Auditor’s report

Auditor’s Report

Audit Opinion

We have audited the consolidated financial statements of

VIENNA INSURANCE GROUP AG Wiener Versicherung Gruppe, Vienna, Austria,

and its subsidiaries (“the Group”), which comprise the Consolidated Balance Sheet as of 31 December 2023, the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Cash Flow Statement and the Consolidated Statement of Changes in Equity for the year then ended, and the Notes to the Consolidated Financial Statements.

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of 31 December 2023, and its consolidated financial performance and consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU, the additional requirements pursuant to Section 245a UGB (Austrian Commercial Code) as well as other legal or regulatory requirements.

Basis for our Opinion

We conducted our audit in accordance with the EU Regulation 537/2014 (“AP Regulation”) and Austrian Standards on Auditing. These standards require the audit to be conducted in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the “Auditor’s Responsibilities” section of our report. We are independent of the audited Group in accordance with Austrian company law and professional regulations, and we have fulfilled our other responsibilities under those relevant ethical requirements. We believe that the audit evidence we have obtained up to the date of the auditor’s report is sufficient and appropriate to provide a basis for our audit opinion on this date.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, however, we do not provide a separate opinion thereon.

We have identified the following key audit matters:

• Recoverability of goodwill
• Adequacy of insurance contracts assets and liabilities issued
• Restatement related to the initial application of IFRS 17 and IFRS 9

Recoverability of goodwill

Refer to notes 3. Goodwill on pages 130ff, Material estimates and discretionary decisions – 24.4. Impairment of goodwill on page 176 and Accounting policies – 25.5. Goodwill on pages 201ff.

Risk for the Consolidated Financial Statements

The recoverability of goodwill recognized in the Consolidated Financial Statements of the Vienna Insurance Group amounting to EUR 1,371.4 million, is monitored separately at country level. At least once a year and in case of a triggering event on an ad hoc basis Vienna Insurance Group performs a recoverability test (the so-called impairment test) of the recorded goodwill amounts.

Impairment testing of goodwill is complex and based on a number of estimates and discretionary factors. Those factors include in particular the expected future cash flows of the individual countries, which are primarily based on past experience as well as on the management’s assessment of the expected market environment and the future business development. Other factors are the assumed long-term growth rate as well as the underlying region-specific costs of capital.

Our response

We have carried out the following main audit procedures in connection with the recoverability of goodwill:

• Plausibility of the detailed planning for future years.
• Furthermore, we have dealt with the key planning assumptions and analysed consistency of the assumptions regarding the market development to general and sector-specific market expectations.
• We have backtested the consistency of planning data using information from prior periods.
• Given that minor changes in the applied cost of capital rate significantly impact the recoverable amount of the cash generating units, we have, together with our valuation specialists, assessed the determination of the applied cost of capital rate and comprehended the derivation of the underlying parameters.
• By means of our own sensitivity analysis we have determined whether the tested book values are still sufficiently covered by the recoverable amounts in case of possible changes in the assumptions within a realistic range.
• Additionally, we have assessed whether the disclosures in the notes with respect to the recoverability of goodwill are appropriate.

Adequacy of insurance contracts assets and liabilities issued

Refer to notes 1. Insurance contracts on pages 90ff, Material estimates and discretionary decisions – 24.1. (Re -) insurance contracts on pages 171ff and Accounting policies – 25.3. (Re -) insurance contracts on pages 179ff.

Risk for the Consolidated Financial Statements

The recognized insurance contracts assets issued as of the balance sheet date amount to EUR 229.5 million and insurance contracts liabilities issued amount to EUR 37,804.1 million . The valuation of insurance contract liabilities is complex. The assumptions underlying the valuation rely on numerous estimates and discretionary factors.

The uncertainties associated with these assumptions pose a risk to the financial statements, as changes in the assumptions can have significant impacts on the amount of liabilities and the result of the period.

Our response

In our audit of the adequacy of insurance contract liabilities our own actuaries and IT specialists were part of the audit team. We performed the following significant audit procedures:

• We gained an understanding of the processes and internal controls implemented in the company and tested the effectiveness of selected internal controls.
• We tested the general IT controls of the relevant systems.
• We examined the adequacy of significant assumptions, judgments, and the applied valuation and calculation models.
• For Non-life insurance, we conducted actuarial recalculations of the provision for outstanding claims in samples.
• For the valuation models “General Measurement Model” and “Variable Fee Approach” we also performed recalculations of the rollforward of the Contractual Service Margin in samples.
• Finally, we evaluated the adequacy of the disclosures in the consolidated financial statements regarding insurance contract liabilities.

