Solvency and Financial Condition Report (SFCR) CNP Assurances SA,
solo 2017
31 December 2017
This Solvency and Financial Condition Report (SFCR) has been prepared in accordance with the public disclosure requirements of Articles 51 to 56 and 256 of Directive 2009/138/EC of the European Parliament and of the Council dated 25 November 2009 and the implementing rules contained in the Delegated Regulation dated 17 January 2015.
This report discloses the information referred to in Articles 292 to 298 and 359 to 371 of the Delegated Regulation and follows the structure set out in the Delegated Regulation's Annex 20.
It is a solo SFCR that addresses the operations of CNP Assurances SA only, without consolidating the operations of its main subsidiaries in France and abroad. In this report, these subsidiaries are treated as strategic investments without analysing their insurance commitments and their investment portfolios. Hereinafter, unless otherwise stated, "CNP Assurances" refers to the legal entity CNP Assurances SA.
This document covers the reference period from 1 January 2017 to 31 December 2017.
The report includes an executive summary, five sections (business and performance, system of governance, risk profile, valuation for solvency purposes and capital management) and a set of quantitative reports in the appendix.
This 2017 report was approved by CNP Assurances’ Board of Directors at its meeting on 27 April 2018.
It has also been submitted to France's banking and insurance supervisor (Autorité de Contrôle Prudentiel et de Résolution – ACPR).
A glossary of key terms is provided at the end of this document.
Introduction
2
3
Contents
A. BUSINESS AND PERFORMANCE 8
A1. Business review 9
A2. Underwriting performance 17
A3. Investment performance 19
A4. Performance of other activities 22
B. SYSTEM OF GOVERNANCE 23
B1. Information on the system of governance 24
B2. Fit and proper requirements 31
B3. Risk management system 33
B4. Own risk and solvency assessment (ORSA) 37
B5. Internal control system and Compliance function 39
B6. Internal audit function 42
B7. Actuarial function 44
B8. Outsourcing 46
C. RISK PROFILE 49
C1. Underwriting risk 51
C2. Market risk 57
C3. Credit risk 64
C4. Liquidity risk 67
C5. Operational risk 69
C6. Other material risks 72
D. VALUATION FOR SOLVENCY PURPOSES 75
D1. Assets 76
D2. Technical reserves 82
D3. Other liabilities 88
D4. Alternative valuation methods 89
4
E. CAPITAL MANAGEMENT 90
E1. Own funds 91
E2. Solvency capital requirement (SCR) and minimum capital requirement (MCR) 96
E3. Use of duration-based equity risk sub-module 99
E4. Differences between the standard formula and any internal model used 99
E5. Non-compliance with MCR and SCR 99
F. APPENDIX: QUANTITATIVE REPORTING TEMPLATES (QRTS) FOR
PUBLIC DISCLOSURE 100
S.02.01.02 – Balance sheet 101
S.05.01.02 – Premiums, claims and expenses by line of business 104 S.12.01.02 – Life and Health SLT Technical Provisions 106
S.17.01.02 – Non-life Technical Provisions 107
S.19.01.21 – Non-life Insurance Claims 108
S.22.01.22 – Impact of long term guarantees and transitional measures 109
S.23.01.22 – Own funds 110
S.25.01.22 – Solvency Capital Requirement (for undertakings on Standard Formula) 112 S.28.02.01 – Minimum Capital Requirement (Both life and non-life insurance
activity) 113
G. GLOSSARY 115
5
Executive Summary
As an insurer, co-insurer and reinsurer, CNP Assurances provides its customers and partners with unique expertise in protection insurance and savings solutions. Thanks to a multi-partner, multi-channel business model, the Company’s solutions are distributed in France by its many banking and social economy partners.
CNP Assurances is France's leading personal insurer1.
Key figures
2017 2016 Change
Net new money (French GAAP) €22,948m €24,045m -5%
Net insurance revenue2 €1,669m €1,512m +10%
Value of new business3
€500m €230m +117%
Investment income and expenses4 €8,371m €8,085m +4%
Technical reserves (gross of reinsurance)5 €329.1bn €331.6bn -1%
Eligible own funds covering the SCR €27.1bn €24.9bn +9%
SCR €13.5bn €13.2bn +2%
SCR coverage ratio 201% 188% +13 pts
Eligible own funds covering the MCR €23.4bn €21.0bn +11%
MCR €6.1bn €6.0bn +2%
MCR coverage ratio 387% 354% +33 pts
Business and performance
CNP Assurances is stepping up its strategic diversification, in terms of both partnerships and products. The Company is continuing to refocus determinedly on the personal risk/protection insurance market and on the unit-linked segment of the savings market.
Premium income under French GAAP amounted to €22.9 billion in 2017, a decrease of €1.1 billion compared to 2016 that was due to a change in the partnership environment. New money invested in traditional savings products fell by 16.4%, while the flow of new money into unit-linked funds grew by 24.7%, reflecting the strategic focus on building this business.
In 2017, unit-linked products accounted for 21.8% of total savings premium income, representing a 6.1-point increase compared to the previous year.
