TWOTHOUSANDAND SAFE. Group Annual Report 2014 Vienna Insurance Group

Transcription

1 TWOTHOUSANDAND SAFE Group Annual Report 2014 Vienna Insurance Group

2 Get informed and be on THE SAFE SIDE If a VIG newspaper is not included, simply send an to info@vig.com and we will send you your own personal copy. THE SAFE SIDE Everything, it s safe to say, you should know about VIG.

3 GROUP ANNUAL REPORT 2014 Whether it is two thousand and fourteen or the future, at Vienna Insurance Group the clocks are always at TWOTHOUSANDAND SAFE INSURANCE COMPANIES OFFER SECURITY. BUT YOU RECEIVE EVEN MORE FROM VIENNA INSURANCE GROUP: RELIABILITY, STABILITY AND TRUSTWORTHINESS. Our employees fill these words with life in 25 markets in Austria and Central and Eastern Europe. For the benefit of our customers. It is not merely chance that Vienna Insurance Group (VIG) is number 1 in its core markets. This leading position is the result of carefully thought-out strategies, hard work and motivated employees. This is the only way we can be a safe partner for our customers. Day after day. Vienna Insurance Group 1

4 TABLE OF CONTENTS GROUP ANNUAL REPORT 2014 COMPANY 4... Highlights Letter from the Chairman of the Managing Board 6... Key figures at a glance 8... Company profile Market positions 12 CORPORATE GOVERNANCE REPORT 22 SUPERVISORY BOARD REPORT GROUP MANAGEMENT REPORT Economic environment Legal environment Business development of the Group in Development by lines of business Development by region Austria Czech Republic Slovakia Poland Romania Remaining Markets Central Functions OUTLOOK Outlook 2015 SUPPLEMENT TO THE GROUP ANNUAL REPORT 2014 HEADLINES From Austria to the CEE region VIG s history of success. Page 2 More in the enclosed newspaper THE SAFE SIDE Everything, it s safe to say, you should know about VIG. We want to continue growing faster than the overall market Managing Board of VIG on current challenges in the insurance industry and VIG s plans for the future. Page 6 A clear strategy for success Key success factors. Page 9 2 Group Annual Report 2014

5 CONSOLIDATED FINANCIAL STATEMENTS Table of contents for the consolidated financial statements Consolidated balance sheet Consolidated shareholders equity Consolidated income statement 63...Consolidated statement of comprehensive income Consolidated cash flow statement Segment reporting Summary of significant accounting policies Financial instruments and risk management Explanatory notes to the consolidated financial statements Auditor s report Declaration by the Managing Board SERVICE List of abbreviations Glossary Addresses of Group companies Vienna Insurance Group contact information Address Notes Information An online version of the Annual Report is available at VIG s IR app is available for ipad users at Please note: Our goal is to make the annual report quick and easy to read. For this reason we have not used phrasing such as he/ she, his/her, etc. It should be understood that the text always refers to women and men equally without discrimination. Wiener for Serbia Quick help for flood victims. Page 11 Solvency II Big changes from Brussels How reforming supervisory law affects European insurance companies. Page 13 Help instead of talk Solidarity in practice. Since 2011, thousands of VIG employees have taken part in good causes by dedicating their time to many social projects and their fellow men. Page 18 VIG celebrates 20 years on the Vienna Stock Exchange. Success story. Page 14 VIG as an employer of choice Diversity and attractive career opportunities at VIG. Page 16 Vienna Insurance Group 3

6 HIGHLIGHTS 2014 Group premiums EUR 9.1 billion Close to the same level as the previous year, in spite of negative factors (in particular, exchange rate effects, Poland, Italy), around 54.8% of all premiums generated outside Austria. Page % net combined ratio Underwriting result improves in spite of numerous natural disasters. The programme and measures for improving efficiency and profitability will be systematically continued. Page 31 DEAR SHAREHOLDERS, LADIES AND GENTLEMEN! No. 1 in the core markets VIG expands its market share in core markets to a total of 19%. Page 10 Profit before taxes EUR million Result improves significantly by 46.0% over previous year all lines of business and regions provide positive contributions. Earnings per share rose even more strongly by 75.5% to EUR Page 30 and 31 Planned dividend per share EUR 1.40 VIG maintains dividend policy with an increase of EUR DEVELOPMENT OF DIVIDEND PER SHARE in EUR Dividend Optimally prepared for Solvency II Due to effective Group-wide preparations, VIG is optimally prepared for this reform of capital requirements. Page 26 A+ with a stable outlook Confirmed by Standard & Poor s again. VIG has the best rating in the ATX Index. Entry into the Moldovan market VIG s acquisition of the Moldovan insurer Donaris extends its operations to 25 countries. Page planned Dividend As a leading insurance company in Austria and Central and Eastern Europe, we especially stand out from other insurance companies during challenging times of high volatility and uncertainty: as a reliable partner for our customers, an attractive employer for our employees and a transparent, profitable company for you, our valued shareholders. VIG stands for Value Inspired Growth. In 2014, we proved that we can achieve this goal even when times are bad. The Group wrote EUR 9.1 billion in premiums, close to the same level as the previous year, in spite of negative exchange rate effects, necessary optimisation measures in Italy and an intentional reduction in low-margin short-term single-premium business in Poland. In Austria, which continues to be our largest single market, Wiener Städtische generated above-average growth that compensated for the decline in Italy due to Donau Versicherung. Although exchange rate effects caused premiums to decline by 4.5% in the Czech Republic, when adjusted for these effects premiums rose by 1.3%, which meant that the Czech Republic remained our largest market in the CEE region. It was followed by Poland, where we continued to reduce our business in low-margin short-term single-premium life insurance products, thereby accepting a premium decrease of 9.5%. The Re- 4 Group Annual Report 2014

