GROUPAMA / 2019 Universal Registration Document

7 FINANCIAL STATEMENTS Consolidated financial statements and notes

3.4.1

Spread hedges

the accountingreservingrisk in case of a realisableamount (sale ● price net of disposal costs or value in use) that is lower than the net bookvalue; the commercialrisk broughtabout by the reservingrisk insofaras ● policyholder compensation could be impacted by the aforementioned reserving. The proportionof property assets out of total financial investments (including operating properties) was 1.91%. They may be held directly, in OPCI or SCI form, or througheligible rental assets under IFRS 16. Property assets can be splitinto: investment properties representing 1.24% of total financial ● investments; operating properties representing 0.68% of total financial ● investments. 3.5.2 Property assets are managed by the Group within a framework of internal constraints with a limit setting the maximum permissible exposureto propertyrisk. The limits are definedat the level of each insuranceentity and at the Group level. Any exceedingof the limits is handled accordingto whether it is part of an entity or the Group by the corresponding RiskCommittees. Within the constraints system and concerning investment risk especially, the Property Commitment Committee decides on the property budget as a whole and on acquisition, restructuring,and development works projects beyond predefined amounts. to market risks analyses The followingtable shows all the sensitivityto market risks analyses for fiscal years 2019 and 2018, split between group’s equity and income, excluding profitsharing andtaxes. Group risk management Summary of sensitivity 3.6

SPREAD WIDENING RISK In addition, a hedging strategy was tested during a pilot operation intendedto protect the value of a bond against the risk of widening of its spread. The strategy involved fixing the bond’s spread to one year using a dedicatedFFI. At the end of the hedge (one year renewable),a finalisingbalancingpaymentwas paid in return for the gain on the valueof the bond hedgedfor thevariation of its spread. This hedge was the subject of specific documentation for accounting hedgesat fair value under IAS 39. All over-the-countertransactionsare securedby a “collateralisation” system with theGroup’s top-tierbankingcounterparties. A strategy for exposure to the 10-year swap rate is also being tested. It aims to allow the Group to take durationwithoutexposure to spread risk (sovereign or credit). This operation is carried out using a vehicle paying the Euribor and an FFI exchanging this remuneration forthe 10-year swap rate. 3.4.2 Internal procedures stipulate that any over-the-countercontract is systematically covered by guarantee contracts with the banking counterparties in question. This systematic collateralisation of the hedging transactions significantly reduces the counterparty risk related to these over-the-counter transactions. 3.5.1 Exposure to property markets makes it possible to capture the performance of these markets (investment property) and benefit from premises for its operating needs (operating properties),but it also exposescompaniesto threemain types of risks: the investment risk generated by property restructuring ● operations; Managing counterparty risk Risk on property assets 3.5 Type of and exposure to property risk

31.12.2019

31.12.2018

Up fluctuation in sensitivitycriteria

Down fluctuation in sensitivitycriteria

Up fluctuation in sensitivitycriteria

Down fluctuation in sensitivitycriteria

Group's equity

Income (Loss)

Group's equity

Income (Loss)

Income (Loss)

Income (Loss)

Group’sequity

Group’sequity

(in millions ofeuros)

Interestrate risk

(745)

111

831 (145)

(550)

72

602

(77)

Underwritingliabilities

105

(139)

87

(93)

Financial investments

(745)

6

831

(6)

(550)

(15)

602

16

Financingdebt Equitiesrisk

76

8

(76)

(8)

59

10

(59)

(10)

Financial investments

76

8

(76)

(8)

59

10

(59)

(10)

Foreignexchangerisk

49

(49)

35

(35)

Financial investments

49

(49)

35

(35)

250

Universal Registration Document 2019 - GROUPAMA ASSURANCES MUTUELLES