1 Source: FFA 2016 data, June 2017.
2 Based on the IFRS consolidated financial statements.
3 Based on MCEV© measurement principles.
4 Based on QRT S.09 – Information on gains/income and losses in the period.
5 Based on Solvency II measurement principles.
6
Significant events of the year included the merger of two wholly-owned subsidiaries, Préviposte and Investissement Trésor Vie (ITV), into CNP Assurances.
System of governance
CNP Assurances’ governance is organised around the Board of Directors, which determines the Company’s overall strategy and oversees its implementation, the Chief Executive Officer and the Executive Committee, whose members include the three Deputy Chief Executive Officers and ten other senior executives.
At its meeting on 13 April 2017, the Board of Directors re-appointed Jean-Paul Faugère as Chairman of the Board and Frédéric Lavenir as Chief Executive Officer.
The holders of the four key functions (risk management, compliance, actuarial and internal audit) report to the Chief Executive Officer.
These initiatives were part of the process of continuous improvement of our risk management and internal control systems conducted in cooperation with our partner networks. We consider that these systems are appropriate for our business model.
Risk profile
The risk profile shows that the Company's primary exposure is to market risk, which accounts for 60% of the solvency capital requirement (SCR) per risk. However, the Company's broad and diverse range of products has a significant diversification effect.
Interest rates recovered slightly in 2017 but nevertheless were still very low. We responded to the resulting increase in the Company’s exposure to persistently low rates by scaling back our investments in the bond market which we viewed as over-priced. This led to a small decrease in the proportion of insurance investments represented by fixed income securities and an increase in the amount held in cash.
In the term creditor insurance segment, 2017 was devoted to preparing for the application, as from 2018, of legislation giving insureds an annual right to switch to a different insurer. This new legislation may trigger a significant shift in the term creditor insurance market towards individual insurance products. Our response has been to adjust our offer and implement an appropriate system to track the cancellation risk on in-force term creditor insurance contracts.
Valuation of assets and liabilities
Assets and liabilities in CNP Assurances’ Solvency II economic balance sheet are measured in accordance with valuation and reserving policies approved by the Board of Directors. The main methods and assumptions used for the valuations are presented in section D.
Where appropriate, assets are measured at their value in the IFRS balance sheet audited each year by the Company’s Statutory Auditors.
Solvency II technical reserves gross of reinsurance amounted to €329.1 billion at 31 December 2017.
7
Solvency capital requirement (SCR) and minimum capital requirement (MCR) coverage ratios
Efficient capital management is essential to ensure that the Company’s capital requirements are met. It is therefore part of the annual ORSA planning process and gives rise to the preparation each year of a five-year medium-term capital management plan that is submitted to the Board of Directors.
CNP Assurances' Solvency II own funds eligible for SCR calculations, based on the economic balance sheet, amounted to €27.1 billion at 31 December 2017. The total included €19.6 billion in basic own funds, classified as unrestricted Tier 1 capital (i.e., the highest-quality component of capital), and €7.5 billion in subordinated liabilities (of which a portion is covered by the grandfathering clause).
Its solvency capital requirement, calculated using the Solvency II Standard Formula without applying transitional measures, was €13.5 billion at 31 December 2017.
CNP Assurances’ Solvency II SCR coverage ratio at that date was 201%, a 13-point improvement versus end-2016 that was largely due to resilient financial markets and the shift in product mix towards unit-linked contracts. SCR coverage ratio calculations take into account the volatility adjustment provided for in Solvency II (Article 77 quinquies) which had a 3-point positive impact on the ratio at 31 December 2017.
CNP Assurances' Solvency II own funds eligible for inclusion in the MCR coverage ratio, based on the economic balance sheet, amounted to €23.4 billion at 31 December 2017. The total included €19.6 billion in basic own funds, classified as unrestricted Tier 1 capital (i.e., the highest-quality component of capital), and €3.8 billion in subordinated liabilities.
CNP Assurances' minimum capital requirement was €6.1 billion at 31 December 2017.
CNP Assurances' MCR coverage ratio at that date was therefore 387%.
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13
The best performances since 2010, with bond and equity prices rising in tandem
The favourable environment helped to keep share prices high, along with the prices of other assets. The MSCI World index gained 21 points, led by US equities (with the three benchmarks – S&P500, Dow Jones and Nasdaq – setting new records) and emerging market equities (which gained 32 points). European equities experienced mixed fortunes (the Euro Stoxx 50 Index gained 10% and the CAC 40 Index 13%), reflecting the impact of last year’s electoral periods and the euro’s appreciation against the dollar (with the exchange rate rising from 1.05 to 1.20). Equity prices as a whole were boosted by sharp rises in corporate earnings which exceeded the January consensus forecasts for the first time since 2010.
