NATIXIS - 2018 Registration document and annual financial report

RISK FACTORS, RISK MANAGEMENT AND PILLAR III Risk management

The Company's risk limits are set out in the asset management agreement established with Ostrum. By collecting surety insurance premiums at the time of commitment, CEGC does not require funding. Neither does CEGC carry transformation risk: the investment portfolio is entirely backed by equity and technical reserves.

Market risk CEGC holds an investment portfolio of about €2.02 billion on its balance sheet as at December 31, 2018, hedging underwriting provisions. The portfolio is up 5.50% since the end of 2017. Market risk from the investment portfolio is limited by the Company’s investment choices.

31/12/2018

31/12/2017

Balance sheet value, net of

Balance sheet value, net of

3

provision % breakdown Mark to market

provision % breakdown Mark to market

(in millions of euros)

Equities

150

7.4%

144

137

7.2%

164

Bonds

1,451

71.8%

1,547

1,338

69.8%

1,476

Diversified

113 111 182

5.6% 5.5% 9.0% 0.6% 0.1%

112 111 179

131 124 169

6.8% 6.5% 8.8% 0.7% 0.2%

137 124 174

Cash

Real estate

FCPR Other

12

19

14

19

2

2

3

2

TOTAL

2,021

100%

2,114

1,915

100%

2,096

Strategy risks are monitored by the Board of Directors, supported by its Strategic Committee, which examines the strategies guiding Natixis’ activities at least once a year. The Board of Directors also approves strategic investment projects and any transactions, particularly acquisitions and disposals, that are likely to significantly affect Natixis’ results, the structure of its balance sheet or its risk profile. Senior Management is in charge of defining and steering Natixis’ strategy, with assistance from the Senior Management Committee. The membership of these various bodies is presented in Chapter 2 of the 2018 Natixis registration document. The Internal Rules of the Board of Directors, including the procedure for calling meetings, can be found in Chapter 2 paragraph 2.3.1, of the registration document. Climate risk 3.2.10.3 Pursuant to Article 173 of the energy transition act, as of the 2016 fiscal year Natixis is required to report on the risks linked to climate change and on its low-carbon strategy. The identification and management of risks linked to social and climate change are presented in Chapter 6 of 2018 Natixis registration document. Environmental and social risks 3.2.10.4 The identification and management of these risks are presented in Chapter 6 of 2018 Natixis registration document.

Reinsurance risk CEGC hedges its liability portfolio by implementing a reinsurance program tailored to its activities. For loan guarantees, reinsurance is used as a tool for managing regulatory capital by protecting guarantee beneficiaries in the event of an economic recession leading to a loss of up to 2% of outstanding guaranteed loans. In the Corporate segments, the program is used to protect CEGC’s capital by hedging against high-intensity risks. It has been calibrated to protect against three individual loss events (loss related to a counterparty or a group of counterparties) which could have a significant impact on the Corporate segment’s income statement. Any modification of the reinsurance program (reinsurers, pricing, structure) is subject to the validation of the Capital and Solvency Management Committee chaired by a director. Reinsurer default risk is governed by counterparty concentration and rating limits. CEGC’s reinsurance programs are underwritten by a broad panel of international reinsurers with a minimum rating of A on the S&P scale. Strategic risk 3.2.10.2 Strategy risks is defined as: the risk inherent to the strategy chosen; a or resulting from Natixis’ inability to implement its strategy. a

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Natixis Registration Document 2018