UNIVERSAL REGISTRATION DOCUMENT 2023

7 FINANCIAL STATEMENTS Combined financial statements and notes

An amount of the contractual service margin is recognised in profit or loss for the portion representing the services provided during the period. This allocation is made on the basis of units of cover, the number of which corresponds to the volume of services provided under the insurance contracts. Given the diversity of insurance contracts, Groupama exercises its judgement to define the units of cover, taking into account both the level of cover defined in the contract and the expected duration of cover of the contract. For example, for its personal protection contracts, Groupama uses the expected annuity capital to determine the amount of service transferred to policyholders over the period. Liabilities for incurred claims (“LIC”) After the initial recognition of a group of insurance contracts, the group’s carrying amount at the end of each period is the sum of the LRC, which relates to the remaining coverage, and the LIC, which corresponds to FCF for services already provided to the group. The LIC reflects Groupama’s obligation to investigate and settle valid claims in respect of insured events that have already occurred, including those that have not been reported, and other expenses incurred in respect of insurance, as well as to settle other services under insurance contracts already provided, investment components, or other amounts that are not related to the provision of services under insurance contracts and that do not form part of the liability for remaining coverage. (g) PAA Model The Premium Allocation Approach (PAA) model is a simplification of the general model allowing a company to measure the liabilities for remaining coverage (“LRC”), insofar as this simplified method does not differ materially from the one that would be produced by applying the general model or if the coverage period of each of the group’s contracts does not exceed one year. The PAA is thus used for most property and casualty insurance contracts and health insurance contracts. In this model, the LRC corresponds to the amount of premiums initially received minus acquisition costs and amounts already recognised on a pro rata basis in insurance income at the reporting date. However, the BBA remains applicable for the measurement of liabilities for incurred claims. No CSM is calculated. Cash flows relating to attributable acquisition costs may be capitalised or expensed. This choice is made at the contract portfolio level. If they are capitalised, they are amortised over the hedging period. The general model remains applicable for the measurement of the LIC. The accretion expense is recorded under insurance financial income or expenses as in the general model.

Future cash flows are included in the boundary of an existing contract until the date on which Groupama can no longer require the holder of the insurance contract to pay the premium or is no longer obliged to provide services to the holder ( i.e. , practical possibility of revising the rate or covers). Beyond this boundary, future cash flows belong to a future contract and should not be taken into account when measuring liabilities. Estimates of future cash flows include all reasonable and justifiable information available on the amount, timing, and uncertainty of future cash flows. Groupama must estimate the expected value ( i.e. , the probability ‑ weighted average) of all possible results. Attributable expenses consist of expenses that are directly attributable to particular groups of contracts (such as commissions, certain claims handling costs, or costs relating to policyholder investment activities), as well as expenses that are not directly attributable to a particular group of contracts but that, such as fixed and variable general expenses, are allocated to the groups of contracts using systematic, rational methods applied uniformly to all costs with similar characteristics. The difference between the expected attributable costs and those observed (with the exception of acquisition costs) is included in the experience adjustments. Costs not attributable to contracts are not included in future cash flow projections and are therefore recognised in profit or loss. Contractual service margin (“CSM”) The contractual service margin of a group of insurance contracts is the unearned profit that the entity will recognise in profit or loss as it provides services to the policyholders. Initially, the CSM is the amount that offsets FCF, minus derecognition of insurance acquisition cash flows. In other words, it corresponds to the value of Groupama’s rights that exceeds the value of its obligations resulting from the insurance contract. The CSM cannot be negative. Consequently, if expected cash outflows exceed expected cash inflows, the group of contracts is onerous, and the loss, which corresponds to an expected net cash outflow, is immediately recognised in the income statement. This loss component is monitored outside the accounting system until the contract is derecognised or becomes profitable again. At the end of each subsequent period, Groupama remeasures the liabilities for remaining coverage (“LRC”), which includes FCF relating to future services and the CSM (or the loss component) of the group of contracts. CSM is thus adjusted for changes in future cash flows generated by changes in experience assumptions (mortality, morbidity, longevity, surrenders, costs, future payments, etc.). Negative changes in future cash flows that are greater than the remaining margin are immediately recognized in profit or loss. Interest is also capitalised on the CSM using the fixed rate determined on initial recognition of the group of insurance contracts valued using BBA ( i.e. , the discount rate initially used to calculate the present value of estimated future cash flows).

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Universal Registration Document 2023 GROUPAMA ASSURANCES MUTUELLES