Erste Bank JPMorgan Merrill Lynch International

The following table shows Vienna Insurance Group real estate investments as of 31 December
2007 and 31 December 2006, broken down by location and type of use of the respective properties:
Use of Property
31.12.2007 31.12.2006
% of the real
estate portfolio
% of the real
estate portfolio
Austria ................................................ 94 92
Used by the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 4
Used by third parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 88
Andere Staaten ......................................... 6 8
Used by the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 5
Used by third parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 3
Participations
The Vienna Insurance Group portfolio of ownership interests had a book value of EUR 970.8 million
on 31 December 2007, and a book value of EUR 532.2 million on 31 December 2006. The ratio
of ownership interests to the book value of the total investment portfolio was therefore approximately
5% on 31 December 2007.
The Vienna Insurance Group focuses primarily on long-term interests in insurance companies, or
in companies whose activities are closely related to insurance. Reflecting a greater concentration on
the core business, the tendency over the last few years has been towards a reduction of purely
financial equity interests outside of the insurance portfolio. To date, the Vienna Insurance Group has
held only a few financial equity interests in the CEE region, primarily serving to support insurance
business operations.
Market risk
The Vienna Insurance Group divides market risk into interest rate, equity, currency, real estate,
and ownership interest risks. For the Vienna Insurance Group, interest rates and equity prices are the
most relevant parameters for market risk. Currency prices are less important at present. The Vienna
Insurance Group uses fair value assessments, value-at-risk calculations, sensitivity analyses and
stress tests to monitor market risks.
The composition of capital assets is aimed at providing coverage for insured risks appropriate to
the insurance business and the durations of the liabilities of the Vienna Insurance Group.
Interest-rate and equity risk
In the Vienna Insurance Group’s investment design, the bond segment serves primarily to ensure
stable earnings over the long term. Derivatives are used to reduce investment risk. Appropriate
investment guidelines expressly govern the use of derivatives for bonds managed by third parties. Unit
trusts, for example, must be expressly governed by the corresponding investment guidelines.
The equity segment serves to increase earnings over the long term, provides diversification and
compensates for long-term erosion in value due to inflation. The Vienna Insurance Group assesses
equity risk by considering diversification within the overall portfolio and the correlation to other
securities exposed to price risk.
Market price risk affecting profit or loss is controlled by periodically calculating the VaR according
to the “Investment and Risk Strategy — Securities” guideline for securities and adjusting it to the limit
relative to the risk budget. The VaR is determined based on a daily variance-covariance calculation.
The Vienna Insurance Group statistically estimates variances and covariances from market data
over a 12-month period.
The Vienna Insurance Group uses a 99% confidence level. The holding period is between 10 and
20 days. Each stock’s average risk contribution is somewhat smaller than its risk yield contribution.
The foreign-currency risk contribution corresponds only to a few percentage points of the overall risk.
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