1 st Year in Operations 1 st Rank in Life Insurance Premium

Transcription

1 Contents 1 st Year in Operations 1 st Rank in Life Insurance Premium Summary of 2010 Annual Report and Independent Auditor s Report INTRODUCTION 2 General Information, Corporate Profile and Shareholders 3 Brief Financial Information on the Operating Results 4 Our General Manager s Assessment of 2010 and Expectations 8 Organizational Structure and Work Force 9 Our Position in the Sector FINANCIAL INFORMATION AND INDEPENDENT AUDITOR S REPORT 12 Information on the Financials 14 Financial Information as of the Reporting Period 15 Independent Auditors Report

2 Independent Auditors Compliance Opinion on Annual Report To the Board of Directors of ; We have audited the accuracy and compliance of financial information provided in the accompanying annual activity report of ( the Company ) with the audit report issued as of December 31, 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 and by the Individual Pension, Saving and Investment System Law No 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 Ziraat Hayat ve Emeklilik A.Ş. as of December 31, 2010 in accordance with the prevailing accounting principles and standards set out in the Insurance Law No: 5684 and by the Individual Pension, Saving and Investment System Law No 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 BAĞIMSIZ DENETİM VE SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş. Member of DELOITTE TOUCHE TOHMATSU LIMITED Hasan Kılıç Partner İstanbul, 21 March 2011

3 2010 Annual Report 1 Ziraat Brand for 147 years obtained certificate to operate in Life and Individual Pension branches on May 11, 2009 and started operations in the Life branch as of January 01, The Private Pension licence was registered on January 31, 2011 and the Company has started working on the other necessary requirements to operate in the Private Pension System. The Company aims at fulfilling all the insurance needs of individual and corporate customers in the branches of Life, Personal Accident and Private Pension with the trustworthy brand name Ziraat.

4 Annual Report General Information, Corporate Profile and Shareholders The founding capital of is TL 20,000,000, of which TL 10,000,000 was paid by the shareholders at the stage of foundation; the payment of the remainder TL 10,000,000, was completed on December 28, 2009 and thus, the capital has been entirely paid up. The capital and final shareholding structure of is provided below: COMPANY NAME NUMBER OF SHARES SHARE AMOUNT (TL) SHARE PERCENTAGE (%) T.C. Ziraat Bankası A.Ş. 19,992,000 19,992, Ziraat Finansal Kiralama A.Ş. 2,000 2, Ziraat Yatırım Menkul Değerler A.Ş. 2,000 2, Bileşim Alternatif Dağıtım Kanalları ve Ödeme Sistemleri A.Ş. 2,000 2, Fintek Finansal Teknoloji Hizmetleri A.Ş. 2,000 2, TOTAL 20,000,000 20,000, There are no shares held by the Chairman and members of the Executive Board, General Manager or Assistant General Managers of the Company and no change has been made to the shareholding structure from its foundation until today.

5 2010 Annual Report 3 Brief Financial Information on the Operating Results TL million Total Premium Production TL million Total Assets TL million Net Profit of the Period TL million 2010 Total Premium Production 601,770,235 Current Assets 435,258,870 Non-current Assets 1,904,169 Total Assets 437,163,039 Liabilities 368,735,667 Shareholders Equity 68,427,372 Total technical Profit 38,287,963 Investment income 24,000,379 Investment Expenses -113,561 Extraordinary Revenues and Expenses -112,143 Gross Profit of the Period 62,062,638 Net Profit of the Period 48,521,320 Our Company achieved premium generation totaling TL 601,770,235 in the Life and Accident branches in Considering the size of the premium generation for the subject branches, the Company has already secured a market share of 26.5% among the Life and Pension Companies and currently ranks first in the Life branch premium generation. Our assets currently total TL 437,163,039 as our shareholders equity is TL 68,427,372. As a result of the entire operations, net after-tax profit of the period was TL 48,521,320. Our Company s main ratios as of 2010 are as follows: % 2010 Net Profit / Shareholders Equity 70.91% Premiums / Total Assets % Shareholders Equity / Total Assets 15.65% Net Profit / Total Assets 11.10%

6 Annual Report Our General Manager s Assessment of 2010 and Expectations We want to make a difference in the forthcoming period by carrying the name of T.C. Ziraat Bankası, our principal shareholder that has proven its supremacy and quality throughout the country as Turkey s biggest bank, and giving high quality service worthy of this brand.

