UNIVERSAL REGISTRATION DOCUMENT 2023

7 FINANCIAL STATEMENTS Combined financial statements and notes

3.5.2 Group risk management Property assets are managed by the Group within a framework of internal constraints with a limit setting the maximum permissible exposure to property risk. These limits are set for each insurance entity and at Group level. Any exceeding of limits is handled by the appropriate Risk Committees according to whether it occurred in an entity or at Group level. Within the constraints system and concerning investment risk especially, the Property Commitment Committee decides on the property budget as a whole and on acquisition, restructuring, and development works projects beyond predefined amounts. Sustainability risk on financial assets Since 2022, Groupama has had a sustainable investing charter, which is updated annually. Sustainable investing is defined as integrating environmental, social/societal and governance (ESG) factors into investment processes to help manage financial risks and finance transitions. The challenge is therefore twofold: investment properties, accounting for 2.59% of all financial investments; ❯ operating properties, accounting for 1.11% of all financial investments. ❯ taking into account sustainability risks, i.e. risks related to ESG factors, in particular climate factors that may affect the value of or return on financial assets; ❯ managing the negative impacts linked to investments and promoting the positive impacts of financial management on sustainability factors, in particular by contributing to the fight against global warming and contributing to the financing of the three major transitions (demographic, digital, and ecological). ❯ 3.6 The proportion of property assets out of total financial investments (including operating properties) was 3.70% by market value. Properties can be held directly or leased when eligible under IFRS 16. Property assets can be split into: commercial risk brought about by the reserving risk insofar as policyholder compensation could be impacted by the aforementioned reserving. ❯ To date, this sustainable investment strategy is more focused on climate risk and is based on four pillars: asset management fully incorporating ESG criteria; ❯ an exclusion policy to address the highest sustainability risks and eliminate the most harmful financing; ❯ a policy of shareholder engagement that contributes to, among other things, decarbonising our portfolios and constantly improving corporate practices; ❯ investments to finance transitions. ❯ accounting reserving risk if the realisable value (sale price net of disposal fees or utility value) is less than the net carrying amount; ❯

3.3.2 Managing currency risk Foreign exchange risk is hedged mainly through currency swaps and forward contracts. The documentation is updated each time the financial statements are closed. Some hedges qualify as hedges under IFRS, in particular the exposure to the Hungarian forint arising from the Group’s stake in OTP Bank. Credit risk The breakdown of the Group bond portfolio by issuer type and by rating is presented in Notes 8.6.3 and 8.6.4 to the annual financial statements. The Group manages credit risk under certain internal constraints. The main objective of these constraints is to limit the concentration of issues according to several criteria (country, issuer, ratings, subordinated issues). These limits are observed by each insurance entity and at the Group level. Any exceeding of limits is handled by the appropriate Risk Committees according to whether it occurred in an entity or at Group level. Spread hedges Spread widening risk A hedging strategy was tested during a pilot operation intended to protect the value of a bond against the risk of widening of its spread. The strategy involved fixing the bond’s spread to one year using a dedicated FFI. At the end of the hedge (one year renewable), a finalising balancing payment was paid to offset the gain on the value of the bond hedged for the variation of its spread. However, in view of market conditions, this hedge has not been renewed since 2016 but remains an option that the Group can activate if necessary. All over ‑ the ‑ counter transactions are secured by a “collateralisation” system with the Group’s top ‑ tier banking counterparties. Managing counterparty risk Internal procedures stipulate that any negotiated contract is systematically covered by guarantee agreements with the banking counterparties in question. This systematic collateralisation of the hedging transactions significantly reduces the counterparty risk related to these over ‑ the ‑ counter transactions. 3.4

Property risk Type of and exposure to property risk

3.5 3.5.1

Exposure to property markets allows companies to capture the yield on these markets (investment properties) and use the premises for operational purposes (operating properties) but also exposes them to two major types of risk: investment risk brought about by property restructuring operations; ❯

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Universal Registration Document 2023 GROUPAMA ASSURANCES MUTUELLES