Vienna Insurance : 2023 VIG SFCR

SOLVENCY AND FINANCIAL CONDITION REPORT 2023

VIG Group Report

Table of contents

SUMMARY	4
A. Business and performance	8
A.1 Business	8
A.2 Underwriting performance	12
A.3 Investment performance	15
A.4 Performance of other activities	17
A.5 Any other information	17
B. System of governance	18
B.1	General information on the system of governance	18
B.2	Fit and proper requirements	30
B.3	Risk management system including the own risk and solvency assessment	31
B.4	Internal control system	37
B.5	Internal Audit function	39
B.6	Actuarial function	40
B.7	Outsourcing	40
B.8	Any other information	41
C. Risk profile	42
C.1 Underwriting risk	43
C.2 Market risk	47
C.3 Credit risk	49
C.4 Liquidity risk	50
C.5 Operational risk	50
C.6 Other material risks	52
C.7 Any other information	54

D. Valuation for solvency purposes	56
D.1 Assets	57
D.2 Technical provisions	64
D.3 Other liabilities	67
D.4 Alternative methods for valuation	69
D.5 Any other information	70
E. Capital management	71
E.1	Own funds	71
E.2	Solvency Capital Requirement and Minimum Capital Requirement	78
E.3	Use of the duration-based equity risk sub-module in the calculation of the Solvency Capital
Requirement	80
E.4	Differences between the standard formula and any internal model used	80
E.5	Non-compliance with the Minimum Capital Requirement and non-compliance with the Solvency
Capital Requirement	82
E.6	Any other information	82
ANNEX	83
Glossary	83
Notice	86
Quantitative reporting templates	87

SUMMARY

This document is the solvency and financial condition report (SFCR) of VIENNA INSURANCE GROUP AG Wiener Versicherung Gruppe (VIG Insurance Group) for the 2023 financial year. This SFCR has been prepared based on the EU Directive 2009/138/EC and Delegated Regulation (EU) 2015/35.

VIG Insurance Group, together with its individual companies, is the leading insurance group in Austria and the CEE region. Wiener Städtische Wechselseitiger Versicherungsverein - Vermögensverwaltung - Vienna Insurance Group (WSTW) is the majority shareholder owning around 70% of VIG Insurance Group.

In 2018, a notice from the competent supervisory authority, the Austrian Financial Market Authority (FMA), removed WSTW from its supervision of the Group, so that supervision of the Group is now performed at the level of VIG Holding. This SFCR reports on the solvency and financial condition of VIG Insurance Group in accordance with this decision and the legal requirements.

Chapter A presents business activities and performance. The Group is based in Vienna and with its insurance companies is the leading insurance group in Austria and the CEE region.

In 2023, VIG Insurance Group generated a premium volume in non-life business of TEUR 8,120,877 (2022: TEUR 7,173,003).

The total premium volume in life insurance business was TEUR 4,146,510 in 2023 (2022: TEUR 4,193,019). The total capital investment result in 2023 amounted to TEUR 284,255.

Due to interest rate developments on the capital market, on 21 April 2023 VIG Holding prematurely repurchased a portion of the subordinated bond from 2015, with the repurchase rate amounting to around 46% (EUR 185.6 million) of the original total nominal amount (EUR 400 million). The outstanding volume of the subordinated bond from 2015 in the amount of EUR 214.4 million can be called for the first time in March 2026.

With effect from 9 October 2023, VIG Holding called the outstanding volume of EUR 284.4 million of the subordinated bond from 2013.

The purchase agreement that was concluded on 29 November 2020 for the VIG Group acquisition of the companies of the Dutch company Aegon N.V. in Hungary, Poland, Romania and Türkiye has been successfully closed. The VIG Group finalised the acquisition of the Hungarian Aegon companies in March 2022. Consequently, the Hungarian state holding Corvinus holds a 45% stake in Aegon Hungary. The acquisition of the Turkish AEGON insurance company was closed in April 2022 and the acquisition of the Aegon companies in Poland and Romania was also completed in May 2023. The Aegon companies in Poland and Romania were not yet consolidated as of 31 December 2023.

