Turkish Pension & Life Insurance: A Dual Story of Defense and Growth

The sector stands out with its long-term growth potential and defensive balance sheet structure. The Turkish pension and life insurance sector has demonstrated a strong growth trend in recent years, reaching total assets equivalent to around 3.3% of GDP and becoming an important part of the financial system. Supported by structural transformation, regulatory backing, and favorable demographics, the sector offers both a defensive and growth-oriented investment story. Key drivers behind this growth include increasing state-backed incentives, substantial room for expansion due to low penetration rates, and improving financial literacy.

Strong growth in pension funds with additional upside potential from the Complementary Pension Scheme (TES). In 2024, total assets under management (AUM) in private pension funds grew by 62% y/y, while nominal growth since the beginning of 2025 reached 51% (18% in real terms). The favorable macroeconomic backdrop and regulatory support are expected to sustain this momentum. The implementation of the TES, planned to be introduced as of 2Q26, is expected to significantly boost both the number of participants and total fund size. We believe that this structure, which combines contributions from employees, employers, and the state, could increase fund inflows and serve as a catalyst for the sector. However, while the system represents a vital structural reform for Turkey, its implementation may face significant challenges under the prevailing economic conditions.

Life insurance continues to grow despite a high interest rate environment. Despite elevated TL interest rates, life insurance premium production grew by 76% y/y in 2024, while cumulative growth in the first eight months of 2025 reached 79% y/y, implying a real growth rate of around 35%. We expect the segment’s solid performance to continue into late 2025 and 2026, supported by potential rate cuts. In particular, the contribution of credit-linked life insurance products and a potential easing of macroprudential limits on credit growth could serve as additional long-term growth catalysts for the segment. However, under the current tight monetary policy environment, any relaxation of credit growth limits appears challenging, suggesting that the realization of this upside potential may be gradual.

Strong profitability signals high dividend potential. Both players exhibit robust ROE well above inflation and maintain strong capital buffers, supporting sustainable and high dividend yields. Anadolu Hayat and AGESA’s solvency ratios stand well above the 135% regulatory threshold required for dividend distribution, at 313% and 198% respectively as of end-2024. We project ROE of 51% for Anadolu Hayat and 72% for AGESA in 2025, implying potential high dividend yields of 6.5% and 5.7% for 2026, respectively.

Catalysts: Policy rate cuts supporting the life insurance segment, the structural growth potential stemming from the implementation of TES, and the positive impact of IFRS transition on technical profitability in the pension segment. Risks: Possible delays in the implementation of TES, volatility in fund returns.

We initiate coverage on ANHYT and AGESA with an Outperform rating. Based on our Dividend Discount Model valuation, we set a target price of TRY 150.94 per share for Anadolu Hayat and TRY 294.72 per share for AGESA, implying upside potentials of 63% and 50%, respectively. According to our estimates, Anadolu Hayat trades at 3.3x P/BV and 7.7x P/E for 2025, 2.3x P/BV and 5.0x P/E for 2026. AGESA trades at 3.8x P/BV and 7.0x P/E for 2025, 2.4x P/BV and 4.7x P/E for 2026.