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 ...

@@start.t1@@--------------------------------------------------------------------------------   Disclosure announcement transmitted by euro adhoc. The issuer is responsible   for the content of this announcement. --------------------------------------------------------------------------------@@end@@

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

@@start.t2@@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,@@end@@

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.

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ots Originaltext: Vienna Insurance Group
Im Internet recherchierbar: http://www.presseportal.ch

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



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