Sparkassen Versicherung

Transcription

1 Sparkassen Versicherung The competence center for pension planning Annual Report 2006

2 Key Data to unfold >

3 Key Data Sparkassen Versicherung Balance sheet total (in mill. EUR) 5, , , Premiums written (in mill. EUR) - Life insurance, regular premium Life insurance, single premium Casualty insurance Total , Policies in force - Life insurance 837, , ,030 - Casualty insurance 134, , ,829 Total 972,351 1,058,038 1,127,859 Insured capital Life insurance (in mill. EUR) , , ,32 Technical provisions, net (in mill. EUR) 5, , , Investments (in mill. EUR) 5, , , Income on investments (in mill. EUR) Equity (in mill. EUR)

4 Owner and Publisher: Sparkassen Versicherung Aktiengesellschaft Wipplingerstrasse Vienna Editing and responsible for contents: Prok. Mag. Michael Deléglise (Sparkassen Versicherung) Prok. Hartwig Fuhs (Sparkassen Versicherung) Mag. Thomas Steiner (Sparkassen Versicherung) Photos: Peter Ehringer CD Archive Design and Layout: SPV-Druck A-1030 Vienna, Grimmelshausengasse 1 Translation: Donna J. Schiller-Margolis Sparkassen Versicherung, 2007 FN f Commercial Court Vienna DVR:

5 With our compliments With our compliments Thank you Introduction by the Boards The Business Environment in 2006 Management Report and Report on the Annual Financial Statements Balance Sheet Income Statement Notes to the Annual Financial Statements Report of the Supervisory Board Contacts Our traditional close cooperation with the Austrian Savings Bank Group allowed us to maintain a leading position on the Austrian life insurance market in In order to provide you with a detailed overview of our activities during the past year and an outlook on 2007, we are pleased to send you our Annual Report 2006 The

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7 Thank You! With our compliments Thank you Introduction by the Boards The Business Environment in 2006 Management Report and Report on the Annual Financial Statements Balance Sheet Income Statement Notes to the Annual Financial Statements Report of the Supervisory Board Contacts s Versicherung was able to maintain its long-standing position as one of the leading companies on the Austrian life insurance market during the past year because we as a member company of the Austrian Savings Bank Group are able to rely on the expertise of our employees, partners and friends to place the concept of pension planning at the forefront of their activities. We are very proud of each and every one of these men and women and value their performance. We would like to thank all our customers for their confidence in our products and our work the many employees of the Austrian Savings Bank Group for their commitment and motivation our own employees and all those who work with s Versicherung for their support in helping us to realize our goals. To all of you, an honest and heartfelt THANK YOU!

8 Introduction by the Dear Ladies and Gentlemen, s Versicherung was again able to position itself as one of the leading life insurers in Austria thanks to the outstanding cooperation with its sales partners the Austrian Savings Banks, s Bausparkasse and Erste Bank. The development of private and corporate pension planning in 2006 reflected the trend that has characterized previous years. Only the classical single-premium endowment insurance policies, which are viewed by customers as an alternative investment product, were unable to match the above-average growth in premiums recorded for One major reason for this situation was an increase in the interest rates on short-term bank products, which created an interesting option for consumers. The Company was able to continue the pursuit of its product policy during the reporting year, which calls for the expansion of business in the areas of regular-premium policies as well as unit- and index-linked life insurance. This allowed s Versicherung to outpace the overall growth of the market by a substantial margin. The introduction of specially designed new products created a broad-based offering that will support the Company s long-term and profitable development. In 2006 s Versicherung set a milestone with the launch of an index-linked life insurance policy and new products for statesubsidized retirement planning. We also met the changing needs of our customers by introducing product innovations that include an insurance policy for nursing care under the s Pflegevorsorge brand and an insurance policy for funeral costs under the s Bestattungsvorsorge brand, which also represent an attractive offering for new target groups. Manfred Rapf, Erwin Hammerbacher, Alfred Neimke of pension planning for many years. The key issue at this time is to provide sufficient government support for nursing care and thereby reduce the burden on the family nursing networks that have been weakened by demographic changes. Only in this way will it be possible to finance nursing care over the long-term. During the past year s Versicherung was also able to demonstrate its competence in Hungary, the Czech Republic, Slovakia and Croatia in an impressive manner. Our subsidiaries in the countries of Central and Eastern Europe were able to make optimal use of the growth potential in these markets and continue their expansion. We used the extensive public discussions on the important subject of nursing care as an occasion to publish a report on the costs of this treatment, which was prepared by the Economic University of Vienna at our request. The results of this study not only triggered a substantial response by the media but also formed the basis for our new nursing care product, which is marketed as s Pflegevorsorge. Through our informational programs, we have worked to increase the awareness and understanding of the Austrian population for the importance

9 With our compliments Thank you Introduction by the Boards The Business Environment in 2006 Management Report and Report on the Annual Financial Statements Balance Sheet Income Statement Notes to the Annual Financial Statements Report of the Supervisory Board Contacts The primary focus of our planning for 2007 is to utilize the opportunities created by the positive market environment for life insurance, in spite of the changing economic conditions. The Austrian population is well aware that the welfare state must react to the challenges created by an aging society and the new and steadily changing working world. Politicians must now work to establish a new balance between individual responsibility and collective security. The challenges for the insurance industry are to identify the correct procedures and develop suitable instruments for pension planning, nursing care and other important needs. s Versicherung intends to remain a competent partner for this process in the future. With best regards, Erwin Hammerbacher Alfred Neimke Manfred Rapf

10 EXECUTIVE BOARD Erwin Hammerbacher Seyring Member of the Manfred Rapf Fischamend Member of the Alfred Neimke Vienna Member of the 6

11 Bodies of the Corporation With our compliments Thank you Introduction by the Boards The Business Environment in 2006 Management Report and Report on the Annual Financial Statements Balance Sheet Income Statement Notes to the Annual Financial Statements Report of the Supervisory Board Contacts Erwin Hammerbacher, Seyring Member of the Manfred Rapf, Fischamend Member of the Alfred Neimke, Vienna Member of the Supervisory Board Chairman Andreas Treichl, Vienna First Vice-Chairman Günter Geyer, Vienna Second Vice-Chairman Gerhard Fabisch, Graz Andreas Almeder, Vienna Heinz Bednar, Vienna (as of July 5, 2006) Peter Bosek, Langenzersdorf (up to June 28, 2006) Manuela Deutsch, Untersiebenbrunn (as of December 19, 2006) Stefan Dörfler, Vienna (as of July 5, 2006) Ulrike Ebner, Vienna Rudolf Ertl, Vienna Friedrich Fuchs, Hartberg Martin Gschwentner, Kramsach Helmut Hager, Grosshöflein Friedrich Himmelfreundpointner, Neuhofen Wolfgang Just, St.Pölten Ernst Karner, Vienna Michael Kitzler, Vienna Gernot Mittendorfer (up to June 28, 2006) Otto Puschnig, St. Kanzian Ernst Raschhofer, Vienna (as of July 5, 2006) Helmut Rattinger, Vienna (up to June 28, 2006) Martin Simhandl, Purkersdorf (as of July 5, 2006) Heinz Schuster, Langenzersdorf (up to December 18, 2006) Robert Schweizer, Stockerau Anton Steinberger, Götzis Kurt Stöber, Bruck/Leitha Josef Tichler, Linz (as of March 15, 2006) Rudolf Warga, Graz Andreas Wecht, Gnadenwald (up to June 28, 2006) Ulrich Wedl, Neunkirchen Trustees Trustee Isabella Mammerler, Vienna Deputy Trustee Sabine Balogh-Preininger, Vienna (up to July 31, 2006) Deputy Trustee Peter Baumann, Vienna (as of August 1, 2006)

12 The Business Environment in 2006 MARKETS The year 2006 brought the long-awaited economic recovery in Europe. Growth of 2.8% provided the urgently needed impulses for development in the Euro zone, and was driven above all by strong increases in the areas of exports and capital investments. Japan, China and India served as the most important sources of growth in 2006, while the USA lost its status as a key economic motor in favor of a more equal distribution of development among the various regions. In Europe, the countries in the central and eastern regions recorded by far the most dynamic growth with a plus of roughly 5%. The Austrian economy was not only able to match the European trend during the past year, but also outperformed the regional average with GDP growth of 3.2%. The result was a positive impact on capital investment (+5.2%) and merchandise exports (+10.4%). In spite of these favorable effects, consumer spending rose by only 1.9% and lagged behind the sound development of the economy, even through employment grew by 1.5%. The increase in consumer spending was limited by weak growth of only 0.8% in net real income per capita. In contrast, the labor market reacted much more positively to the improvement in the economy during The average unemployment rate for the year totaled 6.8%, which reflects a decrease below the prior year level of 7.3%. Forecasts by the Austrian Institute for Higher Studies call for growth of 3% in 2007, which will be supported by a decline in the oil price and the mild winter as well as the robust condition of the German economy. Germany is still the most important market for Austrian exporters. Life insurance: cautious growth in 2006 The life insurance branch recorded an increase of 1.9% in total premiums to EUR billion in Although the awareness of the Austrian population for the importance of retirement planning remained high, the life insurance segment was characterized by subdued growth in Total premiums rose by only 0.8% to EUR 7.18 billion because of a noticeable decline in single-premium policies as well as higher payments for maturing life insurance policies. Premiums from single-premium policies totaled EUR 1.89 billion, which represents a decline of 12.2%. In contrast, regular premiums rose by 6.4% to EUR 5.29 billion and provided key support for the positive results generated by the life insurance segment. Sales of state-subsidized pension plans, which were introduced in 2003, again proved to be highly successful in With roughly 1 million contracts and a premium volume of approximately EUR 619 million (+36%), the Austrian life insurance companies were able to continue this success story in Supplementary pension insurance: potential remains high The potential for supplementary retirement insurance in Austria has been very high for many years. The awareness of the general public for retirement planning is steadily increasing and has become an important issue for the general public and with good reason: in addition to the certainty that government pensions will at some point not be sufficient to maintain the customary standard of living, expected demographic developments such as a longer calculation period for the determination of pensions have shifted the issue of supplementary retirement planning to the foreground. A study commissioned by s Versicherung on the value of private retirement planning confirms that this is not only a subjective opinion, but plain reality: The survey covered 2,000 persons between the ages of 15 and 54, and only 13% believe that their pensions will be guaranteed when they retire. In addition, 52% consider the subject of private retirement planning to be very important, 40% as important and only 5% as unimportant. This study also confirmed that the importance of retirement planning is not necessarily coupled with age and experience: 61% of the persons surveyed indicated that 30 years of age or younger would be the ideal starting point for retirement planning and 11% considered 20 years of age or younger to be optimal. Roughly 40% of the survey participants indicated that they would take steps to arrange for private pension planning

13 With our compliments Thank you Introduction by the Boards The Business Environment in 2006 Management Report and Report on the Annual Financial Statements Balance Sheet Income Statement Notes to the Annual Financial Statements Report of the Supervisory Board Contacts in A further 40% of those who have already made arrangements for supplementary retirement insurance want to complete this planning during the coming year. Life insurance remained the preferred method for retirement insurance in Austria during 2006 with a share of 44%. The share held by state-subsidized pension insurance rose from 18% in 2005 to 27% for the reporting year, and is now the second most popular form of pensions. Moreover, 32% of the survey participants who have not yet made any plans for pension insurance (and here primarily persons under 30 years of age) indicated they will select a state-subsidized pension plan. An interesting detail: the trend toward the purchase of retirement planning products at financial institutions continues to grow, with 63% of those surveyed indicating this segment as their preferred contact. Insurance companies ranked second with 31%, followed by financial and asset managers with 11% and brokers with only 5%. S VERSICHERUNG IN 2006 Leading position on the Austrian life insurance market A competitive product offering and a strong network of sales partners above all the Austrian savings banks, Erste Bank and s Bausparkasse as well as a market share of nearly 12% in the life insurance segment make s Versicherung one of the leading life insurance companies on the Austrian market. Success with product innovations In addition to outstanding results in the unit-linked life insurance area, state-subsidized pension plans provided additional support for the development of business in 2006 with roughly 26,000 new policies sold. Major product innovations such as an indexlinked life insurance policy and the s Pflegevorsorge nursing care policy or the s Bestattungsvorsorge funeral cost policy represent successful answers by s Versicherung to the changing needs of customers in Significant expansion of business activities In 2006 s Versicherung continued to pursue its strategy for the further development of regular-premium policies. Regular policy premiums as a percentage of total premium income rose by 10.3% to EUR million, while the market reported growth of only 6.4% for this period. New single-premium products have been created together with the experts in the Austrian Savings Bank Group, and combine the security provided by life insurance with the earnings opportunities offered by internationally diversified investment instruments. Attractive investment alternatives in the short-term segment made traditional single-premium insurance policies with a guaranteed actuarial interest rate of 2.25% and based on tax regulations a minimum lock-in period of ten years the temporary second best choice for investors. Supported by initial market successes with the launch of index-linked life insurance policies, s Versicherung was able to generate premiums of EUR million in the single-premium life insurance segment. In the casualty segment, s Versicherung recorded respectable growth during the 2006 Business Year. Premiums totaled EUR 15.4 million, which represents an increase of 6.3% in comparison with Comprehensive approach to the subject of nursing care In connection with the intensive public discussions on the nursing care emergency in Austria, s Versicherung commissioned the Institute for Social Policy at the Economic University of Vienna to prepare a comprehensive study on the cost structure and financing of nursing care in this country. The results showed the actual expenditures for this treatment in Austria, and also underscored the need to finance suitable private nursing care. The new and flexible s Pflegevorsorge nursing care policy gives customers an opportunity to close the financing gap according to their own discretion. The s Pflegevorsorge policy is based on the legally defined levels of government nursing care subsidies and can be concluded as an add-on to all retirement products. The s Pflegevorsorge policy offers all the advantages of term insurance. In addition, the benefits provided by the s Pflegevorsorge policy are indexed, e.g. the annuity payment carries rights to profit distribution and increases with the annual distribution of profit. Together with the Hilfswerk Austria s Versicherung also published The autumn of life,

