NATIXIS - Universal registration document and financial report 2019

5 FINANCIAL DATA

Consolidated financial statements and notes

On initial recognition, loans and receivables are measured at fair value (i.e. face value) plus transaction costs and less any discount and transaction revenues. In the case of loans, transaction costs include fees and any expenses directly attributable to setting up the loan. After initial recognition, loans and receivables are measured at amortized cost using the effective interest rate method and tested for impairment at each reporting date. Where necessary, an impairment charge is recorded in income under “Provision for credit losses”. When loans are granted at below-market interest rates, a discount corresponding to the difference between the face value of the loan and the sum of future cash flows discounted at the market interest rate is deducted from the face value of the loan. The market rate of interest is the rate applied by the vast majority of financial institutions at any given time for instruments and counterparties with similar characteristics. Available-for-sale financial assets Available-for-sale financial assets include non-derivative financial assets that are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss. Securities classified in this category are initially recognized at their market value. At the reporting date, they are remeasured at their market value determined based on the market price for listed instruments. Gains or losses arising from changes in the fair value (excluding revenues) of available-for-sale financial assets that are not hedged are recognized directly in equity under “Gains and losses recorded directly in equity”. Accrued or earned income is recognized in the income statement under “Net income from insurance activities” using the effective interest rate method. Available-for-sale financial assets are tested for impairment at each reporting date. Where there is objective evidence that an asset is impaired and a decline in the fair value has already been recognized directly in equity, the cumulative impairment loss is removed from equity and recognized in income under “Provision for credit losses” (debt instruments) or “Net income from insurance activities” (equity instruments). Provisions for impairment of financial 9.2.2 assets At the reporting date, the relevant entities assess whether there is any objective evidence of individual or collective impairment for loans and receivables. To identify evidence of impairment, they analyze trends in a number of objective criteria, but also rely on the judgment of its own expert teams. Similarly, they may use expert judgment to establish the likely timing of recoveries.

Available-for-sale equity instruments The impairment criteria for non-amortizing securities categorized as available-for-sale assets are as follows: automatic impairment if there are unrealized losses of more than V 50% at the reporting date; automatic impairment if there are unrealized losses for a period of V more than 24 consecutive months; case-by-case analysis of securities presenting unrealized losses of V more than 30% at the reporting date; case-by-case analysis of securities presenting unrealized losses V for more than six consecutive months. Identified securities give rise to an impairment charge based on their total carrying amount so that their post-impairment value reflects the recoverable value. The impairment charge is never reversed. In accordance with IFRIC 10, an additional impairment charge will be recognized on investment securities for which a provision has already been made if its value has declined further at the reporting date, regardless of threshold or duration requirements. 9.2.3 The general principles of fair value of financial instruments are the same as those presented in Note 6.6. Fair value of financial instruments Insurance transactions are recognized before reinsurance transfers. Reinsurance transfers are recognized in accordance with the terms of the different reinsurance treaties. Acceptances Reinsurance acceptance policies are recognized as insurance policies. Guarantees given or received as part of these transactions are recognized on the balance sheet (cash deposits) or off-balance sheet (securities pledged or received as collateral). No Natixis reinsurance policies fall under the scope of IAS 39. 9.2.5 Policies managed by the insurance subsidiaries of the Coface and Natixis Assurances sub-groups meet the definitions of insurance policies and investment contracts with a discretionary participation feature set out in IFRS 4. Accordingly, they result in the recognition of technical reserves in liabilities. These reserves are measured in accordance with French GAAP pending the entry into force of IFRS 17 dealing with technical liabilities of insurance companies. Technical reserves for insurance policies meet the commitments of insurance companies with regard to policyholders and contract beneficiaries. In accordance with IFRS 4, insurance technical reserves are calculated using methods stipulated by local regulations. A liability adequacy test is carried out in order to ensure that the insurance liabilities as presented in the consolidated financial statements are sufficient to cover future cash flows estimated at that date. The test is based on a stochastic or deterministic valuation model of discounted future cash flows. Technical reserves for life-insurance policies are primarily composed of mathematical reserves corresponding to the surrender value of the contract. Liabilities related to insurance policies Reinsurance transactions 9.2.4 Transfers

Assets measured at amortized cost and available-for-sale debt instruments

A provision for impairment is set aside as soon as there is reason to believe the issuer may not be able to meet its commitments regarding the payment of principal and interest, such as a default on interest or principal payments. Securities in this category are determined on a case-by-case basis at each reporting date after the portfolios are reviewed.

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NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019