On 30 November 2023, VIG increased its indirect participation in the Hungarian ALFA insurance company (formerly AEGON) and UNION insurance company from 55% to 90%. The Hungarian government retains its 10% stake in the Hungarian business via the state-owned holding company Corvinus.

In June 2023, the Czech company Global Assistance CZ implemented a pilot project in Croatia and, in collaboration with Frantisek Paum, owner of PAME-AUTO s.r.o., established Global Assistance Croatia, which will offer its customers car assistance services in Croatia, particularly during the summer. This means VIG Insurance Group now has nine assistance companies that provide customer support and service in twelve countries.

Together with energy utility company Wien Energie, the association VIG Energiegemeinschaft was established on 28 November 2023 as an institution for a citizens' energy community. This makes it possible for participating members in Austria to exchange electricity produced by their own photovoltaic systems and wind turbines, thus supporting its members' security of supply and environmental protection. In a later phase, membership will also be open to employees of the VIG Group.

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Chapter B contains a description of the governance system of VIG Insurance Group, the core elements of which comprise the Supervisory Board, the Managing Board, the governance and other key functions as well as the risk management system and internal control system (ICS).

As well as presenting the compensation policy and fit and proper requirements, the risk management system (including the Risk Management function), own risk and solvency assessment (ORSA), internal control system (including the Compliance function), Internal Audit function and Actuarial function are also described. The measures implemented in the area of outsourcing and the critical and important outsourced functions and activities are also discussed.

The VIG Insurance Group governance system includes all the processes needed to effectively and efficiently manage and supervise the Group and is appropriate with respect to the nature, size and complexity of the Group. There were changes in the members of the VIG Holding Supervisory Board in the reporting period. In addition, organisational changes were made in the area of the risk management system as an important part of the governance system during the reporting year.

Chapter C describes the VIG Insurance Group risk profile. As an internationally active insurance group the risk profile is dominated by market risk arising from the capital investments and underwriting risks stemming from its business operations. These risks are of a strategic nature and are consciously accepted. The following table provides an overview of material risks of the Group according to the partial internal model (PIM), which is also used in risk measurement for the regulatory Solvency Capital Requirement calculation.

Risks based on the PIM		31 December 2023
Solvency Capital Requirement (SCR)		3,847,135
Market risk		2,714,667
Counterparty default risk		327,188
Life underwriting risk		1,969,440
Health underwriting risk		659,413
Non-life underwriting risk		985,825
Intangible asset risk		0
Operational risk	397,969

Other risks not included in the solvency calculation are qualitatively assessed as part of the risk management process.

Chapter D describes the valuation of the assets and liabilities for solvency purposes, which is primarily governed by the European Framework Directive (2009/138/EC) and the Delegated Regulation (EU) 2015/35. The underlying principle thereof is the evaluation of the economic situation of an undertaking on the basis of current market prices. For this purpose, an economic balance sheet that shows the balance sheet items according to their market values must be prepared. The material items of the economic balance sheet, the assets and the technical provisions, are presented. The quantitative and qualitative valuation differences between the market valuation and the values presented in the annual financial statements prepared in accordance with IFRS are described.

When calculating the technical provisions and the Solvency and Minimum Capital Requirements, the transitional measure for technical provisions (TM TP) or the volatility adjustment (VA) is used. The volatility adjustment (VA) constitutes a regulatory premium on the yield curve. Besides that no other transitional measures were used.

The transitional measure for technical provisions provides for a deduction at the level of homogeneous risk groups. This deduction corresponds to the difference between the provisions under Solvency II and the provisions under the local accounting regulations in effect on entry into force of Solvency II. The deduction will be gradually reduced to zero by 2032, which means that the transitional measure is effective until this date.

Without using the TM TP, the eligible economic own funds for the SCR would be TEUR 974,453 lower, whilst the Solvency Capital Requirement of VIG Insurance Group would be TEUR 9,839 higher.

Technical provisions

Basic own funds

Eligible own funds SCR

SCR

Effect TM

1,286,318

-974,453

-974,453

9,839

VIENNA INSURANCE GROUP AG Wiener Versicherung Gruppe

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Without using the VA, the eligible economic own funds for the SCR would be TEUR 168,004 lower, whilst the Solvency Capital Requirement would be TEUR 85,881 higher.

