NATIXIS_REGISTRATION_DOCUMENT_2017

5 FINANCIAL DATA

Consolidated financial statements and notes

for credit insurance, claims reserves include an estimate of a claims reported but not settled at the reporting date. In addition to the amount of claims payable, a provision is set aside for unknown claims, calculated on a statistical basis in reference to the final amount of claims to be paid following settlement of risks and any debt recovery measures. Provisions for debt recovery procedures, representing estimatesof expected recoveries,are calculatedby applying a terminal recovery rate to all subscription periods not yet settled. Deferred profit-sharing The participationrate used to calculate deferred profit-sharingis determined based on payout ratios projected over the term of the medium-termplan and in line with the actual pay-outratio for the previousfiscal year. In the event of a deferred profit-sharing asset, a recoverability test is carriedout to verify that liquidityrequirementsarisingfrom an unfavorable economic environment do not force the sale of assets and generate unrealized losses. This recoverability test relies on projected future cash flows based on different economic assumptionsabout historical redemptionsand inflows (see Note 2.8) . Deferred taxes As a precaution,Natixisrecordsa net deferredtax asset linked to its ability to generate taxable income over a given period (10 yearsmaximum),while tax loss carry forwardsare deductible with no time limitation in France and the UK or over very long periods(20 yearsin the US for deficitsprior to January 1, 2018). To this end, Natixis prepares tax business plans based on the medium-termplans for the businesslines. Adjustmentsfor specialtax schemesare also implemented. Other provisions Provisions recognized in the consolidated balance sheet, other than those relating to financial instruments, employee benefits and insurance policies, mainly concern provisions for litigation, restructuring,fines and penalties. A provisionis raisedwhen it is likely that an outflowof resources embodying economic benefits will be required to settle an obligationarising from a past event, and when the amountof the obligation can be reliably estimated. In order to calculate this amount,Managementis requiredto assess the probabilityof the risk occurring. Future cash flows are discounted where the impactof discountingis material. Earnings/(loss) per share 5.24 Diluted earnings/(loss) per share corresponds to net earnings/(loss)for the period attributableto the Group, dividedby the weighted average number of shares, adjusted for the maximum impact resulting from the conversion of dilutive instrumentsinto ordinary shares. Stock options issued are taken into account in calculating diluted earnings/(loss)per share. The conversion of these instruments does not impact net income/(loss)used to calculatedilutedearnings/(loss)per share.

Value of cash-generating units (CGUs) All goodwill is assigned to a CGU so that it may be tested for impairment.The tests conductedby Natixis consist in comparing the carrying amount of each CGU (including goodwill) with its recoverable amount. Where the recoverable amount equals the value in use, it is determined by discounting annual free cash flows to infinity (see Note 2.5) . Use of the discountedcash flow methodinvolves: estimating future cash flows. Natixis has based these a estimates on forecasts included in its business units’ medium-termplans spanningfive years; projectingcash flows for the last year of the plan to perpetuity, a at a rate reflectingthe expectedannualgrowthrate; discountingcash flows at a specificrate for each CGU. a Fair value of loans and receivables recognized at amortized cost (excluding loans reclassified under the amendment to IAS 39 and IFRS 7) The fair value of loans not quoted on an active market is determined using the discounted cash flow method. The discountrate is basedon an assessmentof the rates used by the institution during the period for groups of loans with similar risk characteristics. Loans have been classified into groups with similar risk characteristicsbased on statistical research enabling factors having an impact on credit spreads to be identified. Natixis also relies on expert judgment to refine this segmentation. Employee benefits Natixis calls on independent actuaries to calculate its principal employee benefits. These commitments are determined using assumptionssuch as the salary growth rate, discount rates and rates of return on plan assets (see Note 11.2.3) . These discount rates and rates of return are based on observedmarket rates at the end of each calculation period (e.g. the yield curve on AA Corporate bonds for discount rates). When applied to long-term benefit obligations, these rates introduce uncertainty into the valuations. Insurance-related liabilities Insurance technical reserves are calculated using assumptions and estimatesthat may lead to adjustmentsin amountsreported over the subsequentperiod: for personal protection insurance, claims reserves are a calculatedby modelingclaimsexperience; for life insurance, underwriting reserves are computed based a on economic and financial assumptions, mortality and morbidity tables, and behavioral statistics, for example concerningsurrenders; for general insurance, technical reserves comprise provisions a for unearned premium income (calculated on an accrual basis and representing the portion of premiums issued during the period that relate to a period after the reporting date) and reserves for claims to be paid, corresponding to known and unknown claims that have occurred but not yet paid at the reportingdate;

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Natixis Registration Document 2017