Acquisition and administrative expenses

Acquisition and administrative expenses for retained business are broken down into acquisition expenses, administrative expenses less reinsurance commissions and profit commissions for reinsurance cessions. Expenses for claims investigation, loss prevention and claims processing (claims handling expenses) or for making insurance payments (settlement costs) are shown in the expenses for insurance benefits item.

Affiliated companies

The parent company and its subsidiaries are considered to be affiliated companies if the parent company is able to exert control over the business policies of the subsidiary. Examples of this are where the parent company can affect variable returns from the subsidiary, a controlling agreement exists or it is possible to appoint the majority of the Members of the Managing Board or other executive bodies of the subsidiary.

Asset and liability management (ALM)

ALM refers to taking both assets and liabilities into account when implementing strategic decisions in order to achieve optimal company results and is therefore needed for determining and managing the risk capital required, matching assets and liabilities (duration, cash flow and income matching) and optimising investments and reinsurance.

Austrian Commercial Code (UGB)

Unternehmensgesetzbuch (UGB) as of 1 January 2007, Handelsgesetzbuch (HGB) until 31 December 2006.

Austrian Insurance Supervision Act (VAG)

The Austrian Insurance Supervision Act (Versicherungsaufsichtsgesetz) includes provisions governing the organisation and supervision of insurance companies.

Cash flow

A key figure used in the analysis of shares and companies. It represents the inflow and outflow of liquid assets during a specific accounting period. Cash flow is essentially calculated by adding together the profit for the year, depreciation, changes in long-term provisions, and income taxes.

Cash flow statement

A presentation of the changes in cash and cash equivalents during a financial year, broken down into the three areas of ordinary activities, investing activities, and financing activities. The aim is to provide information on the financial strength of the company.

Ceded reinsurance premiums

Share of the premiums to which the reinsurer is entitled in return for reinsuring certain risks.

Central and Eastern Europe (CEE) or CEE markets

The Vienna Insurance Group defines the “CEE” region as all the growth markets in Central and Eastern Europe in which the Group operates. This includes Albania, Belarus, Bosnia-Herzegovina, Bulgaria, Croatia, the Czech Republic, Estonia, Georgia, Hungary, Latvia, Lithuania, North Macedonia, Moldova, Montenegro, Poland, Romania, Serbia, Slovakia, Slovenia, Turkey and Ukraine. Note that differences may exist between this definition and the definition of CEE used by other companies, financial institutions (e.g. IMF, OECD, WIFO, IHS), etc.

Claims incurred but not reported

Losses that are reported in the current financial year but occurred in the previous year. Each year as of the balance sheet date, a reserve (= incurred but not reported reserve, IBNR) is formed for losses that relate to the financial statement year but are not reported until the following year.

Combined ratio (net)

When the total of all items in the income statement that contribute to the profit before taxes, except for income from capital assets, other non-underwriting income and expenses and the value of gross earned premiums itself, is divided by gross earned premiums, the result is called the combined ratio. If this ratio is less than 100%, the company is earning a profit from the underwriting portion of the business. This ratio is only calculated for property and casualty insurance. Since the reinsurers’ share is taken into account in the calculation, the result is a net combined ratio.


The financial statements of the parent company and those of the subsidiaries are combined when the consolidated financial statements are prepared by the parent company. During this process, intragroup equity interests, interim results, receivables and payables and income and expenses are eliminated.

Deposits on assumed and ceded reinsurance business

A claim by the reinsuring company against the ceding company for deposits that it retains. When business is assumed, the reinsurer’s share of premiums and claims are retained as security by the ceding insurance company. The deposits on ceded reinsurance items is analogous.

Derivative financial instruments (derivatives)

Financial contracts whose value depends on the price of an underlying asset. Derivatives can be classified systematically according to the nature of the underlying asset (interest rates, share prices, currency rates, or commodity prices). Options, futures, forwards and swaps are important examples of derivative financial instruments.

Direct business

Insurance business where an immediate legal relationship exists between the insurer and policyholder.

Earnings per share (undiluted/diluted)

The ratio of consolidated annual profit (less interest on hybrid capital) divided by the average number of shares outstanding. The diluted earnings per share include convertible securities that have been exercised, or are still available for exercise, in the calculation of the number of shares and net income. The convertible securities consist of convertible bonds and stock options.

Embedded value

The embedded value represents the economic value of the insurance business and is comprised of future profits from the insurance portfolio. Profits from future new business are not included. It therefore corresponds to the distributable profits after taxes and takes into account the risks contained in the business.

Enterprise Risk Management (ERM)

Risk and opportunity management. The responsibilities of ERM are identification, assessment, analysis and control of opportunities and risks.