7 Company Group Management Report Consolidated Financial Statements 2014 maining Markets grew by more than 8.9%, the highest rate in the entire VIG Group. In the CEE region, performance in Albania, the Baltic States and Hungary was particularly noteworthy. I am particularly pleased that the positive development of premiums was also reflected in VIG s results of operations. Our underwriting result improved substantially in 2014, and profit before taxes rose 46.0% over the previous year to EUR million, in spite of lower investment income due to the current low level of interest rates and a EUR 79 million write-down of Hypo Alpe Adria bonds. Moreover, Poland, Slovakia and the Remaining Markets provided their best performance to date. For the first time in years, Romania once again achieved a positive result. The Czech Republic achieved the highest profit before taxes in the Group, partly because the results in Austria were negatively affected by the write-down of Hypo Alpe Adria bonds mentioned above. This shows that our efforts to increase efficiency and profitability have truly paid off. The same applies to our combined ratio of 96.7%, which was significantly below the 100% mark in As a result of these positive developments, we will propose in the Annual General Meeting in May 2015 that our dividend policy be maintained by in creasing the dividend from EUR 1.30 in the previous year to EUR 1.40 per share. In addition to these operating successes, our entry into Moldova in 2014 expanded the group of markets in which VIG operates to 25 countries. This puts the VIG Group in an excellent position in Central and Eastern Europe. Our total market share of 19% makes us number 1 in our core markets and further expands our leading position. We will continue to strengthen this successful position in future years and use it to achieve earnings-oriented growth. We aim to continue growing faster than the overall market, while maintaining our focus on Austria and the CEE region. The current low interest rate environment is expected to cause a decline in our ordinary financial result in 2015 that is not likely to be overcompensated by another increase in our underwriting result. In addition to our excellent capital resources and outstanding rating, we will also do Vienna Insurance Group is excellently positioned in Central and Eastern Europe. everything in the future to safeguard the advantages that VIG offers. This fundamental attitude is also reflected in the title given to the newspaper in cluded with this VIG Annual Report 2014: VIG is on the safe side now and in the future. With this in mind, I want to thank you on behalf of the Managing Board for the confidence you have placed in us. I would also particularly like to thank the around 23,000 employees of VIG for their outstanding efforts and commitment in Peter Hagen General Manager of VIG Note: Detailed information on VIG s business strategy is provided on page 9 of the paper The Safe Side that is included with this report. Vienna Insurance Group 5

8 KEY FIGURES * Incl. unit-linked and index-linked life insurance investments and excl. cash and cash equivalents ** Planned dividend; rounding differences may occur when rounded amounts or percentages are added restated 2014 Income statement Premiums written EUR millions 9, , , Property and casualty insurance EUR millions 4, , , Life insurance EUR millions 4, , , Health insurance EUR millions Premiums written EUR millions 9, , , Austria EUR millions 4, , , Czech Republic EUR millions 1, , , Slovakia EUR millions Poland EUR millions 1, , , Romania EUR millions Remaining Markets EUR millions , , Central Functions EUR millions 1, , , Consolidation EUR millions -1, , , Results from investments EUR millions 1, , , Profit before taxes EUR millions Property and casualty insurance EUR millions Life insurance EUR millions Health insurance EUR millions Profit before taxes EUR millions Austria EUR millions Czech Republic EUR millions Slovakia EUR millions Poland EUR millions Romania EUR millions Remaining Markets EUR millions Central Functions EUR millions Consolidation EUR millions Profit for the period after taxes and non-controlling interest EUR millions Balance sheet Investments * EUR millions 35, , , Shareholders equity EUR millions 5, , , Underwriting provisions EUR millions 32, , , Total assets EUR millions 42, , , Share Number of shares Units 128,000, ,000, ,000,000 Market capitalisation EUR millions 5, , , Average number of shares traded by day Units ~ 76,000 ~ 64,000 ~ 65,000 Year-end price EUR High EUR Low EUR Share performance for the year (excluding dividends) % Dividend per share EUR ** Dividend yield % Earnings per share EUR Price-earnings ratio as of 31 December Number of employees (average for the year) 24,086 23,362 23,360 thereof Austria 5,405 5,235 5,202 thereof outside Austria 17,961 17,584 17,725 thereof central functions Group Annual Report 2014

9 Company Group Management Report Consolidated Financial Statements AT A GLANCE VIG BY REGION Country Premium volume total Premium volume life Premium volume property and casualty and health (EUR 000) (EUR 000) (EUR 000) Employees Austria 4,076,992 1,870,739 2,206,253 5,202 Czech Republic 1,683, , ,654 4,802 Slowakia 726, , ,098 1,579 Poland 1,034, , ,857 1,825 Romania 339,673 54, ,313 2,351 Remaining Markets 1,155, , ,215 7,168 Albania 33,526 33, Baltic States 51,562 51, Bosnia-Herzegovina 11, , Bulgaria 114,305 27,802 86, Germany 175,011 81,929 93, Georgia 43,044 43, Croatia 90,880 56,615 34, Liechtenstein 170, , Macedonia 23, , Moldova 396 Serbia 71,651 28,151 43,500 1,240 Turkey 127, , Ukraine 62,435 3,058 59,377 1,471 Hungary 179, ,740 69, Moldova was included on The Montenegro and Belarus markets were not included in the Vienna Insurance Group consolidated financial statements in There are also branch offices in Italy and Slovenia. PREMIUM DEVELOPMENT BY LINES OF BUSINESS in EUR million 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Health Life Property and casualty PERCENTAGE OF PREMIUMS BY REGION 2014 (VALUES FOR 2013 IN PARENTHESES) in per cent Austria 58.6 (58.9) 41.4 (41.1) Property/ Casualty 55.3 (56.0) 44.7 (44.0) Life Outside Austria 4.7 (10.2) 95.3 (89.8) Health 54.8 (55.5) 45.2 (44.5) Total Vienna Insurance Group 7

