Anadolu Hayat Emeklilik 2019 Annual Report 1
2019 Annual Report Content
Presentation Corporate Governance Information Form 76 At a Glance: Our Vision, Our Mission, Our Additional Information on Corporate Corporate Strategy 8 Governance 84 29 Years of Anadolu Hayat Emeklilik The Author of “Firsts” in Its Industry… 10 Information on General Assembly Message from the Chairman 14 Summary Report of the Board of Directors Message from the CEO 16 for the General Assembly of Shareholders 92 An Overview of the World and Turkish Ordinary General Assembly Agenda 95 Economies in 2019 and 2020 Outlook 20 2018 Profit Distribution Table 96 Anadolu Hayat Emeklilik by Numbers 24 2019 Profit Distribution Proposal Table 97 Strategic Goals of Anadolu Hayat Emeklilik 27 Financial Position 2019 Activities Information on Financial Structure 100 An Overview of Anadolu Hayat Emeklilik’s Assessment of Financial Standing, Position in the Industry and its Activities in Profitability and Claims Payment Ability 103 2019 30 5-Year Summary Financial Information Sustainability 38 Including the Reporting Period 104 Research and Development 39 Risk Management Corporate Governance Active Committees and an Assessment Organization Chart 42 by the Board of Directors 108 Board of Directors 44 Risk Management Policies and an Declarations of Independence by Independent Assessment by the Board of Directors 111 Members of the Board of Directors 48 Outside Positions Held by the Board of Financial Reports and Other Matters Directors and Executives 49 31 December 2019 Unconsolidated Financial Senior Management 50 Statements Together with Independent İşbank 52 Auditors’ Report Thereon 116 Changes in the Legislation during the Information on Consolidated Associate 213 Fiscal Year 53 31 December 2019 Consolidated Financial Other Material Disclosures Concerning the Statements Together with Independent Reporting Period 54 Auditors’ Report Thereon 214 Transactions Executed with the Risk Group in Information for Investors 312 Which the Company Is Included 55 An Assessment of Independent Audit, Directory Internal Control System and Internal Audit Activities by the Board of Directors 57 Independent Auditor’s Report on the Annual Report of the Board of Directors 59 Policies About Corporate Governance 61 Statement of Compliance with Corporate Governance Principles 67 Corporate Governance Compliance Report 68
Cover photo: Özge Yılmaz / Shots From Life As Seen By Women ‘19 Anadolu Hayat Emeklilik 2019 Annual Report 1
Rukiye Erşahin Shots From Life As Seen By Women ‘19
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. 2 Anadolu Hayat Emeklilik 2019 Annual Report Financial Indicators
Total Assets: Equity:
TL 27.1 billion TL 1.3 billion
Gross Profit: Market Capitalization:
TL 477 million TL 2.9 billion
Sector’s Leader in Life Insurance Sector’s Leader in Life and Private Pension Funds Insurance Funds
TL 25.2 billion (1) (2) TL 2.2 billion(2)
(1) Pension Monitoring Center (PMC) 31 December 2019 (Including Auto Enrolment) (2) Insurance Information and Monitoring Center (31 December 2019) Anadolu Hayat Emeklilik 2019 Annual Report 3
Emel Akar Shots From Life As Seen By Women ‘19
A member of the UN Women’s Empowerment Principles (WEPs) Platform, Anadolu Hayat Emeklilik supports the empowerment of women in business and social life. 4 Anadolu Hayat Emeklilik 2019 Annual Report Human Resources
Headquarters & Districts: Direct Sales Force: 591 496
Total: 1,087
Position in the Sector
Private Pension (1) Life Insurance (2)
Contracts & Certificates: Mathematical Provisions:
#1 - 14.6% #1 - 22.5%
Participants: Written Premiums:
#1 - 14.5% #2 - 10.9%
Total Pension Assets Under Management:
#2 - 18.0%
(1) Pension Monitoring Center (PMC) 31 December 2019 (Including Auto Enrolment) (2) Insurance Information and Monitoring Center (31 December 2019) Anadolu Hayat Emeklilik 2019 Annual Report 5
Mina Bal Köyönü Shots From Life As Seen By Women ‘19
Organization
• İstanbul Headquarters • Customer Operations Center • 11 District Sales Offices • TRNC Branch Office 6 Anadolu Hayat Emeklilik 2019 Annual Report
Presentation
◊ At a Glance: Our Vision, Our Mission, Our Corporate Strategy
◊ 29 Years of Anadolu Hayat Emeklilik
◊ Message from the Chairman
◊ Message from the CEO
◊ An Overview of the World and Turkish Economies in 2019 and 2020 Outlook
◊ Anadolu Hayat Emeklilik by Numbers
◊ Strategic Goals of Anadolu Hayat Emeklilik Anadolu Hayat Emeklilik 2019 Annual Report 7
The Company Creating the Highest Amount of Funds
Year after year, Anadolu Hayat Emeklilik further consolidates its identity as the company “creating the highest amount of funds” in the aggregate of life insurance and private pension and keeps leading the sector’s growth.
Songül Denizer Shots From Life As Seen By Women ‘19 8 Anadolu Hayat Emeklilik 2019 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.
Our Corporate Strategy
• Contribute to the stable growth of the industry by developing and maintaining a diverse range of products capable of satisfying customers’ needs and demands in terms of life insurance and private pensions.
• Increase our market share by combining our success in offering innovative products and creating value through an extensive service network.
• Provide our customers with financial security and enable them to save up for their retirement by taking advantage of the company’s experience and effectiveness in the industry to achieve superior performance in the management of pension funds.
• Maintain a sustainable level of profitability that is above the market average. Anadolu Hayat Emeklilik 2019 Annual Report 9
F. Dilek Uyar Shots From Life As Seen By Women ‘19
Anadolu Hayat Emeklilik started Providing service via District Sales while continuing to lead the growth of operations in 1990 as Turkey’s first life Offices in İstanbul (3), Ankara (2), the sector. insurance company. İzmir, Adana, Bursa, Antalya, Trabzon A subsidiary of Türkiye İş Bankası A.Ş. and Kocaeli, a branch office in the Having acquired private pension (İşbank), Anadolu Hayat Emeklilik Turkish Republic of Northern Cyprus company status upon establishment is the first publicly traded pension besides its head office in İstanbul, of the private pension system in company in Turkey. Anadolu Hayat Emeklilik commands a Turkey in 2003, the Company began widespread service organization with The Company’s shares are quoted on offering services under the company its strong bancassurance network, the Borsa İstanbul (BIST) Stars Market name Anadolu Hayat Emeklilik A.Ş. direct sales force and nearly 250 Group 2 under the symbol ANHYT. Anadolu Hayat Emeklilik, which agencies. addresses a broad audience of Beyond being the company that policyholders and participants steers the sector, Anadolu Hayat with its value-added product and Emeklilik further builds on its identity service mix, assures a high level of as the company creating the highest customer satisfaction on the back amount of funds in the aggregate of of its extensive service network and life insurance and private pension, technological infrastructure. 10 Anadolu Hayat Emeklilik 2019 Annual Report
29 Years of Anadolu Hayat Emeklilik The Author of “Firsts” in Its Industry…
1990 2000 2003
Founded as Turkey’s first life Became the first and only life Transformed into a private pension insurance company. insurance company whose shares company. are publicly traded.
1990 the Company was transformed into a 2007 private pension company. Anadolu Hayat Emeklilik A.Ş. was First pensioners of the private pension founded as Turkey’s first life insurance The first private pension contract was system were entitled to pension company taking over the life insurance issued in October 27. benefits. activities carried out by Anadolu 2004 An agency agreement was signed with Anonim Türk Sigorta Şirketi. Bank Pozitif A.Ş. Undersigning yet another first, the 1991 Company introduced the “Pension Plan “Shots From Life As Seen By Women” District offices were opened in Ankara, for Housewives” that provides income photography contest has been held for Bursa, Adana and İzmir. for housewives without social security the first time. and supplementary income in older 1995 2008 ages. First payouts on maturity were made in Anadolu Hayat Emeklilik became According to legislation, the Company’s the “Insurance of the Future”. the first pension company to hit the health insurance portfolio and activities 300,000 participants mark under the 1999 were transferred to Anadolu Anonim private pension system. Lefkoşa Branch was set up in the Türk Sigorta Şirketi. The Company exceeded TL 1 billion in Turkish Republic of Northern Cyprus to Online payment of private pension total funds. conduct life insurance activities. Sirkeci contributions and life insurance and Kadıköy branches were opened. premiums via the internet was enabled. PPS+ packages were started to be sold 2000 2005 covering either one of “Life Insurance with Serious Illness Cover”, “Annual Anadolu Hayat Emeklilik A.Ş. became Bancassurance activities carried out Life Insurance” or “Life for Everyone the first and only life insurance with the parent company İşbank were Insurance” products in addition to the company whose shares are publicly expanded by agency agreements with Private Pension Plan. traded. Türk Ekonomi Bankası A.Ş. (TEB) and HSBC Bank A.Ş. (HSBC). A new variant was added to life 2001 insurance policies issued in connection “Life for everyone” policy, Turkey’s first- 2006 with loans, and Loan Support Insurance ever insurance coverage without any With the support of the Ministry of incorporating unemployment cover was age limitation and without requiring National Education, the Company added to its product range. any health conditions was introduced. initiated the social responsibility The competition “Young Ideas by Bursa, Adana, İzmir and İstanbul project “Girls: The Insurance of Owner” was launched, thereby branches were reorganized as Our Future” in cooperation with enabling university students’ idea Marmara, South Anatolia, Aegean the Association for Supporting conception related to the industry. Contemporary Living (ÇYDD). District Offices, and İstanbul District 2009 Office 1 and 2. Bancassurance activities were The Company became the first 2003 expanded through agency agreements with Anadolubank A.Ş. and TSKB A.Ş. pension company to reach 400,000 In accordance with the “Private Pension participants in the private pension Savings and Investment System Law”, system (PPS). Anadolu Hayat Emeklilik 2019 Annual Report 11
2007 2010 2014
“Shots From Life As Seen By Became the first company to reach Became the first company to reach Women” photography contest has 500,000 participants in the private TL 7 billion in total funds in the been held for the first time. pension system. private pension system.
Targeting İşbank credit card customers, With the aim of new customer “AHE Gold Fund” was introduced. Credit Card Protection Insurance acquisition activities, alternative The scope of the new customer policy, which provides cover in the delivery channels were started to be acquisition activities of the alternative event of death, disablement and used. delivery channels was widened with unemployment, was launched. An implementation was introduced retention and deepening activities. Private Pension Plans portfolio was enabling participants holding İşbank The Company began selling further expanded with “Master’s credit cards incorporating Maximum “Investment Insurance for My Child” Pension Plan”, which incorporates card features to transfer the insurance policy that is designed for the special features of “Life-Cycle MaxiPoints earned to their private investment for the future of children at Fund Exchange Model” and “Auto Re- pension accounts as additional an age of 0-15. Balancing System”, a first in Turkey. contributions. 2014 2010 2012 Anadolu Hayat Emeklilik became the The Company became the first pension Anadolu Hayat Emeklilik became the first pension company to reach TL 7 company to reach 500,000 participants first pension company to reach TL 4 billion in total funds in the private in the private pension system. billion in total funds and 600,000 pension system. participants in the private pension Volume of the participants’ private system. Anadolu Hayat Emeklilik was named pension funds topped TL 2 billion. the “Most Admired Private Pension Anadolu Hayat Emeklilik was named An agency agreement was signed Company” in the “Turkey’s Most the “Most Admired Private Pension with Albaraka Türk Katılım Bankası A.Ş. Admired Companies 2014” survey Company” in the “Turkey’s Most (Albaraka Türk). conducted by Capital magazine. Admired Companies 2012” survey Anadolu Hayat Emeklilik was named conducted by Capital magazine. East Black Sea District Office was set the “Most Admired Private Pension up and started operations. “Standard Critical Illness Insurance” was Company” at the “Turkey’s Most launched. 2015 Admired Companies 2010” survey conducted by Capital magazine. Mediterranean District Office was The Company became the first pension established and started operations. company to reach 1 million participants The Company set up “Emerging Markets in the private pension system. Flexible Pension Growth Fund” (BRIC 2013 Plus Fund) and “Alternative Flexible The uncle/aunt themed advertising Anadolu Hayat Emeklilik became the Pension Income Fund” (Alternative campaign entitled ‘Bana Amca/Teyze first pension company to reach TL 5 Income Fund) and started their sales. Dediler’ received six different awards billion in total funds in the private including the big prize in the Crystal “Pension Income Plan” targeting private pension system. Apple Turkey Advertising Awards pension system participants was put Anadolu Hayat Emeklilik was named Competition, and the Golden Effie in on sale. the “Most Admired Private Pension the 7th Effie Awards Turkey Marketing 2011 Company” in the “Turkey’s Most Effectiveness Competition, while Admired Companies 2013” survey garnering seven different awards in the Anadolu Hayat Emeklilik became the conducted by Capital magazine. Mediacat Felis Awards. first company to reach TL 3 billion in funds in the private pension system. 12 Anadolu Hayat Emeklilik 2019 Annual Report
29 Years of Anadolu Hayat Emeklilik The Author of “Firsts” in Its Industry…
2015 2016 2017
Became the first company to reach Exceeded TL 10 billion in total funds Neutralized its carbon footprint and 1 million participants in the private in the private pension system. became a carbon neutral company. pension system.
The “Youth Pension Plan”, Turkey’s first Anadolu Hayat Emeklilik was named Anadolu Hayat Emeklilik neutralized its pension plan designed for the youth, the “Best Life Insurer in Turkey” 2016 carbon footprint within the scope was introduced. by World Finance, crowned with of the Sustainability Management this award for the second time by System introduced, and became a “İşbank Subsidiaries Index Fund” was this eminent business and finance carbon neutral company. put on sale. magazine. It became the first company from “Life Insurance Linked to Commercial Anadolu Hayat Emeklilik was Turkey to receive the Customers’ Loans” was introduced. recognized as the “Best Overall Friend award given by ICERTIAS, an Critical illness insurance product range Insurance Company in the Levant international certification association, was expanded and “Female Critical Region” in 2016 at the Middle East in recognition of its successful Illness Insurance” and “Comprehensive Insurance Forum. customer relationship management. Critical Illness Insurance” were put on Based on the outcomes from the It was named the best in its sector sale. Voice of Customer Turkey survey at the “Social Media Awards Turkey”, Anadolu Hayat Emeklilik was named administered by KalDer (Quality Turkey’s most comprehensive first the best Zurich Employee Benefits Association of Turkey) and Ipsos, social media competition co-organized Network service partner. Anadolu Hayat Emeklilik has been by Marketing Türkiye and BoomSonar. the private pension and life insurance Anadolu Hayat Emeklilik “Mobile “Life Insurance with Premium Refund” company with the highest customer Branch“ application was launched. was introduced, which offers cover loyalty. against the risk of loss of life and also District offices were renamed to Credit-linked life insurance product refunds the premiums collected in “District Sales Offices”. began to be offered via İşbank Internet case the risk does not occur during the Western Black Sea, Thrace and Central Branch and İşcep mobile branch. policy term. Anatolia II District Sales Offices were “Commercial Life Insurance” aimed “Excellence in Customer Experience set up and started their operations. at İşbank’s commercial segment Project” was launched to gain 2016 customers was introduced. an insight into customers’ true expectations and their experiences The Company exceeded TL 10 billion 2017 at touchpoints, to ensure optimum in total funds in the Private Pension Having completed the first phase end-to-end operation, and to offer the System. of technological infrastructure desired deliverables to the customers. transformation, Anadolu Hayat Anadolu Hayat Emeklilik participants 2018 received the highest amount of state Emeklilik was given the Best Corporate contributions once again in 2017, Transformation Award at the “FinTech Considering the needs of diverse the fourth consecutive year from the Projects of the Year” awards organized professional groups, Anadolu Hayat date state contribution practice was within the scope of IDC Turkey Financial Emeklilik introduced the Farmers’ introduced. Services Conference 2017. Retirement Plan. The Company was named the “Most The Company has become the first and Education Insurance was launched, Admired Private Pension Company” only private pension and life insurance which ensures a safe future for for the fifth time in the “Turkey’s Most company from Turkey to affiliate children by covering his/her care and Admired Companies” survey conducted with UNEP-FI, the United Nations education costs against the risk of by Capital magazine. Environment Program - Finance parents’ death or permanent disability Initiative. or critical illness. Anadolu Hayat Emeklilik 2019 Annual Report 13
2018 2019
Became a signatory of the Women’s Turkey’s one and only private pension fund robot, Empowerment Principles (WEPs). Fonmatik ROBO was launched.
The Brand Personality Project was Customer Services Center began The Company was named the best- launched in a bid to make clearer and operating in Kartal Manzara Adalar in-class private pension company in best express the messages conveyed Office. customer experience at the A.L.F.A. to customers on every communication Awards organized by Marketing Turkiye 2019 channel. and Akademetre. Anadolu Hayat Emeklilik captured The Company presented on the market The Company claimed the “Gold leadership in the total number of the “IQ Funds” that allow the customers Prize” in the “Private Pension and Life unique participants in private pension to invest their savings in optimum Insurance” category at the “Social and auto enrolment systems. pension mutual funds in line with their Media Awards Turkey” co-organized by risk / return expectations. With its content and infrastructure Marketing Türkiye and BoomSonar. revamped, the website was relaunched Anadolu Hayat Emeklilik neutralized its Anadolu Hayat Emeklilik was awarded with a contemporary, user-friendly 2017 carbon footprint resulting from “Customers’ Friend” accolade given by design in June 2019. The new corporate its operations through the support ICERTIAS, an international certification website won bronze in the “Website extended to wind energy power association. Awards-Insurance” category at the plants and remained a carbon neutral Stevie Awards. Corporate Language Project designed company also in 2018. to uniform the language used in all The development enabling The Company became a signatory of touchpoints with customers and to transitioning to AHE Mobile from the Women’s Empowerment Principles clarify the intended message has been İşCep mobile app without entering a (WEPs) co-established by the UN Global completed. password was completed. Compact and UN Women. Anadolu Hayat Emeklilik neutralized its AHE Assistant, the AI-based (artificial Anadolu Hayat Emeklilik was named 2018 carbon footprint resulting from intelligence-based) chatbot application the best-in-class private pension its operations through the support as part of customer-centered company in customer experience at the extended to wind energy power digitalization, was launched on the new A.L.F.A. Awards organized by Marketing plants and remained a carbon neutral website in June 2019. Türkiye and Akademetre. company also in 2019. The first attempt at the integration In a repeat of last year’s success, the “Shots From Life As Seen By Women” of digital processes within fund Company claimed the “Gold Award” photography contest was held for the management and Turkey’s one and in Private Pension and Life Insurance 13th time. only private pension fund robot that category at the Social Media Awards modifies fund distribution according Work was initiated to establish the Turkey. to market conditions, Fonmatik ROBO Southeastern Anatolia District Sales At the Model Insurer Awards 2018, was launched on the Internet branch Office. which is a recognition program by and mobile branch in October 2019 for Celent – a global financial services use by customers. The app earned the consultancy firm, it was given the second prize in the “Digital Channels” “Model Insurer” award for its Basic category at the IDC Fintech Awards. Insurance Transformation Project- Commercial loan life insurance product Feniks, in the Legacy and Ecosystem began to be offered via İşbank’s Transformation category. Commercial Internet Branch and İşCep mobile app. 14 Anadolu Hayat Emeklilik 2019 Annual Report
Message from the Chairman
Global economic activity lost pace significant advantage. 20.30% at year- in 2019 end 2018, end-to-end CPI slipped down to 11.84% in 2019. The Central Bank The loss of pace that began in global of the Republic of Turkey (CBRT) pulled economic activity in 2018 increased the policy rate by 1,200 basis points its depth in 2019, particularly via the down to 12% throughout the second manufacturing industry, and spread half of the year in connection with the across the countries. This was driven by improved inflation outlook. geopolitical uncertainties, and mainly initiatives restricting trade, combined The gradual recuperation tendency with the deteriorated macroeconomic that started in the second half of 2019 indicators of countries due to in the Turkish economy is anticipated to idiosyncratic reasons. Low inflation continue and gain further momentum levels in connection with protectionist in 2020. trade policies, weak demand conditions Turkey ranks 9th in the world in and the moderate course of commodity terms of the growth of private prices led the leading central banks to pension assets. loosen their monetary policies. According to the latest OECD data on International agencies that deal with private pension sector, the ratio of PPS projections for the global economy funds to GDP was 2.5% at end-2018, predict a gradual increase in economic whereas the weighted average of OECD activity in 2020. countries stand at 126%. We believe The Turkish economy embarked that this quite low ratio in our country upon growth in the second half of will rise in the future. the year. While total funds in the private Anadolu Hayat Emeklilik Having started to contract in the last pension system based on voluntary remained the sector’s quarter of 2018, the Turkish economy participation (voluntary PPS) exceeded carried on in the same direction TL 119 billion in our country at the end leader with total assets through the first half of 2019. After of 2019, the number of participants worth TL 27.1 billion. shrinking by 1.9% in the first half of reached 6.9 million. In the auto the year, economy grew by 0.9% in enrolment system, however, the the third quarter on the back of the number of employees arrived at 6 monetary and fiscal policies pursued, million and total funds at TL 8.2 billion. thus bringing the overall contraction The points addressed in the New in the first three quarters of the year Economic Program (NEP) covering down to 0.9%. the period 2020-2022 and the 2020 The low interest rates and low oil Annual Presidential Plan indicate that prices in the global markets in 2019 our private pension system will grow presented the Turkish economy with a further. Anadolu Hayat Emeklilik 2019 Annual Report 15
A successful year for our company We are internalizing the private pension and life insurance sustainability concept for a Good category at the Social Media Awards Voluntary PPS completed its 16th year Future for Everyone. Turkey, in a repeat of last year’s in 2019. Since the inception of the achievement. system, our long-term strategic goal in Concentrating on its sustainability this branch has been set as sustaining efforts based on a long-term In recognition of the good our pioneering and leading position perspective, Anadolu Hayat Emeklilik relationships established with its on the basis of all criteria. Being increases its contributions to the customers, employees and business the company creating the highest national economy and sustainable partners, its prestige in the sector amount of funds in the aggregate of development. and the importance it attaches to life insurance, voluntary PPS and auto user experience, trust and social Within the scope of its sustainability enrolment, our Company consolidates responsibility, our Company was policy, our Company neutralized its its leadership position in the private honored with the “Customers’ carbon footprint resulting from its pension system with more than 1.8 Friend” award given by ICERTIAS, an operations through its contributions million unique participants as at year- international certification association. to sustainable energy resources and end 2019. We also preserve our leading remained a carbon neutral company as We will carry on with our consistent position with 25% market share in the it has been in previous years. and profitable growth and continue to number of system retirees. cement our role as the driving force of We are targeting to excel in Our Company has captured the highest the sector with the support of the core customer experience with a focus share among privately-held pension values and corporate culture we share on digitalization. companies in terms of the number with the İşbank Group, our financial of participants and total funds under Ever since our incorporation, we have strength, experience, our vision that management in the auto enrolment been offering innovative services and leverages our experience and our market. products to our customers together technological infrastructure that with personalized solutions at Anadolu bolsters our expertise. In 2019, Anadolu Hayat Emeklilik Hayat Emeklilik. expanded its technical profitability On behalf of our Board of Directors by a remarkable 49% year-over-year We are upgrading the added value we and myself, I would like to extend my and brought it to TL 353.7 million. create by adopting the best practices sincere thanks to all our employees, While the Company booked TL 476.8 in marketing, distribution, service and business partners, participants and million in gross profit, which is 48% operation processes in the business policyholders who have lent us support higher than it was the year before, net lines we are active in. in building a better future. profit augmented by 41% to TL 357.5 We are also endorsing these Yours sincerely, million. Total premium production, on achievements with the awards we the other hand, reached TL 1.2 billion earn. While Anadolu Hayat Emeklilik representing a 92% increase over the was named the “Best Private Pension Yalçın Sezen 2018 figure. Having TL 1.3 billion in Brand in Customer Experience Chairman of the Board of Directors shareholders’ equity as at year-end, Management” at the fifth edition of the Company remained the leader A.L.F.A. Awards organized by Marketing position in the sector with total assets Turkey and Akademetre in 2019, the worth TL 27.1 billion. Company claimed the Gold Prize in 16 Anadolu Hayat Emeklilik 2019 Annual Report
Message from the CEO
A good year despite economic private pension system made up of challenges voluntary and auto enrolment branches closed to 13 million, whereas total In the first half of 2019, the credit funds went above TL 127 billion. market continued to contract, which restrained the development of The return on pension mutual funds in life insurance and private pension 2019 highly outdid the inflation. End- sectors. In the second half of the year, to-end annual inflation was around however, the Central Bank of the 12%, whereas the weighted average Republic of Turkey (CBRT) started rate return of pension mutual funds was cuts in line with the global economic 27.4% in 2019. developments. The interest rate Total premium production on life reduction that added up to 1,200 insurance by the overall sector went up base points cumulatively, and the by 64% year-over-year and reached fiscal policies pursued, helped revive TL 11.2 billion, whereas that on term the credit demand, which reflected life increased by 60% to reach TL 9.5 positively on credit-linked life insurance billion. premium production. Our solid performance is sustained. In the private pension system based on voluntary participation (PPS) Our Company had approximately 1.1 that has a history of 16 years in our million participants and TL 22 billion country, total funds exceeded TL 119 in total funds under management in billion, and the number of participants the voluntary private pension segment reached 6.9 million at year-end. In as of 31 December 2019. Total funds the auto enrolment system launched augmented by 34%, bringing the in 2017 and having a workplace- Company a nearly 19% market share. Our Company’s total driven expansion, all phases have We remained the company with the premium production been completed with the inclusion of highest number of contracts and companies with 5 to 9 employees as of certificates, as well as total state on life insurance in January 2019 and the system gained contributed funds in the reporting 2019 boosted by 92% momentum. In the auto enrolment period. In auto enrolment, our Company system, 6 million employees were has 771 thousand employees and year-over-year and reached and total funds topped TL 8 TL 866 million in total funds, and is was up to TL 1.2 billion, billion at the end of the year. Thus, the leader among private pension the total number of participants in the companies with respective market whereas that on term life insurance doubled by 102% to TL 911 million. Anadolu Hayat Emeklilik 2019 Annual Report 17
shares of 12.8% and 10.6%. Our pension by our customers in numerous notifications and added functions in leadership position in cumulative customer surveys. Thanks to Fonmatik the first quarter of the year. voluntary PPS and auto enrolment is ROBO, our participants who are not The new Internet Branch, which we are also retained with approximately 1.9 fund specialists, are able to invest targeting to launch with a new design million participants in total. In 2019, their savings in private pension using state-of-the-art technology total funds under our management funds optimally according to their to offer a faster, clearer and easily amounted to TL 23 billion. investor characters, and steer their accessible content to our customers, is accumulations easily. Fonmatik Our Company’s total premium planned to be put into service following ROBO modifies the fund distribution production on life insurance in 2019 the Mobile Branch’s launch. according to market conditions on boosted by 92% year-over-year and behalf of the participants, and also 2020 will be a year of progress. was up to TL 1.2 billion, whereas that regularly shares fund income. on term life insurance doubled by At the point we have arrived, 102% to TL 911 million. Outperforming Fonmatik ROBO takes to the fore as approximately 13 million customers the sector average in both categories, a service offering excellent customer are being served in the private pension our Company captured 10.9% market experience, which is automated end- system including auto enrolment. share in total life insurance segment. to-end with its design, the AI (artificial Established on a solid structure, the With mathematical provisions in the intelligence) technology employed, private pension system instills trust in amount of TL 2.2 billion, the Company process automation and proactive terms of furnishing quality service to remained as the sector’s leader in this information sharing infrastructure. more extensive customer groups. area. Our new corporate website that “Annual Presidential Program 2020” We continue to lead digital is noted for its modern design released in November 2019 declared transformation. went online. Built on a dynamic certain structural modifications to infrastructure with greater adaptability voluntary PPS and auto enrolment Since 2018, we have been conducting to technological advancement, the system. One of these modifications a number of projects focused on new website is rendered conducive to differentiates the existing 25% state digitalization in line with the roadmap further upgrades. contribution according to ages of set for achieving the target of excellent individuals and sets a higher ratio for customer experience. On our corporate website, we have also the youth; as such, it is considered that launched AHE Assistant, our chatbot The first attempt at the integration the new rule will attract more young employing AI technology as part of of digital processes within fund people and expand the coverage of the our customer-centered digitalization management in private pension, pension system. process. Fonmatik ROBO was launched as the first of its kind in the sector to Our new Mobile Branch is slated for address “fund distribution selection”, going live in the first quarter of 2020 which was identified and underlined with a design incorporating the latest as the greatest challenge in private customer experience trends, proactive 18 Anadolu Hayat Emeklilik 2019 Annual Report
Message from the CEO
An arrangement allowing the Equal opportunity to women is one participants to withdraw part of their of our red lines. accumulated funds is also anticipated It is always a top priority for us to to be made within the scope of the ensure equal opportunity to women in program in order to satisfy urgent our products and social responsibility cash needs, which is one of the top projects, as well as in our HR policies. reasons of early drop-outs, a key factor We boast a woman-intensive interrupting the continuity in the distribution above the sector’s system. averages both in terms of the number Another such arrangement is the of employees and in the number of We carry on complementary pension system; once customers. The fact that we have committedly with it is launched with the concurrence of become a signatory of the Women’s social parties, voluntary PPS will be Empowerment Principles (WEPs) our efforts in the able to cover the population outside covering policies supporting women’s digital field in a bid the scope of the complementary empowerment in business and social pension system and individuals having life is one of the important steps of our to optimally fulfill additional saving capacity. approach in this respect. customer needs While complementary regulatory We deem women to be the main power and to deliver speed framework is being awaited regarding behind our country’s progress and we the details of the implementations take care to realize social responsibility and convenience in mentioned, it is thought that these projects that will contribute to social operational processes. changes will increase financial depth and cultural advancement of women. and product diversity, and will thus add We take pride in offering a platform to to the attraction of long-term savings. freely express themselves with the “Shots From Life As Seen By Women”, Turkey’s one and only photography competition exclusively for women. Anadolu Hayat Emeklilik 2019 Annual Report 19
We keep growing stronger together We will continue to create added value with our customers… for our sector and all our stakeholders drawing on our robust capitalization, Being the first publicly-held life sound financial structure, our corporate insurance and private pension company culture, and our service concept that in Turkey, and the leader of the sector, places customer at the center. we are aware of the responsibility that falls upon us. Accordingly, it is I would like to extend my heartfelt our priority focus to provide holistic thanks to our customers for endorsing solutions that will provide assurance our reliability by choosing our Company, for our customers, their families, to our principal shareholder İbank for children and loved ones throughout its support and contributions, and to all all the stages of their lives and that our employees, business partners and will satisfy their saving needs. We aim shareholders. to raise awareness of private pension Yours sincerely, funds and to act as an intermediary in channeling our customers’ savings in line with their investment preferences. Yılmaz Ertürk We believe that digitalization is the Board Member and CEO key to ensure customer satisfaction in all branches we are active in. We carry on committedly with our efforts in the digital field in a bid to optimally fulfill customer needs and to deliver speed and convenience in operational processes. 20 Anadolu Hayat Emeklilik 2019 Annual Report
An Overview of the World and Turkish Economies in 2019 and 2020 Outlook
The World Economy in emerging market and developing economies, and up by 0.4 points to In 2019, global economic growth rate 3.3% in global economy. Developments lost pace. After sending out the first in trade war and geopolitical risks might signals in 2018, the deceleration in possibly impact global risk perception global economic activity persisted in negatively also in 2020. Owing to the 2019 and spread across the world. This growth in global economy and low predicament was driven by geopolitical interest rates in developed countries, uncertainties, and mainly by initiatives it is anticipated that global liquidity restricting trade, combined with the conditions will improve to some degree deteriorated macroeconomic indicators in favor of emerging market and Annual CPI that stood of countries due to idiosyncratic developing economies. at 12% at year-end reasons. The IMF estimates that global growth, which was 3.6% in 2018, While it may not recapture its pre- 2019 is anticipated to declined to 2.9% in 2019. Inflation 2019 performance, global economy is fall to the order of 10% took a downturn globally in connection expected to register limited recovery with protectionist trade policies, weak in 2020, and this trend is anticipated in 2020. demand conditions and the moderate to persist in the years thereafter. It is course of commodity prices, which in forecasted that the difference between turn led the leading central banks to the growth rates of developed versus loosen their monetary policies. During developing countries will expand 2019, the US Federal Reserve (the somewhat in favor of the latter, and Fed) curbed its policy rate three times, that growth performances between while the European Central Bank (ECB) developed countries will differentiate. not only implemented rate cut but also In the next two years, global economic restarted asset purchases. Recently, growth is projected to be around central banks of many other developing 3.3% on average. Protectionist trade countries also made decisions to curb policies and potential geopolitical interest rates. Developments related developments that might arise in to trade wars, changes in monetary conjunction with the roadmap the policies and increased geopolitical risks US will pursue in foreign policy caused global capital flows to pursue a following the US presidential elections fluctuating course throughout the year. in November 2020 might pose an uncertainty element upon global The projections disclosed in January economy and markets. It is predicted 2020 by the IMF indicate that global that developed countries will stick to economy might recover to a certain monetary policies supporting economic extent led by emerging market and activity, and this will positively affect developing economies in 2020. It is capital flows to emerging market and projected that growth will be down developing economies. by 0.1 points to 1.6% in developed countries, up by 0.7 points to 4.4% Anadolu Hayat Emeklilik 2019 Annual Report 21
Real Growth (%) 2018 2019 (E) 2020 (P)
Global 3.6 2.9 3.3
Advanced Economies 2.2 1.7 1.6
USA 2.9 2.3 2.0
Euro Area 1.9 1.2 1.3
Japan 0.3 1.0 0.7
Emerging Market and Developing Economies 4.5 3.7 4.4
Change in Trade Volume (%) 3.7 1.0 2.9 Inflation (%) Advanced Economies 2.0 1.4 1.7
Emerging Market and Developing Economies 4.8 5.1 4.6
Source: IMF World Economic Outlook, January 2020
The Turkish Economy demand, low oil prices and increased and non-interest expenditures shot tourism revenues, current accounts up, the rise in tax revenues was behind Having started to contract on an annual balance gave a deficit once again the inflation. Consequently, the ratio of basis from the last quarter of 2018, the in November as a result of the budget deficit at end-2019 to GDP was Turkish economy restarted growing expanded foreign trade deficit. The up by 1 point to 2.9% year-over-year in the third quarter of 2019. Although 12-month cumulative current accounts in line with the projections in the New the contribution of net exports turned surplus amounted to USD 2.7 billion Economic Program (NEP). This ratio to negative, the Turkish economy in November. It is anticipated that is planned to be kept flat in 2020 in registered 0.9% growth annually in the current accounts will generate official targets. the third quarter of 2019 with the a surplus close to balance, and will positive effect lent by consumption Following the strong monetary restart producing limited deficit in expenditures. Growth for the whole tightening in September 2018, inflation 2020 in connection with the expected year is estimated to remain below the displayed a downtrend in 2019 recovery in economic activity. projected potential growth of 4-5% because of weak demand conditions, interval and will be recorded in the In 2019, there was a rapid escalation in relatively consistent Turkish currency, order of 0.5%. In 2020, however, it the budget deficit because of the local high base effect and moderate course is predicted that growth could reach elections, decisions adopted to support of commodity prices. Annual CPI that 4.0%. the economy, and the slowdown in stood at 12% at year-end 2019 is the economy. 2019 budget deficit anticipated to fall to the order of 10% After producing a surplus from July enlarged by 69.9% year-over-year to in 2020. 2019 due to weakened domestic TL 123.7 billion. While interest costs 22 Anadolu Hayat Emeklilik 2019 Annual Report
An Overview of the World and Turkish Economies in 2019 and 2020 Outlook
The rate of unemployment increased 41.0%. Up by 21.6%, pension mutual by 1 points year-over-year and reached funds increased their share in total 13.3% in November 2019. The NEP household financial assets by 30 bps projects an unemployment rate of to 5.8%. 11.8% for year-end 2020. It is projected that a meaningful Paralleling the betterment in inflation recovery will take place in domestic and conducive global liquidity demand and the contribution of net conditions, the CBRT started rate exports to growth will end also due cuts in the second half of 2019. to the weak outlook of European Following the cuts by 1,200 points economies in 2020. However, despite 2019 has been a year in the aggregate in July, September, monetary and fiscal policies supporting of sustained stable October and December, the interest growth, the Turkish economy will rate declined from 24% at the onset possibly achieve a performance below growth for private of the year to 12%. Through the the long-term average over the course pension and life modifications made to required reserve of the projection period. ratios throughout the year, the CBRT It is anticipated that monetary and insurance sectors, implemented policies to pursue fiscal policies supporting the economy financial stability and support credit intensified competition, and existing geopolitical risks might expansion. More limited rate cuts are restrain the downtrend in inflation. and a high number of anticipated in 2020 depending on the regulatory frameworks course of inflation. According to the projections, improvement in credit demand will Credit demand was low due to the published. continue parallel to the recovery in high interest rates in the first half of economic activity, and the distribution the year, continued tendencies of of total credit volume will continue to companies to reduce their borrowings, change in favor of Turkish lira loans and low household demand. A depending on the continued low level pronounced rise began to be seen in of FC credit demand. the Turkish lira credit balance of the sector after the CBRT’s rate cuts. The financial assets of households amounted to TL 1.7 trillion in September 2019, translating into an annual growth of 13.8%. The highest increases occurred in gold deposits with 63.3% and in mutual funds with Anadolu Hayat Emeklilik 2019 Annual Report 23
The Turkish Private Pension and Regulatory framework for all these It is expected that the private pension Life Insurance Sectors points are being awaited, and it is system will see improved new considered that the said changes participation and retention rates, 2019 has been a year of sustained will increase financial depth and and pension mutual funds will keep stable growth for private pension significantly contribute to long-term delivering positive returns in real and life insurance sectors, intensified savings that our country needs. terms in keeping with the projected competition, and a high number of Insurance and Private Pension macroeconomic climate in 2020 and regulatory frameworks published. Regulation and Supervision Agency, the regulatory framework that is The main regulations are summarized which was another long-awaited anticipated to be accompanied by new below: establishment by the industry, went initiatives. • Differentiation of state support live on 18 October 2019. In the life insurance branch, term according to age in order to increase Total number of participants in the life insurance linked to retail and the attraction of the system for private pension system including commercial banking products are young participants, auto enrolment was up by 8% to anticipated to preserve their weight in • Inclusion of the under-18 population 12.9 million in the twelve months to line with the real growth expected in in the system, 31 December 2019, whereas total the credit stock in 2020. Nonetheless, funds increased by 36% to TL 127.3 stand-alone term life and endowment • An arrangement allowing the billion. In the life insurance branch, products will presumably continue to participants to withdraw partially total premium production augmented increase their importance. and to show their accumulated by 64% year-over-year and reached funds as collateral for loans in order Digital transformation will likely take TL 11.2 billion as of 31 December 2019. to prevent early drop-outs because place among the industry’s priorities Credit-linked life insurance regained of short-term cash needs, also in the year ahead. In this context, momentum in connection with the companies are anticipated to maintain • Establishment of the recovery in the retail loans market that their digitalization journeys to ensure Complementary Pension System paralleled the downtrend in general new customer acquisition, reduce with the concurrence of social interest rates particularly from the third service costs, increase operational parties in an effort to create long- quarter of 2019. As a result, the overall efficiency and upgrade customer term funding for the economy, sector’s premium production on term experience. • Introduction of FC-denominated PPS life insurance enlarged by 60% year- aimed at non-resident citizens, and on-year and came to TL 9.5 billion as of 31 December 2019. • Trading of pension mutual funds on Turkey Electronic Fund Trading Platform (TEFAS). 24 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik by Numbers
Successful performance, sustainable profitability
Summary Financial Information
Financial Highlights (TL thousand) 2018 2019 Change (%)
Total Premium and Contribution Production (*) 2,032,510 3,148,700 55
Mathematical Provisions 1,740,281 2,231,797 28
Pension Funds (**) 16,937,635 22,913,666 35
General Technical Profit 237,576 353,733 49
Total Assets 20,221,515 27,134,778 34
Paid-in Capital 430,000 430,000 -
Shareholders’ Equity 940,618 1,273,673 35
Financial Income 133,742 167,325 25
Pretax Profit 322,207 476,840 48
Net Profit 253,600 357,535 41
Key Ratios (%) (%)
Net Profit/Shareholders’ Equity 29 35 Premium and Contribution Production/Total 10 12 Assets Shareholders’ Equity/Total Assets 5 5
(*) Based on the data released by the Pension Monitoring Center (PMC) as of 31 December 2019. Total premium figures include gross written premiums of personal accident and life branch. (**) Includes Auto Enrolment. Anadolu Hayat Emeklilik 2019 Annual Report 25
Shareholder Share Amount (TL) Share (%) Capital and Shareholder Structure (%) Türkiye İş Bankası A.Ş.* 274,742,970 63.89 Anadolu Anonim Türk Sigorta Şti. 86,000,000 20.00 63.89 Türkiye İş Bankası A.Ş. Millî Reasürans T.A.Ş. 4,299,999 1.00 Publicly-held 64,957,031 15.11 Total 430,000,000 100.00 1.00 Out of 43,000,000,000 shares representing the capital in the amount of TL 430,000,000, 100,000,000 Millî are Class A and the remaining 42,900,000,000 are Class B shares. As at the date of the balance sheet, all Reasürans of Class A shares are held by the Company’s shareholder, Türkiye İş Bankası A.Ş. (İşbank). Holders of Class T.A.Ş. 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 15.11 shareholders, and four from amongst those nominated by Class B shareholders. The Company’s articles of Publicly-held association do not allow creation of new Class A shares in capital increases. 20.00 The Company did not repurchase any of its own shares in the reporting period. The Company has only one Anadolu Anonim Türk associate, İş Portföy Yönetimi A.Ş., in which it holds 20% share in capital. İş Portföy Yönetimi A.Ş. does not Sigorta Şti. 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. * The ratio of publicly-held shares is 17%. As of 31 December 2018, Türkiye İş Bankası A.Ş. holds 1.89% of There are no cross-shareholding relations between any shareholder and our Company. the publicly-held shares.
Pension Funds (*) (TL million) Total Assets (TL thousand)
22,914 27,135
16,938 20,222
35% 34% Change Change
2018 2019 2018 2019
General Technical Profit (TL thousand) Pretax Profit (TL thousand)
353,733 476,840
237,576 322,207
49% 48% Change Change
2018 2019 2018 2019
* Includes Auto Enrolment. 26 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik by Numbers
Anadolu Hayat Emeklilik Market Capitalization (2000-2019, USD million)
900
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
Anadolu Hayat Emeklilik Market Capitalization (2000-2019, 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 Anadolu Hayat Emeklilik 2019 Annual Report 27
Strategic Goals of Anadolu Hayat Emeklilik
Anadolu Hayat Emeklilik pursues its Initiatives and efforts are underway to operations in keeping with its vision realize digital transformation, which is to be Turkey’s top and most preferred the key to securing sustainable growth life insurance and pension company and efficiency in business processes. in all aspects and to take place among One of the main focal points is to carry the world’s leading companies in out these initiatives with integrated, terms of quantity and quality where agile and solution-oriented systems. the degree of economic integration is In line with its sustainability strategy, constantly increasing. Being one of the Anadolu Hayat Emeklilik carries on its strongest and most reliable companies activities in order both to integrate in the sector, Anadolu Hayat Emeklilik Initiatives and efforts sustainability into its business models further raises its goals by the day and and to make the sustainability concept are underway to realize makes optimum use of its know-how, an indispensable part of the corporate experience and capital accumulation to digital transformation, culture. secure sustainable profitable growth. which is the key to Ensuring constant development of the The aspects putting Anadolu Hayat human resource that represents the securing sustainable Emeklilik in a differentiated and most competitive and longest-lived privileged position in the sector are its growth and efficiency asset and investing in qualified people know-how, competent human resource, are among the main strategic goals. in business processes. robust financial structure, strong brand equity, extensive distribution network, and deep-rooted corporate culture. The Company uninterruptedly fulfills 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 enhance the quality of life, and contributing to the development of the national economy by creating long-term stable funds. The key priorities for the Company include cementing the leading position in the sector through innovative products and practices, ensuring effective product and service positioning in line with the needs of customer segments and sales channels, and reaching the highest level in customer experience and services with the target of operational excellence. 28 Anadolu Hayat Emeklilik 2019 Annual Report
2019 Activities
◊ An Overview of Anadolu Hayat Emeklilik’s Position in the Industry and its Activities in 2019
◊ Sustainability
◊ Research and Development Anadolu Hayat Emeklilik 2019 Annual Report 29
Digital Solutions in Customer Experience
Anadolu Hayat Emeklilik uninterruptedly carried on with its activities that put digitalization and superior customer experience at its focal point in line with evolving customer expectations.
