Erste Bank JPMorgan Merrill Lynch International

Changes to the statutory framework could make restructuring necessary, thereby resulting in
increased costs.
Investments
The Group’s investments are made in fixed-interest securities (bonds, loans/credits), shares, real
estate, ownership interests, and structured investment products, taking into consideration the overall
risk position of the Group and the investment strategy provided for this purpose. The risk inherent in
the specified categories and the market risks are of fundamental importance when determining
exposure volumes and limits. The capital investment strategy is laid down in the form of investment
guidelines, which are continuously monitored for compliance by the central risk controlling and internal
audit departments. Investment guidelines are laid down by the central company, with a distinction
made between the capital investment strategies for Austria, the CEE region and Germany, and are
mandatory for all group companies.
The capital investment strategy for Austria can be summarised as follows:
Wiener Städtische follows a conservative investment policy with long-term investments.
Wiener Städtische focuses on its asset mix as a way to ensure that cash flows match its longterm
liability profile and to create sustainable increases in value by making use of correlation
and diversification effects for the individual asset classes.
Investment management depends on the asset class in question or on the objective within
asset classes, and is performed internally or by an outside manager. Decisions in this regard
are made by a committee set up for this purpose.
Security market-risk management is aimed at providing a transparent view of the risk
exposure arising from price, interest-rate, and currency fluctuations as they affect profitability
and the value of security investments, and at limiting these risks. Risks are limited by setting
position limits and by means of a two-level limit system for risk exposure.
Market trends are monitored continuously and the allocation of portfolio assets managed
actively.
Vienna Insurance Group’s investment portfolio contains direct holdings of fixed-interest securities
and loans of approximately 60%. The direct holdings of shares and real estate are 7% and 13%,
respectively, in each case measured relative to the book value of the total investment portfolio.
The table below shows the breakdown of the Vienna Insurance Group investments as of
31 December 2006 and 31 December 2005, broken down in EUR millions according to the property
and casualty, health, and life insurance segments:
F-107