Anadolu Insurance Annual Report 2009

You Never Lose
with Anadolu Sigorta

Annual Report 2009
Contents
Presentation 3 4 8 10 12 16 23 26 34 36 37 38 Corporate Profile, Our Vision, Our Mission, Corporate Values The historical development of Anadolu Sigorta Key Indicators Message from the Chairman Message from the Chief Executive Officer 2009 Economic and Sectoral Overview An Overview of the Global and Turkish Insurance Industries, and Future Outlook An Assessment of Anadolu Sigorta in 2009 Anadolu Sigorta in the Industry Research and Development Pertaining to New Services and Business Activities Commitment to Social Responsibility Annual Activity Report Compliance Opinion
Corporate Governance Practices at Anadolu Sigorta 40 Board of Directors and Auditors 42 Executive Committee 44 Heads of Units Under the Internal Systems 45 Organization Chart 46 An Assessment of the Board Directors by the Corporate Governance Committee 49 Committees Operating within Anadolu Sigorta 51 An Assessment of the Operation of the Independent Audit Firm in 2009 Activity Period via the Audit Committee 52 Human Resources Policy 54 The Companys Transactions with the Risk Group 55 Agenda of the Annual General Assembly 56 Board of Directors Report Summary 58 Dividend Distribution Proposal 59 Corporate Governance Principles Compliance Report Financial Information and Assessment on Risk Management 79 Summary of Statutory Auditors Report 80 An Assessment of 2009 by the Board of Inspectors 81 2009 Annual Report Compliance Statement 82 Independent Auditors Report 83 The Unconsolidated Financial Report for the Year Ended 31 December 2009 84 Detailed Balance Sheet 89 Detailed Income Statement 90 Statement of Changes in Equity 92 Cash Flow Statement 93 Statement of Profit Distribution 94 Detailed Balance Sheet 96 Notes to the Financial Statements as of 31 December 2009 157 An Assessment of Financial Standing, Profitability and Solvency 159 Information on Financial Structure 160 Summary Financial Information for the Last 5 Years Including the Reporting Period 161 Risk Management Policies Adhered to by Types of Risks 164 Directory
Never Lose Energy

As Turkeys leading insurer for 84 years, Anadolu Sigortas priorities since the day it was founded have been to maximize the quality of the products and services that it offers its policyholders and to keep on making continuous and lasting contributions to the growth and development of the Turkish insurance industry. In line with these priorities, Anadolu Sigortas approach to insurance is based on the principle of Never Lose.
Anadolu Sigorta
Annual Report
2009
Never Lose Customers

Having defined its mission as being the insurance brand preferred by everyone who needs insurance, Anadolu Sigorta aims at achieving a strength that makes it a reference point in the worldwide insurance industry as well with its corporate vales of rooted history, pioneership, integrity, and powerful structure.
Anadolu Sigorta
Annual Report
2009
Corporate Profile
Solid growth in 2009 has enabled Anadolu Sigorta to further strengthen its position in the Turkish insurance industry. The Company increased its total premium production to TL 1,243 million, which corresponds to a year-on rise of 7%. Rises were recorded in premium production levels in such major branches as fire, accident, engineering, health, agriculture, and catastrophe, with the highest amount (close to TL 420 million) being booked in the accident branch and the highest (35.57%) rate of growth in premium production taking place in motor third party liability branch. Based on provisional figures, Anadolu Sigorta controlled an 11.72% share of the overall market among non-life insurers. In keeping with its deep-rooted 84-year-old history as Turkeys leading insurer, Anadolu Sigorta will continue to support the growth and development of the Turkish insurance industry without letup and in the most determined way possible while marshaling all of its energies and efforts to further strengthen the sector.
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.
Corporate Values
A Company Entrenched in History It was founded in accordance with the instructions given by Mustafa Kemal Atatrk It is Turkeys 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 created by bank.
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
Anadolu Sigorta
Annual Report
2009
The Historical Development of Anadolu Sigorta
In keeping with its deeprooted 84-year-old history as Turkeys leading insurer, Anadolu Sigorta will continue to support the growth and development of the Turkish insurance industry without letup and in the most determined way possible while marshaling all of its energies and efforts to further strengthen the sector.
1925
Anadolu Sigorta was founded on April 1 at the initiative of Atatrk and under the leadership of bank, Turkeys first national bank.
1984
Highly acclaimed by the public and the sector, Insurance of the Future, the most comprehensive life policy ever offered in Turkey until then, was introduced.
1975
Being the leader of national insurance since the onset of the Turkish Republic, Anadolu Sigorta celebrated its 50th anniversary.
1986
Representing a new branch in the Turkish insurance business, Electronic Equipment Insurance was first started by Anadolu Sigorta.
1983
Blue Insurance policies marking the introduction of comprehensive insurance system in Turkey and offering 17 types of cover were put on sale for the first time.
1987 1991
Activities commenced in the agricultural insurance branch.
The life branch was transferred to Anadolu Hayat Sigorta, a newly-formed life insurer as required by law.
Anadolu Sigorta
Annual Report
2009
Never Lose Time

Anadolu Sigorta defines its mission as that of being a insurance trademark that is preferred by everyone who needs insurance. With its deep-rooted past, commitment to innovation and honesty, and strong corporate structure and values, Anadolu Sigorta also strives to uphold its superior reputation in international insurance markets.
1993
Extending administrative and technical assistance to Gnay Anadolu Sigorta, founded and started to operate in Azerbaijan, Anadolu Sigorta became the first Turkish insurance company to set up an international operation.
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 Quality Management System certification, an endorsement proving that the Companys quality management system complies with international standards.
1996 1997
Policies in legal protection insurance branch, another first in our country, were written.
2006
Aiming to make the most of the possibilities offered by IT, a Recon Project was launched. Services were made more efficient and productive with the inclusion of all services and agencies in the data processing network with online and real-time systems.
The Company maintained its sectoral leadership in premium production for the fifth consecutive year and realized a premium production in excess of TL 1 billion, undersigning yet another historic result in the history of the Turkish insurance industry. The Company also won the Active Academy Private Customer Satisfaction Award in Insurance for a third time, verifying the success of Maximum Service.
1999
2007
In 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.
2001
The sectors unrelenting champion in premium production for the last six years, Anadolu Sigorta became in 2007 the first insurance company in Turkey to exceed the USD 1 billion threshold in total premium production. The Companys approach to quality was rewarded once again with the Active Academy Private Customer Satisfaction Award in Insurance 2007, granted to it for the fourth time.
After providing service for over five decades, the Company was relocated from its building in Karaky to Towers, where it would be together with bank subsidiaries.
2008
2002
A 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 first in the sector.
Anadolu Sigorta launched the C2C (Closer to Customer) project whereby all business processes are reviewed and revised. While the Company increased its profitability through sustainable growth strategy, it also received Active Academy Private Customer Satisfaction Award in Insurance for the fifth consecutive time.
2009
2004
Voted 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
The first of a series of changes planned under the C2C project were rolled out. Anadolu Sigortas communication activities, which set the tone for the sector as a whole, received a total of eight recognitions including three Crystal Apples at the 21st Annual Crystal Apple Awards Ceremony.
Anadolu Sigorta
Annual Report
2009
Never Lose Financial Strength

Anadolu Sigorta continues to abide by its strategy of pursuing growth only on sound foundations. It supports that strategy by focusing on making the right choices in terms of productivity, risk selection, and pricing.
Total Premium Production (TL thousand)
696,429
2004
825,932
2005
1,060,160
2006
Anadolu Sigorta
Annual Report
2009
1,192,587
2007
1,161,386
2008
1,243,477
2009
Anadolu Sigorta
Annual Report
2009
Key Indicators
Financial Highlights (TL thousand) Total Premium Production Total Assets Claims Paid Paid-in Capital Shareholders Equity Pretax Profit Net Profit
2008 1,161,386 1,534,376 685,304 350,000 607,991 140,723 117,666
2009 1,243,477 1,738,919 854,890 425,000 806,387 59,217 48,164
Capital Adequacy Ratios Premiums Received/Shareholders Equity Shareholders Equity/Total Assets Shareholders Equity/Technical Provisions
2008 1.91 0.40 0.82
2009 1.54 0.46 1.00
Asset Quality and Liquidity Ratios Liquid Assets/Total Assets Liquidity Ratio Current Ratio Premium and Reinsurance Receivables/Total Assets Receivables from Agencies/Shareholders Equity
2008 0.59 1.01 1.50 0.28 0.68
2009 0.53 1.03 1.52 0.25 0.51
Operational Ratios Conservation Ratio Claims Payment Ratio
2008 0.75 0.67
2009 0.75 0.69
Profitability Ratios Loss-Premium Ratio Loss-Premium Ratio (Net) Cost Ratio Combined Ratio (Loss-Premium Ratio+Cost Ratio) Pretax Profit/Premiums Received Financial Profit (Gross)/Premiums Received* Technical Profit/Premiums Received
2008 0.70 0.79 0.20 0.99 0.12 0.12 0.08
2009 0.75 0.82 0.27 1.09 0.05 0.11 0.04
* In the calculation of financial profit, investment income that was transferred from the non-technical division to the technical division was excluded in the investments expenses figure.
Capital Increase in 2009 From 2008 Dividends From Retained Earnings From Sales Income From Prior-Year Profits Capital Increase
(TL) 40,000,000 16,370,267 538,388 18,091,345 75,000,000
During 2009 Anadolu Sigorta increased its capitalization 21.4% from TL 350,000,000 to TL 425,000,000 through bonus capital increase with the addition of TL 75,000,000 consisting of TL 40,000,000 from its 2008 dividends, TL 16,370,267 from its retained earnings, TL 538,388 from sales income to be added to the capital, and TL 18,081,345 from prior-year profits. The Companys issued capital was registered on 3 July 2009 and announced in issue 7349 of Turkish Trade Registry Gazette dated 8 July 2009. Changes in the Articles of Association During the Reporting Year There were no changes in the Companys articles of association during 2009.
Anadolu Sigorta
Annual Report
2009
Premium Production (TL thousand) Fire Marine Accident 442,403 420,088 Motor Third Engineering Agriculture Legal Party Liability Protection Personal Accident Health Credit
225,172
232,201
186,246
252,493
67,557
63,244
49,992
65,668
43,594
7,315
8,709
5,015
4,897
42,936
133,920
153,127 172
08
09
08
09
08
09
08
09
08
09
08
09
08
09
08
09
08
09
08
09
Increase in Premium Production (%) Fire Marine Accident Motor Third Engineering Agriculture Legal Party Liability Protection 35.57 31.36 19.06 Personal Accident Health Credit
3.12
-2.35
-6.38
-5.04
-1.51
14.34
09
09
09
09
09
09
09
09
09
09
Premium Production by Branches (%) Fire Marine Accident Motor Third Party Liability Engineering
18.67
Agriculture Legal Protection
5.09
33.78
Personal Accident Health
20.31
Credit
5.28
0.70
0.39
3.45
12.31
0.01
Shareholder Structure (%) Trkiye Bankas A.. Mill Reasrans T.A. Others
35.53
21.78
42.69
-33.72
114
Anadolu Sigorta
Annual Report
2009
Message from the Chairman
Anadolu Sigorta remains committed to the neverending pursuit of improvements in order to further expand its search for ways to better serve its policyholders and to deliver technology-driven and innovative products and services in line with societys changing requirements.
The recent crisis has transformed our perception of country risk. Developing countries appear to have emerged from the global crisis stronger than they were when it began. The underlying scenario for the period ahead of us is shaped by the realization that weak growth will prevail in the developed countries while the developing countries will be the engines of global growth and trade. Both the Turkish economy as a whole and its real sector in particular were also in decline. Nevertheless the participants in our battle-toughened financial system exhibited a strong stance in this volatile environment with a skill which was acquired as a result of the lessons learned in previous crises and which may be summed up as an ability to make the right decisions in times of emergency.
Esteemed shareholders:
We have put behind us a year of exigencies that was overshadowed by the events of 2008 with the hope that we have at last reached the exit stage in the global economic crisis. With the third quarter of 2009 it was to be observed that economic indicators around the world had begun to recover albeit to markedly different degrees.
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Anadolu Sigorta
Annual Report
2009
Although the global insurance industry suffered seriously as a whole, in Turkey the sector did not experience any dramatic contractions and, on the face of things, even appears to have registered marginal growth. It is a source of pride for us all at Anadolu Sigorta to report that we have emerged from such a tremendous crisis with even greater strength. The sources of that strength are to be found in our companys knowledge and experience, in its corporate makeup, in its steadfastness, and in its financial structure. We must never forget that the past is but prologue to our future. When Anadolu Sigorta was established at Atatrks directives just two years after the founding of the Turkish Republic, it undertook the mission of being the sectors trailblazer and school. The first nationallyowned insurer in Turkey, Anadolu Sigortas formation was spearheaded by bank with the aim of making sure that the Turkish economy would grow on sound foundations. Since then, our company has maintained its premier position by being the first to reach and chart every landmark that the sector has passed. The singular position of Anadolu Sigorta in the Turkish insurance industry and the outstanding service that it provides can be summed up in the unique one-word telegraph address that its headquarters used for decades: imtiyaz (privilege). Having played a major role in the growth and development of its sector, Anadolu Sigorta remains committed to the never-ending pursuit of improvements in order to further expand its search for ways to better serve its policyholders and to deliver technology-driven and innovative products and services in line with societys changing requirements.
Acting in concert within the deep-rooted and robust group structure whose core consists of bank with individuals whose efforts are spurred by their patriotism and by the conviction that the people of their country deserve a more prosperous future gives me both great pride and energy. With these sentiments and thoughts, I repeat that we shall continue to strive with all our might to provide the policyholders that put their confidence in us with the best protection possible while extending my gratitude to all our employees and shareholders. Sincerely
Burhan Karagz Chairman of the Board of Directors
Anadolu Sigorta
Annual Report
2009
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Message from the Chief Executive Officer
Achieved at a time when the effects of the global economic crisis were being seriously felt, such a rise in premium production is an important indication and reflection of Anadolu Sigortas strength.
2009 was not an easy year for the Turkish insurance industry either.
According to figures published by the Association of Insurance and Reinsurance Companies of Turkey (TSRB), our sectors premium production in 2009 stood below the growth in 2008 with just a nominal growth.
Insurance industry premium production continued to decline worldwide during 2009.

The effects of the global crisis made themselves felt in 2009 as well. 2008 marked the first year in which the global insurance industry experienced a genuine contraction since 1980. The decline in premium production persisted into 2009 as well. It is estimated that premiums in non-life branches were down more than 10% overall. Prices fell when the demand for insurance began to lag behind supply in reaction to the economic downturn and this trend continued all year long. The result was stagnation in insurers technical profits in 2009.
To be sure, the life branch did perform fairly well but the elementary branches were nowhere as successful. Non-life premium production in 2009 amounted to TL 10.6 billion, which corresponds to a year-on rise of just 4%, while life branch premium production by comparison increased 15.6% during the same period. Overall growth however amounted to 5.6%, with a total of TL 12.4 billion worth of premiums being taken in. In real terms, growth in the non-life branches was two and a half points below the 6.53% twelve-month rise in consumer prices as measured at year-end 2009.
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Anadolu Sigorta
Annual Report
2009
The effects of the financial sectors crisis combined with the insurance industrys obstinate insistence on competing solely on the basis of price created market conditions that were completely inhospitable for smaller insurers in terms of both production and equity. There was a serious cutback in the sectors technical profits even as loss ratios mounted in some branches. Losses resulting from flash floods caused by heavy rainfall during the year and disastrous flooding in the Marmara region in September generated the highest claims (totaling TL 700 million) experienced by the Turkish insurance market since the frightful earthquakes of 1999.
Anadolu Sigorta continued to register real growth in premium production.

Anadolu Sigorta increased its premium production in 2009 about 7% to TL 1,243 million. Rises were recorded in premium production levels in such major branches as fire, accident, engineering, health, agriculture, and catastrophe, with the highest amount (close to TL 420 million) being booked in the accident branch. Based on TSRB provisional figures, Anadolu Sigorta controlled an 11.72% share of the overall market among elementary insurers. Achieved at a time when the effects of the global economic crisis were being seriously felt, such a rise in premium production is an important indication and reflection of Anadolu Sigortas strength. Our company did not just survive but continued to grow during the crisis thanks in no small part to its investments in infrastructure, human resources, and communication. These results are also important as clear evidence that our sector has begun to shake off the effects of the crisis.
Changes in laws and regulations strengthening the sectors legal framework signal positive future developments.
As a result of intensive efforts by the Treasury Undersecretariat, the Turkish insurance industrys problems with respect to its legal underpinnings have been largely resolved. With the introduction of regulations that comply with EU norms, the industry now has a legal framework that conforms to current international standards and practices. New General Terms, Tariffs, and Instructions were introduced in 2009 for some types of insurance while changes were made in those of others. A clutch of amendments to the Life Insurance Regulations went into effect as of 1 March 2009. Another important development was the formation of the Insurance Arbitration Commission under article 30 of Statute 5684, which sets up an arbitration system that provides for the prompt and straightforward resolution of disputes arising under insurance contracts.
Our bancassurance unit was launched in 2009.

Thanks to the strong synergies generated by the formation of our bancassurance unit, we have embarked upon a new period in which Anadolu Sigorta will be able to maximize its communication and relationships with all of its bank agents from bank on down the line. Our bancassurance project is part of the C2C Customer-Focused Transformation Program that we launched last year in order to make Anadolu Sigorta a more innovative and competitive insurer. By creating stronger and more productive channels of communication through increased integration, this project will allow our company to generate higher premiums and to deliver better service.
Anadolu Sigorta
Annual Report
2009
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Message from the Chief Executive Officer
Anadolu Sigorta continues to lead the Turkish insurance industry with innovative practices and solutions that set the standards that its sector aspires to.
Developing new products to expand our market
Anadolu Sigorta believes that the key to growth and development in the insurance industry lies in enlarging the breadth and depth of its overall market. Taking this as our point of departure, we constantly seek to extend our innovative strengths and to introduce new products to the market and improve our service quality through the effective use of the latest technology. In 2009 Anadolu Sigorta once again demonstrated that it was the sectors most active company in terms of new products introduced to the market. The launching of such products at a time when the effects of the global economic crisis were still being felt had a favorable impact on our premium production while bringing new dynamics to the sector. Products like the SME Package Policy, Credit Card Protection Policy, Comprehensive Motor Vehicle Policy, and Homeowner Policy make it possible for Anadolu Sigorta to address the insurance needs of many different individuals and groups.
Addressing SMEs greater insurance needs in a crisis environment

Small and medium-sized enterprises (SME) generate a huge amount of value for our national economy but are among the businesses that are most at risk in times of economic crisis. For them Anadolu Sigorta has introduced its SME Package Policy, which is based on our analysis of the needs of such firms. We believe that with this product we will be contributing indirectly to our countrys economic development by expanding SMEs export capacities and increasing their competitive strength.
Individualized motor vehicle insurance

In 2009 Anadolu Sigorta rewrote its motor vehicle insurance tariff as part of its overall efforts to improve its policyholder service quality and to be innovative in its service approach. Under the new tariff, which went into effect at the beginning of 2010, premiums are no longer determined according to generalized segments but rather are set on the basis of a policyholders individual attributes and risks. This new tariff will make it possible to quote and charge premiums that are much more realistic because they actually reflect a policyholders individual risks. When preparing our new motor vehicle insurance tariff, we employed internationally accepted insurance techniques while formulating comprehensive models using advanced software and data bases containing millions of entries.
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Anadolu Sigorta
Annual Report
2009
Turkeys most admired and best known insurer

According to a brand recognition survey conducted by GfK, Germanys biggest market research institute, Anadolu Sigorta is the most admired and best known insurer in Turkey. In our opinion this result is a natural outcome of the levels of strength, reliability, and satisfaction for which we are known among our target groups, customers, and delivery channels and it is proof to us that we have been successful in our efforts to create more value for all of our stakeholders.
The way forward

Steadily increasing signals that the contraction in the global economy is slowing down and their impact on our countrys national markets make it more and more likely that the process of emerging from the crisis will work its way out in 2010. Expectations are that real growth in the insurance industry will resume some time during the second half of 2010. The issues of productivity, risk selection, and pricing that became crucial because of the crisis will lose littleif anyof their importance in the near term. For this reason, our primary objective for the foreseeable future must be to continue competing fairly on price and improving the quality of our service in recognition of the fact that sustainable and adequate technical profitability is at least as important and precious as premium production. In all events however we are determined to maintain our successful performance as Anadolu Sigorta in 2010 and to remain on course with our strategy of steady growth. In closing I extend my thanks to all my colleagues in service, to those at bank, and to all our agents, business partners, and policyholders for all the efforts that have contributed to the success of the Anadolu Sigorta family. Sincerely,
Lloyds List Maritime Service and Crystal Apple awards for Anadolu Sigorta
Anadolu Sigorta continues to lead the Turkish insurance industry with innovative practices and solutions that set the standards that its sector aspires to. In 2009 our company gave even greater attention to the shipping sector than in previous years while continuing to write all cargo insurance as well as hull and contingent liability insurance policies for the shipping branch. Anadolu Sigortas contributions to the Turkish shipping industry were acknowledged with the Companys recognition in the Maritime Service Award category of the Lloyds List 2009 Turkish Shipping Awards for excellence and innovation in maritime support services provided by a Turkish or non-Turkish company, organization or other entity which has demonstrated outstanding service to the Turkish shipping industry. In 2009 Anadolu Sigorta was also the recipient of awards in many different categories from the Turkish Association of Advertising Agencies, whose Crystal Apple is regarded as the Oscar of the Turkish advertising industry. At last years ceremony Anadolu Sigorta walked away with the most awards having received four Crystal Apples along with three second place and one third place citations.
Mustafa Su Chief Executive Officer
Anadolu Sigorta
Annual Report
2009
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2009 Economic and Sectoral Overview
The World Economy

The impact of the crisis that began in developed countries financial markets and spread throughout the world as it grew deeper in the last quarter of 2008 began to lose effect in the third quarter of 2009 in part due to the monetary and financial measures being taken. The financial markets of both developed and developing countries embarked upon a process of recovery much more quickly than had been anticipated. There were noteworthy improvements observed both in the developed countries production indicators and in overall world trade.
Recession ends in the United States

While the US Federal Reserve is expected to keep its short-term interest rates (held in the 0-0.025% band since December 2008) at existing levels for some time yet, the positive effects of the fiscal stimulus package that the Fed unveiled in the first quarter of the year can already be seen. There is renewed vigor in private consumption expenditures associated with automotive and housing sales. Located at ground zero of the global economic crisis, the US economy registered a 3.5% rate of growth in the third quarter of 2009 for the first time in twelve months while growth in the fourth quarter also exceeded expectations. Indeed the Q4 5.7% growth that was announced is the highest witnessed since Q3 2003. Although there are some concerns that high unemployment (on the order of 9.8%) may put a damper on rises in consumption outlays and that the progress of economic activity may remain weak for some time yet, the fiscal and monetary measures that have been taken appear to have been remarkably effective in supporting the recovery. With recession (defined as at least two consecutive quarters of down GDP) technically over in the US economy, growth is now expected to continue in 2010.
The impact of the crisis that grew deeper in the last quarter of 2008 began to lose effect in the third quarter of 2009 in part due to the monetary and financial measures being taken.
supported by near-term rises in exports once stability is restored. Although the most recent developments appear to have reduced risks relatively speaking, any sudden, rapid rise in oil or commodity prices could easily provoke uncertainties among economic actors. It is thought that inflation, which has been in decline, could resume rising once again in the period ahead with the elimination of base-year effects. Although the increase may be expected to exceed 2%, that is contingent upon domestic demand remaining weak. Unemployment remained high in the Eurozone throughout the year and in the fourth quarter it surpassed expectations by reaching the 10% level.
Bank of Japan policies remain prudent

Extending its implementation of measures aimed at supplying the private sector with liquidity until the end of 2009, the Bank of Japan (BOJ) left its short-term interest rates unchanged at the 0.1% level to which it had most recently lowered them in December 2008. It appears that the deterioration in the Japanese economy has ended, that public sector investments are on the rise, and that both production and exports are gaining momentum but that private consumption outlays remain weak as a result of higher unemployment and lower income levels. The decline in inflation is likely to slow down as economic recovery takes hold in the period ahead.
Eurozone improvements more sluggish

The European Central Bank (ECB) lowered its shortterm interest rates from 2.5% at the end of 2008 in a series of cuts to 1% (their lowest level ever) during 2009. It is expected that improvements in Eurozone economies will continue and that growth will be
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Anadolu Sigorta
Annual Report
2009
Growth continues at high levels in China

Worries that recession among Chinas trading partners might throttle the worlds second biggest economy prompted the Peoples Bank of China (PBC) to unveil a gigantic USD 586 billion incentives package that appears to have succeeded in maintaining a high level of growth in that country during 2009. It is expected that efforts will be made to keep this growth from falling below 8%, which is seen as the minimum that is necessary to meet 2009 targets, to keep unemployment in check, and to pre-empt political tensions on the domestic front. Even as it protects the Chinese economy from the effects of the global economic crisis however, this package is not without its critics. Specifically there are dire warnings that, by focusing particularly on construction projects, its incentives could cause Chinas chronic over-capacity problem to become even worse.
USD remains weak throughout the year

In the face of the measures that were taken to deal with the global downturn in the United States, the US dollar gained rapidly in value during 2008, particularly at the expense of the euro due to concerns that a perceived inability to take quick, concerted in the Eurozone would result in its economies suffering more from a global recession. As more encouraging numbers started coming in from the economic front however, investors became increasingly less riskaverse with the result that the dollar remained weak throughout most of 2009. Buffeted by expectations about global financial markets movements, by changes in global risk perceptions, and by pronouncements, the dollars parity followed an erratic course against leading currencies. The EUR/USD parity peaked at 1.5139 during 2009 only to subside and end the year at the 1.4316 level.
2008 Growth (%) Global USA Eurozone Japan China Turkey Developing Countries Inflation (%) USA Eurozone Japan China Turkey Developing Countries
Source: IMF World Economic Outlook, October 2009 (E): Estimation (P): Projection
2009 (E) -1.1 -2.7 -4.2 -5.4 8.5 -6.5 1.7 -0.4 0.3 -1.1 -0.1 6.2 5.5
2010 (P) 3.1 1.5 0.3 1.7 9.0 3.7 5.1 1.7 0.8 -0.8 0.6 6.8 4.9
3.0 0.4 0.7 -0.7 9.0 0.9 6.0 3.8 3.3 1.4 5.9 10.4 9.3
Anadolu Sigorta
Annual Report
2009
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In its World Economic Outlook, the IMF revised its global economic growth projections, saying that it now expected a 1.1% contraction in 2009 but a 3.1% growth rate in 2010.
Global interest rates stay depressed during 2009.
Short-term interest rates at end-2009 were at the 0-0.25% level in the US, 1.00% in the Eurozone, and 0.10% in Japan.
consensus that exit strategies must incorporate a soft transition as they move away from existing policies, that countries need to coordinate this process, and that it is very important to remain focused on strong and sustainable growth in the global economy. However just as abandoning supportive fiscal and monetary policies without achieving long-term improvements in economic activity or stability in financial markets may thwart growth, adhering to them for too long could easily raise concerns about public sector debt levels and serviceability. Furthermore decisions on the part of monetary authorities to hold the line on interest rates at historically low levels and to keep markets supplied with liquidity began to trigger significant rises in financial asset and house prices throughout the world in the second half of the year. This creates worries about new speculative bubbles in which asset prices cut free of their economic anchors once again take off.
And in the last quarter of 2009

When balance sheet figures announced by many firms, particularly in the US, revealed results much better than had been expected, investors appetite for risk surged and there were rapid rises in stock exchanges around the world. This situation had a favorable impact on developing countries economies too. Many such countries became the targets of strong capital inflows which not only caused their local currencies to appreciate but which also sent their stock markets on upward trends. Worries that the global economy is at risk of encountering a double-dip recession are now being voiced with increasingly less frequency. In its October World Economic Outlook, the IMF revised its global economic growth projections, saying that it now expected a 1.1% contraction in 2009 but a 3.1% growth rate in 2010. In the case of developing countries, which grew an average 6% in 2008, growth should be around 1.7% in 2009 but nearly three times that (5.1%) in 2010.
A surge in oil prices may be the offing

The spot price of a barrel of Brent crude, which was below USD 40 at the end of 2008, surged in 2009 reaching the USD 78.80 levelthe highest in a yearin October. This rise was driven as much by signals of recovery in the global economy as by increases in other commodity prices and by EUR/USD parity movements. By the end of the year the spot price had edged down slightly to USD 77.70.
The need for a soft transition in crisis exit strategies

Both modest improvements in economic indicators and restored stability in financial markets have prompted debates over what strategies should be employed when winding up the extraordinary monetary and fiscal measures that have been taken during the crisis. Even while there will inevitably be differences from country to country, there is a
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Anadolu Sigorta
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2009
The Turkish Economy 2009: The year the economy shrank

Weak domestic demand combined with depressed external demand brought on by the global credit crunch had an adverse impact on economic activity in Turkey, whose national economy shrank 14.3% quarter-to-quarter in the first three months of 2009. The contraction continued into the second quarter but, at 7%, was only half as fast. This trend was repeated in the third quarter, when a 3.3% contraction was registered. Looking at GDP broken down by category, agriculture, which contracted in the first quarter, appears to have registered a 6.4% rate of growth in the second. The rate of contraction in manufacturing industries, which contribute about a fourth of the countrys GDP, also lost momentum very much along the same lines going from 21.8% in the first quarter to 11.2% in the second. This change is thought to have been largely due to a recovery in automotives sector and white goods sales stimulated by second-quarter cuts in tax rates. In contrast with this, the first-quarter decline in construction not only continued in the second quarter but even picked up speed and remained high in the third as well: construction industry output, which shrank 18.9% in the first three months of 2009, was down 21.4% in the second and another 18.1% in the third.
Turkish economy shrank by 8.4% in the first three quarters of 2009.

In the first quarter
Having shrunk 26.3% in the first quarter, wholesale and retail trade volumes subsequently recovered somewhat though they still registered quarterly declines of 15.4% and 7.2% in the second and third quarters respectively. Special consumption tax cuts, which had stimulated consumption in the second quarter of the year, lost much of their impact in the third. On the other hand, leading indicators such as real sector and consumer confidence index figures announced for the third quarter lagged behind those of the second quarter, when they suggested that there had been rapid corrections. Economic contraction in the third quarter of the year was slower than what it was in the second but the improvement remained modest. As of this writing it is thought that positive growth resumed in the fourth quarter, this being the result of the delayed effects of Turkish central bank short-term interest rate cuts and of increased consumption sparked by banks charging less for consumer credit late in the year combined with base-year effects.
GDP Growth (%) Sectoral Growth (%) Agriculture Manufacturing Industry Construction Trade
Source: TurkSTAT Fixed Prices
2008 0.9
2009-I -14.3
2009-II -7
2009-III -3.3
2009-9 Months -8.4
3.9 0.8 -8.2 -1.1
-0.4 -21.8 -18.9 -26.3
6.4 -11.2 -21.4 -15.4
-2.7 -3.9 -18.1 -7.2
3.2 -12.4 -19.5 -16.3
Anadolu Sigorta
Annual Report
2009
19
Medium-term program
In the medium-term program announced by the government for the years 2010-2012, it is stated that emphasis will be given to economic policies to achieve lasting increases in production, investment, and exports. At the same time, it is also said that the aim is for the private sector to lead the way out of the crisis and during the post-crisis growth process. Foremost among the measures that the government is to take is a changeover to the so-called golden rule of fiscal policy whose aim is to ensure that the ratio of public sector debt to national income remains sustainable over the medium and long terms. A legal framework incorporating this guideline is supposed to be set in place no later than the first quarter of 2010. According to the medium-term program, the government has set GDP growth-rate targets of 3.5%, 4%, and 5% for 2010, 2011, and 2012 respectively. (The program also posits a net 6% contraction in GDP in 2009.) Only modest improvements in unemployment rates are foreseen as taking place in 2010 and 2011. A number of revisions are made in 2009 budget performance projections with the deficit now expected to weigh in at TL 62.8 billion (6.6% of GDP) and the non-interest deficit (NID) at TL 20.8 billion (2.2% of GDP). In its program, the government also calls for NID/GDP ratios of 0.8% in 2010 and of 0.2% in 2011 and says that it expects that there will be a non-interest surplus equal to 0.4% of GDP in 2012.
susceptible to changes in demand, prices continued to rise albeit rather more slowly. Although changes in some tax rates with the intention of bringing public finances into balance in the third quarter exerted upward pressure on prices, twelve-month rises in consumer prices continued to slip in line with the overall downward trend. Factors influencing the underlying inflationary trend in the last quarter of 2009 conformed essentially to the outlook presented in the Central Banks October inflation report. Both domestic and external demand continued to recover modestly as foreseen while economic resource utilization levels remained low. Nevertheless unprocessed food prices shot up quite unexpectedly registering the highest rates of increase witnessed in recent years with the result that yearend inflation in 2009 ended up a whole percentage point higher than the target. On other fronts, rises in oil and other commodity prices and the resumption of normal advance tax rates (which had been cut to support economic activity) also contributed to greater inflationary pressure during this period. The upshot of all these developments is that annualized last-quarter inflation went from 5.27% to 6.53% in 2009.
Improvements expected in foreign trade

Although there were hopes that recovery in Eurozone economies would have a favorable impact on our countrys exports, the actual results were mixed. Exports in October 2009 were up 3.9% compared with the same period a year earlier but reversed themselves and dropped 5.2% in November. According to twelve-month figures for 2009, the foreign trade balance was down 53.4% compared with the previous year and showed a deficit amounting to USD 24,729 million. Comparing twelve-month figures from 2009 and 2008 on the basis of individual categories, CIF imports (including gold) amounted to USD 140,776 million (down 30.3%) and FOB export revenues to USD 102,165 million (down 22.6%). Even unregistered earnings from the so-called shuttle trade are thought to have declined 22.9% to USD 4,783 million.
Inflation subsides in line with global trends

In the wake of the crisis there was a marked contraction in total demand brought on by a clear cutback in economic activity resulting as much from an increasing propensity to save as from rapidly shrinking external demand and tighter money. When combined with sharp declines in commodity prices, this led to a rapid drop in inflation rates everywhere in the world, including Turkey. This trend manifested considerable variation however. In categories that are directly affected by commodity price movements such as energy and processed foods for example, there was a sharp decline in inflation whereas in the case of basic goods and services whose prices are particularly
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Anadolu Sigorta
Annual Report
2009
The current account deficit continues to grow

Cutbacks in both consumption and investment brought on by the global economic crisis led to lower energy prices which resulted in a substantial decline in Turkeys current account deficit in the last quarter of 2008. The crisis also appears to have altered the makeup of the deficit as well. In August 2008 the countrys 12-month current account deficit peaked at USD 49.1 billion. Beginning in October, when the impact of the global crisis on internal and external demand started to make itself felt, there was a rapid decline in the deficit that did not reverse itself until it bottomed out at USD 11.8 billion in October 2009. On a year-to-year basis, the current account deficit was down 67%, going from USD 41.9 billion in 2008 to USD 13.9 billion in 2009. In the period ahead, developments that help reduce country risk, Turkeys growth potential, restoring discipline in public finances, keeping inflation in check, making continued improvements in country ratings as most recently announced, and signing an agreement with the IMF will all be important to the financing of the current account deficit insofar as they rejuvenate both foreign direct and short-term portfolio investment in our country.
Two factors in particular are contributing adversely to budget performance: a persistent rise in noninterest expenses on the one hand and the pernicious effect that the contraction in economic activity has on tax revenues on the other. Expectations that economic recovery is going to be gradual preclude the likelihood of any quick-fix rises in tax revenues in the near term. At the same time, the fact that growth in non-interest expenses stems largely from health, pension, and social welfare outlays only underscores the need for urgent structural reforms in such areas.
CBT keeps the lid on interest rates throughout 2009

Having first lowered interest rates in November 2008, the Central Bank of Turkey (CBT) Monetary Policy Board continued to do so throughout 2009. At the boards last meeting on November 19th of the year, the overnight borrowing rate was reduced 25 basis points to 6.50% while the lending rate was lowered to 9%. While both actions were in line with expectations, the board also signaled it had reached the end of the road insofar as its curtailment of interest rates was concerned.
A rousing performance at ISE

Positive indications of growth emanating from the USA, China, and India had a favorable impact on most equity markets. When a surprise increase in domestic industrial output and improved country rating were added to this encouragement from abroad, the ISE 100 index at the stanbul Stock Exchange shot up 16.48% in December. Trading at the stanbul Stock Exchange paralleled developments in international asset markets for the most part during 2009. The ISE National 100 index closed the year at 52,825 points, 97% higher than its 26,864 level twelve months earlier.
The huge deficit that looms on the budget horizon

The national budget deficit, which amounted to TL 17.4 billion in 2008, reached TL 52.2 billion in 2009 despite some improvements in performance in December. During the same period the non-interest surplus all but dried up, going from TL 33.2 billion to TL 986 million. Centralized administration budgetary outlays in 2009 amounted to TL 267 billion while there were TL 214 billion worth of non-interest expenses. Budget revenues weighed in at TL 215 billion.
Anadolu Sigorta
Annual Report
2009
21
The Macroeconomic Outlook: 2010-2012

2009 (Estimation) I. NATIONAL INCOME Real growth (%) GDP (Current prices, TL bn) GDP (USD bn) II. EXTERNAL BALANCE Current balance (USD mn) Exports (USD mn) (FOB) Imports (USD mn) (CIF) III. PUBLIC FINANCES Total net public debt/GDP (%) IV. MONEY SUPPLY, DEPOSITS & CREDITS Including participation banks Bank deposits (TL bn) (1) TL Convertible FX Credit stock (TL bn) (2) Banking sector total assets (TL bn) Banking sector total assets (USD bn) Banking sector total assets/GDP (%) V. INTEREST, INFLATION & EXCHANGE RATES Real interest rates (%) (3) Government debt securities interest rates (%) (4) PPI (%) - Average - End-to-end CPI (%) - Average - End-to-end USD/TL (5) - Year-end - Average EUR/TL (5) - Year-end - Average EUR/USD parity (6) -6.2 944.7 609.5 -11,500 98,100 136,800 35.3 2010 3.5 1,026.60 660.6 -19,900 108,190 151,350 37.6 Projection 2011 4 1,115.70 683.6 -22,000 117,600 165,000 39 2012 4 1,212.60 709.3 -26,000 127,800 183,000 38.8
515 329.6 185.4 380 805 533.1 85.2 6.6 12.5 1.19 5.4 6.22 6.18 1.51 1.5494 2.2499 2.1636 1.49
575 370 205 437 903.1 564.5 88 5 10 5.21 4.5 6.15 5.15 1.6 1.554 2.376 2.2947 1.485
660 429 231 515.7 1,049.10 627.4 94 4.1 9 4.2 4 4.81 4.5 1.6721 1.6322 2.483 2.425 1.485
760 501.6 258.4 608.5 1,216.30 694.9 100.3 3.8 8.5 4 4 4.73 4.5 1.7504 1.7095 2.5906 2.5395 1.48
(1) BRSA figures (includes interbank deposits). (2) Includes loans to the financial sector. (3) Shows the relationship between average yearly rate on government debt securities and average CPI inflation during the next year. (4) Average compounded rate determined by auctions. (5) CBT FX buying rate. (6) Year-end parities for 2010-2010 are based on Reuters, IIF, and similar institutional projections.
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Anadolu Sigorta
Annual Report
2009
An Overview of the Global and Turkish Insurance Industries, and Future Outlook
The Global Insurance Industry