Oya Akkul Shots From Life As Seen By Women ‘19 30 Anadolu Hayat Emeklilik 2019 Annual Report
An Overview of Anadolu Hayat Emeklilik’s Position in the Industry and its Activities in 2019
Initiatives backed by digital these two criteria, the Company solutions secured 18% and 14% market shares, respectively, In the 29 years that passed since its incorporation, Anadolu Hayat Emeklilik • Enlarged its premium production in made effective use of its know-how life insurance branch by a huge 92% and capital, and became a leading year-over-year to reach TL 1,229 company for the national economy. million for an 11% market share Carrying on with its activities with the according to Insurance Information power and sense of responsibility of and Monitoring Center data of its position, Anadolu Hayat Emeklilik 31 December 2019, Anadolu Hayat Emeklilik kept bringing need-based innovative • Doubled its premium production products and services, and supporting sustained its leadership by 102% year-over-year in term these with technological solutions in life insurance and wrote premiums in private pension, 2019. in the amount of TL 911 million. auto enrolment and Anadolu Hayat Emeklilik sustained its Fund value held by its life insurance life insurance funds leadership in private pension, auto policyholders worth more than enrolment and life insurance funds TL 2.2 billion handed the Company combined on the combined on the back of its successful sustained sector leadership in this back of its successful performance achieved in line with its segment, strategies in the reporting period. The • Increased its total assets by 34% performance Company rose to no.1 spot also in the year-over-year and reached TL 27.1 total number of participants on the achieved in line with billion as at year-end 2019, basis of voluntary private pension and its strategies in the auto enrolment systems combined. • Once again manifested its ability to create sustainable and permanent reporting period. Ability to generate permanent value value with a net profit of TL 357.5 As a result of its activities in 2019, million, Anadolu Hayat Emeklilik: • Neutralized its 2018 carbon • Augmented total funds under footprint, and thus, became a carbon its management, including auto neutral company also in 2019 within enrolment, in the private pension the scope of the Sustainability system by 35% growth year-over- Management System, with the year to TL 23 billion and the number goals of measuring and minimizing of participants by 9% year-over- the environmental impact of the year to 1.9 million based on the Company’s operations and raising Pension Monitoring Center (PMC) awareness of the subject, data of 31 December 2019. For Anadolu Hayat Emeklilik 2019 Annual Report 31
• Carried on with customer base and steer their accumulations Personalized products tailored to expansion, retention and deepening easily. FonMatik ROBO modifies customer expectations activities in all segments employing the fund distribution according to With the target of providing the the right product and channel mix market conditions on account of the highest level of customer experience, maintaining its focus on excellence participants, and also regularly shares Anadolu Hayat Emeklilik delivers all of in customer experience, fund income. its products and services along with • Continued to work on increasing the Anadolu Hayat Emeklilik introduced its personalized solutions tailored to use and effectiveness of alternative chatbot named AHE Assistant (digital customers’ expectations. distribution channels. Obtained customer representative) in 2019. In the private pension branch, Anadolu quotations and sent contracts AHE Assistant has been developed Hayat Emeklilik offers services with a automatically through the digital employing artificial intelligence rich product portfolio covering pension solutions offered in auto enrolment, technology as part of the customer- plans and private pension funds centered digitalization process. • Paid utmost attention to achieving with different content and fees, and full compliance with the corporate Expanded participant base in auto encompassing various alternatives that governance principles and enrolment system respond to the investment and risk regulatory requirements that define expectations of participants. The expansion in the participant the framework of its operations, base of the private pension system In line with the needs of private and kept carefully observing the continued in 2019 thanks to the auto pension participants, the services transparency principle in all of its enrolment system introduced in 2017. of contribution payment guarantee practices. In a repeat of last year’s performance, for housewives, as well as social Marketing and Sales Anadolu Hayat Emeklilik ranked security advisory, investment advisory, at the top of the private pension emergency ambulance, and healthcare During 2019, Anadolu Hayat Emeklilik companies backed with private capital advisory to all customers are offered. focused on securing high penetration in terms of total pension assets under in all branches on the back of right Within the scope of auto enrolment, management. product and channel mixes, enhancing discounted and free-of-charge services pre- and post-sales service quality, Online Auto Enrolment, which allows continued to be offered to employees expanding the coverage of digital easy execution of all steps from of organizations in various topics, processes, and improving customer quotations to contracts, ensured cost including legal consultancy, check-up experience. and time saving for companies in 2019. and psychological counseling. Initiatives aimed at new customer Integration making auto enrolment In the life insurance branch, premiums acquisition and customer retention procedures easier were revised in credit-linked and stand- continued. alone life insurance products in line Within the scope of software with the needs. In the management of its pension integration of HR and payroll funds, Anadolu Hayat Emeklilik applications, the Company worked The new Anadolu Hayat Emeklilik maintains cooperation predominantly with the leading companies in the website went live, which is vested in with İ Asset Management, as well sector and alleviated the operational a customer-centered structure with as other leading asset management workload falling on the companies its revamped content, design and companies in the sector. FonMatik included in the auto enrolment system. infrastructure. Website visitors can ROBO, the first initiative integrating Transactions such as account opening now reach the information they are digital processes in fund management of employees, viewing the current interested in much more quickly and in private pension, has been launched. status of employees’ pension accounts, easily. FonMatik ROBO is intended to enable changing status of the accounts, and participants to invest their savings collection settlement can be performed in private pension funds optimally easily and quickly. according to their investor characters, 32 Anadolu Hayat Emeklilik 2019 Annual Report
An Overview of Anadolu Hayat Emeklilik’s Position in the Industry and its Activities in 2019
The “Corporate Language Project”, Campaigns aimed at strengthening designed to uniform the language used customer relations in all touchpoints with customers and Campaigns backing effective customer to clarify the intended message, has relationship initiatives that were been completed. conducted for increasing customer The efficiency and capacity of the retention and depth served as a distant sales channel were increased, powerful tool for strengthening and new customer acquisition and the cooperation among distribution cross-selling activities were carried out channels and for achieving sales using channel-specific products. targets, and played an important role Anadolu Hayat Emeklilik in helping Anadolu Hayat Emeklilik Personalized offers continued to be consolidate its leadership in the sector continued to carry made in inbound calls and through the also in 2019. out projects aimed at IVR system. Campaigns were organized aiming Within the scope of Key Account enriching its digital at the introduction of digital media, Management, quality of services increasing their use and boosting the channels, upgrading offered to key customers has been sales of segment-based products and constantly enhanced based on one-on- customer experience stand-alone life insurance products. one service notion. and enhancing service Customer Services To measure satisfaction with the quality also in 2019. Company’s products and services, Digital approach to customer services customer satisfaction questionnaires In our day, digital channel usage continued to be administered to increasingly expands in connection cover sample customer groups with the advancements in technology divided according to segments, and in the insurance industry as in all other deliverables from the questionnaire sectors, and customers’ usage habits were evaluated, upon which actions and expectations evolve quickly. Based were taken to enhance the level of on this awareness and consciousness, customer satisfaction and improve Anadolu Hayat Emeklilik acted in customer experience. line with the changing customer expectations and carried on with its activities putting digitalization and superior customer experience at its focal point. Continuing to build on its Anadolu Hayat Emeklilik 2019 Annual Report 33
digital channel management expertise Steadily increasing efficiency in A pioneering company in and capability, Anadolu Hayat Emeklilik customer relations bancassurance kept enriching these channels, and In an effort to boost service level, Having one of the most extensive introducing projects designed to speed, and increase productivity, distribution channels in the improve customer experience and Anadolu Hayat Emeklilik continued to bancassurance channel, Anadolu enhance its service quality in 2019. work on upgrading and configuring the Hayat Emeklilik continues to make Within the context of increasing the IVR flow of the Call Center. a difference with this strength and usage of digital channels, the Company competence. The number of agents on outbound carried out activities related to Mobile, calls and inbound calls teams were kept Anadolu Hayat Emeklilik sustained its Online Transactions and the IVR system at the optimum level, and efficiency powerful collaboration with its main in line with the customer expectations, has been secured in the service level business partner İbank throughout while at the same time launching provided to customers. During 2019, 2019, enjoying an unrivaled the AHE Assistant service offering the Call Center responded to more competitive edge with respect to multi- customers service related to private than 5 million calls and placed over channel use thanks to approximately pension and insurance on its website. 1.9 million outbound calls. A total 1,250 branches of the Bank, cutting- AHE Mobile Branch and Online of 2,365,794 transactions were edge technology and alternative Transactions executed within the scope of customer distribution channels. operations during the reporting period. Giving the customers access to Delivering its products to a large information about private pension, Distribution Channels audience through this extensive auto enrolment and life insurance network, Anadolu Hayat Emeklilik High level customer reach enabled products any time anywhere through realized 92% of its annual new through effective distribution channel AHE Mobile application, Anadolu Hayat business figure in private pension management Emeklilik has been giving weight to branch and 99% of the term life investments in digital transformation. The nationwide distribution channel insurance premium production via the structure is a building block of Anadolu bancassurance channel in 2019. Using AHE Mobile and Online Hayat Emeklilik’s sales and distribution Transactions, Anadolu Hayat Emeklilik Future Planning Specialists: A direct strategy focused on efficiency and customers are able to instantly view sales force of 496 people across productivity. The Company ensures their private pension, auto enrolment, Turkey an extensive customer reach via the life and personal accident insurance diverse channels listed below: Anadolu Hayat Emeklilik captured contract details, the accumulated leadership in the total number of funds, state contributions, their • district sales offices in Istanbul (3), participants in voluntary PPS and auto coverage, payments and fund Ankara (2), Izmir, Adana, Bursa, enrolment in 2019. performances, and perform their Antalya, Trabzon and Kocaeli, and transactions securely. a branch in the Turkish Republic of One of the key factors underlying this Northern Cyprus, achievement was the direct sales force During 2019, AHE Mobile and of 496 individuals that serve as a direct Online Transactions were visited by • direct sales force, communication channel between the approximately 1 million Anadolu Hayat • bank branches that serve as the customers and the Company. Emeklilik customers. Company’s agencies, • private agencies network, and • alternative distribution channels. 34 Anadolu Hayat Emeklilik 2019 Annual Report
An Overview of Anadolu Hayat Emeklilik’s Position in the Industry and its Activities in 2019
The so-called Future Planning Private Pension Intermediaries Specialists, the direct sales force Agencies and sales representatives offers service in İbank’s branches offering service as intermediaries in the that are present in each city in Turkey. private pension system are required Optimally representing Anadolu Hayat to pass the e-BEAS (Electronic Private Emeklilik’s capability in providing Pension Intermediaries Exam). solutions by its performance in the marketing of private pension and life Anadolu Hayat Emeklilik made sure that insurance products, the sales team all of its private pension intermediary was responsible for 84% of the private candidates across all distribution Anadolu Hayat Emeklilik pension products sold in 2019. channels took the e-BEAS also in 2019. The number of the Company’s private Extensive and deep-rooted agency successfully executes pension intermediaries reached 4,174 network its long-term social people by the end of 2019. Anadolu Hayat Emeklilik works with Human Resources responsibility projects 250 agencies countrywide, a network that emphasize that embodies a harmonious blend of The power behind the success: various business models and combines Competent employees the role of women this mosaic with a solid tradition and The success attained by Anadolu corporate structure. in economic and Hayat Emeklilik is powered by its highly social development, Representing the Company’s oldest knowledgeable, creative and dynamic distribution channel, this strong people who reflect the deep-rooted and support their agency network displayed a successful corporate culture in their activities and development. sales performance also in 2019, despite are capable of meeting on common the distribution channels that are ground. diversified owing to the advancing The total number of Anadolu Hayat technology. Emeklilik employees including the During the reporting period, the agency direct sales team was 1,087 as at year- network was responsible for 19 % of end 2019. Boasting a young team, the total contribution and premium 58% of the Company’s human resource collections in endowment and private consists of employees in the 18-34 age pension segments. interval. Anadolu Hayat Emeklilik 2019 Annual Report 35
One of the most preferred employers Aiming to give the employees a in the sector for its corporate qualities, more pleasant and productive brand equity and innovative HR working environment, Anadolu Hayat practices, Anadolu Hayat Emeklilik Emeklilik administers “Employee always makes a difference with the Satisfaction Questionnaires” and value attached to its employees, and “Internal Customer Satisfaction the training and career opportunities Questionnaires”, and uses the feedback offered. from these questionnaires as input for remarkable initiatives that will lead to Anadolu Hayat Emeklilik supports its transformation. employees’ professional and personal Anadolu Hayat Emeklilik development, and gives them the Communication opportunity to keep abreast of new supports its employees’ Corporate social responsibility practices, helps them acquire new projects professional and perspectives, and further raises the bar personal development, in services rendered to policyholders Anadolu Hayat Emeklilik focuses on through training programs aligned with social responsibility projects that and gives them the their career plans. emphasize the role of women in economic and social development, and opportunity to acquire Within the scope of the training support their development. new perspectives programs focused mostly on the private pension system, and professional and Shots From Life As Seen By Women through training personal development, the Company Photography Contest employees received 41,970 hours of programs aligned with Aiming to contribute to the social and training in total during the reporting cultural development of the Turkish their career plans. period. women, “Shots From Life As Seen By Within the frame of the education Women” photography contest offers collaboration agreement with Istanbul them a platform where they can freely Bilgi University, “Management express themselves. Skills Training” for managers and management trainees continued in 2019. 321 managers and management trainees in total, including sales managers, attended these programs. The “Visionary Leadership Program” addressing the Direct Sales Team managers and management trainees covered over 70 employees. 36 Anadolu Hayat Emeklilik 2019 Annual Report
An Overview of Anadolu Hayat Emeklilik’s Position in the Industry and its Activities in 2019
First Prize Zehra Çöplü, Among the Fogs
Second Prize Gülten Ünal, Love
The thirteenth edition of the Since its debut in 2007, more than 19 photography contest “Shots From Life thousand women submitted over 75 As Seen By Women” was held in 2019 thousand photographs. under the auspices of the Photographic Selected photos are exhibited in Arts Federation of Turkey. Having set Istanbul and various other cities, and its theme as “About Life” and open to collected in a special catalogue each all amateur and professional women year. photographers, the contest is the one and only photography contest in Turkey organized exclusively for women. Anadolu Hayat Emeklilik 2019 Annual Report 37
Long-lived communication projects • SEO (search engine optimization) campaigns centered on the social actions were realized to ensure media compete, Below are the highlights of 2019 that the corporate website takes communication activities of Anadolu • Was named the best-in-class private place in the top places within search Hayat Emeklilik, which are executed on pension company in customer engine results, as well as SEM the axis of long-term plans with the experience at A.L.F.A. Awards co- (search engine marketing) initiatives objective of instilling an awareness of organized by Marketing Turkiye and aimed at creating sales leads via the secure future across Turkey: Akademetre, website. • The press launch took place for • Received the Customers’ Friend • Internal communication activities FonMatik ROBO, Turkey’s one and accolade given by ICERTIAS, were carried on within the frame only private pension fund robot that an international certification of different events in an effort to modifies fund distribution according association, promote corporate awareness and to market conditions on account internal communication. • Claimed Bronze at the Stevie Awards of the participants, along with in the “Website Awards-Insurance” communication activities on digital, • Giving the Company employees the category with the new corporate cinema, radio and outdoor media. chance to express the way they see website, life and seeking to promote internal • Communication activities were communication, “Shots From Life • Earned the second prize in the carried out on the radio to promote As Seen By Women” photography “Digital Channels” category at the Farmers’ Retirement Plan. contest was held for the twelfth the IDC Fintech Awards with the • As part of promotional activities for time. Fonmatik ROBO Project, “Investment Insurance for Children” Awards encouraging the mission • Clinched the second prize in the product, broadcasts were made on towards the society and stakeholders “Change Management” category at digital, cinema, radio and outdoor the IDC CIO 2019 Awards with its media. The activities of Anadolu Hayat New PPM Tool Project under which Emeklilik that are appreciated by its • Contents were prepared on various work is carried out in relation to customers and eminent organizations topics for “Anadolu Hayat Emeklilik project and demand management are underpinned by the Company’s Blog”, which covers posts under the tool modification and improvement innovative, technology- and customer- categories Culture/Arts, About Life, of associated processes. focused approach. The Company’s Must-See Places and Career. mission towards the society and its • Communications and campaigns stakeholders were further encouraged were carried out on social networks. by the following awards collected in 2019: • Campaign posters were set up in foyers and commercials were • Anadolu Hayat Emeklilik was named screened at Cinemaximum cinemas. the best-in-class in Private Pension and Life Insurance category for the • Press conferences were held in successful campaigns conducted order to build on brand image, to on all social media networks and maintain contact with the press and particularly on Facebook, Twitter, to increase recognition. Instagram and YouTube at the Social Media Awards Turkey, where 38 Anadolu Hayat Emeklilik 2019 Annual Report
Sustainability
Seeking to create economic, social Having affiliated with UNEP-FI, the and environmental value in all of its United Nations Environment Program operations, Anadolu Hayat Emeklilik – Finance Initiative in 2017, Anadolu pioneers the sector with respect to Hayat Emeklilik is the one and only “Sustainable Future” with its products private pension and life insurance and its social responsibility initiatives, company from Turkey included in this while serving sustainable development global alliance. The initiative facilitates with the target of perpetuating the information exchange with companies standard of living captured during the undertaking similar efforts in relation productive period of individuals. to sustainability, discussions are held about creation of new products, and In keeping with its The activities associated with the about potential benefits that can be implementation of the Sustainability slogan “A Good Future contributed to pension/insurance Management System that was activities from a sustainability for Everyone”, Anadolu launched in cooperation with Escarus perspective. Hayat Emeklilik steadily - TSKB Sustainability Consultancy Inc. continued during 2019. Regarding equal opportunity not as a carries on with its privilege but as a right in its HR policies, Having embraced the mission products and social responsibility sustainability activities of creating economic, social and projects, Anadolu Hayat Emeklilik environmental value, Anadolu Hayat with the objectives supports the empowerment of women Emeklilik neutralizes it carbon footprint in business and social life in keeping of passing on a more resulting from its operations, and with the Women’s Empowerment extends support to renewable energy livable world to future Principles (WEPs) spelled out by the resources within the scope of the United Nations that it has signed in generations, and Carbon Footprint Management Project. 2018. presenting them with a The Sustainability Committee that In keeping with its slogan “A Good was set up to ensure effective sustainable and reliable Future for Everyone”, Anadolu Hayat implementation of the Sustainability Emeklilik will steadily carry on with future. Policy and related procedures carried its sustainability activities with the on with its activities in 2019. objectives of passing on a more livable With the intention of raising awareness world to future generations and of sustainability, advisory posters were presenting them with a sustainable used in offices, in addition to various and reliable future. informative activities addressing employees including conversation sessions with experts, employee questionnaires and e-bulletins. Anadolu Hayat Emeklilik 2019 Annual Report 39
Research and Development
Keeping customer satisfaction in the completed, and efforts continued to foreground at all times, Anadolu Hayat apply the “Brand Personality Guide” to Emeklilik continued with its projects customer touchpoints. to enhance the experience rendered The AI-based Chatbot (AHE Assistant) to its customers through all channels aiming to offer instant and quick and to switch to a dynamic structure support to Anadolu Hayat Emeklilik that makes the evolving customer customers was launched and proved to expectations the focal point of all be an application providing satisfaction its processes. While concentrating with a 94% response rate. on process optimization within the Anadolu Hayat Emeklilik frame of Operational Excellence Turkey’s one and only private Project, the Company took significant pension fund robot that modifies carries on with its steps towards enhancing customer fund distribution according to projects and work to experience as digitalization projects market conditions on account of the executed under the “Customer participants, Fonmatik ROBO was deliver a high-level Experience Program” roof began to be launched on the Internet branch and customer experience put into life. mobile branch for use by customers. With this app, Anadolu Hayat Emeklilik The corporate website designed to to its customers at all authored yet another first in the enhance customer experience went industry. touchpoints with a live with its modern and user-friendly stronger infrastructure design, which was developed based on The transformation of life insurance the outcomes derived from customer branch that makes the second and more agile and experience surveys. phase of Feniks, the Basic Insurance Transformation Project of Anadolu integrated processes, The new Mobile Branch, which will be Hayat Emeklilik, continued with the offering high-level user experience by putting digitalization work on credit-linked life insurance. and will incorporate quick interfaces The related work is slated for in the focal point of all written with cutting edge technology, completion in the second half of 2020. processes. is slated for going live in the first quarter of 2020. Under the project for Alignment with the Personal Data Protection Law, Anadolu Hayat Emeklilik carries progress was achieved in consent on with the revamping of Online and information activities addressing Transactions initiated under the customers and employees, as well as in Customer Experience Program roof data anonymization, data masking and with the aim of steering customers destruction, whereas data inventory to digital channels for faster and has been brought to completion. easier execution of their transactions, increasing the diversity of information During 2019, Anadolu Hayat Emeklilik and functions available on digital commenced work for test automation channels, and adding further speed to in order to render the quality of its Online Transactions. With its modern products and services delivered to design and functions, the new Online customers sustainable, and to rapidly Transactions are planned to be respond to changes and needs. In launched in the second half of 2020. 2020, a greater portion of test studies are planned to be automated. Carried out with the purpose of using a common, corporate language at all touchpoints with customers, the Corporate Language Project has been 40 Anadolu Hayat Emeklilik 2019 Annual Report
Corporate Governance
◊ Organization Chart
◊ Board Directors
◊ Declarations of Independence by Independent Members of the Board of Directors
◊ Outside Positions Held by the Board of Directors and Executives
◊ Senior Management
◊ İşbank
◊ Human Resources Policy
◊ Dividend Payment Policy
◊ Changes in the Legislation during the Fiscal Year
◊ Other Material Disclosures Concerning the Reporting Period
◊ Transactions Executed with the Risk Group in Which the Company Is Included
◊ An Assessment of Independent Audit, Internal Control System and Internal Audit Activities by the Board of Directors
◊ The Independent Auditor’s Report Related to Annual Report
◊ Policies About Corporate Governance
◊ Statement of Compliance with Corporate Governance Principles
◊ Corporate Governance Compliance Report
◊ Corporate Governance Information Form
◊ Additional Information About Corporate Governance Anadolu Hayat Emeklilik 2019 Annual Report 41
While fostering its deep-rooted corporate heritage and robust financial structure through innovative practices and investments, Anadolu Hayat Emeklilik continues to adhere to its sustainable profitable growth strategy and creating added value for the national economy through long-term funds.
Gamze Dönmez Shots From Life As Seen By Women ‘19 42 Anadolu Hayat Emeklilik 2019 Annual Report
Organization Chart
BOARD OF DIRECTORS
Corporate Governance Committee Şebnem Ergün Kemal Emre Sayar N. Cem Özcan
Audit Committee M. Rafet Akgünay Ahmet D. Erelçin
Early Detection of Risk Committee Erda Gerçek Kemal Emre Sayar CEO YILMAZ ERTÜRK
Deputy Chief Executive Deputy Chief Executive Deputy Chief Executive Orhan Bozkurt Haldun Aydoğdu Murat Atalay
Funds Management Agencies IT Department District Sales Office and Department Department Branch Offices - Aegean District Sales Office - Central Anatolian I. District Change and Project Sales Office Individual Sales Accounting Management - Central Anatolian II. District Department Department Department Sales Office - Çukurova District Sales Office - İstanbul Asian District Legal and Administrative Corporate Sales Sales Office Reporting Department Department - İstanbul European District Sales Office - Marmara District Sales Office Software Development - Mediterranean District Department Sales Office - North Eastern Anatolia District Sales Office - Thrace District Sales Office - Western Black Sea District Sales Office - TRNC Branch Office Anadolu Hayat Emeklilik 2019 Annual Report 43
SECRETARIAT TO THE BOARD OF DIRECTORS
BOARD OF INTERNAL AUDIT M. Selahattin Bayraktaroğlu
Deputy Chief Executive Deputy Chief Executive M. Cengiz Aytekin Tuna Uğun
Coordinator İ. Hakkı Altay
Actuarial and Risk Management and Customer Operations Communications Reinsurance Internal Control Department Department Department Department
Support Services Customer Relations and Procurement and Digital Channels Department Management Department
Legal Marketing Department Department
Human Resources Strategy and Corporate and Training Performance Management Department Department
Health Product Management Department Department 44 Anadolu Hayat Emeklilik 2019 Annual Report
Board of Directors
Yalçın Sezen Hasan Koçhan Yılmaz Ertürk Chairman of the Board of Directors Vice Chairman of the Board of Directors Director and CEO Yalçın Sezen graduated from the Political Hasan Koçhan graduated from Ankara Academy Yılmaz Ertürk received his bachelor’s degree Sciences and Public Administration Department of Economic and Commercial Sciences, in economics from the Faculty of Economics of the Middle East Technical University, Faculty Banking Insurance Trade Institution of Higher at İstanbul University in 1985 and his master’s of Economics and Administrative Sciences. He Education, Banking Department. Beginning degree in Economics from the same university, started his career on the Board of Inspectors his career at İşbank as an Officer in the Maçka/ Institute of Social Sciences in 1988. He started of İşbank in 1987. After serving in managerial Trabzon Branch in 1984, Mr. Koçhan was his banking career at İşbank as an Assistant positions in various units of İşbank from 1998, appointed to Bayburt Branch as an Assistant Specialist in the Economic Research Division he was promoted to Deputy Chief Executive on Section Head and served in the same position in August 1987. He was appointed to İşbank’s 13 April 2011, in which role he is responsible at Yomra/Trabzon, Bulancak/Giresun and Treasury Department as an Assistant Specialist for the Retail Banking Business Unit. He has Trabzon Branches. He served as a Sub-Manager in October 1990. He became the Head of been elected a Board Director of Anadolu Hayat and Assistant Manager at the Trabzon Branch. Economic Research Division of İşbank in Emeklilik on 21 March 2019. He was appointed as a Branch Manager to Park/ March 2003, Head of International Financial Trabzon, Ordu, Gaziantep and İzmit/Kocaeli Institutions Division in October 2006, and Branches. He was elected to İşbank’s Board of Manager of Kozyatağı Corporate Branch in Directors on 3 November 2008, 31 March 2011 March 2011. Yılmaz Ertürk was promoted to and 28 March 2014. He served as Member of Deputy Chief Executive on 30 January 2013. the Credit Committee from 30 May 2011, and He has been named the CEO of Anadolu Hayat retired when he was a member of İşbank’s Emeklilik on 26 August 2019. Board of Directors on 31 March 2017. He has been elected a Board Director of Anadolu Hayat Emeklilik on 28 April 2017 and Vice Chairman of the Board on 26 March 2018. Anadolu Hayat Emeklilik 2019 Annual Report 45
Şebnem Ergün, Attorney at Law and Dr. Ahmet D. Erelçin Erda Gerçek Mediator Director (Independent) Director (Independent) Director (Independent) Dr. Erelçin received his B.A. degree in Business Erda Gerçek holds a degree in economics from Şebnem Ergün received her law degree in Administration at the University of Istanbul, Boğaziçi University. Erda Gerçek started his 1986 at Ankara University Faculty of Law. After M.Sc. degree in Accounting & Finance at LSE career in the Treasury Department of Citicorp completing her law internship, she started and his Ph.D. in Business & Economics at Lehigh Zurich in 1989, where he later managed the her professional carrier as an Assistant Legal University. Having 28 years of experience in principal-guaranteed products from Swiss and Expert at the Capital Markets Board of Turkey Turkish Capital Markets, Dr. Erelçin started his UK pension funds. In 1991, he set up the Global (CMB) in 1988. Later she was promoted to career in banking at İktisat Bankası. Dr. Erelçin Emerging Markets division at the same group Legal Expert and Senior Legal Expert posts, later worked at Treasury, Investment Banking and also worked as Latin America and EMEA respectively and also served as the Deputy and Asset Management departments of strategist. He undertook two secondments to Head of the Corporate Finance Department Garanti Bankası, Interbank and Finansbank. the Hong Kong office as the group’s Far East for three years. After her retirement from the After appointed to Demir Yatırım General strategist and Chief Investment Officer and was CMB in 2008, she started to provide services on Manager in 1997, Dr. Erelçin was appointed in charge of the Asia Pacific region. In addition her specialized areas such as Capital Markets as the General Manager of HSBC Investments to managing the global funds of Citi Asset Law, Corporate Law, M&A and Corporate in 2000 and served as a member of the Management (CAM), he was also the Portfolio Finance to publicly traded companies/holdings, Executive Committee of HSBC Turkey in charge Manager of Korea, Thailand, Greece, Portugal companies who intend to go public, Capital of its Brokerage and Asset Management and Turkey in the same period. In 2004, he set Market Institutions, individual and institutional subsidiaries. In 2008, Dr. Erelçin established up the Group’s Hedge Funds. In tandem with his investors as a Legal Consultant and Attorney- the Turkish desk of HSBC Principal Investments strategist role, he assumed the responsibility at-Law. She was registered in the mediators and invested in Turkish companies utilizing for portfolio management, managing and list of the Ministry of Justice in 2017. She has HSBC’s equity. During this period, Dr. Erelçin marketing Long-Short Market Neutral and Advanced Capital Markets Activities License, represented HSBC at the boards of its portfolio 130-30 products. Within the Citigroup, he gave Corporate Governance Rating License, Real companies, Havaş and TGS. After ending his courses to employees of market and economy Estate Appraiser License, Derivatives License active professional career in banking, Dr. Erelçin regulators and especially central banks of and Credit Rating License. She has served as started lecturing in finance courses at the various countries. He also worked as trainer a board member of Turkish Capital Markets Graduate Business Schools of Koç and Özyeğin in the group’s Management Trainee program. Association for two periods. She was a member Universities. Dr. Erelçin sits at the Board of Erda Gerçek currently offers training programs of the Advisory Board during the establishment Directors of Darüşşafaka Society and its in strategy and global markets in and out of phase of İstanbul Arbitration Center. She is various commissions. He has been elected a Turkey, provides consultancy services, and an independent board member of Gimat Real Board Director of Anadolu Hayat Emeklilik on teaches in the graduate programs of various Estate Investment Company Inc. She has been 26 March 2018. universities in Turkey. He has been elected as elected as a Board Director of Anadolu Hayat a Board Director of Anadolu Hayat Emeklilik on Emeklilik on 26 March 2018. 24 March 2014. 46 Anadolu Hayat Emeklilik 2019 Annual Report
Board of Directors
Dr. M. Rafet Akgünay M. Elif Germirli Serdar Yılmaz
Director (Independent) Director Director
Dr. Rafet Akgünay holds a degree in public M. Elif Germirli graduated from the Chemical Serdar Yılmaz received his bachelor’s degree administration from the Faculty of Economic Engineering Department of Boğaziçi University in electrical and electronics engineering and Administrative Sciences at the Middle East in 1990 and received her MBA in finance from the Middle East Technical University in Technical University. After completing a master’s from Columbia University in the USA. She 1995 and his master’s degree in 1998. He got degree in the USA, he received a doctorate degree from the Department of International has held various positions in a number of an MBA from Bilgi University in 2014. After Relations at the Middle East Technical University. departments at Citibank İstanbul including starting his career as a developer in İşbank’s He started his professional life as a Junior the capital markets and corporate finance Software Development Department in 1995, Career Officer in the Department of Cyprus departments until 2000. After working as he worked as an Application Architect and and Greece Affairs at the Ministry of Foreign a Director in the Global Securitized Markets Project Manager at Softtech from 2004 Affairs in 1977. He worked in various postings in at Citigroup in London between 2000 and to 2008. In 2008, he was assigned as an Nicosia, Tel Aviv and Athens under the Ministry 2007, the last position Elif Germirli held with Assistant Manager to IT Architecture and of Foreign Affairs between 1980 and 1985. He the Citigroup was as a Director of Real Estate Security Division of İşbank, where he became then worked as Section Head, Department of Finance for CEEMEA region. From 2008 to International Security Affairs of the Ministry a Unit Manager in 2009. He functioned as (1985-1987), Faculty Advisor and Senior Turkish 2018, she worked for Tahincioğlu Holding as IT Architecture Director until 2012, when he Representative in the NATO Defense College a Deputy Managing Director, CFO, and CEO became IT Architecture and Data Management (1987-1991), Division Head of Military Affairs, respectively. Elif Germirli has been elected as Director. Serving as Data Management Division Department of International Security Affairs of a Board Director of Anadolu Hayat Emeklilik on Head since 30 January 2015, Mr. Yılmaz has the Ministry of Foreign Affairs, Counselor and 21 March 2019. been elected as a Board Director of Anadolu Deputy Chief of Mission in the Turkish Embassy Hayat Emeklilik on 26 March 2015. in Washington DC (1993-1997), Deputy Director General of the Directorate General of Policy Planning under the Ministry of Foreign Affairs (1997-1998), Chief of Staff to the President of the Republic of Turkey (1998-2000), Turkish Ambassador in Beijing (2000-2004), and Chief Foreign Policy Advisor to the Prime Minister and Deputy Undersecretary for Multilateral Political Affairs and International Political Organizations (2005-2008). He held the position of Special Envoy for Countering Terrorism in 2007 and 2008. Following his posting as the Turkish Ambassador in Ottawa from 2008 until 2012, he voluntarily retired. Ambassador (R) Dr. Akgünay works as Advisor to the President and Faculty Member at the Middle East Technical University Northern Cyprus Campus and also serves on the Consultative Council to the President of the Turkish Republic of Northern Cyprus, which was formed to assist the 3rd President of the TRNC in the negotiations. Dr. Akgünay has been elected a Board Director of Anadolu Hayat Emeklilik on 24 March 2014. Anadolu Hayat Emeklilik 2019 Annual Report 47
Kemal Emre Sayar Mesut Dinçer
Director Director
Kemal Emre Sayar received his bachelor’s Mesut Dinçer received his bachelor’s degree in degree in industrial engineering from the international relations from Uludağ University. Middle East Technical University. He then He started his career at İşbank in 1999, where got an MS in Information Technologies in he held managerial positions in various units. Management from Sabancı University and an He was promoted to Division Manager in the MA in Economics and Finance from Boğaziçi Private Banking Sales Department of İşbank University. He started his career as an Assistant on 26 August 2019. Mesut Dinçer has been Inspector on İşbank’s Board of Auditors in elected as a Board Director of Anadolu Hayat 1999, where he subsequently held managerial Emeklilik on 13 September 2019. positions in various units of the Bank. Currently he serves as a Unit Manager in the Subsidiaries Department of İşbank. Having held seats in the boards of directors of various group companies, Mr. Sayar has been elected as a Board Director of Anadolu Hayat Emeklilik on 27 November 2015. 48 Anadolu Hayat Emeklilik 2019 Annual Report
Declarations of Independence by Independent Members of the Board of Directors
İstanbul, 22 February 2019 İstanbul, 22 February 2019 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 2019. the General Assembly to be convened in March 2019. Yours sincerely, Yours sincerely, Erda Gerçek Dr. Merih Rafet Akgünay
İstanbul, 22 February 2019 İstanbul, 22 February 2019 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 2019. the General Assembly to be convened in March 2019. Yours sincerely, Yours sincerely, Şebnem Ergün, Attorney-at-Law & Mediator Dr. Ahmet D. Erelçin Anadolu Hayat Emeklilik 2019 Annual Report 49
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 Bankalararası Kart Merkezi A.Ş. • Board Director at Livewell Giyilebilir Sağlık Ürün Hizmet ve Teknolojileri Sanayi ve Ticaret A.Ş.
Hasan Koçhan Vice Chairman of the Board of • Retired 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 • Chairman of the Board of Directors at İşbank AG Şebnem Ergün Independent Board Director • Founder Attorney-at-Law/Mediator at ERGÜN Law Office • Independent Member of the Board of Directors at Gimat GYO A.Ş.
Ahmet D.Erelçin Independent Board Director • Member of the Board of Directors at Darüşşafaka Society • Lecturer in the Graduate School of Business / Finance at Koç University • Lecturer in the Graduate School of Business / Finance at Özyeğin University Dr.Merih Rafet Independent Board Director • Adviser to the President and Faculty Member at Middle East Technical Akgünay University TRNC Campus Erda Gerçek Independent Board Director • Executive at Thales Training and Consultancy • Faculty Member at Koç University • Independent Board Director at İş Yatırım Menkul Değerler A.Ş.
Mesut Dinçer Board Director • Division Head at İşbank Mühibe Elif Board Director • Auditor at Council of Shopping Centers-Turkey Germirli • Management Consultant
Serdar Yılmaz Board Director • Division Head at İşbank Kemal Emre Board Director • Unit Manager at İşbank Sayar • 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 Topkapı Yatırım Holding A.Ş. • Member of the Board of Directors at Batı Karadeniz Elektrik Dağıtım ve Ticaret A.Ş. • Member of the Board of Directors at Softtech Yazılım Teknolojileri Araştırma Geliştirme ve Pazarlama Ticaret A.Ş. Mustafa Cengiz Deputy Chief Executive • Member of the Insurance Law Association of Turkey Aytekin Officer 50 Anadolu Hayat Emeklilik 2019 Annual Report
Senior Management
Executive Board
Yılmaz Ertürk Orhan Bozkurt Haldun Aydoğdu Board Director and CEO Deputy Chief Executive Officer Deputy Chief Executive Officer Yılmaz Ertürk received his bachelor’s degree He is a graduate of Galatasaray School of He holds a degree in electrical and electronics in economics from the Faculty of Economics Economics and Business Administration of engineering from the Middle East Technical at İstanbul University in 1985 and his master’s İstanbul Academy of Economic and Commercial University. He started working as a Software degree in Economics from the same university, Sciences. He started working as an Assistant Specialist at İşbank in 1995, where he Institute of Social Sciences in 1988. He started Inspector at Anadolu Sigorta in 1982. He was functioned as the Software Team Leader his banking career at İşbank as an Assistant appointed to Anadolu Sigorta Aegean Regional (1999-2003), Project Leader (2003-2006), Specialist in the Economic Research Division Branch in 1989 and was involved in the Assistant Manager in the Operational Solutions in August 1987. He was appointed to İşbank’s incorporation of Anadolu Hayat in the position Division (2007-2010), and Head of the Micro Treasury Department as an Assistant Specialist of İzmir Regional Director. He then served, in Services Development Division (2010-2011). He in October 1990. He became the Head of order, as Accounting, Agencies, PR and Training joined Anadolu Hayat Emeklilik as Coordinator Economic Research Division of İşbank in Manager. Appointed as the Head of the Board on 1 July 2011. Mr. Aydoğdu has been serving March 2003, Head of International Financial of Inspectors in 1997, Orhan Bozkurt also as a Deputy Chief Executive Officer since Institutions Division in October 2006, and served as the CEO of Gothaer-Anadolu Hayat 1 February 2013. Manager of Kozyatağı Corporate Branch in partnership between 2000 and 2002. Mr. March 2011. Yılmaz Ertürk was promoted to Bozkurt has been serving as a Deputy Chief Deputy Chief Executive on 30 January 2013. Executive Officer at Anadolu Hayat Emeklilik He has been named the CEO of Anadolu Hayat since 12 June 2007. 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. Anadolu Hayat Emeklilik 2019 Annual Report 51
Murat Atalay Tuna Uğun Mustafa Cengiz Aytekin Deputy Chief Executive Officer Deputy Chief Executive Officer Deputy Chief Executive Officer He holds a degree in statistics from the Faculty He graduated from the Economics Department He holds a degree in law from İstanbul of Science at Hacettepe University. He joined (English) at Marmara University. He joined University. He joined Anadolu Hayat Emeklilik İşbank in 1996 as an Assistant Specialist and Anadolu Hayat Emeklilik in 1994 as a Fund as a lawyer in 1995. He was promoted to functioned as a Specialist and Manager in Management Assistant Specialist in the the position of Assistant Legal Counsel in various Branch and Head Office divisions. He Pension Accounting and Finance Department, 1999, Legal Counsel in 2004, and Chief Legal was a Board Director representing İşbank at where he was promoted to II. Manager in the Counsel in 2014. Mr. M. Cengiz Aytekin has been Anadolu Hayat Emeklilik from 24 May 2011 until Funds Management Department in 2000. appointed as Deputy Chief Executive Officer on 31 October 2014. Serving as the Head of Retail Having started to work in the Private Pension 29 December 2014. Banking Marketing Division of İşbank since Department, he promoted to the position of 2011, Mr. Atalay has been appointed as Deputy Assistant Manager and Manager in the same Chief Executive Officer of Anadolu Hayat department in 2004 and 2007, respectively. Emeklilik on 1 November 2014. Having served as the Marketing Manager between 2008-2014, Mr. Tuna Uğun has been appointed to the position of Deputy Chief Executive on 29 December 2014.
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 Technical University, Faculty She holds a degree in Business Administration of Economic and Administrative Sciences. from the Middle East Technical University, Faculty He started working as an Assistant Internal of Economic and Administrative Sciences. She Auditor at Anadolu Hayat Sigorta in 1994. At started her career at Anadolu Hayat Sigorta as an the İstanbul District Office 2, he functioned as Assistant Specialist in 1990. After functioning as an Assistant Manager between 2001-2006 a Specialist and a Manager in various divisions, and then as a Manager from 2006 onwards. Mr. Ms. Kılıçuzar has been serving as a Manager Bayraktaroğlu has been appointed as the Head at the Risk Management and Internal Control of the Board of Internal Audit on 12 June 2007, Department since 2011. She also serves as a position he still holds. a member of the Anti-Money Laundering/ Combating the Financing of Terrorism Committee of the Insurance Association of Turkey. 52 Anadolu Hayat Emeklilik 2019 Annual Report
İşbank
İşbank, the first national bank of Having pioneered the establishment Turkish Republic, was founded on and growth of many new industries in 26 August 1924 at the initiative of the country with its corporate identity Atatürk, consequent to the decisions championing innovation in every made in the First Economy Congress in aspect, İşbank controls a portfolio of İzmir. İşbank, which has taken a leading equity stakes in leading companies that stance at every stage of economic and are active in a wide range of endeavors. commercial life, assumed various roles The financial participations operating in a number of fields, mainly in industry in a variety of business lines from and trade, and made significant investment banking to portfolio contributions through 95 years since management and from leasing to its foundation. private pension make İşbank unique. As the largest private bank of Turkey in Having crowned its trusted company terms of total assets, loans, deposits image with its achievements in 2019, and shareholders’ equity, İşbank İşbank continued to build on product provides its customers quick access to and service diversity offered through financial services through its extensive alternative distribution channels, and branch network and alternative to consistently augment its transaction distribution channels. volumes. İşbank’s superior scale and its As of 2019 year-end, 32.81% of competence of service delivery are İşbank’s shares are on free float and defined by its excellent and extensive they are publicly traded on Borsa network that consists of: İstanbul. • 24,053 employees • 1,249 domestic and 22 international branches • 6,506 ATMs Anadolu Hayat Emeklilik 2019 Annual Report 53
Changes in the Legislation during the Fiscal Year
Regulation Circular Standard The Regulation Amending the The Circular Amending the Private TFRS17 Insurance Contracts Standard Regulation on State Contributions in Pension System Circular has been has been published in the Official the Private Pension System has been published on 18 April 2019. The Gazette dated 16 February 2019 published in the Official Gazette dated Circular describes various principles with the aim of incorporating the 29 May 2019. The Regulation modified and procedures related to stipulations “IFRS17 Insurance Contracts” standard the limits for investment of state contained in the Law no. 4632 on published by the International contributed funds. the Private Pension Savings and Accounting Standards Board in the Investment System, Private Pension national legislation. The Regulation Amending the System Regulation, Regulation on Regulation on the Establishment Decree State Contributions in the Private and Operating Principles of Pension Pension System, and the Regulation on The Presidential Decree concerning Mutual Funds has been published in the Principles and Procedures of Auto the Organization and Duties of the Official Gazette dated 15 May 2019. Enrolment of Employees in a Pension the Insurance and Private Pension The Regulation authorized the Capital Plan Arranged by their Employers. Regulation and Supervision Agency has Markets Board to set out the principles been published in the Official Gazette and procedures for the assessment of Sector Announcement dated 18 October 2019. The Decree the performances of private pension Sector Announcement concerning Auto resolved that the Insurance and Private mutual funds and those related to Enrolment of Employees in a Pension Pension Regulation and Supervision incentives and measures to be applied Plan Arranged by their Employees has Agency be established to carry out the to portfolio managers based on the been published on 16 January 2019. duties associated with the regulation said evaluations, after getting input The sector announcement set out age and supervision of insurance and from the Ministry of Treasury and control of employees, conditions for private pension sectors. Finance. their inclusion and re-participation in The Private Pension Intermediaries the system, and the considerations for Regulation has been published in the employees and pension companies in Official Gazette dated 13 June 2019. their dealings and transactions. The Regulation sets out the principles and procedures governing private pension intermediaries, removed the principles and procedures concerning private pension intermediation exams, and stipulated that the exam to be prepared by the Pension Monitoring Center be determined in the “Registry and Licensing Procedures”. 54 Anadolu Hayat Emeklilik 2019 Annual Report
Other Material Disclosures Concerning the Reporting Period
Disclosures on the Special Audit and Penalties and Sanctions against the Financial Rights Public Audit Conducted During the Company and Board Directors on In the fiscal year ended Reporting Period account of Practices Contradicting 31 December 2019, wages and similar with the Provisions of Legislation During 2019, T.R. Prime Ministry benefits provided to the chairman and of Treasury and Finance Insurance There were no penalties and sanctions the members of the Board of Directors Supervision Board conducted a private of material nature imposed on account amounted to TL 1,953,600 and to pension procedures and regulatory of practices contradicting with the senior executives such as the CEO compliance audit. provisions of legislation in 2019. and Deputy Chief Executive Officers amounted to TL 5,254,388. The semi-annual independent audits Grants and Donations, Expenses of the Company and annual information Incurred within the Frame of Social Other Means systems and work processes audit Responsibility during the Reporting Under other means including, among were performed by Guney Bagımsız Period others, business trip expenses, Denetim ve Serbest Muhasebeci Mali In 2019, the Company’s grants entertainment expenses and insurance Müavirlik A.S. and donations totaled TL 1,650 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 55,026 to the Chairman and attached thereto were audited and Board Directors, and TL 1,119,671 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 21 March 2019 have been Association During the Reporting TL 6,595,392 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 2019 are against the Company during 2019, presented below. which might have a potential impact on the Company’s financial standing and activities. Anadolu Hayat Emeklilik 2019 Annual Report 55
Transactions Executed with the Risk Group in Which the Company Is Included
During the reporting period, the Company collected TL 32,523,391 (31 December 2018: TL 27,215,781) employer contribution for private pension plans from related parties, and accrued TL 714,119 employer premium for life insurance (31 December 2018: TL 488,432). Other material transactions executed with related parties in the fiscal years that ended on 31 December 2019 and 31 December 2018 are presented below: 31 December 2019 (TL) 31 December 2018 (TL) Milli Reasürans T.A.Ş. - written premiums, ceded 2,267,611 2,062,750 Written premiums, ceded 2,267,611 2,062,750
Milli Reasürans T.A.Ş. - commission income from reinsurers 238,523 428,043 Commission income from reinsurers 238,523 428,043
Türkiye İş Bankası A.Ş. – interest income from deposits 15,097,349 26,827,071 Türkiye İş Bankası A.Ş. – rent income 5,978 13,532 Investment income 15,103,327 26,840,603
İş Portföy Yönetimi A.Ş. – investment consultancy fee 2,129,310 1,578,429 İş Yatırım Menkul Değerler A.Ş. – settlement and custody expense 617 161 Türkiye İş Bankası A.Ş. – settlement and custody expense 17,158 13,127 Investment expense 2,147,085 1,591,717
Türkiye İş Bankası A.Ş. – commission of policy production 216,000,441 129,724,138 İş Portföy Yönetimi A.Ş. – portfolio management fee of pension funds 16,373,564 11,721,046 İş Merkezleri Yönetim ve İşletim A.Ş. – building administrative expense 5,039,270 4,761,520 İş Gayrimenkul Yatırım Ortaklığı A.Ş. – operating leases interest expense (TFRS 16 affect) 5,848,910 - İş Gayrimenkul Yatırım Ortaklığı A.Ş. – other expenses (*) 894,652 7,165,701 İş-Net Elektronik Bilgi Üretim Dağ. Tic. ve İletişim A.Ş. – communication expense 5,272,466 1,549,714 Erişim Müşteri Hizmetleri A.Ş. – call center service expense 18,073,491 15,536,857 Softtech Yazılım Teknoloji Araştırma Geliştirme ve Pazarlama Ticaret A.Ş. – software support expense 49,251 51,273 Türkiye İş Bankası A.Ş. – commission of premium collection and banking services 1,811,339 1,156,304 Türkiye Iş Bankası A.Ş. – fund operation service expense 2,694,073 2,244,531 Türkiye Iş Bankası A.Ş. – operating leases interest expense (TFRS 16 affect) 284,852 - Türkiye Iş Bankası A.Ş. – data storage expenses 387,161 - Türkiye Iş Bankası A.Ş. – other expenses (*) 7,823 291,741 İş Portföy Yönetimi A.Ş. Birinci Gayrimenkul Yatırım Fonu – operating leases interest expense (TFRS 16 affect) 2,202,493 - İş Portföy Yönetimi A.Ş. Birinci Gayrimenkul Yatırım Fonu - other expenses (*) - 371,679 Anadolu Anonim Türk Sigorta Şirketi – premium paid 4,470,899 4,015,374 Anadolu Anonim Türk Sigorta Şirketi – operating leases interest expense 212,104 - Anadolu Anonim Türk Sigorta Şirketi – other expenses (*) 87,066 283,995 Other expenses 279,709,855 178,873,873
(*) Rental costs are included in other expenses item as of 31 December 2018. 56 Anadolu Hayat Emeklilik 2019 Annual Report
Transactions Executed with the Risk Group in Which the Company Is Included
Related party balances as of 31 December 2019 and 2018 are as follows: 31 December 2019 (TL) 31 December 2018 (TL) Türkiye İş Bankası A.Ş. – receivables from credit card collections 170,623,012 188,935,962 Cash and cash equivalents 170,623,012 188,935,962
Türkiye İş Bankası A.Ş. – bank deposits 217,710,555 137,493,170 Cash at banks 217,710,555 137,493,170
Anadolu Anonim Türk Sigorta Şirketi – premium receivable 68 25 Receivables from main operations 68 25
Türkiye İş Bankası A.Ş. – commission payables 32,469,117 11,671,942 Milli Reasürans T.A.Ş. – premium payables 1,289,981 543,781 Payable from main operations 33,759,098 12,215,723
Türkiye İş Bankası A.Ş. – settlement and custody commission 33 - Türkiye İş Bankası A.Ş. – operating leases payables 3,346,088 - Anadolu Anonim Türk Sigorta Şirketi – operating leases payables 1,296,000 Anadolu Anonim Türk Sigorta Şirketi – premium payables 60,849 137,069 Payables to shareholders 4,702,970 137,069
İş Portföy Yönetimi A.Ş. 3,989,219 2,597,677 İş Merkezleri Yönetim ve İşletim A.Ş. 285,388 306,778 İş Gayrimenkul Yatırım Ortaklığı A.Ş. 43,583 128,938 İş Gayrimenkul Yatırım Ortaklığı A.Ş. – operating leases payables 66,505,809 - İş Portföy Yönetimi A.Ş. Birinci G.menkul Yat.Fonu – operating leases 23,348,191 - payables İş-Net Elektronik Bilgi Üretim Dağıtım Ticaret ve İletişim A.Ş. 92,793 32,068 Erişim Müşteri Hizmetleri A.Ş. 1,468,694 1,366,737 Softtech Yazılım Teknoloji Araştırma Geliştirme ve Pazarlama 3,815 Ticaret A.Ş. - Other payables 95,733,677 4,436,013
The conclusion of the Associated Company Report 2019, 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 2019 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.” Anadolu Hayat Emeklilik 2019 Annual Report 57
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 conditions. provisions of the “Regulation on The Internal Audit Plan and Schedule The Board of Internal Audit has made Independent Auditing in Insurance, of the Board of Internal Audit is it a mission to contribute value to the Reinsurance and Pension Companies” developed within the frame of the Company’s activities, while increasing dated 12 July 2008 and numbered Regulation on the Internal Systems of efficiency and productivity, as well as 26934. Insurance, Reinsurance and Pension to provide independent and objective External audits at our Company are Companies, and enters into force upon assurance to the Company’s Senior performed on an entirely independent its approval by the Board of Directors. Management that the Company’s basis and its external auditors operate In this context, the Board of Internal activities are carried out in accordance completely within the framework of Audit reports on all Headquarters units, with the Law, other applicable truthfulness, professional honesty, and district sales offices and branches at legislation, internal strategies and candor and without any involvement least once a year, and on all agencies policies. In addition, the Board carries in a conflict of interest whatsoever. at least once in every three years. In on with its activities to train and gear No payments are made to any addition to these auditing activities, up the managers for the Company independent auditor in our employ investigations and reviews are in the long run through investments other than such fees as are reasonable conducted, as well as process audits. made into the human resource. in light of existing market conditions. The Board of Internal Audit is staffed The factors that strengthen the by 5 inspectors, 1 senior assistant independence of firms from which inspector and 6 assistant inspectors. In we obtain independent auditing 2019, 22 headquarters units, 11 district services are: the existence of an Audit sales offices and 1 branch adding Committee, the possession of an up to 34 units in total were audited. effective accounting and internal audit In addition, 4 process audit and 4 system, and adherence to rules of investigation reports were issued. ethics that give importance to truthful Auditing of agencies continued during public disclosure of company-related 2019, and 73 agencies were audited matters. in this frame. Reports resulting from audits have been submitted to the Board of Directors. 58 Anadolu Hayat Emeklilik 2019 Annual Report
An Assessment of Independent Audit, Internal Control System and Internal Audit Activities by the Board of Directors
Risk Management and Internal all similar elements. In this framework, Reports covering internal control Control Department operational activities and risk elements activities and risk monitoring, at the Company are evaluated assessment and management Risk Management and Internal Control and priority is given to compliance activities is submitted to the Board of Department conducts its activities efforts. New products and new Directors at regular intervals. within the frame of the “Regulation implementations put on the market on the Internal Systems of Insurance, The Department had 7 members during are reviewed, and subjected to risk Reinsurance and Pension Companies” 2019. The employees were provided assessments and compliance checks. published in the Official Gazette with training opportunities to enhance issue 26913 dated 21 June 2008. The Efforts are spent to make sure that the their professional development and Department’s activities are led and internal control system that make up expand their knowledge. conducted directly by the CEO. The the control functions of the Company Board Director responsible for Internal and encompasses all the units is kept Systems is also responsible for the in compliance with the legislation establishment of the Department, and standards, and efficient with ensuring its operation, adequacy respect to its structure and operation. and effectiveness, monitoring and The basic strategy turned towards coordination towards the Board of these goals is to conduct internal Directors. The Department regularly control activities independently, reports all findings resulting from the productively and effectively based on investigation of risks independently a risk-focused approach and within from executive functions to the Board the frame of applicable legislation and Director responsible for Internal internationally accepted principles and Systems, to the CEO and the Board of standards. Directors. It is intended to have a control system The control system aimed at the which enables due and effective activities carried out by the Company management, mitigation and control units basically consists of the following: of the risks involved in the Company’s compliance and conformity controls, activities and which is structured to tangible asset controls, review cover all operations of the Company. of adherence to limits set by the The system is designed to encompass Company and tracking limit overruns, the principles, standards, legislation, controls pertaining to the approval methods, procedures and guidelines and authorization system, inquiry that all employees at any level are and reconciliation controls, controls responsible for fully, accurately for information and communication and efficiently abiding by and systems, controls for the financial implementing, as well as risk mitigating reporting systems, and controls for systems, facilities, mechanisms and communication channels. Anadolu Hayat Emeklilik 2019 Annual Report 59
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
(Convenience translation of a report originally issued in Turkish) 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, 2019. 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 30, 2020 on the full set consolidated and unconsolidated financial statements of the Company for the period of January 1 – December 31, 2019. 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. 60 Anadolu Hayat Emeklilik 2019 Annual Report
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 Customs and Trade and related institutions. 5) Auditor’s Responsibilities for the Audit of the Annual Report Our aim is to express an opinion, based on the independent audit we have performed on the annual report in accordance with provisions of the Turkish Commercial Code and the Communiqué, on whether the consolidated and unconsolidated financial information provided in this annual report and the discussions of the Board of Directors are presented fairly and consistent with the Company’s audited consolidated and unconsolidated financial statements and to prepare a report including our opinion. The independent audit we have performed is conducted in accordance with InAS and the standards on auditing as issued by the Capital Markets Board of Turkey. These standards require compliance with ethical provisions and the independent audit to be planned and performed to obtain reasonable assurance on whether the consolidated and unconsolidated financial information provided in the annual report and the discussions of the Board of Directors are free from material misstatement and consistent with the consolidated and unconsolidated financial statements. The name of the engagement partner who supervised and concluded this audit is Seda Akkuş Tecer. Güney Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik Anonim Şirketi A member firm of Ernst & Young Global Limited Seda Akkuş Tecer, SMMM Partner February 27, 2020 İstanbul, Turkey Anadolu Hayat Emeklilik 2019 Annual Report 61
Policies About Corporate Governance
DISCLOSURE POLICY Disclosure Platform (PDP), Central Committee and the Company managers Registry Agency e-Company, Electronic responsible for financial management Disclosure Policy General Framework: General Meeting System (e-GEM), and reporting. In press releases given Anadolu Hayat Emeklilik (the Company) national/local newspapers, the Turkish in addition to the financial statements satisfies all kinds of financial data Trade Registry Gazette (TTRG) and the disclosed on a quarterly basis, the and other disclosure and information Company’s corporate website. public is informed about the activities provision requirements as stipulated in the relevant period, the Company’s Authority and Responsibility by the Capital Market Legislation, the position in the market, its overall Turkish Commercial Code and other The Disclosure Policy has been financial performance and other applicable legislation, and in particular developed by the Board of Directors. material matters. Press releases, as by the Insurance Law, Private Pension At our Company, the Board of Directors well as related financial statements are Savings and Investment System Law has the authority and the responsibility published on the website. Our financial and regulations issued thereunder. In for developing, monitoring, overseeing statements (Balance Sheet and Income doing that, the Company also takes and enhancing the public disclosure Statement) are translated into English into consideration the generally and information policy. The Investor at quarterly intervals, and our annual accepted accounting principles and Relations Unit is assigned with the report is translated into English on an corporate governance principles. Within coordination of the disclosure function. annual basis, both of which are posted this context, the Company pursues The employees in the said unit perform on the Company website. a detailed information and public these responsibilities in a coordinated The Company makes notifications disclosure policy. fashion with the Audit Committee, electronically to the T.R. Prime Ministry Corporate Governance Committee and The main purpose of the Disclosure Undersecretariat of Treasury on behalf the Board of Directors. Policy is to ensure that necessary of the public authority on a monthly information and disclosures apart from Public Disclosure Activities, Methods basis, and to the Insurance Association trade secrets are conveyed equally to and Tools of Turkey on a quarterly basis. shareholders, investors, employees, The tools and methods employed for Material event disclosures required customers, creditors, reinsurers and public disclosure within the frame of to be made under the CMB legislation other related parties in a manner that is the Turkish Commercial Code, Insurance are announced on PDP within due timely, accurate, complete, intelligible, Legislation, Private Pension Legislation, time. Material event disclosures are, interpretable and easily accessible at Capital Markets Legislation and other in principle, signed by the managers low cost. applicable legislation are provided responsible for financial management Our Company has embraced an below: and reporting; however, they are active approach with respect to the also signed in exceptional cases by Quarterly financial statements, drawn adoption and implementation of the managers in charge of the units up in accordance with the legislation Corporate Governance principles, and concerned with a given topic before published by the T.R. Prime Ministry spends maximum effort to satisfy the being submitted to related authorities. Undersecretariat of Treasury and requirements of applicable legislation Material event disclosures are also the Capital Markets Board of Turkey and to implement international announced on the Company website (CMB), the footnotes and explanations best practices in respect of public the day after the public disclosure at in relation to relevant financial disclosure and information provision. the latest. statements, and independent auditor’s The Company’s Disclosure Policy reports drawn up at mid-year and year- In order to guarantee the that has been developed accordingly end are published within statutorily confidentiality of material events until was prepared within the framework prescribed periods of time on the Public their disclosure, individuals with access mentioned above, approved by the Disclosure Platform (PDP) and on the to inside information are informed Board of Directors, and put into Company website. The related financial about their responsibilities arising implementation. statements, along with a statement from the applicable legislation, and a For public disclosure purposes, our as to their accuracy and fairness, are confidentiality article is incorporated, Company makes use of the Public signed by the members of the Audit as and when necessary, in contracts 62 Anadolu Hayat Emeklilik 2019 Annual Report
Policies About Corporate Governance
concluded with individuals and Regular contacts and meetings both of which relate to protection of organizations which may have access with the media are not envisaged; reputation. to inside information by reason of statements are made via the press Information is communicated to providing a certain service to the and visual media when deemed shareholders and other related Company. On the other hand, the necessary or when requests from parties through teleconferences Company meticulously observes media representatives are to be organized from time to time. These its legal obligation for keeping the responded. Press statements to the teleconferences are coordinated by the Company’s and customers’ secrets and printed and visual media can be made Investor Relations Unit. for not divulging the same to legally by the Chairman of the Board, the CEO and explicitly authorized authorities or his deputy and other officials to be Through domestic and overseas as per the Insurance Law no. 5684 deemed appropriate thereby. investor meetings and roadshows, and the Private Pension Savings and information is conveyed to Company-related news featured in the Investment System Law no. 4632. shareholders and other related press and media in Turkey are followed This obligation applies to the Company parties. The CEO, to the extent up via a professional media-monitoring support services providers and their possible, managers responsible agency. Within this framework, in case employees, as well as the Company’s for financial management and of a necessity to make a statement own employees. reporting and Investor Relations within the scope of the legislation Unit manager participate in these Relevant provisions of applicable governing public disclosure of material meetings and roadshows carried out legislation and the Articles of events, necessary information is by the Investor Relations Unit. When Association are adhered to in gathered from the related units upon deemed necessary, the contact teams announcements and disclosures which relevant statement is made. mentioned above can be expanded regarding amendments to the Articles When making a statement about news further. of Association, General Assembly and rumors that are featured by the meetings, capital increases, dividend press/media and/or the Internet, but Presentations and reports made distribution, year-end financial which do not give rise to the obligation available in investor conferences, statement and footnote notifications. to make a material event disclosure roadshows and press meetings are Documents and information related to as per the applicable legislation, the posted under the Investor Relations the General Assembly are conveyed to method and content of the statement sections on the Company’s corporate the shareholders also via the Electronic are determined in view of some factors website in order to provide equal General Meeting System pursuant including the nature of the news, the information simultaneously to all to the provisions of the Turkish expanse of the audience reached by market participants. Commercial Code. the press/media organ, and whether The Investor Relations Unit the news affects the Company’s The Annual Report is prepared every provides relevant information and reputation. In cases when statements year before the General Assembly financial statements in particular to are made regarding such news and Meeting in accordance with the shareholders, domestic and foreign rumors, in the event that the content of requirements under applicable investors and institutions issuing the statement incorporates an element legislation, in a manner to cover research reports about our Company requiring a public disclosure, a material the necessary information and via email. event disclosure is also made in line explanations and made available with the provisions of the applicable Detailed information and data about for examination by shareholders, is legislation relevant to the subject. The the Company are posted under the published on PDP and the corporate Company is entitled to take necessary Investor Relations tab on the corporate website (in Turkish and English), and legal action in the event that the website at anadoluhayat.com.tr in a the hard copy report is available upon news covered constitutes a crime format that is in accordance with the request from the Investor Relations according to Article 35 of the Insurance corporate governance profile. Relevant Unit of our Company. Law and Article 23 of the Private components are monitored and kept Pension Savings and Investment Law, up-to-date by the Investor Relations Anadolu Hayat Emeklilik 2019 Annual Report 63
