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Annual Report 2015 Previous years’ annual reports of Anadolu Sigorta

Content

General Information 27 Information on Associates 75 Other Matters and Financial Statements 1 Corporate Profile 27 Repurchased Own Shares by the Company 75 Independent Auditor’s Report Related to 1 Our Vision, Our Mission, 27 Disclosures Concerning Special Audit and Annual Report Our Corporate Values Public Audit 76 An Assessment of the Board Directors by the 2 Milestones from the History of 27 Lawsuits Filed Against the Company and Corporate Governance Committee Anadolu Sigorta Potential Results 78 Disclosure Policy 4 Message from the Chairman 27 Disclosure of Administrative or Judicial 80 Corporate Governance Principles 6 Message from the CEO Sanctions Against the Company and/or Board Compliance Report 10 The Organization, Capital and Shareholder of Directors Members 90 Committees Operating Within Structure of the Company 27 Assessment of Prior Period Targets and Anadolu Sigorta and an Assessment by the 10 Organization Chart General Assembly Decisions Board of Directors 11 Capital and Shareholder Structure 27 Expenses Incurred in Relation to Donations 94 An Assessment of the Operation of the 11 Disclosures on Preferred Shares and Grants and Social Responsibility Projects Independent Audit Firm in 2015 Activity 12 Governing Body, Executives and the Number 28 Commitment to Social Responsibility Period via the Audit Committee of Employees 31 The Company’s Transactions with the Risk Group 95 Human Resources Practices at 12 Board of Directors 32 Financial Status Anadolu Sigorta 15 Declarations of Independence by 32 Summary Report by the Board of Directors 96 Agenda of the Annual General Assembly Independent Members of the Board of 36 Financial Information and Indicators Meeting Directors 38 2015 Economic Overview 97 Dividend Distribution Proposal 16 Senior Management 44 Overview of the World and Turkish Insurance 98 2015 Profit Distribution Table 18 Heads of Units Under the Internal Systems Industries and Future Outlook 99 2015 Annual Report Compliance Statement 18 Average Number of Employees by Categories 49 Developments and Changes in Legislation 100 Detailed Income Statement During the Reporting Period 58 An Assessment of Anadolu Sigorta in 2015 102 31 December 2015 Unconsolidated Financial 19 Financial Affairs and Actuarial Unit Managers 66 Assessment of the Company Capital and Statements Together with Independent 19 Financial Rights Provided to the Members of Comments Auditors’ Report Thereon the Governing Body and Executives 67 Profit Distribution Policy 184 Information on Consolidated 19 Financial Rights 70 Risks and an Assessment by the Governing Body Subsidiaries 19 Other Means 70 Risk Management Policies Adhered to by 185 31 December 2015 Consolidated Financial 22 Research and Development Activities of the Types of Risks Statements Together with Independent Company 73 Activities of the Committee of Early Auditors’ Report Thereon 22 Research and Development Pertaining to New Determination of Risk 266 An Assessment of Financial Standing, Services and Business Activities Profitability and Solvency 24 Company Activities and Major Developments in 267 Information on Financial Structure Activities 268 Summary Financial Information for the Last 24 2015-2016 Primary Goals, Policies 5 Years Including the Reporting Period 24 Information on the Company’s Investments 268 Information for Investors 25 Internal Control System and Internal Audit Activities 25 An Assessment of 2015 by the Board of Inspectors 26 Internal Control System and Internal Audit Activities

General Information

Anadolu Anonim Türk Sigorta Şirketi Mediterranean Regional Branch Central Anatolia Regional Branch 2015 Annual Report Konyaaltı Cad. No: 78 Cinnah Cad. Farabi Sok. No: 43 Muratpaşa 07050 Antalya Kavaklıdere 06690 Ankara Corporate Title Tel: +90 850 744 0 744 Tel: +90 850 744 0 744 Anadolu Anonim Türk Sigorta Şirketi Fax: +90 850 744 0 752 Fax: +90 850 744 0 749 E-mail: [email protected] E-mail: [email protected] Website www.anadolusigorta.com.tr Western Anatolia Regional Branch Black Sea Regional Branch Atatürk Cad. No: 92 Karşıyaka Mah. 4 Nolu Sok. No: 479 Anadolu Sigorta Trade Registration No Anadolu Sigorta Binası 2 Ortahisar 61040 Trabzon 4593/557 Pasaport Konak 35210 İzmir Tel: +90 850 744 0 744 Tel: +90 850 744 0 744 Fax: +90 850 744 0 751 Directory Fax: +90 850 744 0 747 E-mail: [email protected] E-mail: [email protected] Head Office Marmara Regional Branch Rüzgarlıbahçe Mah. Kavak Sok. No: 31 Middle Black Sea Regional Branch Odunluk Mah. Akademi Cad. Kavacık 34805 İstanbul Kılıçdede Mah. Ülkem Sok. No: 8-A/7 Zeno İş Merkezi A Blok No10/5 Tel: +90 850 744 0 744 İlkadım 55060 Samsun Nilüfer 16110 Bursa Fax: +90 850 744 0 745 Tel: +90 850 744 0 744 Tel: +90 850 744 0 744 E-mail: [email protected] Fax: +90 850 744 0 750 Fax: +90 850 744 0 748 E-mail: [email protected] E-mail: [email protected] İstanbul Regional Branch Beytem Plaza Büyükdere Cad. 20/B Southern Anatolia Regional Branch Turkish Republic of Northern Cyprus Branch Şişli 34394 İstanbul Reşatbey Mah. 62029. Sok. No: 16/A Memduh Asaf Sok. 8 Tel: +90 850 744 0 744 Seyhan 01120 Adana Köşklüçiftlik Lefkoşa / KKTC Fax: +90 850 744 0 753 Tel: +90 850 744 0 744 Tel: +90 92 227 95 95 E-mail: [email protected] Fax: +90 850 744 0 746 Fax: +90 392 227 95 96 E-mail: [email protected] E-mail: [email protected] Kadıköy Regional Branch K2 Plaza Sarıkanarya Sok. No: 14 Kozyatağı 34742 İstanbul Tel: +90 850 744 0 744 Fax: +90 850 744 0 754 E-mail: [email protected] General Information 1 Corporate Profile, Our Vision, Our Mission, Our Corporate Values

Corporate Profile, Our Vision, Our Mission, Our Corporate Values

Corporate Profile

In 2015, Anadolu Sigorta expanded its total Anadolu Sigorta registered its highest Turkey’s first national insurance company premium production by 20.2% year-on- premium production in the motor vehicle and the pioneer in the sector, Anadolu year to TL 3,610.7 million and controlled a liability with TL 1,042.8 million, followed Sigorta will keep contributing to the 13.2% share of the overall market among by the motor vehicles branch with TL advancement of the insurance business in non‑life companies. Anadolu Sigorta 845.7 million in 2015. Trailing these two Turkey in the light of its mission and vision, pursues its operations via nine regional branches, in order, were fire and natural and further build on its solid position in the branches across the nation and one disasters with TL 637.5 million, illness/ industry on the back of its powerful digital branch in the Turkish Republic of Northern health with TL 328.3 million, general losses insurance initiative. Cyprus. The number of employees on the with TL 298.8 million and general liability company’s payroll averaged 1,083 in 2015. with TL 122.9 million.

Our Vision Our Mission

• To make Anadolu Sigorta the • In keeping with the deeply-rooted, pioneering, honest, and solid corporate insurance brand preferred by values of Anadolu Sigorta to: everyone who needs insurance. • Lead the sector, • To achieve a strength that makes it • Help create a broad public awareness of insurance in Turkey, a reference point in the worldwide • Implement a customer-focused approach to service, insurance industry as well. • Increase our financial strength to international standards, • Enhance the value of our company.

Our Corporate Values

A Company Entrenched In Pioneership: Integrity: Powerful Structure: History: • Pioneer in creating product; • It has ethical merits; • It has a stable financial • It was founded in accordance • Pioneer in service; • It fulfills its promises power; with the instructions given • Pioneer in technology; definitely; • It has an extended and by Mustafa Kemal Atatürk. • With its self-renewing ability • It inheres in transparency as efficient service network; • It is Turkey’s first national preserves its pioneering principle; • It has a sophisticated and insurance company. position; • It never abandons human high qualified human source; • It has a powerful corporate • It plays a pioneering role in values. • It gains power from the structure built on its social responsibility. synergy created by İşbank. knowledge of insurance accumulated through the years.

Anadolu Sigorta Annual Report 2015 2 General Information Milestones from the History of Anadolu Sigorta

Milestones from the History of Anadolu Sigorta

1920’s 1960’s 1970’s 1980’s

1925 1961 1975 1983 Anadolu Sigorta was founded on The first data processing system Being the leader of national “Blue Insurance” policies April 1 at the initiative of Atatürk was set up. insurance since the onset of the marking the introduction of and under the leadership of İşbank, Turkish Republic, Anadolu Sigorta comprehensive insurance system Turkey’s first national bank. celebrated its 50th anniversary. in Turkey and offering 17 types of cover were put on sale for the first time.

1984 Highly acclaimed by the public and the sector, “Insurance of the Future”, the most comprehensive life policy ever offered in Turkey until then, was introduced.

1986 Representing a new branch in the Turkish insurance business, “Electronic Equipment Insurance” was first started by Anadolu Sigorta.

1987 Activities commenced in the agricultural insurance branch.

Anadolu Sigorta Annual Report 2015 3

1990’s 2000’s 2010’s

1991 2001 2010 The life branch was transferred to After providing service for over five The company celebrated its 85th Anadolu Hayat Sigorta, a newly- decades, the company was relocated anniversary. formed life insurer as required by law. from its building in Karaköy to İş Towers, where it would be together with İşbank Planned within the frame of the 1993 subsidiaries. C2C change program, the first set of Extending administrative and changes was put into life. technical assistance to Günay 2002 Anadolu Sigorta, founded and started A brand-new era began with the The company launched its new social to operate in Azerbaijan, Anadolu “Maximum Service in Insurance” concept. responsibility project, “Bir Usta Bin Sigorta became the first Turkish The company introduced the service Usta” (From One Master to One insurance company to set up an philosophy under one title that it has Thousand), thus contributing to international operation. possessed since its foundation, and once revitalize vanishing professions in again became the author of a first in the Anatolia. 1996 sector. Policies in legal protection insurance 2012 branch, another first in our country, 2004 The company received four were written. Voted as “the most satisfactory insurance International award with its social company with its products and services”, responsibility project, and its 2011 1997 Anadolu Sigorta received the Active Annual Report. Aiming to make the most of the Academy Private Customer Satisfaction possibilities offered by IT, a “Recon Award in Insurance. The company 2013 Project” was launched. Services were expanded its service range by taking Anadolu Sigorta relocated to is new made more efficient and productive over the health branch from Anadolu head office in Kavacık-İstanbul. with the inclusion of all services Hayat Emeklilik, which the company and agencies in the data processing was required by law to give up. Anadolu 2014 network with online and real‑time Sigorta was awarded its ISO 9001: 2000 Total premium production surpassed systems. Quality Management System certification, TL 3 billion. an endorsement proving that the 1999 company’s quality management system 2015 In order to provide the fastest and complies with international standards. While celebrating its 90th year, the most comprehensive service to its company launched its revamped policyholders in the aftermath of the 2006 website. disastrous earthquake of 17 August, The company maintained its sectoral the company worked round the clock leadership in premium production for to provide uninterrupted service. the fifth consecutive year and realized a premium production in excess of TL 1 Anadolu Sigorta’s 90th billion, undersigning yet another historic anniversary commercial result in the history of the Turkish insurance industry.

2007 The sector’s unrelenting champion in premium production for the last six years, Anadolu Sigorta became the first insurance company in Turkey to exceed the USD 1 billion threshold in total premium production.

2008 Anadolu Sigorta launched the C2C (Closer to Customer) change program whereby all business processes are reviewed and revised. While the company increased its profitability through sustainable growth strategy, it also received Active Academy Private Customer Satisfaction Award in Insurance for the fifth consecutive time.

Anadolu Sigorta Annual Report 2015 4 General Information Message from the Chairman

Message from the Chairman

For Anadolu Sigorta that is identified with the 2015 was a year of intense economic and political agenda packed with national insurance business, it has always been uncertainties in Turkey and across the a principal duty to capitalize on the potential the world. industry presents and to increase public awareness In its “Global Prospects and Policy Challenges” report, the IMF cited three of insurance so as to add momentum to growth. significant transitions that will define the course of global economy: the US Federal Reserve’s (the Fed) gearing up for gradual normalization of its monetary policy; rebalancing of the growth model in China, and decade-long commodity super cycle that appears to be over. The IMF also underlined that international migration has become a pressing economic issue for both sending and receiving countries.

The weak developing market economies, in particular, and the still-fragile recovery in developed countries stand as major hurdles the global economy has to deal with. In an environment of ongoing talks about new expansionary moves in the EU and Asia, rate hike and sterilization contemplated by the Fed caused the US dollar to appreciate especially against the currencies of developing economies. The volatility and the unstable outlook in developing markets, on the other hand, fuelled a considerable amount of capital outflows from these countries.

The anticipated liftoff by the Fed, which has been the main determinant of capital flows in the last couple of years, came to an end with the rate hike of 25 base points in the 16 December 2015 meeting, which marked a new turning point. In her speech following the historic rate decision, the Fed’s Chair Janet Yellen underlined that the US economy has taken significant distance, the risks inherent in the global economy lessened, and the rate hike from then on will be gradual.

While the slumped oil prices reflect positively on the current accounts of oil importing developing economies, they put oil-exporting countries in an even more difficult position. The fall in other commodities’ prices accelerates further, while adding to deflationist effects as a result of reduced demand due to the transition in China.

Anadolu Sigorta Annual Report 2015 5

In 2015, the Turkish economy preserved It is among our primary goals to take We will leverage our achievements. its sustainable growth despite the our industry further. volatilities in the conjuncture. Our company is recognized by a multitude While the national insurance industry of awards for the quality of its services, Within national borders, the two general appears to be short of the desired size customer satisfaction, position and elections and political uncertainties, as compared with the world, the Turkish achievements in the industry. While these combined with the restless ambience insurance industry increased the share awards endorse our success, we also resulting from the tensions with the of its premium production in GDP at an realize the responsibility they put on our neighboring countries and terrorist attacks increasing pace in the past three years. shoulders at the same time, because what on top of the issues in global markets makes great companies is not just figures, added to the pressures upon economic However, the insurance industry also but the perception in people’s minds. growth. As the rate of growth in the first stands out as a high-potential sector that The perception of Anadolu Sigorta is the three quarters of 2015 registered 3.4%, the is in the process of developing and that trust built by our company’s deep-seated 3% growth targeted in the Government’s has yet to reach its saturation point in our heritage of nine decades. MTP came within reach. However, changing country. Premium production is low due the consumption-driven structure of the to several reasons including the currently Today, we boast a countrywide presence growth model into a production-driven one insufficient level of public awareness of the at more than 5,000 points of contact on is crucial with regard to sustainable growth. insurance concept, and the low per capita the back of our cooperation with İşbank national income in Turkey. branches and our agencies. We are being The budgetary discipline was preserved, as represented strongly and we are offering the budget deficit remained flat at a low For Anadolu Sigorta that is identified with uninterrupted service to our policyholders. 1%. The current deficit shrank due to the the national insurance business, it has We maintain our robust position in terms slimmed imports as a result of increasing always been a principal duty to capitalize of reinsurance quality and capacity, as exchange rates and decreasing oil prices, on the potential the industry presents and well as taking place among the industry’s combined with the low growth rate. The to increase public awareness of insurance biggest players with respect to asset and last quarter, however, was the scene to so as to add momentum to growth. shareholders’ equity size. certain developments that will result in dipped exports and tourism revenues, Our credibility has been endorsed. Anadolu Sigorta, embracing the goal of carrying its national identity that it proudly prompted by the crisis that erupted with Being one of the industry’s essential, deep- Russia. wears into the future, will contribute to rooted actors, Anadolu Sigorta always sets the development of the Turkish insurance At 8.8%, the inflation was way above the itself apart with the strength of its financial business, and will always lead the sector 5% target the CBRT set jointly with the structure. with the products, services and insurance government. The international rating agency Fitch practices developed. Turkey decoupled negatively from other Ratings affirmed Anadolu Sigorta’s IFS Being the first insurance company of the developing countries because of the rating at “BBB-“ and the national IFS rating Republic Era in Turkey, we will uphold the deteriorated risk perception in the country, at “AA+(tur)”, assigning a “stable” outlook, notion of being the assurance of all of particularly in the second half of the year. considering the company in the investment Turkey’s assets, as we have always done. Thus, Turkey’s 5-year risk premiums (CDS) grade both internationally and nationally. climbed to 325 basis points on September We would like to thank our policyholders, The rating report underlined that the all our employees and shareholders, with 25th, their highest since January 2012. assigned rating reflected Anadolu Sigorta’s The USD/TL rate, on the other hand, hit whom we are hoping to share a safer leading position in the industry, and noted future. the record 3,0744 on September 24th, our company’s strong stance in terms of and the Turkish currency depreciated by a capital adequacy, reinsurance protection Sincerely, remarkable 30% against the US dollar in and profitability. the nine months to end-September. TL lost value by 24.89% against the USD on the basis of the whole year.

The IMF World Economic Outlook released by early October estimated Turkey’s growth rate at 3% this year, projecting Caner Çimenbiçer 2.9% for the next year, while anticipating Chairman of the Board of Directors the global economy to register the last five years’ strongest growth in 2016 following its moderate and uneven growth in 2015.

Anadolu Sigorta Annual Report 2015 6 General Information Message from the CEO

Message from the CEO

Anadolu Sigorta pursues a strategy that addresses In 2015, the global insurance industry registered a limited premium production the entire market, rather than one focusing on and low profitability as a consequence of the insurmountable stagnation in the certain products. As a result, our company ended the world economy. year as the leader company in 6 branches in total The rate of growth remained slim in thanks to its 2015 performance. developing countries, repressing the development of the insurance industry, while the appreciated US dollar resulted in shrunk premium volumes in terms of dollar for these countries.

As developed countries experienced a moderate economic recovery, the Eurozone was still unable to shed off economic stagnation, which, in turn, led to low rates of premium increase in the insurance business.

The premium production increase in the non-life sector is anticipated to remain in the 2.5-3% interval in 2015 and 2016.

The Turkish insurance industry attained real growth overall, as well as in non-life branch in 2015.

According to data published by the Insurance Association of Turkey (IAT), total premium production of all insurance companies rose by 19.4% to TL 31.0 billion in 2015 from TL 26.0 billion in 2014. Of this amount, TL 27.3 billion was generated on non-life insurance and TL 3.7 billion on life insurance. On the basis of real growth that is calculated net of annual inflation, the industry grew by 9.7%. Premiums written in the non-life sector, on the other hand, expanded by 14.7% nominally and by 5.4% in real terms.

The insurance industry generated the highest premium production on motor vehicle liability branch last year, booking TL 7.5 billion. The production in the motor vehicles branch amounted to TL 5.5 billion. Fire and natural disasters branch ranked third with a production figure of TL 4.4 billion, followed by illness/health and general losses with respective figures of TL 3.4 billion and TL 3.0 billion. On the basis

Anadolu Sigorta Annual Report 2015 7

of sales channels of insurance products, Anadolu Sigorta pursues a strategy that Proving its pioneering agencies take the highest share with addresses the entire market, rather than 59% in premium production. The agency one focusing on certain products. As a character also in the network was followed, in order, by banks result, our company ended the year as with 22.1% share, brokers with 11.2%, the leader company in 6 branches in total digitization steps head office with 6.4%, and other channels thanks to its 2015 performance. taken, Anadolu Sigorta with 1.3%. We are taking bold and remarkable introduced a number While there were three companies with steps in digitization. of groundbreaking a premium production of above TL 3 billion in 2015, the companies that wrote Digital developments open new doors initiatives to successfully premiums in the TL 1 to 3 billion interval to insurers in terms of customer reach numbered six. and service delivery, and set the course deliver its services with of the future for the insurance industry. the same quality via each The developments in the compulsory Thanks to higher-efficiency operations motor TPL branch remained as the primary and the opportunity to reach untapped channel. factor that reflected negatively upon segments owing to digitization and use technical profitability in 2015. Non-life of multiple customer access and service companies posted a technical loss of TL delivery channels, insurers are now able 1,660 million in the compulsory motor TPL to better manage various processes branch as at end-September. including more comprehensive customer profiling, information gathering for sales The hike in exchange rates in the last purposes, financial solution customization, period, coupled with the regulatory and evaluation and finalization of changes, have led to higher losses for compensation claims particularly in the insurers. The higher costs that the non-life branch. insurance companies will incur as a result of the changes in implementation will be Proving its pioneering character also in the inevitably reflected on policy premiums. digitization steps taken, Anadolu Sigorta That being said, the price competition in introduced a number of groundbreaking the market rules out significant rises in initiatives to successfully deliver its services premiums. with the same quality via each channel. Having initiated online insurance sales in Anadolu Sigorta outgrew the industry 2010, our company relaunched Anadolu in terms of premium production in 2015. Online, its retail Internet branch, in 2015 in its new design and upgraded technical Anadolu Sigorta ranked second in the infrastructure. In addition, the corporate industry with a premium production of TL website at www.anadolusigorta.com. 3.6 billion that it has attained on the basis tr, which we regard as the showcase of of 20.2% growth (10.5% in real terms) in Anadolu Sigorta, was revamped with 2015. up-to-date content, upgraded technology, With its 2015 production performance, and a responsive design compatible with Anadolu Sigorta captured 13.2% market mobile devices. share among non-life companies. Motor We have been offering service to our vehicles liability branch claimed the biggest customers on the digital environment via share of our total portfolio with 28.9%, our “Sigortam Cepte” (“Insurance on my followed, in order, by motor vehicles with Mobile”) application since 2010. We have 23.4%, fire and natural disasters with been consolidating our digital presence 17.7% and illness/health with 9.1%. particularly in the last two years with new investments that will make an impact.

Anadolu Sigorta Annual Report 2015 8 General Information Message from the CEO

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Our company was recognized with awards by national A year swarmed with awards and international organizations also in 2015. Attesting Our company was recognized with awards by national and international organizations to our standing in the industry and establishing that also in 2015. Attesting to our standing in we have duly fulfilled the role we have assumed, these the industry and establishing that we have duly fulfilled the role we have assumed, awards motivate us to perfect our services, preserving these awards motivate us to perfect our the ambition we had when we first set out on the road. services, preserving the ambition we had when we first set out on the road.

While the 2014 Annual Report of Anadolu Sigorta was awarded Platinum, the top prize, in the ‘Insurance’ category at the LACP (League of American Using the “Sigortam Cepte” application, We have left behind five years in our Communications Professionals) Awards, which was updated to incorporate new project “Bir Usta Bin Usta” (“One it received the Silver in the ‘Financials/ features in 2015 and which supports Master, Thousand Masters”). Diversified Services’ category. Capturing android and iOS platforms, our customers the Gold in the Most Creative Report can send claim notifications, request tow Launched by Anadolu Sigorta in 2010, the Worldwide category, the report also trucks and courtesy cars, as well as viewing project “Bir Usta Bin Usta” (“One Master, clinched Platinum in the EMEA Region. their policies. Our goal is to improve the Thousand Masters”) continued to revive service and experience we offer to our vanishing crafts and to train prospective In addition, our company: customers from policy sales to the time of masters also in its sixth year. The courses loss. held in 2015 within the scope of the • emerged as the Leader of the Insurance project were as follows: Local Damal Doll Industry in Customer Satisfaction We are using digital technology not just Making of Ardahan, Traditional Accordion according to the 2014 Q4 results of the for service delivery, but also for process Boot Making of Söke, Aydın, Traditional Turkish Customer Satisfaction Index improvement. We are utilizing our analysis Silver Threading of Bartın, Puppet Making (TCSI), capabilities and powerful analytics of İstanbul, and Wooden Walking Cane infrastructure in a number of aspects from Making of Devrek, Zonguldak. • was named the Most Admired Insurance tariff management to marketing strategy Company in Turkey according to formulation. In this context, we are Under the project “Bir Usta Bin Usta” “Turkey’s Most Admired Companies targeting to add new links to the already that has been honored with a number Survey” by the Capital Magazine, introduced applications such as policy of national and international awards, 25 • was selected the most valuable insurance management, bookkeeping, payment and vocational training programs were held and brand in the ‘Turkey 100 2015’ survey collection systems, and we are aiming to 475 masters-to-be were trained to date. conducted by Brand Finance, increase our investments in this area. The participants receive course completion certificates that verify qualification as a • won the big prize in the Best Use of master trainer endorsed by the Ministry of Social Media category under media National Education upon graduation. The use at the Crystal Apple Awards with courses help keep local crafts alive, and its Whatsapp sitcom campaign, and also create new employment opportunities the Bronze Apple in the Film/TV and for the youth. Cinema/Insurance and Other Financial Our goal is to carry our project that has Services category with its “App Koydum, left behind five years successfully into its Sigortam Cepte” (“Downloaded the tenth year with the same commitment and App, Insurance on My Mobile Now”) devotion. commercial film.

Anadolu Sigorta Annual Report 2015 9

We are committed to steering our cross-selling by agencies and winning new Our unchanged goal is industry’s future. customers for the company portfolio. Digitization projects continue at a growing to nurture a long-lived The deep-seated structure of our company extent at our bancassurance channel, that is synonymous and coeval with the which will be followed by our agency relationship with our Turkish insurance business brings along the network; these projects will also serve to policyholders, whereby experience that provides an insight into the maximize our capabilities. Responsible industry’s dynamics and expectations and for a substantial portion of our premium they feel protected and that develops innovative solutions with the production, our agencies will increase their receive services beyond fitting service and product mix. portfolio diversity and production shares as they raise the level of their adjustment to their expectations. In the period ahead, weak investment the advancing digital age. income and low interest rates will compel the insurance industry to adopt diverse Our long-term targets include sustaining decisions regarding pricing and operational high quality service delivery to customers, approaches. Technology investments and maintaining our protection policy that aimed at supporting growth and improving secure our policyholders’ trust and loyalty risk management will become a strategic in the future. necessity for the insurance industry. In terms of technical profitability, on the We will remain committed to reaching our other hand, efforts will gain momentum existing and potential policyholders and to secure risk-based pricing and a well- offering our services via alternative delivery balanced portfolio. and service channels.

At Anadolu Sigorta, we are determined to Our unchanged goal is to nurture a long- pursue and leverage our goal of achieving lived relationship with our policyholders, profitable and healthy growth, which we whereby they feel protected and receive have maintained consistently, by securing services beyond their expectations. the balance between premium production and technical profitability on the basis of I would like to extend my thanks and my fair price competition. best wishes to our policyholders for their unyielding trust, and to our team and Being the company that has introduced distribution/service organization for their the insurance concept to Turkey, we will commitment and hard work, with whom sustain our pioneering role with the target we have achieved yet another successful of steering our industry’s future, as well. year. We are launching implementations that will further upgrade customer experience Sincerely, and setting up our infrastructure to keep abreast of the advancements in technology so as to further cement our position as the company that leads its peers.

Our efforts are ongoing towards attaining higher productivity through improved cost management, better risk pricing, and increased efficiency of the bank delivery channel. The company’s short and medium-term plans include increasing Musa Ülken CEO

Anadolu Sigorta Annual Report 2015 10 The Organization, Capital and Shareholder Structure of the Company Organization Chart

Organization Chart

Board of Directors

Coordination Department to the Board of Directors

Corporate Governance Committee

Audit Committee

Board of Auditors

Early Determination of Risk Committee

Chief Executive Officer Musa Ülken

Risk Management and Internal Control Department

1st Deputy Chief Executive Deputy Chief Executive Deputy Chief Executive Deputy Chief Executive Deputy Chief Executive Deputy Chief Executive Filiz Tiryakioğlu M. Metin Oğuz M. Levent Sönmez Erdinç Gökalp Fatih Gören Mehmet Abacı

Agency and Legal Individual and Information Channel Motor Insurance Actuarial Affairs & Commercial Insurance Technologies Labor Law Management Department Department Subrogation Department Department Adviser Department Department Ömer Ekmekçi Information and Quality Accounting Corporate Insurance Communication Bank Insurance Health Insurance Management and Finance Department Department Technologies Department Systems Department Department Software Legal Development Consultant Department Samim Ünan Human Non-Motor Marine Reinsurance Resources Regional Offices Claims Insurance Department Department and Training Department Board of Project and Department Southern Anatolia Headquarters Change Management Western Anatolia Consultant Marmara Ahmet Hamdi Başar Central Anatolia Procurement, Motor Corporate Middle Black Sea Risk Engineering Support and Claims Communication Black Sea Department Construction Department Department Mediterranean Department İstanbul Kadıköy

Corporate TRNC Branch Strategy and Liability, Aviation and Management Performance Special Risks Insurance Reporting Management Department Department Department

Fire and Engineering Insurance Department

Anadolu Sigorta Annual Report 2015 The Organization, Capital and Shareholder Structure of the Company 11 Capital and Shareholder Structure Disclosures on Preferred Shares

Capital and Shareholder Structure

Shareholder Structure (%)

Other* Milli Reasürans T.A.Ş. 42.7 57.3

* Stocks traded on Borsa İstanbul.

Disclosures on Preferred Shares

No more preferred shares remained following the amendment to the Articles of Incorporation registered by the company on 11 April 2013.

Capital Increases and Their Sources

There were no capital increases in 2015.

Changes in the Articles of Association during 2015

No changes were made to the company’s articles of association during 2015.

Rating

Credit Rating Notes Fitch Ratings Rating Outlook IFS BBB- stable National IFS AA+ stable Corporate Governance Rating SAHA Kurumsal Derecelendirme Hizmetleri A.Ş. Rating Corporate Governance Rating Note 9.16

Anadolu Sigorta Annual Report 2015 12 Governing Body, Executives and the Number of Employees Board of Directors

Board of Directors

Caner Çimenbiçer Hakan Aran Chairman Deputy Chairman

Musa Ülken Kubilay Aykol CEO and Director Director

Faruk Karpuz Hafız Ekrem Kürkçü Director Director

Ayşen Aygül Board of Directors Reporter

Anadolu Sigorta Annual Report 2015 13

Kemal Emre Sayar Prof. Savaş Taşkent Director Director (Independent)

Cengiz Tezel Assoc. Prof. Atakan Yalçın Director Director (Independent)

Hasan Hulki Yalçın Director

Information on Board of Directors Meetings:

During 2015, Board of Directors of Anadolu Sigorta met 12 times and held its 1202nd meeting at the end of the year. Four members were absent in each three of these meetings due to their justified excuses. Topics discussed in the meetings generally consist of the reports by the Board of Directors Committees and by the Board of Inspectors, executive reports, proposals laid down for approval, informative memos, and working study reports that deal with the bank insurance activities. The meeting documents are distributed to the members approximately five days in advance of the meeting date.

Anadolu Sigorta Annual Report 2015 14 Governing Body, Executives and the Number of Employees Board of Directors

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Caner Çimenbiçer Faruk Karpuz a seat as a member on the Board of Directors of Chairman Director İşbank from 31 March 2005 until 28 March 2014. He Born in 1952 in Bursa, Caner Çimenbiçer graduated Born in 1961 in Kahramanmaraş, Faruk Karpuz began assumed the position of Vice Dean between 1986 and from the Business Administration Department of the his career as an officer in Diyarbakır Branch of İşbank 1992, and as Vice Rector between 1996 and 1998 at Faculty of Administrative Sciences at the Middle East in 1983. He later worked as assistant to section head İstanbul Technical University. On 19 November 2013, Technical University in 1973. He began his career in at İslahiye Branch in Gaziantep (1988-1991), as section Savaş Taşkent has been assigned as advisor to the İşbank in 1974 as an assistant inspector on the Board head at Erdemli Branch in Mersin (1991-1995), as Rector related to legal affairs by the ITU Rector. Savaş of Inspectors. After holding various positions in the submanager at Elazığ Branch (1995-1996), as manager Taşkent retired on 12 January 2010 due to age limit. Bank, he was elected as Board of Directors member at Cizre, Yenihal, Akşehir, Fethiye and Afyonkarahisar He currently teaches “Labor Law” and “Management from 2005 to 2008 and the Chairman of the Board branches (1996-2007), as Konya Regional Director Law” courses at the Faculty of Management at İstanbul from 2008 to 2011. He also served as the Chairman of (2007-2012), and as manager of Samsun Branch Technical University. Elected as an independent the Board of Milli Re in 2008 and 2009. Mr. Çimenbiçer (2012). Faruk Karpuz was appointed as the head of member of the Board of Directors of Anadolu Sigorta was appointed as the Chairman and Managing Director SME and Commercial Banking Sales Division at İşbank on 16 April 2014, Prof. Taşkent, in tandem, serves as of Anadolu Sigorta on 1 April 2011 and was elected as in 2013, and the head of Human Resources Division in the head of the Corporate Governance Committee and the Chairman of the Board on 25 March 2014. January 2016. the Audit Committee.

Hakan Aran Hafız Ekrem Kürkçü Cengiz Tezel Deputy Chairman Director Director Born in 1968 in Antakya, Hakan Aran graduated from Born in 1966 in İstanbul, Hafız Ekrem Kürkçü Born in 1962 in Antalya, Cengiz Tezel graduated from the Middle East Technical University, Department of graduated from Uludağ Univeristy, Faculty of Berlin Freie Universität getting a degree in business Computer Engineering in 1990. He started his career Education. He started his career as a clerk in Harbiye management. He started his professional life at İşbank at İşbank as a Software Specialist Trainee the same branch of İşbank in 1993, and subsequently worked as as a Money Market Dealer and International Bond year, where he was appointed as an Assistant Manager section head and II. Manager at Beyoğlu branch (1995- Dealer in December 1991. He worked in various units in 1999, and promoted to Group Manager position in 2005). He functioned as an assistant manager in the at İşbank AG Frankfurt/Main Head Office from 1995 2002. He became Software Development Manager Central Operations Department from 2005 until 2008, until 2007. He served as the assistant branch manager in 2005 and was finally appointed as Deputy CEO on when he became a unit manager. He has been serving of İstanbul Balmumcu Branch (2007), of İstanbul July 2008. Having completed his MBA on scholarship as the Head of Foreign Trade & Commercial Loans Galata Branch (2008) and branch manager of İstanbul from Başkent University, Institute of Social Sciences Operations Division since September 2008. Arapcamii Branch (2008). He was appointed as the in 2002, Hakan Aran has a master’s dissertation on branch manager of Multinationals’ Branch at İşbank in Process Management and a Model on Information Kemal Emre Sayar 2012, a position he still holds. Technologies Supporting Customer-Centric Approach Director to Banking. Hakan Aran is currently Chairman of Born in 1976 in Ankara, Kemal Emre Sayar graduated Assoc. Prof. Atakan Yalçın Boards at SoftTech A.Ş., İş Net A.Ş., and Erişim Müşteri from the Middle East Technical University, Department Director (Independent) Hizmetleri A.Ş. of Industrial Engineering. He then got an MS in Born in 1971 in İstanbul, Atakan Yalçın received information technologies in management from his bachelor’s degree in electrical and electronic Musa Ülken Sabancı University and an MA in economics and engineering from Boğaziçi University in 1994. He CEO and Director finance from Boğaziçi University. He started his career got an MBA degree from the Southern Methodist Born in 1953 in Tarsus, Musa Ülken graduated from as an assistant inspector on İşbank’s Board of Auditors University in 1996, and a Ph.D. degree in finance from the İstanbul Academy of Economic and Commercial in 1999, where he, from 2008 onwards, worked in Boston College in 2002. He was a faculty member at Sciences, Department of Economics and Public the Change Management Department, Strategy and Brandeis University (2000), Boston College (2003- Finance. He began his career at Anadolu Sigorta Claims Corporate Performance Management Department 2004) and Koç University (2004-2012). He currently Department as a Clerk on 01 November 1978; after and the Subsidiaries Department. He currently serves serves as the Department Head of the Banking and holding various positions in the Claims and Accident as a Unit Manager in the Subsidiaries Department of Finance Program in the Faculty of Business at Özyeğin Insurance Departments, he subsequently rose to the İşbank. University. Teaching courses in financial management, position of Accident Department Manager on 01 May portfolio management, financial modeling and 1993. He was appointed as Marmara Regional Manager Prof. Savaş Taşkent derivatives securities, Assoc. Prof. Yalçın’s research in on 06 June 1997 and Kadıköy Regional Manager on 01 Director (Independent) financial economics has been published in a number June 2002. Musa Ülken was brought to the position Born in 1943 in İstanbul, Savaş Taşkent graduated of leading journals such as the Journal of Empirical of Deputy Chief Executive Officer on 01 August 2004, from the Deutsche Schule (German High School) Finance, Journal of Banking and Finance, Journal of I. Deputy Chief Executive Officer on 01 February in İstanbul and from the Faculty of Law, İstanbul Financial Research, and Journal of Marketing. Assoc. 2008 and CEO on 30 May 2012. He is a member of University. Having started his academic career in the Prof. Yalçın is a member of the CFA Institute, and holds the Board of Directors of the Insurance Association of labor law section at İstanbul Technical University seats on a number of academic boards. Turkey. (ITU), he pursued his doctorate studies in the Faculty of Law of İstanbul University. He became a doctor Hasan Hulki Yalçın Kubilay Aykol of law with his dissertation titled “The Employer’s Director Director Management Right” in 1980, an associate professor Born in 1964 in Ankara, Hasan Hulki Yalçın holds a Born in 1974 in Bolu, Kubilay Aykol graduated from in the Department of Labor and Social Security Law degree in economics from the Middle East Technical Middle East Technical University (Faculty of Economics in 1984, and a professor in 1990 upon review of University and a master’s degree in international and Administrative Sciences) department of Business his publications which included, among others, his banking and finance from the University of Administration. He began his career in 1997 at Türkiye dissertation titled “Job Security (Protecting the Worker Birmingham (UK). He started working at İşbank on İş Bankası, as assistant inspector at Bank’s Board Against Termination)”. He pursued research studies the Board of Inspectors, where he served in various Member of Inspectors. He was appointed as Merter abroad, at Erlangen and Heidelberg universities in positions and capacities for fourteen years. He branch manager. He became an assistant manager 1982 and 1987. He has numerous books and articles joined Milli Re in 2003 and took part in a number of in Retail Banking Marketing Department in 2007. He on labor law, as well as many translations into Turkish professional training programs abroad. He has been was promoted to group manager in the Retail Banking from the German law. He has presented papers in appointed as a member of Board of Directors and Marketing, unit of Micro Individual Segment in 2009. numerous national and international seminars. After General Manager of Milli Re on 16 January 2009. Since 2011, he has been serving as Retail Banking serving as an advisor to the Minister of Labor and Hasan Hulki Yalçın is also serving as a member of the Products Department Manager. Social Security from 1991 until 2000, Savaş Taşkent Non-Life Executive Board in the Insurance Association attended ILO Conference held in Geneva from 1991 of Turkey. to 2003 as the advisor to the Government. He held

Anadolu Sigorta Annual Report 2015 Governing Body, Executives and the Number of Employees 15 Declarations of Independence by Independent Members of the Board of Directors

Declarations of Independence by Independent Members of the Board of Directors

To: Anadolu Anonim Türk Sigorta Şirketi Corporate Governance Committee

I hereby declare that I satisfy the criteria of independence pursuant to applicable legislation within the framework of the criteria covered in the Communiqué on the Determination and Implementation of Corporate Governance Principles, and submit my candidacy as an independent member of the Board of Directors of Anadolu Anonim Türk Sigorta Şirketi.

Yours sincerely,

Prof. Savaş Taşkent

16 February 2015

To: Anadolu Anonim Türk Sigorta Şirketi Corporate Governance Committee

I hereby declare that I satisfy the criteria of independence pursuant to applicable legislation within the framework of the criteria covered in the Communiqué on the Determination and Implementation of Corporate Governance Principles, and submit my candidacy as an independent member of the Board of Directors for your consideration at the General Assembly Meeting of Anadolu Anonim Türk Sigorta Şirketi to be convened on 25 March 2014.

Yours sincerely,

Assoc. Prof. Atakan Yalçın

16 February 2015

Anadolu Sigorta Annual Report 2015 16 Governing Body, Executives and the Number of Employees Executive Committee

Executive Committee

Musa Ülken Filiz Tiryakioğlu CEO 1st Deputy Chief Executive

Mehmet Metin Oğuz M. Levent Sönmez Deputy Chief Executive Deputy Chief Executive

Erdinç Gökalp Fatih Gören Deputy Chief Executive Deputy Chief Executive

Mehmet Abacı Deputy Chief Executive

Anadolu Sigorta Annual Report 2015 17

Musa Ülken M. Levent Sönmez Fatih Gören CEO Deputy Chief Executive Deputy Chief Executive Born in 1953 in Tarsus, Musa Ülken graduated from Individual and Commercial Insurance Department Legal Affairs & Subrogation Department the İstanbul Academy of Economic and Commercial Corporate Insurance Department Accounting and Finance Department Sciences, Department of Economics and Public Marine Insurance Department Motor Claims Department Finance. He began his career at Anadolu Sigorta Risk Engineering Insurance Department Non-Motor Claims Department Claims Department as a Clerk on 01 November 1978 Liability Aviation and Special Risks Insurance Born in 1969 in Ankara, Fatih Gören graduated from and after holding various positions in the Claims and Department Ankara University, Faculty of Political Sciences, Accident Insurance Departments, he subsequently Fire and Engineering Insurance Department Department of International Relations. He worked rose to the position of Accident Department Manager Born in 1962 in Ankara, M. Levent Sönmez graduated as a Specialist at Retail Banking and Agricultural on 01 May 1993. He was appointed as Marmara from İstanbul Technical University, Faculty of Loans Departments at Ziraat Bank between 1991 Regional Manager on 06 June 1997 and Kadıköy Maritime Studies, Department of Marine Engineering and 1994. Having joined Anadolu Sigorta as an Regional Manager on 01 June 2002. Musa Ülken in 1985, got his master’s degree in “Contemporary Assistant Inspector on the Board of Inspectors on 01 became a Deputy Chief Executive Officer on 01 Management Techniques” from Marmara University November 1994, Fatih Gören rose to Senior Inspector August 2004, I. Deputy Chief Executive Officer on and Maine University and completed the “SITC (Swiss on 01 November 1997 and grade 3 Inspector on 01 01 February 2008 and CEO on 30 May 2012. He is Re) Marine Insurance” program. Having participated November 1998. He was appointed as Assistant a member of the Board of Directors of Insurance in various training programs in Turkey and abroad, Manager to the Accounting and Finance Department Association of Turkey. M. Levent Sönmez also holds “Chartered Insurance on 01 June 2000, where he was promoted to Manager Institute/London Dip. CII” degree. He started his position on 01 August 2004. Fatih Gören has become Filiz Tiryakioğlu career at Anadolu Sigorta as a Specialist at the Marine a Deputy Chief Executive Officer on 01 February I. Deputy Chief Executive Department on 01 May 1991 and continued working 2008. Agency and Channel Management Department with same title till 30 April 1996. He subsequently Bank Insurance Department rose to Specialist position on 01 March 1994, Chief Mehmet Abacı Human Resources and Training Department Superintendent position on 01 May 1996, Assistant Deputy Chief Executive Corporate Communications Department Manager on 01 October 1997, and Manager on 01 Information and Communication Technologies Corporate Strategy and Performance Management May 1999. M. Levent Sönmez has become Bakırköy Software Development Department Directorate Regional Manager on 01 June 2002 and Kadıköy Software Development Department Born in 1967 in İstanbul, Filiz Tiryakioğlu Regional Manager on 01 August 2004. He has become Project and Change Management Department graduated from Anadolu University, Faculty of Deputy Chief Executive Officer on 01 February 2008. Born in 1967 in Ankara. Mehmet Abacı, graduated Business Administration, Department of Business from the Department of Metallurgical and Materials Administration. She started her career at Anadolu Erdinç Gökalp Engineering, Faculty of Engineering at the Middle Sigorta as a clerk in the Fire Department on 16 Deputy Chief Executive East Technical University in 1991. Starting his September 1985. She rose to Assistant Superintendent Actuarial Department professional career at İşbank IT Department as a position at the same department on 01 January 1990. Quality Management Systems Department Software Specialist the same year, Mehmet Abacı She was appointed to the Claims Department on Reinsurance Department was appointed as Assistant Manager in 1999, and 01 February 1993 as Superintendent, then rose to Procurement Department Unit Manager in 2004. He was promoted as Deputy Chief Superintendent on 01 May 1996, and Assistant Management Reporting Department Chief Executive Officer at SoftTech A.Ş. in 2008, and Manager on 01 March 1998 at the same department. Born in 1967 in Ankara, Erdinç Gökalp graduated from became Solution Development Manager and Project She became a Manager at the Training Department on the Turkish Military Academy, Department of Business & Change Manager at İşbank in 2010 and in 2011 01 June 2000 and was then appointed as the Human Administration. He then got his master’s degree respectively. Mehmet Abacı was appointed as Deputy Resources and Training Manager on 01 August 2004. in insurance from Marmara University, Institute of Chief Executive Officer of SoftTech A.Ş. for a second She was appointed as Deputy Chief Executive Officer Banking and Insurance. During his employment with term, on 1 January 2011. As of 01 June 2012, he took on 01 February 2008 and I. Deputy Chief Executive on Anadolu Sigorta, he earned the Atatürk scholarship office at Anadolu Sigorta as Deputy Chief Executive 25 December 2013. granted by TSB (Insurance Association of Turkey) and Officer. pursued his studies abroad. Having started his career Mehmet Metin Oğuz at Anadolu Sigorta as Specialist at the Marketing Deputy Chief Executive Department on 01 May 1991, Erdinç Gökalp was Regional Offices appointed to the Reinsurance Department on 23 TRNC Branch September 1991 with the same title. He rose to Motor Insurance Department senior specialist position on 01 March 1994, and Health Insurance Department to Chief Superintendent position on 01 May 1996. Born in 1959 in Çanakkale, M. Metin Oğuz graduated Promoted to the Assistant Manager position on 01 from Middle East Technical University, Faculty October 1997, he was appointed to the Marketing of Arts and Sciences, Department of Physics and Department. Erdinç Gökalp was appointed to the Mathematics, and holds a master’s degree from Accident Department on 26 December 1997 with the Marmara University Institute of Banking and same title. He rose to the position of Manager and Insurance, Department of Insurance. M. Metin Oğuz was assigned to the Reinsurance Department on 01 began his career at Anadolu Sigorta as a Clerk in July 2001. Erdinç Gökalp has become a Deputy Chief the Accident Department on 16 October 1985 and Executive Officer on 01 February 2008. subsequently rose to Assistant Superintendent on 01 February 1989, Superintendent on 01 February 1992, Chief Superintendent on 01 February 1995, Assistant Manager on 01 May 1997, Manager on 01 March 1998, and Motor Insurance Manager on 01 June 2002. Having served in the last position until 31 July 2004, M. Metin Oğuz became a Deputy Chief Executive Officer on 01 August 2004.

Anadolu Sigorta Annual Report 2015 18 Governing Body, Executives and the Number of Employees Heads of Units Under the Internal Systems Average Number of Employees by Categories During the Reporting Period

Heads of Units Under the Internal Systems

Dr. İbrahim Erdem Esenkaya Ömer Altun Chairman of the Board of Inspectors Risk Management and Internal Control Manager Born in 1969 in İstanbul. İbrahim Erdem Esenkaya Born in 1970 in Malatya. Ömer Altun graduated from graduated from İstanbul University, Faculty of Political Hacettepe University, Faculty of Science, Department Sciences, Department of Public Administration. of Statistics. He began his career at Anadolu Sigorta as He then completed a master’s degree without a Clerk at the Accounting and Finance Department on dissertation in the graduate program for the 01 May 1997, where he subsequently rose to Specialist management of financial institutions at İstanbul position on 01 February 1998 and continued working University, Faculty of Business Administration, with same title till 30 November 2005 and then he Institute of Business Administration. He earned rose to Assistant Manager position on 01 December his master’s degree in business management and 2005. On 01 February 2008, Ömer Altun has been organization, and his doctorate degree in accounting appointed as a Manager to the Risk Management and auditing from the Institute of Social Sciences and Actuarial Department, which was renamed to at the same university. He continues his academic Risk Management and Internal Control Department career as assistant professor at İstanbul Esenyurt within the scope of the restructuring of internal University. He started his career at Anadolu Sigorta systems organization. He serves as the Chairman of as an Assistant Inspector at the Board of Inspectors Anti-Money Laundering/Combating the Financing of on 01 May 1995 till 31 May 2001. He was appointed Terrorism (AFL/CFT) Committee under the Insurance to the Accounting and Finance Department on 01 Association of Turkey. June 2001 as an Assistant Manager and to Internal Audit Department on 01 January 2005 as a Manager. İbrahim Erdem Esenkaya has been appointed as the Chairman of the Board of Inspectors on 01 June 2007.

Average Number of Employees by Categories During the Reporting Period 2015 Senior level managers 7 Managers 37 Consultants 3 Middle level managers 145 Specialists/Officers/Other employees 891 Total 1,083

Anadolu Sigorta Annual Report 2015 Financial Affairs and Actuarial Unit Managers 19 Financial Rights Provided to the Members of the Governing Body and Executives Financial Rights, Other Means

Financial Affairs and Actuarial Unit Managers

Murat Tetik Taylan Matkap Accounting and Financial Affairs Manager Appointed Actuary/Manager Born in 1968 in Eskişehir, Murat Tetik graduated Born in 1978 in Antakya, Taylan Matkap graduated from İstanbul University, Business Administration from Ankara University, Department of Statistics and Department (English) and started his career in our completed his master’s degree in the Department company on 01 May 1997 as an Assistant Inspector of Actuarial Science and Finance at Boston on the Board of Inspectors. He was promoted to University. He is currently pursuing his doctorate Senior Assistant Inspector on 01 May 2000, to Class studies at İstanbul University, Department of Labor III Inspector on 01 June 2001, to Class II Inspector on Economics and Industrial Relations. He started his 01 June 2003, and to Vice Chairman of the Board of career at Anadolu Sigorta on 01 December 2008 in Inspectors on 01 August 2004. He was appointed as appointed actuary/manager position at the Actuarial an Assistant Manager to the Accounting and Financial Consultancy Unit, and he has been transferred to Affairs Department on 01 January 2005, where he the Actuarial Department with the same title on rose to the position of Manager on 01 February 28 February 2011. In tandem with his post as the 2008. He is a member in the Insurance Association of Secretary General of the Actuarial Society of Turkey, Turkey Financial Accounting Inspection and Research Taylan Matkap is responsible for improving the Committee. relations with the Actuarial Association of Europe (AAE) and the International Actuarial Association (IAA) on behalf of the Society.

Financial Rights Provided to the Members of the Governing Body and Executives

Financial Rights In the fiscal year ended on 31 December 2015, TL 5,484 thousand in total has been provided in remunerations and similar benefits to the governing body and senior executives such as the Chief Executive Officer and Deputy Chief Executive Officers. Further details are presented in the relevant section of financial notes.

Other Means The expenses incurred for the members of the company’s governing body and senior executives under other means such as business related entertainment and travels amounted to TL 349 thousand.

Anadolu Sigorta Annual Report 2015 20

In 2015, Anadolu Sigorta developed its “Digital Strategy” and launched a digital transformation initiative. As the central role of digitalization for the company was spelled out, the primary goals were set as upgrading the customer experience through efficient use of technology, mobile devices and data analytics capabilities.

Anadolu Sigorta Annual Report 2015 21

customer operational experience efficiency

Customer experience was Steps were taken towards enriched through new digital increasing the efficiency of product, service and business operational processes. models.

Anadolu Sigorta Annual Report 2015 22 Research and Development Activities of the Company Research and Development Pertaining to New Services and Business Activities

Research and Development Pertaining to New Services and Business Activities

Anadolu Sigorta continues to lead the industry Practice Model” in the presentations made in İstanbul and Stockholm. with the products, services and insurance practices • Within the frame of business continuity developed. management system initiatives of Anadolu Sigorta, “Emergency Assembly Points” and “Alternative Assembly Points” were determined for the Head Office, Archives and Regional Branches, focusing on sheltered outdoor locations that can be reached quickly and accessed more easily by emergency response teams so that the necessary support to employees can be delivered in the • As per the relevant article of the Law • Hard copy policies for home, personal shortest time possible in the event of on Consumer Protection (LCP) which accident, secure future and motor own an incident requiring evacuation of the stipulates that the agreements and damage insurance were updated in line premises. The same are posted on the associated information sheets must be with the Regulation on Implementation Intranet so that employees have access printed in a font size that is no smaller Principles for Insurance Linked to Retail to it any time. than 12, must be written using a Loans. • Contact information of the employees comprehensible language, be in a clear, involved in business continuity and plain and legible form, the following • For enhancing customer satisfaction and guides for all employees were added have been printed in 12 font size: reducing operational formalities, multiple documents provided in different page to the Business Continuity Employee -- Hard copy proposals, policies, renewals dimensions attached to the policy have Documents section available on the and addenda, been compiled in booklets and in CD Intranet for enhancing and monitoring format for each product. employees’ awareness of their roles -- Printed documents provided in within the frame of the Business attachment to the policy (clauses, • Thanks to the departments’ efforts Continuity Management System. leaflets, information sheets and regarding the Quality Management general conditions), System activities and to their attentive • On-site examinations were conducted and sensitive approach to quality audits as part of the efforts for achieving -- Customer letters. during the fiscal year, no irregularities compliance with the competition law. were established in the follow-up audit • Pursuant to the provisions of the LCP • Anadolu Sigorta is facing increased conducted by the audit firm within and associated legislation, explanations workload in connection with its the scope of ISO 9001:2008 Quality have been inserted into the policies and expanding portfolio and is revising its Management System, and hence, the information sheets regarding the right processes in keeping with its notion of extension of the quality certification for of withdrawal granted to non-merchant constant improvement and development another year has been approved. policyholders in accordance with the in view of the current conditions that legislation. “Withdrawal Notice Form” • Undertaking a significant function in determine producing the highest quality has been prepared, which may be used ensuring the continuity of the Quality work with the optimum number of by policyholders to notify their intention Management System at Anadolu Sigorta, competent employees as the main to exercise the right of withdrawal, the new web-based, more user-friendly achievement. In this context, staffing and it has been added under the “Legal “Electronic Quality Management efforts of Anadolu Sigorta in relation to Information” tab on the corporate System” (EQMS) that was revamped the Head Office and regional branches website. in 2014 has been presented as a “Best were revised in parallel with the

Anadolu Sigorta Annual Report 2015 23

modified practices and processes with together under the roof of the BID. forms that risk engineers use in the the aim of accurately determining the Henceforth, Maximum Sales Specialists field were transferred to the mobile number of employees needed. (MSS) and MSS Team and Group Leaders environment. The advantages offered began administratively reporting to the by the mobile environment also allowed • Job descriptions were reformulated BID, which they had long organic ties to, adding the location information, photos, on the basis of positions created to instead of Regional Branches. map objects to the application output, describe the role and responsibilities as well as instant delivery of risk analysis of employees with respect to their • Work was undertaken to update the reports. departments, units, sections and titles. geocode address data. • In 2015, Anadolu Sigorta received an • Service outsourcing agreement and • The personal online branch of Anadolu investment grade both internationally confidentiality agreement templates Sigorta was relaunched with a new and nationally from the international were revised, which are drafted to be design and infrastructure that is rating agency Fitch Ratings. The executed with service suppliers pursuant integrated with the new systems. The company was assigned an IFS rating to the Regulation on Insurance Support online branch was equipped with the of “BBB-” and a national IFS rating of Services. capability to sell foreign travel and “AA+(tur)”, with a “stable” outlook. secure future products in addition to • During 2015, 141 suggestions were the existing products. In addition to the received from the employees through “view claims file status” feature, the Corporate Governance Rating 9.16 the suggestion system that supports website now allows online submission of quality, constant improvement and missing documents. Shareholders 9.45 innovation at Anadolu Sigorta. These suggestions were evaluated, steps were • The infrastructure of the Sigortam Cepte Public Disclosure and Transparency 9.04 taken in relation to those deemed (Insurance on My Mobile) application Stakeholders 9.25 feasible, and feedbacks were given to all of Anadolu Sigorta was redesigned so Board of Directors 8.99 propounders regarding their suggestions. as to be compatible with devices using iOS and android operating systems. The • Middle Black Sea Regional Branch has application now enables quick claims been relocated to the office space notifications for motor own damage and redesigned in the same concept with the home policies, besides policy details, Head Office building. payment schedule and hard copy viewing functions. • The responsibility for evaluating and managing discretionary works • Ofisim Cepte (Office on My Mobile) and proposal approvals in fire and mobile application is now compatible Corporate Governance engineering branches, which are in with devices using iOS and android Rating Report excess of the authorized limits of the operating systems. The application Regional Branches/Bank Insurance offers a platform for the agencies to Department, has been handed over from interactively view their own production the Corporate Insurance Department figures, targets, renewals, segments, to the Fire and Engineering Insurance rewards, announcements and rankings. Department. The application has been spread to allow sales channel supervisors and authorized • Within the frame of reorganization, Bank company users to access the data for Sales Channel Supervisors in Regional any agency they choose. Branches had started to report to the Bank Insurance Department (BID) and • As part of the master plan for upgrading sales and production were brought alternative delivery channels, printed

Anadolu Sigorta Annual Report 2015 24 Company Activities and Major Developments in Activities 2015-2016 Primary Goals, Policies Information on the Company’s Investments

2015-2016 Primary Goals, Policies

2016 will likely be a turning point with respect to overground coal mining, and underground non-coal mining. the use of new technologies and mobile applications. Another product that will support new premium generation is the Building Completion Insurance, which is imposed as another compulsory guarantee for all prepaid housing unit sales. For this insurance that requires expertise, Anadolu Sigorta executed cooperation agreements with experienced reinsurers.

The period ahead is anticipated to see the optimistic views about the industry’s real growth persist owing to the insurance Turkey’s low income level and highly possible to suggest that 2016 will be a types that are backed also by the unbalanced distribution of wealth present much better year than 2015 in terms government and rendered compulsory, major obstacles against creation of of motor TPL insurance, and therefore, along with the targeted increase in the insurance demand. The development level overall profitability, due to the retroactive ratio of insurance ownership, and hence, of financial markets is crucial with respect decisions introduced by the authority in penetration. The industry is working to utilizing the resources engendered particularly in the motor TPL branch and to enhance the service quality delivered through insurance mechanism. The size the additional loss costs that will result to policyholders through constant of the existing markets in Turkey fails to from increased minimum wage. updates to the systemic infrastructure provide the sufficient means to achieve on one hand, and to introduce new that. Likewise, the education system does In the health branch, premium increase products and applications targeted at the not focus adequately on raising awareness rates went up, which originated from the policyholder profile that evolves with the of future, or on the insurance notion in new sales in the complementary group digital developments, on the other. This terms of getting the students acquainted product. transformation will probably continue at with it. An additional development that will a growing extent in the years to come, The extreme price competition that possibly contribute to the industry’s and the industry will give increased weight dominated the industry in the previous new premium production is the Council to cross-selling of products, as well as to years started to change in favor of a of Ministers Decision published in the improvement investments in the operation slightly more profit-driven approach. Official Gazette issue 29259 dated 06 of loss and associated assistance services. Furthermore, the negative impact of February 2015, which obligates obtaining In particular, 2016 is predicted to be operating costs that cannot be reduced “Compulsory Personal Accident Insurance a turning point and a year of shelling upon profit margins is also better for Mine Workers” for real and legal particularly with respect to the use of new understood. Notwithstanding, it is not persons engaged in underground and technologies and mobile applications.

Information on the Company’s Investments

The company’s outlays in 2015 amounted to USD 8.5 million for projects carried out for revising basic insurance implementations, enhancing operational efficiency within the scope of the company’s information and communication technology investments. These projects are detailed under the heading “Research and Development Activities of the Company”.

Anadolu Sigorta Annual Report 2015 Internal Control System and Internal Audit Activities 25 An Assessment of 2015 by the Board of Inspectors

An Assessment of 2015 by the Board of Inspectors

Pursuant to the Regulation on the Internal On the other hand, based on Articles 16/1 Developments are carefully monitored Systems of Insurance and Reinsurance and 17/2 of the Regulation on the Internal to ensure that the audits conducted and and Pension Companies, the internal audit Systems of Insurance and Reinsurance the reports subsequently issued take activity at our company is carried out by and Pension Companies, audits were account of the “International Standards the Board of Inspectors reporting to our conducted at all of the agencies that for Internal Audit”, are risk-based, provide company’s Board of Directors. The Board remain after eliminating those that were assurance for risk management and of Directors reviewed and acquainted itself dissolved during the reporting period from contribute added value to our company with the 2015 Activity Report of the Board the 2,723 agencies that were listed in the and necessary revisions and changes are of Inspectors. audit programs approved by the Board of made accordingly. Directors and planned to be audited in the In 2015, 25 headquarters units, 9 regional 2013-2015 period. The Board of Inspectors will keep carrying branches and 1 branch adding up to out the activities within the context of the 35 units in total were audited and the In line with the experiences derived from internal audit program prepared, as well resulting determinations and assessments agency audits, agencies were continued as other activities outside of this scope, were reported. to be assessed through scoring based on based on the fundamental approach for the financial data for the past three years, maximizing the benefits expected from Initiated in order to monitor the extent within the frame of efforts to further internal auditing. at which the audited units fulfill the expand and strengthen the central auditing requirements of the reports resulting from of agencies and to create early warning the audits conducted, follow-up audits systems that correctly identify and reveal continued to be carried out in 2015. A total the risk elements in advance. of 35 follow-up audits were conducted during 2015, 19 of which resulted from In 2015, 31 studies were completed: 14 2014 audits. investigations, 10 examinations and 7 other studies. Auditing of agencies persisted pursuant to the Regulation on the Internal Systems As of year-end 2015, the Board of of Insurance and Reinsurance and Pension Inspectors was staffed by 20 board Companies during 2015, and 676 agencies members consisting of inspectors, were audited, and the results were senior assistant inspectors, and assistant reported. inspectors. With the aim to support professional development of the Board members and to expand their professional knowledge, their participation in various seminars, meetings and training programs in Turkey and abroad have been facilitated. In this frame, efforts were carried on also in 2015 so that the members of the Board of Inspectors obtain nationally and internationally recognized professional certificates.

Anadolu Sigorta Annual Report 2015 26 Internal Control System and Internal Audit Activities Internal Control System and an Assessment by the Governing Body

Internal Control System and an Assessment by the Governing Body

Pursuant to the provisions of the and controlling the risks involved in the functions, and the relevant project “Regulation on the Internal Systems company’s operations; and employing launched was finalized as at year-end 2012. of Insurance, Reinsurance and Pension a risk-focused approach to the conduct The following headings were addressed Companies” enforced upon its publication and management of review, control, under the COBIT Alignment Project for in the Official Gazette issue 26913 dated monitoring, assessment and reporting Information Technology Governance and 21 June 2008, the Risk Management and activities concerning the activities of the Information Technology Processes: Internal Control Department was set up company’s units, all of the company’s in a structure so as to be conducted and key processes were schematized, and • Devising the Information Technology (IT) administered directly by the CEO, and risk-control matrixes detailing the control Governance Model vested in the powers and responsibilities points were prepared, thus completing the • Creating the Governance Processes that will allow the Department to assess system documentation. • Formulating the IT Service Development the risk exposure and internal control Processes environment in an independent/impartial A Contingency Action and Funding Plan has • Developing the IT Service Delivery and and effective fashion. The Board Director been designed, which specifies the actions Operation Processes responsible for Internal Systems is also to be taken in the event of a liquidity crisis • Creating the IT Support Processes responsible toward the Board of Directors sustained by the company due to negative • IT Audit Management. for the formation of the Department and market movements beyond its control, Accordingly, the Information Systems ensuring, monitoring and coordinating its unexpected macroeconomic events, Management Committee was set up, which operability, adequacy and effectiveness. catastrophic or big-ticket claims payments and other reasons. will report directly to the Executive Board The duties, powers and responsibilities of and will be responsible for IT strategy the individuals charged with the operation With the aim to prevent the company’s and steering activities. The Information and activities of the Internal Control exposure to various perils of differing scales Systems Management Committee was system, and for conducting the activities (machinery breakdown, human errors, established with the purpose of managing are defined in the relevant Operating theft, fire, explosion, state of war, sabotage, information systems in alignment with Guidelines released. The internal control natural disasters, terrorist acts, power the company’s strategic goals, establishing system is set up as a separate mechanism outages, etc.) and the losses resulting the policies, procedures and processes independent from the internal audit therefrom, the Business Continuity for ensuring information security, and system, based on applicable legislation and Management System has been set up to efficiently managing the risks arising from numerous references available in national recover as quickly as possible from the the use of information systems. Basically and international literature. interruption caused by such perils and to the Committee defines, assesses and enable resumption of key activities. Within reports on the risks arising from the use of Centralized internal control activities the scope of the Business Continuity information systems; creates the guidelines do not eliminate or modify, in part Management System, Headquarters for the management of these risks, or in whole, the relevant operational Emergency Response Plan, IT Continuity establishes and monitors relevant controls. and supervisory responsibilities of the Plan, Business Continuity Management employees who are in charge of conducting System Guidelines, Business Continuity It has been considered that the internal and/or managing these activities. The Plan and Incident Management Plan were control policies and procedures introduced Board of Inspectors separately oversees the drawn up and published on the Electronic and the internal control activities carried effectiveness and adequacy of the internal Document Management System. The out are aligned with the company’s nature, control system. operability of the said plans is tested at the complexity of its operations and risk certain intervals. structure, and possesses the minimum Within the scope of establishing an elements of an efficient internal control effective internal control system that is It was targeted to secure alignment with system. aligned with the nature, complexity and COBIT (Control Objectives for Information risk structure of the company’s operations; and Related Technology) in the execution duly and efficiently managing, mitigating of information systems processes and

Anadolu Sigorta Annual Report 2015 27

Information on Associates The de facto scope of Anadolu Hayat Emeklilik A.Ş. covers engaging in individual or group private pension activities; setting up pension funds in this framework; creating fund bylaws for the funds to be set up; executing pension contracts, annuity contracts, portfolio management contracts, custody agreements with the custodian for safekeeping of fund assets; and offering individual or group life or whole life insurance policies and accident policies in connection therewith, as well as all sorts of life policies, and carrying out reinsurance operations in relation thereto.

The company has 20% stakeholding in Anadolu Hayat Emeklilik A.Ş.

31 December 2015 Book Value (TL) Shareholding (%) Anadolu Hayat Emeklilik A.Ş 495,280,000 20.0%

Repurchased Own Shares by the Company None. Disclosures Concerning Special Audit and Public Audit The company undergoes independent audits conducted by the independent audit firm, Akis Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik Anonim Şirketi (KPMG) on its semi-annual financial statements at six-month intervals and on its annual financial statements annually, as well as consolidation audits performed by İşbank at the end of first and third quarters of the year. Due to being an associate of the Bank, the company is also subject to the annual information systems audits banks conduct at their consolidated entities. Lawsuits Filed Against the Company and Potential Results Lawsuits brought against the company and their possible results are presented under the heading “42 – Risks” in the notes to the financial statements. Disclosure of Administrative or Judicial Sanctions Against the Company and/or Board of Directors Members During 2015, there were no penalties and/or sanctions of material nature imposed against the company and/or Board of Directors members on account of acts in violation of the legislation. Assessment of Prior Period Targets and General Assembly Decisions All decisions adopted in the Annual General Assembly meeting held on 24 March 2015 have been carried out.

Our company acts on the principle of providing quality service and it has preserved its leading position in terms of market share in line with its targets by furthering innovation and customer-orientation concepts. Expenses Incurred in Relation to Donations and Grants and Social Responsibility Projects Our company acts in awareness of its social responsibility and spent TL 623 thousand during the reporting period. The activities carried out within the frame of social responsibility are detailed under the heading “Commitment to Social Responsibility”.

Anadolu Sigorta Annual Report 2015 28 Expenses Incurred in Relation to Donations and Grants and Social Responsibility Projects Commitment to Social Responsibility

Commitment to Social Responsibility

The objective of the project “Bir Usta Bin Usta” (One Master, Thousand Masters) is to focus the public attention on vanishing crafts and local values, to revive these crafts, and to be instrumental in letting professional craftsmen and artisans pass on their experiences to the future.

www.birustabinusta.com.tr

Anadolu Sigorta Annual Report 2015 29

Aspiring to crown its 85th anniversary of Eskişehir, Edirnekâri Art (traditional with an extensive project in 2010, Anadolu painting and varnishing of wood or leather) Sigorta designed a social responsibility of Edirne, Kutnu (traditional silk-based project aligned with the corporate strategy cloth) Weaving of Gaziantep, and Kazaziye and the expectations of the target (traditional jewelry made with threads of audiences. The project was named “Bir gold or silver) of Trabzon. Starting with Usta Bin Usta” (One Master, Thousand these five provinces, participants began Masters), perfectly corresponding to its receiving basic training about the relevant scope and content. craft in courses organized by civil society organizations designated by the Ministry The objective of the project “Bir Usta Bin of Culture. Usta” (One Master, Thousand Masters) is to focus the public attention on vanishing In 2011 that marked the second year of crafts and local values, to revive these the initiative, the scope of the project was crafts, and to be instrumental in letting defined as Kargı Cloth Weaving of Çorum, professional craftsmen and artisans pass on Silk Weaving of Hatay, Stone Working of their experiences to the future. Mardin, Bone Combs of Sivas and Savatlı Silver Work of Van. The project is conducted under the technical advisory of the Ministry of Under the project, İz TV, a national Culture, Research and Training Directorate. documentary channel, is producing the During the course of the project, the documentary films of the crafts addressed Ministry of Culture proposes cities and by the project, as well as a photographic city-specific crafts that are about to vanish, archive of the courses. identifies the NGOs, and guides Provincial Directorates of Culture. In 2011, Anadolu Sigorta carried out a special initiative with İşbank concerning Under the project, five cities and callings microloans. In this context, İşbank will offer are selected from among those proposed microloans designed with special terms to by the Ministry of Culture every year, and “Bir Usta Bin Usta” trainees. Accordingly, 15 to 20 trainees receive training for each “Bir Usta, Bin Usta” (One Master, Thousand vocation. The company aims to extend Masters) trainees, who shall have acquired support to 50 vocations and a total of the necessary technical know-how during 1,000 masters-to-be over the course of 10 the training, will be able to utilize the loan years. entailing special conditions designed by İşbank, by presenting the participation The project “Bir Usta Bin Usta” made its certificates given at the end of the training. debut with a press conference held on 10 In this way, Anadolu Sigorta will be lending June 2010. The project’s scope for its initial support not only to vocational training, but year covered five provisions and five crafts also to efforts aimed at helping the crafts which were Karagöz (Turkish shadow play) survive. Figuration of Bursa, Meerschaum Carving

Anadolu Sigorta Annual Report 2015 30 Expenses Incurred in Relation to Donations and Grants and Social Responsibility Projects Commitment to Social Responsibility

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Under the One Master, Thousand Masters project, courses were organized for Local Damal Doll Making in

Ardahan, Traditional Accordion Boot Making in Aydın, DevrekTraditional in Zonguldak Silver Threading in 2015. in Bartın, Puppet Making in İstanbul, and Wooden Walking Cane Making of

In addition, a commercial film was also for Local Damal Doll Making in Ardahan, developed in 2011 to help publicize the Traditional Accordion Boot Making in project, which represented a significant Aydın, Traditional Silver Threading in step towards conveying the initiative to Bartın, Puppet Making in İstanbul, and broad audiences. Wooden Walking Cane Making of Devrek in Zonguldak. Within the frame of the project Bir Usta Bin Usta, third year courses were Under the project, informative trips are organized in Mother of Pearl Inlaying in being organized for media members since Ankara, Rug and Carpetbag Weaving in 2010. Media trips to selected provinces Kars, Glassblowing in Muğla, Earthenware covered the courses offered in Edirne in Pottery in Nevşehir and Woodblock 2010, Mardin in 2011, Nevşehir in 2012, Printing (on cotton or silk) in Tokat in Rize in 2013, Şanlıurfa in 2014, and Bartın 2012, while the fourth year courses in 2015. included Wood Carving in Kahramanmaraş, Traditional Carpet Weaving of Gördes in Anadolu Sigorta collaborates with Manisa, Needlepoint Art of Namrun in TURMEPA (Turkish Marine Environment Mersin, Basketry in Rize and Hand Weaving Protection Association) to prevent of Karacakılavuz in Tekirdağ in 2013. marine pollution and to contribute to the combat against pollution. Based on the In 2014 that marked the fifth year of the protocol with TURMEPA, the Association project, courses were held in Tile Working that spends efforts to clean the marine in Çanakkale, Oltu Stone Working in environment in Turkey receives a share Erzurum, Art of Leather-Made Accessories from the revenues generated by the in Isparta, Art of Felt-Made Accessories insurance coverage sold to any type of in İzmir, and Amber Working in Şanlıurfa. vessel. The protocol for this cooperation In the sixth year, courses were organized was signed in 2010.

Anadolu Sigorta Annual Report 2015 The Company’s Transactions with the Risk Group 31

The Company’s Transactions with the Risk Group

Within the framework of the applicable Commercial transactions the company The company’s transactions of a material provisions of the Turkish Commercial realized with its controlling shareholder nature with the related parties during 2015 Code (TCC), our company is a subsidiary and other Group Companies during 2015, are presented in Note no. 45 under the of İşbank Group [during 2015 fiscal year]. which are detailed in the report, fall within notes to the financial statements in the Pursuant to Article 199 of the TCC, the the company’s field of activity and were present report. company’s Board of Directors presented carried out on an arm’s length basis. In all the declaration below in the conclusion of of the transactions the company realized the affiliation report issued in relation to its in 2015 fiscal year with the controlling relations with the controlling company or company and its affiliates, any and all legal an affiliate thereof: acts carried out in favor of the controlling company or its affiliate with guidance Between our company and our principal from the controlling company, and any shareholder Türkiye İş Bankası A.Ş. and/or and all actions taken or avoided in favor of other ‘Group Companies’, there is no; the controlling company or its affiliates in 2015 have been reviewed according to the • transfer of receivables, payables or conditions and circumstances known to us. assets, We hereby declare that our company did • legal transaction that may result in an not sustain any such loss on account of any obligation, such as furnishing surety, transaction arising according to conditions guarantee or endorsement, and circumstances known in relation to 2015 fiscal year. • legal transaction that may result in transfer of profit.

Anadolu Sigorta Annual Report 2015 32 Financial Status Summary Report by the Board of Directors

Summary Report by the Board of Directors

Dear shareholders The Fed’s expected rate hike has been In its World Economic Outlook released a central topic that remained on the in October, the IMF, however, predicted a Before presenting the 2015 financial worldwide economy agenda throughout more pessimistic scenario for the growth statement figures covering the company’s 2015. In this context, the Fed stated expectations of the Turkish economy as 90th year of operation for your approval that liftoff would be delayed until the compared with its previous report, and and comments, we deem it useful to economic activity picks up and positive revised 2015 growth estimate downwards recap the changes and developments in developments are observed in inflation from 3.1% to 3.0%. The 2016 growth economic life and the insurance sector. and unemployment figures, two key projection for Turkey, which was previously indicators that steer the monetary policy. 3.6%, was updated as 2.9% in the said Having entered 2015 with the anticipation The Fed held the last meeting of the year report, citing the negative changes that the moderate recovery of 2014 would in December and passed the much awaited that political uncertainty will cause in persist, global economy failed to capture liftoff decision, increasing the interest rates domestic demand and the contracted the expected momentum due to various by 0.25 points for the first time since 2006 Russian economy as the reasons for this fluctuations that occurred in emerging and bringing the interest rate interval up to downgrade. and developing economies during the the 0.25-0.50% band. reporting period. In a similar vein, the IMF The ongoing stagnation in the global World Economic Outlook reported that The Turkish economy underperformed economy also reflected on the world the worldwide growth slowed down as due to the ever-increasing geopolitical insurance markets in 2015. Premium of the first half of 2015, and the global risks that have been long ongoing and to production growths remained limited, growth estimate for 2015 was revised the financial stagnation sustained by its while profitability further declined as downwards by 0.2 points to 3.1% in the partners in trade, particularly the European compared with the previous years with update released in October. According to Union, and registered a growth rate of the added effect of the shrank investment the report, the moderate growth observed 2.5% in the first quarter of 2015, 3.8% in income, and hence, the competition in 2015 in developed countries would the second and 4.0% in the third quarter, between insurance companies got continue, while developing countries would the highest since the first quarter of 2014. increasingly fiercer. see a decline as compared with 2014. Growth declined from 3.7% to 3.1% year- over-year in the first half of 2015, making Turkey the fourth fastest growing economy among OECD, G20 and European countries. The “Medium Term Program (MTP) 2016- 2018” revised by the Government on 11 January 2016 estimates annual growth at year-end 2015 at 4.0%, while projecting a growth rate of 4.5% for 2016.

Anadolu Sigorta Annual Report 2015 33

During 2015, many branches sustained Based on the data for the first nine months Looking at our company’s financial decreased insurance prices across the of 2015 for the non-life segment, motor standing and operating results, our assets world, which originated mainly from vehicle liability branch that represents the grew by 28% year-to-year to TL 4,888 the increased capacity provided by the largest portion of the industry’s market million, while premium production went worldwide insurance industry and the share posted a technical loss of TL 1,432 up by 20.2% in the same period to TL marked decline in the frequency and the million. In the motor TPL segment that 3,611 million. Our company also rose to severity of catastrophe losses. In addition, makes up a substantial portion of this second place in terms of market share in lower reinsurance costs also contributed to branch, on the other hand, the loss figure the non-life segment on the back of the declined insurance prices. went up to as high as TL 1,660 million. premium growth it has achieved. Motor Motor vehicles (own damage) branch, i.e. vehicles liability branch claimed the biggest The real growth trend of the Turkish the other motor vehicle insurance branch, share of our total premium production insurance industry that had been ongoing registered a technical profit of TL 374 with 28.9%. This was followed, in order, since 2008 was disturbed particularly due million. Following motor own damage, by motor vehicle with 23.4%, fire and to the shrinking on the life side in 2014, the highest profit generators in the natural disasters branch with 17.7%, and and the industry narrowed down by 0.8% industry were, in order, personal accident health branch with 9.1%. The company in real terms at the end of the year. Having with TL 256 million and health with TL booked a profit of TL 65.6 million gross and recovered quickly, the industry recaptured 185 million. Technical loss figure for all TL 63.8 million net owing to the positive double-digit nominal rates, also with branches combined was TL 125 million. At results attained particularly in the technical the help of the base effect, and attained the bottom line, non-life segment booked division and particularly in the accident 9.7% real growth in 2015. According a profit of TL 15 million gross, and a loss branch in 2015, which reflected on to 2015 data, non-life branches were of TL 110 million net with the effect of technical accounts, and also to the positive accountable for 87.9% of total production, taxes and other liabilities in its financial effect of the developments in financial corresponding to a premium production of statements for the period ended 30 markets to financial accounts. TL 27,264 million, while premiums written September 2015. on life insurance reached TL 3,761 million, Our company’s goal in 2016 will be to translating into 12.1% of total production. improve the concepts of quality service, In 2016, the industry is anticipated to leadership, innovation and customer-focus, come close to the nominal growth rate and to sustainably increase the success of 20.1% achieved as of 2015 in non- captured in profitability. life segment that includes our company, although the year ahead incorporates a number of economic unknowns, and the nominal growth is projected to be in the order of 15%.

Anadolu Sigorta Annual Report 2015 34

Developed for the agencies, “Ofisim Cepte” application serves as a platform for instant viewing of production figures, targets, renewals, segments, rewards, announcements and rankings. In addition, the Riskpad Tablet application development put the risk analysis processes of premises for which policies will be issued on the mobile platform.

Anadolu Sigorta Annual Report 2015 35

“Ofisim Cepte”

“Ofisim Cepte” application that was received with great interest was developed with keen consideration of the “Ofisim Cepte” application agencies’ needs.

Anadolu Sigorta Annual Report 2015 36 Financial Status Financial Information and Indicators

Financial Information and Indicators

20.2% 24.9% TL 1.201,9 TL 63.8 million million

Total premium production Claims paid were up by Shareholders’ equity Anadolu Sigorta posted a of Anadolu Sigorta during 25.0% to TL 1,941.2 million reached TL 1,201.9 million, net profit of TL 63.8 million 2015 expanded by 20.2% to in 2015. translating into 14.3% on its 2015 operations. TL 3,610.7 million. growth in 2015.

