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Erste Bank JPMorgan Merrill Lynch International

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Group are a party or which are being threatened against them will have a material adverse effect on<br />

the business or consolidated financial position of the Vienna Insurance Group.<br />

Coverage-related proceedings<br />

In its capacity as an insurance company, the Vienna Insurance Group and its affiliated companies<br />

are involved as a defendant in a number of court proceedings or have been threatened with legal<br />

actions. In addition, there are proceedings to which the companies of the Vienna Insurance Group are<br />

not a party, but whose outcome could have an effect on them due to agreements with other insurers<br />

concerning participation in losses. In the opinion of the Vienna Insurance Group, adequate provisions<br />

have been formed to all claims of the Austrian Group companies, based on the amount in dispute.<br />

Threatened and Pending Judicial and Arbitration Proceedings<br />

Legal action by the Association for Consumer Information (Verein für Konsumenteninformation,<br />

VKI)<br />

In a class action suit filed in 2005, the Association for Consumer Information objected to some of<br />

the clauses contained in Wiener Städtische AG’s standard contract terms (AVB) for traditional life<br />

insurance due, among other things, to a violation of the transparency requirement, and has demanded<br />

that Wiener Städtische AG omit these clauses in the future. Since that time, the suit has also been<br />

extended to Wiener Städtische AG’s standard contract terms for unit-linked life insurance. The<br />

objection is aimed specifically against the following traditional life insurance provisions:<br />

Allocation of the full costs of writing a policy right at the start of the policy (“zillmerisation”);<br />

Deduction of a charge against the surrender value of a policy;<br />

Restriction of valid declarations made by the insurer to those made in writing;<br />

Deemed delivery of a declaration made by the insurer to the policyholder when the declaration<br />

is sent to the last address of the policyholder known to the insurer.<br />

With respect to unit-linked life insurance, VKI objects to the following provisions of the standard<br />

contract terms:<br />

The way in which the costs of the policy are allocated against the insurance premium and the<br />

manner in which these costs are presented;<br />

Deduction of a death risk premium from the actuarial reserve;<br />

Specification of a direct debit procedure as the only possible way to make premium payments;<br />

Charges for policy set-up costs and a processing fee in the case of policy surrender;<br />

Allocation of the costs of writing a policy to the start of the policy term.<br />

In addition to Wiener Städtische AG, the other Austrian companies in the Group and most other<br />

large Austrian insurance companies have comparable clauses in their standard contract terms. VKI<br />

has also filed similar legal actions against UNION (which in the mean-time has merged with BA-CA<br />

Versicherung) and other Austrian insurance companies. Wiener Städtische AG und BA-CA Versicherung<br />

are disputing the legitimacy of VKI’s action. They also consider the action to be without merit,<br />

particularly in view of the fact that the contract clauses criticized by VKI as non-transparent and/or<br />

unlawful are either specified in individual agreements or reflect statutory provisions. The claim against<br />

Wiener Städtische AG was granted in all forums (most recently on 15 November 2007). VKI waived<br />

publication of the decision. The challenged clauses were replaced with new ones — with the<br />

substantive approval of the Financial Market Authority — which are also legal from the standpoint of<br />

this judicial decision. Similarly, the claim against BA-CA Versicherung was granted in the courts of first<br />

and second instance (most recently on 12 October 2007). However, an extraordinary appeal from the<br />

appellate court’s ruling was filed, and the decision of the Supreme Court of Justice is still pending.<br />

The Vienna Insurance Group has already formed provisions against the consequences of the judicial<br />

decisions which it regards as adequate given the current status of the proceedings. The management<br />

of the Vienna Insurance Group does not believe that the decisions will have a material impact on the<br />

Vienna Insurance Group’s net assets, financial position or results of operations.<br />

F-59

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