7 2010 Annual Report 5 We have actually broken a record by achieving premium generation and the number of policies at such a level that has never been accomplished by any other company in the life insurance sector. was incorporated on May 11, 2009 as the representative of T.C. Ziraat Bankası in the Life and Personal Accident Insurances and Individual Pension System. Following the foundation and official authorization in 2009, it started operating in the Life and Personal Accident branches at the beginning of The period when our Company was founded was a more dynamic and competitive period marked by a couple of developments including the radical transformation of the Turkish Insurance System, thorough streamlining of the legal framework along with the process of integration with the European Union, Solvency regulations having been rendered more effective and last but not least, private foreign capital capturing a substantial share in our sector. We therefore consider that our entry into the market as in this period has been particularly more important. I do believe that by joining the sector at a time when the sector undergoes transformation substantially and the concept of technical profitability and efficiency is now highlighted following decline in financial revenues, we have managed to adapt to the new dynamics of the sector with the most modern and efficient structuring by adapting our Company to the latest developments and making use of the versatility provided by our young, dynamic and new identity. On the other hand, based on an analysis of the figures indicating per capita premium generation, which is referred to as insurance density, it is observed that as per capita premium was 3,655 US Dollars in the developed countries as in 2009, this figure unfortunately realized at as low as 113 US Dollars in our country in the same period. And an analysis of the ratio of the total premium generation to the Gross Domestic Product (GDP) reveals that although the world average is 7-8% and the average in the developed countries is in the range of 8-9%, the same ratio is at a level of 1.30% in our country. Considering this fact, we may confidently comment that the national insurance sector is still at the bottom of the leader, having substantial potential in terms of premium generation. In this context, the foundation of our Company may be better understood in conjunction with acquiring a market share and even increasing it. This is because we firmly believe that the said figures never match the world s 16th biggest economy and that therefore, there is still much progress to be achieved and much work to be done at this point. We consider that the nationwide presence of our Bank, which is our principal shareholder and agency, with about 1,400 branch offices and about 23,000 employees constitute a very substantial potential and by using this potential as Ziraat Hayat ve Emeklilik, we aim at capturing a position exactly matching the magnitude of the brand, Ziraat, represented by us in all branches of our operation in the insurance sector. As a result of this potential and support from our Bank, we have already broken an actual record with a premium generation of TL million and a market share of 27.59% in the life branch in 2010 as well as with about 4.2 million insured clients served in 2010 although we have just recognized our first anniversary of operations. Thus, we were able to achieve such premium generation and the number of policies not achieved by any other company singlehandedly

8 Annual Report Our General Manager s Assessment of 2010 and Expectations in the life insurance sector so far. The company profit resulting from this generation was at a very high level, amounting to TL 62 million and thus, a ranking above the sector average in terms of shareholders equity and asset profitability has been gained. Although this generation obtained was due to the premiums produced from the credit life insurance largely, our corporate target is to increase our contribution to the national premium generation by using our agency s extensive and widespread distribution channel as well as other alternative distribution channels in group and individual life insurance, particularly in personal accident insurance, and developing simple, low premium products which may provide mass production and be extended to the masses. In this sense, we pursue an understanding which values marketing and sales techniques including innovation. In this framework, we launched a product on the occasion of November 24 Teachers Day in 2010 providing teachers an insurance coverage of TL 24,000 on payment of a premium in an amount of TL 24 in association with the date November 24, a particular occasion for the teachers, probably the first of its kind in the national insurance sector allowing the concept of giving personal accident policies as a gift and we have received highly positive reactions. Following this, we launched our product, Kazasız Yıllar, which is more extensive and would cover the entire year, under the slogan, Do Not Stay Uninsured in 2011, late in 2010 and this product currently enjoys a high popularity. Individual Pension is yet another branch of our Company. Given the national practice at present, the Individual Pension System is a system based on voluntary participation, which is designed to allow the participants to maintain their living standards or secure some of their income in their pension periods by channeling their savings into long term investment. Its primary aim is to encourage savings and provide reliable investment instruments. We consider the Individual Pension System a highly beneficial system which is quite essential in terms of its aspects supporting the present social security practices and allowing individuals to lead a retired life to better standards as well as contributions by such funds channeled into investment to the development, growth and sophistication of the national money and capital markets. We started working in April 2010 to obtain an operation license for the branch of Individual Pension. Because the Individual Pension System is such a system providing assurances to the investments of individuals, the regulatory and supervisory authority pays attention to the operation of the system and in particular, meticulously supervises proper operation of the Information Technology platforms in connection therewith. Therefore, we were able to obtain our operation license on January 24, 2011 following a long preparation period of 10 months. At present, the process of establishment of Pension Investment Funds is under way before the Capital Markets Board and we plan soon to be operating in this branch as well. On this occasion, I would like to extend my deepest appreciation to all of my valuable colleagues for their selfsacrifice rendering this venture possible; it must be noted that they have all been successfully involved in efforts for feasibility studies and establishment, organization and testing of the data processing platforms with commendable contributions to initiation of individual pension operations while, at the same time, carrying out the current operations of our Company.

