2014 eport - anadolu sigorta · authority (“poa”) 70 an assessment of the board directors by...

2014Annual Report

2 / Anadolu Sigorta Annual Report 2014

1 General Information 2 Corporate Profile 3 Our Vision, Our Mission, Our Corporate Values 4 Message from the Chairman 6 Message from the CEO12 The Organization, Capital and Shareholder Structure of the Company 12 Organization Chart 13 Capital and Shareholder Structure13 Disclosures on Preferred Shares14 Governing Body, Executives and the Number of Employees 14 Board of Directors 16 Declarations of Independence by Independent Members of the Board of Directors 18 Executive Committee 20 Heads of Units Under the Internal Systems 20 Average Number of Employees by Categories During the Reporting Period 21 Financial Affairs and Actuarial Unit Managers 21 Financial Rights Provided to the Members of the Governing Body and Executives 21 Financial Rights 21 Other Means24 Research and Development Activities of the Company 24 Research and Development Pertaining to New Services and Business Activities26 Company Activities and Major Developments in Activities 26 2014-2015 Primary Goals, Policies 27 Information on the Company’s Investments 28 Internal Control System and Internal Audit Activities 28 An Assessment of 2014 by the Board of Inspectors 29 Internal Control System and an Assessment by the Governing Body

30 Information on Associates 30 Repurchased Own Shares by the Company 30 Disclosures Concerning Special Audit and Public Audit 30 Lawsuits Filed Against the Company and Potential Results 30 Disclosure of Administrative or Judicial Sanctions Against the Company and/or Board of Directors Members 30 Assessment of Prior Period Targets and General Assembly Decisions 30 Expenses Incurred in Relation to Donations and Grants and Social Responsibility Projects 31 Commitment to Social Responsibility33 The Company’s Transactions with the Risk Group36 Financial Status 36 Summary Report by the Board of Directors 38 Financial Information and Indicators 40 2014 Economic Overview 44 An Overview of the World Insurance Industry 47 Developments and Changes in Legislation 50 An Assessment of Anadolu Sigorta in 2014 58 Assessment of the Company Capital and Comments 59 Profit Distribution Policy62 Risks and an Assessment by the Governing Body 62 Risk Management Policies Adhered to by Types of Risks 65 Activities of the Committee of Early Determination of Risk

67 Other Matters and Financial Statements 67 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”) 70 An Assessment of the Board Directors by the Corporate Governance Committee 72 Corporate Governance Principles Compliance Report 85 Committees Operating Within Anadolu Sigorta and an Assessment by the Board of Directors 89 An Assessment of the Operation of the Independent Audit Firm in 2014 Activity Period via the Audit Committee 90 Human Resources Practices at Anadolu Sigorta 92 Agenda of the Annual General Assembly Meeting 93 Dividend Distribution Proposal 94 2014 Profit Distribution Table 95 2014 Annual Report Compliance Statement 96 Detailed Income Statement 98 31 December 2014 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon 179 31 December 2014 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon 180 Information on Consolidated Subsidiaries 262 AnAssessmentofFinancıalStanding, Profitability and Solvency 263 Information on Financial Structure 264 Summary Financial Information for the Last 5 Years Including the Reporting Period

Anadolu Anonim Türk Sigorta Şirketi2014 Annual Report.

Corporate TitleAnadoluAnonimTürkSigortaŞirketi

Websitewww.anadolusigorta.com.tr

Anadolu Sigorta Trade Registration No: 4593/557

Directory

Head OfficeAddress:RüzgarlıbahçeMah.KavakSok.No:3134805Kavacık/İSTANBULTel: +90 850 744 0 744Fax: +90 850 744 0 745E-mail: [email protected]

Corporate Insurance DepartmentAddress:RüzgarlıbahçeMah.KavakSok.No:3134805Kavacık/İSTANBULTel: +90 850 744 0 744Fax: +90 850 744 0 745E-mail: [email protected]

Motor Claims DepartmentAddress: RüzgarlıbahçeMah.KavakSok.No:3134805Kavacık/İSTANBULTel: +90 850 744 0 744Fax: +90 850 744 0 182E-mail: [email protected]

İstanbul Regional BranchAddress: Beytem Plaza Büyükdere Cad. 20/B 34394Şişli/İSTANBULTel: +90 850 744 0 744Fax: +90 850 744 0 753E-mail: [email protected]

Kadıköy Regional BranchAddress: K2PlazaSarıkanaryaSok.No:1434742Kozyatağı/İSTANBULTel: +90 850 744 0 744Fax: +90 850 744 0 754E-mail: [email protected]

Mediterranean Regional BranchAddress: KonyaaltıCad.No:7807050 ANTALYATel: +90 850 744 0 744Fax: +90 850 744 0 752E-mail: [email protected]

Western Anatolia Regional BranchAddress: Atatürk Cad. No: 92 AnadoluSigortaBinası235210İZMİRTel: +90 850 744 0 744Fax: +90 850 744 0 747E-mail: [email protected]

Middle Black Sea Regional BranchAddress:KaleMah.ZiyaPaşaSok.No:4Kat:755030İlkadım/SAMSUNTel: +90 850 744 0 744Fax: +90 850 744 0 750E-mail: [email protected]

Southern Anatolia Regional BranchAddress:ReşatbeyMah.62029.Sok.16/A01120 Seyhan/ADANATel: +90 850 744 0 744Fax: +90 850 744 0 746E-mail: [email protected]

Central Anatolia Regional BranchAddress: Cinnah Cad. Farabi Sok. No: 43 06690Kavaklıdere/ANKARATel: +90 850 744 0 744Fax: +90 850 744 0 749E-mail: [email protected]

Black Sea Regional BranchAddress: KarşıyakaMah.4NoluSok.No:47961040TRABZONTel: +90 850 744 0 744Fax: +90 850 744 0 751E-mail: [email protected]

Marmara Regional BranchAddress:OdunlukMah.,AkademiCad.,ZenoİşMerkezi,ABlokNo10/5Kat:1Daire:No:6-1016110 BURSATel: +90 850 744 0 744Fax: +90 850 744 0 748E-mail: [email protected]

Turkish Republic of Northern Cyprus BranchAddress: Memduh Asaf Sok. 8 KöşklüçiftlikLefkoşa/TRNCTel: +90 392 227 95 95Fax: +90 392 227 95 96E-mail: [email protected]

General Information

Content

1925-1935National Capital

+ Action and Motivation

Tanzimat (Reform) Era-1925First Examples

of Insurance 1935-1950System Settles +

Grows Strong

It had been just one year since the establishment of the Republic. Having emerged as a modern Republic from a 13-year

war period it had entered as a dissolving empire, Turkey was about to undertake heavy-duty industry initiatives, although

lackingthecapabilitytomanufa

cturesomuchasaneedleuntil

then.Theconstructionofthefi

rstshipyardunitinGölcükwas

followedbytheestablishmento

ftheStateRailways,andthenby

thefirstpassengeraircrafttrip

betweenİstanbulandAnkara.

Thesameyearsawtheincorpor

ationof“TürkiyeİşBankası”(İş

bank),thefirstnationalbank,w

hatwouldbethedriving

engine of the nation’s economic development. That completed the first phase of the pursuit of a national identity in banking

and insurance. Mainly conducted through marine transportation, foreign trade was carried out under the supervision of

insurance companies dominated by foreign capital, which set an obstacle to the incorporation of national insurance business.

Exporters joined in the desire for the nationalization of the insurance business, since they had the prevailing opinion that,

otherwise, profits would not be achievable in view of the monies paid to foreign insurance companies. In the light of these

developments,oneyearafterth

efoundationofİşbank,“Anadol

uAnonimTürkSigortaŞirketi”,

thefirstnationalinsurance

companyoftheRepublicofTur

key,wasincorporatedattheini

tiativeofMustafaKemalAtatür

k.

In the Ottoman State before Tanzimat (Reform) Era, legislation

or rulings about insurance were non-existent. Having turned

westward with the Tanzimat Era, the Ottoman State began

introducing reforms in various fields. While religious scholars

defined insurance as a special covenant separate from sharia,

it was first addressed in a regulation published in 1860 as

an addendum to the Statute of Commerce. Regarded as a

foreigner’s activity because of the capitulations that dominated

the Ottoman territory since the 1500s, insurance remained

beyond governmental supervision. In 1889, foreign insurance

companies wishing to operate in Ottoman territory were required

to be registered by getting a license. In 1916, when insurance

companies were formally registering, syndicates were illegal;

so the name of the Syndicate was changed to the Association of

Insurance Companies Operating in Turkey. In those days, the word

‘syndicate’ was objectionable, as it was usually understood to mean

‘labor union’. Following the 1908 strikes that shook the country,

syndication was forbidden by the Law of Corporations. At the time,

the Association had 81 members, all of them foreign insurance

companies.TheAssociationpha

selasteduntil1925,whenİşban

k

tackled the insurance issue after the proclamation of the Republic.

The establishment of Anadolu Sigorta served as an encouragement for other

insurance companies that were to be founded. With the establishment of Güven

Türk Sigorta company and with Anadolu Sigorta completely severing its ties with

İttihadıMilliŞirketi,aninsuran

cecompanythatwaspartofthe

UnionGroup,

the portfolio was shared among national, semi-national and foreign companies

in 1939. One of the most important developments in the insurance industry

between 1936 and the start of World War II was the founding of Ankara Türk

SigortaŞirketibyAnadoluSigor

ta.Thenegativedevelopmentsd

uringWWIItook

their toll on the insurance industry as well, and the Turkish insurance business

had to cover the perils of the war after its onset. However, no reinsurers in

Europe extended support against these perils under wartime circumstances, and

sufficient coverage could not be obtained. Since London and Paris markets were

out of reach during the war years, Anadolu Sigorta turned to the Italian market

for reinsurance. This distressed period that lasted until the end of the war had

been replaced with economic comfort toward late 1940s. Anadolu Sigorta had

provided one third of the cargo insurance for the aid materials shipped from the

U.S.A. under the Marshall Plan.

• Inception of investments, laying the foundations of the national insurance industry...

• Incorporation of Anadolu Sigorta, early Republic era…

• The birth of insurance business in Turkey…

• The period of non-regulated operation for

foreign capital…

• Increasing number of national insurance companies…

• The public institution portfolio handled by Anadolu Sigorta

almost in its entirety…

1925-1935National Capital

+ Action and Motivation

1935-1950System Settles +

Grows Strong

1960-1980Raising Awareness +

Growth Expectations

Political developments of 1960, the new constitution and social movements added momentum to urbanization moves and migration, and

populationsofbigcitiesbegani

ncreasinggradually.1.8million

in1960,İstanbul’spopulationh

adsurpassed3millionin1970

.Withthe

increased urban population, the insurance industry was hopeful that the society would gain increased insurance and future awareness.

However, despite all efforts, total premiums collected by the middle of the 1970s had barely amounted to 2 billion liras. Apparently, it

would take longer than expected for the creation of future awareness; with periodic economic issues added, the anticipated growth

did not materialize. On the other hand, premiums collected by insurers in other parts of the world reached large sums, and as such,

constituted one of the largest funds for countries’ investment programs. Come the ‘70s, and the industry was substantially dominated

by domestic companies as a result of the “import substitution” policy pursued. The funds collected under the insurance were scarce, and

investments were not crucial. In this period, Anadolu Sigorta employed methods aimed at increasing productivity and saving labor, and

succeeded in maintaining its stable growth in spite of everything. From the first half of the 1960s, Anadolu Sigorta began actively using

the facilities offered by technology thanks to a cooperation with the International Business Machines (IBM) company. Anadolu Sigorta

made an especially dramatic leap forward between 1965 and 1974: total net premiums of approximately 40 million liras in 1965 went up

to 225 million liras in 1974. In other words, the company grew to six times its size in 10 years.

• A planned phase

• Attempts at urbanization, lack of future awareness, non-realization of growth

• Anadolu Sigorta strives to increase productivity and achieve growth.

1950-1960New Era + Restructuring

Politics started to affect all segments of the population when Turkey entered the multi- party period in 1946. From the 1950s, there was a rapid

rise in the number of insurance policies. Since there was no regulation about the state funding of political parties, they entered the elections

by their own means, and obtained funds by asking for support mainly from banks and insurance companies. The donation Anadolu Sigorta

made to political parties during election time had become customary. However, these donations incorporated the risk of pulling corporations

into politics. As a matter of fact, Anadolu Sigorta had difficulties over this during the 1950s. After the military coup of 27 May 1960, the Board

of Directors was discharged. The National Unity Committee, the group of military officers that ruled Turkey following the coup, appointed

a new Board of Directors. In this period when the industry dealt with supervision and placement issues, certain regulations aligned with

contemporary norms were introduced in the area of insurance. The first law concerning the supervision of insurance companies was enacted

aftertheratificationoftheCom

mercialCode.Anotherhighligh

tofthatperiodwasBaşakinsur

ancecompany,whichwasestabl

ishedbyZiraat

Bank,oneofthetwomainshare

holdersofthecompanyandto

whichAnadoluSigortahadlong

beenprovidinginsuranceservi

ce.ZiraatBank

discontinued acting as an agent of Anadolu Sigorta from the beginning of 1960.

• The supervision issue of the industry, multi-party era, arbitrary donation and lending policies…

• The stability policy of Anadolu Sigorta…


1980-2000Competition + Technological

Advancements and Global Initiatives

2000-2014Future Investments

+ Global Trends Monitored

The decrees of 24 January 1980 and the military coup on the following 12 September marked the onset of social and financial restructuring

in Turkey. Political and social movements, acts of anarchy, and continuously rising inflation caused industrial risks to multiply during 1980,

especially in the first three quarters. At the same time, despite the absence of training or advertising activities, the public’s insurance awareness

was growing, especially in the motor vehicle, household goods, and building fire branches, again due to anarchy. Meanwhile, some companies

were unable to pay their debts, and some others were having difficulty finding collateral abroad. Some foreign reinsurers, especially the

renowned ones, were withdrawing from the Turkish market because they could not collect their premium receivables, and even when they could,

they actually collected less due to the devaluation of the Turkish lira. Despite these problems, Anadolu Sigorta’s premium production reached TL

2,208 million in 1980, which represented 85% growth over the previous year. The free market economy that had been flourishing in Turkey by

the middle of the ‘80s had brought about higher premiums. The 1990s saw the transition from compulsory insurance tariff rates to autonomous

rates. Competition in the insurance market was at its fiercest ever when Anadolu Sigorta inaugurated a series of moves. In 1993, it became

the first Turkish insurance company to set up an international operation with Günay Anadolu Sigorta in Azerbaijan. In the same year, Anadolu

Sigorta confirmed its market leadership by becoming the first company to top TL 1 trillion in premium production. The company achieved

another national first in 1993, when its shares were quoted on the Istanbul Stock Exchange. From the first half of the 1990s, computers began

to be used widely in the insurance business, as in the banking industry; in 1997, all agencies were able to connect to the central data processing

system on-line and in real-time, and offer instant service to customers, thus making optimum use of the information processing technology. The

vitality of the system was manifested in the massive earthquake of 17 August 1999. In the aftermath of this disaster of epic proportions, the

losses of the insured were compensated quickly as a result of 24/7 uninterrupted service offered by Anadolu Sigorta employees and agents.

One year into the millennium, Anadolu Sigorta booked TL 21 trillion in net profit. In the insurance sector that was

the scene to price competition rather than contention on the basis of service and service quality, Anadolu Sigorta’s

shareholders’ equity had expanded by 111.6%. Including the profits, the company’s equity value was approximately

USD 80 million. Although the industry was adversely affected by the economic crises of 2001 and 2008, Anadolu

Sigorta, being a modern insurance company boasting world standards and undergoing constant transformation,

had always been in a better position than its competition, owing to its investments into profitability. Continuously

observing change through new projects and new structures so as to preserve its advantageous position, Anadolu

Sigorta, in this period of returned foreign dominance, formulated important strategies in order to reach a financially

stronger position and to avoid international dependence. Having allocated millions of dollars for its C2C (Closer

to Customer) project for this purpose, Anadolu Sigorta sustained its leadership within national borders, while it

constantly endeavored to further improve its international standards. The first insurance company of the Republic

of Turkey, Anadolu Sigorta successfully carries on in its voyage that it has set out on with the objective of instilling

the concept of insurance security instead of fatalism in the Turkish public, and pursues the goal of having an Anadolu

Sigorta policy in every household in Turkey by 2025 that marks its centenary.

• A period characterized by neoliberal economic policies, technical progress, new products, foreign

capital domination of the industry…

• Anadolu Sigorta sharpens its competitive strength, places emphasis on technical profit and sustains

its leadership.

•World standards captured, constant transformation

• Anadolu Sigorta’s planned future investments intended to secure modern norms,

the goal of having an Anadolu Sigorta policy in each household on the company’s

centenary...


General Information / Corporate Profile

Corporate Profile

In 2014, Anadolu Sigorta expanded its total premium production by 9.3% year-on-year to TL 3,005 million and controlled a 13.2% share of the overall market among non-life companies. Anadolu Sigorta pursues its operations via nine regional branches across the nation and one branch in the Turkish Republic of Northern Cyprus. The company had 1,050 employees on its payroll as at 31 December 2014.

Anadolu Sigorta registered its highest premium production in the motor vehicles branch with TL 824million, followed by motor vehicle liability with TL 780 million in 2014. Trailing these two branches, in order, were fire and natural disasters with TL 503 million, illness/health with TL 280 million, general losses with TL 239 million and general liability with TL 105 million.

Turkey’s first national insurance company and the pioneer in the sector that will celebrate its 90th anniversary in 2015, Anadolu Sigorta will keep contributing to the advancement of the insurance business in Turkey in the light of its mission and vision. Anadolu Sigorta will remain the insurance company taken as benchmark in the sector and further build on its solid position.



Our Vision

• To make Anadolu Sigorta the insurance brand preferred by everyone who needs insurance.

• To achieve a strength that makes it a reference point in the worldwide insurance industry as well.

Our Mission

In keeping with the deeply-rooted, pioneering, honest, and solid corporate values of Anadolu Sigorta to:

• Lead the sector,

• Help create a broad public awareness of insurance in Turkey,

• Implement a customer-focused approach to service,

• Increase our financial strength to international standards,

• Enhance the value of our company.

A Company Entrenched In History: • It was founded in accordance with

the instructions given by Mustafa KemalAtatürk.

• It is Turkey’s first national insurance company.

• It has a powerful corporate structure built on its knowledge of insurance accumulated through the years.

Pioneership:• Pioneer in creating product;

• Pioneer in service;

• Pioneer in technology;

• With its self-renewing ability preserves its pioneering position;

• It plays a pioneering role in social responsibility.

Integrity: • It has ethical merits;

• It fulfills its promises definitely;

• It inheres in transparency as principle;

• It never abandons human values.

Powerful Structure: • It has a stable financial power;

• It has an extended and efficient service network;

• It has a sophisticated and high qualified human source;

• It gains power from the synergy createdbyİşbank.

General Information / Our Vision, Our Mission, Our Corporate Values

Our Vision, Our Mission, Our Corporate Values

Our Corporate Values



The low growth performance of the world economy passed on to 2015.Loss of pace sustained by developing economies such as China and India, combined with the growth issues in developed economies, escalated the concerns about the world economy in 2014. Although the global economy is anticipated to pick-up, even if slightly, in the second half of 2014 and early 2015, international institutions make the observation that the damage the global crisis did to economies reduced potential growth, and the world embarked upon a period of lower growth rates.

Turkey, despite decelerated growth rate, maintains steadfast growth. The negative impact Turkey’s international risk perception suffered due to the developments in geopolitically problematic regions coupled with the outcomes of the Fed’s tapering on capital movements, and our country found herself amid rapid hot money outflow at the onset of 2014. With the picture further aggravated by the fluctuating exchange rates and the depreciated Turkish lira, the Central Bank of the Republic of Turkey’s (CBRT) rate hike decisions, and the ensuing narrowing of credit and credit card installment facilities in an effort to reduce the current deficit, the national economy was dominated

by a stagnant atmosphere throughout the year. Decelerated domestic demand and increased exchange rates allowed net exports to lend a positive contribution to growth after a long time, and the current deficit to decline significantly. However, inflation surged, as unemployment climbed once again to two-digit numbers.

In the Turkey Regular Economic Note released in December 2014, the World Bank revised 2014 growth estimate downwards from 3.5% to 3.1%, whereas 2015 projection was kept unchanged at 3.5%. The Note reports that Turkey’s growth prospects in the medium term depend on the recovery of private investment and a resumption

General Information / Message from the Chairman

Message from the Chairman

Anadolu Sigorta has been carrying on with its strong

growth since 1925, always remaining loyal to the

deep-rooted corporate values and ethical code of

conduct that it has embraced.


of productivity growth, which relies on the implementation of structural reforms.

It is common knowledge that the Turkish economy is unable to attain growth without producing current deficit, and is fragile in the face of interrupted capital inflows due to its inherent imbalances. In a conjuncture of decreased global risk appetite, the financing of growth will constitute a highly critical agenda item for the Turkish economy, and it will only be enabled with the implementation of structural reforms in a number of aspects starting with the economy and ranging from education to justice. Within this context, it is crucial to capitalize on the opportunity offered by the oil prices that are projected to continue at low levels with respect to the enforcement of the “Priority Transformation Programs” prescribed in the tenth development plan.

The Fed’s decisions, geopolitical developments, the course of oil prices, and domestic political agenda may lead to volatile periods in economy in 2015.The conjuncture described above indicates at potential significant deviations during the year in various economic parameters, including credit rates, loan utilization, housing and car sales, which are interrelated with the production performance of the insurance industry. Yet, in general, the insurance sector is expected to perform more positively in 2015 than it did in 2014. Indeed, the contraction that inflicted the automotive, construction and other

associated sectors throughout 2014, which was driven by domestic events, increased interest rates, higher special consumption tax rates and the restrictions the BRSA imposed on credit transactions, began slowing down late in the year.

With her dynamic economy, young population and expanding middle class, Turkey presents very attractive opportunities for the insurance industry.Looking at a remarkable window of opportunity, the Turkish insurance industry will be able to claim its deserved position in the world insurance business, provided that rapid steps are taken. The positive developments that have been going on for a rather long time both in terms of applicable legislation and implementation are appreciated, as they facilitate more powerful performance of the Turkish insurance industry and the attainment of 2023 targets.

The pioneer and grande école of the industryAnadolu Sigorta is the first national insurance company in Turkey and it is the pioneer of the industry. Our company has been carrying on with its strong growth since 1925, always remaining loyal to the deep-rooted corporate values and ethical code of conduct that it has embraced.

In a fashion befitting our position in the sector and the role we have taken on, we have been, and are, working to inculcate broad populations with the notion that insurance is a major necessity and also a part of life.

We touch our customers at 5,000 points across 81 provinces of Turkeyviaİşbankbranchesandouragencies. We are striving to present our policyholders with the best, innovative services. In addition, we are targeting to produce added value from alternative delivery channels, making maximum use of the facilities technology has to offer.

Anadolu Sigorta employees, who are united in the deep-seated and solid İşbankcultureandwhoarecommittedto providing a better and safer future to our people based on the faith they have in the job they are doing, will keep working to win together with our country.

We would like to thank our policyholders, all our employees and shareholders, with whom we are hoping to share many more and better days.

Sincerely,

Caner ÇimenbiçerChairman of the Board of Directors

General Information / Message from the Chairman


Our sector experienced the slowest growth of the past five years. According to data published by the Insurance Association of Turkey, premium production of all insurance companies combined rose by 7.3% from TL 24.2 billion in 2013 to TL 25.9 billion in 2014. Of this amount, TL 22.7 billion was generated on non-life insurance and TL 3.3 billion on life insurance. On the basis of real growth that is calculated net of annual inflation, however, the sector narrowed down by 0.8%.

Having succeeded in attaining two-digit growth rates since 2009 and having captured a high level in 2013 with a nominal growth of 22.2% and a real growth of 13.8%, the industry experienced the slowest growth of the past five years in 2014. The rise in premium production in non-life insurance was 9.1% in nominal terms and 0.9% in real terms.

The primary factor that led to the limited growth in the insurance industry was the 11.6% decline in automotive sales, which resulted from the restriction the economy administration imposed upon consumer loans in an attempt to increase savings rate. This, of course, negatively reflected on premium production in the motor own damage and motor third party liability branches, which are the driving engines of the industry.

The insurance industry generated the highest premium production on motor third party liability branch last year, booking TL 5.5 billion. The production in the motor own damage branch amounted to TL 5.1 billion. Together, motor own damage and motor third party liability branches were accountable for 41% of premium production.

Fire and natural disasters branch ranked third with a production figure of TL 3.8 billion, followed by health and general losses with respective figures of TL 2.9 billion and TL 2.4 billion.

On the basis of sales channels of insurance products, agencies take the highest share with 58.9% in premium production. The agency network was followed, in order, by banks with 22.6% share, brokers with 10.9%, head office with 6.2%, and other sales channels with 1.4%.

While there were three companies with a premium production of above TL 3 billion in 2014, the companies that went over TL 1 billion in premium production numbered four.

General Information / Message from the CEO

Message from the CEO

At Anadolu Sigorta, we are committed to making

optimum use of technology on the axes of customer

access, and easy, high-quality and swift service

delivery.


Looking at 2014, we observe that the extreme price competition of previous years is starting to change in favor of a more profit-driven understanding. Furthermore, the negative impact of operating costs that cannot be reduced upon profit margins is also better understood.

The key to preserving profitability and increasing productivity is, undoubtedly, control over claims processes. The focal point of strategy plans devised for controlling claims processes is the prevention of fake claims and ensuring customer satisfaction. Playing a major role at this point are the companies the industry collaborates with and outsourced loss services. Primary important considerations include the adjustment of supplier firms to the processes of insurance companies, their maximization of the speed and quality of their services, and pursuance of customer satisfaction. We can talk about ideal profitability levels only to the extent that all of these are secured and the expected improvements in the coming period materialize.

Anadolu Sigorta attained 9.3% growth in premium production in 2014Anadolu Sigorta ranked third in the sector with a premium production of TL 3 billion that it has generated based on 9.3% production growth it has achieved in 2014.

With its 2014 production performance, Anadolu Sigorta preserves its 13.2% market share. Motor vehicles branch continued to claim the biggest share of the total portfolio at 27.4%. This is followed, in order, by motor vehicle liability with 26%, and fire and natural disasters branch with 16.7%.

We maintain our customer focusWe believe that customer management processes need to be given priority so that the insurance industry can get its deserved share out of Turkey’s existing economic growth. Accurate reading of insurance customers’ attitudes and their incorporation in strategies are critical for customer satisfaction. In a bid to strengthen the processes for customers and sales channels, Anadolu Sigorta uninterruptedly continues with its investments in project, research and development activities.

With our teams that analyze customer needs and expectations, develop new products accordingly, and reformulate the existing products so as to best respond to identified needs, we undertake many activities ranging from intelligible and plain policy contents to offering the right product packages to the right customers and organizing advantageous campaigns for our customers. Furthermore, we continue with our publicity and social media activities at full speed, whereby we underline not only our products, but also the importance of insurance.

Technology investment is a strategic necessityAt Anadolu Sigorta, we are committed to making optimum use of technology on the axes of customer access, and easy, high-quality and swift service delivery. In this framework, we reflect our innovative approach also in our products and services.

We continuously carry on with our innovative investments aimed at further upgrading the customer experience. With the “Claims Services Hotline and Interactive Voice Response System” and the “Online Claims File Query Service” launched in 2014, we have targeted to maximize customer satisfaction.



Signing our name under an ambitious application in mobile insurance, we have introduced the new “Sigortam Cepte” (“Insurance on My Mobile”) mobile application that is compatible with IOS and Android telephones. This service gives Anadolu Sigorta policyholders access to dozens of services from a single screen, including tracking their policy and claims data and locating the nearest agency. Intended to offer an interactive experience, our “Sigortam Cepte” application draws the attention also with its customizable content and enriched user-friendly design.

We are consolidating our technological and innovative character with digital channel useOur company boasts an award-winning corporate website, which gives users easy access to information and acts as a benchmark in the industry with its rich content. In addition to our corporate website, we also have risk analysis service and different online facilities such as the leaflet center for our agencies. At present, we are in the final stages of revamping these websites.

We have an active presence also on digital media through our corporate social media accounts opened with the name Anadolu Sigorta. Our project “Bir Usta Bin Usta” (One Master, Thousand Masters) has a dedicated website and an Instagram account. We are using social media specifically to increase brand awareness and enhance communication with our target audience.

We have also begun making more frequent use of the digital media for advertising and publicity purposes. With our viral films developed specifically for online media as opposed to the conventional advertising instruments, we are receiving admiration, while keeping the interest in our products and services alive.

We enjoy distinctive competitive strengths in bancassurance and agencies channelsIn view of the bancassurance dynamics across the world, Turkey, undeniably, has a long way to travel. However, enjoying an increasing efficiency in the insurance industry, bancassurance has lately been serving to grow the customer group that it is addressing in retail and commercial fields, and in turn, premium production. In parallel with the expanding customer group, types of products offered by the banks are increasing at an equal pace in line with the customer needs.

Within the framework of bancassurance, Anadolu Sigorta works in coordination with all bank branches and its sales force in the field. Thanks to increased awareness of insurance and their growing experience, bank employees are able to present new solution proposals to diverse customer groups that are aligned with their expectations, and are instrumental in achieving higher production and profitability in this field through correct risk selections.

Our high brand equity is an important factor that contributes towards our company’s strong agency organization. Our agencies, which make up a substantial portion of our sales channels and are vital components of the Anadolu Sigorta family, have internalized our corporate values, mission and vision. Our strong synergy is underpinned by the capability to act with shared wisdom with our agencies.


Message from the CEO


Our award-winning social responsibility project leaves its fifth year behindOur project “Bir Usta Bin Usta” (One Master, Thousand Masters) was named the “Best CSR Social Solution 2014” at the Corporate Social Responsibility awards distributed within the scope of the CSR Turkey Marketplace event, co-organized for the sixth time in 2014 by the Corporate Social Responsibility Association of Turkey (CSR Turkey) and KadirHasUniversity.

Launched in 2010 by Anadolu Sigorta, the project “Bir Usta Bin Usta” carried its successful mission over to the new fiscal year, while the courses held in 2014 were ‘Tile Working’ in Çanakkale, ‘Oltu Stone Working’ in Erzurum, ‘Art of Leather-Made Accessories’ in Isparta, ‘Art of Felt-Made Accessories’ inİzmirand‘AmberWorking’inŞanlıurfa.

Under the project “Bir Usta Bin Usta” that has been honored with a number of national and international awards, numerous masters-to-be were trained to date. While participants receive course completion certificates that verify qualification as a master trainer endorsed by the Ministry of National Education upon graduation, the courses are instrumental in keeping local vocations alive on one hand, and in creating new employment opportunities, on the other hand.

Anadolu Sigorta: Dynamic and forward-looking drawing on the experience of 90 yearsIn setting its course, Anadolu Sigorta is guided by service quality, product diversity, and securing the balance between premium production and technical profitability on the basis of fair price competition. In a bid to increase the brand equity of Anadolu Sigorta that has become synonymous with trust owing to its character as a pioneer for nine decades that has been carrying the sector forward, we will continue with our committed work, hand in hand with all our employees, towards our goal of improving our market share while attaining sustainable profitability in the year ahead.

The young population of Turkey, constantly increasing qualified human resource potential and the new regulatory arrangements governing the insurance industry add to the possibility that the interest of the investors in Asia and Europe that present decelerated consumption will be directed towards Turkey. These developments support our prediction that the insurance industry will be in leading and telling position in its own geography in the future.

In this competitive environment, risk-based pricing, formation of a balanced portfolio, technology-backed risk follow-up and management, and the support to be lent by regulatory arrangements will be key for profitable and healthy growth of the market players.

Our company continues to attach importance to fundamental branches, specifically motor own damage, health and fire insurance. In addition to those, we are targeting to increase our focus on package products for the SMEs, primarily professional and personal liability policies, while building on our strength in branches such as marine and general liability insurance.

Backed by an experienced and professional team, strong technological and financial infrastructure, extensive service platform, and an understanding to constantly develop and upgrade quality products and services, Anadolu Sigorta is focused on the future.

I would like to extend my thanks and my best wishes to our policyholders for their unyielding trust, and to our team and distribution/service organization for their commitment and hard work, who altogether make our company’s consistently successful performance possible.

Sincerely,

Musa ÜlkenCEO



1925 Anadolu Sigorta was founded

on April 1 at the initiative

of Atatürk and under the

leadershipofİşbank,Turkey’s

firstnationalbank.

1961Thefirstdatapr

ocessing

system was set up.

1975Being the leader of national insurance since the

onset of the Turkish Republic, Anadolu Sigorta

celebrated its 50th anniversary.

1983“Blue Insurance” policies

marking the introduction of

comprehensive insurance

system in Turkey and offering

17 types of cover were put on

saleforthefirsttime.


The Organization, Capital and Shareholder Structure of the Company / Organization Chart

Organization Chart

Board of Directors

ChiefExecutiveOfficerMusa Ülken

Coordination Department to the Board of Directors

Board of Auditors

Risk Management and Internal Control Department

Early Determination of Risk Committee

Audit Committee

Corporate Governance Committee

1st Deputy Chief ExecutiveFilizTiryakioğlu

Motor Insurance Department

Agency and Channel

Management Department

Legal Affairs &

Subrogation Department

Labor Law AdviserÖmer

Ekmekçi

Legal Consultant

Samim Ünan

Headquarters Consultant

Ahmet Hamdi Başar

Bank Insurance

Department

Accounting and Finance Department

Human Resources

and Training Department

Non-Motor Claims

Department

Corporate Communication

Department

Motor Claims

Department

Individual and Commercial Insurance

DepartmentActuarial Department

Information Technologies Department

Liability, Aviation and Special Risks Insurance

Department

Health Insurance Department

Corporate InsuranceDepartment

Enterprise ArchitectureDepartment

Information and Communication

Technologies Software Development Department

Fire and Engineering Insurance Department

Risk Engineering Department

Procurement Department

Marine Insurance Department

Reinsurance Department

Board of Project and Change Management

RegionalOffices

Southern AnatoliaWestern Anatolia

MarmaraCentral AnatoliaMiddle Black Sea

Black SeaMediterranean

İstanbulKadıköy

TRNC Branch

Deputy Chief ExecutiveM.LeventSönmez

Deputy Chief ExecutiveFatihGören

Deputy Chief ExecutiveM.MetinOğuz

Deputy Chief ExecutiveErdinçGökalp

Deputy Chief ExecutiveMehmetAbacı

Management Reporting Department


The Organization, Capital and Shareholder Structure of the Company / Capital and Shareholder StructureDisclosures on Preferred Shares

Capital and Shareholder Structure

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 2014.

Changes in the Articles of Association during 2014

At the Annual General Assembly Meeting held on 25 March 2014 based on the permission letters of the Republic of Turkey Prime Ministry Capital Markets Board dated 27 February 2014, no. 29833736-110.03.02-412-2049, and of the Republic of Turkey Ministry of Customs and Trade Directorate General of Domestic Trade dated 18 March 2014, no. 67300147-431-02-2-413677-2725-1643, it has been agreed to amend “Article 4 – The Company’s Headquarters and Branches” of the company’s Articles of Association; the said amendment was registered on 10 April 2014 and promulgated in the Turkish Trade Registry Gazette issue 8551, dated 16 April 2014.

Shareholder Structure (%)

Other42.7

MilliReasüransT.A.Ş.57.3


Information on Board of Directors Meetings:During 2014, Board of Directors of Anadolu Sigorta met 12 times and held its 1190th meeting at the end of the year.

One member each was absent in two 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, status reports on the restructuring project, 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.

Governing Body, Executives and the Number of Employees / Board of Directors

Board of Directors

1

4

7

10

2

5

8

11

3

6

9

Ayşen AyanBoard of DirectorsReporter


1- Caner ÇimenbiçerChairman

Bornin1952inBursa,CanerÇimenbiçergraduated from the Business Administration Department of the Faculty of Administrative Sciences at the Middle East Technical University in1973.Hebeganhiscareerinİşbankin1974asan assistant inspector on the Board of Inspectors. After holding various positions in the Bank, he was elected as Board of Directors member from 2005 to 2008 and the Chairman of the Board from 2008 to 2011. He also served as the Chairman of the Board of Milli Re in 2008 and 2009. Mr. ÇimenbiçerwasappointedastheChairmanandManaging Director of Anadolu Sigorta on 1 April 2011 and was elected as the Chairman of the Board on 25 March 2014.

2- Ahmet Doğan ArıkanDeputy Chairman

Bornin1949inAnkara,AhmetDoğanArıkangraduated from Middle East Technical University in 1971. He began his career as a systems analyst at the General Directorate for the Turkish State MeteorologicalServiceandhejoinedİşbankin1973.In1974-1975AhmetDoğanArıkanalsodid his military service as a systems analyst and programmingofficer.Returningtoİşbankuponcompletionofhismilitaryservice,AhmetDoğanArıkancontinuedtoserveinvariouscapacitiesboth in Turkey and abroad for about ten years, becomingGeneralManagerofanİşbank-ownedforeigntradingcompany,MepaDışTicaretSermayeŞirketi,in1987.ThiswasfollowedbyGeneral Manager positions at two other bank-ownedcompanies:İzmirDemirÇelikSanayiA.Ş.in1991andTürkiyeŞişeveCamFabrikalarıA.Ş.in2000.AhmetDoğanArıkanretiredfromthelatterposition on 16 September 2009. In the course of hiscareer,AhmetDoğanArıkanhasservedasaMember or Chairman of the Boards of Directors of firms in the textiles, automotives, maritime shipping, lodging, tourism, manufacturing, and banking industries.

3- Musa ÜlkenGeneral Manager and Director

Born in 1953 in Tarsus, Musa Ülken graduated fromtheİstanbulAcademyofEconomicandCommercial Sciences, Department of Economics and Public Finance. He began his career at Anadolu Sigorta Claims Department as a Clerk on 01 November 1978 and subsequently rose to the positions of Assistant Superintendent on 01 January 1984, Superintendent on 01 January 1988, Accident Department Superintendent on 07 February 1990, Chief Superintendent on 01 January 1991, Assistant Manager on 01 August 1992, Manager on 01 May 1993, Marmara Regional Manageron06June1997andKadıköyRegionalManager on 01 June 2002. Having served in the last position until 31 July 2004, Musa Ülken became a Deputy Chief Executive Officer on 01 August 2004, I. Deputy Chief Executive Officer on 01 February 2008 and General Manager on May 2012.

4- Hakan AranDirector

Born in 1968 in Antakya, Hakan Aran graduated from the Middle East Technical University, Department of Computer Engineering in 1990. HestartedhiscareeratİşbankasaSoftwareSpecialist Trainee the same year, where he was appointed as an Assistant Manager in 1999, and promoted to Group Manager position in 2002. He became Software Development Manager in 2005 and was finally appointed as Deputy CEO on July 2008. Having completed his MBA on scholarshipfromBaşkentUniversity,Instituteof Social Sciences in 2002, Hakan Aran has a master’s dissertation on process management and a model on Information Technologies supporting customer-centric approach to banking. Hakan Aran is currently Chairman of Boards at SoftTech A.Ş.,İşNetA.Ş.,andErişimMüşteriHizmetleri.

5- Kubilay AykolDirector

BorninBoluin1974,KubilayAykolgraduatedfrom Middle East Technical University (Faculty of Economics and Administrative Sciences) department of Business Administration. He beganhiscareerin1997atTürkiyeİşBankası,as assistant inspector at Bank’s Board Member of Inspectors. He was appointed as Merter branch manager. He became an assistant manager in Retail Banking Marketing Department in 2007. He promoted as group manager in the Retail Banking Marketing, unit of Micro Individual Segment in 2009. Since 2011, he has been serving as Retail Banking Products Department Manager.

6- Faruk KarpuzDirector

Bornin1961inKahramanmaraş,FarukKarpuzbeganhiscareerasanofficerinDiyarbakırBranchofİşbankin1983.HelaterworkedasassistanttosectionheadatİslahiyeBranchinGaziantep(1988-1991), as section head at Erdemli Branch inMersin(1991-1995),assubmanageratElazığBranch (1995-1996), as manager at Cizre, Yenihal, Akşehir,FethiyeandAfyonkarahisarbranches(1996-2007),asregionalmanageratKonyaRegional Directorate (2007-2012), and as manager ofSamsunBranch(2012).FarukKarpuzcurrentlyserves as manager in the SME and Commercial Banking Sales Division, a position he holds since August 2013.

7- R. Semih NabioğluDirector

Bornin1967inIsparta,SemihNabioğluhasgraduated from the Business Administration department of Gazi Üniversitesi. He has got a master’s degree in Accounting and Finance field at the same university. In 1990, he started his careerasAssistantSpecialistatİşbank,wherehe still works as Unit Manager at the Equity ParticipationsDepartment.SemihNabioğluhasserved as Board Member and Member of Board of Auditorsatvariousİşbank’saffiliatesduringhiscareer.SemihNabioğluiscurrentlyBoardMemberatAnadoluAnonimTürkSigortaŞirketi,AnadoluHayat Emeklilik and Milli Reasürans.

8- Fahri Kayhan SöylerDirector

Bornin1954inKadirli,FahriKayhanSöylergraduated from Marmara University, Faculty of Economics and Administrative Sciences, Department of Economics. He started his career asaClerkatİşbankGalataBranchin1976,wherehe subsequently worked as a Service Officer and II. Manager. He functioned as Assistant Manager of BeşiktaşBranchin1990,andasBranchManagerof Yenibosna Branch in 1991, Dudullu Sanayi Branchin1992,CağaloğluBranchin1996,RıhtımKadıköyBranchin1998,andYenicamiBranchin2002. He served as a Deputy CEO from 2003 until 2010. Having voluntarily retired on 31 January 2010,SöyleralsoheldmembershipsontheBoardof Auditors at Anadolu Sigorta, Executive Board atHizmetİşleriLtd.Şti.,BoardofDirectorsatİşFinansalKiralamaA.Ş.andwastheChairmanofİşGirişimSermayesiA.Ş.duringhiscareer.

9- Prof. Savaş TaşkentDirector (Independent)

Borninİstanbulin1943,Prof.SavaşTaşkentgraduatedfromtheFacultyofLaw,İstanbulUniversity. Having started his academic career as an assistant in 1971 in the Department of LawoftheFacultyofBasicSciences,İstanbulTechnical University (ITU), he received his Ph.D.degreefromtheFacultyofLawofİstanbulUniversity, became assistant professor at ITU, Faculty of Management and associate professor in the Department of Labor and Social Security Law and professor in the same Department in 1990. He served as the vice-dean and the vice-rectoratthesameuniversity.SavaşTaşkentpursued research studies abroad, at Erlangen and Heidelberg universities in 1982 and 1987. He has numerous books and articles on labor law, as well as many translations into Turkish from the German law. Having assumed the position of the head of the Department of Law at ITU, Faculty of Management,Mr.Taşkentretiredon12January2010 due to age limit. He currently teaches “Labor Law” and “Management Law” courses at the same faculty.On19November2013,SavaşTaşkenthasbeen assigned as advisor to the Rector related to legal affairs by the ITU Rector. He also served as an advisor to the Minister of Labor and Social Security from 1991 until 2000, and attended ILO Conferences held in Geneva from 1991 to 2003 as the advisor to the Government. Having been elected as a Board of Directors member of İşbankin2005,2008and2011,Prof.Taşkenthasbeen appointed, in tandem, as a member of the Audit Committee in March 2008, TRNC Internal Systems Committee in June 2009, and Corporate Governance Committee in February 2013. He resignedfromİşbankeffectiveMarch2014.

10- Hasan Hulki YalçınDirector

Bornin1964inAnkara,HasanHulkiYalçınholds a degree in Economics from the Middle East Technical University and a Master’s Degree in International Banking and Finance from the UniversityofBirmingham(UK).Afterservinginvariouspositionsandcapacitieswithİşbankfor fourteen years, he joined Milli Re in 2003 and subsequently took part in a number of professional training programs abroad. He has been appointed as a member of Board of Directors and General ManageronJanuary16,2009.HasanHulkiYalçınis also serving as a member of Board of Directors in the Insurance Association of Turkey.

11- Assoc. Prof. Atakan YalçınDirector (Independent)

Bornin1971inİstanbul,AssociateProfessorAtakanYalçınisonthefacultyofSchoolofEconomics and Administrative Sciences at ÖzyeğinUniversity.HepreviouslywasonthefacultyofKoçUniversityandhasheldvisitingpositions at Brandeis University and Boston College.Dr.YalçınreceivedanMBAdegreefromCox School of Business at Southern Methodist University in 1996, and a Ph.D. degree in finance from Carroll School of Management at Boston Collegein2002.Dr.YalçınhastaughtcoursesinInvestment Management, Derivatives Securities and Financial Management. His research interest is in empirical asset pricing and empirical aspects of financial economics. His work has been published in such journals as the Journal of Empirical Finance, Journal of Banking and Finance, Journal of Financial Research, Quarterly Review of Economics and Finance, and the JournalofMarketing.Dr.YalçınisamemberoftheAmerican Finance Association, Western Finance Association, Financial Management Association and the CFA Institute.

Governing Body, Executives and the Number of Employees / Board of Directors


Declarations of Independence by Independent Members of the Board of Directors

Governing Body, Executives and the Number of Employees / Declarations of Independence by Independent Members of the Board of Directors

15 April 2014

To:AnadoluAnonimTürkSigortaŞirketiCorporateGovernanceCommittee

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 candidacyasanindependentmemberoftheBoardofDirectorsofAnadoluAnonimTürkSigortaŞirketi.

Yours sincerely,

Prof.SavaşTaşkent

03 March 2014


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 AnadoluAnonimTürkSigortaŞirketitobeconvenedon25March2014.

Yours sincerely,

Assoc.Prof.AtakanYalçın


Governing Body, Executives and the Number of Employees / Declarations of Independence by Independent Members of the Board of Directors

03 March 2014


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 AnadoluAnonimTürkSigortaŞirketitobeconvenedon25March2014.

Yours sincerely,

Prof. Turkay Berksoy


Governing Body, Executives and the Number of Employees / Executive Committee

Executive Committee

1

4

7

2

5

3

6


1- Musa ÜlkenGeneral Manager

Born in 1953 in Tarsus, Musa Ülken graduated fromtheİstanbulAcademyofEconomicandCommercial Sciences, Department of Economics and Public Finance. He began his career at Anadolu Sigorta Claims Department as a Clerk on 01 November 1978 and subsequently rose to the positions of Assistant Superintendent on 01 January 1984, Superintendent on 01 January 1988, Accident Department Superintendent on 07 February 1990, Chief Superintendent on 01 January 1991, Assistant Manager on 01 August 1992, Manager on 01 May 1993, Marmara Regional Manageron06June1997andKadıköyRegionalManager on 01 June 2002. Having served in the last position until 31 July 2004, Musa Ülken became a Deputy Chief Executive Officer on 01 August 2004, 1st Deputy Chief Executive Officer on 01 February 2008 and General Manager on May 2012.

2- Filiz Tiryakioğlu1st Deputy Chief ExecutiveAgency and Channel Management DepartmentBank Insurance DepartmentHuman Resources and Traning DepartmentCorporate Communications Department

Bornin1967inİstanbul,FilizTiryakioğlugraduated from Anadolu University, Faculty of Business Administration, Department of Business Administration. She started her career at Anadolu Sigorta as a Clerk at the Fire Department on 16 September 1985. She rose to Assistant Superintendent position at the same department on 01 January 1990. She was appointed to the Claims Department on 01 February 1993 as Superintendent, then rose to Chief Superintendent on 01 May 1996, and Assistant Manager on 01 March 1998 at the same department. She became a Manager at the Training Department on 01 June 2000 and was then appointed as the Human Resources and Training Manager on 01 August 2004. She was appointed as Deputy Chief Executive Officer on 01 February 2008 and 1st Deputy Chief Executive on 25 December 2013.

3- Mehmet Metin OğuzDeputy Chief ExecutiveRegional OfficesTRNC BranchMotor Insurance DepartmentHealth Insurance Department

Bornin1959inÇanakkale,M.MetinOğuzgraduated from Middle East Technical University, Faculty of Arts and Sciences, Department of Physics and Mathematics, and holds a master’s degree from Marmara University Institute of Banking and Insurance, Department of Insurance. M.MetinOğuzbeganhiscareeratAnadoluSigorta as a Clerk in the Accident Department on 16 October 1985 and 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 July2004,M.MetinOğuzbecameaDeputyChiefExecutive Officer on 01 August 2004.

4- M. Levent SönmezDeputy Chief ExecutiveIndividual and Commercial Insurance DepartmentCorporate Insurance DepartmentMarine Insurance DepartmentRisk Engineering Insurance DepartmentLiability Aviation and Special Risks Insurance DepartmentFire and Engineering Insurance Department

Bornin1962inAnkara,M.LeventSönmezgraduatedfromİstanbulTechnicalUniversity,Faculty of Maritime Studies, Department of Marine Engineering in 1985, got his master’s degree in “Contemporary Management Techniques” from Marmara University & Maine University and completed the “SITC (Swiss Re) Marine Insurance” program. Having participated in various training programsinTurkeyandabroad,M.LeventSönmezalso holds “Chartered Insurance Institute/London Dip. CII” degree. He started his career at Anadolu Sigorta as a Specialist at the Marine Department on 01 May 1991 and continued working with same title till 30 April 1996. He subsequently rose to Specialist position on 01 March 1994, Chief Superintendent position on 01 May 1996, Assistant Manager on 01 October 1997, and Manageron01May1999.M.LeventSönmezhasbecomeBakırköyRegionalManageron01June2002andKadıköyRegionalManageron01August2004. He has been appointed as Deputy Chief Executive Officer on 01 February 2008.

5- Erdinç GökalpDeputy Chief ExecutiveActuarial DepartmentEnterprise Architecture DepartmentReinsurance DepartmentProcurement DepartmentManagement Reporting Department

Bornin1967inAnkara,ErdinçGökalpgraduatedfromKuleliMilitaryHighSchoolandTurkishMilitary Academy, Department of Business Administration. He then got his master’s degree in insurance from Marmara University, Institute of Banking and Insurance. During his employment with Anadolu Sigorta, he earned the Atatürk scholarship granted by TSB (Insurance Association of Turkey) and pursued his studies abroad. Having started his career at Anadolu Sigorta as Specialist at the Marketing Department on01May1991,ErdinçGökalpwasappointedtothe Reinsurance Department on 23 September 1991, rose to senior specialist position and continued working till 30 April 1996 with the same title. He promoted to Chief Superintendent position on 01 May 1996 and to Assistant Manager position on 01 October 1997, he was appointed totheMarketingDepartment.ErdinçGökalpwas appointed to the Accident Department on 26 December 1997 with the same title. He rose to the position of Manager and was assigned to the Reinsurance Department on 01 July 2001. ErdinçGökalphasbeenappointedasDeputyChiefExecutive Officer on 01 February 2008.

6- Fatih GörenDeputy Chief ExecutiveLegal Affairs & Subrogation DepartmentAccounting and Finance DepartmentMotor Claims DepartmentNon-Motor Claims Department

Bornin1969inAnkara,FatihGörengraduatedfrom Ankara University, Faculty of Political Sciences, Department of International Relations. He worked as a Specialist at Retail Banking and AgriculturalLoansDepartmentsatZiraatBankbetween 1991 and 1994. Having joined Anadolu Sigorta as an Assistant Inspector on the Board ofInspectorson01November1994,FatihGörenrose to Senior Inspector on 01 November 1997 and grade 3 Inspector on 01 November 1998. He was appointed as Assistant Manager to the Accounting and Finance Department on 01 June 2000, where he was promoted to Manager position on 01 August2004.FatihGörenhasbeenappointedasDeputy Chief Executive Officer on 01 February 2008.

7- Mehmet AbacıDeputy Chief ExecutiveInformation and Communication Technologies Informations Technologies DepartmentSoftware Development DepartmentBoard of Project and Change Management

Bornin1967inAnkara.MehmetAbacı,graduatedfrom the Department of Metallurgical and Materials Engineering, Faculty of Engineering at Middle East Technical University in 1991. Starting hisprofessionalcareeratİşbankITDepartmentasaSoftwareSpecialistthesameyear,MehmetAbacıwas appointed as Assistant Manager in 1999, and Unit Manager in 2004. He was promoted as Deputy Chief Executive Officer at SoftTech in 2008, and became Solution Development Manager and Project&ChangeManageratİşbankin2010andin2011respectively.MehmetAbacıwasappointedas Deputy Chief Executive Officer of SoftTech for a second term, on 1 January 2011. As of June 2012, he took office at Anadolu Sigorta as Deputy Chief Executive Officer.

Governing Body, Executives and the Number of Employees / Executive Committee


Dr. İbrahim Erdem EsenkayaChairman of the Board of Inspectors

Bornin1969inİstanbul.İbrahimErdemEsenkayagraduatedfromİstanbulUniversity,Facultyof Political Sciences, Department of Public Administration. He then completed a master’s degree without dissertation in the graduate program for the management of financial institutionsatİstanbulUniversity,FacultyofBusiness Administration, Institute of Business Administration. He earned his master’s degree in business management and organization, and his doctorate degree in accounting and auditing from the Institute of Social Sciences at the same university. He started his career at Anadolu Sigorta as an Assistant Inspector at the Board of Inspectors on 01 May 1995 till 31 May 2001. He was appointed to the Accounting and Finance Department on 01 June 2001 as an Assistant Manager and to Internal Audit Department on 01January2005asaManager.İbrahimErdemEsenkaya has been appointed as the Chairman of the Board of Inspectors on 01 June 2007.