Unit. The Investor Relations Unit liabilities, profit and loss, cash flow, targets and the conditions prevailing handles the necessary coordination strategic goals etc. have been identified the capital markets, as well as the for responding to all kinds of questions as individuals with administrative Company’s profitability. directed by the shareholders and other responsibility. The Board of Directors has adopted a related parties via electronic mail, post, Anadolu Hayat Emeklilik A.Ş. Corporate dividend payment policy that is based phone, etc. as soon as possible. Website (anadoluhayat.com.tr) on proposing to the General Assembly Other Notifications of Shareholders that at least 30% Anadolu Hayat Emeklilik A.Ş. of net distributable profit out as free Notifications other than the ones Corporate Website (anadoluhayat. shares of stock and/or in cash. described above are publicly disclosed com.tr) is actively and heavily used after being signed as appropriate for information provision and public There are no preferred stocks in the according to the powers set forth in the disclosure purposes. The website Company’s profit distribution. Company’s list of authorized signatures. covers the information and data as There are no founder’s shares nor is required by the Corporate Governance Forward-Looking Evaluations it a Company practice to give shares Principles and regulatory authorities. of profits to members of the Board of In case of public disclosure of Care is taken to keep the website up- Directors. forward-looking evaluations that to-date at all times. may affect investors’ decisions, the As required by our articles of Pursuant to the provisions of the Board of Directors shall make a public association, a maximum of 3% of the Turkish Commercial Code governing disclosure upon approval of the CEO total amount remaining after the first websites, the e-COMPANY platform, or the individuals authorized by the dividend has been set aside is paid which is set up under the Central CEO through the Public Disclosure out to our employees as their share Registry Agency and which can be Platform, in the annual reports or of the profits, subject to a cap of reached through the link under the employing other methods specified by three monthly salaries. Cash dividend “Information Society Services” tab on the legislation. In case of significant payouts are made until no later than the Company website, is also used for differences between the matters the end of the second month following communications with shareholders. disclosed to the public previously and the date of the General Assembly The documents defined in the relevant the actualizations, disclosure shall be Meeting in which the dividend legislation can be accessed through the made if necessary under the applicable distribution decision is adopted. said platform as well. legislation. Dividend distribution in the form of DIVIDEND PAYMENT POLICY dematerialized shares takes place Identification of Individuals Having following legal permissions. Administrative Responsibility The Company’s dividend distribution principles applicable to shareholders Advances on dividends may be The criteria employed when and other persons participating in the paid subject to the principles and identifying the individuals with profit are governed by the provisions of procedures set out in the Capital administrative responsibility include the Turkish Commercial Code, Capital Market legislation. the roles such individuals assume Market legislation, other legislation within the Company organization REMUNERATION POLICY governing our Company, and our and the content of information such articles of association. 1. The Purpose and Scope of the Policy individuals have access to. Within this context, in addition to the members The dividend payment proposals that The main purpose of Anadolu Hayat of the Board of Directors, the CEO, the Board of Directors submits to the Emeklilik A.Ş. Remuneration Policy Deputy CEOs and Coordinators, the General Assembly of Shareholders are is to ensure that the Company’s managers of the units having access prepared in a manner to preserve the remuneration-related practices are to information about the entirety of delicate balance between shareholders’ planned, executed and managed the Company and units authorized to expectations and the Company’s need in alignment with the applicable make administrative decisions with a to grow, taking into consideration the legislation, the scope of the Company’s macro influence upon various elements future expectations regarding the activities, its structure, strategies, including composition of assets and Company’s activities, capital adequacy long-term goals and risk management 64 Anadolu Hayat Emeklilik 2019 Annual Report
Policies About Corporate Governance
structures, in a manner that precludes incorporate incentive systems that will HUMAN RESOURCES POLICY AND excessive risks and based on active risk injure the interests of shareholders, PRACTICES management and so as to be linked to employees and/or customers. Our Company defines and conducts its the performance of the Company and 3. Duty and Responsibilities human resources policy in light of our its employees. country’s social, cultural, and economic The Company’s Board of Directors The Policy covers the Company’s conditions and the following principles: has the ultimate authority and managers and employees at all levels in responsibility for effective execution In recruitment, the Company espoused respect of remuneration management. and management of the Company’s the principle that individuals are to be 2. Basic Principles and Fundamentals remuneration practices within the given equal opportunity under identical Related to Remuneration frame of applicable legislation and this conditions. Hiring criteria are set forth Policy. The Board of Directors assures in writing for each job position and are The basic principle is to make sure that the efficiency of the Policy by reviewing strictly complied with in practice. the remuneration to be paid to the the same at least once a year. Company’s managers and employees Job descriptions and assignments and at all levels is compatible with the Within the framework of the Policy, performance criteria are determined Company’s ethical values, internal the Company’s remuneration practices by the Company management and balances, strategic goals, and the are monitored and audited by the announced to employees. employees’ performances, and must Corporate Governance Committee When making training, assignment, not be related solely to the Company’s under the Board of Directors on behalf and promotion decisions, particular short-term performance. of the Board of Directors. In addition, care is taken to making use of objective the said Committee communicates its Incentive payments are determined data and to observing the Company’s assessments and suggestions to the according to objective criteria without best interests, to the maximum extent Board of Directors. guaranteeing their amounts in advance possible. and by taking also the long-term Duties and activities related to the Training plans are developed and reflections of the tasks performed preparation, publication, updating, training policies are formulated in an into consideration, and in a manner effective implementation and follow-up effort to help our employees improve to positively impact the Company’s of the procedures for the Company’s their knowledge and skills. corporate values. implementation principles and procedures related to remuneration Our Company’s employees are Remunerations to be paid to the within the frame of applicable members of the Labor Union of Bank- managers and employees of units legislation and this Policy are carried Finance and Insurance Companies. Any within the scope of internal systems out, managed and coordinated by decisions or developments concerning are determined in view of the related the Human Resources and Training them are communicated to the employees’ performance in their Department. Other Departments of employees or their representatives, respective functions, independently the Company and branches fulfill their and the opinion of the said union is from the performance of the duties within this scope in coordination sought in such decisions. operational unit that they are auditing with the Human Resources and or overseeing or controlling. The Company provides a working Training Department as well. environment and working conditions Necessary action is taken in relation to 4. Enforcement that are safe and efforts are the remunerations of those who are undertaken to improve these established to have jeopardized the This Policy enters into force as of conditions depending on social and Company’s safe operation by reason of 29 February 2012. Any amendments technological requirements. their activities or who are established and updates to be subsequently made to be responsible for the deterioration to the Policy in connection with the Our employees are kept informed on of the Company’s financial structure. then-current conditions shall come into decisions made or developments that force upon the approval of the Board of occur concerning them. Care is taken to make sure that Directors. neither the Remuneration Policy nor remuneration practices thereunder Anadolu Hayat Emeklilik 2019 Annual Report 65
Measures are taken to prevent The general principles and criteria of and Training Department is responsible discrimination among employees based human resources practices recognized for receiving all job applications, on race, religion, language, or sex; by our Company are specified below. conducting written and/ or oral exams, create a working environment that is announcing exam results, and all other Hiring Practices respectful of human rights; and prevent recruitment-related matters. all physical, mental, and emotional The general principles and criteria Progression abuse within the Company. adhered to by Anadolu Hayat Emeklilik are: Advancement to positions in our It is not deemed appropriate to appoint Company’s organizational structure a representative to handle relations • Be a citizen of Turkey. (manager, assistant manager, 2nd with our employees. • Be at least 18 and not more than 30 manager, service chief, assistant Succession planning is made to identify years of age. service chief, clerk, specialist, the new managers to be appointed assistant specialist, internal audit, and • Have completed any active military in cases where it is predicted that assistant internal audit) is governed service obligations if applicable or changes in a managerial position will by the Company’s related bylaws. The have obtained a deferment. cause hitches in the management of following general principles apply to the Company. • Not have been deprived of their civil all advancements. To be promoted to a rights. higher position: Launched for the purpose of increasing the efficiency of internal • Never have been convicted of any of • the employee must have served communication, the Company’s the offenses specified in insurance for the minimum periods of time corporate portal is used to share the and private pension system law, specified by headquarters in his current announcements, insurance whether or not officially pardoned. current position; and private pension legislation, and • Be healthy enough to work and • the employee must have earned supplementary references with our travel anywhere in Turkey. a good performance score employees. • For janitorial positions, hold at least substantiating his promotion; Our union representative employees a high-school diploma. For white- • there must be a vacancy to which play an important role in the handling collar positions, be a graduate the employee can be promoted; of relations between our Company and of at least a two-year vocational • the employee must have our employees. On the other hand, school as defined in the applicable successfully completed whatever matters our employees wish to be legislation, or of four-year faculties. covered in the collective agreement are course, examination, thesis, project, gathered from all employees in writing, • Be under no service obligation to or similar qualifying requirements and considered during the agreement any government agency or private that the Company requires for the process. concern. position. No complaints have been received • Successfully pass the qualifying Performance Management on account of discrimination among examination and/or interview for Performance appraisal system is Company employees. the position being hired into. in place at the Company in order to The provisions of the suggestion Job Applications measure the individual contribution system regulation are applied to Whenever vacant positions are of each employee in supporting the promote Company employees’ creative available, they are announced on Company towards achievement of its ideas about the company activities the Company’s internet website. corporate objectives. In this frame, all and practices, collect and evaluate Applications for such positions may be company employees are evaluated individual ideas, and to appreciate and submitted by mail, by fax, in person, once a year. reward those deemed successful. and from the website. All applications that are received are placed in a single pool. The Company’s Human Resources 66 Anadolu Hayat Emeklilik 2019 Annual Report
Policies About Corporate Governance
The performance appraisal system Within this framework; Training aims to establish objective criteria for Severance Pay is paid to employees AHE Academy the employees’ career progressions and with the tenure of service as stipulated to determine their training needs. The Company set up the AHE in the Labor Law no. 1475, whose Academy in order to systematize the Job Security employment contract ends as a result training and development activities of one of the cases specified in the Job security for our employees is directed towards our employees, Law, taking into account the term provided under a collective bargaining by incorporating the cultural aspect of service, either to the employee agreement arrangement between as well. Through the AHE Academy, himself/herself, or to his/ her legal the Company and BASİSEN (Labor the Company invests in its human heirs, in case of death; Union of Bank-Finance and Insurance capital and aims to make the Companies). According to the collective bargaining customer-focused culture permanent. agreement, the amount of the Anadolu Hayat Emeklilik supports its Wage Policy severance pay (which must not exceed employees’ professional and personal Employees’ salaries are adjusted the maximum amount in the Labor development, offers various activities annually in accordance with current Law) is paid on the basis of 60 days that are aligned with their career paths conditions and as specified in a for each full year that has passed if and aim to equip its employees so as collective bargaining agreement that the employment contract ends due to enable them to look from different is renewed every other year. Salaries to disability, old age and entitlement perspectives. and bonuses are paid on the last day of to pension, or death, and on the basis Training Programs each month. In addition to salary and of 45 days for each full year in case of bonuses, personnel are entitled to a entitlement otherwise. Company employees are provided broad range of fringe benefits such as with in-house and extramural Based on Article 17 of the Labor Law health insurance coverage, employer’s training opportunities to foster no. 4857, the employee is notified that contributions to the private pension their professional and personal his/her employment contract will be system on the employee’s behalf, development. National and terminated and he/she is either given personal life insurance, and company- international resources are made use leave for looking for another job in the provided transportation and lunchtime of for these training programs. When number of days stipulated by the law meals. personnel are first hired, they are put depending on his/her tenure, or is paid through an orientation program and Practices associated with the seniority a Notice Pay in cash, which will cover given training in basic insurance and and notice pays to be paid to Anadolu the period of time until the end of the private pension system issues. After Hayat Emeklilik A.Ş. personnel have notice period. this and for the rest of their careers, been based on Article 14 of the Labor training is provided so that they have Law no. 1475, Article 17 of the Labor all the knowledge and skills they may Law no. 4857, and the collective need for whatever position they may bargaining agreement in force. be filling. The annual training programs are designed with the primary goal of building on employees’ competencies and preparing them as necessary for their future positions. Anadolu Hayat Emeklilik 2019 Annual Report 67
Statement of Compliance with Corporate Governance Principles
Our Company believes that compliance Compulsory Principles compensation provided to stakeholders with corporate governance principles in the applicable legislation. The There are no principles that are not is at least as important as its financial corporate governance structure of implemented by our Company, which performance and that such compliance the Company allows, and safeguards are compulsory to be implemented is of great benefit from the standpoints the right of, all stakeholders to under the Corporate Governance both of the development of national convey their concerns regarding any Communiqué no. II-17.1. (It is planned and international capital markets illegal or unethical transaction to the to incorporate the point that the and of the advancement of our own Corporate Governance Committee or remuneration to be paid to Board company’s interests. the Audit Committee. These matters members in a given period is are addressed in the section titled Pursuant to the Corporate Governance determined by a resolution of the “Keeping Stakeholders Informed” of Communiqué no. II-17.1 published General Assembly and that no other the annual report. Comprehensive in the CMB Bulletin no. 2/49 dated payments are made thereto also in the information about the indemnification 10 January 2019, Corporate Governance Compensation Policy within the scope payments to be made to Company Compliance Report (CRF) and Corporate of the Corporate Governance Principle employees is provided on our corporate Governance Information Form (CGIF) no. 4.6.2). website, in the section titled “Human were publicly disclosed three weeks Non-Compulsory Principles That Resources Policies and Practices” before the date of the General are not Covered in the Corporate of the annual report, and in the Assembly meeting. Governance Compliance Report Collective Agreement. The Company Under the said legislation, the management is considering to compile In the context of Corporate Governance CRF prepared to report the level of the relevant information under the Principle no. 1.3.10, information is compliance with optional principles heading “Indemnification Policy”. provided to shareholders during the and the CGIF prepared to provide General Assembly under a dedicated Our articles of association do not information about the existing agenda item about the amounts and contain any provisions stipulating: corporate governance practices are beneficiaries of all charitable donations presented in the following sections. • Exercise of the request for and grants made during the reporting appointment of a special auditor as The letter “X” was used to indicate period. In addition, the maximum an individual right (Article 1.2.1), the Company’s level of compliance in amount of charitable donations the Corporate Governance Compliance envisaged to be made in the current • Participation of stakeholders in Report template, and necessary fiscal year is also laid down for the the management of the Company explanations were provided within approval of the General Assembly of (Article 3.2.1), the scope of Article 8 of the Corporate Shareholders. While we do not have a • Expansion of the scope of minority Governance Communiqué no. II-17.1 charitable donations policy approved by rights beyond the provisions of for all answers given, save for those the General Assembly, these activities applicable legislation (Article 1.5.2) answered as “Yes”. are carried out within the frame of the Charitable Donations and Grants Furthermore, minority rights are not Pursuant to the principles that Regulation that has been approved by represented on our Board of Directors. are not yet implemented by our the Board of Directors. The Company Company as explained in the CRF management is considering to develop and also hereinbelow, no conflicts the said Policy. of interest arose between the stakeholders to date. The Company In the context of the Corporate management targets to work towards Governance Principle no. 3.1.2, achieving maximum compliance effective and speedy indemnification is with the principles that are not yet available in the event of violation of the implemented, which situation is of an stakeholders’ rights that are protected exceptional nature. by the legislation and contracts. The Company takes the necessary steps for the use of mechanisms such as 68 Anadolu Hayat Emeklilik 2019 Annual Report
Corporate Governance Compliance Report
Corporate Governance Compliance Report Compliance Status Not Yes Partial No Exempted Applicable Explanation 1.1. FACILITATING THE EXERCISE OF SHAREHOLDER RIGHTS 1.1.2 - Up-to-date information and disclosures which may affect the exercise of shareholder X - - - - 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 conduct X - - - - of special audit. 1.3. GENERAL ASSEMBLY 1.3.2 -The company ensures the clarity of the General Assembly agenda, and that an item on X - - - - the agenda does not cover multiple topics. 1.3.7- Insiders with privileged information - - - - X No such transactions took have informed the board of directors about place in 2019. transactions conducted on their behalf within the scope of the company’s 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 X - - - - as the officers who are responsible 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 X - - - - detailing the amounts and beneficiaries of all donations and contributions. 1.3.11 - The General Shareholders’ Meeting - X - - - 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. 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. 1.4. VOTING RIGHTS 1.4.1-There is no restriction preventing shareholders from exercising their shareholder X - - - - rights. Anadolu Hayat Emeklilik 2019 Annual Report 69
Corporate Governance Compliance Report Compliance Status Not Yes Partial No Exempted Applicable Explanation 1.4.2-The company does not have shares that X - - - - carry privileged voting rights. 1.4.3-The company withholds from exercising its voting rights at the General Shareholders’ Meeting of any company with which it has X - - - - cross-ownership, in case such cross-ownership provides management control. 1.5. MINORITY RIGHTS 1.5.1- The company pays maximum diligence to X - - - - the exercise of minority rights. 1.5.2-The Articles of Association extend the - - X - - The Company pays maximum use of minority rights to those who own less attention to ensure exercise than one twentieth of the outstanding shares, of minority rights granted and expand the scope of the minority rights. under the Turkish Commercial Code and the Capital Market 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 the X - - - - company website. 1.6.2-The dividend distribution policy comprises the minimum information to ensure that the shareholders can have an opinion X - - - - on the procedure and principles of dividend distributions in the future. 1.6.3 - The reasons for retaining earnings, and Profit distribution is carried their allocations, are stated in the relevant out regularly within the scope - - - - X agenda item. of our 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. 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. 70 Anadolu Hayat Emeklilik 2019 Annual Report
Corporate Governance Compliance Report
Corporate Governance Compliance Report Compliance Status Not Yes Partial No Exempted Applicable Explanation 2.1.4 -The company website is prepared in - X - - - A substantial portion of the other selected foreign languages, in a way to information available on our present exactly the same information with the website is also presented in Turkish content. English so that international investors may make use of them. The disclosures in English may be given in the form of 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 complete X - - - - view of the company’s activities. 2.2.2 - The annual report includes all elements X - - - - listed in Corporate Governance 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 regulations, X - - - - 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 place X - - - - for reporting legal and ethical issues. 3.1.5-The company addresses conflicts of interest among stakeholders in a balanced X - - - - manner. Anadolu Hayat Emeklilik 2019 Annual Report 71
Corporate Governance Compliance Report Compliance Status Not Yes Partial No Exempted Applicable Explanation 3.2. SUPPORTING THE PARTICIPATION OF THE STAKEHOLDERS IN THE CORPORATION’S MANAGEMENT 3.2.1-The Articles of Association, or the - X - - - The employees of our internal regulations (terms of reference/ Company are members of the manuals), regulate the participation of Bank, Finance and Insurance employees in management. Workers 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 are sought for decisions of such nature. The Suggestion System Regulation targeting the company employees has been introduced as of 1 May 2006. Meetings are held with the sales force twice a year for sharing information and gathering their suggestions. 3.2.2 - Surveys/other research techniques, - X - - - Questionnaires are being consultation, interviews, observation method administered among our etc. were conducted to obtain opinions from customers and employees stakeholders on decisions that significantly within the scope of our 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 of X - - - - the company, remuneration, career planning, education and health. 3.3.5 - Employees, or their representatives, were notified of decisions impacting them. The X - - - - opinion of the related trade unions was also taken. 3.3.6 - Job descriptions and performance criteria have been prepared for all employees, X - - - - announced to them and taken into account to determine employee remuneration. 72 Anadolu Hayat Emeklilik 2019 Annual Report
Corporate Governance Compliance Report
Corporate Governance Compliance Report Compliance Status Not Yes Partial No Exempted Applicable Explanation 3.3.7 - Measures (procedures, trainings, raising awareness, goals, monitoring, complaint mechanisms) have been taken to prevent X - - - - 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 collective X - - - - 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 in X - - - - handling their requests. 3.4.3 - The company complied with the quality standards with respect to its products and X - - - - 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 corporate X - - - - website. 3.5.2-The company has been mindful of its social responsibility and has adopted measures X - - - - 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. 4.1.2 - The agenda and minutes of board meetings indicate that the board of directors discussed and approved strategy, ensured X - - - - 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. Anadolu Hayat Emeklilik 2019 Annual Report 73
Corporate Governance Compliance Report Compliance Status Not Yes Partial No Exempted Applicable Explanation 4.2.2-Duties and authorities of the members of the board of directors are disclosed in the X - - - - annual report. 4.2.3-The board has ensured the company has an internal control framework adequate for its X - - - - activities, size and complexity. 4.2.4-Information on the functioning and effectiveness of the internal control system is X - - - - provided in the annual report. 4.2.5 - The roles of the Chairman and Chief X - - - - Executive Officer are separated and 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 The Company’s Board of Directors and Officers liability insurance Directors members and covering more than 25% of the capital. executives are insured up to a limit of USD 25 million against the risk of loss that they may cause due to their X - - - - fault in the performance of their duties under the liability insurance policy that covers the companies in the group to which we are affiliated as insureds. 4.3. STRUCTURE OF THE BOARD OF
DIRECTORS 4.3.9-The board of directors has approved - - X - - In principle, Board Directors the policy on its own composition, setting a take part in all meetings. minimal target of 25% for female directors. Special care is taken to The board annually evaluates its composition setting meeting dates that and nominates directors so as to be compliant will allow all Board Directors with the policy. to attend and to hold the meetings with all 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. 4.3.10-At least one member of the audit committee has 5 years of experience in audit/ X - - - - accounting and finance. 74 Anadolu Hayat Emeklilik 2019 Annual Report
Corporate Governance Compliance Report
Corporate Governance Compliance Report Compliance Status Not Yes Partial No Exempted Applicable Explanation 4.4. BOARD MEETING PROCEDURES The meeting procedures of the Board of Directors are set out in detail in our articles
of association. There is not a dedicated internal written regulation about this matter. 4.4.1-Each board member attended the X - - - - majority of the board meetings in person. 4.4.2-The board has formally approved a - X - - - There are no limits to external minimum time by which information and commitments of Board documents relevant to the agenda items members. Outside positions should be supplied to all board members. held by Board members are stated in the General Shareholders’ Meeting information document and in the annual reports. 4.4.3 - The opinions of board members that - - - - X could not attend the meeting, but did submit their opinion in written format, were presented to other members. 4.4.4-Each member of the board has one vote. As a matter of principle, Board Directors do not undertake roles in several committees. X - - - - During the reporting period, one Board member served as a member on two committees. 4.4.5-The board has a charter/written internal rules defining the meeting procedures of the - X - - - board. 4.4.6-Board minutes document that all items In 2019, the Committees on the agenda are discussed, and board did not use any external X - - - - resolutions include director’s dissenting consultancy service. opinions if any. 4.4.7-There are limits to external commitments In principle, Board Directors of board members. Shareholders are informed take part in all meetings. of board members’ external commitments at Special care is taken to the General Shareholders’ Meeting. setting meeting dates that will allow all Board Directors to attend and to hold the meetings with all directors - X - - - 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. Anadolu Hayat Emeklilik 2019 Annual Report 75
Corporate Governance Compliance Report Compliance Status Not Yes Partial No Exempted Applicable Explanation 4.5. BOARD COMMITTEES 4.5.5-Board members serve in only one of the - X - - - The meeting procedures of Board’s committees. the Board of Directors are set out in detail in our articles of association. There is not a dedicated internal written regulation about this matter. 4.5.6 - Committees have invited persons to the meetings as deemed necessary to obtain their X - - - - views. 4.5.7-If external consultancy services are used, There are no limits to external the independence of the provider is stated in commitments of Board the annual report. members. Outside positions held by Board members - - - - X are stated in the General Shareholders’ Meeting information document and in the annual reports. 4.5.8-Minutes of all committee meetings are X - - - - kept and reported to board members. 4.6. FINANCIAL RIGHTS 4.6.1-The board of directors has conducted - X - - - The Company’s short- and a board performance evaluation to review medium-term goals are whether it has discharged all its responsibilities discussed and determined by effectively. the Board of Directors, and the extent at which these 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 improve conditions thereon, and X - - - - 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 cumulatively in the footnotes - X - - - of our financial statements and in the annual report, which are publicly disclosed and also accessible on our website. 76 Anadolu Hayat Emeklilik 2019 Annual Report
Corporate Governance Information Form
1. SHAREHOLDERS 1.1. Facilitating the Exercise of Shareholders Rights The number of investor meetings (conference, seminar/etc.) In total, 8 investor presentations were made and 8 organised by the company during the year teleconferences were held in 2019. 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 None. the General Shareholders’ Meeting 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/742215 Whether the company provides materials for the General They are not provided at the same time. Shareholders’ Meeting in English and Turkish at the same time The links to the PDP announcements associated with No transactions falling under the scope of Principle 1.3.9 the transactions that are not approved by the majority of took place. independent directors or by unanimous votes of present board members in the context of Principle 1.3.9 The links to the PDP announcements associated with Our Company did not engage in any transactions in the related party transactions in the context of Article 9 of the context of Article 9 of the Communiqué on Corporate Communique on Corporate Governance (II-17.1) Governance (II-17.1). The links to the PDP announcements associated with Our Company did not engage in any transactions in the common and continuous transactions in the context of context of Article 10 of the Communiqué on Corporate Article 10 of the Communique on Corporate Governance (II- Governance (II-17.1). 17.1) The name of the section on the corporate website that We do not have a dedicated policy for charitable donations demonstrates the donation policy of the company and grants. Such activities are carried out within the scope of internal guidelines. The relevant link to the PDP with minute of the General None. Shareholders’ Meeting where the donation policy has been approved The number of the provisions of the articles of association Articles 23 and 24 stipulate the attendance of our that discuss the participation of stakeholders to the General shareholders in the General Shareholders’ Meetings. Shareholders’ Meeting Identified stakeholder groups that participated in the In the Company’s General Shareholders’ Meeting for General Shareholders’ Meeting, if any 2018, shares corresponding to TL 365,042,868.191 were represented in proxy and TL 29,076,388 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 393,119,256.191. 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/files/yatirimci-iliskileri/ genel-kurul/2018/HazirBulunanlarListesi.pdf 1.4. Voting Rights Whether the shares of the company have differential voting No rights Anadolu Hayat Emeklilik 2019 Annual Report 77
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% 1.5. Minority Rights Whether the scope of minority rights enlarged (in terms of No content or the ratio) in the articles of the association If yes, specify the relevant provision of the articles of association. - 1.6. Dividend Right The name of the section on the corporate website that Home Page / Investor Relations / Corporate Governance / describes the dividend distribution policy Dividend Payment Policy (https://www.anadoluhayat.com.tr/ en/investor-relations/corporate-governance) Minutes of the relevant agenda item in case the board of Dividends are distributed regularly for each operating year in directors proposed to the general assembly not to distribute accordance with our Dividend Payment Policy. dividends, the reason for such proposal and information as to use of the dividend. 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 Specify the The number of the page of the name of the The number of of information corporate website page of the the relevant requests that contains corporate item or received by the General website that paragraph the company Shareholders’ contains all of General The regarding the Shareholder Meeting questions asked Shareholders’ number of The link to clarification participation Percentage minutes, and also in the general Meeting declarations the related of the agenda rate to the of shares Percentage indicates for each assembly minutes in by insiders PDP general General of the General General directly of shares resolution the meeting and all relation to received by shareholder Meeting Shareholders’ Shareholders’ present at represented voting levels for or responses to related party the board of meeting Date Meeting Meeting the GSM by proxy against them transactions directors notification 21.03.2019 0 92% - 92% During the 0 https://www. General Assembly kap.org.tr/tr/ Home Page / Meeting, none of Bildirim/756398 Investor Relations / our shareholders None General Assembly exercised their right to pose questions.
2. DISCLOSURE AND TRANSPARENCY 2.1. Corporate Website Specify the name of the sections of the website providing Home Page / Investor Relations the 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) Shareholding Structure who 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. 78 Anadolu Hayat Emeklilik 2019 Annual Report
Corporate Governance Information Form
a) The page numbers and/or name of the sections in Corporate Governance / Outside Positions Held by the Board the Annual Report that demonstrate the information on Directors and Executives / Declarations of Independence by the duties of the members of the board of directors and Independent Members of the Board of Directors executives conducted out of the company and declarations on independence of board members b) The page numbers and/or name of the sections in Risk Management / Active Committees and an Assessment the Annual Report that demonstrate the information on by the Board of Directors the duties of the 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 Corporate Governance / Additional Information About Annual Report that demonstrate the information on the Corporate Governance number of 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 Corporate Governance / Changes in the Legislation during the Annual Report that demonstrate the information on the Fiscal Year amendments in the legislation which may significantly affect the activities of the corporation d) The page numbers and/or name of the sections in Corporate Governance / Other Material Disclosures the Annual Report that demonstrate the information on Concerning the Reporting Period significant lawsuits filed against the corporation and the possible results thereof e) The page numbers and/or name of the sections in Our Company does not receive investment consulting the Annual Report that demonstrate the information on or rating services. The services procured from portfolio the conflicts of interest of the corporation among the management companies within the scope of our field institutions that it purchases services on matters such as of activity are governed by strict rules contained in the investment consulting and rating and the measures taken applicable legislation. (Corporate Governance / Additional by the corporation in order to avoid from these conflicts of Information about Corporate Governance / Keeping interest Stakeholders Informed) f) The page numbers and/or name of the sections in the No shareholder is involved in a cross-shareholding Annual Report that demonstrate the information on the relationship with the Company. Presentation / Anadolu Hayat cross ownership subsidiaries that the direct contribution to Emeklilik by Numbers / Capital and Shareholder Structure the 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 2019 rights and professional training of the employees and / An Overview of Anadolu Hayat Emeklilik’s Position in the activities of corporate social responsibility in respect of the Industry and its Activities in 2019 / Communication corporate 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 None. subject to in relation to breach of employee rights The position of the person responsible for the alert Our corporate governance structure provides the mechanism (i.e. whistleblowing mechanism) means to all stakeholders including employees and their representative bodies to communicate their concerns about any illegal or unethical practices to the Corporate Governance Committee and the Audit Committee, and safeguards their right to do so. Anadolu Hayat Emeklilik 2019 Annual Report 79
The contact detail of the company alert mechanism [email protected], investorrelations@ anadoluhayat.com.tr 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 Employees are not represented on any management body. However, internal practices are in place that encourage employee participation in management. 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 company has a succession plan for the key management to be appointed in cases where it is predicted that changes in positions a 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 opportunities and hiring principles. Also provide a summary are set forth in writing for each job position and are strictly of relevant parts of the human resource policy. complied 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 There isn’t an employee stock ownership program. ownership 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 None. to 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 Boards and Practice Principles The name of the section on the company website that In our corporate website information about any measures demonstrates the corporate social responsibility report. If taken on environmental, social and corporate governance such a report does not exist, provide the information about issues are given under “Social Responsibility Approach” title any measures taken on environmental, social and corporate (Home Page /About Us / Our Culture / Social Responsibility governance issues. Approach) and “Sustainability Approach” title (Home Page / About Us / Sustainability Approach). Any measures combating any kind of corruption including Specified in our webpage (Home Page / About Us / embezzlement and bribery Sustainability / Our Approach / Our Policies / Anti-Bribery and Anti-Corruption Policy.) 80 Anadolu Hayat Emeklilik 2019 Annual Report
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 The new Board of Directors elected at the Company’s duties and authorities, and descriptions of such duties Ordinary General Shareholders’ Meeting convened on 21 March 2019, 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, M. Rafet Akgünay assumed the position of the Head of Audit Committee whereas Ahmet D. Erelçin 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; Erda Gerçek became Head of the Early Detection of Risk Committee and Kemal Emre Sayar members of that committee; and Yalçın Sezen and Kemal Emre Sayar became members responsible for Internal Systems. Number of reports presented by internal auditors to the In 2019, the Board of Internal Audit submitted 41 reports and audit committee or any relevant committee to the board Internal Control Unit 6. Specify the name of the section or page number of the Corporate Governance / An Assessment of Independent annual report that provides the summary of the review of the Audit, Internal Control System and Internal Audit Activities by effectiveness of internal controls the 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 Chairman and CEO are not the same people. to the relevant PDP announcement providing the rationale for such combined roles Link to the PDP notification stating that any damage that While there is a liability insurance policy for the group to may be caused by the members of the board of directors which our Company belongs, the policy was not subject to during the discharge of their duties is insured for an amount a KAP (Public Disclosure Platform) disclosure. Information exceeding 25% of the company’s capital about the insurance is provided in the “Additional Information about Corporate Governance” 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 Anadolu Hayat Emeklilik 2019 Annual Report 81
Board Members Whether She/ Whether the Link To PDP He is the Director has at Notification Whether the Director Who Least 5 Years’ That Independent Ceased to Experience on Whether Independent The First Includes The Director Considered Satisfy The Audit, Accounting Name- Executive Board Member Election Date Independency By The Nomination Independence and/or Finance Surname Director or Not or not To Board Declaration Committee or Not or not YALÇIN SEZEN Non-Executive Dependent Yes Member 21.03.2019 - Not Applicable Not Applicable HASAN KOÇHAN Non-Executive Dependent Yes Member 28.04.2017 - Not Applicable Not Applicable YILMAZ ERTÜRK Executive Dependent Yes Member 26.08.2019 - Not Applicable Not Applicable MERİH RAFET Non-Executive Independent Specified in the Yes Considered AKGÜNAY Member 24.03.2014 Annual Report Not Applicable ERDA GERÇEK Non-Executive Independent Specified in the Yes Considered Member 24.03.2014 Annual Report Not Applicable AHMET DERVİŞ Non-Executive Independent Specified in the Yes Considered ERELÇİN Member 26.03.2018 Annual Report Not Applicable ŞEBNEM ERGÜN Non-Executive Independent Specified in the Yes Considered Member 26.03.2018 Annual Report Not Applicable KEMAL EMRE Non-Executive Dependent Yes SAYAR Member 27.11.2015 - Not Applicable Not Applicable SERDAR YILMAZ Non-Executive Dependent Yes Member 26.03.2015 - Not Applicable Not Applicable MÜHİBE ELİF Non-Executive Dependent Yes GERMİRLİ Member 21.03.2019 - Not Applicable Not Applicable MESUT DİNÇER Non-Executive Dependent Yes Member 13.09.2019 - Not Applicable Not Applicable
4. BOARD OF DIRECTORS-II 4.4. Meeting Procedures of the Board of Directors Number of physical board meetings in the reporting period 11 (meetings in person) Director average attendance rate at board meetings 97% Whether the board uses an electronic portal to support its No work or not Number of minimum days ahead of the board meeting to In 3-7 days provide information to directors, as per the board charter 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 Although there are no set rules on non-independent Directors’ undertaking other duties outside the Company, the Directors do not have any other duties apart from their Number of maximum external commitments for board natural duties in the entities they represent and from those members as per the policy covering the number of external in the establishments owned by the entities they represent. duties held by directors 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. 82 Anadolu Hayat Emeklilik 2019 Annual Report
Corporate Governance Information Form
4.5. Board Committees Page numbers or section names of the annual report where Risk Management / Active Committees and an Assessment information about the board committees are presented by the Board of Directors Link(s) to the PDP announcement(s) with the board https://www.kap.org.tr/tr/Bildirim/367089 committee charters
Composition of Board Committees-I Name Of Committees Names Of The Board Defined As “Other” In Name-Surname of Whether Committee Whether Board Committees The First Column Committee Members Chair Or Not Member Or Not Audit Committee - M. Rafet Akgünay Yes Board member Audit Committee - Ahmet D. Erelçin No Board member Corporate Governance - Şebnem Ergün Yes Board member Committee Corporate Governance - Kemal Emre Sayar No Board member Committee Corporate Governance - N. Cem Özcan No Not board member Committee Committee of Early - Erda Gerçek Yes Board member Detection of Risk Committee of Early - Kemal Emre Sayar No Board member Detection of Risk
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 presented in your annual report or website (Page number or an 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 committee are presented in your annual report or website an Assessment by the Board of Directors (Page number or section name in the annual report/website Specify where the activities of the nomination committee Annual Report / Risk Management / Active Committees and are presented in your annual report or website (Page number an Assessment by the Board of Directors or section name in the annual report/website) Specify where the activities of the early detection of risk Annual Report / Risk Management / Active Committees and committee are presented in your annual report or website an Assessment by the Board of Directors (Page number or section name in the annual report/website) Specify where the activities of the remuneration committee Annual Report / Risk Management / Active Committees and are presented in your annual report or website (Page number an Assessment by the Board of Directors or section name in the annual report/website) 4.6. Financial Rights Specify where the operational and financial targets and Annual Report / Financial Position their achievement are presented in your annual report (Page number or section name in the annual report) Anadolu Hayat Emeklilik 2019 Annual Report 83
Specify the section of website where remuneration policy Home Page / Investor Relations / Corporate Governance / for executive and non-executive directors are presented. Remuneration Policy Specify where the individual remuneration for board Corporate Governance / Other Material Disclosures members and senior executives are presented in your annual Concerning the Reporting Period / Rights Provided to Board report (Page number or section name in the annual report) Directors and Senior Executives
Composition of Board Committees-II Name of The Number committees The Percentage Of Reports On Names Of defined as The Percentage Of Independent The Number Of Its Activities The Board “Other” in the Of Non-executive Directors In The Meetings Held In Submitted To The Committees first column Directors Committee Person Board Audit Committee 100% 100% 5 5 Corporate Governance Committee 67% 33% 5 8 Committee of Early Detection of Risk 100% 50% 4 6 84 Anadolu Hayat Emeklilik 2019 Annual Report
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] Manager (Investor Relations N. Cem Özcan* (+90 212) 317 71 04 [email protected] Unit Manager) C. Ozan Sezer** Assistant Manager (+90 212) 317 70 18 [email protected]
*License Information: Capital Markets Activities Level 3 License and Corporate Governance Rating License ** License Information: Capital Markets Activities Level 3 License, Corporate Governance Rating License, Credit Rating License, Derivatives License
The Unit presents the report produced Up-to-date information and disclosures VOTING RIGHTS AND MINORITY by the Investor Relations Unit in that may have an effect on the exercise RIGHTS relation to its activities to the Corporate of shareholding rights are made According to our articles of association, Governance Committee and the Board available to investors on the Company each share of stock is entitled to one of Directors. In essence, the Investor website. vote. Relations Unit carries out the following In 2019, all verbal information requests tasks: Our Company’s capital is divided into received from researchers and our Class A and Class B shares. Ensure that records pertaining to investors in relation to our Company the correspondence between the and/or publicly disclosed financial As of 31 December 2019, our investors and the Company, and statement results were answered. Company’s issued capital amounts other information and documents are Requests for meetings received during to TL 430 million consisting of maintained in a reliable, secure, and the reporting period from national and 100,000,000 Class A shares up-to-date manner international investment companies worth a total of TL 1 million and were accepted and necessary 42,900,000,000 Class B registered Respond to the Company shareholders’ information was provided. In total, 8 shares worth a total of TL 429 written requests for Company-related investor presentations were made and million. As required by our articles of information 8 teleconferences were held in 2019. association, seven of the members Prepare the documents related to the In these meetings, presentations were of the Board of Directors are elected general assembly meetings that need made on our sector and our Company, from among nominees designated by to be made available for shareholders’ and the investors’ questions were Class A shareholders and four from information and review, and take answered. 35 queries and information among nominees designated by Class B necessary measures to ensure that requests received at the email accounts shareholders. general assembly meetings are [email protected] Class A shares have no privileges conducted in accordance with the and investorrelations@anadoluhayat. other than the nomination privilege requirements of applicable legislation, com.tr that were set up for answering mentioned above. New Class A shares the Company’s articles of association the questions of national and are not issued when share capital and other internal regulations international investors have been increases take place. responded to. Oversee and monitor fulfillment of obligations arising from the capital market legislation, including any matter related to corporate governance and public disclosure. Anadolu Hayat Emeklilik 2019 Annual Report 85
No shareholder is involved in a cross- STAKEHOLDERS service offered within the context of shareholding relationship with the best service delivery to our customer KEEPING STAKEHOLDERS INFORMED Company. portfolio. Care is taken to keeping stakeholders The Company pays maximum attention Attention is paid to confidentiality of –those who have an interest in our to ensure exercise of minority rights customers’ and suppliers’ information Company and include shareholders, granted under the Turkish Commercial that is of trade secret nature. employees, creditors, customers, Code and the Capital Market Law, and suppliers, nongovernmental STAKEHOLDER PARTICIPATION IN no stipulations were incorporated in organizations, the government, and MANAGEMENT our articles of association due to the potential investors in our Company– fact that the legal provisions governing Our shareholders participate in the informed on issues concerning our this matter have been expanded. decision-making process in relation Company that are of interest to them to Company management by way Minority shareholding interests are not in writing, to the extent possible. of voting in the General Assembly represented on the Board of Directors, The Company’s relationships with Meetings. which is formed at the discretion of our stakeholders are governed by written General Assembly. agreements as far as possible. While the articles of association contain no provisions on stakeholder There is no upper limit on the number In situations where the rights of participation in the Company’s of votes a shareholder may cast at a stakeholders are not governed by law management, the Company’s internal General Assembly. or contract, the Company safeguards regulations cover practices to this end. them within the framework of the rules Voting rights are acquired the of good faith, to the degree possible, The Suggestion System Regulation moment the shares on which they are and mindful of the Company’s own targeting the company employees has contingent are acquired. There are no reputation. been introduced as of 1 May 2006. rules stipulating that voting rights may Suggestions for innovations and be exercised only after a specific period The corporate governance structure improvements are evaluated within the of time has passed after shares are provides the means to all stakeholders framework of this regulation and put acquired. including employees and their into effect in the Company. representative bodies to communicate Our articles of association contain their concerns about any illegal or The Company meets with its sales no provisions preventing non- unethical practices to the Corporate organization twice a year at which time shareholders from voting in proxy. Governance Committee and the Audit they are informed about the Company’s Shareholders may exercise their voting Committee, and safeguards their right activities, their suggestions are heard, rights personally at General Assemblies to do so. and successful intermediaries are and may do so through any other party rewarded. The Company’s quality policy pledges irrespective of the shareholder status to offer and maintain quality products BOARD OF DIRECTORS of that party. and services on the back of the teams STRUCTURE AND FORMATION OF THE A non-corporate shareholder may enjoying expertise and experience, BOARD OF DIRECTORS only be represented by a single proxy strong technological and financial at a General Assembly. If a corporate infrastructure, constant development The Company’s Board of Directors is shareholder is represented by more and improvement concept, combined composed of eleven members so as than one individual at an assembly, only with its experienced and extensive to enable our Board Directors to work one of them may cast votes. The proxy agency network. efficiently and constructively, make statement must identify the individual decisions swiftly and rationally, and The Company pays regard to ensuring who is authorized to cast votes. organize the formation and activities of continued quality and standards in the committees efficiently. All shareholders are treated equally, service across all phases of its life including minority and foreign insurance and private pension services. Inasmuch as our Company has no shareholders. Customer demands are responded ultimate non-corporate controlling to quickly and policyholders are shareholders, all of the Board Directors informed in case of any delays. It is of are assumed to be naturally able to particular importance for the Company act with independence and therefore, to constantly upgrade the quality of have the advantage of being able to act 86 Anadolu Hayat Emeklilik 2019 Annual Report
Additional Information on Corporate Governance
impartially in their decisions by holding in the entities they represent and from Candidates are required to be present the interests of the Company and of its those in the establishments owned by at general assemblies of shareholders stakeholders above everything else. the entities they represent. Yet, Board at which Board elections are to be held. Directors devote sufficient amount of There are four independent members Shareholders are provided with time for Company affairs, and exercise on the Board of Directors. The complete information about their powers prudently and within the independent Board Directors have candidates. frame of good faith, possessing all not served as members for more than necessary knowledge to ensure full Shareholders have the right to put six years in the past ten years. While performance of the duty. questions to candidates. the term of office for an independent Board Director is one year, they can be Past experiences, and outside positions Attention is given to the conduct of reelected upon being nominated. held, if any, of the independent Board regular Board meetings, which are held Directors are disclosed in their résumés at least once a month. The Corporate Governance Committee and presented on our website and in functioning as the Nomination Approval of the majority of our annual report. Committee nominated five candidates independent Board Directors is for independent Board Director In the fulfillment of its decision-making sought for the Board of Directors status, and the report on whether functions, the Board of Directors’ decisions pertaining to the Company’s the candidates fulfill the criteria of fundamental concerns are to: transactions of a material nature independence has been presented with related parties and to furnishing Maximize the Company’s market value to the Board of Directors on guarantee, pledge and mortgage in 25 February 2019. Ensure that the Company’s activities favor of third parties. If majority of are conducted in such a way as to the independent Board Directors do Independent Board Directors fulfill secure long-term, stable gains for its not approve the transaction, this is the independence criteria published shareholders publicly disclosed, providing adequate in the relevant legislation, and their information on the transaction declarations of independence have Maintain the delicate balance between within the frame of public disclosure been duly received. No instances shareholders’ expectations and the requirements, and the transaction took place during the reporting Company’s need to grow. is laid down for the approval of the period, which would compromise The Board of Directors define the General Assembly. The matter is independence. If an instance strategic goals of the Company, decided in the said General Assembly compromising independence arises, determines the human resources and meeting through voting where the then the independent Board Director financial resources the Company will parties to the transaction and their shall present such change immediately need, and audits the management respective related parties may not to the Board of Directors to be performance. cast votes, thus involving other disclosed to the public. In such a case, shareholders in such decisions at the the Board Director who loses his At the same time, the Board of General Assembly. Meeting quorum independence shall resign as a matter Directors also oversees the compliance shall not be sought for General of principle. of the Company activities with the Assembly meetings that will be held legislation, articles of association, The General Assembly decision for circumstances specified in this internal regulations, and the policies pertaining to the appointment of the article. Decisions are made with the formulated. independent Board Director has been simple majority of those eligible to disclosed on the corporate website. The Board of Directors plays a vote. Board of Directors and General leading role in ensuring efficient Assembly decisions passed in violation Apart from the CEO, the Board of communication between the of the principles herein shall be null and Directors consists of non-executive Company and shareholders, and in the void. The articles of association cover members. Chairman of the Board elimination and resolution of potential provisions governing these aspects. and CEO functions are carried out by conflicts. To this end, the Board of different individuals. There are no administrative or judicial Directors closely cooperates with the sanctions imposed against the Although there are no set rules on non- Corporate Governance Committee and Company or the Board Directors. independent Directors’ undertaking the Investor Relations Unit. other duties outside the Company, There two women members on the When choosing new members to fill the Directors do not have any other Board of Directors. vacancies on the Board attention is duties apart from their natural duties given to the following matters: Anadolu Hayat Emeklilik 2019 Annual Report 87
The résumés of M. Rafet Akgünay and Ahmet D. Erelçin, 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: Tenure Educational Background/ Professional of Office Name Position University/Faculty/ Company Position Experience with our Department (Years) Company Yalçın Sezen Chairman Middle East Technical Türkiye İş Deputy Chief 32 9 months University/Faculty of Economics Bankası Executive and Administrative Sciences/ A.Ş./ In-Group Officer Political Sciences Hasan Koçhan Vice Ankara Academy of Economic - - 35 2 years 8 Chairman and Commercial Sciences months / Banking Insurance Trade Institution of Higher Education / Banking Department Yılmaz Ertürk Director & İstanbul Anadolu Hayat CEO 30 4 months CEO University/Faculty of Emeklilik A.Ş. Economics Sciences/Economics Şebnem Ergün Independent Ankara University/Faculty of Ergün Law Lawyer / 32 1 year 9 Director Law Office/Non Group Mediator months Ahmet D. Erelçin Independent İstanbul University/Faculty of Koç University / Banker/ 34 1 year 9 Director Law Non Group Academician months Dr. Merih Rafet Independent Middle East Technical Middle East Advisor to 42 5 years 9 Akgünay Director University/Faculty of Technical the President months Economic and Administrative University and Faculty Sciences/Public Northern Cyprus Member Administration Campus/Non Group Erda Gerçek Independent Boğaziçi University/ Thales Training Director 30 5 years 9 Director Department of Economics and Consultancy / Faculty months Company/ /Non Member Group Mesut Dinçer Director Uludağ University / Faculty of Türkiye İş Division Head 20 3 months Economics and Administrative Bankası A.Ş./In- Sciences / International Group Relations Department Mühibe Elif Director Boğaziçi - Banking/ 26 9 months Germirli University / Faculty of Finance Engineering / Chemical Engineering Department Serdar Yılmaz Director Middle East Technical Türkiye İş Division Head 24 4 years 9 University /Faculty of Bankası A.Ş./In- months Engineering/Electrical and Group Electronic Engineering Kemal Emre Director Middle East Technical Türkiye İş Unit Manager 20 4 years 1 Sayar University / Faculty of Bankası A.Ş./In- month Engineering / Industrial Group Engineering 88 Anadolu Hayat Emeklilik 2019 Annual Report
Additional Information on Corporate Governance
INFORMATION ON BOARD As a rule, at each regular meeting No Company Director cast a dissenting DIRECTORS WHO RESIGNED DURING of the Board, the date of the next vote against any Board decision passed THE REPORTING PERIOD scheduled meeting is set and Members during 2019. are subsequently reminded of this in Mahmut Magemizoğlu There were no related party writing. (Left office on 21 March 2019) transactions or transactions of material Utmost care is paid to ensure that the nature that have been laid down for the Mehmet Celayir information and documents pertaining approval of our Independent Directors. (Left office on 21 March 2019) to items on the Board’s agenda are The Board of Directors establishes M. Uğur Erkan normally sent out to Members for the internal control systems of the (Left office on 26 August 2019) them to examine 3-7 days before the Company, after obtaining the opinions meeting date. In situations where this H. Emre Yılmaz of the related Board of Directors is not possible, every effort is made to (Left office on 13 September 2019) committees, and annually reviews the ensure that all members are equally efficiency of risk management and INFORMATION ON BOARD OF informed about the matters involved. internal control systems. DIRECTORS MEETINGS A secretariat has been set up that is The Company’s Board Directors and During 2019, Anadolu Hayat Emeklilik responsible for executing the activities executives are insured with a coverage Board of Directors held 11 meetings, of the Board of Directors, keeping the of USD 75,000,000 per claim and 7 of which were convened with full Company’s Directors informed, and for annual total against the risk of loss participation of the members. In 4 communicating with them. they may cause to the Company due to other meetings, full participation A Board’s first meeting is preferably their fault in the performance of their could not be achieved due to justified held on the same day that it is elected duties, within the scope of the liability excuses of the Board Directors. These into office. insurance policy that names Türkiye İş meetings were convened in the Bankası A.Ş. and its subsidiaries (İşbank absence of one Director. At this first meeting, the Chairman and Group) as the Insured. Deputy Chairman are elected, duties OTHER INFORMATION are assigned, and committees are NUMBER, STRUCTURES AND During 2019, our Board Directors did formed. INDEPENDENCE OF COMMITTEES not perform any transactions under WITHIN THE BOARD OF DIRECTORS The Board meets regularly at least once the authorization received from the a month as previously scheduled and There is an Audit Committee, a General Assembly so that they can occasionally as circumstances warrant. Corporate Governance Committee and perform the transactions specified Early Detection of Risk Committee in under articles 395 and 396 of the In principle, Board Directors take part in our Company. Turkish Commercial Code. all meetings. Due to the structure of the Board of OPERATING PRINCIPLES OF THE Each Board Director is entitled to a Directors, the Corporate Governance BOARD OF DIRECTORS single vote. All directors’ votes carry Committee also functions as the equal weight and no Director has a A draft of the agenda for a Board Nomination Committee and the positive or negative veto power. meeting is prepared by the CEO Remuneration Committee. and finalized in line with the As stipulated in our articles of There are two non-executive recommendations of the Chairman and association, the Board convenes with Board Directors in each one of other directors. a simple majority of its membership the Committees. The Corporate and decisions are passed by a simple Special care is taken to setting meeting Governance Committee consists of majority of those present. dates that will allow all Board Directors three members. to attend and to hold the meetings The Board convened 11 times during As a matter of principle, Board Directors with all directors in attendance except 2019 do not undertake roles in several in unforeseen exceptional cases. committees. Furthermore, as there are Anadolu Hayat Emeklilik 2019 Annual Report 89
no ultimate non-corporate controlling is elected from amongst independent FINANCIAL RIGHTS shareholders in our Company, it is Directors. The term of office for the Aggregate of the salaries and similar assumed that all of the Board Directors Audit Committee is coeval with that of benefits provided to the Company’s serving in committees are naturally the Board of Directors. The Committee Board Directors and senior executives able to act with independence and meets at least quarterly. Committee are disclosed in the notes to the therefore, have the advantage of decisions are adopted on the basis of financial statements, which are publicly acting impartially in their decisions. the majority of votes cast. disclosed and are also accessible on The Corporate Governance Committee M. Rafet Akgünay serves as the head our corporate website, and thereby, is formed by the Board of Directors of the Audit Committee, and Ahmet D. incorporated in our annual report. within the scope of corporate Erelçin as its member. Company directors receive no financial governance principles and firstly from The term of office of the Early benefits other than the honorarium amongst its own members. When Detection of Risk Committee is coeval that is paid to them. necessary, specialist individuals with that of the Board of Directors. who are not members of the Board The amount to be paid as an The Committee spends efforts to of Directors may be assigned to the honorarium is determined by early detect the risks that might committee. The Chief Executive Officer shareholders at a general assembly. endanger the existence, progress does not take place in this committee. and survival of the Company, to The remuneration policy developed The Committee consists of a minimum ensure implementation of necessary for the Company’s managers and of two members. The majority of the measures and remedies in relation to employees at any level is put into Committee members consist of non- the identified risks, and to manage the writing, presented to the shareholders executive Board Directors. The head of risk. The Committee reviews the risk for their information as a separate the Committee is elected from amongst management systems at least on an agenda item at the 2011 General independent Directors. While the term annual basis. The Committee presents Assembly. The said remuneration policy of office for the Corporate Governance an assessment of the situation in is published on the Company website. Committee is, in essence, coeval with its quarterly report to the Board of that of the Board of Directors; the Stock options or payment plans based Directors, pointing at the perils, if any, Committee will remain in office until on the Company’s performance are not and indicating the remedies. the completion of the predetermined used in the remuneration of our Board adjustment process, when the Board Erda Gerçek serves as the head of the Directors, including the independent of Directors is succeeded. To the Early Detection of Risk Committee, and Board Directors. Nonetheless, it is extent possible, the Committee meets Kemal Emre Sayar as its member. believed that the remuneration of consistently with the Board of Directors independent Board Directors is at All of the members of the Audit meetings. Committee decisions are a level that will not prejudice their Committee and the heads of other adopted on the basis of the majority of independence. committees are elected from amongst votes cast. independent Directors. The Board Directors and executives Şebnem Ergün, Kemal Emre Sayar with administrative responsibility have Our executive Directors and CEO do not and N. Cem Özcan serve on the never utilized, directly or indirectly, serve on any committee. Corporate Governance Committee at cash or non-cash loans from the the Company. The Committee head is The objectives, members, structures Company, nor did the Company Şebnem Ergün. and activities of committees take place lend money or give suretyship or in the annual report. provide any similar guarantee to any The Audit Committee is formed by Board Director or executive with the Board of Directors from amongst administrative responsibility. Therefore, its members. The Committee must the Company was not confronted with consist of at least two members. The any conflict of interest that arose due majority of the Committee members to such reasons. must consist of non-executive Board Directors. The head of the Committee 90 Anadolu Hayat Emeklilik 2019 Annual Report
Information on General Assembly
◊ Summary Report of the Board of Directors for the General Assembly of Shareholders
◊ Ordinary General Assembly Agenda
◊ 2018 Profit Distribution Table
◊ 2019 Profit Distribution Proposal Table Anadolu Hayat Emeklilik 2019 Annual Report 91
Having successfully completed its 2019 operations, Anadolu Hayat Emeklilik increased its net profit by 41% to TL 357.5 million.