9 2010 Annual Report 7 Our medium and long term target is to achieve sustainable growth and profitability. We want to make a difference in the forthcoming period by carrying the name of T.C. Ziraat Bankası, our principal shareholder which has proven its supremacy and quality throughout the country as Turkey s biggest bank, and achieving an understanding of service worthy of this brand. Our main targets for 2011 may be outlined as follows: to carry out joint works with our Group Companies in cooperation with our Bank, to maintain quality services extended to our clients, to be capable of completing our operations regarding production and claims payments fully and free of any mistakes, to develop our operational platform for both life and individual pension branches completely and to maintain our leadership in the life insurance sector. Again, our targets for this year include: preparation of infrastructure for sales at branch offices through development of our individual pension sales organization and preparation of such products, which may be competitive without compromising quality, for the purpose of acquiring a bigger share of the market. It is our medium and long term target to have access to more customers by supporting and enhancing our present range of products with innovative products and using our Company s sales organization, Bank s distribution channel and alternative distribution channels and finally, attain sustainable growth and profitability through diversification of the product types. For Ziraat Hayat ve Emeklilik, 2010 was a very busy and highly demanding year, as operations were incepted in the life branch; efforts were maintained for starting operations in the Individual Pension branch; the set up, staffing and data processing platform were developed and efforts were exerted to put the operational processes in place. But, to note it happily, all of our exhaustive efforts have been duly rewarded by our success to conclude the year as the leader of the sector thanks to a record premium generation after overcoming such an intensive process smoothly. With this opportunity, I would like to thank, first, the Chairman and members of the Executive Board and our Bank and its valuable employees, who have ensured our success by extending any support in this process, and then, my colleagues of any ranking, who could maintain the extraordinary work tempo required by the foundation period with much self-sacrifice at the cost of restricting their social life. I do hope that our success continues growing in Yours faithfully, M. Akif EROĞLU Member of the Executive Board - General Manager

10 Annual Report Organizational Structure and Work Force Under the organizational chart of our Company, the Internal Audit Department directly reports to the Executive Board and the Office of the Executive Board, Legal Consultant s Office and Internal Control and Risk Management Department directly report to the General Manager. In addition, again, there are the positions of Assistant General Managers in charge of Sales and Marketing, Technical and Operational Affairs, Financial Affairs and Support Affairs, who directly report to the General Manager. The Office of the Assistant General Manager in charge of Sales and Marketing conducts its operations through an organization comprising: Strategic Marketing and Corporate Communications Individual Sales Corporate Sales Sales via the Special Agencies, Unions and Other Banks and Regional Offices The Office of the Assistant General Manager in charge of Technical and Operational Affairs conducts its operations through an organization comprising: Actuarial and Reinsurance Production and Risk Assessment Claims Payment Operations The Office of the Assistant General Manager in charge of Financial Affairs conducts its operations through an organization comprising: Under the Financial Affairs Group Directorate Accounting and Budgeting and Reporting In addition Collection Fund Management Fund Services The Office of the Assistant General Manager in charge of Support Affairs conducts its operations through an organization comprising: Quality, Customer Services and Organization Human Resources and Training Administrative Affairs and Procurement Our Company, which started Individual Pension operations in addition to insurance operations with 17 employees at the beginning of 2010, reached a staff level of 35 by the end of the year. At present, our Company operates at its head-office located in Istanbul and no efforts have so far been undertaken to establish any regional offices or liaison offices. It has completed its operational infrastructure to provide services through the Regional Offices of T.C. Ziraat Bankası nationwide in February A large portion of our employees comprises experienced and specialized core staff representing the entire industrial spectrum. The average age of our employees, that constitutes a young, dynamic and yet experienced staff profile in the industry, is 37; 80% holds graduate degrees and 17% post-graduate and doctorate degrees in terms of education. Breakdown by gender % Educational status % Post-graduate 17% Male 63% Female 37% Graduate 80% High school 3%

11 2010 Annual Report 9 Our Position in the Sector According to the data released by the Turkish Union of Insurance and Reinsurance Companies (TSRŞB), the national insurance sector achieved growth at a rate of 13.62% compared to the previous year by generating a total premium of TL 14.1 billion in As seen in the table below, the premium generation by the Life and Pension Companies operating in the sector as of the end of December 2010, which resulted from sales of Life and Personal Accident Insurance policies, registered an increase of 20.40% at almost TL 2.3 billion as compared to the previous year. On its first anniversary of operations, our Company is in a position as the leader with a market share of 26.5% in the Life and Personal Accident Insurance products premium generation of the Life and Pension Companies. The biggest contribution to this success scored by our Company is thanks to the synergy achieved jointly with our distinguished partner, T.C. Ziraat Bankası and its subsidiaries as well as our experienced and dynamic human resources. We aim at further developing and increasing our cooperation with our Bank and subsidiaries in order to be able to achieve our targets. Our Company, which presently offers Life and Personal Accident Insurance products and will soon start operations in the Individual Pension system as well, is firmly committed to the objective of concentrating on customer satisfaction, adopting delivery of innovative, quality and rapid services and thereby increasing product diversity and penetration. In the global insurance industry, premiums totaling 4,055 US billion Dollars were generated in 2009, representing a decline of 4.77% as compared to the previous year. Gross premium generation declined by 6.36% and 3.16% in the life branch and non-life branches, respectively, totaling 2,332 US billion Dollars and 1,723 US billion Dollars, respectively. However, the real decline in the premium generation proved to be less than the nominal due to the economic crisis. The national insurance sector largely operates parallel to the developing markets. However, the real premium generation in the non-life branches declined in our country in 2008 despite the growth in the premium generation in the life branch. The developing countries and industrialized countries held shares of 13% and 87% in the global premium generation as at 2009, respectively. The share by the developing countries in the total figure steadily rise every year because in the recent years, the premium generation declines in the developed countries and there is an increase in the volume of premiums generated by the developing countries. The share by the developing countries in the total premium generation rose from 12% in 2008 to 13% in Turkey ranked 36th with a share of 0.21% in the global premium generation in In our country, which ranked 65th with US Dollars in per capita premium generation in 2008, 113 US Dollars in premiums was generated per capita in As per capita premium generation was 96.1 US Dollars in the non-life branches in 2009, this was at a level of only 16.9 US Dollars in the life branch, which is such a low level as compared to the developed countries.