Equity method

Shares in associated companies are recognised using this method. As a rule, the value recognised corresponds to the Group’s proportional share of the equity in these companies. In the case of shares in companies that prepare their own consolidated financial statements, the consolidated equity is recognised instead. For current valuation, the value recognised is adjusted using a proportional share of changes to equity, with the shares in net income being allocated to consolidated net income and disbursed profit distributions deducted.

Erste Group

An abbreviated version of the company name of Erste Group Bank AG.

Expenses for claims and insurance benefits

These are comprised of the payments for insurance claims, payments for claims investigation, claims settlement, and claims prevention, and from the change in the associated reserves.

Fair value

Value of a security calculated using a theoretical pricing model that takes into account factors on which the price depends.

Financial instruments available for sale

Available-for-sale financial instruments include securities that were not acquired with the intention of being held to maturity, or for short-term trading purposes. They are recognised at market value as of the balance sheet date.

Financial result

Income and expenses for investments and interest. This includes, for example, income from securities, loans, real estate and participations, as well as bank interest, and expenses incurred in the financial area, such as depreciation of owned real estate, write-downs of securities to listed market prices, bank fees, etc.

General Data Protection Regulation (GDPR)

Regulation (EU) 2016/679 on the protection of natural persons with regard to the processing of personal data enters into force on 25 May 2018 and must therefore be immediately applied in the European Union. The GDPR standardises the provisions applicable to the processing of personal data by private-sector companies and public bodies in the entire EU. The main objectives of the GDPR are data security and strengthening the fundamental rights and freedoms of natural persons. Although the GDPR is immediately applicable across the EU, it nevertheless contains opening clauses that allow member states to enact their own national regulations. The GDPR was implemented in Austrian law by the Austrian Data Protection Amendment Act of 2018 (Datenschutz-Anpassungsgesetz 2018), which extensively amended the Austrian Data Protection Act of 2000 (Datenschutzgesetz 2000).

Gross domestic product (GDP)

A measure of a country’s economic production. All goods and services produced or provided within a country (by citizens or foreigners) during a specified period, valued at current prices (market prices) or constant prices (prices in a certain base year). By using a constant price level in the calculations, price increases can be eliminated so that the figures presented over time are independent of inflation. GDP at constant prices is also known as real GDP.


In insurance terminology, “gross/net” means before or after reinsurance has been deducted (“net” is also used to mean “for own account” or “retention”). In connection with income from participations, the term “net” is used when related expenses have already been deducted from income (e.g. write-offs and losses from disposals). Therefore, (net) income from participations equals the profit or loss from these interests.


International Accounting Standards.

Income from investments and interest income

Income from investments and other interest income is comprised of income from participations (of which affiliated companies), income from land and buildings, income from other investments, income from write-ups, gains from the disposal of investments, and other income from investments and interest income.

Indirect business

Insurance business where the company acts as a reinsurer.

Insurance density

Annual per capita insurance premiums, used as an indicator for the state of development of a country’s insurance sector.

Insurance Distribution Directive (IDD)

Directive (EU) 2016/97 on insurance distribution must be applied by 1 October 2018 at the latest in the European Union. The IDD affects all aspects of the insurance business, including the recruiting of insurance distributors entailing training and advanced training, product development, the advisory process including wide-ranging duties to provide information, the distribution of standardised information sheets, the handling of conflicts of interest and remuneration.

Insurance payments (net)

Expenses (after deducting reinsurance) for insurance claims.

Insurance supervisory authority

The Austrian insurance supervisory authority is a part of the Austrian Financial Market Authority (FMA) that was established as an independent authority in April 2002. Its supervision extends to private-sector insurance companies with registered offices in Austria.

International Financial Reporting Standards (IFRS)

The IFRS are international financial reporting standards. Since 2002, the designation IFRS has stood for the overall framework of all standards adopted by the International Accounting Standards Board (IASB). Standards that were previously adopted, however, are still cited as IAS.

Loss reserve

A reserve for losses that have already been incurred but have not yet been settled. Claims and claims settlement expenses can be divided into two categories: reserves for reported but not yet settled claims (“RBNS”), and reserves for claims that have been incurred but have not yet been reported, or the correct amount has not been reported (“IBNR”, “IBNER”).

Market capitalisation

Stock exchange value or market capitalisation means the value of a stock corporation calculated by multiplying the current stock exchange price by the total number of shares issued.

Market value

The value of an asset on the balance sheet that can be realised by selling it in the market to a third party.

Mathematical reserve

A reserve calculated according to mathematical principles for future insurance payments in the life and health insurance balance sheet units. In the health insurance balance sheet unit, this is also referred to as an ageing reserve.

Net earned premiums

The portion of premiums written that is allocated to the current financial year.


Non-life insurance includes the property and casualty insurance and health insurance segments.


Derivative financial instruments which entitle, but do not obligate the buyer to purchase (call option) or sell (put option) an underlying asset at a future point in time for a specified price. In contrast, the seller of the option is obligated to deliver or purchase the asset and receives a premium for providing the option.

