BPCE - 2020 Universal Registration Document

FINANCIAL REPORT

IFRS CONSOLIDATED FINANCIAL STATEMENTS OF GROUPE BPCE AS AT DECEMBER 31, 2020

The Group uses the same impairment indicators for debt securities as those used for individually assessing the impairment risk on loans and receivables, irrespective of the portfolio to which the debt securities are ultimately designated. For perpetual deeply subordinatednotes (TSSDI), particularattention is also paid if, under certain conditions,the issuer may be unable to pay the coupon or extend the issue beyond the scheduled redemption date. In the event of an improvement in the issuer’s financial position, impairment losses taken on debt instrumentsmust be written back to the income statement. Impairment losses and write-backs are recorded in “Cost of credit risk” (for the insurer’s net share). Impairment of loans and receivables IAS 39 defines the methods for calculatinagnd recognizing the impairment of loans. A loan or receivableis deemed to be impaired if the following two conditions are met: there is objective evidence of impairment on an individual • or portfolio basis: there are “triggering events” or “loss events” identifying counterparty risk occurring after the initial recognition of the loans in question. On an individual level, the criteria for deciding whether or not a credit risk has been incurred include the existence of past due payments; these events are likely to lead to the recognitionof incurred • losses. Impairment is determined as the difference between the amortizedcost and the recoverableamount of the receivable, i.e. the present value of estimated recoverable future cash flows taking into account the impact of any collateral.

Impairment of securities An impairment loss is recognized on an individual basis against securities, with the exception of securities classified as financial assets at fair value throughprofit or loss, when there is objective evidence of impairment resulting from one or more loss events having occurred since the initial recognition of the asset and where the impact of these events on estimated future cash flows can be reliably measured. Different rules are used for the impairment of equity instruments and debt instruments. For equity instruments, a lasting decline or a significant decrease in value are objective indicators of impairment. A decline of over 50% or lasting for over 36 months in the value of a security by comparisonwith its historic cost is an objective indicator of permanent impairment, leading to the recognition of an impairment loss in income. In addition, these impairment criteria are also supplemented by a line-by-line review of the assets that have recorded a decline of over 30%or for more than six months in their value by comparisonwith their historic cost or if events occur that are liable to represent a material or prolonged decline. An impairment charge is recorded in the income statement if the Group determines that the value of the asset will not be recovered in its entirety. For unlisted equity instruments, a qualitative analysis of their situation is carried out. Impairment losses recognizedon equity instrumentsmay not be reversed and nor may they be written back to income. Losses are recorded under “Net income from insurance businesses”. A subsequent increase in value is taken to “Gains and losses recognizeddirectly in other comprehensive income” until disposal of the securities. Impairment losses are recognized on debt instruments such as bonds or securitized transactions (ABS, CMBS, RMBS, cash CDOs) when there is a known counterparty risk.

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12/31/2020

12/31/2019

in millions of euros

Investment property

1,842

1,887

Financial assets at fair value through profit or loss Available-for-sale financial assets Loans and receivables due from banks Loans and receivables due from customers

30,209 59,737

25,217 58,546

393

747

12,379

13,017

Held-to-maturity financial assets

1,274

1,622

Share held by cedents and retrocessionaires in liabilities relating to insurance policies and financial contracts

16,569

15,269

Receivables arising from insurance and assumed reinsurance activities

1,768

2,243

Receivables arising from ceded reinsurance activities

35

93

Deferred acquisition costs

361

405

TOTAL INSURANCE BUSINESS INVESTMENTS (1)

124,566

119,046

At December 31, 2019, Coface contributed €3,987 million to Insurance business investments. (1)

321

UNIVERSAL REGISTRATION DOCUMENT 2020 | GROUPE BPCE