CNP Assurances — Audit Report / Information 2017

May 2, 2018

PRESS RELEASE

Paris, 2 May 2018

CNP Assurances publishes its solo and group SFCRs at 31 December 2017

CNP Assurances has today published its Solvency and Financial Condition Reports (SFCRs) in French, as required by the regulations. These 2017 reports were approved by CNP Assurances' Board of Directors at its meeting on 27 April 2018. The English-language versions of these reports will soon be available online.

The SFCR is a narrative report intended for public disclosure that insurance undertakings have been required to prepare annually since 2016 in application of the Solvency II directive. Two reports have been prepared:

• a group SFCR providing consolidated information for CNP Assurances SA and its main French and international subsidiaries
• a solo SFCR providing information for CNP Assurances SA only, without consolidating the operations of its subsidiaries

KEY INFORMATION

• CNP Assurances has chosen to measure its solvency in a transparent manner by applying, as from 1 January 2016, the Standard Formula recommended by the insurance supervisor, without measuring any equivalent capital requirement and without applying any transitional measures except for the grandfathering of subordinated debt
• The Group and all of its subsidiaries enjoy a comfortable solvency position, as evidenced by their SCR coverage ratios, despite last year's low interest rates in Europe
• At 31 December 2017, the Group had €26.1 billion of eligible own funds for SCR calculations, of which 81% consists of Tier 1 capital. In addition, the main subsidiaries have a further €3.3 billion of surplus own funds that are not recognised by the supervisor at Group level
• The group SCR amounted to €13.7 billion at 31 December 2017, of which 54% for market risks and 34% for underwriting risks
• Risk diversification benefits amounted to €5.4 billion or 26% of the SCR, reflecting the Group's excellent diversification in terms of both geographic markets (Europe and Latin America) and product markets (savings/pensions and personal risk/protection)
• The group SCR coverage ratio stood at 190% at 31 December 2017
• The Company's solo SCR coverage ratio at the same date was 201%

1. SCR coverage ratio

The SCR coverage ratio is the estimated amount of own funds needed to absorb significant losses and provides reasonable assurance to policyholders and beneficiaries that payments will be made as they fall due.

CNP Assurances has chosen to calculate its SCR coverage ratio using the Standard Formula without measuring any equivalent capital requirement and without applying transitional measures, except for grandfathering¹ of subordinated debt. Solvency II is applied to all of the subsidiaries included in the Solvency II scope of consolidation, including those in Brazil, so that risks are measured in the same way throughout the Group.

Country	Scope	Eligible own funds for SCR calculations (€bn)	SCR (€bn)	SCR coverage ratio at 31 Dec. 2017	SCR coverage ratio at 31 Dec. 2016
Group	CNP Assurances Group	26.1	13.7	190%	177%
France	CNP Assurances SA	27.1	13.5	201%	188%
Brazil	Caixa Seguradora2	2.7	1.0	266%	294%
Italy	CNP UniCredit Vita	0.8	0.4	234%	239%
Ireland	CNP Santander Insurance Life	0.3	0.1	220%	198%
Ireland	CNP Santander Insurance Europe	0.2	0.1	133%	131%

The SCR coverage ratios of the main Group subsidiaries were as follows at 31 December 2017:

The group SCR coverage ratio is calculated on the basis of 100% of each subsidiary's SCR even for subsidiaries that are not wholly owned (for example, Caixa Seguradora in Brazil is 51.75%-owned, CNP UniCredit Vita in Italy is 57.5%-owned and CNP Santander in Ireland is 51.0%-owned). It does not include the surplus own funds of the main subsidiaries over and above their contribution to the group SCR, which are not recognised by the supervisor at Group level due to the unfungibility rules. At 31 December 2017, these surplus own funds represented €3.3 billion including non-controlling interests³ or 24% of the group SCR. The effect of excluding these funds is to treat the subsidiaries as having a 100% SCR coverage ratio for the purpose of calculating the group ratio. From a financial standpoint, however, CNP Assurances nonetheless receives regular dividends from its insurance subsidiaries, totalling €282 million in 2017.

CNP Assurances' solo SCR coverage ratio at 31 December 2017 represented 201%. This was even better than the Group's 190% ratio, reflecting the fact that CNP Assurances SA's eligible own funds are not affected by the unfungibility rules unlike those of the Group. The SCR coverage ratios of the main Group subsidiaries were also comfortably above 100% at 31 December 2017.

