anadolu insurance annual report 2008

7/29/2019 Anadolu Insurance Annual Report 2008

1/172

Annual Report 2008

You Never Lose With Anadolu Sigorta


2/172

Backing its approach to insurancebusiness formed by the motto

Never Lose by its 83 years ofexperience and know-how, AnadoluSigorta's key priorities are to maximize the quality of

services and products offered to its policyholders, and

to continually contribute to the development of the

Turkish insurance business as it has done since itsinception.

Never Lose Energy


3/172

Corporate Profile Anadolu Sigorta 2008 Annual Report 1

Corporate Profile

Maintaining its pioneering mission inthe Turkish insurance industry withits growth strategy founded onprofitability, Anadolu Sigorta morethan doubled its total net profit on ayear-to-year basis and continued totake place among the industry'sleading companies in profitability in2008. In the same period, Anadolu

Sigorta registered staggeringincreases of 82% in its gross profitand 346% in its technical profit.

In 2008, Anadolu Sigorta had a totalmarket share of 11.84% in non-lifebranches.

Backing its approach to insurancebusiness formed by the motto NeverLose by its 83 years of experienceand know-how, Anadolu Sigorta's keypriorities are to maximize the qualityof services and products offered toits policyholders, and to continuallycontribute to the development of theTurkish insurance business as it has

done since its inception.

Anadolu Sigorta will continue to steerthe Turkish insurance business withits standard-setting innovativepractices and solutions in the industry,and to be Turkey's insurance.

The top place secured in customerpreference is best evidenced in theawards granted for the last fiveconsecutive years based on thecustomer satisfaction provided.

Contents1 Corporate Profile3 Milestones5 Our Vision, Mission and

Corporate Values6 Key Indicators8 Message from the Chairman

10 Message from the CEO14 An Overview of the Economy and

the Industry in 200820 An Assessment of 2008

at Anadolu Sigorta29 Anadolu Sigorta in the Industry30 Research & Development Applications

Regarding New Services and Activities31 Commitment to Social Responsibility32 Annual Activity Report Compliance

Opinion

Corporate Governance Practices atAnadolu Sigorta34 Board of Directors and Auditors36 Executive Committee38 Heads of Units Under the Internal

Audit Systems39 Organization Chart40 An Assessment of the Board Directors

by the Corporate GovernanceCommittee

43 Committees Operating withinAnadolu Sigorta

45 An Assessment of the Operation of theIndependent Audit Firm in 2008 ActivityPeriod via the Audit Committee

46 Human Resources Practices49 The Companys Transactions with the

Risk Group50 Agenda of the Annual General Meeting51 Board of Directors Report53 Dividend Distribution Proposal54 Corporate Governance Principles

Compliance Report

Financial Information and Assessment onRisk Management77 Summary of Statutory Auditors Report78 An Assessment of 2008 by the Board

of Inspectors79 2008 Annual Report Compliance

Statement80 Independent Auditors Report

177 An Assessment of Financial Standing,Profitability and Solvency

179 Information on Financial Structure180 Summary Financial Information for the

Last 5 Years Including the ReportingPeriod

181 Risk Management Policies Adhered toby Types of Risks

184 Directory


4/172

2 Anadolu Sigorta 2008 Annual Report Milestones

Owing to its superior service quality,Anadolu Sigorta received the Active

Academy Private Customer Satisfaction in InsuranceAward for the fifth time in a row in 2008.

Never Lose Time


5/172

Milestones Anadolu Sigorta 2008 Annual Report 3

Milestones

1925Anadolu Sigorta was founded on April1 at the initiative of Atatrk and underthe leadership of flbank, Turkey's firstnational bank.

1975Being the leader of national insurance

since the onset of the TurkishRepublic, Anadolu Sigorta celebratedits 50th anniversary.

1983Blue Insurance policies marking theintroduction of comprehensiveinsurance system in Turkey andoffering 17 types of cover were puton sale for the first time.

1984

Highly acclaimed by the public andthe sector, Insurance of the Future,the most comprehensive life policyever offered in Turkey until then, wasintroduced.

1986Representing a new branch in theTurkish insurance business,Electronic Equipment Insurancewas first started by Anadolu Sigorta.

1987Activities commenced in theagricultural insurance branch.

1991The life branch was transferred toAnadolu Hayat Sigorta, a newly-formedlife insurer as required by law.

1993Extending administrative and technicalassistance to Gnay Anadolu Sigorta,

founded and started to operate inAzerbaijan, Anadolu Sigorta becamethe first Turkish insurance companyto set up an international operation.

1996Policies in legal protection insurancebranch, another first in our country,were written.

1997Aiming to make the most of thepossibilities offered by IT, a Recon

Project was launched. Services weremade more efficient and productivewith the inclusion of all services andagencies in the data processingnetwork with online and real-timesystems.

1999In order to provide the fastest andmost comprehensive service to itspolicyholders in the aftermath of thedisastrous earthquake of 17 August,the Company worked round the clock

to provide uninterrupted service.

2001After providing service for over fivedecades, the Company was relocatedfrom its building in Karaky toflTowers, where it would be togetherwith flbank subsidiaries.

2002A brand-new era began with the"Maximum Service in Insurance"

concept. The Company introduced theservice philosophy under one title thatit has possessed since its foundation,and once again became the author ofa first in the sector.

2004Voted as the most satisfactoryinsurance company with its productsand services, Anadolu Sigortareceived the Active Academy PrivateCustomer Satisfaction Award in

Insurance. The Company expandedits service range by taking over thehealth branch from Anadolu Hayat

Emeklilik, which the Company wasrequired by law to give up. AnadoluSigorta was awarded its ISO9001:2000 Quality ManagementSystem certification, an endorsementproving that the Company's qualitymanagement system complies withinternational standards.

2006The Company maintained its sectoralleadership in premium production forthe fifth consecutive year and realizeda premium production in excess ofTRY 1 billion, undersigning yet anotherhistoric result in the history of theTurkish insurance industry. TheCompany also won the ActiveAcademy Private CustomerSatisfaction Award in Insurance for athird time, verifying the success of"Maximum Service.

2007The sector's unrelenting champion inpremium production for the last sixyears, Anadolu Sigorta became in 2007the first insurance company in Turkeyto exceed the USD 1 billion thresholdin total premium production. TheCompany's approach to quality wasrewarded once again with the ActiveAcademy Private CustomerSatisfaction Award in Insurance 2007,

granted to it for the fourth time.

2008Anadolu Sigorta launched the C2C(Closer to Customer) project wherebyall business processes are reviewedand revised. While the Companyincreased its profitability throughsustainable growth strategy, it alsoreceived Active Academy PrivateCustomer Satisfaction Award inInsurance for the fifth consecutivetime.


6/172

4 Anadolu Sigorta 2008 Annual Report Our Vision, Mission and Corporate Values

In the light of its deeply-rooted,pioneering, honest and strong

corporate values, Anadolu Sigortatargets to be the insurance brand to be preferred byeveryone needing insurance, and to attain a strength that

is referenced in the international insurance business.

Never Lose a Customer


7/172

Our Vision, Mission and Corporate Values Anadolu Sigorta 2008 Annual Report 5

Our Vision, Mission and Corporate Values

Our Vision

To make Anadolu Sigorta the insurance brandpreferred by everyone who needs insurance.

To achieve a strength that makes it a referencepoint in the worldwide insurance industry as

well.

Our Mission

In keeping with the deeply-rooted, pioneering,honest, and solid corporate values of AnadoluSigorta to: Lead the sector, Help create a broad public awareness of

insurance in Turkey, Implement a customer-focused approachto service, Increase our financial strength tointernational standards, Enhance the value of our Company.

Anadolu Sigorta a Company Entrenched inHistoryAnadolu Sigorta was founded in accordancewith the instructions given by Mustafa KemalAtatrk as the Turkeys first national insurancecompany. It has a powerful corporate structure

built on its knowledge of insuranceaccumulated through the years.

Anadolu Sigorta and PioneershipPioneer in creating product; pioneer in service;pioneer in technology; with its self- renewingability preserves its pioneering position; itplays a pioneering role in social responsibility.

Anadolu Sigorta and IntegrityIt has ethical merits; it fulfills its promisesdefinitely; it inheres in transparency asprinciple: it never abandons human values.

Anadolu Sigorta and a Powerful Structure

It has a stable financial power; it has anextended and efficient service network; it hasa sophisticated and high qualified humansource; it gains power from the synergycreated by flbank.

Our Corporate Values


8/172

6 Anadolu Sigorta 2008 Annual Report Key Indicators

Never Lose Financial Strength

Shareholder Structure (%)

Trkiye fl Bankas A.fi. 35.53 Other 42.69Milli Reasrans T.A.fi. 21.78

Capital Increases in 2008 and their Financial Resources

In 2008, the issued capital of Anadolu Sigorta was increased from TRY 275,000,000 to TRY 350,000,000 through bonus capital increase.Of TRY 75,000,000 that was increased in total, representing 27.2% increment, TRY 23,000,000 was covered from 2007 dividends,TRY 51,460,668 from retained earnings and TRY 539,332 from sales income to be added to the capital.

The Companys issued capital was registered on 16 June 2008 and promulgated in the Turkish Trade Registry Gazette issue 7087

dated 19 June 2008.