Financial Highlights (TL thousand) 2015 2014 Total Premium Production 3,610,674 3,004,830 Total Assets 4,887,545 3,804,993 Claims Paid 1,941,149 1,553,197 Paid‑in Capital 500,000 500,000 Total Assets Shareholders’ Equity Shareholders’ Equity 1,201,893 1,051,435 (TL thousand) (TL thousand) Pretax Profit/Loss 65,576 92,782 Net Profit/Loss 63,806 71,700

Capital Adequacy Ratios 2015 2014 1,201,893 4,887,545 Premiums Received/Shareholders’ Equity 3.00 2.86 Shareholders’ Equity/Total Assets 0.25 0.28 1,051,435 3,804,993 Shareholders’ Equity/Technical Provisions 0.41 0.46

Asset Quality and Liquidity Ratios 2015 2014 Liquid Assets/Total Assets 0.61 0.59 Current Ratio 1.18 1.22 14 15 14 15 Liquidity Ratio 1.41 1.53 Premium and Reinsurance Receivables/Total Assets 0.19 0.21 Receivables from Agencies/Shareholders’ Equity 0.58 0.60 Claims Paid Net Profit/Loss (TL thousand) (TL thousand) Operational Ratios 2015 2014 Retention Ratio (*) 0.77 0.77 Claims Payment Ratio 0.51 0.56 71,700 1,941,149 Profitability Ratios 2015 2014 63,806 Loss-Premium Ratio 0.82 0.78 Cost Ratio 0.25 0.25 1,553,197 Combined Ratio (Loss-Premium Ratio+Cost Ratio) 1.07 1.03 Pretax Profit/Premiums Received 0.02 0.03 Financial Profit (Gross) (**)/Premiums Received (*) 0.07 0.05 Technical Profit/Premiums Received 0.03 0.04 14 15 14 15

(*) Including premiums transferred to the Social Security Institution (**) In the calculation of the financial profit, investment income that has been transferred from the non-technical division to the technical division was excluded.

Anadolu Sigorta Annual Report 2015 37

Premium Growth Rate Total Premium Production (%) (TL thousand) 61.7 47.6 3,610,674 3,004,830 38.4 33.6 26.7 26.7 17.3 24.9 20.2 18.3 17.0 2.6 13.3 7.4 14 15 -13.5 Total Credit Marine Aircraft General Liability Liability Accident Disasters Watercraft Illness/Health General Losses Motor Vehicles Motor Vehicles Financial Losses Aircraft Liability Legal Protection Fire and Natural

Premium Production (TL thousand) 2015 2014 Change (%) Total premium production Accident 110,400 79,755 38.4 of Anadolu Sigorta went Illness/Health 328,342 279,983 17.3 Motor Vehicles 845,727 824,143 2.6 up by 20.2% in 2015 on Aircraft 18,543 12,563 47.6 the back of a successful Watercraft 84,936 67,021 26.7 Marine 70,902 66,019 7.4 performance. Premiums Fire and Natural Disasters 637,516 503,259 26.7 written increased from TL General Losses 298,821 239,216 24.9 3,004.8 million in 2014 Motor Vehicles Liability 1,042,780 780,421 33.6 Aircraft Liability 26,133 30,205 -13.5 to TL 3,610.7 million in General Liability 122,875 105,013 17.0 2015. Credit 1,333 1,127 18.3 Financial Losses 13,748 8,500 61.7 Legal Protection 8,617 7,606 13.3 Total 3,610,674 3,004,830 20.2

Anadolu Sigorta Annual Report 2015 38 Financial Status Financial Information and Indicators 2015 Economic Overview

2015 Economic Overview

Having entered 2015 with the anticipation that the in 2015 in developed countries would continue, while developing countries would moderate recovery of 2014 would persist, global see a decline as compared with 2014. The report also underlined that the financial economy failed to capture the expected momentum volatility resulting from the slumps in due to various fluctuations that occurred in emerging commodity prices, the depreciation of developing countries’ currencies against and developing economies during the year. the US dollar and particularly the Fed’s expected rate hike increased the risks upon the world economy, mostly upon developing economies. The report also projected that the economic activity would gain momentum in 2016, and that even those economies that had a weak year in 2015 would experience a Growth (%) 2014 2015 (E) 2016 (P) moderate recovery. Along the line, the IMF projected a growth rate of 3.6% for the Global 3.4 3.1 3.4 global economy, but revised it downwards Developed Countries 1.8 1.9 2.1 by 0.2 points to 3.4 in its January update USA 2.4 2.5 2.6 in view of the developments in the last Eurozone 0.9 1.5 1.7 quarter of 2015. The report cited the Japan 0.0 0.6 1.0 negative impacts of declined oil prices on Developing Countries 4.6 4.0 4.3 the Middle East economies and the flat China 7.3 6.9 6.3 course of the US economy in defiance of Brazil 0.1 -3.8 -3.5 the expectations as the reasons for this revision. Turkey 2.9 3.0 2.9

Source: IMF World Economic Outlook, January 2016 2015 has been a year of uneven growth for (E): Estimated, (P): Projected the US economy. After growing by 0.6% in the first quarter, the US economy gained momentum in the second quarter and expanded by 3.9%, whereas the economic The World Economy activity slowed down once again in the third quarter to push the growth rate Having entered 2015 with the anticipation down to 2.0%. While seasonal effects and that the moderate recovery of 2014 would the negative exports stemming from the persist, global economy failed to capture strengthened US currency led to a low the expected momentum due to various growth figure in the first quarter, increased fluctuations that occurred in emerging consumer expenditures and the rise in and developing economies during the investments resulted in a growth rate of reporting period. In a similar vein, the IMF 3.9% in the second quarter. As the impact World Economic Outlook reported that of the slackened global economy on the the worldwide growth slowed down as US economy wore off, growth in the US of the first half of 2015, and the global economy surpassed the expectations and growth estimation for 2015 was revised reached 2.0% in the third quarter. Despite downwards by 0.2 points to 3.1% in the the quarterly deceleration of the economy, update released in October. According to positive expectations for the year-end the report, the moderate growth observed are backed by the continued high level of

Anadolu Sigorta Annual Report 2015 39

consumption expenditures, the greatest In an attempt to provide a future The Fed’s expected rate contributor to growth, coupled with the stronghold for the economic stance increase in salaries. secured, the Fed passed the much awaited hike has been a central liftoff decision and increased the interest The Fed’s expected rate hike has been rates by 0.25 points for the first time since topic that remained on a central topic that remained on the 2006, bringing the interest rate interval up the worldwide economy worldwide economy agenda throughout to the 0.25-0.50% band. 2015. In this context, the Fed stated agenda throughout 2015. that liftoff would be delayed until the Having started 2015 with a bundle of economic activity picks up and positive issues including low inflation, weak developments are observed in inflation and demand and political and economic risks unemployment figures, two key indicators in Greece, the European Union displayed that steer the monetary policy. moderate recovery in the first three quarters. While the Tsipras Government However, the positive performance that came to power in Greece’s snap anticipated in economic indicators election and the new government’s failure remained elusive until the end of the to agree on the resolution of the debt year, causing a delay in the Fed’s liftoff crisis with the creditors put additional while also adding to the pressure on other pressure on the economy, creditors and countries’ economies and currencies. the Greek government reached a deal on Pursuing a fluctuating course during the new bailout package, which diminished 2015, the inflation figure slipped down the risks on the EU economy. On the by 0.3 points on a monthly basis and the other hand, the European Central Bank annual inflation was registered as 0.7% (ECB) expanded the volume of its asset according to published December data. purchase program to EUR 60 billion a The anticipated rise in inflation did not month, which is intended to give a lift to materialize due to the strengthened US the low inflation and weakening demand dollar against other currencies and the in the Eurozone in an effort to accelerate low oil prices, which joined among the economic recuperation. The program was factors that caused the Fed to postpone its also enlarged to include the purchase of rate hike. The unemployment rate, which government bonds. is another determinant of the monetary policy, saw continued recovery throughout In spite of these fluctuations in the area, the year. Announced as 5.7% in January, the Eurozone grew 1.2%, 1.5% and 1.6% the unemployment figure declined to in the first three quarters respectively with 5.1% in September in keeping with the the positive push from the ECB’s monetary projections. The minutes of the Fed’s policy and weakened Euro. The inflation, last meeting of the year in December which showed some recovery owing to the mentioned the remarkable rise in asset buying program, adopted an uptrend household consumption expenditures and in the March-August period, but turned in fixed capital investments, and noted the to negative once again in September in decreased unemployment and its expected conjunction with the dipped energy prices, positive impact on inflation. and stood at a monthly -0.1%.

Anadolu Sigorta Annual Report 2015 40 Financial Status Financial Information and Indicators 2015 Economic Overview

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The Brent oil dropped Pursuing a growth policy that relies on to 1.1193 at end-February, its lowest in exports, China, on the other hand, failed the past 12 years. The parity sustained its to as low as USD 37 a to capture the anticipated momentum in downtrend in March, reacquired its volatile economy due to the low global demand course after declining to the order of 1.06, barrel as at the end of and the lower-than-expected investment and ended the year at 1,0886. the year. From a demand expenditures, which serve as the drivers of economy. The Chinese economy attained Having displayed sharp drops in 2014, perspective, the negative growth rates of 7% in the first two commodity and especially oil prices developments in the quarters of 2015, and 6.9% in the third were uneven also during 2015 due to a quarter. In addition, reduced production number of global reasons including the Chinese economy and volume resulting from slack demand made Greece-originated developments in the the lower industrial its impact on PPI, and the Producers Price EU economy, the continued shrinkage in Index fell for the 42nd period in a row, the Chinese economy and decline in that manufacturing figures coming down to -5.9% in August. The country’s trade volume, combined with emerge as the key data Chinese industrial production that faltered the uncertainty prevailing over the Fed’s with the effect of stagnated international liftoff. The downturn that started in the per that curb the demand for trade repressed economic growth, while barrel price of Brent oil in the second half also putting pressure on the economies of of 2014 persisted through 2015 due to the oil. other countries that are in the position of deteriorated supply and demand balance, producing inputs used particularly in the and the Brent oil dropped to as low as manufacturing of heavy industrial goods. USD 37 a barrel as at the end of the year. As a result of the gradual stagnation of From a demand perspective, the negative the Chinese economy, the Central Bank of developments in the Chinese economy and China curbed the borrowing and lending the lower industrial manufacturing figures rates by 0.25 bps, and required reserve emerge as the key data that curb the ratios by 0.50 points in an effort to support demand for oil. The factors increasing the the economy. Because of the negative supply, on the other hand, include the deal atmosphere observed in the Chinese Iran reached with the Western countries, economy that ranks first among developing increased US production of shale gas countries, and the Yuan’s position as one and shale oil production, and the OPEC’s of the most valuable currencies against statements that crude oil manufacturing the US dollar, the Central Bank of China would not be cut back. devaluated Yuan by 2% with the goal of Having followed suite of 2014 and started driving exports and reviving economic 2015 with a fluctuating course, gold prices activity. slumped to 1,100 USD/ounce in July, the The EUR/USD parity remained volatile lowest level of the past five years in parallel throughout 2015. The remark “(to be) with the increased demand for US dollar in patient” in beginning to normalize the face of the Fed’s approaching rate hike, monetary policy was removed from the aggravated global risks, and the negative new year statement of Fed’s new Chair economic indicators in EU countries and Yellen, a move interpreted by the markets in China. The gold prices fluctuated for the that the rates might be hiked in the near rest of the year and closed December at future. Hence, after starting 2015 at 1,062 USD/ounce. 1.21, the EUR/USD parity backed down

Anadolu Sigorta Annual Report 2015 41

The Turkish Economy Medium Term Program 2016-2018 Data

The Turkish economy underperformed Years Growth GDP (%) Inflation Rate (%) due to the ever-increasing geopolitical risks that have been long ongoing and to 2015 4.0 8.8 the financial stagnation sustained by its 2016 4.5 7.5 partners in trade, particularly the European 2017 5.0 6.0 Union, and registered a growth rate of 2018 5.0 5.0 2.5% in the first quarter of 2015, 3.8% in the second and 4.0% in the third quarter, the highest since the first quarter of 2014. Growth declined from 3.7% to 3.1% year- over-year in the first half of 2015, making and the drop in fresh produce prices, and The Turkish economy Turkey the fourth fastest growing economy stood at 7.2% and 6.8%, respectively. The among OECD, G20 and European countries. 6.8% CPI of July was noted as the lowest underperformed due The “Medium Term Program (MTP) 2016- CPI rate of the past 26 months. The food to the ever-increasing 2018” revised by the Government on 11 prices continued to rise in August and January 2016 estimates annual growth at September, which, in conjunction with geopolitical risks that year-end 2015 at 4.0%, while projecting a the negative developments in exchange growth rate of 4.5% for 2016. rates, pushed the CPI figure to 7.1% and have been long ongoing 7.9% respectively in these two months. In and to the financial In its World Economic Outlook released October, the CPI somewhat dropped owing in October, the IMF, however, predicted a to the base effect and came down to 7.6%. stagnation sustained more pessimistic scenario for the growth Up to 8.10% in November, the CPI’s annual by its partners in trade, expectations of the Turkish economy as increase of 8.81% in 2015 represented the compared with its previous report, and highest inflation rate of the past four years. particularly the European revised 2015 growth estimate downwards In its World Economic Outlook published in from 3.1% to 3.0%. The 2016 growth October, the IMF revised Turkey’s inflation Union. projection for Turkey, which was previously estimates upwards from 6.6% to 7.4% for 3.6%, was updated as 2.9% in the said 2015, and from 6.5% to 7.0% for 2016. report, citing the negative changes that political uncertainty will cause in As a result of the modified global monetary domestic demand and the contracted policies, the uncertain rate hike by the Russian economy as the reasons for this Fed, and the developments in the US, downgrade. capital inflows to developing countries including Turkey slowed down, volatility In the first five months of 2015, CPI in exchange rates increased in 2015, and went up to 8.1% due particularly to the the CBRT was challenged in setting policies increased food prices and the Turkish with the added impact of the domestic currency’s depreciation against the uncertainties. In its Monetary Policy currencies of developed countries, in Committee meeting held in February, spite of the positive effects of fallen oil the CBRT reduced the overnight marginal prices. The CPI declined in June and July funding rate from 11.25% to 10.75%, owing to the increasingly lower oil prices the interest rate on borrowing facilities

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Owing to the positive effect lent by energy and constantly escalating terrorist acts in neighboring countries, economic financing oil prices, weak domestic demand, low growth of of the resulting migration, highly volatile exchange rates, shrank tourism revenues, the Turkish economy and positive foreign trade, and low trade volume resulting from Turkey’s chronic problem of high current account economic hardships experienced mainly by Russia, as well as our other major deficit somewhat improved conjuncturally. partners in trade. Hence, the current deficit declined from USD 46.5 billion at year-end 2014 to USD 32.2 billion at the end of 2015. Although this betterment presents a positive appearance with respect to the fragility of the economy, the slowdown in foreign funds and especially in direct foreign capital inflows and the increase in direct foreign capital investments made in foreign countries suggest that this positive outlook is not a permanent and sustainable one that is rooted in structural improvements. provided for primary dealers via repo remained fervent and set new records after In 2015, exports decreased by 8.7% year- transactions from 10.75% to 10.25%, the February, urging the CBRT to adopt a new over-year and went down to USD 143.9 CBRT borrowing rate from 7.50% to 7.25%, decision that replaced the remark “by up billion, while imports slimmed by 14.4% to and one-week repo rate, which is the policy to 50%” in its previous decision with the USD 202.7 billion. In parallel, the foreign rate, from 7.75% to 7.50%, in view of the remark “by up to USD 30 million”; since trade deficit in 2015 shrank by 25.2% to conjunctural developments in January and this amount also failed to be sufficient, USD 63.3 billion. February, and the positive indicators for it was further raised to USD 70 million energy and food prices. on August 18th. In response to the liftoff The ratio of exports to imports went up started by the Fed in December, the CBRT, from 65.1% in 2014 to 69.5% in 2015. In an attempt to stop the US dollar’s whose reaction was a burning question, Turkey’s exports to EU countries that record rise in February, the CBRT had raised the interest rate of the free reserves, represent our country’s largest export passed a decision that it put into practice; USD-denominated required reserves and destination moved in parallel with the accordingly, the amount of FX selling reserve options held at the Bank from decline in the EUR/USD parity, and tender may be determined on a daily basis 0.24% to 0.49%. narrowed down by 1.5% year-to-year. The depending on the FX market conditions for reduction in the exports figure to other the purpose of countering the volatility in Owing to the positive effect lent by energy major trade partners including Russia, the FX rate at times of increased financial and oil prices, weak domestic demand, Iran, Iraq and Egypt in the same period fluctuations, and the FX selling amount low growth of the Turkish economy and corresponds to a substantial portion of may be increased by up to 50% of the positive foreign trade, Turkey’s chronic the decrease in the exports figure. The minimum amount announced on the problem of high current account deficit fall in the imports figures in 2015 are previous day at times of excessive volatility somewhat improved conjuncturally, also remarkable. This decrease was driven in the market. However, the US dollar despite negative factors including the by the lower energy prices, along with

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domestic turmoil and volatile exchange the world and in Turkey, the migrant In spite of the negative rates. The MTO revised by the Government crisis, the tension with Russia, stagnation projects 2016 imports at USD 210.7 billion in EU economies, the recession possibility reflection of the moderate and exports at USD 155.5 billion. threatening the Chinese and Japanese economies, and continued rate hike by the GDP growth of 2015 In spite of the negative reflection of the Fed. The shrinkage in tourism revenues upon the labor market moderate GDP growth of 2015 upon that will result from the ongoing crisis the labor market in Turkey, the rise in situation with Russia and the trade volume in Turkey, the rise in employment that has been ongoing since between the two countries that is poised employment that has 2007 persisted, and more than 7 million to narrow down will negatively impact jobs were added. While the key driver the foreign trade figures in 2016, which, been ongoing since 2007 behind this improvement was the service in turn, might negatively reflect on the persisted, and more than sector, the industry’s contribution was current deficit. The pressure the Fed’s limited once again. The MTP announced inception of its reportedly gradual rate hike 7 million jobs were added. by the Government projects that the upon exchange rates will bear negative unemployment rate will continue to results with respect to the economy and rise in the event of sustained moderate growth figures. On the other hand, the course of domestic demand and because minimum wage, which will be increased by of the weak investments, and predicts 30% to TL 1,300 in 2016, will have major unemployment rates of 10.5% for year-end effects on the national economy that are 2015 and 10.2% for year-end 2016. While currently unclear. While lifting at least part unemployment rate was 10.5% in the first of the resulting burden off the shoulders 10 months of 2015, the number of people of employers is a relief to some extent, the placed in a job grew by 718,000 year- said rise will possibly contribute negatively over-year and the rate of employment was to unregistered employment, and in turn to registered as 51.6%. The main contributor the unemployment, exports and inflation to this upturn is the increased participation figures. of women in the workforce. While this rise is positive, it is still way below the level in developed countries. Seasonally adjusted unemployment, e.g. the most significant item in the assessment of unemployment rate, was 10.6% in October, whereas labor force participation rate was 51.5%.

Although the markets reacted positively to the establishment of the new government and sustained single-party rule, the performance of the Turkish economy will be clearly affected by various social and economic risks such as the severe geopolitical risks along our borders, the impact of the potential terrorist acts in

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The ongoing stagnation in the global economy also The moderate economic recovery of 2015 in developed countries, on the other hand, reflected on the world insurance markets in 2015. has yet to reflect on the insurance business. The increased competition kept causing Premium growth remained limited. declines in the premium growth rate in these countries. Another contributor to this situation is the Euro Area that could not shake off economic stagnation as yet.

In written premiums, the non-life insurance segment is anticipated to see a rise of 2.5% in 2015, and to capture a slightly higher rise of 3% in 2016.

While the profitability of the insurance industry varies regionally, which was Non-Life Insurance Worldwide Premium Production static overall in 2015, the downtrend of Real Growth (%) investment revenues also brought about 2016 2015 2014 2013 lower profitability ratios as compared with World 3.0 2.5 2.8 3.2 the previous year. Developed countries 1.8 1.7 2.0 2.1 During 2015, many insurance lines Developing countries 7.9 5.6 6.3 8.0 sustained decreased prices across the world, which originated mainly from the increased capacity provided by the worldwide insurance industry and the marked decline in the frequency and the An Overview of the World Insurance severity of catastrophe losses. In addition, Industry lower reinsurance costs also contributed to declined insurance prices. The decrease The ongoing stagnation in the global in rates was in excess of 5% in the fire economy also reflected on the world branch, varied between 2% to 4% in the insurance markets in 2015. Premium casualty branch although changing on the growth remained limited, while profitability basis of regions, and was nearly 5% in the further declined as compared with the financial risks and liability insurances. previous years with the added effect of the shrank investment income, and hence, the Shrank profit margins and increased competition between insurance companies competition in non-life insurance steer became increasingly fiercer. insurance companies to invest more in technology. In 2015, this trend continued The rate of economic growth kept falling and picked up even further. Insurers turned in developing countries as it did in the to serious IT investments in various fields previous years. While this influenced the like data analysis, cloud computing, and performance of the insurance industry, catastrophe modeling. The primary goals equally remarkably, the premium volumes of these investments included easier reach of these countries shrank in USD terms due to customers, lower transaction costs, to the appreciated US currency. better insight into risks so as to ensure

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better risk management and underwriting. disaster to date in Asia. Much larger than In 2015, production In the future, technology is predicted to likes of it in terms of size and occurrence, shape the insurance business at a greater this loss is of a nature which may alter the growth in classic extent, and to be instrumental in ensuring risk perception of insurers and reinsurers. more competent customer relationship insurance branches lost management on all distribution channels On the life insurance front, 2015 presented pace, while new products including agencies, and particularly on an uptrend in profitability in defiance of social media and mobile applications. a number of factors including modest targeted at specific economic growth around the globe, low risks gained increasing In 2015, production growth in traditional interest rates, volatile financial markets lines of business lost pace, while new and regulatory developments. Emerging prevalence. products targeted at specific risks gained markets serve as the engine of this increasing prevalence. The increase in cyber rise. Although life insurance business is attacks in many countries including Turkey seemingly agency-driven and characterized caused a higher demand for insurance by a restricted choice of products, it keeps products offering coverage for cyber risks. capitalizing on the benefits of digital The prices that went up concurrently with technology and continues to undergo increased demand can be considered a transformation on the back of customer- harbinger of the future significance of this focused initiatives. 2016 is expected to branch. see increase in the profitability of the life insurance business, albeit at a small extent. Contractual risks made up another branch that saw rapidly growing demand in 2015. When we look at the reinsurance markets, The premiums written in this branch had we see that reinsurers’ capital sizes risen by 15% by mid-year. The primary shrank during 2015. The total capital of factor that drove the demand for this reinsurance companies decreased by USD insurance was mergers and acquisitions 10 billion and went down to USD 565 that picked up on a global scale. Vitality billion as a result of this shrinkage, which and increasing purchases in the real estate was 1.7% as at the third quarter. The sector drove the demand for title deed primary drivers were the rise in US dollar insurance in this line of business. and higher bond rates.

In 2015, catastrophe losses stopped at On the other hand, alternative reinsurance USD 30.5 billion, way below the last capital grew, and countered this shrinkage decade’s average of USD 61 billion. The in traditional capital. Alternative most significant catastrophe losses that reinsurance capital had grown by 8% as took place during 2015 resulted from the at the third quarter of 2015, and reached snowfalls and hurricanes in the US and USD 69 million. Accounting for 14% of the Europe in the first half of the year. Each of traditional capital, alternative capital has these losses amounted to ca. USD 1 billion. been the main reason that further drove the reinsurance prices downwards in 2015, However, the biggest catastrophe in 2015 which had been decreasing for many years was not a natural disaster. The explosions already. in Tianjin Port of China in August, which are estimated to have caused insured losses of USD 3.3 billion, are likely to constitute one of the largest insured man-made

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The downtrend in In the year ahead, reinsurance supply is However, discussions are ongoing about projected to remain flat while reinsurance the usefulness of mergers and acquisitions reinsurance prices demand is anticipated to grow, mainly in helping investors attain the said goals. because of the fact that rating agencies The ultimate result will be unveiled in time. persisted, and pushed and country lawmakers are on the verge of the prices close to their enforcing some regulations that give rise to A noteworthy M&A transaction in higher reinsurance need such as Solvency 2015 was the acquisition of Platinum lowest limits which are II and C-ROSS. In addition, capacity needs Underwriters Holdings by RenaissanceRe technically possible. In that will arise out of insurers’ search for Holdings at a price of USD 1.9 billion. The new products are expected to contribute XL Group acquired the Catlin Group at a many branches, rates to this demand increase. For instance, the price of more than USD 4.2 billion, and barely covered costs of gradually increasing cyber risk policies now pursues operations under the name constitute a new line where reinsurance XLCatlin. Endurance Specialty Holdings losses. will be employed intensely due to the acquired Montpelier Re Holdings for heavy loss burden that will be occasioned USD 1.8 billion. Another acquisition of by collective attacks. significance in 2015 was the acquisition of Partner Re by Exor investment company for In 2015, insurance and reinsurance circles USD 6.9 billion. experienced a significant increase in mergers and acquisitions. According to Solvency II, which has been on the Aon Benfield data, the M&A volume of table for many years, came into force the global insurance industry amounted on EU countries as of 1 January 2016. to USD 89 billion on the basis of 770 This situation is expected to increase agreements, which translated into a 187% reinsurance demand, and therefore, the Low catastrophe losses represented value increase as compared with the expenses of insurance companies. The another contributor to low reinsurance previous year’s volume of 701 agreements gradual enforcement of the C-ROSS prices. Another factor was the released worth USD 31 billion. legislation will also create a similar provisions, which the reinsurers had set effect on China, the world’s second aside beyond their needs. The profitability The key motivations behind the growing biggest economy. In the event that of reinsurance companies went up also number of mergers and acquisitions can these developments coincide with for this reason, adding to the downward be summed up as achieving geographic major catastrophe losses that have been pressure on reinsurance prices. However, expansion, accessing new products and nonexistent for a long time and increased the downtrend in reinsurance prices delivery channels, increasing efficiency demand as a result of economic recovery, persisted, and pushed the rates close to starting with scale economies, and insurance and reinsurance prices may be their lowest limits which are technically creating more solid customer relationships. anticipated to rise on a global scale in possible. In many lines of business, prices Moreover, low interest rates, capital surplus 2016. barely covered costs of losses. and competitive conditions arising from new alternative capital render acquisitions a suitable method for more efficient management of the available capital.

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An Overview of the Turkish Insurance Technical loss figure for all branches The Turkish insurance Industry and Future Outlook combined was TL 125 million. Nonetheless, the effect of the amount of TL 1,325 industry narrowed down The industry’s growth trend in real terms million needs to be taken into account, that had been ongoing since 2008 was which has been transferred from financial by 0.8% in real terms in disturbed particularly due to the shrinking accounts to the industry’s financial 2014. Having recovered on the life side in 2014, and the industry statements. At the bottom line, non-life narrowed down by 0.8% in real terms at segment booked a profit of TL 15 million quickly, the industry the end of the year. Having recovered gross, and a loss of TL 110 million net with recaptured double-digit quickly, the industry recaptured double- the effect of taxes and other liabilities in its digit nominal rates, also with the help of financial statements for the period ended nominal rates, also with the base effect, and attained 9.7% real 30 September 2015. growth in 2015. According to 2015 data, the help of the base effect, non-life branches were accountable for Changes occurred in the calculation and attained 9.7% real 87.9% of total production, corresponding method of IBNR provisions set aside to a premium production of TL 27,264 by companies within the scope of the growth in 2015. million, while premiums written on life Undersecretariat of Treasury circular insurance reached TL 3,761 million, published on 5 December 2014, which translating into 12.1% of total production. came into force on 1 January 2015. This change can be stated among the primary In 2016, the industry is anticipated to reasons that led to the loss figure of come close to the nominal growth rate of approximately TL 1.7 billion booked in the 20.1% achieved on non-life branches as of motor TPL branch as at the end of the third 2015, although the year ahead incorporates quarter. a number of economic unknowns, and the nominal growth is projected to be in the 2015 has been quite an active year order of 15%. with respect to the motor TPL branch. The technical balance of the motor TPL Based on the data for the first nine months branch was negatively influenced by the of 2015 for the non-life segment, motor Compulsory Motor Third Party Liability vehicle liability branch that represents the Insurance General Conditions that were largest portion of the industry’s market published on 14 May 2015 and came share posted a technical loss of TL 1,432 into force on 1 June 2015, which includes million. In the motor TPL segment that repairs made using “equivalent parts” makes up a substantial portion of this and losses arising from the vehicle’s branch, on the other hand, the loss figure loss of value due to crashes within went up to as high as TL 1,660 million. the scope of the insurance. The same Motor vehicles (own damage) branch, i.e. regulation also introduced significant the other motor vehicle insurance branch, changes and standardization regarding registered a technical profit of TL 374 the calculation of the compensation for million. Following motor own damage, the “loss of financial support” to the industry. highest profit generators in the industry The Undersecretariat of Treasury brought were, in order, personal accident with TL a remarkable change again in the motor 256 million and health with TL 185 million. TPL branch with the letter published on

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2015 2014 Premium Production Premium Production Change (%) Branch Production (TL) Share% Production (TL) Share% Accident 1,196,577,633 4.39 1,035,675,457 4.56 15.54 Illness/Health 3,436,286,131 12.60 2,930,346,787 12.90 17.27 Motor Vehicles 5,551,397,549 20.36 5,085,067,734 22.39 9.17 Motor Own Damage 5,551,397,549 20.36 5,085,067,734 22.39 9.17 Rail Vehicles 16,835 0.00 10,586 0.00 59.03 Aircraft 75,365,723 0.28 58,724,204 0.26 28.34 Watercraft 176,889,820 0.65 140,455,545 0.62 25.94 Marine 534,078,929 1.96 488,871,753 2.15 9.25 Fire and Natural Disasters 4,391,714,837 16.11 3,844,573,725 16.93 14.23 General Losses 2,977,729,279 10.92 2,429,292,744 10.70 22.58 Motor Vehicle Liability 7,486,398,536 27.46 5,528,325,411 24.34 35.42 Motor Vehicle TPL 6,941,671,601 25.46 5,070,820,284 22.33 36.89 Aircraft Liability 123,098,712 0.45 92,765,288 0.41 32.70 Watercraft Liability 16,758,157 0.06 9,409,070 0.04 78.11 General Liability 758,010,417 2.78 634,407,542 2.79 19.48 Credit 185,239,267 0.68 138,958,449 0.61 33.31 Fidelity 29,154,217 0.11 26,554,285 0.12 9.79 Financial Losses 226,583,127 0.83 178,765,763 0.79 26.75 Legal Protection 95,863,842 0.35 84,360,711 0.37 13.64 Support 3,165,708 0.01 2,984,038 0.01 6.09 Total Non-Life 27,264,328,716 87.88 22,709,549,092 87.38 20.06 Total Life 3,761,410,459 12.12 3,280,003,588 12.62 14.68 Grand Total 31,025,739,176 100.00 25,989,552,680 100.00 19.38

27 October 2015, imposing a cap on The insurance industry will also be on the basis of minimum wage, it is commercial limits in the Compulsory negatively affected by the minimum wage envisaged that the already high loss posted Motor Vehicle TPL Insurance policy that is determined as TL 1,647.00 gross by the said branch will escalate further premium, which used to be freely set by and TL 1,300.99 net by the Minimum and the rise in minimum wage will put an the companies since 2008. The cap that Wage Determination Committee for 2016, additional burden of TL 2 to 2.5 billion per varies according to vehicle types went into which was one of the campaign promises annum upon the industry. In connection force on 28 October 2015 and impacted of the November 2015 elections. Since with these developments, high increases the insurance industry significantly. the death and disability compensations in Compulsory Motor TPL Insurance under the Compulsory Motor Vehicle TPL premiums will be inevitable. Insurance policies were largely computed

Anadolu Sigorta Annual Report 2015 Financial Status 49 Financial Information and Indicators Developments and Changes in Legislation

Developments and Changes in Legislation

Summary information about the key prevents the supply of parts that do not • Information must have been provided changes in the legislation published have a certificate of equivalence issued regarding pre-contract notification, the during the fiscal year, which concern by certification institutions holding the compulsory content of the agreement, the company’s operations and operating 17065 certificate for equivalent parts. out-of-scope agreements, rights and results, are presented below. For OEM parts not imprinted with a logo, obligations of the consumer and creditor, which were being supplied so far, it has right of withdrawal and early payment. Sector Announcement on Minimum become obligatory to procure a certificate Coverage for Compulsory Motor TPL of authenticity that will be obtained from • If the seller fails to fulfill his obligations Insurance and Compulsory Motorway parts manufacturers. totally or duly, then he may not claim Transportation TPL Insurance (2015/1) any sums from the consumer. Regulation on Installment Sale The sector announcement no. 2014/8 Contracts • Unfair terms: No agreement may be dated 24 February 2014 of the concluded which contains terms that Undersecretariat of Treasury stated that In parallel with the matters addressed are incorporated without negotiating treatment cost, disability and death under Article 4 in “Part 2 – General with the consumer and which leads to minimum coverage limits per accident Principles” of the Law no 6502 on an imbalance in the parties’ contractual in MTPL and CMTTPL policies issued for Consumer Protection that it relies upon, rights and obligations to the detriment the Bus (31 and plus seats including the the Regulation setting out the content of the consumer so as to contradict with driver’s seat) vehicle type allowed to carry and form of installment sale contracts to good faith. standing passengers, which were in force be made stipulates that the agreement as of 01 July 2014, should be determined and information sheets must be printed Circular on Private Health Insurance as the existing coverage amount plus TL in a font size that is no smaller than 12, Required from Erasmus Plus 1,699,510 on the basis of 10 standing must be written using a comprehensible Beneficiaries in their Residence Permit passengers. The sector announcement language, be in a clear, plain and legible Requests (2015/1) no. 2014/13 dated 28 May 2014, on form. Bearing resemblances also to the The Circular sets out the minimum the other hand, fixed the incremental Regulation on Distance Agreements for conditions required if policies are to be amount for standing passengers in 2015 Financial Services in this respect, the issued for the customer segment specified and for the following three years. The Regulation limits the period granted for therein. sector announcement no. 2015/1 dated the right of withdrawal to seven days, as 06 May 2015 on Minimum Coverage for opposed to what is allowed for in distance Circular on Surety Bond and Single-Peril Compulsory Motor TPL Insurance and agreements. Other matters that require Insurance (2015/3) Compulsory Motorway Transportation alignment are as follows: TPL Insurance specified the amounts to It is stated that licenses for “misconduct” be added to the coverage limits for the • If the consumer exercises his right branch, a non-life insurance branch said vehicle type published in the Official of withdrawal, then the seller or the addressed in Circular no. 2015/3, needs to Gazette issue 29219 dated 28 December supplier is obligated to return the be submitted to the Undersecretariat of 2014 for standing passengers for the years price collected, along with any and all Treasury until 30 January 2015 for renewal 2015 through 2018. documents indebting the consumer and purposes. without charging any expenses to the Circular on Documentation Principles consumer, within seven days of receipt Regulation on the Measurement and for Equivalent Parts in Motor Vehicle of the notice of withdrawal. Evaluation of Capital Adequacy of Insurance (2015/2) Insurance, Reinsurance and Pension • If the seller or the supplier violates the Companies Important requirements have been obligations in this article or fails to duly introduced regarding spare parts supply, inform the consumer about the right The said alteration to the Regulation which is currently subject to motor of withdrawal, then the consumer will defines various interventions of the public TPL general conditions. Accordingly, not be bound with the 14-day period to authority for remedying the capital deficit, documentation has become obligatory exercise the right of withdrawal. In any and revisions were made to the calculation for equivalent parts and for OEM parts case, such period will expire one year systematic, which will affect assets, that are not imprinted with a logo as of after the date the withdrawal period underwriting and reinsurance risks. 01 June 2015, until which date there were ends. no applicable standards. This obligation

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Draft Regulation Amending the healthcare units or in their private offices. the loan may not be made without the Regulation on the Measurement and It is stated that the activities of self- consumer’s request. Article 42 states that Evaluation of Capital Adequacy of employed specialist physicians performed in prepaid housing unit sales, taking out a Insurance, Reinsurance and Pension either by their own means or using the building completion insurance is optional. Companies means of another healthcare facility fall According to Article 47, insurance contracts under this policy coverage. concluded outside the business premises 1- Within the scope of in-group will be in writing and the consumer will be transactions, the draft regulation prescribes Compulsory Earthquake Insurance - free to withdraw from the contract within new, high risk multipliers that negatively Phone Number Checks 14 days. Article 49 specifically sets out differentiate for deposits maintained at pre-contract notification and the insured’s It has become compulsory to provide banks, credit card receivables from banks, right of withdrawal in distance agreements mobile phone numbers in Compulsory productions generated via banks, and for financial services. Article 51 (8) Earthquake Insurance policies. cessions to in-group reinsurers. contains provisions regarding a compulsory insurance to be obtained by package tour 2- As another important change with an Sector Announcement for Opening New organizers. Article 61 introduces specific implication, the draft regulation seeks Sub-Accounts in the Insurance Chart of rules regarding commercial advertisements. to terminate the risk-based multiplier Accounts (2015/5) Articles 66 through 73 specifically deal practice, which changes depending on The announcement deals with the with the litigation of consumer problems. the rating of reinsurers when calculating definition of Direct Suretyship (736) and Article 77 sanctions a number of penalties. reinsurance risk. Indirect Suretyship (706) technical profit/ • Agreement terms must be written in a Tariff and Instruction Amending the loss accounts. clear and comprehensible language. Tariff and Instruction for Compulsory Regulation on Distance Agreements for Liability Insurance to be obtained for Financial Services • Information must have been provided Hazardous Materials about pre-contract notification, Article 3 (1) clearly designates insurance compulsory contents of the contract, out It has been announced to the industry that contracts as consumer transactions. Article of scope contracts, rights and obligations the term “death” in the tariffs produced for 4 separately addresses notification in of the consumer and the creditor, the Compulsory Liability Policies for Hazardous consumer agreements, stipulates that no right of withdrawal, and early payment. Materials has been replaced with the alterations may be made to the detriment phrase “death and permanent disability”. of the consumer during the agreement • If the seller fails to totally or duly fulfill his obligations, then he may not claim Draft Communiqué Amending the term, and obligates that expenses that any sums from the consumer. Communiqué on Watercraft Liability may be claimed from the consumer must be given to the consumer printed on a Tariff and Instruction • Unfair terms: No agreement may be separate sheet. It introduces the rule that concluded which contains terms that The said draft has been published as is on the bill to be issued for the fee payable are incorporated without negotiating 22 April 2015. A state-run P&I company by the consumer can only be made “in with the consumer and which leads to (Türk P&I Sigorta A.Ş.) was established the name of the holder”, and one must an imbalance in the parties’ contractual in June for providing the coverage be issued for each installment. Article rights and obligations to the detriment forming the subject matter of the draft 5 deals with principles regarding unfair of the consumer so as to contradict with communiqué. Insurance companies are not terms, stating that a regulation will be good faith. obliged to issue the related policy. issued for this matter. Article 6 sets out that service provision may not be withheld In parallel with the matters addressed Sector Announcement on Compulsory without a justified cause and it may not under Article 4 in “Part 2 – General Medical Malpractice Liability Insurance be made conditional upon purchase of Principles” of the Law no. 6502 on (2015/3) another service. Articles 13 through 16 Consumer Protection that it relies upon, contain provisions regarding liability for The said announcement stated that the Regulation setting out the content and defective service. Article 18 sets forth physicians and dentists falling under form of distance agreements for financial that the insured may withdraw from the scope of medical malpractice policy services to be concluded stipulates that the contract within 7 days in the case of coverage are obliged to obtain this policy the agreement and information sheets installment sales. According to Articles 29 by virtue of their professional responsibility must be printed in a font size that is no and 38, in consumer and mortgage loans, during their practice in private or public smaller than 12, must be written using a an insurance policy in conjunction with comprehensible language, be in a clear,

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plain and legible form. The Regulation be taken into consideration in Motor Regulation Amending the Regulation on Distance Agreements grants fourteen TPL policies to be issued following a on the Detection, Notification, and days for exercising the right of withdrawal, change in the type of companies. In Recording of Improper Insurance as opposed to what is allowed for in the announcement no. 2015/7, on the Practices and Principles and Procedures installment sale contracts. other hand, this entitlement is restricted for Fighting such Practices only to companies whose types change Circular on Subrogation and Salvage and to lessees, and that the said bonus Article 5 (1) (c) of the Regulation on the Accounts (2015/6) entitlement is not granted in the event that Detection, Notification and Recording of the owner of the insured vehicle changes Improper Insurance Practices and Principles The Circular no. 2015/6 replaced the from a real person to a corporation. It is, and Procedures for Fighting such Practices term “income” contained in the wording however, added that it can be earned by published in the Official Gazette issue and bookkeeping accounts with the term adding the same among the parameters 27920 dated 30 April 2011 has been “amount”, and provided an explanation used in determining the tariff premium, in modified as follows: “c) Intermediary’s for the operation of the “Positive/negative parallel to rate autonomy. Improper Insurance Practices: Improper differences in collected subrogation and insurance practices by insurance salvage amounts” account, which will Regulation Amending the Regulation intermediaries towards companies, insured actually become effective provided that on the Financial Structure of Insurance, or relevant people with whom they are in it is accepted by the Ministry of Finance. Reinsurance and Pension Companies an insurance relationship. If an insurance The said account is designed to run on intermediary produces a policy in such the differences between the initially The following sentence has been added a manner to reduce the premium the accrued subrogation and salvage income to Article 7 (1) of the Regulation on insurer deserves through incorrect entry and subsequently and actually collected the Financial Structure of Insurance, of conditions that it should be reasonably subrogation and salvage income. Reinsurance and Pension Companies aware of, then that is deemed an improper published in the Official Gazette issue practice.” Sector Announcement Amending 26606 dated 7 August 2007. “The the Sector Announcement Regarding Undersecretariat of Treasury may shorten Regulation Amending the Regulation on Residence-Based Policy Issuance and this period of time for specific branches Compulsory Insurance Tracking Minimum Coverage in Compulsory and/or companies”. Furthermore, the Motor TPL Insurance (2015/6) title of Article 14 of the Regulation was Amendments were made to certain articles changed to “Prohibition of Asset Reducing of the Regulation on Compulsory Insurance Article 1 of the Sector Announcement no. Transactions” and the following paragraphs Tracking published in the Official Gazette 2014/8 dated 24 February 2014 has been have been added to the same article. “(6) issue 29083 dated 09 August 2014, and altered as follows: “The following decision Companies may not pay any commissions, new articles were added. Accordingly, order has been made regarding Compulsory additional commissions or make similar of precedence in practice is determined by Motor TPL Insurance: the operator’s city payments to their in-group intermediaries the Undersecretariat of Treasury for the of residence or the city represented by in amounts higher than those paid to their insurance types falling under the scope the plate number of the related vehicle, other intermediaries in contradiction with of the Regulation; insurance companies depending on the corporation’s choice, insurance business principles, nor may they are obliged to submit proposals for will be taken as basis for real persons, and directly or indirectly transfer revenues to compulsory insurance types; insurers the city where the tax office to which the them. (7) Companies may not insure other may not set prices and commissions so taxpayer is affiliated is located or the city in-group companies at premiums lower as to urge against taking out a policy; represented by the plate number of the than the market rates in contradiction with and the Undersecretariat is authorized to related vehicle will be taken as basis for insurance business principles.” implement measures, within the frame of legal persons.” the Insurance Information and Monitoring Sector Announcement on Inheritance Regulation, against companies with Sector Announcement Regarding and Transfer Tax (2015/8) imbalanced portfolios deviating from the Changes in Type of Corporation While principles to be set by the Undersecretariat Issuing Compulsory Motor TPL Policies In personal accident insurance linked to of Treasury. (2015/7) personal loans, inheritance and transfer tax withholding is required to be applied The Sector Announcement no. 2014/28 in case of payment to the bank or dated 21 November 2014 stated that beneficiaries. no-claims bonus entitlements need to

Anadolu Sigorta Annual Report 2015 52 Financial Status Financial Information and Indicators Developments and Changes in Legislation

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Regulation Amending the Regulation Furthermore, in the event a new policy is Draft General Conditions Amending on Tariff Implementation Principles in issued or a policy is renewed, a duplicate Health Insurance General Conditions Compulsory Motor TPL Insurance policy may be issued within 30 days from the renewal date or from the issue date of The said draft was adopted as is and The Regulation Amending the Regulation the new policy. Duplicate policies issued announced on 05 May 2015. “Article on Tariff Implementation Principles in within this scope may be terminated within 18 – Information Sheet and Participation Compulsory Motor TPL Insurance published the said 30-day period upon request by the Certificate in Group Policies” supplemented in the Official Gazette issue 29288 dated insured, provided that no interruption will to Health Insurance General Conditions 07 March 2015 abolished Article 9 (2) of result in coverage.” 2 “As an exception to obligates insurance companies to provide the Regulation. Hence the Compulsory Article 1 of this sector announcement, a an information sheet and participation Motorway Transportation TPL discount of motor TPL policy may be terminated upon certificate to insured individuals under a 20% granted in Motor TPL policies issued request by the insured, provided that the group contract. These sheets are required for transporters having a Compulsory insured shall have paid to the insurer the to be delivered against signature and one Motorway Transportation TPL policy will termination premium amount, which is the copy each thereof needs to be kept by no longer be applicable. earned premium plus 10% of the annual the company; they may also be delivered policy premium, and provided further that electronically if a physical encounter Building Completion Insurance General the expiration and inception days of the between the insurer and the insured is not Conditions new policy to be issued and of the previous possible. terminated policy shall follow one another Our Company holds a surety bond branch Draft Circular on the Contents of the so as not to result in an interruption of license in connection with the fidelity Information Sheet in Health, Illness, coverage.” branch, and an application was filed Personal Accident and Life Insurance with the Undersecretariat of Treasury to Regulation on Implementation Principles Contracts obtain an indirect surety branch license for Insurance Linked to Retail Loans for policy issuing purposes. The relevant The following article needs to be added general conditions were issued to prevent ARTICLE 14 – (1) With respect to insurance to Information Sheets: “By signing the aggrievement of the consumer by reason policies naming a loss payee, requests for related documents, individuals, who of the contractor, in case of a prepaid termination, cancellation, alteration or are or will be covered by the insurance, house purchase, in parallel with the surrendering of coverage scope shall bear a thereby consent to the procurement Consumer Law. It is aimed at remedying consequence three business days from the of their health information, insurance the consumer’s aggrievement in the event day the company notifies the loss payee records and other data from the Insurance of the contractor’s death, bankruptcy or of the matter electronically or via similar Information and Monitoring Center (IIMC), in case the completion of the project is means. Social Security Institution, the Ministry delayed by more than 12 months due to of Health, healthcare institutions and reasons other than force majeure. Circular Amending the Circular (2014/6) organizations and insurance companies, for Calculating Outstanding Claims and to submission of the said information Sector Announcement on Motor TPL Provisions (2015/7) and records available at the company to Insurance Termination Principles the IIMC, insurance companies, and other (2015/13) If the amount resulting from the IBNR authorities authorized by the applicable calculation is higher than the amount in legislation, for risk assessment and claims The sector announcement no. 2015/13 the preceding quarter, IBNR calculation can finalization purposes.” dated 09 March 2015 issued by the be performed for 2015, 2016 and 2017 on T.R. Prime Ministry Undersecretariat of the basis of 25%, 30%, 35%, 40%, 45%, Sector Announcement Regarding the Treasury Directorate General of Insurance 50%, 55%, 60%, 70%, 80%, 90%, and Implementation of the Regulation imposed the principles for terminating 100% of the quarterly increases over the on Compulsory Insurance Tracking motor TPL insurance contracts. 1. “In previous quarters. Explanations about the (2015/15) relation to duplicate policies, a duplicate IBNR calculation and the rate of increase may be issued from 30 days prior to the applied on the basis of branches need to The scope of the Regulation on the expiration of the existing policy. In such a be provided in the notes to the relevant Compulsory Insurance Tracking was case, irrespective of the inception dates of financial statements and should be detailed expanded to include Compulsory Insurance duplicate policies, any one of them may be in the actuarial report. for Hazardous Materials and Hazardous valid for the coming period, while others Wastes, and Compulsory Liability Insurance may be terminated from their inception. for LPG; under the new requirement imposed, issued policies are required

Anadolu Sigorta Annual Report 2015 53

to be transferred instantly from the intermediary service providers, contracts Sector Announcement Regarding the respective insurer’s IT infrastructure to which are entered into via electronic means Capital Structures of Insurance Agencies Hatmer (Insurance Claim Monitoring and and obligations to provide information and Professional Experiences of their Surveillance Center). regarding electronic commerce and the Personnel (2015/10) related remedies. Sector Announcement Regarding the This announcement has been issued Sector Announcement on Static IP Sector Announcement Regarding to clarify the hesitations regarding the Verification of Insurance Agencies Alignment with the Provisions of professional experience and educational and Technical Personnel by Insurance the “Circular on the Principles of background of agency personnel, capitals Companies (2015/16) Documenting Equivalent Parts in Motor of agencies and assets admitted as capital. Vehicle Insurance” (2015/18) It does not impose any obligation on the The said sector announcement was part of our Company. Agencies are obliged published in relation to the sector The said circular regulates the to fulfill certain criteria and to update the announcement no. 2014/30 published documentation process for equivalent branch and agency data as entered into the on 26 November 2014 with regard to parts and imposes the following obligations list maintained by the TOBB (The Union the measures to be adopted by insurance upon our Company. Equivalent parts to be of Chambers and Commodity Exchanges companies to ensure that sales and sales- procured by our Company must possess of Turkey). As was the case before the related transactions concerning insurance documents for each product obtained announcement was issued, our Company products to be carried out by insurance from certification agencies that have been is obliged to check the records in the agencies be made solely by employees who accredited according to ISO 17065 by an said list upon receiving an application for are in the capacity of authorized technical accreditation body covered under the roof working as a branch, and to work with personnel. The sector announcement of the TSE (Turkish Standards Institution) agency branches having smooth entries. no. 2014/30 underlines that a Static IP or the IAF (International Accreditation On the other hand, information memos are Verification System needs to be established Forum). The parts procurement system of being sent to our agencies, as is customary urgently by companies to guarantee that our Company needs to be aligned with the in every new release concerning the policy sales and production at insurance new legislation announced in the circular legislation. agencies are made solely by technical no 2015/2 and associated circulars. personnel. The sector announcement Regulation Amending the Motorways no. 2015/16, on the other hand, stated Sector Announcement Amending the Traffic Regulation that the verification system had still not Sector Announcement Concerning been established, and set the deadline for Disability Rates Forming the Basis of The alterations in the “Regulation achieving alignment as 01 October 2015. Claims Payments in Compulsory Motor Amending the Motorways Traffic Vehicle Insurance (2015/17) Regulation” published in the Official Regulation Amending the Insurance Gazette issue 29329 dated 17 April 2015, Agencies Regulation It has been stipulated that the healthcare which concern our current practices, are institutions authorized to issue health contained under “Article 3 – Definitions” ARTICLE 4 – Provisional Article 1 of the board disability report for individuals “Paragraph (c) – Vehicle Definitions” of the said Regulation has been altered as follows: who are invalidated by reason of a traffic present Regulation. The said Regulation accident need to determine the disability did not necessitate any alterations in our “PROVISIONAL ARTICLE 1 – (1) Alignment rates in accordance with the regulation. practices. should be achieved with the present Insurance companies, on the other hand, Regulation’s provisions concerning are required to base their examinations Sector Announcement Regarding the leasing and financing companies, regarding applications stemming from Amendments Made to the General agency agreement, technical personnel, motor TPL and other motor vehicle Conditions of Motor Own Damage subordinate technical personnel and policies under which they provide disability Insurance (2015/20) manager by 30 April 2015, and with the coverage upon reports that have been remaining provisions by 22 October 2014.” issued in accordance with the Regulation The changes introduced by the on Disability Criteria, Classification and Sector Announcement Regarding the Law no. 6553 Regulating Electronic Health Board Reports to be Issued for Amendments Made to the General Commerce Disabled Individuals when determining the Conditions of Motor Own Damage Insurance relate to claims procedures. The purpose of the Law is to set out disability rates of victims. In addition, the Necessary steps have been taken with the principles and procedures regarding procedure for objecting to the health board respect to those alterations required electronic commerce. The Law reports should be operated, if necessary. to be enforced as of 01 June 2015. The encompasses commercial communication, enforcement date of the new requirement liabilities of service providers and

Anadolu Sigorta Annual Report 2015 54 Financial Status Financial Information and Indicators Developments and Changes in Legislation

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is 01 September 2015, which stipulates Sector Announcement Regarding underground and overground coal mining, that in the absence of a specific reference the Amendment to Health Insurance and underground non-coal mining are in the policy for the determination of a General Conditions (2015/22) required to take out this policy. Real and damaged vehicle’s market value on the legal persons engaged in activities subject date of loss, the method determined by the The key change introduced by the Circular to the insurance as of the enactment date Undersecretariat of Treasury needs to be is Article 18 supplemented to Health of the Resolution are obliged to request applied. Insurance General Conditions, which insurance within the frame of the said entered into force on 10 October 1990. Resolution within 1.5 months as of the Sector Announcement Regarding enactment of the Resolution, regardless The said article stipulates as follows: Medical Malpractice Compulsory TPL of whether they already have policies Insurance (2015/21) • Participation certificate and information providing the same or similar coverage. sheet must be given to each insured Article B.1. of the Medical Malpractice Accordingly, proposal requests are covered by a group contract, Compulsory TPL Insurance reads ‘The risk is anticipated to be submitted until 20 June deemed to have occurred when the insured • Information sheet and participation 2015. becomes aware of the compensation claim certificate will be delivered against against him in relation to the subject Circular Regarding Risk Examination signature, and a copy of the signed matter insured, or when the aggrieved to be Performed Within the Scope of document will be kept by the Company, party applies directly to the insurer’. Compulsory Personal Accident Insurance The said announcement stated that the • The information sheet must be delivered for Mine Workers (the Insurance) date the insured becomes aware of the before the insured is included in the (2015/11) compensation claim will be deemed as the group contract, and the participation Appointments to the Risk Examination date of service of the public prosecutor’s certificate must be delivered within 15 Committee are being made from the settlement proposal to the parties, and that days upon his/her inclusion in the group Insurance Information and Monitoring the company that issued the contract shall contract, be liable for the compensation claim as of Center system, and the circular set out the that date. • In cases where it is impossible for the process in relation to risk examination. insurer and the insured to come face Communiqué Amending the Circular Regarding the Content of the to face, the information sheet and Communiqué (2010/1) on the Principles Information Sheet for Health, Illness, participation certificate may be delivered and Procedures Concerning Corporate Personal Accident and Life Insurance electronically, provided that the burden Contributions in Medical Malpractice Contracts (2015/10) of proof shall rest with the insurer, Compulsory TPL Insurance (2015/9) The Circular (2015/10) Regarding the • Insured individuals covered by a The Communiqué clarifies the principles Content of the Information Sheet for group contract will be given access to of policy issuance for workplace physicians Health, Illness, Personal Accident and the participation certificate and the and for doctors on-call in emergency Life Insurance Contracts stated that the information sheet through a specific services, which is a common topic of following wording needs to be contained web-based domain. in the information sheets: “By signing uncertainty. Physicians assigned to serve the related documents, individuals, who Communiqué on the Tariffs and in hospitals to offer emergency healthcare are or will be covered by the insurance, Instructions for Compulsory Personal services need to have policies issued for thereby consent to the procurement Accident Insurance for Mine Workers the branch in which they are specialized of their health information, insurance in any case. “Occupational and Vocational records and other data from the Insurance The Council of Ministers Resolution Illnesses (Occupational Health and Safety)” Information and Monitoring Center (IIMC), published in the Official Gazette issue option in Risk Group 2 should be selected Social Security Institution, the Ministry 29259 dated 06 February 2015 determined and a relevant policy should be issued only of Health, healthcare institutions and that the Compulsory Personal Accident for those physicians whose specialization organizations and insurance companies, Insurance for Mine Workers would be fields fall under Risk Group 1 and who and to submission of the said information introduced. The Communiqué on the serve as workplace physicians. Workplace and records available at the company to Tariffs and Instructions for Compulsory physicians who are specialized in disciplines the IIMC, insurance companies, and other Personal Accident Insurance for Mine falling under other risk groups need to have authorities empowered by the applicable Workers was published in the Official their policies issued for their respective legislation, for risk assessment and claims Gazette issue 29347 dated 06 May disciplines. finalization purposes.” 2015. Real and legal persons engaged in

Anadolu Sigorta Annual Report 2015 55

Circular on Compulsory Insurance Circular on Principles of Documenting new implementation also introduced a Tracking (2015/12) OEM Parts not Imprinted with the Logo certification requirement for spare parts to in Motor Vehicle Insurance (2015/16) be used in repairs and a specific norm for The sector announcement (2015/15) the use of equivalent parts. Furthermore, regarding the implementation of the The said circular makes the use of OEM the new arrangement standardized the Regulation on Compulsory Insurance parts not imprinted with a logo conditional computation method for calculating the Tracking states that the cancellation of merely upon a certification by the compensation for loss of financial support. Compulsory TPL policies for Hazardous manufacturer stating that the part has the Another new rule is preclusion of the Materials and Hazardous Wastes and same characteristics as the original one. relatives of faulty drivers from claiming Liability policies for LPG, which are compensations by way of the revision Council of Ministers Resolution Altering compulsory to be issued, is subject to made to the exclusions section of the the Resolution Regarding Compulsory certain restrictions, and cancellations general conditions. conforming to such restrictions may only Personal Accident Insurance for Mine be made on pro rata basis. Workers (2015/7707) Resolution Regarding Compulsory Personal Accident Insurance for Mine Article 5 (1) setting out that product sales Circular Regarding the Payment of Workers Claims and Expenses Within the Frame must be carried out ‘by companies holding of Compulsory Motor TPL General liability license’ was revised as ‘companies In accordance with the Council of Ministers Conditions (2015/14) having personal accident license’. Resolution published in the Official Gazette issue 29259 dated 06 February Furthermore, the time granted for re- The Circular stated that the claimant may 2015, the obligation has been imposed examination in the event it is established demand that his vehicle be repaired at to obtain “Compulsory Personal Accident that eligibility for insurance has been lost a repair center of his choice that meets Insurance for Mine Workers” for real and as a result of the risk examination to be the criteria set by the Undersecretariat of legal persons engaged in underground and performed in the 6th month while the Treasury as per this article. It is stated that overground coal mining, and underground policy is in force, and for termination of the the claimant may demand repairs to be non-coal mining. According to the said policy for this reason has been increased made at any authorized, in-network and decision, obtaining a mining license and from 1 month to 4 months. private repair shop. pursuing operations are conditional upon eligibility for being insured, and the duty Circular Regarding the Minimum Regulation on Insurance and of auditing the mines has been virtually Fixed Amount in Guarantee Scheme Reinsurance Brokers assigned to the insurance industry. Later, Contributions (2015/15) Although the regulation basically concerns the Communiqué on the Tariffs and The Circular sets the minimum brokers, it has been deemed potentially Instructions for Compulsory Personal contribution to be transferred to the critical particularly by virtue of Article 17 Accident Insurance for Mine Workers Guarantee Scheme for motor TPL policies thereof, which stipulates that brokers are was enacted upon its publication in the to be issued from 1 July 2015 onwards not permitted to issue insurance policies. Official Gazette dated 06 May 2015. The as TL 9 for vehicles falling into passenger According to the said Article, brokering Communiqué obligates the mine operators car class. Two thirds of the fixed amount protocols must be revised and systemic to request insurance within 1.5 months shall be transferred from the insurance production authorities of brokers must be upon the enforcement date of the Council customer, and the remaining one third completely abolished. of Ministers Resolution, which is 06 May from the insurance company. However, if 2015. Hence, it was projected that initial Compulsory Motor TPL Insurance the proportional amount to be transferred insurance requests would be received General Conditions (Guarantee Scheme contribution computed until 22 June 2015 and the completion on the basis of 2%) is higher than the said of necessary systemic preparations was The revised general conditions provide planned on the basis of this date. fixed amount, then the amount determined coverage for losses resulting from the according to the proportional basis needs decrease in the vehicle’s value due to to be transferred. repairs made using equivalent parts and due to accidents. Hence, insurance companies will begin paying the vehicles’ decrease in value to the aggrieved parties in accidents in addition to repair costs. The

Anadolu Sigorta Annual Report 2015 56

Acting as our point of contact with the customers in the mobile world, “Sigortam Cepte” application has been upgraded for all mobile platforms. The application can now issue policies and receive claims notifications for certain branches, and offers a greater diversity of services.

Anadolu Sigorta Annual Report 2015 57

“Sigortam Cepte”

Adding practicality to insurance procedures, “Sigortam Cepte” application “Sigortam Cepte” application will continue to be developed with new updates.

Anadolu Sigorta Annual Report 2015 58 Financial Status Financial Information and Indicators An Assessment of Anadolu Sigorta in 2015

An Assessment of Anadolu Sigorta in 2015

2015 - Breakdown of Premium Production by Branches (%) Branch Share (%) Motor Vehicles Liability 28.9 Motor Vehicles 23.4 Fire and Natural Disasters 17.7 Illness/Health 9.1 General Losses 8.3 General Liability 3.4 Accident 3.0 Watercraft 2.4 Marine 2 Aircraft Liability 0.7 Aircraft 0.5 Financial Losses 0.4 Legal Protection 0.2 Credit 0

Anadolu Sigorta is an insurer active in non-life branches, which include accident, illness/health, motor vehicles, aircraft, watercraft, marine, fire and natural disasters, general losses, motor vehicle liability, aircraft liability, general liability, credit, financial losses and legal protection.

Premium Production and Technical Results

Anadolu Sigorta’s premium production reached TL 3,611 million in 2015.

With 28.9%, motor vehicle liability branch commands the biggest share of the total portfolio. This is followed by motor vehicle, fire and natural disasters, and illness/health branches.

Anadolu Sigorta Annual Report 2015 59

Premium Production 2014-2015 (TL thousand)

2014 2015 3,610,674 3,004,830 1,042,780 845,727 824,143 780,421 637,516 503,259 328,342 279,983 298,821 239,216 122,875 105,013 110,400 79,755 84,936 70,902 66,019 67,021 26,133 30,205 18,543 12,563 1,127 8,617 1,333 7,606 8,500 13,748 Total Credit Marine Aircraft Liability Accident Disasters Watercraft Illness/Health General Losses Motor Vehicles Motor Vehicles Financial Losses Aircraft Liability Legal Protection Fire and Natural General Liability

Anadolu Sigorta Annual Report 2015 60 Financial Status Financial Information and Indicators An Assessment of Anadolu Sigorta in 2015

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Accident

Premium production in the accident branch Premium Production Claims Paid Claims Ratio Technical Profitability was up 38.4% year-on-year and amounted (TL thousand) (TL thousand) (%) (%) to TL 110,400 thousand in 2015. Claims paid in this branch totaled TL 15,735 23.8 thousand. The accident branch booked a 48.2 15,735

technical profit of TL 46,698 thousand in 110,400 2015, translating into a year-on rise by 42.3 21,6%. 11,243 15.2 79,755

14 15 14 15 14 15 14 15

Illness/Health

In 2015, premium production on illness/ Premium Production Claims Paid Claims Ratio Technical Profitability health branch grew 17.3% year-on-year (TL thousand) (TL thousand) (%) (%) and amounted to TL 328,342 thousand, while claims paid totaled TL 265,107 1.3

thousand. Technical accounts showed a 86.1

loss of TL 15,283 thousand in illness/health 82.2 265,107 328,342 branch in 2015. 279,983 211,843 -4.7

14 15 14 15 14 15 14 15

Motor Vehicles

Premium production on motor vehicles Premium Production Claims Paid Claims Ratio Technical Profitability insurance went up by 2.6% year-on, (TL thousand) (TL thousand) (%) (%) amounting to TL 845,727 thousand. Claims paid in this branch in the same period went 74.4 up by 4.2% to TL 553,604 thousand. After 10.4 posting a technical profit of TL 85,313 70.6 845,727 553,604 824,143 531,227

thousand in 2014, the branch registered a 8.0 technical profit of TL 67.264 thousand in 2015.

14 15 14 15 14 15 14 15

Anadolu Sigorta Annual Report 2015 61

Aircraft

While premium production on aircraft Premium Production Claims Paid Claims Ratio Technical Profitability insurance was worth TL 18,543 thousand, (TL thousand) (TL thousand) (%) (%) claims paid dwindled by 212.9% as compared to 2014 and amounted to TL 33.7

15,014 thousand. The technical accounts 61.9 15,014 showed a loss of TL 7,781 thousand in 18,543 2015. 12,563 -66.5 4,798 -336.1

14 15 14 15 14 15 14 15

Watercraft

In 2015, watercraft insurance premium Premium Production Claims Paid Claims Ratio Technical Profitability production grew by 26.7% year-on-year (TL thousand) (TL thousand) (%) (%) and reached TL 84,396 thousand. Claims paid in this branch, which amounted to

TL 57,560 thousand in 2014, decreased 13.6 107.3 57,560 by 17.7% in 2015 to TL 47,361 thousand. 84,936 After posting a technical loss of TL 3,506 47,361 thousand in 2014, the watercraft branch 67,021

booked a technical profit of TL 11,588 66.4 thousand in the reporting period, in connection with the lower claims paid figure and higher premium production. -5.2

14 15 14 15 14 15 14 15

Marine

During 2015, premium production on Premium Production Claims Paid Claims Ratio Technical Profitability marine branch rose by 7.4% to TL 70,902 (TL thousand) (TL thousand) (%) (%) thousand while claims paid amounted to TL 17,316 thousand. Technical profit was 46.4 TL 19,997 thousand in 2015. 34.5 20,452 70,902 66,019 28.2 17,316 25.6

14 15 14 15 14 15 14 15

Anadolu Sigorta Annual Report 2015 62 Financial Status Financial Information and Indicators An Assessment of Anadolu Sigorta in 2015

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Fire and Natural Disasters

Premium production on fire and natural Premium Production Claims Paid Claims Ratio Technical Profitability disasters insurance policies was up 26.7% (TL thousand) (TL thousand) (%) (%) in 2015 and reached TL 637,516 thousand while claims paid amounted to TL 221,000 12.6 thousand. Up by a remarkable 111.0% in 63.8 637,516

2015, technical profit of the branch was TL 221,000

32,401 thousand. 51.5 503,259 129,415 5.1

14 15 14 15 14 15 14 15

General Losses

During 2015, premium production on Premium Production Claims Paid Claims Ratio Technical Profitability general losses branch was up by 24.9% (TL thousand) (TL thousand) (%) (%) to TL 298,821 thousand, while claims paid amounted to TL 186,613 thousand. 8.0

The branch posted TL 10,890 thousand in 78.5 technical profit in 2015. 186,613 67.9 298,821 239,216 3.6 110,220

14 15 14 15 14 15 14 15

Motor Vehicle Liability

Premium production on motor vehicle Premium Production Claims Paid Claims Ratio Technical Profitability liability insurance, which is responsible (TL thousand) (TL thousand) (%) (%) for the highest share in the company’s

total premium production, expanded by 0.4 33.6% in 2015 to TL 1,042, 780 thousand, while claims paid amounted to TL 558,137 105.9 558,137

thousand. The branch booked a technical 1,042,780 loss of TL 127,001 thousand in the 82.3 442,934

reporting period. 780,421 12.2

14 15 14 15 14 15 14 15

Anadolu Sigorta Annual Report 2015 63

Aircraft Liability

Premium production on aircraft liability Premium Production Claims Paid Claims Ratio Technical Profitability branch was TL 26,133 thousand in 2015, (TL thousand) (TL thousand) (%) (%) down by 13.5%. The technical loss in this branch amounted to TL 1,950 thousand corresponding to a technical profitability 1.7 204.1 1,575 of -7.5%. 30,205 26,133 92.0 -7.5 296 14 15 14 15 14 15 14 15

General Liability

During 2015, general liability insurance Premium Production Claims Paid Claims Ratio Technical Profitability premium production grew 17.0% and (TL thousand) (TL thousand) (%) (%) amounted to TL 122,875 thousand. While claims paid rose from TL 32,243 thousand

to TL 51,040 thousand, the previous year’s 50.4 426.8 technical loss of TL 126,639 thousand was 51,040 122,875 reversed to a technical profit of TL 61,933 thousand. 105,013 32,243 48.6 -120.6

14 15 14 15 14 15 14 15

Credit

Premium production in the credit insurance Premium Production Claims Paid Claims Ratio Technical Profitability branch was worth TL 1,333 thousand in (TL thousand) (TL thousand) (%) (%) 2015, while claims paid amounted to TL 461 thousand. The technical profit was TL 24.5 778

326 thousand in 2015. 91.0 1,333 1,127 461 -119.6 0.0 14 15 14 15 14 15 14 15

Anadolu Sigorta Annual Report 2015 64 Financial Status Financial Information and Indicators An Assessment of Anadolu Sigorta in 2015

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Financial Losses

Premium production on financial losses Premium Production Claims Paid Claims Ratio Technical Profitability branch totaled TL 13,748 thousand in (TL thousand) (TL thousand) (%) (%) 2015 and claims paid were worth TL 8,008 thousand. The financial losses branch 33.9 posted a technical profit of TL 1,408 30.2 8,008 thousand at the end of the reporting 13,748 period. 8,500 10.5 26 -9.2

14 15 14 15 14 15 14 15

Legal Protection

Premium production in the legal protection Premium Production Claims Paid Claims Ratio Technical Profitability branch stood at TL 8,617 thousand in (TL thousand) (TL thousand) (%) (%) 2015. The branch attained a profitability of 89,0% in 2015 for a technical profit of TL 9.0 181

7,671 thousand. 89.0 8,617 83.0 162 7,606 1.3 14 15 14 15 14 15 14 15

Total

Anadolu Sigorta’s total premium Premium Production Claims Paid Claims Ratio Technical Profitability production in 2015 was up 20.2% and (TL thousand) (TL thousand) (%) (%) reached TL 3,610,674 thousand, while claims paid grew by 25,0% to TL 1,941,149

thousand. As a result of the 3.9-point rise 4.00 81.60

in loss premium ratio, the technical profit 77.70 1,941,149 figure went down by 14.5% to TL 103,634 3,610,674

thousand. 2.90 3,004,830 1,553,197

14 15 14 15 14 15 14 15

Anadolu Sigorta Annual Report 2015 65

Investment Income thousand of this was from the sale of bills The company booked currency translation and bonds, while TL 3,254 thousand was gains in the amount of TL 109,290 Investment income grew by 42.1% to from the sale of equities, and TL 1,784 thousand in 2015. Income from Anadolu reach TL 368,013 thousand in 2015. thousand was from the sale of mutual Sigorta’s equity participations amounted to funds. The portion of TL 1,315 thousand TL 18,000 thousand. The company, in 2015, derived TL 148,344 remaining outside these amounts consists thousand as interest income on time of income generated by the sale of Also revising its accounting policy at deposits, TL 25,549 thousand from the sale financial assets subject to repo trading. the onset of 2015, Anadolu Sigorta of government securities and private sector started apprasing its properties at their bonds, and TL 9,585 thousand in dividend The “financial investments valuation fair values, and hence, derived TL 7,458 income from equities. account”, which consists of valuation thousand income. In addition, the company income derived from all equities, bills and generated an income of TL 5,221 thousand A total of TL 9,642 thousand was booked bonds, mutual fund shares, repo trading, on property sales and leases. as income on sales of financial investments and fixed-term deposits, created an income during the reporting period. TL 3,289 effect of TL 33,453 thousand.

Investment Income (TL thousand) 2015 2014 Change (%) Income from Financial Investments 183,751 130,175 41.2 Revenues from the Sales of Financial Investments 9,642 31,151 -69.0 Valuation of Financial Investments 33,543 19,421 72.7 FX Gains 109,290 59,971 82.2 Dividend from Affiliates 18,000 16,000 12.5 Income from Real Estate 12,678 1,815 598.5 Income from Derivatives 675 206 227.7 Other Investments 434 189 129.6 Total 368,013 258,928 42.1

Investment Expenses to the technical division. As required by technical division. The investment income the Undersecretariat of Treasury Circular transferred to the technical division in line Anadolu Sigorta’s investment expenses on the Procedures and Principles of Keys with the relevant transfer method was up increased 38.7% to TL 382,414 thousand Used in Financial Statements that went by 45.2% year-to-year and reached TL in 2015. The biggest component of this into effect on 1 January 2008, investment 276,543 thousand. figure consisted of TL 276,543 thousand income on assets covering technical in investment income that was transferred reserves has been transferred to the

Investments Expenses (TL thousand) 2015 2014 Change (%) Investment Management Expenses (incl. interests) -939 -137 587.5 Devaluation of Investments -2,824 -3,510 -19.5 Loss from the Sales of Financial Investments -9,629 -7,713 24.8 Investment Expenses Transferred to the Technical Division -276,543 -190,509 45.2 Loss from Derivative Products -75 -185 -59.5 FX Losses -61,168 -49,954 22.4 Depreciation Expenses -31,236 -23,662 32.0 Total -382,414 -275,670 38.7

Anadolu Sigorta Annual Report 2015 66 Financial Status Financial Information and Indicators An Assessment of Anadolu Sigorta in 2015

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Revenues, Income, Expenses and Losses from Other Operations

The “revenues, income, expenses and losses from other operations” account stood at TL 23,656 thousand at year-end 2015. A major contributor to this account balance stems from a TL 25,546 thousand charge against the reserves account, while the deferred tax liabilities account created a loss effect of TL 6,510 thousand.

Revenues, Income, Expenses and Losses from Other Operations 2015 2014 Change (%) (TL thousand) Provisions -25,546 -20,361 25.5 Rediscounts 1,459 -3,360 -143.4 Deferred Tax Account -6,510 7,396 - Other Revenues and Income 7,600 5,142 47.8 Other Expenses and Losses -659 -554 19.0 Total -23,656 -11,736 101.6

Operating Results

Key ratios concerning the company’s performance are shown in the chart below along with prior-year results for comparison.

2015 2014 Technical Profitability Ratio 2.9% 4.0% Claims Ratio 81.6% 77.7% Return on Equity 5.3% 6.8% Return on Assets 1.3% 1.9%

2015 2014 Change (%) Technical Division Balance 103,634 121,260 -14.5 Investment Income 368,013 258,928 42.1 Investment Expenses -382,414 -275,670 38.7 Revenues, Income, Expenses and Losses from Other Operations -23,656 -11,736 101.6 Total 65,576 92,782 -29.3 Income/Loss (Gross) 65,576 92,782 -29.3 Tax Provisions -1,770 -21,082 -91.6 Income/Loss (Net) 63,806 71,670 -11.0

The insurance sector is expected to sustain while continuing to offer its services to When planning for growth and profitability its growth in 2016 while the goal of the policyholders with strict adherence to targets, Anadolu Sigorta observes capital Anadolu Sigorta will be to secure increased its quality service concept as it has always needs as well. Attention is paid to ensure production in real terms and attain a done. that the company capital is at adequate sustainable profit, by further leveraging level, taking into consideration the the concepts of quality service, leadership, Assessment of the Company Capital and regulatory requirements. Information innovation and customer focus. Technical Comments on capital adequacy is presented in the results will be monitored closely, targeting relevant section of the notes to the The key considerations that the companies to increase technical profitability through financial statements. in the insurance sector will face in the improving loss premium ratios particularly years ahead will be the satisfaction in unprofitable branches. In striving to of potential capital requirements that achieve its strategic goals, the company might arise in line with growth, and due aims to further increase its brand equity management of the capital.

Anadolu Sigorta Annual Report 2015 Financial Status 67 Profit Distribution Policy

Profit Distribution Policy

• The company’s profit distribution • The profit distribution policy espoused • Pursuant to the company’s Articles of principles for shareholders and other by the Board of Directors is based on Incorporation, our employees are paid people participating in the profit are the principle of proposing to the General dividends up to three times of their governed by the applicable requirements Assembly the distribution of at least salaries, which, in the aggregate, must of the Turkish Commercial Code, Capital 30% of the net distributable profit for not be in excess of 3% of the amount Market legislation and our Articles of the period as bonus shares and/or in remaining after the first dividend is set Incorporation. cash. aside.

• The dividend distribution proposals • In the event that the net distributable • The company may distribute advances presented by the Board of Directors for profit for the period calculated based on dividends in accordance with the the approval of the General Assembly on the legal records remains below 5% principles and procedures set forth in the are prepared in a manner to preserve of the company’s paid-in capital, the Capital Market legislation. the delicate balance between the Board of Directors may propose to the expectations of our shareholders and General Assembly that no dividends be • There are no preference shares in the the company’s need to grow, and taking distributed. company. into consideration future expectations • No founder’s bonus certificates are regarding the company’s operations, • Dividend distribution formalities and given, nor are dividends paid to the capital adequacy targets and the processes are carried out so as to be members of the Board Directors. conditions prevailing in capital markets, completed by no later than the end as well as the profitability of the of the fiscal year in which the General company. Assembly Meeting is convened.

Anadolu Sigorta Annual Report 2015 68

During 2015, the website was revamped in view of the users’ experiences and was redesigned to be compatible with mobile devices. A new function incorporated in Anadolu Sigorta Online website allows delivery of missing claims documents to the company.

Anadolu Sigorta Annual Report 2015 69

5 million 140,000

Anadolu Sigorta corporate Log-ins at Anadolu Sigorta website was viewed nearly 5 Online website during 2015 million times during 2015. numbered nearly 140,000. Anadolu Sigorta Online website

Anadolu Sigorta Annual Report 2015 70 Risks and an Assessment by the Governing Body Risk Management Policies Adhered to by Types of Risks

Risk Management Policies Adhered to by Types of Risks

The company’s risk policies and related • The basic objective of the company’s Senior Management is responsible for implementation procedures include written activity in the money and capital implementation of Risk Management standards devised and enforced by the markets is to generate maximum Policies. For purposes of ensuring Board of Directors and implemented by possible return at a specified risk level. compliance with policies, Senior senior management. Determined and The priorities in asset investments are, Management means the CEO, Deputy enforced by the Board of Directors in in order of precedence, safe investment, Chief Executive Officers, and relevant Unit parallel with international practices on liquidity and return. Managers and Regional Managers. On the basis of insurance underwriting risk, the other hand, all authorized employees credit risk, market risk, operational risk and • When investing assets, the company performing the transactions regarded as the risk of use of the company’s services takes into account market and liquidity a part of risk management processes are for laundering proceeds from crime and risks, portfolio concentration risk, individually responsible for the accuracy for financing terrorism, these are general payables in high amounts such as known and reliability of all kinds of data and standards that define the organization and or foreseeable advance taxes, corporate information they provide in relation to scope of the risk management function, taxes, reinsurer payments and claims their respective jobs within the process, risk measurement procedures, the duties payments, as well as receivables from which form the basis of the making of and responsibilities of the company’s insurance activity. decisions. Risk Management Committee, as well • Through scenario analyses and stress as the procedures for determining risk 1- Insurance Underwriting Risk Policy tests, the assets portfolio is exposed to limits, actions to be taken in possible limit various shocks and tested with respect Insurance underwriting risk is defined violations, and the compulsory approvals to interest rates, exchange rates and as a risk that might arise from failure to and confirmations that are required to be share certificate prices. These tests are correctly and effectively implement the given in various cases and circumstances. conducted at quarterly intervals at a insurance technique within the process of Besides insurance underwriting, credit, minimum. turning coverage provision for natural risks market and operational risks, other which are not known certainly if they will • Utmost attention is paid to maintaining risks can result from the reciprocal and occur and for risks which are known for a cash position in foreign currency for successive interaction of these risks. sure to occur but are unknown time-wise potential catastrophic risks equivalent Therefore, an integrated consideration into sustainable commercial earnings. to the lower limit of excess of loss should be adopted for all risk elements The scope of Insurance Underwriting Risk agreements, as well as known liabilities stemming from assets and liabilities Policies consists of the conditions and price for any given period. positions. The company’s basic strategy of the coverage to be provided for the risk; the principles applied in determining which with respect to the distribution of long- returns to be derived and general economic of the coverages provided will be ceded term assets and liabilities is to ensure expectations, sets the company’s risk up to what amounts and to whom in the consistency between assets and liabilities tolerance, which is then expressed in terms case of risks decided to be transferred; at optimum liquidity risk level so as to of risk limits. In line with the procedures conducting effective monitoring of risk support the objective of maximizing set in the Policies and in view of the portfolio loss frequency so as to allow returns. Accordingly, utmost importance is market conditions in the relevant period, formulation of fitting reinsurance strategies given to the following points: the Risk Management and Internal Control at sufficient frequency, and related Department reports violations of limits monitoring and reporting system. submitted to the CEO and the Board of Directors.