The effects of the global economic crisis continued to make themselves felt on the sector throughout 2008. Although companies made high underwriting profits, they experienced sharp declines in the returns on their investment: indeed some even booked net losses on them. When economic conditions slowly began to recover in 2009, developments in insurers investment income also began to return to normal. The global insurance industry experienced a real contraction in 2008the first such since 1980with written premium down 3.7% on a year-to-year basis. A large part of that shortfall stemmed from the life insurance, with premiums there off by 5.8%. The shrinkage in non-life insurance was 0.6%, which was the result as much of weak demand as it was of softening premium rates. Worldwide written premium amounted to USD 4,217 billion, of which USD 2,436 billion was from life insurance and USD 1,781 billion was from non-life insurance. In 2008, among the industrialized nations, non-life written premium was down 1.6% with such countries contributing an 86.4% share of the total. Among the developing countries, which contributed 13.6% of worldwide written premium, the year-to-year rise was 7.1%. In the Americas, which together make up the worlds biggest market for non-life insurance, written premium was down 2.1% in 2008 overall but this figure masks an 8.8% increase in Latin America countered by a 3% decline in North America. In Europe, the overall rise in written premium was 0.2% but again there was considerable regional variation: a 0.4% decline in Western Europe but a 5.9% rise in Central and Eastern Europe. In Japan and India, written premium was down 3.5% and 1.6% respectively but up 14.8% in China, whose performance essentially made possible the overall 2.2% written premium increase registered among Asian countries. On the basis of available evidence it appears that the decline in overall written premium continued in 2009 and that non-life insurance premiums were dropped
The global insurance industry experienced a real contraction in 2008the first such since 1980with written premium down 3.7% on a year-to-year basis.
by 11.2%. Premium rates fell when the demand for insurance began to lag behind supply in reaction to the economic downturn and this trend continued all year long. The result was stagnation in insurers technical profits in 2009. Expectations are however that such trends will reverse themselves in 2010 and that demand will pick up once again. That, combined with a resumption in investment returns, is what underlies the belief that the global insurance industry will witness greater profitability in 2010. In 2008 USD 50 billion worth of damages caused by natural disasters were paid out, making it one of the most expensive years experienced by the insurance sector in its history. Most companies managed to cover such high losses by having recourse to their capital, except a number of American and European insurers who found it necessary to ask for government support in order to survive. 2009 was a relatively lucky year from the standpoint of natural disasters. Total catastrophe losses and insured losses last year are estimated at around USD 52 billion and USD 24 billion respectively. The 52% decline in insured losses in 2009 is largely attributable to a relatively calm hurricane season in the United States. Indeed Europe was the continent that suffered the most from catastrophe losses last year. Insurers had to pay out about USD 3.5 billion in damages as a result of Klaus, a winter storm that hit southern France and
Anadolu Sigorta
Annual Report
2009
23
An Overview of the Global and Turkish Insurance Industries, and Future Outlook
Although the Turkish insurance industrys life branch performed rather well in 2009, the same cannot be said for the nonlife branches.
northern Spain in January and was the biggest source of the sectors losses. Hailstorms in Switzerland and Austria in June generated losses amounting to USD 1.25 billion while brushfires in Australia caused another billion dollars worth of insured losses. Despite such spectacular and high-profile events however, worldwide losses from natural disasters were less costly in 2009 than in previous years. However this should not be a cause for optimism. Catastrophe losses have been on the rise over the last two decades and according to scientists we are now likely to experience much greater variation from year to year than in the past. Some years, like 2009, will be relatively calm; others will not. Although reinsurers were seriously affected by the global economic crisis, for the most part they continued to support insurers during 2009. Despite indications that the economic downturn has begun to end, the reinsurance sectors capital formation increased only 8% in the first half-year of 2008 whereas it declined 15% in 2008. That being the case, it is clearly much too early to say that the problem of capital impairment brought on by the economic crisis is behind us. This view is supported by the negative outlook which Fitch, one of the worlds foremost credit-rating agencies, assigned in its 2009-2010 report on developments and prospects in the global reinsurance market.
The United Nations Climate Change Conference held in Copenhagen on 7-18 December 2009 was an event to which the global insurance industry paid particular attention. The Copenhagen Accord which was signed at the conclusion of the conference and which, it had been hoped, would provide for effective and radical measures as a successor to the Kyoto Protocol, turned out to be a disappointment both for environmentally aware individuals and for an insurance sector confronted by increasingly greater losses attributable to climate change. Nevertheless the accord does go on record by acknowledging the reality of global warming and the need to reduce emissions so the conference was not a complete failure. What is needed now is for individuals and organizationsincluding those in the insurance industryto take action so as to make the decisions reached in Copenhagen more effective and binding.
The Turkish Insurance Industry

Although the Turkish insurance industrys life branch performed rather well in 2009, the same cannot be said for the non-life branches. Like the rest of the world, the sector suffered from the effects of the global economic crisis to which were added substantial losses caused by disastrous floods in the third quarter of the year. Total premium production in all non-life branches in 2009 was up 4% yearon and reached TL 10.6 billion in value. During the same period however, premium production in the life branch rose 15.6% and it was this superior performance that boosted the sectors overall premium production 5.6% to TL 12.4 billion. Given the twelve-month 6.53% rise in consumer prices last year however, it becomes clear that the non-life branches performance actually corresponds to a 2.4% decline when the effects of inflation are taken into account. It is expected that the contraction will reverse itself gradually as economic activity picks up again in the period ahead.
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Anadolu Sigorta
Annual Report
2009
Since the beginning of 2009, insurers have been required to publish consolidated financial statements that conform to prescribed standards set forth in a government communique concerning insurance, reinsurance, and pension companies that was announced in issue 27097 of the official gazette on 31 December 2008. One other outcome of the global economic crisis in 2009 was that major international insurers showed rather less interest in the Turkish insurance industry than they had been in the habit of doing in previous years. Vakfbank, which had decided to sell stakes in two firmsGne Sigorta (general) and Vakf Emeklilik (life and pensions)changed its mind in 2009. Another pension company, OYAK Emeklilik, which was sold to Holland-based ING, was reorganized under the name of ING Emeklilik while Ko Allianz, all of whose shares were bought up by Allianz last year, was recast simply as Allianz.
In what amounts to the deregulation of compulsory motor vehicle financial liability insurance tariffs, in 2009 the Treasury Undersecretariat raised the upper limit on approved tariffs from +20% to +100%. Along with this development, the Insurance Arbitration Commission was launched. Forty-four insurance companies have joined the new system, which provides a mechanism for resolving disagreements between service providers and consumers without there having to be recourse to litigation. In a progress report concerning Turkey that was published on 14 October 2009 by the European Commission, it is noted that some progress had been made in the areas detailed above after which the commission stated that while Turkey had largely satisfied requirements with respect to financial market infrastructure, its compliance in the area of insurance was still limited. The report also said that safeguards and auditing standards in the banking and nonbanking financial sectors had not been strengthened and that there still had been no progress in the establishment of an independent regulatory and supervisory agency for the insurance and private pension sectors.
Branches Fire TCIP Marine Accident Motor Third Party Liability Engineering Agriculture Health Legal Protection Personal Accident Credit Non-Life Total Life Grand Total
2008 Premium Production (TL) 1,596,779,129 272,824,680 413,600,680 3,330,869,729 2,062,285,307 535,217,981 125,111,095 1,326,125,506 32,412,600 467,501,881 40,944,611 10,203,673,200 1,576,208,875 11,779,882,075
Share (%) 13.56 2.32 3.51 28.28 17.51 4.54 1.06 11.26 0.28 3.97 0.35 86.6 13.4 100
2009 Premium Production (TL) 1,670,810,100 322,611,823 374,352,036 3,237,041,576 2,249,245,391 623,890,949 151,119,652 1,415,189,392 36,028,946 505,591,674 28,436,157 10,614,317,698 1,821,653,559 12,435,971,258
Share (%) 13.44 2.59 3.01 26.03 18.09 5.02 1.22 11.38 0.29 4.07 0.23 85.35 14.65 100
Change (%) 4.6 18.2 -9.5 -2.8 9.1 16.6 20.8 6.7 11.2 8.1 -30.5 4.0 15.6 5.6
Anadolu Sigorta
Annual Report
2009
25
An Assessment of Anadolu Sigorta in 2009
Anadolu Sigorta is an insurer active in non-life branches, the most important of which are fire, marine, accident, motor third party liability, engineering, agriculture, legal protection, personal accident, health, and credit.
TL 54 million in reinsurance premiums, the Companys total premium production amounted to TL 1,243 million last year. As in previous years, the accident branch accounted for the biggest (34%) share of the total portfolio. This is followed in order of importance by the motor third party liability, fire, and health branches.
Premium Production and Technical Results

Anadolu Sigortas direct premium production reached TL 1,189 million in value in 2009. With the addition of
Premium production in 2009 by branches are presented below with a comparison with the previous year.
Premium Production by Branches (TL thousand) Fire Marine Accident Motor Third Party Liability Engineering Agriculture Legal Protection Personal Accident Health Credit Total 2008 225,172 67,557 442,403 186,246 49,992 7,315 5,015 43,594 133,920 172 1,161,386 2009 232,201 63,244 420,088 252,493 65,668 8,709 4,897 42,936 153,127 114 1,243,477 Premium Growth Rate (%) 3.12 -6.38 -5.04 35.57 31.36 19.06 -2.35 -1.51 14.34 -33.72 7.07 % Share 18.67 5.09 33.78 20.31 5.28 0.7 0.39 3.45 12.31 0.01 11.72*
*Temporary data (TSRB)
Fire
Premium production on fire insurance policies was up 3.1% last year and reached TL 232,201 thousand while claim payments amounted to TL 109,569 thousand. Technical profit in this branch was TL 21,760 thousand in 2009 (TL 26,640 thousand in 2008).
The Performance of the Fire Branch in 2009 Premium Production (TL thousand) 225,172 232,201 Claims Paid (TL thousand) 109,569 Combined Loss Premium Ratio Technical Profitability Ratio (%) (%)
73.5
67,016
59.8
11.8
08
09
08
09
08
09
08
26
Anadolu Sigorta
Annual Report
9.4
09
2009
Marine
Premium production in the marine branch amounted to TL 63,244 thousand in 2009 while claim payments amounted to TL 34,737 thousand. Technical profit in this branch was TL 22,079 thousand (down 4.8% year-onyear).
The Performance of the Marine Branch in 2009 Premium Production (TL thousand) 67,557 63,244 Claims Paid (TL thousand) 34,737 Combined Loss Premium Ratio Technical Profitability Ratio (%) (%)
44.1
23,416
08
09
08
09
08
29.8
09
34.5
08
Accident
Anadolu Sigortas premium production in the accident branch was down 5.0% year-on-year and amounted to TL 420,088 thousand. Claim payments in the accident branch increased 9.3% in 2009 and stood at TL 355,267 thousand. The accident branch booked a technical loss of TL -34,170 thousand.
The Performance of the Accident Branch in 2009 Premium Production (TL thousand) 442,403 420,088 Claims Paid (TL thousand) 325,150 355,267 Combined Loss Premium Ratio Technical Profitability Ratio (%) (%)
89.6
80.5
8.4
08
09
08
09
08
09
08
-8.1
34.9
09
09
Anadolu Sigorta
Annual Report
2009
27
Motor Third Party Liability

Motor third party liability insurance premium production increased 35.6% year-on-year in 2009 and reached TL 252,493 thousand while claim payments rose 35.7% and stood at TL 179,745 thousand. Technical profitability in the motor third party liability branch was 8.3%.
The Performance of the Motor Third Party Liability Branch in 2009 Premium Production (TL thousand) 252,493 Claims Paid (TL thousand) 179,745 Combined Loss Premium Ratio Technical Profitability Ratio (%) (%) 118.2
186,246
132,503
82.0
08
09
08
09
08
09
08
-18.2
Engineering
The year-on-year rise in engineering insurance premium production was 31.4% with TL 65,668 thousand booked in this branch. Claim payments in the engineering branch amounted to TL 30,318 thousand in 2009. A technical loss of TL -1,967 thousand was registered in the engineering insurance branch last year.
The Performance of the Engineering Branch in 2009 Premium Production (TL thousand) 65,668 Claims Paid (TL thousand) 30,318 Combined Loss Premium Ratio Technical Profitability Ratio (%) (%)
27,256
82.5
49,992
75.4
2.7
08
09
08
09
08
09
08
28
Anadolu Sigorta
Annual Report
-3.0
8.3
09
09
2009
Agriculture
Agricultural insurance premium production showed an increase of 19.1% and reached TL 8,709 thousand in 2009 while claim payments amounted to TL 3,615 thousand. Technical profit in the agriculture branch rose from TL -154 thousand in 2008 to TL 2,409 thousand in 2009.
The Performance of the Agriculture Branch in 2009 Premium Production (TL thousand) 8,709 Claims Paid (TL thousand) 3,615 Combined Loss Premium Ratio Technical Profitability Ratio (%) (%) 94.2
7,315
3,130
54.3
08
09
08
09
08
09
-2.1
08
Legal Protection
Premium production in the legal protection branch was down 2.4% to TL 4,897 thousand year-to-year in 2009 while claim payments amounted to TL 38 thousand. Technical profit in the legal protection branch rose from TL 725 thousand in 2008 to TL 3,903 thousand in 2009.
The Performance of the Legal Protection Branch in 2009 Premium Production (TL thousand) 5,015 4,897 Claims Paid (TL thousand) Combined Loss Premium Ratio Technical Profitability Ratio (%) (%) 79.7 0.4
20
2.4
38
08
09
08
09
08
09
14.5
08
27.7
09
09
Anadolu Sigorta
Annual Report
2009
29
Personal Accident
Personal accident insurance premium production was down 1.5% in 2009 and amounted to TL 42,936 thousand. Claim payments stood at TL 8,700 thousand during the same period. Technical profit in the personal accident branch rose 6.8% from TL 34,324 thousand in 2008 to TL 36,661 thousand in 2009.
The Performance of the Personal Accident Branch in 2009 Premium Production (TL thousand) 43,594 42,936 Claims Paid (TL thousand) 8,700 Combined Loss Premium Ratio Technical Profitability Ratio (%) (%)
22.3
5,070
08
09
08
09
08
13.5
09
08
78.7 5.3
Health
Anadolu Sigortas premium production on health insurance policies increased 14.3% in 2009 and amounted to TL 153,127 thousand while claim payments amounted to TL 132,900 thousand. Although the health branch showed a technical profit of TL 7,162 thousand in 2008, it booked a technical loss of TL -21,750 thousand in 2009.
The Performance of the Health Branch in 2009 Premium Production (TL thousand) 133,920 153,127 Claims Paid (TL thousand) 132,900 Combined Loss Premium Ratio Technical Profitability Ratio (%) (%)
101,743
77.8
96.3
08
09
08
09
08
09
08
30
Anadolu Sigorta
Annual Report
-14.1
85.4
09
09
2009
Credit
Premium production in the credit insurance branch was down 33.7% year-on-year and amounted to TL 114 thousand in 2009. After posting a technical loss of TL 8 thousand in 2008, the credit insurance branch showed a technical profit of TL 5 thousand in 2009.
The Performance of the Credit Branch in 2009 Premium Production (TL thousand) Claims Paid (TL thousand) Combined Loss Premium Ratio Technical Profitability Ratio (%) (%)
172
114
08
09
08
09
08
09
-4.9
08
Total
Total premium production in 2009 was up 7.0% and amounted to TL 1,243,477 thousand in 2009. Total claim payments went from TL 685,304 thousand in 2008 to TL 854,890 thousand in 2009. Overall technical profit last year weighed in at TL 50,142 thousand.
The Performance the Branches in 2009 (Total) Premium Production (TL thousand) 1,161,386 1,243,477 Claims Paid (TL thousand) 854,890 Combined Loss Premium Ratio Technical Profitability Ratio (%) (%)
685,304
81.6
78.7
8.3
08
09
08
09
08
09
08
4.0
4.2
09
09
Anadolu Sigorta
Annual Report
2009
31
Investment Income
As a result of lower interest rates in 2009, the returns on Anadolu Sigortas investments were down 8% last year and stood at TL 162,323 thousand. A total of TL 42,617 thousand was booked as income on sales of financial investments during the reporting period. More than half (TL 28,195 thousand) of this was from the sale of government securities while less than half that amount (TL 12,055 thousand) was from the sale of equities. The Financial investments valuation account, which consists of valuation income derived from all equities, government bond, mutual fund shares, repo trading, and fixed-term deposits, increased 383% year-on-year creating an income effect in the amount of TL 18,236 thousand. The Company booked currency translation gains in the amount of TL 11,551 thousand during the reporting period. Income from Anadolu Sigortas equity participations stood at TL 8,400 thousand.
Investment Income (TL thousand) Income from Financial Investments Revenues from the Sales of Financial Investments Valuation of Financial Investments FX Gains Dividend from Affiliates Income from Real Estate Income from Derivatives Other Investments Total 31.12.2008 128,089 16,391 -6,440 19,776 17,888 1,200 13 27 176,944 31.12.2009 79,902 42,617 18,236 11,551 8,400 1,077 540 0 162,323 Change (%) -38 160 383 -42 -53 -10 4,054 -8
Investments Expenses
Anadolu Sigortas investments expenses increased 28% to TL 150,424 thousand in 2009. The biggest component of this figure consisted of TL 129,968 thousand in investment income that was transferred to the technical division. As required by the Undersecretariat of Treasury Circular on the Procedures and Principles of Keys Used in Financial Statements that went into effect on 1 January 2008, Investment income transferred to the technical division in line with the relevant transfer method registered a 31% growth and reached TL 129,968.
Investments Expenses (TL thousand) Investment Management Expenses (incl. interests) Devaluation of Investments Loss from the Sales of Financial Investments Investment Expenses Transferred to the Technical Division FX Losses Depreciation Expenses Total 31.12.2008 -108 -283 -3,347 -99,397 -9,499 -5,107 -117,741 31.12.2009 -1 -3,473 -4,191 -129,968 -8,277 -4,514 -150,424 Change (%) -99 1,127 25 31 -13 -12 28
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Anadolu Sigorta
Annual Report
2009
Revenues, Income, Expenses and Losses from Other Operations

The Revenues, income, expenses and losses from other operations account showed a net year-on-year decline of 81% and a negative balance of TL -2,824 thousand. The biggest contributor to this loss stems from a TL -7,874 thousand charge against the Reserves account.
Revenues, Income, Expenses and Losses from Other Operations (TL thousand) Provisions Rediscounts Compulsory Earthquake Insurance Deferred Tax Income Deferred Taxation Other Revenues and Income Other Expenses and Losses Total 31.12.2008 -13,666 3,808 57 0 -2,122 1,124 -4,353 -15,152 31.12.2009 -7,874 5,460 0 1,207 0 912 -2,529 -2,824 (%) -42 43 -19 -42 -81
Operating Results
Key ratios concerning our companys performance are shown in the accompanying chart along with prior-year results for comparison.
2008 Technical Profitability Ratio Net Loss-Premium Ratio Return on Equity Return on Assets 8.3% 78.7% 19.4% 7.7% 2009 4.0% 81.6% 6.0% 2.8%
31.12.2008 Technical Division Balance Investment Income Investment Expenses Revenues, Income, Expenses and Losses from Other Operations Total Gross Income Tax Provisions Net Income 96,671 176,944 -117,741 -15,151 140,723 140,723 -23,057 117,666
31.12.2009 50,142 162,323 -150,424 -2,824 59,217 59,217 -11,053 48,164
(%) -48 -8 28 -81 -58 -58 -52 -59
As of end-2009, Anadolu Sigorta showed a gross profit of TL 59,127 thousand. After setting aside TL 11,053 thousand as a tax provision, the remaining TL 48,164 thousand corresponds to a 59% year-on-year decline in the Companys net profit.
Anadolu Sigorta
Annual Report
2009
33
Anadolu Sigorta in the Industry
As our countrys biggest nationally owned insurer, Anadolu Sigortas mission is to increase the Companys value while maintaining its financial robustness at international standards. In line with this mission, the Company pursues a soundly-based growth strategy that focuses on profitability while supporting that strategy by seeking to always make the right choices in terms of productivity, risk selection, and pricing. As Turkeys first national insurance company, promoting insurance awareness throughout the country is one of Anadolu Sigortas primary strategic goals. Combining the deep-rooted experience that it regards as its most important capital with an innovative approach that shapes the industry, Anadolu Sigorta undertakes projects that reinforce its solid position in its sector. The most recent of these is the C2C Customer Focus Transformation project that was launched two years ago and has now reached the final stage. As an outcome of the Companys more customerfocused approach in the period ahead, even greater attention will be given to the issues of thoroughly and correctly analyzing existing customers, seeking out and exploiting cross-sale opportunities, taking on new customers, and determining the right prices for the right risks. A team of specialists are currently involved in extensive actuarial studies aimed at achieving these objectives. Small and medium-sized enterprises (SME) generate a huge amount of value for our national economy but are among the businesses that are most at risk in times of economic crisis. Based on its analysis of the needs of such firms, Anadolu Sigorta has introduced its SME Package Policy. This product is seen as having a unique importance and efforts are currently being made to broaden its use through strong promotion and effective sales activities. In the motor vehicle insurance business line, in which Anadolu Sigorta controls a significant share of the sectors total, the Company is currently working on a new and innovative tariff model that is about to be introduced to the market.
Anadolu Sigorta conducted its activities in 2009 while continuing to build on the concepts of quality service, leadership, innovation, and customer focus by which its name is identified.
Training and related activities are constantly being carried out in order to increase the effectiveness of sales channels and in light of changes in the legal framework. A variety of activities are being carried out with the aim of taking the already high level of Anadolu Sigorta brand awareness, satisfaction, and recommendability among target audiences and delivery channels to even greater levels.
2009 highlights
Anadolu Sigorta conducted its activities in 2009 while continuing to build on the concepts of quality service, leadership, innovation, and customer focus by which its name is identified. Important developments involving changes in the Companys organization and in its distribution and sales channels are summarized below. As required by the new insurance law (Statute 5684 dated 3 June 2007) and the Insurance Agency Regulations of 14 April 2008, agents were notified at regular intervals on matters related to their Union of Chambers and Commodity Exchanges of Turkey (TOBB) registration. Checks were made from the TOBB website and the business activities of 148 agents that had not completed their registration requirements within the required period of time were suspended.
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Anadolu Sigorta
Annual Report
2009
The registrations of these agents were subsequently finalized within a short time. At this time there are no active agents with which Anadolu Sigorta works who have not fulfilled their TOBB registration requirements. Priority was given to setting up agencies in provinces were there was deemed to be a need with particular attention being given to recruiting new agents who were properly trained and qualified. At the same time, efforts were also made to improve the existing agent profile and to expand the Companys broker and agent network. In order to deal with severe price competition in the sector, a number of campaigns were conducted by the Company to support its sales channels and to minimize commission fee losses. A coordinated effort involving regional offices was begun to update and complete all customer-related information and documentation as required by Regulations concerning Measures to Prevent MoneyLaundering and the Financing of Terrorism.
Based on findings from investigations of regional business process bottlenecks caused by agents having to obtain the approval of their regional head offices and on discussions of problems frequently raised at meetings in which agents take part, it was decided to allow agents to perform some types of transactions on their own authority. This action has also had the effect of reducing the Companys own operational workload. Quarterly reports of customer complaints broken down by branch were prepared and submitted to the Treasury Undersecretariat as required by Circular 2008/28 concerning reports to be prepared pursuant to article 12 of the Regulations pertaining to Insurance Contract Information Disclosure published on 19 September 2009. With the formation of the Bancassurance Unit set up on 1 July 2009 to provide for centralized monitoring and coordination of relations with banks and of direct sales team activities, the erosion that had been taking place in the Companys Banks portfolio was halted and reversed. The immediate effect of this was a 0.25% rise in this business lines premiums in the month of August. Activities were carried out in line with Regulations concerning Principles applicable to Retail Credit Protection Insurance.
Delivery Channels as of 2009 year-end

Region Southern Anatolia Western Anatolia Marmara Central Anatolia Western Black Sea Black Sea Mediterranean stanbul Kadky TRNC Total Number of Agents 126 189 152 222 45 70 68 310 232 27 1,441 Number of Corporate Agents 34 7 41 Number of bank Branches 139 156 76 195 29 60 56 226 139 13 1,089 Number of Other Banks Branches 4 7 3 8 2 2 17 12 55 Number of Brokers 3 1 2 35 20 61 Total 269 355 232 427 74 132 126 622 410 40 2,687
Anadolu Sigorta
Annual Report
2009
35
Research and Development Pertaining to New Services and Business Activities
Launched in order to apply the business model and processes identified as a result of the Business Model and Top Level Process Design project which was undertaken to examine and improve the Companys business model and processes and which was completed in 2008, Anadolu Sigortas C2C (Closer to Customer) Transformation Program is continuing without any loss in momentum. As part of the C2C Customer Focused Transformation Program, a Bancassurance Unit was set up within the Agents and Marketing Department in order to create a targeted bancassurance model in which Anadolu Sigorta and bank join forces. Organizational activities related to the formation of a Claims Management Department and an Motor Claims Department have been completed with attention being given to compliance with the business model that is to be achieved in the C2C target structure. In line with the objective of providing faster and more effective service by centralizing damage assessment and compensation processes, the duties and responsibilities of the Motor Claims Department have been expanded to encompass all automobile damages files within the combined territory of all stanbul regional departments. Organizational activities related to the formation of a Risk Management and Internal Control Department have been completed as part of the structuring of the Internal Control System. The Companys risk management and internal control manager has been designated as its compliance officer pursuant to article 4 of Regulations concerning Program Compliance with Obligations pertaining to the Prevention of Money Laundering and the Financing of Terrorism published on 16 September 2008. The Organization Department has been restructured as the Project Management and Organization Department with the addition of business analysis and project management functions.
The Project Management and Organization Department, the Software Development Department, and part of the Data Processing Department have been relocated to bank premises in the Gneli district of stanbul. A Business Continuity Management System has been set up with the aim of quickly overcoming any interruptions that may take place during or after earthquakes, floods, terrorist attacks, or other emergencies and of allowing the Company to continue carrying out its essential activities. New quality internal auditors have been given training as part of the quality management system. A number of general use projects were carried under the heading of application development: - Security tokens were introduced for agents to use when entering the Anadolu Sigorta computer system. - New rules and procedures were introduced to heighten security when entering the Anadolu Sigorta computer system. - Improvements were made in products; agents were given greater decision-making authorities. - Policy, rider, offer, information form, questionnaire, and other document design activities were carried out. - Applications were further developed for use in transactions involving the bank Banking Basic Operations Unit (BTOB). - Improvements were made in all processes subject to anti-money laundering regulations. - Warnings that are sent out to lenders were developed and other application-related activities were carried out in line with Regulations concerning Principles applicable to Retail Credit Protection Insurance. - The My Workspace screen on which offer and customer validation processes are performed was improved in line with new requirements. - Corporate customer offer processes were further developed.
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Anadolu Sigorta
Annual Report
2009
Commitment to Social Responsibility
Within the framework of its sense of social responsibility, Anadolu Sigorta supports education, academic activities, sports, and cultural and artistic events. Among the education and art-related activities that the Company sponsored in 2009, mention should be made of Turkish Education Foundation nan Trke Lycee Science & Art Week, theatrical performances staged by TEKSEM, and a sponsorship agreement with the stanbul Museum of Modern Art. In the area of professional organizations and activities aimed at directly or indirectly supporting the development of the insurance industry, Anadolu Sigorta was a sponsor for the 2nd Active Academy Insurance Summit, the Honorary Traffic Inspectors Association Panel, the Hastane Magazine Healthcare Management Award Ceremony, the NART Risk Management Forum 2009, the Fleet Management Seminar, the Lloyds List Shipping Awards, the Aegean Insurance Lobby, the Association of Aegean Insurance Agencies, the Turkish Industrialists and Businessmens Associations Healthcare Workgroup Report, the Kadir Has University 2nd International Healthcare Law Symposium, and the 3rd stanbul Informatics Congress. Anadolu Sigorta is a sponsor for a number of sports federations and clubs: the Turkish Basketball Federation, the Turkish Ice Hockey Federation, the Efes Pilsen Premier League Mens Basketball Team, the Trabzonspor Club, the Eczacba Womens Volleyball Team, and the Adana Tennis, Mountaineering, and Water Sports Club. The Company was also a sponsor for the Womens Circuit 2009 tennis tournament held at the Milta sports complex. Anadolu Sigorta is a founding member of a number of social-purpose foundations such as the Turkish Earthquake Foundation and the Economic Research Foundation. It is also a member of professional organizations such as the Chamber of Shipping and the stanbul Chamber of Commerce.
Within the framework of its sense of social responsibility, Anadolu Sigorta supports education, academic activities, sports, and cultural and artistic events.
Anadolu Sigorta has contributed to the support of foundations and associations such as the Insurance Agents Association, the stanbul Technical University Maritime Faculty Alumni Association, Solidarity Association for the Physical Disabled, the Turkish Spinal Cord Injury Association, and the Foundation for Children with Leukemia. One of Anadolu Sigortas essential missions is to foster an awareness of insurance and its importance in our country and to this end the Company undertakes a variety of informational, advertising, and promotional campaigns. In its 2009 communication campaigns the Company focused on SME insurance during the spring months and on home-owner and automobile insurance products towards the end of the year. In 2009 Anadolu Sigorta launched a series of activities aimed at outlining a much more comprehensive and long-term social responsibility project that it will be undertaking as part of the celebrations surrounding its 85th anniversary in 2010. When supporting projects, Anadolu Sigorta gives the utmost attention to compliance with all laws and regulations pertaining to environmental and public health. Anadolu Sigorta has never been the target of any complaint or sanction related to environmental wellbeing.
Anadolu Sigorta
Annual Report
2009
37
Annual Activity Report Compliance Opinion
To the Board of Directors of Anadolu Anonim Trk Sigorta irketi: We have audited the accuracy and compliance of financial information provided in the accompanying annual activity report of Anadolu Anonim Trk Sigorta irketi (the Company) with the audit report issued as of December 31, 2009. 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 financial information 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 preparing and issuing annual activity reports as set out by the Insurance Law No: 5684. Those standards require that we plan and perform our audit to obtain reasonable assurance whether the annual activity report is free from material misstatement. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. In our opinion, the financial information provided in the accompanying annual activity report presents fairly, in all material respects, the financial position of Anadolu Anonim Trk Sigorta irketi as of December 31, 2009 in accordance with the prevailing accounting principles and standards set out in the Insurance Law No: 5684. The financial information provided 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 MAVRLK A.. Member of DELOITTE TOUCHE TOHMATSU
Sibel Trker Partner stanbul, March 09, 2010
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Anadolu Sigorta
Annual Report
2009
Corporate Governance Practices at Anadolu Sigorta
40 Board of Directors and Auditors 42 Executive Committee 44 Heads of Units Under the Internal Systems 45 Organization Chart 46 An Assessment of the Board Directors by the Corporate Governance Committee 49 Committees Operating within Anadolu Sigorta 51 An Assessment of the Operation of the Independent Audit Firm in 2009 Activity Period via the Audit Committee 52 Human Resources Policy 54 The Companys Transactions with the Risk Group 55 Agenda of the Annual General Assembly 56 Board of Directors Report Summary 58 Dividend Distribution Proposal 59 Corporate Governance Principles Compliance Report
Anadolu Sigorta
Annual Report
2009
39
Board of Directors and Auditors
4
(1) Burhan Karagz Chairman Born on 22 December 1929 in stanbul, Burhan Karagz graduated from stanbul Higher Education School of Economics and Commerce in 1951. He started his career at bank in 1953 as an Assistant Inspector at the Board of Inspectors and was later promoted to the position of Inspector. After serving as the Manager of the Deposits Department, as the Chairman of banks Board of Inspectors and lastly as the Manager of the Loans Department of bank; he was appointed as Deputy Chief Executive Officer in 1972. He was appointed as the Chief Executive Officer of bank in 1982. After his retirement in 1988; Burhan Karagz was appointed to banks Board as a Member. He served as the Chairman of the Board of Directors from 1996 until 2002. Between 1966-1993, he served on the Boards of Directors of Anadolu Bankas A.., Ereli Demir elik Fabrikalar A., Trk Eximbank A., and Trkiye Snai Kalknma Bankas A.. as a Member, and stanbul Segman ve Gmlek San. T.A.., Aslan imento A.., Trkiye Snai Kalknma Bankas A.., T. D Ticaret Bankas A.. and Trk Eximbank A.. as the Chairman. Burhan Karagz was elected as the Chairman of the Board at Anadolu Sigorta on 18 October 1993. He is also the Head of the Anadolu Sigorta Corporate Governance Committee, and a Member of Turkish Industrialists and Businessmens Association (TSAD). (4) Ahmet Doan Arkan Director Born in 1949 in Ankara. Ahmet Doan Arkan graduated from Middle East Technical University in 1971. He began his career as a systems analyst at the General Directorate for the Turkish State Meteorological Service and he joined bank in 1973. In 1974-1975 Ahmet Doan Arkan also did his military service as a systems analyst and programming officer. Returning to bank upon completion of his military service, Ahmet Doan Arkan continued to serve in various capacities both in Turkey and abroad for about ten years, becoming General Manager of an bank-owned foreign trading company in 1987. This was followed by General Manager positions at two other bank-owned companies: zmir Demir elik Sanayi A.. in 1991 and Trkiye ie ve Cam Fabrikalar A.. in 2000.
5
Ahmet Doan Arkan retired from the latter position on 16 September 2009. In the course of his career, Ahmet Doan Arkan has served as a Member or Chairman of the Boards of Directors of firms in the textiles, automotives, maritime shipping, lodging, tourism, manufacturing, and banking industries (2) Yaar dirsel Deputy Chairman Born in 1946 in ivril/Denizli, Yaar dirsel graduated from Ankara University, Faculty of Political Sciences, the Department of Economics and Finance. He started his career at bank in 1973 as an Assistant Inspector at the Board of Inspectors. He was appointed as Assistant Manager to the Galata Branch in 1985 and became the Manager of Gayrettepe Branch in 1988. He functioned at Levent, Yenicami and ili branches as Branch Manager between 1989-1997, then became the Deputy Chief Executive Officer in 1997. Between 1998-2004, he was appointed as Chief Executive Officer of Factoring Financial Services. After his retirement in 2004, Yaar dirsel has been elected as a Board Director of Anadolu Sigorta on 30 April 2008. He is also the Deputy Head of the Corporate Governance Committee at Anadolu Sigorta. (5) Mustafa Nail Yac Director Born on 07 May 1950 in Gdl/Ankara, Mustafa Nail Yac graduated from Ankara University, Faculty of Law. After completion of his internship in law, he joined bank as an Assistant Inspector at the Board of Inspectors in 1974. He became the Assistant Manager of Corporate Loans Department in 1985 and Non-Performing Loans Department in 1986. He was appointed to Mersin Branch as a Manager in 1988 and became the Manager of Credit Information and Financial Analysis Department in 1990. He functioned at Rhtm-Kadky and Yenicami branches as Branch Manager between 1993-2002. He was appointed to banks Board of Directors as a Member in 2002. After his retirement in 2008, Mustafa Nail Yac has been elected as a Board Director of Anadolu Sigorta on 30 April 2008.
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(3) Mustafa Ali Su Director and Chief Executive Officer Born on 28 September 1953 in Antalya, Mustafa Ali Su graduated from Middle East Technical University, Faculty of Administrative Sciences, Department of Business Administration. He started his career at bank in 1976 as an Assistant Inspector at the Board of Inspectors. Mustafa Ali Su was appointed to the Organization Department as Assistant Manager in 1986, as Unit Manager to the IT Department in 1988 and then became the Manager of the Department of Credit Cards in 1990, and the Manager of the Organization Department in 1992. He became the Director of the New Head Office Construction Project during the relocation of bank Head Office to stanbul in 1996. Appointed as the Chief Executive Officer of Anadolu Hayat Emeklilik in 2001, Mustafa Ali Su has become the Chief Executive Officer of Anadolu Sigorta on 01 February 2006. Mustafa Ali Su is a Member of the Graduates Associations of TED Ankara College and of the Middle East Technical University, Board Member of TSRB (Association of the Insurance and Reinsurance Companies of Turkey), and Head of the Coordination Committee of the Insurance Information Center. (6) Necati Aksoyolu Director Born in 1957 in Ankara, Necati Aksoyolu graduated from Ankara University Faculty of Law in 1979, and completed LLM in 1981 at the same faculty. He worked as a legal practitioner between 1981-1983 and joined bank as a lawyer in 1984, where he has been serving as the Chief Legal Counsel of the Legal Affairs Department since 1999. He has participated in various, and mostly internal, seminars and workshops as an instructor and speaker on the Banks Law, Legal Proceedings Law, Collaterals, and Service of Notices Law.
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Anadolu Sigorta
Annual Report
2009
10
(7) mer Karaku Director Born on 01 January 1965 in Gmhane, mer Karaku graduated from Gazi University, Faculty of Economic and Administrative Sciences, Department of Public Administration in 1986. He started his career at bank in 1988 as an Assistant Inspector at the Board of Inspectors, where he later became an Inspector. He was appointed as Assistant Manager to the Accounting Department in 1998, where he subsequently rose to Unit Manager and Manager. He was appointed as the Manager of bank Yeniehir Branch in Ankara on 02 July 2007 and the Manager of Human Resources Department on 08 October 2008. Elected to a seat on the Board of Anadolu Sigorta on 30 March 2006. mer Karaku is also a Member on Anadolu Sigorta Audit Committee.
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(8) Aziz Ferit Eraslan Director Born in stanbul in 1969, Aziz Ferit Eraslan graduated from Middle East Technical University, Department of Public Administration in 1991. He got his masters degree in banking and finance from the University of Stirling. After attending Ziraat Bank School of Banking for nine months in 1991 and 1992, Eraslan joined bank as a Member of the Banks Board of Inspectors in 1992 before he became an Assistant Manager in the Accounting Department in 2000, where he also served as a Group Manager. On 26 July 2007, he has been appointed as Accounting Manager, a position he still holds under the new name Financial Management Division.
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(9) Emre Duranl Director Born in 1972 in Dsseldorf/Germany, Emre Duranl graduated from Hacettepe University, Faculty of Economic and Administrative Sciences, Department of Business Administration (English). He started his career at bank as an Assistant Inspector at the Board of Inspectors in 1996. He later became an Inspector and was appointed as Assistant Manager to Equity Participations Department in 2004. Currently the Insurance and Capital Market Unit Manager in the Equity Participations Department at bank, Emre Duranl served as a Member of the Board of Auditors at Anadolu Sigorta in 2005 and 2006, and has been elected to a seat on the Board of Directors on 30 March 2006. A Member on the Audit Committee and the Board Director responsible for internal systems at Anadolu Sigorta, Duranl also serves as a Board Member at Anadolu Hayat Emeklilik, Milli Reasrans, Yatrm, Portfy Ynetimi, and Yatrm Finansman Menkul Deerler A..
Board of Auditors
(10) Zeliha lke Selvi Auditor Born on 12 July 1962 in Grdes/Manisa, Zeliha lke Selvi graduated from Middle East Technical University, Faculty of Engineering, Department of Computer Engineering in 1985 and started her career at bank as a Software Specialist trainee at zmir Electronic Data Processing Center the same year. She became an assistant programmer at the Head Office Organization Department in 1986. After serving at zmir Electronic Data Processing Center from 1988 until 1992; she started working at the Head Office IT Department in 1992. She was appointed as an Assistant Manager at the Software Development Department in 1999, and promoted to Group Manager position on 29 March 2005. Zeliha lke Selvi has been appointed as an auditor of Anadolu Sigorta on 27 April 2006. (11) Aye Alev Ata Auditor Born on 05 August 1963 in Ankara, Aye Alev Ata graduated from Ankara University, Faculty of Political Sciences, Department of Economics in 1984. She began her career at bank as a trainee clerk in the International Relations Department in 1985. She was promoted to assistant service officer in the same department in 1992, to II. Manager in 1998, to Assistant Manager in 2000 and to Unit Manager in 2006. Since 2008, Aye Alev Ata has been serving as a Group Manager in the Cash Management and International Trade Financing Products Management Unit under the Corporate Banking Products Department. (12) Engin Eki Auditor Born on 01 April 1976 in Karasu/Sakarya, Engin Eki graduated from stanbul University with a BS degree in Management in 1997 and started his professional career at banks Board of Inspectors as an Assistant Inspector in 2000. He has been appointed to the Equity Participations Department as Assistant Manager in 2008, a position he still holds. Elected as an Auditor of Anadolu Sigorta on 26 March 2009, Engin Eki is an Auditor of Portfy Ynetimi A.. and Giriim Sermayesi Yatrm Ortakl A.., as well. He also serves as a Board Member at Mipa Mmessillik thalat hracat ve Pazarlama Datm A.. and Trakya Yatrm Holding A..
Information on Board of Directors Meetings