14 an extensive nursing care advisory brochure with numerous tips, information and contacts for nursing patients and their families. Continued success with corporate pension planning s Versicherung was able to expand its activities in the area of corporate pension planning during 2006, with all products providing support for the development of business. The new s Betriebspension product established a firm position in the corporate group insurance area and set key impulses for the market. More and more companies are turning to the lower risk system of corporate group insurance instead of pension funds as a means to finance their pension plans, presumably as a result of the volatile stock market development during the first quarter of Pension solutions for small businesses and the transfer of existing pension commitments also contributed to the positive development of this new product. Social commitment In addition to the financial aspects of retirement planning, s Versicherung is also well aware of its social and sociopolitical responsibility. A major part of the Company s activities in this area were again directed in 2006 to providing support for people who are in poor health and in need of nursing care. s Versicherung has entered into partnerships with Caritas, the Caritas Hospice and Hilfswerk Austria and meets its responsibility to society in part by providing support for these competent organizations. Hilfswerk Austria and Caritas Hospice In 2006 s Versicherung again joined together with Erste Bank and the Austrian Savings Banks as partners of the Hilfswerk Austria: the campaign that was started in 2003 under the motto Grow older, but remain part of life was continued with great success during the past year through directed lobbying, information and other activities to increase the awareness of the general public for the subject of nursing care. A seminar for experts and an information tour throughout Austria, combined with media support from the Austrian Broadcasting Corporation and the Kronen Zeitung newspaper, was designed to raise the consciousness of society for protecting the quality of life for older men and women. s Versicherung also provided key support for Caritas in 2006: under the motto Live up to the last minute, the Caritas hospice helps terminal patients remain in their homes during the last stage of life with full pain relief and appropriate care, and thereby guarantee a humane environment together with family members until the end. s Versicherung supports these efforts, in particular for the development of mobile hospice and palliative teams. Partnership with the Austrian National Library s Versicherung has been a committed partner of the Austrian National Library for many years, and has played an important role in supporting the maintenance and restoration of the world s valuable cultural heritage. The highlights of recent years include the digitalization of the card catalogue with 260,000 entries, which was completed in 2005, as well as the restoration of objects in the world s only globe museum and their transfer to the baroque Mollard Palace. Support for music: Camerata Salzburg The connection between s Versicherung and the Camerata Salzburg, which began in 1997 under the title Partnership for Pension Planning and Culture, also proved to be successful in The highlight of the year was an exclusive performance at the Vienna concert hall. In the context of this cooperation, s Versicherung also provides special pension and casualty insurance for all members of this world famous chamber orchestra. OUTLOOK ON 2007 The demographic changes in our society will not only continue but accelerate over the coming years. It is important to counter this development and construct a suitable financial foundation for the later years of life above and beyond the scope of government pension plans. In this connection, the frequently discussed subject of nursing care should finally receive the necessary legislative attention during the next few months as well as appropriate support through government regulations. For the key area of corporate pension planning, we expect the new government will expand corporate group insurance to also include members of professional associations and legal entities 10

15 With our compliments Thank you Introduction by the Boards The Business Environment in 2006 Management Report and Report on the Annual Financial Statements Balance Sheet Income Statement Notes to the Annual Financial Statements Report of the Supervisory Board Contacts as well as civil servants and government employees at the federal, provincial and local levels. Another necessary step would be the tax-free treatment of up to 10% of salaries and additional contributions by employees to corporate pensions plans. In line with the Erste Bank Group, we plan to expand our product offering during the coming year to include additional innovative and flexible elements and thereby meet the wishes of our customers for better service. We will also set a new focal point this year, which concentrates on women. In autumn s Versicherung will issue a further edition in its long-standing free of charge book series, this time with the title Woman in Society. We intend to follow the strategy pursued by the Erste Bank Group and also continue our expansion into the CEE countries during Our goal is to utilize the many opportunities for growth that are provided by the markets in Hungary, the Czech Republic, Slovakia and Croatia, where s Versicherung has been successfully active for many years, in order to realize the same outstanding results as in our home market of Austria. 11

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17 Management Report and Report on the Annual Financial Statements for 2006 With our compliments Thank you Introduction by the Boards The Business Environment in 2006 Management Report and Report on the Annual Financial Statements Balance Sheet Income Statement Notes to the Annual Financial Statements Report of the Supervisory Board Contacts The business of the Company is the provision of life and casualty insurance. The life and casualty insurance policies issued by the Company developed as follows during the 2006 Business Year: New Policies In the life insurance segment (endowment insurance, annuity insurance and state-subsidized supplementary pension insurance), new policies with a total sum insured of TEUR 1,487,505 (2005: TEUR 2,059,458) were concluded during This figure represents an increase of 27.8% over the previous year (2005: increase of 10.8%). The average sum insured of the regular-premium policies concluded in 2006 totaled EUR 13,928 (2005: EUR 15,815) for endowment insurance, EUR 37,285 (2005: EUR 44,377) for pure endowment insurance, EUR 21,348 (2005: EUR 23,907) for private pensions and EUR 23,548 (2005: EUR 26,246) for single-premium policies. In the term insurance segment (term insurance), new policies with a total sum insured of TEUR 1,408,044 (2005: TEUR 1,527,470) were concluded during This figure represents a decline of 7.8% (2005: increase of 3.2%). In the unit-linked and index-linked life insurance segment (pension plans with subsidized premiums), new policies with a total sum insured of TEUR 889,315 (2005: TEUR 815,354) were concluded in This figure represents an increase of 9.1% (2005: decrease of 7.4%). Contracts in Force As of the balance sheet date, s Versicherung managed 995,030 life insurance policies (2005: 922,980 policies) and 132,829 casualty insurance policies (2005: 135,058 policies). With these results, s Versicherung was able to increase the number of policies managed from 1,058,038 to 1,127,859, or by 6.6%, after passing the 1 million-level for the first time in The insured volume for life insurance policies totaled TEUR 26,301,320 (2005: TEUR 24,307,732). In the casualty insurance segment, annual premiums equaled TEUR 15,573 (2005: TEUR 14,548). (see table on page 14) Premiums Premiums written for life insurance declined by 23.1% or TEUR 253,081 to TEUR 844,813 (2005: TEUR 1,097,894). However, this development reflects our expectations because of the above-average increase in single-premium life insurance policies during the previous year (+31.1%). Direct premiums for regular-premium life insurance rose by TEUR 17,101 or 6.4% to TEUR 282,834 (2005: TEUR 265,733). The premiums for single-premium life insurance (including single premiums for annuity insurance) decreased by TEUR 330,803 or 47.4% to TEUR 367,621 (2005: TEUR 698,424). Premiums written for unit-linked and index-linked life insurance rose by TEUR 31,570 or 23.7% to TEUR 165,053 (2005: TEUR 133,483). In this segment, the premiums for regular-premium policies increased 19.2% to TEUR 135,964 (2005: TEUR 114,005) and single-premium policies totaled TEUR 29,089 (2005: TEUR 19,478) which represents an increase of 49.34%. s Versicherung markets the new state-subsidized pension plans under the product name s Privatpension mit Prämienplus NEU as unit-linked life insurance policies. Premium income for the 2006 Business Year totaled TEUR 87,808 (2005: TEUR 73,007), for a plus of 20.3%. The first segment of unit-linked life insurance, the s Garantie- Concept, was introduced to the market during the second half of The premium volume for the reporting year totaled TEUR 28,972. Premiums written for casualty insurance rose by TEUR 914, or 6.3%, from TEUR 14,493 in 2005 to TEUR 15,407 for

18 Development of policies in the life insurance segment during 2006 Number Endowment insurance (incl. annuities and unit-linked) Insured amount/ 10-times annual annuity Term insurance Total Number Insured amount Number Insured amount/ 10-times annual annuity Policies at end of ,200 14,965,403, ,780 8,727,015, ,980 23,692,418,908 Additions in New production 95,783 1,920,453,755 37,873 1,367,127, ,656 3,287,580, Changes 7, ,366, ,917,209 8, ,283,944 Total 103,755 2,376,820,491 38,484 1,408,044, ,239 3,784,864,718 Decreases in Death -1,828-41,977, ,674,474-2,192-50,651, Surrender -13, ,198,922-1,432-32,348,094-15, ,547, Non-redemption/ cancellation -6, ,011,634-11, ,892,663-18, ,904, Expiration -4,679-90,104,371-11, ,455,685-16, ,560, Changes -7, ,197,919-11, ,534,667-18, ,732,586 Total -33,879-1,009,490,174-36, ,905,583-70,189-1,869,395,757 Policies at end of ,076 16,332,734, ,954 9,275,153, ,030 25,607,887,868 Absolute change 69,876 1,367,330,316 2, ,138,644 72,050 1,915,468,960 Change in % Total premiums written in the two areas of business declined TEUR 252,167, or 22.7%, from TEUR 1,112,387 in 2005 to TEUR 860,220 for Information on premiums earned and recorded is provided in the notes to the financial statements. Claims Claims in the life insurance segment (including expenses for claim processing) totaled TEUR 323,662 (2005: TEUR 263,574). These figures also include TEUR 36,553 (2005: TEUR 27,880) of profit sharing distributions to policyholders. During the reporting year, TEUR 96,955 (2005: TEUR 61,700) of endowment expiration and TEUR 130,339 (2005: TEUR 112,912) of regular annuity payments formed the major part of total claims. Death benefits totaled TEUR 37,045 (2005: TEUR 32,440) and surrender equaled TEUR 56,661 (2005: TEUR 48,446). Claims of TEUR 7,954 (2005: TEUR 5,250) were recorded in the casualty segment (earned claims), which represents an increase of TEUR 2,704. Disability claims equaled TEUR 4,317 (2005: TEUR 3,402). The claims equalization reserve decreased by TEUR 401 in 2006 (2005: addition of TEUR 26). The reserve for future policy benefits to policyholders was increased by TEUR 695,665 during 2006 (2005: TEUR 1,027,673). 14

19 With our compliments Thank you Introduction by the Boards The Business Environment in 2006 Management Report and Report on the Annual Financial Statements Balance Sheet Income Statement Notes to the Annual Financial Statements Report of the Supervisory Board Contacts Of the total declared profit distributions as of December 31, 2006, TEUR 73,834 (2005: TEUR 65,820) was allocated to our policyholders and transferred to the reserve for future policy benefits. Expenses Investments and deposits with banks The balance sheet value of investments rose by TEUR 620,719 or 10.1% from TEUR 6,146,144 in the previous year to TEUR 6,766,863 for New investments were made almost exclusively in securities and time deposits. Total expenses for insurance operations (excluding reinsurance commissions) declined by 9.6% to TEUR 85,740 (2005: TEUR 94,876). Acquisition costs totaled TEUR 76,055 (2005: TEUR 86,511), which represents a decrease of 12.1%. This figure includes TEUR 62,495 of commissions, which were 15.4% lower than in the previous year (TEUR 73,849). Other expenses for insurance operations equaled TEUR 9,685 (2005: TEUR 8,365), which reflects a decline of TEUR 1,320 or 15.8%. In the life insurance segment, other operating expenses rose by TEUR 992 to TEUR 8,114 (2005: TEUR 7,122). In the casualty insurance segment, expenses for insurance operations (excluding reinsurance commissions) totaled TEUR 6,281 (2005: TEUR 5,851). Of this amount, TEUR 4,710 (2005: TEUR 4,608) represent acquisition costs. Information on premiums ceded and the indirect business is provided in the notes to the financial statements. Taxes Corporate income tax totaled TEUR 5,923 for the 2006 Business Year. The assessments for corporate income tax payable for 2003 and 2005 resulted in a credit of TEUR 985. Tax expense for the reporting year was reduced by deferred tax assets of TEUR 731. The Company therefore reported tax expense of TEUR 4,207 for Total tax expense as a percentage of income before tax and minority interests was 18.7%. 15

20 The development of the individual categories of investments in 2006 is shown below: Life 2006 in TEUR Casualty 2006 in TEUR Balance on in TEUR Balance on in TEUR Absolute change Change in % Land and buildings 26, ,726 27, % Shares in subsidiaries, affiliates and associates 94,539 1,283 95,822 79,315 16, % Securities 5,567,335 20,000 5,587,335 5,445, , % Loans granted 237, , ,852-97, % Deposits with banks 367, ,213 46, , % Demand deposits with banks 451,126 1, , , , % 6,744,097 22,766 6,766,863 6,146, , % Investment funds for unit-linked life insurance 897, , , % The returns in 2006 were as follows: Balance on in TEUR Share in % Return in % Balance on in TEUR Share in % Land and buildings 26, % 1.92% 27, % Shares in subsidiaries, affiliates and associates 95, % 0.23% 79, % Securities 5,587, % 5.14% 5,445, % Loans granted 237, % 7.60% 334, % Deposits with banks 367, % 3.14% 46, % Demand deposits with banks 452, % 2.79% 212, % 6,766, % 4.98% 6,146, % 16

21 With our compliments Thank you Introduction by the Boards The Business Environment in 2006 Management Report and Report on the Annual Financial Statements Balance Sheet Income Statement Notes to the Annual Financial Statements Report of the Supervisory Board Contacts The returns shown in the above table were calculated in accordance with the following procedure: The net total of the positions investment income including interest less investment expenses including interest for each class of investment (excluding costs for asset management) as a percent of average invested capital (= balance at the beginning of the year less balance at the end of the reporting year / 2). Income from investments increased by TEUR 27,023 or 7.6% from TEUR 357,264 to TEUR 384,287. Expenses for investments rose from TEUR 26,341 in 2005 to TEUR 57,755 for 2006, or by TEUR 31,414. This figure includes interest expense on the supplementary capital bonds, recognized foreign exchange losses and required write-downs as well as a pro rata share of personnel and operating expenses for asset management. Income from and expenses for investments Life 2006 in TEUR Casualty 2006 in TEUR Total 2006 in TEUR Total 2005 in TEUR Absolute change in TEUR Change in % Income from investments Income from investments in other companies 3, ,535 1,411 2, Income from land and buildings 1, ,102 1, Income from other investments 310,975 1, , ,042 7, Gains on the disposal of investments 54, ,465 43,795 10, Other income from investments and interest income 13, ,108 5,478 7, ,120 1, , ,264 27, Expenses for investments Expenses for asset management 2, ,445 2, Write-downs to investments 25, ,160 6,299 18, Interest expense 6, ,461 5,366 1, Losses on the disposal of investments 14, ,637 11,976 2, Other expenses for investments 8, , , , ,755 26,341 31, Net total 325, , ,923-4,