At the same time, the bond markets delivered a resilient performance despite fears concerning the United States’
fiscal policy. The markets’ positive performances were attributable to the narrower spreads resulting from institutional investors’ attempts to earn higher yields and to interest rate stability (European rates remained stubbornly low, with the ten-year European swap rate at around 0.85%, France’s 10-year OAT rate at close to 0.75%, and the US 10-year Fed Funds rate at around 2.45%). High yield debt funds generated yields of 5% to 7% while the average yield on emerging market debt was 10%. More generally, volatility in the bond and equity markets was extremely low, with the VIX Dow Jones implied volatility index at 10% and the V2X Euro Stoxx 50 implied volatility index at 12%, despite last year’s electoral periods and geopolitical tensions.
A fall in the dollar which had a significant impact on geographic performance
The main surprise of 2017 came at the end of the year when the US dollar lost 14% against the euro and 6% against the Chinese yuan, confounding consensus forecasts made in January. The fall in value of the US currency was due to the setbacks experienced in implementing the reforms announced by the Trump administration. The markets were not affected, but the weak dollar led to differences in performance between regions, to the detriment of Europe amongst others. Of particular note was the Brazilian currency’s 14% fall against the euro.
5.2. Significant events for CNP Assurances
Merger of Préviposte and ITV into CNP Assurances
As of 1 January 2017, Préviposte, which was licensed to write class 20 lines (life insurance and death benefits) and class 24 lines (endowment insurance), and Investissement Trésor Vie (ITV), which was licensed to write class 24 lines, were both wholly-owned subsidiaries of CNP Assurances. They were originally created to manage the bons de capitalisation endowment insurance contracts sold by La Banque Postale and the Trésor Public network, on behalf of CNP Assurances which was not licensed to write class 24 lines until 1994. The purpose of merging them into CNP Assurances was to reduce the number of separate companies from three to one.
The proposed merger was authorised by France’s insurance supervisor, ACPR in its decision No. 2017-C-36 dated 11 September 2017 approving the transfer of the two subsidiaries’ insurance books, which was published in the French legal gazette Journal Officiel on 4 October 2017. As allowed by Article L.236-11 of the French Commercial Code, the simplified merger was backdated to 1 January 2017 for accounting and tax purposes.
14
€5 billion worth of new investments announced in energy and environmental transition projects by the year 2021
To help limit global warming to 2°C at the end of the century, CNP Assurances has announced €5 billion in new investments in support of the Energy and Environmental Transition (EET) between now and the end of 2021. The Company is adapting its equity investment strategy by aligning the management of its portfolios on indices favouring the Energy and Environmental Transition and is boosting its commitment to reducing their carbon footprint.
As a signatory of the Montreal Carbon Pledge in May 2015 and in keeping with COP 21, CNP Assurances undertook, among other things, to reduce the carbon footprint of its listed equity portfolios by 20% and reduce the energy consumption of its property assets, also by 20%, by the year 2020. In view of the results already achieved and the urgency of the climate challenge, CNP Assurances has decided to strengthen its initiatives by setting new targets.
The objective of reducing the carbon footprint of the companies held in its equity portfolio has been raised to 30% by 2021 compared to the 2014 baseline8.
Signature of a distribution and reinsurance agreement with Malakoff Médéric covering the self-employed professional and individual market segments
The Company’s Amétis network will offer Malakoff Médéric’s non-salaried and executive clients a comprehensive approach to personal and wealth protection strategies. The Amétis network comprises 220 advisers, including 86 with wealth management and personal protection certification, located throughout France and specialised in loyalty building through one-on-one advice and their ability to provide global protection solutions. This commercial partnership reinforces the multi-partnership strategy of CNP Assurances and its development efforts in the personal protection and wealth building market segments for professionals and individuals.
Via its distance selling platform, the partnership will enable Malakoff Médéric to increase its growth in the individual health and funeral insurance segments by providing access to the individual clients of CNP Assurances.
Caisse des Dépôts and CNP Assurances complete their acquisition of 49.9% of RTE
Caisse des Dépôts and CNP Assurances have completed the acquisition of a 49.9% indirect stake in RTE, after obtaining anti-trust approval of the deal.
One of the core aims of this investment is to support France's energy and environmental transition, in line with the Company's strategy as a responsible and long-term investor.
CNP Assurances with Open CNP at the 5
thannual France Digitale Day
For the second consecutive year, CNP Assurances partnered France Digitale Day.
During France Digitale Day 2016, CNP Assurances announced a budget of €100 million for its Open CNP programme, to be spent over five years. This Open Innovation programme, an integral part of the insurer's digital strategy, aims to support the growth of innovative start-ups financially while developing win-win situations through partnerships.
8 On 22 February 2018, in the press release reporting its 2017 results, CNP Assurances announced that it was stepping up its commitment to reducing the carbon footprint of the equity portfolio, setting an objective of 0.25 teqCO2/€k invested by end-2021 (versus 0.33 teqCO2/€k invested). This represents a target reduction of 47% from the 2014 baseline, compared with the 30% target set in 2017 that is referred to in the press release reproduced here.
15
In 2016, Open CNP completed three transactions, acquiring equity stakes in:
■ Lendix, the leading French crowd-lending platform for SMEs.
■ H4D, a leading provider of telemedicine solutions.
■ Alan, which offers start-ups and SMEs supplementary health insurance with 100% on-line direct underwriting.
