GROUPAMA / 2018 Registration document

5 RISK FACTORS AND RISK MANAGEMENT RISK FACTORS Since 2016, the ORSA reports of all of the Group’s entities have been made available to the local regulators. In 2015, the Group also obtained the ACPR’s approval to use the transitionalmeasure on technical reserves for the life insurance subsidiary Groupama Gan Vie (the additional cost brought about by switching from the calculationof technical reserves according to Solvency I standards to Solvency II standards is spread out over 16 years) and a partial internal model onnon-lifeunderwritingrisk at the Group level. The regulatory capital and solvency requirements associated with Solvency 2 heavily impact the Group in terms of governance and internal organisation as well as risk management and capital management. Ongoing compliance with the regulatory requirements and any commitments made to supervisors could have significant consequences on the Group, such as the deterioration of net income or its financial position as well as an increase in the required regulatory capital. The obligations of the Sapin 2 law were taken into account with the publicationof a new ethics charter a code of conduct aimed at preventing risks of corruption, as well as a procedure for handling ethics alerts guaranteeing the protection and confidentiality of whistle-blowers. In addition, the EU’s Insurance Distribution Directive, which came into force on 1 October 2018, presents considerable progress in the area of marketing of insurance products to consumers, such as better pre-contract information, definition of governance rules for products within the Company, management of conflicts of interest, and training of salespeople.Within this framework, during 2018 the Group carried out several IDD compliance projects, including the enrichment of the Sales Assistance Tools with the StandardisedInformationDocumentsand the duty to advise letters and the productgovernance andsupervision system. Changes in regulations that aim to strengthen the protection of policyholders and confer broad powers of regulation on the regulatoryauthoritiescould also affect the Group’s ability to sell the products thatit offers. The rapidly changing regulatory environment and the firmness shown by the regulatory authorities in the interpretation and application of current regulations require that Groupama be especially vigilantin respect ofcompliance. Despite the measures implemented to comply with existing regulations, Groupama could, through its activities as an insurer, Asset Manager,securities issuer, investor, employer,and taxpayer, be subject to regulatory investigations, sometimes accompanied by civil actions. Systems to fight money laundering and the financing of terrorism are thus the subject of particular attention and controls by the legislative and regulatory authorities, with sanctions for non-compliance. Given the complexity and the stricter requirements on this topic (revision of the joint guidelines of the ACPR and Tracfin on the Tracfin reporting requirements, transposition of the 4 th Directive into domestic law on 1 December 2016, etc.), both the risks and the costsof complianceare increasing.

In the same way, with regard to distribution, the Insurance DistributionDirective with broad requirementscovering the duty to advise, management of conflicts of interest, supervision and governance of products, disclosure and transparency or the Regulation on key information documents for packaged retail and insurance-basedinvestment products (PRIIPs) could also increase the costsof operationalcomplianceof the Group’s entities. Lastly, the Group’s actions through the approved consumer association now possible in France in certain areas of involvement (consumption and health in terms of compensation for bodily injuries) could increase the risks and litigation costs of the Group’s entities. This strengtheningof regulatory requirements,the potential impact of which is difficult to estimate, could significantly affect the business, reputation, net income and financial position of the Group. Changes to tax legislation and 5.1.4.3 regulations at the local, European or international level Changes to the tax laws of countries where Groupama operates may have adverse consequenceseither on some Group products and reduce their attractiveness, especially those that currently receive favourable taxtreatment,or on the Group’s tax expense. Examples of such changes include the taxation of life insurance policies or annuities contracts, changes in the tax status of some insurance or asset management products and tax incentives or disincentives to investing in some asset classes or product categories. Groupama generally remains vigilant on the future interpretations or developments of the tax systems in the countries in which it operates that could lead to an increase in tax expenditures, generate compliance costs, or adversely affect the Group’s activity, cash position, andnet income. In this regard, recent tax developments in France have been marked by significant tax reform for companies but with no major impact on the Group. The French finance act for 2019 includes an adaptation of the tax integration regime to meet a need for compliancewith Community law, which eliminates some of its advantages, without significantly leading to recurring tax costs for the Groupama Assurances Mutuelles tax group. Similarly, the reform of the system for deductingfinancial expenses from thecorporatetax base hasno negative impacton the Group. However, the announcementof the postponementof the planned reduction of the corporate tax rate, as part of the financing of the “yellowvests” measures,will naturallybe costly for the Group since it will result in at least maintaining the 2019 corporate tax rate at 34.43% instead of 32.02%. Pending the introduction of the legislative text, it also raises doubts as to whether the target rate will be reached in 2022(25.83%).

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REGISTRATION DOCUMENT 2018 - GROUPAMA ASSURANCES MUTUELLES

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