Vienna Insurance Group

euro adhoc: Vienna Insurance Group
Mergers - Acquisitions - Takeovers
Vienna Insurance Group acquires all Insurance Operations from Erste Bank (1) Long-term partnership with Erste Bank in Austria and CEE (1) Creating the leading insurance compa

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26.03.2008

Not for distribution in the United States, Canada, Japan and Australia.

Please note: this is a translation; only the German version of this release is legally binding

Vienna Insurance Group has entered into an agreement with Erste Bank to acquire all of Erste Bank's insurance activities including its operations in Austria, Czech Republic, Slovakia, Hungary, Croatia and Romania for a cash consideration of approximately EUR 1.4bn. As part of the transaction, a long-term distribution agreement has been entered into, giving Vienna Insurance Group access to Erste Bank's extensive distribution network with more than 16m clients and more than 2,900 branches.

Vienna Insurance Group CEO Günter Geyer notes: "With this acquisition and long- term cooperation, Vienna Insurance Group takes advantage of a unique opportunity to further implement its strategy for sustained growth in CEE. This transaction makes us the No. 1 insurance company among the international insurers operating in CEE and, importantly, we also become a leading player in the life insurance segment, which we see as our future growth engine in Austria and CEE. Two financial groups with extensive financial services know-how are joining forces in this region to build a lasting partnership with substantial benefits for customers, employees and shareholders alike."

Both the acquisition and the long-term agreement are subject to customary regulatory and anti-trust authority approvals. Closing of the transaction is expected in the third quarter of 2008.

Transaction Overview

Erste Bank's insurance activities consist of two main entities: s Versicherung Group with operations in Austria, Czech Republic, Slovakia, Hungary and Croatia and BCR Asigurari Group with operations in Romania. s Versicherung Group comprises primarily life insurance activities, whereas BCR Asigurari Group has significant presence in both life and non-life insurance. The Vienna Insurance Group already has small minority stakes in s Versicherung and s Versicherung's subsidiaries through its subsidiary Donau Versicherung (3). Post-transaction, Vienna Insurance Group will own about 95% in s Versicherung and its subsidiaries with the remaining 5% of the life insurance operations owned by Erste Bank and its subsidiaries. With regard to BCR Asigurari Group, Vienna Insurance Group will acquire an 88.5% ownership from Erste Bank, with the remainder owned by existing minority shareholders. Overall, the transaction adds almost EUR 1.3bn based on gross written premiums for fiscal year 2007 to Vienna Insurance Group - predominantly in the life insurance segment.

Vienna Insurance Group and Erste Bank have also concluded a 15 year preferred mutual distribution partnership, in all countries in which the two groups are present. This currently includes Austria, Croatia, Romania, the Czech Republic, Serbia, Slovakia, Ukraine and Hungary. The distribution agreement will be automatically renewed for an additional 10 years, unless terminated by one of the parties 12 months prior to the initial expiration date.

Transaction rationale

The Vienna Insurance Group believes the transaction offers an excellent opportunity to substantially reinforce its presence in CEE with compelling benefits for all stake holders:

- Creates No. 1 international insurance group in CEE

- Long-term agreement with preferred access to Erste Bank's strong retail distribution platform with more than 16m clients and more than 2,900 branches - the bancassurance channel is poised to become the most important distribution channel for life insurance policies and with its extensive bancassurance experience, Vienna Insurance Group believes it is ideally positioned to develop products and services tailored to this channel. As part of this long-term sales and distribution agreement, the partners' products will be offered to clients of both Vienna Insurance Group and Erste Bank

- Significant strengthening of Vienna Insurance Group's life insurance platform via both the acquisition of the life insurance operations and also the access to the bank distribution of Erste Bank. This enables Vienna Insurance Group to capitalise on the attractive growth prospects in the CEE life insurance markets, driven by strong economic growth, rapidly increasing life insurance penetration levels and pension reforms in the region

- Substantial synergy potential resulting from extended product offering for the distribution channels with considerable cross-selling potential between Vienna Insurance Group and Erste Bank

Vienna Insurance Group believes the existing relationship with Erste Bank, similar corporate culture and both parties' extensive transaction experience will ensure a smooth execution of the transaction and integration of the acquired entities.