Anadolu Sigorta Annual Report 2015 71

Management of insurance underwriting Early identification and definition of 3-Market Risk Policy risk is based on the principle of forming issues are of the essence for effective the risk portfolio with risks that represent management of credit risk. For this purpose Market Risk means the risk of loss in the a low potential to cause loss. In order to early warning signals are determined; value of the company’s placements in avoid poor risk selection and incorrect these are indicators pointing at cases that financial borrowing instruments whose pricing of insurance policies and to create will adversely influence the credit risk return is linked to interest rate; stock, other accurate reinsurance policies, effective and lead to a credit risk that is above the investment securities, all FX or FX-indexed monitoring is carried out on loss frequency company’s risk tolerance. For insurance assets and liabilities in or off the balance and loss severity of the risk portfolio. The brokers, these are declined collection sheet, derivative agreements based on the risk portfolio is separately overseen on the ratios, reduced production performances, said instruments, which loss might result basis of agents, industry, branches, regions, slackened discipline in conforming to from the volatilities in interest rates, stock brands, models, tariffs, products, customers company guidelines, and other data from prices and exchange rates. and other parameters. intelligence. For Reinsurance companies The basic and ultimate purpose of the and counterparties, these cover all kinds of company’s activities in money and capital A comprehensive insurance underwriting data and information obtained in relation markets is to generate returns. The basis of risk reporting system is used to ensure to negative ratings and developments. It Market Risk policies is to measure, report measurement of loss performance, oversee is the duty and responsibility of executive and keep under control the risk that the compliance with applicable legislation units to obtain data and information company is exposed to by reason of such and ensure reporting on the effectiveness in relation to credit risk. All kinds of activity. The top priority is to ensure that of insurance underwriting risk controls. information obtained are urgently the company’s Market Risk exposure is The risk of the portfolio is regularly considered within the frame of decision- within the limits stipulated by applicable reported by executive departments and making, monitoring, reporting and auditing legislation and is compliant with the the Risk Management and Internal Control processes. Department to the CEO and the Board of company’s risk appetite. In market risk Directors. A credit risk scoring system used, which management, risk appetite is expressed in has the capability to be made use of in the terms of market risk limits assigned to the 2-Credit Risk Policy management of credit risk and decision- executive fund management unit and the making, to enable monitoring risk on the contracted asset management companies. Credit risk means the possibility of the basis of counterparties, to take notice of Market risk limits are categorized into two company’s sustaining loss due to failure on expected and unexpected losses, and to groups: limits set employing the value at the part of policyholders, agents, reinsurers, allow for making the decisions based not risk method, and limits determined based fronting companies, coinsurers, and only on the return derived or anticipated on the ratio of each group of investment other parties to partially or totally fulfill to be derived from the counterparty at any securities to the total portfolio and their obligations towards the company. time, but also on the risk underwritten. shareholders’ equity. The Risk Management It also indicates to the loss of market The risks of counterparties are regularly and Internal Control Department and capitalization caused by the deterioration reported by the Risk Management and executive fund management unit closely in the financial standing of companies Internal Control Department to the and constantly monitor limit violations. In with which there are subsidiary or affiliate CEO and the Board of Directors. The case limits are exceeded, the amount at relationships. The Credit Risk Policy sets Risk Management and Internal Control which a limit is exceeded and its reasons out the procedures and responsibilities Department is also responsible for are reported to the CEO and the Board related to the management, control and undertaking daily follow-up of regional, of Directors, along with the assessments monitoring of credit risk, as well as matters sectoral and market trends that have an of the executive body. If limit violations in relation to credit risk limits. actual or possible impact on the company’s are above the ratios or durations set by credit risk, and for reporting the results to the Board of Directors, necessary action is the CEO and the Board of Directors. determined by the Board of Directors.

Anadolu Sigorta Annual Report 2015 72 Risks and an Assessment by the Governing Body Risk Management Policies Adhered to by Types of Risks

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Market risk is calculated employing risks in relation to activities conducted The overall scope of the policy covers the internationally accepted statistical are exposed with the involvement of the activities centrally executed for defining, methods. Since these calculations cover personnel performing the job. measuring, monitoring, controlling and risk prediction for the following days, the reporting the risks that the company is accuracy of predictions are compared Qualitative and quantitative methods exposed to for reasons of the use of the subsequently with actual values and are used jointly in the measurement insurance service offered by the company monitored on a daily basis. On the other and evaluation of operational risk. The in laundering proceeds from crime or in hand, the portfolio is tested under different measurement process uses data obtained financing of terrorism, or the company’s scenarios for determining the effects of from “impact - likelihood analysis”, failure to fully comply with the liabilities occurrences, which pose a low probability “control culture profile surveys” and imposed by the Law no 5549 on Prevention in terms of occurrence, but big volume internal and external “loss database.” of Laundering Proceeds from Crime and by in terms of loss. The assessments, which When managing operational risk, efforts related regulations and communiqués. include the possible mismatches among are spent to develop controls to eliminate types and maturities of the company’s or mitigate the possibility of sustaining The basic strategy of the company assets and liabilities, are regularly reported loss due to risks that the company may to achieve the ultimate goal is to in detail to the CEO and the Board of be exposed to in relation to its activities. carefully plan, conduct and manage risk Directors. Effectiveness and adequacy of existing or management activities independently, subsequently developed controls, and the impartially, purposefully, productively 4-Operational Risk Policy implementation of action plans adopted in and efficiently, employing a risk-focused this regard are evaluated in coordination approach and in line with applicable Operational risk is defined as any risk other with the Risk Management and Internal legislation and internationally accepted than absolute insurance underwriting, Control Department and the Board of principles and standards. The basic principle credit and market risks which might Inspectors. The Risk Management and in achieving this goal is to employ the occur in the organization, business Internal Control Department monitors most advanced tools and methods that are continuity, insufficient or inoperative all operational risks that the company available and possible to be used. Findings business processes, technology, human may be exposed to during the course from risk management, monitoring and resource, underperformance by individuals, of its activities, and regularly reports on control activities are regularly reported administrative mistakes, unfortunate the same to the CEO and the Board of to the Board of Directors by the Board events, misconduct, accident and fraud, Directors. Director who is delegated by the Board of systems or external factors, legislation, Directors in respect of this matter. management and business environment, 5- Policy for Combating the Legalization and which might cause physical or (Laundering) of Proceeds from Crime reputational loss to the company. and Financing of Terrorism

Limits are introduced for potential This policy is intended to define, rate, operational risks that might arise during monitor, assess and mitigate the risks the the activities based on the “Company company is exposed to with respect to Risk Catalogue,” which is the basic the use of the insurance service offered document used in defining and classifying by the company in laundering proceeds all risks that may be faced with. The Risk from crime or financing of terrorism. Catalogue is updated in parallel with the The ultimate goal can be achieved by changing conditions. “Self-Assessment effectively monitoring and supervising Methodology” is used in the identification customers and transactions in full of operational risks. In this method, the compliance with the applicable legislation and regulations.

Anadolu Sigorta Annual Report 2015 Risks and an Assessment by the Governing Body 73 Activities of the Committee of Early Determination of Risk

Activities of the Committee of Early Determination of Risk

Pursuant to the provisions of the financial performance, the potential Although the Turkish economy has Communiqué Serial: IV No: 56 on the earthquake in İstanbul, and low technical received well-deserved credit for its growth Determination and Implementation of profitability gain the foreground. performance in the past decade, that same Corporate Governance Principles enforced performance also brought along the current upon its publication in the Official When the company’s risk exposure is deficit issue. It is common knowledge that Gazette issue 28158 dated 30 December assessed with respect to the magnitude of the Turkish economy is unable to attain 2011, it has been decided to set up a potential impact of those risks, the effects growth without producing current deficit, Committee of Early Determination of Risk of developments in global and national and is fragile in the face of interrupted as of 27 February 2012. The committee economy upon the technical and financial capital inflows due to its inherent will be responsible for carrying out all performance, the potential earthquake in imbalances. In a conjuncture of decreased relevant works and efforts for the early İstanbul, and low technical profitability global risk appetite, the financing of growth determination of risks that might endanger come to the fore. constitutes a highly critical agenda item for the existence, progress and survival of the the Turkish economy. It is well known that macroeconomic company, implementation of measures risks and financial stability risks mostly and remedies against identified risks, and During 2016, the Fed’s decisions, result from global developments, as well management of the risk. geopolitical developments, the course of as national developments, in outward- oil prices, domestic political agenda and The committee makes an assessment oriented economies with a broad current the armed conflict in Turkey’s southeast of the situation in its bimonthly reports deficit such as Turkey. The key factors that might obviously lead to volatile periods submitted to the Board of Directors; the fueled macrofinancial risks particularly in economy. Such a conjuncture might said report is also shared with the statutory in recent years have been the sudden easily pave the way for potentially auditor. changes in risk perceptions in conjunction significant deviations in various economic with the weak global economic outlook parameters, including credit rates, loan RISK MANAGEMENT ACTIVITIES AND and the extremely volatile capital flows. utilization, housing and car sales, which RISK ASSESSMENT The plummeted commodity prices and are interrelated with the production particularly that of oil and geopolitical performance of the insurance industry. The company’s risk exposure is monitored, tensions arose as new sources of instability. However, in general, the insurance industry assessed and controlled individually under In this respect, the risks and uncertainties is expected to display a performance that is the categories of insurance underwriting against the growth of all developing parallel to its 2015 performance in 2016. risk, credit risk, market risk and operational economies in general emerge as follows: risk. The risk exposure arising out of the The compensation amounts that might use of the company’s insurance services • The Fed’s decisions regarding the result from earthquakes and other for laundering proceeds from crime or monetary policy and the potential catastrophe risks that exceed the upper for financing terrorism, or out of failure effects thereof on developing economies, limits of various existing agreements are to achieve full compliance with the of a nature that might lead the company • Sustained fragility in the Eurozone, obligations imposed by the Law no 5549 to suffer losses of a magnitude that cannot on Prevention of Laundering Proceeds • Aggravated concerns that the global be made up for in a typical operating year. from Crime and by related regulations and economic outlook worsened due to the Modeling software is used to determine communiqués is addressed independently fact that the oil prices that continue the magnitude of an earthquake in İstanbul from other types of risks as per the to decline affect the economies of oil and the potential losses that would arise applicable legislation. exporting countries therefrom, and the potential margin of error incorporated in such software When the company’s risk exposure is • Geopolitical tensions that have regained is also taken into consideration when assessed with respect to the magnitude of vigor in various geographies across the determining the final protection level. potential impact of those risks; the effects world. of global, national and near geography developments upon the technical and

Anadolu Sigorta Annual Report 2015 74 Risks and an Assessment by the Governing Body Activities of the Committee of Early Determination of Risk

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On the other hand, scenario analysis are Low operating profitability is at the top employed to establish some uncertainties of the risk elements that are critical for that cannot be calculated by modeling the company, which is the case also for all programs, such as personal injury, companies in the sector that are engaged motor own damage claims, tsunami, in non-life branches. This predicament that post-earthquake fire, changes in our results from excessive price competition protection level due to volatile exchange and prevents accumulation of capital rates, inflation, high level coverage in is anticipated to disappear gradually, conjunction with loss of profit, and a in parallel with the future depth to be portfolio that expands during the course of achieved by the Turkish Insurance Industry, the year, whereas a certain safety margin which constantly grows other than in is allowed for some other uncertainties. periods of crises. Another expectation is It is considered that the total amount that the problem of technical profitability of protection the company obtains for will be mitigated significantly by the catastrophe risks is sufficient for a 1000- contribution to be lent to operational year earthquake, which is the minimum efficiency by company-wide projects model according to the Reinsurance conducted within the frame of a Strategy. comprehensive transformation program.

Although it is not deemed vital when a potential earthquake in İstanbul is considered individually, a Contingency Action and Funding Plan and a Business Continuity Plan have been formulated for the management of potential market, credit and operational risks that might be triggered simultaneously by such an earthquake and are likely to increase substantially. The operability of these plans is tested at regular intervals.

Anadolu Sigorta Annual Report 2015 Other Matters and Financial Statements 75 Independent Auditor’s Report Related to Annual Report

Convenience Translation Into English of the Independent Auditor’s Report Related to Annual Report Originally Issued in Turkish

Akis Bağımsız Denetim ve Serbest Telephone +90 (216) 681 90 00 Muhasebeci Mali Müşavirlik A.Ş. Fax +90 (216) 681 90 90

Kavak Sok. No: 3 Kavacık Rüzgarlı Bahçe Mah. İnternet www.kpmg.com.tr

Beykoz 34805 İstanbul

To Anadolu Anonim Türk Sigorta Şirketi General Assembly, Report on the Audit of Board of Directors’ Annual Report Based on Standards on Auditing which is a Component of The Turkish Auditing Standards Published by The Public Oversight Accounting and Auditing Standards Authority (“POA”) We have audited the accompanying annual report of Anadolu Anonim Türk Sigorta Şirketi (the “Company”), for the year ended 31 December 2015.

Board of Directors’ Responsibility for the Annual Report Pursuant to the article 514 of the Turkish Commercial Code numbered 6102 (“TCC”) and Communiqué on Individual Retirement Saving and Investment System” (“Communiqué”) issued on 7 August 2007 dated and 26606 numbered, management is responsible for the preparation of the annual report fairly and consistent with the financial statements and for such internal control as management determines is necessary to enable the preparation of such annual report.

Auditor’s Responsibility Our responsibility is to express an opinion on the Company’s annual report based on our audit in accordance with article 397 of the TCC and Communiqué whether the financial information included in the accompanying annual report is consistent with the audited financial statements expressed in the auditor’s report of the Company dated 28 January 2016 and provides fair presentation.

Our audit has been conducted in accordance with the Standards on Auditing which is a component of the Turkish Auditing Standards (“TAS”) published by the POA and the insurance legislation. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial information included in the annual report is consistent with the financial statements and provide fair presentation.

An audit also includes performing audit procedures in order to obtain audit evidence about the historical financial information. The procedures selected depend on the auditor’s judgment.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the financial information included in the annual report is consistent, in all material respects, with the audited financial statements and provides a fair presentation.

Report on Other Regulatory Requirements In accordance with the third clause of the article 402 of TCC, no material issue has come to our attention that shall be reported about the Company’s ability to continue as a going concern in accordance with TAS 570 “Going Concern”.

Akis Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. A member of KPMG International Cooperative

Alper Güvenç Partner 29 February 2016 İstanbul, Turkey

Anadolu Sigorta Annual Report 2015 76 Other Matters and Financial Statements An Assessment of the Board Directors by the Corporate Governance Committee

An Assessment of the Board Directors by the Corporate Governance Committee

Apart from the CEO, the Board of Directors days in advance, and when such timing • Approving the company’s annual budget consists of non-executive members. cannot be met, efforts are spent to ensure and business plans, equal flow of information to the Board Chairman of the Board and CEO functions Directors. • Preparing the company’s annual reports are carried out by different individuals. and finalizing the same to be presented Each Director is entitled to one vote and to the General Assembly, Taking into consideration that there are none has weighted vote or affirmative/ no non-corporate ultimate shareholders negative vetoing rights. • Ensuring that the General Assemblies with a controlling interest in our company, are held in compliance with the it is thought that the Board Directors Pursuant to the Articles of Incorporation, legislation and the company’s Articles of naturally possess the advantage to act the Board of Directors convenes on the Incorporation, independently and therefore, to be basis of absolute majority and makes impartial in their decisions, upholding the decisions with the absolute majority of • Taking necessary action in relation to interests of our company and stakeholders Directors present in the meeting. General Assembly decisions, above everything else. Pursuant to the company’s Articles of • Approving the executives’ career plans The Board of Directors meets regularly and Incorporation; and rewarding provided to them, at least monthly as pre-scheduled, and at • Determining the company’s policies any time as and when deemed necessary. The Board of Directors is authorized to about Shareholders, stakeholders and The Board of Directors met 12 times in pass decisions on any and all acts and Public Relations, 2015. The Board Directors, in principle, transactions that are necessary for the achievement of the company’s operating attend every meeting. • Determining the company’s disclosure scope, save for those for which the General policy, Care is paid to determine the Board Assembly is authorized as per the law and meeting date during the immediately the Articles of Incorporation. • Setting the codes of ethics for the preceding meeting, followed by written company and its employees, invitation. It is intended to set the Without prejudice to the duties and meeting date so as to allow all Directors powers that cannot be delegated as set out • Establishing the operating principles of to participate, and save for unforeseeable in Article 375 of the Turkish Commercial committees; ensuring their efficient and exceptional events, the Board meetings are Code and in other articles, the Board of productive functioning, held with the participation of all Directors. Directors may delegate management, in part of in whole, by way of an internal • Taking necessary action so as to ensure The Board meeting agenda is determined bylaws in accordance with Article 367 of the company’s organizational structure by the Chairman of the Board of Directors the Turkish Commercial Code. responds to current circumstances, in line with the proposals of the CEO and the Board Directors. The Board of Directors fulfills its • Examining the activities of former boards responsibilities remaining outside the of directors. Utmost care is paid to ensure that the scope of its basic functions taking information and documents about the into consideration the opinions and The Board of Directors consists of eleven topics covered in the Board meeting recommendations of executive bodies and Directors, which number enables efficient agenda are made available for the committees. Such responsibilities include, organization of the activities of the Board. examination of the Directors at least five but are not limited to the following: Two independent Directors serve on the company’s Board of Directors.

Anadolu Sigorta Annual Report 2015 77

Although there are no set rules on In the formation of the Board of Directors, Pursuant to legislation, general managers of non-independent Directors’ undertaking care is given to; insurance companies must have graduated other duties outside the company, the from a four-year university minimum, Directors do not have any other duties • Ensure that the nominees are present in and have at least ten years experience in apart from their natural duties in the the meeting at the time of election to any one of insurance, banking, economy, entities they represent and from those in the seats on the Board of Directors, business management, accounting, the establishments owned by the entities law, finance, mathematics, statistics or • Inform the Shareholders about the they represent. Yet, Board Directors devote engineering fields. More than half of the nominees, sufficient amount of time for company Board Directors must have graduated from affairs, and exercise their powers prudently • Allow Shareholders to ask questions to a four-year university minimum, and have and within the frame of good faith, the nominees, knowledge and experience in at least one possessing all necessary knowledge to of the fields mentioned above. ensure full performance of the duty. • Inform the Shareholders, during the General Assemblies, on other companies The Directors possess these qualifications Past experiences, and outside positions on the boards of which Director and have; held, if any, of the independent Board nominees serve and on the compliance • Satisfactory knowledge and skills in Directors are disclosed in their résumés and or non-compliance to internal banking and insurance business, presented on our website and in our annual regulations set exclusively on this topic. report. • The skill to read and analyze financial Directors just starting to serve on the statements and reports, When fulfilling its decision-making Board are offered an orientation program function, the Board of Directors acts on the covering the following at a minimum: • Basic knowledge about the legal basic consideration of: regulations governing our company, and • Introduction with our executives and about general market circumstances, Maximizing the fair value of the company, visits to the company’s units, • The will and the opportunity to regularly Pursuing the company operations so as to • The CVs and performance assessments attend the Board meetings for the period ensure long-term and stable earnings for of our executives, our Shareholders, of time for which they are elected to • Strategic goals, current status and issues serve. Maintaining the delicate balance between of the company, the Shareholders and the company’s need The Board of Directors adopted the to grow. • Market share, financial structure and necessary measures for preventing performance indicators of the company. undisclosed information and/or trade secrets from being disseminated out of the company.

Fatih Gören Hasan Hulki Yalçın Prof. Savaş Taşkent Deputy Chief Executive and Board Director and Board Director and Member of the Corporate Governance Member of the Corporate Governance Head of the Corporate Governance Committee Committee Committee

Anadolu Sigorta Annual Report 2015 78 Other Matters and Financial Statements Disclosure Policy

Disclosure Policy

Disclosure policy of our company, approved Authorization and Responsibility Disclosures for special cases, which must by the Board of Directors, is described be notified pursuant to the Capital Markets herein. The Board of Directors is responsible and Board (CMB) legislation, are notified to PDP authorized for preparation, monitoring, within its legal deadline. Disclosures for Any modification thereto, including the auditing and improvement of public special cases are published on the company justification will also be disclosed to disclosure policy of our company. Directors website of Anadolu Sigorta on the next public after it is approved by the Board of in charge of financial management business day at the latest following the Directors. and reporting and Investor Relations public disclosure and stays on the website Department have been appointed for for a duration of 5 years. General Framework the responsibility of conducting and coordination of disclosure function under For the purpose of ensuring the Anadolu Anonim Türk Sigorta Şirketi fulfills the policy. The officials of the mentioned confidentiality during the time until the its obligations of public disclosure of department perform their duties in public disclosure of special cases, persons financial and other type of information as coordination with the Audit Committee, who have access to insider information required mainly by the Law on Insurances Corporate Governance Committee and the are informed about the requirements and relevant regulations hereunder and Board of Directors. stemming from the relevant legislation. As Capital Markets Legislation, Turkish for those who may have access to insider Commercial Code and the legislation Public Disclosure Operations and information through the service supplied governing the Istanbul Stock Exchange Methods and Instruments Used from them, their contracts include a clause (BIST), through which our shares were of confidentiality. On the other hand, listed and exchanged, in line with the Public Disclosure operations and methods Anadolu Sigorta carefully complies with the generally accepted accounting principles and instruments used for these operations legislative requirements imposed by the and corporate governance principles; under the legislation on insurances, Capital Law on Insurance No. 5684 and relevant therefore, it follows a detailed public Markets Legislation, Turkish Commercial legislation requiring the safekeeping the disclosure policy. Code and other relevant legislation are customers’ secrets and not disclosing described below: Main purpose of the disclosure policy is them to parties other than those who to ensure true, complete, convenient, less Financial statements and notes and are explicitly authorized by the law. This costly, understandable and fair conveyance explanations thereof for each quarter, requirement binds not only the Anadolu of necessary information and disclosures, which are Prepared in accordance with the Sigorta employees but also the employees other than those classified as trade secret, legislation issued by the Undersecretary of of the companies through which the to shareholders, investors, employees, Treasury, Directorate General of Insurance company gets support services. clients, creditors, reassurers and other and Capital Markets Board and signed with In accordance with the legislation and concerned parties. an attestation by the Committee Members the provisions of the Company Charter, in charge of Audit and the Director Having an active approach for the announcements and notifications for General or Directors in charge of financial changes to the Company Charter, General adoption and implementation of Corporate reporting, and external audit reports, issued Governance Principles, our company Assembly meetings, capital raise, reporting annually semi-annually are published on of year-end financial statements are given attaches utmost care for compliance our website and reported to the Public with the requirements of the relevant on the TTRJ and national newspapers. Disclosure Platform (PDP) within its legal Documents and information about legislation and best international practices deadline. Furthermore, our company issues with respect to public disclosure. Anadolu the General Assembly are delivered to financial statements for each quarter and shareholders through Electronic General Anonim Türk Sigorta Şirketi Disclosure upload them to the portal managed by the Policy has been prepared within the scope Assembly System in line with the Undersecretary of Treasury and convey provisions of the Turkish Commercial Code. of above principles and put into practice most of these statements also to the after its approval by the Board of Directors. Turkish Insurers Union (TIU) for informative Each year before the General Assembly reasons. Anadolu Anonim Türk Sigorta Şirketi meeting, annual activity report, in line with uses Public Disclosure Platform (PDP), the relevant legislation, is presented for Central Registry Institution (E-Company), the examination of shareholders with a Electronic General Assembly System view too include all necessary information (EGAS), national/local newspapers, Turkey’s and descriptions and is published on our Trade Registry Journal and company’s website (Both in Turkish and in English) official website for informing the public. and reported to PDP. When requested, this report may be obtained in print from our Investor Relations Department.

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Regular meetings and briefings are not part company website under the Investor Therefore, in defining the persons with of our policy. Instead, where requested or Relations Section. administrative responsibility, the duties of needed to respond to questions raised by the persons in the Company organization the press members, press releases are made Investor Relations Department delivers and the nature of the information which on the printed and visual media. via e-mail necessary information, mainly may be accessed by these persons are financial statements, to shareholders, taken into account. Press statements to printed and visual national and international investors and to media may be made by the Chairman those companies which releases research In addition to Members of the Board, of the Board, the Director General or reports on our company. Director General and Deputy Director its Deputy or other officials assigned by Generals, managers of certain departments, them. News about our company published Investor Relations Section of the who have access to all information on national or international media official website of our company (www. regarding the Company and who are are followed by a professional media anadolusigorta.com.tr) includes detailed entitled to take administrative decisions on monitoring agency. Therefore, in case of a information and data on our company. This matters such as active-passive structure, necessity of a disclosure for special case, section is managed and kept up-to-date profit-loss, cash-flow, strategic targets, which must be notified pursuant to the by the Investor Relations Department. (decisions, which may affect these relevant legislation, necessary briefing All questions sent by all stakeholders matters at macro level) have also been is made on the subject gathering the via e-mail, regular mail, phone, etc. are determined as persons with administrative departmental information from concerned answered at the shortest delay under the responsibility. departments. coordination of the Investor Relations Department. Official Website of Anadolu Sigorta: When making a statement to press on www.anadolusigorta.com.tr news and talks, which are not classified as a Other Notifications special case disclosure by a legislation, type Our company’s official website is and content of the statement are defined Notifications other than above are actively used for informing the public according to certain factors such as the disclosed to public with signature of the and disclosure. The website includes news’ feature, size of the target audience officials whose power of signature was all information and data envisaged by of the media, whether the news affect the indicated in the company’s certificate of the Corporate Governance Principles company reputation. If these news and signature. and Regulatory Authorities in Turkish and English. This website is always kept rumors inherit a matter which requires the Forecasts company to make a public disclosure, a updated with due care. special case disclosure is then made in line In case of disclosure of forecasts for the E-Company platform may also be used with the provisions of relevant legislation. company, which may affect the investor in communication with shareholders, a decisions, the Board of Directors, Director platform which was established within International and national investor General or other officials assigned by the Central Registry Institution in accordance meetings and road-shows are used to latter make necessary disclosures via Public with pursuant to the provisions of Turkish convey information to shareholders Disclosure Platform, activity reports or Commercial Code on websites, which and to other concerned parties. These other means defined by the legislation. In can be accessed through “Bilgi Toplum meetings and visits which were organized case of a significant difference between the Hizmetleri” link. Documents indicated in and managed by Investor Relations issues disclosed earlier and realizations, a the relevant legislation can be accessed Department are sometimes attended by statement may be released according to through this platform. Director General, Directors in charge of relevant legislation. financial management and reporting and the personnel of the Investor Relations Defining the Persons with Department. Where needed, the size of Administrative Responsibility these contact teams may be enlarged. To ensure that all market participants are Persons with administrative responsibility simultaneously and equally informed, the are the members of the Board of Directors reports and presentations disclosed during and those, who are not a member of the the introductory and information meetings Board, yet, have regular access to internal held with investors are published on the information of our company, directly or indirectly, and who are entitled to take administrative decisions which may affect the future development and commercial ends of our company.

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Corporate Governance Principles Compliance Report

PART I - STATEMENT OF COMPLIANCE • Expansion of the scope of minority rights provisions of the Turkish Commercial Code WITH CORPORATE GOVERNANCE beyond the provisions of applicable no. 6102. PRINCIPLES legislation. The assessment and determinations of Our company firmly believes that Hence, minority rights are not represented the level of compliance achieved by our Corporate Governance Principles are as on the Board of Directors. company to the corporate governance critical as financial performance, and principles, and opinions regarding the scope that putting these principles into practice Since the company’s Articles of of the compliance level and ideas on its bears utmost importance both for the Incorporation do not include a provision qualitative improvement are presented development of national and international about making donations, the company below. capital markets and for the best interests does not have a donations policy. of our company. PART II – SHAREHOLDERS Our company does not have a specific Our company implements the principles policy for the number of woman members 2.1 Shareholder Relations Department that are set as compulsory principles by the on the Board of Directors. An Investor Relations Unit has been set Corporate Governance Communiqué Serial: The principles that are not yet up in the company in 2005. Messrs. Fatih II-17.1. implemented, which are exceptional, have Gören, Murat Tetik, Barış Hüseyin Şafak Within this context, the company’s Articles not led to any conflict of interest among and Cem Çözer have been serving in the of Incorporation do not cover provisions the stakeholders to date. Investor Relations Unit. stipulating; No changes were made to the company’s The head of the unit is Mr. Fatih Gören, • Stakeholder participation in the Articles of Incorporation at the Annual Deputy Chief Executive, who also serves company’s management, General Assembly Meeting convened on as a member of the Corporate Governance 24 March 2015 in accordance with the Committee.

Contact information for our employees working in this unit is as follows.

Name Title Phone No E-mail Address Mr. Fatih Gören Deputy Chief Executive 0 850 744 00 55 [email protected] Mr. Murat Tetik Manager 0 850 744 02 55 [email protected] Mr. Barış H. Şafak Supervisor 0 850 744 02 54 [email protected] Mr. Cem Çözer Specialist 0 850 744 01 64 [email protected]

This unit plays an active part in the • Respond to the Shareholders’ and Assembly, protection of shareholding rights and potential investors’ written information facilitates their exercise, mainly regarding requests about the company, apart from • Ensure that the results of the voting are the right to obtain and review information, those that are not publicly disclosed, recorded and the reports thereon are and establishes the communication are of a confidential and/or commercial communicated to the Shareholders, between the Board of Directors and secret nature, • Observe and monitor the fulfillment shareholders. All of the employees serving of all liabilities arising from the capital in the Investor Relations Department • Make available to the shareholders market legislation, including all possess the required licenses. such information and disclosures that may have an effect on the exercise of requirements in relation to corporate The Investor Relations Department reports shareholding rights on the company governance and public disclosure, its activities to the Board of Directors four website in an up-to-date manner • Ensure representation of our company times a year, on a quarterly basis. • Ensure that the General Assembly in investor relations meetings organized In essence, the Investor Relations Meetings are convened in accordance in Turkey or abroad by international Department works to; with the applicable legislation, the establishments through participation in Articles of Incorporation and other such events, • Ensure maintenance of the records about internal regulations, Shareholders in a healthy, secure and • Prepare the presentation materials to be up-to-date manner, • Prepare the documents the Shareholders used in meetings. could make use of in the General

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In 2015, all verbal and written information such shareholder satisfies the requirements While the company’s Board Directors, queries received from researchers and under Article 438 of the TCC. other relevant individuals, officials and our investors in relation to our company auditors responsible for drawing up the and/or to publicly disclosed financial In view of the fact that the General financial statements, an official from the statement results were answered. Assembly of Shareholders must honor the Independent Audit Company auditing Requests for meetings received during request for the appointment of a special the financial statements of the company the reporting period from national and auditor pursuant to the legislation and and some employees participated in the international investment companies were that such request constitutes one of the meeting, other stakeholders or media accepted and necessary information was exceptions to the principle of adherence representatives did not attend the meeting. provided. “ During 2015, the company to the meeting agenda, it is assessed participated in one roadshow and three that the stipulation of the request for The announcement on the meeting investor conferences, and held a total of the appointment of a special auditor invitation including the meeting place, seven teleconferences and 40 investor as an individual right in the Articles of date, hour, agenda, and a specimen of a meetings, 28 of them with foreign Incorporation will be considered in the proxy statement was published at least investment companies. In these meetings, future depending on the developments, three weeks prior to the meeting date in presentations were made on our sector and based on the concern that in practice it the Turkish Trade Registry Gazette, Posta our company, and the investors’ questions might lead to problems with respect to and Habertürk daily newspapers, at www. were answered. maintaining the confidentiality of trade anadolusigorta.com.tr, Central Registry secrets and/or undisclosed information. Agency (CRA) and Public Disclosure 2.2 Shareholders’ Exercise of Their Right Platform (in Turkish: KAP). to Obtain Information It is believed that all information necessary for healthy exercise of Shareholders’ rights Care is taken that General Assembly All information queries of our Shareholders is made available to our Shareholders announcements cover: are answered, apart from those that are on our website, in our annual report and trade secrets or undisclosed information. material event disclosures in general, and • The meeting date and hour through individual queries, in particular. Information requests received from • The meeting place, our shareholders are addressed by our The Shareholders’ queries in relation to • Agenda, employees in the shareholder relations the legal and commercial relationships unit, and are prudently responded to in a between our company and the real persons • Necessary information about the agenda timely, accurate and complete manner, or legal entities with which our company items, on condition that trade secrets and is directly or indirectly associated in terms confidential information shall be protected. of capital, management or auditing are • Former and current versions of the also fulfilled to the extent permitted by the amended article(s) as approved by the Information on the topics our Shareholders applicable legislation. related authorities, if the agenda covers frequently need and developments that any amendments to the Articles of might affect the exercise of their rights are All information that might affect the Incorporation, posted in English and Turkish languages Shareholders’ exercise of their rights is on our website accessible at www. made available to the same on our Internet • The body making the invitation, anadolusigorta.com.tr. site in an updated manner, with a view to expand their right of obtaining information. • The reason for postponement of the Pursuant to applicable legislation, minority original meeting and the meeting Shareholders are entitled to request the 2.3 Information About General quorum for the current one, if the General Assembly to appoint a special Assembly Meetings General Assembly is summoned to auditor for examining certain events. reconvene upon postponement of the In 2015, one General Assembly meeting original one for any reason, In 2015, our Shareholders did not request was convened which was the 2014 Annual appointment of a special auditor from the General Assembly meeting held on 24 • In ordinary meeting announcements, General Assembly of Shareholders. March 2015. the address at which the annual report, financial statements, and other Our Articles of Incorporation contain The said meeting was held with the documents related to the General no provisions stipulating the request for participation of Shareholders representing Assembly can be examined. appointment of a special auditor as an 67.1% or a portion of TL 335.7 million of individual right. On the other hand, each our paid-in capital of TL 500 million. shareholder’s request to have a special auditor appointed is reserved, provided that

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Financial statements and reports including of dissenting votes cast, information shall Pursuant to the applicable legislation and the annual report; informative documents be provided on the General Assembly to the Articles of Incorporation, ordinary on the General Assembly meeting agenda decision regarding the actions taken in general assembly must be held within three items for which there was a need, and relation to such transactions. During months following the end of each fiscal other documents underlying the agenda 2015, there were no transactions that year. items; the latest version of the Articles of had not been approved by the majority of Incorporation and the amendment text, impendent Board Directors. In line with our Articles of Incorporation, if applicable, and the grounds therefor, General Assemblies are held in the place shall be made available at the company To facilitate participation in the General where our company headquarters is headquarters and branches for review by Assemblies, utmost attention is paid to located and at a venue that will enable our shareholders from the date of the fully comply with the points stipulated participation by all our Shareholders. announcement summoning the General by the legislation, and it is believed that Total number of votes that may be cast Assembly. our shareholders are not faced with any difficulties with regard to participation during the General Assembly is classified All information and documents related to in General Assemblies. To date, no on the basis of Shareholders and provided the General Assembly meeting are also notifications to the contrary were received to the Shareholders at the beginning of the accessible on the company website at the from our Shareholders, either. meeting by means of their insertion in the address www.anadolusigorta.com.tr. The list of attendants. following are also posted on the company The shareholders were informed that the Questions posed by our Shareholders website: total number of shares reflecting company did not make any charitable to the Board of Directors are answered, the company’s shareholding structure and donations or grants during the reporting provided that such questions are essential voting rights; grounds for the dismissal period under a specific agenda item at the for exercise of shareholder rights and are or substitution of Board Director(s) and General Assembly Meeting. not trade secrets. information on individuals to be nominated Minutes of the General Assembly meeting to the seats on the Board of Directors, if are delivered to the shareholders upon The General Assembly Chairman chairs the General Assembly meeting agenda conclusion of the meeting, and are made the meeting efficiently and in a manner to contains such dismissal, substitution and/ available in Turkish and English languages ensure that Shareholders can exercise their or election; additional items requested for electronic access at our website at rights. to be incorporated in the agenda by www.anadolusigorta.com.tr, in order shareholders, Capital Markets Board (CMB) Care is taken to answer every question to keep non-participating shareholders and/or other government authorities and raised during the General Assembly by the informed. agencies that govern the company; the shareholders during the same meeting. relevant Board of Directors decision, if In the preparation of the General Assembly If the question raised is not relevant to the agenda covers changes to the Articles agenda, care is paid to include each the agenda or is too comprehensive to of Incorporation and the former and new proposal under a separate heading, to be answered promptly, then the Investor versions thereof. word the agenda headings clearly and in a Relations Department provides written manner to avoid different interpretations, answers within no later than 15 days. During 2015, neither the shareholders and not to insert any agenda items like All questions raised during the General possessing management control, nor Board “others” or “various” as also prohibited by Assembly Meeting and the answers Directors, nor senior executives, nor their the applicable legislation. provided thereto are publicly disclosed spouses or relatives by blood or marriage on the company’s website within 30 unto the second degree engaged in any For Shareholders who will have themselves days following the date of the General transactions, on their own or other’s behalf, represented in the General Assemblies in Assembly, the latest. that might lead to a conflict of interest proxy, a specimen of a proxy statement with the company and/or its subsidiaries. is publicized along with the meeting Directors, authorized employees If such a transaction is planned, then prior announcements, and is also made available responsible for the preparation of financial approval shall be sought and information to Shareholders on the electronic medium. statements and auditors, and other shall be provided at the General Assembly relevant people to offer explanations on meetings. Topics that are communicated by our the agenda topics that are of specialty shareholders to the company’s Investor spend their best efforts to be present in the In the event that transactions, for which Relations Unit, which they would like to be meeting. the affirmative votes of the majority of included in the agenda, are considered by independent Board Directors are required the Board of Directors in the preparation of In General Assemblies, each agenda item and the approval of which has been the agenda. is voted individually, and for the avoidance referred to the general assembly by reason of doubt in relation to voting results, the

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votes are counted and the results are No agenda items have been proposed by person empowered to vote is named in the announced to the Shareholders before the our shareholders during the meeting. certificate of authority. General Assembly is concluded. Minutes of the General Assemblies are 2.5 Entitlement to Dividends At the Annual General Assembly held on accessible in electronic medium in Turkish 24 March 2015, shareholders ratified all of and English languages at the website at The important aspects covered in the the agenda items below unanimously or by www.anadolusigorta.com.tr or in written company’s Dividend Distribution Policy majority of votes: form. are presented below. The said policy is presented in the General Assembly Meeting 1. Opening, election of the Presiding Board 2.4 Voting Rights and Minority Rights for the information of shareholders, and and authorization of the Presiding Board published in the company’s annual reports to sign the minutes of the Annual General The company’s capital is divided into and posted on the corporate website. Assembly 50,000,000,000 shares each with a value of TL 0.01 and entitling their holders to one The company’s Articles of Incorporation 2. Presentation of and discussion on the vote. set forth it as a principle to distribute first Board of Directors’ 2014 Activity Report, dividends out of the distributable profit in and presentation of the Independent Audit There are no cross-shareholding interests the ratio to be set by the General Assembly Report for 2014 fiscal year between any Shareholder and the in accordance with the Capital Markets company. Board requirements. 3. Review, deliberation and ratification of 2014 financial statements The company’s Articles of Incorporation do Dividend distribution proposals laid not set the minority rights to be less than down for the approval of the General 4. Approval of the membership of the one twentieth of the capital. Assembly by the Board of Directors are individual elected, as per Article 363 of formulated so as to preserve the delicate Minority shares are not represented in our the Turkish Commercial Code, to the seat balance between the expectations of our Board of Directors, which is elected under vacated on the Board of Directors during Shareholders and the company’s need to the discretion of the General Assembly. the reporting period grow, and paying due regard to the future expectations for the company’s operations, 5. Individual acquittal of Board Directors There are no upper limits with regard to the number of votes that our Shareholders capital adequacy targets and the prevailing 6. Information on dividend distribution are allowed to cast in the General conditions in the capital markets, as well as policy and decision on profit distribution Assemblies. the profitability of the company. prepared by the Board of Directors No shares are privileged in terms of voting. In the event that the Board of Directors 7 Election of the Board Directors and proposes against distributing profit to the determination of their terms of office Voting right arises at the time the share General Assembly, the reasons therefor and is acquired and there are no provisions information on the use of retained earnings 8. Authorizing the Board Directors to stipulating exercise of the voting right after shall be presented to the shareholders perform the transactions specified in lapse of a certain period of time after the during the General Assembly. The same Articles 395 and 396 of the Turkish date of acquisition. will also be included in the annual report Commercial Code and posted on the corporate website. Our Articles of Incorporation contain no 9. Determination of remuneration for the provisions preventing non-Shareholders The dividend policy espoused by the Board members of the Board of Directors from casting votes in proxy in the capacity of Directors is based on the principle of of representatives. proposing to the General Assembly the 10. Designation of the independent audit distribution of at least 30% of the net firm Shareholders may exercise their voting distributable period profit as bonus shares rights personally in the General Assemblies or in cash. 11. Presentation of information on the or via a third party that may or may not be donations and grants made during the a Shareholder. No shares are privileged in terms of getting reporting period share from the profit. Each real person Shareholder is represented During the General Assembly, the question in the General Assemblies by one No founder’s bonus certificates are given, raised by one shareholder was responded person only; in the case that legal entity nor are dividends paid to the Board to by the Presiding Chair. Shareholders are represented by several Directors. people, only one may cast votes. The

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Pursuant to the Articles of Incorporation, 3.2 Annual Report 4.2 Stakeholder Participation in our employees are paid dividends up to Management three times of their salaries maximum The company’s annual reports are prepared from the amount remaining after the first in sufficient detail to cover the information While the Articles of Incorporation contain dividend is set aside. listed in Corporate Governance Principles. no provisions on stakeholder participation in the company’s management, the Care is paid to effect the dividend The annual activity report is prepared by company’s internal regulations cover payments as soon as possible, taking into the Board of Directors and incorporates practices to this end. consideration the time stipulated by the the declaration that financial statements legislation. present a true and fair view of the An employee proposal guideline has been company’s financial status and that the formulated. Proposals that are innovative In 2015, cash dividends distributed company achieved full compliance with the and aimed at improvement are assessed amounted to TL 21 million. legislation. within the framework of this guideline and put into life across the company. 2.6 Transfer of Shares PART IV – STAKEHOLDERS Stakeholders’ opinions and complaints are The company’s Articles of Incorporation 4.1 Keeping Stakeholders Informed followed up on by the Audit Committee. contain no provisions restricting the transfer of shareholding interests. In matters concerning our Shareholders, Agencies Meetings, İşbank Branches employees, creditors, customers, suppliers, Meetings and Managers Meetings are held, All our Shareholders are treated various NGOs, the Government and where the stakeholders, i.e. employees and equally, including minority and foreign potential investors that might consider suppliers, share their opinions. Shareholders. investing in our company, i.e. the stakeholders, care is taken to provide 4.3 Human Resources Policy PART III – PUBLIC DISCLOSURE AND information in writing and to base the TRANSPARENCY relations with such parties on written The basic principles of the company’s contracts as much as possible (through human resources policy are stated below. 3.1 Company Internet Site and Its electronic mail, corporate website, Public Content Job descriptions and distributions, along Disclosure Platform). with the performance criteria are set by the The company has an Internet site prepared In cases where the rights of stakeholders company management and announced to in Turkish and English languages, accessible are not regulated by the legislation the employees. at the address www.anadolusigorta.com. or contractually, the interests of the tr. The company website is actively used in Hiring activities are based on the principle stakeholders are protected within the providing information and public disclosure. of giving equal opportunities to people of framework of the rules of good faith and equal qualities. Criteria for hiring are put to the extent permitted by the company’s The company website features the into writing on the basis of titles and are facilities, observing the company’s information and data stipulated by the followed in practice. Corporate Governance Principles and credibility at the same time. The necessary regulatory authorities. structure is in place to enable stakeholders Succession planning is made to identify to report such transactions of the company the new managers to be appointed in cases Attention is paid to comments and that are contradictory to the legislation or where it is predicted that changes in a suggestions received via our website are unethical. managerial position will cause hitches in and are taken into consideration at the the management of the company. company. Care is paid to keep the website up-to-date. In decisions on training, transfer and promotion, objective data are used and the The company’s letterhead contains the company’s interests are observed as much website address. as possible.

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Training plans are formulated aimed at 4.4 Codes of Ethics and Social with a controlling interest in the company, developing our employees’ knowledge and Responsibility it is thought that the Board Directors skills. all naturally possess the advantage to Codes of ethics setting out the professional act independently, and therefore, to be Company employees are members of the ethics that the company and its employees impartial in their decisions, upholding Bank and Insurance Employees Union. are required to abide by when performing the interests of our company and the their activities within the existing laws stakeholders above everything else. Safe working environment and conditions and regulations is posted on the corporate are provided for our employees; work is website. There are two independent members on undertaken to improve these conditions the Board of Directors. The independent depending on social and technological Attention is paid that the projects offered Board Directors have not served as necessities. with cover are in compliance with the members for more than six years in the applicable environmental safety and public past ten years. Term of office for all Board Decisions made in relation to our health legislation. Directors is one year. employees or developments concerning them are shared with the employees. Within the frame of its commitment to The Corporate Governance Committee, social responsibility, our company extends functioning as the Nomination Committee, Measures are adopted to prevent support to education, academic activities, nominated two candidates as independent discrimination on the basis of race, religion, sports organizations, and cultural and artistic Board Directors on 16 February 2015. The language and sex among the employees, events. Through the “One Master, Thousand reports on whether all nominees possess to ensure human rights are respected and Masters” social responsibility project the independence criteria have been to protect the employees against internal launched in 2010 and currently in progress, presented to the Board of Directors on the physical, mental and emotional abuse. it is intended to focus the public attention said dates. on vanishing vocations and local values, and The company does not appoint a to help revive them. Independent Board Directors fulfill the representative to carry out the relations independence criteria published in the with our employees. Yet, there are union PART V – BOARD OF DIRECTORS relevant legislation, and their declarations representatives who are designated by the of independence have been duly received Union of Banking and Insurance Workers 5.1 Structure and Formation of the and incorporated in the annual report. organized at our company from amongst Board of Directors No instances took place during the our headquarters and regional branch reporting period, which would compromise employees to handle the relations with The company’s Board of Directors is independence. If an instance compromising employees. composed of eleven members so as to enable our Board Directors to work independence arises, then the independent The employee Compensation Policy is efficiently and constructively, make Board Director shall present such change posted on the corporate website. decisions swiftly and rationally, and immediately to the Board of Directors organize the formation and activities of the to be disclosed to the public. In such a No complaints have been received on committees efficiently. case, the Board Director who loses his account of discrimination among company independence shall resign as a matter of employees. Résumés of our Board Directors are principle. published on the corporate website and in our annual report. Apart from the CEO, the Board of Directors consists of non-executive members. Taking into consideration that there are Chairman of the Board and CEO functions no non-corporate ultimate Shareholders are carried out by different individuals.

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Information about our Board Directors is presented below.

Name Title Degree Executive / Entity Worked Title Held in the Professional Non-Executive Entity Experience Mr. Caner Çimenbiçer Chairman Bachelor’s Faculty of Non-Executive - - 41 years Administrative Sciences Mr. Hakan Aran Deputy Master’s Business Non-Executive Türkiye İş Bankası A.Ş / Deputy Chief 26 years Chairman Administration In-Group Executive Officer Mr. Musa Ülken Member& Bachelor’s Faculty of Executive Anadolu Anonim Türk CEO 37 years CEO Administrative Sciences Sigorta Şirketi Mr. Kubilay Aykol Member Bachelor’s Faculty of Non-Executive Türkiye İş Bankası A.Ş / Section Manager 19 years Administrative Sciences In-Group Mr. Faruk Karpuz Member High School Non-Executive Türkiye İş Bankası A.Ş / Section Manager 33 years In-Group Mr. Hafız Ekrem Kürkçü Member Bachelor’s Faculty of Non-Executive Türkiye İş Bankası A.Ş / Section Manager 23 years Education In-Group Mr. Kemal Emre Sayar Member Master’s Banking & Non-Executive Türkiye İş Bankası A.Ş. / Unit Manager 16 years Finance In-Group Mr. Cengiz Tezel Member Master’s Business Non-Executive Türkiye İş Bankası A.Ş / Branch Manager 24 years Administration In-Group Mr. Hasan Hulki Yalçın Member Master’s Banking & Non-Executive Milli Reasürans T.A.Ş. / CEO 27 years Finance In-Group Mr. Prof. Savaş Taşkent Independent Master’s Law Non-Executive İstanbul Technical Faculty Member, 44 years Member University, Faculty of Department of Law Management /Non- Group Mr. Assoc. Prof. Atakan Independent Master’s Finance Non-Executive Özyeğin University/Non- Faculty of Business, 15 years Yalçın Member Group Head of Banking and Finance Department

When fulfilling its decision-making • Allow Shareholders to ask questions to disposal, then it is also laid down for the function, the Board of Directors acts on the the nominees. approval of the General Assembly. The basic considerations of; matter is decided in the said General Our Board of Directors takes care to hold Assembly meetings through voting where • Maximizing the fair value of the regular monthly meetings. the parties to the transaction and their company, respective related parties may not cast Approval of the majority of independent votes, thus involving other shareholders in • Execution of company operations so as Board Directors is sought for the Board of such decisions at the General Assembly. to ensure long-term and stable earnings Directors decisions pertaining to all kinds of Meeting quorum shall not be sought for for our Shareholders, the company’s transactions with related General Assembly meetings that will be parties of material nature as specified held for circumstances specified in this • Maintaining the delicate balance in the Corporate Governance Principles article. Decisions are made with the simple between the Shareholders and the Communiqué, to company transactions majority of those eligible to cast votes. company’s need to grow. of an ongoing nature, to purchases/ Board of Directors and General Assembly disposals of a material nature, and to In the formation of the Board of Directors, decisions passed in violation of the furnishing guarantee, pledge and mortgage care is given to; principles herein shall be null and void. in favor of third parties. If majority of • Ensure the attendance of nominees to the independent Board Directors do not There are no administrative or judicial the meeting during the election to the approve the transaction, this is publicly sanctions imposed against the company or seats on the Board of Directors, disclosed, providing adequate information the members of the governing body. on the transaction within the frame of • Inform the Shareholders about the public disclosure requirements. If the There are no woman members on our nominees, transaction in question is a related party Board of Directors, nor is there a policy on transaction or a material purchase/ this matter.

Anadolu Sigorta Annual Report 2015 87

Although there are no set rules on The Board of Directors holds its first 5.3 Numbers, Structures and non-independent Directors’ undertaking meeting preferably on the date the same Independence of Committees within the other duties outside the company, the is elected. Board of Directors Directors do not have any other duties apart from their natural duties in the During the first meeting, the chairman There is an Audit Committee, a Corporate entities they work for and from those in and the deputy chairman of the board Governance Committee and a Committee the establishments owned by the entities are elected, and decisions are made on of Early Determination of Risk in our they work for. Yet, Board Directors devote the job distribution and establishment of company. sufficient amount of time for company committees. Owing to the structure of the Board affairs, and exercise their powers prudently Board Directors, in principle, attend every of Directors, Corporate Governance and within the frame of good faith, meeting. Committee also fulfills the functions of possessing all necessary knowledge to Nomination Committee and Remuneration ensure full performance of the duty. The Board of Directors takes care to meet Committee. regularly and at least monthly as pre- Past experiences, and outside positions scheduled, and at any time as and when There are two non-executive Board held, if any, of the independent Board deemed necessary. Directors in each one of the Committees. Directors are disclosed in their résumés and presented on our website and in our annual Utmost care is paid to ensure that the As a matter of principle, Board Directors do report. information and documents about the not undertake roles in several committees. topics covered in the Board meeting However, since all members of the Audit 5.2 Operating Principles of the Board Of agenda are made available for the Committee and the chairman of the Directors examination of the Directors at least five Corporate Governance Committee must be The Board meeting agenda is determined days in advance, and when such timing elected from amongst independent Board by the Chairman of the Board of Directors cannot be met, efforts are spent to ensure Directors, our independent Board Directors in line with the proposals of the CEO and equal flow of information to the Board serve on two different committees. the Board Directors. Directors. The Corporate Governance Committee The Board of Directors met twelve times Each Director is entitled to one vote and establishes whether the corporate in 2015. none has weighted vote or affirmative/ governance principles are implemented negative vetoing rights. in the company, as well as the grounds Care is paid to determine the meeting date for non-implementation, if applicable; so as to allow all Directors to participate. The Board of Directors convenes on the identifies conflicts of interest, if any, arising Save for unforeseeable exceptional events, basis of majority of its full membership and from failure to fully comply with these the Board meetings are held with the decisions are passed with the majority of principles, and presents proposals to the participation of all Directors. Directors present in the meeting. Board of Directors for the improvement of relevant practices. The committee also The company’s Board Directors are Attention is given to set the Board meeting works to create a transparent system insured with an annual coverage of USD date during the immediately preceding regarding identification, assessment, 75,000,000 against the risk of loss they meeting, followed by written invitation. training and rewarding of nominees may cause to the company due to their eligible for the Board of Directors, and to The existing secretariat responsible for fault in the performance of their duties. establish related policies and strategies. execution of the Board activities, keeping The Corporate Governance Committee the Directors and auditors informed, and develops proposals regarding the numbers establishing communication with them of the members of the Board of Directors was transformed into Board of Directors and executives. It is also charged with Reporting Unit in 2005. establishing and overseeing the approaches, The Board of Directors decisions passed in principles and practices in relation to the 2015 were adopted with the unanimous performance evaluation, career planning votes of the members present in those and rewarding of Board Directors and meetings. executives. The committee performs the activities specified in the Compensation Policy and coordinates the activities of the Investor Relations Department.

The Audit Committee oversees the

Anadolu Sigorta Annual Report 2015 88 Other Matters and Financial Statements Corporate Governance Principles Compliance Report

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operation and efficiency of the company’s the Board of Directors. The said decisions Taking into consideration that there are accounting system, public disclosure reported that the financial statements were no non-corporate ultimate Shareholders of financial information, independent examined, and that they were deemed with a controlling interest in the company, auditing, internal control and internal audit fit for public disclosure. Moreover, the it is thought that the Board Directors systems. The committee supervises the Board of Directors was informed on the all naturally possess the advantage to selection of the independent audit firm, complaints received by the company and act independently, and therefore, to be preparation of independent audit contracts the complaint management system. impartial in their decisions. and initiation of independent audit process, and every phase of the work carried out The Committee of Early Determination of 5.4 Risk Management and Internal by the independent audit firm. The Audit Risk is responsible for efforts aimed at early Control Mechanism Committee determines the independent detection of risks that might endanger Set up in 2006 in order to restructure the audit firm from which the company will the existence, progress and survival of the risk management systems and processes, procure services and the services to be company; ensuring adoption of necessary the Risk Management Department’s supplied therefrom, and submits the same measures in relation to the identified risks, activities were expanded in scope to cover for the approval of the Board of Directors. and managing the risks. The committee reviews the risk management systems at internal control activities within the frame The Audit Committee assesses the least once a year. of the provisions of the “Regulation on the conformity of annual and interim financial Internal Systems of Insurance, Reinsurance statements to be publicly disclosed to Prof. Savaş Taşkent, Mr. Hasan Hulki and Pension Companies” published in the the accounting principles pursued by Yalçın and Mr. Fatih Gören serve on Official Gazette issue 26913 dated 21 June the company, as well as their accuracy the company’s Corporate Governance 2008. Along the same line, the Department and fairness, and reports its written Committee. The Committee is headed by was renamed to Risk Management and assessments to the Board of Directors, Prof. Turkay Berksoy. Internal Control Department. by incorporating the opinions of the Prof. Savaş Taşkent functions as the head The primary objectives of the Department’s company’s responsible managers and of of the Audit Committee, and Assoc. Prof. activities are as follows: the independent audit firm. Atakan Yalçın as its member. • Measure, assess and control risks The Audit Committee determines the The Committee of Early Determination independently from executive units, methods and criteria applicable for the of Risk is headed by Assoc. Prof. Atakan review and finalization of the complaints Yalçın, where Hakan Aran serves as a • Protect company assets, received by the company in relation member. to the company’s accounting, internal • Ensure efficient and effective execution control and internal audit systems and to All members of the Audit Committee of activities in line with the Law and its independent audit, and for handling and the heads of other committees are other applicable legislation, internal the company employees’ notifications elected from amongst independent Board policies and guidelines, as well as regarding the company’s accounting and Directors. customary insurance practices, independent audit within the frame of the confidentiality principle. The company’s CEO does not serve on any • Guarantee the reliability, integrity and committee. timely availability of the accounting and In 2015, the Audit Committee met four financial reporting system. times on various dates, recorded the Structures and operating principles of outcomes of the meetings in minutes committees have been put into writing and and submitted the decisions adopted to posted on our company website.

Anadolu Sigorta Annual Report 2015 89

The basic strategy directed towards the And its mission as: 5.6 Financial Rights ultimate goal is to carefully plan, conduct and manage risk management and “In keeping with the deeply-rooted, Aggregate of the salaries and similar internal control activities independently, pioneering, honest and solid corporate benefits provided to the company’s impartially, purposefully, effectively and values of Anadolu Sigorta, to lead the Board Directors and senior executives efficiently, employing a risk-focused sector, to help create a broad public are disclosed in the notes to the financial approach and within the frame of awareness of insurance in Turkey, to statements and thereby, incorporated in applicable legislation and internationally implement a customer-focused approach our annual report. They are also posted accepted principles and standards. The to service, to increase our financial strength on the corporate website and publicly basic principle in achieving this goal is to international standards, to enhance the disclosed. to employ the most advanced tools and value of our company.” With a view to giving the shareholders methods that are available and possible to Our company’s vision and mission are the chance to voice their comments, the use. publicly disclosed on our website accessible remuneration principles for the Board The activities of the Department are at www.anadolusigorta.com.tr. Directors are presented as a separate item administered directly by the CEO. The for the information of shareholders. The Our strategic goals are set by our Board Director responsible for Internal remuneration policy developed for the executives with a keen eye on competitive Systems is also responsible toward the company’s managers and employees at conditions, general economic conjuncture, Board of Directors for the formation of the any level is put into writing, presented to overall expectations in national and Department and ensuring, monitoring and the General Assembly for information, and international financial markets, and the coordinating its operability, adequacy and is published on the company website. company’s medium and long-term targets. effectiveness. Stock options or payment plans based Strategies and targets proposed are All outcomes obtained by examining on the company’s performance are negotiated comprehensively by the Board the risks independently from executive used in the remuneration of our Board of Directors on a broad perspective. functions are regularly reported by Directors, including the independent Board Directors. Nonetheless, it is believed that the Department to the Board Director Actualizations in relation to approved the remuneration of independent Board responsible for Internal Systems, to the strategies and targets are reviewed during Directors is at a level that will not prejudice CEO and the Board of Directors. Board meetings and monthly within the their independence. scope of the assessment of company The Board of Directors oversees the operations, financial structure and efficiency of the risk management and The Board Directors and senior executives performance level. internal control mechanism via the have never utilized, directly or indirectly, cash or non-cash loans from the company, company’s Board of Inspectors. In principle, the Board of Directors meets nor did the company lent money or monthly in order to efficiently and 5.5 Strategic Goals of the Company gave suretyship or provided any similar continuously fulfills its monitoring and guarantee to any Board Director or senior supervision function. The company’s vision is set as: executive. ”To make our company the insurance In the meetings, the basic topics of brand preferred by everyone who needs assessment are the company activities, insurance, and to achieve a strength that approved annual budget and target makes it a reference point in the worldwide realizations, the company’s place in the insurance industry as well.” sector, financial structure and performance level, reporting, and compliance of operations to international standards.

Anadolu Sigorta Annual Report 2015 90 Other Matters and Financial Statements Committees Operating Within Anadolu Sigorta and an Assessment by the Board of Directors

Board of Directors Committees Operating Within Anadolu Sigorta and an Assessment by the

In order to ensure that the Board of with the Board of Directors decision • The committee shall enter the Directors duly performs its duties and no. 06838 dated 26 June 2014. These conclusions reached in a meeting in the responsibilities, an Audit Committee, provisions are carried out by the Board of minutes, and submit the assessments Committee of Early Determination of Risk, Directors. made and decisions passed, along with and Corporate Governance Committee the grounds therefor, in a written report were set up at the company. The Corporate The committee consists of a minimum of to the Board of Directors within no later Governance Committee also fulfills the two members to be elected from among than one month following the relevant functions of the Nomination Committee directors and the Investor Relations committee meeting. and Remuneration Committee. Manager. • Committee decisions shall take effect The Board of Directors makes all kinds of The members will elect the head of the upon approval of the Board of Directors. resources and support available necessary committee from among themselves. The for the performance of their duties by head of the committee is elected from • The committee shall forthwith present the committees. The committees hold among independent directors. Non-director its determinations, assessments and meetings at the frequency deemed individuals, who have expertise in their suggestions in relation to its duties and necessary for ensuring efficiency of their respective fields, can be members of the scope of responsibilities in writing to the activities and specified in their respective committee. Board of Directors. operating principles, and submit the reports If the number of committee members • The committee may invite the covering information about their activities elected from among Board Directors is two, individuals it deems necessary to its and meeting outcomes to the Board of then both of them must be non-executive meetings and seek their opinions. Directors. directors; if such number is greater than • Investor Relations Unit/Department shall The objectives, formations, operating two, then the majority of the members determine the meeting agenda of the principles and procedures, and activities of must be non-executive directors. The CEO committee, make the invitations to the our committees are described below. may not serve on this committee. meeting, establish communication with CORPORATE GOVERNANCE COMMITTEE The Investor Relations Managers must committee members, keep the book of be a full-time employee of the company resolutions, and handle other secretarial Head of Committee: Prof. Savaş Taşkent and must be assigned as a member of the tasks for the committee. Corporate Governance Committee. Member: Hasan Hulki Yalçın • As the committee fulfills its functions, A member’s term of office on the the Board of Directors shall make Member: Fatih Gören Corporate Governance Committee is all necessary resources and support terminated when his/her term of office available. Objective on the Board of Directors expires or upon • The committee may seek independent Overseeing compliance of the company a decision to such effect by the Board of expert opinion upon approval of the with corporate governance principles, Directors. Board of Directors on matters that call undertaking improvement efforts thereon, Operating Procedures and Principles for expertise and the committee deems and submitting proposals to the Board of necessary in relation to its activities. The Directors. • The Corporate Governance Committee cost of the consultancy service needed holds at least four meetings a year, Formation by the committee shall be borne by the which must take place at least on a company. The Corporate Governance Committee quarterly basis. was set up upon approval by the Board • Committee members shall observe • Committee meetings are held with of Directors’ decision no. 5508 dated 10 the principles of independence and the attendance of all its members and March 2005. The provisions governing impartiality when performing their decisions are passed with the votes of the formation, principles and procedures duties. the majority of members in attendance. and activities of the committee have been based on the Corporate Governance • The committee shall keep a resolution Communiqué issued by the Capital Markets book, in which the decisions, assigned a Board of Turkey (CMB) and put into force sequence number, will be entered.

Anadolu Sigorta Annual Report 2015 91

Activities • Carries out activities to ensure that • Presenting its suggestions regarding the corporate governance culture is the remuneration to be paid to The committee carries out the following established within the company, and is Board directors and executives with activities with respect to corporate espoused by managers and employees administrative responsibility, which will governance: working at any level. The committee be determined in view of the extent follows up the developments related the remuneration criteria have been • Establishes whether the corporate to corporate governance in and out achieved; governance principles are implemented of Turkey and examines their possible in the company, as well as the grounds implications for the company. • Developing suggestions and assessments for non-implementation, if applicable; for the formulation and revision of the identifies conflicts of interest, if any, • The duties of the Nomination and company’s remuneration policy, which arising from failure to fully comply with Remuneration Committees shall be sets out the remuneration principles these principles, and presents proposals fulfilled by the Corporate Governance for the Board directors and executives to the Board of Directors for the Committee, until these committees shall with administrative responsibility, and improvement of corporate governance have been set up. presenting its opinions to the Board of practices; Directors. The committee’s duties and responsibilities • Oversees the activities of the company’s with respect to nomination are presented The Corporate Governance Committee Investor Relations Department. Within below: shall fulfill other duties and responsibilities this context, the committee sets and to be assigned to it by the Board of regularly reviews the basic principles • Works to create a transparent system Directors in relation to its field of activity. for the company’s communication with regarding identification, assessment, investors; training and rewarding of nominees AUDIT COMMITTEE eligible for the Board of Directors and • Works in cooperation with the Investor managerial positions with administrative Head of Committee: Prof. Savaş Taşkent Relations Department to present responsibility, and establishes related Member: Assoc. Prof. Atakan Yalçın suggested improvements for ensuring policies and strategies; efficient communication between the Objective company and investors, and elimination • Regularly evaluates the structure and and resolution of potential conflicts to efficiency of the Board of Directors and Overseeing the operation and efficiency the Board of Directors; presents its suggestions for possible of the company’s accounting system, revisions to the Board of Directors; public disclosure of financial information, • Reviews the company’s Corporate independent auditing of the company and Governance Compliance Report before • The committee is charged with internal control system. it is published within the company’s performing the duties set out in the Annual Report, and presents its legislation concerning the nomination Formation comments to the Board of Directors; of independent members to the Board of Directors, which are announced The Audit Committee was set up upon • Makes proposals and assessments every year by the Board and which are approval by the Board of Directors’ regarding the determination or revision compulsory to be implemented by the decision no. 5317 dated 26 June 2003. The of the company’s disclosure policy, group to which the company is affiliated. provisions governing the principles and and presents the same to the Board procedures and activities of the committee of Directors. The committee reviews The committee’s duties and responsibilities have been based on the Corporate that the Disclosure Policy covers the with respect to remuneration are presented Governance Communiqué issued by the minimum content as stipulated by the below: Capital Markets Board of Turkey (CMB) and legislation with respect to the company’s put into force with the Board of Directors • Setting and overseeing the principles, communication with stakeholders, as decision no. 06839 dated 26 June 2014. criteria and practices applicable for well as the scope, quality, consistency These provisions are carried out by the the remuneration of Board directors and accuracy of documents, Board of Directors. presentations and explanations prepared and executives with administrative by the company for informative responsibility, taking into consideration purposes, and oversees that the same the company’s long-term targets; are developed in accordance with the Disclosure Policy;

Anadolu Sigorta Annual Report 2015 92 Other Matters and Financial Statements Committees Operating Within Anadolu Sigorta and an Assessment by the Board of Directors

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The committee consists of a minimum of • The committee’s activities and meeting • Supervises the selection of the two members to be elected from among results shall be described in the annual independent audit firm, preparation the Board of Directors members. report. The annual report shall also of independent audit contracts and specify the number of written reports initiation of independent audit process, The members will elect the head of the the committee submitted to the Board and every phase of the work carried out committee from among themselves. of Directors during the fiscal year. by the independent audit firm;

All members of the committee are elected • The committee may invite the • Determines the independent audit firm from among independent directors. individuals it deems necessary to its from which the company will procure meetings and seek their opinions. services and the services to be supplied To the extent possible, at least one therefrom, and submits the same for the member of the Audit Committee should • Board of Inspectors/Audit Department approval of the Board of Directors; preferably have minimum five years of shall determine the meeting agenda of experience in audit/accounting and finance. the committee, make the invitations to • Establishes the methods and criteria the meeting, establish communication for the handling and resolution of A member’s term of office on the Audit with committee members, keep the complaints received by the company in Committee is terminated when his/her book of resolutions, and handle other relation to the company’s accounting, term of office on the Board of Directors secretarial tasks for the committee. internal control and internal audit expires or upon a decision to such effect by systems and its independent audit; and the Board of Directors. • As the committee fulfills its functions, for addressing the company employees’ the Board of Directors shall make Operating Procedures and Principles notifications about the company’s all necessary resources and support accounting and independent audit within • The committee holds at least four available. the frame of confidentiality principle; meetings a year, which must take place • The committee may seek independent at least on a quarterly basis. • Assesses the conformity of annual expert opinion upon approval of the and interim financial statements to be • Committee meetings are held with Board of Directors on matters that call publicly disclosed to the accounting the attendance of all its members and for expertise and the committee deems principles pursued by the company, as decisions are passed with the votes of necessary in relation to its activities. The well as their accuracy and fairness, and the majority of members in attendance. cost of the consultancy service needed reports its written assessments to the by the committee shall be borne by the Board of Directors, by incorporating the • The committee shall keep a resolution company. opinions of the company’s responsible book, in which the decisions, assigned a managers and of the independent audit • Committee members shall observe sequence number, will be entered. firm. the principles of independence and • The committee shall enter the impartiality when performing their The Audit Committee shall fulfill other conclusions reached in a meeting in the duties. duties and responsibilities to be assigned to minutes, and submit the assessments it by the Board of Directors in relation to Activities made and decisions passed, along with its field of activity. the grounds therefor, in a written report In essence, the Audit Committee; to the Board of Directors within no later than one month following the relevant • Oversees the operation and efficiency committee meeting. of the company’s accounting system, public disclosure of financial information, • Committee decisions shall take effect independent auditing, internal control upon approval of the Board of Directors. and internal audit systems; • The committee shall forthwith present its determinations, assessments and suggestions in relation to its duties and scope of responsibilities in writing to the Board of Directors.

Anadolu Sigorta Annual Report 2015 93

COMMITTEE OF EARLY DETERMINATION A member’s term of office on the • The committee may seek independent OF RISK committee is terminated when his/her expert opinion upon approval of the term of office on the Board of Directors Board of Directors on matters that call Head of Committee: Assoc. Prof. Atakan expires or upon a decision to such effect by for expertise and the committee deems Yalçın the Board of Directors. necessary in relation to its activities. The cost of the consultancy service needed Member: Hakan Aran Operating Procedures and Principles by the committee shall be borne by the company. Objective • The committee holds at least four meetings a year, which must take place Managing the risks that might threaten • Committee members shall observe at least on a quarterly basis. the existence, progress and survival of the the principles of independence and impartiality when performing their company. • Committee meetings are held with duties. the attendance of all its members and Formation decisions are passed with the votes of Activities The Committee of Early Determination of the majority of members in attendance. Risk was set up as a result of the discussion The Committee of Early Determination of • The committee shall keep a resolution of the General Directorate proposal no. Risk: book, in which the decisions, assigned a 3550 dated 24 February 2012, pursuant sequence number, will be entered. • Works to early detect the risks that to Article 4.5.1 of the Communiqué might endanger the existence, progress Serial:IV-56 on Determination and • The committee shall enter the and survival of the company, to ensure Implementation of Corporate Governance conclusions reached in a meeting in the necessary measures are adopted in Principles enforced upon its publication in minutes, and submit the assessments relation to the identified risks, and to the Official Gazette issue 28158, dated 30 made and decisions passed, along with manage the risk; December 2011. The provisions governing the grounds therefor, in a written report the formation, principles and procedures to the Board of Directors within no later • Informs the Board of Directors and activities of the committee have than one month following the relevant of its opinions and comments in been based on Article 378 of the Turkish committee meeting. writing regarding the creation and Commercial Code and the Corporate development of the company’s risk Governance Communiqué issued by the • Committee decisions shall take effect management system which will be Capital Markets Board of Turkey (CMB) and upon approval of the Board of Directors. aimed at minimizing the impact of risks put into force with the Board of Directors that might affect the shareholders in • The committee shall forthwith present decision no. 06840 dated 26 June 2014. particular and all stakeholders in general; They are carried out by the Board of its determinations, assessments and Directors. suggestions in relation to its duties and • Reviews the company’s risk management scope of responsibilities in writing to the systems at least on an annual basis; The committee consists of a minimum of Board of Directors. two members to be elected from among • Oversees that risk management practices the Board directors. • The committee may invite the are carried out in accordance with the individuals it deems necessary to its decisions of the Board of Directors and The members shall elect the head of the meetings and seek their opinions. the committee; committee from among themselves. The head of the committee shall be elected • Risk Management Unit/Department shall • Reviews the determinations and from among independent directors. Non- determine the meeting agenda of the assessments about risk management director individuals, who have expertise in committee, make the invitations to the that will be incorporated in the their respective fields, can be members of meeting, establish communication with company’s annual report. the committee. committee members, keep the book of resolutions, and handle other secretarial The Committee of Early Determination If the committee is formed of two tasks for the committee. of Risk shall fulfill other duties and members, then both of them must be responsibilities to be assigned to it by the non-executive directors; if such number is • As the committee fulfills its functions, Board of Directors in relation to its field of greater than two, then the majority of the the Board of Directors shall make activity. members must be non-executive directors. all necessary resources and support The CEO may not serve on this committee. available.

Anadolu Sigorta Annual Report 2015 94 Other Matters and Financial Statements An Assessment of the Operation of the Independent Audit Firm in 2015 Activity Period via the Audit Committee

An Assessment of the Operation of the Independent Audit Firm in 2015 Activity Period via the Audit Committee

Formation and Independence of the External auditing of our company is efficient accounting and internal audit Independent (External) Audit Firm conducted in a fully independent manner, system in place at the company, and and the external auditor performs the strongly established ethical rules attaching Periodic financial statements and their relevant tasks adhering strictly to the importance to correct public disclosures. footnotes are prepared in a manner to principles of accuracy, professional represent the actual financial status integrity and straightforwardness, without Independent conduct of the external and within the framework of existing being involved in any conflicts of interests auditing of our company testifies to the legislation and insurance business that might restrict its independence. The accuracy and veracity of our financial accounting standards. They are subjected external auditor auditing our company acts statements in the face of the public, to independent auditing and publicly independently and also refrains from any and is perceived as guarantee by our disclosed at time intervals stipulated by the activity that might lead third parties to Shareholders. The independent opinion of legislation. doubt its independence. the external auditor further strengthens our company’s corporate image in that The independent audit firm we work with No service is obtained, directly or indirectly they enhance the reliability of our financial is alternated at certain intervals, and an from the firms we obtain independent statements. Having made it a principle to independent audit firm is selected for a audit service, save for the audit service undertake public disclosure and to assure maximum of 7 fiscal years for regular and/ itself, and no fees are paid to these firms, transparency in line with its ethical values, or special audit. At least two years are apart from the reasonable audit fee at our company earns the trust of its investors allowed to pass before re-signing a regular current market conditions. by giving importance to independence of and/or special audit contract with the same the external auditor, and therefore, aims independent audit firm. The factors that contribute to the to serve the development of national independence of the firms we obtain economy by contributing to accumulation independent audit service from are the of capital. existence of our Audit Committee, the

Assoc. Prof. Atakan Yalçın Prof. Savaş Taşkent Member of the Audit Committee Head of the Audit Committee

Anadolu Sigorta Annual Report 2015 Other Matters and Financial Statements 95 Human Resources Practices at Anadolu Sigorta

Human Resources Practices at Anadolu Sigorta

Human Resources Policy When rising to the specialist position, Compensation Policy employees take the promotion exam that Our company is proud to be the first differs according to the job families and Our employees’ salaries are adjusted in national insurance company in Turkey, positions, and thus undergo assessment of accordance with the terms of a collective established in 1925 at the directives their qualification for the technical know- bargaining agreement that is renewed of Mustafa Kemal Atatürk. Ever since how and competence levels required by the every two years and with annual or semi- its establishment, our company has related position. annual raises based on current conditions. continuously grown and developed and has been recognized and acknowledged as Our employees in specialist position, In addition to their salaries, employees the grande école of the Turkish insurance which is the midpoint for all of our receive extensive fringe benefits as well. industry. positions, are offered dual career paths, Social Benefits which give the option of advancing as a Utmost importance is given to our manager or a specialist in the relevant Our company’s employees are entitled employees as they are the ones to field. Career paths at this level are shaped to a variety of social rights and benefits undertake the biggest duty in carrying out and supported within the scope of the in keeping with current conditions. our company’s key policies. For this reason, company’s Development Center Initiative. The healthcare costs of our employees the primary goal of our human resources The initiative that assesses managerial and their dependant family members policies and practices is to identify our and specialist competencies provides our are covered by our company under its company’s needs for personnel in line with employees with personalized development Healthcare Assistance Regulations. All its objectives and strategies and assist the plans, while supporting them with various our personnel are able to fulfill all their creation of human resources that are open resources, readying them for the next level. healthcare needs free of charge through to change and are focused on continuous A number of training opportunities are the company’s outsourced healthcare success by recruiting high-quality people, provided to our employees at any level system. Employees are provided with free motivating them, evaluating their who join us and become a member of our transportation services to and from work performance, and encouraging interaction team in line with the competencies they and with lunches as well. and communication among individuals and need to acquire to further their careers, as groups. well as their existing skills. Retirement Benefits

Career Development Performance Management Our employees are covered by two private pension funds that have been set up in Various career paths within the frame of Our employees are evaluated twice a accordance with the company’s special job families are available at the company. year in line with specific performance status. The pensions paid by these funds Employees recruited into any job family criteria. The content of such evaluation enable former employees to enjoy a good and level have the opportunity to advance varies depending on the competence standard of living during their retirement to senior management positions in the requirements on the basis of job families. years. company. On the basis of the results of these performance evaluations, an employee’s Training Our company’s human resources strategy training needs are identified and a career is defined as “Creating the organizational plan is developed. Competency-based training programs climate conducive to promoting creativity and technical and professional trainings and innovation directed at ensuring Job Guarantee required by our employees’ jobs are customer satisfaction, and establishing a provided in line with their career culture of superior performance supporting Our employees enjoy a substantial degree progression plans. employees’ development. In keeping with of job guarantee within the framework of this strategy, employees successfully unionization composed by the Union and Training has special importance at Anadolu completing the training and development our company. Sigorta owing to the fact that our company plans designed for the relative job families is an organization that fills managerial can advance to a higher level, if they positions from within. Therefore, display the performance and capabilities orientation program and professional required for the relevant level in the training provided to new-hires are followed predetermined time. by necessary planning for improving their managerial skills, thereby extending the necessary support to our employees.

Anadolu Sigorta Annual Report 2015 96 Other Matters and Financial Statements Agenda of the Annual General Assembly Meeting

Agenda of the Annual General Assembly Meeting

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ AGENDA OF THE ANNUAL GENERAL ASSEMBLY DATED 24 MARCH 2016

1. Opening, election of the Presiding Board and authorization of the Presiding Board to sign the minutes of the Annual General Assembly

2. Presentation of and discussion on the Board of Directors’ 2015 Activity Report, and presentation of the Independent Audit Report for 2015 fiscal year

3. Review, deliberation and ratification of 2015 financial statements

4. Approval of the membership of the individual elected, as per Article 363 of the Turkish Commercial Code, to the seat vacated on the Board of Directors during the reporting period

5. Individual acquittal of Board Directors

6. Information on dividend distribution policy and decision on profit distribution prepared by the Board of Directors

7. Information on the disclosure policy,

8 Election of the Board Directors and determination of their terms of office

9. Authorizing the Board Directors to perform the transactions specified in Articles 395 and 396 of the Turkish Commercial Code

10. Determination of remuneration for the members of the Board of Directors

11. Designation of the independent audit firm

12. Presentation of information on the donations and grants made during the reporting period

Anadolu Sigorta Annual Report 2015 Other Matters and Financial Statements 97 Dividend Distribution Proposal

Dividend Distribution Proposal

The dividend distribution proposal prepared within the frame of the company’s Dividend Distribution Policy and submitted for the approval of the General Assembly is presented below:

Our company booked a net profit for the current period of TL 63,806,242 on its 2015 operations. The company’s legal records show TL 61,264,743 as profit for the period, which remains after deducting the undistributed amount of TL 2,541,499, which is the sales income on immovables that is decided to be maintained in a special fund account under liabilities to benefit from the exemption provisions granted under Article 5 of the Corporate Tax Law no. 5520 and to be used in capital increases as and when necessary.

In the Capital Markets Board of Turkey (CMB) meeting of 27 January 2010, it has been resolved that companies obliged to draw up consolidated financial statements should compute the net distributable profit taking into account the net profit for the period descending in the consolidated financial statements that will be drawn up and publicly disclosed as per the Communiqué II-14.1 on Principles of Financial Reporting in the Capital Market, provided that the net distributable profit can be covered from the sources reflected in their legal records. After consolidation of Anadolu Hayat Emeklilik A.Ş. and after deducting the undistributed sales income on immovables, a consolidated net profit of TL 72,441,307 arises.

Accordingly, it is proposed as follows:

TL 3,063,237 TL, which is 5% of the net profit figure that arises according to legal records, be set aside as general legal reserves,

TL 21,000,000, which is 30.27% of TL 69,378,070 that is the amount remaining according to the CMB, be distributed as first dividend to shareholders

TL 1,451,342 be set aside as dividend to employees as per the Articles of Incorporation,

TL 3,575,016 be set aside as statutory reserves as per the Articles of Incorporation,

TL 32,175,148 (based on legal records) that remains after the items mentioned above be allocated to extraordinary reserves, and sales income on immovables in the amount of TL 2,541,499 that is not available for distribution be transferred to relevant reserves so as to benefit from the exemption provisions set out in Article 5 of the Corporate Tax Law no. 5520.

Anadolu Sigorta Annual Report 2015 98 Other Matters and Financial Statements 2015 Profit Distribution Table

2015 Profit Distribution Table

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ 2015 Profit Distribution Proposal (TL) 1. Paid-in/Issued Capital 500,000,000 2. General Legal Reserves (according to legal records) 34,311,746 If there are privileges for distribution of profits according to the Articles of Incorporation, information on None such privileges Based on CMB Based on Legal Records 3. Profit for the Period (*) 74,211,266 63,034,702 4. Taxes Payable (-) (1,769,959) (1,769,959) 5. Net Profit for the Period (=) 72,441,307 61,264,743 6. Losses in Prior Years (-) - - 7. General Legal Reserves (-) 3,063,237 3,063,237 8. NET DISTRIBUTABLE PROFIT FOR THE PERIOD (=) 69,378,070 58,201,506 9. Donations during the Year (+) - 10. Net Distributable Profit for the Period Including Donations 69,378,070 11. First Dividend to Shareholder - Cash 21,000,000 - Bonus Shares - - Total 21,000,000 12. Dividends Distributed to Owners of Privileged Shares - 13. Other Dividends Distributed (to Board Members, Employees, etc.) 1,451,342 14. Dividends Distributed to Owners of Redeemed Shares - 15. Second Dividend to Shareholders - 16. General Legal Reserves - 17. Statutory Reserves 3,575,016 3,575,016 18. Special Reserves - - 19. EXTRAORDINARY RESERVES 43,351,712 32,175,148 20. Other Resources to be Distributed - Prior Year Profit - Extraordinary Reserves - Other Distributable Reserves Pursuant to the Law and the Articles of Incorporation (*) In the profit for the period ended 31 December 2015, TL 2,541,499, which arises from 75% of the profit from sales of immovables and which has been set aside to be followed up under the account item “Profit Not Available for Distribution” under shareholders’ equity, was not taken into account as per Article 5 of the Corporate Tax Law no. 5520.

