UNIVERSAL REGISTRATION DOCUMENT 2023

7 FINANCIAL STATEMENTS Combined financial statements and notes

Two types of discount rate curves are used depending on the type of flows to be discounted, the applicable accounting model, and the accounting aggregates to be impacted: current rate curve: constructed from market information as of the valuation date; ❯ yield curves at inception: constructed from historical data and allowing liabilities to be discounted as at the date of initial recognition. ❯ The yield curves used by Groupama are summarised in Note 19.5. The Group has chosen to apply the OCI (other comprehensive income) option (see paragraph 3.12.1.(h)) to all contract portfolios, which allows the effect of changes in discount rates to be recognised in other comprehensive income. (j) Non ‑ financial risk adjustment (“RA”) The non ‑ financial risk adjustment (“RA”) reflects the compensation required by Groupama for bearing the uncertainty around the amount and timing of cash flows generated by the non ‑ financial risk when Groupama’s insurance contracts are performed. IFRS 17 does not prescribe a specific approach to determine the non ‑ financial risk adjustment. Groupama uses a value ‑ at ‑ risk approach that reflects the level of confidence relative to the risk factors associated with the underwriting reserves. Value at risk is the maximum loss within a given confidence level. Groupama defines the RA according to a 70% final confidence level. The non ‑ financial risk adjustment reflects the benefits of risk diversification at the entity level, determined using a correlation matrix. Diversification between entities is also taken into account to reflect the fact that it is unlikely that the same risk could affect all the Group’s entities simultaneously. Groupama has chosen to break down the change in the adjustment for non ‑ financial risk between the insurance service result and insurance financial income or expenses. (k) OCI option and presentation of insurance financial income (loss) With regard to the presentation of the financial statements, the Group applies the OCI option to the presentation of the insurance financial income (loss), which makes it possible to break down the financial income or financial expense from insurance between net income and equity (which corresponds to the change in the carrying amount of groups of insurance contracts resulting from the effects of the time value of money, financial risk, and their variations – with the exception of adjustments to the contractual service margin of insurance contracts with direct participation features) for all portfolios of contracts. Under this option, for contracts without direct participation features, the difference between the valuation of liabilities with fixed rates (used to determine the discount effect in financial income or expenses) and their valuation at current rates is recognised by Groupama in OCI. For groups of contracts applying the PAA model, the breakdown between net income and Group’s IFRS equity is determined on the basis of discount rates fixed at the date of occurrence of the claims.

(h) VFA Model The variable fee approach is mandatory when the service provided to the policyholder depends on the benefits of the assets or liabilities underlying the contract. This concerns insurance contracts with direct participation features as well as financial contracts with discretionary participation. Contracts without direct participation as well as reinsurance contracts issued and held are excluded from this model. This model applies to savings/pension participation contracts, both for contracts denominated in euros and for unit ‑ linked contracts. The VFA model is derived from the general valuation model (“BBA”). It is also based on a building block approach. Liabilities also consist of fulfilment cash flows (“FCF”) and the CSM. At initial recognition, there is no difference between the BBA and the VFA (except for groups of contracts exempted from the annual cohort requirement). However, the methodology differs for subsequent assessments since, in the VFA model, the CSM absorbs: the changes in experience generated over the period by the underlying items; ❯ the consequences of changes in experience and financial assumptions; ❯ the effect of changes in financial risks not relating to the underlying items (such as options and guarantees). ❯ In order to record the CSM in profit or loss over the coverage period at an appropriate rate of recognition, consistent with the definition of investment services, the number of cover units is determined on the basis of the actuarial reserves of the policyholders, which are adjusted to take into account the expected return on the underlying items resulting from deterministic “real world” assumptions. This adjustment makes it possible to recognise in profit or loss (provided that a certain threshold is exceeded) a CSM amortisation surplus equal to Groupama’s share of the anticipated excess return over one year between an anticipated deterministic real ‑ world view and the stochastic risk ‑ neutral view. (i) Discount rate Future cash flows are discounted using “IFRS 17 yield curves”. The standard does not require a particular estimation technique to determine yield curves. In line with the provisions of IFRS 17, Groupama has defined a Group methodology for the calibration and production of yield curves. Groupama has chosen to adopt a bottom ‑ up approach to building the discount rate curve. The methodology consists in using a risk ‑ free yield curve based on an interbank swap rate curve and applying an adjustment reflecting the liquidity gap between interbank rate swaps and liabilities ( i.e. illiquidity premium, which takes into account the various asset classes (type of bonds, equities, property, etc.) making up the underlying assets and their weight, as well as the mismatch in terms of duration and volume between the underlying assets and the liabilities of the insurance contracts). This curve is extrapolated between the last liquid point and an ultimate forward rate reflecting expectations for real interest rates and long ‑ term inflation.

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Document d’Enregistrement Universel 2023 GROUPAMA ASSURANCES MUTUELLES