 2.458 authorized agencies and 98 unauthorized agencies) of which, 2.314 agencies (December 31, 2016: 2.556 authorized).
1.4 Description of the main operations of the Company
The Company conducts its operations in accordance with the Insurance Law No.5684 (the “Insurance Law”) issued in June 14, 2007 dated and 26552 numbered Official Gazette and the communiqués and other regulations in force issued by the Turkish Treasury based on the Insurance Law. The Company operates in insurance branches as mentioned above Note 1.3 Business of the Company.
The Company’s shares have been listed on the Istanbul Stock Exchange (“ISE”). The company operates based on its own specific laws and regulations in matters of establishment, auditing, supervision/oversight, accounting and financial reporting in accordance Capital Market Law No: 6362, part of VIII and paragraph of 5 of Article 136.
1.5 The average number of the personnel during the period in consideration of their categories
The average number of the personnel during the period in consideration of their categories is as follows: December 31, 2017 December 31, 2016
Senior level managers 7 7 Directors 38 38 Officers 2 3 Intermediate directors 171 163 Contracted personnel 982 952 Total 1.200 1.163
218 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
1.6 Wages and similar benefits provided to the senior management
For the period ended December 31, 2017, wages and similar benefits provided to the members of the board of directors is amounting to TL 1.561.811 (December 31, 2016: TL 1.306.590), executives TL 5.777.795 (December 31, 2016: TL 5.192.515).
1.7 Keys used in the distribution of investment income and operating expenses (personnel, administrative, research and development, marketing and selling, services rendered from third parties and other operating expenses) in the financial statements
Procedures and principles related to keys used in the financial statements of the companies are determined in accordance with the 4 January 2008 dated and 2008/1 numbered “Communiqué Related to the Procedures and Principles for the Keys Used in the Financial Statements Being Prepared In Accordance With Insurance Accounting Plan” issued by the Turkish Treasury.
In accordance with the above mentioned Communiqué, insurance companies are allowed to transfer technical section operating expense to insurance section through methods determined by Turkish Treasury or by the Company itself. Methods determined by the Company should be approved by the Turkish Treasury, Known and exactly distinguishable operating expenses are distributed to related branches directly, while operating expenses are distributed to the sub-branches in accordance with the average of 3 ratios calculated by dividing “number of the policies produced within the last three years”, “gross premium written within the last three years”, and “number of the claims reported within the last three years” to the “total number of the policies”, “total gross written premiums” and the “total number of the claims reported”, respectively.
Income from the assets invested against non-life technical provisions is transferred to technical section from non-technical section; remaining income is transferred to the non-technical section.
1.8 Information on the financial statements as to whether they comprise an individual company or a group of companies
The accompanying financial statements comprise consolidated financial information of the Company and basis of the consolidation is detailed in note 2.2 - Consolidation.
The Company owns 20% of Anadolu Hayat Emeklilik Anonim Şirketi (“Anadolu Hayat”) and this associate have been consolidated in the accompanying consolidated financial statements by using the equity method of accounting.
The activities of Anadolu Hayat involve providing individual and group insurance and reinsurance services relating to group life, individual life, retirement and related personal accident branches, establishing, retirement funds, developing internal rules and regulations related to these funds, carrying out retirement, annual income insurance, portfolio management and custody contracts for the assets of the funds held in custody.
1.9 Name or other identity information about the reporting entity and the changes in this information after previous reporting date Trade name of the Company: Anadolu Anonim Türk Sigorta Şirketi Registered address of the head office: Rüzgarlıbahçe Mahallesi, Kavak Sokak, No: 31 34805 Kavacık/İstanbul The web page of the Company: www.anadolusigorta.com.tr
The information presented above has not any change since the end of the previous reporting period.
1.10 Events after the reporting date
After the balance sheet date, there has been no change in the company’s activities, the registration of these activities, the document structure and Company policies.
As of December 31, 2017, the consolidated financial statements prepared has been approved by the Board of Directors of the Company on January 29, 2018.
Anadolu Sigorta 2017 Annual Report 219 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
2 Summary of significant accounting policies
2.1 Basis of preparation
2.1.1 Information about the principles and the specific accounting policies used in the preparation of the financial statements
In accordance with Article 136(5) in Section VIII of the Capital Markets Law, numbered 6362 insurance companies have to comply with their own specific laws and regulations in matters of establishment, auditing, supervision/oversight, accounting and financial reporting. Therefore, the Company maintains its books of account and prepares its financial statements in accordance with the Turkish Accounting Standards (“TAS”), Turkish Financial Reporting Standards (“TFRS”), and other accounting and financial reporting principles, statements and guidance (collectively “the Reporting Standards”) in accordance with the “Communiqué Related to the Financial Reporting of Insurance, Reinsurance, and Individual Pension Companies” as promulgated by the Turkish Treasury based on Article 18 of the Insurance Law and Article 11 of the 4632 numbered Individual Pension Savings and Investment System Law (‘‘Individual Retirement Law’’).
According to numbered 4th related law Accounting for subsidiaries, associates, joint ventures is, consolidated financial statements, financial statements which disclosed public regulated by the Turkish Treasury.
The company prepare their financial statements are regulated in form and content ın order to compare the financial statements of prior period and with other companies according to “Communiqué on Presentation of Financial Statements “ which is published in the Official Gazette dated April 18, 2008 and numbered 26851.
The financial statements are prepared in accordance with the accounting and financial reporting regulations in force in accordance with the insurance legislation and the provisions of Turkish Accounting Standards on matters not regulated by them.
2.1.2 Other accounting policies appropriate for the understanding of the financial statements
Accounting in hyperinflationary countries
Financial statements of the Turkish entities have been restated for the changes in the general purchasing power of the Turkish Lira based on “TAS 29 - Financial Reporting in Hyperinflationary Economies” as of December 31, 2004. TAS 29 requires that financial statements prepared in the currency of a hyperinflationary economy be stated in terms of the measuring unit current at the reporting date, and that corresponding figures for previous years be restated in the same terms.
With respect to the declaration of the Turkish Treasury with the article dated April 4, 2005 and numbered 19387, financial statements as of December 31, 2004 are adjusted for the opening balances of 2005 in accordance with the section with respect to inflation accounting of the Capital Markets Board (“CMB”) Communiqué No: 25 of Series XI, “Communiqué on Accounting Standards in Capital Market” published in the Official Gazette dated January 15, 2003 and numbered 25290. Inflation accounting is no longer applied starting from January 1, 2005, in accordance with the same declaration of the Turkish Treasury. Accordingly, as of December 31, 2017, non-monetary assets and liabilities and items included in shareholders’ equity including paid-in capital recognized or recorded before December 31, 2004 in order to reflect inflation adjustments. Non-monetary assets and liabilities and items included in shareholders’ equity including paid-in capital recognized or recorded after December 31, 2004 are measured at their nominal values.
Other accounting policies
Information regarding other accounting polices is disclosed above in “Note 2.1.1 - Information about the principles and the specific accounting policies used in the preparation of the financial statements” and each under its own caption in the following sections of this report.
2.1.3 Valid and presentation currency
The accompanying consolidated financial statements are presented in TL, which is the Company’s functional currency.
2.1.4 Rounding scale of the amounts presented in the financial statements
Financial information presented in TL, has been rounded to the nearest TL values.
220 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
2.1.5 Basis of measurement used in the preparation of the financial statements
The accompanying financial statements are prepared on the historical cost basis as adjusted for the effects of inflation that lasted until December 31, 2004, except for the financial assets at fair value through profit or loss, available-for-sale financial assets, derivative financial instruments and associates which are measured at their fair values unless reliable measures are available.
2.1.6 Accounting policies, changes in accounting estimates and errors
No changes or errors have occured in the accounting policies for the current period.
Explanations on accounting estimates are given in the “Note 3” which is critical accounting estimates and judgments.
2.2 Consolidation
“Circular Related to the Preparation of the Consolidated Financial Statements of Insurance, Reinsurance, and Individual Pension Companies” issued by the Turkish Treasury in the December 31, 2008 dated and 27097 numbered Official Gazette, has been in force since March 31, 2009. Accordingly, consolidated financial statements are also prepared using the equity method of accounting to consolidate the Company’s associate; Anadolu Hayat Emeklilik A.Ş. (“Anadolu Hayat”).
Accordingly, consolidated financial statements are prepared using the equity method of accounting to consolidate the Company’s associate; Anadolu Hayat.
2.3 Segment reporting
An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company’s other components, whose operating results are reviewed regularly by the Board of Directors (being chief operating decision maker) to make decisions about resources allocated to each segment and assess its performance, and for which discrete financial information is available. Since the main economic environment, where the Company operates, is Turkey, a geographical segment reporting has not been presented. A business segment reporting of the Company is presented in Note 5 in accordance with TFRS 8- Operating Segments standard.
2.4 Foreign currency transactions
Transactions are recorded in TL, which is the Company’s functional currency. Transactions in foreign currencies are recorded at the rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at exchange rates ruling at the reporting date and foreign currency exchange differences are offset and all exchange differences are recognized in the statement of income.
Foreign currency exchange differences of unrecognized gains or losses arising from the difference between their fair value and the discounted values calculated per effective interest rate method of foreign currency available-for-sale financial assets are recorded in “Revaluation of financial assets” under equity and the realized gain or losses are recognized directly in the statement of income.
2.5 Tangible assets
Tangible assets of the Company are recorded at their historical costs that have been adjusted for the effects of inflation until the end of December 31, 2004. There have been no other inflationary adjustments for these tangible assets for the following years and therefore they have been recorded at their costs restated for the effects of inflation until December 31, 2004. Tangible assets that have been purchased after January 1, 2005 have been recorded at their costs after deducting any exchange rate differences and finance expenses.
The company has started to show based on the revaluation model by measuring over fair value as of the third quarter of the 2015 year by making changes in the use of the property which is measuring the cost model in the financial statements before.
Buildings for own use is recognized by fair value that determined in valuations made by independent valuation experts who have professional competency by reducing their following accumulated depreciation. Accumulated depreciation which is at the date of revaluation net of gross book value and net amount brought to values after revaluation.
Anadolu Sigorta 2017 Annual Report 221 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Increase of revaluation results in the carrying value of use of land and building account in equity in the balance sheet under “Other Capital Account” as the net of tax effects. As a result of the evaluation of real estate an increase on the corresponding impairments are deducted from the fund; all other decrease are reflected the profit/loss account.
Gains/losses arising from the disposal of the tangible assets are calculated as the difference between the net carrying value and the proceeds from the disposal of related tangible assets and reflected to the statement of income of the related period.
Land is not depreciated to have indefinite life. Depreciation are allocated based on the useful life of tangible assets at cost or revalued amounts of tangible assets by using the straight-line method basis.
Maintenance and repair costs incurred in the ordinary course of the business are recorded as expense.
There are no pledges, mortgages and other encumbrances on tangible fixed assets.
There are no changes in accounting estimates that have significant effect on the current period or that are expected to have significant effect on the following periods.
Depreciation is recognized in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of tangible assets since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset.
Depreciation rates and estimated useful lives are as follows: Estimated Useful Depreciation Tangible Assets Lives (years) Rates (%) Buildings for own use 50 2,0 Machinery and equipment 3 - 16 6,3 - 33,3 Furniture and fixtures 4 - 16 6,3 - 25,0 Vehicles 5 20,0 Other tangible assets (including leasehold improvements) 5 - 10 10,0 - 20,0 Leased tangible assets 4 - 10 10,0 - 25,0
2.6 Investment properties
Investment properties are held either to earn rentals and/or for capital appreciation or for both.
In the event of investment property of first registration is measured on fair value including transaction costs after measured at cost. The changes which result of fair value valuation recognised in the income statement.
Any gains or losses on the retirement or disposal of an investment property are recognized in profit or loss in the period of retirement or disposal.
Investment properties are derecognized when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal.
The fair value on the date of change in the usage is considered as cost in the reclassification recognition when investment property that measured with fair value is reclassified as a tangible asset.
2.7 Intangible assets
The Company’s intangible assets consist of computer software, goodwill and advances paid for tangible assets.
Intangible assets are recorded at cost in compliance with “TAS 38 - Accounting for intangible assets”. The cost of the intangible assets purchased before December 31, 2004 are restated from the purchasing dates to December 31, 2004, the date the hyperinflationary period is considered to be ended. The intangible assets purchased after this date are recorded at their historical costs.
222 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Amortization is charged on a straight-line basis over their estimated useful lives over the cost of the asset. The period of redemption of intangible assets is 3 to 15 years.
Goodwill represents the excess of the cost of an acquisition over the fair value of the Company’s share of the net identifiable assets of the acquired subsidiary/associate at the date of the acquisition. Goodwill on acquisitions of associates is included in ‘investments in associates’ and is tested for impairment as part of the overall balance. Separately recognized goodwill is tested annually for impairment and carried at cost less accumulated impairment losses, Impairment losses on goodwill are not reversed. Gain or losses on the disposal of an entity includes the carrying amount of goodwill relating to the entity disposed of.
For the purpose of impairment testing, goodwill is allocated to cash-generating units. The allocations made to those cash- generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arises.
The Company has acquired the health portfolio of Anadolu Hayat Emeklilik A.Ş. at August 31, 2004 with all of its rights and liabilities. The value at acquisition of the portfolio amounting to TL 16.250.000 is capitalized as goodwill by the Company.
2.8 Financial assets
A financial asset is any asset that is cash, an equity instrument of another entity, a contractual right to receive cash or another financial asset from another entity; or to exchange financial assets or financial liabilities with another entity under conditions that are potentially favourable to the entity.
Financial assets are classified in four categories; as financial assets held for trading, available-for-sale financial assets, held to maturity financial assets, and loans and receivables.
Financial assets at fair value through profit or loss are presented as financial assets held for trading in the accompanying financial statements and trading securities and derivatives are included in this category. Financial assets at fair value through profit or loss measured at their fair values and gain/loss arising due to changes in the fair values of related financial assets is recorded in profit/ loss. Interest income earned on trading purpose financial assets and the difference between their fair values and acquisition costs are recorded as interest income in the statement of income. In case of disposal of such financial assets before their maturities, the gains/losses on such disposal are recorded under trading income/losses. Accounting policies of derivatives are detailed in note 2.10 - Derivative financial instruments.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Company provides money, goods or services directly to a debtor with no intention of trading the receivable. Loans and receivables those are not interest earning are measured by discounting of future cash flows less impairment losses, and interest earning loans and receivables are measured at amortized cost less impairment losses.
Held to maturity financial assets are the financial assets with fixed maturities and fixed or pre-determined payment schedules that the Company has the intent and ability to hold until maturity, excluding loans and receivables. Subsequent to initial recognition, held to maturity financial assets and loans and receivables are measured at amortized cost using effective interest rate method less impairment losses, if any. The Company has no financial assets that are not allowed to be classified as held to maturity financial assets for two years due to the tainting rules applied for the breach of classification rules.
Available-for-sale financial assets are the financial assets other than assets held for trading purposes, held-to-maturity financial assets and loans and receivables.
Anadolu Sigorta 2017 Annual Report 223 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Available-for-sale financial assets are initially recorded at cost and subsequently measured at their fair values. Unrecognized gains or losses derived from the difference between their fair value and the discounted values calculated per effective interest rate method are recorded in “Revaluation of financial assets” under shareholders’ equity. Upon disposal, the realized gain or losses are recognized directly in the statement of income.
The determination of fair values of financial instruments not traded in an active market is determined by using valuation techniques. Observable market prices of the quoted financial instruments which are similar in terms of interest, maturity and other conditions are used in determining the fair value.
The Company has accounted equity shares classified as available-for-sale according to quoted market prices or dealer price quotations for financial instruments traded in active markets or according to cost less impairment losses for financial instruments not traded in active markets.
Securities are recognized and derecognized at the date of settlement.
Associates; Anadolu Hayat has been consolidated in the accompanying consolidated financial statements by using the equity method of accounting.
A financial asset is derecognized when the control over the contractual rights that comprise that asset is lost. This occurs when the rights are realized, expire or are surrendered.
Impairment on financial asset
Financial assets or group of financial assets are reviewed at each reporting date to determine whether there is objective evidence of impairment. If any such indication exists, the Company estimates the amount of impairment. A financial asset is impaired if, and only if, there is objective evidence that the expected future cash flows of financial asset or group of financial assets are adversely affected by an event(s) (“loss event(s)”) incurred subsequent to recognition. The losses expected to incur due to future events are not recognized even if the probability of loss is high.
Receivables are presented net of specific allowances for uncollectibility. Specific allowances are made against the carrying amounts of loans and receivables that are identified as being impaired based on regular reviews of outstanding balances to reduce these loans and receivable to their recoverable amounts.
The recoverable amount of an equity instrument is its fair value. The recoverable amount of debt instruments and purchased loans measured to fair value is calculated as the present value of the expected future cash flows discounted at the current market rate of interest.
An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized. For financial assets measured at amortized cost and available-for-sale financial assets that are debt securities, the reversal is recognized in the statement of operations. For available-for-sale financial assets that are equity securities, the reversal is recognized directly in equity.
2.9 Impairment on assets
Impairment on tangible and intangible assets
On each reporting date, the Company evaluates whether there is an indication of impairment of tangible and intangible assets. If there is an objective evidence of impairment, the asset’s recoverable amount is estimated in accordance with the “TAS 36 - Impairment of Assets” and if the recoverable amount is less than the carrying value of the related asset, a provision for impairment loss is made.
Rediscount and provision expenses of the period are detailed in Note 47
224 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
2.10 Derivative financial instruments
As of December 31, 2017, the Company’s the marketable securities in the trade book totals to TL 6.558.978 (December 31, 2016: TL 6.649.637). These securities also have derivate warranty and as of the report date have no express warranty (December 31, 2016: None).
As of December 31, 2017, the Company has accounted in income accruals and other financial liabilities amounting to TL 14.828.603 (December 31, 2016: None) that is increase in value and TL (8.167.487) (December 31, 2016: None) that is decrease in value respectively, due to forward foreign currency agreement.
Derivative instruments are treated as held for trading financial assets in compliance with the standard TAS 39 - Financial Instruments: Recognition and measurement.
Derivative financial instruments are initially recognized at their fair value.
The receivables and liabilities arising from the derivative transactions are recognized under the off-balance sheet accounts through the contract amounts.
Derivative financial instruments are subsequently remeasured at fair value and positive fair value differences are presented either as “financial assets held for trading” and negative fair value differences are presented as “other financial liabilities” in the accompanying financial statements. All unrealized gains and losses on these instruments are included in the statement of income.
2.11 Offsetting of financial assets
Financial assets and liabilities are offset and the net amount is presented in the balance sheet when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.
Income and expenses are presented on a net basis only when permitted by the Reporting Standards, or for gains and losses arising from a group of transactions resulting from the Company’s similar activities like trading transactions.
2.12 Cash and cash equivalents
Cash and cash equivalents, which is the basis for the preparation of the statement of cash flows includes cash on hand, cheques received, other cash and cash equivalents, demand deposits and time deposits at banks having an original maturity less than 3 months which are ready to be used by the Company or not blocked for any other purpose.
2.13 Share capital
The shareholder having indirect control over the shares of the Company is İş Bankası Group. The share capital and ownership structure of the Company as of December 31, 2017 and December 31, 2016 are as follows: December 31, 2017 December 31, 2016 Shareholding Shareholding Shareholding Shareholding Name Amount (TL) Rate (%) Amount (TL) Rate (%)
Milli Reasürans T.A.Ş. 286.550.106 57,31 286.550.106 57,31 Other 213.449.894 42,69 213.449.894 42,69 Paid in capital 500.000.000 100,00 500.000.000 100,00
Sources of capital increases during the period
The company has not performed capital increase as of December 31, 2017 (December 31, 2016: None).
Anadolu Sigorta 2017 Annual Report 225 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Privileges on common shares representing share capital
As of December 31, 2017, the issued share capital of the Company is TL 500.000.000 (December 31, 2016: TL 500.000.000) and The Company unregistered Group 150 A shares which each of value is TL 1,5 as of April 11, 2013 in which approved in Main Article of the Company dated in April 11, 2013. The share capital of the Company consists of 50.000.000.000 (December 31, 2016: 50.000.000.000 shares) issued shares with TL 1 nominal value each.
Registered capital system in the Company
The Company has accepted the registered capital system. As of December 31, 2017, the Company’s registered capital is TL 700.000.000 (December 31, 2016: TL 700.000.000).
Repurchased own shares by the Company
None.
2.14 Insurance and investments contracts - classification
An insurance contract is a contract under which the Company accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder. Insurance risk covers all risk except for financial risks. All premiums have been received within the coverage of insurance contracts recognized as revenue under the account caption “written premiums”.
Investment contracts are those contracts which transfer financial risk with no significant insurance risk. Financial risk is the risk of a possible future change in a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index or other variable, provided, that it is not specific to a party to the contract, in the case of a non-financial variable.
As of the reporting date, the Company does not have a contract which is classified as an investment contract.
2.15 Insurance contracts and investment contracts with discretionary participation feature
Discretionary participation feature within insurance contracts and investment contracts is the right to have following benefits in addition to the guaranteed benefits. (i) that are likely to comprise a significant portion of the total contractual benefits; (ii) whose amount or timing is contractually at the discretion of the Issuer; and (iii) that are contractually based on: (1) the performance of a specified pool of contracts or a specified type of contract; (2) realized and/or unrealized investments returns on a specified pool of assets held by the Issuer; or (3) the profit or loss of the Company, Fund or other entity that issues the contract.