Technical provisions

Basic own funds

Eligible own funds SCR

SCR

Effect VA

228,574

-168,004

-168,004

85,881

In Chapter E, the economic own funds and the Solvency Capital Requirement (SCR) of VIG Insurance Group are explained. A comparison of the economic own funds and the SCR gives the SCR ratio. In order to ensure that the risks are covered, this ratio must be more than 100%. If it falls short of this threshold, the interests of policy holders are at major risk and regulatory measures will follow.

The economic own funds are derived from the valuation of the balance sheet for solvency purposes and represent the amount available to the company to cover the SCR. VIG Insurance Group had TEUR 10,344,756 in total eligible own funds as of 31 December 2023.

The eligible economic own funds are broken down as follows into the individual own funds classes (tiers):

Eligible own funds to meet the SCR		31 December 2023
Tier 1		9,094,278
Tier 2		1,142,782
Tier 3		107,696
Total	10,344,756

The SCR corresponds to the capital required for the company to withstand a one-in-200-years event. To calculate the SCR, VIG Insurance Group uses the standard formula prescribed by the European regulator for most risks.

To calculate the SCR in the areas of non-life and property, a partial internal model is used as it better reflects the specific risk profile in these areas. The Austrian Financial Market Authority (FMA) has reviewed the model and approved its use. VIG Insurance Group had a statutory Solvency Capital Requirement of TEUR 3,847,135 as of the reporting date 31 December 2023.

This results in a solid SCR ratio of around 268.9% for VIG Insurance Group.

Besides the SCR, the company is also required to determine a Minimum Capital Requirement (MCR), which represents the last supervisory threshold intervention before the company's operating licence is withdrawn. According to the statutory requirements, the Minimum Capital Requirement determined for VIG Insurance Group was TEUR 2,142,047 as of 31 December 2023.

Only basic own fund items in the Tier 1 and Tier 2 quality classes are eligible for covering the Minimum Capital Requirement. In addition, the Tier 2 subordinated liabilities exceed the quantitative limit of Tier 2 own funds. This category is therefore limited to 20% of the MCR. The eligible own funds for covering the MCR thus amount to TEUR 9,367,216 and are broken down into the following own funds classes (tiers):

Eligible own funds to meet the MCR

Tier 1 (excl. sectoral own funds)

Tier 2

Total

31 December 2023

8,938,806

428,409

9,367,216

Overall, VIG Insurance Group is considered to meet the relevant legal requirements and is able to cover the Solvency Capital Requirement and the Minimum Capital Requirement with the respective eligible own funds.

The annex prescribed by law contains an excerpt from the quantitative reporting templates (QRT) that must be submitted to the regulator by insurance companies quarterly and annually. The aim of disclosing these quantitative key figures is to increase transparency.

Pursuant to Article 2 of Implementing Regulation 2015/2452 of the Commission, figures that relate to monetary amounts are shown in thousands of euros (TEUR) in this report. Calculations, however, are done using exact amounts, including digits not shown, which may lead to rounding differences.

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DECLARATION BY THE MANAGING BOARD

We confirm to the best of our knowledge that the Solvency and Financial Condition Report of VIENNA INSURANCE GROUP AG Wiener Versicherung Gruppe, which has been prepared in accordance with the provisions of the Austrian Insurance Supervision Act and corresponding directly applicable rules at the European level, gives a true picture of the solvency and financial condition of the company and that it describes the business development, governance system, risk profile and assets, liabilities, and own funds of the solvency balance sheet.

Vienna, 9 April 2024

The Managing Board:

Hartwig Löger	Peter Höfinger	Liane Hirner
General Manager (CEO),	Deputy General Manager,	CFRO, Member of the Managing Board
Chairman of the Managing Board	Deputy Chairman of the Managing Board

Gerhard Lahner	Gábor Lehel	Harald Riener
COO, Member of the Managing Board	CIO, Member of the Managing Board	Member of the Managing Board

VIENNA INSURANCE GROUP AG Wiener Versicherung Gruppe

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A. Business and performance

This report contains all information required by law regarding the solvency and financial condition of VIG Insurance Group

VIENNA INSURANCE GROUP AG

Wiener Versicherung Gruppe

Schottenring 30, 1010 Vienna

Commercial register 75687 f, Vienna Commercial Court

Tel: [phone]

www.vig.com

for the 2023 financial year. Important information regarding the solvency and financial condition of VIG Insurance Group is communicated to the public to ensure transparency.

