UNIVERSAL REGISTRATION DOCUMENT 2023

7 FINANCIAL STATEMENTS Combined financial statements and notes

Note 2

Goodwill

2.1 Goodwill

31.12.2022

31.12.2023

Foreign exchange adjustment

(in millions of euros)

Gross value

Impairment

Net value

Net value

OPENING VALUE

2,645

(778)

(232)

1,635

1,648

Newly consolidated entities

0

Eliminations from the scope of consolidation

0

France

0

Central and Eastern European countries

7

7

(13)

Italy

0

Other changes during the fiscal year

7

7

(13)

CLOSING VALUE

2,645

(778)

(225)

1,641

1,635

The grouping within a single cash ‑ generating unit for all countries of Central and Eastern Europe is explained in particular by centralised management bancassurance agreements. Changes during the fiscal year The only changes that affected goodwill on the balance sheet were foreign exchange adjustment differences. Impairment test Goodwill is tested for impairment at least once a year. This test is carried out at the level of the cash ‑ generating unit. As for those insurance entities acquired during the fiscal year where no index on loss in value exists, no impairment test is carried out. Nevertheless, an internal control is carried out on a simplified basis to demonstrate the matching of the acquisition price. Each cash ‑ generating unit provides its forecasts of underwriting and financial income (rate of return). Underwriting assumptions are determined based on estimated growth in premium income and a combined ratio target for the plan period. These assumptions are adapted on the basis of past experience and external constraints imposed by the local market (competition, regulation, market shares, etc.). The financial assumptions relating to discount rates are set by the Group and are used to determine discounted cash flows. The benchmark value in use applied to justify impairment tests corresponds to the current value of future cash flows to be generated by this cash ‑ generating unit. As a general rule, the flows used correspond to: an explicit period based on the Group’s operational strategy planning in the early years. This is subject to a discussion process between local management and the Group; ❯ beyond the explicit horizon, the cash flow column is completed by a terminal value. This terminal value is based on long ‑ term growth assumptions applied to an updated projection of normative cash flows; ❯

In mature countries, the explicit life insurance period is generally 10 years and 6 years for non ‑ life insurance. It can be extended for longer (10 years). In effect, this period is necessary for the market to attain a sufficient level of maturity for the normative cash flow to be representative of recurring long ‑ term performance. The discount rates are set based on risk ‑ free rates for each country, plus a risk premium specific to the insurance business itself. For the eurozone, the discount rate is 8.5% (compared with 7.5% as 31 December 2022). For emerging countries, the yield curve used takes into account a higher explicit risk premium and then incorporates future changes in the country’s macroeconomic situation and the expected higher level of maturity in these economies. This is particularly the case for European Union countries that are assumed to have a strong possibility of joining the eurozone. In order to take into account changes in the economic environment, the discount rates were revised upwards compared with the previous year for Italy (+1.5%), Hungary (+3.5%), Romania (+3.0%), and Bulgaria (+2.5%). The long ‑ term growth rates used for valuation beyond the explicit period depend on the maturity of the markets and are based on indicators derived from strategic studies. The rates used for Western and Southern European mature markets range from 2% to 4%, up from 0.5% to 1%. Ex ‑ post comparative analyses of business plan data and actual data for the main income statement totals (combined ratio, underwriting income etc.) have been carried out and have had no impact on the impairment tests. Sensitivity tests have been carried out on the value in use applied, with the following change assumptions: the solvency margin integrated into the business plans is valued according to the prudential rules established by the Solvency 2 directive for subsidiaries in a country subject to this regulation. ❯ rise of 100 basis points in the discount rate; and ❯ decline of 50 basis points in the long ‑ term rate of growth. ❯

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Document d’Enregistrement Universel 2023 GROUPAMA ASSURANCES MUTUELLES