GROUPAMA / 2018 Registration document

5 RISK FACTORS AND RISK MANAGEMENT RISK FACTORS Assessments by the Group 5.1.3.2 and its senior management In the valuationof certain investments (a) For some of the Group’s financial assets for which there is no active trading market or where observable values are reduced or unrepresentative, fair value is measured by valuation techniques using methodologies and models incorporating assumptions or assessments that involve a significant amount of judgement (see § 3.2.1 – Accountingprinciples and methods used in the valuation of financial assets in the notes to the consolidated financial statements). Groupama cannot guarantee that the estimated fair values based on such valuation techniques represent the price at which a security may ultimately be sold or for which it could be sold at any specific point in time. The resulting differences in value as well as changing credit and equity market conditions could have a significantnegative impact on the net income and financial position of the Group. The determinationof the amount of reservesand impairmentvaries depending on the type of investment and is based on periodic assessment and estimates of known risks inherent to each asset class. These assessments and estimates are revised when conditions change or as new information becomes available. The Group’s senior management, based on this information and accordingto the principlesand objectivemethodologiesdetailed in the consolidated and combined accounts (see § 3 – Accounting principles and valuation methods used in the notes to the consolidatedfinancialstatements),analyses,evaluates,and uses its best judgementto assess the causes of a decline in the estimated fair value of securitiesand the prospectsfor short-termrecovery,as well as the appropriate amount of the resulting reserves for impairment. Groupama cannot guarantee that its senior management has correctlyestimatedthe amountof impairmentand reservesrecorded in the financial statements or that the impairment or additional reserves will not have a negative impact on the net income and financial position of the Group. In the determination of reserves (b) and impairment The development projections could come to a halt, or be lower than forecast, mainly as a result of difficult conditions in the financial and capital markets and changes in economic conditions in the sectors or countries in which Groupamadoes business. The development of the Group’s life insurance, savings and pension products could also be negatively affected by changes in existing regulations, suchas tax legislation. The Group’s inability to capitalise on its innovative products, partnerships or new distribution methods, to deploy them within the Group and develop them according to its objectives could adversely impactthe growth of Groupama’s business activity. A decline in the growth of 5.1.3.3 the Group’s insurance and asset management businesses

The diversity of the countries where 5.1.3.4 Groupama operates Groupama markets its products and services in Europe, Turkey, northern Africa, and Asia through legal structures and various distribution channels such as majority- and minority-owned subsidiaries, partnerships, joint ventures, independentbrokers, etc. The diversity of the Group’s international presence exposes it to different and sometimes rapidly changing economic, financial, regulatory, commercial, social and political environments, which may affect the demand for its products and services, the value of the investment portfolio or the solvency of its local commercial partners. The successful implementation of the Group’s overall strategy could be affected by the environment of certain countries where Groupama operates and could have an adverse impact on its net income and financial position. Hedging programmes for certain 5.1.3.5 products Groupama uses derivatives instruments, including equity and treasury futures contracts, to hedge certain risks arising from guarantees givento policyholders. However, in some cases, Groupama may not be able to use or choosesnot to use these hedgingtechniques,the purposeof which is to limit the economicimpactof adversemarkettrends,particularly in the capitaland fixed-incomemarkets,due to a lack of liquidity,the insufficientsize of the relevantderivativesmarkets,or an overly high hedging cost. Moreover, numerical estimates and the assessments of Groupama’s senior management in implementing these hedging programmes,such as those for mortality, surrender rates, election rates, interest rates, volatility and correlation among the markets, could be significantly different to initial expectations and assumptions, which may significantly impact its net income and financial position. Similarly, measures taken by Groupama to optimise the products covered by this type of guarantee, improve their profitability and avoid future hedging losses cannot constitute a guarantee and could significantly impact Groupama’s business, competitive position, net income,and financial position.

Existence of contingent liabilities 5.1.3.6 relating to discontinued, sold

or liquidated operations and charges relating to other off-balance-sheet commitments

Groupama may occasionally retain insurance and reinsurance obligations and other contingent liabilities relating to the sale or liquidationof various activities or be required to provide guarantees and enter into other off-balance sheet transactions. The Group’s reserves for such obligations and liabilities may be inadequate, which could require it to recognise additional charges that could significantly impactits net income.

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REGISTRATION DOCUMENT 2018 - GROUPAMA ASSURANCES MUTUELLES