10 VIENNA INSURANCE GROUP COMPANY PROFILE Approximately 23,000 employees in around 50 Group companies in 25 countries generated around EUR 9.1 billion in premiums in 2014, making us one of the leading listed insurance groups in Austria and Central and Eastern Europe. As the number 1 insurance company in our core markets, we provide our customers an outstanding portfolio of products and services in the areas of property and casualty, life and health insurance. From Austria to Central and Eastern Europe VIG's roots go all the way back to the year 1824 in Austria: 190 years of history in which the Company developed from a successful local insurer to a leading international insurance group. The story begins with Wiener Städtische, one of the first Western European companies in its industry to recognise the growth opportunities in Central and Eastern Europe, and to take a chance on entering the market in the former Czechoslovakia in Additional markets followed, with the Company expanding into Hungary in 1996, Poland in 1998, Croatia in 1999 and Romania in 2001, to mention only a few examples. Following its entry into the Moldovan market in 2014, Vienna Insurance Group now operates in 25 markets. The leading insurance specialist in the CEE region. Number 1 in its core markets VIG's core markets include Austria, the Czech Republic, Slovakia, Poland, Romania, Bulgaria, Croatia, Hungary, Serbia and Ukraine. With a market share of 19%, VIG is the clear number 1 insurer in these markets. The VIG markets in Central and Eastern Europe generated more than half of the approximately EUR 9.1 billion in Group premiums in 2014 a clear indication of the success of the CEE expansion strategy. VIG is convinced that the region will continue to converge economically, leading to further increases in the demand for insurance. VIG RE, the reinsurance company that was established by VIG in 2008, has its registered office in the Czech Republic, thereby stressing the importance of the CEE region as a growth market for VIG. Customer proximity in 25 markets Local entrepreneurship, and the customer proximity it brings, plays a key role in VIG's success and is reflected in the regional ties, multi-brand strategy and the wide variety of distribution channels used. The Group therefore intentionally relies on established regional brands united under the Vienna Insurance Group umbrella, because it is the individual strengths of these brands and local expertise that make VIG successful as a corporate group. Success thanks to a focus on our core business and binding values VIG is a progressive, highly risk-conscious insurer that focuses on its core business, the insurance business. It offers security in the form of reliability, trustworthiness and soundness not only to its customers, but also in its dealings with business partners, employees and shareholders. All its business decisions in this regard are based on ethical values such as honesty, integrity, diversity, equal opportunity and customer orientation. The effects of this fundamental approach are shown not only by its strategy of continuous sustainable growth, but also its excellent creditworthiness. In July 2014 the internationally recognised rating agency Standard & Poor's confirmed its A+ rating with a stable outlook. As a result, VIG continues to have the best rating of all companies in the ATX, the leading index of the Vienna Stock Exchange. Two strong partners in the CEE region: VIG and the Erste Group The Erste Group is one of the leading banking groups in Central and Eastern Europe, with strong ties to Austria. VIG and the Erste Group entered into a strategic partnership in 2008 that has benefited both of them. In markets where both groups are active, Erste Group branches market VIG insurance products and VIG Group companies offer Erste Group bank products in return. Strong stock-exchange presence, long-term principal shareholder VIG shares have been listed on the Vienna Stock Exchange since October At the end of 2014, slightly more than 20 years after its IPO, VIG was one of the top 8 Group Annual Report 2014

11 Company Group Management Report Consolidated Financial Statements companies in the Prime Market of the Vienna Stock Exchange, with a market capitalisation of around EUR 4.7 billion. While the ATX leading index fell by 15.2% in 2014, VIG shares once again proved their stability by achieving a price gain of around 2.4%. The Company's dividend policy is based on stability and continuity. VIG has paid a dividend every year since its IPO, the latest being EUR 1.30 per share in A further dividend increase of EUR 0.10 to EUR 1.40 will be proposed in the Annual General Meeting in VIG's secondary listing on the Prague Stock Exchange in February 2008 underscores the great importance of the Central and Eastern European region to the Company. With a market capitalisation of around CZK billion, VIG was also one of the largest companies on the Prague Stock Exchange at the end of Around 70% of VIG's shares are held by Wiener Städtische Versicherungsverein, a stable principal shareholder with a long-term orientation. The remaining shares are in free float. Employer of choice In addition to being first choice for insurance products, VIG also wants to be the first choice as an employer and attract the most talented and intelligent employees. A wide array of measures, such as identifying and developing each employee's individual skills, are implemented by a modern People Management department. Diversity is seen as an opportunity and is part of day-to-day life at VIG. Importance is attached to creating the conditions needed to enable women to develop their full potential. This is because Vienna Insurance Group is aware that its success is based on people, and therefore on the dedication of its approximately 23,000 employees. KEY POINTS IN THE BUSINESS STRATEGY Focus on Austria and the CEE region Concentrate on the core business of "insurance" Local entrepreneurship: "Think globally act locally" Multi-brand strategy Multi-channel distribution Conservative investment Vienna Insurance Group 9

