Erste Bank JPMorgan Merrill Lynch International

policyholders. These reserves are formed based on the application of certain percentage rates to
overdue premium receivables.
Underwriting provisions of unit-linked and index-linked life insurance
Underwriting provisions of unit- and index-linked life insurance represent obligations to policyholders
that are linked to the performance and income of the associated investments. The valuation of
these provisions corresponds to the valuation of the investments of unit- and index-linked life
insurance, and is based on the fair value of the investment fund or index serving as a reference value.
Reserve for pensions and similar obligations
Pension obligations
Pension obligations are based on individual contractual obligations and collective agreements.
The obligations are defined benefit obligations uncovered by plan assets.
These obligations are recognised in accordance with IAS 19, by determining the present value of
the defined benefit obligation (DBO). Calculation of the DBO is performed using the projected unit
credit method. In this method, future payments, calculated based on realistic assumptions, are
collected linearly over the period in which the beneficiary acquires these claims. Actuarial reports,
which are used to calculate the necessary reserve amount for each balance sheet reporting date, are
available for 31 December 2006 and 31 December 2007.
Any difference between the reserve amount which is calculated in advance based on assumptions
and the value which actually occurs (“actuarial gain/loss”) is not recognised as part of the reserve
while it remains within 10% of the actual value. When the 10% limit is exceeded, the excess amount
which falls outside the limit is recognised, distributed over the average remaining working lives of all
employees (“corridor method”).
The calculations for 31 December 2007 and 31 December 2006 are based on the following
assumptions:
2007 2006
Interest rate . . . . . . . . . . . . . . . . . . . 5.0% 4.5%
Pension and salary increases . . . . . . 3.0% 2.5%
Labour turnover rate . . . . . . . . . . . . . Age-dependent 0% - 7% Age-dependent 0% - 7%
Retirement age, Woman . . . . . . . . . . 62+ transitional arrangement 62+ transitional arrangement
Retirement age, Men. . . . . . . . . . . . . 62+ transitional arrangement 62+ transitional arrangement
Life expectancy . . . . . . . . . . . . . . . . . according to AVÖ 1999-P for
employees
according to AVÖ 1999-P for
employees
A portion of the direct pension obligations are administered as an occupational group insurance
plan following conclusion of an insurance contract in accordance with § 18 f to 18 j VAG.
Severance allowance
Wiener Städtische is required according to the law, supplemented by collective agreements, to
make a severance benefit payment to all employees in Austria whose contracts are terminated by their
employer or who begin retirement, and whose employment started before 1 January 2003. The size of
this payment depends on the number of years of service and earnings at the time employment ends,
and is equal to between two and 18 months’ earnings. A reserve has been set up for this obligation.
The reserve is calculated using the projected unit credit method. Under this method, the sum of
the present values of future payments is calculated up to the point in time when the claims reach their
highest value (to a maximum of 25 years). The calculation for the balance sheet reporting date in
question is based on an actuarial report.
Any difference between the reserve amount which is calculated in advance based on assumptions
and the value which actually occurs (“actuarial gain/loss”) is not recognised as part of the reserve
while it remains within 10% of the actual value. When the 10% limit is exceeded, the excess amount
which falls outside the limit is recognised, distributed over the average remaining working lives of all
employees (“corridor method”).
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