DIVIDEND RATIO CHART TOTAL DIVIDENDS TOTAL DIVIDENDS DISTRIBUTED DIVIDENDS PER SHARE WITH A NOMINAL GROUP DISTRIBUTED / NET DISTRIBUTABLE PROFIT FOR VALUE OF TL 1 CASH (TL) BONUS (TL) THE PERIOD RATIO (%) AMOUNT (TL) RATIO (%) B 21,000,000 0 30.27% 0.042 4.20% TOTAL 21,000,000 0 30.27% 0.042 4.20%

Anadolu Sigorta Annual Report 2015 Other Matters and Financial Statements 99 2015 Annual Report Compliance Statement

2015 Annual Report Compliance Statement

Our company’s 2015 Annual Report has been drawn up within the frame of the principles and procedures set forth in the Regulation on the Financial Structures of Insurance, Reinsurance and Pension Companies, which went into force upon its publication in the Official Gazette issue 26606 dated 7 August 2007.

Murat TETİK Fatih GÖREN Musa ÜLKEN Caner ÇİMENBİÇER Accounting and Financial Deputy Chief Executive Officer Chief Executive Officer Chairman Affairs Manager

Anadolu Sigorta Annual Report 2015 100 Other Matters and Financial Statements Detailed Income Statement

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Detailed Income Statement

Illness/ Motor Fire and Natural Motor Vehicles General Accident Health Vehicles Aircrafts Watercrafts Marine Disasters General Losses Liability Aircraft Liability Liability Credit Financial Losses Legal Protection Total I-TECHNICAL PART A- Non-Life Technical Income 95,014,495 302,378,091 883,751,342 -2,556,542 33,831,040 54,423,026 280,579,372 174,847,673 887,738,444 6,030,238 130,768,886 1,977,106 1,699,281 9,780,485 2,860,262,936 1- Earned Premiums (Net of Reinsurer Share) 76,423,510 290,123,192 791,787,471 -2,556,542 29,861,213 44,156,818 242,188,093 155,646,515 762,001,651 3,564,428 118,722,315 17 1,589,775 7,845,832 2,521,354,286 1-1. Premiums (Net of Reinsurer Share) 89,489,409 301,804,016 843,260,116 4,517,165 30,408,324 45,181,403 261,519,107 171,150,990 933,836,452 3,955,162 84,141,074 0 1,876,885 8,617,352 2,779,757,454 1.2- Change in Unearned Premium Provisions (Net of Reinsurers Shares and Reserves Carried Forward) (+/-) -13,415,390 -11,680,824 -51,472,645 -588,495 -1,760,373 -1,024,585 -19,331,014 -15,504,475 -189,768,083 -390,734 -4,584,842 17 -287,110 -771,520 -310,580,074 1.3- Changes in Unexpired Risk Reserves (Net of Reinsurer Share and Reserves Carried Forward)(+/-) 349,492 0 0 0 0 0 0 0 17,933,282 0 0 0 0 0 18,282,774 1.4- Changes in Ongoing Risk Reserves (Net of Reinsurer Share and Reserves Carried Forward)(+/-) 0 0 0 -6,485,213 1,213,263 0 0 0 0 0 39,166,083 0 0 0 33,894,132 2- Investment Income Transfered from Non-Technical Divisions 18,332,384 12,011,534 66,881,408 0 2,122,619 7,162,414 32,263,601 14,351,852 109,254,412 545,695 11,572,542 0 109,506 1,934,648 276,542,615 3- Other Technical Income 4,580 248,437 5,491,360 0 2,945 12,565 106,912 21,672 43,367 8 1,071 0 0 5 5,932,923 4- Accrued Salvage and Subrogation Income 254,020 -5,072 19,591,103 0 1,844,263 3,091,229 6,020,766 4,827,634 16,439,013 1,920,108 472,958 1,977,089 0 0 56,433,113 B- Non-Life Technical Expense (-) -48,316,211 -317,660,739 -816,487,502 -9,782,583 -22,242,619 -34,426,448 -248,178,310 -163,957,761 -1,014,739,540 -7,980,142 -68,835,752 -1,650,672 -261,656 -2,109,182 -2,756,629,118 1- Realized Claims (Net of Reinsurer Share) -18,165,606 -249,811,507 -588,829,058 -8,592,698 -19,820,930 -20,487,221 -154,540,083 -122,211,721 -806,999,557 -7,275,421 -57,691,939 -1,680,770 -538,679 -105,638 -2,056,750,827 1.1- Claims Paid (Net of Reinsurer Share) -12,848,087 -249,423,079 -551,597,881 -12,174,193 -21,151,823 -13,946,928 -120,821,205 -112,631,977 -553,597,698 -1,575,450 -33,674,532 -8,619 -1,399,340 -180,574 -1,685,031,386 1.2- Changes in Outstanding Claims Provisions (Net of Reinsurer Share and Reserves Carried Forward) (+/-) -5,317,518 -388,428 -37,231,177 3,581,495 1,330,893 -6,540,293 -33,718,878 -9,579,744 -253,401,859 -5,699,971 -24,017,407 -1,672,151 860,662 74,935 -371,719,442 2- Changes in Bonus and Discount Provisions (Net of Reinsurer Share and Reserves Carried Forward) (+/-) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 3- Changes in Other Technical Reserves (Net of Reinsurer Share and Reserves Carried Forward) (+/-) -1,400,411 0 -4,524,662 0 0 0 -13,431,353 -1,452,050 0 0 0 0 -187,374 0 -20,995,851 4- Operating Expenses (-) -26,684,735 -58,075,656 -190,322,001 -1,188,300 -2,094,346 -13,663,464 -70,014,458 -36,723,336 -193,371,257 -704,544 -10,985,936 30,098 464,668 -1,990,805 -605,324,073 5- Other Technical Expenses -2,065,460 -9,773,575 -32,811,780 -1,585 -327,343 -275,763 -10,192,417 -3,570,653 -14,368,726 -176 -157,878 0 -271 -12,739 -73,558,366 C- Non Life Technical Profit (A-B) 46,698,283 -15,282,648 67,263,840 -12,339,126 11,588,421 19,996,578 32,401,061 10,889,913 -127,001,097 -1,949,904 61,933,134 326,434 1,437,625 7,671,303 103,633,819 II- NON TECHNICAL PART C- Non Life Technical Profit (A-B) 103,633,819 J- Total Technical Profit (C) 103,633,819 K- Investment Income 368,012,897 1- Income from Financial Investments 183,751,030 2- Income from Sales of Financial Assets 9,642,262 3- Revaluation of Financial Assets 33,542,592 4- Foreign Exchange Gains 109,289,546 5- Dividend Income from Affiliates 18,000,000 6- Income form Subsidiaries and Joint Ventures 0 7- Real Estate Income 12,678,354 8- Income from Derivative Instruments 674,700 9- Other Investments 434,414 10- Investment Income transferred from Life Technical Division 0 L- Investment Expenses (-) -382,414,280 1- Investment Management Expenses (including interest) (-) -939,230 2- Valuation Allowance of Investments (-) -2,824,154 3- Losses On Sales of Investments (-) -9,629,064 4- Investment Income Transferred to Non - Life Technical Division (-) -276,542,615 5- Losses from Derivative Instruments (-) -74,638 6- Foreign Exchange Losses (-) -61,168,299 7- Depreciation Expenses (-) -31,236,280 8- Other Investment Expenses (-) 0 M- Income and Expenses (+/-) -23,656,235 1- Reserves (Provisions) Account (+/-) -25,546,469 2- Rediscount Account (+/-) 1,458,591 3- Mandatory Earthquake Insurance Account (+/-) 0 4- Inflation Adjustment Account (+/-) 0 5- Deferred Tax Asset Accounts (+/-) 0 6- Deferred Tax Liability Expense (+/-) -6,509,894 7- Other Income and Revenues 7,600,350 8- Other Expense and Losses (-) -658,813 9- Prior Period Income 0 10- Prior Period Losses (-) 0 N- Net Profit/(Loss) 63,806,242 1- Profit/(Loss) Before Tax 65,576,201 2- Taxes Provisions (-) -1,769,959 3- Net Profit (Loss) after Tax 63,806,242 4- Inflation Adjustment Account (+/-) 0

Anadolu Sigorta Annual Report 2015 101

Illness/ Motor Fire and Natural Motor Vehicles General Accident Health Vehicles Aircrafts Watercrafts Marine Disasters General Losses Liability Aircraft Liability Liability Credit Financial Losses Legal Protection Total I-TECHNICAL PART A- Non-Life Technical Income 95,014,495 302,378,091 883,751,342 -2,556,542 33,831,040 54,423,026 280,579,372 174,847,673 887,738,444 6,030,238 130,768,886 1,977,106 1,699,281 9,780,485 2,860,262,936 1- Earned Premiums (Net of Reinsurer Share) 76,423,510 290,123,192 791,787,471 -2,556,542 29,861,213 44,156,818 242,188,093 155,646,515 762,001,651 3,564,428 118,722,315 17 1,589,775 7,845,832 2,521,354,286 1-1. Premiums (Net of Reinsurer Share) 89,489,409 301,804,016 843,260,116 4,517,165 30,408,324 45,181,403 261,519,107 171,150,990 933,836,452 3,955,162 84,141,074 0 1,876,885 8,617,352 2,779,757,454 1.2- Change in Unearned Premium Provisions (Net of Reinsurers Shares and Reserves Carried Forward) (+/-) -13,415,390 -11,680,824 -51,472,645 -588,495 -1,760,373 -1,024,585 -19,331,014 -15,504,475 -189,768,083 -390,734 -4,584,842 17 -287,110 -771,520 -310,580,074 1.3- Changes in Unexpired Risk Reserves (Net of Reinsurer Share and Reserves Carried Forward)(+/-) 349,492 0 0 0 0 0 0 0 17,933,282 0 0 0 0 0 18,282,774 1.4- Changes in Ongoing Risk Reserves (Net of Reinsurer Share and Reserves Carried Forward)(+/-) 0 0 0 -6,485,213 1,213,263 0 0 0 0 0 39,166,083 0 0 0 33,894,132 2- Investment Income Transfered from Non-Technical Divisions 18,332,384 12,011,534 66,881,408 0 2,122,619 7,162,414 32,263,601 14,351,852 109,254,412 545,695 11,572,542 0 109,506 1,934,648 276,542,615 3- Other Technical Income 4,580 248,437 5,491,360 0 2,945 12,565 106,912 21,672 43,367 8 1,071 0 0 5 5,932,923 4- Accrued Salvage and Subrogation Income 254,020 -5,072 19,591,103 0 1,844,263 3,091,229 6,020,766 4,827,634 16,439,013 1,920,108 472,958 1,977,089 0 0 56,433,113 B- Non-Life Technical Expense (-) -48,316,211 -317,660,739 -816,487,502 -9,782,583 -22,242,619 -34,426,448 -248,178,310 -163,957,761 -1,014,739,540 -7,980,142 -68,835,752 -1,650,672 -261,656 -2,109,182 -2,756,629,118 1- Realized Claims (Net of Reinsurer Share) -18,165,606 -249,811,507 -588,829,058 -8,592,698 -19,820,930 -20,487,221 -154,540,083 -122,211,721 -806,999,557 -7,275,421 -57,691,939 -1,680,770 -538,679 -105,638 -2,056,750,827 1.1- Claims Paid (Net of Reinsurer Share) -12,848,087 -249,423,079 -551,597,881 -12,174,193 -21,151,823 -13,946,928 -120,821,205 -112,631,977 -553,597,698 -1,575,450 -33,674,532 -8,619 -1,399,340 -180,574 -1,685,031,386 1.2- Changes in Outstanding Claims Provisions (Net of Reinsurer Share and Reserves Carried Forward) (+/-) -5,317,518 -388,428 -37,231,177 3,581,495 1,330,893 -6,540,293 -33,718,878 -9,579,744 -253,401,859 -5,699,971 -24,017,407 -1,672,151 860,662 74,935 -371,719,442 2- Changes in Bonus and Discount Provisions (Net of Reinsurer Share and Reserves Carried Forward) (+/-) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 3- Changes in Other Technical Reserves (Net of Reinsurer Share and Reserves Carried Forward) (+/-) -1,400,411 0 -4,524,662 0 0 0 -13,431,353 -1,452,050 0 0 0 0 -187,374 0 -20,995,851 4- Operating Expenses (-) -26,684,735 -58,075,656 -190,322,001 -1,188,300 -2,094,346 -13,663,464 -70,014,458 -36,723,336 -193,371,257 -704,544 -10,985,936 30,098 464,668 -1,990,805 -605,324,073 5- Other Technical Expenses -2,065,460 -9,773,575 -32,811,780 -1,585 -327,343 -275,763 -10,192,417 -3,570,653 -14,368,726 -176 -157,878 0 -271 -12,739 -73,558,366 C- Non Life Technical Profit (A-B) 46,698,283 -15,282,648 67,263,840 -12,339,126 11,588,421 19,996,578 32,401,061 10,889,913 -127,001,097 -1,949,904 61,933,134 326,434 1,437,625 7,671,303 103,633,819 II- NON TECHNICAL PART C- Non Life Technical Profit (A-B) 103,633,819 J- Total Technical Profit (C) 103,633,819 K- Investment Income 368,012,897 1- Income from Financial Investments 183,751,030 2- Income from Sales of Financial Assets 9,642,262 3- Revaluation of Financial Assets 33,542,592 4- Foreign Exchange Gains 109,289,546 5- Dividend Income from Affiliates 18,000,000 6- Income form Subsidiaries and Joint Ventures 0 7- Real Estate Income 12,678,354 8- Income from Derivative Instruments 674,700 9- Other Investments 434,414 10- Investment Income transferred from Life Technical Division 0 L- Investment Expenses (-) -382,414,280 1- Investment Management Expenses (including interest) (-) -939,230 2- Valuation Allowance of Investments (-) -2,824,154 3- Losses On Sales of Investments (-) -9,629,064 4- Investment Income Transferred to Non - Life Technical Division (-) -276,542,615 5- Losses from Derivative Instruments (-) -74,638 6- Foreign Exchange Losses (-) -61,168,299 7- Depreciation Expenses (-) -31,236,280 8- Other Investment Expenses (-) 0 M- Income and Expenses (+/-) -23,656,235 1- Reserves (Provisions) Account (+/-) -25,546,469 2- Rediscount Account (+/-) 1,458,591 3- Mandatory Earthquake Insurance Account (+/-) 0 4- Inflation Adjustment Account (+/-) 0 5- Deferred Tax Asset Accounts (+/-) 0 6- Deferred Tax Liability Expense (+/-) -6,509,894 7- Other Income and Revenues 7,600,350 8- Other Expense and Losses (-) -658,813 9- Prior Period Income 0 10- Prior Period Losses (-) 0 N- Net Profit/(Loss) 63,806,242 1- Profit/(Loss) Before Tax 65,576,201 2- Taxes Provisions (-) -1,769,959 3- Net Profit (Loss) after Tax 63,806,242 4- Inflation Adjustment Account (+/-) 0

Anadolu Sigorta Annual Report 2015 102

31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

Anadolu Sigorta Annual Report 2015 Other Matters and Financial Statements 103 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Independent Auditor’s Report

Akis Bağımsız Denetim ve Serbest Telephone +90 (216) 681 90 00 Muhasebeci Mali Müşavirlik A.Ş. Fax +90 (216) 681 90 90 Kavacık Rüzgarlı Bahçe Mah. İnternet www.kpmg.com.tr Kavak Sok. No: 3 Beykoz 34805 İstanbul

To the Board of Directors of Anadolu Anonim Türk Sigorta Şirketi

Report on the Financial Statements

We have audited the accompanying unconsolidated balance sheet of Anadolu Anonim Türk Sigorta Şirketi (“the Company”) as at 31 December 2015 and the related unconsolidated statement of income, unconsolidated statement of changes in equity and unconsolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the Financial Statements

The Company’s management is responsible for the preparation and fair presentation of these financial statements in accordance with the “Insurance Accounting and Reporting Legislation” which includes the accounting principles and standards, in force as per the insurance legislation, and the requirements of Turkish Accounting Standards for the matters not regulated by the aforementioned legislations and for such internal controls as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to error and/or fraud.

Independent Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. Our audit was conducted in accordance with audit standards in force as per insurance legislation and Independent Standards on Auditing which is a component of the Turkish Auditing Standards published by the Public Oversight Accounting and Auditing Standards Authority (“POA”). Those standards require that ethical requirements are complied with and that the independent audit is planned and performed to obtain reasonable assurance whether the financial statements are free from material misstatement and provide a true and fair view of the Company.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal systems relevant to the entity’s preparation and fair presentation of the financial statements 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 entity’s internal system. An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for audit opinion.

Opinion

In our opinion, the accompanying unconsolidated financial statements present fairly, in all material respects, the unconsolidated financial position of Anadolu Anonim Türk Sigorta Şirketi as at 31 December 2015 and its unconsolidated financial performance and unconsolidated cash flows for the year then ended in accordance with the Insurance Accounting and Reporting Legislation.

Anadolu Sigorta Annual Report 2015 104 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Independent Auditor’s Report

Other Related Legislation Reports of Independent Auditors

1) Pursuant to the fourth paragraph of Article 398 of Turkish Commercial Code (“TCC”) no. 6102; Auditors’ Report on System and Committee of Early Identification of Risks is presented to the Board of Directors of the Company on 28 January 2016. 2) Pursuant to the fourth paragraph of Article 402 of the TCC; no significant matter has come to our attention that causes us to believe that for the period 1 January - 31 December 2015, the Company’s bookkeeping activities are not in compliance with TCC and provisions of the Company’s articles of association in relation to financial reporting. 3) Pursuant to the fourth paragraph of Article 402 of the TCC; the Board of Directors provided us the necessary explanations and required documents in connection with the audit.

Akis Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. A member of KPMG International Cooperative

Alper Güvenç Partner

28 January 2016 İstanbul, Türkiye

Anadolu Sigorta Annual Report 2015 105

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Unconsolidated Financial Statements as at and For the Year Ended 31 December 2015

We confirm that the unconsolidated financial statements and related disclosures and footnotes as at 31 December 2015 which were prepared in accordance with the accounting principles and standards in force as per the regulations of T.C. Başbakanlık Hazine Müsteşarlığı are in compliance with the “Code Related to the Financial Reporting of Insurance, Reinsurance and Private Pension Companies” and the financial records of our Company.

İstanbul, 28 January 2016

Musa ÜLKEN Fatih GÖREN Member of Board of Directors Chief Executive Officer Executive Vice President of Finance

Murat TETİK Taylan MATKAP Accounting Reporting Manager Actuary

Anadolu Sigorta Annual Report 2015 106 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Contents

Page BALANCE SHEET 1-5 STATEMENT OF INCOME 6-8 STATEMENT OF CASH FLOW 9 STATEMENT OF CHANGES IN EQUITY 10 STATEMENT OF PROFIT DISTRIBUTION 11 NOTES TO THE FINANCIAL STATEMENTS 12-83 NOTE 1 GENERAL INFORMATION 12-14 NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 15-36 NOTE 3 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS 37 NOTE 4 MANAGEMENT OF INSURANCE AND FINANCIAL RISK 38-51 NOTE 5 SEGMENT REPORTING 52-54 NOTE 6 TANGIBLE ASSETS 55-56 NOTE 7 INVESTMENT PROPERTIES 57 NOTE 8 INTANGIBLE ASSETS 58 NOTE 9 INVESTMENTS IN ASSOCIATES 58 NOTE 10 REINSURANCE ASSETS AND LIABILITIES 59 NOTE 11 FINANCIAL ASSETS 60-64 NOTE 12 LOANS AND RECEIVABLES 65 NOTE 13 DERIVATIVE FINANCIAL INSTRUMENTS 66 NOTE 14 CASH AND CASH EQUIVALENTS 66 NOTE 15 EQUITY 67-69 NOTE 16 OTHER RESERVES AND EQUITY COMPONENT OF DISCRETIONARY PARTICIPATION 69 NOTE 17 INSURANCE CONTRACT LIABILITIES AND REINSURANCE ASSETS 69-73 NOTE 18 INVESTMENT CONTRACT LIABILITIES 73 NOTE 19 TRADE AND OTHER PAYABLES AND DEFERRED INCOME 74 NOTE 20 FINANCIAL LIABILITIES 74 NOTE 21 DEFERRED TAX 75 NOTE 22 RETIREMENT BENEFIT OBLIGATIONS 76 NOTE 23 OTHER LIABILITIES AND PROVISIONS 76-77 NOTE 24 NET INSURANCE PREMIUM 77 NOTE 25 FEE REVENUE 77 NOTE 26 INVESTMENT INCOME 77 NOTE 27 NET INCOME ACCRUAL ON FINANCIAL ASSETS 77 NOTE 28 ASSETS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS 77 NOTE 29 INSURANCE RIGHTS AND CLAIMS 77 NOTE 30 INVESTMENT CONTRACT BENEFITS 77

Anadolu Sigorta Annual Report 2015 107

Page NOTE 31 OTHER EXPENSES 78 NOTE 32 OPERATING EXPENSES 78 NOTE 33 EMPLOYEE BENEFIT EXPENSES 78 NOTE 34 FINANCIAL COSTS 78 NOTE 35 INCOME TAX 79 NOTE 36 NET FOREIGN EXCHANGE GAINS 79 NOTE 37 EARNINGS PER SHARE 79 NOTE 38 DIVIDENDS PER SHARE 79 NOTE 39 CASH GENERATED FROM OPERATIONS 79 NOTE 40 CONVERTIBLE BONDS 79 NOTE 41 REDEEMABLE PREFERENCE SHARES 80 NOTE 42 RISKS 80 NOTE 43 COMMITMENTS 80 NOTE 44 BUSINESS COMBINATIONS 80 NOTE 45 RELATED PARTY TRANSACTIONS 81-82 NOTE 46 EVENTS AFTER THE REPORTING DATE 82 NOTE 47 OTHER 83

Anadolu Sigorta Annual Report 2015 108 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Unconsolidated Balance Sheet As at 31 December 2015 (Currency: Turkish Lira (TL)

ASSETS Audited Audited Current Period Prior Period (Reorganized)(*) I- Current Assets Note 31 December 2015 31 December 2014 A- Cash and Cash Equivalents 14 2.304.904.212 1.606.048.714 1- Cash 14 18.864 37.347 2- Cheques Received -- -- 3- Banks 14 1.937.834.876 1.356.733.446 4- Cheques Given and Payment Orders 14 (125.585) (171.519) 5- Bank Guaranteed Credit Card Receivables with Maturities Less Than Three Months 14 367.176.057 249.449.440 6- Other Cash and Cash Equivalents -- -- B- Financial Assets and Financial Investments with Risks on Policyholders 11 680.812.513 644.067.957 1- Available-for-Sale Financial Assets 11 569.121.106 442.140.789 2- Held to Maturity Investments 11 15.555.214 73.670.047 3- Financial Assets Held for Trading 11 96.232.135 134.054.733 4- Loans and Receivables -- -- 5- Provision for Loans and Receivables -- -- 6- Financial Investments with Risks on Saving Life Policyholders -- -- 7- Company’s Own Equity Shares -- -- 8- Diminution in Value of Financial Investments 11 (95.942) (5.797.612) C- Receivables from Main Operations 12 928.282.683 797.454.113 1- Receivables from Insurance Operations 12 869.275.449 751.368.850 2- Provision for Receivables from Insurance Operations 2.21,12 (8.305.178) (7.677.067) 3- Receivables from Reinsurance Operations 12 59.472.101 47.022.365 4- Provision for Receivables from Reinsurance Operations -- -- 5- Cash Deposited to Insurance and Reinsurance Companies 12 7.840.311 6.739.965 6- Loans to the Policyholders -- -- 7- Provision for Loans to the Policyholders -- -- 8- Receivables from Individual Pension Operations -- -- 9- Doubtful Receivables from Main Operations 12 150.758.235 113.380.507 10- Provision for Doubtful Receivables from Main Operations 12 (150.758.235) (113.380.507) D- Due from Related Parties -- -- 1- Due from Shareholders -- -- 2- Due from Associates -- -- 3- Due from Subsidiaries -- -- 4- Due from Joint Ventures -- -- 5- Due from Personnel -- -- 6- Due from Other Related Parties -- -- 7- Rediscount on Receivables from Related Parties -- -- 8- Doubtful Receivables from Related Parties -- -- 9- Provision for Doubtful Receivables from Related Parties -- -- E- Other Receivables 12 10.378.575 5.321.041 1- Finance Lease Receivables -- -- 2- Unearned Finance Lease Interest Income -- -- 3- Deposits and Guarantees Given 357.920 358.718 4- Other Miscellaneous Receivables 10.020.655 4.962.323 5- Rediscount on Other Miscellaneous Receivables -- -- 6- Other Doubtful Receivables -- -- 7- Provision for Other Doubtful Receivables -- -- F- Prepaid Expenses and Income Accruals 280.651.377 208.618.353 1- Prepaid Expenses 17 275.073.222 205.884.923 2- Accrued Interest and Rent Income -- -- 3- Income Accruals 10,12 5.577.825 2.733.430 4- Other Prepaid Expenses 330 -- G- Other Current Assets 23.705.128 2.230.484 1- Stocks to be Used in the Following Months 1.049.275 212.258 2- Prepaid Taxes and Funds 19 22.398.667 1.848.492 3- Deferred Tax Assets -- -- 4- Job Advances 12 253.035 165.103 5- Advances Given to Personnel 12 4.151 4.631 6- Inventory Count Differences -- -- 7- Other Miscellaneous Current Assets -- -- 8- Provision for Other Current Assets -- -- I- Total Current Assets 4.228.734.488 3.263.740.662 (*) See Note 2.1.6 to reorganize. The accompanying notes are an integral part of these unconsolidated financial statements.

Anadolu Sigorta Annual Report 2015 109

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Unconsolidated Balance Sheet As at 31 December 2015 (Currency: Turkish Lira (TL)

ASSETS Audited Audited Current Period Prior Period (Reorganized)(*) II- Non-Current Assets Note 31 December 2015 31 December 2014 A- Receivables from Main Operations -- -- 1- Receivables from Insurance Operations -- -- 2- Provision for Receivables from Insurance Operations -- -- 3- Receivables from Reinsurance Operations -- -- 4- Provision for Receivables from Reinsurance Operations -- -- 5- Cash Deposited for Insurance and Reinsurance Companies -- -- 6- Loans to the Policyholders -- -- 7- Provision for Loans to the Policyholders -- -- 8- Receivables from Individual Pension Business -- -- 9- Doubtful Receivables from Main Operations -- -- 10- Provision for Doubtful Receivables from Main Operations -- -- B- Due from Related Parties -- -- 1- Due from Shareholders -- -- 2- Due from Associates -- -- 3- Due from Subsidiaries -- -- 4- Due from Joint Ventures -- -- 5- Due from Personnel -- -- 6- Due from Other Related Parties -- -- 7- Rediscount on Receivables from Related Parties -- -- 8- Doubtful Receivables from Related Parties -- -- 9- Provision for Doubtful Receivables from Related Parties -- -- C- Other Receivables 12 2.207.981 -- 1- Finance Lease Receivables -- -- 2- Unearned Finance Lease Interest Income -- -- 3- Deposits and Guarantees Given -- -- 4- Other Miscellaneous Receivables 2.839.780 -- 5- Rediscount on Other Miscellaneous Receivables (631.799) -- 6- Other Doubtful Receivables -- -- 7- Provision for Other Doubtful Receivables -- -- D- Financial Assets 9 495.280.000 391.400.000 1- Investments in Equity Shares -- -- 2- Investments in Associates 9 495.280.000 391.400.000 3- Capital Commitments to Associates -- -- 4- Investments in Subsidiaries -- -- 5- Capital Commitments to Subsidiaries -- -- 6- Investments in Joint Ventures -- -- 7- Capital Commitments to Joint Ventures -- -- 8- Financial Assets and Financial Investments with Risks on Policyholders -- -- 9- Other Financial Assets -- -- 10- Impairment in Value of Financial Assets -- -- E- Tangible Assets 6 90.862.004 65.145.258 1- Investment Properties 6,7 54.343.600 36.242.000 2- Impairment for Investment Properties -- -- 3- Owner Occupied Property 6 11.532.400 6.788.733 4- Machinery and Equipment 6 41.909.394 34.554.018 5- Furniture and Fixtures 6 12.253.700 11.775.416 6- Motor Vehicles 6 619.736 1.362.223 7- Other Tangible Assets (Including Leasehold Improvements) 6 20.322.655 19.401.127 8- Tangible Assets Acquired Through Finance Leases 6 4.166.354 4.166.354 9- Accumulated Depreciation 6 (54.285.835) (49.144.613) 10- Advances Paid for Tangible Assets (Including Construction in Progress) -- -- F- Intangible Assets 8 52.009.300 62.254.841 1- Rights -- -- 2- Goodwill 8 16.250.000 16.250.000 3- Pre-operating Expenses -- -- 4- Research and Development Costs -- -- 5- Other Intangible Assets 8 93.201.169 88.079.901 6- Accumulated Amortization 8 (66.877.216) (43.804.438) 7- Advances Paid for Intangible Assets 8 9.435.347 1.729.378 G- Prepaid Expenses and Income Accruals 17 5.221.880 3.562.038 1- Prepaid Expenses 17 5.221.880 3.562.038 2- Income Accruals -- -- 3- Other Prepaid Expenses and Income Accruals -- -- H- Other Non-Current Assets 21 13.229.325 18.889.913 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 13.229.325 18.889.913 6- Other Miscellaneous Non-Current Assets -- -- 7- Amortization on Other Non-Current Assets -- -- 8- Provision for Other Non-Current Assets -- -- II- Total Non-Current Assets 658.810.490 541.252.050 TOTAL ASSETS 4.887.544.978 3.804.992.712 (*) See Note 2.1.6 to reorganize. The accompanying notes are an integral part of these unconsolidated financial statements.

Anadolu Sigorta Annual Report 2015 110 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Unconsolidated Balance Sheet As at 31 December 2015 (Currency: Turkish Lira (TL)

LIABILITIES Audited Audited Current Period Prior Period (Reorganized)(*) III- Short-Term Liabilities Note 31 December 2015 31 December 2014 A- Financial Liabilities 20 210.669.647 -- 1- Borrowings from Financial Institutions -- -- 2- Finance Lease Liabilities -- -- 3- Deferred Leasing Costs -- -- 4- Current Portion of Long Term Debts -- -- 5- Principal Instalments and Interests on Bonds Issued -- -- 6- Other Financial Assets Issued -- -- 7- Valuation Differences of Other Financial Assets Issued -- -- 8- Other Financial Liabilities 20 210.669.647 -- B- Payables Arising from Main Operations 19 339.189.344 302.045.983 1- Payables Arising from Insurance Operations 19 226.165.931 218.662.943 2- Payables Arising from Reinsurance Operations -- -- 3- Cash Deposited by Insurance and Reinsurance Companies 10,19 4.365.775 7.277.133 4- Payables Arising from Individual Pension Business -- -- 5- Payables Arising from Other Main Operations 19 108.657.638 76.105.907 6- Discount on Payables from Other Main Operations -- -- C- Due to Related Parties 19 92.190 -- 1- Due to Shareholders -- -- 2- Due to Associates -- -- 3- Due to Subsidiaries -- -- 4- Due to Joint Ventures -- -- 5- Due to Personnel 92.190 -- 6- Due to Other Related Parties -- -- D- Other Payables 19 60.481.800 47.561.333 1- Deposits and Guarantees Received 3.177.561 2.916.577 2- Medical Treatment Payables to Social Security Institution 27.524.238 16.625.234 3- Other Miscellaneous Payables 30.287.110 28.268.772 4- Discount on Other Miscellaneous Payables (507.109) (249.250) E- Insurance Technical Provisions 17 2.844.320.564 2.214.197.954 1- Reserve for Unearned Premiums - Net 17 1.451.927.808 1.159.630.507 2- Reserve for Unexpired Risks - Net 2.26,17 6.485.214 40.379.346 3- Mathematical Provisions - Net -- -- 4- Provision for Outstanding Claims - Net 17 1.385.907.542 1.014.188.101 5- Provision for Bonus and Discounts - Net -- -- 6- Other Technical Provisions - Net -- -- F- Provisions for Taxes and Other Similar Obligations 19 37.087.955 27.386.135 1- Taxes and Funds Payable 34.487.522 25.121.485 2- Social Security Premiums Payable 2.600.433 2.264.650 3- Overdue, Deferred or By Instalment Taxes and Other Liabilities -- -- 4- Other Taxes and Similar Payables -- -- 5- Corporate Tax Payable 35 1.769.959 21.081.960 6- Prepaid Taxes and Other Liabilities Regarding Current Period Income (1.769.959) (21.081.960) 7- Provisions for Other Taxes and Similar Liabilities -- -- G- Provisions for Other Risks -- -- 1- Provision for Employee Termination Benefits -- -- 2- Provision for Pension Fund Deficits -- -- 3- Provisions for Costs -- -- H- Deferred Income and Expense Accruals 87.824.309 80.052.263 1- Deferred Income 19 54.739.019 45.447.065 2- Expense Accruals 23 33.076.660 34.605.198 3- Other Deferred Income and Expense Accruals 8.630 -- I- Other Short-Term Liabilities 23 1.492.709 1.433.153 1- Deferred Tax Liabilities -- -- 2- Inventory Count Differences -- -- 3- Other Various Short-Term Liabilities 23 1.492.709 1.433.153 III - Total Short-Term Liabilities 3.581.158.518 2.672.676.821 (*) See Note 2.1.6 to reorganize. The accompanying notes are an integral part of these unconsolidated financial statements.

Anadolu Sigorta Annual Report 2015 111

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Unconsolidated Balance Sheet As at 31 December 2015 (Currency: Turkish Lira (TL)

LIABILITIES Audited Audited Current Period Prior Period (Reorganized)(*) IV- Long-Term Liabilities Note 31 December 2015 31 December 2014 A- Financial Liabilities -- -- 1- Borrowings from Financial Institutions -- -- 2- Finance Lease Liabilities -- -- 3- Deferred Leasing Costs -- -- 4- Bonds Issued -- -- 5- Other Financial Assets Issued -- -- 6- Valuation Differences of Other Financial Assets Issued -- -- 7- Other Financial Liabilities -- -- B- Payables Arising from Main Operations -- -- 1- Payables 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 17 89.248.488 68.252.637 1- Reserve for Unearned Premiums - Net -- -- 2- Reserve for Unexpired Risks - Net -- -- 3- Mathematical Provisions - Net -- -- 4- Provision for Outstanding Claims - Net -- -- 5- Provision for Bonus and Discounts - Net -- -- 6- Other Technical Provisions - Net 17 89.248.488 68.252.637 F-Other Liabilities and Relevant Accruals -- -- 1- Other Liabilities -- -- 2- Overdue, Deferred or By Instalment Taxes and Other Liabilities -- -- 3- Other Liabilities and Expense Accruals -- -- G- Provisions for Other Risks 23 15.244.930 12.628.115 1- Provision for Employee Termination Benefits 23 15.244.930 12.628.115 2- Provision for Pension Fund Deficits -- -- H-Deferred Income and Expense Accruals -- -- 1- Deferred Income -- -- 2- Expense Accruals -- -- 3- Other Deferred Income and Expense Accruals -- -- I- Other Long-Term Liabilities -- -- 1- Deferred Tax Liabilities -- -- 2- Other Long-Term Liabilities -- -- IV- Total Long-Term Liabilities 104.493.418 80.880.752

(*) See Note 2.1.6 to reorganize. The accompanying notes are an integral part of these unconsolidated financial statements.

Anadolu Sigorta Annual Report 2015 112 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Unconsolidated Balance Sheet As at 31 December 2015 (Currency: Turkish Lira (TL)

EQUITY Audited Audited Prior Period Current Period (Reorganized)(*) V- Equity Note 31 December 2015 31 December 2014 A- Paid in Capital 500.000.000 500.000.000 1- (Nominal) Capital 2.13,15 500.000.000 500.000.000 2- Unpaid Capital -- -- 3- Positive Capital Restatement Differences -- -- 4- Negative Capital Restatement Differences -- -- 5- Register in Progress Capital -- -- B- Capital Reserves 15 25.887.403 8.809.304 1- Share Premiums -- -- 2- Cancellation Profits of Equity Shares -- -- 3- Profit on Asset Sales That Will Be Transferred to Capital -- -- 4- Currency Translation Adjustments -- -- 5- Other Capital Reserves 15 25.887.403 8.809.304 C- Profit Reserves 580.597.470 439.463.962 1- Legal Reserves 15 34.311.746 30.779.762 2- Statutory Reserves 15 11.726.993 7.262.220 3- Extraordinary Reserves 15 60.728.553 20.545.601 4- Special Funds -- -- 5- Revaluation of Financial Assets 15 430.663.565 336.666.816 6- Other Profit Reserves 15 43.166.613 44.209.563 D- Retained Earnings 2.1.6 31.601.927 31.462.272 1- Retained Earnings 2.1.6 31.601.927 31.462.272 E- Accumulated Losses -- -- 1- Accumulated Losses -- -- F-Net Profit/(Loss) for the Period 63.806.242 71.699.601 1- Net Profit for the Period 61.264.743 70.779.329 2- Net Loss for the Period -- -- 3- Profit not Available for Distribution 15 2.541.499 920.272 V- Total Equity 1.201.893.042 1.051.435.139 TOTAL EQUITY AND LIABILITIES 4.887.544.978 3.804.992.712 (*) See Note 2.1.6 to reorganize.

The accompanying notes are an integral part of these unconsolidated financial statements.

Anadolu Sigorta Annual Report 2015 113

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Unconsolidated Statement of Income For the Year Ended 31 December 2015 (Currency: Turkish Lira (TL)

Audited Audited Current Period Prior Period (Reorganized)(*) I-TECHNICAL SECTION Note 31 December 2015 31 December 2014 A- Non-Life Technical Income 2.860.262.936 2.441.216.789 1- Earned Premiums (Net of Reinsurer Share) 2.521.354.285 2.235.759.340 1.1- Written Premiums (Net of Reinsurer Share) 17 2.779.757.454 2.325.110.061 1.1.1- Written Premiums, gross 17 3.610.673.887 3.004.830.066 1.1.2- Written Premiums, ceded 10,17 (731.404.966) (605.617.965) 1.1.3- Premiums Transferred to Social Security Institutions 17 (99.511.467) (74.102.040) 1.2- Change in Reserve for Unearned Premiums (Net of Reinsurer Shares and Less the Amounts Carried Forward) 17,29 (292.297.301) (62.089.748) 1.2.1- Reserve for Unearned Premiums, gross 17 (357.300.300) (68.928.251) 1.2.2- Reserve for Unearned Premiums, ceded 17 46.720.226 4.900.846 1.2.3 - Reserve for Unearned Premiums, Social Security Institution Share 18.282.773 1.937.657 1.3- Change in Reserve for Unexpired Risks (Net of Reinsurer Share and Less the Amounts Carried Forward) 29 33.894.132 (27.260.973) 1.3.1- Reserve for Unexpired Risks, gross 34.155.326 (30.198.184) 1.3.2- Reserve for Unexpired Risks, ceded (261.194) 2.937.211 2- Investment Income - Transferred from Non-Technical Section 276.542.615 190.509.410 3- Other Technical Income (Net of Reinsurer Share) 5.932.923 2.788.809 3.1- Other Technical Income, gross 5.932.923 2.788.809 3.2- Other Technical Income, ceded -- -- 4- Accrued Salvage and Subrogation Income 56.433.113 12.159.230 B - Non-Life Technical Expense (2.756.629.118) (2.319.957.258) 1- Incurred Losses (Net of Reinsurer Share) 17 (2.056.750.827) (1.738.079.061) 1.1- Claims Paid (Net of Reinsurer Share) 17,29 (1.685.031.386) (1.412.362.272) 1.1.1- Claims Paid, gross 17 (1.941.148.764) (1.553.196.954) 1.1.2- Claims Paid, ceded 10,17 256.117.378 140.834.682 1.2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward) 17,29 (371.719.441) (325.716.789) 1.2.1- Change in Provisions for Outstanding Claims, gross 17 (634.990.652) (420.158.951) 1.2.2- Change in Provisions for Outstanding Claims, ceded 17 263.271.211 94.442.162 2- Change in Provision for Bonus and Discounts (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- 2.1- Provision for Bonus and Discounts, gross -- -- 2.2- Provision for Bonus and Discounts, ceded -- -- 3- Change in Other Technical Reserves (Net of Reinsurer Share and Less the Amounts Carried Forward) 29 (20.995.851) (15.970.036) 4- Operating Expenses 32 (605.324.073) (522.686.229) 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) 2.25 (73.558.367) (43.221.932) 6.1- Change in Other Technical Provisions, gross 2.25 (73.558.367) (43.221.932) 6.2- Change in Other Technical Provisions, ceded -- -- C- Net Technical Income-Non-Life (A - B) 103.633.818 121.259.531 D- Life Technical Income -- -- 1- Earned Premiums (Net of Reinsurer Share) -- -- 1.1- Written Premiums (Net of Reinsurer Share) -- -- 1.1.1- Written Premiums, gross -- -- 1.1.2- Written Premiums, ceded -- -- 1.2- Change in Reserve for Unearned Premiums (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- 1.2.1- Reserve for Unearned Premiums, gross -- -- 1.2.2- Reserve for Unearned Premiums, ceded -- -- 1.3- Change in Reserve for Unexpired Risks (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- 1.3.1- Reserve for Unexpired Risks, gross -- -- 1.3.2- Reserve for Unexpired Risks, ceded -- -- 2- Investment Income -- -- 3- Unrealized Gains on Investments -- -- 4- Other Technical Income (Net of Reinsurer Share) -- -- 4.1- Other Technical Income. gross -- -- 4.2- Other Technical Income. ceded -- -- 5- Accrued Salvage Income -- --

(*) See Note 2.1.6 to reorganize. The accompanying notes are an integral part of these unconsolidated financial statements.

Anadolu Sigorta Annual Report 2015 114 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Unconsolidated Statement of Income For the Year Ended 31 December 2015 (Currency: Turkish Lira (TL)

Audited Audited Current Period Prior Period (Reorganized) (*) I-TECHNICAL SECTION Note 31 December 2015 31 December 2014 E- Life Technical Expense -- -- 1- Incurred Losses (Net of Reinsurer Share) -- -- 1.1- Claims Paid (Net of Reinsurer Share) -- -- 1.1.1- Claims Paid, gross -- -- 1.1.2- Claims Paid, ceded -- -- 1.2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- 1.2.1- Change in Provisions for Outstanding Claims, gross -- -- 1.2.2- Change in Provisions for Outstanding Claims, ceded -- -- 2- Change in Provision for Bonus and Discounts (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- 2.1- Provision for Bonus and Discounts, gross -- -- 2.2- Provision for Bonus and Discounts, ceded -- -- 3- Change in Mathematical Provisions (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- 3.1- Change in Mathematical Provisions, gross -- -- 3.1.1- Change in Actuarial Mathematical Provisions, gross -- -- 3.1.2- Change in Profit Share Provisions (Provision for Financial Investments with Risks on Saving Life Policyholders), gross -- -- 3.2- Change in Mathematical Provisions, ceded -- -- 3.2.1- Change in Actuarial Mathematical Provisions, ceded -- -- 3.2.2- Change in Profit Share Provisions (Provision for Financial Investments with Risks on Saving Life Policyholders). ceded -- -- 4- Change in Other Technical Reserves (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- 5- Operating Expenses -- -- 6- Investment Expenses -- -- 7- Unrealized Losses on Investments -- -- 8- Investment Income Transferred to the Non-Life Technical Section -- -- F- Net Technical Income- Life (D - E) -- -- G- Pension Business Technical Income -- -- 1- Fund Management Income -- -- 2- Management Fee -- -- 3- Entrance Fee Income -- -- 4- Management Expense Charge in case of Suspension -- -- 5- Income from Private Service Charges -- -- 6- Increase in Value of Capital Allowances Given as Advance -- -- 7- Other Technical Expense -- -- H- Pension Business Technical Expense -- -- 1- Fund Management Expense -- -- 2- Decrease in Value of Capital Allowances Given as Advance -- -- 3- Operating Expenses -- -- 4- Other Technical Expenses -- -- I- Net Technical Income - Pension Business (G - H) -- --

(*) See Note 2.1.6 to reorganize.

The accompanying notes are an integral part of these unconsolidated financial statements.

Anadolu Sigorta Annual Report 2015 115

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Unconsolidated Statement of Income For the Year Ended 31 December 2015 (Currency: Turkish Lira (TL)

Audited Audited Prior Period Current Period (Reorganized)(*) II-NON-TECHNICAL SECTION Note 31 December 2015 31 December 2014 C- Net Technical Income - Non-Life (A-B) 103.633.818 121.259.531 F- Net Technical Income - Life (D-E) -- -- I - Net Technical Income - Pension Business (G-H) -- -- J- Total Net Technical Income (C+F+I) 103.633.818 121.259.531 K- Investment Income 368.012.898 258.928.064 1- Income from Financial Assets 4.2 183.751.030 130.174.857 2- Income from Disposal of Financial Assets 4.2 9.642.262 31.151.423 3- Valuation of Financial Assets 4.2 33.542.592 19.421.434 4- Foreign Exchange Gains 4.2 109.289.546 59.970.980 5- Income from Associates 4.2 18.000.000 16.000.000 6- Income from Subsidiaries and Joint Ventures -- -- 7- Income from Property, Plant and Equipment 12.678.354 1.815.006 8- Income from Derivative Transactions 4.2 674.700 205.678 9- Other Investments 434.414 188.686 10- Income Transferred from Life Section -- -- L- Investment Expense (382.414.280) (275.669.933) 1- Investment Management Expenses (incl. interest) 4.2 (939.230) (136.623) 2- Diminution in Value of Investments 4.2 (2.824.154) (3.509.979) 3- Loss from Disposal of Financial Assets 4.2 (9.629.064) (7.713.065) 4- Investment Income Transferred to Non-Life Technical Section (276.542.615) (190.509.410) 5- Loss from Derivative Transactions 4.2 (74.638) (184.509) 6- Foreign Exchange Losses 4.2 (61.168.299) (49.954.025) 7- Depreciation and Amortization Expenses 6,8 (31.236.280) (23.662.322) 8- Other Investment Expenses -- -- M- Income and Expenses From Other and Extraordinary Operations (23.656.235) (11.736.101) 1- Provisions 47 (25.546.469) (20.360.660) 2- Rediscounts 47 1.458.591 (3.360.281) 3- Specified Insurance Accounts -- -- 4- Monetary Gains and Losses -- -- 5- Deferred Taxation (Deferred Tax Assets) 35 -- 7.396.097 6- Deferred Taxation (Deferred Tax Liabilities) 35 (6.509.894) -- 7- Other Income 7.600.350 5.142.413 8- Other Expenses and Losses (658.813) (553.670) 9- Prior Year’s Income -- -- 10- Prior Year’s Expenses and Losses -- -- N- Net Profit for the Period 63.806.242 71.699.601 1- Profit for the Period 65.576.201 92.781.561 2- Corporate Tax Provision and Other Fiscal Liabilities 35 (1.769.959) (21.081.960) 3- Net Profit for the Period 63.806.242 71.699.601 4- Monetary Gains and Losses -- -- (*) See Note 2.1.6 to reorganize.

The accompanying notes are an integral part of these unconsolidated financial statements.

Anadolu Sigorta Annual Report 2015 116 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Unconsolidated Statement of Changes in Equity For the Year Ended 31 December 2015 (Currency: Turkish Lira (TL)

Audited Prior Period (Reorganized)(*) Statement of Changes in Equity - 31 December 2014 Own Shares Revaluation Currency Paid-in of the of Financial Inflation Translation Legal Statutory Other Reserves and Net Profit Retained Note Capital Company Assets Adjustments Adjustments Reserves Reserves Retained Earnings for the Year Earnings Total I - Balance at the end of the previous year - 31 December 2013 500.000.000 -- 302.035.089 -- -- 30.638.111 6.993.082 69.868.926 67.461.924 (63.981.132) 913.016.000 II - Change in Accounting Standards (*) ------31.462.272 31.462.272 III - Restated balances (I+II) -1 January 2014 500.000.000 -- 302.035.089 -- -- 30.638.111 6.993.082 69.868.926 67.461.924 (32.518.860) 944.478.272 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 ------625.539 -- -- 625.539 D- Change in the value of financial assets 11,15 -- -- 34.631.727 ------34.631.727 E- Currency translation adjustments ------F- Other gains or losses ------G- Inflation adjustment differences ------H- Net profit for the period ------71.699.601 -- 71.699.601 I - Dividends paid ------J - Transfers to reserves 15 ------141.651 269.138 3.070.003 (67.461.924) 63.981.132 -- IV - Balance at the end of the period - 31 December 2014 500.000.000 -- 336.666.816 -- -- 30.779.762 7.262.220 73.564.468 71.699.601 31.462.272 1.051.435.139

Audited Current Period Statement of Changes in Equity - 31 December 2015 Own Shares Revaluation Currency Paid-in of the of Financial Inflation Translation Legal Statutory Other Reserves and Net Profit Retained Note Capital Company Assets Adjustments Adjustments Reserves Reserves Retained Earnings for the Year Earnings Total I - Balance at the end of the previous year - 31 December 2014 500.000.000 -- 336.666.816 -- -- 30.779.762 7.262.220 73.564.468 71.699.601 31.462.272 1.051.435.139 II - Change in Accounting Standards ------III - Restated balances (I+II) -1 January 2015 500.000.000 -- 336.666.816 -- -- 30.779.762 7.262.220 73.564.468 71.699.601 31.462.272 1.051.435.139 A- Capital increase (A1+A2) ------1- In cash ------2- From reserves ------B- Purchase of own shares ------C- Gains or losses that are not included in the statement of income ------(1.042.950) -- -- (1.042.950) D- Change in the value of financial assets 11,15 -- -- 93.996.749 ------16.157.827 -- -- 110.154.576 E- Currency translation adjustments ------F- Other gains or losses ------G- Inflation adjustment differences ------H- Net profit for the period ------63.806.242 -- 63.806.242 I - Dividends paid ------(22.459.965) -- (22.459.965) J - Transfers to reserves 15 ------3.531.984 4.464.773 41.103.224 (49.239.636) 139.655 -- IV - Balance at the end of the period - 31 December 2015 500.000.000 -- 430.663.565 -- -- 34.311.746 11.726.993 129.782.569 63.806.242 31.601.927 1.201.893.042 (*) See Note 2.1.6 to reorganize.

The accompanying notes are an integral part of these unconsolidated financial statements.

Anadolu Sigorta Annual Report 2015 117

Audited Prior Period (Reorganized)(*) Statement of Changes in Equity - 31 December 2014 Own Shares Revaluation Currency Paid-in of the of Financial Inflation Translation Legal Statutory Other Reserves and Net Profit Retained Note Capital Company Assets Adjustments Adjustments Reserves Reserves Retained Earnings for the Year Earnings Total I - Balance at the end of the previous year - 31 December 2013 500.000.000 -- 302.035.089 -- -- 30.638.111 6.993.082 69.868.926 67.461.924 (63.981.132) 913.016.000 II - Change in Accounting Standards (*) ------31.462.272 31.462.272 III - Restated balances (I+II) -1 January 2014 500.000.000 -- 302.035.089 -- -- 30.638.111 6.993.082 69.868.926 67.461.924 (32.518.860) 944.478.272 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 ------625.539 -- -- 625.539 D- Change in the value of financial assets 11,15 -- -- 34.631.727 ------34.631.727 E- Currency translation adjustments ------F- Other gains or losses ------G- Inflation adjustment differences ------H- Net profit for the period ------71.699.601 -- 71.699.601 I - Dividends paid ------J - Transfers to reserves 15 ------141.651 269.138 3.070.003 (67.461.924) 63.981.132 -- IV - Balance at the end of the period - 31 December 2014 500.000.000 -- 336.666.816 -- -- 30.779.762 7.262.220 73.564.468 71.699.601 31.462.272 1.051.435.139

Audited Current Period Statement of Changes in Equity - 31 December 2015 Own Shares Revaluation Currency Paid-in of the of Financial Inflation Translation Legal Statutory Other Reserves and Net Profit Retained Note Capital Company Assets Adjustments Adjustments Reserves Reserves Retained Earnings for the Year Earnings Total I - Balance at the end of the previous year - 31 December 2014 500.000.000 -- 336.666.816 -- -- 30.779.762 7.262.220 73.564.468 71.699.601 31.462.272 1.051.435.139 II - Change in Accounting Standards ------III - Restated balances (I+II) -1 January 2015 500.000.000 -- 336.666.816 -- -- 30.779.762 7.262.220 73.564.468 71.699.601 31.462.272 1.051.435.139 A- Capital increase (A1+A2) ------1- In cash ------2- From reserves ------B- Purchase of own shares ------C- Gains or losses that are not included in the statement of income ------(1.042.950) -- -- (1.042.950) D- Change in the value of financial assets 11,15 -- -- 93.996.749 ------16.157.827 -- -- 110.154.576 E- Currency translation adjustments ------F- Other gains or losses ------G- Inflation adjustment differences ------H- Net profit for the period ------63.806.242 -- 63.806.242 I - Dividends paid ------(22.459.965) -- (22.459.965) J - Transfers to reserves 15 ------3.531.984 4.464.773 41.103.224 (49.239.636) 139.655 -- IV - Balance at the end of the period - 31 December 2015 500.000.000 -- 430.663.565 -- -- 34.311.746 11.726.993 129.782.569 63.806.242 31.601.927 1.201.893.042 (*) See Note 2.1.6 to reorganize.

Anadolu Sigorta Annual Report 2015 118 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Unconsolidated Statement of Cash Flow For the Year Ended 31 December 2015 (Currency: Turkish Lira (TL)

Audited Audited Prior Period Current Period (Reorganized) (*) Note 31 December 2015 31 December 2014 A - Cash flows from operating activities 1- Cash provided from insurance activities 3.881.788.562 3.153.798.374 2- Cash provided from reinsurance activities -- -- 3- Cash provided from individual pension business -- -- 4- Cash used in insurance activities (3.643.412.204) (2.924.054.056) 5- Cash used in reinsurance activities (13.550.082) (6.560.002) 6- Cash used in individual pension business -- -- 7- Cash provided by operating activities 224.826.276 223.184.316 8- Interest paid -- -- 9- Income taxes paid 19 (22.398.667) (22.930.452) 10- Other cash inflows 233.503.726 26.050.558 11- Other cash outflows (42.151.838) (37.055.680) 12-Net cash provided by operating activities 393.779.497 189.248.742 B - Cash flows from investing activities 1- Proceeds from disposal of tangible assets 17.987.811 -- 2- Acquisition of tangible assets 6, 8 (22.158.602) (21.111.793) 3- Acquisition of financial assets 11 (609.793.354) (541.175.656) 4- Proceeds from disposal of financial assets 617.953.122 865.215.792 5- Interests received 162.853.642 (142.557.704) 6- Dividends received 12.000.000 10.000.000 7- Other cash inflows 165.276.635 62.448.109 8- Other cash outflows (90.897.471) (205.552.139) 9- Net cash provided by investing activities 253.221.783 27.266.609 C- Cash flows from financing activities 1- Equity shares issued -- -- 2- Cash provided from loans and borrowings -- -- 3- Finance lease payments -- -- 4- Dividends paid (22.459.965) -- 5- Other cash inflows -- -- 6- Other cash outflows -- -- 7- Net cash used in financing activities (22.459.965) -- D- Effect of exchange rate fluctuations on cash and cash equivalents 1.931.150 1.701.066 E- Net increase in cash and cash equivalents 626.472.465 218.216.417 F- Cash and cash equivalents at the beginning of the year 14 1.043.729.224 825.512.807 G- Cash and cash equivalents at the end of the year 14 1.670.201.689 1.043.729.224 (*) See Note 2.1.6 to reorganize.

The accompanying notes are an integral part of these unconsolidated financial statements.

Anadolu Sigorta Annual Report 2015 119

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Unconsolidated Profit Distribution For the Year Ended 31 December 2015 (Currency: Turkish Lira (TL)

Audited Current Period (**) Audited Prior Period (***) Note 31 December 2015 31 December 2014 I. PROFIT DISTRIBUTION 1.1. CURRENT YEAR PROFIT(*) 74.211.266 94.279.437 1.2. TAX AND FUNDS PAYABLE (1.769.959) (21.081.960) 1.2.1. Corporate Income Tax (Income Tax) (1.769.959) (21.081.960) 1.2.2. Income tax deduction -- -- 1.2.3. Other taxes and Duties -- -- A NET PROFIT (1.1 - 1.2) 72.441.307 73.197.477 1.3. PREVIOUS PERIOD LOSSES (-) -- -- 1.4. FIRST LEGAL RESERVE 3.063.237 3.531.984 1.5. STATUTORY FUND (-) -- -- B NET PROFIT DISTRIBUTION [(A-(1.3 + 1.4 + 1.5)] 69.378.070 69.665.493 1.6. FIRST DIVIDEND TO SHAREHOLDERS (-) -- -- 1.6.1. Holders of shares -- 21.000.000 1.6.2. Holders of Preferred shares -- -- 1.6.3. Holders of Redeemed shares -- -- 1.6.4. Holders of Participation Bond -- -- 1.6.5. Holders of Profıt and Loss sharing certificate -- -- 1.7. DIVIDEND TO PERSONNEL (-) -- 1.459.965 1.8. DIVIDENDS TO BOARD OF DIRECTORS (-) -- -- 1.9. SECOND DIVIDEND TO SHAREHOLDERS (-) -- -- 1.9.1. Holders of shares -- -- 1.9.2. Holders of Preferred shares -- -- 1.9.3. Holders of Redeemed shares -- -- 1.9.4. Holders of Participation Bond -- -- 1.9.5. Holders of Profıt and Loss sharing certificate -- -- 1.10. SECOND LEGAL RESERVE (-) -- -- 1.11. STATUTORY RESERVES (-) -- 4.464.773 1.12. EXTRAORDINARY RESERVES -- 42.740.755 1.13. OTHER RESERVES -- -- 1.14. SPECIAL FUNDS -- -- II. DISTRIBUTION OF RESERVES -- -- 2.1. DISTRIBUTION OF RESERVES -- -- 2.2. SECOND LEGAL RESERVES (-) -- -- 2.3. COMMON SHARES (-) -- -- 2.3.1. Holders of shares -- -- 2.3.2 Holders of Preferred shares -- -- 2.3.3. Holders of Redeemed shares -- -- 2.3.4 Holders of Participation Bond -- -- 2.3.5 Holders of Profıt and Loss sharing certificate -- -- 2.4. DIVIDENDS TO PERSONNEL (-) -- -- 2.5. DIVIDENDS TO BOARD OF DIRECTORS (-) -- -- III. PROFIT PER SHARE -- -- 3.1. HOLDERS OF SHARES -- 0,188559 3.2. HOLDERS OF SHARES (%) -- 18,86% 3.3. HOLDERS OF PREFERRED SHARES -- -- 3.4. HOLDERS OF PREFERRED SHARES (%) -- -- IV. DIVIDEND PER SHARE -- -- 4.1. HOLDERS OF SHARES -- 0,042 4.2. HOLDERS OF SHARES (%) -- 4,20% 4.3. HOLDERS OF PREFERRED SHARES -- -- 4.4. HOLDERS OF PREFERRED SHARES (%) -- -- (*) In accordance with Capital Markets Board’s no.2014/2 in the Weekly Bulletin “Profit Distribution Statement Preparation Guide” the distribution are based on the consolidated profit figure. 2.541.499 TL 75% of ‘income from investments in associates and real estate sales pursuant to the shareholders’ account which is followed in “Profit not subject to distribution” section in equity is not taken into consideration due to profit for the year December 31, 2015, rely on no.5 of the Corporate Tax Law. (**) Profit distribution table has not been filled yet, due to profit distribution proposal for the year 2015 has not prepared by the Board of Directors. (***) The figures of 2014 is filled with the data which is “According to Legal Records” belongs to the Profit Distribution.

The accompanying notes are an integral part of these unconsolidated financial statements.

Anadolu Sigorta Annual Report 2015 120 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

1 General Information

1.1 Name of the Company and the ultimate owner of the group

The shareholding structure of Anadolu Anonim Türk Sigorta Şirketi (“the Company”) is presented below. As at 31 December 2015, the shareholder having indirect control over the shares of Anadolu Anonim Türk Sigorta Şirketi (“the Company”) is Türkiye İş Bankası A.Ş. (“İş Bankası”). 31 December 2015 31 December 2014 Shareholding Shareholding Shareholding Shareholding Name Amount (TL) Rate (%) Amount (TL) Rate (%)

Milli Reasürans T.A.Ş. 286.550.106 57,31 286.550.106 57,31 Other 213.449.894 42,69 213.449.894 42,69 Paid in Capital 500.000.000 100,00 500.000.000 100,00

1.2 Domicile and the legal structure of the Company, country and the address of the registered office (address of the operating centre if it is different from the registered office)

The Company was registered in Turkey and has the status of ‘Incorporated Company. The company address “Rüzgarlıbahçe Mahallesi, Kavak Sokak, No: 31 34805 Kavacık/İstanbul”. Company has nine regional offices; two of them established in İstanbul and others established in Antalya, İzmir, Samsun, Adana, Ankara, Trabzon and Bursa, and a branch in Turkish Republic of Northern Cyprus.

1.3 Business of the Company

The Company operates in almost all non-life insurance branches consisting of mainly accident, illness/health, motor vehicles, aircrafts, watercrafts, marine, fire and natural disasters, general loss, credit, financial losses, and legal protection.

As at 31 December 2015, the Company serves through, 2.468 authorized agencies and 93 unathorized agencies (31 December 2014: 2.485 authorized agencies and 91 unathorized agencies) of which, 2.561 agencies (31 December 2014: 2.576 authorized).

1.4 Description of the main operations of the Company

The Company conducts its operations in accordance with the Insurance Law No.5684 (the “Insurance Law”) issued in 14 June 2007 dated and 26552 numbered Official Gazette and the communiqués and other regulations in force issued by the Turkish Treasury based on the Insurance Law. The Company operates in insurance branches as mentioned above Note 1.3 Business of the Company.

The Company’s shares have been listed on the Istanbul Stock Exchange (“ISE”). The company operates ith their own specific laws and regulations in matters of establishment, auditing, supervision/oversight, accounting and financial reporting in accordance Capital Market Law No:6362, part of VIII and paragraph of 5 of Article 136.

1.5 The average number of the personnel during the period in consideration of their categories

The average number of the personnel during the period in consideration of their categories is as follows: 31 December 2015 31 December 2014

Senior level managers 7 7 Directors 37 37 Officers 3 3 Intermediate directors 145 142 Contracted personnel 891 799 Total 1.083 988

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ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

1.6 Wages and similar benefits provided to the senior management

For the year ended 31 December 2015, wages and similar benefits provided to the members of the board of directors is amounting to TL 1.110.000 (31 December 2014: TL 1.034.290), chairman TL 4.374.000 (31 December 2014: 3.915.203 TL).

1.7 Keys used in the distribution of investment income and operating expenses (personnel, administrative, research and development, marketing and selling, services rendered from third parties and other operating expenses) in the financial statements

Procedures and principles related to keys used in the financial statements of the companies are determined in accordance with the 4 January 2008 dated and 2008/1 numbered “Communiqué Related to the Procedures and Principles for the Keys Used in the Financial Statements Being Prepared In Accordance With Insurance Accounting Plan” issued by the Turkish Treasury.

In accordance with the above mentioned Communiqué, insurance companies are allowed to transfer technical section operating expense to insurance section through methods determined by Turkish Treasury or by the Company itself. Methods determined by the Company should be approved by the Turkish Treasury, Known and exactly distinguishable operating expenses are distributed to related branches directly, while operating expenses are distributed to the sub-branches in accordance with the average of 3 ratios calculated by dividing “number of the policies produced within the last three years”, “gross premium written within the last three years”, and “number of the claims reported within the last three years” to the “total number of the policies”, “total gross written premiums” and the “total number of the claims reported”, respectively.

Income from the assets invested against non-life technical provisions is transferred to technical section from non-technical section; remaining income is transferred to the non-technical section.

1.8 Information on the financial statements as to whether they comprise an individual company or a group of companies

The accompanying financial statements comprise only the unconsolidated financial information of the Company. As further discussed in note 2.2 - Consolidation, the Company has prepared additionally consolidated financial statements as at and for the year ended 31 December 2015.

1.9 Name or other identity information about the reporting entity and the changes in this information after previous reporting date Trade name of the Company: Anadolu Anonim Türk Sigorta Şirketi Registered address of the head office: Rüzgarlıbahçe Mahallesi, Kavak Sokak, No: 31 34805 Kavacık/İstanbul The web page of the Company: www.anadolusigorta.com.tr

The information presented above has not any change since the end of the previous reporting period.

1.10 Events after the reporting date

There haven’t been any change at services of the company, recording of this services and company policies after accounting date.

2 Summary of significant accounting policies

2.1 Basis of preparation

2.1.1 Information about the principles and the specific accounting policies used in the preparation of the financial statements

In accordance with Article 136(5) in Section VIII of the Capital Markets Law, numbered 6362 insurance companies have to comply with their own specific laws and regulations in matters of establishment, auditing, supervision/oversight, accounting and financial reporting. Therefore, the Company maintains its books of account and prepares its financial statements in accordance with the Turkish Accounting Standards (“TAS”), Turkish Financial Reporting Standards (“TFRS”), and other accounting and financial reporting principles, statements and guidance (collectively “the Reporting Standards”) in accordance with the “Communiqué Related to the Financial Reporting of Insurance, Reinsurance, and Individual Pension Companies” as promulgated by the Turkish Treasury based on Article 18 of the Insurance Law and Article 11 of the 4632 numbered Individual Pension Savings and Investment System Law (‘‘Individual Retirement Law’’).

Anadolu Sigorta Annual Report 2015 122 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

According to numbered 4th related law Accounting for subsidiaries, associates, joint venturesis, consolidated financial statements, financial statements which disclosed public regulated by the Turkish Treasury.

The company prepare their financial statements are regulated in form and content in order to compare the financial statements of prior periodand with other companies according to“Communiqué on Presentation of Financial Statements “ which is published in the Official Gazette dated 18 April 2008 and numbered 26851

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 31 December 2004. TAS 29 requires that financial statements prepared in the currency of a hyperinflationary economy be stated in terms of the measuring unit current at the reporting date, and that corresponding figures for previous years be restated in the same terms.

With respect to the declaration of the Turkish Treasury with the article dated 4 April 2005 and numbered 19387, financial statements as of 31 December 2004 are adjusted for the opening balances of 2005 in accordance with the section with respect to inflation accounting of the Capital Markets Board (“CMB”) Communiqué No: 25 of Series XI, “Communiqué on Accounting Standards in Capital Market” published in the Official Gazette dated 15 January 2003 and numbered 25290. Inflation accounting is no longer applied starting from 1 January 2005, in accordance with the same declaration of the Turkish Treasury. Accordingly, as at 31 December 2015, non-monetary assets and liabilities and items included in shareholders’ equity including paid-in capital recognized or recorded before 31 December 2004 in order to reflect inflation adjustments. Non-monetary assets and liabilities and items included in shareholders’ equity including paid-in capital recognized or recorded after 31 December 2004 are measured at their nominal values.

Other accounting policies

Information regarding other accounting polices is disclosed above in “Note 2.1.1 - Information about the principles and the specific accounting policies used in the preparation of the financial statements” and each under its own caption in the following sections of this report.

2.1.3 Valid and presentation currency

The accompanying unconsolidated financial statements are presented in TL, which is the Company’s functional currency.

2.1.4 Rounding scale of the amounts presented in the financial statements

Financial information presented in TL, has been rounded to the nearest TL values.

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 31 December 2004, except for the financial assets at fair value through profit or loss, available-for-sale financial assets, derivative financial instruments and associates which are measured at their fair values unless reliable measures are available.

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ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

2.1.6 Accounting policies, changes in accounting estimates and errors

Policy changes regarding subsequent measurement use of the property

Accordance with IAS 16- “Property, Plant and Equipment” standard of tangible assets, The first record to be the following “cost model” or if possible the reliable measurement of fair value ‘revaluation model’ to be measured. The company has started to show based on the revaluation model by measuring over fair value as of the third quarter of the current year by making changes in the use of the property which is measuring the cost model in the financial statements before. “IAS 8 - Accounting Policies, Changes and Errors in Accounting Estimates” standard, making changes in the accounting policy for the measurement of tangible assets revaluation model rather than cost model, need to be restated prior period financial statements in the period in which the change without the revaluation of the valuation differences should be presented in the financial statements.

Use of the property’s fair value calculated TL 11.532.400 based on expertise report, the amount of revaluation TL 17.008.240 was recognized ‘Other Capital Reserves’ account in equity to be shown as the net tax effect of TL 16.157.827 as 31 December 2015 accompanying financial statements.

Policy changes regarding subsequent measurement investment property

According to “IAS 40-Investment Property”, business has voting rights to be the first recording of investment properties in the subsequent measurement how to use one ‘fair value method’ or ‘cost method’. Reporting standards, in the case of businesses believed that allow them to make more sense to allow an assessment of the financial statement users to change the way which is identified before.

“IAS 8 - Accounting Policies, Changes and Errors in Accounting Estimates” standard is defined as a change in an optional change and it requires to restate prior period financial statements by calculating the effects. The company has started to measure investment property based on fair value method rather than cost method as of third quarter of the current year and the effect of changes in accounting policies are shown by correction of prior period financial statements.

Investment property’s fair value was calculated as TL 54.343.600 based on expertise reports. The increase in value amounting to TL 33.265.186 associated with prior period, as of 31 December 2015 the tax effect of TL 31.601.927 net to be shown as “Retained Earnings” account in the equity. The TL 7.457.593 profit/loss account in the “Land, the Income from Building and Land” in equity in accompanying financial statements.

Anadolu Sigorta Annual Report 2015 124 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Policy changes regarding subsequent measurement investment property and its effects on the financial statements are shown as of 31 December 2013 and 31 December 2014 as below. 31 December 2014 Previously reported Reorganized

Investment property 6.982.776 36.242.000 Accumulated depreciation (52.723.166) (49.144.613) Deferred tax assets 20.125.763 18.889.913 Retained Earnings -- 31.462.272 Net Profit 71.559.946 71.699.901

Depreciation and amortization expenses (23.801.977) (23.662.322)

31 December 2013 Previously reported Reorganized

Investment property 6.982.776 36.242.000 Accumulated depreciation (46.556.664) (43.117.766) Retained earnings/(losses) (63.981.132) (32.518.860)

Explanations on accounting estimates are given in the notes 3 which is critical accounting estimates and judgments.

2.2 Consolidation

“Circular Related to the Preparation of the Consolidated Financial Statements of Insurance, Reinsurance, and Individual Pension Companies” issued by the Turkish Treasury in the 31 December 2008 dated and 27097 numbered Official Gazette, has been in force since 31 March 2009. Accordingly, consolidated financial statements are prepared using the equity method of accounting to consolidate the Company’s associate; Anadolu Hayat Emeklilik A.Ş.

In the 12 August 2008 dated and 2008/36 numbered “Sector Announcement Related to the Accounting of Subsidiaries, Associates and Joint Ventures in the Stand Alone Financial Statements of Insurance, Reinsurance and Individual Pension Companies” of the Turkish Treasury, it is stated that although insurance, reinsurance and individual pension companies are exempted from TAS 27 - Consolidated and Separate Financial Statements, subsidiaries, associates and joint-ventures could be accounted in accordance with TAS 39 - Financial Instruments: Recognition and Measurement or at cost in accordance with the 37th paragraph of TAS 27 - Consolidated and Separate Financial Statements, Parallel to the related sector announcements mentioned above, as at the reporting date the Company has accounted for its associate at fair value based on quoted market price.

2.3 Segment reporting

An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company’s other components, whose operating results are reviewed regularly by the Board of Directors (being chief operating decision maker) to make decisions about resources allocated to each segment and assess its performance, and for which discrete financial information is available. Since the main economic environment, where the Company operates, is Turkey, a geographical segment reporting has not been presented. A business segment reporting of the Company is presented in Note 5 in accordance with TFRS 8- Operating Segments standard.

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ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

2.4 Foreign currency transactions

Transactions are recorded in TL, which is the Company’s functional currency. Transactions in foreign currencies are recorded at the rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at exchange rates ruling at the reporting date and foreign currency exchange differences are offset and all exchange differences are recognized in the statement of income.

Foreign currency exchange differences of unrecognized gains or losses arising from the difference between their fair value and the discounted values calculated per effective interest rate method of foreign currency available-for-sale financial assets are recorded in “Revaluation of financial assets” under equity and the realized gain or losses are recognized directly in the statement of income.

2.5 Tangible assets

Tangible assets of the Company are recorded at their historical costs that have been adjusted for the effects of inflation until the end of 31 December 2004. There have been no other inflationary adjustments for these tangible assets for the following years and therefore they have been recorded at their costs restated for the effects of inflation until 31 December 2004. Tangible assets that have been purchased after 1 January 2005 have been recorded at their costs after deducting any exchange rate differences and finance expenses.

The company has started to show based on the revaluation model by measuring over fair value as of the third quarter of the current year by making changes in the use of the property which is measuring the cost model in the financial statements before.

Buildings for own use is recognized by fair value that determined in valuations made by independent valuation experts who have professional competency by reducing their following accumulated depreciation. Accumulated depreciation which is at the date of revaluation net of gross book value and net amount brought to values after revaluation.

Increase of revaluation results in the carrying value of use of land and building account in equity in the balance sheet under “Other Capital Account” as the net of tax effects. As a result of the evaluation of real estate, an increase on the corresponding impairments are deducted from the fund; all other decrease are reflected the profit/loss account.

Gains/losses arising from the disposal of the tangible assets are calculated as the difference between the net carrying value and the proceeds from the disposal of related tangible assets and reflected to the statement of income of the related period.

Land is not depreciated to have indefinite life. Depreciation are allocated based on the useful life of tangible assets at cost or revalued amounts of tangible assets by using the straight-line method basis.

Maintenance and repair costs incurred in the ordinary course of the business are recorded as expense.

There are no pledges, mortgages and other encumbrances on tangible fixed assets.

There are no changes in accounting estimates that have significant effect on the current period or that are expected to have significant effect on the following periods.

Depreciation is recognized in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of tangible assets since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset.

Anadolu Sigorta Annual Report 2015 126 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Depreciation rates and estimated useful lives are as follows: Tangible Assets Estimated Useful Lives (years) Depreciation Rates (%) Buildings 50 2,0 Machinery and equipment 3 - 16 6,3 - 33,3 Furniture and fixtures 4 - 16 6,3 - 25,0 Vehicles 5 20,0 Other tangible assets (including leasehold improvements) 5 - 10 10,0 - 20,0 Leased tangible assets 4 - 10 10,0 - 25,0

2.6 Investment properties

Investment properties are held either to earn rentals and/or for capital appreciation or for both.

In the event of investment property of first registration is measured on fair value including transaction costs after measured at cost. The changes which result of fair value valuation recognised in the income statement.

Any gains or losses on the retirement or disposal of an investment property are recognized in profit or loss in the period of retirement or disposal.

Investment properties are derecognized when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal.

The fair value on the date of change in the usage is considered as cost in the reclassification recognition when investment property that measured with fair value is reclassified as a tangible asset.

2.7 Intangible Assets

The Company’s intangible assets consist of computer software, goodwill and advances paid for tangible assets.

Intangible assets are recorded at cost in compliance with “TAS 38 - Accounting for intangible assets”. The cost of the intangible assets purchased before 31 December 2004 are restated from the purchasing dates to 31 December 2004, the date the hyperinflationary period is considered to be ended. The intangible assets purchased after this date are recorded at their historical costs.

Amortization is charged on a straight-line basis over their estimated useful lives over the cost of the asset.

Goodwill represents the excess of the cost of an acquisition over the fair value of the Company’s share of the net identifiable assets of the acquired subsidiary/associate at the date of the acquisition. Goodwill on acquisitions of associates is included in ‘investments in associates’ and is tested for impairment as part of the overall balance. Separately recognized goodwill is tested annually for impairment and carried at cost less accumulated impairment losses, Impairment losses on goodwill are not reversed. Gain or losses on the disposal of an entity includes the carrying amount of goodwill relating to the entity disposed of.

For the purpose of impairment testing, goodwill is allocated to cash-generating units. The allocations made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arises.

The Company has acquired the illness/health portfolio of Anadolu Hayat Emeklilik A.Ş. at 31 August 2004 with all of its rights and liabilities. The value at acquisition of the portfolio amounting to TL 16.250.000 is capitalized as goodwill by the Company.

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ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

2.8 Financial assets

A financial asset is any asset that is cash, an equity instrument of another entity, a contractual right to receive cash or another financial asset from another entity; or to exchange financial assets or financial liabilities with another entity under conditions that are potentially favourable to the entity.

Financial assets are classified in four categories; as financial assets held for trading, available-for-sale financial assets, held to maturity financial assets, and loans and receivables.

Financial assets at fair value through profit or loss are presented as financial assets held for trading in the accompanying financial statements and trading securities and derivatives are included in this category. Financial assets at fair value through profit or loss measured at their fair values and gain/loss arising due to changes in the fair values of related financial assets is recorded in profit/loss. Interest income earned on trading purpose financial assets and the difference between their fair values and acquisition costs are recorded as interest income in the statement of income. In case of disposal of such financial assets before their maturities, the gains/losses on such disposal are recorded under trading income/losses. Accounting policies of derivatives are detailed in note 2.10 - Derivative financial instruments.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Company provides money, goods or services directly to a debtor with no intention of trading the receivable. Loans and receivables those are not interest earning are measured by discounting of future cash flows less impairment losses, and interest earning loans and receivables are measured at amortized cost less impairment losses.

Held to maturity financial assets are the financial assets with fixed maturities and fixed or pre-determined payment schedules that the Company has the intent and ability to hold until maturity, excluding loans and receivables. Subsequent to initial recognition, held to maturity financial assets and loans and receivables are measured at amortized cost using effective interest rate method less impairment losses, if any. The Company has no financial assets that are not allowed to be classified as held to maturity financial assets for two years due to the tainting rules applied for the breach of classification rules.

Available-for-sale financial assets are the financial assets other than assets held for trading purposes, held-to-maturity financial assets and loans and receivables.

Available-for-sale financial assets are initially recorded at cost and subsequently measured at their fair values. Unrecognized gains or losses derived from the difference between their fair value and the discounted values calculated per effective interest rate method are recorded in “Revaluation of financial assets” under shareholders’ equity. Upon disposal, the realized gain or losses are recognized directly in the statement of income.

The determination of fair values of financial instruments not traded in an active market is determined by using valuation techniques. Observable market prices of the quoted financial instruments which are similar in terms of interest, maturity and other conditions are used in determining the fair value.

The Company has accounted equity shares classified as available-for-sale according to quoted market prices or dealer price quotations for financial instruments traded in active markets or according to cost less impairment losses for financial instruments not traded in active markets.

Securities are recognized and derecognized at the date of settlement.

Associates; shares of the associate of the Company; Anadolu Hayat Emeklilik A.Ş. are classified as available-for-sale financial assets in the financial statements and are recorded at their fair values since those shares are traded in an active market.

A financial asset is derecognized when the control over the contractual rights that comprise that asset is lost. This occurs when the rights are realized, expire or are surrendered.

Anadolu Sigorta Annual Report 2015 128 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

2.9 Impairment on assets

Impairment on financial asset

Financial assets or group of financial assets are reviewed at each reporting date to determine whether there is objective evidence of impairment. If any such indication exists, the Company estimates the amount of impairment. A financial asset is impaired if, and only if, there is objective evidence that the expected future cash flows of financial asset or group of financial assets are adversely affected by an event(s) (“loss event(s)”) incurred subsequent to recognition. The losses expected to incur due to future events are not recognized even if the probability of loss is high.

Receivables are presented net of specific allowances for uncollectibility. Specific allowances are made against the carrying amounts of loans and receivables that are identified as being impaired based on regular reviews of outstanding balances to reduce these loans and receivable to their recoverable amounts.

The recoverable amount of an equity instrument is its fair value. The recoverable amount of debt instruments and purchased loans measured to fair value is calculated as the present value of the expected future cash flows discounted at the current market rate of interest.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized. For financial assets measured at amortized cost and available-for-sale financial assets that are debt securities, the reversal is recognized in the statement of operations. For available-for-sale financial assets that are equity securities, the reversal is recognized directly in equity.

Impairment on tangible and intangible assets

On each reporting date, the Company evaluates whether there is an indication of impairment of tangible and intangible assets. If there is an objective evidence of impairment, the asset’s recoverable amount is estimated in accordance with the “TAS 36 - Impairment of Assets” and if the recoverable amount is less than the carrying value of the related asset, a provision for impairment loss is made.

