2020 Annual Report Contents
Presentation 61 Statement of Compliance with 2 Key Indicators Corporate Governance Principles 6 30 Years of Anadolu Hayat Emeklilik 62 Corporate Governance Compliance The Author of “Firsts” in Its Industry… Report 10 Message from the Chairman 70 Corporate Governance Information 12 Message from the CEO Form 16 An Overview of the World and Turkish 78 Additional Information on Corporate Economies in 2020 and 2021 Outlook Governance 20 Anadolu Hayat Emeklilik by Numbers 84 Sustainability Principles Compliance 23 Strategic Goals of Anadolu Hayat Framework Emeklilik Information on General 2020 Activities Assembly 25 An Overview of Anadolu Hayat 88 Summary Report of the Board of Emeklilik’s Position in the Industry and Directors for the General Assembly of Its Activities in 2020 Shareholders 32 Sustainability 91 Ordinary General Assembly Agenda 34 Research and Development 92 2019 Profit Distribution Table 93 2020 Profit Distribution Proposal Table Corporate Governance 36 Organization Chart Financial Position 38 Board of Directors 95 Information on Financial Structure 42 Declarations of Independence by 98 Assessment of Financial Standing, Independent Members of the Board of Profitability and Claims Payment Ability Directors 99 5-Year Summary Financial Information 43 Outside Positions Held by the Board of Including the Reporting Period Directors and Executives 44 Senior Management Risk Management 46 İşbank 102 Active Committees and an Assessment 47 Changes in the Legislation during the by the Board of Directors Fiscal Year 105 Risk Management Policies and an 48 Other Material Disclosures Concerning Assessment by the Board of Directors the Reporting Period 49 Transactions Executed with the Financial Reports and Other Risk Group in which the Company is Matters Included 109 31 December 2020 Unconsolidated 51 An Assessment of Independent Audit, Financial Statements Together with Internal Control System and Internal Independent Auditors’ Report Thereon Audit Activities by the Board of 186 Information on Consolidated Associate Directors 187 31 December 2020 Consolidated 53 Independent Auditor’s Report on Financial Statements Together with the Annual Report of the Board of Independent Auditors’ Report Thereon Directors 267 Information for Investors 55 Policies About Corporate Governance 268 Directory
Cover photo: Elif Bora - The Tea Garden Shots From Life As Seen By Women ‘20 Anadolu Hayat Emeklilik remains strictly adhered to its mission of nurturing in people an awareness of the need to safeguard their future, offering financial solutions that respond to needs of individuals and organizations, and contributing to the development of the national economy by creating long-term stable funds.
Aslı Ayyürü - The Lovers Shots From Life As Seen By Women ‘20
Anadolu Hayat Emeklilik 2020 Annual Report 1 Key Indicators
Çiğdem Ayyıldız - Foggy Valley Shots From Life As Seen By Women ‘20
Financial Indicators
Total Assets: Equity: Gross Profit:
TL 36.1 billion TL 1.6 billion TL 647.7 million
Market Capitalization: Sector’s Leader Amongst Privately- Sector’s Leader in Life Insurance Owned Companies in the Aggregate Funds TL 3.7 billion of Life and Pension Funds TL 3.1 billion (2) TL 33.7 billion (1) (2)
Sectoral Market Shares
Private Pension (1)
Participants: Total Pension Assets Under Number of Pensioners: Management: 14.6% 25.5% 18.0% Life Insurance (2)
Mathematical Provisions: Written Premiums: 22.8% 11.8%
(1) Pension Monitoring Center (PMC) data on 31 December 2020 (including Auto Enrolment) (2) Insurance Information and Monitoring Center data on 31 December 2020
2 Anadolu Hayat Emeklilik 2020 Annual Report Münevver Ulusoy - The Fishermen Shots From Life As Seen By Women ‘20
Human Resources
Headquarters & Districts: Direct Sales Force: Total: A member of the UN 557 494 1,051 Women’s Empowerment Principles (WEPs) Platform, Anadolu Hayat Emeklilik supports the empowerment of women in business Organization and social life.
• İstanbul Headquarters
• Customer Operations Center
• 12 District Sales Offices
• TRNC Branch Office
Anadolu Hayat Emeklilik 2020 Annual Report 3 Presentation
Derya Balkan - Metro The Company Creating the Largest Shots From Life As Seen By Women ‘20 Amount of Funds amongst Privately-Owned Companies Anadolu Hayat Emeklilik retains its position as “the company creating the largest amount of funds amongst privately-owned companies in the aggregate of life insurance and private pension branches, and plays a leading role in growing the sector.
4 Anadolu Hayat Emeklilik 2020 Annual Report Anadolu Hayat Emeklilik at a Glance
Our Vision
To be the leading company in Turkey in all aspects of financial planning that are of concern to the future of Turkey and the Turkish people.
Our Mission
To develop and to nurture in people an awareness of the need to safeguard their own futures and the futures of their loved ones, to offer financial solutions that eliminate people’s doubts about the future and enhance the quality of their lives and to contribute to the development of the national economy by creating long-term financial resources. Anadolu Hayat Emeklilik started Northern Cyprus besides its head Our Corporate Strategy operations in 1990 as Turkey’s first office in İstanbul, Anadolu Hayat life insurance company. Emeklilik commands a widespread service organization with its strong • Contribute to the stable growth Having acquired private pension bancassurance network, direct sales of the industry by developing company status upon establishment force and more than 260 agencies. and maintaining a diverse range of the private pension system in of products capable of satisfying Turkey in 2003, the Company began Beyond being the company that customers’ needs and demands in offering services under the company steers the sector, Anadolu Hayat terms of life insurance and private name Anadolu Hayat Emeklilik A.Ş. Emeklilik preserves its identity as pensions. the “company creating the largest Anadolu Hayat Emeklilik, which amount of funds amongst privately- • Increase our market share by addresses a broad audience of owned companies in the aggregate combining our success in offering policyholders and participants of life insurance and private pension”, innovative products and creating with its value-added product and and undertakes a leading role in value through an extensive service service mix, assures a high level of growing the sector. network and digitalization. customer satisfaction on the back • Provide our customers with of its extensive service network A subsidiary of Türkiye İş Bankası A.Ş. financial security and enable them and technological infrastructure. (İşbank), Anadolu Hayat Emeklilik to save up for their retirement by Providing service via District Sales is the first publicly traded pension taking advantage of the company’s Offices in İstanbul (3), Ankara (2), company in Turkey. İzmir, Adana, Bursa, Antalya, Trabzon, experience and effectiveness in The Company’s shares are quoted Kocaeli and Diyarbakır, a branch the industry to achieve superior on the Borsa İstanbul (BIST) Stars office in the Turkish Republic of performance in the management Market under the symbol ANHYT. of pension funds. • Maintain a sustainable level of profitability that is above the market average. Esin Deniz - Homeward Shots From Life As Seen By Women ‘20
Anadolu Hayat Emeklilik 2020 Annual Report 5 30 Years of Anadolu Hayat Emeklilik The Author of “Firsts” in Its Industry…
1990 2000 2003
Founded as Turkey’s first Became the first and only Transformed into life insurance company. life insurance company a private pension whose shares are publicly company. traded.
1990 2004 2008 Anadolu Hayat Emeklilik A.Ş. was Undersigning yet another first, the Anadolu Hayat Emeklilik became founded as Turkey’s first life insurance Company introduced the “Pension Plan the first pension company to hit the company taking over the life insurance for Housewives” that provides income 300,000 participants mark under the activities carried out by Anadolu Anonim for housewives without social security private pension system. Türk Sigorta Şirketi. and supplementary income in older The Company exceeded TL 1 billion in ages. 1991 total funds. According to legislation, the Company’s District offices were opened in Ankara, PPS+ packages were started to be sold health insurance portfolio and activities Bursa, Adana and İzmir. covering either one of “Life Insurance were transferred to Anadolu Anonim with Serious Illness Cover”, “Annual 1995 Türk Sigorta Şirketi. Life Insurance” or “Life for Everyone First payouts on maturity were made in Online payment of private pension Insurance” products in addition to the the “Insurance of the Future”. contributions and life insurance Private Pension Plan. premiums via the internet was enabled. 1999 A new variant was added to life 2005 insurance policies issued in connection Lefkoşa Branch was set up in the Turkish with loans, and Loan Support Insurance Bancassurance activities carried out Republic of Northern Cyprus to conduct incorporating unemployment cover was with the parent company İşbank were life insurance activities. Sirkeci and added to its product range. Kadıköy branches were opened. expanded by agency agreements with Türk Ekonomi Bankası A.Ş. (TEB) and The competition “Young Ideas by 2000 HSBC Bank A.Ş. (HSBC). Owner” was launched, thereby enabling Anadolu Hayat Emeklilik A.Ş. became the 2006 university students’ idea conception first and only life insurance company related to the industry. whose shares are publicly traded. With the support of the Ministry of 2009 National Education, the Company 2001 initiated the social responsibility project The Company became the first pension “Life for everyone” policy, Turkey’s first- “Girls: The Insurance of Our Future” in company to reach 400,000 participants ever insurance coverage without any cooperation with the Association for in the private pension system (PPS). Supporting Contemporary Living (ÇYDD). age limitation and without requiring any Targeting İşbank credit card customers, health conditions was introduced. Bancassurance activities were expanded Credit Card Protection Insurance policy, Bursa, Adana, İzmir and İstanbul through agency agreements with which provides cover in the event of branches were reorganized as Marmara, Anadolubank A.Ş. and TSKB A.Ş. death, disablement and unemployment, South Anatolia, Aegean District Offices, 2007 was launched. and İstanbul District Office 1 and 2. Private Pension Plans portfolio was First pensioners of the private pension further expanded with “Master’s 2003 system were entitled to pension Pension Plan”, which incorporates benefits. In accordance with the “Private Pension the special features of “Life-Cycle Savings and Investment System Law”, An agency agreement was signed with Fund Exchange Model” and “Auto Re- the Company was transformed into a Bank Pozitif A.Ş. Balancing System”, a first in Turkey. private pension company. “Shots From Life As Seen By Women” 2010 The first private pension contract was photography contest has been held for The Company became the first pension issued in October 27. the first time. company to reach 500,000 participants in the private pension system.
6 Anadolu Hayat Emeklilik 2020 Annual Report 2007 2010 2014
“Shots From Life As Seen By Became the first company to Became the first company Women” photography contest reach 500,000 participants to reach TL 7 billion in has been held for the first in the private pension total funds in the private time. system. pension system.
Volume of the participants’ private Anadolu Hayat Emeklilik was named 2015 pension funds topped TL 2 billion. the “Most Admired Private Pension Company” in the “Turkey’s Most Admired The Company became the first pension An agency agreement was signed Companies 2012” survey conducted by company to reach 1 million participants with Albaraka Türk Katılım Bankası A.Ş. Capital magazine. in the private pension system. (Albaraka Türk). “Standard Critical Illness Insurance” was The uncle/aunt themed advertising Anadolu Hayat Emeklilik was named launched. campaign entitled ‘Bana Amca/Teyze the “Most Admired Private Pension Dediler’ received six different awards Company” at the “Turkey’s Most Admired Mediterranean District Office was including the big prize in the Crystal Companies 2010” survey conducted by established and started operations. Apple Turkey Advertising Awards Capital magazine. 2013 Competition, and the Golden Effie in The Company set up “Emerging Markets the 7th Effie Awards Turkey Marketing Anadolu Hayat Emeklilik became the Flexible Pension Growth Fund” (BRIC Effectiveness Competition, while first pension company to reach TL Plus Fund) and “Alternative Flexible garnering seven different awards in the 5 billion in total funds in the private Pension Income Fund” (Alternative Mediacat Felis Awards. pension system. Income Fund) and started their sales. The “Youth Pension Plan”, Turkey’s first Anadolu Hayat Emeklilik was named “Pension Income Plan” targeting private pension plan designed for the youth, the “Most Admired Private Pension pension system participants was put on was introduced. Company” in the “Turkey’s Most Admired sale. Companies 2013” survey conducted by “İşbank Subsidiaries Index Fund” was put 2011 Capital magazine. on sale. Anadolu Hayat Emeklilik became the “AHE Gold Fund” was introduced. “Life Insurance Linked to Commercial first company to reach TL 3 billion in Loans” was introduced. The scope of the new customer funds in the private pension system. acquisition activities of the alternative Critical illness insurance product range With the aim of new customer delivery channels was widened with was expanded and “Female Critical acquisition activities, alternative retention and deepening activities. Illness Insurance” and “Comprehensive delivery channels were started to be Critical Illness Insurance” were put on The Company began selling “Investment used. sale. Insurance for My Child” insurance policy An implementation was introduced that is designed for investment for the Anadolu Hayat Emeklilik was named the enabling participants holding İşbank future of children at an age of 0-15. best Zurich Employee Benefits Network service partner. credit cards incorporating Maximum 2014 card features to transfer the MaxiPoints Anadolu Hayat Emeklilik “Mobile Branch“ earned to their private pension accounts Anadolu Hayat Emeklilik became the application was launched. as additional contributions. first pension company to reach TL District offices were renamed to “District 2012 7 billion in total funds in the private pension system. Sales Offices”. Anadolu Hayat Emeklilik became the Anadolu Hayat Emeklilik was named Western Black Sea, Thrace and Central first pension company to reach TL the “Most Admired Private Pension Anatolia II District Sales Offices were set 4 billion in total funds and 600,000 Company” in the “Turkey’s Most Admired up and started their operations. participants in the private pension Companies 2014” survey conducted by system. 2016 Capital magazine. The Company exceeded TL 10 billion East Black Sea District Office was set up in total funds in the private pension and started operations. system.
Anadolu Hayat Emeklilik 2020 Annual Report 7 30 Years of Anadolu Hayat Emeklilik The Author of “Firsts” in Its Industry…
2015 2016 2017
Became the first company Exceeded TL 10 billion in Neutralized its carbon to reach 1 million total funds in the private footprint and became participants in the private pension system. a carbon neutral pension system. company.
Anadolu Hayat Emeklilik participants The Company has become the first and costs against the risk of parents’ death received the highest amount of state only private pension and life insurance or permanent disability or critical illness. contributions once again in 2017, company from Turkey to affiliate The Brand Personality Project was the fourth consecutive year from the with UNEP-FI, the United Nations launched in a bid to make clearer and date state contribution practice was Environment Program - Finance Initiative. best express the messages conveyed introduced. Anadolu Hayat Emeklilik neutralized to customers on every communication The Company was named the “Most its 2016 carbon footprint within the channel. Admired Private Pension Company” scope of the Sustainability Management The Company presented on the market for the fifth time in the “Turkey’s Most System introduced, and became a the “IQ Funds” that allow the customers Admired Companies” survey conducted carbon neutral company. to invest their savings in optimum by Capital magazine. It became the first company from Turkey pension mutual funds in line with their Anadolu Hayat Emeklilik was named to receive the Customers’ Friend award risk / return expectations. the “Best Life Insurer in Turkey” by given by ICERTIAS, an international Anadolu Hayat Emeklilik neutralized its World Finance, crowned with this award certification association, in recognition 2017 carbon footprint resulting from for the second time by this eminent of its successful customer relationship its operations through the support business and finance magazine. management. extended to wind energy power plants Anadolu Hayat Emeklilik was recognized It was named the best in its sector at the and remained a carbon neutral company as the “Best Overall Insurance Company “Social Media Awards Turkey”, Turkey’s also in 2018. in the Levant Region” in 2016 at the most comprehensive first social media The Company became a signatory of Middle East Insurance Forum. competition co-organized by Marketing the Women’s Empowerment Principles Türkiye and BoomSonar. Based on the outcomes from the Voice (WEPs) co-established by the UN Global of Customer Turkey survey administered “Life Insurance with Premium Refund” Compact and UN Women. by KalDer (Quality Association of Turkey) was introduced, which offers cover Anadolu Hayat Emeklilik was named the and Ipsos, Anadolu Hayat Emeklilik against the risk of loss of life and also best-in-class private pension company has been the private pension and life refunds the premiums collected in case in customer experience at the A.L.F.A. insurance company with the highest the risk does not occur during the policy Awards organized by Marketing Türkiye customer loyalty. term. and Akademetre. Credit-linked life insurance product “Excellence in Customer Experience In a repeat of last year’s success, the began to be offered via İşbank Internet Project” was launched to gain an insight Company claimed the “Gold Award” Branch and İşcep mobile branch. into customers’ true expectations and in Private Pension and Life Insurance their experiences at touchpoints, to “Commercial Life Insurance” aimed at category at the Social Media Awards ensure optimum end-to-end operation, İşbank’s commercial segment customers Turkey. and to offer the desired deliverables to was introduced. the customers. At the Model Insurer Awards 2018, which 2017 2018 is a recognition program by Celent – a global financial services consultancy firm, Having completed the first phase Considering the needs of diverse it was given the “Model Insurer” award of technological infrastructure professional groups, Anadolu Hayat for its Basic Insurance Transformation transformation, Anadolu Hayat Emeklilik introduced the Farmers’ Project- Feniks, in the Legacy and Emeklilik was given the Best Corporate Retirement Plan. Ecosystem Transformation category. Transformation Award at the “FinTech Projects of the Year” awards organized Education Insurance was launched, Customer Services Center began within the scope of IDC Turkey Financial which ensures a safe future for children operating in Kartal Manzara Adalar Services Conference 2017. by covering his/her care and education Office.
8 Anadolu Hayat Emeklilik 2020 Annual Report 2018 2019 2020
Became a signatory of the Turkey’s one and only The first and only company Women’s Empowerment private pension fund from the insurance and Principles (WEPs). robot, FonMatik ROBO was pension sector quoted at launched. BIST Sustainability Index.
2019 The Company claimed the “Gold Prize” in operations through contributions to the “Private Pension and Life Insurance” renewable energy sources. Anadolu Hayat Emeklilik captured category at the “Social Media Awards The Company was recognized with the leadership in the total number of unique Turkey” co-organized by Marketing “Customers’ Friend” accolade awarded by participants in private pension and auto Türkiye and BoomSonar. enrolment systems. ICERTIAS, an international certification Anadolu Hayat Emeklilik was awarded agency. With its content and infrastructure “Customers’ Friend” given by ICERTIAS, The Company was awarded the “Gold revamped, the website was relaunched an international certification association. with a contemporary, user-friendly Prize” in the “Private Pension and Life design in June 2019. The new corporate Corporate Language Project designed Insurance” category at the “Social website won bronze in the “Website to uniform the language used in all Media Awards Turkey”, the first most Awards-Insurance” category at the touchpoints with customers and to comprehensive social media competition Stevie Awards. clarify the intended message has been in Turkey co-organized by Marketing completed. Türkiye and BoomSonar. The development enabling transitioning to AHE Mobile from İşCep mobile app Anadolu Hayat Emeklilik neutralized its The Company was awarded in the “Best without entering a password was 2018 carbon footprint resulting from Retention, Marketing Achievement” completed. its operations through the support category with its FonMatik ROBO project extended to wind energy power plants at the PSM Awards 2020 organized by AHE Assistant, the AI-based (artificial and remained a carbon neutral company PSM, Payment Systems Magazine. intelligence-based) chatbot application also in 2019. as part of customer-centered Anadolu Hayat Emeklilik has become digitalization, was launched on the new 2020 a Crystal Brand, a title recognizing the 17 brands that have received the website in June 2019. Various private pension and life highest number of awards under Crystal insurance products began to be sold The first attempt at the integration Apple award program, the deepest- online through the Company’s website. of digital processes within fund rooted creativity contest in the Turkish management and Turkey’s one and Anadolu Hayat Emeklilik’s mobile advertising and marketing industry. only private pension fund robot that application AHE Mobile was revamped It has become the first and only modifies fund distribution according in line with the new technologies and company from the insurance and to market conditions, FonMatik ROBO customer needs. was launched on the Internet branch pension sector quoted at BIST and mobile branch in October 2019 for DEV BES Pension Plan, Turkey’s first Sustainability Index. plan for individuals with disabilities, was use by customers. The app earned the The Customer Services Center earned launched. second prize in the “Digital Channels” the “Leed Gold” certification awarded category at the IDC Fintech Awards. Group Education and Education to sustainable and environmentally- Commercial loan life insurance product Insurance For Private Schools insurance friendly offices by the U.S. Green began to be offered via İşbank’s products were put on sale. Building Council (USGBC). Commercial Internet Branch and İşCep Cooperation was launched with the “Shots From Life As Seen By Women” mobile app. TurkishBank in order to expand the photography contest was held for the The Company was named the best- distribution network in the Turkish 14th time. Republic of Northern Cyprus. in-class private pension company in South Eastern Anatolia District Sales customer experience at the A.L.F.A. Anadolu Hayat Emeklilik remained a Office was established and began Awards organized by Marketing Türkiye carbon neutral company by neutralizing operations. and Akademetre. its carbon footprint resulting from its
Anadolu Hayat Emeklilik 2020 Annual Report 9 Message from the Chairman
restrictive measures imposed against the pandemic. In the third quarter of the year, economic activity regained a recovering trend owing to relaxed restrictive measures due to decelerated spread of the virus, coupled with the government’s supportive measures. Thanks to the monetary policies pursued by the Central Bank of the Republic of Turkey (CBRT) coupled with the measures aimed at reviving domestic demand, the Turkish economy registered 6.7% growth in the third quarter of the year on an annual basis. The data released indicate a limited positive growth for the economy in 2020. Having halted the rate cut process in June 2020, the CBRT initiated tight monetary policy implementation by increasing the weighted average funding cost from August. In The pandemic plagued the global I believe that the November, the CBRT hiked the policy economy. rate by 475 basis points to 15% and changes we have The world spent the year of 2020 announced it returned to simplification undergone and battling an unprecedented pandemic. of the monetary policy. The global reach the Covid-19 In connection with the increased the experiences outbreak acquired negatively affected domestic demand as a result of the growth of the world economy. supportive measures taken to alleviate we have gained Restrictive measures implemented the impacts of the pandemic and with worldwide caused the economic during the pandemic the implications of increased exchange activity, and hence production rates, annual CPI was recorded as will be influential levels, to crash. Led by the US 14.6% in 2020. Federal Reserve System (the Fed), on sustaining our all central banks strove to support Growth in our sector continued existence as a strong the recovery of economic activities despite the tough macroeconomic through expansionary monetary policy environment. implementations. The IMF estimates and profitable During the pandemic, individuals that the global economy will contract heavily used the Internet, mobile and company and on the by 3.5% in 2020 due to the pandemic. phone channels for product purchases, decisions we will The pandemic puts pressure on the after-sales service demands and their be making with the recovery tendency of the Turkish other needs. economy. While the pandemic shifted the target of building Following the rebalancing period in individuals’ priorities in life, it also “a good future for 2019, the Turkish economy, after promoted risk awareness and achieving 4.5% annual growth in saving tendency. As the need grew everyone”. the first quarter of 2020, shrank for the assurance offered by life by 9.9% annually in the second insurance products against the quarter in connection with the future uncertainties and potential
10 Anadolu Hayat Emeklilik 2020 Annual Report risks, private pension, being an net profit with respective rises by agile management approach than ever advantageous and reliable investment 35.8% and 45.3% year-on-year in before in terms of taking the necessary instrument, began to come to the 2020, Anadolu Hayat Emeklilik’s total actions. forefront as a basic necessity of assets were registered as TL 36,067 The pandemic added further priority individuals and families. million and its shareholders’ equity to our fundamental strategies and as TL 1,581 million. Serving as the Premium production in life insurance targets in relation to digitalization, and indicator of efficiency in core branches, branch in Turkey amounted to TL solid steps have been taken to perfect technical profitability grew by 33.5% 14.3 billion in 2020, having grown by the customer experience. as compared to the previous year and 27% year-on-year. According to data amounted to TL 472.2 million. Of the Being Turkey’s first life insurance on 31 December 2020, number of total technical profitability, TL 327.6 company, it has been our topmost participants was up by 5.1% closing in million was derived on life insurance priority -as always- to make sure that on 13.6 million people, and total funds branch, and TL 145.5 million on private our policyholders feel secure during expanded by 33.6% to reach TL 170.1 pension branch. these extraordinary times that we billion in the private pension system are going through. As the need for including auto enrolment. Anadolu Hayat Emeklilik has financial protection and loss of life been the first insurance and The Insurance and Private Pension as a reality were firmly etched at pension company quoted at BIST Regulation and Supervision Agency the top of people’s minds during the Sustainability Index. (IPPRSA) that began its activities pandemic, the fact that we are offering in 2020 will clearly contribute Always giving the forefront to the products capable of catering significantly to our industry both in sustainable future in all of its to both needs further added to the terms of regulation and supervision operations, our Company has been a responsibility upon us. and also institutionalization and carbon neutral company since 2017. In 2021, we will be investing in new competition. The growth of the private Charging ahead with its sustainability- technology more heavily than ever in pension system (PPS) is anticipated to related initiatives, Anadolu Hayat pursuance of product diversity and gain momentum significantly in view Emeklilik has become a constituent service efficiency, and ease and speed of the commencement of activities by of the BIST Sustainability Index in in operational processes with the the IPPRSA and awaited regulatory December 2020, becoming the one ultimate goal of upgrading customer framework including coverage of and only company from the insurance experience. individuals under the age of 18 in and pension sector. the PPS, partial withdrawal from PPS I believe that the changes we have In keeping with its sustainability funds, obtaining a loan through putting undergone and the experiences we concept, our Company continues to up PPS funds as collateral, and PPS have gained during the pandemic launch social responsibility projects in foreign currency terms for non- will be influential on sustaining our that will contribute to the society. resident Turkish citizens. existence as a strong and profitable “Shots from Life as Seen by Women”, company and on the decisions we will Our Company maintains its solid the first and only photography contest be making with the target of building “a position. in our country exclusively for women good future for everyone”. which we have been holding with a As at year-end 2020, Anadolu Hayat broad participation and high level of On behalf of the Board of Directors Emeklilik ranks first among private interest since 2007, takes to the fore and myself, I would like to extend my pension companies with more than as our exemplary project offering heartfelt thanks to all our employees, TL 30.5 billion in total private pension women a platform to freely express business partners, participants and system funds consisting of voluntary themselves. policyholders who have contributed to and auto enrolment segments. Our our achievements in this special year Company also boasts the highest The experiences we have gained in that marked our 30th anniversary. number of pensioners. It is the sector’s 2020 will provide guidance to us. leader in life insurance funds with Yours sincerely, While building on its capabilities 22.8% market share. to battle crises amid challenging Having booked TL 647.7 million in circumstances, Anadolu Hayat Yalçın Sezen gross profit and TL 519.3 million in Emeklilik began acting with a more Chairman of the Board of Directors
Anadolu Hayat Emeklilik 2020 Annual Report 11 Message from the CEO
2020 was characterized by a transformation of habits and priorities, increased awareness of assurance and saving up, and digital channels gaining the foreground in accessing products and services. In this process, life insurance and private pension sectors gave a good account of themselves, and sustained their growth in 2020 in spite of all the negative effects of the pandemic. Significant real growth was achieved in a number of aspects, primarily in total assets, shareholders’ equity, pension assets and net profit, as well as others. The future anxiety created by the pandemic influenced savings positively. According to data released by the CBRT, household assets in our country grew by 41.3% year-on-year and reached TL 2.4 trillion in September 2020. 2020 was The pandemic dealt a blow on all While total funds in the private sectors in 2020. pension system based on voluntary participation (voluntary PPS) increased characterized by a As the Covid-19 outbreak deeply by 32.9% to exceed TL 158 billion, afflicted the whole world in 2020, transformation of that in Auto Enrolment segment governments and central banks was up by 43.8% to top TL 11.7 habits and priorities, pursued various fiscal and monetary billion, for a total growth of 33.6% to policies to try and mitigate the surpass TL 170 billion. The number of increased awareness impacts of the virus, and launched participants went up 0.4% in voluntary unprecedented massive relief of assurance and PPS, and 10.5% in auto enrolment, programs in a bid to support the corresponding to 5.1% growth overall saving up, and digital economy. The key agenda topics of driving the number of participants 2020 included the negative effects in the private pension system above channels gaining the pandemic created upon the Turkish 13.5 million. The future anxiety that economy, the turbulent exchange the foreground in aggravated due to the pandemic rates triggered by the economic and supported decreased withdrawals accessing products political developments in Turkey and from PPS, addition of new participants abroad, the CBRT’s decisions and their to the system, and payment of higher and services. implications for asset prices, and the contributions. rising inflation. During 2020, returns on pension mutual funds, at 28%, highly outdid the inflation. A look at the past 3 and 5 years reveals that participants achieved high returns in real terms, which promoted the trust held in the system and encouraged participants to remain in the system, as well as new enrolments.
12 Anadolu Hayat Emeklilik 2020 Annual Report In life insurance branch, premium Despite the pandemic-induced Through this critical production amounted to TL 14.3 billion uncertainties and negativities on in 2020, up by 27% year-on-year. the economy, our Company achieved period, our Company Credit-linked life insurance remained as successful financial results in 2020. the key driver of growth in the sector. Our assets expanded by 33% to has prioritized the The lower interest rates resulting from exceed TL 36 billion, while our health and safety the expansionary monetary policies shareholders’ equity increased by pursued during the pandemic added 24.1% to nearly TL 1.6 billion. Our of its employees. momentum to consumer loans, and pension assets augmented by 32.8% premium production on credit-linked to surpass TL 30.4 billion, while our Significant supportive life insurance policies expanded by life assets grew by 42.7% to top TL steps were taken for 26.5% as compared to 2019. Premium 3.1 billion. Our net profit, on the other production on endowment policies hand, enlarged by around 45% and our customers, and and life insurance policies with survival was registered as TL 519 million. benefits, on the other hand, increased life-easing practices We are going through a test of by 55% and reached TL 2.6 billion. resilience and adaptation. for them were Our Company forges ahead solidly Through this critical period, our in all its fields of activity. introduced. Company has prioritized the health Having reached 1,091,440 participants and safety of its employees. The and TL 29.4 billion in total funds under necessary measures were quickly management in voluntary PPS as at 31 introduced and remote working system December 2020, our Company controls was instated within the frame of the 15.8% market share in the number battle against the Covid-19 pandemic. of participants and 18.5% in total Many countermeasures aimed at funds. In auto enrolment segment, protecting the health of our employees on the other hand, our Company and their relations still continue to be attained 13.3% market share with implemented with utmost diligence. 882,336 employees and 10.4% market Significant supportive steps were share with TL 1,224 million in total taken for our customers, and life- funds under management. While the easing practices for them were cumulative number of our participants introduced. Withdrawals were for voluntary PPS and auto enrolment facilitated for our customers who closes in on 2 million, funds under needed lump sum in these days, and our management topped TL 30.5 our Company covered the differences billion. In the life insurance branch, our in collaterals resulting for instalment Company outgrew the sector’s average deferments of our customers who in premium production that went up by were having difficulty in repaying 37% to reach TL 1.7 billion at year-end their bank loans. In addition, policy 2020. cancellations were deferred for three months for our customers who were unable to pay the premiums on their life insurance policies, and their risks in this timeframe were assumed by our Company.
Anadolu Hayat Emeklilik 2020 Annual Report 13 Message from the CEO
Our Company Our Company restructured its business The number of our life insurance processes in order to dynamically products promoted and sold via restructured its respond to customer needs that telemarketing was increased; in our transformed during the pandemic. calls, it was particularly emphasized business processes in Maximum efforts were spent to fulfill that our policies provide coverage order to dynamically all kinds of requests and expectations also in case of loss of life due to the of our customers in the quickest ongoing pandemic. manner possible through our digital respond to customer In this period, priority was given also products and services delivered online to customer retention, which we needs that and via mobile channels. Offering a consider to be equally valuable as new number of conveniences to users with transformed during sales. During the reporting period, its redesigned format, AHE Mobile lets weight was given to Special Customer our customers quickly and practically the pandemic. Management and Investment Advisory handle their private pension and life services, and our monthly retention insurance transactions. rate reached the highest level of the We are delivering a good digital past five years. experience to our customers with our To sum up, our investments continued Internet branch AHE Online, Online for satisfying our customers’ all kinds Auto Enrolment allowing organizations of demands and expectations through to get quotations and create contracts digital channels in the fastest and most online in the auto enrolment segment, accurate manner possible and positive our chatbot that we have developed results were attained by focusing on using AI technology and call AHE our targets despite going through a Assistant, and our dynamic corporate period during which the pandemic website. negatively affected life in the world During 2020, we have also monitored and in Turkey. the rise of digital channels, and our The coming period promises private pension and life insurance significant wins for our sector. products were put on sale through our website. On another note, necessary The agenda of the private pension means were made available to let our sector in the coming period covers customers holding private pension such topics as the inclusion of the accounts to easily perform their under-18 population in the PPS transactions such as withdrawal, system, publication of the secondary contribution increase, additional ancillary legislation governing FC- contribution payments, etc. via our based PPS for non-resident Turkish telephone, internet and mobile citizens, granting the participants the channels without leaving their homes. right to make partial withdrawals from their accumulated funds to cover their urgent cash needs, and Supplementary Pension Scheme. The arrangements that will be introduced upon the ongoing efforts in these regards will contribute significantly to the growth of the PPS.
14 Anadolu Hayat Emeklilik 2020 Annual Report In the life insurance branch, the As our Company successfully gets As our Company sector’s agenda topics include through a tough period testing diversification and proliferation of adaptation to change and digitalization successfully gets annuity and pension income plan capabilities with its solid financial and solutions for the retirement period. As organizational structure and effective through a tough the number of system retirees grows management mechanism, it also period testing by the day, it becomes increasingly charges ahead solidly. more important to develop the Having left its 30th year behind in adaptation to change products that meet the expectations 2020, our Company holds a strong associated with retirement. In addition, and digitalization position in private pension and life the momentum captured in the insurance sector. I would like to extend capabilities with endowment products, which become my heartfelt thanks to our customers more attractive with the tax advantage for their complete confidence its solid financial they entail as well as for providing throughout these 30 years during coverage against the loss of life risk, and organizational which we have signed our name will presumably be maintained and underneath many innovations, firsts structure and these products will get higher share and achievements, to our principal out of total production. shareholder İşbank for its support and effective management We continue to take important contributions, and to our employees, mechanism, it also steps in the areas of digitalization agencies, brokers and stakeholders. and customer experience. charges ahead solidly. Yours sincerely, Our company boasts a vast selection of products and services that its customers will need throughout all Yılmaz Ertürk the stages of their lives. It gradually Board Member and CEO accelerated its efforts for upgrading its technical infrastructure for fulfilling its customers’ expectations of obtaining financial protection and being covered by increasing the diversity of its products that can be easily purchased through digital channels, which at the same time optimally respond to needs. All kinds of innovative developments will certainly contribute to new customer acquisition, while also serving to customer retention activities. Therefore, a number of projects associated with digital transformation have already been planned, with the projects initiated in relation to the expansion of the scope of digital channels, and robotic process automation (RPA) and process automation through artificial intelligence (AI).
Anadolu Hayat Emeklilik 2020 Annual Report 15 An Overview of the World and Turkish Economies in 2020 and 2021 Outlook
Following the damage The World Economy and the Bank of Japan (BOJ) initiated asset buying programs, augmenting Global growth, which was 2.8% in their balance sheets by USD 8.5 the global economy 2019, started weakening from March trillion in total in the twelve months to 2020. sustained because end-2020. In 2020, the Fed and the of the pandemic, Coronavirus has been influential in BoE cut rates by 150 bps and 65 bps, this deceleration, which emerged respectively. In addition to monetary normalization and at the start of the year and was measures, comprehensive fiscal declared a pandemic in March by the measures were adopted in a number recovery in the World Health Organization (WHO). of countries and regions, led by the US, economy is expected Lockdown measures that began to Japan, China and the European Union. be implemented globally from spring The fiscal measures taken during to ensue in the 2021 onwards in an effort to combat the the reporting period for mitigating pandemic led to deterioration of the damage caused by the pandemic and beyond upon the macroeconomic indicators. While accounted for as much as 14.3% of positive outcomes numerous sectors were negatively global GDP. In the wake of the Covid-19 affected by the pandemic, the services crisis, global capital flows weakened achieved from vaccine industry was among the hardest-hit much more harshly than they did at the ones. Demand conditions weakened, time of the 2008 global financial crisis. efforts. as oil prices worldwide slumped. Gold prices shot up globally because of Along this line, inflation declined in quantitative easing and risk aversion developed countries. Central banks of tendency. developed economies implemented The estimations released by the IMF in massive monetary policy measures, October 2020 indicated that following the likes of which were unseen for a the collapse that the global economy long time, and the G4 central banks sustained in the second quarter of consisting of the US Federal Reserve the year due to the Covid-19 crisis, System (the Fed), the European Central recovery became pronounced in the Bank (ECB), the Bank of England (BoE) third quarter, and that the recuperation would gradually gain strength throughout 2021. It is projected that after contracting by 4.9% in developed Real Growth (%) 2019 2020 (E) 2021 (P) countries in 2020, the economy would strengthen to a 4.3% growth rate in Global 2,8 -3,5 5,5 2021, whereas emerging countries Advanced Economies 1,6 -4,9 4,3 would follow suit after suffering 2.4% contraction in 2020 to be reversed USA 2,2 -3,4 5,1 to 6.3% growth in the year ahead. Euro Area 1,3 -7,2 4,2 Along this line, it is projected that, after shrinking by 3.5% in 2020, global Japan 0,3 -5,1 3,1 economy will grow by 5.5% in 2021. It Emerging Market and Developing Economies 3,6 -2,4 6,3 is assumed that social distancing will continue to be adhered to during 2021, Change in Trade Volume (%) 1,0 -9,6 8,1 but would be terminated in time as the Inflation (%) coverage of vaccination expands and cures for the disease are developed. Advanced Economies 1,4 0,7 1,3 • Following the damage the global Emerging Market and Developing Economies 5,1 5,0 4,2 economy sustained because of the
Source: IMF World Economic Outlook, January 2021 pandemic, vaccination is expected
16 Anadolu Hayat Emeklilik 2020 Annual Report to reach larger populations in 33.8 billion as of October 2020. The Having initiated rate cuts in the second 2021 upon the positive outcomes main drivers of the enlarged current half of 2019 in line with the improved achieved from vaccine efforts, and deficit were downsizing in export inflation and conducive global liquidity normalization and recovery in the markets and the sudden halt of tourism conditions, the CBRT carried on with economy is expected to ensue in the revenues due to the pandemic. It is the cuts until its meeting in May 2021-2023 period. estimated that the current accounts will 2020. The CBRT was forced to reduce produce a deficit of USD 33.9 billion at provisions and took steps to support • With the Democrat Party’s Biden year-end 2020, which deficit will barely financial stability and credit growth having been elected as the new improve to USD 33.6 billion in 2021. during the year with the aim of curbing president of the USA, this result the negative repercussions of the is anticipated to ease the trade Having followed a moderate course in Covid-19 pandemic upon the economy. tensions between the US and the first two months of the year, the With the commencement of gradual China and the protectionist policies. central government budget deficit took normalization, the CBRT withdrew its Notwithstanding, the global trade an upturn from April with the effect of supportive steps from August. Having volume is expected to present a the measures implemented against the declined from 12% at the start of weaker outlook as compared to the pandemic, and the ratio of 12-month 2020 to 8.25% until May, the policy pre-pandemic period. cumulative budget deficit to GDP went rate was hiked by 875 basis points up to 3.3% as of November. The New • Developed countries are expected to and increased to 17% in December Economic Program (NEP) estimated keep pursuing fiscal and monetary during the tightening process initiated the ratio of budget deficit to GDP at policies so as to support the in September to recapture the around 4.9% at end-2020, with a economy. disinflation period and to support price decline towards 4.3% in 2021. The stability. Moreover, liquidity support • Global oil prices are anticipated to recent budget actualizations indicated provided at the onset of the pandemic average 45-55 USD a barrel annually. that the deficit would perform more were also gradually withdrawn and positively than the NEP estimation at The Turkish Economy the monetary policy was given a year-end 2020. Annual inflation went simplified framework. The policy rate The annual growth rate of the GDP, up from 12.2% at the onset of the is anticipated to be reduced somewhat which registered 0.9% rise in 2019, year to 12.6% at the end of the first in parallel with the developments in was restricted to 0.5% in the first three half of the year, and reached 14.6% inflation in 2021; however, these cuts quarters of 2020. Following a 9.9% at the end of 2020, following a path are likely to be started after the first contraction in the second quarter in that was above the projections. Annual half of 2021, during which inflation will conjunction with the pandemic, the core inflation C index excluding gold, be high. Gross reserves of the CBRT strong 6.7% rise in the third quarter energy, food and beverages, alcoholic declined from USD 106.3 billion at put the trend back on the positive beverages and tobacco products shot year-end 2019 to USD 94.6 billion as of side. While net exports’ contribution to up from 9.9% at the start of the year 25 December. Foreign capital outflows growth was negative for four quarters to 14.3% at year-end 2020 with the in connection with the pandemic, the in a row, consumption expenditures effects of accumulated exchange rates residents’ demand for foreign currency, and total investment outlays have and unit cost increases resulting from external loan repayments and current been the engine of growth in the third company closures. Annual rise in CPI is deficit have been the factors behind quarter. Despite the tightened financial estimated to be in the order of 11% at the decreased reserves. conditions and accelerated course of the end of 2021. the disease in the last quarter of the The acceleration observed in the The labor market was also negatively year, lead indicators of growth remained credit demand from September affected by the Coronavirus pandemic. relatively strong, and no marked 2019 continued during 2020. The The rate of unemployment rose to signals of a deceleration were detected provision of Treasury-backed loans to 13.4% in the June-July period, declined from the data; hence, 3.5% growth is sectors affected by the pandemic and to 12.9% in November following the projected for 2021. On the side of the the BRSA’s urging the banks’ credit economic recovery that started in the current accounts balance, the value that expansion by way of the assets ratio third quarter, and a large portion of ended 2019 with a surplus of USD 8.6 rule have driven the acceleration of the loss of employment during the billion was reversed to a deficit of USD loans. At 43.1% in the week of 25 pandemic was recovered.
Anadolu Hayat Emeklilik 2020 Annual Report 17 An Overview of the World and Turkish Economies in 2020 and 2021 Outlook
December 2020, the annual rise in Overall; economic growth when the levels Turkish lira (TL) loans pointed at a of the reserves are also taken into • The Turkish economy is anticipated marked acceleration as compared to consideration. to increase its annual growth rate the year-end 2019 value of 13.9%. upon normalization of economic life The Turkish Private Pension and The decline in foreign currency (FC) after the pandemic and with the loans continued due to the debt- Life Insurance Sectors help of the weak base effect. reduction tendency and evident The Covid-19 pandemic that emerged weakening in investment appetite. • After hitting the rock bottom in the also in our country in March 2020 The annual decline in FC loans was second quarter of 2020, economic deeply impacted a number of sectors, measured at 3.2% in US dollar terms as activity recuperated better than including the financial services of 25 December. The annual expansion anticipated in the third quarter. In sector. Pension and insurance sectors in total credit volume was registered the last quarter of the year, lead adopted all necessary measures as 39.7% as of 25 December 2020. indicators do not point at a marked against the pandemic to ensure In 2021, the anticipated recovery loss of pace. On the basis of the service continuity and to protect in economic activity is expected to whole year, economy is estimated to the health of its customers and support the growth in credit volume. have registered positive growth in employees, and kept working without Notwithstanding, the credit expansion 2020. letup in order to offer uninterrupted will possibly lose significant pace as • 3.5% growth is projected for 2021 service to customers. In this context, compared to 2020. in view of deferred demand, which pension and insurance companies also The rapid growth in FC deposits figure is below Turkey’s long-term assumed a number of costs in view of base continued during 2020 and growth average. public interest. dollarization tendency was preserved. Due to the lagging effects of Among the potential implications As of 25 December 2020, FC deposits volatile exchange rates, in 2021, it is of the Covid-19 outbreak for our volume expanded with USD 38 billion anticipated that inflation will remain in sector are reduced long-term saving annually and reached USD 258.3 double-digit numbers, monetary policy up tendency and in turn, lower new billion. TL deposits volume enlarged will display a prudent stance, and additions to the system due to the by 22.1% in the same timeframe and credit demand will grow marginally. uncertainties in the markets and amounted to TL 1.54 trillion. In this Based on these assumptions, the individuals’ concerns over losing period, total deposits volume grew Turkish economy is estimated to have their income/jobs; contribution 35.8% and reached TL 3.5 trillion. grown 0.5% in 2020 and growth is payments being halted or reduced by Accompanied by the anticipated expected to accelerate to 3.5% in existing participants due to financial recovery in economic activity, 2021. Although a rise in the growth difficulties; increased withdrawals dollarization tendency in the deposits rate of the economy is a factor that from the system due to the need for market is expected to lose some pace will positively reflect on revenue cash, and negatively affected fund in 2021. performance in the budget, the NEP performances due to volatile markets. The financial assets of households plans to accelerate public investment Despite these unprecedented tough amounted to TL 2.4 trillion in the first outlays indicate at a high budget conditions, it was observed that three quarters of 2020, and was up deficit. In line with the presumed consciousness of saving up further by 41.3% on an annual basis. Pension partial acceleration of tourism increased in this period, and the mutual funds increased 39.7% in revenues and restricted gold imports private pension system stood out this period, and the share of pension in 2021, it is predicted that current as it is capable of responding to this mutual funds in total household deficit will not vary much as compared need optimally. While the pandemic financial assets declined from 5.9% to 2020 in spite of the recovery in contributed to realization of the in September 2019 to 5.8% in the economy. Nevertheless, it is importance of life insurance and September 2020. considered that foreign capital flows saving up for retirement, customers will play an important role in achieving continued to remain in the system.
18 Anadolu Hayat Emeklilik 2020 Annual Report An important development of 2020 life insurance. As a result, the overall While the pandemic for our sector was the law amendment sector’s premium production on term allowing accumulating funds in foreign life insurance was registered as TL 11.7 contributed to currency in the private pension system, billion, up by 22% year-on-year. with the aim of encouraging Turkish realization of the In 2021, new additions to the pension citizens living abroad to save up in our system will presumably increase in importance of life country. Along this line, it is targeted view of the anticipated economic to channel non-resident citizens’ recovery, reflections of the positive insurance and saving savings in a foreign currency to the outcomes of vaccine efforts, and the PPS, and at the same time, to allow up for retirement, pandemic’s contribution to realization them to benefit the state contribution of the importance of life insurance customers continued advantage. The legislation governing and saving up for retirement. The the matter is being awaited and this system’s expansion might possibly to remain in the practice is anticipated to contribute to gain momentum upon introduction the System in terms of total funds and system. of the FC-based PPS pending for the number of participants. implementation details and admission Another highlight of 2020 has been of the under-18 population to the the commencement of operations private pension system. actively by the Insurance and Private In the life insurance branch, although Pension Regulation and Supervision growth in credit-linked term life Agency, and the merger of public insurance might be restricted in pension companies to offer service line with the performance of credit under the company name Türkiye volumes in 2021, these products are Hayat ve Emeklilik A.Ş. anticipated to preserve their weight. While the total number of participants Life insurance products such as stand- in the private pension system including alone term life and critical illness will auto enrolment was up by 5% to likely gain further ground in 2021. exceed 13.5 million as of 31 December Both the pandemic and the natural 2020, total funds increased by 34% to disasters that took place served as TL 170.1 billion. Sustaining its stable reminders of the nature of saving expansion since its establishment, up and life insurance as critical the System continues to generate necessities. The major effect digital significant yields in the long term with platforms have in creating a broad- the state contribution incentive and based consciousness of saving up the real returns secured on pension and insurance ownership can be mutual funds in the past 1-, 3- and discerned clearly. The vitality of the 5-year periods. investments in digitalization was bared In the life insurance branch, total once again during the pandemic, and premium production increased by the process provided the opportunity 27% year-on-year and reached TL for further upgrading the product 14.3 billion as of 31 December 2020. and service levels offered through The downtrend adopted by interest digital channels. In this framework, rates in the first half of the year with companies are expected to accelerate the added effect of the pandemic their digitalization efforts to position and maintained until September themselves accurately and to cater to brought along credit expansion, which customer expectations in a rapid and added momentum to credit-linked accurate fashion.
Anadolu Hayat Emeklilik 2020 Annual Report 19 Anadolu Hayat Emeklilik by Numbers
Successful performance, sustainable profitability
Having grown its Summary Financial Information total premium and contribution Financial Highlights (TL thousand) 2019 2020 Change (%) Total Premium and Contribution 3,148,700 4,681,154 49 production by a Production (*) strong 49% in Mathematical Provisions 2,231,797 3,185,639 43 2020, Anadolu Pension Funds (**) 22,913,666 30,434,760 33 Hayat Emeklilik General Technical Profit 353,733 472,210 33 booked TL 519 Total Assets 27,134,778 36,067,123 33 million in net Paid-in Capital 430,000 430,000 - profit, up by 45% Shareholders’ Equity 1,273,673 1,581,264 24 annually. Financial Income 167,325 246,998 48 Pretax Profit 476,840 647,678 36
Net Profit 357,535 519,341 45
Key Ratios (%) (%)
Net Profit/Shareholders’ Equity 35 40 Premium and Contribution 12 13 Production/Total Assets Shareholders’ Equity/Total Assets 5 4
(*) Based on the data released by the Pension Monitoring Center (PMC). Total premium figures include gross written premiums of personal accident and life branch. (**) Also includes auto enrolment and is based on the “Receivables from the Clearing House” item in the balance sheet.
20 Anadolu Hayat Emeklilik 2020 Annual Report Pension Funds (*) Total Assets Share Amount Shareholder Share (%) (TL Million) (TL Million) (TL) Türkiye İş Bankası A.Ş.* 274,743,069 63.89 Anadolu Anonim Türk 30,435 36,067 86,000,000 20.00 Sigorta Şti. Millî Reasürans T.A.Ş. 4,299,999 1.00 22,914 27,135 Publicly-held 64,956,932 15.11
33% 33% Total 430,000,000 100.00 Change Change Out of 43,000,000,000 shares representing the capital in the amount of TL 430,000,000, 100,000,000 are Class A and the remaining 42,900,000,000 are Class B shares. As at the date of the balance sheet, all of Class A shares are held by the Company’s shareholder, Türkiye İş Bankası A.Ş. (İşbank). Holders of Class A shares are not granted any privileges save for the nomination of the Board Directors. Seven members of the Board Directors are elected by the General Assembly from amongst candidates nominated by Class A shareholders, and four from amongst those nominated by Class B shareholders. The Company’s articles of association do not allow creation of new Class A shares in capital increases. 2019 2020 2019 2020 The Company did not repurchase any of its own shares in the reporting period. The Company has only one associate, İş Portföy Yönetimi A.Ş., in which it holds 20% share in capital. İş Portföy Yönetimi A.Ş. does not own any share in our Company. Shares held in the Company by the members of the Board of Directors and the Executive Committee are negligible. There are no cross-shareholding relations between any shareholder and our Company.
General Technical Profit Pretax Profit Capital and Shareholder Structure (TL Million) (TL Million) (%)
1.00 472 648 15.11
354 477
20.00 63.89 33% 36% Change Change
Türkiye İş Bankası A.Ş. Anadolu Anonim Türk Sigorta Şti. Publicly-held 2019 2020 2019 2020 Millî Reasürans T.A.Ş.
* The ratio of publicly-held shares is 17%. As of 31 December 2020, Türkiye İş * Includes Auto Enrolment. Bankası A.Ş. holds 1.89% of the publicly-held shares.
Anadolu Hayat Emeklilik 2020 Annual Report 21 Anadolu Hayat Emeklilik by Numbers
Anadolu Hayat Emeklilik Market Capitalization (2000-2020, TL million)
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Anadolu Hayat Emeklilik Market Capitalization (2000-2020, USD million)
800
700
600
500
400
300
200
100
0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
22 Anadolu Hayat Emeklilik 2020 Annual Report Strategic Goals of Anadolu Hayat Emeklilik
Anadolu Hayat Emeklilik pursues its The key priorities for the Company Anadolu Hayat operations in keeping with its vision to include cementing the leading position be Turkey’s top and most preferred life in the sector through innovative Emeklilik proficiently insurance and pension company in all products and practices, maximizing aspects and to take place among the effective product and service uses its wealth world’s leading companies in terms of positioning in every segment in line of knowledge, quantity and quality where the degree with the digitalization target, the of integration in terms of economy and needs of customer segments and sales experience and capital digitalization is constantly increasing. channels, and reaching the highest level in customer experience and for profitable growth Being one of the strongest and most services with the target of operational reliable companies in the sector, focused on innovation excellence. Anadolu Hayat Emeklilik further raises its goals by the day and makes Initiatives and efforts are underway to and digitalization. optimum use of its know-how, realize digital transformation, which is experience and capital accumulation the key to securing sustainable growth to secure a profitable growth and efficiency in business processes. that is focused on innovation and One of the main focal points is to carry digitalization. out these initiatives with integrated, agile and solution-oriented systems. The aspects putting Anadolu Hayat Emeklilik in a differentiated and In line with its sustainability strategy, privileged position in the sector are Anadolu Hayat Emeklilik carries on its its know-how, competent human activities in order both to integrate resource, robust financial structure, sustainability into its business models strong brand equity, deep-rooted and to make the sustainability concept corporate culture, competitive edge an indispensable part of the corporate in digitalization, and extensive culture. distribution network. The Company Ensuring constant development of the uninterruptedly fulfills its mission human resource that represents the of nurturing in people an awareness most competitive and longest-lived of the need to safeguard their asset and investing in qualified people future, offering financial solutions equipped with knowledge and skills that respond to needs of individuals related to technology are among the and organizations and enhance the main strategic goals. quality of life, and contributing to the development of the national economy by creating long-term stable funds.
Anadolu Hayat Emeklilik 2020 Annual Report 23 2020 Activities
Alev İyibudar - The Transfogarian Innovative products and services Shots From Life As Seen By Women ‘20 for 30 years During 2020 that marked its 30th anniversary, Anadolu Hayat Emeklilik continued to offer innovative products and services optimally catering to customer needs and to back these initiatives with digital solutions.
24 Anadolu Hayat Emeklilik 2020 Annual Report An Overview of Anadolu Hayat Emeklilik’s Position in the Industry and its Activities in 2020
Digital solutions during the enrolment, by 5.9% year-on-year to Anadolu Hayat pandemic nearly 2 million based on the Pension Monitoring Center (PMC) data on The Covid-19 pandemic gave rise Emeklilik has become 31 December 2020. For these two to a critical environment for the criteria, the Company secured 18% the first company from insurance and pension sectors, as it and 15% market shares, respectively. did for all the others. In this period, the insurance and Anadolu Hayat Emeklilik addressed • Enlarged its premium production the health and safety of its employees in life insurance branch by 37% pension sector quoted as a matter of topmost priority and year-on-year to reach TL 1,684 at Borsa İstanbul began implementing the remote million for a 12% market share working model. In addition to that, according to Insurance Information Sustainability Index concentrated on digital channels and and Monitoring Center data of 31 mobile applications for the customers, December 2020. in 2020, the year the and digital products and services were • By 19% year-on-year increase, Company celebrated developed in view of the customer wrote premiums in the amount of TL needs that were transformed during 1,082 million in term life insurance. its 30th anniversary. the pandemic. Continuity has been the Fund value held by its life insurance main concern in customer transactions policyholders worth nearly TL 3.1 and operations, and all services were billion sustained the Company sector carried on uninterruptedly. leadership in this segment. Founded in 1990 as Turkey’s first life • Increased its total assets by 33% insurance company, Anadolu Hayat year-on-year and reached TL 36.1 Emeklilik continued to offer innovative billion as at year-end 2020. products and services catering to • Once again manifested its ability to customer needs and to back these create sustainable and permanent initiatives with digital solutions also value with a net profit of TL 519.3 in 2020, during which the Company million. celebrated its 30th anniversary. • Neutralized its 2019 carbon Anadolu Hayat Emeklilik sustained its footprint, and thus, became a carbon leadership amongst privately-owned neutral company also in 2020 within companies In the aggregate of private the scope of the Sustainability pension, auto enrolment and life Management System, with the insurance funds in 2020, enabled by goals of measuring and minimizing its successful performance captured in the environmental impact of the line with its strategies. The Company is Company’s operations and raising the leader also in terms of the highest awareness of the subject. number of system retirees. • Signed its name under yet another significant achievement in 2020 A year filled with achievements and and has become the first company firsts from the insurance and pension As a result of its activities in 2020, sector quoted at Borsa İstanbul Anadolu Hayat Emeklilik: Sustainability Index: • Augmented total funds under • Carried on with customer base its management, including auto expansion, retention and deepening enrolment, in the private pension activities in all segments employing system by 33.3% year-on-year the right product and channel mix to TL 30.6 billion and the number maintaining its focus on excellence in of participants, including auto customer experience.
Anadolu Hayat Emeklilik 2020 Annual Report 25 An Overview of Anadolu Hayat Emeklilik’s Position in the Industry and its Activities in 2020
Özlem Sönmez - The Sandal Maker Shots From Life As Seen By Women ‘20
• Continued with efforts and initiatives • Paid utmost attention to achieving Initiatives aimed at new customer to increase the use and efficiency full compliance with the corporate acquisition and customer retention of digital channels, started selling governance principles and regulatory continued. five products online through the requirements that define the The private pension fund robot corporate website, and kept on with framework of its operations, launched for the first time in Turkey innovative developments on its and kept carefully observing the by Anadolu Hayat Emeklilik, FonMatik mobile application, AHE Mobile. transparency principle in all of its ROBO celebrated its first year in practices. • Was awarded in the “Best Retention, October. FonMatik ROBO is intended Marketing Achievement” category Marketing and Sales to help participants, who do not at the PSM Awards 2020 organized have expertise in relation to funds, During 2020, Anadolu Hayat Emeklilik by PSM payment systems magazine invest their savings in private pension focused on securing high penetration with its FonMatik ROBO project. mutual funds optimally according in all branches on the back of right to their investor profiles, and steer • Earned the “Leed Gold” certification product and channel optimization, their accumulations easily. FonMatik awarded to sustainable and enhancing pre- and post-sales service ROBO modifies the fund distribution environmentally-friendly offices quality, expanding the coverage of according to market conditions on by the U.S. Green Buildings Council digital processes, and improving account of the participants, and also (USGBC) with its Customer Services customer experience. regularly reports fund income. Center.
26 Anadolu Hayat Emeklilik 2020 Annual Report AHE Assistant chatbot developed rich product portfolio covering pension New Products and Online Sales using the AI technology as an plans and private pension funds The new products launched during the important element of the customer- with different content and fees, and reporting period included Education centered digitalization project encompassing various alternatives that Insurance For Private Schools and contributed significantly to customer respond to the investment and risk Group Education Insurance, as well communication in 2020. expectations of participants. as the DEV BES, the PPS product Digital solutions in auto enrolment In line with the needs of private introduced in cooperation with the procedures pension participants, the services World Disability Foundation (in Turkish: of contribution payment guarantee DEV). The expansion in the participant for housewives, as well as social base of the private pension system Our private pension products “Youth security advisory, investment advisory, continued in 2020 thanks to the auto Pension Plan” and “Investment for emergency ambulance, and healthcare enrolment system introduced in 2017. Future Pension Plan”, and our life advisory to all customers are offered. As at year-end 2020, Anadolu Hayat insurance products “Standard Critical Emeklilik ranked at the top of the In the life insurance branch, premiums Illness Insurance”, “Full Coverage Life privately-owned pension companies were revised in credit-linked and Insurance” and “Personal Accident in terms of total pension assets under stand-alone life insurance products in Insurance” started to be sold online management and the number of line with the needs. through our corporate website . employees. The efficiency and capacity of the Product description and analysis Digital solutions offered for auto distant sales channel were increased studies were carried out as part of enrolment allow easy execution of all taking into consideration the the efforts for the introduction of the steps from quotations to contracts. pandemic-induced circumstances as annuity product. well, and new customer acquisition and Within the scope of software Improving customer relations and cross-selling activities were carried out integration of HR and payroll interaction using channel-specific products. applications, functions such as account Campaigns that were conducted for opening of employees, viewing the Personalized offers continued to be increasing customer retention and current status of employees’ pension made in inbound calls and through the depth proved to be a significant tool accounts, changing status of the IVR system. for strengthening the cooperation accounts, and collection settlement Within the scope of Key Account among distribution channels and for can be performed easily and quickly. Management, quality of services increasing efficiency, and played an These capabilities hand the companies offered to key customers has been important role in helping Anadolu included in auto enrolment with cost constantly enhanced based on one-on- Hayat Emeklilik consolidate its strong and time saving advantages. one service notion. position in the sector also in 2020. Excellence in customer experience Customer satisfaction questionnaires Promoting digital media and increasing Being the most preferred company in continued to be administered to cover their use have become even more the sector, Anadolu Hayat Emeklilik sample customer groups divided critical during the reporting period, continues to offer its innovative according to segments, and results and campaigns were organized aimed products and services uninterruptedly were evaluated, upon which necessary at boosting the sales of segment- in keeping with its vision of achieving revisions were made to enhance the based products and stand-alone life excellence in customer experience and level of customer satisfaction on insurance products. digitalization. the basis of individual products and
services, and to improve customer In the private pension branch, Anadolu experience. Hayat Emeklilik offers services with a
Anadolu Hayat Emeklilik 2020 Annual Report 27 An Overview of Anadolu Hayat Emeklilik’s Position in the Industry and its Activities in 2020
Customer Services are able to instantly view their Distribution Channels private pension, auto enrolment, Digital approach to customer services Creating a distinction in customer life and personal accident insurance reach through effective distribution Nowadays, digital channel usage has contract details, accumulated funds, channel management increasingly expanded in connection state contributions, their coverage, with the advancements in technology payments and fund performances, and The nationwide distribution channel in the insurance industry as in all perform their transactions securely. structure is a building block of Anadolu other sectors, and customers’ usage Hayat Emeklilik’s sales and distribution The functions and capabilities of AHE habits and expectations keep evolving. strategy focused on efficiency and Mobile were updated to keep abreast In addition, suddenly emerging productivity. The Company ensures with new technologies and they were pandemics have the capacity to an extensive customer reach via the launched for use by customers in April deeply influence the delivery and diverse channels listed below: 2020. provision methods of all services. • district sales offices in İstanbul Accordingly, Anadolu Hayat Emeklilik During 2020, AHE Mobile and AHE (3), Ankara (2), İzmir, Adana, Bursa, carried on with its activities putting Online were visited by approximately Antalya, Trabzon, Kocaeli and digitalization and excellent customer 1 million Anadolu Hayat Emeklilik Diyarbakır, and a branch in the experience at its focal point based customers. Other capabilities made Turkish Republic of Northern Cyprus on its approach entailing adjustment available during the reporting • direct sales force to changing conditions and dynamic period included transition from process management, and made İşCep application without entering • bank branches that serve as the them a part of its strategic planning. password, new profile, login screen Company’s agencies Continuing to build on its digital and login to AHE Mobile with İşCep • private agencies network and channel management expertise and password. • alternative distribution channels capability, Anadolu Hayat Emeklilik Efforts are ongoing for online sales kept introducing projects designed to Solid and extensive bancassurance of various products through the AHE enrich these channels and enhance its network Mobile application. Customer- and service quality in 2020. user-oriented renovation of AHE Having one of the most extensive Within the context of increasing the Online continued incessantly, bringing distribution channels in the usage rates of digital channels, the these efforts to the final stage. bancassurance channel, Anadolu Company carried out activities related Hayat Emeklilik continues to make Continuity of productivity increase in to AHE Mobile, AHE Online and the a difference with this strength and customer relations IVR system in line with the customer competence. expectations, and also continued In an effort to boost service level, Anadolu Hayat Emeklilik sustained to make its AHE Assistant chatbot speed, and increase productivity, its powerful collaboration with available on its website, which offers Anadolu Hayat Emeklilik continued to its main business partner İşbank customers services in private pension work on upgrading and configuring the throughout 2020, enjoying an and insurance. IVR flow of the Call Center. unrivaled competitive edge with AHE Mobile and AHE Online The number of agents on outbound respect to multi-channel use thanks to calls and inbound calls teams were approximately 1,230 branches of the Giving the customers efficient access kept at the optimum level, and Bank, cutting-edge technology and to information about private pension, efficiency has been secured in the alternative distribution channels. auto enrolment and life insurance service level provided to customers. products and enabling execution of Delivering its products to a large During 2020, the Call Center related transactions through the AHE audience through this extensive responded to more than 3.5 million Mobile application, Anadolu Hayat network, Anadolu Hayat Emeklilik calls and placed over 1.2 million Emeklilik prioritizes investments in realized 90% of its annual new outbound calls. A total of 1,735,442 digital transformation. business figure in private pension transactions were executed within the branch and 99% of the term life Using AHE Mobile and AHE Online, scope of customer operations during insurance premium production via the Anadolu Hayat Emeklilik customers the reporting period. bancassurance channel in 2020.
28 Anadolu Hayat Emeklilik 2020 Annual Report Direct Sales Force: A nationwide despite the distribution channels that One of the most preferred employers presence by a young and dynamic are diversified owing to the advancing in the sector for its corporate qualities, team technology. brand equity and innovative HR practices, Anadolu Hayat Emeklilik During 2020, Anadolu Hayat Emeklilik During the reporting period, the always makes a difference with the increased total private pension funds agency network was responsible for value attached to its employees, and under its management by 33% and life 20% of the total contribution and the training and career opportunities insurance customer assets by 39%. premium collections in endowment offered. and private pension segments. A major contributor to this Anadolu Hayat Emeklilik supports its achievement was the direct sales Private Pension Intermediaries employees’ professional and personal force of 494 individuals that serve Agencies and sales representatives development, and gives them the as a direct communication channel offering service as intermediaries opportunity to keep abreast of between the customers and the in the private pension system are new practices, helps them acquire Company. required to pass the e-BEAS (Electronic new perspectives, and further Direct sales force named Future Private Pension Intermediaries Exam). raises the bar in services rendered Planning Specialists, offers service to policyholders through training Anadolu Hayat Emeklilik made in İşbank’s branches that are present programs aligned with their career sure that all of its private pension in each city in Turkey. Optimally plans. intermediary candidates across representing Anadolu Hayat Emeklilik’s all distribution channels took the Within the scope of the training customer experience-focused vision e-BEAS also in 2020. The number programs focused mostly on by its performance in the marketing of the Company’s private pension the private pension system, and sales of private pension and life intermediaries was 3,993 people by and professional and personal insurance products, the sales team the end of 2020. development, more than 400 maintained its consistent efficiency participants received product, financial and was responsible for nearly 80% Human Resources literacy, persuasion and sales skills of the private pension products sold in The most valuable asset: Qualified training during the reporting period. 2020. employees “Visionary Leadership Program” was In 2020, AHE BizBize, the internal The success attained by Anadolu carried out for the managers and digital communication application Hayat Emeklilik is powered by its management trainees in the direct that will increase the interaction and highly knowledgeable, tech-savvy, sales force. contact of the direct sales force, was competent, creative and dynamic Aiming to give the employees a launched, and contributed to the people, who reflect the deep-rooted more pleasant and productive communication and motivation of the corporate culture in their activities and working environment, Anadolu Hayat sales force during the pandemic. are capable of meeting on common Emeklilik administers “Employee Value-driven channel management ground. Satisfaction Questionnaires” and on the back of a deep-rooted agency The total number of Anadolu Hayat “Internal Customer Satisfaction network Emeklilik employees including the Questionnaires”, and uses the feedback from these questionnaires Anadolu Hayat Emeklilik works with direct sales team was 1,051 as at as input for remarkable initiatives that more than 260 agencies countrywide, year-end 2020. Boasting a young will lead to transformation. a network that embodies a team, 52% of the Company’s human harmonious blend of various business resource consists of employees models and combines this mosaic in the 18-34 age interval. With a with a solid tradition and corporate workforce made up of women by structure. 62% and men by 38%, the Company, being a signatory of the UN Women’s Representing the Company’s oldest Empowerment Principles (WEPs), puts distribution channel, this strong great emphasis on the involvement of agency network displayed a successful women in business life. sales performance also in 2020,
Anadolu Hayat Emeklilik 2020 Annual Report 29 An Overview of Anadolu Hayat Emeklilik’s Position in the Industry and its Activities in 2020
Communication Corporate social responsibility projects Anadolu Hayat Emeklilik focuses on social responsibility projects that emphasize and support the role of women in economic and social development. Shots From Life As Seen By Women Photography Contest Aiming to contribute to the social and cultural development of the Turkish women, “Shots From Life As Seen By Women” photography contest offers them a platform where they can freely express themselves. The fourteenth edition of the Berna Nalçacı - The Love photography contest “Shots From Life Shots From Life As Seen By Women ‘20 As Seen By Women” was held in 2020 under the auspices of the Photographic Arts Federation of Turkey. Since its debut in 2007, more than 21 thousand women submitted over 83 thousand photographs. Having set its theme as “About Life” and open to all amateur and professional women photographers, the contest is the one and only photography contest in Turkey organized exclusively for women. The works are collected in a special catalogue each year. With its exhibition that made its debut on the digital environment in 2020, the works selected in the 14th edition of the Shots from Life as Seen by Women photography contest delivered a new experience to the photography enthusiasts this year. Showcasing 44 photographs, the digital exhibition can Ümmü Kandilcioğlu - The Corn be reached via anadoluhayat.com.tr. Shots From Life As Seen By Women ‘20
30 Anadolu Hayat Emeklilik 2020 Annual Report Leader communication steering the • Campaigns were carried out on Social communication and sector digital, radio and press to promote responsibility initiatives crowned with the revamped AHE Mobile. awards Below are the communication activities of Anadolu Hayat Emeklilik • DEV BES product co-launched with The widely appreciated activities in 2020, which are executed with the the World Disability Foundation of Anadolu Hayat Emeklilik are objective of instilling an awareness of (DEV) was promoted on digital media underpinned by the Company’s secure future: and radio channels. innovative, technology- and customer- focused approach. The Company’s • Radio spots continued to be aired on • The press and social media were mission towards the society and its terrestrial and digital radio channels used to communicate the first stakeholders were further encouraged through the year. anniversary of FonMatik ROBO. by the following awards collected in • As part of the promotional activities • Contents were produced throughout 2020: for “Investment Insurance for the year for “AHEblog” Career • Anadolu Hayat Emeklilik was named Children” product, an advertising category. the best-in-class in Private Pension campaign themed “the value of • The internal magazine “About Life” and Life Insurance category at some presents are to be realized began to be published solely digitally the fourth edition of Social Media years later” were broadcast on starting from its 50th issue. Awards Turkey 2020, where offline and digital media. campaigns centered on the social • Campaigns were carried out on • The Company’s 30th anniversary media compete. social networks. was celebrated on social media with • Received the Customers’ Friend a special video production. Mailing • SEO (search engine optimization) accolade given by ICERTIAS, was made to Company employees, actions were realized to ensure an international certification with the 30th anniversary film that the corporate website takes association. attached to it, which featured place in the top places within search messages from the CEO as well as engine results, as well as SEM • Customer Services Center Office former CEOs and chairpersons who (search engine marketing) initiatives earned the “Leed Gold” certification have served so far. The employees aimed at creating sales leads via the granted by the U.S. Green Building whose serving periods reached website. Council (USGBC) to sustainable and 15, 20 and 25 years were also environmentally-friendly offices. • Internal communication activities congratulated by the CEO during were carried on within the frame 30th anniversary celebrations. of different events in an effort to Greeting cards and mails were sent promote corporate awareness and to agencies, brokers, İşbank and internal communication. Anadolu Hayat Emeklilik’s business partners. • Giving the Company employees the chance to express the way they see • “You, through your Mother’s Eyes” life and seeking to promote internal filter was developed on Instagram communication, “Shots From Life As for the Mother’s Day. Seen By Employees” photography • The film themed “Where Were We” contest was held for the fourteenth depicting the inception of the post- time. pandemic normalization process was
broadcast on digital media.
Anadolu Hayat Emeklilik 2020 Annual Report 31 Sustainability
2017 2018
Milestones in Anadolu Hayat • Sustainability Committee started • The Company has become Emeklilik’s its operations. a signatory of Women’s Empowerment Principles (WEPs). Sustainability • Anadolu Hayat Emeklilik has Journey been the first and only Turkish • The Company neutralized its private pension and life insurance carbon footprint resulting from its company to be included in operations in 2017 and remained UNEP‑FI. carbon neutral. •The Company neutralized its carbon footprint and became carbon neutral.
Anadolu Hayat Emeklilik serves Informative e-bulletins about United Nations that it has signed in to sustainable development with sustainability were sent to employees, 2018. the target of perpetuating the and special contents about the topic As part of the Company’s activities standard of living captured during were posted on social media accounts. to manage its environmental the productive period of individuals, Having affiliated with the United impacts, the Company’s Manzara pioneers the sector with respect to Nations Environment Program – Adalar Offices entitled to receive “Sustainable Future” with its products Finance Initiative (UNEP-FI) in 2017, the LEED (Leadership in Energy and and social responsibility initiatives, Anadolu Hayat Emeklilik is the first and Environmental Design) Gold green and seeks to create economic, social only private pension and life insurance building certification granted by the and environmental value in all of its company from Turkey included in this U.S. Green Building Council (USGBC) in operations. global alliance. The initiative facilitates 2020. The activities for the implementation information exchange with companies Being the only insurance and pension of the Sustainability Management undertaking similar efforts in relation company quoted at BIST Sustainability System launched in cooperation to sustainability, discussions are held Index in 2020, Anadolu Hayat Emeklilik with ESCARUS - TSKB Sustainability about creation of new products, and pursues responsible investment notion Consultancy Inc. and the actions of about potential benefits that can be for “Sustainable Future”, and targets the Sustainability Committee set up to contributed to pension/insurance to lead the sector while creating ensure effective implementation of the activities from a sustainability economic, environmental and social system continued in 2020. perspective. value in the long-term. In the reporting period, Anadolu Regarding equal opportunity not as a Hayat Emeklilik neutralized its carbon privilege but as a right in its HR policies, footprint resulting from its operations, products and social responsibility and extended its support to renewable projects, Anadolu Hayat Emeklilik energy resources within the scope of supports the empowerment of women the Carbon Footprint Management in business and social life in keeping Project. with the Women’s Empowerment Principles (WEPs) spelled out by the
32 Anadolu Hayat Emeklilik 2020 Annual Report 2019 2020
• The Company neutralized its • Anadolu Hayat Emeklilik has become carbon footprint resulting from its the first company from the insurance operations in 2018 and remained and pension sector quoted at BIST carbon neutral. Sustainability Index. • The Company neutralized its carbon footprint resulting from its operations in 2019 and remained carbon neutral. • Manzara Adalar Offices of the Company entitled to receive LEED Gold green building certification.
Our Sustainability Philosophy with both our products and our In keeping with its social responsibility projects for a We are serving sustainable “Sustainable Future”. We see the slogan “A Good Future development with an objective sustainability as an integral part of focusing on continuity of life for Everyone”, Anadolu our business in order to contribute standards of individuals during the community development and to Hayat Emeklilik their productive periods since leave a more livable world for future our establishment as a company generations, and we realize projects steadily carries on operating in private pension and that integrate the sustainability to all life insurance sector. We are proud with its sustainability of our processes based on our motto to be the pioneer of the sector “Good Future for Everyone” initiatives with the objectives of passing Our Sustainability Strategy expectations for the sustainability of society. on a more livable Our sustainability strategy based on multi-layered objectives; • We develop public awareness world to future on securing the future with our • We are committed to create stakeholder communications generations and economic, environmental and activities. social value in long term with all our presenting them with activities. • We create long-term and stable pension funds. a sustainable and • We are committed to act under a sense of responsibility within • We provide a fair working reliable future. the framework of combating the environment respecting human climate change and adaptation, rights and employee rights. and we develop projects in order to • We strive to provide continuous reduce the impacts of the climate customer satisfaction. change. • We internalize the concept of • We aim to increase positive impact sustainability within our company, in our activities by prioritizing the we continuously improve our concept of responsible investment. practices within this framework • We provide financial solutions and share them with all of our which will satisfy the needs and stakeholders.
Anadolu Hayat Emeklilik 2020 Annual Report 33 Research and Development
Keeping high-level customer lack of communication effect of the this platform. Projects using machine satisfaction in the foreground at pandemic period. learning and artificial intelligence are all times, Anadolu Hayat Emeklilik being carried out. “Risk Analysis” and “Return Analysis” continued with its projects for reports added to FonMatik ROBO were Robotic Process Automation enhancing the experience rendered put into use on AHE Mobile. (RPA) tools began to be employed to its customers through all channels for business flow automation. and for switching to a dynamic Carried out with the purpose of using Investments in RPA projects are structure that makes the evolving a common, corporate language at intended to be increased in the period customer expectations the focal point all touchpoints with customers, the ahead, which will provide benefits of all its processes. In order to adjust Corporate Language Project has been in a number of areas including more to the new circumstances arising completed, and efforts continued to efficient use of the human resource, from the pandemic and in view of apply the “Brand Personality Guide” to minimization of human errors, the contributions it would lend to customer touchpoints. alleviation of operational workload, digital transformation, developments The AI-based chatbot AHE Assistant ensuring uninterrupted operation, and were completed for online sales of aiming to offer instant and quick decision-making with AI integration. various products. Robotic automation support to Anadolu Hayat Emeklilik developments also gained momentum Necessary infrastructural work customers continued to offer service lately, and efforts for their incorporation has been completed for ensuring and proved to be an application within business processes at a higher continued productive teamwork providing satisfaction with a 95% extent are carried on ceaselessly. while remote working, in line with the response rate. conditions imposed by the pandemic. While concentrating on process The transformation of life insurance optimization within the frame of Work was initiated on test branch, which is the second phase Operational Excellence Project, the automation, software lifecycle of Feniks, the Core Insurance Company kept taking significant quality measurement and integration Transformation Project of Anadolu steps towards enhancing customer of IT architecture with enterprise Hayat Emeklilik continued with the experience as digitalization projects architecture. work on credit-linked life insurance. executed under the “Customer In addition, comprehensive training Experience Program” . activities targeting IT teams were New functions aimed at enhancing carried out. Planning has been made Anadolu Hayat Emeklilik service quality were added to the with regard to integration with all corporate website, in addition to stakeholders that we interact with, carried on with its online sales capability. İşbank taking the lead among them. projects to enhance the Delivering high-level user experience Under the project for Alignment and interfaces designed with fast and with the Personal Data Protection experience delivered the latest technology, the new Mobile Law, significant steps were taken in to customers through Branch went live in April 2020. Our consent customers were offered further ease and information activities addressing all channels and to of use with the capabilities to switch customers and employees, as well to AHE Mobile from İşCep without redesign all of its as in data anonymization, data entering a password and logging in to masking and destruction, whereas processes in a customer- AHE Mobile with their İşCep password. data inventory has been brought to AHE BizBize, the internal digital completion. Efforts for classification oriented manner. communication platform, was and viewing of personal data have launched for use by the sales force been finalized. in an effort to mitigate the effects Big data environment installation was of the obstacles hindering face-to- completed, and structural and non- face communication also reduced the structural data began to be stored on
34 Anadolu Hayat Emeklilik 2020 Annual Report Corporate Governance
Nurşen Coşar - The Winter Transparent, Ethical and Responsible Shots From Life As Seen By Women ‘20 Anadolu Hayat Emeklilik believes that compliance with corporate governance principles is at least as important as its financial performance and that such compliance is of great benefit from the standpoints both of the development of national and international capital markets and of the advancement of our own company’s interests.