12 Annual Report Our Position in the Sector MONTHS MONTHS COMPANY TOTAL PREMIUM PRODUCTION (TL) MARKET SHARE RANK TOTAL PREMIUM PRODUCTION (TL) MARKET SHARE RANK CHANGE Acıbadem Sağlık ve Hayat 10,650, % 18 11,453, % % Aegon Emeklilik ve Hayat 7,262, % 19 14,348, % % Allianz Hayat ve Emeklilik 77,745, % 7 74,851, % % American Life Hayat 66,605, % 10 60,764, % % Anadolu Hayat Emeklilik 500,047, % 1 357,610, % % AvivaSA 154,922, % 4 155,313, % % Axa Hayat 70,243, % 8 56,648, % % Halk Hayat ve Emeklilik 77,890, % 6 141,343, % % Cardif Hayat 44,610, % 13 36,751, % % Civ Hayat 13,694, % 16 25,628, % % Demir Hayat 5,457, % 20 5,046, % % Deniz Emeklilik ve Hayat 55,864, % 11 72,437, % % Ergo Emeklilik ve Hayat 23,326, % 15 26,064, % % Finans Emeklilik ve Hayat 48,782, % 12 85,491, % % Fortis Emeklilik ve Hayat 23,663, % 14 19,617, % % Garanti Emeklilik 181,095, % 3 234,159, % % Groupama Emeklilik 345,354, % 2 51,622, % % ING Emeklilik % 23 20,324, % 17 - Mapfre Genel Yasam 12,469, % 17 13,680, % % New Life Yaşam 5,095, % 21 3,036, % % Rumeli Hayat 270, % , % % Vakıf Emeklilik 68,871, % 9 92,990, % % Yapı Kredi Emeklilik 92,383, % 5 109,956, % % Ziraat Hayat ve Emeklilik % ,770, % 1 - SECTOR TOTAL 1,886,307, % 2,271,114, % 20.40%

13 2010 Annual Report 11 Financial Information and Independent Auditor s Report

14 Annual Report Information on the Financials Brief information regarding the company balance sheet in the period as of December 31, 2010 is clarified below. CURRENT ASSETS Cash and Cash Equivalent Assets Cash and Cash Equivalent Assets total TL 423,880,572, which entirely comprises bank accounts. Of this amount, TL 422,346,803 is composed of term deposit accounts, TL 1,529,363, of blocked bank accounts and TL 4,406 of sight bank accounts. Due from the Principal Operations Due from the principal operations amount to TL 128,936. Of this amount, TL 55,717 represents our premium credits from the insured and TL 73,219, our receivables from the Reinsurance Companies. Due from the Related Parties TL 3,181, which is the sum of the accounts of due from the related parties, comprises the group health insurance premiums deducted off the staff salaries in installments. Prepaid Expenses and Accrued Income The Account of Prepaid Expenses and Accrued Income amounts to TL 11,245,541, which is entirely recognized in the Account of Pre- Paid Expenses. The Account of Prepaid Expenses comprises deferred commission costs of TL 11,141,586, with the remainder being composed of pre-paid expenses such as advertising, subscription, insurance, consultancy and data processing expenses. Other Current Assets Other Current Assets amount to TL 640 and the said amount comprises the sum of work advances and advances to personnel. NON-CURRENT ASSETS Tangible Assets The net balance of the Account of Tangible Assets is TL 216,436, of which TL 115,940 comprises office furniture and fixtures, installations and other tangible assets and special costs and TL 100,496 relates to the motor vehicles. Intangible Assets The net balance of the Account of Intangible Assets is TL 255,509, which entirely relates to the software licenses. Prepaid Expenses and Accrued Income The Account of Prepaid Expenses and Accrued Income comprises pre-paid expenses such as advertising and data processing expenses and amounts to TL 1,857. Other Non-Current Assets The sum of Other Non-Current Assets is TL 1,430,367 which entirely comprises Deferred Tax Assets. SHORT TERM LIABILITIES Due from the Principal Operations The total sum of the Due from the Principal Operations is TL 27,098 and this sum entirely comprises the Liabilities from the Insurance Operations.

