GROUPAMA / 2019 Universal Registration Document

7 FINANCIAL STATEMENTS Consolidated financial statements and notes

Sensitivity to interest rate risk analysis 3.1.3 Pursuant to IFRS 7, an analysis of accounting sensitivity was carried out at 31 December2019 with a comparativeperiod. This analysis applies to year-end balance-sheet postings that show accountingsensitivity to interest rate risk (technical non-life and life liabilities, bond investments,financial debt in the form of bonds). It is not similar to analyses applying to embedded-value-type prospective data. The impacts on group's equity and income are shown net of profit sharing andcorporate tax. 3.1.3.1 SENSITIVITY OF TECHNICAL INSURANCE LIABILITIES ANALYSIS (a) Non-life insurance Regarding non-life underwriting liabilities, risk mapping allows the sensitivity of portfolios showing interest rate changes to be analysed, i.e., portfolios of current annuities and temporary payments (individual life and health insurance, and third-party liability insurance premiums). With the exception of increasing annuities and risk reserves for long-term care risk, as non-life insurance technical reserves are not discounted on the consolidatedfinancial statements,these amounts are therefore not sensitiveto changes in interest rates. At 31 December2019, the amount of the discount in the actuarial reservesfor non-lifeannuities,before reinsurance,was €142 million. The amount of the discount in the reserve for increasing risks on long-term care, gross of reinsurance, was approximately €54 million. The result of the sensitivityto interest rates analysesshows that the Group is not particularly sensitive with regard to all its non-life commitments. The impact of a change of +/-100 basis points, calculated netof tax, is shown in thefollowingtable:

3.1.2.2 INTERACTIONS WITH REDEMPTION RISK Redemption behaviours are sensitive to changes in interest rates: an increasein the rates can lead to an increasein the policyholders’ expectation of revaluation and, if this expectation cannot be met, the sanctionof early redemptions.In addition to the loss of income and an increase in payouts, the risk will be losses related to the disposal of assets at a loss (which could be the case for fixed-rate bonds) in cash of insufficient cash. The objective of Asset/Liabilities Management is to optimise the policyholder’s satisfaction and the insurer’s risk using strategies that take into accountthe variousreservesavailable(includingcash) and bond management strategies coupled withedgingproducts. 3.1.2.3 INTEREST RATE RISK RELATED TO THE EXISTENCE OF GUARANTEED RATES The constraints of guaranteedminimum interest rates constitute a risk for the insurer if rates fall, as the yield on the assets may be insufficientin terms of these constraints.These risks are handledat the regulatory level through specific risks. The purpose of the hedges that are implemented is to partially hedge the portfolios against the risk of interest rate increases.This is made possible by converting fixed-rate bonds into variable-rate bonds (“payer swaps”). The strategy consists of transforming a fixed-ratebond into a variable rate, either on a security held or new investments, and has the objective of limiting the capital loss recognisedbecause ofan increase ininterestrates in caseof partial liquidationof the bond portfolio for the payment of benefits. These strategies aimto limit the impactof potential redemptions. All over-the-countertransactionsare securedby a “collateralisation” system with theGroup’s top-tierbankingcounterparties. 3.1.2.4 INTEREST RATE HEDGING Risk of rate increase

31.12.2019

31.12.2018

Interest rate

Interest rate

+1%

-1%

+1%

-1%

(in millions ofeuros)

Impact on income (net of taxes)

84

(111)

67

(66)

Equity impact (excluding income)

246

Universal Registration Document 2019 - GROUPAMA ASSURANCES MUTUELLES