Turkish Insurance Industryby Sezi Meriby Sezi Mericc, Milli Re, Milli Re

ContentsContents

Market HistoryMarket History

General Market General Market ConditionsConditions

Role of Foreign CapitalRole of Foreign Capital

Turkish Reinsurance Turkish Reinsurance MarketMarket

Future OutlookFuture Outlook

Milli ReMilli Re

Market History

Market Overview

Foreign Capital

Reinsurance Market

Future Outlook

Milli Re

The History of the Turkish Insurance The History of the Turkish Insurance MarketMarket

• The first developments regarding insurance activities in Turkey were seen following the big fire which occurred in Istanbul in 1870.

• The pioneering insurance companies established in Turkey (during the Ottoman times) were the agencies of the English and French companies (Sun, Northern, North British, La Fonciere).

• The first Turkish capitalized insurance company was established in 1918.

Market History

Market Overview

Foreign Capital

Reinsurance Market

Future Outlook

Milli Re

2005 2006 2007 2008 2009

Non-Life 32 32 35 36 36

Life – Pension

11 11 10 12 12

Life 10 10 14 12 11

Reinsurance

2 1 1 1 1

The History of the Turkish Insurance The History of the Turkish Insurance MarketMarket

Market History

Market Overview

Foreign Capital

Reinsurance Market

Future Outlook

Milli Re

Turkish Insurance Market: a brief Turkish Insurance Market: a brief overviewoverview

Premium Production TL

Branches 2007 2008 2009 Share (%)

Fire 1.482.841.577 1.596.779.128 1.670.810.100 13,43

Marine 364.887.256 413.600.680 374.352.036 3,01

Accident (*) 3.574.502.835 3.330.869.728 3.237.041.576 26,02

Motor TPL 1.650.517.911 2.062.285.306 2.249.245.391 18,08

Eng. 523.356.482 535.217.981 623.890.948 5,01

Agriculture 95.331.476 125.111.095 151.119.651 1,21

Health 1.217.976.563 1.326.125.505 1.415.189.392 11,37

LegalProtection 39.216.024 32.412.600 36.028.946 0,28

Pers.Acc. 400.666.470 467.501.881 505.591.674 4,06

Credit 13.784.873 40.944.611 28.436.157 0,22

Non- Life Total 9.597.468.685 10.203.673.199 10.614.317.698 85,35

Life 1.412.198.649 1.576.208.875 1.821.653.559 14,65

G.Total 11.009.667.334 11.779.882.075 12.435.971.258 100,00

(*) Including Motor Own Damage

Market History

Market Overview

Foreign Capital

Reinsurance Market

Future Outlook

Milli Re

Premium Production vs. Annual GrowthPremium Production vs. Annual Growth

Market History

Market Overview

Foreign Capital

Reinsurance Market

Future Outlook

Milli Re

Turkish Insurance Market: a Turkish Insurance Market: a profitability profitability checkcheck

2007 2008 2009

Profit (TL)

447.558.788 481.931.039 217.007.460

Premium (TL)

11.009.667.334

11.774.219.813

12.435.971.258

(%) 4,65 4,10 1,74

* Including both life and non-life branches.

Branch Loss Ratio Market Share

Accident (including M.O.D) 90% 26%

MTPL 92% 18%

Health 92% 11%

Total 91-92% 55%55%

Market History

Market Overview

Foreign Capital

Reinsurance Market

Future Outlook

Milli Re

Profit / Shareholder‘s Fund RatiosProfit / Shareholder‘s Fund Ratios

2007 2008 2009

Profit (TL) 447.558.788 481.931.039 217.007.460

Shareholder’s Fund (TL)

6.848.092.633

7.021.692.161

8.821.077.683

Profit/Shareholder’s Fund (%)

6,53 6,86 2,50

Market History

Market Overview

Foreign Capital

Reinsurance Market

Future Outlook

Milli Re

Important Insurance Organizations in the Important Insurance Organizations in the MarketMarket

TARSIM: Agricultural Insurance Pool

TCIP: Turkish Catastrophe Insurance Pool

Earthquake insurance for dwellings became compulsory after 1999 earthquake in the Marmara region. The main objectives of TCIP are:

• To provide an earthquake insurance cover for dwellings in return for an affordable premium• To reduce or mitigate the financial burden of potential earthquakes suffered by the State, by spreading it to the international financial and reinsurance markets• To make contribution in developing insurance awareness in the society.

