GROUPAMA / 2018 Registration document

RISK FACTORS AND RISK MANAGEMENT RISK FACTORS

These items cannot always be known, particularlyon a prospective basis. Actual losses may thus differ materially from the original gross reserves established. Consequently,the reserves may need to be increased orreduced,with an impact on net income. Groupama continually reviews the adequacy of its established claims reserveswith regard to its commitments.While the reserves currently established are sufficient and comply with the Group’s prudent reserve policy, there can be no assurance that ultimate losses will not materially exceed the claims reserves established and will not havea material adverse effect onnet income. Uncertainties and changes in the 5.1.1.4 forward-looking assumptions used to calculate the life insurance reserves and deferred acquisitions costs (DAC) The establishment of insurance reserves, including the minimum guarantees found in certain group savings and pension products, the adequacy test performed on the life insurance policy reserves, the recoverabilitytest on the deferred profit-sharingassets and the establishment of DAC rely, by their very nature, on uncertain informationbased on forward-lookingassumptionsabout changes in factors that may (i) be of economic, demographic, social, legislative, regulatory or financial origin, (ii) relate to policyholder behaviour (surrender, lapses, persistency,etc.) or (iii) be specific to life insurance, suchas mortality, morbidityand longevity. Use of these many assumptions involving a high degree of estimation on the part of the Group’s governing bodies, as well as changes in those assumptionsor changes in the financial markets, may influence reserve levels, underwriting expenses and calculationof Groupama’sDAC and could have an adverse impact on Groupama’s net income, financial position and assessment of its valuation. Requests for compensation that 5.1.1.5 do not conform to the assumptions used to establish prices and to calculate technical reserves for life, savings and pension products The profitability of the life, savings and pension products depends heavily on the extent to which actual claims match the assumptions used to determine prices for products, insurance policy servicing expenses andtechnical reserves. If the benefitsactuallypaid to policyholderswere less favourablethan those estimated based on the initial underlying assumptions,or if eventsor trends led us to modifythose underlyingassumptions,the Groupwouldhave to increaseits commitments,which could reduce its net income.

As noted at § 5.1.1.4 above, establishing savings/pension insurance reserves, with or without specific guarantees such as minimum guarantees, naturally relies on uncertain information and judgements, both internal and external, and there are no guaranteesthat the reality of the productswill not differ – positively or negatively – from these estimates. Default of a reinsurer or increased 5.1.1.6 reinsurance costs While the purpose of reinsurance agreements is to transfer a portion of losses and related expenses to other insurers, they do not eliminate the requirement for Groupama, the direct insurer, to settle claims. In this regard, the Group is thus subject to the solvency risk of its reinsurers at the time that sums due are recovered from them (see section 5.2.5 – Risk of reinsurer insolvencyfactors for the breakdownof the insurancereserves and recoverables byGroupamaby reinsurer rating). Although Groupama makescertain that its reinsurersare diversified and solvent, based on selection rules that are reviewed and updated regularly as part of the work of the Security and Reinsurance Committee, and although the financial crisis has not led any of the Group’s reinsurers to default, they may find themselves unable to meet their financial obligations. This inability could adverselyaffect the netincome. Furthermore, the availability, amount and cost of reinsurance depend on overall current economic conditions and may vary considerably. In the future, the Group may be unable to obtain reinsurance at commercially reasonable prices, thus increasing its risk of loss due to lower levels of reinsurance, or its income statement could be adversely affected by the increased cost of reinsurance forits already-reinsuredactivities.

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5.1.2

RISK FACTORS RELATING TO THE FINANCIAL MARKETS, THE FINANCIAL STRENGTH RATING, THE VALUATION OF ASSETS AND OTHER RELATED ASPECTS

The difficult and persistent 5.1.2.1 conditions of the economy and the global context

Just like the market’sotherplayers,Groupamahas been impactedin the past few fiscal years by the financialcrisis and its repercussions, which have stronglyaffectedthe real economyat the global level. In Europe, despite the economic recovery triggered starting in the second half of 2016, the high debt levels of companiesand States and high unemployment,especially in France, Italy, and Spain, can only be significantly reduced very slowly.

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REGISTRATION DOCUMENT 2018 - GROUPAMA ASSURANCES MUTUELLES