Breakdown of Premium Production by Branches (%)

Fire19.4

Marine5.82

Accident38.09

Motor ThirdParty Liability

16.04Engineering

4.30Agriculture

0.63

LegalProtection

0.43

PersonalAccident

3.75Health11.53

Credit0.01

Changes Made in the Articles of Association During the Year 2008

No changes were made in the Articles of Association during the year 2008.


9/172

Key Indicators Anadolu Sigorta 2008 Annual Report 7

Key Indicators

Capital Adequacy Ratios

Premium Received/Shareholders EquityShareholders Equity/Total AssetsShareholders Equity/Technical Provisions (Net)

1.850.461.05

1.910.400.84

Asset Quality and Liquidity Ratios

Current Assets/Total AssetsLiquidity RatioCurrent RatioPremium and Reinsurance Receivables/Total AssetsReceivables From Agencies/Shareholders Equity

0.50.961.580.320.68

0.591.011.600.280.68

Financial Highlights (TRY thousand)

Total Premium ProductionTotal AssetsLosses PaidPaid-in CapitalShareholders EquityPretax ProfitNet Profit

1,192,5871,401,538

708,006275,000644,088

77,22554,209

2007

1,161,3861,534,376

685,304350,000607,991140,723117,666

2008

Operational Ratios

Conservation RatioClaims Payment Ratio

0.770.72

0.750.67

Premium Production (TRY thousand)

07

221,8

97

08

225,1

72

Fire

07

54,5

81

08

67,5

57

Marine

07

512,5

62

08

442,4

03

Accident

07

153,8

25

08

186,2

46

Motor ThirdParty Liability

07

53,2

56

08

49,9

92

Engineering

07

4,9

30

08

7,3

15

Agriculture

07

4,6

99

08

5,0

15

LegalProtection

07

46,0

34

08

43,5

94

PersonalAccident

07

140,7

22

08

133,9

20

Health

07

81

08

172

Credit

Increase in Premium Production (%)

08

1.4

8

08

23.7

7

08

-13.

69

08

21.0

8

08

08

48.3

8

08

6.7

2

08

-5.3

0

08

08

112.

35

Fire Marine Accident Motor ThirdParty Liability

Engineering Agriculture LegalProtection

PersonalAccident

Health Credit

Profitability Ratios

Loss-Premium RatioLoss-Premium Ratio (Net)Cost RatioCombined Ratio (Loss-Premium Ratio+Cost Ratio)Pretax Profit/Premium ReceivedFinancial Profit (Gross)/Premium ReceivedTechnical Profit/Premium Received

0.660.740.200.940.060.050.02

-6.1

3

4.8

3

* In line with the amendment made by the Undersecretariat of Treasury in 2008, deferred commissions were deducted from the Unearned Premium Provisions.The loss-premium ratio (net) according to the old method is 0.65.** In line with the amendment made by the Undersecretariat of Treasury in 2008, deferred commissions were deducted from the Unearned Premium Provisions.The loss-premium ratio according to the old method is 0.73.

0.700.790.20

0.990.120.040.08

***


10/172

8 Anadolu Sigorta 2008 Annual Report Message from the Chairman

We lead the sector in productcreation, service and technology.

Our goal is to create a broad public awareness of insurancein Turkey and to protect our people against any loss with

our customer-focused approach to service.

Turkey's insurance


11/172

Message from the Chairman Anadolu Sigorta 2008 Annual Report 9

Message from the Chairman

Dear shareholders,

2008 presented us with the occasionto live through a crucial experienceabout how to be successful underunusual and tough economicconditions.

The current crisis in the world bears

either a direct or indirect impact onnumerous sectors. It will be an illusionto think that one would be totallyimmune to the crisis; however, it isa reality that companies possessinga robust financial structure andcorrectly channeled investments suchas Anadolu Sigorta will be lessinfluenced by it.

As Anadolu Sigorta, our recent priorityhas been to capture a setting ofstrong growth built on solid

foundations, which does not disregardprofitability. The crisis reminded usonce again of the great importanceand appropriateness of this tendencywe have.

Anadolu Sigorta, being the firstnational company, holds a distinctiveand very important place in the historyof insurance business in Turkey.Backed by this deeply-rooted historyof 83 years, we are working towardsauthoring more novelties and we

steer our industry.

We lead the sector in productcreation, service and technology.Our goal is to create a broad publicawareness of insurance in Turkeyand to protect our people against anyloss with our customer-focusedapproach to service.

In our efforts to this end, we are

supported and brought to a privilegedposition in terms of access to ourpolicyholders by the perfectcombination of our competence toreflect advanced technology in ourservices, our speed, efficiency, andresult-orientation, and the capabilitiesgranted by our extensive servicenetwork.

One of the main engines behind ourachievements is the synergy createdwith flbank, the greatest contributor

to the economic progress owing toits unique scale today, as it has beenat any phase of the national economy.Being a member of this communityhas always given us immense prideand the perseverance to work harder.

Trust and reputation are the twofeatures we keep repeating in ourmessages, and we will not grow tiredof reiterating them. Both are hard toearn, and extremely easy to lose. Thisis a fact that has been even better

comprehended during the latestglobal crisis. Anadolu Sigorta

preserves these features as the keyto sustainability, combined with thestrong corporate values espoused,the principles of caring for the humanand ethical code of conduct.

We fulfill all the criteria to be asuccessful insurance company: weare a profitable company, we maintain

our strong financial structure, weachieve maximum customersatisfaction, and we are a professionalteam.

Challenging circumstances furthertighten the bond among us andsharpen our focus on the target.Drawing on the pride and powerbestowed upon us by our assertionto be Turkey's insurance, we willkeep working vigorously to offermaximum protection to our

policyholders and to always stand bytheir side.

Not today and not tomorrow, neitherour customers, nor our company canever lose with Anadolu Sigorta.

Sincerely,

Burhan Karagz

Chairman of the Board


12/172

10 Anadolu Sigorta 2008 Annual Report Message from the CEO

Once again in 2008, AnadoluSigorta reached two important

targets: The Company maintained and furtherincreased its profitability, and remained the name

achieving highest customer satisfaction.

Innovative products and solutions...


13/172

Message from the CEO Anadolu Sigorta 2008 Annual Report 11

Message from the CEO

Once again in 2008 we have reachedtwo important targets: We maintainedand further increased our profitability,and we remained the name achievinghighest customer satisfaction.

At a time when global crisis conditionsmade their presence felt, the

performance results attained whileadhering strictly to our strategies yetagain confirmed that we havecorrectly positioned our Company.

Growth backed by profitability...We set our priority goal for 2008 asgrowth established on solidfoundations backed by profitability.The results we achieved brought asuccess beyond our targets.

Owing to our strategy based on the

fact that profitability is one of the keyelements for securing sustainablegrowth, our technical profit in 2008reached TRY 96,671,499, with astaggering increase by 346% on ayear-to-year basis. As thisachievement was supported also byour Company's financial performanceresults, our gross profit for 2008 wentup 82% to TRY 140,722,726, whileour net profit more than doubled witha 117% rise and materialized as TRY117,666,276.

We believe that it is necessary tobrace up the financial structure withprofitability and to minimizereinsurance requirements particularlyat times of crisis. On the other hand,we support this solid structure withour liquid assets.

We are raising our return onpremiums.Under ideal conditions, morepremiums mean more profit;however, correct pricing policies arenot implemented in Turkey forcompetition purposes. As a result,the risk of posting loss is not reducedeven if there is an increase in

turnover, as opposed to the generalprinciple.

Not sustainable, this competitionpolicy will be abandoned even morerapidly in the crisis environment. Thismay be interpreted as increasedprices at first glance. Yet, it shouldbe kept in mind that otherwisecompanies will have difficulty inmaintaining their existence, not tomention in growing.

Our Company's success in raisingthe return on premiums led toincreased technical profitabilitydespite decreased premiumproduction in some products. Likewe always say, our aim is to deriveprofit on insurance business.

For the fifth time, we are the leaderin customer satisfaction.Once again in 2008, Anadolu Sigortawas named the the mostsatisfactory insurance company with

its products and services, and wonthe Active Academy Private CustomerSatisfaction Award in Insurance.Anadolu Sigorta got nearly 29% ofthe votes in the survey which isbasically a customer satisfaction poll.

We sculpt all the products andservices we present as the sector'sleader with a keen eye on ourpolicyholders' demands and needs.As Anadolu Sigorta, we appear beforeour insured customers with theprinciple Never lose. We takeenormous pride in the fact that ourapproach is being rewarded for the

fifth consecutive time.

Our achievements are crowned withawards.Focused on producing innovativeproducts and solutions, and erectedon customer satisfaction, the superiorservice understanding of AnadoluSigorta continued to be crowned withvarious awards also in the reportingperiod.

Anadolu Sigorta;

was named the best insurancecompany in Turkey by Euromoney,the leading international economyand finance magazine, and took thefirst place also in claims payment,innovation and price subcategoriesin addition to its overall leadership.

was awarded for its Spare PartSupply Project by Active Academyat the Insurance Summit under theInnovative Company Award category.

An overview of the sector in 2008...In 2008, the insurance sectorexpanded 7.71% overall, registering6.24% nominal growth in total non-life branches; however, the sectordid not grow in real terms. While totalpremium production stood at TRY11.8 billion, non-life premiumproduction materialized as TRY 10.2billion.


14/172

12 Anadolu Sigorta 2008 Annual Report Message from the CEO

Public awareness of insurance...

