BPCE - 2019 Universal Registration Document

FINANCIAL REPORT

IFRS CONSOLIDATED FINANCIAL STATEMENTS OF BPCE SA GROUP AS AT DECEMBER 31, 2019

income generated, in addition to guaranteed benefits. For these contracts, in accordance with shadow accounting principles defined by IFRS 4, the provision for deferred profit sharing is adjusted to include the policyholders’ share in the unrealized capital gains or losses on financial instruments measured at fair value in application of IAS 39. The share of the gains or losses attributable to policyholders is determined on the basis of the characteristics of contracts likely to generate such gains or losses. Any change in deferred profit sharing is taken to other comprehensive income where it results from changes in the value of available-for-sale financial assets and to profit or loss where it arises from changes in the value of financial assets at fair value through profit or loss. At each balance sheet date, the Group tests the adequacy of its recognized insurance liabilities based on the estimated present value of future cash flows from its insurance policies and investment contracts containing a discretionary profit sharing feature. The liability adequacy test shows the economic value of the liabilities corresponding to the average derived from stochastic analyses. If the sum of the surrender value and deferred profit sharing is lower than the fair value of the technical reserves, the shortfall is recognized in income. Groupe BPCE has decided to apply the option available under ANC recommendation No. 2017-02 of presenting the insurance businesses separately on the balance sheet and income statement.

Pending amendments to IFRS 4, insurance liabilities continue to be measured broadly in line with French GAAP. In accordance with Phase I of IFRS 4, insurance contracts are classified into three categories: policies that expose the insurer to a significant insurance • risk within the meaning of IFRS 4: this category comprises policies covering provident insurance, pensions, property and casualty and unit-linked savings carrying a minimum guarantee. These policies continue to be measured under the rules provided under local GAAP for measuring technical reserves; financial contracts such as savings contracts that do not • expose the insurer to a significant insurance risk are recognized in accordance with IFRS 4 if they contain a discretionary profit sharing feature, and continue to be measured in accordance with the rules for measuring technical reserves provided under local GAAP; and financial contracts without a discretionary profit sharing • feature, such as unit-linked policies without a non-unit-linked component and without a minimum guarantee, are accounted for in accordance with IAS 39. Most financial contracts issued by Group entities contain discretionary profit sharing features. The discretionary profit sharing feature grants life insurance policyholders the right to receive a share of the financial Accounting principles The “Insurance business investments” line on the assets side of the balance sheet includes insurance business assets representative of: financial investments ( i.e. in financial instruments) including • advances to policyholders; financial investments in unit-linked products; • derivatives; • revaluation differences on interest rate risk-hedged • portfolios. Other balances related to the insurance business are aggregated with the balances related to the other balance sheet items by type. NOTES TO THE BALANCE SHEET

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On the liabilities side of the balance sheet, the “Liabilities related to insurance policies” line consists of: the technical reserves of insurance companies (as defined • in Appendix A to IFRS 4); insurance and reinsurance liabilities, including amounts due • to policyholders; insurance-related derivatives; • shares of the revaluation of interest rate risk-hedged • portfolios; the deferred profit sharing liability. •

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UNIVERSAL REGISTRATION DOCUMENT 2019 | GROUPE BPCE