Rediscount and provision expenses of the period are detailed in Note 47

2.10 Derivative financial instruments

As of 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 recognized at their fair value.

The receivables and liabilities arising from the derivative transactions are recognized under the off-balance sheet accounts through the contract amounts.

Derivative financial instruments are subsequently remeasured at fair value and positive fair value differences are presented either as “financial assets held for trading” and negative fair value differences are presented as “other financial liabilities” in the accompanying financial statements. All unrealized gains and losses on these instruments are included in the statement of income.

2.11 Offsetting of financial assets

Financial assets and liabilities are offset and the net amount is presented in the balance sheet when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

Income and expenses are presented on a net basis only when permitted by the Reporting Standards, or for gains and losses arising from a group of transactions resulting from the Company’s similar activities like trading transactions.

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ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

2.12 Cash and cash equivalents

Cash and cash equivalents, which is the basis for the preparation of the statement of cash flows includes cash on hand, cheques received, other cash and cash equivalents, demand deposits and time deposits at banks having an original maturity less than 3 months which are ready to be used by the Company or not blocked for any other purpose.

2.13 Share capital

The shareholder having direct or indirect control over the shares of the Company is İş Bankası Group, As at 31 December 2015 and 31 December 2014, the share capital and ownership structure of the Company are as follows: 31 December 2015 31 December 2014 Shareholding Shareholding Shareholding Shareholding Name Amount (TL) Rate (%) Amount (TL) Rate (%)

Milli Reasürans T.A.Ş. 286.550.106 57,31 286.550.106 57,31 Other 213.449.894 42,69 213.449.894 42,69 Paid in Capital 500.000.000 100,00 500.000.000 100,00

Sources of capital increases during the period

The company has not performed capital increase as at 31 December 2015. (31 December 2014: None).

Privileges on common shares representing share capital

As at 31 December 2015, the issued share capital of the Company is TL 500.000.000 (31 December 2014: TL 500.000.000) and The Company unregistered Group 150 A shares which each of value is TL 1,5 as of 11 April 2013 in which approved in Main Article of the Company dated in 11 April 2013. The share capital of the Company consists of 50.000.000.000 (31 December 2014: 50.000.000.000 shares) issued shares with TL 1 nominal value each.

Registered capital system in the Company

The Company has accepted the registered capital system. As of 31 December 2015, the Company’s registered capital is TL 700.000.000 (31 December 2014: TL 700.000.000).

Repurchased own shares by the Company

None.

2.14 Insurance and investments contracts - classification

An insurance contract is a contract under which the Company accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder. Insurance risk covers all risk except for financial risks. All premiums have been received within the coverage of insurance contracts recognized as revenue under the account caption “written premiums”.

Investment contracts are those contracts which transfer financial risk with no significant insurance risk. Financial risk is the risk of a possible future change in a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index or other variable, provided, that it is not specific to a party to the contract, in the case of a non-financial variable.

As at the reporting date, the Company does not have a contract which is classified as an investment contract.

Anadolu Sigorta Annual Report 2015 130 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

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) realized and/or unrealized investments returns on a specified pool of assets held by the Issuer; or (3) the profit or loss of the Company, Fund or other entity that issues the contract.

As at the reporting date, the Company does not have any insurance or investment contracts that contain a DPF.

2.16 Investment contracts without DPF

As at the reporting date, the Company does not have any insurance contracts and investment contracts without DPF.

2.17 Liabilities

Financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to another entity. Financial liabilities of the Company are measured at their discounted values. A financial liability is derecognized when it is extinguished.

2.18 Income taxes

Corporate tax

Statutory income is subject to corporate tax at 20%. This rate is applied to accounting income modified for certain exemptions (like dividend income) and deductions (like investment incentives), and additions for certain non-tax deductible expenses and allowances for tax purposes. If there is no dividend distribution planned, no further tax charges are made.

Dividends paid to the resident institutions and the institutions working through local offices or representatives are not subject to withholding tax. The withholding tax rate on the dividend payments other than the ones paid to the non-resident institutions generating income in Turkey through their operations or permanent representatives and the resident institutions is 15%. In applying the withholding tax rates on dividend payments to the non-resident institutions and the individuals, the withholding tax rates covered in the related Double Tax Treaty Agreements are taken into account. Appropriation of retained earnings to capital is not considered as profit distribution and therefore is not subject to withholding tax.

Prepaid taxes are calculated and paid at the rates valid for the earnings of the related years. The payments can be deducted from the annual corporate tax calculated for the whole year earnings.

In Turkey, there is no procedure for a final and definite agreement on tax assessments. Companies file their tax returns with their tax offices by the end of 25th of the fourth month following the close of the accounting period to which they relate. Tax returns are open for five years from the beginning of the year that follows the date of filing during which time the tax authorities have the right to audit tax returns, and the related accounting records on which they are based, and may issue re-assessments based on their findings.

Deferred taxes

In accordance with TAS 12 - Income taxes, deferred tax assets and liabilities are recognized on all taxable temporary differences arising between the carrying values of assets and liabilities in the financial statements and their corresponding balances considered in the calculation of the tax base, except for the differences not deductible for tax purposes and initial recognition of assets and liabilities which affect neither accounting nor taxable profit.

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ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Deferred tax assets and liabilities are reported as net in the financial statements if, and only if, the Company has a legally enforceable right to offset current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity.

In case where gains/losses resulting from the subsequent measurement of the assets are recognized in the statement of income, then the related current and/or deferred tax effects are also recognized in the statement of income. On the other hand, if such gains/losses are recognized as an item under equity, then the related current and/or deferred tax effects are also recognized directly in the equity.

Transfer pricing

In Turkey, the transfer pricing provisions have been stated under the Article 13 of Corporate Tax Law with the heading of “disguised profit distribution via transfer pricing”. The General Communiqué on disguised profit distribution via Transfer Pricing, dated 18 November 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

Pension and other post-retirement obligations

A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee and his/her dependants will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.

Employees of the Company are the members of “Anadolu Anonim Pension Fund” which is established in accordance with the temporary Article 20 of the Social Security Act No: 506. As per the temporary sub article No: 20 of the Article 73 of the Social Security Law, pension funds should be transferred to the Social Security Institution within three years after the publication of the a aforementioned Law published in the Official Gazette numbered 26870 and dated 8 May 2008. The related three-year transfer period has been prolonged for two years by the Cabinet decision, which was published on the Official Gazette dated 9 April 2011. Accordingly, the three-year period expired on 8 May 2011 was extended to the 8 May 2015. The principles and applications of the transfer will be determined by the Decree of the Council of Ministers separately. Lastly, first paragraph of temporary 20th article of 5510 numbered Law, article 51 of the law regarding changing of several laws and delegated legislations and the law of occupational health and safety which are published in 23 April 2015 dated Official Gazette is changed as following; insurance and reinsurance companies, chambers of commerce, industry chambers, stock exchanges or which constitutes their union personnel and associates of funds “The Council is authorized to determine the date of transfer within the scope of article 20th of the law, 506 banks, insurance and reinsurance companies, chambers of commerce, industry chambers, stock exchanges or which constitutes their union personnel and associates of funds to the social security institution. The date of the transfer of the first paragraph of Article 4 of this law pension fund contributors as are considered insured”. According to this arrangement the bank within the scope of Act 506, article No.20, insurance and reinsurance companies, chambers of commerce, industry chambers, stock exchanges or associations which constitute their union personnel and associates of funds are required to be transferred until 08.05.2015 to Social Security Administration, authority to determine the date of transfer is given the Council of Ministers thus the transfer of the funds has been postponed to an unknown date.

The application which containing temporary transfer provision on 19 June 2008 cancellation and cessation of claims by Republican People’s Party, it is rejected in accordance with the decision at the court’s meeting on March 30, 2011. The cash value of the obligations of the pension fund for each member of the fund including members left the fund as of the transfer date will be calculated according to following assumptions: a) Technical deficit rate of 9,8% shall be used in the actuarial calculation of the value in cash, and. b) Gains and losses of the funds stems from benefits covered by the aforementioned Law taken into accounts to calculate present value of the obligations.

Anadolu Sigorta Annual Report 2015 132 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Employee termination benefits

In accordance with existing Turkish Labour Law, the Company is required to make lump-sum termination indemnities to each employee who has completed one year of service with the Company and whose employment is terminated due to retirement or for reasons other than resignation or misconduct. The amount payable for each year of service the employee union members; death, disability, retirement, pension bonding states is 60 days, in other provinces it amounted 45 daily wages. In other employees, it is one month’s salary. The computation of the liability is based upon the retirement pay ceiling announced by the Government. The applicable ceiling amount as at 31 December 2015 is TL 4.092,53 (31 December 2014: 3.438,22 TL). In Accordance IAS 19 which published by Public Company Accounting Oversight Board (PCAOB) dated March 12, 2013 is about “Benefits Employee Accounting Standard” and defined by beginning from 31 December 2012 net defined benefit liability of the actuarial gains and losses arising on re-measurement should be recognized in other comprehensive income under shareholders’ equity and this effect should be applied retrospectively. The company started to account current actuarial gains and losses under equity (other profit reserves) due to the fact that prior period actuarial gains and losses have remained below the materiality.

The Company accounted for employee severance indemnities using actuarial method in compliance with the TAS 19 - Employee Benefits, The major actuarial assumptions used in the calculation of the total liability as at 31 December 2015 and 31 December 2014 are as follows: 31 December 2015 31 December 2014 Discount rate %4,61 %4,46 Expected rate of salary/limit increase %5,83 %4,37 Estimated employee turnover rate %3,27 %6,29

Expected rate of salary/limit increase above was determined according to the government’s annual inflation forecasts.

Other benefits

The Company has provided for undiscounted short-term employee benefits earned during the period as per services rendered in compliance with TAS 19 in the accompanying financial statements.

2.20 Provisions

A provision is made for an existing obligation resulting from past events if it is probable that the commitment will be settled and a reliable estimate can be made of the amount of the obligation. Provisions are calculated based on the best estimates of management on the expenses to incur as of the reporting date and, if material, such expenses are discounted to their present values. If the amount is not reliably estimated and there is no probability of cash outflow from the Company to settle the liability, the related liability is considered as “contingent” and disclosed in the notes to the financial statements.

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non- occurrence of one or more uncertain future events not wholly within the control of the Company. Contingent assets are not recognized in financial statements since this may result in the recognition of income that may never be realized. Contingent assets are assessed continually to ensure that developments are appropriately reflected in the financial statements. If it has become virtually certain that an inflow of economic benefits will arise, the asset and the related income are recognized in the financial statements of the period in which the change occurs. If an inflow of economic benefits has become probable, the Company discloses the contingent asset.

2.21 Revenue recognition

Written premiums and claims paid

Written premiums represent premiums on policies written during the period net of taxes, premiums of the cancelled policies which were produced in prior periods and premium ceded to reinsurance companies,. Premiums ceded to reinsurance companies are accounted as “written premiums, ceded” in the statement of income.

Claims are recognized as expense as they are paid. Outstanding claims provision is provided for both reported unpaid claims at period-end and incurred but not reported claims. Reinsurer’s shares of claims paid and outstanding claims provisions are off-set against these reserves.

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ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Subrogation, salvage and quasi income

According to the Circular 2010/13 dated 20 September 2010; the Company may account for income accrual for subrogation receivables without any voucher after the completion of the claim payments made to the insurer. If the amount cannot be collected from the counterparty insurance company, the Company provides provision for uncollected amounts due for six months. If the counter party is not an insurance company, the provision is provided after four months. As at the reporting date, in accordance with the related circular the Company provided TL 45.354.423 (31 December 2014: 26.118.178 TL) subrogation receivables and recorded TL 49.626.517 (31 December 2014: 30.648.790 TL) (Note 12) net subrogation and salvage receivables under receivables from main operations. The Company provided allowance for uncollected subrogation receivables amounting to TL 8.305.178 (31 December 2014: 7.677.067 TL) (Note 12) in accordance with circular.

For the years ended 31 December 2015 and 2014, salvage and subrogation collected are as follows: 31 December 2015 31 December 2014 Motor Vehicles 292.754.774 255.938.892 Third Party liability for motor vehicles (MTPL) 7.174.650 4.894.794 Fire and natural disaster 3.654.611 1.951.328 Marine 2.946.419 2.556.620 Watercrafts 1.052.607 1.087.073 General Losses 164.084 248.943 General Responsibility 135.207 129.658 Credit 68.150 2.410 Accident 7.759 452.519 Aircrafts -- 16.861 Legal Protection -- (22.011) Total 307.958.261 267.257.087

As at 31 December 2015 and 31 December 2014, accrued subrogation and salvage income per branches is as follows: 31 December 2015 31 December 2014 Motor Vehicles 36.648.709 29.805.959 Third Party liability for motor vehicles (MTPL) 4.252.062 213.733 General Losses 3.904.872 16.671 Fire and natural disaster 3.485.325 397.028 Marine 1.048.488 181.347 Accident 274.558 -- Watercrafts 12.503 34.052 Total 49.626.517 30.648.790

Commission income and expense

As further disclosed in Note 2.24 - Reserve for unearned premiums, commissions paid to the agencies related to the production of the insurance policies and the commissions received from the reinsurance firms related to the premiums ceded are recognized over the life of the contract by deferring commission income and expenses within the calculation of reserve for unearned premiums for the policies produced before 1 January 2008 and recognizing deferred commission income and deferred commission expense in the financial statements for the policies produced after 1 January 2008.

Anadolu Sigorta Annual Report 2015 134 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Interest income and expense

Interest income and expense are recognized using the effective interest method. The effective interest rate is the rate that exactly discounts the estimated future cash payments and receipts through the expected life of the financial asset or liability (or, where appropriate, a shorter period) to the carrying amount of the financial asset or liability. The effective interest rate is established on initial recognition of the financial asset and liability and is not revised subsequently.

The calculation of the effective interest rate includes all fees and points paid or received transaction costs, and discounts or premiums that are an integral part of the effective interest rate. Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or liability.

Trading income/expense

Trading income/expense includes gains and losses arising from disposals of financial assets held for trading purpose and available-for-sale financial assets. Trading income and trading expenses are recognized as “Income from disposal of financial assets” and “Loss from disposal of financial assets” in the accompanying unconsolidated financial statements.

Dividends

Dividend income is recognized when the Company’s right to receive payment is ascertained.

2.22 Leasing transactions

The maximum period of the lease contracts is 10 years. Tangible assets acquired by way of finance leases are recorded in tangible assets and the obligations under finance leases arising from the lease contracts are presented under “Finance Lease Payables” account in the financial statements. In the determination of the related asset and liability amounts, the lower of the fair value of the leased asset and the present value of leasing payments is considered. Financial costs on leasing agreements are expanded in lease periods at a fixed interest rate.

If there is impairment in the value of the assets obtained through finance lease and in the expected future benefits, the leased assets are measured at net realizable value. Depreciation for assets obtained through financial lease is calculated in the same manner as tangible assets.

Payments made under operating leases are recognized in the statement of income on a straight-line basis over the term of the lease.

2.23 Dividend distribution

Based on the guidelines and principals issued by the CMB dated 27 January 2010 for the distribution of dividends from the profit generated from operating activities in 2009, concerning public entities, the shares of which are quoted in public equity markets, it has been agreed upon not to set a mandatory minimum dividend payment quota. Furthermore, it has been agreed upon to let public entities perform dividend distributions.

Additionally, as stated within the aforementioned decision of CMB, for entities required to prepare consolidated financial statements, it has been agreed upon to require the net distributed profit calculations to be performed on the net profit for the period as stated on the consolidated financial statements, so long that the distribution can be funded through statutory resources.

Board of Directors proposal which is related with distribution of the profits gained from the operations of the 2014 was adopted unanimously in the framework of the General Assembly dated March 24, 2015.

According to the distributable profit of TL 67.107.690; TL 21.000.000 was distributed as cash dividends to shareholders as of March 25, 2015. The amount of TL 1.459.965 distributed to company employees. The amount of TL 4.464.773 is distributed as a statuary reserves and remained after the amount of TL 40.182.952 is distributed excess reserve.

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ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

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 7 August 2007 dated Official Gazette and put into effect starting from 1 January 2008, the reserve for unearned premiums represents the proportions of the gross premiums written without deductions of commission or any other allowance, in a period that relate to the period of risk subsequent to the reporting date for all short-term insurance policies. For commodity transportation policies with indefinite expiration dates, 50% of the remaining portion of the premiums accrued in the last three months, less any commissions is also provided as unearned premium reserves.

Reserve for unearned premiums is calculated for all insurance contracts except for the contracts for which the mathematical reserve is provided. Reserve for unearned premiums is also calculated for the annual premiums of the annually renewed long term insurance contracts.

Since the Communiqué on Technical Reserves was effective from 1 January 2008, the Turkish Treasury issued 4 July 2007 dated and 2007/3 numbered “Circular to Assure the Compliance of the Technical Reserves of Insurance, Reinsurance and Pension Companies With the Insurance Law No: 5684” (“Compliance Circular”) to regulate the technical provisions between the issuance date and enactment date of the Communiqué on Technical Reserves. In accordance with the Compliance Circular, it is stated that companies should consider earthquake premiums written after 14 June 2007 in the calculation of the reserve for unearned premiums while earthquake premiums were deducted in the calculation of the reserve for unearned premiums before. Accordingly, the Company has started to calculate reserve for unearned premiums for the earthquake premiums written after 14 June 2007, while the Company had not calculated reserve for unearned premiums for the earthquake premiums written before 14 June 2007.

According to the 2009/9 Numbered Circular Related to Application of Technical Reserves issued on 27 March 2009 which was published by Undersecretariat of Treasury reserve for unearned premiums is calculated by taking into account that all polices become active at 12:00 at noon and end at 12:00 at noon.

According to the Communiqué on Technical Reserves, for the calculation of unearned premium reserves of foreign currency indexed insurance agreements, foreign currency selling exchange rates announced by Turkish Central Bank will be considered, unless there is a specified exchange rate in the agreement.

As at the reporting date, the Company has provided reserve for unearned premiums amounting to TL 1.848.552.863 (31 December 2014: 1.491.252.563 TL) and reinsurer share in reserve for unearned premiums amounting TL 341.649.490 (31 December 2014: 294.929.264 TL). Furthermore, reserve for unearned premiums includes Social Security Institution (“SSI”) share amounting to TL 54.975.565 TL (31 December 2014: 36.692.792 TL).

2.25 Provision for outstanding claims

Claims are recorded in the year in which they occur, based on reported claims or on the basis of estimates when not reported. Provision for outstanding claims represents the estimate of the total reported costs of notified claims on an individual case basis at the reporting date as well as the corresponding handling costs. Incurred but not reported claims (“IBNR”) are also provided.

Claims incurred before the accounting periods but reported subsequent to those dates are considered as incurred but not reported (“IBNR”) claims.

In accordance with 5 December 2014 dated and 2014/15 numbered “Circular for Provision for Outstanding Claims” of Turkish Treasury, ACML calculation should be on main branch. Insurance and reinsurance companies are allowed to use six different methods which are “Standard Chain, Claim/Premium, Cape Code, Frequency/Volume, Munich Chain Ladder and Bornhuetter-Ferguson” to make ACLM calculations. The Company’s method selections for each branch are presented below.

The Company recorded IBNR calculated by ACLM method amounting to TL 483.809.233 (31 December 2014: TL 327.611.024) to the unconsolidated financial statements as IBNR and TL 47.092.646 (31 December 2014: TL 17.969.121) as reinsurer’s share of IBNR.

Anadolu Sigorta Annual Report 2015 136 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

In Accordance with the Circular issued by the Turkish Treasury dated 2014/16, the Company eliminated severe damages by using Box-Plot method to make more homogeneous calculation in ACML.

The Circular issued by the Turkish Treasury dated 2014/16, IBNR is calculated by the company’s actuaries. The selection of data to be used, correction operations, the most appropriate method of growth factors and growth factors to interfere is determined by actuarial using by actuarial methods on the basis of branches in accordance with actuarial report which is submitted Regulation to the Treasury, is detailed.

Used damage claims software and damage claims reserve development factors are tested for all methods and the selection was made with actuarial factor analysis. Development of coefficients are evaluated retrospectively in the next step. The data which is high damage, the effect of inflation, determining the factors that may affect the analysis as CDS application corrections were made.

As a consequence of actuarial work, trend function of development of coefficient of portfolio for each branch is determined and conclusion of that function for each development period is calculated. Consequently, the curve which passed from data points with the least error is considered.

In this context, development of coefficient is calculated for all branches and incurred damage triangles are analyzed and the effects regarding damage files that affect development of coefficient are eliminated.

According to 2015/28 numbered circular of Turkish Treasury, IBNR amount that calculated by basing 10% increase rate in Compulsory Traffic, Facultative Fiscal Responsibility and General Responsibility branches is represented on financial statements.

In accordance with these judgments, IBNR provision amounts to TL 203.903.058 in branch of Motor Vehicles, TL 7.407.845 in branch of Third party liability and TL 10.774.133 in branch of General liability. The total amount is TL 222.085.036.

The IBNR method to be selected on the basis of branch is follow.

As of 30 June 2015 “Munich Chain” method abandoned the “Standard Chain” method was introduced on branch of Fire and natural disasters.

Based on each branch, calculation amount of Net IBNR; reinsurance agreements’ effect in force was to be reflected based on actual reinsurance rate. 31 December 2015 31 December 2014 Motor vehicles Standard Chain Ladder Standard Chain Ladder Watercrafts Standard Chain Ladder Standard Chain Ladder Third party liability for motor vehicles (MTPL) Cape Code Cape Code Third party liability Standard Chain Ladder Standard Chain Ladder Aircraft Liability Standard Chain Ladder Standard Chain Ladder Fire and natural disasters Munich Chain Ladder Munich Chain Ladder Aircrafts Standard Chain Ladder Standard Chain Ladder Accident Standard Chain Ladder Standard Chain Ladder General losses Standard Chain Ladder Standard Chain Ladder Financial losses Standard Chain Ladder Standard Chain Ladder Illness/health Standard Chain Ladder Standard Chain Ladder Marine Standard Chain Ladder Standard Chain Ladder Credit Standard Chain Ladder Standard Chain Ladder Legal protection Standard Chain Ladder Standard Chain Ladder General liability Cape Code Cape Code

Anadolu Sigorta Annual Report 2015 137

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

In accordance with “Circular Related to Information on Calculation of Incurred But Not Reported Claims Reserve” numbered 2011/23 and dated 26 November 2011, companies may decrease their outstanding claims reserve balances based on the winning ratio of the sub- branches calculated from the last five years claims. Winning ratio used for decrease in provision for outstanding claims could not exceed 25% (15% for the new sub-branches which do not have five year data). Based on the aforementioned regulation, the Company calculated winning ratio from the last five year data set and TL 104.862.951 (31 December 2014: TL 75.260.122) as IBNR and TL 18.207.321 (31 December 2014: TL 9.912.780) as reinsurer’s share of IBNR is excluded from outstanding claims reserve balance.

The calculated winning ratio of the Company as at 31 December 2015 is within 0% - 100% range (31 December 2014:%0-%100), Winning ratios used in and amounts decreased from provision for outstanding claims are as follows: 31 December 2015 Winning Ratios Gross Amount Net Amount Branch Used Decreased Decreased

General responsibility %25 44.952.215 40.954.135 Third party liability for motor vehicles (MTPL) %10 34.977.046 34.149.860 Fire and natural disasters %25 16.115.339 5.546.618 General losses %25 3.014.805 1.082.648 Motor vehicles %21 2.994.637 2.925.531 Marine %25 804.446 394.117 Watercrafts %25 677.619 482.354 Accident %16 656.803 469.951 Credit %25 636.655 636.655 Financial Liability %3 28.162 8.537 Legal protection %25 5.224 5.224 Total 104.862.951 86.655.630

31 December 2014 Winning Ratios Gross Amount Net Amount Branch Used Decreased Decreased

Third party liability for motor vehicles (MTPL) %13 27.061.833 26.173.740 General responsibility %25 31.775.165 30.362.994 Fire and natural disasters %23 10.183.292 4.417.948 Motor vehicles %21 2.623.152 2.533.992 General losses %19 2.057.461 686.961 Watercrafts %25 791.187 493.422 Transportation %25 431.542 362.137 Accident %14 304.698 284.356 Credit %25 25.000 25.000 Legal protection %25 6.792 6.792 Total 75.260.122 65.347.342

Anadolu Sigorta Annual Report 2015 138 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

New Regulations on Treatment Costs Resulted from Traffic Accidents in Accordance with the Circular Numbered 2011/18 “Circular Related to the Accounting of Payments Related to Payment of Treatment Costs Resulted from Traffic Accidents and New Accounts in the Insurance Chart of Accounts”

58th and 59th articles and 1st and 2nd provisional articles of the Law no 6111 on “Restructuring of certain receivables and amendment to the law of social insurance and general health insurance and certain other laws and decree laws” published in the Official Gazette numbered 27857 and has come into effect on 25 February 2011.

According to the Article 59 of the aforementioned law, starting from 25 February 2011, premiums written under compulsory motor third party liability insurance contracts providing health assurance will be transferred to SSI by the rate up to 15% which will be later defined by Turkish Treasury. By this premium transfer, all liabilities related to body injuries resulted from traffic accidents will be compensated by SSI. According to the Provisional Article 1 and Article 59 of the Law, up to 20% of the transferred premium amount defined by the Turkish Treasury will also be transferred to SSI and treatment costs resulted from traffic accidents occurred before 25 February 2011 will also be compensated by SSI. As part of the aforementioned law, “Communiqué on Payment of Treatment Costs Resulted from Traffic Accidents” which was issued in Official Gazette numbered 28038 and dated 27 August 2011 has become effective. On 17 October 2011, the Turkish Treasury issued circular numbered 2011/18 “Circular Related to the Accounting of Payments Related to Payment of Treatment Costs Resulted from Traffic Accidents and New Accounts in the Insurance Chart of Accounts”. In accordance with the related circular, the Company eliminated outstanding claims reserve amounting to TL 2.279.273 related to treatment costs occurred before issuance of the aforementioned law, with “Paid Claims” account. The same amount is recorded as “Payable to SSI” under “Other Payables” in the accompanying financial statements.

In accordance with the circular numbered 2011/18, the Company recalculated test IBNR amount by excluding treatments costs covered by the aforementioned law as at 31 March 2011 and eliminated difference between the newly calculated IBNR amount and IBNR amount in the financial statements amounting to TL 2.375.923 with “Paid Claims” account. The same amount is recorded as “Payable to SSI” under “Other Payables” in the accompanying financial statements.

The Turkish Treasury informed the Company 7.02% for motor third party liability, 2.08% for compulsory personal accident seat insurance and 15.8% for compulsory transportation liability for traffic accidents occurred before issuance of the aforementioned law. The difference amounting to TL 448 (31 December 2014: TL 1.153.499) between the amount informed by the Turkish Treasury and the amount eliminated by the Company is transferred to “Other Technical Expense” for the year ended 31 December 2015.

2.26 Reserve for unexpired risks

In accordance with the Communiqué on Technical Reserves, while providing reserve for unearned premiums, in each accounting period, the companies should perform adequacy test covering the preceding 12 months due to the probability that future claims and compensations of the outstanding policies may be in excess of the reserve for unearned premiums already provided. In performing this test, it is required to multiply the reserve for unearned premiums, net with the expected claim/premium ratio. Expected claim/premium ratio is calculated by dividing incurred losses (provision for outstanding claims, net at the end of the period + claims paid, net - provision for outstanding claims, net at the beginning of the period) to earned premiums (written premiums, net + reserve for unearned premiums, net at the beginning of the period - reserve for unearned premiums, net at the end of the period). In the calculation of earned premiums; deferred commission expenses paid to the agencies and deferred commission income received from the reinsurance firms which were netted off from reserve for unearned premiums both at the beginning of the period and at the end of the period are not taken into consideration.

In accordance with Treasury circular numbered 2012/15, unexpired risk reserve started to be calculated over main branches as of December 31, 2012. The test is performed on branch basis and in case where the expected claim/premium ratio is higher than 95%, reserve calculated by multiplying the exceeding portion of the expected claim/premium ratio with the reserve for unearned premiums of that specific branch is added to the reserves of that branch. Accordingly, as at the reporting date, the Company has provided net reserve for unexpired risk amounting to TL 18.531.890 (31 December 2014: TL 52.687.216) and unexpired risk amounting of reassurance to TL 12.046.676 (31 December 2014: TL 12.307.870) in the accompanying unconsolidated financial statements. According to the Circular numbered 2015/30, the amount of the opening provision for outstanding claims which is determined unexpired risk reserve redefined in a manner consistent with the current period as of 31 December 2015.

According to the Circular numbered 2011/18, the Company excluded both the premiums transferred to SSI and claims related to treatment costs from calculation of reserve for unexpired risks in motor third party liability, compulsory transportation financial liability and compulsory personal accident for bus transportation branches.

Anadolu Sigorta Annual Report 2015 139

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

2.27 Equalization provision

In accordance with the Communiqué on Technical Reserves put into effect starting from 1 January 2008, the companies should provide equalization provision in credit insurance and earthquake branches to equalize the fluctuations in future possible claims and for catastrophic risks. Equalization provision, started to be provided in 2008, is calculated as 12% of net premiums written in credit insurance and earthquake branches. In the calculation of net premiums, fees paid for un-proportional reinsurance agreements are considered as premiums ceded to the reinsurance firms. The companies should provide equalization provision up to reaching 150% of the highest premium amount written in a year within the last five years.

In case where claims incurred, the amounts below exemption limits as stated in the contracts and the share of the reinsurance firms cannot be deducted from equalization provisions. Claims payments are deducted from first year’s equalization provisions by first in first out method. Equalization provisions are presented under “other technical reserves” in the accompanying financial statements. As at the reporting date, the Company provided equalization provision amounting to TL 81.545.727 in the accompanying unconsolidated financial statements (31 December 2014: 60.549.876 TL).

2.28 Related parties

Parties are considered related to the Company if;

(a) directly, or indirectly through one or more intermediaries, the party:

• controls, is controlled by, or is under common control with the Company (this includes parent, subsidiaries and fellow subsidiaries); • has an interest in the Company that gives it significant influence over the Company; or • has joint control over the Company;

(b) the party is an associate of the Company;

(c) the party is a joint venture in which the Company is a venturer;

(d) the party is member of the key management personnel of the Company and its parent;

(e) the party is a close member of the family of any individual referred to in (a) or (d);

(f) the party is an entity that is controlled or significantly influenced by, or for which significant voting power in such entity resides with directly or indirectly, any individual referred to in (d) or

(g) the party is a post-employment benefit plan for the benefit of employees of the Company, or of any entity that is a related party of the Company.

A related party transaction is a transfer of resources, services or obligations between related parties, regardless of whether a price is charged.

A number of transactions are entered into with related parties in the normal course of business.

2.29 Earnings per share

Earnings per share are determined by dividing the net income by the weighted average number of shares outstanding during the year attributable to the shareholders of the Company. In Turkey, companies can increase their share capital by making a pro-rata distribution of shares (“Bonus Shares”) to existing shareholders from retained earnings. For the purpose of earnings per share computations, such bonus shares issued are regarded as issued shares.

Anadolu Sigorta Annual Report 2015 140 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

2.30 Events after the reporting date

Post-balance sheet events that provide additional information about the Company’s position at the reporting dates (adjusting events) are reflected in the financial statements. Post-balance sheet events that are not adjusting events are disclosed in the notes when material.

2.31 New standards and interpretations not yet adopted

There are a number of new standards, updates related to the existing standards and interpretations which are not adopted in the preparation of the accompanying financial statements and have not yet entered into force for the accounting period 31 December 2015.

TFRS 9 Financial Instruments: Recognition and Measurement

An entity shall apply TFRS 9 for annually years beginning on or after 1 January 2018. An earlier application is permitted. If an entity adopts this TFRS in its financial statements for a period beginning before 1 January 2012, then prior periods are not needed to be restated. The objective of TFRS 9, being the first phase of the project, is to establish principles for the financial reporting of financial assets that will present relevant and useful information to users of financial statements for their assessment of amounts, timing and uncertainty of the entity’s future cash flows. With TFRS 9 an entity shall classify financial assets as subsequently measured at either amortized cost or fair value on the basis of both the entity’s business model for managing the financial assets and the contractual cash flow characteristic of the financial assets. The guidance in TAS 39 on impairment of financial assets and hedge accounting continues to apply.

3 Critical accounting estimates and judgments in applying accounting policies

The notes given in this section are provided to addition/supplement the commentary on the management of insurance risk note 4.1 - Management of insurance risk and note 4.2 - Financial risk management.

The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected.

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 recognized in the financial statements are described in the following notes:

Note 4.1 - Management of insurance risk

Note 4.2 - Financial risk management

Note 10 - Reinsurance assets/liabilities

Note 11 - Financial assets

Note 12 - Loans and receivables

Note 17 - Insurance liabilities and reinsurance assets

Note 17 - Deferred acquisition costs

Note 19 - Trade and other payables, deferred income

Note 21 - Deferred income taxes

Note 23 - Provisions for other liabilities and charges

Anadolu Sigorta Annual Report 2015 141

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

4 Management of insurance and financial risk

4.1 Management of insurance risk

Insurance risk is defined as coverage for exposures that exhibit a possibility of financial loss due to applying inappropriate and insufficient insurance techniques. Main reasons of insurance risk exposure result from the risk selection and inaccurate calculation of insurance coverage, policy terms and fee or inaccurate calculation of coverage portion kept within the company and coverage portion transfers to policyholders and transfer conditions.

Objective of managing risks arising from insurance contracts and policies used to minimize such risks

Potential risks that may be exposed in transactions are managed based on the requirements set out in the Company’s “Risk Management Policies” issued by the approval of the Board of Directors. The main objective of risk management policies is to determine the risk measurement, assessment, and control procedures and maintain consistency between the Company’s asset quality and limitations allowed by the insurance standards together with the Company’s risk tolerance of the accepted risk level assumed in return for a specific consideration. In this respect, instruments that are related to risk transfer, such as; insurance risk selection, risk quality follow-up by providing accurate and complete information, effective monitoring of level of claims by using risk portfolio claim frequency, treaties, facultative reinsurance contracts and coinsurance agreements, and risk management instruments, such as; risk limitations, are used in achieving the related objective.

Risk tolerance is determined by the Company’s Board of Directors by considering the Company’s long-term strategies, equity resources, potential returns and economical expectations, and it is presented by risk limitations. Authorization limitations during policy issuing include authorizations for risk acceptances granted based on geographical regions in relation to unacceptable special risks or pre-approved acceptable special risks, insurance coverage to agencies, district offices, technical offices, assistant general managers and top management in the policy issuance period and authorizations for claim payment granted to district offices, claim management administration, automobile claims administration and Claim Committee established by the managing director and assistant managing director in the claim payment period.

Whatsoever, risk acceptance is based on technical income expectations under the precautionary principle. In determining insurance coverage, policy terms and fee, these expectations are based accordingly

It is essential that all the authorized personnel in charge of executing policy issuance transactions, which is the initial phase of insurance process, should ensure to gather or provide all the accurate and complete information to issue policies in order to obtain evidence on the acceptable risks that the Company can tolerate from the related insurance transactions. On the other hand, decision to be made on risk acceptance will be possible by transferring the coverage to the reinsurers and/or co-insurers and considering the terms of the insurance policy.

In order to avoid destructive losses over company’s financial structure, company transfers the exceeding portion of risks assumed over the Company’s risk tolerance and equity resources through treaties, facultative reinsurance contracts and coinsurance agreements to reinsurance and coinsurance companies. Insurance coverage and policy terms of reinsurance are determined by assessing the nature of each insurance branch.

Insurance risks do not generally have significant unrecoverable losses in the course of ordinary transactions, except for risks associated with earthquake and other catastrophic risks. Therefore, there is a high sensitivity to earthquake and catastrophic risks.

The case of potential claims’ arising from earthquake and other catastrophic risks exceeding the maximum limit of the excess of loss agreements, such risks are treated as the primary insurance risks and are managed based on the precautionary principle. Maximum limit of excess of loss agreements is determined based on the worst case scenario on the possibility of an earthquake that Istanbul might be exposed to in terms of its severity and any potential losses incurred in accordance with the generally accepted international earthquake models. The total amount of protection for catastrophic risks of the company is identified taking into the compensation amount for an earthquake will occur in a 1000 years.

Anadolu Sigorta Annual Report 2015 142 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Insurance risk concentration

The Company’s gross and net insurance risk concentrations (after reinsurance) in terms of insurance branches are summarized as below: Total claims liability (*) Gross total claims Reinsurance share of Net total 31 December 2015 liability total claims liability claims liability Motor vehicles liability (MTPL) 792.901.221 (19.137.207) 773.764.014 General liability 362.417.122 (71.333.402) 291.083.720 Fire and natural disasters 325.947.406 (233.078.873) 92.868.533 General losses 135.123.261 (98.567.511) 36.555.750 Motor vehicles 121.797.869 489.732 122.287.601 Watercrafts 44.281.777 (28.552.564) 15.729.213 Marine 36.165.288 (23.526.688) 12.638.600 Accident 23.179.924 (4.057.472) 19.122.452 Financial losses 13.682.143 (12.926.920) 755.223 Aircrafts liability 11.311.404 (715.949) 10.595.455 Aircrafts 6.676.863 (1.487.700) 5.189.163 Illness/health 2.435.130 (163.213) 2.271.917 Credit 2.257.355 (13.000) 2.244.355 Legal protection 801.653 (107) 801.546 Total 1.878.978.416 (493.070.874) 1.385.907.542

Total claims liability (*) Gross total claims Reinsurance share of Net total 31 December 2014 liability total claims liability claims liability Motor vehicles liability (MTPL) 536.683.814 (16.321.658) 520.362.156 General liability 302.883.129 (35.816.816) 267.066.313 Fire and natural disasters 126.898.890 (67.749.236) 59.149.654 General losses 68.615.172 (41.639.167) 26.976.005 Motor vehicles 83.781.790 1.274.635 85.056.425 Watercrafts 35.733.940 (18.673.835) 17.060.105 Marine 19.805.194 (13.706.887) 6.098.307 Aircrafts 28.943.534 (20.172.876) 8.770.658 Financial losses 17.017.918 (15.402.033) 1.615.885 Accident 15.096.696 (1.291.762) 13.804.934 Aircrafts liability 4.955.110 (59.627) 4.895.483 Illness/health 1.936.936 (53.446) 1.883.490 Credit 759.191 (186.986) 572.205 Legal protection 876.450 31 876.481 Total 1.243.987.764 (229.799.663) 1.014.188.101

(*) Total claims liability includes outstanding claims reserve (excluding contingent amounts deducted from claims reserve determined by winning probability) and incurred but not reported claims.

Anadolu Sigorta Annual Report 2015 143

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Gross and net insurance risk concentrations of the insurance contracts (after reinsurance) based on geographical regions are summarized as below: Total claims liability (*) Gross total Reinsurance share of Net total 31 December 2015 claims liability total claims liability claims liability

Turkey 1.443.297.017 (463.960.502) 979.336.515 Europe 1.493.087 (68.658) 1.424.429 Africa 233.465 (156.388) 77.077 Asia 107.555 -- 107.555 Total 1.445.131.124 (464.185.548) 980.945.576

Total claims liability (*) Gross total Reinsurance share of Net total 31 December 2015 claims liability total claims liability claims liability

Marmara Region 1.137.664.480 (412.169.503) 725.494.977 Middle Anatolian Region 74.902.822 (3.465.073) 71.437.749 Aegean Region 53.281.050 (3.272.023) 50.009.027 Mediterranean Region 52.863.005 (7.216.702) 45.646.303 South East Anatolian Region 40.096.870 (9.169.708) 30.927.162 Black Sea Region 42.423.121 (16.263.951) 26.159.170 East Anatolian Region 42.065.669 (12.403.542) 29.662.127 Total 1.443.297.017 (463.960.502) 979.336.515

(*) Total claims liability includes estimated compensation amounts for realized claims. Gross incurred but not reported claims amounting to TL 483.809.233 additional provision for outstanding claims per adequacy test amounting to TL 54.901.010 outstanding claims of treaty activities which could not be distributed to geographical regions and the contingent amounts deducted from claims reserve amounting to TL (104.862.951) are excluded from the table.

Total claims liability (*) Gross total Reinsurance share of Net total 31 December 2014 claims liability total claims liability claims liability

Turkey 945.064.232 (221.076.633) 723.987.599 Europe 1.905.186 (566.539) 1.338.647 America 156.303 (95.322) 60.981 Asia 224.723 (4.829) 219.894 Total 947.350.444 (221.743.323) 725.607.121

Total claims liability (*) Gross total Reinsurance share of Net total 31 December 2014 claims liability total claims liability claims liability

Marmara Region 522.387.693 (121.442.279) 400.945.414 Middle Anatolian Region 137.929.862 (43.864.250) 94.065.612 Aegean Region 73.890.193 (11.987.253) 61.902.940 Mediterranean Region 68.908.939 (10.656.183) 58.252.756 South East Anatolian Region 43.207.867 (7.764.575) 35.443.292 Black Sea Region 34.487.066 (2.878.530) 31.608.536 East Anatolian Region 64.252.612 (22.483.563) 41.769.049 Total 945.064.232 (221.076.633) 723.987.599

(*) Total claims liability includes estimated compensation amounts for realized claims. Gross incurred but not reported claims amounting to TL 327.611.024 additional provision for outstanding claims per adequacy test amounting to TL 44.286.418 outstanding claims of treaty activities which could not be distributed to geographical regions and the contingent amounts deducted from claims reserve amounting to TL (75.260.122) are excluded from the table.

Anadolu Sigorta Annual Report 2015 144 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Given insurance collateral amounts in respect to branches 31 December 2015 31 December 2014

Motor vehicles liability (MTPL) 5.815.758.509.513 4.654.710.390.062 Illness/health 127.386.361.920 151.297.301.000 Fire and natural disasters 113.337.662.301 96.950.579.558 Accident 108.257.529.723 96.127.353.408 General liability 46.994.504.007 59.258.632.580 General losses 46.367.784.061 37.012.012.369 Motor vehicles 46.280.638.734 40.623.491.870 Marine 17.497.239.726 14.331.713.699 Aircrafts liability 5.194.503.027 5.324.064.633 Legal protection 4.776.739.825 4.184.780.935 Watercrafts 2.115.462.411 1.904.293.907 Financial losses 707.337.973 469.945.601 Aircrafts 570.396.075 429.356.389 Total(*) 6.335.244.669.296 5.162.623.916.011

(*) Net amount which deducted share of reinsurance and social security

4.2 Management of financial risk

Introduction and overview

This note presents information about the Company’s exposure to each of the below risks, the Company’s objectives, policies and processes for measuring and managing risk, and the Company’s management of capital. The Company has exposure to the following risks from its use of financial instruments:

• credit risk • liquidity risk • market risk

The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. Duties and responsibilities of the Risk Management and Internal Control Department include design and implementation of risk management system and identification and implementation of risk management policies. It is also responsible for ensuring that the Company implements all necessary risk management techniques. Activities of the Risk Management and Internal Control Department are managed directly by General Manager. The Board of Directors monitors the effectiveness of the risk management system through the internal audit department.

Risk management policies and guidelines are set by the Board of Directors and applied by the top management. These policies include organisation and scope of the risk management function, risk measurement and assessment methods, duties and responsibilities of the Board of Directors, top management and all of the employees, procedures followed in the case of limit extension and compulsory approval and confirmation processes for certain situations.

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ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Credit Risk

Credit risk is most simply defined as the potential that a bank borrower or counterparty will fail to meet its obligations in accordance with agreed terms. The balance sheet items that the Company is exposed to credit risks are as follows:

• Cash at banks • Other cash and cash equivalents • Available for sale financial assets (except equity-shares) • Financial assets held for trading (except equity-shares) • Held to maturity financial asset • Premium receivables from policyholders • Receivables from intermediaries (agencies) • Receivables from reinsurance companies related to commissions and claims paid • Reinsurance shares of insurance liability • Receivables from related parties • Other receivables

Reinsurance contracts are the most common method to manage insurance risk. 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 creditworthiness of reinsurers is considered on an annual basis by reviewing their financial strength prior to finalization of the reinsurance contract.

Net carrying value of the assets that is exposed to credit risk is shown in the table below. 31 December 2015 31 December 2014

Cash and cash equivalents (Note 14) 2.305.010.933 1.606.182.886 Receivables from main operations (Note 12) 928.282.683 797.454.113 Financial assets (Note 11) (*) 562.261.032 539.941.067 Reinsurer share in provision for outstanding claims (Note 10), (Note 17) 493.070.874 229.799.663 Prepaid taxes and funds (Note 19) 22.398.667 1.848.492 Other receivables (Note 12) 12.586.556 5.321.041 Other prepaid expenses (Note 10) 5.577.825 2.733.430 Other miscellaneous current assets (Not 12) 257.186 169.734 Total 4.329.445.756 3.183.450.426

(*) Equity shares amounting to TL 118.551.481 are not included (31 December 2014: 104.126.890 TL).

Anadolu Sigorta Annual Report 2015 146 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

As at 31 December 2015 and 31 December 2014, the aging of the receivables from main operations is as follows: 31 December 2015 31 December 2014 Gross Amount Provision Gross Amount Provision

Not past due 662.243.535 -- 583.917.123 -- Past due 0-30 days 90.517.564 -- 89.759.753 -- Past due 31-60 days 16.577.325 -- 13.190.866 -- Past due 61-90 days 5.602.047 -- 3.147.750 -- More than 90 days (*) 154.676.931 (150.758.235) 116.737.854 (113.380.507) Total (**) 929.617.402 (150.758.235) 806.753.346 (113.380.507)

(*) As per the 3 February 2005 dated and B.02.1.HM.O.SGM.0.3.1/01/05 numbered Circular issued by the Turkish Treasury, in case where subrogation is subject to claim/legal action, related subrogation amount is recognized as doubtful receivables and allowance for doubtful receivables is provided by the same amount in the financial statements. Related amounts are presented in “More than 90 days” line in the above table. (**) Except for TL 929.617.402 TL (31 December 2014: 806.753.346 TL) presented under receivables from insurance operations in the financial statements, this amount also includes TL 108.102.177 (31 December 2014: 81.109.551 TL) of not-transferred amount collected by intermediaries and TL 49.626.517 (31 December 2014: 30.648.790 TL) of subrogation and salvage receivables. Subrogation receivables having past over 4 months for individuals and 6 months for legal entities but not transferred to legal follow-up amounting to TL 8.305.178 (31 December 2014: 7.677.067 TL) are excluded from the table.

The movements of the allowances for impairment losses for receivables from main operations during the period are as follows: 31 December 2015 31 December 2014

Provision for receivables from insurance operations at the beginning of the period 113.380.507 102.829.158 Collections during the period (Note 47) (348.983) (1.071.425) Impairment losses provided during the period (Note 47) 748.206 2.518.673 Impairment losses provided for subrogation - salvage receivables during the period (Note 47) 36.978.505 9.104.101 Provision for receivables from insurance operations at the end of the period 150.758.235 113.380.507

Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in raising funds to meet cash commitments associated with financial instruments.

Management of the liquidity risk

The Company considers the maturity match between asset and liabilities for the purpose of avoiding liquidity risk and ensure that it will always have sufficient liquidity to meet its liabilities when due.

Anadolu Sigorta Annual Report 2015 147

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Maturity distribution of monetary assets and liabilities:

Carrying Up to 1 to 3 to 6 6 to 12 Over 31 December 2015 amount 1 month 3 months months months 1 year Unallocated

Cash and cash equivalents 2.304.904.212 757.875.875 1.537.438.950 ------9.589.387 Financial assets 680.812.513 11.888.027 22.176.537 13.944.222 72.233.650 304.131.367 256.438.710 Receivables from main operations 928.282.683 81.504.262 345.748.838 407.774.676 82.529.424 10.725.483 -- Other receivables and current assets 12.228.636 4.260.956 1.111.564 1.612.816 3.035.319 2.207.981 -- Other prepaid expenses 5.577.825 -- 1.348.196 -- -- 4.229.629 -- Total monetary assets 3.931.805.869 855.529.120 1.907.824.085 423.331.714 157.798.393 321.294.460 266.028.097

Insurance technical provisions (*) 1.385.907.542 193.379.758 386.759.515 157.100.713 146.675.348 501.992.208 -- Payables arising from main operations 339.189.344 108.657.637 41.382.701 70.857.244 118.291.762 -- -- Other liabilities 60.481.800 22.649.598 34.654.641 -- -- 3.177.561 -- Provisions for taxes and other similar obligations 37.088.955 37.088.955 ------Financial liabilities 210.669.647 210.669.647 ------Provisions for other risks and expense accruals 51.247.452 -- 17.120.234 9.759.024 7.690.111 16.678.083 -- Total monetary liabilities 2.084.584.740 572.445.595 479.917.091 237.716.981 272.657.221 521.847.852

(*) Provision for outstanding claims is presented as short term liabilities in the accompanying unconsolidated financial statements whereas maturity distribution is presented according to projected payment dated in the above table.

Carrying Up to 1 to 3 to 6 6 to 12 Over 31 December 2014 amount 1 month 3 months months months 1 year Unallocated

Cash and cash equivalents 1.606.048.714 563.509.281 960.079.777 82.459.656 ------Financial assets 644.067.957 16.290.316 29.820.736 33.595.436 43.855.877 248.492.451 272.013.141 Receivables from main operations 797.454.113 77.086.258 309.715.708 319.130.980 83.346.625 8.174.542 -- Other receivables and current assets 4.962.323 2.949.214 718.715 431.465 862.929 -- -- Other prepaid expenses 2.733.430 -- 1.250.015 1.483.415 ------Total monetary assets 3.055.266.537 659.835.069 1.301.584.951 437.100.952 128.065.431 256.666.993 272.013.141

Insurance technical provisions (*) 1.014.188.101 152.781.804 305.563.607 116.206.094 99.256.001 340.380.595 -- Payables arising from main operations 302.045.983 76.105.908 46.629.462 83.703.672 95.606.941 -- -- Other liabilities 47.561.333 18.251.375 26.393.381 -- -- 2.916.577 -- Provisions for taxes and other similar obligations 27.386.135 27.386.135 ------Provisions for other risks and expense accruals 47.233.313 -- 3.356.650 15.759.247 -- 28.117.416 -- Total monetary liabilities 1.438.414.865 274.525.222 381.943.100 215.669.013 194.862.942 371.414.588 --

(*) Provision for outstanding claims is presented as short term liabilities in the accompanying unconsolidated financial statements whereas maturity distribution is presented according to projected payment dated in the above table.

Anadolu Sigorta Annual Report 2015 148 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Market risk

Market risk is the risk that changes in market prices, such as interest rates, foreign exchange rates and credit spreads will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return on risk.

Currency risk

The Company is exposed to currency risk through insurance and reinsurance transactions in foreign currencies.

Foreign exchange gains and losses arising from foreign currency transactions are recorded at transaction dates. At the end of the periods, foreign currency assets and liabilities evaluated by the Central Bank of the Republic of Turkey’s spot purchase rates and the differences arising from foreign currency rates are recorded as foreign exchange gain or loss in the statement of income.

The Company’s exposure to foreign currency risk is as follows: 31 December 2015 US Dollar Euro Other currencies Total

Receivables from main operations 185.603.152 59.359.667 3.747.550 248.710.369 Financial assets 17.469.980 11.206.804 -- 28.676.784 Cash and cash equivalents 174.413.814 7.810.072 2.552.838 184.776.724 Total foreign currency assets 377.486.946 78.376.543 6.300.388 462.163.877

Insurance technical provisions 126.270.805 32.537.953 1.139.896 159.948.654 Payables arising from main operations 129.628.522 8.029.263 (158.758) 137.499.027 Total foreign currency liabilities 255.899.327 40.567.216 981.138 297.447.681

Net financial position 121.587.619 37.809.327 5.319.250 164.716.196

31 December 2014 US Dollar Euro Other currencies Total

Receivables from main operations 170.593.626 44.519.657 5.389.927 220.503.210 Financial assets -- 12.320.065 -- 12.320.065 Cash and cash equivalents 120.322.331 2.232.333 987.046 123.541.710 Total foreign currency assets 290.915.957 59.072.055 6.376.973 356.364.985

Insurance technical provisions 91.396.977 24.659.552 691.344 116.747.873 Payables arising from main operations 111.938.980 9.454.831 -- 121.393.811 Total foreign currency liabilities 203.335.957 34.114.383 691.344 238.141.684

Net financial position 87.580.000 24.957.672 5.685.629 118.223.301

TL equivalents of the related monetary amounts denominated in foreign currencies are presented in the above table.

If technical provision denominated in any currency not specified, ıt is evaluated are evaluated by the Central Bank of the Republic of Turkey’s spot sales rates as at 31 December 2015 (31 December 2014: spot sales rate) and Foreign currency transactions are recorded at the foreign exchange rates ruling at the dates of the transactions and foreign currency denominated monetary items are evaluated by the Central Bank of the Republic of Turkey’s spot purchase rates as at 31 December 2015 (31 December 2014: spot purchase rate.)

Anadolu Sigorta Annual Report 2015 149

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Exposure to currency risk

Foreign currency rates used for the translation of foreign currency denominated assets and liabilities as at 31 December 2015 and 31 December 2014 are as follows: US Dollar Euro

31 December 2015 2,9076 3,1776 31 December 2014 2,3189 2,8207

A 10 percent depreciation of the TL against the following currencies as at 31 December 2015 and 31 December 2014 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. 31 December 2014 31 December 2013 Profit or loss Equity (*) Profit or loss Equity (*)

US Dollar 12.099.615 12.158.762 8.758.000 8.758.000 Euro 3.780.933 3.780.933 2.495.767 2.495.767 Other 531.925 531.925 568.563 568.563 Total, net 16.412.473 16.471.620 11.822.330 11.822.330

(*) Equity effect also includes profit or loss effect of 10% depreciation of TL against related currencies.

Exposure to financial risk

The principal risk to which non-trading portfolios are exposed is the risk of loss from fluctuations in the future cash flows or fair values of financial instrument because of a change in market interest rates. Interest rate risk is managed principally through monitoring interest rate gaps and by having pre-approved limits for repricing bands.

As at reporting date; the interest rate profile of the Company’s interest earning financial assets and interest bearing financial liabilities are detailed as below: 31 December 2015 31 December 2014

Financial assets with fixed interest rates:: Cash at banks (Note 14) 1.928.245.489 1.350.525.371 Other financial liabilities (210.669.647) -- Available for sale financial assets - Government bonds (Note 11) 310.377.056 260.405.699 Available for sale financial assets - Private debt securities (Note 11) 25.540.683 -- Cash deposited to insurance and reinsurance companies (Note 12) 7.840.311 6.739.965 Other-financial assets (Note 11) 11.888.027 5.887.281

Financial assets with variable interest rates:: Held to maturity investments - Government bonds (Note 11) 15.555.214 73.670.047 Available for sale financial assets - Government bonds (Note 11) 34.236.829 11.198.005 Available for sale financial assets - Private debt securities (Note 11) 25.877.633 19.993.767 Financial assets held for trading - Government bonds (Note 11) 898.362 900.017 (*) Demand deposits amounting to TL 9.589.387 are not included (31 December 2014: 6.208.075 TL).

Anadolu Sigorta Annual Report 2015 150 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Interest rate sensitivity of the financial instruments

Interest rate sensitivity of the statement of income is the effect of the assumed changes in interest rates on the fair values of financial assets at fair value through profit or loss and on the net interest income for the periods ended 31 December 2015 and 2014 of the floating rate non-trading financial assets and financial liabilities held at 31 December 2015 and 2014. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The table below demonstrating the effect of changes in interest rates on statement of income and equity excludes tax effects on related loss or income. Profit or loss Equity (*) 31 December 2015 100 bp increase 100 bp decrease 100 bp increase 100 bp decrease

Financial assets held for trading (1.842) 1.889 (1.842) 1.889 Available for sale financial assets -- -- (3.958.553) 4.116.851 Total, net (1.842) 1.889 (3.960.395) 4.118.740

(*) Equity effect also includes profit or loss effect.

Profit or loss Equity (*) 31 December 2014 100 bp increase 100 bp decrease 100 bp increase 100 bp decrease

Financial assets held for trading (20.889) 21.616 (20.889) 21.616 Available for sale financial assets ------Total, net (20.889) 21.616 (20.889) 21.616

(*) Equity effect also includes profit or loss effect.

Fair value information

The estimated fair values of financial instruments have been determined using available market information, and where they exist, appropriate valuation methodologies.

The Company has classified its financial assets as held for trading, available for sale or held to maturity. As at the reporting date, available for sale financial assets and financial assets held for trading are measured at their fair values based on their quoted prices or fair value information obtained from brokers in the accompanying unconsolidated financial statements. Equity shares not traded in active markets are measured at cost less impairment losses if any. Held to maturity investments with a carrying amount of TL 15.555.214 (31 December 2014: 73.670.047 TL) are measured at amortised cost and their fair value amounting to TL14.936.855 TL (31 December 2014: 74.133.508 TL) as at 31 December 2015.

Management estimates that the fair value of other financial assets and liabilities are not materially different than their carrying amounts.

Fair value sensitivity of the equities

Equity price risk is the risk that the fair values of equities decrease as a result of the changes in the levels of equity indices and the value of individual stocks.

Anadolu Sigorta Annual Report 2015 151

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

The effect on income as a result of 10% change in the fair value of equity instruments held as held for trading financial assets (traded at İstanbul Stock Exchange) due to a reasonably possible change in equity indices, with all other variables held constant, is as follows (excluding tax effect): 31 December 2015 31 December 2014 Profit or loss Equity (*) Profit or loss Equity (*)

Financial assets held for trading (265.467) (265.467) (303.683) (303.683) Available for sale financial assets -- (11.486.174) -- (9.717.561) Associates -- (49.528.000) -- (39.140.000) Total, net (265.467) (61.279.641) (303.683) (49.161.244)

(*) Equity impact includes impact of change of conjectural interest rates on income statement.

Classification of fair value measurements

TFRS 7 - Financial instruments: Disclosures requires the classification of fair value measurements into a fair value hierarchy by reference to the observability and significance of the inputs used in measuring fair value of financial instruments measured at fair value to be disclosed. This classification basically relies on whether the relevant inputs are observable or not. Observable inputs refer to the use of market data obtained from independent sources, whereas unobservable inputs refer to the use of predictions and assumptions about the market made by the Company. This distinction brings about a fair value measurement classification generally as follows:

Level 1: Fair value measurements using quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: Fair value measurements using inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices).

Level 3: Fair value measurements using inputs for the assets or liability that are not based on observable market data (unobservable inputs).

Classification requires the utilization of observable market data, if available.

The classification of fair value measurements of financial assets and liabilities measured at fair value is as follows: 31 December 2015 Level 1 Level 2 Level 3 Total

Financial assets: Associates (Note 9) 495.280.000 -- -- 495.280.000 Financial assets held for trading (Note 11) 96.232.135 -- -- 96.232.135 Available for sale financial assets (*) (Note 11) 567.990.094 -- 358.464 568.348.558 Total financial assets 1.159.502.229 -- 358.464 1.159.860.693 31 December 2014 Level 1 Level 2 Level 3 Total

Financial assets: Associates (Note 9) 391.400.000 -- -- 391.400.000 Financial assets held for trading (Note 11) 134.054.733 -- -- 134.054.733 Available for sale financial assets (*) (Note 11) 432.428.727 -- 3.297.263 435.725.990 Total financial assets 957.883.460 -- 3.297.263 961.180.723

(*) As at 31 December 2015, securities that are not publicly traded and the determination of fair values could not be obtained reliably amounting to TL, 676.606 have been measured at cost (31 December 2014: 617.187 TL).

Anadolu Sigorta Annual Report 2015 152 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

The following table shows the fair value measurements financial assets available for sales which classified as Level 3: 31 December 2015 31 December 2014

Financial assets available for sale beginning of the period 3.297.263 3.297.263 Capital increase by bonus issue 42.626 -- Avea İletişim Hizmetleri A.Ş. sale of shares (2.981.425) Financial assets available for sale ending of the period 358.464 3.297.263

Gains and losses from financial assets Gains and losses recognized in the statement of income: 31 December 2015 31 December 2014

Interest income from bank deposits 168.846.805 99.252.595 Foreign exchange gains 109.289.546 59.970.980 Income from investments in associates 18.000.000 16.000.000 Income from equity shares classified as available-for-sale financial assets 32.656.433 35.373.747 Income from equity shares classified as trading financial assets 74.661 75.040 Income from debt securities classified as held to maturity financial investments 3.511.381 10.730.801 Income from equity shares classified as available-for-sale financial assets 12.782.052 10.197.910 Income from equity shares classified as trading financial assets 430.223 702.880 Income from investment funds as available for sale financial assets 498.879 7.810.467 Income from investment funds as trading financial assets 6.817.395 13.498.121 Income from derivative transactions 674.700 205.678 Other 1.318.055 3.106.153 Investment income 354.900.130 256.924.372

Loss from valuation of financial assets (2.824.154) (3.509.979) Foreign exchange losses (61.168.299) (49.954.025) Loss from derivative transactions (74.638) (184.509) Loss from disposal of financial assets (9.629.064) (7.713.065) Investment expenses - including interest (939.230) (136.623) Investment expenses (74.635.385) (61.498.201)

Financial gains and losses recognized in the statement of income, net 280.264.745 195.426.171

Financial gains and losses recognized in equity: 31 December 2015 31 December 2014

Fair value changes in investments in associates (Note 15) 115.880.000 23.200.000 Net gains transferred from statement of equity to the statement of income on disposal of available for sale financial assets (Note 15) 617.378 (3.609.723) Fair value changes in available-for-sale financial assets (Note 15) (22.500.629) 15.041.450 Gains and losses recognized in equity, net 93.996.749 34.631.727

Anadolu Sigorta Annual Report 2015 153

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Capital management

The Company’s capital management policies include the following:

• To comply with the insurance capital requirements required by the Turkish Treasury • To safeguard the Company’s ability to continue as a going concern

In accordance with the “Communiqué on Measurement and Assessment of Capital Adequacy for Insurance, Reinsurance and Individual Pension Companies” issued by Turkish Treasury on 19 January 2008 dated and 26761 numbered; the Company measured its minimum capital requirement as TL 857.574.388 as at 30 June 2015. As at 31 December 2015, the capital amount of the Company presented in the unconsolidated financial statements are above the minimum capital requirement amounts calculated according to the communiqué.

5 Segment reporting

A segment is a distinguishable component of the Company that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.

Business segment

A business segment reporting of the Company is presented in accordance with TFRS 8 - Operating Segments standard in this section.

Insurance on Fire and Natural Disaster

Insurance on fire and natural disasters covers material damages occurred due to fire, lightining, explotion or smoke, steam and temperature resulted from fire, lightning and explosion up to insurance policy limits.

Motor Third Party Liability Insurance

According to the Motorway Traffic Code numbered 2918, Motor Third Party Liability Insurance is covers vehicle owner’s legal liability for all bodily damages to third persons and financial damages to other vehicles.

Damages caused by the trailer or semi-trailers (included light trailers) or the vehicles pulled is covered by the insurance of the trailer. However, the trailers used for transportation of people should be included in an additional liability insurance in order to obtain coverage.

In order to reduce and prevent the damage in the accident happened, reasonable and necessary expenses of the policyholder is compensated by the Company. This insurance also covers unfair claims against the policyholders.

Motor Vehicles

Insurance on motor vehicles covers the following dangers related with vehicles. It is possible to widen policy scope for accessories or audio, display and communication devices which are not included in standard version of the vehicle by specifying on the insurance policy.

• Accident with the motorized or non-motorized vehicles which used in high-ways, • Crash with fixed or moving items without desire of the driver or accidents due to crash, capsize, fall or tumble • The actions of third parties resulted from bad intention or mischief, • Burn, • Theft or attempted theft.

Anadolu Sigorta Annual Report 2015 154 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Illness/health

Insurance on illness/health compensates treatment costs of illnesses or accidental injuries during the period of insurance and, if any, daily allowances in this general framework with special conditions up to the amount written in the policy. Geographical limits of the insurance are stated in the policy.

Geographical segment

The main geographical segment which the Company operates is Turkey. Hence, the Company has not disclosed report on geographical segments.

Fire and Motor third Motor natural party liability Illness/health vehicles disasters Other Unallocated Total

1 January - 31 December 2015 1- Earned Premiums (Net of Reinsurer Share) 762.001.651 290.123.192 791.787.471 242.188.093 435.253.878 -- 2.521.354.285 1.1- Written Premiums (Net of Reinsurer Share) 933.836.452 301.804.016 843.260.116 261.519.107 439.337.763 -- 2.779.757.454 1.2- Change in Reserve for Unearned Premiums (Net of Reinsurer Shares and Less the Amounts Carried Forward) (171.834.801) (11.680.824) (51.472.645) (19.331.014) (37.978.017) -- (292.297.301) 1.3- Change in Reserve for Unexpired Risks (Net of Reinsurer Share and Less the Amounts Carried Forward) ------33.894.132 -- 33.894.132 2- Other Technical Income (Net of Reinsurer Share) 43.367 248.437 5.491.360 106.912 42.847 -- 5.932.923 3- Accrued Salvage and Subrogation Income 16.439.013 (5.072) 19.591.103 6.020.766 14.387.303 -- 56.433.113 Technical Income (*) 778.484.031 290.366.557 816.869.934 248.315.771 449.684.028 -- 2.583.720.321

1- Incurred Losses (Net of Reinsurer Share) (806.999.557) (249.811.507) (588.829.058) (154.540.083) (256.570.622) -- (2.056.750.827) 1.1- Claims Paid (Net of Reinsurer Share) (553.597.698) (249.423.079) (551.597.881) (120.821.205) (209.591.523) -- (1.685.031.386) 1.2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward) (253.401.859) (388.428) (37.231.177) (33.718.878) (46.979.099) -- (371.719.441) 2- Change in Other Technical Reserves (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- (4.524.662) (13.431.353) (3.039.836) -- (20.995.851) 3- Operating Expenses (193.371.257) (58.075.656) (190.322.001) (70.014.458) (93.540.701) -- (605.324.073) 4- Other Technical Provisions (14.368.726) (9.773.575) (32.811.780) (10.192.417) (6.411.869) -- (73.558.367) Technical Expense (1.014.739.540) (317.660.738) (816.487.501) (248.178.311) (359.563.028) -- (2.756.629.118)

Investment Income 368.012.898 368.012.898 Investment Expense (*) (105.871.665) (105.871.665) Other (**) (17.146.341) (17.146.341) Net loss before tax 72.086.095 72.086.095

Income tax (8.279.853) (8.279.853)

Net loss 63.806.242 (*) Investment income transferred to non-technical section from technical section amounting to TL 276.542.615 is not included. (**) Deferred tax income amounting TL 6.509.894 is presented as income tax.

Anadolu Sigorta Annual Report 2015 155

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Fire and Motor third Motor natural party liability Illness/health vehicles disasters Other Unallocated Total

1 January - 31 December 2014 1- Earned Premiums (Net of Reinsurer Share) 704.976.162 242.507.645 786.541.564 190.560.310 311.173.659 -- 2.235.759.340 1.1- Written Premiums (Net of Reinsurer Share) 698.476.272 256.547.252 790.728.883 213.840.185 365.517.469 -- 2.325.110.061 1.2- Change in Reserve for Unearned Premiums (Net of Reinsurer Shares and Less the Amounts Carried Forward) 6.499.890 (14.039.607) (4.187.319) (23.279.875) (27.082.837) -- (62.089.748) 1.3- Change in Reserve for Unexpired Risks (Net of Reinsurer Share and Less the Amounts Carried Forward) ------(27.260.973) -- (27.260.973) 2- Other Technical Income (Net of Reinsurer Share) 65.238 320.015 2.276.330 93.174 34.052 -- 2.788.809 3- Accrued Salvage and Subrogation Income 5.516.244 -- 5.561.204 918.516 163.266 -- 12.159.230 Technical Income (*) 710.557.644 242.827.660 794.379.098 191.572.000 311.370.977 -- 2.250.707.379

1- Incurred Losses (Net of Reinsurer Share) (579.959.219) (199.455.063) (555.299.019) (98.225.647) (305.140.113) -- (1.738.079.061) 1.1- Claims Paid (Net of Reinsurer Share) (437.438.283) (198.906.106) (529.436.786) (82.711.965) (163.869.132) -- (1.412.362.272) 1.2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward) (142.520.936) (548.957) (25.862.233) (15.513.682) (141.270.981) -- (325.716.789) 2- Change in Other Technical Reserves (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- (3.035.177) (10.577.300) (2.357.559) -- (15.970.036) 3- Operating Expenses (181.604.847) (44.314.719) (186.178.682) (38.744.510) (71.843.471) -- (522.686.229) 4- Other Technical Provisions (10.218.490) (6.594.484) (14.949.198) (5.851.538) (5.608.222) -- (43.221.932) Technical Expense (771.782.556) (250.364.266) (759.462.076) (153.398.995) (384.949.365) -- (2.319.957.258)

Investment Income 258.928.064 258.928.064 Investment Expense (*) (85.160.523) (85.160.523) Other (**) (19.132.198) (19.132.198) Net loss before tax 85.385.464

Income tax (13.685.863) (13.685.863)

Net loss 71.699.601 (*) Investment income transferred to non-technical section from technical section amounting to TL 190.509.410 is not included. (**) Deferred tax income amounting TL 7.396.097 is presented as income tax.

Anadolu Sigorta Annual Report 2015 156 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

6 Tangible assets

Movements in tangible assets in the period from 1 January to 31 December 2015 are presented below: Difference 1 January 2015 Additions Transfers Disposal of valuation 31 December 2015

Cost: Investment properties (Note 7) 36.242.000 59.500 10.584.507 -- 7.457.593 54.343.600 Buildings for own use 6.788.733 304.228 (10.584.507) -- 15.023.946 11.532.400 Machinery and equipment 34.554.018 7.449.593 -- (94.217) -- 41.909.394 Furniture and fixtures 11.775.416 596.516 -- (118.232) -- 12.253.700 Motor Vehicles 1.362.223 -- -- (742.487) -- 619.736 Other tangible assets (including leasehold improvements) 19.401.127 921.528 ------20.322.655 Leased tangible assets 4.166.354 ------4.166.354 114.289.871 9.331.365 -- (954.936) 22.481.539 145.147.839 Accumulated depreciation: Investment properties (Note 7) ------Buildings for own use 2.041.475 33.579 -- -- (2.041.475) 33.579 Machinery and equipment 25.913.753 3.776.154 -- (66.717) -- 29.623.190 Furniture and fixtures 9.395.902 692.013 -- (111.701) -- 9.976.214 Motor vehicles 773.729 113.404 -- (606.901) -- 280.232 Other tangible assets (including leasehold improvements) 6.853.450 3.352.816 ------10.206.266 Leased tangible assets 4.166.304 50 ------4.166.354 49.144.613 7.968.016 -- (785.319) (2.041.475) 54.285.835

Carrying amounts 65.145.258 90.862.004

(*) Property for own usage is shown as fair value as of third quarter of 2015 and presented as cost value in previous periods.

Company’s property for own use is valuated over fair value as of 2015 year-end and subjected to valuation in this context. Expertise reports regarding this property are prepared by CMB licenced Property Valuation Company in June and July 2015. There is not any hypothec over Company’s property for use.

As of 31 December 2015, property for use’s fair value (except VAT) and net book value is as following: Net Book Value Landings and Buildings For Use Expertise value (31 December 2015)

İzmir Regional Office 7.957.400 7.938.011 Adana Regional Office 1.750.000 1.745.694 Lefkoşe Kıbrıs Branch 720.000 716.571 Adana Office 425.000 423.935 Others 680.000 674.610 Total 11.532.400 11.498.821

Anadolu Sigorta Annual Report 2015 157

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Fair value measurement

Fair value of landings and buildings for use is determined by equivalence value method. Fair value measurement of landings and buildings for use those fair value is determined by equivalence value method is reclassified as Level 2.

Movements in tangible assets in the period from 1 January to 31 December 2014 are presented below: Difference 1 January 2014 Additions Disposals of valuation 31 December 2014

Cost: Investment properties (Note 7) 36.242.000 ------36.242.000 Buildings for own use 6.520.974 319.222 (51.463) -- 6.788.733 Machinery and equipment 32.800.391 2.925.379 (1.171.752) -- 34.554.018 Furniture and fixtures 11.331.085 444.331 -- -- 11.775.416 Motor Vehicles 1.285.983 383.160 (306.920) -- 1.362.223 Other tangible assets (including leasehold improvements) 18.262.277 1.138.850 -- -- 19.401.127 Leased tangible assets 4.166.354 ------4.166.354 110.609.064 5.210.942 (1.530.135) -- 114.289.871 Accumulated depreciation: Investment properties (Note 7) -- 139.655 -- (139.655) -- Buildings for own use 1.935.467 131.780 (25.772) -- 2.041.475 Machinery and equipment 23.879.216 3.198.899 (1.164.362) -- 25.913.753 Furniture and fixtures 8.729.811 666.091 -- -- 9.395.902 Motor vehicles 813.465 215.321 (255.057) -- 773.729 Other tangible assets (including leasehold improvements) 3.593.702 3.259.748 -- -- 6.853.450 Leased tangible assets 4.166.105 199 -- -- 4.166.304 43.117.766 7.611.693 (1.445.191) (139.655) 49.144.613

Carrying amounts 67.491.298 65.145.258

There is not any mortgage over tangible assets of the Company as at 31 December 2015 and 31 December 2014.

7 Investment properties

Additions and disposals for investment properties is given “6- Tangible Assets” note in table of current period movement of tangible assets.

Investment property is presented by fair value method as of third quarter of current period on balance sheet and detailed information regarding policy change is given 2.1.6 note.

Company’s investment property gained TL 7.457.593 amount of value in 2015 in the context of expertise report prepared by independent professional valuation specialists authorized by Capital Markets Board. From investment property, TL 1.797.989 amount of rent income is obtained in current accounting period (31 December 2014: TL 1.772.698)

As at 31 December 2015 and 2014, details of investment properties and the fair values are as follows Expertise reports regarding these property is prepared by independent professional valuation specialists authorized by CMB in June and August. There is not any hypothec on related property.

Anadolu Sigorta Annual Report 2015 158 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Expertise and net book value Net book value Net book value Net book value Investment land and buildings (31.12.2013) (31.12.2014) (31.12.2015)

Building/İzmir 15.500.000 15.500.000 26.542.600 Building/Mersin 13.350.000 13.350.000 16.300.000 Building/İzmir 7.392.000 7.392.000 8.670.000 Building/Bursa -- -- 2.000.000 Building/Adana -- -- 600.000 Other 231.000

Expertise and net book value 36.242.000 36.242.000 54.343.600

Fair value measurement

Fair value of investment property is determined by equivalence value method. Fair value measurement of investment property those fair value is determined by equivalence value method is reclassified as Level 2.

8 Intangible assets

Movements in intangible assets in the period from 1 January to 31 December 2015 are presented below: 1 January 2015 Additions Transfers Disposals 31 December 2015

Cost: Goodwill 16.250.000 ------16.250.000 Advances given for intangible assets 1.729.378 11.110.660 (3.404.691) -- 9.435.347 Other intangible assets 88.079.901 1.716.577 3.404.691 -- 93.201.169 106.059.279 12.827.237 -- -- 118.886.516 Accumulated amortization: Other intangible assets 43.804.438 23.190.615 (117.837) -- 66.877.216 43.804.438 23.190.615 (117.837) -- 66.877.216

Carrying amounts 62.254.841 52.009.300

Movements in intangible assets in the period from 1 January to 31 December 2014 are presented below: 1 January 2014 Additions Transfers Disposals 31 December 2014

Cost: Goodwill 16.250.000 ------16.250.000 Advances given for intangible assets 19.296.314 2.853.643 (20.420.579) -- 1.729.378 Other intangible assets 54.879.873 12.779.449 20.420.579 -- 88.079.901 90.426.187 15.633.092 -- -- 106.059.279 Accumulated amortization: Other intangible assets 27.614.154 16.190.284 -- -- 43.804.438 27.614.154 16.190.284 -- -- 43.804.438

Carrying amounts 62.812.033 62.254.841

Anadolu Sigorta Annual Report 2015 159

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

9 Investments in associates 31 December 2015 31 December 2014 Carrying Participation Carrying Participation value rate value rate Anadolu Hayat Emeklilik A.Ş. 495.280.000 %20,0 391.400.000 %20,0 Investments in associates, net 495.280.000 391.400.000

Total financial assets (Note 4.2) 495.280.000 391.400.000

Total Shareholders’ Retained Profit for Audited Name assets equity earnings the period or not Period Anadolu Hayat Emeklilik A.Ş. 31 December (consolidated) 11.893.996.679 783.025.976 101.289.300 145.882.820 Audited 2015

In the current period, the Company has bonus stocks amounting to TL 6.000.000 owing to capital expenditure from internal resources in income from subsidiaries. The Company has TL 12.000.000 of dividend income from subsidiaries.

10 Reinsurance assets and liabilities

As at 31 December 2015 and 31 December 2014, outstanding reinsurance assets and liabilities of the Company in accordance with existing reinsurance contracts are as follows: Reinsurance assets 31 December 2015 31 December 2014

Reserve for unearned premiums, ceded (Note 17) 341.649.490 294.929.264 Provision for outstanding claims, ceded (Note 4.2), (Note 17) 493.070.874 229.799.663 Reinsurers share in the provision for ongoing risk (Note 17) 12.046.676 12.307.870 Commission income accrual from reinsurers 159.943 1.250.015 Cash deposited to reinsurance companies (Note 12) 7.840.311 6.739.965 Reinsurers share in the provision for subrogation and salvage receivables 218.531 36.305 Total 854.985.825 545.063.082

There is no impairment losses recognised for reinsurance assets. Reinsurance liabilities 31 December 2015 31 December 2014

Payables to the reinsurers related to premiums written (Note 19) 188.370.605 188.610.275 Deferred commission income (Note 19) 54.739.019 45.447.065 Commission payables to the reinsurers related to written premiums (Note 23) 2.237.886 1.576.728 Cash deposited by reinsurance companies (Note 19) 4.365.775 7.277.133 Total 249.713.285 242.911.201

Anadolu Sigorta Annual Report 2015 160 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Gains and losses recognized in the statement of income in accordance with existing reinsurance contracts are as follows: 31 December 2015 31 December 2014

Premiums ceded during the period (Note 17) (731.404.966) (605.617.965) Reserve for unearned premiums, ceded at the beginning of the period (Note 17) (294.929.264) (290.028.419) Reserve for unearned premiums, ceded at the end of the period (Note 17) 341.649.490 294.929.264 Premiums earned, ceded (Note 17) (684.684.740) (600.717.120)

Claims paid, ceded during the period (Note 17) 256.117.378 140.834.682 Provision for outstanding claims, ceded at the beginning of the period (Note 17) (229.799.663) (135.357.501) Provision for outstanding claims, ceded at the end of the period (Note 17) 493.070.874 229.799.663 Claims incurred, ceded (Note 17) 519.388.589 235.276.844

Commission income accrued from reinsurers during the period 107.002.636 99.029.989 Deferred commission income at the beginning of the period 45.366.287 39.307.119 Deferred commission income at the end of the period (54.739.019) (45.366.287) Commission income earned from reinsurers 97.629.904 92.970.821

Commission debt accrued to reinsurers (2.237.886) (1.576.728) Commission receivable accrued from reinsurers 159.943 1.250.015 Total, net (69.744.190) (272.796.168)

11 Financial assets

As at 31 December 2015 and 31 December 2014, the Company’s financial assets are as follows: 31 December 2015 31 December 2014

Available for sale financial assets 569.121.106 442.140.789 Held to maturity financial assets 15.555.214 73.670.047 Financial assets held for trading 96.232.135 134.054.733 Impairment loss on available for sale financial assets (95.942) (5.797.612) Total 680.812.513 644.067.957

Anadolu Sigorta Annual Report 2015 161

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

As at 31 December 2015 and 31 December 2014, the Company’s available for sale financial assets are as follows: 31 December 2015 Face Face Carrying Value Cost Value Value

Debt instruments: Government bonds - TL 347.622.931 341.176.972 344.613.885 344.613.885 Private sector bonds - TL 33.660.000 33.339.144 33.948.336 33.948.336 Issued by İş Faktoring A.Ş. (Note 45) 5.800.000 5.479.144 5.522.064 5.522.064 Issued by İş Finansal Kiralama A.Ş. (Note 45) 5.000.000 5.000.000 5.046.154 5.046.154 Issued by İş Gayrimenkul Yatırım Ortaklığı A.Ş. (Note 45) 14.360.000 14.360.000 14.749.064 14.749.064 Others 8.500.000 8.500.000 8.631.054 8.631.054 Private sector bonds - USD 17.649.132 17.267.984 17.469.980 17.469.980 Issued by Türkiye Sınai Kalkınma Bankası A.Ş. (Note 45) 5.698.896 5.807.175 5.843.739 5.843.739 Others 11.950.236 11.460.809 11.626.241 11.626.241 398.932.063 391.784.100 396.032.201 396.032.201

Other non-fixed income financial assets: Investment funds 4.341.424.158 57.573.560 57.096.156 57.096.156 Issued by İş Portföy (Note 45) 4.340.847.658 57.346.386 56.859.827 56.859.827 Others 576.500 227.174 236.329 236.329 Equity shares 61.252.064 87.528.612 115.992.749 115.992.749 Impairment loss on Equity shares -- -- (95.942) (95.942) 4.402.676.222 145.102.172 172.992.963 172.992.963

Total available for sale financial assets (Note 4.2) 4.801.608.285 536.886.272 569.025.164 569.025.164

Anadolu Sigorta Annual Report 2015 162 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

31 December 2014 Face Face Carrying Value Cost Value Value

Debt instruments: Government bonds - TL 261.907.366 260.630.673 271.603.704 271.603.704 Private sector bonds - TL 19.560.000 19.561.015 19.993.767 19.993.767 Issued by ISGYO (Note 45) 14.360.000 14.360.000 14.713.703 14.713.703 Issued by ISFIN 5.000.000 5.000.000 5.078.714 5.078.714 Others 200.000 201.015 201.350 201.350 281.467.366 280.191.688 291.597.471 291.597.471

Other non-fixed income financial assets: Investment funds 3.714.742.000 43.165.318 43.655.648 43.655.648 Issued by İş Portföy (Note 45) 3.714.742.000 43.165.318 43.655.648 43.655.648 Equity shares 56.198.951 82.023.168 106.887.670 106.887.670 İmpairment loss on Equity shares -- -- (5.797.612) (5.797.612) 3.770.940.951 125.188.486 144.745.706 144.745.706

Total available for sale financial assets (Note 4.2) 4.052.408.317 405.380.174 436.343.177 436.343.177

As at 31 December 2015 and 31 December 2014, the Company’s financial assets held for trading are as follows: 31 December 2015 Face Fair Carrying Value Cost Value Value

Debt instruments: Government bonds - TL 900.000 905.152 898.362 898.362 Other - TL 11.884.791 11.888.027 11.888.027 900.000 12.789.943 12.786.389 12.786.389

Other non-fixed income financial assets: Investment funds 3.804.277.022 63.837.754 80.791.072 80.791.072 Founded by İş Portföy Yönetimi A.Ş. (Note 45) 3.804.186.891 56.033.754 69.584.268 69.584.268 Founded by İşbank AG (Note 45) 90.131 7.804.000 11.206.804 11.206.804 Equity shares 2.137.783 3.664.047 2.654.674 2.654.674 3.806.414.805 67.501.801 83.445.746 83.445.746

Total financial assets held for trading (Note 4.2) 3.807.314.805 80.291.744 96.232.135 96.232.135

Anadolu Sigorta Annual Report 2015 163

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

31 December 2014 Face Fair Carrying Value Cost Value Value

Debt instruments: Government bonds - TL 900.000 907.616 900.017 900.017 Other - TL -- 5.885.733 5.887.281 5.887.281 900.000 6.793.349 6.787.298 6.787.298

Other non-fixed income financial assets: Investment funds 7.393.158.949 106.660.295 124.230.603 124.230.603 Founded by Iş Bankası (Note 45) 120.605.000 9.009.287 15.972.195 15.972.195 Founded by Iş Portföy Yönetimi A.Ş.(Note 45) 7.272.463.818 89.847.008 95.938.343 95.938.343 Founded by Işbank AG (Note 45) 90.131 7.804.000 12.320.065 12.320.065 Equity shares 2.287.783 4.085.272 3.036.832 3.036.832 7.395.446.732 110.745.567 127.267.435 127.267.435

Total financial assets held for trading (Note 4.2) 7.396.346.732 117.538.916 134.054.733 134.054.733

As at 31 December 2015 and 31 December 2014, the Company’s financial assets held to maturity are as follows: 31 December 2015 Face Fair Carrying Value Cost Value Value

Debt instruments: Government bonds - TL 14.866.200 14.890.092 14.936.855 15.555.214 Total financial assets held to maturity 14.866.200 14.890.092 14.936.855 15.555.214

31 December 2014 Face Fair Carrying Value Cost Value Value

Debt instruments: Government bonds - TL 55.937.785 57.921.026 74.133.508 73.670.047 Total financial assets held to maturity 55.937.785 57.921.026 74.133.508 73.670.047

All debt instruments (financial assets held to maturity) presented above are publicly traded in active markets.