As of the reporting date, the Company does not have any insurance or investment contracts that contain a discretionary participation feature.
2.16 Investment contracts without discretionary participation feature
As of the reporting date, the Company does not have any insurance contracts and investment contracts without discretionary participation feature.
2.17 Liabilities
Financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to another entity. Financial liabilities of the Company are measured at their discounted values. A financial liability is derecognized when it is extinguished.
226 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
2.18 Income taxes
Corporate tax
Statutory income is subject to corporate tax at 20%.(However, according to the Provisional Article 10 added to the Corporate Tax Law, the corporate tax rate of 20% is calculated as 22% for the corporate earnings for the fiscal periods starting in the related year for the institutions whose special accounting periods are assigned to the taxation periods of 2018, 2019 and 2020 will be implemented. This rate is applied to accounting income modified for certain exemptions (like dividend income) and deductions (like investment incentives), and additions for certain non-tax deductible expenses and allowances for tax purposes. If there is no dividend distribution planned, no further tax charges are made.
Dividends paid to the resident institutions and the institutions working through local offices or representatives are not subject to withholding tax. The withholding tax rate on the dividend payments other than the ones paid to the non-resident institutions generating income in Turkey through their operations or permanent representatives and the resident institutions is 15%. In applying the withholding tax rates on dividend payments to the non-resident institutions and the individuals, the withholding tax rates covered in the related Double Tax Treaty Agreements are taken into account. Appropriation of retained earnings to capital is not considered as profit distribution and therefore is not subject to withholding tax.
Prepaid taxes are calculated and paid at the rates valid for the earnings of the related years. The payments can be deducted from the annual corporate tax calculated for the whole year earnings.
In Turkey, there is no procedure for a final and definite agreement on tax assessments. Companies file their tax returns with their tax offices by the end of 25th of the fourth month following the close of the accounting period to which they relate. Tax returns are open for five years from the beginning of the year that follows the date of filing during which time the tax authorities have the right to audit tax returns, and the related accounting records on which they are based, and may issue re-assessments based on their findings.
Deferred taxes
In accordance with TAS 12 - Income taxes, deferred tax assets and liabilities are recognized on all taxable temporary differences arising between the carrying values of assets and liabilities in the financial statements and their corresponding balances considered in the calculation of the tax base, except for the differences not deductible for tax purposes and initial recognition of assets and liabilities which affect neither accounting nor taxable profit.
Deferred tax assets and liabilities are reported as net in the financial statements if, and only if, the Company has a legally enforceable right to offset current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity.
In case where gains/losses resulting from the subsequent measurement of the assets are recognized in the statement of income, then the related current and/or deferred tax effects are also recognized in the statement of income. On the other hand, if such gains/losses are recognized as an item under equity, then the related current and/or deferred tax effects are also recognized directly in the equity.
Transfer pricing
In Turkey, the transfer pricing provisions have been stated under the Article 13 of Corporate Tax Law with the heading of “disguised profit distribution via transfer pricing”. The General Communiqué on disguised profit distribution via Transfer Pricing, dated November 18, 2007 sets details about implementation.
If a taxpayer enters into transactions regarding sale or purchase of goods and services with related parties, where the prices are not set in accordance with arm’s length principle, then related profits are considered to be distributed in a disguised manner through transfer pricing. Such disguised profit distributions through transfer pricing are not accepted as tax deductible for corporate income tax purposes.
Anadolu Sigorta 2017 Annual Report 227 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
2.19 Employee benefits
Pension and other post-retirement obligations
A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee and his/her dependants will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.
Employees of the Company are the members of “Anadolu Anonim Türk Sigorta Şirketi Pension Fund” which is established in accordance with the temporary Article 20 of the Social Security Act No: 506. As per the temporary sub article No: 20 of the Article 73 of the Social Security Law, pension funds should be transferred to the Social Security Institution within three years after the publication of the a aforementioned Law published in the Official Gazette numbered 26870 and dated May 8, 2008. The related three-year transfer period has been prolonged for two years by the Cabinet decision, which was published on the Official Gazette dated April 9, 2011. Accordingly, the three-year period expired on May 8, 2011 was extended to the May 8, 2015.
The principles and applications of the transfer will be determined by the Decree of the Council of Ministers separately. Lastly, first paragraph of temporary 20th article of 5510 numbered Law, article 51 of the law regarding changing of several laws and delegated legislations and the law of occupational health and safety which are published in 23 April 2015 dated Official Gazette is changed as following; insurance and reinsurance companies, chambers of commerce, industry chambers, stock exchanges or which constitutes their union personnel and associates of funds “The Council is authorized to determine the date of transfer within the scope of article 20th of the law, 506 banks, insurance and reinsurance companies, chambers of commerce, industry chambers, stock exchanges or which constitutes their union personnel and associates of funds to the social security institution. The date of the transfer of the first paragraph of Article 4 of this law pension fund contributors as are considered insured”.
According to this arrangement the bank within the scope of Act 506, article No.20, insurance and reinsurance companies, chambers of commerce, industry chambers, stock exchanges or associations which constitute their union personnel and associates of funds are required to be transferred until 08.05.2015 to Social Security Administration, authority to determine the date of transfer is given the Council of Ministers thus the transfer of the funds has been postponed to an unknown date.
The application which containing temporary transfer provision on June 19, 2008 cancellation and cessation of claims by Republican People’s Party, it is rejected in accordance with the decision at the court’s meeting on March 30, 2011.
The cash value of the obligations of the pension fund for each member of the fund including members left the fund as of the transfer date will be calculated according to following assumptions: a) Technical deficit rate of 9,8% shall be used in the actuarial calculation of the value in cash, and. b) Gains and losses of the funds stems from benefits covered by the aforementioned Law taken into accounts to calculate present value of the obligations.
Employee termination benefits
In accordance with existing Turkish Labour Law, the Company is required to make lump-sum termination indemnities to each employee who has completed one year of service with the Company and whose employment is terminated due to retirement or for reasons other than resignation or misconduct. The amount payable for each year of service the employee union members; death, disability, retirement, pension bonding states is 60 days, ın other provinces it amounted 45 daily wages. In other employees, it is one month’s salary. The computation of the liability is based upon the retirement pay ceiling announced by the Government. The applicable ceiling amount as of December 31, 2017 is TL 4.732,48 (December 31, 2016: TL 4.426,16). In Accordance IAS 19 which published by Public Company Accounting Oversight Board(PCAOB) dated March 12, 2013 is about “Benefits Employee Accounting Standard” and defined by beginning from December 31, 2012 net defined benefit liability of the actuarial gains and losses arising on re-measurement should be recognized in other comprehensive income under shareholders’ equity and this effect should be applied retrospectively. The Company started to account current actuarial gains and losses under equity (other profit reserves) due to the fact that prior period actuarial gains and losses have remained below the materiality.
228 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
The Company accounted for employee severance indemnities using actuarial method in compliance with the TAS 19 - Employee Benefits, The major actuarial assumptions used in the calculation of the total liability as of December 31, 2017 and December 31, 2016 are as follows: December 31, 2017 December 31, 2016 Discount rate 4,21% 4,61% Expected rate of salary/limit increase 7,00% 5,83% Estimated employee turnover rate 3,27% 3,27%
Expected rate of salary/limit increase above was determined according to the government’s annual inflation forecasts.
Other benefits
The Company has provided for undiscounted short-term employee benefits earned during the period as per services rendered in compliance with TAS 19 in the accompanying financial statements.
2.20 Provisions
A provision is made for an existing obligation resulting from past events if it is probable that the commitment will be settled and a reliable estimate can be made of the amount of the obligation. Provisions are calculated based on the best estimates of management on the expenses to incur as of the reporting date and, if material, such expenses are discounted to their present values. If the amount is not reliably estimated and there is no probability of cash outflow from the Company to settle the liability, the related liability is considered as “contingent” and disclosed in the notes to the financial statements.
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company. Contingent assets are not recognized in financial statements since this may result in the recognition of income that may never be realized. Contingent assets are assessed continually to ensure that developments are appropriately reflected in the financial statements. If it has become virtually certain that an inflow of economic benefits will arise, the asset and the related income are recognized in the financial statements of the period in which the change occurs. If an inflow of economic benefits has become probable, the Company discloses the contingent asset.
2.21 Revenue recognition
Written premiums and claims paid
Written premiums represent premiums on policies written during the period net of taxes, premiums of the cancelled policies which were produced in prior periods and premium ceded to reinsurance companies,. Premiums ceded to reinsurance companies are accounted as “written premiums, ceded” in the statement of income.
Claims are recognized as expense as they are paid. Outstanding claims provision is provided for both reported unpaid claims at period-end and incurred but not reported claims. Reinsurer’s shares of claims paid and outstanding claims provisions are off-set against these reserves.
Subrogation, salvage and quasi income
According to the Circular 2010/13 dated September 20, 2010; the Company may account for income accrual for subrogation receivables without any voucher after the completion of the claim payments made to the insurer. If the amount cannot be collected from the counterparty insurance company, the Company provides provision for uncollected amounts due for six months. If the counter party is not an insurance Company, the provision is provided after four months. As of the reporting date, in accordance with the related circular the Company provided TL 47.325.075 (December 31, 2016: TL 43.739.284) subrogation receivables and recorded TL 50.653.264 (December 31, 2016: TL 47.016.782) (Note 12) net subrogation and salvage receivables under receivables from main operations. The Company provided allowance for uncollected subrogation receivables amounting to TL 8.337.019 (December 31, 2016: TL 8.836.586) (Note 12) in accordance with circular.
Anadolu Sigorta 2017 Annual Report 229 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
For the years ended December 31, 2017 and 2016, salvage and subrogation collected are as follows: December 31, 2017 December 31, 2016
Motor vehicles 375.105.975 341.775.724 Third party liability for motor vehicles (MTPL) 13.422.397 10.694.282 Fire and natural disaster 4.521.486 3.961.070 Marine 1.485.087 2.799.577 Water vehicles 1.004.392 10.222 General responsibility 812.773 103.795 General losses 307.007 313.114 Financial losses 144.816 -- Accident 28.880 21.706 Legal protection 475 529 Credit -- 467.351 Air crafts -- 10.588 Total 396.833.288 360.157.958
As of December 31, 2017 and December 31, 2016, accrued subrogation and salvage income per branches is as follows: December 31, 2017 December 31, 2016
Motor vehicles 37.076.373 37.302.823 Third party liability for motor vehicles (MTPL) 5.926.818 4.565.163 Fire and natural disaster 1.321.152 1.883.852 General losses 1.657.069 490.114 Marine 2.991.999 2.688.121 Accident 1.544.801 -- Water vehicles 122.868 78.448 General responsibility 12.184 8.261 Total 50.653.264 47.016.782
Commission income and expense
As further disclosed in Note 2.24 - Reserve for unearned premiums, commissions paid to the agencies related to the production of the insurance policies and the commissions received from the reinsurance firms related to the premiums ceded 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 expense
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.
230 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
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.
Dividends
Dividend income is recognized when the Company’s right to receive payment is ascertained.
2.22 Leasing transactions
The maximum period of the lease contracts is 10 years. Tangible assets acquired by way of finance leases are recorded in tangible assets and the obligations under finance leases arising from the lease contracts are presented under “Finance Lease Payables” account in the financial statements. In the determination of the related asset and liability amounts, the lower of the fair value of the leased asset and the present value of leasing payments is considered. Financial costs on leasing agreements are expanded in lease periods at a fixed interest rate.
If there is impairment in the value of the assets obtained through finance lease and in the expected future benefits, the leased assets are measured at net realizable value. Depreciation for assets obtained through financial lease is calculated in the same manner as tangible assets.
Payments made under operating leases are recognized in the statement of income on a straight-line basis over the term of the lease.
2.23 Dividend distribution
Based on the guidelines and principals issued by the CMB dated January 27, 2010 for the distribution of dividends from the profit generated from operating activities in 2009, there is no requirement of minimum profit distribution for joint stock companies that are traded in the stock market and in this context, it has decided that dividend distribution will be performed in accordance with principles in Dividend Declaration numbered II-19.1 of the Board, clauses contained in the articles of association of the partnership and dividend policies which are disclosed the public of companies.
Additionally, as stated within the aforementioned decision of CMB, for entities required to prepare consolidated financial statements, it has been agreed upon to require the net distributed profit calculations to be performed on the net profit for the period as stated on the consolidated financial statements, so long that the distribution can be funded through statutory resources.
Board of Directors proposal which is related with distribution of the profits gained from the operations of the 2016 was approved unanimously in the framework of the General Assembly dated March 24,2017.
Consequently, TL 30.000.000 of the distributable net profit of the period that is amounting to TL 83.459.618 which is remaining amount after deducting the legal reserve amounting to TL 4.392.611, distributed to shareholders as cash dividend since March 28, 2017. The Company distributed dividend amounting to TL 2.031.330 to its employee and reserved second legal reserve and statutory reserve amounting to TL 703.133 and TL 5.142.829 respectively. The remaining of the distributable net profit of the period which is amounting to TL 45.582.326 was transferred to extraordinary reserves (2016: There was no profit distribution.).
2.24 Reserve for unearned premiums
In accordance with the “Communiqué on Technical Reserves for Insurance, Reinsurance and Pension Companies and the Related Assets That Should Be Invested Against Those Technical Reserves” (“Communiqué on Technical Reserves”) which was issued in 26606 numbered and August 7, 2007 dated Official Gazette and put into effect starting from January 1, 2008, the reserve for unearned premiums represents the proportions of the gross premiums written without deductions of commission or any other allowance, in a period that relate to the period of risk subsequent to the reporting date for all short-term insurance policies. For marine cargo policies with indefinite expiration dates, 50% of the remaining portion of the premiums accrued in the last three months, less any commissions is also provided as unearned premium reserves.
Anadolu Sigorta 2017 Annual Report 231 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Reserve for unearned premiums is calculated for all insurance contracts except for the contracts for which the mathematical reserve is provided. Reserve for unearned premiums is also calculated for the annual premiums of the annually renewed long term insurance contracts.
Since the Communiqué on Technical Reserves was effective from January 1, 2008, the Turkish Treasury issued July 4, 2007 dated and 2007/3 numbered “Circular to Assure the Compliance of the Technical Reserves of Insurance, Reinsurance and Pension Companies With the Insurance Law No, 5684” (“Compliance Circular”) to regulate the technical provisions between the issuance date and enactment date of the Communiqué on Technical Reserves. In accordance with the Compliance Circular, it is stated that companies should consider earthquake premiums written after June 14, 2007 in the calculation of the reserve for unearned premiums while earthquake premiums were deducted in the calculation of the reserve for unearned premiums before. Accordingly, the Company has started to calculate reserve for unearned premiums for the earthquake premiums written after June 14, 2007, while the Company had not calculated reserve for unearned premiums for the earthquake premiums written before June 14, 2007.
According to the 2009/9 Numbered Circular Related to Application of Technical Reserves issued on March 27, 2009 which published by Undersecretariat of Treasury reserve for unearned premiums is calculated by taking into account that all polices become active at 12:00 at noon and end at 12:00 at noon.
According to the Communiqué on Technical Reserves, for the calculation of unearned premium reserves of foreign currency indexed insurance agreements, foreign currency selling exchange rates announced by Turkish Central Bank will be considered, unless there is a specified exchange rate in the agreement.
As of the reporting date, the Company has provided reserve for unearned premiums amounting to TL 2.349.673.619 (December 31, 2016: TL 2.228.090.805) and reinsurer share in reserve for unearned premiums amounting TL 610.721.482 (December 31, 2016: TL 400.082.643). Furthermore, reserve for unearned premiums includes Social Security Institution (“SSI”) share amounting to TL 58.817.233 (December 31, 2016: TL 75.059.218).
2.25 Provision for outstanding claims
Claims are recorded in the year in which they occur, based on reported claims or on the basis of estimates when not reported. Provision for outstanding claims represents the estimate of the total reported costs of notified claims on an individual case basis at the reporting date as well as the corresponding handling costs. Incurred but not reported claims (“IBNR”) are also provided.
Claims incurred before the accounting periods but reported subsequent to those dates are considered as incurred but not reported (“IBNR”) claims.
In accordance with December 5, 2014 dated and 2014/16 numbered “Circular for Provision for Outstanding Claims” of Turkish Treasury, by the Undersecretariat of Treasury the compensation that incurred but was not reported (IBNR) since January 1, 2015 is being calculated with the best of ability of the company’s actuary. The best estimate assumption is calculating the claims which will be paid in the future according to a model and assumption, and by utilizing the risk free return curves to calculate today’s value.
The methods, corrections, the suitable data and the growth factor choice and the intervention is being calculated by the company’s actuary using actuarial methods. According to Actuaries Regulations Law no. 11, an actuarial report has been sent the Undersecretariat of Treasury and these calculations are detailed there. Company’s actuary tests loss development factors with some methods by using software tools and then making some choices for actuarial analysis.
In the compulsory traffic branch the physical and bodily claims, and in the General Responsibility branch the Employer Third Party Liability, Compulsory Medical Malpractice, Professional Liability and other liability branches are being analysed separately.
232 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
As of December 31, 2017, the Company’s actuary has used 9% which is the latest statutory rate of interest in the Official Gazette for the discount process in accordance with “General Instructions Regarding The Cash Flow From Provision for Outstanding Claim And Their Discounts” which was published in June 10th, 2016 numbered 2016/22 which regulates the processes involving the discount of cash flow from provision for outstanding claim. As of December 31, 2017, Company has made a net discount of TL 608.482.096 (December 31, 2016: TL 483.203.785) in the calculation of the outstanding claims.
As of December 31, 2016, the Company has used the gradual transition curve which was published by the Undersecretariat of Treasury’s “General Instructions Regarding to the Changes in the General Instructions Regarding Provision for Outstanding Claim (2014/16)” which was published in February 29th, 2016 with the number 2016/11. The company has used these gradual transition curve with 100% accuracy and has reflected the calculations on the official statements as well as possible as of December 31, 2016 and the Company has continued the method exact same like prior year too as of December 31, 2017.
According to Provisional Article 12 of the Regulation on the Amendment of the Regulation on Tariff Implementation Principles in the Motor Vehicles Compulsory Third Party Liability Insurance, published in the Official Gazette dated July 11, 2017 and numbered 30121, high claim frequency level and/or vehicle groups the “Risk Insured Pool” has been announced.
In this context, the premiums and claims related to the traffic insurance policies issued within the scope of the pool starting on April 12, 2017 have started to be shared among insurance companies within the framework of the principles determined by the Undersecretariat of Turkish Motor Vehicle Office.
The company, after the change in legislation, by the Turkish Motor Vehicles office (TMTB) within the scope of monthly declarations, accounting records were created on premiums, claims and commission amounts transferred to the pool and transferred to the pool within the scope of the share, and also the receipt was made for the amounts for the period not yet communicated by the Turkish Motor Vehicles office.
In accordance with the Communiqué on the Amendment of the Communiqué on the Procedures and Principles of the Contribution of the Institution in the Compulsory Financial Liability Insurance for Medical Malpractice Law, published in the Official Gazette dated 7 October 2017 and numbered 30203, the Compulsory Financial Liability Insurance for Medical Malpractice the rules for premium and claim sharing have been established. The said transactions related to the sharing are decided to be managed by Güneş Sigorta, which has a licence for general liability insurance business.
The Company has provided provision for outstanding claims for unexpired claims that were accrued and accounted for but have not been paid in the previous accounting period or current period or if the amount has not been calculated, with the estimated amount and for the unreported claims.
Compensations that have been filed before the accounting period but have been notified after these dates are regarded as incurred but not reported (IBNR). Regulation Regarding the Amendment of the Regulation on the Technical Reserves of Insurance and Reinsurance Companies and Pension Funds and the Assets to be Invested in These Provisions “published in the Official Gazette dated 28 July 2010 and numbered 27655 and the” Circular on Outstanding Claims “dated 5 December 2014 and numbered 2014/16, the IBNR amount is calculated.
According to the Undersecretariat of Treasury ‘s circular dated December 5, 2014 and numbered 2014/16, best estimates are used to calculate incurred but not reported claims by the guidance of the Company’s appointed actuary since January 1, 2015.
The best estimate is based on the calculation of present value under certain models and assumptions of future claims using risk- free return curves at the time of the report. In the study based on the Standard Chain method, the combination of loss-premium and growth factor methods was taken into account. The selection of the data to be used is made by the company actuary using actuarial methods to correct the adjustment factors, to select the most appropriate method and development factors, and to intervene in the development factors. The company actuary tests the claim development factors with the response software for specific methods and then conducts actuarial analyzes and appropriate factor selection. These particulars are detailed in the actuarial report submitted to the Undersecretariat of Treasury pursuant to Article 11 of the Actuarial Regulation.