12 WELL POSITIONED IS HALF THE BATTLE. Success 25 times over. Thanks to its internationalisation strategy, Vienna Insurance Group is a reliable partner for its customers in 25 countries. A comparison of insurance density clearly shows the enormous catch-up potential in the CEE region. VIG s overall market share of 19% makes it No. 1 in its core markets AUSTRIA Market ranking: 23.8% #1 Premium volume: EUR 4,077.0 million Employees: 5,202 CZECH REPUBLIC Market ranking: 33.7% #1 Premium volume: EUR 1,683.4 million Employees: 4,802 BULGARIA Market ranking: 13.7% CROATIA Market ranking: 8.4% #2 Premium volume: EUR million Employees: 812 #4 Premium volume: EUR 90.9 million Employees: 799 SLOVAKIA Market ranking: 33.6% #1 Premium volume: EUR million Employees: 1,579 SERBIA 9.7% Market ranking: #4 Premium volume: EUR 71.7 million Employees: 1, POLAND 8.3% Market ranking: #4 Premium volume: EUR 1,034.1 million Employees: 1,825 UKRAINE Market ranking: 4.2% #2 Premium volume: EUR 62.4 million Employees: 1,471 1, ROMANIA Market ranking: 18.2% #1 Premium volume: EUR million Employees: 2,351 Market share HUNGARY Market ranking: 7.4% #7 Premium volume: EUR million Employees: st 3 rd quarter 2014: Slovakia, Romania, Bulgaria, Serbia, Ukraine and total core markets 1 st 4 th quarter 2014: Austria, Czech Republic, Poland, Croatia, Hungary VIG core markets VIG markets (excl. core markets) 2013 insurance density (= average annual per capita insurance expenditures, in euro) In-house calculations based on data published by national insurance supervisory authorities and associations, the IMF and Swiss Re (Sigma) 10 Group Annual Report 2014

13 Company Group Management Report Consolidated Financial Statements As of January Vienna Insurance Group 11

14 CORPORATE GOVERNANCE REPORT Transparency and stakeholder trust are important to us. Observance of and compliance with the provisions of the Austrian Code of Corporate Governance therefore play an important role in Vienna Insurance Group. The Austrian Code of Corporate Governance was introduced in 2002 and is amended periodically to account for changes in the law and current trends. It is the standard for good corporate governance and control in Austria. The provisions of the Code contribute to the strengthening of trust in the Austrian capital market, and the report that companies are required to publish on compliance with these provisions requires a high level of transparency. Vienna Insurance Group views corporate governance as a continuous process that changes in response to new conditions and current trends and must be continuously improved for the benefit of the Group and all its stakeholders. The goal of all corporate governance measures is to ensure responsible corporate management aimed at longterm growth while simultaneously maintaining effective corporate control. The Vienna Insurance Group Managing Board, Supervisory Board and employees all consider observance of and compliance with the rules of the Austrian Code of Corporate Governance to be highly important for the practical implementation of corporate governance. The Vienna Insurance Group s declaration of adherence to the Code, discussions regarding the areas of deviation, and detailed information on the composition of, procedures followed by, and the compensation of the Managing Board and Supervisory Board are clearly organized and presented below. Vienna Insurance Group is committed to the application of and compliance with the July 2012 version of the Austrian Code of Corporate Governance. The rules are divided into the following three categories: Rules based on mandatory legal requirements ( Legal Requirement ) Rules based on standard international requirements. Non-compliance with these rules must be declared and explained in order to comply with the Code ( Comply or Explain ) Rules that merely possess the character of recommendations. Non-compliance with these rules need not necessarily be disclosed or explained ( Recommendation ) The Austrian Code of Corporate Governance is available to the public both on the Vienna Insurance Group website at and on the website of the Austrian Working Group for Corporate Governance. VIG complies with all of the Legal Requirement of the Austrian Code of Corporate Governance as required by law. Vienna Insurance Group deviates from one Comply or Explain rule, as explained below: Rule 41: The Supervisory Board shall set up a nomination committee. In cases of Supervisory Boards with no more than six members (including employee representatives), this function may be exercised by all members jointly. The nomination committee submits proposals to the Supervisory Board for filling positions that become free in the Managing Board and deals with issues of successor planning. Explanation: Because of its special importance, the issue of successor planning is handled by the Supervisory Board as a whole. The Vienna Insurance Group Supervisory Board has therefore not established a nomination committee. 12 Group Annual Report 2014

