Aksigorta : 2022 Year End Earnings Release Commentary

14 February 2023

AKSIGORTA GWP REACHED 4,996m TL WITH 99% YoY GROWTH IN THE FOURTH QUARTER OF 2022

2022 FOURTH QUARTER PERFORMANCE SUMMARY

Aksigorta reported gross written premiums (GWP) of 4,996m TL and net profit of 274m TL in fourth quarter of 2022 compared to gross written premiums of 2,516m TL and net loss of 64m TL in fourth quarter of 2021. These figures represent 99% YoY growth in GWP, and 531% YoY increase in net profit in the fourth quarter of 2022.

• Highlights of the fourth quarter of 2022 GWP growth:

1. Strong growth of 205% in MOD (casco) insurance - pricing supported by use of artificial intelligence technology

1. Strong growth of 106% in non-motor - home package, liability, corporate fire, and business fire insurance are main drivers

1. Focus on non-motor products especially in bank and corporate channels

o Aksigorta market share decreased by 1.5pp YoY and reached 6.9% as of Dec.22. Market share loss is mainly driven by motor and health products, whereas non-motor market share was maintained compared to the same period of the previous year

GWP
(m TL)	1Q21	1Q22	YoY	2Q21	2Q22	YoY	3Q21	3Q22	YoY	4Q21	4Q22	YoY	2021	2022	YoY
MTPL	488	625	28%	426	850	100%	514	728	42%	675	719	6%	2.103	2.922	39%
MOD	369	508	37%	274	780	184%	332	1.080	225%	455	1.389	205%	1.430	3.757	163%
Non-Motor	582	1.129	94%	616	1.166	89%	538	1.042	94%	1.186	2.440	106%	2.922	5.777	98%
Health	138	220	59%	106	231	118%	87	209	140%	200	448	124%	531	1.108	108%
Total	1.578	2.482	57%	1.422	3.027	113%	1.471	3.059	108%	2.516	4.996	99%	6.988	13.563	94%

• As a result of the depreciation in TL and the increase in the minimum wage MOD claim cost (spare part cost and labor expense) increased, leading to technical loss which arises from the portfolio that is already priced (in-force portfolio) in the first three quarters of 2022. The technical profit of the new business portfolio written in 2022 reached a level which compensates for the losses of the in-force portfolio in the third quarter and MOD technical loss turned into profit in the fourth quarter of 2022

• In the actuarial valuation report on the risky drivers' pool ultimate loss ratio estimation prepared as of the third quarter of 2022 and published by PwC in December ultimate loss ratio of the traffic pool was revised upwards for all accident years

• Increase in medium and large size claims in non-motor products

• Total underwriting result (UWR) is positive with 463 million TL YoY increase reaching to 71 million TL in the fourth quarter of 2022

• The combined ratio improved by 50pp YoY in the fourth quarter of 2022 and resulted as 105%. The decrease in the combined ratio comes entirely from the loss ratio which decreased to 83% in the fourth quarter of 2022

• Net financial income, including FX gain/loss and financial expenses, decreased by 19% compared to the fourth quarter of 2021 and realized as 339 million TL. In 2022 137 million TL financial income was recorded from TL tax advantage funds, generating 37 million TL tax shield.

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Financial Highlights
(m TL)	Restated 1Q21	1Q22	YoY	Restated 2Q21	2Q22	YoY	Restated 3Q21	3Q22	YoY	4Q21	4Q22	YoY	2021	2022	YoY
GWP	1.578	2.482	57%	1.422	3.027	113%	1.471	3.059	108%	2.516	4.996	99%	6.988	13.563	94%
UWR	22	-490	n/a	62	-498	n/a	-9	-298	n/a	-393	71	118%	-319	-1.216	-282%
Expenses	-66	-101	-52%	-68	-103	-52%	-65	-127	-95%	-72	-152	-113%	-271	-484	-79%
Net Financial Income	147	274	86%	135	324	139%	162	468	189%	417	339	-19%	861	1.406	63%
Net Profit	92	-254	-377%	95	-192	-303%	67	51	-24%	-64	274	531%	189	-121	-164%
Combined Ratio	106%	164%	+58pp	101%	156%	+55pp	109%	132%	+23pp	155%	105%	-50pp	118%	135%	+17pp

• In the fourth quarter 2022, Aksigorta AuM increased by 90% YoY and reached 7.6 billion TL. Thanks to successful fund management, the financial annualized return yield (interest + FX) increased to 25% in the fourth quarter of 2022.
• With 1.0 billion TL capital increase and capital adequacy focused actions, the year-end capital adequacy ratio realized as 103% in 2022.

Prospects

We feel the deep sadness for the earthquakes that took place in Kahramanmaraş and affected approximately 12 provinces. We wish God's mercy on those who lost their lives and a speedy recovery to the injured ones. As always, we stand by our people in every way, both materially and morally, in this difficult period as Aksigorta. We would like to point out that we have the financial power to recover the claims of our policyholders. We foresee that with our excess of loss reinsurance agreement covering all catastrophic risks, including earthquakes and equalization reserve in our financials booked to recover the catastrophic risks such as flood and earthquake etc. could compensate the claims of the earthquake incurred and we do not see any negative impact on our equity and balance sheet profitability in 2023.

Topline growth will be maintained via:

• Contribution of new agencies; in the last 5 years 1.612 new agencies are added to our agency network which make 34% of total agency GWP in 2022
• # of agencies exceeded 3.600 in 2022
• Increase in bank channel penetration with the complementary health product
• Following corporate business potential closely
• Telcosurance partnership with Vodafone to sell insurance products
• IOT partnership with Fiat Connect to sell insurance products bundled with auto sales
• Economic MOD product suitable for economic conditions

Combined ratio will be kept below 100% via:

• Enhanced risk management policy and profitable insurance portfolio
• Data analytics capabilities used in pricing and underwriting
• Usage of robotic process automation (currently 160 processes are automated corresponding to 5,9m transactions and 200+ FTE in Jan.22-Dec.22 period) leading to operational efficiency & saving
• New technologies applied in customers' claim experiences
• New technologies such as AI, ML used in pricing of motor products
• New collaborations in the Digital Channel
• New products in the bank channel

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