In 2017, the Open CNP programme continued its support for start-ups by taking a stake in Stratumn, a leader in network solutions providing secure processing links between companies and their stakeholders via blockchain technology. Then most recently, it invested in MyNotary, the leading French collaborative platform designed to facilitate the co-construction of real property contracts on line.
Open CNP should eventually be in a position to provide support for between 15 and 20 start-ups.
Transfer of a portfolio of contracts to Arial CNP Assurances
On 15 December 2015, AG2R La Mondiale and CNP Assurances signed a framework partnership contract in the field of retirement savings. The strategic partnership, covering both retirement savings plans and employee benefit plans, is being led by a joint subsidiary named Arial CNP Assurances. Arial CNP Assurances combines the teams, resources and business portfolios of the two partners, and is aiming to become the leading company retirement savings plan provider. CNP Assurances and AG2R La Mondiale have demonstrated their support for the new venture, of which they own 40% and 60% respectively, by agreeing to reinsure the contracts sold by Arial CNP Assurances.
The partnership contract covered the following main aspects:
■ Contribution of each of the partners' group pensions contracts (traditional and unit-linked funds). The contributions were subject to the condition precedent of the signature of a reinsurance treaty between the partnership vehicle, Arial CNP Assurances, and each partner, with each transferred contract being reinsured on a 100% basis.
■ A commitment to reinsure the new business written by Arial CNP Assurances, pro rata to each partner's ownership interest.
The transfer by CNP Assurances to Arial CNP Assurances of a portfolio of group pensions contracts (traditional and unit-linked funds) was authorised by France’s insurance supervisor, ACPR, on 11 September 2017 (decision 2017-C- 35 published in the French legal gazette Journal Officiel, edition 0252 dated 27 October 2017), allowing the project to be implemented.
The transfer was backdated to 1 January 2017 and all transactions carried out by CNP Assurances in respect of the transferred portfolio were considered as having been carried out by Arial CNP Assurances as from that date for accounting and tax purposes.
The transfer concerned (i) a portfolio of company retirement savings plans invested in both traditional and unit- linked funds representing liabilities of €4,013 million and (ii) unit-linked asset portfolios and mutual fund units with an equivalent value, transferred at net book value. The net assets (assets less liabilities) transferred by CNP Assurances amounted to €23.99. As consideration for the transferred net assets, CNP Assurances received one new Arial CNP Assurances share, credited as fully paid.
Elim of a
The 201 afte Elim paid tota To
“exc size Fren
€31
6.
As a in p Com Tota
In t prod netw sha acco cred with La B dive and
mination o a 30% exce
2018 Finan 2 and payab er France’s Co mination of th d in prior yea al of €69.4 m
help offset t ceptional” su
of its busin nch income .5 million co
Parent c
an insurer, co protection in mpany’s solu
al premium i
he individua ducts throug work (BPCE reholders, w ounted for 5 ditor insuran h BPCE, in li Banque Posta ersification to technical re
of the con eptional s
ce Act has e ble by French
onstitutional his surtax wi ars. In additio
illion includin the negative urtax payable ness (in term
tax liability mpared to th
company
o-insurer an nsurance an
tions are dis income unde
(In € Life
Non
TOTA
al insurance gh the banki group). As with a joint 36 53.5% of our nce business
ne with the ale, highligh owards unit- eserves comp
ntribution a urtax on F
eliminated th h companies Council held ll generate a on, the Com ng interest.
e effect on e by large co ms of premiu y and amou
he €63.1 mil
y busines
nd reinsurer, nd savings s stributed in F
er French GA
€ millions) With- Index Othe Healt Life r Healt -life Work Medi Incom AL
market, CN ng networks well as bein 6.25% stake i r Company's and growth strategy of hts of 2017 -linked funds pared with 2
additionne French cor
he 3% contrib s subject to c d the surtax
n annual sav pany has ob
public finan rporates (Am m income), unts to arou
lion refund o
ss review
CNP Assura solutions. T France by its AAP breaks d
-profits life in x-linked and er life insuran th insurance reinsurance
th reinsuran kers' compen
ical expense me protectio
NP Assurance s of our two ng distributio in CNP Assur 2017 premi in unit-linke our BPCE b included th s, which acco 016.
elle surtax rporate in
bution additi corporate inc to be uncon ving of some btained a refu
nces of these mended 2017 the surtax p und €94.6 of the 3% tax
w
ances provid Thanks to a many banki down as follo
nsurance unit-linked i nce
e
ce
nsation insur insurance on insurance
es focuses o long-standin
on partners rances. The t ium income ed pensions business uni he successfu ounted for a
on distrib come tax
ionnelle surta come tax tha stitutional in e €15 million und of the su
e refunds, t 7 Finance Ac payable by C million. This x on distribut
es its custom multi-partn ng and socia ows by busin
nsurance
rance
on the banc ng partners, s, La Banque two network (based on IF
business in t t. In the net ul launch of a significantl
buted earn in 2017
ax on distrib at pay divide n a ruling dat
for the Com urtax paid in
he French S ct dated 1 De CNP Assuran
s represents ted earnings
mers and pa ner, multi-ch al economy p ess segment
12 3 1 1 2
22
cassurance m La Banque P e Postale an ks, which hav FRS). Last ye the networks tworks cove new eurocr y higher pro
nings and
buted earnin ends (with so ted 6 Octobe mpany based the years 20
State has in ecember 201
ces will repr s an additio s (excluding i
rtners with u hannel busin partners.