Anadolu Hayat Emeklilik 2020 Annual Report 35 Organization Chart
BOARD OF DIRECTORS
Corporate Governance Committee Atty. Med. Şebnem Ergün Kemal Emre Sayar C. Ozan Sezer
Audit Committee Dr. Ahmet D. Erelçin Murat Bolat
Early Detection of Risk Committee Mühibe Elif Germirli Kemal Emre Sayar CEO YILMAZ ERTÜRK
Deputy Chief Executive Deputy Chief Executive Deputy Chief Executive Murat Atalay M. Cengiz Aytekin Tuna Uğun
Coordinator İ. Hakkı Altay
Agencies Communications Funds Management Customer Operations Department Department Department Department
Corporate Sales Enterprise Architecture Marketing Customer Relations Department Department Department and Digital Channels Management Department Human Resources Individual Sales Product Management and Training Department Department Department
District Sales Office and Legal Strategy and Corporate Branch Offices Department Performance - Aegean District Sales Management Office Department - Central Anatolian I. District Sales Office Support Services - Central Anatolian II. and Procurement District Sales Office Department - Çukurova District Sales Office - İstanbul Asian District Sales Office - İstanbul European District Sales Office - Marmara District Sales Office - Mediterranean District Sales Office - North Eastern Anatolia District Sales Office - South Eastern Anatolia District Sales Office - Thrace District Sales Office - Western Black Sea * The activities of the Investor Relations Unit have been reported to Tuna District Sales Office Ugun since 19 January 2015. - TRNC Branch Office
36 Anadolu Hayat Emeklilik 2020 Annual Report Secretariat To The Board Of Directors
Board of Internal Audit M. Selahattin Bayraktaroğlu
Deputy Chief Executive Deputy Chief Executive N. Cem Özcan Tayfun Ceyhun
Change and Project Risk Management and Accounting Management Internal Control Department Department Department
Actuarial and Reinsurance IT Department Department
Legal and Software Development Administrative Department Reporting Department
Anadolu Hayat Emeklilik 2020 Annual Report 37 Board of Directors
Yalçın Sezen Yılmaz Ertürk Chairman of the Board of Director and CEO Directors
Hasan Koçhan Atty. Med. Şebnem Ergün Vice Chairman of the Director (Independent) Board of Directors
Dr. Ahmet D. Erelçin Murat Bolat Director (Independent) Director (Independent)
Z. Mehmet Tuğtan M. Elif Germirli Director Director (Independent)
Ümit Bilik Mesut Dinçer Director Director
Kemal Emre Sayar Director
38 Anadolu Hayat Emeklilik 2020 Annual Report Yalçın Sezen Yılmaz Ertürk After her retirement from the CMB Chairman of the Board of Directors Director and CEO in 2008, she started to provide services on her specialized areas such Yalçın Sezen graduated from Yılmaz Ertürk received his bachelor’s as Capital Markets Law, Corporate the Political Sciences and Public degree in economics from the Faculty Law, M&A and Corporate Finance to Administration Department of the of Economics at İstanbul University publicly traded companies/holdings, Middle East Technical University, in 1985 and his master’s degree in companies who intend to go public, Faculty of Economics and Economics from the same university, Capital Market Institutions, individual Administrative Sciences. He started Institute of Social Sciences in 1988. He and institutional investors as a Legal his career on the Board of Inspectors started his banking career at İşbank as Consultant and Attorney-at-Law. She of İşbank in 1987. After serving in an Assistant Specialist in the Economic was registered in the mediators list of managerial positions in various units Research Division in August 1987. He the Ministry of Justice in 2017. She has of İşbank from 1998, he was promoted was appointed to İşbank’s Treasury Advanced Capital Markets Activities to Deputy Chief Executive on 13 April Department as an Assistant Specialist License, Corporate Governance Rating 2011, in which role he is responsible for in October 1990. He became the License, Real Estate Appraiser License, the Retail Banking Business Unit. He Head of Economic Research Division Derivatives License and Credit Rating has been elected a Board Director of of İşbank in March 2003, Head of License. She has served as a board Anadolu Hayat Emeklilik on 21 March International Financial Institutions member of Turkish Capital Markets 2019. Division in October 2006, and Manager Association for two periods. She of Kozyatağı Corporate Branch in March Hasan Koçhan was a member of the Advisory Board 2011. Yılmaz Ertürk was promoted Vice Chairman of the Board of Directors during the establishment phase of to Deputy Chief Executive on 30 İstanbul Arbitration Center. She is an Hasan Koçhan graduated from Ankara January 2013. He was responsible for independent board member of Gimat Academy of Economic and Commercial International Financial Institutions and Real Estate Investment Company Sciences, Banking Insurance Trade Economic Research between 2013- Inc. She has been elected as a Board Institution of Higher Education, 2017, and Capital Markets and Private Director of Anadolu Hayat Emeklilik on Banking Department. Beginning his Banking departments between 2017- 26 March 2018. career at İşbank as an Officer in the 2019. He took seats as an auditor and Maçka/Trabzon Branch in 1984, Mr. a member of the board of directors Dr. Ahmet D. Erelçin Koçhan was appointed to Bayburt of many companies within İşbank. He Director (Independent) Branch as an Assistant Section Head served as the chairman of the board Dr. Erelçin received his B.A. degree and served in the same position at of directors of İş Kültür Yayınları A.Ş., in Business Administration at the Yomra/Trabzon, Bulancak/Giresun and İşbank AG and A&T Bank A.Ş. He has University of Istanbul, M.Sc. degree Trabzon Branches. He served as a Sub- been named the CEO of Anadolu Hayat in Accounting & Finance at LSE and Manager and Assistant Manager at Emeklilik on 26 August 2019. his Ph.D. in Business & Economics at the Trabzon Branch. He was appointed Atty. Med. Şebnem Ergün Lehigh University. Having 28 years as a Branch Manager to Park/Trabzon, Director (Independent) of experience in Turkish Capital Ordu, Gaziantep and İzmit/Kocaeli Markets, Dr. Erelçin started his career Branches. He was elected to İşbank’s Şebnem Ergün received her law degree in banking at İktisat Bankası. Dr. Erelçin Board of Directors on 3 November in 1986 at Ankara University Faculty later worked at Treasury, Investment 2008, 31 March 2011 and 28 March of Law. After completing her law Banking and Asset Management 2014. He served as Member of the internship, she started her professional departments of Garanti Bankası, Credit Committee from 30 May 2011, carrier as an Assistant Legal Expert at Interbank and Finansbank. After and retired when he was a member of the Capital Markets Board of Turkey appointed to Demir Yatırım General İşbank’s Board of Directors on 31 March (CMB) in 1988. Later she was promoted Manager in 1997, Dr. Erelçin was 2017. He has been elected a Board to Legal Expert and Senior Legal Expert appointed as the General Manager Director of Anadolu Hayat Emeklilik on posts, respectively and also served of HSBC Investments in 2000 and 28 April 2017 and Vice Chairman of the as the Deputy Head of the Corporate served as a member of the Executive Board on 26 March 2018. Finance Department for three years. Committee of HSBC Turkey in charge of
Anadolu Hayat Emeklilik 2020 Annual Report 39 Board of Directors
its Brokerage and Asset Management Estate Finance for CEEMEA region. Securities and New Rye Securities in subsidiaries. In 2008, Dr. Erelçin From 2008 to 2018, she worked trading and transfer administration established the Turkish desk of HSBC for Tahincioğlu Holding as a Deputy of private interests (i.e. secondary of Principal Investments and invested Managing Director, CFO, and CEO private funds and shares of private in Turkish companies utilizing HSBC’s respectively. She works as an Auditor companies). He currently advises equity. During this period, Dr. Erelçin at the Shopping Centers and Investors companies and institutions resident represented HSBC at the boards of its Association. Elif Germirli has been in the United States and Turkey. Mr. portfolio companies, Havaş and TGS. elected as a Board Director of Anadolu Bolat holds various certificates and After ending his active professional Hayat Emeklilik on 21 March 2019. documents from institutions such as career in banking, Dr. Erelçin started the Chicago Board of Option Trading Murat Bolat lecturing in finance courses at the (CBOT) and The Financial Industry Director (Independent) Graduate Business Schools of Koç and Regulatory Authority (FINRA). Özyeğin Universities. Dr. Erelçin sits at He holds a bachelor’s degree from Kemal Emre Sayar the Board of Directors of Darüşşafaka Ankara University, Faculty of Political Director Society and its various commissions. Sciences, Department of Economics He is Advisory Board Member at Lycian and a postgraduate degree from Exeter Kemal Emre Sayar received his Capital. He has been elected a Board University, Finance and Investment bachelor’s degree in industrial Director of Anadolu Hayat Emeklilik on Department in England. Murat Bolat engineering from the Middle East 26 March 2018. has 30 years of experience in the Technical University. He then got an financial markets. He worked as a MS in Information Technologies in M. Elif Germirli manager in Borsa Istanbul between Management from Sabancı University Director (Independent) 1990-2013. He served as a consultant and an MA in Economics and Finance M. Elif Germirli graduated from the and board member in the institutions from Boğaziçi University. He started Chemical Engineering Department of Eurasian and Eastern European his career as an Assistant Inspector of Boğaziçi University in 1990 and country exchanges. Within the on İşbank’s Board of Auditors in received her MBA in finance from scope of ICMA and IIFM joint working 1999, where he subsequently held Columbia University in the USA. She committee membership, he worked in managerial positions in various units has held various positions in a number the Sukuk issue and secondary market of the Bank. Currently he serves as of departments at Citibank İstanbul project in Gulf countries, London and a Unit Manager in the Subsidiaries including the capital markets and Brussels. He continued his carrier in Department of İşbank. Having held corporate finance departments until Private Equity Fund business after seats in the boards of directors of 2000. After working as a Director in the his resignation from Borsa Istanbul. various group companies, Mr. Sayar Global Securitized Markets at Citigroup Within the scope of Private Equity has been elected as a Board Director in London between 2000 and 2007, Funds secondary transactions in of Anadolu Hayat Emeklilik on 27 the last position Elif Germirli held with the US and European markets, he November 2015. the Citigroup was as a Director of Real contracted with NYPPEX, Rainmaker
40 Anadolu Hayat Emeklilik 2020 Annual Report Mesut Dinçer Ümit Bilik Director Director Mesut Dinçer received his bachelor’s Ümit Bilik received his bachelor’s degree in international relations from degree in Electrical and Electronics Uludağ University. He started his Engineering from Middle East Technical career at İşbank in 1999, where he University. He also holds a master’s held managerial positions in various degree in business from Gazi University units. He was promoted to Division Institute of Social Sciences. He started Manager in the Private Banking Sales his career as Software Specialist in the Department of İşbank on 26 August Software Development Department 2019. Mesut Dinçer has been elected at İşbank in 1995. After performing as a Board Director of Anadolu Hayat management duties in various Emeklilik on 13 September 2019. divisions of İşbank, he was appointed as Director of Financial Applications Z. Mehmet Tuğtan to Softtech, the technology company Director of İşbank, in 2011. Bilik, who was Zekai Mehmet Tuğtan, who graduated promoted to Deputy CEO position at from International Relations Softtech in 2013, was appointed as Department at Ankara University Division Manager to İşbank’s Data Faculty of Political Science, started Management Division on 26 August his career as an Assistant Inspector 2020. Bilik has been elected a Board at Türkiye İş Bankası A.Ş. in 2001. Director of Anadolu Hayat Emeklilik on Zekai Mehmet Tuğtan who worked as 31 August 2020. the Assistant Manager in the Retail Banking Sales Division in 2009 and as the Unit Manager in the same Division in 2013, was appointed as the Branch Manager of the Çarşı- Bakırköy Branch in 2017. Mr. Tuğtan, still working as the Retail Banking Product Division Manager, was elected to the membership of Anadolu Hayat Emeklilik Board of Directors as of 23 March 2020.
* Current composition effective from 1 September 2020. Our Board Member Mr. Serdar Yılmaz left his position in our company as of 31 August 2020. It was decided to elect Ümit Bilik to serve from 31 August 2020 until the first meeting of the General Assembly.
Anadolu Hayat Emeklilik 2020 Annual Report 41 Declarations of Independence by Independent Members of the Board of Directors
İstanbul, 13 March 2020 İstanbul, 13 March 2020 To: Anadolu Hayat Emeklilik A.Ş. To: Anadolu Hayat Emeklilik A.Ş. Corporate Governance Committee Corporate Governance Committee I hereby declare that I satisfy the criteria of independence I hereby declare that I satisfy the criteria of independence pursuant to applicable legislation within the framework pursuant to applicable legislation within the framework of the criteria covered in the Communiqué on the of the criteria covered in the Communiqué on the Determination and Implementation of Corporate Governance Determination and Implementation of Corporate Governance Principles, and submit my candidacy as an independent Principles, and submit my candidacy as an independent member of the Board of Directors for your consideration at member of the Board of Directors for your consideration at the General Assembly to be convened in March 2020. the General Assembly to be convened in March 2020. Yours sincerely, Yours sincerely,
Atty. Med. Şebnem Ergün Dr. Ahmet D.Erelçin
İstanbul, 13 March 2020 İstanbul, 13 March 2020 To: Anadolu Hayat Emeklilik A.Ş. To: Anadolu Hayat Emeklilik A.Ş. Corporate Governance Committee Corporate Governance Committee I hereby declare that I satisfy the criteria of independence I hereby declare that I satisfy the criteria of independence pursuant to applicable legislation within the framework pursuant to applicable legislation within the framework of the criteria covered in the Communiqué on the of the criteria covered in the Communiqué on the Determination and Implementation of Corporate Governance Determination and Implementation of Corporate Governance Principles, and submit my candidacy as an independent Principles, and submit my candidacy as an independent member of the Board of Directors for your consideration at member of the Board of Directors for your consideration at the General Assembly to be convened in March 2020. the General Assembly to be convened in March 2020. Yours sincerely, Yours sincerely,
M. Elif Germirli Murat Bolat
42 Anadolu Hayat Emeklilik 2020 Annual Report Outside Positions Held by the Board of Directors and Executives
Name Position in the Company Outside Positions Held Yalçın Sezen Chairman of the Board of Deputy Chief Executive Officer at İşbank Directors Chairman of the Board of Directors at Erişim Müşteri Hizmetleri A.Ş. Board Director at Softtech Ventures Teknoloji A.Ş. Chairman of the Board of Directors at Topkapı Danışmanlık Elektronik Hiz. Paz. ve Tic. A.Ş. Hasan Koçhan Vice Chairman of the Retired Board of Directors Yılmaz Ertürk Board Director and CEO Member of the Board of Directors at Pension Monitoring Center Member of Life Insurance and Private Pension Management Committee at the Insurance Association of Turkey Atty. Med. Şebnem Independent Board Founder Attorney-at-Law/Mediator at ERGÜN Law Office Ergün Director Independent Member of the Board of Directors at Gimat GYO A.Ş. Ahmet D. Erelçin Independent Board Member of the Board of Directors at Darüşşafaka Society Director Lecturer in the Graduate School of Business / Finance at Koç University Lecturer in the Graduate School of Business / Finance at Özyeğin University Advisory Board Member at Lycian Capital Murat Bolat Independent Board Managing Partner at Turpem Finansal Yönetim Ltd. Şirketi Director Partner (shareholder) at Taze Süt ve Süt Ürünleri Sanayi ve Ticaret A.Ş. Mühibe Elif Germirli Independent Board Auditor at Shopping Centers and Investors Association Board member Director at Germirli Turizm ve Ticaret A.Ş. Management Consultant Mesut Dinçer Board Director Division Head at İşbank
Kemal Emre Sayar Board Director Unit Manager at İşbank Member of the Board of Directors at Anadolu Sigorta Member of the Board of Directors at Milli Reasürans T.A.Ş. Member of the Board of Directors at Trakya Yatırım Holding A.Ş. Member of the Board of Directors at Softtech Yazılım Teknolojileri Araştırma Geliştirme ve Pazarlama Ticaret A.Ş. Chairman of the Board of Directors at GullsEye Lojistik Teknolojileri A.Ş. Chairman of the Board of Directors at Livewell Giyilebilir Sağlık Ürün Hizmet ve Teknolojileri San. ve Tic. A.Ş. Board member at Topkapı Danışmanlık Elektronik Hizmetler Pazarlama ve Ticaret A.Ş. Board member at Kasaba Gayrimenkul İnşaat Taahhüt ve Ticaret A.Ş. Board member at Batı Karadeniz Elektrik Dağıtım ve Ticaret A.Ş. Z. Mehmet Tuğtan Board Director Division Head at İşbank Auditor at Turkey İş Bankası A.Ş. Members Retirement Fund Foundation Ümit Bilik Board Director Division Head at İşbank
Anadolu Hayat Emeklilik 2020 Annual Report 43 Senior Management
Executive Board
Yılmaz Ertürk Murat Atalay Tuna Uğun Director and CEO Deputy Chief Executive Officer Deputy Chief Executive Officer Yılmaz Ertürk received his bachelor’s He holds a degree in statistics from the He graduated from the Economics degree in economics from the Faculty of Faculty of Science at Hacettepe University. Department (English) at Marmara Economics at İstanbul University in 1985 He joined İşbank in 1996 as an Assistant University. He joined Anadolu Hayat and his master’s degree in Economics from Specialist and functioned as a Specialist Emeklilik in 1994 as a Fund Management the same university, Institute of Social and Manager in various Branch and Head Assistant Specialist in the Pension Sciences in 1988. He started his banking Office divisions. He was a Board Director Accounting and Finance Department, career at İşbank as an Assistant Specialist representing İşbank at Anadolu Hayat where he was promoted to II. Manager in in the Economic Research Division in Emeklilik from 24 May 2011 until 31 October the Funds Management Department in August 1987. He was appointed to İşbank’s 2014. Serving as the Head of Retail Banking 2000. Having started to work in the Private Treasury Department as an Assistant Marketing Division of İşbank since 2011, Pension Department, he promoted to the Specialist in October 1990. He became the Mr. Atalay has been appointed as Deputy position of Assistant Manager and Manager Head of Economic Research Division of Chief Executive Officer of Anadolu Hayat in the same department in 2004 and İşbank in March 2003, Head of International Emeklilik on 1 November 2014. 2007, respectively. Having served as the Financial Institutions Division in October Marketing Manager between 2008-2014, 2006, and Manager of Kozyatağı Corporate Mr. Tuna Uğun has been appointed to the Branch in March 2011. Yılmaz Ertürk was position of Deputy Chief Executive on 29 promoted to Deputy Chief Executive on December 2014. 30 January 2013. He was responsible for International Financial Institutions and Economic Research between 2013-2017, and Capital Markets and Private Banking departments between 2017-2019. He took seats as an auditor and a member of the board of directors of many companies within İşbank. He served as the chairman of the board of directors of İş Kültür Yayınları A.Ş., İşbank AG and A&T Bank A.Ş. He has been named the CEO of Anadolu Hayat Emeklilik on 26 August 2019.
Coordinator
İsmail Hakkı Altay Coordinator He got his degree in economics from the Faculty of Economic and Administrative Sciences at Hacettepe University. He began his career as an Assistant Inspector at Anadolu Hayat Emeklilik on 4 August 1997. He was appointed as Inspector (grade 2) at Marmara District Office on 5 April 2004 and as Assistant Manager at the same branch on 1 April 2006. Having been assigned to the Customer Relations and Operations Department on 1 May 2007 and as Manager on 1 April 2009, Mr. Altay has been serving as Coordinator since 9 October 2013.
44 Anadolu Hayat Emeklilik 2020 Annual Report Mustafa Cengiz Aytekin N. Cem Özcan Tayfun Ceyhun Deputy Chief Executive Officer Deputy Chief Executive Officer Deputy Chief Executive Officer He holds a degree in law from İstanbul He received his bachelor’s degree in He received his bachelor’s degree in University. He joined Anadolu Hayat economics from Ankara University in 1996. Mathematics from Middle East Technical Emeklilik as a lawyer in 1995. He was He started his working career as Assistant University in 1998. He started his working promoted to the position of Assistant Inspector at İşbank in 1997. N. Cem Özcan, career as Software Specialist at İşbank Legal Counsel in 1999, Legal Counsel in who served as Assistant Accounting in 1999. He served as Project Specialist, 2004, and Chief Legal Counsel in 2014. Manager between 2005-2008 and as Assistant Project Manager and Project Mr. M. Cengiz Aytekin has been appointed Accounting Manager between 2008-2020 Manager at the Software Development as Deputy Chief Executive Officer on 29 at Anadolu Hayat Emeklilik, has been Department. He was promoted to Assistant December 2014. appointed as Deputy Chief Executive on 27 Manager position at the mentioned July 2020. department in 2010. In 2011, he was appointed to Softtech as Manager and then promoted to Director position in the same year. Mr. Ceyhun was appointed as Deputy Chief Executive Officer at Anadolu Hayat Emeklilik on 28 September 2020.
Managers Responsible for Internal Systems
Mehmet Selahattin Bayraktaroğlu Nilgün Kılıçuzar Head of the Board of Internal Audit Risk Management and Internal Control Department He holds a degree in Public Administration from the Middle East She holds a degree in Business Administration from the Middle Technical University, Faculty of Economic and Administrative East Technical University, Faculty of Economic and Administrative Sciences. He started working as an Assistant Internal Auditor at Sciences. She started her career at Anadolu Hayat Sigorta as an Anadolu Hayat Sigorta in 1994. At the İstanbul District Office 2, Assistant Specialist in 1990. After functioning as a Specialist and he functioned as an Assistant Manager between 2001-2006 and a Manager in various divisions, Ms. Kılıçuzar has been serving then as a Manager from 2006 onwards. Mr. Bayraktaroğlu has as a Manager at the Risk Management and Internal Control been appointed as the Head of the Board of Internal Audit on 12 Department since 2011. She also serves as a member of the June 2007, a position he still holds. Anti-Money Laundering/Combating the Financing of Terrorism Committee of the Insurance Association of Turkey.
Anadolu Hayat Emeklilik 2020 Annual Report 45 İşbank
İşbank, the first national bank of İşbank’s superior scale and its The financial participations operating Turkish Republic, was founded on competence of service delivery are in a variety of business lines from 26 August 1924 at the initiative of defined by its excellent and extensive investment banking to portfolio Atatürk, consequent to the decisions network that consists of: management and from leasing to made in the First Economy Congress in private pension make İşbank unique. • 23,518 employees İzmir. İşbank, which has taken a leading Having crowned its trusted company stance at every stage of economic and • 1,205 domestic and 22 international image with its achievements in 2020, commercial life, assumed various roles branches İşbank continued to build on product in a number of fields, mainly in industry • 6,521 ATMs and service diversity offered through and trade, and made significant digital channels, and to consistently contributions through 96 years since Having pioneered the establishment augment its transaction volumes. its foundation. and growth of many new industries in the country with its corporate identity As of 2020 year-end, 34.83% of As the largest private bank of Turkey in championing innovation in every İşbank’s shares are on free float and terms of total assets, loans, deposits aspect, İşbank controls a portfolio of they are publicly traded on Borsa and shareholders’ equity, İşbank equity stakes in leading companies İstanbul. provides its customers quick access to that are active in a wide range of financial services through its extensive endeavors. branch network and alternative distribution channels.
46 Anadolu Hayat Emeklilik 2020 Annual Report Changes in the Legislation during the Fiscal Year
Law published in the Official Gazette The Regulation on Identity Information dated 4 January 2020. The Regulation Sharing System has been published in Law no. 7262 on the Prevention established the Commercial Message the Official Gazette 21 August 2020. of the Financing of Proliferation of Management System (İYS), set out The Regulation sets out the principles Weapons of Mass Destruction has the principles and procedures for the and procedures for online sharing been published in the Official Gazette operation of the system, and imposed of the data stored on the central dated 31 December 2020. The Law the obligation to have databases of database of the Ministry of Interior set out the principles and procedures consent recorded on the system. Directorate General of Civil Registration related to the implementation of and Citizenship with recipient the UN Security Council decisions The Regulation on Provision of institutions. for implementation of sanctions Information in Insurance Contracts for preventing the financing of has been published in the Official The Regulation on the Organization proliferation of weapons of mass Gazette dated 14 February 2020. of the Insurance and Private Pension destruction. The Regulation allows information Regulation and Supervision Agency provision also via a “structure to has been published in the Official Law no. 7226 Amending Certain Laws be established over the Insurance Gazette dated 16 October 2020. The has been published in the Official Information and Monitoring Center or Regulation set out the organizational Gazette dated 26 March 2020. The e-government” in addition to electronic structure of the Insurance and Private Law introduces the possibility to pay communication tools. Pension Regulation and Supervision contributions in a foreign currency Agency, duties and powers of service for Turkish citizens who do not have The Regulation Amending the units, and operating principles and a legal domicile in Turkey and those Regulation on Activities to be procedures. individuals falling under the scope of Considered within the Scope of Article 28 of the Turkish Citizenship Insurance Business, Insurance Decree Law no. 5901. Contracts Made to the Benefit of Decree on Determining the Rate of Consumers and Distance Insurance Regulation State Contribution for Foreign Currency Contracts has been published in the Contributions to the Private Pension The Regulation on Insurance and Official Gazette dated 9 May 2020. System (Decree No. 2477) has been Private Pension Activities within the The Regulation sets out the principles published in the Official Gazette dated Framework of Participation Principles and procedures for determining the 24 April 2020. The Decree set the has been published in the Official borders of insurance operation and rate of state contribution for foreign Gazette dated 19 December 2020. of businesses falling outside that currency contributions at 10%. The Regulation is intended to set scope, insurance contracts made to out the principles and procedures the benefit of consumers, insurance for the execution of insurance and contracts concluded by parties without private pension activities within the getting together physically, and framework of participation principles. insurance policies that can be provided in connection with the goods and The Regulation Amending services supplied by establishments, the Regulation on Commercial whose principal business is not Communication and Commercial insurance brokerage. Electronic Messages has been
Anadolu Hayat Emeklilik 2020 Annual Report 47 Other Material Disclosures Concerning the Reporting Period
Disclosures on the Special Audit Penalties and Sanctions against the Financial Rights and Public Audit Conducted During Company and Board Directors on In the fiscal year ended 31 December the Reporting Period account of Practices Contradicting 2020, wages and similar benefits with the Provisions of Legislation During 2020, T.R. Prime Ministry provided to the chairman and the of Treasury and Finance Insurance There were no penalties and sanctions members of the Board of Directors Supervision Board conducted a private of material nature imposed on account amounted to TL 2,074,200 and to pension procedures and regulatory of practices contradicting with the senior executives such as the CEO compliance audit. provisions of legislation in 2020. and Deputy Chief Executive Officers amounted to TL 5,310,795. The semi-annual independent Grants and Donations, Expenses audits of the Company and annual Incurred within the Frame of Social Other Means information systems and work Responsibility during the Reporting Under other means including, among processes audit were performed by Period others, business trip expenses, Güney Bağımsız Denetim ve Serbest In 2020, the Company’s grants and entertainment expenses and insurance Muhasebeci Mali Müşavirlik A.Ş. donations totaled TL 433,700 to premium payments, the Company The Company’s annual income and foundations extending support to provided means in kind and in cash corporate tax declarations and reports education. worth TL 2,451 to the Chairman and attached thereto were audited and Board Directors, and TL 1,174,866 to Information on General Assembly attested by DRT Yeminli Mali Müşavirlik senior executives such as the CEO and ve Bağımsız Denetim A.Ş. All of the resolutions adopted at the Deputy Chief Executive Officers. Ordinary General Assembly meeting Changes to the Articles of In addition, an insurance coverage of held on 23 March 2020 have been Association During the Reporting TL 8,775,696 in total has been defined realized. Period for senior executives within the frame Rights Provided to Board Directors of term life insurance. None and Senior Executives Major Lawsuits Brought against the Financial rights and other benefits Company provided to the Board Directors and There are no major lawsuits brought senior executives during 2020 are against the Company during 2020, presented below. which might have a potential impact on the Company’s financial standing and activities.
48 Anadolu Hayat Emeklilik 2020 Annual Report Transactions Executed with the Risk Group in which the Company is Included
During the reporting period, the Company collected TL 37,488,913 (31 December 2019: TL 32,523,391) employer contribution for private pension plans from related parties, and accrued TL 1,335,055 employer premium for life insurance (31 December 2019: TL 714,119). Other material transactions executed with related parties in the fiscal years that ended on 31 December 2020 and 31 December 2019 are presented below: 31 December 31 December 2020 (TL) 2019 (TL) Milli Reasürans TAŞ - premiums written, ceded 2,338,593 2,267,611 Premiums written, ceded 2,338,593 2,267,611
Milli Reasürans TAŞ - commission income from reinsurers 238,456 238,523 Commission income from reinsurers 238,456 238,523
Türkiye İş Bankası AŞ - interest income from deposits 18,156,948 15,097,349 Türkiye İş Bankası AŞ - rent income - 5,978 Türkiye İş Bankası AŞ - interest income from reverse repo 6,460,389 10,981,521 İş Yatırım Menkul Değerler AŞ - interest income from reverse repo 382 9,477 Investment income 24,617,719 26,094,325
İş Portföy Yönetimi AŞ - investment consultancy fee 2,832,000 2,129,310 İş Yatırım Menkul Değerler A.Ş. - settlement and custody expense 7,320 617 Türkiye İş Bankası AŞ - settlement and custody expense 24,867 17,158 Investment expense 2,864,187 2,147,085
Türkiye İş Bankası AŞ - commission of policy production 274,143,668 216,000,441 İş Portföy Yönetimi AŞ - portfolio management fee of pension funds(*) - 16,373,564 İş Merkezleri Yönetim ve İşletim A.Ş. - building administrative expense 5,305,340 5,039,270 İş Gayrimenkul Yatırım Ortaklığı AŞ - operating leases interest expense (TFRS 16 6,373,845 5,848,910 effect) İş Gayrimenkul Yatırım Ortaklığı A.Ş. - other expenses 231,928 894,652 İş-Net Elektronik Bilgi Üretim Dağ. Tic. ve İletişim A.Ş. - communication expense 3,097,389 5,272,466 Erişim Müşteri Hizmetleri A.Ş. - call center service expense 16,676,654 18,073,491 Softtech Yazılım Teknoloji Araştırma Geliştirme ve Pazarlama Ticaret A.Ş - software 210,727 49,251 support expense Türkiye İş Bankası AŞ - commission of premium collection and banking services 2,144,865 1,811,339 Türkiye Iş Bankası AŞ - fund operation service expense 3,443,889 2,694,073 Türkiye Iş Bankası AŞ - operating leases interest expense (TFRS 16 effect) 278,502 284,852 Türkiye Iş Bankası AŞ - data storage expenses 1,388,224 387,161 Türkiye Iş Bankası AŞ - other expenses 16,433 7,823 İş Portföy Yönetimi A.Ş. Real Estate Investment Fund - operating leases interest 2,436,959 2,202,493 expense (TFRS 16 effect) Anadolu Anonim Türk Sigorta Şirketi - premium paid 7,637,204 4,470,899 Anadolu Anonim Türk Sigorta Şirketi - operating leases interest expense 120,726 212,104 Anadolu Anonim Türk Sigorta Şirketi - other expenses 50,898 87,066 Other expenses 323,557,251 279,709,855
(*) The fund management fee made for management and representation of the fund and for expense deduction made for hardware, software, personnel and accounting services allocated to the fund was recognised in the “Fund management income” under technical income and the share of portfolio manager was recognised in the “Fund management expense” under technical expenses before 31.12.2019. After 31.12.2019 the share belonging to portfolio manager is paid directly by the related fund and is not recognised in the Company’s “Fund management expense” under technical expenses.
Anadolu Hayat Emeklilik 2020 Annual Report 49 Transactions Executed with the Risk Group in Which the Company Is Included
The related party balances as at 31 December 2020 and 31 December 2019 are as follows 31 December 2020 31 December 2019 (TL) (TL) Türkiye İş Bankası AŞ - receivables from credit card collections 211,809,048 170,623,012 Cash and cash equivalents 211,809,048 170,623,012
Türkiye İş Bankası AŞ - bank deposits 86,871,301 217,710,555 Cash at banks 86,871,301 217,710,555
Türkiye İş Bankası AŞ - reverse repo 41,868,907 52,714,137 Reverse repo 41,868,907 52,714,137
Anadolu Anonim Türk Sigorta Şirketi - premium receivable - 68 Receivables from main operations - 68
Türkiye İş Bankası AŞ - commission payables 20,519,315 32,469,117 Milli Reasürans TAŞ - premium payables 954,220 1,289,981 Payable from main operations 21,473,535 33,759,098
Türkiye İş Bankası A.Ş. - settlement and custody commission 243 33 Türkiye İş Bankası A.Ş. - operating leases payables - 3,346,088 Anadolu Anonim Türk Sigorta Şirketi - operating leases payables 1,284,134 1,296,000 Anadolu Anonim Türk Sigorta Şirketi - premium payables 96,340 60,849 Payables to shareholders 1,380,717 4,702,970
İş Portföy Yönetimi A.Ş. - 3,989,219 İş Merkezleri Yönetim ve İşletim A.Ş. 280,331 285,388 İş Gayrimenkul Yatırım Ortaklığı A.Ş. (30) 43,583 İş Gayrimenkul Yatırım Ortaklığı A.Ş. - operating leases payables 64,891,957 66,505,809 İş Portföy Yönetimi A.Ş. Real Estate Investment Fund - operating leases 23,904,396 23,348,191 payables İş-Net Elektronik Bilgi Üretim Dağıtım Ticaret ve İletişim A.Ş. 96,256 92,793 Erişim Müşteri Hizmetleri A.Ş. 1,479,960 1,468,694 Softtech Yazılım Teknoloji Araştırma Geliştirme ve Pazarlama Ticaret A.Ş. 7,699 - Other payables 90,660,569 95,733,677
The conclusion of the Associated Company Report 2020, which is prepared pursuant to Article 199 of the Turkish Commercial Code no 6102, is copied below: “Between our Company and our controlling shareholder İşbank or other Group Companies affiliated to İşbank, there is: No transfer of receivables, payables or assets, No legal transaction creating liability such as providing suretyship, guarantee or endorsement, No legal transaction that might result in transfer of profit. All legal transactions with the controlling company and group companies affiliated thereto during the 2020 operating year have been carried out on an arm’s length basis, according to the terms and conditions known to us, and necessary counter- performances have been provided, and the Company did not register loss.”
50 Anadolu Hayat Emeklilik 2020 Annual Report An Assessment of Independent Audit, Internal Control System and Internal Audit Activities by the Board of Directors
Independent Auditor The Board of Internal Audit To support their professional development and to expand their Periodic financial reports are prepared The Board of Internal Audit carries out professional knowledge, the Company within the framework of current its activities within the frame of the facilitated participation of the laws and regulations and insurance Regulation on the Internal Systems of members of the Board of Internal accounting standards in such a Insurance, Reinsurance and Pension Audit in various training programs. way as to show the Company’s true Companies that was published in the Revisions and updates are made as financial standing. Such reports are Official Gazette issue 26913 dated necessary to ensure alignment of the independently audited and publicly 21 June 2008. The Board reports auditing activities and the resulting disclosed as prescribed by law. directly to the Board of Directors audit reports with the “International and is organized independently in The Company’s independent auditor Standards for the Professional Practice administrative terms. is rotated at regular intervals. In this of Internal Auditing” and current respect, the Company abides by the The Internal Audit Plan and Schedule conditions. provisions of the “Regulation on of the Board of Internal Audit is The Board of Internal Audit has made Independent Auditing in Insurance, developed within the frame of the it a mission to contribute value to the Reinsurance and Pension Companies” Regulation on the Internal Systems of Company’s activities, while increasing dated 12 July 2008 and numbered Insurance, Reinsurance and Pension efficiency and productivity, as well as 26934. Companies, and enters into force upon to provide independent and objective its approval by the Board of Directors. External audits at our Company are assurance to the Company’s Senior In this context, the Board of Internal performed on an entirely independent Management that the Company’s Audit reports on all Headquarters basis and its external auditors operate activities are carried out in accordance units, district sales offices and completely within the framework of with the Law, other applicable branches at least once a year, and truthfulness, professional honesty, legislation, internal strategies and on all agencies at least once in every and candor and without any policies. In addition, the Board carries three years. In addition to these involvement in a conflict of interest on with its activities to train and gear auditing activities, investigations and whatsoever. No payments are made to up the managers for the Company reviews are conducted, as well as any independent auditor in our employ in the long run through investments process audits. other than such fees as are reasonable made into the human resource. in light of existing market conditions. The Board of Internal Audit is staffed by 3 inspectors and 12 assistant The factors that strengthen the inspectors. In 2020, 20 headquarters independence of firms from which units, 12 district sales offices and 1 we obtain independent auditing branch adding up to 33 units in total services are: the existence of an Audit were audited. In addition, 3 process Committee, the possession of an audit and 7 investigation reports were effective accounting and internal audit issued. Auditing of agencies continued system, and adherence to rules of during 2020, and 110 agencies were ethics that give importance to truthful audited in this frame. Reports resulting public disclosure of company-related from audits have been submitted to matters. the Board of Directors.
Anadolu Hayat Emeklilik 2020 Annual Report 51 An Assessment of Independent Audit, Internal Control System and Internal Audit Activities by the Board of Directors
Risk Management and Internal The system is designed to encompass The control system aimed at Control Department the rules, legislation, methods, the activities carried out by the procedures and guidelines that all Company units basically consists Risk Management and Internal Control employees at any level are responsible of the following: compliance and Department conducts its activities for fully, accurately and efficiently conformity controls, tangible asset within the frame of the “Regulation abiding by and implementing, as well controls, review of adherence to limits on the Internal Systems of Insurance, as risk mitigating systems, facilities, set by the Company and tracking Reinsurance and Pension Companies” and all similar elements. In this limit overruns, controls pertaining published in the Official Gazette framework, operational activities to the approval and authorization issue 26913 dated 21 June 2008. The and risk elements at the Company system, inquiry and reconciliation Department’s activities are led and are evaluated and priority is given to controls, controls for information and conducted directly by the CEO. The compliance efforts. New products communication systems, controls for Board Director responsible for Internal and new implementations put on the the financial reporting systems, and Systems is also responsible for the market are reviewed, and subjected controls for communication channels. establishment of the Department, to risk assessments and compliance ensuring its operation, adequacy Reports covering internal control checks. and effectiveness, monitoring and activities and risk monitoring, coordination towards the Board of Efforts are spent to make sure that the assessment and management Directors. The Department regularly internal control system that make up activities is submitted to the Board of reports all findings resulting from the the control functions of the Company Directors at regular intervals. investigation of risks independently and encompasses all the units is kept The Department had 8 members from executive functions to the Board in compliance with the legislation during 2020. The employees were Director responsible for Internal and standards, and efficient with provided with training opportunities Systems, to the CEO and the Board of respect to its structure and operation. to enhance their professional Directors. The basic strategy turned towards development and expand their these goals is to conduct internal It is intended to have a control system knowledge. control activities independently, which enables due and effective productively and effectively based on management, mitigation and control a risk-focused approach and within of the risks involved in the Company’s the frame of applicable legislation and activities and which is structured to internationally accepted principles and cover all operations of the Company. standards.
52 Anadolu Hayat Emeklilik 2020 Annual Report (Convenience translation of a report originally issued in Turkish) Independent Auditor’s Report on the Annual Report of the Board of Directors
Güney Bağımsız Denetim ve Tel: +90 212 315 3000 SMMM A.Ş. Fax: +90 212 230 8291 Eski Büyükdere Cad. Orjin Maslak İş ey.com Merkezi No: 27 Kat: 2-3-4 Ticaret Sicil No: 479920 34485 Sarıyer Mersis No: 0-4350-3032-6000017 İstanbul - Turkey
To the Shareholders of Anadolu Hayat Emeklilik Anonim Şirketi
1) Opinion
We have audited the annual report of Anadolu Hayat Emeklilik Anonim Şirketi (“the Company) for the period of January 1 – December 31, 2020.
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 28, 2021 on the full set consolidated and unconsolidated financial statements of the Company for the period of January 1 – December 31, 2020.
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.
Anadolu Hayat Emeklilik 2020 Annual Report 53 Independent Auditor’s Report on the Annual Report of the Board of Directors
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 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
Seda Akkuş Tecer, SMMM Partner
February 25, 2021 İstanbul, Turkey
54 Anadolu Hayat Emeklilik 2020 Annual Report Policies About Corporate Governance
Disclosure Policy For public disclosure purposes, our on the Public Disclosure Platform Company makes use of the Public (PDP) and on the Company website. Disclosure Policy General Framework: Disclosure Platform (PDP), Central The related financial statements, Anadolu Hayat Emeklilik (the Company) Registry Agency e-Company, Electronic along with a statement as to their satisfies all kinds of financial data General Meeting System (e-GEM), accuracy and fairness, are signed by and other disclosure and information national/local newspapers, the Turkish the members of the Audit Committee provision requirements as stipulated Trade Registry Gazette (TTRG) and the and the Company managers by the Capital Market Legislation, the Company’s corporate website. responsible for financial management Turkish Commercial Code and other and reporting. In press releases given Authority and Responsibility applicable legislation, and in particular in addition to the financial statements by the Insurance Law, Private Pension The Disclosure Policy has been disclosed on a quarterly basis, the Savings and Investment System Law developed by the Board of Directors. public is informed about the activities and regulations issued thereunder. In At our Company, the Board of in the relevant period, the Company’s doing that, the Company also takes Directors has the authority and position in the market, its overall into consideration the generally the responsibility for developing, financial performance and other accepted accounting principles and monitoring, overseeing and enhancing material matters. Press releases, as corporate governance principles. the public disclosure and information well as related financial statements Within this context, the Company policy. The Investor Relations Unit are published on the website. Our pursues a detailed information and is assigned with the coordination financial statements (Balance Sheet public disclosure policy. of the disclosure function. The and Income Statement) are translated employees in the said unit perform into English at quarterly intervals, The main purpose of the Disclosure these responsibilities in a coordinated and our annual report is translated Policy is to ensure that necessary fashion with the Audit Committee, into English on an annual basis, both information and disclosures apart from Corporate Governance Committee and of which are posted on the Company trade secrets are conveyed equally to the Board of Directors. website. shareholders, investors, employees, customers, creditors, reinsurers and Public Disclosure Activities, Methods The Company makes notifications other related parties in a manner and Tools electronically to the T.R. Prime Ministry that is timely, accurate, complete, Undersecretariat of Treasury on behalf The tools and methods employed for intelligible, interpretable and easily of the public authority on a monthly public disclosure within the frame accessible at low cost. basis, and to the Insurance Association of the Turkish Commercial Code, of Turkey on a quarterly basis. Our Company has embraced an Insurance Legislation, Private Pension active approach with respect to the Legislation, Capital Markets Legislation Material event disclosures required adoption and implementation of and other applicable legislation are to be made under the CMB legislation Corporate Governance principles, and provided below: are announced on PDP within due spends maximum effort to satisfy the time. Material event disclosures are, Quarterly financial statements, requirements of applicable legislation in principle, signed by the managers drawn up in accordance with the and to implement international responsible for financial management legislation published by the T.R. Prime best practices in respect of public and reporting; however, they are Ministry Undersecretariat of Treasury disclosure and information provision. also signed in exceptional cases by and the Capital Markets Board of The Company’s Disclosure Policy the managers in charge of the units Turkey (CMB), the footnotes and that has been developed accordingly concerned with a given topic before explanations in relation to relevant was prepared within the framework being submitted to related authorities. financial statements, and independent mentioned above, approved by the Material event disclosures are also auditor’s reports drawn up at mid-year Board of Directors, and put into announced on the Company website and year-end are published within implementation. the day after the public disclosure at statutorily prescribed periods of time the latest.
Anadolu Hayat Emeklilik 2020 Annual Report 55 Policies About Corporate Governance
In order to guarantee the explanations and made available made in line with the provisions of confidentiality of material events for examination by shareholders, is the applicable legislation relevant to until their disclosure, individuals published on PDP and the corporate the subject. The Company is entitled with access to inside information are website (in Turkish and English), and to take necessary legal action in informed about their responsibilities the hard copy report is available upon the event that the news covered arising from the applicable legislation, request from the Investor Relations constitutes a crime according to Article and a confidentiality article is Unit of our Company. 35 of the Insurance Law and Article incorporated, as and when necessary, 23 of the Private Pension Savings and Regular contacts and meetings in contracts concluded with individuals Investment Law, both of which relate with the media are not envisaged; and organizations which may have to protection of reputation. statements are made via the press access to inside information by and visual media when deemed Information is communicated to reason of providing a certain service necessary or when requests from shareholders and other related to the Company. On the other hand, media representatives are to be parties through teleconferences the Company meticulously observes responded. Press statements to the organized from time to time. These its legal obligation for keeping the printed and visual media can be made teleconferences are coordinated by Company’s and customers’ secrets and by the Chairman of the Board, the CEO the Investor Relations Unit. for not divulging the same to legally or his deputy and other officials to be and explicitly authorized authorities Through domestic and overseas deemed appropriate thereby. as per the Insurance Law no. 5684 investor meetings and roadshows, and the Private Pension Savings and Company-related news featured in the information is conveyed to Investment System Law no. 4632. press and media in Turkey are followed shareholders and other related This obligation applies to the Company up via a professional media-monitoring parties. The CEO, to the extent support services providers and their agency. Within this framework, in case possible, managers responsible employees, as well as the Company’s of a necessity to make a statement for financial management and own employees. within the scope of the legislation reporting and Investor Relations governing public disclosure of material Unit manager participate in these Relevant provisions of applicable events, necessary information is meetings and roadshows carried out legislation and the Articles of gathered from the related units upon by the Investor Relations Unit. When Association are adhered to in which relevant statement is made. deemed necessary, the contact teams announcements and disclosures When making a statement about news mentioned above can be expanded regarding amendments to the Articles and rumors that are featured by the further. of Association, General Assembly press/media and/or the Internet, but meetings, capital increases, dividend Presentations and reports made which do not give rise to the obligation distribution, year-end financial available in investor conferences, to make a material event disclosure statement and footnote notifications. roadshows and press meetings are as per the applicable legislation, the Documents and information related to posted under the Investor Relations method and content of the statement the General Assembly are conveyed sections on the Company’s corporate are determined in view of some factors to the shareholders also via the website in order to provide equal including the nature of the news, the Electronic General Meeting System information simultaneously to all expanse of the audience reached by pursuant to the provisions of the market participants. the press/media organ, and whether Turkish Commercial Code. the news affects the Company’s The Investor Relations Unit The Annual Report is prepared every reputation. In cases when statements provides relevant information and year before the General Assembly are made regarding such news and financial statements in particular to Meeting in accordance with the rumors, in the event that the content shareholders, domestic and foreign requirements under applicable of the statement incorporates an investors and institutions issuing legislation, in a manner to cover element requiring a public disclosure, research reports about our Company the necessary information and a material event disclosure is also via email.
56 Anadolu Hayat Emeklilik 2020 Annual Report Detailed information and data about context, in addition to the members The dividend payment proposals that the Company are posted under the of the Board of Directors, the CEO, the Board of Directors submits to the Investor Relations tab on the corporate Deputy CEOs and Coordinators, the General Assembly of Shareholders website at anadoluhayat.com.tr in a managers of the units having access are prepared in a manner to preserve format that is in accordance with the to information about the entirety of the delicate balance between corporate governance profile. Relevant the Company and units authorized shareholders’ expectations and the components are monitored and kept to make administrative decisions Company’s need to grow, taking into up-to-date by the Investor Relations with a macro influence upon various consideration the future expectations Unit. The Investor Relations Unit elements including composition of regarding the Company’s activities, handles the necessary coordination assets and liabilities, profit and loss, capital adequacy targets and the for responding to all kinds of questions cash flow, strategic goals etc. have conditions prevailing the capital directed by the shareholders and other been identified as individuals with markets, as well as the Company’s related parties via electronic mail, post, administrative responsibility. profitability. phone, etc. as soon as possible. Anadolu Hayat Emeklilik A.Ş. The Board of Directors has adopted a Other Notifications Corporate Website (anadoluhayat. dividend payment policy that is based com.tr) on proposing to the General Assembly Notifications other than the ones of Shareholders that at least 30% described above are publicly disclosed Anadolu Hayat Emeklilik A.Ş. of net distributable profit out as free after being signed as appropriate Corporate Website (anadoluhayat. shares of stock and/or in cash. according to the powers set forth com.tr) is actively and heavily used in the Company’s list of authorized for information provision and public There are no preferred stocks in the signatures. disclosure purposes. The website Company’s profit distribution. covers the information and data as Forward-Looking Evaluations There are no founder’s shares nor is required by the Corporate Governance it a Company practice to give shares In case of public disclosure of Principles and regulatory authorities. of profits to members of the Board of forward-looking evaluations that Care is taken to keep the website up- Directors. may affect investors’ decisions, the to-date at all times. Board of Directors shall make a public As required by our articles of Pursuant to the provisions of the disclosure upon approval of the CEO association, a maximum of 3% of the Turkish Commercial Code governing or the individuals authorized by the total amount remaining after the first websites, the e-COMPANY platform, CEO through the Public Disclosure dividend has been set aside is paid which is set up under the Central Platform, in the annual reports or out to our employees as their share Registry Agency and which can be employing other methods specified by of the profits, subject to a cap of reached through the link under the the legislation. In case of significant three monthly salaries. Cash dividend “Information Society Services” tab on differences between the matters payouts are made until no later than the Company website, is also used for disclosed to the public previously and the end of the second month following communications with shareholders. the actualizations, disclosure shall be the date of the General Assembly The documents defined in the relevant made if necessary under the applicable Meeting in which the dividend legislation can be accessed through legislation. distribution decision is adopted. the said platform as well. Dividend distribution in the form of Identification of Individuals Having Dividend Payment Policy dematerialized shares takes place Administrative Responsibility following legal permissions. The Company’s dividend distribution The criteria employed when principles applicable to shareholders Advances on dividends may be identifying the individuals with and other persons participating paid subject to the principles and administrative responsibility include in the profit are governed by the procedures set out in the Capital the roles such individuals assume provisions of the Turkish Commercial Market legislation. within the Company organization Code, Capital Market legislation, other and the content of information such legislation governing our Company, individuals have access to. Within this and our articles of association.
Anadolu Hayat Emeklilik 2020 Annual Report 57 Policies About Corporate Governance
Remuneration Policy respective functions, independently coordinated by the Human Resources from the performance of the and Training Department. Other 1. The Purpose and Scope of the operational unit that they are auditing Departments of the Company and Policy or overseeing or controlling. branches fulfill their duties within this The main purpose of Anadolu Hayat scope in coordination with the Human Necessary action is taken in relation to Emeklilik A.Ş. Remuneration Policy Resources and Training Department the remunerations of those who are is to ensure that the Company’s as well. established to have jeopardized the remuneration-related practices are Company’s safe operation by reason of 4. Enforcement planned, executed and managed their activities or who are established in alignment with the applicable This Policy enters into force as of 29 to be responsible for the deterioration legislation, the scope of the Company’s February 2012. Any amendments and of the Company’s financial structure. activities, its structure, strategies, updates to be subsequently made to long-term goals and risk management Care is taken to make sure that the Policy in connection with the then- structures, in a manner that precludes neither the Remuneration Policy nor current conditions shall come into excessive risks and based on active risk remuneration practices thereunder force upon the approval of the Board management and so as to be linked to incorporate incentive systems that will of Directors. the performance of the Company and injure the interests of shareholders, Human Resources Policy And its employees. employees and/or customers. Practices The Policy covers the Company’s 3. Duty and Responsibilities Our Company defines and conducts its managers and employees at all The Company’s Board of Directors human resources policy in light of our levels in respect of remuneration has the ultimate authority and country’s social, cultural, and economic management. responsibility for effective execution conditions and the following principles: 2. Basic Principles and Fundamentals and management of the Company’s In recruitment, the Company espoused Related to Remuneration remuneration practices within the the principle that individuals are to frame of applicable legislation and The basic principle is to make sure that be given equal opportunity under this Policy. The Board of Directors the remuneration to be paid to the identical conditions. Hiring criteria assures the efficiency of the Policy Company’s managers and employees are set forth in writing for each job by reviewing the same at least once a at all levels is compatible with the position and are strictly complied with year. Company’s ethical values, internal in practice. balances, strategic goals, and the Within the framework of the Policy, Job descriptions and assignments and employees’ performances, and must the Company’s remuneration practices performance criteria are determined not be related solely to the Company’s are monitored and audited by the by the Company management and short-term performance. Corporate Governance Committee announced to employees. under the Board of Directors on behalf Incentive payments are determined of the Board of Directors. In addition, When making training, assignment, according to objective criteria the said Committee communicates its and promotion decisions, particular without guaranteeing their amounts assessments and suggestions to the care is taken to making use of in advance and by taking also the Board of Directors. objective data and to observing the long-term reflections of the tasks Company’s best interests, to the performed into consideration, and Duties and activities related to the maximum extent possible. in a manner to positively impact the preparation, publication, updating, Company’s corporate values. effective implementation and Training plans are developed and follow-up of the procedures for training policies are formulated in an Remunerations to be paid to the the Company’s implementation effort to help our employees improve managers and employees of units principles and procedures related their knowledge and skills. within the scope of internal systems to remuneration within the frame are determined in view of the related Our Company’s employees are of applicable legislation and this employees’ performance in their members of the Labor Union of Bank- Policy are carried out, managed and
58 Anadolu Hayat Emeklilik 2020 Annual Report Finance and Insurance Companies. Any writing, and considered during the • Successfully pass the qualifying decisions or developments concerning agreement process. examination and/or interview for them are communicated to the the position being hired into. No complaints have been received employees or their representatives, on account of discrimination among Job Applications and the opinion of the said union is Company employees. sought in such decisions. Whenever vacant positions are The provisions of the suggestion available, they are announced on The Company provides a working system regulation are applied to the Company’s internet website. environment and working conditions promote Company employees’ creative Applications for such positions may be that are safe and efforts are ideas about the company activities submitted by mail, by fax, in person, undertaken to improve these and practices, collect and evaluate and from the website. All applications conditions depending on social and individual ideas, and to appreciate and that are received are placed in a technological requirements. reward those deemed successful. single pool. The Company’s Human Our employees are kept informed on Resources and Training Department The general principles and criteria of decisions made or developments that is responsible for receiving all job human resources practices recognized occur concerning them. applications, conducting written by our Company are specified below. and/ or oral exams, announcing exam Measures are taken to prevent Hiring Practices results, and all other recruitment- discrimination among employees related matters. based on race, religion, language, or The general principles and criteria sex; create a working environment adhered to by Anadolu Hayat Emeklilik Progression that is respectful of human rights; are: Advancement to positions in our and prevent all physical, mental, and • Be a citizen of Turkey. Company’s organizational structure emotional abuse within the Company. (manager, assistant manager, 2nd • Be at least 18 and not more than 30 It is not deemed appropriate to appoint manager, service chief, assistant years of age. a representative to handle relations service chief, clerk, specialist, with our employees. • Have completed any active military assistant specialist, internal audit, and service obligations if applicable or assistant internal audit) is governed Succession planning is made to have obtained a deferment. by the Company’s related bylaws. The identify the new managers to following general principles apply to be appointed in cases where it is • Not have been deprived of their civil all advancements. To be promoted to a predicted that changes in a managerial rights. higher position: position will cause hitches in the • Never have been convicted of any of management of the Company. the offenses specified in insurance the employee must have served for the minimum periods of time specified Launched for the purpose of and private pension system law, by headquarters in his current increasing the efficiency of internal whether or not officially pardoned. position; communication, the Company’s • Be healthy enough to work and corporate portal is used to share the travel anywhere in Turkey. the employee must have earned current announcements, insurance a good performance score and private pension legislation, and • For janitorial positions, hold at least substantiating his promotion; supplementary references with our a high-school diploma. For white- there must be a vacancy to which the employees. collar positions, be a graduate of at least a two-year vocational school as employee can be promoted; Our union representative employees defined in the applicable legislation, the employee must have successfully play an important role in the handling or of four-year faculties. completed whatever course, of relations between our Company and examination, thesis, project, or similar our employees. On the other hand, • Be under no service obligation to qualifying requirements that the matters our employees wish to be any government agency or private Company requires for the position. covered in the collective agreement concern. are gathered from all employees in
Anadolu Hayat Emeklilik 2020 Annual Report 59 Policies About Corporate Governance
Performance Management Practices associated with the seniority Training and notice pays to be paid to Anadolu Performance appraisal system is AHE Academy Hayat Emeklilik A.Ş. personnel have in place at the Company in order to been based on Article 14 of the Labor The Company set up the AHE measure the individual contribution Law no. 1475, Article 17 of the Labor Academy in order to systematize the of each employee in supporting the Law no. 4857, and the collective training and development activities Company towards achievement of its bargaining agreement in force. directed towards our employees, corporate objectives. In this frame, all by incorporating the cultural aspect company employees are evaluated Within this framework; as well. Through the AHE Academy, once a year. Severance Pay is paid to employees the Company invests in its human The performance appraisal system with the tenure of service as capital and aims to make the aims to establish objective criteria for stipulated in the Labor Law no. 1475, customer-focused culture permanent. the employees’ career progressions whose employment contract ends as Anadolu Hayat Emeklilik supports its and to determine their training needs. a result of one of the cases specified employees’ professional and personal in the Law, taking into account the development, offers various activities Job Security term of service, either to the employee that are aligned with their career paths Job security for our employees is himself/herself, or to his/ her legal and aim to equip its employees so as provided under a collective bargaining heirs, in case of death; to enable them to look from different agreement arrangement between perspectives. According to the collective bargaining the Company and BASİSEN (Labor agreement, the amount of the Training Programs Union of Bank-Finance and Insurance severance pay (which must not exceed Companies). Company employees are provided the maximum amount in the Labor with in-house and extramural Wage Policy Law) is paid on the basis of 60 days training opportunities to foster for each full year that has passed if Employees’ salaries are adjusted their professional and personal the employment contract ends due annually in accordance with current development. National and to disability, old age and entitlement conditions and as specified in a international resources are made use to pension, or death, and on the basis collective bargaining agreement that of for these training programs. When of 45 days for each full year in case of is renewed every other year. Salaries personnel are first hired, they are put entitlement otherwise. and bonuses are paid on the last day of through an orientation program and each month. In addition to salary and Based on Article 17 of the Labor Law given training in basic insurance and bonuses, personnel are entitled to a no. 4857, the employee is notified that private pension system issues. After broad range of fringe benefits such as his/her employment contract will be this and for the rest of their careers, health insurance coverage, employer’s terminated and he/she is either given training is provided so that they have contributions to the private pension leave for looking for another job in the all the knowledge and skills they may system on the employee’s behalf, number of days stipulated by the law need for whatever position they may personal life insurance, and company- depending on his/her tenure, or is paid be filling. The annual training programs provided transportation and lunchtime a Notice Pay in cash, which will cover are designed with the primary goal of meals. the period of time until the end of the building on employees’ competencies notice period. and preparing them as necessary for their future positions.
60 Anadolu Hayat Emeklilik 2020 Annual Report Statement of Compliance with Corporate Governance Principles
Our Company believes that compliance Compulsory Principles and contracts. The Company takes with corporate governance principles the necessary steps for the use of There are no principles that are not is at least as important as its mechanisms such as compensation implemented by our Company, which financial performance and that such provided to stakeholders in the are compulsory to be implemented compliance is of great benefit from the applicable legislation. The corporate under the Corporate Governance standpoints both of the development governance structure of the Company Communiqué no. II-17.1. (It is planned of national and international capital allows, and safeguards the right to incorporate the point that the markets and of the advancement of of, all stakeholders to convey their remuneration to be paid to Board our own company’s interests. concerns regarding any illegal or members in a given period is unethical transaction to the Corporate Pursuant to the Corporate Governance determined by a resolution of the Governance Committee or the Communiqué no. II-17.1 published in General Assembly and that no other Audit Committee. These matters the CMB Bulletin no. 2/49 dated 10 payments are made thereto also in the are addressed in the section titled January 2019, Corporate Governance Compensation Policy within the scope “Keeping Stakeholders Informed” of Compliance Report (CRF) and of the Corporate Governance Principle the annual report. Comprehensive Corporate Governance Information no. 4.6.2). information about the indemnification Form (CGIF) were publicly disclosed Non-Compulsory Principles That payments to be made to Company three weeks before the date of the are not Covered in the Corporate employees is provided on our General Assembly meeting. Governance Compliance Report corporate website, in the section Under the said legislation, the titled “Human Resources Policies In the context of Corporate CRF prepared to report the level of and Practices” of the annual report, Governance Principle no. 1.3.10, compliance with optional principles and in the Collective Agreement. The information is provided to shareholders and the CGIF prepared to provide Company management is considering during the General Assembly under information about the existing to compile the relevant information a dedicated agenda item about the corporate governance practices are under the heading “Indemnification amounts and beneficiaries of all presented in the following sections. Policy”. charitable donations and grants The letter “X” was used to indicate made during the reporting period. In Our articles of association do not the Company’s level of compliance in addition, the maximum amount of contain any provisions stipulating: the Corporate Governance Compliance charitable donations envisaged to • Exercise of the request for Report template, and necessary be made in the current fiscal year is appointment of a special auditor as explanations were provided within also laid down for the approval of the an individual right (Article 1.2.1), the scope of Article 8 of the Corporate General Assembly of Shareholders. Governance Communiqué no. II-17.1 While we do not have a charitable • Participation of stakeholders in for all answers given, save for those donations policy approved by the the management of the Company answered as “Yes”. General Assembly, these activities (Article 3.2.1), are carried out within the frame of Pursuant to the principles that • Expansion of the scope of minority the Charitable Donations and Grants are not yet implemented by our rights beyond the provisions of Regulation that has been approved by Company as explained in the CRF applicable legislation (Article 1.5.2) the Board of Directors. The Company and also hereinbelow, no conflicts management is considering to develop Furthermore, minority rights are not of interest arose between the the said Policy. represented on our Board of Directors. stakeholders to date. The Company management targets to work towards In the context of the Corporate achieving maximum compliance Governance Principle no. 3.1.2, with the principles that are not yet effective and speedy indemnification implemented, which situation is of an is available in the event of violation exceptional nature. of the stakeholders’ rights that are protected by the legislation
Anadolu Hayat Emeklilik 2020 Annual Report 61 Corporate Governance Compliance Report
Corporate Governance Compliance Report Compliance Status Explanation Not Yes Partial No Exempted Applicable 1.1. FACILITATING THE EXERCISE OF SHAREHOLDER RIGHTS 1.1.2 - Up-to-date information and disclosures which may affect the exercise of X - - - - shareholder rights are available to investors at the corporate website. 1.2. RIGHT TO OBTAIN AND REVIEW
INFORMATION 1.2.1- Management did not enter into any transaction that would complicate the X - - - - conduct of special audit. 1.3. GENERAL ASSEMBLY 1.3.2 -The company ensures the clarity of the General Assembly agenda, and that an X - - - - item on the agenda does not cover multiple topics. 1.3.7- Insiders with privileged information No such transactions took place have informed the board of directors in 2020. about transactions conducted on their behalf within the scope of the company’s - - - - X activities in order for these transactions to be presented at the General Shareholders’ Meeting. 1.3.8 - Members of the board of directors who are concerned with specific agenda items, auditors, and other related persons, as well as the officers who are responsible X - - - - for the preparation of the financial statements were present at the General Shareholders’ Meeting. 1.3.10 - The agenda of the General Shareholders’ Meeting included a separate item detailing the amounts X - - - - and beneficiaries of all donations and contributions. 1.3.11 - The General Shareholders’ Meeting Announcements in relation was held open to the public, including the to the General Shareholders’ stakeholders, without having the right to Meetings are made in speak. accordance with regulatory requirements; in this context, no additional invitations are made. - X - - - On the other hand, stakeholders may participate in the General Shareholders’ Meetings without having the right to speak, provided that they inform the Company of their such desire prior to the meeting.
62 Anadolu Hayat Emeklilik 2020 Annual Report Corporate Governance Compliance Report Compliance Status Explanation Not Yes Partial No Exempted Applicable 1.4. VOTING RIGHTS 1.4.1-There is no restriction preventing shareholders from exercising their X - - - - shareholder rights. 1.4.2-The company does not have shares X - - - - that carry privileged voting rights. 1.4.3-The company withholds from exercising its voting rights at the General Shareholders’ Meeting of any company with X - - - - which it has cross-ownership, in case such cross-ownership provides management control. 1.5. MINORITY RIGHTS 1.5.1- The company pays maximum diligence X - - - - to the exercise of minority rights. 1.5.2-The Articles of Association extend the The Company pays maximum use of minority rights to those who own attention to ensure exercise less than one twentieth of the outstanding of minority rights granted shares, and expand the scope of the under the Turkish Commercial minority rights. Code and the Capital Market - - X - - Law, and no stipulations were incorporated in our articles of association due to the fact that the legal provisions governing this matter have been expanded. 1.6. DIVIDEND RIGHT 1.6.1 -The dividend policy approved by the General Shareholders’ Meeting is posted on X - - - - the company website. 1.6.2-The dividend distribution policy comprises the minimum information to ensure that the shareholders can have an X - - - - opinion on the procedure and principles of dividend distributions in the future. 1.6.3 - The reasons for retaining earnings, Profit distribution is carried out and their allocations, are stated in the - - - - X regularly within the scope of our relevant agenda item. Dividend Payment Policy. 1.6.4 - The board reviewed whether the dividend policy balances the benefits of the X - - - - shareholders and those of the company. 1.7. TRANSFER OF SHARES 1.7.1 - There are no restrictions preventing X - - - - shares from being transferred.
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Corporate Governance Compliance Report Compliance Status Explanation Not Yes Partial No Exempted Applicable 2.1. CORPORATE WEBSITE 2.1.1.-The company website includes all elements listed in Corporate Governance X - - - - Principle 2.1.1. 2.1.2-The shareholding structure (names, privileges, number and ratio of shares, and beneficial owners of more than 5% of the X - - - - issued share capital) is updated on the website at least every 6 months. 2.1.4 -The company website is prepared in A substantial portion of the other selected foreign languages, in a way information available on our to present exactly the same information website is also presented in with the Turkish content. English so that international investors may make use of them. The disclosures in English may be given in the form of - X - - - a summary that is accurate, complete, direct, intelligible, adequate and consistent with the Turkish original in an extent that will be sufficient to help the readers make their decisions based on them. 2.2. ANNUAL REPORT 2.2.1-The board of directors ensures that the annual report represents a true and X - - - - complete view of the company’s activities. 2.2.2 - The annual report includes all elements listed in Corporate Governance X - - - - Principle 2.2.2. 3.1. CORPORATION’S POLICY ON
STAKEHOLDERS 3.1.1- The rights of the stakeholders are protected pursuant to the relevant X - - - - regulations, contracts and within the framework of bona fides principles. 3.1.3-Policies or procedures addressing stakeholders’ rights are published on the X - - - - company’s website. 3.1.4 - A whistleblowing programme is in X - - - - place for reporting legal and ethical issues. 3.1.5-The company addresses conflicts of interest among stakeholders in a balanced X - - - - manner.
64 Anadolu Hayat Emeklilik 2020 Annual Report Corporate Governance Compliance Report Compliance Status Explanation Not Yes Partial No Exempted Applicable 3.2. SUPPORTING THE PARTICIPATION OF THE STAKEHOLDERS IN THE CORPORATION’S MANAGEMENT 3.2.1-The Articles of Association, or the The employees of our Company internal regulations (terms of reference/ are members of the Bank, manuals), regulate the participation of Finance and Insurance Workers employees in management. Union. Decisions passed in relation to the employees or developments concerning them are notified to the employees or their representatives. The related union’s opinions - X - - - are sought for decisions of such nature. The Suggestion System Regulation targeting the company employees was introduced as of 1 May 2006, was updated on 2 July 2020 . Meetings are held with the sales force twice a year for sharing information and gathering their suggestions. 3.2.2 - Surveys/other research techniques, Questionnaires are being consultation, interviews, observation administered among our method etc. were conducted to obtain - X - - - customers and employees opinions from stakeholders on decisions within the scope of our that significantly affect them. activities. 3.3. HUMAN RESOURCES POLICY 3.3.1- The company has adopted an employment policy ensuring equal X - - - - opportunities, and a succession plan for all key managerial positions. 3.3.2-Recruitment criteria are documented. X 3.3.3 - The company has a policy on human resources development, and organises X - - - - trainings for employees. 3.3.4-Meetings have been organised to inform employees on the financial status X - - - - of the company, remuneration, career planning, education and health. 3.3.5 - Employees, or their representatives, were notified of decisions impacting them. X - - - - The opinion of the related trade unions was also taken.
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Corporate Governance Compliance Report Compliance Status Explanation Not Yes Partial No Exempted Applicable 3.3.6 - Job descriptions and performance Due to the unionization at criteria have been prepared for all our Company, title-based employees, announced to them and taken - X - - - remuneration has been adopted into account to determine employee instead of performance-based remuneration. compensation. 3.3.7 - Measures (procedures, trainings, raising awareness, goals, monitoring, complaint mechanisms) have been taken X - - - - to prevent discrimination, and to protect employees against any physical, mental, and emotional mistreatment. 3.3.8 - The company ensures freedom of association and supports the right for X - - - - collective bargaining. 3.3.9 - A safe working environment for X - - - - employees is maintained. 3.4. RELATIONS WITH CUSTOMERS AND
SUPPLIERS 3.4.1-The company measured its customer satisfaction, and operated to ensure full X - - - - customer satisfaction. 3.4.2-Customers are notified of any delays X - - - - in handling their requests. 3.4.3 - The company complied with the quality standards with respect to its X - - - - products and services. 3.4.4 - The company has in place adequate controls to protect the confidentiality of X - - - - sensitive information and business secrets of its customers and suppliers. 3.5. ETHICAL RULES AND SOCIAL
RESPONSIBILITY 3.5.1-The board of the corporation has adopted a code of ethics, disclosed on the X - - - - corporate website. 3.5.2-The company has been mindful of its social responsibility and has adopted X - - - - measures to prevent corruption and bribery. 4.1. ROLE OF THE BOARD OF DIRECTORS 4.1.1 - The board of directors has ensured strategy and risks do not threaten the long- X - - - - term interests of the company, and that effective risk management is in place.
66 Anadolu Hayat Emeklilik 2020 Annual Report Corporate Governance Compliance Report Compliance Status Explanation Not Yes Partial No Exempted Applicable 4.1.2 - The agenda and minutes of board meetings indicate that the board of directors discussed and approved strategy, X - - - - ensured resources were adequately allocated, and monitored company and management performance. 4.2. ACTIVITIES OF THE BOARD OF
DIRECTORS 4.2.1-The board of directors documented its meetings and reported its activities to the X - - - - shareholders. 4.2.2-Duties and authorities of the members of the board of directors are X - - - - disclosed in the annual report. 4.2.3-The board has ensured the company has an internal control framework adequate X - - - - for its activities, size and complexity. 4.2.4-Information on the functioning and effectiveness of the internal control system X - - - - is provided in the annual report. 4.2.5 - The roles of the Chairman and Chief Executive Officer are separated and X - - - - defined. 4.2.7 - The board of directors ensures that the Investor Relations department and the corporate governance committee work X - - - - effectively. The board works closely with them when communicating and settling disputes with shareholders. 4.2.8 - The company has subscribed to a While the Company’s Board Directors and Officers liability insurance of Directors members and covering more than 25% of the capital. Executives are insured against the risk of loss for potential faults in the performance of their duties under the umbrella - X - - - liability insurance naming the companies affiliated to our parent group as insureds, the sum insured is not set in an amount that is more than 25% of the capital as set out in the Communiqué.
Anadolu Hayat Emeklilik 2020 Annual Report 67 Corporate Governance Compliance Report
Corporate Governance Compliance Report Compliance Status Explanation Not Yes Partial No Exempted Applicable 4.3. STRUCTURE OF THE BOARD OF
DIRECTORS 4.3.9-The board of directors has approved While we do not have a policy the policy on its own composition, setting addressing this topic, two a minimal target of 25% for female women members served on our - - X - - directors. The board annually evaluates its Board of Directors during the composition and nominates directors so as reporting period. to be compliant with the policy. 4.3.10-At least one member of the audit committee has 5 years of experience in X - - - - audit/accounting and finance. 4.4. BOARD MEETING PROCEDURES 4.4.1-Each board member attended the Due to the conditions imposed majority of the board meetings in person. by the pandemic, attendance by electronic means was also X - - - - included. Save for exceptions, all Board of Directors members attended these meetings. 4.4.2-The board has formally approved a While there are no written minimum time by which information and guidelines, information and documents relevant to the agenda items - X - - - documents relevant to the should be supplied to all board members. agenda items are shared with all members reasonably in advance. 4.4.3 - The opinions of board members In principle, Board Directors that could not attend the meeting, but did take part in all meetings. submit their opinion in written format, were Special care is taken to setting presented to other members. meeting dates that will allow all Board Directors to attend and to hold the meetings with all - - - - X directors in attendance except in unforeseen exceptional cases. During the reporting period, there were no members who could not attend the meeting but submitted their opinions to the Board of Directors in writing. 4.4.4-Each member of the board has one X - - - - vote. 4.4.5-The board has a charter/written The meeting procedures of internal rules defining the meeting the Board of Directors are set procedures of the board. out in detail in our articles - X - - - of association. There is not a dedicated internal written regulation about this matter. 4.4.6-Board minutes document that all items on the agenda are discussed, X - - - - and board resolutions include director’s dissenting opinions if any.
68 Anadolu Hayat Emeklilik 2020 Annual Report Corporate Governance Compliance Report Compliance Status Explanation Not Yes Partial No Exempted Applicable 4.4.7-There are limits to external There are no limits to external commitments of board members. commitments of Board Shareholders are informed of board members. Outside positions held members’ external commitments at the - X - - - by Board members are stated General Shareholders’ Meeting. in the General Shareholders’ Meeting information document and in the annual reports. 4.5. BOARD COMMITTEES 4.5.5-Board members serve in only one of As a matter of principle, Board the Board’s committees. Directors do not undertake roles in several committees. During - X - - - the reporting period, one Board member served as a member on two committees. 4.5.6 - Committees have invited persons to the meetings as deemed necessary to X - - - - obtain their views. 4.5.7-If external consultancy services are In 2020, the Committees did not used, the independence of the provider is - - - - X use any external consultancy stated in the annual report. service. 4.5.8-Minutes of all committee meetings X - - - - are kept and reported to board members. 4.6. FINANCIAL RIGHTS 4.6.1-The board of directors has conducted The Company’s short- and a board performance evaluation to medium-term goals are review whether it has discharged all its discussed and determined by responsibilities effectively. the Board of Directors, and the extent at which these - X - - - goals are realized is monitored regularly. Other than that, the Board of Directors does not conduct a self-evaluation of its performance. 4.6.4-The company did not extend any loans to its board directors or executives, nor extended their lending period or enhanced the amount of those loans, or X - - - - improve conditions thereon, and did not extend loans under a personal credit title by third parties or provided guarantees such as surety in favour of them. 4.6.5-The individual remuneration of board The remunerations and members and executives is disclosed in the benefits provided to the annual report. Board of Directors members and executives are disclosed - X - - - cumulatively in the footnotes of our financial statements and in the annual report, which are publicly disclosed and also accessible on our website.
Anadolu Hayat Emeklilik 2020 Annual Report 69 Corporate Governance Information Form
1. SHAREHOLDERS 1.1. Facilitating the Exercise of Shareholders Rights The number of investor meetings (conference, seminar/etc.) In total, 2 investor presentations were made and 25 organised by the company during the year teleconferences were held in 2020. 1.2. Right to Obtain and Examine Information The number of special audit request(s) None. The number of special audit requests that were accepted at the General Shareholders’ Meeting None. 1.3. General Assembly Link to the PDP announcement that demonstrates the information requested by Principle 1.3.1. (a-d) https://www.kap.org.tr/tr/Bildirim/821512 Whether the company provides materials for the General Shareholders’ Meeting in English and Turkish at the same time They are not provided at the same time. The links to the PDP announcements associated with the transactions that are not approved by the majority of independent directors or by unanimous votes of present board No transactions falling under the scope of Principle 1.3.9 took members in the context of Principle 1.3.9 place. The links to the PDP announcements associated with Our Company did not engage in any transactions in the context related party transactions in the context of Article 9 of the of Article 9 of the Communiqué on Corporate Governance (II- Communique on Corporate Governance (II-17.1) 17.1). The links to the PDP announcements associated with common Our Company did not engage in any transactions in the context and continuous transactions in the context of Article 10 of the of Article 10 of the Communiqué on Corporate Governance (II- Communique on Corporate Governance (II-17.1) 17.1). We do not have a dedicated policy for charitable donations The name of the section on the corporate website that and grants. Such activities are carried out within the scope of demonstrates the donation policy of the company internal guidelines. The relevant link to the PDP with minute of the General Shareholders’ Meeting where the donation policy has been approved None. The number of the provisions of the articles of association that discuss the participation of stakeholders to the General Articles 23 and 24 stipulate the attendance of our shareholders Shareholders’ Meeting in the General Shareholders’ Meetings. Identified stakeholder groups that participated in the General In the Company’s General Shareholders’ Meeting for 2019, Shareholders’ Meeting, if any shares corresponding to TL 365,042,993.034were represented in proxy and TL 22,456,200 were represented by the depositor out of the Company’s total capital which consists of Group A shares with a nominal value of TL 1,000,000 and Group B shares with a nominal value of 386,499,193.034. In addition, the majority of the Company’s Board of Directors and Senior Management, part of our employees, and the Company’s Independent Auditor were present in the meeting. For the List of Attendants at the General Shareholders’ Meeting: https://www.anadoluhayat.com.tr/Documents/ PDF%20Files/Yat%C4%B1r%C4%B1mc%C4%B1%20 %C4%B0li%C5%9Fkileri/Genel%20Kurul/2019/ HazirBulunanlarListesi.pdf
1.4. Voting Rights Whether the shares of the company have differential voting rights No In case that there are voting privileges, indicate the owner and percentage of the voting majority of shares. - The percentage of ownership of the largest shareholder 63.89%
70 Anadolu Hayat Emeklilik 2020 Annual Report 1.5. Minority Rights Whether the scope of minority rights enlarged (in terms of content or the ratio) in the articles of the association No If yes, specify the relevant provision of the articles of association. - 1.6. Dividend Right Home Page / Investor Relations / Corporate Governance / The name of the section on the corporate website that Dividend Payment Policy (https://www.anadoluhayat.com.tr/ describes the dividend distribution policy en/investor-relations/corporate-governance) Minutes of the relevant agenda item in case the board of directors proposed to the general assembly not to distribute dividends, the reason for such proposal and information as to Dividends are distributed regularly for each operating year in use of the dividend. accordance with our Dividend Payment Policy. PDP link to the related general shareholder meeting minutes in case the board of directors proposed to the general assembly - not to distribute dividends
General Assembly Meetings Specify the name of the The page of the Specify the number of corporate name of the information website that page of the requests contains corporate received by the General website that The number of the company Shareholders’ contains all the relevant item regarding the Meeting questions or paragraph The clarification Shareholder minutes, and asked in of General number of The link to of the participation Percentage also indicates the general Shareholders’ declarations the related agenda of rate to the of shares Percentage for each assembly Meeting minutes by insiders PDP general General the General General directly of shares resolution the meeting and all in relation to received by shareholder Meeting Shareholders’ Shareholders’ present at represented voting levels for responses to related party the board of meeting Date Meeting Meeting the GSM by proxy or against them transactions directors notification 23.03.2020 0 90% - 90% Home Page During the None 0 https://www. / Investor General kap.org.tr/tr/ Relations Assembly Bildirim/83088 / General Meeting, Assembly none of our shareholders exercised their right to pose questions.
2. DISCLOSURE AND TRANSPARENCY 2.1. Corporate Website Specify the name of the sections of the website providing the Home Page / Investor Relations information requested by the Principle 2.1.1. If applicable, specify the name of the sections of the website Home Page / Investor Relations / Corporate Information / providing the list of shareholders (ultimate beneficiaries) who Shareholding Structure directly or indirectly own more than 5% of the shares. List of languages for which the website is available Turkish and English 2.2. Annual Report The page numbers and/or name of the sections in the Annual Report that demonstrate the information requested by principle 2.2.2.
Anadolu Hayat Emeklilik 2020 Annual Report 71 Corporate Governance Information Form
a) The page numbers and/or name of the sections in the Annual Corporate Governance / Outside Positions Held by the Board Report that demonstrate the information on the duties of the Directors and Executives / Declarations of Independence by members of the board of directors and executives conducted Independent Members of the Board of Directors out of the company and declarations on independence of board members b) The page numbers and/or name of the sections in the Annual Risk Management / Active Committees and an Assessment by Report that demonstrate the information on the duties of the the Board of Directors members of the board of directors and executives conducted out of the company and declarations on independence of board members c) The page numbers and/or name of the sections in the Annual Corporate Governance / Additional Information About Corporate Report that demonstrate the information on the number of Governance board meetings in a year and the attendance of the members to these meetings ç) The page numbers and/or name of the sections in the Annual Corporate Governance / Changes in the Legislation during the Report that demonstrate the information on amendments in the Fiscal Year legislation which may significantly affect the activities of the corporation d) The page numbers and/or name of the sections in the Annual Corporate Governance / Other Material Disclosures Concerning Report that demonstrate the information on significant lawsuits the Reporting Period filed against the corporation and the possible results thereof e) The page numbers and/or name of the sections in the Annual Our Company does not receive investment consulting or rating Report that demonstrate the information on the conflicts services. The services procured from portfolio management of interest of the corporation among the institutions that it companies within the scope of our field of activity are purchases services on matters such as investment consulting governed by strict rules contained in the applicable legislation. and rating and the measures taken by the corporation in order (Corporate Governance / Additional Information about Corporate to avoid from these conflicts of interest Governance / Keeping Stakeholders Informed) f) The page numbers and/or name of the sections in the No shareholder is involved in a cross-shareholding relationship Annual Report that demonstrate the information on the cross with the Company. Presentation / Anadolu Hayat Emeklilik by ownership subsidiaries that the direct contribution to the Numbers / Capital and Shareholder Structure capital exceeds 5% g) The page numbers and/or name of the sections in the Corporate Governance / Policies about Corporate Governance / Annual Report that demonstrate the information on social Human Resources Policy and Practices, Activities in 2020 / An rights and professional training of the employees and activities Overview of Anadolu Hayat Emeklilik’s Position in the Industry of corporate social responsibility in respect of the corporate and its Activities in 2020 / Communication activities that arises social and environmental results
3. STAKEHOLDERS 3.1. Corporation’s Policy on Stakeholders The name of the section on the corporate website that Home Page / Investor Relations / Corporate Governance / demonstrates the employee remedy or severance policy Corporate Governance Policies, Home Page / Career / HR Practices / Wage Policy and Social Rights The number of definitive convictions the company was subject None. to in relation to breach of employee rights The position of the person responsible for the alert mechanism Our corporate governance structure provides the means to all (i.e. whistleblowing mechanism) stakeholders including employees and their representative bodies to communicate their concerns about any illegal or unethical practices to the Audit Committee and the Corporate Governance Committee, and safeguards their right to do so. Complaints received about our Company’s accounting and internal control system and independent audit are forwarded to the address [email protected].