15 Company Group Management Report Consolidated Financial Statements Members of the Managing Board and areas of responsibility as of 1 January 2015 The Vienna Insurance Group Managing Board has four members: Peter Hagen has been a member of the Managing Board since 1 July Prior to that, he managed the General Secretariat, the international division and the Group s reinsurance unit. From January 1998 to December 2002, Mr Hagen was a member of the Managing Board of the Group s Kooperativa companies, and from November 2007 to December 2009, he was Deputy General Manager and Member of the Managing Board of Kooperativa (Czech Republic). He played a key role in the establishment of the Group reinsurance company VIG Re in Mr Hagen has been Chairman of the Managing Board and General Manager since 1 June Peter Hagen General Manager Year of birth: 1959 Date first appointed: 2004 End of current term of office: 30 June 2018 Areas of responsibility: Group management, strategic planning, European matters, public relations, sponsoring, people management, performance management motor vehicle insurance, IT/SAP smile solutions, international processes and methods, business development Country responsibilities: Austria (incl. s Versicherungsgruppe coordination), Romania (Asirom, BCR Life), Czech Republic Positions held on the Supervisory Boards of other Austrian and foreign companies outside of the Group: voestalpine AG Franz Fuchs began his career in the insurance industry as an actuary. He held leading management positions in other international companies as a specialist in life insurance and pension funds before joining Vienna Insurance Group. Franz Fuchs was Chairman of the managing board of Compensa Non-life and Compensa Life from 2003 to April He has been Chairman of the managing board of VIG Polska since He was first appointed to the Vienna Insurance Group Managing Board on 1 October Areas of responsibility: Performance management personal insurance, asset risk management Franz Fuchs Year of birth: 1953 Date first appointed: 2009 End of current term of office: 30 June 2018 Country responsibilities: Baltic States, Moldova, Poland, Romania (Omniasig), Ukraine Positions held on the Supervisory Boards of other Austrian and foreign companies outside of the Group: C-QUADRAT Investment AG Vienna Insurance Group 13

16 Peter Höfinger has been a member of the Vienna Insurance Group Managing Board since 1 January Prior to that, he was director of the Managing Board of Donau Versicherung. Mr Höfinger joined this company in Previously, he held management positions outside the Group in Hungary, the Czech Republic and Poland. Areas of responsibility: International corporate and large customer business, Vienna International Underwriters (VIU), reinsurance; business development Country responsibilities: Albania (incl. Kosovo), Belarus, Bosnia-Herzegovina, Bulgaria, Croatia, Hungary, Macedonia, Montenegro, Serbia, Slovakia Peter Höfinger Year of birth: 1971 Date first appointed: 2009 End of current term of office: 30 June 2018 Martin Simhandl began his career with the Group in 1985 in the legal department of Wiener Städtische. In 1995, he became head of the subsidiaries department, and in 2003 he took over coordination of the Group s investment activities. In 2002 and 2003, Mr Simhandl was also a member of the Managing Boards of InterRisk Non-life and InterRisk Life in Germany, with responsibility for the areas of property insurance, reinsurance and planning/controlling. On 1 November 2004, Mr Simhandl was appointed to the Managing Board of the Company. Areas of responsibility: Asset management, subsidiaries department, finance and accounting, internal capital model project (Solvency II project), legal matters, treasury/capital market Martin Simhhandl, CFO Year of birth: 1961 Date first appointed: 2004 End of current term of office: 30 June 2018 Country responsibilities: Germany, Georgia, Liechtenstein, Turkey Positions held on the Supervisory Boards of other Austrian and foreign companies outside of the Group: CEESEG Aktiengesellschaft, Ringturm Kapitalanlagen GmbH, Wiener Hafen Management GmbH, Wien 3420 Aspern Development AG, Wiener Börse AG The Managing Board as a whole is responsible for enterprise risk management/solvency II, the actuarial department, general secretariat, Group compliance, Group controlling, internal audit and investor relations. The following two substitute members were also appointed to the Managing Board, and will become members of the Managing Board if a member of the Managing Board becomes permanently incapable of performing his or her duties: Martin Diviš (year of birth: 1973) Judit Havasi (year of birth: 1975) 14 Group Annual Report 2014

17 Company Group Management Report Consolidated Financial Statements Members of the Supervisory Board as of 31 December 2014: Günter Geyer Chairman Year of birth: 1943 Date first appointed: 2014 End of current term of office: 2019 Karl Skyba Deputy Chairman Year of birth: 1939 Date first appointed: 1992 End of current term of office: 2019 Bernhard Backovsky Year of birth: 1943 Date first appointed: 2002 End of current term of office: 2019 Martina Dobringer Year of birth: 1947 Date first appointed: 2011 End of current term of office: 2019 Rudolf Ertl Year of birth: 1946 Date first appointed: 2014 End of current term of office: 2019 Maria Kubitschek Year of birth: 1962 Date first appointed: 2014 End of current term of office: 2019 Heinz Öhler Year of birth: 1945 Date first appointed: 2002 End of current term of office: 2019 Reinhard Ortner Year of birth: 1949 Date first appointed: 2007 End of current term of office: 2019 Georg Riedl Year of birth: 1959 Date first appointed: 2014 End of current term of office: 2019 Gertrude Tumpel-Gugerell Year of birth: 1952 Date first appointed: 2012 End of current term of office: 2019 Supervisory Board independence In accordance with Rule 53 of the Austrian Code of Corporate Governance, the Supervisory Board of Vienna Insurance Group has established the following criteria defining independence: The Supervisory Board member has not been a member of the Managing Board or a senior manager of the Company or subsidiary of the Company in the last five years. The Supervisory Board member does not have a business relationship with the Company or a subsidiary of the Company that is of such significant scope for the Supervisory Board member that it affects his or her activities on the Supervisory Board to the detriment of the Company. This also applies to business relationships with companies in which the Supervisory Board member has a significant economic interest. The approval of individual transactions by the Supervisory Board in accordance with 95(5)(12) of the Austrian Stock Corporation Act (AktG) or 15(2)(l) of the articles of association does not automatically lead to a classification of nonindependence. For the purpose of clarification, it is expressly noted that the purchase or existence of insurance policies with the Company has no adverse effect on independence. The Supervisory Board member has not been an auditor of the Company s financial statements, or held an ownership interest in or been an employee of the auditing company doing such auditing in the last three years. The Supervisory Board member is not a member of the managing board of another company that has a member of the Company s Managing Board on its supervisory board. The Supervisory Board member is not a close family member (direct descendant, spouse, partner, parent, uncle, aunt, brother, sister, niece, nephew) of a member of the Managing Board or individuals holding one of the positions described above. The Supervisory Board as a whole is to be considered independent if at least 50% of the members elected by the general meeting satisfy the criteria above for independence of a Supervisory Board member. Vienna Insurance Group 15

