Groupama // Universal Registration Document 2022

7

FINANCIAL STATEMENTS Combined financial statements and notes

Note 2

Goodwill

2.1 Goodwill

31.12.2022

31.12.2021

Foreign exchange adjustment

Gross value

Impairment

Net value

Net value

(in millions of euros)

OPENING VALUE

2,907

(925)

(334)

1,648

1,654

Newly consolidated entities Eliminations from the scope of consolidation France

(2)

Central and Eastern European countries

(13)

(13)

(4)

Turkey

(262)

147

116

Italy Other changes during the fiscal year

(262)

147

103

(13)

(6)

CLOSING VALUE

2,645

(778)

(232)

1,635

1,648

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 Changes in goodwill on the balance sheet correspond to changes in foreign exchange adjustments and the reclassification of goodwill of Turkish subsidiaries to discontinued operations in accordance with IFRS 5 (see note 3). As a reminder, this goodwill was fully written down. 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 audit is conducted on a simplified basis so as to link in to the purchase 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; ❯

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 7.5%. 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 the new economic environment characterised by the increase in rates, the discount rates of certain cash ‑ generating units were revised upwards compared with the previous fiscal year, for Greece (+2.5%) and Italy (+1.5%). 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 are within the 1% to 3% bracket. In emerging markets with a low insurance penetration level this rate may be up to 3.5%. These rates were lowered on the Greece and Central and Eastern European Countries CGUs by 0.5 to 1 point to be consistent 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. ❯ 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; ❯

203

Universal Registration Document 2022 - GROUPAMA ASSURANCES MUTUELLES