GROUPAMA / 2018 Registration document

EARNINGS AND FINANCIAL POSITION MANAGEMENT REPORT OF THE BOARD OF DIRECTORS

Training in both methodology and operations is given regularly to all the players involved in the Group so that the requirements introduced by the IFRS are properly understood and incorporated into the financial statements.

As with interest rate risk, all OTC transactions are secured by a system of “collateralisation” with leading bank counterparties selected by Groupama AssurancesMutuelles. Equity risk 6.1.7.3 In 2018, the Group’s equity risk continuedto be activelymanaged, which led to, in particular,the continuationof the hedgingpolicy on protected equity funds, but in amore opportunistic manner. This last strategy usesderivatives housed in mutual funds. Credit risk 6.1.7.4 In a tactical management strategy of the credit asset class, the Groupama Asset Management can be exposed or hedge credit risk by using forward financial instruments like Credit Default Swaps. This type of operation only involves assets managed through mutual funds. Spread risk 6.1.7.5 A 10-year swap rate exposure strategy was introduced in 2017 in the form of a test. It aims to allow the Group to take duration without exposure to spread risk (sovereignor credit). This operation is carried out using a vehicle paying the Euribor and an FFI exchangingthis remunerationfor the 10-yearswap rate. All over-the-counter transactions are secured by a “collateralisation” system with the Group’s top-tier banking counterparties. Income (Loss) 6.1.8.1 The Groupama Assurances Mutuelles income statement includes the technical balance before expenses (premiums, claims, and reinsurance) as a replacement for the Antilles Guyane regional mutual, which is exempt from approval. There was no impact on the net transactions of the Groupama Assurances Mutuelles income statement. However, the substituted transactions led to a symmetrical increase in the gross technical operations of GroupamaAssurancesMutuellesand the outward reinsuranceand retrocessions. The acquired contributions thus appear in the corporate financial statements for €2.7437 billion, broken down into €37.1 million in substituted contributions net of inward reinsurance as a share of the reinsurer Groupama Assurances Mutuelles and €2.7066 billion in acquired contributions (excluding substitution). The remainder of the commentary on business activity focuses exclusively on netsubstitutiontransactions. ANALYSIS OF THE ANNUAL FINANCIAL STATEMENTS FOR THE FISCAL YEAR 6.1.8

Supervision of intra-group 6.1.6.3 accounting transactions

Transactions among subsidiaries and Groupama Assurances Mutuelles (internal loans, subsidiary restructurings, capital increases, dividend payouts, etc.) are subject to decisions validated by the Groupama Assurances Mutuelles Executive Management, and to technical and operational controls by the Group Financial Controlling Department. Controls on these operations are carried out by auditing the consolidated financial statements, i.e. by reconciling intra-group transactions,monitoring any changes in shareholders’ equity, and reviewing the transactionsrecordedfor consistency withlegal documentation. Interest rate risk 6.1.7.1 The purpose of the hedges that are implemented is to partially hedge theportfolios against therisk of interest rate increases. This is made possible by converting fixed-rate bonds into variable-rate bonds (“payer swaps”). The strategy consists in transforming a fixed-rate bond into a variable-rate bond, either on a security held or on new investments.They are intended to permit asset disposals in the event of an increase in interest rates by limiting realisations of capital losses, either to pay benefits or to invest at higherrate levels. Hedgingprogrammeswere gradually implementedon behalf of the life insurance companies as from 2005. In accordance with the approval of the Boards of Directors, the swap programme was supplemented in 2012 and partially extended to the Non-Life portion with a tactical management objective. All over-the-counter transactions are secured by a “collateralisation” system with the Groupama Assurances Mutuelles top-tier banking counterparties. Foreign exchange risk 6.1.7.2 Ownership of international equities entails dollar and yen foreign exchange risk, which can be hedged through forward sales. These forward sales are terminatedas the underlyingsare disposed of or are renewed to hedge the residual underlyings. The hedging of currency risk on the Hungarian forint has been actively managed since 2015. The holding of bonds issued in foreign currencies (dollar, sterling, Swiss franc) is hedged via currency swaps against theeuro. FINANCIAL FUTURES POLICY 6.1.7

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REGISTRATION DOCUMENT 2018 - GROUPAMA ASSURANCES MUTUELLES