Ömer AltunRisk Management and Internal Control Manager

Born in 1970 in Malatya. Ömer Altun graduated from Hacettepe University, Faculty of Science, Department of Statistics. He began his career at Anadolu Sigorta as a Clerk at the Accounting and Finance Department on 01 May 1997, where he subsequently rose to Specialist position on 01 February 1998 and continued working with same title till 30 November 2005 and then he rose to Assistant Manager position on 01 December 2005. On 01 February 2008, Ömer Altun has been appointed as a Manager to the Risk Management and Actuarial Department, which was renamed to Risk Management and Internal Control Department within the scope of the restructuring of internal systems organization. He serves as the Chairman of Anti-Money Laundering/Combating the Financing of Terrorism (AFL/CFT) Committee under the Insurance Association of Turkey.

Governing Body, Executives and the Number of Employees / Heads of Units Under the Internal SystemsAverage Number of Employees by Categories During the Reporting Period

Heads of Units Under the Internal Systems

2014Senior level managers 7Managers 37Consultants 3Middle level managers 142Specialists/Officers/Otheremployees 799Total 988

Average Number of Employees by Categories During the Reporting Period


Murat TetikAccounting and Financial Affairs Manager

Bornin1968inEskişehir,MuratTetikgraduatedfromİstanbulUniversity,BusinessAdministrationDepartment (English) and started his career in our company on 01 May 1997 as an Assistant Inspector on the Board of Inspectors. He was promoted to Senior Assistant Inspector on 01 May 2000, to Class III Inspector on 01 June 2001, to Class II Inspector on 01 June 2003, and to Vice Chairman of the Board of Inspectors on 01 August 2004. He was appointed as an Assistant Manager to the Accounting and Financial Affairs Department on 01 January 2005, where he rose to the position of Manager on 01 February 2008. He is a member in the Insurance Association of Turkey Financial Accounting Inspection and Research Committee.

Taylan MatkapAppointed Actuary/ManagerActuarial Department

Born in 1978 in Antakya, Taylan Matkap graduated from Ankara University, Department of Statistics and completed his master’s degree in the Department of Actuarial Science and Finance at Boston University. He is currently pursuing hisdoctoratestudiesatİstanbulUniversity,Department of Labor Economics and Industrial Relations. He started his career at Anadolu Sigorta on 01 December 2008 in appointed actuary/manager position at the Actuarial Consultancy Unit, and he has been transferred to the Actuarial Department with the same title on 28 February 2011. In tandem with his post as the Secretary General of the Actuarial Society of Turkey, Taylan Matkap is responsible for improving the relations with the Actuarial Association of Europe (AAE) and the International Actuarial Association (IAA) on behalf of the Society.

Financial Affairs and Actuarial Unit Managers Financial Rights Provided to the Members of the Governing Body and Executives / Financial Rights, Other Means

Financial Affairs and Actuarial Unit Managers

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

Financial RightsInthefiscalyearendedon31December2014,TL4,949intotalhasbeenprovidedinremunerationsandsimilarbenefitstothegoverningbodyandseniorexecutivessuchastheChiefExecutiveOfficerandDeputyChiefExecutiveOfficers.Furtherdetailsarepresentedintherelevantsectionoffinancialnotes.

Other MeansThe 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 197 thousand.


1984Highly acclaimed by the public

and the sector, “Insurance

of the Future”, the most

comprehensive life policy ever

offered in Turkey until then,

was introduced.

1987Activities commenced in the

agricultural insurance branch.

1986Representing a new branch in the Turkish

insurance business, “Electronic Equipment

Insurance”wasfirststartedby

AnadoluSigorta.

1991The life branch was

transferred to Anadolu Hayat

Sigorta, a newly-formed life

insurer as required by law.


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

• In2012,bookkeepingandcollectiontransactions of Istanbul Regional Branches and Health Insurance Department were centralized under the Accounting and Finance Department (AFD) in keeping with the targeted centralization of bookkeeping and collection transactions. Forming the next step under the initiative, bookkeeping and collection transactions of Middle Black Sea and Mediterranean Regional Branches were also centralized under the AFD in 2013. With the migration of the bookkeeping and accounting transactions of the Central Anatolia, West Anatolia, Marmara, Southern Anatolia and Black Sea Regional Branches to the AFD, centralization has been completed for all regional branches of Anadolu Sigorta in 2014.

• Legalaffairswerecentralizedunderthe Legal Affairs and Subrogation Department (LASD) in order to increase the efficiency and speed of legal processes in regional branches.

• SituatedinMerter,İstanbulRegionalOffice was relocated to the office inŞişliBeytemPlazathatenjoysa central location, which has been renovated in the same concept with the Head Office.

• Undertheinitiativeaimedatenablingcallers to easily access the required service by dialing a single number, the switchboard numbers for the Head Office and regional branches were eliminated, and Anadolu Sigorta contact number at 0850 744 0 744 was introduced incorporating the new announcement structure. In this way, “Single Number – Single Menu” implementation went live for non-claims topics.

• Throughimprovementsthatentailed provision of a single point of contact for customer demands for replacement vehicles, the process was accelerated and customer satisfaction was enhanced.

• HoldingISO9001QualityManagement System certification since 2004, Anadolu Sigorta executes processes with an eye on constant improvement and development within the frame of quality standards. Work was carried out to launch a web-based, more flexible and more user-friendly application to replace the existing Electronic Quality Management System application, which performs a significant function for ensuring the continuity of the Quality Management System at the company, as a result of which the relevant application was introduced.

• Noirregularitieswerefoundintheexternal audit conducted within the scope of ISO 9001 2008 Quality Management System, resulting in an extension of the quality certification.

• Asaresultofjointeffortsaimedatcreating a closer, one-to-one and constantly interacting working environmentbetweenİşbankandAnadolu Sigorta and at enriching the bancassurance transactions, Anadolu Sigorta Bank Sales Leaders have been assigned who will work out of İşbank’sregionalsalesoffices.


Research and Development Activities of the Company / Research and Development Pertaining to New Services and Business Activities

• Withintheframeofeffortstoimprovethe Anadolu Sigorta Corporate Information Portal, the section of the existing Portal designed for agencies has been rearranged, and put into service as an Extranet Portal. In addition, the legislation and publications section on the Intranet has been revised.

• AgenciesTelephoneDirectorywasput into use for giving easier access to contact numbers of the agencies and their employees by incorporating the agencies in the company phone directory.

• Theannualdeskexercisewascarried out, which is required to be performed within the scope of Business Continuity Management System activities. In the exercise, two different scenarios were applied, assessing the Incident Response Team, which is formed by senior management, and the departments supporting this team, with respect to their preparedness in case of an incident causing interruption to business processes.

• Withunitspreviouslyoperatingoutof different locations now brought together under the Head Office roof inKavacık,thecoordination,controland management of policy printing and correspondence tasks, which used to be executed individually, are now handled centrally by the Procurement, Support and Construction Department. The move was intended to centralize these functions and allow swifter and uniform action in cases affecting these tasks.

• Archivedautoandnon-autoclaimsdocuments have been revised, resulting in improved archiving processes and reduced number of documents to be archived.

• ASOS,thenewproductionandcollection platform, was introduced with the personal health product. In addition, it was decided to centralize medical assessment and operational transactions involved in personal health insurance proposal and policy production transactions under the Health Insurance Department. The purpose is to furnish faster service to all sales channels and customers, eliminate the potentially varying approaches in medical assessments, and ensure a more effective operation in terms of workforce with the central team.


For all countries, developed or developing, the level of economic development and the development level of insurance industry move in parallel to a significant extent. Particularly in developed countries, the insurance industry is considered as an important funding source for the economy. Insurance and private pension sector, which is an important actor of the financial services market, lends significant contributions to the national economy, as it provides efficient use of sources and also serves to increase savings. Fulfilling the functions of providing coverage and enabling savings in our national economy, insurance and private pension sector keeps growing consistently every year. In addition to these developments, the global economic and political risks that have been growing in recent years, combined with natural disasters, obligate people to take measures against these risks. Insurance, by nature, comes at the top of the ways to handle these risks. The altered perception of the society, along with the urge to be protected against risks, caused insurance activities to increase in Turkey. Although it is observed that the insurance industry in our country is not in the desired magnitudes

when compared with other parts of the world, the share of the premium production of the Turkish insurance industry to GDP increased at a growing pace in 2012, 2013 and 2014. In 2014, banks maintained their dominance in the financial services sector by preserving their share of 87.4% (as at June 2013) within the industry’s total assets, and the share of the relatively smaller insurance industry (inclusive of private pension) remained flat at 4.6%.

The hike in exchange rates at the onset of 2014 bore a short-lived impact on the insurance industry, as it did on all other sectors. This impact reflected on the balance sheets of businesses as higher loss items. In addition, policies issued in a foreign currency automatically resulted in increased premiums in this period. The recovery in exchange rates allowed this effect to be transient.

The industry attained growth also in the reporting period, on the back of the motor own damage product that was diversified as compared with the previous years as a result of revised general conditions for this product. New product development activities gained speed in 2014. Under the new

regulation prepared in relation to private health insurance by the T.R. Prime Ministry Undersecretariat of Treasury, policyholders who have qualified for lifelong renewal guarantee will not lose this entitlement from now on. They will neither be exposed to increased risk premiums nor restricted scope in the event of an illness. The regulation about online comparison of premiums for motor TPL policies introduced some positive changes of practice for the sector; accordingly, companies are required to make available a premium querying screen on their official websites for motor TPL insurance, and they are free to set basic insurance premiums by provinces a on the basis of vehicle types. Meanwhile, acquisitions and mergers continued. The official merger ofAllianzSigortagroupandYapıKrediSigorta Group as of October 2014 is an important event that will affect the balances in the industry.

Looking at 2014, it is observed that the extreme price competition of previous years is starting to change in favor of a more profit-driven understanding. Furthermore, the negative impact of operating costs that cannot be reduced upon profit margins is also better understood.

Company Activities and Major Developments in Activities / 2014-2015 Primary Goals, Policies

2014-2015 Primary Goals, Policies


Moreover, Consumer Protection Law no. 6502 was published in the Official Gazette issue 28835 dated 28 November 2013 to be enforced 6 months later. The key change the new law introduces with respect to insurance companies is the expanded scope of consumer transaction so as to incorporate insurance transactions, thus making insurance transactions a consumer transaction. The requirements in the New Consumer Law went into force on 28 May 2014. The new regulation on insurance

agencies made some revisions to the qualifications of people who will work as insurance agents, their authorities and responsibilities, and principles and procedures in relation to their activities, while the former Insurance Agencies Regulation was superseded.

In the period ahead, it is projected that the insurance industry will be compelled to adopt diverse decisions regarding pricing and operational approaches due to weak investment returns and low interest rates.

Technology investments aimed at supporting the growth and improving risk management will become a strategic necessity for the insurance industry. In terms of technical profitability, on the other hand, efforts will gain speed for risk-based pricing and well-balanced portfolios.

The company’s outlays in 2014 amounted to TL 5.5 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”.

Company Activities and Major Developments in Activities / 2014-2015 Primary Goals, Policies, Information on the Company’s Investments

Information on the Company’s Investments


Internal Control System and Internal Audit Activities / An Assessment of 2014 by the Board of Inspectors

An Assessment of 2014 by the Board of Inspectors

Pursuant to the Regulation on the Internal Systems of Insurance and Reinsurance and Pension Companies, the internal audit activity at our company is carried out by the Board of Inspectors reporting to our company’s Board of Directors. The Board of Directors reviewed and acquainted itself with the 2014 Activity Report of the Board of Inspectors.

In 2014, 25 headquarters units, 9 regional branches and 1 branch adding up to 35 units in total were audited and the resulting determinations and assessments were reported.

Initiated in order to monitor the extent at which the audited units fulfill the requirements of the reports resulting from the audits conducted, follow-up audits continued to be carried out in 2014. A total of 31 follow-up audits were conducted during 2014, 19 of which resulted from 2013 audits.

Auditing of agencies persisted pursuant to the Regulation on the Internal Systems of Insurance and Reinsurance and Pension Companies during 2014, and 1,108 agencies were audited, and the results were reported.

On the other hand, based on Articles 16/1 and 17/2 of the Regulation on the Internal Systems of Insurance and

Reinsurance and Pension Companies, audits were conducted at all of the agencies that remain after eliminating those that were dissolved during the reporting period from the 2,791 agencies that were listed in the audit programs approved by the Board of Directors and planned to be audited in the 2012-2014 period.

In line with the experiences derived from agency audits, agencies were continued to be assessed through scoring based on the financial data for the past three years, within the frame of efforts to further expand and strengthen the central auditing of agencies and to create early warning systems that correctly identify and reveal the risk elements in advance.

In 2014, 24 studies were completed: 10 investigations, 6 examinations and 8 other studies.

As of year-end 2014, the Board of Inspectors was staffed by 20 board members consisting of inspectors, senior assistant inspectors, and assistant 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 2014 so that the members of the Board of Inspectors obtain nationally and internationally recognized professional certificates.

Within the scope of the work aimed at enhancing the level of standard and quality of audits conducted, “Regional Branches Performance” initiative was brought to a certain point, and then to completion with the support of relevant Head Office units. The same started to be used in the 2014 Regional Branch Audit Reports.

Developments are carefully monitored to ensure that the audits conducted and the reports subsequently issued take account of the “International Standards for Internal Audit”, are risk-based, provide assurance for risk management and contribute added value to our company and necessary revisions and changes are made accordingly.

The Board of Inspectors will keep carrying out the activities within the context of the internal audit program prepared, as well as other activities outside of this scope, based on the fundamental approach for maximizing the benefits expected from internal auditing.


Internal Control System and Internal Audit Activities / Internal Control System and an Assessment by the Governing Body

Internal Control System and an Assessment by the Governing Body

Pursuant to the provisions of the “Regulation on the Internal Systems of Insurance, Reinsurance and Pension Companies” enforced upon its publication in the Official Gazette issue 26913 dated 21 June 2008, the Risk Management and Internal Control Department was set up in a structure so as to be conducted and administered directly by the CEO, and vested in the powers and responsibilities that will allow the Department to assess the risk exposure and internal control environment in an independent/impartial and effective fashion. The Board Director responsible for Internal Systems is also responsible toward the Board of Directors for the formation of the Department and ensuring, monitoring and coordinating its operability, adequacy and effectiveness.

The duties, powers and responsibilities of the individuals charged with the operation and activities of the Internal Control system, and for conducting the activities are defined in the relevant Operating Guidelines released. The internal control system is set up as a separate mechanism independent from the internal audit system, based on applicable legislation and numerous references available in national and international literature.

Centralized internal control activities do not eliminate or modify, in part or in whole, the relevant operational and supervisory responsibilities of the employees who are in charge of conducting and/or managing these activities. The Board of Inspectors separately oversees the effectiveness and adequacy of the internal control system.

Within the scope of establishing an effective internal control system that is aligned with the nature, complexity and risk structure of

the company’s operations; duly and efficiently managing, mitigating and controlling the risks involved in the company’s operations; and employing a risk-focused approach to the conduct and management of review, control, monitoring, assessment and reporting activities concerning the activities of the company’s units, all of the company’s key processes were schematized, and risk-control matrixes detailing the control points were prepared, thus completing the system documentation.

A Contingency Action and Funding Plan has been designed, which specifies the actions to be taken in the event of a liquidity crisis sustained by the company due to negative market movements beyond its control, unexpected macroeconomic events, catastrophic or big-ticket claims payments and other reasons.

With the aim to prevent the company’s exposure to various perils of differing scales (machinery breakdown, human errors, theft, fire, explosion, state of war, sabotage, natural disasters, terrorist acts, power outages, etc.) and the losses resulting therefrom, the Business Continuity Management System has been set up to recover as quickly as possible from the interruption caused by such perils and to enable resumption of key activities. Within the scope of the Business Continuity Management System, Headquarters Emergency Response Plan, IT Continuity Plan, Business Continuity Management System Guidelines, Business Continuity Plan and Incident Management Plan were drawn up and published on the Electronic Document Management System. The operability of the said plans is tested at certain intervals.

It was targeted to secure alignment with COBIT (Control Objectives for

Information and Related Technology) in the execution of information systems processes and functions, and the relevant project launched was finalized as at year-end 2012. The following headings were addressed under the COBIT Alignment Project for Information Technology Governance and Information Technology Processes:• DevisingtheInformationTechnology

(IT) Governance Model• CreatingtheGovernanceProcesses• FormulatingtheITService

Development Processes• DevelopingtheITServiceDelivery

and Operation Processes• CreatingtheITSupportProcesses• ITAuditManagement.

Accordingly, the Information Systems Management Committee was set up, which will report directly to the Executive Board and will be responsible for IT strategy and steering activities. The Information Systems Management Committee was established with the purpose of managing information systems in alignment with the company’s strategic goals, establishing the policies, procedures and processes for ensuring information security, and efficiently managing the risks arising from the use of information systems. Basically the Committee will define, asses and report on the risks arising from the use of information systems; create the guidelines for the management of these risks, establish and monitor relevant controls.

It has been considered that the internal control policies and procedures introduced and the internal control activities carried out are aligned with the company’s nature, the complexity of its operations and risk structure, and possesses the minimum elements of an efficient internal control system.


Information on AssociatesThedefactoscopeofAnadoluHayatEmeklilikA.Ş.coversengaginginindividualorgroupprivatepensionactivities;settingup 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.

Thecompanyhas20%stakeholdinginAnadoluHayatEmeklilikA.Ş.

31 December 2014 Book Value (TL) Shareholding (%)

AnadoluHayatEmeklilikA.Ş. 391,400,000 20.0

Repurchased Own Shares by the Company None.

Disclosures Concerning Special Audit and Public AuditThecompanyundergoesindependentauditsconductedbytheindependentauditfirm,AkisBağımsızDenetimveSerbestMuhasebeciMaliMüşavirlikAnonimŞirketi(KPMG)onitssemi-annualfinancialstatementsatsix-monthintervalsandonitsannualfinancialstatementsannually,aswellasconsolidationauditsperformedbyİşbankattheendoffirstandthirdquarters 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. In 2014, T.R. Ministry of Finance Tax Inspection Board conducted an examination on scrap sales collections resulting from the claims paid by our company for total loss or theft incidents.

Lawsuits Filed Against the Company and Potential ResultsLawsuits 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 MembersDuring 2014, 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 DecisionsAll decisions adopted in the Annual General Assembly meeting held on 25 March 2014 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 ProjectsOur company acts in awareness of its social responsibility and spent TL 628 thousand during the reporting period. The activities carried out within the frame of social responsibility are detailed under the heading “Commitment to Social Responsibility”.


Expenses Incurred in Relation to Donations and Grants and Social Responsibility Projects/ Commitment to Social Responsibility

Commitment to Social Responsibility

Within the frame of its commitment to social responsibility, Anadolu Sigorta extends support to education, academic activities, sports organizations, and cultural and artistic events.

Anadolu Sigorta’s approach to social responsibility projects can be summed up as one that encompasses not only customers or agencies but the whole of Turkey as a social stakeholder, and one that seeks to contribute to the entire society on this axis.

Anadolu Sigorta believes that organizations that grow stronger thanks to the society should give back to the same society. Therefore, to Anadolu Sigorta, it is crucial to construct its social responsibility projects in a human-oriented and sustainable format.

Aspiring to crown its 85th anniversary with an extensive project in 2010, Anadolu Sigorta designed a social responsibility project aligned with the corporate strategy and the expectations of the target audiences. The project was named “Bir Usta Bin Usta” (One Master, Thousand Masters), perfectly corresponding to its scope and content.

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.

The project is conducted under the technical advisory of the Ministry of Culture, Research and Training Directorate. During the course of the project, the Ministry of Culture proposes cities and city-specific crafts that are about to vanish, identifies the NGOs, and guides Provincial Directorates of Culture.

Under the project, five cities and callings are selected from among those proposed by the Ministry of Culture every year, and 15 to 20 trainees receive training for each vocation. The company aims to extend support to 50 vocations and a total of 1,000 masters-to-be over the course of 10 years.


Expenses Incurred in Relation to Donations and Grants and Social Responsibility Projects/ Commitment to Social Responsibility

Selected cities and crafts within the scope of the “Bir Usta, Bin Usta” (One Master, Thousand Masters) project are presented below:

2010• Karagöz(Turkishshadowplay)

Figuration/Bursa• MeerschaumCarving/Eskişehir• EdirnekâriArt(traditionalpainting

and varnishing of wood or leather)/Edirne

• Kutnu(traditionalsilk-basedcloth)Weaving/Gaziantep

• Kazaziye(traditionaljewelrymadewith threads of gold or silver)/Trabzon

2011• KargıClothWeaving/Çorum• SilkWeaving/Hatay• StoneWorking/Mardin• BoneCombs/Sivas• SavatlıSilverWork/Van

2012• MotherofPearlInlaying/Ankara• RugandCarpetbagWeaving/Kars• Glassblowing/Muğla• EarthenwarePottery/Nevşehir• WoodblockPrinting(oncottonor

silk)/Tokat

2013• WoodCarving/Kahramanmaraş• TraditionalCarpetWeavingofGördes/Manisa

• NeedlepointArtofNamrun/Mersin• Basketry/Rize• HandWeavingofKaracakılavuz/Tekirdağ

2014• TileWorking/Çanakkale• OltuStoneWorking/Erzurum• ArtofLeather-MadeAccessories/

Isparta• ArtofFelt-MadeAccessories/İzmir• AmberWorking/Şanlıurfa

The courses that will be launched in 2015 within the scope of the project are Local Damal Doll Making of Ardahan, Traditional Accordion Boot Making ofSöke,Aydın,TraditionalSilverThreadingofBartın,PuppetMakingofİstanbul,andWoodenWalkingCaneMakingofDevrek,Zonguldak.

Under the project, an exclusive initiative is being carried in collaborationwithİzTV,anationaldocumentary channel, under which the documentaries of the courses are produced.

In 2011, Anadolu Sigorta carried outaspecialinitiativewithİşbankconcerning microloans. Accordingly, “Bir Usta, Bin Usta” (One Master, Thousand Masters) trainees, who shall have acquired the necessary technical know-how during the training, will be able to utilize the loan entailing specialconditionsdesignedbyİşbank,by presenting the participation certificates given at the end of the training. In this way, Anadolu Sigorta will be lending support not only to vocational training, but also to efforts aimed at helping the crafts survive.

Anadolu Sigorta collaborates with TURMEPA (Turkish Marine Environment Protection Association) to prevent marine pollution and to contribute to the combat against pollution. Based on the protocol with TURMEPA, the Association that spends efforts to clean the marine environment in Turkey receives a share from the revenues generated by the insurance coverage sold to any type of vessel. The protocol for this cooperation has been in force since 2011.

Through “Bir Usta Bin Usta”

(One Master, Thousand

Masters) project, it is targeted

to extend support to 50 crafts

and a total of 1,000 masters-to-

be over the course of 10 years.1,000


The Company’s Transactions with the Risk Group

The Company’s Transactions with the Risk Group

Within the framework of the applicable provisions of the Turkish Commercial Code (TCC), our company is a subsidiaryofİşbankGroup[during2014 fiscal year]. Pursuant to Article 199 of the TCC, the company’s Board of Directors presented the declaration below in the conclusion of the affiliation report issued in relation to its relations with the controlling company or an affiliate thereof:

Commercial transactions the company realized with its controlling shareholder and other Group Companies during 2014, which are detailed in the report, fall within the company’s field of activity and were

carried out on an arm’s length basis. In all of the transactions the company realized in 2014 fiscal year with the controlling company and its affiliates, any and all legal acts carried out in favor of the controlling company or its affiliate with guidance from the controlling company, and any and all actions taken or avoided in favor of the controlling company or its affiliates in 2014 have been reviewed according to the conditions and circumstances known to us. We hereby declare that our company did not sustain any such loss on account of any transaction arising according to conditions and circumstances known in relation to 2014 fiscal year.

Details of the company’s transactions with the risk group during 2014 and related disclosures are presented in Note no. 45 under the notes to the financial statements in the present report.


1993Extending administrative and

technical assistance to Günay

Anadolu Sigorta, founded

and started to operate in

Azerbaijan, Anadolu Sigorta

becamethefirstTurkish

insurance company to set up

an international operation.

1997Aiming to make the most

of the possibilities offered

by IT, a “Recon Project” was

launched. Services were made

moreefficientandproductive

with the inclusion of all

services and agencies in the

data processing network with

online and real-time systems.

1996Policies in legal protection insurance branch,

anotherfirstinourcountry,we

rewritten.


1999In order to provide the fastest

and most comprehensive

service to its policyholders

in the aftermath of the

disastrous earthquake of

17 August, the company

worked round the clock

to provide uninterrupted

service.


Financial Status / Summary Report by the Board of Directors

Summary Report by the Board of Directors

Dear Shareholders,

Before presenting the 2014 financial statement figures covering the company’s 89th year of operation for your approval and comments, we deem it useful to recap the changes and developments in economic life and the insurance sector.

In 2014, global economic recovery lost some pace. While the issues caused by the global crisis in developed countries continued to repress their growth performances, growth in developing countries remained low as compared both to the pre- and post-crisis recovery periods. Accordingly, economic growth in 2014 is estimated to be in parallel with that of the previous year and stand at 3.3%. In its report published in January, the IMF estimates growth rates of 1.8% and 2.4% for developed countries in 2014 and 2015, respectively. Growth rates of developing economies for the same years are forecasted as 4.4% and 4.3%, respectively.

The US economy unexpectedly shrank in the first quarter of 2014, but the recovery in the ensuing periods showed that the weakness was transient. The Eurozone economy, on another front, came to a point of standstill in the second quarter of the year in line with the weak course of investments and negative export performance, and the risks in relation to decelerated growth still persist. The anticipated subsided global demand for oil due to weak economic activity in the Eurozone resulted in declined oil prices. While geopolitical problems gained the foreground as downside risks on global growth in the second half of the year, the turmoils in the Middle East, in particular, along with the tension between Russia and Ukraine, have been the key factors to put pressure on global economy.

On the side of the Turkish economy, prudential measures introduced by late 2013 and early 2014 in an effort to take under control private consumption and to curb current deficit resulted in weakened domestic demand. Having grown 4.1% in 2013, the Turkish economy expanded by 2.8% in the first three quarters of 2014 as a result of the local elections, monetary tightening and macro-prudential measures.

In the report published in November, the IMF estimated the Turkish economy’s growth rate at the end of 2014 at 3%. The report also made the determinations that the rapid growth of the Turkish economy came at the expense of large external deficits, making the economy sensitive to changes in external financing conditions, and that macroeconomic policies were adjusted to maintain the current situation rather than fixing economic imbalances. The report noted that the financial system preserved its strong structure and the main risk for Turkey remains a capital flows reversal. The IMF report of January 2015, on the other hand, projected a growth rate of 3.4% for Turkey in 2015 and 2016.

The decline in the growth of premium production in the worldwide insurance industry in 2013 persisted in the first half of 2014 in line with low economic growth rates. However, premium production growth is expected to increase progressively from the second half of 2014, and to reach 2.5% at the end of the year, and 2.8% in 2015.

With low losses and new capital that joined the reinsurance market, reinsurance costs showed a descending trend in all branches in 2014. Positive results in catastrophe and non-catastrophe losses gave rise to improved renewal conditions. In 2014, catastrophes around the world caused insured losses of USD 22 billion, which is below the ten-year average.


Financial Status / Summary Report by the Board of Directors

Increased insurance capital and scarce catastrophe losses kept the demand for the reinsurance market flat, and the insurance capital available globally expanded by 6% in the second quarter of 2014. Besides falling prices, improvements were witnessed in the reinsurance renewal terms of certain insurance companies.

The Turkish insurance industry’s growth trend in real terms that had been going on since 2008 could not be sustained in 2014 as a result of the economy administration’s measures intended to take private consumption under control. As at end-December, the insurance industry narrowed down by 0.8% in real terms. A review of industry data reveals that the real reason for the broken trend is the life branch that shrank by 10.7% in real terms, whereas the non-life branch captured a real growth of 0.8% in the same period. The non-life segment, in which our company belongs, is projected to attain nominal growth also in 2015.

Although the financial statements of the non-life sector showed generally positive results in 2014, the technical losses that arose particularly in liability branches were noteworthy. Based on the data for the first nine months of 2014, motor vehicle liability branch that represents the largest portion of the market share posted a technical loss of TL 429 million. Motor vehicles (own damage) branch, i.e. the other motor vehicle insurance branch, registered a technical profit of TL 569 million. Following motor own damage, the highest profit generators in the industry were, in order, fire with TL 255 million and personal accident with TL 213 million. Technical profit figure for all branches combined was TL 813 million, whereas net profit after tax was TL 569 million.

Looking at our company’s financial standing and operating results, our assets grew by 16% year-to-year to TL 3,773 million, while premium production went up by 9.3% in the same period to TL 3,005 million. Our company also increased its market share to 13.2% on the back of the premium growth it has achieved. Motor vehicles branch claimed the biggest share of our total premium production with 27.4%. This was followed, in order, by motor vehicle liability with 26%, fire and natural disasters branch with 16.7%, and health branches with 9.3%. Based on the positive results attained particularly in fire, motor vehicles and accident branches in 2014, technical results performed positively and the company booked a profit of TL 92.6 million gross and TL 71.6 million net at the end of the year.

Our company’s goal in 2015 will be to improve the concepts of quality service, leadership, innovation and customer-focus, and to sustainably increase the success captured in profitability.


Financial Status / Financial Information and Indicators

Financial Highlights (TL thousand) 2014 2013

Total Premium Production 3,004,830 2,749,704

Total Assets 3,773,391 3,252,770

Claims Paid 1,553,197 1,249,199

Paid-in Capital 500,000 500,000

Shareholders’ Equity 1,019,833 913,016

PretaxProfit/Loss 92,642 67,462

NetProfit/Loss 71,560 67,462

Capital Adequacy Ratios

Premiums Received/Shareholders’ Equity 2.95 3.01

Shareholders’ Equity/Total Assets 0.27 0.28

Shareholders’ Equity/Technical Provisions 0.45 0.49

Asset Quality and Liquidity Ratios

Liquid Assets/Total Assets 0.60 0.55

Current Ratio 1.22 1.22

Liquidity Ratio 1.53 1.53

Premium and Reinsurance Receivables/Total Assets 0.21 0.24

Receivables from Agencies/Shareholders’ Equity 0.62 0.66

Operational Ratios

Retention Ratio (*) 0.77 0.75

Claims Payment Ratio 0.56 0.60

Profitability Ratios

Loss-Premium Ratio 0.78 0.74

Cost Ratio 0.25 0.27

Combined Ratio (Loss-Premium Ratio+Cost Ratio) 1.03 1.01

PretaxProfit/PremiumsReceived 0.03 0.02

FinancialProfit(Gross)(**)/PremiumsReceived(*) 0.05 0.03

TechnicalProfit/PremiumsReceived 0.04 0.04

Financial Information and Indicators

(*) Including premiums transferred to the Social Security Institution(**)Inthecalculationofthefinancialprofit,investmentincomethathasbeentransferredfromthenon-technical division to the technical division was excluded.

Shareholders’ Equity(TL thousand)

Claims Paid(TL thousand)

Net Profit/Loss(TL thousand)

Total Assets(TL thousand)

3,77

3,39

1

14

3,25

2,77

0

13

1,01

9,83

3

14

1,55

3,19

7

14

71,5

60

14

913,

016

13

1,24

9,19

9

13

67,4

62

13


Financial Status / Financial Information and Indicators

Premium Production (TL thousand) 2014 2013 Change (%)

Accident 79,755 50,494 57.9

Illness/Health 279,983 229,008 22.3

Motor Vehicles 824,143 811,525 1.6

Aircraft 12,563 10,099 24.4

Watercraft 67,021 63,534 5.5

Marine 66,019 49,343 33.8

Fire and Natural Disasters 503,259 463,414 8.6

General Losses 239,216 249,689 -4.2

Motor Vehicles Liability 780,421 703,489 10.9

Aircraft Liability 30,205 21,181 42.6

General Liability 105,013 80,846 29.9

Credit 1,127 710 58.7

Financial Losses 8,500 9,510 -10.6

Legal Protection 7,606 6,860 10.9

Total 3,004,830 2,749,704 9.3

Total Premium Production(TL thousand)

3,00

4,83

0

14

2,74

9,70

4

13

Premium Growth Rate(%)

Accident

Illness/Health

Motor Vehicles

Aircraft

Watercraft

Marine

Fire and Natural Disasters

Motor Vehicles Liability

Aircraft Liability

General Liability

Credit

Legal Protection

Total

Financial Losses

General Losses

57.9

22.3

1.6

-4.2

24.4

5.5

8.6

33.8

10.9

42.6

29.9

58.7

10.9

-10.6

9.3


Financial Status / Financial Information and Indicators / 2014 Economic Overview

In 2014, global economic recovery lost some pace. While the issues caused by the global crisis in developed countries continued to repress their growth performances, growth in developing countries remained low as compared both to the pre- and post-crisis recovery periods. Accordingly, the IMF revised its growth projection for the world economy downwards in the World Economic Outlook released in October, as it has been doing for the last three years. Decreasing global economic growth estimate for 2014 from 3.4% to 3.3%, the IMF also revised its growth projection for 2014 from 4% to 3.8%. The World Economic Outlook update published in January 2015, on the other hand, revised the 2015 figure once again, this time at 3.5%. The IMF estimates that the growth rates to be registered by developed countries and developing economies in 2014 will be 1.8% and 4.4%, respectively.

In the said report, the IMF noted that global economy displayed a recovery that differentiated on the basis of countries, rather than an overall recuperation. The US economy unexpectedly shrank in the first quarter of the year, but the recovery in the ensuing periods showed that the weakness was temporary. The Eurozone economy, on another front, came to a point of standstill in the second quarter of the year in line with the weak course of investments and negative export performance, and the risks in relation to decelerated growth still persist. While geopolitical problems gained the foreground as downside risks on global growth in the second half of the year, the turmoils in the Middle East, along with the tensions between Russia and Ukraine, put pressure on global economy.

Nevertheless, in its Global Financial Stability Report, the IMF stated that, six years after the global crisis, worldwide economic recovery still relies on supportive monetary policies implemented by developed countries.

Suggesting that these policies that give substantial support to economic recovery increase the tendency to take financial risks, it is underlined that they have also given rise to higher market and liquidity risks lately. The IMF also reported that global risk appetite increased, as compared to its April report, and credit risk alleviated in conjunction with the positive course of financing terms within the frame of the pursuit for high yields.

According to the US Department of Commerce data announced in the last week of October, seasonally adjusted GDP grew beyond expectations and registered 3.5% in the third quarter. While the estimate that resulted from the Wall Street Journal survey was 3.1%, the US economy displayed the best half-year performance in more than a decade when the figure for the third quarter is evaluated in conjunction with 4.6% growth recorded in the second quarter. While the positive outlook of the growth data was driven especially by improved net exports, household expenditures,

2014 Economic Overview

2013 2014 (E) 2015 (P)

Growth (%)Global 3.3 3.3 3.5Developed Countries 1.3 1.8 2.4USA 2.2 2.4 3.6Eurozone -0.5 0.8 1.2Japan 1.6 0.1 0.6Developing Countries 4.7 4.4 4.3China 7.8 7.4 6.8Brazil 2.5 0.1 0.3Turkey 4.0 3.0 3.0Inflation (%)Developed Countries 1.4 1.4 1.0Developing Countries 5.9 5.4 5.7

The World Economy

IMF World Economic Outlook, January 2015 (E): Estimated, (P): Projected



although slower than the first quarter, supported growth. The US employment data also exhibited a positive outlook. Having started to decline from the first quarter of 2014, the unemployment rate retreated to the pre-crisis level during the year, and was 5.6% at year-end 2014, even below the expectations.

The economic activity in the Eurozone remains weak. Data announced in the Eurozone point that the zone economy continues to be under pressure. With the effect of declined energy prices, annual inflation was -0.2% in December. On the other hand, industrial production fell by 1.8%, above projections, on a monthly basis in August, and showed that the negative course of production activities continued.Onanotherwing,ZEWindexthat shows investors’ sentiments about the economic future of Germany dropped to -3.6 in October, acquiring a negative value for the first time since November 2012. The Federal Ministry for Economic Affairs in Germany revised growth estimations downwards from 1.8% to 1.2% for 2014, and from 2% to 1.3% for 2015. Acting as the driver of the Eurozone since the global crisis, the German economy’s slowdown comes to the fore as a factor that aggravates the concerns about the Eurozone. On the other hand, GDP growth for the first quarter of 2014 in the Eurozone, previously announced as 0.2%, was revised as 0.3%, while the second quarter growth, which was announced to be flat, was revised as 0.1%.

Having expanded by 7.5% in the second quarter of the year, the Chinese economy grew 7.3% in the third quarter, surpassing the market estimate of 7.2%. Despite beyond-projected growth, the data that was indicative of the Chinese economy’s worst growth performance in the post-global crisis period was deemed as a negative development.

In its guidance that followed the FOMC meeting of 17 December, the US Fed underlined that they would be patient on deciding when to raise rates, instead of their previous remark that interest rates would be kept low for a “considerable time”. The Fed noted that this change of language is not a change of guidance away from the “considerable time” characterization.

Based on the expectation that the Fed will take a step toward rate hike by mid 2015 the latest, developing economies are anticipated to suffer from fund issues as a result of shrank liquidity, and funding costs are predicted to increase. In the event that rates are raised, it is considered that the course of liquidity in the world will change and funds in search of a safe haven will head toward the USA.

EUR/USD parity went up somewhat in the first half of October. The expectation that the Fed might start rate hikes sooner than projected in line with the positive course of the US economy led the US dollar to grow stronger in international markets from July. Another contributor was the

further loosened monetary policy by the European Central Bank (ECB). EUR/USD parity dropped to 1.2499 as of early October. Thereafter, the lessened worries about faster and earlier action to be taken by the Fed with respect to its monetary policy caused some depreciation of the US dollar. However, the US currency readopted an appreciating trend as the recuperation of the economic outlook in the US was more strongly underlined in the Fed meeting ended on 29 October. Within this framework, EUR/USD parity was in the order of 1.2163 at the end of December.

Besides the global economic growth projections that were revised downwards, the anticipated subsided global demand for oil due to the weak economic activity in the Eurozone resulted in declined oil prices. In this framework, crude oil price per barrel that dropped to its lowest since November 2010 lost value by 46% in the aggregate in 2014, and closed at USD 57 as at the end of December. This situation will supposedly affect net energy importing countries including Turkey positively. Following a downward course in parallel with the strengthened US dollar, gold prices fell rapidly in the last week of October, and stood at 1,188 USD/ounce as at 31 December.

Decreasing global economic growth estimate for

2014 from 3.4% to 3.3%, the IMF also revised its

growth projection for 2014 from 4% to 3.8%.



The Turkish Economy

As a result of the prudential measures introduced by late 2013 and early 2014 in an effort to take private consumption under control and to curb current deficit in the Turkish economy, domestic demand adopted a weakening trend. Having grown 4.1% in 2013, the Turkish economy’s growth was 2.8% in the first three quarters of 2014 as a result of the local elections, monetary tightening and macro-prudential measures.

Geopolitical repercussions of the developments that take place in our neighboring countries upon the national economy, coupled with the anticipated recovery in the European Union that kept failing to match projections, put pressure on growth and acted as significant factors that resulted in restricted economic growth.

Remaining below the potential and growing in the 2-4% interval since 2012, the Turkish economy is projected to perform similarly also in 2015, although the rate is expected to be closer to the upper cap. This can be considered as a more acceptable level amid the new global equilibrium, although it will be below the potential level. The Medium Term Program 2015-2017 announced by the Government on 8 October 2014 estimated the annual growth at the end of 2014 as 3.3%, while projecting a growth rate of 4% for 2015. It is stated that the increase

in growth in 2015 will be driven mainly by recovered global economy, expected economic recuperation in the EU, increased growth in Turkey’s trading partners, and revived domestic demand.

The IMF, on the other hand, painted a more pessimistic picture regarding Turkey’s economic growth expectations and anticipated 3% growth rate for 2014 and 2015 for our national economy in its World Economic Outlook published in October. In the Article 4 Consultation with Turkey Report published in November, the IMF made the determinations that the rapid growth of the Turkish economy came at the expense of large external deficits, making the economy sensitive to changes in external financing conditions; and that macroeconomic policies were adjusted to maintain the current situation rather than fixing economic imbalances. The report noted that the financial system preserved its strong structure and the main risk for Turkey remains a capital flows reversal.

The negative state that resulted from increased volatilities in the financial markets drove inflation outlook and expectations away from the medium term target in 2014. Moreover, the effects of the declining oil prices throughout the year have become visible as of December. Consequently, CPI cumulative increase rate went up by 0.7%, below the projections, in the twelve months to December 2014, and stood at 8.17%. Plummeted oil prices that decreased the Transportation group prices, combined with the seasonal decline in the clothing and footwear group, have been influential on the restricted cumulative growth rate of CPI. Hence, the annual rate of increase of CPI was 8.17% in 2014. The economy administration projects the 2015 inflation at 6.3%, slightly below the market.

Most certainly, inflation will be a critical factor of balance in 2015. While it is not anticipated to be widespread, double-digit annual inflation figures may be in question at certain periods during 2015. Although inflation is expected to decline with significant

Medium Term Program 2015-2017 Data

Years Growth GDP (%) Inflation Rate (%)

2014 3.3 9.4

2015 4.0 6.3

2016 5.0 5.0

2017 5.0 5.0

The annual rate of

increase of CPI was

8.17% in 2014.

8.17%



contribution from the base effect advantage in the first half of 2015, the important point is whether this decline can be preserved until the end of the year. The key dynamic at this point will surely be the trend to be adopted by food prices, which have a significant share in the rise of inflation.

Increased uncertainties in global economy resulted in fluctuations in capital flows towards developing countries and Turkey. When these global uncertainties combined with the political tensions in our country, the US dollar saw sharp upturns particularly early in the year. In an effort to counter the resulting hike in the US dollar rate, the CBRT increased the one-week repo rate, i.e. the lead policy rate, by 550 basis points in the first month of the year, which was followed by a decrease of 175 basis points in the aggregate in May-July period after the US dollar slackened. From August, the CBRT chose to keep this critical policy rate indicator stable at 8.25%.

Behind the improved foreign trade balance in 2014 were stronger exports combined with the slowed down imports. As at year-end 2014, exports expanded by 3.9% on an annual basis while imports declined by 3.7%, which resulted in a significant downfall of 15.4% in foreign trade deficit.

It can be suggested that the increased export was triggered by the depreciated Turkish lira during the reporting period, improvement in the Eurozone although it incorporated downside risks, and increased gold exports. The primary drivers behind decelerated imports included slow

domestic demand, lower energy prices and slackened gold imports, as well as the effect of the Turkish lira that lost value.

Although the recovery in the European Union economies failed to capture the desired level and despite the weak demand conditions, Turkey’s export to the Eurozone in December went up by 1.8% year-to-year. In the same period, EU’s share in Turkey’s total exports was up from 40.0% in December 2013 to 40.2% in December 2014.

Overall, foreign trade data indicate that the expansion in exports is maintained to a large extent despite the ongoing issues plaguing Turkey’s export markets. The revival that can be observed in domestic demand in line with the lagging effects of the rate cuts the CBRT realized in earlier months, on the other hand, may lead to an upturn in imports in the period ahead.

Nevertheless, the recent plummet in oil prices is noteworthy. The price of Brent oil, which averaged USD 109 per barrel in 2013, plunged to USD 55 as at 31 December 2014 in connection with the increased worries about global economic growth in 2014. If they persist at this level in the period ahead, oil prices will certainly contribute towards keeping the foreign trade deficit at its present level despite the anticipated expansion in domestic demand.

The Medium Term Program issued by the government estimates imports to decrease to USD 244 billion at year-end 2014, while exports will preserve its uptrend and finish the year at

USD 160.5 billion. The same report projects export and import figures at USD 173 billion and USD 244 billion, respectively, for 2015.

Unemployment rate data, which have been displaying an upward trend since the middle of 2012, continued to rise throughout 2014. Having gained momentum particularly in the second quarter of 2014 and having reached 9.9% at the end of the first half of the year, the rate of unemployment maintained its climb in the November data published by TurkSTAT and was registered as 10.7%.

The anticipated policy rate hike of the US Fed in keeping with the economic improvement, the ECB’s decision to continue with quantitative easing for the purpose of supporting economic recovery, and geopolitical developments take the forefront among the global headlines that will bear an impact on national economy in 2015. Keyissueswithinnationalborders,on the other hand, include the CBRT’s commitment to fight inflation, the performance of the current deficit, steps to be taken with respect to structural reforms, and the ongoing election process.

Having grown 4.1% in 2013, the Turkish economy’s

growth was 2.8% in the first three quarters of 2014

as a result of the local elections, monetary tightening

and macro-prudential measures.


Financial Status / Financial Information and Indicators / Overview of the Turkish Insurance Industry and Future Outlook

Worldwide decline in the non-life insurance premium production in 2013 persisted in the first half of 2014 in line with low economic growth rates. However, premium production growth progressively increased around the globe from the second half of 2014; it is estimated to reach 2.5% at the end of the year, and projected to be 2.8% in 2015 and 3.2% in 2016.

Owing to economic growth, increased penetration and population, developing markets are anticipated to claim higher shares out of the total written premiums by 2023. The table above shows that this was also the case in the 2012-2014 period.

As at the year-end 2014, the rate of premium growth is expected to gain speed in developed countries, whereas the same is anticipated to fall in developing countries.

Increased capital available to the global insurance industry and the low level of catastrophe losses paved the way for lower insurance prices in 2014. The decline in fire and engineering insurance was 4.6% as at the second quarter. Decreased freights caused

downward trends in prices both in hull and cargo insurances. Owing to major passenger aircraft crashes that occurred last year, insurance prices applied to airline companies showed some rises depending on losses. However, in line with the trend in other lines of business, the prices in the general aviation insurance exhibit a downturn due to abundance of capacity. The overall downward trend in prices manifested itself at a ratio of 0.6% in liability insurance and 2.3% in financial risks insurance in the first half of the year.

With low losses and new capital that joined the reinsurance market, reinsurance costs showed a descending trend in all lines of business in 2014. Positive results in catastrophe and non-catastrophe losses gave rise to improved renewal conditions. In 2013, catastrophes around the world caused insured losses of USD 45 billion, which is below the ten-year average of USD 58 billion. This tendency persisted through the first half of 2014, and insured losses amounted to USD 22 billion. While meteorological forecasts reported intensive North Atlantic hurricanes, which make up

the cause of the biggest-ticket losses for the insurance industry, 2014 saw no hurricanes that made a significant impact on the US coastline. In this respect, the world insurance business had yet another lucky year. A major earthquake did not take place in the reporting period either, and the highest cat losses arose once again from meteorological phenomena. However, these events were far from affecting reinsurance prices. According to projections by Aon Benfield brokerage, it will take a cat loss worth USD 100 billion for reversing global prices upwards.

The size of the classic reinsurance market expanded by USD 15 billion in the second quarter of 2014 over the first quarter figure and reached USD 570 billion. This magnitude translates into a 6% rise as compared with year-end 2013. The drivers behind this increase were low cat losses, unrealized financial returns, and the contribution of unconventional capital to the reinsurance market. The share of unconventional capital to reinsurance capital allocated for catastrophes reached 14%. Unconventional capital resources include capital market actors

Non-Life Insurance Worldwide Premium ProductionPremium Production (USD million) Inflation-Adjusted Change (%)2014 2013 2012 2014* 2013 2012

World 2,083,671 2,032,850 1,968,677 2.5 2.3 2.7Developed countries 1,681,120 1,653,018 1,623,616 1.7 1.1 1.5Developing countries 400,723 379,832 345,060 5.5 8.3 9.3Turkey 9,793 9,762 9,556 0.8 13.3 9.0

An Overview of the World Insurance Industry

Worldwide premium

production growth is

estimated to reach 2.5%

at the end of the year.2.5%

*2014figuresareestimated


Financial Status / Financial Information and Indicators / Overview of the Turkish Insurance Industry and Future Outlook

managing large sums such as hedge funds, pension funds and the like. Their contribution to the reinsurance market continues at an increasing rate. In the first half of 2014, cat bonds worth USD 9.4 billion were redeemed, representing 41% rise year-to-year. Total amount of cat bonds traded on the market in the second half of 2013 and in the first half of 2014 reached a record USD 22.4 billion.

Alternative capital was up by 18% to USD 58.6 billion as compared with year-end 2013. Increased insurance capital and scarce catastrophe losses kept the demand for the reinsurance market flat and the insurance capital available globally expanded by 6% in the second quarter of 2014. Besides falling prices, improvements were witnessed in the reinsurance renewal terms of certain insurance companies, such as an increased number of replacements, expanded coverage scope etc.

The bill in relation to Solvency II that sets out the capital adequacy requirements for the European insurance industry was ratified in the European Union Parliament on 11 March 2014, with its enforcement

date set as 1 January 2016. One of the most crucial regulatory arrangements of 2014, C-ROSS (China Risk Oriented Solvency System) targets to develop a risk assessment that is more comprehensive than Solvency II. With this implementation, non-life companies are expected to optimize their portfolios, and to arrange their investment portfolios and reinsurers in China, which charges ahead toward becoming one of the world’s largest insurance markets.

Rating agencies including A.M. Best, Standard and Poors and Moody’s revised the outlook for reinsurance companies from stable to negative during the reporting period, on account of increased competition and decreased demand, combined with macroeconomic conditions. If this tendency continues in 2015, then it can be anticipated for the conventional reinsurance industry to opt for downsizing, and in return, the insurance industry to reduce cessions on one hand, while making more frequent use of alternative risk management instruments on the other.

Overview of the Turkish Insurance Industry and Future Outlook

The Turkish insurance industry’s growth trend in real terms that had been going on since 2008 came to an end in 2014 as a result of the economy administration’s measures intended to take private consumption under control. On the basis of year-end premium production figures, the insurance industry narrowed down by 0.8% in real terms in the reporting period. In 2015, the sector is projected to attain a nominal growth in non-life branches in the range of 10-15% depending on economic developments, and thus, to recapture real increase.

Looking at the current situation of the sector, it can be suggested that the shrinkage resulted from the life segment. While the non-life segment registered 9.0% nominal growth at the end of December, the same has grown by 0.8% when the CPI rate of 8.17% announced for the same period is taken into consideration. Impacted by the shrank bank loans, the life segment’s downsizing of 3.4% in nominal and 10.7% in real terms resulted in a real contraction of 0.8% for the overall insurance industry.

According to December 2014 data, non-life branches were accountable for 87.4% of total production, corresponding to a premium production of TL 22,710 million. Premiums written on life insurance reached TL 3,280 million in 2014, translating into 12.6% of total production.

Based on the data for the first nine months of 2014 for the non-life segment, motor vehicle liability branch that represents the largest portion of the market share posted a

The Turkish insurance industry’s growth trend

in real terms that had been going on since 2008

came to an end in 2014 as a result of the economy

administration’s measures intended to take private

consumption under control.


Financial Status / Financial Information and Indicators / Dünya ve Türkiye Sigortacılığının Genel Durumu ve Beklentiler

technical loss of TL 429 million. In the motor TPL segment that makes up a substantial portion of this branch, on the other hand, the loss figure goes up to as high as TL 567 million. Motor vehicles (own damage) branch, i.e. the other motor vehicle insurance branch, registered a technical profit of TL 569 million. Following motor own damage, the highest profit generators in the industry were, in order, fire with TL 255 million and personal accident with TL 213 million. Technical profit figure for all branches combined was TL 813 million. Nonetheless, the effect of the amount of TL 919 million needs to be taken into account, which has been transferred from financial accounts to the industry’s financial statement.

At the bottom line, non-life segment booked a profit of TL 717 million gross, and TL 569 million net in its financial statements for the period ended 30 September 2014.

Having languished since 2012, the acquisitions in the industry picked up one again with Halk Bank’s announcement on the Public Disclosure Platform(inTurkish:KAP)inJuly.Inits disclosure, Halk Bank informed that they have authorized the Head Office forthedisposalofHalkSigortaA.Ş.andHalkHayatveEmeklilikA.Ş.,inthecapitals of which Halk Bank controls the majority share.

Another piece of information concerning the industry came from

SabancıHolding,whichdisclosedthatit would carry out a public offering for 19.66% of the shares in AvivaSA EmeklilikveHayatA.Ş.Withthebook building having taken place in the first week of November, the price for the AvivaSA Emeklilik ve HayatA.Ş.IPOwassetatTL47.Withthis development, the number of life companiestradedonBorsaİstanbulwent up to two, including our associate Anadolu Hayat Emeklilik.

The merger process that was initiated in July 2013 with the acquisition of YapıKrediSigortabyAllianzwasconcluded on 1 October 2014 when the two companies began pursuing their activities as a single entity under the name Allianz.

The non-life segment

registered 9.0% nominal

growth at the end of

December 2014.9.0% 31.12.2014 31.12.2013

BranchPremium

Production (TL)Market

Share%Premium

Production (TL)Market Share

%Change (%)

Accident 1,035,675,457 4.56% 887,277,513 4.26% 16.73%Illness/Health 2,930,346,787 12.90% 2,473,114,765 11.87% 18.49%Motor Vehicles 5,085,067,734 22.39% 5,025,804,558 24.12% 1.18%

Motor Own Damage 5,085,067,734 22.39% 5,025,804,558 24.12% 1.18%Rail Vehicles 10,586 0.00% 5,286 0.00% 100.27%Aircraft 58,724,204 0.26% 41,755,849 0.20% 40.64%Watercraft 140,455,545 0.62% 139,916,316 0.67% 0.39%Marine 488,871,753 2.15% 415,936,425 2.00% 17.54%Fire and Natural Disasters 3,844,573,725 16.93% 3,324,489,251 15.96% 15.64%General Losses 2,429,292,744 10.70% 2,186,115,158 10.49% 11.12%Motor Vehicle Liability 5,528,325,411 24.34% 5,382,930,772 25.84% 2.70%

Motor Vehicle TPL 5,070,820,284 22.33% 4,963,838,584 23.83% 2.16%Aircraft Liability 92,765,288 0.41% 69,721,106 0.33% 33.05%Watercraft Liability 9,409,070 0.04% 1,675,496 0.01% 461.57%General Liability 634,407,542 2.79% 508,124,765 2.44% 24.85%Credit 138,958,449 0.61% 106,601,433 0.51% 30.35%Fidelity 26,554,285 0.12% 24,702,020 0.12% 7.50%Financial Losses 178,765,763 0.79% 171,417,053 0.82% 4.29%Legal Protection 84,360,711 0.37% 67,218,062 0.32% 25.50%Support 2,984,038 0.01% 7,482,251 0.04% -60.12%Total Non-Life 22,709,549,092 87.38% 20,834,288,079 85.99% 9.00%Total Life 3,280,003,588 12.62% 3,395,327,656 14.01% -3.40%Grand Total 25,989,552,680 100.00% 24,229,615,735 100.00% 7.26%Kaynak:TSB


Financial Status / Financial Information and Indicators / Developments and Changes in Legislation

Developments and Changes in Legislation

Summary information about the key changes in the legislation published during the fiscal year, which concern the company’s operations and operating results, are presented below.

