Erste Bank JPMorgan Merrill Lynch International

Table 3b
Key economic assumptions as at 31 Dec 2006 Austria Czech republic Slovakia Hungary
Risk discount rates . . . . . . . . . . . . . . . . . . . . . . . . . 6.67% 7.74% 8.24% 10.77%
10-year interest rates . . . . . . . . . . . . . . . . . . . . . . . 4.17% 3.74% 4.24% 6.77%
10-year swap interest rates . . . . . . . . . . . . . . . . . . . 4.29% 4.04% 4.54% 7.07%
Expense inflation(*) . . . . . . . . . . . . . . . . . . . . . . . . . 2.00% 2.80% 3.30% 3.10%
Equity risk premium. . . . . . . . . . . . . . . . . . . . . . . . . 3.00% 3.00% 3.00% 3.00%
Property risk premium . . . . . . . . . . . . . . . . . . . . . . . 1.00% 1.00% 1.00% 1.00%
Tax rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25% 24% (2007) 19% 20%
Tax rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 21% (2008) — +2.3%(**)
Tax rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 20% (2009) — —
Tax rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 19% (2010+) — —
(*) Expense inflation is calendar year dependent for Czech Republic, Slovakia and Hungary. Figures
in the table above reflect long term assumptions.
(**) Industry tax and innovation fee.
4.2 Operating assumptions
Shareholder returns for with-profit business allow for locally applicable legislation regarding
minimum policyholder profit sharing. In the case of SVAG in Austria, the profit sharing rates for with
profits business are based on an 85:15 split of the gross surplus between policyholders and
shareholders, and set at a level consistent with management expectations on the basis of the
economic assumptions in tables 3a and 3b. There is no profit sharing on unit linked and risk business.
In the Czech Republic the profit sharing rates are assumed to be equal to 85% of the excess of
investment return over the technical guaranteed rate. In Slovakia the profit sharing rates are equal to
60% of the excess of investment return over the technical guaranteed rate. In Hungary the profit
sharing rates are assumed to be equal to 80% of the excess of the investment return over the
technical guaranteed rate for traditional products.
Expense assumptions have been based on the companies’ recent experience without anticipating
future expense synergies or integration costs due to the transaction. No expenses have been
excluded as one-off expenses.
The trail commissions from fund managers in respect of unit linked business are assumed to
continue at the current levels.
Other assumptions such as mortality and morbidity rates, surrender and annuity take-up rates
have been included on the basis of management’s best estimates. Where there was insufficient
company experience data to derive the assumptions, the management has used available market
experience.
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