Anadolu Sigorta OUTPERFORM. 08 April Leading the market with solid premium growth. *Upside Potential 71% Equity / Small Cap. / Insurance.

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1 Equity / Small Cap. / Insurance 08 April 2009 Bloomberg: ANSGR TI Reuters: ANSGR IS Leading the market with solid premium growth Turkish Association of Insurance and Reinsurance Companies (TSRSB) disclosed gross premium generation figures as of Feb 09. Accordingly, gross premium generation was down by a nominal 2.28% in the first two months of the year. When adjusted for s contribution, the overall market is down by 4.12% YoY. Breakdown of the premiums has changed in favour of fire and health branches while the automotive industry related accident branch have lost some market share owing to the lacklustre auto sales compared to a year ago., on the other hand, significantly outperformed the sector with a solid 14.46% premium growth driven by and health branches in the respective period and gained the market leader position in the sector. In a nutshell, we welcome the insurers outperformance in the premium generation. However, keep in mind that increasing premiums especially in the branch may not transpire into profitability. The insurer is trading at historically low 12-month trailing multiples. We calculate 0.44x P/BV and 2.02x P/E multiples after adjusting for its 20% Anadolu Hayat stake. We reiterate our OUTPERFORM rating with a 12-month target price of TRY1.60 on, which still offers a hefty 71% upside potential. Breakdown of Gross Premiums, Overall Sector Company Update OUTPERFORM *Upside Potential 71% Stock Data TRY US$ Price at 08 Apr Month Target Price Mcap (mn) Float Mcap (mn) No. of Shares Outstanding 350 mn Free Float (%) Avg.Daily Volume (3M, mn) Market Data TRY ISE ,654 US$ Spot Rate US$ 12-Month Forw ard Price Performance (%) 1 Mn 3 Mn 12 Mn TRY US$ Relative to ISE Price / Relative Price TRY Re lative % ANSGR Relative to ISE Week Range (Close TRY) % *Excludes dividend yield 30% 26% Kutlug Doganay kdoganay@isyatirim.com.tr ANSGR (TLmn) 2007A 2008A YoY 2009E 2010E Market Share (non-life) 11,4% 12,4% -1,0pps 11,3% 11,5% Gross Premiums ,6% Net Profit 54,2 117,7 117,1% 93,0 101,0 Combined Ratio 102% 100% -1,2pps 101% 103% Please refer to important disclaimer at the end of this report. 1

2 Premium Generation in terms of branches, Overall Industry (TLmn) 11.7% 2.5% 364,6 326,3 321,0 329,2 559,0-14.5% 478,1 4.5% -7.0% 346,0 361,6 348,5 324,2 Average premiums per policy in the sector has increased in the fire and health branches significantly while the accident branch, which is widely composed of MOD policies making up c25% of the premiums generated, shrank owing to the fierce competition in the market. Average Premiums per Policy, Overall Industry (TL) will definitely be a tough year for the insurance sector and first two months of the year lack momentum in premium generation compared to that of 4Q08, according to the sector specialists. The recently announced temporary tax cuts in the automotive industry is the unique catalyst for the insurance sector. However, since those incentives are of temporary nature, the premium generation will again be deprived of a new driver. We also know that the MOD branch, which makes up some c25% of the non-life premiums, will further lack profitability owing to some 15% surge in claims after the inception of the new traffic accident reporting back in 2Q08. 2

3 generated TL216mn gross premiums in the first two months of the year. The insurer gained the market leader position in gross premium generation as of Feb 09 with 11.62% share in non-life segment. has solidly improved its total premiums by 14.46% YoY which is quite encouraging reading compared to the 2.28% contraction in the sector. Breakdown of the premiums in terms of branches has drastically changed with respect to the same period a year ago. The accident branch has lost some share while the and health branches are the biggest gainers. Breakdown of Gross Premiums, 19% He alth 22% 21% 35% 25% Benefiting from the price liberalisation in branch. Compared to the same period a year ago, has significantly improved its exposure to the and health branches while the accident branch has retreated more abruptly with respect to the sector figures. However, robust premium generation in the aforementioned branches does not translate into profitability. Recall that, the insurer registered -18.2% and 5.3% technical profit ratio in and health branches, respectively last year. Premium Generation in terms of branches, (TLmn) 67,3-17.4% 34,2 14.0% 38,9 76.6% 25,6 45,2 55,6 35,4 31.1% 46,4 26,1 13.7% 29,7 3

4 Given the tough market conditions, seems to have started to refocus premium growth and shifted back to the competitive pricing in key branches i.e. accident and fire branches. We have also confirmed with the insurer that competitive pricing should not be read as irrational pricing, and profit maximisation is still the major concern. Recall that has shifted its focus to profitability rather than growth or market share gain among fierce competition back in Average Premiums per Policy, (TL) In a nutshell, we welcome the insurers outperformance in the premium generation. However, keep in mind that increasing premiums especially in the branch may not transpire into profitability. The insurer is trading at historically low 12-month trailing multiples. We calculate 0.44x P/BV and 2.02x P/E multiples after adjusting for its 20% Anadolu Hayat stake. We reiterate our OUTPERFORM rating with a 12-month target price of TRY1.60 on, which still offers a hefty 71% upside potential. Trailing Multiples, Adjusted for 20% Anadolu Hayat Stake P/E 18,0 P/BV 1,8 16,0 1,6 14,0 1,4 12,0 1,2 10,0 1,0 8,0 0,8 6,0 0,6 4,0 2,0 12-month Trailing Adj. P/E 12-month Trailing Adj. P/BV 0,4 0,2 0,0 Mar-06 Jul-06 Nov-06 Mar-07 Jul-07 Nov-07 Mar-08 Jul-08 Nov-08 Mar-09 0,0 Source: Reuters, Is Investment 4

5 This report has been prepared by İş Yatırım Menkul Değerler A.Ş. (İş Investment) solely for the information of clients of İş Investment. Opinions and estimates contained in this material are not under the scope of investment advisory services. Investment advisory services are given according to the investment advisory contract, signed between the intermediary institutions, portfolio management companies, investment banks and the clients. Opinions and recommendations contained in this report reflect the personal views of the analysts who supplied them. The investments discussed or recommended in this report may involve significant risk, may be illiquid and may not be suitable for all investors. Investors must make their decisions based on their specific investment objectives and financial positions and with the assistance of independent advisors, as they believe necessary. The information presented in this report has been obtained from public institutions, such as Istanbul Stock Exchange (ISE), Capital Market Board of Turkey (CMB), Republic of Turkey, Prime Ministry State Institute of Statistics (SIS), Central Bank of the Republic of Turkey (CBT); various media institutions, and other sources believed to be reliable but no independent verification has been made, nor is its accuracy or completeness guaranteed. All information in these pages remains the property of İş Investment and as such may not be disseminated, copied, altered or changed in any way, nor may this information be printed for distribution purposes or forwarded as electronic attachments without the prior written permission of İş Investment. ( This research report can also be accessed by subscribers of Capital IQ, a division of Standard & Poor's. For more information, please visit Capital IQ's web site at 5