Anadolu Sigorta 2017 Annual Report 233 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
As of December 31, 2017 and December 31, 2016, IBNR amounts calculated by the Company actuary’s on the basis of branches are as follows: December 31, 2017 December 31, 2016 Gross Net Gross Net additional additional additional additional Branch provision provision provision provision Third party liability for motor vehicles (MTPL) 1.132.267.909 1.046.552.001 828.189.093 807.932.168 General liability 331.983.783 271.885.165 281.473.055 236.037.629 Voluntary financial liability 116.652.751 113.666.911 103.526.790 100.111.499 Fire and natural disasters 34.844.913 20.172.580 30.930.434 14.130.704 General losses 14.812.802 4.670.248 20.080.341 5.235.671 Accident 16.915.922 13.226.710 17.850.059 14.337.311 Air crafts liability 4.919.072 1.011.125 2.742.419 1.990.955 Air crafts 5.237.051 1.228.666 1.349.294 746.618 Water vehicles 7.729.096 2.988.830 4.272.746 1.700.070 Financial losses 1.019.382 406.545 2.788.702 422.443 Credit 526.262 526.262 201.350 201.350 Health 2.549.899 2.524.400 2.865.796 2.682.685 Legal protection 278.843 279.943 256.651 256.969 Marine (520.399) 1.015.647 (8.449.429) (3.611.541) Motor vehicles (42.055.210) (41.454.538) (56.742.609) (54.819.827) Total 1.627.162.076 1.438.700.495 1.231.334.692 1.127.354.704
In the compulsory traffic branch the physical and bodily claims, and in the General Responsibility branch the Employer Third Party Liability, Compulsory Medical Malpractice, Professional Liability and other liability branches are being analysed separately.
As of December 31, 2017, the Company’s actuary has used 9% which is the latest statutory rate of interest in the Official Gazette for the discount process in accordance with “General Instructions Regarding The Cash Flow From Provision for Outstanding Claim And Their Discounts” which was published in June 10th, 2016 numbered 2016/22 which regulates the processes involving the discount of cash flow from provision for outstanding claim.
As of December 31, 2016, the Company has used the gradual transition curve which was published by the Undersecretariat of Treasury’s “General Instructions Regarding to the Changes in the General Instructions Regarding Provision for Outstanding Claim (2014/16)” which was published in February 29th, 2016 with the number 2016/11. The company has used these gradual transition curve with 100% accuracy and has reflected the calculations on the official statements as well as possible as of December 31, 2016 and the Company has continued the method exact same like prior year too as of December 31, 2017.
According to Provisional Article 12 of the Regulation on the Amendment of the Regulation on Tariff Implementation Principles in the Motor Vehicles Compulsory Third Party Liability Insurance, published in the Official Gazette dated July 11, 2017 and numbered 30121, high claim frequency level and/or vehicle groups the “Risk Insured Pool” has been announced.
In this context, it began to be shared between insurance companies in the pool covered by premium and claims amounts related to issued motor vehicles compulsory third party liability insurance Turkey Motor Vehicle Bureau by the Undersecretariat determined by conformity to start since April 12, 2017.
The company, after changes in legislation, Turkey Motor Vehicle Bureau (TMTB) by the accounting records are created on the basis of the premiums, claims and commission amounts transferred to the pool within the scope of the monthly receipts that have been finalized and taken over from the pool within the scope of the share, and the financial statements are reflected by working on the amounts not yet transmitted by the deed TMTB.
In accordance with the Communiqué on the Amendment of the Communiqué on the Procedures and Principles of the Contribution of the Institution in the Compulsory Financial Liability Insurance for Medical Malpractice Law, published in the Official Gazette dated 7 October 2017 and numbered 30203, the Compulsory Financial Liability Insurance for Medical Malpractice the rules for premium and claim sharing have been established. The said transactions related to the sharing are in the General Liability Insurance branch Güneş Sigorta A.Ş.
234 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
In this context, premiums and claims related to the policies issued as of October 1, 2017 have been started to be allocated among the insurance companies within the framework of the principles determined by the Undersecretariat.
After the change in legislation, the accounting records are created on the basis of the premiums, claims and commission amounts transferred from the pool within the scope of the share transferred within the scope of the monthly declarations which are finalized by Güneş Sigorta A.Ş. and also the financial statements are reflected by the works related to the turnover not yet delivered.
As of December 31, 2017, the Company has outstanding claims provision amounting to TL 3.245.443.076 (December 31, 2016: TL 2.530.257.134) and TL 640.756.720 outstanding claims provision reinsurer share (December 31, 2016: TL 487.012.274) in the consolidated financial statements.
The Company calculates net IBNR amount on branches basis; current reinsurance shares to reflect the effect of current reinsurance agreements.
According to the “Circular on the Explanation of the Notification of the Undersecretariat of Treasury on the Calculation of the Incurred But Not Reported (IBNR)” dated 26 November 2011 and numbered 2011/23, the companies are opened against the company in sub-branches according to the last five years’ (15% in the branches where there is no new five-year data and started the new activity) by calculating a win rate over the amounts of the cases by not exceeding 25% of the outstanding files accrued for the files in the trial period. In accordance with the related regulation, taking into consideration the earning ratios calculated by using the Company’s last five years’ filing dossier file, TL 182.575.898 (December 31, 2016: TL 170.861.245) and reinsurance share TL 30.415.385 (December 31, 2016: 25.166. TL 208) has been liquidated against provisions for outstanding claims.
As of December 31, 2017, the Company’s calculated earning rate is between 0% and 100% (31 December 2016: 0% - 100%). As of December 31, 2017 and December 31, 2016, the earning ratios and reduced amounts used in the branches are as follows:
December 31, 2017 Earnings Ratios Gross Amount Net Amount Branch Used Decreased Decreased
General liability 25% 74.714.664 65.998.305 Third party liability for motor vehicles (MTPL) 10% 62.120.743 61.236.662 Fire and natural disasters 25% 25.698.638 11.128.770 Motor vehicles 22% 8.048.030 7.958.337 General losses 25% 4.214.820 1.646.063 Marine 25% 3.920.234 1.599.097 Accident 21% 2.320.622 1.366.437 Water 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 182.575.898 152.160.513
December 31, 2016 Earnings Ratios Gross Amount Net Amount Branch Used Decreased Decreased
General liability 25% 78.777.548 72.050.356 Third party liability for motor vehicles (MTPL) 11% 55.777.818 54.833.381 Fire and natural disasters 25% 21.068.122 9.042.415 Motor vehicles 25% 5.382.650 1.422.206 General losses 22% 5.296.987 5.210.113 Marine 25% 1.825.148 1.167.341 Accident 25% 1.308.549 851.196 Water vehicles 25% 708.020 422.494 Credit 25% 681.222 681.222 Financial losses 3% 30.283 9.415 Legal protection 25% 4.898 4.898 Total 170.861.245 145.695.037
Anadolu Sigorta 2017 Annual Report 235 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
2.26 Reserve for unexpired risks
In accordance with the Communiqué on Technical Reserves, while providing reserve for unearned premiums, in each accounting period, the companies should perform adequacy test covering the preceding 12 months due to the probability that future claims and compensations of the outstanding policies may be in excess of the reserve for unearned premiums already provided. In performing this test, it is required to multiply the reserve for unearned premiums, net with the expected claim/premium ratio. Expected claim/premium ratio is calculated by dividing incurred losses (provision for outstanding claims, net at the end of the period + claims paid, net - provision for outstanding claims, net at the beginning of the period) to earned premiums (written premiums, net + reserve for unearned premiums, net at the beginning of the period - reserve for unearned premiums, net at the end of the period). In the calculation of earned premiums; deferred commission expenses paid to the agencies and deferred commission income received from the reinsurance firms which were netted off from reserve for unearned premiums both at the beginning of the period and at the end of the period are not taken into consideration.
In accordance with Treasury circular numbered 2012/15, unexpired risk reserve started to be calculated over main branches as of December 31, 2012. The test is performed on branch basis and in case where the expected claim/premium ratio is higher than 95%, reserve calculated by multiplying the exceeding portion of the expected claim/premium ratio with the reserve for unearned premiums of that specific branch is added to the reserves of that branch. Accordingly, as of the reporting date, the Company has accounted for reserve for unexpired risk amounting to TL 47.086.775 (December 31, 2016: TL 4.020.419) and reinsurance share of reserve for unexpired risk amounting to TL 24.105.605 (December 31, 2016: TL 3.455.888) in the accompanying consolidated financial statements.
According to the Circular numbered 2015/30, the amount of the opening provision for outstanding claims which is determined unexpired risk reserve redefined in a manner consistent with the current period as of December 31, 2017.
According to the Circular numbered 2011/18 of the Undersecretariat of Treasury, the Company excluded both the premiums transferred to SSI and claims related to treatment costs from calculation of reserve for unexpired risks in Motor Third Party Liability, Compulsory Third Party Liability Insurance for Road Passenger Transportation and Compulsory Road Passenger Transportation Personal Accident branches.
According to Undersecretariat of Treasury’s 2016/37 numbered general instructions has remarked that the method below can be used to calculate the reserve for unexpired risks in motor vehicles, motor vehicle liability and general liability.
Turkish Treasury allows insurance companies with the circular 2016/37 to calculate their unexpired risks reserve on Motor Own Damage, Motor Third Party Liability (Compulsory and Facultative separately) and General Liability by considering only the last 4 accident quarters’ loss ratios. According to this new method, loss ratios exceeding 95% in 2016, 90% in 2017 and 85% in 2018 and later years, will be multiplied by unearned premiums reserve.
As of December 31, 2017, the Company has not used the method outlined in the 2016/37 numbered “General Instructions Regarding Reserve for Unexpired Risks” which was published in November 11, 2016.
2.27 Equalization provision
In accordance with the Communiqué on Technical Reserves put into effect starting from January 1, 2008, the companies should provide equalization provision in credit insurance and earthquake branches to equalize the fluctuations in future possible claims and for catastrophic risks. Equalization provision, started to be provided in 2008, is calculated as 12% of net premiums written in credit insurance and earthquake branches. In the calculation of net premiums, fees paid for un-proportional reinsurance agreements are considered as premiums ceded to the reinsurance firms. The companies should provide equalization provision up to reaching 150% of the highest premium amount written in a year within the last five years.
In case where claims incurred, the amounts below exemption limits as stated in the contracts and the share of the reinsurance firms cannot be deducted from equalization provisions. Claims payments are deducted from first year’s equalization provisions by first in first out method. Equalization provisions are presented under “other technical reserves” in the accompanying financial statements. As of the reporting date, the Company provided equalization provision amounting to TL 140.939.211 in the accompanying consolidated financial statements (December 31, 2016: TL 109.427.806).
236 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
2.28 Related parties
Parties are considered related to the Company if;
(a) directly, or indirectly through one or more intermediaries, the party: • controls, is controlled by, or is under common control with the Company (this includes parent, subsidiaries and fellow subsidiaries); • has an interest in the Company that gives it significant influence over the Company; or • has joint control over the Company; (b) the party is an associate of the Company; (c) the party is a joint venture in which the Company is a venturer; (d) the party is member of the key management personnel of the Company and its parent; (e) the party is a close member of the family of any individual referred to in (a) or (d); (f) the party is an entity that is controlled or significantly influenced by, or for which significant voting power in such entity resides with directly or indirectly, any individual referred to in (d) or (g) the party is a post-employment benefit plan for the benefit of employees of the Company, or of any entity that is a related party of the Company.
A related party transaction is a transfer of resources, services or obligations between related parties, regardless of whether a price is charged.
A number of transactions are entered into with related parties in the normal course of business.
2.29 Earnings per share
Earnings per share are determined by dividing the net income by the weighted average number of shares outstanding during the year attributable to the shareholders of the Company. In Turkey, companies can increase their share capital by making a pro-rata distribution of shares (“Bonus Shares”) to existing shareholders from retained earnings. For the purpose of earnings per share computations, such bonus shares issued are regarded as issued shares. Accordingly, the weighted average number of shares used in these calculations has been determined taking into account the retrospective effects of such stock distributions.
2.30 Events after the reporting date
Events after the reporting date that provide additional information about the Company’s position at the reporting dates (adjusting events) are reflected in the financial statements. Events after the reporting date that are not adjusting events are disclosed in the notes when material.
2.31 The new standards, amendments and interpretations
The accounting policies adopted in preparation of the interim financial statements as of December 31, 2017 are consistent with those of the previous financial year. There is no new and amended TFRS or TFRIC interpretation effective as of January 1, 2017. i) The new standards, amendments and interpretations which are effective as of January 1, 2017 are as follows:
TAS 7 Statement of Cash Flows (Amendments)
In December 2017, POA issued amendments to TAS 7 ‘Statement of Cash Flows’. The amendments are intended to clarify TAS 7 to improve information provided to users of financial statements about an entity’s financing activities. The improvements to disclosures require companies to provide information about changes in their financing liabilities. These amendments are to be applied for annual periods beginning on or after January 1, 2017 with earlier application permitted. When the Company first applies those amendments, it is not required to provide comparative information for preceding periods. The Company disclosed additional information in its annual consolidated financial statements for the year ended December 31, 2017.
Anadolu Sigorta 2017 Annual Report 237 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
TAS 12 Income Taxes: Recognition of Deferred Tax Assets for Unrealised Losses (Amendments)
In December 2017, POA issued amendments to TAS 12 Income Taxes. The amendments clarify how to account for deferred tax assets related to debt instruments measured at fair value. The amendments clarify the requirements on recognition of deferred tax assets for unrealised losses, to address diversity in practice. These amendments are to be retrospectively applied for annual periods beginning on or after January 1, 2017 with earlier application permitted. However, on initial application of the amendment, the change in the opening equity of the earliest comparative period may be recognised in opening retained earnings (or in another component of equity, as appropriate), without allocating the change between opening retained earnings and other components of equity. If the Company applies this relief, it shall disclose that fact.
Annual Improvements to IFRSs - 2014-2016 Cycle
The IASB issued Annual Improvements to IFRS Standards 2014-2016 Cycle, amending the following standards: • IFRS 1 First-time Adoption of International Financial Reporting Standards: This amendment deletes the short-term exemptions about some IFRS 7 disclosures, IAS 19 transition provisions and IFRS 10 Investment Entities. These amendments are to be applied for annual periods beginning on or after 1 January 2018. • IFRS 12 Disclosure of Interests in Other Entities: This amendment clarifies that an entity is not required to disclose summarised financial information for interests in subsidiaries, associates or joint ventures that is classified, or included in a disposal group that is classified, as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. These amendments are to be applied for annual periods beginning on or after 1 January 2017. • IAS 28 Investments in Associates and Joint Ventures: This amendment clarifies that the election to measure an investment in an associate or a joint venture held by, or indirectly through, a venture capital organisation or other qualifying entity at fair value through profit or loss applying IFRS 9 Financial Instruments is available for each associate or joint venture, at the initial recognition of the associate or joint venture. These amendments are to be applied for annual periods beginning on or after 1 January 2018. Earlier application is permitted.
The amendments are not applicable for the Company and will not have an impact on the financial position or performance of the Company. ii) Standards issued but not yet effective and not early adopted
Standards, interpretations and amendments to existing standards that are issued but not yet effective up to the date of issuance of the consolidated financial statements are as follows. The Company will make the necessary changes if not indicated otherwise, which will be affecting the consolidated financial statements and disclosures, when the new standards and interpretations become effective.
TFRS 15 Revenue from Contracts with Customers
In September 2016, POA issued TFRS 15 Revenue from Contracts with Customers. The new standard issued includes the clarifying amendments to IFRS 15 made by IASB in April 2016. The new five-step model in the standard provides the recognition and measurement requirements of revenue. The standard applies to revenue from contracts with customers and provides a model for the sale of some non-financial assets that are not an output of the entity’s ordinary activities (e.g., the sale of property, plant and equipment or intangibles). TFRS 15 effective date is January 1, 2018, with early adoption permitted. Entities will transition to the new standard following either a full retrospective approach or a modified retrospective approach. The modified retrospective approach would allow the standard to be applied beginning with the current period, with no restatement of the comparative periods, but additional disclosures are required. The Company is in the process of assessing the impact of the standard on financial position or performance of the Company.
238 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
TFRS 9 Financial Instruments
In January 2017, POA issued the final version of TFRS 9 Financial Instruments. The final version of TFRS 9 brings together all three aspects of the accounting for financial instruments project: classification and measurement, impairment and hedge accounting. TFRS 9 is built on a logical, single classification and measurement approach for financial assets that reflects the business model in which they are managed and their cash flow characteristics. Built upon this is a forward-looking expected credit loss model that will result in more timely recognition of loan losses and is a single model that is applicable to all financial instruments subject to impairment accounting. In addition, TFRS 9 addresses the so-called ‘own credit’ issue, whereby banks and others book gains through profit or loss as a result of the value of their own debt falling due to a decrease in credit worthiness when they have elected to measure that debt at fair value. The Standard also includes an improved hedge accounting model to better link the economics of risk management with its accounting treatment. TFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted by applying all requirements of the standard. Alternatively, entities may elect to early apply only the requirements for the presentation of gains and losses on financial liabilities designated as FVTPL without applying the other requirements in the standard. The Company has performed an impact assessment of TFRS 9. This assessment is based on currently available information and may be subject to changes arising from further detailed analyses or additional supportable information being made available to the Company in the future. The impact of standard on all three aspects of TFRS 9 is as follows:
Classification and Measurement of Financial Assets:
The Company does not expect a significant impact on its balance sheet or equity on applying the classification and measurement requirements of TFRS 9. It expects to continue measuring at fair value all financial assets currently held at fair value. Quoted equity shares currently held as available-for-sale with gains and losses recorded in OCI will, instead, be measured at fair value through profit or loss, which will increase volatility in recorded profit or loss.
Impairment:
IFRS 9 requires the Company to record expected credit losses on all of its debt securities, loans and trade receivables, either on a 12-month or lifetime basis. The Company will apply the simplified approach and record lifetime expected losses on all trade receivables.
Hedge accounting:
The Group determined that all existing hedge relationships that are currently designated in effective hedging relationships will continue to qualify for hedge accounting under TFRS 9. As TFRS 9 does not change the general principles of how an entity accounts for effective hedges, applying the hedging requirements of TFRS 9 will not have a significant impact on Group’s financial statements
TFRS 4 Insurance Contracts (Amendments)
In December 2017, POA issued amendments to TFRS 4 Insurance Contracts. The amendments introduce two approaches: an overlay approach and a deferral approach. The amended Standard will: • give all companies that issue insurance contracts the option to recognise in other comprehensive income, rather than profit or loss, the volatility that could arise when TFRS 9 Financial instruments is applied before the new insurance contracts Standard is issued; and • give companies whose activities are predominantly connected with insurance an optional temporary exemption from applying TFRS 9 Financial instruments until 2021. The entities that defer the application of TFRS 9 Financial instruments will continue to apply the existing financial instruments Standard-TAS 39.
These amendments are to be applied for annual periods beginning on or after 1 January 2018. Earlier application is permitted.
Anadolu Sigorta 2017 Annual Report 239 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
TFRIC 22 Foreign Currency Transactions and Advance Consideration
The interpretation issued by POA on December 2017 clarifies the accounting for transactions that include the receipt or payment of advance consideration in a foreign currency.
The Interpretation states that the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income is the date on which an entity initially recognises the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration. An entity is not required to apply this Interpretation to income taxes; or insurance contracts (including reinsurance contracts) it issues or reinsurance contracts that it holds.
The interpretation is effective for annual reporting periods beginning on or after 1 January 2018. Earlier application is permitted.
TFRS 2 Classification and Measurement of Share-based Payment Transactions (Amendments)
In December 2017, POA issued amendments to TFRS 2 Share-based Payment, clarifying how to account for certain types of share-based payment transactions. The amendments, provide requirements on the accounting for: a. the effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments; b. share-based payment transactions with a net settlement feature for withholding tax obligations; and c. a modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled. These amendments are to be applied for annual periods beginning on or after 1 January 2018. Earlier application is permitted.
The Company is in the process of assessing the impact of the amendments on financial position or performance of the Company amendment are not applicable for the Company and will not have an impact on the financial position or performance of the Company.
Amendments to TAS 28 Investments in Associates and Joint Ventures (Amendments)
In December 2017, POA issued amendments to TAS 28 Investments in Associates and Joint Ventures. The amendments clarify that a company applies TFRS 9 Financial Instruments to long-term interests in an associate or joint venture that form part of the net investment in the associate or joint venture.
TFRS 9 Financial Instruments excludes interests in associates and joint ventures accounted for in accordance with TAS 28 Investments in Associates and Joint Ventures. In this amendment, POA clarified that the exclusion in TFRS 9 applies only to interests a company accounts for using the equity method. A company applies TFRS 9 to other interests in associates and joint ventures, including long-term interests to which the equity method is not applied and that, in substance, form part of the net investment in those associates and joint ventures.
The amendments are effective for annual periods beginning on or after 1 January 2019, with early application permitted.
The Company has performed a high-level impact assessment of Amendments. This preliminary assessment is based on currently available information and may be subject to changes arising from further detailed analyses or additional supportable information being made available to the Company in the future. Overall, the Company expects no significant impact on its balance sheet and equity. The Company is in the process of assessing the impact of the amendments on financial position or performance of the Company amendments are not applicable for the Company and will not have an impact on the financial position or performance of the Company.
TAS 40 Investment Property: Transfers of Investment Property (Amendments)
In December 2017, POA issued amendments to TAS 40 ‘Investment Property ‘. The amendments state that a change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. These amendments are to be applied for annual periods beginning on or after 1 January 2018. Earlier application is permitted.
240 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
iii) The new standards, amendments and interpretations that are issued by the International Accounting Standards Board (IASB) but not issued by Public Oversight Authority (POA)
The following standards, interpretations and amendments to existing IFRS standards are issued by the IASB but not yet effective up to the date of issuance of the financial statements. However, these standards, interpretations and amendments to existing IFRS standards are not yet adapted/issued by the POA, thus they do not constitute part of TFRS. The Company will make the necessary changes to its financial statements after the new standards and interpretations are issued and become effective under TFRS.
IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments)
In December 2015, the IASB postponed the effective date of this amendment indefinitely pending the outcome of its research project on the equity method of accounting. Early application of the amendments is still permitted.
