UNIVERSAL REGISTRATION DOCUMENT 2023

7 FINANCIAL STATEMENTS Combined financial statements and notes

3.1.2 Group risk management Several years ago, the Group implemented systematic studies on the exposure of the Group’s subsidiaries to market risks. Asset/Liability Management Asset/liability simulations permit an analysis of the behaviour of the liabilities in different interest ‑ rate environments, particularly the ability to meet the remuneration requirements for the policyholder. These simulations allow the Group to develop strategies designed to reduce the impact of contingencies on the financial markets on both the results and on the balance sheets. Interactions with redemption risk Redemption behaviours are sensitive to changes in interest rates: an increase in rates can lead to an increase in the policyholders’ expectation of revaluation and, if this expectation cannot be met, the sanction of early redemptions. In addition to the loss of income and an increase in payouts, the risk will be losses related to the disposal of assets at a loss (which could be the case for fixed ‑ rate bonds) in cash of insufficient cash. The objective of Asset/Liability Management is to optimise the policyholder’s satisfaction and the insurer’s risk using strategies that take into account the various reserves available (including cash) and bond management strategies coupled with hedging products. Interest rate risk related to the existence of guaranteed rates The constraints of guaranteed minimum interest rates constitute a risk for the insurer if rates fall, as the yield on the assets may be insufficient in terms of these constraints. These risks are handled at the regulatory level through specific risks. (a) (b) (c)

(d)

Interest rate hedges

3.1.3 All over ‑ the ‑ counter transactions are secured by a “collateralisation” system with the Group’s top ‑ tier banking counterparties. Interest rate risk sensitivity analysis Pursuant to IFRS 7, an analysis of accounting sensitivity was carried out as at 31 December 2023. This analysis applies to year ‑ end balance ‑ sheet postings that show accounting sensitivity to interest rate risk (insurance liabilities, bond investments, and financing debt in the form of bonds). INTEREST RATE RISK SENSITIVITY ANALYSIS The table below shows the impacts on the CSM, result, and equity of a sensitivity analysis conducted in the event of a rise or fall in interest rates of 50 basis points. Impacts are presented gross of tax. 3.1.3.1 Risk of rate increase The purpose of the hedges that are implemented is to partially hedge the portfolios against the risk of interest rate increases. This is made possible by converting fixed ‑ rate bonds into variable ‑ rate bonds (“payer swaps”). The strategy consists of transforming a fixed ‑ rate bond into a variable rate, either on a security already held or new investments, and has the objective of limiting the capital loss recognised because of an increase in interest rates in case of partial liquidation of the bond portfolio for the payment of benefits. These strategies aim to limit the impact of potential redemptions.

31.12.2023

CSM

Result

Equity

Increase

Decrease

Increase

Decrease

Increase

Decrease

(in millions of euros)

TOTAL

166

(292)

(16)

1

166

(328)

3.2 3.2.1

Equity market price risk Type of and exposure to equity risk

3.1.3.2

FINANCING DEBT INTEREST RATE RISK SENSITIVITY ANALYSIS

Subordinated loans posted to liabilities on the Group income statement may be posted to debt or shareholders’ equity under IFRS. In 2014, the Group issued perpetual bonds consisting of perpetual subordinated instruments (TSDI). The features of this issuance meet the criteria to allow the bond to be considered an equity instrument (see Note 15 – Shareholders’ equity). Consequently, a sensitivity analysis is not required. The principal features of the financial debt instruments analysed are described in Note 18 – Financing Debt. The Group’s subordinated debt is recognised at historical cost. In this respect, this balance sheet item is therefore not sensitive to potential changes in interest rates.

Exposure to equity markets allows the companies to capture the yield on these markets but also exposes them to two major types of risks: accounting reserving risk (reserve for long ‑ term impairment, reserve for contingent payment risks, reserves for financial contingencies); ❯ commercial risk brought about by the reserving risk insofar as policyholder compensation could be impacted by the aforementioned reserving. ❯

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Universal Registration Document 2023 GROUPAMA ASSURANCES MUTUELLES