Erste Bank JPMorgan Merrill Lynch International

The following table shows Vienna Insurance Group real estate investments as of 31 December
2006 and 31 December 2005, broken down according to location and type of use of the various real
estate holdings:
Type of real estate use 31.12.2006 31.12.2005
% of the real estate
portfolio
% of the real estate
portfolio
Austria ........................................... 92 86
Used by the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 8
Used by third parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 78
Other countries .................................... 8 14
Used by the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 10
Used by third parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 4
Ownership interests
The Vienna Insurance Group portfolio of ownership interests had a book value of EUR 532.2 million
on 31 December 2006, and a book value of EUR 636.1 million on 31 December 2005. The ratio
of ownership interests to the book value of the total investment portfolio was therefore approximately
3% on 31 December 2006.
The Vienna Insurance Group focuses primarily on long-term interests in insurance companies, or
in companies whose activities are closely related to the insurance field. Reflecting greater concentration
on the core business, the tendency over the last few years has been towards a reduction of
purely financial interests outside of the insurance portfolio. To date, the Vienna Insurance Group has
held only a few financial interests in the CEE region, primarily serving to support insurance business
operations.
Market risk
The Vienna Insurance Group divides market risk into interest rate, equity, currency, real estate,
and ownership interest risks. For the Vienna Insurance Group, interest rates and equity prices are the
most relevant parameters for market risk. Currency prices are less important at present. The Vienna
Insurance Group uses fair value assessments, value-at-risk calculations, sensitivity analyses, and
stress tests to monitor market risks.
The composition of investments is aimed at providing cover for insured risks appropriate for the
insurance business and the durations of the liabilities of the Vienna Insurance Group.
Interest-rate and equity risk
In the Vienna Insurance Group’s investment concept, the bond segment serves primarily to
ensure stable earnings over the long term. Derivatives are used to reduce investment risk. Appropriate
investment guidelines expressly govern the use of derivatives for bonds that are managed by third
parties, for example investment funds.
The equity segment serves to increase earnings over the long term, provides diversification and
compensates for long-term erosion in value due to inflation. The Vienna Insurance Group assesses
equity risk by considering diversification within the overall portfolio and the correlation to other
securities exposed to price risk.
Market price risk affecting profit or loss is controlled by periodically calculating the VaR according
to the “Investment and Risk Strategy — Securities” guideline for securities and comparing it with the
limit relative to the risk budget. The VaR is determined based on a daily variance-covariance
calculation.
The Vienna Insurance Group statistically estimates the variances and covariances from market
data over a 12-month period, using a 99% confidence level. The holding period is between 20 and
60 days. Each stock’s average risk contribution is somewhat smaller than its risk yield contribution.
The foreign-currency risk contribution is within a few percentage points of the overall risk.
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