Annual Improvements - 2010-2012 Cycle
IFRS 13 Fair Value Measurement
As clarified in the Basis for Conclusions short-term receivables and payables with no stated interest rates can be held at invoice amounts when the effect of discounting is immaterial. The amendment is effective immediately.
Annual Improvements - 2011-2013 Cycle
IFRS 16 Leases
The IASB has published a new standard, IFRS 16 ‘Leases’. The new standard brings most leases on-balance sheet for lessees under a single model, eliminating the distinction between operating and finance leases. Lessor accounting however remains largely unchanged and the distinction between operating and finance leases is retained. IFRS 16 supersedes IAS 17 ‘Leases’ and related interpretations and is effective for periods beginning on or after January 1, 2019, with earlier adoption permitted if IFRS 15 ‘Revenue from Contracts with Customers’ has also been applied. The Company is in the process of assessing the impact of the standard on financial position or performance of the Company.
IFRIC 23 Uncertainty over Income Tax Treatments
The interpretation clarifies how to apply the recognition and measurement requirements in “IAS 12 Income Taxes” when there is uncertainty over income tax treatments.
When there is uncertainty over income tax treatments, the interpretation addresses:
(a) whether an entity considers uncertain tax treatments separately; (b) the assumptions an entity makes about the examination of tax treatments by taxation authorities; (c) how an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates; and (d) how an entity considers changes in facts and circumstances.
An entity shall apply this Interpretation for annual reporting periods beginning on or after 1 January 2019. Earlier application is permitted. If an entity applies this Interpretation for an earlier period, it shall disclose that fact. On initial application, an entity shall apply the interpretation either retrospectively applying IAS 8, or retrospectively with the cumulative effect of initially applying the Interpretation recognised at the date of initial application.
The Company is in the process of assessing the impact of the interpretation on financial position or performance of the Company.
Anadolu Sigorta 2017 Annual Report 241 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
IFRS 17 - The new Standard for insurance contracts
The IASB issued IFRS 17, a comprehensive new accounting standard for insurance contracts covering recognition and measurement, presentation and disclosure. IFRS 17 model combines a current balance sheet measurement of insurance contract liabilities with the recognition of profit over the period that services are provided. Certain changes in the estimates of future cash flows and the risk adjustment are also recognised over the period that services are provided. Entities will have an option to present the effect of changes in discount rates either in profit and loss or in OCI. The standard includes specific guidance on measurement and presentation for insurance contracts with participation features. IFRS 17 will become effective for annual reporting periods beginning on or after 1 January 2021; early application is permitted. The Company is in the process of assessing the impact of the standard on financial position or performance of the Company.
Prepayment Features with Negative Compensation (Amendments to IFRS 9)
In October 2017, the IASB issued minor amendments to IFRS 9 Financial Instruments to enable companies to measure some prepayable financial assets at amortised cost.
Applying IFRS 9, a company would measure a financial asset with so-called negative compensation at fair value through profit or loss. Applying the amendments, if a specific condition is met, entities will be able to measure at amortised cost some prepayable financial assets with so-called negative compensation.
The amendments are effective from annual periods beginning on or after 1 January 2019, with early application permitted.
Annual Improvements - 2015-2017 Cycle
In December 2017, the IASB announced Annual Improvements to IFRS Standards 2015-2017 Cycle, containing the following amendments to IFRSs: • IFRS 3 Business Combinations and IFRS 11 Joint Arrangements - The amendments to IFRS 3 clarify that when an entity obtains control of a business that is a joint operation, it remeasures previously held interests in that business. The amendments to IFRS 11 clarify that when an entity obtains joint control of a business that is a joint operation, the entity does not remeasure previously held interests in that business. • IAS 12 Income Taxes - The amendments clarify that all income tax consequences of dividends (i.e. distribution of profits) should be recognised in profit or loss, regardless of how the tax arises. • IAS 23 Borrowing Costs - The amendments clarify that if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalisation rate on general borrowings.
3 Significant accounting estimates and requirements
The notes given in this section are provided to addition/supplement the commentary on the management of insurance risk note 4.1 - Management of insurance risk and note 4.2 - Financial risk management.
The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected.
242 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
In particular, information about significant areas of estimation uncertainty and critical judgment in applying accounting policies that have the most significant effect on the amount recognized in the financial statements are described in the following notes:
Note 4.1 - Management of insurance risk Note 4.2 - Financial risk management Note 10 - Reinsurance assets/liabilities Note 11 - Financial assets Note 12 - Loans and receivables Note 17 - Insurance liabilities and reinsurance assets Note 17 - Deferred acquisition costs Note 19 - Trade and other payables, deferred income Note 21 - Deferred income taxes Note 23 - Provisions for other liabilities and charges
4 Management of insurance and financial risk
4.1 Management of insurance risk
Insurance risk is defined as coverage for exposures that exhibit a possibility of financial loss due to applying inappropriate and insufficient insurance techniques. Main reasons of insurance risk exposure result from the risk selection and inaccurate calculation of insurance coverage, policy terms and fee or inaccurate calculation of coverage portion kept within the company and coverage portion transfers to policyholders and transfer conditions.
Objective of managing risks arising from insurance contracts and policies used to minimize such risks
Potential risks that may be exposed in transactions are managed based on the requirements set out in the Company’s “Risk Management Policies” issued by the approval of the Board of Directors. The main objective of risk management policies is to determine the risk measurement, assessment, and control procedures and maintain consistency between the Company’s asset quality and limitations allowed by the insurance standards together with the Company’s risk tolerance of the accepted risk level assumed in return for a specific consideration. In this respect, instruments that are related to risk transfer, such as; insurance risk selection, risk quality follow-up by providing accurate and complete information, effective monitoring of level of claims by using risk portfolio claim frequency, treaties, facultative reinsurance contracts and coinsurance agreements, and risk management instruments, such as; risk limitations, are used in achieving the related objective.
Risk tolerance is determined by the Company’s Board of Directors by considering the Company’s long-term strategies, equity resources, potential returns and economical expectations, and it is presented by risk limitations. Authorization limitations during policy issuing include authorizations for risk acceptances granted based on geographical regions in relation to unacceptable special risks or pre-approved acceptable special risks, insurance coverage to agencies, district offices, technical offices, assistant general managers and top management in the policy issuance period and authorizations for claim payment granted to district offices, claim management administration, automobile claims administration and Claim Committee established by the managing director and assistant managing director in the claim payment period.
In any case, risk acceptance is based on technical income expectations under the precautionary principle. In determining insurance coverage, policy terms and fee, these expectations are based accordingly
It is essential that all the authorized personnel in charge of executing policy issuance transactions, which is the initial phase of insurance process, should ensure to gather or provide all the accurate and complete information to issue policies in order to obtain evidence on the acceptable risks that the Company can tolerate from the related insurance transactions. On the other hand, decision to be made on risk acceptance will be possible by transferring the coverage to the reinsurers and/or co-insurers and considering the terms of the insurance policy.
In order to avoid destructive losses over company’s financial structure, company transfers the exceeding portion of risks assumed over the Company’s risk tolerance and equity resources through treaties, facultative reinsurance contracts and coinsurance agreements to reinsurance and coinsurance companies. Insurance coverage and policy terms of reinsurance are determined by assessing the nature of each insurance branch.
Anadolu Sigorta 2017 Annual Report 243 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Insurance risks do not generally have significant unrecoverable losses in the course of ordinary transactions, except for risks associated with earthquake and other catastrophic risks. Therefore, there is a high sensitivity to earthquake and catastrophic risks.
The case of potential claims’ arising from earthquake and other catastrophic risks exceeding the maximum limit of the excess of loss agreements, such risks are treated as the primary insurance risks and are managed based on the precautionary principle. Maximum limit of excess of loss agreements is determined based on the worst case scenario on the possibility of an earthquake that Istanbul might be exposed to in terms of its severity and any potential losses incurred in accordance with the generally accepted international earthquake models. The total amount of protection for catastrophic risks of the company is identified taking into the compensation amount for an earthquake will occur in a 1000 years.
Insurance risk concentration
The Company’s gross and net insurance risk concentrations (net of reinsurer share) in terms of insurance branches are summarized as below: Total claims liability (*) Gross total Reinsurance share of Net total December 31, 2017 claims liability total claims liability claims liability Motor vehicles liability (MTPL) 1.703.454.177 (91.899.001) 1.611.555.176 General liability 608.167.498 (126.031.645) 482.135.853 Fire and natural disasters 377.218.223 (171.884.480) 205.333.743 General losses 165.931.149 (101.645.108) 64.286.041 Motor vehicles 142.322.531 (7.870.986) 134.451.545 Water vehicles 40.980.920 (18.378.585) 22.602.335 Marine 35.495.591 (14.745.963) 20.749.628 Accident 41.324.839 (11.250.978) 30.073.861 Financial losses 10.877.792 (8.194.132) 2.683.660 Air crafts liability 58.009.302 (46.083.877) 11.925.425 Air crafts 49.750.517 (42.391.076) 7.359.441 Health 9.119.780 (249.390) 8.870.390 Credit 2.452.500 (132.447) 2.320.053 Legal protection 338.257 948 339.205 Total 3.245.443.076 (640.756.720) 2.604.686.356
Total claims liability (*) Gross total Reinsurance share of Net total December 31, 2016 claims liability total claims liability claims liability Motor vehicles liability (MTPL) 1.264.364.997 (25.933.527) 1.238.431.470 General liability 488.244.066 (111.244.859) 376.999.207 Fire and natural disasters 325.217.969 (153.703.822) 171.514.147 General losses 151.128.531 (99.947.796) 51.180.735 Motor vehicles 126.343.879 1.060.964 127.404.843 Marine 37.492.291 (24.183.360) 13.308.931 Accident 36.067.400 (7.972.192) 28.095.208 Air crafts liability 35.072.041 (24.770.280) 10.301.761 Water vehicles 31.629.823 (16.946.735) 14.683.088 Financial losses 15.356.973 (14.090.576) 1.266.397 Air crafts 8.603.509 (6.012.777) 2.590.732 Credit 5.412.219 (3.039.839) 2.372.380 Health 5.061.186 (227.697) 4.833.489 Legal protection 262.250 221 262.471 Total 2.530.257.134 (487.012.275) 2.043.244.859
(*) Total claims liability includes outstanding claims reserve (excluding contingent amounts deducted from claims reserve determined by winning probability) and incurred but not reported claims.
244 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Gross and net insurance risk concentrations of the insurance contracts (net of reinsurer share) based on geographical regions are summarized as below: Total claims liability (*) Gross total Reinsurance share of Net total December 31, 2017 claims liability total claims liability claims liability
Turkey 2.165.208.839 407.915.926 1.757.292.913 Europe 136.593.544 112.059.173 24.534.371 America 935.716 751.334 184.382 Africa 39.888.256 33.834.113 6.054.143 Asia 3.586.319 3.018.414 567.905 Total 2.346.212.674 557.578.960 1.788.633.714
Total claims liability (*) Gross total claims Reinsurance share of Net total December 31, 2017 liability total claims liability claims liability
Marmara Region 888.877.514 200.116.838 688.760.676 Middle Anatolian Region 346.514.938 43.519.951 302.994.987 Aegean Region 232.261.711 23.513.374 208.748.337 Mediterranean Region 218.303.191 49.125.995 169.177.196 South East Anatolian Region 145.061.923 15.446.122 129.615.801 Black Sea Region 160.724.197 52.685.372 108.038.825 East Anatolian Region 173.465.365 23.508.274 149.957.091 Total 2.165.208.839 407.915.926 1.757.292.913
(*) Total claims liability includes estimated compensation indemnity for realized claims. Gross incurred but not reported claims amounting to TL 1.627.162.076, outstanding claims of treaty activities which could not be distributed to geographical regions amounting to TL 171.367.335, discount of outstanding claim reserves amounting to TL (716.723.111), and the potential income deducted from the outstanding claims processed in the case amounting to TL (182.575.898) are excluded from the table.
Total claims liability (*) Gross total Reinsurance share of Net total December 31, 2016 claims liability total claims liability claims liability
Turkey 1.970.302.437 (492.193.691) 1.478.108.746 Europe 369.432 (13.174) 356.258 Africa 3.266 -- 3.266 Asia 499.630 (1.088) 498.542 Total 1.971.174.765 (492.207.953) 1.478.966.812
Total claims liability (*) Gross total Reinsurance share of Net total December 31, 2016 claims liability total claims liability claims liability
Marmara Region 1.684.106.253 (455.240.487) 1.228.865.766 Middle Anatolian Region 74.439.694 (3.516.290) 70.923.404 Aegean Region 58.354.851 (1.722.600) 56.632.251 Mediterranean Region 49.799.759 (4.489.755) 45.310.004 Black Sea Region 38.363.932 (13.035.965) 25.327.967 East Anatolian Region 32.851.506 (8.172.880) 24.678.626 South East Anatolian Region 32.386.442 (6.015.714) 26.370.728 Total 1.970.302.437 (492.193.691) 1.478.108.746
(*) Total claims liability includes estimated compensation indemnity for realized claims. Gross incurred but not reported claims amounting to TL 483.809.233, outstanding claims of treaty activities which could not be distributed to geographical regions amounting to TL 54.901.010 and the potential income deducted from the outstanding claims processed in the case amounting to TL (104.862.951) are excluded from the table.
Anadolu Sigorta 2017 Annual Report 245 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Given insurance collateral amounts in respect to branches December 31, 2017 December 31, 2016
Motor vehicles liability (MTPL) 5.265.078.838.278 5.583.713.745.062 Fire and natural disasters 135.608.274.423 127.483.898.693 Health 103.781.728.941 126.422.487.105 Accident 118.199.306.463 111.234.472.203 General liability 59.897.144.573 59.272.513.598 General losses 59.224.580.559 54.169.810.431 Motor vehicles 48.781.635.664 50.018.215.060 Marine 16.963.726.644 15.833.370.275 Air crafts liability 5.854.747.561 5.169.788.401 Legal protection 4.438.225.143 4.997.047.631 Water vehicles 2.330.774.067 2.323.062.746 Financial losses 750.973.356 692.634.277 Aircrafts 644.430.596 680.104.955 Total(*) 5.821.554.386.268 6.142.011.150.437
(*) Net amount which deducted share of reinsurance and social security
4.2 Management of financial risk
Introduction and overview
This note presents information about the Company’s exposure to each of the below risks, the Company’s objectives, policies and processes for measuring and managing risk, and the Company’s management of capital. The Company has exposure to the following risks from its use of financial instruments: • credit risk • liquidity risk • market risk
The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. Duties and responsibilities of the Risk Management and Internal Control Department include design and implementation of risk management system and identification and implementation of risk management policies. It is also responsible for ensuring that the Company implements all necessary risk management techniques. Activities of the Risk Management and Internal Control Department are managed directly by General Manager. The Board of Directors monitors the effectiveness of the risk management system through the internal audit department.
Risk management policies and guidelines are set by the Board of Directors and applied by the top management. These policies include organisation and scope of the risk management function, risk measurement and assessment methods, duties and responsibilities of the Board of Directors, top management and all of the employees, procedures followed in the case of limit extension and compulsory approval and confirmation processes for certain situations.
Credit risk
Credit risk is most simply defined as the potential that a bank borrower or counterparty will fail to meet its obligations in accordance with agreed terms. The balance sheet items that the Company is exposed to credit risks are as follows: • Cash at banks • Other cash and cash equivalents • Available for sale financial assets (except equity-shares) • Financial assets held for trading (except equity-shares) • Held to maturity financial asset • Premium receivables from policyholders
246 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
• Receivables from intermediaries (agencies) • Receivables from reinsurance companies related to commissions and claims paid • Reinsurance shares of insurance liability • Receivables from related parties • Other receivables
Reinsurance contracts are the most common method to manage insurance risk. The contract does not, however, discharge the Company’s liability as the primary insurer. If a reinsurer fails to pay a claim for any reason, the Company remains liable for the payment to the policyholder. The creditworthiness of reinsurers is considered on an annual basis by reviewing their financial strength prior to finalization of the reinsurance contract.
Net book value of the assets that is exposed to credit risk is shown in the table below. December 31, 2017 December 31, 2016
Cash and cash equivalents (Note 14) 3.504.701.722 3.217.511.262 Receivables from main operations (Note 12) 1.178.955.084 1.048.793.865 Financial assets (Note 11) (*) 943.438.187 606.134.613 Reinsurer share in provision for outstanding claims (Note 10), (Note 17) 640.756.720 487.012.275 Other receivables (Note 12) 21.224.166 15.540.321 Prepaid taxes and funds (Note 19) -- 12.441.095 Other prepaid expenses (Note 12) 19.928.671 4.358.898 Other miscellaneous current assets (Note 12) 493.641 185.836 Total 6.309.498.191 5.391.978.165
(*) Equity shares amounting to TL 160.082.153 are not included (December 31, 2016: TL 142.475.171).
As of December 31, 2017 and December 31, 2016, the aging of the receivables from main operations is as follows: December 31, 2017 December 31, 2016 Gross Amount Provision Gross Amount Provision
Not past due 969.119.015 -- 829.900.876 -- Past due 0-30 days 150.529.379 (1.992.510) 151.599.029 (1.730.318) Past due 31-60 days 23.807.314 (1.486.876) 29.458.231 (1.895.127) Past due 61-90 days 27.290.704 (1.783.910) 23.833.891 (1.305.330) More than 90 days (*) 242.771.427 (229.299.459) 211.699.386 (192.766.773) Total (**) 1.413.517.839 (234.562.755) 1.246.491.413 (197.697.548)
(*) As per the February 3, 2005 dated and B.02.1.HM.O.SGM.0.3.1/01/05 numbered Circular issued by the Turkish Treasury, in case where subrogation is subject to claim/legal action, related subrogation amount is recognized as doubtful receivables and allowance for doubtful receivables is provided by the same amount in the financial statements. Related amounts are presented in “More than 90 days” line in the above table.
The movements of the allowances for receivables from main operations during the period are as follows: December 31, 2017 December 31, 2016
Provision for receivables from insurance operations at the beginning of the period 188.860.962 150.758.235 Provision for receivables provided for subrogation - salvage receivables during the period (Note 47) 36.875.264 35.926.722 Provision for losses provided during the period (Note 47) 1.079.389 2.758.273 Collections during the period (589.879) (582.268) Provision for receivables from insurance operations at the end of the period 226.225.736 188.860.962
Anadolu Sigorta 2017 Annual Report 247 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulty in raising funds to meet cash commitments associated with financial instruments.
Management of the liquidity risk
The Company considers the maturity match between asset and liabilities for the purpose of avoiding liquidity risk and ensure that it will always have sufficient liquidity to meet its liabilities when due.
Maturity distribution of monetary assets and liabilities:
Net book Up to 1 6 to 12 December 31, 2017 value month 1 to 3 months 3 to 6 months months Over 1 year Unallocated
Cash and cash equivalents 3.504.676.959 1.278.672.658 1.065.357.964 1.143.525.416 -- -- 17.120.921 Financial assets 1.103.520.340 23.241.814 6.072.043 3.093.332 1.821.088 407.099.010 662.193.053 Receivables from main operations 1.178.955.084 117.654.370 450.131.408 417.658.801 174.723.436 18.787.069 -- Other receivables 21.224.166 13.589.698 400.486 1.671.027 3.342.053 2.205.704 15.198 Income accruals 19.928.671 2.369.468 4.094.659 12.584.727 -- -- 879.817 Total monetary assets 5.828.305.220 1.435.528.008 1.526.056.560 1.578.533.303 179.886.577 428.091.783 680.208.989
Financial liabilities 110.802.339 108.072.424 -- 2.729.915 ------Payables arising from main operations 492.116.005 171.765.145 71.399.133 89.189.977 159.761.750 -- -- Other liabilities 113.563.203 61.896.745 45.384.376 -- -- 6.282.082 -- Insurance technical provisions (*) 2.604.686.356 190.530.133 381.060.259 226.832.656 287.309.067 1.518.954.241 -- Provisions for taxes and other similar obligations 50.750.268 50.750.268 ------Provisions for other risks and expense accruals 73.632.169 3.843.837 14.223.446 -- 29.067.524 3.678.792 22.818.570 Total monetary liabilities 3.445.550.340 586.858.552 512.067.214 318.752.548 476.138.341 1.528.915.115 22.818.570
(*) Provision for outstanding claims is presented as short term liabilities in the accompanying consolidated financial statements whereas maturity distribution is presented according to projected payment dated in the above table.
Net book Up to 1 6 to 12 December 31, 2016 value month 1 to 3 months 3 to 6 months months Over 1 year Unallocated
Cash and cash equivalents 3.217.463.827 1.695.918.178 1.052.403.773 454.921.081 -- -- 14.220.795 Financial assets 748.609.784 19.480.516 9.725.366 21.774.982 13.892.056 355.823.150 327.913.714 Receivables from main operations 1.048.793.865 96.847.623 439.570.619 401.277.310 99.198.545 11.899.768 -- Other receivables 15.540.321 7.183.518 1.386.489 1.628.792 3.257.583 1.749.362 334.577 Income accruals 4.358.898 129.269 ------4.229.629 Total monetary assets 5.034.766.695 1.819.559.104 1.503.086.247 879.602.165 116.348.184 369.472.280 346.698.715
Financial liabilities 134.413.473 134.413.473 ------Payables arising from main operations 449.205.545 142.812.014 -- 49.905.834 256.487.697 -- -- Other liabilities 82.609.754 31.378.830 45.744.147 -- -- 5.486.777 -- Insurance technical provisions (*) 2.043.244.859 160.120.169 320.240.339 180.809.484 214.124.793 1.167.950.074 -- Provisions for taxes and other similar obligations 39.526.586 39.526.586 ------Provisions for other risks and expense accruals 72.607.084 304.120 29.886.473 20.109.362 -- 3.381.653 18.925.476 Total monetary liabilities 2.821.607.301 508.555.192 395.870.959 250.824.680 470.612.490 1.176.818.504 18.925.476
(*) Provision for outstanding claims is presented as short term liabilities in the accompanying consolidated financial statements whereas maturity distribution is presented according to projected payment dated in the above table.