t:
2017 2,522 3,812 1,977 1,341 2,271 5 129 511 382 2,948
model, mark Postale and t nd the BPCE
ve a deep pre ear saw the r s covered by red by the p roissance fun oportion of b
introduct
ngs introduce ome exceptio er 2017.
on the amo 013 to 2017 f
troduced a 17). Based on resent 30% o onal tax cos
nterest).
unique expe ness model,
keting insura the savings b E group are esence in Fra ramp-up of t y the partner partnership nds and fur both new mo
16
tion
ed in ons),
ounts for a
new n the of its st of
ertise the
ance bank also ance, term rship with rther oney
17
During the year, we continued to focus our development strategy on the wealth management segment, establishing new partnerships and continuing to offer innovative products to our various distribution partners, including private banking institutions, high street banks, family offices, asset management firms, brokers and independent financial advisors.
Since 2004, products have also been distributed via our own in-house network, Amétis, which has evolved into a social protection and wealth management expert serving the SME, micro-enterprise, self-employed and personal markets. It is growing the business by targeting its own portfolio of 280,000 individual customers and the customers of its partners, leveraging distribution agreements such as those signed with two employee benefits institutions, Klésia in 2016 and Malakoff Médéric at the end of 2017.
Leveraging our comprehensive range of supplementary pension and employee benefits products, we craft tailor- made solutions for the many companies, local authorities, non-profit organisations, mutual insurance companies and employee benefits institutions we count among our partners. CNP Assurances is currently leader in the long- term care sector where it offers compulsory and optional products that protect policyholders against the financial impact of a loss of independence. In an increasingly digital society where ties between generations are being stretched and transformed, we are developing guarantees, services and a distribution model that break the mould.
Lastly, CNP Assurances is one of the leading providers of term creditor insurance in France, partnering numerous banks, social economy lenders and mutual insurers.
A2. Underwriting performance
Business performance is tracked using various indicators, including the following:
■ Premium income, which is an indicator of underwriting volume.
■ Net insurance revenue (NIR), which measures the margin generated by insurance contracts before deducting administrative costs.
■ Value of new business (VNB), which measures estimated future profits from insurance policies written during the period.
In 2017, Préviposte and ITV were merged into CNP Assurances. The following discussion of the Company’s business performance in 2017 compared to 2016 takes into account the expansion of the Savings business base resulting from this merger.
1. Premium income
Premium income (French GAAP) generated by the CNP Assurances reporting entity amounted to €22.9 billion in 2016, down €1.1 billion on 2016. The change compared with 2016 by CNP Assurances business segment is presented below.
■ Savings new money in 2017 totalled €16.8 billion, representing €1.9 billion less than in 2016. The new partnership environment led to a €2.3 million decline in savings new money generated by one of the two main distribution partners. New money invested in traditional savings products fell by 16.4%, while the flow of new money into unit-linked funds grew by 24.7%, reflecting the strategic focus on building this business.
18
■ In 2017, unit-linked products accounted for 21.8% of total savings premium income, representing a 6.1-point increase compared to the previous year.
■ Pensions premium income was 21.3% higher at €1.6 billion, with the €0.3 billion in additional premiums corresponding mainly to a new group pensions contract.
■ Personal risk and health insurance premiums amounted to €1.7 billion, an increase of €0.3 billion compared to 2016 that primarily reflected new business written in 2017.
■ Term creditor insurance premium income totalled €2.8 billion, an increase of €0.1 billion or 5.7% compared with 2016 that was attributable to the extension of the BPCE partnership to include the Banques Populaires network and Crédit Foncier.
In the savings/pensions business, the Company reported a €5.4 billion net outflow of funds in 2017, with the net inflow into unit-linked funds only partly offsetting the net outflow from traditional contracts.
Net new money
(In € billions) 2017
Traditional contracts (7.7)
Unit-linked contracts 2.3
Total (5.4)
Net by g Net
€1,1 By c
€51 Net segm Savi Pers Tota
The incr volu mea
Valu Tota
A3
1.