72 Anadolu Hayat Emeklilik 2020 Annual Report The contact detail of the company alert mechanism [email protected], [email protected], [email protected] 3.2. Supporting the Participation of the Stakeholders in the Corporation’s Management Name of the section on the corporate website that Investor Relations / Corporate Governance / Additional demonstrates the internal regulation addressing the Information About Corporate Governance / Stakeholders participation of employees on management bodies Corporate bodies where employees are actually represented While the Company employees do not directly take place within management bodies, they are members of the Labor Union of Bank/Finance and Insurance Workers and there are union representative employees in our workplace. Our union representative employees play an important role in maintenance of the relationship between our Company and our employees. 3.3. Human Resources Policy The role of the board on developing and ensuring that the Succession planning is made to identify the new managers to company has a succession plan for the key management be appointed in cases where it is predicted that changes in a positions managerial position will cause hitches in the management of the Company. These plans basically identify employees who will be appointed to vacant key managerial positions, in the event such positions are vacated for various reasons, and ensure that such employees are trained and equipped so as to be able to satisfy the requirements of relevant positions. The Board of Directors has the authority and responsibility for identifying the administrators who will be appointed to key managerial positions. The name of the section on the corporate website that When hiring, it is a principle that individuals are to be given demonstrates the human resource policy covering equal equal opportunity under identical conditions. Hiring criteria are opportunities and hiring principles. Also provide a summary of set forth in writing for each job position and are strictly complied relevant parts of the human resource policy. with in practice. Home Page / Career / Human Resources Policy /HR Practices, Home Page / Investor Relations / Corporate Governance / Corporate Governance Policies, Whether the company provides an employee stock ownership There isn’t an employee stock ownership program. programme The name of the section on the corporate website Home Page / Career / Human Resources Policy / HR Practices that demonstrates the human resource policy covering discrimination and mistreatments and the measures to prevent them. Also provide a summary of relevant parts of the human resource policy. The number of definitive convictions the company is subject to None. in relation to health and safety measures 3.4. Ethical Rules and Social Responsibility The name of the section on the corporate website that Home Page / Investor Relations /Corporate Governance / demonstrates the code of ethics Anadolu Hayat Emeklilik Ethical Rules and Practice Principles The name of the section on the company website that In our corporate website information about any measures taken demonstrates the corporate social responsibility report. If on environmental, social and corporate governance issues are such a report does not exist, provide the information about given under “Social Responsibility Approach” title (Home Page any measures taken on environmental, social and corporate /About Us / Our Culture / Social Responsibility Approach) and governance issues. “Sustainability” title (Home Page / Sustainability). Any measures combating any kind of corruption including Specified in our webpage (Home Page / Sustainability / Our embezzlement and bribery Policies / Anti-Bribery and Anti-Corruption Policy.)
Anadolu Hayat Emeklilik 2020 Annual Report 73 Corporate Governance Information Form
4. BOARD OF DIRECTORS-I 4.2. Activity of the Board of Directors Date of the last board evaluation conducted Our annual business programs that also incorporate our strategic goals are approved by the Board of Directors and performance results are regularly monitored on a monthly basis. Other than that, the Board of Directors does not carry out self- evaluation of its own performance. Whether the board evaluation was externally facilitated No Whether all board members released from their duties at the Yes GSM Name(s) of the board member(s) with specific delegated duties The new Board of Directors elected at the Company’s Ordinary and authorities, and descriptions of such duties General Shareholders’ Meeting convened on 23 March 2020, the members have determined the distribution of tasks among themselves. Accordingly, it was unanimously voted to elect Mr. Yalçın Sezen as the Chairman and Mr. Hasan Koçhan as the Vice Chairman. In addition, Ahmet D. Erelçin assumed the position of the Head of Audit Committee whereas Murat Bolat became the member of that committee; Şebnem Ergün became the Head of the Corporate Governance Committee and Kemal Emre Sayar and N. Cem Özcan members of that committee; Mühibe Elif Germirli became Head of the Early Detection of Risk Committee and Kemal Emre Sayar member of that committee; and Yalçın Sezen and Kemal Emre Sayar became members responsible for Internal Systems. At the Board of Directors meeting held on 31 August 2020, it was decided to accept the resignation of our Board of Directors member Serdar Yılmaz, to revoke the first degree signature authorization granted to him, and to elect Mr. Ümit Bilik as his successor to serve until the next Ordinary General Shareholders’ Meeting as per the Company’s Internal Bylaws, Article 363 of the Turkish Commercial Code and Article 10 of the Company’s Articles of Association, and to confer upon him first degree signature authorization. At the Board of Directors meeting held on 28 September 2020, it was decided that N. Cem Özcan will be succeeded by Cavit Ozan Sezer, Accounting Manager, in the role as Corporate Governance Committee Member within the frame of the change in the Investor Relations Unit Manager at the Company. Number of reports presented by internal auditors to the audit In 2020, the Board of Internal Audit submitted 33 reports and committee or any relevant committee to the board Internal Control Unit submitted 26 reports. Specify the name of the section or page number of the Corporate Governance / An Assessment of Independent Audit, annual report that provides the summary of the review of the Internal Control System and Internal Audit Activities by the effectiveness of internal controls Board of Directors Name of the Chairman Yalçın Sezen Name of the CEO Yılmaz Ertürk If the CEO and Chair functions are combined: provide the link to Chairman and CEO are not the same people. the relevant PDP announcement providing the rationale for such combined roles
74 Anadolu Hayat Emeklilik 2020 Annual Report Link to the PDP notification stating that any damage that may While there is a liability insurance policy for the group to which be caused by the members of the board of directors during the our Company belongs, the policy was not subject to a KAP discharge of their duties is insured for an amount exceeding (Public Disclosure Platform) disclosure. Information about the 25% of the company’s capital insurance is provided in the “Additional Information about Corporate Governance "Operating Principles of the Board of Directors” section of this Annual Report. The name of the section on the corporate website that - demonstrates current diversity policy targeting women directors The number and ratio of female directors within the Board of 2 directors, the rate is 18%. Directors
Structure of the Board of Directors Whether She/ Whether the Link To PDP Whether the He is the Director has at Notification Whether Independent The First Independent Director Who Least 5 Years’ Name- That Executive Board Member Election Date Director Considered Ceased to Experience on Surname Includes The Director or Not or not To Board By The Nomination Satisfy The Audit, Accounting Independency Committee Independence and/or Finance Declaration or Not or not Dependent YALÇIN SEZEN Non-Executive 21.03.2019 - Not Applicable Not Applicable Yes Member Dependent HASAN KOÇHAN Non-Executive 28.04.2017 - Not Applicable Not Applicable Yes Member Dependent YILMAZ ERTÜRK Executive 26.08.2019 - Not Applicable Not Applicable Yes Member AHMET DERVİŞ Independent Specified in the Non-Executive 26.03.2018 Considered No Yes ERELÇİN Member Annual Report Independent Specified in the ŞEBNEM ERGÜN Non-Executive 26.03.2018 Considered No No Member Annual Report MÜHİBE ELİF Independent Specified in the Non-Executive 21.03.2019 Considered No Yes GERMİRLİ Member Annual Report Independent Specified in the MURAT BOLAT Non-Executive 23.03.2020 Considered No Yes Member Annual Report KEMAL EMRE Dependent Non-Executive 27.11.2015 - Not Applicable Not Applicable Yes SAYAR Member Dependent MESUT DİNÇER Non-Executive 13.09.2019 - Not Applicable Not Applicable Yes Member ZEKAİ MEHMET Dependent Non-Executive 23.03.2020 - Not Applicable Not Applicable Yes TUĞTAN Member Dependent ÜMİT BİLİK Non-Executive 31.08.2020 - Not Applicable Not Applicable Yes Member
Anadolu Hayat Emeklilik 2020 Annual Report 75 Corporate Governance Information Form
4. BOARD OF DIRECTORS-II 4.4. Meeting Procedures of the Board of Directors During 2020, Anadolu Hayat Emeklilik Board of Directors held 11 Number of physical board meetings in the reporting period meetings. Two of those were physical meetings, whereas the (meetings in person) remaining nine were held online because of the pandemic. Director average attendance rate at board meetings 98% Whether the board uses an electronic portal to support its work or not No Number of minimum days ahead of the board meeting to provide information to directors, as per the board charter In 3-7 days The name of the section on the corporate website that Home Page / Investor Relations / Corporate Information / demonstrates information about the board charter Articles of Association Number of maximum external commitments for board members Although there are no set rules on non-independent Directors’ as per the policy covering the number of external duties held by undertaking other duties outside the Company, the Directors do directors not have any other duties apart from their natural duties in the entities they represent and from those in the establishments owned by the entities they represent. Yet, Board Directors devote sufficient amount of time for Company affairs, and exercise their powers prudently and within the frame of good faith, possessing all necessary knowledge to ensure full performance of the duty. 4.5. Board Committees Page numbers or section names of the annual report where Risk Management / Active Committees and an Assessment by information about the board committees are presented the Board of Directors Link(s) to the PDP announcement(s) with the board committee charters https://www.kap.org.tr/tr/Bildirim/367089
Composition of Board Committees-I Names Of The Board Name Of Committees Name-Surname of Whether Committee Whether Board Committees Defined As “Other” In Committee Members Chair Or Not Member Or Not The First Column Audit Committee - Ahmet D. Erelçin Yes Board member Audit Committee - Murat Bolat No Board member Corporate Governance - Şebnem Ergün Yes Board member Committee Corporate Governance - Kemal Emre Sayar No Board member Committee Corporate Governance - C. Ozan Sezer No Not board member Committee Committee of Early - Mühibe Elif Germirli Yes Board member Detection of Risk Committee of Early - Kemal Emre Sayar No Board member Detection of Risk
76 Anadolu Hayat Emeklilik 2020 Annual Report 4. BOARD OF DIRECTORS-III 4.5. Board Committees-II Specify where the activities of the audit committee are Annual Report / Risk Management / Active Committees and an presented in your annual report or website (Page number or Assessment by the Board of Directors section name in the annual report/website) Specify where the activities of the corporate governance Annual Report / Risk Management / Active Committees and an committee are presented in your annual report or website (Page Assessment by the Board of Directors number or section name in the annual report/website Specify where the activities of the nomination committee are Annual Report / Risk Management / Active Committees and an presented in your annual report or website (Page number or Assessment by the Board of Directors section name in the annual report/website) Specify where the activities of the early detection of risk Annual Report / Risk Management / Active Committees and an committee are presented in your annual report or website (Page Assessment by the Board of Directors number or section name in the annual report/website) Specify where the activities of the remuneration committee Annual Report / Risk Management / Active Committees and an are presented in your annual report or website (Page number or Assessment by the Board of Directors section name in the annual report/website) 4.6. Financial Rights Specify where the operational and financial targets and their Annual Report / Financial Position achievement are presented in your annual report (Page number or section name in the annual report) Specify the section of website where remuneration policy for Home Page / Investor Relations / Corporate Governance / executive and non-executive directors are presented. Remuneration Policy Specify where the individual remuneration for board members Corporate Governance / Other Material Disclosures Concerning and senior executives are presented in your annual report (Page the Reporting Period / Rights Provided to Board Directors and number or section name in the annual report) Senior Executives
Composition of Board Committees-II Names Of The Name of The Percentage The Percentage The Number Of The Number Board Committees committees Of Non-executive Of Independent Meetings Held In Of Reports On defined as “Other” Directors Directors In The Person Its Activities in the first column Committee Submitted To The Board Audit Committee 100% 100% 5 (3 of them were 4 online because of the pandemic) Corporate 67% 33% 4 (2 of them were 7 Governance online because of Committee the pandemic) Committee of Early 100% 50% 4 (3 of them were 6 Detection of Risk online because of the pandemic)
Anadolu Hayat Emeklilik 2020 Annual Report 77 Additional Information on Corporate Governance
INVESTOR RELATIONS UNIT The Investor Relations Unit in the Company was set up in 2014. The unit reports to Mr. Tuna Uğun, Deputy CEO, effective 19 January 2015. In our Company, the functions of the Investor Relations Unit are mainly performed by the Accounting Department, and the Funds Management Department extends support for the process as and when needed. This unit plays an active part in the protection of shareholding rights and facilitates their exercise, mainly regarding the right to obtain and review information, and establishes the communication between the Board of Directors and shareholders.
Name-Surname Position Telephone E-mail Tuna Uğun Deputy CEO (+90 212) 317 70 05 [email protected] C. Ozan Sezer* Manager (+90 212) 317 70 18 [email protected]
*License Information: Capital Markets Activities Level 3 License, Corporate Governance Rating License, Credit Rating License, Derivatives License
The Unit presents the report governance and public disclosure. VOTING RIGHTS AND MINORITY produced by the Investor Relations RIGHTS Up-to-date information and Unit in relation to its activities to the disclosures that may have an effect According to our articles of association, Corporate Governance Committee and on the exercise of shareholding rights each share of stock is entitled to one the Board of Directors. In essence, the are made available to investors on the vote. Investor Relations Unit carries out the Company website. following tasks: Our Company’s capital is divided into In 2020, all verbal information Class A and Class B shares. Ensure that records pertaining to requests received from researchers the correspondence between the As of 31 December 2020, our and our investors in relation to our investors and the Company, and Company’s issued capital amounts Company and/or publicly disclosed other information and documents are to TL 430 million consisting of financial statement results were maintained in a reliable, secure, and 100,000,000 Class A shares answered. Requests for meetings up-to-date manner worth a total of TL 1 million and received during the reporting period 42,900,000,000 Class B registered Respond to the Company shareholders’ from national and international shares worth a total of TL 429 written requests for Company-related investment companies were million. As required by our articles of information accepted and necessary information association, seven of the members was provided. In total, 2 investor Prepare the documents related to the of the Board of Directors are elected presentations were made and 25 general assembly meetings that need from among nominees designated by teleconferences were held in 2020. In to be made available for shareholders’ Class A shareholders and four from these meetings, presentations were information and review, and take among nominees designated by Class made on our sector and our Company, necessary measures to ensure that B shareholders. and the investors’ questions were general assembly meetings are answered. During 2020, 65 queries Class A shares have no privileges conducted in accordance with the and information requests received at other than the nomination privilege requirements of applicable legislation, the email accounts yatirimciiliskileri@ mentioned above. New Class A shares the Company’s articles of association anadoluhayat.com.tr and are not issued when share capital and other internal regulations [email protected]. increases take place. Oversee and monitor fulfillment tr that were set up for answering the No shareholder is involved in a cross- of obligations arising from the questions of national and international shareholding relationship with the capital market legislation, including investors have been responded to. Company. any matter related to corporate
78 Anadolu Hayat Emeklilik 2020 Annual Report The Company pays maximum attention STAKEHOLDERS informed in case of any delays. It is of to ensure exercise of minority rights particular importance for the Company KEEPING STAKEHOLDERS INFORMED granted under the Turkish Commercial to constantly upgrade the quality of Code and the Capital Market Law, and Care is taken to keeping stakeholders service offered within the context of no stipulations were incorporated in –those who have an interest in our best service delivery to our customer our articles of association due to the Company and include shareholders, portfolio. fact that the legal provisions governing employees, creditors, customers, Attention is paid to confidentiality of this matter have been expanded. suppliers, nongovernmental customers’ and suppliers’ information organizations, the government, and Minority shareholding interests are not that is of trade secret nature. potential investors in our Company– represented on the Board of Directors, informed on issues concerning our STAKEHOLDER PARTICIPATION IN which is formed at the discretion of our Company that are of interest to them MANAGEMENT General Assembly. in writing, to the extent possible. Our shareholders participate in the There is no upper limit on the number The Company’s relationships with decision-making process in relation of votes a shareholder may cast at a stakeholders are governed by written to Company management by way General Assembly. agreements as far as possible. of voting in the General Assembly Voting rights are acquired the In situations where the rights of Meetings. moment the shares on which they are stakeholders are not governed by law While the articles of association contingent are acquired. There are or contract, the Company safeguards contain no provisions on stakeholder no rules stipulating that voting rights them within the framework of the participation in the Company’s may be exercised only after a specific rules of good faith, to the degree management, the Company’s internal period of time has passed after shares possible, and mindful of the Company’s regulations cover practices to this end. are acquired. own reputation. The Suggestion System Regulation Our articles of association contain The corporate governance structure targeting the company employees has no provisions preventing non- provides the means to all stakeholders been introduced as of 1 May 2006. shareholders from voting in proxy. including employees and their Suggestions for innovations and representative bodies to communicate Shareholders may exercise their voting improvements are evaluated within the their concerns about any illegal or rights personally at General Assemblies framework of this regulation and put unethical practices to the Corporate and may do so through any other party into effect in the Company. Governance Committee and the Audit irrespective of the shareholder status Committee, and safeguards their right The Company meets with its sales of that party. to do so. organization twice a year at which time A non-corporate shareholder may they are informed about the Company’s The Company’s quality policy pledges only be represented by a single proxy activities, their suggestions are heard, to offer and maintain quality products at a General Assembly. If a corporate and successful intermediaries are and services on the back of the teams shareholder is represented by more rewarded. enjoying expertise and experience, than one individual at an assembly, strong technological and financial BOARD OF DIRECTORS only one of them may cast votes. The infrastructure, constant development proxy statement must identify the STRUCTURE AND FORMATION OF THE and improvement concept, combined individual who is authorized to cast BOARD OF DIRECTORS with its experienced and extensive votes. agency network. The Company’s Board of Directors is All shareholders are treated equally, composed of eleven members so as The Company pays regard to ensuring including minority and foreign to enable our Board Directors to work continued quality and standards in shareholders. efficiently and constructively, make service across all phases of its life decisions swiftly and rationally, and insurance and private pension services. organize the formation and activities of Customer demands are responded the committees efficiently. to quickly and policyholders are Inasmuch as our Company has no
Anadolu Hayat Emeklilik 2020 Annual Report 79 Additional Information on Corporate Governance
ultimate non-corporate controlling members. Chairman of the Board The Board of Directors plays a shareholders, all of the Board Directors and CEO functions are carried out by leading role in ensuring efficient are assumed to be naturally able to act different individuals. communication between the with independence and therefore, have Company and shareholders, and in the Although there are no set rules on non- the advantage of being able to act elimination and resolution of potential independent Directors’ undertaking impartially in their decisions by holding conflicts. To this end, the Board of other duties outside the Company, the interests of the Company and of its Directors closely cooperates with the the Directors do not have any other stakeholders above everything else. Corporate Governance Committee and duties apart from their natural duties the Investor Relations Unit. There are four independent members in the entities they represent and from on the Board of Directors. The those in the establishments owned by When choosing new members to fill independent Board Directors have the entities they represent. Yet, Board vacancies on the Board attention is not served as members for more than Directors devote sufficient amount of given to the following matters: six years in the past ten years. While time for Company affairs, and exercise Candidates are required to be present the term of office for an independent their powers prudently and within the at general assemblies of shareholders Board Director is one year, they can be frame of good faith, possessing all at which Board elections are to be held. reelected upon being nominated. necessary knowledge to ensure full performance of the duty. Shareholders are provided with The Corporate Governance Committee complete information about functioning as the Nomination Past experiences, and outside candidates. Committee nominated five candidates positions held, if any, of the for independent Board Director independent Board Directors are Shareholders have the right to put status, and the report on whether disclosed in their résumés and questions to candidates. the candidates fulfill the criteria of presented on our website and in our Attention is given to the conduct of independence has been presented to annual report. regular Board meetings, which are held the Board of Directors on 25 February In the fulfillment of its decision-making at least once a month. 2019. functions, the Board of Directors’ Approval of the majority of Independent Board Directors fulfill fundamental concerns are to: independent Board Directors is the independence criteria published Maximize the Company’s market value sought for the Board of Directors in the relevant legislation, and their decisions pertaining to the Company’s declarations of independence have Ensure that the Company’s activities transactions of a material nature been duly received. No instances are conducted in such a way as to with related parties and to furnishing took place during the reporting secure long-term, stable gains for its guarantee, pledge and mortgage in period, which would compromise shareholders favor of third parties. If majority of independence. If an instance Maintain the delicate balance between the independent Board Directors do compromising independence arises, shareholders’ expectations and the not approve the transaction, this is then the independent Board Director Company’s need to grow. publicly disclosed, providing adequate shall present such change immediately information on the transaction to the Board of Directors to be The Board of Directors define the within the frame of public disclosure disclosed to the public. In such a case, strategic goals of the Company, requirements, and the transaction the Board Director who loses his determines the human resources and is laid down for the approval of the independence shall resign as a matter financial resources the Company will General Assembly. The matter is of principle. need, and audits the management decided in the said General Assembly performance. The General Assembly decision meeting through voting where the pertaining to the appointment of the At the same time, the Board of parties to the transaction and their independent Board Director has been Directors also oversees the compliance respective related parties may not disclosed on the corporate website. of the Company activities with the cast votes, thus involving other legislation, articles of association, shareholders in such decisions at the Apart from the CEO, the Board of internal regulations, and the policies General Assembly. Meeting quorum Directors consists of non-executive formulated. shall not be sought for General
80 Anadolu Hayat Emeklilik 2020 Annual Report Assembly meetings that will be held Assembly decisions passed in violation There are no administrative or judicial for circumstances specified in this of the principles herein shall be null sanctions imposed against the article. Decisions are made with the and void. The articles of association Company or the Board Directors. simple majority of those eligible to cover provisions governing these vote. Board of Directors and General aspects.
There two women members on the Board of Directors. The résumés of M Ahmet D. Erelçin and Murat Bolat, the members of the Audit Committee, are incorporated in the Annual Report and these individuals possess adequate experience in finance. Information about the members of the Board of Directors is presented below: Name Position Educational Background/ Company Position Professional Tenure of University/Faculty/ Experience Office with our Department (Years) Company Yalçın Sezen Chairman Middle East Technical Türkiye İş Deputy Chief 33 1 year 9 months University/Faculty of Bankası A.Ş./ Executive Economics and Administrative In-Group Officer Sciences/ Political Sciences Hasan Koçhan Vice Chairman Ankara Academy of Economic - - 36 3 years 8 months and Commercial Sciences / Banking Insurance Trade Institution of Higher Education / Banking Department Yılmaz Ertürk Director & İstanbul University/Faculty of Anadolu Hayat CEO 31 1 year 4 months CEO Economics Sciences/Economics Emeklilik A.Ş. Şebnem Ergün Independent Ankara University/Faculty of Ergün Law Lawyer / 33 2 years 9 months Director Law Office/Non Mediator Group Ahmet D. Erelçin Independent İstanbul University/Faculty of Koç University Banker/ 35 2 years 9 months Director Law /Non Group Academician Mehmet Tuğtan Director Ankara University /Faculty of Türkiye İş Division Head 19 9 months Political Sciences/International Bankası A.Ş./ Relations Department In-Group Murat Bolat Independent Ankara University / Faculty of Turpem Finance 30 9 months Director Political Sciences/Economics Finansal Department Yönetim Ltd.- Ön Besicilik ve Süt Ürünleri A.Ş./ Non Group Mesut Dinçer Director Uludağ University / Faculty of Türkiye İş Division Head 21 1 year 3 months Economics and Administrative Bankası A.Ş./ Sciences / International In-Group Relations Department Mühibe Elif Independent Boğaziçi University / Faculty - Banking/ 27 1 year 9 months Germirli Director of Engineering / Chemical Finance Engineering Department Ümit Bilik Director Middle East Technical University Türkiye İş Division Head 25 4 months /Faculty of Engineering/ Bankası A.Ş./ Electrical and Electronic In-Group Engineering Kemal Emre Director Middle East Technical University Türkiye İş Unit Manager 21 5 years 1 months Sayar / Faculty of Engineering / Bankası A.Ş./ Industrial Engineering In-Group
Anadolu Hayat Emeklilik 2020 Annual Report 81 Additional Information on Corporate Governance
Information on the Board Directors to items on the Board’s agenda are of the related Board of Directors Who Resigned During the Reporting normally sent out to Members for committees, and annually reviews the Period them to examine 3-7 days before the efficiency of risk management and meeting date. In situations where this internal control systems. Merih Rafet Akgünay is not possible, every effort is made to Left office on 23.03.2020 The Company’s Board Directors and ensure that all members are equally executives are insured against the Erda Gerçek informed about the matters involved. risk of loss they may cause to the Left office on 23.03.2020 A secretariat has been set up that is Company due to their fault in the Serdar Yılmaz responsible for executing the activities performance of their duties, within the Left office on 31.08.2020 of the Board of Directors, keeping the scope of the liability insurance policy Company’s Directors informed, and for that names Türkiye İş Bankası A.Ş. and Information on Board of Directors communicating with them. its subsidiaries (İşbank Group) as the Meetings Insured. A Board’s first meeting is preferably During 2020, Anadolu Hayat Emeklilik held on the same day that it is elected Number, Structures and Board of Directors held 11 meetings, into office. Independence of Committees 8 of which were convened with full within the Board of Directors participation of the members. In 3 At this first meeting, the Chairman and other meetings, full participation Deputy Chairman are elected, duties There is an Audit Committee, a could not be achieved due to justified are assigned, and committees are Corporate Governance Committee and excuses of the Board Directors. These formed. Early Detection of Risk Committee in meetings were convened in the our Company. The Board meets regularly at least absence of one Director. once a month as previously scheduled Due to the structure of the Board of Other Information and occasionally as circumstances Directors, the Corporate Governance warrant. Committee also functions as the During 2020, our Board Directors did Nomination Committee and the not perform any transactions under In principle, Board Directors take part in Remuneration Committee. the authorization received from the all meetings. General Assembly so that they can There are two non-executive Each Board Director is entitled to a perform the transactions specified Board Directors in each one of single vote. All directors’ votes carry under articles 395 and 396 of the the Committees. The Corporate equal weight and no Director has a Turkish Commercial Code. Governance Committee consists of positive or negative veto power. three members. Operating Principles Of The Board As stipulated in our articles of Of Directors As a matter of principle, Board association, the Board convenes with Directors do not undertake roles in A draft of the agenda for a Board a simple majority of its membership several committees. Furthermore, as meeting is prepared by the CEO and decisions are passed by a simple there are no ultimate non-corporate and finalized in line with the majority of those present. controlling shareholders in our recommendations of the Chairman and The Board convened 11 times during Company, it is assumed that all of the other directors. 2020. Board Directors serving in committees Special care is taken to setting meeting are naturally able to act with No Company Director cast a dissenting dates that will allow all Board Directors independence and therefore, have the vote against any Board decision passed to attend and to hold the meetings advantage of acting impartially in their during 2020. with all directors in attendance except decisions. in unforeseen exceptional cases. There were no related party The Corporate Governance Committee transactions or transactions of material As a rule, at each regular meeting is formed by the Board of Directors nature that have been laid down of the Board, the date of the next within the scope of corporate for the approval of our Independent scheduled meeting is set and Members governance principles and firstly from Directors. are subsequently reminded of this in amongst its own members. When writing. The Board of Directors establishes necessary, specialist individuals the internal control systems of the who are not members of the Board Utmost care is paid to ensure that the Company, after obtaining the opinions of Directors may be assigned to the information and documents pertaining
82 Anadolu Hayat Emeklilik 2020 Annual Report committee. The Chief Executive Corporate Governance Committee at Financial Rights Officer does not take place in this the Company. The Committee head is Aggregate of the salaries and similar committee. The Committee consists Şebnem Ergün. benefits provided to the Company’s of a minimum of two members. At our The Audit Committee is formed by Board Directors and senior executives Board of Directors meeting held on the Board of Directors from amongst are disclosed in the notes to the 27 May 2014, it was decided to elect its members. The Committee must financial statements, which are publicly Accounting Manager N. Cem Özcan as consist of at least two members. The disclosed and are also accessible on member of the Corporate Governance majority of the Committee members our corporate website, and thereby, Committee pursuant to Article must consist of non-executive Board incorporated in our annual report. 11(2) of the Corporate Governance Directors. The head of the Committee Communiqué published by the Capital Company directors receive no financial is elected from amongst independent Markets Board of Turkey (CMB) in the benefits other than the honorarium Directors. The term of office for the Official Gazette issue 28871 dated 3 that is paid to them. Audit Committee is coeval with that of January 2014. At our Board of Directors the Board of Directors. The Committee The amount to be paid as an meeting held on 27 July 2020, it was meets at least quarterly. Committee honorarium is determined by decided to appoint Necdet Cem Özcan decisions are adopted on the basis of shareholders at a general assembly. as Deputy Chief Executive holding the majority of votes cast. first degree signature authorization The remuneration policy developed following the consummation of the Ahmet D. Erelçin serves as the head of for the Company’s managers and necessary legal approval process. Upon the Audit Committee, and Mühibe Elif employees at any level is put into completion of the approval process Germirli as its member. writing, presented to the shareholders as of 17 August 2020, Necdet Cem for their information as a separate The term of office of the Early Özcan began serving in his position agenda item at the 2011 General Detection of Risk Committee is coeval as Deputy Chief Executive. At the Assembly. The said remuneration with that of the Board of Directors. Board of Directors meeting held on 28 policy is published on the Company The Committee spends efforts to September 2020, it was decided that website. early detect the risks that might N. Cem Özcan will be succeeded by endanger the existence, progress Stock options or payment plans based Cavit Ozan Sezer, Accounting Manager, and survival of the Company, to on the Company’s performance are not in the role as Corporate Governance ensure implementation of necessary used in the remuneration of our Board Committee Member within the frame measures and remedies in relation to Directors, including the independent of the change in the Investor Relations the identified risks, and to manage the Board Directors. Nonetheless, it is Unit Manager at the Company. risk. The Committee reviews the risk believed that the remuneration of The majority of the Committee management systems at least on an independent Board Directors is at members consist of non-executive annual basis. The Committee presents a level that will not prejudice their Board Directors. The head of the an assessment of the situation in independence. Committee is elected from amongst its quarterly report to the Board of The Board Directors and executives independent Directors. While the term Directors, pointing at the perils, if any, with administrative responsibility have of office for the Corporate Governance and indicating the remedies. never utilized, directly or indirectly, Committee is, in essence, coeval with Erda Gerçek serves as the head of the cash or non-cash loans from the that of the Board of Directors; the Early Detection of Risk Committee, and Company, nor did the Company Committee will remain in office until Kemal Emre Sayar as its member. lend money or give suretyship or the completion of the predetermined provide any similar guarantee to adjustment process, when the All of the members of the Audit any Board Director or executive Board of Directors is succeeded. To Committee and the heads of other with administrative responsibility. the extent possible, the Committee committees are elected from amongst Therefore, the Company was not meets consistently with the Board independent Directors. confronted with any conflict of interest of Directors meetings. Committee Our executive Directors and CEO do not that arose due to such reasons. decisions are adopted on the basis of serve on any committee. the majority of votes cast. The objectives, members, structures Şebnem Ergün, Kemal Emre Sayar and activities of committees take place and C. Ozan Sezer serve on the in the annual report.
Anadolu Hayat Emeklilik 2020 Annual Report 83 Sustainability Principles Compliance Framework
Sustainability Management • Raises consciousness of Anadolu Hayat Emeklilik Sustainability safeguarding the future among Committee is responsible for the Being a private pension and life the society through stakeholder Company’s sustainability strategy, insurance company, Anadolu Hayat communication initiatives, setting targets and establishing Emeklilik embeds sustainability related policies, coordinating the in its core values, and has been • Sets up long-term and stable sustainability-related initiatives, working with the aim of contributing pension funds, monitoring performance, and to enhancing the living standards • Provides a fair working environment identifying the necessary training of individuals and ensuring their where human rights and labor rights programs within the scope of sustainability since its incorporation. are respected, sustainability. The Sustainability As it carries on with its operations in Committee meets biannually, and keeping with its missions to develop a • Works with the goal of continuous the duties of the Committee Head consciousness among individuals for customer satisfaction. and members are detailed in the safeguarding their futures, offering In its fund management activities Sustainability Committee Internal financial solutions that fulfill their falling under the scope of its Bylaws and related procedures. needs, and creating long-term and sustainability policy, Anadolu Hayat Implementations within the scope stable pension funds, the Company Emeklilik defines nuclear energy, coal- of the Sustainability Management also shares its sustainability-related fueled thermal power plants, gambling System are monitored by the senior initiatives transparently with all its and games of chance and firearms management within a specific process. stakeholders. industries as “sensitive sectors”. The As it operates in a low-impact sector, The Company’s sustainability strategy Company evaluates private sector Anadolu Hayat Emeklilik is not covered that is built upon multi-layered targets borrowings and investment decisions by any carbon pricing system. Detailed are posted on the corporate website. in marketable securities within these information about the Company’s Accordingly, Anadolu Hayat Emeklilik; sectors with a focus on institutional Sustainability Policy and Sustainability information within the framework Management System can be found on • Seeks to create economic, of its sensitive sector approach, and the corporate website. environmental and social value in submits these for the approval of the the long term, Environmental Impact Reporting Executive Committee. • Acts with an awareness of its Each year, annual sustainability Anadolu Hayat Emeklilik’s responsibility incumbent upon it reports are prepared and presented Sustainability Management System for combating climate change and to senior management, and planned incorporates periodically updated alignment, and develops projects activities are announced via the procedures that define internal to mitigate the impacts of climate corporate website. Comparative data processes related to sustainability and change, on the basis of years for Scope-1 determine roles and responsibilities. (Direct Emissions)1, Scope-2 (Energy • Pursues responsible investment These procedures deal with Indirect Emissions)2, Scope-3 (Other notion in its operations and aims to “Evaluation of Internal Environmental Emissions)3,4 emissions are published increase positive impact, Impacts”, “Evaluation of External on the website every year. Calculated Environmental Impacts”, “Setting • Offers financial solutions that will Greenhouse Gas (GHG) emissions Goals and Objectives”, “Training”, meet the needs and expectations stemming from the operations “Internal and External Communication”, for the sustainability of the society, carried out in 2020 are targeted to be “Document Review”, “Internal Control disclosed in September 2021. and Internal Audit”, and “Management Review”.
1 AHE Scope-1 calculation covers GHG emissions from gas consumption, company cars, generators, cooling groups, ventilation and fire extinguishing systems. 2 AHE Scope-2 calculation covers GHG emissions from electricity consumption. 3 AHE Scope-3 calculation covers GHG emissions from employee commuter bus services, use of taxis and buses, business-related air travels and paper consumption. 4 Due to the relocation of certain offices by end 2018, total office space used by Anadolu Hayat Emeklilik employees increased in 2019. Our GHG emissions density per usage area remained unchanged from the previous year.
84 Anadolu Hayat Emeklilik 2020 Annual Report Anadolu Hayat Emeklilik has devised was taken as 2018 in this study. The became a signatory of the Women’s the roadmap for the transformation Company’s sustainability performance Empowerment Principles (WEPs) that sets digitalization as one of its and initiatives are transparently in 2018, which is a joint initiative key targets. In this context, progress disclosed on the corporate website. of the UN Global Compact and UN is planned in digitalization initiatives The Company intends to release a Entity for Gender Equality and the within the scope of actions for sustainability report aligned with Empowerment of Women. Within the achieving reduction in GHG emissions. the Global Reporting Initiative (GRI) frame of the WEPs, which is one of Decreasing paper consumption, Sustainability Reporting Standards as the most important global initiatives reducing air travels, optimization of 2021. by the private sector, the Company of employee commuter bus routes, incorporates and implements the Anadolu Hayat Emeklilik carries out and opting for fuel-efficient cars principles seeking to create company projects to manage the impacts of its for the company private cars fleet policies supporting women’s locations where it pursues activities. are among the solutions that are empowerment in business and society Accordingly, Manzara Adalar Offices currently in place and will remain so in all of its work processes. hold the LEED (Leadership in Energy in the future. Every year since 2017, and Environmental Design) Gold Human Resources Management the Company has been offsetting its green building certification awarded and Ethical Rules carbon footprint resulting from its by the U.S. Green Building Council operations with contributions made Anadolu Hayat Emeklilik’s “Human (USGBC). In addition to environmental to sustainable energy sources and Rights and Human Resources” policies management efforts, the Company has since remained carbon neutral; are published on the corporate uses recyclable paper and materials in this achievement is publicly disclosed website. The Human Resources and printed materials such as planners and through press releases. The 2019 Training Department is responsible annual reports in order to manage its value disclosed in 2020 was 2,248.3 for the implementation of the said indirect impacts as well. During 2020, tons CO e. policy. As mentioned in the policy, the 2 no violations of the environmental Company provides equal opportunities. GHG emissions resulting from Anadolu legislation took place, nor were there Anadolu Hayat Emeklilik seeks to Hayat Emeklilik’s operations are any penal sanctions imposed. The act fairly and free from prejudice to calculated every year using the Zero practices in relation to environmental people, encourage diversity both Carbon Principles within the scope of management are published on the at the workplace and within the the cooperation with ESCARUS - TSKB Company’s corporate website. society, and protect human dignity. Sustainability Consultancy Inc.1. In the Anadolu Hayat Emeklilik affiliated While aiming to also eliminate the data collection process for the GHG to the United Nations Environment negative effects of possible unjust emissions report prepared in 2020 and Programme – Finance Initiative treatments in the past with its equal covering the period 01 January 2019 (UNEP-FI) in 2017. Anadolu Hayat opportunities approach, the Company – 31 December 2019, the Company’s Emeklilik is the first and only private ensures following a path that will avoid activities were taken into account, pension and life insurance company discrimination, that is constructive and whereas the GHG Protocol, IPCC from Turkey admitted to this global inclusive. Assessment Reports, ISO 14064 and alliance formed by the UN Environment BSI PAS 2050 standards were utilized Programme and the finance sector. in GHG calculations. The base year On the other hand, the Company
1 ZeroCarbon aims to be a useful tool for assessing, reporting and documenting climate neutrality of Turkish companies and organizations. The ZeroCarbon label provides a transparent method for sharing a company’s contribution to greenhouse gas emissions reduction. In this context, ZeroCarbon contributes to Turkey’s transition to a low-carbon economy. ZeroCarbon Principles were recognized by the Republic of Turkey Ministry of Environment and Urbanization, Gold Standard, UNDP-Turkey, BCSD Turkey and BSI Turkey.
Anadolu Hayat Emeklilik 2020 Annual Report 85 Sustainability Principles Compliance Framework
In all of its decisions made concerning It is among the top priorities for practices when necessary. The its employees, Anadolu Hayat Anadolu Hayat Emeklilik to make sure Company manages activities targeted Emeklilik acts free from all kinds of that the working environments of at employees within the scope of biases including those on the basis employees are healthy and safe. There awareness initiatives. of race, religion, language, sect or are Occupational Health and Safety Details of the rules covered in the any faith, gender, mental or physical (OHS) Committees in all workplaces, information document regarding the disabilities, age, cultural or social class and all practices associated with collection, retention, processing and differences. The Company refuses all occupational health and safety are transfer of personal data by Anadolu sorts of discrimination towards and/or carried out in accordance with the Hayat Emeklilik A.Ş. in the capacity of between employees and executives. In Occupational Health and Safety Law “Data Controller” under the Personal its recruitment practices, the Company no. 6331. Each new hire is offered Data Protection Law no. 6698, and guarantees that child labor is not informative training about OHS and the “Anti-Bribery and Anti-Corruption employed. The Company discloses the Occupational Health and Safety Policy” are published on the corporate training programs it organizes for its Guidelines within the scope of OHS website. employees, the right to unionization procedures. All employees receive within the scope of employment basic OHS training regularly pursuant Owing to its sustainability strategy security, its remuneration policy to the Occupational Health and Safety and its activities summarized above, covering compensation and fringe Law no. 6331. Anadolu Hayat Emeklilik has been benefits, performance management the first and only company from the Anadolu Hayat Emeklilik organizes and resolution processes employed insurance and pension sector quoted informative meetings and training in case of disputes on its corporate at BIST Sustainability Index in 2020. programs on Environmental, Social website. and Governance (ESG) policies and
86 Anadolu Hayat Emeklilik 2020 Annual Report Information on General Assembly
Zeliha Begöz - The Boatman Having successfully completed its 2020 Shots From Life As Seen By Women ‘20 operations, Anadolu Hayat Emeklilik increased its net profit by 45% to TL 519.3 million.
Anadolu Hayat Emeklilik 2020 Annual Report 87 Summary Report of the Board of Directors for the General Assembly of Shareholders
Dear Shareholders, unemployment rates that resulted functions in the sector, support from the restrictions implemented in competitive environment, and sustain Ever since its inception, our Company numerous countries deeply affected the rise in the number of participants has espoused it as a fundamental many sectors, including the financial and total funds under management philosophy to offer the best practices services sector. As the pandemic in the coming period so as to capture of modern private pension and life maintains its effect on our country, life stable growth in the Private Pension insurance businesses, and to give the insurance and private pension sectors, System. foreground to its robust capitalization, in which our Company is engaged, gave In 2020, our Company focused on the transparent implementations a good account of themselves. The activities listed below in line with its and customer satisfaction, while sector sustained its growth in 2020 innovation and digitalization oriented being innovative. It is also a priority in spite of all the negative effects of profitable growth vision: principle for the Company to maintain the outbreak. Significant real growth customer-focus in every respect was achieved in a number of aspects, • Continued work for updating before its shareholders, investors, primarily in total assets, shareholders’ the credit-linked life insurance customers and employees with equity, pension assets and net profit, infrastructure as part of the regard to all of its corporate values, as well as many others. In 2020 that transformation of insurance principally, putting its resources and marked its 30th year in operation, our software infrastructure, new technologies to use towards Company achieved successful results • Continued efforts for increasing increasing productivity, and being even amid this challenging period, the use and effectiveness of digital instrumental in attaining sustainable and outperformed its targets in total channels, revamping the Mobile development. assets, shareholders’ equity, life and Branch AHE Mobile, introduction pension assets and net profit. Anadolu Hayat Emeklilik defined it of the capability to switch from as a key objective to sustain its solid An important development of 2020 İşCep without entering password, position in the market on the back of for the sector was the law amendment and online sales made available its pioneering and innovative practices allowing accumulating funds in for various products through the in life insurance and in the private foreign currency in the private pension corporate website, pension branches by fortifying its system, with the aim of encouraging •Enhancing the experience of position among the leading financial Turkish citizens living abroad to save customers furnished with FonMatik services companies of the capital up in our country. Other highlights ROBO service, Turkey’s one and only market as the first publicly-floated include the commencement of private pension fund robot that private pension company in the operations actively by the Insurance provides automated modification system. and Private Pension Regulation and of customers’ fund distributions Supervision Agency (PPRSA) upon the 2020 has been a year characterized according to market conditions, appointments made to this entity, the by destructive impacts sustained by merger of public pension companies • Development of products and economic, social and commercial life on under Turkey Wealth Fund, and the services addressing different target a global and local scale induced by the Presidential Annual Program 2021. audiences in the private pension Covid—19 breakout that emerged in The said program and regulations branch, China in December 2019, which spread incorporate actions in order to ensure across the rest of the world in March • Execution of product, sales and more effective execution of the and ultimately declared a pandemic. marketing activities directed regulation, supervision and auditing Slumped demand and surged towards increasing premium
88 Anadolu Hayat Emeklilik 2020 Annual Report productions on credit-linked and • “Customers’ Friend” accolade submitted to our Board of Directors, stand-alone life insurance, awarded by ICERTIAS, an are used to ensure that potential risk independent international exposure is regularly assessed and • Continued improvement of customer certification agency. monitored. processes as part of the operational excellence efforts, In its 30th year, our Company has also Based on the sectoral data for 2020: become the first and only company • Execution of efforts for alignment • Total written premiums in life from the insurance and pension with the regulatory framework, insurance by the overall sector sector quoted at BIST Sustainability primarily with TFRS 17, Personal went up by 27% year-on-year and Index that includes companies traded Data Protection Law and the Private amounted to TL 14.3 billion, while on Borsa İstanbul with superior Pension System legislation, premium production on term life sustainability performance. insurance augmented by increased • Neutralization of the Company’s Total gross dividends paid in cash to 22% to TL 11.7 billion. Life insurance carbon footprint resulting from our shareholders in 2020 amounted customer assets, on the other hand, its 2019 operations by extending to TL 280 million, and all of the grew by 37% and reached TL 13.6 support to renewable energy resolutions adopted at the Annual billion. projects under the Sustainability General Assembly Meeting held on 23 Management System and continued • The number of participants in March 2020 have been realized. to remain as a carbon neutral Voluntary PPS remained flat around company also in 2020, Carrying out their activities in 6.9 million, while total funds of alignment with the regulatory participants went up by 33% and Our Company endorsed its arrangements and targeting to ensure topped TL 158 billion. achievements with prestigious that our Company’s overall operation certifications and awards earned in • In the auto enrolment system, the and practices are conducted in a 2020 as well: number of employees went up by manner that is structured, efficient 11% to top 6.6 million and total • “Gold Prize” in the “Private Pension and transparent, the Board of Directors funds increased by 44% to coming and Life Insurance” category at the Committees continued with their close to TL 12 billion. “Social Media Awards Turkey”, the efforts and work during the reporting most comprehensive first social period. The Risk Management and • All in all, total number of participants media competition in Turkey co- Internal Control Department issues in the private pension system organized by Marketing Türkiye and quarterly Risk Assessment Report, including auto enrolment was up BoomSonar. Compliance Report and Insurance by 5% to 13.5 million on an annual Risk Report, annual Internal Control basis, whereas total funds increased • “Gold Prize” in the “Best Retention, Report, bimonthly Early Detection of by 34% to TL 170.1 billion. Marketing Achievement” category at Risk Committee Report, and monthly the PSM Awards 2020 organized by Market Risk Monitoring Report, and PSM, payment systems magazine, performs “Value at Risk” computations with its FonMatik ROBO project. on a daily basis. In addition, annual and • “Leed Gold” certification awarded quarterly reports are being produced to sustainable and environmentally- in accordance with the Financial friendly offices by the U.S. Green Crimes Investigation Board (in Turkish: Building Council (USGBC) with the MASAK) legislation. The data derived Customer Services Center from the said reports, which are
Anadolu Hayat Emeklilik 2020 Annual Report 89 Summary Report of the Board of Directors for the General Assembly of Shareholders
In view of the Company’s current • In voluntary PPS and auto enrolment participants, achieve regulatory mission, vision, corporate strategies system combined, our Company’s compliance, and improve the level and primary goals, 2020 has been a number of participants went up by of automation, digital maturity, and period during which we preserved 5.9% to 1,973,776, and total funds digital sales and self-service channel our pioneering position in the by 33.3% to TL 30.6 billion. Our usage will uninterruptedly continue segments we are engaged in and Company ranks third in the sector also in the coming year. attained successful financial results. in the total number of participants In line with our goal of securing The Company’s data for 2020 are with 14.6% market share and high-level customer experience and summarized below: second in total funds with 18% cost optimization at all customer market share. • Our Company’s total premium touchpoints, applications such as production reached TL 1,684 million • Anadolu Hayat Emeklilik remained FonMatik ROBO and projects for using representing a 37% increase over the company creating the largest robotic process automation (RPA) the 2019 figure, whereas term life funds amongst privately-owned and artificial intelligence (AI) will be insurance production was up by 19% companies in the aggregate of life ongoing. to reach TL 1,082 million. Premium insurance, private pension and auto Our Corporate Governance Principles production on endowment policies enrolment system, also in 2020 with Compliance Report and the financial augmented by 93% to reach TL TL 33.7 billion in total. statements for 2020 are presented 582 million. Life insurance customer • Having concluded its activities in on the following pages for your assets, on the other hand, grew by 2020 successfully, our Company information and approval. 39% and came to TL 3.1 billion. remarkably increased its net profit We would like to take this opportunity • In Voluntary PPS, total funds of our by 45% to TL 519.3 million and its to express our gratitude to our founder Company’s 1,091,440 participants total assets by 33% to TL 36,067 İşbank and our other shareholders, went up 33% on an annual basis and million. Technical profit, on the other our customers who place their trust in reached TL 29.4 billion. Controlling hand, went up by 33% year-on- year our Company, and all our distribution 15.8% market share in the number and amounted to TL 472.2 million. channels and all our employees for of participants and 18.5% in total Drawing on its pioneering position their contributions that made the funds, our Company remains the in the market, its solid shareholding results achieved possible. leader with a market share of 25% in structure, its successful financial the number of system retirees. Sincerely, performance, its corporate culture • Having reached 882,336 employees and the customer experience-focused Board of Directors and TL 1,224 million in total funds approach to service, our Company will in the auto enrolment system continue to create added value for the with respective increases of 14% sector and the national economy also and 41% on an annual basis, our in the year ahead, being Turkey’s first Company is the leader amongst publicly- floated pension company. privately-owned pension companies Our efforts to constantly enhance with respective market shares of the quality of service rendered to 13.3% and 10.4%.
90 Anadolu Hayat Emeklilik 2020 Annual Report Ordinary General Assembly Agenda
2020 Ordinary General Assembly Meeting Agenda 25 March 2021, Thursday Oditoryum Binası İş Kuleleri 34330 Levent-Beşiktaş/İstanbul 10:00 am Agenda: 1. Opening, electing a Presiding Board, and authorizing the Presiding Board to sign the minutes of the Ordinary General Assembly Meeting 2. Presentation and discussion on the Board of Directors’ 2020 Annual Report, and presentation of the Statutory Auditors’ report for 2020 3. Presentation, discussion and approval of the financial statements for 2020 4. Approval of the election made to fill the seats vacated on the Board of Directors during the reporting period as per Article 363 of the Turkish Commercial Code and Article 10 of the Articles of Association 5. Acquittal of the Company’s Directors 6. Decision on distribution of profits 7. Approval of the extension of the permissible period granted to our Company in relation to the authorized capital in the amount of TL 900,000,000.-TL (Nine hundred million Turkish liras) and the amendment of “Article 6 – Capital and Shares” of the Company’s Articles of Association 8. Election of the members of the Board of Directors and determination of their terms of office 9. Authorizing the Board Directors to carry out the transactions set out in Articles 395 and 396 of the Turkish Commercial Code 10. Determination of the remuneration of Board Directors 11. Designation of the independent audit firm 12. Presentation of information on grants and donations made in 2020 13. Approval of the limit for the donations and grants intended to be made during 2021
Anadolu Hayat Emeklilik 2020 Annual Report 91 2019 Profit Distribution Table
Anadolu Hayat Emeklilik A.Ş. 2019 Profit Distribution Table (TL) 1- Paid-in/Issued Capital 430,000,000 2- General Legal Reserves (according to Legal Records) 170.931.830 If there are privileges for distribution of profits according to the articles of association, information on There are no privileges for
such privileges distribution of profits Based on CMB Based on Legal Records
(Consolidated) (Unconsolidated) 3- Profit for the Period (*) 465,400,846 462,243,903 4- Taxes Payable (-) (119,305,000) (119,305,000) 5- Net Profit for the Period (=) 346,095,846 342,938,903 6- Losses in Prior Years (-) (**) - - 7- First Legal Reserves (-) - - 8- NET DISTRIBUTABLE PROFIT FOR THE PERIOD (=) 346,095,846 342,938,903 9- Donations during the Year (+) 1,650 10- Net Distributable Profit for the Period Including Donations 346,097,496 11- First Dividend to Shareholders - Cash 69,219,499 - Bonus Shares - - Total 69,219,499 12- Dividends Distributed to Owners of Privileged Shares - 13- Dividends Distributed to Board Members, employees, etc. 7,440,317 14- Dividends Distributed to Owners of Redeemed Shares - 15- Second Dividend to Shareholders 210,780,501 16- Second Legal Reserves 26,594,032 17- Statutory Reserves 26,943,603 26,943,603 18- Special Reserves - - 19- Extraordinary Reserves (***) 5,117,894 1,960,951 20- Other Resources to be Distributed - -
(*) Pursuant to Article 13 of the Dividend Communiqué included in the CMB Weekly Bulletin 2014/2 and published in the Official Gazette dated 23 January 2014, dividend distribution was made based on the consolidated profit figure. Profit for the period for the year ended 31 December 2019 includes the provision for dividends to personnel in the amount of TL 7,500,000, which is set aside pursuant to TAS 19. Furthermore, benefiting from the exemption granted in the legislation, TL 20,650,000 for İş Portföy Yönetimi A.Ş. (İş Asset Management) Infrastructure Venture Capital Fund decided to be invested in 2020 and TL 1,094,978, which is 75% of the sales profit of TL 1,927,896 derived on the sales of equity stock sold in 2019 have been retained.
(**) Pursuant to Article 33/a of the Company’s Articles of Association, first legal reserves can be set aside until 5% of the net annual profit reaches 20% of the capital. As the said limit has been reached, first legal reserves have not been calculated in dividend distribution.
(***) As a result of dividend distribution, TL 1,960,951 has been taken into consideration as extraordinary reserves, which is calculated according to legal records. Information on Dividend Ratio Dividend Ratios Table Group Total Dividends Total Dividends Distributed / Total Dividends Distributed / Distributed Net Distributable Profit Net Distributable Profit for the Period for the Period Cash (TL) Bonus (TL) Rate (%) Amount (TL) Rate (%) NET (****) A 553,488.37 - 0.16 0.5534883 55.34883 B 237,446,511.63 - 68.61 0.5534883 55.34883 TOTAL 238,000,000.00 - 68.77 - -
Ratio of Dividends Distributed to Net Distributable Profit for the Period Including Donations Amount of Dividends Distributed to Shareholders (TL) Ratio of Dividends Distributed to Shareholders to Net Distributable Profit for the Period Including Donations (%) 280,000,000.00 80.90%
(****) 15% income tax will not be applied on cash dividends for full-fledged taxpayer
92 Anadolu Hayat Emeklilik 2020 Annual Report 2020 Profit Distribution Proposal Table
Anadolu Hayat Emeklilik A.Ş. 2020 Profit Distribution Proposal (TL) 1- Paid-in/Issued Capital 430,000,000 2- General Legal Reserves (according to Legal Records) 197,525,862 Information on privileges for distribution of profits, if granted as per the Articles of Association There are no privileges for distribution of profits Based on CMB Based on Legal Records (LR) (Consolidated) (Unconsolidated) 3- Profit for the Period (*) 638,322,095 630,724,183 4- Taxes Payable (-) -128,336,961 -128,336,961 5- Net Profit for the Period (=) 509,985,134 502,387,222 6- Losses in Prior Years (-) - - 7- First Legal Reserves (-) (**) - - 8- NET DISTRIBUTABLE PROFIT FOR THE PERIOD (=) 509,985,134 502,387,222 9- Donations during the Year (+) 433,700 10- Net Distributable Profit for the Period Including Donations 510,418,834 11- First Dividend to Shareholders - Cash 102,083,767 - Bonus Shares - - Total 102,083,767 12- Dividend Distributed to Owners of Privileged Shares - 13- Dividends Distributed to Board Members, Employees, etc. 8,339,894 14- Dividends Distributed to Owners of Redeemed Shares - 15- Second Dividend to Shareholders 257,916,233 16- Second Legal Reserves 34,683,989 17- Statutory Reserves 39,956,147 39,956,147 18- Special Reserves - - 19- Extraordinary Reserves (***) 67,005,104 59,407,192 20- Other Resources to be Distributed -
(*) Pursuant to Article 13 of the Dividend Communiqué included in the CMB Weekly Bulletin 2014/2 and published in the Official Gazette dated 23 January 2014, dividend distribution was made based on the consolidated profit figure. Profit for the period for the year ended 31 December 2020 includes the provision for dividends to personnel in the amount of TL 8,400,000, which is set aside pursuant to TAS 19. Furthermore, benefiting from the exemption granted in the legislation, TL 10,000,000 for Maxis Girişim Sermayesi Portföy Yönetimi A.Ş. (Maxis Private Equity Portfolio Management) Atlas Growth Venture Capital Fund, TL 15,000,000 for Maxis Private Equity Portfolio Management Renewable Energy Venture Capital Fund in which the Company decided to invest in 2021, , and TL 354,130, which is 75% of the sales profit of TL 472,173 derived on the sales of equity stock sold in 2020, have been retained.
(**) Pursuant to Article 33/a of the Company’s Articles of Association, first legal reserves can be set aside until 5% of the net annual profit reaches 20% of the issued capital. Currently, our Company’s paid-in capital is TL 430,000,000 and 20% thereof is TL 86,000,000. At present, our Company’s total legal reserves have reached TL 86,000,000. Therefore, first legal reserves have not been set aside.
(***) As a result of dividend distribution, TL 59,407,192 will be taken into consideration as extraordinary reserves, which is calculated according to legal records. Information on Dividend Ratio Dividend Ratios Table Group Total Dividends Total Dividends Distributed / Total Dividends Distributed / Distributed Net Distributable Profit Net Distributable Profit for the Period for the Period Cash (TL) Bonus (TL) Rate (%) Amount (TL) Rate (%) NET (****) A 711,627.91 - 0.14 0.7116279 71.16279 B 305,288,372.09 - 59.86 0.7116279 71.16279 TOTAL 306,000,000.00 - 60.00 - -
Ratio of Dividends Distributed to Net Distributable Profit for the Period Including Donations Amount of Dividends Distributed to Shareholders (TL) Ratio of Dividends Distributed to Shareholders to Net Distributable Profit for the Period Including Donations (%) 360,000,000.00 70.53%
(****) 15% income tax will not be applied on cash dividends for full-fledged taxpayer.
Anadolu Hayat Emeklilik 2020 Annual Report 93 Financial Position
Evrim Gülderen Kuşcu - The Wild Horses Anadolu Hayat Emeklilik reached a technical profit Shots From Life As Seen By Women ‘20 of TL 472.2 million in 2020, up 33.5% year-on- year.
94 Anadolu Hayat Emeklilik 2020 Annual Report Information on Financial Structure
With its capital backed by its strong shareholding structure since its foundation and its business philosophy focused on sustainable profitability in the branches in which it is active, Anadolu Hayat Emeklilik always succeeded in taking place among the industry’s strongest companies with respect to financial structure. A key indicator of a strong financial structure, the Capital Adequacy Statement is reported at regular intervals in line with the legal requirements, and as such, it is registered before the public authority that our Company possesses a capital in excess of the capital amount necessary to cover its liabilities. Capital Adequacy Table presented hereinbelow show that the Company’s shareholders’ equity in 2020 is above the required shareholders’ equity amounts.
Capital Adequacy Table (31 December 2020) (*) Required Capital for Asset Risks 506,575,122 Required Capital for Reinsurance Risks 2,706,591 Required Capital for Outstanding Claims 6,226,215 Required Capital for Underwriting Risks 80,527,112 Required Capital for Interest and FX Risks 3,581,931 Total Required Capital 599,616,971 Current Capital (**) 1,634,667,552 Excessive Capital 1,035,050,581
(*) Capital Adequacy Table dated 31 December 2020 has not been submitted to the Ministry of Treasury and Finance as of the date the annual report is released.
(**) As per the legislation, equalization provision in the amount of TL 53,403,589 (31 December 2019: TL 39,434,063) was included in the equity capital. An Assessment Regarding Operations of the Company’s Segments Anadolu Hayat Emeklilik closed 2020 posting a technical profit of TL 472.2 million in life insurance, personal accident insurance and private pension branches in which it is active. The distribution of balance sheet and income statement items according to branches was based on the distribution key that was set out in the “Circular on the Principles and Procedures for Keys Used in Financial Statements Drawn Up within the Frame of Uniform Chart of Accounts in Insurance” dated 4 January 2008 published by the Ministry of Treasury and finance, The table below shows the contributions of the branches in which the Company is active to our financial structure with respect to asset sizes.
31 December 2020 (TL) Life Private Pension Personal Accident Total Segment assets 3,888,303,524 32,103,106,967 75,712,710 36,067,123,201 Total segment assets 3,888,303,524 32,103,106,967 75,712,710 36,067,123,201 Segment liabilities (4,081,511,141) (31,906,344,652) (79,267,408) (36,067,123,201) Total segment liabilities (4,081,511,141) (31,906,344,652) (79,267,408) (36,067,123,201) Other segment information Depreciation and amortization (12,022,342) (19,097,972) (234,098) (31,354,412)
31 December 2020 (TL) Life Private Pension Personal Accident Total Continuing operations: Technical income 2,179,293,930 506,282,690 591,910 2,686,168,530 Technical expense (1,851,680,989) (360,755,917) (1,521,624) (2,213,958,530) Total of other income and expense 67,280,484 106,877,749 1,310,080 175,468,313 Income before tax 394,893,425 252,404,522 380,366 647,678,313 Income tax expense - - - (128,336,961) Net profit for the period 394,893,425 252,404,522 380,366 519,341,352
Anadolu Hayat Emeklilik 2020 Annual Report 95 Information on Financial Structure
Financial Assets Life insurance and private pension funds created before our Company are invested within the frame of processes, which are defined by the provisions of applicable legislation, and are constantly monitored by the public authorities. These invested funds are recognized in the balance sheet assets in line with the provisions of the International Accounting Standards, which we are obliged to comply with. Our primary goal is to ensure maximization of benefits for our Company and for all our shareholders. The Company manages financial assets into which the funds that belong to our Company and those into which life branch funds are invested. The Company’s fund management principles are formulated in compliance with the requirements of effective cash and asset management. These assets are presented hereinbelow in order.
Financial Assets (TL) Cost Value Fair Value Book Value Financial Assets Held for Trading Purpose 210,585,421 260,119,043 260,119,043 Loans (receivables from reverse repo transactions) 357,265,000 360,254,858 360,254,858 Available-for-Sale Financial Assets 772,125,073 914,125,453 914,125,453 Total 1,339,975,494 1,534,499,354 1,534,499,354
Financial Investments with Risks on Saving Life Policyholders 2,550,193,845 2,759,735,890 2,759,735,890 Total 2,550,193,845 2,759,735,890 2,759,735,890
96 Anadolu Hayat Emeklilik 2020 Annual Report 30 private pension funds that we have set up were managed by İş Asset Management, whereas 4 private pension funds that we have set up were managed by HSBC Asset Management.
Private Pension Funds Number Amount (TL) AH1 Bond Fund 29,518,275,765.84 2,306,764,696.27 AH2 Money Market Fund 20,177,140,535.47 1,417,222,174.07 AH3 First Public External Debt Instruments Fund 20,331,184,064.60 2,504,293,597.16 AH4 Second Public External Debt Instruments Fund 10,946,762,443.34 1,071,841,297.88 AH5 Equity Fund 6,006,182,766.66 1,084,170,045.03 AH6 Developed Countries Flexible Fund 7,386,248,965.78 833,937,053.23 AH8 Conservative Flexible Fund 19,676,337,698.56 1,428,206,971.85 AH9 Balanced Flexible Fund 23,663,201,758.91 2,277,701,485.30 AH0 Dynamic Flexible Fund 8,410,608,001.26 1,315,789,158.15 AGE Participation Standard Fund 18,029,992,474.63 495,554,343.17 ABE BRIC Plus Fund 16,545,187,689.83 845,674,178.39 AHC Private Sector Debt Instruments Fund 50,459,669,257.15 1,322,598,390.90 AHL Aggressive Flexible Fund 6,746,805,508.01 197,013,467.64 AET Contribution Fund 212,176,429,082.71 4,041,960,974.03 AER Participation Contribution Fund 5,501,996,347.33 131,734,298.55 AEA Gold Fund 134,303,266,869.79 6,261,218,301.47 AG1 Group Bond Fund 2,236,384,790.65 175,180,493.42 AG2 Group Debt Instruments Fund 813,442,826.34 73,387,184.91 AG3 Group Equity Fund 943,684,745.82 136,180,314.62 AG4 Group Conservative Fund 1,812,186,436.64 138,795,359.18 HS1 Debt Instruments Fund 5,240,074,611.01 271,886,511.27 AHB Second Equity Fund 1,251,926,478.54 109,299,441.21 ATK Standard Fund 12,994,567,800.06 532,179,529.68 ATE İşbank Subsidiaries Index Fund 3,581,946,945.50 282,099,813.64 AO1 Initial Fund 3,878,478,315.87 67,264,449.43 AO2 Initial Participation Fund 2,669,176,666.13 43,750,474.73 AJA Auto Enrolment Aggressive Fund 892,354,000.56 15,973,136.61 AJB Auto Enrolment Dynamic Fund 896,009,842.18 16,369,203.81 AJC Auto Enrolment Balanced Fund 819,837,393.23 13,811,800.56 AJF Auto Enrolment Conservative Fund 318,534,260.30 4,985,061.17 AJG Auto Enrolment Aggressive Participation Fund 882,987,246.00 19,931,671.11 AJH Auto Enrolment Dynamic Participation Fund 723,560,028.55 15,037,024.51 AFH Auto Enrolment Standard Fund 35,808,993,625.78 564,779,447.47 AFP Auto Enrolment Participation Standard Fund 26,029,779,735.18 418,168,411.45
Total 30,434,759,761.87
Anadolu Hayat Emeklilik 2020 Annual Report 97 Assessment of Financial Standing, Profitability and Claims Payment Ability
2020 has been a remarkable year Receivables from pension operations, at TL 1,635 million, including the that saw increased density in which mostly refer to the total amount equalization provision. Carrying on its auto enrolment participations and of accumulation in Private Pension activities in life insurance and private significant levels reached in the Funds reached by the contributions pension branches as the sectoral number of participants. Having deposited by our participants with the leader among private insurance posted successful results in 2020, Company under the private pension companies, our Company has Anadolu Hayat Emeklilik was able system, grew 33% year-on and rose maintained its strong shareholders’ to sustain its stable and profitable from TL 22,952 million to TL 30,477 equity ever since its foundation. growth. The Company kept producing million. Claims Payment Ability added value for the sector and the In 2020, private pension funds made national economy thanks to its Claims paid in life insurance branch up 91% of the total funds managed solid shareholding structure, robust by the Company in 2020 for policy by our Company that were worth TL financial structure and the corporate maturity and death benefits totaled TL 33,663 million. culture it possesses. 204 million (gross). Liability Performance Remaining the sector’s leader in total Our claim payments for policy maturity funds in the private pension and life In Anadolu Hayat Emeklilik’s balance and death benefits consist of life insurance branches combined among sheet, liabilities consist of payables insurance and accumulation-based private insurance companies, Anadolu due to pension operations by 86%, products from the prior periods, Hayat Emeklilik increased its total technical provisions by 9%, and and items related to our production assets by 33%, its gross profit by 36% shareholders’ equity and other liability covering both aspects. and its technical profit by 33% year- items by 5%. These disbursements are basically on-year as at year-end 2020. Running in reciprocation with the covered through disposal of Asset Performance receivables from pension operations marketable securities that belong to under assets with respect to the our policyholders and registered under The Company increased its total assets private pension portfolio, the payables the Company’s assets. by 33% and reached an asset size of due to pension operations item TL 36,067 million. Our claim payments for death benefits registered 33% year-on growth, amounted to TL 93 million (gross) in Within asset items, “Receivables driven by the performance displayed 2020 with a rise of 40% year-on-year. from Main Operations” and “Financial in the valorization of savings of Assets and Investments with existing participants as well as in new When our existing capital structure, Risks on Policyholders” items take productions. shareholders’ equity and profit the top places in terms of size. generation potential are taken into As of 31 December 2020, the Financial investments with risks on consideration in addition to the above- minimum amount of shareholders’ policyholders, which make up 64% mentioned matters, our Company’s equity necessary for the Company of the latter, refer to the amount claims payment ability is regarded as calculated on the principles set by of financial assets into which the quite high. the Ministry of Treasury and Finance policyholders’ funds under the was TL 600 million; the Company’s Company’s management are invested. equity capital as of the said date stood
98 Anadolu Hayat Emeklilik 2020 Annual Report 5-Year Summary Financial Information Including the Reporting Period
Financial Highlights and Key Ratios Financial Highlights (TL thousand) 2016 2017 2018 2019 2020 Total Premium and Contribution Production* 1,859,336 2,208,463 2,032,510 3,148,700 4,681,154 Total Technical Profit 133,012 199,189 237,576 353,733 472,210 Total Assets 14,391,682 17,877,195 20,221,515 27,134,778 36,067,123 Nominal Capital 430,000 430,000 430,000 430,000 430,000 Shareholders’ Equity 860,855 926,560 940,618 1,273,673 1,581,264 Financial Income 123,363 124,324 133,742 167,325 246,998 Pretax Profit 229,804 279,810 322,207 476,840 647,678 Net Profit 190,274 224,703 253,600 357,535 519,341
Key Ratios (%) (%) (%) (%) (%) Net Profit/Average Shareholders’ Equity (ROAE) 24 26 29 35 40 Premium and Contribution Production/Total 13 12 10 12 13 Assets Shareholders’ Equity/Total Assets 6 5 5 5 4
* Total premium figures include gross written premiums of personal accident and life branch,
Premium and Private Pension Contribution Production (TL thousand) Private Pension Contribution Production 2016 2017 Change (%) 2018 Change (%) 2019 Change (%) 2020 Change (%) 1,357,936 1,632,789 20 1,392,314 -15 1,918,619 38 2,996,072 56 Life/Non-Life Premium Production 2016 2017 Change (%) 2018 Change (%) 2019 Change (%) 2020 Change (%) 501,400 575,673 15 640,196 11 1,230,081 92 1,685,082 37 Premium and Private Pension Contribution Production 2016 2017 Change (%) 2018 Change (%) 2019 Change (%) 2020 Change (%) 1,859,336 2,208,463 19 2,032,510 -8 3,148,700 55 4,681,154 49 Mathematical Provisions 2016 2017 Change (%) 2018 Change (%) 2019 Change (%) 2020 Change (%) 1,682,434 1,725,733 3 1,740,281 1 2,231,797 28 3,185,639 43 Pension Funds 2016 2017 Change (%) 2018 Change (%) 2019 Change (%) 2020 Change (%) 11,359,421 14,712,834 30 16,937,635 15 22,913,666 35 30,434,760 33
Anadolu Hayat Emeklilik 2020 Annual Report 99 5-Year Summary Financial Information Including the Reporting Period
Policy Maturity and Death/Disability Benefit Payments (TL thousand) Policy Maturity 2016 2017 Change (%) 2018 Change (%) 2019 Change (%) 2020 Change (%) 120,607 106,973 -11 137,738 29 134,840 -2 111,614 -17 Death/Disability Benefit Payments 2016 2017 Change (%) 2018 Change (%) 2019 Change (%) 2020 Change (%) 49,942 52,255 5 62,340 19 66,359 6 92,863 40 Total 2016 2017 Change (%) 2018 Change (%) 2019 Change (%) 2020 Change (%) 170,549 159,228 -7 200,078 26 201,199 1 204,477 2
Technical Results (thousand TL) Life Insurance 2016 2017 Change (%) 2018 Change (%) 2019 Change (%) 2020 Change (%) 112,486 132,610 18 151,096 14 264,078 75 327,613 24 Non-Life Insurance 2016 2017 Change (%) 2018 Change (%) 2019 Change (%) 2020 Change (%) -566 -546 -4 -1,076 97 -1,025 -5 -930 -9 Private Pension 2016 2017 Change (%) 2018 Change (%) 2019 Change (%) 2020 Change (%) 21,091 67,125 218 87,556 30 90,680 4 145,527 60 Total 2016 2017 Change (%) 2018 Change (%) 2019 Change (%) 2020 Change (%) 133,011 199,189 50 237,576 19 353,733 49 472,210 33 Financial Income (TL thousand) 2016 2017 Change (%) 2018 Change (%) 2019 Change (%) 2020 Change (%) 123,363 124,324 1 133,742 8 167,325 25 246,998 48 Financial Expenses and Other Expenses 2016 2017 Change (%) 2018 Change (%) 2019 Change (%) 2020 Change (%) -26,570 -43,704 64 -49,111 12 -44,219 -10 -71,529 62 Pretax Profit 2016 2017 Change (%) 2018 Change (%) 2019 Change (%) 2020 Change (%) 229,804 279,810 22 322,207 15 476,840 48 647,678 36 Shareholders’ Equity 2016 2017 Change (%) 2018 Change (%) 2019 Change (%) 2020 Change (%) 860,855 926,560 8 940,618 2 1,273,673 35 1,581,264 24 Total Assets 2016 2017 Change (%) 2018 Change (%) 2019 Change (%) 2020 Change (%) 14,391,682 17,877,195 24 20,221,515 13 27,134,778 34 36,067,123 33
100 Anadolu Hayat Emeklilik 2020 Annual Report Risk Management
Didem Sevinç Yelekoğlu - Dried Desert Anadolu Hayat Emeklilik oversees a system that Shots From Life As Seen By Women ‘20 ensures mitigation and control of its operations’ risk exposure through their proper and efficient management.
Anadolu Hayat Emeklilik 2020 Annual Report 101 Active Committees and an Assessment by the Board of Directors
Corporate Governance Committee, CORPORATE GOVERNANCE of office on the Board of Directors Audit Committee and Early Detection COMMITTEE expires. of Risk Committee have been Objectives Activities set up to facilitate effective and transparent execution of the Board of To monitor the Company’s compliance The committee performs the following Directors’ duties and responsibilities, with corporate governance principles duties and responsibilities with in alignment with the obligations and to engage in activities and make respect to corporate governance: imposed by applicable legislation. recommendations to the Board of • The Corporate Governance Directors to improve such compliance. Pursuant to Article 4.5.1 of the Committee establishes whether Communiqué Serial: IV No: 56 on Members the corporate governance principles Determination and Implementation are implemented in the Company, Şebnem Ergün, Attorney-at-Law of Corporate Governance Principles as well as the grounds for non- & Mediator, Independent Director enforced upon its publication in the implementation, if applicable; (Committee Head) Official Gazette issue 28158 dated identifies conflicts of interest, if any, 30 December 2011, the Corporate Kemal Emre Sayar, Director (Committee arising from failure to fully comply Governance Committee, which has Member) with these principles, and presents proposals to the Board of Directors been set up based on the Board of Cavit Ozan Sezer (Committee Member) Directors decision no 353/1 dated for the improvement of corporate 14 March 2005, also functions as Structure governance practices; the Nomination Committee and the The Corporate Governance Committee • The committee oversees the Remuneration Committee. will be formed of at least two members activities of the Investor Relations In the Board of Directors Meeting held to be elected from among Board Department. Within this context, on 23 June 2014, operating principles Directors and the Investor Relations the committee sets and regularly of the Audit Committee, Corporate Unit Manager. reviews the basic principles for the Company’s communication with Governance Committee and Early The members will elect the head of the investors; Detection of Risk Committee, which committee from among themselves. have been identified within the The head of the committee is elected • The Corporate Governance scope of the Capital Markets Board of from among independent Directors. Committee works in cooperation Turkey (CMB) Corporate Governance Non-director individuals, who have with the Investor Relations Communiqué no. II-17.1, have been expertise in their respective fields, can Department to present suggested defined and publicly disclosed. be members of the committee. improvements for ensuring efficient communication between Our committees carry out their If the number of committee members the Company and shareholders, activities in line with regulatory elected from among Board Directors is and elimination and resolution of requirements, target to ensure two, then both of them must be non- potential conflicts to the Board of that the Company’s overall conduct executive directors; if such number is Directors. and practices are executed in a greater than two, then the majority of fashion that is structured, efficient the members must be non-executive • The committee reviews the and transparent, keep the Board directors. The CEO may not serve on Company’s Corporate Governance of Directors informed on material this committee. Compliance Report before it is developments in a timely manner published within the Company’s and as necessary, and observe strict The Investor Relations Department/ Annual Report, and presents its harmony and coordination with the Unit Manager must be a full-time comments to the Board of Directors. executive officers of the Company employee of the Company and must be in their activities. Information on assigned as a member of the Corporate • The committee makes proposals the objectives, members, structures Governance Committee. and assessments regarding the determination or revision of the and activities of the committees is A member’s term of office on the Company’s disclosure policy, and presented below. Corporate Governance Committee presents the same to the Board of is terminated when his/her term
102 Anadolu Hayat Emeklilik 2020 Annual Report Directors. The committee reviews which are announced every year by Members that the Disclosure Policy covers the Board and which are compulsory Mühibe Elif Germirli, Independent the minimum content as stipulated to be implemented by the Group to Director (Committee Head) by the legislation with respect to which the Company is affiliated. the Company’s communication with Kemal Emre Sayar, Director (Committee • The committee’s duties and stakeholders, as well as the scope, Member) responsibilities with respect to quality, consistency and accuracy remuneration are presented below: Structure of documents, presentations and explanations prepared by the -- Setting and overseeing the The Early Detection of Risk Committee Company for informative purposes, principles, criteria and practices consists of a minimum of two and oversees that the same are applicable for the remuneration of members to be elected from among developed in accordance with the Board Directors and executives with the Board Directors. administrative responsibility, taking Disclosure Policy; The members will elect the head of the into consideration the Company’s • The committee carries out committee from among themselves. long-term targets; activities to ensure that the The head of the committee is elected corporate governance culture is -- Presenting its suggestions regarding from among independent Directors. established within the Company, the remuneration to be paid to Non-director individuals, who have and is espoused by managers and Board Directors and executives with expertise in their respective fields, can employees working at any level. administrative responsibility, which be members of the committee. will be determined in view of the The committee follows up the If the committee is formed of two extent the remuneration criteria developments related to corporate members, then both of them must have been achieved; governance in and out of Turkey, and be non-executive Directors; if such examines their possible implications -- Developing suggestions and number is greater than two, then the for the Company. assessments for the formulation majority of the members must be non- • The duties and responsibilities and revision of the Company’s executive Directors. The CEO may not of the Corporate Governance remuneration policy, which sets serve on this committee. out the remuneration principles for Committee with respect to A member’s term of office on the the Board Directors and executives nomination are presented below: Early Detection of Risk Committee with administrative responsibility, • Creation of a transparent is terminated when his/her term and presenting its opinions to the system regarding identification, of office on the Board of Directors Board of Directors. The Corporate assessment, and training of expires. Governance Committee shall fulfill nominees eligible for the Board of other duties and responsibilities Activities Directors and managerial positions to be assigned to it by the Board of with administrative responsibility, Directors in relation to its field of • The Early Detection of Risk and establishing the related policies activity. Committee works to early detect and strategies; the risks that might endanger the EARLY DETECTION OF RISK • Regular evaluation of the structure existence, progress and survival of COMMITTEE and efficiency of the Board of the Company, to ensure necessary Directors and presentation of its Objectives measures are adopted in relation to suggestions for possible revisions to the identified risks, and to manage To early detect the risks that might the Board of Directors; the risk. endanger the existence, progress and • The committee is charged with survival of the Company, implement • The committee informs the Board performing the duties set out necessary measures and remedies of Directors of its suggestion and in the legislation concerning in relation to the identified risks, and comments in writing regarding the the nomination of independent manage the risk. creation and development of the members to the Board of Directors,
Anadolu Hayat Emeklilik 2020 Annual Report 103 Active Committees and an Assessment by the Board of Directors
Company’s risk management system, The members will elect the head Company’s accounting, internal which will be aimed at minimizing of the committee from among control and internal audit systems the impact of risks that might affect themselves. and its independent audit; and for the shareholders in particular and all addressing the Company employees’ All members of the committee are stakeholders in general. notifications about the Company’s elected from among independent accounting and independent audit Directors. • The committee reviews the within the frame of confidentiality Company’s risk management To the extent possible, at least one principle; systems at least on an annual basis. member of the Audit Committee should preferably have minimum • The Audit Committee assesses • The Early Detection of Risk five years of experience in audit/ the conformity of annual and Committee oversees that risk accounting and finance. interim financial statements management practices are carried to be publicly disclosed to the A member’s term of office on the Audit out in accordance with the decisions accounting principles pursued Committee is terminated when his/ of the Board of Directors and the by the Company, as well as their her term of office on the Board of committee; accuracy and fairness, and reports Directors expires. its written assessments to the • The committee reviews the Activities Board of Directors, by incorporating determinations and assessments the opinions of the Company’s The duties and responsibilities of the about risk management that will responsible managers and of the Audit Committee are presented below: be incorporated in the Company’s independent audit firm. annual report. • The Audit Committee oversees • The Audit Committee shall fulfill the operation and efficiency of the • The Early Detection of Risk other duties and responsibilities Company’s accounting system, public Committee shall fulfill other duties to be assigned to it by the Board of disclosure of financial information, and responsibilities to be assigned Directors in relation to its field of independent auditing, internal to it by the Board of Directors in activity. control and internal audit systems. relation to its field of activity. During the period 1 January 2020-31 AUDIT COMMITTEE • The Audit Committee supervises the December 2020, the Audit Committee selection of the independent audit presented five notifications to the Objectives firm, preparation of independent Board of Directors. To monitor the operation and audit contracts and initiation of the effectiveness of the Company’s independent audit process, and accounting system, public disclosure every phase of the work carried out of financial information, and process of by the independent audit firm. independent auditing. • The Audit Committee determines Members the independent audit firm from Dr. Ahmet D. Erelçin, Independent which the company will procure Director (Committee Head) services and the services to be supplied therefrom, and submits the Murat Bolat, Independent Director same for the approval of the Board (Committee Member) of Directors. Structure • The Audit Committee establishes The Audit Committee consists of the methods and criteria for a minimum of two members to the handling and resolution be elected from among the Board of complaints received by the Directors. Company in relation to the
104 Anadolu Hayat Emeklilik 2020 Annual Report Risk Management Policies and an Assessment by the Board of Directors
The primary purpose of risk Risk Management Policies Insurance Underwriting and management policies is to measure Implemented on the Basis of Types Pension Branch Risk Policy and assess risks, determine control of Risks Insurance underwriting and pension procedures, and ultimately, ensure The Risk Management Policy is pivotal branch risk refers, with respect to alignment of the Company’s asset for supporting and developing the the insurance branch, to the risk quality and the risk level that the Company’s corporate structure. The that might arise from failure to Company is willing to take in return policy is, in essence, intended to set correctly and effectively employ for a given yield with the limits the key principles and norms related the underwriting technique while stipulated by the legislation governing to the risk management system providing coverage for probable the Company and the Company’s risk and processes; to introduce the risk incidents; and with respect to the tolerance. The approval of the Board management system and processes private pension branch, to the risk of of Directors is required for provisions specified in the policy, and to achieve sustaining loss due to the generated and revisions in/to the policies. At conformity with the risk limits set. revenues that fall short of the costs a minimum, the risk management incurred. system and processes mentioned in The activities falling under the Risk the policy must be implemented and Management Policy are carried In insurance and pension branch the risk limits set must be adhered to. out within the framework set by products, the basic principle is to the insurance and private pension establish the actuarial structure in line The Board of Directors is responsible legislation, and other legislation with technical profit forecasts within for setting the risk management governing the Company. The the frame of precautionary principle. principles and norms that will be Company’s risk exposure is individually Along this line, technical income and implemented across the Company; monitored, assessed and controlled expenses for insurance and pension updating the risk policies in connection under the following categories: branches are set within the frame of with the changes in the circumstances insurance underwriting and pension the principles defined in insurance governing operations; establishing and branch risk, assets and liabilities and private pension legislation, taking operating effective risk management management risk, structural interest into consideration the Company’s risk system and processes; monitoring rate risk, market risk, credit risk, appetite. the Company’s risk level; establishing operational risk, reputation risk, risk limits and checking actualizations Essentially, the limits defined strategic risk and AML /CFT risks. versus these limits, and introducing by insurance, pension and other necessary measures. Risk Management and Internal applicable legislation should be Control Department is responsible adhered to. The Board of Directors Risk limits that are set for the for describing, measuring, analyzing, monitors the Company’s position purpose of measuring, evaluating and monitoring and reporting risks. Other against the limits defined by the monitoring the risk levels are enforced responsibilities of the department legislation in force. based on a Board of Directors decision include following up the developments as and when deemed necessary and Insurance underwriting risk is in risk management, improving the important. managed according to the expected methods employed, and submitting technical profit from the portfolio The key considerations in setting the reports to the Board of Directors on consisting of individual risks taken. The risk limits are the risk measurement required legal reporting, notification coverage scope, conditions and price results and the Company’s risk and follow-up activities. In addition, of the policy are set according to this appetite. the department also acts as the expectation. The Company’s income Compliance Unit with regard to the Separate from risk limits, indicators of and risk limits are regularly followed- enforcement of the Law no 5549 on developments and occurrences that up to determine whether they are at Prevention of Laundering Proceeds will negatively impact the risk level the level to cover the risk underwritten from Crime and related regulations. are detected and monitored as early by the Company. warning signals.