As part of the implementation of Solvency II, the CNP Assurances Group has decided to reduce the number of insurance companies operating in France in order to simplify the Group's governance, optimise capital requirements and reduce recurring costs. In 2017, this process was continued with the merger of Préviposte and ITV into CNP Assurances SA⁴ and the merger of Garantie Assistance into Filassistance. These operations were preceded in 2015 by the merger of CNP IAM into CNP Assurances SA.

¹ Subordinated notes issued before Solvency II came into effect are included in Tier 1 capital (undated notes) and Tier 2 capital (dated notes) for a period of ten years ending on 1 January 2026.

² CNP Assurances applies Solvency II to Caixa Seguradora, without using the Brazilian solvency regulation, solely for the purpose of Group solvency calculations. Caixa Seguradora's SCR coverage ratio has no regulatory impact for the Brazilian insurance undertakings.

³ Of which €2.1 billion of surplus own funds in Brazil.

⁴ See p.238 of the 2017 Registration Document.

2. MCR coverage ratio

The MCR is the amount of eligible own funds below which the insurer may have its authorisation withdrawn.

CNP Assurances calculates its MCR in accordance with Solvency II: MCR is a metric based on premiums, claims, benefits and capital at risk. Each subsidiary's MCR represents between 25% and 45% of its SCR. The group MCR is determined by consolidating the MCRs of all the subsidiaries without taking into account any inter-subsidiary diversification benefits.

Country	Scope	Eligible own funds for MCR calculations (€bn)	MCR (€bn)	MCR coverage ratio at 31 Dec. 2017	MCR coverage ratio at 31 Dec. 2016
Group	CNP Assurances Group	22.6	7.0	324%	300%
France	CNP Assurances SA	23.4	6.1	387%	354%
Brazil	Caixa Seguradora5	2.7	0.5	591%	867%
Italy	CNP UniCredit Vita	0.8	0.2	515%	532%
Ireland	CNP Santander Insurance Life	0.3	0.0	651%	594%
Ireland	CNP Santander Insurance Europe	0.2	0.0	495%	449%

The MCR coverage ratios of the main Group subsidiaries were as follows at 31 December 2017:

The group MCR coverage ratio was 324% at 31 December 2017.

CNP Assurances' solo MCR coverage ratio at the same date was 387%. The MCR coverage ratios of the main Group subsidiaries were also comfortably above 100% at 31 December 2017.

⁵ CNP Assurances applies Solvency II to Caixa Seguradora, without using the Brazilian solvency regulation, solely for the purpose of Group solvency calculations. Caixa Seguradora's MCR coverage ratio has no regulatory impact for the Brazilian insurance undertakings.

3. Impact of the volatility adjustment and transitional measures on technical reserves and interest rates

The Solvency II directive includes transitional measures to allow insurance undertakings time to adapt to the new regulations and smooth the financial impacts over time. The CNP Assurances Group has not applied the transitional measures concerning interest rates and technical reserves.

A static volatility adjustment (VA) has been applied to adjust the risk-free interest rate curve used to measure technical reserves.

The following table presents the impact of these measures on the Group's solvency indicators at 31 December 2017:

	Impact of transitional measures on technical reserves	Impact of transitional measures on interest rates	Impact of the volatility adjustment at 31 Dec. 2017	Impact of the volatility adjustment at 31 Dec. 2016
Group SCR coverage ratio	n/a	n/a	+ 3 pts	+ 11 pts
Group SCR (€bn)	n/a	n/a	- 0.1	- 0.5
Eligible own-funds for SCR calculations (€bn)	n/a	n/a	+ 0.2	+ 0.6

4. Breakdown of SCR

The group SCR at 31 December 2017 breaks down as follows:

		2017	2016
(€bn)	Before loss absorbing capacity of technical reserves	Net of loss absorbing capacity of technical reserves	Before loss absorbing capacity of technical reserves	Net of loss absorbing capacity of technical reserves
Market risk (i)	33.1	12.0	30.5	11.6
Life underwriting risk (ii)	7.4	4.3	5.3	3.5
Health underwriting risk (iii)	3.2	2.1	3.2	2.0
Non-life underwriting risk (iv)	0.9	0.9	0.7	0.7
Counterparty default risk (v)	1.4	1.3	1.1	1.1
Diversification benefit (vi)	(8.6)	(5.4)	(7.0)	(4.7)
Basic SCR (1) = (i) + (ii) + (iii) + (iv) + (v) + (vi)	37.4	15.2	33.7	14.2
Operational risk (2)	1.5	1.5	1.5	1.5
Loss-absorbing capacity of technical reserves (3)	(22.2)	-	(19.6)	-
Loss-absorbing capacity of deferred taxes (4)	(3.0)	(3.0)	(2.4)	(2.4)
Total SCR = (1) + (2) + (3) + (4)	13.7	13.7	13.4	13.4

The group SCR⁶ at 31 December 2017 breaks down as follows:

• 54% for market risk
• 34% for underwriting risk
• 12% for counterparty default and operational risks

The risk diversification benefit was €5.4 billion, representing 26% of the total SCR before diversification (€19.1 billion). This benefit reflects the Group's excellent diversification in terms of both geographic markets (Europe and Latin America) and product markets (savings/pensions and personal risk/protection insurance).