22 The majority of investments represent variable interest rate instruments for which the issuers have generally provided a capital guarantee. Therefore, the strong increase in interest rates during the reporting year led to a related decline in the fair value of these assets. A table with information on the fair value of investments by category is provided in the notes to the financial statements. Equity Equity as shown on the balance sheet, including subordinated liabilities, totaled TEUR 280,797 as of December 31, 2005 and increased by TEUR 60,851 during the reporting year to equal TEUR 341,348 as of December 31, Capital stock remained unchanged at TEUR 14, Additions totaling TEUR 14,550 were made to available reserves. The individual components of equity developed as follows: Balance on in TEUR Balance on in TEUR Capital stock 15,000 15,000 Capital surplus 66,743 66,743 Revenue reserves 71,649 57,098 Reserve as per 73 a VAG, taxed portion 36,421 36,421 Retained earnings 3,750 3,750 Reserve as per 73 a VAG 5,250 5,250 Supplementary capital as per 73 c VAG 142,535 96, , ,797 Change 21.6% 2.0% Development of equity Capital stock TEUR Capital surplus TEUR Revenue reserves TEUR Contingency reserve TEUR Retained earnings TEUR Total TEUR Balance on Jan. 1, ,000 66,743 43,113 29,903 18, ,509 Dividend -18,750-18,750 Additions 0 Allocation to/reversal of reserves 13,986 6,518 20,504 Net income 3,750 3,750 Balance on Dec ,000 66,743 57,099 36,421 3, ,013 Dividend -3,750-3,750 Additions 0 Allocation to/reversal of reserves 14,550 14,550 Net income 3,750 3,750 Balance on Dec ,000 66,743 71,649 36,421 3, ,563 18

23 With our compliments Thank you Introduction by the Boards The Business Environment in 2006 Management Report and Report on the Annual Financial Statements Balance Sheet Income Statement Notes to the Annual Financial Statements Report of the Supervisory Board Contacts At the end of December 2002, Erste Bank der oesterreichischen Sparkassen AG acquired a majority stake in s Versicherung AG. In accordance with the relevant legal regulations, s Versicherung is therefore classified as a subsidiary of Erste Bank. The shareholder structure of s Versicherung is as follows: Untaxed Reserves Untaxed reserves totaled TEUR 5,250 as of the balance sheet date (2005: TEUR 5,250). Shareholder structure Erste Bank der oesterreichischen Sparkassen AG 33.3% Immorent AG 22.2% Donau Allgemeine Versicherungs-AG 10.0% Steiermärkische Bank und Sparkassen AG 9.4% NÖ-Sparkassen Beteiligungsges.m.b.H. 4.8% Kärntner Sparkasse AG 4.7% Allgemeine Sparkasse OÖ Bank-AG 4.7% Salzburger Sparkasse Bank-AG 4.7% 7-Tiroler-Sparkassen Beteiligungsges.m.b.H. 3.5% Tiroler Sparkasse Bank-AG Innsbruck 2.3% Shareholders with stake < 1% 0.4% As of December 31, 2006 s Versicherung fulfilled the equity requirements defined in the Austrian Insurance Company Supervisory Act (liquidity) by 134.6%. The liquidity of the Company equaled 127.4% of the requirements for equity as defined in 86 e to l of the Austrian Insurance Company Supervisory Act (group liquidity). 19

24 Technical Reserves The technical reserves, after the deduction of reinsurers shares, developed as follows during 2006: Balance on in TEUR Balance on in TEUR Absolute change in TEUR Change in % Unearned premiums 18,591 18, Reserve for future policy benefits 6,223,763 5,659, , Reserve for unpaid claims 30,935 28,477 2, Reserve for profit distribution to policyholders 115, ,277 4, Equalization reserve 4,354 4, Other technical reserves total 6,393,745 5,822, , % of balance sheet total 82.28% 83.72% Technical reserve for unit-linked life insurance 880, , , % of balance sheet total, including technical reserves for unit-linked life insurance 93.61% 93.49% Of technical reserves totaling TEUR 6,393,745, TEUR 16,195 (2005: TEUR 15,272) are related to the casualty segment. Of this amount, TEUR 11,407 (2005: TEUR 9,893) represent provisions for unpaid claims. 20

25 With our compliments Thank you Introduction by the Boards The Business Environment in 2006 Management Report and Report on the Annual Financial Statements Balance Sheet Income Statement Notes to the Annual Financial Statements Report of the Supervisory Board Contacts Reserve for profit distribution to policyholders The reserve for future policy benefits includes accumulated profits of TEUR 521,793 (2005: TEUR 450,809). The addition to the reserve for profit distribution to policyholders totaled TEUR 78,500 for the reporting year. This reserve had a balance of TEUR 115,943 on December 31, 2006 (2005: TEUR 111,277). Profit distribution 2006 in TEUR Balance on January 1 111,277 Transfer to reserve for future policy benefits -73,834 37,443 Requirements in , ,853 Addition 10,090 Balance on December ,943 Reinsurance A total of TEUR 15,746 (2005: TEUR 16,634) in premiums written for life insurance and TEUR 4,220 (2005: TEUR 3,935) in premiums written for casualty insurance were ceded to reinsurers in These reinsurers carried TEUR 10,871 (2005: TEUR 9,325) of claims for life insurance and contributed TEUR 4,352 (2005: TEUR 6,528) to the reserve for future policy benefits during the reporting year. In the casualty insurance segment, their share of claims equaled TEUR 1,522 (2005: TEUR 1,113). Information on the major risks and uncertainties to which the Company is exposed in accordance with IFRS fair valuation rules The overall risk situation of the Company is comprised of technical risks, risks arising from the default of receivables in the insurance business and the risk associated with investments as well as operating and other risks. Diversification effects must also be taken into account. Technical risk is defined as the possibility that major payment flows in the insurance business may deviate from their expected value. This is explained by the fact that premiums are received at the start of an insurance period, but the contractually agreed services (claims) are determined by coincidence. The individual categories of technical risks are described below: The premium/damage risk represents the risk associated with casualty insurance, which arises from the obligation to pay claims in the future from premiums that are defined in advance. The amount of these claims is not known with certainty when the premiums are determined because the occurrence of a claim situation is determined by coincidence. The premium/claim risk is the risk associated with life insurance, which arises from the obligation to make constant insurance payments over a longer period of time whereby these payments are dependent on future developments from a constant premium that is defined in advance. Interest guarantee risk reflects the risk for insurance branches that is linked to guaranteed interest payments. Reserve risk is the risk associated with technical reserves. Risks arising from the default of receivables in the insurance business are comprised of the risks associated with receivables due from reinsurers as well as receivables due from policyholders and insurance brokers. The risks associated with investments cover the following areas: 21

26 Market risk is defined as the potential loss arising from unfavorable changes in market prices or parameters that may influence market prices. Market risk includes the risk of changes in interest rates, risks associated with stocks and other equity instruments as well as foreign currency risks. Credit risk is the risk of a loss or lost profit resulting from default by a debtor. Liquidity risk reflects the inability to meet payment obligations, in particular obligations arising from insurance contracts, at any time. Operating risks comprise the risks associated with systems or processes used by the Company, especially in the form of operating risks that can arise from human error, technical failure or external factors, as well as legal risks that may result from contractual agreements or legal regulations. s Versicherung established a corporate risk management department in This department carried out an assessment of the general risk situation during the reporting year, which led to the identification and definition of the major risks to which the Company is exposed. A professional asset-liability management (ALM) program was successfully implemented during the reporting year, which makes it possible to actively manage all individual risks within the context of the Company s overall risk position as part of a newly established risk management process. Determinant and stochastic ALM analyses permit the identification and valuation of investment and interest guarantee risks. The reserves for future policy benefits and assets that are held to cover technical liabilities are invested in accordance with the overall risk situation and strategy of s Versicherung. These investments may include bonds, stocks, structured bonds, loans, property and derivative financial instruments. The volume and limitation of open transactions were determined based on the increasing risk of the planned categories of investment as well as market risk. s Versicherung has defined its investment strategy in guidelines and regulations for derivative financial instruments, and compliance with these rules is monitored regularly by the internal audit department. The internal audit department reports to the on the results of its examinations. The Company has implemented a hierarchical decision structure that incorporates the risk content of the individual investments and investment volumes, and ranges up to investments that must be approved by the Supervisory Board in accordance with the articles of association of s Versicherung. The documents prepared for decision-making include an explanation of all related risks and the possible negative effects on liquidity, and relevant existing values are provided where available. The investment guidelines call for the maintenance of a generally low level of risk, which reflects the requirements for profit distribution based on a steady and safe return over the long-term. A major function of risk analysis is to achieve a diversified portfolio that will minimize risk through an appropriate mix and distribution of investments. During the reporting year, the asset management area was reorganized to separate market and post-market activities. The newly created mid-office reports directly to the responsible member of the and oversees risk management for investments. Work has also started to implement a suitable software solution to support the entire workflow. In order to minimize the credit risk associated with investments, the Company focuses on investment-grade bonds and the broadest possible diversification of issuers. The rating structure of directly held annuities and loans on December 31, 2006 is shown below: Rating classe: AAA AA A BBB Not Rated As a % of investments 5.7% 20.6% 35.7% 1.1% 0.3% As of December 31, 2006, no debtor had a lower rating than BBB- (in this list the ratings AA+, AA and AA- are combined into class AA; a similar combined group is reported for A and BBB.) Liquidity planning incorporates expected premium payments, income on investments and the repayment of principal from 22

27 With our compliments Thank you Introduction by the Boards The Business Environment in 2006 Management Report and Report on the Annual Financial Statements Balance Sheet Income Statement Notes to the Annual Financial Statements Report of the Supervisory Board Contacts loans or bonds as well as the development of claims. As a rule, the major part of income on investments is reinvested. The Company s risk position is evaluated periodically, among others, based on the stress test required by the Austrian Financial Market Supervisory Authority. Outlook s Versicherung further strengthened its leading position on the Austrian life insurance market during In its function as the competence center for pension planning in the Austrian Savings Bank Group, s Versicherung can look to the development of business in 2007 with great optimism. The restructuring of the social security system and related steady growth in private insurance will create a range of new opportunities for s Versicherung in the coming years. The Company sees a sizeable potential for market development, above all in the areas of nursing care, unit-linked life insurance and retirement products with a capital guarantee. The Company s established products combined with the continuous introduction of new and innovative models for retirement planning will allow s Versicherung to maintain a leading position on the Austrian market in the future. In order to meet a frequent wish of customers and complete our offering of retirement-related services, we developed an insurance policy for funeral costs. This product was introduced to the market in 2006 and is marketed through our proven sales channel in the Austrian Savings Bank Group. The ongoing discussion of nursing care in Austria underscores the fact that in addition to financing for retirement benefits and the future of the national health care system the financing of these services will represent a major challenge for the aging population. This will also open a new and important market for s Versicherung in addition to traditional retirement planning, and the Company is well equipped to utilize these opportunities. In September 2006 s Versicherung presented an insurance product for nursing care, which can be added to all categories of private pension policies as supplementary term insurance. The introduction of single-premium insurance for nursing care is also planned. In contrast to products currently offered on the market and the government subsidy for nursing care, this insurance will have additional advantages that include the indexing of benefits and vested claims if premium payments are discontinued as the result of a financial crisis. s Versicherung also took a new approach to customer and service orientation through its cooperation with the Caritas hospice organization, which also provides free professional care for terminally ill patients. The High fix Concept that was introduced in 2006 is a unit-linked life insurance policy with a maximum balance guarantee. It will provide support, above all, for the expansion of our sales activities to also include cooperation partners in the credit brokerage sector. A decisive factor for the success of s Versicherung is formed by the recognized high standard of services provided by the employees of the Austrian Savings Bank Group. In order to continue to provide customers with the best possible advice on the many issues related to financial and pension planning, s Versicherung will continue the training program that was started in 2005 together with the Austrian Savings Bank Group. s Versicherung is well aware that the commitment of its employees represents the foundation for the successful development of business, and therefore places substantial value on the creation of a working climate that encourages motivation. That includes measures such as the design of workstations in accordance with the latest industrial medicine and technical standards, protection against passive smoking and help for employees who decide to quit smoking. The Company has also worked for many years to meet the training needs of its workforce with individually designed programs, which are continuously adjusted to meet the needs of the market. During the second half of 2006, s Versicherung and the Employees Council developed a pension plan for the Company s employees based on the collective insurance program. This plan took effect at the start of

28 s Versicherung on the International Stage Hungary Erste Sparkassen Biztosító Zrt. is wholly owned by s Versicherung and its Austrian subsidiaries. The company s most important sales partner for life insurance products is Erste Bank Hungary Rt. The capital stock of the company totals HUF 1,000 million (TEUR 3,972). Erste Sparkassen Biztosító Zrt. is supported by ERSTE S Biztositási Alkusz Kft., Budapest, which is a brokerage company as well as a 100% subsidiary of s Versicherung. The capital stock of this company totaled HUF 6 million (TEUR 24) as of December 31, These two companies had an average of 45.4 employees (excl. board members) during the reporting year. The Hungarian life insurance market The life insurance market in Hungary grew by more than 50% in 2006, in part due to the announced introduction of higher taxes on income from insurance policies. Erste Sparkassen Biztosító Zrt. ranked 15th with an increase of 35.3% and a market share of 1.5%. Premium income Erste Sparkassen Biztosító Zrt. recorded premiums of HUF 6,546 million (TEUR 24,868) in 2006 in the life insurance business. Of this total, HUF 4,086 million (TEUR 15,524) were generated by single-premium policies. Results The company recorded profit of HUF 27.6 million (TEUR 105) in Focus and activities Activities in 2006 focused on increasing the cooperation with the company s main sales partner, Erste Bank Hungary Rt. Following changes in the organizational structure of the company and the replacement of two executive board members, the satisfactory development of business during the second half-year confirmed the success of these measures in full. Outlook on 2007 A major goal for 2007 is to further expand sales channels through independent Hungarian cooperative savings societies and brokers, especially when these companies or persons also serve as credit brokers for Erste Bank Hungary Rt. In addition, the product line will be enlarged together with the company s main sales partner. Commercial customers represent a new target group, and will be serviced by the commercial center of Erste Bank Hungary Rt. These measures are designed to increase premiums at a rate significantly in excess of the market and also generate positive earnings. (Amounts in TEUR) Premium income 174 3,793 7,506 11,773 19,476 24,868 Investments 1,985 4,486 8,911 17,071 29,216 39,695 24

