GROUPAMA / 2018 Registration document

RISK FACTORS AND RISK MANAGEMENT RISK MANAGEMENT AND SENSITIVITY ANALYSES

Asset/Liability Management Asset/liabilitysimulationspermit an analysis of the behaviour of the liabilities in different interest-rate environments, particularly the ability to meetthe remuneration requirements for the policyholder. These simulations allow the Group to develop strategies designed to reduce the impact of contingencieson the financial markets on both the results andon the balance sheets. Interactions with redemption risk Redemption behaviours are sensitive to changes in interest rates: an increasein the rates can lead to an increasein the policyholders’ expectation of revaluation and, if this expectation cannot be met, the sanctionof early redemptions.In addition to the loss of income and an increase in payouts, the risk will be losses related to the disposal of assets at a loss (which could be the case for fixed-rate bonds) in cash of insufficient cash. The objective of Asset/Liabilities Management is to optimise the policyholder’s satisfaction and the insurer’s risk using strategies that take into account the various reserves available (including cash) and bond management strategies coupled with hedging products.

investments, and has the objective of limiting the capital loss recognised because of an increase in interest rates in case of partial liquidation of the bond portfolio for the payment of benefits. These strategiesaim to limit the impactof potentialredemptions. All over-the-counter transactions are secured by a “collateralisation” system with the Group’s top-tier banking counterparties. Sensitivity to interest rate risk analysis (c) Pursuant to IFRS 7, an analysis of accounting sensitivity was carried out at 31 December2018 with a comparativeperiod. This analysis applies to year-end balance-sheet postings that show accountingsensitivity to interest rate risk (underwritingnon-life and life liabilities, bond investments, financing debt in the form of bonds). It is not similar to analyses applying to embedded-value-type prospective data. The impacts on group's equity and income are shown net of profit sharing andcorporate tax. Regarding non-life underwriting liabilities, risk mapping allows the sensitivity of portfolios showing interest rate changes to be analysed, i.e. , portfolios of current annuities and temporary payments (individual life and health insurance, and third-party liability insurance premiums). With the exception of increasing annuities and risk reserves for long-term care risk, as non-life insurance technical reserves are not discounted on the consolidated accounts, these amounts are therefore not sensitive to changes ininterest rates. At 31 December2018, the amount of the discount in the actuarial reservesfor non-lifeannuities,before reinsurance,was €127 million. The amount of the discount in the reserve for increasing risks on long-term care, gross of reinsurance, was approximately €59 million. Sensitivity of technical insurance liabilities analysis NON-LIFEINSURANCE

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Interest rate risk related to the existence of guaranteed rate

The constraints of guaranteedminimum interest rates constitute a risk for the insurer if rates fall, as the yield on the assets may be insufficientin terms of these constraints.These risks are handledat the regulatorylevel through specific risks.

Rate hedges RISKOF RATE INCREASE

The purpose of the hedges that are implemented is to partially hedge the portfolios against the risk of interest rate increases. This is made possible by converting fixed-rate bonds into variable-rate bonds (“payer swaps”). The strategy consists of transforming a fixed-ratebond into a variable rate, either on a security held or new

The result of the sensitivity to interest rates analyses shows that the Group is not particularly sensitive with regard to all its non-life commitments. Theimpact of a changeof +/-100 basis points,calculatednet of tax, is shown inthe following table:

31.12.2018

31.12.2017

Interest rate

Interest rate

+1%

-1%

+1%

-1%

(in millions of euros)

Impacton income (net of taxes)

67

(66)

54

(66)

Equityimpact(excluding income)

LIFE INSURANCEANDFINANCIALCONTRACTS This analysis was limited to life commitments with accounts sensitive tochanges in interestrates.

Moreover, with the exception of the floor guarantees,no sensitivity analysis was carried out on actuarial reserves for account unit policies, since the risk of change in the index is assumed by the policyholderrather than by the insurer.

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REGISTRATION DOCUMENT 2018 - GROUPAMA ASSURANCES MUTUELLES