18 All members of the Supervisory Board have declared whether they can be considered independent based on the criteria specified by the Supervisory Board. The following members are independent in terms of the points mentioned above: Karl Skyba, Bernhard Backovsky, Martina Dobringer, Maria Kubitschek, Heinz Öhler, Reinhard Ortner, Georg Riedl, Gertrude Tumpel-Gugerell. No member of the Supervisory Board is a shareholder holding more than 10% of the shares of the Company or represents the interests of such a shareholder. The following members of the Supervisory Board held supervisory board positions or comparable positions in Austrian or foreign listed companies as of 31 December 2014: Martina Dobringer Praktiker AG Georg Riedl AT&S Austria Technologie und Systemtechnik AG Bwin.Party Digital Entertainment Plc Gertrude Tumpel-Gugerell Commerzbank AG Supervisory Board Committees The following qualified Supervisory Board committees were formed to increase the efficiency of the Supervisory Board and deal with complex issues: COMMITTEE FOR URGENT MATTERS (WORKING COMMITTEE) The Committee for Urgent Matters (Working Committee) decides on matters that require Supervisory Board approval but cannot be deferred to the next ordinary Supervisory Board meeting because of particular urgency. Günter Geyer (Chairman) 1 st Substitute member: Gertrude Tumpel-Gugerell 2 nd Substitute member: Reinhard Ortner Karl Skyba (Deputy Chairman) 1 st Substitute member: Georg Riedl 2 nd Substitute member: Reinhard Ortner Rudolf Ertl 1 st Substitute member: Martina Dobringer 2 nd Substitute member: Reinhard Ortner AUDIT COMMITTEE (ACCOUNTS COMMITTEE) The Audit Committee (Accounts Committee) is responsible for the duties assigned by 92(4a) of the Austrian Stock Corporation Act, namely: 1. Monitoring the accounting process; 2. Monitoring the effectiveness of the Company s internal control system, internal auditing system and risk management system; 3. Monitoring audits of the financial statements and consolidated financial statements; 4. Examination and monitoring of the independence of the financial statements auditor (consolidated financial statements auditor), in particular with respect to additional services provided for the audited company; 5. Auditing of the annual financial statements and preparations for their approval, examination of the proposal for appropriation of profits, management report and corporate governance report, and presentation of a report on the audit findings to the Supervisory Board; 6. Auditing of the consolidated financial statements and Group management report, and presentation of a report on the audit findings to the Supervisory Board of the parent company; 7. Preparation of the Supervisory Board proposal for choosing the financial statements auditor (consolidated financial statements auditor). Furthermore, in a meeting (another meeting, in addition to the meeting required by law), the Audit Committee (Accounts Committee) specifies how the two-way communication between the (consolidated) financial statements auditor and the Audit Committee has to take place, while making provision for exchanges to take place between the Audit Committee (Accounts Committee) and the (consolidated) financial statements auditor without the presence of the Managing Board. 16 Group Annual Report 2014

19 Company Group Management Report Consolidated Financial Statements All of the members of the Audit Committee are experienced financial experts with knowledge and practical experience in finance, accounting and reporting that satisfy the requirements of the Company. Gertrude Tumpel-Gugerell (Chairwoman) 1 st Substitute member: Georg Riedl 2 nd Substitute member: Heinz Öhler Reinhard Ortner 1 st Substitute member: Martina Dobringer 2 nd Substitute member: Heinz Öhler Günter Geyer 1 st Substitute member: Maria Kubitschek 2 nd Substitute member: Heinz Öhler Rudolf Ertl 1 st Substitute member: Karl Skyba 2 nd Substitute member: Heinz Öhler COMMITTEE FOR MANAGING BOARD MATTERS (COMPENSATION COMMITTEE) The Committee for Managing Board Matters (Compensation Committee) deals with Managing Board personnel matters. The Committee for Managing Board Matters therefore decides on the terms of employment contracts with members of the Managing Board and their compensation, and examines remuneration policies at regular intervals. Günter Geyer (Chairman) Karl Skyba (Deputy Chairman) Substitute member: Rudolf Ertl STRATEGY COMMITTEE The Strategy Committee works together with the Managing Board and, when appropriate, with experts that it consults, to prepare fundamental decisions that must then be decided on by the Supervisory Board as a whole. Günter Geyer (Chairman) 1 st Substitute member: Gertrude Tumpel-Gugerell 2 nd Substitute member: Reinhard Ortner Karl Skyba (Deputy Chairman) 1 st Substitute member: Georg Riedl 2 nd Substitute member: Reinhard Ortner Rudolf Ertl 1 st Substitute member: Martina Dobringer 2 nd Substitute member: Reinhard Ortner The Supervisory Board gave its consent in 2014 for VIG Holding and the other companies in the VIG Group to use the legal services of Georg Riedl, Member of the Supervisory Board, and engage him or his law firm to act as a representative and provide advisory services on a projectrelated basis at normal market terms. Georg Riedl provided legal advisory services to the Group resulting in (net) fees of EUR 110, in financial year Other than this, the Company did not enter into any contracts with members of the Supervisory Board in 2014 that would have required Supervisory Board approval. Procedures followed by the Managing Board and Supervisory Board Managing Board The Managing Board manages the business of the Company under the leadership of its Chairman and within the constraints of the law, articles of association, rules of procedure for the Managing Board and rules of procedure for the Supervisory Board. The Managing Board usually meets once a week to discuss current business developments, and makes necessary decisions and resolutions during the course of those meetings. The members of the Managing Board continuously exchange information with each other and the heads of the various departments. Supervisory Board The Supervisory Committee performs all activities defined under the law, articles of association and rules of procedure of the Supervisory Committee. In order to ensure the effectiveness and efficiency of its activities and procedures, the Supervisory Board examines its procedures regularly in the form of a self-evaluation at least once per year. The results of the self-evaluation once again show in 2014 that the practices used meet the requirements of the Austrian Vienna Insurance Group 17