29 With our compliments Thank you Introduction by the Boards The Business Environment in 2006 Management Report and Report on the Annual Financial Statements Balance Sheet Income Statement Notes to the Annual Financial Statements Report of the Supervisory Board Contacts Czech Republic The shareholders of Pojišt ovna České spořitelny, a.s., which was founded in 1992, are s Versicherung (44.75%) and the largest retail bank in the Czech Republic, Česká spořitelna, a.s. (55.25%). Since the start of 2004 and following the sale of the property insurance business Pojišt ovna České spořitelny, a.s. is active as a pure life insurance company on the Czech market. The capital stock of the company totals CZK 1,117 million (TEUR 40,648). The company employed a workforce of 137 in 2006 (excl. board members). The Czech life insurance market The life insurance market in the Czech Republic reported growth of 4.8% in However, Pojišt ovna České spořitelny reported the strongest development of all life insurance companies with an 80% increase in premiums. Of special note is the fact that Pojišt ovna České spořitelny became the market leader in the single-premium policy segment with a share of 23.5%. The company was able to nearly double its market share from 5.4% to 9.36% and ranked fifth on the market. Premium income Pojišt ovna České spořitelny, a.s. generated total premiums of CZK 4,428 million (TEUR 156,329) in This represents an increase of 80.5% compared to the previous year. Results Net profit totaled CZK 311,984 million (TEUR 11,016) for the reporting year. These outstanding results were supported above all by higher income from investments. Focus and activities A range of measures that were implemented to counteract the decline in market shares over the past three years allowed the company to achieve a market share of 9.36% in These measures also led to a significant improvement in customer service and cooperation with Česká spořitelna, the company s main sales partner. Outlook on 2007 The introduction of new products for Česká spořitelna such as payment protection insurance, which is a form of credit guarantee insurance as well as the continued expansion of sales through brokers and associated insurance representatives should support further growth in market shares. (Amounts in TEUR) Premium income (life) 32, , , ,125 81, ,485 Premium income (casualty) 82,920 86,650 96,528 20, Investments 95, , , , , ,166 25

30 Slovakia Poist ovňa Slovenskej sporitel ne, a.s., which was founded in 2003, is owned one-third each by Slovenská sporitel ňa a.s., Erste Bank der oesterreichischen Sparkassen AG and s Versicherung. The capital stock of the company totals SKK 81 million (TEUR 2,352). Poist ovňa Slovenskej sporitel ne, a.s. employed an average workforce of (excl. board members) during The Slovakian life insurance market The life insurance market registered growth of 17% in Poist ovňa Slovenskej sporitel ne, a.s. was able to hold the number six position on the market, but with a slightly lower market share of roughly 5%. However, this company ranks third in the area of new business with a share of nearly 14%. The company also remained the undisputed number one in single-premium policies with a market share of over 30% in Results The company recorded net profit of SKK 80,612 million (TEUR 2,170) for the reporting year. Focus and activities The focal point of activities during the past year was placed on the sale of regular-premium products, which was reflected in a 54% increase over the previous year. Outlook on 2007 The goals for 2007 include a further significant increase in regular premiums through the introduction of the first unitlinked product as well as the continued intensification of cooperation with Slovenská sporitel ňa, a. s. in the financing area. Following an increase in the legally required minimum capital for life insurance companies to EUR 4 million, equity will be raised from SKK 90 million to SKK 171 million during the first quarter of The contributions by the previous shareholders will reflect their stakes in the company. Premium income In 2006 Poist ovňa Slovenskej sporitel ne, a.s. sold life insurance contracts with a total premium volume of SKK 1,205 million (TEUR 32,432). (Amounts in TEUR) Premium income 7,721 26,704 30,704 32,432 Investments 14,726 39,641 72, ,081 26

31 With our compliments Thank you Introduction by the Boards The Business Environment in 2006 Management Report and Report on the Annual Financial Statements Balance Sheet Income Statement Notes to the Annual Financial Statements Report of the Supervisory Board Contacts Croatia In Croatia, Erste Sparkassen osiguranje d.d. za životno osiguranje started activities in July The shareholders of this company are s Versicherung (74%) and the Erste Bank subsidiary in Croatia, Erste & Steiermärkischen Bank, d.d. (26%). As of December 31, 2006 the company had 22 employees (excl. board members). The Croatian life insurance market The Croatian life insurance market reported year-on-year growth of 13% in Erste Sparkassen osiguranje d.d. za životno osiguranje was able to gain a market share of 2.4% in its first full year of business, which ranked the company 13th on the market. Premium income The company sold life insurance policies with a total value of HRK 51 million (TEUR 7,029) in Results The results reported by Erste Sparkassen osiguranje d.d. za životno osiguranje were better than expected at HRK -7 million (TEUR -932). Focus and activities Business processes in this young company were optimized during In accordance with an increase in the legal minimum capital requirement, equity was raised from HRK 15 million to HRK 22.5 million (TEUR 3,061.1) during the reporting year. The shareholders subscribed to this capital increase in proportion to their holdings in the company. Outlook on 2007 The company plans to conclude agreements with at least one other bank and several agents (associated insurance brokers) as new sales partners in 2007 as an addition to the current cooperation with Erste & Steiermärkischen Bank, d.d. The product line will be expanded to include unit-linked life insurance to also meet the rising demand for insurance products as an investment alternative in Croatia. (Amounts in TEUR) Premium income 1,388 7,029 Investments 5,003 9,512 27

32 The following information is based on data from the insurance companies managed by s Versicherung. It is designed to provide an overview of the contribution made by these subsidiaries to the total volume of business in the s Versicherung Group. Premiums 20.4% 79.6% s Versicherung 14.5% Pojišt ovna České spořitelny, a.s. Premiums The premiums generated by the insurance companies in Central Europe during 2006 rose by 65.1% over the previous year, in particular due to an increase of 90.4% in the Czech Republic. The foreign subsidiaries were responsible for 20.4% of the total premium income recorded by the s Versicherung Group. 3.0% Poist ovňa Slovenskej sporitel ne, a.s. 2.3% ERSTE Sparkassen Biztosító Zrt. 0.6% Erste Sparkassen osiguranje, d.d. Premiums in million Share Change Share Change s Versicherung 1, % 23.4% % -22.7% ERSTE Sparkassen Biztosító Zrt % 65.5% % 27.7% Poist ovňa Slovenskej sporitel ne, a.s % 15.0% % 5.6% Pojišt ovna České spořitelny, a.s % -35.7% % 90.4% Erste Sparkassen osiguranje, d.d % % 405.8% Total foreign subsidiaries % -19.6% % 65.1% s Versicherungs-Group - Total 1, % 16.7% 1, % -13.3% 28

33 With our compliments Thank you Introduction by the Boards The Business Environment in 2006 Management Report and Report on the Annual Financial Statements Balance Sheet Income Statement Notes to the Annual Financial Statements Report of the Supervisory Board Contacts Investments, including investments in unit-linked life insurance The development of investments in Central Europe was outstanding, with an increase of 36% (10.6% in total for the s Versicherung Group) for the reporting year. Of the total investments in the s Versicherung Group, over 8.5% are held in Central Europe. Investments 8.5% 91.5% s Versicherung 6.6% Pojišt ovna České spořitelny, a.s. 1.3% Poist ovňa Slovenskej sporitel ne, a.s. 0.5% ERSTE Sparkassen Biztosító Zrt. 0.1% Erste Sparkassen osiguranje, d.d. Investments as per IAS 39 in million Share Change Share Change s Versicherung 6, % 22.6% 7, % 8.7% ERSTE Sparkassen Biztosító Zrt % 71.2% % 35.9% Poist ovňa Slovenskej sporitel ne, a.s % 82.7% % 50.6% Pojišt ovna České spořitelny, a.s % -8.6% % 32.7% Erste Sparkassen osiguranje, d.d % % 90.2% Total foreign subsidiaries % 2.3% % 36.0% s Versicherungs-Group - Total 7, % 20.9% 8, % 10.6% 29

34 Balance Sheet as of December 31, 2006 Assets Life insurance in EUR Property and casualty in EUR Total 2006 in EUR Total 2005 in EUR 000 A. Intangible assets 2,940, , ,943, ,617 I. Other intangible assets 2,940, , ,943, ,617 B. Investments 6,293,103, ,282, ,314,386, ,933,908 I. Real estate 26,725, ,725, ,315 II. Investments in affiliated companies and non-consolidated minority shareholdings 1. Shares in affiliated companies 32,576, , ,782, , Bonds and other securities issued by and loans to affiliated companies 1,033,589, ,000, ,053,589, ,099, Non-consolidated minority shareholdings 61,962, ,076, ,039, , Bonds and other securities issued by and loans to companies linked to the Group by equity interests 1,795, ,795, ,934 III. Other investments 1. Equities and other variable-income securities 1,665,227, ,665,227, ,015, Bonds and other fixed-income securities 2,837,538, ,837,538, ,318, Interests in joint investments 40,946, ,946, , Mortgages receivable 7,427, ,427, , Prepayments received on policies 156, , Other loans granted 217,809, ,809, , Bank deposits 367,212, ,212, ,852 IV. Deposits with ceding companies 133, , C. Investments held for unit-linked and index-linked life insurance 897,173, ,173, ,505 (Transferred amount) 7,193,218, ,285, ,214,503, ,615,030 30

35 With our compliments Thank you Introduction by the Boards The Business Environment in 2006 Management Report and Report on the Annual Financial Statements Balance Sheet Income Statement Notes to the Annual Financial Statements Report of the Supervisory Board Contacts Equity and Liabilities Life insurance in EUR Property and casualty in EUR Total 2006 in EUR Total 2005 in EUR 000 A. Shareholders equity 186,491, ,072, ,563, ,013 I. Capital stock 1. Par value 14,999, ,999, ,000 II. Capital surplus 1. Non-available 62,186, ,556, ,742, ,743 III. Revenue reserve 1. Legal reserve pursuant to 130 Stock Corporation Act of , , Available reserves 71,644, ,644, ,094 IV. Contingency reserve under 73a VAG, taxed portion 36,076, , ,421, ,421 V. Retained earnings 1,579, ,170, ,750, ,750 - of which retained earnings brought forward B. Untaxed reserves 5,139, , ,249, ,250 I. Contingency reserve under 73a VAG 5,139, , ,249, ,250 C. Subordinated liabilities 141,284, ,250, ,534, ,535 (Transferred amount) 332,915, ,432, ,347, ,798 31

36 Assets Life insurance in EUR Property and casualty in EUR Total 2006 in EUR Total 2005 in EUR 000 (Transferred amount) 7,193,218, ,285, ,214,503, ,615,030 D. Receivables 15,236, , ,057, ,371 I. Receivables from direct insurance business 1. from policyholders 3,104, , ,598, , from intermediaries 274, , , II. Receivables from reinsurance business 94, , III. Other receivables 11,763, , ,069, ,733 E. Accrued interest and rent 81,810, , ,273, ,348 F. Other assets 453,564, ,499, ,064, ,780 I. Tangible assets (excluding real estate) and inventory 2,430, , ,448, ,439 II. Demand deposits, cheques and cash in hand 451,127, ,482, ,609, ,336 III. Miscellaneous assets 6, , G. Prepaid expenses 1,582, , ,580, ,965 I. Deferred tax assets 1,462, , ,459, ,728 II. Other prepaid expenses 120, , H. Eliminations -2,337, ,337, Total Assets 7,743,075, ,403, ,770,478, ,954,494 32

37 With our compliments Thank you Introduction by the Boards The Business Environment in 2006 Management Report and Report on the Annual Financial Statements Balance Sheet Income Statement Notes to the Annual Financial Statements Report of the Supervisory Board Contacts Equity and Liabilities Life insurance in EUR Property and casualty in EUR Total 2006 in EUR Total 2005 in EUR 000 (Transferred amount) 332,915, ,432, ,347, ,798 D. Technical reserves - net 6,377,549, ,195, ,393,745, ,822,254 I. Unearned premiums 1. Gross 24,114, , ,837, , Reinsurers share -5,917, , ,246, ,686 II. Reserve for future policy benefits 1. Gross 6,310,273, ,310,273, ,741, Reinsurers share -86,510, ,510, ,159 III. Reserve for unpaid claims 1. Gross 21,786, ,360, ,147, , Reinsurers share -2,259, ,953, ,212, ,496 IV. Reserve for profit distribution to policyholders 1. Gross 115,942, ,942, , Anteil der Rückversicherer V. Claims equalization reserve 4,354, ,354, ,756 VI. Other technical reserves 1. Gross 133, , , Reinsurers share -13, , , E. Investments held for unit-linked and index-linked life insurance 880,089, ,089, ,505 I. Gross 880,089, ,089, ,505 (Transferred amount) 7,590,554, ,627, ,615,182, ,782,557 33

38 Unearned premiums were classified as follows as of December 31, 2006: direct business EUR 24,114,935.73, ceded to reinsurers EUR 5,917, The reserve for future policy benefits as of December 31, 2006 is classified as follows: direct business EUR 6,310,273,428.06, ceded to reinsurers EUR 86,510, I confirm that the reserve for future policy benefits and unearned permiums were calculated in accordance with the applicable regulations and actuarial principles. Vienna, January 2007 Paul Huss m.p. In accordance with 81a Par. 1 of the Austrian Insurance Company Supervisory Act, I confirm that the reserve for future policy benefits equals the required amount due to the designation of assets that are suitable for coverage. Vienna, January 2007 Isabella Mammerler Trustee 34

39 With our compliments Thank you Introduction by the Boards The Business Environment in 2006 Management Report and Report on the Annual Financial Statements Balance Sheet Income Statement Notes to the Annual Financial Statements Report of the Supervisory Board Contacts Equity and Liabilities Life insurance in EUR Property and casualty in EUR Total 2006 in EUR Total 2005 in EUR 000 (Transferred amount) 7,590,554, ,627, ,615,182, ,782,557 F. Non-technical reserves 24,829, , ,734, ,122 I. Reserve for severance payments 2,303, ,303, ,039 II. Reserve for pensions 9,369, ,369, ,258 III. Reserve for taxes payable 5,130, , ,870, IV. Other reserves 8,026, , ,192, ,097 G. Funds held under ceded reinsurance business 94,374, ,374, ,593 H. Other liabilities 33,316, ,870, ,186, ,197 I. Liabilities from primary insurance business 1. to policyholders 10,968, , ,058, , to insurance brokers 9,356, , ,902, , to other insurance companies 336, , II. Liabilities from reinsurance business 2,757, , ,121, ,978 III. Miscellaneous liabilities 9,897, , ,769, ,150 I. Deferred income Total liabilities and shareholders equity 7,743,075, ,403, ,770,478, ,954,494 35