As at 31 December 2015, equity shares classified as available for sale financial assets with a carrying amount of TL 1.035.070 TL are not publicly traded (31 December 2014: 3.914.450 TL).

There is no debt security issued during the period or issued before and paid during the period by the Company.

There is no financial asset that is overdue but not impaired among the Company’s financial investments portfolio. As at 31 December 2015, TL 95.942 of impairment loss is recognised for equity shares classified as available for sale in the accompanying unconsolidated financial statements (31 December 2014: 5.797.612 TL).

Anadolu Sigorta Annual Report 2015 164 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Value increases in financial assets including equity shares classified as available for sale financial assets for the last 3 years (including tax effects): Change in value increase/ Total increase Year (decrease) in value

2015 93.996.749 430.663.565 2014 34.631.727 336.666.816 2013 89.799.174 302.035.089

Movements of the financial assets during the period are presented below: 31 December 2015 (*) Trading Available for sale Held to maturity Total Balance at the beginning of the period 128.167.452 436.343.177 73.670.047 638.180.676 Acquisitions during the period 10.000.000 599.793.354 -- 609.793.354 Disposals (sale and redemption) (58.662.297) (497.664.595) (61.626.214) (617.953.106) Change in the fair value of financial assets (Note 15) 4.838.953 24.897.206 -- 29.736.159 Change in amortized cost of the financial assets -- -- 3.511.381 3.511.381 Bonus shares acquired -- 5.656.022 -- 5.656.022 Balance at the end of the period 84.344.108 569.025.164 15.555.214 668.924.486

(*) Amount of reverse repo to TL 11.888.027 (31 December 2014: 5.887.281 TL) are excluded.

31 December 2014 (*) Trading Available for sale Held to maturity Total Balance at the beginning of the period 59.183.393 450.876.549 94.501.549 604.561.491 Acquisitions during the period 90.450.000 450.725.656 -- 541.175.656 Disposals (sale and redemption) (30.910.832) (494.361.599) (18.745.842) (544.018.273) Change in the fair value of financial assets (Note 15) 9.444.891 24.347.100 -- 33.791.991 Change in amortized cost of the financial assets -- -- (2.085.660) (2.085.660) Bonus shares acquired -- 4.755.471 -- 4.755.471 Balance at the end of the period 128.167.452 436.343.177 73.670.047 638.180.676

(*) Amount of reverse repo to TL 5.887.281 (31 December 2013: TL 26.447.255) are excluded.

Anadolu Sigorta Annual Report 2015 165

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Financial assets blocked in favour of the Turkish Treasury as a guarantee for the insurance activities are as follows. 31 December 2015 Face Fair Carrying Value Cost Value Value

Held to maturity financial assets (Note 17) 14.866.200 14.890.092 14.936.855 15.555.214 Total 14.866.200 14.890.092 14.936.855 15.555.214

31 December 2014 Face Fair Carrying Value Cost Value Value

Available for sale financial assets (Note 17) 10.000.000 9.801.651 10.145.962 10.145.962 Held to maturity financial assets (Note 17) 55.937.785 57.921.026 74.133.508 73.670.047 Total 65.937.785 67.722.677 84.279.470 83.816.009

12 Loans and receivables 31 December 2015 31 December 2014

Receivables from main operations (Note 4.2) 928.282.683 797.454.113 Other receivables (Note 4.2) 12.586.556 5.321.041 Income prepaid expenses (Note 4.2), (Note 10) 5.577.825 2.733.430 Other current assets (Note 4.2) 257.186 169.734 Total 946.704.250 805.678.318

Short-term receivables 944.496.269 805.678.318 Long and medium-term receivables 2.207.981 -- Total 946.704.250 805.678.318

As at 31 December 2015 and 31 December 2014, the details of the receivables from main operations are as follows: 31 December 2015 31 December 2014

Receivables from agencies, brokers and intermediaries 690.773.097 624.433.183 Salvage and subrogation receivables 49.626.517 30.648.790 Receivables from policyholders 34.014.724 33.242.694 Long term receivable which is bank guarantee and three months credit card 94.861.111 63.044.183 Total receivables from insurance operations, net 869.275.449 751.368.850

Receivables from reinsurance operations 59.472.101 47.022.365 Cash deposited to insurance and reinsurance companies (Note 4.2), (Note 10) 7.840.311 6.739.965 Provisions for receivables from insurance operations - subrogation receivables (8.305.178) (7.677.067) Doubtful receivables from insurance operations - subrogation receivables 123.623.771 86.645.265 Provisions for doubtful receivables from insurance operations - subrogation receivables (Note 4.2) (123.623.771) (86.645.265) Doubtful receivables from main operations - premium receivables 27.134.464 26.735.242 Provisions for doubtful receivables from main operations - premium receivables (Note 4.2) (27.134.464) (26.735.242) Receivables from main operations 928.282.683 797.454.113

Anadolu Sigorta Annual Report 2015 166 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

As at 31 December 2015 and 31 December 2014, the details of mortgages and other guarantees for the Company’s receivables are presented below: 31 December 2015 31 December 2014

Mortgage notes 70.149.267 71.597.067 Letters of guarantees 79.133.111 71.825.655 Other guarantees 17.322.671 15.188.186 Government bonds and treasury bills 2.951.479 2.976.479 Total 169.556.528 161.587.387

Provisions for overdue receivables and receivables not due yet

a) Receivables under legal or administrative follow up (due): 27.134.464 TL (31 December 2014: 26.735.242 TL).

b) Provision for subrogation receivables under legal or administrative follow up: 131.928.949 TL (31 December 2014: 94.322.332 TL).

The Company’s receivables from and payables to shareholders, associates and subsidiaries are detailed in note 45 - Related party transactions.

The details of the receivables and payables denominated in foreign currencies and foreign currency rates used for the translation are presented in Note 4.2- Financial risk management.

13 Derivative financial instruments

As at 31 December 2015, the Company does not have derivative financial instruments (31 December 2014: None).

14 Cash and cash equivalents

As at 31 December 2015 and 31 December 2014, cash and cash equivalents are as follows: 31 December 2015 31 December 2014 At the At the At the At the end of beginning end of beginning the period of the period the period of the period

Cash on hand 18.864 37.347 37.347 49.256 Bank deposits 1.937.834.876 1.356.733.446 1.356.733.446 901.838.577 Cheques given and payment orders (125.585) (171.519) (171.519) (1.025.984) Bank guaranteed credit card receivables with maturities less than three months 367.176.057 249.449.440 249.449.440 252.850.367 Cash and cash equivalents in the balance sheet 2.304.904.212 1.606.048.714 1.606.048.714 1.153.712.216

Bank deposits - blocked (*) (Note 17) (340.277.623) (223.171.410) (223.171.410) (151.508.238) Time deposits with maturities longer than 3 months (287.914.280) (335.567.238) (335.567.238) (174.210.161) Interest accruals on banks deposits (6.510.620) (3.580.842) (3.580.842) (2.481.010) Cash and cash equivalents in the statement of cash flows 1.670.201.689 1.043.729.224 1.043.729.224 825.512.807

(*) As at 31 December 2015 and 31 December 2014 cash collateral kept in favour of the Turkish Treasury as a guarantee for the insurance activities.

Anadolu Sigorta Annual Report 2015 167

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

As at 31 December 2015 and 31 December 2014, bank deposits are further analyzed as follows: 31 December 2015 31 December 2014

Foreign currency denominated bank deposits - time deposits 177.329.471 119.637.331 - demand deposits 7.431.915 3.883.616

Bank deposits in Turkish Lira - time deposits 1.750.916.018 1.230.888.040 - demand deposits 2.157.472 2.324.459 Bank deposits 1.937.834.876 1.356.733.446

15 Equity

Paid in capital

The shareholder having direct or indirect control over the shares of the Company is İş Bankası Group.

The Company does not increase its share capital in the current period.

As at 31 December 2015, the issued share capital of the Company is TL 500.000.000 (31 December 2014: TL 500.000.000) and The Company unregistered Group 150 A shares which each of value is TL 1,5 as of 11 April 2013 in which approved in Main Article of the Company dated in 11 April 2013. the share capital of the Company consists of 50.000.000.000 (31 December 2014: 50.000.000.000 shares) issued shares with TL 1 nominal value each.

Other capital reserves

In accordance with tax legislation, 75% of profits from sales of participation shares and real states included in the assets of companies is exempt from corporate tax provided that it is classified under a special fund for full five years. The exempt gains cannot be transferred to another account other than a capital increase or cannot be withdrawn from the entity for five years. As at 31 December 2015, tax exempt gain from participation shares and real estate sale in 2010 amounting to TL 8.081.516 TL, and in 2011 amounting to TL 80.025 TL is classified as other capital reserves and also in 2013 amounting TL 647.763 and 2014 amounting TL 920.272 reclassified to other capital reserves as a gain on sale of fixed assets and equity. 31 December 2015 31 December 2014

Other capital reserves at the beginning of the period 8.809.304 8.161.541 Transfer from profit 920.272 647.763 Use property revaluation fund (Note 6) 16.157.827 -- Other capital reserves at the end of the period 25.887.403 8.809.304

Anadolu Sigorta Annual Report 2015 168 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Legal reserves

The legal reserves consist of first and second legal reserves in accordance with the Turkish Commercial Code. The first legal reserve is appropriated out of the statutory profits at the rate of 5%, until the total reserve reaches a maximum of 20% of the entity’s share capital. The second legal reserve is appropriated at the rate of 10% of all distributions in excess of 5% of the entity’s share capital. The first and second legal reserves are not available for distribution unless they exceed 50% of the share capital, but may be used to absorb losses in the event that the general reserve is exhausted.

The movements of legal reserves are presented below: 31 December 2015 31 December 2014

Legal reserves at the beginning of the period 30.779.762 30.638.111 Transfer from profit 3.531.984 141.651 Legal reserves at the end of the period 34.311.746 30.779.762

Extraordinary reserves

The movements of extraordinary reserves are presented below: 31 December 2015 31 December 2014

Extraordinary reserves at the beginning of the period 20.545.601 18.123.361 Transfer from profit 40.182.952 2.422.240 Extraordinary reserves at the end of the period 60.728.553 20.545.601

Statutory reserves

The movements of statutory reserves are presented below: 31 December 2015 31 December 2014

Statutory reserves at the beginning of the period 7.262.220 6.993.082 Transfer from profit 4.464.773 269.138 Statutory reserves at the end of the period 11.726.993 7.262.220

Anadolu Sigorta Annual Report 2015 169

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Valuation of financial assets

Movement of fair value reserves of available for sale financial assets and associates are presented below: 31 December 2015 31 December 2014 Available Available for sale for sale financial financial assets Associates Total assets Associates Total Fair value reserves at the beginning of the period 26.298.684 310.368.132 336.666.816 8.866.957 293.168.132 302.035.089

Change in the fair value (6.367.019) 115.880.000 109.512.981 24.347.100 23.200.000 47.547.100 Net gains transferred to the statement of income 617.378 (18.000.000) (17.382.622) (3.609.723) (6.000.000) (9.609.723) Deferred tax effect 1.866.390 -- 1.866.390 (3.305.650) -- (3.305.650) Fair value reserves at the end of the period 22.415.433 408.248.132 430.663.565 26.298.684 310.368.132 336.666.816

Other profit reserves

In accordance with the 4 July 2007 dated and 2007/3 numbered Compliance Circular issued by the Turkish Treasury, it was stated that the companies would not further provide earthquake provision for the year 2007. However, it was also stated that earthquake provisions provided in previous periods (earthquake provision in the financial statements as at 31 December 2006) should be transferred to the reserve accounts under equity in accordance with the 5th Temporary Article of the Insurance Law. The companies had to transfer total amount of provisions, including earthquake provisions reserved as at 31 December 2006 and related gains obtained from investment of these amounts, to the account called as “549.01 - transferred earthquake provisions” which would be opened as at 1 September 2007 within Uniform Chart of Account and the reserves amount should not be subject to dividend distribution or should not be transferred to other accounts.

Accordingly, the Company initially transferred total provisions amounting to TL 96.036.157 including earthquake provisions reserved as at 31 December 2006 and related gains obtained from investment of this amount, to the reserve accounts under equity, TL 51.846.111 of this amount is used for capital increase in 2010. Accordance with IAS 19, to add the amount of actuarial loss and net profit of TL (1.042.950) defined remeasure net profit debt, the amount of new balance is TL 43.166.613.

Profit on assets sale that will be transferred to capital

In accordance with tax legislation, 75% of profits from sales of participation shares and real states included in the assets of companies is exempt from corporate tax provided that it is classified under a special fund for full five years. The exempt gains cannot be transferred to another account other than a capital increase or cannot be withdrawn from the entity for five years.

In the direction of sector announcement made by Treasury dated 27 October 2008 and numbered 2008/41, the Company classified the gain on sale from the land in real estate amounting to TL 2.541.499 (31 December 2014: TL 920.272) as of 31 December 2015.

16 Other reserves and equity component of DPF

As at 31 December 2015 and 31 December 2014, change in fair values of available-for-sale financial assets which is presented as “valuation of financial assets” and earthquake provisions provided in the previous years presented under “other profit reserves” are explained in detail in Note 15 - Equity above. As at 31 December 2015 and 31 December 2014, the Company does not hold any insurance or investment contracts which contain a DPF.

Anadolu Sigorta Annual Report 2015 170 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

17 Insurance contract liabilities and reinsurance assets

Estimation of the ultimate payment for the outstanding claims is one of the most important accounting assumptions of the Company. Estimation of the insurance contract liabilities contains several ambiguities by nature. The Company makes calculation of the related insurance technical provisions accordance with the Insurance Legislation and reflects them into financial statements as mentioned in Note 2 - Summary of significant accounting policies.

As at 31 December 2015 and 31 December 2014, technical reserves of the Company are as follows: 31 December 2015 31 December 2014

Reserve for unearned premiums, gross 1.848.552.863 1.491.252.563 Reserve for unearned premiums, ceded (Note 10) (341.649.490) (294.929.264) Reserve for unearned premiums, SSI share (54.975.565) (36.692.792) Reserves for unearned premiums, net 1.451.927.808 1.159.630.507

Provision for outstanding claims, gross 1.878.978.416 1.243.987.764 Provision for outstanding claims, ceded (Note 10) (493.070.874) (229.799.663) Provision for outstanding claims, net 1.385.907.542 1.014.188.101

Gross of provision unexpired risk reserve 18.531.890 52.687.216 Reinsurer’s share of the provision for unexpired risk (12.046.676) (12.307.870) Provision unexpired risk reserve, net 6.485.214 40.379.346

Equalization provision, net (*) 81.545.727 60.549.876 General provision, net 7.702.761 7.702.761 Other technical provisions, net 89.248.488 68.252.637

Total technical provisions, net 2.933.569.052 2.282.450.591

Short-term 2.844.320.564 2.214.197.954 Medium and long-term 89.248.488 68.252.637 Total technical provisions, net 2.933.569.052 2.282.450.591

(*) It contains a provision which is reflected in the all prior financial statements amounting TL 7.702.761 due to the possible impact of adverse developments that may occur by company’s management.

Anadolu Sigorta Annual Report 2015 171

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

As at 31 December 2015 and 31 December 2014, movements of the insurance liabilities and related reinsurance assets are presented below: 31 December 2015 Reserve for unearned premiums Gross Ceded SSI share Net

Reserve for unearned premiums at the beginning of the period 1.491.252.563 (294.929.264) (36.692.792) 1.159.630.507 Premiums written during the period 3.610.673.887 (731.404.966) (99.511.467) 2.779.757.454 Premiums earned during the period (3.253.373.587) 684.684.740 81.228.694 (2.487.460.153) Reserve for unearned premiums at the end of the period 1.848.552.863 (341.649.490) (54.975.565) 1.451.927.808 31 December 2014 Reserve for unearned premiums Gross Ceded SSI share Net

Reserve for unearned premiums at the beginning of the period 1.422.324.312 (290.028.419) (34.755.134) 1.097.540.759 Premiums written during the period 3.004.830.066 (605.617.965) (74.102.040) 2.325.110.061 Premiums earned during the period (2.935.901.815) 600.717.120 72.164.382 (2.263.020.313) Reserve for unearned premiums at the end of the period 1.491.252.563 (294.929.264) (36.692.792) 1.159.630.507

31 December 2015 Provision for outstanding claims Gross Ceded Net

Provision for outstanding claims at the beginning of the period 1.243.987.764 (229.799.663) 1.014.188.101 Claims reported during the period and changes in the estimations of provisions for outstanding claims provided at the beginning of the period 2.576.139.416 (519.388.589) 2.056.750.827 Claims paid during the period (1.941.148.764) 256.117.378 (1.685.031.386) Provision for outstanding claims at the end of the period 1.878.978.416 (493.070.874) 1.385.907.542

31 December 2014 Provision for outstanding claims Gross Ceded Net

Provision for outstanding claims at the beginning of the period 823.828.813 (135.357.501) 688.471.312 Claims reported during the period and changes in the estimations of provisions for outstanding claims provided at the beginning of the period 1.973.355.905 (235.276.844) 1.738.079.061 Claims paid during the period (1.553.196.954) 140.834.682 (1.412.362.272) Provision for outstanding claims at the end of the period 1.243.987.764 (229.799.663) 1.014.188.101

Anadolu Sigorta Annual Report 2015 172 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Claim development tables

The basic assumption used in the estimation of provisions for outstanding claims is the Company’s past experience on claim developments. Judgment is used to assess the extent to which external factors such as judicial decisions and government legislation affect the estimates. The sensitivity of certain assumptions like legislative change, uncertainty in the estimation process, etc., is not possible to quantify. Furthermore, because of delays that arise between occurrence of a claim and its subsequent notification and eventual settlement, the outstanding claim provisions are not known with certainty at the reporting date. Consequently, the ultimate liabilities will vary as a result of subsequent developments. Differences resulting from reassessment of the ultimate liabilities are recognized in subsequent financial statements.

Development of insurance liabilities enables to measure the performance of the Company in estimation of its ultimate claim losses. The amounts presented on the top of the below tables show the changes in estimations of the Company for the claims in subsequent years after claim years. The amounts presented on the below of the below tables give the reconciliation of total liabilities with provision for outstanding claims presented in the accompanying financial statements. 31 December 2015 Claim year 2011 2012 2013 2014 2015 Total Claim year 1.076.294.828 1.495.831.758 1.222.446.719 1.650.596.281 2.275.471.459 7.720.641.045 1 year later 1.144.862.138 1.543.473.873 1.292.816.917 1.798.922.951 -- 5.780.075.879 2 years later 1.190.218.111 1.609.766.674 1.343.700.980 -- -- 4.143.685.765 3 years later 1.239.664.600 1.683.416.144 ------2.923.080.744 4 years later 1.284.766.945 ------1.284.766.945 Current estimate of cumulative claims 1.284.766.945 1.683.416.144 1.343.700.980 1.798.922.951 2.275.471.459 8.386.278.479 Cumulative payments to date 1.166.344.699 1.453.964.968 1.174.348.650 1.482.441.065 1.448.180.559 6.725.279.941 Liability recognized in the financial statements 118.422.246 229.451.176 169.352.330 316.481.886 827.290.900 1.660.998.538 Liability recognized before 2010 ------217.979.878 Total gross outstanding claims presented in the financial statements at the end of the period 1.878.978.416

31 December 2014 Claim year 2010 2011 2012 2013 2014 Total Claim year 856.910.386 1.075.581.281 1.495.474.317 1.229.263.704 1.717.748.856 6.374.978.544 1 year later 867.349.763 1.144.103.263 1.543.105.072 1.300.026.322 -- 4.854.584.420 2 years later 878.025.588 1.189.429.253 1.609.382.065 -- -- 3.676.836.906 3 years later 900.866.545 1.238.843.054 ------2.139.709.599 4 years later 928.050.817 ------928.050.817 Current estimate of cumulative claims 928.050.817 1.238.843.054 1.609.382.065 1.300.026.322 1.717.748.856 6.794.051.114 Cumulative payments to date 861.604.436 1.131.547.961 1.398.954.819 1.116.056.443 1.189.365.685 5.697.529.344 Liability recognized in the financial statements 66.446.381 107.295.093 210.427.246 183.969.879 528.383.171 1.096.521.770 Liability recognized before 2009 ------147.465.994 Total gross outstanding claims presented in the financial statements at the end of the period 1.243.987.764

Anadolu Sigorta Annual Report 2015 173

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

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 31 December 2015 Should be Carrying placed (**) Placed (*) amount Non-life: Bank deposits (Note 14) 339.186.373 340.277.623 Financial assets (*) (Note 11) 15.150.590 15.555.214 Total 286.658.129 354.336.963 355.832.837

31 December 2014 Should be Carrying placed (**) Placed (*) amount Non-life: Bank deposits (Note 14) 222.697.267 223.171.410 Financial assets (*) (Note 11) 84.612.376 83.816.009 Total 282.343.518 307.309.643 306.987.419

(*) “As at 31 December 2015 and 31 December 2014, government bonds and treasury bills are measured at daily official prices announced by the Central Bank of Turkey in accordance with the 6th Article of “Circular Related to the Financial Structure of Insurance, Reinsurance, and Private Pension Companies. (**) “According to the 7th article of the “Circular Related to the Financial Structure of Insurance, Reinsurance, and Private Pension Companies” which regulates necessary guarantee amount, minimum guarantee fund for capital adequacy calculation period will be 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 Private Pension Companies”, companies must prepare their capital adequacy tables twice in a financial year at June and December periods and must sent capital adequacy tables to the Turkish Treasury Department within two months. Since the amounts that should be placed as of 31 December 2015 (31 December 2014) will be through the calculated amounts as of 30 June 2015 (30 June 2014), the settled amounts as of June is presented as “should be placed” amounts.

Company’s number of life insurance policies, additions, disposals during the period and the related mathematical reserves

None.

Distribution of new life insurance policyholders in terms of numbers and gross and net premiums as individual or group during the period

None.

Distribution of mathematical reserves for life insurance policyholders who left the Company’s portfolio as individual or group during the period

None.

Deferred commission expenses

The Company capitalizes commissions paid to the intermediaries related to policy production under short-term and long-term prepaid expenses. As at 31 December 2014, short-term prepaid expenses amounting to TL 275.073.222 (31 December 2014: TL 205.884.923) consist of deferred commission expenses amounting to TL 249.521.695 (31 December 2014: TL 200.624.439) and other prepaid expenses amounting to TL 25.551.527 (31 December 2014: TL 5.260.484). The amount of commission expense TL 25.551.527 (31 December 2014: 5.260.484) Long-term prepaid expenses amounting TL 5.221.880 (31 December 2014: TL 3.562.038) are composed of other prepaid expenses

Anadolu Sigorta Annual Report 2015 174 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

As at 31 December 2015 and 31 December 2014, the movements of deferred commission expenses are presented below: 31 December 2015 31 December 2014

Deferred commission expenses at the beginning of the period 200.624.439 190.775.088 Commissions accrued during the period 526.399.728 429.400.515 Commissions expensed during the period (*) (477.502.472) (419.551.164) Deferred commission expenses at the end of the period 249.521.695 200.624.439

(*) Commission expense are included as a reinsurance commissions.

Individual pension funds

None.

18 Investment contract liabilities

None.

19 Trade and other payables and deferred income 31 December 2015 31 December 2014

Payables from main operations 339.189.344 302.045.983 Other payables 210.669.647 -- Deferred income and expense accruals (Note 10) 60.481.800 47.561.333 Taxes and funds payable and other similar obligations 54.739.019 45.447.065 Payables from main operations 37.087.955 27.386.135 Personnel liabilities 92.190 -- Total 702.259.955 422.440.516

Short-term liabilities 702.259.955 422.440.516 Long-term liabilities -- -- Total 702.259.955 422.440.516

As at 31 December 2015, other payables amounting to TL 60.481.800 (31 December 2014: TL 47.561.333) consist of treatment cost payables to SSI amounting to TL 27.017.129 (31 December 2014: TL 16.375.984), payables to Tarsim and DASK and outsourced benefits and services amounting to TL 30.287.110 (31 December 2014: TL 28.268.772) and deposits and guarantees received amounting to TL 3.177.561 (31 December 2014: TL 2.916.577).

Payables arising from main operations of the Company as at 31 December 2015 and 31 December 2014 are as follows: 31 December 2015 31 December 2014

Payables to reinsurance companies (Note 10) 188.370.605 188.610.275 Payables to agencies, brokers and intermediaries 37.795.326 30.052.668 Total payables arising from insurance operations 226.165.931 218.662.943

Payables arising from other operating activities 108.657.638 76.105.907 Cash deposited by insurance and reinsurance companies (Note 10) 4.365.775 7.277.133 Payables arising from main operations 339.189.344 302.045.983

Anadolu Sigorta Annual Report 2015 175

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Corporate tax liabilities and prepaid taxes are disclosed below: 31 December 2015 31 December 2014

Prepaid taxes 24.168.626 22.930.452 Provision of calculated corporate tax (1.769.959) (21.081.960) Corporate tax assets, net 22.398.667 1.848.492

Total amount of investment incentives which will be benefited in current and forthcoming periods

None.

20 Financial liabilities

As of 31 December 2015, the Company has financial liabilities which is occurred repurchase agreement TL 210.669.647 (31 December 2014: None)

21 Deferred tax

As at 31 December 2015 and 31 December 2014, deferred tax assets and liabilities are attributable to the following: 31 December 2015 31 December 2014 Deferred tax Deferred tax assets/(liabilities) assets/(liabilities)

Other provisions 5.375.706 3.588.669 Equalization provision 12.101.836 8.907.829 Reserve for unexpired risks 1.297.043 8.075.869 Provisions for employee termination benefits and unused vacations 3.091.670 2.812.254 Provision for subrogation receivables 1.661.036 1.535.413 TAS adjustment differences in depreciation (2.460.037) (2.192.013) Discount of receivables and payables (56.576) (88.941) Valuation differences in financial assets (1.746.888) (1.547.916) Subrogation receivables from third parties (3.147.915) (965.401) Real estate valuation (2.886.550) (1.235.850) Deferred tax assets, net 13.229.325 18.889.913

As at 31 December 2015 the company has not deductible tax losses. (31 December 2014: None).

Movement of deferred tax assets table: 31 December 2015 31 December 2014

Opening balance at 1 January 18.889.913 16.191.701 Recognised in profit or loss (Note 35) (6.509.894) 7.396.097 Recognised in equity (Note 15) 849.306 (4.697.885) Deferred tax asset 13.229.325 18.889.913

Anadolu Sigorta Annual Report 2015 176 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

22 Retirement benefit obligations

Employees of the Company are the members of “Anadolu Anonim Pension Fund” which is established in accordance with the temporary Article 20 of the Social Security Act No: 506. As per the temporary sub article No: 20 of the Article 73 of the Social Security Law, pension funds should be transferred to the Social Security Institution within three years after the publication of the a aforementioned Law published in the Official Gazette numbered 26870 and dated 8 May 2008. The related three-year transfer period has been prolonged for two years by the Cabinet decision, the three-year period was extended to the 8 May 2015.

23 April 2015 dated Official Gazette is changed as following; insurance and reinsurance companies, chambers of commerce, industry chambers, stock exchanges or which constitutes their union personnel and associates of funds “The Council is authorized to determine the date of transfer within the scope of article 20th of the law, 506 banks, insurance and reinsurance companies, chambers of commerce, industry chambers, stock exchanges or which constitutes their union personnel and associates of funds to the social security institution. The date of the transfer of the first paragraph of Article 4 of this law pension fund contributors as are considered insured.

According to this arrangement the bank within the scope of Act 506, article No.20, insurance and reinsurance companies, chambers of commerce, industry chambers, stock exchanges or associations which constitute their union personnel and associates of funds are required to be transferred until 08.05.2015 to Social Security Administration, authority to determine the date of transfer is given the Council of Ministers thus the transfer of the funds has been postponed to an unknown date.

23 Other liabilities and provisions

As at 31 December 2015 and 31 December 2014; the details of the provisions for other risks are as follows: 31 December 2015 31 December 2014

Provision for employee termination benefits 15.244.930 12.628.115 Provision for unused vacation pay liability 1.492.709 1.433.153 Total provision for other risks 16.737.639 14.061.268

31 December 2015 31 December 2014

Provision for agency award 9.759.024 7.182.519 Provision for guarantee account 9.125.000 3.356.650 Provision for employee bonus 8.500.000 7.000.000 Provision for tax assessment (Not 42, (Not 47) 3.084.516 15.489.301 Expense provision for gauge commission (Not 10) 2.237.886 1.576.728 Invoice accrual 370.234 -- Prepaid income and expense accruals 33.076.660 34.605.198

Movements of provision for employee termination benefits during the period are presented below: 31 December 2015 31 December 2014

Provision at the beginning of the period 12.628.115 11.720.142 Interest cost (Note 47) 1.288.802 1.196.136 Service cost (Note 47) 1.085.271 930.599 Payments made during the period (Note 47) (1.060.945) (436.838) Actuarial difference (Note 47) 1.303.687 (781.924) Provision at the end of the period 15.244.930 12.628.115

Anadolu Sigorta Annual Report 2015 177

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

24 Net insurance premium

Net insurance premium revenue is presented in detailed in the accompanying consolidated statement of income.

25 Fee revenue

None.

26 Investment income

Investment income is presented in “Note 4.2 - Financial Risk Management..

27 Net income accrual on financial assets

Net realized gains on financial assets are presented in “Note 4.2 - Financial Risk Management.

28 Assets held at fair value through profit or loss

Presented in “Note 4.2 - Financial Risk Management”.

29 Insurance rights and claims 31 December 2015 31 December 2014 Claims paid, net off reinsurers’ share 1.685.031.386 1.412.362.272 Changes in reserve for unearned premiums, net off reinsurers’ share 292.297.301 62.089.748 Changes in provision for outstanding claims, net off reinsurers’ share 371.719.441 325.716.789 Change in equalization provisions 20.995.851 15.970.036 Changes in reserve for unexpired risks, net off reinsurers’ share (33.894.132) 27.260.973 Total 2.336.149.847 1.843.399.818

30 Investment contract benefits

None.

31 Other expenses

The allocation of the expenses with respect to their nature or function is presented in Note 32 - Expenses by nature below.

32 Operating expenses

As of 31 December 2015 and 31 December 2014 the operating expenses are disclosed as follows: 31 December 2015 31 December 2014

Commission expenses (Note 17) 434.055.605 385.141.391 Commissions to intermediaries accrued during the period (Note 17) 481.698.669 390.315.759 Change in deferred commission expenses (Note 17) (47.643.064) (5.174.368) Employee benefit expenses (Note 33) 113.296.033 104.693.751 Administration expenses 82.642.008 69.230.043 Advertising and marketing expenses 19.727.757 13.987.613 Outsourced benefits and services 9.858.726 8.250.751 Commission income from reinsurers (Note 10) (54.256.056) (58.617.320) Commission income from reinsurers accrued during the period (Note 10) (62.301.577) (60.026.011) Change in deferred commission income (Note 10) 8.045.521 1.408.691 Total 605.324.073 522.686.229

Anadolu Sigorta Annual Report 2015 178 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

33 Employee benefits expenses 31 December 2015 31 December 2014

Wages and salaries 84.272.162 76.090.749 Employer’s share 19.392.154 15.758.608 Other 9.631.717 12.844.394 Total 113.296.033 104.693.751

34 Financial costs

Finance costs of the period are presented in “Note 4.2 - Financial Risk Management” above. There are no finance costs classified in production costs or capitalized on tangible assets. All financial costs are directly recognised as expense in the unconsolidated statement of income.

35 Income tax

Income tax expense in the accompanying unconsolidated financial statements is as follows: 31 December 2015 31 December 2014 Current tax expense provision: Corporate tax provision (1.769.959) (21.081.960) Deferred taxes: Origination and reversal of temporary differences (6.509.894) 7.396.097 Total income tax expense recognised in profit or loss (8.279.853) (13.685.863)

A reconciliation of tax expense applicable to profit from operating activities before income tax at the statutory income tax rate to income tax expense at the Company’s effective income tax rate is as follows: 31 December 2015 31 December 2014 Profit before tax 72.086.095 Tax rate (%) 85.385.464 Tax rate (%) Taxes on income per statutory tax rate 14.417.219 20,00 17.077.093 20,00 Tax exempt income (7.407.303) (10,28) (4.661.167) (5,46) Non-deductible expenses 1.269.937 1,76 1.269.937 1,49 Total tax income recognized in profit or loss 8.279.853 13,04 13.685.863 16,03

36 Net foreign exchange gains

Net foreign exchange gains are presented in “Note 4.2 - Financial Risk Management” above.

37 Earnings per share

Earnings per share are calculated by dividing net profit of the period to the weighted average number of shares. 31 December 2015 31 December 2014

Net profit/(loss) for the period 63.806.242 71.669.601 Weighted average number of shares 50.000.000.000 50.000.000.000 Earnings/loss per share (TL) 0,0013 0,0014

Anadolu Sigorta Annual Report 2015 179

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

38 Dividends per share

There is a paid gross cash dividend which 0.042 shares with nominal value of TL 1 percent to shareholders. (Total cash dividend of TL 21.000.000). (31 December 2014: None).

39 Cash generated from operations

The cash flows from operating activities are presented in the accompanying consolidated statement of cash flows.

40 Convertible bonds

None.

41 Redeemable preference shares

None.

42 Risks

In the normal course of its operations, the Company is exposed to legal disputes, claims and challenges, which mainly stem from its insurance operations. The necessary income/expense accruals for the revocable cases against/on behalf of the Company are provided under provision for outstanding claims in the accompanying consolidated financial statements.

As at 31 December 2015, total amount of the claims that the Company face is TL 925.745.000 in gross (31 December 2014: TL 1.040.392.000). The Company provided provision for outstanding claims in the consolidated financial statements by considering collateral amounts

As at 31 December 2015, ongoing law suits prosecuted by the Company against the third parties amounting TL 233.643.000 (31 December 2014: TL 194.259.000)

Anadolu Anonim Türk Sigorta Şirketi Mensupları Dayanışma Vakfı” was established by Anadolu Anonim Türk Sigorta Şirketi in accordance with the Turkish Commercial and Civil Laws which is examined by Tax Audit Committee inspectors due to the Company payments what are fulfilled obligations to the foundation owing to deed of the foundation and the related act. As a result of this investigation, an examination was reported for periods of 2007, 2008, 2009, 2010 and 2011

The final legal process which is related the period of 2007, 2008 is expected to result in the Company’s favor and the amount of provision TL 12.768.684 which was published on the Official Gazette dated 12 November 2014. December 2013 and after the condition of the provision is evaluated later ongoing development of the legal process. There is a provision amount of TL3.084.516 (31 December 2014: 15.489.301) related with this process. Furthermore, the Company has paid a total of TL 4.229.629 pursuant to the tax inspection in line with the above description (31 December 2014: none) was recognized as the prospect will get back, it is recognized accrued income in the current period.

As a result of investigation conducted by the Ministry of Finance Tax Audit Board, tax penalty which is amount of TL 2,1 million (actual tax), and TL 3,1 million tax penalty is announced by reason to tax salvage operations not subject to the banking and insurance transactions. The amount of TL 10 million tax, TL 15 million tax penalty has been modified for the period of 2010, 2011 and 2012 in 6 February 2015. The company do not make provision for this tax penalty because of considering the implementation of these financial statements in accordance with legislation.

Anadolu Sigorta Annual Report 2015 180 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

43 Commitments

The details of the guarantees that are given by the Company for the operations in non-life branches are presented in Note 17.

The future aggregate minimum lease payments under operating leases for properties rented for use of head office and regional offices and motor vehicles rented for sales and marketing departments are as follows: 31 December 2015 31 December 2014 Within one year 3.392.007 7.517.871 Between one to five years 1.918.527 3.476.491 Total of minimum lease payments 5.310.534 10.994.362

44 Business combinations

None.

45 Related party transactions

The ultimate controlling party of the Company is İş Bankası Group and the groups having direct control over İş Bankası Group and the affiliates and associates of İş Bankası Group are defined as related parties of the Company.

The related party balances as of 31 December 2015 and 31 December 2014 are as follows: 31 December 2015 31 December 2014

İş Bankası - cash at banks 914.658.774 533.547.278 Banks 914.658.774 533.547.278

Bonds issued by Is GYO (Note 11) 14.749.064 14.713.703 Bonds issued by Is Leasing (Note 11) 5.046.154 5.078.714 Bonds issued by İş Faktoring A.Ş. (Note 11) 5.522.064 -- Bonds issued by Türkiye Sınai Kalkınma Bankası (Note 11) 5.843.739 -- Investment funds founded by İş Portföy Yönetimi A.Ş. (Note 11) 126.444.095 155.566.186 Investment funds founded by İşbank AG (Note 11) 11.206.804 12.320.065 Financial assets 168.811.920 187.678.668

İş Bankası - receivables stem from premiums written via the Bank 106.339.774 91.802.800 Receivables stems from premiums written via Şişecam Sigorta Aracılık Hiz. A.Ş. 5.621.566 2.924.252 Trakya Cam Sanayii A.Ş. 47.472 167.971 Milli Reasürans T.A.Ş. - receivables from reinsurance operations 40.850 1.416 Anadolu Hayat Emeklilik A.Ş. - premium receivables 586.490 490.293 Receivables from main operations 112.636.152 95.386.732

Milli Reasürans T.A.Ş.- payables from reinsurance operations 9.387.546 11.953.520 İş Bankası - commission payables 9.603.965 7.082.553 Şişecam Sigorta Aracılık Hizmetleri A.Ş. - commission payables 349.731 23.437 Payables from main operations 19.341.242 19.059.510

No guarantees have been taken against receivables from related parties.

There are no doubtful receivables from shareholders, subsidiaries and joint ventures.

No guarantees, commitments, guarantee letters, advances and endorsements given in favour of shareholders, associates and subsidiaries.

Anadolu Sigorta Annual Report 2015 181

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

The Company accrued TL 53.855.115TL premium (31 December 2014: 59.098.301 TL) for related party policies. The transactions with related parties during the year ended 31 December 2015 and 2014 are as follows: 31 December 2015 31 December 2014

İş Bankası - premiums written via the Bank 410.699.700 328.891.626 Premiums written via Şişecam Sigorta Aracılık Hizmetleri A.Ş. 17.600.899 41.316.107 Anadolu Hayat Emeklilik A.Ş - premiums written 2.805.903 2.214.450 Milli Reasürans T.A.Ş. 510.277 440.421 Premiums written 431.616.779 372.862.604

Milli Reasürans T.A.Ş (105.383.566) (93.328.833) Premiums written, ceded (105.383.566) (93.328.833)

İş Bankası - interest income from deposits 61.509.302 55.732.060 İş Portföy Yönetimi - income from investment funds 1.784.202 9.488.742 İş Bankası - income from bonds 599.000 11.828.210 İş Gayrimenkul Yatırım Ortaklığı - income from bonds 1.545.076 560.304 İş Leasing- income from bonds 896.366 -- İş Yatırım Menkul Değerler - income from bonds 864.204 -- Yatırım gelirleri 67.198.150 77.609.316

Türkiye İş Bankası A.Ş - commission expense (54.279.283) (39.896.267) Şişecam Sigorta Aracılık Hizmetleri A.Ş. - commission expense (3.520.602) (8.674.189) Milli Reasürans T.A.Ş- commission expense 23.600.904 21.497.125 Operating expenses, net (34.198.981) (27.073.331)

Anadolu Hayat ve Emeklilik A.Ş -Rent income 170.435 163.212 Other Income 170.435 163.212

İş Merkezleri Yönetim ve İşletim A.Ş. - building service cost (3.212.713) (2.628.651) İş Portföy Yönetimi - management commission (690.905) (632.924) Anadolu Anonim Türk Sigorta Şirketi Memurları Emekli Sandığı Vakfı-Rent Expense (2.790.764) (2.606.606) Other Expense (6.694.382) (5.868.1811)

46 Events after the reporting date

Subsequent events are disclosed in Note 1.10 Events after the reporting date.

Anadolu Sigorta Annual Report 2015 182 Other Matters and Financial Statements 31 December 2015 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

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

They are presented in the related notes above.

“Payables to employees and receivables from employees presented under accounts, “other receivables” and “other short or long term payables”, and which have balance more than 1% of the total assets

None.

Subrogation recorded in “Off-Balance Sheet Accounts”

None.

Real rights on immovable and their values

None.

Explanatory note for the amounts and nature of previous years’ income and losses

None.

For the years ended 31 December 2015 and 2014, details of discount and provision expenses are as follows: Provision expenses 31 December 2015 31 December 2014

Provision expense for unused vacation (Note 23) (59.556) (245.663) Provision expense for employee termination benefits (Note 23) (1.313.128) (1.689.897) Provision expense for doubtful receivables (Note4.2) (37.726.711) (11.622.774) Tax assessment expense (Not 23) (363.899) (7.873.752) Other provision income/(expense) 13.916.825 1.071.426 Provisions account (25.546.469) (20.360.660)

Rediscount expenses 31 December 2015 31 December 2014

Rediscount income 18.199.693 12.636.796 Rediscount expense (16.741.102) (15.997.077) Total of rediscounts 1.458.591 (3.360.281)

Anadolu Sigorta Annual Report 2015 183

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

Anadolu Sigorta Annual Report 2015 184 Other Matters and Financial Statements Information on Consolidated Subsidiaries

Information on Consolidated Subsidiaries

Offering service in private pension and life insurance segments, Anadolu Hayat Emeklilik was founded in 1990 as “Turkey’s first life insurance company”. The first and only publicly-traded pension company in Turkey, Anadolu Hayat Emeklilik is the largest company in the sector in terms of total funds attained in life insurance and private pension branches, while preserving its top spot with the number of participants achieved in the Private Pension System.

A subsidiary of İşbank, Anadolu Hayat Emeklilik’s shares are quoted on the Borsa Istanbul (BIST) Star Market under the symbol (ANHYT)

Headquartered in İstanbul, Anadolu Hayat Emeklilik brings its products to its customers via regional offices in İstanbul (3), Ankara (2), Adana, Antalya, Bursa, Trabzon, İzmir and Kocaeli, and a branch in the Turkish Republic of Northern Cyprus, direct sales force, and nearly 300 agencies.

Anadolu Hayat Emeklilik possesses the most extensive bank insurance network in Turkey. The Company uses the branches in its bank insurance network, mainly the branches of İşbank, as a fundamental element of its service delivery.

Controlling a 11% share of the market with a premium production of TL 402 million in the life insurance branch, Anadolu Hayat Emeklilik retained its leadership by a large margin with total life insurance funds in excess of TL 1.7 billion.

According to the Pension Monitoring Center (PMC) data dated 1 January 2016, Anadolu Hayat Emeklilik achieved 19% increase in the number of participants and 21% in total funds in the twelve months to year-end 2015. Having reached TL 8,945 million in total funds and 1,026,467 people in the number of participants, Anadolu Hayat Emeklilik is the sector’s leader with respective market shares of 19% and 17% in total funds including state contributions and number of participants.

Total unconsolidated assets of Anadolu Hayat Emeklilik were up 16% year-to-year and reached TL 11,889 million at year-end 2015. Posting TL 145 million in net profit, the company successfully completed yet another year in terms of sustainable profitability.

Anadolu Sigorta Annual Report 2015 Other Matters and Financial Statements 185 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Independent Auditor’s Report

Akis Bağımsız Denetim ve Serbest Telephone +90 (216) 681 90 00 Muhasebeci Mali Müşavirlik A.Ş. Fax +90 (216) 681 90 90 Kavacık Rüzgarlı Bahçe Mah. İnternet www.kpmg.com.tr Kavak Sok. No: 3 Beykoz 34805 İstanbul

To the Board of Directors of Anadolu Anonim Türk Sigorta Şirketi

Report on the Financial Statements

We have audited the accompanying consolidated balance sheet of Anadolu Anonim Türk Sigorta Şirketi (“the Company”) as at 31 December 2015 and the related consolidated statement of income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the Financial Statements

The Company’s management is responsible for the preparation and fair presentation of these financial statements in accordance with the “Insurance Accounting and Reporting Legislation” which includes the accounting principles and standards, in force as per the insurance legislation, and the requirements of Turkish Accounting Standards for the matters not regulated by the aforementioned legislations and for such internal controls as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to error and/or fraud.

Independent Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. Our audit was conducted in accordance with audit standards in force as per insurance legislation and Independent Standards on Auditing which is a component of the Turkish Auditing Standards published by the Public Oversight Accounting and Auditing Standards Authority (“POA”). Those standards require that ethical requirements are complied with and that the independent audit is planned and performed to obtain reasonable assurance whether the financial statements are free from material misstatement and provide a true and fair view of the Company.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal systems relevant to the entity’s preparation and fair presentation of the financial statements 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 entity’s internal system. An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for audit opinion.

Opinion

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of Anadolu Anonim Türk Sigorta Şirketi as at 31 December 2015 and its consolidated financial performance and consolidated cash flows for the year then ended in accordance with the Insurance Accounting and Reporting Legislation.

Anadolu Sigorta Annual Report 2015 186 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Independent Auditor’s Report

Other Related Legislation Reports of Independent Auditors

1) Pursuant to the fourth paragraph of Article 398 of Turkish Commercial Code (“TCC”) no. 6102; Auditors’ Report on System and Committee of Early Identification of Risks is presented to the Board of Directors of the Company on 28 January 2016. 2) Pursuant to the fourth paragraph of Article 402 of the TCC; no significant matter has come to our attention that causes us to believe that for the period 1 January - 31 December 2015, the Company’s bookkeeping activities are not in compliance with TCC and provisions of the Company’s articles of association in relation to financial reporting. 3) Pursuant to the fourth paragraph of Article 402 of the TCC; the Board of Directors provided us the necessary explanations and required documents in connection with the audit.

Akis Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. A member of KPMG International Cooperative

Alper Güvenç Partner

28 January 2016 İstanbul, Türkiye

Anadolu Sigorta Annual Report 2015 187

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Consolidated Financial Statements as at and For the Year Ended 31 December 2015

We confirm that the consolidated financial statements and related disclosures and footnotes as at 31 December 2015 which were prepared in accordance with the accounting principles and standards in force as per the regulations of T.C. Başbakanlık Hazine Müsteşarlığı are in compliance with the “Code Related to the Financial Reporting of Insurance, Reinsurance and Private Pension Companies” and the financial records of our Company.

İstanbul, 28 January 2016

Musa ÜLKEN Fatih GÖREN Member of Board of Directors Chief Executive Officer Executive Vice President of Finance

Murat TETİK Taylan MATKAP Accounting Reporting Manager Actuary

Anadolu Sigorta Annual Report 2015 188 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Contents

Page CONSOLIDATED BALANCE SHEET 1-5 CONSOLIDATED STATEMENT OF INCOME 6-8 CONSOLIDATED STATEMENT OF CASH FLOWS 9 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 10 CONSOLIDATED STATEMENT OF PROFIT DISTRIBUTION 11 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 12-83 NOTE 1 GENERAL INFORMATION 12-14 NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 15-36 NOTE 3 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS 37 NOTE 4 MANAGEMENT OF INSURANCE AND FINANCIAL RISK 38-51 NOTE 5 SEGMENT REPORTING 52-54 NOTE 6 TANGIBLE ASSETS 55-56 NOTE 7 INVESTMENT PROPERTIES 57 NOTE 8 INTANGIBLE ASSETS 58 NOTE 9 INVESTMENTS IN ASSOCIATES 58 NOTE 10 REINSURANCE ASSETS AND LIABILITIES 59 NOTE 11 FINANCIAL ASSETS 60-64 NOTE 12 LOANS AND RECEIVABLES 65 NOTE 13 DERIVATIVE FINANCIAL INSTRUMENTS 66 NOTE 14 CASH AND CASH EQUIVALENTS 66 NOTE 15 EQUITY 67-69 NOTE 16 OTHER RESERVES AND EQUITY COMPONENT OF DISCRETIONARY PARTICIPATION 69 NOTE 17 INSURANCE CONTRACT LIABILITIES AND REINSURANCE ASSETS 69-73 NOTE 18 INVESTMENT CONTRACT LIABILITIES 73 NOTE 19 TRADE AND OTHER PAYABLES AND DEFERRED INCOME 74 NOTE 20 FINANCIAL LIABILITIES 74 NOTE 21 DEFERRED TAX 75 NOTE 22 RETIREMENT BENEFIT OBLIGATIONS 76 NOTE 23 OTHER LIABILITIES AND PROVISIONS 76-77 NOTE 24 NET INSURANCE PREMIUM 77 NOTE 25 FEE REVENUE 77 NOTE 26 INVESTMENT INCOME 77 NOTE 27 NET INCOME ACCRUAL ON FINANCIAL ASSETS 77 NOTE 28 ASSETS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS 77 NOTE 29 INSURANCE RIGHTS AND CLAIMS 77 NOTE 30 INVESTMENT CONTRACT BENEFITS 77

Anadolu Sigorta Annual Report 2015 189

Page NOTE 31 OTHER EXPENSES 78 NOTE 32 OPERATING EXPENSES 78 NOTE 33 EMPLOYEE BENEFIT EXPENSES 78 NOTE 34 FINANCIAL COSTS 78 NOTE 35 INCOME TAX 79 NOTE 36 NET FOREIGN EXCHANGE GAINS NOTE 37 EARNINGS PER SHARE 79 NOTE 38 DIVIDENDS PER SHARE 79 NOTE 39 CASH GENERATED FROM OPERATIONS 79 NOTE 40 CONVERTIBLE BONDS 79 NOTE 41 REDEEMABLE PREFERENCE SHARES 80 NOTE 42 RISKS 80 NOTE 43 COMMITMENTS 80 NOTE 44 BUSINESS COMBINATONS 80 NOTE 45 RELATED PARTY TRANSACTIONS 81-82 NOTE 46 EVENTS AFTER THE REPORTING DATE 82 NOTE 47 OTHER 83

Anadolu Sigorta Annual Report 2015 190 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Consolidated Balance Sheet As at 31 December 2015 (Currency: Turkish Lira (TL)

ASSETS Audited Audited Prior Period Current Period (Reorganized)(*) I- Current Assets Note 31 December 2015 31 December 2014 A- Cash and Cash Equivalents 14 2.304.904.212 1.606.048.714 1- Cash 14 18.864 37.347 2- Cheques Received -- -- 3- Banks 14 1.937.834.876 1.356.733.446 4- Cheques Given and Payment Orders 14 (125.585) (171.519) 5- Bank Guaranteed Credit Card Receivables with Maturities Less Than Three Months 14 367.176.057 249.449.440 6- Other Cash and Cash Equivalents -- -- B- Financial Assets and Financial Investments with Risks on Policyholders 11 680.812.513 644.067.957 1- Available-for-Sale Financial Assets 11 569.121.106 442.140.789 2- Held to Maturity Investments 11 15.555.214 73.670.047 3- Financial Assets Held for Trading 11 96.232.135 134.054.733 4- Loans and Receivables -- -- 5- Provision for Loans and Receivables -- -- 6- Financial Investments with Risks on Saving Life Policyholders -- -- 7- Company’s Own Equity Shares -- -- 8-Provision in Value of Financial Investments 11 (95.942) (5.797.612) C- Receivables from Main Operations 12 928.282.683 797.454.113 1- Receivables from Insurance Operations 12 869.275.449 751.368.850 2- Provision for Receivables from Insurance Operations 2.21,12 (8.305.178) (7.677.067) 3- Receivables from Reinsurance Operations 12 59.472.101 47.022.365 4- Provision for Receivables from Reinsurance Operations -- -- 5- Cash Deposited to Insurance and Reinsurance Companies 12 7.840.311 6.739.965 6- Loans to the Policyholders -- -- 7- Provision for Loans to the Policyholders -- -- 8- Receivables from Individual Pension Operations -- -- 9- Doubtful Receivables from Main Operations 12 150.758.235 113.380.507 10- Provision for Doubtful Receivables from Main Operations 12 (150.758.235) (113.380.507) D- Due from Related Parties 12 -- -- 1- Due from Shareholders -- -- 2- Due from Associates -- -- 3- Due from Subsidiaries -- -- 4- Due from Joint Ventures -- -- 5- Due from Personnel 12 -- -- 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 10.378.575 5.321.041 1- Finance Lease Receivables -- -- 2- Unearned Finance Lease Interest Income -- -- 3- Deposits and Guarantees Given 357.920 358.718 4- Other Miscellaneous Receivables 10.020.655 4.962.323 5- Rediscount on Other Miscellaneous Receivables -- -- 6- Other Doubtful Receivables -- -- 7- Provision for Other Doubtful Receivables -- -- F- Prepaid Expenses and Income Accruals 280.651.377 208.618.353 1- Prepaid Expenses 17 275.073.222 205.884.923 2- Accrued Interest and Rent Income -- -- 3- Income Accruals 10,12 5.577.825 2.733.430 4- Other Prepaid Expenses 330 -- G- Other Current Assets 23.705.128 2.230.484 1- Stocks to be Used in the Following Months 1.049.275 212.258 2- Prepaid Taxes and Funds 19 22.398.667 1.848.492 3- Deferred Tax Assets -- -- 4- Job Advances 12 253.035 165.103 5- Advances Given to Personnel 12 4.151 4.631 6- Inventory Count Differences -- -- 7- Other Miscellaneous Current Assets -- -- 8- Provision for Other Current Assets -- -- I- Total Current Assets 4.228.734.488 3.263.740.662 (*) See Note 2.1.6 to reorganize. The accompanying notes are an integral part of these unconsolidated financial statements.

Anadolu Sigorta Annual Report 2015 191

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Consolidated Balance Sheet As at 31 December 2015 (Currency: Turkish Lira (TL)

ASSETS Audited Audited Prior Period Current Period (Reorganized) (*) II- Non-Current Assets Note 31 December 2015 31 December 2014 A- Receivables from Main Operations -- -- 1- Receivables from Insurance Operations -- -- 2- Provision for Receivables from Insurance Operations -- -- 3- Receivables from Reinsurance Operations -- -- 4- Provision for Receivables from Reinsurance Operations -- -- 5- Cash Deposited for Insurance and Reinsurance Companies -- -- 6- Loans to the Policyholders -- -- 7- Provision for Loans to the Policyholders -- -- 8- Receivables from Individual Pension Business -- -- 9- Doubtful Receivables from Main Operations -- -- 10- Provision for Doubtful Receivables from Main Operations -- -- B- Due from Related Parties -- -- 1- Due from Shareholders -- -- 2- Due from Associates -- -- 3- Due from Subsidiaries -- -- 4- Due from Joint Ventures -- -- 5- Due from Personnel -- -- 6- Due from Other Related Parties -- -- 7- Rediscount on Receivables from Related Parties -- -- 8- Doubtful Receivables from Related Parties -- -- 9- Provision for Doubtful Receivables from Related Parties -- -- C- Other Receivables 12 2.207.981 -- 1- Finance Lease Receivables -- -- 2- Unearned Finance Lease Interest Income -- -- 3- Deposits and Guarantees Given -- -- 4- Other Miscellaneous Receivables 2.839.780 -- 5- Rediscount on Other Miscellaneous Receivables (631.799) -- 6- Other Doubtful Receivables -- -- 7- Provision for Other Doubtful Receivables -- -- D- Financial Assets 9 156.605.195 141.148.361 1- Investments in Equity Shares -- -- 2- Investments in Associates 9 156.605.195 141.148.361 3- Capital Commitments to Associates -- -- 4- Investments in Subsidiaries -- -- 5- Capital Commitments to Subsidiaries -- -- 6- Investments in Joint Ventures -- -- 7- Capital Commitments to Joint Ventures -- -- 8- Financial Assets and Financial Investments with Risks on Policyholders -- -- 9- Other Financial Assets -- -- 10- Impairment in Value of Financial Assets -- -- E- Tangible Assets 6 90.862.004 65.145.258 1- Investment Properties 6,7 54.343.600 36.242.000 2- Impairment for Investment Properties -- -- 3- Owner Occupied Property 6 11.532.400 6.788.733 4- Machinery and Equipment 6 41.909.394 34.554.018 5- Furniture and Fixtures 6 12.253.700 11.775.416 6- Motor Vehicles 6 619.736 1.362.223 7- Other Tangible Assets (Including Leasehold Improvements) 6 20.322.655 19.401.127 8- Tangible Assets Acquired Through Finance Leases 6 4.166.354 4.166.354 9- Accumulated Depreciation 6 (54.285.835) (49.144.613) 10- Advances Paid for Tangible Assets (Including Construction in Progress) -- -- F- Intangible Assets 8 52.009.300 62.254.841 1- Rights -- -- 2- Goodwill 8 16.250.000 16.250.000 3- Pre-operating Expenses -- -- 4- Research and Development Costs -- -- 5- Other Intangible Assets 8 93.201.169 88.079.901 6- Accumulated Amortization 8 (66.877.216) (43.804.438) 7- Advances Paid for Intangible Assets 8 9.435.347 1.729.378 G- Prepaid Expenses and Income Accruals 17 5.221.880 3.562.038 1- Prepaid Expenses 17 5.221.880 3.562.038 2- Income Accruals -- -- 3- Other Prepaid Expenses and Income Accruals -- -- H- Other Non-Current Assets 21 13.229.325 18.889.913 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 13.229.325 18.889.913 6- Other Miscellaneous Non-Current Assets -- -- 7- Amortization on Other Non-Current Assets -- -- 8- Provision for Other Non-Current Assets -- -- II- Total Non-Current Assets 320.135.685 291.000.411 TOTAL ASSETS 4.548.870.173 3.554.741.073 (*) See Note 2.1.6 to reorganize. The accompanying notes are an integral part of these unconsolidated financial statements.

Anadolu Sigorta Annual Report 2015 192 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Consolidated Balance Sheet As at 31 December 2015 (Currency: Turkish Lira (TL)

LIABILITIES Audited Audited Prior Period Current Period (Reorganized) (*) III- Short-Term Liabilities Note 31 December 2015 31 December 2014 A- Financial Liabilities 20 210.669.647 -- 1- Borrowings from Financial Institutions -- -- 2- Finance Lease Liabilities -- -- 3- Deferred Leasing Costs -- -- 4- Current Portion of Long Term Debts -- -- 5- Principal Instalments and Interests on Bonds Issued -- -- 6- Other Financial Assets Issued -- -- 7- Valuation Differences of Other Financial Assets Issued -- -- 8- Other Financial Liabilities 20 210.669.647 -- B- Payables Arising from Main Operations 19 339.189.344 302.045.983 1- Payables Arising from Insurance Operations 19 226.165.931 218.662.943 2- Payables Arising from Reinsurance Operations -- -- 3- Cash Deposited by Insurance and Reinsurance Companies 10,19 4.365.775 7.277.133 4- Payables Arising from Individual Pension Business -- -- 5- Payables Arising from Other Main Operations 19 108.657.638 76.105.907 6- Discount on Payables from Other Main Operations -- -- C- Due to Related Parties 19 92.190 -- 1- Due to Shareholders -- -- 2- Due to Associates -- -- 3- Due to Subsidiaries -- -- 4- Due to Joint Ventures -- -- 5- Due to Personnel 92.190 -- 6- Due to Other Related Parties -- -- D- Other Payables 19 60.481.800 47.561.333 1- Deposits and Guarantees Received 3.177.561 2.916.577 2- Medical Treatment Payables to Social Security Institution 27.524.238 16.625.234 3- Other Miscellaneous Payables 30.287.110 28.268.772 4- Discount on Other Miscellaneous Payables (507.109) (249.250) E- Insurance Technical Provisions 17 2.844.320.564 2.214.197.954 1- Reserve for Unearned Premiums - Net 17 1.451.927.808 1.159.630.507 2- Reserve for Unexpired Risks - Net 2.26,17 6.485.214 40.379.346 3- Mathematical Provisions - Net -- -- 4- Provision for Outstanding Claims - Net 17 1.385.907.542 1.014.188.101 5- Provision for Bonus and Discounts - Net -- -- 6- Other Technical Provisions - Net -- -- F- Provisions for Taxes and Other Similar Obligations 19 37.087.955 27.386.135 1- Taxes and Funds Payable 34.487.522 25.121.485 2- Social Security Premiums Payable 2.600.433 2.264.650 3- Overdue, Deferred or By Instalment Taxes and Other Liabilities -- -- 4- Other Taxes and Similar Payables -- -- 5- Corporate Tax Payable 19,35 1.769.959 21.081.960 6- Prepaid Taxes and Other Liabilities Regarding Current Period Income 19,35 (1.769.959) (21.081.960) 7- Provisions for Other Taxes and Similar Liabilities -- -- G- Provisions for Other Risks -- -- 1- Provision for Employee Termination Benefits -- -- 2- Provision for Pension Fund Deficits -- -- 3- Provisions for Costs -- -- H- Deferred Income and Expense Accruals 87.824.309 80.052.263 1- Deferred Income 19 54.739.019 45.447.065 2- Expense Accruals 23 33.076.660 34.605.198 3- Other Deferred Income and Expense Accruals 8.630 -- I- Other Short-Term Liabilities 23 1.492.709 1.433.153 1- Deferred Tax Liabilities -- -- 2- Inventory Count Differences -- -- 3- Other Various Short-Term Liabilities 23 1.492.709 1.433.153 III - Total Short-Term Liabilities 3.581.158.518 2.672.676.821 (*) See Note 2.1.6 to reorganize. The accompanying notes are an integral part of these unconsolidated financial statements.

Anadolu Sigorta Annual Report 2015 193

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Consolidated Balance Sheet As at 31 December 2015 (Currency: Turkish Lira (TL)

LIABILITIES Audited Audited Prior Period Current Period (Reorganized) (*) IV- Long-Term Liabilities Note 31 December 2015 31 December 2014 A- Financial Liabilities -- -- 1- Borrowings from Financial Institutions -- -- 2- Finance Lease Liabilities -- -- 3- Deferred Leasing Costs -- -- 4- Bonds Issued -- -- 5- Other Financial Assets Issued -- -- 6- Valuation Differences of Other Financial Assets Issued -- -- 7- Other Financial Liabilities -- -- B- Payables Arising from Main Operations -- -- 1- Payables 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 17 89.248.488 68.252.637 1- Reserve for Unearned Premiums - Net -- -- 2- Reserve for Unexpired Risks - Net -- -- 3- Mathematical Provisions - Net -- -- 4- Provision for Outstanding Claims - Net -- -- 5- Provision for Bonus and Discounts - Net -- -- 6- Other Technical Provisions - Net 17 89.248.488 68.252.637 F-Other Liabilities and Relevant Accruals -- -- 1- Other Liabilities -- -- 2- Overdue, Deferred or By Instalment Taxes and Other Liabilities -- -- 3- Other Liabilities and Expense Accruals -- -- G- Provisions for Other Risks 23 15.244.930 12.628.115 1- Provision for Employee Termination Benefits 23 15.244.930 12.628.115 2- Provision for Pension Fund Deficits -- -- H-Deferred Income and Expense Accruals -- -- 1- Deferred Income -- -- 2- Expense Accruals -- -- 3- Other Deferred Income and Expense Accruals -- -- I- Other Long-Term Liabilities -- -- 1- Deferred Tax Liabilities -- -- 2- Other Long-Term Liabilities -- -- IV- Total Long-Term Liabilities 104.493.418 80.880.752

(*) See Note 2.1.6 to reorganize. The accompanying notes are an integral part of these unconsolidated financial statements.

Anadolu Sigorta Annual Report 2015 194 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Consolidated Balance Sheet As at 31 December 2015 (Currency: Turkish Lira (TL)

EQUITY Audited Audited Prior Period Current Period (Reorganized) (*) V-Equity Note 31 December 2015 31 December 2014 A- Paid in Capital 500.000.000 500.000.000 1- (Nominal) Capital 2.13,15 500.000.000 500.000.000 2- Unpaid Capital -- -- 3- Positive Capital Restatement Differences -- -- 4- Negative Capital Restatement Differences -- -- 5- Register in Progress Capital -- -- B- Capital Reserves 15 25.887.403 8.809.304 1- Share Premiums -- -- 2- Cancellation Profits of Equity Shares -- -- 3- Profit on Asset Sales That Will Be Transferred to Capital -- -- 4- Currency Translation Adjustments -- -- 5- Other Capital Reserves 15 25.887.403 8.809.304 C- Profit Reserves 197.520.109 154.907.376 1- Legal Reserves 15 52.415.164 46.999.839 2- Statutory Reserves 15 11.788.629 7.710.040 3- Extraordinary Reserves 15 60.745.557 20.962.756 4- Special Funds -- -- 5- Revaluation of Financial Assets 15 29.179.139 35.200.299 6- Other Profit Reserves 15 43.391.620 44.034.442 D- Retained Earnings 2.1.6 64.827.919 60.952.290 1- Retained Earnings 2.1.6 64.827.919 60.952.290 E- Accumulated Losses -- -- 1- Accumulated Losses -- -- F-Net Profit/(Loss) for the Period 74.982.806 76.514.530 1- Net Profit for the Period 72.441.307 75.119.905 2- Net Loss for the Period -- -- 3- Profit not Available for Distribution 15 2.541.499 1.394.625 V- Total Equity 863.218.237 801.183.500 TOTAL EQUITY AND LIABILITIES 4.548.870.173 3.554.741.073 (*) See Note 2.1.6 to reorganize.

The accompanying notes are an integral part of these unconsolidated financial statements.

Anadolu Sigorta Annual Report 2015 195

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Consolidated Statement of Income For the Year Ended 31 December 2015 (Currency: Turkish Lira (TL)

Audited Audited Prior Period Current Period (Reorganized) (*) I-TECHNICAL SECTION Note 1 January - 31 December 2015 1 January - 31 December 2014 A- Non-Life Technical Income 2.860.262.936 2.441.216.789 1- Earned Premiums (Net of Reinsurer Share) 2.521.354.285 2.235.759.340 1.1- Written Premiums (Net of Reinsurer Share) 17 2.779.757.454 2.325.110.061 1.1.1- Written Premiums, gross 17 3.610.673.887 3.004.830.066 1.1.2- Written Premiums, ceded 10,17 (731.404.966) (605.617.965) 1.1.3- Premiums Transferred to Social Security Institutions 17 (99.511.467) (74.102.040) 1.2- Change in Reserve for Unearned Premiums (Net of Reinsurer Shares and Less the Amounts Carried Forward) 17,29 (292.297.301) (62.089.748) 1.2.1- Reserve for Unearned Premiums, gross 17 (357.300.300) (68.928.251) 1.2.2- Reserve for Unearned Premiums, ceded 17 46.720.226 4.900.846 1.2.3 - Reserve for Unearned Premiums, Social Security Institution Share 18.282.773 1.937.657 1.3- Change in Reserve for Unexpired Risks (Net of Reinsurer Share and Less the Amounts Carried Forward) 29 33.894.132 (27.260.973) 1.3.1- Reserve for Unexpired Risks, gross 34.155.326 (30.198.184) 1.3.2- Reserve for Unexpired Risks, ceded (261.194) 2.937.211 2- Investment Income - Transferred from Non-Technical Section 276.542.615 190.509.410 3- Other Technical Income (Net of Reinsurer Share) 5.932.923 2.788.809 3.1- Other Technical Income, gross 5.932.923 2.788.809 3.2- Other Technical Income, ceded -- -- 4- Accrued Salvage and Subrogation Income 56.433.113 12.159.230 B - Non-Life Technical Expense (2.756.629.118) (2.319.957.258) 1- Incurred Losses (Net of Reinsurer Share) 17 (2.056.750.827) (1.738.079.061) 1.1- Claims Paid (Net of Reinsurer Share) 17,29 (1.685.031.386) (1.412.362.272) 1.1.1- Claims Paid, gross 17 (1.941.148.764) (1.553.196.954) 1.1.2- Claims Paid, ceded 10,17 256.117.378 140.834.682 1.2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward) 17,29 (371.719.441) (325.716.789) 1.2.1- Change in Provisions for Outstanding Claims, gross 17 (634.990.652) (420.158.951) 1.2.2- Change in Provisions for Outstanding Claims, ceded 17 263.271.211 94.442.162 2- Change in Provision for Bonus and Discounts (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- 2.1- Provision for Bonus and Discounts, gross -- -- 2.2- Provision for Bonus and Discounts, ceded -- -- 3- Change in Other Technical Reserves (Net of Reinsurer Share and Less the Amounts Carried Forward) 29 (20.995.851) (15.970.036) 4- Operating Expenses 32 (605.324.073) (522.686.229) 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) 2.25 (73.558.367) (43.221.932) 6.1- Change in Other Technical Provisions, gross 2.25 (73.558.367) (43.221.932) 6.2- Change in Other Technical Provisions, ceded -- -- C- Net Technical Income-Non-Life (A - B) 103.633.818 121.259.531 D- Life Technical Income -- -- 1- Earned Premiums (Net of Reinsurer Share) -- -- 1.1- Written Premiums (Net of Reinsurer Share) -- -- 1.1.1- Written Premiums, gross -- -- 1.1.2- Written Premiums, ceded -- -- 1.2- Change in Reserve for Unearned Premiums (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- 1.2.1- Reserve for Unearned Premiums, gross -- -- 1.2.2- Reserve for Unearned Premiums, ceded -- -- 1.3- Change in Reserve for Unexpired Risks (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- 1.3.1- Reserve for Unexpired Risks, gross -- -- 1.3.2- Reserve for Unexpired Risks, ceded -- -- 2- Investment Income -- -- 3- Unrealized Gains on Investments -- -- 4- Other Technical Income (Net of Reinsurer Share) -- -- 4.1- Other Technical Income. gross -- -- 4.2- Other Technical Income. Ceded -- -- 5- Accrued Salvage Income -- -- (*) See Note 2.1.6 to reorganize. The accompanying notes are an integral part of these unconsolidated financial statements.

Anadolu Sigorta Annual Report 2015 196 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Consolidated Statement of Income For the Year Ended 31 December 2015 (Currency: Turkish Lira (TL)

Audited Audited Prior Period Current Period (Reorganized) (*) I-TECHNICAL SECTION Note 1 January - 31 December 2015 1 January - 31 December 2014 E- Life Technical Expense -- -- 1- Incurred Losses (Net of Reinsurer Share) -- -- 1.1- Claims Paid (Net of Reinsurer Share) -- -- 1.1.1- Claims Paid, gross -- -- 1.1.2- Claims Paid, ceded -- -- 1.2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- 1.2.1- Change in Provisions for Outstanding Claims, gross -- -- 1.2.2- Change in Provisions for Outstanding Claims, ceded -- -- 2- Change in Provision for Bonus and Discounts (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- 2.1- Provision for Bonus and Discounts, gross -- -- 2.2- Provision for Bonus and Discounts, ceded -- -- 3- Change in Mathematical Provisions (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- 3.1- Change in Mathematical Provisions, gross -- -- 3.1.1- Change in Actuarial Mathematical Provisions, gross -- -- 3.1.2- Change in Profit Share Provisions (Provision for Financial Investments with Risks on Saving Life Policyholders), gross -- -- 3.2- Change in Mathematical Provisions, ceded -- -- 3.2.1- Change in Actuarial Mathematical Provisions, ceded -- -- 3.2.2- Change in Profit Share Provisions (Provision for Financial Investments with Risks on Saving Life Policyholders). ceded -- -- 4- Change in Other Technical Reserves (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- 5- Operating Expenses -- -- 6- Investment Expenses -- -- 7- Unrealized Losses on Investments -- -- 8- Investment Income Transferred to the Non-Life Technical Section -- -- F- Net Technical Income- Life (D - E) -- -- G- Pension Business Technical Income -- -- 1- Fund Management Income -- -- 2- Management Fee -- -- 3- Entrance Fee Income -- -- 4- Management Expense Charge in case of Suspension -- -- 5- Income from Private Service Charges -- -- 6- Increase in Value of Capital Allowances Given as Advance -- -- 7- Other Technical Expense -- -- H- Pension Business Technical Expense -- -- 1- Fund Management Expense -- -- 2- Decrease in Value of Capital Allowances Given as Advance -- -- 3- Operating Expenses -- -- 4- Other Technical Expenses -- -- I- Net Technical Income - Pension Business (G - H) -- --

(*) See Note 2.1.6 to reorganize.

The accompanying notes are an integral part of these unconsolidated financial statements.

Anadolu Sigorta Annual Report 2015 197

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Consolidated Statement of Income For the Year Ended 31 December 2015 (Currency: Turkish Lira (TL)

Audited Audited Prior Period Current Period (Reorganized) (*) II-NON-TECHNICAL SECTION Note 1 January - 31 December 2015 1 January - 31 December 2014 C- Net Technical Income - Non-Life (A-B) 103.633.818 121.259.531 F- Net Technical Income - Life (D-E) -- -- I - Net Technical Income - Pension Business (G-H) -- -- J- Total Net Technical Income (C+F+I) 103.633.818 121.259.531 K- Investment Income 379.189.462 263.742.993 1- Income from Financial Assets 4.2 183.751.030 130.174.857 2- Income from Disposal of Financial Assets 4.2 9.642.262 31.151.423 3- Valuation of Financial Assets 4.2 33.542.592 19.421.434 4- Foreign Exchange Gains 4.2 109.289.546 59.970.980 5- Income from Associates 4.2 29.176.564 20.814.929 6- Income from Subsidiaries and Joint Ventures -- -- 7- Income from Property, Plant and Equipment 12.678.354 1.815.006 8- Income from Derivative Transactions 4.2 674.700 205.678 9- Other Investments 434.414 188.686 10- Income Transferred from Life Section -- -- L- Investment Expense (382.414.280) (275.669.933) 1- Investment Management Expenses (incl. interest) 4.2 (939.230) (136.623) 2- Diminution in Value of Investments 4.2 (2.824.154) (3.509.979) 3- Loss from Disposal of Financial Assets 4.2 (9.629.064) (7.713.065) 4- Investment Income Transferred to Non-Life Technical Section (276.542.615) (190.509.410) 5- Loss from Derivative Transactions 4.2 (74.638) (184.509) 6- Foreign Exchange Losses 4.2 (61.168.299) (49.954.025) 7- Amortization Expenses 6,8 (31.236.280) (23.662.322) 8- Other Investment Expenses -- -- M- Income and Expenses From Other and Extraordinary Operations (23.656.235) (11.736.101) 1- Provisions 47 (25.546.469) (20.360.660) 2- Rediscounts 47 1.458.591 (3.360.281) 3- Specified Insurance Accounts -- -- 4- Monetary Gains and Losses -- -- 5- Deferred Taxation (Deferred Tax Assets) 35 -- 7.396.097 6- Deferred Taxation (Deferred Tax Liabilities) 35 (6.509.894) -- 7- Other Income 7.600.350 5.142.413 8- Other Expenses and Losses (658.813) (553.670) 9- Prior Year’s Income -- -- 10- Prior Year’s Expenses and Losses -- -- N- Net Profit for the Period 74.982.806 76.514.530 1- Profit for the Period 76.752.765 97.596.490 2- Corporate Tax Provision and Other Fiscal Liabilities 35 (1.769.959) (21.081.960) 3- Net Profit for the Period 74.982.806 76.514.530 4- Monetary Gains and Losses -- -- (*) See Note 2.1.6 to reorganize.

The accompanying notes are an integral part of these unconsolidated financial statements.

Anadolu Sigorta Annual Report 2015 198 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Consolidated Statement of Changes in Equity For the Year Ended 31 December 2015 (Currency: Turkish Lira (TL)

Audited Statement of Changes in Equity (Reorganized) (*) - 31 December 2014 Own Shares Revaluation Currency Paid-in of the of Financial Inflation Translation Other Reserves and Net Profit for the Notes Capital Company Assets Adjustments Adjustments Legal Reserves Statutory Reserves Retained Earnings Year Retained Earnings Total I - Balance at the end of the previous year (31.12.2013) 500.000.000 -- 11.454.748 -- -- 45.293.051 7.161.457 71.411.204 66.403.111 (48.878.904) 652.844.667 II - Change in Accounting Standards (*) ------(330) 235.997 47.330.605 47.566.272 III - Restated balances (I+II) (01.01.2014) 500.000.000 -- 11.454.748 -- -- 45.293.051 7.161.457 71.410.874 66.639.108 (1.548.299) 700.410.939 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 ------512.480 -- -- 512.480 D- Change in the value of financial assets 11,15 -- -- 23.745.551 ------23.745.551 E- Currency translation adjustments ------F- Other gains or losses ------330 (235.997) 235.667 -- G- Inflation adjustment differences ------H- Net profit for the period ------76.514.530 -- 76.514.530 I - Dividends paid ------J - Transfers to reserves 15 ------1.706.788 548.583 1.882.818 (66.403.111) 62.264.922 -- II - Balance at the end of the period - 31 December 2014 500.000.000 -- 35.200.299 -- -- 46.999.839 7.710.040 73.806.502 76.514.530 60.952.290 801.183.500

Audited Statement of Changes in Equity - 31 December 2015 Own Shares Revaluation Currency Paid-in of the of Financial Inflation Translation Other Reserves and Net Profit for the Note Capital Company Assets Adjustments Adjustments Legal Reserves Statutory Reserves Retained Earnings Year Retained Earnings Total I Balance at the end of the previous year (31.12.2014) 500.000.000 -- 35.200.299 -- -- 46.999.839 7.710.040 73.806.502 76.514.530 60.952.290 801.183.500 II - Change in Accounting Standards ------III - Restated balances (I+II) (01.01.2015) 500.000.000 -- 35.200.299 -- -- 46.999.839 7.710.040 73.806.502 76.514.530 60.952.290 801.183.500 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 ------(642.822) -- -- (642.822) D- Change in the value of financial assets 11,15 -- -- (6.021.160) ------16.610.291 -- 1.920.839 12.509.970 E- Currency translation adjustments ------F- Other gains or losses ------(1.922.428) -- (1.922.428) G- Inflation adjustment differences ------H- Net profit for the period ------74.982.806 -- 74.982.806 I - Dividends paid 2.23 ------(22.892.789) -- (22.892.789) J - Transfers to reserves 15 ------5.415.325 4.078.589 40.250.609 (51.699.313) 1.954.790 -- IV - Balance at the end of the period - 31 December 2015 500.000.000 -- 29.179.139 -- -- 52.415.164 11.788.629 130.024.580 74.982.806 64.827.919 863.218.237 (*) See Note 2.1.6 to reorganize.