The competent supervisory authority for the company and VIG Insurance Group is the

Austrian Financial Market Authority (FMA)

Otto-Wagner-Platz 5, 1090 Vienna

Tel: [phone]

www.fma.gv.at

The audit of the accuracy of this report and the information contained therein was performed by

KPMG Austria GmbH

Wirtschaftsprüfungs- und Steuerberatungsgesellschaft

Porzellangasse 51, 1090 Vienna

Tel: [phone]

www.kpmg.at

A.1 BUSINESS

VIG Insurance Group is an international insurance group headquartered in Vienna. VIG Insurance Group stands for stability and expertise in providing financial protection against risks. The roots of the Group reach back to the year 1824. This 200 years of experience and a focus on the core competence of providing insurance represent a solid and secure foundation for the around 32 million customers of VIG Insurance Group.

Around 300 VIG Holding employees were assisting the Managing Board with managing and steering the participations in insurance companies at the end of 2023. A list of all Group companies, including their names, legal forms, countries and shareholdings can be found in the QRT S.32.01.22 in the annex to this report.

The VIG insurance companies are primarily managed and monitored by their respective Supervisory Boards, in which members of the Managing Board of VIG Holding are always represented. Group-wide guidelines and policies are defined in the management areas of VIG Holding to assist with the management of participations in insurance companies and are also used in VIG Holding as a separate company. The management areas include Planning and Controlling, Opportunity Management, Asset Management (incl. Real Estate), Group Treasury & Capital Management, Reinsurance, Compliance incl. AML, Risk Management, Internal Audit, Actuarial Services, VIG IT, Data Analytics, Group Finance & Regulatory Reporting, Process & Project Management and Human Resources.

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The following charts show a simplified Group structure of the VIG insurance companies.

VIENNA INSURANCE GROUP AG Wiener Versicherung Gruppe

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Ownership structure

The main shareholder of VIG Holding is Wiener Städtische Wechselseitiger Versicherungsverein - Vermögensverwaltung - Vienna Insurance Group (a mutual insurance company headquartered at Schottenring 30, 1010 Vienna), which holds around 72% of the shares (directly and indirectly). The remaining shares of approximately 28% are in free float.

SIGNIFICANT BUSINESS EVENTS

CAPITAL MEASURES

Due to interest rate developments on the capital market, on 21 April 2023 VIG Holding prematurely repurchased a portion of the subordinated bond from 2015, with the repurchase rate amounting to around 46% (EUR 185.6 million) of the original total nominal amount (EUR 400 million). The outstanding volume of the subordinated bond from 2015 in the amount of EUR 214.4 million can be called for the first time in March 2026.

With effect from 9 October 2023, VIG Holding called the outstanding volume of EUR 284.4 million of the subordinated bond from 2013.

AEGON CEE

The purchase agreement that was concluded on 29 November 2020 for the VIG Group acquisition of the companies of the Dutch company Aegon N.V. in Hungary, Poland, Romania and Türkiye has been successfully closed. The VIG Group finalised the acquisition of the Hungarian Aegon companies in March 2022. Consequently, the Hungarian state holding Corvinus holds a 45% stake in Aegon Hungary. The acquisition of the Turkish AEGON insurance company was closed in April 2022 and the acquisition of the Aegon companies in Poland and Romania was also completed in May 2023. The Aegon companies in Poland and Romania were not yet consolidated as of 31 December 2023.

On 30 November 2023, VIG increased its indirect participation in the Hungarian ALFA insurance company (formerly AEGON) and UNION insurance company from 55% to 90%. The Hungarian government retains its 10% stake in the Hungarian business via the state-owned holding company Corvinus.

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