Organic growth

Organic growth means the growth of a company resulting from the company’s own financial strength. Such growth is therefore not the result of purchasing other companies.

Own Risk and Solvency Assessment (ORSA)

Under Article 45 of Directive 2009/138/EC, every insurance company must perform the Own Risk and Solvency Assessment (ORSA) as part of its risk management system.

Personal insurance

Comprised of life, health and casualty insurance.


Agreed fee paid in exchange for assumption of risk by an insurance company.

Premiums written

Direct business premiums written are comprised of set premiums, not including insurance or fire service taxes, plus policyholder collateral payments, reduced by premiums cancelled during the financial year. In indirect business, the premiums written correspond to the premiums that the ceding insurer has indicated for offset. In co-insurance business, the premiums written by each co-insurer correspond to the share of premiums allotted to it.

Present value

Current value of a cash amount to be received in the future, calculated by discounting with a known discount rate.

Price-earnings ratio (PE ratio)

A financial ratio for evaluating shares. The price-earnings ratio is the ratio of the share price to the earnings per share in a reference period, or to the expected earnings per share in a future period. If the reference period is defined as one year, the price-earnings ratio is the end-of-year price divided by the earnings per share in that year.

Profit participation

See profit-related premium refunds.

Profit-related premium refunds

The policyholder’s profit participation in the profit of the insurance class in question (mandatory for traditional life insurance).

Profit-unrelated premium refunds

Contractually accorded refund of premiums to the policyholder.

Provision for unearned premiums

The portion of premiums written that were specified for the period following the balance sheet date and are therefore not included in the income for the financial year. These premiums are used to cover obligations arising after the balance sheet date.


A rating is an evaluation of the creditworthiness of a debtor (countries, companies and so on) often carried out by a specialised rating agency. The evaluation is expressed as a kind of grading. It is very similar to a school grading system. The rating systems of the agencies use different grading schemes and their own symbols.


Reinsurance is when an insurance company insures a portion of its risk with another insurance company.

Retained earnings

Retained earnings are the profits generated by the company that have not been distributed as dividends.

Return on equity (RoE)

Profit before taxes divided by average shareholders’ equity (less revaluation reserve), calculated using values at the beginning and end of the year.

Securities held to maturity

Held-to-maturity securities comprise debt securities that are intended to be held to maturity, and can be held to maturity. They are measured at cost on the date of initial recognition and are subsequently measured at amortised cost. A write-down is recognised in profit or loss in the case of permanent impairment.

Segment reporting

Presentation of the consolidated financial statements using segments defined in accordance with IFRS 8. For VIG, these are countries.

Single premium

A special type of premium payment used for life insurance. A (high) amount is paid as a single premium at the start of the policy.

Solvency II

Solvency II is a fundamental reform of insurance supervisory law in Europe, particularly solvency regulations relating to the capital adequacy of insurance companies. Solvency II is intended to create methods for the risk-based management of the total solvency of insurance companies. The current static system for determining capital adequacy is replaced by a risk-based system, which goes beyond the current capital adequacy provisions of the Austrian Insurance Supervision Act, in particular to also take qualitative factors (e.g. internal risk management) into account.

Standard & Poor’s (S&P)

S&P is an internationally recognised rating agency. It analyses and evaluates companies, countries and bonds, among other things. It uses its own rating scale, which ranges from AAA for the highest category to CC for the lowest when rating the financial strength of insurance companies. The ratings can be modified by adding a plus or minus sign.

Stress test

Stress tests are a special form of scenario analysis. The objective is to arrive at a quantitative assessment of the potential losses incurred by portfolios in the event of extreme market fluctuations.


Underwriters are responsible for evaluating risks in the insurance industry, and have the authority to underwrite risks. An underwriter estimates the probability and size of a loss as precisely as possible, calculates insurance premiums and establishes policy terms.

Underwriting provisions

These consist of the provision for outstanding claims, mathematical reserve, unearned premiums, provisions for profit-related and profit-unrelated premium refunds, the equalisation provision and other underwriting provisions.

Unit-linked and index-linked life insurance

Insurance policies where the investment is made at the policyholder’s risk. The investments in this area are valued at fair value, with the underwriting reserves shown at the value of the investments.

Value of new business

The value of new business is the value generated by the new business sold during the financial year.

Value-at-risk (VaR)

The value-at-risk concept is a procedure used to calculate potential losses arising from changes in the price of a trading position. This loss potential is expressed using a specific confidence limit (e.g. 98%), and is calculated based on market-related price changes.

Vienna Insurance Group (VIG)

VIG generally refers to the Group as a whole. Vienna Insurance Group and VIG are used as synonyms. If a statement refers only to the activities of the Group holding company, the word “Holding” is added at the end of the name.


Fluctuations in security prices, currency rates and interest rates.