Erste Bank JPMorgan Merrill Lynch International

The Vienna Insurance Group has made acquisitions and founded new companies as part of the
strategy followed in this region. Political, economic and social conditions in these countries have
changed rapidly in recent years. Far-reaching political and economic reforms have created a situation
where it is possible for political and economic change to take place during the establishment of new
democratic and market-oriented systems.
Risks due to acquisitions
The Vienna Insurance Group has acquired a number of companies, or interests in them, in
Central and Eastern Europe to date.
Acquisitions often bring challenges in terms of corporate management and financing, such as:
The need to integrate the infrastructure of the acquired company, including management
information systems, and risk management and controlling systems;
Handling unsettled matters of a legal, supervisory, contractual or labour law nature resulting
from the acquisition;
Integrating marketing, customer support and product lines; and
Integrating different corporate and management cultures.
Cross-border acquisitions in Central and Eastern Europe can present a major challenge, due to
differences in national cultures, business practices and legal systems.
Climate change
The environmental catastrophes that have been becoming increasingly common in recent years,
such as floods, mud slides, earthquakes, storms, etc., may be the result of general climate change. It
is possible that the number of claims caused in this manner might continue to rise in the future.
Credit risk due to reinsurance
The Vienna Insurance Group follows a policy of ceding a portion of assumed risks to reinsurance
companies.
This transfer of risk to reinsurers does not, however, relieve Wiener Städtische AG and its Group
companies of their obligations to policyholders. The Vienna Insurance Group is therefore exposed to
the risk of insolvency on the part of the reinsurer.
Currency risks
The investment area also uses international capital markets and, to a very small extent, foreign
currencies for portfolio diversification. The foreign exchange risk in the investment area does not
represent a significant risk.
Concentration risk
The Vienna Insurance Group’s expansion into the CEE region increases diversification.
Supervisory regulations
Wiener Städtische AG and its principal Group companies are insurance companies and as such
are subject to (insurance) supervisory regulations in Austria and abroad. These regulations cover
matters such as:
Equity capital endowment of insurance companies and groups;
Admissibility of investments as security for underwriting reserves;
Concessions for the various Group companies in the Vienna Insurance Group;
Marketing activities and the sale of insurance policies; and
Policyholders’ cancellation rights.
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