Erste Bank JPMorgan Merrill Lynch International

RISK REPORT
Capital assets
The Group’s capital asset 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 risk 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.
In accordance with the Group’s conservative investment policy, Wiener Städtische’s investment
portfolio contains direct holdings of fixed-interest securities and loans of approximately 59%. In
contrast, equities generally represent less than 10% of the investment portfolio (legal upper limit is
40%), and real estate less than 10% (legal upper limit is 30%), based in all cases on the total book
value of the investment portfolio.
The table below shows the breakdown of the Wiener Städtische Group investment portfolio as of
31 December 2005 and 31 December 2004, broken down in EUR millions according to the property
and casualty, health, and life insurance segments:
in EUR million
31 December 2005 31 December 2004
Property/
Casualty Health Life
Property/
Casualty Health Life
Land and buildings . . . . . . . . . . . . . . . . 430.9 71.2 583.8 628.6 73.4 429.5
Holdings in affiliated companies and
ownership interests . . . . . . . . . . . . . . 333.3 107.1 195.7 325.9 25.5 275.3
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 161.4 135.5 950.5 165.1 151.2 1,189.8
Other securities. . . . . . . . . . . . . . . . . . . 1,467.4 512.0 9,138.7 965.7 455.5 7,126.4
held to maturity . . . . . . . . . . . . . . . . . 55.2 0.0 191.4 15.4 0.0 158.4
available for sale . . . . . . . . . . . . . . . . 1,303.2 469.9 8,533.5 892.9 455.5 6,700.9
trading securities . . . . . . . . . . . . . . . . 109.0 42.1 413.9 57.4 0.1 266.8
Other capital assets . . . . . . . . . . . . . . . 652.5 17.8 404.9 352.3 19.1 184.8
Total capital assets ............... 3,045.5 843.6 11,273.6 2,437.6 724.8 9,205.8
On 31 December 2005, the other securities account was comprised of holdings of approx. 8% in
shares, approx. 69% in bonds, 4% in miscellaneous securities, and 19% in investment funds. This
breakdown has changed slightly from that of 31 December 2004, due primarily to the capital increase
(additional bank deposits and money market funds). This cash component is to be converted in timely
fashion to more profitable, longer-term investments.
F-179