Anadolu Hayat Emeklilik 2020 Annual Report 105 Risk Management Policies and an Assessment by the Board of Directors
Assets and Liabilities Management Market risk limits are set by the Board The basic principle is to manage Risk Policy of Directors in accordance with the counterparty transactions, which are Company’s risk appetite. Adherence to of a nature to give rise to credit risk, so Assets and liabilities risk covers all limits is constantly monitored by the as not to create concentration, and in financial risks which stem from the Risk Management and Internal Control a well-diversified manner by keeping Company’s assets and liabilities, such Department and related executive an eye on the risk level created. To as market, liquidity, structural interest units. In the event of limit overruns, this end, the credit risk exposure is rate, capital investment and real the violation and the reasons therefor monitored by way of various criteria estate investment risks. The Board of are reported to the Board of Directors, including counterparty, collateral, Directors sets the risk limits associated accompanied by the executive units’ sector, maturity and currency. with assets and liabilities risk comments. Action to be taken in the management taking into consideration The minimum scope of the credit risk event of a limit overrun is decided by the Company’s risk appetite. evaluation process covers monitoring, the Board of Directors. and reporting on, the risk levels In the composition of the Company’s Careful consideration is given to the of insurance brokers, reinsurers, assets and liabilities, return on asset creditworthiness of those issuing companies in which shareholding items and cost of liability items, financial instruments that pose a stakes are acquired, and banks/ cashing-in and reinvestment times market risk. Basically, the issuer of the financial institutions from which are taken into account. The Company’s financial instrument should have been financial services are procured. needs, alternative borrowing sources, assigned an “investment grade” in profitability of the lending and lending Early detection and definition of the terms of credit risk rating. facilities are taken into account when issues are essential for effective credit identifying and utilizing the sources Within the frame of structural interest risk management. for funding assets. rate risk, the exposure stemming Operational Risk Policy from the interest sensitivity of all The basic principle is to ensure of the Company’s assets, liabilities, Operational risk is the risk of loss that the transactions carried out in income and expenses are followed up that might result from inadequate the money and capital markets are separately from the interest risk that is or inoperational internal processes, “well diversified” so as to avoid any addressed under the market risk. people, systems or external factors. concentration in any investment The model risk, IT risk, human capital instrument, maturity, currency, Decisions on capital investments (new management risk and compliance risk interest type and other similar investments, increasing/decreasing that the Company may be exposed to parameters and in view of the risk level the investment level or withdrawal are considered within the scope of this created thereby. from an investment) are made by the risk. Company’s Board of Directors. Capital When managing the liquidity risk, investments are managed based on Quantitative and qualitative methods the Company composes its portfolio a portfolio approach, observing the are used in combination when in a structure that is compatible balance between the risk undertaken measuring and assessing operational with the functions of deriving profit and the return generated. risk. When managing operational risk, on the portfolio and of market controls are designed to eliminate or risk management. Hence, key Credit Risk Policy mitigate the risk of sustaining loss due considerations include the maturity Credit Risk refers to the probability to the risk exposure of the activities. distribution of the portfolio composed of loss the Company might sustain Risk Management and Internal Control as such, its having a profit-focus due to the failure of indebted parties Department evaluates the efficiency while uncompromising from liquidity (agencies, reinsurers, etc.) to the and adequacy of the controls, as well requirements, and the risk versus Company to fulfill the contractual as the enforcement of the action plans return balance. requirements and their failure to adopted. satisfy their obligations in part or in whole.
106 Anadolu Hayat Emeklilik 2020 Annual Report Reputation Risk Policy when identifying the risk. Efforts and • Raise employees’ awareness of legal monitoring activities carried out by the obligations and the principles related Reputation risk refers to potential Strategy and Corporate Performance to the matter. loss that may result from loss of Management Department guarantee confidence in the Company or injury to Auditing of Risk Management that all executive units act in the Company’s reputation stemming System and Processes accordance with the Company’s from the negative thoughts of various strategies. The risk management system parties including current or potential and processes are audited by the customers, shareholders, competitors AML/CFT Policy Company’s Board of Internal Audit. and regulatory authorities about the The Company pursues effectiveness The Board of Directors determines Company, or from regulatory non- in its internal guidelines and practices the principles relating to execution compliance. for the prevention of laundering of action plans for the conduct of the The principal elements of reputation proceeds from crime (Anti-Money audit, the reporting of audit results, risk (financial performance, service Laundering/AML) and financing of and remedy of errors and irregularities continuity, customer satisfaction, terrorism (Combating the Financing of identified in the audits. regulatory compliance, corporate Terrorism/CFT) and aims the following The Company’s risk management culture and corporate governance as a matter of policy: and assessment process consists of understanding, organization and providing information to the Board of conduct, employee competence, etc.) • Safeguard the reputation and Directors on topics such as: are taken individually and as a whole. trust elements possessed by the Appropriate systems and controls Company brand name, Adequacy of the Company’s risk are created to efficiently manage the management system and processes, elements that constitute a risk. • Ensure regulatory compliance Compliance with limits, of risk management, internal The level of compliance with the audit, implementation, reporting, Accuracy and quality of the data used corporate governance concept that monitoring and control methods, in the risk management process, forms the basis of the reputation and implement the Compliance risk is monitored by the Corporate Accuracy and quality of limit violation Program, Governance Committee. The Senior reports, Management is responsible for • Keep the Company from being used Compliance with the policy and the final evaluation of the level of for laundering proceeds from crime implementation procedures. reputation risk, and ensuring that and financing of terrorism, necessary actions are taken as and The process also includes laying down proposals regarding the possible when deemed necessary. • Determine the strategies, internal measures that can be adopted, as well controls and measures, operating Strategic Risk Policy as reporting stages. rules and responsibilities for Failure to ensure the coordination of mitigation of risk that the Company the Company’s activities with strategic may be exposed to by evaluating priorities are addressed within the customers, transactions and scope of strategic risk. The Company’s services delivered with a risk-based strategic plans and developments approach, affecting them are taken into account
Anadolu Hayat Emeklilik 2020 Annual Report 107 Financial Reports and Other Matters
Zerrin Yanıkömeroğlu - Arduous Things Having successfully completed its 2020 Shots From Life As Seen By Women ‘20 operations, Anadolu Hayat Emeklilik increased its total assets by 33% to TL 36,067 million.
108 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ DECEMBER 31, 2020 UNCONSOLIDATED FINANCIAL STATEMENTS TOGETHER WITH INDEPENDENT AUDITORS’ REVIEW REPORT THEREON (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish)
Anadolu Hayat Emeklilik 2020 Annual Report 109 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 İş ey.com Merkezi No: 27 Kat: 2-3-4 Ticaret Sicil No: 479920 34485 Sarıyer Mersis No: 0-4350-3032-6000017 İstanbul - Turkey
To the Shareholders of Anadolu Hayat Emeklilik Anonim Şirketi
A) Report on the Audit of the Unconsolidated Financial Statements
1) Opinion
We have audited the unconsolidated financial statements of Anadolu Hayat Emeklilik Anonim Şirketi (the Company), which comprise the unconsolidated statement of financial position as at December 31, 2020, and the unconsolidated statement of comprehensive income, unconsolidated statement of changes in equity, unconsolidated statement of cash flows and unconsolidated statement of profit distribution 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, 2020, and its unconsolidated financial performance, its unconsolidated cash flows and its unconsolidated profit distribution for the year then ended in accordance with the prevailing accounting principles and standards as per the insurance legislation and Turkish Financial Reporting Standards 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.
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, 2020, the Company has insurance liabilities of TL The audit procedures regarding the insurance contract liabilities were performed 3.413.305.496 representing 9% of the Company’s total liabilities. The measure- with the use of an actuarial auditor, who is part of our team, and together with ment of insurance contract liabilities involves judgement over uncertain future manually calculated components of insurance contract liabilities, audit evidence outcomes, mainly the ultimate total settlement value of long-term liabilities, about key controls over calculation methods used by Company’s actuaries were including those for guarantees provided to policyholders. obtained; reconciliation of input data related to the Company’s insurance contract liabilities with system and other source data was tested; Tariffs and profit sharing Liabilities related to life insurance group comprise of actuarial mathematical re- reserves which are components of Life group insurance contract liabilities serves which are calculated according to formulas and principles given in approved were tested on calculation data by using sampling method and compliance of technical basis of tariffs and profit sharing reserves which consist of profit sharing the explanatory information regarding to insurance contract liabilities with the calculated in previous years and a certain percentage of current year’s income, accounting and reporting regulations in force due to the insurance legislation was determined in the approved profit sharing tariffs, including other beneficiaries for reviewed. the contracts which the Company is liable to give profit sharing.
Accounting policies and actuarial assumptions used for the mentioned insurance contract liabilities are explained in note 2 and 17. Given their magnitude in terms of financial statement and significant uncertainty of estimates containing, insur- ance contract liabilities has been considered as a key audit matter.
4) 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.
110 Anadolu Hayat Emeklilik 2020 Annual Report 5) 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 standards on auditing as issued by the Capital Markets Board of Turkey and 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.
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.
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 28, 2021. 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 2020 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
Seda Akkuş Tecer, SMMM Partner January 28, 2021 İstanbul, Turkey
Anadolu Hayat Emeklilik 2020 Annual Report 111 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ UNCONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED DECEMBER 31, 2020
We confirm that the unconsolidated financial statements and related disclosures and footnotes as at December 31, 2020 which were prepared in accordance with the accounting principles and standards in force as per the regulations of T.C. Hazine ve Maliye Bakanlığı 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.
Istanbul, January 28, 2021
Yılmaz Ertürk N. Cem Özcan C. Ozan Sezer Aslıhan Duymaz Member of the Board of Directors/ Chief Vice Chief Executive Officer Accounting Manager Actuary (Registration Number:61) Executive Officer
112 Anadolu Hayat Emeklilik 2020 Annual Report CONTENTS
PAGE BALANCE SHEET 114 STATEMENT OF INCOME 119 STATEMENT OF CHANGES IN EQUITY 122 STATEMENT OF CASH FLOWS 124 STATEMENT OF PROFIT DISTRIBUTION 125 NOTES TO THE FINANCIAL STATEMENTS 126-185 NOTE 1 General information 126 NOTE 2 Summary of significant accounting policies 127 NOTE 3 Critical accounting estimates and judgments in applying accounting policies 141 NOTE 4 Management of insurance and financial risk 142 NOTE 5 Segment reporting 157 NOTE 6 Tangible assets 158 NOTE 7 Investment properties 159 NOTE 8 Intangible assets 160 NOTE 9 Investments in associates 160 NOTE 10 Reinsurance assets and liabilities 161 NOTE 11 Financial assets 162 NOTE 12 Loans and receivables 166 NOTE 13 Derivative financial instruments 167 NOTE 14 Cash and cash equivalents 167 NOTE 15 Equity 168 NOTE 16 Other reserves and equity component of DPF 170 NOTE 17 Insurance contract liabilities and reinsurance assets 170 NOTE 18 Investment contracts 176 NOTE 19 Trade and other payables and deferred income 176 NOTE 20 Financial liabilities 176 NOTE 21 Deferred tax 177 NOTE 22 Retirement benefit obligations 177 NOTE 23 Other liabilities and provisions 178 NOTE 24 Net insurance premium revenue 178 NOTE 25 Fee revenues 178 NOTE 26 Investment income 179 NOTE 27 Net income accrual on financial assets 179 NOTE 28 Assets held at fair value through profit or loss 179 NOTE 29 Insurance rights and claims 179 NOTE 30 Investment contract benefits 179 NOTE 31 Other expenses 179 NOTE 32 Operating expenses 179 NOTE 33 Employee benefit expenses 180 NOTE 34 Financial costs 180 NOTE 35 Income tax expense 180 NOTE 36 Net foreign exchange gains 181 NOTE 37 Earnings per share 181 NOTE 38 Dividends per share 181 NOTE 39 Cash generated from operations 181 NOTE 40 Convertible bonds 181 NOTE41 Redeemable preference shares 181 NOTE 42 Risks 181 NOTE 43 Commitments 182 NOTE 44 Business combinations 182 NOTE 45 Related party transactions 182 NOTE 46 Events after the reporting period 184 NOTE 47 Others 185
Anadolu Hayat Emeklilik 2020 Annual Report 113 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ UNCONSOLIDATED BALANCE SHEET AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
ASSETS Audited Audited Current Period Prior Period I- Current Assets Note December 31, 2020 December 31, 2019 A- Cash and Cash Equivalents 14 666,497,704 656,922,735 1- Cash 14 104 219 2- Cheques Received - - 3- Banks 14 444,769,124 477,786,945 4- Cheques Given and Payment Orders 14 - - 5- Bank Guaranteed Credit Card Receivables with Maturities Less Than Three Months 14 221,728,476 179,135,571 6- Other Cash and Cash Equivalents - - B- Financial Assets and Financial Investments with Risks on Policyholders 11 4,294,235,244 3,064,282,042 1- Available-for-Sale Financial Assets 11 920,341,874 886,943,685 2- Held to Maturity Investments - - 3- Financial Assets Held for Trading 11 260,119,043 191,398,602 4- Loans and Receivables 11 360,254,858 52,714,137 5- Provision for Loans and Receivables - - 6- Financial Investments with Risks on Saving Life Policyholders 11 2,759,735,890 1,937,750,426 7- Company’s Own Equity Shares - - 8- Diminution in Value of Financial Investments 11 (6,216,421) (4,524,808) C- Receivables from Main Operations 12 30,604,323,752 23,051,046,800 1- Receivables from Insurance Operations 12 68,631,908 64,328,597 2- Provision for Receivables from Insurance Operations 12 (5,002,574) (5,002,574) 3- Receivables from Reinsurance Operations - - 4- Provision for Receivables from Reinsurance Operations - - 5- Cash Deposited to Insurance and Reinsurance Companies - - 6- Loans to the Policyholders 12 63,328,266 40,071,706 7- Provision for Loans to the Policyholders - - 8- Receivables from Individual Pension Operations 12 30,477,366,152 22,951,649,071 9- Doubtful Receivables from Main Operations 12 117,996 117,996 10- Provision for Doubtful Receivables from Main Operations 12 (117,996) (117,996) D- Due from Related Parties 12 - 12,413 1- Due from Shareholders - - 2- Due from Associates - - 3- Due from Subsidiaries - - 4- Due from Joint Ventures - - 5- Due from Personnel 12 - 12,413 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 12 139,807,221 38,467,083 1- Finance Lease Receivables - - 2- Unearned Finance Lease Interest Income - - 3- Deposits and Guarantees Given 183,530 160,731 4- Other Miscellaneous Receivables 47 139,623,691 38,430,163 5- Rediscount on Other Miscellaneous Receivables - (123,811) 6- Other Doubtful Receivables - - 7- Provision for Other Doubtful Receivables - - F- Prepaid Expenses and Income Accruals 4.2 60,454,977 49,478,060 1- Deferred Commission Expense 28,943,962 32,810,452 2- Accrued Interest and Rent Income 229,676 187,774 3- Income Accruals - - 4- Other Prepaid Expenses 31,281,339 16,479,834 G- Other Current Assets 4.2 19,808 17,048 1- Stocks to be Used in the Following Months - - 2- Prepaid Taxes and Funds 8,444 8,444 3- Deferred Tax Assets - - 4- Job Advances 11,364 8,604 5- Advances Given to Personnel - - 6- Inventory Count Differences - - 7- Other Miscellaneous Current Assets - - 8- Provision for Other Current Assets - - I- Total Current Assets 35,765,338,706 26,860,226,181
The accompanying notes are an integral part of these unconsolidated financial statements.
114 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ UNCONSOLIDATED BALANCE SHEET AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
ASSETS Audited Audited Current Period Prior Period II- Non-Current Assets Note December 31, 2020 December 31, 2019 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 - - 1- Finance Lease Receivables - - 2- Unearned Finance Lease Interest Income - - 3- Deposits and Guarantees Given - - 4- Other Miscellaneous Receivables - - 5- Rediscount on Other Miscellaneous Receivables - - 6- Other Doubtful Receivables - - 7- Provision for Other Doubtful Receivables - - D- Financial Assets 9,45.d 12,762,193 12,762,193 1- Investments in Equity Shares - - 2- Investments in Associates 9,45.d 12,762,193 12,762,193 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 267,372,838 242,224,002 1- Investment Properties 7 184,834,492 153,068,758 2- Impairment for Investment Properties - - 3- Owner Occupied Property 6 4,700,000 4,700,000 4- Machinery and Equipment 6 56,041,450 54,127,336 5- Furniture and Fixtures 6 6,443,616 5,943,075 6- Motor Vehicles 6 592,474 592,474 7- Other Tangible Assets (Including Leasehold Improvements) 6 16,537,182 14,111,319 8- Tangible Assets Acquired Through Finance Leases 6 65,590,343 59,463,348 9- Accumulated Depreciation 6 (67,366,719) (49,782,308) 10- Advances Paid for Tangible Assets (Including Construction in Progress) - - F- Intangible Assets 8 16,616,741 16,840,377 1- Rights 8 101,850,144 90,121,930 2- Goodwill - - 3- Pre-operating Expenses - - 4- Research and Development Costs - - 5- Other Intangible Assets - - 6- Accumulated Amortisation (Depreciation) 8 (85,233,403) (73,281,553) 7- Advances Paid for Intangible Assets - - G- Prepaid Expenses and Income Accruals 5,032,723 2,725,005 1- Deferred Commission Expense - - 2- Income Accruals - - 3- Other Prepaid Expenses and Income Accruals 5,032,723 2,725,005 H- Other Non-Current Assets - - 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 - - 6- Other Miscellaneous Non-Current Assets - - 7- Amortisation on Other Non-Current Assets - - 8- Provision for Other Non-Current Assets - - II- Total Non-Current Assets 301,784,495 274,551,577 TOTAL ASSETS 36,067,123,201 27,134,777,758
The accompanying notes are an integral part of these unconsolidated financial statements.
Anadolu Hayat Emeklilik 2020 Annual Report 115 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ UNCONSOLIDATED BALANCE SHEET AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
LIABILITIES Audited Audited Current Period Prior Period III- Short-Term Liabilities Note December 31, 2020 December 31, 2019 A- Financial Liabilities 20 4,812,019 4,999,036 1- Borrowings from Financial Institutions - - 2- Finance Lease Liabilities 20 14,985,424 14,952,011 3- Deferred Leasing Costs 20 (10,173,405) (9,952,975) 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 - - B- Payables Arising from Main Operations 19 30,870,615,962 23,233,734,534 1- Payables Arising from Insurance Operations 19 37,748,769 44,297,453 2- Payables Arising from Reinsurance Operations - - 3- Cash Deposited by Insurance and Reinsurance Companies 19,10 5,563,279 4,479,832 4- Payables Arising from Individual Pension Business 19 30,822,902,731 23,180,814,298 5- Payables Arising from Other Main Operations 4,401,183 4,142,951 6- Discount on Payables from Other Main Operations - - C- Due to Related Parties 19 154,018 94,256 1- Due to Shareholders 19,45 92,787 60,849 2- Due to Associates - - 3- Due to Subsidiaries - - 4- Due to Joint Ventures - - 5- Due to Personnel 19 61,036 33,290 6- Due to Other Related Parties 19 195 117 D- Other Payables 19 21,693,248 32,795,799 1- Deposits and Guarantees Received 19 899,244 973,972 2- Medical Treatment Payables to Social Security Institution - - 3- Other Miscellaneous Payables 19,47 20,794,004 31,821,827 4- Discount on Other Miscellaneous Payables - - E- Insurance Technical Provisions 17 3,413,305,496 2,432,168,782 1- Reserve for Unearned Premiums - Net 17 47,475,659 53,772,339 2- Reserve for Unexpired Risks - Net - - 3- Mathematical Provisions - Net 17 3,185,639,115 2,231,797,169 4- Provision for Outstanding Claims - Net 17 126,602,797 106,773,754 5- Provision for Bonus and Discounts - Net 184,336 391,457 6- Other Technical Provisions - Net 17 53,403,589 39,434,063 F- Provisions for Taxes and Other Similar Obligations 41,123,566 49,012,353 1- Taxes and Funds Payable 18,477,353 13,874,687 2- Social Security Premiums Payable 3,499,300 3,289,009 3- Overdue, Deferred or By Instalment Taxes and Other Liabilities - - 4- Other Taxes and Similar Payables 2,190 399 5- Corporate Tax Payable 35 136,125,818 119,305,000 6- Prepaid Taxes and Other Liabilities Regarding Current Period Income 35 (116,981,095) (87,456,742) 7- Provisions for Other Taxes and Similar Liabilities - - G- Provisions for Other Risks 23 34,209,243 29,037,733 1- Provision for Employee Termination Benefits - - 2- Provision for Pension Fund Deficits - - 3- Provisions for Costs 23 34,209,243 29,037,733 H- Deferred Income and Expense Accruals 19 13,052,342 7,303,198 1- Deferred Commission Income 19 378,719 327,171 2- Expense Accruals 19 12,672,940 6,975,344 3- Other Deferred Income and Expense Accruals 19 683 683 I- Other Short-Term Liabilities - - 1- Deferred Tax Liabilities - - 2- Inventory Count Differences - - 3- Other Various Short-Term Liabilities - - III - Total Short-Term Liabilities 34,398,965,894 25,789,145,691
The accompanying notes are an integral part of these unconsolidated financial statements.
116 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ UNCONSOLIDATED BALANCE SHEET AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
LIABILITIES Audited Audited Current Period Prior Period IV- Long-Term Liabilities Note December 31, 2020 December 31, 2019 A- Financial Liabilities 20 49,878,800 48,770,362 1- Borrowings from Financial Institutions - - 2- Finance Lease Liabilities 20 90,649,910 95,524,721 3- Deferred Leasing Costs 20 (40,771,110) (46,754,359) 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 Arising from Insurance Operations - - 2- Payables Arising from Reinsurance Operations - - 3- Cash Deposited by Insurance and Reinsurance Companies - - 4- Payables Arising from Individual Pension Business - - 5- Payables Arising from Other Operations - - 6- Discount 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 - - 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 - - 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 22,23 26,177,882 22,016,074 1- Provision for Employee Termination Benefits 22,23 26,177,882 22,016,074 2- Provision for Pension Fund Deficits - - H- Deferred Income and Expense Accruals - - 1- Deferred Commission Income - - 2- Expense Accruals - - 3- Other Deferred Income and Expense Accruals - - I- Other Long-Term Liabilities 21 10,836,662 1,173,101 1- Deferred Tax Liabilities 21 10,836,662 1,173,101 2- Other Long-Term Liabilities - - IV- Total Long-Term Liabilities 86,893,344 71,959,537
The accompanying notes are an integral part of these unconsolidated financial statements.
Anadolu Hayat Emeklilik 2020 Annual Report 117 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ UNCONSOLIDATED BALANCE SHEET AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
EQUITY Audited Audited Current Period Prior Period V- Equity Note December 31, 2020 December 31, 2019 A- Paid in Capital 2.13,15 430,000,000 430,000,000 1- (Nominal) Capital 2.13,15 430,000,000 430,000,000 2- Unpaid Capital - - 3- Positive Capital Restatement Differences - - 4- Negative Capital Restatement Differences - - 5- Register in Progress Capital - - B- Capital Reserves 5,680,764 4,190,243 1- Share Premiums - - 2- Cancellation Profits of Equity Shares - - 3- Profit on Assets Sale That Will Be Transferred to Capital 5,680,764 4,190,243 4- Currency Translation Adjustments - - 5- Other Capital Reserves - - C- Profit Reserves 532,334,438 387,995,454 1- Legal Reserves 15 197,525,862 170,931,830 2- Statutory Reserves 15 79,620,126 52,676,523 3- Extraordinary Reserves 15 122,005,563 120,044,612 4- Special Funds 20,650,000 - 5- Revaluation of Financial Assets 15,16 121,255,510 50,937,622 6- Other Profit Reserves 15 (8,722,623) (6,595,133) D- Retained Earnings 93,907,409 93,952,008 1- Retained Earnings 93,907,409 93,952,008 E- Accumulated Losses - - 1- Accumulated Losses - - F- Net Profit for the Period 519,341,352 357,534,825 1- Net Profit for the Period 518,987,222 335,438,903 2- Net Loss for the Period - - 3- Profit not Available for Distribution 354,130 22,095,922 V- Total Equity 1,581,263,963 1,273,672,530 TOTAL EQUITY AND LIABILITIES 36,067,123,201 27,134,777,758
The accompanying notes are an integral part of these unconsolidated financial statements.
118 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ UNCONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Audited Audited Current Period Prior Period I- TECHNICAL SECTION Note December 31, 2020 December 31, 2019 A- Non-Life Technical Income 5 591,910 548,127 1- Earned Premiums (Net of Reinsurer Share) 591,910 548,127 1.1- Written Premiums (Net of Reinsurer Share) 24 591,066 542,357 1.1.1- Written Premiums, gross 998,199 1,052,251 1.1.2- Written Premiums, ceded 10 (407,133) (509,894) 1.1.3- Premiums Transferred to Social Security Institutions - - 1.2- Change in Reserve for Unearned Premiums (Net of Reinsurer Shares and Less the Amounts Carried Forward) 844 (12,740) 1.2.1- Reserve for Unearned Premiums, gross (16,528) (36,012) 1.2.2- Reserve for Unearned Premiums, ceded 10 17,372 23,272 1.2.3- Reserve for Unearned Premiums, Social Security Institution Share - - 1.3- Change in Reserve for Unexpired Risks (Net of Reinsurer Share and Less the Amounts Carried Forward) - 18,510 1.3.1- Reserve for Unexpired Risks, gross - 28,897 1.3.2- Reserve for Unexpired Risks, ceded - (10,387) 2- Investment Income - Transferred from Non-Technical Section - - 3- Other Technical Income (Net of Reinsurer Share) - - 3.1- Other Technical Income, gross - - 3.2- Other Technical Income, ceded - - 4- Accrued Salvage and Subrogation Income - - B- Non-Life Technical Expense 5 (1,521,624) (1,573,382) 1- Incurred Losses (Net of Reinsurer Share) (218,820) (346,843) 1.1- Claims Paid (Net of Reinsurer Share) (162,654) (232,322) 1.1.1- Claims Paid, gross (230,842) (262,148) 1.1.2- Claims Paid, ceded 10 68,188 29,826 1.2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward) (56,166) (114,521) 1.2.1- Change in Provisions for Outstanding Claims, gross (6,290) (132,037) 1.2.2- Change in Provisions for Outstanding Claims, ceded 10 (49,876) 17,516 2- Change in Provision for Bonus and Discounts (Net of Reinsurer and Less the Amounts Carried Forward) (38,208) (96) 2.1- Provision for Bonus and Discounts, gross (40,206) 4,039 2.2- Provision for Bonus and Discounts, ceded 1,998 (4,135) 3- Change in Other Technical Reserves (Net of Reinsurer Share and Less the Amounts Carried Forward) (20,288) (10,240) 4- Operating Expenses 32 (1,244,308) (1,216,203) 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) - - 6.1- Change in Other Technical Provisions, gross - - 6.2- Change in Other Technical Provisions, ceded - - C- Net Technical Income-Non-Life (A - B) (929,714) (1,025,255) D- Life Technical Income 5 2,179,293,930 1,493,819,611 1- Earned Premiums (Net of Reinsurer Share) 1,665,368,474 1,193,744,545 1.1- Written Premiums (Net of Reinsurer Share) 24 1,659,072,638 1,206,792,924 1.1.1- Written Premiums. gross 1,684,083,168 1,229,029,128 1.1.2- Written Premiums. ceded 10 (25,010,530) (22,236,204) 1.2- Change in Reserve for Unearned Premiums (Net of Reinsurer Shares and Less the Amounts Carried Forward) 6,295,836 (13,048,379) 1.2.1- Reserve for Unearned Premiums. gross 6,590,615 (13,885,169) 1.2.2- Reserve for Unearned Premiums. ceded 10 (294,779) 836,790 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 26 499,907,634 291,740,654 3- Unrealised Gains on Investments - - 4- Other Technical Income (Net of Reinsurer Share) 14,017,822 8,334,412 4.1- Other Technical Income. gross 14,017,822 8,334,412 4.2- Other Technical Income. ceded - - 5- Accrued Salvage Income - -
The accompanying notes are an integral part of these unconsolidated financial statements.
Anadolu Hayat Emeklilik 2020 Annual Report 119 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ UNCONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Audited Audited Current Period Prior Period I- TECHNICAL SECTION Note December 31, 2020 December 31, 2019 E- Life Technical Expense 5 (1,851,680,989) (1,229,741,045) 1- Incurred Losses (Net of Reinsurer Share) (596,648,802) (597,008,631) 1.1- Claims Paid (Net of Reinsurer Share) (571,191,067) (572,323,682) 1.1.1- Claims Paid, gross (579,981,710) (583,093,822) 1.1.2- Claims Paid, ceded 10 8,790,643 10,770,140 1.2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward) (25,457,735) (24,684,949) 1.2.1- Change in Provisions for Outstanding Claims, gross (29,627,117) (27,001,309) 1.2.2- Change in Provisions for Outstanding Claims, ceded 10 4,169,382 2,316,360 2- Change in Provision for Bonus and Discounts (Net of Reinsurer and Less the Amounts Carried Forward) 245,329 18,792 2.1- Provision for Bonus and Discounts, gross 319,412 581,948 2.2- Provision for Bonus and Discounts, ceded (74,083) (563,156) 3- Change in Life Mathematical Provisions (Net of Reinsurer Share and Less the Amounts Carried Forward) (873,200,220) (335,824,825) 3.1- Change in Life Mathematical Provisions, gross (873,563,387) (336,534,290) 3.1.1- Change in Actuarial Mathematical Provisions, gross (758,232,968) (284,505,220) 3.1.2- Change in Profit Share Provisions (Provision for Financial Investments with Risks on Saving Life Policyholders), gross (115,330,419) (52,029,070) 3.2- Change in Life Mathematical Provisions, ceded 10 363,167 709,465 3.2.1- Change in Actuarial Mathematical Provisions, ceded 363,167 709,465 3.2.2- Change in Profit Share Provisions (Provision for Financial Investments with Risks on Saving Life Policyholders). ceded - - 4- Change in Other Technical Provisions (Net of Reinsurer and Less the Amounts Carried Forward) (13,949,238) (11,699,233) 5- Operating Expenses 32 (368,128,058) (285,227,148) 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) 327,612,941 264,078,566 G- Pension Business Technical Income 5,25 506,282,690 427,720,032 1- Fund Management Income 25 368,730,550 304,264,809 2- Management Fee 25 76,875,084 58,862,051 3- Entrance Fee Income 25 38,341,466 49,513,171 4- Management Expense Charge in case of Suspension 25 21,610,394 14,661,983 5- Income from Individual Service Charges - - 6- Increase in Value of Capital Allowances Given as Advance - - 7- Other Technical Expense 25 725,196 418,018 H- Pension Business Technical Expense 5 (360,755,917) (337,039,910) 1- Fund Management Expense (12,673,070) (27,174,746) 2- Decrease in Value of Capital Allowances Given as Advance - - 3- Operating Expenses 32 (321,323,467) (286,889,993) 4- Other Technical Expenses (25,079,317) (20,672,907) 5- Fine Payments (1,680,063) (2,302,264) I- Net Technical Income - Pension Business (G - H) 145,526,773 90,680,122
The accompanying notes are an integral part of these unconsolidated financial statements.
120 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ UNCONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Audited Audited Current Period Prior Period II- NON-TECHNICAL SECTION Note December 31, 2020 December 31, 2019 C- Net Technical Income - Non-Life (A-B) (929,714) (1,025,255) F- Net Technical Income - Life (D-E) 327,612,941 264,078,566 I - Net Technical Income - Pension Business (G-H) 145,526,773 90,680,122 J- Total Net Technical Income (C+F+I) 472,210,000 353,733,433 K- Investment Income 26 246,997,683 167,325,031 1- Income from Financial Assets 108,429,056 98,075,472 2- Income from Disposal of Financial Assets 9,739,740 25,045,421 3- Valuation of Financial Assets 58,888,029 16,533,659 4- Foreign Exchange Gains 36 27,683,158 10,053,255 5- Income from Associates 26 4,272,000 4,272,000 6- Income from Subsidiaries and Joint Ventures - - 7- Income from Property, Plant and Equipment 7,26 33,463,714 8,483,587 8- Income from Derivative Transactions - - 9- Other Investments 26 4,521,986 4,861,637 10- Income Transferred from Life Section - - L- Investment Expense (58,836,450) (57,853,096) 1- Investment Management Expenses (inc. interest) (14,630,491) (14,681,714) 2- Diminution in Value of Investments - (225,114) 3- Loss from Disposal of Financial Assets (7,493) (305,979) 4- Investment Income Transferred to Non-Life Technical Section - - 5- Loss from Derivative Transactions - - 6- Foreign Exchange Losses 36 (12,844,054) (5,563,894) 7- Depreciation and Amortisation Expenses 5 (31,354,412) (37,076,395) 8- Other Investment Expenses - - M- Income and Expenses From Other and Extraordinary Operation (12,692,920) 13,634,457 1- Provisions 47 (5,921,460) (6,451,638) 2- Rediscounts 47 123,811 100,794 3- Specified Insurance Accounts - - 4- Monetary Gains and Losses - - 5- Deferred Taxation (Deferred Tax Assets) 21 (6,367,535) 20,236,379 6- Deferred Taxation (Deferred Tax Liabilities) - - 7- Other Income 267,964 886,689 8- Other Expenses and Losses (795,700) (1,137,767) 9- Prior Year’s Income - - 10- Prior Year’s Expenses and Losses - - N- Net Profit for the Period 37 519,341,352 357,534,825 1- Profit for the Period 647,678,313 476,839,825 2- Corporate Tax Provision and Other Fiscal Liabilities 35 (128,336,961) (119,305,000) 3- Net Profit for the Period 37 519,341,352 357,534,825 4- Monetary Gains and Losses - -
The accompanying notes are an integral part of these unconsolidated financial statements.
Anadolu Hayat Emeklilik 2020 Annual Report 121 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ UNCONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Audited -Changes in Equity - December 31, 2019 Audited -Changes in Equity - December 31, 2019 Paid-in Own Shares of the Revaluation of Inflation Currency Translation Legal Statutory Other Reserves and Net Profit Retained Note Capital Company Financial Assets Adjustments Adjustments Reserves Reserves Retained Earnings for the Period Earnings Total I - Balance at the end of the year period - December 31, 2018 430,000,000 - (56,522,836) - - 153,833,566 32,870,889 32,883,765 253,600,251 93,952,011 940,617,646 II - Change in Accounting Standards ------III - Restated balances (I+II) - January 1, 2019 430,000,000 - (56,522,836) - - 153,833,566 32,870,889 32,883,765 253,600,251 93,952,011 940,617,646 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 ------(2,059,022) - - (2,059,022) D- Change in the value of financial assets 15 - - 107,460,458 ------107,460,458 E- Currency translation adjustments ------F- Other gains or losses 15 ------44,080 6,200,000 (3) 6,244,077 G- Inflation adjustment differences ------H- Net profit for the period ------357,534,825 - 357,534,825 I - Dividends paid 38 ------(136,125,454) - (136,125,454) J - Transfers from retained earnings 15 - - - - - 17,098,264 19,805,634 86,770,899 (123,674,797) - - IV - Balance at the end of the period - December 31, 2019 430,000,000 - 50,937,622 - - 170,931,830 52,676,523 117,639,722 357,534,825 93,952,008 1,273,672,530
Audited - Changes in Equity - December 31, 2020 Audited - Changes in Equity - December 31, 2020 Paid-in Own Shares of the Revaluation of Inflation Currency Translation Legal Statutory Other Reserves and Net Profit Retained Note Capital Company Financial Assets Adjustments Adjustments Reserves Reserves Retained Earnings for the Period Earnings Total I - Balance at the end of the year period - December 31, 2019 430,000,000 - 50,937,622 - - 170,931,830 52,676,523 117,639,722 357,534,825 93,952,008 1,273,672,530 II - Change in Accounting Standards ------III - Restated balances (I+II) - January 1, 2020 430,000,000 - 50,937,622 - - 170,931,830 52,676,523 117,639,722 357,534,825 93,952,008 1,273,672,530 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 ------(2,127,490) - - (2,127,490) D- Change in the value of financial assets 15 - - 70,317,888 ------70,317,888 E- Currency translation adjustments ------F- Other gains or losses 15 ------7,500,000 - 7,500,000 G- Inflation adjustment differences ------H- Net profit for the period ------519,341,352 - 519,341,352 I - Dividends paid 38 ------(287,440,317) - (287,440,317) J - Transfers from retained earnings 15 - - - - - 26,594,032 26,943,603 24,101,472 (77,594,508) (44,599) - IV - Balance at the end of the period - December 31, 2020 430,000,000 - 121,255,510 - - 197,525,862 79,620,126 139,613,704 519,341,352 93,907,409 1,581,263,963
The accompanying notes are an integral part of these unconsolidated financial statements.
122 Anadolu Hayat Emeklilik 2020 Annual Report Audited -Changes in Equity - December 31, 2019 Audited -Changes in Equity - December 31, 2019 Paid-in Own Shares of the Revaluation of Inflation Currency Translation Legal Statutory Other Reserves and Net Profit Retained Note Capital Company Financial Assets Adjustments Adjustments Reserves Reserves Retained Earnings for the Period Earnings Total I - Balance at the end of the year period - December 31, 2018 430,000,000 - (56,522,836) - - 153,833,566 32,870,889 32,883,765 253,600,251 93,952,011 940,617,646 II - Change in Accounting Standards ------III - Restated balances (I+II) - January 1, 2019 430,000,000 - (56,522,836) - - 153,833,566 32,870,889 32,883,765 253,600,251 93,952,011 940,617,646 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 ------(2,059,022) - - (2,059,022) D- Change in the value of financial assets 15 - - 107,460,458 ------107,460,458 E- Currency translation adjustments ------F- Other gains or losses 15 ------44,080 6,200,000 (3) 6,244,077 G- Inflation adjustment differences ------H- Net profit for the period ------357,534,825 - 357,534,825 I - Dividends paid 38 ------(136,125,454) - (136,125,454) J - Transfers from retained earnings 15 - - - - - 17,098,264 19,805,634 86,770,899 (123,674,797) - - IV - Balance at the end of the period - December 31, 2019 430,000,000 - 50,937,622 - - 170,931,830 52,676,523 117,639,722 357,534,825 93,952,008 1,273,672,530
Audited - Changes in Equity - December 31, 2020 Audited - Changes in Equity - December 31, 2020 Paid-in Own Shares of the Revaluation of Inflation Currency Translation Legal Statutory Other Reserves and Net Profit Retained Note Capital Company Financial Assets Adjustments Adjustments Reserves Reserves Retained Earnings for the Period Earnings Total I - Balance at the end of the year period - December 31, 2019 430,000,000 - 50,937,622 - - 170,931,830 52,676,523 117,639,722 357,534,825 93,952,008 1,273,672,530 II - Change in Accounting Standards ------III - Restated balances (I+II) - January 1, 2020 430,000,000 - 50,937,622 - - 170,931,830 52,676,523 117,639,722 357,534,825 93,952,008 1,273,672,530 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 ------(2,127,490) - - (2,127,490) D- Change in the value of financial assets 15 - - 70,317,888 ------70,317,888 E- Currency translation adjustments ------F- Other gains or losses 15 ------7,500,000 - 7,500,000 G- Inflation adjustment differences ------H- Net profit for the period ------519,341,352 - 519,341,352 I - Dividends paid 38 ------(287,440,317) - (287,440,317) J - Transfers from retained earnings 15 - - - - - 26,594,032 26,943,603 24,101,472 (77,594,508) (44,599) - IV - Balance at the end of the period - December 31, 2020 430,000,000 - 121,255,510 - - 197,525,862 79,620,126 139,613,704 519,341,352 93,907,409 1,581,263,963
Anadolu Hayat Emeklilik 2020 Annual Report 123 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ UNCONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Audited Audited Current Period Prior Period Note December 31, 2020 December 31, 2019 A. Cash flows from operating activities 1. Cash provided from insurance activities 1,675,955,915 1,011,053,647 2. Cash provided from reinsurance activities 1,083,447 425,122 3. Cash provided from individual pension business 595,094,171 402,513,328 4. Cash used in insurance activities (579,981,710) (210,698,038) 5. Cash used in reinsurance activities - - 6. Cash used in individual pension business (333,196,046) (366,174,495) 7. Cash provided by/(used in) operating activities 1,358,955,777 837,119,564 8. Interest paid - - 9. Income taxes paid (148,829,353) (107,482,874) 10. Other cash inflows 322,740,193 164,288,940 11. Other cash outflows (99,972,183) (180,540,806) 12. Net cash provided by operating activities 1,432,894,434 713,384,824 B. Cash flows from/(used in) investing activities 1. Proceeds from disposal of tangible assets 4,521,986 3,798,622 2. Acquisition of tangible assets 6,7.8 (18,171,456) (18,373,707) 3. Acquisition of financial assets (1,395,741,933) (1,006,922,828) 4. Proceeds from disposal of financial assets 32,225,057 626,136,367 5. Interests received 216,598,763 218,181,004 6. Dividends received 4,999,889 4,828,118 7. Other cash inflows 398,473,524 40,857,112 8. Other cash outflows (100,605,182) (497,273,490) 9. Net cash used in investing activities (857,699,352) (628,768,802) C. Cash flows from/(used in) financing activities - - 1. Equity shares issued - - 2. Cash provided from loans and borrowings - - 3. Finance lease payments - - 4. Dividends paid 38 (287,440,317) (136,125,454) 5. Other cash inflows - - 6. Other cash outflows - - 7. Net cash used in financing activities (287,440,317) (136,125,454) D. Effect of exchange rate fluctuations on cash and cash equivalents - - E. Net decrease in cash and cash equivalents 287,754,765 (51,509,432) F. Cash and cash equivalents at the beginning of the period 14 286,581,598 338,091,030 G. Cash and cash equivalents at the end of the period 14 574,336,363 286,581,598
The accompanying notes are an integral part of these unconsolidated financial statements.
124 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ UNCONSOLIDATED STATEMENT OF PROFIT DISTRIBUTION FOR THE YEAR ENDED DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Audited Audited Current Period Prior Period Note December 31, 2020(3) December 31, 2019 I. DISTRIBUTION OF THE PERIOD PROFIT 1.1. PERIOD PROFIT(1) 663,336,745 465,400,846 1.2. TAXES AND DUTIES PAYABLE (128,336,961) (119,305,000) 1.2.1. Corporate Tax (Income Tax) (128,336,961) (119,305,000) 1.2.2. Income Tax Deductions - - 1.2.3. Other Taxes and Legal Duties - - A. CURRENT PERIOD PROFIT (1.1 - 1.2) 534,999,784 346,095,846 1.3. ACCUMULATED LOSSES (-) - - 1.4. FIRST LEGAL RESERVES (-)(2) - - 1.5. OTHER STATUTORY RESERVES (-) - - B. NET PROFIT AVAILABLE FOR DISTRIBUTION [(A - (1.3 + 1.4 + 1.5)] 534,999,784 346,095,846 1.6. FIRST DIVIDEND TO SHAREHOLDERS (-) - (69,219,499) 1.6.1. To owners of ordinary shares - (69,219,499) 1.6.2. To owners of privileged shares - - 1.6.3. To owners of redeemed shares - - 1.6.4. To holders profit sharing bonds - - 1.6.5. To holders of profit and loss sharing certificates - - 1.7. DIVIDENDS TO PERSONNEL (-) - (7,440,317) 1.8. DIVIDENDS TO BOARD OF DIRECTORS (-) - - 1.9. DIVIDENDS TO FOUNDERS - 1.10. SECOND DIVIDEND TO SHAREHOLDERS (-) - (210,780,501) 1.10.1. To owners of ordinary shares - (210,780,501) 1.10.2. To owners of privileged shares - - 1.10.3. To owners of redeemed shares - - 1.10.4. To holders profit sharing bonds - - 1.10.5. To holders of profit and loss sharing certificates - - 1.11. SECOND LEGAL RESERVES (-) - (26,594,032) 1.12. STATUTORY RESERVES(-) - (26,943,603) 1.13. EXTRAORDINARY RESERVES - (5,117,894) 1.14. OTHER RESERVES - - 1.15. SPECIAL FUNDS - - II. DISTRIBUTION OF RESERVES - - 2.1. APPROPRIATED RESERVES - - 2.2. SECOND LEGAL RESERVES (-) - - 2.3. DIVIDENDS TO SHAREHOLDERS (-) - - 2.3.1. To owners of ordinary shares - - 2.3.2. To owners of privileged shares - - 2.3.3. To owners of redeemed shares - - 2.3.4. To holders of profit sharing bonds - - 2.3.5. To holders of profit and loss sharing certificates - - 2.4. DIVIDENDS TO PERSONNEL (-) - - 2.5. DIVIDENDS TO BOARD OF DIRECTORS (-) - - III. EARNINGS PER SHARE - - 3.1. TO OWNERS OF ORDINARY SHARES 1.24419 0.55349 3.2. TO OWNERS OF ORDINARY SHARES (%) 124.419 55.349 3.3. TO OWNERS OF PRIVILEGED SHARES 1.24419 0.55349 3.4. TO OWNERS OF PRIVILEGED SHARES (%) 124.419 55.349 IV. DIVIDEND PER SHARE - 4.1. TO OWNERS OF ORDINARY SHARES - - 4.2. TO OWNERS OF ORDINARY SHARES (%) - - 4.3. TO OWNERS OF PRIVILEGED SHARES - - 4.4. TO OWNERS OF PRIVILEGED SHARES (%) - -
(1) Consolidated current year profit is used for profit distribution according to the article 13 of the “Profit Share Guidebook” issued by the Capital Markets Board on 23 January 2014 dated. Provision for dividend expense amounting to TL 8,400,000 is added to the profit for the year ended December 31, 2020 according to TAS 19 Employee Benefits. Besides TL 354,130 amounting the 75% of TL 472,173 which was gained from the sales profit of equities in 2020 are not subjected to profit distribution within the relevant legislation. (2) In accordance with the relevant article of Association of the Company 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. Due to reaching this limit first legal reserve has not been allocated. (3) As of the reporting date, the General Assembly Meeting has not been held, therefore only distributable net profit is presented in the 2020 profit distribution table above.
The accompanying notes are an integral part of these unconsolidated financial statements.
Anadolu Hayat Emeklilik 2020 Annual Report 125 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
1. General information
1.1 Name of the Company and the ultimate owner of the group
Anadolu Hayat Emeklilik Anonim Şirketi (the “Company”) has been operating since May 31, 1990 and the shareholding structure of the Company is presented below. As at December 31, 2020, the shareholder having direct or indirect control over the shares of the Company is Türkiye İş Bankası AŞ (“İş Bankası”) by 84.89% of the outstanding shares of the Company.
December 31, 2020 December 31, 2019 Shareholding Shareholding Shareholding Shareholding Name amount (TL) rate (%) amount (TL) rate (%)
Türkiye İş Bankası AŞ(1) 274,743,069 63.89 274,742,830 63.89 Anadolu Anonim Türk Sigorta Şirketi 86,000,000 20.00 86,000,000 20.00 Milli Reasürans TAŞ 4,299,999 1.00 4,299,999 1.00 Publicly traded 64,956,932 15.11 64,957,171 15.11 Paid in capital 430,000,000 100.00 430,000,000 100.00
(1) The rate of publicly traded shares is 17%. As at December 31, 2020, Türkiye İş Bankası AŞ. owns the 1.89% of the publicly traded shares.
1.2 Domicile and the legal structure of the Company, country and the address of the registered office (address of the operating center if it is different from the registered office)
The Company was registered in Turkey and has the status of ‘Incorporated Company’ in accordance with the regulations of Turkish Commercial Code. The address of the Company’s registered office is Meltem Sokak No: 10 İş Kuleleri Kule: 2 Kat: 16, Levent 34330 Beşiktaş/İstanbul.
1.3 Business of the Company
The activities of the Company 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.
As at December 31, 2020, the Company has 34 individual pension investment funds (December 31, 2019: 34).
1.4 Description of the main operations of the Company
The Company issues policies in insurance branches specified in the above note 1.3 - Business of the Company and contracts in individual pension business by conducting it operations in accordance with the Insurance Law No. 5684 (the “Insurance Law”) issued on June 14, 2007 dated and 26552 numbered Official Gazette and Individual Pension Savings and Investment System Law No. 4632 (the “Individual Pension Law”) and other communiqués and regulations in force issued by the Ministry of Treasury and Finance of the Turkish Republic (the “Ministry”) based on the Insurance Law and the Individual Pension Law.
The Company’s shares are listed on the Borsa Istanbul (“BIST”). In accordance with Article 136 (5) in Section VIII of the Capital Markets Law, 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 performs its operations accordingly.
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, 2020 December 31, 2019
Senior level managers 7 7 Directors 150 142 Officers 403 420 Sales personnel 496 506 Other 10 11 Total 1,066 1,086
1.6 Wages and similar benefits provided to the senior management
For the year ended as of December 31, 2020, wages and similar benefits provided to the senior management including chairman, members of the board of the directors, general manager, and deputy general managers amounted to TL 7,384,995 (December 31, 2019: TL 7,207,988).
126 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
1.7 Explanation about the distribution of investment income and operating expenses (personnel expenses, administrative expenses, research and development expenses, marketing and selling expenses, and expenses for the services bought from third parties) in the financial statements
Procedures and principles related to keys used in the financial statements of the companies are determined in accordance with the January 4, 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 Ministry. In accordance with the above mentioned Communiqué, known and exactly distinguishable operating expenses are directly recorded under life, non-life or individual pension segments. Other non-distinguishable expenses, which are not exactly distinguished, are distributed between insurance segments and individual pension segment in accordance with the number of policies and contracts at the end of last 3 years and arithmetic average of contribution premium and earned premium within the last 3 years in accordance with the August 9, 2010 dated and 2010/9 numbered “Amendments 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 Ministry. Amendment is effective from January 1, 2011. The portion of insurance segments calculated as described above is distributed between life and non-life branches in accordance with the average of 3 ratios calculated by dividing “number of the policies produced within the last three years”, “gross premiums 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.
Income from the assets invested against mathematical and profit sharing provisions is recorded under technical section, remaining income is transferred to the non- technical section.
As at the reporting period, distribution of the operating expense between life, non-life and pension branches is presented in note 5 - Segment distribution.
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 detailed in note 2.2 - Consolidation, the Company has prepared consolidated financial statements as at December 31, 2020, separately.
1.9 Name or other identity information about the reporting entity and the changes in this information after previous reporting period
Trade name of the Company : Anadolu Hayat Emeklilik Anonim Şirketi Registered address of the head office : Meltem Sokak No: 10 İş Kuleleri Kule: 2 Kat: 16 Levent 34330 Beşiktaş/İstanbul The web page of the Company : www.anadoluhayat.com.tr E-mail address of the Company : [email protected] Phone : 0212 317 70 70 Fax : 0212 317 70 77
There has been no change in the aforementioned information subsequent to the previous reporting period.
1.10 Events after the reporting period
Unconsolidated financial statements prepared for the period ended as of December 31, 2020 was approved by Board of Directors on January 28, 2021.
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
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 Ministry based on Article 18 of the Insurance Law.
In Article 4 of related communiqué; insurance contracts, subsidiaries, jointly controlled partnerships and subsidiaries consolidated financial statements and the accounting, financial statements and footnotes to be announced publicly relating to the regulation of procedures and principles determined by the Ministry stated that it would be issued with communiqué.
Comparative financial statements with prior period and other companies’ financial statements provided that regulated to content and form of financial statements of companies which were published as “Communiqué on Presentation of Financial Statements” in Official Gazette April 18, 2008 dated and 26851 numbered.
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 at 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 period, and that corresponding figures for previous years be restated in the same terms.
Anadolu Hayat Emeklilik 2020 Annual Report 127 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
With respect to the April 4, 2005 dated and 19387 numbered declaration of the Ministry, the Company restated its financial statements as at December 31, 2004 and prepared opening financial statements of 2005 in accordance with the “Restatement of Financial Statements in Hyperinflationary Periods” of the Capital Markets Board (“CMB”) Communiqué No: 25 of Series XI, “Communiqué on Accounting Standards in Capital Markets” 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 Ministry. Accordingly, as at December 31, 2020, non-monetary assets and liabilities and items included in shareholders’ equity including paid-in capital recognised or recorded before January 1, 2005 are measured as restated to December 31, 2004 in order to reflect inflation adjustments. Non-monetary assets and liabilities and items included in shareholders’ equity including paid-in capital recognised or recorded after January 1, 2005 are measured at their nominal costs or values.
Other accounting policies
Information regarding to other accounting polices is explained above in the section of note 2.1.1 - Information about the principles and the special accounting policies used in the preparation of the financial statements and each on its own caption in following sections of this report.
2.1.3. Functional and presentation currency
The Company’s financial statements are presented in the currency of the primary economic environment in which the entity operates. The results and financial position of the Company are expressed in TL, which is the functional and presentation currency of the Company.
2.1.4 Rounding level of the amounts presented in the financial statements
Financial information presented in TL has been rounded to the nearest TL values.
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, financial investments with risks on saving life policyholders classified as available-for- sale financial assets, derivative financial instruments, investment properties and owner occupied properties which are measured at their fair values unless reliable measures are available.
2.1.6 Accounting policies, changes in accounting estimates and errors
Explanations regarding to the Company’s accounting policies are presented in note 3 - Critical accounting estimates and judgements in applying accounting policies.
2.2 Consolidation
“Circular Related to the Preparation of the Consolidated Financial Statements of Insurance, Reinsurance, and Individual Pension Companies” issued by the Ministry in the December 31, 2008 dated and 27097 numbered Official Gazette, has been in force since March 31, 2009. Accordingly, consolidated financial statements are prepared using the equity method of accounting to consolidate the Company’s associate; İş Portföy Yönetimi A.Ş.
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 Ministry, 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 at the reporting period the Company has accounted for its associate at cost less impairment losses, if any.
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.
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 period and foreign currency exchange differences are offset and all exchange differences are recognised in the statement of income.
Foreign currency exchange differences of unrecognised 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 realised gain or losses are recognised directly in the statement of income. Foreign currency exchange differences of unrecognised gains or losses arising from financial investments with risks on saving life policyholders classified as available-for-sale financial assets, 5% of the difference is recorded under equity and the remaining 95% belonging to policyholders is recorded as ‘insurance technical provisions - life mathematical provisions’.
128 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
2.5 Tangible assets
Except owner occupied properties, tangible assets are recorded at their historical costs that have been adjusted according to the inflation rates 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 indexed to the inflation rates for December 31, 2004. Tangible assets that have been purchased after January 1, 2005 have been recorded at their costs excluding their exchange rate differences and finance expenses less impairment losses if any.
The Company has changed historical cost basis method with revaluation method for owner occupied properties. Fair values of owner occupied properties have been reflected in the financial statements instead of historical cost values since the third quarter of 2015.
The fair values of owner occupied properties were provided by CMB licensed real estate companies. The fair values excluding the accumulated depreciation are reflected in the financial statements.
Increase arising from the revaluation of owner occupied properties is presented under the “other profit reserves” in equity excluding tax.
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.
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 recognised 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:
Tangible assets Estimated useful lives (years) Depreciation rates (%) Buildings 50 years 2.00 Machinery and equipment 3-16 years 6.25-33.33 Fixtures and furniture 4-13 years 7.69-25.00 Vehicles 5 years 20.00 Other tangible assets (includes leasehold improvements) 5 years 20.00 Leased assets 4-15 years 6.66-25.00
2.6 Investment properties
Investment properties are held either to earn rentals and/or for capital appreciation or for both.
Investment properties are measured initially at cost including transaction costs and then measured at fair value. The change arising from fair value is recognised in the income statement.
The difference arising between sale prices and carrying value of an investment property is recognised in profit or loss.
Investment properties are derecognised 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.
When the investment property recorded at fair value is reclassified as tangible assets, the fair value of the investment property at the reclassification date is accepted as historical cost value.
2.7 Intangible assets
The Company’s intangible assets consist of computer software.
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. Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specific software.
Amortisation is charged on a straight-line basis over their estimated useful lives (3 years) over the cost of the asset.
Costs associated with developing or maintaining computer software programs are recognised as expense when incurred. Costs that are directly associated with the development of identifiable and unique software products that are controlled by the Company and will probably provide more economic benefits than costs in one year are recognised as intangible assets. Costs include software development employee costs and an appropriate portion of relevant overheads. Computer software development costs recognised as assets are amortised over their estimated useful lives (not exceeding three years).
Anadolu Hayat Emeklilik 2020 Annual Report 129 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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.
Securities are recognised and derecognised at the date of settlement.
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 are recorded in the statement of income. 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 amortised 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 amortised cost using effective interest rate method less impairment losses, if any.
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.
Available-for-sale financial assets are initially recorded at cost and subsequently measured at their fair values. Assets that are not traded in an active market are measured by valuation techniques, including recent market transactions in similar financial instruments, adjusted for factors unique to the instrument being valued; or discounted cash flow techniques for the assets which do not have a fixed maturity. Unrecognised 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 realised gain or losses are recognised 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.
Associates are classified as financial assets in the unconsolidated financial statements. Associates, traded in an active market or whose fair value can be reliably measured, are recorded at their fair values. Associates that are not traded in an active market and whose fair value cannot be reliably set are reflected in financial statements at their costs after deducting impairment losses, if any.
Specific instruments
Financial investments with risks on saving life policyholders are the financial assets invested against the savings of the life policyholders. Financial investments with risks on saving life policyholders could be classified as financial assets held for trading purpose, available for sale financial assets or held to maturity investments by considering the benefits of the policyholders and measured in accordance with the principles as explained above.
When such investments are classified as available-for-sale financial assets, 5% of the difference between the fair values and amortised costs, calculated by using effective interest method, of the financial assets is recorded under equity and the remaining 95% belonging to policyholders is recorded as ‘insurance technical provisions - life mathematical provisions’. As at December 31, 2020, 95% of the difference between fair values and amortised costs of those assets backing liabilities amounting to TL 92,019,672 (December 31, 2019: TL 11,377,946) is recorded in life mathematical provisions.
Receivables from individual pension operations consist of ‘capital advances given to pension investment funds’, ‘receivable from pension investment funds for fund management fees’, ‘entrance fee receivable from participants’ and ‘receivables from clearing house on behalf of the participants’.
‘Receivable from pension investment funds for fund management fee’ are the fees charged to the pension investment funds against for the administration of related pension investment funds which consist of fees which are not collected in the same day.
Capital advances given to pension investments funds during their establishment are recorded under ‘capital advances given to pension investment funds’.
‘Receivables from the clearing house on behalf of the participants’ is the receivable from clearing house on fund basis against the collections of the participants. Same amount is also recorded as payables to participants for the funds sold against their collections under the ‘payables arising from individual pension businesses.
Loans to the policyholders are loans that are provided to the policyholders from saving component of the life insurance policies based on the fund amounts and fund unit prices. Valuation of the loans to the policyholders based on the fund amounts and fund unit prices as at the reporting date.
Derecognition
A financial asset is derecognised when the control over the contractual rights that comprise that asset is lost. This occurs when the rights are realised, expire or are surrendered.
130 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
2.9 Impairment on assets
Impairment on financial assets
Financial assets or group of financial assets are reviewed at each reporting period to determine whether there is objective evidence of impairment. If any such indication exists, the Company estimates the amount of impairment. Impairment loss incurs 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 recognised even if the probability of loss is high.
Loans and receivables are presented net of specific allowances against uncollectability. 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 recognised. For financial assets measured at amortised cost and available-for-sale financial assets that are debt securities, the reversal is recognised in the statement of operations. For available-for-sale financial assets that are equity securities, the reversal is recognised directly in equity.
Impairment on tangible and intangible assets
On each reporting period, the Company evaluates whether there is an indication of impairment of fixed 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 the reporting date, the Company does not have any derivative financial instruments. 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 recognised at their fair value. The receivables and liabilities arising from the derivative transactions are recognised under the off-balance sheet accounts through the contract amounts.
Derivative financial instruments are subsequently re-measured 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 unrealised gains and losses on these instruments are included in the statement of income.
2.11 Offsetting of financial assets
Financial assets and liabilities are off-set and the net amount is presented in the balance sheet when, and only when, the Company has a legal right to set off the amounts and intends either to settle on a net basis or to realise 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 a base for the preparation of the statement of cash flows includes cash on hand, other cash and cash equivalents, demand deposits and time deposits at banks having original maturity less than 3 months which are ready to be used by the Company or not blocked for any other purpose.
2.13 Capital
The shareholding structure of the Company is presented in note 1.1 - Name of the Company and the ultimate owner of the group. As of December 31, 2020, the Company’s issued capital is TL 430,000,000 (December 31, 2019: TL 430,000,000).
Sources of the capital increases during the period
None.
Privileges on common shares representing share capital
As at December 31, 2020, the share capital of the Company was amounted TL 430,000,000 (December 31, 2019: TL 430,000,000), divided into 43,000,000,000 shares (December 31, 2019: 43,000,000,000 shares) with each has a nominal value of TL 0.01. The Company’s share capital was divided into groups comprised of 100,000,000 Group A shares having a nominal values of TL 1,000,000 for each and the rest of amount by Group B shares having a nominal values of TL 1,000,000 for each. Among eleven members of the Board of Directors, seven are elected among candidates nominated by Group A shareholders while four are elected among candidates nominated by Group B shareholders.
Anadolu Hayat Emeklilik 2020 Annual Report 131 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Registered capital system in the Company
The Company has accepted the registered capital system set out in accordance with the Law No: 2499 and applied the system as of June 15, 2000 upon the permission no: 67/1039 granted by the Capital Markets Board. As at December 31, 2020, the registered capital of the Company is TL 900,000,000 (December 31, 2019: TL 900,000,000).
Repurchased own shares by the Company
None.
2.14 Insurance and investment 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 recognised 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.
The Company mainly issues policies under personal accident, risk and saving life insurance branches and individual pension contracts.
Saving component of the life products can be measured separately by the Company. However, insurance and saving components are not separated due to accounting policy requirements specified to account all risks and rewards without considering the basis of measurement.
2.15 Insurance contracts and investment contracts with discretionary participation feature
Discretionary participation feature (“DPF”) 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) realised and/or unrealised 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 at the reporting period, the Company does not have any insurance or investment contracts that contain a DPF.
2.16 Investment contracts without DPF
In the context of the saving life products, if the investment return, obtained from the savings of the policyholders which is invested by the Company results a lower yield rate than the technical interest rate, the Company compensates the difference; if investment return results higher yield than the guaranteed technical interest rate, the difference is distributed to the policyholders as profit sharing bonus. Due to contractual and competitive constraints in practice, the Company has classified these contracts as investment contracts without DPF.
For such products, investment income obtained from assets backing liabilities is recorded within income statement or equity in accordance with the accounting policies mentioned above; and whole contract is presented as a liability under life mathematical provisions.
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 derecognised when it is extinguished.
Payables arising from individual pension business consist of payables to participants, participants’ temporary accounts, and payables to individual pension agencies. The payables to participants are the account in which the contribution of participants that transferred to investments on behalf of individual pension contract owners and income from these investments are recorded. The temporary account of participants includes the contributions of participants that have not yet been transferred to the investment. This account also includes the entrance fee deducted portion of the participants’ fund amounts, obtained from the fund share sales occur in the case of system leaves. This account consists of the amounts of participants that will be transferred to other individual pension companies or participants’ own accounts. Payables to individual pension agencies are Company’s liabilities to individual pension agencies in return of their services.
132 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
2.18 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 the retained earnings to capital is not considered as profit distribution and therefore is not subject to withholding tax.
The 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 accordance with the local tax legislation, tax losses can be carried forward to offset against future taxable income for up to five years. December 31, 2020 and 2019, the Company does not have any deductible tax losses.
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.
According to the “General Communiqué on Corporate Tax” promulgated in Official Gazette no 28178 dated January 19, 2012, fair value of derivative transactions and option premiums are accepted as income or expense in the corporate tax statement if those transactions are performed at Derivative Exchange Market and not if those transactions are performed with entities as previously.
Deferred tax
In accordance with TAS 12 - Income taxes, deferred tax assets and liabilities are recognised 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.
The deferred tax assets and liabilities are reported as net in the financial statements only if, the Company has a legally enforceable right to net off current tax assets with current tax liabilities.
In case where gains/losses resulting from the subsequent measurement of the assets are recognised in the statement of income, then the related current and/or deferred tax effects are also recognised in the statement of income. On the other hand, if such gains/losses are recognised as an item under equity, then the related current and/or deferred tax effects are also recognised directly in the equity.
As of January 1, 2018, the corporate tax rate of 22% is used for the temporary differences expected to be realized/settled within 3 years (2018, 2019 and 2020) for deferred tax calculation since the tax rate applicable for 3 years has been changed to 22%. However, 20% tax rate is used for the current differences expected/expected to be incurred after 2020 since the corporate tax rate applicable is 20% for after 2020.
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 Hayat Emeklilik 2020 Annual Report 133 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
2.19 Employee benefits
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 computation of the liability is based upon the retirement pay ceiling announced by the Government. The applicable ceiling amount as at December 31, 2020 is TL 7,117.17 (December 31, 2019: TL 6,379.86).
The Company accounted for employee termination benefits using actuarial method in compliance with the TAS 19 - Employee Benefits. The major actuarial assumptions used in the calculation of the total liability as at December 31, 2020 and December 31, 2019 are as follows:
December 31, 2020 December 31, 2019 Discount rate 4.07% 4.20% Expected rate of salary/limit increase 8.00% 7.20%
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 period 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 footnotes 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 recognised in financial statements since this may result in the recognition of income that may never be realised. 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 recognised 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 profit or loss statement.
Claims are recognised as expense as they are paid. Outstanding claims reserve is provided for both reported unpaid claims at the reporting period and incurred but not reported claims. Reinsurer’s shares of claims paid and outstanding claims reserves are off-set against these reserves.
Commission income and expense
As further disclosed in Note 2.24, 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 recognised 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 recognising deferred commission income and deferred commission expense in the financial statements for the policies produced after January 1, 2008.
In compliance with the matching principle, the Company accrues the commissions of the intermediaries simultaneously on a policy basis, while accruing the receivables from the insureds.
Reinsurance commissions are accounted for based on reinsurer agreements. According to the Circular no: 2007/25 issued by the Ministry on December 28, 2007, starting from January 10, 2008, deferred reinsurance commissions are presented in “Deferred Income” account in the balance sheet.
Interest income and expense
Interest income and expense are recognised in the statement of income 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.
134 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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 recognised as “Income from disposal of financial assets” and “Loss from disposal of financial assets” in the accompanying unconsolidated financial statements.
Dividends
Dividend income is recognised when the Company’s right to receive payment is ascertained.
Income from individual pension business
The share of fund management fee belonging to portfolio manager is paid directly by the relevant fund for management and representation of the fund and for expense deduction made for hardware, software, personnel and accounting services allocated to the fund and is not recognised as Company’s “Fund management expense” under technical expenses. Net income of the company from the fund management fee is recognised as “Fund management income” under technical income.
According to the “Individual Pension System Communiqué” promulgated in Official Gazette no 29366 dated May 25, 2015 and within the changes enacted since January 1, 2016 total entrance fee and management fee that can be made in first 5 years of contract does not exceed 8.5% of gross minimum wage that is valid for the first 6 months of the relevant year. The management fees can be levied on contributions or pension investment funds of the participants and is recognised as “Management fee” under pension business technical income. Entrance fees are received by the Company from participants during the access into the system and for the opening of a new individual pension account or during first time at a different company if the pension contract is already concluded, the aforementioned income is recognised as “Entrance fee income” under pension business technical income.
If no payment is made within three months after the contribution paid at maturity date, case of suspension occurs and management expense is charged. The aforementioned expense is recognised as “Management expense charge in the case of suspension”.
The difference in value of the pension investment fund shares, obtained due to capital advance on the date of establishment, to the date of selling of those shares to the participants is recorded in the income statement as “increase in value of capital allowances given as advances”.
According to the amendments, promulgated in Official Gazette no 29812 dated August 25, 2016 and effective from January 1, 2017, made to the personal pension savings and investments system law, automatic enrolment to individual pension system that enables employees to be automatically included to an individual pension plan, has come into effect. According to the automatic enrolment system’s regulations, maximum of 0.85% fund management fee could be applied to participants; entrance and management fees are not applied.
2.22 Leasing transactions
Tangible assets acquired by way of finance leasing are recognised 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 assets and liabilities, the lower of the fair value of the leased asset and the present value of leasing payments is considered. Financial costs of leasing agreements are expanded in lease periods at a fixed interest rate.
If there is impairment in the value of the assets obtained through financial lease and in the expected future benefits, the leased assets are valued with net realisable value. Depreciation for assets obtained through financial lease is calculated in the same manner as tangible assets.
Right-of-use assets
The Company recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities.
The cost of the right-of-use asset includes:
(a) initial direct costs incurred,
(b) lease payments made at or before the commencement date less any lease incentives received, and
(c) All initial costs incurred by the company.
Unless the Company is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment.
Right-of-use assets are subject to impairment.
Lease liabilities
At the commencement date of the lease, the Company recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating a lease, if the lease term reflects the Company exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as expense in the period on which the event or condition that triggers the payment occurs.
Anadolu Hayat Emeklilik 2020 Annual Report 135 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
In calculating the present value of lease payments, the Company uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.
Right-of-use assets calculated regarding to lease liabilities are accounted in “Tangible Assets” located in balance sheet.
Interest expense on lease liabilities and depreciation expense of right-of-use asset are accounted in “Investment Management Expenses (inc. interest)” and “Depreciation and Amortisation Expenses” respectively.
The details related to contracts term of operating leases and applied discount rates are presented below:
Contract term Discount rate - TL Discount rate - Euro Assets subject to operating leases (Year) (%) (%) Buildings 10 years 20.00 - Motor vehicles 1-3 years 12,50-20.00 5.00
2.23 Dividend distribution
In accordance with the Articles of Association of the Company, first dividend distribution is made from distributable profit based on the rates and amounts set out by the Capital Markets Board. In regards to the profit share distribution policy of the Company, two options are presented to the General Assembly; 30% of distributable profit at a minimum as bonus shares or in cash. Based on its articles of association, the Company makes at a maximum of 3% of profit share payments to its employees following the appropriation of first profit share, limited to a maximum of three-month salary.
Dividend payables are recognised as liability in the financial statements when they are announced.
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 period for all short-term insurance policies.
In the case of personal accident insurance, annual life insurance and life insurance which of the renewal date exceeds one year, reserve for unearned premiums is calculated for the portion of the remaining part which is left after deducting savings from gross premium written for the year. In accordance with the “Communiqué on Amendments to the Communiqué on Technical Reserves for Insurance, Reinsurance and Pension Companies and the Related Assets That Should Be Invested Against Those Technical Reserves” issued in 28356 numbered and July 17, 2012 dated Official Gazette and effective from June 30, 2012, reserve for unearned premiums is calculated from remaining amount of gross written premiums by deducting saving component and expenses related with saving component for life insurance and life insurance with saving components having longer than one year maturity. Insurance policies covering possibilities of life and death or both and personal accident, disability by illness and serious illness insurance policies are considered as life insurance policies and their premiums are classified as life insurance premiums.
According to the 2009/9 Numbered Circular Related to Application of Technical Reserves issued on March 27, 2009 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.
2.25 Reserve for unexpired risks
In accordance with the Communiqué on Technical Reserves, in each accounting period, the companies while providing reserve for unearned premiums should perform adequacy test covering the preceding 12 months in regard with the probability of future claims and compensations of the outstanding policies will arise 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 the “Communiqué on Amendments to the Communiqué on Technical Reserves for Insurance, Reinsurance and Pension Companies and the Related Assets That Should Be Invested Against Those Technical Reserves” issued in 28356 numbered and July 17, 2012 dated Official Gazette and effective from June 30, 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. The difference between the gross amount and the net amount is considered as the reinsurer’s share.
136 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
According to Undersecretariat of Treasury’s 2019/5 numbered general instructions has remarked that the method below can be used to calculate the reserve for unexpired risks in all branches. Turkish Treasury allows insurance companies with the circular 2019/5 to calculate their unexpired risks reserve on all branches by considering only the last 4 accident quarters’ loss ratios. According to this new method, loss ratios exceeding 85% will be multiplied by unearned premiums reserve for the calculation of unexpired risk reserve.
The Ministry is authorised to change test methods and require additional reserve for unexpired risks on branch basis. As at December 31, 2020, related test have not resulted any reserve for unexpired risks (December 31, 2019: None).
2.26 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 period as well as the corresponding handling costs.
Change in measurement of technical reserves became effective as at September 30, 2010 according to the Ministry Circular which were published as “Communiqué on Amendments to Communiqué on Technical Reserves” in Official Gazette dated July 28, 2010 and numbered 27655.
Following the changes made by the mentioned circular issued by the Ministry, the Circulars, that include explanations regarding accounting of income from salvage and subrogation and methodological changes on Actuarial Chain ladder method, numbered 2010/12, 2010/13, 2010/14 and the sector announcement numbered 2010/29 issued, which became effective as at December 31, 2010, in order to clarify uncertainties on measurement of technical reserves and accounting of income from salvage and subrogation.
Additional amendments effective from June 30, 2012 are issued in the “Communiqué on Amendments to the Communiqué on Technical Reserves for Insurance, Reinsurance and Pension Companies and the Related Assets That Should Be Invested Against Those Technical Reserves” in 28356 numbered and July 17, 2012 dated Official Gazette. Test IBNR method ceased in the calculation of provision for outstanding claims. In accordance with the previous communiqués and sector announcements companies should perform actuarial chain ladder method for the non-life insurance branches engaged more than five years and had sufficient data.
Upon issuance the Circular on Outstanding Claims Reserve numbered 2014/16 issued by the Ministry, the Circulars numbered 2010/12, 2010/14 and 2010/16 are repealed. In accordance with the aforementioned Circular numbered 2014/16, IBNR calculation can be made with the other methods by the companies if the calculation method rests upon actuarial basis and amount obtained from this method is greater than the amount calculated by the Actuarial Chain Ladder Method. In this context, Company maintains to calculate IBNR amount according to the repealed Circulars numbered 2010/12 and 2010/14.
Claims incurred before the accounting periods but reported subsequent to those dates are accepted as incurred but not reported (“IBNR”) claims. According to the “Communiqué on Provision for IBNR Claims in Life Branch” numbered 2010/14, IBNR calculation is changed. In accordance with the related regulations, last five or more than five years’ weighted average calculated by dividing total gross amount of incurred but not reported claims to average annual guarantee of the related years. As of the current reporting period, IBNR is calculated by multiplying weighted average IBNR ratio by the average guarantee amount of last twelve months before reporting period. Accordingly, as at the reporting period, the Company has provided for IBNR, net off ceded amounting to TL 11,378,274 (December 31, 2019: TL 12,082,030).
According to the 7th article 6th sub clause of the “Circular on Change in Technical Reserves for Insurance, Reinsurance and Pension Companies and the Related Assets That Should Be Invested against Those Technical Reserves”; provision for the outstanding claims of the period cannot be less than the result of the actuarial chain ladder method determined by the Ministry. The Company has selected “Standard chain ladder method” for personal accident branch as stated in the “Communiqué on Technical Reserves and Circular on Actuarial Chain Ladder Method” dated 20 September 2010 and numbered 2010/12. Accordingly, as at the reporting period, the Company has provided for IBNR, net off ceded amounting to TL 6,245 (December 31, 2019: TL 56,472).
According to the Sector Announcement dated July 18, 2012 and numbered 2012/13 published by the Ministry, insurance, reinsurance and individual pension companies are required to perform adequacy test to assess the adequacy of provision for outstanding claims at the end of the each reporting period. Companies performed actuarial chain ladder method are not obliged to record additional provision for outstanding claims. As at December 31, 2020, this adequacy test has not resulted in additional provision for outstanding claims.