Message from the CEO

The work on legal infrastructure hasbeen ongoing with the secondarylegislation continued to be publishedduring 2008 following theenforcement of the Insurance Lawin 2007. All these efforts in the legalarena bear utmost importance inbringing the insurance industry intoalignment with the European Union

and international norms. Revisedlegislation and the changesintroduced are generally of the natureto enhance the reliability of theexisting or future companies engagedin the industry, and to protect theinsured.

Foreigners' interest in the industrygets more and more intense.Similar to the previous year, foreigncapital inflow into the insuranceindustry increased also in 2008.

Following the agreement reached forthe sale of 50% stake in AXA OyakHolding A.fi. to the AXA Group, TEBSigorta A.fi. has been acquired byZurich Financial Services Group, KoAllianz Sigorta A.fi. and Ko AllianzHayat ve Emeklilik A.fi. by Allianz,and Ankara Emeklilik A.fi. by Aegon.

The contraction in economy willimpact also the insurance industry.Though the stagnation caused byglobal crisis combined with liquidity

shortage gave rise to significantissues for a part of the financialservices sector, the insuranceindustry was able to shun the firstwave without suffering from majorinjuries. The reasons behind therelative resilience of insurancecompanies include various factors

such as the flexibility of their businessmodels, the conservative attitudedisplayed by executives ininvestments as a result of pastexperiences, and the strictsupervision of the public authoritiesover the insurance industry. Inaddition, the financing of insurancecompanies is based on insurance

premiums that serve as a relativelymore regular resource. Although theyare not affected by the crisis as muchas the other financial institutions forthe time being, insurance companieswill also be inevitably influenced fromthe negative economic conditionsand reduced growth expectations atan increasing extent.

In the last quarter of 2008, thecontraction in the national economyand the stagnation in manufacturing

led by sectors such as textile andautomotive started to be felt. Thehardships particularly in automotivewill be directly reflected in thepremium production of motor owndamage branch. On the other hand,the narrowed lending volumetranslates into non-emergence of neweconomic values, which will impactour industry.

The antidote to the economic crisisis to attract new policyholders...

We believe that crisis period is justthe right time for tapping the bigpotential we frequently refer to. Attimes when wheels stop turning,revenues shrink and businesses postlosses, indemnification gets all themore difficult if a risk materializes.For this reason, we should be able

to clearly communicate to our targetaudience that having insurance coverbecomes more important than everat times of crisis.

As Anadolu Sigorta, our goal in thisperiod is to introduce the segmentof individuals and organizations thatnever have had any insurance cover

to the insurance notion, and to sellnew products while retaining ourexisting customers. For us, theantidote to the economic crisis is toattract new policyholders.

We need to broaden publicawareness of insurance.We recognize our responsibilities asthe leading company of the insuranceindustry. Based on theseresponsibilities, Anadolu Sigorta hasadopted it as a mission to create

enhanced public awareness ofinsurance. We observe that there isstill a huge gap of knowledge aboutthe major returns that can be derivedon minor precautions to be adoptedagainst the negative events thateveryday life has in store for us alllike flood, fire or theft.

Our efforts to develop the dynamicsof the insurance industry and toextend the reach of service solutionsare backed by advertising and

promotional campaigns. In this frame,we successfully realized twoadvertising campaigns on homeinsurance and motor own damageinsurance in 2008.


15/172

Message from the CEO Anadolu Sigorta 2008 Annual Report 13

We constantly adapt ourselves.Targeting to keep its servicestandards at the highest level,Anadolu Sigorta continued with itstechnology investments also in 2008,which were commenced forrendering the best service in thefastest and most effective manner.Our Company is undergoing a major

change and transformation process,thereby fortifying its technicalinfrastructure with new systemsemploying rule, service and process-based software solution andadvanced hardware products that willsupport growth.

Technological upgrade carried out viathe System Web Integration Project(SWEP) is supported by the ProcessImprovement Project whereby all ourbusiness processes are reviewed and

revised as necessary. Uponcompletion of all these activities, weaim to launch a new powerful,renewed system of maximumeffectiveness at the Company. Ourendeavors within the scope of ourtransformation program named C2C(Closer to Customer) will be ongoingalso in 2009.

We are targeting to better capitalizeon flbank's potential.Representing one of the most deeply-

rooted examples of bancassuranceactivities in Turkey, our cooperationwith flbank and the synergy createdtherefrom give our Company anunparalleled advantage in customerreach.

While the total number of AnadoluSigorta delivery points exceeds 3,000,we aim to further increase ourpremium production via flbankbranches numbering over 1,000 andeach acting as an Anadolu Sigortaagency. We are planning to speed upthe activities of our direct sales teamworking at the branches in particular.

We are a big family with ourcustomers...All of us as the members of AnadoluSigorta community share the thrill ofmoving closer to our targets by theday with the help of the projectsrealized, which targets were set inline with our motto never lose. Ourservice approach focused oncustomer satisfaction is reinforcedby the awards we win. We will remainloyal to this attitude also in 2009.

We should always keep in mind thatwhat makes a company is not figuresor charts, but its employees. AnadoluSigorta holds a privileged position inthe industry also with respect tohuman resource as manifested in theCompany's efforts invested towardsemploying and training qualifiedhuman resource. Our strongintellectual capital plays a major partin making the most of the industry'sgrowth potential.

I would like to take this opportunityto thank all my colleagues offeringservice all over the country under theroof of Anadolu Sigorta, to all flbankemployees, our agencies, businesspartners and policyholders.

Strictly adhering to its profitability-based growth strategy, our Company,

as the most deeply-rootedestablishment in the insuranceindustry, moves ahead with theunderstanding a stronger AnadoluSigorta for a stronger insuranceindustry.

Mustafa Su

Chief Executive Officer


16/172

An Overview of the Economy and the Industry in 2008

Global EconomyThe crisis sustained in the financialservices sector since September2008 and the decline in theconfidence of producers/consumersled to a decrease in the growthrate of global economy. In 2009,developed countries are expectedto experience a contraction in

production which is similar to the onein the post-1929 crisis period. Onanother wing, emerging countries areestimated to exhibit higher growthrates than developed countries,although they will also suffer fromsome deceleration. The global growthrate which was 5.2% in 2007 and3.4% in 2008 is expected to decreaseto 0.5% in 2009.

With 9% increase in GNP, China wasthe greatest contributor to the

development in global economy,

while the same ratio was 7.3% inIndia and 6.2% in Russia. EU and USeconomies grew nearly by 1% in thesame period.

International crude oil prices soaredto a historic high level of over USD140 in July 2008, as a result of theupward move that commenced in

2006 and 2007 due to intensedemand. After the fall in thecommodity demand due to thestagnation and declined growth ratethat followed the onset of the financialcrisis, crude oil prices fell below USD40, matching its price level in 2005,and closed 2008 below USD 39.

Floating around 1.48 in January,Euro/USD parity exceeded 1.60 bylate August due to devaluation of USdollar, a result born out of the fact

that the financial crisis broke out in

the USA. Major policies and measuresenforced by the USA against thecrisis pushed the parity down to1.25 in October. As the actionpackages failed to bring about thedesired results and the crisis startedbearing heavier impact upon themanufacturing industry, the parityrose once again, and adopted a flat

course around 1.40 in December2008.

After the end of crisis which isexpected to get deeper, the periodof low interest rate and high liquidityis anticipated to cease with liquidityand credit crunch, global bankingsector is expected to be restructuredand free market economy is expectedto turn into regulated marketeconomy.

14 Anadolu Sigorta 2008 Annual Report An Overview of the Economy and the Industry in 2008

The impact of the global crisis onthe insurance industry has beenlimited in 2008 compared to the

effect it had on the overall financialservices sector. The industry was affected by thecrisis at a later stage because of the regular income derived

on insurance premiums, cautious attitude of the companies

in their investments, and the legislation that imposes strict

supervisory rules.

Developments in the World...


17/172

An Overview of the Economy and the Industry in 2008 Anadolu Sigorta 2008 Annual Report 15

Worldwide Insurance BusinessThough the stagnation caused by theglobal crisis combined with liquidityshortage gave rise to significantissues for a part of the financialservices sector, the insuranceindustry was able to get through thefirst phase of the financial crisiswithout suffering from major negative

impacts . The primary exceptions tothis were AIG and Fortis, big financialinstitutions whose operations coveredinsurance business among their otherfinancial operations One of thebiggest companies in the world, AIGwas able to sustain its operationsonly by means of urgent loan in theamount of USD 85 billion extendedby the Federal Reserve Bank.

The impact of the global crisis on theinsurance industry has been limited

in 2008 compared to the effect it hadon the overall financial servicessector. The industry was affected bythe crisis at a later stage because ofthe regular income derived oninsurance premiums, cautiousattitude of the companies in theirinvestments, and the legislation thatimposes strict supervisory rules. Yet,insurance and reinsurance companieswill be inevitably influenced at agreater extent by the global crisis in2009. This was already started to be

manifested from end-2008 in thedeclining credit ratings of internationalinsurance and reinsurancecompanies.

As the global crisis increased itsdepth, the actors in the insuranceindustry started questioning thecorrectness of their assetmanagement strategies, the reliabilityof their financial analysis models andcredit ratings, and the adequacy ofthe provisions they set aside. The

uncertainty of the market led the

insurance companies to act morecautiously both in their investmentsand in their underwriting policies.