15 2010 Annual Report 13 Information on the Financials Due to the Related Parties Due to the related parties total TL 32,054, of which TL 2,263 arises from the account of due to the shareholders and TL 29,791, from the balance of the account of due to other related parties. Other Liabilities Other liabilities amount to TL 80,393, which are entirely recognized in the Account of Due to the Suppliers. Insurance Technical Provisions The total sum of our Short Term Technical Provisions reserved subject to the current legislation is TL 75,322,135 after deduction of the reinsurer s share. Of this amount, TL 58,258,216 comprises the Provisions for Non-Earned Premiums, TL 7,673,709, the Provisions for Life Insurance and TL 9,390,210, the Provisions for Claims and Outstanding Claims. Taxes Payable and Other Fiscal Liabilities and Provisions Thereof The total sum of Taxes Payable and Other Fiscal Liabilities is TL 4,121,238, of which TL 229,809 comprises the Taxes and Funds assessed in December 2010 and payable in January 2011, TL 59,474, Social Security Deductions payable and TL 3,831,955, Corporate Tax payable (after deduction of pre-paid taxes thereof). Provisions for Other Risks The sum of the Provisions for Other Risks is TL 416,785; TL 121,627 of the said amount comprises Insurance Transaction Taxes calculated on the rediscount income for our Savings Accounts, TL 102,679, the provisions for staff leaves and the remainder, TL 192,479, the sums calculated for our potential obligations to be paid in the next period. LONG TERM OBLIGATIONS Insurance Technical Provisions The total sum of the Long Term Technical Provisions reserved subject to the current legislation is TL 288,707,643 after deduction of the reinsurer s share. Of this amount, TL 281,947,370 comprises the provisions for the Life insurance (after deduction of the reinsurer s share) and TL 16,760,273, the Balancing Provisions (after deduction of the reinsurer s share). Provisions for Other Risks The provisions for other risks amount to TL 28,321 and this sum comprises the provisions for Severance Pays calculated for the staff of the Company. SHAREHOLDERS EQUITY Paid-in Capital The sum of the nominal capital of our Company is TL 20,000,000, which is totally paid in. Previous Years Losses Previous Years Losses amount to TL 93,948. The said amount results from the establishment expenses of our Company founded in 2009 during which no insurance operations were realized. Net Profit of the Period and Result Our company generated a Profit of the Period of TL 62,062,638 in 2010, which was its first operation year and the Net Profit of the Period realized at TL 48,521,320 after deduction of tax provisions amounting to TL 13,541,318.

16 Annual Report Financial Information as of the Reporting Period FINANCIAL INDICATORS Technical Provisions - 364,029,778 Shareholders Equity 19,906,052 68,427,372 Paid-in Capital 20,000,000 20,000,000 Total Assets 20,079, ,163,039 Premium Generation - 601,770,235 Technical Income Expense Balance - 38,287,963 Non-Operational Income Expense Balance -93,948 23,774,675 Pre-tax Profit / Loss -93,948 62,062,638

17 2010 Annual Report 15 Independent Auditors Report To Board of Directors of 1. We have audited the accompanying financial statements of ( the Company ) which comprises the balance sheet as at 31 December 2010, and the income statement, statement of changes in equity and cash flows statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. Management s Responsibility for the Financial Statements 2. Management is responsible for the preparation and fair presentation of these financial statements in accordance with 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. Auditor s Responsibility 3. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards issued in 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 Entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity s internal 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. Opinion 4. In our opinion, the accompanying financial statements give a true and fair view of the financial position of Ziraat Hayat ve Emeklilik A.Ş. as of 31 December 2010, and of its financial performance and its cash flows for the year then ended in accordance with the prevailing accounting principles and standards issued (Note 2) based on insurance laws and regulations. Other matter: 5. As the Company obtained license for insurance activities at 31 December 2009, it has been subject to the insurance regulations since 1 January Accordingly, prior period financial statements were neither audited, nor reviewed. Additional paragraph for the English translation: 6. 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 Company s 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. İstanbul, 4 March 2011 DRT BAĞIMSIZ DENETİM VE SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş. Member of DELOITTE TOUCHE TOHMATSU LIMITED Hasan Kılıç Partner

18 Annual Report Detailed Balance Sheet ASSETS Note Audited Current Period (31/12/2010) Unaudited Previous Period (31/12/2009) I- CURRENT ASSETS A- Cash and Cash Equivalents Cash Cheques Received Banks Cheques Given and Payment Orders (-) Other Cash and Cash Equivalents B- Financial Assets and Investments with Risks on Policyholders Financial Assets Available for Sale Financial Assets Held to Maturity Financial Assets Held for Trading Loans Provision for Loans (-) Investments with Risks on Policyholders Equity Shares Impairment on Financial Assets (-) - - C- Receivables From Main Operations Receivables From Insurance Operations Provision for Receivables From Insurance Operations (-) Receivables From Reinsurance Operations Provision for Receivables From Reinsurance Operations (-) Cash Deposited With Insurance & Reinsurance Companies Loans to Policyholders Provision for Loans to Policyholders (-) Receivables from Pension Operation Doubtful Receivables From Main Operations Provisions for Doubtful Receivables From Main Operations (-) D- Due from Related Parties Due from Shareholders Due from Affiliates Due from Subsidiaries Due from Entities Under Common Control Due from Personnel Due from Other Related Parties Discount on Receivables Due from Related Parties (-) Doubtful Receivables Due from Related Parties Provisions for Doubtful Receivables Due from Related Parties (-) - - E- Other Receivables Leasing Receivables Unearned Leasing Interest Income (-) Deposits and Guarantees Given Other Receivables Discount on Other Receivables (-) Other Doubtful Receivables Provisions for Other Doubtful Receivables (-) - - F- Prepaid Expenses and Income Accruals Prepaid Expenses Accrued Interest and Rent Income Income Accruals - - G- Other Current Assets Inventories Prepaid Taxes and Funds Deferred Tax Assets Business Advances Advances Given to Personnel Stock Count Differences Other Current Assets Provision for Other Current Assets (-) - - I- Total Current Assets The accompanying notes form an integral part of these financial statements. TL