Capital raising to fund transaction and further growth in the CEE region

The Vienna Insurance Group strives to have excellent capital resources at its disposal at all times. In order to fund the transaction as well as to further expand its growth in CEE and, especially, to finance further acquisitions in Poland, the Ukraine and Hungary, the Vienna Insurance Group plans to raise in total EUR 1.2-1.4bn. The Vienna Insurance Group intends to raise approximately EUR 0.9 billion to approximately EUR 1.0 billion by way of a rights issue with the remainder being raised in the hybrid capital market. Wiener Städtische Wechselseitige Versicherungsanstalt-Vermögensverwaltung, the main shareholder of Vienna Insurance Group with about 70%, has informed Vienna Insurance Group that it will fully support the capital increase and that it intends to maintain

approximately the same percentage of ownership in Vienna Insurance  Group  after
the capital increase. The financing has been designed  to  maintain  the  strong
capitalisation  and  financial  position  of  Vienna   Insurance   Group   post-
transaction.

The exact timing and further details of the rights issue and hybrid  debt  issue
will be announced at a later stage.

(1) Pending official approval by the relevant authorities

(2) CEE region defined as: Bulgaria, Croatia, Poland, Romania, Serbia, 

Slovakia, Czech Republic and Hungary

(3) Donau Versicherung owns 10% in s Versicherung in Austria directly, and 4.5% in Pojišt´ovna Ceské sporitelny in Czech Republic, 3.3% in Poistovna Slovenskej sporitelne in Slovakia, 9.0% in ERSTE Sparkassen Biztosító Zártkörüen Müködö Részvénytársaság in Hungary and 7.4% in Erste Sparkassen osiguranje d.d. za životno osiguranje in Croatia indirectly.

Disclaimer

This information constitutes neither an offer to sell nor a solicitation to buy any securities of Wiener Städtische Versicherung AG Vienna Insurance Group ("VIG"). A public offer would only be made in Austria or in the Czech Republic after publication of a prospectus prepared in accordance with the provisions of the Austrian Capital Market Act or the Czech Capital Markets Act. Any securities orders received prior to the commencement of a public offer will be rejected. If a public offer is made in Austria or in the Czech Republic, a prospectus prepared in accordance with the Austrian Capital Market Act or the Czech Capital Markets Act will be published and will be available free of charge (i) at the seat of Wiener Städtische Versicherung AG Vienna Insurance Group, Schottenring 30, 1010 Vienna, during usual business hours, and, (ii) in case of the offering in the Czech Republic, the prospectus will be available also on Vienna Insurance Group's internet pages http://www.viennainsurancegroup.com and on internet pages of participating securities brokers.

This press release and the information contained herein are not for distribution in or into the United States of America and must not be distributed to U.S. persons (as defined in Regulation S of the U.S. Securities Act of 1933, as amended ("Securities Act")) or to publications with a general circulation in the United States. This press release does not constitute an offer to sell or a solicitation of an offer to purchase any securities in the United States. The securities of Vienna Insurance Group have not been and will not be registered under the Securities Act and may not be offered, sold or delivered within the United States or to U.S. persons absent registration under or an applicable exemption from the registration requirements of the Securities Act. There will be no public offer of securities of Vienna Insurance Group in the United States.

This press release is directed only to persons (i) who are outside the United Kingdom or (ii) who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 (as amended) (the "Order") or (iii) who fall within Article 49(2)(a) to (d) ("high net worth companies, unincorporated associations, etc.") of the Order (all such persons together being referred to as "Relevant Persons"). Any person who is not a Relevant Person must not act or rely on this communication or any of its contents. Any investment or investment activity to which this communication relates is available only to relevant persons and will be engaged in only with Relevant Persons.

This press release contains forward-looking statements based on the currently held beliefs and assumptions of the management of Vienna Insurance Group, which are expressed in good faith and, in their opinion, reasonable. These statements may be identified by words such as "expectation" or "target" and similar expressions, or by their context. Forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, financial condition, performance, or achievements of Vienna Insurance Group, or results of the insurance industry generally, to differ materially from the results, financial condition, performance or achievements express or implied by such forward-looking statements. Given these risks, uncertainties and other factors, recipients of this press release are cautioned not to place undue reliance on these forward-looking statements. Vienna Insurance Group disclaims any obligation to update these forward-looking statements to reflect future events or developments.

end of announcement                               euro adhoc
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Further inquiry note:

Contact: 
WIENER STÄDTISCHE Versicherung AG
Vienna Insurance Group
Barbara Hagen-Grötschnig, MBA
Corporate Communications
Schottenring 30, 1010 Vienna
Tel.: +43 (0)50 350-21027
Fax: +43 (0)50 350 99-21027
E-Mail: b.hagen@staedtische.co.at

Branche: Insurance
ISIN: AT0000908504
WKN: A0ET17
Index: WBI, ATX Prime, ATX
Börsen: Prague Stock Exchange / stock market
Wiener Börse AG / official market
Original-Content von: Vienna Insurance Group, übermittelt durch news aktuell

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