The accompanying notes are an integral part of these unconsolidated financial statements.

Anadolu Sigorta Annual Report 2015 199

Audited Statement of Changes in Equity (Reorganized) (*) - 31 December 2014 Own Shares Revaluation Currency Paid-in of the of Financial Inflation Translation Other Reserves and Net Profit for the Notes Capital Company Assets Adjustments Adjustments Legal Reserves Statutory Reserves Retained Earnings Year Retained Earnings Total I - Balance at the end of the previous year (31.12.2013) 500.000.000 -- 11.454.748 -- -- 45.293.051 7.161.457 71.411.204 66.403.111 (48.878.904) 652.844.667 II - Change in Accounting Standards (*) ------(330) 235.997 47.330.605 47.566.272 III - Restated balances (I+II) (01.01.2014) 500.000.000 -- 11.454.748 -- -- 45.293.051 7.161.457 71.410.874 66.639.108 (1.548.299) 700.410.939 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 ------512.480 -- -- 512.480 D- Change in the value of financial assets 11,15 -- -- 23.745.551 ------23.745.551 E- Currency translation adjustments ------F- Other gains or losses ------330 (235.997) 235.667 -- G- Inflation adjustment differences ------H- Net profit for the period ------76.514.530 -- 76.514.530 I - Dividends paid ------J - Transfers to reserves 15 ------1.706.788 548.583 1.882.818 (66.403.111) 62.264.922 -- II - Balance at the end of the period - 31 December 2014 500.000.000 -- 35.200.299 -- -- 46.999.839 7.710.040 73.806.502 76.514.530 60.952.290 801.183.500

Audited Statement of Changes in Equity - 31 December 2015 Own Shares Revaluation Currency Paid-in of the of Financial Inflation Translation Other Reserves and Net Profit for the Note Capital Company Assets Adjustments Adjustments Legal Reserves Statutory Reserves Retained Earnings Year Retained Earnings Total I Balance at the end of the previous year (31.12.2014) 500.000.000 -- 35.200.299 -- -- 46.999.839 7.710.040 73.806.502 76.514.530 60.952.290 801.183.500 II - Change in Accounting Standards ------III - Restated balances (I+II) (01.01.2015) 500.000.000 -- 35.200.299 -- -- 46.999.839 7.710.040 73.806.502 76.514.530 60.952.290 801.183.500 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 ------(642.822) -- -- (642.822) D- Change in the value of financial assets 11,15 -- -- (6.021.160) ------16.610.291 -- 1.920.839 12.509.970 E- Currency translation adjustments ------F- Other gains or losses ------(1.922.428) -- (1.922.428) G- Inflation adjustment differences ------H- Net profit for the period ------74.982.806 -- 74.982.806 I - Dividends paid 2.23 ------(22.892.789) -- (22.892.789) J - Transfers to reserves 15 ------5.415.325 4.078.589 40.250.609 (51.699.313) 1.954.790 -- IV - Balance at the end of the period - 31 December 2015 500.000.000 -- 29.179.139 -- -- 52.415.164 11.788.629 130.024.580 74.982.806 64.827.919 863.218.237 (*) See Note 2.1.6 to reorganize.

Anadolu Sigorta Annual Report 2015 200 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Consolidated Statement of Cash Flow For the Year Ended 31 December 2015 (Currency: Turkish Lira (TL)

Audited Audited Prior Period Current Period (Reorganized) (*) Note 31 December 2015 31 December 2014 A - CASH FLOWS FROM OPERATING ACTIVITIES 1- Cash provided from insurance activities 3.881.788.562 3.153.798.374 2- Cash provided from reinsurance activities -- -- 3- Cash provided from individual pension business -- -- 4- Cash used in insurance activities (3.643.412.204) (2.924.054.056) 5- Cash used in reinsurance activities (13.550.082) (6.560.002) 6- Cash used in individual pension business -- -- 7- Cash provided by operating activities 224.826.276 223.184.316 8- Interest paid -- -- 9- Income taxes paid 19 (22.398.667) (22.930.452) 10- Other cash inflows 233.503.726 26.050.558 11- Other cash outflows (42.151.838) (37.055.680) 12- Net cash provided by operating activities 393.779.497 189.248.742 B - CASH FLOWS FROM INVESTING ACTIVITIES 1- Proceeds from disposal of tangible assets 17.987.811 -- 2- Acquisition of tangible assets 6,8 (22.158.602) (21.111.793) 3- Acquisition of financial assets 11 (609.793.354) (541.175.656) 4- Proceeds from disposal of financial assets 617.953.122 865.215.792 5- Interests received 162.853.642 (142.557.704) 6- Dividends received 12.000.000 10.000.000 7- Other cash inflows 165.276.635 62.448.109 8- Other cash outflows (90.897.471) (205.552.139) 9- Net cash provided by investing activities 253.221.783 27.266.609 C- CASH FLOWS FROM FINANCING ACTIVITIES 1- Equity shares issued -- -- 2- Cash provided from loans and borrowings -- -- 3- Finance lease payments -- -- 4- Dividends paid (22.459.965) -- 5- Other cash inflows -- -- 6- Other cash outflows -- -- 7- Net cash used in financing activities (22.459.965) -- D- EFFECT OF EXCHANGE RATE FLUCTUATIONS ON CASH AND CASH EQUIVALENTS 1.931.150 1.701.066 E- Net increase in cash and cash equivalents 626.472.465 218.216.417 F- Cash and cash equivalents at the beginning of the year 14 1.043.729.224 825.512.807 G- Cash and cash equivalents at the end of the year 14 1.670.201.689 1.043.729.224 (*) See Note 2.1.6 to reorganize.

The accompanying notes are an integral part of these unconsolidated financial statements.

Anadolu Sigorta Annual Report 2015 201

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Consolidated Profit Distribution For the Year Ended 31 December 2015 (Currency: Turkish Lira (TL)

Audited Current Period (**) Audited Prior Period (***) Note 31 December 2015 31 December 2014 I. PROFIT DISTRIBUTION 1.1. CURRENT YEAR PROFIT(*) 74.211.266 94.279.437 1.2. TAX AND FUNDS PAYABLE (1.769.959) (21.081.960) 1.2.1. Corporate Income Tax (Income Tax) (1.769.959) (21.081.960) 1.2.2. Income tax deduction -- -- 1.2.3. Other taxes and Duties -- -- A NET PROFIT (1.1 - 1.2) 72.441.307 73.197.477 1.3. PREVIOUS PERIOD LOSSES (-) -- -- 1.4. FIRST LEGAL RESERVE 3.063.237 3.531.984 1.5. STATUTORY FUND (-) -- -- B NET PROFIT DISTRIBUTION [(A-(1.3 + 1.4 + 1.5)] 69.378.070 69.665.493 1.6. FIRST DIVIDEND TO SHAREHOLDERS (-) -- -- 1.6.1. Holders of shares -- 21.000.000 1.6.2. Holders of Preferred shares -- -- 1.6.3. Holders of Redeemed shares -- -- 1.6.4. Holders of Participation Bond -- -- 1.6.5. Holders of Profıt and Loss sharing certificate -- -- 1.7. DIVIDEND TO PERSONNEL (-) -- 1.459.965 1.8. DIVIDENDS TO BOARD OF DIRECTORS (-) -- -- 1.9. SECOND DIVIDEND TO SHAREHOLDERS (-) -- -- 1.9.1. Holders of shares -- -- 1.9.2. Holders of Preferred shares -- -- 1.9.3. Holders of Redeemed shares -- -- 1.9.4. Holders of Participation Bond -- -- 1.9.5. Holders of Profıt and Loss sharing certificate -- -- 1.10. SECOND LEGAL RESERVE (-) -- -- 1.11. STATUTORY RESERVES (-) -- 4.464.773 1.12. EXTRAORDINARY RESERVES -- 42.740.755 1.13. OTHER RESERVES -- -- 1.14. SPECIAL FUNDS -- -- II. DISTRIBUTION OF RESERVES -- -- 2.1. DISTRIBUTION OF RESERVES -- -- 2.2. SECOND LEGAL RESERVES (-) -- -- 2.3. COMMON SHARES (-) -- -- 2.3.1. Holders of shares -- -- 2.3.2 Holders of Preferred shares -- -- 2.3.3. Holders of Redeemed shares -- -- 2.3.4 Holders of Participation Bond -- -- 2.3.5 Holders of Profıt and Loss sharing certificate -- -- 2.4. DIVIDENDS TO PERSONNEL (-) -- -- 2.5. DIVIDENDS TO BOARD OF DIRECTORS (-) -- -- III. PROFIT PER SHARE -- -- 3.1. HOLDERS OF SHARES -- 0,188559 3.2. HOLDERS OF SHARES (%) -- 18,86% 3.3. HOLDERS OF PREFERRED SHARES -- -- 3.4. HOLDERS OF PREFERRED SHARES (%) -- -- IV. DIVIDEND PER SHARE -- -- 4.1. HOLDERS OF SHARES -- 0,042 4.2. HOLDERS OF SHARES (%) -- 4,20% 4.3. HOLDERS OF PREFERRED SHARES -- -- 4.4. HOLDERS OF PREFERRED SHARES (%) -- -- (*) In accordance with Capital Markets Board’s no.2014/2 in the Weekly Bulletin “Profit Distribution Statement Preparation Guide” the distribution are based on the consolidated profit figure. 2.541.499 TL 75% of ‘income from investments in associates and real estate sales pursuant to the shareholders’ account which is followed in “Profit not subject to distribution” section in equity is not taken into consideration due to profit for the year December 31, 2015, rely on no.5 of the Corporate Tax Law. (**) Profit distribution table has not been filled yet, due to profit distribution proposal for the year 2015 has not prepared by the Board of Directors. (***) The figures of 2014 is filled with the data which is “According to Legal Records” belongs to the Profit Distribution.

The accompanying notes are an integral part of these unconsolidated financial statements.

Anadolu Sigorta Annual Report 2015 202 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

1 General Information

1.1 Name of the Company and the ultimate owner of the group

The shareholding structure of Anadolu Anonim Türk Sigorta Şirketi (“the Company”) is presented below. As at 31 December 2015, the shareholder having indirect control over the shares of Anadolu Anonim Türk Sigorta Şirketi (“the Company”) is Türkiye İş Bankası A.Ş. (“İş Bankası”). 31 December 2015 31 December 2014 Shareholding Shareholding Shareholding Shareholding Name Amount (TL) Rate (%) Amount (TL) Rate (%)

Milli Reasürans T.A.Ş. 286.550.106 57,31 286.550.106 57,31 Other 213.449.894 42,69 213.449.894 42,69 Paid in Capital 500.000.000 100,00 500.000.000 100,00

1.2 Domicile and the legal structure of the Company, country and the address of the registered office (address of the operating centre if it is different from the registered office)

The Company was registered in Turkey and has the status of ‘Incorporated Company’. The Company moved from “Büyükdere Caddesi İş Kuleleri Kule 2 Kat: 22-26, 34330 4. Levent, Istanbul to the new address “Rüzgarlıbahçe Mahallesi, Kavak Sokak, No: 31 34805 Kavacık/ İstanbul and the Company has nine regional offices; two of them established in İstanbul and others established in Antalya, İzmir, Samsun, Adana, Ankara, Trabzon and Bursa, and a branch in Turkish Republic of Northern Cyprus.

1.3 Business of the Company

The Company operates in almost all non-life insurance branches consisting of mainly accident, illness/health, motor vehicles, aircrafts, watercrafts, marine, fire and natural disasters, general loss, credit, financial losses, and legal protection.

As at 31 December 2015, the Company serves through, 2.468 authorized agencies and 93 unauthorized agencies (31 December 2014: 2.485 authorized agencies and 91 unauthorized agencies) of which, 2.561 agencies (31 December 2014: 2.576 authorized).

1.4 Description of the main operations of the Company

The Company conducts its operations in accordance with the Insurance Law No.5684 (the “Insurance Law”) issued in 14 June 2007 dated and 26552 numbered Official Gazette and the communiqués and other regulations in force issued by the Turkish Treasury based on the Insurance Law. The Company operates in insurance branches as mentioned above Note 1.3 Business of the Company.

The Company’s shares have been listed on the Istanbul Stock Exchange (“ISE”). The company operates based on its own specific laws and regulations in matters of establishment, auditing, supervision/oversight, accounting and financial reporting in accordance Capital Market Law No: 6362, part of VIII and paragraph of 5 of Article 136.

1.5 The average number of the personnel during the period in consideration of their categories

The average number of the personnel during the period in consideration of their categories is as follows: 31 December 2015 31 December 2014

Senior level managers 7 7 Directors 37 37 Intermediate directors 3 3 Officers 145 142 Contracted personnel 891 799 Total 1.083 988

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ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

1.6 Wages and similar benefits provided to the senior management

For the year ended 31 December 2015, wages and similar benefits provided chairman is amounting to TL 1.110.000 TL (31 December 2014: 1.034.290 TL), senior management 4.374.000 TL (31 December 2014: 3.915.203 TL).

1.7 Keys used in the distribution of investment income and operating expenses (personnel, administrative, research and development, marketing and selling, services rendered from third parties and other operating expenses) in the financial statements

Procedures and principles related to keys used in the financial statements of the companies are determined in accordance with the 4 January 2008 dated and 2008/1 numbered “Communiqué Related to the Procedures and Principles for the Keys Used in the Financial Statements Being Prepared In Accordance With Insurance Accounting Plan” issued by the Turkish Treasury.

In accordance with the above mentioned Communiqué, insurance companies are allowed to transfer technical section operating expense to insurance section through methods determined by Turkish Treasury or by the Company itself. Methods determined by the Company should be approved by the Turkish Treasury, Known and exactly distinguishable operating expenses are distributed to related branches directly, while operating expenses are distributed to the sub-branches in accordance with the average of 3 ratios calculated by dividing “number of the policies produced within the last three years”, “gross premium written within the last three years”, and “number of the claims reported within the last three years” to the “total number of the policies”, “total gross written premiums” and the “total number of the claims reported”, respectively.

Income from the assets invested against non-life technical provisions is transferred to technical section from non-technical section; remaining income is transferred to the non-technical section.

1.8 Information on the financial statements as to whether they comprise an individual company or a group of companies

The accompanying financial statements comprise consolidated financial information of the Company and basis of the consolidation is detailed in note 2.2 - Consolidation.

The Company owns 20% of Anadolu Hayat Emeklilik Anonim Şirketi (“Anadolu Hayat”) and this associate have been consolidated in the accompanying consolidated financial statements by using the equity method of accounting.

The activities of Anadolu Hayat involve providing individual and group insurance and reinsurance services relating to group life, individual life, retirement and related personal accident branches, establishing, retirement funds, developing internal rules and regulations related to these funds, carrying out retirement, annual income insurance, portfolio management and custody contracts for the assets of the funds held in custody.

1.9 Name or other identity information about the reporting entity and the changes in this information after previous reporting date Trade name of the Company: Anadolu Anonim Türk Sigorta Şirketi Registered address of the head office: Rüzgarlıbahçe Mahallesi, Kavak Sokak, No: 31 34805 Kavacık/İstanbul The web page of the Company: www.anadolusigorta.com.tr

Since the end of the previous reporting period, there is not been any change in presented information.

1.10 Events after the reporting date

There haven’t been any change at services of the company, recording of this services and company policies after accounting date.

Anadolu Sigorta Annual Report 2015 204 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

2 Summary of significant accounting policies

2.1 Basis of preparation

2.1.1 Information about the principles and the specific accounting policies used in the preparation of the financial statements

In accordance with Article 136(5) in Section VIII of the Capital Markets Law, numbered 6362 insurance companies have to comply with their own specific laws and regulations in matters of establishment, auditing, supervision/oversight, accounting and financial reporting. Therefore, the Company maintains its books of account and prepares its financial statements in accordance with the Turkish Accounting Standards (“TAS”), Turkish Financial Reporting Standards (“TFRS”), and other accounting and financial reporting principles, statements and guidance (collectively “the Reporting Standards”) in accordance with the “Communiqué Related to the Financial Reporting of Insurance, Reinsurance, and Individual Pension Companies” as promulgated by the Turkish Treasury based on Article 18 of the Insurance Law and Article 11 of the 4632 numbered Individual Pension Savings and Investment System Law (‘‘Individual Retirement Law’’).

According to numbered 4th related law Accounting for subsidiaries, associates, joint ventures is, consolidated financial statements, financial statements which disclosed public regulated by the Turkish Treasury.

The company prepare their financial statements are regulated in form and content in order to compare the financial statements of prior period and with other companies according to“Communiqué on Presentation of Financial Statements “ which is published in the Official Gazette dated 18 April 2008 and numbered 26851.

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 31 December 2004. TAS 29 requires that financial statements prepared in the currency of a hyperinflationary economy be stated in terms of the measuring unit current at the reporting date, and that corresponding figures for previous years be restated in the same terms.

With respect to the declaration of the Turkish Treasury with the article dated 4 April 2005 and numbered 19387, financial statements as of 31 December 2004 are adjusted for the opening balances of 2005 in accordance with the section with respect to inflation accounting of the Capital Markets Board (“CMB”) Communiqué No: 25 of Series XI, “Communiqué on Accounting Standards in Capital Market” published in the Official Gazette dated 15 January 2003 and numbered 25290. Inflation accounting is no longer applied starting from 1 January 2005, in accordance with the same declaration of the Turkish Treasury. Accordingly, as at 31 December 2015, non-monetary assets and liabilities and items included in shareholders’ equity including paid-in capital recognized or recorded before 31 December 2004 in order to reflect inflation adjustments. Non-monetary assets and liabilities and items included in shareholders’ equity including paid-in capital recognized or recorded after 31 December 2004 are measured at their nominal values.

Other accounting policies

Information regarding other accounting polices is disclosed above in “Note 2.1.1 - Information about the principles and the specific accounting policies used in the preparation of the financial statements” and each under its own caption in the following sections of this report.

2.1.3 Valid and presentation currency

The accompanying consolidated financial statements are presented in TL, which is the Company’s functional currency.

2.1.4 Rounding scale of the amounts presented in the financial statements

Financial information presented in TL, has been rounded to the nearest TL values.

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ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

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 31 December 2004, except for the financial assets at fair value through profit or loss, available-for-sale financial assets and derivative financial instruments which are measured at their fair values unless reliable measures are available.

2.1.6 Accounting policies, changes in accounting estimates and errors

Policy changes regarding subsequent measurement use of the property

Accordance with IAS 16- “Property, Plant and Equipment” standard of tangible assets, The first record to be the following “cost model” or if possible the reliable measurement of fair value ‘revaluation model’ to be measured. The company has started to show based on the revaluation model by measuring over fair value as of the third quarter of the current year by making changes in the use of the property which is measuring the cost model in the financial statements before. “IAS 8 - Accounting Policies, Changes and Errors in Accounting Estimates” standard, making changes in the accounting policy for the measurement of tangible assets revaluation model rather than cost model, need to be restated prior period financial statements in the period in which the change without the revaluation of the valuation differences should be presented in the financial statements.

Use of the property’s fair value calculated TL 11.532.400 based on expertise report, the amount of revaluation TL 17.008.240 was recognized ‘Other Capital Reserves’ account in equity to be shown as the net tax effect of TL 16.157.827 as 31 December 2015 accompanying financial statements.

Policy changes regarding subsequent measurement investment property

According to “IAS 40-Investment Property”, business has voting rights to be the first recording of investment properties in the subsequent measurement how to use one ‘fair value method’ or ‘cost method’. Reporting standards, in the case of businesses believed that allow them to make more sense to allow an assessment of the financial statement users to change the way which is identified before.

“IAS 8 - Accounting Policies, Changes and Errors in Accounting Estimates” standard is defined as a change in an optional change and it requires to restate prior period financial statements by calculating the effects. The company has started to measure investment property based on fair value method rather than cost method as of third quarter of the current year and the effect of changes in accounting policies are shown by correction of prior period financial statements.

Investment property’s fair value was calculated as TL 54.343.600 based on expertise reports. The increase in value amounting to TL 33.265.186 associated with prior period, as of 31 December 2015, the tax effect of TL 31.601.927 net to be shown as “Retained Earnings” account in the equity. The TL 7.457.593 profit/loss account in the “Land, the Income from Building and Land” in equity in accompanying financial statements.

Anadolu Sigorta Annual Report 2015 206 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Policy changes regarding subsequent measurement investment property and its effects on the financial statements are shown as of 31 December 2013 and 31 December 2014 as below: 31 December 2014 Previously reported Reorganized

Investment property 6.982.776 36.242.000 Accumulated depreciation (52.723.166) (49.144.613) Deferred tax assets 20.125.763 18.889.913 Retained Earnings 13.386.141 60.952.290 Net Profit 74.592.102 76.514.530

Depreciation and amortization expenses (23.801.977) (23.662.322)

31 December 2013 Previously reported Reorganized

Investment property 6.982.776 36.242.000 Accumulated depreciation (46.556.664) (43.117.766) Retained earnings/(losses) (48.878.904) (1.548.299)

Explanations on accounting estimates are given in the notes 3 which is critical accounting estimates and judgments.

2.2 Consolidation

“Circular Related to the Preparation of the Consolidated Financial Statements of Insurance, Reinsurance, and Individual Pension Companies” issued by the Turkish Treasury in the 31 December 2008 dated and 27097 numbered Official Gazette, has been in force since 31 March 2009. Accordingly, consolidated financial statements are prepared using the equity method of accounting to consolidate the Company’s associate; Anadolu Hayat Emeklilik A.Ş.

Accordingly, consolidated financial statements are prepared using the equity method of accounting to consolidate the Company’s associate; Anadolu Hayat.

2.3 Segment reporting

An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company’s other components, whose operating results are reviewed regularly by the Board of Directors (being chief operating decision maker) to make decisions about resources allocated to each segment and assess its performance, and for which discrete financial information is available. Since the main economic environment, where the Company operates, is Turkey, a geographical segment reporting has not been presented. A business segment reporting of the Company is presented in Note 5 in accordance with TFRS 8- Operating Segments standard.

2.4 Foreign currency transactions

Transactions are recorded in TL, which is the Company’s functional currency. Transactions in foreign currencies are recorded at the rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at exchange rates ruling at the reporting date and foreign currency exchange differences are offset and all exchange differences are recognized in the statement of income.

Foreign currency exchange differences of unrecognized gains or losses arising from the difference between their fair value and the discounted values calculated per effective interest rate method of foreign currency available-for-sale financial assets are recorded in “Revaluation of financial assets” under equity and the realized gain or losses are recognized directly in the statement of income.

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ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

2.5 Tangible assets

Tangible assets of the Company are recorded at their historical costs that have been adjusted for the effects of inflation until the end of 31 December 2004. There have been no other inflationary adjustments for these tangible assets for the following years and therefore they have been recorded at their costs restated for the effects of inflation until 31 December 2004. Tangible assets that have been purchased after 1 January 2005 have been recorded at their costs after deducting any exchange rate differences and finance expenses.

The company has started to show based on the revaluation model by measuring over fair value as of the third quarter of the current year by making changes in the use of the property which is measuring the cost model in the financial statements before.

Buildings for own use is recognized by fair value that determined in valuations made by independent valuation experts who have professional competency by reducing their following accumulated depreciation. Accumulated depreciation which is at the date of revaluation net of gross book value and net amount brought to values after revaluation.

Increase of revaluation results in the carrying value of use of land and building account in equity in the balance sheet under “Other Capital Account” as the net of tax effects. As a result of the evaluation of real estate, an increase on the corresponding impairments are deducted from the fund; all other decrease are reflected the profit/loss account.

Gains/losses arising from the disposal of the tangible assets are calculated as the difference between the net carrying value and the proceeds from the disposal of related tangible assets and reflected to the statement of income of the related period.

Land is not depreciated to have indefinite life. Depreciation are allocated based on the useful life of tangible assets at cost or revalued amounts of tangible assets by using the straight-line method basis.

Maintenance and repair costs incurred in the ordinary course of the business are recorded as expense.

There are no pledges, mortgages and other encumbrances on tangible fixed assets.

There are no changes in accounting estimates that have significant effect on the current period or that are expected to have significant effect on the following periods.

Depreciation is recognized in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of tangible assets since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset.

Depreciation rates and estimated useful lives are as follows: Tangible Assets Estimated Useful Lives (years) Depreciation Rates (%) Buildings 50 2,0 Machinery and equipment 3 - 16 6,3 - 33,3 Furniture and fixtures 4 - 16 6,3 - 25,0 Vehicles 5 20,0 Other tangible assets (including leasehold improvements) 5 - 10 10,0 - 20,0 Leased tangible assets 4 - 10 10,0 - 25,0

Anadolu Sigorta Annual Report 2015 208 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

2.6 Investment properties

Investment properties are held either to earn rentals and/or for capital appreciation or for both.

In the event of investment property of first registration is measured on fair value including transaction costs after measured at cost. The changes which result of fair value valuation recognised in the income statement.

Any gains or losses on the retirement or disposal of an investment property are recognized in profit or loss in the period of retirement or disposal.

Investment properties are derecognized when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal.

The fair value on the date of change in the usage is considered as cost in the reclassification recognition when investment property that measured with fair value is reclassified as a tangible asset.

2.7 Intangible Assets

The Company’s intangible assets consist of computer software, goodwill and advances paid for tangible assets.

Intangible assets are recorded at cost in compliance with “TAS 38 - Accounting for intangible assets”. The cost of the intangible assets purchased before 31 December 2004 are restated from the purchasing dates to 31 December 2004, the date the hyperinflationary period is considered to be ended. The intangible assets purchased after this date are recorded at their historical costs.

Amortization is charged on a straight-line basis over their estimated useful lives over the cost of the asset.

Goodwill represents the excess of the cost of an acquisition over the fair value of the Company’s share of the net identifiable assets of the acquired subsidiary/associate at the date of the acquisition. Goodwill on acquisitions of associates is included in ‘investments in associates’ and is tested for impairment as part of the overall balance. Separately recognized goodwill is tested annually for impairment and carried at cost less accumulated impairment losses, Impairment losses on goodwill are not reversed. Gain or losses on the disposal of an entity includes the carrying amount of goodwill relating to the entity disposed of.

For the purpose of impairment testing, goodwill is allocated to cash-generating units. The allocations made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arises.

The Company has acquired the illness/health portfolio of Anadolu Hayat Emeklilik A.Ş. at 31 August 2004 with all of its rights and liabilities. The value at acquisition of the portfolio amounting to TL 16.250.000 is capitalized as goodwill by the Company.

2.8 Financial assets

A financial asset is any asset that is cash, an equity instrument of another entity, a contractual right to receive cash or another financial asset from another entity; or to exchange financial assets or financial liabilities with another entity under conditions that are potentially favourable to the entity

Financial assets are classified in four categories; as financial assets held for trading, available-for-sale financial assets, held to maturity financial assets, and loans and receivables.

Financial assets at fair value through profit or loss are presented as financial assets held for trading in the accompanying financial statements and trading securities and derivatives are included in this category. Financial assets at fair value through profit or loss measured at their fair values and gain/loss arising due to changes in the fair values of related financial assets is recorded in profit/loss. Interest income earned on trading purpose financial assets and the difference between their fair values and acquisition costs are recorded as interest income in the statement of income. In case of disposal of such financial assets before their maturities, the gains/losses on such disposal are recorded under trading income/losses. Accounting policies of derivatives are detailed in note 2.10 - Derivative financial instruments

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ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Company provides money, goods or services directly to a debtor with no intention of trading the receivable. Loans and receivables those are not interest earning are measured by discounting of future cash flows less impairment losses, and interest earning loans and receivables are measured at amortized cost less impairment losses.

Held to maturity financial assets are the financial assets with fixed maturities and fixed or pre-determined payment schedules that the Company has the intent and ability to hold until maturity, excluding loans and receivables. Subsequent to initial recognition, held to maturity financial assets and loans and receivables are measured at amortized cost using effective interest rate method less impairment losses, if any. The Company has no financial assets that are not allowed to be classified as held to maturity financial assets for two years due to the tainting rules applied for the breach of classification rules.

Available-for-sale financial assets are the financial assets other than assets held for trading purposes, held-to-maturity financial assets and loans and receivables.

Available-for-sale financial assets are initially recorded at cost and subsequently measured at their fair values. Unrecognized gains or losses derived from the difference between their fair value and the discounted values calculated per effective interest rate method are recorded in “Revaluation of financial assets” under shareholders’ equity. Upon disposal, the realized gain or losses are recognized directly in the statement of income.

The determination of fair values of financial instruments not traded in an active market is determined by using valuation techniques. Observable market prices of the quoted financial instruments which are similar in terms of interest, maturity and other conditions are used in determining the fair value.

The Company has accounted equity shares classified as available-for-sale according to quoted market prices or dealer price quotations for financial instruments traded in active markets or according to cost less impairment losses for financial instruments not traded in active markets.

Securities are recognized and derecognized at the date of settlement.

Associates; Anadolu Hayat has been consolidated in the accompanying consolidated financial statements by using the equity method of accounting.

A financial asset is derecognized when the control over the contractual rights that comprise that asset is lost. This occurs when the rights are realized, expire or are surrendered.

2.9 Impairment on assets

Impairment on financial assets

Financial assets or group of financial assets are reviewed at each reporting date to determine whether there is objective evidence of impairment. If any such indication exists, the Company estimates the amount of impairment. A financial asset is impaired if, and only if, there is objective evidence that the expected future cash flows of financial asset or group of financial assets are adversely affected by an event(s) (“loss event(s)”) incurred subsequent to recognition. The losses expected to incur due to future events are not recognized even if the probability of loss is high.

Loans and receivables are presented net of specific allowances for uncollectibility. Specific allowances are made against the carrying amounts of loans and receivables that are identified as being impaired based on regular reviews of outstanding balances to reduce these loans and receivable to their recoverable amounts.

The recoverable amount of an equity instrument is its fair value. The recoverable amount of debt instruments and purchased loans measured to fair value is calculated as the present value of the expected future cash flows discounted at the current market rate of interest.

Anadolu Sigorta Annual Report 2015 210 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized. For financial assets measured at amortized cost and available-for-sale financial assets that are debt securities, the reversal is recognized in the statement of operations. For available-for-sale financial assets that are equity securities, the reversal is recognized directly in equity.

Impairment on tangible and intangible assets

On each reporting date, the Company evaluates whether there is an indication of impairment of tangible and intangible assets. If there is an objective evidence of impairment, the asset’s recoverable amount is estimated in accordance with the “TAS 36 - Impairment of Assets” and if the recoverable amount is less than the carrying value of the related asset, a provision for impairment loss is made.

Rediscount and provision expenses of the period are detailed in Note 47.

2.10 Derivative financial instruments

As of 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 recognized at their fair value.

The receivables and liabilities arising from the derivative transactions are recognized under the off-balance sheet accounts through the contract amounts.

Derivative financial instruments are subsequently remeasured at fair value and positive fair value differences are presented either as “financial assets held for trading” and negative fair value differences are presented as “other financial liabilities” in the accompanying financial statements. All unrealized gains and losses on these instruments are included in the statement of income.

2.11 Offsetting of financial assets

Financial assets and liabilities are offset and the net amount is presented in the balance sheet when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

Income and expenses are presented on a net basis only when permitted by the Reporting Standards, or for gains and losses arising from a group of transactions resulting from the Company’s similar activities like trading transactions.

2.12 Cash and cash equivalents

Cash and cash equivalents, which is the basis for the preparation of the statement of cash flows includes cash on hand, cheques received, other cash and cash equivalents, demand deposits and time deposits at banks having an original maturity less than 3 months which are ready to be used by the Company or not blocked for any other purpose.

2.13 Share capital

The shareholder having direct or indirect control over the shares of the Company is İş Bankası Group, As at 31 December 2015 and 31 December 2014, the share capital and ownership structure of the Company are as follows: 31 December 2015 31 December 2014 Shareholding Shareholding Shareholding Shareholding Name Amount (TL) Rate (%) Amount (TL) Rate (%)

Milli Reasürans T.A.Ş. 286.550.106 57,31 286.550.106 57,31 Other 213.449.894 42,69 213.449.894 42,69 Paid in capital 500.000.000 100,00 500.000.000 100,00

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ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Sources of capital increases during the period

The company has not performed capital increase as at 31 December 2015 (31 December 2014: None)

Privileges on common shares representing share capital

As at 31 December 2015, the issued share capital of the Company is TL 500.000.000 (31 December 2014: 500.000.000 TL).

The Company unregistered Group 150 A shares which each of value is TL 1,5 as of 11 April 2013 in which approved in Main Article of the Company dated in 11 April 2013. The share capital of the Company consists of 50.000.000.000 (31 December 2014: 50.000.000.000 shares) issued shares with TL 1 nominal value each

Registered capital system in the Company

The Company has accepted the registered capital system. As of 31 December 2015, the Company’s registered capital is TL 700.000.000 (31 December 2014: 700.000.000 TL)

Repurchased own shares by the Company

None.

2.14 Insurance and investments contracts - classification

An insurance contract is a contract under which the Company accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder. Insurance risk covers all risk except for financial risks. All premiums have been received within the coverage of insurance contracts recognized as revenue under the account caption “written premiums”.

Investment contracts are those contracts which transfer financial risk with no significant insurance risk. Financial risk is the risk of a possible future change in a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index or other variable, provided, that it is not specific to a party to the contract, in the case of a non-financial variable.

As at the reporting date, the Company does not have a contract which is classified as an investment contract.

2.15 Insurance contracts and investment contracts with discretionary participation feature

Discretionary participation feature (“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) realized and/or unrealized investments returns on a specified pool of assets held by the Issuer; or (3) the profit or loss of the Company, Fund or other entity that issues the contract.

As at the reporting date, the Company does not have any insurance or investment contracts that contain a DPF.

2.16 Investment contracts without DPF

As at the reporting date, the Company does not have any insurance contracts and investment contracts without DPF.

Anadolu Sigorta Annual Report 2015 212 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

2.17 Liabilities

Financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to another entity. Financial liabilities of the Company are measured at their discounted values. A financial liability is derecognized when it is extinguished.

2.18 Income Taxes

Corporate Tax

Statutory income is subject to corporate tax at 20%. This rate is applied to accounting income modified for certain exemptions (like dividend income) and deductions (like investment incentives), and additions for certain non-tax deductible expenses and allowances for tax purposes. If there is no dividend distribution planned, no further tax charges are made.

Dividends paid to the resident institutions and the institutions working through local offices or representatives are not subject to withholding tax. The withholding tax rate on the dividend payments other than the ones paid to the non-resident institutions generating income in Turkey through their operations or permanent representatives and the resident institutions is 15%. In applying the withholding tax rates on dividend payments to the non-resident institutions and the individuals, the withholding tax rates covered in the related Double Tax Treaty Agreements are taken into account. Appropriation of retained earnings to capital is not considered as profit distribution and therefore is not subject to withholding tax.

Prepaid taxes are calculated and paid at the rates valid for the earnings of the related years. The payments can be deducted from the annual corporate tax calculated for the whole year earnings.

In Turkey, there is no procedure for a final and definite agreement on tax assessments. Companies file their tax returns with their tax offices by the end of 25th of the fourth month following the close of the accounting period to which they relate. Tax returns are open for five years from the beginning of the year that follows the date of filing during which time the tax authorities have the right to audit tax returns, and the related accounting records on which they are based, and may issue re-assessments based on their findings.

Deferred tax

In accordance with TAS 12 - Income taxes, deferred tax assets and liabilities are recognized on all taxable temporary differences arising between the carrying values of assets and liabilities in the financial statements and their corresponding balances considered in the calculation of the tax base, except for the differences not deductible for tax purposes and initial recognition of assets and liabilities which affect neither accounting nor taxable profit.

Deferred tax assets and liabilities are reported as net in the financial statements if, and only if, the Company has a legally enforceable right to offset current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity.

In case where gains/losses resulting from the subsequent measurement of the assets are recognized in the statement of income, then the related current and/or deferred tax effects are also recognized in the statement of income. On the other hand, if such gains/losses are recognized as an item under equity, then the related current and/or deferred tax effects are also recognized directly in the equity.

Transfer pricing

In Turkey, the transfer pricing provisions have been stated under the Article 13 of Corporate Tax Law with the heading of “disguised profit distribution via transfer pricing”. The General Communiqué on disguised profit distribution via Transfer Pricing, dated 18 November 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.

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ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

2.19 Employee benefits

Pension and other post-retirement obligations

A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee and his/her dependants will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.

Employees of the Company are the members of “Anadolu Anonim Pension Fund” which is established in accordance with the temporary Article 20 of the Social Security Act No: 506. As per the temporary sub article No: 20 of the Article 73 of the Social Security Law, pension funds should be transferred to the Social Security Institution within three years after the publication of the a aforementioned Law published in the Official Gazette numbered 26870 and dated 8 May 2008. The related three-year transfer period has been prolonged for two years by the Cabinet decision, which was published on the Official Gazette dated 9 April 2011. Accordingly, the three-year period expired on 8 May 2011 was extended to the 8 May 2015. The principles and applications of the transfer will be determined by the Decree of the Council of Ministers separately. Lastly, first paragraph of temporary 20th article of 5510 numbered Law, article 51 of the law regarding changing of several laws and delegated legislations and the law of occupational health and safety which are published in 23 April 2015 dated Official Gazette is changed as following; insurance and reinsurance companies, chambers of commerce, industry chambers, stock exchanges or which constitutes their union personnel and associates of funds “The Council is authorized to determine the date of transfer within the scope of article 20 th of the law, 506 banks, insurance and reinsurance companies, chambers of commerce, industry chambers, stock exchanges or which constitutes their union personnel and associates of funds to the social security institution. The date of the transfer of the first paragraph of Article 4 of this law pension fund contributors as are considered insured”. According to this arrangement the bank within the scope of Act 506, article No.20, insurance and reinsurance companies, chambers of commerce, industry chambers, stock exchanges or associations which constitute their union personnel and associates of funds are required to be transferred until 08.05.2015 to Social Security Administration, authority to determine the date of transfer is given the Council of Ministers thus the transfer of the funds has been postponed to an unknown date.

The application which containing temporary transfer provision on 19 June 2008 cancellation and cessation of claims by Republican People’s Party, it is rejected in accordance with the decision at the court’s meeting on March 30, 2011.

The cash value of the obligations of the pension fund for each member of the fund including members left the fund as of the transfer date will be calculated according to following assumptions: a) Technical deficit rate of 9,8% shall be used in the actuarial calculation of the value in cash, and. b) Gains and losses of the funds stems from benefits covered by the aforementioned Law taken into accounts to calculate present value of the obligations.

Employee termination benefits

In accordance with existing Turkish Labour Law, the Company is required to make lump-sum termination indemnities to each employee who has completed one year of service with the Company and whose employment is terminated due to retirement or for reasons other than resignation or misconduct. The amount payable for each year of service the employee union members; death, disability, retirement, pension bonding states is 60 days, in other provinces it amounted 45 daily wages. In other employees, it is one month’s salary. The applicable ceiling amount as at 31 December 2015 is TL 4.092,53 (31 December 2014: 3.438,22 TL).

In Accordance IAS 19 which published by KGK dated March 12, 2013 is about “Benefits Employee Accounting Standard” and defined by beginning from 31 December 2012 net defined benefit liability of the actuarial gains and losses arising on re-measurement should be recognized in other comprehensive income under shareholders’ equity and this effect should be applied retrospectively. The company started to account current actuarial gains and losses under equity (other profit reserves) due to the fact that prior period actuarial gains and losses have remained below the materiality

Anadolu Sigorta Annual Report 2015 214 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

The Company accounted for employee severance indemnities using actuarial method in compliance with the TAS 19 - Employee Benefits, The major actuarial assumptions used in the calculation of the total liability as at 31 December 2015 and 31 December 2014 are as follows: 31 December 2015 31 December 2014 Discount rate %4,61 %4,46 Expected rate of salary/limit increase %5,83 %4,37 Estimated employee turnover rate %3,27 %6,29

Expected rate of salary/limit increase above was determined according to the government’s annual inflation forecasts.

Other benefits

The Company has provided for undiscounted short-term employee benefits earned during the period as per services rendered in compliance with TAS 19 in the accompanying financial statements.

2.20 Provisions

A provision is made for an existing obligation resulting from past events if it is probable that the commitment will be settled and a reliable estimate can be made of the amount of the obligation. Provisions are calculated based on the best estimates of management on the expenses to incur as of the reporting date and, if material, such expenses are discounted to their present values. If the amount is not reliably estimated and there is no probability of cash outflow from the Company to settle the liability, the related liability is considered as “contingent” and disclosed in the notes to the financial statements.

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non- occurrence of one or more uncertain future events not wholly within the control of the Company. Contingent assets are not recognized in financial statements since this may result in the recognition of income that may never be realized. Contingent assets are assessed continually to ensure that developments are appropriately reflected in the financial statements. If it has become virtually certain that an inflow of economic benefits will arise, the asset and the related income are recognized in the financial statements of the period in which the change occurs. If an inflow of economic benefits has become probable, the Company discloses the contingent asset.

2.21 Revenue recognation

Written premiums and claims paid

Written premiums represent premiums on policies written during the period net of taxes, premiums of the cancelled policies which were produced in prior periods and premium ceded to reinsurance companies. Premiums ceded to reinsurance companies are accounted as “written premiums, ceded” in the statement of income.

Claims are recognized as expense as they are paid. Outstanding claims provision is provided for both reported unpaid claims at period-end and incurred but not reported claims. Reinsurer’s shares of claims paid and outstanding claims provisions are off-set against these reserves.

Subrogation, salvage and quasi income

According to the Circular 2010/13 dated 20 September 2010; the Company may account for income accrual for subrogation receivables without any voucher after the completion of the claim payments made to the insurer. If the amount cannot be collected from the counterparty insurance company, the Company provides provision for uncollected amounts due for six months. If the counter party is not an insurance company, the provision is provided after four months. As at the reporting date, in accordance with the related circular the Company provided TL 45.354.423 (31 December 2014: 26.118.178 TL) subrogation receivables and recorded 49.626.517 TL (31 December 2014: 30.648.790 TL) (Note 12) net subrogation and salvage receivables under receivables from main operations. The Company provided allowance for uncollected subrogation receivables amounting to TL 8.305.178 (31 December 2014: 7.677.067 TL) (Note 12) in accordance with circular.

Anadolu Sigorta Annual Report 2015 215

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

For the year ended 31 December 2015 and 2014, salvage and subrogation collected are as follows: 31 December 2015 31 December 2014 Motor vehicles 292.754.774 255.938.892 Third Party liability for motor vehicles (MTPL) 7.174.650 4.894.794 Fire and natural disaster 3.654.611 1.951.328 Marine 2.946.419 2.556.620 Watercrafts 1.052.607 1.087.073 General Losses 164.084 248.943 General Responsibility 135.207 129.658 Credit 68.150 2.410 Accident 7.759 452.519 Aircrafts -- 16.861 Legal Protection -- (22.011) Total 307.958.261 267.257.087

As at 31 December 2015 and 31 December 2014, accrued subrogation and salvage income per branches is as follows: 31 December 2015 31 December 2014 Motor Vehicles 36.648.709 29.805.959 Third Party liability for motor vehicles (MTPL) 4.252.062 213.733 General Losses 3.904.872 16.671 Fire and natural disaster 3.485.325 397.028 Marine 1.048.488 181.347 Accident 274.558 -- Watercrafts 12.503 34.052 Total 49.626.517 30.648.790

Commission income and expense

As further disclosed in Note 2.24 - Reserve for unearned premiums, commissions paid to the agencies related to the production of the insurance policies and the commissions received from the reinsurance firms related to the premiums ceded are recognized over the life of the contract by deferring commission income and expenses within the calculation of reserve for unearned premiums for the policies produced before 1 January 2008 and recognizing deferred commission income and deferred commission expense in the financial statements for the policies produced after 1 January 2008.

Interest income and expense

Interest income and expense are recognized using the effective interest method. The effective interest rate is the rate that exactly discounts the estimated future cash payments and receipts through the expected life of the financial asset or liability (or, where appropriate, a shorter period) to the carrying amount of the financial asset or liability. The effective interest rate is established on initial recognition of the financial asset and liability and is not revised subsequently.

The calculation of the effective interest rate includes all fees and points paid or received transaction costs, and discounts or premiums that are an integral part of the effective interest rate. Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or liability.

Trading income/expense

Trading income/expense includes gains and losses arising from disposals of financial assets held for trading purpose and available-for-sale financial assets. Trading income and trading expenses are recognized as “Income from disposal of financial assets” and “Loss from disposal of financial assets” in the accompanying consolidated financial statements.

Anadolu Sigorta Annual Report 2015 216 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Dividends

Dividend income is recognized when the Company’s right to receive payment is ascertained.

2.22 Leasing transactions

The maximum period of the lease contracts is 10 years. Tangible assets acquired by way of finance leases are recorded in tangible assets and the obligations under finance leases arising from the lease contracts are presented under “Finance Lease Payables” account in the financial statements. In the determination of the related asset and liability amounts, the lower of the fair value of the leased asset and the present value of leasing payments is considered. Financial costs on leasing agreements are expanded in lease periods at a fixed interest rate.

If there is impairment in the value of the assets obtained through finance lease and in the expected future benefits, the leased assets are measured at net realizable value. Depreciation for assets obtained through financial lease is calculated in the same manner as tangible assets.

Payments made under operating leases are recognized in the statement of income on a straight-line basis over the term of the lease.

2.23 Dividend distribution

Based on the guidelines and principals issued by the CMB dated 27 January 2010 for the distribution of dividends from the profit generated from operating activities in 2009, concerning public entities, the shares of which are quoted in public equity markets, it has been agreed upon not to set a mandatory minimum dividend payment quota. Furthermore, it has been agreed upon to let public entities perform dividend distributions as stated within the principal agreement of the companies and as stated within the policies on dividend distribution that have been shared with the public.

Additionally, as stated within the aforementioned decision of CMB, for entities required to prepare consolidated financial statements, it has been agreed upon to require the net distributed profit calculations to be performed on the net profit for the period as stated on the consolidated financial statements, so long that the distribution can be funded through statutory resources.

Board of Directors proposal which is related with distribution of the profits gained from the operations of the 2014 was adopted unanimously in the framework of the General Assembly dated March 24, 2015.

According to the distributable profit of TL 67.107.690; TL 21.000.000 was distributed as cash dividends to shareholders as of March 25, 2015. The amount of TL 1.459.965 distributed to company employees. The amount of TL 4.464.773 is distributed as a statuary reserves and remained after the amount of TL 40.182.952 is distributed excess reserve.

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 7 August 2007 dated Official Gazette and put into effect starting from 1 January 2008, the reserve for unearned premiums represents the proportions of the gross premiums written without deductions of commission or any other allowance, in a period that relate to the period of risk subsequent to the reporting date for all short-term insurance policies. For commodity transportation policies with indefinite expiration dates, 50% of the remaining portion of the premiums accrued in the last three months, less any commissions is also provided as unearned premium reserves.

Reserve for unearned premiums is calculated for all insurance contracts except for the contracts for which the mathematical reserve is provided. Reserve for unearned premiums is also calculated for the annual premiums of the annually renewed long term insurance contracts.

Anadolu Sigorta Annual Report 2015 217

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Since the Communiqué on Technical Reserves was effective from 1 January 2008, the Turkish Treasury issued 4 July 2007 dated and 2007/3 numbered “Circular to Assure the Compliance of the Technical Reserves of Insurance, Reinsurance and Pension Companies With the Insurance Law No: 5684” (“Compliance Circular”) to regulate the technical provisions between the issuance date and enactment date of the Communiqué on Technical Reserves. In accordance with the Compliance Circular, it is stated that companies should consider earthquake premiums written after 14 June 2007 in the calculation of the reserve for unearned premiums while earthquake premiums were deducted in the calculation of the reserve for unearned premiums before. Accordingly, the Company has started to calculate reserve for unearned premiums for the earthquake premiums written after 14 June 2007, while the Company had not calculated reserve for unearned premiums for the earthquake premiums written before 14 June 2007.

According to the 2009/9 Numbered Circular Related to Application of Technical Reserves issued on 27 March 2009 which was published by Undersecretariat of Treasury reserve for unearned premiums is calculated by taking into account that all polices become active at 12:00 at noon and end at 12:00 at noon.

According to the Communiqué on Technical Reserves, for the calculation of unearned premium reserves of foreign currency indexed insurance agreements, foreign currency selling exchange rates announced by Turkish Central Bank will be considered, unless there is a specified exchange rate in the agreement.

As at the reporting date, the Company has provided reserve for unearned premiums amounting to TL 1.848.552.863 (31 December 2014: 1.491.252.563 TL) and reinsurer share in reserve for unearned premiums amounting TL 341.649.490 (31 December 2014: 294.929.264 TL). Furthermore, reserve for unearned premiums includes Social Security Institution (“SSI”) share amounting to TL 54.975.565 (31 December 2014: 36.692.792TL).

2.25 Provision for outstanding claims

Claims are recorded in the year in which they occur, based on reported claims or on the basis of estimates when not reported. Provision for outstanding claims represents the estimate of the total reported costs of notified claims on an individual case basis at the reporting date as well as the corresponding handling costs. Incurred but not reported claims (“IBNR”) are also provided.

Claims incurred before the accounting periods but reported subsequent to those dates are considered as incurred but not reported (“IBNR”) claims.

In accordance with 5 December 2014 dated and 2014/15 numbered “Circular for Provision for Outstanding Claims” of Turkish Treasury, ACML calculation should be on main branch. Insurance and reinsurance companies are allowed to use six different methods which are “Standard Chain, Claim/Premium, Cape Code, Frequency/Volume, Munich Chain Ladder and Bornhuetter-Ferguson” to make ACLM calculations. The Company’s method selections for each branch are presented below.

The Company recorded IBNR calculated by ACLM method amounting to TL 483.809.233 (31 December 2014: TL 327.611.024) to the unconsolidated financial statements as IBNR and TL 47.092.646 (31 December 2014: TL 17.969.121) as reinsurer’s share of IBNR.

In Accordance with the Circular issued by the Turkish Treasury dated 2014/16, the Company eliminated severe damages by using Box-Plot method to make more homogeneous calculation in ACML.

The Circular issued by the Turkish Treasury dated 2014/16, IBNR is calculated by the company’s actuaries. The selection of data to be used, correction operations, the most appropriate method of growth factors and growth factors to interfere is determined by actuarial using by actuarial methods on the basis of branches in accordance with actuarial report which is submitted Regulation to the Treasury, is detailed.

Used damage claims software and damage claims reserve development factors are tested for all methods and the selection was made with actuarial factor analysis. Development of coefficients are evaluated retrospectively in the next step. The data which is high damage, the effect of inflation, determining the factors that may affect the analysis as CDS application corrections were made.

As a consequence of actuarial work, trend function of development of coefficient of portfolio for each branch is determined and conclusion of that function for each development period is calculated. Consequently, the curve which passed from data points with the least error is considered.

Anadolu Sigorta Annual Report 2015 218 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

In this context, development of coefficient is calculated for all branches and incurred damage triangles are analyzed and the effects regarding damage files that affect development of coefficient are eliminated.

According to 2015/28 numbered circular of Turkish Treasury, IBNR amount that calculated by basing 10% increase rate in Compulsory Traffic, Facultative Fiscal Responsibility and General Responsibility branches is represented on financial statements.

In accordance with these judgments, IBNR provision amounts to TL 203.903.058 in branch of Motor Vehicles, TL 7.407.845 in branch of Third party liability and TL 10.774.133 in branch of General liability. The total amount is TL 222.085.036.

The IBNR method to be selected on the basis of branch is follow.

As of 30 June 2015 “Munich Chain” method abandoned the “Standard Chain” method was introduced on branch of Fire and natural disasters.

Based on each branch, calculation amount of Net IBNR; reinsurance agreements’ effect in force was to be reflected based on actual reinsurance rate. 31 December 2015 31 December 2014 Motor vehicles Standard Chain Ladder Standard Chain Ladder Watercrafts Standard Chain Ladder Standard Chain Ladder Third party liability for motor vehicles (MTPL) Cape Code Cape Code Third party liability Standard Chain Ladder Standard Chain Ladder Aircraft Liability Standard Chain Ladder Standard Chain Ladder Fire and natural disasters Standard Chain Ladder Standard Chain Ladder Aircrafts Standard Chain Ladder Standard Chain Ladder Accident Standard Chain Ladder Standard Chain Ladder General losses Standard Chain Ladder Standard Chain Ladder Financial losses Standard Chain Ladder Standard Chain Ladder Illness/health Standard Chain Ladder Standard Chain Ladder Marine Standard Chain Ladder Standard Chain Ladder Credit Standard Chain Ladder Standard Chain Ladder Legal protection Standard Chain Ladder Standard Chain Ladder General liability Cape Code Cape Code

In accordance with “Circular Related to Information on Calculation of Incurred But Not Reported Claims Reserve” numbered 2011/23 and dated 26 November 2011, companies may decrease their outstanding claims reserve balances based on the winning ratio of the sub- branches calculated from the last five years claims. Winning ratio used for decrease in provision for outstanding claims could not exceed 25% (15% for the new sub-branches which do not have five year data). Based on the aforementioned regulation, the Company calculated winning ratio from the last five year data set and TL 104.862.951 (31 December 2014: TL 75.260.122) as IBNR and TL 18.207.321 (31 December 2014: TL 9.912.780) as reinsurer’s share of IBNR is excluded from outstanding claims reserve balance.

Anadolu Sigorta Annual Report 2015 219

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

The calculated winning ratio of the Company as at 31 December 2015 is within %0 -%100 (31 December 2014: %0-%100). Winning ratios used in and amounts decreased from provision for outstanding claims are as follows: 31 December 2015 Winning Ratios Gross Amount Net Amount Branch Used Decreased Decreased

General responsibility %25 44.952.215 40.954.135 Third party liability for motor vehicles (MTPL) %10 34.977.046 34.149.860 Fire and natural disasters %25 16.115.339 5.546.618 General Losses %25 3.014.805 1.082.648 Motor vehicles %21 2.994.637 2.925.531 Marine %25 804.446 394.117 Watercrafts %25 677.619 482.354 Accident %16 656.803 469.951 Credit %25 636.655 636.655 Financial Losses %3 28.162 8.537 Legal protection %25 5.224 5.224 Total 104.862.951 86.655.630

31 December 2014 Winning Ratios Gross Amount Net Amount Branch Used Decreased Decreased

Third party liability for motor vehicles (MTPL) %13 27.061.833 26.173.740 General responsibility %25 31.775.165 30.362.994 Fire and natural disasters %23 10.183.292 4.417.948 Motor vehicles %21 2.623.152 2.533.992 General Losses %19 2.057.461 686.961 Watercrafts %25 791.187 493.422 Marine %25 431.542 362.137 Accident %14 304.698 284.356 Credit %25 25.000 25.000 Legal protection %25 6.792 6.792 Total 75.260.122 65.347.342

Anadolu Sigorta Annual Report 2015 220 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

New Regulations on Treatment Costs Resulted from Traffic Accidents in Accordance with the Circular Numbered 2011/18 “Circular Related to the Accounting of Payments Related to Payment of Treatment Costs Resulted from Traffic Accidents and New Accounts in the Insurance Chart of Accounts”

58th and 59th articles and 1st and 2nd provisional articles of the Law no 6111 on “Restructuring of certain receivables and amendment to the law of social insurance and general health insurance and certain other laws and decree laws” published in the Official Gazette numbered 27857 and has come into effect on 25 February 2011.

According to the Article 59 of the aforementioned law, starting from 25 February 2011, premiums written under compulsory motor third party liability insurance contracts providing health assurance will be transferred to SSI by the rate up to 15% which will be later defined by Turkish Treasury. By this premium transfer, all liabilities related to body injuries resulted from traffic accidents will be compensated by SSI. According to the Provisional Article 1 and Article 59 of the Law, up to 20% of the transferred premium amount defined by the Turkish Treasury will also be transferred to SSI and treatment costs resulted from traffic accidents occurred before 25 February 2011 will also be compensated by SSI. As part of the aforementioned law, “Communiqué on Payment of Treatment Costs Resulted from Traffic Accidents” which was issued in Official Gazette numbered 28038 and dated 27 August 2011 has become effective. On 17 October 2011, the Turkish Treasury issued circular numbered 2011/18 “Circular Related to the Accounting of Payments Related to Payment of Treatment Costs Resulted from Traffic Accidents and New Accounts in the Insurance Chart of Accounts”. In accordance with the related circular, the Company eliminated outstanding claims reserve amounting to TL 2.279.273 related to treatment costs occurred before issuance of the aforementioned law, with “Paid Claims” account. The same amount is recorded as “Payable to SSI” under “Other Payables” in the accompanying financial statements.

In accordance with the circular numbered 2011/18, the Company recalculated test IBNR amount by excluding treatments costs covered by the aforementioned law as at 31 March 2011 and eliminated difference between the newly calculated IBNR amount and IBNR amount in the financial statements amounting to TL 2.375.923 with “Paid Claims” account. The same amount is recorded as “Payable to SSI” under “Other Payables” in the accompanying financial statements.

The Turkish Treasury informed the Company 7.02% for motor third party liability, 2.08% for compulsory personal accident seat insurance and 15.8% for compulsory transportation liability for traffic accidents occurred before issuance of the aforementioned law. The difference amounting to TL 448 (31December 2014: 1.153.499 TL) between the amount informed by the Turkish Treasury and the amount eliminated by the Company is transferred to “Other Technical Expense” for the year ended 31 December 2015.

2.26 Reserve for unexpired risks

In accordance with the Communiqué on Technical Reserves, while providing reserve for unearned premiums, in each accounting period, the companies should perform adequacy test covering the preceding 12 months due to the probability that future claims and compensations of the outstanding policies may be in excess of the reserve for unearned premiums already provided. In performing this test, it is required to multiply the reserve for unearned premiums, net with the expected claim/premium ratio. Expected claim/premium ratio is calculated by dividing incurred losses (provision for outstanding claims, net at the end of the period + claims paid, net - provision for outstanding claims, net at the beginning of the period) to earned premiums (written premiums, net + reserve for unearned premiums, net at the beginning of the period - reserve for unearned premiums, net at the end of the period). In the calculation of earned premiums; deferred commission expenses paid to the agencies and deferred commission income received from the reinsurance firms which were netted off from reserve for unearned premiums both at the beginning of the period and at the end of the period are not taken into consideration.

In accordance with Treasury circular numbered 2012/15, unexpired risk reserve started to be calculated over main branches as of December 31, 2012. The test is performed on branch basis and in case where the expected claim/premium ratio is higher than 95%, reserve calculated by multiplying the exceeding portion of the expected claim/premium ratio with the reserve for unearned premiums of that specific branch is added to the reserves of that branch. Accordingly, as at the reporting date, the Company has provided net reserve for unexpired risk amounting to TL 18.531.890 (31 December 2014: TL 52.687.216) and unexpired risk amounting of reassurance to TL 12.046.676 (31 December 2014: TL 12.307.870) in the accompanying unconsolidated financial statements. According to the Circular numbered 2015/30, the amount of the opening provision for outstanding claims which is determined unexpired risk reserve redefined in a manner consistent with the current period as of 31 December 2015.

According to the Circular numbered 2011/18, the Company excluded both the premiums transferred to SSI and claims related to treatment costs from calculation of reserve for unexpired risks in motor third party liability, compulsory transportation financial liability and compulsory personal accident for bus transportation branches.

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ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

2.27 Equalization provision

In accordance with the Communiqué on Technical Reserves put into effect starting from 1 January 2008, the companies should provide equalization provision in credit insurance and earthquake branches to equalize the fluctuations in future possible claims and for catastrophic risks. Equalization provision, started to be provided in 2008, is calculated as 12% of net premiums written in credit insurance and earthquake branches. In the calculation of net premiums, fees paid for un-proportional reinsurance agreements are considered as premiums ceded to the reinsurance firms. The companies should provide equalization provision up to reaching 150% of the highest premium amount written in a year within the last five years.

In case where claims incurred, the amounts below exemption limits as stated in the contracts and the share of the reinsurance firms cannot be deducted from equalization provisions. Claims payments are deducted from first year’s equalization provisions by first in first out method. Equalization provisions are presented under “other technical reserves” in the accompanying financial statements. As at the reporting date, the Company provided equalization provision amounting to TL 81.545.727 in the accompanying consolidated financial statements (31 December 2014: 60.549.876 TL)

2.28 Related parties

Parties are considered related to the Company if;

(a) directly, or indirectly through one or more intermediaries, the party:

• controls, is controlled by, or is under common control with the Company (this includes parent, subsidiaries and fellow subsidiaries); • has an interest in the Company that gives it significant influence over the Company; or • has joint control over the Company;

(b) the party is an associate of the Company;

(c) the party is a joint venture in which the Company is a venturer;

(d) the party is member of the key management personnel of the Company and its parent;

(e) the party is a close member of the family of any individual referred to in (a) or (d);

(f) the party is an entity that is controlled or significantly influenced by, or for which significant voting power in such entity resides with directly or indirectly, any individual referred to in (d) or

(g) the party is a post-employment benefit plan for the benefit of employees of the Company, or of any entity that is a related party of the Company.

A related party transaction is a transfer of resources, services or obligations between related parties, regardless of whether a price is charged.

A number of transactions are entered into with related parties in the normal course of business.

2.29 Earnings per share

Earnings per share are determined by dividing the net income by the weighted average number of shares outstanding during the year attributable to the shareholders of the Company. In Turkey, companies can increase their share capital by making a pro-rata distribution of shares (“Bonus Shares”) to existing shareholders from retained earnings. For the purpose of earnings per share computations, such bonus shares issued are regarded as issued shares.

2.30 Events after the reporting date

Post-balance sheet events that provide additional information about the Company’s position at the reporting dates (adjusting events) are reflected in the financial statements. Post-balance sheet events that are not adjusting events are disclosed in the notes when material.

Anadolu Sigorta Annual Report 2015 222 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

2.31 New standards and interpretations not yet adopted

There are a number of new standards, updates related to the existing standards and interpretations which are not adopted in the preparation of the accompanying financial statements and have not yet entered into force for the accounting period 31 December 2015. The new standards and updates to standards is not expected to have material effect on the financial statements except for TFRS 9.

TFRS 9 Financial Instruments: Recognition and Measurement

An entity shall apply TFRS 9 for annually years beginning on or after 1 January 2018. An earlier application is permitted. If an entity adopts this TFRS in its financial statements for a period beginning before 1 January 2012, then prior periods are not needed to be restated. The objective of TFRS 9, being the first phase of the project, is to establish principles for the financial reporting of financial assets that will present relevant and useful information to users of financial statements for their assessment of amounts, timing and uncertainty of the entity’s future cash flows. With TFRS 9 an entity shall classify financial assets as subsequently measured at either amortized cost or fair value on the basis of both the entity’s business model for managing the financial assets and the contractual cash flow characteristic of the financial assets.

3 Critical accounting estimates and judgments in applying accounting policies

The notes given in this section are provided to addition/supplement the commentary on the management of insurance risk note 4.1 - Management of insurance risk and note 4.2 - Financial risk management.

The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected.

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 recognized in the financial statements are described in the following notes:

Not 4.1 - Management of insurance risk

Not 4.2 - Financial risk management

Not 10 - Reinsurance assets/liabilities

Not 11 - Financial assets

Not 12 - Loans and receivables

Not 17 - Insurance liabilities and reinsurance assets

Not 17 - Deferred acquisition costs

Not 19 - Trade and other payables, deferred income

Not 21 - Deferred income taxes

Not 23 - Provisions for other liabilities and charges

Anadolu Sigorta Annual Report 2015 223

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

4 Management of insurance and financial risk

4.1 Management of insurance risk

Insurance risk is defined as coverage for exposures that exhibit a possibility of financial loss due to applying inappropriate and insufficient insurance techniques. Main reasons of insurance risk exposure result from the risk selection and inaccurate calculation of insurance coverage, policy terms and fee or inaccurate calculation of coverage portion kept within the company and coverage portion transfers to policyholders and transfer conditions.

Objective of managing risks arising from insurance contracts and policies used to minimize such risks

Potential risks that may be exposed in transactions are managed based on the requirements set out in the Company’s “Risk Management Policies” issued by the approval of the Board of Directors. The main objective of risk management policies is to determine the risk measurement, assessment, and control procedures and maintain consistency between the Company’s asset quality and limitations allowed by the insurance standards together with the Company’s risk tolerance of the accepted risk level assumed in return for a specific consideration. In this respect, instruments that are related to risk transfer, such as; insurance risk selection, risk quality follow-up by providing accurate and complete information, effective monitoring of level of claims by using risk portfolio claim frequency, treaties, facultative reinsurance contracts and coinsurance agreements, and risk management instruments, such as; risk limitations, are used in achieving the related objective.

Risk tolerance is determined by the Company’s Board of Directors by considering the Company’s long-term strategies, equity resources, potential returns and economical expectations, and it is presented by risk limitations. Authorization limitations during policy issuing include authorizations for risk acceptances granted based on geographical regions in relation to unacceptable special risks or pre-approved acceptable special risks, insurance coverage to agencies, district offices, technical offices, assistant general managers and top management in the policy issuance period and authorizations for claim payment granted to district offices, claim management administration, automobile claims administration and Claim Committee established by the managing director and assistant managing director in the claim payment period.

Whatsoever, risk acceptance is based on technical income expectations under the precautionary principle. In determining insurance coverage, policy terms and fee, these expectations are based accordingly.

It is essential that all the authorized personnel in charge of executing policy issuance transactions, which is the initial phase of insurance process, should ensure to gather or provide all the accurate and complete information to issue policies in order to obtain evidence on the acceptable risks that the Company can tolerate from the related insurance transactions. On the other hand, decision to be made on risk acceptance will be possible by transferring the coverage to the reinsurers and/or co-insurers and considering the terms of the insurance policy.

In order to avoid destructive losses over company’s financial structure, company transfers the exceeding portion of risks assumed over the Company’s risk tolerance and equity resources through treaties, facultative reinsurance contracts and coinsurance agreements to reinsurance and coinsurance companies. Insurance coverage and policy terms of reinsurance are determined by assessing the nature of each insurance branch.

Insurance risks do not generally have significant unrecoverable losses in the course of ordinary transactions, except for risks associated with earthquake and other catastrophic risks. Therefore, there is a high sensitivity to earthquake and catastrophic risks.

The case of potential claims’ arising from earthquake and other catastrophic risks exceeding the maximum limit of the excess of loss agreements, such risks are treated as the primary insurance risks and are managed based on the precautionary principle. Maximum limit of excess of loss agreements is determined based on the worst case scenario on the possibility of an earthquake that Istanbul might be exposed to in terms of its severity and any potential losses incurred in accordance with the generally accepted international earthquake models. The total amount of protection for catastrophic risks of the company is identified taking into the compensation amount for an earthquake will occur in a 1000 years.

Anadolu Sigorta Annual Report 2015 224 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Sensitivity to insurance risk

The Company’s gross and net insurance risk concentrations (after reinsurance) in terms of insurance branches are summarized as below: Total claims liability (*) Gross total claims Reinsurance share of Net total 31 December 2015 liability total claims liability claims liability Motor vehicles liability (MTPL) 792.901.221 (19.137.207) 773.764.014 General liability 362.417.122 (71.333.402) 291.083.720 Fire and natural disasters 325.947.406 (233.078.873) 92.868.533 General losses 135.123.261 (98.567.511) 36.555.750 Motor vehicles 121.797.869 489.732 122.287.601 Watercrafts 44.281.777 (28.552.564) 15.729.213 Marine 36.165.288 (23.526.688) 12.638.600 Accident 23.179.924 (4.057.472) 19.122.452 Financial losses 13.682.143 (12.926.920) 755.223 Aircrafts liability 11.311.404 (715.949) 10.595.455 Aircrafts 6.676.863 (1.487.700) 5.189.163 Illness/health 2.435.130 (163.213) 2.271.917 Credit 2.257.355 (13.000) 2.244.355 Legal protection 801.653 (107) 801.546 Total 1.878.978.416 (493.070.874) 1.385.907.542

Total claims liability (*) Gross total claims Reinsurance share of Net total 31 December 2014 liability total claims liability claims liability Motor vehicles liability (MTPL) 536.683.814 (16.321.658) 520.362.156 General liability 302.883.129 (35.816.816) 267.066.313 Fire and natural disasters 126.898.890 (67.749.236) 59.149.654 General losses 68.615.172 (41.639.167) 26.976.005 Motor vehicles 83.781.790 1.274.635 85.056.425 Watercrafts 35.733.940 (18.673.835) 17.060.105 Marine 19.805.194 (13.706.887) 6.098.307 Aircrafts 28.943.534 (20.172.876) 8.770.658 Financial losses 17.017.918 (15.402.033) 1.615.885 Accident 15.096.696 (1.291.762) 13.804.934 Aircrafts liability 4.955.110 (59.627) 4.895.483 Illness/health 1.936.936 (53.446) 1.883.490 Credit 759.191 (186.986) 572.205 Legal protection 876.450 31 876.481 Total 1.243.987.764 (229.799.663) 1.014.188.101

(*) Total claims liability includes outstanding claims reserve (excluding contingent amounts deducted from claims reserve determined by winning probability) and incurred but not reported claims.

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ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Gross and net insurance risk concentrations of the insurance contracts (after reinsurance) based on geographical regions are summarized as below: Total claims liability (*) Gross total Reinsurance share of Net total 31 December 2015 claims liability total claims liability claims liability

Turkey 1.443.297.017 (463.960.502) 979.336.515 Europe 1.493.087 (68.658) 1.424.429 Africa 233.465 (156.388) 77.077 Asia 107.555 -- 107.555 Total 1.445.131.124 (464.185.548) 980.945.576

Total claims liability (*) Gross total Reinsurance share of Net total 31 December 2015 claims liability total claims liability claims liability

Marmara Region 1.137.664.480 (412.169.503) 725.494.977 Middle Anatolian Region 74.902.822 (3.465.073) 71.437.749 Aegean Region 53.281.050 (3.272.023) 50.009.027 Mediterranean Region 52.863.005 (7.216.702) 45.646.303 South East Anatolian Region 40.096.870 (9.169.708) 30.927.162 Black Sea Region 42.423.121 (16.263.951) 26.159.170 East Anatolian Region 42.065.669 (12.403.542) 29.662.127 Total 1.443.297.017 (463.960.502) 979.336.515

(*) Total claims liability includes estimated compensation amounts for realized claims. Gross incurred but not reported claims amounting to TL 483.809 additional provision for outstanding claims per adequacy test amounting to TL 54.901.010 outstanding claims of treaty activities which could not be distributed to geographical regions and the contingent amounts deducted from claims reserve amounting to TL (104.862.951) are excluded from the table.

Total claims liability (*) Gross total Reinsurance share of Net total 31 December 2014 claims liability total claims liability claims liability

Turkey 945.064.232 (221.076.633) 723.987.599 Europe 1.905.186 (566.539) 1.338.647 America 156.303 (95.322) 60.981 Asia 224.723 (4.829) 219.894 Total 947.350.444 (221.743.323) 725.607.121

Total claims liability Gross total Reinsurance share of Net total 31 December 2014 claims liability total claims liability claims liability

Marmara Region 522.387.693 (121.442.279) 400.945.414 Middle Anatolian Region 137.929.862 (43.864.250) 94.065.612 Aegean Region 73.890.193 (11.987.253) 61.902.940 Mediterranean Region 68.908.939 (10.656.183) 58.252.756 South East Anatolian Region 43.207.867 (7.764.575) 35.443.292 Black Sea Region 34.487.066 (2.878.530) 31.608.536 East Anatolian Region 64.252.612 (22.483.563) 41.769.049 Total 945.064.232 (221.076.633) 723.987.599

(*) Total claims liability includes estimated compensation amounts for realized claims. Gross incurred but not reported claims amounting to TL 327.611.024 additional provision for outstanding claims per adequacy test amounting to TL 44.286.418 outstanding claims of treaty activities which could not be distributed to geographical regions and the contingent amounts deducted from claims reserve amounting to TL (75.260.122) are excluded from the table.

Anadolu Sigorta Annual Report 2015 226 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Given insurance collateral amounts in respect to branches 31 December 2015 31 December 2014

Motor vehicles liability (MTPL) 5.815.758.509.513 4.654.710.390.062 Illness/health 127.386.361.920 151.297.301.000 Fire and natural disasters 113.337.662.301 96.950.579.558 Accident 108.257.529.723 96.127.353.408 General liability 46.994.504.007 59.258.632.580 General Losses 46.367.784.061 37.012.012.369 Motor vehicles 46.280.638.734 40.623.491.870 Marine 17.497.239.726 14.331.713.699 Aircrafts liability 5.194.503.027 5.324.064.633 Legal protection 4.776.739.825 4.184.780.935 Watercrafts 2.115.462.411 1.904.293.907 Financial Losses 707.337.973 469.945.601 Aircrafts 570.396.075 429.356.389 Total (*) 6.335.244.669.296 5.162.623.916.011

(*) Net amount which deducted share of reinsurance and social security

4.2 Management of financial risk

Introduction and overview

This note presents information about the Company’s exposure to each of the below risks, the Company’s objectives, policies and processes for measuring and managing risk, and the Company’s management of capital. The Company has exposure to the following risks from its use of financial instruments:

• credit risk • liquidity risk • market risk

The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. Duties and responsibilities of the Risk Management and Internal Control Department include design and implementation of risk management system and identification and implementation of risk management policies. It is also responsible for ensuring that the Company implements all necessary risk management techniques. Activities of the Risk Management and Internal Control Department are managed directly by General Manager. The Board of Directors monitors the effectiveness of the risk management system through the internal audit department.

Risk management policies and guidelines are set by the Board of Directors and applied by the top management. These policies include organisation and scope of the risk management function, risk measurement and assessment methods, duties and responsibilities of the Board of Directors, top management and all of the employees, procedures followed in the case of limit extension and compulsory approval and confirmation processes for certain situations.

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ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Credit Risk

Credit risk is most simply defined as the potential that a bank borrower or counterparty will fail to meet its obligations in accordance with agreed terms. The balance sheet items that the Company is exposed to credit risks are as follows:

• Cash at banks • Other cash and cash equivalents • Available for sale financial assets (except equity-shares) • Financial assets held for trading (except equity-shares) • Held to maturity financial asset • Premium receivables from policyholders • Receivables from intermediaries (agencies) • Receivables from reinsurance companies related to commissions and claims paid • Reinsurance shares of insurance liability • Receivables from related parties • Other receivables

Reinsurance contracts are the most common method to manage insurance risk. 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 creditworthiness of reinsurers is considered on an annual basis by reviewing their financial strength prior to finalization of the reinsurance contract.

Anadolu Sigorta Annual Report 2015 228 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Net carrying value of the assets that is exposed to credit risk is shown in the table below. 31 December 2015 31 December 2014

Cash and cash equivalents (Note 14) 2.305.010.933 1.606.182.886 Receivables from main operations (Note 12) 928.282.683 797.454.113 Financial assets (Note 11) (*) 562.261.032 539.941.067 Reinsurer share in provision for outstanding claims (Note 10), (Note 17) 493.070.874 229.799.663 Prepaid taxes and funds (Note 19) 22.398.667 1.848.492 Other receivables (Note 12) 12.586.556 5.321.041 Income accruals (Not 12) 5.577.825 2.733.430 Other current assets (Not 12) 257.186 169.734 Total 4.329.445.756 3.183.450.426

(*) Equity shares amounting to TL 118.551.481 are not included (31 December 2014: 104.126.890 TL).

As at 31 December 2015 and 31 December 2014, the aging of the receivables from main operations is as follows: 31 December 2015 31 December 2014 Gross Amount Provision Gross Amount Provision

Not past due 662.243.535 -- 583.917.123 -- Past due 0-30 days 90.517.564 -- 89.759.753 -- Past due 31-60 days 16.577.325 -- 13.190.866 -- Past due 61-90 days 5.602.047 -- 3.147.750 -- More than 90 days (*) 154.676.931 (150.758.235) 116.737.854 (113.380.507) Total (**) 929.617.402 (150.758.235) 806.753.346 (113.380.507)

(*) As per the 3 February 2005 dated and B.02.1.HM.O.SGM.0.3.1/01/05 numbered Circular issued by the Turkish Treasury, in case where subrogation is subject to claim/legal action, related subrogation amount is recognized as doubtful receivables and allowance for doubtful receivables is provided by the same amount in the financial statements. Related amounts are presented in “More than 90 days” line in the above table. (**) Except for TL 929.617.402 (31 December 2014: 806.753.346 TL) presented under receivables from insurance operations in the financial statements, this amount also includes TL 108.102.177 (31 December 2014: 81.109.551 TL) of not-transferred amount collected by intermediaries and TL 49.626.517 (31 December 2014: 30.648.790 TL) of subrogation and salvage receivables. subrogation receivables having past over 4 months for individuals and 6 months for legal entities but not transferred to legal follow-up amounting to TL 8.305.178 (31 December 2014: 7.677.067 TL) are excluded from the table.

The movements of the allowances for impairment losses for receivables from main operations during the period are as follows: 31 December 2015 31 December 2014

Provision for receivables from insurance operations at the beginning of the period 113.380.507 102.829.158 Collections during the period (348.983) (1.071.425) Impairment losses provided during the period (Note 47) 748.206 2.518.673 Impairment losses provided for subrogation - salvage receivables during the period (Note 47) 36.978.505 9.104.101 Provision for receivables from insurance operations at the end of the period 150.758.235 113.380.507

Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in raising funds to meet cash commitments associated with financial instruments.

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ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Management of the liquidity risk

The Company considers the maturity match between asset and liabilities for the purpose of avoiding liquidity risk and ensure that it will always have sufficient liquidity to meet its liabilities when due.

Maturity distribution of monetary assets and liabilities:

Carrying Up to 1 to 3 to 6 6 to 12 Over 31 December 2015 amount 1 month 3 months months months 1 year Unallocated

Cash and cash equivalents 2.304.904.212 757.875.875 1.537.438.950 ------9.589.387 Financial assets 680.812.513 11.888.027 22.176.537 13.944.222 72.233.650 304.131.367 256.438.710 Receivables from main operations 928.282.683 81.504.262 345.748.838 407.774.676 82.529.424 10.725.483 -- Other receivables and current assets 12.228.636 4.260.956 1.111.564 1.612.816 3.035.319 2.207.981 -- Income accruals 5.577.825 -- 1.348.196 -- -- 4.229.629 -- Total monetary assets 3.931.805.869 855.529.120 1.907.824.085 423.331.714 157.798.393 321.294.460 266.028.097

Insurance technical provisions (*) 1.385.907.542 193.379.758 386.759.515 157.100.713 146.675.348 501.992.208 -- Payables arising from main operations 339.189.344 108.657.637 41.382.701 70.857.244 118.291.762 -- -- Other liabilities 60.481.800 22.649.598 34.654.641 -- -- 3.177.561 -- Provisions for taxes and other similar obligations 37.088.955 37.088.955 ------Financial liabilities 210.669.647 210.669.647 ------Provisions for other risks and expense accruals 51.247.452 -- 17.120.234 9.759.024 7.690.111 16.678.083 -- Total monetary liabilities 2.084.584.740 572.445.595 479.917.091 237.716.981 272.657.221 521.847.852

(*) Provision for outstanding claims is presented as short term liabilities in the accompanying financial statements whereas maturity distribution is presented according to projected payment dated in the above table.

Carrying Up to 1 to 3 to 6 6 to 12 Over 31 December 2014 amount 1 month 3 months months months 1 year Unallocated

Cash and cash equivalents 1.606.048.714 563.509.281 960.079.777 82.459.656 ------Financial assets 644.067.957 16.290.316 29.820.736 33.595.436 43.855.877 248.492.451 272.013.141 Receivables from main operations 797.454.113 77.086.258 309.715.708 319.130.980 83.346.625 8.174.542 -- Other receivables and current assets 4.962.323 2.949.214 718.715 431.465 862.929 -- -- Income accruals 2.733.430 -- 1.250.015 1.483.415 ------Total monetary assets 3.055.266.537 659.835.069 1.301.584.951 437.100.952 128.065.431 256.666.993 272.013.141

Insurance technical provisions (*) 1.014.188.101 152.781.804 305.563.607 116.206.094 99.256.001 340.380.595 -- Payables arising from main operations 302.045.983 76.105.908 46.629.462 83.703.672 95.606.941 -- -- Other liabilities 47.561.333 18.251.375 26.393.381 -- -- 2.916.577 -- Provisions for taxes and other similar obligations 27.386.135 27.386.135 ------Provisions for other risks and expense accruals 47.233.313 -- 3.356.650 15.759.247 -- 28.117.416 -- Total monetary liabilities 1.438.414.865 274.525.222 381.943.100 215.669.013 194.862.942 371.414.588 --

(*) Provision for outstanding claims is presented as short term liabilities in the accompanying financial statements whereas maturity distribution is presented according to projected payment dated in the above table.