19 2010 Annual Report 17 Detailed Balance Sheet ASSETS Note Audited Current Period (31/12/2010) Unaudited Previous Period (31/12/2009) II- NON CURRENT ASSETS A- Receivables From Main Operations Receivables From Insurance Operations Provision for Receivables From Insurance Operations (-) Receivables From Reinsurance Operations Provision for Receivables From Reinsurance Operations (-) Cash Deposited with Insurance & Reinsurance Companies Loans to Policyholders Provision for Loans to Policyholders (-) Receivables From Pension Operations Doubtful Receivables from Main Operations Provision for Doubtful Receivables from Main Operations - - B- Due from Related Parties Due from Shareholders Due from Affiliates Due from Subsidiaries Due from Entities Under Common Control Due from Personnel Due from Other Related Parties Discount on Receivables Due from Related Parties (-) Doubtful Receivables Due from Related Parties Provisions for Doubtful Receivables Due from Related Parties (-) - - C- Other Receivables Leasing Receivables Unearned Leasing Interest Income (-) Deposits and Guarantees Given Other Receivables Discount on Other Receivables (-) Other Doubtful Receivables Provisions for Other Doubtful Receivables (-) - - D- Financial Assets Long-term Investments Affiliates Capital Commitments to Affiliates (-) Subsidiaries Capital Commitments to Subsidiaries (-) Entities Under Common Control Capital Commitments to Entities Under Common Control (-) Financial Assets and Investments with Risks on Policyholders Other Financial Assets Impairment on Financial Assets (-) - - E- Tangible Fixed Assets Investment Properties Impairment on Investment Properties (-) Owner Occupied Property Machinery and Equipments Furnitures and Fixtures Vehicles Other Tangible Assets (Including Leasehold Improvements) Leased Tangible Fixed Assets Accumulated Depreciation (-) 6 (47.347) (9.735) 10- Advances Paid for Tangible Fixed Assets (Including Construction In Progresses) - - F- Intangible Fixed Assets Rights Goodwill Establishment Costs Research and Development Expenses Other Intangible Assets Accumulated Amortizations (-) 8 (75.949) - 7- Advances Regarding Intangible Assets - - G- Prepaid Expenses and Income Accruals Prepaid Expenses Income Accruals Other Prepaid Expenses and Income Accruals - - H- Other Non-current Assets Cash Foreign Currency Accounts Foreign Currency Accounts Inventories Prepaid Taxes and Funds Deferred Tax Assets Other Non-current Assets Other Non-current Assets Amortization (-) Provision for Other Non-current Assets (-) - - II- Total Non-current Assets Total Assets (I+II) The accompanying notes form an integral part of these financial statements. TL

20 Annual Report Detailed Balance Sheet LIABILITIES Note Audited Current Period (31/12/2010) Unaudited Previous Period (31/12/2009) III- SHORT TERM LIABILITIES A- Borrowings Borrowings from Financial Institutions Finance Lease Payables Deferred Finance Lease Costs (-) Current Portion of Long Term Borrowings Principal, Installments and Interests on Issued Bills (Bonds) Other Financial Instruments Issued In Excess of Par of Financial Instruments (-) Other Financial Borrowings (Liabilities) - - B- Payables From Main Operations Payables From Insurance Operations Payables From Reinsurance Operations Cash Deposited by Insurance & Reinsurance Companies Payables From Pension Operations Payables From Other Operations Discount on Other Payables From Main Operations, Notes Payable (-) - - C- Due to Related Parties Due to Shareholders Due to Affiliates Due to Subsidiaries Due to Entities Under Common Control Due to Personnel Due to Other Related Parties D- Other Payables Guarantees and Deposits Received Other Payables Discount on Other Payables (-) (11) - E- Insurance Technical Reserves Unearned Premiums Reserve - Net Unexpired Risk Reserves - Net Life Mathematical Reserves - Net Outstanding Claims Reserve - Net Provision for Bonus and Discounts - Net Reserve for Policies Investment Risk, Belonging to Life Insurance Policyholders - Net Other Technical Reserves - Net - - F- Taxes and Other Liabilities and Provisions Taxes and Dues Payable Social Security Premiums Payable Overdue, Deferred or By Installment Taxes and Other Liabilities Other Taxes and Liabilities Corporate Tax Provision on Period Profit Advance Taxes and Other Liabilities on Period Profit (-) 35 ( ) - 7- Provisions for Other Taxes and Liabilities - - G- Provisions for Other Risks Provision for Employment Termination Benefits Pension Fund Deficit Provision Provisions for Costs H- Deferred Income and Expense Accruals Deferred Income Expense Accruals Other Deferred Income and Expense Accruals - - I- Other Short Term Liabilities Deferred Tax Liability Inventory Count Differences Other Short Term Liabilities III - Total Short Term Liabilities TL The accompanying notes form an integral part of these financial statements.