The global insurance industrycontinued to expand in 2007 and theglobal premium production hasincreased by 3.3% when comparedto the last year. The greater portion

of this increase was contributed bythe life branch that went up 5.4%,whereas premiums in non-lifebranches rose merely 0.7%.Worldwide premium productiontotaled USD 4,061 billion, with USD2,393 billion generated in life branchand USD 1,668 billion in non-lifebranches.

In 2007, industrialized countriesaccounted for 90% of the globalpremium production, while there was

0.3% decrease in the premiums onnon-life branches in these countries.Bringing their share in globalproduction up to 10%, emergingcountries registered 10% growth inpremiums.

Representing the world's largestmarket in non-life branches,continental America achieved 3.7%increase in premium production in2007. While premium productiondropped by 1.3% in North America,

it increased by 8.3% in LatinAmerican countries. The premiumincrease averaged 0.8% in theEuropean continent. Premiumproduction slightly decreased inWestern Europe but rose 11.7% inCentral and Eastern Europeancountries. As premium productiondecreased 1.6% in Japan, it increased20% and 5.6% in China and India,resulting in the growth of premiumproduction in the Asian continent tobe in the region of 10%.

Total losses caused by the naturaldisasters that occurred in 2008 areestimated to amount to USD 200billion, while insured loss amountwas nearly USD 45 billion. With thesefigures, 2008 has been the third yearwith highest losses after 2005 and1995. The great majority of theselosses resulted from meteorological

events. Such great number ofhurricanes had never occurred beforein the first half of any year, and 2008was marked by weather catastrophesthat particularly hit America. Sixtropical cyclones occurred along theAmerican coasts, with Ike and Gustavbeing the most drastic ones amongthem; insured losses of these twoextraordinary events weredetermined as USD 30 billion andUSD 5 billion, respectively. Scientistsstate that the upward trend in climate-

based risks in relation to globalwarming will continue and furtherincrease in the years coming.

The financial crisis and increasedmeteorological risks also shape theexpectations about Solvency II (EUSolvency Standards), which wasplanned to be enforced in 2010 buthas been postponed to 2012. TheCommittee of European Insuranceand Occupational PensionsSupervisors (CEIOPS) already

announced that Solvency II structurewill need to be reinforced after thecrisis so as to place even greateremphasis on internationalcooperation. Apart from suchmodifications, the overall structureof Solvency II is considered sufficientfor combating crises, and is expectedto add to the financial stability of theinsurance industry in the future.


18/172


Turkish EconomyThe weak course of domesticdemand, coupled with the foreigndemand that slackened because ofthe global credit crisis, negativelyinfluenced the Turkish economy.The marked decline experienced inthe industrial production first inAugust then in September

strengthened the expectations forcontraction in the economy in thethird quarter of the year. Thedownturn in the manufacturing sectorand consumer confidence indices,the downfall in automotive sales, andthe downsizing in employment incertain sectors point out that theslowdown in the Turkish economywill continue in the periods coming.

According to temporary data for thefirst three quarters of 2008, the

Turkish economy grew 3% year-on.The growth in the GDP that stood at6.7% in the first quarter of the yearwith the contribution of the low basein the same period of the prior yearwas realized as 2.3% and 0.5% inthe second and third quarters of theyear, respectively. The decelerated

domestic demand, contracted publicinvestment outlays and the markedloss of pace in private investmentoutlays have been influential in theslowdown in growth in the secondand third quarters of 2008.

Annual consumer inflation stood at10.06% as of December 2008.

Though the increase in food pricesmaintained its high level of the recentyears in 2008, there was somedecline owing to the combined effectof the betterment in domesticproduction and the decrease ininternational prices. As a result of thehigh increases in items other thanfuel oil, energy prices continued togo up despite the significant reductionin oil prices in the last period of theyear. Each of these developmentshas been a factor in the sustained

increase in inflation in 2008, resultingin failure to reach the 4% target.

Based on TURKSTAT (TurkishStatistical Institute) data, exports wentdown 3.1% and imports 4.8% year-on in October 2008, while foreigntrade deficit contracted by 7.6% and

decreased to USD 5.3 billion. Thus,exports and imports declined on anannual basis for the first time sinceFebruary 2002. In the first ten monthsof the year under review, foreigntrade volume stood at USD 293 billionand foreign trade deficit at USD 63billion, and the ratio of exports toimports was 64.4%. The overall

export performance was negativelyinfluenced by the shrinkageexperienced particularly in road motorvehicles and in the textile industry inOctober. There was 20% decline inthe exports to the European Unionduring this period. The contributingfactors to decreased imports inOctober were the decelerateddomestic demand and the decreasein commodity prices, combined withthe devaluation of the Turkish lira. Inthis timeframe, imports contracted

by 13.9% in consumer goods, by12.8% in investment goods and by1.1% in intermediate goods on ayearly basis.

In September, the current deficit wentdown 60.1% year-on to USD 914million. This figure represents the


Having consistently achieved agrowth above the inflation in therecent years, the insurance industry entered intoa period of standstill in 2008 displaying a growth that

lags behind inflation.

Developments in Turkey...


19/172


lowest current deficit since October2005. The deficit in the first ninemonths of the year rose to USD 35.4billion, up 35.6% YoY. As atSeptember, the 12-month cumulativedeficit stepped down from USD 48.4billion in August to USD 47.0 billion.The pronounced decline in the foreigntrade deficit has been influential in

the decline of the current deficit inSeptember. According to the balanceof payments data, foreign trade deficitstood at its lowest since April 2007.The primary factors that led to thisdevelopment are regarded as thedecline particularly in oil prices andthe loss of value by the Turkish lira.

The balance of payments data forSeptember indicate that the currentdeficit might adopt a shrinking trendin the period coming in connection

with the decrease in oil prices,devaluation of the Turkish lira and thedeceleration in domestic demand.Yet, the Turkish economy remainsvulnerable because of the problemsthat might be encountered in thefinancing due to the global creditcrisis.

It is observed that the budgetrealizations are aligned with year-endtargets as of the first ten months ofthe reporting period. Yet, thenarrowed domestic demand becauseof the economic stagnation mighthave a negative impact on indirecttaxes that make up a substantialportion of tax revenues. In addition,

reduced corporate profits might alsoreduce the corporate tax revenues.The developments in budgetexpenditures are also critical due tothe upcoming local elections in 2009.

In its meeting held in November, theCentral Bank of the Republic ofTurkey (CBT) Monetary PolicyCommittee (the Committee) reducedshort-term interest rate by 50 basepoints to 16.25%, and lending interestrate by 100 base points to 18.75%.

The Committee's brief stated thatthe recently announced data point atpronounced deceleration in economicactivity; the issues in internationalcredit markets and global economywill continue to limit domestic andforeign demand for a prolongedperiod of time, and therefore the

movements in exchange rates willhave a limited impact on inflation,and the plunge in oil and othercommodity prices will positively affectthe inflation. In terms of thedevelopments in FX markets, theCommittee drew attention to theimportance of fluidity in the financialsystem and active operation of

lending markets in view of theexisting conjuncture, and along thisline, decided to introduce additionalprecautions on FX liquidity.

At the end of 2008, the course ofexchange rates was affected by theincreased risk perception,deterioration in funding conditions,and the developments in EUR/USDparity. As at year-end 2008, Turkishlira lost value by 34.77% against USdollar and by 17.46% against euro.

Standing at 55,538 points at the onsetof 2008, the ISE National-100 indexclosed the year at 26,864, down51.6% compared with end-2007, inparallel with the developments ininternational asset prices.

GNP Growth (%)

2007

4.6

Quarter I

6.7

Quarter III

0.5

9 Months

3

Inflation(%)

PPI

Annual change

CPIAnnual change

December

10.06

8.11

Source: As of writing of this report, the Turkish Statistical Institute has not announced the data for the 4th quarter. Source: Turkish Statistical Institute

6 Months

4.2

2008Quarter II

2.3


20/172


Turkish Insurance BusinessHaving consistently achieved agrowth above the inflation in therecent years, the insurance industryentered into a period of standstill in2008 displaying a growth that lagsbehind inflation. TRY 9,600 million innon-life branches as at year-end 2007,premium production expanded 6.24%

and went up to TRY 10,199 million atthe end of 2008.

The conclusion of the 2008 RegularReport on Turkey's Progress towardsAccession reads ... Turkey achievedsignificant progress in relation to theinsurance business and privatepension by accepting arrangementsregarding private pension plans,publishing financial statements andintroducing regulations on insurancebrokerage. The Capital Markets Board

of Turkey accepted internationalaccounting standards and internationalfinancial reporting standards forcompanies traded on the stockexchange... Alignment has been

completed in insurance business andprivate pensions. An independentsupervision agency that will regulatethe insurance and private pensionindustries needs to be set up.

The remark there is partialcompliance with the European Union'sacquis in insurance business and

private pension sector that appearedin the 2007 Regular Report takes placealso in the 2008 Regular Report.

Another important development thatoccurred in 2008 concerning theinsurance industry was the increasein foreign capital inflow into theindustry in a manner similar to theprior year. Following the agreementreached for the sale of 50% stake inAXA Oyak Holding A.fi. to the AXAGroup, TEB Sigorta A.fi. has been

acquired by Zurich Financial ServicesGroup, Ko Allianz Sigorta A.fi. andKo Allianz Hayat ve Emeklilik A.fi.by Allianz, and Ankara Emeklilik A.fi.by Aegon.

