GROUPAMA / 2018 Registration document

7 FINANCIAL STATEMENTS

ANNUAL FINANCIAL STATEMENTS AND NOTES

Premiums 3.1.1 Premiums for the year relate to direct business and mainly to inward insurance. They include: premiums forthe fiscal year, netof cancellations; ❯ variation in premiumsstill to bewritten; ❯ variation in premiumsto be cancelled. ❯ These premiums are corrected for variation in unearned premiums and constitutethe amount ofearned premiums. 3.1.2 The reserve for unearned premiums for all policies in force at the fiscal year-end shows the share of premiums written and premiumsyet to be written relating to the risk coverage in effect for the year or years following the reporting year. It is calculated pro rata temporis. 3.1.3 Costs relating to the insurancebusiness are recordedaccordingto their nature. They are classified for the presentationof the financial statements according to the purposes of the claims management costs, acquisitioncosts, administrationcost, investmentcosts, and other technical costs. Acquisition andadministration costs mainly include: commissions paid by Groupama Assurances Mutuelles to the ❯ regional mutuals. These are determined pursuant to the provisions stipulated in the reinsurance agreement with the regional mutuals and are calculated based on the earned premiums that Groupama Assurances Mutuelles accepts from the regionalmutuals; commissions assessed on direct business and other inward ❯ reinsurance business. Deferred acquisition costs 3.1.4 A portion of the general expenses of Groupama Assurances Mutuelles allocated for the acquisition of contracts and commissionson direct and accepted business is posted to assets in the balance sheet. This is the share of acquisition expenses pertainingto unearnedpremiums. Reserve forunearned premiums Costsrelatingto the insurance business benefits and expenses paid for in connection with direct ❯ business or that accepted under reinsurance treaties which equate the claims paid net of remedies to be received for the year plus periodic annuity payments. They also include claims-related expenses. These claims also include periodic payments of annuities managed directly by Groupama Assurances Mutuelles, as well as management costs from the distribution ofgeneral expenses; the reservesfor claims in direct businessand inward reinsurance ❯ business represent the estimate, net of projected claims receivable,of the cost of all unpaid claims at the end of the year, both declared and undeclared. These reserves also include Claims 3.1.5 The claims expensefor the year consistsmainly of:

charges for managementfees determinedon the basis of actual expense rates observedby Groupama AssurancesMutuelles. The estimated value of reserves for claims is based on an actuarial approach, defined in accordance with a group methodology. By means of valuations of final costs based on payment triangles or costs (by risk segment), it permits a determinationof the sufficient amount of outstanding claims reserve. This valuation incorporates the valuation of delinquent claims into its approach. The amounts of these reserves are indicated in Note 11. In construction risk, the reserve for claims yet to be made comprises direct claims and claims from the regional mutuals is two-pronged. One component is set aside for ten-year cover for general liability and the other is for ten-year cover for property damages. This reserve is determined in accordance with the provisions of Articles 143-14 and 143-15 of ANC Regulation no 2015-11. Outstanding claims reserves for payments made for traffic accidents occurring on or after 1 January 2013 include the annual adjustment withan inflation rate of 2%. The technical reserves for incapacity and invalidity benefits are calculated in accordance with Article 143-12 of ANC Regulation no 2015-11.The discount rate used is 75% of the average TME of the last 24 months. 3.1.6 Pursuant to Article R. 343-7.6° of the French Insurance Code, an insurance company may establish so-called equalisation reserves to cover extraordinary expenses relating to operations to guarantee risks due to natural factors, nuclear risk, risks of civil liability due to pollution, space risks, as well as risks relating to attacks, terrorism and air transport. These reserves are funded voluntarily. Groupama Assurances Mutuelles computes this reserve based on the share of risks it insures or reinsures or that is obtained through its share of the results owing to its shareholding in certain professional pools. The amounts of these reserves are indicated in Note 11. 3.1.7 A reserve for unexpired risks is allocated when the estimated amount of claims (including management costs) that could be reported after the year end on policies written up before that date exceeds the reserve forunearnedpremiums. The reserve for increasing risks defined in Article R. 343-7 of the French Insurance Code is the difference between the current values of the commitments taken respectively by the insurer and by the policyholders for insurance operations covering health and disability risks. This reserve concerns the reserves formed in long-term care insurance as well as those on business accepted. The amountof this reserve is indicated in Note 11. The actuarial reserves for annuities are based on the discounted values of annuities and annuity ancillariesstill owed at the inventory date. This item includes the reserves set aside against direct business and supplementary reserves on inward reinsurance business. Equalisation reserve Other technical reserves

298

REGISTRATION DOCUMENT 2018 - GROUPAMA ASSURANCES MUTUELLES