248 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Market risk
Market risk is the risk that changes in market prices, such as interest rates, foreign exchange rates and credit spreads will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return on risk.
Currency risk
The Company is exposed to currency risk through insurance and reinsurance transactions in foreign currencies.
Foreign exchange gains and losses arising from foreign currency transactions are recorded at transaction dates. At the end of the periods, foreign currency assets and liabilities evaluated by the Central Bank of the Republic of Turkey’s spot purchase rates and the differences arising from foreign currency rates are recorded as foreign exchange gain or loss in the statement of income.
The Company’s exposure to foreign currency risk is as follows: December 31, 2017 US Dollar Euro Other currencies Total
Receivables from main operations 229.328.864 97.458.592 3.500.750 330.288.206 Financial assets 133.672.721 17.439.313 -- 151.112.034 Cash and cash equivalents(*) 141.033.816 38.172.274 2.134.826 181.340.916 Total foreign currency assets 504.035.401 153.070.179 5.635.576 662.741.156
Insurance technical provisions 259.112.932 71.877.478 5.412.663 336.403.073 Payables arising from main operations 126.151.525 27.613.966 351.643 154.117.134 Total foreign currency liabilities 385.264.457 99.491.444 5.764.306 490.520.207
Net financial position 118.770.944 53.578.735 (128.730) 172.220.949
(*) The currency risk table are not included the amount of foreign currency forward transaction TL 1.844.825.014 located in the cash and cash equivalents.
December 31, 2016 US Dollar Euro Other currencies Total
Receivables from main operations 105.568.670 31.585.213 2.162.747 139.316.630 Financial assets 127.861.783 11.880.374 -- 139.742.157 Cash and cash equivalents 239.406.323 73.168.517 2.884.461 315.459.301 Total foreign currency assets 472.836.776 116.634.104 5.047.208 594.518.088
Insurance technical provisions 165.014.054 52.038.624 79.122 217.131.800 Payables arising from main operations 179.845.158 50.177.535 915.993 230.938.686 Total foreign currency liabilities 344.859.212 102.216.159 995.115 448.070.486
Net financial position 127.977.564 14.417.945 4.052.093 146.447.602
TL equivalents of the related monetary amounts denominated in foreign currencies are presented in the above table.
If technical provision denominated in any currency not specified, ıt is evaluated are evaluated by the Central Bank of the Republic of Turkey’s spot sales rates as of December 31, 2017 (December 31, 2016: spot sales rate) and Foreign currency transactions are recorded at the foreign exchange rates ruling at the dates of the transactions and foreign currency denominated monetary items are evaluated by the Central Bank of the Republic of Turkey’s spot purchase rates as of December 31, 2017 (December 31, 2016: spot purchase rate).
Anadolu Sigorta 2017 Annual Report 249 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Exposure to currency risk
Foreign currency rates used for the translation of foreign currency denominated assets and liabilities as of December 31, 2017 and December 31, 2016 are as follows: US Dollar Euro
December 31, 2017 3,7719 4,5155 December 31, 2016 3,5192 3,7099
A 10 percent depreciation of the TL against the following currencies as of December 31, 2017 and December 31, 2016 would have increased or decreased equity and profit or loss (excluding tax effects) by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. In case of a 10 percent appreciation of the TL against the following currencies, the effect will be in opposite direction. December 31, 2017 December 31, 2016 Profit or loss Equity (*) Profit or loss Equity (*)
US Dollar 11.877.094 11.877.094 12.797.756 12.570.486 Euro 5.357.874 5.357.874 1.441.795 1.441.795 Other (12.270) (12.270) 405.209 405.209 Total, net 17.222.698 17.222.698 14.644.760 14.417.490
(*) Equity effect also includes profit or loss effect of 10% depreciation of TL against related currencies.
Exposure to interest rate risk
The principal risk to which non-trading portfolios are exposed is the risk of loss from fluctuations in the future cash flows or fair values of financial instrument because of a change in market interest rates. Interest rate risk is managed principally through monitoring interest rate gaps and by having pre-approved limits for repricing bands.
As of reporting date; the interest rate profile of the Company’s interest earning financial assets and interest bearing financial liabilities are detailed as below: December 31, 2017 December 31, 2016
Financial assets with fixed interest rates: Available for sale financial assets - Other (Note 11) 23.241.814 4.308.334 Cash at banks (Note 14)(*) 3.088.213.726 2.781.686.316 Other-financial liabilities (102.934.273) (134.413.473) Available for sale financial assets - Government bonds (Note 11) 237.576.200 267.176.904 Available for sale financial assets - Private debt securities (Note 11) 38.099.583 53.881.169 Cash deposited to insurance and reinsurance companies (Note 12) 29.650.034 12.604.316
Financial assets with variable interest rates: Available for sale financial assets - Government bonds (Note 11) 23.611.670 34.226.660 Available for sale financial assets - Private debt securities (Note 11) 118.798.021 45.017.578 Financial assets held for trading - Government bonds (Note 11) -- 913.243 Held to maturity investments - Government bonds (Note 11) -- 15.172.182
(*) Demand deposits amounting to TL 17.120.921 are not included (December 31, 2016: TL 14.220.795).
250 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Interest rate sensitivity of the financial instruments
Interest rate sensitivity of the statement of income is the effect of the assumed changes in interest rates on the fair values of financial assets at fair value through profit or loss and on the net interest income for the periods ended December 31, 2017 and December 31, 2016 of the floating rate non-trading financial assets and financial liabilities held at December 31, 2017 and December 31, 2016. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The table below demonstrating the effect of changes in interest rates on statement of income and equity excludes tax effects on related loss or income. Profit or loss Equity (*) December 31, 2017 100 bp increase 100 bp decrease 100 bp increase 100 bp decrease
Available for sale financial assets -- -- (7.104.540) 7.483.673 Total, net -- -- (7.104.540) 7.483.673
(*) Equity effect also includes profit or loss effect of assumed change in interest rates.
Profit or loss Equity (*) December 31, 2016 100 bp increase 100 bp decrease 100 bp increase 100 bp decrease
Financial assets held for trading (6.560) 6.669 (6.560) 6.669 Available for sale financial assets -- -- (7.417.571) 7.837.571 Total, net (6.560) 6.669 (7.424.131) 7.844.240
(*) Equity effect also includes profit or loss effect of assumed change in interest rates.
Fair value information
The estimated fair values of financial instruments have been determined using available market information, and where they exist, appropriate valuation methodologies.
The Company has classified its financial assets as held for trading, available for sale or held to maturity. As of the reporting date, available for sale financial assets and financial assets held for trading are measured at their fair values based on their quoted prices or fair value information obtained from brokers in the accompanying consolidated financial statements. Equity shares not traded in active markets are measured at cost less impairment losses if any. As of December 31, 2017, the Company has no held to maturity investment measured at amortised cost calculating the effective interest method (December 31, 2016: TL 15.172.182 As of December 31, 2017 and December 31, 2016 the Company’s fair value classification of financial assets held to the maturity is 1. Level.
Management estimates that the fair value of other financial assets and liabilities are not materially different than their net book value.
Fair value sensitivity of the equity shares
Equity share price risk is the risk that the fair values of equity shares decrease as a result of the changes in the levels of equity shares indices and the value of equity shares.
The effect on income as a result of 10% change in the fair value of equity share instruments held as held for trading financial assets (traded at İstanbul Stock Exchange) due to a reasonably possible change in equity share indices, with all other variables held constant, is as follows (excluding tax effect): December 31, 2017 December 31, 2016 Profit or loss Equity (*) Profit or loss Equity (*)
Financial assets held for trading (4.834.620) (4.834.620) (3.778.444) (3.778.444) Available for sale financial assets -- (11.173.595) -- (10.469.073) Total, net (4.834.620) (16.008.215) (3.778.444) (14.247.517)
(*) Equity effect also includes profit or loss effect of assumed change in interest rates.
Anadolu Sigorta 2017 Annual Report 251 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Classification of fair value measurements
TFRS 7 - Financial instruments: Disclosures requires the classification of fair value measurements into a fair value hierarchy by reference to the observability and significance of the inputs used in measuring fair value of financial instruments measured at fair value to be disclosed. This classification basically relies on whether the relevant inputs are observable or not. Observable inputs refer to the use of market data obtained from independent sources, whereas unobservable inputs refer to the use of predictions and assumptions about the market made by the Company. This distinction brings about a fair value measurement classification generally as follows:
Level 1: Fair value measurements using quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: Fair value measurements using inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices).
Level 3: Fair value measurements using inputs for the assets or liability that are not based on observable market data (unobservable inputs).
Classification requires the utilization of observable market data, if available.
The classification of fair value measurements of financial assets and liabilities measured at fair value is as follows: December 31, 2017 Level 1 Level 2 Level 3 Total
Financial assets: Financial assets held for trading (Note 11) 123.087.098 224.448.052 -- 347.535.150 Available for sale financial assets (*) (Note 11) 468.301.161 219.514.315 67.311.993 755.127.469 Total financial assets 591.388.259 443.962.367 67.311.993 1.102.662.619
December 31, 2016 Level 1 Level 2 Level 3 Total
Financial assets: Financial assets held for trading (Note 11) 67.520.258 60.360.746 -- 127.881.004 Available for sale financial assets (*) (Note 11) 382.417.739 159.492.559 62.944.793 604.855.091 Total financial assets 449.937.997 219.853.305 62.944.793 732.736.095
(*) As of December 31, 2017, equity shares that are not publicly traded and the determination of fair values could not be obtained reliably amounting to TL 857.721 have been measured at cost value (December 31, 2016: TL 701.507).
The following table shows the reconciliation of financial assets available for sales that are classified as fair value measurement Level 3: December 31, 2017 December 31, 2016
Financial assets available for sale beginning of the period 62.944.793 17.828.444 Addition 48.622.825 48.250.549 Disposal (44.466.936) (3.927.478) Capital increase by bonus issue 204.248 -- Revaluation 7.063 793.278 Financial assets available for sale ending of the period 67.311.993 62.944.793
252 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Gains and losses from financial assets Gains and losses recognized in the statement of income: December 31, 2017 December 31, 2016
Interest income from bank deposits 190.737.844 251.980.134 Foreign exchange gains 430.645.835 134.101.122 Income from investments in associates 45.318.362 38.251.374 Income from debt securities classified as available-for-sale financial assets 40.204.760 30.555.552 Income from debt securities classified as trading financial assets 39.566 109.741 Income from debt securities classified as held to maturity financial investments 13.641 1.494.265 Income from equity shares classified as available-for-sale financial assets 12.510.285 11.944.564 Income from equity shares classified as trading financial assets 18.303.260 6.762.828 Income from investment funds as available for sale financial assets 7.118.861 2.497.586 Income from investment funds as trading financial assets 35.163.436 8.720.045 Income from derivative transactions 90.116.129 4.432.112 Other 3.087.195 1.530.171 Investment income 873.259.174 492.379.494
Loss from valuation of financial assets (1.118.002) (1.643.638) Foreign exchange losses (112.534.636) (76.942.491) Loss from derivative transactions (179.274.294) (3.616.449) Loss from disposal of financial assets (16.137.959) (15.270.224) Investment expenses - including interest (385.326) (756.432) Investment expenses (309.450.217) (98.229.234)
Financial gains and losses recognized in the consolidated statement of income, net 563.808.957 394.150.260
Financial gains and losses recognized in equity: December 31, 2017 December 31, 2016
Fair value changes in investments in associates (Note 15) (3.497.756) (1.310.905) Net gains transferred from statement of equity to the statement of income on disposal of available for sale financial assets (Note 15) (7.896.672) 4.104.171 Fair value changes in available-for-sale financial assets (Note 15) 10.768.680 981.737 Gains and losses recognized in equity, net (625.748) 3.775.003
Capital management
The Company’s capital management policies include the following: • To comply with the insurance capital requirements determined by the Turkish Treasury • To ensure the continuity of the Company’s activities within the framework of the Company’s continuity principle
In accordance with the “Communiqué on Measurement and Assessment of Capital Adequacy for Insurance, Reinsurance and Individual Pension Companies” issued by Turkish Treasury on January 19, 2008 dated and 26761 numbered; the Company measured its minimum capital requirement as TL 1.137.929.541 as of June 30, 2017. As of June 30, 2017, the capital amount of the Company presented in the consolidated financial statements are above the minimum capital requirement amounts calculated according to the communiqué.
Anadolu Sigorta 2017 Annual Report 253 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
5 Segment reporting
A segment is a distinguishable component of the Company that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.
Business segment
A business segment reporting of the Company is presented in accordance with TFRS 8 - Operating Segments standard in this section.
Insurance on Fire and Natural Disaster
Insurance on fire and natural disasters covers material damages occurred due to fire, lightening, explosion or smoke, steam and temperature resulted from fire, lightning and explosion up to insurance policy limits.
Insurance on Motor Third Party Liability
According to the Motorway Traffic Code numbered 2918, Motor Third Party Liability Insurance is covers vehicle owner’s legal liability for all bodily claims to third persons and financial claims to other vehicles.
Claims caused by the trailer or semi-trailers (included light trailers) or the vehicles pulled is covered by the insurance of the trailer. However, the trailers used for transportation of people should be included in an additional liability insurance in order to obtain coverage.
In order to reduce and prevent the damage in the accident happened, reasonable and necessary expenses of the policyholder is compensated by the Company. This insurance also covers unfair claims against the policyholders.
Insurance on Motor Vehicles
Insurance on motor vehicles covers the following dangers related with vehicles. It is possible to widen policy scope for accessories or audio, display and communication devices which are not included in standard version of the vehicle by specifying on the insurance policy. • Accident with the motorized or non-motorized vehicles which used in high-ways, • Crash with fixed or moving items without desire of the driver or accidents due to crash, capsize, fall or tumble, • The actions of third parties resulted from bad intention or mischief, • Burn, • Theft or attempted theft.
Insurance on Health
Insurance on health compensates treatment costs of illnesses or accidental injuries during the period of insurance and, if any, daily allowances in this general framework with special conditions up to the amount written in the policy. Geographical limits of the insurance are stated in the policy.
254 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Geographical segment
The main geographical segment which the Company operates is Turkey. Hence, the Company has not disclosed report on geographical segments.
Fire and Motor third Motor natural party liability Health vehicles disasters Other Unallocated Total
January 1 - December 31, 2017 1- Earned Premiums (Net of Reinsurer Share) 1.176.156.608 453.813.681 893.389.313 336.807.419 463.217.105 -- 3.323.384.126 1.1- Written Premiums (Net of Reinsurer Share) 951.627.235 507.872.801 946.461.755 353.802.944 513.221.990 -- 3.272.986.725 1.2- Change in Reserve for Unearned Premiums (Net of Reinsurer Shares and Less the Amounts Carried Forward) 224.529.373 (54.059.120) (53.072.442) (16.995.525) (27.588.246) -- 72.814.040 1.3- Change in Reserve for Unexpired Risks (Net of Reinsurer Share and Less the Amounts Carried Forward) ------(22.416.639) -- (22.416.639) 2- Other Technical Income (Net of Reinsurer Share) 76.305 337.870 5.931.814 195.658 63.898 -- 6.605.545 3- Accrued Salvage and Subrogation Income 17.597.183 -- 8.246.992 4.414.179 10.483.603 -- 40.741.957 Technical income (*) 1.193.830.096 454.151.551 907.568.119 341.417.256 473.764.606 -- 3.370.731.628
1- Incurred Losses (Net of Reinsurer Share) (1.041.617.897) (388.086.802) (681.929.327) (243.279.304) (359.351.990) -- (2.714.265.320) 1.1- Claims Paid (Net of Reinsurer Share) (668.494.190) (384.049.900) (674.882.625) (209.459.709) (215.937.399) -- (2.152.823.823) 1.2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward) (373.123.707) (4.036.902) (7.046.702) (33.819.595) (143.414.591) -- (561.441.497) 2- Change in Other Technical Reserves (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- (5.511.788) (20.970.727) (5.028.889) -- (31.511.404) 3- Operating Expenses (246.840.165) (95.005.660) (206.518.178) (104.082.654) (103.382.084) -- (755.828.741) 4- Other Technical Provisions (23.889.604) (15.564.363) (58.354.849) (14.756.402) (6.046.280) -- (118.611.498) Technical expense (1.312.347.666) (498.656.825) (952.314.142) (383.089.087) (473.809.243) -- (3.620.216.963)
Investment Income 877.126.299 877.126.299 Investment Expense (*) (337.531.234) (337.531.234) Other (**) (41.660.528) (41.660.528) Net income before tax 248.449.202
Income tax (46.934.214) (46.934.214)
Net income 201.514.988
(*) Investment income transferred to non-technical section from technical section amounting to TL 542.114.497 is not included. (**) Deferred tax income amounting TL 5.702.299 is presented as income tax.
Anadolu Sigorta 2017 Annual Report 255 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Fire and Motor third Motor natural party liability Health vehicles disasters Other Unallocated Total
January 1 - December 31, 2016 1- Earned Premiums (Net of Reinsurer Share) 1.227.755.087 344.782.017 885.913.041 274.182.843 419.595.214 -- 3.152.228.202 1.1- Written Premiums (Net of Reinsurer Share) 1.419.110.799 377.422.354 895.629.815 312.094.631 443.071.056 -- 3.447.328.655 1.2- Change in Reserve for Unearned Premiums (Net of Reinsurer Shares and Less the Amounts Carried Forward) (191.355.712) (32.640.337) (9.716.774) (37.911.788) (29.396.525) -- (301.021.136) 1.3- Change in Reserve for Unexpired Risks (Net of Reinsurer Share and Less the Amounts Carried Forward) ------5.920.683 -- 5.920.683 2- Other Technical Income (Net of Reinsurer Share) 47.999 218.979 3.528.594 (37.092) 19.218 -- 3.777.698 3- Accrued Salvage and Subrogation Income 18.638.929 -- 4.412.959 5.005.892 3.321.026 -- 31.378.806 Technical income (*) 1.246.442.015 345.000.996 893.854.594 279.151.643 422.935.458 -- 3.187.384.706
1- Incurred Losses (Net of Reinsurer Share) (1.124.709.925) (280.614.505) (617.259.111) (211.289.305) (291.481.026) -- (2.525.353.872) 1.1- Claims Paid (Net of Reinsurer Share) (660.042.471) (278.052.934) (612.141.869) (132.643.690) (185.135.591) -- (1.868.016.555) 1.2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward) (464.667.454) (2.561.571) (5.117.242) (78.645.615) (106.345.435) -- (657.337.317) 2- Change in Other Technical Reserves (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- (5.280.491) (18.587.421) (4.014.167) -- (27.882.079) 3- Operating Expenses (269.946.353) (73.163.671) (211.669.248) (84.373.193) (103.394.274) -- (742.546.739) 4- Other Technical Provisions (22.900.231) (9.950.488) (58.110.456) (16.389.358) (6.536.827) -- (113.887.360) Technical expense (1.417.556.509) (363.728.664) (892.319.306) (330.639.277) (405.426.294) -- (3.409.670.050)
Investment Income 501.978.555 501.978.555 Investment Expense (*) (125.245.042) (125.245.042) Other (**) (36.173.421) (36.173.421) Net income before tax 118.274.748
Income tax (16.156.051) (16.156.051)
Net income 102.118.697
(*) Investment income transferred to non-technical section from technical section amounting to TL 379.849.157 is not included. (**) Deferred tax income amounting TL 7.160.762 is presented as income tax.
256 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
6 Tangible assets
Movements in tangible assets in the period of January 1 - December 31, 2017 are presented below: January 1, Valuation December 31, 2017 Additions Disposal Differences 2017
Cost: Investment properties (Note 7) 62.175.000 39.136 -- 2.000.864 64.215.000 Buildings for own use 12.372.253 -- -- 1.022.747 13.395.000 Machinery and equipment 49.033.797 8.204.174 (280.754) -- 56.957.217 Furniture and fixtures 13.717.551 394.797 (118.850) -- 13.993.498 Motor vehicles 619.736 -- (329.156) -- 290.580 Other tangible assets (including leasehold improvements) 22.982.418 922.014 (417.594) -- 23.486.838 Leased tangible assets 3.868.337 -- (10.263) -- 3.858.074 164.769.092 9.560.121 (1.156.617) 3.023.611 176.196.207 Accumulated depreciation: Buildings for own use 58.683 109.441 -- (158.435) 9.689 Machinery and equipment 33.541.297 6.486.538 (270.968) -- 39.756.867 Furniture and fixtures 10.375.795 974.653 (117.718) -- 11.232.730 Motor vehicles 397.036 80.487 (255.072) -- 222.451 Other tangible assets (including leasehold improvements) 13.838.190 3.814.142 (417.595) -- 17.234.737 Leased tangible assets 3.868.337 -- (10.263) -- 3.858.074 62.079.338 11.465.261 (1.071.616) (158.435) 72.314.548
Net book value 102.689.754 103.881.659
The Company’s property for own use is valuated over fair value as of 2016 and 2015 year-end and subjected to valuation in this context. Expertise reports regarding this property are prepared by CMB licenced Property Valuation Company in December 2016. There is no any pledge over Company’s property for own use.