For the insurance industry, 2008 hasbeen a year in which numerouschanges and new practices wereintroduced. Pursuant to the InsuranceLaw published in the Official Gazetteissue 5684 dated 14 June 2007, andthe Regulation on Technical Provisionsof Insurance, Reinsurance andPension Companies and Assets in

Which Such Provisions Shall BeInvested issued in connection withthe said law, certain arrangementshave been introduced for thecomputation of technical provisionsfrom 01 January 2008. Thesearrangements are summarizedhereinbelow.

Provision for unearned premiums: Inline with the Regulation on TechnicalProvisions of Insurance, Reinsuranceand Pension Companies and Assets

in Which Such Provisions Shall BeInvested published on 07 August2007, starting with the policies issuedfrom the beginning of 2008, provisionfor unearned premiums was started


Turkey achieved significant progress

in relation to the insurance businessand private pension by accepting arrangementsregarding private pension plans, publishing financial

statements and introducing regulations on insurance

brokerage.

Changes, new practices...


21/172


to be computed on the basis of thegross premium, without deductingthe commission. Commissionamounts are now followed-up undera separate account using the deferredcommission account.

Equalization provision: This provisionis started to be set aside on credit

and earthquake coverage to equalizethe fluctuations that might arise inthe indemnification ratios in thefollowing fiscal years and to covercatastrophic risks.

Actuarial chain ladder method andoutstanding claims practices: It is setout that the amount of outstandingclaims provision for the current fiscalperiod cannot be lower than theamount calculated using the actuarialchain ladder method described by

the Undersecretariat, and thatsubrogation, residual value and anyother similar income will be deductedin the calculation of outstandingclaims provision.

Provision for unexpired risks: This isstarted to be set aside as a provisionallocated in the event that theprovision for unearned premiumsremains inadequate for the riskborne by the company and for theanticipated expenses in insurancebranches which are considered topresent incompatibility among the

time-dependent distribution of thelevel of risk underwritten duringthe validity of the insurance contractand the premiums earned.

Investment income and expensestransferred to technical division:The distribution of operatingexpenses transferred to technicaldivision takes into consideration thepremium production, the number ofclaims files, and the number ofpolicies.

A standard approach has beenintroduced for determining theamount of investment incometransferred to technical division,

and all income generated on theinvestment of assets coveringtechnical provisions are ensured tobe transferred to technical division.

Within the frame of the MotorwaysTraffic Law no. 2918 and MotorwaysTraffic Regulation, the practice ofReport on Accident Resulting in

Material Damage was begun on 01April 2008, which is to be filled in bythe free will of the involved partiesin traffic accidents that result only inmaterial damage.

The enforcement of the InsuranceAgencies Regulation issued basedon the Insurance Law no. 5684 on14 April 2008 signifies an equallyimportant development for theindustry and for the agencies.

Branches

Fire

TCIP

Marine

Accident

Motor Third Party Liability

Engineering

Agriculture

Health

Legal Protection

Personal Accident

Credit

Non-Life Total

Life

Total

Premium Production of the Sectoras of Year End 2007 (TRY)

1,482,841,577

234,387,215

364,887,256

3,574,502,836

1,650,517,911

523,356,482

95,331,476

1,217,976,563

39,216,024

400,666,470

13,784,873

9,597,468,685

1,331,031,955

10,928,500,640

Share (%)

13,57

2,14

3,34

32,71

15,10

4,79

0,87

11,14

0,36

3,67

0,13

87,82

12,18

100,00

Premium Production of the Sectoras of Year End 2008 (TRY)

1,598,455,151

272,771,343

413,587,291

3,329,805,336

2,060,499,622

536,149,073

124,617,714

1,326,836,954

32,319,859

467,198,588

37,101,738

10,199,342,670

1,574,896,096

11,774,238,766

Share (%)

15.67

2.67

4.06

32.65

20.20

5.26

1.22

13.01

0.32

4.58

0.36

86.62

13.38

100.00


22/172

20 Anadolu Sigorta 2008 Annual Report An Assessment of 2008 at Anadolu Sigorta

Profitable growth...

As a result of its growth strategyestablished on solid foundationssupported with profitability, AnadoluSigorta captured a success beyond its targets in 2008.


23/172

An Assessment of 2008 at Anadolu Sigorta Anadolu Sigorta 2008 Annual Report 21

An Assessment of 2008 at Anadolu Sigorta

Anadolu Sigorta is mainly active in non-life branches that include fire, accident, marine, engineering, agricultural,health, legal protection and credit insurance categories.

Technical Division

Premium ProductionsIn 2008, direct premiums written by Anadolu Sigorta stood at TRY 1,109 million. With the addition of TRY 52 millionreceived in reinsurance premiums, total premium production amounted to TRY 1,161 million last year.

Premium ProductionBreakdown by Branches (TRY thousand) (%)

Fire 225,172 19.4Marine 67,557 5.8Accident 442,403 38.1Motor Third Party Liability 186,246 16.0Engineering 49,992 4.3Agriculture 7,315 0.6Legal Protection 5,015 0.4Personal Accident 43,594 3.8Health 133,920 11.5Credit 172 0.0Total 1,161,386 100

Combined Loss

Premium Ratio (%)

Technical Profitability

Ratio (%)

07 08

79.7

59.8

07 08

0.2

11.8

Fire

Up 1.4%, Anadolu Sigorta's fire insurance premium production was TRY 225,172 thousand in 2008, while claimpayments amounted to TRY 67,016 thousand. Technical profit of the fire branch rose from TRY 507 thousand toTRY 26,640 thousand.

07 08

Premium Production

(TRY thousand)

221,897225,172

07 08

94,262

67,016

Claims Paid

(TRY thousand)

Fire

Marine

AccidentMotor Third Party Liability

CreditHealth

Personal AccidentLegal Protection

Agriculture

Engineering


24/172


Combined Loss

Premium Ratio (%)Technical Profitability

Ratio (%)

07 08

42.1

29.8

07 08

17.1

34.5

Marine

There was a year-on increase of 23.7% in marine branch, bringing the total premium production to TRY 67,557thousand. The Company's claim payments in the marine branch totaled TRY 23,416 thousand in 2008. Technicalprofit of the marine branch went up 149% to TRY 23.318 thousand in the reporting period.

07 08

Premium Production

(TRY thousand)

54,581

67,557

07 08

18,435

23,416

Claims Paid

(TRY thousand)

Combined Loss

Premium Ratio (%)


Ratio (%)

07 08

74.4 80.5

07 08

1.6

8.4

Accident

In 2008, Anadolu Sigorta's premium production in accident insurance declined by 13.6% to TRY 442,403 thousandon a year-over-year basis. Down 6%, claims paid in the accident branch stood at TRY 325,150 thousand in the yearunder review. TRY 8,104 thousand in 2007, the technical profit of the accident branch stood at TRY 37,247 thousandin 2008.

07 08

Premium Production

(TRY thousand)

512,562

442,403

07 08

344,687325,150

Claims Paid

(TRY thousand)



25/172


Combined Loss

Premium Ratio (%)


Ratio (%)

07 08

73.1 75.4

07 08

8.0

2.7

Engineering

Engineering insurance premium production in 2008 sustained a 6.1% year-on decrease and stood at TRY 49,992thousand. The Company paid TRY 27,256 thousand in claims in 2008. Technical profit dropped from TRY 4,280thousand to TRY 1,359 thousand in the same period.

07 08

Premium Production

(TRY thousand)

53,25649,992

07 08

23,827

27,256

Claims Paid

(TRY thousand)

Combined Loss


Ratio (%)

07 08

96.7

118.2

07 08

-16.3-18.2

Motor Third Party Liability

Motor third party liability insurance premium production realized a 21.0% year-on increase in 2008 and amountedto TRY 186,246 thousand. At TRY 132,503 thousand, claim payments were up 20%. Technical division balance inthe motor third party liability branch went down from -18.2% to -16.3%.

07 08

Premium Production

(TRY thousand)

153,825

186,246

07 08

110,141

132,503

Claims Paid

(TRY thousand)


26/172


Combined Loss


Ratio (%)

07 08

24.6

94.2

07 08

25.1

-2.1

Agriculture

Anadolu Sigorta's premium production in agricultural insurance grew 48.3% and amounted to TRY 7,315 thousandin 2008. Claims paid in the agricultural insurance totaled TRY 3,130 thousand. TRY 1,235 thousand in 2007, technicalprofit in the agriculture branch was TRY 154 thousand in 2008.

07 08

Premium Production

(TRY thousand)

4,930

7,315

07 08

904

3,130

Claims Paid

(TRY thousand)

Combined Loss

Premium Ratio (%)


Ratio (%)

07 08

0.3

2.4

07 08

74.0

14.5

Legal Protection

In 2008, premium production in legal protection insurance had a 6.7% increase and reached TRY 5,015 thousand.TRY 20 thousand was paid in claims. TRY 3,475 thousand in 2007, technical profit generated in the legal protectionbranch in 2008 was TRY 725 thousand.