Insurance Data Center

TRAMER

Market History

Market Overview

Foreign Capital

Reinsurance Market

Future Outlook

Milli Re

Foreign Capital Development in the Foreign Capital Development in the MarketMarket

20020055 20020066 20020077 20020088 20020099

No. of Foreign Capital CompaniesNo. of Foreign Capital Companies 2020 2424 3535 4141 4343

NonNon--Life CompaniesLife Companies 1111 1414 1919 2222 2424

Life / Pension Companies Life / Pension Companies 99 1010 1616 1919 1919

20052005 20062006 20072007 20082008 20092009

Foreign Share in Paid-up Foreign Share in Paid-up CapitalCapital 1166,,81%81% 23,00%23,00%

38,0938,09%%

51,3751,37%% 554,98%4,98%

NonNon--Life CompaniesLife Companies 1133,,64%64% 119,00%9,00%38,1038,10

%%51,2051,20

%% 55,40%55,40%

Life / Pension Life / Pension Companies Companies 224,85%4,85% 34,85%34,85%

338,078,07%%

51,9251,92%% 554,76%4,76%

Market History

Market Overview

Foreign Capital

Reinsurance Market

Future Outlook

Milli Re

Turkish Reinsurance Market (Premium Turkish Reinsurance Market (Premium Ratio)Ratio)

2009 million TL

BranchesMarket Insurance Premium

Market Reinsurance Premium

Market Reins. Prem. Ratio. in %

Fire 1.671 952 57.00Marine 374 183 49.00Accident (*) 3.807 720 18.93Motor TPL 2.249 333 14.82Engineering 624 424 68.00Agriculture 151 128 85.40Health 1.415 268 19.00Total 10.291 3.011 29.25

(*) Including Motor Own Damage, Personal Accident, Legal Protection and Credit.

Market History

Market Overview

Foreign Capital

Reinsurance Market

Future Outlook

Milli Re

Turkish Reinsurance Market in Brief..Turkish Reinsurance Market in Brief..Per Risk Protection in General

• Currently 23 companies employ proportional reinsurance protection for the risks they have written.

• On the other hand, the number of the companies that have excess of loss protection on gross account basis is only 4.

• Milli Re being the leader of 13 of the proportional treaties, working on bouquet basis, holds a 25% share within proportional reinsurance premium of the market.

Market History

Market Overview

Foreign Capital

Reinsurance Market

Future Outlook

Milli Re

Outlook for 2010Outlook for 2010....

• Despite the Global Economic Crisis, Non-Life premiums rose by nearly 13% in Q1 2010.

• A number of regulatory initiatives have acted as a catalyst for the development of the insurance industry:

• authorities are implementing more compulsory insurances

• encourage strong reserving, correct and appropriate reinsurance purchasing, and credit risk control

Market History

Market Overview

Foreign Capital

Reinsurance Market

Future Outlook

Milli Re

Outlook for 2010Outlook for 2010....

• Companies are forced for stricter financial compliance (Auditors, Shareholders, Regulatory Bodies)

• Trend of increased foreign investments/take-overs, consolidation expected in the coming years.

Market History

Market Overview

Foreign Capital

Reinsurance Market

Future Outlook

Milli Re

Milli ReMilli Re

Corporate Profile• Est. in 1929 as the World‘s first and only private company to operate compulsory reinsurance for each insurance branch & promote the development of the Turkish Insurance Market.

• Run the compulsory reinsurance system in all lines of business until 31.12.2001.

• Actively started writing business from emerging markets as from 01.01.2006.

Financial Strength Ratings• A.M. Best 11.08.2009 B++ (outlook stable)

• Standard & Poor‘s 24.02.2010 tr AA

Market History

Market Overview

Foreign Capital

Reinsurance Market

Future Outlook

Milli Re

Milli ReMilli Re

Portfolio Mix

Key Figures (2009)

• Gross Premiums: $547 Million

• Paid-Up Capital: $256 Million

• Assets: $1 Billion

• Net Profit: $59 Million

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Sezi Meric (Area Underwriter)

T: +90 212 231 47 30/ext. 1261 F: +90 212 246 16 08

smeric@millire.com www.millire.com