Dilara Açıkgöz Shots From Life As Seen By Women ‘19 92 Anadolu Hayat Emeklilik 2019 Annual Report
Summary Report of the Board of Directors for the General Assembly of Shareholders
Dear Shareholders, the intense economic and political FC-denominated PPS aimed at developments in the world and in our non-resident citizens, and trading Ever since its inception, our Company country and despite the volatilities of pension mutual funds on Turkey has espoused it as a fundamental in the financial markets, and carried Electronic Fund Trading Platform philosophy to maintain customer-focus on with its activities with the goal of (TEFAS). before its shareholders, investors further upgrading customer experience and customers with respect to all of While complementary regulatory within the frame of its sustainable and its corporate values, with a special framework is being awaited regarding profitable growth strategy. focus on offering the best practices the details of the implementations of modern private pension and life During 2019, numerous new mentioned, it is thought that these insurance businesses; giving the regulations incorporating radical changes will increase financial depth foreground to its robust capitalization, changes to the private pension system and product diversity, and will thus add transparent implementations and have been published. The highlights to the attraction of long-term savings. customer satisfaction; being innovative of the regulatory framework included In 2019, our Company focused on the and creative; putting its resources the 11th Development plan covering the topics listed below in order to sustain and new technologies to use towards period 2019-2023, the New Economic its stable and profitable growth in line increasing productivity, and achieving Program covering the period 2020- with its strategic goals: maximum involvement in social 2022, and the Presidential Annual activities by a strict commitment to its Plan 2020. Addressing the details of • Continued work for updating social responsibilities. the structural transformation that the the credit-linked life insurance Turkish economy needs, these plans infrastructure as part of the Anadolu Hayat Emeklilik successfully and programs encourage participation transformation of insurance transported its know-how and in the private pension system with software infrastructure, capital accumulation gained in the the objective of bolstering long-term life insurance branch to the private • Development of products and saving tendency, and contains targets pension segment regarded as a crucial services addressing different target set for increasing the number of part of the social security system. The audiences in the private pension participants, in-system time, and total Company defined it as a key objective branch, funds. to sustain its leadership in the market • Execution of the process of on the back of its pioneering and The topics that gained the foreground participating the system in auto innovative practices in life insurance in this context in 2019 have been enrolment through “Online Auto and in the private pension segment the differentiation of existing state Enrolment” website, which is the by fortifying its position among the support according to age in order to self-serve transaction channel, and leading financial services companies of increase the attraction of the system development of the integration with the capital market as the first publicly- for young participants, inclusion of payroll software companies, floated private pension company in the under-18 population in the system, an system. arrangement allowing the participants • Execution of product, sales and to withdraw partially and to show marketing activities directed With respect to global economy, their accumulated funds as collateral towards increasing premium 2019 has been a year of decelerated for loans in order to prevent early productions on credit-linked and growth. For the Turkish economy, on drop-outs because of short-term stand-alone life insurance, the other hand, while contraction cash needs, establishment of the took place in the first half of the • Introduction of the Corporate complementary pension system with year, growth was observed from the Language Project with the aim of the concurrence of social parties in third quarter onwards. Our Company using a common and consistent an effort to create long-term funding ended the year successfully despite language at all customer for the economy, introduction of Anadolu Hayat Emeklilik 2019 Annual Report 93
touchpoints within the frame of • Bronze at the Stevie Awards with to TL 9.5 billion. Life insurance excellence in customer experience the revamped corporate website customer assets, on the other hand, goals, grew by 31% and reached TL 9.9 • Customers’ Friend accolade given billion. • Launching of the new corporate by ICERTIAS, an international website and AHE Assistant (chatbot) certification association. • The number of participants in within the frame of digitalization Voluntary PPS remained flat around Total gross dividends paid in cash to targets, 6.9 million, while total funds our shareholders in 2019 amounted of participants including state • Continued efforts for increasing to TL 130 million, and all of the contributions went up by 34% and the use and effectiveness of digital resolutions adopted at the Annual topped TL 119 billion. channels, General Assembly Meeting held on 21 March 2019 have been realized. • In the auto enrolment system, the • Introduction of the Fonmatik ROBO number of employees went up by service, Turkey’s one and only Carrying out their activities in 20% to top 6 million and total funds private pension fund robot that alignment with the regulatory increased by 75% to top TL 8 billion. provides automated modification arrangements and targeting to ensure of customers’ fund distributions that our Company’s overall operation • All in all, total number of participants according to market conditions, and practices are conducted in a in the private pension system manner that is structured, efficient including auto enrolment was up • Continued improvement of customer and transparent, the Board of Directors by 8% to 12.9 million on an annual processes as part of the operational Committees continued with their basis, whereas total funds increased excellence efforts, efforts and work during the reporting by 36% to TL 127.3 billion. • Execution of efforts for alignment period. The Risk Management and In view of the Company’s current with the regulatory framework, Internal Control Department issues mission, vision, corporate strategies primarily with the Personal Data quarterly Risk Assessment Report, and primary goals, 2019 has been a Protection Law and the Private Compliance Report and Insurance period during which we preserved our Pension System Circular, Risk Report, annual Internal Control pioneering position in the segments we Report, bimonthly Early Detection of • Neutralization of the Company’s are engaged in and attained successful Risk Committee Report, and monthly carbon footprint resulting from financial results. The Company’s data Market Risk Monitoring Report, and its 2018 operations by extending for 2019 are summarized below: performs “Value at Risk” computations support to wind energy power on a daily basis. In addition, annual and • Our Company’s total premium plants under the Sustainability quarterly reports are being produced in production reached TL 1 billion 229 Management System and continued accordance with the Financial Crimes million representing a 92% increase status as a carbon neutral company Investigation Board (in Turkish: MASAK) over the 2018 figure, whereas term also in 2019. legislation. The data derived from the life insurance production more than Our Company crowned its said reports, which are submitted to doubled by 102% to reach TL 911 achievements with the following our Board of Directors, are used to million. Life insurance customer prestigious awards garnered in 2019: ensure that potential risk exposure is assets, on the other hand, grew by 18% and came to TL 2.2 billion. • “Best-in-Class Private Pension regularly assessed and monitored. Company in Customer Experience” Based on the sectoral data for 2019: • In Voluntary PPS, total funds at the A.L.F.A. Awards organized by including state contributions of our • Total written premiums in life Marketing Turkiye and Akademetre Company’s 1,092,911 participants insurance by the overall sector went up 34% on an annual basis • Gold Prize in the Private Pension and enlarged by 64% year-over-year and reached TL 22.1 billion. Our Life Insurance category at the Social and amounted to TL 11.2 billion, Company controls 15.9% market Media Awards Turkey while Premium production on term share in the number of participants life insurance augmented by 60% and 18.5% in total funds. 94 Anadolu Hayat Emeklilik 2019 Annual Report
Summary Report of the Board of Directors for the General Assembly of Shareholders
• Having reached 771,227 employees Drawing on its leadership in the and TL 866 million in total funds pension system, its solid shareholding in the auto enrolment system structure, its successful financial with respective increases of 31% performance, its corporate culture and and 79% on an annual basis, our the customer-focused approach to Company is the leader among service, our Company will continue to private pension companies with create added value for the sector and respective market shares of 12.8% the national economy also in the year and 10.6%. ahead, being Turkey’s first publicly- floated pension company. • In voluntary PPS and auto enrolment system combined, our Company’s Our efforts to constantly enhance number of participants went up by the quality of service rendered to 9% to 1,864,138, and total funds by participants and to achieve regulatory 35% to TL 22.9 billion. Our Company compliance will uninterruptedly ranks first in the sector in the total continue also in the coming year. number of participants with 14.5% In line with our goal of securing market share and second in total high-level customer experience and funds with 18% market share. cost optimization at all customer • Our Company remained the company touchpoints, projects for using robotics creating the highest funds in life such as Fonmatik ROBO and artificial insurance, private pension and auto intelligence will be ongoing. enrolment system combined also in Our Corporate Governance Principles 2019 with TL 25.2 billion in total. Compliance Report and the financial • Having concluded its activities in statements for 2019 are presented 2019 successfully, our Company on the following pages for your remarkably increased its net profit information and approval. by 41% to TL 357.5 million and its We would like to take this opportunity total assets by 34% to TL 27,135 to express our gratitude to our founder million. Technical profit, on the other İşbank and our other shareholders, hand, hiked up by 49% year-over- our customers who place their trust in year and amounted to TL 353.7 our Company, and all our distribution million. channels and all our employees for their contributions that made the results achieved possible. Sincerely, Board of Directors Anadolu Hayat Emeklilik 2019 Annual Report 95
Ordinary General Assembly Agenda
2019 Ordinary General Assembly Meeting Agenda 23 March 2020, Monday 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’ 2019 Annual Report, and presentation of the Statutory Auditors’ report for 2019 3. Presentation, discussion and approval of the financial statements for 2019 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. Election of the members of the Board of Directors and determination of their terms of office 8. Authorizing the Board Directors to carry out the transactions set out in Articles 395 and 396 of the Turkish Commercial Code 9. Determination of the remuneration of Board Directors 10. Designation of the independent audit firm 11. Presentation of information on grants and donations made in 2019. 12. Approval of the limit for the donations and grants intended to be made during 2020. 96 Anadolu Hayat Emeklilik 2019 Annual Report
2018 Profit Distribution Table
Anadolu Hayat Emeklilik A.Ş. 2018 Profit Distribution Table (TL) 1- Paid-in/Issued Capital 430,000,000 2- General Legal Reserves (according to Legal Records) 153,833,566 If there are privileges for distribution of profits according to the articles of association, There are no privileges for
information on such privileges distribution of profits Based on CMB Based on Legal Records
(Consolidated) (Unconsolidated) 3- Profit for the Period (*) 329,470,182 328,407,251 4- Taxes Payable (-) (68,607,000) (68,607,000) 5- Net Profit for the Period (=) 260,863,182 259,800,251 6- Losses in Prior Years (-) (**) - - 7- First Legal Reserves (-) 5,635,719 5,635,719 8- NET DISTRIBUTABLE PROFIT FOR THE PERIOD (=) 255,227,463 254,164,532 9- Donations during the Year (+) 860 10- Net Distributable Profit for the Period Including Donations 255,228,323 11- First Dividend to Shareholders - Cash 51,045,665 - Bonus Shares - - Total 51,045,665 12- Dividends Distributed to Owners of Privileged Shares - 13- Dividends Distributed to Board Members, employees, etc. 6,125,454 14- Dividends Distributed to Owners of Redeemed Shares - 15- Second Dividend to Shareholders 78,954,335 16- Second Legal Reserves 11,462,545 17- Statutory Reserves 19,805,634 19,805,634 18- Special Reserves - - 19- Extraordinary Reserves (***) 87,833,830 86,770,899 20- Other Resources to be Distributed - -
(*) Pursuant to the Dividend Guide issued by the Capital Markets Board of Turkey (CMB) in January 2014, dividend distribution has been based on the consolidated profit figure. “Provision for Dividends to Personnel” in the amount of TL 6,200,000, which is set aside as per TAS 19, was added to the profit for the period as at 31 December 2018.
(**) 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 in the amount of TL 5,635,719 have been set aside. (***) At the end of dividend distribution, the figure in the amount of TL 86,770,899 for extraordinary reserves based on CMB will be taken into account Information on Dividend Ratio Dividend Ratios Table Total Dividends Distributed / Total Dividends Distributed / Total Dividends Group Net Distributable Profit Net Distributable Profit Distributed for the Period for the Period Cash (TL) Bonus (TL) Rate (%) Amount (TL) Rate (%) NET (****) A 256,976.74 - 0.10 0.2569768 25.69768 B 110,243,023.26 - 43.19 0.2569768 25.69768 TOTAL 110,500,000.00 - 43.29 - -
Ratio of Dividends Distributed to Net Distributable Profit for the Period Including Donations Ratio of Dividends Distributed to Shareholders to Net Amount of Dividends Distributed to Distributable Profit for the Period Including Shareholders (TL) Donations (%) 130,000,000.00 50.93%
(****) 15% income tax will not be applied on cash dividends for full-fledged taxpayer Anadolu Hayat Emeklilik 2019 Annual Report 97
2019 Profit Distribution Proposal Table
Anadolu Hayat Emeklilik A.Ş. 2019 Profit Distribution Proposal 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, There are no privileges for information on 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 Total Dividends Distributed / Total Dividends Distributed / Total Dividends Group Net Distributable Profit Net Distributable Profit Distributed for the Period for the Period Cash (TL) Bonus (TL) Rate (%) Amount (TL) Rate (%) A 553,488.37 - 0.16 0.5534883 55.34883 NET (****) 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 Ratio of Dividends Distributed to Shareholders to Net Distributable Profit for the Period Including Amount of Dividends Distributed to Shareholders (TL) Donations (%) 280,000,000.00 80.90%
(****) 15% income tax will not be applied on cash dividends for full-fledged taxpayer 98 Anadolu Hayat Emeklilik 2019 Annual Report
Financial Position
◊ Information on Financial Structure
◊ Assessment of Financial Standing, Profitability and Claims Payment Ability
◊ 5-Year Summary Financial Information Including the Reporting Period Anadolu Hayat Emeklilik 2019 Annual Report 99
Anadolu Hayat Emeklilik reached a technical profit of TL 353.7 million in 2019, up 49% year-over-year.
Nüket Uluç Shots From Life As Seen By Women ‘19 100 Anadolu Hayat Emeklilik 2019 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 2019 is above the required shareholders’ equity amounts. Capital Adequacy Table (31 December 2019) (*) Required Capital for Asset Risks 330,422,631 Required Capital for Reinsurance Risks 2,458,137 Required Capital for Outstanding Claims 5,195,079 Required Capital for Underwriting Risks 58,735,202 Required Capital for Interest and FX Risks 749,812 Total Required Capital 397,560,861 Current Capital (**) 1,313,106,593 Excessive Capital 915,545,732 (*) Capital Adequacy Table dated 31 December 2018 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 39,434,063 (31 December 2018: TL 27,724,590) was included in the equity capital.
An Assessment Regarding Operations of the Company’s Segments Anadolu Hayat Emeklilik closed 2019 posting a technical profit of TL 353.7 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 2019 (TL) Life Private Pension Personal Accident Total Segment assets 2,907,838,294 24,167,898,568 59,040,896 27,134,777,758 Total segment 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 segment liabilities (3,047,513,712) (24,025,575,755) (61,688,291) (27,134,777,758) Other segment information Depreciation and amortization (15,396,654) (21,367,126) (312,615) (37,076,395)
31 December 2019 (TL) Life Private Pension Personal Accident 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 Anadolu Hayat Emeklilik 2019 Annual Report 101
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 177,679,702 191,398,602 191,398,602 Loans (receivables from reverse repo transactions) 52,700,000 52,714,137 52,714,137 Available-for-Sale Financial Assets 844,078,293 882,418,877 882,418,877 Total 1,074,457,995 1,126,531,616 1,126,531,616
Financial Investments with Risks on Saving Life 1,851,718,057 1,937,750,426 1,937,750,426 Policyholders Total 1,851,718,057 1,937,750,426 1,937,750,426 102 Anadolu Hayat Emeklilik 2019 Annual Report
Information on Financial Structure
Based on the decisions passed by the related Fund Committees, 24 private pension funds that we have set up were managed by İş Asset Management and HSBC Asset Management between 1 January 2019 and 31 December 2019, whereas 10 private pension funds that we have set up were managed by İş Asset Management, HSBC Asset Management, Ak Asset Management, Yapı Kredi Asset Management and TEB Asset Management between 1 January 2019 and 3 March 2019, and by İş Asset Management and HSBC Asset Management between 4 March 2019 and 31 December 2019. Private Pension Funds Number Amount (TL) AH1 Bond Fund 34,936,636,839.41 2,547,649,431.60 AH2 Money Market Fund 22,639,810,896.35 1,444,057,698.21 AH3 First Public External Debt Instruments Fund (*) 20,275,861,042.58 1,856,822,802.56 AH4 Second Public External Debt Instruments Fund (*) 9,698,733,885.85 686,447,288.24 AH5 Equity Fund 5,150,265,375.40 703,711,659.83 AH6 Developed Countries Flexible Fund 7,361,062,529.29 610,092,223.49 AH8 Conservative Flexible Fund 22,152,608,429.11 1,484,003,238.67 AH9 Balanced Flexible Fund 26,121,885,851.60 2,085,649,732.05 AH0 Dynamic Flexible Fund 8,739,340,240.74 1,076,538,148.88 AGE Participation Standard Fund 17,417,213,087.53 389,483,719.06 ABE BRIC Plus Fund 11,299,226,064.65 487,335,620.17 AHC Private Sector Debt Instruments Fund 32,109,416,047.33 765,649,025.65 AHL Aggressive Flexible Fund 4,803,238,660.76 105,272,581.73 AET Contribution Fund 191,522,883,592.49 3,307,600,199.64 AER Participation Contribution Fund 4,301,317,898.29 86,065,069.83 AEA Gold Fund 93,583,902,826.90 2,818,092,065.83 AG1 Group Bond Fund 2,958,668,122.98 214,340,712.17 AG2 Group Debt Instruments Fund 1,008,745,295.87 69,346,195.37 AG3 Group Equity Fund 858,680,286.81 90,157,995.39 AG4 Grup Conservative Fund 2,510,909,308.27 174,874,789.68 HS1 Debt Instruments Fund 6,534,937,474.38 312,579,129.28 AHB Second Equity Fund 1,332,884,951.40 85,708,501.03 ATK Standard Fund 13,794,535,640.17 506,769,855.81 ATE İşbank Subsidiaries Index Fund 2,737,909,093.20 138,946,148.57 AO1 Initial Fund 5,830,253,262.45 91,709,883.82 AO2 Initial Participation Fund 4,223,968,854.87 62,958,255.78 AJA Auto Enrolment Aggressive Fund 490,222,276.59 6,550,350.06 AJB Auto Enrolment Dynamic Fund 571,516,674.96 8,081,245.78 AJC Auto Enrolment Balanced Fund 586,412,045.77 8,243,780.54 AJF Auto Enrolment Conservative Fund 258,836,981.50 3,626,564.95 AJG Auto Enrolment Aggressive Participation Fund 329,192,796.26 4,796,997.43 AJH Auto Enrolment Dynamic Participation Fund 364,499,906.95 5,393,505.12 AFH Auto Enrolment Standard Fund 27,193,202,791.80 383,750,477.80 AFP Auto Enrolment Participation Standard Fund 20,697,680,649.56 291,361,250.50
Total 22,913,666,144.52
(*) In accordance with the permission dated 14 February 2019 and numbered 2395 taken from the Capital Markets Board of Turkey, the business names of the funds were changed on 26 February 2019. Anadolu Hayat Emeklilik 2019 Annual Report 103
Assessment of Financial Standing, Profitability and Claims Payment Ability
2019 has been a remarkable year In 2019, private pension funds made up Claims Payment Ability that saw increased density in 91% of the total funds managed by our Claims paid in life insurance branch auto enrolment participations and Company that were worth TL 25,183 by the Company in 2019 for policy significant levels reached in the million. maturity and death benefits totaled number of participants. Having Liability Performance TL 201 million (gross). posted successful results in 2019, Anadolu Hayat Emeklilik was able In Anadolu Hayat Emeklilik’s balance Our claim payments for policy maturity to sustain its stable and profitable sheet, liabilities consist of payables and death benefits consist of life growth. The Company kept producing due to pension operations by 85%, insurance and accumulation-based added value for the sector and the technical provisions by 9%, and products from the prior periods, national economy thanks to its solid shareholders’ equity and other liability and items related to our production shareholding structure, robust financial items by 6%. covering both aspects. structure and the corporate culture it Running in reciprocation with the These disbursements are basically possesses. receivables from pension operations covered through disposal of marketable Remaining the sector’s leader in total under assets with respect to the securities that belong to our funds in the private pension and life private pension portfolio, the payables policyholders and registered under the insurance branches combined, Anadolu due to pension operations item Company’s assets. Hayat Emeklilik increased its total registered 34% year-on growth, Our claim payments for death benefits assets by 34%, its gross profit by 48% driven by the performance displayed amounted to TL 66 million (gross) in and its technical profit by 49% year- in the valorization of savings of 2019 with a rise of 6% year-over-year. on-year as at year-end 2019. existing participants as well as in new productions. When our existing capital structure, Asset Performance shareholders’ equity and profit As of 31 December 2019, the The Company increased its total assets generation potential are taken into minimum amount of shareholders’ by 34% and reached an asset size of consideration in addition to the above- equity necessary for the Company TL 27,135 million. mentioned matters, our Company’s as calculated on the principles set by claims payment ability is regarded quite Within asset items, “Receivables the Ministry of Treasury and Finance high. from Main Operations” and “Financial was TL 398 million; the Company’s Assets and Investments with Risks on equity capital as of the said date Policyholders” items take the top places stood at TL 1,313 million, including the in terms of size. Financial investments equalization provision. Carrying on its with risks on policyholders, which activities in life insurance and private make up 63% of the latter, refer to the pension branches as the sectoral amount of financial assets into which leader, our Company has maintained its the policyholders’ funds under the strong shareholders’ equity ever since Company’s management are invested. its foundation. Receivables from pension operations, which mostly refer to the total amount of accumulation in Private Pension Funds reached by the contributions deposited by our participants with the Company under the private pension system, grew 35% year-on and rose from TL 16,967 million to TL 22,952 million. 104 Anadolu Hayat Emeklilik 2019 Annual Report
5-Year Summary Financial Information Including the Reporting Period
Financial Highlights and Key Ratios Financial Highlights (TL thousand) 2015 2016 2017 2018 2019 Total Premium and Contribution Production* 1,736,762 1,859,336 2,208,463 2,032,510 3,148,700 Total Technical Profit 108,259 133,012 199,189 237,576 353,733 Total Assets 11,889,176 14,391,682 17,877,195 20,221,515 27,134,778 Nominal Capital 410,000 430,000 430,000 430,000 430,000 Shareholders’ Equity 778,205 860,855 926,560 940,618 1,273,673 Financial Income 87,545 123,363 124,324 133,742 167,325 Pretax Profit 175,845 229,804 279,810 322,207 476,840 Net Profit 145,067 190,274 224,703 253,600 357,535
Key Ratios (%) (%) (%) (%) (%) Net Profit/Average Shareholders’ Equity 29 35 20 24 26 (ROAE) Premium and Contribution Production/Total 10 12 15 13 12 Assets Shareholders’ Equity/Total Assets 7 6 5 5 5
* 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 Change Change Change 2015 2016 Change (%) 2017 (%) 2018 (%) 2019 (%) 1,334,210 1,357,936 2 1,632,789 20 1,392,314 -15 1,918,619 38 Life /Non-Life Premium Production Change Change Change 2015 2016 Change (%) 2017 (%) 2018 (%) 2019 (%) 402,552 501,400 25 575,673 15 640,196 11 1,230,081 92 Premium and Private Pension Contribution Production Change Change Change 2015 2016 Change (%) 2017 (%) 2018 (%) 2019 (%) 1,736,762 1,859,336 7 2,208,463 19 2,032,510 -8 3,148,700 55 Mathematical Provision Change Change Change 2015 2016 Change (%) 2017 (%) 2018 (%) 2019 (%) 1,700,163 1,682,434 -1 1,725,733 3 1,740,281 1 2,231,797 28 Pension Funds Change Change Change 2015 2016 Change (%) 2017 (%) 2018 (%) 2019 (%) 8,933,550 11,359,421 27 14,712,834 30 16,937,635 15 22,913,666 35 Anadolu Hayat Emeklilik 2019 Annual Report 105
Policy Maturity and Death/Disability Benefit Payments (TL thousand) Change Change 2015 2016 Change (%) 2017 Change (%) 2018 (%) 2019 (%) 182,417 120,607 -34 106,973 -11 137,738 29 134,840 -2 Death/Disability Benefit Payments Change Change 2015 2016 Change (%) 2017 Change (%) 2018 (%) 2019 (%) 35,326 49,942 41 52,255 5 62,340 19 66,359 6 Total Change 2015 2016 Change (%) 2017 Change (%) 2018 (%) 2019 Change (%) 217,743 170,549 -22 159,228 -7 200,078 26 201,199 1
Technical Results (thousand TL) Life Insurance Change 2015 2016 Change (%) 2017 Change (%) 2018 Change (%) 2019 (%) 86,478 112,486 30 132,610 18 151,096 14 264,078 75 Non-Life Insurance Change 2015 2016 Change (%) 2017 Change (%) 2018 Change (%) 2019 (%) -240 -566 (-) -546 -4 -1,076 97 -1,025 5 Private Pension Change 2015 2016 Change (%) 2017 Change (%) 2018 Change (%) 2019 (%) 22,021 21,091 -4 67,125 218 87,556 30 90,680 4 Total Change 2015 2016 Change (%) 2017 Change (%) 2018 Change (%) 2019 (%) 108,259 133,011 23 199,189 50 237,576 19 353,733 49 Financial Income (TL thousand) Change 2015 2016 Change (%) 2017 Change (%) 2018 Change (%) 2019 (%) 87,545 123,363 41 124,324 1 133,742 8 167,325 25 Financial Expenses and Other Expenses Change 2015 2016 Change (%) 2017 Change (%) 2018 Change (%) 2019 (%) -19,958 -26,570 33 -43,704 64 -49,111 12 -44,219 10 Pretax Profit Change 2015 2016 Change (%) 2017 Change (%) 2018 Change (%) 2019 (%) 175,845 229,804 31 279,810 22 322,207 15 476,840 48 Shareholders’ Equity Change 2015 2016 Change (%) 2017 Change (%) 2018 Change (%) 2019 (%) 778,205 860,855 11 926,560 8 940,618 2 1,273,673 35 Total Assets Change 2015 2016 Change (%) 2017 Change (%) 2018 Change (%) 2019 (%) 11,889,176 14,391,682 21 17,877,195 24 20,221,515 13 27,134,778 34 106 Anadolu Hayat Emeklilik 2019 Annual Report
Risk Management
◊ Active Committees and an Assessment by the Board of Directors
◊ Risk Management Policies and an Assessment by the Board of Directors Anadolu Hayat Emeklilik 2019 Annual Report 107
Anadolu Hayat Emeklilik oversees a system that ensures mitigation and control of its operations’ risk exposure through their proper and efficient management.
Melek Okur Shots From Life As Seen By Women ‘19 108 Anadolu Hayat Emeklilik 2019 Annual Report
Active Committees and an Assessment by the Board of Directors
Corporate Governance Committee, CORPORATE GOVERNANCE A member’s term of office on the Audit Committee and Early Detection COMMITTEE Corporate Governance Committee is of Risk Committee have been set up terminated when his/her term of office Objectives to facilitate effective and transparent on the Board of Directors expires. execution of the Board of Directors’ To monitor the Company’s compliance Activities duties and responsibilities, in alignment with corporate governance principles with the obligations imposed by and to engage in activities and make The committee performs the following applicable legislation. recommendations to the Board of duties and responsibilities with respect Directors to improve such compliance. to corporate governance: Pursuant to Article 4.5.1 of the Communiqué Serial: IV No: 56 on Members • The Corporate Governance Determination and Implementation Committee establishes whether Şebnem Ergün, Attorney-at-Law of Corporate Governance Principles the corporate governance principles & Mediator, Independent Director enforced upon its publication in the are implemented in the Company, (Committee Head) Official Gazette issue 28158 dated as well as the grounds for non- 30 December 2011, the Corporate Kemal Emre Sayar, Director (Committee implementation, if applicable; Governance Committee, which has Member) identifies conflicts of interest, if any, arising from failure to fully comply been set up based on the Board of Necdet Cem Özcan (Committee with these principles, and presents Directors decision no 353/1 dated Member) 14 March 2005, also functions as proposals to the Board of Directors the Nomination Committee and the Structure for the improvement of corporate governance practices; Remuneration Committee. The Corporate Governance Committee In the Board of Directors Meeting held will be formed of at least two members • The committee oversees the on 23 June 2014, operating principles to be elected from among Board activities of the Investor Relations of the Audit Committee, Corporate Directors and the Investor Relations Department. Within this context, Governance Committee and Early Unit Manager. the committee sets and regularly reviews the basic principles for the Detection of Risk Committee, which The members will elect the head of the Company’s communication with have been identified within the committee from among themselves. investors; scope of the Capital Markets Board of The head of the committee is elected Turkey (CMB) Corporate Governance from among independent Directors. • The Corporate Governance Communiqué no. II-17.1, have been Non-director individuals, who have Committee works in cooperation defined and publicly disclosed. expertise in their respective fields, can with the Investor Relations Our committees carry out their be members of the committee. Department to present suggested improvements for ensuring activities in line with regulatory If the number of committee members efficient communication between requirements, target to ensure that elected from among Board Directors is the Company and shareholders, the Company’s overall conduct and two, then both of them must be non- and elimination and resolution of practices are executed in a fashion that executive directors; if such number is potential conflicts to the Board of is structured, efficient and transparent, greater than two, then the majority of Directors. keep the Board of Directors informed the members must be non-executive on material developments in a timely directors. The CEO may not serve on • The committee reviews the manner and as necessary, and observe this committee. Company’s Corporate Governance strict harmony and coordination with Compliance Report before it is the executive officers of the Company The Investor Relations Department/ published within the Company’s in their activities. Information on Unit Manager must be a full-time Annual Report, and presents its the objectives, members, structures employee of the Company and must be comments to the Board of Directors. and activities of the committees is assigned as a member of the Corporate presented below. Governance Committee. • The committee makes proposals and assessments regarding the determination or revision of the Anadolu Hayat Emeklilik 2019 Annual Report 109
Company’s disclosure policy, and • The committee is charged with EARLY DETECTION OF RISK presents the same to the Board of performing the duties set out COMMITTEE Directors. The committee reviews in the legislation concerning Objectives that the Disclosure Policy covers the nomination of independent the minimum content as stipulated members to the Board of To early detect the risks that might by the legislation with respect to Directors, which are announced endanger the existence, progress and the Company’s communication with every year by the Board and survival of the Company, implement stakeholders, as well as the scope, which are compulsory to be necessary measures and remedies quality, consistency and accuracy implemented by the Group to in relation to the identified risks, and of documents, presentations and which the Company is affiliated. manage the risk. explanations prepared by the • The committee’s duties and Members Company for informative purposes, responsibilities with respect to and oversees that the same are Erda Gerçek, Independent Director remuneration are presented below: developed in accordance with the (Committee Head) • Setting and overseeing the Disclosure Policy; Kemal Emre Sayar, Director (Committee principles, criteria and practices • The committee carries out Member) applicable for the remuneration activities to ensure that the of Board Directors and executives Structure corporate governance culture is with administrative responsibility, established within the Company, The Early Detection of Risk Committee taking into consideration the and is espoused by managers and consists of a minimum of two members Company’s long-term targets; employees working at any level. to be elected from among the Board The committee follows up the • Presenting its suggestions Directors. developments related to corporate regarding the remuneration to The members will elect the head of the governance in and out of Turkey, and be paid to Board Directors and committee from among themselves. examines their possible implications executives with administrative The head of the committee is elected for the Company. responsibility, which will be from among independent Directors. determined in view of the extent • The duties and responsibilities Non-director individuals, who have the remuneration criteria have of the Corporate Governance expertise in their respective fields, can been achieved; Committee with respect to be members of the committee. nomination are presented below: • Developing suggestions and If the committee is formed of two assessments for the formulation • Creation of a transparent members, then both of them must and revision of the Company’s system regarding identification, be non-executive Directors; if such remuneration policy, which assessment, and training of number is greater than two, then the sets out the remuneration nominees eligible for the Board majority of the members must be non- principles for the Board of Directors and managerial executive Directors. The CEO may not Directors and executives with positions with administrative serve on this committee. administrative responsibility, responsibility, and establishing and presenting its opinions A member’s term of office on the the related policies and to the Board of Directors. The Early Detection of Risk Committee is strategies; Corporate Governance Committee terminated when his/her term of office • Regular evaluation of the shall fulfill other duties and on the Board of Directors expires. structure and efficiency of responsibilities to be assigned the Board of Directors and to it by the Board of Directors in presentation of its suggestions relation to its field of activity. for possible revisions to the Board of Directors; 110 Anadolu Hayat Emeklilik 2019 Annual Report
Active Committees and an Assessment by the Board of Directors
Activities Members • The Audit Committee determines the independent audit firm from • The Early Detection of Risk Dr. M. Rafet Akgünay, Independent which the company will procure Committee works to early detect Director (Committee Head) services and the services to be the risks that might endanger the Dr. Ahmet D. Erelçin, Independent supplied therefrom, and submits the existence, progress and survival of Director (Committee Member) same for the approval of the Board the Company, to ensure necessary of Directors. measures are adopted in relation to Structure the identified risks, and to manage • The Audit Committee establishes The Audit Committee consists of the risk. the methods and criteria for a minimum of two members to the handling and resolution • The committee informs the Board be elected from among the Board of complaints received by the of Directors of its suggestion and Directors. Company in relation to the comments in writing regarding the The members will elect the head of the Company’s accounting, internal creation and development of the committee from among themselves. control and internal audit systems Company’s risk management system, and its independent audit; and for which will be aimed at minimizing All members of the committee are addressing the Company employees’ the impact of risks that might affect elected from among independent notifications about the Company’s the shareholders in particular and all Directors. accounting and independent audit stakeholders in general. To the extent possible, at least one within the frame of confidentiality • The committee reviews the member of the Audit Committee should principle; Company’s risk management preferably have minimum five years • The Audit Committee assesses systems at least on an annual basis. of experience in audit/accounting and finance. the conformity of annual and • The Early Detection of Risk interim financial statements Committee oversees that risk A member’s term of office on the Audit to be publicly disclosed to the management practices are carried Committee is terminated when his/her accounting principles pursued out in accordance with the decisions term of office on the Board of Directors by the Company, as well as their of the Board of Directors and the expires. accuracy and fairness, and reports committee; Activities its written assessments to the Board of Directors, by incorporating • The committee reviews the The duties and responsibilities of the the opinions of the Company’s determinations and assessments Audit Committee are presented below: responsible managers and of the about risk management that will independent audit firm. be incorporated in the Company’s • The Audit Committee oversees annual report. the operation and efficiency of • The Audit Committee shall fulfill the Company’s accounting system, other duties and responsibilities • The Early Detection of Risk public disclosure of financial to be assigned to it by the Board of Committee shall fulfill other duties information, independent auditing, Directors in relation to its field of and responsibilities to be assigned internal control and internal audit activity. to it by the Board of Directors in systems. relation to its field of activity. • During the period 1 January 2019- • The Audit Committee supervises the 31 December 2019, the Audit AUDIT COMMITTEE selection of the independent audit Committee presented five Objectives firm, preparation of independent notifications to the Board of audit contracts and initiation of the Directors. To monitor the operation and independent audit process, and effectiveness of the Company’s every phase of the work carried out accounting system, public disclosure by the independent audit firm. of financial information, and process of independent auditing. Anadolu Hayat Emeklilik 2019 Annual Report 111
Risk Management Policies and an Assessment by the Board of Directors
Risk management policies describe Risk Management Policies Insurance Underwriting and the key principles and norms related Implemented on the Basis of Types Pension Branch Risk Policy to the risk management system and of Risks Insurance underwriting and pension processes. The requirements under the The Risk Management Policy is pivotal branch risk refers, with respect to policy are set by the Board of Directors, for supporting and developing the the insurance branch, to the risk that the approval of which is required for Company’s corporate structure. The might arise from failure to correctly and any revisions. At a minimum, the risk policy is, in essence, intended to set effectively employ the underwriting management system and processes the key principles and norms related technique while providing coverage for must be introduced and the risk limits to the risk management system probable incidents; and with respect to set must be adhered to. and processes; to introduce the risk the private pension branch, to the risk The Board of Directors is responsible management system and processes of sustaining loss due to the generated for setting the risk management specified in the policy, and to achieve revenues that fall short of the costs principles and norms that will be conformity with the risk limits set. incurred. implemented across the Company; The activities falling under the Risk In insurance and pension branch updating the risk policies in connection Management Policy are carried products, the basic principle is to with the changes in the circumstances out within the framework set by establish the actuarial structure in line governing operations; establishing and the insurance and private pension with technical profit forecasts within operating effective risk management legislation, and other legislation the frame of precautionary principle. system and processes; monitoring governing the Company. The Company’s Along this line, technical income and the Company’s risk level; establishing risk exposure is individually monitored, expenses for insurance and pension risk limits and checking actualizations assessed and controlled under the branches are set within the frame of versus these limits, and introducing following categories: insurance the principles defined in insurance necessary measures. underwriting and pension branch risk, and private pension legislation, taking Risk limits that are set for the credit risk, market risk, operational risk, into consideration the Company’s risk purpose of measuring, evaluating and assets and liabilities management risk, appetite. monitoring the risk levels are enforced structural interest rate risk, liquidity The management of insurance based on a Board of Directors decision risk, property investment risk, capital underwriting risk is based on the as and when deemed necessary and investment risk and reputation risk. principle of composing a low-risk important. Risk Management and Internal portfolio of policyholders. To this end, The key considerations in setting the Control Department is responsible the policyholder portfolio is effectively risk limits are the risk measurement for describing, measuring, analyzing, monitored. The Company’s income and results and the Company’s risk appetite. monitoring and reporting risks. Other risk limits are regularly followed-up responsibilities of the department to determine whether they are at the Separate from risk limits, indicators of include following up the developments level to cover the risk underwritten by developments and occurrences that in risk management, improving the the Company. will negatively impact the risk level methods employed, and submitting are detected and monitored as early reports to the Board of Directors on warning signals. required legal reporting, notification and follow-up activities. In addition, the department also acts as the Compliance Unit with regard to the enforcement of the Law no 5549 on Prevention of Laundering Proceeds from Crime and related regulations. 112 Anadolu Hayat Emeklilik 2019 Annual Report
Risk Management Policies and an Assessment by the Board of Directors
Assets and Liabilities Risk Policy Market risk limits are set by the Board Credit Risk Policy of Directors in accordance with the Under the assets and liabilities risk Credit Risk refers to the probability Company’s risk appetite. Adherence to that expresses all financial risks apart of loss the Company might sustain limits is constantly monitored by the from the credit risk which stem from due to the failure of indebted parties Risk Management and Internal Control the Company’s assets and liabilities, (agencies, reinsurers, etc.) to the Department and related executive structural interest rate risk, liquidity Company to fulfill the contractual units. In the event of limit overruns, risk, capital investment risk and real requirements and their failure to the violation and the reasons therefor estate investment risk are considered. satisfy their obligations in part or in are reported to the Board of Directors, whole. In the composition of the Company’s accompanied by the executive units’ assets and liabilities, return on asset comments. Action to be taken in the The basic principle is to manage items and cost of liability items, event of a limit overrun is decided by counterparty transactions, which are cashing-in and reinvestment times the Board of Directors. of a nature to give rise to credit risk, so are taken into account. The Company’s as not to create concentration, and in Careful consideration is given to the needs, alternative borrowing sources, a well-diversified manner by keeping creditworthiness of those issuing profitability of the lending and lending an eye on the risk level created. To financial instruments that pose a facilities are taken into account when this end, the credit risk exposure is market risk. Basically, the issuer of the identifying and utilizing the sources for monitored by way of various criteria financial instrument should have been funding assets. including counterparty, collateral, assigned an “investment grade” in sector, maturity and currency. The basic principle is to ensure terms of credit risk rating. that the transactions carried out in The minimum scope of the credit risk Within the frame of structural interest the money and capital markets are evaluation process covers monitoring, rate risk, the exposure stemming “well diversified” so as to avoid any and reporting on, the risk levels from the interest sensitivity of all concentration in any investment of insurance brokers, reinsurers, of the Company’s assets, liabilities, instrument, maturity, currency, interest companies in which shareholding income and expenses are followed up type and other similar parameters and stakes are acquired, and banks/ separately from the interest risk that is in view of the risk level created thereby. financial institutions from which addressed under the market risk. financial services are procured. When managing the liquidity risk, Decisions on capital investments (new the Company composes its portfolio Early detection and definition of the investments, increasing/decreasing in a structure that is compatible issues are essential for effective credit the investment level or withdrawal with the functions of deriving profit risk management. from an investment) are made by the on the portfolio and of market Company’s Board of Directors. Capital risk management. Hence, key investments are managed based on considerations include the maturity a portfolio approach, observing the distribution of the portfolio composed balance between the risk undertaken as such, its having a profit-focus and the return generated. while uncompromising from liquidity requirements, and the risk versus return balance. Anadolu Hayat Emeklilik 2019 Annual Report 113
Operational Risk Policy Auditing of Risk Management System and Processes Operational risk is the risk of loss that might result from inadequate The risk management system or inoperational internal processes, and processes are audited by the people, systems or external factors. Company’s Board of Internal Audit. The basic principle is to consider The Board of Directors determines operational risks with respect to their the principles relating to execution likelihood and the impact they would of action plans for the conduct of the create in the event they occurred, and audit, the reporting of audit results, to take necessary countermeasures. and remedy of errors and irregularities identified in the audits. When managing operational risk, controls are designed to eliminate or The Company’s risk management mitigate the risk of sustaining loss due and assessment process consists of to the risk exposure of the activities. providing information to the Board of Risk Management and Internal Control Directors on topics such as: Department monitors, and reports on, • Adequacy of the Company’s risk the efficiency and adequacy of the management system and processes, controls, as well as the enforcement of the action plans adopted. • Compliance with limits, Reputation Risk Policy • Accuracy and quality of the data used in the risk management Reputation risk refers to potential process, loss that may result from loss of confidence in the Company or injury to • Accuracy and quality of limit the Company’s reputation stemming violation reports, from the negative thoughts of various • Compliance with the policy and parties including current or potential implementation procedures. customers, shareholders, competitors and regulatory authorities about the The process also includes laying down Company, or from regulatory non- proposals regarding the possible compliance. measures that can be adopted, as well as reporting stages. The principal elements of reputation risk (financial performance, service continuity, customer satisfaction, regulatory compliance, corporate culture and corporate governance understanding, organization and conduct, employee competence, etc.) are taken individually and as a whole. Appropriate systems and controls are created to efficiently manage the elements that constitute a risk. 114 Anadolu Hayat Emeklilik 2019 Annual Report
Financial Reports and Other Matters
◊ 31 December 2019 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon
◊ Information on Consolidated Associate
◊ 31 December 2019 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon
◊ Information for Investors Anadolu Hayat Emeklilik 2019 Annual Report 115
Having successfully completed its 2019 operations, Anadolu Hayat Emeklilik increased its total assets by 34% to TL 27,135 million.
Reyhan Türk Shots From Life As Seen By Women ‘19 116 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi December 31, 2019 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 2019 Annual Report 117
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
(Convenience translation of a report and unconsolidated financial statements originally issued in Turkish) 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, 2019, and the unconsolidated statement of comprehensive income, unconsolidated statement of changes in equity and unconsolidated statement of cash flows for the year then ended, and notes to the unconsolidated financial statements, including a summary of significant accounting policies. In our opinion, the accompanying unconsolidated financial statements present fairly, in all material respects, the unconsolidated financial position of the Company as at December 31, 2019, and its unconsolidated financial performance and its unconsolidated cash flows for the year then ended in accordance with the prevailing accounting principles and standards as per the insurance legislation and Turkish Financial Reporting Standards 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.