The Board of Directors holds meetings on a monthly basis, while interim meetings are also convened as and when deemed necessary. Topics to be discussed at the meetings are determined in the meeting agenda consisting of proposals requiring the approval of the Companys Board of Directors and Executive Board reports for informative purposes. During the meetings, other topics raised by the members so as to inform the Board of Directors and the auditors are addressed in the time allocated for any other business. Consisting of the agenda, proposal, informative notes and reports, member files are distributed to all the members nearly four days in advance of the meeting date. The Board of Directors met 14 times during 2009. Five of these meetings were held with full participation of the members, whereas two members were unable to attend one meeting, and one member was absent in eight other meetings.
Ayen Ayan Board of Directors Reporter
Anadolu Sigorta
Annual Report
2009
41
Executive Committee
4
(1) Mustafa Ali Su Director and Chief Executive Officer Born on 28 September 1953 in Antalya, Mustafa Ali Su graduated from Middle East Technical University, Faculty of Administrative Sciences, Department of Business Administration. He started his career at bank in 1976 as an Assistant Inspector at the Board of Inspectors. Mustafa Ali Su was appointed to the Organization Department as Assistant Manager in 1986, as Unit Manager to the IT Department in 1988 and then became the Manager of the Department of Credit Cards in 1990, and the Manager of the Organization Department in 1992. He became the Director of the New Head Office Construction Project during the relocation of bank Head Office to stanbul in 1996. Appointed as the Chief Executive Officer of Anadolu Hayat Emeklilik in 2001, Mustafa Ali Su has become the Chief Executive Officer of Anadolu Sigorta on 01 February 2006. Mustafa Ali Su is a Member of the Graduates Associations of TED Ankara College and of the Middle East Technical University, Board Member of TSRB (Association of the Insurance and Reinsurance Companies of Turkey), and Head of the Coordination Committee of the Insurance Information Center. (2) Musa lken 1. Deputy Chief Executive Officer Claim Management Motor Claims Legal Affairs and Subrogation Born on 20 August 1953 in Tarsus, Musa lken graduated from the stanbul Academy of Economic and Commercial 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 Manager on 06 June 1997 and Kadky Regional Manager on 01 June 2002. Having served in the last position until 31 July 2004, Musa lken became a Deputy Chief Executive Officer on 01 August 2004, and I. Deputy Chief Executive Officer on 01 February 2008. (4) Hakk Efe Gnde Deputy Chief Executive Officer Agencies and Marketing Regional Offices Born on 08 January 1960 in Ankara, H. Efe Gnde graduated from Gazi Teacher-Training Institute, Department of Mathematics and from Middle East Technical University Faculty of Economic and Administrative Sciences, Department of Political Science and Public Administration. Gnde began his career at bank as an Inspector Trainee at the banks Board of Inspectors on 01 December 1986 and rose to the position of grade 3 Inspector before becoming Assistant Accounting Manager on 31 October 1996, and Unit Manager in the same section on 24 February 2000. Having served in this last position at bank until 30 April 2005, H. Efe Gnde became a Deputy Chief Executive Officer at Anadolu Sigorta on 01 May 2005.
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(3) Mehmet Metin Ouz Deputy Chief Executive Officer Motor Insurance Health Insurance Fire and Engineering Insurance Born on 04 April 1959 in anakkale, M. Metin Ouz graduated from Middle East Technical University, Faculty of Arts and Sciences, Department of Physics and Mathematics, and holds a masters degree from Marmara University Institute of Banking and Insurance, Department of Insurance. M. Metin Ouz began his career at Anadolu Sigorta 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 July 2004, M. Metin Ouz became a Deputy Chief Executive Officer on 01 August 2004. (5) Tahsin Erdoan Deputy Chief Executive Officer IT Software Development Project Management & Organization Born on 20 May 1956 in Srmene, Tahsin Erdoan graduated from Hacettepe University Faculty of Science, Department of Mathematics. He began his career at Anadolu Sigorta as a Programmer in the Data Processing Department on 15 September 1980 and subsequently rose to Senior Programmer on 01 January 1987, Chief Programmer on 21 April 1989, Organization and Data Processing Department Chief Superintendent on 01 May 1991, Assistant Manager on 01 February 1993, Manager on 01 May 1996, and Data Processing Manager on 01 June 2002. Having served in this position until 31 August 2005, Tahsin Erdoan became Deputy Chief Executive Officer on 01 September 2005.
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Anadolu Sigorta
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8
(6) Filiz Tayumruk Deputy Chief Executive Officer Human Resources and Training Public Relations Born on 26 June 1967 in stanbul, Filiz Tayumruk graduated 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 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. (8) Erdin Gkalp Deputy Chief Executive Officer Reinsurance Actuarial Consultancy Born on 26 July 1967 in Ankara, Erdin Gkalp graduated from Kuleli Military High School and Turkish Military Academy, Department of Business Administration. He then got his masters degree in insurance from Marmara University, Institute of Banking and Insurance. During his employment with Anadolu Sigorta, he earned the Atatrk scholarship granted by TSRB (Association of the Insurance and Reinsurance Companies of Turkey) and pursued his studies abroad. Having started his career at Anadolu Sigorta as Specialist at the Marketing Department on 01 May 1991, Erdin Gkalp was appointed to the Reinsurance Department on 23 September 1991 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 to the Marketing Department. Erdin Gkalp was 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. Erdin Gkalp has been appointed as Deputy Chief Executive Officer on 01 February 2008.
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(7) M. Levent Snmez Deputy Chief Executive Officer Marine and Liability Insurance Corporate Insurance Born on 22 June 1962 in Ankara, M. Levent Snmez graduated from stanbul Technical University, Faculty of Maritime Studies, Department of Marine Engineering in 1985, got his masters degree in Contemporary Management Techniques from Marmara University & Maine University and completed the SITC (Swiss Re) Marine Insurance program. Having participated in various training programs in Turkey and abroad, M. Levent Snmez also 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 Manager on 01 May 1999. M. Levent Snmez has become Bakrky Regional Manager on 01 June 2002 and Kadky Regional Manager on 01 August 2004. He has been appointed as Deputy Chief Executive Officer on 01 February 2008. (9) Fatih Gren Deputy Chief Executive Officer Accounting and Finance Purchasing Support and Premises Born on 11 November 1969 in Ankara, Fatih Gren graduated from Ankara University, Faculty of Political Sciences, Department of International Relations. He worked as a Specialist at Retail Banking and Agricultural Loans Departments at Ziraat Bank between 1991 and 1994. Having joined Anadolu Sigorta as an Assistant Inspector on the Board of Inspectors on 01 November 1994, Fatih Gren rose 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 August 2004. Fatih Gren has been appointed as Deputy Chief Executive Officer on 01 February 2008.
Anadolu Sigorta
Annual Report
2009
43
Heads of Units Under the Internal Systems
1 (1) Dr. brahim Erdem Esenkaya Chairman of the Board of Inspectors Born on 03 November 1969 in stanbul, brahim Erdem Esenkaya graduated from stanbul University, Faculty of Political Sciences, Department of Public Administration. He then completed a masters degree without dissertation in the graduate program for the management of financial institutions at stanbul University, Faculty of Business Administration, Institute of Business Administration. He earned his masters 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 Auditor 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 01 January 2005 as a Manager. brahim Erdem Esenkaya has been appointed as the Chairman of the Board of Inspectors on 01 June 2007.
2 (2) mer Altun Risk Management and Internal Control Manager Born on 31 October 1970 in Malatya, mer 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, mer 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.
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Anadolu Sigorta
Board of Directors
Corporate Governance Committee Burhan Karagz Yaar dirsel Board of Auditors
Coordination Department to the Board of Directors
Organization Chart
Annual Report
Audit Committee Emre Duranl mer Karaku
2009
Chief Executive Officer Mustafa Ali Su
Risk Management and Internal Control Department
I. Deputy Chief Executive Officer Musa lken
Deputy Chief Executive Officer M. Metin Ouz
Deputy Chief Executive Officer H. Efe Gnde
Deputy Chief Executive Officer Tahsin Erdoan
Deputy Chief Executive Officer Filiz Tayumruk
Deputy Chief Executive Officer M. Levent Snmez
Deputy Chief Executive Officer Erdin Gkalp
Deputy Chief Executive Officer Fatih Gren
Legal Consultant Samim nan
Motor Insurance Department
Agencies and Marketing Department
Information Technologies Department
Labor Law Counsellor mer Ekmeki
Marine and Liability Insurance Department
Actuarial Consultancy
Accounting and Finance Department
Headquarters Consultant Ahmet Hamdi Baar Software Development Department
Health Insurance Department
Regional Offices
Corporate Insurance Department
Reinsurance Department
Purchasing, Support and Premises Department
Fire and Engineering Insurance Department
Southern Anatolia Western Anatolia Marmara Central Anatolia Western Black Sea Black Sea Mediterranean stanbul Kadky TRNC Branch
Project Management & Organization Department
Claims Department
Legal Affairs and Subrogation Department
Motor Claims Department
Human Resources and Training Department
Public Relations Department
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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 14 times during the reporting period. 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 draft Board meeting agenda is prepared by the CEO and finalized in line with the proposals of the Chairman 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 seven 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 association, 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 articles of association, our Board of Directors is authorized on matters of importance such as; Establishment and abolition of agencies, branches and representation offices, and determination of the terms and conditions applicable therefor, Being a proxy, leading insurer, representative or agency of other insurance and reinsurance companies, Setting the dates for commencing and terminating activities in various insurance branches, Determination of the essential conditions of insurance and reinsurance agreements, Execution and termination of all kinds of reinsurance agreements, Entering into financial and industrial undertakings and initiatives, founding companies in relation to insurance business, participating in companies that are or will be established for this purpose, Buying and selling immovables, and constructing buildings. 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 Companys annual budget and business plans, Preparing the Companys 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 Companys articles of association, Taking necessary action in relation to General Assembly decisions, Overseeing the use of substantial amounts that are in excess of 10% of the total assets in the Companys most recent balance sheet, Approving the executives career plans and rewarding provided to them,
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Determining the Companys policies about Shareholders, stakeholders and Public Relations, Determining the Companys 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 Companys organizational structure responds to current circumstances, Examining the activities of former boards of directors.
The Board of Directors consists of nine Directors, which number enables efficient organization of the activities of the Board. Since they represent legal entities, the Directors do not have to be shareholders pursuant to the legislation on account of their Board of Directors service. The obligation to deliver shares as collateral imposed on the Directors is fulfilled by the legal entities they represent. There are no Directors holding any shares in the Company. Although there are no set rules on the 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. 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 Companys 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 Companys 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.
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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. Board Directors allocate sufficient time for the Company affairs, and exercise their authorities cautiously and within the framework of good faith and equipped with all necessary knowledge to ensure full satisfaction of their duties. The Board of Directors adopted the necessary measures for preventing undisclosed information and/or trade secrets from being disseminated out of the Company.
Yaar DRSEL Deputy Chairman of the Board and Member of the Corporate Governance Committee
Burhan KARAGZ Chairman of the Board and Head of the Corporate Governance Committee
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Committees Operating within Anadolu Sigorta
Objective Overseeing the Companys compliance with corporate governance principles, undertaking improvement work thereon and submitting proposals to the Board of Directors. Members Burhan Karagz, Board Director (Head) Yaar dirsel, Board Director (Deputy Head) Formation The Committee is formed, subject to corporate governance principles, by the Board of Directors and primarily from amongst Directors. As and when needed, non-Director individuals who are specialized in their respective fields can also be assigned to the committee. The CEO does not take place in this Committee. The Committee consists of a minimum of two members. The majority of the Committee members consist of nonexecutive Board Directors. The head of the Committee is elected from amongst independent Directors. The term of office for the Corporate Governance Committee is, in essence, parallel to that of the Board of Directors; the Committee, however, will remain in office until the completion of the predetermined compliance process, when the Board of Directors is succeeded. To the extent possible, the Committee meets consistently with the Board of Directors meetings. Committee decisions are adopted on the basis of the majority of votes cast. Following the Committee meetings, the head of the Committee provides written reports on the activities of the Committee to the Board of Directors, and either informs the members of the Board Directors, or provides them to be informed, on the Committees meeting minutes. Activities In essence, the Corporate Governance Committee; Establishes whether the corporate governance principles are implemented in the Company, as well as the grounds for non-implementation, if applicable, and the 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 the practices; Coordinates the tasks of the Investor Relations Unit; Works to create a transparent system regarding identification, assessment, training and rewarding of nominees eligible for the Board of Directors, and establishes related policies and strategies; Formulates recommendations regarding the number of Board Directors and executives (CEO, Deputy Chief Executives, Managers, Assistant Managers, personnel directly reporting to Chairman of the Board of Directors or the CEO, as well as other people such as advisors); Sets and oversees the approaches, principles and practices regarding performance evaluation, career planning and rewarding of Board Directors and executives. AUDIT COMMITTEE Objective Overseeing the operation and efficiency of the Companys accounting system, public disclosure of financial information, independent auditing of the Company, and internal control system. Members Emre Duranl, Board Director (Chairman) mer Karaku, Board Director Formation The Audit Committee is formed, subject to corporate governance principles, by the Board of Directors from amongst its Directors.
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Committees Operating within Anadolu Sigorta
The Committee consists of a minimum of two members. The majority of the Committee members consist of non-executive Board Directors. The head of the Committee is elected from amongst independent Directors. Two employees holding titles are assigned by the Board of Directors for ensuring coordination between the Audit Committee and the Company. The term of office for the Corporate Governance Committee is, in essence, parallel to that of the Board of Directors; the Committee holds at least quarterly meetings. Committee decisions are adopted on the basis of the majority of votes cast. Following the Committee meetings, the head of the Committee provides written reports on the activities of the Committee to the Board of Directors, and either informs the members of the Board Directors, or provides them to be informed, on the Committees meeting minutes. Activities In essence, the Audit Committee; Audits the conformity of periodical financial statements and notes to be publicly disclosed to applicable legislation and international accounting standards, and reports the same to the Board of Directors, by incorporating the opinion of the independent audit firm; Takes necessary action to ensure sufficient and transparent conduct of any and all internal and independent audits; Oversees the operation and efficiency of the Companys accounting system, public disclosure of financial information, independent auditing of the Company, and internal control system. The Committee also supervises the selection of the independent audit firm, preparation of audit contracts and initiation of independent audit process, and every phase of the work carried out by the independent audit firm; Gives approval to the selection of, from the independent audit firm and the services to be supplied from them which the Company will obtain service, and submits the same to the Board of Directors. The Committee prepares a report as to whether there exists any matter that might impair the independence of the independent audit firm prior to its submission to the Board of Directors. Examines the complaints received by the partnership regarding the Companys accounting, internal control system and independent audit, and ensures examination of related notifications by the Company employees subject to confidentiality principles; Oversees compliance with internal regulations and policies aimed at preventing conflicts of interest that might arise between the Directors, executives and other employees, and at preventing abuse of trade secret information.
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An Assessment of the Operation of the Independent Audit Firm in 2009 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 5 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 Companys 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.
mer KARAKU Board Director and Member of Audit Committee
Emre DURANLI Board Director and Member of Audit Committee
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Human Resources Policy
Our Company is proud to be the first national insurance company in Turkey, established in 1925 at the directives of Mustafa Kemal Atatrk. Ever since its establishment, our Company has continuously grown and developed and has been recognized and acknowledged as the grande cole 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 Companys key policies. For this reason, the primary goal of our human resources policies and practices is to identify our Companys 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 There are three main career paths at our Company the startup positions of which are clerk, assistant specialist, and assistant inspector respectively. Anyone who starts out in one of these positions has opportunity to advance to the most senior of management positions in the Company. Employees who start out as an assistant specialist or assistant inspector may advance to full specialist or be promoted to a managerial position provided they demonstrate the performance required of them within clearly defined periods of time. Those who start out as clerks become entitled to sit for the assistant superintendent qualifying exam after they have worked for a specified period of time and have successfully satisfied performance criteria. Those who successfully pass this exam advance along a career path in line with the Companys promotion procedures and can rise to middle or senior management positions. In our awareness that newly recruited personnel are part of our team and that there may be a variety of competencies of which they will be in need in order to develop their careers in addition to the ones they already possess to support their personal development, we provide them with training opportunities. Performance Management Our employees are evaluated twice a year in line with specific performance criteria. On the basis of the results of these performance evaluations, an employees training needs are identified and a career plan is developed. Job Security Our employees enjoy a substantial degree of job security 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 raises based on current conditions. Employees also receive four bonuses a year, each equal to their one-month salary, as well as half pay on religious holidays. In addition to their salaries and bonuses, employees receive extensive fringe benefits as well. Social Benefits Our Companys 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 Companys outsourced healthcare system. Employees are provided with free transportation services to and from work and with lunches as well.
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Human Resources Policy
Retirement Benefits Our employees are covered by two private pension funds that have been set up in accordance with the Companys special status. The pensions paid by these funds enable former employees to enjoy a good standard of living during their retirement years. Training Technical and personal development trainings required by our employees jobs are provided in line with their career progression plans in the form of in-house and external practical training sessions. 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 training and basic insurance training are provided to new-hires; the training programs needed at any stage of their careers is identified for all employees so as to develop and equip them with the competencies called for by their positions. Two primary resources are used for the trainings offered to our employees: 1. In-house training programs 2. International training programs In addition, various training programs are given to strengthen the personal development of employees. When forming the annual training program, the Human Resources and Training Department has espoused it as a primary objective to help employees build on their current job competencies while also readying them for their future responsibilities. E-Learning Within the scope of the e-learning project, the Companys training portal enabling remote learning online went live on 01 September 2008 at the address www.supersigortaciokulu.com. named Super Sigortac Okulu , the training portal offers training modules on insurance that can be accessed by our employees, agencies and bank branches at any time they might need without any time restrictions and from anywhere with internet access. Super Sigortac Okulu covers screen trainings and personal development trainings, as well as training modules on all insurance branches. Total number of registered users at the portal is 7,788. The training programs made available on the portal are continually increased in variety in line with the needs of our employees and delivery channels.
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The Companys Transactions with the Risk Group
Every kind of insurance services to the companies that are in our Companys risk group are provided with the same procedure and policies of the services to all other third parties. The details of our Companys transactions in 2009 with the risk group and related explanations are presented in the note 45 of the Auditors Report.
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Agenda of the Annual General Assembly
1. Election of the Presiding Board and authorization of the Presiding Board to sign the minutes of the General Assembly 2. Presentation of and discussion on the Board of Directors and auditors reports for 2009 fiscal year 3. Examination and ratification of 2009 financial statements and individual acquittal of the Board of Directors and Auditors from their fiduciary responsibilities for the transactions and accounts in 2009 4. Presentation of information on dividend distribution policy and resolution related to dividend distribution 5. Approval of the memberships of individuals elected, as per Article 315 of the Turkish Commercial Code and article 18 of the articles of association, to the seats vacated during the reporting period on the Board of Directors 6. Informing the General Assembly on the changes that occurred with regard to statutory auditors during the reporting period 7. Election of the Board Directors and determination of their terms of office 8. Election of statutory auditors 9. Determination of remuneration for the members of the Board of Directors and for statutory auditors 10. Determination of the independent audit company 11. Wishes and closing
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Board of Directors Report Summary
Dear Shareholders, Before presenting the 2009 balance sheet and income statement covering the Companys 84th year of operation for your reviews and comments, we deem it useful to recap the changes and developments in economic life and the insurance sector. The impact of the crisis that extended its reach to the whole world from the last quarter of 2008 upon financial markets started to wear-off from the third quarter of 2009. 3% in 2008, the global growth figure is anticipated to drop to 1.1% for 2009 and projected to rise back to 3.1% in 2010. The US economy, which stood at the heart of the global crisis, achieved growth for the first time in the past one year in the third quarter of 2009, while the worlds second biggest economy China maintained its high growth percentages in 2009 on the back of the incentive packages introduced. In 2009, emerging countries are expected to outdo the world average and attain a growth level of 1.7%. With the measures adopted and interventions made across the world, the recession came to an end and global economy thinned down the uncertainties towards the end of last year. Yet, a full recovery of the global economy will probably take a while due to the fact that the measures adopted by governments and central banks are temporary, stringent financial conditions are still ongoing in many countries, and the recuperation in household savings is slow. While the Turkish economy narrowed down by 14.3% year-on in the first quarter of 2009, the shrinkage was down to 7% in the second quarter and dropped to 3.3% in the third quarter. In the Inflation Report published in January 2009, the Central Bank of Turkey (CBT) forecasted a rapid fall in inflation in the first half of the year and estimated that the inflation would be below the target at the end of the year; in this frame, the CBRT pursued a series of policy rate cuts. In 2009, the inflation markedly decreased compared to the previous year and stood at 6.5%. On the other hand, the uncertainties regarding the impact of global crisis upon total demand and the unpredictable movements in oil and food prices throughout the year drove the inflation upward. The worldwide insurance sector suffered shrinkage in real terms in 2008, for the first time since 1980, and premium production decreased by 3.7% year-on. The decrease was largely due to the life branch, which slimmed down by 5.8%, whereas premiums on non-life branches were reduced by 0.6% as a result of the declined demand for insurance, coupled with lower prices. The insurance sector in Turkey performed well in life branch in 2009 but failed to repeat this achievement in nonlife branches. First hit by the financial crisis that dominated the whole world, the sector took another major blow from the flood that occurred in the third quarter of the year. Total premium production on non-life branches grew 4% and rose to TL 10,614 million in the twelve months to end-2009. Life branch expanded by 15.6% in the same period, bringing the overall growth in the sector to 5.6% and total premium production to TL 12,436 million. Owing to the effect of the global crisis as well, foreign interest in the national insurance sector weakened in 2009 compared with the previous years. Having decided to sell its shares in Gne Sigorta and Vakf Hayat, Vakfbank announced the change of intentions in 2009. Sold to Holland-based ING, Oyak Hayat started pursuing activities under the name ING Hayat in 2009, while Ko Allianz, whose shares were sold in their entirety to Allianz, started operating under the name Allianz last year. In 2009, the Undersecretariat of Treasury increased the upper limit from +20% to +100% of approved tariffs with respect to the freedom of tariff in compulsory motor third party liability insurance. In addition, the Insurance Arbitration Commission became functional and 44 insurance companies joined the new arbitration mechanism created for resolving conflicts between consumers and service providers, using methods without resorting to litigation. Pursuant to the Communiqu on Drawing-up Consolidated Financial Statements of Insurance, Reinsurance and Pension Companies published in the Official Gazette issue 27097 dated 31 December 2008, our company started employing the equity method in consolidating Anadolu Hayat Emeklilik A.., in which our Company holds 20% stake, starting from 31 March 2009.
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Board of Directors Report Summary
The Companys premium production grew 7% and rose to TL 1,243.5 million in the twelve months to end-2009. Total claims payments amounted to TL 854,890 thousand and combined loss/premium ratio stood at 81.6%. While the Companys total shareholders equity increased 32.63% to TL 806,387 thousand, total assets were up 13.3% to TL 1,738,919 thousand. Our investment income totaled TL 162,323 thousand, 49% of which was generated on income from financial investments. At year-end 2009, the Companys technical profit was worth TL 50,142 thousand, whereas gross profit was TL 59,217 thousand and net profit amounted to TL 48,164 thousand after deduction of TL 11,053 thousand in tax provision.
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Dividend Distribution Proposal
The Companys Dividend Distribution Policy has been publicly disclosed in the previous years; it also takes place within the Corporate Governance Principles Compliance report in the 2009 annual report. Our proposal for dividend distribution has been formulated in strict compliance with the policy presented in the Corporate Governance Principles Compliance Report attached hereto. A net profit for the current period of TL 48,164,213 has been posted on our operations during 2009. However, 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 stated in the consolidated financial statements that will be drawn up and publicly disclosed as per the Communiqu Serial: XI No: 29 on Principles of Financial Reporting in the Capital Market, provided that the net distributable profit can be covered from the sources reflected in their legal records. Accordingly, it is proposed that the net profit for the period in the amount of TL 55,380,286 computed after consolidation of Anadolu Hayat Emeklilik A.. be distributed as follows so as to enable its covering from legal records as per applicable legislation and Article 58 of the articles of association of Anadolu Anonim Trk Sigorta irketi. 1- Balance Sheet Profit 2- Tax and Financial Liabilities Provision according to article 58 of the articles of the association Net Profit 3- Legal Reserves according to article 58/a of the articles of association Distributable Profit Charitable donations during the period ( + ) Net distributable profit for the period including donations based on which first dividends will be computed 4- First Dividend to Shareholders according to article 58/b of the articles of the association Residue 5- Dividends to the Personnel according to article 58/c of the articles of the association Residue 6- Extraordinary Reserves according to article 58/d of the articles of the association 7- Second Dividends according to article 58/e of the articles of association 8- 10% Legal Reserves according to article 58/f of the articles of association TL 66,432,943 (11,052,657) 55,380,286 (2,408,211) 52,972,075 30,000 *53,002,075 (10,600,415) 42,371,660 (1,271,150) 41,100,510 (4,110,050) (29,272,272) (502,115)
* The amount of TL 53,002,075 computed by adding the charitable donations during the period to distributable profit has been used in the calculation of the amount of first dividend to shareholders, and the amount of TL 52,972,075, i.e. the distributable profit figure, has been used for the items in the subsequent stages. In the event this proposal is accepted by the General Assembly, profit share in the ratio of 9.38% (TL 39,872,687.-) will be distributed as first and second dividends to the Companys shareholders out of 2009 profit; of this amount, TL 25,000,000 will be paid in cash, and the balance in the amount of TL 14,872,687 as bonus issue. As per the communiqus of the CMB, dividend distribution to be made in cash will be completed by 31 March 2010, and that in share certificates by 30 June 2010. The Companys Board of Directors adopted a decision to increase the Companys issued capital by TL 75,000,000 to TL 500,000,000; in the event that our proposals in this meeting are accepted, TL 14,872,687 of the increase will be covered from bonus issues and TL 60,127,313 from rights issues.
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Corporate Governance Principles Compliance Report
1. STATEMENT OF COMPLIANCE WITH CORPORATE GOVERNANCE PRINCIPLES Our Company firmly believes that Corporate Governance Principles are as critical as financial performance, and that putting these principles 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 aims to achieve compliance with these principles to the highest extent possible, and the work is underway to attain this goal. Within this scope, our articles of association do not contain any provisions stipulating; Exercise of the request for appointment of a special auditor as an individual right, Distribution of advances on dividends, Participation of stakeholders in the management of the Company, Implementation of cumulative voting system for the election to the seats on the Board of Directors, Adoption of resolutions concerning demerger or share exchange that would result in a change in the Companys capital and management structure and in its assets, buying/selling, letting or renting tangible/ intangible assets or making donations or grants in substantial amounts, and providing guarantee such as suretyship, mortgage in favor of third parties. Minority rights are not represented in our Board of Directors. It is desired that principles of exceptional nature that are not yet in practice are enforced within the framework of a plan and as soon as possible, although they have not led to a conflict of interest among the stakeholders to date. 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. 2. SHAREHOLDER RELATIONS UNIT A Shareholder Relations Unit has been set up in the Company in 2005. Fatih Gren, Murat Tetik, Bar Hseyin afak and Cem zer have been serving in this unit. The head of the unit is Fatih Gren, Deputy Chief Executive Officer. Contact information for our employees working in this unit is as follows. Name & Surname Fatih Gren Murat Tetik Bar H. afak Cem zer Title Deputy Chief Executive Officer Manager Specialist Assistant Specialist Phone No 90 212 350 00 55 90 212 350 02 55 90 212 350 02 54 90 212 350 01 64 Mail Address fgoren@anadolusigorta.com.tr mtetik@anadolusigorta.com.tr bsafak@anadolusigorta.com.tr ccozer@anadolusigorta.com.tr
In his position as the head of the unit, Fatih Gren reports directly to the Head of Corporate Governance Committee. This unit is active in the exercise of shareholding rights and establishes the communication between the Board of Directors and the Shareholders. In its activities, the unit reports to the Board of Directors. In essence, the Shareholder Relations Unit 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 are not publicly disclosed, are of a confidential and/or commercial secret nature, Ensure that the General Assembly Meetings are convened in accordance with the applicable legislation, the articles of association and other internal regulations,
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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 sent to the Shareholders, Observe and comply with all considerations related to public disclosure, including the legislation and the Companys disclosure policy, Ensure representation of our Company in investor relations meetings organized in Turkey or abroad by international establishments through participation in such events, Prepare, and update as necessary, the presentation materials to be used in the meetings.
3. SHAREHOLDERS EXERCISE OF THEIR RIGHT TO OBTAIN INFORMATION In 2009, all verbal information queries received from researchers and our investors in relation to our Company and/or to publicly disclosed financial statement results were answered. Requests for meetings received during the reporting period from national and international investment companies were accepted and necessary information was provided. In total 32 investor meetings were held in 2009, 20 of them with foreign investment companies. In addition, the Company participated in two investors conferences held abroad in the reporting period, during which one-on-one meetings were held with fund managers from various international investment companies. All information queries of our Shareholders are answered, apart from those that are trade secrets or undisclosed information. Information queries received from our Shareholders are evaluated by our employees in the Shareholder Relations Unit and are fully and prudently responded to as soon as possible and in a manner to fairly represent the truth, subject to the limits of trade secrets and confidentiality. 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 2009, our Shareholders did not request appointment of a special auditor from the General Assembly of Shareholders. Our articles of association contain no provisions stipulating the request for appointment of a special auditor as an individual right. Given that the General Assembly must honor the request for appointment of a special auditor pursuant to applicable legislation and that such request constitutes one of the exceptions to the principle of adherence to agenda, inclusion of a provision in the articles of association stipulating such request as an individual right will be taken into consideration in the future depending on the developments, based on the concern that problems might arise in practice with regard to protection of the confidentiality of such information that is of commercial secret nature or that is not yet publicly disclosed. 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 fulfilled to the extent permitted by the applicable legislation. All information that might affect the Shareholders exercise of their rights is made available to the same on the electronic medium in an updated manner, with a view to expand their right of obtaining information. 4. INFORMATION ABOUT GENERAL ASSEMBLY MEETINGS In 2009, one General Assembly meeting was convened which was the 2008 annual General Assembly meeting held on 26 March 2009.
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The said meeting was held with the participation of Shareholders representing 60% or a portion of TL 210.2 million of our paid-in capital of TL 350 million. While an official from the Independent Audit Company auditing the financial statements of the Company and some employees participated in the meeting, other stakeholders or media representatives did not attend the meeting. The announcement on the meeting place, date, hour, agenda, including a specimen of a proxy statement was published at least two weeks prior to the meeting date in the Turkish Trade Registry Gazette, Radikal and Referans daily newspapers, and in the ISE bulletin. Care will be paid to extend this period to three weeks minimum. Information about the meeting was also sent to holders of registered shares by registered mail return receipt requested within the same period of time. To provide direct access by all Shareholders to the information on the meeting, the same is made available in Turkish and English languages at our Company website at www.anadolusigorta.com.tr. Although the entries into the shareholders register are made based on a Board of Directors resolution, no deadlines were set for registration in the shareholders register so as to achieve maximum participation of the holders of registered shares to the General Assembly. Financial statements and reports including the annual report, proposal on dividend distribution, the informative document prepared on the agenda items necessary for the General Assembly, and other documents forming the basis of the agenda items, along with the latest version of the articles of association, and the amendment text and grounds if the articles are to be amended, are made available for examination by our Shareholders at our Company headquarters and branches from the announcement date of invitation to the General Assembly. The said information and documents are accessible at our website at www.anadolusigorta.com.tr. During the Ordinary General Assembly held in 2009, no Shareholders exercised their right to raise questions. During the meeting, the Shareholders unanimously agreed to the proposals on; The election of the presiding board and authorizing the presiding board to sign the minutes of the annual General Assembly, Reading out and deliberation on the 2008 reports of the Board of Directors and of the statutory auditors, Reviewing and approving the financial statements for 2008 and acquittal of the Board Directors and statutory auditors, Providing information on the dividend distribution policy and deciding on dividend distribution, Approval of the memberships of directors elected to the seats vacated on the Board of Directors during the reporting period, pursuant to Article 315 of the Turkish Commercial Code and article 18 of the Articles of Association, Presentation of changes that occurred in statutory auditors during the reporting period to the General Assembly, Election of the Board Directors and determination of their terms of office, Election of statutory auditors, Determination of the remuneration to be paid to the Directors and auditors, Decision about the independent audit firm. According to our articles of association, the Board of Directors is authorized in making material decisions like; Setting up or disposing of subsidiaries and partnerships, Buying or selling real property or constructing buildings on behalf of the Company.
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Our articles of association contain no provisions on the adoption of resolutions concerning demerger or share exchange that would result in a change in the Companys capital and management structure and in its assets, buying/selling, letting or renting tangible/intangible assets or making donations or grants in substantial amounts,, and providing guarantee such as suretyship, mortgage in favor of third parties by the general assembly. It is believed that inclusion of provisions to that effect in the articles of association would: Decrease the efficiency in management, Adversely affect the competitive edge and result in missing important opportunities, and therefore would not bring out consequences beneficial to our Companys stakeholders. To facilitate participation in the General Assemblies, utmost attention is paid to fully comply with the points stipulated by the legislation at a minimum, and it is believed that our Shareholders are not faced with any difficulties with regard to participation in General Assemblies. To date, no notifications to the contrary were received from our Shareholders, either. Minutes of the General Assembly 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. Care is taken that General Assembly announcements cover: The meeting date and hour, The meeting place in a manner to avoid any confusion, 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 association, 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, In ordinary meeting announcements, the address at which the annual report, financial statements, and other documents related to the General Assembly can be examined. Prior to the General Assembly, our Company informs our Shareholders on the changes in the management and operational organization that took place in the previous fiscal year or are planned for the future periods. Within this scope, the following are made available at the General Assembly to be presented for examination by our Shareholders: The Companys explanation and grounds for organizational structure change, Report by the firm, if any, from which consultancy is obtained; in the absence of such a firm, information and documents prepared by our Company in relation to this matter, In the case of organization changes in subsidiaries and affiliates, annual reports and annual financial statements and proforma financial statements for the latest three fiscal years of all enterprises that are subject to organizational structure change 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. An authorized person from the Independent Audit Firm auditing the Companys financial statements is invited to the General Assemblies.
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The procedures and principles of voting in our Companys General Assemblies are listed below: Each Class (A) share is entitled to ten, and each Class (B) share is entitled to one vote. In the case where one share is held by multiple owners, such votes may be cast only via a joint representative. Our Shareholders may participate in the General Assemblies personally or have themselves represented in proxy. Open voting by raise of hands is employed in General Assemblies. However, upon demand by participating Shareholders representing one tenth of the capital, secret voting will be carried out. The procedures and principles of voting are also announced to the Shareholders at the beginning of the meeting. Topics that are communicated by our Shareholders to the Companys Shareholder Relations Unit, which they would like to be included in the agenda, are taken into consideration by the Board of Directors in the preparation of the agenda, as much as possible. Pursuant to the applicable legislation and to the articles of association, ordinary general assembly must be held within three months following the end of each fiscal year. Ordinary General Assembly is convened as soon as possible, and within no later than three months following the end of each fiscal year. In line with our articles of association, 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. Total number of votes that may be cast during the General Assembly and the privileges enjoyed are classified on the basis of Shareholders and are provided to the Shareholders at the beginning of the meeting by means of their insertion in the list of attendants. During General Assemblies, our Shareholders are informed on the news and analyses about disputed topics on the Company that were covered by the media. Questions posed by our Shareholders to the Board of Directors or Auditors are answered, provided that such questions are essential for exercise of shareholder rights and are not trade secrets. The General Assembly Chairman chairs the meeting efficiently and in a manner to ensure that Shareholders can exercise their rights. Care is paid to answer every question raised during the General Assembly by the Shareholders during the same meeting, and to provide written answers within no more than one week, in case the question raised is not relevant to the agenda or is too comprehensive to be answered promptly. Directors, authorized employees responsible for the preparation of financial statements and auditors, and other relevant people to 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. 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. 5. VOTING RIGHTS AND MINORITY RIGHTS The issued capital of our Company as of end-2005 consisted of Class (A) shares with a nominal value of TL 50 and Class (B) shares with a nominal value of TL 500, and by means of granting equal voting rights to shares that did not have equal nominal values, Class (A) shares were granted privilege in voting. While the articles of association section related to capital was amended within the framework of the Law no. 5083 on the Currency of the Republic
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of Turkey and Law no 5274 Concerning the Amendment of the Turkish Commercial Code during the 2005 Ordinary General Assembly held on 30 March 2006, nominal values of Class (A) and (B) shares were equalized at Kr 1. At the same General Assembly, the articles of association section concerning votes was amended as follows so as to maintain the existing privilege: Each Class (A) share is entitled to ten, and each Class (B) share is entitled to one vote. In the present situation, the Companys issued capital in the amount of TL 425,000,000 consists of Class (A) shares divided into 150 shares each with a nominal value of Kr 1 and all with a value of TL 1.5, and Class (B) shares divided into 42,499,999,850 shares each with a value of Kr 1 and all with a value of TL 424,999,998.5. Class (A) shares have no privileges other than the voting right privilege mentioned above. In capital increases, new Class (A) shares are not created. There are no cross-shareholding interests between any Shareholder and the Company. Minority shares are not represented in our Board of Directors which is elected under the discretion of the General Assembly. Our articles of association do not cover the cumulative voting method. There are no upper limits with regard to the number of votes that our Shareholders are allowed to cast in the General Assemblies. 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 association 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 certificate of authority. 6. DIVIDEND DISTRIBUTION POLICY AND TIMING The articles of association set the principle of distributing first dividends in the ratio and amount as determined by the Capital Markets Board (CMB) from out of the attributable profit. The dividend distribution proposals presented by the Board of Directors for the approval of the General Assembly are based on a dividend distribution policy that takes into consideration: Preserving the delicate balance between the expectations of our Shareholders and the Companys need to grow, The profitability of the Company. The dividend policy espoused by the Board of Directors is based on the principle of proposing to the General Assembly the distribution of at least 30% of the attributable profit as bonus shares or in cash. No shares are privileged in terms of getting share from the profit. No founders bonus certificates are given, nor are dividends paid to the Board Directors. Pursuant to the articles of association, our employees are paid dividends up to three times of their salaries maximum from the amount remaining after the first dividend is set aside.
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Care is paid to effect the dividend payments as soon as possible, and in any case, until no later than the end of the fifth month, as stipulated by the applicable legislation. The articles of association contain no provisions stipulating payment of advances on dividends. There are no material donations or grants made during the reporting period or planned to be made at year-end by our Company. Our Company has made no donations for political causes. 7. TRANSFER OF SHARES The Companys articles of association contain no provisions restricting the transfer of shareholding interests. All our Shareholders including minority and foreigner Shareholders are treated equally. 8. COMPANY DISCLOSURE POLICY The disclosure policy approved by the Board of Directors is presented below. In case of any changes to the disclosure policy, the matters subject to change and the grounds therefore will be presented for information to the General Assembly after the approval of the Board of Directors, and will be disclosed to the public. General Framework Anadolu Anonim Trk Sigorta irketi makes the announcements and disclosures in relation to all necessary financial information as required primarily by regulations in relation to the Insurance Law no 5684 and any arrangements in relation thereto, and by the Capital Market Legislation, the Turkish Commercial Code (TCC) and the regulations of the stanbul Stock Exchange (ISE), where the shares of the Company are traded, while observing the generally accepted accounting principles and corporate governance principles; the Company follows a detailed public disclosure and information policy within the scope above. The principal purpose of the disclosure policy is to secure that the necessary information and announcements apart from trade secrets are disclosed to Shareholders, investors, employees, customers, creditors, reinsurers and other related parties on a timely manner and on the principles of being accurate, complete, intelligible, conveniently accessible at low cost and equally available to all. Having an active approach to the adoption and implementation of corporate governance principles, the Company spends maximum effort to put into life the requirements of applicable legislation and international best practices with regard to public disclosure. Anadolu Anonim Trk Sigorta irketi Disclosure Policy has been prepared within the framework described above, approved by the Board of Directors, and put into implementation. Authority and Responsibility In our Company, the Board of Directors is authorized and responsible for monitoring, observing and improving the public disclosure policy. Executives in charge of financial management and reporting, and the Shareholder Relations Unit have been assigned with the coordination of disclosure function. The said people fulfill these responsibilities in close cooperation with the Audit Committee and the Board of Directors. Public Disclosure Work and the Methods and Tools Used The work carried out in relation to public disclosure and the tools and methods used within the framework of insurance legislation, Capital Market Legislation, TCC and other applicable legislation are presented below: Quarterly financial statements and footnotes and descriptions on related financial statements prepared in accordance with the legislation along with independent auditors report published by the Turkish Treasury, Directorate General of Insurance and by the CMB, along with the independent auditors report issued at the middle and end of the year are submitted to the Public Disclosure Platform (in Turkish: KAP)within the legal periods stipulated, and also posted on the Companys website. The Companys financial statements are
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signed by independent auditors and our executives in charge of financial reporting; furthermore, members of the Audit Committee and the Company executives in charge of financial reporting provide written statement of accuracy for relevant financial statements. Quarterly financial statements and footnotes and descriptions on related financial statements prepared in accordance with the insurance legislation are provided to reinsurers upon request. Material event disclosures required to be made under the CMB legislation are submitted to the KAP within the prescribed periods of time, and to the CMB, if necessary. Necessary announcements and promulgations are made in the cases of amendments of articles of association, General Assemblies, capital increases, etc. in the Turkish Trade Registry Gazette and daily newspapers. Covering the necessary information and explanations in line with insurance regulations, an annual report is prepared every year before the General Assembly meeting and presented for examination by the Shareholders and posted on our website (www.anadolusigorta.com.tr); the related report in hard copy can be obtained from the Companys Shareholder Relations Unit at any time. There are no regular contacts or meetings set with the press. Press releases are given to the printed and visual media when deemed necessary or when responding to the demands from the members of the press is considered necessary. Press releases in printed and visual media may be given by the Chairman of the Board, Chief Executive Officer or his deputy and other authorized persons to be named thereby. Information is provided to Shareholders and other related parties through investor meetings and road shows in and out of Turkey. Such meetings and road shows carried out by the Shareholder Relations Unit are attended by the CEO, executives in charge of financial management and reporting, and Shareholder Relations Unit managers, depending on their work schedules. In necessary cases, the said contact teams can be expanded. Relevant information and primarily the financial statements are provided by the Shareholder Relations Unit via email to Shareholders, reinsurers, national and international investors, as well as to institutions issuing research reports on our Company. Investor Relations section in our corporate website (www.anadolusigorta.com.tr) covers detailed information and data. The related website is monitored and updated by the Shareholder Relations Unit. All questions forwarded by Shareholders and other concerned parties by email, mail, phone, etc. are answered as quickly as possible, under the coordination of the Shareholder Relations Unit.
Other Announcements Made Announcements in addition to those mentioned above are signed within the scope of authorizations set in the Companys certificate of authorized signatures and disclosed to the public. Anadolu Sigorta Corporate Website (www.anadolusigorta.com.tr) The Companys website is actively used in providing information and public disclosure. The website contains the information and data as required by the Corporate Governance principles and regulatory authorities. The announcement for the General Assembly to be held, agenda items and information on methods of participation in the General Assembly are also available on the website, in addition to the Companys disclosure policy and codes of ethics. Utmost care is paid to keep the website up-to-date. Other Matters A Corporate Governance Committee is set up in the Company. The members of the committee are Burhan Karagz, the Chairman of the Board, and Yaar dirsel, Deputy Chairman of the Board. The head of the Committee is Burhan Karagz. Shareholder Relations Unit is responsible for the implementation of disclosure policy. Contact details for the members of this unit are provided on page 59, under the heading Shareholder Relations Unit. The basic principle of the Company is to secure timely public disclosure of information that is not of commercial secret nature and that remains outside the scope of the legislation, to all our Shareholders and other persons and entities that will make use of the disclosures, on the principles of being accurate, complete, intelligible, interpretable, conveniently accessible at low cost, and equally available to all.
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There are no relationships between the Company and the Directors and executives, apart from those arising out of their respective positions. Relationships between the Company and the Shareholders are publicly disclosed under the provisions of applicable legislation. 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 audits. At least 2 fiscal years are allowed to pass before re-signing a constant and/or special audit contract with the same independent audit firm. Care is paid to avoid obtaining consultancy service directly or indirectly from the firms we obtain independent audit service during the time we receive such audit service. The annual report is prepared in detail so as to ensure the public opinion gains access to all information about the Companys operations. The annual report is prepared by the Companys CEO and the executive of the unit responsible for the preparation of financial statements and reports, and approved by the Board of Directors. The report also includes the declaration that the financial statements fully represent the Companys financial status and that the Company fully complies with applicable legislation. The annual report covers, at a minimum: The Companys field of activity, Information on the sector in which it operates and its position in the sector, Analysis and assessments on its financial status and operating results, Degree of actualization of planned activities, Degree of satisfaction of predetermined strategic goals, Statement on the internal control system and whether this system operates healthily, Rating of the credit rating agency, if applicable, Detailed description on foreseeable risks related to operations, Analysis of transactions in substantial amount carried out within the past one year with group companies and other affiliated persons and entities, Commercial and non-commercial tasks and transactions between the Directors, executives, and Shareholders directly or indirectly possessing at least 5% of the Companys capital with the companies in which they own more than 5% of the capital, or irrespective of this ratio, hold the control over or have an influence on the management. CVs, duties and responsibilities of Directors and executives, other duties undertaken thereby outside of the Company, and whether the rules set by the Company exclusively in relation to this matter are complied with, Capital market instruments of the Company that are held by the Directors and executives. Lawsuits filed against the Directors and executives in relation to their activities, Directors and executives shareholding ratios and amounts in the capital, Transactions carried out with the Directors and executives, Changes in the organization, capital, shareholding structure and administrative structure, Fines, if any, imposed due to practices contradicting with the provisions of applicable legislation, and explanation on the grounds therefore, Amendments to the legislation which might materially affect its operations, Material lawsuits brought against it, any warnings, notices or administrative fines issued by public authorities, and similar information, Dividend distribution proposal, Future expectations with regard to sales, profitability and efficiency level, market share, income generation capacity, debt/equity ratio and similar subjects, Access details for texts describing the function of General Assemblies, rights enjoyed by Shareholders and the principles regarding the exercise of these rights, Statistical data and graphs related to operations.
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9. DISCLOSURE OF MATERIAL EVENTS Pursuant to CMB regulations, our Company made 27 material event disclosures in 2009. ISE or CMB required no additional explanations, nor are there any material event disclosures not made in due time. Bar Hseyin afak from Shareholder Relations Unit is assigned with monitoring and observing any matter exclusively related to public disclosure. Investors, financial analysts, members of the press and similar persons are also referred to this unit. The following are also disclosed to the public: Accounting policies implemented and the operating results representing the truth, in line with the transparency principle, Developments that are likely to affect the value of our Companys capital market instruments, without delay and within the period of time prescribed by the legislation, Provisions of relevant regulations being reserved, necessary information in case of any material changes in the Companys financial status and/or operations, or in cases where a material change is regarded imminent, Updates to reflect the subsequent changes and developments in relation to the Companys public disclosures. 10. COMPANY INTERNET SITE AND ITS CONTENT The 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 basically features information on the Company profile, our products, agencies, online transactions, investor relations, human resources and contact information. The Investor Relations section on the website covers the Companys trade registry data, shareholding and management structure, organization chart, the articles of association, Company history, policies, codes of ethics, corporate governance compliance report, financial statements and independent audit reports, annual reports, General Assemblies, privileged shares, capital increases and dividend amounts, news about our Company and frequently asked questions. The Investor Relations section is also made available in the English language, so as to allow foreign investors to make use of the same. 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. A substantial part of the information contained on the website prepared in Turkish language is also available in the website prepared in the English language. The Companys letterhead contains the website address. 11. DISCLOSURE OF NON-CORPORATE ULTIMATE SHAREHOLDERS WHO HAVE A CONTROLLING INTEREST There are no non-corporate ultimate Shareholders with a controlling interest in the Company. The current shareholding structure of the Company is presented below: Shareholders Trkiye Bankas A.. Mill Reasrans T.A.. Others Total TL 151,002,594 92,564,995 181,432,411 425,000,000 Ratio (%) 35.53 21.78 42.69 100.00
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12. PUBLIC DISCLOSURE OF THOSE WHO MAY HAVE ACCESS TO INSIDER INFORMATION All necessary action is taken to prevent the use of insider information. The Company executives who are in a position to have access to information that might affect the value of capital market instruments and other persons/entities from which the Company obtains service are identified below: Entity Anadolu Anonim Trk Sigorta irketi Trkiye Bankas A.. Trkiye Bankas A.. Trkiye Bankas A.. Trkiye Bankas A.. Trkiye Bankas A.. Trkiye Bankas A.. Trkiye Bankas A.. Anadolu Anonim Trk Sigorta irketi Anadolu Anonim Trk Sigorta irketi Anadolu Anonim Trk Sigorta irketi Anadolu Anonim Trk Sigorta irketi Anadolu Anonim Trk Sigorta irketi Anadolu Anonim Trk Sigorta irketi Anadolu Anonim Trk Sigorta irketi Anadolu Anonim Trk Sigorta irketi Anadolu Anonim Trk Sigorta irketi Anadolu Anonim Trk Sigorta irketi Anadolu Anonim Trk Sigorta irketi Anadolu Anonim Trk Sigorta irketi Anadolu Anonim Trk Sigorta irketi Anadolu Anonim Trk Sigorta irketi Anadolu Anonim Trk Sigorta irketi Anadolu Anonim Trk Sigorta irketi Anadolu Anonim Trk Sigorta irketi Anadolu Anonim Trk Sigorta irketi DRT Bamsz Denetim ve SMMM A.. Baaran Nas Yeminli Mali Mavirlik A.. Person Burhan Karagz Yaar dirsel Mustafa Ali Su Ahmet Doan Arkan Mustafa Nail Yac Necati Aksoyolu mer Karaku Aziz Ferit Eraslan Emre Duranl Zeliha lke Selvi Aye Alev Ata Engin Eki Musa lken Mehmet Metin Ouz Efe Gnde Tahsin Erdoan Filiz Tayumruk M. Levent Snmez Erdin Gkalp Fatih Gren Ayen Ayan Ufuk Ulualp Sadi Ufuk Sunal Macit Bal Murat Tetik mer Altun Berna Ergntan Bar Hseyin afak Cem zer Independent Audit Firm Tax Consultant Position Chairman Deputy Chairman Director and CEO Director Director Director Director Director Director Auditor Auditor Auditor I. Deputy Chief Executive Officer Deputy Chief Executive Officer Deputy Chief Executive Officer Deputy Chief Executive Officer Deputy Chief Executive Officer Deputy Chief Executive Officer Deputy Chief Executive Officer Deputy Chief Executive Officer Board of Directors Reporter IT Manager Software Development Manager Agencies and Marketing Manager Accounting and Finance Manager Risk Management and Internal Control Manager PR Manager Accounting and Finance Specialist Accounting and Finance Assistant Specialist
13. KEEPING STAKEHOLDERS INFORMED In 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. 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 Companys facilities, observing the Companys credibility at the same time. 14. STAKEHOLDER PARTICIPATION IN MANAGEMENT The articles of association contain no provisions on the stakeholder participation in the Companys management. 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.
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Agency Consultancy Council consisting of selected agencies meets several times a year, general agency meetings are held biannually, and the executive council meetings are held 3 times a year with the participation of all departments and regional managers. 15. HUMAN RESOURCES POLICY The basic principles of the Companys 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. In decisions on training, transfer and promotion, objective data are used and the Companys 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. There is no exercise of appointing representatives to carry the relationship with the employees. 16. RELATIONS WITH CUSTOMERS AND SUPPLIERS The Companys quality policy pledges delivering and sustaining high quality products and services with the expert and experienced people in its organization, drawing upon its solid technological and financial infrastructure, constant development and improvement philosophy, and experienced and extensive agency network. With the ISO 9001 quality certification obtained in 2004, these pledges are made permanent by the Companys General Management. The Company observes permanence of service quality and standard in every phase of insurance service. Customers demands are fulfilled quickly and they are informed on any delays at every phase of the service. Utmost care is paid to protect the confidentiality of the customers and suppliers data that are of commercial secret nature. 17. SOCIAL RESPONSIBILITY Attention is paid that the projects offered with cover are in compliance with the applicable environmental safety and public health legislation. Various informative, advertising and similar activities are undertaken to develop public awareness on insurance in our country. We hold founding member status in social foundations like the Earthquake Foundation, Economic Research Foundation, and memberships with various Chambers of Commerce such as the Chamber of Shipping and stanbul Chamber of Commerce. Until today, no charges were filed or no sanctions were imposed against our Company on account of any environmental protection infringement.
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18. STRUCTURE AND FORMATION OF THE BOARD OF DIRECTORS; INDEPENDENT BOARD DIRECTORS 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 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. Information about our Board Directors and CEO is presented below.
Education Degree Bachelors Title Held in Entity Worked Anadolu Anonim Trk Sigorta irketi Trkiye Bankas A.. Trkiye Bankas A.. Trkiye Bankas A.. Trkiye Bankas A.. Professional the Entity Experience 57 years CEO Legal Advisor Division Manager Division Manager Unit Manager 37 years 34 years 36 years 36 years 25 years 22 years 18 years 14 years
Name & Surname Title Burhan Karagz Chairman Yaar dirsel Mustafa Ali Su A. Doan Arkan
Deputy Chairman Bachelors Member & CEO Member Bachelors Bachelors Bachelors Bachelors Bachelors Masters Bachelors
Mustafa Nail Yac Member Necati Aksoyolu Member mer Karaku Member
Discipline Higher School of Economy and Commerce Faculty of Political Sciences Faculty of Economic and Administrative Sciences Faculty of Administrative Sciences Faculty of Law Faculty of Law Faculty of Economic and Administrative Sciences Banking and Finance Faculty of Economic and Administrative Sciences
Aziz Ferit Eraslan Member Emre Duranl Member
When fulfilling its decision-making function, the Board of Directors acts on the basic considerations 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 Companys 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. Our Board of Directors takes care to hold regular monthly meetings. Since they represent legal entities, the Directors do not have to be Shareholders pursuant to the legislation on account of their Board of Directors service. The obligation to deliver shares as collateral imposed on the Directors is fulfilled by the legal entities they represent.
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Annual Report
2009
71
There are no Directors holding any shares in the Company. The articles of association contain no provisions on the implementation of cumulative voting system in the election of Board Directors. 19. QUALIFICATIONS OF BOARD DIRECTORS Because it is regulated by the law, the articles of association contain no other provisions in relation to the minimum qualifications required in Board Director elections. 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 consists of nine Directors, which number enables efficient organization of the activities of the Board. 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 Companys 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. Although there are no set rules on the 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. 20. MISSION, VISION AND STRATEGIC GOALS OF THE COMPANY The Companys, Vision is identified 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. Mission is identified 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 financial strength to international standards, to enhance the value of our Company. Our Companys vision and mission are publicly disclosed on our website accessible at ww.anadolusigorta.com.tr.
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Our strategic goals are set by our executives with a keen eye on competitive conditions, general economic conjuncture, overall expectations in national and international financial markets, and the Companys medium and long term targets. 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 of the assessment of Company operations, financial structure and performance level. In principle, the Board of Directors meets monthly in order to efficiently and continuously fulfills its monitoring and supervision function. In the meetings, the basic topics of assessment are the Company activities, approved annual budget and target realizations, the Companys place in the sector, financial structure and performance level, reporting, and compliance of operations to international standards. 21. RISK MANAGEMENT AND INTERNAL CONTROL MECHANISM Set up in 2006 in order to restructure the risk management systems and processes, the Risk Management Departments activities were expanded in scope to cover internal control activities within the frame of the provisions of the Regulation on the Internal Systems of Insurance, Reinsurance and Pension Companies published in the Official Gazette issue 26913 dated 21 June 2008. Along the same line, the Department was renamed to Risk Management and Internal Control Department. The primary objectives of the Departments activities are as follows: Measure and evaluate risks and keep them under control independently from executive units, Protect the Companys assets, Conduct the activities efficiently and effectively while achieving compliance with the Law and other applicable legislation as well as internal policies and rules and insurance business customs, Ensure reliability, integrity and time availability of the accounting and financial reporting system. The basic strategy directed towards the ultimate goal is to carefully plan, conduct and manage risk management and internal control activities independently, impartially, purposefully, effectively and efficiently, employing a risk-focused approach and within 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.
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Annual Report
2009
73
22. AUTHORITIES AND RESPONSIBILITIES OF BOARD DIRECTORS AND EXECUTIVES The authorities of the Board of Directors are stated in the articles of association. Pursuant to the articles of association, the Board of Directors is authorized on matters of importance such as: Establishment, abolition of agencies, branches and representation offices, and determination of the terms and conditions applicable therefor, Being a proxy, leading insurer, representative or agency of other insurance and reinsurance companies, Setting the dates for commencing and terminating activities in various insurance branches, determination of the essential conditions of insurance and reinsurance agreements, Execution and termination of all kinds of reinsurance agreements, Entering into financial and industrial undertakings and initiatives, founding companies in relation to insurance business, participating in companies that are or will be established for this purpose, Buying and selling immovables, and constructing buildings. The Board of Directors may delegate part or all of its authorities to the CEO, save for those that are not permissible to be delegated by law or due to the nature of the business. The Board of Directors exercises its authorities cautiously and within the framework of good faith and equipped with all necessary knowledge to ensure full satisfaction of the duty. Pursuant to the articles of association, the CEO is responsible for the execution of the Companys day-to-day business on the principles and within borders set by the Board of Directors. Delegation of authority to executive bodies for execution of Company activities is made under the certificate of authorized signatures. Put into force upon approval by the Collective Bargaining Agreement and the Board of Directors, the Personnel Regulation states the sanctions to be imposed against transactions violating the procedures and/or the legislation. Board Directors allocate sufficient time for the Company affairs. The Board of Directors adopted the necessary measures for preventing the information that is not in the public domain and/or is of trade secret nature from being disseminated out of the Company. The Board of Directors adopts an individual decision for the approval of periodic financial statements and annual report. 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 Companys annual budget and business plans, Preparing the Companys 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 Companys articles of association, Taking necessary action in relation to General Assembly decisions, Overseeing the use of substantial amounts that is in excess of 10% of the total assets in the Companys most recent balance sheet, Approving the executives career plans and rewarding provided to them, Determining the Companys policies about Shareholders, stakeholders and public relations, Determining the Companys 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 Companys organizational structure responds to current circumstances, Examining the activities of former boards of directors.
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23. OPERATING PRINCIPLES OF THE BOARD OF DIRECTORS The draft Board meeting agenda is prepared by the CEO, and finalized in line with the proposals of the Chairman and the Board Directors. The Board of Directors met fourteen times in 2009. 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. No dissenting votes were cast by any Director against the Board decisions made in the reporting period. All Board Directors spend their best efforts to be personally present in meetings concerning matters of importance such as: Determination of the fields in which the Company will be engaged and approval of business and financing plans, Matters related to inviting the General Assembly for ordinary/extraordinary meeting and its organization, Finalization of the annual report to be presented to the General Assembly, Election of the chairman, deputy chairman of the Board and appointment of new directors, Formation of administrative units or termination of their activities, Appointment or discharging of the CEO, Establishment of committees, Merger, demerger, restructuring, selling the Company in its entirety or selling 10% of its fixed assets or making investments in amounts in excess of 10% of the fixed assets, outlays in excess of 10% of total assets, Determination of the Companys dividend policy, the amount to be distributed from the profit for the period, Increasing or decreasing the capital. The Board of Directors holds its first meeting preferably on the date the same is elected. During the first meeting, the chairman and the deputy chairman of the board are elected, and decisions are made on the job distribution and establishment of committees. Board Directors, in principle, attend every meeting. The Board of Directors meets 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 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 association, the Board of Directors convenes on the basis of absolute majority and makes decisions with the absolute majority of Directors present in the meeting.
Anadolu Sigorta
Annual Report
2009
75
24. PROHIBITION ON DOING BUSINESS OR COMPETING WITH THE COMPANY Company Directors are not engaged in any transaction or activity that would fall under the prohibition on doing business or competing with the Company, therefore that would require obtaining the approval of the General Assembly. 25. CODES OF ETHICS AND IMPLEMENTATION PRINCIPLES The Association of the Insurance and Reinsurance Companies of Turkey called insurance and reinsurance companies to pay attention to conform with the Codes of Ethics adopted by the Association by the decision made in its Board of Directors meeting of 18 January 2007, which codes are posted on the Associations official website accessible at www.tsrsb.org.tr. In addition to the said, our codes of ethics as approved by the Board of Directors are presented below: Purpose These principles set the codes of professional ethics that Anadolu Anonim Trk Sigorta irketi (the Company) and its employees must conform to in their activities within the scope of existing laws and regulations, and form the grounds for the sanctions applicable by the Company in case of violation of the provisions of these principles. Scope All Company employees, executives and Board Directors (Employees) comply with these principles. General Principles With a view to ensuring trust and stability in the insurance sector and to prevent transactions and practices that might harm the economy during the activities, all Company employees will fulfill their duties in line with the following general principles: a) Full compliance with the legislation on insurance business b) Integrity in relationships with the customers, agencies, and their employees, Shareholders, group companies and other entities and establishments with which insurance business relationships are established c) Providing clear, intelligible and accurate information in all services provided to all parties with which there is a relation, and keeping the parties fully and accurately informed on their rights and obligations d) Paying attention to pursue operations with an eye on the requirements of economic development, as well as profitability e) Refraining from creating unfair competition conditions, in line with the principles of ensuring the sustainability of the trust held in the insurance sector and observing the common interests of the sector f) Observing social benefit in all activities and paying attention to protecting the environment; ensuring timely and full implementation of the measures to be adopted in this matter g) Full and timely satisfaction of the requirements of the combat against money laundering; cooperating with authorized entities and organizations on this under the provisions of international and national legislation Prohibitions The employees will refrain from the following in their activities: a) Being engaged in activities that are incompatible with the interests and benefits of the sector b) Using the advantages granted to the sector under the laws for the purpose of drawing advantages for customers in activities in a manner that would contradict with the considerations covered in the preamble of legal regulations on insurance and those that are described under these principles, even if such advantages conform to the law in appearance c) Acting in a manner to lead to unfair competition in the sector d) Engaging in acts and activities that contradict with the rules that are set by the Companys authorized bodies and are binding for all employees and executives
76
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2009
Obligation of Secrecy All Employees will treat the information provided by the customers and information created in the Company in confidence and they may not disclose the confidential information they have about the customers to customers and other third parties to draw an advantage. Work Harmony All Employees must act in a manner that befits the Companys respectability in their relations among themselves and with the customers. No Employee may utter any words, write anything, and make any announcements, advertisements or implications that would lead to the creation of a negative image about the other companies operating in the sector and about their executives. Audit The Company prepares its accounts in accordance with the principles governing insurance and reinsurance companies stipulated by the Turkish Treasury, and the regulations of the CMB, if necessary, and has the same audited by an independent audit firm. 26. NUMBERS, STRUCTURES AND INDEPENDENCE OF COMMITTEES WITHIN THE BOARD OF DIRECTORS There is an Audit Committee and a Corporate Governance Committee in our Company. 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. The structures and operating principles of the committees are formulated in writing. 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. 27. FINANCIAL RIGHTS PROVIDED TO THE BOARD OF DIRECTORS Apart from the attendance fee, no remunerations are paid to the Board Directors. Amounts of attendance fees are set by the General Assembly in line with the proposals brought by the Shareholders. The Board Directors have never utilized, directly or indirectly, cash or non-cash loans from the Company.
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2009
77
Financial Information and Assessment on Risk Management
79 80 81 82 83 84 89 90 92 93 94 96 157 159 160 161 164
Summary of Statutory Auditors Report An Assessment of 2009 by the Board of Inspectors 2009 Annual Report Compliance Statement Independent Auditors Report The Unconsolidated Financial Report for the Year Ended 31 December 2009 Detailed Balance Sheet Detailed Income Statement Statement of Changes in Equity Cash Flow Statement Statement of Profit Distribution Detailed Income Statement Notes to the Financial Statements as of 31 December 2009 An Assessment of Financial Standing, Profitability and Solvency Information on Financial Structure Summary Financial Information for the Last 5 Years Including the Reporting Period Risk Management Policies Adhered to by Types of Risks Directory
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Summary of Statutory Auditors Report
THE GENERAL ASSEMBLY OF THE SHAREHOLDERS OF ANADOLU ANONM TRK SGORTA RKET Company Name Head Office Capital Sector - Statutory auditors names, surnames, term of office, and nature of association with the company: Anadolu Anonim Trk Sigorta irketi stanbul TL 425,000,000 Insurance Mehmet ahin Karabilgin (until 26 March 2009) Ali Tolga nal (until 27 October 2009) Zeliha lke Selvi Engin Eki (from 26 March 2009) Aye Alev Ata (from 27 October 2009) Auditors are neither a shareholder nor an employee. The auditors attended all the monthly Board of Directors meetings.
- Number of Board of Directors meetings attended and Board of Auditors meetings held: - Scope, dates and outcome of the examination of Company accounts, books and records: - Number and results of the cash counts held in the Companys pay desk pursuant to article 353, section 1.3 of the Turkish Commercial Code: - Dates and results of the examinations as required by article 353, section 1.4 of the Turkish Commercial Code: - Complaints or irregularities brought to the auditors attention and actions taken.
As a result of the examination of accounts, books and records conducted every three months (January, April, July and October), no irregularities were established. Four cash counts were made. Dates and results of cash counts: 31.03.2009: TL 57.749 30.06.2009: TL 95.504 30.09.2009: TL 74.186 31.12.2009: TL 53.278 As a result of examinations conducted subsequent to monthly Board of Directors meetings, no irregularities were established. None received.
We have audited the accounts and transactions of Anadolu Anonim Trk Sigorta irketi for the period between 01 January 2009 and 31 December 2009 with respect to their compliance with the Turkish Commercial Code, the Companys articles of association, other applicable legislation and with generally accepted accounting principles and standards. In our opinion, the attached balance sheet drawn up on 31 December 2009, the contents of which we acknowledge, fairly and accurately presents the Companys financial status on the date, and the income statement for the period 01 January 2009 31 December 2009 fairly and accurately presents the operating results for the period. The profit distribution proposal was also found to conform to the laws and the Companys articles of association. We propose that the balance sheet and the statement of income be approved and that the members of the Board of Directors be acquitted of their fiduciary responsibilities for the accounts of 2009.
Auditor Zeliha lke SELV
Auditor Aye Alev ATA
Auditor Engin EK
Anadolu Sigorta
Annual Report
2009
79
An Assessment of 2009 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 Companys Board of Directors. In 2009, 18 headquarters units, 9 regional branches and 1 branch adding up to 28 units in total were audited and their results were reported. Auditing of agencies was carried on pursuant to the Regulation on the Internal Systems of Insurance and Reinsurance and Pension Companies during 2009, and 465 agencies were audited, exceeding the targeted 459, and their 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 1,376 agencies that were listed in the audit programs approved by the Board of Directors and planned to be audited in the 2007-2009 period. In 2009, 13 studies were completed: 9 investigations, 3 examinations and one other task that do not fall under either investigation or examination scope. The Board of Inspectors informs the Board of Directors via monthly activity summaries relating to the reports prepared after the audits, investigations and examinations conducted. This system enables close follow-up of the activities of the Board of Inspectors by the Board of Directors. In 2009, the Board of Inspectors was staffed by 19 board members consisting of inspectors, senior assistant inspectors and assistant inspectors. With an 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 started in 2009 will be ongoing in 2010 so that the members of the Board of Inspectors obtain nationally and internationally recognized auditor certificates. Developments are carefully monitored to ensure that the audits conducted and the audit reports subsequently issued are in line with International Standards for Internal Audit, are risk-based, and contribute added value to our Company, and necessary revisions and changes are made accordingly. In line with the experiences derived from agency audits, agencies were continued to be assessed through scoring, 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. The future plans cover transition to the score card system on the basis of agencies. Self-assessment, initiated in 2008 at the audited units, was further improved in 2009, resulting in the assessment of risk criteria, quantification of these assessments, and creation of risk maps for audited units. Owing to ongoing and future efforts, even more effective results are expected to be attained with respect to risk-based auditing. 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.
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Annual Report
2009