07 08

Premium Production

(TRY thousand)

4,6995,015

07 08

20 20

Claims Paid

(TRY thousand)



27/172


Combined Loss

Premium Ratio (%)


Ratio (%)

07 08

80.377.8

07 08

-1.4

5.3

Health

With a 4.8% decrease, Anadolu Sigorta registered TRY 133,920 thousand in premium production in health branchin 2008, and paid TRY 101,743 thousand in claims. Technical division balance in the health branch, which was TRY-2,000 thousand in 2007, stood at TRY 7,162 thousand in 2008.

07 08

Premium Production

(TRY thousand)

140,722133,920

07 08

109,746101,743

Claims Paid

(TRY thousand)

Combined Loss


Ratio (%)

07 08

15.6

13.5

07 08

47.0

78.7

Personal Accident

Down 5.3%, premium production in personal accident insurance amounted to TRY 43,594 thousand in 2008. Claimspaid in the personal accident branch decreased 15% and went down to TRY 5,070 thousand. TRY 21,638 thousandin 2007, technical profit in the personal accident branch increased 58% in 2008 and reached TRY 34,324 thousand.

07 08

Premium Production

(TRY thousand)

46,034

43,594

07 08

5,983

5,070

Claims Paid

(TRY thousand)


28/172


Combined Loss


Ratio (%)

07 08

0 0

07 08

100.6

-4.9

Credit

Having achieved a significant increase of 112.3%, premium production in credit insurance branch amounted to TRY172 thousand in 2008. Technical division balance in the credit branch declined from TRY 81 thousand to TRY -8thousand.

07 08

Premium Production

(TRY thousand)

81

172

07 08

0 0

Claims Paid

(TRY thousand)


Total

In 2008, total premium production decreased by 2.6% and was materialized as TRY 1,161,386 thousand. Claimspaid went down from TRY 708,006 thousand to TRY 685,304 thousand. TRY 21,653 thousand in 2007, technicalprofit achieved a staggering expansion of 346% and reached TRY 96,671 thousand.

07 08

1.80

8.30

07 08

74.30 78.70

Combined Loss

Premium Ratio (%)


Ratio (%)

07 08

Premium Production

(TRY thousand)

1,192,5871,161,386

07 08

708,006685,304

Claims Paid

(TRY thousand)


29/172


Investment IncomeWhile investment income grew 38%to reach TRY 176,944 thousand in2008, the greatest contributor tothe increase was the financialinvestment income which amountedto TRY 128,089 thousand.

A sales revenue of TRY 16,391thousand was derived on financialinvestments during the reporting

period; a substantial portion of thisamount was constituted by thedisposal of government bonds thattotaled TRY 13,786 thousand, anddisposal of securities subject torepo which were in the amount ofTRY 2,326 thousand.

Owing to the fact that they alsoincluded the reversals of 2007valuation amounts, valuation of

financial investments accountconsisting of the valuation incomeof share certificates, governmentbonds, mutual funds, repo and timedeposits created an expense impactof TRY 6,440 thousand in 2008.

In 2008, TRY 19,776 was generatedin foreign exchange gains, whiledividend income from affiliates wasup 372% to TRY 17,888 thousand.

Investment Income (TRY thousand)

Income from Financial Investments

Revenues from the sales from financial Investments

Valuation of Financial Investments

Foreign Exchange Gains

Dividend Income from Affiliates

Income from Real Estate

Income from Derivatives

Other investments

Total

31 December 2007

100.652

15.630

-1.290

7.535

3.792

1.469

92

0

127.880

31 December 2008

128.089

16.391

-6.440

19.776

17.888

1.200

13

28

176.944

Change (%)

27

5

-399

162

372

-18

-86

-

38

Investment ExpensesWhile investment expensesexpanded 107% to reach TRY117,741 thousand in 2008,investment expenses transferred tothe technical division took thegreatest share in this amount withTRY 99,397 thousand. Based on theUndersecretariat of Treasury Circularon the Procedures and Principles of

Keys Used in Financial Statementsenacted with effect from 01December 2008, investment incomefrom assets covering technicalprovisions were transferred to thetechnical division. Investment incometransferred to the technical divisionin line with the relevant transfermethod registered a 187% growth.

Investment Expenses (TRY thousand)

Investment Management Expenses (incl. interests)

Devaluation of Investments

Loss from the Sales from Financial Investments

Investment Expenses Transferred to the Technical Division

Foreign Exchange Losses

Depreciation Expenses

Total

31 December 2007

-279

-222

-1.285

-34.686

-13.025

-7.398

-56.895

31 December 2008

-108

-283

-3.347

-99.397

-9.500

-5.107

-117.741

Change (%)

-61

27

161

187

-27

-31

107


30/172

Other Income and ExpensesWith 2% decrease year-on, the otherincome and expenses accountregistered TRY 15,152 thousand in2008. The most significant portion

of the balance in this account comesfrom the provisions account withTRY 13,666 thousand.

Revenues, Income, Expenses and Lossesfrom Other Operations (TRY thousand)

Provisions

Rediscounts

Compulsory Earthquake InsuranceDeferred Taxation

Other Revenues and Income

Other Expenses and Losses

Total

31 December 2007

-12.501

-3.912

00

1.457

-456

-15.412

31 December 2008

-13.666

3.808

57-2.122

1.124

-4.353

-15.152

Change (%)

9

197

-23

854

-2



Operating ResultsSome of the ratios of Anadolu Sigorta in 2008 in comparison with those of 2007 are presented below.

(%)

Technical Profitability Ratio

Loss-Premium Ratio (net)

Return on Equity

Return on Assets

2007

1.8

74.3

12.0

5.5

2008

8.3

*78.7

23.1

9.2

* In line with the amendment made by the Undersecretariat of Treasury in 2008, deferred commissions were deducted from the Unearned Premium Provisions.The loss-premium ratio according to the old method is 0.73.

(TRY thousand)

Technical Division Balance

Investment Income

Investment Expenses

Revenues, Income, Expenses and Losses from Other Operations

Total

Gross Income

Tax Provisions

Net Income

31 December 2007

21,653

127,879

-56,895

-15,412

77,225

77,225

-23,016

54,209

31 December 2008

96,671

176,944

-117,741

-15,151

140,723

140,723

-23,057

117,666

Change (%)

346

38

107

-2

82

82

0

117

At the close of 2008, gross profit registered a year-on rise by 82% and reached TRY 140,723 thousand, a resultparticularly contributed to by the positive development in the technical division balance. Net profit after the tax

provision in the amount of TRY 23,057 thousand had a year-on increase by 117% and went up to TRY 117,666thousand.


31/172

Anadolu Sigorta in the Industry Anadolu Sigorta 2008 Annual Report 29

Anadolu Sigorta in the IndustryAnadolu Sigorta reinforced itsuninterrupted leadership in theindustry with high profitability attainedin 2008 based on the awareness thatsustainable and adequate technicalprofitability is as valuable as premiumproduction. Fair competition in pricing,and maintaining its modern and high-quality service will remain the primarygoals of Anadolu Sigorta also in theperiod coming.

Anadolu Sigorta continues to deliverhigh-quality service to its customerswith the expert and experiencedpeople in its organization, drawingupon its solid technological andfinancial infrastructure, constantdevelopment and improvementphilosophy, and extensive agencynetwork.

The main reason for its achievements,the Company's team was furtherstrengthened in 2008 and reached779 people. Having adopted acustomer-focused approach with itsextensive agency network, AnadoluSigorta team takes on an analyticaland guiding role in providing theproducts that will respond to thedemand by correctly and exactlydetermining the need, as well asinforming the customers on theinsurance business while creatingbroad public awareness of insurance.

The sales organization brings serviceto customers in many cities acrossthe country, under the coordinationof ten regional branches. Two of theregional branches are located instanbul, which is also responsiblefor the greater part of the portfolio.

Anadolu Sigorta Regional Branches: stanbul Regional Branch - stanbul Kadky Regional Branch - stanbul Western Anatolia RegionalBranch - zmir Marmara Regional Branch - Bursa Central Anatolia Regional Branch -Ankara Black Sea Regional Branch -Trabzon Western Black Sea RegionalBranch - Zonguldak Mediterranean RegionalBranch - Antalya Southern Anatolia RegionalBranch -Adana Turkish Republic of NorthernCyprus Branch - Lefkofla

The numbers of delivery channelsoperating under Anadolu SigortaRegional Offices as of year-end 2008are presented below:

Delivery Channels: Professional/corporate agenciesand brokers (1,512) All flbank branches (1,029) Trkiye Snai KalknmaBankas A.fi. (1) Arap Trk Bankas A.fi.branches (3) Alternatif Bank A.fi.branches (47)

Anadolu Sigorta will stand by itscustomers also in the future with itsmaximum service concept,nationwide agencies, use of

technology, pioneering identity ininsurance services, and capability toconstantly develop products.

Anadolu Sigorta makes significantinvestments into technology with aview to capturing both profitability

and leadership in the industry, and tomaximizing customer satisfaction.

Structures designed to offer evenbetter service to the customers viaall of the delivery channels will belaunched in the near future.

During 2008, Anadolu Sigorta initiatedthe C2C (Closer to Customer)transformation program, whereby theCompany will establish its future onmuch more solid foundations, in orderto introduce a model that will givecompetitive edge based on customer-focused approach to service, as wellas new work flows. The Company'sefforts relating to the C2C (Closer toCustomer) transformation programwill be continued uninterruptedly in2009.