2.27 Mathematical provisions
In accordance with the Communiqué on Technical Reserves, companies operating in life and non-life insurance branches are obliged to allocate adequate mathematical reserves based on actuarial basis to meet liabilities against policyholders and beneficiaries for long-term life, health and personal accident insurance contracts. Mathematical provisions are composed of actuarial mathematical provisions and profit sharing provisions. Actuarial mathematical provisions, according to formulas and basis in approved technical basis of tariffs for over one year-length life insurance, are calculated by determining the difference between present value of liabilities that the Company meets in future and current value of premiums paid by policyholder in future (prospective method). In life insurance where saving plan premiums are also generated, actuarial mathematical provisions consist of total saving plan portions of premiums. Provision for profit sharing consist of profit sharing calculated in previous years and a certain percentage of current year’s income, determined in the approved profit sharing tariffs, obtained from the financial assets backing liabilities of the Company against the policyholders and other beneficiaries for the contracts which the Company is liable to give profit sharing. The valuation method used in calculation of the profit to be shared for saving life contracts is the same with the valuation basis of portfolio on which assets on which the Company invests the provisions allocated due to liabilities against the beneficiaries are included in the framework of basis defined in the note 2.8 - Financial assets above.
Anadolu Hayat Emeklilik 2020 Annual Report 137 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
2.28 Equalisation provision - Provision for bonus and discounts
According to “Communiqué on Technical Reserves”, companies should book equalisation provision for guarantees of loan and earthquakes in order to offset fluctuations in the rate of indemnification and to meet catastrophic risks in the accounting period.
In accordance with the Communiqué on Technical Reserves issued by the Ministry on March 27, 2009 numbered 2009/9, the insurance companies should recognise equalisation provision for disability and death occurred because of an earthquake and tariffs that include additional guarantee in life and casualty branches. With the circular released on July 28, 2010 and numbered 27655 “Circular on Change in Technical Reserves for Insurance, Reinsurance and Pension Companies and the Related Assets That Should Be Invested Against Those Technical Reserves”, the calculation of equalisation provision is revised. In accordance with the Communiqué on Technical Reserves, the companies which give additional guarantee in life use their own statistical data for equalisation provision calculation. The companies not having sufficient data for calculation will accept 11% of death net premium (including damage payments) as earthquake premium and 12% of that amount is calculated as equalisation provision. In accordance with the Communiqué on Technical Reserves, booking provisions should continue until reaching 150% of the highest net premium amount of the last five financial years. Equalisation provisions amounting to TL 53,403,589 are presented under “Other Technical Reserves” within short-term liabilities in the accompanying financial statements (December 31, 2019: TL 39,434,063).
In accordance with Regulation on Technical Reserves, insurance companies are required to account for the bonus or discounts provided to policyholders and beneficiaries in accordance with the current year technical income. As of December 31, 2020, the Company accounted for provision for bonus and discounts, net amounting to TL 184,336 (December 31, 2019: TL 391,457).
2.29 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, jointly controlled or significantly influenced by, or any individual referred to in (d) or (e) which significant voting power in such entity resides with directly or indirectly, 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.
2.30 Earnings per share
Earnings per share presented in the income statement is calculated by dividing the net profit into the weighted average number of the outstanding shares throughout the financial year. Companies in Turkey can increase their capital by distributing “bonus shares” to shareholders from the prior years’ profit. Such “bonus share” distributions are considered as issued shares in the earnings per share calculations. Accordingly, weighted average number of equity shares used in the calculations is calculated by considering the retrospective effects of share distributions.
2.31 Events after the reporting period
“Events After the Reporting Period”; post-reporting date events that provide additional information about the Company’s position at the reporting periods (adjusting events) are reflected in the unconsolidated financial statements. Post-reporting date events that are not adjusting events are disclosed in the notes when material.
2.32 The new standards, amendments and interpretations
The accounting policies adopted in preparation of the unconsolidated financial statements as at December 31, 2020 are consistent with those of the previous financial year, except for the adoption of new and amended TFRS and TFRIC interpretations effective as of January 1, 2020. The effects of these standards and interpretations on the Company’s financial position and performance have been disclosed in the related paragraphs.
138 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
i) The new standards, amendments and interpretations which are effective as at January 1, 2020 are as follows:
Definition of a Business (Amendments to TFRS 3)
In May 2019, the POA issued amendments to the definition of a business in TFRS 3 Business Combinations standards. The amendments are intended to assist entities to remove the assessment regarding the definition of business.
The amendments: - clarify the minimum requirements for a business; - remove the assessment of whether market participants are capable of replacing any missing elements; - add guidance to help entities assess whether an acquired process is substantive; - narrow the definitions of a business and of outputs; and - introduce an optional fair value concentration test.
The amendments to TFRS 3 are effective for annual reporting periods beginning on or after 1 January 2020 and apply prospectively. The amendments are not applicable for the Company and did not have an impact on the financial position or performance of the Company.
Amendments to TFRS 9, TAS 39 and TFRS 7- Interest Rate Benchmark Reform
The amendments issued to TFRS 9 and TAS 39 which are effective for periods beginning on or after January 1, 2020 provide reliefs which enable hedge accounting to continue. For these reliefs, it is assumed that the benchmark on which the cash flows of hedged risk or item are based and/or, the benchmark on which the cash flows of the hedging instrument are based, are not altered as a result of IBOR reform in connection with interest rate benchmark reform.
Reliefs used as a result of amendments in TFRS 9 and TAS 39 is aimed to be disclosed in financial statements based on the amendments made in TFRS 7. The amendments did not have a significant impact on the financial position or performance of the Company.
Definition of Material (Amendments to TAS 1 and TAS 8)
In June 2019, the POA issued amendments to TAS 1 Presentation of Financial Statements and TAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to align the definition of ‘material’ across the standards and to clarify certain aspects of the definition. The new definition states that, ’Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity. The amendments clarify that materiality will depend on the nature or magnitude of information, or both. An entity will need to assess whether the information, either individually or in combination with other information, is material in the context of the financial statements.
The amendments to TAS 1 and TAS 8 are required to be applied for annual periods beginning on or after 1 January 2020. The amendments must be applied prospectively and earlier application is permitted. The amendments did not have a significant impact on the financial position or performance of the Company
Amendments to TFRS 16 - Covid-19 Rent Related Concessions
In June 5, 2020, the POA issued amendments to TFRS 16 Leases to provide relief to lessees from applying TFRS 16 guidance on lease modifications to rent concessions arising a direct consequence of the Covid-19 pandemic. A lessee that makes this election accounts for any change in lease payments related rent concession the same way it would account for the change under the standard, if the change were not a lease modification.
The practical expedient applies only to rent concessions occurring as a direct consequence of the Covid-19 pandemic and only if all of the following conditions are met: - The change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change. - Any reduction in lease payments affects only payments originally due on or before 30 June 2021 - There is no substantive change to other terms and conditions of the lease.
A lessee will apply the amendment for annual reporting periods beginning on or after 1 June 2020. Early application of the amendments is permitted. The amendments did not have a significant 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 10 and TAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments)
In December 2017, POA 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. The Company will wait until the final amendment to assess the impacts of the changes.
Anadolu Hayat Emeklilik 2020 Annual Report 139 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
TFRS 17 - The new Standard for insurance contracts
The POA issued TFRS 17 in February 2019, a comprehensive new accounting standard for insurance contracts covering recognition and measurement, presentation and disclosure. TFRS 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. TFRS 17 will become effective for annual reporting periods beginning on or after 1 January 2023; 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.
Amendments to TAS 1- Classification of Liabilities as Current and Non-Current Liabilities
On March 12, 2020, the POA issued amendments to TAS 1 Presentation of Financial Statements. The amendments issued to TAS 1 which are effective for periods beginning on or after 1 January 2022, clarify the criteria for the classification of a liability as either current or non-current. Amendments must be applied retrospectively in accordance with TAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. Early application is permitted.
The Company is in the process of assessing the impact of the amendments on financial position or performance of the Company.
Amendments to TFRS 3 - Reference to the Conceptual Framework
In May 2020, the IASB issued amendments to TFRS 3 Business combinations. The amendments are intended to replace to a reference to a previous version of the IASB’s Conceptual Framework (the 1989 Framework) with a reference to the current version issued in March 2018 (the Conceptual Framework) without significantly changing requirements of TFRS 3. At the same time, the amendments add a new paragraph to TFRS 3 to clarify that contingent assets do not qualify for recognition at the acquisition date. The amendments issued to TFRS 3 which are effective for periods beginning on or after 1 January 2022 and must be applied prospectively. Earlier application is permitted if, at the same time or earlier, an entity also applies all of the amendments contained in the Amendments to References to the Conceptual Framework in TFRS standards (March 2018).
The Company is in the process of assessing the impact of the amendments on financial position or performance of the Company.
Amendments to TAS 16 - Proceeds before intended use
In May 2020, the IASB issued amendments to IAS 16 Property, plant and equipment. The amendment prohibits entities from deducting from the cost of an item of property, plant and equipment (PP&E), any proceeds of the sale of items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognises the proceeds from selling such items, and costs of producing those items, in profit or loss. The amendments issued to IAS 16 which are effective for periods beginning on or after 1 January 2022. Amendments must be applied retrospectively only to items of PP&E made available for use on or after beginning of the earliest period presented when the entity first applies the amendment.
There is no transition relief for the first time adopters. The Company is in the process of assessing the impact of the amendments on financial position or performance of the Company.
Amendments to TAS 37 - Onerous contracts - Costs of Fulfilling a Contract
In May 2020, the IASB issued amendments to IAS 37 Provisions, Contingent Liabilities and Contingent assets. The amendments issued to IAS 37 which are effective for periods beginning on or after 1 January 2022, to specify which costs an entity needs to include when assessing whether a contract is onerous or loss-making and also apply a “directly related cost approach”. Amendments must be applied retrospectively to contracts for which an entity has not fulfilled all of its obligations at the beginning of the annual reporting period in which it first applies the amendments (the date of initial application). Earlier application is permitted and must be disclosed.
The Company is in the process of assessing the impact of the amendments on financial position or performance of the Company.
Interest Rate Benchmark Reform - Phase 2 - Amendments to TFRS 9, TAS 39, TFRS 7, TFRS 4 and TFRS 16
In December 2020, the POA issued Interest Rate Benchmark Reform - Phase 2, Amendments to TFRS 9, TAS 39, TFRS 7, TFRS 4 and TFRS 16 to provide temporary reliefs which address the financial reporting effects when an interbank offering rate (IBOR) is replaced with an alternative nearly risk-free rate (RFR, amending the followings. The amendments are effective for periods beginning on or after 1 January 2021. Earlier application is permitted and must be disclosed.
Practical expedient for changes in the basis for determining the contractual cash flows as a result of IBOR reform
The amendments include a practical expedient to require contractual changes, or changes to cash flows that are directly required by the reform, to be treated as changes to a floating interest rate, equivalent to a movement in a market rate of interest. Under this practical expedient, if the interest rates applicable to financial instruments change as a result of the IBOR reform, the situation is not considered as a derecognition or contract modification; instead, this would be determined by recalculating the carrying amount of the financial instrument using the original effective interest rate to discount the revised contractual cash flows.
The practical expedient is required for entities applying TFRS 4 Insurance Contracts that are using the exemption from TFRS 9 Financial Instruments (and, therefore, apply TAS 39 Financial Instruments: Classification and Measurement) and for TFRS 16 Leases, to lease modifications required by IBOR reform.
140 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Relief from discontinuing hedging relationships - The amendments permit changes required by IBOR reform to be made to hedge designations and hedge documentation without the hedging relationship being discontinued. - Amounts accumulated in the cash flow hedge reserve are deemed to be based on the RFR. - For the TAS 39 assessment of retrospective hedge effectiveness, on transition to an RFR, entities may elect on a hedge-by-hedge basis, to reset the cumulative fair value changes to zero. - The amendments provide relief for items within a designated group of items (such as those forming part of a macro cash flow hedging strategy) that are amended for modifications directly required by IBOR reform. The reliefs allow the hedging strategy to remain and not be discontinued. - As instruments transition to RFRs, a hedging relationship may need to be modified more than once. The phase two reliefs apply each time a hedging relationship is modified as a direct result of IBOR reform.
Separately identifiable risk components
The amendments provide temporary relief to entities from having to meet the separately identifiable requirement when an RFR instrument is designated as a hedge of a risk component.
Additional disclosures
Amendments need additional TFRS 7 Financial Instruments disclosures such as; How the entity is managing the transition to RFRs, its progress and the risks to which it is exposed arising from financial instruments due to IBOR reform, quantitative information about financial instruments that have yet to transition to RFRs and If IBOR reform has given rise to changes in the entity’s risk management strategy, a description of these changes.
The amendments are mandatory, with earlier application permitted. While application is retrospective, an entity is not required to restate prior periods. The Company is in the process of assessing the impact of the amendments on financial position or performance of the Company.
Annual Improvements - 2018-2020 Cycle
In July 2020, the POA issued Annual Improvements to TFRS Standards 2018-2020 Cycle, amending the followings: - TFRS 1 First-time Adoption of International Financial Reporting Standards - Subsidiary as a first-time adopter: The amendment permits a subsidiary to measure cumulative translation differences using the amounts reported by the parent. The amendment is also applied to an associate or joint venture. - TFRS 9 Financial Instruments - Fees in the “10 per cent test” for derecognition of financial liabilities: The amendment clarifies the fees that an entity includes when assessing whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability. These fees include only those paid or received between the borrower and the lender, including fees paid or received by either borrower or lender on the other’s behalf. - TAS 41 Agriculture - Taxation in fair value measurements: The amendment removes the requirement in paragraph 22 of TAS 41 that entities exclude cash flows for taxation when measuring fair value of assets within the scope of TAS 41.
Improvements are effective for annual reporting periods beginning on or after 1 January 2022. Earlier application is permitted for all. The Company is in the process of assessing the impact of the amendments on financial position or performance of the Company.
3 Critical accounting estimates and judgments in applying accounting policies
The notes given in this section are provided in addition to 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 recognised in the period in which the estimate is revised and in any future periods affected.
In particular, information about significant areas at estimation uncertainty and critical judgment in applying accounting policies that have the most significant effect on the amount recognised 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 and liabilities
Note 11 - Financial assets
Note 12 - Loans and receivables
Note 17 - Insurance contract liabilities and reinsurance assets
Note 17 - Deferred commissions
Note 19 - Trade and other payables, deferred income
Anadolu Hayat Emeklilik 2020 Annual Report 141 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Note 21 - Deferred tax
Note 23 - Other liabilities and provisions
Evaluation of the effect of Covid 19 pandemic on Company activities
Covid 19 pandemic brought economic problems with it in global scale. Within this scope to reduce the negative effects in question economical precautions are started to be implemented by many countries.
For our industry, the course of death compensation under life insurance, premium production mainly related to bank loans, additions and cancellations to private pension system and return value of securities are important.
Furthermore, the developments on the subject are closely monitored and different impact analysis are realized for the Company activities and financial results.
For our Company; - Relatively low life insurance rates at upper age groups, - Existence of reinsurance agreements, - Production of life insurance premium at a high level in 2020 compared to the same period last year, - Regular income generation capacity depending on the fund size of 30.6 billion TL belonging to 2 million customers in private pension system, - No significant change at cancellation, compensation payments, collection and the number of corporate transection in life insurance and private pension branches, - Securities portfolio with balanced distribution, - Strong capital higher than three times the minimum level determined by legal legislation are positive indicators in terms of continuity of our activities and profitability.
When we look at the financial performance of our Company in 2020, the effect of the pandemic on our results is considered to be limited. In this period, there was no unusual death compensation payments and no unusual cancellation of private pension accounts and life insurances. Premiums related to bank loans which had increase in the first quarter of the year started to increase again especially as of June.
Within this scope, in 2020 TL 1.7 billion gross premium production was realized in life insurance and an increase of 37% was recorded compared to the same period of the previous year. On the other hand, the size of the private pension fund increased by 33% compared to the beginning of the year and reached TL 30.6 billion and continues to contribute to increase in profit. In addition, operating expenses continued to be managed in a controlled manner. As a result, life and private pension technical profits respectively were TL 327.6 million and TL 145.5 million and total technical profit increased by 33% compared to the previous year. Our gross profit reached TL 647.7 million with an increase of 36% in the same period.
On the other hand, necessary precautions have been taken for our personnel to work remotely and our practices have been shaped in this direction not to disrupt our operational activities. In this period, there was no disruption caused by remote working in the fields of customer relations, operations and information technologies. In addition, our customer service is maintained without interruption from all contact points including our call center and digital channels.
4 Management of insurance and financial risk
4.1 Management of insurance risk
Objective of managing risks arising from insurance contracts and policies used to minimise such risks:
Insurance risk is defined as coverage for exposures that exhibit a possibility of financial loss due to applying inappropriate and insufficient insurance techniques. In line with the nature of an insurance contract, as the risk is coincidental, the risk amount cannot be predictable.
Insurance risk represents the possibility of the non-coverage of the claims paid by the premiums collected.
As of December 31, 2020, the Company’s life insurance (excluding saving component of saving life insurance) claims/premiums ratio stands at 15%. Low claims/premiums ratio, which is calculated by the proportion of claims to risk premiums collected, indicates that the Company makes significant profit. The Company adopts central risk assessment policy. The Company applies this policy to the all marketing channels produced. In its life policy production, the Company has no sales channel with continuous risk exposure. The Company analyses its claims/premiums ratio periodically in order to identify its insurance risks.
142 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
As of December 31, 2020, the Company’s personal accident insurance claims/premiums ratio is 67%. Since personal accident insurance portfolio has an insignificant share in the Company’s general portfolio, this ratio would be low when no compensation is paid and this ratio would be high when compensation is paid.
Claims/premium ratio of the Company as of the financial statement periods is presented below:
December 31, 2020 December 31, 2019
Life insurance (*) 15% 16% Personal accident 67% 46%
(*) Saving component of saving life insurance has excluded.
The Company shares its significant risks associated with natural disasters, such as; earthquake, terrorism or large-scale accidents, with reinsurers by entering into catastrophic excess of loss agreements.
As at December 31, 2020 and December 31, 2019, risk portion transferred to reinsurers in terms of risk guarantee is presented as below:
December 31, 2020 December 31, 2019
Death by natural cause 15% 14% Death by accident 75% 55% Disability by accident 74% 60% Disability by illness 76% 72%
Sensitivity to insurance risk
The Company’s policy production strategy follows an effective risk management in the policy production process considering the nature, extent, and accurate distribution of the risk incurred.
Reinsurer agreements include claims surplus, excess of loss and quota reinsurances. In 2020, the Company retains the risk, stemming from insurance contracts, which varies with regards to provided coverage, product and portfolio and transfers the exceeding portion to reinsurers via reinsurance agreements. The limits regarding the maximum risk that can be retained by the Company is audited by the Ministry.
Determination of insurance risk concentrations by management and the common characteristics of insurance risk concentrations (nature, location and currency)
The Company produces life and personal accident branch policies. The Company’s gross and net insurance risk concentrations (after reinsurance) in terms of insurance branches are summarised as below:
December 31, 2020 Total gross Reinsurer’s share The Company’s Branches risk liability(1) of risk liability net claims liability
Life insurance 118,931,323,477 44,066,294,924 74,865,028,553 Personal accident 14,099,095,078 6,838,009,378 7,261,085,700 Total 133,030,418,555 50,904,304,302 82,126,114,253
December 31, 2019 Total gross Reinsurer’s share The Company’s Branches risk liability(1) of risk liability net claims liability
Life insurance 83,854,107,957 23,884,650,315 59,969,457,642 Personal accident 11,310,308,852 4,634,745,758 6,675,563,094 Total 95,164,416,809 28,519,396,073 66,645,020,736
(1) Represents the maximum insurance amount based on death by natural cause, death by accident, disability by accident and disability by illness.
Anadolu Hayat Emeklilik 2020 Annual Report 143 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
The Company issues insurance contracts mainly in Turkey. Gross and net insurance risk concentrations of the insurance contracts (after reinsurance) based on geographical regions are summarised as below:
December 31, 2020 Total gross Reinsurer’s share Total net Claims liability(1) claims liability of claims liability claims liability
Marmara Region 43,369,982 4,915,663 38,454,319 Central Anatolia Region 14,312,123 730,179 13,581,944 Aegean Region 17,946,492 1,458,699 16,487,793 Mediterranean Region 14,064,586 326,938 13,737,648 Black Sea Region 10,510,251 137,894 10,372,357 Southeastern Anatolia Region 8,450,143 350,841 8,099,302 Eastern Anatolia Region 4,159,769 17,283 4,142,486 Foreign Countries (Other) 10,342,427 - 10,342,427 Total 123,155,773 7,937,497 115,218,276
December 31, 2019 Total gross Reinsurer’s share Total net Claims liability(1) claims liability of claims liability claims liability
Marmara Region 37,245,088 2,676,233 34,568,855 Central Anatolia Region 12,297,081 555,095 11,741,986 Aegean Region 15,431,618 495,990 14,935,628 Mediterranean Region 10,317,901 237,075 10,080,826 Black Sea Region 8,200,594 322,584 7,878,010 Southeastern Anatolia Region 4,437,348 525,459 3,911,889 Eastern Anatolia Region 2,985,212 69,819 2,915,393 Foreign countries (Other) 8,602,665 - 8,602,665 Total 99,517,507 4,882,255 94,635,252
(1) Total claims liability includes the actual estimated compensation amounts. IBNR provision and outstanding claims adequacy provision are not included in the calculation.
Comparison of incurred claims with past estimations
Incurred claim development table is disclosed in note 17 - Insurance liabilities and reinsurance assets.
Effects of the changes in assumptions used in the measurement of insurance assets and liabilities showing the effect of each change separately that has significant effect on financial statements
In the current period, there are no material changes in the assumptions of measurement of insurance assets and liabilities.
4.2 Financial risk management
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 Company’s risk management program focuses on minimising the negative effects of the ambiguities in financial markets on the Company’s financial statements. The Company is mostly exposed to interest risk and price risk in relation with financial investments, to credit risk in relation with insurance receivables and exchange rate risk due to policies and assets in foreign currencies.
The risk is managed by a specific department which is in line with the approved policies by the Board of Directors. Several risk policies have been prepared by the Board of Directors in order to manage the exchange risk, interest risk, credit risk, using the derivative and non-derivative financial instruments risks.
144 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Credit risk
Credit risk is basically defined as the possibility that counterparty will fail to meet its obligations in accordance under agreed terms of a contract. When the Company’s field of activity and third party relations is considered, its credit risk is deemed to be relatively at minimum. The balance sheet items that the Company is exposed to credit risk are as follows: - Cash at banks - Other cash and cash equivalents - Available for sale financial assets - Financial assets held for trading - Held-to-maturity financial assets - Premium receivables from policyholders - Receivables from intermediaries (agencies) - Receivables from reinsurance companies related to claims paid and commissions accrued - Reinsurance shares of insurance liabilities - Due from related parties - Other receivables
The review of the Company’s third party relations are presented below.
Reinsurers: Reinsurance contracts are the most common method to manage insurance risk. This 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 Company works with international reinsurance companies with strong financial status. In this perspective, the level of risk exposure is also considered to be at minimum.
Agencies: Agencies working with the Company expose it to a limited level of credit risk. Since the Company’s products are issued with long-term use, commissions given to agencies are also long term in nature; therefore, the Company has consistent payables to agencies.
Policyholders: Overdue premium receivables are not considered as a significant risk exposure to the Company because if the Company has unpaid premiums, all guarantees related to the insurance will be invalid.
Anadolu Hayat Emeklilik 2020 Annual Report 145 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
As at December 31, 2020 and December 31, 2019, the Company’s credit risk exposure by types of financial instruments is as follows. Banks and other cash and cash equivalents are also included in the credit risk.
Receivables(1) Receivables from insurance Other Banks and other activities receivables cash and cash December 31, 2020 Related party Third party Related party Third party Financial assets(2) equivalent assets
Maximum credit risk exposure as at the reporting period (A+B+C) - 126,957,600 - 139,807,221 4,059,029,366 666,497,600 - Secured portion of maximum risk by guarantees, provisions, etc. ------A. Net book value of neither past due nor impaired financial assets - 96,075,912 - 139,807,221 4,059,029,366 666,497,600 B. Net book value of past due but not impaired assets - 30,881,688 - - - - C. Net book value of impaired assets ------Gross book value - 5,120,570 - - - - - Impairment - (5,120,570) - - - - - Secured portion of net book value by guarantees, provisions, etc. ------
Receivables(1) Receivables from insurance Receivables from insurance Banks and other activities activities Financial cash and cash December 31, 2019 Related party Third party Related party Third party Assets(2) equivalent assets
Maximum credit risk exposure as at the reporting period (A+B+C) 68 99,397,661 12,413 38,467,083 2,899,546,383 656,922,516 - Secured portion of maximum risk by guarantees, provisions, etc. ------A. Net book value of neither past due nor impaired financial assets - 78,387,538 12,413 38,467,083 2,899,546,383 656,922,516 B. Net book value of part due but not impaired assets 68 21,010,123 - - - - C. Net book value of impaired assets ------Gross book value - 5,120,570 - - - - - Impairment - (5,120,570) - - - - - Secured portion of net book value by guarantees, provisions, etc. ------
(1) Receivables from individual pension activities are not included in the credit risk table since those receivables are followed both side of the balance sheet as asset and liability and they are held on behalf of participants by İstanbul Takas ve Saklama Bankası A.Ş. (the “Istanbul Settlement and Custody Bank Inc”). (2) Equities and impairment are not included to financial assets.
146 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the net funding obligations. Liquidity risk arises from the events trigger decreasing funds such as deterioration in the market conditions or downgrading of credit ratings. As at December 31, 2020 and December 31, 2019 maturity analyses of the Company’s assets and liabilities are presented in the table below:
Without Up to 1 to 3 3 to 12 1 to 5 5 years December 31, 2020 maturity 1 month months months years and over Unallocated Total Cash and cash equivalents 21,086,843 511,936,919 133,473,942 - - - 666,497,704 Financial assets and investments with risks on policyholders - 110,986,986 217,192,866 319,979,359 751,433,229 2,346,335,900 548,306,904 4,294,235,244 Receivables from main operations - 5,852,594 10,963,822 20,876,681 - - 30,566,630,655 30,604,323,752 Due from related parties ------Other receivables - 138,939,396 - - - 867,825 139,807,221 Prepaid expenses and income accruals, short term ------60,454,977 60,454,977 Other current assets ------19,808 19,808 Other receivables ------Financial assets (Associates) ------12,762,193 12,762,193 Tangible assets ------267,372,838 267,372,838 Intangible assets ------16,616,741 16,616,741 Prepaid expenses and income accruals, long term ------5,032,723 5,032,723 Deferred tax assets ------Total assets 21,086,843 767,715,895 361,630,630 340,856,040 751,433,229 2,346,335,900 31,478,064,664 36,067,123,201
Financial liabilities - - - 4,812,019 20,962,799 28,916,001 - 54,690,819 Payables arising from main operations - 49,200,381 - 5,563,279 - - 30,815,852,302 30,870,615,962 Due to related parties - 61,036 - 92,787 - - 195 154,018 Other payables - 92,636 - - - - 21,600,612 21,693,248 Insurance technical provisions - 7,535,952 25,201,419 100,057,216 503,173,881 1,315,656,185 1,461,680,843 3,413,305,496 Provisions for taxes and other similar obligations - 21,976,653 - - - - 19,146,913 41,123,566 Deferred income and expense accruals ------13,052,342 13,052,342 Other short term liabilities ------Provisions for other risks - 2,100,000 - 17,100,000 - 26,177,882 15,009,243 60,387,125 Deferred tax liabilities ------10,836,662 10,836,662 Shareholders’ equity ------1,581,263,963 1,581,263,963 Total liabilities - 80,966,658 25,201,419 127,625,301 524,136,680 1,370,750,068 33,938,443,075 36,067,123,201 Net liquidity surplus/(deficit) 21,086,843 686,749,237 336,429,211 213,230,739 227,296,549 975,585,832 (2,460,378,411) -
Anadolu Hayat Emeklilik 2020 Annual Report 147 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Without Up to 1 to 3 3 to 12 1 to 5 5 years December 31, 2019 maturity 1 month months months years and over Unallocated Total Cash and cash equivalents 52,446,026 185,146,418 419,330,291 - - - - 656,922,735 Financial assets and investments with risks on policyholders - 540,540,976 228,011,764 170,684,837 362,958,592 1,370,427,532 391,658,341 3,064,282,042 Receivables from main operations - 5,502,415 10,237,969 22,539,778 - - 23,012,766,638 23,051,046,800 Due from related parties - - 12,413 - - - - 12,413 Other receivables - 37,109,651 - - - 1,357,432 38,467,083 Prepaid expenses and income accruals, short term ------49,478,060 49,478,060 Other current assets ------17,048 17,048 Other receivables ------Financial assets (Associates) ------12,762,193 12,762,193 Tangible assets ------242,224,002 242,224,002 Intangible assets ------16,840,377 16,840,377 Prepaid expenses and income accruals, long term ------2,725,005 2,725,005 Deferred tax assets ------Total assets 52,446,026 768,299,460 657,592,437 193,224,615 362,958,592 1,370,427,532 23,729,829,096 27,134,777,758
Financial liabilities ------53,769,398 53,769,398 Payables arising from main operations - 58,607,158 1,243,039 4,479,832 - - 23,169,404,505 23,233,734,534 Due to related parties - 33,290 - 60,849 - - 117 94,256 Other payables - 21,922,070 - - - - 10,873,729 32,795,799 Insurance technical provisions ------2,432,168,782 2,432,168,782 Provisions for taxes and other similar obligations - 17,163,696 - - - - 31,848,657 49,012,353 Deferred income and expense accruals ------7,303,198 7,303,198 Other short term liabilities ------Provisions for other risks - 2,000,000 - 15,300,000 - 22,016,074 11,737,733 51,053,807 Deferred tax liabilities ------1,173,101 1,173,101 Shareholders’ equity ------1,273,672,530 1,273,672,530 Total liabilities - 99,726,214 1,243,039 19,840,681 - 22,016,074 26,991,951,750 27,134,777,758 Net liquidity surplus/(deficit) 52,446,026 668,573,246 656,349,398 173,383,934 362,958,592 1,348,411,458 (3,262,122,654) -
Market risk
Market risk is the risk that changes in market prices, such as interest rate, 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 optimising the return on risk.
Foreign currency risk
The Company is exposed to foreign 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 (CBRT) spot purchase rates and the differences arising from foreign currency rates are recorded as foreign exchange gain or loss in the statement of operations.
Parallel to the general characteristic of Turkish insurance sector, the Company holds long position in terms of US Dollar and Euro.
148 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
The Company’s exposure to foreign currency risk is as follows:
Foreign currency position table - December 31, 2020 Total TL (Functional currency) US Dollar Euro GBP CHF JPY 1. Cash at banks 19,264,880 637,984 18,604,518 22,297 81 - 2. Financial assets and financial investments with risks on policyholders 1,990,688,326 1,569,365,722 386,826,133 34,496,471 - - 3. Receivables from main operations 51,117,506 43,348,167 7,749,232 20,107 - - 4. Reinsurance receivables 2,487,152 - 2,487,152 - - - 5. Rent receivables ------6. Deposits given 80,746 80,746 - - - - Foreign currency assets, current 2,063,638,610 1,613,432,619 415,667,035 34,538,875 81 - 7. Total assets 2,063,638,610 1,613,432,619 415,667,035 34,538,875 81 -
8. Other miscellaneous payables 1,040,329 409,697 630,632 - - - 9. Payables to reinsurers 91,857 85,255 - 6,596 - 6 10. Agency guarantees 579,836 555,462 24,374 - - - 11. Technical provisions (*) 2,014,167,508 1,591,750,936 387,124,490 35,287,701 481 3,900 Foreign currency liabilities, short term 2,015,879,530 1,592,801,350 387,779,496 35,294,297 481 3,906 12. Total liabilities 2,015,879,530 1,592,801,350 387,779,496 35,294,297 481 3,906
Net financial position 47,759,080 20,631,269 27,887,539 (755,422) (400) (3,906) Net foreign currency assets/(liabilities) position on monetary items 47,678,334 20,550,523 27,887,539 (755,422) (400) (3,906)
(*) The Company’s foreign currency denominated financial assets and financial investments with risks on policyholders are measured at their fair values, technical provisions are measured at amortised cost in financial statements. In order to eliminate inconsistency between these interconnected asset and liability, the difference between fair value and amortised cost of financial assets which are classified as available for sale financial assets is added to technical provisions.
Foreign currency position table - December 31, 2019 Total TL (Functional currency) US Dollar Euro GBP CHF JPY 1. Cash at banks 36,930,684 5,285,143 31,187,372 225,641 232,528 - 2. Financial assets and financial investments with risks on policyholders 1,094,293,829 891,681,865 173,576,944 29,035,020 - - 3. Receivables from main operations 8,409,297 6,980,143 1,417,391 11,763 - - 4. Reinsurance receivables ------5. Rent receivables ------6. Deposits given 65,342 65,342 - - - - Foreign currency assets, current 1,139,699,152 904,012,493 206,181,707 29,272,424 232,528 - 7. Total assets 1,139,699,152 904,012,493 206,181,707 29,272,424 232,528 -
8. Other miscellaneous payables 10,457,821 10,309,883 147,938 - - - 9. Payables to reinsurers 440,437 393,651 - 46,776 - 10 10. Agency guarantees 531,846 506,868 24,978 - - - 11. Technical provisions (*) 1,138,266,535 909,825,237 200,431,421 27,999,712 353 9,812 Foreign currency liabilities, short term 1,149,696,639 921,035,639 200,604,337 28,046,488 353 9,822 12. Total liabilities 1,149,696,639 921,035,639 200,604,337 28,046,488 353 9,822
Net financial position (9,997,487) (17,023,146) 5,577,370 1,225,936 232,175 (9,822) Net foreign currency assets/(liabilities) position on monetary items (10,062,829) (17,088,488) 5,577,370 1,225,936 232,175 (9,822)
(*) The Company’s foreign currency denominated financial assets and financial investments with risks on policyholders are measured at their fair values, technical provisions are measured at amortised cost in financial statements. In order to eliminate inconsistency between these interconnected asset and liability, the difference between fair value and amortised cost of financial assets which are classified as available for sale financial assets is added to technical provisions.
Foreign currency transactions are recorded at exchange rates at the transaction dates and foreign currency denominated monetary items are evaluated by the Central Bank of the Republic of Turkey’s spot purchase rates as at reporting dates.
Anadolu Hayat Emeklilik 2020 Annual Report 149 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Foreign currency rates used for the translation of foreign currency denominated monetary assets and liabilities as at reporting periods are as follows:
December 31, 2020 US Dollar Euro GBP CHF JPY
Foreign currency rate used in translation of balance sheet items 7.3405 9.0079 9.9438 8.2841 0.0709
December 31, 2019 US Dollar Euro GBP CHF JPY
Foreign currency rate used in translation of balance sheet items 5.9402 6.6506 7.7765 6.0932 0.0543
Exposure to foreign currency risk
A 10 percent depreciation of the TL against the following currencies as at December 31, 2020 and December 31, 2019 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.
Exchange rate sensitivity analysis table - December 31, 2020 Profit/loss Equity(1) Appreciation of Depreciation of Appreciation of Depreciation of foreign currency foreign currency foreign currency foreign currency
If USD value changes by 10% against TL: 1- Net US Dollar assets/liabilities 923,926 (923,926) 2,063,127 (2,063,127) 2- Hedged portion from US Dollar risk (-) - - - - 3- Net effect of US Dollar (1+2) 923,926 (923,926) 2,063,127 (2,063,127)
If EUR value changes by 10% against TL: 4- Net Euro assets/liabilities 2,545,811 (2,545,811) 2,788,754 (2,788,754) 5- Hedged portion from Euro risk (-) - - - - 6- Net effect of Euro (4+5) 2,545,811 (2,545,811) 2,788,754 (2,788,754)
If GBP value changes by 10% against TL: 7- Net GBP assets/liabilities (84,952) 84,952 (75,542) 75,542 8- Hedged portion from GBP risk (-) - - - - 9- Net effect of GBP (7+8) (84,952) 84,952 (75,542) 75,542
If CHF value changes by 10% against TL: 10- Net CHF assets/liabilities (40) 40 (40) 40 11- Hedged portion from CHF risk (-) - - - - 12- Net effect of CHF (10+11) (40) 40 (40) 40
If JPY value changes by 10% against TL: 13- Net JPY assets/liabilities (391) 391 (391) 391 14- Hedged portion from JPY risk (-) - - - - 15- Net effect of JPY (13+14) (391) 391 (391) 391
Total (3+6+9+12+15) 3,384,354 (3,384,354) 4,775,908 (4,775,908)
(1) Includes profit/loss effect.
150 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Exchange rate sensitivity analysis table - December 31, 2019 Profit/loss Equity(1) Appreciation of Depreciation of Appreciation of Depreciation of foreign currency foreign currency foreign currency foreign currency
If USD value changes by 10% against TL: 1- Net US Dollar assets/liabilities (1,864,215) 1,864,215 (1,702,315) 1,702,315 2- Hedged portion from US Dollar risk (-) - - - - 3- Net effect of US Dollar (1+2) (1,864,215) 1,864,215 (1,702,315) 1,702,315
If EUR value changes by 10% against TL: 4- Net Euro assets/liabilities 505,668 (505,668) 557,737 (557,737) 5- Hedged portion from Euro risk (-) - - - - 6- Net effect of Euro (4+5) 505,668 (505,668) 557,737 (557,737)
If GBP value changes by 10% against TL: 7- Net GBP assets/liabilities 121,643 (121,643) 122,594 (122,594) 8- Hedged portion from GBP risk (-) - - - - 9- Net effect of GBP (7+8) 121,643 (121,643) 122,594 (122,594)
If CHF value changes by 10% against TL: 10- Net CHF assets/liabilities 23,217 (23,217) 23,217 (23,217) 11- Hedged portion from CHF risk (-) - - - - 12- Net effect of CHF (10+11) 23,217 (23,217) 23,217 (23,217)
If JPY value changes by 10% against TL: 13- Net JPY assets/liabilities (982) 982 (982) 982 14- Hedged portion from JPY risk (-) - - - - 15- Net effect of JPY (13+14) (982) 982 (982) 982
Total (3+6+9+12+15) (1,214,669) 1,214,669 (999,749) 999,749
(1) Includes profit/loss effect.
Interest risk
Exposure to interest risk
The changes in interest rate that arise fluctuations in prices of financial instruments lead to the necessity of overcoming interest rate risk. The Company’s sensitivity for interest rate risk is related to the inconsistency of maturity of asset and liability items. The interest risk is managed by compensating the assets exposed to the interest fluctuations with the identical liabilities.
Financial instruments which are sensitive to the changes in interest rates are given in the table below:
December 31, 2020 December 31, 2019
Fixed rate financial instruments Financial assets 3,092,465,779 2,193,341,949 Available-for-sale financial assets 2,732,210,921 2,140,627,812 Loans and receivables 360,254,858 52,714,137 Time deposits 451,920,893 653,352,901
Variable rate financial instruments Financial assets 625,224,053 251,269,988 Available-for-sale financial assets 625,224,053 251,269,988
Anadolu Hayat Emeklilik 2020 Annual Report 151 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Interest rate sensitivity of financial instruments
As at December 31, 2020 and December 31, 2019, interest rate risk analysis of financial assets and financial liabilities are summarised in the table below:
3 to 12 1 to 5 5 years Non-interest December 31, 2020 Up to 1 month 1 to 3 months months years and over bearing Total Assets: Cash and cash equivalents 511,936,919 133,473,942 - - 21,086,843 666,497,704 Financial assets and investments with risks on policyholders 110,986,986 231,768,686 925,472,417 664,869,543 1,812,830,708 548,306,904 4,294,235,244 Receivables from main operations 5,852,594 10,963,822 20,876,681 - - 30,566,630,655 30,604,323,752 Due from related parties ------Other receivables 138,939,396 - - - 867,825 139,807,221 Prepaid expenses and income accruals, short term - - - - - 60,454,977 60,454,977 Other current assets - - - - - 19,808 19,808 Other current receivables ------Financial assets (Associates) - - - - - 12,762,193 12,762,193 Tangible assets - - - - - 267,372,838 267,372,838 Intangible assets - - - - - 16,616,741 16,616,741 Prepaid expenses and income accruals, long term - - - - - 5,032,723 5,032,723 Deferred tax assets ------Total assets 767,715,895 376,206,450 946,349,098 664,869,543 1,812,830,708 31,499,151,507 36,067,123,201 Liabilities: Financial liabilities - - 4,812,019 20,962,799 28,916,001 - 54,690,819 Payables arising from main operations 49,200,381 - 5,563,279 - - 30,815,852,302 30,870,615,962 Due to related parties 61,036 - 92,787 - - 195 154,018 Other liabilities 92,636 - - - - 21,600,612 21,693,248 Insurance technical provisions 7,535,952 25,201,419 100,057,216 503,173,881 1,315,656,185 1,461,680,843 3,413,305,496 Provisions for taxes and other similar obligations 21,976,653 - - - - 19,146,913 41,123,566 Deferred income and expense accruals - - - - - 13,052,342 13,052,342 Other short term liabilities ------Provisions for other risks 2,100,000 - 17,100,000 - 26,177,882 15,009,243 60,387,125 Deferred tax liabilities - - - - - 10,836,662 10,836,662 Shareholders’ equity - - - - - 1,581,263,963 1,581,263,963 Total liabilities and equity 80,966,658 25,201,419 127,625,301 524,136,680 1,370,750,068 33,938,443,075 36,067,123,201
Net position 686,749,237 351,005,031 818,723,797 140,732,863 442,080,640 (2,439,291,568) -
152 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
3 to 12 1 to 5 5 years Non-interest December 31, 2019 Up to 1 month 1 to 3 months months years and over bearing Total Assets: Cash and cash equivalents 185,146,418 419,330,291 - - - 52,446,026 656,922,735 Financial assets and investments with risks on policyholders 540,540,976 228,011,764 361,296,108 296,773,884 1,246,000,969 391,658,341 3,064,282,042 Receivables from main operations 5,502,415 10,237,969 22,539,778 - - 23,012,766,638 23,051,046,800 Due from related parties - 12,413 - - - - 12,413 Other receivables 37,109,651 - - - 1,357,432 38,467,083 Prepaid expenses and income accruals, short term - - - - - 49,478,060 49,478,060 Other current assets - - - - - 17,048 17,048 Other current receivables ------Financial assets (Associates) - - - - - 12,762,193 12,762,193 Tangible assets - - - - - 242,224,002 242,224,002 Intangible assets - - - - - 16,840,377 16,840,377 Prepaid expenses and income accruals, long term - - - - - 2,725,005 2,725,005 Deferred tax assets ------Total assets 768,299,460 657,592,437 383,835,886 296,773,884 1,246,000,969 23,782,275,122 27,134,777,758 Liabilities: Financial liabilities - - - - - 53,769,398 53,769,398 Payables arising from main operations 58,607,158 1,243,039 4,479,832 - - 23,169,404,505 23,233,734,534 Due to related parties 33,290 - 60,849 - - 117 94,256 Other liabilities 21,922,070 - - - - 10,873,729 32,795,799 Insurance technical provisions - - - - - 2,432,168,782 2,432,168,782 Provisions for taxes and other similar obligations 17,163,696 - - - - 31,848,657 49,012,353 Deferred income and expense accruals - - - - - 7,303,198 7,303,198 Other short term liabilities ------Provisions for other risks 2,000,000 - 15,300,000 - 22,016,074 11,737,733 51,053,807 Deferred tax liabilities - - - - - 1,173,101 1,173,101 Shareholders’ equity - - - - - 1,273,672,530 1,273,672,530 Total liabilities and equity 99,726,214 1,243,039 19,840,681 - 22,016,074 26,991,951,750 27,134,777,758
Net position 668,573,246 656,349,398 363,995,205 296,773,884 1,223,984,895 (3,209,676,628) -
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 as at and for December 31, 2020 and 2019 of the floating rate non-trading financial assets and financial liabilities held at . Interest rate sensitivity of equity is calculated by considering change due to effects of the assumed changes in interest rates in fair value of government bond and treasury bond which are significant portion of the Company’s own portfolio, as at December 31, 2020 and 2019. 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.
100 bp 100 bp 500 bp 500 bp December 31, 2020 increase decrease increase decrease
Company’s own portfolio (12,596,228) 13,252,472 (57,384,560) 73,870,905 Total, net (12,596,228) 13,252,472 (57,384,560) 73,870,905
100 bp 100 bp 500 bp 500 bp December 31, 2019 increase decrease increase decrease
Company’s own portfolio (5,874,320) 6,169,332 (26,853,289) 34,404,520 Total, net (5,874,320) 6,169,332 (26,853,289) 34,404,520
Anadolu Hayat Emeklilik 2020 Annual Report 153 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Fair value information
The estimated fair values of financial instruments have been determined using available market information, and where it exists, appropriate valuation methodologies.
The Company has classified its financial assets as held for trading purpose or available for sale. As at reporting period, available for sale financial assets and financial assets held for trading are measured at their fair values which are determined by using market data or prices published by brokers, in the accompanying unconsolidated financial statements.
Management estimates that the fair value of other financial assets and liabilities are not materially different than their carrying values.
Classification relevant to fair value information
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).
If classification is available for usage, it necessitates the utilisation of observable market data.
The classification of fair value measurements of financial assets and liabilities measured at fair value is as follows:
December 31, 2020 Level 1 Level 2 Level 3 Total
Financial assets(1): Financial assets held for trading 260,119,043 - - 260,119,043 Available for sale financial assets(2) 911,857,327 - - 911,857,327 Financial investments with risks on policyholders classified as available for sale 2,678,515,399 - - 2,678,515,399 Financial investments with risks on policyholders classified as held for trading 52,981,983 - - 52,981,983 Receivables from individual pension business(3) 30,434,759,762 - - 30,434,759,762 Total financial assets 34,338,233,514 - - 34,338,233,514
Financial liabilities: Investment contract liabilities - life mathematical provision for saving life policies 3,185,639,115 - - 3,185,639,115 Payables arising from individual pension business(3) 30,434,759,762 - - 30,434,759,762 Total financial liabilities 33,620,398,877 - - 33,620,398,877
(1) As at December 31, 2020, time deposits in financial investments with risks on policyholders amounting to TL 28,238,508 are not included in the table. (2) As at December 31, 2020, equity shares that are amounting to TL 2,268,126 occurred resulting cost value TL 8,484,547 and its impairment TL 6,216,421, have been measured with cost value and have excluded from the table because of they are not publicly traded. (3) Includes investments directed individual pension funds.
154 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
December 31, 2019 Level 1 Level 2 Level 3 Total
Financial assets(1): Financial assets held for trading 191,398,602 - - 191,398,602 Available for sale financial assets(2) 877,225,411 - - 877,225,411 Financial investments with risks on policyholders classified as available for sale 1,674,214,583 - - 1,674,214,583 Financial investments with risks on policyholders classified as for the purposes of purchase and sale 35,524,079 35,524,079 Receivables from individual pension business 22,913,666,145 - - 22,913,666,145 Total financial assets 25,692,028,820 - - 25,692,028,820
Financial liabilities: Investment contract liabilities - life mathematical provision for saving life policies 2,231,797,169 - - 2,231,797,169 Payables arising from individual pension business(3) 22,913,666,145 - - 22,913,666,145 Total financial liabilities 25,145,463,314 - - 25,145,463,314
(1) As at December 31, 2019, time deposits in financial investments with risks on policyholders amounting to TL 228,011,764 are not included in the table. (2) As at December 31, 2019, equity shares that are amounting to TL 5,193,466 occurred resulting cost value -TL 9,718,274 and its impairment -TL 4,524,808, have been measured with cost value and have excluded from the table because of they are not publicly traded. (3) Includes investments directed individual pension funds.
Equity share price risk
Equity share price risk is defined as the risk of decreasing the market price of equity shares as a result of a decline in index.
The effect of changes in fair values of all equity shares publicly traded in the available-for-sale financial assets on equity that is resulted from the fluctuations on index (all of the other variables are assumed to be fixed) are as follows for the periods ended December 31, 2020 and December 31, 2019.
Change of price December 31, 2020 December 31, 2019 Market price of equity share 10% 23,293,775 15,954,219
The effect of changes in fair values of all equity shares publicly traded in the financial assets held for trading on statement of income that is resulted from the fluctuations on index (all of the other variables are assumed to be fixed) are as follows as at December 31, 2020 and December 31, 2019.
Change of price December 31, 2020 December 31, 2019 Market price of equity share 10% - -
(*) As at 31.12.2020 The Company has no equity shares publicly traded in the financial assets held for trading.
Anadolu Hayat Emeklilik 2020 Annual Report 155 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Capital management
The aim of the Company’s capital management is defined as to provide the continuity of profit-making company, to protect the benefits of the shareholders and institutional partners and also to conduct the most efficient capital structure in order to reduce the cost of capital.
The capital adequacy of the Company is calculated in accordance with the Decree “Measurement and Assessment of Capital Adequacy of Insurance and Reinsurance Companies and Pension Funds” in all reporting periods. The Capital Adequacy calculated according to two methods are in line with the minimum requirements. The Company’s recent capital adequacy table prepared as at the report date for June 30, 2020 is summarised below. As at June 30, 2020, the capital adequacy of the Company is TL 342,013,143 and TL 491,256,548; based on first and second method respectively. By the table below, it is observed that capital adequacy balances calculated by using first and second methods are less than the Company’s capital as at June 30, 2020. The Company’s capital calculated based on the regulation as at June 30, 2020 is TL 1,312,250,078 Consequently, the Company’s capital is adequate.
Capital adequacy table June 30, 2020 December 31, 2019 First Method Required capital for non-life branches 152,054 163,203 Required capital for life branch 208,881,006 174,334,269 Required capital for pension branch 132,980,083 114,568,331 Required capital based on the first method 342,013,143 289,065,803
Second Method Required capital for asset risk 397,196,542 330,422,631 Required capital for reinsurance risk 3,004,272 2,458,137 Required capital for outstanding claims risk 5,460,610 5,195,079 Required capital for underwriting risk 82,891,417 58,735,202 Required capital for interest rate and currency risk 2,703,707 749,812 Required capital based on the second method 491,256,548 397,560,861
Required capital 491,256,548 397,560,861 Current capital(1) 1,312,250,078 1,313,106,593 Excessive capital 820,993,530 915,545,732
(1) According to legal regulations, equalisation provision of TL 47,494,681 (December 31, 2019: TL 39,434,063) have been included in the amount for equity.
156 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
5 Segment reporting
Segmenting of balance sheet and income statement items is based on the distribution key described in Circular “Principles and Procedures of Distribution Keys Used in Financial Statements under the Insurance Uniformed Chart of Accounts” issued by the Ministry on January 4, 2008 and Circular “Amendments to Principles and Procedures of Distribution Keys Used in Financial Statements under the Insurance Uniformed Chart of Accounts” issued by the Ministry on August 9, 2010.
Individual December 31, 2020 Life pension Non-Life Total
Continuing operations: Technical income 2,179,293,930 506,282,690 591,910 2,686,168,530 Technical expense (1,851,680,989) (360,755,917) (1,521,624) (2,213,958,530) Total of other income and expense 67,280,484 106,877,749 1,310,080 175,468,313 Income before tax 394,893,425 252,404,522 380,366 647,678,313 Income tax expense - - - (128,336,961) Net profit for the period 394,893,425 252,404,522 380,366 519,341,352
Individual December 31, 2020 Life pension Non-Life Total
Segment assets 3,888,303,524 32,103,106,967 75,712,710 36,067,123,201 Total assets 3,888,303,524 32,103,106,967 75,712,710 36,067,123,201
Segment liabilities (4,081,511,141) (31,906,344,652) (79,267,408) 36,067,123,201) Total liabilities (4,081,511,141) (31,906,344,652) (79,267,408) (36,067,123,201)
Other segment information Depreciation and amortisation (12,022,342) (19,097,972) (234,098) (31,354,412)
Individual December 31, 2019 Life pension Non-Life Total
Continuing operations: Technical income 1,493,819,611 427,720,032 548,127 1,922,087,770 Technical expense (1,229,741,045) (337,039,910) (1,573,382) (1,568,354,337) Total of other income and expense 51,122,190 70,946,214 1,037,988 123,106,392 Income before tax 315,200,756 161,626,336 12,733 476,839,825 Income tax expense - - - (119,305,000) Net profit for the period 315,200,756 161,626,336 12,733 357,534,825
Individual December 31, 2019 Life pension Non-Life Total
Segment assets 2,907,838,294 24,167,898,568 59,040,896 27,134,777,758 Total assets 2,907,838,294 24,167,898,568 59,040,896 27,134,777,758
Segment liabilities (3,047,513,712) (24,025,575,755) (61,688,291) 27,134,777,758) Total liabilities (3,047,513,712) (24,025,575,755) (61,688,291) 27,134,777,758)
Other segment information Depreciation and amortisation (15,396,654) (21,367,126) (312,615) (37,076,395)
Anadolu Hayat Emeklilik 2020 Annual Report 157 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
6 Tangible assets
Movement in tangible assets in the period from January 1 to December 31, 2020 is presented below:
Increase December 31, January 1, 2020 Additions in value Disposals 2020 Cost: Owner occupied land and buildings 4,700,000 - - - 4,700,000 Machinery and equipment 54,127,336 3,075,789 - (1,161,675) 56,041,450 Vehicles 592,474 - - - 592,474 Furniture and fixtures (includes leased assets) 6,476,825 658,173 - (157,632) 6,977,366 Leasehold improvements 14,111,319 2,709,280 - (283,417) 16,537,182 Operating leases (1) 58,929,598 7,741,607 - (1,614,612) 65,056,593 138,937,552 14,184,849 - (3,217,336) 149,905,065 Accumulated depreciation: Owner occupied land and buildings (13,135) (13,135) - - (26,270) Machinery and equipment (31,949,738) (8,742,172) - 1,087,373 (39,604,537) Vehicles (307,266) (83,444) - - (390,710) Furniture and fixtures (includes leased assets) (4,566,140) (636,681) - 151,095 (5,051,726) Leasehold improvements (4,256,617) (1,463,289) - 283,416 (5,436,490) Operating leases (1) (8,689,412) (8,463,839) - 296,265 (16,856,986) (49,782,308) (19,402,560) - 1,818,149 (67,366,719)
Carrying amounts 89,155,244 82,538,346
(1) Tangible assets which are not covered by TFRS 16 but also obtained by finance lease are presented in the furniture and fixtures.
Owner occupied properties are evaluated by revaluation method and subjected to valuation. Appraisal reports were provided by CMB licensed real estate appraisal company at the end of 2018. There is no pledge on the properties.
As of December 31, 2020, the fair values (excluding VAT) and net carrying values of owner occupied properties are presented below:
Net carrying value Owner occupied land and buildings Appraisal value (December 31, 2020)
Building/Southern Anatolia district sales office/Adana 2,600,000 2,573,730 Land/İstanbul Kağıthane 2,100,000 2,100,000 Total 4,700,000 4,673,730
158 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Fair value measurement
The fair values of owner occupied land and buildings were determined by sales comparison approach. Owner occupied lands and buildings with fair value measured by sales comparison approach, are classified as Level 2.
Movement in tangible assets in the period from January 1 to December 31, 2019 is presented below:
January 1, 2019 Additions Increase in value Disposals December 31, 2019 Cost: Owner occupied land and buildings 4,700,000 - - - 4,700,000 Machinery and equipment 45,818,086 9,352,859 - (1,043,609) 54,127,336 Vehicles 502,597 158,900 - (69,023) 592,474 Furniture and fixtures (includes leased assets) 6,341,370 180,254 - (44,799) 6,476,825 Leasehold improvements 12,371,453 1,924,347 - (184,481) 14,111,319 Operating leases - 58,929,598 - - 58,929,598 69,733,506 70,545,958 - (1,341,912) 138,937,552 Accumulated depreciation: Owner occupied land and buildings - (13,135) - - (13,135) Machinery and equipment (24,022,869) (8,983,223) - 1,056,354 (31,949,738) Vehicles (258,463) (100,571) - 51,768 (307,266) Furniture and fixtures (includes leased assets) (3,981,482) (627,095) - 42,437 (4,566,140) Leasehold improvements (3,236,770) (1,204,328) - 184,481 (4,256,617) Operating leases - (8,689,412) - - (8,689,412) (31,499,584) (19,617,764) - 1,335,040 (49,782,308)
Carrying amounts 38,233,922 89,155,244
7 Investment properties
Properties held to earn rentals and/or acquire capital appreciation are classified as investment properties.
Movement in investment properties in the period from January 1 to December 31, 2020 is presented below:
January 1, 2020 Additions Increase in value Disposals December 31, 2020
Land/İstanbul Ömerli 67,068,758 - 15,960,000 (754,266) 82,274,492 Building/İstanbul Gayrettepe 57,000,000 - 14,150,000 - 71,150,000 Building/Mersin 29,000,000 - 2,410,000 - 31,410,000 153,068,758 - 32,520,000 (754,266) 184,834,492 Carrying amounts 153,068,758 184,834,492
Movement in investment properties in the period from January 1 to December 31, 2019 is presented below:
January 1, 2019 Additions Increase in value Disposals December 31, 2019
Land/İstanbul Ömerli 60,429,755 - 6,700,000 (60,997) 67,068,758 Building/İstanbul Gayrettepe 56,300,000 - 700,000 - 57,000,000 Building/Mersin 29,000,000 - - - 29,000,000 145,729,755 - 7,400,000 (60,997) 153,068,758 Carrying amounts 145,729,755 153,068,758
For the period ended December 31, 2020, the Company has rental income from investment properties amounting to TL 943,714 (December 31, 2019: TL 858,473). The Company has a net gain from increase in value of investment properties amounting to TL 32,520,000 (December 31, 2019: 7.400.000 TL).
The appraisal values (excluding VAT) and net carrying values of investment properties are presented below. Appraisal reports were provided by CMB licensed real estate appraisal company at November and December 2020. There is no mortgage on the properties aforementioned.
Anadolu Hayat Emeklilik 2020 Annual Report 159 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Appraisal and net carrying value Net carrying value Net carrying value Investment land and buildings (December 31, 2020) (December 31, 2019)
Land/İstanbul Ömerli 82,274,492 67,068,758 Building/İstanbul Gayrettepe 71,150,000 57,000,000 Building/Mersin 31,410,000 29,000,000 Appraisal and net carrying value 184,834,492 153,068,758
Fair value measurement
The fair values of investment properties were determined by sales comparison approach. Investment properties with fair value measured by sales comparison approach, are classified as Level 2.
8 Intangible assets
Movement in intangible assets in the period from January 1 to December 31, 2020 is presented below:
January 1, 2020 Additions Transfers December 31, 2020 Cost: Rights 90,121,930 11,728,214 - 101,850,144 90,121,930 11,728,214 - 101,850,144 Accumulated amortisation: Rights (73,281,553) (11,951,850) - (85,233,403) (73,281,553) (11,951,850) - (85,233,403)
Carrying amounts 16,840,377 16,616,741
Movements in intangible assets in the period from January 1 to December 31, 2019 is presented below:
January 1, 2019 Additions Transfers December 31, 2019 Cost: Rights 83,364,583 6,757,347 - 90,121,930 83,364,583 6,757,347 - 90,121,930 Accumulated amortisation: Rights (55,822,922) (17,458,631) - (73,281,553) (55,822,922) (17,458,631) - (73,281,553)
Carrying amounts 27,541,661 16,840,377
9 Investments in associates
December 31, 2020 December 31, 2019 Carrying value Participation rate % Carrying value Participation rate %
İş Portföy Yönetimi AŞ 12,762,193 20.0% 12,762,193 20.0% Investments in associates, net 12,762,193 12,762,193
Total Shareholders’ Retained Profit for Reviewed Associate assets equity earnings the period or not Period İş Portföy Yönetimi AŞ 187,408,826 166,957,976 18,904,830 59,349,560 Reviewed December 31, 2020
The Company has TL 4,272,000 of dividend income from associates in current period.
160 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
10 Reinsurance assets and liabilities
Outstanding reinsurance assets and liabilities of the Company, as a ceding company in accordance with the existing reinsurance contracts are as follows:
Reinsurance assets December 31, 2020 December 31, 2019
Life mathematical reserve, ceded (Note 17,15) 4,166,658 3,803,491 Provision for outstanding claims, ceded (Note 17,15) 10,786,917 6,709,653 Reserve for unearned premiums, ceded (Note 17,15) 3,574,236 3,851,643 Provision for bonus and discount, ceded (Note 17,15) 293,862 365,948 Reserve for unexpired risks, ceded (Note 17,15) - - Other technical provision, ceded 1,304,948 1,014,229 Receivables from reinsurance companies 505,373 - Total 20,631,994 15,744,964
There are not any impairment losses recognised for reinsurance assets.
Reinsurance liabilities December 31, 2020 December 31, 2019
Payables to reinsurance companies - 1,243,040 Cash deposited by insurance and reinsurance companies (Note 19) 5,563,279 4,479,832 Total 5,563,279 5,722,872
Gains and losses recognised in the statement of income in accordance with existing reinsurance contracts are as follows:
December 31, 2020 December 31, 2019
Life branch: Premiums ceded during the period (25,010,530) (22,236,204) Change in unearned premiums reserve, ceded (294,779) 836,790 Commissions received from reinsurers(1) 7,498,708 5,638,926 Reinsurers share of claims paid 8,790,643 10,770,140 Change in outstanding claims, ceded 4,169,382 2,316,360 Change in provision for bonus and discount, ceded (74,083) (563,156) Change in life mathematical reserve, ceded 363,167 709,465 (4,557,492) (2,527,679)
Non-life branch: Premiums ceded during the period (407,133) (509,894) Change in unearned premiums reserve, ceded 17,372 23,272 Commissions received from reinsurers(1) 106,160 159,993 Reinsurers share of claims paid 68,188 29,826 Change in outstanding claims, ceded (49,876) 17,516 Change in provision for bonus and discount, ceded 1,998 (4,135) (263,291) (283,422)
Total, net (4,820,783) (2,811,101)
(1) Deferred commissions are excluded from commissions received from reinsurers.
Anadolu Hayat Emeklilik 2020 Annual Report 161 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
11 Financial assets
As at December 31, 2020 and December 31, 2019, the Company’s financial assets are detailed as follows:
Financial assets and financial investments with risk on policyholders December 31, 2020 December 31, 2019
Available for sale financial assets, Company’s own portfolio 920,341,874 886,943,685 Financial assets held for trading 260,119,043 191,398,602 Loans and receivables 360,254,858 52,714,137 Financial investments with risks on saving life policyholders classified as held for trading and available for sale 2,759,735,890 1,937,750,426 Impairment loss on financial assets (6,216,421) (4,524,808) Total 4,294,235,244 3,064,282,042
As at December 31, 2020 and December 31, 2019, the Company’s financial assets held for trading are detailed as follows:
December 31, 2020 Nominal value Cost Fair value Carrying value
Equity shares and other non-fixed income financial assets: Equity shares - - - - Investment funds 454,047,593 210,585,421 260,119,043 260,119,043 Total financial assets held for trading purpose - other 210,585,421 260,119,043 260,119,043
Total financial assets held for trading purpose 210,585,421 260,119,043 260,119,043
December 31, 2019 Nominal value Cost Fair value Carrying value
Equity shares and other non-fixed income financial assets: Equity shares - - - - Investment funds 175,253,384 177,679,702 191,398,602 191,398,602 Total financial assets held for trading purpose - other 177,679,702 191,398,602 191,398,602
Total financial assets held for trading purpose 177,679,702 191,398,602 191,398,602
The Company’s financial assets held for trading issued by the Company’s related parties, are detailed as follows:
December 31, 2020 Nominal value Cost Fair value Carrying value
Investment funds 454,047,593 210,585,421 260,119,043 260,119,043 Total 454,047,593 210,585,421 260,119,043 260,119,043
December 31, 2019 Nominal value Cost Fair value Carrying value
Investment funds 175,253,384 177,679,702 191,398,602 191,398,602 Total 175,253,384 177,679,702 191,398,602 191,398,602
162 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
As at December 31, 2020 and December 31, 2019, the Company’s loans and receivables are detailed as follows:
December 31, 2020 Cost Fair value Carrying value
Reverse repo transaction 41,850,000 41,868,907 41,868,907 Receivables from Takasbank money market transections 315,415,000 318,385,951 318,385,951 Total loans and receivables 357,265,000 360,254,858 360,254,858
December 31, 2019 Cost Fair value Carrying value
Reverse repo transaction 52,700,000 52,714,137 52,714,137 Total loans and receivables 52,700,000 52,714,137 52,714,137
As at December 31, 2020 and December 31, 2019, the Company’s available for sale financial assets in its own portfolio are detailed as follows:
December 31, 2020 Nominal value Cost Fair value Carrying value
Debt instruments: Private sector bonds and asset-backed securities 159,610,000 152,317,927 153,224,091 153,224,091 Government bonds 479,312,727 458,899,153 462,306,116 462,306,116 Eurobonds issued by the Turkish Government 1,700,000 12,229,359 13,498,155 13,498,155 Eurobonds issued by the private sector 6,341,000 47,098,415 49,891,214 49,891,214 Total available for sale financial assets - debt instruments 646,963,727 670,544,854 678,919,576 678,919,576
Equity shares and other non-fixed income financial assets: Equity shares(1) 107,796,640 241,422,298 241,422,298 Total available for sale financial assets - other 107,796,640 241,422,298 241,422,298
Total available for sale financial assets 778,341,494 920,341,874 920,341,874
Impairment loss on available for sale equity shares (6,216,421) (6,216,421) (6,216,421)
Net available for sale financial assets 772,125,073 914,125,453 914,125,453
(1) Financial assets of which the fair values are measured reliably are presented at their fair values, if not, presented at their costs.
December 31, 2019 Nominal value Cost Fair value Carrying value
Debt instruments: Private sector bonds and asset-backed securities 5,130,000 5,130,000 5,144,428 5,144,428 Government bonds 693,386,660 729,558,882 707,175,969 707,175,969 Eurobonds issued by the Turkish Government 900,000 4,884,032 5,362,821 5,362,821 Total available for sale financial assets - debt instruments 699,416,660 739,572,914 717,683,218 717,683,218
Equity shares and other non-fixed income financial assets: Equity shares(1) 109,030,187 169,260,467 169,260,467 Total available for sale financial assets - other 109,030,187 169,260,467 169,260,467
Total available for sale financial assets 848,603,101 886,943,685 886,943,685
Impairment loss on available for sale equity shares (4,524,808) (4,524,808) (4,524,808)
Net available for sale financial assets 844,078,293 882,418,877 882,418,877
(1) Financial assets of which the fair values are measured reliably are presented at their fair values, if not, presented at their costs.
Anadolu Hayat Emeklilik 2020 Annual Report 163 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
The Company has equity shares issued by the Company’s related parties and classified as available for sale financial assets in its own portfolio with a cost amount of TL 107,383,848 and with a carrying value TL 241,045,617 (December 31, 2019: Equity shares with a cost amount of TL 108,617,575 and a carrying amount of TL 168,883,786).).
Financial investments classified as held for trading and available-for-sale with risks on saving life policyholders (“FIRSLP”) and as at December 31, 2020 and December 31, 2019 are detailed as follows:
December 31, 2020 Nominal value Cost Fair value Carrying value
Debt instruments: Government bonds - TL 778,366,869 737,651,430 751,216,441 751,216,441 Eurobonds issued by the Turkish Government Investment funds 228,888,000 1,758,210,497 1,927,298,958 1,927,298,958 Total available for sale financial assets - debt instruments 1,007,254,869 2,495,861,927 2,678,515,399 2,678,515,399 Debt instruments for trading purposes Investment funds 486,959 26,159,153 52,981,983 52,981,983 The sum of debt instruments classified as financial assets for trading purposes 486,959 26,159,153 52,981,983 52,981,983 Time deposits 28,172,765 28,172,765 28,238,508 28,238,508 Total time deposits 28,172,765 28,172,765 28,238,508 28,238,508
Financial investments with risks on saving life policyholders 2,550,193,845 2,759,735,890 2,759,735,890
December 31, 2019 Nominal value Cost Fair value Carrying value
Debt instruments: Government bonds - TL 605,037,341 563,522,288 585,283,574 585,283,574 Eurobonds issued by the Turkish Government Investment funds 170,588,000 1,034,924,835 1,088,931,009 1,088,931,009 Total available for sale financial assets - debt instruments 775,625,341 1,598,447,123 1,674,214,583 1,674,214,583 Debt instruments for trading purposes Investment funds 486,959 26,159,153 35,524,079 35,524,079 The sum of debt instruments classified as financial assets for trading purposes 486,959 26,159,153 35,524,079 35,524,079 Time deposits 227,111,781 227,111,781 228,011,764 228,011,764 Total time deposits 227,111,781 227,111,781 228,011,764 228,011,764
Financial investments with risks on saving life policyholders 1,851,718,057 1,937,750,426 1,937,750,426
The financial assets issued by the Company’s related parties and classified as FIRSLP are detailed as follows:
December 31, 2020 Nominal value Cost Fair value Carrying value
investment funds 486,959 26,159,153 52,981,983 52,981,983 Total investment funds 486,959 26,159,153 52,981,983 52,981,983
December 31, 2019 Nominal value Cost Fair value Carrying value
Investment funds 486,959 26,159,153 35,524,079 35,524,079 Total investment funds 486,959 26,159,153 35,524,079 35,524,079
The Company has not any securities, other than issued shares in the current period, or any matured debt securities.
164 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Value increases/(decreases) in financial assets for the last three years:
December 31, 2020 December 31, 2019 December 31, 2018
Current financial assets: Available for sale financial assets, Company’s own portfolio 142,000,380 38,340,584 (52,949,439) Financial assets held for trading 49,533,622 13,718,900 1,195,957 Loans and receivables 2,989,858 14,137 31,715 Financial investments with risks on saving life policyholders classified as available for sale 209,542,045 86,032,369 (113,047,305) Total 404,065,905 138,105,990 (164,769,072)
Value increases/(decreases) reflect the difference between the carrying value and cost of the financial assets.
The Company has TL 6,216,421 of impairment loss arising from its available for sale investments in equity participations not having a quoted market price in an active market (December 31, 2019: TL 4,524,808).
The Company does not apply hedge accounting. Exchange rate differences arising from the payments of monetary items or different conversion rates used in the current period or at initial recognition are recognised in profit or loss.
Financial assets blocked in favour of the Ministry as a guarantee for the insurance activities are as follows:
December 31, 2020 Nominal value Cost Fair value Carrying value
Financial investments with risks on saving life policyholders - debt securities 1,035,914,593 2,550,193,845 2,759,735,890 2,759,735,890 Available for sale financial assets 625,452,727 610,049,205 614,472,139 614,472,139 Time deposits 89,921,364 89,921,364 90,337,294 90,337,294 Total 1,751,288,684 3,250,164,414 3,464,545,323 3,464,545,323
December 31, 2019 Nominal value Cost Fair value Carrying value
Financial investments with risks on saving life policyholders - debt securities 1,003,224,081 1,851,718,057 1,937,750,426 1,937,750,426 Available for sale financial assets 290,756,651 299,033,595 293,332,847 293,332,847 Time deposits 237,771,502 237,771,502 238,636,475 238,636,475 Total 1,531,752,234 2,388,523,154 2,469,719,748 2,469,719,748
Anadolu Hayat Emeklilik 2020 Annual Report 165 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
12 Loans and receivables
December 31, 2020 December 31, 2019
Receivables from insurance operations 68,631,908 64,328,597 Provisions for receivables from insurance operations (5,002,574) (5,002,574) Loans to the policyholders 63,328,266 40,071,706 Doubtful receivables from main operations and insurance operations 117,996 117,996 Provisions for doubtful receivables from main operations and insurance operations (117,996) (117,996) Receivables from pension activities 30,477,366,152 22,951,649,071 Net fund value of participants 30,434,759,762 22,913,666,145 Other 42,606,390 37,982,926 Total receivables from main operations 30,604,323,752 23,051,046,800 Receivables from personnel - 12,413 Other receivables 139,807,221 38,467,083 Total 30,744,130,973 23,089,526,296
The details of guarantees for the Company’s receivables are presented below:
December 31, 2020 December 31, 2019
Guarantees and commitments 4,355,343 4,562,398 Letters of guarantees 5,262,663 4,620,232 Real estate pledges 782,900 782,900 Total 10,400,906 9,965,530
December 31, 2020 December 31, 2019
Provisions for doubtful receivables from main operations and insurance operations at the beginning of the period 117,996 117,996 Collections - - Charge for the period - - Provisions for doubtful receivables from main operations and insurance operations at the end of the period 117,996 117,996
Provision for both overdue receivables and receivables not due yet a) Receivables under legal or administrative follow up (due): TL 117,996 (December 31, 2019: TL 117,996). b) Provision for premium receivables (due): TL 5.002.574 (December 31, 2019: TL 5.002.574).
The Company provides provision for its doubtful receivables in the legal follow-up by considering the value and nature of the receivable.
The Company reflects its receivables from and payables to reinsurance and insurance companies by netting off on the entity basis.
The Company’s receivables from and payables to shareholders, associates and subsidiaries are detailed in note 45 - Related party transactions.
166 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
13 Derivative financial instruments
At the reporting period, the Company has not any derivative financial instruments.
14 Cash and cash equivalents
As at December 31, 2020 and December 31, 2019, cash and cash equivalents are as follows:
December 31, 2020 December 31, 2019 At the At the beginning of At the At the beginning of end of the period the period end of the period the period
Cash on hand 104 219 219 1,002 Bank deposits 444,769,124 477,786,945 477,786,945 320,570,433 Bank guaranteed credit card receivables with maturities less than three months(1) 221,728,476 179,135,571 179,135,571 197,086,418 Cheques given and payment orders - - - (16) Cash and cash equivalents in the balance sheet 666,497,704 656,922,735 656,922,735 517,657,837
Blocked amount(2) (Note 11) (90,337,294) (238,636,475) (238,636,475) (178,507,685) Interest accruals on bank deposits (1,824,047) (92,143) (92,143) (1,059,122) Term deposits with original maturities of longer than 3 months - (131,612,519) (131,612,519) - Cash and cash equivalents presented in the statement of cash flow 574,336,363 286,581,598 286,581,598 338,091,030
(1) Bank guaranteed credit card receivables with maturities less than three months include credit card receivables from banks in relation to premium payments of policyholders. (2) As at December 31, 2020, this amount regarding insurance operations is blocked in favour for the Ministry.
Anadolu Hayat Emeklilik 2020 Annual Report 167 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
As at December 31, 2020 and December 31, 2019, bank deposits are further analysed as follows:
December 31, 2020 December 31, 2019
Foreign currency denominated bank deposits - time deposits - - - demand deposits 19,264,880 36,930,684 Bank deposits in TL - time deposits 423,682,385 425,341,138 - demand deposits 1,821,859 15,515,123 Cash at banks 444,769,124 477,786,945
As at December 31, 2020, TL time deposits have a maximum maturity of 33 days and their simple interest rates vary between 16.50% and 18.75%. The Company has not any foreign currency denominated bank deposits.
As at December 31, 2019, TL time deposits have a maximum maturity of 90 days and their simple interest rates vary between 10.00% and 23.50%. The Company has not any foreign currency denominated bank deposits.
15 Equity
Paid in capital
As at December 31, 2020, the authorised nominal share capital of the Company is TL 430,000,000 and the share capital of the Company consists of 43,000,000,000 issued shares with TL 0.01 nominal value each.
The Company’s share capital is divided into group A and group B shares. Group A shares are represented by 100,000,000 of equity shares having a nominal amount of TL 0.01 each. Group B shares are represented by 42,900,000,000 shares having a nominal amount of TL 0.01 each and all shares are owned by Türkiye İş Bankası AŞ. Group A shareholders have no privileges except for the election of Board members. In accordance with the Articles of Association, new group A shares cannot be issued in capital increases.
The Company has accepted the registered capital system set out in accordance with the Law No: 2499 and applied the system as of June 15, 2000 upon the permission no: 67/1039 granted by the Capital Markets Board. As at December 31, 2020, the Company’s registered capital is TL 900,000,000.
As at December 31, 2020, there are not any treasury shares held by the Company’s associate; namely İş Portföy Yönetimi AŞ. There are not any treasury shares held by the Company itself.
Profit on assets sale that will be transferred to capital
In accordance with tax legislation, 75% of profits from sales of participation shares and 50% of profits from sales of real estates 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.
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 reimburse losses in the event that the general reserve is used.
The movement of legal reserves is as follows:
December 31, 2020 December 31, 2019
Legal reserves at the beginning of the period 170,931,830 153,833,566 Transfer from profit 26,594,032 17,098,264 Legal reserves at the end of the period 197,525,862 170,931,830
168 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Extraordinary reserves
The movement of extraordinary reserves is presented below:
December 31, 2020 December 31, 2019
Extraordinary reserves at the beginning of the period 120,044,612 33,273,713 Transfer from profit 1,960,951 86,770,899 Extraordinary reserves at the end of the period 122,005,563 120,044,612
Statutory reserves
The movement of statutory reserves is presented below:
December 31, 2020 December 31, 2019
Statutory reserves at the beginning of the period 52,676,523 32,870,889 Transfer from profit 26,943,603 19,805,634 Statutory reserves at the end of the period 79,620,126 52,676,523
Other profit reserves
In accordance with the revision of TAS 19, the amount of actuarial gains and losses have been presented under the Other Profit Reserves since December 31, 2013, which were previously shown under the income statement. As at December 31, 2020, actuarial loss amounting to TL (11,669,721) is presented under the other profit reserves (December 31, 2019: TL (9,542,231)). The difference arising from the owner occupied land and buildings at fair value amounting to TL 2,947,098 is also presented under the Other Profit Reserves (December 31, 2019: TL 2,947,098).
Valuation of financial assets
Movement of valuation differences of available for sale financial assets is presented below:
January 1- January 1- December 31, 2020 December 31, 2019
Valuation differences at the beginning of the period 50,937,622 (56,522,836)
Changes during the period: The effect of changes in foreign exchange rates on unrealised gains and losses, recognised due to change in the fair values of available for sale financial assets with risks on saving life policyholders 343,937 (303,245) Change in unrealised gains and losses due to changes in the fair values of available for sale financial assets with risks on saving life policyholders 82,284,104 143,182,278 Change in unrealised gains and losses due to changes in the fair values of available for sale financial assets with risks on saving life policyholders, policyholders’ portion (78,169,900) (136,023,164) Change in unrealised gains and losses from available for sale financial assets, company’s own portfolio 69,931,842 103,819,715 Deferred and corporate tax effect (3,451,240) (14,520,455)
Disposals during the period: Unrealised gains and losses transferred from equity to income statement due to disposal of available for sale financial assets with risks on saving life policyholders 293,672 27,653,334 Unrealised gains and losses transferred from equity to income statement due to disposal of available for sale financial assets with risks on saving life policyholders, policyholders’ portion (278,988) (26,270,666) Unrealised gains and losses transferred from equity to income statement due to disposal of available for sale financial assets, company’s own portfolio (790,753) 12,748,993 Deferred and corporate tax effect 155,214 (2,826,332)
Valuation differences at the end of the period 121,255,510 50,937,622
Anadolu Hayat Emeklilik 2020 Annual Report 169 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
16 Other reserves and equity component of DPF
Income and expense items that are directly accrued in equity as of the reporting period are as follows:
December 31, 2020 December 31, 2019
Temporary differences arising from revaluation of financial assets 126,507,806 7,058,475 Permanent differences arising from revaluation of financial assets and actuarial gain and losses (14,587,151) 33,375,756 The differences arising from revaluation of investment properties 3,265,699 3,265,699 Deferred tax effect (2,653,467) 642,559 Total 112,532,887 44,342,489
17 Insurance contract liabilities and reinsurance assets
17.1 Total amount of guarantee that should be placed 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, 2020 December 31, 2019 Should be provided(2) Provided(1) Should be provided(2) Provided(1) Life: Financial assets(1) 2,746,372,981 3,169,653,989 2,015,927,862 2,304,906,450 Total 2,746,372,981 3,169,653,989 2,015,927,862 2,304,906,450
Non-life: Financial assets(1) 1,297,772 1,919,280 401,802 1,147,404 Total 1,297,772 1,919,280 401,802 1,147,404
Total 2,747,670,753 3,171,573,269 2,016,329,664 2,306,053,854
(1) Government bonds and treasury bills are measured at daily official prices announced by the Central Bank of Turkey as at December 31, 2020 and December 31, 2019; if these prices are not available, they are measured with stock exchange values; investment fund participation certificates are measured using the daily prices announced in accordance with the 6th Article of “Circular Related to the Financial Structure of Insurance, Reinsurance, and Individual Pension Companies”. (2) According to 7th article of “Circular Related to the Financial Structure of Insurance, Reinsurance, and Individual Pension Companies” which regulates necessary guarantee amount, minimum guarantee fund for capital adequacy calculation period will be established as a guarantee in two months following the calculation period. According to “Regulations Regarding to Capital Adequacy Measurement and Assessment of Insurance, Reinsurance, and Individual 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 Ministry within two months. As at December 31, 2020 (December 31, 2019), minimum guarantee amount of June 30, 2020 (June 30, 2019) is shown as necessary guarantee amount; since, minimum guarantee amount as at June 30, 2020 (June 30, 2019) is based on June 30, 2020 (June 30, 2019) calculations.