The attr Prév Excl
Fixe
In 2 in 2 inve scal Euro
2. Net in
insurance re growth in per insurance 150 million.
contrast, net 9 million, ref insurance re ment (In € m ings/Pension sonal Risk/Pr al
3. Value
e value of n rease of 117 umes follow
asures to im
ue of new bu al
3. Inve
Descrip
market val ibutable to viposte and I uding unit-li
ed-income
2017, the inve 2016 and a m esting in the
ing back inve opean issue
nsurance
evenue total rsonal risk/p revenue fro
t insurance flecting grow evenue by bu millions)
ns
rotection ins
e of new
new busines 7.7%. Growt wing expans mprove loss r
usiness (In € m
estmen
tion of th
ue of the a growth in u ITV into CNP nked portfol
e portfolio
estment foc more attract credit mark estment in b es accounted
e revenu
lled €1,669 m protection ins
om the sav
revenue fro wth in premiu
usiness
surance
business
ss written in th drivers in ion of the d ratios on em
millions)
nt perfo
he asset
sset portfoli unit-linked p P Assurances
lios, changes
os
us was on so tive risk/retu ket, adding t bonds rated B
d for 90% of
e
million in 201 surance busi ings and pe
om personal um income a
s
n 2017 was ncluded favo
distribution mployee ben
orman
portfolio
io increased portfolios, in
(for €7.9 bill s in the vario
overeign deb urn ratio tha o our portfo BBB or lower f bond purch
17, represen iness.
ensions bus
risk/protect and stable re
2017 1,150 519 1,669
s €500 milli ourable eco base, incre nefits busine
2017 500
ce
o
d by nearly € n line with
lion).
ous asset clas
bt (mainly Fr an the credi olio of AA-ra
r.
hases and A
nting an incre
siness segm
tion insuran egulatory disc
2016 1,163 363 1,525
on versus € onomic cond eased unit-li ess.
2016 230
€9 billion or our strategy
sses were as
rench and Sp t market. W ted bonds, m
merican issu
ease of €144
ment was sta
ce business count rates.
Chan
+1 +1
€230 million ditions, high
nked sales
6 Change 0 +117.7%
r 3% in 201 y (for €2.8
follows:
panish), whic We maintaine maintaining
uers for 7%.
4 million or 9
able compa
was €156 m
nge -12 156 144
n in 2016, r her term cre and the po
e
%
7. Part of t billion), and
ch offered h ed our prud the AAA-rat
.
9.4% that wa
ared to 201
million highe
representing editor insura ositive impac
he increase d the merge
igher yields ent approac ted portfolio
19
s led
6 at
er at
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was er of
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and
20
We regularly use forward financial instruments to hedge policyholder and own-funds portfolios against the main market risks. At 31 December 2017, we held caps on a notional amount of €53 billion as a hedge against rising interest rates. The notional amount of hedges against equity risks totalled €7.8 billion at 31 December 2017, representing three times the end-2016 amount.
Diversified investments
The proportion of the total portfolio represented by diversified investments rose by 1.22% in 2017 (based on market values), mainly due to increased investment in real estate and listed equities.
Equities continued to offer an attractive yield of around 3%. The hedge fund portfolio has been wound down in recent years and no longer represents a significant asset class in the Company’s portfolio.
The Investments department regularly uses forward financial instruments to hedge policyholder and own-funds portfolios against the main market risks. The notional amount of hedges against equity risks totalled €7.8 billion at 31 December 2017, representing three times the end-2016 amount.
Concerning unlisted asset classes (property, infrastructure and private equity):
■ Property investments increased from 4.45% to 4.59% of total insurance assets. The low interest rates were an incentive to continue investing in this asset class, focusing mainly on commercial property.
■ Infrastructure investments were also increased in 2017 (by 0.27%) in response to the low interest rate environment.
■ In private equity, the best managers launched major fund raising exercises in 2017. Nearly €0.6 billion was invested in private equity during the year, increasing the Company’s net exposure to this asset class to
€4.5 billion at 31 December 2017.
2.
Inve QRT
Not and The
■
■
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estment inco T S.09.01):
(in € m FIXED PORT
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Total e: income fr
losses inclu €8.4 billion On the plus On the min portfolios.
ment inco
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millions) D INCOME TFOLIOS
Money market
Asset-backed rities
RSIFIED TFOLIOS
Equities
Private equity
rom fixed-inc de impairme in investmen side, favour nus side, ve
ome and
xpenses for
Type Divide Intere Realis Total t Divide
Intere Realis Total Intere Realis Total Divide Rent Intere Realis Total Divide Rent Intere Realis Total Divide Rent Intere Realis Total Divide Rent Intere Realis
come funds ent moveme nt income re rable stock m
ry low inter
expense
r 2017 can
ends est
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est
sed gains and
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and propert ents.
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es
be analyse
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d losses
d losses
ty companie
017 was up o ch drove up d which led to
ed as follow
2 5,5 5,8
( (
1,5
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1 9 7
1 5 1,5 1,7 5,7 7 8,3
es is qualified
on the 2016 t dividend inco
a 12% dec
ws for Solve
2017
245.8 3
556.9 5,8 16.7
819.5 6,3 1.5
(1.0) (11.5)
(11.0) (
11.4 0.0 11.4
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205.0
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0.0 59.3
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371.4 8,0
d as dividen
total, reflecti ome and rea cline in inter
ency II purp
2016 C
308.8 853.2 139.4 301.3 -
3.0 11.5 (48.5) (34.0) 39.0 4.0 43.0 372.7 +
42.4 102.4 + 266.1 + 783.6 + 737.7
0.0 69.8
159.8) +
647.8 +
630.4 +
42.4
32.6 +
378.7 +
084.1 + 681.5
42.4 955.5 405.5 + 084.9 +
d income an
ng:
alised capital rest income
poses (based
Change -63.0 -296.2 -122.6 -481.8 -1.6 -12.5 +37.0 +22.9 -27.6 -4.0 -31.6 +155.7 -2.4 +102.7 +512.4 +768.3 -1.4 0.0 -10.5 +357.2 +345.4 +160.3 -2.4 +112.5 +204.6 +475.1 +92.7 -2.4 -193.6 +389.7 +286.5
nd realised g
gains.
from the b
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3.
