Erste Bank JPMorgan Merrill Lynch International

The shareholder margin is calculated taking into account surpluses from all available income
sources, with the profit participation regulation promulgated on 20 October 2006 being taken into
account in the life insurance class for Austria. For the other sectors and markets, the amount of profit
sharing assumed is based on local practice and the regulatory rules in each instance.
The projections of future profits are based on realistic assumptions for investment income,
inflation, costs, taxes, cancellations, mortality, illness and other key figures, such as changes in
health-care costs and future premium increases.
The interest rate curve used depends on an assessment of the risks associated with the
realisation of future profits. In order to be able to make a statement on the impact of alternative
interest rate curves, the Embedded Value as of 31 December 2006 and the increase in value resulting
from new business in 2006 were calculated using an interest rate curve alternately increased and
decreased by 1%. The sensitivities are shown in the table below:
Sensitivities of the European Embedded Value of the life
insurance and health insurance as of 31 December 2006
Change in % of
the base value
European Embedded Value, Austria
Decrease in level of equity and property values �10%......................... �3.8%
Interest rate curve shift +1% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �1.0%
Interest rate curve shift �1% ............................................ �4.1%
Maintenance expenses +10% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �2.2%
Maintenance expenses �10% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2%
Lapse rate improvement 10% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.6%
Lapse rate deterioration 10% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �0.6%
Improvement in mortality and morbidity rates for assurances +5% . . . . . . . . . . . . . . . . 0.2%
Improvement in mortality, rates for annuities +5% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �0.1%
Value of new business, Austria
Interest rate curve shift +1% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.7%
Interest rate curve shift �1% ............................................ �15.5%
Maintenance expenses +10% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �7.5%
Maintenance expenses �10% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.5%
Lapse rate improvement 10% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.9%
Lapse rate deterioration 10% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �3.9%
Improvement in mortality and morbidity rates for assurances +5% . . . . . . . . . . . . . . . . 1.6%
Improvement in mortality, rates for annuities +5% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �0.2%
Property and casualty insurance provisions
General information
If claims are asserted by or against policyholders, all amounts that a company in the Vienna
Insurance Group’s property and casualty segment pays or expects to have to pay to the claimant are
referred to as losses and the costs of investigating, adjusting and processing these insurance claims
are referred to as “claims handling expenses”. Within the framework of its property and casualty
insurance policies, Vienna Insurance Group has formed provisions according to segment, extent of
cover and year for each Group company to pay for losses and claims handling expenses due to
insurance claims.
Losses and claims handling expenses can be divided into two categories: provisions for known
but not yet processed insurance claims and provisions for insurance claims that have occurred but
have not yet been reported (“IBNR”). Provisions for insurance claims that still have to be processed
are based on estimates of future payments, including the claims handling expenses of these insurance
claims. These estimates are made on individual bases, according to recognisable facts and circumstances
at the time the provision is made. The estimates reflect the well founded judgement of the
Group adjusters based on general practices for forming insurance provisions and knowledge of the
nature and value of each type of claim. These provisions are adjusted regularly during normal
processing and represent the expected eventual costs necessary to finally settle all pending reported
insurance claims, taking into account inflation and other company and economic factors that could
affect the amount of provisions that are required.
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