As at December 31, 2020, TL 1,049,374,570 of government bonds (December 31, 2019: TL 736,942,001) and TL 1,812,739,231 of Eurobonds (December 31, 2019: TL 1,066,939,535) and TL 52,981,984 (December 31, 2019: TL 35,524,079) of investment funds and TL 118,575,802 of time deposits (December 31, 2019: TL 466,648,239) are provided as guarantee for the life and non-life branches,
17.2 Number of life insurance policies, additions, disposals in the current period, and current life policy holders and the related mathematical reserves
December 31, 2020(1) December 31, 2019 Number of policies Mathematical reserves Number of policies Mathematical reserves Additions during the period 1,735,461 1,331,237,724 1,668,026 637,201,100 Disposals during the period (1,597,890) (457,674,337) (1,993,837) (300,666,810) Outstanding 2,130,573 3,097,786,101 1,993,002 2,224,222,714
(1) The above table includes 2 of reactivated life insurance policies (December 31, 2019: 65 policies) and their corresponding mathematical reserves.
As explained in Note 2 - Financial assets, available for sale financial assets with risks on saving life policyholders are measured at fair value; 95% of the fair value and amortised cost difference amounting to TL 92,019,672 (December 31, 2019: TL 11,377,946) is recognised under the life mathematical provisions, TL 4,166,658 (December 31, 2019: TL 3,803,491) of reinsurer’s share of life mathematical provisions is not offset against the mathematical provisions in the above table.
17.3 Guarantees given to non-life insurances based on branches:
December 31, 2020 December 31, 2019
Guarantees given to death by accident 7,075,669,485 5,675,509,354 Guarantees given to disability by accident 7,023,425,593 5,634,799,497 Total 14,099,095,078 11,310,308,851
170 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
17.4 Pension investment funds established by the Company and their unit prices:
As at December 31, 2020 and December 31, 2019, individual pension investment funds founded by the Company and their unit prices are as follows:
December 31, 2020 December 31, 2019 Unit price Unit price AH1 Bond Fund 0.078147 0.072922 AH2 Money Market Fund 0.070239 0.063784 AH3 First Debt Instruments Fund (*) 0.123175 0.091578 AH4 Second Debt Instruments Fund (*) 0.097914 0.070777 AH5 Equity Fund 0.180509 0.136636 AH6 Developed Countries Flexible Fund 0.112904 0.082881 AH8 Conservative Flexible Fund 0.072585 0.066990 AH9 Balanced Flexible Fund 0.096255 0.079843 AH0 Dynamic Flexible Fund 0.156444 0.123183 AGE Participation Standard Fund 0.027485 0.022362 ABE BRIC Plus Fund 0.051113 0.043130 AHC Private Sector Debt Instruments Fund 0.026211 0.023845 AHL Aggressive Flexible Fund 0.029201 0.021917 AET Contribution Fund 0.019050 0.017270 AER Participation Contribution Fund 0.023943 0.020009 AEA Gold Fund 0.046620 0.030113 AG1 Group Bond Fund 0.078332 0.072445 AG2 Group Debt Instruments Fund 0.090218 0.068745 AG3 Group Equity Fund 0.144307 0.104996 AG4 Group Conservative Fund 0.076590 0.069646 HS1 Debt Instruments Fund 0.051886 0.047832 AHB Second Equity Fund 0.087305 0.064303 ATK Standard Fund 0.040954 0.036737 ATE Isbank Subsidiaries Index Fund 0.078756 0.050749 AO1 Initial Fund 0.017343 0.015730 AO2 Initial Participation Fund 0.016391 0.014905 AJA Auto Enrolment Aggressive Fund 0.017900 0.013362 AJB Auto Enrolment Dynamic Fund 0.018269 0.014140 AJC Auto Enrolment Balanced Fund 0.016847 0.014058 AJF Auto Enrolment Conservative Fund 0.015650 0.014011 AJG Auto Enrolment Aggressive Participation Fund 0.022573 0.014572 AJH Auto Enrolment Dynamic Participation Fund 0.020782 0.014797 AFH Auto Enrolment Standard Fund 0.015772 0.014112 AFP Auto Enrolment Participation Standard Fund 0.016065 0.014077
Anadolu Hayat Emeklilik 2020 Annual Report 171 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
17.5 Number and amount of participation certificates in portfolio and circulation:
Number of participation documents in the portfolio and in circulation is such as follows as of December 31, 2020 and December 31, 2019:
December 31, 2020 December 31, 2019 Participation certificates in circulation Participation certificates in circulation Number Amount Number Amount AH1 Bond Fund 29,518,275,765.84 2,306,764,696.27 34,936,636,839.41 2,547,649,431.60 AH2 Money Market Fund 20,177,140,535.47 1,417,222,174.07 22,639,810,896.35 1,444,057,698.21 AH3 First Debt Instruments Fund (*) 20,331,184,064.60 2,504,293,597.16 20,275,861,042.58 1,856,822,802.56 AH4 Second Debt Instruments Fund (*) 10,946,762,443.34 1,071,841,297.88 9,698,733,885.85 686,447,288.24 AH5 Equity Fund 6,006,182,766.66 1,084,170,045.03 5,150,265,375.40 703,711,659.83 AH6 Developed Countries Flexible Fund 7,386,248,965.78 833,937,053.23 7,361,062,529.29 610,092,223.49 AH8 Conservative Flexible Fund 19,676,337,698.56 1,428,206,971.85 22,152,608,429.11 1,484,003,238.67 AH9 Balanced Flexible Fund 23,663,201,758.91 2,277,701,485.30 26,121,885,851.60 2,085,649,732.05 AH0 Dynamic Flexible Fund 8,410,608,001.26 1,315,789,158.15 8,739,340,240.74 1,076,538,148.88 AGE Participation Standard Fund 18,029,992,474.63 495,554,343.17 17,417,213,087.53 389,483,719.06 ABE BRIC Plus Fund 16,545,187,689.83 845,674,178.39 11,299,226,064.65 487,335,620.17 AHC Private Sector Debt Instruments Fund 50,459,669,257.15 1,322,598,390.90 32,109,416,047.33 765,649,025.65 AHL Aggressive Flexible Fund 6,746,805,508.01 197,013,467.64 4,803,238,660.76 105,272,581.73 AET Contribution Fund 212,176,429,082.71 4,041,960,974.03 191,522,883,592.49 3,307,600,199.64 AER Participation Contribution Fund 5,501,996,347.33 131,734,298.55 4,301,317,898.29 86,065,069.83 AEA Gold Fund 134,303,266,869.79 6,261,218,301.47 93,583,902,826.90 2,818,092,065.83 AG1 Group Bond Fund 2,236,384,790.65 175,180,493.42 2,958,668,122.98 214,340,712.17 AG2 Group Debt Instruments Fund 813,442,826.34 73,387,184.91 1,008,745,295.87 69,346,195.37 AG3 Group Equity Fund 943,684,745.82 136,180,314.62 858,680,286.81 90,157,995.39 AG4 Group Conservative Fund 1,812,186,436.64 138,795,359.18 2,510,909,308.27 174,874,789.68 HS1 Debt Instruments Fund 5,240,074,611.01 271,886,511.27 6,534,937,474.38 312,579,129.28 AHB Second Equity Fund 1,251,926,478.54 109,299,441.21 1,332,884,951.40 85,708,501.03 ATK Standard Fund 12,994,567,800.06 532,179,529.68 13,794,535,640.17 506,769,855.81 ATE Isbank Subsidiaries Index Fund 3,581,946,945.50 282,099,813.64 2,737,909,093.20 138,946,148.57 AO1 Initial Fund 3,878,478,315.87 67,264,449.43 5,830,253,262.45 91,709,883.82 AO2 Initial Participation Fund 2,669,176,666.13 43,750,474.73 4,223,968,854.87 62,958,255.78 AJA Auto Enrolment Aggressive Fund 892,354,000.56 15,973,136.61 490,222,276.59 6,550,350.06 AJB Auto Enrolment Dynamic Fund 896,009,842.18 16,369,203.81 571,516,674.96 8,081,245.78 AJC Auto Enrolment Balanced Fund 819,837,393.23 13,811,800.56 586,412,045.77 8,243,780.54 AJF Auto Enrolment Conservative Fund 318,534,260.30 4,985,061.17 258,836,981.50 3,626,564.95 AJG Auto Enrolment Aggressive Participation Fund 882,987,246.00 19,931,671.11 329,192,796.26 4,796,997.43 AJH Auto Enrolment Dynamic Participation Fund 723,560,028.55 15,037,024.51 364,499,906.95 5,393,505.12 AFH Auto Enrolment Standard Fund 35,808,993,625.78 564,779,447.47 27,193,202,791.80 383,750,477.80 AFP Auto Enrolment Participation Standard Fund 26,029,779,735.18 418,168,411.45 20,697,680,649.56 291,361,250.50 Total 30,434,759,761.87 22,913,666,144.52
17.6 Portfolio amounts in terms of number of new participants left or cancelled participants and existing participants for individuals and groups:
December 31, 2020 Additions Left/cancellations during the period during the period Existing Total amount Individuals 138,153 129,693 975,710 19,039,542,031 Group 573,063 451,553 1,318,595 7,221,522,458 Total 711,216 581,246 2,294,305 26,261,064,489
December 31, 2019 Additions Left/cancellations during the period during the period Existing Total amount Individuals 188,025 160,507 957,040 13,971,307,709 Group 809,326 592,004 1,207,295 5,548,693,166 Total 997,351 752,511 2,164,335 19,520,000,875
172 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Additions: The sum of the new contracts added in the period and their registered cumulative values as of the period end in addition with the number of the contracts that begin and finish in the same period.
Left/cancellations: The number of finalised contracts during the period and their values at their expiration dates.
Existing: The number of existing contracts and their values as of the period end.
Since retirement plan transfers between individual and group retirement plans occurs during the period, periodical changes should be followed by the total number and portfolio amount of policies. Also, when the contracts effective at the prior reporting period become a liability because of collection reversals in the current period or when the contracts effective at the prior reporting period become an asset, total numbers and portfolio values of these contracts are net off at the period end. Number and portfolio amount of individual and group policies presented in notes reflect the existing position of the Company as of the period-end.
Existing contracts have state contribution amounting to TL 4,173,695,273 in the state contribution funds as of the period end.
17.7 Valuation methods used in profit share calculation for saving life contracts with profit sharing:
Financial investments with risks on saving life policyholders are classified as “available-for-sale financial assets”. These assets are measured in accordance with the principles specified in Note 2.8 Financial Assets and valuation differences are taken into account in the profit share calculation.
17.8 Distribution of new participants in terms of their numbers and gross and net contributions for individuals and groups:
January 1 - December 31, 2020 January 1 - December 31, 2019 Number of contracts Gross contributions Net contributions Number of contracts Gross contributions Net contributions Individuals 138,153 1,323,684,171 1,317,290,828 150,165 943,638,872 936,311,216 Group 573,063 240,792,494 240,790,817 809,880 266,537,808 266,534,121 Total 711,216 1,564,476,665 1,558,081,645 960,045 1,210,176,680 1,202,845,337
Contracts become effective in the current period and the total contracts become effective and ceased in the same period and contributions collected regarding these contracts and the investment oriented contributions have been specified. The collections made with credit cards with undue blockage terms are also added into gross and net contributions. Transfer amounts are not included in the current period numbers and balances. In addition to these table, the Company has collected by TL 133,158,763 as state contribution.
17.9 Distribution of new participants in terms of their numbers and gross and net contributions for individuals and groups which were transferred from other insurance companies during the period:
January 1 - December 31, 2020 January 1 - December 31, 2019 Number of contracts Gross contributions Net contributions Number of contracts Gross contributions Net contributions Individuals 5,728 242,137,726 242,137,726 7,028 223,125,537 223,125,537 Group 10,784 32,881,791 32,881,791 29,713 33,238,710 33,238,710 Total 16,512 275,019,517 275,019,517 36,741 256,364,247 256,364,247
Distribution of new participants in terms of their numbers and gross and net contributions for individuals and groups which were transferred from foundations and funds during the period:
January 1 - December 31, 2020 January 1 - December 31, 2019 Number of contracts Gross contributions Net contributions Number of contracts Gross contributions Net contributions Individuals ------Group ------Total ------
In addition to amounts above, the Company has transferred TL 42,247,799 as state contribution from other pension companies in the same period.
17.10 Distribution of individual and group participants and their gross and net contributions which were transferred from life insurance portfolio to private pension portfolio during the period:
The legal permission of the transfer from life portfolio to private pension portfolio expired on October 7, 2006 and therefore, there is no transfer in the current and prior period.
17.11 Distribution of individual and group participants which were transferred to other insurance companies in terms of their numbers and gross and net contributions:
January 1 - December 31, 2020 January 1 - December 31, 2019 Number of contracts Gross contributions Net contributions Number of contracts Gross contributions Net contributions Individuals 129,693 2,588,709,962 2,467,771,928 160,507 2,467,865,313 2,365,914,190 Group 451,553 1,130,427,888 1,086,534,815 592,004 1,104,500,869 1,067,715,801 Total 581,246 3,719,137,850 3,554,306,743 752,511 3,572,366,182 3,433,629,991
Anadolu Hayat Emeklilik 2020 Annual Report 173 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Number of contracts indicates the number of disposals in the related period.
Gross contributions indicate the fund sales amount as a result of disposal.
Net contributions indicate the remaining amount paid to participant less any deductions (initiation fee and withholding) against the gross amount as a result of disposal.
In addition to amounts above, Company’s fund outflow is TL 552,214,231 as state contribution.
17.12 Distribution of new life insurance participants in terms of their numbers and premium amounts for individuals and groups during the period:
January 1 - December 31, 2020 January 1 - December 31, 2019 Number of contracts Premium amounts (TL) Number of contracts Premium amounts (TL) Individuals 120,258 370,110,898 135,106 219,189,645 Group 1,615,201 1,012,043,157 1,532,855 828,327,158 Total(1) 1,735,459 1,382,154,055 1,667,961 1,047,516,803
(1) 2 of reactivated contracts are not included in the current period additions (January 1 - December 31, 2019: 65).
17.13 Distribution of left or cancelled life insurance participants in terms of their numbers and mathematical reserves for individuals and groups during the period:
January 1 - December 31, 2020 Number of contracts Mathematical reserves (TL) Number of contracts Mathematical reserves (TL) Individuals 97,846 283,946,190 108,919 192,935,375 Group 1,500,044 173,728,147 1,884,918 107,731,435 Total 1,597,890 457,674,337 1,993,837 300,666,810
17.14 Profit share distribution rate of life insurances as of December 31, 2020 and 2019
December 31, 2020 (%) December 31, 2019 (%) TL 12.77 15.32 USD 6.46 6.55 EURO 5.09 5.10 GBP 6.56 6.65
17.15 Information on insurance contract balances in the financial statements
December 31, 2020 December 31, 2019
Reserve for unearned premiums, gross 51,049,895 57,623,982 Reserve for unearned premiums, ceded (Note 10) (3,574,236) (3,851,643) Reserves for unearned premiums, net 47,475,659 53,772,339
Provision for outstanding claims, gross 137,389,714 113,483,407 Provision for outstanding claims, ceded (Note 10) (10,786,917) (6,709,653) Provision for outstanding claims, net 126,602,797 106,773,754
Life mathematical provisions, gross 3,189,805,773 2,235,600,660 Life mathematical provisions, ceded (Note 10) (4,166,658) (3,803,491) Life mathematical provisions, net 3,185,639,115 2,231,797,169
Provision for bonus and discount, gross 478,198 757,405 Provision for bonus and discount, ceded (Note 10) (293,862) (365,948) Provision for bonus and discount, net 184,336 391,457
Reserve for unexpired risks, gross - - Reserve for unexpired risks, ceded (Note 10) - - Reserve for unexpired risks, net - -
Equalisation provision, gross 54,708,537 40,448,292 Equalisation provision, ceded (Note 10) (1,304,948) (1,014,229) Equalisation provision, net 53,403,589 39,434,063
Total insurance technical provisions, net 3,413,305,496 2,432,168,782
174 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
17.16 Factors resulting from individual insurance policies which provide portfolio
Factors resulting from individual insurance policies which provide portfolio increase through the change in mathematical provisions, gross for the periods January 1 - December 31, 2020 and January 1 - December 31, 2019 are as follows:
Mathematical provisions December 31, 2020 December 31, 2019 New policies issued 372,451,950 202,947,647 Activated from reductions 14,892,538 8,092,663 Activated from cancellations 2,228 - Contracts with increased capital 682,221,143 227,129,588 Total increase in the portfolio 1,069,567,859 438,169,898
Factors resulting from individual insurance policies which provide portfolio decrease through the change in mathematical provisions, gross for the periods January 1 - December 31, 2020 and January 1 - December 31, 2019 are as follows:
Mathematical provisions December 31, 2020 December 31, 2019 Terminations and cancellations (-) (559,680) (756,623) Transformed to contracts without charge (-) (68,730,666) (49,922,712) Insurances had capital decrease (-) (853,824) - Withdrawals (-) (108,581,050) (118,217,055) Ceased with risk formed (-) (5,777,376) (4,530,043) Expirations (-) (99,443,594) (19,508,942) Total decrease in the portfolio (283,946,190) (192,935,375)
Factors resulting from group insurance policies which provide portfolio increase through the change in mathematical provisions, gross for the period January 1 - December 31, 2020 and January 1 - December 31, 2019 are as follows:
Mathematical provisions December 31, 2020 December 31, 2019 New contracts 241,334,759 192,919,843 Activated from reductions 3,245 - Activated from cancellations - - Insurances had capital increase 20,331,861 6,111,359 Total increase in the portfolio 261,669,865 199,031,202
Factors resulting from group insurance policies which provide portfolio decrease through the change in mathematical provisions, gross for the periods January 1 - December 31, 2020 and January 1 - December 31, 2019 are as follows:
Mathematical provisions December 31, 2020 December 31, 2019 Terminations and cancellations (-) (1,033,026) (251,839) Transformed to contracts without charge (-) (456,806) (930,556) Insurances had capital decrease (-) (60,583,025) (41,025,736) Withdrawals (-) (106,208,050) (61,033,829) Ceased with risk formed (-) (800,046) (816,187) Expirations (-) (4,647,194) (3,673,288) Total decrease in the portfolio (173,728,147) (107,731,435)
17.17 Gain/losses resulted from reinsurance contracts and recognised in the income statement
Gain or losses resulted from reinsurance contracts and recognised in the income statement are disclosed in note 10 - Reinsurance assets, liabilities.
Anadolu Hayat Emeklilik 2020 Annual Report 175 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
17.18 Incurred claim development table
Incurred claim development table presented below provided cumulative payments of claims according to claim year and following years:
Claim year 2015 2016 2017 2018 2019 2020 Total Claim year 22,040,556 31,699,169 34,947,861 44,249,830 45,171,372 66,702,207 244,810,995 1 year later 13,955,576 14,179,090 14,090,104 16,952,810 20,969,774 - 80,147,354 2 years later 843,246 1,691,659 754,332 848,525 - - 4,137,762 3 years later 734,373 632,503 643,366 - - - 2,010,242 4 years later 496,782 281,718 - - - - 778,500 5 years later 328,888 - - - - - 328,888 Cumulative payments up to date 38,399,421 48,484,139 50,435,663 62,051,165 66,141,146 66,702,207 332,213,741 Payments for the period ended as of December 31, 2020(1) 328,888 281,718 643,366 848,525 20,969,774 66,702,207 89,774,478
(1) The claims paid includes death-disability termination and personal accident branch gross payments.
17.19 Effects of changes in the assumptions used in the measurement of insurance assets and liabilities, showing the effects of each change that has significant effect on the financial statements separately
Effects of changes in the assumptions used in the measurement of insurance assets and liabilities are disclosed in note 4 - Management of insurance risks.
18 Investment contracts
None.
19 Trade and other payables and deferred income
December 31, 2020 December 31, 2019
Payables from insurance operations 37,748,769 44,297,453 Cash deposited by insurance and reinsurance companies 5,563,279 4,479,832 Payables from pension activities 30,822,902,731 23,180,814,298 Net fund value of participants 30,434,759,762 22,913,666,145 Other 388,142,969 267,148,153 Other payables from main operations 4,401,183 4,142,951 Total payables from main operations 30,870,615,962 23,233,734,534
Due to shareholders 92,787 60,849 Due to personnel 61,036 33,290 Payables to other related parties 195 117 Total payables to related parties 154,018 94,256
Guarantees and deposits received 899,244 973,972 Other payables 20,794,004 31,821,827 Total other payables 21,693,248 32,795,799
Deferred commission income 378,719 327,171 Expense accruals 12,672,940 6,975,344 Other deferred income and expense accruals 683 683 Total deferred income and expense accruals 13,052,342 7,303,198
Total 30,905,515,570 23,273,927,787
20 Financial liabilities
Financial liabilities as at the reporting date are given in the note 34 - Financial costs.
176 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
21 Deferred tax
The Company recognises deferred tax assets and liabilities based upon temporary differences arising between its financial statements as reported for TFRS purposes and its statutory tax financial statements. These differences usually result in the recognition of revenue and expenses in different reporting periods for TFRS and tax purposes and they are given below.
Since the applicable tax rate has been changed to 22% for the 3 years beginning from January 1, 2018, 22% tax rate is used in the deferred tax calculation of December 31, 2020 for the temporary differences expected to be realized/closed within 3 years (for the years 2018, 2019 and 2020). However, since the corporate tax rate after 2020 is 20%, 20% tax rate is used for the temporary differences expected to be realized/closed after 2020.
Deferred tax (assets)/liabilities base: December 31, 2020 December 31, 2019
Difference in valuation of financial assets 54,765,364 16,882,920 Provision for employee termination benefits and other wages (43,277,882) (37,316,074) Provision for litigations and other provisions (1,538,905) (888,879) Equalisation reserves (53,403,589) (39,434,063) Bonus and discount provision (184,336) (391,457) TFRS 16 effect (6,491,211) (3,529,213) Infrastructure venture capital investment fund 20,650,000 - The difference arising from revaluation of investment properties 84,129,332 67,980,279 Differences in depreciation methods on tangible and intangible assets between tax regulations and the Reporting Standards 13,004,877 14,395,577 Provision for unused vacation pay liability (13,470,338) (10,848,853) Total 54,183,312 6,850,238
Deferred tax (assets)/liabilities: December 31, 2020 December 31, 2019
Difference in valuation of financial assets 10,953,073 3,380,208 Provision for employee termination benefits and other wages (8,655,576) (7,800,038) Provision for litigations and other provisions (307,781) (195,553) Equalisation reserves (10,680,718) (7,886,813) Bonus and discount provision (36,867) (78,291) TFRS 16 effect (1,298,242) (705,842) Infrastructure venture capital investment fund 4,130,000 - The difference arising from revaluation of investment properties 16,825,866 14,254,532 Differences in depreciation methods on tangible and intangible assets between tax regulations and the Reporting Standards 2,600,975 2,591,646 Provision for unused vacation pay liability (2,694,068) (2,386,748) Total 10,836,662 1,173,101
Movement of deferred tax assets/liabilities for the year ended as of December 31, 2020 and December 31, 2019 are given below:
Movement of deferred tax (assets)/liabilities: December 31, 2020 December 31, 2019
Opening balance at January 1 1,173,101 4,062,693 Recognised in profit or loss 6,367,535 (20,236,379) Recognised in equity 3,296,026 17,346,787 Closing balance 10,836,662 1,173,101
22 Retirement benefit obligations
Under the Turkish Labor Law, the Company is required to pay employment termination benefits to each employee who has qualified for such payment. Also, employees are entitled to retirement pay provisions subsequent to the completion of their retirement period by gaining a right to receive retirement payments in accordance with the amended Article 60 of the applicable Social Insurance Law No: 506 and the related Decrees No: 2422 and 4447 issued on March 6, 1981 and August 25, 1999, respectively. Some transitional provisions related to pre-retirement service term was excluded from the law since the related law was amended as of May 23, 2002. The termination benefit to be paid is subject to upper limit of TL 7,117.17 as at December 31, 2020 (December 31, 2019: TL 6.379,86).
The provision has been calculated by estimating the present value of the future probable obligation of the Company arising from the retirement of employees. TAS 19 “Employee Benefits” requires actuarial valuation methods to be developed to estimate the enterprise’s obligation under defined benefit plans. Accordingly, the following actuarial assumptions were used in the calculation of the total liability:
Anadolu Hayat Emeklilik 2020 Annual Report 177 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
The principal assumption is that the maximum liability for each year of service will increase parallel with inflation. Thus, the discount rate applied represents the expected real rate after adjusting for the anticipated effects of future inflation. Consequently, in the accompanying financial statements as at December 31, 2020, the provision has been calculated by estimating the present value of the future probable obligation of the Company arising from the retirement of the employees. The provisions at the respective reporting periods have been calculated assuming an annual inflation rate of 8% and a discount rate of 12.40%, resulting in a real discount rate of 4.07% (December 31, 2019: 7.20%, 11.70%, 4.20% respectively).
As at 31 December 2020 the Company has actuarial gain or loss difference in the calculation of employee termination benefit amounting to TL 2,659,362 (December 31, 2019: TL 2,573,778).
Movement of provision for employee termination benefits during the period is presented below:
December 31, 2020 December 31, 2019 Provision as at January 1 22,016,074 18,079,050 Interest cost 2,729,993 2,892,648 Service cost 2,354,256 2,040,198 Payments made during the year (3,581,803) (3,569,600) Actuarial gain and losses 2,659,362 2,573,778 Provision at the of the period/year 26,177,882 22,016,074
23 Other liabilities and provisions
As at December 31, 2020 and December 31, 2019; the details of the provisions for other risks are as follows:
December 31, 2020 December 31, 2019 Provision for unused vacation pay liability 13,470,338 10,848,853 Dividend to personnel and salary provision 17,100,000 15,300,000 Provision for commissions to sales personnel 2,100,000 2,000,000 Provision for litigations 530,675 755,785 Provision for commissions and expenses 1,008,230 133,095 Provisions for costs 34,209,243 29,037,733 Provision for employee termination benefits 26,177,882 22,016,074 Total provisions for other risks 60,387,125 51,053,807
24 Net insurance premium revenue
December 31, 2020 December 31, 2019
Non-life 591,066 542,357 Life 1,659,072,638 1,206,792,924 Total 1,659,663,704 1,207,335,281
25 Fee revenues
The details of fee revenues for the year ended as of December 31, 2020 and 2019 received from individual pension, life and non-life branches in accordance with TAS 18 are as follows:
December 31, 2020 December 31, 2019
Fund management income 368,730,550 304,264,809 Administrative cost deductions 76,875,084 58,862,051 Entrance fee 38,341,466 49,513,171 Administrative cost deduction in the form of cessation 21,610,394 14,661,983 Other technical income 725,196 418,018 Total 506,282,690 427,720,032
(*) The fund management fee made for management and representation of the fund and for expense deduction made for hardware, software, personnel and accounting services allocated to the fund was recognised in the “Fund management income” under technical income and the share of portfolio manager was recognised in the “Fund management expense” under technical expenses before 31.12.2019. After 31.12.2019 the share belonging to portfolio manager is paid directly by the related fund and is not recognised in the Company’s “Fund management expense” under technical expenses. Net income of the company from the fund management fee is recognised as “Fund management income” under technical income.
178 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
26 Investment income
December 31, 2020 December 31, 2019 Financial assets held-for-trading: Valuation gain 53,272,626 20,363,054 Gain on sale 2,543,063 12,825,144 Interest income - - Cash dividend income - 2,485 Financial assets available- for-sale: Interest income 141,477,092 120,358,091 Valuation gain 391,329,701 163,765,853 Gain on sale - 1,319,299 Cash dividend income 727,889 553,633 Income from associates: 4,272,000 4,272,000 Investment properties: Rent income 943,714 858,473 Valuation gain 32,520,000 7,625,114 Other income(1): 119,819,232 127,122,539 Total(2) 746,905,317 459,065,685
(1) Other income includes interest income from time deposits, income from derivative transactions, foreign exchange gains and etc. (2) TL 246,997,683 (December 31, 2019: TL 167,325,031) of investment income obtained from the Company’s own portfolio and TL 499,907,634 (December 31, 2019: TL 291,740,654) of investment income obtained from policyholders’ portfolio.
27 Net income accrual on financial assets
Net income accrual from the Company’s own portfolio is as follows:
December 31, 2020 December 31, 2019 Available-for-sale financial assets: Fair value differences recognised in equity 116,677,215 51,242,337 Fair value differences recognised in profit/loss 17,843,310 696,128 Total 134,520,525 51,938,465
28 Assets held at fair value through profit or loss
Net gain from financial assets classified as fair value difference is recognised to income statement as at December 31, 2020 is TL 55,815,689 (December 31, 2019: TL 33,190,683 net gain).
29 Insurance rights and claims
Details of insurance rights and claims are presented in statement of income.
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 - Operating expenses below.
32 Operating expenses
For the year ended as of December 31, 2020 and 2019, the details of operating expenses are as follows:
December 31, 2020 December 31, 2019
Production commission expenses (372,692,214) (285,314,203) Employee benefit expenses (186,034,275) (167,464,628) Administration expenses (74,863,576) (57,938,672) Marketing and sales expenses (30,537,164) (32,154,702) Outsourced benefits and services (30,372,286) (32,040,725) Reinsurance commission income 7,553,320 5,709,800 Other expenses (3,749,638) (4,130,214) Total (690,695,833) (573,333,344)
(*) As of January 1, 2019, rent expenses are recognised as “Investment Management Expenses (inc. interest)” and “Depreciation and Amortisation Expenses” within TFRS 16 The Leases Standard (Note 34)
Anadolu Hayat Emeklilik 2020 Annual Report 179 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
33 Employee benefit expenses
December 31, 2020 December 31, 2019
Wages and salaries 186,034,275 167,464,628 Employee termination benefits 1,502,446 1,363,246 Provision for unused vacation 2,621,485 1,996,495 Total 190,158,206 170,824,369
34 Financial costs
As at December 31, 2020, TL 10,797,861 interest expense (January 1 - December 31, 2019: 10,019,794) and TL 8,463,840 amortisation expense (January 1 - December 31, 2019: 8,689,412) arising from leases which are the subject to TFRS 16 Leases, are recognised as “Investment Management Expenses (inc, interest)” and “Depreciation and Amortisation Expenses” respectively in the accompanying unconsolidated financial statements.
As at December 31, 2020 discounted reimbursement plan for operating leases of the Company is as follows (December 31, 2019: 53,769,398):
Operating Leases Reimbursement Plan -TL December 31, 2020
Up to 1 Year 4,812,019 Up to 2 Years 4,641,240 Up to 3 Years 4,754,546 Up to 4 Years 5,208,263 Up to 5 Years 6,358,750 More than 5 years 28,916,001 Total 54,690,819
35 Income tax expense
December 31, 2020 December 31, 2019
Corporate tax liabilities: Corporate tax provision 136,125,818 119,305,000 Less: Corporation taxes paid in advances during the period (116,981,095) (87,456,742) Total 19,144,723 31,848,258
Total tax expense recognised in profit or loss
December 31, 2020 December 31, 2019
Current tax expense 128,336,961 119,305,000 Deferred tax expense/(income) 6,367,535 (20,236,379) Total 134,704,496 99,068,621
Total tax expense recognised in equity
December 31, 2020 December 31, 2019
Change in fair value of available for sale financial assets and owner occupied properties (5,570,897) (1,742,999) Actuarial gain and losses 2,917,430 2,385,558 Total deferred tax expense recognised in equity (2,653,467) 642,559
180 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Reconciliation of the Company’s taxation with period profit
December 31, 2020 December 31, 2019 Profit before tax 654,045,848 Tax rate (%) 456,603,446 Tax rate (%) Taxes on income per statutory tax rate (143,890,087) (22.00) (100,452,758) (22.00) Disallowable expenses (21,884,049) (3.35) (39,017,365) (8.55) Effect of allowances 31,069,640 4.75 40,401,502 8.85 Total tax expense recognised in profit or loss (134,704,496) (20.60) (99,068,621) (21.70)
36 Net foreign exchange gains
December 31, 2020 December 31, 2019
Foreign exchange gains 27,683,158 10,053,255 Foreign exchange losses (12,844,054) (5,563,894) Total 14,839,104 4,489,361
37 Earnings per share
Earnings per share is calculated by dividing net profit for the period to the weighted average number of shares.
December 31, 2020 December 31, 2019 For a share having TRKr (Kuruş) 1 of nominal value: Weighted average number of shares 43,000,000,000 43,000,000,000 Net profit for the period 519,341,352 357,534,825 Earnings per share (for 100 shares) 1.20777 0.83148
38 Dividends per share
The Company’s dividend distribution in 2020 from the profit of 2019 is presented below.
Cash dividend corresponding to a Total cash share having TL 1 of nominal value Group dividend amount (TL) Amount (TL) Rate (%) A 553,488,37 0.5534883 55.34883 Net B 237,446,511,63 0.5534883 55.34883 Total 238,000,000,00
The Company’s dividend distribution in 2020 from the profit of 2019 is TL 280,000,000. Additionally, TL 7,440,317 of dividend is distributed to the personnel of the Company.
39 Cash generated from operations
The cash flows from operating activities is presented in the accompanying 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 either under provision for outstanding claims or provisions for other risks in the accompanying financial statements.
As at December 31, 2020, there are 416 ongoing law suit filed against the Company and total amount of these law suits are TL 9,725,704, TL 20,713,280 of provision (December 31, 2019: TL 15,655,933) including interest expense for ongoing law suits for which cash outflow is probable and measurable reliably is set by the Company in the financial statements, There are 64 ongoing law suits prosecuted by the Company against the third parties that have amounted TL 6,442,558, Subsequent to the reporting period, there is no expected amount of law suits to be prosecuted against the Company.
Anadolu Hayat Emeklilik 2020 Annual Report 181 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
43 Commitments
Total amount of commitments that are not included in liabilities:
December 31, 2020 December 31, 2019
Guarantees and commitments 3,924,284 3,343,986 Guarantees and commitments 3,924,284 3,343,986
44 Business combinations
None.
45 Related party transactions a. Parent company’s name and the ultimate owner of the group
The Company’s parent is Türkiye İş Bankası AŞ with a 63.89% of share. b. In accordance with the Company’s activities, items of sub-classifications.
The activities of the Company 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. c. No expense is recognised in the related period for bad or doubtful debts in respect of the amounts owed by the shareholders, associates and subsidiaries. d. Details of associates and subsidiaries having indirect capital and management relations with the Company; names, amounts and rates of participations in the associates and subsidiaries; profit/loss for the period presented in the recent financial statements of such participations; net profit/loss for the period and period covered by the financial statements; information about whether these financial statements are prepared in accordance with the CMB standards; information about whether these financial statements are audited; details of the audit opinion (if the report includes unqualified, adverse or qualified opinion):
Participation Reporting Profit before Net profit of the Financial Independent Carrying amount rate (%) period income tax period statements base auditor’s opinion İş Portföy December 31, Yönetimi AŞ 12,762,193 20.0 2020 76,177,639 59,349,560 SPK XI/29 Unqualified e. Bonus shares obtained from associates or subsidiaries through internal resource capital increases
At the reporting date, the Company has obtained no bonus shares through capital increases in associates from profit or capital reserves. f. No guarantees, commitments, guarantee letters, advances and endorsements given in favor of shareholders, associates and subsidiaries. g. Related party disclosures
182 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
The related party balances as at December 31, 2020 and December 31, 2019 are as follows:
December 31, 2020 December 31, 2019
Türkiye İş Bankası AŞ - receivables from credit card collections 211,809,048 170,623,012 Cash and cash equivalents 211,809,048 170,623,012
Türkiye İş Bankası AŞ - bank deposits 86,871,301 217,710,555 Cash at banks 86,871,301 217,710,555
Türkiye İş Bankası AŞ - reverse repo 41,868,907 52,714,137 Reverse repo 41,868,907 52,714,137
Anadolu Anonim Türk Sigorta Şirketi - premium receivable - 68 Receivables from main operations - 68
Türkiye İş Bankası AŞ - commission payables 20,519,315 32,469,117 Milli Reasürans TAŞ - premium payables 954,220 1,289,981 Payable from main operations 21,473,535 33,759,098
Türkiye İş Bankası A.Ş. - settlement and custody commission 243 33 Türkiye İş Bankası A.Ş. - operating leases payables - 3,346,088 Anadolu Anonim Türk Sigorta Şirketi - operating leases payables 1,284,134 1,296,000 Anadolu Anonim Türk Sigorta Şirketi - premium payables 96,340 60,849 Payables to shareholders 1,380,717 4,702,970
İş Portföy Yönetimi A.Ş. - 3,989,219 İş Merkezleri Yönetim ve İşletim A.Ş. 280,331 285,388 İş Gayrimenkul Yatırım Ortaklığı A.Ş. (30) 43,583 İş Gayrimenkul Yatırım Ortaklığı A.Ş. - operating leases payables 64,891,957 66,505,809 İş Portföy Yönetimi A.Ş. Real Estate Investment Fund - operating leases payables 23,904,396 23,348,191 İş-Net Elektronik Bilgi Üretim Dağıtım Ticaret ve İletişim A.Ş. 96,256 92,793 Erişim Müşteri Hizmetleri A.Ş. 1,479,960 1,468,694 Softtech Yazılım Teknoloji Araştırma Geliştirme ve Pazarlama Ticaret A.Ş. 7,699 - Other payables 90,660,569 95,733,677
Anadolu Hayat Emeklilik 2020 Annual Report 183 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
In the current period in amount of TL 37,488,913 individual retirement employer contributions (December 31, 2019: TL 32,523,391) have been collected from related parties, in amount of TL 1,335,055 life insurance employer premium was accrual (December 31, 2019: TL 714,119).
The details of revenues and expenses for the year ended as of December 31, 2020 and 2019 stems from related parties are as follows:
December 31, 2020 December 31, 2019
Milli Reasürans TAŞ - premiums written, ceded 2,338,593 2,267,611 Premiums written, ceded 2,338,593 2,267,611
Milli Reasürans TAŞ - commission income from reinsurers 238,456 238,523 Commission income from reinsurers 238,456 238,523
Türkiye İş Bankası AŞ - interest income from deposits 18,156,948 15,097,349 Türkiye İş Bankası AŞ - rent income - 5,978 Türkiye İş Bankası AŞ - interest income from reverse repo 6,460,389 10,981,521 İş Yatırım Menkul Değerler AŞ - interest income from reverse repo 382 9,477 Investment income 24,617,719 26,094,325
İş Portföy Yönetimi AŞ - investment consultancy fee 2,832,000 2,129,310 İş Yatırım Menkul Değerler A.Ş. - settlement and custody expense 7,320 617 Türkiye İş Bankası AŞ - settlement and custody expense 24,867 17,158 Investment expense 2,864,187 2,147,085
Türkiye İş Bankası AŞ - commission of policy production 274,143,668 216,000,441 İş Portföy Yönetimi AŞ - portfolio management fee of pension funds(*) - 16,373,564 İş Merkezleri Yönetim ve İşletim A.Ş. - building administrative expense 5,305,340 5,039,270 İş Gayrimenkul Yatırım Ortaklığı AŞ - operating leases interest expense (TFRS 16 effect) 6,373,845 5,848,910 İş Gayrimenkul Yatırım Ortaklığı A.Ş. - other expenses 7,763,517 894,652 İş-Net Elektronik Bilgi Üretim Dağ. Tic. ve İletişim A.Ş. - communication expense 3,097,389 5,272,466 Erişim Müşteri Hizmetleri A.Ş. - call center service expense 16,676,654 18,073,491 Softtech Yazılım Teknoloji Araştırma Geliştirme ve Pazarlama Ticaret A.Ş - software support expense 210,727 49,251 Türkiye İş Bankası AŞ - commission of premium collection and banking services 2,144,865 1,811,339 Türkiye Iş Bankası AŞ - fund operation service expense 3,443,889 2,694,073 Türkiye Iş Bankası AŞ - operating leases interest expense (TFRS 16 effect) 278,502 284,852 Türkiye Iş Bankası AŞ - data storage expenses 1,388,224 387,161 Türkiye Iş Bankası AŞ - other expenses 16,433 7,823 İş Portföy Yönetimi A.Ş. Real Estate Investment Fund - operating leases interest expense (TFRS 16 effect) 2,436,959 2,202,493 Anadolu Anonim Türk Sigorta Şirketi - premium paid 7,637,204 4,470,899 Anadolu Anonim Türk Sigorta Şirketi - operating leases interest expense 120,726 212,104 Anadolu Anonim Türk Sigorta Şirketi - other expenses 50,898 87,066 Other expenses 331,088,840 279,709,855
(*) The fund management fee made for management and representation of the fund and for expense deduction made for hardware, software, personnel and accounting services allocated to the fund was recognised in the “Fund management income” under technical income and the share of portfolio manager was recognised in the “Fund management expense” under technical expenses before 31.12.2019. After 31.12.2019 the share belonging to portfolio manager is paid directly by the related fund and is not recognised in the Company’s “Fund management expense” under technical expenses.
46 Events after the reporting period
Events after the reporting period are disclosed in note 1.10 - Events after the reporting period.
184 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
47 Others
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
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 are as follows:
Current assets (Other receivables) December 31, 2020 December 31, 2019
Receivables from pension fund transections 138,939,396 37,109,651 Other 684,295 1,320,512 Total 139,623,691 38,430,163
Short-term liabilities (Other miscellaneous payables) December 31, 2020 December 31, 2019
Payable to suppliers 9,503,959 21,921,973 Suspense accounts 11,197,409 9,899,756 Securities reconciliation account 92,636 98 Total 20,794,004 31,821,827
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 immovable and their values
None.
Explanatory note for the amounts and nature of previous years’ income and losses
None.
For the six month period ended as of December 31, 2020 and 2019, details of discount and provision expenses are as follows:
December 31, 2020 December 31, 2019
Unused vacation pay liability (2,621,485) (1,996,495) Provision for employee termination benefits (1,502,446) (1,363,246) Provisions no longer required - 2,526,406 Other provision expenses (1,797,529) (5,618,303) Provision expenses (5,921,460) (6,451,638)
December 31, 2020 December 31, 2019
Rediscount interest expense(1) 123,811 100,794 Total rediscount 123,811 100,794
(1) Rediscount interest income/expense arising from selling the shares of AVEA İletişim Hizmetleri A.Ş. by instalment.
Anadolu Hayat Emeklilik 2020 Annual Report 185 INFORMATION ON CONSOLIDATED ASSOCIATE
Pursuant to the “Circular Related to the Preparation of the Consolidated Financial Statements of Insurance, Reinsurance, and Private Pension Companies” (“Consolidation Circular”) issued by the Turkish Treasury in the Official Gazette issue 27097 dated 31 December 2008, insurance, reinsurance and pension companies are obliged to publish consolidated financial statements besides unconsolidated financial statements.
Accordingly, our Company started drawing up consolidated financial statements as of 2010, taking into consideration the financial statements of İş Portföy Yönetimi A.Ş., which is the only associate of the Company, and using the equity method of accounting.
Founded in October 2000 as an associate of İşbank, İş Portföy Yönetimi A.Ş. offers asset management and investment advisory services to institutional investors.
General information on İş Portföy Yönetimi A.Ş. is presented in the below-given table.
Name Carrying Value Participation Reporting Period Profit for the Net Profit for the Financial Independent Rate (%) Period before Tax Period Statements Base Auditor’s Opinion İş Portföy Yönetimi A.Ş. 12,762,193 20 31 December 2020 76,177,639 59,349,560 SPK XI/29 Unqualified
Unconsolidated/Consolidated Summary Financial Data (TL thousand):
Financial statement items that show a different value due to consolidation are presented below with their unconsolidated and consolidated values
Unconsolidated Consolidated Associates 12,762 33,392 Financial Income 246,998 254,596 Pretax Profit 647,678 655,276 Shareholders’ Equity 1,581,264 1,601,893 Total Assets 36,067,123 36,087,753
186 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ DECEMBER 31, 2020 CONSOLIDATED FINANCIAL STATEMENTS TOGETHER WITH INDEPENDENT AUDITORS’ REVIEW REPORT THEREON (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish)
Anadolu Hayat Emeklilik 2020 Annual Report 187 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 İş ey.com Merkezi No: 27 Kat: 2-3-4 Ticaret Sicil No: 479920 34485 Sarıyer Mersis No: 0-4350-3032-6000017 İstanbul - Turkey
To the Shareholders of Anadolu Hayat Emeklilik Anonim Şirketi
A) Report on the Audit of the Consolidated Financial Statements
1) Opinion
We have audited the consolidated financial statements of Anadolu Hayat Emeklilik Anonim Şirketi (the Company), which comprise the consolidated statement of financial position as at December 31, 2020, and the consolidated statement of comprehensive income, consolidated statement of changes in equity, consolidated statement of cash flows and consolidated statement of profit distribution 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, 2020, and its consolidated financial performance, its consolidated cash flows and its consolidated profit distribution for the year then ended in accordance with the prevailing accounting principles and standards as per the insurance legislation and Turkish Financial Reporting Standards 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.
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, 2020, the Company has insurance liabilities of TL The audit procedures regarding the insurance contract liabilities were performed 3.413.305.496 representing 9% of the Company’s total liabilities. The with the use of an actuarial auditor, who is part of our team, and together with measurement of insurance contract liabilities involves judgement over uncertain manually calculated components of insurance contract liabilities, audit evidence future outcomes, mainly the ultimate total settlement value of long-term about key controls over calculation methods used by Company’s actuaries were liabilities, including those for guarantees provided to policyholders. obtained; reconciliation of input data related to the Company’s insurance contract liabilities with system and other source data was tested; Tariffs and profit sharing Liabilities related to life insurance group comprise of actuarial mathematical reserves which are components of Life group insurance contract liabilities reserves which are calculated according to formulas and principles given in were tested on calculation data by using sampling method and compliance of approved technical basis of tariffs and profit sharing reserves which consist of the explanatory information regarding to insurance contract liabilities with the profit sharing calculated in previous years and a certain percentage of current accounting and reporting regulations in force due to the insurance legislation was year’s income, determined in the approved profit sharing tariffs, including other reviewed. beneficiaries for the contracts which the Company is liable to give profit sharing.
Accounting policies and actuarial assumptions used for the mentioned insurance contract liabilities are explained in note 2 and 17. Given their magnitude in terms of financial statement and significant uncertainty of estimates containing, insurance contract liabilities has been considered as a key audit matter.
4) 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.
188 Anadolu Hayat Emeklilik 2020 Annual Report 5) 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 standards on auditing as issued by the Capital Markets Board of Turkey and 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.
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 Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group 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.
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 28, 2021. 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 2020 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
Seda Akkuş Tecer, SMMM Partner January 28, 2021 Istanbul, Turkey
Anadolu Hayat Emeklilik 2020 Annual Report 189 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED DECEMBER 31, 2020
We confirm that the consolidated financial statements and related disclosures and footnotes as at December 31, 2020 which were prepared in accordance with the accounting principles and standards in force as per the regulations of T.C. Hazine ve Maliye Bakanlığı 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.
Istanbul, January 28, 2021
Yılmaz Ertürk N. Cem Özcan C. Ozan Sezer Aslıhan Duymaz Member of the Board of Directors/ Chief Vice Chief Executive Officer Accounting Manager Actuary (Registration Number:61) Executive Officer
190 Anadolu Hayat Emeklilik 2020 Annual Report CONTENTS
PAGE CONSOLIDATED BALANCE SHEET 192 CONSOLIDATED STATEMENT OF INCOME 197 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 200 CONSOLIDATED STATEMENT OF CASH FLOWS 202 CONSOLIDATED STATEMENT OF PROFIT DISTRIBUTION 203 CONSOLIDATED NOTES TO THE FINANCIAL STATEMENT 204-266 NOTE 1 General information 204 NOTE 2 Summary of significant accounting policies 205 NOTE 3 Critical accounting estimates and judgments in applying accounting policies 219 NOTE 4 Management of insurance and financial risk 220 NOTE 5 Segment reporting 236 NOTE 6 Tangible assets 237 NOTE 7 Investment properties 238 NOTE 8 Intangible assets 239 NOTE 9 Investments in associates 239 NOTE 10 Reinsurance assets and liabilities 240 NOTE 11 Financial assets 241 NOTE 12 Loans and receivables 245 NOTE 13 Derivative financial instruments 246 NOTE 14 Cash and cash equivalents 246 NOTE 15 Equity 247 NOTE 16 Other reserves and equity component of DPF 248 NOTE 17 Insurance contract liabilities and reinsurance assets 249 NOTE 18 Investment contracts 255 NOTE 19 Trade and other payables and deferred income 256 NOTE 20 Financial liabilities 256 NOTE 21 Deferred tax 257 NOTE 22 Retirement benefit obligations 258 NOTE 23 Other liabilities and provisions 258 NOTE 24 Net insurance premium revenue 258 NOTE 25 Fee revenues 259 NOTE 26 Investment income 259 NOTE 27 Net income accrual on financial assets 259 NOTE 28 Assets held at fair value through profit or loss 259 NOTE 29 Insurance rights and claims 259 NOTE 30 Investment contract benefits 259 NOTE 31 Other expenses 260 NOTE 32 Operating expenses 260 NOTE 33 Employee benefit expenses 260 NOTE 34 Financial costs 260 NOTE 35 Income tax expense 261 NOTE 36 Net foreign exchange gains 261 NOTE 37 Earnings per share 261 NOTE 38 Dividends per share 262 NOTE 39 Cash generated from operations 262 NOTE 40 Convertible bonds 262 NOTE 41 Redeemable preference shares 262 NOTE 42 Risks 262 NOTE 43 Commitments 262 NOTE 44 Business combinations 263 NOTE 45 Related party transactions 263 NOTE 46 Events after the reporting period 265 NOTE 47 Others 266
Anadolu Hayat Emeklilik 2020 Annual Report 191 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ CONSOLIDATED BALANCE SHEET AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
ASSETS Audited Audited Current Period Prior Period I- Current Assets Note December 31, 2020 December 31, 2019 A- Cash and Cash Equivalents 14 666,497,704 656,922,735 1- Cash 14 104 219 2- Cheques Received - - 3- Banks 14 444,769,124 477,786,945 4- Cheques Given and Payment Orders 14 - - 5- Bank Guaranteed Credit Card Receivables with Maturities Less Than Three Months 14 221,728,476 179,135,571 6- Other Cash and Cash Equivalents - - B- Financial Assets and Financial Investments with Risks on Policyholders 11 4,294,235,244 3,064,282,042 1- Available-for-Sale Financial Assets 11 920,341,874 886,943,685 2- Held to Maturity Investments - - 3- Financial Assets Held for Trading 11 260,119,043 191,398,602 4- Loans and Receivables 11 360,254,858 52,714,137 5- Provision for Loans and Receivables - - 6- Financial Investments with Risks on Saving Life Policyholders 11 2,759,735,890 1,937,750,426 7- Company’s Own Equity Shares - - 8- Diminution in Value of Financial Investments 11 (6,216,421) (4,524,808) C- Receivables from Main Operations 12 30,604,323,752 23,051,046,800 1- Receivables from Insurance Operations 12 68,631,908 64,328,597 2- Provision for Receivables from Insurance Operations 12 (5,002,574) (5,002,574) 3- Receivables from Reinsurance Operations - - 4- Provision for Receivables from Reinsurance Operations - - 5- Cash Deposited to Insurance and Reinsurance Companies - - 6- Loans to the Policyholders 12 63,328,266 40,071,706 7- Provision for Loans to the Policyholders - - 8- Receivables from Individual Pension Operations 12 30,477,366,152 22,951,649,071 9- Doubtful Receivables from Main Operations 12 117,996 117,996 10- Provision for Doubtful Receivables from Main Operations 12 (117,996) (117,996) D- Due from Related Parties 12 - 12,413 1- Due from Shareholders - - 2- Due from Associates - - 3- Due from Subsidiaries - - 4- Due from Joint Ventures - - 5- Due from Personnel 12 - 12,413 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 12 139,807,221 38,467,083 1- Finance Lease Receivables - - 2- Unearned Finance Lease Interest Income - - 3- Deposits and Guarantees Given 183,530 160,731 4- Other Miscellaneous Receivables 47 139,623,691 38,430,163 5- Rediscount on Other Miscellaneous Receivables - (123,811) 6- Other Doubtful Receivables - - 7- Provision for Other Doubtful Receivables - - F- Prepaid Expenses and Income Accruals 4.2 60,454,977 49,478,060 1- Deferred Commission Expense 28,943,962 32,810,452 2- Accrued Interest and Rent Income 229,676 187,774 3- Income Accruals - - 4- Other Prepaid Expenses 31,281,339 16,479,834 G- Other Current Assets 4.2 19,808 17,048 1- Stocks to be Used in the Following Months - - 2- Prepaid Taxes and Funds 8,444 8,444 3- Deferred Tax Assets - - 4- Job Advances 11,364 8,604 5- Advances Given to Personnel - - 6- Inventory Count Differences - - 7- Other Miscellaneous Current Assets - - 8- Provision for Other Current Assets - - I- Total Current Assets 35,765,338,706 26,860,226,181
The accompanying notes are an integral part of these consolidated financial statements.
192 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ CONSOLIDATED BALANCE SHEET AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
ASSETS Audited Audited Current Period Prior Period II- Non-Current Assets Note December 31, 2020 December 31, 2019 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 - - 1- Finance Lease Receivables - - 2- Unearned Finance Lease Interest Income - - 3- Deposits and Guarantees Given - - 4- Other Miscellaneous Receivables - - 5- Rediscount on Other Miscellaneous Receivables - - 6- Other Doubtful Receivables - - 7- Provision for Other Doubtful Receivables - - D- Financial Assets 9,45.d 33,391,595 24,978,982 1- Investments in Equity Shares - - 2- Investments in Associates 9,45.d 33,391,595 24,978,982 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 267,372,838 242,224,002 1- Investment Properties 7 184,834,492 153,068,758 2- Impairment for Investment Properties - - 3- Owner Occupied Property 6 4,700,000 4,700,000 4- Machinery and Equipment 6 56,041,450 54,127,336 5- Furniture and Fixtures 6 6,443,616 5,943,075 6- Motor Vehicles 6 592,474 592,474 7- Other Tangible Assets (Including Leasehold Improvements) 6 16,537,182 14,111,319 8- Tangible Assets Acquired Through Finance Leases 6 65,590,343 59,463,348 9- Accumulated Depreciation 6 (67,366,719) (49,782,308) 10- Advances Paid for Tangible Assets (Including Construction in Progress) - - F- Intangible Assets 8 16,616,741 16,840,377 1- Rights 8 101,850,144 90,121,930 2- Goodwill - - 3- Pre-operating Expenses - - 4- Research and Development Costs - - 5- Other Intangible Assets - - 6- Accumulated Amortisation (Depreciation) 8 (85,233,403) (73,281,553) 7- Advances Paid for Intangible Assets - - G- Prepaid Expenses and Income Accruals 5,032,723 2,725,005 1- Deferred Commission Expense - - 2- Income Accruals - - 3- Other Prepaid Expenses and Income Accruals 5,032,723 2,725,005 H- Other Non-Current Assets - - 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 - - 6- Other Miscellaneous Non-Current Assets - - 7- Amortisation on Other Non-Current Assets - - 8- Provision for Other Non-Current Assets - - II- Total Non-Current Assets 322,413,897 286,768,366 TOTAL ASSETS 36,087,752,603 27,146,994,547
The accompanying notes are an integral part of these consolidated financial statements.
Anadolu Hayat Emeklilik 2020 Annual Report 193 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ CONSOLIDATED BALANCE SHEET AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
LIABILITIES Audited Audited Current Period Prior Period III- Short-Term Liabilities Note December 31, 2020 December 31, 2019 A- Financial Liabilities 20 4,812,019 4,999,036 1- Borrowings from Financial Institutions - - 2- Finance Lease Liabilities 20 14,985,424 14,952,011 3- Deferred Leasing Costs 20 (10,173,405) (9,952,975) 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 - - B- Payables Arising from Main Operations 19 30,870,615,962 23,233,734,534 1- Payables Arising from Insurance Operations 19 37,748,769 44,297,453 2- Payables Arising from Reinsurance Operations - - 3- Cash Deposited by Insurance and Reinsurance Companies 19,10 5,563,279 4,479,832 4- Payables Arising from Individual Pension Business 19 30,822,902,731 23,180,814,298 5- Payables Arising from Other Main Operations 4,401,183 4,142,951 6- Discount on Payables from Other Main Operations - - C- Due to Related Parties 19 154,018 94,256 1- Due to Shareholders 19,45 92,787 60,849 2- Due to Associates - - 3- Due to Subsidiaries - - 4- Due to Joint Ventures - - 5- Due to Personnel 19 61,036 33,290 6- Due to Other Related Parties 19 195 117 D- Other Payables 19 21,693,248 32,795,799 1- Deposits and Guarantees Received 19 899,244 973,972 2- Medical Treatment Payables to Social Security Institution - - 3- Other Miscellaneous Payables 19,47 20,794,004 31,821,827 4- Discount on Other Miscellaneous Payables - - E- Insurance Technical Provisions 17 3,413,305,496 2,432,168,782 1- Reserve for Unearned Premiums - Net 17 47,475,659 53,772,339 2- Reserve for Unexpired Risks - Net - - 3- Mathematical Provisions - Net 17 3,185,639,115 2,231,797,169 4- Provision for Outstanding Claims - Net 17 126,602,797 106,773,754 5- Provision for Bonus and Discounts - Net 184,336 391,457 6- Other Technical Provisions - Net 17 53,403,589 39,434,063 F- Provisions for Taxes and Other Similar Obligations 41,123,566 49,012,353 1- Taxes and Funds Payable 18,477,353 13,874,687 2- Social Security Premiums Payable 3,499,300 3,289,009 3- Overdue, Deferred or By Instalment Taxes and Other Liabilities - - 4- Other Taxes and Similar Payables 2,190 399 5- Corporate Tax Payable 35 136,125,818 119,305,000 6- Prepaid Taxes and Other Liabilities Regarding Current Period Income 35 (116,981,095) (87,456,742) 7- Provisions for Other Taxes and Similar Liabilities - - G- Provisions for Other Risks 23 34,209,243 29,037,733 1- Provision for Employee Termination Benefits - - 2- Provision for Pension Fund Deficits - - 3- Provisions for Costs 23 34,209,243 29,037,733 H- Deferred Income and Expense Accruals 19 13,052,342 7,303,198 1- Deferred Commission Income 19 378,719 327,171 2- Expense Accruals 19 12,672,940 6,975,344 3- Other Deferred Income and Expense Accruals 19 683 683 I- Other Short-Term Liabilities - - 1- Deferred Tax Liabilities - - 2- Inventory Count Differences - - 3- Other Various Short-Term Liabilities - - III - Total Short-Term Liabilities 34,398,965,894 25,789,145,691
The accompanying notes are an integral part of these consolidated financial statements.
194 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ CONSOLIDATED BALANCE SHEET AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
LIABILITIES Audited Audited Current Period Prior Period IV- Long-Term Liabilities Note December 31, 2020 December 31, 2019 A- Financial Liabilities 20 49,878,800 48,770,362 1- Borrowings from Financial Institutions - - 2- Finance Lease Liabilities 20 90,649,910 95,524,721 3- Deferred Leasing Costs 20 (40,771,110) (46,754,359) 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 Arising from Insurance Operations - - 2- Payables Arising from Reinsurance Operations - - 3- Cash Deposited by Insurance and Reinsurance Companies - - 4- Payables Arising from Individual Pension Business - - 5- Payables Arising from Other Operations - - 6- Discount 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 - - 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 - - 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 22,23 26,177,882 22,016,074 1- Provision for Employee Termination Benefits 22,23 26,177,882 22,016,074 2- Provision for Pension Fund Deficits - - H- Deferred Income and Expense Accruals - - 1- Deferred Commission Income - - 2- Expense Accruals - - 3- Other Deferred Income and Expense Accruals - - I- Other Long-Term Liabilities 21 10,836,662 1,173,101 1- Deferred Tax Liabilities 21 10,836,662 1,173,101 2- Other Long-Term Liabilities - - IV- Total Long-Term Liabilities 86,893,344 71,959,537
The accompanying notes are an integral part of these consolidated financial statements.
Anadolu Hayat Emeklilik 2020 Annual Report 195 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ CONSOLIDATED BALANCE SHEET AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
EQUITY Audited Audited Current Period Prior Period V- Equity Note December 31, 2020 December 31, 2019 A- Paid in Capital 2.13,15 430,000,000 430,000,000 1- (Nominal) Capital 2.13,15 430,000,000 430,000,000 2- Unpaid Capital - - 3- Positive Capital Restatement Differences - - 4- Negative Capital Restatement Differences - - 5- Register in Progress Capital - - B- Capital Reserves 5,680,764 4,190,243 1- Share Premiums - - 2- Cancellation Profits of Equity Shares - - 3- Profit on Assets Sale That Will Be Transferred to Capital 5,680,764 4,190,243 4- Currency Translation Adjustments - - 5- Other Capital Reserves - - C- Profit Reserves 537,075,154 391,559,270 1- Legal Reserves 15 200,873,197 173,916,965 2- Statutory Reserves 15 79,620,126 52,676,523 3- Extraordinary Reserves 15 122,005,563 120,044,612 4- Special Funds 20,650,000 - 5- Revaluation of Financial Assets 15,16 122,743,116 51,636,244 6- Other Profit Reserves 15 (8,816,848) (6,715,074) D- Retained Earnings 102,198,183 99,448,038 1- Retained Earnings 102,198,183 99,448,038 E- Accumulated Losses - - 1- Accumulated Losses - - F- Net Profit for the Period 526,939,264 360,691,768 1- Net Profit for the Period 526,585,134 338,595,846 2- Net Loss for the Period - - 3- Profit not Available for Distribution 354,130 22,095,922 V- Total Equity 1,601,893,365 1,285,889,319 TOTAL EQUITY AND LIABILITIES 36,087,752,603 27,146,994,547
The accompanying notes are an integral part of these consolidated financial statements.
196 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Audited Audited Current Period Prior Period I-TECHNICAL SECTION Note December 31, 2020 December 31, 2019 A- Non-Life Technical Income 5 591,910 548,127 1- Earned Premiums (Net of Reinsurer Share) 591,910 548,127 1.1- Written Premiums (Net of Reinsurer Share) 24 591,066 542,357 1.1.1- Written Premiums, gross 998,199 1,052,251 1.1.2- Written Premiums, ceded 10 (407,133) (509,894) 1.1.3- Premiums Transferred to Social Security Institutions - - 1.2- Change in Reserve for Unearned Premiums (Net of Reinsurer Shares and Less the Amounts Carried Forward) 844 (12,740) 1.2.1- Reserve for Unearned Premiums, gross (16,528) (36,012) 1.2.2- Reserve for Unearned Premiums, ceded 10 17,372 23,272 1.2.3- Reserve for Unearned Premiums, Social Security Institution Share - - 1.3- Change in Reserve for Unexpired Risks (Net of Reinsurer Share and Less the Amounts Carried Forward) - 18,510 1.3.1- Reserve for Unexpired Risks, gross - 28,897 1.3.2- Reserve for Unexpired Risks, ceded - (10,387) 2- Investment Income - Transferred from Non-Technical Section - - 3- Other Technical Income (Net of Reinsurer Share) - - 3.1- Other Technical Income, gross - - 3.2- Other Technical Income, ceded - - 4- Accrued Salvage and Subrogation Income - - B- Non-Life Technical Expense 5 (1,521,624) (1,573,382) 1- Incurred Losses (Net of Reinsurer Share) (218,820) (346,843) 1.1- Claims Paid (Net of Reinsurer Share) (162,654) (232,322) 1.1.1- Claims Paid, gross (230,842) (262,148) 1.1.2- Claims Paid, ceded 10 68,188 29,826 1.2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward) (56,166) (114,521) 1.2.1- Change in Provisions for Outstanding Claims, gross (6,290) (132,037) 1.2.2- Change in Provisions for Outstanding Claims, ceded 10 (49,876) 17,516 2- Change in Provision for Bonus and Discounts (Net of Reinsurer and Less the Amounts Carried Forward) (38,208) (96) 2.1- Provision for Bonus and Discounts, gross (40,206) 4,039 2.2- Provision for Bonus and Discounts, ceded 1,998 (4,135) 3- Change in Other Technical Reserves (Net of Reinsurer Share and Less the Amounts Carried Forward) (20,288) (10,240) 4- Operating Expenses 32 (1,244,308) (1,216,203) 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) - - 6.1- Change in Other Technical Provisions, gross - - 6.2- Change in Other Technical Provisions, ceded - - C- Net Technical Income-Non-Life (A - B) (929,714) (1,025,255) D- Life Technical Income 5 2,179,293,930 1,493,819,611 1- Earned Premiums (Net of Reinsurer Share) 1,665,368,474 1,193,744,545 1.1- Written Premiums (Net of Reinsurer Share) 24 1,659,072,638 1,206,792,924 1.1.1- Written Premiums. gross 1,684,083,168 1,229,029,128 1.1.2- Written Premiums. ceded 10 (25,010,530) (22,236,204) 1.2- Change in Reserve for Unearned Premiums (Net of Reinsurer Shares and Less the Amounts Carried Forward) 6,295,836 (13,048,379) 1.2.1- Reserve for Unearned Premiums. gross 6,590,615 (13,885,169) 1.2.2- Reserve for Unearned Premiums. ceded 10 (294,779) 836,790 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 26 499,907,634 291,740,654 3- Unrealised Gains on Investments - - 4- Other Technical Income (Net of Reinsurer Share) 14,017,822 8,334,412 4.1- Other Technical Income. gross 14,017,822 8,334,412 4.2- Other Technical Income. ceded - - 5- Accrued Salvage Income - -
The accompanying notes are an integral part of these consolidated financial statements.
Anadolu Hayat Emeklilik 2020 Annual Report 197 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Audited Audited Current Period Prior Period I- TECHNICAL SECTION Note December 31, 2020 December 31, 2019 E- Life Technical Expense 5 (1,851,680,989) (1,229,741,045) 1- Incurred Losses (Net of Reinsurer Share) (596,648,802) (597,008,631) 1.1- Claims Paid (Net of Reinsurer Share) (571,191,067) (572,323,682) 1.1.1- Claims Paid, gross (579,981,710) (583,093,822) 1.1.2- Claims Paid, ceded 10 8,790,643 10,770,140 1.2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward) (25,457,735) (24,684,949) 1.2.1- Change in Provisions for Outstanding Claims, gross (29,627,117) (27,001,309) 1.2.2- Change in Provisions for Outstanding Claims, ceded 10 4,169,382 2,316,360 2- Change in Provision for Bonus and Discounts (Net of Reinsurer and Less the Amounts Carried Forward) 245,329 18,792 2.1- Provision for Bonus and Discounts, gross 319,412 581,948 2.2- Provision for Bonus and Discounts, ceded (74,083) (563,156) 3- Change in Life Mathematical Provisions (Net of Reinsurer Share and Less the Amounts Carried Forward) (873,200,220) (335,824,825) 3.1- Change in Life Mathematical Provisions, gross (873,563,387) (336,534,290) 3.1.1- Change in Actuarial Mathematical Provisions, gross (758,232,968) (284,505,220) 3.1.2- Change in Profit Share Provisions (Provision for Financial Investments with Risks on Saving Life Policyholders), gross (115,330,419) (52,029,070) 3.2- Change in Life Mathematical Provisions, ceded 10 363,167 709,465 3.2.1- Change in Actuarial Mathematical Provisions, ceded 363,167 709,465 3.2.2- Change in Profit Share Provisions (Provision for Financial Investments with Risks on Saving Life Policyholders). ceded - - 4- Change in Other Technical Provisions (Net of Reinsurer and Less the Amounts Carried Forward) (13,949,238) (11,699,233) 5- Operating Expenses 32 (368,128,058) (285,227,148) 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) 327,612,941 264,078,566 G- Pension Business Technical Income 5,25 506,282,690 427,720,032 1- Fund Management Income 25 368,730,550 304,264,809 2- Management Fee 25 76,875,084 58,862,051 3- Entrance Fee Income 25 38,341,466 49,513,171 4- Management Expense Charge in case of Suspension 25 21,610,394 14,661,983 5- Income from Individual Service Charges - - 6- Increase in Value of Capital Allowances Given as Advance - - 7- Other Technical Expense 25 725,196 418,018 H- Pension Business Technical Expense 5 (360,755,917) (337,039,910) 1- Fund Management Expense (12,673,070) (27,174,746) 2- Decrease in Value of Capital Allowances Given as Advance - - 3- Operating Expenses 32 (321,323,467) (286,889,993) 4- Other Technical Expenses (25,079,317) (20,672,907) 5- Fine Payments (1,680,063) (2,302,264) I- Net Technical Income -Pension Business (G -H) 145,526,773 90,680,122
The accompanying notes are an integral part of these consolidated financial statements.
198 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Audited Audited Current Period Prior Period II-NON-TECHNICAL SECTION Note December 31, 2020 December 31, 2019 C- Net Technical Income - Non-Life (A-B) (929,714) (1,025,255) F- Net Technical Income - Life (D-E) 327,612,941 264,078,566 I - Net Technical Income - Pension Business (G-H) 145,526,773 90,680,122 J- Total Net Technical Income (C+F+I) 472,210,000 353,733,433 K- Investment Income 26 254,595,595 170,481,974 1- Income from Financial Assets 108,429,056 98,075,472 2- Income from Disposal of Financial Assets 9,739,740 25,045,421 3- Valuation of Financial Assets 58,888,029 16,533,659 4- Foreign Exchange Gains 36 27,683,158 10,053,255 5- Income from Associates 26 11,869,912 7,428,943 6- Income from Subsidiaries and Joint Ventures - - 7- Income from Property, Plant and Equipment 7,26 33,463,714 8,483,587 8- Income from Derivative Transactions - - 9- Other Investments 26 4,521,986 4,861,637 10- Income Transferred from Life Section - - L- Investment Expense (58,836,450) (57,853,096) 1- Investment Management Expenses (inc. interest) (14,630,491) (14,681,714) 2- Diminution in Value of Investments - (225,114) 3- Loss from Disposal of Financial Assets (7,493) (305,979) 4- Investment Income Transferred to Non-Life Technical Section - - 5- Loss from Derivative Transactions - - 6- Foreign Exchange Losses 36 (12,844,054) (5,563,894) 7- Depreciation and Amortisation Expenses 5 (31,354,412) (37,076,395) 8- Other Investment Expenses - - M- Income and Expenses From Other and Extraordinary Operation (12,692,920) 13,634,457 1- Provisions 47 (5,921,460) (6,451,638) 2- Rediscounts 47 123,811 100,794 3- Specified Insurance Accounts - - 4- Monetary Gains and Losses - - 5- Deferred Taxation (Deferred Tax Assets) 21 (6,367,535) 20,236,379 6- Deferred Taxation (Deferred Tax Liabilities) - - 7- Other Income 267,964 886,689 8- Other Expenses and Losses (795,700) (1,137,767) 9- Prior Year’s Income - - 10- Prior Year’s Expenses and Losses - - N- Net Profit for the Period 37 526,939,264 360,691,768 1- Profit for the Period 655,276,225 479,996,768 2- Corporate Tax Provision and Other Fiscal Liabilities 35 (128,336,961) (119,305,000) 3- Net Profit for the Period 37 526,939,264 360,691,768 4- Monetary Gains and Losses - -
The accompanying notes are an integral part of these consolidated financial statements.
Anadolu Hayat Emeklilik 2020 Annual Report 199 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Audited - Changes in Equity - December 31, 2019 Audited - Changes in Equity - December 31, 2019 Paid-in Own Shares of the Revaluation of Inflation Currency Translation Legal Statutory Other Reserves and Net Profit Retained Note Capital Company Financial Assets Adjustments Adjustments Reserves Reserves Retained Earnings for the Period Earnings Total I - Balance at the end of the year period - December 31, 2018 430,000,000 - (56,447,893) - - 156,456,501 32,870,889 32,791,100 254,663,182 98,747,310 949,081,089 II - Change in Accounting Standards ------III - Restated balances (I+II) - January 1, 2019 430,000,000 - (56,447,893) - - 156,456,501 32,870,889 32,791,100 254,663,182 98,747,310 949,081,089 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 ------(2,086,298) - - (2,086,298) D- Change in the value of financial assets 15 - - 108,084,137 ------108,084,137 E- Currency translation adjustments ------F- Other gains or losses 15 ------44,080 5,499,269 700,728 6,244,077 G- Inflation adjustment differences ------H- Net profit for the period ------360,691,768 - 360,691,768 I - Dividends paid 38 ------(136,125,454) - (136,125,454) J - Transfers from retained earnings 15 - - - - - 17,460,464 19,805,634 86,770,899 (124,036,997) - - IV - Balance at the end of the period - December 31, 2019 430,000,000 - 51,636,244 - - 173,916,965 52,676,523 117,519,781 360,691,768 99,448,038 1,285,889,319
Audited -Changes in Equity - December 31, 2020 Audited -Changes in Equity - December 31, 2020 Paid-in Own Shares of the Revaluation of Inflation Currency Translation Legal Statutory Other Reserves and Net Profit Retained Note Capital Company Financial Assets Adjustments Adjustments Reserves Reserves Retained Earnings for the Period Earnings Total I - Balance at the end of the year period - December 31, 2019 430,000,000 - 51,636,244 - - 173,916,965 52,676,523 117,519,781 360,691,768 99,448,038 1,285,889,319 II - Change in Accounting Standards ------III - Restated balances (I+II) - January 1, 2020 430,000,000 - 51,636,244 - - 173,916,965 52,676,523 117,519,781 360,691,768 99,448,038 1,285,889,319 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 ------(2,101,774) - - (2,101,774) D- Change in the value of financial assets 15 - - 71,106,872 ------71,106,872 E- Currency translation adjustments ------F- Other gains or losses 15 ------4,705,257 2,794,744 7,500,001 G- Inflation adjustment differences ------H- Net profit for the period ------526,939,264 - 526,939,264 I - Dividends paid 38 ------(287,440,317) - (287,440,317) J - Transfers from retained earnings 15 - - - - - 26,956,232 26,943,603 24,101,472 (77,956,708) (44,599) - IV - Balance at the end of the period - December 31, 2020 430,000,000 - 122,743,116 - - 200,873,197 79,620,126 139,519,479 526,939,264 102,198,183 1,601,893,365
The accompanying notes are an integral part of these consolidated financial statements.
200 Anadolu Hayat Emeklilik 2020 Annual Report Audited - Changes in Equity - December 31, 2019 Audited - Changes in Equity - December 31, 2019 Paid-in Own Shares of the Revaluation of Inflation Currency Translation Legal Statutory Other Reserves and Net Profit Retained Note Capital Company Financial Assets Adjustments Adjustments Reserves Reserves Retained Earnings for the Period Earnings Total I - Balance at the end of the year period - December 31, 2018 430,000,000 - (56,447,893) - - 156,456,501 32,870,889 32,791,100 254,663,182 98,747,310 949,081,089 II - Change in Accounting Standards ------III - Restated balances (I+II) - January 1, 2019 430,000,000 - (56,447,893) - - 156,456,501 32,870,889 32,791,100 254,663,182 98,747,310 949,081,089 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 ------(2,086,298) - - (2,086,298) D- Change in the value of financial assets 15 - - 108,084,137 ------108,084,137 E- Currency translation adjustments ------F- Other gains or losses 15 ------44,080 5,499,269 700,728 6,244,077 G- Inflation adjustment differences ------H- Net profit for the period ------360,691,768 - 360,691,768 I - Dividends paid 38 ------(136,125,454) - (136,125,454) J - Transfers from retained earnings 15 - - - - - 17,460,464 19,805,634 86,770,899 (124,036,997) - - IV - Balance at the end of the period - December 31, 2019 430,000,000 - 51,636,244 - - 173,916,965 52,676,523 117,519,781 360,691,768 99,448,038 1,285,889,319
Audited -Changes in Equity - December 31, 2020 Audited -Changes in Equity - December 31, 2020 Paid-in Own Shares of the Revaluation of Inflation Currency Translation Legal Statutory Other Reserves and Net Profit Retained Note Capital Company Financial Assets Adjustments Adjustments Reserves Reserves Retained Earnings for the Period Earnings Total I - Balance at the end of the year period - December 31, 2019 430,000,000 - 51,636,244 - - 173,916,965 52,676,523 117,519,781 360,691,768 99,448,038 1,285,889,319 II - Change in Accounting Standards ------III - Restated balances (I+II) - January 1, 2020 430,000,000 - 51,636,244 - - 173,916,965 52,676,523 117,519,781 360,691,768 99,448,038 1,285,889,319 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 ------(2,101,774) - - (2,101,774) D- Change in the value of financial assets 15 - - 71,106,872 ------71,106,872 E- Currency translation adjustments ------F- Other gains or losses 15 ------4,705,257 2,794,744 7,500,001 G- Inflation adjustment differences ------H- Net profit for the period ------526,939,264 - 526,939,264 I - Dividends paid 38 ------(287,440,317) - (287,440,317) J - Transfers from retained earnings 15 - - - - - 26,956,232 26,943,603 24,101,472 (77,956,708) (44,599) - IV - Balance at the end of the period - December 31, 2020 430,000,000 - 122,743,116 - - 200,873,197 79,620,126 139,519,479 526,939,264 102,198,183 1,601,893,365
Anadolu Hayat Emeklilik 2020 Annual Report 201 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Audited Audited Current Period Prior Period Note December 31, 2020 December 31, 2019 A. Cash flows from operating activities 1. Cash provided from insurance activities 1,675,955,915 1,011,053,647 2. Cash provided from reinsurance activities 1,083,447 425,122 3. Cash provided from individual pension business 595,094,171 402,513,328 4. Cash used in insurance activities (579,981,710) (210,698,038) 5. Cash used in reinsurance activities - - 6. Cash used in individual pension business (333,196,046) (366,174,495) 7. Cash provided by/(used in) operating activities 1,358,955,777 837,119,564 8. Interest paid - - 9. Income taxes paid (148,829,353) (107,482,874) 10. Other cash inflows 322,740,193 164,288,940 11. Other cash outflows (99,972,183) (180,540,806) 12. Net cash provided by operating activities 1,432,894,434 713,384,824 B. Cash flows from/(used in) investing activities 1. Proceeds from disposal of tangible assets 4,521,986 3,798,622 2. Acquisition of tangible assets 6,7.8 (18,171,456) (18,373,707) 3. Acquisition of financial assets (1,395,741,933) (1,006,922,828) 4. Proceeds from disposal of financial assets 32,225,057 626,136,367 5. Interests received 216,598,763 218,181,004 6. Dividends received 4,999,889 4,828,118 7. Other cash inflows 398,473,524 40,857,112 8. Other cash outflows (100,605,182) (497,273,490) 9. Net cash used in investing activities (857,699,352) (628,768,802) C. Cash flows from/(used in) financing activities - - 1. Equity shares issued - - 2. Cash provided from loans and borrowings - - 3. Finance lease payments - - 4. Dividends paid 38 (287,440,317) (136,125,454) 5. Other cash inflows - - 6. Other cash outflows - - 7. Net cash used in financing activities (287,440,317) (136,125,454) D. Effect of exchange rate fluctuations on cash and cash equivalents - - E. Net decrease in cash and cash equivalents 287,754,765 (51,509,432) F. Cash and cash equivalents at the beginning of the period 14 286,581,598 338,091,030 G. Cash and cash equivalents at the end of the period 14 574,336,363 286,581,598
The accompanying notes are an integral part of these consolidated financial statements.