2009 Annual Report Compliance Statement
Our Companys 2007 annual report has been prepared in line with the principles and procedures set forth in the Regulation on the Financial Structures of Insurance, Reinsurance and Pension Companies enforced upon its publication in the Official Gazette issue 26606 dated 7 August 2007.
Murat TETK Accounting and Financial Affairs Manager
Fatih GREN Deputy Chief Executive Officer
Mustafa SU Chief Executive Officer
Burhan KARAGZ Chairman
Anadolu Sigorta
Annual Report
2009
81

Independent Auditors Report
To the Board of Directors of Anadolu Anonim Trk Sigorta irketi, Introduction 1. We have audited the accompanying financial statements of Anadolu Anonim Trk Sigorta irketi, which comprise the balance sheet as at 31 December 2009, and statement of income, statement of changes in equity and statement of cash flow for the then ended, and a summary of significant accounting policies and other explanatory notes. Managements Responsibility for the Financial Statements 2. Management is responsible for the preparation and fair presentation of these financial statements in accordance with the applicable accounting principles and standards issued based on insurance laws and regulations. This responsibility includes; designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors Responsibility 3. Our responsibility is to express a conclusion on these financial statements based on our audit. We conducted our audit in accordance with standards on auditing issued based on insurance laws and regulations. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from 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 the auditors 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, the auditor considers internal control relevant to the entitys 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 entitys internal control. An audit also includes evaluating the appropriateness of accounting policies 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 audit opinion. Basis of Qualified Conclusion 4. As of the balance sheet date, in accompanying consolidated financial statements, the Companys management has provided TL 13.702.761 of free provision charged to the prior years statement of income as expense for the purpose of the precautionary principle to consider any potential risks which may arise from any changes in the economy or market conditions. Qualified Conclusion 5. In our opinion, except for the effects of the matter set out in paragraph 4 above, the accompanying financial statements give a true and fair view of the financial position of Anadolu Anonim Trk Sigorta irketi as of 31 December 2009, and of its financial performance and its cash flows for the year then ended in accordance with the applicable accounting principles and standards issued (Note 2) based on insurance laws and regulations. Additional paragraph for the English translation: The effect of the differences between the accounting principles summarized in Note 2 and the accounting principles generally accepted in countries in which the accompanying financial statements are to be distributed and International Financial Reporting Standards (IFRS) have not been quantified and reflected in the accompanying financial statements. The accounting principles used in the preparation of the accompanying financial statements differ materially from IFRS. Accordingly, the accompanying financial statements are not intended to present the Companys financial position and results of its operations in accordance with accounting principles generally accepted in such countries of users of the financial statements and IFRS. stanbul, 9 March 2010 DRT BAIMSIZ DENETM VE SERBEST MUHASEBEC MAL MAVRLK A.. Member of DELOITTE TOUCHE TOHMATSU
Sibel Trker Partner
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The Unconsolidated Financial Report for the Year Ended 31 December 2009
We assure you that our year end unconsolidated financial report and the related disclosures and notes prepared in accordance with the requirements set out by the T.C. Prime Ministry Undersecretariat of the Treasury are in compliance with the provisions of the Decree on Financial Reporting of Insurance and Reinsurance Companies and Pension Funds and our Companys accounting records. stanbul, 9 March 2010
Mustafa Su Member of the Board of Directors, Chief Executive Officer
Fatih Gren Deputy Chief Executive Officer
Murat Tetik Accounting and Financial Affairs Manager
Zeliha lke Selvi Statutory Auditor
Engin Eki Statutory Auditor
Aye Alev Ata Statutory Auditor
Anadolu Sigorta
Annual Report
2009
83

Detailed Balance Sheet
ASSETS I- Current Assets A- Cash and Cash Equivalents 1- Cash 2- Cheques Received 3- Banks 4- Cheques Given and Payment Orders (-) 5- Other Cash and Cash Equivalents B- Financial Assets and Investments with Risks on Policy Holders 1- Financial Assets Available for Sale 2- Financial Assets Held to Maturity 3- Financial Assets Held for Trading 4- Loans 5- Provision for Loans (-) 6- Investments with Risks on Policy Holders 7- Equity Shares 8- Diminution in Value of Financial Assets (-) C- 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 & Reinsurance Companies 6- Loans to Policyholders 7- Provision for Loans to Policyholders (-) 8- Receivables from Pension Operations 9- Doubtful Receivables from Main Operations 10- Provisions for Doubtful Receivables from Main Operations (-) D- Due from Related Parties 1- Due from Shareholders 2- Due from Affiliates 3- Due from Subsidiaries 4- Due from Joint Ventures 5- Due from Personnel 6- Due from Other Related Parties 7- Discount on Receivables Due from Related Parties (-) 8- Doubtful Receivables Due from Related Parties 9- Provisions for Doubtful Receivables Due from Related Parties (-) E- Other Receivables 1- Lease Receivables 2- Unearned Lease Interest Income (-) 3- Deposits and Guarantees Given 4- Other Receivables 5- Discount on Other Receivables (-) 6- Other Doubtful Receivables 7- Provisions for Other Doubtful Receivables (-) F- Prepaid Expenses and Income Accruals 1- Prepaid Expenses 2- Accrued Interest and Rent Income 3- Income Accruals 4- Other Prepaid Expenses and Income Accruals G- Other Current Assets 1- Inventories 2- Prepaid Taxes and Funds 3- Deferred Tax Assets 4- Business Advances 5- Advances Given to Personnel 6- Stock Count Differences 7- Other Current Assets 8- Provision for Other Current Assets (-) I- Total Current Assets
Note 2.12,14 14 14 11.1 11.1 11.1 11.1
11.1, 11.7 4.2.3, 12.1 12.1, 17.16 12.1, 17.16
4.2.3, 12.1, 42 4.2.3, 12.1, 42 12.1
47.2
47.2 47.2
2.1.1.c, 12.1
Audited Current Period 31/12/2009 493,439,595 53,278 33,740 407,927,829 (5,925,520) 91,350,268 426,821,731 60,074,502 120,069,630 252,475,211 (5,797,612) 435,410,551 408,780,788 21,332,124 5,297,639 65,129,434 (65,129,434) 937,911 937,911 1,406,279 14,940 1,391,339 94,422,524 94,422,524 644,865 353,387 78,945 9,201 203,332 1,453,083,456
TL Audited Prior Period 31/12/2008 681,610,191 57,170 15,912 633,357,943 (7,470,138) 55,649,304 221,022,027 48,262,948 106,772,583 88,923,623 (22,937,127) 432,563,671 410,543,183 17,656,888 4,363,600 57,499,314 (57,499,314) 173,259 82,029 91,230 1,144,914 14,544 1,130,370 87,401,332 87,401,332 449,268 313,175 26,067 6,225 103,801 1,424,364,662
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2009

ASSETS II- Non Current Assets A- Receivables from Main Operations 1- Receivables from Insurance Operations 2- Provision for Receivables from Insurance Operations (-) 3- Receivables from Reinsurance Operations 4- Provision for Receivables from Reinsurance Operations (-) 5- Cash Deposited for Insurance & Reinsurance Companies 6- Loans to Policyholders 7- Provision for Loans to Policyholders (-) 8- Receivables from Pension Operations 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 Affiliates 3- Due from Subsidiaries 4- Due from Joint Ventures 5- Due from Personnel 6- Due from Other Related Parties 7- Discount on Receivables Due from Related Parties (-) 8- Doubtful Receivables Due from Related Parties 9- Provisions for Doubtful Receivables Due from Related Parties (-) C- Other Receivables 1- Leasing Receivables 2- Unearned Leasing Interest Income (-) 3- Guarantees Given 4- Other Receivables 5- Discount on Other Receivables (-) 6- Other Doubtful Receivables 7- Provisions for Other Doubtful Receivables (-) D- Financial Assets 1- Investments In Associates 2- Affiliates 3- Capital Commitments to Affiliates (-) 4- Subsidiaries 5- Capital Commitments to Subsidiaries (-) 6- Joint Ventures 7- Capital Commitments to Joint Ventures (-) 8- Financial Assets and Investments with Risks on Policy Holders 9- Other Financial Assets 10- Diminution in Value of Financial Assets (-) E- Tangible Assets 1- Investment Properties 2- Diminution in Value for Investment Properties (-) 3- Owner Occupied Properties 4- Machinery and Equipments 5- Furnitures and Fixtures 6- Vehicles 7- Other Tangible Assets (Including Leasehold Improvements) 8- Leased Tangible Assets 9- Accumulated Depreciation (-) 10- Advances Paid for Tangible Assets (Including Construction In Progresses) F- Intangible Assets 1- Rights 2- Goodwill 3- Establishment Costs 4- Research and Development Expenses 6- Other Intangible Assets 7- Accumulated Amortization (-) 8- Advances Regarding Intangible Assets G- Prepaid Expenses and Income Accruals 1- Prepaid Expenses 2- Income Accruals 3- Other Prepaid Expenses and Income Accruals H- Other Non-current Assets 1- Effective Foreign Currency Accounts 2- Foreign Currency Accounts 3- Inventories 4- Prepaid Taxes and Funds 5- Deferred Tax Assets 6- Other Non-current Assets 7- Other Non-current Assets Amortization (-) 8- Provision for Other Non-current Assets (-) II- Total Non-current Assets TOTAL ASSETS
Note
11.4
2.6, 6.4, 7 6.4 6.4 6.4 6.4 6.4 6.4 6.4
2.7, 8
12.1
21, 35
Audited Current Period 31/12/2009 246,999,981 246,999,981 22,524,994 6,982,776 10,320,840 17,354,801 8,412,228 972,378 11,221,210 4,339,065 (37,078,304) 16,250,000 16,250,000 53,572 53,572 7,316 7,316 285,835,863 1,738,919,319
TL Audited Prior Period 31/12/2008 71,999,994 71,999,994 21,758,407 6,831,991 10,311,518 13,791,891 11,929,614 729,746 9,513,674 4,339,065 (35,689,092) 16,250,000 16,250,000 2,624 2,624 110,011,025 1,534,375,687
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2009
85

LIABILITIES III-Short Term Liabilities Note A- Borrowings 1- Loans to Financial Institutions 2- Finance Lease Payables 2.22, 32.2 3- Deferred Finance Lease Borrowing Costs (-) 2.22, 32.2 4- Current Portion of Long Term Borrowings 5- Principal, Installments and Interests on Issued Bills (Bonds) 6- Other Issued Financial Assets 7- Value Differences on Issued Financial Assets (-) 8- Other Financial Borrowings (Liabilities) B- Payables from Main Operations 1- Payables Due to Insurance Operations 19.1 2- Payables Due to Reinsurance Operations 3- Cash Deposited by Insurance & Reinsurance Companies 17.16, 19.1 4- Payables Due to Pension Operations 5- Payables from Other Operations 19.1 6- Discount on Other Payables from Main Operations, Notes Payable (-) C- Due to Related Parties 1- Due to Shareholders 2- Due to Affiliates 3- Due to Subsidiaries 4- Due to Joint Ventures 5- Due to Personnel 6- Due to Other Related Parties D- Other Payables 1- Guarantees and Deposits Received 19.1, 47.2 2- Other Payables 19.1, 47.2 3- Discount on Other Payables (-) E- Insurance Technical Reserves 1- Unearned Premiums Reserve - Net 2.1.1.c 2- Unexpired Risk Reserves - Net 2.1.1.c 3- Life Mathematical Reserves - Net 4- Outstanding Claims Reserve - Net 2.1.1.c, 4.1.2.2 5- Provision for Bonus and Discounts - Net 6- Reserve for Policies Investment Risk of Life Insurance Policyholders - Net 7- Other Technical Reserves - Net F- Taxes and Other Liabilities and Provisions 1- Taxes and Dues Payable 2- Social Security Premiums Payable 23.1 3- Overdue, Deferred or By Installment Taxes and Other Liabilities 4- Other Taxes and Liabilities 5- Corporate Tax Liability Provision on Period Profit 35 6- Prepaid Taxes and Other Liabilities on Period Profit (-) 35 7- Provisions for Other Taxes and Liabilities G- Provisions for Other Risks 1- Provision for Employment Termination Benefits 2- Pension Fund Deficit Provision 3- Provisions for Costs H- Deferred Income and Expense Accruals 1- Deferred Income 2.1.1.c, 19.1 2- Expense Accruals 3- Other Deferred Income and Expense Accruals 19.1 I- Other Short Term Liabilities 1- Deferred Tax Liability 2- Inventory Count Differences 3- Other Short Term Liabilities 23.1 III - Total Current Liabilities
Audited Current Period 31/12/2009 925 (925) 73,339,698 48,147,814 24,846 25,167,038 11,915 11,915 12,151,406 1,524,247 10,627,159 772,263,742 482,411,460 8,312,029 281,540,253 5,457,128 9,368,226 1,067,177 11,052,657 (16,030,932) 31,404,645 27,304,987 4,099,658 463,659 463,659 895,092,193
TL Audited Prior Period 31/12/2008 88,079 1,850 (1,850) 88,079 116,073,704 96,276,171 1,792,582 18,004,951 14,164 5,657 8,507 13,474,347 1,326,874 12,147,473 716,655,472 458,316,484 8,164,367 250,174,621 11,497,605 9,389,968 1,386,978 23,056,450 (22,335,791) 34,782,669 27,558,111 7,224,558 345,977 345,977 892,932,017
86
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2009