The pioneering role Anadolu Sigortahas undertaken in the industry isfurther reinforced by exemplaryprojects that are commenced with aview to enhancing productivity, qualityand efficiency. These projects includethe following: E-Invoice and E-Service Provisionthat will increase service quality SWEP now featuring upgradedtechnological infrastructure Process Analysis that willenhance productivity Claims Management that willenable correct determination of theperformances of surveyors and

services Pricing Model that will respondto the question what is the correctprice? Digital Address Determinationthat enables direct viewing of addressdata by agencies


32/172

30 Anadolu Sigorta 2008 Annual Report Research & Development Applications Regarding New Services and Activities

Research & Development Applications Regarding New Services and Activities

In line with the customer-focusedapproach to management, CorporateInsurance Department was set up tocentralize the handling of relationshipswith corporate customers and toupgrade the service standard. Reorganization efforts wereundertaken for stanbul RegionalBranches. In this frame, theoperations of fiiflli Regional Branchwere discontinued and BakrkyRegional Branch was renamedstanbul Regional Branch. Previouslycarried out by fiiflli Regional Branch,claims, legal, subrogation andaccounting activities were handedover to the stanbul Regional Branch. Two individual organizationstructures were formed under thename Risk Management andInternal Control Department andActuarial Consultancy in order tocarry out the activities of the RiskManagement and ActuarialDepartment. A survey has been conductedamong the Company's real personpolicyholders in an effort to assessthe service quality as perceived bythe customers. Providing information aboutproducts was added to the servicesoffered by Anadolu Service andClaims line at the number 444 0 350which has the objective of informingexisting and potential policyholderson the products. Informative Form practice was

introduced to inform the existing andpotential customers on AnadoluSigorta products within the scope ofthe Regulation on Disclosure inInsurance Contracts. Within the frame of new productdevelopment to respond to thecustomers' needs, a number ofpolicies were introduced: Motor Own

Damage Insurance (for members ofKamu-Sen), Maximum TrafficInsurance (for members of Kamu-Sen), Healthcare Specialists IndividualRisks Insurance (for doctors that aremembers of Kamu- Sen), Life&PAInsurance for Turkish Soldiers, MotorOwn Damage Insurance for TurkishSoldiers, Fishing Boat Insurance,Agency Professional LiabilityInsurance, and SME Package Policy. With a view to enabling moreeffective and efficient handling ofmarine and liability claims, the processwas handed over to the Marine andLiability Insurance Department. Mystery customer initiative wasrealized to identify customerrequirements relating to regionalbranches, Maximum InsuranceSpecialists and agencies. Based on the fact that companieshaving an insight into their portfolioslead by a large margin in competitionunder the current conditions, thenecessary infrastructure work wasstarted for data mining, and relatedtraining sessions for employees wereheld. Informative SMS/e-mail messagesare started to be sent to thecustomers via flbank so as to letthem know when their policies arerenewed. Further, analysis work is inprogress on the notification ofsurveyor and missing documentinformation to the customers viaSMS/e-mail messages.

The scope of the centralized letterprinting and enveloping service wasexpanded with letters to healthpolicyholders (policy renewal letters,premium receipt documents andcredit card letters) to enhance thequality of service offered tocustomers with health policies. Inaddition, premium receipt documents

are started to be sent via e-mail tothose health policyholders whose e-mail addresses are available to theCompany. Work was undertaken for theestablishment of Information SecurityManagement System. The Company's initiatives alsocovered the Business Model andAdvanced Process Design projectexecuted in cooperation with theconsultant firm in order to sustain theCompany's leadership in the country.One other goal of the project is toanalyze and upgrade the Company'sbusiness model and processes so asto achieve international standards.Another initiative was the FunctionalDesign and Detailed Analysis, thesecond phase of the C2C Programwhereby the target business modeland processes identified as a resultof the Business Model and AdvancedProcess Design will be realized in linewith the Company's corporate goalsand vision.

C2C (Closer to Customer)transformation program can beoutlined as follows:

Improvement of key insuranceactivities Betterment of delivery functions Enhancement of the effectivenessand productivity of businessprocesses Development of performance

management activities Amplification of the depth ofcustomer data Improvement of claims andsubrogation processes Acceleration of productdevelopment Upgrading sales and service model


33/172

Commitment to Social Responsibility Anadolu Sigorta 2008 Annual Report 31

Based on its commitment to its socialresponsibilities, Anadolu Sigortaextends support to educationaland academic activities, sportsorganizations, and cultural and artisticevents.

Educational and academic activitiesAnadolu Sigorta sponsored during2008 included organizations such asMarmara Educational Institutions April23 Children's Festival and TEKSEMChildren's Play Project.

In 2008, the Company was also asponsor at organizations contributingto the growth and development ofthe industry. These organizationswere Health Insurance Symposium,Bursa Union of Insurance AgentsConvention, Nart Risk ManagementForum 2008 organized by NartInsurance and Reinsurance BrokerageCompany, and the Active Academy6th International Finance Summit.

Anadolu Sigorta also sponsors andsupports several sports organizationsand clubs: the Turkish BasketballFederation, Efes Pilsen PremiereLeague Men's Basketball Team,Trabzonspor Club, EczacbaflWomen's Volleyball Team, and theTurkish Football Federation.

During 2008, the Company alsosupported various foundations andassociations including the InsuranceAgents Association (SAB), and ITUMaritime Faculty Alumni Association(DEFAMED).

Anadolu Sigorta was also a sponsorat the 19th Most Open Air Concertsorganized in July and August.

Anadolu Sigorta also takes placeamong the founding members offoundations assuming social causessuch as the Turkish EarthquakeFoundation (TDV) and EconomicResearch Foundation (AV), and is amember of various commercechambers including the Chamber ofShipping (DTO), stanbul Chamber ofCommerce (TO) as well as others.

Utmost care is paid to assure thatthe supported projects comply withapplicable legislation with regard toenvironmental and public health, anduntil today, no charges were filed orno sanctions were imposed againstAnadolu Sigorta on account of anyenvironmental protection violation.

Commitment to Social Responsibility


34/172

32 Anadolu Sigorta 2008 Annual Report Annual Activity Report Compliance Opinion

Annual Activity Report Compliance Opinion

To the Board of Directors of Anadolu Anonim Trk Sigorta fiirketi:

We have audited the accuracy and compliance of financial information provided in the accompanying annual activityreport of Anadolu Anonim Trk Sigorta fiirketi (the Company) with the audit report issued as of December 31,2008. The Board of Directors of the Company is responsible for the annual activity report. As independent auditors,our responsibility is to express an opinion on the audited annual activity report based on the compliance of financialinformation provided in the annual activity report with the audited financial statements and explanatory notes.

Our audit was performed in accordance with the accounting standards and principles and procedures of preparingand issuing annual activity reports as set out by the Insurance Law No: 5684. Those standards require that we planand perform our audit to obtain reasonable assurance whether the annual activity report is free from materialmisstatement. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our audit opinion.

In our opinion, the financial information provided in the accompanying annual activity report presents fairly, in allmaterial respects, the financial position of Anadolu Anonim Trk Sigorta fiirketi as of December 31, 2008 in accordancewith the prevailing accounting principles and standards set out in the Insurance Law No: 5684. The financial informationprovided in the annual activity report is in compliance with the audited financial statements and explanatory notes,and also includes the summary Management report and our audit opinion on these financial statements.

DRT BAIMSIZ DENETM VE SERBEST MUHASEBEC MAL MfiAVRLK A.fi.Member of DELOITTE TOUCHE TOHMATSU

Sibel TrkerPartnerstanbul, March 26, 2009


35/172

Anadolu Sigorta 2008 Annual Report 33

34 Board of Directors and Auditors36 Executive Committee38 Heads of Units Under the Internal Audit Systems39 Organization Chart40 An Assessment of the Board Directors by the

Corporate Governance Committee43 Committees Operating within Anadolu Sigorta45 An Assessment of the Operation of the Independent Audit Firm

in 2008 Activity Period via the Audit Committee46 Human Resources Practices49 The Companys Transactions with the Risk Group50 Agenda of the Annual General Meeting51 Board of Directors Report

53 Dividend Distribution Proposal54 Corporate Governance Principles Compliance Report

Corporate Governance Practices at Anadolu Sigorta


36/172

Burhan KaragzChairmanBorn on 22 December 1929 in stanbul, Burhan Karagzgraduated from stanbul Higher Education School ofEconomics and Commerce in 1951. He started hiscareer at flbank in 1953 as an assistant inspector atthe Board of Inspectors and was later promoted tothe position of inspector. After serving as the managerof the Deposits Department, as the chairman offlbank's Board of Inspectors and lastly as the manager

of the Loans Department of flbank; he was appointedas Deputy Chief Executive Officer in 1972. He wasappointed as the Chief Executive Officer of flbank in1982. After his retirement in 1988; Burhan Karagzwas appointed to flbank's Board as a member. Heserved as the chairman of the Board of Directors from1996 until 2002. Between 1966-1993, he served onthe Boards of Directors of Anadolu Bankas A.fi., EreliDemir elik Fabrikalar A.fi, Trk Eximbank A.fi, andTrkiye Snai Kalknma Bankas A.fi. as a member, andstanbul Segman ve Gmlek San. T.A.fi., Aslan imentoA.fi., Trkiye Snai Kalknma Bankas A.fi., T. Dfl TicaretBankas A.fi. and Trk Eximbank A.fi. as the chairman.Burhan Karagz was elected as the chairman of theBoard at Anadolu Sigorta on 18 October 1993. He isalso the head of the Anadolu Sigorta CorporateGovernance Committee, and a member of TurkishIndustrialists' and Businessmen's Association (TSAD).

