FOR IMMEDIATE RELEASE

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Mahesh Mistry Jim Peavy

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A.M. Best Revises Outlooks to Negative for Milli Reasurans Turk Anonim Sirketi

LONDON, 24 June 2016—A.M. Best has revised the outlooks to negative from stable and affirmed the

financial strength rating of B+ (Good) and the issuer credit rating of “bbb-” of Milli Reasurans Turk Anonim

Sirketi (Milli Re) (Turkey).

The revised outlooks reflect concern regarding Milli Re’s deteriorating technical performance and

marginal consolidated risk-adjusted capitalisation.

The ratings continue to reflect Milli Re’s strong business profile in the Turkish market and track record of

solid operating performance.

Milli Re’s consolidated technical performance has been poor over the past five years (2011-2015),

evidenced by an average combined ratio of 105.9%. Milli Re continues to address underperformance emanating

from its standalone reinsurance operations, however, profitability remains impacted by run-off accounts and the

persisting competitive conditions in the company’s core market of Turkey. The underwriting performance of Milli

Re’s direct insurance subsidiary, Anadolu Anonim Turk Sigorta Sirketi (Anadolu), has also previously aided to

strengthen Milli Re’s consolidated technical results. However, following underperformance from Anadolu’s

motor portfolio in 2015, driven principally by regulatory and legal changes resulting in reserve strengthening, the

subsidiary’s technical results have also fallen to a loss position. Partially offsetting the deteriorating technical

results is Milli Re’s track record of strong operating performance, with a return on capital and surplus of 18.3%

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reported in 2015 and 14.4% in 2014.

Milli Re’s consolidated risk-adjusted capitalisation remained at a pressured level during 2015. Despite

capital and surplus growing by 26.4% during the year, this was fully offset by significant growth in net premium

and reserve risks. Over the medium term, A.M. Best expects capital adequacy to be supported by robust internal

capital generation and controlled underwriting growth. However, A.M. Best notes that capital requirements

continue to be driven in part by the operations of Anadolu, with excessive growth likely to drive further negative

pressure on Milli Re’s consolidated capital adequacy.

Milli Re has a strong business profile in its domestic market, operating as the only Turkish-domiciled

reinsurer. In addition, Milli Re benefits from its majority-owned insurance subsidiary, Anadolu, which is a leader

in the direct insurance market of Turkey. Partially offsetting Milli Re’s profile is the increase in foreign capital

that has entered the Turkish insurance segment in recent years, leading to a number of local insurers becoming

internationally owned. Despite the increase in foreign ownership resulting in some lost business for Milli Re, the

company has maintained its domestic market share and has gradually grown its international operations.

This press release relates to rating(s) that have been published on A.M. Best’s website. For all

rating information relating to the release and pertinent disclosures, including details of the office

responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s

Recent Rating Activity web page.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For

more information, visit www.ambest.com.

Copyright © 2016 by A.M. Best Rating Services, Inc. ALL RIGHTS RESERVED.

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