Erste Bank JPMorgan Merrill Lynch International

Acquisition costs
GLOSSARY
The amount paid in currency or currency equivalent in the acquisition of an asset, or the current
fair value of another form of payment at the time of acquisition.
Acquisition expenses ratio
The acquisition expenses ratio is calculated based on the expenses arising in particular from
commissions for the issuing of the insurance in relation to the gross earned premiums.
Actuarial reserves
The actuarial reserves represent the value calculated according to mathematical principles of the
obligations of the insurance company and include the already allocated and promised profit shares
and a provision for administrative costs less the total present value of premiums to be received in the
future. These reserves are created for life insurance, health insurance, and accident insurance when it
operates in the same fashion as life insurance.
In principle, the reserves are calculated using the parameters underlying the premium calculations.
The appointed actuary has to verify that the selected parameters are sufficiently cautious. In
accordance with the regulations of the VAG, the amount of the reserves must ensure that the claims
of the policy holders can be fulfilled at all times.
Life insurance. In the life insurance business in Austria, acquisition costs are calculated using
the rates set out in the business plans and included by zillmerization when calculating the actuarial
reserve. This approach results in the capitalization and premium-proportionate write offs of these
acquisition costs. To the extent that the acquisition costs exceed the amount of the actuarial reserves
before deduction of acquisition costs, these asset items are to be written off. If the reserves before
deduction via zillmerization increase, these write-offs are to be reversed. As a result, the amount is
recovered within the first three years of an insurance contract. For the most part, an increase in
actuarial reserves results from the premiums. An increase in premiums automatically leads to an
increase in the actuarial reserves, whereby a major part of the premiums are to be assigned to the
actuarial reserves. For insurance payments, the actuarial reserves provide sufficient provisioning.
Therefore, the insurance payment amount primarily has the effect of reducing the actuarial reserves.
A change in the actuarial reserves is due to a premium increase as well as to the development of the
insurance benefits paid out.
Health insurance. In health insurance, the actuarial reserves are calculated on the basis of the
applicable mathematical principles. The principles are applied with an adequate amount of caution
and are verified by the appointed actuary. For the most part, the actuarial reserves consist of reserves
for the increasing healthcare costs associated with the increasing age of the policy holder.
Administrative expense ratio
The administrative expense ratio is the ratio of other operating expenses to gross earned
premiums.
Amortized costs
Actualization of historic acquisition costs reduced by the associated depreciation amounts.
Assets under management
The total of investments, assessed at the current fair value, which the Group manages and for
the investment performance of which the Group is responsible.
Aviation insurance
Aviation insurance has three branches: aviation liability, aviation hull and aviation passenger
accident. These classes cover damages by and to the aircraft. In addition, passengers and crew are
covered.
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