Bahittin Daver OrhonDeputy ChairmanBorn on 11 December 1942 in Srmene/Trabzon, B.Daver Orhon graduated from the Department of Financeand Accounting, stanbul Academy of Economic andCommercial Sciences in 1975. He started his careerat flbank as a clerk at Beyazt branch in 1968 andbecame assistant chief at the same branch in 1972.He functioned as a chief at Aflirefendi, Yenimahalle/Ordu, Ordu and zmit branches from 1974 until 1979,

and as II. Manager in Emirda and Glck branchesin 1980. He was branch manager in Hereke branchbetween 1980-1983, assistant branch manager inSirkeci branch between 1983-1986, branch managerin Demirkap branch between 1986-1988 and in Fatihbranch between 1988-1990, and regional manager instanbul Deputy Chief Executive Officer's Office. Hewas appointed to flbank's Board of Directors as amember in 1996 and rose to Deputy Chief ExecutiveOfficer in 1998. After his retirement in 2003, B. DaverOrhon was elected as Board member on 29 March2004 and then as Deputy Chairman on 30 March 2005in Anadolu Sigorta. He is also a member of AnadoluSigorta Corporate Governance Committee.

Mustafa Ali SuDirector and Chief Executive OfficerBorn on 28 September 1953 in Antalya, Mustafa AliSu graduated from Middle East Technical University,Faculty of Administrative Sciences, Department ofBusiness Administration in 1974. He started his careerat flbank in 1976 as an assistant inspector at the Boardof Inspectors. Mustafa Ali Su was appointed to theOrganization Department as assistant manager in 1986,as group manager to the IT Department in 1988 and

then became the manager of the Department of CreditCards in 1990, and the manager of the OrganizationDepartment in 1992. He became the director of theNew Head Office Construction Project during therelocation of flbank Head Office to stanbul in 1996.Having served as the Chief Executive Officer of AnadoluHayat Emeklilik from 2001 until 2006, Mustafa Ali Suhas become the Chief Executive Officer of AnadoluSigorta on 01 February 2006. Mustafa Ali Su is amember of Middle East Technical University Graduates'Association, Vice President of TSRfiB (Association ofthe Insurance and Reinsurance Companies of Turkey),and .Head of the Management Committee of theInsurance Information Center.

Nilgn skenderDirectorBorn on 01 November 1956 in Trabzon, Nilgn skendergraduated from stanbul University, Faculty ofEconomics, Department of Economics in 1978 andstarted her career at flbank as a clerk in Ayaspaflabranch the same year. After serving at CreditInformation & Financial Analysis Department in various

positions for 10 years; she was appointed as II. managerand then as assistant manager at fiiflli branch. Shefunctioned at Osmanbey, Maslak and Teflvikiyebranches as branch manager and at stanbul I. RegionalDepartment as regional manager between 1995 and2007. On 28 March 2007, she was appointed asmanager of the Private Banking Sales Department.Nilgn skender has been appointed as Board Directorof Anadolu Sigorta on 12 May 2005.

mer KarakuflDirectorBorn on 01 January 1965 in Gmflhane, mer Karakuflgraduated from Gazi University, Faculty of Economicand Administrative Sciences, Department of PublicAdministration in 1986. He started his career at flbankin 1988 as an assistant inspector at the Board ofInspectors, where he later became an inspector. He

was appointed as assistant manager to the AccountingDepartment in 1998, where he subsequently rose togroup manager and manager. He was appointed asthe manager of flbank Yeniflehir branch in Ankara in2007. Serving as the manager of Human ResourcesDepartment since 24 September 2008, mer Karakuflhas been elected to a seat on the Board of AnadoluSigorta on 30 March 2006. mer Karakufl is also amember on Anadolu Sigorta Audit Committee.

Aysel TacerDirectorBorn on 07 May 1959 in Siverek/fianlurfa, Aysel Tacergraduated from Marmara University, Faculty ofEconomic and Administrative Sciences, Departmentof Business Administration in 1980 and started hercareer at flbank as a clerk in Taksim branch the sameyear. After becoming assistant chief at stanbul Credit

Information Department in 1983; she became assistantcredit specialist in 1989 and then assistant managerin 1993 at fiiflli branch. After serving at Akatlar, arflBakrky, Bakrky and Gneflli branches as branchmanager between 1996 and 2005, she was appointedto Gneflli Corporate/stanbul branch as branchmanager. Aysel Tacer has been elected as a BoardDirector of Anadolu Sigorta on 30 March 2005.

34 Anadolu Sigorta 2008 Annual Report

Board of Directors and Auditors

BOARD OF DIRECTORS


37/172

Emre DuranlDirectorBorn on 03 October 1972 in Dsseldorf/Germany,Emre Duranl graduated from Hacettepe UniversityFaculty of Economic and Administrative Sciences,Department of Business Administration in 1994 andstarted his career at flbank as an assistant inspectorat the Board of Inspectors in 1996. Currently the CapitalMarket Unit Manager in the Equity ParticipationsDepartment at flbank, Duranl serves as a Board

member at Milli Reasrans T.A.fi., Anadolu HayatEmeklilik A.fi., fl Yatrm Menkul Deerler A.fi., flPortfy Ynetimi A.fi., and Yatrm Finansman MenkulDeerler A.fi., and as an auditor at Avea letiflimHizmetleri A.fi. Appointed as a member to the Boardof Directors at Anadolu Sigorta on 30 March 2006, heis the Board Director responsible for internal systemsand a member on the Audit Committee at AnadoluSigorta.

Yaflar dirselDirectorBorn in 1946 in ivril/Denizli, Yaflar dirsel graduatedfrom Ankara University, Faculty of Political Sciences,the Department of Economics and Finance. He startedhis career at flbank in 1973 as an assistant inspectorat the Board of Inspectors. He was appointed asassistant manager to the Galata branch in 1985 andbecame the manager of Gayrettepe branch in 1988.He functioned at Levent, Yenicami and fiiflli branches

as branch manager between 1989-1997, then becamethe Deputy Chief Executive Officer in 1997. Between1998-2004, he was appointed as Chief ExecutiveOfficer of fl Factoring Financial Services. After hisretirement in 2004, Yaflar dirsel has been elected asa Board Director of Anadolu Sigorta on 30 April 2008.

Mustafa Nail YacDirectorBorn on 07 May 1950 in Gdl/Ankara, Mustafa NailYac graduated from Ankara University, Faculty ofLaw. After completion of his internship in law, hejoined flbank as an assistant inspector at the Boardof Inspectors in 1974. He became the assistantmanager of Corporate Loans Department in 1985 andNon-Performing Loans Department in 1986. He wasappointed to Mersin branch as a manager in 1988 and

became the manager of Credit Information and FinancialAnalysis Department in 1990. He functioned at Rhtm-Kadky and Yenicami branches as branch managerbetween 1993-2002. He was appointed to flbank'sBoard of Directors as a member in 2002. After hisretirement in 2008, Mustafa Nail Yac has been electedas a Board Director of Anadolu Sigorta on 30 April2008.

Mehmet fiahin KarabilginAuditorBorn on 20 January 1957 in Adana, Mehmet fiahinKarabilgin graduated from Anadolu University, Facultyof Economics, Department of Economics in 1993. Hestarted his career at flbank in 1983 as a clerk in Pozantbranch and was promoted to assistant chief in Adliyebranch in 1987, to chief in Pozant branch in 1989, to

II. Manager in skenderun branch in 1996, and branchmanager of Erzin branch in 1997. Having served as anassistant manager in Orta Anadolu Regional Departmentfrom 2001, and as the branch manager of Giresunbranch from 2005, he was appointed as the groupmanager to the Financial Operations Department in2006. Mehmet fiahin Karabilgin has been appointedas the branch manager of Kdz. Ereli branch, a positionhe currently holds and has been elected as an auditorof Anadolu Sigorta on 27 March 2008.

Zeliha lke SelviAuditorBorn on 12 July 1962 in Grdes/Manisa, Zeliha lkeSelvi graduated from Middle East Technical University,Faculty of Engineering, Department of ComputerEngineering in 1985 and started her career at flbankas a software specialist trainee at zmir Electronic DataProcessing Center the same year. She became an

assistant programmer at the Head Office OrganizationDepartment in 1986. After serving at zmir ElectronicData Processing Center from 1988 until 1992; shestarted working at the Head Office IT Department in1992. She was appointed as an assistant manager atthe Software Development Department in 1999, andpromoted to group manager position on 29 March2005. Zeliha lke Selvi has been appointed as an auditorof Anadolu Sigorta on 27 April 2006.

Ali Tolga nalAuditorBorn in 1971 in zmir, Ali Tolga nal graduated fromBilkent University, Faculty of Engineering, Departmentof Industrial Engineering in 1993. He received hismaster's degree in economics from Bilkent University,Institute of Economics and Social Sciences in 1995.He joined flbank in 1996 as an assistant inspector at

the Board of Inspectors. He was appointed to theAccounting Department as an assistant manager in2005 and then as group manager in 2008. Ali Tolganal has been elected as an audi

anadolu insurance annual report 2008

Documents