Consumer Protection Law

Consumer Protection Law no. 6502 was published in the Official Gazette issue 28835 dated 28 November 2013, to be enforced six months later. The key change the new law introduced with respect to insurance companies was the expanded scope of consumer transaction definition so as to incorporate insurance transactions, thus making insurance transactions a consumer transaction. The requirements in the New Consumer Law went into force on 28 May 2014.

General Conditions for Suretyship Insurance

Scope, terms and other general conditions of implementation for the Suretyship Insurance was enacted by the Undersecretariat of Treasury effective 01 February 2014. While they have not been implemented in Turkey as at the enforcement date of the general conditions, suretyship insurance calls for a new perspective and expertise. The suretyship insurance is expected to serve as an alternative to bank letters of guarantee and contribute significantly to the solution of suretyship and guarantee problems domestic companies are faced with.

Circular on the Newspaper Announcements to be Placed for Unclaimed Monies by Right Holders

The Regulation on Unclaimed Monies by Right Holders under Insurance Policies Governed by the Provisions of Private Law, which was published in the Official Gazette issue 28789 dated 08 October 2013, sets forth the principles and procedures for lapsed monies such as premiums and compensations that need to be paid or returned to right holders.

Draft Audit Guides

Article 23 of the Regulation on the Supervision and Audit Principles

and Procedures for Insurance and Private Pension Sectors, which went into force upon its publication in the Official Gazette issue 28054 dated 14 September 2011, stipulates public disclosure of such portions of the audit guides drawn up by the Undersecretariat of Treasury, the minimum content of the documents and information to be required from companies within the scope of the audit, and audit norms.

Circular on the Implementation Principles of Private Health Insurance Regulation

Private Health Insurance Regulation governing the implementation principles and procedures for private health insurance practices has been revised by being published in the Official Gazette issue 28800 dated 23 October 2013. The Regulation, which went into force six months after the date of its promulgation, incorporates important new rules about information and proposals, and specifically about lifetime renewal guarantee, which is a frequent topic of conflict between insurance companies and policyholders.

Insurance Agencies Regulation

The new regulation that went into force upon its publication in the Official Gazette issue 28980 dated 22 April 2014 made some revisions to the qualifications of people who will work as insurance agents, their authorities and responsibilities, and principles and procedures in relation to their activities. Article 25 of the new regulation repealed the former Insurance Agencies Regulation that went into force upon its publication in the Official Gazette issue 26847 (duplicate) dated 14 April 2008.

Circular on the E-Announcement and E-Legislation Feedback System of the Directorate General of Insurance

For the purpose of more efficient performance of regulatory work, the Undersecretariat of Treasury launched the E-Announcement and E-Legislation Feedback System as of 01 May 2014. The system will enable electronic

conveyance of draft legislation for seeking the feedback of the concerned institutions/companies thereupon, and electronic announcement of the legislation drawn up.

Regulation on Unfair Terms in Consumer Contracts

The regulation, which went into force upon its publication in the Official Gazette issue 29033 dated 17 June 2014, sets out the principles and procedures for establishing and overseeing the unfair terms incorporated in contracts made with consumers.

Regulation on Activities to be Considered Under Insurance Business, Insurance Contracts Made in Favor of Consumers and Distance Insurance Contracts

The Regulation, which went into force upon its publication in the Official Gazette issue 28982 dated 25 April 2014 by the Undersecretariat of Treasury, establishes the boundaries of insurance activity and of the businesses that do not fall thereunder, and sets out the principles and procedures in relation to insurance contracts made in favor of consumers and insurance contracts that the parties make without getting together.

Draft Regulation on Distance Contracts for Financial Services

Draft Regulation was drawn up based on Articles 49 and 84 of the Consumer Protection Law no. 6502 dated 28 November 2013, for setting out the implementation principles and procedures in relation to distance contracts for financial services. The draft regulation sets forth the obligation to provide advance information, exercise of the right of withdrawal, and obligations of parties, as well as termination of the contract and burden of proof under the heading various provisions.


2001After providing service

foroverfivedecades,the

company was relocated from

itsbuildinginKaraköyto

İşTowers,whereitwould

betogetherwithİşbank

subsidiaries.

2002A brand-new era began

with the “Maximum Service

in Insurance” concept. The

company introduced the

service philosophy under

one title that it has possessed

since its foundation, and once

again became the author of a

firstinthesector.

2004Voted as “the most satisfactory insurance

company with its products and services”,

Anadolu Sigorta received the Active Academy

Private Customer Satisfaction Award in

Insurance. The company expanded its service

range by taking over the health branch from

Anadolu Hayat Emeklilik, which the company

was required by law to give up. Anadolu

Sigorta was awarded its ISO 9001: 2000

QualityManagementSystemce

rtification,an

endorsement proving that the company’s quality

management system complies with international

standards.


2006The company maintained

its sectoral leadership in

premium production for

thefifthconsecutiveyear

and realized a premium

production in excess of TL 1

billion, undersigning yet

another historic result in

the history of the Turkish

insurance industry.


Financial Status / Financial Information and Indicators/ An Assessment of Anadolu Sigorta in 2014

An Assessment of Anadolu Sigorta in 2014

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 direct premium production reached TL 2,880 million in 2014. With the addition of TL 125 million in reinsurance premiums, the company’s total premium production amounted to TL 3,005 million last year.

With 27.4%, motor vehicles branch commands the biggest share of the total portfolio. This is followed by motor vehicle liability, fire and natural disasters, and illness/health branches.

2014 - Breakdown of Premium Production by Branches (%)

Branch Share (%)

Accident 2.7

Illness/Health 9.3

Motor Vehicles 27.4

Aircraft 0.4

Watercraft 2.2

Marine 2.2

Fire and Natural Disasters 16.7

General Losses 8.0

Motor Vehicles Liability 26.0

Aircraft Liability 1.0

General Liability 3.5

Credit 0.0

Financial Losses 0.3

Legal Protection 0.3



Premium Production 2013-2014 (TL thousand)

Accident

Illness/Health

Motor Vehicles

Aircraft

Watercraft

Marine

Fire and Natural Disasters

General Losses

Motor Vehicles Liability

AircraftLiability

General Liability

Credit

Financial Losses

Legal Protection

50,494

2013 2014

10,099

63,534

49,343

21,181

80,846

9,510

6,860

710

463,414

703,489

249,689

811,525

229,008

79,755

12,563

67,021

66,019

30,205

105,013

8,500

7,606

1,127

503,259

780,421

239,216

824,143

279,983


11.1

13

3.1

13

48.2

13

11,2

43

13


Accident:

Premium production in the accident branch was up 57.9% year-on-year and amounted to TL 79,755 thousand in 2014. Claims paid in this branch totaled TL 11,243 thousand. The accident branch booked a technical profit of TL 38,407 thousand in 2014, translating into a year-on rise by 238,5%.

Motor Vehicles:

Premium production on motor vehicles insurance, which has the highest share in the premium production of Anadolu Sigorta, went up by 1.6 % year-on, amounting to TL 824,143 thousand. Claims paid in this branch in the same period went up by 8.0% to TL 531,227 thousand. After posting a technical profit of TL 90,430 thousand in 2013, the branch registered a technical profit of TL 85,313 thousand in 2014.

Illness/Health:

In 2014, premium production on illness/health branch grew 22.3% year-on-year and amounted to TL 279,983 thousand, while claims paid totaled TL 211,843 thousand. Technical accounts showed a profit of TL 3,581 thousand in illness/health branch in 2014.

Premium Production(TL thousand)

79,7

55

14

50,4

94

13

13,5

17

14

42.1

14

15.2

13

22.5

14


Claims Paid(%)

Technical Profitability(%)


279,

983

14

229,

008

13

211,

843

14

168,

735

13

82.2

14

78.7

13

1.3

14


Claims Paid(%)



824,

143

14

811,

525

13

531,

227

14

491,

961

13

70.6

14

66.5

13

10.4

14


Claims Paid(%)



41.6

13

14,2

12

13


Aircraft:

While premium production on aircraft insurance was worth TL 12,563 thousand, claims paid dwindled by 66.2% as compared to 2013 and amounted to TL 4,798 thousand. The technical accounts showed a loss of TL 7,781 thousand in 2014.

Marine:

During 2014, premium production on marine branch rose by 33.8% to TL 66,019 thousand while claims paid amounted to TL 20,452 thousand. Technical profitability was TL 22,796 thousand in 2014.

Watercraft:

In 2014, watercraft insurance premium production grew by 5.5% year-on-year and reached TL 67,021 thousand. While claims paid in this branch were worth TL 57,560 thousand in the reporting period, technical loss was TL 3,506 thousand.


12,5

63

14

10,0

99

13

4,79

8

14

33.7

14

-661

.3

1361

.914

-203

.6

13


Claims Paid(%)



67,0

21

14

63,5

34

13

57,5

60

14

28,4

58

13

107.

3

14

80.2

13

5.3

13

-5.2

14


Claims Paid(%)



66,0

19

14

49,3

43

13

20,4

52

14

19,0

25

13

25.6

14

34.5

14

26.2

13


Claims Paid(%)



86.9

13


Fire and Natural Disasters:

Premium production on fire and natural disasters insurance policies was up 8.6% in 2014 and reached TL 503,259 thousand while claims paid amounted to TL 129,415 thousand. Up by a remarkable 111.0% in 2014, technical profitability of the branch reached TL 63,464 thousand.

Motor Vehicle Liability:

Anadolu Sigorta’s premium production on motor vehicle liability insurance went up by 10.9% in 2014 to TL 780,421 thousand, while claims paid amounted to TL 442,934 thousand. The technical loss of TL 35,212 thousand booked by motor vehicle liability branch in 2013 was reversed to a profit figure of TL 2,885 thousand at the end of 2014.

General Losses:

During 2014, premium production on general losses branch was down by 4.2% to TL 239,216 thousand, while claims paid amounted to TL 110,220 thousand. The branch posted TL 19,131 thousand in technical profit in 2014, up by 62.6% year-on-year.


503,

259

14

463,

414

13

129,

415

14

86,7

86

13

51.5

14

49.0

13

12.6

14

6.5

13


Claims Paid(%)



239,

216

14

249,

689

13

110,

220

14

94,3

56

13

68.8

13

67.9

14

8.0

14

4.7

13


Claims Paid(%)



780,

421

14

703,

489

13

442,

934

14

296,

757

13

82.3

14

0.4

14

-5.0

13


Claims Paid(%)




Aircraft Liability:

Premium production on aircraft liability branch was TL 30,205 thousand in 2014, up by 42.6%. The technical profit in this branch amounted to TL 515 thousand corresponding to a technical profitability of 1.7%.

Credit:

Premium production in the credit insurance branch was worth TL 1,127 thousand in 2014, while claims paid amounted to TL 778 thousand. The technical accounts showed a loss of TL -1,348 thousand on 2014 operations of the branch.

General Liability:

During 2014, general liability insurance premium production grew 29.9% and amounted to TL 105,013 thousand. While claims paid rose from TL 23,187 thousand to TL 32,243 thousand, a technical loss of TL 126.639 thousand was registered.


30,2

05

14

21,1

81

13

296

14

1,53

2

13

92.0

14

57.6

131.

714

7.6

13


Claims Paid(%)



105,

013

14

80,8

46

13

32,2

43

14

23,1

87

13

426.

8

14

120.

6

13

-120

.6

14

-20.

2

13


Claims Paid(%)



1,12

7

14

710

13

778

14

6,30

1

13

91.0

14

385.

0

13

-119

.6

14

-450

.6

13


Claims Paid(%)



94.3

13

4,24

5

13

9,51

0

13


Financial Losses:

Premium production on financial losses branch totaled TL 8,500 thousand in 2014 and claims paid were worth TL 26 thousand. The financial losses branch posted a technical profit of TL 2,570 thousand at the end of the reporting period.

Total:

Anadolu Sigorta’s total premium production in 2014 was up 9.3% and reached TL 3,004,830 thousand, while claims paid grew by 24.3% to TL 1,553,197 thousand. Despite the 4.0-point rise in loss premium ratio, the technical profit figure went up by 20.2% to TL 121,260 thousand owing to the positive contribution from the increased financial profitability.

Legal Protection:

Premium production in the legal protection branch stood at TL 7,606 thousand in 2014. The branch attained a profitability of 83.0 % in 2014 for a technical profit of TL 6,310 thousand.


8,50

0

14

26

14

-9.2

14

49.9

13

30.2

14

10.6

13


Claims Paid(%)



7,60

6

14

6,86

0

13

162

14

129

13

9.0

14

4.8

13

83.0

14


Claims Paid(%)



3,00

4,83

0

14

2,74

9,70

4

13

1,55

3,19

7

14

1,24

9,19

9

13

77.7

14

73.7

13

4.0

14

3.7

13


Claims Paid(%)




Investment Income

Investment income grew by 39.0 % to reach TL 258,928thousand in 2014.

The company, in 2014, derived TL 94,307 thousand as interest income on time deposits, TL 27,749 thousand from the sale of government securities and private sector bonds, and TL 8,119 thousand in dividend income from equities.

Investment Expenses

Anadolu Sigorta’s investment expenses increased 47.3 % to TL 275,810 thousand in 2013. The biggest component of this figure consisted of TL 1190,509 thousand in investment income that was transferred to the technical division. As required by theUndersecretariatofTreasuryCircularontheProceduresandPrinciplesofKeysUsedinFinancialStatementsthatwentinto effect on 1 January 2008, investment income on assets covering technical reserves has been transferred to the technical division. The investment income transferred to the technical division in line with the relevant transfer method was up by 54.6% year-to-year and reached TL 190,509 thousand.

A total of TL 31,151 thousand was booked as income on sales of financial investments during the reporting period. TL 13,409 thousand of this was from the sale of bills and bonds, while TL 2,408 thousand was from the sale of equities, and TL 12,225 thousand was from the sale of mutual funds. The portion of TL 3,109 thousand remaining outside these amounts consists of income generated by the sale of financial assets subject to repo trading.

The “financial investments valuation account”, which consists of valuation income derived from all equities, bills and bonds, mutual fund shares, repo trading, and fixed-term deposits, showed TL 19,421thousand.

The company booked currency translation gains in the amount of TL 59,971 thousand in 2014. Income from Anadolu Sigorta’s equity participations amounted to TL 16,000 thousand.

Investment Income (TL thousand) 2014 2013 Change (%)Income from Financial Investments 130,175 85,749 51,8Revenues from the Sales of Financial Investments

31,151 16,004 94,6

Valuation of Financial Investments 19,421 10,576 83,6FX Gains 59,971 52,709 13,8DividendfromAffiliates 16,000 18,000 -11,1Income from Real Estate 1,815 2,848 -36,3Income from Derivatives 206 213 -3,4Other Investments 189 113 67,5Total 258,928 186,213 39,0

Investments Expenses (TL thousand) 2014 2013 Change (%)

Investment Management Expenses (incl. interests)

-137 - -

Devaluation of Investments -3,510 -4,678 -25.0Loss from the Sales of Financial Investments

-7,713 -13,582 -43.2

Investment Expenses Transferred to the Technical Division

-190,509 -123,220 54.6

Loss from Derivative Products -185 -100 85.3FX Losses -49,954 -28,805 73.4Depreciation Expenses -23,802 -16,832 41.4Total -275,810 -187,216 47.3


Financial Status / Financial Information and Indicators/ An Assessment of Anadolu Sigorta in 2014Financial Status / Assessment of the Company Capital and Comments

Revenues, Income, Expenses and Losses from Other Operations

The “revenues, income, expenses and losses from other operations” account stood at TL 11,736 thousand at year-end 2014. A major contributor to this account balance stems from a TL 20,361 thousand charge against the reserves account, while the deferred tax assets account created an income effect of TL 7,396 thousand.

Operating Results

Keyratiosconcerningthecompany’sperformanceareshowninthecharttotherightalongwithprior-yearresultsforcomparison.

The insurance sector is expected to sustain its growth in 2015 while the goal of Anadolu Sigorta will be to secure increased production in real terms and attain a sustainable profit, by further leveraging the concepts of quality service, leadership, innovation and customer focus. Technical results will be monitored closely, targeting to increase technical profitability through improving loss premium ratios particularly in unprofitable branches. In striving to achieve its strategic goals, the company aims to further increase its brand equity while continuing to offer its services to the policyholders with strict adherence to its quality service concept as it has always done.

Assessment of the Company Capital and Comments

The key considerations that the companies in the insurance sector will face in the years ahead will be the satisfaction of potential capital requirements that might arise in line with growth, and due management of the capital.

When planning for growth and profitability targets, Anadolu Sigorta observes capital needs as well. Attention is paid to ensure that the company capital is at adequate level, taking into consideration the regulatory requirements. Information on capital adequacy is presented in the relevant section of the notes to the financial statements.

Revenues, Income, Expenses and Losses from Other Operations (TL thousand) 2014 2013 Change (%)Provisions -20,361 -23,893 -14.8Rediscounts -3,360 2,354 -242.8Deferred Tax Income 7,396 - -Deferred Tax Liability Expense - -11,655 -100.0Other Revenues and Income 5,142 3,469 48.2Other Expenses and Losses -554 -2,689 -79.4Total -11,736 -32,414 -63.8

2014 2013TechnicalProfitabilityRatio 4.0% 3.7%Net Loss-Premium Ratio 77.7% 73.7%Return on Equity 7.0% 7.4%Return on Assets 1.9% 2.1%

2014 2013 Change (%)Technical Division Balance 121,260 100,878 20.2Investment Income 258,928 186,213 39.0Investment Expenses -275,810 -187,216 47.3Revenues, Income, Expenses and Losses from Other Operations

-11,736 -32,414 -63.8

Total 92,642 67,462 37.3Income/Loss (Gross) 92,642 67,462 37.3Tax Provisions -21,082 - -Income/Loss (Net) 71,560 67,462 6.1


Financial Status / Profit Distribution Policy

Profit Distribution Policy

• Thecompany’sprofitdistributionprinciples for shareholders and other people participating in the profit are governed by the applicable requirements of the Turkish Commercial Code, Capital Market legislation and our Articles of Incorporation.

• Thedividenddistributionproposalspresented by the Board of Directors for the approval of the General Assembly are prepared in a manner to preserve the delicate balance between the expectations of our shareholders and the company’s need to grow, and taking into consideration future expectations regarding the company’s operations, capital adequacy targets and the conditions prevailing in capital markets, as well as the profitability of the company.

• Theprofitdistributionpolicyespoused by the Board of Directors is based on the principle of proposing to the General Assembly the distribution of at least 30% of the net distributable profit for the period as bonus shares and/or in cash.

• Intheeventthatthenetdistributableprofit for the period calculated based on the legal records remains below 5% of the company’s paid-in capital, the Board of Directors may propose to the General Assembly that no dividends be distributed.

• Dividenddistributionformalitiesandprocesses are carried out so as to be completed by no later than the end of the fiscal year in which the General Assembly Meeting is convened.

• Pursuanttothecompany’sArticlesof Incorporation, our employees are paid dividends up to three times of their salaries, which, in the aggregate, must not be in excess of 3% of the amount remaining after the first dividend is set aside.

• Thecompanymaydistributeadvances on dividends in accordance with the principles and procedures set forth in the Capital Market legislation.

• Therearenopreferencesharesinthecompany.

• Nofounder’sbonuscertificatesaregiven, nor are dividends paid to the members of the Board Directors.


2007The sector’s unrelenting

champion in premium

production for the last six

years, Anadolu Sigorta

becamethefirstinsurance

company in Turkey to exceed

the USD 1 billion threshold in

total premium production.

2008Anadolu Sigorta launched

the C2C (Closer to Customer)

change program whereby

all business processes are

reviewed and revised. While

the company increased

itsprofitabilitythrough

sustainable growth strategy, it

also received Active Academy

Private Customer Satisfaction

Award in Insurance for the

fifthconsecutivetime.

2010The company celebrated its 85th anniversary.

Planned within the frame of the C2C change

program,thefirstsetofchange

swasputinto

life. The company launched its new social

responsibility project, “Bir Usta Bin Usta” (From

One Master to One Thousand), thus contributing

to revitalize vanishing professions in Anatolia.


Risks and an Assessment by the Governing Body / Risk Management Policies Adhered to by Types of Risks

The company’s risk policies and related implementation procedures include written standards devised and enforced by the Board of Directors and implemented by senior management. Determined and enforced by the Board of Directors in parallel with international practices on the basis of insurance underwriting risk, credit risk, market risk, operational risk and the risk of use of the company’s services for laundering proceeds from crime and for financing terrorism, these are general standards that define the organization and scope of the risk management function, risk measurement procedures, the duties and responsibilities of the company’s Risk Management Committee, as well as the procedures for determining risk limits, actions to be taken in possible limit violations, and the compulsory approvals and confirmations that are required to be given in various cases and circumstances.

Besides insurance underwriting, credit, market and operational risks, other risks can result from the reciprocal and successive interaction of these risks. Therefore, an integrated consideration should be adopted for all risk elements stemming from assets and liabilities positions. The company’s basic strategy with respect to the distribution of long-term assets and liabilities is to ensure consistency between assets and liabilities at optimum liquidity risk level so as to support the objective of maximizing returns. Accordingly, utmost importance is given to the following points:

• Thebasicobjectiveofthecompany’s activity in the money and capital markets is to generate maximum possible return at a specified risk level. The priorities in asset investments are, in order of precedence, safe investment, liquidity and return.

• Wheninvestingassets,thecompany takes into account market and liquidity risks, portfolio concentration risk, payables in high amounts such as known or foreseeable advance taxes, corporate taxes, reinsurer payments and claims payments, as well as receivables from insurance activity.

• Throughscenarioanalysesandstress tests, the assets portfolio is exposed to various shocks and tested with respect to interest rates, exchange rates and share certificate prices. These tests are conducted at quarterly intervals at a minimum.

• Utmostattentionispaidtomaintaining a cash position in foreign currency for potential catastrophic risks equivalent to the lower limit of excess of loss agreements, as well as known liabilities for any given period.

returns to be derived and general economic expectations, sets the company’s risk tolerance, which is then expressed in terms of risk limits. In line with the procedures set in the Policies and in view of the market conditions in the relevant period, the Risk Management and Internal Control Department reports violations of limits submitted to the CEO and the Board of Directors.

Senior Management is responsible for implementation of Risk Management Policies. For purposes of ensuring compliance with policies, Senior Management means the CEO, Deputy Chief Executive Officers, and relevant Unit Managers and Regional Managers. On the other hand, all authorized employees performing the transactions regarded as a part of risk management processes are individually responsible for the accuracy and reliability of all kinds of data and information they provide in relation to their respective jobs within the process, which form the basis of the making of decisions.

Risk Management Policies Adhered to by Types of Risks



1- Insurance Underwriting Risk Policy

Insurance underwriting risk is defined as a risk that might arise from failure to correctly and effectively implement the insurance technique within the process of turning coverage provision for natural risks which are not known certainly if they will occur and for risks which are known for sure to occur but are unknown time-wise into sustainable commercial earnings. The scope of Insurance Underwriting Risk Policies consists of the conditions and price of the coverage to be provided for the risk; the principles applied in determining which of the coverages provided will be ceded up to what amounts and to whom in the case of risks decided to be transferred; conducting effective monitoring of risk portfolio loss frequency so as to allow formulation of fitting reinsurance strategies at sufficient frequency, and related monitoring and reporting system.

Management of insurance underwriting risk is based on the principle of forming the risk portfolio with risks that represent a low potential to cause loss. In order to avoid poor risk selection and incorrect pricing of insurance policies and to create accurate reinsurance policies, effective monitoring is carried out on loss frequency and loss severity of the risk portfolio. The risk portfolio is separately overseen on the basis of agents, industry, branches, regions, brands, models, tariffs, products, customers and other parameters.

A comprehensive insurance underwriting risk reporting system is used to ensure measurement of loss performance, oversee compliance with applicable legislation and ensure reporting on the effectiveness of insurance underwriting risk controls. The risk of the portfolio is regularly reported by executive departments and the Risk Management and Internal Control Department to the CEO and the Board of Directors.

2-Credit Risk Policy

Credit risk means the possibility of the company’s sustaining loss due to failure on the part of policyholders, agents, reinsurers, fronting companies, coinsurers, and other parties to partially or totally fulfill their obligations towards the company. It also indicates to the loss of market capitalization caused by the deterioration in the financial standing of companies with which there are subsidiary or affiliate relationships. The Credit Risk Policy sets out the procedures and responsibilities related to the management, control and monitoring of credit risk, as well as matters in relation to credit risk limits.

Early identification and definition of issues are of the essence for effective management of credit risk. For this purpose early warning signals are determined; these are indicators pointing at cases that will adversely influence the credit risk and lead to a credit risk that is above the company’s risk tolerance. For insurance brokers, these are declined collection ratios, reduced production performances, slackened discipline in conforming to company guidelines, and other data from intelligence. For Reinsurance companies and counterparties, these cover all kinds of data and information obtained in relation to negative ratings and developments. It is the duty and responsibility of executive units to obtain data and information in relation to credit risk. All kinds of information obtained are urgently considered within the frame of decision-making, monitoring, reporting and auditing processes.

A credit risk scoring system used, which has the capability to be made use of in the management of credit risk and decision-making, to enable monitoring risk on the basis of counterparties, to take notice of expected and unexpected losses, and to allow for making the decisions based not only on the return derived or anticipated to be derived

from the counterparty at any time, but also on the risk underwritten. The risks of counterparties are regularly reported by the Risk Management and Internal Control Department to the CEO and the Board of Directors. The Risk Management and Internal Control Department is also responsible for undertaking daily follow-up of regional, sectoral and market trends that have an actual or possible impact on the company’s credit risk, and for reporting the results to the CEO and the Board of Directors.

3-Market Risk Policy

Market Risk means the risk of loss in the value of the company’s placements in financial borrowing instruments whose return is linked to interest rate; stock, other investment securities, all FX or FX-indexed assets and liabilities in or off the balance sheet, derivative agreements based on the said instruments, which loss might result from the volatilities in interest rates, stock prices and exchange rates.

The basic and ultimate purpose of the company’s activities in money and capital markets is to generate returns. The basis of Market Risk policies is to measure, report and keep under control the risk that the company is exposed to by reason of such activity. The top priority is to ensure that the company’s Market Risk exposure is within the limits stipulated by applicable legislation and is compliant with the company’s risk appetite.In market risk management, risk appetite is expressed in terms of market risk limits assigned to the executive fund management unit and the contracted asset management companies. Market risk limits are categorized into two groups: limits set employing the value at risk method, and limits determined based on the ratio of each group of investment securities to the total portfolio and shareholders’ equity. The Risk Management and Internal Control Department and executive fund management unit closely and



constantly monitor limit violations. In case limits are exceeded, the amount at which a limit is exceeded and its reasons are reported to the CEO and the Board of Directors, along with the assessments of the executive body. If limit violations are above the ratios or durations set by the Board of Directors, necessary action is determined by the Board of Directors.

Market risk is calculated employing internationally accepted statistical methods. Since these calculations cover risk prediction for the following days, the accuracy of predictions are compared subsequently with actual values and monitored on a daily basis. On the other hand, the portfolio is tested under different scenarios for determining the effects of occurrences, which pose a low probability in terms of occurrence, but big volume in terms of loss. The assessments, which include the possible mismatches among types and maturities of the company’s assets and liabilities, are regularly reported in detail to the CEO and the Board of Directors.

4-Operational Risk Policy

Operational risk is defined as any risk other than absolute insurance underwriting, credit and market risks which might occur in the organization, business continuity, insufficient or inoperative business processes, technology, human resource, underperformance by individuals, administrative mistakes, unfortunate events, misconduct, accident and fraud, systems or external factors, legislation, management and business environment, and which might cause physical or reputational loss to the company.

Limits are introduced for potential operational risks that might arise during the activities based on the “Company Risk Catalogue,” which is the basic document used in defining and classifying all risks that may be faced with. The Risk Catalogue is updated in parallel with the changing conditions. “Self-Assessment Methodology” is used in the identification of operational risks. In this method, the risks in relation to activities conducted are exposed with the involvement of the personnel performing the job.

Qualitative and quantitative methods are used jointly in the measurement and evaluation of operational risk. The measurement process uses data obtained from “impact - likelihood analysis”, “control culture profile surveys” and internal and external “loss database.” When managing operational risk, efforts are spent to develop controls to eliminate or mitigate the possibility of sustaining loss due to risks that the company may be exposed to in relation to its activities. Effectiveness and adequacy of existing or subsequently developed controls, and the implementation of action plans adopted in this regard are evaluated in coordination with the Risk Management and Internal Control Department and the Board of Inspectors. The Risk Management and Internal Control Department monitors all operational risks that the company may be exposed to during the course of its activities, and regularly reports on the same to the CEO and the Board of Directors.

5- Policy for Combating the Legalization (Laundering) of Proceeds from Crime and Financing of Terrorism

This policy is intended to define, rate, monitor, assess and mitigate the risks the company is exposed to with respect to the use of the insurance service offered by the company in laundering proceeds from crime or financing of terrorism. The ultimate goal can be achieved by effectively monitoring and supervising customers and transactions in full compliance with the applicable legislation and regulations.

The overall scope of the policy covers the activities centrally executed for defining, measuring, monitoring, controlling and reporting the risks that the company is exposed to for reasons of the use of the insurance service offered by the company in laundering proceeds from crime or in financing of terrorism, or the company’s failure to fully comply with the liabilities imposed by the Law no 5549 on Prevention of Laundering Proceeds from Crime and by related regulations and communiqués.

The basic strategy of the company to achieve the ultimate goal is to carefully plan, conduct and manage risk management activities independently, impartially, purposefully, productively and efficiently, employing a risk-focused approach and in line with applicable legislation and internationally accepted principles and standards. The basic principle in achieving this goal is to employ the most advanced tools and methods that are available and possible to be used. Findings from risk management, monitoring and control activities are regularly reported to the Board of Directors by the Board Director who is delegated by the Board of Directors in respect of this matter.


Risks and an Assessment by the Governing Body / Activities of the Committee of Early Determination of Risk

Activities of the Committee of Early Determination of Risk

Pursuant to the provisions of the Communiqué Serial: IV No: 56 on the Determination and Implementation of Corporate Governance Principles enforced upon its publication in the Official Gazette issue 28158 dated 30 December 2011, it has been decided to set up a Committee of Early Determination of Risk as of 27 February 2012. The committee will be responsible for carrying out all relevant works and efforts for the early determination of risks that might endanger the existence, progress and survival of the company, implementation of measures and remedies against identified risks, and management of the risk.

The committee makes an assessment of the situation in its bimonthly reports submitted to the Board of Directors; the said report is also shared with the statutory auditor.

RISK MANAGEMENT ACTIVITIES AND RISK ASSESSMENT

The company’s risk exposure is monitored, assessed and controlled individually under the categories of insurance underwriting risk, credit risk, market risk and operational risk. The risk exposure arising out of the use of the company’s insurance services for laundering proceeds from crime or for financing terrorism, or out of failure to achieve full compliance with the obligations imposed by the Law no 5549 on Prevention of Laundering Proceeds from Crime and by related regulations and communiqués is addressed independently from other types of risks as per the applicable legislation.

When the company’s risk exposure is assessed with respect to the magnitude of potential impact of those risks, the effects of developments in global and national economy upon the technical and financial performance, the potentialearthquakeinİstanbul,andlow technical profitability come to the fore.

It is well known that macroeconomic risks and financial stability risks mostly result from global developments, as well as national developments, in outward-oriented economies with a broad current deficit such as Turkey. The key factors that fuelled macrofinancial risks particularly in recent years have been

the sudden changes in risk perceptions in conjunction with the weak global economic outlook and the extremely volatile capital flows. The plummeted commodity prices and particularly that of oil and geopolitical tensions arose as new sources of instability. In this respect, the risks and uncertainties against the growth of all developing economies in general emerge as follows:

• TheFed’snormalizationofitsmonetary policy and the potential effects thereof on developing economies,

• SustainedfragilityintheEurozone

• Aggravatedconcernsthattheglobaleconomic outlook worsened due to the fact that the oil prices, which quickly slumped to their lowest levels of the past five years, affected the economies of oil exporting countries,

• Geopoliticaltensionsthathave regained vigor in various geographies across the world.

Although the Turkish economy has received well-deserved credit for its growth performance in the past decade, that same performance also brought along the current deficit issue. It is common knowledge that the Turkish economy is unable to attain growth without producing current deficit, and is fragile in the face of interrupted capital inflows due to its


Risks and an Assessment by the Governing Body / Activities of the Committee of Early Determination of Risk

inherent imbalances. In a conjuncture of decreased global risk appetite, the financing of growth constitutes a highly critical agenda item for the Turkish economy.

During 2015, the Fed’s decisions, geopolitical developments, the course of oil prices and domestic political agenda will obviously lead to volatile periods in economy. Such a conjuncture might easily pave the way for potentially significant deviations in various economic parameters, including credit rates, loan utilization, housing and car sales, which are interrelated with the production performance of the insurance industry. Yet, in general, the insurance industry is expected to perform more positively in 2015 than it did in 2014.

The compensation amounts that might result from earthquakes and other catastrophe risks that exceed the upper limits of various existing agreements are of a nature that might lead the company to suffer losses of a magnitude that cannot be made up for in a typical operating year. Modeling software is used to determine the magnitude of an earthquake in İstanbulandthepotentiallossesthat would arise therefrom, and the potential margin of error incorporated in such software is also taken into consideration when determining the final protection level. Scenario analysis is employed to establish some uncertainties that cannot be calculated by modeling programs, such as personal injury, motor own damage claims, tsunami, post-earthquake fire, changes in our protection level due to volatile exchange rates, inflation, high level coverage in conjunction with loss of profit, and a portfolio that expands during the course of the year, whereas a certain safety margin is allowed for some other uncertainties.

It is considered that the total amount of protection the company obtains for catastrophe risks is sufficient for a 1000-year earthquake, which is the minimum model according to the Reinsurance Strategy.Although it is not deemed vital when a potential earthquakeinİstanbulisconsideredindividually, 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. The operability of these plans is tested at regular intervals.

Low operating profitability is at the top of the risk elements that are critical for the company, which is the case also for all companies in the sector that are engaged in non-life branches. This predicament that results from excessive price competition and prevents accumulation of capital is anticipated to disappear gradually, in parallel with the future depth to be achieved by the Turkish Insurance Industry, which constantly grows other than in periods of crises. Another expectation is that the problem of technical profitability will be mitigated significantly by the contribution to be lent to operational efficiency by company-wide projects conducted within the frame of a comprehensive transformation program.


Other Matters and Financial Statements / 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”)

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”)Convenience Translation into Englısh of the Independent Auditor’s Report Related to Annual Report Originally Issued in Turkish

ToAnadoluAnonimTürkSigortaŞirketiGeneralAssembly,

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”)

WehaveauditedtheaccompanyingannualreportofAnadoluAnonimTürkSigortaŞirketi(the“Company”),fortheyearended31 December 2014.

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 ResponsibilityOur 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 29 January 2015 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.

AkisBağımsızDenetimveSerbestMuhasebeciMaliMüşavirlikA.Ş.AmemberofKPMGInternationalCooperative

AlperGüvenç,SMMMPartner 24 February 2015İstanbul,Turkey


2012The company received four

International award with its

social responsibility project,

and its 2011 Annual Report.

2013Anadolu Sigorta relocated to

isnewheadofficeinKavacık-

İstanbul.

2014Total premium production surpassed

TL 3 biillion.


An Assessment of the Board Directors by the Corporate Governance Committee

Apart from the CEO, the Board of Directors consists of non-executive members.

Chairman of the Board and CEO functions are carried out by different individuals.

Taking into consideration that there are no non-corporate ultimate shareholders with a controlling interest in our company, it is thought that the Board Directors naturally possess the advantage to act independently and therefore, to be impartial in their decisions, upholding the interests of our company and stakeholders above everything else.

The Board of Directors meets regularly and at least monthly as pre-scheduled, and at any time as and when deemed necessary. The Board of Directors met 12 times in 2014. The Board Directors, in principle, attend every meeting.

Care is paid to determine the Board meeting date during the immediately preceding meeting, followed by written invitation. It is intended to set the meeting date so as to allow all Directors to participate, and save for unforeseeable exceptional events, the Board meetings are held with the participation of all Directors.

The Board meeting agenda is determined by the Chairman of the Board of Directors in line with the proposals of the CEO and the Board

Directors.

Utmost care is paid to ensure that the information and documents about the topics covered in the Board meeting agenda are made available for the examination of the Directors at least five days in advance, and when such timing cannot be met, efforts are spent to ensure equal flow of information to the Board Directors.

Each Director is entitled to one vote and none has weighted vote or affirmative/negative vetoing rights.

Pursuant to the Articles of Incorporation, the Board of Directors convenes on the basis of absolute majority and makes decisions with the absolute majority of Directors present in the meeting.

Pursuant to the company’s Articles of Incorporation;

The Board of Directors is authorized to pass decisions on any and all acts and transactions that are necessary for the achievement of the company’s operating scope, save for those for which the General Assembly is authorized as per the law and the Articles of Incorporation.

Without prejudice to the duties and powers that cannot be delegated as

set out in Article 375 of the Turkish Commercial Code and in other articles, the Board of Directors may delegate management, in part of in whole, by way of an internal bylaws in accordance with Article 367 of the Turkish Commercial Code.

The Board of Directors fulfills its responsibilities remaining outside the scope of its basic functions taking into consideration the opinions and recommendations of executive bodies and committees. Such responsibilities include, but are not limited to the following:

• Approving the company’s annual budget and business plans,

• Preparing the company’s annual reports and finalizing the same to be presented to the General Assembly,

• Ensuring that the General Assemblies are held in compliance with the legislation and the company’s Articles of Incorporation,

• Taking necessary action in relation to General Assembly decisions,

• Approving the executives’ career plans and rewarding provided to them,

• Determining the company’s policies about Shareholders, stakeholders and Public Relations,

• Determining the company’s disclosure policy,

• Setting the codes of ethics for the company and its employees,

• Establishing the operating principles of committees; ensuring their efficient and productive functioning,

• Taking necessary action so as to ensure the company’s organizational structure responds to current circumstances,

• Examining the activities of former boards of directors.

Other Matters and Financial Statements / An Assessment of the Board Directors by the Corporate Governance Committee


The Board of Directors consists of eleven Directors, which number enables efficient organization of the activities of the Board. Two independent Directors serve on the company’s Board of Directors.

Although there are no set rules on non-independent Directors’ undertaking other duties outside the company, the Directors do not have any other duties apart from their natural duties in the entities they represent and from those in the establishments owned by the entities they represent. Yet, Board Directors devote sufficient amount of time for company affairs, and exercise their powers prudently and within the frame of good faith, possessing all necessary knowledge to ensure full performance of the duty.

Past experiences, and outside positions held, if any, of the independent Board Directors are disclosed in their résumés and presented on our website and in our annual report.

When fulfilling its decision-making function, the Board of Directors acts on the basic consideration of:

• Maximizing the fair value of the company,

• Pursuing the company operations so as to ensure long-term and stable earnings for our Shareholders,

• Maintaining the delicate balance between the Shareholders and the company’s need to grow.

In the formation of the Board of Directors, care is given to;

• Ensure that the nominees are present in the meeting at the time of election to the seats on the Board of Directors,

• Inform the Shareholders about the nominees,

• Allow Shareholders to ask questions to the nominees,

• Inform the Shareholders, during the General Assemblies, on other companies on the boards of which Director nominees serve and on the compliance or non-compliance to internal regulations set exclusively on this topic.

Directors just starting to serve on the Board are offered an orientation program covering the following at a minimum:

• Introduction with our executives and visits to the company’s units,

• The CVs and performance assessments of our executives,

• Strategic goals, current status and issues of the company,

• Market share, financial structure and performance indicators of the company.

Pursuant to legislation, general managers of insurance companies must have graduated from a four-year university minimum, and have at least ten years experience in any one of insurance, banking, economy, business management, accounting, law, finance,

mathematics, statistics or engineering fields. More than half of the Board Directors must have graduated from a four-year university minimum, and have knowledge and experience in at least one of the fields mentioned above.

The Directors possess these qualifications and have;

• Satisfactory knowledge and skills in banking and insurance business,

• The skill to read and analyze financial statements and reports,

• Basic knowledge about the legal regulations governing our company, and about general market circumstances,

• The will and the opportunity to regularly attend the Board meetings for the period of time for which they are elected to serve.

The Board of Directors adopted the necessary measures for preventing undisclosed information and/or trade secrets from being disseminated out of the company.

FatihGören HasanHulkiYalçın Prof.SavaşTaşkent

Deputy Chief Executive and Board Director and Board Director and Member of the Corporate Member of the Corporat Head of the CorporateGovernance Committee Governance Committee Governance Committee

Other Matters and Financial Statements / An Assessment of the Board Directors by the Corporate Governance Committee


Other Matters and Financial Statements / Corporate Governance Principles Compliance Report

PART I - STATEMENT OF COMPLIANCE WITH CORPORATE GOVERNANCE PRINCIPLES

OurcompanyfirmlybelievesthatCorporateGovernancePrinciplesareascriticalasfinancialperformance,andthatputtingtheseprinciples into practice bears utmost importance both for the development of national and international capital markets and for the best interests of our company.

Our company implements the principles that are set as compulsory principles by the Corporate Governance Communiqué Serial: II-17.1.

Within this context, the company’s Articles of Incorporation do not cover provisions stipulating;

· Stakeholder participation in the company’s management,· Expansion of the scope of minority rights beyond the provisions of applicable legislation.

Hence, minority rights are not represented on the Board of Directors.

Since the company’s Articles of Incorporation do not include a provision about making donations, the company does not have a donations policy.

OurcompanydoesnothaveaspecificpolicyforthenumberofwomanmembersontheBoardofDirectors.

Theprinciplesthatarenotyetimplemented,whichareexceptional,havenotledtoanyconflictofinterestamongthestakeholders to date.

At the Annual General Assembly Meeting convened on 25 March 2014 in accordance with the provisions of the Turkish Commercial Code no. 6102, it has been agreed to amend Article 4 of the company’s Articles of Incorporation. The said amendment has been registered on 10 April 2014, and the announcement for such registration was promulgated in the Turkish Trade Registry Gazette issue 8551 dated 16 April 2014.

The assessment and determinations of the level of compliance achieved by our company to the corporate governance principles, and opinions regarding the scope of the compliance level and ideas on its qualitative improvement are presented below.

PART II - SHAREHOLDERS

2.1 Shareholder Relations Department AnInvestorRelationsUnithasbeensetupinthecompanyin2005.Messrs.FatihGören,MuratTetik,BarışHüseyinŞafakandCemÇözerhavebeenservingintheInvestorRelationsUnit.

TheheadoftheunitisMr.FatihGören,DeputyChiefExecutive,whoalsoservesasamemberoftheCorporateGovernanceCommittee.Mr.GörenholdsaCorporateGovernanceRatingLicense.

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

Name Title Phone No E-mail AddressMr.FatihGören Deputy Chief Executive 0 850 744 00 55 [email protected]. Murat Tetik Manager 0 850 744 02 55 [email protected]ışH.Şafak Supervisor 0 850 744 02 54 [email protected]Çözer Specialist 0 850 744 01 64 [email protected]

Corporate Governance Principles Compliance Report



This unit plays an active part in the protection of shareholding rights and facilitates their exercise, mainly regarding the right to obtain and review information, and establishes the communication between the Board of Directors and shareholders. All of the employees serving in the Investor Relations Department possess the required licenses.

The Investor Relations Department reports its activities to the Board of Directors four times a year, on a quarterly basis.

In essence, the Investor Relations Department works to;

· Ensure maintenance of the records about Shareholders in a healthy, secure and up-to-date manner,· Respond to the Shareholders’ and potential investors’ written information requests about the company, apart from those that arenotpubliclydisclosed,areofaconfidentialand/orcommercialsecretnature,

· Make available to the shareholders such information and disclosures that may have an effect on the exercise of shareholding rights on the company website in an up-to-date manner

· Ensure that the General Assembly Meetings are convened in accordance with the applicable legislation, the Articles of Incorporation and other internal regulations,

· Prepare the documents the Shareholders could make use of in the General Assembly,· Ensure that the results of the voting are recorded and the reports thereon are communicated to the Shareholders,· Observeandmonitorthefulfillmentofallliabilitiesarisingfromthecapitalmarketlegislation,includingallrequirementsin

relation to corporate governance and public disclosure,· Ensure representation of our company in investor relations meetings organized in Turkey or abroad by international

establishments through participation in such events,· Prepare the presentation materials to be used in meetings.

In 2014, all verbal and written information queries received from researchers and our investors in relation to our company and/ortopubliclydisclosedfinancialstatementresultswereanswered.Requestsformeetingsreceivedduringthereportingperiodfrom national and international investment companies were accepted and necessary information was provided. In total, two teleconferences and 28 investor meetings were held in 2014, 17 of them with foreign investment companies. In these meetings, presentations were made on our sector and our company, and the investors’ questions were answered.

2.2 Shareholders’ Exercise of Their Right to Obtain Information All information queries of our Shareholders are answered, apart from those that are trade secrets or undisclosed information.Information requests received from our shareholders are addressed by our employees in the shareholder relations unit, and are prudentlyrespondedtoinatimely,accurateandcompletemanner,onconditionthattradesecretsandconfidentialinformationshall be protected.

Information on the topics our Shareholders frequently need and developments that might affect the exercise of their rights are posted in English and Turkish languages on our website accessible at www.anadolusigorta.com.tr.Pursuant to applicable legislation, minority Shareholders are entitled to request the General Assembly to appoint a special auditor for examining certain events.In 2014, our Shareholders did not request appointment of a special auditor from the General Assembly of Shareholders.

Our Articles of Incorporation contain no provisions stipulating the request for appointment of a special auditor as an individual right. On the other hand, each shareholder’s request to have a special auditor appointed is reserved, provided that such shareholdersatisfiestherequirementsunderArticle438oftheTCC.

It is believed that all information necessary for healthy exercise of Shareholders’ rights is made available to our Shareholders on our website, in our annual report and material event disclosures in general, and through individual queries, in particular.

The Shareholders’ queries in relation to the legal and commercial relationships between our company and the real persons or legal entities with which our company is directly or indirectly associated in terms of capital, management or auditing are also fulfilledtotheextentpermittedbytheapplicablelegislation.

All information that might affect the Shareholders’ exercise of their rights is made available to the same on our Internet site in an updated manner, with a view to expand their right of obtaining information.



2.3 Information About General Assembly MeetingsIn 2014, one General Assembly meeting was convened which was the 2013 Annual General Assembly meeting held on 25 March 2014.

The said meeting was held with the participation of Shareholders representing 65.4% or a portion of TL 326.8 million of our paid-in capital of TL 500 million.

Whilethecompany’sBoardDirectors,otherrelevantindividuals,officialsandauditorsresponsiblefordrawingupthefinancialstatements,anofficialfromtheIndependentAuditCompanyauditingthefinancialstatementsofthecompanyandsomeemployees participated in the meeting, other stakeholders or media representatives did not attend the meeting.

The announcement on the meeting invitation including the meeting place, date, hour, agenda, and a specimen of a proxy statement was published at least three weeks prior to the meeting date in the Turkish Trade Registry Gazette, Posta and Radikal daily newspapers,atwww.anadolusigorta.com.tr,CentralRegistryAgency(CRA)andPublicDisclosurePlatform(inTurkish:KAP).

Care is taken that General Assembly announcements cover:

· The meeting date and hour· The meeting place,· Agenda,· Necessary information about the agenda items,· Former and current versions of the amended article(s) as approved by the related authorities, if the agenda covers any

amendments to the Articles of Incorporation,· The body making the invitation,· The reason for postponement of the original meeting and the meeting quorum for the current one, if the General Assembly is

summoned to reconvene upon postponement of the original one for any reason,· Inordinarymeetingannouncements,theaddressatwhichtheannualreport,financialstatements,andotherdocuments

related to the General Assembly can be examined.

Financial statements and reports including the annual report; informative documents on the General Assembly meeting agenda items for which there was a need, and other documents underlying the agenda items; the latest version of the Articles of Incorporation and the amendment text, if applicable, and the grounds therefor, shall be made available at the company headquarters and branches for review by our shareholders from the date of the announcement summoning the General Assembly.

All information and documents related to the General Assembly meeting are also accessible on the company website at the addresswww.anadolusigorta.com.tr.Thefollowingarealsopostedonthecompanywebsite:totalnumberofsharesreflectingthe company’s shareholding structure and voting rights; grounds for the dismissal or substitution of Board Director(s) and information on individuals to be nominated to the seats on the Board of Directors, if the General Assembly meeting agenda contains such dismissal, substitution and/or election; additional items requested to be incorporated in the agenda by shareholders, Capital Markets Board (CMB) and/or other government authorities and agencies that govern the company; the relevant Board of Directors decision, if the agenda covers changes to the Articles of Incorporation and the former and new versions thereof.

During 2014, neither the shareholders possessing management control, nor Board Directors, nor senior executives, nor their spouses or relatives by blood or marriage unto the second degree engaged in any transactions, on their own or other’s behalf, that mightleadtoaconflictofinterestwiththecompanyand/oritssubsidiaries.Ifsuchatransactionisplanned,thenpriorapprovalshall be sought and information shall be provided at the General Assembly meetings.

Intheeventthattransactions,forwhichtheaffirmativevotesofthemajorityofindependentBoardDirectorsarerequiredandthe approval of which has been referred to the general assembly by reason of dissenting votes cast, information shall be provided on the General Assembly decision regarding the actions taken in relation to such transactions. During 2014, there were no transactions that had not been approved by the majority of impendent Board Directors.



To facilitate participation in the General Assemblies, utmost attention is paid to fully comply with the points stipulated by the legislation,anditisbelievedthatourshareholdersarenotfacedwithanydifficultieswithregardtoparticipationinGeneralAssemblies.Todate,nonotificationstothecontrarywerereceivedfromourShareholders,either.

The shareholders were informed that the company did not make any charitable donations or grants during the reporting period underaspecificagendaitemattheGeneralAssemblyMeeting.

Minutes of the General Assembly meeting are delivered to the shareholders upon conclusion of the meeting, and are made available in Turkish and English languages for electronic access at our website at www.anadolusigorta.com.tr, in order to keep non-participating shareholders informed.

In the preparation of the General Assembly agenda, care is paid to include each proposal under a separate heading, to word the agenda headings clearly and in a manner to avoid different interpretations, and not to insert any agenda items like “others” or “various” as also prohibited by the applicable legislation.

For Shareholders who will have themselves represented in the General Assemblies in proxy, a specimen of a proxy statement is publicized along with the meeting announcements, and is also made available to Shareholders on the electronic medium.

Topics that are communicated by our shareholders to the company’s Investor Relations Unit, which they would like to be included in the agenda, are considered by the Board of Directors in the preparation of the agenda.

Pursuant to the applicable legislation and to the Articles of Incorporation, ordinary general assembly must be held within three monthsfollowingtheendofeachfiscalyear.

In line with our Articles of Incorporation, General Assemblies are held in the place where our company headquarters is located and at a venue that will enable participation by all our Shareholders.

TotalnumberofvotesthatmaybecastduringtheGeneralAssemblyisclassifiedonthebasisofShareholdersandprovidedtotheShareholders at the beginning of the meeting by means of their insertion in the list of attendants.

Questions posed by our Shareholders to the Board of Directors are answered, provided that such questions are essential for exercise of shareholder rights and are not trade secrets.

TheGeneralAssemblyChairmanchairsthemeetingefficientlyandinamannertoensurethatShareholderscanexercisetheirrights.

Care is taken to answer every question raised during the General Assembly by the shareholders during the same meeting. If the question raised is not relevant to the agenda or is too comprehensive to be answered promptly, then the Investor Relations Department provides written answers within no later than 15 days. All questions raised during the General Assembly Meeting and the answers provided thereto are publicly disclosed on the company’s website within 30 days following the date of the General Assembly, the latest.

Directors,authorizedemployeesresponsibleforthepreparationoffinancialstatementsandauditors,andotherrelevantpeopleto offer explanations on the agenda topics that are of specialty spend their best efforts to be present in the meeting.

In General Assemblies, each agenda item is voted individually, and for the avoidance of doubt in relation to voting results, the votes are counted and the results are announced to the Shareholders before the General Assembly is concluded.



