NATIXIS - 2018 Registration document and annual financial report

5 FINANCIAL DATA

Consolidated financial statements and notes

When loans are granted at below-market interest rates, a discount corresponding to the difference between the face value of the loan and the sum of future cash flows discounted at the market interest rate is deducted from the face value of the loan. The market rate of interest is the rate applied by the vast majority of financial institutions at any given time for instruments and counterparties with similar characteristics. Available-for-sale financial assets Available-for-sale financial assets include non-derivative financial assets that are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss. Securities classified in this category are initially recognized at their market value. At the reporting date, they are remeasured at their market value determined based on the market price for listed instruments. Gains or losses arising from changes in the fair value (excluding revenues) of available-for-sale financial assets that are not hedged are recognized directly in equity under “Gains and losses recorded directly in equity”. Accrued or earned income is recognized in the income statement under “Net income from insurance activities” using the effective interest rate method. Available-for-sale financial assets are tested for impairment at each reporting date. Where there is objective evidence that an asset is impaired and a decline in the fair value has already been recognized directly in equity, the cumulative impairment loss is removed from equity and taken to income under “Provision for credit losses” (debt instruments) or “Net income from insurance activities” (equity instruments). assets At the reporting date, the relevant entities assess whether there is any objective evidence of individual or collective impairment for loans and receivables. To identify evidence of impairment, they analyze trends in a number of objective criteria, but also rely on the judgment of its own expert teams. Similarly, they may use expert judgment to establish the likely timing of recoveries. Assets measured at amortized cost and available-for-sale debt instruments A provision for impairment is set aside as soon as there is reason to believe the issuer may not be able to meet its commitments regarding the payment of principal and interest, such as a default on interest or principal payments. Securities in this category are determined on a case-by-case basis at each reporting date after the portfolios are reviewed. Available-for-sale equity instruments The impairment criteria for non-amortizing securities categorized as available-for-sale assets are as follows: automatic impairment if there are unrealized losses of more a than 50% at the reporting date; automatic impairment if there are unrealized losses for a period a of more than 24 consecutive months; case-by-case analysis of securities presenting unrealized losses a of more than 30% at the reporting date; case-by-case analysis of securities presenting unrealized losses a for more than six consecutive months. Provisions for impairments of financial 9.2.2

Identified securities give rise to an impairment charge based on their total carrying amount so that their post-impairment value reflects the recoverable value. The impairment charge is never reversed. In accordance with IFRIC 10, an additional impairment charge will be recognized on investment securities for which a provision has already been made if its value has declined further at the reporting date, regardless of threshold or duration requirements.

9.2.3

Fair value of financial instruments

The general principles of fair value of financial instruments are the same as those presented in Note 6.6.

9.2.4 Transfers

Reinsurance transactions

Insurance transactions are recognized before reinsurance transfers. Reinsurance transfers are recognized in accordance with the terms of the different reinsurance treaties. Acceptances Reinsurance acceptance policies are recognized as insurance policies. Guarantees given or received as part of these transactions are recognized on the balance sheet (cash deposits) or off-balance sheet (securities pledged or received as collateral). No Natixis reinsurance policies fall under the scope of IAS 39. 9.2.5 Policies managed by the insurance subsidiaries of the Coface, Compagnie Européenne de Garanties et Cautions (CEGC) and Natixis Assurances sub-groups meet the definitions of insurance policies and investment contracts with a discretionary participation feature set out in IFRS 4. Accordingly, they result in the recognition of technical reserves in liabilities. These reserves are measured in accordance with French GAAP pending the entry into force of IFRS 17 dealing with technical liabilities of insurance companies. Technical reserves for insurance policies meet the commitments of insurance companies with regard to policyholders and contract beneficiaries. In accordance with IFRS 4, insurance technical reserves are calculated using methods stipulated by local regulations. A liability adequacy test is carried out in order to ensure that the insurance liabilities as presented in the consolidated financial statements are sufficient to cover future cash flows estimated at that date. The test is based on a stochastic or deterministic valuation model of discounted future cash flows. Technical reserves for life-insurance policies are primarily composed of mathematical reserves corresponding to the surrender value of the contract. Insurance offered primarily covers death, disability, work disability, dependency, damage to persons or property, health, legal protection and financial loss. Related technical reserves are calculated using specialized tables (life, experience and Bureau Commun des Assurances Collectives/BCAC tables). Insurance-related liabilities

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Natixis Registration Document 2018