LIABILITIES IV- Long Term Liabilities A- Borrowings 1- Loans to Financial Institutions 2- Finance Lease Payables 3- Deferred Finance Lease Borrowing Costs (-) 4- Bonds Issued 5- Other Issued Financial Assets 6- Value Differences on Issued Financial Assets (-) 7- Other Financial Borrowings (Liabilities) B- Payables from Main Operations 1- Payables Due to Insurance Operations 2- Payables Due to Reinsurance Operations 3- Cash Deposited by Insurance & Reinsurance Companies 4- Payables Due to Pension Operations 5- Payables from Other Operations 6- Discount on Other Payables from Main Operations (-) C- Due to Related Parties 1- Due to Shareholders 2- Due to Affiliates 3- Due to Subsidiaries 4- Due to Joint Ventures 5- Due to Personnel 6- Due to Other Related Parties D- Other Payables 1- Guarantees and Deposits Received 2- Other Payables 3- Discount on Other Payables (-) E- Insurance Technical Reserves 1- Unearned Premiums Reserve - Net 2- Unexpired Risk Reserves - Net 3- Life Mathematical Reserves - Net 4- Outstanding Claims Reserve - Net 5- Provision for Bonus and Discounts - Net 6- Reserve for Policies Investment Risk of Life Insurance Policyholders - Net 7- Other Technical Reserves - Net F- Other Liabilities and Provisions 1- Other Liabilities 2- Overdue, Deferred or By Installment Other Liabilities 3- Other Liabilities and Expense Accruals G- Provisions for Other Risks 1- Provision for Employment Termination Benefits 2- Provisions for Employee 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 Liability 2- Other Long Term Liabilities IV- Total Non Current Liabilities
Note
47.2
2.19, 22
21, 35
Audited Current Period 31/12/2009 33,754,914 33,754,914 3,685,283 3,685,283 37,440,197
TL Audited Prior Period 31/12/2008 29,099,764 29,099,764 3,154,041 3,154,041 1,199,199 1,199,199 33,453,004
Anadolu Sigorta
Annual Report
2009
87

LIABILITIES V- Shareholders Equity A- Paid in Capital 1- (Nominal) Capital 2- Unpaid Capital (-) 3- Positive Inflation Adjustment on Capital 4- Negative Inflation Adjustment on Capital (-) B- Capital Reserves 1- Equity Share Premiums 2- Cancellation Profits of Equity Shares 3- Profit on Sale to be Transferred to Capital 4- Translation Reserves 5- Other Capital Reserves C- Profit Reserves 1- Legal Reserves 2- Statutory Reserves 3- Extraordinary Reserves 4- Special Funds (Reserves) 5- Revaluation of Financial Assets 6- Other Profit Reserves D- Previous Years Profits 1- Previous Years Profits E- Previous Years Losses (-) 1- Previous Years Losses F- Net Profit of the Period 1- Net Profit of the Period 2- Net Loss of the Period 3- Net Income not subject to distribution Total Shareholders Equity TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
Note 1.1, 2.13, 15
11.6, 16.1
37
Audited Current Period 31/12/2009 425,000,000 425,000,000 333,222,716 26,055,108 8,281,202 202,850,249 96,036,157 48,164,213 48,164,213 806,386,929 1,738,919,319
TL Audited Prior Period 31/12/2008 350,000,000 350,000,000 129,910,768 16,708,714 16,947,698 218,199 96,036,157 18,091,345 18,091,345 (7,677,723) (7,677,723) 117,666,276 117,127,888 538,388 607,990,666 1,534,375,687
88
Anadolu Sigorta
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2009

Detailed Income Statement
I-TECHNICAL PART A- Non-Life Technical Income 1- Earned Premiums (Net of Reinsurer Share) 1.1 - Premiums (Net of Reinsurer Share) 1.1.1 - Gross Premiums (+) 1.1.2 - Ceded Premiums to Reinsurers (-) 1.2- Change in Unearned Premiums Reserve (Net of Reinsurers Shares and Reserves Carried Forward) (+/-) 1.2.1 - Unearned Premiums Reserve (-) 1.2.2 - Reinsurance Share of Unearned Premiums Reserve (+) 1.3- Changes in Unexpired Risks Reserve (Net of Reinsurer Share and Reserves Carried Forward)(+/-) 1.3.1 - Unexpired Risks Reserve (-) 1.3.2 - Reinsurance Share of Unexpired Risks Reserve (+) 2- Investment Income Transferred from Non-Technical Part 3- Other Technical Income (Net of Reinsurer Share) 3.1 - Gross Other Technical Income (+) 3.2 - Reinsurance Share of Other Technical Income (-) B- Non-Life Technical Expense (-) 1- Total Claims (Net of Reinsurer Share) 1.1- Claims Paid (Net of Reinsurer Share) 1.1.1 - Gross Claims Paid (-) 1.1.2 - Reinsurance Share of Claims Paid (+) 1.2- Changes in Outstanding Claims Reserve (Net of Reinsurer Share and Reserves Carried Forward) (+/-) 1.2.1 - Outstanding Claims Reserve (-) 1.2.2 - Reinsurance Share of Outstanding Claims Reserve (+) 2- Changes in Bonus and Discount Reserve (Net of Reinsurer Share and Reserves Carried Forward) (+/-) 2.1 - Bonus and Discount Reserve (-) 2.2 - Reinsurance Share of Bonus and Discount Reserve (+) 3- Changes in Other Technical Reserves (Net of Reinsurer Share and Reserves Carried Forward) (+/-) 4- Operating Expenses (-) C- Non Life Technical Net Profit (A-B) II-NON TECHNICAL PART C- Non Life Technical Net Profit (A-B) J- General Technical Net Profit (C) K- Investment Income 1- Income from Financial Investments 2- Income from Sales of Financial Investments 3- Revaluation of Financial Investments 4- Foreign Exchange Gains 5- Dividend Income from Participations 6- Income from Affiliated Companies 7- Income Received from Land and Building 8- Income from Derivatives 9- Other Investments 10- Investment Income transferred from Life Technical Part L- Investment Expenses (-) 1- Investment Management Expenses (Including Interest) (-) 2- Valuation Allowance of Investments (-) 3- Losses On Sales of Investments (-) 4- Investment Income Transferred to Life Technical Part (-) 5- Losses from Derivatives (-) 6- Foreign Exchange Losses (-) 7- Depreciation Expenses (-) 8- Other Investment Expenses (-) M- Other Income and Expenses (+/-) 1- Provisions Account (+/-) 2- Discount Account (+/-) 3- Speciality Insurances Account (+/-) 4- Inflation Adjustment Account (+/-) 5- Deferred Tax Asset Accounts(+/-) 6- Deferred Tax Liability Accounts (+/-) 7- Other Income and Revenues 8- Other Expense and Losses (-) 9- Prior Period Income 10- Prior Period Losses (-) N- Net Profit/(Loss) 1- Profit/(Loss) Before Tax 2- Corporate Tax Liability Provision (-) 3- Net Profit (Loss) 4- Inflation Adjustment Account
Notes 2.1.1.e, 24 17.16 2.1.1.c 17.16 2.1.1.c 29
TL Audited Audited Current Period Prior Period 01/01/2009 31/12/2009 01/01/2008 31/12/2008 1,054,386,706 932,498,168 902,224,415 822,807,792 926,467,053 872,199,140 1,243,477,307 1,161,386,191 (317,010,254) (289,187,051) (24,094,976) (24,883,333) 788,357 (147,662) 6,624 (154,286) 129,967,912 22,194,379 27,076,808 (4,882,429) (1,004,244,823) (735,787,294) (704,421,662) (854,889,956) 150,468,294 (31,365,632) (54,293,775) 22,928,143 (42,860,837) (90,478,681) 47,617,844 (6,530,511) (7,521,469) 990,958 99,397,266 10,293,110 10,389,900 (96,790) (835,826,669) (647,270,036) (595,760,563) (685,304,251) 89,543,688 (51,509,473) (63,872,437) 12,362,964 (5,444,952) (183,111,681) 96,671,499
17.16 2.1.1.c 17.16
2.1.1.c, 47.1 31.1, 32.1, 47.1
(4,655,150) (263,802,379) 50,141,883
50,141,883 50,141,883 162,322,606 79,902,465 42,616,722 18,235,732 11,550,904 8,399,999 1,076,723 540,061 (150,423,542) (925) (3,473,221) (4,191,139) (129,967,912) (8,276,790) (4,513,555) (2,824,077) (7,874,018) 5,460,458 1,206,515 911,791 (2,528,823) 48,164,213 59,216,870 (11,052,657) 48,164,213
96,671,499 96,671,499 176,944,315 128,088,722 16,390,548 (6,439,850) 19,776,678 17,888,252 1,199,623 12,800 27,542 (117,741,481) (108,031) (282,743) (3,346,990) (99,397,266) (9,499,637) (5,106,814) (15,151,607) (13,665,702) 3,808,326 57,447 (2,122,323) 1,123,980 (4,353,335) 117,666,276 140,722,726 (23,056,450) 117,666,276 -
26 26 26 26, 36 26 26 2.10, 13, 26
34.1 26 26 26, 36 6.1, 6.4, 32.1 4.2.3 2.1.1.g 35 35 47.1 47.1
35
Anadolu Sigorta
Annual Report
2009
89

Statement of Changes in Equity
Audited Equity Shares Owned by Capital CURRENT PERIOD I - Opening Balance of Prior Period (31/12/2008) A- Capital increase (A1 + A2) 1- Cash 2- Internal sources B- Equity shares purchased by the company C- Income/(expense) recognized directly in the equity D- Revaluation of financial assets E- Translation reserves F- Other income/(expenses) G- Inflation adjustment differences H- Period net profit I- Dividends distributed J- Transfer II - Closing Balance at 31/12/2009 (I+A+B+C+D+E+F+G+H+I+J) PRIOR PERIOD I - Opening Balance of Prior Period (31/12/2007) II - Effects of Changes In Accounting Policy III - As Restated (I + II) (01/01/2008) A- Capital increase (A1 + A2) 1- Cash 2- Internal sources B- Equity shares purchased by the company C- Income/(expense) recognized directly in the equity D- Revaluation of Financial Assets E- Translation reserves F- Other income/(expenses) G- Inflation adjustment differences H- Period net profit I- Dividends distributed J-Transfer IV - Closing Balance at 31/12/2008 (III+A+B+C+D+E+F+G+H+I+J) 275,000,000 275,000,000 75,000,000 75,000,000 350,000,000 142,581,854 142,581,854 (142,363,655) 218,199 75,000,000 425,000,000 350,000,000 75,000,000 218,199 202,632,050 202,850,249 Company (-) Revaluation of Financial Assets
90
Anadolu Sigorta
Annual Report
2009

Statement of Changes in Equity
Other Inflation Adjustment of Capital Translation Reserves Legal Reserves 16,708,714 9,346,394 26,055,108 8,242,159 104,317,359 Statutory Reserves Reserves and Retained Earnings 112,983,855 (16,908,655) (16,908,655) Net Profit (Loss) for the Period 48,164,213 48,164,213 Previous Years Profits/Losses 128,079,898 (58,091,345) (58,091,345) (52,400,000) (17,588,553) Total 607,990,666 202,632,050 48,164,213 (52,400,000) 806,386,929
13,207,066 13,207,066 3,501,648 16,708,714
159,090,661 (539,332) 158,551,329 (51,460,668) (51,460,668) 5,893,194 112,983,855
117,666,276 117,666,276
54,208,548 10,952,954 65,161,502 (23,539,332) (23,539,332) (21,813,706) (9,394,842) 10,413,622
644,088,129 10,413,622 654,501,751 (142,363,655) 117,666,276 (21,813,706) 607,990,666
Anadolu Sigorta
Annual Report
2009
91

Cash Flow Statement
A. CASH FLOWS FROM THE OPERATING ACTIVITIES 1. Cash inflows from the insurance operations 2. Cash inflows from the reinsurance operations 3. Cash inflows from the pension operations 4. Cash outflows due to the insurance operations (-) 5. Cash outflows due to the reinsurance operations (-) 6. Cash outflows due to the pension operations (-) 7. Cash generated from the operating activities (A1+A2+A3-A4-A5-A6) 8. Interest payments (-) 9. Income tax payments (-) 10. Other cash inflows 11. Other cash outflows (-) 12. Net cash generated from the operating activities B. CASH FLOWS FROM THE INVESTING ACTIVITIES 1. Sale of tangible assets 2. Purchase of tangible assets (-) 3. Acquisition of financial assets (-) 4. Sale of financial assets 5. Interest received 6. Dividends received 7. Other cash inflows 8. Other cash outflows (-) 9. Net cash generated from the investing activities C. CASH FLOWS FROM THE FINANCING ACTIVITIES 1. Issue of equity shares 2. Cash inflows from the loans to policyholders 3. Payments of financial leases (-) 4. Dividends paid (-) 5. Other cash inflows 6. Other cash outflows (-) 7. Cash generated from the financing activities D. EFFECTS OF EXCHANGE RATE DIFFERENCES ON CASH AND CASH EQUIVALENTS E. Net increase/(decrease) in cash and cash equivalents (A12+B9+C7+D) F. Cash and cash equivalents at the beginning of the period G. Cash and cash equivalents at the end of the period (E+F)
Note
Audited Current Period (01/01/2009-31/12/2009) 1,062,671,992 (1,000,446,509) (6,377,011) 55,848,472 (16,751,591) 14,742,315 (14,311,147) 39,528,049
TL Audited Prior Period (01/01/2008-31/12/2008) 1,107,622,086 354,787 (921,013,429) (6,790,724) 180,172,720 (27,793,974) 40,124,620 (54,329,127) 138,174,239 387,636 (6,678,733) 89,728,496 76,278,039 3,692,172 15,085,994 (112,724,838) 65,768,766 (401,412) (21,813,706) (22,215,118) 181,727,887 495,876,384 677,604,271
6 6
1,567,924 (6,848,066) (230,588,682) 191,370,729 10,082,554 6,500,715 (146,192,730) (174,107,556) (52,400,000) (52,400,000) (186,979,507) 677,604,271 490,624,764
14
92
Anadolu Sigorta
Annual Report
2009

Statement of Profit Distribution
I. DISTRIBUTION OF PROFIT FOR THE PERIOD 1.1. PROFIT FOR THE PERIOD (**) 1.2. TAXES PAYABLE AND LEGAL LIABILITIES 1.2.1. Corporate Tax (Income Tax) 1.2.2. Income Tax Deduction 1.2.3. Other Taxes and Legal Liabilities A NET PROFIT FOR THE PERIOD (1.1 1.2) 1.3. PREVIOUS YEARS LOSSES (-) 1.4. FIRST LEGAL RESERVE 1.5. LEGAL RESERVES KEPT IN THE COMPANY (-) B NET DISTRIBUTABLE PROFIT FOR THE PERIOD [ (A - (1.3 + 1.4 + 1.5) ] 1.6. FIRST DIVIDENDS TO SHAREHOLDERS (-) 1.6.1. To Common Shareholders (***) 1.6.2. To Preferred Shareholders 1.6.3 To Owners of Participating Redeemed Shares 1.6.4 To Owners of Profit-sharing Securities 1.6.5 To Owners of Profit and Loss Sharing Securities 1.7. DIVIDENDS TO PERSONNEL (-) (***) 1.8. DIVIDENDS TO FOUNDERS (-) 1.9. DIVIDENDS TO BOARD OF DIRECTORS (-) 1.10. SECOND DIVIDENDS TO SHAREHOLDERS (-) (***) 1.10.1. To Common Shareholders 1.10.2. To Preferred Shareholders 1.10.3. To Owners of Participating Redeemed Shares 1.10.4. To Owners of Profit-sharing Securities 1.10.5. To Owners of Profit and Loss Sharing Securities 1.11. SECOND LEGAL RESERVE (-) 1.12. STATUTORY RESERVES (-) 1.13. EXTRAORDINARY RESERVES 1.14 OTHER RESERVES 1.15 SPECIAL FUNDS II. DISTRIBUTION FROM RESERVES 2.1. DISTRIBUTED RESERVES 2.2. SECOND LEGAL RESERVE (-) 2.3. DIVIDENDS TO SHAREHOLDERS (-) 2.3.1. To Common Shareholders 2.3.2 To Preferred Shareholders 2.3.3. To Owners of Participating Redeemed Shares 2.3.4 To Owners of Profit-sharing Securities 2.3.5 To Owners of Profit and Loss Sharing Securities 2.4. DIVIDENDS TO EMPLOYEES (-) 2.5. DIVIDENDS TO BOARD OF DIRECTORS (-) III. PROFIT PER SHARE 3.1. TO COMMON SHAREHOLDERS 3.2. TO COMMON SHAREHOLDERS (%) 3.3. TO PREFERRED SHAREHOLDERS 3.4. TO PREFERRED SHAREHOLDERS (%) IV. DIVIDENDS PER SHARE 4.1. TO COMMON SHAREHOLDERS 4.2. TO COMMON SHAREHOLDERS (%) 4.3. TO PREFERRED SHAREHOLDERS 4.4. TO PREFERRED SHAREHOLDERS (%)
Note
Audited Current Period 01/01/2009-31/12/2009 (*) 66,432,942 (11,052,657) (11,052,657) 55,380,285
TL Audited Prior Period 01/01/2008-31/12/2008 140,184,338 (23,056,450) (23,056,450) 117,127,888 (5,856,394) 111,271,494 (20,795,532) (20,795,531) (1)
(2,400,000) (69,204,468) (69,204,467) (1) (3,490,000) (8,087,657) 0.3346 33.46 0.3346 33.46 0.2571 25.71 0.2571 25.71
(*) Since 2009 profit distribution proposal has not been approved by the General Assembly, just net profit available for distribution is shown on the profit distribution table. (**) Current period : As per the Capital Markets Board 27 January 2010 dated resolution, it has been resolved that for companies, required to prepare consolidated financial statements, the consolidated profit for the period will be used in the calculations of distributable profit for the period. Prior period: As per No. 5520 Corporate Tax Law Article 5 of the first paragraph (e), 75 % of the sales income from subsidiaries and real estate ,is exempted from corporate tax. Because of the fact, TL 538.388 sales income from subsidiaries and real estate, presented in Net Income not subject to distribution line of balance sheet, deducted from the Period Profit. (***) TL 40.000.000 amount of the dividend has been distributed to shareholders as bonus shares.
Anadolu Sigorta
Annual Report
2009
93

I-TECHNICAL PART A- Non-Life Technical Income 1- Earned Premiums (Net of Reinsurer Share) 1-1. Premiums (Net of Reinsurer Share) 1.2- Change in Unearned Premium Provisions (Net of Reinsurers Shares and Reserves Carried Forward) (+/-) 1.3- Changes in Unexpired Risk Reserves (Net of Reinsurer Share and Reserves Carried Forward)(+/-) 2- Investment Income Transferred from Non-Technical Divisions 3- Other Technical Income (Net of Reinsurer Share) B- Non-Life Technical Expense (-) 1- Realized Claims (Net of Reinsurer Share) 1.1- Claims Paid (Net of Reinsurer Share) 1.2- Changes in Outstanding Claims Provisions (Net of Reinsurer Share and Reserves Carried Forward) (+/-) 2- Changes in Bonus and Discount Provisions (Net of Reinsurer Share and Reserves Carried Forward) (+/-) 3- Changes in Other Technical Reserves (Net of Reinsurer Share and Reserves Carried Forward) (+/-) 4- Operating Expenses (-) C- Non Life Technical Profit (A-B) II- NON TECHNICAL PART C- Non Life Technical Profit (A-B) J- Total Technical Profit (C) K- Investment Income 1- Income from Financial Investments 2- Income from Sales of Financial Assets 3- Revaluation of Financial Assets 4- Foreign Exchange Gains 5- Dividend Income from Affiliates 6- Income form Subsidiaries and Joint Ventures 7- Real Estate Income 8- Income from Derivative Instruments 9- Other Investments 10- Investment Income transferred from Life Technical Division L- Investment Expenses (-) 1- Investment Management Expenses (including interest) (-) 2- Valuation Allowance of Investments (-) 3- Losses On Sales of Investments (-) 4- Investment Income Transferred to Non - Life Technical Division (-) 5- Losses from Derivative Instruments (-) 6- Foreign Exchange Losses (-) 7- Depreciation Expenses (-) 8- Other Investment Expenses (-) M- Other Income and Expenses (+/-) 1- Reserves (Provisions) Account (+/-) 2- Rediscount Account (+/-) 3- Mandatory Earthquake Insurance Account (+/-) 4- Inflation Adjustment Account (+/-) 5- Deferred Tax Asset Accounts (+/-) 6- Deferred Tax Liability Expense (+/-) 7- Other Income and Revenues 8- Other Expense and Losses (-) 9- Prior Period Income 10- Prior Period Losses (-) N- Net Profit / (Loss) 1- Profit /(Loss) Before Tax 2- Taxes Provisions (-) 3- Net Profit (Loss) after Tax 4- Inflation Adjustment Account (+/-)
FIRE 96,133,439 73,519,482 77,856,665 -4,337,183 0 21,549,681 1,064,276 -74,373,724 -54,017,704 -41,399,716 -12,617,987 0 -3,181,012 -17,175,009 21,759,715
MARINE 47,263,077 33,525,191 32,234,541 1,290,649 0 11,509,234 2,228,653 -25,184,472 -14,781,863 -12,368,031 -2,413,831 0 -13,009 -10,389,600 22,078,605
ACCIDENT 398,493,296 359,841,174 367,601,673 -7,486,411 -274,088 23,030,049 15,622,074 -432,662,982 -322,546,939 -328,015,929 5,468,989 0 -527,575 -109,588,467 -34,169,686
94
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Annual Report
2009

MOTOR THIRD PARTY LIABILITY 264,916,907 225,115,822 235,074,024 -10,864,789 906,586 37,476,629 2,324,457 -243,884,631 -184,483,703 -170,384,243 -14,099,460 0
ENGINEERING 17,386,860 16,187,510 14,182,335 2,065,364 -60,188 1,168,556 30,794 -19,353,390 -13,353,822 -13,554,218 200,396 0 -204,357 -5,795,211 -1,966,530
AGRICULTURE 7,436,129 5,420,355 7,074,527 -1,692,596 38,424 2,003,978 11,796 -5,026,966 -2,945,254 -3,615,386 670,132 0
LEGAL PROTECTION 7,875,561 5,060,609 4,896,627 163,982 0 2,814,949 3 -3,972,776 -20,738 -37,640 16,902 0 0 -3,952,038 3,902,785
PERSONAL ACCIDENT 64,761,555 44,782,868 41,960,364 2,822,503 0 19,336,011 642,676 -28,100,835 -10,002,821 -8,583,768 -1,419,053 0 -715,447 -17,382,567 36,660,719
HEALTH 150,106,963 138,762,219 145,579,853 -6,059,238 -758,395 11,075,093 269,650 -171,676,900 -133,634,450 -126,462,730 -7,171,720 0 0 -38,042,450 -21,569,938
CREDIT 12,918 9,186 6,443 2,743
TOTAL 1,054,386,706 902,224,415 926,467,053 -24,094,976
0 -147,662 3,733 129,967,912 0 22,194,379 -8,146 -1,004,244,823 0 -735,787,294 0 -704,421,662 0 0 -13,750 5,604 4,772 -31,365,632 0 -4,655,150 -263,802,379 50,141,883
-59,400,928 21,032,276
-2,081,712 2,409,163
50,141,883 50,141,883 162,322,606 79,902,465 42,616,722 18,235,732 11,550,904 8,399,999 0 1,076,723 540,061 0 0 -150,423,542 -925 -3,473,221 -4,191,139 -129,967,912 0 -8,276,790 -4,513,555 0 -2,824,077 -7,874,018 5,460,458 0 0 1,206,515 0 911,791 -2,528,823 0 0 48,164,213 59,216,870 -11,052,657 48,164,213 0
Anadolu Sigorta
Annual Report
2009
95
Notes to the Financial Statements as of 31 December 2009