40 Income Statement for the year from January 1 to December 31, 2006 I. Technical account Life insurance Total 2006 in EUR Total 2005 in EUR Earned premiums 828,672, ,079,963 a) Premiums written 829,067, ,081,259 aa) Gross 844,813, ,097,893 ab) Premiums ceded -15,745, ,634 b) Change in reserve for unearned premiums -395, ,296 ba) Gross 40, bb) Reinsurers share -435, Interest income from technical operations 325,969, , Unrealized gains on investments according to Item C of Assets 45,371, , Other technical revenues 142, Losses and loss adjustment expenses -312,909, ,153 a) Claims paid -311,965, ,602 aa) Gross -322,836, ,927 ab) Reinsurers share 10,871, ,325 b) Change in reserve for unpaid claims -944, ,551 ba) Gross -825, ,646 bb) Reinsurers share -118, Increase in technical reserves -691,313, ,021,144 a) Reserve for future policy benefits aa) Gross -695,665, ,027,672 ab) Reinsurers share 4,351, , Expenses for profit distribution to policyholders -78,500, ,000 a) Gross -78,500, , Operating expenses -77,896, ,693 a) Acquisition costs -71,345, ,902 b) Other operating expenses -8,113, ,122 c) Reinsurance commissions and profit shares paid under assumed reinsurance 1,562, , Unrealized losses on investments according to Item C of Assets -16,590, , Other technical expenses -3,432, , Technical result 19,513, ,396 36

41 With our compliments Thank you Introduction by the Boards The Business Environment in 2006 Management Report and Report on the Annual Financial Statements Balance Sheet Income Statement Notes to the Annual Financial Statements Report of the Supervisory Board Contacts II. Technical account Property and casualty insurance Gesamt 2006 in EUR Gesamt VJ 2005 in EUR 1. Earned premiums 11,376, ,545 a) Premiums written 11,186, ,558 aa) Gross 15,406, ,493 ab) Premiums ceded -4,219, ,935 b) Change in reserve for unearned premiums 189, ba) Gross 216, bb) Reinsurers share -27, Other technical revenues 559, Losses and loss adjustment expenses -5,596, ,043 a) Claims paid -4,083, ,497 aa) Gross -5,605, ,610 ab) Reinsurers share 1,521, ,113 b) Change in reserve for unpaid claims -1,513, ba) Gross -2,348, bb) Reinsurers share 835, Operating expenses -4,417, ,830 a) Acquisition costs -4,709, ,608 b) Other operating expenses -1,571, ,243 c) Reinsurance commissions and profit shares paid under assumed reinsurance 1,863, , Other technical expenses -1, Change in claims equalization reserve 401, Versicherungstechnisches Ergebnis 2,321, ,236 37

42 III. Non-technical account Life insurance in EUR Property and casualty in EUR Total 2006 in EUR Total 2005 in EUR Technical result - net 19,513, ,321, ,834, , Investment income, including interest 383,120, ,166, ,287, ,264 a) non-consolidated subsidiaries 3,524, , ,534, ,411 of which associated companies 3,524, ,524, ,378 b) Income from real estate 1,102, ,102, ,538 c) Income from other investments 310,974, ,102, ,076, ,042 of which associated companies 61,484, , ,454, ,445 d) Gains on the reversal of impairment losses 54,436, , ,465, ,795 e) Gains on the sale of investments 13,081, , ,107, , Investment expenses, including interest -57,150, , ,755, ,341 a) Asset management expenses -2,923, , ,444, ,680 b) Depreciation and impairment losses on investments -25,159, ,159, ,299 c) Interest expense -6,385, , ,461, ,366 d) Losses on the sale of investments -14,630, , ,637, ,976 e) Other investment expenses -8,051, ,051, Investment income transferred to technical account -325,969, ,969, , Other non-technical revenues 98, , , Other non-technical expenses -5, , Income before tax and minority interests 19,606, ,900, ,507, ,569 38

43 With our compliments Thank you Introduction by the Boards The Business Environment in 2006 Management Report and Report on the Annual Financial Statements Balance Sheet Income Statement Notes to the Annual Financial Statements Report of the Supervisory Board Contacts III. Non-technical account Life insurance in EUR Property and casualty in EUR Total 2006 in EUR Total 2005 in EUR Income before tax and minority interests 19,606, ,900, ,507, , Taxes on income -4,207, , Income before minority interests 18,300, , Write-back of reserves -14,550, ,504 a) Allocation to contingency reserve under 73 a VAG ,518 b) Allocation to available reserves -14,550, , Net income 3,750, , Retained earnings brought forward Retained earnings 3,750, ,750 39

44 Notes to the Annual Financial Statements for 2005 The annual financial statements were prepared in accordance with the provisions of the Austrian Insurance Company Supervisory Act ( Versicherungsaufsichtsgesetz or VAG ) that define the accounting procedures for insurance companies. Accounting and Valuation Methods and Notes to the Balance Sheet Intangible assets were recorded at acquisition cost less ordinary amortization of up to 33% per year. The balance sheet value totaled TEUR 1,616 as of December 31, 2005; it was increased by additions of TEUR 2,344 (2005: TEUR 642) and reduced by amortization of TEUR 1,016 (2005: TEUR 995) during the reporting year, and equaled TEUR 2,944 as of December 31, Of this total, TEUR 1,287 is related to the subsidiary Camelot Informatik und Consulting GmbH. Land and buildings are valued at acquisition or production cost. Ordinary depreciation is generally calculated at the rates established by tax law. As of December 31, 2005 the balance sheet value totaled TEUR 27,315; after additions of TEUR 0 (2005: TEUR 310) and depreciation of TEUR 590 (2005: TEUR 586), the balance sheet value totaled TEUR 26,725 as of December 31, The value of land equaled TEUR 2,442 (2005: TEUR 2,442). The book value of the property at 3107 St. Pölten, Dr.-Adolf-Schärf-Strasse 4, which is used by the Company for business operations, was TEUR 521 (2005: TEUR 540). The Company owns the following properties: 1070 Vienna, Kandlgasse Vienna, Spittelauer Lände Vienna, Meidlinger Hauptstrasse 84 (condominium) 1150 Vienna, Schweglerstrasse Vienna, Pfeiffergasse Vienna, Gunoldstrasse St. Pölten, Dr.-Adolf-Schärf-Strasse 4 (condominium) The balance sheet value of subsidiaries developed as follows: balance on December 31, 2005 TEUR 73,446, additions TEUR 758 (2005: TEUR 46,290), reclassification TEUR 41,022 (2005: TEUR 71), disposals TEUR 400 (2005: TEUR 0); Balance on December 31, 2006 TEUR 32,782. The additions are comprised of Camelot Informatik und Consulting GmbH with TEUR 3 and Erste Sparkassen osiguranje d.d., Zagreb with TEUR 755. The balance sheet value of Sparkassen Immobilien AG, which totals TEUR 41,022, was reclassified to investments in subsidiaries. The disposal was related to PR-Immobiliengesellschaft m.b.h., which was merged with Sparkassen Versicherung as of January 1, These transactions reflect stakes in the following companies: Sparkassen Versicherungsservice Gesellschaft m.b.h., Vienna, with a 100% share of capital stock; the equity of the company totaled TEUR 126 as of December 31, 2006 (2005: TEUR 126). Sparkassen Versicherungsservice Ges.m.b.H. supports our sales partners in the private customer segment and serves as a broker for insurance policies and savings contracts with building societies. ERSTE S Biztosítási Alkusz Kft., Budapest, with a 100% share of capital stock; the equity of the company totaled THUF (TEUR 24) as of December 31, This company is active as an insurance broker on the Hungarian market. The stake owned in Camelot Informatik und Consulting GmbH was increased from 49% to 100% through the purchase of additional shares in Equity totaled TEUR 1,113 as of December 31, 2006, and net profit for 2006 equaled TEUR 118. ERSTE Sparkassen Biztosító Zrt., Budapest, with a 99.9% share of capital stock; the equity of the company totaled THUF 1,046,739 (TEUR 4,158) as of December 31, The other shareholder is Sparkassen Versicherungsservice Gesellschaft m.b.h., Vienna, with a stake of 0.1%. Life insurance policies are sold primarily through Erste Bank Hungary. SVI-EDV-Programmentwicklungsgesellschaft m.b.h., Vienna, with a 76% share of capital stock; the equity of the company totaled TEUR 80 as of December 31, 2006 (2005: TEUR 77) and retained earnings equaled TEUR 44 as of this same balance sheet date (2005: TEUR 41). The other shareholder is SPARDAT Sparkassen-Datendienst Ges.m.b.H., Vienna, with a 24% share of capital stock. 40

45 With our compliments Thank you Introduction by the Boards The Business Environment in 2005 Management Report and Report on the Annual Financial Statements Balance Sheet Income Statement Notes to the Annual Financial Statements Report of the Supervisory Board Contacts The equity of Erste Sparkassen osiguranje d.d., Zagreb, which was founded in 2005, totaled THRK 25,652 (TEUR 3,490) as of December 31, s Versicherung owns a stake of 74% in this company. A loss of THRK 6,826 (TEUR 932) was recorded for The equity of Pojišt ovna České spořitelny, a.s. (stake: 44.75%), which is headquartered in Pardubice, totaled TCZK 1,824,710 (TEUR 66,059) as of December 31, The company recorded net profit of TCZK 307,547 (TEUR 10,860) for the 2006 Business Year. Poist ovňa Slovenskej sporitel ne, a.s., Bratislava, with a 33.33% share of capital stock, started operations in Equity totaled TSKK 275,488 (TEUR 8,000). The company recorded net profit of TSKK 80,612 (TEUR 2,170) for In addition, s Versicherung owns investments of less than 10% each in three other affiliated companies. The balance sheet value of investments in other companies developed as follows: balance on December 31, 2005 TEUR 5,869, additions TEUR 69,910 (2005: TEUR 537), disposals TEUR 9,399 (2005: 0) and write-downs TEUR 3,340 (2005: TEUR 1,252); balance on December 31, 2006 TEUR 63,040. The additions and write-downs resulted from the transfer of VBV Pensionskassen AG to VBV Betriebliche Altersvorsorge AG, the transfer of Projektbau GmbH to Projektbau Holding GmbH and the transfer of PFG Liegenschaftsbewirtschaftungs GmbH & Co KG to PFG Holding GmbH as well as an increase in the stake owned in Elisabeth Liegenschafts-Entwicklungs AG following the merger with PR-Immobiliengesellschaft m.b.h. and the reclassification of Sparkassen Immobilien AG. The write-down involved PFG Holding GmbH and PFG Liegenschaftsbewirtschaftungs GmbH & Co KG. Bonds and other securities issued by affiliated companies and loans to affiliated companies developed as follows: Securities: balance on December 31, 2005 TEUR 1,086,621, additions and transfers TEUR 72,557 (2005: TEUR 139,420), disposals TEUR 117,021 (2005: TEUR 84,509), write-downs TEUR 192 (2005: TEUR 69) and write-ups TEUR 0 (2005: TEUR 0); the resulting balance as of December 31, 2006 was TEUR 1,041,965. These securities are comprised primarily of bonds, which were issued by Erste Bank der oesterreichischen Sparkassen AG and the Austrian savings banks with joint liability. Loans: balance on December 31, 2005 TEUR 12,877, additions and transfers TEUR 0 (2005: TEUR 0), disposals TEUR 1,252 (2005: TEUR 1,474), write-downs TEUR 0 (2005: TEUR 0) and write-ups TEUR 0 (2005: TEUR 0); the resulting balance as of December 31, 2006 was TEUR 11,625. Bonds and other securities issued by as well as loans granted to companies linked to the Group by equity interests developed as follows: Securities: balance on December 31, 2005 TEUR , additions and transfers TEUR 0 (2005: TEUR 0), disposals and transfers TEUR 100 (2005: TEUR 0), write-downs TEUR 0 (2005: TEUR 0) and write-ups TEUR 0 (2005: TEUR 0); the resulting balance as of December 31, 2006 was TEUR 1,657. Loans: balance on December 31, 2005 TEUR 177, additions and transfers TEUR 0 (2005: TEUR 0), disposals TEUR 38 (2005: TEUR 66), write-downs TEUR 0 (2005: TEUR 0) and write-ups TEUR 0 (2005: TEUR 0); the resulting balance as of December 31, 2006 was TEUR 139. Shares and other-variable income securities as well as shares in affiliated companies and investments in other companies are generally valued in accordance with the lower of cost or market principle. Bonds and other fixed-income securities are also valued in accordance with the lower of cost or market principle. The determination of present value for shares in affiliated companies and investments in other companies is based on acquisition cost less any necessary impairment charges. The present value of land and buildings was determined in accordance with recommendations made by the Austrian Association of Insurers in 1999 or on the basis of expert appraisals. The market value of prepayments received on policies and other loans is based on recognized financial models (discounted cash flow). All other investments were valued at market prices or nominal value; shares that are not traded on a stock exchange were valued at cost. 41

