NATIXIS_PILLAR_III_2017_EN

13 OTHER RISKS Strategy risk

Market risk CEGC holds an investment portfolio of about €1.92 billion on its balance sheet as at December 31, 2017, hedging underwriting provisions. The portfolio is up 13.62% since the end of 2016. In 2017 CEGC set up an investment program in the real estate segment (which has an allocation target of 10%). Market risk from the investment portfolio is limited by the Company's investment choices.

The company's risk limits are set out in the asset management agreement established with Natixis Asset Management. 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.

12.31.2017

 12.31.2016

Net balance sheet value of the provision % breakdown

Net balance sheet value of the provision % breakdown

Fair value

Fair value

(in millions of euros)

Equity Bonds

137

7.2%

164

130

7.7%

155

1,338

69.8%

1,476

1,244

73.5%

1,387

Diversified

131 124 169

6.8% 6.5% 8.8% 0.7% 0.2%

137 124 174

111 119

6.6% 7.0% 4.2% 1.0% 0.1%

115 119

Cash

Real estate

63 18

99 22

FCPR Other

14

19

3

2

1

1

TOTAL

1,915

100%

2,096

1,686

100%

1,899

Reinsurance risk CEGC hedges its liability portfolio by implementing a reinsurance program tailored to its activities. In loan guarantees, reinsurance is used as a way to manage regulatory capital by protecting guarantee beneficiaries in the event of an economic scenario giving rise 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 covering high-severity 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 corporate officer. 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.

Strategy risk 13.3

Strategy risks is defined as: the risk inherent to the strategy chosen; a

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 2017 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.

or resulting from Natixis’ inability to implement its strategy. a 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.

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NATIXIS Risk report Pillar III 2017