AttheAnnualGeneralAssemblyheldon25March2014,shareholdersratifiedalloftheagendaitemsbelowbymajorityofvotes:

1. Election of the Presiding Board and authorization of the Presiding Board to sign the minutes of the General Assembly,2. Foregoing the reading of the Board of Directors’ 2013 Activity Report as it had been made available beforehand for review by shareholders; reading the Statutory Auditors’ report and the opinion section of the Independent Auditor’s report for 2012; discussion on the said reports,3.Reviewandratificationof2013financialstatements,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. Acquittal of the Board Directors,6. Amending the company’s dividend distribution policy,7. Approval of the dividend distribution proposal prepared by the Board of Directors within the framework of the dividend distribution policy,8. Approval of the draft amendments to the company’s Articles of Incorporation,9.ElectionoftheBoardDirectorsanddeterminationoftheirtermsofoffice,10.ApprovalofthepermissionsgrantedtotheBoardDirectorstocarryoutthetransactionsspecifiedinArticles395and396ofthe Turkish Commercial Code,11. Determination of remuneration for the Board Directors,12.Designationoftheindependentauditfirm,13. Presentation of information on the donations and grants made during the reporting period.

During the General Assembly, none of our shareholders exercised their right to pose questions.

No agenda items have been proposed by our shareholders during the meeting.

Minutes of the General Assemblies are accessible in electronic medium in Turkish and English languages at the website at www.anadolusigorta.com.tr or in written form.

2.4 Voting Rights and Minority Rights 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.

There are no cross-shareholding interests between any Shareholder and the company.

The company’s Articles of Incorporation do not set the minority rights to be less than one twentieth of the capital.

Minority shares are not represented in our Board of Directors, which is elected under the discretion of the General Assembly.There are no upper limits with regard to the number of votes that our Shareholders are allowed to cast in the General Assemblies.

No shares are privileged in terms of voting.

Voting right arises at the time the share is acquired and there are no provisions stipulating exercise of the voting right after lapse of a certain period of time after the date of acquisition.

Our Articles of Incorporation contain no provisions preventing non-Shareholders from casting votes in proxy in the capacity of representatives.



Shareholders may exercise their voting rights personally in the General Assemblies or via a third party that may or may not be a Shareholder.

Each real person Shareholder is represented in the General Assemblies by one person only; in the case that legal entity Shareholders are represented by several people, only one may cast votes. The person empowered to vote is named in the certificateofauthority.

2.5 Entitlement to Dividends The important aspects covered in the company’s Dividend Distribution Policy are presented below. The said policy is presented in the General Assembly Meeting for the information of shareholders, and published in the company’s annual reports and posted on the corporate website.

Thecompany’sArticlesofIncorporationsetforthitasaprincipletodistributefirstdividendsoutofthedistributableprofitintheratio to be set by the General Assembly in accordance with the Capital Markets Board requirements.

Dividend distribution proposals laid down for the approval of the General Assembly by the Board of Directors are formulated so as to preserve the delicate balance between the expectations of our Shareholders and the company’s need to grow, and paying due regard to the future expectations for the company’s operations, capital adequacy targets and the prevailing conditions in the capitalmarkets,aswellastheprofitabilityofthecompany.

IntheeventthattheBoardofDirectorsproposesagainstdistributingprofittotheGeneralAssembly,thereasonsthereforandinformation on the use of retained earnings shall be presented to the shareholders during the General Assembly. The same will also be included in the annual report and posted on the corporate website.

The dividend policy espoused by the Board of Directors is based on the principle of proposing to the General Assembly the distributionofatleast30%ofthenetdistributableperiodprofitasbonussharesorincash.

Nosharesareprivilegedintermsofgettingsharefromtheprofit.

Nofounder’sbonuscertificatesaregiven,noraredividendspaidtotheBoardDirectors.

Pursuant to the Articles of Incorporation, our employees are paid dividends up to three times of their salaries maximum from the amountremainingafterthefirstdividendissetaside.

Care is paid to effect the dividend payments as soon as possible, taking into consideration the time stipulated by the legislation.

No dividends were distributed in 2014 since the amount remaining after deducting the prior year loss that descended in our legalrecordsandtheGeneralLegalReservesfromthenetprofitfortheperiodwaslessthan5%ofthepaid-incapitalthatwasspecifiedintheDividendDistributionPolicy

2.6 Transfer of SharesThe company’s Articles of Incorporation contain no provisions restricting the transfer of shareholding interests.



PART III – PUBLIC DISCLOSURE AND TRANSPARENCY

3.1 Company Internet Site and Its ContentThe company has an Internet site prepared in Turkish and English languages, accessible at the address www.anadolusigorta.com.tr. The company website is actively used in providing information and public disclosure.

The company website features the information and data stipulated by the Corporate Governance Principles and regulatory authorities.

Attention is paid to comments and suggestions received via our website and are taken into consideration at the company. Care is paid to keep the website up-to-date.

The company’s letterhead contains the website address.

3.2 Annual ReportThecompany’sannualreportsarepreparedinsufficientdetailtocovertheinformationlistedinCorporateGovernancePrinciples.

TheannualactivityreportispreparedbytheBoardofDirectorsandincorporatesthedeclarationthatfinancialstatementspresentatrueandfairviewofthecompany’sfinancialstatusandthatthecompanyachievedfullcompliancewiththelegislation.

PART IV – STAKEHOLDERS

4.1 Keeping Stakeholders InformedIn matters concerning our Shareholders, employees, creditors, customers, suppliers, various NGOs, the Government and potential investors that might consider investing in our company, i.e. the stakeholders, care is taken to provide information in writing and to base the relations with such parties on written contracts as much as possible (through electronic mail, corporate website, Public Disclosure Platform).

In cases where the rights of stakeholders are not regulated by the legislation or contractually, the interests of the stakeholders are protected within the framework of the rules of good faith and to the extent permitted by the company’s facilities, observing the company’s credibility at the same time. The necessary structure is in place to enable stakeholders to report such transactions of the company that are contradictory to the legislation or are unethical.

4.2 Stakeholder Participation in ManagementWhile the Articles of Incorporation contain no provisions on stakeholder participation in the company’s management, the company’s internal regulations cover practices to this end.An employee proposal guideline has been formulated. Proposals that are innovative and aimed at improvement are assessed within the framework of this guideline and put into life across the company.AgenciesMeetings,İ̇şbankBranchesMeetingsandManagersMeetingsareheld,wherethestakeholders,i.e.employeesandsuppliers, share their opinions.

4.3 Human Resources PolicyThe basic principles of the company’s human resources policy are stated below.

Job descriptions and distributions, along with the performance criteria are set by the company management and announced to the employees.

Hiring activities are based on the principle of giving equal opportunities to people of equal qualities. Criteria for hiring are put into writing on the basis of titles and are followed in practice.



Succession planning is made to identify the new managers to be appointed in cases where it is predicted that changes in a managerial position will cause hitches in the management of the company.

In decisions on training, transfer and promotion, objective data are used and the company’s interests are observed as much as possible.

Training plans are formulated aimed at developing our employees’ knowledge and skills.

Company employees are members of the Bank and Insurance Employees Union.

Safe working environment and conditions are provided for our employees; work is undertaken to improve these conditions depending on social and technological necessities.

Decisions made in relation to our employees or developments concerning them are shared with the employees.

Measures are adopted to prevent discrimination on the basis of race, religion, language and sex among the employees, to ensure human rights are respected and to protect the employees against internal physical, mental and emotional abuse.

The company does not appoint a representative to carry out the relations with our employees. Yet, there are union representatives who are designated by the Union of Banking and Insurance Workers organized at our company from amongst our headquarters and regional branch employees to handle the relations with employees.

No complaints have been received on account of discrimination among company employees.

4.4 Codes of Ethics and Social ResponsibilityCodes of ethics setting out the professional ethics that the company and its employees are required to abide by when performing their activities within the existing laws and regulations is posted on the corporate website.

Attention is paid that the projects offered with cover are in compliance with the applicable environmental safety and public health legislation.

Within the frame of its commitment to social responsibility, our company extends support to education, academic activities, sports organizations, and cultural and artistic events. Through the “One Master, Thousand Masters” social responsibility project launched in 2010 and currently in progress, it is intended to focus the public attention on vanishing vocations and local values, and to help revive them.

PART V – BOARD OF DIRECTORS

5.1 Structure and Formation of the Board of DirectorsThecompany’sBoardofDirectorsiscomposedofelevenmemberssoastoenableourBoardDirectorstoworkefficientlyandconstructively,makedecisionsswiftlyandrationally,andorganizetheformationandactivitiesofthecommitteesefficiently.

Résumés of our Board Directors are published on the corporate website and in our annual report.

Taking into consideration that there are no non-corporate ultimate Shareholders with a controlling interest in the company, it is thought that the Board Directors all naturally possess the advantage to act independently, and therefore, to be impartial in their decisions, upholding the interests of our company and the stakeholders above everything else.

There are two independent members on the Board of Directors. The independent Board Directors have not served as members formorethansixyearsinthepasttenyears.TermofofficeforallBoardDirectorsisoneyear.

The Corporate Governance Committee, functioning as the Nomination Committee, nominated two candidates as independent Board Directors on 3 March 2014, and a new candidate to substitute a Director who had resigned on 15 April 2014. The reports on whether all nominees possess the independence criteria have been presented to the Board of Directors on the said dates.



IndependentBoardDirectorsfulfilltheindependencecriteriapublishedintherelevantlegislation,andtheirdeclarationsofindependence have been duly received and incorporated in the annual report. No instances took place during the reporting period, which would compromise independence. If an instance compromising independence arises, then the independent Board Director shall present such change immediately to the Board of Directors to be disclosed to the public. In such a case, the Board Director who loses his independence shall resign as a matter of principle.

Apart from the CEO, the Board of Directors consists of non-executive members. Chairman of the Board and CEO functions are carried out by different individuals.

Information about our Board Directors is presented below.

Name Title DegreeExecutive / Non-Executive

Entity WorkedTitle Held in the Entity

Professional Experience

Mr. Caner Çimenbiçer Chairman

Bachelor’sFaculty of Administrative Sciences

Non-Executive - - 40 years

Mr. Ahmet DoğanArıkan

Deputy Chairman



Mr. Musa Ülken

Member& CEO


Executive Anadolu Anonim Türk SigortaŞirketi CEO 36 years

Mr. Fahri KayhanSöyler

Member

Bachelor’sFaculty of Economic & Administrative Sciences


Mr. Hakan Aran Member

Bachelor’sFaculty of Engineering

Non-Executive TürkiyeİşBankasıA.Ş./In-Group

Deputy Chief ExecutiveOfficer 24 years

Mr. Hasan HulkiYalçın Member Master’s

Banking & Finance Non-Executive MilliReasüransT.A.Ş./In-Group CEO 25 years

Mr. Recai Semih Nabioğlu

Member

Master’sFaculty of Economic & Administrative Sciences

Non-Executive TürkiyeİşBankasıA.Ş./In-Group Unit Manager 24 years

Mr. Faruk Karpuz Member High School Non-Executive TürkiyeİşBankasıA.Ş.

/In-Group Section Manager 32 years

Mr.KubilayAykol Member


Non-Executive TürkiyeİşBankasıA.Ş./In-Group Section Manager 18 years

Mr. Prof. SavaşTaşkent

Independent Member


Non-Executive Marmara University/ Non-Group

Chair of the Finance Department

43 years

Mr. Assoc. Prof. Atakan Yalçın

Independent Member

Master’sFaculty of Engineering

Non-Executive ÖzyeğinUniversity/ Non-Group

Faculty of Economic & Administrative Sciences

14 years

Whenfulfillingitsdecision-makingfunction,theBoardofDirectorsactsonthebasicconsiderationsof;

· Maximizing the fair value of the company,· Pursuing the company operations so as to ensure long-term and stable earnings for our Shareholders,· Maintaining the delicate balance between the Shareholders and the company’s need to grow.



In the formation of the Board of Directors, care is given to;

· Ensure the attendance of nominees to the meeting during the election to the seats on the Board of Directors,· Inform the Shareholders about the nominees,· Allow Shareholders to ask questions to the nominees,

Our Board of Directors takes care to hold regular monthly meetings.

Approval of the majority of independent Board Directors is sought for the Board of Directors decisions pertaining to all kinds ofthecompany’stransactionswithrelatedpartiesofmaterialnatureasspecifiedintheCorporateGovernancePrinciplesCommuniqué, and to furnishing guarantee, pledge and mortgage in favor of third parties. If majority of the independent Board Directors do not approve the transaction, this is publicly disclosed, providing adequate information on the transaction within the frame of public disclosure requirements, and the transaction is laid down for the approval of the General Assembly. The matter is decided in the said General Assembly meetings through voting where the parties to the transaction and their respective related parties may not cast votes, thus involving other shareholders in such decisions at the General Assembly. Meeting quorum shall notbesoughtforGeneralAssemblymeetingsthatwillbeheldforcircumstancesspecifiedinthisarticle.Decisionsaremadewiththe simple majority of those eligible to cast votes. Board of Directors and General Assembly decisions passed in violation of the principles herein shall be null and void.

There are no administrative or judicial sanctions imposed against the company or the members of the governing body.

There are no woman members on our Board of Directors, nor is there a policy on this matter.

Although there are no set rules on non-independent Directors’ undertaking other duties outside the company, the Directors do not have any other duties apart from their natural duties in the entities they work for and from those in the establishments ownedbytheentitiestheyworkfor.Yet,BoardDirectorsdevotesufficientamountoftimeforcompanyaffairs,andexercisetheirpowers prudently and within the frame of good faith, possessing all necessary knowledge to ensure full performance of the duty.

Past experiences, and outside positions held, if any, of the independent Board Directors are disclosed in their résumés and presented on our website and in our annual report.

5.2 Operating Principles of the Board Of DirectorsThe Board meeting agenda is determined by the Chairman of the Board of Directors in line with the proposals of the CEO and the Board Directors.

The Board of Directors met twelve times in 2014.

Care is paid to determine the meeting date so as to allow all Directors to participate. Save for unforeseeable exceptional events, the Board meetings are held with the participation of all Directors.

Attention is given to set the Board meeting date during the immediately preceding meeting, followed by written invitation.

The existing secretariat responsible for execution of the Board activities, keeping the Directors and auditors informed, and establishing communication with them was transformed into Board of Directors Reporting Unit in 2005.

The Board of Directors decisions passed in 2014 were adopted with the unanimous votes of the members present in those meetings.

TheBoardofDirectorsholdsitsfirstmeetingpreferablyonthedatethesameiselected.

Duringthefirstmeeting,thechairmanandthedeputychairmanoftheboardareelected,anddecisionsaremadeonthejobdistribution and establishment of committees.



Board Directors, in principle, attend every meeting.

The Board of Directors takes care to meet regularly and at least monthly as pre-scheduled, and at any time as and when deemed necessary.

Utmost care is paid to ensure that the information and documents about the topics covered in the Board meeting agenda are madeavailablefortheexaminationoftheDirectorsatleastfivedaysinadvance,andwhensuchtimingcannotbemet,effortsarespenttoensureequalflowofinformationtotheBoardDirectors.EachDirectorisentitledtoonevoteandnonehasweightedvoteoraffirmative/negativevetoingrights.The Board of Directors convenes on the basis of majority of its full membership and decisions are passed with the majority of Directors present in the meeting.

The company’s Board Directors and executives are insured with a coverage of USD 75,000,000 “per claim and annual total” against the risk of loss they may cause to the company due to their fault in the performance of their duties, within the scope of the liabilityinsurancepolicythatnamesTürkiyeİşBankasıA.Ş.anditssubsidiaries(İşbankGroup)astheInsured.

5.3 Numbers, Structures and Independence of Committees within the Board of DirectorsThere is an Audit Committee, a Corporate Governance Committee and a Committee of Early Determination of Risk in our company.OwingtothestructureoftheBoardofDirectors,CorporateGovernanceCommitteealsofulfillsthefunctionsofNominationCommittee and Remuneration Committee.

There are two non-executive Board Directors in each one of the Committees.

As a matter of principle, Board Directors do not undertake roles in several committees. However, since all members of the Audit Committee and the chairman of the Corporate Governance Committee must be elected from amongst independent Board Directors, our independent Board Directors serve on two different committees.

The Corporate Governance Committee establishes whether the corporate governance principles are implemented in the company, aswellasthegroundsfornon-implementation,ifapplicable;identifiesconflictsofinterest,ifany,arisingfromfailuretofullycomply with these principles, and presents proposals to the Board of Directors for the improvement of relevant practices. The committeealsoworkstocreateatransparentsystemregardingidentification,assessment,trainingandrewardingofnomineeseligible for the Board of Directors, and to establish related policies and strategies. The Corporate Governance Committee develops proposals regarding the numbers of the members of the Board of Directors and executives. It is also charged with establishing and overseeing the approaches, principles and practices in relation to the performance evaluation, career planning and rewarding ofBoardDirectorsandexecutives.ThecommitteeperformstheactivitiesspecifiedintheCompensationPolicyandcoordinatesthe activities of the Investor Relations Department.

TheAuditCommitteeoverseestheoperationandefficiencyofthecompany’saccountingsystem,publicdisclosureoffinancialinformation, independent auditing, internal control and internal audit systems. The committee supervises the selection of the independentauditfirm,preparationofindependentauditcontractsandinitiationofindependentauditprocess,andeveryphaseoftheworkcarriedoutbytheindependentauditfirm.TheAuditCommitteedeterminestheindependentauditfirmfromwhichthe company will procure services and the services to be supplied therefrom, and submits the same for the approval of the Board of Directors.

TheAuditCommitteeassessestheconformityofannualandinterimfinancialstatementstobepubliclydisclosedtotheaccounting principles pursued by the company, as well as their accuracy and fairness, and reports its written assessments to the BoardofDirectors,byincorporatingtheopinionsofthecompany’sresponsiblemanagersandoftheindependentauditfirm.

In 2014, the Audit Committee met four times, holding quarterly meetings, and recorded the outcomes of the meetings in minutes andsubmittedthedecisionsadoptedtotheBoardofDirectors.Thesaiddecisionsreportedthatthefinancialstatementswereexamined,andthattheyweredeemedfitforpublicdisclosure.



The Committee of Early Determination of Risk is responsible for efforts aimed at early detection of risks that might endanger the existence,progressandsurvivalofthecompany;ensuringadoptionofnecessarymeasuresinrelationtotheidentifiedrisks,andmanaging the risks. The committee reviews the risk management systems at least once a year.

Prof.SavaşTaşkent,Mr.HasanHulkiYalçınandMr.FatihGörenserveonthecompany’sCorporateGovernanceCommittee.TheCommittee is headed by Prof. Turkay Berksoy.Prof.SavaşTaşkentfunctionsastheheadoftheAuditCommittee,andAssoc.Prof.AtakanYalçınasitsmember.

TheCommitteeofEarlyDeterminationofRiskisheadedbyAssoc.Prof.AtakanYalçın,whereHakanAranservesasamember.

All members of the Audit Committee and the heads of other committees are elected from amongst independent Board Directors.The company’s CEO does not serve on any committee.

Structures and operating principles of committees have been put into writing and posted on our company website.

Taking into consideration that there are no non-corporate ultimate Shareholders with a controlling interest in the company, it is thought that the Board Directors all naturally possess the advantage to act independently, and therefore, to be impartial in their decisions.

5.4 Risk Management and Internal Control MechanismSet up in 2006 in order to restructure the risk management systems and processes, the Risk Management Department’s activities were expanded in scope to cover internal control activities within the frame of the provisions of the “Regulation on the Internal SystemsofInsurance,ReinsuranceandPensionCompanies”publishedintheOfficialGazetteissue26913dated21June2008.Along the same line, the Department was renamed to Risk Management and Internal Control Department.The primary objectives of the Department’s activities are as follows:

· Measure, assess and control risks independently from executive units,· Protect company assets,· EnsureefficientandeffectiveexecutionofactivitiesinlinewiththeLawandotherapplicablelegislation,internalpoliciesand

guidelines, as well as customary insurance practices,· Guaranteethereliability,integrityandtimelyavailabilityoftheaccountingandfinancialreportingsystem.

The basic strategy directed towards the ultimate goal is to carefully plan, conduct and manage risk management and internal controlactivitiesindependently,impartially,purposefully,effectivelyandefficiently,employingarisk-focusedapproachandwithin the frame of applicable legislation and internationally accepted principles and standards. The basic principle in achieving this goal is to employ the most advanced tools and methods that are available and possible to use.

The activities of the Department are administered directly by the CEO. The Board Director responsible for Internal Systems is also responsible toward the Board of Directors for the formation of the Department and ensuring, monitoring and coordinating its operability, adequacy and effectiveness.

All outcomes obtained by examining the risks independently from executive functions are regularly reported by the Department to the Board Director responsible for Internal Systems, to the CEO and the Board of Directors.

TheBoardofDirectorsoverseestheefficiencyoftheriskmanagementandinternalcontrolmechanismviathecompany’sBoardof Inspectors.



5.5 Strategic Goals of the CompanyThe company’s vision is set as:

”To make our company the insurance brand preferred by everyone who needs insurance, and to achieve a strength that makes it a reference point in the worldwide insurance industry as well.”

And its mission as:

“In keeping with the deeply-rooted, pioneering, honest and solid corporate values of Anadolu Sigorta, to lead the sector, to help create a broad public awareness of insurance in Turkey, to implement a customer-focused approach to service, to increase our financialstrengthtointernationalstandards,toenhancethevalueofourcompany.”

Our company’s vision and mission are publicly disclosed on our website accessible at www.anadolusigorta.com.tr.

Our strategic goals are set by our executives with a keen eye on competitive conditions, general economic conjuncture, overall expectationsinnationalandinternationalfinancialmarkets,andthecompany’smediumandlong-termtargets.

Strategies and targets proposed are negotiated comprehensively by the Board of Directors on a broad perspective.

Actualizations in relation to approved strategies and targets are reviewed during Board meetings and monthly within the scope oftheassessmentofcompanyoperations,financialstructureandperformancelevel.

Inprinciple,theBoardofDirectorsmeetsmonthlyinordertoefficientlyandcontinuouslyfulfillsitsmonitoringandsupervisionfunction.

In the meetings, the basic topics of assessment are the company activities, approved annual budget and target realizations, the company’splaceinthesector,financialstructureandperformancelevel,reporting,andcomplianceofoperationstointernationalstandards.

5.6 Financial RightsAggregateofthesalariesandsimilarbenefitsprovidedtothecompany’sBoardDirectorsandseniorexecutivesaredisclosedinthenotestothefinancialstatementsandthereby,incorporatedinourannualreport.Theyarealsopostedonthecorporatewebsite and publicly disclosed.

With a view to giving the shareholders the chance to voice their comments, the remuneration principles for the Board Directors are presented as a separate item for the information of shareholders. The remuneration policy developed for the company’s managers and employees at any level is put into writing, presented to the General Assembly for information, and is published on the company website.

Stock options or payment plans based on the company’s performance are used in the remuneration of our Board Directors, including the independent Board Directors. Nonetheless, it is believed that the remuneration of independent Board Directors is at a level that will not prejudice their independence.

The Board Directors and senior executives have never utilized, directly or indirectly, cash or non-cash loans from the company, nor did the company lent money or gave suretyship or provided any similar guarantee to any Board Director or senior executive.


Other Matters and Financial Statements / Committees Operating Within Anadolu Sigorta and an Assessment by the Board of Directors

In order to ensure that the Board of Directors duly performs its duties and responsibilities, an Audit Committee, Committee of Early Determination of Risk, and Corporate Governance Committee were set up at the company. The Corporate Governance Committee also fulfills the functions of the Nomination Committee and Remuneration Committee.

The Board of Directors makes all kinds of resources and support available necessary for the performance of their duties by the committees. The committees hold meetings at the frequency deemed necessary for ensuring efficiency of their activities and specified in their respective operating principles, and submit the reports covering information about their activities and meeting outcomes to the Board of Directors.

The objectives, formations, operating principles and procedures, and activities of our committees are described below.

Corporate Governance Committee

Head of Committee: Prof.SavaşTaşkentMember:HasanHulkiYalçınMember: FatihGören

Objective

Overseeing compliance of the company with corporate governance principles, undertaking improvement efforts thereon, and submitting proposals to the Board of Directors.

Formation

The Corporate Governance Committee was set up upon approval by the Board of Directors’ decision no. 5508 dated 10 March 2005. The provisions governing the formation, principles and procedures and activities of the

committee have been based on the Corporate Governance Communiqué issued by the Capital Markets Board of Turkey (CMB) and put into force with the Board of Directors decision no. 06838 dated 26 June 2014. They are carried out by the Board of Directors.

The committee consists of a minimum of two members to be elected from among directors and the Investor Relations Manager.

The members will elect the head of the committee from among themselves. The head of the committee is elected from among independent directors. Non-director individuals, who have expertise in their respective fields, can be members of the committee.

If the number of committee members elected from among Board Directors is two, then both of them must be non-executive directors; if such number is greater than two, then the majority of the members must be non-executive directors. The CEO may not serve on this committee.

The Investor Relations Managers must be a full-time employee of the company and must be assigned as a member of the Corporate Governance Committee.

A member’s term of office on the Corporate Governance Committee is terminated when his/her term of office on the Board of Directors expires or upon a decision to such effect by the Board of Directors.

Operating Procedures and Principles

• TheCorporateGovernanceCommittee holds at least four meetings a year, which must take place at least on a quarterly basis.

• Committeemeetingsareheldwiththe attendance of all its members and decisions are passed with the votes of the majority of members in attendance.

• Thecommitteeshallkeeparesolution book, in which the decisions, assigned a sequence number, will be entered.

• Thecommitteeshallentertheconclusions reached in a meeting in the minutes, and submit the assessments made and decisions passed, along with the grounds therefor, in a written report to the Board of Directors within no later than one month following the relevant committee meeting.

• Committeedecisionsshalltakeeffect upon approval of the Board of Directors.

• Thecommitteeshallforthwithpresent its determinations, assessments and suggestions in relation to its duties and scope of responsibilities in writing to the Board of Directors.

• Thecommitteemayinvitetheindividuals it deems necessary to its meetings and seek their opinions.

• InvestorRelationsUnit/Departmentshall determine the meeting agenda of the committee, make the invitations to the meeting, establish communication with committee members, keep the book of resolutions, and handle other secretarial tasks for the committee.

• Asthecommitteefulfilsitsfunctions,the Board of Directors shall make all necessary resources and support available.

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



• Thecommitteemayseekindependent expert opinion upon approval of the Board of Directors on matters that call for expertise and the committee deems necessary in relation to its activities. The cost of the consultancy service needed by the committee shall be borne by the company.

• Committeemembersshallobservethe principles of independence and impartiality when performing their duties.

Activities

The committee carries out the following activities with respect to corporate governance:

• Establisheswhetherthecorporategovernance principles are implemented in the company, as well as the grounds for non-implementation, if applicable; identifies conflicts of interest, if any, arising from failure to fully comply with these principles, and presents proposals to the Board of Directors for the improvement of corporate governance practices;

• Overseestheactivitiesofthecompany’s Investor Relations Department. Within this context, the committee sets and regularly reviews the basic principles for the company’s communication with investors;

• WorksincooperationwiththeInvestor Relations Department to present suggested improvements for ensuring efficient communication between the company and investors, and elimination and resolution of potential conflicts to the Board of Directors;

• Reviewsthecompany’sCorporateGovernance Compliance Report before it is published within the company’s Annual Report, and presents its comments to the Board of Directors;

• Makesproposalsandassessmentsregarding the determination or revision of the company’s disclosure policy, and presents the same to the Board of Directors.

The committee reviews that the Disclosure Policy covers the minimum content as stipulated by the legislation with respect to the company’s communication with stakeholders, as well as the scope, quality, consistency and accuracy of documents, presentations and explanations prepared by the company for informative purposes, and oversees that the same are developed in accordance with the Disclosure Policy;

• Carriesoutactivitiestoensurethatthe corporate governance culture is established within the company, and is espoused by managers and employees working at any level. The committee follows up the developments related to corporate governance in and out of Turkey and examines their possible implications for the company.

The duties of the Nomination and Remuneration Committees shall be fulfilled by the Corporate Governance Committee, until these committees shall have been set up.

The committee’s duties and responsibilities with respect to nomination are presented below:

• Workstocreateatransparentsystem regarding identification, assessment, training and rewarding of nominees eligible for the Board of Directors and managerial positions with administrative responsibility, and establishes related policies and strategies;

• Regularlyevaluatesthestructureand efficiency of the Board of Directors and presents its suggestions for possible revisions to the Board of Directors;

• Thecommitteeischargedwithperforming the duties set out in the legislation concerning the nomination of independent members to the Board of Directors, which are announced every year by the Board and which are compulsory to be implemented by the group to which the company is affiliated.

The committee’s duties and responsibilities with respect to remuneration are presented below:

• Setting and overseeing the principles, criteria and practices applicable for the remuneration of Board directors and executives with administrative responsibility, taking into consideration the company’s long-term targets;

• Presentingitssuggestionsregardingthe remuneration to be paid to Board directors and executives with administrative responsibility, which will be determined in view of the extent the remuneration criteria have been achieved;

• Developingsuggestionsandassessments for the formulation and revision of the company’s remuneration policy, which sets out the remuneration principles for the Board directors and executives with administrative responsibility, and presenting its opinions to the Board of Directors.

The Corporate Governance Committee shall fulfill other duties and responsibilities to be assigned to it by the Board of Directors in relation to its field of activity.

Audit Committee

Head of Committee: Prof.SavaşTaşkentMember: Assoc.Prof.AtakanYalçın

Objective

Overseeing the operation and efficiency of the company’s accounting system, public disclosure of financial information, independent auditing of the company and internal control system.

Formation

The Audit Committee was set up upon approval by the Board of Directors’ decision no. 5317 dated 26 June 2003. The provisions governing the principles and procedures and activities of the committee have been based on the Corporate Governance



Communiqué issued by the Capital Markets Board of Turkey (CMB) and put into force with the Board of Directors decision no. 06839 dated 26 June 2014. They are carried out by the Board of Directors.

The committee consists of a minimum of two members to be elected from among the Board of Directors members.

The members will elect the head of the committee from among themselves.

All members of the committee are elected from among independent directors.

To the extent possible, at least one member of the Audit Committee should preferably have minimum five years of experience in audit/accounting and finance.

A member’s term of office on the Audit Committee is terminated when his/her term of office on the Board of Directors expires or upon a decision to such effect by the Board of Directors.


• Thecommitteeholdsatleastfourmeetings a year, which must take place at least on a quarterly basis.






• Thecommittee’sactivitiesandmeeting results shall be described in the annual report. The annual report shall also specify the number of written reports the committee submitted to the Board of Directors during the fiscal year.


• BoardofInspectors/AuditDepartment shall determine the meeting agenda of the committee, make the invitations to the meeting, establish communication with committee members, keep the book of resolutions, and handle other secretarial tasks for the committee.




Activities

In essence, the Audit Committee;

• Overseestheoperationandefficiency of the company’s accounting system, public disclosure of financial information, independent auditing, internal control and internal audit systems;

• Supervisestheselectionoftheindependent audit firm, preparation of independent audit contracts and initiation of independent audit process, and every phase of the work carried out by the independent audit firm;

• Determinestheindependentauditfirm from which the company will procure services and the services to be supplied therefrom, and submits the same for the approval of the Board of Directors;

• Establishesthemethodsandcriteria for the handling and resolution of complaints received by the company in relation to the company’s accounting, internal control and internal audit systems and its independent audit; and for addressing the company employees’ notifications about the company’s accounting and independent audit within the frame of confidentiality principle;

• Assessestheconformityofannualand interim financial statements to be publicly disclosed to the accounting principles pursued by the company, as well as their accuracy and fairness, and reports its written assessments to the Board of Directors, by incorporating the opinions of the company’s responsible managers and of the independent audit firm.

The Audit Committee shall fulfill other duties and responsibilities to be assigned to it by the Board of Directors in relation to its field of activity.



Committee of Early Determination of Risk

Head of Committee: Assoc. Prof. AtakanYalçınMember: Hakan Aran

Objective

Managing the risks that might threaten the existence, progress and survival of the company.

Formation

The Committee of Early Determination of Risk was set up as a result of the discussion of the General Directorate proposal no. 3550 dated 24 February 2012, pursuant to Article 4.5.1 of the Communiqué Serial:IV-56 on Determination and Implementation of Corporate Governance Principles enforced upon its publication in the Official Gazette issue 28158, dated 30 December 2011. The provisions governing the formation, principles and procedures and activities of the committee have been based on Article 378 of the Turkish Commercial Code and the Corporate Governance Communiqué issued by the Capital Markets Board of Turkey (CMB) and put into force with the Board of Directors decision no. 06840 dated 26 June 2014. They are carried out by the Board of Directors.

The committee consists of a minimum of two members to be elected from among the Board directors.

The members shall elect the head of the committee from among themselves. The head of the committee shall be elected from among independent directors. Non-director individuals, who have expertise in their respective fields, can be members of the committee.

If the committee is formed of two members, then both of them must be non-executive directors; if such number is greater than two, then the majority of the members must be non-executive directors. The CEO may not serve on this committee.

A member’s term of office on the committee is terminated when his/her term of office on the Board of Directors expires or upon a decision to such effect by the Board of Directors.


• Thecommitteeholdsatleastfourmeetings a year, which must take place at least on a quarterly basis.







• RiskManagementUnit/Departmentshall determine the meeting agenda of the committee, make the invitations to the meeting, establish communication with committee members, keep the book of resolutions, and handle other secretarial tasks for the committee.




Activities

The Committee of Early Determination of Risk:

• Workstoearlydetecttherisksthat might endanger the existence, progress and survival of the company, to ensure necessary measures are adopted in relation to the identified risks, and to manage the risk;

• InformstheBoardofDirectorsof its opinions and comments in writing regarding the creation and development of the company’s risk management system which will be aimed at minimizing the impact of risks that might affect the shareholders in particular and all stakeholders in general;

• Reviewsthecompany’sriskmanagement systems at least on an annual basis;

• Overseesthatriskmanagementpractices are carried out in accordance with the decisions of the Board of Directors and the committee;

• Reviewsthedeterminationsandassessments about risk management that will be incorporated in the company’s annual report.

The Committee of Early Determination of Risk shall fulfill other duties and responsibilities to be assigned to it by the Board of Directors in relation to its field of activity.


Other Matters and Financial Statements / An Assessment of the Operation of the Independent Audit Firm in 2014 Activity Period via the Audit Committee

Formation and Independence of the Independent (External) Audit Firm

Periodic financial statements and their footnotes are prepared in a manner to represent the actual financial status and within the framework of existing legislation and insurance business accounting standards. They are subjected to independent auditing and publicly disclosed at time intervals stipulated by the legislation.

The independent audit firm we work with is alternated at certain intervals, and an independent audit firm is selected for a maximum of 7 fiscal years for regular and/or special audit. At least two years are allowed to pass before re-signing a regular and/or special audit contract with the same independent audit firm.

External auditing of our company is conducted in a fully independent manner, and the external auditor performs the relevant tasks adhering strictly to the principles of accuracy, professional integrity and straightforwardness, without being involved in any conflicts of interests that might restrict its independence. The external auditor auditing our company acts independently and also refrains from any activity that might lead third parties to doubt its independence.

No service is obtained, directly or indirectly from the firms we obtain independent audit service, save for the audit service itself, and no fees are paid to these firms, apart from the reasonable audit fee at current market conditions.

The factors that contribute to the independence of the firms we obtain independent audit service from are the existence of our Audit Committee, the efficient accounting and internal audit system in place at the company, and strongly established ethical rules attaching importance to correct public disclosures.

Independent conduct of the external auditing of our company testifies to the accuracy and veracity of our financial statements in the face of the public, and is perceived as guarantee by our Shareholders. The independent opinion of the external auditor further strengthens our company’s corporate image in that they enhance the reliability of our financial statements. Having made it a principle to undertake public disclosure and to assure transparency in line with its ethical values, our company earns the trust of its investors by giving importance to independence of the external auditor, and therefore, aims to serve the development of national economy by contributing to accumulation of capital.

An Assessment of the Operation of the Independent Audit Firm in 2014 Activity Period via the Audit Committee

Assoc.Prof.AtakanYalçın Prof.SavaşTaşkentMember of the Audit Committee Head of the Audit Committee


Other Matters and Financial Statements / Human Resources Practices at Anadolu Sigorta

Human Resources Policy

Our company is proud to be the first national insurance company in Turkey, established in 1925 at the directives ofMustafaKemalAtatürk.Eversinceits establishment, our company has continuously grown and developed and has been recognized and acknowledged as the grande école of the Turkish insurance industry.

Utmost importance is given to our employees as they are the ones to undertake the biggest duty in carrying out our company’s key policies. For this reason, the primary goal of our human resources policies and practices is to identify our company’s needs for personnel in line with its objectives and strategies and assist the creation of human resources that are open to change and are focused on continuous success by recruiting high-quality people, motivating them, evaluating their performance, and encouraging interaction and communication among individuals and groups.

Career Development

Various career paths within the frame of job families are available at the company. Employees recruited into any job family and level have the opportunity to advance to senior management positions in the company.

Our company’s human resources strategy is defined as “Creating the organizational climate conducive to promoting creativity and innovation directed at ensuring customer satisfaction, and establishing a culture of superior performance supporting employees’ development. In keeping with this strategy, employees successfully completing the training and development plans designed for the relative job families can advance to a higher level, if they display the performance and capabilities required for the relevant level in the predetermined time.

When rising to the specialist position, employees take the promotion exam that differs according to the

job families and positions, and thus undergo assessment of their qualification for the technical know-how and competence levels required by the related position.

Our employees in specialist position, which is the midpoint for all of our positions, are offered dual career paths, which give the option of advancing as a manager or a specialist in the relevant field. Career paths at this level are shaped and supported within the scope of the company’s Development Center Initiative. The initiative that assesses managerial and specialist competencies provides our employees with personalized development plans, while supporting them with various resources, readying them for the next level. A number of training opportunities are provided to our employees at any level who join us and become a member of our team in line with the competencies they need to acquire to further their careers, as well as their existing skills.

Human Resources Practices at Anadolu Sigorta


Other Matters and Financial Statements / Human Resources Practices at Anadolu Sigorta

Performance Management

Our employees are evaluated twice a year in line with specific performance criteria. The content of such evaluation varies depending on the competence requirements on the basis of job families. On the basis of the results of these performance evaluations, an employee’s training needs are identified and a career plan is developed.

Job Guarantee:

Our employees enjoy a substantial degree of job guarantee within the framework of unionization composed by the Union and our company.

Compensation Policy

Our employees’ salaries are adjusted in accordance with the terms of a collective bargaining agreement that is renewed every two years and with annual or semi-annual raises based on current conditions.

In addition to their salaries, employees receive extensive fringe benefits as well.

Social Benefits

Our company’s employees are entitled to a variety of social rights and benefits in keeping with current conditions. The healthcare costs of our employees and their dependant family members are covered by our company under its Healthcare Assistance Regulations. All our personnel are able to fulfill all their healthcare needs free of charge through the company’s outsourced healthcare system. Employees are provided with free transportation services to and from work and with lunches as well.

Retirement Benefits

Our employees are covered by two private pension funds that have been set up in accordance with the company’s special status. The pensions paid by these funds enable former employees to enjoy a good standard of living during their retirement years.

Training

Competency-based training programs and technical and professional trainings required by our employees’ jobs are provided in line with their career progression plans.

Training has special importance at Anadolu Sigorta owing to the fact that our company is an organization that fills managerial positions from within. Therefore, orientation program and professional training provided to new-hires are followed by necessary planning for improving their managerial skills, thereby extending the necessary support to our employees.


Other Matters and Financial Statements / Agenda of the Annual General Assembly Meeting

ANADOLUANONİMTÜRKSİGORTAŞİRKETİAGENDA OF THE ANNUAL GENERAL ASSEMBLY DATED 24 MARCH 2015

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’ 2014 Activity Report, and presentation of the Independent Audit Report for 2014 fiscal year

3. Review, deliberation and ratification of 2014 financial statements4. 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 period5. Individual acquittal of Board Directors6. Information on dividend distribution policy and decision on profit distribution7 Election of the Board Directors and determination of their terms of office8. Authorizing the Board Directors to perform the transactions specified in Articles 395 and 396 of the Turkish Commercial

Code9. Determination of remuneration for the members of the Board of Directors10. Designation of the independent audit firm11. Presentation of information on the donations and grants made during the reporting period

Agenda of the Annual General Assembly Meeting


Other Matters and Financial Statements / 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 71,559,946 on its 2014 operations. The company’s legal records show TL 70,639,674 as profit for the period, which remains after deducting the undistributed amount of TL 920,272, which is the sales income on immovables and participation shares 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 becoveredfromthesourcesreflectedintheirlegalrecords.AfterconsolidationofAnadoluHayatEmeklilikA.Ş.andafterdeducting the undistributed sales income on immovables and participation share, a consolidated net profit of TL 73,197,477 arises.

Accordingly, it is proposed as follows:

• TL 3,531,984 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 30.14% of TL 69,665,493 that is the amount remaining according to the CMB, be distributed as first dividend to shareholders

• TL 1,459,965 be set aside as dividend to employees as per the Articles of Incorporation,

• TL 4,464,773 be set aside as statutory reserves as per the Articles of Incorporation,

• TL 40,182,952 that remains after the items mentioned above be allocated to extraordinary reserves, and

sales income on immovables and participation shares in the amount of TL 920,272 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 ANONİM TÜRK SİGORTA ŞİRKETİ 2014 Profit Distribution Proposal (TL)1. Paid-in/Issued Capital 500,000,0002. General Legal Reserves (according to legal records) 30,779,762If there are privileges for distribution of profits according to the Articles of Incorpora-tion, information on such privileges

None

Based on CMB Based on Legal Records3. Profit for the Period (*) 94,279,437 91,721,6344. Taxes Payable (-) 21,081,960 21,081,9605. Net Profit for the Period (=) 73,197,477 70,639,6746. Losses in Prior Years (-) 0 07. General Legal Reserves (-) 3,531,984 3,531,9848. NET DISTRIBUTABLE PROFIT FOR THE PERIOD (=) 69,665,493 67,107,6909. Donations during the Year (+) 0

10. Net Distributable Profit for the Period Including Donations 69,665,493 11. First Dividend to Shareholder

- Cash 21,000,000 - Bonus Shares 0 - Total 21,000,000

12. Dividends Distributed to Owners of Privileged Shares 13. Other Dividends Distributed (to Board Members, Employees, etc.) 1,459,965 14. Dividends Distributed to Owners of Redeemed Shares 15. Second Dividend to Shareholders 0 16. General Legal Reserves 0 17. Statutory Reserves 4,464,773 4,464,77318. Special Reserves 19. EXTRAORDINARY RESERVES 40,182,952 40,182,95220. Other Resources to be Distributed

-PriorYearProfit- Extraordinary Reserves- Other Distributable Reserves Pursuant to the Law and the Articles of Incorporation

(*) Intheprofitfortheperiodended31December2014,theamountsofTL920,272asperthelegalrecordsandTL1,394,625aspertheCMB,whicharisesfrom75%oftheprofitfromsalesofimmovablesandparticipationsharesandwhichhasbeensetasidetobefollowedupundertheaccountitem“ProfitNotAvailable for Distribution” under shareholders’ equity, was not taken into account as per Article 5 of the Corporate Tax Law no. 5520.

DIVIDEND RATIO CHART

GROUP

TOTAL DIVIDENDS DISTRIBUTED

TOTAL DIVIDENDS DISTRIBUTED / NET DISTRIBUTABLE PROFIT FOR

THE PERIOD

DIVIDENDS PER SHARE WITH A NOMINAL VALUE OF TL 1

CASH (TL)BONUS

(TL)RATIO (%) AMOUNT (TL) RATIO (%)

B 21,000,000 0 30.14% 0.042 4.20%TOTAL 21,000,000 0 30.14% 0.042 4.20%

Other Matters and Financial Statements / 2014 Profit Distribution Table

2014 Profit Distribution Table


Other Matters and Financial Statements / 2014 Annual Report Compliance Statement

2014 Annual Report Compliance Statement

Our company’s 2014 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.

MuratTETİKAccounting and Financial Affairs Manager

Fatih GÖRENDeputy Chief ExecutiveOfficer

MusaÜLKENChiefExecutiveOfficer

CanerÇİMENBİÇERChairman


ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Detailed Income Statement

I-TECHNICAL PART Accident Illness-Health Motor Vehicles Aircrafts Watercrafts Marine

Fire and Natural

DisastersGeneral

LossesMotor Vehicles

LiabilityAircraft

LiabilityGeneral

Liability CreditFinancial

LossesLegal

Protection TotalExplanationA- Non-Life Technical Income 64,954,732 253,945,062 844,775,207 13,325,739 27,059,708 45,543,157 216,863,052 137,016,707 774,667,390 5,047,411 48,798,440 -1,322,665 1,892,330 8,650,516 2,441,216,7881- Earned Premiums (Net of Reinsurer Share) 54,362,002 242,507,645 786,541,563 13,181,748 26,199,568 39,714,367 190,560,310 126,142,312 704,976,162 4,300,100 38,439,929 31,085 1,587,757 7,214,790 2,235,759,3401-1. Premiums (Net of Reinsurer Share) 62,537,257 256,547,252 790,728,883 5,542,081 29,096,322 40,340,630 213,840,185 135,732,901 698,476,272 4,105,767 78,975,999 0 1,580,171 7,606,342 2,325,110,0611.2- Change in Unearned Premium Provisions (Net of Reinsurers Shares and Reserves Carried Forward) (+/-) -9,541,908 -14,039,607 -4,187,319 495,329 -1,683,491 -626,263 -23,279,875 -9,590,589 5,928,885 194,334 -7,344,021 31,085 7,586 -391,551 -64,027,4051.3- Changes in Unexpired Risk Reserves (Net of Reinsurer Share and Reserves Carried Forward)(+/-) 1,366,653 0 0 0 0 0 0 0 571,005 0 0 0 0 0 1,937,6571.4- Changes in Ongoing Risk Reserves (Net of Reinsurer Share and Reserves Carried Forward)(+/-) 0 0 0 7,144,338 -1,213,263 0 0 0 0 0 -33,192,048 0 0 0 -27,260,9732- Investment Income Transfered from Non-Technical Divisions 10,584,962 11,117,403 50,396,109 143,991 929,731 4,902,828 25,291,052 10,652,104 64,109,747 747,307 9,893,884 0 304,573 1,435,720 190,509,4103- Other Technical Income 3,810 320,015 2,276,330 0 1,090 8,961 93,174 16,190 65,238 4 3,989 2 1 6 2,788,8094- Accrued Salvage and Subrogation Income 3,958 0 5,561,204 0 -70,681 917,002 918,516 206,101 5,516,244 0 460,638 -1,353,752 0 0 12,159,230B- Non-Life Technical Expense (-) -26,547,592 -250,364,266 -759,462,075 -5,544,598 -30,566,164 -22,747,046 -153,398,996 -117,885,471 -771,782,556 -4,532,699 -175,437,543 -25,347 677,339 -2,340,244 -2,319,957,2571- Realized Claims (Net of Reinsurer Share) -8,244,907 -199,455,063 -555,299,019 -4,440,034 -28,112,601 -10,150,613 -98,225,647 -85,643,583 -579,959,219 -3,957,501 -164,062,227 -28,288 146,455 -646,815 -1,738,079,0621.1- Claims Paid (Net of Reinsurer Share) -10,402,605 -198,906,106 -529,436,786 -4,795,520 -24,275,881 -14,920,610 -82,711,965 -80,504,221 -437,438,283 -231,156 -27,857,034 -718,605 -1,033 -162,466 -1,412,362,2731.2- Changes in Outstanding Claims Provisions (Net of Reinsurer Share and Reserves Carried Forward) (+/-) 2,157,699 -548,957 -25,862,233 355,485 -3,836,719 4,769,997 -15,513,682 -5,139,362 -142,520,936 -3,726,345 -136,205,192 690,317 147,489 -484,349 -325,716,7892- 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 03- Changes in Other Technical Reserves (Net of Reinsurer Share and Reserves Carried Forward) (+/-) -1,013,436 0 -3,035,177 0 0 0 -10,577,300 -1,204,683 0 0 0 0 -139,439 0 -15,970,0354- Operating Expenses (-) -17,159,414 -44,314,719 -186,178,682 -1,103,260 -2,181,869 -12,338,972 -38,744,510 -26,240,845 -181,604,847 -575,198 -11,224,043 2,941 670,501 -1,693,311 -522,686,2295- Other Technical Expenses -129,835 -6,594,484 -14,949,198 -1,303 -271,694 -257,462 -5,851,538 -4,796,359 -10,218,490 0 -151,273 0 -178 -118 -43,221,932C- Non Life Technical Profit (A-B) 38,407,140 3,580,797 85,313,132 7,781,141 -3,506,456 22,796,111 63,464,057 19,131,236 2,884,835 514,712 -126,639,103 -1,348,011 2,569,670 6,310,272 121,259,531II- NON TECHNICAL PARTC- Non Life Technical Profit (A-B) 121,259,531J- Total Technical Profit (C) 121,259,531K- Investment Income 258,928,0651- Income from Financial Investments 130,174,8572- Income from Sales of Financial Assets 31,151,4233- Revaluation of Financial Assets 19,421,4344- Foreign Exchange Gains 59,970,9805- Dividend Income from Affiliates 16,000,0006- Income form Subsidiaries and Joint Ventures 07- Real Estate Income 1,815,0068- Income from Derivative Instruments 205,6789- Other Investments 188,68610- Investment Income transferred from Life Technical Division 0L- Investment Expenses (-) -275,809,5881- Investment Management Expenses (including interest) (-) -136,6232- Valuation Allowance of Investments (-) -3,509,9793- Losses On Sales of Investments (-) -7,713,0654- Investment Income Transferred to Non - Life Technical Division (-) -190,509,4105- Losses from Derivative Instruments (-) -184,5096- Foreign Exchange Losses (-) -49,954,0257- Depreciation Expenses (-) -23,801,9778- Other Investment Expenses (-) 0M- Income and Expenses (+/-) -11,736,1011- Reserves (Provisions) Account (+/-) -20,360,6602- Rediscount Account (+/-) -3,360,2813- Mandatory Earthquake Insurance Account (+/-) 04- Inflation Adjustment Account (+/-) 05- Deferred Tax Asset Accounts (+/-) 7,396,0976- Deferred Tax Liability Expense (+/-) 07- Other Income and Revenues 5,142,4128- Other Expense and Losses (-) -553,6709- Prior Period Income 010- Prior Period Losses (-) 0N- Net Profit/(Loss) 71,559,9461- Profit/(Loss) Before Tax 92,641,9062- Taxes Provisions (-) -21,081,9603- Net Profit (Loss) after Tax 71,559,9464- Inflation Adjustment Account (+/-) 0


I-TECHNICAL PART Accident Illness-Health Motor Vehicles Aircrafts Watercrafts Marine

Fire and Natural

DisastersGeneral

LossesMotor Vehicles

LiabilityAircraft

LiabilityGeneral

Liability CreditFinancial

LossesLegal

Protection TotalExplanationA- Non-Life Technical Income 64,954,732 253,945,062 844,775,207 13,325,739 27,059,708 45,543,157 216,863,052 137,016,707 774,667,390 5,047,411 48,798,440 -1,322,665 1,892,330 8,650,516 2,441,216,7881- Earned Premiums (Net of Reinsurer Share) 54,362,002 242,507,645 786,541,563 13,181,748 26,199,568 39,714,367 190,560,310 126,142,312 704,976,162 4,300,100 38,439,929 31,085 1,587,757 7,214,790 2,235,759,3401-1. Premiums (Net of Reinsurer Share) 62,537,257 256,547,252 790,728,883 5,542,081 29,096,322 40,340,630 213,840,185 135,732,901 698,476,272 4,105,767 78,975,999 0 1,580,171 7,606,342 2,325,110,0611.2- Change in Unearned Premium Provisions (Net of Reinsurers Shares and Reserves Carried Forward) (+/-) -9,541,908 -14,039,607 -4,187,319 495,329 -1,683,491 -626,263 -23,279,875 -9,590,589 5,928,885 194,334 -7,344,021 31,085 7,586 -391,551 -64,027,4051.3- Changes in Unexpired Risk Reserves (Net of Reinsurer Share and Reserves Carried Forward)(+/-) 1,366,653 0 0 0 0 0 0 0 571,005 0 0 0 0 0 1,937,6571.4- Changes in Ongoing Risk Reserves (Net of Reinsurer Share and Reserves Carried Forward)(+/-) 0 0 0 7,144,338 -1,213,263 0 0 0 0 0 -33,192,048 0 0 0 -27,260,9732- Investment Income Transfered from Non-Technical Divisions 10,584,962 11,117,403 50,396,109 143,991 929,731 4,902,828 25,291,052 10,652,104 64,109,747 747,307 9,893,884 0 304,573 1,435,720 190,509,4103- Other Technical Income 3,810 320,015 2,276,330 0 1,090 8,961 93,174 16,190 65,238 4 3,989 2 1 6 2,788,8094- Accrued Salvage and Subrogation Income 3,958 0 5,561,204 0 -70,681 917,002 918,516 206,101 5,516,244 0 460,638 -1,353,752 0 0 12,159,230B- Non-Life Technical Expense (-) -26,547,592 -250,364,266 -759,462,075 -5,544,598 -30,566,164 -22,747,046 -153,398,996 -117,885,471 -771,782,556 -4,532,699 -175,437,543 -25,347 677,339 -2,340,244 -2,319,957,2571- Realized Claims (Net of Reinsurer Share) -8,244,907 -199,455,063 -555,299,019 -4,440,034 -28,112,601 -10,150,613 -98,225,647 -85,643,583 -579,959,219 -3,957,501 -164,062,227 -28,288 146,455 -646,815 -1,738,079,0621.1- Claims Paid (Net of Reinsurer Share) -10,402,605 -198,906,106 -529,436,786 -4,795,520 -24,275,881 -14,920,610 -82,711,965 -80,504,221 -437,438,283 -231,156 -27,857,034 -718,605 -1,033 -162,466 -1,412,362,2731.2- Changes in Outstanding Claims Provisions (Net of Reinsurer Share and Reserves Carried Forward) (+/-) 2,157,699 -548,957 -25,862,233 355,485 -3,836,719 4,769,997 -15,513,682 -5,139,362 -142,520,936 -3,726,345 -136,205,192 690,317 147,489 -484,349 -325,716,7892- 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 03- Changes in Other Technical Reserves (Net of Reinsurer Share and Reserves Carried Forward) (+/-) -1,013,436 0 -3,035,177 0 0 0 -10,577,300 -1,204,683 0 0 0 0 -139,439 0 -15,970,0354- Operating Expenses (-) -17,159,414 -44,314,719 -186,178,682 -1,103,260 -2,181,869 -12,338,972 -38,744,510 -26,240,845 -181,604,847 -575,198 -11,224,043 2,941 670,501 -1,693,311 -522,686,2295- Other Technical Expenses -129,835 -6,594,484 -14,949,198 -1,303 -271,694 -257,462 -5,851,538 -4,796,359 -10,218,490 0 -151,273 0 -178 -118 -43,221,932C- Non Life Technical Profit (A-B) 38,407,140 3,580,797 85,313,132 7,781,141 -3,506,456 22,796,111 63,464,057 19,131,236 2,884,835 514,712 -126,639,103 -1,348,011 2,569,670 6,310,272 121,259,531II- NON TECHNICAL PARTC- Non Life Technical Profit (A-B) 121,259,531J- Total Technical Profit (C) 121,259,531K- Investment Income 258,928,0651- Income from Financial Investments 130,174,8572- Income from Sales of Financial Assets 31,151,4233- Revaluation of Financial Assets 19,421,4344- Foreign Exchange Gains 59,970,9805- Dividend Income from Affiliates 16,000,0006- Income form Subsidiaries and Joint Ventures 07- Real Estate Income 1,815,0068- Income from Derivative Instruments 205,6789- Other Investments 188,68610- Investment Income transferred from Life Technical Division 0L- Investment Expenses (-) -275,809,5881- Investment Management Expenses (including interest) (-) -136,6232- Valuation Allowance of Investments (-) -3,509,9793- Losses On Sales of Investments (-) -7,713,0654- Investment Income Transferred to Non - Life Technical Division (-) -190,509,4105- Losses from Derivative Instruments (-) -184,5096- Foreign Exchange Losses (-) -49,954,0257- Depreciation Expenses (-) -23,801,9778- Other Investment Expenses (-) 0M- Income and Expenses (+/-) -11,736,1011- Reserves (Provisions) Account (+/-) -20,360,6602- Rediscount Account (+/-) -3,360,2813- Mandatory Earthquake Insurance Account (+/-) 04- Inflation Adjustment Account (+/-) 05- Deferred Tax Asset Accounts (+/-) 7,396,0976- Deferred Tax Liability Expense (+/-) 07- Other Income and Revenues 5,142,4128- Other Expense and Losses (-) -553,6709- Prior Period Income 010- Prior Period Losses (-) 0N- Net Profit/(Loss) 71,559,9461- Profit/(Loss) Before Tax 92,641,9062- Taxes Provisions (-) -21,081,9603- Net Profit (Loss) after Tax 71,559,9464- Inflation Adjustment Account (+/-) 0


ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ 31 December 2014 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ


Other Matters and Financial Statements / 31 December 2014 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon

Akis Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş.Kavacık Rüzgarlı Bahçe Mah.Kavak Sok. No: 3Beykoz 34805 İstanbul

Telephone +90 (216) 681 90 00Fax +90 (216) 681 90 90İnternet www.kpmg.com.tr

INDEPENDENT AUDITOR’S REPORT

To the Board of Directors of Anadolu Anonim Türk Sigorta Şirketi

Introduction

We have audited the accompanying unconsolidated balance sheet of Anadolu Anonim Türk Sigorta Şirketi (“the Company”) as at 31 December 2014 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

Management is responsible for the preparation and fair presentation of these unconsolidated financial statements in accordance with the accounting principles and standards, in force as per the insurance legislation. This responsibility includes: designing, implementing and maintaining internal systems relevant to the preparation and fair presentation of financial statements that are free from material misstatements, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Independent Auditors’ Responsibility

Our responsibility is to express an opinion on these unconsolidated financial statements based on our audit. We conducted our audit in accordance with audit standards in force as per the insurance legislation. Those standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatement.