Anadolu Sigorta Annual Report 2015 230 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Market risk

Market risk is the risk that changes in market prices, such as interest rates, foreign exchange rates and credit spreads will affect the Company’s income or the value of its holdings of financial instruments, The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return on risk.

Currency risk

The Company is exposed to currency risk through insurance and reinsurance transactions in foreign currencies.

Foreign exchange gains and losses arising from foreign currency transactions are recorded at transaction dates. At the end of the periods, foreign currency assets and liabilities evaluated by the Central Bank of the Republic of Turkey’s spot purchase rates and the differences arising from foreign currency rates are recorded as foreign exchange gain or loss in the statement of income.

The Company’s exposure to foreign currency risk is as follows: 31 December 2015 US Dollar Euro Other currencies Total

Receivables from main operations 185.603.152 59.359.667 3.747.550 248.710.369 Financial assets 17.469.980 11.206.804 -- 28.676.784 Cash and cash equivalents 174.413.814 7.810.072 2.552.838 184.776.724 Total foreign currency assets 377.486.946 78.376.543 6.300.388 462.163.877

Insurance technical provisions 126.270.805 32.537.953 1.139.896 159.948.654 Payables arising from main operations 129.628.522 8.029.263 (158.758) 137.499.027 Total foreign currency liabilities 255.899.327 40.567.216 981.138 297.447.681

Net financial position 121.587.619 37.809.327 5.319.250 164.716.196

31 December 2014 US Dollar Euro Other currencies Total

Receivables from main operations 170.593.626 44.519.657 5.389.927 220.503.210 Financial assets -- 12.320.065 -- 12.320.065 Cash and cash equivalents 120.322.331 2.232.333 987.046 123.541.710 Total foreign currency assets 290.915.957 59.072.055 6.376.973 356.364.985

Insurance technical provisions 91.396.977 24.659.552 691.344 116.747.873 Payables arising from main operations 111.938.980 9.454.831 -- 121.393.811 Total foreign currency liabilities 203.335.957 34.114.383 691.344 238.141.684

Net financial position 87.580.000 24.957.672 5.685.629 118.223.301

TL equivalents of the related monetary amounts denominated in foreign currencies are presented in the above table.

If technical provision denominated in any currency not specified, ıt is evaluated are evaluated by the Central Bank of the Republic of Turkey’s spot sales rates (31 December 2014: Central Bank of the Republic of Turkey’s sales rate) as at 31 December 2015 and Foreign currency transactions are recorded at the foreign exchange rates ruling at the dates of the transactions and foreign currency denominated monetary items are evaluated by the Central Bank of the Republic of Turkey’s spot purchase rates (31 December 2014: Central Bank of the Republic of Turkey’s purchase rate) as at 31 December 2015.

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ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Exposure to currency risk

Foreign currency rates used for the translation of foreign currency denominated assets and liabilities as at 31 December 2015 and 31 December 2014 are as follows: US Dollar Euro

31 December 2015 2,9076 3,1776 31 December 2014 2,3189 2,8207

A 10 percent depreciation of the TL against the following currencies as at 31 December 2014 and 31 December 2013 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. 31 December 2015 31 December 2014 Profit or loss Equity (*) Profit or loss Equity (*)

US Dollar 12.099.615 12.158.762 8.758.000 8.758.000 Euro 3.780.933 3.780.933 2.495.767 2.495.767 Other 531.925 531.925 568.563 568.563 Total, net 16.412.473 16.471.620 11.822.330 11.822.330

(*) Equity effect also includes profit or loss effect of 10% depreciation of TL against related currencies.

Exposure to interest risk

The principal risk to which non-trading portfolios are exposed is the risk of loss from fluctuations in the future cash flows or fair values of financial instrument because of a change in market interest rates, Interest rate risk is managed principally through monitoring interest rate gaps and by having pre-approved limits for repricing bands.

As at reporting date; the interest rate profile of the Company’s interest earning financial assets and interest bearing financial liabilities are detailed as below: 31 December 2015 31 December 2014

Financial assets with fixed interest rates/(liabilities): Cash at banks (Note 14) 1.928.245.489 1.350.525.371 Available for sale financial assets - Government bonds (Note 11) 310.377.056 260.405.699 Available for sale financial assets - Private debt securities (Note 11) 25.540.683 -- Cash deposited to insurance and reinsurance companies (Note 12) 7.840.311 6.739.965 Other - financial assets (Note 11) 11.888.027 5.887.281 Other financial liabilities (210.669.647) --

Financial assets with variable interest rates: Held to maturity investments - Government bonds (Note 11) 15.555.214 73.670.047 Available for sale financial assets - Government bonds (Note 11) 34.236.829 11.198.005 Available for sale financial assets - Private debt securities (Note 11) 25.877.633 19.993.767 Financial assets held for trading - Government bonds (Note 11) 898.362 900.017 (*) Demand deposits amounting to TL 9.589.387 are not included (31 December 2014: 6.208.075 TL).

Anadolu Sigorta Annual Report 2015 232 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Interest rate sensitivity of the financial instruments

Interest rate sensitivity of the statement of income is the effect of the assumed changes in interest rates on the fair values of financial assets at fair value through profit or loss and on the net interest income for the periods ended 31 December 2015 and 2014 of the floating rate non-trading financial assets and financial liabilities. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The effects of changes in tax is not considered in the calculations. Profit or loss Equity (*) 31 December 2015 100 bp increase 100 bp decrease 100 bp increase 100 bp decrease

Financial assets held for trading (1.842) 1.889 (1.842) 1.889 Available for sale financial assets -- -- (3.958.553) 4.116.851 Total, net (1.842) 1.889 (3.960.395) 4.118.740

(*) Consolidated equity effect also includes profit or loss effect.

Profit or loss Equity (*) 31 December 2014 100 bp increase 100 bp decrease 100 bp increase 100 bp decrease

Financial assets held for trading (20.889) 21.616 (20.889) 21.616 Available for sale financial assets ------Total, net (20.889) 21.616 (20.889) 21.616

(*) Consolidated equity effect also includes profit or loss effect.

Fair value information

The estimated fair values of financial instruments have been determined using available market information, and where they exist, appropriate valuation methodologies.

The Company has classified its financial assets as held for trading, available for sale or held to maturity. As at the reporting date, available for sale financial assets and financial assets held for trading are measured at their fair values based on their quoted prices or fair value information obtained from brokers in the accompanying consolidated financial statements. Equity shares not traded in active markets are measured at cost less impairment losses if any. The accompanying consolidated financial statements, amortized cost is calculated using the effective interest method Held to maturity investments with a carrying amount of TL 15.555.214 (31 December 2014: 73.670.047 TL) are measured at amortised cost and their fair value amounting to TL14.936.855 TL (31 December 2014: 74.133.508 TL) as at 31 December 2015.

Management estimates that the fair value of other financial assets and liabilities are not materially different than their carrying amounts.

Fair value sensitivity of the equities

Equity price risk is the risk that the fair values of equities decrease as a result of the changes in the levels of equity indices and the value of individual stocks.

Anadolu Sigorta Annual Report 2015 233

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

The effect on income as a result of 10% change in the fair value of equity instruments held as held for trading financial assets (traded at İstanbul Stock Exchange) due to a reasonably possible change in equity indices, with all other variables held constant, is as follows (excluding tax effect): 31 December 2015 31 December 2014 Profit or loss Equity (*) Profit or loss Equity (*)

Financial assets held for trading (265.467) (265.467) (303.683) (303.683) Available for sale financial assets -- (11.486.174) -- (9.717.561) Total, net (265.467) (11.751.641) (303.683) (10.021.244)

(*) Consolidated equity impact includes impact of change of conjectural interest rates on income statement.

Classification of fair value measurements

TFRS 7 - Financial instruments: Disclosures requires the classification of fair value measurements into a fair value hierarchy by reference to the observability and significance of the inputs used in measuring fair value of financial instruments measured at fair value to be disclosed. This classification basically relies on whether the relevant inputs are observable or not. Observable inputs refer to the use of market data obtained from independent sources, whereas unobservable inputs refer to the use of predictions and assumptions about the market made by the Company. This distinction brings about a fair value measurement classification generally as follows.

Level 1: Fair value measurements using quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: Fair value measurements using inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices).

Level 3: Fair value measurements using inputs for the assets or liability that are not based on observable market data (unobservable inputs).

Classification requires the utilization of observable market data, if available.

The classification of fair value measurements of financial assets and liabilities measured at fair value is as follows: 31 December 2015 Level 1 Level 2 Level 3 Total

Financial assets: Financial assets held for trading (Note 11) 96.232.135 -- -- 96.232.135 Available for sale financial assets (*) (Note 11) 567.990.094 -- 358.464 568.348.558 Total financial assets 664.222.229 -- 358.464 664.580.693 31 December 2014 Level 1 Level 2 Level 3 Total

Financial assets: Financial assets held for trading (Note 11) 134.054.733 -- -- 134.054.733 Available for sale financial assets (*) (Note 11) 432.428.727 -- 3.297.263 435.725.990 Total financial assets 566.483.460 -- 3.297.263 569.780.723

(*) As at 31 December 2015 securities that are not publicly traded and the determination of fair values could not be obtained reliably amounting to TL 676.606 TL have been measured at cost (31 December 2014: 617.187 TL).

Anadolu Sigorta Annual Report 2015 234 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

The following table shows the fair value measurements financial assets available for sales which classified as Level 3: 31 December 2015 31 December2014

Available for sale financial assets beginning of the period 3.297.263 3.297.263 Capital increase by bonus issue 42.626 -- Avea İletişim Hizmetleri A.Ş. sale of shares (2.981.425) Available for sale financial assets end of the period 358.464 3.297.263

Gains and losses from financial assets Gains and losses recognized in the consolidated statement of income: 31 December 2015 31 December 2014

Interest income from bank deposits 168.846.805 99.252.595 Foreign exchange gains 109.289.546 59.970.980 Income from investments in associates 29.176.564 20.814.929 Income from debt securities classified as available-for-sale financial assets 32.656.433 35.373.747 Income from debt securities classified as held for trading financial assets 74.661 75.040 Income from debt securities classified as held to maturity financial investment 3.511.381 10.730.801 Income from equity shares classified as available-for-sale financial assets 12.782.052 10.197.910 Income from equity shares classified as trading financial assets 430.223 702.880 Income from investment funds classified as available-for-sale financial assets 498.879 7.810.467 Income from investment funds classified as held for trading financial assets 6.817.395 13.498.121 Income from derivative transactions 674.700 205.678 Other 1.318.055 3.106.153 Investment income 366.076.694 261.739.301

Loss from valuation of financial assets (2.824.154) (3.509.979) Foreign exchange losses (61.168.299) (49.954.025) Loss from derivative transactions (74.638) (184.509) Loss from disposal of financial assets (9.629.064) (7.713.065) Investment expenses - including interest (939.230) (136.623) Investment expenses (74.635.385) (61.498.201)

Financial gains and losses recognized in the statement of income, net 291.441.309 200.241.100

Financial gains and losses recognized in consolidated equity: 31 December 2015 31 December 2014

Fair value changes in investments in associates (Note 15) (2.137.909) 6.313.825 Net gains transferred from statement of equity to the statement of income on disposal of available for sale financial assets (Note 15) 617.378 (3.609.723) Fair value changes in available-for-sale financial assets (Note 15) (4.500.629) 21.041.450 Gains and losses recognized in equity, net (6.021.160) 23.745.552

Anadolu Sigorta Annual Report 2015 235

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Capital management

The Company’s capital management policies include the following:

• To comply with the insurance capital requirements required by the Turkish Treasury • To safeguard the Company’s ability to continue as a going concern

In accordance with the “Communiqué on Measurement and Assessment of Capital Adequacy for Insurance, Reinsurance and Individual Pension Companies” issued by Turkish Treasury on 19 January 2008 dated and 26761 numbered; the Company measured its minimum capital requirement as TL 857.574.388 553 as at 30 June 2015. As at 31 December 2015, the capital amount of the Company presented in the consolidated financial statements are above the minimum capital requirement amounts calculated according to the communiqué.

5 Segment reporting

A segment is a distinguishable component of the Company that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.

Business segment

A business segment reporting of the Company is presented in accordance with TFRS 8 - Operating Segments standard in this section.

Insurance on Fire and Natural Disaster

Insurance on fire and natural disasters covers material damages occurred due to fire, lightening, explosion or smoke, steam and temperature resulted from fire, lightning and explosion up to insurance policy limits.

Motor Third Party Liability Insurance

According to the Motorway Traffic Code numbered 2918, Motor Third Party Liability Insurance is covers vehicle owner’s legal liability for all bodily damages to third persons and financial damages to other vehicles.

Damages caused by the trailer or semi-trailers (included light trailers) or the vehicles pulled is covered by the insurance of the trailer. However, the trailers used for transportation of people should be included in an additional liability insurance in order to obtain coverage.

In order to reduce and prevent the damage in the accident happened, reasonable and necessary expenses of the policyholder is compensated by the Company. This insurance also covers unfair claims against the policyholders.

Motor Vehicles insurance

Insurance on motor vehicles covers the following dangers related with vehicles. It is possible to widen policy scope for accessories or audio, display and communication devices which are not included in standard version of the vehicle by specifying on the insurance policy.

• Accident with the motorized or non-motorized vehicles which used in high-ways, • Crash with fixed or moving items without desire of the driver or accidents due to crash, capsize, fall or tumble • The actions of third parties resulted from bad intention or mischief, • Burn, • Theft or attempted theft

Anadolu Sigorta Annual Report 2015 236 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Illness/health

Insurance on illness/health compensates treatment costs of illnesses or accidental injuries during the period of insurance and, if any, daily allowances in this general framework with special conditions up to the amount written in the policy. Geographical limits of the insurance are stated in the policy.

Geographical segment

The main geographical segment which the Company operates is Turkey. Hence, the Company has not disclosed report on geographical segments.

Fire and Motor third Motor natural party liability Illness/health vehicles disasters Other Unallocated Total

1 January - 31 December 2015 1- Earned Premiums (Net of Reinsurer Share) 762.001.651 290.123.192 791.787.471 242.188.093 435.253.878 -- 2.521.354.285 1.1- Written Premiums (Net of Reinsurer Share) 933.836.452 301.804.016 843.260.116 261.519.107 439.337.763 -- 2.779.757.454 1.2- Change in Reserve for Unearned Premiums (Net of Reinsurer Shares and Less the Amounts Carried Forward) (171.834.801) (11.680.824) (51.472.645) (19.331.014) (37.978.017) -- (292.297.301) 1.3- Change in Reserve for Unexpired Risks (Net of Reinsurer Share and Less the Amounts Carried Forward) ------33.894.132 -- 33.894.132 2- Other Technical Income (Net of Reinsurer Share) 43.367 248.437 5.491.360 106.912 42.847 -- 5.932.923 3- Accrued Salvage and Subrogation Income 16.439.013 (5.072) 19.591.103 6.020.766 14.387.303 -- 56.433.113 Technical Income (*) 778.484.031 290.366.557 816.869.934 248.315.771 449.684.028 -- 2.583.720.321

1- Incurred Losses (Net of Reinsurer Share) (806.999.557) (249.811.507) (588.829.058) (154.540.083) (256.570.622) -- (2.056.750.827) 1,1- Claims Paid (Net of Reinsurer Share) (553.597.698) (249.423.079) (551.597.881) (120.821.205) (209.591.523) -- (1.685.031.386) 1,2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward) (253.401.859) (388.428) (37.231.177) (33.718.878) (46.979.099) -- (371.719.441) 2- Change in Other Technical Reserves (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- (4.524.662) (13.431.353) (3.039.836) -- (20.995.851) 3- Operating Expenses (193.371.257) (58.075.656) (190.322.001) (70.014.458) (93.540.701) -- (605.324.073) 4- Other Technical Provisions (14.368.726) (9.773.575) (32.811.780) (10.192.417) (6.411.869) -- (73.558.367) Technical Expense (1.014.739.540) (317.660.738) (816.487.501) (248.178.311) (359.563.028) -- (2.756.629.118)

Investment Income 379.189.462 379.189.462 Investment Expense (*) (105.871.665) (105.871.665) Other (**) (17.146.341) (17.146.341) Net loss before tax 83.262.659 83.262.659

Income tax (8.279.853) (8.279.853)

Net loss 74.982.806

(*) Investment income transferred to non-technical section from technical section amounting to TL 276.542.615 is not included. (**) Deferred tax income amounting TL 6.509.894 is presented as income tax.

Anadolu Sigorta Annual Report 2015 237

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Fire and Motor third Motor natural party liability Illness/health vehicles disasters Other Unallocated Total

1 January - 31 December 2014 1- Earned Premiums (Net of Reinsurer Share) 704.976.162 242.507.645 786.541.564 190.560.310 311.173.659 -- 2.235.759.340 1,1- Written Premiums (Net of Reinsurer Share) 698.476.272 256.547.252 790.728.883 213.840.185 365.517.469 -- 2.325.110.061 1,2- Change in Reserve for Unearned Premiums (Net of Reinsurer Shares and Less the Amounts Carried Forward) 6.499.890 (14.039.607) (4.187.319) (23.279.875) (27.082.837) -- (62.089.748) 1,3- Change in Reserve for Unexpired Risks (Net of Reinsurer Share and Less the Amounts Carried Forward) ------(27.260.973) -- (27.260.973) 2- Other Technical Income (Net of Reinsurer Share) 65.238 320.015 2.276.330 93.174 34.052 -- 2.788.809 3- Accrued Salvage and Subrogation Income 5.516.244 -- 5.561.204 918.516 163.266 -- 12.159.230 Technical Income (*) 710.557.644 242.827.660 794.379.098 191.572.000 311.370.977 -- 2.250.707.379

1- Incurred Losses (Net of Reinsurer Share) (579.959.219) (199.455.063) (555.299.019) (98.225.647) (305.140.113) -- (1.738.079.061) 1,1- Claims Paid (Net of Reinsurer Share) (437.438.283) (198.906.106) (529.436.786) (82.711.965) (163.869.132) -- (1.412.362.272) 1,2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward) (142.520.936) (548.957) (25.862.233) (15.513.682) (141.270.981) -- (325.716.789) 2- Change in Other Technical Reserves (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- (3.035.177) (10.577.300) (2.357.559) -- (15.970.036) 3- Operating Expenses (181.604.847) (44.314.719) (186.178.682) (38.744.510) (71.843.471) -- (522.686.229) 4- Other Technical Provisions (10.218.490) (6.594.484) (14.949.198) (5.851.538) (5.608.222) -- (43.221.932) Technical Expense (771.782.556) (250.364.266) (759.462.076) (153.398.995) (384.949.365) -- (2.319.957.258)

Investment Income 263.742.993 263.742.993 Investment Expense (*) (85.160.523) (85.160.523) Other (**) (19.132.198) (19.132.198) Net loss before tax 90.200.393 90.200.393

Income tax (13.685.863) (13.685.863)

Net loss 76.514.530

(*) Investment income transferred to non-technical section from technical section amounting to TL 190.509.410 is not included. (**) Deferred tax income amounting TL 7.396.097 is presented as income tax.

Anadolu Sigorta Annual Report 2015 238 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

6 Tangible assets

Movements in tangible assets in the period from 1 January to 31 December 2015 are presented below: Difference 1 January 2015 Additions Transfers Disposals of valuation 31 December 2015

Cost: Investment properties (Note 7) 36.242.000 59.500 10.584.507 -- 7.457.593 54.343.600 Buildings for own use(*) 6.788.733 304.228 (10.584.507) -- 15.023.946 11.532.400 Machinery and equipment 34.554.018 7.449.593 -- (94.217) -- 41.909.394 Furniture and fixtures 11.775.416 596.516 -- (118.232) -- 12.253.700 Vehicles 1.362.223 -- -- (742.487) -- 619.736 Other tangible assets (including leasehold improvements) 19.401.127 921.528 ------20.322.655 Leased tangible assets 4.166.354 ------4.166.354 114.289.871 9.331.365 -- (954.936) 22.481.539 145.147.839 Accumulated depreciation:: Investment properties (Note 7) ------Buildings for own use 2.041.475 33.579 -- -- (2.041.475) 33.579 Machinery and equipment 25.913.753 3.776.154 -- (66.717) -- 29.623.190 Furniture and fixtures 9.395.902 692.013 -- (111.701) -- 9.976.214 Motor vehicles 773.729 113.404 -- (606.901) -- 280.232 Other tangible assets (including leasehold improvements) 6.853.450 3.352.816 ------10.206.266 Leased tangible assets 4.166.304 50 ------4.166.354 49.144.613 7.968.016 -- (785.319) (2.041.475) 54.285.835

Carrying amounts 65.145.258 90.862.004

(*) Property for own usage is shown as fair value as of third quarter of 2015 and presented as cost value in previous periods.

Company’s property for own use is valuated over fair value as of 2015 year-end and subjected to valuation in this context. Expertise reports regarding this property are prepared by CMB licenced Property Valuation Company in June and July 2015. There is not any hypothec over Company’s property for use

As of 31 December 2015, property for use’s fair value (except VAT) and net book value is as following: Net Book Value Landings and Buildings For Use Expertise value (31 December 2015)

İzmir Regional Office 7.957.400 7.938.011 Adana Regional Office 1.750.000 1.745.694 Lefkoşe Kıbrıs Branch 720.000 716.571 Adana Office 425.000 423.935 Others 680.000 674.610 Total 11.532.400 11.498.821

Anadolu Sigorta Annual Report 2015 239

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Fair value measurement

Fair value of landings and buildings for use is determined by equivalence value method. Fair value measurement of landings and buildings for use those fair value is determined by equivalence value method is reclassified as Level 2.

Movements in tangible assets in the period from 1 January to 31 December 2014 are presented below: Difference 1 January 2014 Additions Disposals of valuation 31 December 2014

Cost: Investment properties (Note 7) 36.242.000 ------36.242.000 Buildings for own use 6.520.974 319.222 (51.463) -- 6.788.733 Machinery and equipment 32.800.391 2.925.379 (1.171.752) -- 34.554.018 Furniture and fixtures 11.331.085 444.331 -- -- 11.775.416 Vehicles 1.285.983 383.160 (306.920) -- 1.362.223 Other tangible assets (including leasehold improvements) 18.262.277 1.138.850 -- -- 19.401.127 Leased tangible assets 4.166.354 ------4.166.354 110.609.064 5.210.942 (1.530.135) -- 114.289.871 Accumulated depreciation: Investment properties (Note 7) -- 139.655 -- (139.655) -- Buildings for own use 1.935.467 131.780 (25.772) -- 2.041.475 Machinery and equipment 23.879.216 3.198.899 (1.164.362) -- 25.913.753 Furniture and fixtures 8.729.811 666.091 -- -- 9.395.902 Motor vehicles 813.465 215.321 (255.057) -- 773.729 Other tangible assets (including leasehold improvements) 3.593.702 3.259.748 -- -- 6.853.450 Leased tangible assets 4.166.105 199 -- -- 4.166.304 43.117.766 7.611.693 (1.445.191) (139.655) 49.144.613

Carrying amounts 67.491.298 65.145.258

There is not any mortgage over tangible assets of the Company as at 31 December 2015 and 31 December 2014.

7 Investment properties

Additions and disposals for investment properties is given “6- Tangible Assets” note in table of current period movement of tangible assets.

Investment property is presented by fair value method as of third quarter of current period on balance sheet and detailed information regarding policy change is given 2.1.6 note Company’s investment property gained TL 7.457.593 amount of value in 2015 in the context of expertise report prepared by independent professional valuation specialists authorized by Capital Markets Board. Rental income on investment properties were obtained TL 1.797.989 (31 December 2014: 1.772.698 TL).

Anadolu Sigorta Annual Report 2015 240 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

As at 31 December 2015 and 2014, details of investment properties and the fair values are as follows Expertise reports regarding these property is prepared by independent professional valuation specialists authorized by CMB in June and August. There is not any hypothec on related property. Expertise and net book value Net book value Net book value Net book value Investment land and buildings (31.12.2013) (31.12.2014) (31.12.2015)

Building/İzmir 15.500.000 15.500.000 26.542.600 Building/Mersin 13.350.000 13.350.000 16.300.000 Building/İzmir 7.392.000 7.392.000 8.670.000 Building/Bursa -- -- 2.000.000 Building/Adana -- -- 600.000 Other 231.000

Expertise and net book value 36.242.000 36.242.000 54.343.600

Fair value measurement

Fair value of investment property is determined by equivalence value method. Fair value measurement of investment property those fair value is determined by equivalence value method is reclassified as Level 2.

8 Intangible assets

Movements in intangible assets in the period from 1 January to 31 December 2015 are presented below: 1 January 2015 Additions Transfers Disposals 31 December 2015

Cost: Goodwill 16.250.000 ------16.250.000 Advances given for intangible assets 1.729.378 11.110.660 (3.404.691) -- 9.435.347 Other intangible assets 88.079.901 1.716.577 3.404.691 -- 93.201.169 106.059.279 12.827.237 -- -- 118.886.516 Accumulated amortization: Other intangible assets 43.804.438 23.190.615 (117.837) -- 66.877.216 43.804.438 23.190.615 (117.837) -- 66.877.216

Carrying amounts 62.254.841 52.009.300

Movements in intangible assets in the period from 1 January to 31 December 2014 are presented below: 1 January 2014 Additions Transfers Disposals 31 December 2014

Cost: Goodwill 16.250.000 ------16.250.000 Advances given for intangible assets 19.296.314 2.853.643 (20.420.579) -- 1.729.378 Other intangible assets 54.879.873 12.779.449 20.420.579 -- 88.079.901 90.426.187 15.633.092 -- -- 106.059.279 Accumulated amortization: Other intangible assets 27.614.154 16.190.284 -- -- 43.804.438 27.614.154 16.190.284 -- -- 43.804.438

Carrying amounts 62.812.033 62.254.841

Anadolu Sigorta Annual Report 2015 241

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

9 Investments in associates 31 December 2015 31 December 2014 Carrying Participation Carrying Participation value rate value rate Anadolu Hayat Emeklilik A.Ş. 156.605.195 %20,0 141.148.361 %20,0 Investments in associates, net 156.605.195 141.148.361

Total financial assets (Note 4.2) 156.605.195 141.148.361

Total Shareholders’ Retained Profit for Audited Name assets equity earnings the period or not Period Anadolu Hayat Emeklilik A.Ş. (consolidated financial 31 December statements) 11.893.996.679 783.025.976 101.289.300 145.882.820 Audited 2015

TL 29.176.564 TL of income is obtained from associates through equity accounted consolidation method (31 December 2014: 20.814.929 TL)

10 Reinsurance assets and liabilities

As at 31 December 2015 and 31 December 2014, outstanding reinsurance assets and liabilities of the Company in accordance with existing reinsurance contracts are as follows: Reinsurance assets 31 December 2015 31 December 2014

Reserve for unearned premiums, ceded (Note 17) 341.649.490 294.929.264 Provision for outstanding claims, ceded (Note 4.2), (Note 17) 493.070.874 229.799.663 Reinsurers share in the provision for ongoing risk (Note 17) 12.046.676 12.307.870 Commission income accrual from reinsurers 159.943 1.250.015 Cash deposited to reinsurance companies (Note 12) 7.840.311 6.739.965 Reinsurers share in the provision for subrogation and salvage receivables 218.531 36.305 Total 854.985.825 545.063.082

There is no impairment losses recognised for reinsurance assets. Reinsurance liabilities 31 December 2015 31 December 2014

Payables to the reinsurers related to premiums written (Note 19) 188.370.605 188.610.275 Deferred commission income (Note 19) 54.739.019 45.447.065 Commission payables to the reinsurers related to written premiums (Note 23) 2.237.886 1.576.728 Cash deposited by reinsurance companies (Note 19) 4.365.775 7.277.133 Total 249.713.285 242.911.201

Anadolu Sigorta Annual Report 2015 242 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Gains and losses recognized in the statement of income in accordance with existing reinsurance contracts are as follows: 31 December 2015 31 December 2014

Premiums ceded during the period (Note 17) (731.404.966) (605.617.965) Reserve for unearned premiums, ceded at the beginning of the period (Note 17) (294.929.264) (290.028.419) Reserve for unearned premiums, ceded at the end of the period (Note 17) 341.649.490 294.929.264 Premiums earned, ceded (Note 17) (684.684.740) (600.717.120)

Claims paid, ceded during the period (Note 17) 256.117.378 140.834.682 Provision for outstanding claims, ceded at the beginning of the period (Note 17) (229.799.663) (135.357.501) Provision for outstanding claims, ceded at the end of the period (Note 17) 493.070.874 229.799.663 Claims incurred, ceded (Note 17) 519.388.589 235.276.844

Commission income accrued from reinsurers during the period (Note 32) 107.002.636 99.029.989 Deferred commission income at the beginning of the period (Note 19) 45.366.287 39.307.119 Deferred commission income at the end of the period (Note 19) (54.739.019) (45.366.287) Commission income earned from reinsurers (Note 32) 97.629.904 92.970.821

Commission debt accrued to reinsurers (2.237.886) (1.576.728) Commission receivable accrued from reinsurers 159.943 1.250.015 Total, net (69.744.190) (272.796.168)

11 Financial assets

As at 31 December 2015 and 31 December 2014, the Company’s financial assets are as follows: 31 December 2015 31 December 2014

Available for sale financial assets 569.121.106 442.140.789 Held to maturity financial assets 15.555.214 73.670.047 Financial assets held for trading 96.232.135 134.054.733 Impairment loss on available for sale financial assets (95.942) (5.797.612) Total 680.812.513 644.067.957

Anadolu Sigorta Annual Report 2015 243

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

As at 31 December 2015 and 31 December 2014, the Company’s available for sale financial assets are as follows: 31 December 2015 Face Fair Carrying Value Cost Value Value

Debt instruments: Government bonds - TL 347.622.931 341.176.972 344.613.885 344.613.885 Private sector bonds - TL 33.660.000 33.339.144 33.948.336 33.948.336 Issued by İş Faktoring A.Ş. (Note 45) 5.800.000 5.479.144 5.522.064 5.522.064 Issued by İş Finansal Kiralama A.Ş. (Note 45) 5.000.000 5.000.000 5.046.154 5.046.154 Issued İş Gayrimenkul Yatırım Ortaklığı A.Ş. (Note 45) 14.360.000 14.360.000 14.749.064 14.749.064 Other 8.500.000 8.500.000 8.631.054 8.631.054 Private sector bonds - USD 17.649.132 17.267.984 17.469.980 17.469.980 Issued by Sınai Kalkınma Bankası A.Ş. (Note 45) 5.698.896 5.807.175 5.843.739 5.843.739 Other 11.950.236 11.460.809 11.626.241 11.626.241 398.932.063 391.784.100 396.032.201 396.032.201

Other non-fixed income financial assets Investment funds 4.341.424.158 57.573.560 57.096.156 57.096.156 Issued by İş Portföy Yönetimi A.Ş. (Note 45) 4.340.847.658 57.346.386 56.859.827 56.859.827 Other 576.500 227.174 236.329 236.329 Equity shares 61.252.064 87.528.612 115.992.749 115.992.749 Impairment loss on equity shares -- -- (95.942) (95.942) 4.402.676.222 145.102.172 172.992.963 172.992.963

Total available for sale financial assets (Note 4.2) 4.801.608.285 536.886.272 569.025.164 569.025.164

Anadolu Sigorta Annual Report 2015 244 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

31 December 2014 Face Fair Carrying Value Cost Value Value

Debt instruments: Government bonds - TL 261.907.366 260.630.673 271.603.704 271.603.704 Private sector bonds - TL 19.560.000 19.561.015 19.993.767 19.993.767 Issued by İş Gayrimenkul Yatırım Ortaklığı A.Ş (Note 45) 14.360.000 14.360.000 14.713.703 14.713.703 Issued byİş Finansal Kiralama (Note 45) 5.000.000 5.000.000 5.078.714 5.078.714 Other 200.000 201.015 201.350 201.350 281.467.366 280.191.688 291.597.471 291.597.471

Other non-fixed income financial assets: Investment funds 3.714.742.000 43.165.318 43.655.648 43.655.648 Founded by İş Portföy Yönetimi A.Ş. (Note 45) 3.714.742.000 43.165.318 43.655.648 43.655.648 Equity shares 56.198.951 82.023.168 106.887.670 106.887.670 Impairment loss on equity shares -- -- (5.797.612) (5.797.612) 3.770.940.951 125.188.486 144.745.706 144.745.706

Total available for sale financial assets (Note 4.2) 4.052.408.317 405.380.174 436.343.177 436.343.177

As at 31 December 2014 and 31 December 2013, the Company’s financial assets held for trading are as follows: 31 December 2015 Face Fair Carrying Value Cost Value Value

Debt instruments: Government bonds - TL 900.000 905.152 898.362 898.362 Reverse repo receivables 11.884.791 11.888.027 11.888.027 900.000 12.789.943 12.786.389 12.786.389

Other non-fixed income financial assets: Investment funds 3.804.277.022 63.837.754 80.791.072 80.791.072 Founded by İş Portföy Yönetimi A.Ş. (Note 45) 3.804.186.891 56.033.754 69.584.268 69.584.268 Founded by İşbank AG (Note 45) 90.131 7.804.000 11.206.804 11.206.804 Equity shares 2.137.783 3.664.047 2.654.674 2.654.674 3.806.414.805 67.501.801 83.445.746 83.445.746

Total financial assets held for trading (Note 4.2) 3.807.314.805 80.291.744 96.232.135 96.232.135

Anadolu Sigorta Annual Report 2015 245

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

31 December 2014 Face Fair Carrying Value Cost Value Value

Debt instruments: Government bonds - TL 900.000 907.616 900.017 900.017 Reverse repo receivables -- 5.885.733 5.887.281 5.887.281 900.000 6.793.349 6.787.298 6.787.298

Other non-fixed income financial assets: Investment funds 7.393.158.949 106.660.295 124.230.603 124.230.603 Founded by İş Bankası (Note 45) 120.605.000 9.009.287 15.972.195 15.972.195 Founded by İş Portföy Yönetimi A.Ş. (Note 45) 7.272.463.818 89.847.008 95.938.343 95.938.343 Founded by İşbank AG (Note 45) 90.131 7.804.000 12.320.065 12.320.065 Equity shares 2.287.783 4.085.272 3.036.832 3.036.832 7.395.446.732 110.745.567 127.267.435 127.267.435

Total financial assets held for trading (Note 4.2) 7.396.346.732 117.538.916 134.054.733 134.054.733

As at 31 December 2015 and 31 December 2014, the Company’s financial assets held to maturity are as follows: 31 December 2015 Face Fair Carrying Value Cost Value Value

Debt instruments: Government bonds - TL 14.866.200 14.890.092 14.936.855 15.555.214 Total financial assets held to maturity 14.866.200 14.890.092 14.936.855 15.555.214

31 December 2014 Face Fair Carrying Value Cost Value Value

Debt instruments: Government bonds - TL 55.937.785 57.921.026 74.133.508 73.670.047 Total financial assets held to maturity 55.937.785 57.921.026 74.133.508 73.670.047

All debt instruments (financial assets held to maturity) presented above are publicly traded in active markets and the fair value of financial assets are classified in the 1st Level.

As at 31 December 2015, equity shares classified as available for sale financial assets with a carrying amount of TL 1.035.070 are not publicly traded (31 December 2014: 3.914.450 TL).

There is no debt security issued during the period or issued before and paid during the period by the Company.

There is no financial asset that is overdue but not impaired among the Company’s financial investments portfolio. As at 31 December 2015, TL 95.942 of impairment loss is recognised for equity shares classified as available for sale in the accompanying unconsolidated financial statements (31 December 2014: 5.797.612 TL).

Anadolu Sigorta Annual Report 2015 246 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Value increases in financial assets including equity shares classified as available for sale financial assets for the last 3 years (including tax effects): Change in value increase/ Total increase Year (decrease) in value

2015 (6.021.160) 29.179.139 2014 23.745.552 35.200.299 2013 (23.174.020) 11.454.747

Movements of the financial assets during the period are presented below: 31 December 2015 Available (*) Trading for sale Held to maturity Total Balance at the beginning of the period 128.167.452 436.343.177 73.670.047 638.180.676 Acquisitions during the period 10.000.000 599.793.354 -- 609.793.354 Disposals (sale and redemption) (58.662.297) (497.664.595) (61.626.214) (617.953.106) Change in the fair value of financial assets (Note 15) 4.838.953 24.897.206 -- 29.736.159 Change in amortized cost of the financial assets -- -- 3.511.381 3.511.381 Bonus shares acquired -- 5.656.022 -- 5.656.022 Balance at the end of the period 84.344.108 569.025.164 15.555.214 668.924.486

(*) Amount of reverse repo to TL 11.888.027 (31 December 2014: 5.887.281 TL) are excluded.

31 December 2014 Available (*) Trading for sale Held to maturity Total Balance at the beginning of the period 59.183.393 450.876.549 94.501.549 604.561.491 Acquisitions during the period 90.450.000 450.725.656 -- 541.175.656 Disposals (sale and redemption) (30.910.832) (494.361.599) (18.745.842) (544.018.273) Change in the fair value of financial assets (Note 15) 9.444.891 24.347.100 -- 33.791.991 Change in amortized cost of the financial assets -- -- (2.085.660) (2.085.660) Bonus shares acquired -- 4.755.471 -- 4.755.471 Balance at the end of the period 128.167.452 436.343.177 73.670.047 638.180.676

(*) Amount of reverse repo to TL 5.887.281 (31 December 2013: 26.447.255 TL) are excluded.

Anadolu Sigorta Annual Report 2015 247

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Financial assets blocked in favour of the Turkish Treasury as a guarantee for the insurance activities are as follows. 31 December 2015 Face Value Cost Fair Value Carrying Value

Held to maturity financial assets (Note 17) 14.866.200 14.890.092 14.936.855 15.555.214 Total 14.866.200 14.890.092 14.936.855 15.555.214

31 December 2014 Face Value Cost Fair Value Carrying Value

Available for sale financial assets (Note 17) 10.000.000 9.801.651 10.145.962 10.145.962 Held to maturity financial assets (Note 17) 55.937.785 57.921.026 74.133.508 73.670.047 Total 65.937.785 67.722.677 84.279.470 83.816.009

12 Loans and receivables 31 December 2015 31 December 2014

Receivables from main operations (Note 4.2) 928.282.683 797.454.113 Other receivables (Note 4.2) 12.586.556 5.321.041 Income prepaid expenses (Note 4.2) 5.577.825 2.733.430 Other current assets (Note 4.2) 257.186 169.734 Total 946.704.250 805.678.318

Short-term receivables 944.496.269 805.678.318 Long and medium-term receivables 2.207.981 -- Total 946.704.250 805.678.318

As at 31 December 2015 and 31 December 2014, the details of the receivables from main operations are as follows: 31 December 2015 31 December 2014

Receivables from agencies, brokers and intermediaries 690.773.097 624.433.183 Salvage and subrogation receivables 49.626.517 30.648.790 Receivables from policyholders 34.014.724 33.242.694 Long term receivable which is bank guarantee and three months credit card 94.861.111 63.044.183 Total receivables from insurance operations, net 869.275.449 751.368.850

Receivables from reinsurance operations 59.472.101 47.022.365 Cash deposited to insurance and reinsurance companies (Note 4.2), (Note 10) 7.840.311 6.739.965 Provisions for receivables from insurance operations - subrogation receivables (8.305.178) (7.677.067) Doubtful receivables from insurance operations - subrogation receivables 123.623.771 86.645.265 Provisions for doubtful receivables from insurance operations - subrogation receivables (Note 4.2) (123.623.771) (86.645.265) Doubtful receivables from main operations - premium receivables 27.134.464 26.735.242 Provisions for doubtful receivables from main operations - premium receivables (Note 4.2) (27.134.464) (26.735.242) Receivables from main operations 928.282.683 797.454.113

Anadolu Sigorta Annual Report 2015 248 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

As at 31 December 2015 and 31 December 2014, the details of mortgages and other guarantees for the Company’s receivables are presented below: 31 December 2015 31 December 2014

Mortgage notes 70.149.267 71.597.067 Letters of guarantees 79.133.111 71.825.655 Other guarantees 17.322.671 15.188.186 Government bonds and treasury bills 2.951.479 2.976.479 Total 169.556.528 161.587.387

Provisions for overdue receivables and receivables not due yet

a) Receivables under legal or administrative follow up (due): TL 27.134.464 (31 December 2014: 26.735.242 TL).

b) Provision for subrogation receivables under legal or administrative follow up: TL 131.928.949 (31 December 2014: 94.322.332 TL).

The Company’s receivables from and payables to shareholders, associates and subsidiaries are detailed in note 45 - Related party transactions

The details of the receivables and payables denominated in foreign currencies and foreign currency rates used for the translation are presented in Note 4.2- Financial risk management.

13 Derivative financial instruments

As at 31 December 2014, the Company does not have derivative financial instruments (31 December 2013: None).

14 Cash and cash equivalents

As at 31 December 2014 and 31 December 2013, cash and cash equivalents are as follows: 31 December 2015 31 December 2014 At the end of At the beginning At the end of At the beginning the period of the period the period of the period

Cash on hand 18.864 37.347 37.347 49.256 Bank deposits 1.937.834.876 1.356.733.446 1.356.733.446 901.838.577 Cheques given and payment orders (125.585) (171.519) (171.519) (1.025.984) Bank guaranteed credit card receivables with maturities less than three months 367.176.057 249.449.440 249.449.440 252.850.367 Cash and cash equivalents in the balance sheet 2.304.904.212 1.606.048.714 1.606.048.714 1.153.712.216

Bank deposits - blocked (*) (Note 17) (340.277.623) (223.171.410) (223.171.410) (151.508.238) Time deposits with maturities longer than 3 months (287.914.280) (335.567.238) (335.567.238) (174.210.161) Interest accruals on banks deposits (6.510.620) (3.580.842) (3.580.842) (2.481.010) Cash and cash equivalents in the statement of cash flows 1.670.201.689 1.043.729.224 1.043.729.224 825.512.807

(*) As at 31 December 2015 and 31 December 2014 cash collateral kept in favour of the Turkish Treasury as a guarantee for the insurance activities.

Anadolu Sigorta Annual Report 2015 249

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

As at 31 December 2015 and 31 December 2014, bank deposits are further analyzed as follows: 31 December 2015 31 December 2014

Foreign currency denominated bank deposits - time deposits 177.329.471 119.637.331 - demand deposits 7.431.915 3.883.616

Bank deposits in Turkish Lira - time deposits 1.750.916.018 1.230.888.040 - demand deposits 2.157.472 2.324.459 Bank deposits 1.937.834.876 1.356.733.446

15 Equity

Paid in capital

The shareholder having direct or indirect control over the shares of the Company is İş Bankası Group.

The Company does not increase its share capital in the current period.

As at 31 December 2015, the issued share capital of the Company is TL 500.000.000 (31 December 2014: TL 500.000.000) The Company unregistered Group 150 A shares which each of value is TL 1,5 as of 11 April 2013 in which approved in Main Article of the Company dated in 11 April 2013. the share capital of the Company consists of 50.000.000.000 (31 December 2014: 50.000.000.000 shares) issued shares with TL 1 nominal value each.

Other capital reserves

In accordance with tax legislation, 75% of profits from sales of participation shares and real states included in the assets of companies is exempt from corporate tax provided that it is classified under a special fund for full five years. The exempt gains cannot be transferred to another account other than a capital increase or cannot be withdrawn from the entity for five years. As at 31 December 2015, tax exempt gain from participation shares and real estate sale in 2010 amounting to TL 8.081.516, and in 2011 amounting to TL 80.025, and in 2013 amounting to TL 647.763 is classified as other capital reserves. Also in 2014 amounting TL 920.272 reclassified to other capital reserves as a gain on sale of fixed assets and equity. 31 December 2015 31 December 2014

Other capital reserves at the beginning of the period 8.809.304 8.161.541 Transfer from profit 920.272 647.763 Use property revaluation fund (Note: 6) 16.157.827 -- Other capital reserves at the end of the period 25.887.403 8.809.304

Anadolu Sigorta Annual Report 2015 250 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Legal reserves

The legal reserves consist of first and second legal reserves in accordance with the Turkish Commercial Code. The first legal reserve is appropriated out of the statutory profits at the rate of 5%, until the total reserve reaches a maximum of 20% of the entity’s share capital. The second legal reserve is appropriated at the rate of 10% of all distributions in excess of 5% of the entity’s share capital. The first and second legal reserves are not available for distribution unless they exceed 50% of the share capital, but may be used to absorb losses in the event that the general reserve is exhausted

The movements of legal reserves are as follows: 31 December 2015 31 December 2014

Legal reserves at the beginning of the period 46.999.839 45.293.051 Transfer from profit 5.415.325 1.706.788 Legal reserves at the end of the period 52.415.164 46.999.839

Extraordinary reserves

The movements of extraordinary reserves are presented below: 31 December 2015 31 December 2014

Extraordinary reserves at the beginning of the period 20.962.756 19.723.583 Transfer from profit 39.782.801 1.239.173 Extraordinary reserves at the end of the period 60.745.557 20.962.756

Statutory reserves

The movements of statutory reserves are presented below: 31 December 2015 31 December 2014

Statutory reserves at the beginning of the period 7.710.040 7.161.457 Transfer from profit 4.078.589 548.583 Statutory reserves at the end of the period 11.788.629 7.710.040

Valuation of financial assets

Movement of fair value reserves of available for sale financial assets and associates are presented below: 31 December 2015 31 December 2014 Valuation differences at the beginning of the period 35.200.299 11.454.747 Fair value changes during the period (6.367.019) 24.347.100 Subsidiaries consolidated according to the equity method (2.137.909) 6.313.825 Net gains transferred to the statement of income 617.378 (3.609.723) Deferred tax effect 1.866.390 (3.305.650) Fair value reserves at the end of the period 29.179.139 35.200.299

Anadolu Sigorta Annual Report 2015 251

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Other profit reserves

In accordance with the 4 July 2007 dated and 2007/3 numbered Compliance Circular issued by the Turkish Treasury, it was stated that the companies would not further provide earthquake provision for the year 2007. However, it was also stated that earthquake provisions provided in previous periods (earthquake provision in the financial statements as at 31 December 2006) should be transferred to the reserve accounts under equity in accordance with the 5th Temporary Article of the Insurance Law. The companies had to transfer total amount of provisions, including earthquake provisions reserved as at 31 December 2006 and related gains obtained from investment of these amounts, to the account called as “549.01 - transferred earthquake provisions” which would be opened as at 1 September 2007 within Uniform Chart of Account and the reserves amount should not be subject to dividend distribution or should not be transferred to other accounts.

Accordingly, the Company initially transferred total provisions amounting to TL 96.036.157 including earthquake provisions reserved as at 31 December 2006 and related gains obtained from investment of this amount, to the reserve accounts under equity, TL 51.846.111 of this amount is used for capital increase in Accordance with IAS 19, to add the amount of actuarial loss and net profit of TL (1.042.950) defined remeasure net profit debt and 225.007 for consolidation process the amount of new balance is TL 43.391.620.

Not subject to profit distribution

In Accordance terms of tax legislation %75 portion of the gains from sales real estate and subsidiaries are exempt from corporate tax on condition that it has kept in a special fund account at least five years. Exempt gains cannot be transferred to another account except to add capital or in any way cannot be withdrawn from the business in five years.

In the direction of sector announcement made by Treasury dated 27 October, 2008 and numbered 2008/41, the Company classified the gain on sale from the land in real estate amounting to TL 2.541.499 (31 December 2014: TL 920.272) as of 31 December 2015.

16 Other reserves and equity component of DPF

As at 31 December 2014 and 31 December 2013, change in fair values of available-for-sale financial assets which is presented as “valuation of financial assets” and earthquake provisions provided in the previous years presented under “other profit reserves” are explained in detail in Note 15 - Equity above. As at 31 December 2015 and 31 December 2014, the Company does not hold any insurance or investment contracts which contain a DPF.

Anadolu Sigorta Annual Report 2015 252 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

17 Insurance contract liabilities and reinsurance assets

Estimation of the ultimate payment for the outstanding claims is one of the most important accounting assumptions of the Company. Estimation of the insurance contract liabilities contains several ambiguities by nature. The Company makes calculation of the related insurance technical provisions accordance with the Insurance Legislation and reflects them into financial statements as mentioned in Note 2 - Summary of significant accounting policies.

As at 31 December 2015 and 31 December 2014, technical reserves of the Company are as follows: 31 December 2015 31 December 2014

Reserve for unearned premiums, gross 1.848.552.863 1.491.252.563 Reserve for unearned premiums, ceded (Note 10) (341.649.490) (294.929.264) Reserve for unearned premiums, SSI share (54.975.565) (36.692.792) Reserves for unearned premiums, net 1.451.927.808 1.159.630.507

Provision for outstanding claims, gross 1.878.978.416 1.243.987.764 Provision for outstanding claims, ceded (Note 10) (493.070.874) (229.799.663) Provision for outstanding claims, net 1.385.907.542 1.014.188.101

Gross of provision unexpired risk reserve 18.531.890 52.687.216 Reinsurer’s share of the provision for unexpired risk (12.046.676) (12.307.870) Provision unexpired risk reserve, net 6.485.214 40.379.346

Equalization provision, net (*) 81.545.727 60.549.876 General provision, net 7.702.761 7.702.761 Other technical provisions, net 89.248.488 68.252.637

Total technical provisions, net 2.933.569.052 2.282.450.591

Short-term 2.844.320.564 2.214.197.954 Medium and long-term 89.248.488 68.252.637 Total technical provisions, net 2.933.569.052 2.282.450.591

(*) It contains a provision which is reflected in the all prior financial statements amounting TL 7.702.761 due to the possible impact of adverse developments that may occur by company’s management.

Anadolu Sigorta Annual Report 2015 253

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

As at 31 December 2015 and 31 December 2014, movements of the insurance liabilities and related reinsurance assets are presented below: 31 December 2015 Reserve for unearned premiums Gross Ceded SSI share Net

Reserve for unearned premiums at the beginning of the period 1.491.252.563 (294.929.264) (36.692.792) 1.159.630.507 Premiums written during the period 3.610.673.887 (731.404.966) (99.511.467) 2.779.757.454 Premiums earned during the period (3.253.373.587) 684.684.740 81.228.694 (2.487.460.153) Reserve for unearned premiums at the end of the period 1.848.552.863 (341.649.490) (54.975.565) 1.451.927.808 31 December 2014 Reserve for unearned premiums Gross Ceded SSI share Net

Reserve for unearned premiums at the beginning of the period 1.422.324.312 (290.028.419) (34.755.134) 1.097.540.759 Premiums written during the period 3.004.830.066 (605.617.965) (74.102.040) 2.325.110.061 Premiums earned during the period (2.935.901.815) 600.717.120 72.164.382 (2.263.020.313) Reserve for unearned premiums at the end of the period 1.491.252.563 (294.929.264) (36.692.792) 1.159.630.507

31 December 2015 Provision for outstanding claims Gross Ceded Net

Provision for outstanding claims at the beginning of the period 1.243.987.764 (229.799.663) 1.014.188.101 Claims reported during the period and changes in the estimations of provisions for outstanding claims provided at the beginning of the period 2.576.139.416 (519.388.589) 2.056.750.827 Claims paid during the period (1.941.148.764) 256.117.378 (1.685.031.386) Provision for outstanding claims at the end of the period 1.878.978.416 (493.070.874) 1.385.907.542

31 December 2014 Provision for outstanding claims Gross Ceded Net

Provision for outstanding claims at the beginning of the period 823.828.813 (135.357.501) 688.471.312 Claims reported during the period and changes in the estimations of provisions for outstanding claims provided at the beginning of the period 1.973.355.905 (235.276.844) 1.738.079.061 Claims paid during the period (1.553.196.954) 140.834.682 (1.412.362.272) Provision for outstanding claims at the end of the period 1.243.987.764 (229.799.663) 1.014.188.101

Anadolu Sigorta Annual Report 2015 254 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Claim development tables

The basic assumption used in the estimation of provisions for outstanding claims is the Company’s past experience on claim developments. Judgment is used to assess the extent to which external factors such as judicial decisions and government legislation affect the estimates. The sensitivity of certain assumptions like legislative change, uncertainty in the estimation process, etc., is not possible to quantify. Furthermore, because of delays that arise between occurrence of a claim and its subsequent notification and eventual settlement, the outstanding claim provisions are not known with certainty at the reporting date. Consequently, the ultimate liabilities will vary as a result of subsequent developments. Differences resulting from reassessment of the ultimate liabilities are recognized in subsequent financial statements.

Development of insurance liabilities enables to measure the performance of the Company in estimation of its ultimate claim losses. The amounts presented on the top of the below tables show the changes in estimations of the Company for the claims in subsequent years after claim years. The amounts presented on the below of the below tables give the reconciliation of total liabilities with provision for outstanding claims presented in the accompanying financial statements. 31 December 2015 Claim year 2011 2012 2013 2014 2015 Total Claim year 1.076.294.828 1.495.831.758 1.222.446.719 1.650.596.281 2.275.471.459 7.720.641.045 1 year later 1.144.862.138 1.543.473.873 1.292.816.917 1.798.922.951 -- 5.780.075.879 2 years later 1.190.218.111 1.609.766.674 1.343.700.980 -- -- 4.143.685.765 3 years later 1.239.664.600 1.683.416.144 ------2.923.080.744 4 years later 1.284.766.945 ------1.284.766.945 Current estimate of cumulative claims 1.284.766.945 1.683.416.144 1.343.700.980 1.798.922.951 2.275.471.459 8.386.278.479 Cumulative payments to date 1.166.344.699 1.453.964.968 1.174.348.650 1.482.441.065 1.448.180.559 6.725.279.941 Liability recognized in the financial statements 118.422.246 229.451.176 169.352.330 316.481.886 827.290.900 1.660.998.538 Liability recognized before 2010 ------217.979.878 Total gross outstanding claims provision presented in the financial statements at the end of the period 1.878.978.416

31 December 2014 Claim year 2010 2011 2012 2013 2014 Total Claim year 856.910.386 1.075.581.281 1.495.474.317 1.229.263.704 1.717.748.856 6.374.978.544 1 year later 867.349.763 1.144.103.263 1.543.105.072 1.300.026.322 -- 4.854.584.420 2 years later 878.025.588 1.189.429.253 1.609.382.065 -- -- 3.676.836.906 3 years later 900.866.545 1.238.843.054 ------2.139.709.599 4 years later 928.050.817 ------928.050.817 Current estimate of cumulative claims 928.050.817 1.238.843.054 1.609.382.065 1.300.026.322 1.717.748.856 6.794.051.114 Cumulative payments to date 861.604.436 1.131.547.961 1.398.954.819 1.116.056.443 1.189.365.685 5.697.529.344 Liability recognized in the financial statements 66.446.381 107.295.093 210.427.246 183.969.879 528.383.171 1.096.521.770 Liability recognized before 2009 ------147.465.994 Total gross outstanding claims provision presented in the financial statements at the end of the period 1.243.987.764

Anadolu Sigorta Annual Report 2015 255

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

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 31 December 2015 Should be Carrying placed (**) Placed (*) amount Non-life: Bank deposits (Note 14) 339.186.373 340.277.623 Financial assets (*) (Note 11) 15.150.590 15.555.214 Total 286.658.129 354.336.963 355.832.837

31 December 2014 Should be Carrying placed (**) Placed (*) amount Non-life: Bank deposits (Note 14) 222.697.267 223.171.410 Financial assets (*) (Note 11) 84.612.376 83.816.009 Total 282.343.518 307.309.643 306.987.419

(*) “As at 31 December 2015 and 31 December 2014, government bonds and treasury bills are measured at daily official prices announced by the Central Bank of Turkey in accordance with the 6th Article of “Circular Related to the Financial Structure of Insurance, Reinsurance, and Private Pension Companies. (**) “According to the 7th article of the “Circular Related to the Financial Structure of Insurance, Reinsurance, and Private Pension Companies” which regulates necessary guarantee amount, minimum guarantee fund for capital adequacy calculation period will be 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 Private Pension Companies”, companies must prepare their capital adequacy tables twice in a financial year at June and December periods and must sent capital adequacy tables to the Turkish Treasury Department within two months. Since the amounts that should be placed as of 31 December 2015 (31 December 2014) will be through the calculated amounts as of 30 June 2015 (30 June 2014), the settled amounts as of June is presented as “should be placed” amounts.

Company’s number of life insurance policies, additions, disposals during the period and the related mathematical reserves

None.

Distribution of new life insurance policyholders in terms of numbers and gross and net premiums as individual or group during the period

None.

Distribution of mathematical reserves for life insurance policyholders who left the Company’s portfolio as individual or group during the period

None.

Anadolu Sigorta Annual Report 2015 256 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Deferred commission expenses

The Company capitalizes commissions paid to the intermediaries related to policy production under short-term and long-term prepaid expenses. As at 31 December 2015, short-term prepaid expenses amounting to TL 275.073.222 (31 December 2014: TL 205.884.923) consist of deferred commission expenses amounting to TL 249.521.695 (31 December 2014: TL 200.624.439) and other prepaid expenses amounting to TL 5.260.484 (31 December 2013: TL 5.905.318). The amount of commission expense TL 25.551.527 (31 December 2014: TL 5.260.484). Long-term prepaid expenses amounting TL 5.221.880 (31 December 2013: TL 3.562.038) are composed of other prepaid expenses.

As at 31 December 2015 and 31 December 2014 the movements of deferred commission expenses are presented below: 31 December 2015 31 December 2014

Deferred commission expenses at the beginning of the period 200.624.439 190.775.088 Commissions accrued during the period 526.399.728 429.400.515 Commissions expensed during the period (*) (477.502.472) (419.551.164) Deferred commission expenses at the end of the period 249.521.695 200.624.439

(*) Commission expense are included as a reinsurance commissions.

Individual pension funds

None.

18 Investment contract liabilities

None.

19 Trade and other payables and deferred income 31 December 2015 31 December 2014

Payables from main operations 339.189.344 302.045.983 Financial payables 210.669.647 -- Other payables 60.481.800 47.561.333 Deferred income and expense accruals (Note 10) 54.739.019 45.447.065 Taxes and funds payable and other similar obligations 37.087.955 27.386.135 Personnel liabilities 92.190 -- Total 702.259.955 422.440.516

Short-term liabilities 702.259.955 422.440.516 Long-term liabilities -- -- Total 702.259.955 422.440.516

As at 31 December 2015, other payables amounting to TL 60.481.800 (31 December 2014: TL 47.561.333) consist of treatment cost payables to SSI amounting to TL 27.017.129 (31 December 2014: TL 16.375.984), payables to Tarsim and DASK and outsourced benefits and services amounting to TL 30.287.110 (31 December 2014: TL 28.268.772) and deposits and guarantees received amounting to TL 3.177.561 (31 December 2014: TL 2.916.577).

Anadolu Sigorta Annual Report 2015 257

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Payables arising from main operations of the Company as at 31 December 2015 and 31 December 2014 are as follows: 31 December 2015 31 December 2014

Payables to reinsurance companies (Note 10) 188.370.605 188.610.275 Payables to agencies, brokers and intermediaries 37.795.326 30.052.668 Total payables arising from insurance operations 226.165.931 218.662.943

Payables arising from other operating activities 108.657.638 76.105.907 Cash deposited by insurance and reinsurance companies (Note 10) 4.365.775 7.277.133 Payables arising from main operations 339.189.344 302.045.983

Corporate tax liabilities and prepaid taxes are disclosed below: 31 December 2015 31 December 2014

Corporate tax liabilities 24.168.626 22.930.452 Taxes paid during the period (1.769.959) (21.081.960) Corporate tax assets, net 22.398.667 1.848.492

Total amount of investment incentives which will be benefited in current and forthcoming periods

None.

20 Financial liabilities

As of 31 December 2015, the Company has financial liabilities which is occurred repurchase agreement TL 210.669.647. (31 December 2014: None).

21 Deferred tax

As at 31 December 2014 and 31 December 2013, deferred tax assets and liabilities are attributable to the following: 31 December 2015 31 December 2014 Deferred tax Deferred tax assets/(liabilities) assets/(liabilities)

Other provisions 5.375.706 3.588.669 Equalization provision 12.101.836 8.907.829 Reserve for unexpired risks 1.297.043 8.075.869 Provisions for employee termination benefits and unused vacations 3.091.670 2.812.254 Provision for subrogation receivables 1.661.036 1.535.413 Difference in depreciation methods on tangible and intangible assets between tax regulations and the Reporting Standards (2.460.037) (2.192.013) Discount of receivables and payables (56.576) (88.941) Valuation differences in financial assets (1.746.888) (1.547.916) Subrogation receivables from third parties (3.147.915) (965.401) Real estate valuation (2.886.550) (1.235.850) Deferred tax assets, net 13.229.325 18.889.913

As at 31 December 2015 the company has not deductible tax losses. (31 December 2014: None).

Anadolu Sigorta Annual Report 2015 258 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Movement of deferred tax assets table: 31 December 2015 31 December 2014

Opening balance at 1 January 18.889.913 16.191.701 Recognised in profit or loss (Note 35) (6.509.894) 7.396.097 Recognised in equity (Note 15) 849.306 (4.697.885) Deferred tax asset 13.229.325 18.889.913

22 Retirement benefit obligations

Employees of the Company are the members of “Anadolu Anonim Pension Fund” which is established in accordance with the temporary Article 20 of the Social Security Act No: 506. As per the temporary sub article No: 20 of the Article 73 of the Social Security Law, pension funds should be transferred to the Social Security Institution within three years after the publication of the a aforementioned Law published in the Official Gazette numbered 26870 and dated 8 May 2008. The related three-year transfer period has been prolonged for two years by the Cabinet decision, the three-year period was extended to the 8 May 2015.

23 April 2015 dated Official Gazette is changed as following; insurance and reinsurance companies, chambers of commerce, industry chambers, stock exchanges or which constitutes their union personnel and associates of funds “The Council is authorized to determine the date of transfer within the scope of article 20 th of the law, 506 banks, insurance and reinsurance companies, chambers of commerce, industry chambers, stock exchanges or which constitutes their union personnel and associates of funds to the social security institution. The date of the transfer of the first paragraph of Article 4 of this law pension fund contributors as are considered insured.

According to this arrangement the bank within the scope of Act 506, article No.20, insurance and reinsurance companies, chambers of commerce, industry chambers, stock exchanges or associations which constitute their union personnel and associates of funds are required to be transferred until 08.05.2015 to Social Security Administration, authority to determine the date of transfer is given the Council of Ministers thus the transfer of the funds has been postponed to an unknown date

23 Other liabilities and provisions

As at 31 December 2015 and 31 December 2014; the details of the provisions for other risks are as follows: 31 December 2015 31 December 2014

Provision for employee termination benefits 15.244.930 12.628.115 Provision for unused vacation pay liability 1.492.709 1.433.153 Total provision for other risks 16.737.639 14.061.268

31 December 2015 31 December 2014

Provision for agency award 9.759.024 7.182.519 Provision for guarantee account 9.125.000 3.356.650 Provision for employee bonus 8.500.000 7.000.000 Provision for tax assessment (Not 42, (Not 47) 3.084.516 15.489.301 Expense provision for gauge commission (Not 10) 2.237.886 1.576.728 Invoice accrual 370.234 -- Prepaid income and expense accruals 33.076.660 34.605.198

Anadolu Sigorta Annual Report 2015 259

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

Movements of provision for employee termination benefits during the period are presented below: 31 December 2015 31 December 2014

Provision at the beginning of the period 12.628.115 11.720.142 Interest cost (Note 47) 1.288.802 1.196.136 Service cost (Note 47) 1.085.271 930.599 Payments made during the period (Note 47) (1.060.945) (436.838) Actuarial difference (Note 15) 1.303.687 (781.924) Provision at the end of the period 15.244.930 12.628.115

24 Net insurance premium

Net insurance premium revenue is presented in detailed in the accompanying consolidated statement of income.

25 Fee revenue

None.

26 Investment income

Investment income is presented in “Note 4.2 - Financial Risk Management”.

27 Net income accrual on financial assets

Net realized gains on financial assets are presented in “Note 4.2 - Financial Risk Management.

28 Assets held at fair value through profit or loss

Presented in “Note 4.2 - Financial Risk Management”.

29 Insurance rights and claims 31 December 2015 31 December 2014 Claims paid, net off reinsurers’ share 1.685.031.386 1.412.362.272 Changes in reserve for unearned premiums, net off reinsurers’ share 292.297.301 62.089.748 Changes in provision for outstanding claims, net off reinsurers’ share 371.719.441 325.716.789 Change in equalization provisions 20.995.851 15.970.036 Changes in reserve for unexpired risks, net off reinsurers’ share (33.894.132) 27.260.973 Total 2.336.149.847 1.843.399.818

30 Investment contract benefits

None.

31 Other expenses

The allocation of the expenses with respect to their nature or function is presented in Note 32 - Expenses by nature below.

Anadolu Sigorta Annual Report 2015 260 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

32 Operating expenses

As of 31 December 2015 and 31 December 2014 the operating expenses are disclosed as follows: 31 December 2015 31 December 2014

Commission expenses 434.055.605 385.141.391 Commissions to intermediaries accrued during the period 481.698.669 390.315.759 Change in deferred commission expenses (47.643.064) (5.174.368) Employee benefit expenses (Note 33) 113.296.033 104.693.751 Administration expenses 82.642.008 69.230.043 Advertising and marketing expenses 19.727.757 13.987.613 Outsourced benefits and services 9.858.726 8.250.751 Commission income from reinsurers (Note 10) (54.256.056) (58.617.320) Commission income from reinsurers accrued during the period (Note 10) (62.301.577) (60.026.011) Change in deferred commission income (Note 10) 8.045.521 1.408.691 Total 605.324.073 522.686.229

33 Employee benefits expenses 31 December 2015 31 December 2014

Wages and salaries 84.272.162 76.090.749 Employer’s share 19.392.154 15.758.608 Other 9.631.717 12.844.394 Total 113.296.033 104.693.751

34 Financial costs

Finance costs of the period are presented in “Note 4.2 - Financial Risk Management” above. There are no finance costs classified in production costs or capitalized on tangible assets. All financial costs are directly recognised as expense in the consolidated statement of income.

35 Income tax

Income tax expense in the accompanying consolidated financial statements is as follows: 31 December 2015 31 December 2014 Current tax expense provision: Corporate tax provision (1.769.959) (21.081.960) Deferred taxes: Origination and reversal of temporary differences (6.509.894) 7.396.097 Total income tax expense recognised in profit or loss (8.279.853) (13.685.863)

Anadolu Sigorta Annual Report 2015 261

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

In the end of accounting period 31 December 2015 and 31 December 2014, A reconciliation of tax expense applicable to profit from operating activities before income tax at the statutory income tax rate to income tax expense at the Company’s effective income tax rate is as follows: 31 December 2015 31 December 2014 Profit before tax 83.262.659 Tax rate (%) 90.200.393 Tax rate (%) Taxes on income per statutory tax rate 16.652.532 20,00 18.040.079 20,00 Tax exempt income (9.642.616) (11,58) (4.426.282) (4,91) Non-deductible expenses 1.269.937 1,53 72.066 0,08 Total tax income recognized in profit or loss 8.279.853 9,94 13.685.863 15,17

36 Net foreign exchange gains

Net foreign exchange gains are presented in “Note 4.2 - Financial Risk Management” above.

37 Earnings per share

Earnings per share are calculated by dividing net profit of the period to the weighted average number of shares. 31 December 2015 31 December 2014

Net profit/(loss) for the period 74.982.806 76.514.530 Weighted average number of shares 50.000.000.000 50.000.000.000 Earnings/(loss) per share (TL) 0,0015 0,0015

38 Dividends per share

There is a paid gross cash dividend which 0.042 shares with nominal value of TL 1 percent to shareholders. (Total cash dividend of TL 21.000.000). (31 December 2014: None).

39 Cash generated from operations

The cash flows from operating activities are presented in the accompanying consolidated statement of cash flows.

40 Convertible bonds

None.

41 Redeemable preference shares

None.

Anadolu Sigorta Annual Report 2015 262 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

42 Risks

In the normal course of its operations, the Company is exposed to legal disputes, claims and challenges, which mainly stem from its insurance operations. The necessary income/expense accruals for the revocable cases against/on behalf of the Company are provided under provision for outstanding claims in the accompanying consolidated financial statements.

As at 31 December 2015, total amount of the claims that the Company face is TL 925.745.000 in gross (31 December 2014: TL 1.040.392.000). The Company provided provision for outstanding claims in the consolidated financial statements by considering collateral amounts.

As at 31 December 2015, ongoing law suits prosecuted by the Company against the third parties amounting TL 233.643.000 (31 December 2014: TL 194.259.000).

Anadolu Anonim Türk Sigorta Şirketi Mensupları Dayanışma Vakfı” was established by Anadolu Anonim Türk Sigorta Şirketi in accordance with the Turkish Commercial and Civil Laws which is examined by Tax Audit Committee inspectors due to the Company payments what are fulfilled obligations to the foundation owing to deed of the foundation and the related act. As a result of this investigation, an examination was reported for periods of 2007, 2008, 2009, 2010 and 2011.

The final legal process which is related the period of 2007, 2008 is expected to result in the Company’s favor and the amount of provision TL 12.768.684 which was published on the Official Gazette dated 12 November 2014. December 2013 and after the condition of the provision is evaluated later ongoing development of the legal process. There is a provision amount of TL3.084.516 (31 December 2014: 15.489.301) related with this process. Furthermore, the Company has paid a total of TL 4.229.629 pursuant to the tax inspection in line with the above description (31 December 2014: none) was recognized as the prospect will get back. It is recognized accrued income in the current period.

As a result of investigation conducted by the Ministry of Finance Tax Audit Board, tax penalty which is amount of TL 2,1 million (actual tax), and TL 3,1 million tax penalty is announced by reason to tax salvage operations not subject to the banking and insurance transactions. The amount of TL 10 million tax, TL 15 million tax penalty has been modified for the period of 2010, 2011, and 2012 in 6 February 2015. The company do not make provision for this tax penalty because of considering the implementation of these financial statements in accordance with legislation.

43 Commitments

The details of the guarantees that are given by the Company for the operations in non-life branches are presented in Note 17.

The future aggregate minimum lease payments under operating leases for properties rented for use of head office and regional offices and motor vehicles rented for sales and marketing departments are as follows: 31 December 2015 31 December 2014 Within one year 3.392.007 7.517.871 Between one to five years 1.918.527 3.476.491 Total of minimum lease payments 5.310.534 10.994.362

44 Business combinations

None.

Anadolu Sigorta Annual Report 2015 263

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

45 Related party transactions

The ultimate controlling party of the Company is İş Bankası Group and the groups having direct control over İş Bankası Group and the affiliates and associates of İş Bankası Group are defined as related parties of the Company.

The related party balances as of 31 December 2015 and 31 December 2014 are as follows: 31 December 2015 31 December 2014

İş Bankası - cash at banks 914.658.774 533.547.278 Banks 914.658.774 533.547.278

Bonds issued by İş Gayrimenkul Yatırım Ortaklığı A.Ş (Note 11) 14.749.064 14.713.703 Bonds issued by Is Leasing (Note 11) 5.046.154 5.078.714 Bond issued by İş Faktoring A.Ş (Note 11) 5.522.064 -- Bond issued by Türkiye Sınai Kalkınma Bankası (Note 11) 5.843.739 -- Investment funds founded by İş Portföy Yönetimi A.Ş. (Note 11) 126.444.095 155.566.186 Investment funds founded by İşbank GmbH (Note 11) 11.206.804 12.320.065 Financial assets 168.811.920 187.678.668

İş Bankası - receivables stem from premiums written via the Bank 106.339.774 91.802.800 Receivables stems from premiums written via Şişecam Sigorta Aracılık Hiz. A.Ş. 5.621.566 2.924.252 Trakya Cam Sanayii A.Ş. 47.472 167.971 Milli Reasürans T.A.Ş. - receivables from reinsurance operations 40.850 1.416 Anadolu Hayat Emeklilik A.Ş. - premium receivables 586.490 490.293 Receivables from main operations 112.636.152 95.386.732

Milli Reasürans T.A.Ş.- payables from reinsurance operations 9.387.546 11.953.520 İş Bankası - commission payables 9.603.965 7.082.553 Şişecam Sigorta Aracılık Hizmetleri A.Ş. - commission payables 349.731 23.437 Payables from main operations 19.341.242 19.059.510

No guarantees have been taken against receivables from related parties.

There are no doubtful receivables from shareholders, subsidiaries and joint ventures.

No guarantees, commitments, guarantee letters, advances and endorsements given in favour of shareholders, associates and subsidiaries.

Anadolu Sigorta Annual Report 2015 264 Other Matters and Financial Statements 31 December 2015 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

The Company accrued TL 53.855.115 TL premium (31 December 2013: 59.098.301 TL) for related party policies. The transactions with related parties during the year ended 31 December 2015 and 2014 are as follows: 31 December 2015 31 December 2014

İş Bankası - premiums written via the Bank 410.699.700 328.891.626 Premiums written via Şişecam Sigorta Aracılık Hizmetleri A.Ş. 17.600.899 41.316.107 Anadolu Hayat - premiums written 2.805.903 2.214.450 Milli Reasürans T.A.Ş. 510.277 440.421 Premiums written 431.616.779 372.862.604

Milli Reasürans T.A.Ş (105.383.566) (93.328.833) Premiums written, ceded (105.383.566) (93.328.833)

İş Bankası - interest income from deposits 61.509.302 55.732.060 İş Portföy Yönetimi - income from investment funds 1.784.202 9.488.742 İş Bankası - income from bonds 599.000 11.828.210 İş Gayrimenkul Yatırım Ortaklığı - income from bonds 1.545.076 560.304 İş Leasing- income from bonds 896.366 -- İş Yatırım Menkul Değerler - income from investment funds 864.204 -- Investment income 67.198.150 77.609.316

Türkiye İş Bankası A.Ş - commission expense (54.279.283) (39.896.267) Şişecam Sigorta Aracılık Hizmetleri A.Ş. - commission expense (3.520.602) (8.674.189) Milli Reasürans T.A.Ş- commission expense 23.600.904 21.497.125 Operating expenses, net (34.198.981) (27.073.331)

Anadolu Hayat ve Emeklilik A.Ş. - Rent income 170.435 163.212 Other incomes 170.435 163.212

İş Merkezleri Yönetim ve İşletim A.Ş. - building service cost (3.212.713) (2.628.651) İş Portföy Yönetimi - management commission (690.905) (632.924) Anadolu Anonim Türk Sigorta Şirketi Memurları Emekli Sandığı Vakfı-rent expense (2.790.764) (2.606.606) Other expenses (6.694.382) (5.868.1811)

46 Events after the reporting date

Subsequent events are disclosed in Note 1.10 Events after the reporting date.

Anadolu Sigorta Annual Report 2015 265

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2015 (Currency: Turkish Lira (TL)

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

They are presented in the related notes above.

“Payables to employees and receivables from employees presented under accounts, “other receivables” and “other short or long term payables”, and which have balance more than 1% of the total assets

None.

Subrogation recorded in “Off-Balance Sheet Accounts”

None.

Real rights on immovable and their values

None.

Explanatory note for the amounts and nature of previous years’ income and losses

None.

For the years ended 31 December 2015 and 2014, details of discount and provision expenses are as follows: Provision expenses 31 December 2015 31 December 2014

Provision expense for unused vacation (Note 23) (59.556) (245.663) Provision expense for employee termination benefits (Note 23) (1.313.128) (1.689.897) Provision expense for doubtful receivables (Note4.2) (37.726.711) (11.622.774) Tax assessment expense (Not 23) (363.899) (7.873.752) Other provision income/(expense) 13.916.825 1.071.426 Total (25.546.469) (20.360.660)

Rediscount expenses 31 December 2015 31 December 2014

Rediscount income 18.199.693 12.636.796 Rediscount expense (16.741.102) (15.997.077) Total of rediscounts 1.458.591 (3.360.281)

Anadolu Sigorta Annual Report 2015 266 Other Matters and Financial Statements An Assessment of Financial Standing, Profitability and Solvency

An Assessment of Financial Standing, Profitability and Solvency

Premium production Premium Production (TL thousand) Anadolu Sigorta registered TL 3,610,674 thousand in premium production in 2015. The greatest contributors to premium production were motor vehicles liability,

motor vehicles, fire and natural disasters, 3,610,674 and illness/health branches. 3,004,830 2,749,704 A portion in the amount of TL 731,405 thousand of premiums were ceded through reinsurance in 2015, thus significantly reducing retained risk in branches likely to present high claim settlements in 13 14 15 particular, such as fire, watercraft and general losses. Claims Paid Claims Retention Ratio Loss/Premium Ratio Solvency and solvency performance (TL thousand) (TL thousand) (%)

Having adopted it as a duty to make

claim payments fully and timely to its 81.6 77.7

policyholders, Anadolu Sigorta attained 73.7 1,685,031 this goal once again in 2015 drawing 1,941,149 on its solid asset structure and balanced 1,412,362 liquidity ratio. A big part of the risk was 1,553,197

ceded through reinsurance contracts made 1,146,966 1,249,199 in branches under which high-amount coverage is provided such as fire and general losses, thus making it possible for the Company’s asset structure to remain 13 14 15 13 14 15 13 14 15 unaffected by claims paid in big amounts.

In 2014, claims paid amounted to Gross Profit/Loss Gross Profit-Loss/Gross TL 1,941,149 thousand. A significant (TL thousand) Premium Production (%) portion of the claims paid arose, in order, from losses in motor vehicles liability, 3.1 motor vehicles, Illness/health, and fire and 92,782

natural disasters. Combined loss/premium 2.5 ratio was 81.6%, 3.9 points lower than its

2014 value. 67,462 65,576 1.8 Assessment of profitability

The company booked a profit of TL 65,576 thousand in 2015. Return on equity and return on assets stood at 5.3% and 1.3%, 13 14 15 13 14 15 respectively.

Anadolu Sigorta Annual Report 2015 Other Matters and Financial Statements 267 Information on Financial Structure

Information on Financial Structure

Assets performance Total Assets (TL thousand) As of year-end 2015, total assets reached TL 4,887,545 thousand, up 28.5% year-on. With a share of 61.1% representing the largest item in total assets, total cash and financial assets grew 32.7% year-on to 4,887,545 TL 2,985,717 thousand, giving confidence

with respect to payment of possible losses 3,804,993

to policyholders with this large volume. 3,252,770

Capital volume

The nominal capital of Anadolu Sigorta was 13 14 15 TL 500,000 thousand as at year-end 2015.

Nominal Capital (TL thousand) 500,000 500,000 500,000

13 14 15

Anadolu Sigorta Annual Report 2015 268 Other Matters and Financial Statements Summary Financial Information for the Last 5 Years Including the Reporting Period Information for Investors

Summary Financial Information for the Last 5 Years Including the Reporting Period

(TL thousand) 2015 2014 2013 2012 2011 Gross Premiums 3,610,674 3,004,830 2,749,704 2,234,633 1,926,090 Technical Division Balance 103,634 121,260 100,878 -72,500 -10,068 Investment Income 368,013 258,928 186,213 154,411 150,280 Investment Expenses -382,414 -275,670 -187,216 -154,271 -141,443 Other Income and Expenses -23,656 -11,736 -32,414 8,378 5,301 Period Gross Income (Loss) 65,576 92,782 67,462 -63,981 4,069 Taxation -1,770 -21,082 - - - Period Net Income (Loss) 63,806 71,700 67,462 -63,981 4,069 Shareholders’ Equity 1,201,893 1,051,435 913,016 756,361 705,124 Total Assets 4,887,545 3,804,993 3,252,770 2,498,198 2,209,016

Information for Investors

Capital

Registered capital: TL 700,000,000 Paid-in capital: TL 500,000,000

Shares

The company’s capital is divided into 50,000,000,000 shares each with a value of TL 0.01 and entitling their holders to one vote. The company’s free float rate is 48%.

Stock Exchange

The company’s shares are traded on Borsa İstanbul Stars Market under the ticker symbol ANSGR and are included in BIST Corporate Governance, BIST Financial, BIST Insurance, BIST All, BİST All-100, BIST Stars indices.

Annual General Assembly Meeting

Based on the decision of the Board of Directors of Anadolu Anonim Türk Sigorta Şirketi, the company’s 2015 Annual General Assembly Meeting will be convened on 24 March 2016, Thursday, at 10:30 hours at the company’s headquarters.

Investor Relations Unit

Rüzgarlıbahçe Mahallesi Kavak Sokak No: 31 Kavacık 34805 İSTANBUL Tel: 0850 744 0 744 E-mail: [email protected] Website: http://www.anadolusigorta.com.tr/en/investor-relations

Anadolu Sigorta Website Investor Relations Page

Anadolu Sigorta Annual Report 2015 Head Office

Address: Rüzgarlıbahçe Mah. Kavak Sok. No: 31 34805 Kavacık/İSTANBUL Tel: +90 850 744 0 744 Fax: +90 850 744 0 745 E-mail: [email protected]

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