20 Stock Corporation Act and the Austrian Code of Corporate Governance and that the organisation and procedures of the Supervisory Board are appropriate and satisfactorily efficient for the business activities and business volume of the Company and Group as a whole. Requests and comments made by members of the Supervisory Board during this self-evaluation are taken into account. The Supervisory Board and its committees, Chairman and Deputy Chairman continuously monitor and periodically examine the management of the Company. Detailed presentations and discussions during Supervisory Board and Supervisory Board Committee meetings serve this purpose, as do recurring discussions between, in particular, the executive committee of the Supervisory Board and the members of the Managing Board, who provide comprehensive explanations and supporting documentation relating to the management and financial position of the Company and the Group. The Company's strategy, business development, risk management, internal control system, activities of the internal audit department, preparations for Solvency II and IT strategy are also discussed at Supervisory Board meetings and in meetings with the Managing Board. The Supervisory Board holds closed Supervisory Board meetings with the Managing Board to discuss policy issues and set the long-term growth strategy. The Supervisory Board and Audit Committee also hold direct discussions with the financial statements auditor and the consolidated financial statements auditor in order to inform themselves regarding the accounting process and the progress of the audit and to inquire whether the audit has produced any material findings. Provision was made for exchanges between the members of the Audit Committee and the (consolidated) financial statements auditor in such meetings without the presence of the Managing Board, but no member of the Audit Committee made use of this opportunity during the financial year. The audit reports are discussed and debated in detail with the audit managers during Audit Committee and Supervisory Board meetings regarding the annual financial statements and consolidated financial statements. The Supervisory Board also receives quarterly reports from the internal audit department and asks the head of internal audit to provide detailed explanations of individual issues and audit focal points if necessary. The annual audit plan is submitted to the Supervisory Board. The Managing Board explains the organisation and operation of the risk management system and internal control system to the Supervisory Board at least once per year, and provides the Supervisory Board with a written report on this subject so that it can confirm the efficiency of the systems. The Audit Committee also examines the report and assessment of the functioning of the risk management system prepared by the (consolidated) financial statements auditor and reports its findings to the Supervisory Board. At least once per year, the Managing Board presents to the Supervisory Board the precautions taken in the Group to prevent corruption and the Supervisory Board discusses these measures. When preparing general meeting proposals concerning the election of new Supervisory Board members, the Supervisory Board takes into account the requirements of the law and the Austrian Code of Corporate Governance that members of the Supervisory Board must satisfy and observe. Particular attention is paid to ensuring appropriate diversity in the sex, age and international distribution of the members. The Audit Committee and Supervisory Board also strictly ensure that all of the requirements and conditions provided for under the law and Austrian Code of Corporate Governance are fully satisfied when preparing the general meeting proposal on selection of the (consolidated) financial statements auditor. In addition, after the audit of the consolidated financial statements has been completed, the Supervisory Board is provided with a list showing the total audit expenses for all Group companies. This list provides a separate breakdown according to expenses for the consolidated financial statements auditor, the members of the network to which the consolidated financial statements auditor belongs, and other financial statement auditors working for the Group. 18 Group Annual Report 2014