202 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ CONSOLIDATED STATEMENT OF PROFIT DISTRIBUTION FOR THE YEAR ENDED DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Audited Audited Current Period Prior Period Note December 31, 2020(3) December 31, 2019 I. DISTRIBUTION OF THE PERIOD PROFIT 1.1. PERIOD PROFIT(1) 663,336,745 465,400,846 1.2. TAXES AND DUTIES PAYABLE (128,336,961) (119,305,000) 1.2.1. Corporate Tax (Income Tax) (128,336,961) (119,305,000) 1.2.2. Income Tax Deductions - - 1.2.3. Other Taxes and Legal Duties - - A. CURRENT PERIOD PROFIT (1.1 - 1.2) 534,999,784 346,095,846 1.3. ACCUMULATED LOSSES (-) - - 1.4. FIRST LEGAL RESERVES (-)(2) - - 1.5. OTHER STATUTORY RESERVES (-) - - B. NET PROFIT AVAILABLE FOR DISTRIBUTION [(A - (1.3 + 1.4 + 1.5)] 534,999,784 346,095,846 1.6. FIRST DIVIDEND TO SHAREHOLDERS (-) - (69,219,499) 1.6.1. To owners of ordinary shares - (69,219,499) 1.6.2. To owners of privileged shares - - 1.6.3. To owners of redeemed shares - - 1.6.4. To holders profit sharing bonds - - 1.6.5. To holders of profit and loss sharing certificates - - 1.7. DIVIDENDS TO PERSONNEL (-) - (7,440,317) 1.8. DIVIDENDS TO BOARD OF DIRECTORS (-) - - 1.9. DIVIDENDS TO FOUNDERS - 1.10. SECOND DIVIDEND TO SHAREHOLDERS (-) - (210,780,501) 1.10.1. To owners of ordinary shares - (210,780,501) 1.10.2. To owners of privileged shares - - 1.10.3. To owners of redeemed shares - - 1.10.4. To holders profit sharing bonds - - 1.10.5. To holders of profit and loss sharing certificates - - 1.11. SECOND LEGAL RESERVES (-) - (26,594,032) 1.12. STATUTORY RESERVES(-) - (26,943,603) 1.13. EXTRAORDINARY RESERVES - (5,117,894) 1.14. OTHER RESERVES - - 1.15. SPECIAL FUNDS - - II. DISTRIBUTION OF RESERVES - - 2.1. APPROPRIATED RESERVES - - 2.2. SECOND LEGAL RESERVES (-) - - 2.3. DIVIDENDS TO SHAREHOLDERS (-) - - 2.3.1. To owners of ordinary shares - - 2.3.2. To owners of privileged shares - - 2.3.3. To owners of redeemed shares - - 2.3.4. To holders of profit sharing bonds - - 2.3.5. To holders of profit and loss sharing certificates - - 2.4. DIVIDENDS TO PERSONNEL (-) - - 2.5. DIVIDENDS TO BOARD OF DIRECTORS (-) - - III. EARNINGS PER SHARE - - 3.1. TO OWNERS OF ORDINARY SHARES 1.24419 0.55349 3.2. TO OWNERS OF ORDINARY SHARES (%) 124.419 55.349 3.3. TO OWNERS OF PRIVILEGED SHARES 1.24419 0.55349 3.4. TO OWNERS OF PRIVILEGED SHARES (%) 124.419 55.349 IV. DIVIDEND PER SHARE - 4.1. TO OWNERS OF ORDINARY SHARES - - 4.2. TO OWNERS OF ORDINARY SHARES (%) - - 4.3. TO OWNERS OF PRIVILEGED SHARES - - 4.4. TO OWNERS OF PRIVILEGED SHARES (%) - -
(1) Consolidated current year profit is used for profit distribution according to the article 13 of the “Profit Share Guidebook” issued by the Capital Markets Board on 23 January 2014 dated. Provision for dividend expense amounting to TL 8,400,000 is added to the profit for the year ended December 31, 2020 according to TAS 19 Employee Benefits. Besides TL 354,130 amounting the 75% of TL 472,173 which was gained from the sales profit of equities in 2020 are not subjected to profit distribution within the relevant legislation. (2) In accordance with the relevant article of Association of the Company 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. Due to reaching this limit first legal reserve has not been allocated. (3) As of the reporting date, the General Assembly Meeting has not been held, therefore only distributable net profit is presented in the 2020 profit distribution table above.
The accompanying notes are an integral part of these consolidated financial statements.
Anadolu Hayat Emeklilik 2020 Annual Report 203 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
1. General information
1.1 Name of the Company and the ultimate owner of the group
Anadolu Hayat Emeklilik Anonim Şirketi (the “Company”) has been operating since May 31, 1990 and the shareholding structure of the Company is presented below. As at December 31, 2020, the shareholder having direct or indirect control over the shares of the Company is Türkiye İş Bankası AŞ (“İş Bankası”) by 84.89% of the outstanding shares of the Company.
December 31, 2020 December 31, 2019 Shareholding Shareholding Shareholding Shareholding Name amount (TL) rate (%) amount (TL) rate (%)
Türkiye İş Bankası AŞ(1) 274,743,069 63.89 274,742,830 63.89 Anadolu Anonim Türk Sigorta Şirketi 86,000,000 20.00 86,000,000 20.00 Milli Reasürans TAŞ 4,299,999 1.00 4,299,999 1.00 Publicly traded 64,956,932 15.11 64,957,171 15.11 Paid in capital 430,000,000 100.00 430,000,000 100.00
(1) The rate of publicly traded shares is 17%. As at December 31, 2020, Türkiye İş Bankası AŞ. owns the 1.89% of the publicly traded shares.
1.2 Domicile and the legal structure of the Company, country and the address of the registered office (address of the operating center if it is different from the registered office)
The Company was registered in Turkey and has the status of ‘Incorporated Company’ in accordance with the regulations of Turkish Commercial Code. The address of the Company’s registered office is Meltem Sokak No: 10 İş Kuleleri Kule: 2 Kat: 16, Levent 34330 Beşiktaş/İstanbul.
1.3 Business of the Company
The activities of the Company 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.
As at December 31, 2020, the Company has 34 individual pension investment funds (December 31, 2019: 34).
1.4 Description of the main operations of the Company
The Company issues policies in insurance branches specified in the above note 1.3 - Business of the Company and contracts in individual pension business by conducting it operations in accordance with the Insurance Law No. 5684 (the “Insurance Law”) issued on June 14, 2007 dated and 26552 numbered Official Gazette and Individual Pension Savings and Investment System Law No. 4632 (the “Individual Pension Law”) and other communiqués and regulations in force issued by the Ministry of Treasury and Finance of the Turkish Republic (the “Ministry”) based on the Insurance Law and the Individual Pension Law.
The Company’s shares are listed on the Borsa Istanbul (“BIST”). In accordance with Article 136 (5) in Section VIII of the Capital Markets Law, 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 performs its operations accordingly.
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, 2020 December 31, 2019
Senior level managers 7 7 Directors 150 142 Officers 403 420 Sales personnel 496 506 Other 10 11 Total 1,066 1,086
1.6 Wages and similar benefits provided to the senior management
For the year ended as of December 31, 2020, wages and similar benefits provided to the senior management including chairman, members of the board of the directors, general manager, and deputy general managers amounted to TL 7,384,995 (December 31, 2019: TL 7,207,988).
204 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
1.7 Explanation about the distribution of investment income and operating expenses (personnel expenses, administrative expenses, research and development expenses, marketing and selling expenses, and expenses for the services bought from third parties) in the financial statements
Procedures and principles related to keys used in the financial statements of the companies are determined in accordance with the January 4, 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 Ministry. In accordance with the above mentioned Communiqué, known and exactly distinguishable operating expenses are directly recorded under life, non-life or individual pension segments. Other non-distinguishable expenses, which are not exactly distinguished, are distributed between insurance segments and individual pension segment in accordance with the number of policies and contracts at the end of last 3 years and arithmetic average of contribution premium and earned premium within the last 3 years in accordance with the August 9, 2010 dated and 2010/9 numbered “Amendments 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 Ministry. Amendment is effective from January 1, 2011. The portion of insurance segments calculated as described above is distributed between life and non-life branches in accordance with the average of 3 ratios calculated by dividing “number of the policies produced within the last three years”, “gross premiums 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.
Income from the assets invested against mathematical and profit sharing provisions is recorded under technical section, remaining income is transferred to the non- technical section.
As at the reporting period, distribution of the operating expense between life, non-life and pension branches is presented in note 5 - Segment distribution.
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 consolidated financial information of the Company and information regarding the basis of consolidation has been detailed in note 2.2 - Consolidation.
In the capital’s 20% share of the business portfolio of the company with the subsidiary in position management, Inc.’s (the “İş Portföy”) as of the date of the financial statements December 31, 2020 prepared by the equity method have been consolidated. İş Portföy Registered with the Istanbul trade registry on October 23, 2000 and November 6, 2000, dated and published in the Turkish trade registry Gazette No. 5168 was established by the purpose, 3794, law and other relevant legislation in accordance with the provisions of capital market Law No. 2499 differs by the company specified in the articles of association of capital market activities. İş Portföy, capital market law and other relevant legislation under the provisions of a portfolio of capital market instruments, the portfolio management agreement with clients are managed by a trustee. Also within the scope of portfolio management business portfolio of domestic and foreign investment funds, investment companies and investment partnerships and similar initiatives with domestic and foreign private persons and legal entities in accordance with the provisions of the legislation of the portfolio also manages. In addition, İş Portföy, provides investment advisory services.
1.9 Name or other identity information about the reporting entity and the changes in this information after previous reporting period
Trade name of the Company : Anadolu Hayat Emeklilik Anonim Şirketi Registered address of the head office : Meltem Sokak No: 10 İş Kuleleri Kule: 2 Kat: 16 Levent 34330 Beşiktaş/İstanbul The web page of the Company : www.anadoluhayat.com.tr E-mail address of the Company : [email protected] Phone : 0212 317 70 70 Fax : 0212 317 70 77
There has been no change in the aforementioned information subsequent to the previous reporting period.
1.10 Events after the reporting period
Consolidated financial statements prepared for the period ended as of December 31, 2020 was approved by Board of Directors on January 28, 2021.
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
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 Ministry based on Article 18 of the Insurance Law.
In Article 4 of related communiqué; insurance contracts, subsidiaries, jointly controlled partnerships and subsidiaries consolidated financial statements and the accounting, financial statements and footnotes to be announced publicly relating to the regulation of procedures and principles determined by the Ministry stated that it would be issued with communiqué.
Comparative financial statements with prior period and other companies’ financial statements provided that regulated to content and form of financial statements of companies which were published as “Communiqué on Presentation of Financial Statements” in Official Gazette April 18, 2008 dated and 26851 numbered.
Anadolu Hayat Emeklilik 2020 Annual Report 205 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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 at 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 period, and that corresponding figures for previous years be restated in the same terms.
With respect to the April 4, 2005 dated and 19387 numbered declaration of the Ministry, the Company restated its financial statements as at December 31, 2004 and prepared opening financial statements of 2005 in accordance with the “Restatement of Financial Statements in Hyperinflationary Periods” of the Capital Markets Board (“CMB”) Communiqué No: 25 of Series XI, “Communiqué on Accounting Standards in Capital Markets” 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 Ministry. Accordingly, as at December 31, 2020, non-monetary assets and liabilities and items included in shareholders’ equity including paid-in capital recognised or recorded before January 1, 2005 are measured as restated to December 31, 2004 in order to reflect inflation adjustments. Non-monetary assets and liabilities and items included in shareholders’ equity including paid-in capital recognised or recorded after January 1, 2005 are measured at their nominal costs or values.
Other accounting policies
Information regarding to other accounting polices is explained above in the section of note 2.1.1 - Information about the principles and the special accounting policies used in the preparation of the financial statements and each on its own caption in following sections of this report.
2.1.3. Functional and presentation currency
The Company’s financial statements are presented in the currency of the primary economic environment in which the entity operates. The results and financial position of the Company are expressed in TL, which is the functional and presentation currency of the Company.
2.1.4. Rounding level of the amounts presented in the financial statements
Financial information presented in TL has been rounded to the nearest TL values.
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, financial investments with risks on saving life policyholders classified as available-for- sale financial assets, derivative financial instruments, investment properties and owner occupied properties which are measured at their fair values unless reliable measures are available.
2.1.6 Accounting policies, changes in accounting estimates and errors
Explanations regarding to the Company’s accounting policies are presented in note 3 - Critical accounting estimates and judgements in applying accounting policies.
2.2 Consolidation
“Circular Related to the Preparation of the Consolidated Financial Statements of Insurance, Reinsurance, and Individual Pension Companies” issued by the Ministry in the December 31, 2008 dated and 27097 numbered Official Gazette, has been in force since March 31, 2009. Accordingly, consolidated financial statements are prepared using the equity method of accounting to consolidate the Company’s associate; İş Portföy Yönetimi AŞ.
Accordingly, consolidated financial statements are prepared using the equity method to consolidate the Company’s associate; İş Portföy Yönetimi AŞ.
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.
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 period and foreign currency exchange differences are offset and all exchange differences are recognised in the statement of income.
Foreign currency exchange differences of unrecognised 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 realised gain or losses are recognised directly in the statement of income. Foreign currency exchange differences of unrecognised gains or losses arising from financial investments with risks on saving life policyholders classified as available-for-sale financial assets, 5% of the difference is recorded under equity and the remaining 95% belonging to policyholders is recorded as ‘insurance technical provisions - life mathematical provisions’.
206 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
2.5 Tangible assets
Except owner occupied properties, tangible assets are recorded at their historical costs that have been adjusted according to the inflation rates 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 indexed to the inflation rates for December 31, 2004. Tangible assets that have been purchased after January 1, 2005 have been recorded at their costs excluding their exchange rate differences and finance expenses less impairment losses if any.
The Company has changed historical cost basis method with revaluation method for owner occupied properties. Fair values of owner occupied properties have been reflected in the financial statements instead of historical cost values since the third quarter of 2015.
The fair values of owner occupied properties were provided by CMB licensed real estate companies. The fair values excluding the accumulated depreciation are reflected in the financial statements.
Increase arising from the revaluation of owner occupied properties is presented under the “other profit reserves” in equity excluding tax.
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.
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 recognised 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:
Tangible assets Estimated useful lives (years) Depreciation rates (%) Buildings 50 years 2.00 Machinery and equipment 3-16 years 6.25-33.33 Fixtures and furniture 4-13 years 7.69-25.00 Vehicles 5 years 20.00 Other tangible assets (includes leasehold improvements) 5 years 20.00 Leased assets 4-15 years 6.66-25.00
2.6 Investment properties
Investment properties are held either to earn rentals and/or for capital appreciation or for both.
Investment properties are measured initially at cost including transaction costs and then measured at fair value. The change arising from fair value is recognised in the income statement.
The difference arising between sale prices and carrying value of an investment property is recognised in profit or loss.
Investment properties are derecognised 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.
When the investment property recorded at fair value is reclassified as tangible assets, the fair value of the investment property at the reclassification date is accepted as historical cost value.
2.7 Intangible assets
The Company’s intangible assets consist of computer software.
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. Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specific software.
Amortisation is charged on a straight-line basis over their estimated useful lives (3 years) over the cost of the asset.
Costs associated with developing or maintaining computer software programs are recognised as expense when incurred. Costs that are directly associated with the development of identifiable and unique software products that are controlled by the Company and will probably provide more economic benefits than costs in one year are recognised as intangible assets. Costs include software development employee costs and an appropriate portion of relevant overheads. Computer software development costs recognised as assets are amortised over their estimated useful lives (not exceeding three years).
Anadolu Hayat Emeklilik 2020 Annual Report 207 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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.
Securities are recognised and derecognised at the date of settlement.
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 are recorded in the statement of income. 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 amortised 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 amortised cost using effective interest rate method less impairment losses, if any.
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.
Available-for-sale financial assets are initially recorded at cost and subsequently measured at their fair values. Assets that are not traded in an active market are measured by valuation techniques, including recent market transactions in similar financial instruments, adjusted for factors unique to the instrument being valued; or discounted cash flow techniques for the assets which do not have a fixed maturity. Unrecognised 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 realised gain or losses are recognised 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.
Associates are classified as financial assets in the consolidated financial statements. Associates, traded in an active market or whose fair value can be reliably measured, are recorded at their fair values. Associates that are not traded in an active market and whose fair value cannot be reliably set are reflected in financial statements at their costs after deducting impairment losses, if any.
Specific instruments
Financial investments with risks on saving life policyholders are the financial assets invested against the savings of the life policyholders. Financial investments with risks on saving life policyholders could be classified as financial assets held for trading purpose, available for sale financial assets or held to maturity investments by considering the benefits of the policyholders and measured in accordance with the principles as explained above.
When such investments are classified as available-for-sale financial assets, 5% of the difference between the fair values and amortised costs, calculated by using effective interest method, of the financial assets is recorded under equity and the remaining 95% belonging to policyholders is recorded as ‘insurance technical provisions - life mathematical provisions’. As at December 31, 2020, 95% of the difference between fair values and amortised costs of those assets backing liabilities amounting to TL 92,019,672 (December 31, 2019: TL 11,377,946) is recorded in life mathematical provisions.
Receivables from individual pension operations consist of ‘capital advances given to pension investment funds’, ‘receivable from pension investment funds for fund management fees’, ‘entrance fee receivable from participants’ and ‘receivables from clearing house on behalf of the participants’.
‘Receivable from pension investment funds for fund management fee’ are the fees charged to the pension investment funds against for the administration of related pension investment funds which consist of fees which are not collected in the same day.
Capital advances given to pension investments funds during their establishment are recorded under ‘capital advances given to pension investment funds’.
‘Receivables from the clearing house on behalf of the participants’ is the receivable from clearing house on fund basis against the collections of the participants. Same amount is also recorded as payables to participants for the funds sold against their collections under the ‘payables arising from individual pension businesses.
Loans to the policyholders are loans that are provided to the policyholders from saving component of the life insurance policies based on the fund amounts and fund unit prices. Valuation of the loans to the policyholders based on the fund amounts and fund unit prices as at the reporting date.
Derecognition
A financial asset is derecognised when the control over the contractual rights that comprise that asset is lost. This occurs when the rights are realised, expire or are surrendered.
208 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
2.9 Impairment on assets
Impairment on financial assets
Financial assets or group of financial assets are reviewed at each reporting period to determine whether there is objective evidence of impairment. If any such indication exists, the Company estimates the amount of impairment. Impairment loss incurs 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 recognised even if the probability of loss is high.
Loans and receivables are presented net of specific allowances against uncollectability. 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 recognised. For financial assets measured at amortised cost and available-for-sale financial assets that are debt securities, the reversal is recognised in the statement of operations. For available-for-sale financial assets that are equity securities, the reversal is recognised directly in equity.
Impairment on tangible and intangible assets
On each reporting period, the Company evaluates whether there is an indication of impairment of fixed 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 the reporting date, the Company does not have any derivative financial instruments. 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 recognised at their fair value. The receivables and liabilities arising from the derivative transactions are recognised under the off-balance sheet accounts through the contract amounts.
Derivative financial instruments are subsequently re-measured 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 unrealised gains and losses on these instruments are included in the statement of income.
2.11 Offsetting of financial assets
Financial assets and liabilities are off-set and the net amount is presented in the balance sheet when, and only when, the Company has a legal right to set off the amounts and intends either to settle on a net basis or to realise 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 a base for the preparation of the statement of cash flows includes cash on hand, other cash and cash equivalents, demand deposits and time deposits at banks having original maturity less than 3 months which are ready to be used by the Company or not blocked for any other purpose.
2.13 Capital
The shareholding structure of the Company is presented in note 1.1 - Name of the Company and the ultimate owner of the group. As of December 31, 2020, the Company’s issued capital is TL 430,000,000 (December 31, 2019: TL 430,000,000).
Sources of the capital increases during the period
None.
Privileges on common shares representing share capital
As at December 31, 2020, the share capital of the Company was amounted TL 430,000,000 (December 31, 2019: TL 430,000,000), divided into 43,000,000,000 shares (December 31, 2019: 43,000,000,000 shares) with each has a nominal value of TL 0.01. The Company’s share capital was divided into groups comprised of 100,000,000 Group A shares having a nominal values of TL 1,000,000 for each and the rest of amount by Group B shares having a nominal values of TL 1,000,000 for each. Among eleven members of the Board of Directors, seven are elected among candidates nominated by Group A shareholders while four are elected among candidates nominated by Group B shareholders.
Anadolu Hayat Emeklilik 2020 Annual Report 209 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Registered capital system in the Company
The Company has accepted the registered capital system set out in accordance with the Law No: 2499 and applied the system as of June 15, 2000 upon the permission no: 67/1039 granted by the Capital Markets Board. As at December 31, 2020, the registered capital of the Company is TL 900,000,000 (December 31, 2019: TL 900,000,000).
Repurchased own shares by the Company
None.
2.14 Insurance and investment 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 recognised 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.
The Company mainly issues policies under personal accident, risk and saving life insurance branches and individual pension contracts.
Saving component of the life products can be measured separately by the Company. However, insurance and saving components are not separated due to accounting policy requirements specified to account all risks and rewards without considering the basis of measurement.
2.15 Insurance contracts and investment contracts with discretionary participation feature
Discretionary participation feature (“DPF”) 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) realised and/or unrealised 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 at the reporting period, the Company does not have any insurance or investment contracts that contain a DPF.
2.16 Investment contracts without DPF
In the context of the saving life products, if the investment return, obtained from the savings of the policyholders which is invested by the Company results a lower yield rate than the technical interest rate, the Company compensates the difference; if investment return results higher yield than the guaranteed technical interest rate, the difference is distributed to the policyholders as profit sharing bonus. Due to contractual and competitive constraints in practice, the Company has classified these contracts as investment contracts without DPF.
For such products, investment income obtained from assets backing liabilities is recorded within income statement or equity in accordance with the accounting policies mentioned above; and whole contract is presented as a liability under life mathematical provisions.
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 derecognised when it is extinguished.
Payables arising from individual pension business consist of payables to participants, participants’ temporary accounts, and payables to individual pension agencies. The payables to participants are the account in which the contribution of participants that transferred to investments on behalf of individual pension contract owners and income from these investments are recorded. The temporary account of participants includes the contributions of participants that have not yet been transferred to the investment. This account also includes the entrance fee deducted portion of the participants’ fund amounts, obtained from the fund share sales occur in the case of system leaves. This account consists of the amounts of participants that will be transferred to other individual pension companies or participants’ own accounts. Payables to individual pension agencies are Company’s liabilities to individual pension agencies in return of their services.
210 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
2.18 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 the retained earnings to capital is not considered as profit distribution and therefore is not subject to withholding tax.
The 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 accordance with the local tax legislation, tax losses can be carried forward to offset against future taxable income for up to five years. December 31, 2020 and 2019, the Company does not have any deductible tax losses.
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.
According to the “General Communiqué on Corporate Tax” promulgated in Official Gazette no 28178 dated January 19, 2012, fair value of derivative transactions and option premiums are accepted as income or expense in the corporate tax statement if those transactions are performed at Derivative Exchange Market and not if those transactions are performed with entities as previously.
Deferred tax
In accordance with TAS 12 - Income taxes, deferred tax assets and liabilities are recognised 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.
The deferred tax assets and liabilities are reported as net in the financial statements only if, the Company has a legally enforceable right to net off current tax assets with current tax liabilities.
In case where gains/losses resulting from the subsequent measurement of the assets are recognised in the statement of income, then the related current and/or deferred tax effects are also recognised in the statement of income. On the other hand, if such gains/losses are recognised as an item under equity, then the related current and/or deferred tax effects are also recognised directly in the equity.
As of January 1, 2018, the corporate tax rate of 22% is used for the temporary differences expected to be realized/settled within 3 years (2018, 2019 and 2020) for deferred tax calculation since the tax rate applicable for 3 years has been changed to 22%. However, 20% tax rate is used for the current differences expected/expected to be incurred after 2020 since the corporate tax rate applicable is 20% for after 2020.
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 Hayat Emeklilik 2020 Annual Report 211 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
2.19 Employee benefits
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 computation of the liability is based upon the retirement pay ceiling announced by the Government. The applicable ceiling amount as at December 31, 2020 is TL 7,117.17 (December 31, 2019: TL 6,379.86).
The Company accounted for employee termination benefits using actuarial method in compliance with the TAS 19 - Employee Benefits. The major actuarial assumptions used in the calculation of the total liability as at December 31, 2020 and December 31, 2019 are as follows:
December 31, 2020 December 31, 2019 Discount rate 4.07% 4.20% Expected rate of salary/limit increase 8.00% 7.20%
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 period 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 footnotes 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 recognised in financial statements since this may result in the recognition of income that may never be realised. 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 recognised 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 profit or loss statement.
Claims are recognised as expense as they are paid. Outstanding claims reserve is provided for both reported unpaid claims at the reporting period and incurred but not reported claims. Reinsurer’s shares of claims paid and outstanding claims reserves are off-set against these reserves.
Commission income and expense
As further disclosed in Note 2.24, 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 recognised 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 recognising deferred commission income and deferred commission expense in the financial statements for the policies produced after January 1, 2008.
In compliance with the matching principle, the Company accrues the commissions of the intermediaries simultaneously on a policy basis, while accruing the receivables from the insureds.
Reinsurance commissions are accounted for based on reinsurer agreements. According to the Circular no: 2007/25 issued by the Ministry on December 28, 2007, starting from January 10, 2008, deferred reinsurance commissions are presented in “Deferred Income” account in the balance sheet.
Interest income and expense
Interest income and expense are recognised in the statement of income 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.
212 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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 recognised as “Income from disposal of financial assets” and “Loss from disposal of financial assets” in the accompanying consolidated financial statements.
Dividends
Dividend income is recognised when the Company’s right to receive payment is ascertained.
Income from individual pension business
The share of fund management fee belonging to portfolio manager is paid directly by the relevant fund for management and representation of the fund and for expense deduction made for hardware, software, personnel and accounting services allocated to the fund and is not recognised as Company’s “Fund management expense” under technical expenses. Net income of the company from the fund management fee is recognised as “Fund management income” under technical income.
According to the “Individual Pension System Communiqué” promulgated in Official Gazette no 29366 dated May 25, 2015 and within the changes enacted since January 1, 2016 total entrance fee and management fee that can be made in first 5 years of contract does not exceed 8.5% of gross minimum wage that is valid for the first 6 months of the relevant year. The management fees can be levied on contributions or pension investment funds of the participants and is recognised as “Management fee” under pension business technical income. Entrance fees are received by the Company from participants during the access into the system and for the opening of a new individual pension account or during first time at a different company if the pension contract is already concluded, the aforementioned income is recognised as “Entrance fee income” under pension business technical income.
If no payment is made within three months after the contribution paid at maturity date, case of suspension occurs and management expense is charged. The aforementioned expense is recognised as “Management expense charge in the case of suspension”.
The difference in value of the pension investment fund shares, obtained due to capital advance on the date of establishment, to the date of selling of those shares to the participants is recorded in the income statement as “increase in value of capital allowances given as advances”.
According to the amendments, promulgated in Official Gazette no 29812 dated August 25, 2016 and effective from January 1, 2017, made to the personal pension savings and investments system law, automatic enrolment to individual pension system that enables employees to be automatically included to an individual pension plan, has come into effect. According to the automatic enrolment system’s regulations, maximum of 0.85% fund management fee could be applied to participants; entrance and management fees are not applied.
2.22 Leasing transactions
Tangible assets acquired by way of finance leasing are recognised 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 assets and liabilities, the lower of the fair value of the leased asset and the present value of leasing payments is considered. Financial costs of leasing agreements are expanded in lease periods at a fixed interest rate.
If there is impairment in the value of the assets obtained through financial lease and in the expected future benefits, the leased assets are valued with net realisable value. Depreciation for assets obtained through financial lease is calculated in the same manner as tangible assets.
Right-of-use assets
The Company recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities.
The cost of the right-of-use asset includes:
(a) initial direct costs incurred,
(b) lease payments made at or before the commencement date less any lease incentives received, and
(c) All initial costs incurred by the company.
Unless the Company is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment.
Right-of-use assets are subject to impairment.
Anadolu Hayat Emeklilik 2020 Annual Report 213 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Lease liabilities
At the commencement date of the lease, the Company recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating a lease, if the lease term reflects the Company exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as expense in the period on which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Company uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.
Right-of-use assets calculated regarding to lease liabilities are accounted in “Tangible Assets” located in balance sheet.
Interest expense on lease liabilities and depreciation expense of right-of-use asset are accounted in “Investment Management Expenses (inc. interest)” and “Depreciation and Amortisation Expenses” respectively.
The details related to contracts term of operating leases and applied discount rates are presented below:
Assets subject to operating leases Contract term (Year) Discount rate - TL (%) Discount rate - Euro (%) Buildings 10 years 20.00 - Motor vehicles 1-3 years 12,50-20.00 5.00
2.23 Dividend distribution
In accordance with the Articles of Association of the Company, first dividend distribution is made from distributable profit based on the rates and amounts set out by the Capital Markets Board. In regards to the profit share distribution policy of the Company, two options are presented to the General Assembly; 30% of distributable profit at a minimum as bonus shares or in cash. Based on its articles of association, the Company makes at a maximum of 3% of profit share payments to its employees following the appropriation of first profit share, limited to a maximum of three-month salary.
Dividend payables are recognised as liability in the financial statements when they are announced.
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 period for all short-term insurance policies.
In the case of personal accident insurance, annual life insurance and life insurance which of the renewal date exceeds one year, reserve for unearned premiums is calculated for the portion of the remaining part which is left after deducting savings from gross premium written for the year. In accordance with the “Communiqué on Amendments to the Communiqué on Technical Reserves for Insurance, Reinsurance and Pension Companies and the Related Assets That Should Be Invested Against Those Technical Reserves” issued in 28356 numbered and July 17, 2012 dated Official Gazette and effective from June 30, 2012, reserve for unearned premiums is calculated from remaining amount of gross written premiums by deducting saving component and expenses related with saving component for life insurance and life insurance with saving components having longer than one year maturity. Insurance policies covering possibilities of life and death or both and personal accident, disability by illness and serious illness insurance policies are considered as life insurance policies and their premiums are classified as life insurance premiums.
According to the 2009/9 Numbered Circular Related to Application of Technical Reserves issued on March 27, 2009 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.
2.25 Reserve for unexpired risks
In accordance with the Communiqué on Technical Reserves, in each accounting period, the companies while providing reserve for unearned premiums should perform adequacy test covering the preceding 12 months in regard with the probability of future claims and compensations of the outstanding policies will arise 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.
214 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
In accordance with the “Communiqué on Amendments to the Communiqué on Technical Reserves for Insurance, Reinsurance and Pension Companies and the Related Assets That Should Be Invested Against Those Technical Reserves” issued in 28356 numbered and July 17, 2012 dated Official Gazette and effective from June 30, 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. The difference between the gross amount and the net amount is considered as the reinsurer’s share.
According to Undersecretariat of Treasury’s 2019/5 numbered general instructions has remarked that the method below can be used to calculate the reserve for unexpired risks in all branches. Turkish Treasury allows insurance companies with the circular 2019/5 to calculate their unexpired risks reserve on all branches by considering only the last 4 accident quarters’ loss ratios. According to this new method, loss ratios exceeding 85% will be multiplied by unearned premiums reserve for the calculation of unexpired risk reserve.
The Ministry is authorised to change test methods and require additional reserve for unexpired risks on branch basis. As at December 31, 2020, related test have not resulted any reserve for unexpired risks (December 31, 2019: None).
2.26 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 period as well as the corresponding handling costs.
Change in measurement of technical reserves became effective as at September 30, 2010 according to the Ministry Circular which were published as “Communiqué on Amendments to Communiqué on Technical Reserves” in Official Gazette dated July 28, 2010 and numbered 27655.
Following the changes made by the mentioned circular issued by the Ministry, the Circulars, that include explanations regarding accounting of income from salvage and subrogation and methodological changes on Actuarial Chain ladder method, numbered 2010/12, 2010/13, 2010/14 and the sector announcement numbered 2010/29 issued, which became effective as at December 31, 2010, in order to clarify uncertainties on measurement of technical reserves and accounting of income from salvage and subrogation.
Additional amendments effective from June 30, 2012 are issued in the “Communiqué on Amendments to the Communiqué on Technical Reserves for Insurance, Reinsurance and Pension Companies and the Related Assets That Should Be Invested Against Those Technical Reserves” in 28356 numbered and July 17, 2012 dated Official Gazette. Test IBNR method ceased in the calculation of provision for outstanding claims. In accordance with the previous communiqués and sector announcements companies should perform actuarial chain ladder method for the non-life insurance branches engaged more than five years and had sufficient data.
Upon issuance the Circular on Outstanding Claims Reserve numbered 2014/16 issued by the Ministry, the Circulars numbered 2010/12, 2010/14 and 2010/16 are repealed. In accordance with the aforementioned Circular numbered 2014/16, IBNR calculation can be made with the other methods by the companies if the calculation method rests upon actuarial basis and amount obtained from this method is greater than the amount calculated by the Actuarial Chain Ladder Method. In this context, Company maintains to calculate IBNR amount according to the repealed Circulars numbered 2010/12 and 2010/14.
Claims incurred before the accounting periods but reported subsequent to those dates are accepted as incurred but not reported (“IBNR”) claims. According to the “Communiqué on Provision for IBNR Claims in Life Branch” numbered 2010/14, IBNR calculation is changed. In accordance with the related regulations, last five or more than five years’ weighted average calculated by dividing total gross amount of incurred but not reported claims to average annual guarantee of the related years. As of the current reporting period, IBNR is calculated by multiplying weighted average IBNR ratio by the average guarantee amount of last twelve months before reporting period. Accordingly, as at the reporting period, the Company has provided for IBNR, net off ceded amounting to TL 11,378,274 (December 31, 2019: TL 12,082,030).
According to the 7th article 6th sub clause of the “Circular on Change in Technical Reserves for Insurance, Reinsurance and Pension Companies and the Related Assets That Should Be Invested against Those Technical Reserves”; provision for the outstanding claims of the period cannot be less than the result of the actuarial chain ladder method determined by the Ministry. The Company has selected “Standard chain ladder method” for personal accident branch as stated in the “Communiqué on Technical Reserves and Circular on Actuarial Chain Ladder Method” dated 20 September 2010 and numbered 2010/12. Accordingly, as at the reporting period, the Company has provided for IBNR, net off ceded amounting to TL 6,245 (December 31, 2019: TL 56,472).
According to the Sector Announcement dated July 18, 2012 and numbered 2012/13 published by the Ministry, insurance, reinsurance and individual pension companies are required to perform adequacy test to assess the adequacy of provision for outstanding claims at the end of the each reporting period. Companies performed actuarial chain ladder method are not obliged to record additional provision for outstanding claims. As at December 31, 2020, this adequacy test has not resulted in additional provision for outstanding claims.
2.27 Mathematical provisions
In accordance with the Communiqué on Technical Reserves, companies operating in life and non-life insurance branches are obliged to allocate adequate mathematical reserves based on actuarial basis to meet liabilities against policyholders and beneficiaries for long-term life, health and personal accident insurance contracts. Mathematical provisions are composed of actuarial mathematical provisions and profit sharing provisions. Actuarial mathematical provisions, according to formulas and basis in approved technical basis of tariffs for over one year-length life insurance, are calculated by determining the difference between present value of liabilities that the Company meets in future and current value of premiums paid by policyholder in future (prospective method). In life insurance where saving plan premiums are also generated, actuarial mathematical provisions consist of total saving plan portions of premiums. Provision for profit sharing consist of profit sharing calculated in previous years and a certain percentage of current year’s income, determined in the approved profit sharing tariffs, obtained from the financial assets backing liabilities of the Company against the policyholders and other beneficiaries for the contracts which the Company is liable to give profit sharing. The valuation method used in calculation of the profit to be shared for saving life contracts is the same with the valuation basis of portfolio on which assets on which the Company invests the provisions allocated due to liabilities against the beneficiaries are included in the framework of basis defined in the note 2.8 - Financial assets above.
Anadolu Hayat Emeklilik 2020 Annual Report 215 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
2.28 Equalisation provision - Provision for bonus and discounts
According to “Communiqué on Technical Reserves”, companies should book equalisation provision for guarantees of loan and earthquakes in order to offset fluctuations in the rate of indemnification and to meet catastrophic risks in the accounting period.
In accordance with the Communiqué on Technical Reserves issued by the Ministry on March 27, 2009 numbered 2009/9, the insurance companies should recognise equalisation provision for disability and death occurred because of an earthquake and tariffs that include additional guarantee in life and casualty branches. With the circular released on July 28, 2010 and numbered 27655 “Circular on Change in Technical Reserves for Insurance, Reinsurance and Pension Companies and the Related Assets That Should Be Invested Against Those Technical Reserves”, the calculation of equalisation provision is revised. In accordance with the Communiqué on Technical Reserves, the companies which give additional guarantee in life use their own statistical data for equalisation provision calculation. The companies not having sufficient data for calculation will accept 11% of death net premium (including damage payments) as earthquake premium and 12% of that amount is calculated as equalisation provision. In accordance with the Communiqué on Technical Reserves, booking provisions should continue until reaching 150% of the highest net premium amount of the last five financial years. Equalisation provisions amounting to TL 53,403,589 are presented under “Other Technical Reserves” within short-term liabilities in the accompanying financial statements (December 31, 2019: TL 39,434,063).
In accordance with Regulation on Technical Reserves, insurance companies are required to account for the bonus or discounts provided to policyholders and beneficiaries in accordance with the current year technical income. As of December 31, 2020, the Company accounted for provision for bonus and discounts, net amounting to TL 184,336 (December 31, 2019: TL 391,457).
2.29 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, jointly controlled or significantly influenced by, or any individual referred to in (d) or (e) which significant voting power in such entity resides with directly or indirectly, 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.
2.30 Earnings per share
Earnings per share presented in the income statement is calculated by dividing the net profit into the weighted average number of the outstanding shares throughout the financial year. Companies in Turkey can increase their capital by distributing “bonus shares” to shareholders from the prior years’ profit. Such “bonus share” distributions are considered as issued shares in the earnings per share calculations. Accordingly, weighted average number of equity shares used in the calculations is calculated by considering the retrospective effects of share distributions.
2.31 Events after the reporting period
“Events After the Reporting Period”; post-reporting date events that provide additional information about the Company’s position at the reporting periods (adjusting events) are reflected in the financial statements. Post-reporting date events that are not adjusting events are disclosed in the consolidated notes when material.
2.32 The new standards, amendments and interpretations
The accounting policies adopted in preparation of the consolidated financial statements as at December 31, 2020 are consistent with those of the previous financial year, except for the adoption of new and amended TFRS and TFRIC interpretations effective as of January 1, 2020. The effects of these standards and interpretations on the Company’s financial position and performance have been disclosed in the related paragraphs.
216 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
i) The new standards, amendments and interpretations which are effective as at January 1, 2020 are as follows:
Definition of a Business (Amendments to TFRS 3)
In May 2019, the POA issued amendments to the definition of a business in TFRS 3 Business Combinations standards. The amendments are intended to assist entities to remove the assessment regarding the definition of business.
The amendments: - clarify the minimum requirements for a business; - remove the assessment of whether market participants are capable of replacing any missing elements; - add guidance to help entities assess whether an acquired process is substantive; - narrow the definitions of a business and of outputs; and - introduce an optional fair value concentration test.
The amendments to TFRS 3 are effective for annual reporting periods beginning on or after 1 January 2020 and apply prospectively. The amendments are not applicable for the Company and did not have an impact on the financial position or performance of the Company.
Amendments to TFRS 9, TAS 39 and TFRS 7- Interest Rate Benchmark Reform
The amendments issued to TFRS 9 and TAS 39 which are effective for periods beginning on or after January 1, 2020 provide reliefs which enable hedge accounting to continue. For these reliefs, it is assumed that the benchmark on which the cash flows of hedged risk or item are based and/or, the benchmark on which the cash flows of the hedging instrument are based, are not altered as a result of IBOR reform in connection with interest rate benchmark reform.
Reliefs used as a result of amendments in TFRS 9 and TAS 39 is aimed to be disclosed in financial statements based on the amendments made in TFRS 7. The amendments did not have a significant impact on the financial position or performance of the Company.
Definition of Material (Amendments to TAS 1 and TAS 8)
In June 2019, the POA issued amendments to TAS 1 Presentation of Financial Statements and TAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to align the definition of ‘material’ across the standards and to clarify certain aspects of the definition. The new definition states that, ’Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity. The amendments clarify that materiality will depend on the nature or magnitude of information, or both. An entity will need to assess whether the information, either individually or in combination with other information, is material in the context of the financial statements.
The amendments to TAS 1 and TAS 8 are required to be applied for annual periods beginning on or after 1 January 2020. The amendments must be applied prospectively and earlier application is permitted. The amendments did not have a significant impact on the financial position or performance of the Company
Amendments to TFRS 16 - Covid-19 Rent Related Concessions
In June 5, 2020, the POA issued amendments to TFRS 16 Leases to provide relief to lessees from applying TFRS 16 guidance on lease modifications to rent concessions arising a direct consequence of the Covid-19 pandemic. A lessee that makes this election accounts for any change in lease payments related rent concession the same way it would account for the change under the standard, if the change were not a lease modification.
The practical expedient applies only to rent concessions occurring as a direct consequence of the Covid-19 pandemic and only if all of the following conditions are met: - The change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change. - Any reduction in lease payments affects only payments originally due on or before 30 June 2021 - There is no substantive change to other terms and conditions of the lease.
A lessee will apply the amendment for annual reporting periods beginning on or after 1 June 2020. Early application of the amendments is permitted. The amendments did not have a significant 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.
Anadolu Hayat Emeklilik 2020 Annual Report 217 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
TFRS 10 and TAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments)
In December 2017, POA 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. The Company will wait until the final amendment to assess the impacts of the changes.
TFRS 17 - The new Standard for insurance contracts
The POA issued TFRS 17 in February 2019, a comprehensive new accounting standard for insurance contracts covering recognition and measurement, presentation and disclosure. TFRS 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. TFRS 17 will become effective for annual reporting periods beginning on or after 1 January 2023; 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.
Amendments to TAS 1- Classification of Liabilities as Current and Non-Current Liabilities
On March 12, 2020, the POA issued amendments to TAS 1 Presentation of Financial Statements. The amendments issued to TAS 1 which are effective for periods beginning on or after 1 January 2022, clarify the criteria for the classification of a liability as either current or non-current. Amendments must be applied retrospectively in accordance with TAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. Early application is permitted.
The Company is in the process of assessing the impact of the amendments on financial position or performance of the Company.
Amendments to TFRS 3 - Reference to the Conceptual Framework
In May 2020, the IASB issued amendments to TFRS 3 Business combinations. The amendments are intended to replace to a reference to a previous version of the IASB’s Conceptual Framework (the 1989 Framework) with a reference to the current version issued in March 2018 (the Conceptual Framework) without significantly changing requirements of TFRS 3. At the same time, the amendments add a new paragraph to TFRS 3 to clarify that contingent assets do not qualify for recognition at the acquisition date. The amendments issued to TFRS 3 which are effective for periods beginning on or after 1 January 2022 and must be applied prospectively. Earlier application is permitted if, at the same time or earlier, an entity also applies all of the amendments contained in the Amendments to References to the Conceptual Framework in TFRS standards (March 2018).
The Company is in the process of assessing the impact of the amendments on financial position or performance of the Company.
Amendments to TAS 16 - Proceeds before intended use
In May 2020, the IASB issued amendments to IAS 16 Property, plant and equipment. The amendment prohibits entities from deducting from the cost of an item of property, plant and equipment (PP&E), any proceeds of the sale of items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognises the proceeds from selling such items, and costs of producing those items, in profit or loss. The amendments issued to IAS 16 which are effective for periods beginning on or after 1 January 2022. Amendments must be applied retrospectively only to items of PP&E made available for use on or after beginning of the earliest period presented when the entity first applies the amendment.
There is no transition relief for the first time adopters. The Company is in the process of assessing the impact of the amendments on financial position or performance of the Company.
Amendments to TAS 37 - Onerous contracts - Costs of Fulfilling a Contract
In May 2020, the IASB issued amendments to IAS 37 Provisions, Contingent Liabilities and Contingent assets. The amendments issued to IAS 37 which are effective for periods beginning on or after 1 January 2022, to specify which costs an entity needs to include when assessing whether a contract is onerous or loss-making and also apply a “directly related cost approach”. Amendments must be applied retrospectively to contracts for which an entity has not fulfilled all of its obligations at the beginning of the annual reporting period in which it first applies the amendments (the date of initial application). Earlier application is permitted and must be disclosed.
The Company is in the process of assessing the impact of the amendments on financial position or performance of the Company.
Interest Rate Benchmark Reform - Phase 2 - Amendments to TFRS 9, TAS 39, TFRS 7, TFRS 4 and TFRS 16
In December 2020, the POA issued Interest Rate Benchmark Reform - Phase 2, Amendments to TFRS 9, TAS 39, TFRS 7, TFRS 4 and TFRS 16 to provide temporary reliefs which address the financial reporting effects when an interbank offering rate (IBOR) is replaced with an alternative nearly risk-free rate (RFR, amending the followings. The amendments are effective for periods beginning on or after 1 January 2021. Earlier application is permitted and must be disclosed.
218 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Practical expedient for changes in the basis for determining the contractual cash flows as a result of IBOR reform
The amendments include a practical expedient to require contractual changes, or changes to cash flows that are directly required by the reform, to be treated as changes to a floating interest rate, equivalent to a movement in a market rate of interest. Under this practical expedient, if the interest rates applicable to financial instruments change as a result of the IBOR reform, the situation is not considered as a derecognition or contract modification; instead, this would be determined by recalculating the carrying amount of the financial instrument using the original effective interest rate to discount the revised contractual cash flows.
The practical expedient is required for entities applying TFRS 4 Insurance Contracts that are using the exemption from TFRS 9 Financial Instruments (and, therefore, apply TAS 39 Financial Instruments: Classification and Measurement) and for TFRS 16 Leases, to lease modifications required by IBOR reform.
Relief from discontinuing hedging relationships
- The amendments permit changes required by IBOR reform to be made to hedge designations and hedge documentation without the hedging relationship being discontinued. - Amounts accumulated in the cash flow hedge reserve are deemed to be based on the RFR. - For the TAS 39 assessment of retrospective hedge effectiveness, on transition to an RFR, entities may elect on a hedge-by-hedge basis, to reset the cumulative fair value changes to zero. - The amendments provide relief for items within a designated group of items (such as those forming part of a macro cash flow hedging strategy) that are amended for modifications directly required by IBOR reform. The reliefs allow the hedging strategy to remain and not be discontinued. - As instruments transition to RFRs, a hedging relationship may need to be modified more than once. The phase two reliefs apply each time a hedging relationship is modified as a direct result of IBOR reform.
Separately identifiable risk components
The amendments provide temporary relief to entities from having to meet the separately identifiable requirement when an RFR instrument is designated as a hedge of a risk component.
Additional disclosures
Amendments need additional TFRS 7 Financial Instruments disclosures such as; How the entity is managing the transition to RFRs, its progress and the risks to which it is exposed arising from financial instruments due to IBOR reform, quantitative information about financial instruments that have yet to transition to RFRs and If IBOR reform has given rise to changes in the entity’s risk management strategy, a description of these changes.
The amendments are mandatory, with earlier application permitted. While application is retrospective, an entity is not required to restate prior periods. The Company is in the process of assessing the impact of the amendments on financial position or performance of the Company.
Annual Improvements - 2018-2020 Cycle
In July 2020, the POA issued Annual Improvements to TFRS Standards 2018-2020 Cycle, amending the followings: - TFRS 1 First-time Adoption of International Financial Reporting Standards - Subsidiary as a first-time adopter: The amendment permits a subsidiary to measure cumulative translation differences using the amounts reported by the parent. The amendment is also applied to an associate or joint venture. - TFRS 9 Financial Instruments - Fees in the “10 per cent test” for derecognition of financial liabilities: The amendment clarifies the fees that an entity includes when assessing whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability. These fees include only those paid or received between the borrower and the lender, including fees paid or received by either borrower or lender on the other’s behalf. - TAS 41 Agriculture - Taxation in fair value measurements: The amendment removes the requirement in paragraph 22 of TAS 41 that entities exclude cash flows for taxation when measuring fair value of assets within the scope of TAS 41.
Improvements are effective for annual reporting periods beginning on or after 1 January 2022. Earlier application is permitted for all. The Company is in the process of assessing the impact of the amendments on financial position or performance of the Company.
3 Critical accounting estimates and judgments in applying accounting policies
The notes given in this section are provided in addition to 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 recognised in the period in which the estimate is revised and in any future periods affected.
In particular, information about significant areas at estimation uncertainty and critical judgment in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described in the following notes:
Note 4.1 - Management of insurance risk
Note 4.2 - Financial risk management
Anadolu Hayat Emeklilik 2020 Annual Report 219 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Note 10 - Reinsurance assets and liabilities
Note 11 - Financial assets
Note 12 - Loans and receivables
Note 17 - Insurance contract liabilities and reinsurance assets
Note 17 - Deferred commissions
Note 19 - Trade and other payables, deferred income
Note 21 - Deferred tax
Note 23 - Other liabilities and provisions
Evaluation of the effect of Covid 19 pandemic on Company activities
Covid 19 pandemic brought economic problems with it in global scale. Within this scope to reduce the negative effects in question economical precautions are started to be implemented by many countries.
For our industry, the course of death compensation under life insurance, premium production mainly related to bank loans, additions and cancellations to private pension system and return value of securities are important.
Furthermore, the developments on the subject are closely monitored and different impact analysis are realized for the Company activities and financial results.
For our Company; - Relatively low life insurance rates at upper age groups, - Existence of reinsurance agreements, - Production of life insurance premium at a high level in 2020 compared to the same period last year, - Regular income generation capacity depending on the fund size of 30.6 billion TL belonging to 2 million customers in private pension system, - No significant change at cancellation, compensation payments, collection and the number of corporate transection in life insurance and private pension branches, - Securities portfolio with balanced distribution, - Strong capital higher than three times the minimum level determined by legal legislation are positive indicators in terms of continuity of our activities and profitability.
When we look at the financial performance of our Company in 2020, the effect of the pandemic on our results is considered to be limited. In this period, there was no unusual death compensation payments and no unusual cancellation of private pension accounts and life insurances. Premiums related to bank loans which had increase in the first quarter of the year started to increase again especially as of June.
Within this scope, in 2020 TL 1.7 billion gross premium production was realized in life insurance and an increase of 37% was recorded compared to the same period of the previous year. On the other hand, the size of the private pension fund increased by 33% compared to the beginning of the year and reached TL 30.6 billion and continues to contribute to increase in profit. In addition, operating expenses continued to be managed in a controlled manner. As a result, life and private pension technical profits respectively were TL 327.6 million and TL 145.5 million and total technical profit increased by 33% compared to the previous year. Our gross profit reached TL 647.7 million with an increase of 36% in the same period.
On the other hand, necessary precautions have been taken for our personnel to work remotely and our practices have been shaped in this direction not to disrupt our operational activities. In this period, there was no disruption caused by remote working in the fields of customer relations, operations and information technologies. In addition, our customer service is maintained without interruption from all contact points including our call center and digital channels.
4 Management of insurance and financial risk
4.1 Management of insurance risk
Objective of managing risks arising from insurance contracts and policies used to minimise such risks:
Insurance risk is defined as coverage for exposures that exhibit a possibility of financial loss due to applying inappropriate and insufficient insurance techniques. In line with the nature of an insurance contract, as the risk is coincidental, the risk amount cannot be predictable.
Insurance risk represents the possibility of the non-coverage of the claims paid by the premiums collected.
As of December 31, 2020, the Company’s life insurance (excluding saving component of saving life insurance) claims/premiums ratio stands at 15%. Low claims/premiums ratio, which is calculated by the proportion of claims to risk premiums collected, indicates that the Company makes significant profit. The Company adopts central risk assessment policy. The Company applies this policy to the all marketing channels produced. In its life policy production, the Company has no sales channel with continuous risk exposure. The Company analyses its claims/premiums ratio periodically in order to identify its insurance risks.
220 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
As of December 31, 2020, the Company’s personal accident insurance claims/premiums ratio is 67%. Since personal accident insurance portfolio has an insignificant share in the Company’s general portfolio, this ratio would be low when no compensation is paid and this ratio would be high when compensation is paid.
Claims/premium ratio of the Company as of the financial statement periods is presented below:
December 31, 2020 December 31, 2019
Life insurance (*) 15% 16% Personal accident 67% 46%
(*) Saving component of saving life insurance has excluded.
The Company shares its significant risks associated with natural disasters, such as; earthquake, terrorism or large-scale accidents, with reinsurers by entering into catastrophic excess of loss agreements.
As at December 31, 2020 and December 31, 2019, risk portion transferred to reinsurers in terms of risk guarantee is presented as below:
December 31, 2020 December 31, 2019
Death by natural cause 15% 14% Death by accident 75% 55% Disability by accident 74% 60% Disability by illness 76% 72%
Sensitivity to insurance risk
The Company’s policy production strategy follows an effective risk management in the policy production process considering the nature, extent, and accurate distribution of the risk incurred.
Reinsurer agreements include claims surplus, excess of loss and quota reinsurances. In 2020, the Company retains the risk, stemming from insurance contracts, which varies with regards to provided coverage, product and portfolio and transfers the exceeding portion to reinsurers via reinsurance agreements. The limits regarding the maximum risk that can be retained by the Company is audited by the Ministry.
Determination of insurance risk concentrations by management and the common characteristics of insurance risk concentrations (nature, location and currency)
The Company produces life and personal accident branch policies. The Company’s gross and net insurance risk concentrations (after reinsurance) in terms of insurance branches are summarised as below:
December 31, 2020 Total gross Reinsurer’s share The Company’s Branches risk liability(1) of risk liability net claims liability
Life insurance 118,931,323,477 44,066,294,924 74,865,028,553 Personal accident 14,099,095,078 6,838,009,378 7,261,085,700 Total 133,030,418,555 50,904,304,302 82,126,114,253
December 31, 2019 Total gross Reinsurer’s share The Company’s Branches risk liability(1) of risk liability net claims liability
Life insurance 83,854,107,957 23,884,650,315 59,969,457,642 Personal accident 11,310,308,852 4,634,745,758 6,675,563,094 Total 95,164,416,809 28,519,396,073 66,645,020,736
(1) Represents the maximum insurance amount based on death by natural cause, death by accident, disability by accident and disability by illness.
Anadolu Hayat Emeklilik 2020 Annual Report 221 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
The Company issues insurance contracts mainly in Turkey. Gross and net insurance risk concentrations of the insurance contracts (after reinsurance) based on geographical regions are summarised as below:
December 31, 2020 Total gross Reinsurer’s share Total net Claims liability(1) claims liability of claims liability claims liability
Marmara Region 43,369,982 4,915,663 38,454,319 Central Anatolia Region 14,312,123 730,179 13,581,944 Aegean Region 17,946,492 1,458,699 16,487,793 Mediterranean Region 14,064,586 326,938 13,737,648 Black Sea Region 10,510,251 137,894 10,372,357 Southeastern Anatolia Region 8,450,143 350,841 8,099,302 Eastern Anatolia Region 4,159,769 17,283 4,142,486 Foreign Countries (Other) 10,342,427 - 10,342,427 Total 123,155,773 7,937,497 115,218,276
December 31, 2019 Total gross Reinsurer’s share Total net Claims liability(1) claims liability of claims liability claims liability
Marmara Region 37,245,088 2,676,233 34,568,855 Central Anatolia Region 12,297,081 555,095 11,741,986 Aegean Region 15,431,618 495,990 14,935,628 Mediterranean Region 10,317,901 237,075 10,080,826 Black Sea Region 8,200,594 322,584 7,878,010 Southeastern Anatolia Region 4,437,348 525,459 3,911,889 Eastern Anatolia Region 2,985,212 69,819 2,915,393 Foreign countries (Other) 8,602,665 - 8,602,665 Total 99,517,507 4,882,255 94,635,252
(1) Total claims liability includes the actual estimated compensation amounts. IBNR provision and outstanding claims adequacy provision are not included in the calculation.
Comparison of incurred claims with past estimations
Incurred claim development table is disclosed in note 17 - Insurance liabilities and reinsurance assets.
Effects of the changes in assumptions used in the measurement of insurance assets and liabilities showing the effect of each change separately that has significant effect on financial statements
In the current period, there are no material changes in the assumptions of measurement of insurance assets and liabilities.
4.2 Financial risk management
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 Company’s risk management program focuses on minimising the negative effects of the ambiguities in financial markets on the Company’s financial statements. The Company is mostly exposed to interest risk and price risk in relation with financial investments, to credit risk in relation with insurance receivables and exchange rate risk due to policies and assets in foreign currencies.
The risk is managed by a specific department which is in line with the approved policies by the Board of Directors. Several risk policies have been prepared by the Board of Directors in order to manage the exchange risk, interest risk, credit risk, using the derivative and non-derivative financial instruments risks.
222 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Credit risk
Credit risk is basically defined as the possibility that counterparty will fail to meet its obligations in accordance under agreed terms of a contract. When the Company’s field of activity and third party relations is considered, its credit risk is deemed to be relatively at minimum. The balance sheet items that the Company is exposed to credit risk are as follows: - Cash at banks - Other cash and cash equivalents - Available for sale financial assets - Financial assets held for trading - Held-to-maturity financial assets - Premium receivables from policyholders - Receivables from intermediaries (agencies) - Receivables from reinsurance companies related to claims paid and commissions accrued - Reinsurance shares of insurance liabilities - Due from related parties - Other receivables
The review of the Company’s third party relations are presented below.
Reinsurers: Reinsurance contracts are the most common method to manage insurance risk. This 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 Company works with international reinsurance companies with strong financial status. In this perspective, the level of risk exposure is also considered to be at minimum.
Agencies: Agencies working with the Company expose it to a limited level of credit risk. Since the Company’s products are issued with long-term use, commissions given to agencies are also long term in nature; therefore, the Company has consistent payables to agencies.
Policyholders: Overdue premium receivables are not considered as a significant risk exposure to the Company because if the Company has unpaid premiums, all guarantees related to the insurance will be invalid.
Anadolu Hayat Emeklilik 2020 Annual Report 223 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
As at December 31, 2020 and December 31, 2019, the Company’s credit risk exposure by types of financial instruments is as follows. Banks and other cash and cash equivalents are also included in the credit risk.
Receivables(1) Receivables from insurance Other Banks and other activities receivables cash and cash December 31, 2020 Related party Third party Related party Third party Financial assets(2) equivalent assets
Maximum credit risk exposure as at the reporting period (A+B+C) - 126,957,600 - 139,807,221 4,059,029,366 666,497,600 - Secured portion of maximum risk by guarantees, provisions, etc. ------A. Net book value of neither past due nor impaired financial assets - 96,075,912 - 139,807,221 4,059,029,366 666,497,600 B. Net book value of past due but not impaired assets - 30,881,688 - - - - C. Net book value of impaired assets ------Gross book value - 5,120,570 - - - - - Impairment - (5,120,570) - - - - - Secured portion of net book value by guarantees, provisions, etc. ------
Receivables(1) Receivables from insurance Receivables from insurance Banks and other activities activities Financial cash and cash December 31, 2019 Related party Third party Related party Third party Assets(2) equivalent assets
Maximum credit risk exposure as at the reporting period (A+B+C) 68 99,397,661 12,413 38,467,083 2,899,546,383 656,922,516 - Secured portion of maximum risk by guarantees, provisions, etc. ------A. Net book value of neither past due nor impaired financial assets - 78,387,538 12,413 38,467,083 2,899,546,383 656,922,516 B. Net book value of part due but not impaired assets 68 21,010,123 - - - - C. Net book value of impaired assets ------Gross book value - 5,120,570 - - - - - Impairment - (5,120,570) - - - - - Secured portion of net book value by guarantees, provisions, etc. ------
(1) Receivables from individual pension activities are not included in the credit risk table since those receivables are followed both side of the balance sheet as asset and liability and they are held on behalf of participants by İstanbul Takas ve Saklama Bankası A.Ş. (the “Istanbul Settlement and Custody Bank Inc”). (2) Equities and impairment are not included to financial assets.
224 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the net funding obligations. Liquidity risk arises from the events trigger decreasing funds such as deterioration in the market conditions or downgrading of credit ratings. As at December 31, 2020 and December 31, 2019 maturity analyses of the Company’s assets and liabilities are presented in the table below:
Without Up to 1 to 3 3 to 12 1 to 5 5 years December 31, 2020 maturity 1 month months months years and over Unallocated Total Cash and cash equivalents 21,086,843 511,936,919 133,473,942 - - - 666,497,704 Financial assets and investments with risks on policyholders - 110,986,986 217,192,866 319,979,359 751,433,229 2,346,335,900 548,306,904 4,294,235,244 Receivables from main operations - 5,852,594 10,963,822 20,876,681 - - 30,566,630,655 30,604,323,752 Due from related parties ------Other receivables - 138,939,396 - - - 867,825 139,807,221 Prepaid expenses and income accruals, short term ------60,454,977 60,454,977 Other current assets ------19,808 19,808 Other receivables ------Financial assets (Associates) ------33,391,595 33,391,595 Tangible assets ------267,372,838 267,372,838 Intangible assets ------16,616,741 16,616,741 Prepaid expenses and income accruals, long term ------5,032,723 5,032,723 Deferred tax assets ------Total assets 21,086,843 767,715,895 361,630,630 340,856,040 751,433,229 2,346,335,900 31,498,694,066 36,087,752,603
Financial liabilities - - - 4,812,019 20,962,799 28,916,001 - 54,690,819 Payables arising from main operations - 49,200,381 - 5,563,279 - - 30,815,852,302 30,870,615,962 Due to related parties - 61,036 - 92,787 - - 195 154,018 Other payables - 92,636 - - - - 21,600,612 21,693,248 Insurance technical provisions - 7,535,952 25,201,419 100,057,216 503,173,881 1,315,656,185 1,461,680,843 3,413,305,496 Provisions for taxes and other similar obligations - 21,976,653 - - - - 19,146,913 41,123,566 Deferred income and expense accruals ------13,052,342 13,052,342 Other short term liabilities ------Provisions for other risks - 2,100,000 - 17,100,000 - 26,177,882 15,009,243 60,387,125 Deferred tax liabilities ------10,836,662 10,836,662 Shareholders’ equity ------1,601,893,365 1,601,893,365 Total liabilities - 80,966,658 25,201,419 127,625,301 524,136,680 1,370,750,068 33,959,072,477 36,087,752,603 Net liquidity surplus/(deficit) 21,086,843 686,749,237 336,429,211 213,230,739 227,296,549 975,585,832 (2,460,378,411) -
Anadolu Hayat Emeklilik 2020 Annual Report 225 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Without Up to 1 to 3 3 to 12 1 to 5 5 years December 31, 2019 maturity 1 month months months years and over Unallocated Total Cash and cash equivalents 52,446,026 185,146,418 419,330,291 - - - - 656,922,735 Financial assets and investments with risks on policyholders - 540,540,976 228,011,764 170,684,837 362,958,592 1,370,427,532 391,658,341 3,064,282,042 Receivables from main operations - 5,502,415 10,237,969 22,539,778 - - 23,012,766,638 23,051,046,800 Due from related parties - - 12,413 - - - - 12,413 Other receivables - 37,109,651 - - - 1,357,432 38,467,083 Prepaid expenses and income accruals, short term ------49,478,060 49,478,060 Other current assets ------17,048 17,048 Other receivables ------Financial assets (Associates) ------24,978,982 24,978,982 Tangible assets ------242,224,002 242,224,002 Intangible assets ------16,840,377 16,840,377 Prepaid expenses and income accruals, long term ------2,725,005 2,725,005 Deferred tax assets ------Total assets 52,446,026 768,299,460 657,592,437 193,224,615 362,958,592 1,370,427,532 23,742,045,885 27,146,994,547
Financial liabilities ------53,769,398 53,769,398 Payables arising from main operations - 58,607,158 1,243,039 4,479,832 - - 23,169,404,505 23,233,734,534 Due to related parties - 33,290 - 60,849 - - 117 94,256 Other payables - 21,922,070 - - - - 10,873,729 32,795,799 Insurance technical provisions ------2,432,168,782 2,432,168,782 Provisions for taxes and other similar obligations - 17,163,696 - - - - 31,848,657 49,012,353 Deferred income and expense accruals ------7,303,198 7,303,198 Other short term liabilities ------Provisions for other risks - 2,000,000 - 15,300,000 - 22,016,074 11,737,733 51,053,807 Deferred tax liabilities ------1,173,101 1,173,101 Shareholders’ equity ------1,285,889,319 1,285,889,319 Total liabilities - 99,726,214 1,243,039 19,840,681 - 22,016,074 27,004,168,539 27,146,994,547 Net liquidity surplus/(deficit) 52,446,026 668,573,246 656,349,398 173,383,934 362,958,592 1,348,411,458 (3,262,122,654) -
226 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Market risk
Market risk is the risk that changes in market prices, such as interest rate, 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 optimising the return on risk.
Foreign currency risk
The Company is exposed to foreign 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 (CBRT) spot purchase rates and the differences arising from foreign currency rates are recorded as foreign exchange gain or loss in the statement of operations.
Parallel to the general characteristic of Turkish insurance sector, the Company holds long position in terms of US Dollar and Euro.
The Company’s exposure to foreign currency risk is as follows:
Foreign currency position table - December 31, 2020 Total TL (Functional currency) US Dollar Euro GBP CHF JPY 1. Cash at banks 19,264,880 637,984 18,604,518 22,297 81 - 2. Financial assets and financial investments with risks on policyholders 1,990,688,326 1,569,365,722 386,826,133 34,496,471 - - 3. Receivables from main operations 51,117,506 43,348,167 7,749,232 20,107 - - 4. Reinsurance receivables 2,487,152 - 2,487,152 - - - 5. Rent receivables ------6. Deposits given 80,746 80,746 - - - - Foreign currency assets, current 2,063,638,610 1,613,432,619 415,667,035 34,538,875 81 - 7. Total assets 2,063,638,610 1,613,432,619 415,667,035 34,538,875 81 -
8. Other miscellaneous payables 1,040,329 409,697 630,632 - - - 9. Payables to reinsurers 91,857 85,255 - 6,596 - 6 10. Agency guarantees 579,836 555,462 24,374 - - - 11. Technical provisions (*) 2,014,167,508 1,591,750,936 387,124,490 35,287,701 481 3,900 Foreign currency liabilities, short term 2,015,879,530 1,592,801,350 387,779,496 35,294,297 481 3,906 12. Total liabilities 2,015,879,530 1,592,801,350 387,779,496 35,294,297 481 3,906
Net financial position 47,759,080 20,631,269 27,887,539 (755,422) (400) (3,906) Net foreign currency assets/(liabilities) position on monetary items 47,678,334 20,550,523 27,887,539 (755,422) (400) (3,906)
(*) The Company’s foreign currency denominated financial assets and financial investments with risks on policyholders are measured at their fair values, technical provisions are measured at amortised cost in financial statements. In order to eliminate inconsistency between these interconnected asset and liability, the difference between fair value and amortised cost of financial assets which are classified as available for sale financial assets is added to technical provisions.
Anadolu Hayat Emeklilik 2020 Annual Report 227 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Foreign currency position table - December 31, 2019 Total TL (Functional currency) US Dollar Euro GBP CHF JPY 1. Cash at banks 36,930,684 5,285,143 31,187,372 225,641 232,528 - 2. Financial assets and financial investments with risks on policyholders 1,094,293,829 891,681,865 173,576,944 29,035,020 - - 3. Receivables from main operations 8,409,297 6,980,143 1,417,391 11,763 - - 4. Reinsurance receivables ------5. Rent receivables ------6. Deposits given 65,342 65,342 - - - - Foreign currency assets, current 1,139,699,152 904,012,493 206,181,707 29,272,424 232,528 - 7. Total assets 1,139,699,152 904,012,493 206,181,707 29,272,424 232,528 -
8. Other miscellaneous payables 10,457,821 10,309,883 147,938 - - - 9. Payables to reinsurers 440,437 393,651 - 46,776 - 10 10. Agency guarantees 531,846 506,868 24,978 - - - 11. Technical provisions (*) 1,138,266,535 909,825,237 200,431,421 27,999,712 353 9,812 Foreign currency liabilities, short term 1,149,696,639 921,035,639 200,604,337 28,046,488 353 9,822 12. Total liabilities 1,149,696,639 921,035,639 200,604,337 28,046,488 353 9,822
Net financial position (9,997,487) (17,023,146) 5,577,370 1,225,936 232,175 (9,822) Net foreign currency assets/(liabilities) position on monetary items (10,062,829) (17,088,488) 5,577,370 1,225,936 232,175 (9,822)
(*) The Company’s foreign currency denominated financial assets and financial investments with risks on policyholders are measured at their fair values, technical provisions are measured at amortised cost in financial statements. In order to eliminate inconsistency between these interconnected asset and liability, the difference between fair value and amortised cost of financial assets which are classified as available for sale financial assets is added to technical provisions.
Foreign currency transactions are recorded at exchange rates at the transaction dates and foreign currency denominated monetary items are evaluated by the Central Bank of the Republic of Turkey’s spot purchase rates as at reporting dates.
Foreign currency rates used for the translation of foreign currency denominated monetary assets and liabilities as at reporting periods are as follows:
December 31, 2020 US Dollar Euro GBP CHF JPY
Foreign currency rate used in translation of balance sheet items 7.3405 9.0079 9.9438 8.2841 0.0709
December 31, 2019 US Dollar Euro GBP CHF JPY
Foreign currency rate used in translation of balance sheet items 5.9402 6.6506 7.7765 6.0932 0.0543
Exposure to foreign currency risk
A 10 percent depreciation of the TL against the following currencies as at December 31, 2020 and December 31, 2019 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.
228 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Exchange rate sensitivity analysis table - December 31, 2020 Profit/loss Equity(1) Appreciation of Depreciation of Appreciation of Depreciation of foreign currency foreign currency foreign currency foreign currency
If USD value changes by 10% against TL: 1- Net US Dollar assets/liabilities 923,926 (923,926) 2,063,127 (2,063,127) 2- Hedged portion from US Dollar risk (-) - - - - 3- Net effect of US Dollar (1+2) 923,926 (923,926) 2,063,127 (2,063,127)
If EUR value changes by 10% against TL: 4- Net Euro assets/liabilities 2,545,811 (2,545,811) 2,788,754 (2,788,754) 5- Hedged portion from Euro risk (-) - - - - 6- Net effect of Euro (4+5) 2,545,811 (2,545,811) 2,788,754 (2,788,754)
If GBP value changes by 10% against TL: 7- Net GBP assets/liabilities (84,952) 84,952 (75,542) 75,542 8- Hedged portion from GBP risk (-) - - - - 9- Net effect of GBP (7+8) (84,952) 84,952 (75,542) 75,542
If CHF value changes by 10% against TL: 10- Net CHF assets/liabilities (40) 40 (40) 40 11- Hedged portion from CHF risk (-) - - - - 12- Net effect of CHF (10+11) (40) 40 (40) 40
If JPY value changes by 10% against TL: 13- Net JPY assets/liabilities (391) 391 (391) 391 14- Hedged portion from JPY risk (-) - - - - 15- Net effect of JPY (13+14) (391) 391 (391) 391
Total (3+6+9+12+15) 3,384,354 (3,384,354) 4,775,908 (4,775,908)
(1) Includes profit/loss effect.
Anadolu Hayat Emeklilik 2020 Annual Report 229 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Exchange rate sensitivity analysis table - December 31, 2019 Profit/loss Equity(1) Appreciation of Depreciation of Appreciation of Depreciation of foreign currency foreign currency foreign currency foreign currency
If USD value changes by 10% against TL: 1- Net US Dollar assets/liabilities (1,864,215) 1,864,215 (1,702,315) 1,702,315 2- Hedged portion from US Dollar risk (-) - - - - 3- Net effect of US Dollar (1+2) (1,864,215) 1,864,215 (1,702,315) 1,702,315
If EUR value changes by 10% against TL: 4- Net Euro assets/liabilities 505,668 (505,668) 557,737 (557,737) 5- Hedged portion from Euro risk (-) - - - - 6- Net effect of Euro (4+5) 505,668 (505,668) 557,737 (557,737)
If GBP value changes by 10% against TL: 7- Net GBP assets/liabilities 121,643 (121,643) 122,594 (122,594) 8- Hedged portion from GBP risk (-) - - - - 9- Net effect of GBP (7+8) 121,643 (121,643) 122,594 (122,594)
If CHF value changes by 10% against TL: 10- Net CHF assets/liabilities 23,217 (23,217) 23,217 (23,217) 11- Hedged portion from CHF risk (-) - - - - 12- Net effect of CHF (10+11) 23,217 (23,217) 23,217 (23,217)
If JPY value changes by 10% against TL: 13- Net JPY assets/liabilities (982) 982 (982) 982 14- Hedged portion from JPY risk (-) - - - - 15- Net effect of JPY (13+14) (982) 982 (982) 982
Total (3+6+9+12+15) (1,214,669) 1,214,669 (999,749) 999,749
(1) Includes profit/loss effect.
Interest risk
Exposure to interest risk
The changes in interest rate that arise fluctuations in prices of financial instruments lead to the necessity of overcoming interest rate risk. The Company’s sensitivity for interest rate risk is related to the inconsistency of maturity of asset and liability items. The interest risk is managed by compensating the assets exposed to the interest fluctuations with the identical liabilities.
Financial instruments which are sensitive to the changes in interest rates are given in the table below:
December 31, 2020 December 31, 2019
Fixed rate financial instruments Financial assets 3,092,465,779 2,193,341,949 Available-for-sale financial assets 2,732,210,921 2,140,627,812 Loans and receivables 360,254,858 52,714,137 Time deposits 451,920,893 653,352,901
Variable rate financial instruments Financial assets 625,224,053 251,269,988 Available-for-sale financial assets 625,224,053 251,269,988
230 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Interest rate sensitivity of financial instruments
As at December 31, 2020 and December 31, 2019, interest rate risk analysis of financial assets and financial liabilities are summarised in the table below:
3 to 12 1 to 5 5 years Non-interest December 31, 2020 Up to 1 month 1 to 3 months months years and over bearing Total Assets: Cash and cash equivalents 511,936,919 133,473,942 - - 21,086,843 666,497,704 Financial assets and investments with risks on policyholders 110,986,986 231,768,686 925,472,417 664,869,543 1,812,830,708 548,306,904 4,294,235,244 Receivables from main operations 5,852,594 10,963,822 20,876,681 - - 30,566,630,655 30,604,323,752 Due from related parties ------Other receivables 138,939,396 - - - 867,825 139,807,221 Prepaid expenses and income accruals, short term - - - - - 60,454,977 60,454,977 Other current assets - - - - - 19,808 19,808 Other current receivables ------Financial assets (Associates) - - - - - 33,391,595 33,391,595 Tangible assets - - - - - 267,372,838 267,372,838 Intangible assets - - - - - 16,616,741 16,616,741 Prepaid expenses and income accruals, long term - - - - - 5,032,723 5,032,723 Deferred tax assets ------Total assets 767,715,895 376,206,450 946,349,098 664,869,543 1,812,830,708 31,519,780,909 36,087,752,603 Liabilities: Financial liabilities - - 4,812,019 20,962,799 28,916,001 - 54,690,819 Payables arising from main operations 49,200,381 - 5,563,279 - - 30,815,852,302 30,870,615,962 Due to related parties 61,036 - 92,787 - - 195 154,018 Other liabilities 92,636 - - - - 21,600,612 21,693,248 Insurance technical provisions 7,535,952 25,201,419 100,057,216 503,173,881 1,315,656,185 1,461,680,843 3,413,305,496 Provisions for taxes and other similar obligations 21,976,653 - - - - 19,146,913 41,123,566 Deferred income and expense accruals - - - - - 13,052,342 13,052,342 Other short term liabilities ------Provisions for other risks 2,100,000 - 17,100,000 - 26,177,882 15,009,243 60,387,125 Deferred tax liabilities - - - - - 10,836,662 10,836,662 Shareholders’ equity - - - - - 1,601,893,365 1,601,893,365 Total liabilities and equity 80,966,658 25,201,419 127,625,301 524,136,680 1,370,750,068 33,959,072,477 36,087,752,603
Net position 686,749,237 351,005,031 818,723,797 140,732,863 442,080,640 (2,439,291,568) -
Anadolu Hayat Emeklilik 2020 Annual Report 231 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
3 to 12 1 to 5 5 years Non-interest December 31, 2019 Up to 1 month 1 to 3 months months years and over bearing Total Assets: Cash and cash equivalents 185,146,418 419,330,291 - - - 52,446,026 656,922,735 Financial assets and investments with risks on policyholders 540,540,976 228,011,764 361,296,108 296,773,884 1,246,000,969 391,658,341 3,064,282,042 Receivables from main operations 5,502,415 10,237,969 22,539,778 - - 23,012,766,638 23,051,046,800 Due from related parties - 12,413 - - - - 12,413 Other receivables 37,109,651 - - - 1,357,432 38,467,083 Prepaid expenses and income accruals, short term - - - - - 49,478,060 49,478,060 Other current assets - - - - - 17,048 17,048 Other current receivables ------Financial assets (Associates) - - - - - 24,978,982 24,978,982 Tangible assets - - - - - 242,224,002 242,224,002 Intangible assets - - - - - 16,840,377 16,840,377 Prepaid expenses and income accruals, long term - - - - - 2,725,005 2,725,005 Deferred tax assets ------Total assets 768,299,460 657,592,437 383,835,886 296,773,884 1,246,000,969 23,794,491,911 27,146,994,547 Liabilities: Financial liabilities - - - - - 53,769,398 53,769,398 Payables arising from main operations 58,607,158 1,243,039 4,479,832 - - 23,169,404,505 23,233,734,534 Due to related parties 33,290 - 60,849 - - 117 94,256 Other liabilities 21,922,070 - - - - 10,873,729 32,795,799 Insurance technical provisions - - - - - 2,432,168,782 2,432,168,782 Provisions for taxes and other similar obligations 17,163,696 - - - - 31,848,657 49,012,353 Deferred income and expense accruals - - - - - 7,303,198 7,303,198 Other short term liabilities ------Provisions for other risks 2,000,000 - 15,300,000 - 22,016,074 11,737,733 51,053,807 Deferred tax liabilities - - - - - 1,173,101 1,173,101 Shareholders’ equity - - - - - 1,285,889,319 1,285,889,319 Total liabilities and equity 99,726,214 1,243,039 19,840,681 - 22,016,074 27,004,168,539 27,146,994,547
Net position 668,573,246 656,349,398 363,995,205 296,773,884 1,223,984,895 (3,209,676,628) -
232 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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 as at and for December 31, 2020 and 2019 of the floating rate non-trading financial assets and financial liabilities held at . Interest rate sensitivity of equity is calculated by considering change due to effects of the assumed changes in interest rates in fair value of government bond and treasury bond which are significant portion of the Company’s own portfolio, as at December 31, 2020 and 2019. 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.
100 bp 100 bp 500 bp 500 bp December 31, 2020 increase decrease increase decrease
Company’s own portfolio (12,596,228) 13,252,472 (57,384,560) 73,870,905 Total, net (12,596,228) 13,252,472 (57,384,560) 73,870,905
100 bp 100 bp 500 bp 500 bp December 31, 2019 increase decrease increase decrease
Company’s own portfolio (5,874,320) 6,169,332 (26,853,289) 34,404,520 Total, net (5,874,320) 6,169,332 (26,853,289) 34,404,520
Fair value information
The estimated fair values of financial instruments have been determined using available market information, and where it exists, appropriate valuation methodologies.
The Company has classified its financial assets as held for trading purpose or available for sale. As at reporting period, available for sale financial assets and financial assets held for trading are measured at their fair values which are determined by using market data or prices published by brokers, in the accompanying consolidated financial statements.
Management estimates that the fair value of other financial assets and liabilities are not materially different than their carrying values.
Classification relevant to fair value information
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).
If classification is available for usage, it necessitates the utilisation of observable market data.
Anadolu Hayat Emeklilik 2020 Annual Report 233 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
The classification of fair value measurements of financial assets and liabilities measured at fair value is as follows:
December 31, 2020 Level 1 Level 2 Level 3 Total
Financial assets(1): Financial assets held for trading 260,119,043 - - 260,119,043 Available for sale financial assets(2) 911,857,327 - - 911,857,327 Financial investments with risks on policyholders classified as available for sale 2,678,515,399 - - 2,678,515,399 Financial investments with risks on policyholders classified as held for trading 52,981,983 - - 52,981,983 Receivables from individual pension business(3) 30,434,759,762 - - 30,434,759,762 Total financial assets 34,338,233,514 - - 34,338,233,514
Financial liabilities: Investment contract liabilities - life mathematical provision for saving life policies 3,185,639,115 - - 3,185,639,115 Payables arising from individual pension business(3) 30,434,759,762 - - 30,434,759,762 Total financial liabilities 33,620,398,877 - - 33,620,398,877
(1) As at December 31, 2020, time deposits in financial investments with risks on policyholders amounting to TL 28,238,508 are not included in the table. (2) As at December 31, 2020, equity shares that are amounting to TL 2,268,126 occurred resulting cost value TL 8,484,547 and its impairment TL 6,216,421, have been measured with cost value and have excluded from the table because of they are not publicly traded. (3) Includes investments directed individual pension funds.
