GROUPAMA / 2019 Universal Registration Document

7 FINANCIAL STATEMENTS Annual financial statements and notes

Reserves 3.2.2 Amortisable securities under Article R. 343-9 (a) of the Insurance Code Any unrealised capital losses resulting from comparing the book value, including the differences between the redemption prices (premium, discount), with the redemptionvalue, do not necessarily carry a reserve for diminution in value. Nevertheless,a reserve for impairment is allocated when there is reason to believe that the debtor will not be able to honour his commitments,either to pay interest or to repay theprincipal. Real estate investments, variable-income (b) or fixed-income securities falling under Article R. 343-10 of the French Insurance Code, loans REAL-ESTATE INVESTMENTS When the net carryingamountof buildings,equity shares,or shares in unlistedpropertyor real estate companiesexceedsthe realisable value of these investments,a reserve for long-termimpairmentmay be allocated. This impairment is applied on investment properties after a materiality threshold has been taken into account. It is also applied to operating properties provided that their value in use is more than15% lessthan the net bookvalue. LISTED SECURITIES (EXCEPT EQUITY INTERESTS) For those investments covered by Article R. 343-10of the French Insurance Code, a line-by-line reserve for impairmentmay only be allocated when there is reason to deem that the impairment is long-term. In accordance with Article 123-7 of ANC regulation 2015-11, long-term impairments of amortisable securities covered by Article R. 343-10of the French InsuranceCode that the Company can and intendsto hold until maturityare analysedin terms of credit risk only. A reserve for long-term impairment is established in the event of a proven credit risk, when there is reason to believe that the counterpartywill not be able to honour his commitments,either to pay interest or to repay the principal. For amortisable securities covered by Article R. 343-10 of the French Insurance Code that the Company does not have the intention or ability to hold until maturity, long-term impairmentsare establishedby analysingall of the risks identifiedon this investment based on the considered holding horizon. The long-termimpairmentof an investmentline can be presumedin the followingcases: there was a long-term reserve on this investment line in the ● previous publishedstatement; the listed investment has consistently shown a significant ● unrecognised loss from its book value over a period of six consecutivemonthsprior toclosing; there are objective indicators of long-term impairment. ●

The recoverable amount is determined based on a multi-criteria approachthat dependson the nature of the assets and the holding strategy. In the event of long-term impairment of a security covered by Article R. 343-10of the French InsuranceCode, the amount of the impairment is the difference between historical cost price and recoverable amount. EQUITY SECURITIES The valuationof equity securities is based on multi-criteriamethods chosen according to each particular situation (nature of assets, holding horizon, etc.). The net book value of the equity securities of Groupama Holding Filiales et Investments (GHFP) was €7,028 million. The valuation method applied to these securities is based on the intrinsic valuation of the securities of subsidiaries and participations that make upGHFP’s assets. Each entity that undergoes a valuation provides its underwriting income forecasts calculated based on an estimated increase in premium income and a change in combined ratio for the plan period. These assumptions are adapted on the basis of the objectivesof each entity, past experience,and external constraints imposed by the local market (competition, regulation, market shares, etc.). Forecasts of financial income and discounted free cash flow are determined on the basis of financial assumptions (notably discountrate and rateof return). As a general rule, the applied available future cash flows correspond: during an explicit period corresponding to the first years, the ● cash flow column is based in particularon the first three yearsof the Group’s strategic operational planning. This is subject to a discussion process between local management and theGroup; beyond the explicit horizon, the cash flow column is completed ● by a terminal value. This terminal value is based on long-term growth assumptions applied to an updated projection of normative cashflows; the solvencymargin integrated into the business plans is valued ● according to the prudential rules establishedby the Solvency II Directive for subsidiaries whose country is subject to this regulation.For the other entities,the solvency marginis assessed accordingto the applicable local regulations. A reserve for impairmentis establishedwhen the value in use at the inventory date obtained through the valuation methods described above is less than the entry costof those securities. LOANS When the estimate of the recoverable value of a loan at inventory date is below its gross amount plus any accrued and unpaid interest at the end of the period, a reserve for impairment is allocated forthe difference.

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Universal Registration Document 2019 - GROUPAMA ASSURANCES MUTUELLES