118 Anadolu Hayat Emeklilik 2019 Annual Report
Independent Auditor’s Report
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, 2019, the Company has insurance The audit procedures regarding the insurance contract liabilities of TL 2.432.168.782 representing 9% of the liabilities were performed with the use of an actuarial Company’s total liabilities. The measurement of insurance auditor, who is part of our team, and together with contract liabilities involves judgement over uncertain manually calculated components of insurance contract future outcomes, mainly the ultimate total settlement liabilities, audit evidence about key controls over calculation value of long-term liabilities, including those for guarantees methods used by Company’s actuaries were obtained; provided to policyholders. reconciliation of input data related to the Company’s insurance contract liabilities with system and other source Liabilities related to life insurance group comprise of data was tested; Tariffs and profit sharing reserves which actuarial mathematical reserves which are calculated are components of Life group insurance contract liabilities according to formulas and principles given in approved were tested on calculation data by using sampling method technical basis of tariffs and profit sharing reserves which and compliance of the explanatory information regarding consist of profit sharing calculated in previous years and a to insurance contract liabilities with the accounting certain percentage of current year’s income, determined and reporting regulations in force due to the insurance in the approved profit sharing tariffs, including other legislation was 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 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. Anadolu Hayat Emeklilik 2019 Annual Report 119
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. 120 Anadolu Hayat Emeklilik 2019 Annual Report
Independent Auditor’s Report
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 30, 2020. 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 2019 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 30, 2020 İstanbul, Turkey Anadolu Hayat Emeklilik 2019 Annual Report 121
Anadolu Hayat Emeklilik Anonim Şirketi Unconsolidated Financial Statements As at and for the Year Ended December 31, 2019
We confirm that the unconsolidated financial statements and related disclosures and footnotes as at December 31, 2019 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 30, 2020
Yılmaz Ertürk Orhan Bozkurt N. Cem Özcan Aslıhan Duymaz Member of the Vice Chief Accounting Actuary Board of Directors / Executive Officer Manager (Registration Number:61) Chief Executive Officer 122 Anadolu Hayat Emeklilik 2019 Annual Report
Contents
PAGE BALANCE SHEET 124 STATEMENT OF INCOME 129 STATEMENT OF CHANGES IN EQUITY 132 STATEMENT OF CASH FLOWS 134 STATEMENT OF PROFIT DISTRIBUTION 135 NOTES TO THE FINANCIAL STATEMENTS 136-212 NOTE 1 GENERAL INFORMATION 136 NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 138 NOTE 3 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS IN APPLYING ACCOUNTING POLICIES 157 NOTE 4 MANAGEMENT OF INSURANCE AND FINANCIAL RISK 157 NOTE 5 SEGMENT REPORTING 177 NOTE 6 TANGIBLE ASSETS 178 NOTE 7 INVESTMENT PROPERTIES 179 NOTE 8 INTANGIBLE ASSETS 180 NOTE 9 INVESTMENTS IN ASSOCIATES 181 NOTE 10 REINSURANCE ASSETS AND LIABILITIES 181 NOTE 11 FINANCIAL ASSETS 182 NOTE 12 LOANS AND RECEIVABLES 188 NOTE 13 DERIVATIVE FINANCIAL INSTRUMENTS 189 NOTE 14 CASH AND CASH EQUIVALENTS 189 NOTE 15 EQUITY 190 NOTE 16 OTHER RESERVES AND EQUITY COMPONENT OF DPF 192 NOTE 17 INSURANCE CONTRACT LIABILITIES AND REINSURANCE ASSETS 192 NOTE 18 INVESTMENT CONTRACTS 200 NOTE 19 TRADE AND OTHER PAYABLES AND DEFERRED INCOME 201 NOTE 20 FINANCIAL LIABILITIES 201 NOTE 21 DEFERRED TAX 201 NOTE 22 RETIREMENT BENEFIT OBLIGATIONS 202 NOTE 23 OTHER LIABILITIES AND PROVISIONS 203 NOTE 24 NET INSURANCE PREMIUM REVENUE 203 NOTE 25 FEE REVENUES 204 NOTE 26 INVESTMENT INCOME 204 NOTE 27 NET INCOME ACCRUAL ON FINANCIAL ASSETS 205 NOTE 28 ASSETS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS 205 NOTE 29 INSURANCE RIGHTS AND CLAIMS 205 NOTE 30 INVESTMENT CONTRACT BENEFITS 205 NOTE 31 OTHER EXPENSES 205 Anadolu Hayat Emeklilik 2019 Annual Report 123
PAGE NOTE 32 OPERATING EXPENSES 205 NOTE 33 EMPLOYEE BENEFIT EXPENSES 206 NOTE 34 FINANCIAL COSTS 206 NOTE 35 INCOME TAX EXPENSE 207 NOTE 36 NET FOREIGN EXCHANGE GAINS 208 NOTE 37 EARNINGS PER SHARE 208 NOTE 38 DIVIDENDS PER SHARE 208 NOTE 39 CASH GENERATED FROM OPERATIONS 208 NOTE 40 CONVERTIBLE BONDS 208 NOTE 41 REDEEMABLE PREFERENCE SHARES 208 NOTE 42 RISKS 208 NOTE 43 COMMITMENTS 209 NOTE 44 BUSINESS COMBINATIONS 209 NOTE 45 RELATED PARTY TRANSACTIONS 209 NOTE 46 EVENTS AFTER THE REPORTING PERIOD 212 NOTE 47 OTHERS 212 124 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Unconsolidated Balance Sheet As at December 31, 2019 (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, 2019 December 31, 2018 A- Cash and Cash Equivalents 14 656,922,735 517,657,837 1- Cash 14 219 1,002 2- Cheques Received - - 3- Banks 14 477,786,945 320,570,433 4- Cheques Given and Payment Orders 14 - (16) 5- Bank Guaranteed Credit Card Receivables with Maturities Less Than Three Months 14 179,135,571 197,086,418 6- Other Cash and Cash Equivalents - - B- Financial Assets and Financial Investments with Risks on Policyholders 11 3,064,282,042 2,334,496,432 1- Available-for-Sale Financial Assets 11 886,943,685 573,585,026 2- Held to Maturity Investments - - 3- Financial Assets Held for Trading 11 191,398,602 55,437,380 4- Loans and Receivables 11 52,714,137 47,231,715 5- Provision for Loans and Receivables - - 6- Financial Investments with Risks on Saving Life Policyholders 11 1,937,750,426 1,662,767,119 7- Company’s Own Equity Shares - - 8- Diminution in Value of Financial Investments 11 (4,524,808) (4,524,808) C- Receivables from Main Operations 12 23,051,046,800 17,057,549,365 1- Receivables from Insurance Operations 12 64,328,597 55,964,785 2- Provision for Receivables from Insurance Operations 12 (5,002,574) (2,574) 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 40,071,706 34,863,790 7- Provision for Loans to the Policyholders - - 8- Receivables from Individual Pension Operations 12 22,951,649,071 16,966,723,364 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 12,549 1- Due from Shareholders - - 2- Due from Associates - - 3- Due from Subsidiaries - - 4- Due from Joint Ventures - - 5- Due from Personnel 12 12,413 12,549 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 38,467,083 50,363,825 1- Finance Lease Receivables - - 2- Unearned Finance Lease Interest Income - - 3- Deposits and Guarantees Given 160,731 100,441 4- Other Miscellaneous Receivables 47 38,430,163 50,364,178 5- Rediscount on Other Miscellaneous Receivables (123,811) (100,794) 6- Other Doubtful Receivables - - 7- Provision for Other Doubtful Receivables - - F- Prepaid Expenses and Income Accruals 4.2 49,478,060 36,252,496 1- Deferred Commission Expense 32,810,452 23,411,109 2- Accrued Interest and Rent Income 187,774 94,148 3- Income Accruals - - 4- Other Prepaid Expenses 16,479,834 12,747,239 G- Other Current Assets 4.2 17,048 22,128 1- Stocks to be Used in the Following Months - - 2- Prepaid Taxes and Funds 8,444 8,303 3- Deferred Tax Assets - - 4- Job Advances 8,604 13,825 5- Advances Given to Personnel - - 6- Inventory Count Differences - - 7- Other Miscellaneous Current Assets - - 8- Provision for Other Current Assets - - I- Total Current Assets 26,860,226,181 19,996,354,632
The accompanying notes are an integral part of these unconsolidated financial statements. Anadolu Hayat Emeklilik 2019 Annual Report 125
Anadolu Hayat Emeklilik Anonim Şirketi Unconsolidated Balance Sheet As at December 31, 2019 (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, 2019 December 31, 2018 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 - 231,161 1- Finance Lease Receivables - - 2- Unearned Finance Lease Interest Income - - 3- Deposits and Guarantees Given - - 4- Other Miscellaneous Receivables - 354,972 5- Rediscount on Other Miscellaneous Receivables - (123,811) 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 242,224,002 183,963,677 1- Investment Properties 7 153,068,758 145,729,755 2- Impairment for Investment Properties - - 3- Owner Occupied Property 6 4,700,000 4,700,000 4- Machinery and Equipment 6 54,127,336 45,818,086 5- Furniture and Fixtures 6 5,943,075 5,807,620 6- Motor Vehicles 6 592,474 502,597 7- Other Tangible Assets (Including Leasehold Improvements) 6 14,111,319 12,371,453 8- Tangible Assets Acquired Through Finance Leases 6 59,463,348 533,750 9- Accumulated Depreciation 6 (49,782,308) (31,499,584) 10- Advances Paid for Tangible Assets (Including Construction in Progress) - - F- Intangible Assets 8 16,840,377 27,541,661 1- Rights 8 90,121,930 83,364,583 2- Goodwill - - 3- Pre-operating Expenses - - 4- Research and Development Costs - - 5- Other Intangible Assets - - 6- Accumulated Amortisation (Depreciation) 8 (73,281,553) (55,822,922) 7- Advances Paid for Intangible Assets - - G- Prepaid Expenses and Income Accruals 2,725,005 661,369 1- Deferred Commission Expense - - 2- Income Accruals - - 3- Other Prepaid Expenses and Income Accruals 2,725,005 661,369 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 21 - - 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 274,551,577 225,160,061 TOTAL ASSETS 27,134,777,758 20,221,514,693
The accompanying notes are an integral part of these unconsolidated financial statements. 126 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Unconsolidated Balance Sheet As at December 31, 2019 (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, 2019 December 31, 2018 A- Financial Liabilities 20 4,999,036 - 1- Borrowings from Financial Institutions - - 2- Finance Lease Liabilities 20 14,952,011 - 3- Deferred Leasing Costs 20 (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 23,233,734,534 17,277,943,412 1- Payables Arising from Insurance Operations 19 44,297,453 20,123,620 2- Payables Arising from Reinsurance Operations - - 3- Cash Deposited by Insurance and Reinsurance Companies 19,10 4,479,832 4,054,710 4- Payables Arising from Individual Pension Business 19 23,180,814,298 17,250,229,880 5- Payables Arising from Other Main Operations 4,142,951 3,535,202 6- Discount on Payables from Other Main Operations - - C- Due to Related Parties 19 94,256 185,751 1- Due to Shareholders 19,45 60,849 131,097 2- Due to Associates - - 3- Due to Subsidiaries - - 4- Due to Joint Ventures - - 5- Due to Personnel 19 33,290 54,560 6- Due to Other Related Parties 19 117 94 D- Other Payables 19 32,795,799 19,247,308 1- Deposits and Guarantees Received 19 973,972 1,054,058 2- Medical Treatment Payables to Social Security Institution - - 3- Other Miscellaneous Payables 19,47 31,821,827 18,193,250 4- Discount on Other Miscellaneous Payables - - E- Insurance Technical Provisions 17 2,432,168,782 1,899,412,052 1- Reserve for Unearned Premiums - Net 17 53,772,339 40,711,220 2- Reserve for Unexpired Risks - Net - 18,510 3- Mathematical Provisions - Net 17 2,231,797,169 1,740,281,090 4- Provision for Outstanding Claims - Net 17 106,773,754 90,266,489 5- Provision for Bonus and Discounts - Net 391,457 410,153 6- Other Technical Provisions - Net 17 39,434,063 27,724,590 F- Provisions for Taxes and Other Similar Obligations 49,012,353 34,212,244 1- Taxes and Funds Payable 13,874,687 11,559,320 2- Social Security Premiums Payable 3,289,009 2,626,675 3- Overdue, Deferred or By Instalment Taxes and Other Liabilities - - 4- Other Taxes and Similar Payables 399 117 5- Corporate Tax Payable 35 119,305,000 68,607,000 6- Prepaid Taxes and Other Liabilities Regarding Current Period Income 35 (87,456,742) (48,580,868) 7- Provisions for Other Taxes and Similar Liabilities - - G- Provisions for Other Risks 23 29,037,733 23,886,690 1- Provision for Employee Termination Benefits - - 2- Provision for Pension Fund Deficits - - 3- Provisions for Costs 23 29,037,733 23,886,690 H- Deferred Income and Expense Accruals 19 7,303,198 3,867,847 1- Deferred Commission Income 19 327,171 238,053 2- Expense Accruals 19 6,975,344 3,623,133 3- Other Deferred Income and Expense Accruals 19 683 6,661 I- Other Short-Term Liabilities - - 1- Deferred Tax Liabilities - - 2- Inventory Count Differences - - 3- Other Various Short-Term Liabilities - - III - Total Short-Term Liabilities 25,789,145,691 19,258,755,304
The accompanying notes are an integral part of these unconsolidated financial statements. Anadolu Hayat Emeklilik 2019 Annual Report 127
Anadolu Hayat Emeklilik Anonim Şirketi Unconsolidated Balance Sheet As at December 31, 2019 (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, 2019 December 31, 2018 A- Financial Liabilities 20 48,770,362 - 1- Borrowings from Financial Institutions - - 2- Finance Lease Liabilities 20 95,524,721 - 3- Deferred Leasing Costs 20 (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 22,016,074 18,079,050 1- Provision for Employee Termination Benefits 22,23 22,016,074 18,079,050 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 1,173,101 4,062,693 1- Deferred Tax Liabilities 21 1,173,101 4,062,693 2- Other Long-Term Liabilities - - IV- Total Long-Term Liabilities 71,959,537 22,141,743
The accompanying notes are an integral part of these unconsolidated financial statements. 128 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Unconsolidated Balance Sheet As at December 31, 2019 (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, 2019 December 31, 2018 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 4,190,243 4,190,243 1- Share Premiums - - 2- Cancellation Profits of Equity Shares - - 3- Profit on Assets Sale That Will Be Transferred to Capital 4,190,243 4,190,243 4- Currency Translation Adjustments - - 5- Other Capital Reserves - - C- Profit Reserves 387,995,454 158,875,141 1- Legal Reserves 15 170,931,830 153,833,566 2- Statutory Reserves 15 52,676,523 32,870,889 3- Extraordinary Reserves 15 120,044,612 33,273,713 4- Special Funds - - 5- Revaluation of Financial Assets 15,16 50,937,622 (56,522,836) 6- Other Profit Reserves 15 (6,595,133) (4,580,191) D- Retained Earnings 93,952,008 93,952,011 1- Retained Earnings 93,952,008 93,952,011 E- Accumulated Losses - - 1- Accumulated Losses - - F- Net Profit for the Period 357,534,825 253,600,251 1- Net Profit for the Period 335,438,903 253,600,251 2- Net Loss for the Period - 3- Profit not Available for Distribution 22,095,922 - V- Total Equity 1,273,672,530 940,617,646 TOTAL EQUITY AND LIABILITIES 27,134,777,758 20,221,514,693
The accompanying notes are an integral part of these unconsolidated financial statements. Anadolu Hayat Emeklilik 2019 Annual Report 129
Anadolu Hayat Emeklilik Anonim Şirketi Unconsolidated Statement of Income For the Year Ended December 31, 2019 (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, 2019 December 31, 2018 A- Non-Life Technical Income 5 548,127 603,996 1- Earned Premiums (Net of Reinsurer Share) 548,127 603,996 1.1- Written Premiums (Net of Reinsurer Share) 24 542,357 576,224 1.1.1- Written Premiums, gross 1,052,251 982,911 1.1.2- Written Premiums, ceded 10 (509,894) (406,687) 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) (12,740) 46,282 1.2.1- Reserve for Unearned Premiums, gross (36,012) (13,527) 1.2.2- Reserve for Unearned Premiums, ceded 10 23,272 59,809 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 (18,510) 1.3.1- Reserve for Unexpired Risks, gross 28,897 (28,897) 1.3.2- Reserve for Unexpired Risks, ceded (10,387) 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 (1,573,382) (1,680,397) 1- Incurred Losses (Net of Reinsurer Share) (346,843) (644,295) 1.1- Claims Paid (Net of Reinsurer Share) (232,322) (463,109) 1.1.1- Claims Paid, gross (262,148) (492,360) 1.1.2- Claims Paid, ceded 10 29,826 29,251 1.2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward) (114,521) (181,186) 1.2.1- Change in Provisions for Outstanding Claims, gross (132,037) (196,574) 1.2.2- Change in Provisions for Outstanding Claims, ceded 10 17,516 15,388 2- Change in Provision for Bonus and Discounts (Net of Reinsurer and Less the Amounts Carried Forward) (96) 96 2.1- Provision for Bonus and Discounts, gross 4,039 (2,811) 2.2- Provision for Bonus and Discounts, ceded (4,135) 2,907 3- Change in Other Technical Reserves (Net of Reinsurer Share and Less the Amounts Carried Forward) (10,240) (12,801) 4- Operating Expenses 32 (1,216,203) (1,023,397) 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) (1,025,255) (1,076,401) D- Life Technical Income 5 1,493,819,611 1,004,266,003 1- Earned Premiums (Net of Reinsurer Share) 1,193,744,545 625,547,838 1.1- Written Premiums (Net of Reinsurer Share) 24 1,206,792,924 620,538,760 1.1.1- Written Premiums. gross 1,229,029,128 639,213,082 1.1.2- Written Premiums. ceded 10 (22,236,204) (18,674,322) 1.2- Change in Reserve for Unearned Premiums (Net of Reinsurer Shares and Less the Amounts Carried Forward) (13,048,379) 5,009,078 1.2.1- Reserve for Unearned Premiums. gross (13,885,169) 4,508,733 1.2.2- Reserve for Unearned Premiums. ceded 10 836,790 500,345 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 26 291,740,654 368,913,826 3- Unrealised Gains on Investments - - 4- Other Technical Income (Net of Reinsurer Share) 8,334,412 9,804,339 4.1- Other Technical Income. gross 8,334,412 9,804,339 4.2- Other Technical Income. ceded - - 5- Accrued Salvage Income - -
The accompanying notes are an integral part of these unconsolidated financial statements. 130 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Unconsolidated Statement of Income For the Year Ended December 31, 2019 (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, 2019 December 31, 2018 E- Life Technical Expense 5 (1,229,741,045) (853,169,546) 1- Incurred Losses (Net of Reinsurer Share) (597,008,631) (491,124,632) 1.1- Claims Paid (Net of Reinsurer Share) (572,323,682) (477,667,863) 1.1.1- Claims Paid, gross (583,093,822) (483,292,332) 1.1.2- Claims Paid, ceded 10 10,770,140 5,624,469 1.2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward) (24,684,949) (13,456,769) 1.2.1- Change in Provisions for Outstanding Claims, gross (27,001,309) (14,485,852) 1.2.2- Change in Provisions for Outstanding Claims, ceded 10 2,316,360 1,029,083 2- Change in Provision for Bonus and Discounts (Net of Reinsurer and Less the Amounts Carried Forward) 18,792 (115,875) 2.1- Provision for Bonus and Discounts, gross 581,948 (253,171) 2.2- Provision for Bonus and Discounts, ceded (563,156) 137,296 3- Change in Life Mathematical Provisions (Net of Reinsurer Share and Less the Amounts Carried Forward) (335,824,825) (155,208,679) 3.1- Change in Life Mathematical Provisions, gross (336,534,290) (155,872,482) 3.1.1- Change in Actuarial Mathematical Provisions, gross (284,505,220) (104,111,695) 3.1.2- Change in Profit Share Provisions (Provision for Financial Investments with Risks on Saving Life Policyholders), gross (52,029,070) (51,760,787) 3.2- Change in Life Mathematical Provisions, ceded 10 709,465 663,803 3.2.1- Change in Actuarial Mathematical Provisions, ceded 709,465 663,803 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) (11,699,233) (5,668,511) 5- Operating Expenses 32 (285,227,148) (201,051,849) 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) 264,078,566 151,096,457 G- Pension Business Technical Income 5,25 427,720,032 369,185,665 1- Fund Management Income 25 304,264,809 256,416,861 2- Management Fee 25 58,862,051 46,359,487 3- Entrance Fee Income 25 49,513,171 53,889,365 4- Management Expense Charge in case of Suspension 25 14,661,983 12,032,419 5- Income from Individual Service Charges - - 6- Increase in Value of Capital Allowances Given as Advance - - 7- Other Technical Expense 25 418,018 487,533 H- Pension Business Technical Expense 5 (337,039,910) (281,630,014) 1- Fund Management Expense (27,174,746) (23,567,612) 2- Decrease in Value of Capital Allowances Given as Advance - - 3- Operating Expenses 32 (286,889,993) (237,971,704) 4- Other Technical Expenses (20,672,907) (16,912,050) 5- Fine Payments (2,302,264) (3,178,648) I- Net Technical Income -Pension Business (G - H) 90,680,122 87,555,651
The accompanying notes are an integral part of these unconsolidated financial statements. Anadolu Hayat Emeklilik 2019 Annual Report 131
Anadolu Hayat Emeklilik Anonim Şirketi Unconsolidated Statement of Income For the Year Ended December 31, 2019 (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, 2019 December 31, 2018 C- Net Technical Income - Non-Life (A-B) (1,025,255) (1,076,401) F- Net Technical Income - Life (D-E) 264,078,566 151,096,457 I - Net Technical Income - Pension Business (G-H) 90,680,122 87,555,651 J- Total Net Technical Income (C+F+I) 353,733,433 237,575,707 K- Investment Income 26 167,325,031 133,741,765 1- Income from Financial Assets 98,075,472 95,694,121 2- Income from Disposal of Financial Assets 25,045,421 7,231,552 3- Valuation of Financial Assets 16,533,659 80,226 4- Foreign Exchange Gains 36 10,053,255 16,990,379 5- Income from Associates 26 4,272,000 4,187,774 6- Income from Subsidiaries and Joint Ventures - - 7- Income from Property, Plant and Equipment 7,26 8,483,587 5,836,444 8- Income from Derivative Transactions - - 9- Other Investments 26 4,861,637 3,721,269 10- Income Transferred from Life Section - - L- Investment Expense (57,853,096) (35,465,758) 1- Investment Management Expenses (inc. interest) (14,681,714) (3,872,203) 2- Diminution in Value of Investments (225,114) (339,051) 3- Loss from Disposal of Financial Assets (305,979) (22,189) 4- Investment Income Transferred to Non-Life Technical Section - - 5- Loss from Derivative Transactions - - 6- Foreign Exchange Losses 36 (5,563,894) (8,907,743) 7- Depreciation and Amortisation Expenses 5 (37,076,395) (22,324,572) 8- Other Investment Expenses - - M- Income and Expenses From Other and Extraordinary Operation 13,634,457 (13,644,463) 1- Provisions 47 (6,451,638) (3,655,127) 2- Rediscounts 47 100,794 75,330 3- Specified Insurance Accounts - - 4- Monetary Gains and Losses - - 5- Deferred Taxation (Deferred Tax Assets) 21 20,236,379 (9,653,804) 6- Deferred Taxation (Deferred Tax Liabilities) - - 7- Other Income 886,689 239,080 8- Other Expenses and Losses (1,137,767) (649,942) 9- Prior Year’s Income - - 10- Prior Year’s Expenses and Losses - - N- Net Profit for the Period 37 357,534,825 253,600,251 1- Profit for the Period 476,839,825 322,207,251 2- Corporate Tax Provision and Other Fiscal Liabilities 35 (119,305,000) (68,607,000) 3- Net Profit for the Period 37 357,534,825 253,600,251 4- Monetary Gains and Losses - -
The accompanying notes are an integral part of these unconsolidated financial statements. 132 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Unconsolidated Statement of Changes in Equity For the Year Ended December 31, 2019 (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, 2018 Audited -Changes in Equity -December 31, 2018 Own Shares Revaluation Currency Other Reserves Paid-in of the of Financial Inflation Translation Statutory and Retained Net Profit for Retained Note Capital Company Assets Adjustments Adjustments Legal Reserves Reserves Earnings the Period Earnings Total I - Balance at the end of the year period - December 31, 2017 430,000,000 - 9,546,468 - - 126,944,038 15,753,835 20,713,104 224,702,693 98,900,291 926,560,429 II - Change in Accounting Standards ------III - Restated balances (I+II) - January 1, 2018 430,000,000 - 9,546,468 - - 126,944,038 15,753,835 20,713,104 224,702,693 98,900,291 926,560,429 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 ------(2,843,053) - - (2,843,053) D- Change in the value of financial assets 15 - - (66,069,304) ------(66,069,304) E- Currency translation adjustments ------F- Other gains or losses 15 ------(78,706) 5,500,000 (758,037) 4,663,257 G- Inflation adjustment differences ------H- Net profit for the period ------253,600,251 - 253,600,251 I - Dividends paid 38 ------(175,293,934) - (175,293,934) J - Transfers from retained earnings 15 - - - - - 26,889,528 17,117,054 15,092,420 (54,908,759) (4,190,243) - IV - Balance at the end of the 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
Audited -Changes in Equity -December 31, 2019 Audited -Changes in Equity -December 31, 2019 Own Shares Revaluation Currency Other Reserves Paid-in of the of Financial Inflation Translation Statutory and Retained Net Profit for Retained Note Capital Company Assets Adjustments Adjustments Legal Reserves Reserves Earnings the 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
The accompanying notes are an integral part of these unconsolidated financial statements. Anadolu Hayat Emeklilik 2019 Annual Report 133
Audited -Changes in Equity -December 31, 2018 Audited -Changes in Equity -December 31, 2018 Own Shares Revaluation Currency Other Reserves Paid-in of the of Financial Inflation Translation Statutory and Retained Net Profit for Retained Note Capital Company Assets Adjustments Adjustments Legal Reserves Reserves Earnings the Period Earnings Total I - Balance at the end of the year period - December 31, 2017 430,000,000 - 9,546,468 - - 126,944,038 15,753,835 20,713,104 224,702,693 98,900,291 926,560,429 II - Change in Accounting Standards ------III - Restated balances (I+II) - January 1, 2018 430,000,000 - 9,546,468 - - 126,944,038 15,753,835 20,713,104 224,702,693 98,900,291 926,560,429 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 ------(2,843,053) - - (2,843,053) D- Change in the value of financial assets 15 - - (66,069,304) ------(66,069,304) E- Currency translation adjustments ------F- Other gains or losses 15 ------(78,706) 5,500,000 (758,037) 4,663,257 G- Inflation adjustment differences ------H- Net profit for the period ------253,600,251 - 253,600,251 I - Dividends paid 38 ------(175,293,934) - (175,293,934) J - Transfers from retained earnings 15 - - - - - 26,889,528 17,117,054 15,092,420 (54,908,759) (4,190,243) - IV - Balance at the end of the 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
Audited -Changes in Equity -December 31, 2019 Audited -Changes in Equity -December 31, 2019 Own Shares Revaluation Currency Other Reserves Paid-in of the of Financial Inflation Translation Statutory and Retained Net Profit for Retained Note Capital Company Assets Adjustments Adjustments Legal Reserves Reserves Earnings the 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 1,273,672,530 134 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Unconsolidated Statement of Cash Flows For the Year Ended December 31, 2019 (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, 2019 December 31, 2018 A. Cash flows from operating activities 1. Cash provided from insurance activities 1,011,053,647 596,471,635 2. Cash provided from reinsurance activities 425,122 2,406,641 3. Cash provided from individual pension business 402,513,328 406,667,171 4. Cash used in insurance activities (210,698,038) (318,319,406) 5. Cash used in reinsurance activities - - 6. Cash used in individual pension business (366,174,495) (258,870,145) 7. Cash provided by / (used in) operating activities 837,119,564 428,355,896 8. Interest paid - - 9. Income taxes paid (107,482,874) (59,912,040) 10. Other cash inflows 164,288,940 51,139,352 11. Other cash outflows (180,540,806) (74,173,201) 12. Net cash provided by operating activities 713,384,824 345,410,007 B. Cash flows from / (used in) investing activities 1. Proceeds from disposal of tangible assets 3,798,622 2,899,970 2. Acquisition of tangible assets 6,7.8 (18,373,707) (41,868,135) 3. Acquisition of financial assets (1,006,922,828) (96,070,535) 4. Proceeds from disposal of financial assets 626,136,367 56,327,111 5. Interests received 218,181,004 215,317,385 6. Dividends received 4,828,118 10,744,802 7. Other cash inflows 40,857,112 41,254,359 8. Other cash outflows (497,273,490) (235,185,740) 9. Net cash used in investing activities (628,768,802) (46,580,783) 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 (136,125,454) (175,293,934) 5. Other cash inflows - - 6. Other cash outflows - - 7. Net cash used in financing activities (136,125,454) (175,293,934) D. Effect of exchange rate fluctuations on cash and cash equivalents - - E. Net decrease in cash and cash equivalents (51,509,432) 123,535,290 F. Cash and cash equivalents at the beginning of the period 14 338,091,030 214,555,740 G. Cash and cash equivalents at the end of the period 14 286,581,598 338,091,030
The accompanying notes are an integral part of these unconsolidated financial statements. Anadolu Hayat Emeklilik 2019 Annual Report 135
Anadolu Hayat Emeklilik Anonim Şirketi Unconsolidated Statement of Profit Distribution For the Year Ended December 31, 2019 (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, 2019(3) December 31, 2018 I. DISTRIBUTION OF THE PERIOD PROFIT 1.1. PERIOD PROFIT(1) 465,400,846 329,470,182 1.2. TAXES AND DUTIES PAYABLE (119,305,000) (68,607,000) 1.2.1. Corporate Tax (Income Tax) (119,305,000) (68,607,000) 1.2.2. Income Tax Deductions - - 1.2.3. Other Taxes and Legal Duties - - A. CURRENT PERIOD PROFIT (1.1 - 1.2) 346,095,846 260,863,182 1.3. ACCUMULATED LOSSES (-) - - 1.4. FIRST LEGAL RESERVES (-)(2) - 5,635,719 1.5. OTHER STATUTORY RESERVES (-) - - B. NET PROFIT AVAILABLE FOR DISTRIBUTION [(A - (1.3 + 1. 4 + 1. 5)] 346,095,846 255,227,463 1.6. FIRST DIVIDEND TO SHAREHOLDERS (-) - (51,045,665) 1.6.1. To owners of ordinary shares - (51,045,665) 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 (-) - (6,125,454) 1.8. DIVIDENDS TO BOARD OF DIRECTORS (-) - - 1.9. DIVIDENDS TO FOUNDERS - 1.10. SECOND DIVIDEND TO SHAREHOLDERS (-) - (78,954,335) 1.10.1. To owners of ordinary shares - (78,954,335) 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 (-) - (11,462,545) 1.12. STATUTORY RESERVES(-) - (19,805,634) 1.13. EXTRAORDINARY RESERVES - (87,833,830) 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 0.80487 0.59355 3.2. TO OWNERS OF ORDINARY SHARES (%) 80.487 59.355 3.3. TO OWNERS OF PRIVILEGED SHARES 0.80487 0.59355 3.4. TO OWNERS OF PRIVILEGED SHARES (%) 80.487 59.355 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 7,500,000 is added to the profit for the year ended December 31, 2019 according to TAS 19 Employee Benefits. Besides TL 20,650,000 decided investment for İş Asset Management Infrastructure Venture Capital Investment Fund in 2020 and TL 1,445,922 amounting the 75% of TL 1,927,896 which was gained from the sales profit of equities in 2019 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 2019 profit distribution table above.
The accompanying notes are an integral part of these unconsolidated financial statements. 136 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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, 2019, 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, 2019 December 31, 2018 Shareholding Shareholding Shareholding Shareholding Name amount (TL) rate (%) amount (TL) rate (%)
Türkiye İş Bankası AŞ(1) 274,742,970 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 64,957,031 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, 2019, 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, 2019, the Company has 34 individual pension investment funds (December 31, 2018: 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, 2019 December 31, 2018
Senior level managers 7 7 Directors 142 134 Officers 420 395 Sales personnel 506 499 Other 11 11 Total 1,086 1,046 Anadolu Hayat Emeklilik 2019 Annual Report 137
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
1.6 Wages and similar benefits provided to the senior management For the year ended as of December 31, 2019, 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 7,207,988 (December 31, 2018: TL 6,404,002). 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, 2019, 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, 2019 was approved by Board of Directors on January 30, 2020. 138 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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. 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, 2019, 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. Anadolu Hayat Emeklilik 2019 Annual Report 139
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
2.1.6 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’. 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. 140 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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 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: Estimated useful Depreciation rates Tangible assets lives (years) (%) 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. Anadolu Hayat Emeklilik 2019 Annual Report 141
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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). 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. 142 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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, 2019, 95% of the difference between fair values and amortised costs of those assets backing liabilities amounting to TL 11,377,946 (December 31, 2018: TL (144,313,308)) 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. Anadolu Hayat Emeklilik 2019 Annual Report 143
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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. 144 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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, 2019, the Company’s issued capital is TL 430,000,000 (December 31, 2018: TL 430,000,000). Sources of the capital increases during the period None. Privileges on common shares representing share capital As at December 31, 2019, the share capital of the Company was amounted TL 430,000,000 (December 31, 2018: TL 430,000,000), divided into 43,000,000,000 shares (December 31, 2018: 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. 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, 2019, the registered capital of the Company is TL 900,000,000 (December 31, 2018: 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. Anadolu Hayat Emeklilik 2019 Annual Report 145
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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. 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. 146 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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, 2019 and 2018, 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. 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, 2019 is TL 6,379.86 (December 31, 2018: TL 5,434.42). Anadolu Hayat Emeklilik 2019 Annual Report 147
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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 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, 2019 and December 31, 2018 are as follows: December 31, 2019 December 31, 2018 Discount rate 4.20% 4.22% Expected rate of salary/limit increase 7.20% 11.30%
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. 148 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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. 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 Fund management fee is recognised as income, charged to the pension investment funds against the hardware, software, personnel and accounting services provided, and fee is shared between the Company and the portfolio managers in accordance with the agreement signed between parties. Total of fund management fee charged to the pension investment funds is recognised as “Fund management income” under technical income and portion of the portfolio manager is recognised as “Fund management expense” under technical expenses. 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. Anadolu Hayat Emeklilik 2019 Annual Report 149
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Summary of the new standards, amendments and interpretations: Set out below are the new accounting policies of the Company upon adoption of TFRS 16. 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 right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. 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. 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: Contract term Discount rate - TL Discount rate - Euro Assets subject to operating leases (Year) (%) (%) Buildings 10 years 20.00 - Motor vehicles 1-3 years 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 recognized as liability in the financial statements when they are announced. 150 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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. Anadolu Hayat Emeklilik 2019 Annual Report 151
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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, 2019, related test have not resulted any reserve for unexpired risks (December 31, 2018: TL 18,510). 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 12,082,030 (December 31, 2018: TL 11,744,574). 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 56,472 (December 31, 2018: TL 38,833). 152 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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 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, 2019, 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. 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 39,434,063 are presented under “Other Technical Reserves” within short-term liabilities in the accompanying financial statements (December 31, 2018: TL 27,724,590). 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, 2019, the Company accounted for provision for bonus and discounts, net amounting to TL 391,457 (December 31, 2018: TL 410,153). Anadolu Hayat Emeklilik 2019 Annual Report 153
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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, 2019 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, 2019. The effects of these standards and interpretations on the Company’s financial position and performance have been disclosed in the related paragraphs. i) The new standards, amendments and interpretations which are effective as at January 1, 2019 are as follows: TFRS 16 Leases In April 2018, POA has published a new standard, TFRS 16 ‘Leases’. The new standard brings most leases on-balance sheet for lessees under a single model, eliminating the distinction between operating and finance leases. Lessor accounting however remains largely unchanged and the distinction between operating and finance leases is retained. TFRS 16 supersedes TAS 17 ‘Leases’ and related interpretations and is effective for periods beginning on or after January 1, 2019, with earlier adoption permitted. 154 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Lessees have recognition exemptions to applying this standard in case of short-term leases (i.e., leases with a lease term of 12 months or less) and leases of ’low-value’ assets (e.g., personal computers, office equipment, etc.). At the commencement date of a lease, a lessee measures the lease liability at the present value of the lease payments that are not paid at that date (i.e., the lease liability), at the same date recognises an asset representing the right to use the underlying asset (i.e., the right-of-use asset) and depreciates it during the lease term. The lease payments shall be discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the lessee shall use the lessee’s incremental borrowing rate. Lessees are required to recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset separately. Lessees are required to remeasure the lease liability upon the occurrence of certain events (e.g. a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). Under these circumstances, the lessee recognises the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset. Transition to TFRS 16: The Company elected to use the exemptions applicable to the standard on lease contracts for which the lease terms ends within 12 months as of the date of initial application and lease contracts for which the underlying asset is of low value. The Company has leases of certain office equipment (i.e., personal computers, printing and photocopying machines) that are considered of low value. The standard is applied for annual periods beginning on or after 1 January 2019. The Company disclosed the impact of the standard on financial position or performance of the Company in Note 2, 6 and 20. Amendments to TAS 28 “Investments in Associates and Joint Ventures” (Amendments) In December 2017, POA issued amendments to TAS 28 Investments in Associates and Joint Ventures. The amendments clarify that a company applies TFRS 9 Financial Instruments to long-term interests in an associate or joint venture that form part of the net investment in the associate or joint venture. TFRS 9 Financial Instruments excludes interests in associates and joint ventures accounted for in accordance with TAS 28 Investments in Associates and Joint Ventures. In this amendment, POA clarified that the exclusion in TFRS 9 applies only to interests a company accounts for using the equity method. A company applies TFRS 9 to other interests in associates and joint ventures, including long-term interests to which the equity method is not applied and that, in substance, form part of the net investment in those associates and joint ventures. These amendments are applied for annual periods beginning on or after 1 January 2019. The amendments did not have a significant impact on the financial position or performance of the Company. TFRIC 23 Uncertainty over Income Tax Treatments The interpretation clarifies how to apply the recognition and measurement requirements in “TAS 12 Income Taxes” when there is uncertainty over income tax treatments. When there is uncertainty over income tax treatments, the interpretation addresses: (a) whether an entity considers uncertain tax treatments separately; (b) the assumptions an entity makes about the examination of tax treatments by taxation authorities; (c) how an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates; and (d) how an entity considers changes in facts and circumstances. The interpretation is effective for annual reporting periods beginning on or after 1 January 2019. The interpretation did not have a significant impact on the financial position or performance of the Company. Anadolu Hayat Emeklilik 2019 Annual Report 155
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Annual Improvements - 2015-2017 Cycle In January 2019, POA issued Annual Improvements to TFRS Standards 2015-2017 Cycle, amending the following standards: -- TFRS 3 Business Combinations and TFRS 11 Joint Arrangements - The amendments to TFRS 3 clarify that when an entity obtains control of a business that is a joint operation, it remeasures previously held interests in that business. The amendments to TFRS 11 clarify that when an entity obtains joint control of a business that is a joint operation, the entity does not remeasure previously held interests in that business. -- TAS 12 Income Taxes - The amendments clarify that all income tax consequences of dividends (i.e. distribution of profits) should be recognised in profit or loss, regardless of how the tax arises. -- TAS 23 Borrowing Costs - The amendments clarify that if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalisation rate on general borrowings. The amendments are effective from annual periods beginning on or after 1 January 2019. The amendments did not have a significant impact on the financial position or performance of the Company. Plan Amendment, Curtailment or Settlement” (Amendments to TAS 19) In January 2019, the POA published Amendments to TAS 19 “Plan Amendment, Curtailment or Settlement” The amendments require entities to use updated actuarial assumptions to determine current service cost and net interest for the remainder of the annual reporting period after a plan amendment, curtailment or settlement occurs. These amendments are applied for annual periods beginning on or after 1 January 2019. The amendments did not have a significant impact on the financial position or performance of the Company. Prepayment Features with Negative Compensation (Amendments to TFRS 9) The POA issued minor amendments to TFRS 9 Financial Instruments to enable companies to measure some prepayable financial assets at amortised cost. Applying TFRS 9, a company would measure a financial asset with so-called negative compensation at fair value through profit or loss. Applying the amendments, if a specific condition is met, entities will be able to measure at amortised cost some prepayable financial assets with so-called negative compensation. These amendments are applied for annual periods beginning on or after 1 January 2019. 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. 156 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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 PAO 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 2021; early application is permitted. The Company is in the process of assessing the impact of the standard on financial position or performance of the Company. Definition of a Business (Amendments to TFRS 3) In May 2019, the PAO issued amendments to the definition of a business in TFRS 3 Business Combinations. The amendments are intended to assist entities to determine whether a transaction should be accounted for as a business combination or as an asset acquisition. 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. Earlier application is permitted. The amendments are not applicable for the Company and will not have an impact on the financial position or performance of the Company. Definition of Material (Amendments to TAS 1 and TAS 8) In June 2019, the PAO 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 Company is in the process of assessing the impact of the amendments on 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 certain reliefs for 4 fundamental matters in connection with interest rate benchmark reform. These reliefs are related to hedge accounting as follows: -- Highly probable requirement -- Prospective Assessments -- Retrospective Assessments -- Separately identifiable risk components 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. Anadolu Hayat Emeklilik 2019 Annual Report 157
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1) iii)The new standards, amendments and interpretations that are issued by the International Accounting Standards Board (IASB) but not issued by Public Oversight Authority (POA) There are no standards, interpretations and amendments to existing IFRS standards issued by the IASB and not yet adapted/ issued by the POA. 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 Note 21 - Deferred tax Note 23 - Other liabilities and provisions 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, 2019, the Company’s life insurance (excluding saving component of saving life insurance) claims/ premiums ratio stands at 16%. 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. 158 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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, 2019, the Company’s personal accident insurance claims/premiums ratio is 46%. 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, 2019 December 31, 2018
Life insurance (*) 16% 21% Personal accident 46% 68% (*) 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, 2019 and December 31, 2018, risk portion transferred to reinsurers in terms of risk guarantee is presented as below: December 31, 2019 December 31, 2018
Death by natural cause 14% 12% Death by accident 55% 53% Disability by accident 60% 56% Disability by illness 72% 64%
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 2018, 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. Anadolu Hayat Emeklilik 2019 Annual Report 159
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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, 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
December 31, 2018 Total gross Reinsurer’s share The Company’s Branches risk liability(1) of risk liability net claims liability
Life insurance 79,326,942,408 18,117,334,551 61,209,607,857 Personal accident 9,774,489,686 4,093,756,237 5,680,733,449 Total 89,101,432,094 22,211,090,788 66,890,341,306
(1) Represents the maximum insurance amount based on death by natural cause, death by accident, disability by accident and disability by illness. 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, 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 South-eastern 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 94,635,252 160 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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, 2018 Total gross Reinsurer’s share Total net Claims liability(1) claims liability of claims liability claims liability
Marmara Region 31,554,305 1,711,922 29,842,383 Central Anatolia Region 10,627,809 373,047 10,254,762 Aegean Region 11,940,652 272,911 11,667,741 Mediterranean Region 9,554,683 514,059 9,040,624 Black Sea Region 6,061,222 73,771 5,987,451 South-eastern Anatolia Region 3,582,898 536,242 3,046,656 Eastern Anatolia Region 2,616,937 53,415 2,563,522 Foreign countries (other) 6,084,144 4,199 6,079,945 Total 82,022,650 3,539,566 78,483,084
(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. Anadolu Hayat Emeklilik 2019 Annual Report 161
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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. 162 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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, 2019 and December 31, 2018, 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 Other insurance activities receivables Banks and other cash and cash Related Third Related Third Financial equivalent December 31, 2019 party party party party assets(2) 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 past 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. ------Anadolu Hayat Emeklilik 2019 Annual Report 163
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
(1) Receivables Banks and Receivables from Receivables from other cash insurance activities insurance activities and cash Related Third Related Third Financial equivalent December 31, 2018 party party party party Assets(2) assets
Maximum credit risk exposure as at the reporting period (A+B+C) 25 90,825,976 12,549 50,363,825 2,224,455,427 517,656,851 - Secured portion of maximum risk by guarantees, provisions, etc. ------A. Net book value of neither past due nor impaired financial assets 25 66,061,899 12,549 50,363,825 2,224,455,427 517,656,851 B. Net book value of part due but not impaired assets - 24,764,077 - - - - C. Net book value of impaired assets ------Gross book value - 120,570 - - - - - Impairment - (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. 164 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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, 2019 and December 31, 2018 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, 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) - Anadolu Hayat Emeklilik 2019 Annual Report 165
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, 2019 and December 31, 2018 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, 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) - 166 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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, 2018 maturity 1 month months months years and over Unallocated Total Cash and cash equivalents 25,977,467 265,472,528 226,207,842 - - - - 517,657,837 Financial assets and investments with risks on policyholders - 47,850,878 237,756,036 68,674,224 939,637,685 847,890,213 192,687,396 2,334,496,432 Receivables from main operations - 4,815,190 9,157,280 16,918,948 - - 17,026,657,947 17,057,549,365 Due from related parties - - 12,549 - - - - 12,549 Other receivables - 49,370,276 - - - - 993,549 50,363,825 Prepaid expenses and income accruals, short term ------36,252,496 36,252,496 Other current assets ------22,128 22,128 Other receivables - - - 231,161 - - - 231,161 Financial assets (Associates) ------12,762,193 12,762,193 Tangible assets ------183,963,677 183,963,677 Intangible assets ------27,541,661 27,541,661 Prepaid expenses and income accruals, long term ------661,369 661,369 Deferred tax assets ------Total assets 25,977,467 367,508,872 473,133,707 85,824,333 939,637,685 847,890,213 17,481,542,416 20,221,514,693
Financial liabilities ------Payables arising from main operations - 24,918,717 4,054,710 - - 17,248,969,985 17,277,943,412 Due to related parties - 54,560 - 131,097 - - 94 185,751 Other payables - 10,256,568 - - - - 8,990,740 19,247,308 Insurance technical provisions ------1,899,412,052 1,899,412,052 Provisions for taxes and other similar obligations - 14,185,995 - - - - 20,026,249 34,212,244 Deferred income and expense accruals ------3,867,847 3,867,847 Other short term liabilities ------Provisions for other risks - 1,400,000 - 12,800,000 - 18,079,050 9,686,690 41,965,740 Deferred tax liabilities ------4,062,693 4,062,693 Shareholders’ equity ------940,617,646 940,617,646 Total liabilities - 50,815,840 - 16,985,807 - 18,079,050 20,135,633,996 20,221,514,693 Net liquidity surplus/(deficit) 25,977,467 316,693,032 473,133,707 68,838,526 939,637,685 829,811,163 (2,654,091,580) - Anadolu Hayat Emeklilik 2019 Annual Report 167
Without Up to 1 to 3 3 to 12 1 to 5 5 years December 31, 2018 maturity 1 month months months years and over Unallocated Total Cash and cash equivalents 25,977,467 265,472,528 226,207,842 - - - - 517,657,837 Financial assets and investments with risks on policyholders - 47,850,878 237,756,036 68,674,224 939,637,685 847,890,213 192,687,396 2,334,496,432 Receivables from main operations - 4,815,190 9,157,280 16,918,948 - - 17,026,657,947 17,057,549,365 Due from related parties - - 12,549 - - - - 12,549 Other receivables - 49,370,276 - - - - 993,549 50,363,825 Prepaid expenses and income accruals, short term ------36,252,496 36,252,496 Other current assets ------22,128 22,128 Other receivables - - - 231,161 - - - 231,161 Financial assets (Associates) ------12,762,193 12,762,193 Tangible assets ------183,963,677 183,963,677 Intangible assets ------27,541,661 27,541,661 Prepaid expenses and income accruals, long term ------661,369 661,369 Deferred tax assets ------Total assets 25,977,467 367,508,872 473,133,707 85,824,333 939,637,685 847,890,213 17,481,542,416 20,221,514,693
Financial liabilities ------Payables arising from main operations - 24,918,717 4,054,710 - - 17,248,969,985 17,277,943,412 Due to related parties - 54,560 - 131,097 - - 94 185,751 Other payables - 10,256,568 - - - - 8,990,740 19,247,308 Insurance technical provisions ------1,899,412,052 1,899,412,052 Provisions for taxes and other similar obligations - 14,185,995 - - - - 20,026,249 34,212,244 Deferred income and expense accruals ------3,867,847 3,867,847 Other short term liabilities ------Provisions for other risks - 1,400,000 - 12,800,000 - 18,079,050 9,686,690 41,965,740 Deferred tax liabilities ------4,062,693 4,062,693 Shareholders’ equity ------940,617,646 940,617,646 Total liabilities - 50,815,840 - 16,985,807 - 18,079,050 20,135,633,996 20,221,514,693 Net liquidity surplus/(deficit) 25,977,467 316,693,032 473,133,707 68,838,526 939,637,685 829,811,163 (2,654,091,580) - 168 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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, 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. Anadolu Hayat Emeklilik 2019 Annual Report 169
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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, 2018 Total TL (Functional currency) US Dollar Euro GBP CHF JPY 1. Cash at banks 14,631,702 7,534,357 6,827,998 207,363 61,984 - 2. Financial assets and financial investments with risks on policyholders 765,132,465 594,527,085 148,409,850 22,195,530 - - 3. Receivables from main operations 9,702,272 8,352,240 1,347,680 2,352 - - 4. Reinsurance receivables ------5. Rent receivables ------6. Deposits given 57,870 57,870 - - - - Foreign currency assets, current 789,524,309 610,471,552 156,585,528 22,405,245 61,984 - 7. Total assets 789,524,309 610,471,552 156,585,528 22,405,245 61,984 -
8. Other miscellaneous payables 1,191,874 1,086,225 105,649 - - - 9. Payables to reinsurers 148,188 148,179 - - - 9 10. Agency guarantees 558,507 535,868 22,639 - - - 11. Technical provisions (*) 779,066,993 609,344,926 148,483,130 21,229,712 309 8,916 Foreign currency liabilities, short term 780,965,562 611,115,198 148,611,418 21,229,712 309 8,925 12. Total liabilities 780,965,562 611,115,198 148,611,418 21,229,712 309 8,925
Net financial position 8,558,747 (643,646) 7,974,110 1,175,533 61,675 (8,925) Net foreign currency assets/(liabilities) position on monetary items 8,500,877 (701,516) 7,974,110 1,175,533 61,675 (8,925)
(*) 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, 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
December 31, 2018 US Dollar Euro GBP CHF JPY
Foreign currency rate used in translation of balance sheet items 5.2609 6.0280 6.6528 5.3352 0.0475 170 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Exposure to foreign currency risk A 10 percent depreciation of the TL against the following currencies as at December 31, 2019 and December 31, 2018 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, 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. Anadolu Hayat Emeklilik 2019 Annual Report 171
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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, 2018 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 215,947 (215,947) (64,365) 64,365 2- Hedged portion from US Dollar risk (-) - - - - 3- Net effect of US Dollar (1+2) 215,947 (215,947) (64,365) 64,365
If EUR value changes by 10% against TL: 4- Net Euro assets/liabilities 786,885 (786,885) 797,412 (797,412) 5- Hedged portion from Euro risk (-) - - - - 6- Net effect of Euro (4+5) 786,885 (786,885) 797,412 (797,412)
If GBP value changes by 10% against TL: 7- Net GBP assets/liabilities 127,323 (127,323) 117,553 (117,553) 8- Hedged portion from GBP risk (-) - - - - 9- Net effect of GBP (7+8) 127,323 (127,323) 117,553 (117,553)
If CHF value changes by 10% against TL: 10- Net CHF assets/liabilities 6,168 (6,168) 6,168 (6,168) 11- Hedged portion from CHF risk (-) - - - - 12- Net effect of CHF (10+11) 6,168 (6,168) 6,168 (6,168)
If JPY value changes by 10% against TL: 13- Net JPY assets/liabilities (893) 893 (893) 893 14- Hedged portion from JPY risk (-) - - - - 15- Net effect of JPY (13+14) (893) 893 (893) 893
Total (3+6+9+12+15) 1,135,430 (1,135,430) 855,875 (855,875)
(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, 2019 December 31, 2018
Fixed rate financial instruments Financial assets 2,193,341,949 1,783,043,917 Available-for-sale financial assets 2,140,627,812 1,735,812,202 Loans and receivables 52,714,137 47,231,715 Time deposits 653,352,901 532,349,987
Variable rate financial instruments Financial assets 251,269,988 121,009,082 Available-for-sale financial assets 251,269,988 121,009,082 172 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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, 2019 and December 31, 2018, interest rate risk analysis of financial assets and financial liabilities are summarised in the table below: Up to 1 to 3 3 to 12 1 to 5 5 years Non-interest December 31, 2019 1 month 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) - Anadolu Hayat Emeklilik 2019 Annual Report 173
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Up to 1 to 3 3 to 12 1 to 5 5 years Non-interest December 31, 2018 1 month months months years and over bearing Total Assets: Cash and cash equivalents 265,472,528 226,207,842 - - - 25,977,467 517,657,837 Financial assets and investments with risks on policyholders 47,850,878 237,756,036 189,683,307 818,628,602 847,890,213 192,687,396 2,334,496,432 Receivables from main operations 4,815,190 9,157,280 16,918,948 - - 17,026,657,947 17,057,549,365 Due from related parties - 12,549 - - - - 12,549 Other receivables 49,370,276 - - - 993,549 50,363,825 Prepaid expenses and income accruals, short term - - - - - 36,252,496 36,252,496 Other current assets - - - - - 22,128 22,128 Other current receivables - - 231,161 - - - 231,161 Financial assets (Associates) - - - - - 12,762,193 12,762,193 Tangible assets - - - - - 183,963,677 183,963,677 Intangible assets - - - - - 27,541,661 27,541,661 Prepaid expenses and income accruals, long term - - - - - 661,369 661,369 Deferred tax assets ------Total assets 367,508,872 473,133,707 206,833,416 818,628,602 847,890,213 17,507,519,883 20,221,514,693 Liabilities: Financial liabilities ------Payables arising from main operations 24,918,717 4,054,710 - - 17,248,969,985 17,277,943,412 Due to related parties 54,560 - 131,097 - - 94 185,751 Other liabilities 10,256,568 - - - - 8,990,740 19,247,308 Insurance technical provisions - - - - - 1,899,412,052 1,899,412,052 Provisions for taxes and other similar obligations 14,185,995 - - - - 20,026,249 34,212,244 Deferred income and expense accruals - - - - - 3,867,847 3,867,847 Other short term liabilities ------Provisions for other risks 1,400,000 - 12,800,000 - 18,079,050 9,686,690 41,965,740 Deferred tax liabilities - - - - - 4,062,693 4,062,693 Shareholders’ equity - - - - - 940,617,646 940,617,646 Total liabilities and equity 50,815,840 - 16,985,807 - 18,079,050 20,135,633,996 20,221,514,693