December 31, 2019 Level 1 Level 2 Level 3 Total
Financial assets(1): Financial assets held for trading 191,398,602 - - 191,398,602 Available for sale financial assets(2) 877,225,411 - - 877,225,411 Financial investments with risks on policyholders classified as available for sale 1,674,214,583 - - 1,674,214,583 Financial investments with risks on policyholders classified as for the purposes of purchase and sale 35,524,079 35,524,079 Receivables from individual pension business 22,913,666,145 - - 22,913,666,145 Total financial assets 25,692,028,820 - - 25,692,028,820
Financial liabilities: Investment contract liabilities - life mathematical provision for saving life policies 2,231,797,169 - - 2,231,797,169 Payables arising from individual pension business(3) 22,913,666,145 - - 22,913,666,145 Total financial liabilities 25,145,463,314 - - 25,145,463,314
(1) As at December 31, 2019, time deposits in financial investments with risks on policyholders amounting to TL 228,011,764 are not included in the table. (2) As at December 31, 2019, equity shares that are amounting to TL 5,193,466 occurred resulting cost value -TL 9,718,274 and its impairment -TL 4,524,808, have been measured with cost value and have excluded from the table because of they are not publicly traded. (3) Includes investments directed individual pension funds.
234 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Equity share price risk
Equity share price risk is defined as the risk of decreasing the market price of equity shares as a result of a decline in index.
The effect of changes in fair values of all equity shares publicly traded in the available-for-sale financial assets on equity that is resulted from the fluctuations on index (all of the other variables are assumed to be fixed) are as follows for the periods ended December 31, 2020 and December 31, 2019.
Change of price December 31, 2020 December 31, 2019 Market price of equity share 10% 23,293,775 15,954,219
The effect of changes in fair values of all equity shares publicly traded in the financial assets held for trading on statement of income that is resulted from the fluctuations on index (all of the other variables are assumed to be fixed) are as follows as at December 31, 2020 and December 31, 2019.
Change of price December 31, 2020 December 31, 2019 Market price of equity share 10% - -
(*) As at 31.12.2020 The Company has no equity shares publicly traded in the financial assets held for trading.
Capital management
The aim of the Company’s capital management is defined as to provide the continuity of profit-making company, to protect the benefits of the shareholders and institutional partners and also to conduct the most efficient capital structure in order to reduce the cost of capital.
The capital adequacy of the Company is calculated in accordance with the Decree “Measurement and Assessment of Capital Adequacy of Insurance and Reinsurance Companies and Pension Funds” in all reporting periods. The Capital Adequacy calculated according to two methods are in line with the minimum requirements. The Company’s recent capital adequacy table prepared as at the report date for June 30, 2020 is summarised below. As at June 30, 2020, the capital adequacy of the Company is TL 342,013,143 and TL 491,256,548; based on first and second method respectively. By the table below, it is observed that capital adequacy balances calculated by using first and second methods are less than the Company’s capital as at June 30, 2020. The Company’s capital calculated based on the regulation as at June 30, 2020 is TL 1,312,250,078 Consequently, the Company’s capital is adequate.
Capital adequacy table June 30, 2020 December 31, 2019 First Method Required capital for non-life branches 152,054 163,203 Required capital for life branch 208,881,006 174,334,269 Required capital for pension branch 132,980,083 114,568,331 Required capital based on the first method 342,013,143 289,065,803
Second Method Required capital for asset risk 397,196,542 330,422,631 Required capital for reinsurance risk 3,004,272 2,458,137 Required capital for outstanding claims risk 5,460,610 5,195,079 Required capital for underwriting risk 82,891,417 58,735,202 Required capital for interest rate and currency risk 2,703,707 749,812 Required capital based on the second method 491,256,548 397,560,861
Required capital 491,256,548 397,560,861 Current capital(1) 1,312,250,078 1,313,106,593 Excessive capital 820,993,530 915,545,732
(1) According to legal regulations, equalisation provision of TL 47,494,681 (December 31, 2019: TL 39,434,063) have been included in the amount for equity.
Anadolu Hayat Emeklilik 2020 Annual Report 235 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
5 Segment reporting
Segmenting of balance sheet and income statement items is based on the distribution key described in Circular “Principles and Procedures of Distribution Keys Used in Financial Statements under the Insurance Uniformed Chart of Accounts” issued by the Ministry on January 4, 2008 and Circular “Amendments to Principles and Procedures of Distribution Keys Used in Financial Statements under the Insurance Uniformed Chart of Accounts” issued by the Ministry on August 9, 2010.
December 31, 2020 Life Individual pension Non-Life Total
Continuing operations: Technical income 2,179,293,930 506,282,690 591,910 2,686,168,530 Technical expense (1,851,680,989) (360,755,917) (1,521,624) (2,213,958,530) Total of other income and expense 70,193,780 111,505,638 1,366,807 183,066,225 Income before tax 397,806,721 257,032,411 437,093 655,276,225 Income tax expense - - - (128,336,961) Net profit for the period 397,806,721 257,032,411 437,093 526,939,264
Individual December 31, 2020 Life pension Non-Life Total
Segment assets 3,896,213,534 32,115,672,336 75,866,733 36,087,752,603 Total assets 3,896,213,534 32,115,672,336 75,866,733 36,087,752,603
Segment liabilities (4,089,421,151) (31,918,910,021) (79,421,431) 36,087,752,603) Total liabilities (4,089,421,151) (31,918,910,021) (79,421,431) (36,087,752,603)
Other segment information Depreciation and amortisation (12,022,342) (19,097,972) (234,098) (31,354,412)
December 31, 2019 Life Individual pension Non-Life Total
Continuing operations: Technical income 1,493,819,611 427,720,032 548,127 1,922,087,770 Technical expense (1,229,741,045) (337,039,910) (1,573,382) (1,568,354,337) Total of other income and expense 52,433,169 72,765,560 1,064,606 126,263,335 Income before tax 316,511,735 163,445,682 39,351 479,996,768 Income tax expense - - - (119,305,000) Net profit for the period 316,511,735 163,445,682 39,351 360,691,768
Individual December 31, 2019 Life pension Non-Life Total
Segment assets 2,912,911,540 24,174,939,103 59,143,904 27,146,994,547 Total assets 2,912,911,540 24,174,939,103 59,143,904 27,146,994,547
Segment liabilities (3,052,586,958) (24,032,616,291) (61,791,298) (27,146,994,547) Total liabilities (3,052,586,958) (24,032,616,291) (61,791,298) (27,146,994,547)
Other segment information Depreciation and amortisation (15,396,654) (21,367,126) (312,615) (37,076,395)
236 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
6 Tangible assets
Movement in tangible assets in the period from January 1 to December 31, 2020 is presented below:
January 1, 2020 Additions Increase in value Disposals December 31, 2020 Cost: Owner occupied land and buildings 4,700,000 - - - 4,700,000 Machinery and equipment 54,127,336 3,075,789 - (1,161,675) 56,041,450 Vehicles 592,474 - - - 592,474 Furniture and fixtures (includes leased assets) 6,476,825 658,173 - (157,632) 6,977,366 Leasehold improvements 14,111,319 2,709,280 - (283,417) 16,537,182 Operating leases (1) 58,929,598 7,741,607 - (1,614,612) 65,056,593 138,937,552 14,184,849 - (3,217,336) 149,905,065 Accumulated depreciation: Owner occupied land and buildings (13,135) (13,135) - - (26,270) Machinery and equipment (31,949,738) (8,742,172) - 1,087,373 (39,604,537) Vehicles (307,266) (83,444) - - (390,710) Furniture and fixtures (includes leased assets) (4,566,140) (636,681) - 151,095 (5,051,726) Leasehold improvements (4,256,617) (1,463,289) - 283,416 (5,436,490) Operating leases (1) (8,689,412) (8,463,839) - 296,265 (16,856,986) (49,782,308) (19,402,560) - 1,818,149 (67,366,719)
Carrying amounts 89,155,244 82,538,346
(1) Tangible assets which are not covered by TFRS 16 but also obtained by finance lease are presented in the furniture and fixtures.
Owner occupied properties are evaluated by revaluation method and subjected to valuation. Appraisal reports were provided by CMB licensed real estate appraisal company at the end of 2018. There is no pledge on the properties.
As of December 31, 2020, the fair values (excluding VAT) and net carrying values of owner occupied properties are presented below:
Net carrying value Owner occupied land and buildings Appraisal value (December 31, 2020)
Building/Southern Anatolia district sales office/Adana 2,600,000 2,573,730 Land/İstanbul Kağıthane 2,100,000 2,100,000 Total 4,700,000 4,673,730
Anadolu Hayat Emeklilik 2020 Annual Report 237 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Fair value measurement
The fair values of owner occupied land and buildings were determined by sales comparison approach. Owner occupied lands and buildings with fair value measured by sales comparison approach, are classified as Level 2.
Movement in tangible assets in the period from January 1 to December 31, 2019 is presented below:
Increase January 1, 2019 Additions in value Disposals December 31, 2019 Cost: Owner occupied land and buildings 4,700,000 - - - 4,700,000 Machinery and equipment 45,818,086 9,352,859 - (1,043,609) 54,127,336 Vehicles 502,597 158,900 - (69,023) 592,474 Furniture and fixtures (includes leased assets) 6,341,370 180,254 - (44,799) 6,476,825 Leasehold improvements 12,371,453 1,924,347 - (184,481) 14,111,319 Operating leases - 58,929,598 - - 58,929,598 69,733,506 70,545,958 - (1,341,912) 138,937,552 Accumulated depreciation: Owner occupied land and buildings - (13,135) - - (13,135) Machinery and equipment (24,022,869) (8,983,223) - 1,056,354 (31,949,738) Vehicles (258,463) (100,571) - 51,768 (307,266) Furniture and fixtures (includes leased assets) (3,981,482) (627,095) - 42,437 (4,566,140) Leasehold improvements (3,236,770) (1,204,328) - 184,481 (4,256,617) Operating leases - (8,689,412) - - (8,689,412) (31,499,584) (19,617,764) - 1,335,040 (49,782,308)
Carrying amounts 38,233,922 89,155,244
7 Investment properties
Properties held to earn rentals and/or acquire capital appreciation are classified as investment properties.
Movement in investment properties in the period from January 1 to December 31, 2020 is presented below:
January 1, 2020 Additions Increase in value Disposals December 31, 2020
Land/İstanbul Ömerli 67,068,758 - 15,960,000 (754,266) 82,274,492 Building/İstanbul Gayrettepe 57,000,000 - 14,150,000 - 71,150,000 Building/Mersin 29,000,000 - 2,410,000 - 31,410,000 153,068,758 - 32,520,000 (754,266) 184,834,492 Carrying amounts 153,068,758 184,834,492
Movement in investment properties in the period from January 1 to December 31, 2019 is presented below:
January 1, 2019 Additions Increase in value Disposals December 31, 2019
Land/İstanbul Ömerli 60,429,755 - 6,700,000 (60,997) 67,068,758 Building/İstanbul Gayrettepe 56,300,000 - 700,000 - 57,000,000 Building/Mersin 29,000,000 - - - 29,000,000 145,729,755 - 7,400,000 (60,997) 153,068,758 Carrying amounts 145,729,755 153,068,758
For the period ended December 31, 2020, the Company has rental income from investment properties amounting to TL 943,714 (December 31, 2019: TL 858,473). The Company has a net gain from increase in value of investment properties amounting to TL 32,520,000 (December 31, 2019: 7.400.000 TL).
The appraisal values (excluding VAT) and net carrying values of investment properties are presented below. Appraisal reports were provided by CMB licensed real estate appraisal company at November and December 2020. There is no mortgage on the properties aforementioned.
238 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Appraisal and net carrying value Net carrying value Net carrying value Investment land and buildings (December 31, 2020) (December 31, 2019)
Land/İstanbul Ömerli 82,274,492 67,068,758 Building/İstanbul Gayrettepe 71,150,000 57,000,000 Building/Mersin 31,410,000 29,000,000 Appraisal and net carrying value 184,834,492 153,068,758
Fair value measurement
The fair values of investment properties were determined by sales comparison approach. Investment properties with fair value measured by sales comparison approach, are classified as Level 2.
8 Intangible assets
Movement in intangible assets in the period from January 1 to December 31, 2020 is presented below:
January 1, 2020 Additions Transfers December 31, 2020 Cost: Rights 90,121,930 11,728,214 - 101,850,144 90,121,930 11,728,214 - 101,850,144 Accumulated amortisation: Rights (73,281,553) (11,951,850) - (85,233,403) (73,281,553) (11,951,850) - (85,233,403)
Carrying amounts 16,840,377 16,616,741
Movements in intangible assets in the period from January 1 to December 31, 2019 is presented below:
January 1, 2019 Additions Transfers December 31, 2019 Cost: Rights 83,364,583 6,757,347 - 90,121,930 83,364,583 6,757,347 - 90,121,930 Accumulated amortisation: Rights (55,822,922) (17,458,631) - (73,281,553) (55,822,922) (17,458,631) - (73,281,553)
Carrying amounts 27,541,661 16,840,377
9 Investments in associates
December 31, 2020 December 31, 2019 Carrying value Participation rate % Carrying value Participation rate %
İş Portföy Yönetimi AŞ 33,391,595 20.0% 24,978,982 20.0% Investments in associates, net 33,391,595 24,978,982
Total Shareholders’ Retained Profit for Reviewed Associate assets equity earnings the period or not Period İş Portföy Yönetimi AŞ 187,408,826 166,957,976 18,904,830 59,349,560 Reviewed December 31, 2020
TL 11,869,912 of income is obtained from associates through equity accounted consolidation method (December 31, 2019: TL 7,428,943).
Anadolu Hayat Emeklilik 2020 Annual Report 239 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
10 Reinsurance assets and liabilities
Outstanding reinsurance assets and liabilities of the Company, as a ceding company in accordance with the existing reinsurance contracts are as follows:
Reinsurance assets December 31, 2020 December 31, 2019
Life mathematical reserve, ceded (Note 17,15) 4,166,658 3,803,491 Provision for outstanding claims, ceded (Note 17,15) 10,786,917 6,709,653 Reserve for unearned premiums, ceded (Note 17,15) 3,574,236 3,851,643 Provision for bonus and discount, ceded (Note 17,15) 293,862 365,948 Reserve for unexpired risks, ceded (Note 17,15) - - Other technical provision, ceded 1,304,948 1,014,229 Receivables from reinsurance companies 505,373 - Total 20,631,994 15,744,964
There are not any impairment losses recognised for reinsurance assets.
Reinsurance liabilities December 31, 2020 December 31, 2019
Payables to reinsurance companies - 1,243,040 Cash deposited by insurance and reinsurance companies (Note 19) 5,563,279 4,479,832 Total 5,563,279 5,722,872
Gains and losses recognised in the statement of income in accordance with existing reinsurance contracts are as follows:
December 31, 2020 December 31, 2019
Life branch: Premiums ceded during the period (25,010,530) (22,236,204) Change in unearned premiums reserve, ceded (294,779) 836,790 Commissions received from reinsurers(1) 7,498,708 5,638,926 Reinsurers share of claims paid 8,790,643 10,770,140 Change in outstanding claims, ceded 4,169,382 2,316,360 Change in provision for bonus and discount, ceded (74,083) (563,156) Change in life mathematical reserve, ceded 363,167 709,465 (4,557,492) (2,527,679)
Non-life branch: Premiums ceded during the period (407,133) (509,894) Change in unearned premiums reserve, ceded 17,372 23,272 Commissions received from reinsurers(1) 106,160 159,993 Reinsurers share of claims paid 68,188 29,826 Change in outstanding claims, ceded (49,876) 17,516 Change in provision for bonus and discount, ceded 1,998 (4,135) (263,291) (283,422)
Total, net (4,820,783) (2,811,101)
(1) Deferred commissions are excluded from commissions received from reinsurers.
240 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
11 Financial assets
As at December 31, 2020 and December 31, 2019, the Company’s financial assets are detailed as follows:
Financial assets and financial investments with risk on policyholders December 31, 2020 December 31, 2019
Available for sale financial assets, Company’s own portfolio 920,341,874 886,943,685 Financial assets held for trading 260,119,043 191,398,602 Loans and receivables 360,254,858 52,714,137 Financial investments with risks on saving life policyholders classified as held for trading and available for sale 2,759,735,890 1,937,750,426 Impairment loss on financial assets (6,216,421) (4,524,808) Total 4,294,235,244 3,064,282,042
As at December 31, 2020 and December 31, 2019, the Company’s financial assets held for trading are detailed as follows:
December 31, 2020 Nominal value Cost Fair value Carrying value
Equity shares and other non-fixed income financial assets: Equity shares - - - - Investment funds 454,047,593 210,585,421 260,119,043 260,119,043 Total financial assets held for trading purpose - other 210,585,421 260,119,043 260,119,043
Total financial assets held for trading purpose 210,585,421 260,119,043 260,119,043
December 31, 2019 Nominal value Cost Fair value Carrying value
Equity shares and other non-fixed income financial assets: Equity shares - - - - Investment funds 175,253,384 177,679,702 191,398,602 191,398,602 Total financial assets held for trading purpose - other 177,679,702 191,398,602 191,398,602
Total financial assets held for trading purpose 177,679,702 191,398,602 191,398,602
The Company’s financial assets held for trading issued by the Company’s related parties, are detailed as follows:
December 31, 2020 Nominal value Cost Fair value Carrying value
Investment funds 454,047,593 210,585,421 260,119,043 260,119,043 Total 454,047,593 210,585,421 260,119,043 260,119,043
December 31, 2019 Nominal value Cost Fair value Carrying value
Investment funds 175,253,384 177,679,702 191,398,602 191,398,602 Total 175,253,384 177,679,702 191,398,602 191,398,602
Anadolu Hayat Emeklilik 2020 Annual Report 241 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
As at December 31, 2020 and December 31, 2019, the Company’s loans and receivables are detailed as follows:
December 31, 2020 Cost Fair value Carrying value
Reverse repo transaction 41,850,000 41,868,907 41,868,907 Receivables from Takasbank money market transections 315,415,000 318,385,951 318,385,951 Total loans and receivables 357,265,000 360,254,858 360,254,858
December 31, 2019 Cost Fair value Carrying value
Reverse repo transaction 52,700,000 52,714,137 52,714,137 Total loans and receivables 52,700,000 52,714,137 52,714,137
As at December 31, 2020 and December 31, 2019, the Company’s available for sale financial assets in its own portfolio are detailed as follows:
December 31, 2020 Nominal value Cost Fair value Carrying value
Debt instruments: Private sector bonds and asset-backed securities 159,610,000 152,317,927 153,224,091 153,224,091 Government bonds 479,312,727 458,899,153 462,306,116 462,306,116 Eurobonds issued by the Turkish Government 1,700,000 12,229,359 13,498,155 13,498,155 Eurobonds issued by the private sector 6,341,000 47,098,415 49,891,214 49,891,214 Total available for sale financial assets - debt instruments 646,963,727 670,544,854 678,919,576 678,919,576
Equity shares and other non-fixed income financial assets: Equity shares(1) 107,796,640 241,422,298 241,422,298 Total available for sale financial assets - other 107,796,640 241,422,298 241,422,298
Total available for sale financial assets 778,341,494 920,341,874 920,341,874
Impairment loss on available for sale equity shares (6,216,421) (6,216,421) (6,216,421)
Net available for sale financial assets 772,125,073 914,125,453 914,125,453
(1) Financial assets of which the fair values are measured reliably are presented at their fair values, if not, presented at their costs.
242 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
December 31, 2019 Nominal value Cost Fair value Carrying value
Debt instruments: Private sector bonds and asset-backed securities 5,130,000 5,130,000 5,144,428 5,144,428 Government bonds 693,386,660 729,558,882 707,175,969 707,175,969 Eurobonds issued by the Turkish Government 900,000 4,884,032 5,362,821 5,362,821 Total available for sale financial assets - debt instruments 699,416,660 739,572,914 717,683,218 717,683,218
Equity shares and other non-fixed income financial assets: Equity shares(1) 109,030,187 169,260,467 169,260,467 Total available for sale financial assets - other 109,030,187 169,260,467 169,260,467
Total available for sale financial assets 848,603,101 886,943,685 886,943,685
Impairment loss on available for sale equity shares (4,524,808) (4,524,808) (4,524,808)
Net available for sale financial assets 844,078,293 882,418,877 882,418,877
(1) Financial assets of which the fair values are measured reliably are presented at their fair values, if not, presented at their costs.
The Company has equity shares issued by the Company’s related parties and classified as available for sale financial assets in its own portfolio with a cost amount of TL 107,383,848 and with a carrying value TL 241,045,617 (December 31, 2019: Equity shares with a cost amount of TL 108,617,575 and a carrying amount of TL 168,883,786).).
Financial investments classified as held for trading and available-for-sale with risks on saving life policyholders (“FIRSLP”) and as at December 31, 2020 and December 31, 2019 are detailed as follows:
December 31, 2020 Nominal value Cost Fair value Carrying value
Debt instruments: Government bonds - TL 778,366,869 737,651,430 751,216,441 751,216,441 Eurobonds issued by the Turkish Government Investment funds 228,888,000 1,758,210,497 1,927,298,958 1,927,298,958 Total available for sale financial assets - debt instruments 1,007,254,869 2,495,861,927 2,678,515,399 2,678,515,399 Debt instruments for trading purposes Investment funds 486,959 26,159,153 52,981,983 52,981,983 The sum of debt instruments classified as financial assets for trading purposes 486,959 26,159,153 52,981,983 52,981,983 Time deposits 28,172,765 28,172,765 28,238,508 28,238,508 Total time deposits 28,172,765 28,172,765 28,238,508 28,238,508
Financial investments with risks on saving life policyholders 2,550,193,845 2,759,735,890 2,759,735,890
Anadolu Hayat Emeklilik 2020 Annual Report 243 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
December 31, 2019 Nominal value Cost Fair value Carrying value
Debt instruments: Government bonds - TL 605,037,341 563,522,288 585,283,574 585,283,574 Eurobonds issued by the Turkish Government Investment funds 170,588,000 1,034,924,835 1,088,931,009 1,088,931,009 Total available for sale financial assets - debt instruments 775,625,341 1,598,447,123 1,674,214,583 1,674,214,583 Debt instruments for trading purposes Investment funds 486,959 26,159,153 35,524,079 35,524,079 The sum of debt instruments classified as financial assets for trading purposes 486,959 26,159,153 35,524,079 35,524,079 Time deposits 227,111,781 227,111,781 228,011,764 228,011,764 Total time deposits 227,111,781 227,111,781 228,011,764 228,011,764
Financial investments with risks on saving life policyholders 1,851,718,057 1,937,750,426 1,937,750,426
The financial assets issued by the Company’s related parties and classified as FIRSLP are detailed as follows:
December 31, 2020 Nominal value Cost Fair value Carrying value
investment funds 486,959 26,159,153 52,981,983 52,981,983 Total investment funds 486,959 26,159,153 52,981,983 52,981,983
December 31, 2019 Nominal value Cost Fair value Carrying value
Investment funds 486,959 26,159,153 35,524,079 35,524,079 Total investment funds 486,959 26,159,153 35,524,079 35,524,079
The Company has not any securities, other than issued shares in the current period, or any matured debt securities.
Value increases/(decreases) in financial assets for the last three years:
December 31, 2020 December 31, 2019 December 31, 2018
Current financial assets: Available for sale financial assets, Company’s own portfolio 142,000,380 38,340,584 (52,949,439) Financial assets held for trading 49,533,622 13,718,900 1,195,957 Loans and receivables 2,989,858 14,137 31,715 Financial investments with risks on saving life policyholders classified as available for sale 209,542,045 86,032,369 (113,047,305) Total 404,065,905 138,105,990 (164,769,072)
Value increases/(decreases) reflect the difference between the carrying value and cost of the financial assets.
The Company has TL 6,216,421 of impairment loss arising from its available for sale investments in equity participations not having a quoted market price in an active market (December 31, 2019: TL 4,524,808).
The Company does not apply hedge accounting. Exchange rate differences arising from the payments of monetary items or different conversion rates used in the current period or at initial recognition are recognised in profit or loss.
244 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Financial assets blocked in favour of the Ministry as a guarantee for the insurance activities are as follows:
December 31, 2020 Nominal value Cost Fair value Carrying value
Financial investments with risks on saving life policyholders - debt securities 1,035,914,593 2,550,193,845 2,759,735,890 2,759,735,890 Available for sale financial assets 625,452,727 610,049,205 614,472,139 614,472,139 Time deposits 89,921,364 89,921,364 90,337,294 90,337,294 Total 1,751,288,684 3,250,164,414 3,464,545,323 3,464,545,323
December 31, 2019 Nominal value Cost Fair value Carrying value
Financial investments with risks on saving life policyholders - debt securities 1,003,224,081 1,851,718,057 1,937,750,426 1,937,750,426 Available for sale financial assets 290,756,651 299,033,595 293,332,847 293,332,847 Time deposits 237,771,502 237,771,502 238,636,475 238,636,475 Total 1,531,752,234 2,388,523,154 2,469,719,748 2,469,719,748
12 Loans and receivables
December 31, 2020 December 31, 2019
Receivables from insurance operations 68,631,908 64,328,597 Provisions for receivables from insurance operations (5,002,574) (5,002,574) Loans to the policyholders 63,328,266 40,071,706 Doubtful receivables from main operations and insurance operations 117,996 117,996 Provisions for doubtful receivables from main operations and insurance operations (117,996) (117,996) Receivables from pension activities 30,477,366,152 22,951,649,071 Net fund value of participants 30,434,759,762 22,913,666,145 Other 42,606,390 37,982,926 Total receivables from main operations 30,604,323,752 23,051,046,800 Receivables from personnel - 12,413 Other receivables 139,807,221 38,467,083 Total 30,744,130,973 23,089,526,296
The details of guarantees for the Company’s receivables are presented below:
December 31, 2020 December 31, 2019
Guarantees and commitments 4,355,343 4,562,398 Letters of guarantees 5,262,663 4,620,232 Real estate pledges 782,900 782,900 Total 10,400,906 9,965,530
December 31, 2020 December 31, 2019
Provisions for doubtful receivables from main operations and insurance operations at the beginning of the period 117,996 117,996 Collections - - Charge for the period - - Provisions for doubtful receivables from main operations and insurance operations at the end of the period 117,996 117,996
Anadolu Hayat Emeklilik 2020 Annual Report 245 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Provision for both overdue receivables and receivables not due yet a) Receivables under legal or administrative follow up (due): TL 117,996 (December 31, 2019: TL 117,996). b) Provision for premium receivables (due): TL 5.002.574 (December 31, 2019: TL 5.002.574).
The Company provides provision for its doubtful receivables in the legal follow-up by considering the value and nature of the receivable.
The Company reflects its receivables from and payables to reinsurance and insurance companies by netting off on the entity basis.
The Company’s receivables from and payables to shareholders, associates and subsidiaries are detailed in note 45 - Related party transactions.
13 Derivative financial instruments
At the reporting period, the Company has not any derivative financial instruments.
14 Cash and cash equivalents
As at December 31, 2020 and December 31, 2019, cash and cash equivalents are as follows:
December 31, 2020 December 31, 2019 At the At the beginning of At the At the beginning of end of the period the period end of the period the period
Cash on hand 104 219 219 1,002 Bank deposits 444,769,124 477,786,945 477,786,945 320,570,433 Bank guaranteed credit card receivables with maturities less than three months(1) 221,728,476 179,135,571 179,135,571 197,086,418 Cheques given and payment orders - - - (16) Cash and cash equivalents in the balance sheet 666,497,704 656,922,735 656,922,735 517,657,837
Blocked amount(2) (Note 11) (90,337,294) (238,636,475) (238,636,475) (178,507,685) Interest accruals on bank deposits (1,824,047) (92,143) (92,143) (1,059,122) Term deposits with original maturities of longer than 3 months - (131,612,519) (131,612,519) - Cash and cash equivalents presented in the statement of cash flow 574,336,363 286,581,598 286,581,598 338,091,030
(1) Bank guaranteed credit card receivables with maturities less than three months include credit card receivables from banks in relation to premium payments of policyholders. (2) As at December 31, 2020, this amount regarding insurance operations is blocked in favour for the Ministry.
As at December 31, 2020 and December 31, 2019, bank deposits are further analysed as follows:
December 31, 2020 December 31, 2019
Foreign currency denominated bank deposits - time deposits - - - demand deposits 19,264,880 36,930,684 Bank deposits in TL - time deposits 423,682,385 425,341,138 - demand deposits 1,821,859 15,515,123 Cash at banks 444,769,124 477,786,945
As at December 31, 2020, TL time deposits have a maximum maturity of 33 days and their simple interest rates vary between 16.50% and 18.75%. The Company has not any foreign currency denominated bank deposits.
As at December 31, 2019, TL time deposits have a maximum maturity of 90 days and their simple interest rates vary between 10.00% and 23.50%. The Company has not any foreign currency denominated bank deposits.
246 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
15 Equity
Paid in capital
As at December 31, 2020, the authorised nominal share capital of the Company is TL 430,000,000 and the share capital of the Company consists of 43,000,000,000 issued shares with TL 0.01 nominal value each.
The Company’s share capital is divided into group A and group B shares. Group A shares are represented by 100,000,000 of equity shares having a nominal amount of TL 0.01 each. Group B shares are represented by 42,900,000,000 shares having a nominal amount of TL 0.01 each and all shares are owned by Türkiye İş Bankası AŞ. Group A shareholders have no privileges except for the election of Board members. In accordance with the Articles of Association, new group A shares cannot be issued in capital increases.
The Company has accepted the registered capital system set out in accordance with the Law No: 2499 and applied the system as of June 15, 2000 upon the permission no: 67/1039 granted by the Capital Markets Board. As at December 31, 2020, the Company’s registered capital is TL 900,000,000.
As at December 31, 2020, there are not any treasury shares held by the Company’s associate; namely İş Portföy Yönetimi AŞ. There are not any treasury shares held by the Company itself.
Profit on assets sale that will be transferred to capital
In accordance with tax legislation, 75% of profits from sales of participation shares and 50% of profits from sales of real estates 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.
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 reimburse losses in the event that the general reserve is used.
The movement of legal reserves is as follows:
December 31, 2020 December 31, 2019
Legal reserves at the beginning of the period 173,916,965 156,456,501 Transfer from profit 26,956,232 17,460,464 Legal reserves at the end of the period 200,873,197 173,916,965
Extraordinary reserves
The movement of extraordinary reserves is presented below:
December 31, 2020 December 31, 2019
Extraordinary reserves at the beginning of the period 120,044,612 33,273,713 Transfer from profit 1,960,951 86,770,899 Extraordinary reserves at the end of the period 122,005,563 120,044,612
Statutory reserves
The movement of statutory reserves is presented below:
December 31, 2020 December 31, 2019
Statutory reserves at the beginning of the period 52,676,523 32,870,889 Transfer from profit 26,943,603 19,805,634 Statutory reserves at the end of the period 79,620,126 52,676,523
Other profit reserves
In accordance with the revision of TAS 19, the amount of actuarial gains and losses have been presented under the Other Profit Reserves since December 31, 2013, which were previously shown under the income statement. As at December 31, 2020, actuarial loss amounting to TL (11,763,946) is presented under the other profit reserves (December 31, 2019: TL (9,662,172)). The difference arising from the owner occupied land and buildings at fair value amounting to TL 2,947,098 is also presented under the Other Profit Reserves (December 31, 2019: TL 2,947,098).
Anadolu Hayat Emeklilik 2020 Annual Report 247 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Valuation of financial assets
Movement of valuation differences of available for sale financial assets is presented below:
January 1- January 1- December 31, 2020 December 31, 2019
Valuation differences at the beginning of the period 51,636,244 (56,447,893)
Changes during the period: The effect of changes in foreign exchange rates on unrealised gains and losses, recognised due to change in the fair values of available for sale financial assets with risks on saving life policyholders 343,937 (303,245) Change in unrealised gains and losses due to changes in the fair values of available for sale financial assets with risks on saving life policyholders 82,284,104 143,182,278 Change in unrealised gains and losses due to changes in the fair values of available for sale financial assets with risks on saving life policyholders, policyholders’ portion (78,169,900) (136,023,164) Change in unrealised gains and losses from available for sale financial assets, company’s own portfolio 69,931,842 103,819,715 Deferred and corporate tax effect (3,451,240) (14,520,455)
Disposals during the period: Unrealised gains and losses transferred from equity to income statement due to disposal of available for sale financial assets with risks on saving life policyholders 293,672 27,653,334 Unrealised gains and losses transferred from equity to income statement due to disposal of available for sale financial assets with risks on saving life policyholders, policyholders’ portion (278,988) (26,270,666) Unrealised gains and losses transferred from equity to income statement due to disposal of available for sale financial assets, company’s own portfolio (790,753) 12,748,993 Deferred and corporate tax effect 155,214 (2,826,332) Fair value changes in investments in associates 788,984 623,679 Valuation differences at the end of the period 122,743,116 51,636,244
16 Other reserves and equity component of DPF
Income and expense items that are directly accrued in equity as of the reporting period are as follows:
December 31, 2020 December 31, 2019
Temporary differences arising from revaluation of financial assets 127,995,412 7,757,097 Permanent differences arising from revaluation of financial assets and actuarial gain and losses (14,681,376) 33,255,815 The differences arising from revaluation of investment properties 3,265,699 3,265,699 Deferred tax effect (2,653,467) 642,559 Total 113,926,268 44,921,170
248 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
17 Insurance contract liabilities and reinsurance assets
17.1 Total amount of guarantee that should be placed 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, 2020 December 31, 2019 Should be provided(2) Provided(1) Should be provided(2) Provided(1) Life: Financial assets(1) 2,746,372,981 3,169,653,989 2,015,927,862 2,304,906,450 Total 2,746,372,981 3,169,653,989 2,015,927,862 2,304,906,450
Non-life: Financial assets(1) 1,297,772 1,919,280 401,802 1,147,404 Total 1,297,772 1,919,280 401,802 1,147,404
Total 2,747,670,753 3,171,573,269 2,016,329,664 2,306,053,854
(1) Government bonds and treasury bills are measured at daily official prices announced by the Central Bank of Turkey as at December 31, 2020 and December 31, 2019; if these prices are not available, they are measured with stock exchange values; investment fund participation certificates are measured using the daily prices announced in accordance with the 6th Article of “Circular Related to the Financial Structure of Insurance, Reinsurance, and Individual Pension Companies”. (2) According to 7th article of “Circular Related to the Financial Structure of Insurance, Reinsurance, and Individual Pension Companies” which regulates necessary guarantee amount, minimum guarantee fund for capital adequacy calculation period will be established as a guarantee in two months following the calculation period. According to “Regulations Regarding to Capital Adequacy Measurement and Assessment of Insurance, Reinsurance, and Individual 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 Ministry within two months. As at December 31, 2020 (December 31, 2019), minimum guarantee amount of June 30, 2020 (June 30, 2019) is shown as necessary guarantee amount; since, minimum guarantee amount as at June 30, 2020 (June 30, 2019) is based on June 30, 2020 (June 30, 2019) calculations.
As at December 31, 2020, TL 1,049,374,570 of government bonds (December 31, 2019: TL 736,942,001) and TL 1,812,739,231 of Eurobonds (December 31, 2019: TL 1,066,939,535) and TL 52,981,984 (December 31, 2019: TL 35,524,079) of investment funds and TL 118,575,802 of time deposits (December 31, 2019: TL 466,648,239) are provided as guarantee for the life and non-life branches,
17.2 Number of life insurance policies, additions, disposals in the current period, and current life policy holders and the related mathematical reserves
December 31, 2020(1) December 31, 2019 Number of policies Mathematical reserves Number of policies Mathematical reserves Additions during the period 1,735,461 1,331,237,724 1,668,026 637,201,100 Disposals during the period (1,597,890) (457,674,337) (1,993,837) (300,666,810) Outstanding 2,130,573 3,097,786,101 1,993,002 2,224,222,714
(1) The above table includes 2 of reactivated life insurance policies (December 31, 2019: 65 policies) and their corresponding mathematical reserves.
As explained in Note 2 - Financial assets, available for sale financial assets with risks on saving life policyholders are measured at fair value; 95% of the fair value and amortised cost difference amounting to TL 92,019,672 (December 31, 2019: TL 11,377,946) is recognised under the life mathematical provisions, TL 4,166,658 (December 31, 2019: TL 3,803,491) of reinsurer’s share of life mathematical provisions is not offset against the mathematical provisions in the above table.
17.3 Guarantees given to non-life insurances based on branches:
December 31, 2020 December 31, 2019
Guarantees given to death by accident 7,075,669,485 5,675,509,354 Guarantees given to disability by accident 7,023,425,593 5,634,799,497 Total 14,099,095,078 11,310,308,851
Anadolu Hayat Emeklilik 2020 Annual Report 249 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
17.4 Pension investment funds established by the Company and their unit prices:
As at December 31, 2020 and December 31, 2019, individual pension investment funds founded by the Company and their unit prices are as follows:
December 31, 2020 December 31, 2019 Unit price Unit price AH1 Bond Fund 0.078147 0.072922 AH2 Money Market Fund 0.070239 0.063784 AH3 First Debt Instruments Fund (*) 0.123175 0.091578 AH4 Second Debt Instruments Fund (*) 0.097914 0.070777 AH5 Equity Fund 0.180509 0.136636 AH6 Developed Countries Flexible Fund 0.112904 0.082881 AH8 Conservative Flexible Fund 0.072585 0.066990 AH9 Balanced Flexible Fund 0.096255 0.079843 AH0 Dynamic Flexible Fund 0.156444 0.123183 AGE Participation Standard Fund 0.027485 0.022362 ABE BRIC Plus Fund 0.051113 0.043130 AHC Private Sector Debt Instruments Fund 0.026211 0.023845 AHL Aggressive Flexible Fund 0.029201 0.021917 AET Contribution Fund 0.019050 0.017270 AER Participation Contribution Fund 0.023943 0.020009 AEA Gold Fund 0.046620 0.030113 AG1 Group Bond Fund 0.078332 0.072445 AG2 Group Debt Instruments Fund 0.090218 0.068745 AG3 Group Equity Fund 0.144307 0.104996 AG4 Group Conservative Fund 0.076590 0.069646 HS1 Debt Instruments Fund 0.051886 0.047832 AHB Second Equity Fund 0.087305 0.064303 ATK Standard Fund 0.040954 0.036737 ATE Isbank Subsidiaries Index Fund 0.078756 0.050749 AO1 Initial Fund 0.017343 0.015730 AO2 Initial Participation Fund 0.016391 0.014905 AJA Auto Enrolment Aggressive Fund 0.017900 0.013362 AJB Auto Enrolment Dynamic Fund 0.018269 0.014140 AJC Auto Enrolment Balanced Fund 0.016847 0.014058 AJF Auto Enrolment Conservative Fund 0.015650 0.014011 AJG Auto Enrolment Aggressive Participation Fund 0.022573 0.014572 AJH Auto Enrolment Dynamic Participation Fund 0.020782 0.014797 AFH Auto Enrolment Standard Fund 0.015772 0.014112 AFP Auto Enrolment Participation Standard Fund 0.016065 0.014077
250 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
17.5 Number and amount of participation certificates in portfolio and circulation:
Number of participation documents in the portfolio and in circulation is such as follows as of December 31, 2020 and December 31, 2019:
December 31, 2020 December 31, 2019 Participation certificates in circulation Participation certificates in circulation Number Amount Number Amount AH1 Bond Fund 29,518,275,765.84 2,306,764,696.27 34,936,636,839.41 2,547,649,431.60 AH2 Money Market Fund 20,177,140,535.47 1,417,222,174.07 22,639,810,896.35 1,444,057,698.21 AH3 First Debt Instruments Fund (*) 20,331,184,064.60 2,504,293,597.16 20,275,861,042.58 1,856,822,802.56 AH4 Second Debt Instruments Fund (*) 10,946,762,443.34 1,071,841,297.88 9,698,733,885.85 686,447,288.24 AH5 Equity Fund 6,006,182,766.66 1,084,170,045.03 5,150,265,375.40 703,711,659.83 AH6 Developed Countries Flexible Fund 7,386,248,965.78 833,937,053.23 7,361,062,529.29 610,092,223.49 AH8 Conservative Flexible Fund 19,676,337,698.56 1,428,206,971.85 22,152,608,429.11 1,484,003,238.67 AH9 Balanced Flexible Fund 23,663,201,758.91 2,277,701,485.30 26,121,885,851.60 2,085,649,732.05 AH0 Dynamic Flexible Fund 8,410,608,001.26 1,315,789,158.15 8,739,340,240.74 1,076,538,148.88 AGE Participation Standard Fund 18,029,992,474.63 495,554,343.17 17,417,213,087.53 389,483,719.06 ABE BRIC Plus Fund 16,545,187,689.83 845,674,178.39 11,299,226,064.65 487,335,620.17 AHC Private Sector Debt Instruments Fund 50,459,669,257.15 1,322,598,390.90 32,109,416,047.33 765,649,025.65 AHL Aggressive Flexible Fund 6,746,805,508.01 197,013,467.64 4,803,238,660.76 105,272,581.73 AET Contribution Fund 212,176,429,082.71 4,041,960,974.03 191,522,883,592.49 3,307,600,199.64 AER Participation Contribution Fund 5,501,996,347.33 131,734,298.55 4,301,317,898.29 86,065,069.83 AEA Gold Fund 134,303,266,869.79 6,261,218,301.47 93,583,902,826.90 2,818,092,065.83 AG1 Group Bond Fund 2,236,384,790.65 175,180,493.42 2,958,668,122.98 214,340,712.17 AG2 Group Debt Instruments Fund 813,442,826.34 73,387,184.91 1,008,745,295.87 69,346,195.37 AG3 Group Equity Fund 943,684,745.82 136,180,314.62 858,680,286.81 90,157,995.39 AG4 Group Conservative Fund 1,812,186,436.64 138,795,359.18 2,510,909,308.27 174,874,789.68 HS1 Debt Instruments Fund 5,240,074,611.01 271,886,511.27 6,534,937,474.38 312,579,129.28 AHB Second Equity Fund 1,251,926,478.54 109,299,441.21 1,332,884,951.40 85,708,501.03 ATK Standard Fund 12,994,567,800.06 532,179,529.68 13,794,535,640.17 506,769,855.81 ATE Isbank Subsidiaries Index Fund 3,581,946,945.50 282,099,813.64 2,737,909,093.20 138,946,148.57 AO1 Initial Fund 3,878,478,315.87 67,264,449.43 5,830,253,262.45 91,709,883.82 AO2 Initial Participation Fund 2,669,176,666.13 43,750,474.73 4,223,968,854.87 62,958,255.78 AJA Auto Enrolment Aggressive Fund 892,354,000.56 15,973,136.61 490,222,276.59 6,550,350.06 AJB Auto Enrolment Dynamic Fund 896,009,842.18 16,369,203.81 571,516,674.96 8,081,245.78 AJC Auto Enrolment Balanced Fund 819,837,393.23 13,811,800.56 586,412,045.77 8,243,780.54 AJF Auto Enrolment Conservative Fund 318,534,260.30 4,985,061.17 258,836,981.50 3,626,564.95 AJG Auto Enrolment Aggressive Participation Fund 882,987,246.00 19,931,671.11 329,192,796.26 4,796,997.43 AJH Auto Enrolment Dynamic Participation Fund 723,560,028.55 15,037,024.51 364,499,906.95 5,393,505.12 AFH Auto Enrolment Standard Fund 35,808,993,625.78 564,779,447.47 27,193,202,791.80 383,750,477.80 AFP Auto Enrolment Participation Standard Fund 26,029,779,735.18 418,168,411.45 20,697,680,649.56 291,361,250.50 Total 30,434,759,761.87 22,913,666,144.52
Anadolu Hayat Emeklilik 2020 Annual Report 251 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
17.6 Portfolio amounts in terms of number of new participants left or cancelled participants and existing participants for individuals and groups:
December 31, 2020 Additions Left/cancellations during the period during the period Existing Total amount Individuals 138,153 129,693 975,710 19,039,542,031 Group 573,063 451,553 1,318,595 7,221,522,458 Total 711,216 581,246 2,294,305 26,261,064,489
December 31, 2019 Additions Left/cancellations during the period during the period Existing Total amount Individuals 188,025 160,507 957,040 13,971,307,709 Group 809,326 592,004 1,207,295 5,548,693,166 Total 997,351 752,511 2,164,335 19,520,000,875
Additions: The sum of the new contracts added in the period and their registered cumulative values as of the period end in addition with the number of the contracts that begin and finish in the same period.
Left/cancellations: The number of finalised contracts during the period and their values at their expiration dates.
Existing: The number of existing contracts and their values as of the period end.
Since retirement plan transfers between individual and group retirement plans occurs during the period, periodical changes should be followed by the total number and portfolio amount of policies. Also, when the contracts effective at the prior reporting period become a liability because of collection reversals in the current period or when the contracts effective at the prior reporting period become an asset, total numbers and portfolio values of these contracts are net off at the period end. Number and portfolio amount of individual and group policies presented in notes reflect the existing position of the Company as of the period-end.
Existing contracts have state contribution amounting to TL 4,173,695,273 in the state contribution funds as of the period end.
17.7 Valuation methods used in profit share calculation for saving life contracts with profit sharing:
Financial investments with risks on saving life policyholders are classified as “available-for-sale financial assets”. These assets are measured in accordance with the principles specified in Note 2.8 Financial Assets and valuation differences are taken into account in the profit share calculation.
17.8 Distribution of new participants in terms of their numbers and gross and net contributions for individuals and groups:
January 1 - December 31, 2020 January 1 - December 31, 2019 Number of contracts Gross contributions Net contributions Number of contracts Gross contributions Net contributions Individuals 138,153 1,323,684,171 1,317,290,828 150,165 943,638,872 936,311,216 Group 573,063 240,792,494 240,790,817 809,880 266,537,808 266,534,121 Total 711,216 1,564,476,665 1,558,081,645 960,045 1,210,176,680 1,202,845,337
Contracts become effective in the current period and the total contracts become effective and ceased in the same period and contributions collected regarding these contracts and the investment oriented contributions have been specified. The collections made with credit cards with undue blockage terms are also added into gross and net contributions. Transfer amounts are not included in the current period numbers and balances. In addition to these table, the Company has collected by TL 133,158,763 as state contribution.
17.9 Distribution of new participants in terms of their numbers and gross and net contributions for individuals and groups which were transferred from other insurance companies during the period:
January 1 - December 31, 2020 January 1 - December 31, 2019 Number of contracts Gross contributions Net contributions Number of contracts Gross contributions Net contributions Individuals 5,728 242,137,726 242,137,726 7,028 223,125,537 223,125,537 Group 10,784 32,881,791 32,881,791 29,713 33,238,710 33,238,710 Total 16,512 275,019,517 275,019,517 36,741 256,364,247 256,364,247
252 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Distribution of new participants in terms of their numbers and gross and net contributions for individuals and groups which were transferred from foundations and funds during the period:
January 1 - December 31, 2020 January 1 - December 31, 2019 Number of contracts Gross contributions Net contributions Number of contracts Gross contributions Net contributions Individuals ------Group ------Total ------
In addition to amounts above, the Company has transferred TL 42,247,799 as state contribution from other pension companies in the same period.
17.10 Distribution of individual and group participants and their gross and net contributions which were transferred from life insurance portfolio to private pension portfolio during the period:
The legal permission of the transfer from life portfolio to private pension portfolio expired on October 7, 2006 and therefore, there is no transfer in the current and prior period.
17.11 Distribution of individual and group participants which were transferred to other insurance companies in terms of their numbers and gross and net contributions:
January 1 - December 31, 2020 January 1 - December 31, 2019 Number of contracts Gross contributions Net contributions Number of contracts Gross contributions Net contributions Individuals 129,693 2,588,709,962 2,467,771,928 160,507 2,467,865,313 2,365,914,190 Group 451,553 1,130,427,888 1,086,534,815 592,004 1,104,500,869 1,067,715,801 Total 581,246 3,719,137,850 3,554,306,743 752,511 3,572,366,182 3,433,629,991
Number of contracts indicates the number of disposals in the related period.
Gross contributions indicate the fund sales amount as a result of disposal.
Net contributions indicate the remaining amount paid to participant less any deductions (initiation fee and withholding) against the gross amount as a result of disposal.
In addition to amounts above, Company’s fund outflow is TL 552,214,231 as state contribution.
17.12 Distribution of new life insurance participants in terms of their numbers and premium amounts for individuals and groups during the period:
January 1 - December 31, 2020 January 1 - December 31, 2019 Number of Premium Number of Premium contracts amounts (TL) contracts amounts (TL) Individuals 120,258 370,110,898 135,106 219,189,645 Group 1,615,201 1,012,043,157 1,532,855 828,327,158 Total(1) 1,735,459 1,382,154,055 1,667,961 1,047,516,803
(1) 2 of reactivated contracts are not included in the current period additions (January 1 - December 31, 2019: 65).
17.13 Distribution of left or cancelled life insurance participants in terms of their numbers and mathematical reserves for individuals and groups during the period:
January 1 - December 31, 2020 January 1 - December 31, 2019 Number of c Mathematical Number of Mathematical ontracts reserves (TL) contracts reserves (TL) Individuals 97,846 283,946,190 108,919 192,935,375 Group 1,500,044 173,728,147 1,884,918 107,731,435 Total 1,597,890 457,674,337 1,993,837 300,666,810
17.14 Profit share distribution rate of life insurances as of December 31, 2020 and 2019
December 31, 2020 (%) December 31, 2019 (%) TL 12.77 15.32 USD 6.46 6.55 EURO 5.09 5.10 GBP 6.56 6.65
Anadolu Hayat Emeklilik 2020 Annual Report 253 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
17.15 Information on insurance contract balances in the financial statements
December 31, 2020 December 31, 2019
Reserve for unearned premiums, gross 51,049,895 57,623,982 Reserve for unearned premiums, ceded (Note 10) (3,574,236) (3,851,643) Reserves for unearned premiums, net 47,475,659 53,772,339
Provision for outstanding claims, gross 137,389,714 113,483,407 Provision for outstanding claims, ceded (Note 10) (10,786,917) (6,709,653) Provision for outstanding claims, net 126,602,797 106,773,754
Life mathematical provisions, gross 3,189,805,773 2,235,600,660 Life mathematical provisions, ceded (Note 10) (4,166,658) (3,803,491) Life mathematical provisions, net 3,185,639,115 2,231,797,169
Provision for bonus and discount, gross 478,198 757,405 Provision for bonus and discount, ceded (Note 10) (293,862) (365,948) Provision for bonus and discount, net 184,336 391,457
Reserve for unexpired risks, gross - - Reserve for unexpired risks, ceded (Note 10) - - Reserve for unexpired risks, net - -
Equalisation provision, gross 54,708,537 40,448,292 Equalisation provision, ceded (Note 10) (1,304,948) (1,014,229) Equalisation provision, net 53,403,589 39,434,063
Total insurance technical provisions, net 3,413,305,496 2,432,168,782
17.16 Factors resulting from individual insurance policies which provide portfolio
Factors resulting from individual insurance policies which provide portfolio increase through the change in mathematical provisions, gross for the periods January 1 - December 31, 2020 and January 1 - December 31, 2019 are as follows:
Mathematical provisions December 31, 2020 December 31, 2019 New policies issued 372,451,950 202,947,647 Activated from reductions 14,892,538 8,092,663 Activated from cancellations 2,228 - Contracts with increased capital 682,221,143 227,129,588 Total increase in the portfolio 1,069,567,859 438,169,898
Factors resulting from individual insurance policies which provide portfolio decrease through the change in mathematical provisions, gross for the periods January 1 - December 31, 2020 and January 1 - December 31, 2019 are as follows:
Mathematical provisions December 31, 2020 December 31, 2019 Terminations and cancellations (-) (559,680) (756,623) Transformed to contracts without charge (-) (68,730,666) (49,922,712) Insurances had capital decrease (-) (853,824) - Withdrawals (-) (108,581,050) (118,217,055) Ceased with risk formed (-) (5,777,376) (4,530,043) Expirations (-) (99,443,594) (19,508,942) Total decrease in the portfolio (283,946,190) (192,935,375)
254 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Factors resulting from group insurance policies which provide portfolio increase through the change in mathematical provisions, gross for the period January 1 - December 31, 2020 and January 1 - December 31, 2019 are as follows:
Mathematical provisions December 31, 2020 December 31, 2019 New contracts 241,334,759 192,919,843 Activated from reductions 3,245 - Activated from cancellations - - Insurances had capital increase 20,331,861 6,111,359 Total increase in the portfolio 261,669,865 199,031,202
Factors resulting from group insurance policies which provide portfolio decrease through the change in mathematical provisions, gross for the periods January 1 - December 31, 2020 and January 1 - December 31, 2019 are as follows:
Mathematical provisions December 31, 2020 December 31, 2019 Terminations and cancellations (-) (1,033,026) (251,839) Transformed to contracts without charge (-) (456,806) (930,556) Insurances had capital decrease (-) (60,583,025) (41,025,736) Withdrawals (-) (106,208,050) (61,033,829) Ceased with risk formed (-) (800,046) (816,187) Expirations (-) (4,647,194) (3,673,288) Total decrease in the portfolio (173,728,147) (107,731,435)
17.17 Gain/losses resulted from reinsurance contracts and recognised in the income statement
Gain or losses resulted from reinsurance contracts and recognised in the income statement are disclosed in note 10 - Reinsurance assets, liabilities.
17.18 Incurred claim development table
Incurred claim development table presented below provided cumulative payments of claims according to claim year and following years:
Claim year 2015 2016 2017 2018 2019 2020 Total Claim year 22,040,556 31,699,169 34,947,861 44,249,830 45,171,372 66,702,207 244,810,995 1 year later 13,955,576 14,179,090 14,090,104 16,952,810 20,969,774 - 80,147,354 2 years later 843,246 1,691,659 754,332 848,525 - - 4,137,762 3 years later 734,373 632,503 643,366 - - - 2,010,242 4 years later 496,782 281,718 - - - - 778,500 5 years later 328,888 - - - - - 328,888 Cumulative payments up to date 38,399,421 48,484,139 50,435,663 62,051,165 66,141,146 66,702,207 332,213,741 Payments for the period ended as of December 31, 2020(1) 328,888 281,718 643,366 848,525 20,969,774 66,702,207 89,774,478
(1) The claims paid includes death-disability termination and personal accident branch gross payments.
17.19 Effects of changes in the assumptions used in the measurement of insurance assets and liabilities, showing the effects of each change that has significant effect on the financial statements separately
Effects of changes in the assumptions used in the measurement of insurance assets and liabilities are disclosed in note 4 - Management of insurance risks.
18 Investment contracts
None.
Anadolu Hayat Emeklilik 2020 Annual Report 255 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
19 Trade and other payables and deferred income
December 31, 2020 December 31, 2019
Payables from insurance operations 37,748,769 44,297,453 Cash deposited by insurance and reinsurance companies 5,563,279 4,479,832 Payables from pension activities 30,822,902,731 23,180,814,298 Net fund value of participants 30,434,759,762 22,913,666,145 Other 388,142,969 267,148,153 Other payables from main operations 4,401,183 4,142,951 Total payables from main operations 30,870,615,962 23,233,734,534
Due to shareholders 92,787 60,849 Due to personnel 61,036 33,290 Payables to other related parties 195 117 Total payables to related parties 154,018 94,256
Guarantees and deposits received 899,244 973,972 Other payables 20,794,004 31,821,827 Total other payables 21,693,248 32,795,799
Deferred commission income 378,719 327,171 Expense accruals 12,672,940 6,975,344 Other deferred income and expense accruals 683 683 Total deferred income and expense accruals 13,052,342 7,303,198
Total 30,905,515,570 23,273,927,787
20 Financial liabilities
Financial liabilities as at the reporting date are given in the note 34 - Financial costs.
256 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
21 Deferred tax
The Company recognises deferred tax assets and liabilities based upon temporary differences arising between its financial statements as reported for TFRS purposes and its statutory tax financial statements. These differences usually result in the recognition of revenue and expenses in different reporting periods for TFRS and tax purposes and they are given below.
Since the applicable tax rate has been changed to 22% for the 3 years beginning from January 1, 2018, 22% tax rate is used in the deferred tax calculation of December 31, 2020 for the temporary differences expected to be realized/closed within 3 years (for the years 2018, 2019 and 2020). However, since the corporate tax rate after 2020 is 20%, 20% tax rate is used for the temporary differences expected to be realized/closed after 2020.
Deferred tax (assets)/liabilities base: December 31, 2020 December 31, 2019
Difference in valuation of financial assets 54,765,364 16,882,920 Provision for employee termination benefits and other wages (43,277,882) (37,316,074) Provision for litigations and other provisions (1,538,905) (888,879) Equalisation reserves (53,403,589) (39,434,063) Bonus and discount provision (184,336) (391,457) TFRS 16 effect (6,491,211) (3,529,213) Infrastructure venture capital investment fund 20,650,000 - The difference arising from revaluation of investment properties 84,129,332 67,980,279 Differences in depreciation methods on tangible and intangible assets between tax regulations and the Reporting Standards 13,004,877 14,395,577 Provision for unused vacation pay liability (13,470,338) (10,848,853) Total 54,183,312 6,850,238
Deferred tax (assets)/liabilities: December 31, 2020 December 31, 2019
Difference in valuation of financial assets 10,953,073 3,380,208 Provision for employee termination benefits and other wages (8,655,576) (7,800,038) Provision for litigations and other provisions (307,781) (195,553) Equalisation reserves (10,680,718) (7,886,813) Bonus and discount provision (36,867) (78,291) TFRS 16 effect (1,298,242) (705,842) Infrastructure venture capital investment fund 4,130,000 - The difference arising from revaluation of investment properties 16,825,866 14,254,532 Differences in depreciation methods on tangible and intangible assets between tax regulations and the Reporting Standards 2,600,975 2,591,646 Provision for unused vacation pay liability (2,694,068) (2,386,748) Total 10,836,662 1,173,101
Movement of deferred tax assets/liabilities for the year ended as of December 31, 2020 and December 31, 2019 are given below:
Movement of deferred tax (assets)/liabilities: December 31, 2020 December 31, 2019
Opening balance at January 1 1,173,101 4,062,693 Recognised in profit or loss 6,367,535 (20,236,379) Recognised in equity 3,296,026 17,346,787 Closing balance 10,836,662 1,173,101
Anadolu Hayat Emeklilik 2020 Annual Report 257 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
22 Retirement benefit obligations
Under the Turkish Labor Law, the Company is required to pay employment termination benefits to each employee who has qualified for such payment. Also, employees are entitled to retirement pay provisions subsequent to the completion of their retirement period by gaining a right to receive retirement payments in accordance with the amended Article 60 of the applicable Social Insurance Law No: 506 and the related Decrees No: 2422 and 4447 issued on March 6, 1981 and August 25, 1999, respectively. Some transitional provisions related to pre-retirement service term was excluded from the law since the related law was amended as of May 23, 2002. The termination benefit to be paid is subject to upper limit of TL 7,117.17 as at December 31, 2020 (December 31, 2019: TL 6.379,86).
The provision has been calculated by estimating the present value of the future probable obligation of the Company arising from the retirement of employees. TAS 19 “Employee Benefits” requires actuarial valuation methods to be developed to estimate the enterprise’s obligation under defined benefit plans. Accordingly, the following actuarial assumptions were used in the calculation of the total liability:
The principal assumption is that the maximum liability for each year of service will increase parallel with inflation. Thus, the discount rate applied represents the expected real rate after adjusting for the anticipated effects of future inflation. Consequently, in the accompanying financial statements as at December 31, 2020, the provision has been calculated by estimating the present value of the future probable obligation of the Company arising from the retirement of the employees. The provisions at the respective reporting periods have been calculated assuming an annual inflation rate of 8% and a discount rate of 12.40%, resulting in a real discount rate of 4.07% (December 31, 2019: 7.20%, 11.70%, 4.20% respectively).
As at 31 December 2020 the Company has actuarial gain or loss difference in the calculation of employee termination benefit amounting to TL 2,659,362 (December 31, 2019: TL 2,573,778).
Movement of provision for employee termination benefits during the period is presented below:
December 31, 2020 December 31, 2019 Provision as at January 1 22,016,074 18,079,050 Interest cost 2,729,993 2,892,648 Service cost 2,354,256 2,040,198 Payments made during the year (3,581,803) (3,569,600) Actuarial gain and losses 2,659,362 2,573,778 Provision at the of the period/year 26,177,882 22,016,074
23 Other liabilities and provisions
As at December 31, 2020 and December 31, 2019; the details of the provisions for other risks are as follows:
December 31, 2020 December 31, 2019 Provision for unused vacation pay liability 13,470,338 10,848,853 Dividend to personnel and salary provision 17,100,000 15,300,000 Provision for commissions to sales personnel 2,100,000 2,000,000 Provision for litigations 530,675 755,785 Provision for commissions and expenses 1,008,230 133,095 Provisions for costs 34,209,243 29,037,733 Provision for employee termination benefits 26,177,882 22,016,074 Total provisions for other risks 60,387,125 51,053,807
24 Net insurance premium revenue
December 31, 2020 December 31, 2019
Non-life 591,066 542,357 Life 1,659,072,638 1,206,792,924 Total 1,659,663,704 1,207,335,281
258 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
25 Fee revenues
The details of fee revenues for the year ended as of December 31, 2020 and 2019 received from individual pension, life and non-life branches in accordance with TAS 18 are as follows:
December 31, 2020 December 31, 2019
Fund management income 368,730,550 304,264,809 Administrative cost deductions 76,875,084 58,862,051 Entrance fee 38,341,466 49,513,171 Administrative cost deduction in the form of cessation 21,610,394 14,661,983 Other technical income 725,196 418,018 Total 506,282,690 427,720,032
(*) The fund management fee made for management and representation of the fund and for expense deduction made for hardware, software, personnel and accounting services allocated to the fund was recognised in the “Fund management income” under technical income and the share of portfolio manager was recognised in the “Fund management expense” under technical expenses before 31.12.2019. After 31.12.2019 the share belonging to portfolio manager is paid directly by the related fund and is not recognised in the Company’s “Fund management expense” under technical expenses. Net income of the company from the fund management fee is recognised as “Fund management income” under technical income.
26 Investment income
December 31, 2020 December 31, 2019 Financial assets held-for-trading: Valuation gain 53,272,626 20,363,054 Gain on sale 2,543,063 12,825,144 Interest income - - Cash dividend income - 2,485 Financial assets available- for-sale: Interest income 141,477,092 120,358,091 Valuation gain 391,329,701 163,765,853 Gain on sale - 1,319,299 Cash dividend income 727,889 553,633 Income from associates: 11,869,912 7,428,943 Investment properties: Rent income 943,714 858,473 Valuation gain 32,520,000 7,625,114 Other income(1): 119,819,232 127,122,539 Total(2) 754,503,229 462,222,628
(1) Other income includes interest income from time deposits, income from derivative transactions, foreign exchange gains and etc. (2) TL 254,595,595 (December 31, 2019: TL 170,481,974) of investment income obtained from the Company’s own portfolio and TL 499,907,634 (December 31, 2019: TL 291,740,654) of investment income obtained from policyholders’ portfolio.
27 Net income accrual on financial assets
Net income accrual from the Company’s own portfolio is as follows:
December 31, 2020 December 31, 2019 Available-for-sale financial assets: Fair value differences recognised in equity 116,677,215 51,242,337 Fair value differences recognised in profit/loss 17,843,310 696,128 Total 134,520,525 51,938,465
28 Assets held at fair value through profit or loss
Net gain from financial assets classified as fair value difference is recognised to income statement as at December 31, 2020 is TL 55,815,689 (December 31, 2019: TL 33,190,683 net gain).
29 Insurance rights and claims
Details of insurance rights and claims are presented in statement of income.
30 Investment contract benefits
None.
Anadolu Hayat Emeklilik 2020 Annual Report 259 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
31 Other expenses
The allocation of the expenses with respect to their nature or function is presented in note 32 - Operating expenses below.
32 Operating expenses
For the year ended as of December 31, 2020 and 2019, the details of operating expenses are as follows:
December 31, 2020 December 31, 2019
Production commission expenses (372,692,214) (285,314,203) Employee benefit expenses (186,034,275) (167,464,628) Administration expenses (74,863,576) (57,938,672) Marketing and sales expenses (30,537,164) (32,154,702) Outsourced benefits and services (30,372,286) (32,040,725) Reinsurance commission income 7,553,320 5,709,800 Other expenses (3,749,638) (4,130,214) Total (690,695,833) (573,333,344)
(*) As of January 1, 2019, rent expenses are recognised as “Investment Management Expenses (inc. interest)” and “Depreciation and Amortisation Expenses” within TFRS 16 The Leases Standard (Note 34)
33 Employee benefit expenses
December 31, 2020 December 31, 2019
Wages and salaries 186,034,275 167,464,628 Employee termination benefits 1,502,446 1,363,246 Provision for unused vacation 2,621,485 1,996,495 Total 190,158,206 170,824,369
34 Financial costs
As at December 31, 2020, TL 10,797,861 interest expense (January 1 - December 31, 2019: 10,019,794) and TL 8,463,840 amortisation expense (January 1 - December 31, 2019: 8,689,412) arising from leases which are the subject to TFRS 16 Leases, are recognised as “Investment Management Expenses (inc. interest)” and “Depreciation and Amortisation Expenses” respectively in the accompanying consolidated financial statements.
As at December 31, 2020 discounted reimbursement plan for operating leases of the Company is as follows (December 31, 2019: 53,769,398):
Operating Leases Reimbursement Plan -TL December 31, 2020
Up to 1 Year 4,812,019 Up to 2 Years 4,641,240 Up to 3 Years 4,754,546 Up to 4 Years 5,208,263 Up to 5 Years 6,358,750 More than 5 years 28,916,001 Total 54,690,819
260 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
35 Income tax expense
December 31, 2020 December 31, 2019
Corporate tax liabilities: Corporate tax provision 136,125,818 119,305,000 Less: Corporation taxes paid in advances during the period (116,981,095) (87,456,742) Total 19,144,723 31,848,258
Total tax expense recognised in profit or loss
December 31, 2020 December 31, 2019
Current tax expense 128,336,961 119,305,000 Deferred tax expense/(income) 6,367,535 (20,236,379) Total 134,704,496 99,068,621
Total tax expense recognised in equity
December 31, 2020 December 31, 2019
Change in fair value of available for sale financial assets and owner occupied properties (5,570,897) (1,742,999) Actuarial gain and losses 2,917,430 2,385,558 Total deferred tax expense recognised in equity (2,653,467) 642,559
Reconciliation of the Company’s taxation with period profit
December 31, 2020 December 31, 2019 Profit before tax 661,643,760 Tax rate (%) 459,760,389 Tax rate (%) Taxes on income per statutory tax rate (145,561,627) (22.00) (101,147,286) (22.00) Disallowable expenses (21,884,049) (3.31) (39,017,365) (8.49) Effect of allowances 32,741,180 4.95 41,096,030 8.94 Total tax expense recognised in profit or loss (134,704,496) (20.36) (99,068,621) (21.55)
36 Net foreign exchange gains
December 31, 2020 December 31, 2019
Foreign exchange gains 27,683,158 10,053,255 Foreign exchange losses (12,844,054) (5,563,894) Total 14,839,104 4,489,361
Anadolu Hayat Emeklilik 2020 Annual Report 261 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
37 Earnings per share
Earnings per share is calculated by dividing net profit for the period to the weighted average number of shares.
December 31, 2020 December 31, 2019 For a share having TRKr (Kuruş) 1 of nominal value: Weighted average number of shares 43,000,000,000 43,000,000,000 Net profit for the period 526,585,134 360,691,768 Earnings per share (for 100 shares) 1.22544 0.83882
38 Dividends per share
The Company’s dividend distribution in 2020 from the profit of 2019 is presented below.
Cash dividend corresponding to a share having TL 1 of Total cash nominal value Group dividend amount (TL) Amount (TL) Rate (%) A 553,488,37 0.5534883 55.34883 Net B 237,446,511,63 0.5534883 55.34883 Total 238,000,000,00
The Company’s dividend distribution in 2020 from the profit of 2019 is TL 280,000,000. Additionally, TL 7,440,317 of dividend is distributed to the personnel of the Company.
39 Cash generated from operations
The cash flows from operating activities is presented in the accompanying 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 either under provision for outstanding claims or provisions for other risks in the accompanying financial statements.
As at December 31, 2020, there are 416 ongoing law suit filed against the Company and total amount of these law suits are TL 9,725,704, TL 20,713,280 of provision (December 31, 2019: TL 15,655,933) including interest expense for ongoing law suits for which cash outflow is probable and measurable reliably is set by the Company in the financial statements, There are 64 ongoing law suits prosecuted by the Company against the third parties that have amounted TL 6,442,558, Subsequent to the reporting period, there is no expected amount of law suits to be prosecuted against the Company.
43 Commitments
Total amount of commitments that are not included in liabilities:
December 31, 2020 December 31, 2019
Guarantees and commitments 3,924,284 3,343,986 Guarantees and commitments 3,924,284 3,343,986
262 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
44 Business combinations
None.
45 Related party transactions a. Parent company’s name and the ultimate owner of the group
The Company’s parent is Türkiye İş Bankası AŞ with a 63.89% of share. b. In accordance with the Company’s activities, items of sub-classifications.
The activities of the Company 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. c. No expense is recognised in the related period for bad or doubtful debts in respect of the amounts owed by the shareholders, associates and subsidiaries. d. Details of associates and subsidiaries having indirect capital and management relations with the Company; names, amounts and rates of participations in the associates and subsidiaries; profit/loss for the period presented in the recent financial statements of such participations; net profit/loss for the period and period covered by the financial statements; information about whether these financial statements are prepared in accordance with the CMB standards; information about whether these financial statements are audited; details of the audit opinion (if the report includes unqualified, adverse or qualified opinion):
Participation Reporting Profit before Net profit of the Financial Independent Carrying amount rate (%) period income tax period statements base auditor’s opinion İş Portföy December 31, Yönetimi AŞ 33,391,595 20.0 2020 76,177,639 59,349,560 SPK XI/29 Unqualified e. Bonus shares obtained from associates or subsidiaries through internal resource capital increases
At the reporting date, the Company has obtained no bonus shares through capital increases in associates from profit or capital reserves. f. No guarantees, commitments, guarantee letters, advances and endorsements given in favor of shareholders, associates and subsidiaries.
Anadolu Hayat Emeklilik 2020 Annual Report 263 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
g. Related party disclosures
The related party balances as at December 31, 2020 and December 31, 2019 are as follows:
December 31, 2020 December 31, 2019
Türkiye İş Bankası AŞ - receivables from credit card collections 211,809,048 170,623,012 Cash and cash equivalents 211,809,048 170,623,012
Türkiye İş Bankası AŞ - bank deposits 86,871,301 217,710,555 Cash at banks 86,871,301 217,710,555
Türkiye İş Bankası AŞ - reverse repo 41,868,907 52,714,137 Reverse repo 41,868,907 52,714,137
Anadolu Anonim Türk Sigorta Şirketi - premium receivable - 68 Receivables from main operations - 68
Türkiye İş Bankası AŞ - commission payables 20,519,315 32,469,117 Milli Reasürans TAŞ - premium payables 954,220 1,289,981 Payable from main operations 21,473,535 33,759,098
Türkiye İş Bankası A.Ş. - settlement and custody commission 243 33 Türkiye İş Bankası A.Ş. - operating leases payables - 3,346,088 Anadolu Anonim Türk Sigorta Şirketi - operating leases payables 1,284,134 1,296,000 Anadolu Anonim Türk Sigorta Şirketi - premium payables 96,340 60,849 Payables to shareholders 1,380,717 4,702,970
İş Portföy Yönetimi A.Ş. - 3,989,219 İş Merkezleri Yönetim ve İşletim A.Ş. 280,331 285,388 İş Gayrimenkul Yatırım Ortaklığı A.Ş. (30) 43,583 İş Gayrimenkul Yatırım Ortaklığı A.Ş. - operating leases payables 64,891,957 66,505,809 İş Portföy Yönetimi A.Ş. Real Estate Investment Fund - operating leases payables 23,904,396 23,348,191 İş-Net Elektronik Bilgi Üretim Dağıtım Ticaret ve İletişim A.Ş. 96,256 92,793 Erişim Müşteri Hizmetleri A.Ş. 1,479,960 1,468,694 Softtech Yazılım Teknoloji Araştırma Geliştirme ve Pazarlama Ticaret A.Ş. 7,699 - Other payables 90,660,569 95,733,677
264 Anadolu Hayat Emeklilik 2020 Annual Report ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
In the current period in amount of TL 37,488,913 individual retirement employer contributions (December 31, 2019: TL 32,523,391) have been collected from related parties, in amount of TL 1,335,055 life insurance employer premium was accrual (December 31, 2019: TL 714,119).
The details of revenues and expenses for the year ended as of December 31, 2020 and 2019 stems from related parties are as follows:
December 31, 2020 December 31, 2019
Milli Reasürans TAŞ - premiums written, ceded 2,338,593 2,267,611 Premiums written, ceded 2,338,593 2,267,611
Milli Reasürans TAŞ - commission income from reinsurers 238,456 238,523 Commission income from reinsurers 238,456 238,523
Türkiye İş Bankası AŞ - interest income from deposits 18,156,948 15,097,349 Türkiye İş Bankası AŞ - rent income - 5,978 Türkiye İş Bankası AŞ - interest income from reverse repo 6,460,389 10,981,521 İş Yatırım Menkul Değerler AŞ - interest income from reverse repo 382 9,477 Investment income 24,617,719 26,094,325
İş Portföy Yönetimi AŞ - investment consultancy fee 2,832,000 2,129,310 İş Yatırım Menkul Değerler A.Ş. - settlement and custody expense 7,320 617 Türkiye İş Bankası AŞ - settlement and custody expense 24,867 17,158 Investment expense 2,864,187 2,147,085
Türkiye İş Bankası AŞ - commission of policy production 274,143,668 216,000,441 İş Portföy Yönetimi AŞ - portfolio management fee of pension funds(*) - 16,373,564 İş Merkezleri Yönetim ve İşletim A.Ş. - building administrative expense 5,305,340 5,039,270 İş Gayrimenkul Yatırım Ortaklığı AŞ - operating leases interest expense (TFRS 16 effect) 6,373,845 5,848,910 İş Gayrimenkul Yatırım Ortaklığı A.Ş. - other expenses 7,763,517 894,652 İş-Net Elektronik Bilgi Üretim Dağ. Tic. ve İletişim A.Ş. - communication expense 3,097,389 5,272,466 Erişim Müşteri Hizmetleri A.Ş. - call center service expense 16,676,654 18,073,491 Softtech Yazılım Teknoloji Araştırma Geliştirme ve Pazarlama Ticaret A.Ş - software support expense 210,727 49,251 Türkiye İş Bankası AŞ - commission of premium collection and banking services 2,144,865 1,811,339 Türkiye Iş Bankası AŞ - fund operation service expense 3,443,889 2,694,073 Türkiye Iş Bankası AŞ - operating leases interest expense (TFRS 16 effect) 278,502 284,852 Türkiye Iş Bankası AŞ - data storage expenses 1,388,224 387,161 Türkiye Iş Bankası AŞ - other expenses 16,433 7,823 İş Portföy Yönetimi A.Ş. Real Estate Investment Fund - operating leases interest expense (TFRS 16 effect) 2,436,959 2,202,493 Anadolu Anonim Türk Sigorta Şirketi - premium paid 7,637,204 4,470,899 Anadolu Anonim Türk Sigorta Şirketi - operating leases interest expense 120,726 212,104 Anadolu Anonim Türk Sigorta Şirketi - other expenses 50,898 87,066 Other expenses 331,088,840 279,709,855
(*) The fund management fee made for management and representation of the fund and for expense deduction made for hardware, software, personnel and accounting services allocated to the fund was recognised in the “Fund management income” under technical income and the share of portfolio manager was recognised in the “Fund management expense” under technical expenses before 31.12.2019. After 31.12.2019 the share belonging to portfolio manager is paid directly by the related fund and is not recognised in the Company’s “Fund management expense” under technical expenses.
46 Events after the reporting period
Events after the reporting period are disclosed in note 1.10 - Events after the reporting period.
Anadolu Hayat Emeklilik 2020 Annual Report 265 ANADOLU HAYAT EMEKLİLİK ANONİM ŞİRKETİ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2020 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
47 Others
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
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 are as follows:
Current assets (Other receivables) December 31, 2020 December 31, 2019
Receivables from pension fund transections 138,939,396 37,109,651 Other 684,295 1,320,512 Total 139,623,691 38,430,163
Short-term liabilities (Other miscellaneous payables) December 31, 2020 December 31, 2019
Payable to suppliers 9,503,959 21,921,973 Suspense accounts 11,197,409 9,899,756 Securities reconciliation account 92,636 98 Total 20,794,004 31,821,827
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 immovable and their values
None.
Explanatory note for the amounts and nature of previous years’ income and losses
None.
For the six month period ended as of December 31, 2020 and 2019, details of discount and provision expenses are as follows:
December 31, 2020 December 31, 2019
Unused vacation pay liability (2,621,485) (1,996,495) Provision for employee termination benefits (1,502,446) (1,363,246) Provisions no longer required - 2,526,406 Other provision expenses (1,797,529) (5,618,303) Provision expenses (5,921,460) (6,451,638)
December 31, 2020 December 31, 2019
Rediscount interest expense(1) 123,811 100,794 Total rediscount 123,811 100,794
(1) Rediscount interest income/expense arising from selling the shares of AVEA İletişim Hizmetleri A.Ş. by instalment.
266 Anadolu Hayat Emeklilik 2020 Annual Report Information for Investors
Stock Exchange Anadolu Hayat Emeklilik A.Ş. stocks are traded on the BIST Star Market Group 2 of Borsa İstanbul under the symbol ANHYT. Information about the Company’s stocks is published on the economics pages of daily newspapers and on the internet portals of brokerage houses. Investor Relations Copies of Anadolu Hayat Emeklilik A.Ş.’s annual reports and other information about the Company may be obtained from the following address as well as from the corporate website located at anadoluhayat.com.tr and from the Public Disclosure Platform (PDP). Investor Relations Unit Anadolu Hayat Emeklilik A.Ş. Levent Mahallesi Meltem Sokak No: 10 İş Kuleleri Kule: 2 Kat: 19 34330 İstanbul Annual General Assembly Anadolu Hayat Emeklilik A.Ş.’s 2020 Annual General Assembly Meeting will be held on 25 March 2021 at 10:00 am at the address of Oditoryum Binası İş Kuleleri 34330 Levent/İstanbul. Independent Auditor Güney Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. Maslak Mahallesi Eski Büyükdere Cad. Orjin Plaza No: 27 Kat: 2-3-4 Daire: 54-57-59 34485 Sarıyer/İstanbul - Türkiye Tax Certification DRT Yeminli Mali Müşavirlik ve Bağımsız Denetim A.Ş. Deloitte Value House Maslak No: 1 34398, İstanbul Anadolu Hayat Emeklilik Share Performance in 2020 As of 31 December 2020. the Company’s nominal capital amounts to TL 430,000,000, consisting of fully-paid 43,000,000,000 shares each with a value of TL 0.01. 17% of the Company’s shares are publicly held.
ANHYT’s Performance in 2020 (TL)
9.54 8.95 7.65 7.48 8.67 7.07 7.62 7.3 7.12 5.3
5.12 Lowest- Highest 4.5 Closing
2020-Q1 2020-Q2 2020-Q3 2020-Q4
Anadolu Hayat Emeklilik 2020 Annual Report 267 Directory
Anadolu Hayat Emeklilik A.Ş. Head Office Customer Operations Trade Registration Number: 265737 Meltem Sokak No: 10 Karlıktepe Mah. Yakacık Cad. Web site anadoluhayat.com.tr İş Kuleleri Kule: 2 Kat: 16-20 Manzara Adalar E Blok No: 67/A For correspondence: Levent 34330 Kat: 7-8-9 34870 [email protected] Beşiktaş / İstanbul Kartal / İstanbul Tel: (+90 212) 317 70 70 Tel: 90 850 724 55 00 Fax: (+90 212) 317 70 77 Fax: (+90 212) 317 70 77
TRNC Branch Şerif Arzık Sokak No: 25 Köşklü Çiftlik Lefkoşa / TRNC Tel: (+90 392) 227 01 27 Fax: (+90 392) 227 01 26
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268 Anadolu Hayat Emeklilik 2020 Annual Report Produced by Tayburn Tel: (90 212) 227 04 36 This report has been printed on recycled paper. www.tayburnkurumsal.com Anadolu Hayat Emeklilik 2020 Annual Report