(Amounts expressed in Turkish Lira (TL) unless otherwise stated).
1. General Information 1.1 Parent Company and the ultimate owner of the Group Anadolu Anonim Trk Sigorta irketi (the Company), operating since 1 April 1925, is the subsidiary of Trkiye Bankas A.. and its ultimate shareholding structure is detailed below: 31 December 2009 Participation Participation Amount TL rate% 151.002.594 35,53 92.564.995 21,78 181.432.411 42,69 425.000.000 100,00 31 December 2008 Participation Participation Amount TL rate% 124.355.077 35,53 76.229.997 21,78 149.414.926 42,69 350.000.000 100,00
Trkiye Bankas A.. Mill Reasrans T.A.. Other
1.2 The Companys address and legal structure and address of its registered country and registered office (or, if the Companys address is different from its registered office, the original location where the Companys actual operations are performed) The Company is a corporation, which was established in accordance with the requirements of Turkish Commercial Code, is located at Kuleleri Kule 2 Kat: 23-26 34330, 4.Levent, stanbul. The Company operates in accordance with the principles determined by Insurance Law No: 5684. 1.3 Main operations of the Company The Companys main operation is insurance business on non-life insurance branches. 1.4 Details of the Companys operations and nature of field of activities In accordance with Article 50(a) in Section VII of the Capital Markets Law, insurance companies have to comply with their own specific laws and regulations in matters of establishment, auditing, supervision/oversight, accounting and financial reporting; therefore, the Company performs its operations accordingly. Principles of operations are determined based on the Insurance Law No: 5684 and standards and policies set out in applicable regulations. 1.5 Average number of the Companys personnel based on their categories 31 December 2009 Number 9 110 329 238 133 819 31 December 2008 Number 8 76 298 251 87 720
Key management personnel Directors Intermediate Director Officers Contracted Personnel Total
1.6 Remuneration and fringe benefits provided to top management As of 31 December 2009, remuneration and fringe benefits provided to top management such as; chairman and members of the board of directors, managing director and assistant managing director (including operational leasing, depreciation and other expenses in addition to monetary rights, such as; compensation, bonuses, premiums, and other charges) in total amount to TL 4.354.521 (31 December 2008: TL 3.678.169). 1.7 Distribution keys used in the distribution of investment income and operating expenses in the financial statements (personnel expenses, administration expenses, research and development expenses, marketing and selling expenses and other operating expenses) The Companys distribution of indirect general administrative, research and development, marketing, selling and advertising expenses to technical accounts by the number of policies based on each branch, gross amount of premiums written and numbers of claim reports is made based on the standards and policies set out in relation
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to distribution keys used in the financial statements prepared in accordance with the Undersecretariat of the Treasurys Circular on the Insurance Uniformed Chart of Accounts issued on 4 January 2008. The Companys distribution of investment income to technical branches by the rates calculated by dividing the net cash flow amount into the total net cash flow amount, less any reinsurance share for each branch is made based on the standards and policies set out in relation to the distribution keys used in the financial statements prepared in accordance with the Undersecretariat of the Treasurys circular on the Insurance Uniformed Chart of Accounts issued on 4 January 2008. 1.8 Stand-alone or consolidated financial statements According to the Decree on Financial Reporting of Insurance and Reinsurance Companies and Pension Funds, published in the Official Gazette No: 26852 on 14 July 2007; the accompanying financial statements comprise the unconsolidated financial statements. 1.9 Name and other information of the reporting company and subsequent changes to the prior balance sheet date Name/Trade name Headquarter address Phone Fax Web page address E-mail address Anadolu Anonim Trk Sigorta irketi Kuleleri Kule 2 Kat: 22-26 34330, 4. Levent/stanbul (212) 350 03 50 (212) 350 03 55 www.anadolusigorta.com.tr bilgi@anadolusigorta.com.tr
There has been no change in the above information as of the prior balance sheet date. 1.10 Subsequent Events There has been no change in the Companys operations, documentation and records or Companys policies subsequent to the balance sheet date. 2. Summary of the Accounting Policies 2.1 Basis of Preparation 2.1.1 Basis of Preparation of Financial Statements and Specific Accounting Policies Used Accounting Standards In accordance with Article 50(a) of Section VII of the Capital Markets Law, insurance companies have to comply with their own specific laws and regulations in matters of establishment, auditing, supervision/oversight, accounting and financial reporting. Therefore, the Companys financial statements are prepared in accordance with the prevailing accounting principles and standards for Insurance and Reinsurance Companies and Pension Funds set out by the Undersecretariat of the Treasury. The Decree on Financial Reporting of Insurance and Reinsurance Companies and Pension Funds was published in the Official Gazette No: 26852 on 14 July 2007 and has become effective as of 1 January 2008. Article 4(1) of the Decree on Financial Reporting of Insurance and Reinsurance Companies and Pension Funds requires the recognition of company operations in accordance with the preparation and presentation of financial statements requirements in the Decree and TASB, except for any Decrees issued by the Undersecretariat of the Treasury in relation to the matters specified in 4(2), and Article 4(2) of the Decree on Financial Reporting of Insurance and Reinsurance Companies and Pension Funds requires the determination of principles and procedures on insurance contracts, accounting of affiliates, associates and entities under common control, consolidated financial statements, publicly available financial statements and the related disclosures and notes in accordance with the decrees issued by the Undersecretariat of the Treasury.
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Within this respect, the below requirements are set out in regards to Article 4(2) of the Decree in the Sector Announcement No: 2008/9 issued on 18 February 2008, which are valid as of balance sheet date: TFRS 4 (Turkish Financial Reporting Standards) Insurance Contracts is applicable for the annual periods beginning on or after 31 December 2005. The Standard is effective as of 25 March 2006; however, it is not applicable for the current period since International Accounting Standards Board has not yet completed the second phase of its project. Principles and procedures on the preparation of notes and disclosures in relation to insurance contracts will be set out by a decree that will be issued by the Undersecretariat of the Treasury in case of need. According to the Communique on Consolidated Financial Reporting of Insurance and Reinsurance Companies and Pension Funds, published in the Official Gazette No: 27097 (4. Bis) on 31 December 2008, the Company prepares consolidated financial statements starting from 2009. According to the Decree on Financial Reporting of Insurance and Reinsurance Companies and Pension Funds, published in the Official Gazette No: 26852 on 14 July 2007; the accompanying financial statements comprise the unconsolidated financial statements. a. Preparation of Financial Statements in Hyperinflationary Periods In accordance with the Undersecretariat of the Treasurys statement no: 19387 issued on 4 April 2005, the Companys financial statements as of 31 December 2004 are adjusted and its 2005 openings are prepared based on the requirements set out in the preparation of financial statements in hyperinflationary periods specified in the CMBs Decree Volume: XI, No: 25 Accounting Standards in Capital Markets which was published in the Official Gazette No: 25290 on 15 November 2003. In addition, the preparation of financial statements in hyperinflationary periods has not been applied in accordance with the statement of the Undersecretariat of the Treasury. b. Comparative Information and Restatement of Prior Period Financial Statements The Companys balance sheet as of 31 December 2009 is presented in comparison with its balance sheet as of 31 December 2008. The Companys income statement, statement of changes in equity and cash flow statement for 2009 are presented in comparison with its income statement, statement of changes in equity and cash flow statement for the period ended as of 31 December 2008. c. Technical Reserves Unearned premiums reserve, outstanding claims reserve and their reinsurance shares included under technical reserves in the financial statements are recognized based on the below principles in accordance with the Insurance Law No: 5684 effective at 14 June 2007 and the requirements set out in the Decree Technical Provisions of Insurance and Reinsurance Companies and Pension Funds and Assets Held For Such Provisions issued in the Official Gazette No: 26606 on 7 August 2007. Unearned premiums reserve is the carried forward portion of unearned gross premiums written in the current period and is calculated on a daily pro-rata basis. Net-of-commissions application has been ceased in the calculation of unearned premium reserve of the insurance policies prepared after 1 January 2008 in accordance with the Decree Technical Provisions of Insurance and Reinsurance Companies and Pension Funds and Assets Held For Such Provisions. In accordance with the related Decree, for marine (commodity) policies issued after 1 January 2008 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. According to the Sectoral Announcement No: 2009/9 on Application of Principles of Technical Reserves, even there is a clause on a policy about the beginning time of the policy, it has to be to assumed as the policy starts at 12.00 pm on noon time and ends at 12.00 pm on noon time, as common practice. Therefore, the day the policy is issued and the last day of the policy is accepted as half day. In addition, the Circular no: 2007/25 issued by the Prime Ministry Undersecretariat of the Treasury of the Turkish Republic on 28 December 2007 requires the recognition of carried forward portions of commissions paid to intermediaries, commissions received due to the premiums ceded to reinsurers, acquisition costs and the amounts paid for the non-proportional reinsurance treaty agreements under new account codes, while the related income and expenses in the current period should be recognized under the old account codes.
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As of 31 December 2009, the Company has calculated and recorded TL 628.029.518 of unearned premium reserve (31 December 2008: TL 603.146.185) and TL 145.618.058 of reinsurer share of the unearned premium reserve (31 December 2008: TL 144.829.701). Following the above-mentioned amendments, the Company has calculated a deferred commission expense amounting to TL 91.519.320 (31 December 2008: TL 85.249.553) and deferred commission income amounting to TL 27.304.987 as of 31 December 2009 (31 December 2008: TL 27.558.111) and presented as Prepaid Expenses and Deferred Income respectively in accompanying financial statements. Insurance companies are required to provide unexpired risk reserves for insurance branches of which are inconsistent with the risk level assumed over the insurance period and the distribution of premiums earned over time in accordance with the Decree Technical Provisions of Insurance and Reinsurance Companies and Pension Funds and Assets Held for Such Provisions. Insurance companies are also required to provide unexpired risk reserves if unearned premium reserve is inadequate for the Companys risks and estimated expenses. In accordance with the Decree, insurance companies should apply an adequacy test covering the last 12 months for each period for the possibility of exceeding claim compensations from existing insurance contracts against the unearned premium reserves provided for these contracts. The related Decree, which was published in the Official Gazette No: 26674 on 18 October 2007, requires the multiplication of unearned premium reserves by the estimated claim premium ratio in adequacy test application. Estimated claim premium ratio is calculated by dividing the occurred claims (outstanding claims (net) + claims paid (net) outstanding claims reversal (net)) into earned premiums (premiums written (net) + carried forward unearned premiums reserve (net) unearned premiums reserve (net)). In addition, if the estimated claim premium ratio exceeds 95% in future periods for the estimated claim premium ratio of insurance branches that will be determined by the Undersecretariat of the Treasury, the amount calculated subsequent to the multiplication of the exceeding rate by unearned premiums reserve will be used in the calculation of unexpired risks reserve of the related branch. In accordance with the Circular issued by the Undersecretariat of the Treasury on 6 November 2007, unexpired risks reserve should be calculated for each sub-branches specified in the Insurance Uniformed Chart of Accounts. As a result of the adequacy test mentioned above, the Company has calculated and recorded TL 9.549.519 of unexpired risk reserve (31 December 2008: TL 9.556.144) and TL 1.237.490 of reinsurance share of unexpired risk reserve (31 December 2008: TL 1.391.777). Outstanding claims reserve is provided for the outstanding claims reported but not paid as of the period-end. If the amount of claims paid is below or above the amount of reserves provided, the resulting difference is reflected to the accounts at the payment date. Reinsurance shares of outstanding claims are offset under the outstanding claims reserve. In accordance with the Decree on Technical Provisions of Insurance and Reinsurance Companies and Pension Funds and Assets Held For Such Provisions published in the Official Gazette No: 26606 on 7 August 2007, insurance companies are required to provide outstanding claims reserve for both occurred and calculated but not actually paid claims and, if such claims could not be calculated, required to provide estimated amounts and not reported but incurred claims, net of subrogation, salvage and other related income, in the prior or current period. For outstanding claim files opened in the last 5 or over 5 years, weighted average ratio is considered in the calculation of subrogation, salvage and the other related incomes to be deducted from the occurred outstanding claims reserve. Weighted average ratio is calculated by dividing the subrogation, salvage and other related income received following the period in which the claims are incurred into the occurred outstanding claims reserve. Subrogation, salvage and other related income to be deducted from the related branchs outstanding claims reserve for the current period is calculated by multiplying the calculated weighted average ratio of the branch by the related branchs occurred outstanding claims reserve of the current period. Based on the calculations mentioned above, the Companys subrogation, salvage and other related incomes to be deducted from outstanding claims reserve amounts to TL 15.046.207 (31 December 2008: TL 20.850.812) and the reduced amount from its reinsurance share for outstanding claims reserve amounts to TL 1.017.983 (31 December 2008: TL 1.175.217) for the first 6 month period in 2009.
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In accordance with the Decree Technical Provisions of Insurance and Reinsurance Companies and Pension Funds and Assets Held For Such Provisions published in the Official Gazette No: 26606 on 7 August 2007, insurance companies should consider the weighted average ratio calculated by dividing the claims incurred prior to the related periods but reported after the related period for the last 5 years or over, after the deduction of subrogation, salvage and other related incomes, to the related periods premium, in the calculation of incurred but not reported claims. The current periods incurred but not reported claim should be measured by multiplying the weighted average ratio by the total premium production for 12 months prior to the current period. Based on the calculations mentioned in detail above, as of 31 December 2009, the Companys net incurred but not reported claim amount presented under the outstanding claims reserve in the financial statements amounts to TL 72.774.792 (31 December 2008: TL 53.567.224) In accordance with Article 7(6) of the Decree Technical Provisions of Insurance and Reinsurance Companies and Pension Funds and Assets Held For Such Provisions published in the Official Gazette No: 26606 on 7 August 2007, outstanding claim reserve provided for the current period cannot be below the amount calculated by using the actuarial chain ladder method developed by the Undersecretariat of the Treasury. Actuarial chain ladder method is used for the statistical calculation of minimum outstanding claim reserves provided for the periodend based on historic claims data. If the provision amount calculated as a result of the method is higher than the outstanding claims reserve, the difference should have been booked as an additional reserve. As of 13 August 2009, a circular No: 2009/12; Circular related with the change on the Circulars of Actuarial Chain Ladder Method No: 2007/24 and 2007/11, is published by Undersecretariat of the Treasury. Additionally, in the sector announcement No: 2009/9, the periods that will be considered in case of the reduction of subrogation, salvage and other income items in the application of actuarial chain ladder method is explained. Nonetheless, it is observed that the new calculation method give abnormal results changing from one company to another company and it is also observed that this method give results that are not consistent with the real data of the company. Consequently, the application should be applied as explained below until 1 January 2010, including 31 December 2009. 1. Firstly, companies could use both the circulars numbered 2007/24 (old formulation) and 2009/11 (new formulation) in the application of actuarial chain ladder method. The companies will choose the method to use in the branch-basis. 2. In the application of these methods (old and new one) in the actuarial chain ladder method, the collection period will be considered for the reduction of subrogation, salvage and other related items from the claims paid. 3. In clean-cut treaty insurance branches, in the contracts that have abnormal deviations in the calculation of actuarial chain ladder method, the calculation will be performed over the gross amounts and the net amounts will be found according to the conditions of the contract. As of 31 December 2009, the Company uses the new calculation in aircrafts liability branch and the old method in other branches in the calculation of the actuarial chain ladder method. According to the calculation method explained above, there is additional outstanding claim reserve TL 552.649 and the reinsurers share for the outstanding claims reserves TL 439.603 as calculated based on the actuarial chain ladder method presented under the outstanding claims reserve in the accompanying financial statements (31 December 2008: Gross: TL 1.199.319, reinsurance share: TL 31.206). As of 31 December 2009, the Company has calculated and recorded total outstanding claim reserve amounts to TL 387.934.087 (31 December 2008: TL 333.640.312) and total reinsurers share for the outstanding claims reserves amounts to TL 106.393.834 (31 December 2008: TL 83.465.691). Insurance companies are required to provide an outstanding claim reserve adequacy table at the end of each year using the format designated by the Undersecretariat of the Treasury and such companies are also required to present the tables to the Undersecretariat of the Treasury. This table presents the outstanding claim reserve adequacy ratio, which is the proportion of outstanding claim reserves provided for the last 5 years to the total of claims paid including all expense shares in relation to the related claims. Within the framework determined by the Undersecretariat, if the average of the last five years outstanding claim adequacy ratio, except for the current
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period, is below 95%, in order to calculate the adequacy ratio, the difference is multiplied by the current years outstanding claim reserve. Final outstanding claims reserve of the period is calculated by adding every branches adequacy ratio difference amount separately. During the preparation of the adequacy table and outstanding claims reserve, incurred but not reported outstanding claims and all expense shares are considered. Based on the calculations mentioned in detail above, as of 31 December 2009, the Companys net outstanding claim adequacy difference calculated and presented under the outstanding claims reserve in the financial statements amounts to TL 3.901.275 (31 December 2008: TL 6.057.043). In accordance with Article 9 of the Decree Technical Provisions of Insurance and Reinsurance Companies and Pension Funds and Assets Held For Such Provisions published in the Official Gazette No: 26606 on 7 August 2007, insurance companies are required to provide equalization reserves for earthquake and credit insurances in order to equalize the possible fluctuations in the claims compensation rates and to cover the catastrophic risks in subsequent periods. Also, in accordance with the related article, equalization reserves should be calculated as 12% of the earthquake and credit net premiums of each year and amounts paid for non-proportional reinsurance contracts should be considered as premiums ceded in the calculation of net premium, and companies should continue to provide reserves to the extent that reserves exceed 150% of the maximum amount of net premiums received in the last five financial periods. As of 31 December 2009, the Company has provided TL 10.100.102 equalization reserve on the calculation explained above (31 December 2008: TL 5.444.952) d. Subrogation Income Accruals The Undersecretariat of the Treasury made some disclosures on accounting for subrogation income accruals in order to establish the uniformity considering various applications in the sector under the statement no: B.02.1.HM.0.SGM.0.3.1.1-3534 published on 18 January 2005 and under the supplementary Article No: 2005/24 of the related statement. In accordance with the requirements set out in the related statements, insurance companies should recognize the subrogation amounts from insurance companies as income, irrespective of having furnished the certificate of release from the counter insurance companies, as long as the insurance company settles the claim payment to the policyholder and receives the relevant payment document from the policyholder. The Company has determined the amount of its subrogation receivables in accordance with the recent statement made by the Undersecretariat of the Treasury through the Union of the Turkish Insurance and Reinsurance Companies as of 3 February 2005 and has calculated the total subrogation receivable from the insurance companies amounting to TL 32.648.842 (31 December 2008: TL 20.247.019) and the reinsurance share of TL 1.893.594 (31 December 2008: TL 1.118.698) and presented these amounts in receivables and payables from operating activities and technical income accounts, respectively. The Company also presented the retention amount of subrogation receivables under litigation and execution amounting to TL 62.019.935 (31 December 2008: TL 51.498.650) and TL 12.488.568 (31 December 2008: TL 8.522.315) of their reinsurance share in doubtful receivables from operating activities and technical income accounts, respectively. e. Premium Income and Claims Premium income represents premiums on policies written during the year. Unearned premium reserves are determined from premiums written during the year on a daily basis. 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. Reinsurers shares of claims paid and outstanding loss provisions are off-set against these reserves. f. Receivables from Insurance Activities For allowance for doubtful receivables, the Company has provided provision for receivables that are subject to administrative and legal follow-up, considering the nature and extent of such receivables, in accordance with Article 323 of the Tax Procedure Law. As of 31 December 2009, the amount of doubtful receivables that are subject to administrative and legal follow-up amounts to TL 65.129.434 (31 December 2008: TL 57.499.314), TL 49.531.367 (31 December 2008: TL 42.976.335) of this provision includes subrogation transactions under litigation.
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g. Discount of Receivables and Payables Receivables and payables are carried at book values in the financial statements. Receivables and payables are subject to discount. As of the balance sheet date, 11% of discount rate is used to discount receivables and payables in TL. The rates used to discount receivables and payables in foreign currencies vary on the currency type. h. Earnings per Share Earnings per share presented in the income statement is calculated by dividing the net profit into the weighted average number of the outstanding shares throughout the financial year. Companies in Turkey can increase their capital by distributing bonus shares to shareholders from the prior periods profit. Such bonus share distributions are considered as issued shares in the earnings per share calculations. Accordingly, weighted average number of equity shares used in the calculations is calculated by considering the retrospective effects of share distributions. i. Subsequent Events Subsequent events cover the events between the balance sheet date and the issuance of the financial statements, even if they are occurred subsequent to the disclosures made on profit or other selected financial information. The Company adjusts its financial statements in the occurrence of any subsequent events. j. Provisions, Contingent Liabilities and Assets Provisions are recognized when the Company has a present obligation as a result of a past event, and it is probable that the Company will be required to settle that obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognized as provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation. If provision is measured using the cash flows estimated to settle the present obligation, its carrying amount will be equal to the present value of such cash flows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. k. Change in Accounting Policies, Accounting Estimates and Errors Changes in accounting policies or accounting errors are applied retrospectively and prior year financial statements are adjusted accordingly. If estimated changes in accounting policies are only for one period, changes are applied on the current year but if estimated changes are for the following periods, changes are applied both on the current and following years prospectively. l. Taxation and deferred tax Taxation and deferred tax are explained in Note 2.18. 2.1.2 Other related accounting policies for the understanding of financial statements All accounting policies are explained in Note 2.1.1. 2.1.3. Functional currency The Companys financial statements are presented in the currency of the primary economic environment in which the Company operates (its functional currency). The results and financial position of the Company are expressed in Turkish Lira, which is the functional and presentation currency of the Company. 2.1.4. Rounding degree used in the financial statements All the balances presented in the financial statements are expressed in full in Turkish Lira (TL).
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2.1.5. Valuation method(s) used in the presentation of financial statements Financial statements, except for revaluation of financial instruments, are prepared based on the historical cost method. 2.1.6 Adoption of New and Revised Standards The following new and revised Standards and Interpretations have been adopted in the current period and have affected the amounts reported and disclosures in these financial statements. Details of other standards and interpretations adopted in these financial statements but that have had no impact on the financial statements. Standards affecting presentation and disclosure in 2009 financial statements International Financial Reporting Standard (IFRS) 7 (Revised), Financial Instruments: Explanations An amendment to IFRS 7 which was issued in March 2009 is applicable to the Company beginning on 1 January 2009. The amendments require enhanced disclosure on fair value measurements as well as on liquidity risks. Specifically, the amendments require the Company to disclose changes in valuation techniques for classes of financial instruments where valuation techniques were used to determine fair values. In addition for each class of financial instrument, the Company is required to disclose the level in the fair value hierarchy into which the fair value measurements are categorized. When valuation techniques used to determine fair values of financial instrument changes, the transfers between levels of the fair value hierarchy are required to be disclosed. Furthermore, the Company is required to provide a reconciliation of fair values measurements that are determined based on unobservable inputs. Sensitivity analysis on changes in assumptions related to unobservable inputs should also be presented if such changes would produce significant fair value changes. Also, the current maturity analysis for non-derivative financial instruments should include issued financial guarantee contracts, and requires the Company to add disclosure of a maturity analysis for derivative financial liabilities. The Company applied the changes related with IFRS 7 within the year 2009 and the information related with fair values are made in disclosure 4.2. In the current period, the Company did not make a classification between three levels of the inputs that are used in the calculation of fair values of the financial assets. There are not any financial instruments whose valuations are performed from inputs that rely on unobservable data. International Accounting Standard (IAS) 1 (Revised) Presentation of Financial Statements The revised standard prohibits the presentation of items of income and expenses (referred to as non-owner changes in equity) in the statement of changes in equity. Non-owner changes in equity are to be presented separately from owner changes in equity and are required to be disclosed in a Statement of Comprehensive Income. IAS 1(Revised) further requires entities to present a restated balance sheet at the beginning comparative period in addition to presenting balance sheets at the end of the current period and comparative period when entities restate or reclassify comparative information. Since the financial statements are prepared in accordance with financial statement format in the appendix of the Communique on the Presentation of Financial Statements, published in the Official Gazette No: 26851 on 18 April 2008, IAS 1 (Revised) has not been applied in the accompanying financial statements.
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Standards and Interpretations that are effective in 2009 with no impact on the 2009 financial statements The following new and revised Standards and Interpretations have also been adopted in these financial statements. Their adoption has not had any significant impact on the amounts reported in these financial statements but may impact the accounting for future transactions or arrangements. Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards and IAS 27 Consolidated and Separate Financial Statements Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate Amendments to IFRS 2 Share-based Payment - Vesting Conditions and Cancellations IAS 23 (as revised in 2007) Borrowing Costs The amendments deal with the measurement of the cost of investments in subsidiaries, jointly controlled entities and associates when adopting IFRSs for the first time and with the recognition of dividend income from subsidiaries in a parents separate financial statements.
The amendments clarify the definition of vesting conditions for the purposes of IFRS 2, introduce the concept of non-vesting conditions, and clarify the accounting treatment for cancellations. The principal change to the Standard was to eliminate the option to expense all borrowing costs when incurred. This change has had no impact on these financial statements because it has always been the Groups accounting policy to capitalize borrowing costs incurred on qualifying assets. IAS 32 Financial Instruments: Presentation IAS 32 standard in the changes made, certain criteria are met and IAS 1 Presentation of Financial in accordance with certain marketable financial instruments and Statements - Financial Instruments for sale business net assets liquidated only in a proportional distribution in liquidation status and Liabilities in accordance with any other party to give you must bring the Change in standards. intermediaries (or intermediaries elements) as resources and classification facilities by providing debt/equity classification for the criteria has led to the change. Amendments to IAS 39 Financial The amendments provide clarification on two aspects of hedge Instruments: Recognition and accounting: identifying inflation as a hedged risk or portion, and Measurement Eligible Hedged Items hedging with options. Embedded Derivatives (Amendments to The amendments clarify the accounting for embedded derivatives in IFRIC 9 and IAS 39) the case of a reclassification of a financial asset out of the fair value through profit or loss category as permitted by the October 2008 amendments to IAS 39 Financial Instruments: Recognition and Measurement (see above).
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IFRIC 15 Agreements for the Construction of Real Estate
The Interpretation addresses how entities should determine whether an agreement for the construction of real estate is within the scope of IAS 11 Construction Contracts or IAS 18 Revenue and when revenue from the construction of real estate should be recognized. IFRIC 16 Hedges of a Net Investment in The Interpretation provides guidance on the detailed requirements a Foreign Operation for net investment hedging for certain hedge accounting designations. IFRIC 18 Transfers of Assets from The Interpretation addresses the accounting by recipients for Customers (adopted in advance of effective transfers of property, plant and equipment from customers and date of transfers of assets from customers concludes that when the item of property, plant and equipment received on or after 1 July 2009) transferred meets the definition of an asset from the perspective of the recipient, the recipient should recognize the asset at its fair value on the date of the transfer, with the credit recognized as revenue in accordance with IAS 18 Revenue. Improvements to IFRSs (2008) In addition to the changes affecting amounts reported in the financial statements described above, the Improvements have led to a number of changes in the detail of the Companys accounting policies some of which are changes in terminology only, and some of which are substantive but have had no material effect on amounts reported. The majority of these amendments are effective from 1 January 2009. Standards and Interpretations that are issued but not yet effective in 2009 and have not been early adopted IFRS 3 (as revised in 2008) Business Combinations IFRS 3(2008) is effective for business combinations where the acquisition date is on or after the beginning of the first annual period beginning on or after 1 July 2009. The main impact of the adoption will be as follows: a) to allow a choice on a transaction-by-transaction basis for the measurement of non-controlling interests (previously referred to as minority interests) either at fair value or at the non-controlling interests share of the fair value of the identifiable net assets of the acquire. b) to change the recognition and subsequent accounting requirements for contingent consideration. c) to require that acquisition-related costs be accounted for separately from the business combination, generally leading to those costs being recognized as an expense in profit or loss as incurred. The company will apply IFRS 3 (revised) prospectively to all business combinations from 1 January 2010.
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IFRS 9 Financial Instruments: Classification and Measurement In November 2009, the first part of IFRS 9 relating to the classification and measurement of financial assets was issued. IFRS 9 will ultimately replace IAS 39 Financial Instruments: Recognition and Measurement. The standard requires an entity to classify its financial assets on the basis of the entitys business model for managing the financial assets and the contractual cash flow characteristics of the financial asset, and subsequently measure the financial assets as either at amortized cost or at fair value. The new standard is mandatory for annual periods beginning on or after 1 January 2013. The Company has not had an opportunity to consider the potential impact of the adoption of this standard. IAS 24(Revised 2009) Related Party Disclosures In November 2009, IAS 24 Related Party Disclosures was revised. The revision to the standard provides government-related entities with a partial exemption from the disclosure requirements of IAS 24. The revised standard is mandatory for annual periods beginning on or after 1 January 2011. The Company has not yet had an opportunity to consider the potential impact of the adoption of this revised standard. IAS 27 (as revised in 2008) Consolidated and Separate Financial Statements IAS 27 (revised) is effective for annual periods beginning on or after 1 July 2009. The revisions to IAS 27 principally affect the accounting for transactions or events that result in a change in the Companys interests in its subsidiaries. The revised standard requires that ownership decreases or increases that do not result in change in control to be recorded in equity. Amendments related to Annual Improvements to IFRS (2009) As part of the Annual Improvement project, in addition to the amendments mentioned above, other amendments were made to various standards and interpretations. These amendments are effective for annual periods beginning on or after 1 January 2010. The Company has not yet had an opportunity to consider the potential impact of the adoption of these amendments. 2.2 Consolidation According to the Decree on Financial Reporting of Insurance and Reinsurance Companies and Pension Funds, published in the Official Gazette No: 26852 on 14 July 2007; the accompanying financial statements comprise the unconsolidated financial statements. 2.3 Segment Reporting The Company has no different operations or geographical segments other than its main line of activity; therefore, no segment reporting is required. 2.4 Reserves in Foreign Currencies For the purpose of the financial statements, the results and financial position of each entity are expressed in TL, which is the functional currency of the Company, and the presentation currency for the financial statements. In preparing the financial statements of the Company, transactions in currencies other than TL (foreign currencies) are recognized at exchange rates prevailing at the transaction date. At each balance sheet date, monetary items denominated in foreign currencies are retranslated to Turkish Lira at the rates prevailing on the balance sheet date. Gains and losses arising from exchange rate transactions are recognized in the income statement. Nonmonetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences, except for those detailed below, and are recognized in profit and loss in the period in which they are incurred: Exchange differences treated as restatements of interest costs on liabilities associated with assets in foreign currencies held for the construction of a future use which are included in the cost of such assets, Exchange differences treated as restatements of interest costs on liabilities associated with assets in foreign currencies held for the construction of a future use which are included in the cost of such assets,
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2009

Exchange differences arising from unpaid receivables and payables from foreign operations that are part of the net investment in foreign operations, accounted in translation reserves and associated with profit and loss in the sale of net investment.
2.5 Property, Plant and Equipment Property, plant and equipment are carried at cost, less any accumulated depreciation and impairment loss. Assets held for use in the construction, or leasing, administrative or any other purposes are carried at cost, less any impairment. Legal charges are also added to costs. For assets that need substantial time to be ready for use or sale, borrowing costs are capitalized based on the Companys accounting policy. Such assets are depreciated, on the same basis used for other fixed assets, when they are ready to use. Assets, other than land and ongoing constructions, are depreciated over their expected useful lives by using the straight line method. Estimated useful life, residual value, and amortization method are reviewed at the end of each annual reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Buildings Leasehold improvements Vehicles Furniture and office equipments (%) 2 20 20 2-25
2.6 Investment Properties Investment property is held to earn rentals and/or for capital appreciation is carried at cost less accumulated depreciation and any accumulated impairment losses. Carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met; and excludes the costs of day to day servicing of an investment property. Depreciation is provided on investment property on a straight line basis. Depreciation period for investment property is 50 years for buildings, lands are not subject to depreciation. 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 year of retirement or disposal. Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. If owner occupied property becomes an investment property, the Company accounts for such property in accordance with the policy applied to Property, Plant and Equipment up to the date of change in use. Real estates rented under operational lease are classified as investment properties.
Anadolu Sigorta
Annual Report
2009
107

2.7 Intangible Assets Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Companys 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. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity disposed of. Goodwill is allocated to cash-generating units for the purpose of impairment testing. 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.. 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 Investments are recognized and derecognized on a trade date where the purchase or sale of an investments under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, net of transaction costs except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value. Financial assets are classified into the following specified categories: financial assets as at fair value through profit or loss, held-to-maturity investments, available-for-sale financial assets and loans and receivables. Effective interest method Effective interest method is a method of calculating the amortized cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period. Financial assets at fair value through profit and loss (Held-for-trading financial assets) Income related to the financial assets except for the financial assets at fair value through profit and loss is calculated by using the effective interest method. Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset can be classified as financial asset at fair value through profit and loss, if it is acquired principally for the purpose of selling in the short-term. Derivatives are also classified as held for trading unless they are designated as hedging instruments. Financial assets at fair value through profit and loss are classified as current assets. Held-to-maturity investments Investments in debt securities with fixed or determinable payments and fixed maturity dates that the Company has the positive intent and ability to hold to maturity are classified as held-to-maturity investments. Held-tomaturity investments are recorded at amortized cost using the effective interest method less impairment, with revenue recognized on an effective yield basis.
108
Anadolu Sigorta
Annual Report
2009

Available-for-sale financial assets Investments other than held-to-maturity debt securities are classified as either investments held for trading or as available-for-sale, and are measured at subsequent reporting dates at fair value except available-forsale investments that do not have quoted prices in an active market and their fair values cannot be reliably measured are stated at cost and restated to the equivalent purchasing power. Where securities are held for trading purposes, gains and losses arising from changes in fair value are included in profit or loss for the period. For available-for-sale investments, gains and losses arising from changes in fair value are recognized directly in equity, until the security is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognized in equity is included in the profit or loss for the period. Impairment losses recognized in profit or loss for equity investments classified as available-for-sale are not subsequently reversed through profit or loss. Impairment losses recognized in profit or loss for debt instruments classified as available-for-sale are subsequently reversed if an increase in the fair value of the instrument can be objectively related to an event occurring after the recognition of the impairment loss. Loans and receivables Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortized cost using the effective interest method, less any impairment Associates An associate is an entity that retains at the shares of voting rights or has significant power over another entity. The difference between carrying value and fair value (to the extent that it is measured reliably) of such assets are recognized in shareholders equity and assets that have fair value are carried at fair value while the other assets are carried at book value. 2.9 Impairment of Assets Impairment of non-financial assets Assets that have an indefinite useful life, for example goodwill, are not subject to amortization and are tested annually for impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the assets carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an assets fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cashgenerating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. The Company assesses its financial assets, other than those at FVTPL, at each balance sheet date whether there is any objective evidence that a financial asset or group of financial assets classified as held-to-maturity, availablefor-sale or loans and receivables is impaired. A financial asset or portfolio of financial assets is impaired and an impairment loss incurred if there is objective evidence that an event or events since initial recognition of the asset have adversely affected the amount or timing of future cash flows from the asset. For loans and receivables, the amount of the impairment is the difference between the assets carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.
Anadolu Sigorta
Annual Report
2009
109

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial except for trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable is uncollectible, it is written off against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss. With the exception of AFS equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized. For AFS equity securities, any increase in fair value subsequent to an impairment loss is recognized directly in equity. 2.10 Derivative Financial Instruments Derivatives are initially recognized at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. 2.11 Offsetting Financial assets and liabilities are offset and the net amount reported in the consolidated balance sheet when there is a legally enforceable right to set off the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously. 2.12 Cash and Cash Equivalents Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments which their maturities are three months or less from date of acquisition and that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. 2.13 Share Capital As of 31 December 2009, the Companys nominal capital is TL425.000.000. Share capital of the Company is composed of Group A and Group B shares. TL 1,50 of Group A share is represented by 150 of equity shares having a nominal amount of TL 0,01 each. TL 424.999.998,5 of Group B share is represented by 42.499.999.850 shares having a nominal amount of TL 0,01 each. In accordance with the Article Voting rights specified in the Articles of Association of the Company, Group A shares have 10 voting rights whereas Group B shares have 1 voting right. 31 December 2009 Participation Participation Amount TL rate% 151.002.594 35,53 92.564.995 21,78 181.432.411 42,69 425.000.000 100,00 31 December 2008 Participation Participation Amount TL rate% 124.355.077 35,53 76.229.997 21,78 149.414.926 42,69 350.000.000 100,00
Trkiye Bankas A.. Mill Reasrans T.A.. Other
As of 31 December 2009, the Companys registered capital is TL 500.000.000 (31 December 2008: TL 500.000.000)
110
Anadolu Sigorta
Annual Report
2009

In the Board of Directors meeting No: 6060 held on 6 March 2009, it has been resolved that, paid-in capital of the Company will be increased from TL 350.000.000 to TL 425.000.000 by TL 75.000.000. In respect of the resolution of the Board of Directors, TL 40.000.000 of this increase will be incorporated from the profit of the year 2008 and TL 16.370.267 from extraordinary reserves, TL 538.388 from profit on sale to be transferred to capital, TL 18.091.345 from previous years profit. The increase in paid-in capital was recorded by Capital Market Board on 29 June 2009. (31 December 2008: TL 275.000.000 paid capital which is increased by TL 75.000.000 amounted to TL 350.000.000. TL 23.000.000 of this increase will be incorporated from the profit of the previous year 2007, TL 51.460.668 from extraordinary reserves and TL 539.332 from profit on sale to be transferred to capital). Profit reserves consist of legal reserves, statutory reserves, extraordinary reserves and revaluation of financial assets. The legal reserves are recorded according to the clauses of Law and statutory reserves are recorded according to the clauses of the main contract. Extraordinary reserves are the reserves that are recorded with the resolution of General Assembly, in order to add to capital, to distribute as dividend and for similar purposes. The revaluation of financial assets account consists of the difference between the fair value and amortized cost of the available for sale financial assets and the associates. 2.14 Insurance and Investment Contracts - Classification The Company issues insurance contracts that provide insurance risk transfer. Insurance Contracts: Insurance contracts are contracts in which one part accepts a significant insurance risk and pays compensation (insurer) to the other part (insure) when any uncertain case affects the insure. The Company makes reinsurance agreements in which the Company (ceding company) is compensated by the insurer (reinsurer company) for one or more claims. Insurance contracts entered into by the Company under which the contract holder is another insurer (reinsurance) are included with insurance contracts. Insurance contracts are accounted when the insurance risk is transferred, and classified as an insurance contract as of the maturity date and/or amortization of the all contractual rights and liabilities. Investment Contracts: Investment contracts are those that transfer financial risks, excluding significant insurance risks. The Company has no investment contracts. 2.15 Insurance and Investment Contracts With Discretionary Participation Features The Company neither has investment contracts nor investment contracts with discretionary participation feature. 2.16 Investment Contracts Without Discretionary Participation Features The Company has no investment contracts. 2.17 Borrowings The Company has no short-term or long-term borrowings. 2.18 Income Tax Income tax expense represents the sum of the current tax payable and deferred tax. Current tax The current tax payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Companys liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Anadolu Sigorta
Annual Report
2009
111

Deferred tax Deferred tax is recognized on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases which is used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognized for taxable temporary differences associated with investments in affiliates and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis. Current and deferred tax are recognized as an expense or income in profit or loss, except when they relate to items credited or debited directly to equity, in which case the tax is also recognized directly in equity, or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is taken into account in calculating goodwill or determining the excess of the acquirers interest in the net fair value of the acquirees identifiable assets, liabilities and contingent liabilities over cost. 2.19 Employee Benefits Under the Turkish law and union agreements, lump sum payments are made to employees retiring or involuntarily leaving the Group. Such payments are considered as being part of defined retirement benefit plan in accordance with TAS 19 Employee Benefits. The retirement benefit obligation recognized in the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognized actuarial gains and losses. 2.20 Provisions Provisions are explained in Note 2.1.1 j.
112
Anadolu Sigorta
Annual Report
2009

2.21 Accounting of Income Premium and Commission Income Premium income represents premiums on policies written during the year. Unearned premiums, set aside to provide for the period of risk extending beyond the end of the financial year, are determined from premiums written during the year on a daily basis. Commissions received in the current period but relate to subsequent financial periods in return for the premiums ceded to the reinsurance companies are accounted as deferred commission income. Interest income and expense Interest income and expense are accounted in the income statement in the related period on an accrual basis. Interest income includes income gains from the coupons of the fixed return investment instruments and valuation of discounted government bonds based on internal rate of return method. Dividend income Dividend income from the equity share investments are recognized when the shareholder has the right to receive dividends. 2.22 Leasing Leasing the Company as lessee Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Assets held under finance leases are recognized as assets of the Company at their fair value atthe inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lesser is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Companys general policy on borrowing costs. Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term. 2.23 Profit Share Distribution Based on the guidelines and principals issued by the Capital Markets Board (the Board) 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 (31 December 2008: 20%). Furthermore, it has been agreed upon to let public entities perform dividend distributions as stated within the Communique Concerning Principal Matters on Dividend Advances Distributed by Public Entities Under the Regulation of the Capital Markets Law (Serial: IV, No: 27), 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 Board Decision, 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 has no announced profit share distribution after the balance sheet date.
Anadolu Sigorta
Annual Report
2009
113

3. Significant Accounting Estimates and Requirements The Company has no significant accounting estimates or requirements. 4. Insurance and Financial Risk Management 4.1 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. 4.1.1 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 Companys 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 Companys asset quality and limitations allowed by the insurance standards together with the Companys 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 Companys Board of Directors by considering the Companys 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 companys financial structure, company transfers the exceeding portion of risks assumed over the Companys 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.
114
Anadolu Sigorta
Annual Report
2009

4.1.1.1 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 stanbul might be exposed to in terms of its severity and any potential losses incurred in accordance with the generally accepted international earthquake models. In 2009, maximum limit of excess of loss agreement is calculated as EUR 400 million including the retention amount of EUR 5 million. (2008: maximum limit of excess of loss agreement is calculated as EUR 400 million including the retention amount of EUR 5 million). 4.1.1.2 Insurance risk concentrations The Companys gross and net insurance risk concentrations (after reinsurance) in terms of insurance branches are summarized as below: Total Claims Liability (*) 31 December 2009 Accident Health Motor vehicles Air crafts Water crafts Marine Fire and natural disasters General losses Motor vehicles liability Aircrafts liability General liability Financial losses Legal protection Total Gross Total Claims Liability 5.837.514 25.084.634 58.590.495 2.443.593 15.568.284 9.508.637 82.770.332 45.603.868 105.529.621 46.176 36.316.561 516.720 117.652 387.934.087 Reinsurance Share of Total Claims Liability (1.594.707) (1.190.636) (3.232.968) (727.763) (10.897.032) (880.426) (46.948.351) (30.799.349) (4.714.819) (4.998.812) (408.971) (106.393.834) Net Total Claims Liability 4.242.807 23.893.998 55.357.527 1.715.830 4.671.252 8.628.211 35.821.981 14.804.519 100.814.802 46.176 31.317.749 107.749 117.652 281.540.253
(*) Total claims liability includes outstanding claims reserve, incurred but not reported claims, additional reserves from the actuarial chain ladder method, subrogation reduction and outstanding claims reserve adequacy difference.
Anadolu Sigorta
Annual Report
2009
115

Total Claims Liability (*) 31 December 2008 Accident Health Motor vehicles Air crafts Water crafts Marine Fire and natural disasters General losses Motor vehicles liability Aircrafts liability General liability Financial losses Legal protection Total
Gross Total Claims Liability 2.978.002 17.358.304 71.935.659 617.105 6.543.755 9.339.500 54.654.269 47.552.193 89.515.469 136.752 31.735.664 1.139.086 134.554 333.640.312
Reinsurance Share of Total Claims Liability (423.840) (636.027) (3.446.490) (4.433.401) (564.223) (32.450.406) (31.732.616) (2.800.127) (6.947.355) (31.206) (83.465.691)
Net Total Claims Liability 2.554.162 16.722.277 68.489.169 617.105 2.110.354 8.775.277 22.203.863 15.819.577 86.715.342 136.752 24.788.309 1.107.880 134.554 250.174.621
(*) Total claims liability includes outstanding claims reserve, incurred but not reported claims, additional reserves from the actuarial chain ladder method, subrogation reduction and outstanding claims reserve adequacy difference. Gross and net insurance risk concentrations of the insurance contracts (after reinsurance) based on geographical regions are summarized as below: Total Claims Liability (*) 31 December 2009 Turkey Europe America Africa Asia Total Total Claims Liability 31 December 2009 Mediterranean Region East Anatolian Region Aegean Region South East Anatolian Region Middle Anatolian Region Black Sea Region Marmara Region Total Gross Total Claims Liability 291.871.913 5.745.238 11.831 1.054.104 273.796 298.956.882 Gross Total Claims Liability 18.439.912 8.534.277 22.244.301 8.122.786 24.614.636 31.573.898 178.342.103 291.871.913 Reinsurance Share of Total Claims Liability (92.471.931) (814.818) (673.654) (106.100) (94.066.503) Reinsurance Share of Total Claims Liability (4.024.533) (2.086.673) (2.944.076) (2.795.751) (2.543.345) (20.786.614) (57.290.939) (92.471.931) Net Total Claims Liability 199.399.982 4.930.420 11.831 380.450 167.696 204.890.379 Net Total Claims Liability 14.415.379 6.447.604 19.300.225 5.327.035 22.071.291 10.787.284 121.051.164 199.399.982
(*) Total claims liability includes the actual estimated compensation amounts. Net incurred but not reported claims amounting to TL (72.774.792), additions of net actuarial chain ladder method calculations amounting to TL (113.046), net outstanding claim reserve adequacy difference amounting to TL (3.901.275), net subrogation reduction amounting to TL 14.028.224, and outstanding claims of treaty activities which could not be distributed to geographical regions amounting to TL (13.888.985) are excluded from the calculation.
116
Anadolu Sigorta
Annual Report
2009

Gross and net insurance risk concentrations of the insurance contracts (after reinsurance) based on geographical regions are summarized as below: Total Claims Liability (*) 31 December 2008 Turkey Europe America Africa Asia Total Total Claims Liability 31 December 2008 Mediterranean Region East Anatolian Region Aegean Region South East Anatolian Region Middle Anatolian Region Black Sea Region Marmara Region Total Gross Total Claims Liability 267.974.295 7.191.982 1.001.363 563.015 584.142 277.314.797 Gross Total Claims Liability 20.001.931 7.565.822 20.438.334 10.392.466 34.102.174 30.103.003 145.370.565 267.974.295 Reinsurance Share of Total Claims Liability (80.705.338) (2.334.861) (900.038) (422.569) (246.895) (84.609.701) Reinsurance Share of Total Claims Liability (5.475.343) (2.063.897) (2.819.792) (4.408.056) (6.238.732) (20.143.085) (39.556.433) (80.705.338) Net Total Claims Liability 187.268.957 4.857.121 101.325 140.446 337.247 192.705.096 Net Total Claims Liability 14.526.588 5.501.925 17.618.542 5.984.410 27.863.442 9.959.918 105.814.132 187.268.957
(*) Total claims liability includes the actual estimated compensation amounts. Net incurred but not reported claims amounting to TL (53.567.224), additions of net actuarial chain ladder method calculations amounting to TL (1.168.113), net subrogation reduction amounting to TL 19.675.595, net outstanding claim reserve adequacy difference amounting to TL (6.057.043) and outstanding claims of treaty activities which could not be distributed to geographical regions amounting to TL (16.352.740) are excluded from the calculation.
Anadolu Sigorta
Annual Report
2009
117

Gross and net (reinsurance deducted) insurance risk concentrations of the company based on the type of currency are summarized as below: Total Claims Liability (*) 31 December 2009 Turkish Lira U.S. Dollar Euro CHF Great Britain Pound Japanese Yen Swedish Krona Total Total Claims Liability (**) 31 December 2008 Turkish Lira U.S. Dollar Euro Great Britain Pound Japanese Yen Swedish Krona Total Gross Total Claims Liability 213.867.433 68.888.500 9.371.970 29.701 6.650.502 144.241 4.535 298.956.882 Gross Total Claims Liability 197.999.838 68.732.519 9.397.766 593.926 590.357 391 277.314.797 Reinsurance Share of Total Claims Liability (67.293.188) (21.675.702) (2.948.882) (9.345) (2.092.574) (45.385) (1.427) (94.066.503) Reinsurance Share of Total Claims Liability (60.410.433) (20.970.529) (2.867.291) (181.209) (180.120) (119) (84.609.701) Net Total Claims Liability 146.574.245 47.212.798 6.423.088 20.356 4.557.928 98.856 3.108 204.890.379 Net Total Claims Liability 137.589.405 47.761.990 6.530.475 412.717 410.237 272 192.705.096
(*) Total claims liability includes the actual estimated compensation amounts. Net incurred but not reported claims amounting to TL (72.774.792), additions of net actuarial chain ladder method calculations amounting to TL (113.046), net outstanding claim reserve adequacy difference amounting to TL (3.901.275), net subrogation reduction amounting to TL 14.028.224, and outstanding claims of treaty activities which could not be distributed to geographical regions amounting to TL (13.888.985) are excluded from the calculation. (**) Total claims liability includes the actual estimated compensation amounts. Net incurred but not reported claims amounting to TL (53.567.224), additions of net Actuarial Chain Ladder Method calculations amounting to TL (1.168.113), net subrogation reduction amounting to TL 19.675.595, net outstanding claim reserve adequacy difference amounting to TL (6.057.043) and outstanding claims of treaty activities which could not distributed to geographical regions amounting to TL (16.352.740) are excluded from the calculation. The insurance guarantees given for insurance branches of the entity is explained in note 17.3. 4.1.1.3 Comparison of incurred claims with past estimations Outstanding claims reserve adequacy table in terms of branches is presented below. The table shows outstanding claims reserve adequacy rate which is the proportion of total outstanding claims reserve that the Company provided in the last 5 years to total compensation amount actually paid including all expenses related to the claims. When the arithmetical average of the last 5 years of the separately calculated outstanding claims reserve adequacy rate, excluding the current financial year, is below 95%, the amount of adequacy rate difference is calculated by multiplying the difference between the related rate and 95% by the current years outstanding claims reserve. The final outstanding claims amount of the current year is calculated by adding adequacy rate difference for each branch separately.
118
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Annual Report
2009