The loss-absorbing capacity of technical reserves represented €22.2 billion or 59% of the basic SCR (€37.4 billion). This reduction in the SCR reflects the high proportion of with-profits policies and the low guaranteed yields on CNP Assurances' insurance obligations (0.34% in France at 31 December 2017).

The loss-absorbing capacity of deferred taxes represented €3.0 billion or 18% of the SCR before tax (€16.7 billion). This absorption capacity is defined as the sum of net deferred tax liabilities in the Solvency II balance sheet and a prudent estimate of future income taxes⁷ .

⁶ Net of the loss-absorbing capacity of technical reserves, before diversification and before loss-absorbing capacity of deferred taxes.

⁷ Estimate based on stressed business plan projections.

5. Breakdown of eligible own funds for SCR calculations

Eligible own funds for group SCR calculations at 31 December 2017 break down as follows:

(€bn)	Own funds in the Solvency II balance sheet at 31 Dec. 2017	Own funds in the Solvency II balance sheet at 31 Dec. 2016
Excess of assets over liabilities (1)	22.6	19.7
Subordinated debt (2)	7.5	7.8
of which restricted Tier 1 own funds8	2.6	2.8
of which Tier 2 own funds9	3.9	4.0
of which Tier 3 own funds10	1.0	1.0
Total own funds in the Solvency II balance sheet = (1) + (2)	30.1	27.5

(€bn)	Eligible own funds at 31 Dec. 2017	Eligible own funds at 31 Dec. 2016
Unrestricted Tier 1 own funds11	18.6	15.9
Restricted Tier 1 own funds	2.6	2.8
Tier 2 own funds	3.9	4.0
Tier 3 own funds	1.0	1.0
Total eligible own funds for SCR calculations	26.1	23.7

Own funds in the Solvency II balance sheet at 31 December 2017 amounted to €30.1 billion, including eligible own funds of €26.1 billion. The difference between these two amounts corresponds to:

• unfungible own funds of €3.3 billion, consisting of the surplus own funds of subsidiaries not wholly owned by the Group, that are considered by the supervisor as not available at Group level
• projected dividends of €0.8 billion¹², representing dividends to be paid for the year, including not only dividends paid to CNP Assurances shareholders but also dividends paid by subsidiaries to non-controlling interests

The Group's financial headroom is based on its high quality eligible own funds:

• 81% of own funds are Tier 1
• the Group does not have any ancillary own funds

⁸ Restricted Tier 1 own funds correspond to subordinated notes classified as Tier 1, including grandfathering of undated subordinated notes issued before Solvency II came into effect.

⁹ Tier 2 own funds correspond to subordinated notes classified as Tier 2, including grandfathering of dated subordinated notes issued before Solvency II came into effect.

¹⁰ Tier 3 own funds correspond to subordinated notes classified as Tier 3.

¹¹ Unrestricted Tier 1 own funds (€18.6 billion) correspond to the excess of assets over liabilities (€22.6 billion) less unfungible own funds (€3.3 billion) and projected dividends (€0.8 billion).

¹² Projected dividends are based on prior year figures and should not be interpreted as a distribution commitment. The dividend is recommended by the Board each year at its discretion and is subject to approval by the Annual General Meeting of Shareholders.

6. Reconciliation of Solvency II eligible own funds to IFRS equity

At 31 December 2017, the difference between total IFRS equity (€20.0 billion), on the one hand, and Solvency II eligible own funds for SCR calculations (€26.1 billion), on the other, breaks down as follows:

CNP Assurances Group (€bn)	2017	2016
Consolidated equity	18.3	17.5
Non-controlling interests	1.8	1.8
Total IFRS equity	20.0	19.3
Differences in scope of consolidation	(0.1)	(0.2)
Reclassification of subordinated debt classified as equity in the IFRS balance sheet	(1.8)	(1.8)
Elimination of intangible assets and deferred acquisition costs	(2.1)	(2.0)
Measurement of assets at fair value	1.5	1.3
Remeasurement of technical reserves	6.3	3.9
Remeasurement of subordinated debt	(0.3)	(0.4)
Other adjustments	(0.9)	(0.4)
Solvency II excess of assets over liabilities	22.6	19.7
Subordinated debt	7.5	7.8
Unfungible own funds	(3.3)	(3.0)
Projected dividends	(0.8)	(0.8)
Eligible own funds for SCR calculations	26.1	23.7
Application of the cap on subordinated debt classified as Tier 2	(2.5)	(2.7)
Elimination of subordinated debt classified as Tier 3	(1.0)	(1.0)
Eligible own funds for MCR calculations	22.6	20.0

CNP Assurances has prudently chosen not to value intangible assets in the Solvency II balance sheet because no fair value can be attributed to them due to the absence of an active market in which they could be sold.