21 Company Group Management Report Consolidated Financial Statements The Supervisory Board has formed four committees from among its members, a Committee for Urgent Matters (Working Committee), an Audit Committee (Accounts Committee), a Committee for Managing Board Matters (Compensation Committee) and a Strategy Committee. Detailed information on these committees is provided in the Supervisory Board committees section. Number of meetings of the Supervisory Board and its committees in financial year 2014 One ordinary general meeting and five Supervisory Board meetings distributed across the financial year were held in Four meetings of the Audit Committee were also held. The financial statements and consolidated financial statements auditor for financial year 2013 and auditor for financial year 2014, KPMG Austria GmbH Wirtschaftsprüfungs- und Steuerberatungsgesellschaft (KPMG), attended three meetings of the Audit Committee and the meeting of the Supervisory Board in 2014 dealing with the auditing of the 2013 annual financial statements and the 2013 consolidated financial statements and formal approval of the 2013 annual financial statements, as well as the general meeting. The Committee for Urgent Decisions was contacted in writing on two occasions. Two meetings of the Committee for Managing Board Matters were held in The Strategy Committee did not hold any meetings in 2014; strategic matters were handled by the Supervisory Board as a whole. No agenda items were discussed in the Supervisory Board and committee meetings without the participation of members of the Managing Board. No member of the Supervisory Board attended fewer than half of the Supervisory Board meetings. Disclosure of information on Managing Board and Supervisory Board compensation Compensation plan for members of the Managing Board Managing Board compensation takes into account the importance of the Group and the responsibility that goes with it, the economic situation of the Company, and the market environment. The variable portion of the compensation emphasises the need for sustainability in a number of ways. Its Achievement depends to a large extent on satisfying performance criteria that extend beyond a single financial year. The performance-related compensation is limited. The maximum performance-related compensation that the Managing Board can receive by overachieving all of its targets in financial year 2014 is approximately the same as its fixed salary. The awarding of such compensation requires that consideration be given to the sustainable development of the Company and the Group; non-financial factors, including, for example, those resulting from the Company's commitment to social responsibility, are also taken into account when target achievement is assessed. The Managing Board is not entitled to the performancerelated component of compensation if performance fails to meet certain thresholds. Even if the performance target is met in a financial year, because of the focus on sustainability, the full variable compensation is only awarded if satisfactory performance is also reported in the following year. In 2014, the key performance criteria for variable compensation are the combined ratio, premium growth, the profit before taxes for the years 2014 and 2015, and a countryspecific target for 2014 and Managing Board compensation does not include stock options or similar instruments. When setting the gross compensation of the Managing Board members, a certain amount of attention was also paid to equalising net effects, so that if compensation was paid for operational positions in affiliated companies outside of Austria, where the tax regime was more favourable than that in Austria, a lower gross compensation was set to take account of this fact. This and the different responsibilities of the members of the Managing Board explain the differences in their gross compensation. Vienna Insurance Group 19

22 In detail, the active members of the Managing Board in 2014 received the following from the Company for their service during the reporting period: Peter Hagen EUR 884,000 (EUR 1,170,000), including EUR 89,000 (EUR 464,000) variable, Franz Fuchs EUR 431,000 (EUR 368,000), including EUR 11,000 (EUR 149,000) variable, Martin Simhandl EUR 559,000 (EUR 819,000), including EUR 62,000 (EUR 333,000) variable, Peter Höfinger EUR 559,000 (EUR 819,000), including EUR 62,000 (EUR 333,000) variable. The members of the Managing Board received the following compensation from affiliated companies for their services to the Company, or as a manager or employee of an affiliated company: Franz Fuchs EUR 75,000 (EUR 321,000), including EUR 11,000 (EUR 129,000) variable. The standard employment contract for a member of the Managing Board of the Company includes a pension equal to a maximum of 40% of the measurement basis if the member remains on the Managing Board until the age of 65 (the measurement basis is equal to the standard fixed salary). A pension is normally received only if a Managing Board member s position is not extended and the member is not at fault for the lack of extension, or the Managing Board member retires due to illness or age. In cases where the provisions of the Austrian Employee and Self-Employment Provisions Act (Mitarbeiter- und Selbstständigen-Vorsorgegesetz) are not applicable by law, the Company's Managing Board contracts provide for a severance payment entitlement structured in accordance with the provisions of the Austrian Employee Act (Angestelltengesetz), as amended in 2003, in combination with applicable sector-specific provisions. This allows Managing Board members to receive a severance payment equal to two to twelve months compensation, depending on the period of service, with a supplement of 50% if the member retires or leaves after a long-term illness. A Managing Board member who leaves of his or her own volition before retirement is possible, or leaves due to a fault of his or her own, is not entitled to a severance payment. Members of the Managing Board are provided a company car for both business and personal use. Compensation plan for the members of the Supervisory Board In accordance with resolutions adopted by the 21 st ordinary general meeting on 4 May 2012, the members of the Supervisory Board elected by the general meeting are entitled to receive compensation in the form of a payment remitted monthly in advance. Members of the Supervisory Board who withdraw from their positions before the end of a month still receive full compensation for the month in question. In addition to this compensation, Supervisory Board members are entitled to receive an attendance allowance for participating in Supervisory Board meetings and Supervisory Board committee meetings (remitted after participation in the meeting). The total compensation paid to members of the Supervisory Board in 2014 was EUR 419,100. In detail, the members of the Supervisory Board received the following: Günter Geyer EUR 39,000 (since 6 June 2014) Wolfgang Ruttenstorfer EUR 36,000 (until 6 June 2014) Karl Skyba EUR 48,600 Bernhard Backovsky EUR 31,500 Martina Dobringer EUR 34,500 Rudolf Ertl EUR 21,750 (since 6 June 2014) Alois Hochegger EUR 16,500 (until 6 June 2014) Maria Kubitschek EUR 20,250 (since 6 June 2014) Heinz Öhler EUR 34,500 Reinhard Ortner EUR 40,500 Georg Riedl EUR 20,250 (since 6 June 2014) Martin Roman EUR 17,250 (until 6 June 2014) Friedrich Stara EUR 21,000 (until 6 June 2014) Gertrude Tumpel-Gugerell EUR 37,500. Supervisory Board compensation does not include stock options or similar instruments. Measures put in place to promote women to the managing board, supervisory board and management positions Female supervisory board members Women hold around 10% of the positions in Vienna Insurance Group supervisory boards across Europe, 16% in the Austrian insurance companies and 30% in VIG Holding (as of 31 December 2014). 20 Group Annual Report 2014