46 Mortgages receivable and other loans granted are carried at the nominal value of the outstanding receivables. Any additional discount is distributed over the term of the loan and recorded under deferred income. Other loans granted include, among others, loans of TEUR 160,598 (2005: TEUR 256,005) provided to the Republic of Austria, loans of TEUR 55,704 (2005: TEUR 56,256) to financial institutions and loans of TEUR (2005: TEUR 1,927) to the Austrian provinces and municipalities Assets in foreign currencies are translated at the average exchange rate on the balance sheet date. Investments held for unit-linked life insurance are valued as of the balance sheet date, and comprise certificates in the 103 funds listed below. In accordance with the insurance policies, the savings component of the unit-linked life insurance is invested in these funds: ASK Pensionsvorsorge (T), Austro Mündelrent, Austrorent (A), Classic Bond, Delphin Invest, Equity s Best Invest, ESPA Alternative Multistrategie, ESPA Best of America, ESPA Best of Europe, ESPA Best of Healthcare, ESPA Best of Japan, ESPA Best of Technology, ESPA Best of World, ESPA Bond Combirent, ESPA Bond Danubia, ESPA Bond Dollar, ESPA Bond Dollar-Corporate, ESPA Bond Emerging Markets, ESPA Bond Euro Rent, ESPA Bond Euro-Corporate, ESPA Bond Euro-Mündelrent, ESPA Bond Europe, ESPA Bond Europe High Yield, ESPA Bond International, ESPA Bond Mortgage, ESPA Bond USA- Corporate, ESPA CASH Euro Plus, ESPA PIF MIX, ESPA PIF TOP, ESPA Portfolio Bond, ESPA Portfolio Creative (A), ESPA Portfolio MED, ESPA Portfolio MIX, ESPA Portfolio Target (A), ESPA PRO INVEST, ESPA PRO TOP, ESPA Select Bond, ESPA Select INVEST, ESPA Select MED, ESPA Select Stock, ESPA Select Stock-PLUS, ESPA Stock America, ESPA Stock Biotec, ESPA Stock BRICK, ESPA Stock Commodities, ESPA Stock Europe, ESPA Stock Europe Emerging (vm Danubia), ESPA Stock Europe-Property, ESPA Stock Europe-Value, ESPA Stock Finance, ESPA Stock Global, ESPA Stock Global Emerging markets, ESPA Stock Istanbul, ESPA Stock Japan, ESPA Stock Pharma, ESPA Stock Techno, ESPA Stock Vienna, The present value of investments is as follows (in TEUR): Present values Fair value of investments Land and buildings 32,500 32,500 Shares in subsidiaries 49,421 76,850 Bonds and other securities issued by, and loans granted to affiliated companies 1,052,632 1,144,187 Non-consolidated minority shareholdings 72,817 5,869 Bonds and other securities issued by, and loans granted to companies linked to the Group 1,813 1,962 Shares and other variable-income securities 1,708,275 1,057,779 Bonds and other fixed income securities 2,707,691 3,417,118 Interests in joint investments 41,058 23,216 Mortgages receivable 8,445 9,001 Prepayments received on policies Other loans granted 232, ,206 Time and notice deposits with banks 367,213 46,852 Investments in unit-linked life insurance Investment fund of unit-linked life insurance 897, ,505 42

47 With our compliments Thank you Introduction by the Boards The Business Environment in 2005 Management Report and Report on the Annual Financial Statements Balance Sheet Income Statement Notes to the Annual Financial Statements Report of the Supervisory Board Contacts ESPA Vinis Stock Austria, ESPA Vinis Stock Europe, ESPA Vinis Stock Global, ESPA WWF Stock Umwelt, EURO MS (T), EuroPlus 50 (A), Global Fund Selection Balanced, Global Fund Selection Growth, Global Performer, Interbond (A), Interstock (A), Invest Global Dynamisch, Master s Best Invest A, Master s Best Invest B, Master s Best Invest C, Piz Buin Global (T), Pro Invest aktiv, Pro Invest Plus (T), s Zukunft Aktien 1, s Zukunft Aktien 2, s Zukunft Renten 1, s Zukunft Renten 2, Sbg.Spk. Bond Austria (A), Sbg.Spk. Invest (A), Sbg.Spk. Top of World, Sbg.Spk. Trend (A), Select Aktien Dachfonds, Select Anleihen Dachfonds, s-garantie Konzept, s-high Fix 16, s-high Fix 20, s-high Fix 24, s-high Fix 29, s-protecter, Tiroleffekt (A), Tirolkapital (A), Tirolrent (A), Tirolvision, TOP Strategie classic, TOP Strategie dynamic, Top-Fonds 1 Der Stabile (T), Top-Fonds 2 Der Flexible (T), Top-Fonds 3 Der Aktive (T), Top-Fonds 4 Der Planende, Top-Fonds 5 Der Offensive, Wilder Kaiser. The financial statements for 2006 show deferred taxes of TEUR 2,460. Tangible assets (with the exception of land and buildings) are valued at acquisition cost less ordinary depreciation, which is calculated at the rates established by tax law. Low-value assets of TEUR 111 (2005: TEUR 101) were written off in full during the year of purchase. Obligations arising from long-term rental contracts total TEUR 533 (2005: TEUR 516) for the next business year and TEUR 997 (2005: TEUR 945) for the following five business years. These contracts generally cover IT equipment (copiers, printers, telephone equipment etc.). Capital stock remained unchanged at TEUR 15,000 in As of December 31, 2006 it was divided into 206,400 registered shares. The balance sheet item subordinated liabilities is comprised of supplementary capital bonds, which were issued as securities and are listed in the following table. Another supplementary bond with a value of TEUR 46,000 was issued on June 30, The legal validity of the issue was confirmed by KPMG Wirtschaftsprüfungs- und Steuerberatungs GmbH, 1090 Vienna, Porzellangasse 51. Description Nominal value in TEUR 6.75% supplementary capital bond 1996/1/P 14, % supplementary capital bond 1999/1/P 22, % supplementary capital bond 2001/1/P 7, % supplementary capital bond 2001/2/P 22, % supplementary capital bond 2003/1/P 30, % supplementary capital bond 2006/1/P 46,000 Unearned premiums in the property and casualty insurance segment are calculated on a pro rata temporis basis over the term of the policy. A deduction of TEUR 128 (2005: TEUR 131) for costs was made in agreement with the accounting regulations for insurance companies. In the life insurance segment, unearned premiums are calculated in accordance with actuarial principles. The reserve for future policy benefits was computed in keeping with the relevant legal requirements and actuarial principles. The most important parameters for the calculation of the reserve for future policy benefits are dependent on the type of insurance and the relevant tariff. The following mortality tables are used for endowment and term insurance: ADStM 24/26, AÖStM 80/82, AÖStF 90/92, AÖStM 90/92, AÖStM 2000/02 bzw. AÖStF 2000/02. The following mortality tables are used for pure endowment insurance: ÖVM 59/61 RR 67, EROM/EROF G 50, AVÖ 1996 R E, und AVÖ 2005 R. Since 2005 the calculation of the reserve for future policy benefits arising from annuity insurance must be based on the AVÖ 2005 R annuity table. This new table was issued 43

48 to reflect the steady increase in life expectancy, which was not incorporated to a sufficient extent in the annuity table previously used for this purpose. The use of the AVÖ 2005 R annuity table led to an increase in the reserve for future policy benefits (requirement for subsequent addition). The reserve for future policy benefits arising from annuity insurance in the indemnification phase was increased to reflect the amount required by the AVÖ 2005 R table during the preparation of the annual financial statements for For deferred annuity and pension insurance, a higher reserve for future policy benefits at the start of benefit payments is taken into account on an individual policy basis and a lump-sum reserve is created during the pay-in phase. The company has elected to use the option provided by 19 Par. 3 of the Austrian Insurance Company Supervisory Act, which permits the development of the lump-sum reserve for future policy benefits over a period of up to ten years (beginning with the annual financial statements for 2005) subject to the approval of the Austrian Financial Market Authority. Of the total additional requirement resulting from the application of the AVÖ 2005 R annuity table, 74% had been added to the reserve by December 31, 2006 (2005: 48%). The technical interest rate used to calculate the reserve for future policy benefits is as follows: for policies up to %, after %, after July %, after January % and after January %. If the calculation of the reserve for future policy benefits includes a discount in accordance with the Zillmer method, this discount equals 40, 35 or 10 for individual insurance policies and 20 or 0 for group insurance policies. The equalization reserve was created in accordance with the provisions of regulation BGBl Nr. 545/1991, which was issued by the Austrian Ministry of Finance. During the reporting year, the equalization reserve was reduced by TEUR 401 (2005: reduction of TEUR 26). The reserve for profit distribution to policyholders includes the shares of profits that are designated for payment in accordance with business plans in cases where distribution had not been authorized as of the balance sheet date. The amounts included in the provision exceed the funds required for distributions approved by the by TEUR 47,532 (2005: TEUR 36,531). The total addition of TEUR 113,247 represents 93.06% of the required assessment base specified in the directive governing profit distributions to life insurance policyholders (GBVVU). The calculation of the reserve for unpaid claims in the direct business for casualty insurance and life insurance was based on the individual valuation of claims that had been reported, but not yet settled as of the balance sheet date. A lump-sum reserve was created for subsequent claims based on past experience. 44

49 With our compliments Thank you Introduction by the Boards The Business Environment in 2005 Management Report and Report on the Annual Financial Statements Balance Sheet Income Statement Notes to the Annual Financial Statements Report of the Supervisory Board Contacts Assessment base according to 3 (1) of the directive for profit distributions to life insurance policy holders (GBVVU) + Earned premiums ( 81e Par. 4 Nr. III.1. VAG) 538,805, Income on investments and interest income ( 81e Par. 5 Nr. IV.2. VAG) 339,479, Expenses for investments and interest expense ( 81e Par. 5 Nr. IV.3. VAG) -52,345, Other technical revenues ( 81e Par. 4 Nr. III.4. VAG) 121, Losses and loss adjustment expenses ( 81e Par. 4 Nr III.5. VAG) -260,125, Increase in technical reserves ( 81e Par. 4 Nr. III.6. VAG) -427,490, Decrease in technical reserves ( 81e Par. 4 Nr. III.7. VAG) 0.00 Operating expenses ( 81e Par. 4 Nr. III.9. VAG) -46,842, Other technical expenses ( 81e Par. 4 Nr. III.11. VAG) -2,920, Other non-technical revenues ( 81e Par. 5 Nr. IV.5. VAG) 84, Other non-technical expenses ( 81e Par. 5 Nr. IV.6. VAG) -4, Taxes on income ( 81e Par. 5 Nr IV.11. VAG) -1,819, Write-back of risk reserve in acc. with 73a VAG ( 81e Par. 5 Nr. IV.13.a. VAG) 0.00 Allocation to risk reserve in acc. with 73a VAG ( 81e Par. 5 Nr. IV.14.a. VAG) 0.00 = Assessment base in acc. with 18 Par. 4 VAG 86,940, Direct allocation in reporting year 34,747, = Assessment base increase through direct allocation 121,687, % of assessment base = minimum allocation to reserve for profit distribution 103,434, Allocation to profit distribution during reporting year 78,500, Direct allocation during reporting year 34,747, Total allocation to profit distribution for reporting year 113,247, as a % of the assessment base 93.06% 45

50 The computation of the reserve for severance payments was based on recognized actuarial methods, using the AVÖ 1999 P calculation parameters for pension insurance (Pagler & Pagler Tables) and the applicable International Accounting Standards. Claims were valued in accordance with the projected unit credit method. The calculations are based on the following parameters: Long-term capital market interest rate 4.5% Trend in collective bargaining agreement 2.0% Wage/salary trend 1.0% Career trend 0.3% The reserve for pensions was also calculated in accordance with actuarial principles, using the AVÖ 1999 P calculation parameters for pension insurance (Pagler & Pagler Tables) and the applicable International Accounting Standards. The projected unit credit method and, for pensions payable, the present value method were used. The calculations are based on the following parameters: Long-term capital market interest rate 4.5% Trend in defined benefit component 2.5% Trend in defined contribution component 0.0% Trend in disability commitments 2.0% Annuity trend for retirees 2.0% Amounts due to insurance brokers totaled TEUR 9,902 (2005: TEUR 17,007), and include TEUR 9,209 of liabilities to affiliated companies. Tax liabilities equaled TEUR 2,591 for the reporting year (2005: TEUR 2,350) and amounts due to social security carriers totaled 194 (2005: TEUR 161). 46

51 With our compliments Thank you Introduction by the Boards The Business Environment in 2005 Management Report and Report on the Annual Financial Statements Balance Sheet Income Statement Notes to the Annual Financial Statements Report of the Supervisory Board Contacts s Versicherung became a member company of the Erste Bank Group through a stock transaction that was carried out at the end of Therefore, the following amounts from the individual balance sheet items are related to subsidiaries. Member company 2006 in TEUR Affiliates Member company 2005 in TEUR Affiliates Deposits with banks 367, ,852 0 Deposits with ceding companies Settlement receivables from reinsurance business Other receivables 6, ,912 0 Demand deposits with banks 440, ,950 0 Settlement liabilities from reinsurance business Other liabilities 2, ,

52 NOTES to the Income Statement Premiums written in the life insurance segment totaled TEUR 844,813 (2005: TEUR 1,097,894) for Of this amount, TEUR 844,480 (2005: TEUR 1,097,640) were generated in the direct business and TEUR 333 (2005: TEUR 254) in the indirect business. Premiums written in the direct business are comprised of the following: Premiums Life Insurance Change Change in TEUR in TEUR absolute in % Premiums written Individual insurance 809,496 1,065, , % Group insurance 34,984 31,966 3, % Single-premium policies 425, , , % Regular-premium policies 418, ,739 39, % Policies with profit sharing 549, , , % Policies without profit sharing 294, , , % Unit-linked life insurance 194, ,483 60, % Premiums earned Individual insurance 809,566 1,064, , % Group insurance 34,984 31,966 3, % Single-premium policies 425, , , % Regular-premium policies 418, ,928 39, % Policies with profit sharing 549, , , % Policies without profit sharing 294, , , % Unit-linked life insurance 194, ,483 60, % 48

53 With our compliments Thank you Introduction by the Boards The Business Environment in 2005 Management Report and Report on the Annual Financial Statements Balance Sheet Income Statement Notes to the Annual Financial Statements Report of the Supervisory Board Contacts The net reinsurers share of the life insurance segment was negative for the Company in 2006, and equaled TEUR 2,932 (2005: TEUR 3,007 negative). Reinsurance Life Change Change in TEUR in TEUR absolute in % Premiums written -15,746-16,634 Change in premiums earned Claims 10,871 9,325 Change in claims reserve Change in reserve for future policy benefits 4,352 6,528 Commissions 1,562 1,332 Interest -3,418-3,220 Total reinsurance life -2,932-3, % The indirect business generated a positive balance of TEUR 118 for the reporting year (2005: TEUR 132). Indirect business Change Change in TEUR in TEUR absolute in % Premiums written Change in premiums earned Interest 6 6 Claims Change in claims reserve Commissions Total indirect business % The transfer of income on investments in the life insurance segment from the non-technical to the technical part of the income statement was made in accordance with 16 of the accounting regulations for insurance companies. 49