Subordinated notes issued by the Group are measured at fair value adjusted for the effect of changes in the Group's credit risk (i.e., at the value of future cash flows discounted at a rate equal to the sum of the risk free rate and the issue-date credit spread paid to note holders). This results in a value of €7.5 billion for subordinated debt in the Solvency II balance sheet versus €7.1 billion in the IFRS balance sheet.

7. Reconciliation of the Solvency II balance sheet to the IFRS balance sheet

The CNP Assurances Group's Solvency II and IFRS balance sheets at 31 December 2017 can be summarised as follows:

Solvency II balance sheet (€bn)	2017	2016	IFRS balance sheet (€bn)	2017	2016
Intangible assets	0.0	0.0	Intangible assets	0.8	0.9
Financial assets and derivative instruments	390.0	385.2	Financial assets and derivative instruments	387.1	383.3
Reinsurers' share of technical reserves	28.4	29.4	Reinsurers' share of technical reserves	22.7	23.0
Deferred tax assets	0.1	0.0	Deferred tax assets	0.3	0.3
Other assets	9.8	9.5	Other assets	12.4	11.6
Total assets under Solvency II	428.3	424.1	Total assets under IFRS	423.3	419.1
Excess of assets over liabilities	22.6	19.7	Total equity	20.0	19.3
Subordinated debt	7.5	7.8	Of which subordinated debt	1.8	1.8
Technical reserves: risk margin (RM)	4.6	4.0	Subordinated debt	5.3	5.4
Technical reserves: best estimate (BE)	356.6	357.9	Insurance and financial liabilities	365.2	361.7
Derivative instruments	1.1	1.2	Derivative instruments	1.1	1.2
Deferred tax liabilities	3.1	2.3	Deferred tax liabilities	0.9	1.3
Other liabilities	32.8	31.2	Other liabilities	30.8	30.2
Total liabilities under Solvency II	428.3	424.1	Total liabilities under IFRS	423.3	419.1

Solvency II balance sheet (€bn)	2017	2016
Intangible assets	0.0	0.0
Financial assets and derivative instruments	390.0	385.2
Reinsurers' share of technical reserves	28.4	29.4
Deferred tax assets	0.1	0.0
Other assets	9.8	9.5
Total assets under Solvency II	428.3	424.1
Excess of assets over liabilities	22.6	19.7
Subordinated debt	7.5	7.8
Technical reserves: risk margin (RM)	4.6	4.0
Technical reserves: best estimate (BE)	356.6	357.9
Derivative instruments	1.1	1.2
Deferred tax liabilities	3.1	2.3
Other liabilities	32.8	31.2
Total liabilities under Solvency II	428.3	424.1

The Solvency II balance sheet is based to a large extent on the fair values of assets and liabilities used in the Group's IFRS balance sheet, as long as the measurement principles are the same in both cases. These fair values are subjected to the controls performed for the preparation of the IFRS balance sheet and they are audited by the Statutory Auditors. This approach guarantees the reliability of the Solvency II balance sheet, through the application of an efficiently managed and audited process, and its alignment with the IFRS balance sheet.

The main adjustments to the IFRS balance sheet concern:

• Elimination of intangible assets
• Measurement of assets at fair value (held-to-maturity investments, loans and receivables, investments in non-consolidated subsidiaries and affiliates)
• Measurement of technical reserves (cancellation of IFRS technical reserves and recognition of the best estimate of liabilities plus a risk margin)
• Reclassification and measurement of subordinated debt
• Adjustments due to the fast-close process

8. Best estimate of liabilities and risk margin by region

Technical reserves (also known as technical provisions) represent the amount an insurance undertaking would have to pay if it transferred its contractual rights and obligations immediately to another undertaking.

They correspond to the sum of:

• the best estimate of liabilities, corresponding to the probability-weighted average of future cash-flows, taking account of the time value of money, using the relevant risk-free interest rate term structure.
• the risk margin, calculated as the cost of providing an amount of eligible own funds equal to the underwriting risk SCR (excluding market risk SCR) required to support the insurance obligations over their lifetime.

