GROUPAMA / 2019 Universal Registration Document

7 FINANCIAL STATEMENTS Consolidated financial statements and notes

Other underwriting reserves Actuarialreservesfor annuities The actuarial reserves for annuities represent the present value of the Company’s payables for annuities andannuity expenses. Reserve for increasing risks This reserve is set aside for periodic premium health and disability insurance policies, for which the risk grows with the age of the policyholders. DEFERRED ACQUISITION COSTS In non-life insurance, acquisition costs related to unearned premiums are deferred and recorded in assets on the balance sheet. Life insurance policies and financial contracts (b) with discretionary profit sharing PREMIUMS Written premiums represent the gross premiums, before reinsurance and tax, net of cancellations, reductions, rebates, of the change in premiums still to be written and of the change in premiums to be cancelled. INSURANCE POLICY SERVICING EXPENSES Servicingexpensesfor life insurancepoliciesand financialcontracts with discretionary profitsharing means: all claims oncethey have been paid to the beneficiary; ● technicalinterestand profit sharingthat may be includedin those ● claims; all costs incurredby the insurancecompanyfor the management ● and payment of claims. They also include the profit sharing and the change in life insurance reserves and other technical reserves. TECHNICAL LIABILITIES RELATED TO LIFE INSURANCE POLICIES AND FINANCIAL CONTRACTS WITH DISCRETIONARY PROFIT SHARING Actuarial reserves Actuarial reserves represent the difference between the present values of the commitments made by the insurer and the policyholders respectively, taking into account the probability that these commitments will be realised. Actuarial reserves are recognised as liabilities on the balance sheet at their gross underwriting value, before reinsurance and deferred acquisition costs. No reserve for financial contingencies is recorded when the actuarial reserves have been funded on the basis of discount rates at most equal to the forecastyield rates, prudentlyestimated,of the assets assigned torepresent them. Profit-sharing reserve The profit-sharing reserve consists of a reserve for profit-sharing payable andpotentially asa reservefor deferred profitsharing. The reserve for payable profit sharing includes the identifiable amounts, from regulatory or contractual obligations, intended for the policyholdersor beneficiariesof contracts in the form of profit sharing and rebates, to the extent that these amounts have not

been credited to the policyholder’s account or included in “Life technical reserves”. The reservefor deferred profit sharing includes: the reserve for unconditionalprofit sharing, which is recognised ● when a difference is recordedbetween the bases for calculating future rights in the individual company accounts and the consolidated financial statements; the reserve for conditional profit-sharing, which relates to the ● difference in liabilities between the individual company and the consolidated financial statements, the payment of which depends on a management decision or the occurrence of an event. In the particular case of restatement in the consolidated financial statements of the capitalisation reserve, a reserve for deferred profit-sharing is determined when the Asset/LiabilityManagement assumptionsdemonstratea probable permanentwrite-backof the total capitalisationreserve.The Group recognisedno deferredprofit sharing on therestatement of the capitalisation reserve. Application of shadow accounting For participatory contracts, the Group has decided to apply shadow accounting, which is intended to pass on to the value of insurance liabilities, deferred acquisition costs and the intangible assets related to insurance policies, the effects of taking into account the unrealisedgains and losses on financial assets valued at fair value. Deferred profit-sharing is recognised through the revaluationreserveor the incomestatement,dependingon whether these gains and losses have been recognised in the reserve or in the incomestatement. Shadow accounting is applied on the basis of a profit-sharingrate that is estimated and applied to unrealised gains and losses. This rate takes into accountthe applicationof regulatoryand contractual conditions for the calculation of profit sharing and is determined using a prospective sharing rate method based on three-year businessplans. In case of an overall unrealised capital loss of the entity’s asset portfolio, the Group records a deferred profit-sharingasset limited to the fraction of deferred profit sharing actually recoverable. A recoverability test based on the projected future performance of insurance portfolios is carried out. This test specifically includes unrealised capital gainson assetsposted atamortised cost.

Other underwriting reserves Overall managementexpensesreserve

The management expenses reserve is established for all future contract management expenses not covered by mark-ups on premiums or by deductionson investment income provided for by them. This approach is carried out according to the grid of

departmentalcategories. Deferredacquisition costs

Variablecosts directlyattributableto the acquisitionof life insurance contracts are recorded in assets in the consolidated financial statements. These amounts may not under any circumstancesbe greater thanthe present value of future income fromthe policies.

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Universal Registration Document 2019 - GROUPAMA ASSURANCES MUTUELLES