54 Classification of the various income statement items for the property and casualty insurance segment by area of business: Casualty insurance: gross calculation, direct business Change Change in TEUR in TEUR absolute in % Premiums written ,3% Premiums earned ,0% Claims ,5% Expenses for insurance operations ,3% The net reinsurers share of the property and casualty segment was negative for the Company in 2006, and equaled TEUR 26 (2005: TEUR 691, negative). Reinsurance casualty Change Change in TEUR in TEUR absolute in % Premiums written -4,220-3,935 Premiums earned Claims 1,522 1,113 Change in claims reserve Commissions 1,864 2,021 Total reinsurance casualty % 50

55 With our compliments Thank you Introduction by the Boards The Business Environment in 2005 Management Report and Report on the Annual Financial Statements Balance Sheet Income Statement Notes to the Annual Financial Statements Report of the Supervisory Board Contacts Information on selected expenses for the Company Losses and loss adjustment expenses, operating expenses, other technical expenses, investment expenses and other non-technical expenses are comprised of the following (in TEUR): Sales Operations Total Total Change absolut Salaries 2,347 3,961 6,308 4,841 1,467 Severance compensation Pensions 937 1,577 2, ,896 Legally required social security and payroll-related duties and mandatory contributions ,489 1, Other employee benefits Commission expenses totaled TEUR 62,450 (2005: TEUR 73,810) for the direct insurance business and TEUR 45 (2005: 38) for the indirect business. Income from investments in non-consolidated subsidiaries includes the assumption of TEUR 1,185 in losses (2004: assumption of losses totaling TEUR 1,395) from the subsidiary Sparkassen Versicherungsservice Gesellschaft m.b.h. Gains on the sale of investments totaling TEUR 54,465 (2005: TEUR 43,795) resulted from the sale and disposal of bonds (TEUR 26,283), supplementary capital bonds and participation rights (521), stocks (TEUR 10,669) funds (TEUR 13,654) and loans (3,338). Losses on the sale of investments totaling TEUR 14,638 (2005: TEUR 11,976) resulted from the sale and disposal of bonds (TEUR 6,608), supplementary capital bonds und participation rights (1,687), stock (TEUR 838) and funds (TEUR 5,504). Other Information Sparkassen Versicherung AG is a member of the Austrian Association of Insurance Companies, an extraordinary member of the Austrian Savings Bank Association, an extraordinary member of the Provincial Association of Savings Banks in Lower Austria and Burgenland, an extraordinary member of the Provincial Association of Savings Banks in Upper Austria and Salzburg and an extraordinary member of the Provincial Association of Savings Banks in Styria. Employees The Company employed 113 persons in operations and 19 in sales during the 2006 Business Year, for a total workforce of 133 (2005: 125 employees). Including the employees of Sparkassen Versicherungsservice Ges.m.b.H., 225 employees worked for s Versicherung in 2006, with 111 of the workforce responsible for sales. Expenses for severance payments and pensions totaled TEUR 3,069 in 2006 (2005: TEUR 1,351), whereby TEUR 330 (2005: TEUR 566) of this amount were related to members of the. Remuneration for the three members of the equaled TEUR

56 in 2006 (2005: TEUR 1,000); remuneration of TEUR 15 (2005: TEUR 10) was paid to the members of the Supervisory Board. The members of the boards of s Versicherung are listed on page 7 of this annual report. Additional Information on Measurement at Fair Value The balance sheet items bonds and other securities issued by affiliated companies and loans to affiliated companies and shares and other variable-interest securities include structured assets that do not carry a capital guarantee. Of these items, TEUR 164,490 (fair value: TEUR 169,472) represent assets for which the payment of interest is guaranteed over the entire term or assets for which capital must not be repaid in part or in full. As of the balance sheet date, s Vesicherung had obligations to purchase bonds and private equity investments of up to TEUR 30,400 over the coming years at the market rate in effect on the date of acquisition. A reserve of TEUR 383 was created for a forward exchange contract (USD 47 mill.). This future hedges the foreign exchange component of a USD security investment with a value of USD 47.8 million. Fair value was determined as the market price or stock exchange price on a recognized and liquid market. Assets that are not traded on a recognized and liquid market were valued by an expert in the issuing bank or a company active in the relevant field. Sufficient documentation is available for these valuations, which is understandable for expert third parties as well as constant and consistent. The valuations are based on current market data. defined in Austrian commercial law to achieve an appropriate valuation based on the purpose of the investments in keeping with the Company s investment policy and a reasonable distribution of the portfolio between fixed-interest and variableinterest assets. Moreover, valuation in accordance with the principles set forth in Austrian commercial law for assets is also generally called for by 81 h of the Austrian Insurance Company Supervisory Act. The valuation of assets in accordance with the relevant principles also incorporates the credit standing of the debtor. The market value, but at least the guaranteed repayment value, forms the basis for valuation. No write-downs were made because there were no signs of permanent impairment as of the balance sheet date. Profit Distribution on Life Insurance in Austria The amounts required for the distribution of profit on the following balance sheet date are explained as follows for single-premium insurance policies in policy groups 2, 3 and 9: The share of profit, which arises between the anniversary of the start of the insurance policy and the balance sheet date and is designated for distribution on the following balance sheet date, is explained and reserved through transfer to the reserve for profit distribution to policyholders. The share of profit, which arises between the balance sheet date and the anniversary in the following business year and is designated for distribution on the following balance sheet date, is recognized as a direct charge for the following business year. This method provides a better matching of income and expenses for the distribution of profit on single-premium insurance policies. Fixed-interest assets, which represent assets that carry fixedinterest rates or index-linked interest rates with a capital guarantee by the life insurance department, are valued in accordance with the principles set forth in Austrian commercial law for assets and with the objective of maintaining continuous profit distributions for policyholders. The property and casualty department applies the principles for assets that are 52

57 With our compliments Thank you Introduction by the Boards The Business Environment in 2005 Management Report and Report on the Annual Financial Statements Balance Sheet Income Statement Notes to the Annual Financial Statements Report of the Supervisory Board Contacts In accordance with our policy for life insurance policies, the following rates are used for the distribution of profit: Amount of Profit Distribution Policy group Profit system Form of premium Mortality table Classification Actuarial interest rate Interest bonus rate Mortality differential 0201 Bonus system regular ADStM 24/26 Endowment 3.00% 1.50% 18.75% 0202 Bonus system regular ÖVM 59/61 RR 67 Pure endowment 3.00% 1.50% 0203 Bonus system regular ÖVM 59/61 RR 67 Annuity insurance (pay-in phase) 3.00% 1.50% 0204 * Bonus system single ADStM 24/26 Endowment 3.00% 1.50% 0205 * Bonus system single EROM/F G 50 Pure endowment 3.00% 1.50% 0206 * Bonus system single EROM/F G 50 Annuity insurance (pay-in phase) 3.00% 1.50% 0207 Bonus system regular ADStM 24/26 Endowment 3.00% 1.50% 18.75% 0208 Bonus system regular ÖVM 59/61 RR 67 Pure endowment 3.00% 1.50% 0301 Bonus system single ADStM 24/26 Endowment 3.00% period-linked 0302 Bonus system single EROM/F G 50 Pure endowment 3.00% period-linked 0303 Bonus system single EROM/F G 50 Annuity insurance (pay-in phase) 3.00% period-linked 0304 Bonus system single AÖStM 90/92 Endowment 4.00% period-linked 0305 Bonus system single EROM/F G 50 Pure endowment 4.00% period-linked 0306 Bonus system single AVÖ 1996 R E Annuity insurance (pay-in phase) 4.00% period-linked 0307 Bonus system single AÖStM 90/92 Endowment 3.25% period-linked 0308 Bonus system single AÖStM 90/92 mod 2003 Endowment 2.75% period-linked 0309 Bonus system single AÖStM/F 2000/02 mod Endowment 2.25% period-linked 0501 Bonus system single EROM/F G 50 Life-long annuity insurance 3.00% 2.00% 0502 Bonus system single EROM/F G 50 Temporary annuity insurance 3.00% period-linked 0503 Bonus system single AVÖ 1996 R E Life-long annuity insurance 4.00% 1.00% 0504 Bonus system single AVÖ 1996 R E Temporary annuity insurance 4.00% period-linked 0505 Bonus system single AVÖ 1996 R E Life-long annuity insurance 3.25% 1.75% 0506 Bonus system single AVÖ 1996 R E Temporary annuity insurance 3.25% period-linked 0507 Bonus system single AVÖ 1996 R E Life-long annuity insurance en 2.75% 1.25% 0509 Bonus system single EROM/F G 50 Lebenslange Rentenversicherungen 3.00% 1.00% 0510 Bonus system single EROM/F G 50 Life-long annuity insurance en 3.00% period-linked 0511 Bonus system single AVÖ 1996 R E Temporary annuity insurance en 4.00% 0.00% 0512 Bonus system single AVÖ 1996 R E Temporäre Rentenversicherungen 4.00% period-linked 0513 Bonus system single AVÖ 1996 R E Lebenslange Rentenversicherungen 3.25% 0.75% 0514 Bonus system single AVÖ 1996 R E Temporäre Rentenversicherungen 3.25% period-linked 0515 Bonus system single AVÖ 2005 R E Lebenslange Rentenversicherungen 2.25% 2.25% 0517 Bonus system single AVÖ 2005 R E Lebenslange Rentenversicherungen 3.00% 1.50% 0518 Bonus system single AVÖ 2005 R E Lebenslange Rentenversicherungen 3.25% 1.25% 0519 Bonus system single AVÖ 2005 R E Lebenslange Rentenversicherungen 2.75% 1.75% * Interest on increases is period-linked. 53

58 Amount of Profit Distribution Policy group Profit system Form of premium Mortality table Classification Actuarial interest rate Interest bonus rate Mortality differential 0601 Bonus system regular AÖStM 80/82 Endowment 3.00% 1.50% Bonus system regular AÖStM 80/82 Endowment 3.00% 1.50% Bonus system regular AÖStM 90/92 Endowment 4.00% 0.50% Bonus system regular AÖStM 90/92 Endowment 4.00% 0.50% Bonus system regular AVÖ 1996 R E Annuity insurance (pay-in phase) 4.00% 0.00% 0606 Bonus system regular AVÖ 1996 R E Annuity insurance (pay-in phase) 4.00% 0.00% 0607 Bonus system regular EROM/F G 50 Pure endowment 4.00% 0.50% 0608 Bonus system regular EROM/F G 50 Pure endowment 4.00% 0.50% 0609 Bonus system regular AÖStM 90/92 Endowment 3.25% 1.25% Bonus system regular AÖStM 90/92 mod 2003 Endowment 2.75% 1.75% Bonus system regular AÖStM 90/92 mod 2003 Endowment 2.75% 1.75% Bonus system regular AÖStM/F 2000/02 mod Endowment 2.25% 2.25% Bonus system regular AÖStM/F 2000/02 mod Endowment 2.25% 2.25% Bonus system regular AÖStM/F 2000/02 mod Term insurance 2.25% 2.25% 0615 Bonus system single AÖStM/F 2000/02 mod Term insurance 2.25% 2.25% 0701 Bonus system regular AVÖ 1996 R G Supplementary pension insurance 3.00% 1.00% 0702 Bonus system regular AVÖ 1996 R G Supplementary pension insurance 3.00% 1.00% 0703 Bonus system single AVÖ 1996 R G Supplementary pension insurance 3.00% 1.00% 0704 Bonus system single AVÖ 1996 R G Supplementary pension insurance 3.00% 1.00% 0705 Bonus system single AVÖ 1996 R G Supplementary pension insurance in annuity phase 3.00% 1.00% 54

59 With our compliments Thank you Introduction by the Boards The Business Environment in 2005 Management Report and Report on the Annual Financial Statements Balance Sheet Income Statement Notes to the Annual Financial Statements Report of the Supervisory Board Contacts Amount of Profit Distribution Policy group Profit system Form of premium Mortality table Classification Actuarial interest rate Interest bonus rate Mortality differential 0801 Int. accum. regular AVÖ 1996 R E Pure endowment 3.25% 1.25% 4.50% 0802 Int. accum. regular AVÖ 1996 R E Annuity insurance (pay-in phase) 3.25% 0.75% 4.00% 0803 Int. accum. regular AVÖ 1996 R E Pure endowment 2.75% 1.75% 4.50% 0804 Int. accum. regular AVÖ 1996 R E Annuity insurance (pay-in phase) 2.75% 1.25% 4.00% 0805 Int. accum. regular AVÖ 2005 R E Pure endowment 2.25% 2.25% 4.50% 0806 Int. accum. regular AVÖ 2005 R E Annuity insurance (pay-in phase) 2.25% 2.25% 4.50% 0901 Int. accum. single AVÖ 1996 R E Pure endowment 3.25% period-linked period-linked 0902 Int. accum. single AVÖ 1996 R E Annuity insurance (pay-in phase) 3.25% period-linked period-linked 0903 Int. accum. single AVÖ 1996 R E Pure endowment 2.75% period-linked period-linked 0904 Int. accum. single AVÖ 1996 R E Annuity insurance (pay-in phase) 2.75% period-linked period-linked 0905 Int. accum. single AVÖ 2005 R E Pure endowment 2.25% period-linked period-linked 0906 Int. accum. single AVÖ 2005 R E Annuity insurance (pay-in phase) 2.25% period-linked period-linked 1001 Int. accum. regular / single AVÖ 2005 R E Company pension insurance (pay-in phase) 2.25% 2.25% 4.50% 1002 Bonus system single AVÖ 2005 R E Company pension insurance (pay-in phase) 2.25% 2.25% 4.50% Under the bonus system, the shares of profit are used as an additional premium-free insured amount or, within policy groups 5, 1002 and 0705, the shares of profit are used to increase the annuity payments. If a bonus yield ( Bonusrente ) is realized in policy group 5, 1002 or 0705, the annuity increase is reduced accordingly. For annuities in the pay-out phase, the rates for the basic annuity and bonus annuity remain unchanged. Therefore, the actual percent of profit distributed equals the greater of the interest bonus rate and the following period-linked interest rates. 55