Net position 316,693,032 473,133,707 189,847,609 818,628,602 829,811,163 (2,628,114,113) - 174 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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, 2019 and 2018 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, 2019 and 2018. 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, 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
100 bp 100 bp 500 bp 500 bp December 31, 2018 increase decrease increase decrease
Company’s own portfolio (7,590,537) 7,891,428 (35,312,669) 42,963,542 Total, net (7,590,537) 7,891,428 (35,312,669) 42,963,542
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. Anadolu Hayat Emeklilik 2019 Annual Report 175
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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, 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 held for trading 35,524,079 - - 35,524,079 Receivables from individual pension business(3) 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. December 31, 2018 Level 1 Level 2 Level 3 Total
Financial assets(1): Financial assets held for trading 55,437,380 - - 55,437,380 Available for sale financial assets(2) 563,866,752 - - 563,866,752 Financial investments with risks on policyholders classified as available for sale 1,396,131,158 - - 1,396,131,158 Financial investments with risks on policyholders classified as for the purposes of purchase and sale 28,879,925 28,879,925 Receivables from individual pension business 16,937,634,744 - - 16,937,634,744 Total financial assets 18,981,949,959 - - 18,981,949,959
Financial liabilities: Investment contract liabilities - life mathematical provision for saving life policies 1,740,281,090 - - 1,740,281,090 Payables arising from individual pension business(3) 16,937,634,744 - - 16,937,634,744 Total financial liabilities 18,677,915,834 - - 18,677,915,834
(1) As at December 31, 2018, time deposits in financial investments with risks on policyholders amounting to TL 237,756,035 are not included in the table. (2) As at December 31, 2018, 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. 176 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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, 2019 and 2018. Change of price December 31, 2019 December 31, 2018 Market price of equity share 10% 15,954,219 10,317,663
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, 2019 and 2018. Change of price December 31, 2019 December 31, 2018 Market price of equity share 10% - 167,091
(*) As at 31.12.2019 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, 2019 is summarised below. As at June 30, 2019, the capital adequacy of the Company is TL 248,670,129 and TL 310,814,829; 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, 2019. The Company’s capital calculated based on the regulation as at June 30, 2019 is TL 987,241,450. Consequently, the Company’s capital is adequate. Capital adequacy table June 30, 2019 December 31, 2018 First Method Required capital for non-life branches 118,627 144,326 Required capital for life branch 152,107,038 157,799,746 Required capital for pension branch 96,444,464 84,688,174 Required capital based on the first method 248,670,129 242,632,246
Second Method Required capital for asset risk 271,681,473 231,533,824 Required capital for reinsurance risk 1,360,459 1,612,489 Required capital for outstanding claims risk 4,112,101 4,418,494 Required capital for underwriting risk 32,876,825 29,974,380 Required capital for interest rate and currency risk 783,971 641,906 Required capital based on the second method 310,814,829 268,181,093
Required capital 310,814,829 268,181,093 Current capital(1) 987,241,450 968,342,236 Excessive capital 676,426,621 700,161,143
(1) According to legal regulations, equalisation provision of TL 31,165,416 (December 31, 2018: TL 27,724,590) have been included in the amount for equity. Anadolu Hayat Emeklilik 2019 Annual Report 177
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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, 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 Personal accident 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)
Individual December 31, 2018 Life pension Non-Life Total
Continuing operations: Technical income 1,004,266,003 369,185,665 603,996 1,374,055,664 Technical expense (853,169,546) (281,630,014) (1,680,397) (1,136,479,957) Total of other income and expense 36,274,861 47,672,949 683,734 84,631,544 Income before tax 187,371,318 135,228,600 (392,667) 322,207,251 Income tax expense - - - (68,607,000) Net profit for the period 187,371,318 135,228,600 (392,667) 253,600,251
Individual December 31, 2018 Life pension Non-Life Total
Segment assets 2,377,905,967 17,798,788,288 44,820,438 20,221,514,693 Total assets 2,377,905,967 17,798,788,288 44,820,438 20,221,514,693
Segment liabilities (2,340,210,700) (17,837,335,103) (43,968,890) (20,221,514,693) Total liabilities (2,340,210,700) (17,837,335,103) (43,968,890) (20,221,514,693)
Other segment information Depreciation and amortisation (9,568,782) (12,575,431) (180,359) (22,324,572) 178 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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, 2019 is presented below: January 1, Increase December 31, 2019 Additions in value Disposals 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 (1) - 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 (1) - (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
(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, 2018, the fair values (excluding VAT) and net carrying values of owner occupied properties are presented below: Appraisal Net carrying value Owner occupied land and buildings value (December 31, 2019)
Building / Southern Anatolia district sales office / Adana 2,600,000 2,586,865 Land / İstanbul Kağıthane 2,100,000 2,100,000 Total 4,700,000 4,686,865
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. Anadolu Hayat Emeklilik 2019 Annual Report 179
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Movement in tangible assets in the period from January 1 to December 31, 2018 is presented below: January 1, Increase December 31, 2018 Additions in value Disposals 2018 Cost: Owner occupied land and buildings 4,610,000 - 90,000 - 4,700,000 Machinery and equipment 29,556,763 16,439,049 - (177,726) 45,818,086 Vehicles 431,268 71,329 - - 502,597 Furniture and fixtures (includes leased assets) 4,275,468 2,065,902 - - 6,341,370 Leasehold improvements 3,850,717 9,055,717 - (534,981) 12,371,453 42,724,216 27,631,997 90,000 (712,707) 69,733,506 Accumulated depreciation: Owner occupied land and buildings (30,953) (8,221) - 39,174 - Machinery and equipment (17,710,069) (6,414,058) - 101,258 (24,022,869) Vehicles (171,374) (87,089) - - (258,463) Furniture and fixtures (includes leased assets) (3,598,598) (382,884) - - (3,981,482) Leasehold improvements (2,935,091) (726,053) - 424,374 (3,236,770) (24,446,085) (7,618,305) - 564,806 (31,499,584)
Carrying amounts 18,278,131 38,233,922
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, 2019 is presented below: January 1, Increase in December 31, 2019 Additions value Disposals 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
Movement in investment properties in the period from January 1 to December 31, 2018 is presented below: January 1, Increase in December 31, 2018 Additions value Disposals 2018
Land / İstanbul Ömerli 56,944,134 - 4,375,000 (889,379) 60,429,755 Building / İstanbul Gayrettepe 56,000,000 - 300,000 - 56,300,000 Building / Mersin 29,000,000 - - - 29,000,000 141,944,134 - 4,675,000 (889,379) 145,729,755 Carrying amounts 141,944,134 145,729,755
For the period ended December 31, 2019, the Company has rental income from investment properties amounting to TL 858,473 (December 31, 2018: TL 817,993), The Company has a gain from increase in value of investment properties amounting to TL 7,625,114 for the period ended December 31, 2019 (December 31, 2018: 5,018,451). When the diminution in value of investment properties amounting to TL 225,114 recorded under “diminution in value of investments” account during the period is considered, the Company has a net gain from increase in value of investment properties amounting to TL 7,400,000. (December 31, 2018:4,675,000). 180 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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 2019. There is no mortgage on the properties aforementioned. Appraisal and net carrying value Net carrying value Net carrying value Investment land and buildings (December 31, 2019) (December 31, 2018)
Land / İstanbul Ömerli 67,068,758 60,429,755 Building / İstanbul Gayrettepe 57,000,000 56,300,000 Building / Mersin 29,000,000 29,000,000 Appraisal and net carrying value 153,068,758 145,729,755
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, 2019 is presented below: January 1, December 31, 2019 Additions Transfers 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
Movements in intangible assets in the period from January 1 to December 31, 2018 is presented below: January 1, December 31, 2018 Additions Transfers 2018 Cost: Rights 69,128,445 14,236,138 - 83,364,583 69,128,445 14,236,138 - 83,364,583 Accumulated amortisation: Rights (41,116,655) (14,706,267) - (55,822,922) (41,116,655) (14,706,267) - (55,822,922)
Carrying amounts 28,011,790 27,541,661 Anadolu Hayat Emeklilik 2019 Annual Report 181
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
9 Investments in associates December 31, 2019 December 31, 2018 Carrying Participation Carrying Participation value rate % value 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 December 31, İş Portföy Yönetimi AŞ 142,194,919 124,894,910 4,931,113 37,144,717 Reviewed 2019
The Company has TL 4,272,000 of dividend income from associates in current period. 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, 2019 December 31, 2018
Life mathematical reserve, ceded (Note 17,15) 3,803,491 3,094,026 Provision for outstanding claims, ceded (Note 17,15) 6,709,653 4,375,778 Reserve for unearned premiums, ceded (Note 17,15) 3,851,643 2,991,581 Provision for bonus and discount, ceded (Note 17,15) 365,948 933,239 Reserve for unexpired risks, ceded (Note 17,15) - 10,387 Other technical provision, ceded 1,014,229 803,664 Receivables from reinsurance companies - 1,012,069 Total 15,744,964 13,220,744
There is not any impairment losses recognised for reinsurance assets. Reinsurance liabilities December 31, 2019 December 31, 2018
Payables to reinsurance companies 1,243,040 - Cash deposited by insurance and reinsurance companies (Note 19) 4,479,832 4,054,710 Total 5,722,872 4,054,710 182 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Gains and losses recognised in the statement of income in accordance with existing reinsurance contracts are as follows: December 31, 2019 December 31, 2018
Life branch: Premiums ceded during the period (22,236,204) (18,674,322) Change in unearned premiums reserve, ceded 836,790 500,345 Commissions received from reinsurers(1) 5,638,926 5,082,540 Reinsurers share of claims paid 10,770,140 5,624,469 Change in outstanding claims, ceded 2,316,360 1,029,083 Change in provision for bonus and discount, ceded (563,156) 137,296 Change in life mathematical reserve, ceded 709,465 663,803 (2,527,679) (5,636,786)
Non-life branch: Premiums ceded during the period (509,894) (406,687) Change in unearned premiums reserve, ceded 23,272 59,809 Commissions received from reinsurers(1) 159,993 112,925 Reinsurers share of claims paid 29,826 29,251 Change in outstanding claims, ceded 17,516 15,388 Change in provision for bonus and discount, ceded (4,135) 2,907 (283,422) (186,407)
Total, net (2,811,101) (5,823,193)
(1) Deferred commissions are excluded from commissions received from reinsurers. 11 Financial assets As at December 31, 2019 and December 31, 2018, the Company’s financial assets are detailed as follows: Financial assets and financial investments with risk on policyholders December 31, 2019 December 31, 2018
Available for sale financial assets, Company’s own portfolio 886,943,685 573,585,026 Financial assets held for trading 191,398,602 55,437,380 Loans and receivables 52,714,137 47,231,715 Financial investments with risks on saving life policyholders classified as held for trading and available for sale 1,937,750,426 1,662,767,119 Impairment loss on financial assets (4,524,808) (4,524,808) Total 3,064,282,042 2,334,496,432 Anadolu Hayat Emeklilik 2019 Annual Report 183
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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, 2019 and December 31, 2018, the Company’s financial assets held for trading are detailed as follows: December 31, 2019 Nominal Fair Carrying value Cost value 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
December 31, 2018 Nominal Fair Carrying value Cost value value
Equity shares and other non-fixed income financial assets: Equity shares 582,437 1,205,770 1,670,912 1,670,912 Investment funds 16,240,978 53,035,653 53,766,468 53,766,468 Total financial assets held for trading purpose - other 54,241,423 55,437,380 55,437,380
Total financial assets held for trading purpose 54,241,423 55,437,380 55,437,380
The Company’s financial assets held for trading issued by the Company’s related parties, are detailed as follows: December 31, 2019 Nominal Fair Carrying value Cost value 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
December 31, 2018 Nominal Fair Carrying value Cost value value
Investment funds 16,240,978 53,035,653 53,766,468 53,766,468 Total 16,240,978 53,035,653 53,766,468 53,766,468 184 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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, 2019 and December 31, 2018, the Company’s loans and receivables are detailed as follows: December 31, 2019 Cost Fair value Carrying value
Reverse repo transaction 52,700,000 52,714,137 52,714,137 Receivables from reverse repo 52,700,000 52,714,137 52,714,137
December 31, 2018 Cost Fair value Carrying value
Reverse repo transaction 47,200,000 47,231,715 47,231,715 Receivables from reverse repo 47,200,000 47,231,715 47,231,715
As at December 31, 2019 and December 31, 2018, the Company’s available for sale financial assets in its own portfolio are detailed as follows: 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 2019 Annual Report 185
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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, 2018 Nominal value Cost Fair value Carrying value
Debt instruments: Private sector bonds and asset-backed securities 501,511,660 509,184,398 452,963,178 452,963,178 Government bonds 1,500,000 7,767,456 7,726,947 7,726,947 Total available for sale financial assets - debt instruments 503,011,660 516,951,854 460,690,125 460,690,125
Equity shares and other non-fixed income financial assets: Equity shares(1) 109,582,611 112,894,901 112,894,901 Total available for sale financial assets - other 109,582,611 112,894,901 112,894,901
Total available for sale financial assets 626,534,465 573,585,026 573,585,026
Impairment loss on available for sale equity shares (4,524,808) (4,524,808) (4,524,808)
Net available for sale financial assets 622,009,657 569,060,218 569,060,218
(1) Financial assets of which the fair values are measured reliably are presented at their fair values, if not, presented at their costs. 186 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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 108,617,575 and with a carrying value TL 168,883,786 (December 31, 2018: Equity shares with a cost amount of TL 108,617,575 and a carrying amount of TL 111,156,935). Financial investments with risks on saving life policyholders (“FIRSLP”) as at December 31, 2019 and December 31, 2018 are detailed as follows: December 31, 2019 Nominal Fair Carrying value Cost value 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
December 31, 2018 Nominal Fair Carrying value Cost value value
Debt instruments: Government bonds - TL 754,413,681 746,983,621 655,261,911 655,261,911 Eurobonds issued by the Turkish Government Investment funds 143,088,000 765,890,788 740,869,247 740,869,247 Total available for sale financial assets - debt instruments 897,501,681 1,512,874,409 1,396,131,158 1,396,131,158 Debt instruments for trading purposes Investment funds 486,159 26,159,153 28,879,925 28,879,925 The sum of debt instruments classified as financial assets for trading purposes 486,159 26,159,153 28,879,925 28,879,925 Time deposits 236,780,862 236,780,862 237,756,036 237,756,036 Total time deposits 236,780,862 236,780,862 237,756,036 237,756,036
Financial investments with risks on saving life policyholders 1,775,814,424 1,662,767,119 1,662,767,119 Anadolu Hayat Emeklilik 2019 Annual Report 187
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
The financial assets issued by the Company’s related parties and classified as FIRSLP are detailed as follows: December 31, 2019 Nominal Fair Carrying value Cost value value lnvestment 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
December 31, 2018 Nominal Fair Carrying value Cost value value
Investment funds 486,159 26,159,153 28,879,925 28,879,925 Total investment funds 486,159 26,159,153 28,879,925 28,879,925
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, December 31, December 31, 2019 2018 2017
Current financial assets: Available for sale financial assets, Company’s own portfolio 38,340,584 (52,949,439) 17,256,545 Financial assets held for trading 13,718,900 1,195,957 15,638,695 Loans and receivables 14,137 31,715 36,112 Financial investments with risks on saving life policyholders classified as available for sale 86,032,369 (113,047,305) 40,949,248 Total 138,105,990 (164,769,072) 73,880,600
Value increases/(decreases) reflect the difference between the carrying value and cost of the financial assets. The Company has TL 4,524,808 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, 2018: 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, 2019 Nominal Fair Carrying value Cost value 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 2,469,719,748 188 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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, 2018 Nominal Fair Carrying value Cost value value
Financial investments with risks on saving life policyholders - debt securities 1,134,768,702 1,775,814,424 1,662,767,119 1,662,767,119 Available for sale financial assets 339,775,391 346,727,504 298,999,813 298,999,813 Time deposits 177,952,965 177,952,965 178,507,685 178,507,685 Total 1,652,497,058 2,300,494,893 2,140,274,617 2,140,274,617
12 Loans and receivables December 31, 2019 December 31, 2018
Receivables from insurance operations 64,328,597 55,964,785 Provisions for receivables from insurance operations (5,002,574) (2,574) Loans to the policyholders 40,071,706 34,863,790 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 22,951,649,071 16,966,723,364 Net fund value of participants 22,913,666,145 16,937,634,744 Other 37,982,926 29,088,620 Total receivables from main operations 23,051,046,800 17,057,549,365 Receivables from personnel 12,413 12,549 Other receivables 38,467,083 50,363,825 Total 23,089,526,296 17,107,925,739
The details of guarantees for the Company’s receivables are presented below: December 31, 2019 December 31, 2018
Guarantees and commitments 4,562,398 4,503,696 Letters of guarantees 4,620,232 3,591,673 Real estate pledges 782,900 782,900 Total 9,965,530 8,878,269
December 31, 2019 December 31, 2018
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, 2018: TL 117,996). b) Provision for premium receivables (due): TL 5.002.574 (December 31, 2018: TL 2,574). The Company provides provision for its doubtful receivables in the legal follow-up by considering the value and nature of the receivable. Anadolu Hayat Emeklilik 2019 Annual Report 189
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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 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, 2019 and December 31, 2018, cash and cash equivalents are as follows: December 31, 2019 December 31, 2018 At the At the At the At the end of the beginning of end of the beginning of period the period period the period
Cash on hand 219 1,002 1,002 5,654 Bank deposits 477,786,945 320,570,433 320,570,433 385,859,525 Bank guaranteed credit card receivables with maturities less than three months(1) 179,135,571 197,086,418 197,086,418 195,892,932 Cheques given and payment orders - (16) (16) (24) Cash and cash equivalents in the balance sheet 656,922,735 517,657,837 517,657,837 581,758,087
Blocked amount(2) (Note 11) (238,636,475) (178,507,685) (178,507,685) (160,089,678) Interest accruals on bank deposits (92,143) (1,059,122) (1,059,122) - Term deposits with original maturities of longer than 3 months (131,612,519) - - (207,112,669) Cash and cash equivalents presented in the statement of cash flow 286,581,598 338,091,030 338,091,030 214,555,740
(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, 2019, this amount regarding insurance operations is blocked in favour for the Ministry. As at December 31, 2019 and December 31, 2018, bank deposits are further analysed as follows: December 31, 2019 December 31, 2018
Foreign currency denominated bank deposits - time deposits - - - demand deposits 36,930,684 14,631,702 Bank deposits in TL - time deposits 425,341,138 294,593,951 - demand deposits 15,515,123 11,344,780 Cash at banks 477,786,945 320,570,433
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. As at December 31, 2018, TL time deposits have a maximum maturity of 56 days and their simple interest rates vary between 23.15% and 23.75%. The Company has not any foreign currency denominated bank deposits. 190 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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, 2019, 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, 2019, the Company’s registered capital is TL 900,000,000. As at December 31, 2019, 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, 2019 December 31, 2018
Legal reserves at the beginning of the period 153,833,566 126,944,038 Transfer from profit 17,098,264 26,889,528 Legal reserves at the end of the period 170,931,830 153,833,566
Extraordinary reserves The movement of extraordinary reserves is presented below: December 31, 2019 December 31, 2018
Extraordinary reserves at the beginning of the period 33,273,713 22,371,536 Transfer from profit 86,770,899 10,902,177 Extraordinary reserves at the end of the period 120,044,612 33,273,713
Statutory reserves The movement of statutory reserves is presented below: December 31, 2019 December 31, 2018
Statutory reserves at the beginning of the period 32,870,889 15,753,835 Transfer from profit 19,805,634 17,117,054 Statutory reserves at the end of the period 52,676,523 32,870,889 Anadolu Hayat Emeklilik 2019 Annual Report 191
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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, 2019, actuarial loss amounting to TL (9,542,231) is presented under the other profit reserves(December 31, 2018: TL (7,483,209)). 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, 2018: 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, 2019 December 31, 2018
Valuation differences at the beginning of the period (56,522,836) 9,546,468
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 (303,245) 959,657 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 143,182,278 (174,856,640) 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 (136,023,164) 166,113,808 Change in unrealised gains and losses from available for sale financial assets, company’s own portfolio 103,819,715 (75,714,205) Deferred and corporate tax effect (14,520,455) 15,204,830
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 27,653,334 7,111,762 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 (26,270,666) (6,756,174) Unrealised gains and losses transferred from equity to income statement due to disposal of available for sale financial assets, company’s own portfolio 12,748,993 2,423,470 Deferred and corporate tax effect (2,826,332) (555,812)
Valuation differences at the end of the period 50,937,622 (56,522,836) 192 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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, December 31, 2019 2018
Temporary differences arising from revaluation of financial assets 7,058,475 (79,195,823) Permanent differences arising from revaluation of financial assets and actuarial gain and losses 33,375,756 (3,123,075) The differences arising from revaluation of investment properties 3,265,699 3,326,525 Deferred tax effect 642,559 17,989,346 Total 44,342,489 (61,003,027)
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, 2019 December 31, 2018 Should be Should be provided(2) Provided(1) provided(2) Provided(1) Life: Financial assets(1) 2,015,927,862 2,304,906,450 1,886,367,251 2,079,159,144 Total 2,015,927,862 2,304,906,450 1,886,367,251 2,079,159,144
Non-life: Financial assets(1) 401,802 1,147,404 403,239 867,730 Total 401,802 1,147,404 403,239 867,730
Total 2,016,329,664 2,306,053,854 1,886,770,490 2,080,026,874
(1) Government bonds and treasury bills are measured at daily official prices announced by the Central Bank of Turkey as at December 31, 2019 and December 31, 2018; 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, 2019 (December 31, 2018), minimum guarantee amount of June 30, 2019 (June 30, 2018) is shown as necessary guarantee amount; since, minimum guarantee amount as at June 30, 2019 (June 30, 2018) is based on June 30, 2019 (June 30, 2018) calculations. As at December 31, 2019, TL 736,942,001 of government bonds (December 31, 2018: TL 845,307,241) and TL 1,066,939,535 of Eurobonds (December 31, 2018: TL 789,575,987) and TL 35,524,079 (December 31, 2018: TL 28,879,925) of investment funds and TL 466,648,239 of time deposits (December 31, 2018: TL 416,263,721) are provided as guarantee for the life and non-life branches. Anadolu Hayat Emeklilik 2019 Annual Report 193
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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, 2019(1) December 31, 2018 Number of Mathematical Number of Mathematical policies reserves policies reserves Additions during the period 1,668,026 637,201,100 1,503,140 341,029,394 Disposals during the period (1,993,837) (300,666,810) (1,718,622) (185,156,912) Outstanding 1,993,002 2,224,222,714 2,318,813 1,887,688,424
(1) The above table includes 65 of reactivated life insurance policies (December 31, 2018: 51 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 11,377,946 (December 31, 2018: TL (144,313,308)) is recognised under the life mathematical provisions. TL 3,803,491 (December 31, 2018: TL 3,094,026) 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, 2019 December 31, 2018
Guarantees given to death by accident 5,675,509,354 4,889,562,426 Guarantees given to disability by accident 5,634,799,497 4,884,927,260 Total 11,310,308,851 9,774,489,686 194 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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, 2019 and December 31, 2018, individual pension investment funds founded by the Company and their unit prices are as follows: December 31, 2019 December 31, 2018 Unit price Unit price AH1 Bond Fund 0.072922 0.057288 AH2 Money Market Fund 0.063784 0.052456 AH3 First Debt Instruments Fund (*) 0.091578 0.073337 AH4 Second Debt Instruments Fund (*) 0.070777 0.060060 AH5 Equity Fund 0.136636 0.100702 AH6 Developed Countries Flexible Fund 0.082881 0.063178 AH8 Conservative Flexible Fund 0.066990 0.055648 AH9 Balanced Flexible Fund 0.079843 0.064691 AH0 Dynamic Flexible Fund 0.123183 0.097810 AGE Participation Standard Fund 0.022362 0.017696 ABE BRIC Plus Fund 0.043130 0.031534 AHC Private Sector Debt Instruments Fund 0.023845 0.019823 AHL Aggressive Flexible Fund 0.021917 0.016577 AET Contribution Fund 0.017270 0.012997 AER Participation Contribution Fund 0.020009 0.015610 AEA Gold Fund 0.030113 0.022839 AG1 Group Bond Fund 0.072445 0.056704 AG2 Group Debt Instruments Fund 0.068745 0.054639 AG3 Group Equity Fund 0.104996 0.075420 AG4 Group Conservative Fund 0.069646 0.057128 HS1 Debt Instruments Fund 0.047832 0.037350 AHB Second Equity Fund 0.064303 0.046566 ATK Standard Fund 0.036737 0.028648 ATE Isbank Subsidiaries Index Fund 0.050749 0.041520 AO1 Initial Fund 0.015730 0.013094 AO2 Initial Participation Fund 0.014905 0.012495 AJA Auto Enrolment Aggressive Fund 0.013362 0.009650 AJB Auto Enrolment Dynamic Fund 0.014140 0.010515 AJC Auto Enrolment Balanced Fund 0.014058 0.011087 AJF Auto Enrolment Conservative Fund 0.014011 0.011438 AJG Auto Enrolment Aggressive Participation Fund 0.014572 0.009471 AJH Auto Enrolment Dynamic Participation Fund 0.014797 0.010326 AFH Auto Enrolment Standard Fund 0.014112 0.011451 AFP Auto Enrolment Participation Standard Fund 0.014077 0.011605
(*) In accordance with the permission dated February 14, 2019 and numbered 2398 taken from the Capital Markets Board of Turkey, the name of the fund was changed on February 26, 2019. Anadolu Hayat Emeklilik 2019 Annual Report 195
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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, 2019 and December 31, 2018: December 31, 2019 December 31, 2018 Participation certificates in circulation Participation certificates in circulation Number Amount Number Amount AH1 Bond Fund 34,936,636,839.41 2,547,649,431.60 40,533,267,485.50 2,322,069,827.71 AH2 Money Market Fund 22,639,810,896.35 1,444,057,698.21 21,327,707,916.41 1,118,766,246.46 AH3 First Debt Instruments Fund (*) 20,275,861,042.58 1,856,822,802.56 16,591,145,296.56 1,216,744,822.61 AH4 Second Debt Instruments Fund (*) 9,698,733,885.85 686,447,288.24 10,052,648,933.72 603,762,094.96 AH5 Equity Fund 5,150,265,375.40 703,711,659.83 5,378,536,625.87 541,629,395.30 AH6 Developed Countries Flexible Fund 7,361,062,529.29 610,092,223.49 7,303,911,899.88 461,446,546.01 AH8 Conservative Flexible Fund 22,152,608,429.11 1,484,003,238.67 20,275,146,686.22 1,128,271,362.80 AH9 Balanced Flexible Fund 26,121,885,851.60 2,085,649,732.05 27,975,847,381.21 1,809,785,542.94 AH0 Dynamic Flexible Fund 8,739,340,240.74 1,076,538,148.88 9,632,969,756.81 942,200,771.91 AGE Participation Standard Fund 17,417,213,087.53 389,483,719.06 17,560,348,601.34 310,747,928.85 ABE BRIC Plus Fund 11,299,226,064.65 487,335,620.17 9,954,462,452.51 313,904,018.98 AHC Private Sector Debt Instruments Fund 32,109,416,047.33 765,649,025.65 25,387,278,568.77 503,252,023.07 AHL Aggressive Flexible Fund 4,803,238,660.76 105,272,581.73 4,183,028,705.62 69,342,066.85 AET Contribution Fund 191,522,883,592.49 3,307,600,199.64 172,046,496,849.71 2,236,088,319.56 AER Participation Contribution Fund 4,301,317,898.29 86,065,069.83 4,062,190,452.69 63,410,792.97 AEA Gold Fund 93,583,902,826.90 2,818,092,065.83 63,026,789,046.45 1,439,468,835.03 AG1 Group Bond Fund 2,958,668,122.98 214,340,712.17 3,514,838,687.57 199,305,412.94 AG2 Group Debt Instruments Fund 1,008,745,295.87 69,346,195.37 954,428,564.27 52,149,022.32 AG3 Group Equity Fund 858,680,286.81 90,157,995.39 924,780,873.61 69,746,973.49 AG4 Group Conservative Fund 2,510,909,308.27 174,874,789.68 2,643,813,957.95 151,035,803.79 HS1 Debt Instruments Fund 6,534,937,474.38 312,579,129.28 8,088,824,492.85 302,117,594.81 AHB Second Equity Fund 1,332,884,951.40 85,708,501.03 1,612,619,574.70 75,093,243.12 ATK Standard Fund 13,794,535,640.17 506,769,855.81 13,765,112,157.80 394,342,933.10 ATE Isbank Subsidiaries Index Fund 2,737,909,093.20 138,946,148.57 3,117,567,563.13 129,441,405.22 AO1 Initial Fund 5,830,253,262.45 91,709,883.82 5,725,401,825.47 74,968,411.50 AO2 Initial Participation Fund 4,223,968,854.87 62,958,255.78 4,128,566,576.47 51,586,439.37 AJA Auto Enrolment Aggressive Fund 490,222,276.59 6,550,350.06 200,589,573.14 1,935,689.38 AJB Auto Enrolment Dynamic Fund 571,516,674.96 8,081,245.78 256,637,276.80 2,698,540.97 AJC Auto Enrolment Balanced Fund 586,412,045.77 8,243,780.54 251,810,369.81 2,791,821.57 AJF Auto Enrolment Conservative Fund 258,836,981.50 3,626,564.95 119,769,742.17 1,369,926.31 AJG Auto Enrolment Aggressive Participation Fund 329,192,796.26 4,796,997.43 83,550,828.75 791,309.90 AJH Auto Enrolment Dynamic Participation Fund 364,499,906.95 5,393,505.12 118,289,991.32 1,221,462.45 AFH Auto Enrolment Standard Fund 27,193,202,791.80 383,750,477.80 16,795,913,491.82 192,330,005.40 AFP Auto Enrolment Participation Standard Fund 20,697,680,649.56 291,361,250.50 13,254,472,397.88 153,818,152.18 Total 22,913,666,144.52 16,937,634,743.83
(*) In accordance with the permission dated February 14, 2019 and numbered 2398 taken from the Capital Markets Board of Turkey, the name of the fund was changed on February 26, 2019. 196 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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, 2019 Additions during Left/cancellations 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
December 31, 2018 Additions during Left/cancellations the period during the period Existing Total amount Individuals 126,895 137,981 958,071 10,519,506,109 Group 465,531 202,150 961,424 4,118,629,522 Total 592,426 340,131 1,919,495 14,638,135,631
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 3,393,665,270 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, 2019 January 1 - December 31, 2018 Number of Gross Net Number of Gross contracts contributions contributions contracts contributions Net contributions Individuals 150,165 943,638,872 936,311,216 126,895 607,948,965 607,946,685 Group 809,880 266,537,808 266,534,121 465,531 248,924,874 248,924,517 Total 960,045 1.210.176.680 1,202,845,337 592,426 856,873,839 856,871,202
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 109,403,334 as state contribution. Anadolu Hayat Emeklilik 2019 Annual Report 197
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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, 2019 January 1 - December 31, 2018 Number of Gross Net Number of Gross Net contracts contributions contributions contracts contributions contributions Individuals 7,028 223,125,537 223,125,537 6,404 203,262,507 203,262,507 Group 29,713 33,238,710 33,238,710 76,020 38,417,809 38,417,809 Total 36,741 256,364,247 256,364,247 82,424 241,680,316 241,680,316
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, 2019 January 1 - December 31, 2018 Number of Gross Net Number of Gross Net contracts contributions contributions contracts contributions contributions Individuals ------Group ------Total ------
In addition to amounts above, the Company has transferred TL 37,900,260 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, 2019 January 1 - December 31, 2018 Number of Gross Net Number of Gross Net contracts contributions contributions contracts contributions contributions Individuals 160,507 2,467,865,313 2,365,914,190 137,981 2,206,238,790 2,119,286,823 Group 592,004 1,104,500,869 1,067,715,801 202,150 860,963,478 830,068,801 Total 752,511 3,572,366,182 3,433,629,991 340,131 3,067,202,268 2,949,355,624
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 511,617,786 as state contribution. 17.12 Distribution of new life insurance participants in terms of their numbers and first premium amounts for individuals and groups during the period: January 1 - December 31, 2019 January 1 - December 31, 2018 Number of First premium Number of First premium contracts amounts (TL) contracts amounts (TL) Individuals 135,106 219,189,645 114,598 104,690,910 Group 1,532,855 828,327,158 1,388,491 371,810,706 Total(1) 1,667,961 1,047,516,803 1,503,089 476,501,616
(1) 65 (January 1 - December 31, 2018: 51) of reactivated contracts are not included in the current period additions. 198 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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, 2019 January 1 - December 31, 2018 Number of Mathematical Number of Mathematical contracts reserves (TL) contracts reserves (TL) Individuals 108,919 192,935,375 143,654 97,964,834 Group 1,884,918 107,731,435 1,574,968 87,192,079 Total 1,993,837 300,666,810 1,718,622 185,156,913
17.14 Profit share distribution rate of life insurances as of December 31, 2019 and 2018 December 31, 2019 December 31, 2018 (%) (%) TL 15.32 11.37 USD 6.55 6.48 EURO 5.10 5.27 GBP 6.65 6.83
17.15 Information on insurance contract balances in the financial statements December 31, 2019 December 31, 2018
Reserve for unearned premiums, gross 57,623,982 43,702,801 Reserve for unearned premiums, ceded (Note 10) (3,851,643) (2,991,581) Reserves for unearned premiums, net 53,772,339 40,711,220
Provision for outstanding claims, gross 113,483,407 94,642,267 Provision for outstanding claims, ceded (Note 10) (6,709,653) (4,375,778) Provision for outstanding claims, net 106,773,754 90,266,489
Life mathematical provisions, gross 2,235,600,660 1,743,375,116 Life mathematical provisions, ceded (Note 10) (3,803,491) (3,094,026) Life mathematical provisions, net 2,231,797,169 1,740,281,090
Provision for bonus and discount, gross 757,405 1,343,392 Provision for bonus and discount, ceded (Note 10) (365,948) (933,239) Provision for bonus and discount, net 391,457 410,153
Reserve for unexpired risks, gross - 28,897 Reserve for unexpired risks, ceded (Note 10) - (10,387) Reserve for unexpired risks, net - 18,510
Equalisation provision, gross 40,448,292 28,528,254 Equalisation provision, ceded (Note 10) (1,014,229) (803,664) Equalisation provision, net 39,434,063 27,724,590
Total insurance technical provisions, net 2,432,168,782 1,899,412,052 Anadolu Hayat Emeklilik 2019 Annual Report 199
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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, 2019 and January 1 - December 31, 2018 are as follows: Mathematical provisions December 31, 2019 December 31, 2018 New policies issued 202,947,647 88,566,653 Activated from reductions 8,092,663 1,463,538 Activated from cancellations - 12,745 Contracts with increased capital 227,129,588 149,047,425 Total increase in the portfolio 438,169,898 239,090,361
Factors resulting from individual insurance policies which provide portfolio decrease through the change in mathematical provisions, gross for the periods January 1 - December 31, 2019 and January 1 - December 31, 2018 are as follows: Mathematical provisions December 31, 2019 December 31, 2018 Terminations and cancellations (-) (756,623) - Transformed to contracts without charge (-) (49,922,712) 1,473,671 Insurances had capital decrease (-) - - Withdrawals (-) (118,217,055) (65,979,373) Ceased with risk formed (-) (4,530,043) (3,133,980) Expirations (-) (19,508,942) (30,325,152) Total decrease in the portfolio (192,935,375) (97,964,834)
Factors resulting from group insurance policies which provide portfolio increase through the change in mathematical provisions, gross for the period January 1 - December 31, 2019 and January 1 - December 31, 2018 are as follows: Mathematical provisions December 31, 2019 December 31, 2018 New contracts 192,919,843 84,435,952 Activated from reductions - 17,265 Activated from cancellations - 41,230 Insurances had capital increase 6,111,359 17,444,587 Total increase in the portfolio 199,031,202 101,939,034
Factors resulting from group insurance policies which provide portfolio decrease through the change in mathematical provisions, gross for the periods January 1 - December 31, 2019 and January 1 - December 31, 2018 are as follows: Mathematical provisions December 31, 2019 December 31, 2018 Terminations and cancellations (-) (251,839) (1,949) Transformed to contracts without charge (-) (930,556) 33,236 Insurances had capital decrease (-) (41,025,736) (76,773,655) Withdrawals (-) (61,033,829) (5,177,723) Ceased with risk formed (-) (816,187) (167,587) Expirations (-) (3,673,288) (5,104,401) Total decrease in the portfolio (107,731,435) (87,192,079) 200 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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 2014 2015 2016 2017 2018 2019 Total Claim year 23,517,657 22,040,556 31,699,169 34,947,861 44,249,830 45,171,372 201,626,445 1 year later 10,486,387 13,955,576 14,179,090 14,090,104 19,189,071 - 71,900,228 2 years later 1,248,087 843,246 1,691,659 757,028 - - 4,540,020 3 years later 469,328 734,373 632,504 - - - 1,836,205 4 years later 255,552 496,783 - - - - 752,335 5 years later 112,032 - - - - - 112,032 Cumulative payments up to date 36,089,043 38,070,534 48,202,422 49,794,993 63,438,901 45,171,372 280,767,265 Payments for the period ended as of December 31, 2019(1) 112,032 496,783 632,504 757,028 19,189,071 45,171,372 66,358,790
(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 2019 Annual Report 201
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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, 2019 December 31, 2018
Payables from insurance operations 44,297,453 20,123,620 Cash deposited by insurance and reinsurance companies 4,479,832 4,054,710 Payables from pension activities 23,180,814,298 17,250,229,880 Net fund value of participants 22,913,666,145 16,937,634,744 Other 267,148,153 312,595,136 Other payables from main operations 4,142,951 3,535,202 Total payables from main operations 23,233,734,534 17,277,943,412
Due to shareholders 60,849 131,097 Due to personnel 33,290 54,560 Payables to other related parties 117 94 Total payables to related parties 94,256 185,751
Guarantees and deposits received 973,972 1,054,058 Other payables 31,821,827 18,193,250 Total other payables 32,795,799 19,247,308
Deferred commission income 327,171 238,053 Expense accruals 6,975,344 3,623,133 Other deferred income and expense accruals 683 6,661 Total deferred income and expense accruals 7,303,198 3,867,847
Total 23,273,927,787 17,301,244,318
20 Financial liabilities Financial liabilities as at the reporting date are given in the note 34 - Financial costs. 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. 202 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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, 2019 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, 2019 December 31, 2018
Difference in valuation of financial assets 16,882,920 8,851,752 Provision for employee termination benefits and other wages (37,316,074) (30,879,050) Provision for claims (888,879) (834,333) Equalisation reserves / bonus and discount provision (43,354,732) (28,134,743) The difference arising from revaluation of investment properties 67,980,279 64,053,149 Differences in depreciation methods on tangible and intangible assets between tax regulations and the Reporting Standards 14,395,577 16,447,444 Provision for unused vacation pay liability (10,848,853) (8,852,358) Total 6,850,238 20,651,861
Deferred tax (assets) / liabilities: December 31, 2019 December 31, 2018
Difference in valuation of financial assets 3,380,208 1,745,444 Provision for employee termination benefits and other wages (7,800,038) (6,457,120) Provision for claim (195,553) (183,553) Equalisation reserves / bonus and discount provision (8,670,946) (5,626,949) The difference arising from revaluation of investment properties 14,254,532 13,402,701 Differences in depreciation methods on tangible and intangible assets between tax regulations and the Reporting Standards 2,591,646 3,129,689 Provision for unused vacation pay liability (2,386,748) (1,947,519) Total 1,173,101 4,062,693
Movement of deferred tax assets / liabilities for the year ended as of December 31, 2019 and December 31, 2018 are given below: Movement of deferred tax (assets) / liabilities: December 31, 2019 December 31, 2018
Opening balance at January 1 4,062,693 9,057,907 Recognised in profit or loss (20,236,379) 9,653,804 Recognised in equity 17,346,787 (14,649,018) Closing balance 1,173,101 4,062,693
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 6,017.60 as at December 31, 2019 (December 31, 2018: TL 5,434.42). Anadolu Hayat Emeklilik 2019 Annual Report 203
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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, 2019, 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 7.20% and a discount rate of 11.70% , resulting in a real discount rate of 4.20% (December 31, 2018: 11.30%, 16%, 4.22% respectively). As at 31 December 2019 the Company has actuarial gain or loss difference in the calculation of employee termination benefit amounting to TL 2,573,778 (December 31, 2018: TL 3,553,816). Movement of provision for employee termination benefits during the period is presented below: December 31, 2019 December 31, 2018 Provision as at January 1 18,079,050 13,724,571 Interest cost 2,892,648 1,550,877 Service cost 2,040,198 1,651,955 Payments made during the year (3,569,600) (2,402,169) Actuarial gain and losses 2,573,778 3,553,816 Provision at the of the period/year 22,016,074 18,079,050
23 Other liabilities and provisions As at December 31, 2019 and December 31, 2018; the details of the provisions for other risks are as follows: December 31, 2019 December 31, 2018 Provision for unused vacation pay liability 10,848,853 8,852,358 Dividend to personnel and salary provision 15,300,000 12,800,000 Provision for commissions to sales personnel 2,000,000 1,400,000 Provision for litigations 755,785 737,481 Provision for commissions and expenses 133,095 96,851 Provisions for costs 29,037,733 23,886,690 Provision for employee termination benefits 22,016,074 18,079,050 Total provisions for other risks 51,053,807 41,965,740
24 Net insurance premium revenue December 31, 2019 December 31, 2018
Non-life 542,357 576,224 Life 1,206,792,924 620,538,760 Total 1,207,335,281 621,114,984 204 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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, 2019 and 2018 received from individual pension, life and non-life branches in accordance with TAS 18 are as follows: December 31, 2019 December 31, 2018
Fund management income 304,264,809 256,416,861 Administrative cost deductions 58,862,051 46,359,487 Entrance fee 49,513,171 53,889,365 Administrative cost deduction in the form of cessation 14,661,983 12,032,419 Other technical income 418,018 487,533 Total 427,720,032 369,185,665
26 Investment income January 1 - January 1 - December 31, 2018 December 31, 2017 Financial assets held-for-trading: Valuation gain 20,363,054 (13,901,811) Gain on sale 12,825,144 (3,839,161) Interest income - - Cash dividend income 2,485 197,174 Financial assets available- for-sale: Interest income 120,358,091 127,239,888 Valuation gain 163,765,853 257,951,200 Gain on sale 1,319,299 390,642 Cash dividend income 553,633 6,359,855 Income from associates: 4,272,000 4,187,774 Investment properties: Rent income 858,473 817,993 Valuation gain 7,625,114 5,018,451 Other income(1): 127,122,539 118,233,586 Total(2) 459,065,685 502,655,591
(1) Other income includes interest income from time deposits, income from derivative transactions, foreign exchange gains and etc. (2) TL 167.325.031 (December 31, 2018: TL 133.741.765) of investment income obtained from the Company’s own portfolio and TL 291.740.654 (December 31, 2018: TL 368.913.826) of investment income obtained from policyholders’ portfolio. Anadolu Hayat Emeklilik 2019 Annual Report 205
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
27 Net income accrual on financial assets Net income accrual from the Company’s own portfolio is as follows: January 1 - January 1 - December 31, 2019 December 31, 2018 Available-for-sale financial assets: Fair value differences recognized in equity 51,242,337 (65.005.103) Fair value differences recognized in profit / loss 696,128 12.650.872 Total 51,938,465 (52.354.231)
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, 2019 is TL 33,190,683 (December 31, 2018: TL 17,543,798 net loss). 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, 2019 and 2018, the details of operating expenses are as follows: December 31, 2019 December 31, 2018
Production commission expenses (285,314,203) (186,601,830) Employee benefit expenses (167,464,628) (135,947,830) Administration expenses (57,938,672) (62,024,145) Marketing and sales expenses (32,154,702) (28,678,470) Outsourced benefits and services (32,040,725) (28,890,634) Reinsurance commission income 5,709,800 5,113,178 Other expenses (4,130,214) (3,017,219) Total (573,333,344) (440,046,950)
(*) 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) 206 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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, 2019 December 31, 2018
Wages and salaries 167,464,628 135,947,830 Employee termination benefits 1,363,246 800,663 Provision for unused vacation 1,996,495 2,415,133 Total 170,824,369 139,163,626
34 Financial costs As at December 31, 2019, TL 10,019,794 interest expense and TL 8,689,412 amortisation expense 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 (January 1 - December 31, 2018: None), As at December 31, 2019 discounted reimbursement plan for operating leases of the Company is as follows (December 31, 2018: None): Operating Leases Reimbursement Plan -TL December 31, 2019
Up to 1 Year 4,999,036 Up to 2 Years 3,924,527 Up to 3 Years 3,650,440 Up to 4 Years 3,931,015 Up to 5 Years 4,801,442 More than 5 years 32,462,938 Total 53,769,398 Anadolu Hayat Emeklilik 2019 Annual Report 207
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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, 2019 December 31, 2018
Corporate tax liabilities: Corporate tax provision 119,305,000 68,607,000 Less: Corporation taxes paid in advances during the period (87,456,742) (48,580,868) Total 31,848,258 20,026,132
Total tax expense recognised in profit or loss December 31, 2019 December 31, 2018
Current tax expense 119,305,000 68,607,000 Deferred tax expense / (income) (20,236,379) 9,653,804 Total 99,068,621 78,260,804
Total tax expense recognised in equity December 31, 2019 December 31, 2018
Change in fair value of available for sale financial assets and owner occupied properties (1,742,999) 16,118,544 Actuarial gain and losses 2,385,558 1,870,802 Total deferred tax expense recognised in equity 642,559 17,989,346
Reconciliation of the Company’s taxation for the year period ended as of December 31, 2019 and 2018 are as follows: December 31,2019 December 31,2018 Profit before tax 456,603,446 Tax rate (%) 331,861,055 Tax rate (%) Taxes on income per statutory tax rate (100,452,758) (22.00) (73,009,432) (22.00) Disallowable expenses (39,017,365) (8.55) (22,747,907) (6.85) Effect of allowances 40,401,502 8.85 17,496,535 5.27 Total tax expense recognised in profit or loss (99,068,621) (21.70) (78,260,804) (23.58) 208 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
36 Net foreign exchange gains December 31, 2019 December 31, 2018
Foreign exchange gains 10,053,255 16,990,379 Foreign exchange losses (5,563,894) (8,907,743) Total 4,489,361 8,082,636
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, 2019 December 31, 2018 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 357,534,825 253,600,251 Earnings per share (for 100 shares) 0.83148 0.58977
38 Dividends per share The Company’s dividend distribution in 2019 from the profit of 2018 is presented below. Cash dividend corresponding to a share Total cash dividend having TL 1 of nominal value Group amount (TL) Amount (TL) Rate (%) A 256,976,74 0.2569768 25.69768 Gross B 110,243,023,26 0.2569768 25.69768 Total 110,500,000,00
The Company’s dividend distribution in 2019 from the profit of 2018 is TL 130,000,000. Additionally, TL 6,125,454 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, 2019, there are 419 ongoing law suit filed against the Company and total amount of these law suits are TL 10,115,691, TL 15,655,933 of provision (December 31, 2018: TL 14,061,439) 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 83 ongoing law suits prosecuted by the Company against the third parties that have amounted TL 7,210,131, Subsequent to the reporting period, there is no expected amount of law suits to be prosecuted against the Company, Anadolu Hayat Emeklilik 2019 Annual Report 209
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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, 2019 December 31, 2018
Guarantees and commitments 3.343.986 2.861.406 Guarantees and commitments 3.343.986 2.861.406
The Company does not have finance lease liabilities as at the reporting period (December 31, 2018: None). 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): Financial Independent Carrying Participation Reporting Profit before Net profit of statements auditor’s amount rate (%) period income tax the period base opinion İş Portföy December 31, Yönetimi AŞ 12,762,193 20.0 2019 47,583,170 37,144,717 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 210 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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, 2019 and December 31, 2018 are as follows: December 31, 2019 December 31, 2018
Türkiye İş Bankası AŞ - receivables from credit card collections 170,623,012 188,935,962 Cash and cash equivalents 170,623,012 188,935,962
Türkiye İş Bankası AŞ - bank deposits 217,710,555 137,493,170 Cash at banks 217,710,555 137,493,170
Anadolu Anonim Türk Sigorta Şirketi - premium receivable 68 25 Receivables from main operations 68 25
Türkiye İş Bankası AŞ - commission payables 32,469,117 11,671,942 Milli Reasürans TAŞ - premium payables 1,289,981 543,781 Payable from main operations 33,759,098 12,215,723
Türkiye İş Bankası AŞ, - settlement and custody commission 33 - Türkiye İş Bankası AŞ, - operating leases payables 3,346,088 - Anadolu Anonim Türk Sigorta Şirketi - operating leases payables 1,296,000 - Anadolu Anonim Türk Sigorta Şirketi - premium payables 60,849 137,069 Payables to shareholders 4,702,970 137,069
İş Portföy Yönetimi A,Ş, 3,989,219 2,597,677 İş Merkezleri Yönetim ve İşletim A,Ş, 285,388 306,778 İş Gayrimenkul Yatırım Ortaklığı A,Ş, 43,583 128,938 İş Gayrimenkul Yatırım Ortaklığı A,Ş, - operating leases payables 66,505,809 - İş Portföy Yönetimi A,Ş, Birinci G,menkul Yat,Fonu - operating leases payables 23,348,191 - İş-Net Elektronik Bilgi Üretim Dağıtım Ticaret ve İletişim A,Ş, 92,793 32,068 Erişim Müşteri Hizmetleri A,Ş, 1,468,694 1,366,737 Softtech Yazılım Teknoloji Araştırma Geliştirme ve Pazarlama Ticaret A,Ş, - 3,815 Other payables 95,733,677 4,436,013 Anadolu Hayat Emeklilik 2019 Annual Report 211
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (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 32,523,391 individual retirement employer contributions (December 31, 2018: TL 27,215,781) have been collected from related parties, in amount of TL 714,119 life insurance employer premium was accrual (December 31, 2018: TL 488,432). The details of revenues and expenses for the year ended as of December 31, 2019 and 2018 stems from related parties are as follows December 31, 2019 December 31, 2018
Milli Reasürans TAŞ - premiums written, ceded 2,267,611 2,062,750 Premiums written, ceded 2,267,611 2,062,750
Milli Reasürans TAŞ - commission income from reinsurers 238,523 428,043 Commission income from reinsurers 238,523 428,043
Türkiye İş Bankası AŞ - interest income from deposits 15,097,349 26,827,071 Türkiye İş Bankası AŞ - rent income 5,978 13,532 Investment income 15,103,327 26,840,603
İş Portföy Yönetimi AŞ - investment consultancy fee 2,129,310 1,578,429 İş Yatırım Menkul Değerler A,Ş, - settlement and custody expense 617 161 Türkiye İş Bankası AŞ - settlement and custody expense 17,158 13,127 Investment expense 2,147,085 1,591,717
Türkiye İş Bankası AŞ - commission of policy production 216,000,441 129,724,138 İş Portföy Yönetimi AŞ - portfolio management fee of pension funds 16,373,564 11,721,046 İş Merkezleri Yönetim ve İşletim A,Ş, - building administrative expense 5,039,270 4,761,520 İş Gayrimenkul Yatırım Ortaklığı AŞ - operating leases interest expense (TFRS 16 affect) 5,848,910 - İş Gayrimenkul Yatırım Ortaklığı A,Ş, - other expenses(*) 894,652 7,165,701 İş-Net Elektronik Bilgi Üretim Dağ, Tic, ve İletişim A,Ş, - communication expense 5,272,466 1,549,714 Erişim Müşteri Hizmetleri A,Ş, - call center service expense 18,073,491 15,536,857 Softtech Yazılım Teknoloji Araştırma Geliştirme ve Pazarlama Ticaret A,Ş - software support expense 49,251 51,273 Türkiye İş Bankası AŞ - commission of premium collection and banking services 1,811,339 1,156,304 Türkiye Iş Bankası AŞ - fund operation service expense 2,694,073 2,244,531 Türkiye Iş Bankası AŞ - operating leases interest expense (TFRS 16 affect) 284,852 - Türkiye Iş Bankası AŞ - data storage expenses 387,161 - Türkiye Iş Bankası AŞ - other expenses (*) 7,823 291,741 İş Portföy Yönetimi A,Ş, Birinci Gayrimenkul Yatırım Fonu - operating leases interest expense (TFRS 16 affect) 2,202,493 - İş Portföy Yönetimi A,Ş, Birinci Gayrimenkul Yatırım Fonu - other expenses (*) - 371,679 Anadolu Anonim Türk Sigorta Şirketi - premium paid 4,470,899 4,015,374 Anadolu Anonim Türk Sigorta Şirketi - operating leases interest expense 212,104 - Anadolu Anonim Türk Sigorta Şirketi - other expenses (*) 87,066 283,995 Other expenses 279,709,855 178,873,873
(*) For the period ended December 31, 2018, rental expenses are included in other expenses. 212 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Unconsolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
46 Events after the reporting period Events after the reporting period are disclosed in note 1.10 - Events after the reporting period. 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, 2019 December 31, 2018
Securities reconciliation account 37,109,651 49,370,276 Other 1,320,512 993,902 Total 38,430,163 50,364,178
Short-term liabilities ( Other miscellaneous payables) December 31, 2019 December 31, 2018
Payable to suppliers 21,921,973 10,256,488 Suspense accounts 9,899,756 7,936,681 Securities reconciliation account 98 81 Total 31,821,827 18,193,250
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 year ended as of December 31, 2019 and 2018, details of discount and provision expenses are as follows: December 31, 2019 December 31, 2018
Unused vacation pay liability (1,996,495) (2,415,133) Provisions no longer required 2,526,406 2,651,078 Provision for employee termination benefits (1,363,246) (800,663) Other provision expenses (5,618,303) (3,090,409) Provision expenses (6,451,638) (3,655,127)
December 31, 2019 December 31, 2018
Rediscount interest expense(1) 100,794 75,330 Total rediscount 100,794 75,330
(1) Rediscount interest income/expense arising from selling the shares of AVEA İletişim Hizmetleri A.Ş. by instalment. Anadolu Hayat Emeklilik 2019 Annual Report 213
Anadolu Hayat Emeklilik Anonim Şirketi 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. Profit for Net Profit Financial Independent Carrying Participation Reporting the Period for the Statements Auditor’s Name Value Rate (%) Period before Tax Period Base Opinion İş Portföy 12,762,193 20 31 December 47,583,170 37,144,717 SPK XI/29 Unqualified Yönetimi A.Ş. 2019 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 24,979 Financial Income 167,325 170,482 Pretax Profit 476,840 479,997 Shareholders’ Equity 1,273,673 1,285,889 Total Assets 27,134,778 27,146,995 214 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi December 31, 2019 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 2019 Annual Report 215
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
(Convenience translation of a report and consolidated financial statements originally issued in Turkish) 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, 2019, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at December 31, 2019, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with the prevailing accounting principles and standards as per the insurance legislation and Turkish 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. 216 Anadolu Hayat Emeklilik 2019 Annual Report
Independent Auditor’s Report
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, 2019, the Company has insurance The audit procedures regarding the insurance contract liabilities of TL 2.432.168.782 representing 9% of the liabilities were performed with the use of an actuarial Company’s total liabilities. The measurement of insurance auditor, who is part of our team, and together with contract liabilities involves judgement over uncertain manually calculated components of insurance contract future outcomes, mainly the ultimate total settlement liabilities, audit evidence about key controls over calculation value of long-term liabilities, including those for guarantees methods used by Company’s actuaries were obtained; provided to policyholders. reconciliation of input data related to the Company’s insurance contract liabilities with system and other source Liabilities related to life insurance group comprise of data was tested; Tariffs and profit sharing reserves which actuarial mathematical reserves which are calculated are components of Life group insurance contract liabilities according to formulas and principles given in approved were tested on calculation data by using sampling method technical basis of tariffs and profit sharing reserves which and compliance of the explanatory information regarding consist of profit sharing calculated in previous years and a to insurance contract liabilities with the accounting certain percentage of current year’s income, determined and reporting regulations in force due to the insurance in the approved profit sharing tariffs, including other legislation was 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.
Anadolu Hayat Emeklilik 2019 Annual Report 217
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.
