GROUPAMA / 2020 UNIVERSAL REGISTRATION DOCUMENT

5 GROUP RISK FACTORS The Group’s main risks

Credit risk 5.1.1.2 The Group is sensitiveto the significant and generalisedwideningof spreads across all private and sovereign issuers. Such developments could have a significant negative impact on the Group’s solvency. As of 31 December 2020, the regulatory solvency ratio was 244%. However, the vast majorityof the Group’sbond portfolioconsistsof public and private eurozone issues, with AA and A ratings predominating at 73.2%, BBB ratings at 25.6%, and ratings below BBB at 1.2%as of 31 December2020. Despite the quality of these ratings, given the current context of financialmarketsand the global environment, the credit risk is considered “significant”. 5.1.1.3 The Group is exposed to the risk of losses on the market value of equities due to fluctuations in financial markets (individual position of assets or reflection of wider market movements). As of 31 December 2020, equities represented 7.1% of the Group’s assets in terms of economicexposure.As of 31 December2020, a 25% decrease in the value of equities would have had a moderate impact of 16 basis points on the Group’s solvency ratio, while a 25% increase in the value of equities would have resulted in an increase in the Group’s solvency ratio of 15 basis points. As of 31 December 2020, the regulatory solvency ratio was 244%. The equity risk is considered “moderate”. 5.1.1.4 The Group is exposed to property risk, presented as an insufficient return on assets (lower income and/or realisedgains) or a decrease in unrealised capital gains (or an increase in unrealised losses). A decrease in returns could have a moderate impact on net income, and a decrease in unrealised gains (or an increase in unrealised losses) could directly affect the Group’s solvency. As of 31 December 2020, the regulatory solvency ratio was 244%. The Group’s property assets are mainly held by subsidiaries in France. As of 31 December 2020, property assets represented 6.1% of the Group’s portfolio. The property risk is considered “moderate”. Groupama publishes its consolidated and combined financial statements in euros. Nevertheless, Groupama is exposed to currency risk. In the first place, through its business activities and international development in regions outside the eurozone. Although the Group does business primarily in eurozone countries, about 16% of its premium income at 31 December 2020 was derived from the business of its international subsidiaries (see Note 34 “Analysis of premium income” to the combined financial statements), and about 6% of premium income was denominated Equities risk Property risk Fluctuations in exchange rates 5.1.1.5

in currencies other than the euro, including the Turkish lira, Romanian leu, Hungarian forint, Tunisian dinar, and Chinese yuan. In addition, holding investmentassets in foreign currenciessuch as the US dollar, the Hungarian forint, and the pound sterling also exposes the Group to changes in the value of these currencies against the euro that have an impact on the Group’s net income and financial position.

The currency risk is considered “moderate”.

5.1.2

INSURANCE RISKS

The cycles associated with the non-life insurance business are of varying length. These cycles may involve the occurrence of catastrophic events at an unusual frequency or be impacted by economic conditions. The increasingnumber of climate events, on a global level, as well as other risks, such as acts of terrorism, explosions, the appearance and development of pandemics, and the impact of global warming, may have major consequences,not only in terms of their immediate damage and impact, but also in respect of insurers’ current and future activities and income. The potential increase in compensationand claims, the emergence of new kinds of liability, growing uncertainty as to the volume and level of maximum losses may, for example, have a material impact on Groupama’s business activities, consolidated net income and liquidity. Through the diversificationof its portfolio, the individual selectionof risks accepted, the limitation of its exposure to risks (specifically in respect of natural disasters), the managementof overlapping risks and reliance on reinsurance, Groupama significantly reduces the negative impacts of its exposure. Insurance risks are managed in accordancewith the principlesand rules relating to underwriting and reserves. In particular, these principles and rules specify the cover limits and the exclusionsfixed under reinsurance agreements, the monitoring of the appropriateness of the portfolio and the price level, preventive measures such as in the case of adverse climatic risks, the provision of information to insured municipalities and, where appropriate, to policyholders in order to anticipate and address such risks, the rules for managing claims, and the standards on reserves. Despite the careful attention paid to the monitoring of these risks and the risk control systemsput into place, Groupama,becauseof its historical customer base and inflation of catastrophic events related to global warming, might experience major losses in the future on such risks, which would have a substantial negative impact on its financial position and net income. The Group’s main insurance risks are presented below in descending order.

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Universal Registration Document 2020 - GROUPAMA ASSURANCES MUTUELLES