Erste Bank JPMorgan Merrill Lynch International

usiness activity of the Vienna Insurance Group in the affected country or as a whole. In addition, the
imposition of fines could have a material adverse effect on the assets, financial position and earnings
of the Vienna Insurance Group. Moreover, were the Group found to be in violation of regulatory
requirements this could lead to intensified supervision of the Vienna Insurance Group and, accordingly,
to an increase in the Group’s administrative expenses. If regulatory orders or fines against the
Vienna Insurance Group were to become publicly known, this could lead to a loss of confidence
among customers and business partners, which could also materially adversely affect the financial
position and earnings of the Vienna Insurance Group.
Risks Relating to the Acquisition of the Target Companies
Difficulties in connection with the planned acquisition and integration of the Target Companies
could have a material adverse effect on the Vienna Insurance Group’s business and
results of operations
Measured in terms of purchase price and strategic importance, the Vienna Insurance Group’s
planned acquisition of Target Companies is the largest acquisition ever considered by the Vienna
Insurance Group. Based on the Indicative Combined Financial Data of the Target Companies, the
integration of the Target Companies will add 18.9% premiums, 9.9% net income and 34.3% assets to
the Vienna Insurance Group. This complex transaction, which will involve the integration of companies
in Austria and throughout the CEE region, presents the Vienna Insurance Group with a number of
specific challenges that expose it to a number of risks, including the following:
Uncertainty regarding the realization of synergy effects. The integration of large businesses
with differences in their cultural background, business culture, working language and compensation
structures is a considerable challenge. Part or all of the synergies that the Vienna
Insurance Group anticipated when it planned the transaction may not be realizable at a later
date. There can be no assurance that the acquired companies will generate the contribution to
profit that was expected by the Vienna Insurance Group and used as a basis for determining
the purchase price. A significant portion of these synergies is dependent on the ability of the
Vienna Insurance Group to distribute its products through the Erste Bank Group’s banking
distribution channels pursuant to the General Distribution Agreement. As noted below, this
ability may be limited by various factors, including by local competition authorities. A failure to
exploit expected synergies could have a material adverse effect on the Vienna Insurance
Group’s financial condition and results of operations.
Diversion of management resources. The integration of the Target Companies will require
significant time and attention from the management of the Vienna Insurance Group as well as
that of the Target Companies. The Vienna Insurance Group’s business and results of operations
could be materially adversely affected if integration issues divert management attention from
other tasks.
Potential loss of key employees. Integration of the Target Companies and the realization of a
common Group strategy depends, among other things, on the management and other key
employees of both the acquired companies and the Vienna Insurance Group. The competition
for well-trained and well performing employees is very strong, and, in particular in the context of
an acquisition, competitors of the Target Companies and of the Vienna Insurance Group may
try to hire such key employees away from the Target Companies and/or Vienna Insurance
Group. The loss of key employees could make it more difficult to accomplish the integration
rapidly and realize the strengths of the various companies.
In addition to the risks mentioned above, the integration of the Target Companies and the other
acquired companies could also be made more difficult, time-consuming and costly than expected by
the occurrence of other risks and unexpected problems that the Vienna Insurance Group is currently
unable to assess. Any of the circumstances above could have a material adverse effect on the Vienna
Insurance Group’s business and its assets, financial position and results of operations. There can be
no assurance that the integration process will be completed effectively or that efficient management
and operation of the integrated companies will continue to be possible in the future.
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