NATIXIS - Universal registration document and financial report 2019

5 FINANCIAL DATA

Consolidated financial statements and notes

for personal protection insurance, claims reserves are calculated V by modeling claims experience; for life insurance, underwriting reserves are computed based on V economic and financial assumptions, mortality and morbidity tables, and behavioral statistics, for example concerning surrenders; for Non-Life Insurance, technical reserves comprise provisions for V 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 reporting date; for credit insurance, claims reserves include an estimate of claims V 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 estimates of expected recoveries, are calculated by applying a terminal recovery rate to all subscription periods not yet settled. Deferred profit-sharing The participation rate used to calculate deferred profit-sharing is determined based on payout ratios projected over the term of the medium-term plan and in line with the actual pay-out ratio for the previous fiscal year. In the event of a deferred profit-sharing asset, a recoverability test is carried out to verify that liquidity requirements arising from 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 various economic assumptions about historical redemptions and inflows (see Note 9.2.5) . Deferred taxes As a precaution, Natixis records a net deferred tax asset linked to its ability to generate taxable income over a given period (10 years maximum), while tax loss carry forwards are deductible with no time limitation in France and the UK or over very long periods (20 years in the US for tax losses prior to January 1, 2018). To this end, Natixis prepares tax business plans based on the medium-term plans for the business lines. Adjustments for special tax schemes are 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 provision is raised when it is likely that an outflow of resources embodying economic benefits will be required to settle an obligation arising from a past event, and when the amount of the obligation can be reliably estimated. In order to calculate this amount, Natixis is required to assess the probability of the risk occurring. Future cash flows are discounted where the impact of discounting is material.

Impairments for expected credit losses The impairment model for expected credit losses is based on parameters and assumptions that affect provisions and value adjustments for losses. These parameters and assumptions are based on current and/or historical data, which also include reasonable and justifiable forecasts such as the estimating and weighting of future economic scenarios. Natixis also considers the opinions of its experts when estimating and applying these parameters and assumptions. Value of cash-generating units (CGUs) All goodwill is assigned to a CGU so that it may be tested for impairment. The tests conducted by Natixis consist in comparing the carrying amount of each CGU (including goodwill) with its recoverable value. If the recoverable value is the same as the value in use, it is determined by discounting the annual free cash flows to infinity (see Note 3.5) . Use of the discounted cash flow method involves: estimating future cash flows. Natixis has based these estimates V on forecasts included in its business units’ medium-term plans spanning five years; projecting cash flows for the last year of the plan to perpetuity, V at a rate reflecting the expected annual growth rate; discounting cash flows at a specific rate for each CGU. V The fair value of loans not quoted on an active market is determined using the discounted cash flow method. The discount rate is based on an assessment of 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 characteristics based on statistical research enabling factors having an impact on credit spreads to be identified. Natixis also relies on expert judgment to refine this segmentation. Lease terms In application of IFRS 16, Natixis uses its own expert judgment when estimating the lease terms to be applied for the recognition of rights of use and lease liabilities. Employee benefits Natixis calls on independent actuaries to calculate its principal employee benefits. These commitments are determined using assumptions such as the salary growth rate, discount rates and rates of return on plan assets (see Note 12.2.3) . These discount rates and rates of return are based on observed market 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. Liabilities related to insurance policies Insurance technical reserves are calculated using assumptions and estimates that may lead to adjustments in amounts reported over the subsequent period: Fair value of loans and receivables at amortized cost

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NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019