GROUPAMA / 2018 Registration document

7 FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL STATEMENTS AND NOTES

Security systems 1.3 The Groupama brand (a)

Agreements Committee (c) An Agreements Committee, a study committee of the Groupama Assurances Mutuelles Board of Directors, was set up in 2005 as part of the possible opening of Groupama SA’s capital. Its main role was to prevent any potential conflict of interest between the regional mutuals or betweenGroupamaAssurancesMutuelles and its subsidiaries likely to result from their business relationships in view of protectingthe interestsof minorityshareholders. Since the conversion of the Company into an national Agricultural Reinsurance Mutual and the corresponding cancellation of any shareholding, there has been no real need for an Agreements Committee. Accordingly, the Board of Directors of Groupama AssurancesMutuelles decided on 7 June 2018 to eliminate it and to replace it with a StrategyCommittee,while assigningsome of its duties to the Audit and Risk ManagementCommittee(examination of possible amendments to the reinsurance agreement and the agreement for a security and solidarity system, financing of major national programmes, in particularmutual certificates). 2.1 The need for reinsurance has been behind the ties forged among the Groupama mutuals since they were founded more than a century ago. The geographical district covered by the mutuals, which at the time was limited to one or two French departments, led them to seek compensationfor the risks taken at the national level in order to expand, following the example of the growth achieved by the large rival insurance companies. Thus, as time went on, an Internal Reinsurance system grew up amongst the Regional Insurance Mutuals and a Central Mutual, whose reinsurance role is now assumed by Groupama Assurances Mutuelles. The reinsuranceof the regional mutuals by GroupamaAssurances Mutuelles is intended, through an internal pooling of risks, to give each mutual, within its district, underwriting capabilities equivalent to those enjoyed by a single company covering the entire territory. It also limits the use of outside reinsurance to what would be neededby sucha company. In order to achieve this objective, the regional mutuals are reinsured within a common framework set by general regulations and not by individual reinsurance treaties. This agreement, which was designed a long time ago, is based on a certain number of founding principles that have outlasted the adjustmentsmade to it over time. Permanent principles and amendments (a) to the reinsurance agreement The permanent principlesare: reinsurance exclusively withGroupama Assurances Mutuelles; ❯ Agreements between Groupama Assurances Mutuelles and its subsidiaries and the regional mutuals The reinsuranceagreement 2

The Groupama brand is solely owned by Groupama Assurances Mutuelles, which grants user licences to its regional mutuals and subsidiaries. Groupama Assurances Mutuelles can therefore guarantee that the brand is properly managed and provide protection forone of theGroup’s critical assets. Agreement for a security and solidarity system (b) On 17 December2003, Groupama AssurancesMutuelles and the regional mutuals signed an agreement, amended by various additional clauses, for a security and solidarity system, aimed at guaranteeing the security and the financial equilibrium of all the regional mutuals and Groupama Assurances Mutuelles and to arrange forsolidarity. By virtue of its new role as central body of the network of agricultural mutual insurance and reinsurance companies or mutuals, Groupama Assurances Mutuelles has the legal responsibility of ensuring the cohesion and smooth running of the network. It has administrative, technical and financial control over the organisation and management of the organisations within the network. It determines its strategic policies, issues any relevant instructions to this effect and oversees their successful implementation.It also takes any requisite measures to guarantee the solvency of not only each organisationwithin the network but of the Group as a whole, and to ensure they comply with all their respective obligations. The agreement has been adapted to reflect these new circumstances. It isfundamentallya three-part agreement: INSTRUCTIONSFROMTHECENTRALBODY The agreement defines the scope and system for issuing instructions, these being one of the methods available to the central body for performing its role. AUDITS The agreement allows Groupama Assurances Mutuelles to conduct audits to verify the current and future economic and financial balances of each regional mutual, compliance with regulatory requirements and with the reinsurance agreement. It may also, in certain conditions,conduct an audit followinga loss or non-compliance withan instruction. FINANCIALSOLIDARITYPLAN As part of the entry into force on 1 January 2016 of Solvency 2 and the Group prudential notion ensuring the fungibility of equity within the Group, the agreement was adjusted by replacing the previously planned solidarity fund with a new solidary mechanism better meeting the constraints set bySolvency 2. The new mechanism thus institutes a monthly guarantee between Groupama Insurance and the regional mutuals aiming to allow Groupama Insurance or the regional mutuals to respect their coverage ratio atall times andto cover any insufficiency ofcover. In addition, the duration of the agreement has been revised to better meet the objectives of long-term relationships between GroupamaAssurancesMutuellesand the regional mutuals through this agreement.

276

REGISTRATION DOCUMENT 2018 - GROUPAMA ASSURANCES MUTUELLES