As of 31 December 2009, outstanding claims reserve adequacy table is presented as below: 31 December 2009 Incurred but not reported Accrual claim and Rate compensation % amount % 158 103 100 85 146 59 119 52 170 283 223 90 144 35 160 101 125 102 875 234 398 105 652 119 31 December 2008 Incurred but not reported Accrual claim and Rate compensation % amount % 158 104 100 82 134 90 119 39 166 427 207 97 140 92 158 137 121 85 107.723 825 189 66 105 773 55
Outstanding claims adequacy rates Accident Illness-Health Motor vehicles Air crafts Water crafts Marine Fire and natural disasters General losses Motor vehicles liability Aircrafts liability General liability Financial losses Legal protection
The claims development table is assessed based on the claims paid in accordance with the Technical Reserves Regulations. As of 31 December 2009, the Companys claims development table prepared based on the claims in retention is summarized below:
31 December 2009 Paid in after 1 period Paid in the incurred Period of Claims Incurred 1 January 2004 -31 December 2004 1 January 2005 -31 December 2005 1 January 2006 -31 December 2006 1 January 2007 -31 December 2007 1 January 2008 -31 December 2008 1 January 2009 -31 December 2009 Total Payment 31 December 2008 Paid in after 1 period Paid in the incurred Period of Claims Incurred 1 January 2003 - 31 December 2003 1 January 2004 - 31 December 2004 1 January 2005 - 31 December 2005 1 January 2006 - 31 December 2006 1 January 2007 - 31 December 2007 1 January 2008 - 31 December 2008 Total Payment period 180.429.019 243.398.163 357.393.586 452.657.156 515.744.779 496.795.435 2.246.418.138 298.207.797 596.635 443.115 736.899 following the incurred period 32.779.511 44.047.662 53.223.053 74.155.181 94.002.390 Paid in after 2 period following the incurred period (445.191) (209.316) (470.753) 1.721.895 Paid in after 3 period following the incurred period (53.569) (258.625) 755.309 Paid in after 4 period following the incurred period (498.441) 1.235.340 Paid in after 5 period following the incurred period 222.258 Total Payment 212.433.587 288.213.224 410.901.195 528.534.232 609.747.169 496.795.435 222.258 2.546.624.842 period 242.623.123 355.811.827 450.947.171 514.276.877 496.311.631 582.490.195 2.642.460.824 following the incurred period 44.102.525 53.393.739 74.180.660 94.151.869 108.428.102 374.256.895 Paid in after 2 period following the incurred period (172.764) (447.592) 1.731.403 5.444.004 6.555.051 Paid in after 3 period following the incurred period (258.625) 756.025 3.426.601 3.924.001 Paid in after 4 period following the incurred period 1.235.340 2.322.792 3.558.132 Paid in after 5 period following the incurred period 642.494 Total Payment 288.172.093 411.836.791 530.285.835 613.872.750 604.739.733 582.490.195
642.494 3.031.397.397
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2009
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As of the balance sheet date, an additional provision amounting to TL 113.046 has been booked based on the actuarial chain ladder method (31 December 2008: Upon the Technical Reserves Regulations, insurance companies should consider 80% of the outstanding claim amount calculated based on the actuarial chain method in their 2008 calculations; therefore, the Company has provided net TL 1.168.113 of additional reserve for the aircraft vehicle liability, financial loss and legal protection branches as the Company considers 100% of the outstanding claim amount calculated based on the actuarial chain method as of the balance sheet date). 4.1.1.4 Effects of the changes in assumptions used in the measurement of insurance assets and liabilities showing the effect of each change separately that has significant effect on financial statements None. 4.2 Financial Risk 4.2.1 Capital structure and management The Companys capital structure consists of equity items which include issued shares, reserves and retained earnings, respectively. While the Company maintains to continue its capital management on a going concern basis, it expects to boost its earnings by optimizing its technical reserve and equity balance. The Companys capital structure is reviewed by the Board of Directors annually in order to determine the amount of dividends paid to shareholders and the value of shares to be issued. 4.2.2 Capital requirement In accordance with the Decree Measurement and Assessment of Capital Adequacy of Insurance and Reinsurance Companies and Pension Funds published in the Official Gazette No: 26761 on 19 January 2008, all insurance and reinsurance companies and pension funds should provide adequate equity for their current liabilities and possible losses that may arise from their potential risks. Based on the requirements of the above-mentioned Decree, the Company prepares capital adequacy tables within the format and content requirements of the Undersecretariat of the Treasurys twice a year for June and December period end. The Companys recent capital adequacy table prepared as of the report date for December 2009 is summarized below. As of 31 December 2009, the Companys current equity exceeds its capital requirement calculated for the same period by TL 398.205.713 (31 December 2008: TL 238.808.816) 1. According to premium base 2. According to claim base Required capital based on the first method 1. Asset risk 2. Reinsurance risk 3. Excessive premium increase risk 4. Outstanding claims risk 5. Underwriting risk 6. Exchange rate risk Required capital based on the second method Required capital amount for the Company Capital (*) Amount of associates deducted from capital Capital adequacy result 31 December 2009 169.214.565 155.545.739 169.214.565 170.631.763 22.263.796 6.225.545 20.206.383 146.450.813 2.503.022 368.281.322 368.281.322 816.487.031 49.999.996 398.205.713 31 December 2008 155.064.450 141.456.865 155.064.450 155.048.977 10.573.255 19.328.987 135.457.318 4.218.269 324.626.806 324.626.806 613.435.618 49.999.996 238.808.816
(*) As the capital adequacy table requirement, the equalization reserve amount of TL 10.100.102 (31 December 2008: TL 5.444.952) has been added to capital amount.
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4.2.3 Financial risk factors The Company is exposed to market risk (exchange rate risk, interest rate risk, and equity shares price risk), credit risk, liquidity risk and operational risk due to its assets and liabilities at a specific time. These risks are managed, as part of the risk management policies, through considering the quality of the Companys receivables by providing detailed information about the debtors and their operations, using risk minimizing factors by receiving guarantees for receivables, measuring periodically market risks arising from the Companys marketable security portfolio, reliability testing of measurement results, assessing and monitoring carefully all risk factors inherent to the Company, and assessing and reporting different scenario trends. The Companys risk exposure is gradually reported to the Board of Directors through the independent review of Risk Management and Internal Control Department. Credit Risk Credit risk is the risk that the debtor defaults on its obligations under the terms of the transaction. Risk management under this group is maintained by considering the due receivables, doubtful receivables, guarantees received for receivables, technical performances of the debtors and related parties with deposit and partnership relations. It is essential to identify and define credit risks on an early basis for the effective risk management. Therefore, information should be provided and shared timely with the respective departments. Factors that may have an adverse effect on the credit risk and create credit risks on the Companys risk tolerance such as; disruption in collection rates of insurance intermediaries, decreases in production performance, violations in compliance with the Company policies, other informative data, and any negative ratings or developments inquired by reinsurance companies and other counterparties are considered as indicators of credit risk. As of 31 December 2009, The Company has classified TL 65.129.434 (31 December 2008: TL 57.499.314) of its trade receivables as doubtful receivables. TL 9.319.456 (31 December 2008: TL 8.382.883) of the related amount is under guarantee, whereas provision for doubtful receivable is provided for the total amount including the guaranteed portion based on the precautionary principle. 31 December 2009 Total Guaranteed Receivable Portion 15.253.468 9.319.456 344.599 49.531.367 65.129.434 9.319.456 31 December 2008 Total Guaranteed Receivable Portion 14.173.799 8.382.883 349.180 42.976.335 57.499.314 8.382.883
Provision for Doubtful Receivables Agency receivables under litigation Other receivables under litigation Subrogation receivables under litigation and execution Total
Movement table of provision for doubtful receivables is below: 31 December 2009 (57.499.314) (8.064.278) 284.196 149.962 (65.129.434) 31 December 2008 (40.156.927) (17.755.538) 413.151 (57.499.314)
Movement table of provision for doubtful receivable Opening balance Charge for the period (*) Collections Write-off Closing balance
(*) TL 8.064.278 of total doubtful receivable period charge includes TL 7.874.018, which is presented under the Provisions Account in the income statement, and the remaining amount, which is recognized as non-deductible expenses under the Other Expense and Losses account. (31 December 2008: TL 17.755.538 of total doubtful receivable period charge includes TL 13.665.702, which is presented under the Provisions Account in the income statement, and the remaining amount, which is recognized as non-deductible expenses under the Other Expense and Losses account.) Company has TL 9.319.456 collateral for doubtful receivables (31 December 2008: TL 8.382.833).
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2009
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Aging table of due receivables as of 31 December 2009 is presented below. TL 9.952.052 of premium receivable provision, which was provided in prior periods for the portion of uncollectible receivables overdue for two months (+61 days), is not compulsory to provide for the current year because the accounting of the related amount is out scoped from the Insurance Law No: 5684 effective on 14 June 2007 and the related amounts accounting left at discretion of the companies and has been classified under other long-term technical provisions based on the precautionary principle (31 December 2008: TL 9.952.052). 0-30 days 31-60 days 61-90 days 90+ Due Receivables Not Due Receivables Total(*) 31 December 2009 31.914.340 11.631.111 4.825.852 23.859.763 72.231.066 244.717.660 316.948.726 31 December 2008 37.168.742 13.614.715 5.780.462 16.150.422 72.714.341 270.988.356 343.702.697
(*) Except for TL 316.948.726 presented under receivables from insurance operations in the financial statements, this amount also includes TL 48.763.623 of untransferred amount collected by intermediaries and TL 43.068.439 of subrogation salvage receivables. (31 December 2008: Except for TL 343.702.697 presented under receivables from insurance operations in the financial statements, this amount also includes TL 36.583.000 of untransferred amount collected by intermediaries and TL 30.257.486 of subrogation salvage receivables.) The details of guarantees for undue and not due receivables of the Company are presented in the below table; Types of Guarantees Letters of guarantees Government bonds and equity shares Real estate pledges Blocked deposits Total 31 December 2009 41.363.155 3.193.952 75.075.287 2.904.298 122.536.692 31 December 2008 39.367.798 3.199.759 72.194.511 3.307.633 118.269.701
Market risk Market risk is defined as the risk exposed due to fluctuations in the financial markets and changes in interest, exchange rates, price changes in bills-bonds and equity shares in the Companys financial position. Generally accepted international Value at Risk Method (VAR) is used in the calculation of market risk. Because the calculations include estimations for the following days, reliability of the estimations is reviewed on a daily basis by comparing the actual figures. Under regular market conditions, the Company performs scenario analysis supporting the VAR method used in measuring inclines in the market prices of the Companys marketable security portfolio and reports the results gradually to the Board of Directors. As part of Risk Management Policies, VAR limits determined for Fund Management Unit Risk and limits related to the proportion of each financial asset group to total portfolio and shareholders equity are reviewed on a daily basis and assessed by considering the market conditions.
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As of 31 December 2009, the Companys total Value Subjected to Risk is TL 1.519.041 (31 December 2008: TL 1.732.125) and presented based on the financial asset group in the below table: Value At Risk Total TL marketable securities TL marketable securities Repo and repurchase agreements TL money market Effect of portfolio diversity Total FC/TL transactions Foreign currency position Forward Effect of portfolio diversity Total equity shares Held-for-trading securities Effect of portfolio diversity Total precious metal Total effect of portfolio diversity Total 31 December 2009 1.014.456 1.014.456 184.555 184.555 1.036.997 1.389.388 (352.391) (716.967) 1.519.041 31 December 2008 2.266.641 2.266.641 4 (4) 1.061.566 1.061.566 592.907 760.317 (167.410) (2.188.989) 1.732.125
Interest rate risk Interest rate risk represents the potential for losses in the value of interest sensitive assets or liabilities arising from changes in interest rates. Interest rate risk is managed through the diversification of marketable security portfolio as marketable securities with fixed and variable interest rates. Sensitivity to interest rate If the Companys government bonds classified as held-for-trading and held-to-maturity investment securities increase by +1, +3, +5 and +10 points and other variables remain constant, negative changes that would occur in the market value of the Companys sensitive financial assets for interest rate and net profit and loss are presented in the below table. 31 December 2009 Change in Portfolio Value Change in Net Profit and Loss (2.721.575) (1.343.602) (7.970.215) (3.956.125) (12.975.686) (6.474.074) (24.536.670) (12.390.240) 31 December 2008 Change in Portfolio Value Change in Net Profit and Loss (2.366.544) (723.627) (6.928.137) (2.129.809) (11.273.825) (3.483.704) (21.283.681) (6.657.524)
Change in Interest Rates +1 point +3 point +5 point +10 point
Change in Interest Rates +1 point +3 point +5 point +10 point
Exchange rate risk Exchange rate risk is defined as the loss risk exposure due to changes from exchange rates based on the differences between the Companys foreign currency denominated assets and liabilities. On the other hand, value changes of different currency types compared to each other is another aspect of an exchange rate risk. Exchange rate risk is managed by keeping the net foreign currency position without any deficits.
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2009
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The details of foreign currency denominated assets and liabilities as of 31 December 2009 are presented below: A. Foreign currency denominated assets B. Foreign currency denominated liabilities Net foreign currency position (A-B) 31 December 2009 90.659.840 57.286.234 33.373.606 31 December 2008 114.009.400 57.765.816 56.243.584
Foreign currency position detailed in terms of currency types is as follows: 31 December 2009 31 December 2008 Amount in Amount in Original Amount in Original Currency TL Currency 8.659.248 1.593.991 7.834 611.916 17.038.865 36.328.392 7.966.268 435.763 22.480 377.596 19.522 145 71 29.814.904 5.577.637 130.172 20.715 107.100 6.165 13.038.230 3.443.499 18.718 886.789 277.767 17.665.003 54.699.660 17.209.528 1.041.124 32.578 6.156 5.666 30 95 72.994.837 44.892.301 12.049.369 311.008 30.021 1.746 1.789 57.286.234 19.217.173 3.392.997 33.309 588.683 33.696 34.842.614 10.713.667 494.619 23.727 279.685 14.589 64.530 71 27.021.435 7.699.692 176.224 18.472 17.855 5.425
Currency Types Cash and banks USD EUR GBP CHF JPY USD EUR GBP CHF JPY DKK SEK AUD USD EUR GBP CHF JPY SEK DKK
Amount in TL 29.062.131 7.263.728 73.027 841.817 564 37.241.267 52.692.485 22.935.818 1.084.403 33.930 4.680 4.191 12.552 74 76.768.133 40.864.516 16.483.501 386.353 26.415 3.473 1.558 57.765.816
Total Receivables
Total Liabilities
Total
Sensitivity to exchange rate risk If all exchange rates decrease by 1%, 3%, 5% and 10%, market value decreases due to the foreign currency denominated deposits and negative changes in profit and loss are presented in the below table: 31 December 2009 Change in Market Value -1% -3% -5% -10% Net Change in Profit and Loss (333.736) (1.001.208) (1.668.680) (3.337.361) Change in Exchange Rates (333.736) (1.001.208) (1.668.680) (3.337.361)
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31 December 2008 Change in Market Value -1% -3% -5% -10% Net Change in Profit and Loss (562.436) (1.687.308) (2.812.179) (5.624.358) Change in Exchange Rates (562.436) (1.687.308) (2.812.179) (5.624.358)
Other price risks Price risks are the loss risks due to the price fluctuations in the Companys equity share positions. Other price risk is managed by diversifying the equity share portfolio and limits designated for the equity share investments. Sensitivity to equity share price If equity shares held by the Company decrease by 1%, 3%, 5% and 10% and all other variables remain constant, negative changes that would occur in the market values of such equity shares and profit and loss are presented in the below table. 31 December 2009 Change in Market Value -1% -3% -5% -10% 31 December 2008 Change in Market Value -1% -3% -5% -10% Net Change in Profit and Loss (1.082.342) (3.247.027) (5.411.712) (10.823.425) Change in Prices of Equity Shares (144.561) (433.683) (722.805) (1.445.609) Net Change in Profit and Loss (3.689.987) (11.069.961) (18.449.935) (36.899.869) Change in Prices of Equity Shares (705.623) (2.116.869) (3.528.115) (7.056.230)
Liquidity risk Liquidity risk is the possibility of non-performance of the Companys due liabilities. Liquidity risk includes risks such as; failure in converting the Companys assets at an appropriate price at short notice because of some difficulties and inconsistencies in markets, inconsistencies in cash inflows and outflows and failure to perform its funding liability at reasonable cost and potential due to inconsistencies in maturities of cash flows. Liquidity risk assessments are performed based on deferrals in collections or possible inconsistencies between the compensation maturities and maturities of reinsurance shares of compensations and gradually reported to the Board of Directors when the types and maturities of assets and liabilities are due, and/or any insurance risks associated with economical crisis, earthquake or other catastrophic events occur. Since insurance agreements cover the prospective liabilities, there is an uncertainty about the timing and amount of such liabilities. Therefore, the Companys ability to pay claims is highly related with the liquidity of the financials assets held. Liquidity risk is managed through arranging the maturity structure of cash and marketable security portfolio with the current and possible liabilities and creating the portfolio with highly liquid public sector borrowing securities.
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2009
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As of 31 December 2009, the distribution of the Companys assets and liabilities with known maturities in terms of remaining maturities are presented in the below table:
Up to 1 month 200.821.239 52.972.599 96.126.202 553.947 350.473.987 29.233.213 29.233.213 321.240.774 Up to 1 month 510.387.751 85.102 90.880.088 6.681.214 608.034.155 32.780.847 32.780.847 575.253.308 3 months1 year 140.670.521 160.658.196 81.781.455 383.110.172 99.973.189 99.973.189 283.136.983 3 months1 year 18.984.284 150.548.084 72.000.843 241.533.211 67.961.056 67.961.056 173.572.155 1 year and over 105.788.061 2.292.619 625.586 108.706.266 1.629.230 1.629.230
31 December 2009 Cash and cash equivalents Financial assets Receivables Other assets Total assets Payables/Technical reserves Other liabilities Shareholders equity Total liabilities Net liquidity surplus/(deficit)
1-3 months 196.700.778 37.509.389 105.616.415 4.029.141 343.855.723 15.246.231 15.246.231 328.609.492 1-3 months 171.222.440 129.968.585 3.430.448 304.621.473 14.519.537 14.519.537 290.101.936 -
No maturity 95.917.578 336.881.142 73.061.309 46.913.142 552.773.171 745.439.812 41.010.715 806.386.929 1.592.837.456
Total 493.439.595 673.821.712 437.754.741 133.903.271 1.738.919.319 891.521.675 41.010.715 806.386.929 1.738.919.319 -
107.077.036 (1.040.064.285) 1 year and over 161.906.335 1.545.227 163.451.562 -
31 December 2008 Cash and cash equivalents Financial assets Receivables Other assets Total assets Payables/Technical reserves Other liabilities Shareholders equity Total liabilities Net liquidity surplus/(deficit)
No maturity 112.046.300 60.939.860 43.749.126 216.735.286 760.144.090 50.979.491 607.990.666 1.419.114.247
Total 681.610.191 293.022.021 433.881.844 125.861.631 1.534.375.687 875.405.530 50.979.491 607.990.666 1.534.375.687 -
163.451.562 (1.202.378.961)
The fair value of financial assets shown in the following table in terms of valuation methods is shown divided into three categories. Category 1, was organized market obtained from fair values (market data), the Category 2 precedent that has truth according to processes and Category 3 is the future cash flows to their present reduced according to the values that are valued financial assets represents.
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Categories of Financial Instruments: 31 December 2009 Book Value Financial assets Held for trading financial assets (Fair value through profit or loss) 252.475.211 Government bonds 175.338.551 Equity instruments (publicly traded in stock market) 35.604.273 Investment funds 34.753.589 Repurchase agreement 6.778.798 Available-for-sale financial assets (*) Equity instruments (publicly traded in stock market) Held-to-maturity financial assets Government bonds Trade receivables Other receivables Financial liabilities Trade payables Other payables 54.276.890 54.276.890 120.069.630 120.069.630 435.410.551 2.344.190 73.339.698 12.163.321 252.475.211 175.338.551 35.604.273 34.753.589 6.778.798 54.276.890 54.276.890 128.928.018 128.928.018 -
Category 1
Category 2
Category 3
- 435.410.551 2.344.190 73.339.698 12.163.321
(*) TL 5.797.612 provision for impairment of financial assets has been deducted from the available for sale financial assets balance.
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2009
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31 December 2008 Book Value Financial assets Held for trading financial assets (Fair value through profit or loss) Government bonds Equity instruments (publicly traded in stock market) Investment funds Repurchase agreement Available-for-sale financial assets (*) Equity instruments (publicly traded in stock market) Held-to-maturity financial assets Government bonds Trade receivables Other receivables Financial liabilities Trade payables Other payables 116.073.704 13.488.511 88.640.881 74.118.036 6.358.679 8.079.064 85.102 25.603.563 25.603.563 106.772.583 106.772.583 432.563.671 1.318.173
Category 1
Category 2
Category 3
88.640.881 74.118.036 6.358.679 8.079.064 85.102 25.603.563 25.603.563 109.022.025 109.022.025 -
- 432.563.671 1.318.173
- 116.073.704 - 13.488.511
(*) Amounting to TL 22.654.235 for impairment of financial assets are reduced from available for sale financial assets. Fair value of financial assets Fair value is the amount for which an asset could be exchanged or a liability settled between knowledgeable, willing parties in an arms length transaction. The Company determines the estimated fair value of its financial instruments by using the current market information and appropriate valuation methods. Additionally, ability to estimate the market values through assessing the market information requires interpretation and judgment. As a result, the estimations presented herein cannot be an indicator of the amounts obtained by the Company in a current market transaction. The following methods and assumptions are used in fair value estimations for financial instruments of which their fair value cannot be practically measured: Financial assets It is anticipated that fair value of the financial assets including cash and cash equivalents and other financial assets carried at cost will approximate to their book value based on their short term nature and having insignificant potential losses. Market value is taken as a basis in the measurement of fair value of government bonds and equity shares. Financial liabilities It is anticipated that fair value of monetary liabilities will approximate to their carrying value based on their short term nature.
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2009

A unit-linking feature embedded in a host financial instrument or host insurance contract is closely related to the host instrument or host contract if the unit-denominated payments are measured at current unit values that reflect the fair values of the assets of the fund. A unit-linking feature is a contractual term that requires payments denominated in units of an internal or external investment fund. A derivative embedded in an insurance contract is closely related to the host insurance contract. In those types, embedded derivative instrument is not being accounted independent from the host contract. There are no subsequent events after the balance sheet date. 5. Segment Information The Company has no operational or geographical segments in order to present information on segmental reporting. 6. Tangible Assets 6.1 Total amount of all depreciation and amortization expenses for the period is TL 4.513.555 (31 December 2008: TL 5.106.814). 6.1.1. Amount of depreciation expenses is TL 4.513.555 (31 December 2008: TL 5.106.814). 6.1.1.1 Amount of normal depreciation expenses is TL 4.513.555 (31 December 2008: TL 5.106.814). 6.1.2. There is no amortization expense. 6.2 Costs of tangible fixed assets, except for land and construction in progress, are amortized based on their estimated useful lives. Estimated useful life, residual value, and amortization method are reviewed at the end of each annual reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Buildings Leasehold Improvements Vehicles Furniture and Office Equipments (%) 2 20 20 2-25
6.3 Movements of tangible fixed assets in the current period: 6.3.1 Cost of acquired or constructed tangible fixed assets: TL 6.848.066 (31 December 2008: TL 6.678.733). 6.3.2 Cost of tangible fixed assets disposed of or become scrap: TL 4.692.267 (31 December 2008: TL 387.636) 6.3.3. Revaluation in the current period: None (31 December 2008: None). 6.3.3.1 In the cost of assets (+): None. 6.3.3.2 In the accumulated depreciations (-): None. 6.3.4 There is no construction in progress (31 December 2008: None).
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2009
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6.4 Tangible Fixed Assets Current Period: 31 December 2009 Cost Values: Opening Balance Additions Disposals Closing Balance TL TL TL TL Held-for-use properties 10.311.518 9.322 - 10.320.840 Investment properties 6.831.991 150.785 6.982.776 Machinery and equipments 13.791.891 4.125.718 (562.808) 17.354.801 Furniture and fixtures 11.929.614 612.073 (4.129.459) 8.412.228 Vehicles 729.746 242.632 972.378 Other tangible assets 9.513.674 1.707.536 - 11.221.210 Tangible assets acquired under leasing transactions 4.339.065 4.339.065 Total 57.447.499 6.848.066 (4.692.267) 59.603.298 Accumulated Depreciation: Balance Depreciation of held-for-use properties Depreciation of investment properties Depreciation of machinery and equipments Depreciation of furniture and fixtures Depreciation of vehicles Depreciation of other tangible assets Depreciation of tangible assets acquired under leasing transactions Total Net Book Value Prior period: 31 December 2008 Cost Values: Opening Balance Additions Disposals Closing Balance TL TL TL TL Held-for-use properties 9.669.274 642.244 - 10.311.518 Investment properties 7.094.216 (262.225) 6.831.991 Machinery and equipments 12.136.378 1.655.513 - 13.791.891 Furniture and fixtures 9.821.086 2.108.528 - 11.929.614 Vehicles 622.530 232.627 (125.411) 729.746 Other tangible assets 7.473.853 2.039.821 9.513.674 Tangible assets acquired under leasing transactions 4.339.065 4.339.065 Total 51.156.402 6.678.733 (387.636) 57.447.499 31 December 2009 Opening Balance Additions Disposals TL TL TL 2.515.081 162.662 2.882.536 137.395 11.429.220 1.176.372 (562.808) 9.305.727 400.958 (2.561.535) 278.615 148.462 5.925.623 1.971.191 3.352.290 35.689.092 516.515 4.513.555 Closing TL 2.677.743 3.019.931 12.042.784 7.145.150 427.077 7.896.814
3.868.805 (3.124.343) 37.078.304 22.524.994
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Accumulated Depreciation: Balance Depreciation of held-for-use properties Depreciation of investment properties Depreciation of machinery and equipments Depreciation of furniture and fixtures Depreciation of vehicles Depreciation of other tangible assets Depreciation of tangible assets acquired under leasing transactions Total Net Book Value Tangible fixed assets are not subject to revaluation.
31 December 2008 Opening Balance Additions Disposals TL TL TL 2.354.705 160.376 2.864.603 136.639 (118.706) 10.830.816 598.404 7.799.513 1.506.214 251.208 113.107 (85.700) 4.188.077 1.737.546 2.497.762 30.786.684 854.528 5.106.814
Closing TL 2.515.081 2.882.536 11.429.220 9.305.727 278.615 5.925.623
3.352.290 (204.406) 35.689.092 21.758.407
The Company has no tangible fixed assets given as guarantees for liabilities and there are no mortgages or pledges on tangible fixed assets. Total operational lease payments in the current period are amounting to TL 5.920.771 (31 December 2008: TL 5.057.900). 7. Investment Properties The Company chose the cost method under TAS 40 Investment Property. 31 December 2009 Buildings 6.831.991 150.785 6.982.776 31 December 2008 Buildings 7.094.216 (262.225) 6.831.991
Cost Values Opening balance as of 1 January Additions Disposals Closing balance as of 31 December Accumulated Depreciation Opening balance as of 1 January Charge for the period Disposals Closing balance as of 31 December Net book value as of 31 December
2.882.536 137.395 3.019.931 3.962.845
2.864.603 136.639 (118.706) 2.882.536 3.949.455
The Companys rent income from its investment properties leased under operational lease is amounting to TL 1.076.723 (31 December 2008: TL 1.093.141). The Company has no direct expenses associated with the investment properties in the current period. The Companys fair value of investment properties is TL 27.000.252 as of 31 December 2009. Fair value of the real estate is measured based on the valuation study made by an independent valuation company in 2008. The valuation company, which was authorized by the Turkish Capital Market Board, is an independent valuation company having the necessary qualifications and experience in the valuation of the related real estate. Valuation study, which was undertaken in accordance with International Valuation Standards, is performed based on by the reference prices of similar real estate transactions in the market.
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2009
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8. Intangible Assets The Company has no intangible assets, except for goodwill. Goodwill Current Period: 31 December2009 Goodwill 16.250.000 16.250.000 16.250.000 16.250.000 31 December2008 Goodwill 16.250.000 16.250.000 16.250.000 16.250.000
Cost Values Opening balance as of 1 January Closing balance as of 31 December Accumulated Impairment Opening balance as of 1 January Closing balance as of 31 December Net book value as of 31 December
The Company has not recognized any impairment loss for its intangible assets in the current period. The Companys goodwill is amounting to TL 16.250.000 in the financial statements (31 December 2008: TL 16.250.000). There is no impairment in goodwill in the current period. The Company has acquired the health portfolio of Anadolu Hayat Emeklilik A.. 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. 9. Investments in Affiliates A subsidiary is an entity, including an unincorporated entity such as a partnership, over which the investor has significant influence and that is neither an affiliate nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. As of 31 December 2009, the details of the Companys Affiliates are as follows: Location of foundation and operation stanbul Participation inshareholders equity% 20
Affiliates Anadolu Hayat Emeklilik A..
Voting rights % 20
Main operation Life Insurance and Pension Funds
Affiliates Listed Anadolu Hayat Emeklilik A..
Cost Value 55.031.863
31 December 2009 Fair Book Value Value 246.999.981 246.999.981
Cost Value 55.031.863
31 December 2008 Fair Book Value Value 71.999.994 71.999.994
As of 31 December 2009, there is no impairment in the Companys Affiliates (31 December 2008: None). 10. Reinsurance Assets Amounts accounted in profit or loss as a result of various reinsurance agreements are disclosed in Note 17.16. The Companys income and losses due to its purchased reinsurance agreements as a ceding company are not deferred and depreciated in the financial statements.
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11. Financial Assets 11.1 Subcategories of Financial Assets Financial assets available-for-sale Financial assets held-to-maturity Financial assets held-for-trading Impairment loss on financial assets (-) Total Financial Assets: 31 December 2009 Financial Assets Held-for-trading Government bonds Repurchase agreements Equity shares Investment funds Total Financial Assets Available-for-sale Equity shares Cost Value 158.738.975 6.774.788 30.386.673 21.896.611 217.797.047 Cost Value 49.192.371 Fair Value 175.338.551 6.778.798 35.604.273 34.753.589 252.475.211 Fair Value (*) 54.276.890 Book Value 175.338.551 6.778.798 35.604.273 34.753.589 252.475.211 Book Value 54.276.890 31 December2009 252.475.211 60.074.502 120.069.630 (5.797.612) 426.821.731 31 December2008 88.923.623 48.262.948 106.772.583 (22.937.127) 221.022.027
(*) Available-for-sale financial assets with market value are carried at their fair value and available-for-sale financial assets with no market value are carried at restated cost adjusted for inflation till 31 December 2004. Financial Assets Held-to-maturity Government bonds Total financial assets (current) 31 December 2008 Held-for-trading Financial Assets Government bonds Repurchase agreements Equity shares Investment funds Total Available-for-sale Financial Assets Equity shares Cost Value 119.058.525 386.047.943 Cost Value 69.206.743 85.037 5.809.321 4.567.893 79.668.994 Cost Value 48.156.110 Fair Value 128.928.018 435.680.119 Fair Value 74.118.036 85.102 6.358.679 8.079.064 88.640.881 Fair Value(*) 25.608.563 Book Value 120.069.630 426.821.731 Book Value 74.118.036 85.102 6.358.679 8.079.064 88.640.881 Book Value 25.608.563
(*)Available-for-sale financial assets with market value are carried at their market value and available-for-sale financial assets with no market value are carried at restated cost adjusted for inflation till 31 December 2004. Held-to-maturity Financial Assets Government bonds Total financial assets (current) Cost Value 98.008.801 225.833.905 Fair Value 109.022.025 223.271.469 Book Value 106.772.583 221.022.027
11.2 Securities issued other than equity shares in the current period None. 11.3 Securities issued representing the amortized borrowing in the current period None
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11.4 Fair value of securities and long-term financial assets that are carried at cost in the balance sheet and cost of securities and long-term financial assets that are carried at fair value in the balance sheet Cost, fair value and book value of marketable securities are presented in Note 11.1, financial non current assets are presented in Note 9. The Company has no unlisted associates as of the balance sheet date. 11.5 Marketable securities issued by the shareholders, affiliates and subsidiaries of the company classified under marketable securities and associates and their issuers None. (31 December 2008: None) 11.6 Value increases of financial assets in the last three periods 31 December 2009 Diminution in value of financial assets Financial assets available-for-sale Affiliates Total 10.882.131 191.968.118 202.850.249 31 December 2008 (16.749.932) 16.968.131 218.199 31 December 2007 11.217.647 131.364.207 142.581.854
Value increases reflect the difference between the carrying value and cost of the financial assets. 11.7i) Information that enables the financial statement users to evaluate the financial position and performance of the Company is disclosed in Note 11.1. ii) Information on the book value of the financial assets is disclosed in Note 11.1. iii) Comparison of the fair value and book value of financial assets is disclosed in Note 11.1. 11.8 The Company does not apply any hedge accounting. 11.9 Exchange rate differences arising from the payments of monetary items or different conversion rates used in the current period or at initial recognition are recognized in profit or loss. 12. Receivables and Payables 12.1 Details of the Companys receivables Receivables from insurance operations Receivables from reinsurance operations Cash deposited for insurance and reinsurance companies Doubtful receivables from operating and insurance operations Provisions for doubtful receivables from operating and insurance operations (-) Due from related parties Other receivables Pre-paid expenses and income accruals Non-current pre-paid expenses and income accruals Total 31 December 2009 408.780.788 21.332.124 5.297.639 65.129.434 (65.129.434) 937.911 1.406.279 94.422.524 53.572 532.230.837 31 December 2008 410.543.183 17.656.888 4.363.600 57.499.314 (57.499.314) 173.259 1.144.914 87.401.332 2.624 521.285.800
Detailed information of Companys receivables are explained in credit risk disclosure in Note 4.2.3.
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12.2 Receivable-payable relationship with shareholders, affiliates and subsidiaries of the Company The information about shareholders, subsidiaries and affiliates are disclosed in note 45. 12.3 Total amount of pledges and other guarantees received for receivables is TL 122.536.692 (31 December 2008: TL 115.130.023). 12.4 Details of the Companys foreign currency denominated receivables without exchange rate guarantees are presented below: 31 December 2009 31 December 2008 Amount In Amount In Type of Original Amount Original the currency Currency (TL) Currency Amount (TL) USD 36.328.392 54.699.660 34.842.614 52.692.485 EUR 7.966.268 17.209.528 10.713.667 22.935.818 GBP 435.763 1.041.124 494.619 1.084.403 CHF 22.480 32.578 23.727 33.930 JPY 377.596 6.156 279.685 4.680 DKK 19.522 5.666 14.589 4.191 SEK 145 30 64.530 12.552 AUD 71 95 71 74 72.994.837 76.768.133 USD EUR GBP CHF JPY SEK DKK 29.814.904 5.577.637 130.172 20.715 107.100 6.165 44.892.301 12.049.369 311.008 30.021 1.746 1.789 57.286.234 27.021.435 7.699.692 176.224 18.472 17.855 5.425 40.864.516 16.483.501 386.353 26.415 3.473 1.558 57.765.816
Receivables
Total Liabilities
Total 12.5 Credit risk is disclosed in Note 4. Book value and fair value of the Companys receivables are the same.
13. Derivative Financial Instruments As of 31 December 2009, Company has no derivative financial instruments (31 December 2008: None).
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14. Cash and Cash Equivalents 31 December 2009 53.278 407.927.829 10.405.812 397.522.017 85.458.488 493.439.595 (2.814.831) 490.624.764 32.868.686 31 December 2008 57.170 633.357.943 19.668.025 613.689.918 48.195.078 681.610.191 (4.005.920) 677.604.271 96.970.963
Cash Cash at banks Demand deposits Time deposits Other cash and cash equivalents Total Interest accruals on cash and cash equivalents (-) Cash flow based grand total Blocked deposits (-)
In other cash and cash equivalents; credit card receivables, cheques received, cheques given (-) and payment orders (-) are presented. 15. Share Capital 15.1 Transactions between the Company and its shareholders, showing each distribution made to the shareholders separately The Companys shareholders and its shareholders equity structure as of 31 December 2009 is below: 31 December 2009 151.002.594 92.564.995 181.432.411 425.000.000 31 December 2008 124.355.077 76.229.997 149.414.926 350.000.000
Shareholders Trkiye Bankas A.. Milli Reasrans T.A.. Other Total
% 35,53 21,78 42,69 100,00
% 35,53 21,78 42,69 100,00
The details of the transactions between the Company and its shareholders and the related balances as of the end of the period are presented in Related Parties note. 15.2 Reconciliation of carrying values of each capital account and each reserve as of the beginning and end of the period showing each change separately The shareholders equity table is presented with the financial statements. 15.3 For each class of share capital; 15.3.1 The explanation about the number of capital shares Share capital of the Company is composed of Group A and Group B shares. TL 1,50 of Group A share is represented by 150 of equity shares having a nominal amount of TL 0,01 each. TL 424.999.998,5 of Group B share is represented by 42.499.999.850 shares having a nominal amount of TL 0,01 each. 15.3.2 The explanation about the number of issued and fully paid shares and issued but not fully paid shares The Company has issued 7.5 billion fully paid equity shares in 2009. All of these shares have been paid (2008: 7.5 billion fully paid equity shares has been issued. All of these shares have been paid).
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15.3.3 Nominal value of an equity share or equity shares without having nominal value Nominal value of equity shares is TL 0,01 per share. 15.3.4. Reconciliation of the number of the equity shares at the beginning and ending of the period 31 December 2009 Number of shares Beginning of the period, 1 January Issued in the current period (internal sources) End of the period, 31 December End of the period, 31 December 35.000.000.000 7.500.000.000 42.500.000.000 42.500.000.000 31 December 2008 Number of shares 27.500.000.000 7.500.000.000 35.000.000.000 42.500.000.000
15.3.5 Rights, privileges and limitations on dividend payments and repayment of share capital Group A shares having TL 1,5 nominal value each have only voting rights. Group A shares have 10 voting rights and Group B shares have 1 voting right. 15.3.6 Equity shares held by the Company, its associates or its Affiliates There is no equity shares held by the Company. There is no equity shares held by the Companys affiliates or subsidiaries. 15.3.7 Equity shares held for future sale for forward transactions and contracts The Company has no sales of shares in relation to forward transactions or contracts. 15.4 Share Based Payments None. 15.5 Subsequent Events The Company has no share transactions subsequent to the balance sheet date. 16. Other Provisions and Capital Component of Discretionary Participation 16.1 Each income and expense item and their total amounts accrued under shareholders equity in the current period in accordance with other standards and interpretations 31 December 2009 Affiliates Valuation difference Financial assets available-for-sale Valuation difference Total 191.968.118 10.882.131 202.850.249 31 December 2008 16.968.131 (16.749.932) 218.199
16.2 Net exchange differences classified separately as an equity item and reconciliation of exchange differences at the beginning and end of the period The Company has no exchange differences classified separately as an equity item. 16.3 Hedging for forecasted transactions and net investment hedging None. 16.4 Hedging transactions None.
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16.5 Gains and losses from available-for-sale financial assets recognized directly in equity for in the current period and amounts recognized in the current profit or loss recycled from shareholders equity: Increase/decrease in value 31 December 2009 31 December 2008 (16.749.932) 11.217.648 27.632.063 10.882.131 (27.967.580) (16.749.932)
Beginning of the period, 1 January Increase/decrease in value recorded in shareholders equity in the current period Increase/decrease in value recycled to income statement from shareholders equity in the current period Ending of the period, 31 December
16.6 Income and loss related to the affiliates recognized directly in equity in the current period The amount of increase in value from affiliates recognized in the equity is TL 191.968.118 (31 December 2008: TL 16.968.131). 16.7 Revaluation increases in tangible fixed assets As of 31 December 2009 and 31 December 2008, the Company carries its tangible fixed assets at cost. 16.8 Current and deferred tax in relation to debit and credit items directly charged to equity None. 17. Insurance Liabilities and Reinsurance Assets 17.1 Guarantees to be provided for life and non-life insurances and guarantees provided for life and non-life insurances based on assets The Companys guarantees to be provided for non-life insurances based on asset are below: 31 December 2009 Current Blockage 90.509.668 33.535.065 124.044.733 31 December 2008 Current Blockage 83.162.241 97.925.908 181.088.149
Branches Non life Government bonds Time deposits Total
The Companys blockage amount to be provided as of 31 December 2009 is TL 122.760.441 and the Company meets the requirements for its blockage liability (31 December 2008: blockage amount to be provided is TL 108.208.935 and the Company meets the requirements for its blockage liability). 17.2 Number of life insurance policies, additions, disposals in the current period, and current life insurers and their mathematical reserves. None (31 December 2008: None).
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17.3 Insurance Guarantees given to non-life insurances based on branches Insurance Branch Accident Health Motor vehicles Air crafts Water crafts Marine Fire and natural disasters General losses Motor vehicles liability General liability Total 31 December 2009 29.125.395.358 186.187.322.099 14.181.276.141 369.827.099 7.573.031.245 8.864.308.838 115.424.219.926 22.637.565.426 1.774.591.410.330 10.495.197.978 2.169.449.554.440 31 December 2008 39.044.118.604 148.562.385.091 14.678.164.249 156.704.932 7.912.772.088 10.041.552.155 101.700.612.070 17.967.524.927 1.232.202.692.001 6.933.270.532 1.579.199.796.649
17.4 Pension investment funds established by the Company and their unit prices None (31 December 2008: None). 17.5 Number and amount of participation certificates in portfolio and circulation None (31 December 2008: None). 17.6 Numbers and portfolio amounts of additions, disposals, reversals and current individual and group pension participants None (31 December 2008: None). 17.7 Valuation methods used in profit share calculation for life insurances with profit shares None (31 December 2008: None). 17.8 Number of additions and their group or individual gross and net share participations in the current period None (31 December 2008: None). 17.9 Number of additions from the other companies and their group or individual gross and net share participations in the current period None (31 December 2008: None). 17.10 Number of transfers from the Companys life portfolio to individual pension portfolio and their group or individual gross and net share participations None (31 December 2008: None).
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17.11 Number of transfers from the Companys individual pension portfolio to other company or not, and together their personal and corporate allocation and gross and net share participations None (31 December 2008: None). 17.12 Number of additions of life insurances and their group or individual allocation and gross and net premiums None (31 December 2008: None). 17.13 Number of disposals of life insurances and their group or individual allocation and gross net premiums and net mathematical reserves None (31 December 2008: None). 17.14 Profit share distribution rate of life insurances in the current period None (31 December 2008: None). 17.15 Amounts from insurance contracts in the financial statements None (31 December 2008: None). 17.16 Assets, liabilities, income and expense and cash flows from insurance contracts recognized when the insurer is a ceding company: As of 31 December 2009, the details of reinsurance receivables and payables are summarized as below; Reinsurance Assets Receivables from reinsurance operations Cash deposited for insurance and reinsurance companies Reinsurance share of unearned premiums reserve Reinsurance share of outstanding claims reserve Reinsurance share of unexpired risks reserve Total Reinsurance Payables Payables due to insurance operations(payables to reinsurers) Cash deposited by insurance and reinsurance companies Total 31 December 2009 21.332.124 5.297.639 145.618.058 106.393.834 1.237.490 279.879.145 (22.622.370) (24.846) (22.647.216) 31 December 2008 17.656.888 4.363.600 144.829.701 83.465.691 1.391.777 251.707.657 (73.242.473) (1.792.582) (75.035.055)
The details of the amounts recognized in profit or loss due to the various purchased reinsurance agreements are presented in the below table: 1 January Income and Expenses from Reinsurance Agreements 31 December 2009 Ceded premiums to reinsurers (-) (317.010.254) Reinsurance commissions received 51.572.505 Reinsurance share of unearned premiums reserve 145.618.058 Reinsurance share of unearned premiums reserve carried forward (-) (144.829.701) Reinsurance share of unexpired risks reserve 1.237.490 Reinsurance share of unexpired risks reserve carried forward (-) (1.391.776) Reinsurance share of claims paid 150.468.294 Reinsurance share of outstanding claim reserve 106.393.834 Reinsurance share of outstanding claim reserve carried forward (-) (83.465.691) Total (91.407.241) 1 January 31 December 2008 (289.187.051) 25.295.526 144.829.701 (97.211.857) 990.958 89.543.688 83.465.691 (71.102.727) (113.376.071)
As of 31 December 2009 the deferred commission income and deferred commission expenses are TL 27.304.987 (31 December 2008: TL 27.558.111) and TL 91.519.320 (31 December 2008: TL 85.249.553), respectively and presented as the deferred income and prepaid expenses at the balance sheet.
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17.17 Comparison of the incurred claims with past estimates Disclosed in Note 4.1.2.3. 17.18 Effects of changes in the assumptions used in the measurement of insurance assets and liabilities, showing the effects of each change that has significant effect on the financial statements separately Disclosed in Note 4.1.2.4. 17.19 Reconciliation of insurance payables, reinsurance assets and changes in deferred acquisition costs 31 December 2009 Insurance Reinsurance Payables Assets 116.073.704 251.707.657 (42.734.006) 73.339.698 28.171.488 279.879.145 31 December 2008 Insurance Reinsurance Payables Assets 89.060.704 183.945.167 27.013.000 116.073.704 67.762.490 251.707.657
Beginning of the period Change in the current period Ending of the period
18. Investment Contract Liabilities The Company has no investment contracts. 19. Trade and Other Payables, Deferred Income 19.1 Sub-classifications of presented items in line with the Companys operations Payables from insurance operations Cash deposited by insurance and reinsurance companies Other payables from main activities Due to shareholders Guarantees and deposits received Other payables Deferred income Other deferred income and expense accruals Total 31 December 2009 48.147.814 24.846 25.167.038 11.915 1.524.247 10.627.159 27.304.987 4.099.658 116.907.664 31 December 2008 96.276.171 1.792.582 18.004.951 14.164 1.326.874 12.147.473 27.558.111 7.224.558 164.344.884
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19.2 Related Parties Transactions and balances between the Company and its shareholders as of the period-end are presented in Note 45 Related Parties. 20. Payables The Companys payables are disclosed in Note 19. 21. Deferred Income Tax Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis. The Company has no current or deferred tax debited or credited directly in equity. The Company recognizes deferred tax assets and liabilities based upon temporary differences arising between its financial statements as reported for TAS purposes and its statutory tax financial statements. These differences usually result in the recognition of revenue and expenses in different reporting periods for TAS and tax purposes and they are given below. 20% is applied in the calculation of deferred tax asset and liabilities (2008: 20%). 1 January31 December 2009 1.206.515 1 January31 December 2008 (2.122.323)
Deferred tax income/(expense) is formed by the items below: Deferred tax income/(expense) related to the occurrence and removal of temporary differences No deferred tax is recognized directly in equity.
Deferred tax assets/(liabilities): Economical life differences of tangible fixed assets Retirement pay and unused vacation provisions differences Valuation differences of the financial assets Insurance technical reserves Doubtful receivable provision differences Other Deferred tax asset/(liabilities)
31 December 2009 217.978 829.788 (675.678) (35.768) (329.004) 7.316 1 January31 December 2009 (1.199.199) 1.206.515 7.316
31 December 2008 204.583 700.035 166.651 (2.068.623) 312.000 (513.845) (1.199.199) 1 January31 December 2008 923.124 (2.122.323) (1.199.199)
Movement of deferred tax asset/(liability): Opening balance at 1 January Charge to income Closing balance at 31 December
22. Retirement Benefits The Act No: 5754 Amendments in Social Securities and General Health Insurance Acts Specific Laws and Related Requirements published in the Official Gazette No: 26870 on 8 May 2008, requires the transfer of participants or beneficiaries of pension funds to SSI as of the effective date of the Act within 3 years and prescribes the extension period of the transfer as maximum of two years upon the order of Council of Ministers. The Act prescribes that, as of the transfer date, present value of fund liabilities should be measured by considering the fund income and expense based on the insurance branches presented in the related act using 9,8% of technical interest rate in the actuarial calculation. The Act also specifies that the uncovered other rights and compensations of participants or beneficiaries of pension funds should be covered by institutions that made the fund transfers.
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As the result of the actuarial calculations made in relation to the Pension Fund of Anadolu Anonim Trk Sigorta irketi established in accordance with Article 20 of the Social Securities Act No: 506, the Company has no deficits by the end of the current period and no payments have been made in relation to any deficit amount by the Company. Fund assets are adequate in covering all the funds liabilities; therefore, the Company management anticipates no liabilities to be assumed in relation to the above-mentioned matter. Retirement pay provision Under the Turkish Labor Law, the Company is required to pay employment termination benefits to each employee who has qualified for such payment. Also, employees are entitled to retirement pay provisions subsequent to the completion of their retirement period by gaining a right to receive retirement payments in accordance with the amended Article 60 of the applicable Social Insurance Law No: 506 and the related Decrees No: 2422 and 4447 issued on 6 March 1981 and 25 August 1999, respectively. Some transitional provisions related to pre-retirement service term was excluded from the law since the related law was amended as of 23 May 2002. The amount payable consists of one months salary limited to a maximum of TL 2.365,16 for each period of service as of 31 December 2009 (31 December 2008: 2.173,19). The provision has been calculated by estimating the present value of the future probable obligation of the Company arising from the retirement of employees. TAS 19 (Employee Benefits) requires actuarial valuation methods to be developed to estimate the enterprises obligation under defined benefit plans. Accordingly, the following actuarial assumptions were used in the calculation of the total liability: The principal assumption is that the maximum liability for each year of service will increase parallel with inflation. Thus, the discount rate applied represents the expected real rate after adjusting for the anticipated effects of future inflation. Consequently, in the accompanying financial statements as at 31 December 2009, the provision has been calculated by estimating the present value of the future probable obligation of the Company arising from the retirement of the employees. The provisions at the respective balance sheet dates have been calculated assuming an annual inflation rate of 4,8% and a discount rate of 11%, resulting in a real discount rate of approximately 5,92% (31 December 2008: 5,4%, 12% and 6,26%, respectively). The anticipated rate of forfeitures is considered and estimated rate of the Companys retirement pay is also taken into account. As the maximum liability is updated semi annually, the maximum amount of TL 2.427,04 effective from 1 January 2010 has been taken into consideration in calculation of provision from employment termination benefits (As of 1 January 2009, the ceiling on severance pay is TL 2.260,05 per month). 1 January31 December 2009 3.154.041 505.185 197.502 (171.445) 3.685.283 1 January31 December 2008 3.245.753 386.488 185.980 (664.180) 3.154.041
Provision at 1 January Service cost Interest cost Retirement pay paid Provision at 31 December
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23. Other Liabilities and Expense Accruals 23.1 Provisions related to employee benefits and others 31 December 2009 463.659 1.067.177 Unused Vacation Provision 346.135 117.524 463.659 Unused Vacation Provision 96.501 249.634 346.135 31 December 2008 346.135 1.386.978 Social Security Premiums Payable 1.386.978 (319.801) 1.067.177 Social Security Premiums Payable 99.435 1.287.543 1.386.978
Unused vacation provision Social security premiums payable
At 1 January 2009 Charge for the period At 31 December 2009
At 1 January 2008 Charge for the period At 31 December 2008
23.2 Off-balance sheet commitments As of 31 December 2009, Total TL 11.540.888 (31 December 2008: TL 7.782.646) of commitments given consists of TL 9.596.692 (31 December 2008: TL 7.334.172), TL 1.822.951 of USD amounts (31 December 2008: TL 382.914) and TL 121.245 of EUR amounts (31 December 2008: TL 65.560). The Company does not have any commitments and contingencies that consist of tangible and intangible assets (31 December 2008: None) In addition, the Companys finance lease liabilities are under the guarantee by the lesser. Carrying value of these liabilities is TL 925 (31 December 2008: TL 1.850). The Company as lesser Leasing agreements: All operating lease contracts contain market review update clauses in the event that the Company exercises its renewal option. The Company has no option to purchase any of the assets leased at the expiry date of the lease period. Total amount of payments recognized as expense in the current period amounts to TL 5.920.771 (31 December 2008: TL 5.057.900). The Company has no liabilities recognized in relation to non-reversible operating lease agreements, commitments, and operating activities from non-reversible operating leases.
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The Company as lessee Financial Lease Agreements Financial lease term is for one year. All financial lease contracts contain market review update clauses in the event that the lessee exercises its renewal option. The Company has no option to purchase any of the assets leased at the expiry date of the lease period. The Company recognizes TL 1.076.723 of operating lease income (31 December 2008: TL 1.093.141). The Company has no direct operating expenses associated with the related real estate in the current period. The Company has no non-reversible operating lease commitments. 23.3 Provisions, Contingent Assets and Liabilities As of the balance sheet date, total amount of litigations filed against the Company amounts to TL 213.609.000 (31 December 2008: TL 178.770.000). The Companys total amount of litigations filed against third parties is TL 106.783.000 (31 December 2008: TL 91.487.000). The Company has provided outstanding claims reserve for the litigations filed against the Company. As of the balance sheet date, the Company has no contingent assets. 23.4 Disclosures on goodwill is presented in Note 8. 24. Net Insurance Premium Revenue 1 January31 December 2009 42.472.390 145.579.853 314.273.906 1.232.109 10.550.870 21.683.671 78.318.340 44.967.121 235.074.024 294.078 27.579.295 6.443 (461.674) 4.896.627 926.467.053 1 January31 December 2008 43.177.547 127.179.863 331.392.921 389.061 9.862.051 27.479.433 70.195.789 38.913.857 195.557.458 117.112 20.210.153 7.587 2.701.001 5.015.307 872.199.140
Accident Illness/Health Motor vehicles Air crafts Water crafts Marine Fire and natural disasters General losses Motor vehicles liability Aircrafts liability General liability Credit Financial losses Legal protection Total Amounts are presented at net gross premiums, less reinsurance shares. 25. Fee Income
Service Income/(Expense) Commissions received from reinsurers Commissions paid to agencies (-)
1 January31 December 2009 51.572.505 (185.594.705) (134.022.200)
1 January31 December 2008 25.295.526 (92.782.463) (67.486.937)
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26. Investment Income/Expense 1 January31 December 2009 Financial assets held-for-trading (Assets held at fair value through profit or loss) Interest income/(expenses) Dividend income Gain on sale/(loss) Financial assets available-for-sale Dividend income Gain on sale Financial assets held-to-maturity Interest income/(expenses) Affiliates Dividend income Investment property Rent income Interest income/(expenses) Other income/(expenses) Total* 23.706.277 787.334 38.425.583 2.491.730 12.069.474 8.399.999 1.076.723 55.610.162 3.814.174 146.381.456 (4.842.139) 272.542 13.043.558 2.261.788 692.173 23.290.397 17.196.079 1.093.141 100.383.540 10.423.866 163.814.945 1 January 31 December 2008
(*) TL 3.473.221 of diminution in value of investments, TL 4.191.139 of losses arising from the investment conversion into cash and TL 8.276.790 of foreign exchange losses are deducted from total investment income (31 December 2008: TL 282.743 of diminution in value of investments, TL 3.346.990 of losses arising from the investment conversion into cash and TL 9.499.637 of foreign exchange losses are deducted from total investment income). 27. Net Income Accrual on Financial Assets 1 January31 December 2009 Financial assets available-for-sale Valuation differences recognized in shareholders equity Valuation differences recognized in profit and loss 10.882.131 (16.749.932) 1 January31 December 2008
28. Assets Held At Fair Value Through Profit and Loss Net gain/loss of assets held at fair value through profit and loss reflected to the income statement as of the balance sheet date is TL 62.919.194 (31 December 2008: TL 8.473.961). Real estates classified as investment property in the accompanying financial statements are valued by using the cost method.
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2009