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 our qualified audit opinion.

Basis for Qualified Conclusion

As explained in Note 17, as of 31 December 2014 the accompanying unconsolidated financial statements included a general provision amounting to TL 7.702.761 provided by the Company management considering the circumstances which may arise from any changes in economy or market conditions recognized as expense in the prior periods. The total amount had been expensed in previous years’ financial statements.

31 December 2014 Unconsolidated Financial Statements Together with Independent Auditors’ Report Thereon




Qualified Opinion

In our opinion, except for the effect on the unconsolidated financial statements of the matter described in the basis for qualified opinion paragraph above, nothing has come to our attention that causes us to believe that the accompanying unconsolidated financial statements give a true and fair view of the unconsolidated financial position of Anadolu Anonim Türk Sigorta Şirketi as at 31 December 2014, and of its unconsolidated financial performance and its unconsolidated cash flows for the year then ended in accordance with the accounting principles and standards (see Note 2) in force as per the insurance legislation.

Report on Other Legal and Regulatory Requirements

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 29 January 2015.

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 the Group’s bookkeeping activities, financial statements and group’s financial statements for the period 1 January - 31 December 2014 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.Alper Güvenç, Certified Public AccountantPartner

29 January 2015 İstanbul, Türkiye

Additional paragraph for convenience translation to English:As explained in Note 2.1.1, the accompanying unconsolidated financial statements are not intended to present the financial position and results of operations of the Company in accordance with the accounting principles and practices generally accepted in countries and jurisdictions other than Turkey.

31 December 2014 Unconsolidated Financial Statements Together With Independent Auditors’ Report Thereon




We confirm that the unconsolidated financial statements and related disclosures and footnotes as at 31 December 2014 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, 29 January 2015

Musa ÜLKENMember of Board of DirectorsChief Executive Officer

Fatih GÖRENExecutive Vice President of Finance

Murat TETİKAccounting Reporting Manager

Taylan MATKAP Actuary

Unconsolidated Financial Statements As at and for the Year Ended 31 December 2014




UNCONSOLIDATED BALANCE SHEET 104-108

UNCONSOLIDATED STATEMENT OF INCOME 109-111

UNCONSOLIDATED STATEMENT OF CHANGES IN EQUITY 112

UNCONSOLIDATED STATEMENT OF CASH FLOWS 114

UNCONSOLIDATED STATEMENT OF PROFIT DISTRIBUTION 115

NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS 116-178

NOTE 1 General Information 116

NOTE 2 Summary of significant accounting policies 118

NOTE 3 Critical accounting estimates and judgments in applying accounting policies 135

NOTE 4 Management of insurance and financial risk 136

NOTE 5 Segment reporting 149

NOTE 6 Tangible assets 152

NOTE 7 Investment properties 153

NOTE 8 Intangible assets 154

NOTE 9 Investments in associates 154

NOTE 10 Reinsurance assets and liabilities 155

NOTE 11 Financial assets 156

NOTE 12 Loans and receivables 160

NOTE 13 Derivative financial instruments 162

NOTE 14 Cash and cash equivalents 162

NOTE 15 Equity 162

NOTE 16 Other reserves and equity component of DPF 164

NOTE 17 Insurance contract liabilities and reinsurance assets 165

NOTE 18 Investment contract liabilities 169

NOTE 19 Trade and other payables and deferred income 169

NOTE 20 Financial liabilities 170

NOTE 21 Deferred tax 170

NOTE 22 Retirement benefit obligations 171

NOTE 23 Other liabilities and provisions 171

NOTE 24 Net insurance premium 172

NOTE 25 Fee revenue 172

Contents

Unconsolidated Financial Statements As at and for the Year Ended 31 December 2014



NOTE 26 Investment income 172

NOTE 27 Net income accrual on financial assets 172

NOTE 28 Assets held at fair value through profit or loss 172

NOTE 29 Insurance rights and claims 172

NOTE 30 Investment contract benefits 172

NOTE 31 Other expenses 172

NOTE 32 Operating expenses 173

NOTE 33 Employee benefits expenses 173

NOTE 34 Financial costs 173

NOTE 35 Income tax 173

NOTE 36 Net foreign exchange gains 174

NOTE 37 Earnings per share 174

NOTE 38 Dividends per share 174

NOTE 39 Cash generated from operations 174

NOTE 40 Convertible bonds 174

NOTE 41 Redeemable preference shares 174

NOTE 42 Risks 174

NOTE 43 Commitments 175

NOTE 44 Business combinations 175

NOTE 45 Related party transactions 176

NOTE 46 Events after the reporting date 177

NOTE 47 Others 178




Unconsolidated Balance Sheet As at 31 December 2014

ASSETS

I- Current Assets Note

AuditedCurrent Period

31 December 2014


31 December 2013A- Cash and Cash Equivalents 14 1.606.048.714 1.153.712.2161- Cash 14 37.347 49.2562- Cheques Received -- --3- Banks 14 1.356.733.446 901.838.5774- Cheques Given and Payment Orders 14 (171.519) (1.025.984)5- Bank Guaranteed Credit Card Receivables with Maturities Less Than Three Months 14 249.449.440 252.850.3676- Other Cash and Cash Equivalents -- --B- Financial Assets and Financial Investments with Risks on Policyholders 11 644.067.957 631.008.7461- Available-for-Sale Financial Assets 11 442.140.789 456.674.1612- Held to Maturity Investments 11 73.670.047 94.501.5493- Financial Assets Held for Trading 11 134.054.733 85.630.6484- 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 (5.797.612) (5.797.612)C- Receivables from Main Operations 12 797.454.113 773.925.2261- Receivables from Insurance Operations 12 751.368.850 736.197.9762- Provision for Receivables from Insurance Operations 2.21,12 (7.677.067) (9.475.078)3- Receivables from Reinsurance Operations 12 47.022.365 42.073.7014- Provision for Receivables from Reinsurance Operations -- --5- Cash Deposited to Insurance and Reinsurance Companies 12 6.739.965 5.128.6276- Loans to the Policyholders -- --7- Provision for Loans to the Policyholders -- --8- Receivables from Individual Pension Operations -- --9- Doubtful Receivables from Main Operations 12 113.380.507 102.829.15810- Provision for Doubtful Receivables from Main Operations 12 (113.380.507) (102.829.158)D- Due from Related Parties 12 -- 72.3241- Due from Shareholders -- --2- Due from Associates -- --3- Due from Subsidiaries -- --4- Due from Joint Ventures -- --5- Due from Personnel -- 72.3246- 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 3.595.183 2.968.7341- Finance Lease Receivables -- --2- Unearned Finance Lease Interest Income -- --3- Deposits and Guarantees Given 358.718 394.5124- Other Miscellaneous Receivables 3.236.465 2.574.2225- Rediscount on Other Miscellaneous Receivables -- --6- Other Doubtful Receivables -- --7- Provision for Other Doubtful Receivables -- --F- Prepaid Expenses and Income Accruals 208.618.353 197.767.1101- Prepaid Expenses 17 205.884.923 196.680.4062- Accrued Interest and Rent Income -- --3- Income Accruals 10,12 2.733.430 1.086.7044- Other Prepaid Expenses -- --G- Other Current Assets 3.956.342 11.284.2551- Stocks to be Used in the Following Months 212.258 888.7742- Prepaid Taxes and Funds 19 1.848.492 9.659.9233- Deferred Tax Assets -- --4- Job Advances 12 165.103 39.1755- Advances Given to Personnel 12 4.631 35.8976- Inventory Count Differences -- --7- Other Miscellaneous Current Assets 12 1.725.858 660.4868- Provision for Other Current Assets -- --I- Total Current Assets 3.263.740.662 2.770.738.611

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

Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1(Currency: Turkish Lira (TL))




Unconsolidated Balance Sheet As at 31 December 2014

ASSETS

II- Non-Current Assets Note


31 December 2014

AuditedPrior Period

31 December 2013A- Receivables from Main Operations -- --1- Receivables from Insurance Operations -- --2- Provision for Receivables from Insurance Operations -- --3- Receivables from Reinsurance Operations -- --4- Provision for Receivables from Reinsurance Operations -- --5- Cash Deposited for Insurance and Reinsurance Companies -- --6- Loans to the Policyholders -- --7- Provision for Loans to the Policyholders -- --8- Receivables from Individual Pension Business -- --9- Doubtful Receivables from Main Operations -- --10- Provision for Doubtful Receivables from Main Operations -- --B- Due from Related Parties -- --1- Due from Shareholders -- --2- Due from Associates -- --3- Due from Subsidiaries -- --4- Due from Joint Ventures -- --5- Due from Personnel -- --6- Due from Other Related Parties -- --7- Rediscount on Receivables from Related Parties -- --8- Doubtful Receivables from Related Parties -- --9- Provision for Doubtful Receivables from Related Parties -- --C- Other Receivables -- --1- Finance Lease Receivables -- --2- Unearned Finance Lease Interest Income -- --3- Deposits and Guarantees Given -- --4- Other Miscellaneous Receivables -- --5- Rediscount on Other Miscellaneous Receivables -- --6- Other Doubtful Receivables -- --7- Provision for Other Doubtful Receivables -- --D- Financial Assets 9 391.400.000 368.200.0001- Investments in Equity Shares -- --2- Investments in Associates 9 391.400.000 368.200.0003- 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 32.307.481 34.793.1761- Investment Properties 6,7 6.982.776 6.982.7762- Impairment for Investment Properties -- --3- Owner Occupied Property 6 6.788.733 6.520.9744- Machinery and Equipments 6 34.554.018 32.800.3915- Furniture and Fixtures 6 11.775.416 11.331.0856- Motor Vehicles 6 1.362.223 1.285.9837- Other Tangible Assets (Including Leasehold Improvements) 6 19.401.127 18.262.2778- Tangible Assets Acquired Through Finance Leases 6 4.166.354 4.166.3549- Accumulated Depreciation 6 (52.723.166) (46.556.664)10- Advances Paid for Tangible Assets (Including Construction in Progress) -- --F- Intangible Assets 8 62.254.841 62.812.0331- Rights -- --2- Goodwill 8 16.250.000 16.250.0003- Pre-operating Expenses -- --4- Research and Development Costs -- --5- Other Intangible Assets 8 88.079.901 54.879.8736- Accumulated Amortization 8 (43.804.438) (27.614.154)7- Advances Paid for Intangible Assets 8 1.729.378 19.296.314G- Prepaid Expenses and Income Accruals 17 3.562.038 34.6711- Prepaid Expenses 17 3.562.038 34.6712- Income Accruals -- --3- Other Prepaid Expenses and Income Accruals -- --H- Other Non-Current Assets 21 20.125.763 16.191.7011- 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 20.125.763 16.191.7016- Other Miscellaneous Non-Current Assets -- --7- Amortization on Other Non-Current Assets -- --8- Provision for Other Non-Current Assets -- --II- Total Non-Current Assets 509.650.123 482.031.581TOTAL ASSETS 3.773.390.785 3.252.770.192


Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1(Currency: Turkish Lira (TL))




LIABILITIES

III- Short-Term Liabilities Note


31 December 2014

AuditedPrior Period

31 December 2013A- Financial Liabilities -- --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 -- --B- Payables Arising from Main Operations 19 302.045.983 327.033.0951- Payables Arising from Insurance Operations 19 218.662.943 260.656.4062- Payables Arising from Reinsurance Operations -- --3- Cash Deposited by Insurance and Reinsurance Companies 10,19 7.277.133 3.105.9064- Payables Arising from Individual Pension Business -- --5- Payables Arising from Other Main Operations 19 76.105.907 63.270.7836- Discount on Payables from Other Main 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 19 47.561.333 56.534.7801- Deposits and Guarantees Received 2.916.577 3.037.0362- Medical Treatment Payables to Social Security Institution 16.625.234 26.428.9553- Other Miscellaneous Payables 28.268.772 27.696.4124- Discount on Other Miscellaneous Payables (249.250) (627.623)E- Insurance Technical Provisions 17 2.214.197.954 1.799.130.4441- Reserve for Unearned Premiums - Net 17 1.159.630.507 1.097.540.7592- Reserve for Unexpired Risks - Net 2.26,17 40.379.346 13.118.3733- Mathematical Provisions - Net -- --4- Provision for Outstanding Claims - Net 17 1.014.188.101 688.471.3125- Provision for Bonus and Discounts - Net -- --6- Other Technical Provisions - Net -- --F- Provisions for Taxes and Other Similar Obligations 19 27.386.135 27.491.0241- Taxes and Funds Payable 25.121.485 25.772.0032- Social Security Premiums Payable 2.264.650 1.719.0213- Overdue, Deferred or By Instalment Taxes and Other Liabilities -- --4- Other Taxes and Similar Payables -- --5- Corporate Tax Payable 35 21.081.960 --6- Prepaid Taxes and Other Liabilities Regarding Current Period Income (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 80.052.263 64.374.6161- Deferred Income 19 45.447.065 39.363.4952- Expense Accruals 23 34.605.198 25.011.1213- Other Deferred Income and Expense Accruals -- --I- Other Short-Term Liabilities 23 1.433.153 1.187.4901- Deferred Tax Liabilities -- --2- Inventory Count Differences -- --3- Other Various Short-Term Liabilities 23 1.433.153 1.187.490III - Total Short-Term Liabilities 2.672.676.821 2.275.751.449


Unconsolidated Balance Sheet As at 31 December 2014Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1(Currency: Turkish Lira (TL))




LIABILITIES

IV- Long-Term Liabilities Note


31 December 2014

AuditedPrior Period

31 December 2013A- 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 68.252.637 52.282.6011- 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 68.252.637 52.282.601F-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 12.628.115 11.720.1421- Provision for Employee Termination Benefits 23 12.628.115 11.720.1422- 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 80.880.752 64.002.743






EQUITY

V- Equity Note


31 December 2014

AuditedPrior Period

31 December 2013A- Paid in Capital 500.000.000 500.000.0001- (Nominal) Capital 2.13,15 500.000.000 500.000.0002- Unpaid Capital -- --3- Positive Capital Restatement Differences -- --4- Negative Capital Restatement Differences -- --5- Register in Progress Capital -- --B- Capital Reserves 15 8.809.304 8.161.5411- 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 8.809.304 8.161.541C- Profit Reserves 439.463.962 401.373.6671- Legal Reserves 15 30.779.762 30.638.1112- Statutory Reserves 15 7.262.220 6.993.0823- Extraordinary Reserves 15 20.545.601 18.123.3614- Special Funds -- --5- Revaluation of Financial Assets 15 336.666.816 302.035.0896- Other Profit Reserves 15 44.209.563 43.584.024D- Retained Earnings -- --1- Retained Earnings -- --E- Accumulated Losses -- (63.981.132)1- Accumulated Losses -- (63.981.132)F-Net Profit/(Loss) for the Period 71.559.946 67.461.9241- Net Profit for the Period 70.639.674 66.814.1612- Net Loss for the Period -- --3- Profit not Available for Distribution 15 920.272 647.763V- Total Equity 1.019.833.212 913.016.000TOTAL EQUITY AND LIABILITIES 3.773.390.785 3.252.770.192






I-TECHNICAL SECTION Note

Audited Current Period

31 December 2014

Audited Prior Period

31 December 2013A- Non-Life Technical Income 2.441.216.789 1.966.929.9681- Earned Premiums (Net of Reinsurer Share) 2.235.759.340 1.825.789.1701.1- Written Premiums (Net of Reinsurer Share) 17 2.325.110.061 2.067.216.0071.1.1- Written Premiums, gross 17 3.004.830.066 2.749.704.4051.1.2- Written Premiums, ceded 10,17 (605.617.965) (618.521.175)1.1.3- Premiums Transferred to Social Security Institutions (74.102.040) (63.967.223)1.2- Change in Reserve for Unearned Premiums (Net of Reinsurer Shares and Less the Amounts Carried Forward) 17,29 (62.089.748) (232.405.987)1.2.1- Reserve for Unearned Premiums, gross 17 (68.928.251) (318.105.539)1.2.2- Reserve for Unearned Premiums, ceded 17 4.900.846 71.144.4331.2.3 - Reserve for Unearned Premiums, Social Security Institution Share 1.937.657 14.555.1191.3- Change in Reserve for Unexpired Risks (Net of Reinsurer Share and Less the Amounts Carried Forward) 29 (27.260.973) (9.020.850)1.3.1- Reserve for Unexpired Risks, gross (30.198.184) (12.778.086)1.3.2- Reserve for Unexpired Risks, ceded 2.937.211 3.757.2362- Investment Income - Transferred from Non-Technical Section 190.509.410 123.220.2263- Other Technical Income (Net of Reinsurer Share) 2.788.809 2.924.3743.1- Other Technical Income, gross 2.788.809 2.924.3743.2- Other Technical Income, ceded -- --4- Accrued Salvage and Subrogation Income 12.159.230 14.996.198B - Non-Life Technical Expense (2.319.957.258) (1.866.051.751)1- Incurred Losses (Net of Reinsurer Share) 17 (1.738.079.061) (1.346.087.004)1.1- Claims Paid (Net of Reinsurer Share) 17,29 (1.412.362.272) (1.146.966.155)1.1.1- Claims Paid, gross 17 (1.553.196.954) (1.249.199.210)1.1.2- Claims Paid, ceded 10,17 140.834.682 102.233.0551.2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward) 17,29 (325.716.789) (199.120.849)1.2.1- Change in Provisions for Outstanding Claims, gross 17 (420.158.951) (245.037.920)1.2.2- Change in Provisions for Outstanding Claims, ceded 17 94.442.162 45.917.0712- 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 (15.970.036) (12.422.591)4- Operating Expenses 32 (522.686.229) (462.834.106)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 (43.221.932) (44.708.050)6.1- Change in Other Technical Provisions, gross 2.25 (43.221.932) (44.708.050)6.2- Change in Other Technical Provisions, ceded -- --C- Net Technical Income-Non-Life (A - B) 121.259.531 100.878.217D- 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 -- --


Unconsolidated Statement of IncomeFor the Year Ended 31 December 2014Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1(Currency: Turkish Lira (TL))






31 December 2014


31 December 2013E- 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) -- --






II-NON-TECHNICAL SECTION Note


31 December 2014


31 December 2013C- Net Technical Income - Non-Life (A-B) 121.259.531 100.878.217F- Net Technical Income - Life (D-E) -- --I - Net Technical Income - Pension Business (G-H) -- --J- Total Net Technical Income (C+F+I) 121.259.531 100.878.217K- Investment Income 258.928.064 186.213.3481- Income from Financial Assets 4.2 130.174.857 85.749.3682- Income from Disposal of Financial Assets 4.2 31.151.423 16.004.3723- Valuation of Financial Assets 4.2 19.421.434 10.576.4494- Foreign Exchange Gains 4.2 59.970.980 52.709.1775- Income from Associates 4.2 16.000.000 18.000.0006- Income from Subsidiaries and Joint Ventures -- --7- Income from Property, Plant and Equipment 1.815.006 2.848.3778- Income from Derivative Transactions 4.2 205.678 212.9319- Other Investments 188.686 112.67410- Income Transferred from Life Section -- --L- Investment Expense (275.809.588) (187.215.654)1- Investment Management Expenses (inc. interest) 4.2 (136.623) --2- Diminution in Value of Investments 4.2 (3.509.979) (4.677.619)3- Loss from Disposal of Financial Assets 4.2 (7.713.065) (13.581.516)4- Investment Income Transferred to Non-Life Technical Section (190.509.410) (123.220.226)5- Loss from Derivative Transactions 4.2 (184.509) (99.585)6- Foreign Exchange Losses 4.2 (49.954.025) (28.804.896)7- Depreciation and Amortization Expenses 6,8 (23.801.977) (16.831.812)8- Other Investment Expenses -- --M- Income and Expenses From Other and Extraordinary Operations (11.736.101) (32.413.987)1- Provisions 47 (20.360.660) (23.892.951)2- Rediscounts 47 (3.360.281) 2.353.9343- 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 -- (11.654.589)7- Other Income 5.142.413 3.469.0738- Other Expenses and Losses (553.670) (2.689.454)9- Prior Year’s Income -- --10- Prior Year’s Expenses and Losses -- --N- Net Profit for the Period 71.559.946 67.461.9241- Profit for the Period 92.641.906 67.461.9242- Corporate Tax Provision and Other Fiscal Liabilities 35 (21.081.960) --3- Net Profit for the Period 71.559.946 67.461.9244- Monetary Gains and Losses -- --






Audited Statement of Changes in Equity - 31 December 2013

Notes Paid-in CapitalOwn Shares of

the CompanyRevaluation of

Financial AssetsInflation

Adjustments

Currency Translation

Adjustments Legal ReservesStatutory Reserves

Other Reserves and Retained

EarningsNet Profit for

the YearRetained Earnings Total

I - Balance at the end of the previous year - 31 December 2012 500.000.000 -- 212.235.915 -- -- 30.638.111 6.993.082 70.474.948 (63.981.132) -- 756.360.924II - Change in Accounting Standards -- -- -- -- -- -- -- -- -- -- --III - Restated balances (I+II) - 1 January 2013 500.000.000 -- 212.235.915 -- -- 30.638.111 6.993.082 70.474.948 (63.981.132) -- 756.360.924A- 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 -- -- -- -- -- -- -- (606.022) -- -- (606.022)D- Change in the value of financial assets 11,15 -- -- 89.799.174 -- -- -- -- -- -- -- 89.799.174E- Currency translation adjustments -- -- -- -- -- -- -- -- -- -- --F- Other gains or losses -- -- -- -- -- -- -- -- -- -- --G- Inflation adjustment differences -- -- -- -- -- -- -- -- -- -- --H- Net profit for the period -- -- -- -- -- -- -- -- 67.461.924 -- 67.461.924I - Dividends paid -- -- -- -- -- -- -- -- -- -- --J - Transfers to reserves 15 -- -- -- -- -- -- -- -- 63.981.132 (63.981.132) --II - Balance at the end of the period - 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


Paid-in Capital

Own Shares of the Company

Revaluation of Financial Assets

Inflation Adjustments





the YearRetained Earnings Total Paid-in Capital

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) 913.016.000II - Change in Accounting Standards -- -- -- -- -- -- -- -- -- -- --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 (63.981.132) 913.016.000A- Capital increase (A1+A2) -- -- -- -- -- -- -- -- -- -- --


B- Purchase of own shares -- -- -- -- -- -- -- -- -- -- --C- Gains or losses that are not included in the statement of income -- -- -- -- -- -- -- 625.539 -- -- 625.539D- Change in the value of financial assets 11,15 -- -- 34.631.727 -- -- -- -- -- -- -- 34.631.727E- Currency translation adjustments -- -- -- -- -- -- -- -- -- -- --F- Other gains or losses -- -- -- -- -- -- -- -- -- -- --G- Inflation adjustment differences -- -- -- -- -- -- -- -- -- -- --H- Net profit for the period -- -- -- -- -- -- -- -- 71.559.946 -- 71.559.946I - 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 71.559.946 -- 1.019.833.212


Unconsolidated Statement of Changes in EquityFor the Year Ended 31 December 2014Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1(Currency: Turkish Lira (TL))







Adjustments





the YearRetained Earnings Total

I - Balance at the end of the previous year - 31 December 2012 500.000.000 -- 212.235.915 -- -- 30.638.111 6.993.082 70.474.948 (63.981.132) -- 756.360.924II - Change in Accounting Standards -- -- -- -- -- -- -- -- -- -- --III - Restated balances (I+II) - 1 January 2013 500.000.000 -- 212.235.915 -- -- 30.638.111 6.993.082 70.474.948 (63.981.132) -- 756.360.924A- Capital increase (A1+A2) -- -- -- -- -- -- -- -- -- -- --


B- Purchase of own shares -- -- -- -- -- -- -- -- -- -- --C- Gains or losses that are not included in the statement of income -- -- -- -- -- -- -- (606.022) -- -- (606.022)D- Change in the value of financial assets 11,15 -- -- 89.799.174 -- -- -- -- -- -- -- 89.799.174E- Currency translation adjustments -- -- -- -- -- -- -- -- -- -- --F- Other gains or losses -- -- -- -- -- -- -- -- -- -- --G- Inflation adjustment differences -- -- -- -- -- -- -- -- -- -- --H- Net profit for the period -- -- -- -- -- -- -- -- 67.461.924 -- 67.461.924I - Dividends paid -- -- -- -- -- -- -- -- -- -- --J - Transfers to reserves 15 -- -- -- -- -- -- -- -- 63.981.132 (63.981.132) --II - Balance at the end of the period - 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


Paid-in Capital

Own Shares of the Company

Revaluation of Financial Assets

Inflation Adjustments





the YearRetained Earnings Total Paid-in Capital

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) 913.016.000II - Change in Accounting Standards -- -- -- -- -- -- -- -- -- -- --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 (63.981.132) 913.016.000A- Capital increase (A1+A2) -- -- -- -- -- -- -- -- -- -- --


B- Purchase of own shares -- -- -- -- -- -- -- -- -- -- --C- Gains or losses that are not included in the statement of income -- -- -- -- -- -- -- 625.539 -- -- 625.539D- Change in the value of financial assets 11,15 -- -- 34.631.727 -- -- -- -- -- -- -- 34.631.727E- Currency translation adjustments -- -- -- -- -- -- -- -- -- -- --F- Other gains or losses -- -- -- -- -- -- -- -- -- -- --G- Inflation adjustment differences -- -- -- -- -- -- -- -- -- -- --H- Net profit for the period -- -- -- -- -- -- -- -- 71.559.946 -- 71.559.946I - 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 71.559.946 -- 1.019.833.212




Note


31 December 2014


31 December 2013A - Cash flows from operating activities

1- Cash provided from insurance activities 3.153.798.374 2.854.861.8342- Cash provided from reinsurance activities -- 6.871.2273- Cash provided from individual pension business -- --4- Cash used in insurance activities (2.924.054.056) (2.501.075.344)5- Cash used in reinsurance activities (6.560.002) (1.222.563)6- Cash used in individual pension business -- --7- Cash provided by operating activities 223.184.316 359.435.154

8- Interest paid -- --9- Income taxes paid 19 (22.930.452) 980.23310- Other cash inflows 26.050.558 50.333.60911- Other cash outflows (37.055.680) (70.513.485)12-Net cash provided by operating activities 189.248.742 340.235.511B - Cash flows from investing activities

1- Proceeds from disposal of tangible assets -- 1.823.5002- Acquisition of tangible assets 6, 8 (21.111.793) (47.756.100)3- Acquisition of financial assets 11 (541.175.656) (714.083.260)4- Proceeds from disposal of financial assets 865.215.792 431.437.0295- Interests received (142.557.704) 89.565.1846- Dividends received 10.000.000 8.000.0007- Other cash inflows 62.448.109 198.407.8798- Other cash outflows (205.552.139) (37.769.638)9- Net cash provided by investing activities 27.266.609 (70.375.406)

C- Cash flows from financing activities1- Equity shares issued -- --2- Cash provided from loans and borrowings -- --3- Finance lease payments -- --4- Dividends paid -- --5- Other cash inflows -- --6- Other cash outflows -- --7- Net cash used in financing activities -- --

D- Effect of exchange rate fluctuations on cash and cash equivalents 1.701.066 31.224.213E- Net increase in cash and cash equivalents 218.216.417 301.084.318F- Cash and cash equivalents at the beginning of the year 14 825.512.807 524.428.489G- Cash and cash equivalents at the end of the year 14 1.043.729.224 825.512.807


Unconsolidated Statement of Cash FlowFor the Year Ended 31 December 2014Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1(Currency: Turkish Lira (TL))




Note


31 December 2014


31 December 2013(**)

I. PROFIT DISTRIBUTION1.1. CURRENT YEAR PROFIT (*) 94.279.437 66.814.1611.2 TAX AND FUNDS PAYABLE (21.081.960) --

1.2.1. Corporate Income Tax (Income Tax) (21.081.960) --1.2.2. Income tax deduction -- --1.2.3. Other taxes and Duties -- --

A NET PROFIT (1.1 - 1.2) 73.197.477 66.814.1611.3. PREVIOUS PERIOD LOSSES (-) -- 63.981.1321.4. FIRST LEGAL RESERVE 3.659.874 141.6511.5. STATUTORY FUND (-) -- --B NET PROFIT DISTRIBUTION [(A-(1.3 + 1.4 + 1.5)] 69.537.603 2.691.3781.6. FIRST DIVIDEND TO SHAREHOLDERS (-) -- --

1.6.1. Holders of shares -- --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 (-) -- --1.8. DIVIDENDS TO BOARD OF DIRECTORS (-) -- --1.9. SECOND DIVIDEND TO SHAREHOLDERS (-) -- --


1.10. SECOND LEGAL RESERVE (-) -- --1.11. STATUTORY RESERVES (-) -- 269.1381.12. EXTRAORDINARY RESERVES -- 2.422.2401.13. OTHER RESERVES -- --1.14. SPECIAL FUNDS -- --II. 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. -- --III. PROFIT PER SHARE -- --3.1. HOLDERS OF SHARES -- --3.2. HOLDERS OF SHARES (%) -- --3.3. HOLDERS OF PREFERRED SHARES -- --3.4. HOLDERS OF PREFERRED SHARES (%) -- --IV. DIVIDEND PER SHARE -- --4.1. HOLDERS OF SHARES -- --4.2. HOLDERS OF SHARES (%) -- --4.3. HOLDERS OF PREFERRED SHARES -- --4.4. HOLDERS OF PREFERRED SHARES (%) -- --

(*) Capital Markets Board’s no.2014/2 in the Weekly Bulletin “Profit Distribution Statement Preparation Guide” in accordance with the profit distribution are based on the consolidated profit figure. Profit for the year December 31, 2014, no.5 of the Corporate Tax Law than 75% of their income from investments in associates and real estate sales pursuant to the shareholders’ equity under “Profit not subject to distribution” account the amount of 1.394.625 TL allocated for follow-up taken into consideration.(**) Profit distribution table has not been filled yet due to profit distribution proposal for the year 2014 has not prepared by the Board of Directors.(***) The figures of 2013 is filled with the data which is “According to Legal Records” belongs to the Profit Distribution.


Unconsolidated Profit DistributionFor the Year Ended 31 December 2014Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1(Currency: Turkish Lira (TL))


ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Unconsolidated Financial Statements As at 31 December 2014Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1(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 2014, the shareholder having indirect control over the shares of Anadolu Anonim Türk Sigorta Şirketi (“the Company”) is Türkiye İş Bankası A.Ş. (“İş Bankası”).

Shareholder

31 December 2014 31 December 2013Shareholding Amount (TL)

Shareholding Rate (%)

Shareholding Amount (TL)


Milli Reasürans T.A.Ş. 286.550.106 57,31 286.550.106 57,31Other 213.449.894 42,69 213.449.894 42,69Paid 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 as of 2 December 2013 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, health, motor vehicles, air vehicles, water vehicles, transportation, fire and natural disasters, general loss, credit, financial losses, and legal protection.

As at 31 December 2014, the Company serves through, 2.485 authorized agencies and 91 unathorized agencies (31 December 2013: 2.468 authorized agencies and 83 unathorized agencies) of which, 2.576 agencies (31 December 2013: 2.551 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 in their own specific laws and regulations for the 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 2014 31 December 2013

Senior level managers 7 8Directors 37 38Intermediate directors 3 3Officers 142 128Contracted personnel 799 760Total 988 937

1.6 Wages and similar benefits provided to the senior management

For the year ended 31 December 2014, wages and similar benefits provided to the senior management including chairman is amounting to TL 1.034.290 (31 December 2013: TL 948.790) and members of the board of the directors, general manager, general coordinator, and deputy general managers is amounting to TL 3.915.203 (31 December 2013: TL: 3.918.307)

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 2014.

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 ŞirketiRegistered address of the head office: Rüzgarlıbahçe Mahallesi, Kavak Sokak, No:3134805 Kavacık /İstanbulThe 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’’).

Although the 4th standard of the Turkish Accounting Standards Board (“TASB”) for the ‘Insurance contracts’ became effective on 25 March 2006 for the accounting periods that begin on or after 31 December 2005, it is stated that TFRS 4 will not be implemented at this stage since the second phase of the International Accounting Standards Board project about the insurance contracts has not been completed yet. In this context, “Communiqué on Technical Reserves for Insurance, Reinsurance and Individual Pension Companies and the Related Assets That Should Be Invested Against Those Technical Reserves” (“Communiqué on Technical Reserves”) is published in the Official Gazette dated 7 August 2007, numbered 26606 and became effective on 1 January 2008. Subsequent to the publication of the Communiqué on Technical Reserves, some other circulars and sector announcements which contain explanations and regulations related to application of the Communiqué on Technical Reserves are published. Accounting policies applied for the insurance contracts based on these communiqué, circulars and other sector announcements are summarized on their own captions in the following sections.

Accounting for subsidiaries, associates and joint ventures is regulated with 28 December 2007 dated and 2007/26 numbered “Circular Related to the Accounting of Subsidiaries, Associates and Joint Ventures”, issued by the Turkish Treasury. It is stated that, the companies will continue to apply the principles of the related standards of TFRSs for the accounting of subsidiaries, associates and joint venture until the publication of another regulation on this issue by the Turkish Treasury. “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 (4th repeat) Official Gazette, constituted the basis of consolidation to be effective on the dates that circular specifies.

Additional paragraph for convenience translation to English

The differences between accounting principles, as described in the preceding paragraphs, and the accounting principles generally accepted in countries, in which the accompanying unconsolidated financial statements are to be distributed, and International Financial Reporting Standards (“IFRS”), may have significant influence on the accompanying unconsolidated financial statements. Accordingly, the accompanying unconsolidated financial statements are not intended to present the financial position and results of operations in accordance with the accounting principles generally accepted in such countries other than Turkey.

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 2014, 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 1 January 2005 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.

2.1.6 Accounting policies, changes in accounting estimates and errors

There is not any change in accounting estimates or determined errors in current year. Critical accounting judgements used in applying the Company’s accounting policies are explained in Note 3 - Critical accounting estimates and judgments in applying accounting policies.

2.2 Consolidation

“Circular Related to the Preparation of the Consolidated Financial Statements of Insurance, Reinsurance, and Individual Pension Companies” issued by the 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.

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.

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

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

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

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

Depreciation is 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 AssetsEstimated Useful Lives

(years)Depreciation

Rates (%)Buildings 50 2,0Machinery and equipments 3 - 16 6,3 - 33,3Furniture and fixtures 4 - 16 6,3 - 25,0Vehicles 5 20,0Other tangible assets (including leasehold improvements) 5 - 10 10,0 - 20,0Leased 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.

Investment properties are measured initially at cost including transaction costs.

Subsequent to initial recognition, the Company measured all investment properties based on the cost model in accordance with the cost model for property and equipment (i.e. at cost less accumulated depreciation and less impairment losses if any).

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. 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.

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 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

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 assetsAvailable-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.

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

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

2.9 Impairment on assets

Impairment on financial asset

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

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.

2.10 Derivative financial instruments

Financial Instruments: Recognition and measurementDerivative 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

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 2014 and 31 December 2013, the share capital and ownership structure of the Company are as follows:

Name






Sources of capital increases during the period

The company has not performed capital increase as at 31 December 2014. (31 December 2013: None).

Privileges on common shares representing share capital

As at 31 December 2014, the issued share capital of the Company is TL 500.000.000 (31 December 2013: TL 500.000.000) and the share capital of the Company consists of 50,000,000,000 (31 December 2013: 50,000,000,000 shares) issued shares with TL 0.01 nominal value each. The share capital is represented by 150 Group A shares of TL 0,01 each.

Registered capital system in the Company

The Company has accepted the registered capital system. As of 31 December 2014, the Company’s registered capital is TL 700.000.000 (31 December 2013: TL 700.000.000).

Repurchased own shares by the Company

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.

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 accordance with the tax legislation, tax losses can be carried forward to offset against future taxable income for up to five years. The company has not deductible tax losses as of 31 December 2014. (31 December 2013: 3.664.725 TL).

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




Deferred taxes

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

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

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

Transfer pricing

In Turkey, the transfer pricing provisions have been stated under the Article 13 of Corporate Tax Law with the heading of “disguised profit distribution via transfer pricing”. The General Communiqué on disguised profit distribution via Transfer Pricing, dated 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 Türk Sigorta Şirketi Memurları Emekli Sandığı (“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.

On the other hand, the application made on 19 June 2008 by the Republican People’s Party to the Constitutional Court for the annulment and motion for stay of some articles, including the first paragraph of the provisional article 20 of the Law, which covers provisions on transfers, was rejected in accordance with the decision taken at the meeting of the afore-mentioned court on 30 March 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.

In accordance with existing Turkish Labour Law, the Company is required to make lump-sum termination indemnities to each employee who has completed one year of service with the Company and whose employment is terminated due to retirement or for reasons other than resignation or misconduct. The computation of the liability is based upon the retirement pay ceiling announced by the Government. The applicable ceiling amount as at 31 December 2014 is TL 3.438 (31 December 2013: TL 3.254).

In Accordance IAS 19 which published by Public Company Accounting Oversight Board (PCAOB) dated March 12,2013 is about “Benefits Employee Accounting Standard” and defined by beginning from December 31,2012 net defined benefit liability of the actuarial gains and losses arising on re-measurement should be recognized in other comprehensive income under shareholders’ equity and this effect should be applied retrospectively. The company started to account current actuarial gains and losses under equity (other profit reserves) due to the fact that prior period actuarial gains and losses have remained below the materiality.

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 2014 and 31 December 2013 are as follows:

31 December 2014 31 December 2013Discount rate %4,46 %3,61Expected rate of salary/limit increase %4,37 %6,37Estimated employee turnover rate %6,29 %7,11

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

Other benefits

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

2.20 Provisions

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

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




2.21 Revenue recognition

Written premiums and claims paid

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

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

Subrogation, salvage and quasi income

According to the Circular 2010/13 dated 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 insure. 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 26.118.178 (31 December 2013: TL 25.286.057) subrogation receivables and recorded TL 30.648.790 (31 December 2013: TL 29.179.630) (Note 12) net subrogation and salvage receivables under receivables from main operations. The Company provided allowance for uncollected subrogation receivables amounting to TL 7.677.067 (31 December 2013: TL 9.475.078) (Note 12) in accordance with circular.

For the years ended 31 December 2013 and 2012, salvage and subrogation collected are as follows:

31 December 2014 31 December 2013Motor Vehicles 255.938.892 198.341.171Third Party liability for motor vehicles (MTPL) 4.894.794 5.275.881Transportation 2.556.620 2.002.200Fire and natural disaster 1.951.328 1.647.652Water Vehicles 1.087.073 751.675Accident 452.519 548.899General Losses 248.943 85.598General Responsibility 129.658 22.584Air Craft 16.861 --Credit 2.410 355.772Legal Protection (22.011) 22.461Health -- 21.104Total 267.257.087 209.074.997

As at 31 December 2014 and 31 December 2013, accrued subrogation and salvage income per branches is as follows:

31 December 2014 31 December 2013Motor Vehicles 29.805.959 27.506.620Third Party liability for motor vehicles (MTPL) 213.733 1.450.379Water Vehicles 34.052 --Fire and natural disaster 397.028 146.400Transportation 181.347 64.907General Losses 16.671 10.291Accident -- 1.033Total 30.648.790 29.179.630




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.

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.

The company did not perform dividend distribution in 2013 and 2014.




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 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 1.491.252.563 (31 December 2013: TL 1.422.324.312) and reinsurer share in reserve for unearned premiums amounting TL 294.929.264 (31 December 2013: TL 290.028.419). Furthermore, reserve for unearned premiums includes Social Security Institution (“SSI”) share amounting to TL 36.692.792 (31 December 2013: TL 34.755.134) as at 31 December 2014.

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.

According to the “Communiqué on Amendments to Communiqué on Technical Reserves for Insurance, Reinsurance and Pension Companies and the Related Assets That Should Be Invested Against Those Technical Reserves” published in Official Gazette no 27655 dated 28 July 2010 and “Communiqué on Technical Reserves and Circular on Actuarial Chain Ladder Method” dated 20 September 2010 and numbered 2010/12, it is stated that the difference between the result of the actuarial chain ladder method and reported but not settled (IBNR calculation by ACLM method) is compared to test IBNR claims and greater amount is recorded to financial statements are accepted as IBNR claims. Requirement on test IBNR calculation is removed per Communiqué on Amendments to Aforementioned Communiqué is published in Official Gazette no 28356 17 July 2013 dated. It is stated that amount, content and implementation principals of incurred but not reported claims should be determined according to IBNR calculation by ACLM method specified by Turkish Treasury or other methods determined by Turkish Treasury.




As at 1 January 2012, 100% of the calculated negative IBNR balances per each insurance branch are taken into calculation in accordance with the Circular issued by the Turkish Treasury dated 26 December 2011 and numbered 2011/23. Accrued salvage, subrogation and similar income is taken into calculation with collections in ACLM method.

The Company recorded 100% of the IBNR calculated by ACLM method with additional provision explained below amounting to TL 327.611.024 (31 December 2013: TL 193.676.094) to the unconsolidated financial statements as IBNR and TL 17.969.121 (31 December 2013: TL 7.596.560) as reinsurer’s share of IBNR.

In Accordance with the Circular issued by the Turkish Treasury dated 2010/12 and 2010/16, the Company

eliminated severe damages by using Box-Plot method to make more homogeneous calculation in ACML.

Also, according to Circular Article 7 issued in 2010/12, total number of files contained in the main branch,

excluding the health branch of the total number of files no more than one thousand of damage or major damage under 300 remaining branches can be done by actuary.

According to Treasury Circular 2010/16, the amounts with ACML determined the minimum amount of provision. If Amounts which are determined the company’s other tools or actuarial studies shows the company’s statu better than methods recommended by the Treasury, the company reflect amount of provision which provided higher than Treasury to financial statements. In accordance with these judgments, as a result of actuarial studies, the Company made IBNR provision amounts to total TL 11.069.337 (31 December 2013: TL 4.831.998) which are TL 858.216 in branch of Health, TL 6.190.791 in branch of Water Vehicles, TL 2.859.830 in branch of Air Craft Responsibility and TL 1.160.500 in branch of Credit.

In accordance with the “Sector Announcement Related to Updating Past Outstanding Claim Amounts for IBNR Calculation” dated 17 June 2013 and numbered 2013/13 and the Company’s actuary decision starting from 30 June 2014, the Company updated provision for outstanding claims for general liability branch.

IBNR amounts which obtained results of updates provision for outstanding claims and uncorrected version in the ACLM triangular series are TL 417.681.075. In accordance with Circular no. 2011/1, the Company corrected updated provision for outstanding claims backwards to avoid deterioration of the data series in the history of the triangle ACLM. As 31 December 2014, IBNR figures obtained for this correction is TL 114.990.730. This amount is accounted in the Company’s financials.

ACLM to be used is announced with “Communiqué on Technical Reserves” which is issued by the Turkish Treasury on 20 September 2010, Insurance and reinsurance companies are allowed to use five different methods which are “Standard Chain, Claim/Premium, Cape Code, Frequency/Volume and Munich Chain Ladder” to make ACLM calculations. The Company’s method selections for each branch are presented below.

In accordance with the Circular of the Turkish Treasury No: 2013/8 dated 5 April 2013 “Circular on Actuarial Chain Ladder Method”, according to the Circular numbered 2010/12, the ACLM calculation methods start to be changed at the end of 2013 that can be started as of first quarter of 2013 if minimal fluctuation between the periods is wanted. Accordingly, in Discretionary Fiscal Responsibility branch, for the purpose of additional IBNR need to be aimed to determine actuarial forecast works by the Company actuary for compatible with the branch’s ACML calculation method has been changed as of 30 September 2013 and “Munich Chain” method was disused to “Standard Chain” method was started to carry out. As 30 September 2014, for the Motor Vehicles and General Losses branches, the Company started to use ‘Standard’ instead of Münich Chain’.




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 2014 31 December 2013Motor vehicles Standard Chain Ladder Munich ChainWater vehicles Standard Chain Ladder Standard Chain LadderThird party liability for motor vehicles (MTPL) Cape Code Munich ChainThird party liability Standard Chain Ladder Standard Chain LadderThird party liability for air vehicles Standard Chain Ladder Standard Chain LadderFire and natural disasters Munich Chain Ladder Munich ChainAir crafts Standard Chain Ladder Standard Chain LadderAccident Standard Chain Ladder Standard Chain LadderGeneral losses Standard Chain Ladder Munich ChainFinancial losses Standard Chain Ladder Standard Chain LadderHealth Standard Chain Ladder Standard Chain LadderTransportation Standard Chain Ladder Standard Chain LadderCredit Standard Chain Ladder Standard Chain LadderLegal protection Standard Chain Ladder Standard Chain LadderGeneral liability Cape Code Munich Chain

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 75.260.122 (31 December 2013: TL 53.749.627) as IBNR and 9.912.780 TL (31 December 2013: TL 6.764.302) as reinsurer’s share of IBNR is excluded from outstanding claims reserve balance




The calculated winning ratio of the Company as at 31 December 2014 is within 0% - 100% range (31 December 2013:%0-%35), Winning ratios used in and amounts decreased from provision for outstanding claims are as follows:

31 December 2014 Branch Winning Ratios Used

Gross Amount Decreased

Net Amount Decreased

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

31 December 2013 Branch Winning Ratios Used

Gross Amount Decreased

Net Amount Decreased

Third party liability for motor vehicles (MTPL) %17 27.348.214 26.167.440General responsibility %25 15.096.889 14.288.654Fire and natural disasters %17 6.386.641 2.789.609Motor vehicles %18 2.065.493 1.977.160Transportation %11 361.329 333.118General losses %17 1.153.064 515.357Motor vehicles %25 973.319 569.692Accident %18 357.604 337.221Legal protection %16 7.074 7.074Total 53.749.627 46.985.325

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”

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.




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 52.687.216 (31 December 2013: TL 22.489.032) and unexpired risk amounting of reassurance to TL 12.307.870 (31 December 2013: TL 9.370.659) in the accompanying unconsolidated financial statements.

As at 31 December 2014, reserve for unexpired risks at the beginning of the period is revised according to calculation method used in the current period in order to determine consistent claims /premium ratio.

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.

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 60.549.876 in the accompanying unconsolidated financial statements (31 December 2013: TL 44.579.840)

Net losses (after reinsurance) resulted from earthquake occurred in Van amounting to TL 7,101,831 (31 December 2013: TL 7.101.831) are decreased from prior periods’ equalization provision .




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.


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 2014. TFRS 9 - Financial instruments, is published by International Accounting Standards Board in November 2009 as a part of a wider project that aims to bring new regulations to replace TAS 39 - Financial Instruments: Recognition and Measurement published by the Turkish Accounting Standards Board on Official Gazette dated 27 April 2010 and numbered 27564.




Developing a new standard for the financial reporting of financial assets that is principle-based and less complex is aimed by this project. 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.

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.

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




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 coinsurers 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.

Sensitivity to insurance risk

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

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




Insurance risk concentration

The Company’s gross and net insurance risk concentrations (after reinsurance) in terms of insurance branches are summarized as below:

Total claims liability (*) 31 December 2014

Gross total claims liability

Reinsurance share of total claims liability

Net total claims liability

Motor vehicles liability (MTPL) 536.683.814 (16.321.658) 520.362.156General liability 302.883.129 (35.816.816) 267.066.313Fire and natural disasters 126.898.890 (67.749.236) 59.149.654General losses 68.615.172 (41.639.167) 26.976.005Motor vehicles 83.781.790 1.274.635 85.056.425Water vehicles 35.733.940 (18.673.835) 17.060.105Transportation 19.805.194 (13.706.887) 6.098.307Air crafts 28.943.534 (20.172.876) 8.770.658Financial losses 17.017.918 (15.402.033) 1.615.885Accident 15.096.696 (1.291.762) 13.804.934Air crafts liability 4.955.110 (59.627) 4.895.483Health 1.936.936 (53.446) 1.883.490Credit 759.191 (186.986) 572.205Legal protection 876.450 31 876.481Total 1.243.987.764 (229.799.663) 1.014.188.101





Motor vehicles liability (MTPL) 392.957.242 (15.116.022) 377.841.220General liability 145.694.331 (14.833.210) 130.861.121Fire and natural disasters 75.030.329 (31.394.357) 43.635.972Motor vehicles 57.404.411 1.789.780 59.194.191General losses 55.319.765 (33.483.122) 21.836.643Air crafts 24.940.859 (15.814.715) 9.126.144Water vehicles 22.199.757 (8.976.371) 13.223.386Transportation 22.053.555 (11.185.251) 10.868.304Accident 16.393.181 (430.548) 15.962.633Financial losses 7.323.143 (5.559.770) 1.763.373Air crafts liability 1.482.083 (312.944) 1.169.139Health 1.352.782 (18.250) 1.334.532Credit 1.228.470 34.052 1.262.522Legal protection 448.905 (56.773) 392.132Total 823.828.813 (135.357.501) 688.471.312

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




Gross and net insurance risk concentrations of the insurance contracts (after reinsurance) based on geographical regions are summarized as below:





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





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





Turkey 645.190.292 (134.181.200) 511.009.092Europe 1.969.039 (264.418) 1.704.621Asia 293.765 (11.963) 281.802Africa 190.977 (67.662) 123.315Total 647.644.073 (134.525.243) 513.118.830

Total claims liability 31 December 2013




Marmara Region 326.101.895 (84.537.280) 241.564.615Middle Anatolian Region 80.036.803 (7.988.570) 72.048.233Aegean Region 58.923.420 (5.953.188) 52.970.232Mediterranean Region 55.160.378 (6.895.999) 48.264.379South East Anatolian Region 47.737.283 (17.149.331) 30.587.952Black Sea Region 45.936.845 (8.833.747) 37.103.098East Anatolian Region 31.293.668 (2.823.085) 28.470.583Total 645.190.292 (134.181.200) 511.009.092

(*) Total claims liability includes estimated compensation amounts for realized claims. Gross incurred but not reported claims amounting to TL 193.676.094 additional provision for outstanding claims per adequacy test amounting to TL 36.258.273 outstanding claims of treaty activities which could not be distributed to geographical regions and the contingent amounts deducted from claims reserve amounting to TL (53.749.627) are excluded from the table.




