Foreword by the Chairman of the Management Board

With this Group Report 2009, we give account of a year which suffered the worst economic crisis in decades, with extremely negative effects on the development of businesses in almost all industries. This far-reaching economic shift was largely unforeseeable and forced the governments and central banks of numerous countries to launch massive governmental economic stimulus programmes and to support economic development through low interest rate policies. This development also had a detrimental effect on the national economies of Eastern Europe, whereby the effects varied greatly between individual countries. Poland, for instance, was the only Member State of the European Union able to record positive economic growth in 2009.

These difficult times have shown that our business model, which has a solid foundation in Austria and broadly diversified interests in Eastern and Western Europe, is able to withstand the negative effects of recessive economic trends. This is underlined by the growth of business volume in 2009, which showed a 2.1% increase in premium volume compared to current premium payments, while single premium business declined in both Western and Eastern Europe due to customers’ general tendency toward more cautious saving behaviour.

The development in the Eastern and Central European markets has shown that these markets – which were often viewed with scepticism – were largely able to weather the crisis – albeit doing so differently in each case. This can also be seen in the premium growth in property insurance, which shows an increase of 4.1% in 2009 despite negative currency effects. In contrast, in 2009 life insurance business declined in Eastern Europe in particular for the reasons stated above. Our unchanging positive attitude towards the markets in Central and Eastern Europe is confirmed by our market entry into Russia, which took place last year.

It is particularly pleasing to note that we exceeded average market development in virtually all insurance lines in Austria last year. I would particularly like to highlight the 6.5% increase in life insurance business, which was also influenced by the large increase in single premium business. This means that the Austrian life insurance business contributed 70% of the total premium volume of this business segment.

All in all, we perceive the developments in 2009 as a confirmation of our strategic orientation – even though the Group pre-tax profit of €82 million was slightly less than in 2008. On the one hand, this is a result of the extreme storm events in the summer of 2009, and on the other, due to the financial costs of the investment results achieved during the crisis-affected course of the previous year – even though, after the low point at the end of the first quarter 2009, the markets showed significant recovery towards the end of the year. We will propose unchanged dividend payouts of 40 cents per share at the Annual General Meeting.

Another thing that will not change is our commitment to create innovation and added benefit for our customers by providing creative insurance solutions. Good examples of this approach include the SafeLine Package for motor vehicle insurance, the introduction of a new product for nursing care provision and the inclusion of new risk modules within our FlexSolution product, which is a combination of traditional and unit-linked life insurance within a single life insurance.

The previous financial year placed significant challenges on our employees and partners. They met these challenges with a combination of commitment, pragmatism and creativity, thus laying the foundation for the successful handling of this difficult financial year. For this, we thank all of our employees and partners.

Vienna, April 2010

Konstantin Klien