GROUPAMA / 2020 UNIVERSAL REGISTRATION DOCUMENT

6 EARNINGS AND FINANCIAL POSITION Management report of the Board of Directors

Supervision of Intra-group 6.1.6.3 Accounting Transactions

Equity risk 6.1.7.3 In 2020, the Group’sequity risk continuedto be activelymanaged, which led to, in particular,the continuationof the hedgingpolicy on protected equity funds, but in a more opportunistic manner. This last strategy uses derivatives housed in mutual funds. Credit risk 6.1.7.4 In a tactical management strategy of the credit asset class, the Groupama AM managementcan be exposed or hedge credit risk by using forward financial instruments like Credit Default Swaps. This type of operation only involves assets managed through mutual funds. Spread risk 6.1.7.5 A 10-year swap rate exposure strategy was introduced in 2017 in the form of a test. It aims to allow the Group to take duration without exposure to spread risk (sovereign or credit). This operationis carriedout using a vehicle paying the Euribor and an FFI exchanging this compensation for the 10-year swap rate. All over-the-counter transactions are secured by a “collateralisation” system with the Group’s top-tier banking counterparties. 6.1.8.1 The Groupama AssurancesMutuelles income statement includes the technical balance before expenses (premiums, claims, and reinsurance) as a replacement for the Antilles Guyane regional mutual, which is exempt from approval. There was no impact on the net transactions of the Groupama Assurances Mutuelles income statement. However, the substituted transactions led to a symmetrical increase in the gross technical operations of Groupama Assurances Mutuelles and the outward reinsurance and retrocessions. Earned contribution thus appear in the individual financial statements for €2,767.0 million, which break down into €40.7 million in substituted contributionsnet of inward reinsurance in quota share of the reinsurer GroupamaAssurances Mutuelles and €2,726.3 millionin earned contributions (excluding substitution). The remainder of the commentary on business activity focuses exclusively on net substitution transactions. Earned contributionsreached€2,726.3,down 3.0% (€83.2 million) compared with 2019 (€2,809.4 million).This change came mainly from: ANALYSIS OF THE ANNUAL FINANCIAL STATEMENTS FOR THE FISCAL YEAR 6.1.8 Profit/Loss

Transactions among subsidiaries and Groupama Assurances Mutuelles (internal loans, subsidiary restructurings, capital increases, dividend payouts, etc.) are subject to decisions validated by the Groupama Assurances Mutuelles Executive Management, and to technical and operational controls by the Group Financial Controlling Department. Controls on these operations are carried out by auditing the consolidated financial statements, i.e. by reconcilingintra-grouptransactions,monitoring any changes in Group’s equity, and reviewing the transactions recorded for consistency with legal documentation. 6.1.7.1 The purpose of the hedges that are implemented is to partially hedge the portfolios against the riskof interest rate increases. This is made possible by converting fixed-rate bonds into variable-rate bonds (“payer swaps”). The strategy consists in transforming a fixed-rate bond into a variable-ratebond, either on a securityheld or on new investments.They are intendedto permit asset disposals in the event of an increase in interest rates by limiting realisations of capital losses, either to pay benefits or to invest at higher rate levels. Hedging programmeswere graduallyimplementedon behalf of the life insurance companies as from 2005. In accordance with the approval of the Boards of Directors, the swap programme was supplemented in 2012 and partially extended to the Non-Life portion with a tactical management objective. All over-the-counter transactions are secured by a “collateralisation” system with the Groupama Assurances Mutuelles top-tier banking counterparties. Foreign exchange risk 6.1.7.2 Ownership of international equities entails dollar and yen foreign exchangerisk, which can be hedged through forwardsales. These forward sales are terminatedas the underlyingsare disposedof or are renewed to hedge the residual underlyings. The hedging of currency risk on the Hungarian forint has been actively managed since 2015. The holding of bonds issued in foreign currencies (dollar, sterling, Swiss franc) is hedged via currency swaps against the euro. As with interest rate risk, all OTC transactions are secured by a system of “collateralisation” with leading bank counterparties selected by Groupama Assurances Mutuelles. FINANCIAL FUTURES POLICY 6.1.7 Interest rate risk

136

Universal Registration Document 2020 - GROUPAMA ASSURANCES MUTUELLES