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A4
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4. Perf
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ly in equity u
other a
not material
ectly in e
under French
activiti
in 2017.
quity in 2
h GAAP.
es
2017
22
B. System of governance
This It be pers This inte asse CNP ove asse iden As w assu app man Not gove leve
B1
1.
The the An o Reg
1
1.
The con The qua assu fulfi pro repo Insu
s section pre egins with a sons respon s is followed rnal risk and essments of P Assurances
rall quality essment and ntified risks.
with any ris urance that propriate for
nner.
e: CNP Assu ernance are el are also res
1. Info
Organis
current gov Company's s overview of t gistration Doc
1.1. Board
1.1 Main ro Board of D cerning the e Board appr lity and relia urance conce
lled jointly posals for su ort and the urance Super
sents CNP A a general de sible for the d by a descr d solvency a the internal s’ priority is of internal d manageme
sk managem possible we its business
urances is th inseparable sponsible fo
rmatio
sation of
vernance stru strategy and the organisa cument (sect
d of Direc
oles and res Directors det
efficient runn roves the fina ability of fina
erning the e with the m ubmission to
corporate g rvisor and th
Assurances' s escription of
system.
iption of eac assessments
control syste to constant control and ent processe
ment and in aknesses wi s model and
he parent co e from that o
r those funct
on on t
powers
ucture separ d overseeing ation of powe
tion 3 – Corp
ctors
sponsibilitie ermines the ning of the b ancial statem
ncial and oth ffectiveness embers of o the Board overnance r his Solvency a
ystem of gov the system
ch of the ke s, which are em and the o tly improve d risk mana es are adapte
nternal cont ill be elimina
provides re
ompany of t f the Group.
tions at solo
he syst
rates the pow its implemen ers is provide porate Gover
es of the Bo e business st business and ments of the her informat of the intern
Executive M for review a report, and v
and Financia
vernance.
of governa
ey functions a critical as outsourcing the quality agement in
ed in respon
trol system, ated. Nevert easonable as
the CNP Ass . In particula
level.
tem of
wers of the ntation, from ed below. Fo rnance).
oard of Dire trategy and d decides all m
Company a tion given to nal control a Management and approva validates the al Condition R
nce and the
defined in S pect of the managemen
of service p liaison with nse to chang
CNP Assura theless, CNP ssurance tha
surances Gro r, the person
f gover
Board of Dir m those of Ex or a detailed
ectors oversees its matters that nd the Grou shareholder and risk man t, who are
l. The Board e ORSA repo
Report.
e fit and pro
Solvency II, w risk manage nt process.
provided to p h its partne ges in its bus
ances’ system Assurances at its objectiv
oup and som ns responsib
rnance
rectors, whic xecutive Man description,
s implement concern CN p, and obtai rs and other nagement sys
responsible of Directors ort, the regu
oper policy a
with particu ement functi
policyholder ers. Whereve
siness enviro
m cannot p considers t ves are met
me aspects ble for key fu
ch is respons nagement.
refer to the
tation. It exa P Assurance ns assuranc r stakeholder ystems. Thes
for prepari s prepares t lar reports s
applicable to
lar emphasi ion, and inte
rs as well as er possible, onment and
provide abso hat its syste in a satisfac
of its system nctions at G
sible for deci
CNP Assura
amines all is es.
e concerning rs. It also obt e three roles ng matters he managem submitted to
24
o the
s on ernal
s the risk new
olute em is ctory
m of roup
iding
nces
sues
g the tains s are and ment o the
25
The Board fulfils other specific roles, such as authorising related party agreements governed by Article L.225-38 of the French Commercial Code, appointing executive directors, assessing their performance and determining their remuneration, allocating among Board members the directors' fees awarded by the General Meeting and calling General Meetings.
1.1.2Committees of the Board of Directors
Three Committees of the Board (the Audit and Risks Committee, the Strategy Committee and the Remuneration and Nominations Committee) help to prepare decisions of the Board within their clearly defined terms of reference.
These Committees facilitate Board decisions by performing the background analysis of technical issues.
1.2. Chairman of the Board of Directors
The Company has chosen to separate the position of Chairman of the Board of Directors from that of Chief Executive Officer to ensure a clear distinction between the Board's strategic planning, decision-making and oversight roles and Executive Management's role as the body responsible for running the business.
The Chairman ensures that the Board members respect the roles and prerogatives of Executive Management.
He makes sure the Board of Directors is kept permanently informed of all of the Company's activities and performances.
The Chairman organises and leads the work of the Board of Directors, calling meetings at least four times per year, or more frequently if warranted by circumstances. In 2017, the Board met nine times.