Given insurance collateral amounts in respect to branches


Motor vehicles liability (MTPL) 4.283.371.745.693 4.511.111.250.942Health 263.459.916.521 195.943.025.085Fire and natural disasters 254.952.055.702 221.876.822.746Accident 35.427.794.810 33.131.190.355General liability 41.614.148.232 41.043.206.431General losses 63.746.730.255 49.463.100.289Motor vehicles 40.753.693.279 31.063.663.602Transportation 46.432.952.597 21.981.060.492Water vehicles 17.529.066.354 14.968.174.500Air crafts 1.651.393.745 979.655.702Legal protection 38.500 --Total 5.048.939.535.688 5.121.561.150.144

4.2 Management of financial risk

Introduction and overview

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

• credit risk• liquidity risk• market risk

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

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




Credit Risk

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

• Cash at banks• Other cash and cash equivalents• Available for sale financial assets (except equity-shares) • Financial assets held for trading (except equity-shares)• Held to maturity financial asset• Premium receivables from policyholders • 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.


Cash and cash equivalents (Note 14) 1.606.182.886 1.154.688.944Receivables from main operations (Note 12) 797.454.113 773.925.226Financial assets (Note 11) (*) 539.941.067 542.222.098Reinsurer share in provision for outstanding claims (Note 10), (Note 17) 229.799.663 135.357.501Prepaid taxes and funds (Note 19) 1.848.492 9.659.923Other receivables (Note 12) 3.595.183 2.968.734Other prepaid expenses (Note 10) 2.733.430 1.086.704Other miscellaneous current assets (Not 12) 1.895.592 735.558Due from related parties (Note 12) -- 72.324Total 3.183.450.426 2.620.717.012

(*) Equity shares amounting to TL 104.126.890 are not included (31 December 2013: TL 88.786.648).




As at 31 December 2014 and 31 December 2013, the aging of the receivables from main operations is as follows:

31 December 2014 31 December 2013Gross Amount Provision Gross Amount Provision

Not past due 583.917.123 -- 565.073.223 --Past due 0-30 days 89.759.753 -- 77.880.279 --Past due 31-60 days 13.190.866 -- 12.545.113 --Past due 61-90 days 3.147.750 -- 4.096.093 --More than 90 days (*) 116.737.854 (113.380.507) 116.140.120 (102.829.158)Total (**) 806.753.346 (113.380.507) 775.734.828 (102.829.158)

(*) 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 806.753.346 (31 December 2013: TL 775.734.828) presented under receivables from insurance operations in the financial statements, this amount also includes TL 81.109.551 (31 December 2013: TL 81.315.004) of untransferred amount collected by intermediaries and TL 30.648.790 (31 December 2013: TL 29.179.630) 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 7.677.067 (31 December 2013: TL 9.475.078) are excluded from the table.

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


Provision for receivables from insurance operations at the beginning of the period 102.829.158 87.996.612Collections during the period (Note 47) (1.071.425) (908.822)Impairment losses provided during the period (Note 47) 2.518.673 1.503.704Impairment losses provided for subrogation - salvage receivables during the period (Note 47) 9.104.101 14.237.664Provision for receivables from insurance operations at the end of the period 113.380.507 102.829.158




Liquidity risk

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

Management of the liquidity risk

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

Maturity distribution of monetary assets and liabilities:

31 December 2014Carrying amount Up to 1 month 1 to 3 months 3 to 6 months

6 to 12 months Over 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 43.855.877 248.492.451 272.013.141Receivables 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.

31 December 2013Carrying amount Up to 1 month 1 to 3 months 3 to 6 months

6 to 12 months Over 1 year Unallocated

Cash and cash equivalents 1.153.712.216 552.341.090 585.163.978 16.207.148 -- -- --Financial assets 631.008.746 26.458.758 13.800.085 28.181.861 70.723.063 308.660.105 183.184.874Receivables from main operations 773.925.226 80.117.472 288.235.185 315.443.908 78.142.696 11.985.965 --Due from related parties 72.324 12.054 24.108 24.108 12.054 -- --Other receivables and current assets 3.234.708 656.067 1.312.134 936.264 330.243 -- --Other prepaid expenses 1.086.704 -- -- 1.086.704 -- -- --Total monetary assets 2.563.039.924 659.585.441 888.535.490 361.879.993 149.208.056 320.646.070 183.184.874

Insurance technical provisions (*) 688.471.312 105.907.915 211.815.830 80.988.022 68.551.187 221.208.358 --Payables arising from main operations 327.033.095 51.873.735 4.506.003 263.749.010 6.904.347 -- --Other liabilities 56.534.780 18.089.629 21.458.198 10.147.654 3.802.264 3.037.035 --Provisions for taxes and other similar obligations 27.491.024 27.491.024 -- -- -- -- --Provisions for other risks and expense accruals 36.731.263 -- 16.480.307 915.265 -- 19.335.691 --Total monetary liabilities 1.136.261.474 203.362.303 254.260.338 355.799.951 79.257.798 243.581.084 --

(*) 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.




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

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.

31 December 2014 US Dollar EuroOther

currencies Total

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

Insurance technical provisions 91.396.977 24.659.552 691.344 116.747.873Payables arising from main operations 111.938.980 9.454.831 -- 121.393.811Total 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


currencies Total

Receivables from main operations 146.548.975 40.037.398 1.091.043 187.677.416Financial assets -- 9.115.193 -- 9.115.193Cash and cash equivalents 119.962.922 3.084.146 1.036.139 124.083.207Total foreign currency assets 266.511.897 52.236.737 2.127.182 320.875.816

Insurance technical provisions 104.016.906 21.350.893 1.666.077 127.033.876Payables arising from main operations 127.927.163 26.396.067 948.835 155.272.065Total foreign currency liabilities 231.944.069 47.746.960 2.614.912 282.305.941

Net financial position 34.567.828 4.489.777 (487.730) 38.569.875

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 2014 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 2014.




Exposure to currency risk

Foreign currency rates used for the translation of foreign currency denominated assets and liabilities as at 31 December 2014 and 31 December 2013 are as follows:

US Dollar Euro

31 December 2014 2,3189 2,820731 December 2013 2,1343 2,9365

31 December 2014 31 December 2013Profit or loss Equity (*) Profit or loss Equity (*)

US Dollar 8.758.000 8.758.000 3.456.783 3.456.783Euro 2.495.767 2.495.767 448.978 448.978Other 568.563 568.563 (48.773) (48.773)Total, net 11.822.330 11.822.330 3.856.988 3.856.988

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 2014

31 December 2013

Financial assets with fixed interest rates:Financial assets held for trading - reverse repos (Note 11) 5.887.281 26.447.255Cash at banks (Note 14) (*) 1.350.525.371 885.045.104Available for sale financial assets - Private debt securities (Note 11) -- 122.041.060Cash deposited to insurance and reinsurance companies (Note 12) 6.739.965 5.128.627Available for sale financial assets - Government bonds (Note 11) 260.405.699 191.749.446

Financial assets with variable interest rates:Held to maturity investments - Government bonds (Note 11) 73.670.047 94.501.549Available for sale financial assets - Government bonds (Note 11) 11.198.005 11.180.763Financial assets held for trading - Government bonds (Note 11) 900.017 914.787Available for sale financial assets - Private debt securities (Note 11) 19.993.767 989.012

(*) Demand deposits amounting to TL 6.208.075 TL are not included (31 December 2013: 16.793.473 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 2014 and 2013 of the floating rate non-trading financial assets and financial liabilities held at 31 December 2014 and 2013. 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.

31 December 2014

Profit or loss Equity (*)

100 bp increase

100 bp decrease

100 bp increase

100 bp decrease

Financial assets held for trading (20.889) 21.616 (20.889) 21.616Available for sale financial assets -- -- (3.964.215) 4.094.020Total, net (20.889) 21.616 (3.985.104) 4.115.636

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

31 December 2013


100 bp increase

100 bp decrease

100 bp increase

100 bp decrease



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 73.670.047 (31 December 2013: TL: 94.501.549) are measured at amortised cost and their fair value amounting to TL 74.133.508 (31 December 2013: TL 93.990.092) as at 31 December 2014.

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

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):


Financial assets held for trading (303.683) (303.683) (266.316) (266.316)Available for sale financial assets -- (9.717.561) -- (8.196.227)Associates -- (39.140.000) -- (36.820.000)Total, net (303.683) (49.161.244) (266.316) (45.282.543)

(*) 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 2014Level 1 Level 2 Level 3 Total

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


Financial assets:Associates (Note 9) 368.200.000 -- -- 368.200.000Financial assets held for trading (Note 11) 85.630.648 -- -- 85.630.648Available for sale financial assets (*) (Note 11) 446.715.336 -- 3.297.263 450.012.599Total financial assets 900.545.984 -- 3.297.263 903.843.247

(*) As at 31 December 2014, securities that are not publicly traded and the determination of fair values could not be obtained reliably amounting to TL 617.187 have been measured at cost (31 December 2013: TL 863.950)

31 December 2014

31 December 2013

Available for sale, beginning of the period 3.297.263 3.272.355Valuation gain, (valuation of financial assets) -- 24.908Available for sale, at the end of the period 3.297.263 3.297.263




Gains and losses from financial assets

Gains and losses recognized in the statement of income: 31 December 2014 31 December 2013

Interest income from bank deposits 99.252.595 63.016.751Foreign exchange gains 59.970.980 52.709.177Income from investments in associates 16.000.000 18.000.000Income from debt securities classified as held to maturity financial investments 10.730.801 9.909.524Income from equity shares classified as available-for-sale financial assets 10.197.910 20.210.895Income from equity shares classified as trading financial assets 702.880 453.914Income from debt securities classified as available-for-sale financial assets 35.373.747 15.639.877Income from debt securities classified as held for trading financial assets 75.040 262.958Income from derivative transactions 205.678 212.931Income from investment funds 21.308.588 1.604.205Other 3.106.153 1.232.065Investment income 256.924.372 183.252.297

Loss from valuation of financial assets (3.509.979) (4.677.619)Foreign exchange losses (49.954.025) (28.804.896)Loss from derivative transactions (184.509) (99.585)Loss from disposal of financial assets (7.713.065) (13.581.516)Investment expenses - including interest (136.623) --Investment expenses (61.498.201) (47.163.616)

Financial gains and losses recognized in the statement of income, net 195.426.171 136.088.681

Financial gains and losses recognized in equity: 31 December 2014 31 December 2013

Fair value changes in investments in associates (Note 15) 23.200.000 106.200.000Net gains transferred from statement of equity to the statement of income on disposal of available for sale financial assets (Note 15) (9.609.723) (2.723.732)Fair value changes in available-for-sale financial assets (Note 15) 21.041.450 (13.677.094)Gains and losses recognized in equity, net 34.631.727 89.799.174

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 847.030.553 as at 30 June 2014. As at 31 December 2014, 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, 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 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.

Health

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




Geographical segment

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

Motor third party liability Health Motor vehicles

Fire and natural

disasters Other Unallocated Total

1 January - 31 December 20131- Earned Premiums (Net of Reinsurer Share) 704.976.162 242.507.645 786.541.564 190.560.310 311.173.659 -- 2.235.759.3401.1- Written Premiums (Net of Reinsurer Share) 698.476.272 256.547.252 790.728.883 213.840.185 365.517.469 -- 2.325.110.0611.2- 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 -- 2.788.8093- Accrued Salvage and Subrogation Income 5.516.244 -- 5.561.204 918.516 163.266 -- 12.159.230Technical 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 258.928.064 258.928.064Investment Expense (*) (85.300.178) (85.300.178)Other (**) (19.132.198) (19.132.198)Net loss before tax 85.245.809

Income tax (13.685.863) (13.685.863)

Net loss 71.559.946

(*) 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.





Fire and natural


1 January - 31 December 20131- Earned Premiums (Net of Reinsurer Share) 493.420.390 199.257.307 721.082.517 149.968.441 262.060.515 -- 1.825.789.1701.1- Written Premiums (Net of Reinsurer Share) 631.464.481 212.148.766 775.368.149 163.108.778 285.125.833 -- 2.067.216.0071.2- Change in Reserve for Unearned Premiums (Net of Reinsurer Shares and Less the Amounts Carried Forward) (138.056.176) (12.891.459) (54.285.632) (13.140.337) (14.032.383) -- (232.405.987)1.3- Change in Reserve for Unexpired Risks (Net of Reinsurer Share and Less the Amounts Carried Forward) 12.085 -- -- -- (9.032.935) -- (9.020.850)2- Other Technical Income (Net of Reinsurer Share) 54.849 185.128 2.524.934 75.063 84.400 2.924.3743- Accrued Salvage and Subrogation Income 4.959.591 -- 7.752.323 637.426 1.646.858 14.996.198Technical Income (*) 498.434.830 199.442.435 731.359.774 150.680.930 263.791.773 -- 1.843.709.742

1- Incurred Losses (Net of Reinsurer Share) (428.640.496) (156.834.895) (479.833.052) (73.474.442) (207.304.119) -- (1.346.087.004)1.1- Claims Paid (Net of Reinsurer Share) (291.979.894) (156.751.764) (490.009.240) (68.674.051) (139.551.206) -- (1.146.966.155)1.2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward) (136.660.602) (83.131) 10.176.188 (4.800.391) (67.752.913) -- (199.120.849)2- Change in Other Technical Reserves (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- (2.087.392) (8.555.192) (1.780.007) -- (12.422.591)3- Operating Expenses (141.750.670) (36.294.964) (178.514.725) (43.655.601) (62.618.146) -- (462.834.106)4- Other Technical Provisions (13.428.446) (6.115.753) (15.995.101) (6.661.240) (2.507.510) -- (44.708.050)Technical Expense (583.819.612) (199.245.612) (676.430.270) (132.346.475) (274.209.782) -- (1.866.051.751)


Income tax (11.654.589) (11.654.589)

Net loss 67.461.924

(*) Investment income transferred to non-technical section from technical section amounting to TL 123.220.226 TL is not included.(**) Deferred tax income amounting TL 11.654.589 is presented as income tax.




6 Tangible assets

Movements in tangible assets in the period from 1 January to 31 December 2014 are presented below:

1 January 2014 Additions Disposals31 December

2014Cost:Investment properties (Note 7) 6.982.776 -- -- 6.982.776Buildings for own use 6.520.974 319.222 (51.463) 6.788.733Machinery and equipment 32.800.391 2.925.379 (1.171.752) 34.554.018Furniture and fixtures 11.331.085 444.331 -- 11.775.416Motor Vehicles 1.285.983 383.160 (306.920) 1.362.223Other tangible assets (including leasehold improvements) 18.262.277 1.138.850 -- 19.401.127Leased tangible assets 4.166.354 -- -- 4.166.354

81.349.840 5.210.942 (1.530.135) 85.030.647Accumulated depreciation:Investment properties (Note 7) 3.578.553 139.655 -- 3.718.208Buildings for own use 1.795.812 131.780 (25.772) 1.901.820Machinery and equipment 23.879.216 3.198.899 (1.164.362) 25.913.753Furniture and fixtures 8.729.811 666.091 -- 9.395.902Motor vehicles 813.465 215.321 (255.057) 773.729Other tangible assets (including leasehold improvements) 3.593.702 3.259.748 -- 6.853.450Leased tangible assets 4.166.105 199 -- 4.166.304

46.556.664 7.611.693 (1.445.191) 52.723.166

Carrying amounts 34.793.176 32.307.481





1 January 2013 Additions Disposals31 December

2013Cost:Investment properties (Note 7) 6.982.776 -- -- 6.982.776Buildings for own use 6.387.729 1.222.795 (1.089.550) 6.520.974Machinery and equipment 26.268.960 6.531.431 -- 32.800.391Furniture and fixtures 9.031.553 2.299.532 -- 11.331.085Motor Vehicles 1.299.851 183.855 (197.723) 1.285.983Other tangible assets (including leasehold improvements) 4.038.677 14.977.547 (753.947) 18.262.277Leased tangible assets 4.166.354 -- -- 4.166.354

58.175.900 25.215.160 (2.041.220) 81.349.840Accumulated depreciation:Investment properties (Note 7) 3.438.898 139.655 -- 3.578.553Buildings for own use 2.221.271 116.975 (542.434) 1.795.812Machinery and equipment 20.908.142 2.971.074 -- 23.879.216Furniture and fixtures 8.495.404 234.407 -- 8.729.811Motor vehicles 764.551 232.810 (183.896) 813.465Other tangible assets (including leasehold improvements) 3.255.088 648.138 (309.524) 3.593.702Leased tangible assets 4.165.906 199 -- 4.166.105

43.249.260 4.343.258 (1.035.854) 46.556.664


There is not any change in depreciation method in the current period.

There is not any mortgage over tangible assets of the Company as at 31 December 2014 and 31 December 2013.

7 Investment properties

As at 31 December 2014, the total carrying amount of the investment properties is TL 3.264.568 (31 December 2013: TL 3.404.223). The fair values of the investment properties are determined by a third party independent expertise firm authorized by Capital Markets Board of Turkey as TL 40.077.000. The total rental income from the investment properties for the year ended 31 December 2013 is TL 1.772.698 (31 December 2013: TL 1.698.492).




8 Intangible assets

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

1 January 2014 Additions Transfers Disposals31 December

2014Cost:Goodwill 16.250.000 -- -- -- 16.250.000Advances given for intangible assets 19.296.314 2.853.643 (20.420.579) -- 1.729.378Other intangible assets 54.879.873 12.779.449 20.420.579 -- 88.079.901

90.426.187 15.633.092 -- -- 106.059.279Accumulated amortization:Other intangible assets 27.614.154 16.190.284 -- -- 43.804.438

27.614.154 16.190.284 -- -- 43.804.438


Movements in intangible assets in the period from 1 January to 31 December 2013 are presented below

1 January 2013 Additions Transfers Disposals31 December

2013Cost:Goodwill 16.250.000 -- -- 16.250.000Advances given for intangible assets 31.717.343 11.190.332 (21.885.303) (1.726.058) 19.296.314Other intangible assets 21.643.962 11.350.608 21.885.303 -- 54.879.873

69.611.305 22.540.940 -- (1.726.058) 90.426.187Accumulated amortization:Other intangible assets 15.125.600 12.488.554 -- -- 27.614.154

15.125.600 12.488.554 -- -- 27.614.154


9 Investments in associates


Carrying valueParticipation

rate Carrying valueParticipation

rateAnadolu Hayat Emeklilik A.Ş. 391.400.000 %20,0 368.200.000 %20,0Investments in associates, net 391.400.000 368.200.000

Total financial assets (Note 4.2) 391.400.000 368.200.000

NameTotal

assetsShareholders’

equityRetained earnings

Profit for the period

Audited or not Period

Anadolu Hayat Emeklilik A.Ş. (consolidated financial statements) 10.157.734.455 616.308.553 12.090.039 95.160.780 Audited

31 December2014

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 10.000.000 of dividend income from subsidiaries.




10 Reinsurance assets and liabilities

As at 31 December 2014 and 31 December 2013, outstanding reinsurance assets and liabilities of the Company in accordance with existing reinsurance contracts are as follows:

Reinsurance assets 31 December 2014 31 December 2013

Reserve for unearned premiums, ceded (Note 17) 294.929.264 290.028.419Provision for outstanding claims, ceded (Note 4.2), (Note 17) 229.799.663 135.357.501Commission income accrual from reinsurers (Note 12) 1.250.015 1.086.704Cash deposited to reinsurance companies (Note 12) 6.739.965 5.128.627Reinsurers share in the provision for subrogation and salvage receivables 36.305 119.739Total 532.755.212 431.720.990

There is no impairment losses recognised for reinsurance assets.

Reinsurance liabilities 31 December 2014 31 December 2013

Payables to the reinsurers related to premiums written (Note 19) 188.610.275 230.767.903Deferred commission income (Note 19) 45.447.065 39.363.495Commission payables to the reinsurers related to written premiums (Note 23) 1.576.728 915.265Cash deposited by reinsurance companies (Note 19) 7.277.133 3.105.906Total 242.911.201 274.152.569

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


Premiums ceded during the period (Note 17) (605.617.965) (618.521.175)Reserve for unearned premiums, ceded at the beginning of the period (Note 17) (290.028.419) (218.883.986)Reserve for unearned premiums, ceded at the end of the period (Note 17) 294.929.264 290.028.419Premiums earned, ceded (Note 17) (600.717.120) (547.376.742)

Claims paid, ceded during the period (Note 17) 140.834.682 102.233.055Provision for outstanding claims, ceded at the beginning of the period (Note 17) (135.357.501) (89.440.431)Provision for outstanding claims, ceded at the end of the period (Note 17) 229.799.663 135.357.501Claims incurred, ceded (Note 17) 235.276.844 148.150.125

Commission income accrued from reinsurers during the period (Note 32) 60.026.011 51.944.012Deferred commission income at the beginning of the period (Note 19) 30.698.798 25.952.255Deferred commission income at the end of the period (Note 19) (32.107.489) (30.698.798)Commission income earned from reinsurers (Note 32) 58.617.320 47.197.469

Commission debt accrued to reinsurers (1.576.728) --Commission receivable accrued from reinsurers 1.250.015 1.086.704

Total, net (307.149.669) (350.942.444)




11 Financial assets

As at 31 December 2014 and 31 December 2013, the Company’s financial assets are as follows


Available for sale financial assets 442.140.789 456.674.161Held to maturity financial assets 73.670.047 94.501.549Financial assets held for trading 134.054.733 85.630.648Impairment loss on available for sale financial assets (5.797.612) (5.797.612)Total 644.067.957 631.008.746

As at 31 December 2014 and 31 December 2013, the Company’s available for sale financial assets are as follows:

31 December 2014Face

Value CostFair

Value Carrying Value

Debt instruments:Government bonds - TL 261.907.366 260.630.673 271.603.704 271.603.704Private 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 14.713.703Issued by ISFIN 5.000.000 5.000.000 5.078.714 5.078.714Others 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 43.655.648Equity shares 56.198.951 82.023.168 106.887.670 106.887.670Impairment 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





Value CostFair



Issued by İş Bankası (Note 45) 133.000.000 121.293.570 122.028.890 122.028.890Others 1.001.139 1.001.958 1.001.182 1.001.182

342.934.437 327.339.205 325.960.281 325.960.281


Founded by Is Portföy (Note 45) 4.089.046.000 42.399.932 38.792.780 38.792.780Equity shares 51.223.377 74.521.510 91.921.100 91.921.100Impairment loss on equity shares -- -- (5.797.612) (5.797.612)

4.140.269.377 116.921.442 124.916.268 124.916.268


As at 31 December 2014 and 31 December 2013, the Company’s financial assets held for trading are as follows


Value CostFair


Debt instruments:Government bonds - TL 900.000 907.616 900.017 900.017Reverse repo receivables 5.885.733 5.887.281 5.887.281

900.000 6.793.349 6.787.298 6.787.298


Founded by Iş Bankası (Note 45) 120.605.000 9.009.287 15.972.195 15.972.195Founded by Iş Portföy Yönetimi A.Ş.(Note 45) 7.272.463.818 89.847.008 95.938.343 95.938.343Founded by Işbank GmbH (Note 45) 90.131 7.804.000 12.320.065 12.320.065

Equity shares 2.287.783 4.085.272 3.036.832 3.036.832110.745.567 127.267.435 127.267.435

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





Value CostFair



27.352.702 27.362.042 27.362.042


Founded by Iş Bankası (Note 45) 120.605.000 9.009.287 13.588.728 13.588.728Founded by Iş Portföy Yönetimi A.Ş.(Note 45) 2.780.723.919 30.305.300 32.901.525 32.901.525Founded by Işbank GmbH (Note 45) 90.131 7.804.000 9.115.193 9.115.193

Equity shares 2.287.783 4.085.272 2.663.160 2.663.16051.203.859 58.268.606 58.268.606


As at 31 December 2014 and 31 December 2013, the Company’s financial assets held to maturity are as follows:


Value CostFair


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


Value CostFair



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 2014, equity shares classified as available for sale financial assets with a carrying amount of TL 3.914.450 are not publicly traded (31 December 2013: TL 4.161.213).

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 2014, TL 5.797.612 of impairment loss is recognised for equity shares classified as available for sale in the accompanying unconsolidated financial statements (31 December 2013: TL 5.797.612).




Value increases in financial assets including equity shares classified as available for sale financial assets for the last 3 years (including tax effects):

Year

Change in value increase /

(decrease)Total increase

in value

2014 34.631.727 336.666.8162013 89.799.174 302.035.0892012 115.217.914 212.235.915

Movements of the financial assets during the period are presented below:

31 December 2014

(*)TradingAvailable

for saleHeld to

maturity TotalBalance at the beginning of the period 59.183.393 450.876.549 94.501.549 604.561.491Acquisitions during the period 90.450.000 450.725.656 -- 541.175.656Disposals (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 -- 33.791.991Change in amortized cost of the financial assets -- -- (2.085.660) (2.085.660)Bonus shares acquired -- 4.755.471 -- 4.755.471Balance 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 TL (31 December 2013: 26.447.255 TL) are excluded.

31 December 2013

(*)TradingAvailable

for saleHeld to

maturity TotalBalance at the beginning of the period 42.051.074 218.238.305 89.590.740 349.880.119Acquisitions during the period 21.305.300 692.777.960 -- 714.083.260Disposals (sale and redemption) (2.742.832) (447.305.977) (796.600) (450.845.409)Change in the fair value of financial assets (Note 15) (1.430.149) (16.767.758) -- (18.197.907)Change in amortized cost of the financial assets -- -- 5.707.409 5.707.409Bonus shares acquired -- 3.934.019 -- 3.934.019Balance at the end of the period 59.183.393 450.876.549 94.501.549 604.561.491

(*) Amount of reverse repo to TL 26.447.255 (31 December 2012: TL: 5.542.173) are excluded




Financial assets blocked in favour of the Turkish Treasury as a guarantee for the insurance activities are as follows.


Value CostFair


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


Value CostFair


Available for sale financial assets (Note 17) 20.000.000 19.775.285 19.677.439 19.677.439Held to maturity financial assets (Note 17) 64.467.988 67.074.876 82.079.788 82.596.991Total 84.467.988 86.850.161 101.757.227 102.274.430

12 Loans and receivables

31 December 2014

31 December 2013

Receivables from main operations (Note 4.2) 797.454.113 773.925.226Other receivables (Note 4.2) 3.595.183 2.968.734Income prepaid expenses (Note 4.2), (Note 10) 2.733.430 1.086.704Other current assets (Note 4.2) 1.895.592 735.558Receivables from related parties (Note 4.2) -- 72.324Total 805.678.318 778.788.546

Short-term receivables 805.678.318 778.788.546Long and medium-term receivables -- --Total 805.678.318 778.788.546




As at 31 December 2014 and 31 December 2013, the details of the receivables from main operations are as follows:


Receivables from agencies, brokers and intermediaries 624.433.183 610.583.925Salvage and subrogation receivables 30.648.790 29.179.630Receivables from policyholders 33.242.694 35.367.913Long term receivable which is bank guarantee and three months credit card 63.044.183 61.066.508Total receivables from insurance operations, net 751.368.850 736.197.976

Receivables from reinsurance operations 47.022.365 42.073.701Cash deposited to insurance and reinsurance companies (Note 4.2), (Note 10) 6.739.965 5.128.627Provisions for receivables from insurance operations - subrogation receivables (7.677.067) (9.475.078)Doubtful receivables from insurance operations - subrogation receivables 86.645.265 77.541.164Provisions for doubtful receivables from insurance operations - subrogation receivables (Note 4.2) (86.645.265) (77.541.164)Doubtful receivables from main operations - premium receivables 26.735.242 25.287.994Provisions for doubtful receivables from main operations - premium receivables (Note 4.2) (26.735.242) (25.287.994)Receivables from main operations 797.454.113 773.925.226

As at 31 December 2014 and 31 December 2013, the details of mortgages and other guarantees for the Company’s receivables are presented below:


Mortgage notes 71.597.067 71.634.717Letters of guarantees 71.825.655 64.353.218Other guarantees 15.188.186 12.620.807Government bonds and treasury bills 2.976.479 2.939.585Total 161.587.387 151.548.327

Provisions for overdue receivables and receivables not due yet

a) Receivables under legal or administrative follow up (due): 26.735.242 TL (31 December 2013: TL 25.287.994).

b) Provision for subrogation receivables under legal or administrative follow up: 94.322.332 TL (31 December 2013: TL 87.016.242).

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 2014 31 December 2013At the end of

the period

At the beginning of

the period

At the end of

the period

At the beginning of

the period

Cash on hand 37.347 49.256 49.256 59.000Bank deposits 1.356.733.446 901.838.577 901.838.577 810.515.425Cheques given and payment orders (171.519) (1.025.984) (1.025.984) (1.104.472)Bank guaranteed credit card receivables with maturities less than three months 249.449.440 252.850.367 252.850.367 159.051.422Cash and cash equivalents in the balance sheet 1.606.048.714 1.153.712.216 1.153.712.216 968.521.375

Bank deposits - blocked (*) (Note 17) (223.171.410) (151.508.238) (151.508.238) (125.966.707)Time deposits with maturities longer than 3 months (335.567.238) (174.210.161) (174.210.161) (315.826.956)Interest accruals on banks deposits (3.580.842) (2.481.010) (2.481.010) (2.299.223)Cash and cash equivalents in the statement of cash flows 1.043.729.224 825.512.807 825.512.807 524.428.489

(*) As at 31 December 2014 and 31 December 2013 cash collateral kept in favour of the Turkish Treasury as a guarantee for the insurance activities.

As at 31 December 2014 and 31 December 2013, bank deposits are further analyzed as follows:

31 December 2014

31 December 2013

Foreign currency denominated bank deposits- time deposits 119.637.331 111.825.146- demand deposits 3.883.616 12.217.907

Bank deposits in Turkish Lira- time deposits 1.230.888.040 773.219.958- demand deposits 2.324.459 4.575.566

Bank deposits 1.356.733.446 901.838.577

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 2014, the issued share capital of the Company is TL 500.000.000 (31 December 2013: TL 500.000.000) and The Company unregistered Group A shares 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 2013: 50,000,000,000 shares) issued shares with TL 0.01 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 2014, 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 is classified as other capital reserves and also in 2013 amounting TL 647.763 reclassified to other capital reserves as a gain on sale of fixed assets and equity.


Other capital reserves at the beginning of the period 8.161.541 8.161.541Transfer from profit 647.763 --Other capital reserves at the end of the period 8.809.304 8.161.541

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:


Legal reserves at the beginning of the period 30.638.111 30.638.111Transfer from profit 141.651 --Legal reserves at the end of the period 30.779.762 30.638.111

Extraordinary reserves

The movements of extraordinary reserves are presented below:


Extraordinary reserves at the beginning of the period 18.123.361 18.123.361Transfer from profit 2.422.240 --Extraordinary reserves at the end of the period 20.545.601 18.123.361

Statutory reserves

The movements of statutory reserves are presented below:


Statutory reserves at the beginning of the period 6.993.082 6.993.082Transfer from profit 269.138 --Statutory reserves at the end of the period 7.262.220 6.993.082




Valuation of financial assets

Movement of fair value reserves of available for sale financial assets and associates are presented below:

31 December 2014 31 December 2013Available

for sale financial

assets Associates Total

Available for sale

financial assets Associates Total

Fair value reserves at the beginning of the period 8.866.957 293.168.132 302.035.089 25.267.783 186.968.132 212.235.915

Change in the fair value 24.347.100 23.200.000 47.547.100 (16.767.758) 106.200.000 89.432.242Net gains transferred to the statement of income (3.609.723) (6.000.000) (9.609.723) (2.723.732) -- (2.723.732)Deferred tax effect (3.305.650) -- (3.305.650) 3.090.664 -- 3.090.664Fair value reserves at the end of the period 26.298.684 310.368.132 336.666.816 8.866.957 293.168.132 302.035.089

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 625.539 defined remeasure net profit debt, the amount of new balance is TL 44.209.563.

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 920.272 which is into “Profit not Available for Distribution” in accordance with the Board of Directors decision dated 2 April 2013 and numbered 6807,dated 26 June and numbered 6844.

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 2014 and 31 December 2013, the Company does not hold any insurance or investment contracts which contain a DPF.




17 Insurance contract liabilities and reinsurance assets

Estimation of the ultimate payment for the outstanding claims is one of the most important accounting assumptions of the Company. Estimation of the insurance contract liabilities contains several ambiguities by nature. The Company makes calculation of the related insurance technical provisions accordance with the Insurance Legislation and reflects them into financial statements as mentioned in Note 2 - Summary of significant accounting policy.

As at 31 December 2014 and 31 December 2013, technical reserves of the Company are as follows::


Reserve for unearned premiums, gross 1.491.252.563 1.422.324.312Reserve for unearned premiums, ceded (Note 10) (294.929.264) (290.028.419)Reserve for unearned premiums, SSI share (36.692.792) (34.755.134)Reserves for unearned premiums, net 1.159.630.507 1.097.540.759

Provision for outstanding claims, gross 1.243.987.764 823.828.813Provision for outstanding claims, ceded (Note 10) (229.799.663) (135.357.501)Provision for outstanding claims, net 1.014.188.101 688.471.312

Gross of provision unexpired risk reserve 52.687.216 22.489.031Reinsurer’s share of the provision for unexpired risk (12.307.870) (9.370.658)Provision unexpired risk reserve, net 40.379.346 13.118.373

Equalization provision, net (*) 60.549.876 44.579.840General provision, net 7.702.761 7.702.761Other technical provisions, net 68.252.637 52.282.601

Total technical provisions, net 2.282.450.591 1.851.413.045

Short-term 2.214.197.954 1.799.130.444Medium and long-term 68.252.637 52.282.601Total technical provisions, net 2.282.450.591 1.851.413.045

(*) Net losses (after reinsurance) resulted from earthquake occurred in Van amounting to TL 7.101.831 TL (31 December 2013: 7.101.831 TL) are decreased from prior periods’ equalization provision based on the regulation.




As at 31 December 2014 and 31 December 2013, movements of the insurance liabilities and related reinsurance assets are presented below:

Reserve for unearned premiums

31 December 2014

GrossReinsurer

share SSI share Net

Reserve for unearned premiums at the beginning of the period 1.422.324.312 (290.028.419) (34.755.134) 1.097.540.759Premiums written during the period 3.004.830.066 (605.617.965) (74.102.040) 2.325.110.061Premiums 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 2013

GrossReinsurer

share SSI share Net

Reserve for unearned premiums at the beginning of the period 1.104.218.773 (218.883.986) (20.200.015) 865.134.772Premiums written during the period 2.749.704.405 (618.521.175) (63.967.223) 2.067.216.007Premiums earned during the period (2.431.598.866) 547.376.742 49.412.104 (1.834.810.020)Reserve for unearned premiums at the end of the period 1.422.324.312 (290.028.419) (34.755.134) 1.097.540.759

Provision for outstanding claims31 December 2014

Gross Ceded Net

Provision for outstanding claims at the beginning of the period 823.828.813 (135.357.501) 688.471.312Claims 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) 1.738.079.061Claims 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


Gross Ceded Net

Provision for outstanding claims at the beginning of the period 578.790.894 (89.440.431) 489.350.463Claims reported during the period and changes in the estimations of provisions for outstanding claims provided at the beginning of the period 1.494.237.129 (148.150.125) 1.346.087.004Claims paid during the period (1.249.199.210) 102.233.055 (1.146.966.155)Provision for outstanding claims at the end of the period 823.828.813 (135.357.501) 688.471.312




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 2014Claim year 2010 2011 2012 2013 2014 TotalClaim year 856.910.386 1.075.581.281 1.495.474.317 1.229.263.704 1.717.748.856 6.374.978.5441 year later 867.349.763 1.144.103.263 1.543.105.072 1.300.026.322 -- 4.854.584.4202 years later 878.025.588 1.189.429.253 1.609.382.065 -- -- 3.676.836.9063 years later 900.866.545 1.238.843.054 -- -- -- 2.139.709.5994 years later 928.050.817 -- -- -- -- 928.050.817Current estimate of cumulative claims 928.050.817 1.238.843.054 1.609.382.065 1.300.026.322 1.717.748.856 6.794.051.114Cumulative payments to date 861.604.436 1.131.547.961 1.398.954.819 1.116.056.443 1.189.365.685 5.697.529.344Liability recognized in the financial statements 66.446.381 107.295.093 210.427.246 183.969.879 528.383.171 1.096.521.770Liability recognized before 2009 -- -- -- -- -- 147.465.994Total gross outstanding claims presented in the financial statements at the end of the period 1.243.987.764

31 December 2013Claim year 2009 2010 2011 2012 2013 TotalClaim year 902.239.347 851.459.419 1.067.586.430 1.482.692.631 1.272.774.899 5.576.752.7261 year later 907.824.330 861.798.734 1.135.585.447 1.529.990.732 -- 4.435.199.2432 years later 921.465.530 872.386.982 1.180.548.434 -- -- 2.974.400.9463 years later 931.210.335 895.069.601 -- -- -- 1.826.279.9364 years later 962.409.997 -- -- -- -- 962.409.997Current estimate of cumulative claims 962.409.997 895.069.601 1.180.548.434 1.529.990.732 1.272.774.899 5.840.793.663Cumulative payments to date 899.070.812 840.148.526 1.092.013.460 1.336.660.376 919.034.121 5.086.927.295Liability recognized in the financial statements 63.339.185 54.921.075 88.534.974 193.330.356 353.740.778 753.866.368Liability recognized before 2008 -- -- -- -- -- 69.962.445Total gross outstanding claims provision presented in the financial statements at the end of the period 823.828.813




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 2014Should be placed (**) Placed (*)

Carrying amount

Non-life:Bank deposits (Note 14) 222.697.267 223.171.410Financial assets (*) (Note 11) 84.612.376 83.816.009

Total 282.343.518 307.309.643 306.987.419


Carrying amount

Non-life:Bank deposits (Note 14) 151.443.845 151.508.238Financial assets (*) (Note 11) 101.932.249 102.274.430

Total 230.055.081 253.376.094 253.782.668

(*) “As at 31 December 2014 and 31 December 2013, 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 2014 (31 December 2013) will be through the calculated amounts as of 30 June 2014 (30 June 2013), 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 205.884.923 (31 December 2013: TL 196.680.406) consist of deferred commission expenses amounting to TL 187.284.759 (31 December 2013: TL 182.110.391) and other prepaid expenses amounting to TL 5.260.484 (31 December 2013: TL 5.905.318). The amount of commission expense TL13.339.680 TL (31 December 2013: 8.664.697) Long-term prepaid expenses amounting TL 3.562.038 (31 December 2013: TL 34.671) are composed of other prepaid expenses.




As at 31 December 2014 and 31 December 2013, the movements of deferred commission expenses are presented below:


Deferred commission expenses at the beginning of the period 190.775.088 156.049.462Commissions accrued during the period 429.400.515 392.156.692Commissions expensed during the period (*) (419.551.164) (357.431.066)Deferred commission expenses at the end of the period 200.624.439 190.775.088

(*) 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


Payables from main operations 302.045.983 327.033.095Other payables 47.561.333 56.534.780Deferred income and expense accruals (Note 10) 45.447.065 39.363.495Taxes and funds payable and other similar obligations 27.386.135 27.491.024Total 422.440.516 450.422.394

Short-term liabilities 422.440.516 450.422.394Long-term liabilities -- --Total 422.440.516 450.422.394

As at 31 December 2014, other payables amounting to TL 47.561.333 (31 December 2013: TL 56.534.780) consist of treatment cost payables to SSI amounting to TL 16.375.984 (31 December 2013: TL 25.801.332), payables to Tarsim and DASK and outsourced benefits and services amounting to TL 28.268.772 (31 December 2013: TL 27.696.412) and deposits and guarantees received amounting to TL 2.916.577 (31 December 2013: TL 3.037.036).

Payables arising from main operations of the Company as at 31 December 2014 and 31 December 2013 are as follows:


Payables to reinsurance companies (Note 10) 188.610.275 230.767.903Payables to agencies, brokers and intermediaries 30.052.668 29.888.503Total payables arising from insurance operations 218.662.943 260.656.406

Payables arising from other operating activities 76.105.907 63.270.783Cash deposited by insurance and reinsurance companies (Note 10) 7.277.133 3.105.906Payables arising from main operations 302.045.983 327.033.095




Corporate tax liabilities and prepaid taxes are disclosed below:


Corporate tax liabilities 22.930.452 9.659.923Taxes paid during the period (21.081.960) --Corporate tax assets, net 1.848.492 9.659.923

Total amount of investment incentives which will be benefited in current and forthcoming periods

None.

20 Financial liabilities

The Company has no financial liabilities as at 31 December 2014 (31 December 2013: 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 2014 31 December 2013Deferred tax

assets /(liabilities)Deferred tax

assets /(liabilities)

Deferred tax effect of current period tax losses (Note 2.18) -- 732.945Other provisions 3.588.669 2.944.113Equalization provision 8.907.829 6.299.668Reserve for unexpired risks 8.075.869 2.623.675Provisions for employee termination benefits and unused vacations 2.812.254 2.581.526Provision for subrogation receivables 1.535.413 1.895.016Difference in depreciation methods on tangible and intangible assets between tax regulations and the Reporting Standards (2.192.013) (1.224.897)Discount of receivables and payables (88.941) 115.797Valuation differences in financial assets (1.547.916) 827.566Subrogation receivables from third parties (965.401) (603.708)Deferred tax assets, net 20.125.763 16.191.701

As at 31 December 2014 The company has not deductible tax losses. (31 December 2013: 9.302.276 TL).

Expiration date 31 December 2014 31 December 2013

31 December 2016 -- --31 December 2017 -- 3.664.725Total -- 3.664.725

Movement of deferred tax assets table:


Opening balance at 1 January 16.191.701 24.604.121Recognised in profit or loss (Note 35) 7.396.097 (11.654.589)Recognised in equity (Note 15) (3.462.035) 3.242.169Deferred tax asset 20.125.763 16.191.701




22 Retirement benefit obligations

The participants or beneficiaries of pension funds are required to be transferred Social Security Institution according to “Amendments to the Social Security and General Health Insurance Act Including Certain Laws and Decrees” numbered 5754 which was published in the Official Gazette dated 8 May 2008 and numbered 26870. Transfer will be completed within a period of 3 years and prescribes the extension period of the transfer as maximum of two years upon the order of the Cabinet. 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 2013. In accordance with the Act, as of the transfer date, present value of the liabilities will be determined by considering the income and expense of the pension fund. Technical deficit rate of 9.8% shall be used in the actuarial calculation of the value in cash, and uncovered other rights and compensations of participants or beneficiaries of pension funds should be covered by the entities that transfer the funds.

Up to date, as per the actuarial calculation performed, there has not been any deficit in Anadolu Anonim Türk Sigorta Şirketi Memurları Emekli Sandığı (Pension Fund of Anadolu Anonim Türk Sigorta Şirketi), which has been founded in accordance with the Article 20 of the Social Securities Act No: 506 and the Company has made no payment for this purpose. It is believed that the assets of this institution are adequate enough to cover its total obligations; therefore this shall not constitute any additional liability on the Company.

Phrases of 2 years which expression in “ Amendments Social Insurance and General Health Insurance Law Amending the Law” numbered 28227 which was published in the Official Gazette dated 8 March 2012 and numbered 506 law which has relevant terms was changed to 4 years Banks, insurance and reinsurance companies, chambers of commerce, industry chambers, exchanges which take part scope of Law 506, No: 20 or the crate which established for constituted staff association are included in this Law to transferred Social Security Administration in the publication of this article within three years from the date. Three year period may be extended by a maximum two years via The Council of Ministers . As of the date of transfer, pension fund contributors are insured scope of this Law Article 4 (a).With this amendment, the authority postpone the transfer of the funds are given The Council of Ministers modified 4 years. (8 May 2011 to 8 May 2015) In this context, the Council of Ministers postpone transfer of the funds one more year with the decision of The Council of Ministers dated 24 February 2014 No. 2014/6042.

23 Other liabilities and provisions

As at 31 December 2014 and 31 December 2013; the details of the provisions for other risks are as follows:


Provision for employee termination benefits 12.628.115 11.720.142Provision for unused vacation pay liability 1.433.153 1.187.490Total provision for other risks 14.061.268 12.907.632


Provision for agency award 3.356.650 4.300.000Provision for guarantee account 7.182.519 6.180.307Provision for employee bonus 7.000.000 6.000.000Expense provision for gauge commission (Not 10) 1.576.728 915.265Provision for tax assessment (Not 42, (Not 47) 15.489.301 7.615.549Prepaid income and expense accruals 34.605.198 25.011.121




Movements of provision for employee termination benefits during the period are presented below:


Provision at the beginning of the period 11.720.142 9.856.211Interest cost (Note 47) 1.196.136 757.050Service cost (Note 47) 930.599 936.206Payments made during the period (Note 47) (436.838) (586.852)Actuarial difference (Note 47) (781.924) 757.527Provision at the end of the period 12.628.115 11.720.142

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


Claims paid, net off reinsurers’ share 1.412.362.272 1.146.966.155Changes in reserve for unearned premiums, net off reinsurers’ share 62.089.748 232.405.987Changes in provision for outstanding claims, net off reinsurers’ share 325.716.789 199.120.849Change in equalization provisions 15.970.036 12.422.591Changes in reserve for unexpired risks, net off reinsurers’ share 27.260.973 9.020.850Total 1.843.399.818 1.599.936.432

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

The operating expenses are disclosed as follows:


Commission expenses (Note 17) 385.141.391 357.431.066Commissions to intermediaries accrued during the period (Note 17) 390.315.759 392.156.692Change in deferred commission expenses (Note 17) (5.174.368) (34.725.626)

Employee benefit expenses (Note 33) 104.693.751 95.467.768Commission income from reinsurers (Note 10) (58.617.320) (72.496.752)

Commission income from reinsurers accrued during the period (Note 10) (60.026.011) (76.879.895)Change in deferred commission income (Note 10) 1.408.691 4.383.143

Administration expenses 69.230.043 69.800.405Advertising and marketing expenses 13.987.613 10.695.100Outsourced benefits and services 8.250.751 1.936.519Total 522.686.229 462.834.106

33 Employee benefits expenses


Wages and salaries 76.090.749 67.586.147Employer’s share 15.758.608 13.983.364Other 12.844.394 13.898.257Total 104.693.751 95.467.768

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 2014 31 December 2013Current tax expense provision:Corporate tax provision (21.081.960) --Deferred taxes:Origination and reversal of temporary differences 7.396.097 (11.654.589)Total income tax expense recognised in profit or loss (13.685.863) (11.654.589)




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 2014 31 December 2013Profit before tax 85.245.809 Tax rate (%) 79.116.513 Tax rate (%)Taxes on income per statutory tax rate 17.049.162 20,00 15.823.303 20,00Tax exempt income (4.041.796) (4,74) (4.940.572) (6,24)Non deductible expenses 678.497 0,80 771.858 0,98Total tax income recognized in profit or loss 13.685.863 16,05 11.654.589 14,73

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 2014

31 December 2013

Net profit /(loss) for the period 71.559.946 67.461.924Weighted average number of shares 50.000.000.000 50.000.000.000Earnings /(loss) per share (TL) 0,00143 0,00135

38 Dividends per share

The company did not perform profit distribution in years of 2013 and 2014.

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 2014, total amount of the claims that the Company face is TL 1.040.392.000 in gross (31 December 2013: TL 726.988.000). The Company provided provision for outstanding claims in the consolidated financial statements by considering collateral amounts.

As at 31 December 2014, ongoing law suits prosecuted by the Company against the third parties amounting TL 194.259.000 (31 December 2013: TL 206.337.000).

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.

Legal process has been initiated related to 2007 and 2008, also as of the report date there are cases against/on behalf of us and also for the against result cases the case has been moved to a higher court. In addition, some part of the payment orders submitted to us for the following periods are subjected to litigation and for the other part of the cases compromise were made to relevant parties.

As of the report date the Company made a payment of TL 3.801.378 for tax assessments, also due to a precautionary condition the company has made a provision to the amount of TL 15.489.301 (31 December 2013: 7.615.549).

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 tax. The Company does not make any provision for this tax penalty because of thinking that the Company’s operations are in line with the local regulations.

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 2014 31 December 2013Within one year 7.517.871 5.871.892Between one to five years 3.476.491 7.725.700Total of minimum lease payments 10.994.362 13.597.592

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 2014 and 31 December 2013 are as follows:


İş Bankası - cash at banks 533.547.278 678.467.430Türkiye Sınai ve Kalkınma Bankası - cash at banks -- 13.055Banks 533.547.278 678.480.485

Bonds issued by İş Bankası (Note 11) -- 122.028.890Bonds issued by Is GYO (Not 11) 14.713.703 --Bonds issued by Is Leasing (Not 11) 5.078.714 --Investment funds founded by İş Bankası (Note 11) 15.972.195 13.588.728Investment funds founded by İş Portföy Yönetimi A.Ş. (Note 11) 139.593.991 71.694.305Investment funds founded by İşbank GmbH (Note 11) 12.320.065 9.115.192Financial assets 187.678.668 216.427.115

İş Bankası - receivables stem from premiums written via the Bank 91.802.800 76.454.603Receivables stems from premiums written via Şişecam Sigorta Aracılık Hiz. A.Ş. 2.924.252 5.743.294Trakya Cam Sanayii A.Ş. 167.971 21.600Milli Reasürans T.A.Ş. - receivables from reinsurance operations 1.416 644Anadolu Hayat Emeklilik A.Ş. - premium receivables 490.293 4.650Receivables from main operations 95.386.732 82.224.791

Milli Reasürans T.A.Ş.- payables from reinsurance operations 11.953.520 20.215.519İş Bankası - commission payables 7.082.553 5.900.234Şişecam Sigorta Aracılık Hizmetleri A.Ş. - commission payables 23.437 365.739Payables from main operations 19.059.510 26.481.492

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.




The Company accrued TL 57.835.977 premium (31 December 2013: 50.126.169 TL) for related party policies. The transactions with related parties during the year ended 31 December 2014 and 2013 are as follows:


İş Bankası - premiums written via the Bank 328.891.626 261.701.058Premiums written via Şişecam Sigorta Aracılık Hizmetleri A.Ş. 41.316.107 38.432.938İş Finansal Leasing- premiums written 17.077.324 14.231.789Premiums written via TSKB 101.511 952.525Premiums written 387.386.568 315.318.310

Milli Reasürans T.A.Ş (93.328.833) (79.445.393)Premiums written, ceded (93.328.833) (79.445.393)

İş Bankası - interest income from deposits 55.732.060 36.922.222İş Portföy Yönetimi - income from investment funds 9.488.742 --İş Yatırım Menkul Değerler - income from investment funds 11.500 --İş Gayrimenkul Yatırım Ortaklığı - income from bonds 560.304 --İş Bankası - income from bonds 11.828.210 3.797.714Investment income 77.620.816 40.719.936

Türkiye İş Bankası A.Ş - commission expense (33.650.040) (24.613.912)Şişecam Sigorta Aracılık Hizmetleri A.Ş. - commission expense (8.674.189) (7.353.671)İş Leasing - commission expense (3.240.935) (2.744.249)TSKB - commission expense -- (75.589)Milli Reasürans T.A.Ş- commission expense 21.497.125 18.214.159Operating expenses, net (24.068.039) (16.573.262)

İş Bankası - banking service fee (3.250.000) (3.271.539)İş Bankası - rent expense -- (371.750)İş Merkezleri Yönetim ve İşletim A.Ş. - building service cost (2.837.238) (1.480.031)İş Gayrimenkul Yatırım Ortaklığı A.Ş. - rent expense -- (4.883.609)İş Portföy Yönetimi - management commission (632.924) (475.950)Other expenses (6.720.162) (10.482.879)

46 Events after the reporting date

Subsequent events are disclosed in Note 1.10 Events after the reporting date.




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 2014 and 2013, details of discount and provision expenses are as follows:

Provision expenses 31 December 2014 31 December 2013

Other provision income /(expense) 1.071.425 908.822Provision expense for unused vacation (Note 23) (245.663) (338.452)Provision expense for employee termination benefits (Note 23) (1.689.897) (1.106.404)Provision expense for doubtful receivables (Note4.2) (11.622.773) (15.741.368)Tax assessment expense (Not 23) (7.873.752) (7.615.549)Total (20.360.660) (23.892.951)

Rediscount expenses 31 December 2014 31 December 2013

Rediscount income 12.636.796 12.842.993Rediscount expense (15.997.077) (10.489.059)Total of rediscounts (3.360.281) 2.353.934


ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ 31 December 2014 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon


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) National Market under the symbol (ANHYT)

Headquartered in İstanbul, Anadolu Hayat Emeklilik brings its products to its customers via regional offices in İstanbul (2), Ankara, Adana, Antalya, Bursa, Trabzon and İzmir 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 of İşbank, Anadolubank, HSBC, TSKB, BankPozitif and Albaraka Türk Participation Bank as fundamental element of its service delivery.

Controlling a 11% share of the market with a premium production of TL 365 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 1.8 billion.

According to the Pension Monitoring Center (PMC) data dated 2 January 2015, Anadolu Hayat Emeklilik achieved 18% increase in the number of participants and in total funds in the twelve months to year-end 2014. Having reached TL 7,399 million in total funds and 863,978 people in the number of participants, Anadolu Hayat Emeklilik is the sector’s leader with respective market shares of 20% and 17% in total funds including state contributions and number of participants.

Total unconsolidated assets of Anadolu Hayat Emeklilik were up 28% year-to-year and reached TL 10,154 million at year-end 2014.

