Groupama // 2021 Universal Registration Document

5 GROUP RISK FACTORS The Group’s main risks

Groupama draws attention to the risks described below. These risks could materially affect the Company’s activities, net income, financial position, solvency margin, 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 materially affect 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 conjunction with the tables in the Group’s financial statements audited by the statutory auditors. Given the multiple possibilities and uncertainties relating 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 ongoing basis, Groupama has implemented numerous risk management processes, procedures, and controls. As with any control and monitoring system, this should not, however, be considered an absolute guarantee. Rather, it offers reasonable assurance that operations are secure and that results are managed. The risks presented below are arranged based on their significance and their category. This classification was based on the Solvency II – Pillar 1 indicators, supplemented by a qualitative expert analysis that takes into account: financial market forecasts (impacts of potential fluctuations on ❯ the Group’s solvency and results); the Group’s business activities (increase in certain risks, ❯ strategic arbitrage operations, regulatory changes, etc.); and the context of emerging risks. ❯ Property: 6.9%; ❯ Other: 1.8%. ❯ 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. In its Life insurance business activities, the Group is exposed to decreases in interest rates or continued low interest rates. This exposure diminishes the rate of return of its portfolios representing the Life insurance business activities and, if this persists, reduces its margins, particularly on annuity contracts, resulting in a reduction in solvency. As of 31 December 2021, a decrease in interest rates of 50 basis points would have had a negative impact of 23 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 13 basis points. As of 31 December 2021, the regulatory solvency ratio was 271%. Conversely, a sudden, significant, and persistent rise in interest rates would have a short-term negligible impact on the interest paid to policyholders, which could lead to redemptions on savings in euros, requiring some of the bond portfolios to be realised at 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 (2.8% of assets) and the moderate weight of assets lacking instant liquidity, such as property (6.9%) and unlisted equities (less than 2%), as of 31 December 2021 at the Group level. Although rates are on an upward trend, the risk of a sudden rise in interest rates is therefore considered low. Interest Rate Risk

5.1

THE GROUP’S MAIN RISKS

5.1.1

FINANCIAL MARKET RISKS

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/Liability Management within 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’s growth, 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 securities held by the Group and increase net income from the purchase of new, fixed-income securities. Conversely, a tightening of credit spreads would increase the value of fixed-income securities held and would reduce net income from the Group’s purchase of new fixed-income securities. As of 31 December 2021, the allocation of the Group’s asset portfolio (market value data, excluding unit-linked investments, minority stakes, and repurchase agreements) was as follows:

Bonds: 79.8%; ❯ Equities: 8.7%; ❯ Liquid assets: 2.8%; ❯

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Universal Registration Document 2021 - GROUPAMA ASSURANCES MUTUELLES