GROUPAMA / 2019 Universal Registration Document

7 FINANCIAL STATEMENTS

Statutory auditors’ report on the annual financial statements

Assessmentof outstandingclaims reserve (Please referto notes 3.1.5 and 11.1to theannualfinancialstatements)

Identifiedrisk

Implementedprocedures

Reservesfor claims, appearingon the balance sheet at 31 December 2019 for €4,719 million,representone of the greatest liabilities. They correspondto unpaid benefits,both in principaland incidentals (managementfees), and also include an estimateof the benefits payable,unknownor late. The estimateof technicalprovisions is based in particularon historical data projectedto calculatethe cost of claims not yet reported,using actuarialmethodsas described in Notes 3.1.5and 11.1. It requiresthe exerciseof management’sjudgementin selecting the assumptionsto be applied, the calculationmethodsto be used, and the relatedmanagementcost estimates. Given the relativeweight of these reserves in the balance sheet and the importanceof the judgementexercisedby management,we consideredthe valuationof these reservesas a key point of the audit.

In order to assess the reasonablenessof the estimationof the amount of reservesfor non-reportedor late claims, our audit approachwas based on the informationprovidedto us and includedthe following work: Review the design and test the effectivenessof the key controls n related to claimsmanagementand the determinationof these provisions; Assess the relevanceof the calculationmethodused to estimate n the reserves; Reconcilethe data used as a basis for estimatingprovisions n with accounting; Assess the appropriatenessof the relative assumptionsused n for the calculationof reserves; Conducta reviewof the outcomeof the previousyear’s n accountingestimates; Use the Company’sdata to independentlyassess these reserves n in certain businesssegmentsand assess their reasonableness.

Valuationof equity securities (Please referto notes 3.2.2 and 5.2to the annualfinancialstatements)

Implementedprocedures

Identified risk

Equity securities,shown on the balance sheet at 31 December 2019 for €9,753 million,representone of the largest assets. They are initially recognisedat their historicalcost of acquisition, includingcosts, minus a provisionfor long-term impairmentwhere appropriate. The valuationof equity securities is based on multi-criteriamethods chosen accordingto each particularsituation (nature of assets, holding horizon,etc.). The techniquesused by managementto value these securitiesthus include a significantamount of judgementin the choice of methodologies,assumptions,and data used. Due to the materialityof the equity securitiesand the sensitivity to management’schoice of methodologiesand calculationparameters, we consideredthe proper valuationof equity securitiesas a key audit point.

In order to assess the reasonablenessof the estimation of the valuationof the equity securitiesheld by CaisseNationale de RéassuranceMutuelleAgricoleGroupama(and especially the GroupamaHoldingFiliales et Participations(GHFP) equity securities),our work particularlyconsisted in analysingthe assumptionsand methodsunderlyingthe valuationof the subsidiaries, in particular: Comparethe growth rates to infinity with the averagegrowth rates n observed in the countries in which Groupamaoperatesfor similar activities; Assess the reasonablenessand coherenceof the businessplans n based on historicalevidence,our knowledgeof the entities, the marketin which they are positioned,and macroeconomic factors that may affect these forecasts; Assess the discountrates comparedwith the customaryrates n used by the market’sfinancialanalystsbased on a sample of listed European insurers consideredcomparablewith the company in termsof activity, size, and geographicalarea; Assess the methodof calculatingS2 Cost of Capital used n for the valuationof equity securitieswith the involvementof our teams of actuariesand analyse the methodologiesfor valuing equity securities.

SPECIFIC VERIFICATIONS

In accordancewith the professionalstandardsapplicable in France, we also performedthe specific verificationsrequired by the applicable laws andregulations. We have no mattersto report as to the fair presentationand the consistencywith the annual financialstatementsof the informationprovided in the managementreport of the Board of Directors approved on 12 March 2020and in the other documentsabout the financial position and the annual financial statementssent to the members,with the exceptionof the point below. With regard to events occurringand items learned after the reporting date relating to the effects of the COVID-19crisis, managementinformed us that they will be communicatedto the generalmeeting convened to approve the financial statements.

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Universal Registration Document 2019 - GROUPAMA ASSURANCES MUTUELLES