Posting TL 97.7 million in net profit, the company successfully completed yet another year in terms of sustainable profitability



Other Matters and Financial Statements / 31 December 2014 Consolidated Financial Statements Together with Independent Auditors’ Report Thereon

INDEPENDENT AUDITOR’S REPORT

To the Board of Directors of Anadolu Anonim Türk Sigorta Şirketi

Introduction

We have audited the accompanying consolidated balance sheet of Anadolu Anonim Türk Sigorta Şirketi (“the Company”) as at 31 December 2014 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

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with the accounting principles and standards, in force as per the insurance legislation. This responsibility includes: designing, implementing and maintaining internal systems relevant to the preparation and fair presentation of financial statements that are free from material misstatements, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Independent Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with audit standards in force as per the insurance legislation. Those standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatement.

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 our qualified audit opinion.

Basis for Qualified Opinion

As explained in Note 17, the accompanying consolidated financial statements included a general provision amounting to TL 7.702.761 provided by the Company management considering the circumstances which may arise from any changes in economy or market conditions recognized as expense in the prior periods. The total amount had been expensed in previous years’ financial statements.

Akis Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş.Kavacık Rüzgarlı Bahçe Mah.Kavak Sok. No: 3Beykoz 34805 İstanbul

Telephone +90 (216) 681 90 00Fax +90 (216) 681 90 90İnternet www.kpmg.com.tr

31 December 2014 Consolidated Financial Statements Together With Independent Auditors’ Report ThereonConvenience Translation of the Independent Auditors’ Report Originally Prepared and Issued in Turkish (See Note 2.1.1)(Currency: Turkish Lira (TL))




Qualified Opinion

In our opinion, except for the effect on the consolidated financial statements of the matter described in the basis for qualified opinion paragraph above, nothing has come to our attention that causes us to believe that the accompanying consolidated financial statements give a true and fair view of the consolidated financial position of Anadolu Anonim Türk Sigorta Şirketi as at 31 December 2014, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with the accounting principles and standards (see Note 2) in force as per the insurance legislation.

Report on Other Legal and Regulatory Requirements

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 29 January 2015.

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 the Group’s bookkeeping activities, financial statements and group’s financial statements for the period 1 January - 31 December 2014 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.Alper Güvenç, Certified Public AccountantPartner

29 Ocak 2015

İstanbul, Türkiye

Additional paragraph for convenience translation to English:As explained in Note 2.1.1, the accompanying consolidated financial statements are not intended to present the financial position and results of operations of the Company in accordance with the accounting principles and practices generally accepted in countries and jurisdictions other than Turkey.

Consolidated Financial Statements As at and for the Year Ended 31 December 2014




We confirm that the consolidated financial statements and related disclosures and footnotes as at 31 December 2014 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, 29 January 2015

Musa ÜLKENMember of Board of DirectorsChief Executive Officer

Fatih GÖRENExecutive Vice President of Finance

Murat TETİKAccounting Reporting Manager

Taylan MATKAP Actuary

Consolidated Financial Statements As at and for the Year Ended 31 December 2014




Consolidated Financial Statements As at and for the Year Ended 31 December 2014Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1(Currency: Turkish Lira (TL))

CONTENTS

CONSOLIDATED BALANCE SHEET 186-190

CONSOLIDATED STATEMENT OF INCOME 191-193

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 194

CONSOLIDATED STATEMENT OF CASH FLOWS 196

CONSOLIDATED STATEMENT OF PROFIT DISTRIBUTION 197

NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTS 198-260

NOTE 1 General Information 198

NOTE 2 Summary of significant accounting policies 200

NOTE 3 Critical accounting estimates and judgments in applying accounting policies 217

NOTE 4 Management of insurance and financial risk 218

NOTE 5 Segment reporting 231

NOTE 6 Tangible assets 234

NOTE 7 Investments in associate 235

NOTE 8 Intangible assets 236

NOTE 9 Investments in associates 236

NOTE 10 Reinsurance assets and liabilities 237

NOTE 12 Loans and receivables 242

NOTE 13 Derivative financial instruments 243

NOTE 14 Cash and cash equivalents 244

NOTE 15 Equity 245

NOTE 16 Other reserves and equity component of DPF 247

NOTE 17 Insurance contract liabilities and reinsurance assets 247

NOTE 18 Investment contract liabilities 252

NOTE 19 Trade and other payables and deferred income 252

NOTE 20 Financial liabilities 253

NOTE 21 Deferred tax 253

NOTE 22 Retirement benefit obligations 254

NOTE 23 Other liabilities and provisions 255

NOTE 24 Net insurance premium 255

NOTE 25 Fee revenue 255




Consolidated Financial Statements As at and for the Year Ended 31 December 2014Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1(Currency: Turkish Lira (TL))

NOTE 26 Investment income 255

NOTE 27 Net income accrual on financial assets 255

NOTE 28 Assets held at fair value through profit or loss 255

NOTE 29 Insurance rights and claims 256

NOTE 30 Investment contract benefits 256

NOTE 31 Other expenses 256

NOTE 32 Operating expenses 256

NOTE 33 Employee benefits expenses 256

NOTE 34 Financial costs 256

NOTE 35 Income tax 257

NOTE 36 Net foreign exchange gains 257

NOTE 37 Earnings per share 257

NOTE 38 Dividends per share 257

NOTE 39 Cash generated from operations 257

NOTE 40 Convertible bonds 257

NOTE 41 Redeemable preference shares 257

NOTE 42 Risks 258

NOTE 43 Commitments 258

NOTE 44 Business combinations 258

NOTE 45 Related party transactions 259

NOTE 46 Events after the reporting date 260

NOTE 47 Others 260




Consolidated Balance Sheet As at 31 December 2014Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1(Currency: Turkish Lira (TL))

ASSETS

I- Current Assets NoteAudited Current Period

31 December 2014Audited Prior Period

31 December 2013A- Cash and Cash Equivalents 14 1.606.048.714 1.153.712.2161- Cash 14 37.347 49.2562- Cheques Received -- --3- Banks 14 1.356.733.446 901.838.5774- Cheques Given and Payment Orders 14 (171.519) (1.025.984)5- Bank Guaranteed Credit Card Receivables with Maturities Less Than Three Months 14 249.449.440 252.850.3676- Other Cash and Cash Equivalents -- --B- Financial Assets and Financial Investments with Risks on Policyholders 11 644.067.957 631.008.7461- Available-for-Sale Financial Assets 11 442.140.789 456.674.1612- Held to Maturity Investments 11 73.670.047 94.501.5493- Financial Assets Held for Trading 11 134.054.733 85.630.6484- 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 (5.797.612) (5.797.612)C- Receivables from Main Operations 12 797.454.113 773.925.2261- Receivables from Insurance Operations 12 751.368.850 736.197.9762- Provision for Receivables from Insurance Operations 2.21,12 (7.677.067) (9.475.078)3- Receivables from Reinsurance Operations 12 47.022.365 42.073.7014- Provision for Receivables from Reinsurance Operations -- --5- Cash Deposited to Insurance and Reinsurance Companies 12 6.739.965 5.128.6276- Loans to the Policyholders -- --7- Provision for Loans to the Policyholders -- --8- Receivables from Individual Pension Operations -- --9- Doubtful Receivables from Main Operations 12 113.380.507 102.829.15810- Provision for Doubtful Receivables from Main Operations 12 (113.380.507) (102.829.158)D- Due from Related Parties 12 -- 72.3241- Due from Shareholders -- --2- Due from Associates -- --3- Due from Subsidiaries -- --4- Due from Joint Ventures -- --5- Due from Personnel -- 72.3246- 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 3.595.183 2.968.7341- Finance Lease Receivables -- --2- Unearned Finance Lease Interest Income -- --3- Deposits and Guarantees Given 358.718 394.5124- Other Miscellaneous Receivables 3.236.465 2.574.2225- Rediscount on Other Miscellaneous Receivables -- --6- Other Doubtful Receivables -- --7- Provision for Other Doubtful Receivables -- --F- Prepaid Expenses and Income Accruals 208.618.353 197.767.1101- Prepaid Expenses 17 205.884.923 196.680.4062- Accrued Interest and Rent Income -- --3- Income Accruals 10,12 2.733.430 1.086.7044- Other Prepaid Expenses -- --G- Other Current Assets 3.956.342 11.284.2551- Stocks to be Used in the Following Months 212.258 888.7742- Prepaid Taxes and Funds 19 1.848.492 9.659.9233- Deferred Tax Assets -- --4- Job Advances 12 165.103 39.1755- Advances Given to Personnel 12 4.631 35.8976- Inventory Count Differences -- --7- Other Miscellaneous Current Assets 12 1.725.858 660.4868- Provision for Other Current Assets -- --I- Total Current Assets 3.263.740.662 2.770.738.611






ASSETS

II- Non-Current Assets Note


31 December 2014

AuditedPrior Period

31 December 2013A- Receivables from Main Operations -- --1- Receivables from Insurance Operations -- --2- Provision for Receivables from Insurance Operations -- --3- Receivables from Reinsurance Operations -- --4- Provision for Receivables from Reinsurance Operations -- --5- Cash Deposited for Insurance and Reinsurance Companies -- --6- Loans to the Policyholders -- --7- Provision for Loans to the Policyholders -- --8- Receivables from Individual Pension Business -- --9- Doubtful Receivables from Main Operations -- --10- Provision for Doubtful Receivables from Main Operations -- --B- Due from Related Parties -- --1- Due from Shareholders -- --2- Due from Associates -- --3- Due from Subsidiaries -- --4- Due from Joint Ventures -- --5- Due from Personnel -- --6- Due from Other Related Parties -- --7- Rediscount on Receivables from Related Parties -- --8- Doubtful Receivables from Related Parties -- --9- Provision for Doubtful Receivables from Related Parties -- --C- Other Receivables -- --1- Finance Lease Receivables -- --2- Unearned Finance Lease Interest Income -- --3- Deposits and Guarantees Given -- --4- Other Miscellaneous Receivables -- --5- Rediscount on Other Miscellaneous Receivables -- --6- Other Doubtful Receivables -- --7- Provision for Other Doubtful Receivables -- --D- Financial Assets 9 123.261.711 108.028.6661- Investments in Equity Shares -- --2- Investments in Associates 9 123.261.711 108.028.6663- 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 32.307.481 34.793.1761- Investment Properties 6,7 6.982.776 6.982.7762- Impairment for Investment Properties -- --3- Owner Occupied Property 6 6.788.733 6.520.9744- Machinery and Equipments 6 34.554.018 32.800.3915- Furniture and Fixtures 6 11.775.416 11.331.0856- Motor Vehicles 6 1.362.223 1.285.9837- Other Tangible Assets (Including Leasehold Improvements) 6 19.401.127 18.262.2778- Tangible Assets Acquired Through Finance Leases 6 4.166.354 4.166.3549- Accumulated Depreciation 6 (52.723.166) (46.556.664)10- Advances Paid for Tangible Assets (Including Construction in Progress) -- --F- Intangible Assets 8 62.254.841 62.812.0331- Rights -- --2- Goodwill 8 16.250.000 16.250.0003- Pre-operating Expenses -- --4- Research and Development Costs -- --5- Other Intangible Assets 8 88.079.901 54.879.8736- Accumulated Amortization 8 (43.804.438) (27.614.154)7- Advances Paid for Intangible Assets 8 1.729.378 19.296.314G- Prepaid Expenses and Income Accruals 17 3.562.038 34.6711- Prepaid Expenses 17 3.562.038 34.6712- Income Accruals -- --3- Other Prepaid Expenses and Income Accruals -- --H- Other Non-Current Assets 21 20.125.763 16.191.7011- 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 20.125.763 16.191.7016- Other Miscellaneous Non-Current Assets -- --7- Amortization on Other Non-Current Assets -- --8- Provision for Other Non-Current Assets -- --II- Total Non-Current Assets 241.511.834 221.860.247TOTAL ASSETS 3.505.252.496 2.992.598.858






LIABILITIES

III- Short-Term Liabilities Note


31 December 2014

AuditedPrior Period

31 December 2013A- Financial Liabilities -- --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 -- --B- Payables Arising from Main Operations 19 302.045.983 327.033.0951- Payables Arising from Insurance Operations 19 218.662.943 260.656.4062- Payables Arising from Reinsurance Operations -- --3- Cash Deposited by Insurance and Reinsurance Companies 10,19 7.277.133 3.105.9064- Payables Arising from Individual Pension Business -- --5- Payables Arising from Other Main Operations 19 76.105.907 63.270.7836- Discount on Payables from Other Main 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 19 47.561.333 56.534.7801- Deposits and Guarantees Received 2.916.577 3.037.0362- Medical Treatment Payables to Social Security Institution 16.625.234 26.428.9553- Other Miscellaneous Payables 28.268.772 27.696.4124- Discount on Other Miscellaneous Payables (249.250) (627.623)E- Insurance Technical Provisions 17 2.214.197.954 1.799.130.4441- Reserve for Unearned Premiums - Net 17 1.159.630.507 1.097.540.7592- Reserve for Unexpired Risks - Net 2.26,17 40.379.346 13.118.3733- Mathematical Provisions - Net -- --4- Provision for Outstanding Claims - Net 17 1.014.188.101 688.471.3125- Provision for Bonus and Discounts - Net -- --6- Other Technical Provisions - Net -- --F- Provisions for Taxes and Other Similar Obligations 19 27.386.135 27.491.0241- Taxes and Funds Payable 25.121.485 25.772.0032- Social Security Premiums Payable 2.264.650 1.719.0213- Overdue, Deferred or By Instalment Taxes and Other Liabilities -- --4- Other Taxes and Similar Payables -- --5- Corporate Tax Payable 35 21.081.960 --6- Prepaid Taxes and Other Liabilities Regarding Current Period Income (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 80.052.263 64.374.6161- Deferred Income 19 45.447.065 39.363.4952- Expense Accruals 23 34.605.198 25.011.1213- Other Deferred Income and Expense Accruals -- --I- Other Short-Term Liabilities 23 1.433.153 1.187.4901- Deferred Tax Liabilities -- --2- Inventory Count Differences -- --3- Other Various Short-Term Liabilities 23 1.433.153 1.187.490III - Total Short-Term Liabilities 2.672.676.821 2.275.751.449






LIABILITIES

IV- Long-Term Liabilities Note


31 December 2014

AuditedPrior Period

31 December 2013A- 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 68.252.637 52.282.6011- 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 68.252.637 52.282.601F-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 12.628.115 11.720.1421- Provision for Employee Termination Benefits 23 12.628.115 11.720.1422- 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 80.880.752 64.002.743






EQUITY

V- Equity Note


31 December 2014

AuditedPrior Period

31 December 2013A- Paid in Capital 500.000.000 500.000.0001- (Nominal) Capital 2.13,15 500.000.000 500.000.0002- Unpaid Capital -- --3- Positive Capital Restatement Differences -- --4- Negative Capital Restatement Differences -- --5- Register in Progress Capital -- --B- Capital Reserves 15 8.809.304 8.161.5411- 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 8.809.304 8.161.541C- Profit Reserves 154.907.376 127.158.9181- Legal Reserves 15 46.999.839 45.293.0512- Statutory Reserves 15 7.710.040 7.161.4573- Extraordinary Reserves 15 20.962.756 19.723.5834- Special Funds -- --5- Revaluation of Financial Assets 15 35.200.299 11.454.7476- Other Profit Reserves 15 44.034.442 43.526.080D- Retained Earnings 13.386.141 --1- Retained Earnings 13.386.141 --E- Accumulated Losses -- (48.878.904)1- Accumulated Losses -- (48.878.904)F-Net Profit/(Loss) for the Period 74.592.102 66.403.1111- Net Profit for the Period 73.197.477 65.755.3482- Net Loss for the Period -- --3- Profit not Available for Distribution 15 1.394.625 647.763V- Total Equity 751.694.923 652.844.666TOTAL EQUITY AND LIABILITIES 3.505.252.496 2.992.598.858







31 December 2014

AuditedPrior Period

31 December 2013A- Non-Life Technical Income 2.441.216.789 1.966.929.9681- Earned Premiums (Net of Reinsurer Share) 2.235.759.340 1.825.789.1701.1- Written Premiums (Net of Reinsurer Share) 17 2.325.110.061 2.067.216.0071.1.1- Written Premiums, gross 17 3.004.830.066 2.749.704.4051.1.2- Written Premiums, ceded 10,17 (605.617.965) (618.521.175)1.1.3- Premiums Transferred to Social Security Institutions (74.102.040) (63.967.223)1.2- Change in Reserve for Unearned Premiums (Net of Reinsurer Shares and Less the Amounts Carried Forward) 17,29 (62.089.748) (232.405.987)1.2.1- Reserve for Unearned Premiums, gross 17 (68.928.251) (318.105.539)1.2.2- Reserve for Unearned Premiums, ceded 17 4.900.846 71.144.4331.2.3 - Reserve for Unearned Premiums, Social Security Institution Share 1.937.657 14.555.1191.3- Change in Reserve for Unexpired Risks (Net of Reinsurer Share and Less the Amounts Carried Forward) 29 (27.260.973) (9.020.850)1.3.1- Reserve for Unexpired Risks, gross (30.198.184) (12.778.086)1.3.2- Reserve for Unexpired Risks, ceded 2.937.211 3.757.2362- Investment Income - Transferred from Non-Technical Section 190.509.410 123.220.2263- Other Technical Income (Net of Reinsurer Share) 2.788.809 2.924.3743.1- Other Technical Income, gross 2.788.809 2.924.3743.2- Other Technical Income, ceded -- --4- Accrued Salvage and Subrogation Income 12.159.230 14.996.198B - Non-Life Technical Expense (2.319.957.258) (1.866.051.751)1- Incurred Losses (Net of Reinsurer Share) 17 (1.738.079.061) (1.346.087.004)1.1- Claims Paid (Net of Reinsurer Share) 17,29 (1.412.362.272) (1.146.966.155)1.1.1- Claims Paid, gross 17 (1.553.196.954) (1.249.199.210)1.1.2- Claims Paid, ceded 10,17 140.834.682 102.233.0551.2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward) 17,29 (325.716.789) (199.120.849)1.2.1- Change in Provisions for Outstanding Claims, gross 17 (420.158.951) (245.037.920)1.2.2- Change in Provisions for Outstanding Claims, ceded 17 94.442.162 45.917.0712- 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 (15.970.036) (12.422.591)4- Operating Expenses 32 (522.686.229) (462.834.106)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 (43.221.932) (44.708.050)6.1- Change in Other Technical Provisions, gross 2.25 (43.221.932) (44.708.050)6.2- Change in Other Technical Provisions, ceded -- --C- Net Technical Income-Non-Life (A - B) 121.259.531 100.878.217D- 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 -- --

Consolidated Statement of IncomeFor the Year Ended 31 December 2014Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1(Currency: Turkish Lira (TL))








31 December 2014

AuditedPrior Period

31 December 2013E- Life Technical Expense -- --1- Incurred Losses (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) -- --






II-NON-TECHNICAL SECTION Note


31 December 2014

AuditedPrior Period

31 December 2013C- Net Technical Income - Non-Life (A-B) 121.259.531 100.878.217F- Net Technical Income - Life (D-E) -- --I - Net Technical Income - Pension Business (G-H) -- --J- Total Net Technical Income (C+F+I) 121.259.531 100.878.217K- Investment Income 261.960.220 185.154.5351- Income from Financial Assets 4.2 130.174.857 85.749.3682- Income from Disposal of Financial Assets 4.2 31.151.423 16.004.3723- Valuation of Financial Assets 4.2 19.421.434 10.576.4494- Foreign Exchange Gains 4.2 59.970.980 52.709.1775- Income from Associates 4.2 19.032.156 16.941.1876- Income from Subsidiaries and Joint Ventures -- --7- Income from Property, Plant and Equipment 1.815.006 2.848.3778- Income from Derivative Transactions 4.2 205.678 212.9319- Other Investments 188.686 112.67410- Income Transferred from Life Section -- --L- Investment Expense (275.809.588) (187.215.654)1- Investment Management Expenses (inc. interest) 4.2 (136.623) --2- Diminution in Value of Investments 4.2 (3.509.979) (4.677.619)3- Loss from Disposal of Financial Assets 4.2 (7.713.065) (13.581.516)4- Investment Income Transferred to Non-Life Technical Section (190.509.410) (123.220.226)5- Loss from Derivative Transactions 4.2 (184.509) (99.585)6- Foreign Exchange Losses 4.2 (49.954.025) (28.804.896)7- Amortization Expenses 6,8 (23.801.977) (16.831.812)8- Other Investment Expenses -- --M- Income and Expenses From Other and Extraordinary Operations (11.736.101) (32.413.987)1- Provisions 47 (20.360.660) (23.892.951)2- Rediscounts 47 (3.360.281) 2.353.9343- 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 -- (11.654.589)7- Other Income 5.142.413 3.469.0738- Other Expenses and Losses (553.670) (2.689.454)9- Prior Year’s Income -- --10- Prior Year’s Expenses and Losses -- --N- Net Profit for the Period 74.592.102 66.403.1111- Profit for the Period 95.674.062 66.403.1112- Corporate Tax Provision and Other Fiscal Liabilities 35 (21.081.960) --3- Net Profit for the Period 74.592.102 66.403.1114- Monetary Gains and Losses -- --





Consolidated Statement of Changes in EquityFor the Year Ended 31 December 2014Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1(Currency: Turkish Lira (TL))





Adjustments


AdjustmentsLegal

ReservesStatutory Reserves

Other Reserves and

Retained Earnings

Net Profit for the Year

Retained Earnings Total

I - Balance at the end of the previous year - 31 December 2012 500.000.000 -- 34.628.767 -- -- 43.918.190 9.737.625 72.916.015 (55.790.717) 4.848.165 610.258.045II - Change in Accounting Standards -- -- -- -- -- -- -- -- -- -- --III - Restated balances (I+II) - 1 January 2013 500.000.000 -- 34.628.767 -- -- 43.918.190 9.737.625 72.916.015 (55.790.717) 4.848.165 610.258.045A- Capital increase (A1+A2) -- -- -- -- -- -- -- -- -- -- --


B- Purchase of own shares -- -- -- -- -- -- -- -- -- -- --C- Gains or losses that are not included in the statement of income -- -- -- -- -- -- -- (663.966) -- -- (663.966)D- Change in the value of financial assets 11,15 -- -- (23.174.020) -- -- -- -- -- -- -- (23.174.020)E- Currency translation adjustments -- -- -- -- -- -- -- -- -- -- --F- Other gains or losses -- -- -- -- -- -- -- -- 400.000 -- 400.000G- Inflation adjustment differences -- -- -- -- -- -- -- -- -- -- --H- Net profit for the period -- -- -- -- -- -- -- -- 66.403.111 -- 66.403.111I - Dividends paid -- -- -- -- -- -- -- -- (378.504) -- (378.504)J - Transfers to reserves 15 -- -- -- -- -- 1.374.861 (2.576.168) (840.845) 55.769.221 (53.727.069) --II - Balance at the end of the period - 31 December 2013 500.000.000 -- 11.454.747 -- -- 45.293.051 7.161.457 71.411.204 66.403.111 (48.878.904) 652.844.666


Note Paid-in CapitalOwn Shares of



Adjustments


AdjustmentsLegal


Other Reserves and

Retained Earnings



I Balance at the end of the previous year - 31 December 2013 500.000.000 -- 11.454.747 -- -- 45.293.051 7.161.457 71.411.204 66.403.111 (48.878.904) 652.844.666II - Change in Accounting Standards -- -- -- -- -- -- -- -- -- -- --III - Restated balances (I+II) -1 January 2014 500.000.000 -- 11.454.747 -- -- 45.293.051 7.161.457 71.411.204 66.403.111 (48.878.904) 652.844.666A- Capital increase (A1+A2) -- -- -- -- -- -- -- -- -- -- --


B- Purchase of own shares -- -- -- -- -- -- -- -- -- -- --C- Gains or losses that are not included in the statement of income -- -- -- -- -- -- -- 512.603 -- -- 512.603D- Change in the value of financial assets 11,15 -- -- 23.745.552 -- -- -- -- -- -- -- 23.745.552E- Currency translation adjustments -- -- -- -- -- -- -- -- -- -- --F- Other gains or losses -- -- -- -- -- -- -- -- -- -- --G- Inflation adjustment differences -- -- -- -- -- -- -- -- -- -- --H- Net profit for the period -- -- -- -- -- -- -- -- 74.592.102 -- 74.592.102I - Dividends paid -- -- -- -- -- -- -- -- -- -- --J - Transfers to reserves 15 -- -- -- -- -- 1.706.788 548.583 1.882.695 (66.403.111) 62.265.045 --IV - 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 74.592.102 13.386.141 751.694.923









Adjustments


AdjustmentsLegal


Other Reserves and

Retained Earnings



I - Balance at the end of the previous year - 31 December 2012 500.000.000 -- 34.628.767 -- -- 43.918.190 9.737.625 72.916.015 (55.790.717) 4.848.165 610.258.045II - Change in Accounting Standards -- -- -- -- -- -- -- -- -- -- --III - Restated balances (I+II) - 1 January 2013 500.000.000 -- 34.628.767 -- -- 43.918.190 9.737.625 72.916.015 (55.790.717) 4.848.165 610.258.045A- Capital increase (A1+A2) -- -- -- -- -- -- -- -- -- -- --


B- Purchase of own shares -- -- -- -- -- -- -- -- -- -- --C- Gains or losses that are not included in the statement of income -- -- -- -- -- -- -- (663.966) -- -- (663.966)D- Change in the value of financial assets 11,15 -- -- (23.174.020) -- -- -- -- -- -- -- (23.174.020)E- Currency translation adjustments -- -- -- -- -- -- -- -- -- -- --F- Other gains or losses -- -- -- -- -- -- -- -- 400.000 -- 400.000G- Inflation adjustment differences -- -- -- -- -- -- -- -- -- -- --H- Net profit for the period -- -- -- -- -- -- -- -- 66.403.111 -- 66.403.111I - Dividends paid -- -- -- -- -- -- -- -- (378.504) -- (378.504)J - Transfers to reserves 15 -- -- -- -- -- 1.374.861 (2.576.168) (840.845) 55.769.221 (53.727.069) --II - Balance at the end of the period - 31 December 2013 500.000.000 -- 11.454.747 -- -- 45.293.051 7.161.457 71.411.204 66.403.111 (48.878.904) 652.844.666


Note Paid-in CapitalOwn Shares of



Adjustments


AdjustmentsLegal


Other Reserves and

Retained Earnings



I Balance at the end of the previous year - 31 December 2013 500.000.000 -- 11.454.747 -- -- 45.293.051 7.161.457 71.411.204 66.403.111 (48.878.904) 652.844.666II - Change in Accounting Standards -- -- -- -- -- -- -- -- -- -- --III - Restated balances (I+II) -1 January 2014 500.000.000 -- 11.454.747 -- -- 45.293.051 7.161.457 71.411.204 66.403.111 (48.878.904) 652.844.666A- Capital increase (A1+A2) -- -- -- -- -- -- -- -- -- -- --


B- Purchase of own shares -- -- -- -- -- -- -- -- -- -- --C- Gains or losses that are not included in the statement of income -- -- -- -- -- -- -- 512.603 -- -- 512.603D- Change in the value of financial assets 11,15 -- -- 23.745.552 -- -- -- -- -- -- -- 23.745.552E- Currency translation adjustments -- -- -- -- -- -- -- -- -- -- --F- Other gains or losses -- -- -- -- -- -- -- -- -- -- --G- Inflation adjustment differences -- -- -- -- -- -- -- -- -- -- --H- Net profit for the period -- -- -- -- -- -- -- -- 74.592.102 -- 74.592.102I - Dividends paid -- -- -- -- -- -- -- -- -- -- --J - Transfers to reserves 15 -- -- -- -- -- 1.706.788 548.583 1.882.695 (66.403.111) 62.265.045 --IV - 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 74.592.102 13.386.141 751.694.923




Consolidated Statement of Cash FlowFor the Year Ended 31 December 2014Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1(Currency: Turkish Lira (TL))


Note


31 December 2014

AuditedPrior Period

31 December 2013A - CASH FLOWS FROM OPERATING ACTIVITIES

1- Cash provided from insurance activities 3.153.798.374 2.854.861.8342- Cash provided from reinsurance activities -- 6.871.2273- Cash provided from individual pension business -- --4- Cash used in insurance activities (2.924.054.056) (2.501.075.344)5- Cash used in reinsurance activities (6.560.002) (1.222.563)6- Cash used in individual pension business -- --7- Cash provided by operating activities 223.184.316 359.435.1548- Interest paid -- --9- Income taxes paid 19 (22.930.452) 980.23310- Other cash inflows 26.050.558 50.333.60911- Other cash outflows (37.055.680) (70.513.485)12-Net cash provided by operating activities 189.248.742 340.235.511

B - CASH FLOWS FROM INVESTING ACTIVITIES1- Proceeds from disposal of tangible assets -- 1.823.5002- Acquisition of tangible assets 6, 8 (21.111.793) (47.756.100)3- Acquisition of financial assets 11 (541.175.656) (714.083.260)4- Proceeds from disposal of financial assets 865.215.792 431.437.0295- Interests received (142.557.704) 89.565.1846- Dividends received 10.000.000 8.000.0007- Other cash inflows 62.448.109 198.407.8798- Other cash outflows (205.552.139) (37.769.638)9- Net cash provided by investing activities 27.266.609 (70.375.406)

C- CASH FLOWS FROM FINANCING ACTIVITIES1- Equity shares issued -- --2- Cash provided from loans and borrowings -- --3- Finance lease payments -- --4- Dividends paid -- --5- Other cash inflows -- --6- Other cash outflows -- --7- Net cash used in financing activities -- --

D- EFFECT OF EXCHANGE RATE FLUCTUATIONS ON CASH AND CASH EQUIVALENTS 1.701.066 31.224.213E- Net increase in cash and cash equivalents 218.216.417 301.084.318F- Cash and cash equivalents at the beginning of the year 14 825.512.807 524.428.489G- Cash and cash equivalents at the end of the year 14 1.043.729.224 825.512.807




Consolidated Profit DistributionFor the Year Ended 31 December 2014Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1(Currency: Turkish Lira (TL))


Note


31 December 2014


31 December 2013(**)

I. PROFIT DISTRIBUTION1.1. CURRENT YEAR PROFIT (*) 94.279.437 66.814.1611.2. TAX AND FUNDS PAYABLE (21.081.960) --

1.2.1. Corporate Income Tax (Income Tax) (21.081.960) --1.2.2. Income tax deduction -- --1.2.3. Other taxes and Duties -- --

A NET PROFIT (1.1 - 1.2) 73.197.477 66.814.1611.3. PREVIOUS PERIOD LOSSES (-) -- 63.981.1321.4. FIRST LEGAL RESERVE 3.659.874 141.6511.5. STATUTORY FUND (-) -- --B NET PROFIT DISTRIBUTION [(A-(1.3 + 1.4 + 1.5)] 69.537.603 2.691.3781.6. FIRST DIVIDEND TO SHAREHOLDERS (-) -- --


1.7. DIVIDEND TO PERSONNEL (-) -- --1.8. DIVIDENDS TO BOARD OF DIRECTORS (-) -- --1.9. SECOND DIVIDEND TO SHAREHOLDERS (-) -- --


1.10. SECOND LEGAL RESERVE (-) -- --1.11. STATUTORY RESERVES (-) -- 269.1381.12. EXTRAORDINARY RESERVES -- 2.422.2401.13. 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 -- --3.2. HOLDERS OF SHARES (%) -- --3.3. HOLDERS OF PREFERRED SHARES -- --3.4. HOLDERS OF PREFERRED SHARES (%) -- --IV. DIVIDEND PER SHARE -- --4.1. HOLDERS OF SHARES -- --4.2. HOLDERS OF SHARES (%) -- --4.3. HOLDERS OF PREFERRED SHARES -- --4.4. HOLDERS OF PREFERRED SHARES (%) -- --

(*) Capital Markets Board’s no.2014/2 in the Weekly Bulletin “Profit Distribution Statement Preparation Guide” in accordance with the profit distribution are based on the consolidated profit figure. Profit for the year December 31, 2014, no.5 of the Corporate Tax Law than 75% of their income from investments in associates and real estate sales pursuant to the shareholders’ equity under “Profit not subject to distribution” account the amount of 1.394.625 TL allocated for follow-up taken into consideration.(**) Profit distribution table has not been filled yet due to profit distribution proposal for the year 2014 has not prepared by the Board of Directors.(***) The figures of 2013 is filled with the data which is “According to Legal Records” belongs to the Profit Distribution.


ANADOLU ANONİM TÜRK SİGORTA ŞİRKETİ Notes to the Consolidated Financial Statements As at 31 December 2014Convenience Translation of Financial Statements and Related Disclosures and Footnotes Originally Issued in Turkish, See Note 2.1.1(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 2014, the shareholder having indirect control over the shares of Anadolu Anonim Türk Sigorta Şirketi (“the Company”) is Türkiye İş Bankası A.Ş. (“İş Bankası”).

Shareholder





Milli Reasürans T.A.Ş. 286.550.106 57,31 286.550.106 57,31Other 213.449.894 42,69 213.449.894 42,69Paid 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, health, motor vehicles, air vehicles, water vehicles, transportation, fire and natural disasters, general loss, credit, financial losses, and legal protection.

As at 31 December 2014, the Company serves through, 2.485 authorized agencies and 91 unathorized agencies (31 December 2013: 2.468 authorized agencies and 83 unathorized agencies) of which, 2.576 agencies (31 December 2013: 2.551 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 in their own specific laws and regulations for the 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:


Senior level managers 7 8Directors 37 38Intermediate directors 3 3Officers 142 128Contracted personnel 799 760Total 988 937




1.6 Wages and similar benefits provided to the senior management

For the year ended 31 December 2014, wages and similar benefits provided chairman is amounting to TL 1.034.290 TL (31 December 2013: 948.790 TL), senior management 3.915.203 TL (31 December 2013: 3.918.307 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 ŞirketiRegistered address of the head office: Rüzgarlıbahçe Mahallesi, Kavak Sokak, No:3134805 Kavacık /İstanbulThe 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.


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’’).

Although the 4th standard of the Turkish Accounting Standards Board (“TASB”) for the ‘Insurance contracts’ became effective on 25 March 2006 for the accounting periods that begin on or after 31 December 2005, it is stated that TFRS 4 will not be implemented at this stage since the second phase of the International Accounting Standards Board project about the insurance contracts has not been completed yet. In this context, “Communiqué on Technical Reserves for Insurance, Reinsurance and Individual Pension Companies and the Related Assets That Should Be Invested Against Those Technical Reserves” (“Communiqué on Technical Reserves”) is published in the Official Gazette dated 7 August 2007, numbered 26606 and became effective on 1 January 2008. Subsequent to the publication of the Communiqué on Technical Reserves, some other circulars and sector announcements which contain explanations and regulations related to application of the Communiqué on Technical Reserves are published. Accounting policies applied for the insurance contracts based on these communiqué, circulars and other sector announcements are summarized on their own captions in the following sections

Accounting for subsidiaries, associates and joint ventures is regulated with 28 December 2007 dated and 2007/26 numbered “Circular Related to the Accounting of Subsidiaries, Associates and Joint Ventures”, issued by the Turkish Treasury. It is stated that, the companies will continue to apply the principles of the related standards of TFRSs for the accounting of subsidiaries, associates and joint venture until the publication of another regulation on this issue by the Turkish Treasury. “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 (4th repeat) Official Gazette, constituted the basis of consolidation to be effective on the dates that circular specifies.

Additional paragraph for convenience translation to English

The differences between accounting principles, as described in the preceding paragraphs, and the accounting principles generally accepted in countries, in which the accompanying consolidated financial statements are to be distributed, and International Financial Reporting Standards (“IFRS”), may have significant influence on the accompanying consolidated financial statements. Accordingly, the accompanying consolidated financial statements are not intended to present the financial position and results of operations in accordance with the accounting principles.

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 2014, non-monetary assets and liabilities and items included in shareholders’ equity including paid-in capital recognized or recorded before 1 January 2005 are measured as restated to 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 1 January 2005 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.

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

There is not any change in accounting estimates or determined errors in current year. Critical accounting judgements used in applying the Company’s accounting policies are explained in Note 3 - Critical accounting estimates and judgments in applying accounting policies.

2.2 Consolidation

“Circular Related to the Preparation of the Consolidated Financial Statements of Insurance, Reinsurance, and Individual Pension Companies” issued by the 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.

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.

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

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

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

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

Depreciation is 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 AssetsEstimated Useful Lives

(years)Depreciation

Rates (%)Buildings 50 2,0Machinery and equipments 3 - 16 6,3 - 33,3Furniture and fixtures 4 - 16 6,3 - 25,0Vehicles 5 20,0Other tangible assets (including leasehold improvements) 5 - 10 10,0 - 20,0Leased 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.

Investment properties are measured initially at cost including transaction costs.

Subsequent to initial recognition, the Company measured all investment properties based on the cost model in accordance with the cost model for property and equipment (i.e. at cost less accumulated depreciation and less impairment losses if any).




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. 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.

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 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.

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 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.

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.

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 2014 and 31 December 2013, the share capital and ownership structure of the Company are as follows:

Name






Sources of capital increases during the period

The company has not performed capital increase as at 31 December 2014 . (31 December 2013: None).

Privileges on common shares representing share capital

As at 31 December 2014, the issued share capital of the Company is TL 500.000.000 (31 December 2013: 500.000.000 TL).

As at 31 December 2014, the issued share capital of the Company is TL 500.000.000 (31 December 2013: TL 500.000.000) and the share capital of the Company consists of 50,000,000,000 (31 December 2013: 50,000,000,000 shares) issued shares with TL 0.01 nominal value each. The share capital is represented by 150 Group A shares of TL 0,01 each.




Registered capital system in the Company

The Company has accepted the registered capital system. As of 31 December 2014, the Company’s registered capital is TL 700.000.000 (31 December 2013: 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.

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 accordance with the tax legislation, tax losses can be carried forward to offset against future taxable income for up to five years. As at 31 December 2014 The Company has not deductible tax losses. (31 December 2013: 3.664.725 TL).

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

Deferred taxes

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

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

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

Transfer pricing

In Turkey, the transfer pricing provisions have been stated under the Article 13 of Corporate Tax Law with the heading of “disguised profit distribution via transfer pricing”. The General Communiqué on disguised profit distribution via Transfer Pricing, dated 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 Türk Sigorta Şirketi Memurları Emekli Sandığı (“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 2014. The principles and applications of the transfer will be determined by the Decree of the Council of Ministers separately.

On the other hand, the application made on 19 June 2008 by the Republican People’s Party to the Constitutional Court for the annulment and motion for stay of some articles, including the first paragraph of the provisional article 20 of the Law, which covers provisions on transfers, was rejected in accordance with the decision taken at the meeting of the afore-mentioned court on 30 March 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 computation of the liability is based upon the retirement pay ceiling announced by the Government. The applicable ceiling amount as at 31 December 2014 is TL 3.438 (31 December 2013: 3.254 TL) .

In Accordance IAS 19 which published by KGK dated March 12,2013 is about “Benefits Employee Accounting Standard” and defined by beginning from December 31,2012 net defined benefit liability of the actuarial gains and losses arising on re-measurement should be recognized in other comprehensive income under shareholders’ equity and this effect should be applied retrospectively. The company started to account current actuarial gains and losses under equity (other profit reserves) due to the fact that prior period actuarial gains and losses have remained below the materiality

The amended TAS 19 “Employee Benefits” is effective for annual periods beginning on or after 1 January 2013, with earlier application permitted. With very few exceptions retrospective application is required. Numerous changes or clarifications are made under the amended standard. Among there numerous amendments, the most important changes are removing the corridor mechanism and making the distinction between short-term and other long-term employee benefits based on expected timing of settlement rather than employee entitlement. The company, couldn’t recognized previous years actuarial gains and losses under the equity due to the related amount is under the materiality but the current year actuarial gains and losses is recognized at the other reserves in equity.

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 2014 and 31 December 2013 are as follows:

31 December 2014 31 December 2013Discount rate %4,46 %3,61Expected rate of salary/limit increase %4,37 %6,37Estimated employee turnover rate %6,29 %7,11

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




Other benefits

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

2.20 Provisions

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

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

2.21 Revenue recognition

Written premiums and claims paid

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

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

Subrogation, salvage and quasi income

According to the Circular 2010/13 dated 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 insure. 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 26.118.178 (31 December 2013: 25.286.057 TL) subrogation receivables and recorded 30.648.790 TL (31 December 2013: 29.179.630 TL) (Note 12) net subrogation and salvage receivables under receivables from main operations. The Company provided allowance for uncollected subrogation receivables amounting to TL 7.677.067 (31 December 2013: 9.475.078 TL) (Note 12) in accordance with circular.




For the year ended 31 December 2014 and 2013, salvage and subrogation collected are as follows:

31 December 2014 31 December 2013Motor Vehicles 255.938.892 198.341.171Third Party liability for motor vehicles (MTPL) 4.894.794 5.275.881Transportation 2.556.620 2.002.200Fire and natural disaster 1.951.328 1.647.652Water Vehicles 1.087.073 751.675Accident 452.519 548.899General Losses 248.943 85.598General Responsibility 129.658 22.584Air Vehicles 16.861 --Credit 2.410 355.772Legal Protection (22.011) 22.461Health -- 21.104Total 267.257.087 209.074.997

As at 31 December 2014 and 31 December 2013, accrued subrogation and salvage income per branches is as follows:

31 December 2014 31 December 2013Motor Vehicles 29.805.959 27.506.620Third Party liability for motor vehicles (MTPL) 213.733 1.450.379Water Vehicles 34.052 --Fire and natural disaster 397.028 146.400Transportation 181.347 64.907General Losses 16.671 10.291Accident -- 1.033Total 30.648.790 29.179.630

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.

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.

The Company did not perform dividend distribution in 2013 and 2014.

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 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 1.491.252.563 (31 December 2013: 1.422.324.312 TL) and reinsurer share in reserve for unearned premiums amounting TL 294.929.264 (31 December 2013: 290.028.419 TL) . Furthermore, reserve for unearned premiums includes Social Security Institution (“SSI”) share amounting to TL 36.692.792 (31 December 2013: 34.755.134 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.

According to the “Communiqué on Amendments to Communiqué on Technical Reserves for Insurance, Reinsurance and Pension Companies and the Related Assets That Should Be Invested Against Those Technical Reserves” published in Official Gazette no 27655 dated 28 July 2010 and “Communiqué on Technical Reserves and Circular on Actuarial Chain Ladder Method” dated 20 September 2010 and numbered 2010/12, it is stated that the difference between the result of the actuarial chain ladder method and reported but not settled (IBNR calculation by ACLM method) is compared to test IBNR claims and greater amount is recorded to financial statements are accepted as IBNR claims. Requirement on test IBNR calculation is removed per Communiqué on Amendments to Aforementioned Communiqué is published in Official Gazette no 28356 17 July 2012 dated. It is stated that amount, content and implementation principals of incurred but not reported claims should be determined according to IBNR calculation by ACLM method specified by Turkish Treasury or other methods determined by Turkish Treasury.

As at 1 January 2012, 100% of the calculated negative IBNR balances per each insurance branch are taken into calculation in accordance with the Circular issued by the Turkish Treasury dated 26 December 2011 and numbered 2011/23. Accrued salvage, subrogation and similar income is taken into calculation with collections in ACLM method.

The Company recorded 100% of the IBNR calculated by ACLM method with additional provision explained below amounting to TL 327.611.024 (31 December 2013: 193.676.094 TL) to the unconsolidated financial statements as IBNR and TL 17.969.121 (31 December 2013: 7.596.560 TL) as reinsurer’s share of IBNR.

In Accordance with the Circular issued by the Turkish Treasury dated 2010/12 and 2010/16, the Company eliminated severe damages by using Box-Plot method to make more homogeneous calculation in ACML.




Also, according to Circular Article 7 issued in 2010/12, total number of files contained in the main branch, excluding the health branch of the total number of files no more than one thousand of damage or major damage under 300 remaining branches can be done by actuary

According to Treasury Circular 2010/16, the amounts with ACML determined the minimum amount of provision. If Amounts which are determined the company’s other tools or actuarial studies shows the company’s statu better than methods recommended by the Treasury, the company reflect amount of provision which provided higher than Treasury to financial statements. In accordance with these judgments, as a result of actuarial studies, the Company made IBNR provision amounts to total TL 11.069.337 (31 December 2013: TL 4.831.998) which are TL 858.216 in branch of Health, TL 6.190.791 in branch of Water Vehicles, TL 2.859.830 in branch of Air Craft Responsibility, TL 1.160.500 in branch of Credit.

In accordance with the “Sector Announcement Related to Updating Past Outstanding Claim Amounts for IBNR Calculation” dated 17 June 2013 and numbered 2013/13 and the Company’s actuary decision starting from 30 June 2014, the Company updated provision for outstanding claims for general liability branch.

IBNR amounts which obtained results of updates provision for outstanding claims and uncorrected version in the ACLM triangular series are TL 417.681.075. In accordance with Circular no. 2011/1, the Company corrected updated provision for outstanding claims backwards to avoid deterioration of the data series in the history of the triangle ACLM. As 31 December 2014, IBNR figures for obtained this correction is TL 114.990.730. This amount is accounted in the Company’s financials.

ACLM to be used is announced with “Communiqué on Technical Reserves” which is issued by the Turkish Treasury on 20 September 2010, Insurance and reinsurance companies are allowed to use five different methods which are “Standard Chain, Claim/Premium, Cape Code, Frequency/Volume and Munich Chain Ladder” to make ACLM calculations. The Company’s method selections for each branch are presented below.

In accordance with the Circular of the Turkish Treasury No: 2013/8 dated 5 April 2013 “Circular on Actuarial Chain Ladder Method”, according to the Circular numbered 2010/12, the ACLM calculation methods start to be changed at the end of 2013 that can be started as of first quarter of 2013 if minimal fluctuation between the periods is wanted. Accordingly, in Discretionary Fiscal Responsibility branch, for the purpose of additional IBNR need to be aimed to determine actuarial forecast works by the Company actuary for compatible with the branch’s ACML calculation method has been changed as of 30 September 2013 and “Munich Chain” method was disused to “Standard Chain” method was started to carry out. As 30 September 2014, started to use ‘Standard’ instead of Münich Chain’.

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 2014 31 December 2013Motor vehicles Standard Chain Ladder Munich ChainWater vehicles Standard Chain Ladder Standard Chain LadderThird party liability for motor vehicles (MTPL) Cape Code Munich ChainThird party liability Standard Chain Ladder Standard Chain LadderThird party liability for air vehicles Standard Chain Ladder Standard Chain LadderFire and natural disasters Munich Chain Ladder Munich ChainAir crafts Standard Chain Ladder Standard Chain LadderAccident Standard Chain Ladder Standard Chain LadderGeneral losses Standard Chain Ladder Munich ChainFinancial losses Standard Chain Ladder Standard Chain LadderHealth Standard Chain Ladder Standard Chain LadderTransportation Standard Chain Ladder Standard Chain LadderCredit Standard Chain Ladder Standard Chain LadderLegal protection Standard Chain Ladder Standard Chain LadderGeneral liability Cape Code Munich Chain




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 75.260.122 (31 December 2013: TL 53.749.627) as IBNR and 9.912.780 TL (31 December 2013: TL 6.764.302) as reinsurer’s share of IBNR is excluded from outstanding claims reserve balance.

The calculated winning ratio of the Company as at 31 December 2014 is within %0 -%100 (31 December 2013: %0-%35). Winning ratios used in and amounts decreased from provision for outstanding claims are as follows:

31 December 2014 BranchWinning Ratios

UsedGross Amount

DecreasedNet Amount

Decreased

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

31 December 2013 BranchWinning Ratios

UsedGross Amount

DecreasedNet Amount

Decreased

Third party liability for motor vehicles (MTPL) %17 27.348.214 26.167.440General responsibility %25 15.096.889 14.288.654Fire and natural disasters %17 6.386.641 2.789.609Motor vehicles %18 2.065.493 1.977.160Transportation %11 361.329 333.118General losses %17 1.153.064 515.357Water vehicles %25 973.319 569.692Accident %18 357.604 337.221Legal protection %16 7.074 7.074Total 53.749.627 46.985.325

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 Company is classified total of TL 2.452.947 which includes new calculation difference over premiums written under compulsory motor third party liability insurance contracts between 25 February 2011 - 26 August 2011 per “Circular Stated Principals on Implementation Related to Collection of Health Service Fees in Connection with Traffic Accidents” stated by the Turkish Treasury as “Payable to SSI”.

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 1.153.501 (31 December 2013: TL 5.721.687) 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 2014.

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, 2013. 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 52.687.216 (31 December 2013: TL 22.489.032) and unexpired risk amounting of reassurance to TL 12.307.870 (31 December 2013: TL 9.370.659) in the accompanying unconsolidated financial statements

As at 31 December 2014, reserve for unexpired risks at the beginning of the period is revised according to calculation method used in the current period in order to determine consistent claims /premium ratio.




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.

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 60.549.876 in the accompanying consolidated financial statements (31 December 2013: 44.579.840 TL).

Net losses (after reinsurance) resulted from earthquake occurred in Van amounting to TL 7.101.831 (31 December 2013: 7.101.831 TL) are decreased from prior periods’ equalization provision.

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.


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 2014. TFRS 9 - Financial instruments, is published by International Accounting Standards Board in November 2009 as a part of a wider project that aims to bring new regulations to replace TAS 39 - Financial Instruments: Recognition and Measurement published by the Turkish Accounting Standards Board on Official Gazette dated 27 April 2010 and numbered 27564.

Developing a new standard for the financial reporting of financial assets that is principle-based and less complex is aimed by this project. 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.

An entity shall apply TFRS 9 for annually years beginning on or after 1 January 2015. An earlier application is permitted. If an entity adopts this TFRS in its financial statements for a period beginning before 1 January 2013, then prior periods are not needed to be restated.

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

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 coinsurers 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.


The Company’s gross and net insurance risk concentrations (after reinsurance) in terms of insurance branches are summarized as below:





Motor vehicles liability (MTPL) 536.683.814 (16.321.658) 520.362.156General liability 302.883.129 (35.816.816) 267.066.313Fire and natural disasters 126.898.890 (67.749.236) 59.149.654General losses 68.615.172 (41.639.167) 26.976.005Motor vehicles 83.781.790 1.274.635 85.056.425Water vehicles 35.733.940 (18.673.835) 17.060.105Transportation 19.805.194 (13.706.887) 6.098.307Air crafts 28.943.534 (20.172.876) 8.770.658Financial losses 17.017.918 (15.402.033) 1.615.885Accident 15.096.696 (1.291.762) 13.804.934Air crafts liability 4.955.110 (59.627) 4.895.483Health 1.936.936 (53.446) 1.883.490Credit 759.191 (186.986) 572.205Legal protection 876.450 31 876.481Total 1.243.987.764 (229.799.663) 1.014.188.101








Motor vehicles liability (MTPL) 392.957.242 (15.116.022) 377.841.220General liability 145.694.331 (14.833.210) 130.861.121Fire and natural disasters 75.030.329 (31.394.357) 43.635.972Motor vehicles 57.404.411 1.789.780 59.194.191General losses 55.319.765 (33.483.122) 21.836.643Air crafts 24.940.859 (15.814.715) 9.126.144Water vehicles 22.199.757 (8.976.371) 13.223.386Transportation 22.053.555 (11.185.251) 10.868.304Accident 16.393.181 (430.548) 15.962.633Financial losses 7.323.143 (5.559.770) 1.763.373Air crafts liability 1.482.083 (312.944) 1.169.139Health 1.352.782 (18.250) 1.334.532Credit 1.228.470 34.052 1.262.522Legal protection 448.905 (56.773) 392.132Total 823.828.813 (135.357.501) 688.471.312

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

Gross and net insurance risk concentrations of the insurance contracts (after reinsurance) based on geographical regions are summarized as below:





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






(*) Total claims liability includes estimated compensation amounts for realized claims. Gross incurred but not reported claims amounting to TL 327.611.024TL t 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.








Turkey 645.190.292 (134.181.200) 511.009.092Europe 1.969.039 (264.418) 1.704.621Asia 293.765 (11.963) 281.802Africa 190.977 (67.662) 123.315Total 647.644.073 (134.525.243) 513.118.830

Total claims liability 31 December 2013





(*) Total claims liability includes estimated compensation amounts for realized claims. Gross incurred but not reported claims amounting to TL 193.676.094 additional provision for outstanding claims per adequacy test amounting to TL 36.258.273 outstanding claims of treaty activities which could not be distributed to geographical regions and the contingent amounts deducted from claims reserve amounting to TL (53.749.627) are excluded from the table.

Given insurance collateral amounts in respect to branches


Motor vehicles liability (MTPL) 4.283.371.745.693 4.511.111.250.942Health 263.459.916.521 195.943.025.085Fire and natural disasters 254.952.055.702 221.876.822.746Accident 35.427.794.810 33.131.190.355General losses 41.614.148.232 41.043.206.431General liability 63.746.730.255 49.463.100.289Motor vehicles 40.753.693.279 31.063.663.602Transportation 46.432.952.597 21.981.060.492Water vehicles 17.529.066.354 14.968.174.500Air crafts 1.651.393.745 979.655.702Legal protection 38.500 --Total 5.048.939.535.688 5.121.561.150.144




4.2 Management of financial risk

Introduction and overview

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

• credit risk• liquidity risk• market risk

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

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

Credit Risk

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

• Cash at banks• Other cash and cash equivalents• Available for sale financial assets (except equity-shares) • Financial assets held for trading (except equity-shares)• Held to maturity financial asset• Premium receivables from policyholders • 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.