29. Insurance Rights and Demands Amounts of subrogation income/(expense) for the periods between 1 January 31 December 2009 based on each branch are presented in the below table: 1 January31 December 2009 54.067 9.343 15.010.806 683.372 1.523.437 1.005.580 166.999 2.074.292 (15.101) 20.560.782 1 January31 December 2008 57.330 15.378 1.575.984 (19.323) 1.442.168 3.577.541 749.939 1.895.421 8.348 9.254.799
Accident Illness-Health Motor vehicles Water crafts Marine Fire and natural disasters General losses Motor vehicles liability General liability Total (*)
(*) In income statement, various technical income balance TL 1.633.597 (2008: TL 1.038.311) recognized in other technical income is not included. 30. Investment Agreement Rights The Company has no investment allowances to be used in current and subsequent periods. 31. Other Expenses 31.1 1 January31 December 2009 55.606.865 41.932.237 16.190.641 113.729.743 1 January31 December 2008 46.702.626 39.027.732 13.952.212 99.682.570
Personnel expenses Administrative expenses Marketing and selling expenses Total (*)
(*) In the income statement, TL (185.594.704) (2008: TL (92.782.463)) of production commission expenses, TL (16.050.437) (2008: TL (15.942.174)) of other expenses, TL 51.572.505 (2008: TL 25.295.526) of reinsurance commission income, recognized in the operating expenses are not included in the table above. 31.2 The Company has no agreements with discretionary participation feature that their fair value cannot be measured reliably.
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Annual Report
2009
147

32 Expense Types 32.1 1 January31 December 2009 55.606.865 5.920.771 1.757.222 2.463.915 12.112.019 4.078.622 4.513.555 31.790.329 118.243.298 1 January31 December 2008 46.702.626 5.057.900 1.428.690 2.790.592 10.788.909 3.163.303 5.106.814 29.750.550 104.789.384
Personnel wages and expenses Rent expenses Transportation expenses Communication expenses Advertisement expenses Marketing expenses Depreciation expenses Other Total(*)
(*) While, TL 51.572.505 (2008: TL 25.295.526) of reinsurance commission and TL 4.513.555 (2008: TL 5.106.814) of depreciation expense in the operating expenses are included, TL (185.594.704) (2008: TL (92.782.463)) of production commission expense and TL (16.050.437) (2008: TL (15.942.174)) of other expenses recognized in operating expenses are not included. 32.2 Leasing Transactions Other information on financial leasing is disclosed in Note 23. 33. Employee Benefit Expenses Employee benefit expenses are detailed in Note 22 (Employee Benefits). The Company has no share-based payments in the current period. 34. Finance Costs 34.1 The current period finance cost include TL 925 of interest expense of finance lease of tangible assets (31 December 2008: TL 19.952). 34.2 The information about shareholders, subsidiaries and affiliates are disclosed in note 45. 34.3 The information about shareholders, subsidiaries and affiliates are disclosed in note 45. 34.4 The information about shareholders, subsidiaries and affiliates are disclosed in note 45. 34.5 The Company does not apply any hedge accounting (31 December 2008: None). 34.6 The Company has no exchange differences, other than those arising from financial assets held at fair value through profit and loss (31 December June 2008: None).
148
Anadolu Sigorta
Annual Report
2009

35. Income Tax 31 December 2009 Current tax provision: Corporate tax liability provision Prepaid taxes and other liabilities on period profit (-) Tax expense in the income statement 1 January31 December 2009 11.052.657 (1.206.515) 1 January31 December 2008 23.056.450 2.122.323 11.052.657 (16.030.932) 31 December 2008 23.056.450 (22.335.791)
Income tax expense/(income) is formed by the items below: Current tax expense/(income) Deferred tax expense/(income) related to the occurrence and disappearance of the temporary differences
Corporate Tax The Company is subject to Turkish corporate taxes. Provision is made in the accompanying financial statements for the estimated charge based on the Companys results for the years and periods. Corporate tax is applied on taxable corporate income, which is calculated from the statutory accounting profit by adding back non-deductible expenses, and by deducting dividends received from resident companies, other exempt income and investment incentives utilized. The effective tax rate used in 2009 is 20% (2008: 20%). In Turkey, advance tax returns are filed on a quarterly basis. The advance corporate income tax rate used in 2009 is 20%. Losses are allowed to be carried 5 years maximum to be deducted from the taxable profit of the following years. Tax carry back is not allowed. In Turkey, there is no procedure for a final and definitive agreement on tax assessments. Companies file their tax returns between 1-25 April following the close of the accounting year to which they relate. Tax authorities may, however, examine such returns and the underlying accounting records and may revise assessments within 5 years. Income Withholding Taxes In addition to corporate taxes, companies should also calculate income withholding taxes and funds surcharge on any dividends distributed, except for companies receiving dividends who are resident companies in Turkey and Turkish branches of foreign companies. The rate of income withholding tax is 10% starting from 24 April 2003 by the end of 22 July 2006. However, this rate was changed to 15% commencing from 22 July 2006 upon the order no: 2006/10731 of the Council of Ministers. However, the new Council of Minister of the 10% rate will apply until there is a replacement for this rate. Undistributed dividends incorporated in share capital are not subject to income withholding taxes. Withholding tax at the rate of 19,8% is still applied to investment allowances relating to investment incentive certificates obtained prior to 24 April 2003. Subsequent to this date, companies can deduct 40% of their investments within the scope of the investment incentive certificate and that are directly related to production facilities of the Company. Investments without investment incentive certificates do not qualify for tax allowance.
Anadolu Sigorta
Annual Report
2009
149

Investment Incentive Investment incentive certificates are revoked commencing from 1 January 2006. If companies cannot use investment incentive due to inadequate profit as of 31 December 2005, such outstanding investment incentive can be carried forward to following years so as to be deducted from taxable income of subsequent profitable years. However, companies can deduct carried forward outstanding allowance from the 2006, 2007 and 2008s taxable income. Investment incentive amount that cannot be deducted from the 2008s taxable income will not be carried forward to following years. Constitutional Court, meeting at the date 15 October 2009, the acquired rights which removes this legal arrangement, contrary to the Constitution finding canceled so that the investment incentives and restrictions regarding the time of the date of the reporting has been eliminated. At about this decision was published in the Official Gazette dated 8 January 2010. Since the Company has not benefit from investment incentives, it applied 20% of corporate tax rate. Inflation Adjusted Legal Tax Calculation The Company has adjusted its statutory financial statements as of 31 December 2004 in accordance with Law No: 5024 published in the Official Gazette No: 25332 on 30 December 2003 which requires the application of inflation accounting in Turkey in 2005 and future years for tax purposes, if the actual rate of inflation meets certain thresholds, using principles which do not differ substantially from the principles in TAS 29, and inflation adjusted balances as at 31 December 2004 were taken as opening balances as of 1 January 2005. However, as inflation did not meet the required thresholds as at 31 December 2005, 2006, 2007, 2008 and 2009 no further inflation adjustment was made to the Companys statutory financial statements in 2005, 2006, 2007, 2008 and 2009. Deferred Tax Deferred tax is explained in Note 21. Reconciliation of period tax with net income for the period is below: 1 January31 December 2009 Reconciliation of tax provision Income before tax Tax calculated: 20% Effect of additions Effect of allowances Corporate tax liability provision on period profit (-) Deferred tax income/(expense) 59.216.870 (11.843.374) (10.004.351) 10.795.068 (11.052.657) 1.206.515 1 January31 December 2008 140.722.726 (28.144.545) (4.786.015) 9.874.110 (23.056.450) (2.122.323)
150
Anadolu Sigorta
Annual Report
2009

36. Net Income from the Changes in Foreign Exchange Rates 1 January31 December 2009 Recognized in profit/loss Foreign exchange rate income Foreign exchange rate expense Total 37. Earnings per Share For an equity share having TL 1 of nominal value: 31 December 2009 Number of ordinary shares outstanding as of 1 January (total) Number of equity shares issued from internal sources Number of ordinary shares outstanding as of 31 December (total) Weighted average number of ordinary shares outstanding Net profit for the period (TL) Earnings per share (TL) 350.000.000 75.000.000 425.000.000 425.000.000 48.164.213 0,11 31 December 2008 275.000.000 75.000.000 350.000.000 425.000.000 117.666.276 0,28 11.550.904 (8.276.790) 3.274.114 1 January31 December 2008 19.776.678 (9.499.637) 10.277.041
38. Dividends per Share In 2009, the Company paid TL 0,142857 of gross cash dividend having TL 1 nominal value each (total cash dividend to shareholders is TL 50.000.000, total cash dividend to personnel is TL 2.400.000) and TL 0,0114285 of bonus share (total bonus share is TL 40.000.000) to shareholders (31 December 2008: TL 20.000.000 cash dividend to shareholders, total cash dividend to personnel is TL 1.813.706 and TL 23.000.000 bonus share). 39. Cash Generated from the Operations The cash flow statement is presented with the financial statements. 40. Equity Share Convertible Bonds None (31 December 2008: None).
Anadolu Sigorta
Annual Report
2009
151

41. Preferred Stocks can be convertible into Cash None (31 December 2008: None). 42. Risks In accordance with Article 323 of the Tax Legislation, the Company provides provision for doubtful receivables under the legal and management follow up considering the nature and amount of its receivables. As of 31 December 2009, the amount of doubtful receivables under legal and management follow up is TL 65.129.434 (31 December 2008: TL 57.499.314) TL 49.531.367 of the related provision amount (31 December 2008: TL 42.976.335) includes subrogation transactions under litigation. Information on the provisions provided in the financial statements is presented in Note 2.1.1. 43. Commitments Total amount of commitments not included in liabilities: The Company has given TL 11.540.888 (31 December 2008: TL 7.782.646) of commitments in total as of 31 December 2009. Total amount consists of TL 9.596.692 of TL amounts (31 December 2008: TL 7.334.172), TL 1.822.951 of USD amounts (31 December 2008: TL 382.914) and TL 121.245 of EUR amounts (31 December 2008: TL 65.560). The Company has no tangible and intangible assets held for commitment (31 December 2008: None). The Companys TL 925 of finance lease payable has a maturity period having less than one year (31 December 2008: TL 1.850). 44. Business Combinations The Company has no business combinations in the current period. 45. Related Parties The details of receivable and payable relationships between the Company and its shareholders and affiliates are presented below. The related party transactions in terms of business relations (agents, reinsurance companies) as receivables and payables are presented below: Due from shareholders (*) Trkiye Bankas A.. Milli Reasrans T.A.. Due from affiliates (*) Anadolu Hayat Emeklilik A. Due to shareholders (*) Trkiye Bankas A.. Milli Reasrans T.A.. Due to affiliates (*) Anadolu Hayat Emeklilik A. 31 December 2009 32.827.540 7.167.546 39.995.086 557.000 557.000 4.464.927 7.728.544 12.193.471 31 December 2008 33.482.477 1.077.680 34.560.157 155.912 155.912 4.984.903 14.764.958 19.749.861 8.998 8.998
(*) Receivables from associates and subsidiaries related to insurance activities have been shown in receivables due from insurance activities in the accompanying financial statements. Payables from associates and subsidiaries related to insurance activities have been shown payables due to insurance activities in the accompanying financial statements.
152
Anadolu Sigorta
Annual Report
2009

The related party transactions of insurance payables are presented below. Related Party Customers Trkiye Bankas A.. Gayrimenkul Yatrm Ort. A.. Nemta Nemrut Liman l. A .. Finansal Kiralama A.. Trakya Cam San A.. Cami Elektrik retim A.. iecam D Ticaret A.. Gemport Gemlik Liman ve Depolama l. A.. Avea letiim Hizmetleri A.. Ode Yaltm Sanayi ve Ticaret A.. TSKB Gayrimenkul Yatrm Ortakl A.. Trkiye Snai Kalknma Bankas A.. Soda Sanayi A.. Asma Ar Sanayi Makinalar A.. Other Total 31 December 2009 3.253.793 671.315 610.735 605.213 465.922 459.297 228.110 217.177 216.907 208.605 160.067 139.133 128.486 109.599 173.482 7.647.841 31 December 2008 3.509.068 852.147 495.297 508.284 7.966 332.872 1.407.234 981.074 200.610 169.270 77.350 129.234 519.816 9.190.222
The details of technical income and technical expense relationships between the Company and its shareholders and affiliates are presented below. The related party transactions in terms of business relations (agents, reinsurance companies) as technical income and expense are presented below: Technical Income Trkiye Bankas A.. Milli Reasrans T.A.. 31 December 2009 101.990.851 55.668.393 157.659.244 31 December 2009 71.442.355 71.503.668 142.946.023 31 December 2008 92.645.380 55.037.670 147.683.050 31 December 2008 68.111.838 68.778.141 136.889.979
Technical Expense Trkiye Bankas A.. Milli Reasrans T.A..
(*) The technical income and expenses balances of associates are presented in the table below.
Anadolu Sigorta
Annual Report
2009
153

The related party transactions arising from other income and other expense are presented below: Related Parties Trkiye Bankas A.. Gayrimen. Yat. Ort. A. Portfy Ynetimi A.. Finansal Kir. A.. Income 33.994.229 33.994.229 31 December 2009 31 December 2008 Expense Income Expense Description - 80.039.449 Interest 3.574.792 3.250.588 Rent 349.601 278.229 Commission 925 19.950 Leasing 3.925.318 80.039.449 3.548.767
The related party transactions arising from technical income and expense are presented below: Related Party Customers Trkiye Bankas A.. Trakya Cam San. A.. Avea letiim Hiz. A.. Anadolu Cam Sanayi A.. Paabahe Cam San. ve Tic. A.. iecam D Ticaret A.. Soda Sanayi A.. Gayrimenkul Yatrm Ort. A.. Cami Elektrik retim A.. Cam Elyaf Sanayi A.. Finansal Kiralama A.. Trk Telekomnikasyon A.. Yatrm Menkul Deerler A.. Cami Ambalaj Sanayi A.. Nemta Nemrut Liman l. A.. Anadolu Hayat Emeklilik A.. (*) Merkezleri Yn. ve letim A.. Bayek Tedavi Sa. Hiz. ve l. A.. Trkiye Snai Kalk. Bankas A.. Trkiye iecam Fabrikalar A.. net Ele. ret. Tic ve let. Hiz.A.. Gemport Gem. Lim. ve Dep l. A.. Cami Madencilik A.. Milli Reasrans Trk A.. Paabahe Maazalar A.. Other Total 31 December 2009 Technical Technical Income Expense 7.296.932 2.738.502 6.432.136 1.029.963 3.490.145 2.322.961 3.275.971 170.170 3.256.370 1.105.913 2.511.618 1.377.497 1.874.475 285.824 1.511.998 47.085 1.357.916 1.034.497 1.279.301 56.668 1.221.069 2.778.628 922.920 57.646 738.787 514.573 725.449 192.685 715.073 695.734 562.557 557.954 374.204 530.641 331.545 528.717 328.929 442.607 640.976 387.751 387.640 361.079 458.486 320.168 27.965 279.755 4.791 264.639 16.162 1.808.904 593.018 42.788.109 17.438.885 31 December 2008 Technical Technical Income Expense 7.606.505 1.427.220 5.315.462 2.756.658 3.954.815 1.766.791 2.763.553 410.635 2.748.438 264.672 2.985.398 136.828 1.413.492 151.211 1.632.362 34.513 432.868 8.807 1.177.796 92.360 1.551.093 2.683.293 6.747 1.474 526.876 12.302 663.598 126.276 1.431.066 251.563 571.632 395.958 465.251 249.653 468.639 302.721 1.081.940 97.239 922.354 704.701 291.311 188.149 2.031.729 662.920 216.531 92.881 238.732 20.897 238.144 46.485 1.579.531 344.133 42.315.863 13.230.340
(*) Technical income and expense arising from the transactions with the associate. No provision for doubtful receivables is provided for due from shareholders, affiliates and subsidiaries. There is no bonus share amount obtained due to the Anadolu Hayat Emeklilik A..s capital increase from its internal sources (31 December 2008: TL 14.196.079) The Company has no liabilities, such as; guarantees, commitments, advances given to shareholders or affiliates.
154
Anadolu Sigorta
Annual Report
2009

Remuneration, fringe benefits provided to top management in the financial year is as follows: As of 31 December 2009, remuneration and fringe benefits provided to top management such as; chairman and members of the board of directors, managing director and assistant managing director (including operational leasing, depreciation and other expenses in addition to monetary rights, such as; compensation, bonuses, premiums, ...etc) in total amount to TL 3.941.258 (31 December 2008: TL 3.332.918). 46. Subsequent Events There has been no change in the Companys operations, documentation and records or Companys policies subsequent to the balance sheet date. 47. Other 47.1 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 Technical Division Changes in Other Technical Reserves Change in equalization reserve Technical Division Operating Expenses Commissions (Net) Personnel expenses Administration expenses Marketing and selling expenses Other expenses Other Operations Other Income and Revenues Income from the collections of doubtful receivables Other Income and Revenues Other Operations Other Expense and Losses Non-deductible expenses Other 1 January31 December 2009 4.655.150 134.022.199 55.606.865 41.932.237 16.190.641 16.050.437 263.802.379 284.196 627.595 911.791 959.181 1.569.642 2.528.823 1 January31 December 2008 5.444.952 67.486.937 46.702.626 39.027.732 13.952.212 15.942.174 183.111.681 413.151 710.829 1.123.980 4.344.596 8.739 4.353.335
Anadolu Sigorta
Annual Report
2009
155

47.2 Total amount of each due to/from personnel items classified under Other Receivables and Other Short and Long Term Payables exceeding one percent of total assets in the balance sheet Current Assets Other Receivables And Due From Related Parties Deposits and guarantees given Agency receivables from compulsory earthquake insurance Agency receivables from agriculture insurance Due from personnel Other Total Current Liabilities Other Payables Institution of natural disaster insurances Deposits and guarantees received Invoices payable Tarm Sigortalar A.. Agency payables for compulsory earthquake insurance Agency commissions payable for agriculture insurances Temporary collection account Payables to personnel Other payables Total Non Current Liabilities Other Technical Reserves Free provision Premium receivable reserves booked as per revoked decree Equalization reserve Total 31 December 2009 14.940 847.163 544.176 937.911 2.344.190 31 December 2009 2.722.692 1.524.247 3.467.509 76.505 396.115 14.946 602.923 2.750.000 596.469 12.151.406 31 December 2009 13.702.761 9.952.051 10.100.102 33.754.914 31 December 2008 14.544 760.955 369.415 91.230 82.029 1.318.173 31 December 2008 2.527.291 1.326.874 5.531.039 69.179 149.175 70.946 492.106 2.650.000 657.737 13.474.347 31 December 2008 13.702.761 9.952.051 5.444.952 29.099.764
47.3 Subrogation receivables followed under the off-balance sheet accounts Subrogation receivables followed under the off-balance sheet accounts is amounting to TL 1.753.827 (31 December 2008: TL 681.147). 47.4 Descriptive disclosure in relation to amounts and resources of income, expenses, and losses for the prior periods None.
156
Anadolu Sigorta
Annual Report
2009
An Assessment of Financial Standing, Profitability and Solvency
Premium Production
Premium Production (TL thousand) 1,192,587 1,161,386 1,243,477
07
08
09
Anadolu Sigorta registered TL 1,243.5 million in premium production in 2009. The greatest contributors to premium production were accident, motor TPL, fire and health branches. A portion in the amount of TL 317,010 thousand of premiums were ceded through reinsurance in 2009, thus significantly reducing retained risk in branches likely to present high claim settlements in particular, such as fire and engineering. Solvency and solvency performance
Claims Paid (TL thousand) 854,890
Conservation Share (TL thousand) 704,422
Combined Loss Premium Ratio (%)
708,006
685,304
588,381
595,761
07
08
09
07
08
09
07
74
79
08
Having adopted it as a duty to make claim payments fully and timely to its policyholders, Anadolu Sigorta attained this goal once again in 2009 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 engineering, thus making it possible for the Companys asset structure to remain unaffected by claims paid in big amounts. Up 24.7% in 2009, claims paid stood at TL 854,890 thousand. A significant portion of the claims paid arose, in order, from losses in accident, motor third party liability, health and fire branches. Combined loss/premium ratio was 82%, 3 points higher than its value in 2008.
82
09
Anadolu Sigorta
Annual Report
2009
157
An Assessment of Financial Standing, Profitability and Solvency
Assessment of Profitability
Gross Profit (TL thousand) Gross Profit/Premiums Received (%)
140,723
77,225
59,217
6.48
12.12
07
08
09
07
08
Gross profit for 2009 amounted to TL 59,217 thousand. Return on equity and return on assets stood at 6.0% and 2.8% respectively.
158
4.76
09
Anadolu Sigorta
Annual Report
2009

Information on Financial Structure
Assets Performance
Total Assets (TL thousand) 1,738,919
07
1,401,538
1,534,376
08
09
As of year-end 2009, total assets reached TL 1,738,919 thousand, corresponding to a year-on rise by 13.3%. Representing the largest item in total assets, total cash and financial assets grew 2% year-on to TL 920,261 thousand, instilling confidence in policyholders with respect to payment of their possible losses with this large volume. Capital Performance
Nominal Capital (TL thousand)
07
275,000
350,000
08
At the end of 2009, the Companys nominal capital augmented by 21.4% year-on and rose to TL 425,000 thousand. Expanded nominal capital is an indication of the Companys financial strength.
425,000
09
Anadolu Sigorta
Annual Report
2009
159
Summary Financial Information for the Last 5 Years Including the Reporting Period
(TL thousand) Gross Premiums Technical Division Balance Investment Income Investment Expenses Other Income and Expenses Period Gross Income (Loss) Taxation Period Net Income (Loss) Shareholders Equity Total Assets
2005 825,932 21,413 86,891 -35,343 -17,038 55,922 -15,649 40,273 466,405 1,028,147
2006 1,060,160 -15,151 102,576 -44,274 -12,069 31,081 -5,882 25,199 506,457 1,229,093
2007 1,192,587 21,653 127,880 -56,895 -15,412 77,225 -23,017 54,209 644,088 1,401,538
2008 1,161,386 96,671 176,944 -117,741 -15,151 140,723 -23,056 117,666 607,990 1,534,376
2009 1,243,477 50,142 162,323 -150,424 -2,824 59,217 -11,053 48,164 806,387 1,738,919
160
Anadolu Sigorta
Annual Report
2009
Risk Management Policies Adhered to by Types of Risks
The Companys 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 Companys 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 Board of Directors, senior management and all employees, 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. In setting the Companys risk tolerance, the Board of Directors takes into account long-term strategies, the Companys equity capabilities, returns to be derived and general economic expectations, and then risk tolerance is 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. 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 Companys 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.
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Annual Report
2009
161
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 Companys 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 other counterparts, 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 followup of regional, sectoral and market trends that have an actual or possible impact on the Companys 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 Companys 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 Companys 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 Market Risk the Company exposed to is within the limits stipulated by applicable legislation and is compliant with the companys 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 Companys 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.
162
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Annual Report
2009
Operational risks that might be faced during the activities are classified 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 These policies are 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 Companys 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 communiqus. 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 riskfocused 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.
Anadolu Sigorta
Annual Report
2009
163

Directory
Headquarters Bykdere Caddesi Kuleleri Kule 2 Kat: 23-26 34330 4. Levent/STANBUL Phone: (90 212) 350 0 350 Fax: (90 212) 350 0 355 E-mail: bilgi@anadolusigorta.com.tr Corporate Insurance Department Beytem Plaza Bykdere Caddesi No: 20-B 34394 ili/STANBUL Phone: (90 212) 368 38 68 Fax: (90 212) 350 01 80 E-mail: ksm@anadolusigorta.com.tr stanbul Regional Branch Merter Merkezi 2/22 General Ali Rza Grcan Caddesi 34173 Merter/STANBUL Phone: (90 212) 484 24 24 Fax: (90 212) 350 0 120 E-mail: bolge11@anadolusigorta.com.tr Kadky Regional Branch K2 Plaza Sarkanarya Sokak No: 14 34742 Kozyata/STANBUL Phone: (90 216) 571 88 00 Fax: (90 216) 571 88 48 E-mail: bolge12@anadolusigorta.com.tr Mediterranean Regional Branch Konyaalt Caddesi No: 78 07050 ANTALYA Phone: (90 242) 248 26 80 Fax: (90 242) 241 42 80 E-mail: bolge08@anadolusigorta.com.tr Western Anatolia Regional Branch Atatrk Caddesi 92 Anadolu Sigorta Binas 2 35210 ZMR Phone: (90 232) 455 33 33 Fax: (90 232) 455 33 43 E-mail: bolge03@anadolusigorta.com.tr
Western Black Sea Regional Branch lhami Soysal Caddesi 44/4 Ervaksan Binas Kat: 3 67320 Kdz. Ereli/ZONGULDAK Phone: (90 372) 322 72 40 Fax: (90 372) 312 11 00 E-mail: bolge06@anadolusigorta.com.tr Southern Anatolia Regional Branch Reatbey Mah. 62029. Sokak 16/A 01120 Seyhan/ADANA Phone: (90 322) 455 32 00 Fax: (90 322) 455 32 32 E-mail: bolge02@anadolusigorta.com.tr Central Anatolia Regional Branch Cinnah Caddesi Farabi Sok. No: 43 06690 Kavakldere/ANKARA Phone: (90 312) 457 17 17 Fax: (90 312) 457 17 49 E-mail: bolge05@anadolusigorta.com.tr Black Sea Regional Branch Karyaka Mah. 4 Nolu Sok. No: 479 61040 TRABZON Phone: (90 462) 230 61 61 Fax: (90 462) 230 70 20 E-mail: bolge07@anadolusigorta.com.tr Marmara Regional Branch Adres: Yalova Caddesi 424 Buttim Plaza Kat: 8 Kap: 1617-20 16350 BURSA Phone: (90 224) 270 05 55 Fax: (90 224) 270 05 88 E-mail: bolge04@anadolusigorta.com.tr Turkish Republic of Northern Cyprus Branch Memduh Asaf Sokak 8 Kkliftlik Lefkoa/TRNC Phone: (90 392) 227 95 95 Fax: (90 392) 227 95 96 E-mail: bolge50@anadolusigorta.com.tr
164
Anadolu Sigorta
Annual Report
2009
Produced by Tayburn Kurumsal Tel: (90 212) 227 04 36 Fax: (90 212) 227 88 57 www.tayburnkurumsal.com
www.anadolusigorta.com.tr

Anadolu Insurance Annual Report 2009

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You Never Lose

with Anadolu Sigorta

Never Lose Energy

Never Lose Customers

The Historical Development of Anadolu Sigorta

Activities commenced in the agricultural insurance branch.

Never Lose Time

Never Lose Financial Strength

Total Premium Production (TL thousand)

2008 1,161,386 1,534,376 685,304 350,000 607,991 140,723 117,666

2009 1,243,477 1,738,919 854,890 425,000 806,387 59,217 48,164

2008 1.91 0.40 0.82

2009 1.54 0.46 1.00

2008 0.59 1.01 1.50 0.28 0.68

2009 0.53 1.03 1.52 0.25 0.51

Operational Ratios Conservation Ratio Claims Payment Ratio

2008 0.75 0.67

2009 0.75 0.69

2008 0.70 0.79 0.20 0.99 0.12 0.12 0.08

2009 0.75 0.82 0.27 1.09 0.05 0.11 0.04

(TL) 40,000,000 16,370,267 538,388 18,091,345 75,000,000

Message from the Chairman

Burhan Karagz Chairman of the Board of Directors

Message from the Chief Executive Officer

Insurance industry premium production continued to decline worldwide during 2009.

Anadolu Sigorta continued to register real growth in premium production.

Our bancassurance unit was launched in 2009.

Message from the Chief Executive Officer

Addressing SMEs greater insurance needs in a crisis environment

Individualized motor vehicle insurance

Turkeys most admired and best known insurer

The way forward

Mustafa Su Chief Executive Officer

2009 Economic and Sectoral Overview

The World Economy

Recession ends in the United States

Bank of Japan policies remain prudent

Eurozone improvements more sluggish

Growth continues at high levels in China

USD remains weak throughout the year

2009 Economic and Sectoral Overview

And in the last quarter of 2009

A surge in oil prices may be the offing

The need for a soft transition in crisis exit strategies

The Turkish Economy 2009: The year the economy shrank

Turkish economy shrank by 8.4% in the first three quarters of 2009.

2009-9 Months -8.4

3.9 0.8 -8.2 -1.1

-0.4 -21.8 -18.9 -26.3

6.4 -11.2 -21.4 -15.4

-2.7 -3.9 -18.1 -7.2

3.2 -12.4 -19.5 -16.3

2009 Economic and Sectoral Overview

Improvements expected in foreign trade

Inflation subsides in line with global trends

The current account deficit continues to grow

CBT keeps the lid on interest rates throughout 2009

A rousing performance at ISE

The huge deficit that looms on the budget horizon

2009 Economic and Sectoral Overview

The Macroeconomic Outlook: 2010-2012

The Global Insurance Industry

The Turkish Insurance Industry

An Assessment of Anadolu Sigorta in 2009