Groupama // Universal Registration Document 2022

7

FINANCIAL STATEMENTS Combined financial statements and notes

31.12.2022

31.12.2021

Foreign exchange risk

Foreign exchange risk

+10%

-10%

+10%

-10%

(in millions of euros)

Impact on the revaluation reserve

70

(70)

80

(80)

Equities

26

(26)

22

(22)

Equity mutual funds

1

(1)

1

(1)

Bonds

42

(42)

56

(56)

Fixed ‑ income mutual funds

1

(1)

1

(1)

Derivative instruments and embedded derivatives Impact on net income

3

(3)

10

(10)

Equities

1

(1)

7

(7)

Equity mutual funds

1

(1)

Cash mutual funds

1

(1)

1

(1)

Bonds Fixed ‑ income mutual funds

1

(1)

1

(1)

Derivative instruments and embedded derivatives

Hedging effects are not taken into account when calculating sensitivity. Consequently, the numbers listed above represent maximum risk and the actual impact reported in the Group’s financial statements is considerably lower.

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 Credit risk The breakdown of the Group bond portfolio by rating and by issuer quality is presented in Notes 7.8.3 and 7.8.4 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.

3.5 3.5.1

Property risk Type of and exposure to property risk

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; ❯ accounting reserving risk if the realisable value (sale price net of disposal fees or utility value) is less than the net book value; ❯ commercial risk brought about by the reserving risk insofar as policyholder compensation could be impacted by the aforementioned reserving. ❯ The proportion of property assets out of total financial investments (including operating properties) was 4.02% by market value. Properties can be held directly or within OPCI (collective property investment schemes) or SCI (property holding companies) or leased when eligible under IFRS 16. Property assets can be split into: investment properties, accounting for 2.91% of all financial investments; ❯ operating properties, accounting for 1.11% of all financial investments. ❯

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Universal Registration Document 2022 - GROUPAMA ASSURANCES MUTUELLES