As of December 31, 2017 and December 31, 2016, property for own use’s fair value (except VAT) and net book value is as following: Net Book Value Net Book Value (December 31, (December 31, Landings and buildings for own use Expertise date Expertise value 2017) 2016)
İzmir Regional Office December 2017 7.500.000 7.494.105 8.669.647 Adana Regional Office December 2017 1.835.000 1.833.762 1.825.031 Lefkoşe Kıbrıs Branch December 2017 2.775.000 2.774.620 706.286 Adana Office December 2017 425.000 424.709 454.719 Others December 2017 860.000 858.115 657.887
Total 13.395.000 13.385.311 12.313.570
Anadolu Sigorta 2017 Annual Report 257 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Fair value measurement
Fair value of landings and buildings for own use is determined by equivalence value method. Fair value measurement of landings and buildings for own use those fair value is determined by equivalence value method is reclassified as Level 2.
Movements in tangible assets in the period of January 1 - December 31, 2016 are presented below: January 1, Valuation December 31, 2016 Additions Disposal Differences 2016
Cost: Investment properties (Note 7) 54.343.600 9.243 (65.000) 7.887.157 62.175.000 Buildings for own use 11.532.400 103.958 -- 735.895 12.372.253 Machinery and equipment 41.909.394 8.714.053 (1.589.650) -- 49.033.797 Furniture and fixtures 12.253.700 1.922.765 (458.914) -- 13.717.551 Motor vehicles 619.736 ------619.736 Other tangible assets (including leasehold improvements) 20.322.655 2.659.763 -- -- 22.982.418 Leased tangible assets 4.166.354 -- (298.017) -- 3.868.337 145.147.839 13.409.782 (2.411.581) 8.623.052 164.769.092 Accumulated depreciation: Buildings for own use 33.579 101.901 -- (76.798) 58.682 Machinery and equipment 29.623.190 5.481.559 (1.563.452) -- 33.541.297 Furniture and fixtures 9.976.214 842.285 (442.703) -- 10.375.796 Motor vehicles 280.232 116.804 -- -- 397.036 Other tangible assets (including leasehold improvements) 10.206.266 3.631.924 -- -- 13.838.190 Leased tangible assets 4.166.354 -- (298.017) -- 3.868.337 54.285.835 10.174.473 (2.304.172) (76.798) 62.079.338
Net book value 90.862.004 102.689.754
There is not any mortgage over tangible assets of the Company as of December 31, 2017 and 2016.
7 Investment properties
Additions and disposals for investment properties is given “6- Tangible Assets” note in table of current period movement of tangible assets.
Investment property is presented by fair value method as of December 31, 2017 and December 31, 2016 on balance sheet.
The Company’s investment property expertise report prepared by independent professional valuation specialists authorized by Capital Markets Board. As of December 31, 2017, the Company has gained the rent income from investment properties amounting to TL 1.866.261 (December 31, 2016: TL 1.695.904).
The expertise (excluding VAT) and net book values of investment properties are as follows on the basis of real estate. Expertise reports regarding these property is prepared by independent professional valuation specialists authorized by CMB in December 2017. There is no pledge on the real estates.
258 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Expertise and net book value Net book value Net book value Investment land and buildings December 31, 2017 December 31, 2016
Building/İzmir 31.500.000 29.325.000 Building/Mersin 19.300.000 19.500.000 Building/İzmir 10.500.000 10.400.000 Building/Bursa 2.220.000 2.140.000 Building/Adana 625.000 650.000 Other 70.000 160.000
Expertise and net book value 64.215.000 62.175.000
Fair value measurement
Fair value of investment property is determined by equivalence value method. Fair value measurement of investment property those fair value is determined by equivalence value method is reclassified as Level 2.
8 Intangible assets
Movements in intangible assets in the period of January 1 - December 31, 2017 are presented below: January 1, Transfers December 31, 2017 Additions Transfers Disposal 2017
Cost: Goodwill 16.250.000 ------16.250.000 Advances given for intangible assets 11.732.239 19.281.847 (6.012.500) -- 25.001.586 Other intangible assets 111.110.866 3.491.699 6.012.500 (36.399) 120.578.666 139.093.105 22.773.546 -- (36.399) 161.830.252 Accumulated amortization: Other intangible assets 83.756.830 16.615.756 -- (35.335) 100.337.251 83.756.830 16.615.756 -- (35.335) 100.337.251
Net book value 55.336.275 61.493.001
Movements in tangible assets in the period of January 1 - December 31, 2016 are presented below: January 1, Transfers December 31, 2016 Additions Transfers Disposal 2016
Cost: Goodwill 16.250.000 ------16.250.000 Advances given for intangible assets 9.435.347 17.256.440 (14.959.548) -- 11.732.239 Other intangible assets 93.201.169 3.028.586 14.959.548 (78.437) 111.110.866 118.886.516 20.285.026 -- (78.437) 139.093.105 Accumulated amortization: Other intangible assets 66.877.216 16.938.782 -- (59.168) 83.756.830 66.877.216 16.938.782 -- (59.168) 83.756.830
Net book value 52.009.300 55.336.275
Anadolu Sigorta 2017 Annual Report 259 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
9 Investments in associates December 31, 2017 December 31, 2016 Net book Participation Net book Participation value rate value rate Anadolu Hayat Emeklilik A.Ş. 186.824.586 20,0% 173.328.875 20,0% Investments in associates, net 186.824.586 173.328.875
Total financial assets (Note 4.2) 186.824.586 173.328.875
Shareholders’ Retained Profit for Audited Name Total assets equity earnings the period or not Period Anadolu Hayat Emeklilik A.Ş. (consolidated) 17.884.757.726 934.122.932 102.405.178 226.591.810 Audited December 31, 2017
As of December 31, 2017, the Company has obtained income amounting to TL 45.318.362 from associates through equity accounted consolidation method (December 31, 2016: TL 38.251.374).
10 Reinsurance assets and liabilities
As of December 31, 2017 and December 31, 2016, reinsurance assets and liabilities of the Company in accordance with existing reinsurance contracts are as follows: Reinsurance assets December 31, 2017 December 31, 2016
Provision for outstanding claims, ceded (Note 4.2), (Note 17) 640.756.720 487.012.275 Reserve for unearned premiums, ceded (Note 17) 610.721.482 400.082.643 Reserve for unexpired risks, ceded (Note 17) 24.105.605 3.455.888 Cash deposited to reinsurance companies (Note 12) 29.650.034 12.604.316 Reinsurers share in the provision for subrogation and salvage receivables 15.182 252.027 Commission income accrual from reinsurers -- -- Total 1.305.249.023 903.407.149
There is no impairment losses recognised for reinsurance assets. Reinsurance liabilities December 31, 2017 December 31, 2016
Payables to the reinsurers related to premiums written (Note 19) 267.629.697 259.564.344 Deferred commission income (Note 19) 95.718.017 58.640.768 Commission payables to the reinsurers related to written premiums (Note 23) -- 7.963.322 Cash deposited by reinsurance companies (Note 19) 8.573.616 5.624.583 Total 371.921.330 331.793.017
260 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Gains and losses recognized in the statement of income in accordance with existing reinsurance contracts are as follows: December 31, 2017 December 31, 2016
Premiums ceded during the period (Note 17) (1.289.191.554) (885.937.607) Reserve for unearned premiums, ceded at the beginning of the period (Note 17) (400.082.643) (341.649.490) Reserve for unearned premiums, ceded at the end of the period (Note 17) 610.721.482 400.082.643 Premiums earned, ceded (Note 17) (1.078.552.715) (827.504.454)
Claims paid, ceded during the period (Note 17) 603.127.311 367.998.753 Provision for outstanding claims, ceded at the beginning of the period (Note 17) (487.012.275) (493.070.874) Provision for outstanding claims, ceded at the end of the period (Note 17) 640.756.720 487.012.275 Claims incurred, ceded (Note 17) 756.871.756 361.940.154
Commission income accrued from reinsurers during the period 207.894.486 121.039.356 Deferred commission income at the beginning of the period 58.640.768 54.662.842 Deferred commission income at the end of the period (95.718.017) (58.640.768) Commission income earned from reinsurers 170.817.237 117.061.430
Commission debt accrued to reinsurers -- (7.963.322) Commission receivable accrued from reinsurers -- -- Total, net (150.863.722) (356.466.192)
The movement of commission debt as a result of reinsurance operations of the Company are as follows: December 31, 2017 December 31, 2016
Commission debt accrued from reinsurers during the period (66.798.761) (51.849.653) Deferred commission debt at the beginning of the period (20.356.072) (14.509.831) Deferred comission debt at the end of the period 20.439.155 20.356.072 Commission debt from reinsurance operations (66.715.678) (46.003.412)
11 Financial assets
As of December 31, 2017 and December 31, 2016, financial assets of the Company are as follows: December 31, 2017 December 31, 2016
Available for sale financial assets 755.985.190 605.652.540 Financial assets held for trading 347.535.150 127.881.004 Held to maturity financial assets -- 15.172.182 Impairment loss on available for sale financial assets -- (95.942) Total 1.103.520.340 748.609.784
Anadolu Sigorta 2017 Annual Report 261 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
As of December 31, 2017 and December 31, 2016, the details of the Company’s available for sale financial assets are as follows: December 31, 2017 Nominal Fair Net book value Cost value value
Debt instruments: Government bonds - TL 199.959.655 191.554.949 194.168.489 194.168.489 Private sector bonds - TL 88.510.000 88.510.000 90.244.264 90.244.264 Issued by İş Gayrimenkul Yatırım Ortaklığı A.Ş. (Note 45) 15.000.000 15.000.000 15.302.769 15.302.769 Others 73.510.000 73.510.000 74.941.495 74.941.495 Government bonds - USD 62.613.540 71.044.346 67.019.381 67.019.381 Private sector bonds - USD 65.517.903 65.746.944 66.653.340 66.653.340 416.601.098 416.856.239 418.085.474 418.085.474
Other non-fixed income financial assets: Investment funds 7.931.904.848 200.280.307 226.163.762 226.163.762 Issued by İş Portföy Yönetimi A.Ş (Note 45) 7.931.904.848 200.280.307 226.163.762 226.163.762 Equity shares 73.877.269 89.082.777 111.735.954 111.735.954 Provision for losses on equity shares ------8.005.782.117 289.363.084 337.899.716 337.899.716
Total available for sale financial assets (Note 4.2) 8.422.383.215 706.219.323 755.985.190 755.985.190
December 31, 2016 Nominal Fair Net book value Cost value value
Debt instruments: Government bonds - TL 238.176.176 231.057.437 236.128.110 236.128.110 Private sector bonds - TL 35.580.000 35.580.863 36.312.418 36.312.418 Issued by İş Gayrimenkul Yatırım Ortaklığı A.Ş. (Note 45) 15.000.000 15.000.000 15.543.150 15.543.150 Others 20.580.000 20.580.863 20.769.268 20.769.268 Government bonds - USD 57.714.880 65.861.358 65.275.454 65.275.454 Private sector bonds - USD 61.656.384 61.591.055 62.586.329 62.586.329 Issued by Türkiye Sınai Kalkınma Bankası A.Ş. (Note 45) 6.897.632 6.985.364 7.050.254 7.050.254 Others 54.758.752 54.605.691 55.536.075 55.536.075 393.127.440 394.090.713 400.302.311 400.302.311
Other non-fixed income financial assets: Investment funds 2.196.392.646 91.851.625 100.563.559 100.563.559 Issued by İş Portföy Yönetimi A.Ş (Note 45) 2.196.392.646 91.851.625 100.563.559 100.563.559 Equity shares 66.438.199 79.353.281 104.786.670 104.786.670 Provision for losses on equity shares -- -- (95.942) (95.942) 2.262.830.845 171.204.906 205.254.287 205.254.287
Total available for sale financial assets (Note 4.2) 2.655.958.285 565.295.619 605.556.598 605.556.598
262 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
As of December 31, 2017 and December 31, 2016, financial assets held for trading of the Company are as follows: December 31, 2017 Nominal Fair Net book value Cost value value
Debt instruments: Government bonds - TL -- 23.219.811 23.241.814 23.241.814 -- 23.219.811 23.241.814 23.241.814
Other non-fixed income financial assets: Investment funds 287.438.209 220.387.100 266.365.506 266.365.506 Issued by İş Portföy Yönetimi A.Ş. (Note 45) 287.348.078 212.583.100 248.926.193 248.926.193 Issued by İşbank AG (Note 45) 90.131 7.804.000 17.439.313 17.439.313 Equity shares 6.322.383 45.337.430 48.346.198 48.346.198 Derivatives -- 9.570.458 9.581.632 9.581.632 293.760.592 275.294.988 324.293.336 324.293.336
Total financial assets held for trading (Note 4.2) 293.760.592 298.514.799 347.535.150 347.535.150
December 31, 2016 Nominal Fair Net book value Cost value value
Debt instruments: Government bonds - TL 900.000 902.576 913.243 913.243 Other - TL 4.306.508 4.308.334 4.308.334 900.000 5.209.084 5.221.577 5.221.577 Other non-fixed income financial assets: Investment funds 3.099.336.845 55.064.774 78.225.348 78.225.348 Issued by İş Portföy Yönetimi A.Ş. (Note 45) 3.099.246.714 47.260.774 66.344.974 66.344.974 Issued by İşbank AG (Note 45) 90.131 7.804.000 11.880.374 11.880.374 Equity shares 12.318.597 37.936.869 37.784.443 37.784.443 Derivatives -- 6.646.566 6.649.636 6.649.636 3.111.655.442 99.648.209 122.659.427 122.659.427
Total financial assets held for trading (Note 4.2) 3.112.555.442 104.857.293 127.881.004 127.881.004
Anadolu Sigorta 2017 Annual Report 263 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
As of December 31, 2017 and December 31, 2016, financial assets held to maturity of the Company are as follows: December 31, 2017 Nominal Fair Net book value Cost value value
Debt instruments: Government bonds - TL ------Total financial assets held to maturity ------
December 31, 2016 Nominal Fair Net book value Cost value value
Debt instruments: Government bonds - TL 14.866.200 14.870.978 15.168.262 15.172.182 Total financial assets held to maturity 14.866.200 14.870.978 15.168.262 15.172.182
All debt instruments (financial assets held to maturity) presented above are publicly traded in stock markets.
As of December 31, 2017, equity shares classified as available for sale financial assets with a net book value of TL 1.516.374 are not publicly traded (December 31, 2016: TL 1.059.970).
There is no debt security issued during the period or issued before and paid during the period by the Company.
There is no financial asset that is overdue but not impaired among the Company’s financial investments portfolio. As of December 31, 2017, there is no impairment loss is recognised for equity shares classified as available for sale in the accompanying consolidated financial statements (December 31, 2016: TL 95.942).
Value increases in financial assets including equity shares classified as available for sale financial assets for the last 3 years (including tax effects): Year Change in value increase Total increase in value
2017 (625.748) 32.328.394 2016 3.775.003 32.954.142 2015 (6.021.160) 29.179.139
Movements of the financial assets during the period are presented below: December 31, 2017 Available for Held to Trading(*) sale maturity Total Balance at the beginning of the period 123.572.670 605.556.598 15.172.182 744.301.450 Acquisitions during the period 501.264.684 408.599.876 -- 909.864.560 Disposals (sale and redemption) (346.680.646) (319.441.107) (15.185.823) (681.307.576) Change in the fair value of financial assets (Note 15) 45.938.579 54.217.714 -- 100.156.293 Change in amortized cost of the financial assets -- -- 13.641 13.641 Bonus shares acquired 198.049 7.052.109 -- 7.250.158 Balance at the end of the period 324.293.336 755.985.190 -- 1.080.278.526
(*) The amount of other in financial assets held for trading to TL 23.241.814 (December 31, 2016: TL 4.308.334) are excluded.
264 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
December 31, 2016 Available for Held to Trading(*) sale maturity Total Balance at the beginning of the period 84.344.108 569.025.164 15.555.214 668.924.486 Acquisitions during the period 243.494.173 599.866.185 -- 843.360.358 Disposals (sale and redemption) (216.906.226) (626.556.811) (1.513.379) (844.976.416) Change in the fair value of financial assets (Note 15) 12.381.923 55.362.432 -- 67.744.355 Change in amortized cost of the financial assets -- -- 1.130.347 1.130.347 Bonus shares acquired 258.692 7.859.628 -- 8.118.320 Balance at the end of the period 123.572.670 605.556.598 15.172.182 744.301.450
(*) The amount of other in financial assets held for trading to TL 4.308.334 (December 31, 2015: TL 11.888.027) are excluded.
The detail of the financial assets given as a guarantee in favour of the Turkish Treasury for the insurance activities are as follows: December 31, 2017 Nominal Fair Net book value Cost value value
Held to maturity financial assets (Note 17) ------Total ------
December 31, 2016 Nominal Fair Net book value Cost value value
Held to maturity financial assets (Note 17) 14.866.200 14.870.978 15.168.262 15.172.182 Total 14.866.200 14.870.978 15.168.262 15.172.182
12 Loans and receivables December 31, 2017 December 31, 2016
Receivables from main operations (Note 4.2) 1.178.955.084 1.048.793.865 Other receivables (Note 4.2)(*) 21.224.166 15.540.321 Income accruals (Note 4.2), (Note 10) 19.928.671 4.358.898 Other current assets (Note 4.2) 493.641 185.836 Total 1.220.601.562 1.068.878.920
Short-term receivables 1.218.395.858 1.067.129.558 Long and medium-term receivables 2.205.704 1.749.362 Total 1.220.601.562 1.068.878.920
(*) As of December 31, 2017, other receivables amounting to TL 21.224.166 (December 31, 2016: TL 15.540.321) comprise of receivables from DASK and TARSİM amounting to TL 12.319.158 (December 31, 2016: TL 6.941.215) and other miscellaneous receivables amounting to TL 8.905.008 (December 31, 2016: TL 8.599.106).
Anadolu Sigorta 2017 Annual Report 265 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
As of December 31, 2017 and December 31, 2016, the details of the receivables from main operations are as follows: December 31, 2017 December 31, 2016
Receivables from agencies, brokers and intermediaries 884.442.432 786.165.652 Salvage and subrogation receivables 50.653.264 47.016.782 Receivables from policyholders 31.786.329 46.488.848 Long term receivable which is bank guarantee and three months credit card 107.556.543 105.184.248 Total receivables from insurance operations, net 1.074.438.568 984.855.530
Receivables from reinsurance operations 83.203.501 60.170.605 Cash deposited to insurance and reinsurance companies (Note 4.2), (Note 10) 29.650.034 12.604.316 Provisions for receivables from insurance operations - subrogation receivables (8.337.019) (8.836.586) Doubtful receivables from insurance operations - subrogation receivables 196.394.800 159.550.493 Provisions for doubtful receivables from insurance operations - subrogation receivables (Note 4.2) (196.394.800) (159.550.493) Doubtful receivables from main operations - premium receivables 29.830.936 29.310.469 Provisions for doubtful receivables from main operations - premium receivables (Note 4.2) (29.830.936) (29.310.469) Receivables from main operations 1.178.955.084 1.048.793.865
As of December 31, 2017 and December 31, 2016, the details of mortgages and other guarantees for the Company’s receivables are presented below: December 31, 2017 December 31, 2016
Letters of guarantees 105.463.663 103.289.621 Mortgages notes 83.516.803 80.884.673 Other guarantees 50.299.983 47.293.518 Government bonds and treasury bills 3.028.656 2.902.263 Total 242.309.105 234.370.075
Provisions for overdue receivables and receivables not due yet a) Receivables under legal or administrative follow up (due): TL 29.396.565 (December 31, 2016: TL 29.310.469). b) Provision for subrogation receivables under legal or administrative follow up: TL 194.445.923 (December 31, 2016: TL 168.387.079).
The Company’s receivables from and payables to shareholders, associates and subsidiaries are detailed in note 45 - Related party transactions.
The details of the receivables and payables denominated in foreign currencies and foreign currency rates used for the translation are presented in Note 4.2- Financial risk management.
13 Derivative financial instruments
As of December 31, 2017, the Company has a derivative financial instruments recognized in the financial assets held for trading amounting to TL 9.581.631 (December 31, 2016: TL 6.649.637). As of December 31, 2017 the Company has express warranty in derivative instruments amounting to TL 5.818.015 (December 31, 2016: None).
As of December 31, 2017, the Company has accounted in income accruals and other financial liabilities amounting to TL 18.939.649 (December 31, 2016: None) that is increase in value and TL (7.868.067) (December 31, 2016: None) that is decrease in value respectively, due to forward foreign currency agreement.
266 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
14 Cash and cash equivalents
As of December 31, 2017 and December 31, 2016, the details of the cash and cash equivalents are as follows: December 31, 2017 December 31, 2016 At the end of the At the beginning of At the end of the At the beginning of period the period period the period
Cash on hand 62.857 35.109 35.109 18.864 Bank deposits 3.105.334.647 2.795.907.111 2.795.907.111 1.937.834.876 Cheques given and payment orders (87.620) (82.544) (82.544) (125.585) Bank guaranteed credit card receivables with maturities less than three months 399.367.075 421.604.151 421.604.151 367.176.057 Cash and cash equivalents in the balance sheet 3.504.676.959 3.217.463.827 3.217.463.827 2.304.904.212
Bank deposits - blocked (*) (Note 17) (483.582.942) (399.688.896) (399.688.896) (340.277.623) Time deposits with maturities longer than 3 months (894.215.799) (933.084.218) (933.084.218) (287.914.280) Interest accruals on banks deposits (5.641.962) (12.217.858) (12.217.858) (6.510.620) Cash and cash equivalents in the statement of cash flows 2.121.236.256 1.872.472.855 1.872.472.855 1.670.201.689
(*) As of December 31, 2017 and December 31, 2016, bank deposits in cash and cash equivalents has been kept in favour of the Turkish Treasury as a guarantee for the insurance activities.