The Chairman oversees the transparency of decision-making processes, with a particular focus on the clarity, accuracy and completeness of information provided to the Board in respect of matters submitted for its decision.
He is closely involved in the Company's strategic management. He meets with the Chief Executive Officer every week (or more frequently if necessary) to receive information about material events and situations that concern the Company's strategy, organisation, major investment or divestment projects or other matters.
1.3. Chief Executive Officer
The Chief Executive Officer has the broadest powers to act in the Company’s name in all circumstances, subject to the restrictions on his powers and the financial authorisations decided by the Board of Directors, as set out in its internal rules which may be consulted on the CNP Assurances website9. The restrictions on his powers concern in particular acquisitions exceeding certain financial limits or that are not fully aligned with the strategy decided by the Board.
The Chief Executive Officer actively participates in Board Meetings and keeps the Board abreast of the day-to-day management of the Company and all significant events affecting the Company. He helps devise and update the strategy decided by the Board.
The Chief Executive Officer is responsible for managing day-to-day operations. A key concern of Executive Management is to ensure that internal operations comply with the policies and strategies decided by the Board and that the link between strategy and shareholder value is maintained.
9 http://www.cnp.fr/en/The-Group/Governance/Corporate-governance
The Offi The effe
1
The stra Chie The out man The Exec The segm It ov Com part are At le furt dep
2.
The Exec The and The resp Gro cove fram inve risk The dep in th
Chief Execu cers and the Chief Execu ectively run C
1.4. Execu
Chief Execu tegy decided ef Executive
Executive C initiatives a nagerial and Executive C cutive Office Committee ment, and al versees the mpany’s resu
ticularly focu key drivers o east one Exe
her assuran partment coo
Key fun
holders of t cutive Office y are regula challenges a e Risk Mana
ponsible for up’s risk ma ered by the mework to th estment guid profile base e Complianc partment ide
he following
utive Officer e members o utive Officer CNP Assuranc
utive Com
utive Officer h d by the Boa Officers and Committee m
and monitor operational Committee di er. Periodic m
e reviews bu lso examines consistency ults and fin uses on ensu of good corp ecutive Comm
ce of consist ordinates the
ctions
the four key er.
rly invited to associated w gement fun coordinating nagement st system and he different b delines and (i ed on the fou ce function ntifies, asses main areas:
r is assisted of the Execut and the De ces.
mmittee
has set up an ard of Direct
ten other se meets once a rs cross-func
skills within iscusses cros management
udgets, fina s proposed a y of action p ancial ratios uring the effic porate govern mittee mem tent strategi e operationa
functions (ri
o attend Boa with these fun
nction is pre g the risk ma trategy throu that the rel businesses t iv) delivers a ur-eyes princ n is present
sses and pre (i) business
in his man ive Committ puty Chief E
n Executive C ors. The Com enior executi a week. As w ctional proje an internal s ss-functiona t indicators a
ncial statem acquisitions.
plans implem s and review ciency of inte nance.
ber sits on th c manageme l manageme
sk managem
ard Meetings nctions.
esented in se anagement sy
ugh risk poli ated surveill hrough such preliminary iple.
ted in sectio events the oc
ethics (profe
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Executive Off
Committee t mmittee com
ives.
well as acting ects. It com structure.
l and strateg are used to tr ments, quart
mented by t ws the actio ernal control
he Board of ent across th ent of the int
ment, compli
s to provide
ection B3 be system. The d
cies and eco lance measu h measures a y opinion on
on B5 belo ccurrence of essional secr
d operationa
ficer and Fin
o lead the Co mprises the C
g in a strateg bines a ver
gic managem rack the Com terly risk re
he business on plans to l, internal au
Directors of he Group. In ernational su
ance, actuar
the Board w
low. It is run department onomic capit ures are effe as underwrit decisions wi
w. It is run f compliance recy and con
l duties by
nance Directo
ompany's op Chief Execut
gic planning y broad ran
ment issues f mpany's busi ports and p
units and s o be implem dit and risk m
f each of the n addition, th ubsidiaries.
rial and inter
with insight in
by the Grou (i) applies th al estimates ective; (iii) ro ting policies, th a significa
n by the Co risks, and p fidentiality, p
the Deputy
or are the tw
perations an tive Officer, t
role, it coord nge of techn
for final decis ness.
profit foreca
subsidiaries.
mented by t managemen
main subsid he Internatio
rnal audit) re
nto the risks
up Risk depa he risk appeti s; (ii) ensures lls down the delegations ant impact o
ompliance d provides advi prevention o
y Chief Execu
wo persons
d implemen the three De
dinates and nical, marke
sion by the C
asts by busi
. It monitors the Compan nt systems, w
diaries, provi onal Partners
eport to the C
s, responsibi
artment, whi ite defined in s that all risks e risk-accepta of authority n the Compa
department.
ice and guida of insider trad
26
utive
who
t the eputy
rolls eting,
Chief
ness
s the ny. It which
iding ships
Chief
lities
ch is n the s are ance y and any's
The ance ding,