Restatement related to the initial application of IFRS 17 and IFRS 9

Refer to notes Initial application of standards: IFRS 9 Financial instruments and IFRS 17 Insurance contracts on pages 66ff, 1. Insurance contracts on pages 90ff, Material estimates and discretionary decisions – 24.1. (Re -) insurance contracts on pages 171ff and 24.2. Impairment losses on financial assets on page 175, Accounting policies: 25.3. (Re -) insurance contracts on pages 179ff and 25.4. Financial instruments on pages 193ff.

The risk to the financial statements

As of 1 January 2023, the revised accounting standards for insurance contracts (IFRS 17) came into force. As part of the initial application on 1 January 2023, it was necessary to prepare comparative information as of 1 January 2022 (opening balance sheet) and for the year 2022 using the principles of IFRS 17. The standard generally requires retrospective application unless impracticable, in which case a modified retrospective approach or fair value approach may be applied. In cases where retrospective application was impracticable, in Life and Health insurance Vienna Insurance Group applied the fair value approach.

The revised accounting standards for financial instruments (IFRS 9) came into force on 1 January 2018. However, insurance companies had the option to apply IFRS 9 simultaneously with IFRS 17. The Vienna Insurance Group applied IFRS 17 and IFRS 9 simultaneously for the first time on 1 January 2023.

The transition to IFRS 17/IFRS 9 resulted in a decrease in equity of EUR 289.6 million as of 1 January 2022.

The implementation of the regulations of IFRS 17 and IFRS 9 required significant management judgments, assumptions, and estimates. Therefore, there is a risk that the restated comparative information due to the initial application of IFRS 17 and IFRS 9 in the 2023 consolidated financial statements may not be appropriate.

Our audit approach

In our audit of the adequacy of the implementation of new accounting standards for insurance contracts and financial instruments, our own actuaries and IT specialists were part of the audit team. We performed the following significant audit procedures on comparative information (consolidated opening balance sheet as of 1 January 2022, consolidated balance sheet as of 31 December, 2022, and consolidated income statement and comprehensive income statement for the year 2022):

• General:
  • We tested the general IT controls of the relevant systems.
  • We gained an understanding of the processes and internal controls implemented in the company and tested the effectiveness of selected internal controls.
• IFRS 17:
  • We critically evaluated the transition methods used.
  • We examined the adequacy of significant assumptions, judgments, and the applied calculation models and methods.
  • We have conducted actuarial recalculations for the contracts valued at fair value as of the group opening balance sheet date, and evaluated external expert opinions.
  • For non-life insurance, we conducted actuarial recalculations of the provision for outstanding claims in samples.
  • For the valuation models “General Measurement Model” and “Variable Fee Approach” we also performed recalculations of the rollforward of the Contractual Service Margin in samples.
• IFRS 9:
  • We critically evaluated the methodology related to classification and measurement (including a review of implementation in the systems).
  • We assessed the classification of individual financial instruments under IFRS 9.
  • We also traced the transition of the financial instrument portfolio from IAS 39 to IFRS 9.
  • Furthermore, we have evaluated the methodology of Expected Credit Losses and reviewed the impairments that have been carried out.
  • We conducted control calculations of deferred taxes at individual company level and on a consolidated basis.
  • We evaluated the consolidation of liabilities, expenses, and revenues (particularly intra-group reinsurance).
  • Finally, we assessed the accuracy and adequacy of the disclosures in the consolidated financial statements regarding the initial application of IFRS 9 and IFRS 17.

Other Information

Management is responsible for other information. Other information is all information provided in the annual report, other than the consolidated financial statements, the group management report and the auditor’s report.

Our opinion on the consolidated financial statements does not cover other information and we do not provide any kind of assurance thereon.

In conjunction with our audit, it is our responsibility to read this other information and to assess whether, based on knowledge gained during our audit, it contains any material inconsistencies with the consolidated financial statements or any apparent material misstatement of fact. If we conclude that there is a material misstatement of fact in other information, we must report that fact. We have nothing to report in this regard.