Cash and cash equivalents (Note 14) 1.606.182.886 1.154.688.944Receivables from main operations (Note 12) 797.454.113 773.925.226Financial assets (Note 11) (*) 539.941.067 542.222.098Reinsurer share in provision for outstanding claims (Note 10), (Note 17) 229.799.663 135.357.501Prepaid taxes and funds (Note 19) 1.848.492 9.659.923Other receivables (Note 12) 3.595.183 2.968.734Other prepaid expenses (Note 10) 2.733.430 1.086.704Other miscellaneous current assets (Not 12) 1.895.592 735.558Due from related parties (Note 12) -- 72.324Total 3.183.450.426 2.620.717.012

(*) Equity shares amounting to TL 104.126.890 are not included (31 December 2013: 88.786.648 TL).

As at 31 December 2013 and 31 December 2012, the aging of the receivables from main operations is as follows:

31 December 2014 31 December 2013Gross Amount Provision Gross Amount Provision

Not past due 583.917.123 -- 565.073.223 --Past due 0-30 days 89.759.753 -- 77.880.279 --Past due 31-60 days 13.190.866 -- 12.545.113 --Past due 61-90 days 3.147.750 -- 4.096.093 --More than 90 days (*) 116.737.854 (113.380.507) 116.140.120 (102.829.158)Total (**) 806.753.346 (113.380.507) 775.734.828 (102.829.158)

(*) 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 806.753.346 TL (31 December 2013: 775.734.828 TL) presented under receivables from insurance operations in the financial statements, this amount also includes TL 81.109.551 (31 December 2013: 81.315.004 TL) of untransferred amount collected by intermediaries and TL 30.648.790 (31 December 2013: 29.179.630 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 7.677.067 (31 December 2013: 9.475.078 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:


Provision for receivables from insurance operations at the beginning of the period 102.829.158 87.996.612Collections during the period (Note 47) (1.071.425) (908.822)Impairment losses provided during the period (Note 47) 2.518.673 1.503.704Impairment losses provided for subrogation - salvage receivables during the period (Note 47) 9.104.101 14.237.664Provision for receivables from insurance operations at the end of the period 113.380.507 102.829.158




Liquidity risk

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

Management of the liquidity risk

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

Maturity distribution of monetary assets and liabilities:

31 December 2014Carrying amount Up to 1 month 1 to 3 months 3 to 6 months 6 to 12 months Over 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 43.855.877 248.492.451 272.013.141Receivables 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 consolidated financial statements whereas maturity distribution is presented according to projected payment dated in the above table.

31 December 2013Carrying amount Up to 1 month 1 to 3 months 3 to 6 months 6 to 12 months Over 1 year Unallocated

Cash and cash equivalents 1.153.712.216 552.341.090 585.163.978 16.207.148 -- -- --Financial assets 631.008.746 26.458.758 13.800.085 28.181.861 70.723.063 308.660.105 183.184.874Receivables from main operations 773.925.226 80.117.472 288.235.185 315.443.908 78.142.696 11.985.965 --Due from related parties 72.324 12.054 24.108 24.108 12.054 -- --Other receivables and current assets 3.234.708 656.067 1.312.134 936.264 330.243 -- --Other prepaid expenses 1.086.704 -- -- 1.086.704 -- -- --Total monetary assets 2.563.039.924 659.585.441 888.535.490 361.879.993 149.208.056 320.646.070 183.184.874

Insurance technical provisions (*) 688.471.312 105.907.915 211.815.830 80.988.022 68.551.187 221.208.358 --Payables arising from main operations 327.033.095 51.873.735 4.506.003 263.749.010 6.904.347 -- --Other liabilities 56.534.780 18.089.629 21.458.198 10.147.654 3.802.264 3.037.035 --Provisions for taxes and other similar obligations 27.491.024 27.491.024 -- -- -- -- --Provisions for other risks and expense accruals 36.731.263 -- 16.480.307 915.265 -- 19.335.691 --Total monetary liabilities 1.136.261.474 203.362.303 254.260.338 355.799.951 79.257.798 243.581.084 --

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




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:


currencies Total

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

Insurance technical provisions 91.396.977 24.659.552 691.344 116.747.873Payables arising from main operations 111.938.980 9.454.831 -- 121.393.811Total 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


currencies Total

Receivables from main operations 146.548.975 40.037.398 1.091.043 187.677.416Financial assets -- 9.115.193 -- 9.115.193Cash and cash equivalents 119.962.922 3.084.146 1.036.139 124.083.207Total foreign currency assets 266.511.897 52.236.737 2.127.182 320.875.816

Insurance technical provisions 104.016.906 21.350.893 1.666.077 127.033.876Payables arising from main operations 127.927.163 26.396.067 948.835 155.272.065Total foreign currency liabilities 231.944.069 47.746.960 2.614.912 282.305.941

Net financial position 34.567.828 4.489.777 (487.730) 38.569.875

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 2014 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 2014.




Exposure to currency risk

Foreign currency rates used for the translation of foreign currency denominated assets and liabilities as at 31 December 2014 and 31 December 2013 are as follows:

US Dollar Euro

31 December 2014 2,3189 2,820731 December 2013 2,1343 2,9365

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.


US Dollar 8.758.000 8.758.000 3.456.783 3.456.783Euro 2.495.767 2.495.767 448.978 448.978Other 568.563 568.563 (48.773) (48.773)Total, net 11.822.330 11.822.330 3.856.988 3.856.988

(*) 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 2014

31 December 2013

Financial assets with fixed interest rates:Financial assets held for trading - reverse repos (Note 11) 5.887.281 26.447.255Cash at banks (Note 14) (*) 1.350.525.371 885.045.104Available for sale financial assets - Private debt securities (Note 11) -- 122.041.060Cash deposited to insurance and reinsurance companies (Note 12) 6.739.965 5.128.627Available for sale financial assets - Government bonds (Note 11) 260.405.699 191.749.446Financial assets with variable interest rates:Held to maturity investments - Government bonds (Note 11) 73.670.047 94.501.549Available for sale financial assets - Government bonds (Note 11) 11.198.005 11.180.763Financial assets held for trading - Government bonds (Note 11) 900.017 914.787Available for sale financial assets - Private debt securities (Note 11) 19.993.767 989.012

(*) Demand deposits amounting to TL 6.208.075 are not included .(31 December 2013: 16.793.473 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 2014 and 2013 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.

31 December 2014


100 bp increase

100 bp decrease

100 bp increase

100 bp decrease



31 December 2013


100 bp increase

100 bp decrease

100 bp increase

100 bp decrease



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. Held to maturity investments with a carrying amount of TL 73.670.047 (31 December 2013: 94.501.549 TL) are measured at amortised cost and their fair value amounting to TL 74.133.508 TL (31 December 2013: 93.990.092 TL) as at 31 December 2014.

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.




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):


Financial assets held for trading (303.683) (303.683) (266.316) (266.316)Available for sale financial assets -- (9.717.561) -- (8.196.227)Total, net (303.683) (10.021.244) (266.316) (8.462.543)

(*) 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:


Financial assets:Financial assets held for trading (Note 11) 134.054.733 -- -- 134.054.733Available for sale financial assets (*) (Note 11) 432.428.727 -- 3.297.263 435.725.990Total financial assets 566.483.460 -- 3.297.263 569.780.723


Financial assets:Financial assets held for trading (Note 11) 85.630.648 -- -- 85.630.648Available for sale financial assets (*) (Note 11) 446.715.336 -- 3.297.263 450.012.599Total financial assets 532.345.984 -- 3.297.263 535.643.247

(*) As at 31 December 2014 securities that are not publicly traded and the determination of fair values could not be obtained reliably amounting to TL 617.187 have been measured at cost (31 December 2013: 863.950 TL).

31 December 2014

31 December 2013

Available for sale financial assets beginning of the period 3.297.263 3.272.355Valuation gain (valuation of financial assets account) -- 24.908Available for sale financial assets end of the period 3.297.263 3.297.263




Gains and losses from financial assets

Gains and losses recognized in the statement of income:31 December

201431 December

2013

Interest income from bank deposits 99.252.595 63.016.751Foreign exchange gains 59.970.980 52.709.177Income from investments in associates 19.032.156 16.941.187Income from debt securities classified as held to maturity financial investments 10.730.801 9.909.524Income from equity shares classified as available-for-sale financial assets 10.197.910 20.210.895Income from equity shares classified as trading financial assets 702.880 453.914Income from debt securities classified as available-for-sale financial assets 35.373.747 15.639.877Income from debt securities classified as held for trading financial assets 75.040 262.958Income from derivative transactions 205.678 212.931Income from investment funds 21.308.588 1.604.205Other 3.106.153 1.232.065Investment income 259.956.528 182.193.484

Loss from valuation of financial assets (3.509.979) (4.677.619)Foreign exchange losses (49.954.025) (28.804.896)Loss from derivative transactions (184.509) (99.585)Loss from disposal of financial assets (7.713.065) (13.581.516)Investment expenses - including interest (136.623) --Investment expenses (61.498.201) (47.163.616)

Financial gains and losses recognized in the statement of income, net 198.458.327 135.029.868

Financial gains and losses recognized in equity:31 December

201431 December

2013

Fair value changes in investments in associates (Note 15) 6.313.825 2.131.545Net gains transferred from statement of equity to the statement of income on disposal of available for sale financial assets (Note 15) (3.609.723) (2.723.732)Fair value changes in available-for-sale financial assets (Note 15) 21.041.450 (22.581.833)Gains and losses recognized in equity, net 23.745.552 (23.174.020)

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 847.030.553 as at 30 June 2014. As at 31 December 2014, 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

Health

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




Geographical segment

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


Fire and natural


1 January - 31 December 20141- Earned Premiums (Net of Reinsurer Share) 704.976.162 242.507.645 786.541.564 190.560.310 311.173.659 -- 2.235.759.3401.1- Written Premiums (Net of Reinsurer Share) 698.476.272 256.547.252 790.728.883 213.840.185 365.517.469 -- 2.325.110.0611.2- 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 -- 2.788.8093- Accrued Salvage and Subrogation Income 5.516.244 -- 5.561.204 918.516 163.266 -- 12.159.230Technical 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)


Income tax (13.685.863) (13.685.863)

Net loss 74.592.102

(*) 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.




Motor third party liability Health

Motor vehicles

Fire and natural


1 January - 31 December 20131- Earned Premiums (Net of Reinsurer Share) 493.420.390 199.257.307 721.082.517 149.968.441 262.060.515 -- 1.825.789.1701,1- Written Premiums (Net of Reinsurer Share) 631.464.481 212.148.766 775.368.149 163.108.778 285.125.833 -- 2.067.216.0071,2- Change in Reserve for Unearned Premiums (Net of Reinsurer Shares and Less the Amounts Carried Forward) (138.056.176) (12.891.459) (54.285.632) (13.140.337) (14.032.383) -- (232.405.987)1,3- Change in Reserve for Unexpired Risks (Net of Reinsurer Share and Less the Amounts Carried Forward) 12.085 -- -- -- (9.032.935) -- (9.020.850)2- Other Technical Income (Net of Reinsurer Share) 54.849 185.128 2.524.934 75.063 84.400 2.924.3743- Accrued Salvage and Subrogation Income 4.959.591 -- 7.752.323 637.426 1.646.858 14.996.198Technical Income (*) 498.434.830 199.442.435 731.359.774 150.680.930 263.791.773 -- 1.843.709.742

1- Incurred Losses (Net of Reinsurer Share) (428.640.496) (156.834.895) (479.833.052) (73.474.442) (207.304.119) -- (1.346.087.004)1,1- Claims Paid (Net of Reinsurer Share) (291.979.894) (156.751.764) (490.009.240) (68.674.051) (139.551.206) -- (1.146.966.155)1,2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward) (136.660.602) (83.131) 10.176.188 (4.800.391) (67.752.913) -- (199.120.849)2- Change in Other Technical Reserves (Net of Reinsurer Share and Less the Amounts Carried Forward) -- -- (2.087.392) (8.555.192) (1.780.007) -- (12.422.591)3- Operating Expenses (141.750.670) (36.294.964) (178.514.725) (43.655.601) (62.618.146) -- (462.834.106)4- Other Technical Provisions (13.428.446) (6.115.753) (15.995.101) (6.661.240) (2.507.510) -- (44.708.050)Technical Expense (583.819.612) (199.245.612) (676.430.270) (132.346.475) (274.209.782) -- (1.866.051.751)


Income tax (11.654.589) (11.654.589)

Net loss 66.403.111

(*) Investment income transferred to non-technical section from technical section amounting to TL 123,220,226 is not included.(**) Deferred tax income amounting TL 11,654,589 is presented as income tax.




6 Tangible assets


1 January 2014 Additions Disposals

31 December 2014

Cost:Investment properties (Note 7) 6.982.776 -- -- 6.982.776Buildings for own use 6.520.974 319.222 (51.463) 6.788.733Machinery and equipment 32.800.391 2.925.379 (1.171.752) 34.554.018Furniture and fixtures 11.331.085 444.331 -- 11.775.416Vehicles 1.285.983 383.160 (306.920) 1.362.223Other tangible assets (including leasehold improvements) 18.262.277 1.138.850 -- 19.401.127Leased tangible assets 4.166.354 -- -- 4.166.354

81.349.840 5.210.942 (1.530.135) 85.030.647Accumulated depreciation:Investment properties (Note 7) 3.578.553 139.655 -- 3.718.208Buildings for own use 1.795.812 131.780 (25.772) 1.901.820Machinery and equipment 23.879.216 3.198.899 (1.164.362) 25.913.753Furniture and fixtures 8.729.811 666.091 -- 9.395.902Motor vehicles 813.465 215.321 (255.057) 773.729Other tangible assets (including leasehold improvements) 3.593.702 3.259.748 -- 6.853.450Leased tangible assets 4.166.105 199 -- 4.166.304

46.556.664 7.611.693 (1.445.191) 52.723.166






1 January 2013 Additions Disposals

31 December 2013

Cost:Investment properties (Note 7) 6.982.776 -- -- 6.982.776Buildings for own use 6.387.729 1.222.795 (1.089.550) 6.520.974Machinery and equipment 26.268.960 6.531.431 -- 32.800.391Furniture and fixtures 9.031.553 2.299.532 -- 11.331.085Vehicles 1.299.851 183.855 (197.723) 1.285.983Other tangible assets (including leasehold improvements) 4.038.677 14.977.547 (753.947) 18.262.277Leased tangible assets 4.166.354 -- -- 4.166.354

58.175.900 25.215.160 (2.041.220) 81.349.840Accumulated depreciation:Investment properties (Note 7) 3.438.898 139.655 -- 3.578.553Buildings for own use 2.221.271 116.975 (542.434) 1.795.812Machinery and equipment 20.908.142 2.971.074 -- 23.879.216Furniture and fixtures 8.495.404 234.407 -- 8.729.811Motor vehicles 764.551 232.810 (183.896) 813.465Other tangible assets (including leasehold improvements) 3.255.088 648.138 (309.524) 3.593.702Leased tangible assets 4.165.906 199 -- 4.166.105

43.249.260 4.343.258 (1.035.854) 46.556.664


There is not any change in depreciation method in the current period.

There is not any mortgage over tangible assets of the Company as at 31 December 2014 and 31 December 2013.

7 Investments in associate

The Company’s net book value of 3.264.568 TL (31 December 2013: 3.404.223 TL) as shown in the valuation work performed by the fair value of investment properties is amount of TL 40.077.000.The fair value of real estate carried out by an independent valuation firm is authorized by the Capital Markets Board of Turkey. Rental income on investment properties were obtained TL 1.772.698 (31 December 2013: TL 1.698.492).




8 Intangible assets


1 January 2014 Additions Transfers Disposals

31 December 2014

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


1 January 2013 Additions Transfers Disposals 31 December 2013

Cost:Goodwill 16.250.000 -- -- 16.250.000Advances given for intangible assets 31.717.343 11.190.332 (21.885.303) (1.726.058) 19.296.314Other intangible assets 21.643.962 11.350.608 21.885.303 -- 54.879.873

69.611.305 22.540.940 -- (1.726.058) 90.426.187Accumulated amortization:Other intangible assets 15.125.600 12.488.554 -- -- 27.614.154

15.125.600 12.488.554 -- -- 27.614.154


9 Investments in associates

31 December 2014 31 December 2013Carrying

valueParticipation

rateCarrying

valueParticipation

rateAnadolu Hayat Emeklilik A.Ş. 123.261.711 %20,0 108.028.666 %20,0Investments in associates, net 123.261.711 108.028.666

Total financial assets (Note 4.2) 123.261.711 108.028.666

NameTotal

assetsShareholders’

equityRetained earnings

Profit for the period

Audited or not Period

Anadolu Hayat Emeklilik A.Ş. (consolidated financial statements) 10.157.734.455 616.308.553 12.090.039 95.160.780 Audited

31 December 2014

TL 19.032.156 of income is obtained from associates through equity accounted consolidation method (31 December 2013: TL 16.941.187) .




10 Reinsurance assets and liabilities

As at 31 December 2014 and 31 December 2013, outstanding reinsurance assets and liabilities of the Company in accordance with existing reinsurance contracts are as follows:

Reinsurance assets 31 December 2014 31 December 2013

Reserve for unearned premiums, ceded (Note 17) 294.929.264 290.028.419Provision for outstanding claims, ceded (Note 4.2), (Note 17) 229.799.663 135.357.501Commission income accrual from reinsurers (Note 12) 1.250.015 1.086.704Cash deposited to reinsurance companies (Note 12) 6.739.965 5.128.627Reinsurers share in the provision for subrogation and salvage receivables 36.305 119.739Total 532.755.212 431.720.990

There is no impairment losses recognised for reinsurance assets.

Reinsurance liabilities 31 December 2014 31 December 2013

Payables to the reinsurers related to premiums written (Note 19) 188.610.275 230.767.903Deferred commission income (Note 19) 45.447.065 39.363.495Commission payables to the reinsurers related to written premiums (Note 23) 1.576.728 915.265Cash deposited by reinsurance companies (Note 19) 7.277.133 3.105.906Total 242.911.201 274.152.569

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


Premiums ceded during the period (Note 17) (605.617.965) (618.521.175)Reserve for unearned premiums, ceded at the beginning of the period (Note 17) (290.028.419) (218.883.986)Reserve for unearned premiums, ceded at the end of the period (Note 17) 294.929.264 290.028.419Premiums earned, ceded (Note 17) (600.717.120) (547.376.742)

Claims paid, ceded during the period (Note 17) 140.834.682 102.233.055Provision for outstanding claims, ceded at the beginning of the period (Note 17) (135.357.501) (89.440.431)Provision for outstanding claims, ceded at the end of the period (Note 17) 229.799.663 135.357.501Claims incurred, ceded (Note 17) 235.276.844 148.150.125

Commission income accrued from reinsurers during the period (Note 32) 60.026.011 51.944.012Deferred commission income at the beginning of the period (Note 19) 30.698.798 25.952.255Deferred commission income at the end of the period (Note 19) (32.107.489) (30.698.798)Commission income earned from reinsurers (Note 32) 58.617.320 47.197.469

Commission debt accrued to reinsurers (1.576.728) --Commission receivable accrued from reinsurers 1.250.015 1.086.704

Total, net (307.149.669) (350.942.444)




11 Financial assets

As at 31 December 2014 and 31 December 2013, the Company’s financial assets are as follows:


Available for sale financial assets 442.140.789 456.674.161Held to maturity financial assets 73.670.047 94.501.549Financial assets held for trading 134.054.733 85.630.648Impairment loss on available for sale financial assets (5.797.612) (5.797.612)Total 644.067.957 631.008.746

As at 31 December 2014 and 31 December 2013, the Company’s available for sale financial assets are as follows:


Value CostFair



Issued by ISGYO (Not 45) 14.360.000 14.360.000 14.713.703 14.713.703Issued by ISFIN 5.000.000 5.000.000 5.078.714 5.078.714Other 200.000 201.015 201.350 201.350

281.467.366 280.191.688 291.597.471 291.597.471


Issued by ISFIN (Not 45) 3.714.742.000 43.165.318 43.655.648 43.655.648Equity shares 56.198.951 82.023.168 106.887.670 106.887.670Impairment loss on equity shares -- -- (5.797.612) (5.797.612)

3.770.940.951 125.188.486 144.745.706 144.745.706






Value CostFair



Issued by İş Bankası (Note 45) 133.000.000 121.293.570 122.028.890 122.028.890Others 1.001.139 1.001.958 1.001.182 1.001.182

342.934.437 327.339.205 325.960.281 325.960.281


Issued by Is Portföy (Not 45) 4.089.046.000 42.399.932 38.792.780 38.792.780Equity shares 51.223.377 74.521.510 91.921.100 91.921.100Impairment loss on equity shares -- -- (5.797.612) (5.797.612)

4.140.269.377 116.921.442 124.916.268 124.916.268


As at 31 December 2013 and 31 December 2012, the Company’s financial assets held for trading are as follows:


Value CostFair



900.000 6.793.349 6.787.298 6.787.298


Founded by Iş Bankası (Note 45) 120.605.000 9.009.287 15.972.195 15.972.195Founded by Iş Portföy Yönetimi A,Ş,(Note 45) 7.272.463.818 89.847.008 95.938.343 95.938.343Founded by Işbank GmbH (Note 45) 90.131 7.804.000 12.320.065 12.320.065

Equity shares 2.287.783 4.085.272 3.036.832 3.036.832 110.745.567 127.267.435 127.267.435






Value CostFair



900.000 27.352.702 27.362.042 27.362.042


Founded by Iş Bankası (Note 45) 120.605.000 9.009.287 13.588.728 13.588.728Founded by Iş Portföy Yönetimi A,Ş,(Note 45) 2.780.723.919 30.305.300 32.901.525 32.901.525Founded by Işbank GmbH (Note 45) 90.131 7.804.000 9.115.193 9.115.193

Equity shares 2.287.783 4.085.272 2.663.160 2.663.16051.203.859 58.268.606 58.268.606


As at 31 December 2013 and 31 December 2012, the Company’s financial assets held to maturity are as follows:


Value CostFair

ValueCarrying

Value



Value CostFair



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 2014, equity shares classified as available for sale financial assets with a carrying amount of TL 3.914.450 are not publicly traded (31 December 2013: TL 4.161.213)

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 of impairment loss is recognised for equity shares classified as available for sale in the accompanying consolidated financial statements (31 December 2013: 5.797.612 TL).




Value increases in financial assets including equity shares classified as available for sale financial assets for the last 3 years (including tax effects):

Year

Change in value increase /

(decrease)Total increase

in value

2014 23.745.552 35.200.2992013 (23.174.020) 11.454.7472012 38.943.340 34.628.767

Movements of the financial assets during the period are presented below:

31 December 2014

(*) TradingAvailable

for saleHeld to

maturity TotalBalance at the beginning of the period 59.183.393 450.876.549 94.501.549 604.561.491Acquisitions during the period 90.450.000 450.725.656 -- 541.175.656Disposals (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 -- 33.791.991Change in amortized cost of the financial assets -- -- (2.085.660) (2.085.660)Bonus shares acquired -- 4.755.471 -- 4.755.471Balance 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.

31 December 2013

(*) TradingAvailable

for saleHeld to

maturity TotalBalance at the beginning of the period 42.051.074 218.238.305 89.590.740 349.880.119Acquisitions during the period 21.305.300 692.777.960 -- 714.083.260Disposals (sale and redemption) (2.742.832) (447.305.977) (796.600) (450.845.409)Change in the fair value of financial assets (Note 15) (1.430.149) (16.767.758) -- (18.197.907)Change in amortized cost of the financial assets -- -- 5.707.409 5.707.409Bonus shares acquired -- 3.934.019 -- 3.934.019Balance at the end of the period 59.183.393 450.876.549 94.501.549 604.561.491

(*) Amount of reverse repo to TL 26,447,255 (31 December 2012: TL 5,542,173) are excluded.




Financial assets blocked in favour of the Turkish Treasury as a guarantee for the insurance activities are as follows.


Value CostFair


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


Value CostFair


Available for sale financial assets (Note 17) 20.000.000 19.775.285 19.677.439 19.677.439Held to maturity financial assets (Note 17) 64.467.988 67.074.876 82.079.788 82.596.991Total 84.467.988 86.850.161 101.757.227 102.274.430

12 Loans and receivables

31 December 2014

31 December 2013

Receivables from main operations (Note 4.2) 797.454.113 773.925.226Other receivables (Note 4.2) 3.595.183 2.968.734Income prepaid expenses (Note 4.2), (Note 10) 2.733.430 1.086.704Other current assets (Note 4.2) 1.895.592 735.558Receivables from related parties (Note 4.2) -- 72.324Total 805.678.318 778.788.546

Short-term receivables 805.678.318 778.788.546Long and medium-term receivables -- --Total 805.678.318 778.788.546




As at 31 December 2014 and 31 December 2013, the details of the receivables from main operations are as follows:

31 December 2014

31 December 2013

Receivables from agencies, brokers and intermediaries 624.433.183 610.583.925 Salvage and subrogation receivables 30.648.790 29.179.630 Receivables from policyholders 33.242.694 35.367.913 Long term receivable which is bank guarantee and three months credit card 63.044.183 61.066.508 Total receivables from insurance operations, net 751.368.850 736.197.976

Receivables from reinsurance operations 47.022.365 42.073.701 Cash deposited to insurance and reinsurance companies (Note 4.2), (Note 10) 6.739.965 5.128.627 Provisions for receivables from insurance operations - subrogation receivables (7.677.067) (9.475.078) Doubtful receivables from insurance operations - subrogation receivables 86.645.265 77.541.164 Provisions for doubtful receivables from insurance operations - subrogation receivables (Note 4.2) (86.645.265) (77.541.164) Doubtful receivables from main operations - premium receivables 26.735.242 25.287.994 Provisions for doubtful receivables from main operations - premium receivables (Note 4.2) (26.735.242) (25.287.994) Receivables from main operations 797.454.113 773.925.226

As at 31 December 2014 and 31 December 2013, the details of mortgages and other guarantees for the Company’s receivables are presented below:

31 December 2014

31 December 2013

Mortgage notes 71.597.067 71.634.717Letters of guarantees 71.825.655 64.353.218Other guarantees 15.188.186 12.620.807Government bonds and treasury bills 2.976.479 2.939.585Total 161.587.387 151.548.327

Provisions for overdue receivables and receivables not due yet

a) Receivables under legal or administrative follow up (due): TL 26.735.242 (31 December 2013: 25.287.994 TL).

b) Provision for subrogation receivables under legal or administrative follow up: TL 94.322.332 TL (31 December 2013: 87.016.242 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 2014 31 December 2013At the end of

the period

At the beginning of

the period

At the end of

the period

At the beginning of

the period

Cash on hand 37.347 49.256 49.256 59.000Bank deposits 1.356.733.446 901.838.577 901.838.577 810.515.425Cheques given and payment orders (171.519) (1.025.984) (1.025.984) (1.104.472)Bank guaranteed credit card receivables with maturities less than three months 249.449.440 252.850.367 252.850.367 159.051.422Cash and cash equivalents in the balance sheet 1.606.048.714 1.153.712.216 1.153.712.216 968.521.375

Bank deposits - blocked (*) (Note 17) (223.171.410) (151.508.238) (151.508.238) (125.966.707)Time deposits with maturities longer than 3 months (335.567.238) (174.210.161) (174.210.161) (315.826.956)Interest accruals on banks deposits (3.580.842) (2.481.010) (2.481.010) (2.299.223)Cash and cash equivalents in the statement of

cash flows 1.043.729.224 825.512.807 825.512.807 524.428.489(*) As at 31 December 2014 and 31 December 2013 cash collateral kept in favour of the Turkish Treasury as a guarantee for the insurance activities.

As at 31 December 2014 and 31 December 2013, bank deposits are further analyzed as follows:

31 December 2014

31 December 2013

Foreign currency denominated bank deposits- time deposits 119.637.331 111.825.146- demand deposits 3.883.616 12.217.907

Bank deposits in Turkish Lira- time deposits 1.230.888.040 773.219.958- demand deposits 2.324.459 4.575.566

Bank deposits 1.356.733.446 901.838.577




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 2014, the issued share capital of the Company is TL 500,000,000 (31 December 2013: TL 500,000,000) and The Company unregistered Group A shares 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 2013: 50,000,000,000 shares) issued shares with TL 0.01 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 2013, 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 is classified as other capital reserves. and to also in 2013 amounting TL 647.763 reclassified to other capital reserves as a gain on sale of fixed assets and equity.


Other capital reserves at the beginning of the period 8.161.541 8.161.541Transfer from profit 647.763 --Other capital reserves at the end of the period 8.809.304 8.161.541

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:


Legal reserves at the beginning of the period 45.293.051 43.918.190Transfer from profit 1.706.788 1.374.861Legal reserves at the end of the period 46.999.839 45.293.051

Extraordinary reserves

The movements of extraordinary reserves are presented below:


Extraordinary reserves at the beginning of the period 19.723.583 20.564.428Transfer from profit 1.239.173 (840.845)Extraordinary reserves at the end of the period 20.962.756 19.723.583

Statutory reserves

The movements of statutory reserves are presented below:


Statutory reserves at the beginning of the period 7.161.457 9.737.625Transfer from profit 548.583 (2.576.168)Statutory reserves at the end of the period 7.710.040 7.161.457

Valuation of financial assets

Movement of fair value reserves of available for sale financial assets and associates are presented below:

31 December 2014 31 December 2013Valuation differences at the beginning of the period 11.454.747 34.628.767Fair value changes during the period 24.347.100 (16.767.758)Subsidiaries consolidated according to the equity method 6.313.825 (6.773.194)Net gains transferred to the statement of income (3.609.723) (2.723.732)Deferred tax effect (3.305.650) 3.090.664Valuation differences at the end of the period 35.200.299 11.454.747




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 625.539 defined remeasure net profit debt and TL 175.121 decreased via by consolidation , the amount of new balance is TL 44.034.442.

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 can not be transferred to another account except to add capital or in any way can not be withdrawn from the business in five years. In relation to these issues, Treasury disclosure Sales profit amounting TL 1.394.625 provided by sales of real estate and equity is classified as a “subject to distribution non profit” .

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 2014 and 31 December 2013, the Company does not hold any insurance or investment contracts which contain a DPF.

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 2014 and 31 December 2013, technical reserves of the Company are as follows:

31 December 2014

31 December 2013

Reserve for unearned premiums, gross 1.491.252.563 1.422.324.312Reserve for unearned premiums, ceded (Note 10) (294.929.264) (290.028.419)Reserve for unearned premiums, SSI share (36.692.792) (34.755.134)Reserves for unearned premiums, net 1.159.630.507 1.097.540.759

Provision for outstanding claims, gross 1.243.987.764 823.828.813Provision for outstanding claims, ceded (Note 10) (229.799.663) (135.357.501)Provision for outstanding claims, net 1.014.188.101 688.471.312

Gross of provision unexpired risk reserve 52.687.216 22.489.031Reinsurer’s share of the provision for unexpired risk (12.307.870) (9.370.658)Provision unexpired risk reserve, net 40.379.346 13.118.373

Equalization provision, net (*) 60.549.876 44.579.840General provision, net 7.702.761 7.702.761Other technical provisions, net 68.252.637 52.282.601

Total technical provisions, net 2.282.450.591 1.851.413.045

Short-term 2.214.197.954 1.799.130.444Medium and long-term 68.252.637 52.282.601Total technical provisions, net 2.282.450.591 1.851.413.045

(*) Net losses (after reinsurance) resulted from earthquake occurred in Van amounting to TL 7.101.831 TL (31 December 2013: 7.101.831 TL) are decreased from prior periods’ equalization provision based on the regulation.




As at 31 December 2014 and 31 December 2013, movements of the insurance liabilities and related reinsurance assets are presented below:


31 December 2014

GrossReinsurer

share SSI share Net

Reserve for unearned premiums at the beginning of the period 1.422.324.312 (290.028.419) (34.755.134) 1.097.540.759Premiums written during the period 3.004.830.066 (605.617.965) (74.102.040) 2.325.110.061Premiums 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 2013

GrossReinsurer

share SSI share Net

Reserve for unearned premiums at the beginning of the period 1.104.218.773 (218.883.986) (20.200.015) 865.134.772Premiums written during the period 2.749.704.405 (618.521.175) (63.967.223) 2.067.216.007Premiums earned during the period (2.431.598.866) 547.376.742 49.412.104 (1.834.810.020)Reserve for unearned premiums at the end of the period 1.422.324.312 (290.028.419) (34.755.134) 1.097.540.759


Gross Ceded Net

Provision for outstanding claims at the beginning of the period 823.828.813 (135.357.501) 688.471.312Claims 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) 1.738.079.061Claims 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


Gross Ceded Net

Provision for outstanding claims at the beginning of the period 578.790.894 (89.440.431) 489.350.463Claims reported during the period and changes in the estimations of provisions for outstanding claims provided at the beginning of the period 1.494.237.129 (148.150.125) 1.346.087.004Claims paid during the period (1.249.199.210) 102.233.055 (1.146.966.155)Provision for outstanding claims at the end of the period 823.828.813 (135.357.501) 688.471.312




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 2014Claim year 2010 2011 2012 2013 2014 TotalClaim year 856.910.386 1.075.581.281 1.495.474.317 1.229.263.704 1.717.748.856 6.374.978.5441 year later 867.349.763 1.144.103.263 1.543.105.072 1.300.026.322 -- 4.854.584.4202 years later 878.025.588 1.189.429.253 1.609.382.065 -- -- 3.676.836.9063 years later 900.866.545 1.238.843.054 -- -- -- 2.139.709.5994 years later 928.050.817 -- -- -- -- 928.050.817Current estimate of cumulative claims 928.050.817 1.238.843.054 1.609.382.065 1.300.026.322 1.717.748.856 6.794.051.114Cumulative payments to date 861.604.436 1.131.547.961 1.398.954.819 1.116.056.443 1.189.365.685 5.697.529.344Liability recognized in the financial statements 66.446.381 107.295.093 210.427.246 183.969.879 528.383.171 1.096.521.770Liability recognized before 2009 -- -- -- -- -- 147.465.994Total gross outstanding claims provision presented in the financial statements at the end of the period 1.243.987.764

31 December 2013Claim year 2009 2010 2011 2012 2013 TotalClaim year 902.239.347 851.459.419 1.067.586.430 1.482.692.631 1.272.774.899 5.576.752.7261 year later 907.824.330 861.798.734 1.135.585.447 1.529.990.732 -- 4.435.199.2432 years later 921.465.530 872.386.982 1.180.548.434 -- -- 2.974.400.9463 years later 931.210.335 895.069.601 -- -- -- 1.826.279.9364 years later 962.409.997 -- -- -- -- 962.409.997Current estimate of cumulative claims 962.409.997 895.069.601 1.180.548.434 1.529.990.732 1.272.774.899 5.840.793.663Cumulative payments to date 899.070.812 840.148.526 1.092.013.460 1.336.660.376 919.034.121 5.086.927.295Liability recognized in the financial statements 63.339.185 54.921.075 88.534.974 193.330.356 353.740.778 753.866.368Liability recognized before 2007 -- -- -- -- -- 69.962.445Total gross outstanding claims provision presented in the financial statements at the end of the period 823,828,813




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


Carrying amount

Non-life:Bank deposits (Note 14) 222.697.267 223.171.410Financial assets (*) (Note 11) 84.612.376 83.816.009Total 282.343.518 307.309.643 306.987.419


Carrying amount

Non-life:Bank deposits (Note 14) 151.443.845 151.508.238Financial assets (*) (Note 11) 101.932.249 102.274.430Total 230.055.081 253.376.094 253.782.668

(*) “As at 31 December 2014 and 31 December 2013, 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 2014 (31 December 2013) will be through the calculated amounts as of 30 June 2014 (30 June 2013), 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 205.884.923 (31 December 2013: TL 196.680.406) consist of deferred commission expenses amounting to TL 187.284.759 (31 December 2013: TL 182.110.391) and other prepaid expenses amounting to TL 5.260.484 (31 December 2013: TL 5.905.318). The amount of commission expense TL13.339.680 TL (31 December 2013: 8.664.697) Long-term prepaid expenses amounting TL 3.562.038 (31 December 2013: TL 34.671) are composed of other prepaid expenses.




As at 31 December 2014 and 31 December 2013, the movements of deferred commission expenses are presented below:


Deferred commission expenses at the beginning of the period 190.775.088 156.049.462Commissions accrued during the period (Note 32) 429.400.515 392.156.692Commissions expensed during the period (*) (419.551.164) (357.431.066)Deferred commission expenses at the end of the period 200.624.439 190.775.088

(*) 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


Payables from main operations 302.045.983 327.033.095Other payables 47.561.333 56.534.780Deferred income and expense accruals (Note 10) 45.447.065 39.363.495Taxes and funds payable and other similar obligations 27.386.135 27.491.024Total 422.440.516 450.422.394

Short-term liabilities 422.440.516 450.422.394Long-term liabilities -- --Total 422.440.516 450.422.394

As at 31 December 2014, other payables amounting to TL 47.561.333 (31 December 2013: TL 56.534.780) consist of treatment cost payables to SSI amounting to TL 16.375.984 (31 December 2013: TL 25.801.332), payables to Tarsim and DASK and outsourced benefits and services amounting to TL 28.268.772 (31 December 2013: TL 27.696.412) and deposits and guarantees received amounting to TL 2.916.577 (31 December 2013: TL 3.037.036).

Payables arising from main operations of the Company as at 31 December 2014 and 31 December 2013 are as follows:


Payables to reinsurance companies (Note 10) 188.610.275 230.767.903Payables to agencies, brokers and intermediaries 30.052.668 29.888.503Total payables arising from insurance operations 218.662.943 260.656.406

Payables arising from other operating activities 76.105.907 63.270.783Cash deposited by insurance and reinsurance companies (Note 10) 7.277.133 3.105.906Payables arising from main operations 302.045.983 327.033.095




Corporate tax liabilities and prepaid taxes are disclosed below:


Corporate tax liabilities 22.930.452 9.659.923Taxes paid during the period (21.081.960) --Corporate tax assets, net 1.848.492 9.659.923

Total amount of investment incentives which will be benefited in current and forthcoming periods

None.

20 Financial liabilities

The Company has no financial liabilities as at 31 December 2014 (31 December 2013: 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 2014 31 December 2013Deferred tax

assets /(liabilities)Deferred tax

assets /(liabilities)

Deferred tax effect of current period tax losses (Note 2.18) -- 732.945Other provisions 3.588.669 2.944.113Equalization provision 8.907.829 6.299.668Reserve for unexpired risks 8.075.869 2.623.675Provisions for employee termination benefits and unused vacations 2.812.254 2.581.526Provision for subrogation receivables 1.535.413 1.895.016Difference in depreciation methods on tangible and intangible assets between tax regulations and the Reporting Standards (2.192.013) (1.224.897)Discount of receivables and payables (88.941) 115.797Valuation differences in financial assets (1.547.916) 827.566Subrogation receivables from third parties (965.401) (603.708)Deferred tax assets, net 20.125.763 16.191.701




As at 31 December 2014 The company has not deductible tax losses.(31 December 2013: TL 9.302.276)

Expiration date 31 December 2014 31 December 2013

31 December 2016 -- --31 December 2017 -- 3.664.725Total -- 3.664.725

Movement of deferred tax assets table:


Opening balance at 1 January 16.191.701 24.604.121Recognised in profit or loss (Note 35) 7.396.097 (11.654.589)Recognised in equity (Note 15) (3.462.035) 3.242.169Deferred tax asset 20.125.763 16.191.701

22 Retirement benefit obligations

The participants or beneficiaries of pension funds are required to be transferred Social Security Institution according to “Amendments to the Social Security and General Health Insurance Act Including Certain Laws and Decrees” numbered 5754 which was published in the Official Gazette dated 8 May 2008 and numbered 26870. Transfer will be completed within a period of 3 years and prescribes the extension period of the transfer as maximum of two years upon the order of the Cabinet. 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 2013. In accordance with the Act, as of the transfer date, present value of the liabilities will be determined by considering the income and expense of the pension fund. Technical deficit rate of 9.8% shall be used in the actuarial calculation of the value in cash, and uncovered other rights and compensations of participants or beneficiaries of pension funds should be covered by the entities that transfer the funds.

Up to date, as per the actuarial calculation performed, there has not been any deficit in Anadolu Anonim Türk Sigorta Şirketi Memurları Emekli Sandığı (Pension Fund of Anadolu Anonim Türk Sigorta Şirketi), which has been founded in accordance with the Article 20 of the Social Securities Act No: 506 and the Company has made no payment for this purpose. It is believed that the assets of this institution are adequate enough to cover its total obligations; therefore this shall not constitute any additional liability on the Company.

Phrases of 2 years which expression in “ Amendments Social Insurance and General Health Insurance Law Amending the Law” numbered 28227 which was published in the Official Gazette dated 8 March 2012 and numbered 506 law which has relevant terms was changed to 4 years Banks, insurance and reinsurance companies, chambers of commerce, industry chambers, exchanges which take part scope of Law 506, No: 20 or the crate which established for constituted staff association are included in this Law to transferred Social Security Administration in the publication of this article within three years from the date. Three year period may be extended by a maximum two years via The Council of Ministers . As of the date of transfer, pension fund contributors are insured scope of this Law Article 4 (a).With this amendment, the authority postpone the transfer of the funds are given The Council of Ministers modified 4 years. (8 May 2011 to 8 May 2015) In this context, the Council of Ministers postpone transfer of the funds one more year with the decision of The Council of Ministers dated 24 February 2014 No. 2014/6042.




23 Other liabilities and provisions

As at 31 December 2014 and 31 December 2013; the details of the provisions for other risks are as follows:


Provision for employee termination benefits 12.628.115 11.720.142Provision for unused vacation pay liability 1.433.153 1.187.490Total provision for other risks 14.061.268 12.907.632


Provision for agency award 3.356.650 4.300.000Provision for guarantee account 7.182.519 6.180.307Provision for employee bonus 7.000.000 6.000.000Expense provision for gauge commission (Not 10) 1.576.728 915.265Provision for tax assessment (Not 42, (Not 47) 15.489.301 7.615.549Prepaid income and expense accruals 34.605.198 25.011.121

Movements of provision for employee termination benefits during the period are presented below:


Provision at the beginning of the period 11.720.142 9.856.211Interest cost (Note 47) 1.196.136 757.050Service cost (Note 47) 930.599 936.206Payments made during the period (Note 47) (436.838) (586.852)Actuarial difference (Note 47) (781.924) 757.527Provision at the end of the period 12.628.115 11.720.142

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


Claims paid, net off reinsurers’ share 1.412.362.272 1.146.966.155Changes in reserve for unearned premiums, net off reinsurers’ share 62.089.748 232.405.987Changes in provision for outstanding claims, net off reinsurers’ share 325.716.789 199.120.849Change in equalization provisions 15.970.036 12.422.591Changes in reserve for unexpired risks, net off reinsurers’ share 27.260.973 9.020.850Total 1.843.399.818 1.599.936.432

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 2014 and 31 December 2013 the operating expenses are disclosed as follows:


Commission expenses (Note 17) 385.141.391 357.431.066Commissions to intermediaries accrued during the period (Note 17) 390.315.759 392.156.692Change in deferred commission expenses (Note 17) (5.174.368) (34.725.626)

Employee benefit expenses (Note 33) 104.693.751 95.467.768Commission income from reinsurers (Note 10) (58.617.320) (72.496.752)

Commission income from reinsurers accrued during the period (Note 10) (60.026.011) (76.879.895)Change in deferred commission income (Note 10) 1.408.691 4.383.143

Administration expenses 69.230.043 69.800.405Advertising and marketing expenses 13.987.613 10.695.100Outsourced benefits and services 8.250.751 1.936.519Total 522.686.229 462.834.106

33 Employee benefits expenses


Wages and salaries 76.090.749 67.586.147Employer’s share 15.758.608 13.983.364Other 12.844.394 13.898.257Total 104.693.751 95.467.768

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 2014 31 December 2013Current tax expense provision:Corporate tax provision (21.081.960) --Deferred taxes:Origination and reversal of temporary differences 7.396.097 (11.654.589)Total income tax expense recognised in profit or loss (13.685.863) (11.654.589)

In the end of accounting period 31 December 2013 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 2014 31 December 2013Profit before tax 88.277.965 Tax rate (%) 78.057.700 Tax rate (%)Taxes on income per statutory tax rate 17.655.593 20,00 15.611.540 20,00Tax exempt income (4.041.796) (4,58) (4.728.809) (6,06)Non deductible expenses 72.066 0,08 771.858 0,99Total tax income recognized in profit or loss 13.685.863 15,50 11.654.589 14,93

36 Net foreign exchange gains

Net foreign exchange gains are presented in “Note 4.2 - Financial Risk Management” above.

37Earnings per share

Earnings per share are calculated by dividing net profit of the period to the weighted average number of shares.


Net profit /(loss) for the period 74.592.102 66.403.111Weighted average number of shares 50.000.000.000 50.000.000.000Earnings /(loss) per share (TL) 0,00149 0,00133

38 Dividends per share

The company did not perform profit distribution in years of 2013 and 2014.

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 2014, total amount of the claims that the Company face is TL 1.040.392.000 in gross (31 December 2013: TL 726.988.000). The Company provided provision for outstanding claims in the consolidated financial statements by considering collateral amounts.

As at 31 December 2014, ongoing law suits prosecuted by the Company against the third parties amounting TL 194.259.000 (31 December 2013: TL 206.337.000).

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.

Legal process has been initiated related to 2007 and 2008, also as of the report date there are cases against/on behalf of us and also for the against result cases the case has been moved to a higher court. In addition, some part of the payment orders submitted to us for the following periods are subjected to litigation and for the other part of the cases compromise were made to relevant parties.

As of the report date the Company made a payment of TL 3.801.378 for tax assessments, also due to a precautionary condition the company has made a provision to the amount of TL 15.489.301 (31 December 2013: 7.615.549)

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 tax. The company does not make any provision for this tax penalty because of thinking that the Company’s operations are in line with the local regulations.

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 2014 31 December 2013Within one year 7.517.871 5.871.892Between one to five years 3.476.491 7.725.700Total of minimum lease payments 10.994.362 13.597.592

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 2014 and 31 December 2013 are as follows:


İş Bankası - cash at banks 533.547.278 678.467.430Türkiye Sınai ve Kalkınma Bankası - cash at banks -- 13.055Banks 533.547.278 678.480.485

Bonds issued by İş Bankası (Note 11) -- 122.028.890Bonds issued by Is GYO (Not 11) 14.713.703 --Bonds issued by Is Leasing (Not 11) 5.078.714 --Investment funds founded by İş Bankası (Note 11) 15.972.195 13.588.728Investment funds founded by İş Portföy Yönetimi A.Ş. (Note 11) 139.593.991 71.694.305Investment funds founded by İşbank GmbH (Note 11) 12.320.065 9.115.192Financial assets 187.678.668 216.427.115

İş Bankası - receivables stem from premiums written via the Bank 91.802.800 76.454.603Receivables stems from premiums written via Şişecam Sigorta Aracılık Hiz. A.Ş. 2.924.252 5.743.294Trakya Cam Sanayii A.Ş. 167.971 21.600Milli Reasürans T.A.Ş. - receivables from reinsurance operations 1.416 644Anadolu Hayat Emeklilik A.Ş. - premium receivables 490.293 4.650Receivables from main operations 95.386.732 82.224.791

Milli Reasürans T.A.Ş.- payables from reinsurance operations 11.953.520 20.215.519İş Bankası - commission payables 7.082.553 5.900.234Şişecam Sigorta Aracılık Hizmetleri A.Ş. - commission payables 23.437 365.739Payables from main operations 19.059.510 26.481.492

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.




The Company accrued TL 57.835.977 premium (31 December 2013: 50.126.169 TL) for related party policies. The transactions with related parties during the year ended 31 December 2014 and 2013 are as follows:


İş Bankası - premiums written via the Bank 328.891.626 261.701.058Premiums written via Şişecam Sigorta Aracılık Hizmetleri A.Ş. 41.316.107 38.432.938İş Finansal Leasing- premiums written 17.077.324 14.231.789Premiums written via TSKB 101.511 952.525Premiums written 387.386.568 315.318.310

Milli Reasürans T.A.Ş (93.328.833) (79.445.393)Premiums written, ceded (93.328.833) (79.445.393)

İş Bankası - interest income from deposits 55.732.060 36.922.222İş Portföy Yönetimi - income from investment funds 9.488.742 --İş Yatırım Menkul Değerler - income from investment funds 11.500 --İş Gayrimenkul Yatırım Ortaklığı - income from bonds 560.304 --İş Bankası - income from bonds 11.828.210 3.797.714Investment income 77.620.816 40.719.936

Türkiye İş Bankası A.Ş - commission expense (33.650.040) (24.613.912)Şişecam Sigorta Aracılık Hizmetleri A.Ş. - commission expense (8.674.189) (7.353.671)İş Finansal Kiralama - commission expense (3.240.935) (2.744.249)TSKB - commission expense -- (75.589)Milli Reasürans T.A.Ş- commission expense 21.497.125 18.214.159Operating expenses, net (24.068.039) (16.573.262)

İş Bankası - banking service fee (3.250.000) (3.271.539)İş Bankası - rent expense -- (371.750)İş Merkezleri Yönetim ve İşletim A.Ş. - building service cost (2.837.238) (1.480.031)İş Gayrimenkul Yatırım Ortaklığı A.Ş. - rent expense -- (4.883.609)İş Portföy Yönetimi - management commission (632.924) (475.950)Other expenses (6.720.162) (10.482.879)

46 Events after the reporting date

Subsequent events are disclosed in Note 1.10 Events after the reporting date.

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 2014 and 2013, details of discount and provision expenses are as follows:

Provision expenses 31 December 2014 31 December 2013

Other provision income /(expense) 1.071.425 908.822Provision expense for unused vacation (Note 23) (245.663) (338.452)Provision expense for employee termination benefits (Note 23) (1.689.897) (1.106.404)Provision expense for doubtful receivables (Note4.2) (11.622.773) (15.741.368)Tax assessment expense (Not 23) (7.873.752) (7.615.549)Total (20.360.660) (23.892.951)

Rediscount expenses 31 December 2014 31 December 2013

Rediscount income 12.636.796 12.842.993Rediscount expense (15.997.077) (10.489.059)Total of rediscounts (3.360.281) 2.353.934

An Assessment of Financıal Standing, Profitability and Solvency

Premium production

Anadolu Sigorta registered TL 3,004,83 thousand in premium production in 2014. The greatest contributors to premium production were motor vehicles, motor vehicles liability, fire and natural disasters, and illness-health branches.

A portion in the amount of TL 605,618 thousand of premiums were ceded through reinsurance in 2014, thus significantly reducing retained risk in branches likely to present high claim settlements in particular, such as fire, watercraft and general losses.

Solvency and solvency performance

Having adopted it as a duty to make claim payments fully and timely to its policyholders, Anadolu Sigorta attained this goal once again in 2014 drawing on its solid asset structure and balanced liquidity ratio. A big part of the risk was ceded through reinsurance contracts made 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 unaffected by claims paid in big amounts.

In 2014, claims paid amounted to TL 1,553,197 thousand. A significant portion of the claims paid arose, in order, from losses in motor vehicles, motor vehicles liability, health/illness, and general losses branches. Combined loss/premium ratio was 77.7%, 4.0 points lower than its 2013 value.

Assessment of profitability

The company booked a profit of TL 92,642 thousand in 2014. Return on equity and return on assets stood at %7.0 and %1.9, respectively.


2,74

9,70

4

3,00

4,83

0

2,23

4,63

3

12 13 14


Claims Retention Ratio(TL thousand)

1,14

6,96

6

1,41

2,36

2

1,24

3,32

7

12 13 14

Loss/Premium Ratio(TL thousand)

73.7 77

.781.2

12 13 14

Gross Profit/Loss(TL thousand)

Gross Profit-Loss/Gross Premium Production

(TL thousand)

67.4

62 92.6

42

-63.

981

12 13 14

2.5 3.

1

-2.9

12 13 14

Other Matters and Financial Statements / An Assessment of Financıal Standing, Profitability and Solvency

1,24

9,19

9

1,55

3,19

7

12 13 14

1,37

1,85

5

Information on Financial Structure

Assets performance

As of year-end 2014, total assets reached TL 3,773,391thousand, up 16.0% year-on. With a share of 59.6% representing the largest item in total assets, total cash and financial assets grew 26.1% year-on to TL 2,250,117 thousand, giving confidence with respect to payment of possible losses to policyholders with this large volume.

Capital volume

The nominal capital of Anadolu Sigorta was TL 500,000 thousand as at year-end 2014.

Total Assets(TL thousand)

3,25

2,77

0

3,77

3,39

1

2,49

8,19

8

12 13 14

Nominal Capital(TL thousand)

500,

000

500,

000

500,

000

12 13 14

Other Matters and Financial Statements / Information on Financial Structure

(TL thousand) 2014 2013 2012 2011 2010Gross Premiums 3,004,830 2,749,704 2,234,633 1,926,090 1,420,458Technical Division Balance 121,260 100,878 -72,500 -10,068 43,108Investment Income 258,928 186,213 154,411 150,280 143,931Investment Expenses -275,810 -187,216 -154,271 -141,443 -128,587Other Income and Expenses -11,736 -32,414 8,378 5,301 -14,703Period Gross Income (Loss) 92,642 67,462 -63,981 4,069 43,749Taxation -21,082 0 0 0 -6,203Period Net Income (Loss) 71,560 67,462 -63,981 4,069 37,546Shareholders’ Equity 1,019,833 913,016 756,361 705,124 848,547Total Assets 3,773,391 3,252,770 2,498,198 2,209,016 1,951,240

Summary Financial Information for the Last 5 Years Including the Reporting Period

Other Matters and Financial Statements / Summary Financial Information for the Last 5 Years Including the Reporting Period

Address:RüzgarlıbahçeMah.KavakSok.No:3134805Kavacık/İSTANBULTel: +90 850 744 0 744Fax: +90 850 744 0 745E-mail: [email protected]

Produced by TayburnTel: (90 212) 227 04 36

www.tayburnkurumsal.com

Head Office

www.anadolusigorta.com.tr

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