GROUPAMA / 2019 Universal Registration Document

7 FINANCIAL STATEMENTS Consolidated financial statements and notes

2.3.1.1 SPECIFIC FEATURES OF CERTAIN NON-LIFE INSURANCE POLICIES As with other insurers, the income and financial position of Groupamamay be affected quite significantlyby the unanticipated and random occurrence of natural or man-made events, such as floods, drought, landslides, storms, earthquake, riots, fire, explosions,or acts of terrorism.For example,the storm sufferedby France in December 1999 resulted in major damage and a significant increase in compensation claims by Groupama customers. Climate changes that have occurred in recent years, specifically global warming, have contributed to increasing the unpredictablenature and frequency of climate events and natural events in regions where Groupama is active, particularly in Europe, and have created new uncertainty as to Groupama’s future risk trends and exposure. Groupama is implementing a reinsurance programme to limit the losses it is likely to suffer as a result of events or other events affecting its underwriting results. The reinsurance programmes implemented by Groupama transfer a portion of the losses and correspondingexpenses to the reinsurers. These programmesare supplementedby the issuanceof a “cat bond” on the high tranche of the force-of-natureprotections.However,as an issuer of policies covered by reinsurancepolicies, Groupama remains committed to all its reinsured risks. Reinsurancepolicies therefore do not relieve Groupama of the obligation to settle claims. The Group remains subject to risks related to the credit situation of reinsurers and its ability to obtain the payments due from them. Moreover, the reinsurance offering, the amounts that may be covered, and the cost of coverage depend upon market conditions and are likely to vary significantly. Other factors in risk growth may be mentioned: ageing of the population (health, long-term care); ● increased pollution; ● strengthened legal structure (liability – compensation for bodily ● injury, etc.).

2.3.1.2 SPECIFIC FEATURES OF CERTAIN LIFE INSURANCE POLICIES AND FINANCIAL CONTRACT (a) Discretionary profit-sharing clause Certain life insurance,savings and pension productsoffered by the Group contain a discretionary profit-sharing clause. This profit sharing must at least correspond to the regulatory and/or contractualconstraints.Commercialconsiderationsmay lead to an increase in this profit-sharing.This increase,the amount of which is left to the insurer’sdiscretion,allows policy holders to participatein financial management results and the underwriting results of the insurance company. (b) Early redemption options Most of the savings and retirement products may be surrendered by the policyholders at a value defined by the policy before maturity. Large redemptions may have significant impact on the resultsor the solvency in certain unfavourable environments. (c) Specific features of unit-linked policies Most unit-linked policies sold by Groupama do not generally provide for contractual performance. Under these conditions, the policyholderalone directly assumesresponsibilityfor the investment risk. Certain policies may provide for a minimum redemption guarantee in case of the death of the policyholder. 2.3.1.3 MORTALITY AND LONGEVITY RISK In life insurance, the payment of benefits depends on the death or the survival of the policyholder.It is the occurrenceof one or other of these events that gives the right to payment of a benefit. The probability that these events will occur is estimated through experientialor regulatory statistical tables. In most cases, reserves are calculated using the regulatory tables based on statistics of population change. These tables are regularly revised to take demographic changes into account. The income or equity is potentially exposed to risk if demographic change deviates from experience with regard to these reserving tables. The amount of actuarial reserves for annuities isas follows:

31.12.2019

31.12.2018

France

International

Total

Total

(in millions ofeuros)

Actuarialreservesfor life annuities

10,349

14

10,363

10,121

Actuarialreservesfor non-life annuities

2,195

20

2,216

2,324

TOTAL

12,544

34

12,578

12,445

The share of actuarial reserves for life annuities continued to be largely predominant at the end of 2019 (>80% ofannuity commitments).

244

Universal Registration Document 2019 - GROUPAMA ASSURANCES MUTUELLES