Responsibilities of Management and the Audit Committee for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU, the additional requirements pursuant to Section 245a UGB (Austrian Commercial Code) as well as other legal or regulatory requirements and for such internal controls as management determines are necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Management is also responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting, unless management either intents to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

The audit committee is responsible for overseeing the Group’s financial reporting process.

Auditor’s Responsibilities

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our audit opinion. Reasonable assurance represents a high level of assurance, but provides no guarantee that an audit conducted in accordance with the AP Regulation and Austrian Standards on Auditing (and therefore ISAs), will always detect a material misstatement, if any. Misstatements may result from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with the AP Regulation and Austrian Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit.

Moreover:

• We identify and assess the risks of material misstatement in the consolidated financial statements, whether due to fraud or error, we design and perform audit procedures responsive to those risks and obtain sufficient and appropriate audit evidence to serve as a basis for our audit opinion. The risk of not detecting material misstatements resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations or override of internal control.
• We obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
• We evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• We conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our audit report to the respective note in the consolidated financial statements. If such disclosures are not appropriate, we will modify our audit opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
• We evaluate the overall presentation, structure and content of the consolidated financial statements, including the notes, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• We obtain sufficient appropriate audit evidence regarding the financial information of the entities and business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
• We communicate with the audit committee regarding, amongst other matters, the planned scope and timing of our audit as well as significant findings, including any significant deficiencies in internal control that we identify during our audit.
• We communicate to the audit committee that we have complied with the relevant professional requirements in respect of our independence, that we will report any relationships and other events that could reasonably affect our independence and, where appropriate, the related safeguards.
• From the matters communicated with the audit committee, we determine those matters that were of most significance in the audit i.e. key audit matters. We describe these key audit matters in our auditor’s report unless laws or other legal regulations preclude public disclosure about the matter or when in very rare cases, we determine that a matter should not be included in our audit report because the negative consequences of doing so would reasonably be expected to outweigh the public benefits of such communication.

Report on other legal requirements

Group Management Report

In accordance with Austrian company law, the group management report is to be audited as to whether it is consistent with the consolidated financial statements and prepared in accordance with legal requirements.

Management is responsible for the preparation of the group management report in accordance with Austrian company law and other legal or regulatory requirements.

We have conducted our audit in accordance with generally accepted standards on the audit of group management reports as applied in Austria.

Opinion

In our opinion, the group management report is consistent with the consolidated financial statements and has been prepared in accordance with legal requirements. The disclosures pursuant to Section 243a UGB (Austrian Commercial Code) are appropriate.

Statement

Based on our knowledge gained in the course of the audit of the consolidated financial statements and our understanding of the Group and its environment, we did not note any material misstatements in the group management report.

Additional Information in accordance with Article 10 AP Regulation

We were elected as auditors at the Annual General Meeting on 20 May 2022 and were appointed by the supervisory board on 13 June 2022 to audit the financial statements of the Vienna Insurance Group for the financial year ending on 31 December 2023.

On 26 May 2023 we were elected as auditors for the financial year ending on 31 December 2024 and were appointed by the supervisory board on 20 June 2023 to audit the financial statements.

We have been auditors of the Vienna Insurance Group, without interruption, since the consolidated financial statements of 31 December 2013.

We declare that our opinion expressed in the “Report on the Consolidated Financial Statements” section of our report is consistent with our additional report to the Audit Committee, in accordance with Article 11 AP Regulation.

We declare that we have not provided any prohibited non-audit services (Article 5 Paragraph 1 AP Regulation) and that we have ensured our independence throughout the course of the audit, from the audited Group.

Engagement partner

The engagement partner is Mr Thomas Smrekar

Vienna, 26 March 2024

KPMG Austria GmbH
Wirtschaftsprüfungs- und Steuerberatungsgesellschaft

signed by:

Mag. Thomas Smrekar
Wirtschaftsprüfer
(Austrian Chartered Accountant)

This report is a translation of the original report in German, which is solely valid. The consolidated financial statements together with our auditor’s opinion may only be published if the consolidated financial statements and the group management report are identical with the audited version attached to this report. Section 281 Paragraph 2 UGB (Austrian Commercial Code) applies.