As of December 31, 2017 and December 31, 2016, the details of the bank deposits are as follows: December 31, 2017 December 31, 2016
Foreign currency denominated bank deposits - time deposits 2.021.413.753 134.723.526 - demand deposits 4.690.121 4.564.342
Bank deposits in Turkish Lira - time deposits 1.066.799.973 2.646.962.790 - demand deposits 12.430.800 9.656.453 Bank deposits 3.105.334.647 2.795.907.111
15 Equity
Paid in capital
The shareholder having direct or indirect control over the shares of the Company is İş Bankası Group.
The Company does not increase its share capital in the current period.
As of December 31, 2017, the issued share capital of the Company is TL 500.000.000 (December 31, 2016: TL 500.000.000) and the Company unregistered Group 150 A shares which each of value is TL 1,5 as of April 11, 2013 in which approved in Main Article of the Company dated in April 11, 2013. The share capital of the Company consists of 50.000.000.000 (December 31, 2016: TL 50.000.000.000 shares) issued shares with TL 1 nominal value each.
Anadolu Sigorta 2017 Annual Report 267 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Other capital reserves
In accordance with tax legislation, 75% of profits from sales of participation shares and real states included in the assets of companies is exempt from corporate tax provided that it is classified under a special fund for full five years. The exempt gains cannot be transferred to another account other than a capital increase or cannot be withdrawn from the entity for five years. As of December 31, 2017, the tax exempt which obtained thanks to sale of participation shares and real estate in 2010, 2011, 2013, 2014, 2015 and 2016 years respectively, amounting to TL 8.081.516, TL 80.025, TL 647.763, TL 920.272, TL 2.541.500 and TL 15.094 is classified as other capital reserves. December 31, 2017 December 31, 2016
Other capital reserves at the beginning of the period 29.200.961 25.887.403 Transfer from profit 15.094 2.541.499 Use property revaluation fund(Note 6) 172.018 772.059 Other capital reserves at the end of the period 29.388.073 29.200.961
Legal reserves
The legal reserves consist of first and second legal reserves in accordance with the Turkish Commercial Code. The first legal reserve is appropriated out of the statutory profits at the rate of 5%, until the total reserve reaches a maximum of 20% of the entity’s share capital. The second legal reserve is appropriated at the rate of 10% of all distributions in excess of 5% of the entity’s share capital. The first and second legal reserves are not available for distribution unless they exceed 50% of the share capital, but may be used to absorb losses in the event that the general reserve is exhausted.
The movement of legal reserves are presented below: December 31, 2017 December 31, 2016
Legal reserves at the beginning of the period 58.683.773 52.415.164 Transfer from profit 9.580.921 6.268.609 Legal reserves at the end of the period 68.264.694 58.683.773
Extraordinary reserves
The movement of extraordinary reserves are presented below: December 31, 2017 December 31, 2016
Extraordinary reserves at the beginning of the period 114.807.844 60.745.557 Transfer from profit 48.358.697 54.062.287 Extraordinary reserves at the end of the period 163.166.541 114.807.844
Statutory reserves
The movement of statutory reserves are presented below: December 31, 2017 December 31, 2016
Statutory reserves at the beginning of the period 17.811.508 11.788.629 Transfer from profit 8.029.232 6.022.879 Statutory reserves at the end of the period 25.840.740 17.811.508
268 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Valuation of financial assets
The movements of valuation differences related available for sale financial assets and associates are presented below: December 31, 2017 December 31, 2016 Valuation difference at the beginning of the period 32.954.142 29.179.139 Change in the fair value 12.147.442 3.362.861 Subsidiaries consolidated according to the equity method (3.497.756) (1.310.905) Net gains transferred to the consolidated statement of income (7.896.672) 4.104.171 Deferred tax effect (1.378.762) (2.381.124) Valuation difference at the end of the period 32.328.394 32.954.142
Other profit reserves
In accordance with the July 4, 2007 dated and 2007/3 numbered Compliance Circular issued by the Turkish Treasury, it was stated that the companies would not further provide earthquake provision for the year 2007. However, it was also stated that earthquake provisions provided in previous periods (earthquake provision in the financial statements as of December 31, 2006) should be transferred to the reserve accounts under equity in accordance with the 5th Temporary Article of the Insurance Law. The companies had to transfer total amount of provisions, including earthquake provisions reserved as of December 31, 2006 and related gains obtained from investment of these amounts, to the account called as “549.01 - transferred earthquake provisions” which would be opened as of September 1, 2007 within Uniform Chart of Account and the reserves amount should not be subject to dividend distribution or should not be transferred to other accounts.
Accordingly, the Company initially transferred total provisions amounting to TL 96.036.157 including earthquake provisions reserved as of December 31, 2006 and related gains obtained from investment of this amount, to the reserve accounts under equity, TL 51.846.111 of this amount is used for capital increase in 2010. As of December 31, 2017, accordance with IAS 19, to add the amount of actuarial loss and net profit of TL (3.269.667) defined remeasure net profit debt and TL 348.898 for consolidation process the amount of new balance is TL 40.571.481.
Profit on assets sale that will be transferred to capital
In accordance with tax legislation, 75% of profits from sales of participation shares and real states included in the assets of companies is exempt from corporate tax provided that it is classified under a special fund for full five years. The exempt gains cannot be transferred to another account other than a capital increase or cannot be withdrawn from the entity for five years.
16 Other reserves and equity component of discretionary participation feature
As of December 31, 2017 and December 31, 2016, change in fair values of available-for-sale financial assets which is presented as “valuation of financial assets” and earthquake provisions provided in the previous years presented under “other profit reserves” are explained in detail in Note 15 - Equity above. As of December 31, 2017 and December 31, 2016, the Company does not hold any insurance or investment contracts which contain a discretionary participation feature.
Anadolu Sigorta 2017 Annual Report 269 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
17 Insurance contract liabilities and reinsurance assets
Estimation of the ultimate payment for the outstanding claims is one of the most important accounting assumptions of the Company. Estimation of the insurance contract liabilities contains several ambiguities by nature. The Company makes calculation of the related insurance technical provisions accordance with the Insurance Legislation and reflects them into financial statements as mentioned in Note 2 - Summary of significant accounting policy.
As of December 31, 2017 and December 31, 2016, technical reserves of the Company are as follows: December 31, 2017 December 31, 2016
Reserve for unearned premiums, gross 2.349.673.619 2.228.090.805 Reserve for unearned premiums, ceded (Note 10) (610.721.482) (400.082.643) Reserve for unearned premiums, SSI share (58.817.233) (75.059.218) Reserves for unearned premiums, net 1.680.134.904 1.752.948.944
Provision for outstanding claims, gross 3.245.443.076 2.530.257.134 Provision for outstanding claims, ceded (Note 10) (640.756.720) (487.012.275) Provision for outstanding claims, net 2.604.686.356 2.043.244.859
Gross of reserve for unexpired risk 47.086.775 4.020.419 Reinsurer’s share of the reserve for unexpired risk (24.105.605) (3.455.888) Provision unexpired risk reserve, net 22.981.170 564.531
Equalization provision, net 140.939.211 109.427.806 General provision, net (*) 7.702.760 7.702.761 Other technical provisions, net 148.641.971 117.130.567
Total technical provisions, net 4.456.444.401 3.913.888.901
Short-term 4.307.802.430 3.796.758.334 Medium and long-term 148.641.971 117.130.567 Total technical provisions, net 4.456.444.401 3.913.888.901
(*) It contains a provision which has been reflected in the prior financial statements amounting TL 7.702.761 due to the possible impact of adverse developments that may occur by company’s management.
As of December 31, 2017 and 2016, the movements of the insurance liabilities and related reinsurance assets are presented below: December 31, 2017 Reserve for unearned premiums Gross Ceded SSI share Net
Reserve for unearned premiums at the beginning of the period 2.228.090.805 (400.082.643) (75.059.218) 1.752.948.944 Premiums written during the period 4.671.409.652 (1.289.191.554) (109.231.373) 3.272.986.725 Premiums earned during the period (4.549.826.838) 1.078.552.715 125.473.358 (3.345.800.765) Reserve for unearned premiums at the end of the period 2.349.673.619 (610.721.482) (58.817.233) 1.680.134.904
270 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
December 31, 2016 Reserve for unearned premiums Gross Ceded SSI share Net
Reserve for unearned premiums at the beginning of the period 1.848.552.863 (341.649.490) (54.975.565) 1.451.927.808 Premiums written during the period 4.484.060.267 (885.937.607) (150.794.005) 3.447.328.655 Premiums earned during the period (4.104.522.325) 827.504.454 130.710.352 (3.146.307.519) Reserve for unearned premiums at the end of the period 2.228.090.805 (400.082.643) (75.059.218) 1.752.948.944
December 31, 2017 Provision for outstanding claims Gross Ceded Net
Provision for outstanding claims at the beginning of the period 2.530.257.134 (487.012.275) 2.043.244.859 Claims reported during the period and changes in the estimations of provisions for outstanding claims provided at the beginning of the period 3.471.137.076 (756.871.756) 2.714.265.320 Claims paid during the period (2.755.951.134) 603.127.311 (2.152.823.823) Provision for outstanding claims at the end of the period 3.245.443.076 (640.756.720) 2.604.686.356
December 31, 2016 Provision for outstanding claims Gross Ceded Net
Provision for outstanding claims at the beginning of the period 1.878.978.416 (493.070.874) 1.385.907.542 Claims reported during the period and changes in the estimations of provisions for outstanding claims provided at the beginning of the period 2.887.294.026 (361.940.154) 2.525.353.872 Claims paid during the period (2.236.015.308) 367.998.753 (1.868.016.555) Provision for outstanding claims at the end of the period 2.530.257.134 (487.012.275) 2.043.244.859
December 31, 2017 Reserve for unexpired risk Gross Ceded Net
Reserve for unexpired risk at the beginning of the period 4.020.419 (3.455.888) 564.531 Change in the reserve during the current period 43.066.356 (20.649.717) 22.416.639 Reserve for unexpired risk at the end of the period 47.086.775 (24.105.605) 22.981.170
December 31, 2016 Reserve for unexpired risk Gross Ceded Net
Reserve for unexpired risk at the beginning of the period 18.531.889 (12.046.675) 6.485.214 Change in the reserve during the current period (14.511.470) 8.590.787 (5.920.683) Reserve for unexpired risk at the end of the period 4.020.419 (3.455.888) 564.531
Reserve for equalization December 31, 2017 December 31, 2016
Reserve for equalization at the beginning of the period 109.427.807 81.545.728 Provision added during the period 31.511.404 27.882.079 Reserve for equalization at the end of the period 140.939.211 109.427.807
Anadolu Sigorta 2017 Annual Report 271 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Claim development tables
The basic assumption used in the estimation of provisions for outstanding claims is the Company’s past experience on claim developments. Judgment is used to assess the extent to which external factors such as judicial decisions and government legislation affect the estimates. The sensitivity of certain assumptions like legislative change, uncertainty in the estimation process, etc., is not possible to quantify. Furthermore, because of delays that arise between occurrence of a claim and its subsequent notification and eventual settlement, the outstanding claim provisions are not known with certainty at the reporting date. Consequently, the ultimate liabilities will vary as a result of subsequent developments. Differences resulting from reassessment of the ultimate liabilities are recognized in subsequent financial statements.
Development of insurance liabilities enables to measure the performance of the Company in estimation of its ultimate claim losses. The amounts presented on the top of the below tables show the changes in estimations of the Company for the claims in subsequent years after claim years. The amounts presented on the below of the below tables give the reconciliation of total liabilities with provision for outstanding claims presented in the accompanying financial statements. December 31, 2017 Claim year 2013 2014 2015 2016 2017 Total Claim year 1.298.328.138 1.781.130.181 2.285.927.435 2.452.778.738 3.147.733.176 10.965.897.668 1 year later 1.460.991.580 2.021.374.527 2.641.719.915 2.738.090.023 -- 8.862.176.045 2 years later 1.516.454.976 2.149.439.498 2.748.295.814 -- -- 6.414.190.288 3 years later 1.592.457.529 2.220.685.091 ------3.813.142.620 4 years later 1.637.662.009 ------1.637.662.009 Current estimate of cumulative claims 1.637.662.009 2.220.685.091 2.748.295.814 2.738.090.023 3.147.733.176 12.492.466.113 Cumulative payments to date 1.399.424.005 1.832.865.427 2.315.870.882 2.142.238.748 2.106.774.810 9.797.173.872 Provision recognized in the financial statements 238.238.004 387.819.664 432.424.932 595.851.275 1.040.958.366 2.695.292.241 Provision recognized in the financial statements before 2012 ------550.150.835 Total gross outstanding claims presented in the financial statements at the end of the period 3.245.443.076
December 31, 2016 Claim year 2012 2013 2014 2015 2016 Total Claim year 1.452.242.590 1.166.111.441 1.579.079.025 2.055.249.641 2.235.157.937 8.487.840.634 1 year later 1.500.150.686 1.236.902.235 1.727.739.052 2.308.062.195 -- 6.772.854.168 2 years later 1.566.813.592 1.288.090.450 1.854.104.401 -- -- 4.709.008.443 3 years later 1.640.873.624 1.364.239.034 ------3.005.112.658 4 years later 1.721.144.385 ------1.721.144.385 Current estimate of cumulative claims 1.721.144.385 1.364.239.034 1.854.104.401 2.308.062.195 2.235.157.937 9.482.707.952 Cumulative payments to date 1.447.075.951 1.159.147.418 1.506.060.346 1.838.890.991 1.357.809.330 7.308.984.036 Provision recognized in the financial statements 274.068.434 205.091.616 348.044.055 469.171.204 877.348.607 2.173.723.916 Provision recognized in the financial statements before 2011 ------356.533.218 Total gross outstanding claims presented in the financial statements at the end of the period 2.530.257.134
272 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
Total amount of guarantee that should be provided by the Company for life and non-life branches and guarantees placed for the life and non-life branches in respect of related assets December 31, 2017 Amount be provided (**) Provided (*) Net book value Non-life: Bank deposits (Note 14) 483.372.018 483.582.942 Total 380.109.847 483.372.018 483.582.942
December 31, 2016 Amount be provided (**) Provided (*) Net book value Non-life: Bank deposits (Note 14) 398.452.370 399.688.896 Financial assets (*) (Note 11) 15.169.173 15.172.182 Total 359.073.153 413.621.543 414.861.078
(*) As of December 31, 2017 and December 31, 2016, government bonds and treasury bills are measured at daily official prices announced by the Central Bank of Turkey in accordance with the 6th Article of “Circular Related to the Financial Structure of Insurance, Reinsurance, and Private Pension Companies”. (**) “According to the 7th article of the “Circular Related to the Financial Structure of Insurance, Reinsurance, and Private Pension Companies” which regulates necessary guarantee amount, minimum guarantee fund for capital adequacy calculation period will be provided as a guarantee in two months following the calculation period. According to “Regulations Regarding to Capital Adequacy Measurement and Assessment of Insurance, Reinsurance, and Private Pension Companies”, companies must prepare their capital adequacy tables twice in a financial year at June and December periods and must sent capital adequacy tables to the Turkish Treasury Department within two months. Since the amounts that to be provided as of December 31, 2017 (December 31, 2016) will be through the calculated amounts as of June 30, 2017 (June 30, 2016), the settled amounts as of June is presented as “to be provided” amounts.
Company’s number of life insurance policies, additions, disposals during the period and the related mathematical reserves
None.
Distribution of new life insurance policyholders in terms of numbers and gross and net premiums as individual or group during the period
None.
Distribution of mathematical reserves for life insurance policyholders who left the Company’s portfolio as individual or group during the period
None.
Deferred commission expenses
The Company capitalizes commissions paid to the intermediaries related to policy production under short-term and long-term prepaid expenses. As of December 31, 2017, short-term prepaid expenses amounting to TL 319.260.853 (December 31, 2016: TL 316.049.141) consist of deferred commission expenses amounting to TL 281.971.139 (December 31, 2016: TL 286.562.140) and other prepaid expenses amounting to TL 37.289.714 (December 31, 2016: TL 29.487.001). Long-term prepaid expenses amounting TL 6.639.202 (December 31, 2016: TL 6.211.364) are composed of other prepaid expenses.
Anadolu Sigorta 2017 Annual Report 273 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
As of December 31, 2017 and December 31, 2016, the movements of deferred commission expenses are presented below: December 31, 2017 December 31, 2016
Deferred commission expenses at the beginning of the period 286.562.140 249.521.695 Commissions accrued during the period 618.327.570 635.988.592 Commissions expensed during the period (*) (622.893.317) (598.948.147) Deferred commission expenses at the end of the period 281.996.393 286.562.140
(*) Commission expense that accounted in reinsurance commissions are included
Individual pension funds
None.
18 Investment contract liabilities
None.
19 Trade and other payables and deferred income December 31, 2017 December 31, 2016
Financial liabilities 110.802.339 134.413.473 Payables arising from main operations 492.116.005 449.205.545 Other payables 113.563.203 82.609.754 Deferred commission income (Note 10) 95.718.017 58.640.768 Taxes and funds payable and other similar obligations 50.750.268 39.526.586 Trade payables to related parties 256.510 91.826 Total 863.206.342 764.487.952
Short-term liabilities 863.206.342 764.487.952 Medium and Long-term liabilities -- -- Total 863.206.342 764.487.952
As of December 31, 2017, other payables amounting to TL 113.563.203 (December 31, 2016: TL 82.609.754) consist of treatment cost payables to SSI amounting to TL 30.922.543 (December 31, 2016: TL 32.037.945), payables to Tarsim and DASK and outsourced benefits and services amounting to TL 76.358.578 (December 31, 2016: TL 45.085.032) and deposits and guarantees received amounting to TL 6.282.082 (December 31, 2016: TL 5.486.777).
274 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
The detail of payables arising from main operations of the Company as of December 31, 2017 and December 31, 2016 are as follows: December 31, 2017 December 31, 2016
Payables to reinsurance companies (Note 10) 267.629.697 259.564.344 Payables to agencies, brokers and intermediaries 44.147.545 41.204.604 Total payables arising from insurance operations 311.777.242 300.768.948
Payables arising from other operating activities 171.765.147 142.812.014 Cash deposited by insurance and reinsurance companies (Note 10) 8.573.616 5.624.583 Payables arising from main operations 492.116.005 449.205.545
Corporate tax liabilities and prepaid taxes are disclosed below: December 31, 2017 December 31, 2016
Prepaid taxes 44.914.337 35.757.908 Provision of calculated corporate tax (52.636.513) (23.316.813) Corporate tax assets/(liabilities), net (7.722.176) 12.441.095
Total amount of investment incentives which will be benefited in current and forthcoming periods
None.
20 Financial liabilities
As of December 31, 2017, The Company has financial liabilities which is occurred repurchase agreement TL 164.422.009 (December 31, 2016: TL 134.413.473). Financial liabilities maturities are as follows: Maturity Date December 31, 2017 Maturity Date December 31, 2016
January 19, 2018 20.084.905 January 17, 2017 40.153.847 January 26, 2018 82.849.368 January 25, 2017 94.259.626 Net book value in balance sheet 102.934.273 134.413.473
As of December 31, 2017, the detail of the expense accrual arising from swap contracts amounting to TL 7.868.067 is disclosed at the Note 13.
Anadolu Sigorta 2017 Annual Report 275 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
21 Deferred tax
As of December 31, 2017 and December 31, 2016, deferred tax assets and liabilities are attributable to the following: December 31, 2017 December 31, 2016 Deferred tax Deferred tax assets/(liabilities) assets/(liabilities)
Equalization provision 21.889.262 16.304.668 Reserve for unexpired risk 5.055.857 112.906 Provisions for employee termination benefits and unused vacations 4.601.292 3.785.096 Provision for subrogation receivables 1.834.144 1.767.317 Other provision 8.667.322 9.064.233 TAS adjustment differences in depreciation (2.084.927) (3.139.467) Discount of receivables and payables 698.951 53.726 Valuation differences in financial assets (7.879.160) (3.157.357) Subrogation receivables from third parties (3.977.190) (3.356.747) Real estate valuation (6.961.291) (3.321.543) Deferred tax assets, net 21.844.260 18.112.832
As of December 31, 2017, the Company does not have deductible tax losses (December 31, 2016: None).
The movement of deferred tax assets table: December 31, 2017 December 31, 2016
Opening balance at 1 January 18.112.832 13.229.325 Recognised in profit or loss (Note 35) 5.702.299 7.160.762 Recognised in equity (Note 15) (1.970.871) (2.277.255) Deferred tax asset 21.844.260 18.112.832
22 Retirement benefit obligations
Employees of the Company are the members of “Anadolu Anonim Pension Fund” which is established in accordance with the temporary Article 20 of the Social Security Act No: 506. As per the temporary sub article No: 20 of the Article 73 of the Social Security Law, pension funds should be transferred to the Social Security Institution within three years after the publication of the a aforementioned Law published in the Official Gazette numbered 26870 and dated May 8, 2008. The related three-year transfer period has been prolonged for two years by the Cabinet decision, the three-year period was extended to the May 8, 2015.
