GROUPAMA / 2019 Universal Registration Document

5 GROUP RISK FACTORS The Group’s main risks

Groupama draws attention to the risks described below. These risks could materially affect the Company’sactivities, consolidated net income, financial position, solvency margin and its ability to achieve estimated results. However,the descriptionof risks is not exhaustive.Additionalrisks and uncertainties not currently known or deemed to be minor could, in the future, prove to be major and materially affect Groupama. The risks describedbelow are inherentto the nature of the Group’s activities and to the economic, competitive and regulatory environmentin whichGroupamaoperates.This presentationshould also be considered in conjunction with the tables in the Group’s financial statements audited by the statutoryauditors.

Given the multiple possibilities and uncertainties relating to these risks, the impact of the identifiedrisks cannot always be accurately quantified. However, in order to prevent, detect and manage risks on an ongoing basis, Groupama has implemented numerous risk management processes, procedures and controls. As with any control and monitoring system, this should not, however, be considered an absolute guarantee. Rather, it offers reasonable assurance that operations are secure and that results are managed. The risks presentedbelow are arrangedbased on their significance and theircategory.

5.1

THE GROUP’S MAIN RISKS

5.1.1

FINANCIAL MARKET RISKS

The Group is exposed to decreases in interest rates, which diminishes the rate of return of its portfolios and, if this persists, reduces its margins, particularlyon annuity contracts,resulting in a reduction in solvency. As of 31 December 2019, a decrease in interest rates of 50 basis points would have had a significant negative impact of 25 basis points on the Group’s solvency ratio, while an increase of 50 basis points would have resulted in an increase in the solvency ratio of 14 basis points. As of 31 December 2019, the regulatory solvency ratio was 302%. Conversely,a rapid, significant,and persistent rise in interest rates would have a short-term negligible impact on the interest paid to policyholders,which could lead to redemptionson savings in euros, requiring some of the bond portfolios to be realised at a loss. This redemptionrisk could also eventuallylead to liquidityrisk in extreme circumstances,but this is limited by the large share of cash assets (5.0% of assets) and the moderateweight of assets lacking instant liquidity, such as property (5.8%) and unlisted equities (<1%), as of 31 December 2019 at the Group level. This risk of rising rates is therefore considered tobe low. As of 31 December 2019, the allocation of the Group’s asset portfolio (market value data, excluding unit-linked investments, minority stakes, and repurchase agreements) was as follows:

The Group’s solvency margin is particularly sensitive to conditions on the capital markets(equities,property,credit, and interestrates). Unfavourable conditions on capital markets, especially on interest rates, are likelyto reducethe Group’s solvencymargin. Although the Group has taken measures to limit and control the adverse effects of fluctuations in interest rates to the extent possible, via Asset/LiabilityManagementwithin the Group’s entities that seeks to calibrate the duration of assets to those of liabilities and reduce the volatility of the differential between the actual yield of the asset and the rate expected and via the use of hedging instruments,Groupama’sgrowth, level of assets, expenses,losses, or financial revenues could nonetheless be materially affected, which could then significantly impact its net income and financial position. Similarly, a widening of credit spreads could reduce the value of fixed-incomesecuritiesheld by the Group and increasenet income from the purchase of new, fixed-income securities. Conversely, a tightening of credit spreads would increase the value of fixed-incomesecuritiesheld and would reduce net income from the Group’spurchase of new fixed-income securities. The financial risks to which the Group is exposed are presented below in descendingorder. 5.1.1.1 The Group is mainly exposed to the risk of eurozone interest rate fluctuations through its fixed-rate bond portfolio and its commitments. Interest rate risk

Bonds: 80.1%; ● Equities: 6.6%; ●

Liquid assets: 5.0%; ● Property: 5.8%;and ● Others: 2.4%. ● Under the current market conditions where interest rates are low, the interest raterisk is considered to be “significant” overall.

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Universal Registration Document 2019 - GROUPAMA ASSURANCES MUTUELLES