60 For with-profit policies, we declare according to our profit plan that the following multiples are used to calculate the final bonuses; these multiples apply to expiration capital due in Multiple for final bonus classified by full premium payment period on regular-premium policies or by duration for single-premium policies GVAV < 10 years >= 10 years and <20 years >= 20 years Amount of final bonus Policy group Profit system Form of premium Mortality table Classification Actuarial interest rate Final bonus rate 0201 Bonus system regular ADStM 24/26 Endowment 3.00% 1.25% 0202 Bonus system regular ÖVM 59/61 RR 67 Pure endowment 3.00% 1.25% 0203 Bonus system regular ÖVM 59/61 RR 67 Annuity insurance (pay-in phase) 3.00% 1.25% 0204 * Bonus system single ADStM 24/26 Endowment 3.00% 1.25% 0205 * Bonus system single EROM/F G 50 Pure endowment 3.00% 1.25% 0206 * Bonus system single EROM/F G 50 Annuity insurance (pay-in phase) 3.00% 1.25% 0207 Bonus system regular ADStM 24/26 Endowment 3.00% 1.25% 0208 Bonus system regular ÖVM 59/61 RR 67 Pure endowment 3.00% 1.25% 0301 Bonus system single ADStM 24/26 Endowment 3.00% period-linked 0302 Bonus system single EROM/F G 50 Pure endowment 3.00% period-linked 0303 Bonus system single EROM/F G 50 Annuity insurance (pay-in phase) 3.00% period-linked 0304 Bonus system single AÖStM 90/92 Endowment 4.00% period-linked 0305 Bonus system single EROM/F G 50 Pure endowment 4.00% period-linked 0306 Bonus system single AVÖ 1996 R E Annuity insurance (pay-in phase) 4.00% period-linked 0307 Bonus system single AÖStM 90/92 Endowment 3.25% period-linked 0308 Bonus system single AÖStM 90/92 mod 2003 Endowment 2.75% period-linked 0309 Bonus system single AÖSt 2000/02 mod Endowment 2.25% period-linked * Interest on increases is period-linked. 56

61 With our compliments Thank you Introduction by the Boards The Business Environment in 2005 Management Report and Report on the Annual Financial Statements Balance Sheet Income Statement Notes to the Annual Financial Statements Report of the Supervisory Board Contacts Amount of final bonus Policy group Profit system Form of premium Mortality table Classification Actuarial interest rate Final bonus rate 0601 Bonus system regular AÖStM 80/82 Endowment 3.00% 1.25% 0602 Bonus system regular AÖStM 80/82 Endowment 3.00% 1.25% 0603 Bonus system regular AÖStM 90/92 Endowment 4.00% 0.25% 0604 Bonus system regular AÖStM 90/92 Endowment 4.00% 0.25% 0605 Bonus system regular AVÖ 1996 R E Annuity insurance (pay-in phase) 4.00% 0.00% 0606 Bonus system regular AVÖ 1996 R E Annuity insurance (pay-in phase) 4.00% 0.00% 0607 Bonus system regular EROM/F G 50 Pure endowment 4.00% 0.25% 0608 Bonus system regular EROM/F G 50 Pure endowment 4.00% 0.25% 0609 Bonus system regular AÖStM 90/92 Endowment 3.25% 1.00% 0610 Bonus system regular AÖStM 90/92 mod 2003 Endowment 2.75% 1.50% 0611 Bonus system regular AÖStM 90/92 mod 2003 Endowment 2.75% 1.50% 0612 Bonus system regular AÖSt 2000/02 mod Endowment 2.25% 2.00% 0613 Bonus system regular AÖSt 2000/02 mod Endowment 2.25% 2.00% 0701 Bonus system regular AVÖ 1996 R G Supplementary pension insurance 3.00% 0.75% 0702 Bonus system regular AVÖ 1996 R G Supplementary pension insurance 3.00% 0.75% 0703 Bonus system single AVÖ 1996 R G Supplementary pension insurance 3.00% 0.75% 0704 Bonus system single AVÖ 1996 R G Supplementary pension insurance 3.00% 0.75% 0801 Int. accum. regular AVÖ 1996 R E Pure endowment 3.25% 1.00% 0802 Int. accum. regular AVÖ 1996 R E Annuity insurance (pay-in phase) 3.25% 0.50% 0803 Int. accum. regular AVÖ 1996 R E Pure endowment 2.75% 1.50% 0804 Int. accum. regular AVÖ 1996 R E Annuity insurance (pay-in phase) 2.75% 1.00% 0805 Int. accum. regular AVÖ 2005 R E Pure endowment 2.25% 2.00% 0806 Int. accum. regular AVÖ 2005 R E Annuity insurance (pay-in phase) 2.25% 2.00% 0901 Int. accum. single AVÖ 1996 R E Pure endowment 3.25% period-linked 0902 Int. accum. single AVÖ 1996 R E Annuity insurance (pay-in phase) 3.25% period-linked 0903 Int. accum. single AVÖ 1996 R E Pure endowment 2.75% period-linked 0904 Int. accum. single AVÖ 1996 R E Annuity insurance (pay-in phase) 2.75% period-linked 0905 Int. accum. single AVÖ 2005 R E Pure endowment 2.25% period-linked 0906 Int. accum. single AVÖ 2005 R E Annuity insurance (pay-in phase) 2.25% period-linked 57

62 The period-linked multiples for the interest or final bonus rates (profit sharing rate) are dependent on the date the policy is concluded or the date of extension. The period-linked multiples for annuity insurance in the payin phase (single premium), which were not calculated in accordance with the AVÖ 2005 RE mortality table, are 0.5% lower than shown in the following table. Insurance policies with actuarial interest rate of 3.00% Periode Policy date valid as of Policy date valid up to Renewal bonus valid as of Renewal bonus valid up to Profit sharing rate Special validity % % % As of sum ins ,85 * % As of sum ins ,28 * % As of sum ins , % As of sum ins , % % % % % % % % % % % sum. ins. = sum insured * Periods apply only to endowment ; period 002 applies to pure endowment or sum insured less than the above limit 58

63 With our compliments Thank you Introduction by the Boards The Business Environment in 2005 Management Report and Report on the Annual Financial Statements Balance Sheet Income Statement Notes to the Annual Financial Statements Report of the Supervisory Board Contacts Insurance policies with actuarial interest rate of 4.00% Periode Policy date valid as of Policy date valid up to Renewal bonus valid as of Renewal bonus valid up to Profit sharing rate % % % % % % % % % % % Insurance policies with actuarial interest rate of 3.25% Periode Policy date valid as of Policy date valid up to Renewal bonus valid as of Renewal bonus valid up to Profit sharing rate % % % % % % % % Insurance policies with actuarial interest rate of 2.75% Periode Policy date valid as of Policy date valid up to Renewal bonus valid as of Renewal bonus valid up to Profit sharing rate % % % % 59

64 Insurance policies with actuarial interest rate of 2.25% Periode Policy date valid as of Policy date valid up to Renewal bonus valid as of Renewal bonus valid up to Profit sharing rate % % 60

65 With our compliments Thank you Introduction by the Boards The Business Environment in 2005 Management Report and Report on the Annual Financial Statements Balance Sheet Income Statement Notes to the Annual Financial Statements Report of the Supervisory Board Contacts Information on relations with subsidiaries, affiliates and associates Companies in which Sparkassen Versicherung AG owns shares (as per 238 Par.2 Austrian Commercial Code) Share of capital Capital stock in TEUR Profit or loss for the year in TEUR Last annual financial statements 1. Subsidiaries Sparkassen Versicherungsservice Gesellschaft mbh, Vienna % 36-1, ERSTE S Biztosítási Alkusz Kft., Budapest % Camelot Informatik und Consulting GmbH, Villach % ERSTE Sparkassen Biztosító Zrt., Budapest 99.90% 3, SVI-EDV-Programmentwicklungsges.m.b.H., Vienna 76.00% Erste Sparkassen osiguranje, d.d. za životno osiguranje, Zagreb 74.00% 3, Pojišt ovna České spořitelny, a.s., Pardubice 44.75% 40,648 10, Poist ovňa Slovenskej sporitel ne, a.s., Bratislava 33.33% 2,352 2, Sparkasse Voitsberg Vorzugsaktien, Voitsberg 0.80% 4, s-wohnbaubank AG, Vienna 0.36% 20,356 2, Sparkassen IT-Holding AG, Vienna 0.03% Affiliates Sparkassen Immobilien AG, Vienna 9.88% 387,700-6, CENTER Hotelbetriebs GmbH, Vienna 5.00% PFG Holding GmbH, Vienna 5.38% 35 PFG Liegenschaftsbewirtschaftungs GmbH, Vienna 4.64% Projektbau Holding GmbH, Vienna 5.00% 35 VBV Betriebliche Altersvorsorge AG, Vienna 2.60% 70 Informations-Technologie Austria GmbH, Vienna 0.20% 3, Sparkassen Versicherung AG is included in the consolidated financial statements prepared by Erste Bank der oesterreichischen Sparkassen AG, which is headquartered in Vienna, and therefore does not prepare its own consolidated financial statements in accordance with 245 Par. 1 of the Austrian Commercial Code. The consolidated financial statements are available for review by the public on the premises of this company at 1010 Vienna, Graben 21. s Versicherung and Erste Bank reached an agreement during the 2005 Business Year, which indicates that s Versicherung, as a member of the Erste Bank Group, will be included in the taxable company group of Erste Bank as defined in 9 Par. 1 of the Austrian Corporate Income Tax Act. This taxable company group also includes the wholly owned subsidiaries Sparkassen Versicherungsservice Gesellschaft m.b.h. and PR-Immobiliengesellschaft m.b.h. In addition, s Versicherung concluded profit and loss transfer agreements with these two companies on December 27, s Versicherung has established integrated company relationships with Sparkassen Versicherungsservice Ges.m.b.H., Vienna, Camelot Informatik und Consulting GmbH and SVI-EDV- Programmentwicklungsgesellschaft m.b.h., Vienna, for VAT purposes. 61

66 Recommendation for the Distribution of Profit Retained earnings as shown in the annual financial statements for 2006 total: Prior year Net income for reporting year , ,33 Profit carried forward from prior year 504,89 149,81 Retained earnings , ,14 We therefore recommend that retained earnings be used as follows: Distribution on capital stock of EUR ,98 10% dividend ,30 and 15% bonus ,95 Carry forward 636, ,66 The : E. Hammerbacher A. Neimke M. Rapf Vienna, January 31,

67 With our compliments Thank you Introduction by the Boards The Business Environment in 2005 Management Report and Report on the Annual Financial Statements Balance Sheet Income Statement Notes to the Annual Financial Statements Report of the Supervisory Board Contacts AUDIT OPINION Unqualified opinion We have audited the attached annual financial statements of Sparkassen Versicherung Aktiengesellschaft, Vienna, for the business year from January 1 to December 31, Our audit also included the bookkeeping of the company. The legal representatives of the company are responsible for the bookkeeping as well as the preparation and content of these annual financial statements and the management report in accordance with Austrian corporate law. Our responsibility is to express an opinion on these financial statements based on our audit and to issue a statement indicating whether the management report agrees with the annual financial statements. We conducted our audit in accordance with the legal requirements and principles applicable to audits in Austria. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the annual financial statements are free of material misstatements and also allow us to state whether the management report agrees with the annual financial statements. The determination of our audit procedures incorporates knowledge of the business activities and economic and legal environment of the company as well as expectations of possible errors. The audit includes an examination of evidence supporting the amounts and disclosures in the annual financial statements, which is based primarily on sampling. The audit also includes an assessment of the accounting principles used and significant estimates made by management, as well as an evaluation of the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Our audit did not give rise to any objections. Based on the results of our audit and in our opinion, the annual financial statements comply with legal requirements and present fairly in all material respects the asset, financial and earnings position of the company in accordance with Austrian principles of correct bookkeeping. The management report agrees with the annual financial statements. KPMG Wirtschaftsprüfungs- und Steuerberatungs GmbH Walter Knirsch Certified Public Accountant Vienna, January 31, 2007 Thomas Smrekar Certified Public Accountant 63

68 REPORT OF THE SUPERVISORY BOARD The provided the Supervisory Board with regular reports on all major transactions and the development of business during The Supervisory Board was therefore able to establish that the management of the Company was correct. The annual financial statements and the management report for 2006, which were prepared by the, were audited by KPMG Wirtschaftsprüfungs- und Steuerberatungs GmbH. The results of this audit provided no grounds for objections, and the auditor therefore awarded an unqualified opinion. The Supervisory Board agrees with the report prepared by the, including the recommendation for the distribution of profit for 2006, and has accepted the annual financial statements for Therefore, these financial statements are considered approved in accordance with 125 Par. 2 of the Austrian Stock Corporation Act. The Supervisory Board would like to thank the members of the and all employees of the Company for their work during The Supervisory Board Andreas Treichl Chairman Vienna, January

69 With our compliments Thank you Introduction by the Boards The Business Environment in 2005 Management Report and Report on the Annual Financial Statements Balance Sheet Income Statement Notes to the Annual Financial Statements Report of the Supervisory Board Contacts 65

70 Contacts Austria - Headquarters Vienna Member of the : Erwin Hammerbacher Member of the : Manfred Rapf Member of the : Alfred Neimke Management Team Asset Management: Bernhard Reisecker International Business: Klaus Bergsmann Sales Austria: Heinz Schuster Employees Benefits: Christian Lückl IT/Internal Organisation/Infrastructure: Herwig Amlacher Marketing: Michael Deléglise Finance & Controlling: Hartwig Fuhs Actuary & Insurance Administration: Paul Huss Croatia Erste Sparkassen osiguranje d.d. za životno osiguranje Zagreb, Miramarska 23 Tel.: Fax: Chief Executive Officer: Snježana Bertoncelj Member of the : Luka Matošic Advisor: Klaus Bergsmann Czech Republic Pojišt ovna České spořitelny, a.s Pardubice, nám. Republiky 115 Tel.: Fax: Chief Executive Officer: Petr Zapletal Member of the : Jaroslav Kulhánek Member of the : František Mareš Wipplingerstraße 36-38, 1010 Vienna Tel.: +43 (0) , Fax: +43 (0) [email protected] 66

71 With our compliments Thank you Introduction by the Boards The Business Environment in 2005 Management Report and Report on the Annual Financial Statements Balance Sheet Income Statement Notes to the Annual Financial Statements Report of the Supervisory Board Contacts Hungary Erste Sparkassen Biztosító Zrt Budapest, Népfürdö ut Tel.: Fax: Chief Executive Officer: Tamás Marusinecz Member of the : Janos Tunner Member of the : Paul Huss Slovak Republic Poist ovňa Slovenskej sporitel ne, a.s Bratislava, Priemyselna 1/A Tel.: Fax: Chief Executive Officer: Roman Podolak Member of the : Martin Hornig 67

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