21 2010 Annual Report 19 Detailed Balance Sheet LIABILITIES Note Audited Current Period (31/12/2010) Unaudited Previous Period (31/12/2009) IV- LONG TERM LIABILITIES A- Borrowings Borrowings From Financial Institutions Finance Lease Payables Deferred Finance Lease Costs (-) Bonds Issued Other Financial Instruments Issued In Excess of Par of Financial Instruments (-) Other Borrowings (Financial Liabilities) - - B- Payables From Main Operations Payables From Insurance Operations Payables From Reinsurance Operations Cash Deposited by Insurance & Reinsurance Companies Payables From Pension Operations Payables From Other Operations Discount on Other Payables From Main Operations (-) - - C- Due to Related Parties Due to Shareholders Due to Affiliates Due to Subsidiaries Due to Entities Under Common Control Due to Personnel Due to Other Related Parties - - D- Other Payables Guarantees and Deposits Received Other Payables Discount on Other Payables (-) - - E- Insurance Technical Reserves Unearned Premiums Reserve - Net Unexpired Risk Reserves - Net Life Mathematical Reserves - Net Outstanding Claims Reserve - Net Provision for Bonus and Discounts - Net Reserve for Policies Investment Risk, Belonging to Life Insurance Policyholders - Net Other Technical Reserves - Net F- Other Liabilities and Provisions Other Liabilities Overdue, Deferred or By Installment Other Liabilities Other Liabilities and Expense Accruals - - G- Provisions for Other Risks Provision for Employment Termination Benefits Provisions for Employee Pension Fund Deficits - - H- Deferred Income and Expense Accruals Deferred Income Expense Accruals Other Deferred Income and Expense Accruals - - I- Other Long Term Liabilities Deferred Tax Liability Other Long Term Liabilities - - IV- Total Long Term Liabilities TL The accompanying notes form an integral part of these financial statements.

22 Annual Report Detailed Balance Sheet TL SHAREHOLDERS EQUITY Note Audited Current Period Unaudited Previous Period V- SHAREHOLDERS EQUITY (31/12/2010) (31/12/2009) A- Paid in Capital (Nominal) Capital Unpaid Capital (-) Positive Inflation Adjustment on Capital Negative Inflation Adjustment on Capital (-) - - B- Capital Reserves Equity Share Premiums Cancellation Profits of Equity Shares Gain on Sale of Assets to be Transferred to Capital Translation Reserves Other Capital Reserves - - C- Profit Reserves Legal Reserves Statutory Reserves Extraordinary Reserves Special Funds (Reserves) Revaluation of Financial Assets Other Profit Reserves - - D- Previous Years Profits Previous Years Profits - - E- Previous Years Losses (-) (93.948) - 1- Previous Years Losses (93.948) - F- Net Profit of the Period (93.948) 1- Net Profit of the Period Net Loss of the Period - (93.948) Total Shareholders Equity Total Liabilities and Shareholders Equity (III+IV+V) The accompanying notes form an integral part of these financial statements.

