GROUPAMA / 2020 UNIVERSAL REGISTRATION DOCUMENT

5 GROUP RISK FACTORS The Group’s main risks

Given the multiplepossibilitiesand uncertaintiesrelating to these risks, the impact of the identified risks cannot always be accurately quantified. However, in order to prevent, detect and manage risks on an ongoingbasis, Groupamahas implemented numerous risk management processes, procedures and controls. As with any control and monitoringsystem, this should not, however, be considered an absolute guarantee. Rather, it offers reasonableassurancethat operationsare secure and that results are managed. The risks presented below are arranged based on their significance and their category.

Groupamadraws attention to the risks described below. These risks could materially affect the Company’s activities, consolidated net income, financial position, solvencymargin and its ability to achieve estimated results. However, the description of risks is not exhaustive. Additional risks and uncertainties not currently known or deemed to be minor could, in the future, prove to be major and materiallyaffect Groupama. The risks described below are inherent to the nature of the Group’s activities and to the economic, competitive and regulatory environment in which Groupama operates. This presentation should also be considered in conjunctionwith the tables in the Group’s financial statements audited by the statutory auditors.

THE GROUP’S MAIN RISKS

5.1

FINANCIAL MARKET RISKS

5.1.1

The Group is exposed to decreases in interest rates or continued low interest rates. This exposurediminishes the rate of return of its portfolios and, if this persists, reduces its margins, particularly on annuity contracts, resulting in a reduction in solvency. As of 31 December 2020, a decrease in interest rates of 50 basis points would have had a significant negative impact of 36 basis points on the Group’s solvency ratio, while an increase of 50 basis points would have resulted in an increase in the solvency ratio of 39 basis points. As of 31 December2020, the regulatorysolvency ratio was 244%. Conversely,a rapid, significant,and persistentrise in interest rates would have a short-termnegligibleimpact on the interest paid to policyholders, which could lead to redemptions on savings in euros, requiringsome of the bond portfoliosto be realisedat a loss. This redemption risk could also eventually lead to liquidity risk in extreme circumstances, but this is limited by the large share of cash assets (3.8% of assets) and the moderate weight of assets lacking instant liquidity, such as property (6.1%) and unlisted equities (1%), as of 31 December2020 at the Group level. This risk of rising rates is therefore considered to be “low”. As of 31 December 2020, the allocation of the Group’s asset portfolio (market value data, excluding unit-linked investments, minority stakes, and repurchase agreements) was as follows: Bonds: 81%; ❯ Equities: 7.1%; ❯ Liquid assets: 3.8%; ❯ Property: 6.1%; ❯ Others: 2.0%. ❯ Under the current market conditions where interest rates are low, the risk of continued low interest rates is considered to be “significant” overall.

The Group’s solvency margin is particularly sensitive to conditions on the capital markets (equities,property,credit, and interest rates). Unfavourable conditions on capital markets, especially on interest rates, are likely to reduce the Group’s solvency margin. Although the Group has taken measures to limit and control the adverse effects of fluctuations in interest rates to the extent possible, via Asset/LiabilityManagementwithin the Group’s entities that seeks to calibrate the duration of assets to those of liabilities and reduce the volatility of the differential between the actual yield of the asset and the rate expected and via the use of hedging instruments, Groupama’sgrowth, level of assets, expenses, losses, or financial revenues could nonetheless be materially affected, which could then significantly impact its net income and financial position. Similarly, a widening of credit spreads could reduce the value of fixed-income securitiesheld by the Group and increasenet income from the purchase of new, fixed-income securities. Conversely, a tightening of credit spreads would increase the value of fixed-income securitiesheld and would reduce net income from the Group’s purchase of new fixed-income securities. The financial risks to which the Group is exposed are presented below in descending order. 5.1.1.1 The Group is mainly exposed to the risk of eurozone interest rate fluctuations through its fixed-rate bond portfolio and its commitments. Interest rate risk

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Universal Registration Document 2020 - GROUPAMA ASSURANCES MUTUELLES