Erste Bank JPMorgan Merrill Lynch International

Financial investments
Financial investments reported as capital assets are divided into the following categories in
accordance with the requirements of IAS 39:
Loans and other receivables
Financial investments held to maturity
Financial investments available for sale
Financial investments held for trading
Financial investments recognised at fair value through profit or loss
The corresponding investments are valued for initial recognition at the cost of acquisition, which
equals fair value at the time of acquisition.
Two valuation measures can be applied to financial investments for subsequent valuation.
Adjusted cost of acquisition is used for subsequent valuation of loans and other receivables. The
adjusted cost of acquisition is determined using the effective interest rate of the loan in question. In
the case of permanent impairment, a write-down is recognised in profit or loss.
Adjusted cost of acquisition is used for subsequent valuation of financial investments held to
maturity. The adjusted cost of acquisition is determined using the effective interest rate of the financial
investment in question. In the case of permanent impairment, a write-down is recognised in profit or
loss.
Financial investments available for sale and financial investments held for trading are recognised
at fair value on the balance sheet. If available-for-sale financial investments are sold, the difference
between the cost of acquisition carried forward and fair value is recognised in other reserves
(“unrealised gains and losses”). No separate calculation of cost of acquisition carried forward is
performed for financial investments held for trading, changes in fair value are recognised as profit or
loss on the income statement. The financial investments held for trading are predominantly structured
investments (“hybrid financial investments”) which Vienna Insurance Group has elected under IAS
39.11A and IAS 39.12 to assign to the category of “financial assets at fair value through profit or loss”.
For clarity, however, this item is referred to as “financial investments held for trading” on the balance
sheet. Structured investments are assigned to this category if the derivatives embedded in the host
contract (as a rule securities or loans) are not closely related to the host contract so that the
requirement under IAS 39 of isolating them from the host contract and valuing them separately at fair
value does not apply.
De-recognition of financial investments is performed when the Group’s contractual rights to cash
flows from the financial investments expire.
Information on the recognition of impairment losses is provided in the section entitled “General
information on the accounting and valuation of investments”.
Investments of unit- and index-linked life insurance
The investments of unit- and index-linked life insurance provide cover for the underwriting
provisions of unit- and index-linked life insurance. The survival and surrender payments from these
policies are linked to the performance of the associated investments of unit- and index-linked life
insurance, with the income from these investments also fully credited to policyholders. As a result,
policyholders bear the risk associated with the performance of the investments of unit- and indexlinked
life insurance.
These investments are held in separate cover funds, and managed separately from the other
investments of the Group. Since the changes in value of the unit- and index-linked life insurance
investments are equal to the changes in value of the underwriting provisions, these investments are
valued using the provisions in IAS 39.9. Investments of unit- and index-linked life insurance are
therefore valued at fair value, and changes in value are recognised in the profit and loss statement.
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