276 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
April 23, 2015 dated Official Gazette is changed as following; insurance and reinsurance companies, chambers of commerce, industry chambers, stock exchanges or which constitutes their union personnel and associates of funds “The Council is authorized to determine the date of transfer within the scope of article 20th of the law, 506 banks, insurance and reinsurance companies, chambers of commerce, industry chambers, stock exchanges or which constitutes their union personnel and associates of funds to the social security institution. The date of the transfer of the first paragraph of Article 4 of this law pension fund contributors as are considered insured.
According to this arrangement the bank within the scope of Act 506, article No.20, insurance and reinsurance companies, chambers of commerce, industry chambers, stock exchanges or associations which constitute their union personnel and associates of funds are required to be transferred until May 8, 2015 to Social Security Administration, authority to determine the date of transfer is given the Council of Ministers thus the transfer of the funds has been postponed to an unknown date.
23 Other liabilities and provisions
As of December 31, 2017 and December 31, 2016; the details of the provisions for other risks are as follows: December 31, 2017 December 31, 2016
Provision for employee termination benefits 20.939.663 17.363.526 Provision for unused vacation pay liability 1.878.908 1.561.950 Total provision for other risks 22.818.571 18.925.476
December 31, 2017 December 31, 2016
Provision for agency award 11.338.826 11.375.000 Provision for guarantee account 12.218.859 15.111.473 Provision for employee bonus 19.000.000 12.000.000 Provision for sliding scale commission (Note 10) -- 7.963.322 Provision for traffic pool 3.843.808 -- Provision for excess of claim contract substitution Premium 733.286 -- Provision for bank expense -- 3.400.000 Invoice accrual 29 450.160 Provision for tax assessment (Note 42, (Note 47) 3.678.790 3.381.653 Prepaid income and expense accruals 50.813.598 53.681.608
Anadolu Sigorta 2017 Annual Report 277 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
The movements of provision for employee termination benefits during the period are presented below: December 31, 2017 December 31, 2016
Provision for employee termination benefits at the beginning of the period 17.363.526 15.244.930 Interest cost (Note 47) 1.859.469 1.631.955 Service cost (Note 47) 1.507.021 1.222.652 Payments made during the period (Note 47) (1.875.629) (1.458.528) Actuarial difference (Note 15) 2.085.276 722.517 Provision for employee termination benefits at the end of the period 20.939.663 17.363.526
24 Net insurance premium
Net insurance premium revenue is presented in detailed in the accompanying consolidated statement of income.
25 Fee revenue
None.
26 Investment income
Investment income is presented in “Note 4.2 - Financial Risk Management”.
27 Net income accrual on financial assets
Net realized gains on financial assets are presented in “Note 4.2 - Financial Risk Management”.
28 Assets held at fair value through profit or loss
Presented in “Note 4.2 - Financial Risk Management”.
29 Insurance rights and claims Jan 1 - Jan 1 - December 31, 2017 December 31, 2016 Claims paid, net off reinsurers’ share 2.152.823.823 1.868.016.555 Changes in provision for unearned premiums, net off reinsurers’ share (72.814.040) 301.021.136 Changes in provision for outstanding claims, net off reinsurers’ share 561.441.497 657.337.317 Change in equalization provisions 31.511.404 27.882.079 Changes in reserve for unexpired risks, net off reinsurers’ share 22.416.639 (5.920.683) Total 2.695.379.323 2.848.336.404
30 Investment contract benefits
None.
31 Other expenses
The allocation of the expenses with respect to their nature or function is presented in Note 32 - Expenses by nature below.
278 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
32 Operating expenses
As of December 31, 2017 and 2016 the operating expenses are disclosed as follows: Jan 1 - Jan 1 - December 31, 2017 December 31, 2016
Commission expenses (Note 17) 556.177.638 552.860.702 Commissions to intermediaries accrued during the period (Note 17) 551.528.809 584.138.939 Change in deferred commission expenses (Note 17) 4.648.829 (31.278.237) Employee benefit expenses (Note 33) 156.330.645 135.568.643 Administration expenses 106.835.655 96.028.749 Advertising and marketing expenses 21.577.701 12.046.504 Outsourced benefits and services 19.008.661 17.100.159 Commission income from reinsurers (Note 10) (170.817.237) (117.061.430) Commission income from reinsurers accrued during the period (Note 10) (207.894.486) (121.039.356) Change in deferred commission income (Note 10) 37.077.249 3.977.926 Commission expenses (Note 17) 66.715.678 46.003.412 Commissions to intermediaries accrued during the period (Note 17) 66.798.761 51.849.653 Change in deferred commission expenses (Note 17) (83.083) (5.846.241) Total 755.828.741 742.546.739
33 Employee benefits expenses Jan 1 - Jan 1 - December 31, 2017 December 31, 2016
Wages and salaries 117.807.470 100.580.810 Insurance payments 25.664.469 23.319.112 Other 12.858.706 11.668.721 Total 156.330.645 135.568.643
34 Financial costs
Finance costs of the period are presented in “Note 4.2 - Financial Risk Management” above. There are no finance costs classified in production costs or capitalized on tangible assets. All financial costs are directly recognised as expense in the consolidated statement of income.
Anadolu Sigorta 2017 Annual Report 279 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
35 Income tax
Income tax expense items in the accompanying consolidated financial statements is as follows: Jan 1 - Jan 1 - December 31, 2017 December 31, 2016
Current tax expense provision: Corporate tax provision (52.636.513) (23.316.813) Deferred taxes: 7.054.855 1.769.959 Origination and reversal of temporary differences Total income tax expense recognised in profit or loss 5.702.299 7.160.762 Current tax expense provision: (39.879.359) (14.386.092)
For the period ended as of December 31, 2017 and 2016, a reconciliation of tax expense applicable to profit from operating activities before income tax at the statutory income tax rate to income tax expense at the Company’s effective income tax rate is as follows: December 31, 2017 December 31, 2016 Profit before tax(*) 94.151.542 Tax rate (%) 46.753.041 Tax rate (%) Taxes on income per statutory tax rate 48.278.869 20,00 23.300.958 20,00 Tax exempt income (10.720.663) (4,44) (8.294.418) (7,12) Non-deductible expenses 134.765 0,06 562.625 0,48 Other - tax rate change 2.186.388 0,91 (1.183.073) (1,02) Total tax income recognized in profit or loss 39.879.359 16,52 14.386.092 12,35
(*) The reversal of provision for Corporate Tax amounting to TL 7.054.855 (December 31, 2016: TL 1.769.959) is excluded.
36 Net foreign exchange gains
Net foreign exchange gains are presented in “Note 4.2 - Financial Risk Management” above.
280 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
37 Earnings per share
Earnings per share are calculated by dividing net profit of the period to the weighted average number of shares. Jan 1 - Jan 1 - December 31, 2017 December 31, 2016
Net profit/(loss) for the period 184.196.626 87.867.323 Weighted average number of shares 50.000.000.000 50.000.000.000 Earnings/loss per share (TL) 0,00368 0,00176
38 Dividends per share
Cash dividend paid amounting to TL 30.000.000 to shareholders during year of 2017 (December 31, 2016: Not paid).
39 Cash generated from operations
The cash flows from operating activities are presented in the accompanying consolidated statement of cash flows.
40 Convertible bonds
None.
41 Redeemable preference shares
None.
42 Risks
In the normal course of its operations, the Company is exposed to legal disputes, claims and challenges, which mainly stem from its insurance operations. The necessary income/expense accruals for the revocable cases against/on behalf of the Company are provided under provision for outstanding claims in the accompanying consolidated financial statements.
As of December 31, 2017, total amount of the claims that the Company face is TL 1.485.894.000 in gross (December 31, 2016: TL 1.189.434.000). The Company provided provision for outstanding claims in the consolidated financial statements by considering collateral amounts
As of December 31, 2017, ongoing law suits prosecuted by the Company against the third parties amounting TL 378.729.000 (December 31, 2016: TL 324.644.000)
Anadolu Anonim Türk Sigorta Şirketi Mensupları Dayanışma Vakfı” was established by Anadolu Anonim Türk Sigorta Şirketi in accordance with the Turkish Commercial and Civil Laws which is examined by Tax Audit Committee inspectors due to the Company payments what are fulfilled obligations to the foundation owing to deed of the foundation and the related act. As a result of this investigation, an examination was reported for periods of 2007, 2008, 2009, 2010 and 2011.
Anadolu Sigorta 2017 Annual Report 281 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
The final legal process which is related the period of 2007 and 2008 is expected to result in the Company’s favour and the amount of provision TL 12.768.684 which was published on the Official Gazette dated November 12, 2014. December 2013 and after the condition of the provision is evaluated later ongoing development of the legal process. There is a provision amount of TL 3.678.791 (December 31, 2016: TL 3.381.653) related with this process. The Company has no revenue recognization resulting from the possibility of recovering tax auditing fees.
As a result of investigation conducted by the Ministry of Finance Tax Audit Board, tax penalty which is amount of TL 2.1 million(actual tax) and TL 3.1 million tax penalty is announced by reason to tax salvage operations not subject to the banking and insurance transactions. The amount of TL 10 million tax, TL 15 million tax penalty has been modified for the period of 2010, 2011 and 2012 in February 6, 2015. The Company do not make provision for this tax penalty because of considering the implementation of these financial statements in accordance with legislation. The Company has utilized the means put forward in the “Law Regarding Some Claims” which was published in the official gazette on August 19, 2016 with the number 6736. According to this, The Company has paid TL 6.990.560 on November 29, 2016 and as a result the assessment has ended.
43 Commitments
The details of the guarantees that are given by the Company for the operations in non-life branches are presented in Note 17.
The future aggregate minimum lease payments under operating leases for properties rented for use of head office and regional offices and motor vehicles rented for sales and marketing departments are as follows: December 31, 2017 December 31, 2016
Within one year 9.819.396 9.819.396 Between one to five years 15.967.534 15.967.534 Above 5 years 3.390.162 3.390.161 Total of minimum lease payments 29.177.092 29.177.091
282 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
44 Business combinations
None.
45 Related party transactions
The ultimate controlling party of the Company is İş Bankası Group and the groups having direct control over İş Bankası Group and the affiliates and associates of İş Bankası Group are defined as related parties of the Company.
3 The related party balances as of December 31, 2017 and December 31, 2016 are as follows: December 31, 2017 December 31, 2016
İş Bankası - cash at banks 383.020.397 420.916.548 Banks 383.020.397 420.916.548
Bonds issued by Is GYO (Note 11) 15.302.769 15.543.150 Bonds issued by Türkiye Sınai Kalkınma Bankası (Note 11) -- 7.050.254 Investment funds issued by İş Portföy Yönetimi A.Ş. (Note 11) 475.089.955 166.908.533 Investment funds founded by İşbank GmbH (Note 11) 17.439.313 11.880.374 Financial assets 507.832.037 201.382.311
İş Bankası - receivables stem from premiums written via the Bank 134.799.092 125.983.624 İş Bankası - credit card receivables 199.001.941 175.092.411 Maturities less than three months 166.384.069 147.055.139 Maturities more than three months 32.617.872 28.037.272 Receivables stems from premiums written via Şişecam Sigorta Aracılık Hiz. A.Ş. 4.773.567 6.182.414 Anadolu Hayat Emeklilik A.Ş. - premium receivables 796.230 1.312.576 Milli Reasürans T.A.Ş. - receivables from reinsurance operations 277 -- Receivables from main operations 339.371.107 308.571.025
Milli Reasürans T.A.Ş.- payables from reinsurance operations 12.104.550 18.534.868 İş Bankası - commission payables 3.962.974 7.016.739 Şişecam Sigorta Aracılık Hizmetleri A.Ş. - commission payables 554.498 399.796 Payables from main operations 16.622.022 25.951.403
No guarantees have been taken against receivables from related parties.
There are no doubtful receivables from shareholders, subsidiaries and joint ventures.
No guarantees, commitments, guarantee letters, advances and endorsements given in favour of shareholders, associates and subsidiaries.
Anadolu Sigorta 2017 Annual Report 283 Other 31 December 2017 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon Matters and Financial Statements Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
The Company has accrued TL 71.257.116 premium (December 31, 2016: TL 55.341.331) for related party policies in 2017. The transactions with related parties during the period ended December 31, 2017 and 2016 are as follows: Jan 1 - Jan 1 - December 31, 2017 December 31, 2016
İş Bankası - premiums written via the Bank 601.172.759 502.036.843 Premiums written via Şişecam Sigorta Aracılık Hizmetleri A.Ş. 17.080.389 20.429.253 Anadolu Hayat Emeklilik A.Ş - premiums written 242.471 3.320.159 Milli Reasürans T.A.Ş. 552.278 476.544 Premiums written 619.047.897 526.262.799
Milli Reasürans T.A.Ş (128.809.219) (109.430.928) Premiums written, ceded (128.809.219) (109.430.928)
İş Bankası - interest income from deposits 39.277.987 80.428.531 İş Portföy Yönetimi - income from investment funds 9.235.579 3.361.480 İş Factoring A.Ş. - income from bonds -- 136.663 İş Gayrimenkul Yatırım Ortaklığı - income from bonds 1.990.500 1.949.520 İş Finansal Kiralama - income from bonds -- 440.160 Türkiye Sınai Kalkınma Bankası A.Ş.- income from bonds (Note 11) 169.859 260.427 Investment income 50.673.925 86.576.781
Türkiye İş Bankası A.Ş - commission expense (67.160.770) (59.382.880) Şişecam Sigorta Aracılık Hizmetleri A.Ş. - commission expense (3.389.113) (4.027.166) Milli Reasürans T.A.Ş- commission expense 29.289.903 23.205.177 Operating expenses, net (41.259.980) (40.204.869)
Anadolu Hayat ve Emeklilik A.Ş – rental income (189.356) (177.117) Other income (189.356) (177.117)
İş Merkezleri Yönetim ve İşletim A.Ş. - building service cost (5.418.690) (5.073.058) Anadolu Anonim Türk Sigorta Şirketi Memurları Emekli Sandığı Vakfı-Rent (3.381.423) (2.997.956) İş Portföy Yönetimi - management commission (293.093) (965.206) Yatırım Finansman Menkul Değerler - management commission (122.317) (51.884) Other expense (9.215.523) (9.088.104)
284 Anadolu Sigorta 2017 Annual Report Anadolu Anonim Türk Sigorta Şirketi Convenience Translation of Notes to the Consolidated Financial Statements as of December 31, 2017 (Amounts expressed in Turkish Lira (“TL”) unless otherwise indicated.)
46 Events after the reporting date
Subsequent events are disclosed in Note 1.10 Events after the reporting date.
47 Other
Items and amounts classified under the “other” account in financial statements either exceeding 20% of the total amount of the group to which they relate or 5% of the total assets in the balance sheet
They are presented in the related notes above.
“Payables to employees and receivables from employees presented under accounts, “other receivables” and “other short or long term payables”, and which have balance more than 1% of the total assets
None.
Subrogation recorded in “Off-Balance Sheet Accounts”
None.
Real rights on properties and their values
None.
Explanatory note for the amounts and nature of previous years’ income and losses
None.
Information on other technical expenses items in income statement
The part of amounting to TL 54.502.643 of other technical expenses in the statement of income amounting to TL 56.627.012 (December 31, 2016: TL 52.472.160) comprised of assistance services and their other technical expenses and cost of deferred.
For the periods ended December 31, 2017 and 2016, details of discount and provision expenses are as follows: Jan 1 – December 31, Jan 1 – December 31, Provision expenses 2017 2016
Provisions no longer required income/(expense) 7.740.675 2.352.227 Provision expense for unused vacation (Note 23) (316.958) (69.241) Provision expense for employee termination benefits (Note 23) (1.490.861) (1.396.079) Provision expense for doubtful receivables (Note4.2) (37.954.653) (38.684.995) Other provisions (297.137) (297.137) Provisions account (32.318.934) (38.095.225)
Jan 1 – December 31, Jan 1 – December 31, Rediscount expenses 2017 2016
Rediscount income 16.755.442 21.046.365 Rediscount expense (28.658.461) (20.553.773) Total of rediscounts (11.903.019) 492.592
Anadolu Sigorta 2017 Annual Report 285 Other An Assessment of Financial Standing, Profitability and Solvency Matters and Financial Statements
An Assessment of Financial Standing, Profitability and Solvency
Premium Production Solvency and Solvency Performance
Anadolu Sigorta registered TL 4.671.410 thousand in premium Having adopted it as a duty to make claim payments fully production in 2017. The greatest contributors to premium and timely to its policyholders, Anadolu Sigorta attained this production were motor vehicles liability, motor vehicles, fire goal once again in 2017 drawing on its solid asset structure and natural disasters, and illness-health branches. and balanced liquidity ratio. A big part of the risk was ceded through reinsurance contracts made in branches under which A portion in the amount of TL 1,289,192 thousand of high-amount coverage is provided such as fire and general premiums were ceded through reinsurance in 2017, thus losses, thus making it possible for the Company’s asset significantly reducing retained risk in branches likely to present structure to remain unaffected by claims paid in big amounts. high claim settlements in particular, such as fire, watercraft and general losses. In 2017, claims paid amounted to TL 2,755,951thousand. A significant portion of the claims paid arose, in order, from losses in motor vehicles liability, motor vehicles, health/illness, and fire and natural disasters. Combined loss/premium ratio was 84.8%, 1.3 points lower than its 2016 value.
Premium Production (TL thousand) Claims Paid (TL thousand)
4,671,410 2,755,951 4,484,060
2,236,015 3,610,674 1,941,149
2015 2016 2017 2015 2016 2017 Claims Retention Ratio (TL thousand) Claims Ratio (%) (*)
2,152,824 84.80 81.60 83.50 1,868,017 1,685,031
2015 2016 2017 2015 2016 2017
(*) Other Technical Income was calculated with the addition of Accrued Salvage and Subrogation Income, Change in Other Technical Provisions and Other Technical Expenses items into claims.
286 Anadolu Sigorta 2017 Annual Report Information on Financial Structure
Information on Financial Structure
Assessment of Profitability Assets Performance
The company booked a profit of TL 236,833 thousand in 2017. As of year-end 2017, total assets reached TL 7,032,315 Return on equity and return on assets stood at 11.2% and thousand, up 17.7% year-on. With a share of 65.5% 2.6%, respectively. representing the largest item in total assets, total cash and financial assets grew 16.2% year-on to TL4,608,197 thousand, giving confidence with respect to payment of possible losses to policyholders with this large volume.
Capital Volume
The nominal capital of Anadolu Sigorta was TL 500,000 thousand as at year-end 2017.
Gross Profit/Loss (TL thousand) Total Assets (TL thousand)
236,833 7,032,315
5,974,173
4,887,545
111,184
65,576
2015 2016 2017 2015 2016 2017 Gross Profit-Loss/Gross Premium Production (%) Nominal Capital (TL thousand)
5.10 500,000 500,000 500,000
2.50
1.80
2015 2016 2017 2015 2016 2017
Anadolu Sigorta 2017 Annual Report 287 Other Summary Financial Information for the Last 5 Years Including the Reporting Period Matters Information for Investors and Financial Statements
Summary Financial Information for the Last 5 Years Including the Reporting Period
2017 2016 2015 2014 2013 Gross Premiums 4,671,410 4,484,060 3,610,674 3,004,830 2,749,704 Technical Division Balance 292,629 157,564 103,634 121,260 100,878 Investment Income 859,808 487,727 368,013 258,928 186,213 Investment Expenses -879,646 -505,094 -382,414 -275,810 -187,216 Other Income and Expenses -35,958 -29,013 -23,656 -11,736 -32,414 Period Gross Income (Loss) 236,833 111,184 65,576 92,642 67,462 Taxation -52,637 -23,317 -1,770 -21,082 0 Period Net Income (Loss) 184,197 87,867 63,806 71,560 67,462 Shareholders’ Equity 1,639,021 1,223,180 1,201,893 1,019,833 913,016 Total Assets 7,032,315 5,974,173 4,887,545 3,773,391 3,252,770
Information for Investors
Capital
Registered capital: TL 700,000,000 Paid-in capital: TL 500,000,000 Shares
The company’s capital is divided into 50,000,000,000 shares each with a value of TL 0.01 and entitling their holders to one vote. The company’s free float rate is 48%.
Stock Exchange
The company’s shares are traded on Borsa İstanbul Stars Market under the ticker symbol ANSGR and are included in BIST Corporate Governance, BIST Financial, BIST Insurance, BIST All, BIST All-100, BIST Stars indices.
Investor Relations Unit
Rüzgarlıbahçe Mahallesi Kavak Sokak No: 31 34805 Kavacık/İSTANBUL Tel: +90 850 744 0 744 E-mail: [email protected] Website: www.anadolusigorta.com.tr/tr/yatirimci-iliskileri
Anadolu Sigorta Website Investor Relations Page
288 Anadolu Sigorta 2017 Annual Report Headquarters
Address: Rüzgarlıbahçe Mah. Kavak Sok. No: 31 34805 Kavacık/İSTANBUL Tel: +90 850 744 0 744 Fax: +90 850 744 0 745 E-mail: [email protected]
Produced by Tayburn Tel: (90 212) 227 04 36 This report has been printed on recycled paper. www.tayburnkurumsal.com www.anadolusigorta.com.tr Anadolu Sigorta 2017 Annual Report