NATIXIS_PILLAR_III_2017_EN

OTHER RISKS Risks related to insurance activities

equity risk: exposure is capped at less than 10% of the a portfolio and is concentrated in the euro zone, in connection with its core business. At December 31, 2017, listed equities represented 7.5% of the investment portfolio. These investments were subject to hedging for 30% of the invested portfolio through the purchase of put options on Eurostoxx indices. This hedging can be adjusted in line with investments and the amount of unrealized capital gains or losses on shares held; counterparty risk: the maximum exposure to any given a counterparty is set at 5% of assets under management, with exceptional exemptions for short-term exposures. More than 89% of the bonds are Investment Grade and therefore have a median rating equal to at least BBB-; liquidity risk; At December 31, 2017, 52% of the bond portfolio a had a maturity of less than three years. The vast majority of the portfolio is listed on OECD markets and carries a liquidity risk that is currently considered as low. Level 2 controls on compliance with Coface’s investment policy are also carried out.

In 2017 underwriting risk was managed effectively, reflected by a level of claims 26% of earned premiums. New committed risks on the balance sheet, particularly those on refinanced mortgage loans, made for a good risk profile. As part of the Solvency 2 supervisory regime, which came into effect on January 1, 2016, CEGC submitted an application to certify its internal assessment model for underwriting risks on mortgage guarantees for retail customers. The ACPR (French Prudential Supervisory Authority for the Banking and Insurance Sector) approved the model in March 2017. CEGC’s partial internal model therefore meets the specific requirement applicable to mortgage loan guarantors to improve the robustness of the French banking system for home loans. CEGC submitted the new annual quantitative statements required by the Solvency II regulations, accompanied by the qualitative and quantitative reports intended for the supervisor (RSR) and the public (SFCR). Underwriting risk Underwriting risk is the main risk incurred by CEGC. It is essentially a counterparty risk, as the commitments given by CEGC to beneficiaries of guarantees result in direct exposure to underwriters. These regulated commitments recorded on the liabilities side of the balance sheet amounted to €1.85 billion at December 31, 2017 (up 15.7% compared to the end of 2016). This increase was in line with fiscal year 2016, driven mainly by mortgage guarantees for individual customers.

CEGC 13.2.3

Compagnie Européenne de Garanties et Cautions is the Group’s multiple business line security and guarantee platform. It is exposed to underwriting risk, market risk and the risk of the reinsurers defaulting, as well as operational risk.

CEGC’S OUTSTANDINGS (IN MILLIONS OF EUROS) R

Change (December 2017 versus December 2016)

CEGC’s activities

December 2017

Individual customers Individual home builders

1,658

16.3% 17.6% 22.2% 38.1%

20 11 29 15 70 42

Property administrators - Realtors

Corporates

Real estate developers Professional customers

(16.7%)

7.7%

Social economy - Social housing

23.5%

Run-off activities

5

(37.5%)

TOTAL

1,849

15.7%

13

145

NATIXIS Risk report Pillar III 2017