23 2010 Annual Report 21 Detailed Income Statement Note Audited Current Period 01/01/ /12/2010 TL Unaudited Previous Period 01/01/ /12/2009 I- TECHNICAL DIVISION A- Non-Life Technical Income Earned Premiums (Net of Reinsurer Share) Premiums (Net of Reinsurer Share) Gross Premiums (+) Ceded Premiums to Reinsurers (-) Change in Unearned Premiums Reserve (Net of Reinsurers Shares and Reserves Carried Forward) (+/-) (61.086) Unearned Premiums Reserve (-) (61.086) Reinsurance Share of Unearned Premiums Reserve (+) Changes in Unexpired Risks Reserve (Net of Reinsurer Share and Reserves Carried Forward)(+/-) Unexpired Risks Reserve (-) Reinsurance Share of Unexpired Risks Reserve (+) Investment Income Transferred from Non-Technical Division Other Technical Income (Net of Reinsurer Share) Gross Other Technical Income (+) Reinsurance Share of Other Technical Income (-) - - B- Non-Life Technical Expenses (-) (27.167) - 1- Total Claims (Net of Reinsurer Share) Claims Paid (Net of Reinsurer Share) Gross Claims Paid (-) Reinsurance Share of Claims Paid (+) Changes in Outstanding Claims Reserve (Net of Reinsurer Share and Reserves Carried Forward) (+/-) Outstanding Claims Reserve (-) Reinsurance Share of Outstanding Claims Reserve (+) Changes in Bonus and Discount Reserve (Net of Reinsurer Share and Reserves Carried Forward) (+/-) Bonus and Discount Reserve (-) Reinsurance Share of Bonus and Discount Reserve (+) Changes in Other Technical Reserves (Net of Reinsurer Share and Reserves Carried Forward) (+/-) (781) - 4- Operating Expenses (-) 32 (26.386) - C- Non Life Technical Profit/(Loss) (A-B) (22.548) - D- Life Technical Income Earned Premiums (Net of Reinsurer Share) Premiums (Net of Reinsurer Share) Gross Premiums (+) Ceded Premiums to Reinsurers (-) 10.2 ( ) Change in Unearned Premiums Reserve (Net of Reinsurers Shares and Reserves Carried Forward) (+/-) ( ) Unearned Premiums Reserve (-) ( ) Reinsurance Share of Unearned Premiums Reserve (+) Changes in Unexpired Risks Reserve (Net of Reinsurer Share and Reserves Carried Forward)(+/-) Unexpired Risks Reserve (-) Reinsurance Share of Unexpired Risks Reserve (+) Life Branch Investment Income Accrued (Unrealized) Income from Investments Other Technical Income (Net of Reinsurer Share) - - E- Life Technical Expense ( ) - 1- Total Claims (Net of Reinsurer Share) ( ) Claims Paid (Net of Reinsurer Share) ( ) Gross Claims Paid (-) ( ) Reinsurance Share of Claims Paid (+) Changes in Outstanding Claims Reserve (Net of Reinsurer Share and Reserves Carried Forward) (+/-) ( ) Outstanding Claims Reserve (-) ( ) Reinsurance Share of Outstanding Claims Reserve (+) Changes in Bonus and Discount Reserve (Net of Reinsurer Share and Reserves Carried Forward) (+/-) Bonus and Discount Reserve (-) Reinsurance Share of Bonus and Discount Reserve (+) Changes in Life Mathematical Reserves (Net of Reinsurer Share and Reserves Carried Forward) (+/-) ( ) Life Mathematical Reserves ( ) Reinsurance Share of Life Mathematical Reserves Changes in Technical Reserves for Investments with Risks on Policyholders (Net of Reinsurer Share and Reserves - - Carried Forward) (+/-) Technical Reserves for Investments with Risks on Policyholders (-) Reinsurance Share of Technical Reserves for Investments with Risks on Policyholders (-) Changes in Other Technical Reserves (Net of Reinsurer Share and Reserves Carried Forward) (+/-) ( ) - 6- Operating Expenses (-) 32 ( ) - 7- Investment Expenses (-) Unrealized Losses from Investments (-) Investment Income Transferred to Non Technical Divisions (-) - - F- Life Technical Profit/(Loss) (D-E) G- Private Pension Technical Income Fund Management Fee Management Fee Deduction Initial Contribution Fee Management Fee In Case Of Temporary Suspension Witholding tax Increase in Market Value of Capital Commitment Advances Other Technical Income - - H- Private Pension Technical Expenses Fund Management Expenses (-) Decrease in Market Value of Capital Commitment Advances (-) Operating Expenses (-) Other Technical Expenses (-) - - I- Private Pension Technical Profit/(Loss) (G-H) - - The accompanying notes form an integral part of these financial statements.

24 Annual Report Detailed Income Statement Note Audited Current Period 01/01/ /12/2010 Unaudited Previous Period 01/01/ /12/2009 II- NON TECHNICAL DIVISION C- Non Life Technical Profit/(Loss) (22.548) - F- Life Technical Profit/(Loss) I- Private Pension Technical Profit/(Loss) - - J- Total Technical Profit/(Loss) (C+F+I) K- Investment Income Income From Financial Investment Income from Sales of Financial Investments Revaluation of Financial Investments Foreign Exchange Gains Dividend Income from Affiliates Income form Subsidiaries and Entities Under Common Control Income Received from Land and Building Income from Derivatives Other Investments Investment Income Transferred from Life Technical Division - - L- Investment Expenses (-) ( ) (9.735) 1- Investment Management Expenses (Including Interest) (-) Valuation Allowance of Investments (-) Losses On Sales of Investments (-) Investment Income Transferred to Life Technical Division (-) Losses from Derivatives (-) Foreign Exchange Losses (-) Depreciation Charges (-) 6.8 ( ) (9.735) 8- Other Investment Expenses (-) - - M- Other Income and Expenses (+/-) ( ) ( ) 1- Provisions (+/-) 22, 23.1 ( ) (9.574) 2- Discounts (+/-) (4.309) - 3- Specialty Insurances (+/-) Inflation Adjustment (+/-) Deferred Tax Asset (+/-) Deferred Tax Liability Accounts (+/-) Other Income and Revenues Other Expenses and Losses (-) ( ) ( ) 9- Prior Period Income Prior Period Losses (-) - - N- Net Profit/(Loss) (93.948) 1- Profit/(Loss) Before Tax (93.948) 2- Corporate Tax Charge (-) 35 ( ) - 3- Net Profit (Loss) Inflation Adjustment Account (+/-) - - TL The accompanying notes form an integral part of these financial statements.