NATIXIS_REGISTRATION_DOCUMENT_2017

3 RISKS AND CAPITAL ADEQUACY Other risks

counterparty risk: the maximum exposure to any given a counterpartyis set at 5% of assets under management,with exceptional exemptions for short-term exposures. More than 89% of the bonds are InvestmentGrade and thereforehave a medianrating equalto at least BBB-; liquidityrisk; At December 31,2017, 52%of the bond portfolio a had a maturityof less than three years. The vast majorityof the portfolio is listed on OECD markets and carries a liquidity risk that is currentlyconsideredas low. Level 2 controls on compliancewith Coface’s investmentpolicy are also carriedout. CEGC CompagnieEuropéennede Garantieset 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 reinsurersdefaulting,as well as operationalrisk. In 2017 underwritingrisk was managed effectively,reflected by a level of claims 26%of earnedpremiums.New committedrisks on the balance sheet, particularlythose on refinancedmortgage 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 robustnessof the Frenchbankingsystemfor 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 beneficiariesof guaranteesresult in direct exposure to underwriters. These regulated commitments recorded on the liabilities side of the balance sheet amounted to €1.85 billionat December 31,2017 (up 15.7% compared to the end of 2016). This increasewas in line with fiscal year 2016, driven mainly by mortgageguaranteesfor individualcustomers.

CEGC’S OUTSTANDINGS (IN MILLIONS OF EUROS) R

Change December 2017 versus December 2016

CEGC’s activities

December 2017

Individual customers

1,658

16.3% 17.6% 22.2% 38.1%

Individual home builders

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%

Market risk CEGC holds an investmentportfolio of about €1.92 billionon 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 investmentchoices.

The Company'srisk 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 entirelybackedby equity and technicalreserves.

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Natixis Registration Document 2017