218 Anadolu Hayat Emeklilik 2019 Annual Report
Independent Auditor’s Report
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 30, 2020. 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 2019 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 30, 2020 Istanbul, Turkey Anadolu Hayat Emeklilik 2019 Annual Report 219
Anadolu Hayat Emeklilik Anonim Şirketi Consolidated Financial Statements As at and for the Year Ended December 31, 2019
We confirm that the consolidated financial statements and related disclosures and footnotes as at December 31, 2019 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 30, 2020
Yılmaz Ertürk Orhan Bozkurt N. Cem Özcan Aslıhan Duymaz Member of the Vice Chief Accounting Actuary Board of Directors / Executive Officer Manager (Registration Number:61) Chief Executive Officer 220 Anadolu Hayat Emeklilik 2019 Annual Report
Contents
PAGE CONSOLIDATED BALANCE SHEET 222 CONSOLIDATED STATEMENT OF INCOME 227 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 230 CONSOLIDATED STATEMENT OF CASH FLOWS 232 CONSOLIDATED STATEMENT OF PROFIT DISTRIBUTION 233 CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS 234-310 NOTE 1 GENERAL INFORMATION 234 NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 236 NOTE 3 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS IN APPLYING ACCOUNTING POLICIES 255 NOTE 4 MANAGEMENT OF INSURANCE AND FINANCIAL RISK 255 NOTE 5 SEGMENT REPORTING 275 NOTE 6 TANGIBLE ASSETS 276 NOTE 7 INVESTMENT PROPERTIES 277 NOTE 8 INTANGIBLE ASSETS 278 NOTE 9 INVESTMENTS IN ASSOCIATES 279 NOTE 10 REINSURANCE ASSETS AND LIABILITIES 279 NOTE 11 FINANCIAL ASSETS 280 NOTE 12 LOANS AND RECEIVABLES 286 NOTE 13 DERIVATIVE FINANCIAL INSTRUMENTS 287 NOTE 14 CASH AND CASH EQUIVALENTS 287 NOTE 15 EQUITY 288 NOTE 16 OTHER RESERVES AND EQUITY COMPONENT OF DPF 290 NOTE 17 INSURANCE CONTRACT LIABILITIES AND REINSURANCE ASSETS 290 NOTE 18 INVESTMENT CONTRACTS 298 NOTE 19 TRADE AND OTHER PAYABLES AND DEFERRED INCOME 299 NOTE 20 FINANCIAL LIABILITIES 299 NOTE 21 DEFERRED TAX 299 NOTE 22 RETIREMENT BENEFIT OBLIGATIONS 300 NOTE 23 OTHER LIABILITIES AND PROVISIONS 301 NOTE 24 NET INSURANCE PREMIUM REVENUE 301 NOTE 25 FEE REVENUES 302 NOTE 26 INVESTMENT INCOME 302 NOTE 27 NET INCOME ACCRUAL ON FINANCIAL ASSETS 303 NOTE 28 ASSETS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS 303 NOTE 29 INSURANCE RIGHTS AND CLAIMS 303 NOTE 30 INVESTMENT CONTRACT BENEFITS 303 NOTE 31 OTHER EXPENSES 303 Anadolu Hayat Emeklilik 2019 Annual Report 221
PAGE NOTE 32 OPERATING EXPENSES 303 NOTE 33 EMPLOYEE BENEFIT EXPENSES 304 NOTE 34 FINANCIAL COSTS 304 NOTE 35 INCOME TAX EXPENSE 305 NOTE 36 NET FOREIGN EXCHANGE GAINS 306 NOTE 37 EARNINGS PER SHARE 306 NOTE 38 DIVIDENDS PER SHARE 306 NOTE 39 CASH GENERATED FROM OPERATIONS 306 NOTE 40 CONVERTIBLE BONDS 306 NOTE 41 REDEEMABLE PREFERENCE SHARES 306 NOTE 42 RISKS 306 NOTE 43 COMMITMENTS 307 NOTE 44 BUSINESS COMBINATIONS 307 NOTE 45 RELATED PARTY TRANSACTIONS 307 NOTE 46 EVENTS AFTER THE REPORTING PERIOD 310 NOTE 47 OTHERS 310 222 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Consolidated Balance Sheet As at December 31, 2019 (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, 2019 December 31, 2018 A- Cash and Cash Equivalents 14 656,922,735 517,657,837 1- Cash 14 219 1,002 2- Cheques Received - - 3- Banks 14 477,786,945 320,570,433 4- Cheques Given and Payment Orders 14 - (16) 5- Bank Guaranteed Credit Card Receivables with Maturities Less Than Three Months 14 179,135,571 197,086,418 6- Other Cash and Cash Equivalents - - B- Financial Assets and Financial Investments with Risks on Policyholders 11 3,064,282,042 2,334,496,432 1- Available-for-Sale Financial Assets 11 886,943,685 573,585,026 2- Held to Maturity Investments - - 3- Financial Assets Held for Trading 11 191,398,602 55,437,380 4- Loans and Receivables 11 52,714,137 47,231,715 5- Provision for Loans and Receivables - - 6- Financial Investments with Risks on Saving Life Policyholders 11 1,937,750,426 1,662,767,119 7- Company’s Own Equity Shares - - 8- Diminution in Value of Financial Investments 11 (4,524,808) (4,524,808) C- Receivables from Main Operations 12 23,051,046,800 17,057,549,365 1- Receivables from Insurance Operations 12 64,328,597 55,964,785 2- Provision for Receivables from Insurance Operations 12 (5,002,574) (2,574) 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 40,071,706 34,863,790 7- Provision for Loans to the Policyholders - - 8- Receivables from Individual Pension Operations 12 22,951,649,071 16,966,723,364 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 12,549 1- Due from Shareholders - - 2- Due from Associates - - 3- Due from Subsidiaries - - 4- Due from Joint Ventures - - 5- Due from Personnel 12 12,413 12,549 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 38,467,083 50,363,825 1- Finance Lease Receivables - - 2- Unearned Finance Lease Interest Income - - 3- Deposits and Guarantees Given 160,731 100,441 4- Other Miscellaneous Receivables 47 38,430,163 50,364,178 5- Rediscount on Other Miscellaneous Receivables (123,811) (100,794) 6- Other Doubtful Receivables - - 7- Provision for Other Doubtful Receivables - - F- Prepaid Expenses and Income Accruals 4.2 49,478,060 36,252,496 1- Deferred Commission Expense 32,810,452 23,411,109 2- Accrued Interest and Rent Income 187,774 94,148 3- Income Accruals - - 4- Other Prepaid Expenses 16,479,834 12,747,239 G- Other Current Assets 4.2 17,048 22,128 1- Stocks to be Used in the Following Months - - 2- Prepaid Taxes and Funds 8,444 8,303 3- Deferred Tax Assets - - 4- Job Advances 8,604 13,825 5- Advances Given to Personnel - - 6- Inventory Count Differences - - 7- Other Miscellaneous Current Assets - - 8- Provision for Other Current Assets - - I- Total Current Assets 26,860,226,181 19,996,354,632
The accompanying notes are an integral part of these consolidated financial statements. Anadolu Hayat Emeklilik 2019 Annual Report 223
Anadolu Hayat Emeklilik Anonim Şirketi Consolidated Balance Sheet As at December 31, 2019 (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, 2019 December 31, 2018 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 - 231,161 1- Finance Lease Receivables - - 2- Unearned Finance Lease Interest Income - - 3- Deposits and Guarantees Given - - 4- Other Miscellaneous Receivables - 354,972 5- Rediscount on Other Miscellaneous Receivables - (123,811) 6- Other Doubtful Receivables - - 7- Provision for Other Doubtful Receivables - - D- Financial Assets 9,45.d 24,978,982 21,225,636 1- Investments in Equity Shares - - 2- Investments in Associates 9,45.d 24,978,982 21,225,636 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 242,224,002 183,963,677 1- Investment Properties 7 153,068,758 145,729,755 2- Impairment for Investment Properties - - 3- Owner Occupied Property 6 4,700,000 4,700,000 4- Machinery and Equipment 6 54,127,336 45,818,086 5- Furniture and Fixtures 6 5,943,075 5,807,620 6- Motor Vehicles 6 592,474 502,597 7- Other Tangible Assets (Including Leasehold Improvements) 6 14,111,319 12,371,453 8- Tangible Assets Acquired Through Finance Leases 6 59,463,348 533,750 9- Accumulated Depreciation 6 (49,782,308) (31,499,584) 10- Advances Paid for Tangible Assets (Including Construction in Progress) - - F- Intangible Assets 8 16,840,377 27,541,661 1- Rights 8 90,121,930 83,364,583 2- Goodwill - - 3- Pre-operating Expenses - - 4- Research and Development Costs - - 5- Other Intangible Assets - - 6- Accumulated Amortisation (Depreciation) 8 (73,281,553) (55,822,922) 7- Advances Paid for Intangible Assets - - G- Prepaid Expenses and Income Accruals 2,725,005 661,369 1- Deferred Commission Expense - - 2- Income Accruals - - 3- Other Prepaid Expenses and Income Accruals 2,725,005 661,369 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 21 - - 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 286,768,366 233,623,504 TOTAL ASSETS 27,146,994,547 20,229,978,136
The accompanying notes are an integral part of these consolidated financial statements. 224 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Consolidated Balance Sheet As at December 31, 2019 (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, 2019 December 31, 2018 A- Financial Liabilities 20 4,999,036 - 1- Borrowings from Financial Institutions - - 2- Finance Lease Liabilities 20 14,952,011 - 3- Deferred Leasing Costs 20 (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 23,233,734,534 17,277,943,412 1- Payables Arising from Insurance Operations 19 44,297,453 20,123,620 2- Payables Arising from Reinsurance Operations - - 3- Cash Deposited by Insurance and Reinsurance Companies 19,10 4,479,832 4,054,710 4- Payables Arising from Individual Pension Business 19 23,180,814,298 17,250,229,880 5- Payables Arising from Other Main Operations 4,142,951 3,535,202 6- Discount on Payables from Other Main Operations - - C- Due to Related Parties 19 94,256 185,751 1- Due to Shareholders 19,45 60,849 131,097 2- Due to Associates - - 3- Due to Subsidiaries - - 4- Due to Joint Ventures - - 5- Due to Personnel 19 33,290 54,560 6- Due to Other Related Parties 19 117 94 D- Other Payables 19 32,795,799 19,247,308 1- Deposits and Guarantees Received 19 973,972 1,054,058 2- Medical Treatment Payables to Social Security Institution - - 3- Other Miscellaneous Payables 19,47 31,821,827 18,193,250 4- Discount on Other Miscellaneous Payables - - E- Insurance Technical Provisions 17 2,432,168,782 1,899,412,052 1- Reserve for Unearned Premiums - Net 17 53,772,339 40,711,220 2- Reserve for Unexpired Risks - Net - 18,510 3- Mathematical Provisions - Net 17 2,231,797,169 1,740,281,090 4- Provision for Outstanding Claims - Net 17 106,773,754 90,266,489 5- Provision for Bonus and Discounts - Net 391,457 410,153 6- Other Technical Provisions - Net 17 39,434,063 27,724,590 F- Provisions for Taxes and Other Similar Obligations 49,012,353 34,212,244 1- Taxes and Funds Payable 13,874,687 11,559,320 2- Social Security Premiums Payable 3,289,009 2,626,675 3- Overdue, Deferred or By Instalment Taxes and Other Liabilities - - 4- Other Taxes and Similar Payables 399 117 5- Corporate Tax Payable 35 119,305,000 68,607,000 6- Prepaid Taxes and Other Liabilities Regarding Current Period Income 35 (87,456,742) (48,580,868) 7- Provisions for Other Taxes and Similar Liabilities - - G- Provisions for Other Risks 23 29,037,733 23,886,690 1- Provision for Employee Termination Benefits - - 2- Provision for Pension Fund Deficits - - 3- Provisions for Costs 23 29,037,733 23,886,690 H- Deferred Income and Expense Accruals 19 7,303,198 3,867,847 1- Deferred Commission Income 19 327,171 238,053 2- Expense Accruals 19 6,975,344 3,623,133 3- Other Deferred Income and Expense Accruals 19 683 6,661 I- Other Short-Term Liabilities - - 1- Deferred Tax Liabilities - - 2- Inventory Count Differences - - 3- Other Various Short-Term Liabilities - - III - Total Short-Term Liabilities 25,789,145,691 19,258,755,304
The accompanying notes are an integral part of these consolidated financial statements. Anadolu Hayat Emeklilik 2019 Annual Report 225
Anadolu Hayat Emeklilik Anonim Şirketi Consolidated Balance Sheet As at December 31, 2019 (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, 2019 December 31, 2018 A- Financial Liabilities 20 - 1- Borrowings from Financial Institutions - - 2- Finance Lease Liabilities 20 95,524,721 - 3- Deferred Leasing Costs 20 (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 22,016,074 18,079,050 1- Provision for Employee Termination Benefits 22,23 22,016,074 18,079,050 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 1,173,101 4,062,693 1- Deferred Tax Liabilities 21 1,173,101 4,062,693 2- Other Long-Term Liabilities - - IV- Total Long-Term Liabilities 71,959,537 22,141,743
The accompanying notes are an integral part of these consolidated financial statements. 226 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Consolidated Balance Sheet As at December 31, 2019 (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, 2019 December 31, 2018 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 4,190,243 4,190,243 1- Share Premiums - - 2- Cancellation Profits of Equity Shares - - 3- Profit on Assets Sale That Will Be Transferred to Capital 4,190,243 4,190,243 4- Currency Translation Adjustments - - 5- Other Capital Reserves - - C- Profit Reserves 391,559,270 161,480,354 1- Legal Reserves 15 173,916,965 156,456,501 2- Statutory Reserves 15 52,676,523 32,870,889 3- Extraordinary Reserves 15 120,044,612 33,273,713 4- Special Funds - - 5- Revaluation of Financial Assets 15,16 51,636,244 (56,447,893) 6- Other Profit Reserves 15 (6,715,074) (4,672,856) D- Retained Earnings 99,448,038 98,747,310 1- Retained Earnings 99,448,038 98,747,310 E- Accumulated Losses - - 1- Accumulated Losses - - F- Net Profit for the Period 360,691,768 254,663,182 1- Net Profit for the Period 338,595,846 254,663,182 2- Net Loss for the Period - 3- Profit not Available for Distribution 22,095,922 - V- Total Equity 1,285,889,319 949,081,089 TOTAL EQUITY AND LIABILITIES 27,146,994,547 20,229,978,136
The accompanying notes are an integral part of these consolidated financial statements. Anadolu Hayat Emeklilik 2019 Annual Report 227
Anadolu Hayat Emeklilik Anonim Şirketi Consolidated Statement of Income For the Year Ended December 31, 2019 (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, 2019 December 31, 2018 A- Non-Life Technical Income 5 548,127 603,996 1- Earned Premiums (Net of Reinsurer Share) 548,127 603,996 1.1- Written Premiums (Net of Reinsurer Share) 24 542,357 576,224 1.1.1- Written Premiums, gross 1,052,251 982,911 1.1.2- Written Premiums, ceded 10 (509,894) (406,687) 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) (12,740) 46,282 1.2.1- Reserve for Unearned Premiums, gross (36,012) (13,527) 1.2.2- Reserve for Unearned Premiums, ceded 10 23,272 59,809 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 (18,510) 1.3.1- Reserve for Unexpired Risks, gross 28,897 (28,897) 1.3.2- Reserve for Unexpired Risks, ceded (10,387) 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 (1,573,382) (1,680,397) 1- Incurred Losses (Net of Reinsurer Share) (346,843) (644,295) 1.1- Claims Paid (Net of Reinsurer Share) (232,322) (463,109) 1.1.1- Claims Paid, gross (262,148) (492,360) 1.1.2- Claims Paid, ceded 10 29,826 29,251 1.2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward) (114,521) (181,186) 1.2.1- Change in Provisions for Outstanding Claims, gross (132,037) (196,574) 1.2.2- Change in Provisions for Outstanding Claims, ceded 10 17,516 15,388 2- Change in Provision for Bonus and Discounts (Net of Reinsurer and Less the Amounts Carried Forward) (96) 96 2.1- Provision for Bonus and Discounts, gross 4,039 (2,811) 2.2- Provision for Bonus and Discounts, ceded (4,135) 2,907 3- Change in Other Technical Reserves (Net of Reinsurer Share and Less the Amounts Carried Forward) (10,240) (12,801) 4- Operating Expenses 32 (1,216,203) (1,023,397) 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) (1,025,255) (1,076,401) D- Life Technical Income 5 1,493,819,611 1,004,266,003 1- Earned Premiums (Net of Reinsurer Share) 1,193,744,545 625,547,838 1.1- Written Premiums (Net of Reinsurer Share) 24 1,206,792,924 620,538,760 1.1.1- Written Premiums. gross 1,229,029,128 639,213,082 1.1.2- Written Premiums. ceded 10 (22,236,204) (18,674,322) 1.2- Change in Reserve for Unearned Premiums (Net of Reinsurer Shares and Less the Amounts Carried Forward) (13,048,379) 5,009,078 1.2.1- Reserve for Unearned Premiums. gross (13,885,169) 4,508,733 1.2.2- Reserve for Unearned Premiums. ceded 10 836,790 500,345 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 26 291,740,654 368,913,826 3- Unrealised Gains on Investments - - 4- Other Technical Income (Net of Reinsurer Share) 8,334,412 9,804,339 4.1- Other Technical Income. gross 8,334,412 9,804,339 4.2- Other Technical Income. ceded - - 5- Accrued Salvage Income - -
The accompanying notes are an integral part of these consolidated financial statements. 228 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Consolidated Statement of Income For the Year Ended December 31, 2019 (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, 2019 December 31, 2018 E- Life Technical Expense 5 (1,229,741,045) (853,169,546) 1- Incurred Losses (Net of Reinsurer Share) (597,008,631) (491,124,632) 1.1- Claims Paid (Net of Reinsurer Share) (572,323,682) (477,667,863) 1.1.1- Claims Paid, gross (583,093,822) (483,292,332) 1.1.2- Claims Paid, ceded 10 10,770,140 5,624,469 1.2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward) (24,684,949) (13,456,769) 1.2.1- Change in Provisions for Outstanding Claims, gross (27,001,309) (14,485,852) 1.2.2- Change in Provisions for Outstanding Claims, ceded 10 2,316,360 1,029,083 2- Change in Provision for Bonus and Discounts (Net of Reinsurer and Less the Amounts Carried Forward) 18,792 (115,875) 2.1- Provision for Bonus and Discounts, gross 581,948 (253,171) 2.2- Provision for Bonus and Discounts, ceded (563,156) 137,296 3- Change in Life Mathematical Provisions (Net of Reinsurer Share and Less the Amounts Carried Forward) (335,824,825) (155,208,679) 3.1- Change in Life Mathematical Provisions, gross (336,534,290) (155,872,482) 3.1.1- Change in Actuarial Mathematical Provisions, gross (284,505,220) (104,111,695) 3.1.2- Change in Profit Share Provisions (Provision for Financial Investments with Risks on Saving Life Policyholders), gross (52,029,070) (51,760,787) 3.2- Change in Life Mathematical Provisions, ceded 10 709,465 663,803 3.2.1- Change in Actuarial Mathematical Provisions, ceded 709,465 663,803 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) (11,699,233) (5,668,511) 5- Operating Expenses 32 (285,227,148) (201,051,849) 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) 264,078,566 151,096,457 G- Pension Business Technical Income 5,25 427,720,032 369,185,665 1- Fund Management Income 25 304,264,809 256,416,861 2- Management Fee 25 58,862,051 46,359,487 3- Entrance Fee Income 25 49,513,171 53,889,365 4- Management Expense Charge in case of Suspension 25 14,661,983 12,032,419 5- Income from Individual Service Charges - - 6- Increase in Value of Capital Allowances Given as Advance - - 7- Other Technical Expense 25 418,018 487,533 H- Pension Business Technical Expense 5 (337,039,910) (281,630,014) 1- Fund Management Expense (27,174,746) (23,567,612) 2- Decrease in Value of Capital Allowances Given as Advance - - 3- Operating Expenses 32 (286,889,993) (237,971,704) 4- Other Technical Expenses (20,672,907) (16,912,050) 5- Fine Payments (2,302,264) (3,178,648) I- Net Technical Income - Pension Business (G - H) 90,680,122 87,555,651
The accompanying notes are an integral part of these consolidated financial statements. Anadolu Hayat Emeklilik 2019 Annual Report 229
Anadolu Hayat Emeklilik Anonim Şirketi Consolidated Statement of Income For the Year Ended December 31, 2019 (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, 2019 December 31, 2018 C- Net Technical Income - Non-Life (A-B) (1,025,255) (1,076,401) F- Net Technical Income - Life (D-E) 264,078,566 151,096,457 I - Net Technical Income - Pension Business (G-H) 90,680,122 87,555,651 J- Total Net Technical Income (C+F+I) 353,733,433 237,575,707 K- Investment Income 26 170,481,974 134,804,696 1- Income from Financial Assets 98,075,472 95,694,121 2- Income from Disposal of Financial Assets 25,045,421 7,231,552 3- Valuation of Financial Assets 16,533,659 80,226 4- Foreign Exchange Gains 36 10,053,255 16,990,379 5- Income from Associates 26 7,428,943 5,250,705 6- Income from Subsidiaries and Joint Ventures - - 7- Income from Property, Plant and Equipment 7,26 8,483,587 5,836,444 8- Income from Derivative Transactions - - 9- Other Investments 26 4,861,637 3,721,269 10- Income Transferred from Life Section - - L- Investment Expense (57,853,096) (35,465,758) 1- Investment Management Expenses (inc. interest) (14,681,714) (3,872,203) 2- Diminution in Value of Investments (225,114) (339,051) 3- Loss from Disposal of Financial Assets (305,979) (22,189) 4- Investment Income Transferred to Non-Life Technical Section - - 5- Loss from Derivative Transactions - - 6- Foreign Exchange Losses 36 (5,563,894) (8,907,743) 7- Depreciation and Amortisation Expenses 5 (37,076,395) (22,324,572) 8- Other Investment Expenses - - M- Income and Expenses From Other and Extraordinary Operation 13,634,457 (13,644,463) 1- Provisions 47 (6,451,638) (3,655,127) 2- Rediscounts 47 100,794 75,330 3- Specified Insurance Accounts - - 4- Monetary Gains and Losses - - 5- Deferred Taxation (Deferred Tax Assets) 21 20,236,379 (9,653,804) 6- Deferred Taxation (Deferred Tax Liabilities) - - 7- Other Income 886,689 239,080 8- Other Expenses and Losses (1,137,767) (649,942) 9- Prior Year’s Income - - 10- Prior Year’s Expenses and Losses - - N- Net Profit for the Period 37 360,691,768 254,663,182 1- Profit for the Period 479,996,768 323,270,182 2- Corporate Tax Provision and Other Fiscal Liabilities 35 (119,305,000) (68,607,000) 3- Net Profit for the Period 37 360,691,768 254,663,182 4- Monetary Gains and Losses - -
The accompanying notes are an integral part of these consolidated financial statements. 230 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Consolidated Statement of Changes in Equity For the Year Ended December 31, 2019 (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, 2018 Audited - Changes in Equity - December 31, 2018
Own Shares Revaluation Currency Other Reserves Paid-in of the of Financial Inflation Translation Legal Statutory and Retained Net Profit Retained Note Capital Company Assets Adjustments Adjustments Reserves Reserves Earnings for the Period Earnings Total I - Balance at the end of the year period - December 31, 2017 430,000,000 - 9,775,232 - - 128,969,833 15,753,835 20,627,044 226,591,810 102,405,178 934,122,932 II - Change in Accounting Standards ------III - Restated balances (I+II) -January 1, 2018 430,000,000 - 9,775,232 - - 128,969,833 15,753,835 20,627,044 226,591,810 102,405,178 934,122,932 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 ------(2,849,658) - - (2,849,658) D- Change in the value of financial assets 15 - - (66,223,125) ------(66,223,125) E- Currency translation adjustments ------F- Other gains or losses 15 ------(78,706) 4,208,023 532,375 4,661,692 G- Inflation adjustment differences ------H- Net profit for the period ------254,663,182 - 254,663,182 I - Dividends paid 38 ------(175,293,934) - (175,293,934) J - Transfers from retained earnings 15 - - - - - 27,486,668 17,117,054 15,092,420 (55,505,899) (4,190,243) - IV - Balance at the end of the 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
Audited - Changes in Equity - December 31, 2019 Audited - Changes in Equity - December 31, 2019 Own Shares Revaluation Currency Other Reserves Paid-in of the of Financial Inflation Translation Legal Statutory and Retained Net Profit Retained Note Capital Company Assets Adjustments Adjustments Reserves Reserves 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
The accompanying notes are an integral part of these consolidated financial statements. Anadolu Hayat Emeklilik 2019 Annual Report 231
Audited - Changes in Equity - December 31, 2018 Audited - Changes in Equity - December 31, 2018
Own Shares Revaluation Currency Other Reserves Paid-in of the of Financial Inflation Translation Legal Statutory and Retained Net Profit Retained Note Capital Company Assets Adjustments Adjustments Reserves Reserves Earnings for the Period Earnings Total I - Balance at the end of the year period - December 31, 2017 430,000,000 - 9,775,232 - - 128,969,833 15,753,835 20,627,044 226,591,810 102,405,178 934,122,932 II - Change in Accounting Standards ------III - Restated balances (I+II) -January 1, 2018 430,000,000 - 9,775,232 - - 128,969,833 15,753,835 20,627,044 226,591,810 102,405,178 934,122,932 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 ------(2,849,658) - - (2,849,658) D- Change in the value of financial assets 15 - - (66,223,125) ------(66,223,125) E- Currency translation adjustments ------F- Other gains or losses 15 ------(78,706) 4,208,023 532,375 4,661,692 G- Inflation adjustment differences ------H- Net profit for the period ------254,663,182 - 254,663,182 I - Dividends paid 38 ------(175,293,934) - (175,293,934) J - Transfers from retained earnings 15 - - - - - 27,486,668 17,117,054 15,092,420 (55,505,899) (4,190,243) - IV - Balance at the end of the 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
Audited - Changes in Equity - December 31, 2019 Audited - Changes in Equity - December 31, 2019 Own Shares Revaluation Currency Other Reserves Paid-in of the of Financial Inflation Translation Legal Statutory and Retained Net Profit Retained Note Capital Company Assets Adjustments Adjustments Reserves Reserves 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 1,285,889,319 232 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Consolidated Statement of Cash Flows For the Year Ended December 31, 2019 (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, 2019 December 31, 2018 A. Cash flows from operating activities 1. Cash provided from insurance activities 1,011,053,647 596,471,635 2. Cash provided from reinsurance activities 425,122 2,406,641 3. Cash provided from individual pension business 402,513,328 406,667,171 4. Cash used in insurance activities (210,698,038) (318,319,406) 5. Cash used in reinsurance activities - - 6. Cash used in individual pension business (366,174,495) (258,870,145) 7. Cash provided by / (used in) operating activities 837,119,564 428,355,896 8. Interest paid - - 9. Income taxes paid (107,482,874) (59,912,040) 10. Other cash inflows 164,288,940 51,139,352 11. Other cash outflows (180,540,806) (74,173,201) 12. Net cash provided by operating activities 713,384,824 345,410,007 B. Cash flows from / (used in) investing activities 1. Proceeds from disposal of tangible assets 3,798,622 2,899,970 2. Acquisition of tangible assets 6,7.8 (18,373,707) (41,868,135) 3. Acquisition of financial assets (1,006,922,828) (96,070,535) 4. Proceeds from disposal of financial assets 626,136,367 56,327,111 5. Interests received 218,181,004 215,317,385 6. Dividends received 4,828,118 10,744,802 7. Other cash inflows 40,857,112 41,254,359 8. Other cash outflows (497,273,490) (235,185,740) 9. Net cash used in investing activities (628,768,802) (46,580,783) 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 (136,125,454) (175,293,934) 5. Other cash inflows - - 6. Other cash outflows - - 7. Net cash used in financing activities (136,125,454) (175,293,934) D. Effect of exchange rate fluctuations on cash and cash equivalents - - E. Net decrease in cash and cash equivalents (51,509,432) 123,535,290 F. Cash and cash equivalents at the beginning of the period 14 338,091,030 214,555,740 G. Cash and cash equivalents at the end of the period 14 286,581,598 338,091,030
The accompanying notes are an integral part of these consolidated financial statements. Anadolu Hayat Emeklilik 2019 Annual Report 233
Anadolu Hayat Emeklilik Anonim Şirketi Consolidated Statement of Profit Distribution For the Year Ended December 31, 2019 (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, 2019(3) December 31, 2018 I. DISTRIBUTION OF THE PERIOD PROFIT 1.1. PERIOD PROFIT(1) 465,400,846 329,470,182 1.2. TAXES AND DUTIES PAYABLE (119,305,000) (68,607,000) 1.2.1. Corporate Tax (Income Tax) (119,305,000) (68,607,000) 1.2.2. Income Tax Deductions - - 1.2.3. Other Taxes and Legal Duties - - A. CURRENT PERIOD PROFIT (1.1 - 1.2) 346,095,846 260,863,182 1.3. ACCUMULATED LOSSES (-) - - 1.4. FIRST LEGAL RESERVES (-)(2) - 5,635,719 1.5. OTHER STATUTORY RESERVES (-) - - B. NET PROFIT AVAILABLE FOR DISTRIBUTION [(A - (1.3 + 1.4 + 1.5)] 346,095,846 255,227,463 1.6. FIRST DIVIDEND TO SHAREHOLDERS (-) - (51,045,665) 1.6.1. To owners of ordinary shares - (51,045,665) 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 (-) - (6,125,454) 1.8. DIVIDENDS TO BOARD OF DIRECTORS (-) - - 1.9. DIVIDENDS TO FOUNDERS - 1.10. SECOND DIVIDEND TO SHAREHOLDERS (-) - (78,954,335) 1.10.1. To owners of ordinary shares - (78,954,335) 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 (-) - (11,462,545) 1.12. STATUTORY RESERVES(-) - (19,805,634) 1.13. EXTRAORDINARY RESERVES - (87,833,830) 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 0.80487 0.59355 3.2. TO OWNERS OF ORDINARY SHARES (%) 80.487 59.355 3.3. TO OWNERS OF PRIVILEGED SHARES 0.80487 0.59355 3.4. TO OWNERS OF PRIVILEGED SHARES (%) 80.487 59.355 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 7,500,000 is added to the profit for the year ended December 31, 2019 according to TAS 19 Employee Benefits. Besides TL 20,650,000 decided investment for İş Asset Management Infrastructure Venture Capital Investment Fund in 2020 and TL 1,445,922 amounting the 75% of TL 1,927,896 which was gained from the sales profit of equities in 2019 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 2019 profit distribution table above.
The accompanying notes are an integral part of these consolidated financial statements. 234 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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, 2019, 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, 2019 December 31, 2018 Shareholding Shareholding Shareholding Shareholding Name amount (TL) rate (%) amount (TL) rate (%)
Türkiye İş Bankası AŞ(1) 274,742,970 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 64,957,031 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, 2019, 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, 2019, the Company has 34 individual pension investment funds (December 31, 2018: 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, 2019 December 31, 2018
Senior level managers 7 7 Directors 142 134 Officers 420 395 Sales personnel 506 499 Other 11 11 Total 1,086 1,046 Anadolu Hayat Emeklilik 2019 Annual Report 235
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
1.6 Wages and similar benefits provided to the senior management For the year ended as of December 31, 2019, 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 7,207,988 (December 31, 2018: TL 6,404,002). 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, 2019 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. 236 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
1.10 Events after the reporting period Consolidated financial statements prepared for the period ended as of December 31, 2019 was approved by Board of Directors on January 30, 2020. 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. 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, 2019, 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. Anadolu Hayat Emeklilik 2019 Annual Report 237
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
2.1.5 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’. 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. 238 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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 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: Estimated useful Depreciation rates Tangible assets lives (years) (%) 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. Anadolu Hayat Emeklilik 2019 Annual Report 239
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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). 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. 240 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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, 2019, 95% of the difference between fair values and amortised costs of those assets backing liabilities amounting to TL 11,377,946 (December 31, 2018: TL (144,313,308)) 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. Anadolu Hayat Emeklilik 2019 Annual Report 241
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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. 242 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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, 2019, the Company’s issued capital is TL 430,000,000 (December 31, 2018: TL 430,000,000). Sources of the capital increases during the period None. Privileges on common shares representing share capital As at December 31, 2019, the share capital of the Company was amounted TL 430,000,000 (December 31, 2018: TL 430,000,000), divided into 43,000,000,000 shares (December 31, 2018: 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. 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, 2019, the registered capital of the Company is TL 900,000,000 (December 31, 2018: 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. Anadolu Hayat Emeklilik 2019 Annual Report 243
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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. 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. 244 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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, 2019 and 2018, 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. 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, 2019 is TL 6,379.86 (December 31, 2018: TL 5,434.42). Anadolu Hayat Emeklilik 2019 Annual Report 245
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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 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, 2019 and December 31, 2018 are as follows: December 31, 2019 December 31, 2018 Discount rate 4.20% 4.22% Expected rate of salary/limit increase 7.20% 11.30%
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. 246 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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. 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 Fund management fee is recognised as income, charged to the pension investment funds against the hardware, software, personnel and accounting services provided, and fee is shared between the Company and the portfolio managers in accordance with the agreement signed between parties. Total of fund management fee charged to the pension investment funds is recognised as “Fund management income” under technical income and portion of the portfolio manager is recognised as “Fund management expense” under technical expenses. 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. Anadolu Hayat Emeklilik 2019 Annual Report 247
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Summary of the new standards, amendments and interpretations: Set out below are the new accounting policies of the Company upon adoption of TFRS 16. 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 right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. 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. 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: Contract term Discount rate - TL Discount rate - Euro Assets subject to operating leases (Year) (%) (%) Buildings 10 years 20.00 - Motor vehicles 1-3 years 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 recognized as liability in the financial statements when they are announced. 248 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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. Anadolu Hayat Emeklilik 2019 Annual Report 249
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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, 2019, related test have not resulted any reserve for unexpired risks (December 31, 2018: TL 18,510). 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 12,082,030 (December 31, 2018: TL 11,744,574). 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 56,472 (December 31, 2018: TL 38,833). 250 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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 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, 2019, 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. 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 39,434,063 are presented under “Other Technical Reserves” within short-term liabilities in the accompanying financial statements (December 31, 2018: TL 27,724,590). 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, 2019, the Company accounted for provision for bonus and discounts, net amounting to TL 391,457 (December 31, 2018: TL 410,153). Anadolu Hayat Emeklilik 2019 Annual Report 251
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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 consolidated 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 consolidated financial statements as at December 31, 2019 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, 2019. The effects of these standards and interpretations on the Company’s financial position and performance have been disclosed in the related paragraphs. i) The new standards, amendments and interpretations which are effective as at January 1, 2019 are as follows: TFRS 16 Leases In April 2018, POA has published a new standard, TFRS 16 ‘Leases’. The new standard brings most leases on-balance sheet for lessees under a single model, eliminating the distinction between operating and finance leases. Lessor accounting however remains largely unchanged and the distinction between operating and finance leases is retained. TFRS 16 supersedes TAS 17 ‘Leases’ and related interpretations and is effective for periods beginning on or after January 1, 2019, with earlier adoption permitted. 252 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Lessees have recognition exemptions to applying this standard in case of short-term leases (i.e., leases with a lease term of 12 months or less) and leases of ’low-value’ assets (e.g., personal computers, office equipment, etc.). At the commencement date of a lease, a lessee measures the lease liability at the present value of the lease payments that are not paid at that date (i.e., the lease liability), at the same date recognises an asset representing the right to use the underlying asset (i.e., the right-of-use asset) and depreciates it during the lease term. The lease payments shall be discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the lessee shall use the lessee’s incremental borrowing rate. Lessees are required to recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset separately. Lessees are required to remeasure the lease liability upon the occurrence of certain events (e.g. a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). Under these circumstances, the lessee recognises the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset. Transition to TFRS 16: The Company elected to use the exemptions applicable to the standard on lease contracts for which the lease terms ends within 12 months as of the date of initial application and lease contracts for which the underlying asset is of low value. The Company has leases of certain office equipment (i.e., personal computers, printing and photocopying machines) that are considered of low value. The standard is applied for annual periods beginning on or after 1 January 2019. The Company disclosed the impact of the standard on financial position or performance of the Company in Note 2, 6 and 20. Amendments to TAS 28 “Investments in Associates and Joint Ventures” (Amendments) In December 2017, POA issued amendments to TAS 28 Investments in Associates and Joint Ventures. The amendments clarify that a company applies TFRS 9 Financial Instruments to long-term interests in an associate or joint venture that form part of the net investment in the associate or joint venture. TFRS 9 Financial Instruments excludes interests in associates and joint ventures accounted for in accordance with TAS 28 Investments in Associates and Joint Ventures. In this amendment, POA clarified that the exclusion in TFRS 9 applies only to interests a company accounts for using the equity method. A company applies TFRS 9 to other interests in associates and joint ventures, including long-term interests to which the equity method is not applied and that, in substance, form part of the net investment in those associates and joint ventures. These amendments are applied for annual periods beginning on or after 1 January 2019. The amendments did not have a significant impact on the financial position or performance of the Company. TFRIC 23 Uncertainty over Income Tax Treatments The interpretation clarifies how to apply the recognition and measurement requirements in “TAS 12 Income Taxes” when there is uncertainty over income tax treatments. When there is uncertainty over income tax treatments, the interpretation addresses: (a) whether an entity considers uncertain tax treatments separately; (b) the assumptions an entity makes about the examination of tax treatments by taxation authorities; (c) how an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates; and (d) how an entity considers changes in facts and circumstances. The interpretation is effective for annual reporting periods beginning on or after 1 January 2019. The interpretation did not have a significant impact on the financial position or performance of the Company. Anadolu Hayat Emeklilik 2019 Annual Report 253
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Annual Improvements - 2015-2017 Cycle In January 2019, POA issued Annual Improvements to TFRS Standards 2015-2017 Cycle, amending the following standards: -- TFRS 3 Business Combinations and TFRS 11 Joint Arrangements - The amendments to TFRS 3 clarify that when an entity obtains control of a business that is a joint operation, it remeasures previously held interests in that business. The amendments to TFRS 11 clarify that when an entity obtains joint control of a business that is a joint operation, the entity does not remeasure previously held interests in that business. -- TAS 12 Income Taxes - The amendments clarify that all income tax consequences of dividends (i.e. distribution of profits) should be recognised in profit or loss, regardless of how the tax arises. -- TAS 23 Borrowing Costs - The amendments clarify that if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalisation rate on general borrowings. The amendments are effective from annual periods beginning on or after 1 January 2019. The amendments did not have a significant impact on the financial position or performance of the Company. Plan Amendment, Curtailment or Settlement” (Amendments to TAS 19) In January 2019, the POA published Amendments to TAS 19 “Plan Amendment, Curtailment or Settlement” The amendments require entities to use updated actuarial assumptions to determine current service cost and net interest for the remainder of the annual reporting period after a plan amendment, curtailment or settlement occurs. These amendments are applied for annual periods beginning on or after 1 January 2019. The amendments did not have a significant impact on the financial position or performance of the Company. Prepayment Features with Negative Compensation (Amendments to TFRS 9) The POA issued minor amendments to TFRS 9 Financial Instruments to enable companies to measure some prepayable financial assets at amortised cost. Applying TFRS 9, a company would measure a financial asset with so-called negative compensation at fair value through profit or loss. Applying the amendments, if a specific condition is met, entities will be able to measure at amortised cost some prepayable financial assets with so-called negative compensation. These amendments are applied for annual periods beginning on or after 1 January 2019. 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. 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. 254 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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 PAO 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 2021; early application is permitted. The Company is in the process of assessing the impact of the standard on financial position or performance of the Company. Definition of a Business (Amendments to TFRS 3) In May 2019, the PAO issued amendments to the definition of a business in TFRS 3 Business Combinations. The amendments are intended to assist entities to determine whether a transaction should be accounted for as a business combination or as an asset acquisition. 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. Earlier application is permitted. The amendments are not applicable for the Company and will not have an impact on the financial position or performance of the Company. Definition of Material (Amendments to TAS 1 and TAS 8) In June 2019, the PAO 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 Company is in the process of assessing the impact of the amendments on 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 certain reliefs for 4 fundamental matters in connection with interest rate benchmark reform. These reliefs are related to hedge accounting as follows: -- Highly probable requirement -- Prospective Assessments -- Retrospective Assessments -- Separately identifiable risk components 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. Anadolu Hayat Emeklilik 2019 Annual Report 255
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1) iii) The new standards, amendments and interpretations that are issued by the International Accounting Standards Board (IASB) but not issued by Public Oversight Authority (POA) There are no standards, interpretations and amendments to existing IFRS standards issued by the IASB and not yet adapted/ issued by the POA. 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 Note 21 - Deferred tax Note 23 - Other liabilities and provisions 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, 2019, the Company’s life insurance (excluding saving component of saving life insurance) claims/ premiums ratio stands at 16%. 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. 256 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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, 2019, the Company’s personal accident insurance claims/premiums ratio is 46%. 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, 2019 December 31, 2018
Life insurance (*) 16% 21% Personal accident 46% 68%
(*) 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, 2019 and December 31, 2018, risk portion transferred to reinsurers in terms of risk guarantee is presented as below: December 31, 2019 December 31, 2018
Death by natural cause 14% 12% Death by accident 55% 53% Disability by accident 60% 56% Disability by illness 72% 64%
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 2018, 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. Anadolu Hayat Emeklilik 2019 Annual Report 257
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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, 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
December 31, 2018 Total gross Reinsurer’s share The Company’s Branches risk liability(1) of risk liability net claims liability
Life insurance 79,326,942,408 18,117,334,551 61,209,607,857 Personal accident 9,774,489,686 4,093,756,237 5,680,733,449 Total 89,101,432,094 22,211,090,788 66,890,341,306
(1) Represents the maximum insurance amount based on death by natural cause, death by accident, disability by accident and disability by illness. 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, 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 South-eastern 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 94,635,252 258 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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, 2018 Total gross Reinsurer’s share Total net Claims liability(1) claims liability of claims liability claims liability
Marmara Region 31,554,305 1,711,922 29,842,383 Central Anatolia Region 10,627,809 373,047 10,254,762 Aegean Region 11,940,652 272,911 11,667,741 Mediterranean Region 9,554,683 514,059 9,040,624 Black Sea Region 6,061,222 73,771 5,987,451 South-eastern Anatolia Region 3,582,898 536,242 3,046,656 Eastern Anatolia Region 2,616,937 53,415 2,563,522 Foreign countries (other) 6,084,144 4,199 6,079,945 Total 82,022,650 3,539,566 78,483,084
(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. Anadolu Hayat Emeklilik 2019 Annual Report 259
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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. 260 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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, 2019 and December 31, 2018, 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 Other insurance activities receivables Banks and other cash and cash Related Third Related Financial equivalent December 31, 2019 party party party Third party assets(2) 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 past 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. ------Anadolu Hayat Emeklilik 2019 Annual Report 261
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
(1) Receivables Banks and Receivables from Receivables from other cash insurance activities insurance activities and cash Related Third Related Financial equivalent December 31, 2018 party party party Third party assets(2) assets
Maximum credit risk exposure as at the reporting period (A+B+C) 25 90,825,976 12,549 50,363,825 2,224,455,427 517,656,851 - Secured portion of maximum risk by guarantees, provisions, etc. ------A. Net book value of neither past due nor impaired financial assets 25 66,061,899 12,549 50,363,825 2,224,455,427 517,656,851 B. Net book value of part due but not impaired assets - 24,764,077 - - - - C. Net book value of impaired assets ------Gross book value - 120,570 - - - - - Impairment - (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 262 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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, 2019 and December 31, 2018 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, 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) - Anadolu Hayat Emeklilik 2019 Annual Report 263
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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, 2019 and December 31, 2018 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, 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) - 264 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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, 2018 maturity 1 month months months years and over Unallocated Total Cash and cash equivalents 25,977,467 265,472,528 226,207,842 - - - - 517,657,837 Financial assets and investments with risks on policyholders - 47,850,878 237,756,036 68,674,224 939,637,685 847,890,213 192,687,396 2,334,496,432 Receivables from main operations - 4,815,190 9,157,280 16,918,948 - - 17,026,657,947 17,057,549,365 Due from related parties - - 12,549 - - - - 12,549 Other receivables - 49,370,276 - - - - 993,549 50,363,825 Prepaid expenses and income accruals, short term ------36,252,496 36,252,496 Other current assets ------22,128 22,128 Other receivables - - - 231,161 - - - 231,161 Financial assets (Associates) ------21,225,636 21,225,636 Tangible assets ------183,963,677 183,963,677 Intangible assets ------27,541,661 27,541,661 Prepaid expenses and income accruals, long term ------661,369 661,369 Deferred tax assets ------Total assets 25,977,467 367,508,872 473,133,707 85,824,333 939,637,685 847,890,213 17,490,005,859 20,229,978,136
Financial liabilities ------Payables arising from main operations - 24,918,717 4,054,710 - - 17,248,969,985 17,277,943,412 Due to related parties - 54,560 - 131,097 - - 94 185,751 Other payables - 10,256,568 - - - - 8,990,740 19,247,308 Insurance technical provisions ------1,899,412,052 1,899,412,052 Provisions for taxes and other similar obligations - 14,185,995 - - - - 20,026,249 34,212,244 Deferred income and expense accruals ------3,867,847 3,867,847 Other short term liabilities ------Provisions for other risks - 1,400,000 - 12,800,000 - 18,079,050 9,686,690 41,965,740 Deferred tax liabilities ------4,062,693 4,062,693 Shareholders’ equity ------949,081,089 949,081,089 Total liabilities - 50,815,840 - 16,985,807 - 18,079,050 20,144,097,439 20,229,978,136 Net liquidity surplus/(deficit) 25,977,467 316,693,032 473,133,707 68,838,526 939,637,685 829,811,163 (2,654,091,580) - Anadolu Hayat Emeklilik 2019 Annual Report 265
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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, 2018 maturity 1 month months months years and over Unallocated Total Cash and cash equivalents 25,977,467 265,472,528 226,207,842 - - - - 517,657,837 Financial assets and investments with risks on policyholders - 47,850,878 237,756,036 68,674,224 939,637,685 847,890,213 192,687,396 2,334,496,432 Receivables from main operations - 4,815,190 9,157,280 16,918,948 - - 17,026,657,947 17,057,549,365 Due from related parties - - 12,549 - - - - 12,549 Other receivables - 49,370,276 - - - - 993,549 50,363,825 Prepaid expenses and income accruals, short term ------36,252,496 36,252,496 Other current assets ------22,128 22,128 Other receivables - - - 231,161 - - - 231,161 Financial assets (Associates) ------21,225,636 21,225,636 Tangible assets ------183,963,677 183,963,677 Intangible assets ------27,541,661 27,541,661 Prepaid expenses and income accruals, long term ------661,369 661,369 Deferred tax assets ------Total assets 25,977,467 367,508,872 473,133,707 85,824,333 939,637,685 847,890,213 17,490,005,859 20,229,978,136
Financial liabilities ------Payables arising from main operations - 24,918,717 4,054,710 - - 17,248,969,985 17,277,943,412 Due to related parties - 54,560 - 131,097 - - 94 185,751 Other payables - 10,256,568 - - - - 8,990,740 19,247,308 Insurance technical provisions ------1,899,412,052 1,899,412,052 Provisions for taxes and other similar obligations - 14,185,995 - - - - 20,026,249 34,212,244 Deferred income and expense accruals ------3,867,847 3,867,847 Other short term liabilities ------Provisions for other risks - 1,400,000 - 12,800,000 - 18,079,050 9,686,690 41,965,740 Deferred tax liabilities ------4,062,693 4,062,693 Shareholders’ equity ------949,081,089 949,081,089 Total liabilities - 50,815,840 - 16,985,807 - 18,079,050 20,144,097,439 20,229,978,136 Net liquidity surplus/(deficit) 25,977,467 316,693,032 473,133,707 68,838,526 939,637,685 829,811,163 (2,654,091,580) - 266 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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, 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. Anadolu Hayat Emeklilik 2019 Annual Report 267
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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, 2018 Total TL (Functional currency) US Dollar Euro GBP CHF JPY 1. Cash at banks 14,631,702 7,534,357 6,827,998 207,363 61,984 - 2. Financial assets and financial investments with risks on policyholders 765,132,465 594,527,085 148,409,850 22,195,530 - - 3. Receivables from main operations 9,702,272 8,352,240 1,347,680 2,352 - - 4. Reinsurance receivables ------5. Rent receivables ------6. Deposits given 57,870 57,870 - - - - Foreign currency assets, current 789,524,309 610,471,552 156,585,528 22,405,245 61,984 - 7. Total assets 789,524,309 610,471,552 156,585,528 22,405,245 61,984 -
8. Other miscellaneous payables 1,191,874 1,086,225 105,649 - - - 9. Payables to reinsurers 148,188 148,179 - - - 9 10. Agency guarantees 558,507 535,868 22,639 - - - 11. Technical provisions (*) 779,066,993 609,344,926 148,483,130 21,229,712 309 8,916 Foreign currency liabilities, short term 780,965,562 611,115,198 148,611,418 21,229,712 309 8,925 12. Total liabilities 780,965,562 611,115,198 148,611,418 21,229,712 309 8,925
Net financial position 8,558,747 (643,646) 7,974,110 1,175,533 61,675 (8,925) Net foreign currency assets/(liabilities) position on monetary items 8,500,877 (701,516) 7,974,110 1,175,533 61,675 (8,925)
(*) 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, 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
December 31, 2018 US Dollar Euro GBP CHF JPY
Foreign currency rate used in translation of balance sheet items 5.2609 6.0280 6.6528 5.3352 0.0475 268 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Exposure to foreign currency risk A 10 percent depreciation of the TL against the following currencies as at December 31, 2019 and December 31, 2018 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, 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. Anadolu Hayat Emeklilik 2019 Annual Report 269
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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, 2018 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 215,947 (215,947) (64,365) 64,365 2- Hedged portion from US Dollar risk (-) - - - - 3- Net effect of US Dollar (1+2) 215,947 (215,947) (64,365) 64,365
If EUR value changes by 10% against TL: 4- Net Euro assets/liabilities 786,885 (786,885) 797,412 (797,412) 5- Hedged portion from Euro risk (-) - - - - 6- Net effect of Euro (4+5) 786,885 (786,885) 797,412 (797,412)
If GBP value changes by 10% against TL: 7- Net GBP assets/liabilities 127,323 (127,323) 117,553 (117,553) 8- Hedged portion from GBP risk (-) - - - - 9- Net effect of GBP (7+8) 127,323 (127,323) 117,553 (117,553)
If CHF value changes by 10% against TL: 10- Net CHF assets/liabilities 6,168 (6,168) 6,168 (6,168) 11- Hedged portion from CHF risk (-) - - - - 12- Net effect of CHF (10+11) 6,168 (6,168) 6,168 (6,168)
If JPY value changes by 10% against TL: 13- Net JPY assets/liabilities (893) 893 (893) 893 14- Hedged portion from JPY risk (-) - - - - 15- Net effect of JPY (13+14) (893) 893 (893) 893
Total (3+6+9+12+15) 1,135,430 (1,135,430) 855,875 (855,875)
(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, 2019 December 31, 2018
Fixed rate financial instruments Financial assets 2,193,341,949 1,783,043,917 Available-for-sale financial assets 2,140,627,812 1,735,812,202 Loans and receivables 52,714,137 47,231,715 Time deposits 653,352,901 532,349,987
Variable rate financial instruments Financial assets 251,269,988 121,009,082 Available-for-sale financial assets 251,269,988 121,009,082 270 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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, 2019 and December 31, 2018, interest rate risk analysis of financial assets and financial liabilities are summarised in the table below: Up to 1 1 to 3 3 to 12 1 to 5 5 years Non-interest December 31, 2019 month 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) - Anadolu Hayat Emeklilik 2019 Annual Report 271
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Up to 1 1 to 3 3 to 12 1 to 5 5 years Non-interest December 31, 2018 month months months years and over bearing Total
Assets: Cash and cash equivalents 265,472,528 226,207,842 - - - 25,977,467 517,657,837 Financial assets and investments with risks on policyholders 47,850,878 237,756,036 189,683,307 818,628,602 847,890,213 192,687,396 2,334,496,432 Receivables from main operations 4,815,190 9,157,280 16,918,948 - - 17,026,657,947 17,057,549,365 Due from related parties - 12,549 - - - - 12,549 Other receivables 49,370,276 - - - 993,549 50,363,825 Prepaid expenses and income accruals, short term - - - - - 36,252,496 36,252,496 Other current assets - - - - - 22,128 22,128 Other current receivables - - 231,161 - - - 231,161 Financial assets (Associates) - - - - - 21,225,636 21,225,636 Tangible assets - - - - - 183,963,677 183,963,677 Intangible assets - - - - - 27,541,661 27,541,661 Prepaid expenses and income accruals, long term - - - - - 661,369 661,369 Deferred tax assets ------Total assets 367,508,872 473,133,707 206,833,416 818,628,602 847,890,213 17,515,983,326 20,229,978,136
Liabilities: Financial liabilities ------Payables arising from main operations 24,918,717 4,054,710 - - 17,248,969,985 17,277,943,412 Due to related parties 54,560 - 131,097 - - 94 185,751 Other liabilities 10,256,568 - - - - 8,990,740 19,247,308 Insurance technical provisions - - - - - 1,899,412,052 1,899,412,052 Provisions for taxes and other similar obligations 14,185,995 - - - - 20,026,249 34,212,244 Deferred income and expense accruals - - - - - 3,867,847 3,867,847 Other short term liabilities ------Provisions for other risks 1,400,000 - 12,800,000 - 18,079,050 9,686,690 41,965,740 Deferred tax liabilities - - - - - 4,062,693 4,062,693 Shareholders’ equity - - - - - 949,081,089 949,081,089 Total liabilities and equity 50,815,840 - 16,985,807 - 18,079,050 20,144,097,439 20,229,978,136