Following the emergence of negative nominal interest rates in the euro zone in recent years, the models used by CNP Assurances to prepare the Solvency II balance sheet now include economic scenarios with negative interest rates.

The risk margin is calculated using a cost-of-capital rate of 6%, as recommended by the EIOPA. It is determined based on the SCRs of all Group insurance undertakings without taking into account inter-subsidiary diversification benefits.

At 31 December 2017, the risk margin was calculated based on detailed SCR projections using different risk factors for the French subsidiaries and a duration-based approach for the international subsidiaries, which have only a limited impact on the Group's risk margin.

The table below shows a breakdown of Solvency II technical reserves at 31 December 2017 by region:

Before reinsurance and tax (€bn)	Best estimate	Risk margin	Risk margin/ Best estimate at 31 Dec. 2017	Risk margin/ Best estimate at 31 Dec. 2016
France	330.0	4.1	1.2%	1.1%
Latin America	11.3	0.4	3.5%	3.8%
Europe excl. France	15.3	0.1	0.7%	0.7%
Total	356.6	4.6	1.3%	1.1%

The risk margin represented 1.3% of the Group's best estimate at 31 December 2017. The rate was higher in Latin America due to the higher underwriting risk associated with the business written by Caixa Seguradora.

About CNP Assurances

CNP Assurances is France's leading personal insurer with net profit of €1,285 million in 2017. The Group also has operations in other European countries and in Latin America, with a significant presence in Brazil. It has more than 38 million personal risk/protection insureds worldwide and more than 14 million savings and pensions policyholders. For 160 years, CNP Assurances has been protecting people against the risks of everyday life. The Group designs and manages life insurance, pension, personal risk insurance and protection products (term creditor insurance and health insurance).

• In France, CNP Assurances distributes its individual insurance products through La Banque Postale and the Caisses d'Épargne, as well as through its own network, Amétis. In Brazil, its second largest market, the Group's partner is Caixa Econômica Federal, the country's second-biggest state-owned bank.
• In group insurance, CNP Assurances crafts tailor-made employee benefits, pension and term creditor insurance products that are aligned with the needs of companies, local authorities, mutual insurers, non-profit organisations and banks, in Europe and Latin America.

CNP Assurances has been listed on the first market of the Paris Stock Exchange since October 1998 and has a stable shareholder structure thanks to the signing of an agreement between its major shareholders (Caisse des Dépôts, La Banque Postale, Groupe BPCE and the French State).

Contacts

Press Florence de Montmarin | +33 (0)1 42 18 86 51 Tamara Bernard | +33 (0)1 42 18 86 19

servicepresse@cnp.fr

Follow us on:

Investors and analysts Vincent Damas | +33 (0)1 42 18 71 31 Jean-Yves Icole | +33 (0)1 42 18 86 70 Typhaine Lissot | +33 (0)1 42 18 83 66

Julien Rouch | +33 (0)1 42 18 94 93

infofi@cnp.fr

Disclaimer:

Some of the statements contained in this document may be forward-looking statements referring to projections, future events, trends or objectives that, by their very nature, involve inherent risks and uncertainties that may cause actual results to differ materially from those currently anticipated in such statements. These risks and uncertainties may concern factors such as changes in general economic conditions and financial market performance, legal or regulatory decisions or changes, changes in the frequency and amount of insured claims, changes in interest rates and foreign exchange rates, changes in the policies of central banks or governments, legal proceedings, the effects of acquisitions and divestments, and general factors affecting competition. Further information regarding factors which may cause results to differ materially from those projected in forward-looking statements is included in CNP Assurances' filings with the Autorité des Marchés Financiers. CNP Assurances does not undertake to update any forward-looking statements presented herein to take into account any new information, future event or other factors.

Certain prior-period information may be reclassified on a basis consistent with current year data. The sum of the amounts presented in this document may not correspond exactly to the total indicated in the tables and the text. Percentages and percentage changes are calculated based on unrounded figures and there may be certain minor differences between the amounts and percentages due to rounding. CNP Assurances' final solvency indicators are submitted post-publication to the insurance supervisor and may differ from the explicit and implicit estimates contained in this document.

This document may contain alternative performance indicators (such as EBIT) that are considered useful by CNP Assurances but are not recognised in the IFRSs adopted for use in the European Union. These indicators should be treated as additional information and not as substitutes for the balance sheet and income statement prepared in accordance with IFRS. They may not be comparable with those published by other companies, as their definition may vary from one company to another.