GROUPAMA / 2019 Universal Registration Document

5 GROUP RISK FACTORS The Group’s main risks

Credit risk 5.1.1.2 The Group is sensitiveto the significantand generalisedwideningof spreads across all private and sovereign issuers. Such developments could have a significant negative impact on the Group’s solvency. As of 31 December 2019, the regulatory solvency ratio was 302%. However,the vast majorityof the Group’sbond portfolioconsistsof public and private eurozone issues, with AAA, AA, and A ratings predominatingat 69.0%, BBB ratings at 27.4%, and ratings below BBB at 3.6%as of 31 December2019. Despitethe quality of these ratings,given the currentcontextof financialmarketsand the global environment, thecredit risk is considered“significant”. 5.1.1.3 The Group is exposed to the risk of losses on the market value of equities due to fluctuations in financial markets (individual position of assets or reflection of wider market movements). As of 31 December 2019, equities represented 6.6% of the Group’s assets in terms of economicexposure.As of 31 December2019, a 25% decrease in the value of equities would have had a moderate impact of 7 basis points on the Group’ssolvencyratio, while a 25% increase in the value of equities would have resulted in an increase in the Group’s solvency ratio of 5 basis points. As of 31 December 2019, the regulatory solvency ratio was 302%. The equity risk isconsidered “moderate”. 5.1.1.4 The Group is exposed to property risk, presentedas an insufficient return on assets (lower income and/or realisedgains) or a decrease in unrealised capital gains (or an increase in unrealised losses). A decrease in returns could have a moderate impact on net income, and a decrease in unrealised gains (or an increase in unrealised losses) could directly affect the Group’s solvency. As of 31 December2019, the regulatory solvency ratiowas 302%. The Group’s property assets are mainly held by subsidiaries in France. As of 31 December 2019, property assets represented 5.8%of the Group’s portfolio. The propertyrisk is considered “moderate”. Groupama publishes its consolidated and combined financial statements in euros. Nevertheless, Groupama is exposed to currencyrisk. Firstly, through its businessactivitiesand international developmentin regions outside the eurozone. Although the Group does business primarily in eurozone countries, about 16% of its premium income at 31 December2019 (22% on the consolidated scope) was derived from the business of its international subsidiaries (see Note 33 – Analysis of premium income to the consolidated financial statements), and about 6% of premium incomewas denominatedin currenciesother than the euro (8% on the consolidated scope), including the Turkish lira, Romanian leu, Equity risk Property risk Fluctuations in exchange rates 5.1.1.5

Hungarian forint, Tunisian dinar, and Chinese yuan. In addition, holding investment assets in foreign currencies such as the US dollar, the Hungarian forint, and the pound sterling exposes the Group to changes in the value of these currenciesagainst the euro that have an impact on the Group’s net income and financial position. Covid-19 - April 2020 5.1.1.6 Covid-19 pandemic is an unprecedentedglobal event of unknown magnitude andduration at thisstage. The uncertainand volatile financial environmentengenderedby the pandemic obliges States to take various economic and financial measuresof great magnitude.Indeed,the budgetaryauthoritiesact as a “guarantor of last resort” with liquidity measures (state guarantee on loans and tax deferrals) and support measures for demand. Central banks ensure the liquidity needs of the financial system by addressing issues one after the other; bank liquidity, dollar liquidity on internationalmarkets,CT and LT loans, sovereign debt. The near-widespreadclosure of borders and the introduction of lockdownmeasuresin several countriesaround the world lead to a downward revision of growth prospects. In high-lockdown countriessuch as Franceand Italy,significantdeclinesin activity are expected in the second quarter. The economic recovery that is expected to occur “mechanically”,once the epidemic is stabilized, may however be impacted by prudent consumptionand cautious investmentbehavior ofthe economic actors. Recent developmentsin the financial markets are likely to lead to a decline in the Group’s solvency ratio, which would nevertheless remain well above regulatory minima. The Group’s solvency ratio (SCR) stood at 302% with transitional measure at 31 December 2019, leaving room in the event of unfavorabledevelopmentsin the financial markets. However, as the medium-term impacts of the epidemic remain uncertain and dependent on future developments, the Group’s financial situation could be more affected if the epidemic becomes more serious and/orprolonged. The cycles associated with the non-life insurance business are of varying length. These cycles may involve the occurrence of catastrophic events at an unusual frequency or be impacted by economic conditions. The increasingnumber of climate events, on a global level, as well as other risks, such as acts of terrorism, explosions, the appearance and development of pandemics, and the impact of global warming, may have major consequences,not only in terms of their immediate damage and impact, but also in respect of insurers’ current and future activities and income. The currency risk isconsidered“moderate”. INSURANCE RISKS 5.1.2

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Universal Registration Document 2019 - GROUPAMA ASSURANCES MUTUELLES