Net position 316,693,032 473,133,707 189,847,609 818,628,602 829,811,163 (2,628,114,113) - 272 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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, 2019 and 2018 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, 2019 and 2018. 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, 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
100 bp 100 bp 500 bp 500 bp December 31, 2018 increase decrease increase decrease
Company’s own portfolio (7,590,537) 7,891,428 (35,312,669) 42,963,542 Total, net (7,590,537) 7,891,428 (35,312,669) 42,963,542
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 2019 Annual Report 273
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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, 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 held for trading 35,524,079 - - 35,524,079 Receivables from individual pension business(3) 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. December 31, 2018 Level 1 Level 2 Level 3 Total
Financial assets(1): Financial assets held for trading 55,437,380 - - 55,437,380 Available for sale financial assets(2) 563,866,752 - - 563,866,752 Financial investments with risks on policyholders classified as available for sale 1,396,131,158 - - 1,396,131,158 Financial investments with risks on policyholders classified as for the purposes of purchase and sale 28,879,925 28,879,925 Receivables from individual pension business 16,937,634,744 - - 16,937,634,744 Total financial assets 18,981,949,959 - - 18,981,949,959
Financial liabilities: Investment contract liabilities - life mathematical provision for saving life policies 1,740,281,090 - - 1,740,281,090 Payables arising from individual pension business(3) 16,937,634,744 - - 16,937,634,744 Total financial liabilities 18,677,915,834 - - 18,677,915,834
(1) As at December 31, 2018, time deposits in financial investments with risks on policyholders amounting to TL 237,756,035 are not included in the table. (2) As at December 31, 2018, 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. 274 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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, 2019 and 2018. Change of price December 31, 2019 December 31, 2018 Market price of equity share 10% 15,954,219 10,317,663
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, 2019 and 2018. Change of price December 31, 2019 December 31, 2018 Market price of equity share 10% - 167,091
(*) As at 31.12.2019 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, 2019 is summarised below. As at June 30, 2019, the capital adequacy of the Company is TL 248,670,129 and TL 310,814,829; 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, 2019. The Company’s capital calculated based on the regulation as at June 30, 2019 is TL 987,241,450. Consequently, the Company’s capital is adequate. Capital adequacy table June 30, 2019 December 31, 2018 First Method Required capital for non-life branches 118,627 144,326 Required capital for life branch 152,107,038 157,799,746 Required capital for pension branch 96,444,464 84,688,174 Required capital based on the first method 248,670,129 242,632,246
Second Method Required capital for asset risk 271,681,473 231,533,824 Required capital for reinsurance risk 1,360,459 1,612,489 Required capital for outstanding claims risk 4,112,101 4,418,494 Required capital for underwriting risk 32,876,825 29,974,380 Required capital for interest rate and currency risk 783,971 641,906 Required capital based on the second method 310,814,829 268,181,093
Required capital 310,814,829 268,181,093 Current capital(1) 987,241,450 968,342,236 Excessive capital 676,426,621 700,161,143
(1) According to legal regulations, equalisation provision of TL 31,165,416 (December 31, 2018: TL 27,724,590) have been included in the amount for equity. Anadolu Hayat Emeklilik 2019 Annual Report 275
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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, 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 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 Personal accident 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)
Individual December 31, 2018 Life pension Non-Life Total
Continuing operations: Technical income 1,004,266,003 369,185,665 603,996 1,374,055,664 Technical expense (853,169,546) (281,630,014) (1,680,397) (1,136,479,957) Total of other income and expense 36,730,456 48,271,698 692,321 85,694,475 Income before tax 187,826,913 135,827,349 (384,080) 323,270,182 Income tax expense - - - (68,607,000) Net profit for the period 187,826,913 135,827,349 (384,080) 254,663,182
Individual December 31, 2018 Life pension Non-Life Total
Segment assets 2,381,533,576 17,803,555,746 44,888,814 20,229,978,136 Total assets 2,381,533,576 17,803,555,746 44,888,814 20,229,978,136
Segment liabilities (2,343,838,309) (17,842,102,560) (44,037,267) 20,229,978,136) Total liabilities (2,343,838,309) (17,842,102,560) (44,037,267) 20,229,978,136)
Other segment information Depreciation and amortisation (9,568,782) (12,575,431) (180,359) (22,324,572) 276 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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, 2019 is presented below: January 1, Increase December 31, 2019 Additions in value Disposals 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 (1) - 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 (1) - (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
(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, 2018, 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, 2019)
Building / Southern Anatolia district sales office / Adana 2,600,000 2,586,865 Land / İstanbul Kağıthane 2,100,000 2,100,000 Total 4,700,000 4,686,865
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. Anadolu Hayat Emeklilik 2019 Annual Report 277
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Movement in tangible assets in the period from January 1 to December 31, 2018 is presented below: January 1, Increase December 31, 2018 Additions in value Disposals 2018 Cost: Owner occupied land and buildings 4,610,000 - 90,000 - 4,700,000 Machinery and equipment 29,556,763 16,439,049 - (177,726) 45,818,086 Vehicles 431,268 71,329 - - 502,597 Furniture and fixtures (includes leased assets) 4,275,468 2,065,902 - - 6,341,370 Leasehold improvements 3,850,717 9,055,717 - (534,981) 12,371,453 42,724,216 27,631,997 90,000 (712,707) 69,733,506 Accumulated depreciation: Owner occupied land and buildings (30,953) (8,221) - 39,174 - Machinery and equipment (17,710,069) (6,414,058) - 101,258 (24,022,869) Vehicles (171,374) (87,089) - - (258,463) Furniture and fixtures (includes leased assets) (3,598,598) (382,884) - - (3,981,482) Leasehold improvements (2,935,091) (726,053) - 424,374 (3,236,770) (24,446,085) (7,618,305) - 564,806 (31,499,584)
Carrying amounts 18,278,131 38,233,922
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, 2019 is presented below: January 1, Increase in December 31, 2019 Additions value Disposals 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
Movement in investment properties in the period from January 1 to December 31, 2018 is presented below: January 1, Increase in December 31, 2018 Additions value Disposals 2018
Land / İstanbul Ömerli 56,944,134 - 4,375,000 (889,379) 60,429,755 Building / İstanbul Gayrettepe 56,000,000 - 300,000 - 56,300,000 Building / Mersin 29,000,000 - - - 29,000,000 141,944,134 - 4,675,000 (889,379) 145,729,755 Carrying amounts 141,944,134 145,729,755
For the period ended December 31, 2019, the Company has rental income from investment properties amounting to TL 858,473 (December 31, 2018: TL 817,993), The Company has a gain from increase in value of investment properties amounting to TL 7,625,114 for the period ended December 31, 2019 (December 31, 2018: 5,018,451). When the diminution in value of investment properties amounting to TL 225,114 recorded under “diminution in value of investments” account during the period is considered, the Company has a net gain from increase in value of investment properties amounting to TL 7,400,000. (December 31, 2018:4,675,000). 278 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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 2019. There is no mortgage on the properties aforementioned. Appraisal and net carrying value Net carrying value Net carrying value Investment land and buildings (December 31, 2019) (December 31, 2018)
Land / İstanbul Ömerli 67,068,758 60,429,755 Building / İstanbul Gayrettepe 57,000,000 56,300,000 Building / Mersin 29,000,000 29,000,000 Appraisal and net carrying value 153,068,758 145,729,755
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, 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
Movements in intangible assets in the period from January 1 to December 31, 2018 is presented below: January 1, 2018 Additions Transfers December 31, 2018 Cost: Rights 69,128,445 14,236,138 - 83,364,583 69,128,445 14,236,138 - 83,364,583 Accumulated amortisation: Rights (41,116,655) (14,706,267) - (55,822,922) (41,116,655) (14,706,267) - (55,822,922)
Carrying amounts 28,011,790 27,541,661 Anadolu Hayat Emeklilik 2019 Annual Report 279
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
9 Investments in associates December 31, 2019 December 31, 2018 Carrying Participation Carrying Participation value rate % value rate %
İş Portföy Yönetimi AŞ 24,978,982 20.0% 21,225,636 20.0% Investments in associates, net 24,978,982 21,225,636
Total Shareholders’ Retained Profit for Reviewed Associate assets equity earnings the period or not Period December 31, İş Portföy Yönetimi AŞ 142,194,919 124,894,910 4,931,113 37,144,717 Reviewed 2019
TL 7,428,943 of income is obtained from associates through equity accounted consolidation method (December 31, 2018: TL 5,250,705). 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, 2019 December 31, 2018
Life mathematical reserve, ceded (Note 17,15) 3,803,491 3,094,026 Provision for outstanding claims, ceded (Note 17,15) 6,709,653 4,375,778 Reserve for unearned premiums, ceded (Note 17,15) 3,851,643 2,991,581 Provision for bonus and discount, ceded (Note 17,15) 365,948 933,239 Reserve for unexpired risks, ceded (Note 17,15) - 10,387 Other technical provision, ceded 1,014,229 803,664 Receivables from reinsurance companies - 1,012,069 Total 15,744,964 13,220,744
There is not any impairment losses recognised for reinsurance assets. Reinsurance liabilities December 31, 2019 December 31, 2018
Payables to reinsurance companies 1,243,040 - Cash deposited by insurance and reinsurance companies (Note 19) 4,479,832 4,054,710 Total 5,722,872 4,054,710 280 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Gains and losses recognised in the statement of income in accordance with existing reinsurance contracts are as follows: December 31, 2019 December 31, 2018
Life branch: Premiums ceded during the period (22,236,204) (18,674,322) Change in unearned premiums reserve, ceded 836,790 500,345 Commissions received from reinsurers(1) 5,638,926 5,082,540 Reinsurers share of claims paid 10,770,140 5,624,469 Change in outstanding claims, ceded 2,316,360 1,029,083 Change in provision for bonus and discount, ceded (563,156) 137,296 Change in life mathematical reserve, ceded 709,465 663,803 (2,527,679) (5,636,786)
Non-life branch: Premiums ceded during the period (509,894) (406,687) Change in unearned premiums reserve, ceded 23,272 59,809 Commissions received from reinsurers(1) 159,993 112,925 Reinsurers share of claims paid 29,826 29,251 Change in outstanding claims, ceded 17,516 15,388 Change in provision for bonus and discount, ceded (4,135) 2,907 (283,422) (186,407)
Total, net (2,811,101) (5,823,193)
(1) Deferred commissions are excluded from commissions received from reinsurers. 11 Financial assets As at December 31, 2019 and December 31, 2018, the Company’s financial assets are detailed as follows: Financial assets and financial investments with risk on policyholders December 31, 2019 December 31, 2018
Available for sale financial assets, Company’s own portfolio 886,943,685 573,585,026 Financial assets held for trading 191,398,602 55,437,380 Loans and receivables 52,714,137 47,231,715 Financial investments with risks on saving life policyholders classified as held for trading and available for sale 1,937,750,426 1,662,767,119 Impairment loss on financial assets (4,524,808) (4,524,808) Total 3,064,282,042 2,334,496,432 Anadolu Hayat Emeklilik 2019 Annual Report 281
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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, 2019 and December 31, 2018, the Company’s financial assets held for trading are detailed as follows: December 31, 2019 Nominal Fair Carrying value Cost value 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
December 31, 2018 Nominal Fair Carrying value Cost value value
Equity shares and other non-fixed income financial assets: Equity shares 582,437 1,205,770 1,670,912 1,670,912 Investment funds 16,240,978 53,035,653 53,766,468 53,766,468 Total financial assets held for trading purpose - other 54,241,423 55,437,380 55,437,380
Total financial assets held for trading purpose 54,241,423 55,437,380 55,437,380
The Company’s financial assets held for trading issued by the Company’s related parties, are detailed as follows: December 31, 2019 Nominal Fair Carrying value Cost value 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
December 31, 2018 Nominal Fair Carrying value Cost value value
Investment funds 16,240,978 53,035,653 53,766,468 53,766,468 Total 16,240,978 53,035,653 53,766,468 53,766,468 282 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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, 2019 and December 31, 2018, the Company’s loans and receivables are detailed as follows: December 31, 2019 Cost Fair value Carrying value
Reverse repo transaction 52,700,000 52,714,137 52,714,137 Receivables from reverse repo 52,700,000 52,714,137 52,714,137
December 31, 2018 Fair Cost value Carrying value
Reverse repo transaction 47,200,000 47,231,715 47,231,715 Receivables from reverse repo 47,200,000 47,231,715 47,231,715
As at December 31, 2019 and December 31, 2018, the Company’s available for sale financial assets in its own portfolio are detailed as follows: 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 2019 Annual Report 283
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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, 2018 Nominal value Cost Fair value Carrying value
Debt instruments: Private sector bonds and asset-backed securities 501,511,660 509,184,398 452,963,178 452,963,178 Government bonds 1,500,000 7,767,456 7,726,947 7,726,947 Total available for sale financial assets - debt instruments 503,011,660 516,951,854 460,690,125 460,690,125
Equity shares and other non-fixed income financial assets: Equity shares(1) 109,582,611 112,894,901 112,894,901 Total available for sale financial assets - other 109,582,611 112,894,901 112,894,901
Total available for sale financial assets 626,534,465 573,585,026 573,585,026
Impairment loss on available for sale equity shares (4,524,808) (4,524,808) (4,524,808)
Net available for sale financial assets 622,009,657 569,060,218 569,060,218
(1) Financial assets of which the fair values are measured reliably are presented at their fair values, if not, presented at their costs. 284 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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 108,617,575 and with a carrying value TL 168,883,786 (December 31, 2018: Equity shares with a cost amount of TL 108,617,575 and a carrying amount of TL 111,156,935). Financial investments with risks on saving life policyholders (“FIRSLP”) as at December 31, 2019 and December 31, 2018 are detailed as follows: 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
December 31, 2018 Nominal value Cost Fair value Carrying value
Debt instruments: Government bonds - TL 754,413,681 746,983,621 655,261,911 655,261,911 Eurobonds issued by the Turkish Government Investment funds 143,088,000 765,890,788 740,869,247 740,869,247 Total available for sale financial assets - debt instruments 897,501,681 1,512,874,409 1,396,131,158 1,396,131,158 Debt instruments for trading purposes Investment funds 486,159 26,159,153 28,879,925 28,879,925 The sum of debt instruments classified as financial assets for trading purposes 486,159 26,159,153 28,879,925 28,879,925 Time deposits 236,780,862 236,780,862 237,756,036 237,756,036 Total time deposits 236,780,862 236,780,862 237,756,036 237,756,036
Financial investments with risks on saving life policyholders 1,775,814,424 1,662,767,119 1,662,767,119 Anadolu Hayat Emeklilik 2019 Annual Report 285
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
The financial assets issued by the Company’s related parties and classified as FIRSLP are detailed as follows: December 31, 2019 Nominal Fair Carrying value Cost value value lnvestment 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
December 31, 2018 Nominal Fair Carrying value Cost value value
Investment funds 486,159 26,159,153 28,879,925 28,879,925 Total investment funds 486,159 26,159,153 28,879,925 28,879,925
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, December 31, December 31, 2019 2018 2017
Current financial assets: Available for sale financial assets, Company’s own portfolio 38,340,584 (52,949,439) 17,256,545 Financial assets held for trading 13,718,900 1,195,957 15,638,695 Loans and receivables 14,137 31,715 36,112 Financial investments with risks on saving life policyholders classified as available for sale 86,032,369 (113,047,305) 40,949,248 Total 138,105,990 (164,769,072) 73,880,600
Value increases/(decreases) reflect the difference between the carrying value and cost of the financial assets. The Company has TL 4,524,808 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, 2018: 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, 2019 Nominal Fair Carrying value Cost value 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 2,469,719,748 286 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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, 2018 Nominal Fair Carrying value Cost value value
Financial investments with risks on saving life policyholders - debt securities 1,134,768,702 1,775,814,424 1,662,767,119 1,662,767,119 Available for sale financial assets 339,775,391 346,727,504 298,999,813 298,999,813 Time deposits 177,952,965 177,952,965 178,507,685 178,507,685 Total 1,652,497,058 2,300,494,893 2,140,274,617 2,140,274,617
12 Loans and receivables December 31, December 31, 2019 2018
Receivables from insurance operations 64,328,597 55,964,785 Provisions for receivables from insurance operations (5,002,574) (2,574) Loans to the policyholders 40,071,706 34,863,790 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 22,951,649,071 16,966,723,364 Net fund value of participants 22,913,666,145 16,937,634,744 Other 37,982,926 29,088,620 Total receivables from main operations 23,051,046,800 17,057,549,365 Receivables from personnel 12,413 12,549 Other receivables 38,467,083 50,363,825 Total 23,089,526,296 17,107,925,739
The details of guarantees for the Company’s receivables are presented below: December 31, December 31, 2019 2018
Guarantees and commitments 4,562,398 4,503,696 Letters of guarantees 4,620,232 3,591,673 Real estate pledges 782,900 782,900 Total 9,965,530 8,878,269
December 31, December 31, 2019 2018
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, 2018: TL 117,996). b) Provision for premium receivables (due): TL 5.002.574 (December 31, 2018: TL 2,574). The Company provides provision for its doubtful receivables in the legal follow-up by considering the value and nature of the receivable. Anadolu Hayat Emeklilik 2019 Annual Report 287
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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 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, 2019 and December 31, 2018, cash and cash equivalents are as follows: December 31, 2019 December 31, 2018 At the At the At the At the end of the beginning of end of the beginning of period the period period the period
Cash on hand 219 1,002 1,002 5,654 Bank deposits 477,786,945 320,570,433 320,570,433 385,859,525 Bank guaranteed credit card receivables with maturities less than three months(1) 179,135,571 197,086,418 197,086,418 195,892,932 Cheques given and payment orders - (16) (16) (24) Cash and cash equivalents in the balance sheet 656,922,735 517,657,837 517,657,837 581,758,087
Blocked amount(2) (Note 11) (238,636,475) (178,507,685) (178,507,685) (160,089,678) Interest accruals on bank deposits (92,143) (1,059,122) (1,059,122) - Term deposits with original maturities of longer than 3 months (131,612,519) - - (207,112,669) Cash and cash equivalents presented in the statement of cash flow 286,581,598 338,091,030 338,091,030 214,555,740
(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, 2019, this amount regarding insurance operations is blocked in favour for the Ministry. As at December 31, 2019 and December 31, 2018, bank deposits are further analysed as follows: December 31, 2019 December 31, 2018
Foreign currency denominated bank deposits - time deposits - - - demand deposits 36,930,684 14,631,702 Bank deposits in TL - time deposits 425,341,138 294,593,951 - demand deposits 15,515,123 11,344,780 Cash at banks 477,786,945 320,570,433
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. As at December 31, 2018, TL time deposits have a maximum maturity of 56 days and their simple interest rates vary between 23.15% and 23.75%. The Company has not any foreign currency denominated bank deposits. 288 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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, 2019, 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, 2019, the Company’s registered capital is TL 900,000,000. As at December 31, 2019, 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, 2019 December 31, 2018
Legal reserves at the beginning of the period 156,456,501 128,969,833 Transfer from profit 17,460,464 27,486,668 Legal reserves at the end of the period 173,916,965 156,456,501
Extraordinary reserves The movement of extraordinary reserves is presented below: December 31, 2019 December 31, 2018
Extraordinary reserves at the beginning of the period 33,273,713 22,371,536 Transfer from profit 86,770,899 10,902,177 Extraordinary reserves at the end of the period 120,044,612 33,273,713
Statutory reserves The movement of statutory reserves is presented below: December 31, 2019 December 31, 2018
Statutory reserves at the beginning of the period 32,870,889 15,753,835 Transfer from profit 19,805,634 17,117,054 Statutory reserves at the end of the period 52,676,523 32,870,889 Anadolu Hayat Emeklilik 2019 Annual Report 289
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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, 2019, actuarial loss amounting to TL (9,662,172) is presented under the other profit reserves(December 31, 2018: TL (7,483,209)). 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, 2018: 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, 2019 December 31, 2018
Valuation differences at the beginning of the period (56,447,893) 9,775,232
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 (303,245) 959,657 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 143,182,278 (174,856,640) 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 (136,023,164) 166,113,808 Change in unrealised gains and losses from available for sale financial assets, company’s own portfolio 103,819,715 (75,714,205) Deferred and corporate tax effect (14,520,455) 15,204,830
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 27,653,334 7,111,762 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 (26,270,666) (6,756,174) Unrealised gains and losses transferred from equity to income statement due to disposal of available for sale financial assets, company’s own portfolio 12,748,993 2,423,470 Deferred and corporate tax effect (2,826,332) (555,812) Fair value changes in investments in associates 623,679 (153,821) Valuation differences at the end of the period 51,636,244 (56,447,893) 290 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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, 2019 December 31, 2018
Temporary differences arising from revaluation of financial assets 7,757,097 (79,102,144) Permanent differences arising from revaluation of financial assets and actuarial gain and losses 33,255,815 (3,238,906) The differences arising from revaluation of investment properties 3,265,699 3,226,525 Deferred tax effect 642,559 17,993,776 Total 44,921,170 (61,120,749)
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, 2019 December 31, 2018 Should be provided(2) Provided(1) Should be provided(2) Provided(1) Life: Financial assets(1) 2,015,927,862 2,304,906,450 1,886,367,251 2,079,159,144 Total 2,015,927,862 2,304,906,450 1,886,367,251 2,079,159,144
Non-life: Financial assets(1) 401,802 1,147,404 403,239 867,730 Total 401,802 1,147,404 403,239 867,730
Total 2,016,329,664 2,306,053,854 1,886,770,490 2,080,026,874
(1) Government bonds and treasury bills are measured at daily official prices announced by the Central Bank of Turkey as at December 31, 2019 and December 31, 2018; 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, 2019 (December 31, 2018), minimum guarantee amount of June 30, 2019 (June 30, 2018) is shown as necessary guarantee amount; since, minimum guarantee amount as at June 30, 2019 (June 30, 2018) is based on June 30, 2019 (June 30, 2018) calculations. As at December 31, 2019, TL 736,942,001 of government bonds (December 31, 2018: TL 845,307,241) and TL 1,066,939,535 of Eurobonds (December 31, 2018: TL 789,575,987) and TL 35,524,079 (December 31, 2018: TL 28,879,925) of investment funds and TL 466,648,239 of time deposits (December 31, 2018: TL 416,263,721) are provided as guarantee for the life and non-life branches. Anadolu Hayat Emeklilik 2019 Annual Report 291
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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, 2019(1) December 31, 2018 Number of Mathematical Number of Mathematical policies reserves policies reserves Additions during the period 1,668,026 637,201,100 1,503,140 341,029,394 Disposals during the period (1,993,837) (300,666,810) (1,718,622) (185,156,912) Outstanding 1,993,002 2,224,222,714 2,318,813 1,887,688,424
(1) The above table includes 65 of reactivated life insurance policies (December 31, 2018: 51 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 11,377,946 (December 31, 2018: TL (144,313,308)) is recognised under the life mathematical provisions. TL 3,803,491 (December 31, 2018: TL 3,094,026) 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, 2019 December 31, 2018
Guarantees given to death by accident 5,675,509,354 4,889,562,426 Guarantees given to disability by accident 5,634,799,497 4,884,927,260 Total 11,310,308,851 9,774,489,686 292 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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, 2019 and December 31, 2018, individual pension investment funds founded by the Company and their unit prices are as follows: December 31, 2019 December 31, 2018 Unit price Unit price AH1 Bond Fund 0.072922 0.057288 AH2 Money Market Fund 0.063784 0.052456 AH3 First Debt Instruments Fund (*) 0.091578 0.073337 AH4 Second Debt Instruments Fund (*) 0.070777 0.060060 AH5 Equity Fund 0.136636 0.100702 AH6 Developed Countries Flexible Fund 0.082881 0.063178 AH8 Conservative Flexible Fund 0.066990 0.055648 AH9 Balanced Flexible Fund 0.079843 0.064691 AH0 Dynamic Flexible Fund 0.123183 0.097810 AGE Participation Standard Fund 0.022362 0.017696 ABE BRIC Plus Fund 0.043130 0.031534 AHC Private Sector Debt Instruments Fund 0.023845 0.019823 AHL Aggressive Flexible Fund 0.021917 0.016577 AET Contribution Fund 0.017270 0.012997 AER Participation Contribution Fund 0.020009 0.015610 AEA Gold Fund 0.030113 0.022839 AG1 Group Bond Fund 0.072445 0.056704 AG2 Group Debt Instruments Fund 0.068745 0.054639 AG3 Group Equity Fund 0.104996 0.075420 AG4 Group Conservative Fund 0.069646 0.057128 HS1 Debt Instruments Fund 0.047832 0.037350 AHB Second Equity Fund 0.064303 0.046566 ATK Standard Fund 0.036737 0.028648 ATE Isbank Subsidiaries Index Fund 0.050749 0.041520 AO1 Initial Fund 0.015730 0.013094 AO2 Initial Participation Fund 0.014905 0.012495 AJA Auto Enrolment Aggressive Fund 0.013362 0.009650 AJB Auto Enrolment Dynamic Fund 0.014140 0.010515 AJC Auto Enrolment Balanced Fund 0.014058 0.011087 AJF Auto Enrolment Conservative Fund 0.014011 0.011438 AJG Auto Enrolment Aggressive Participation Fund 0.014572 0.009471 AJH Auto Enrolment Dynamic Participation Fund 0.014797 0.010326 AFH Auto Enrolment Standard Fund 0.014112 0.011451 AFP Auto Enrolment Participation Standard Fund 0.014077 0.011605
(*) In accordance with the permission dated February 14, 2019 and numbered 2398 taken from the Capital Markets Board of Turkey, the name of the fund was changed on February 26, 2019. Anadolu Hayat Emeklilik 2019 Annual Report 293
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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, 2019 and December 31, 2018: December 31, 2019 December 31, 2018 Participation certificates in circulation Participation certificates in circulation Number Amount Number Amount AH1 Bond Fund 34,936,636,839.41 2,547,649,431.60 40,533,267,485.50 2,322,069,827.71 AH2 Money Market Fund 22,639,810,896.35 1,444,057,698.21 21,327,707,916.41 1,118,766,246.46 AH3 First Debt Instruments Fund (*) 20,275,861,042.58 1,856,822,802.56 16,591,145,296.56 1,216,744,822.61 AH4 Second Debt Instruments Fund (*) 9,698,733,885.85 686,447,288.24 10,052,648,933.72 603,762,094.96 AH5 Equity Fund 5,150,265,375.40 703,711,659.83 5,378,536,625.87 541,629,395.30 AH6 Developed Countries Flexible Fund 7,361,062,529.29 610,092,223.49 7,303,911,899.88 461,446,546.01 AH8 Conservative Flexible Fund 22,152,608,429.11 1,484,003,238.67 20,275,146,686.22 1,128,271,362.80 AH9 Balanced Flexible Fund 26,121,885,851.60 2,085,649,732.05 27,975,847,381.21 1,809,785,542.94 AH0 Dynamic Flexible Fund 8,739,340,240.74 1,076,538,148.88 9,632,969,756.81 942,200,771.91 AGE Participation Standard Fund 17,417,213,087.53 389,483,719.06 17,560,348,601.34 310,747,928.85 ABE BRIC Plus Fund 11,299,226,064.65 487,335,620.17 9,954,462,452.51 313,904,018.98 AHC Private Sector Debt Instruments Fund 32,109,416,047.33 765,649,025.65 25,387,278,568.77 503,252,023.07 AHL Aggressive Flexible Fund 4,803,238,660.76 105,272,581.73 4,183,028,705.62 69,342,066.85 AET Contribution Fund 191,522,883,592.49 3,307,600,199.64 172,046,496,849.71 2,236,088,319.56 AER Participation Contribution Fund 4,301,317,898.29 86,065,069.83 4,062,190,452.69 63,410,792.97 AEA Gold Fund 93,583,902,826.90 2,818,092,065.83 63,026,789,046.45 1,439,468,835.03 AG1 Group Bond Fund 2,958,668,122.98 214,340,712.17 3,514,838,687.57 199,305,412.94 AG2 Group Debt Instruments Fund 1,008,745,295.87 69,346,195.37 954,428,564.27 52,149,022.32 AG3 Group Equity Fund 858,680,286.81 90,157,995.39 924,780,873.61 69,746,973.49 AG4 Group Conservative Fund 2,510,909,308.27 174,874,789.68 2,643,813,957.95 151,035,803.79 HS1 Debt Instruments Fund 6,534,937,474.38 312,579,129.28 8,088,824,492.85 302,117,594.81 AHB Second Equity Fund 1,332,884,951.40 85,708,501.03 1,612,619,574.70 75,093,243.12 ATK Standard Fund 13,794,535,640.17 506,769,855.81 13,765,112,157.80 394,342,933.10 ATE Isbank Subsidiaries Index Fund 2,737,909,093.20 138,946,148.57 3,117,567,563.13 129,441,405.22 AO1 Initial Fund 5,830,253,262.45 91,709,883.82 5,725,401,825.47 74,968,411.50 AO2 Initial Participation Fund 4,223,968,854.87 62,958,255.78 4,128,566,576.47 51,586,439.37 AJA Auto Enrolment Aggressive Fund 490,222,276.59 6,550,350.06 200,589,573.14 1,935,689.38 AJB Auto Enrolment Dynamic Fund 571,516,674.96 8,081,245.78 256,637,276.80 2,698,540.97 AJC Auto Enrolment Balanced Fund 586,412,045.77 8,243,780.54 251,810,369.81 2,791,821.57 AJF Auto Enrolment Conservative Fund 258,836,981.50 3,626,564.95 119,769,742.17 1,369,926.31 AJG Auto Enrolment Aggressive Participation Fund 329,192,796.26 4,796,997.43 83,550,828.75 791,309.90 AJH Auto Enrolment Dynamic Participation Fund 364,499,906.95 5,393,505.12 118,289,991.32 1,221,462.45 AFH Auto Enrolment Standard Fund 27,193,202,791.80 383,750,477.80 16,795,913,491.82 192,330,005.40 AFP Auto Enrolment Participation Standard Fund 20,697,680,649.56 291,361,250.50 13,254,472,397.88 153,818,152.18 Total 22,913,666,144.52 16,937,634,743.83
(*) In accordance with the permission dated February 14, 2019 and numbered 2398 taken from the Capital Markets Board of Turkey, the name of the fund was changed on February 26, 2019. 294 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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, 2019 Additions during Left/cancellations 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
December 31, 2018 Additions during Left/cancellations the period during the period Existing Total amount Individuals 126,895 137,981 958,071 10,519,506,109 Group 465,531 202,150 961,424 4,118,629,522 Total 592,426 340,131 1,919,495 14,638,135,631
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 3,393,665,270 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, 2019 January 1 - December 31, 2018 Number of Gross Net Number of Gross contracts contributions contributions contracts contributions Net contributions Individuals 150,165 943,638,872 936,311,216 126,895 607,948,965 607,946,685 Group 809,880 266,537,808 266,534,121 465,531 248,924,874 248,924,517 Total 960,045 1.210.176.680 1,202,845,337 592,426 856,873,839 856,871,202
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 109,403,334 as state contribution. Anadolu Hayat Emeklilik 2019 Annual Report 295
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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, 2019 January 1 - December 31, 2018 Number of Gross Net Number of Gross Net contracts contributions contributions contracts contributions contributions Individuals 7,028 223,125,537 223,125,537 6,404 203,262,507 203,262,507 Group 29,713 33,238,710 33,238,710 76,020 38,417,809 38,417,809 Total 36,741 256,364,247 256,364,247 82,424 241,680,316 241,680,316
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, 2019 January 1 - December 31, 2018 Number of Gross Net Number of Gross Net contracts contributions contributions contracts contributions contributions Individuals ------Group ------Total ------
In addition to amounts above, the Company has transferred TL 37,900,260 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, 2019 January 1 - December 31, 2018 Number of Gross Net Number of Gross Net contracts contributions contributions contracts contributions contributions Individuals 160,507 2,467,865,313 2,365,914,190 137,981 2,206,238,790 2,119,286,823 Group 592,004 1,104,500,869 1,067,715,801 202,150 860,963,478 830,068,801 Total 752,511 3,572,366,182 3,433,629,991 340,131 3,067,202,268 2,949,355,624
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 511,617,786 as state contribution. 17.12 Distribution of new life insurance participants in terms of their numbers and first premium amounts for individuals and groups during the period: January 1 - December 31, 2019 January 1 - December 31, 2018 Number of First premium Number of First premium contracts amounts (TL) contracts amounts (TL) Individuals 135,106 219,189,645 114,598 104,690,910 Group 1,532,855 828,327,158 1,388,491 371,810,706 Total(1) 1,667,961 1,047,516,803 1,503,089 476,501,616
(1) 65 (January 1 - December 31, 2018: 51) of reactivated contracts are not included in the current period additions. 296 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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, 2019 January 1 - December 31, 2018 Number of Mathematical Number of Mathematical contracts reserves (TL) contracts reserves (TL) Individuals 108,919 192,935,375 143,654 97,964,834 Group 1,884,918 107,731,435 1,574,968 87,192,079 Total 1,993,837 300,666,810 1,718,622 185,156,913
17.14 Profit share distribution rate of life insurances as of December 31, 2019 and 2018 December 31, 2019 December 31, 2018 (%) (%) TL 15.32 11.37 USD 6.55 6.48 EURO 5.10 5.27 GBP 6.65 6.83
17.15 Information on insurance contract balances in the financial statements December 31, 2019 December 31, 2018
Reserve for unearned premiums, gross 57,623,982 43,702,801 Reserve for unearned premiums, ceded (Note 10) (3,851,643) (2,991,581) Reserves for unearned premiums, net 53,772,339 40,711,220
Provision for outstanding claims, gross 113,483,407 94,642,267 Provision for outstanding claims, ceded (Note 10) (6,709,653) (4,375,778) Provision for outstanding claims, net 106,773,754 90,266,489
Life mathematical provisions, gross 2,235,600,660 1,743,375,116 Life mathematical provisions, ceded (Note 10) (3,803,491) (3,094,026) Life mathematical provisions, net 2,231,797,169 1,740,281,090
Provision for bonus and discount, gross 757,405 1,343,392 Provision for bonus and discount, ceded (Note 10) (365,948) (933,239) Provision for bonus and discount, net 391,457 410,153
Reserve for unexpired risks, gross - 28,897 Reserve for unexpired risks, ceded (Note 10) - (10,387) Reserve for unexpired risks, net - 18,510
Equalisation provision, gross 40,448,292 28,528,254 Equalisation provision, ceded (Note 10) (1,014,229) (803,664) Equalisation provision, net 39,434,063 27,724,590
Total insurance technical provisions, net 2,432,168,782 1,899,412,052 Anadolu Hayat Emeklilik 2019 Annual Report 297
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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, 2019 and January 1 - December 31, 2018 are as follows: Mathematical provisions December 31, 2019 December 31, 2018 New policies issued 202,947,647 88,566,653 Activated from reductions 8,092,663 1,463,538 Activated from cancellations - 12,745 Contracts with increased capital 227,129,588 149,047,425 Total increase in the portfolio 438,169,898 239,090,361
Factors resulting from individual insurance policies which provide portfolio decrease through the change in mathematical provisions, gross for the periods January 1 - December 31, 2019 and January 1 - December 31, 2018 are as follows: Mathematical provisions December 31, 2019 December 31, 2018 Terminations and cancellations (-) (756,623) - Transformed to contracts without charge (-) (49,922,712) 1,473,671 Insurances had capital decrease (-) - - Withdrawals (-) (118,217,055) (65,979,373) Ceased with risk formed (-) (4,530,043) (3,133,980) Expirations (-) (19,508,942) (30,325,152) Total decrease in the portfolio (192,935,375) (97,964,834)
Factors resulting from group insurance policies which provide portfolio increase through the change in mathematical provisions, gross for the period January 1 - December 31, 2019 and January 1 - December 31, 2018 are as follows: Mathematical provisions December 31, 2019 December 31, 2018 New contracts 192,919,843 84,435,952 Activated from reductions - 17,265 Activated from cancellations - 41,230 Insurances had capital increase 6,111,359 17,444,587 Total increase in the portfolio 199,031,202 101,939,034
Factors resulting from group insurance policies which provide portfolio decrease through the change in mathematical provisions, gross for the periods January 1 - December 31, 2019 and January 1 - December 31, 2018 are as follows: Mathematical provisions December 31, 2019 December 31, 2018 Terminations and cancellations (-) (251,839) (1,949) Transformed to contracts without charge (-) (930,556) 33,236 Insurances had capital decrease (-) (41,025,736) (76,773,655) Withdrawals (-) (61,033,829) (5,177,723) Ceased with risk formed (-) (816,187) (167,587) Expirations (-) (3,673,288) (5,104,401) Total decrease in the portfolio (107,731,435) (87,192,079) 298 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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 2014 2015 2016 2017 2018 2019 Total Claim year 23,517,657 22,040,556 31,699,169 34,947,861 44,249,830 45,171,372 201,626,445 1 year later 10,486,387 13,955,576 14,179,090 14,090,104 19,189,071 - 71,900,228 2 years later 1,248,087 843,246 1,691,659 757,028 - - 4,540,020 3 years later 469,328 734,373 632,504 - - - 1,836,205 4 years later 255,552 496,783 - - - - 752,335 5 years later 112,032 - - - - - 112,032 Cumulative payments up to date 36,089,043 38,070,534 48,202,422 49,794,993 63,438,901 45,171,372 280,767,265 Payments for the period ended as of December 31, 2019(1) 112,032 496,783 632,504 757,028 19,189,071 45,171,372 66,358,790
(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 2019 Annual Report 299
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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, 2019 December 31, 2018
Payables from insurance operations 44,297,453 20,123,620 Cash deposited by insurance and reinsurance companies 4,479,832 4,054,710 Payables from pension activities 23,180,814,298 17,250,229,880 Net fund value of participants 22,913,666,145 16,937,634,744 Other 267,148,153 312,595,136 Other payables from main operations 4,142,951 3,535,202 Total payables from main operations 23,233,734,534 17,277,943,412
Due to shareholders 60,849 131,097 Due to personnel 33,290 54,560 Payables to other related parties 117 94 Total payables to related parties 94,256 185,751
Guarantees and deposits received 973,972 1,054,058 Other payables 31,821,827 18,193,250 Total other payables 32,795,799 19,247,308
Deferred commission income 327,171 238,053 Expense accruals 6,975,344 3,623,133 Other deferred income and expense accruals 683 6,661 Total deferred income and expense accruals 7,303,198 3,867,847
Total 23,273,927,787 17,301,244,318
20 Financial liabilities Financial liabilities as at the reporting date are given in the note 34 - Financial costs. 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. 300 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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, 2019 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, 2019 December 31, 2018
Difference in valuation of financial assets 16,882,920 8,851,752 Provision for employee termination benefits and other wages (37,316,074) (30,879,050) Provision for claims (888,879) (834,333) Equalisation reserves / bonus and discount provision (43,354,732) (28,134,743) The difference arising from revaluation of investment properties 67,980,279 64,053,149 Differences in depreciation methods on tangible and intangible assets between tax regulations and the Reporting Standards 14,395,577 16,447,444 Provision for unused vacation pay liability (10,848,853) (8,852,358) Total 6,850,238 20,651,861
Deferred tax (assets) / liabilities: December 31, 2019 December 31, 2018
Difference in valuation of financial assets 3,380,208 1,745,444 Provision for employee termination benefits and other wages (7,800,038) (6,457,120) Provision for claim (195,553) (183,553) Equalisation reserves / bonus and discount provision (8,670,946) (5,626,949) The difference arising from revaluation of investment properties 14,254,532 13,402,701 Differences in depreciation methods on tangible and intangible assets between tax regulations and the Reporting Standards 2,591,646 3,129,689 Provision for unused vacation pay liability (2,386,748) (1,947,519) Total 1,173,101 4,062,693
Movement of deferred tax assets / liabilities for the year ended as of December 31, 2019 and December 31, 2018 are given below: Movement of deferred tax (assets) / liabilities: December 31, 2019 December 31, 2018
Opening balance at January 1 4,062,693 9,057,907 Recognised in profit or loss (20,236,379) 9,653,804 Recognised in equity 17,346,787 (14,649,018) Closing balance 1,173,101 4,062,693
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 6,017.60 as at December 31, 2019 (December 31, 2018: TL 5,434.42). Anadolu Hayat Emeklilik 2019 Annual Report 301
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
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, 2019, 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 7.20% and a discount rate of 11.70% , resulting in a real discount rate of 4.20% (December 31, 2018: 11.30%, 16%, 4.22% respectively). As at 31 December 2019 the Company has actuarial gain or loss difference in the calculation of employee termination benefit amounting to TL 2,573,778 (December 31, 2018: TL 3,553,816). Movement of provision for employee termination benefits during the period is presented below: December 31, 2019 December 31, 2018 Provision as at January 1 18,079,050 13,724,571 Interest cost 2,892,648 1,550,877 Service cost 2,040,198 1,651,955 Payments made during the year (3,569,600) (2,402,169) Actuarial gain and losses 2,573,778 3,553,816 Provision at the of the period/year 22,016,074 18,079,050
23 Other liabilities and provisions As at December 31, 2019 and December 31, 2018; the details of the provisions for other risks are as follows: December 31, 2019 December 31, 2018 Provision for unused vacation pay liability 10,848,853 8,852,358 Dividend to personnel and salary provision 15,300,000 12,800,000 Provision for commissions to sales personnel 2,000,000 1,400,000 Provision for litigations 755,785 737,481 Provision for commissions and expenses 133,095 96,851 Provisions for costs 29,037,733 23,886,690 Provision for employee termination benefits 22,016,074 18,079,050 Total provisions for other risks 51,053,807 41,965,740
24 Net insurance premium revenue December 31, 2019 December 31, 2018
Non-life 542,357 576,224 Life 1,206,792,924 620,538,760 Total 1,207,335,281 621,114,984 302 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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, 2019 and 2018 received from individual pension, life and non-life branches in accordance with TAS 18 are as follows: December 31, 2019 December 31, 2018
Fund management income 304,264,809 256,416,861 Administrative cost deductions 58,862,051 46,359,487 Entrance fee 49,513,171 53,889,365 Administrative cost deduction in the form of cessation 14,661,983 12,032,419 Other technical income 418,018 487,533 Total 427,720,032 369,185,665
26 Investment income January 1 - January 1 - December 31, 2018 December 31, 2017 Financial assets held-for-trading: Valuation gain 20,363,054 (13,901,811) Gain on sale 12,825,144 (3,839,161) Interest income - - Cash dividend income 2,485 197,174 Financial assets available- for-sale: Interest income 120,358,091 127,239,888 Valuation gain 163,765,853 257,951,200 Gain on sale 1,319,299 390,642 Cash dividend income 553,633 6,359,855 Income from associates: 7,428,943 5,250,705 Investment properties: Rent income 858,473 817,993 Valuation gain 7,625,114 5,018,451 Other income(1): 127,122,539 118,233,586 Total(2) 462,222,628 503,718,522
(1) Other income includes interest income from time deposits, income from derivative transactions, foreign exchange gains and etc. (2) TL 170,481,974 (December 31, 2018: TL 134,804,696) of investment income obtained from the Company’s own portfolio and TL 291.740.654 (December 31, 2018: TL 368.913.826) of investment income obtained from policyholders’ portfolio. Anadolu Hayat Emeklilik 2019 Annual Report 303
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
27 Net income accrual on financial assets Net income accrual from the Company’s own portfolio is as follows: January 1 - January 1 - December 31, 2019 December 31, 2018 Available-for-sale financial assets: Fair value differences recognized in equity 51,242,337 (65.005.103) Fair value differences recognized in profit / loss 696,128 12.650.872 Total 51,938,465 (52.354.231)
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, 2019 is TL 33,190,683 (December 31, 2018: TL 17,543,798 net loss). 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, 2019 and 2018, the details of operating expenses are as follows: December 31, 2019 December 31, 2018
Production commission expenses (285,314,203) (186,601,830) Employee benefit expenses (167,464,628) (135,947,830) Administration expenses (57,938,672) (62,024,145) Marketing and sales expenses (32,154,702) (28,678,470) Outsourced benefits and services (32,040,725) (28,890,634) Reinsurance commission income 5,709,800 5,113,178 Other expenses (4,130,214) (3,017,219) Total (573,333,344) (440,046,950)
(*) 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) 304 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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, 2019 December 31, 2018
Wages and salaries 167,464,628 135,947,830 Employee termination benefits 1,363,246 800,663 Provision for unused vacation 1,996,495 2,415,133 Total 170,824,369 139,163,626
34 Financial costs As at December 31, 2019, TL 10,019,794 interest expense and TL 8,689,412 amortisation expense 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 (January 1 - December 31, 2018: None), As at December 31, 2019 discounted reimbursement plan for operating leases of the Company is as follows (December 31, 2018: None): Operating Leases Reimbursement Plan -TL December 31, 2019
Up to 1 Year 4,999,036 Up to 2 Years 3,924,527 Up to 3 Years 3,650,440 Up to 4 Years 3,931,015 Up to 5 Years 4,801,442 More than 5 years 32,462,938 Total 53,769,398 Anadolu Hayat Emeklilik 2019 Annual Report 305
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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, 2019 December 31, 2018
Corporate tax liabilities: Corporate tax provision 119,305,000 68,607,000 Less: Corporation taxes paid in advances during the period (87,456,742) (48,580,868) Total 31,848,258 20,026,132
Total tax expense recognised in profit or loss December 31, 2019 December 31, 2018
Current tax expense 119,305,000 68,607,000 Deferred tax expense / (income) (20,236,379) 9,653,804 Total 99,068,621 78,260,804
Total tax expense recognised in equity December 31, 2019 December 31, 2018
Change in fair value of available for sale financial assets and owner occupied properties (1,742,999) 16,118,544 Actuarial gain and losses 2,385,558 1,870,802 Total deferred tax expense recognised in equity 642,559 17,989,346
Reconciliation of the Company’s taxation for the year period ended as of December 31, 2019 and 2018 are as follows: December 31,2019 December 31,2018 Profit before tax 459.760.389 Tax rate (%) 332.923.986 Tax rate (%) Taxes on income per statutory tax rate (101,147,286) (22.00) (73,243,277) (22.00) Disallowable expenses (39,017,365) (8.49) (22,747,907) (6.83) Effect of allowances 41,096,030 8.94 17,730,380 5.32 Total tax expense recognised in profit or loss (99,068,621) (21.55) (78,260,804) (23.51) 306 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
36 Net foreign exchange gains December 31, 2019 December 31, 2018
Foreign exchange gains 10,053,255 16,990,379 Foreign exchange losses (5,563,894) (8,907,743) Total 4,489,361 8,082,636
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, 2019 December 31, 2018 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 360,691,768 254,663,182 Earnings per share (for 100 shares) 0.83882 0.59224
38 Dividends per share The Company’s dividend distribution in 2019 from the profit of 2018 is presented below. Cash dividend corresponding to a share Total cash dividend having TL 1 of nominal value Group amount (TL) Amount (TL) Rate (%) A 256,976,74 0.2569768 25.69768 Gross B 110,243,023,26 0.2569768 25.69768 Total 110,500,000,00
The Company’s dividend distribution in 2019 from the profit of 2018 is TL 130,000,000. Additionally, TL 6,125,454 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, 2019, there are 419 ongoing law suit filed against the Company and total amount of these law suits are TL 10,115,691, TL 15,655,933 of provision (December 31, 2018: TL 14,061,439) 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 83 ongoing law suits prosecuted by the Company against the third parties that have amounted TL 7,210,131, Subsequent to the reporting period, there is no expected amount of law suits to be prosecuted against the Company, Anadolu Hayat Emeklilik 2019 Annual Report 307
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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, 2019 December 31, 2018
Guarantees and commitments 3.343.986 2.861.406 Guarantees and commitments 3.343.986 2.861.406
The Company does not have finance lease liabilities as at the reporting period (December 31, 2018: None). 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): Financial Independent Carrying Participation Reporting Profit before Net profit of statements auditor’s amount rate (%) period income tax the period base opinion İş Portföy December 31, Yönetimi AŞ 24,978,982 20.0 2019 47,583,170 37,144,717 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 308 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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, 2019 and December 31, 2018 are as follows: December 31, 2019 December 31, 2018
Türkiye İş Bankası AŞ - receivables from credit card collections 170,623,012 188,935,962 Cash and cash equivalents 170,623,012 188,935,962
Türkiye İş Bankası AŞ - bank deposits 217,710,555 137,493,170 Cash at banks 217,710,555 137,493,170
Anadolu Anonim Türk Sigorta Şirketi - premium receivable 68 25 Receivables from main operations 68 25
Türkiye İş Bankası AŞ - commission payables 32,469,117 11,671,942 Milli Reasürans TAŞ - premium payables 1,289,981 543,781 Payable from main operations 33,759,098 12,215,723
Türkiye İş Bankası AŞ, - settlement and custody commission 33 - Türkiye İş Bankası AŞ, - operating leases payables 3,346,088 - Anadolu Anonim Türk Sigorta Şirketi - operating leases payables 1,296,000 - Anadolu Anonim Türk Sigorta Şirketi - premium payables 60,849 137,069 Payables to shareholders 4,702,970 137,069
İş Portföy Yönetimi A,Ş, 3,989,219 2,597,677 İş Merkezleri Yönetim ve İşletim A,Ş, 285,388 306,778 İş Gayrimenkul Yatırım Ortaklığı A,Ş, 43,583 128,938 İş Gayrimenkul Yatırım Ortaklığı A,Ş, - operating leases payables 66,505,809 - İş Portföy Yönetimi A,Ş, Birinci G,menkul Yat,Fonu - operating leases payables 23,348,191 - İş-Net Elektronik Bilgi Üretim Dağıtım Ticaret ve İletişim A,Ş, 92,793 32,068 Erişim Müşteri Hizmetleri A,Ş, 1,468,694 1,366,737 Softtech Yazılım Teknoloji Araştırma Geliştirme ve Pazarlama Ticaret A,Ş, - 3,815 Other payables 95,733,677 4,436,013 Anadolu Hayat Emeklilik 2019 Annual Report 309
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (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 32,523,391 individual retirement employer contributions (December 31, 2018: TL 27,215,781) have been collected from related parties, in amount of TL 714,119 life insurance employer premium was accrual (December 31, 2018: TL 488,432). The details of revenues and expenses for the year ended as of December 31, 2019 and 2018 stems from related parties are as follows December 31, 2019 December 31, 2018
Milli Reasürans TAŞ - premiums written, ceded 2,267,611 2,062,750 Premiums written, ceded 2,267,611 2,062,750
Milli Reasürans TAŞ - commission income from reinsurers 238,523 428,043 Commission income from reinsurers 238,523 428,043
Türkiye İş Bankası AŞ - interest income from deposits 15,097,349 26,827,071 Türkiye İş Bankası AŞ - rent income 5,978 13,532 Investment income 15,103,327 26,840,603
İş Portföy Yönetimi AŞ - investment consultancy fee 2,129,310 1,578,429 İş Yatırım Menkul Değerler A,Ş, - settlement and custody expense 617 161 Türkiye İş Bankası AŞ - settlement and custody expense 17,158 13,127 Investment expense 2,147,085 1,591,717
Türkiye İş Bankası AŞ - commission of policy production 216,000,441 129,724,138 İş Portföy Yönetimi AŞ - portfolio management fee of pension funds 16,373,564 11,721,046 İş Merkezleri Yönetim ve İşletim A,Ş, - building administrative expense 5,039,270 4,761,520 İş Gayrimenkul Yatırım Ortaklığı AŞ - operating leases interest expense (TFRS 16 affect) 5,848,910 - İş Gayrimenkul Yatırım Ortaklığı A,Ş, - other expenses(*) 894,652 7,165,701 İş-Net Elektronik Bilgi Üretim Dağ, Tic, ve İletişim A,Ş, - communication expense 5,272,466 1,549,714 Erişim Müşteri Hizmetleri A,Ş, - call center service expense 18,073,491 15,536,857 Softtech Yazılım Teknoloji Araştırma Geliştirme ve Pazarlama Ticaret A,Ş - software support expense 49,251 51,273 Türkiye İş Bankası AŞ - commission of premium collection and banking services 1,811,339 1,156,304 Türkiye Iş Bankası AŞ - fund operation service expense 2,694,073 2,244,531 Türkiye Iş Bankası AŞ - operating leases interest expense (TFRS 16 affect) 284,852 - Türkiye Iş Bankası AŞ - data storage expenses 387,161 - Türkiye Iş Bankası AŞ - other expenses (*) 7,823 291,741 İş Portföy Yönetimi A,Ş, Birinci Gayrimenkul Yatırım Fonu - operating leases interest expense (TFRS 16 affect) 2,202,493 - İş Portföy Yönetimi A,Ş, Birinci Gayrimenkul Yatırım Fonu - other expenses (*) - 371,679 Anadolu Anonim Türk Sigorta Şirketi - premium paid 4,470,899 4,015,374 Anadolu Anonim Türk Sigorta Şirketi - operating leases interest expense 212,104 - Anadolu Anonim Türk Sigorta Şirketi - other expenses (*) 87,066 283,995 Other expenses 279,709,855 178,873,873
(*) For the period ended December 31, 2018, rental expenses are included in other expenses. 310 Anadolu Hayat Emeklilik 2019 Annual Report
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
46 Events after the reporting period Events after the reporting period are disclosed in note 1.10 - Events after the reporting period. 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, 2019 December 31, 2018
Securities reconciliation account 37,109,651 49,370,276 Other 1,320,512 993,902 Total 38,430,163 50,364,178
Short-term liabilities ( Other miscellaneous payables) December 31, 2019 December 31, 2018
Payable to suppliers 21,921,973 10,256,488 Suspense accounts 9,899,756 7,936,681 Securities reconciliation account 98 81 Total 31,821,827 18,193,250
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. Anadolu Hayat Emeklilik 2019 Annual Report 311
Anadolu Hayat Emeklilik Anonim Şirketi Notes to the Consolidated Financial Statements As at December 31, 2019 (Currency: Turkish Lira (TL)) (Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1)
Explanatory note for the amounts and nature of previous years’ income and losses None. For the year ended as of December 31, 2019 and 2018, details of discount and provision expenses are as follows: December 31, 2019 December 31, 2018
Unused vacation pay liability (1,996,495) (2,415,133) Provisions no longer required 2,526,406 2,651,078 Provision for employee termination benefits (1,363,246) (800,663) Other provision expenses (5,618,303) (3,090,409) Provision expenses (6,451,638) (3,655,127)
December 31, 2019 December 31, 2018
Rediscount interest expense(1) 100,794 75,330 Total rediscount 100,794 75,330
(1) Rediscount interest income/expense arising from selling the shares of AVEA İletişim Hizmetleri A.Ş. by instalment. 312 Anadolu Hayat Emeklilik 2019 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 2019 Annual General Assembly Meeting will be held on 23 March 2020 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 2019 As of 31 December 2019. 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 2019 (TL)
7.04
5.79 5.50 6.84 5.27 5.52 5.03 5.27 5.33 5.15 Lowest- Highest 4.84 4.79 Closing
2019-Q1 2019-Q2 2019-Q3 2019-Q4 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
/anadoluhayatemeklilik
/aheemeklilik
/ahemeklilik
/anadolu-hayat-emeklilik
/anadoluhayatemeklilik
Produced by Tayburn Tel: (90 212) 227 04 36 This report has been printed on recycled paper. www.tayburnkurumsal.com Anadolu Hayat Emeklilik 2019 Annual Report