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Marie Lemarie : “We have halved our equity exposures between 2011 and 2016”

According to Marie Lemarie, director of investments at Groupama SA, the conjunction of solvency and low-rate environment has militated for a reduction of the equity risk. Groupama has halved its equity exposures between 2011 and 2016.

Article also available in : English EN | français FR

Next-Finance : What was the impact of Solvency II on your activity / team? Did you need to recruit? Mobilize resources?

Marie Lemarie : Solvency 2 has been and continues to be a project that mobilizes resources. This project is a business project that mobilizes far beyond the financial sphere alone. It is therefore based both on a dedicated budget whose IT component is important and on a strong team commitment. The team perimeter is very broad (It naturally encompasses in first instance the financial department of the group and of its entities, but also the asset manager, the IT functions, the internal control, the monitoring of profitability and product pricing, etc….).

Do you use an internal model or a standard model?

We use a partial internal model that applies to non-life insurance risks in France. This partial internal model approved by the ACPR in 2015 allows to integrate into the capital requirement calculation all the historical data which show a subscription risk lower than anticipated within the framework of the standard formula. We use the standard formula in particular for market risks and for life insurance activities.

What is the impact of Solvency II for your asset allocation? What about the proportion bonds in your portfolio?

The conjunction of solvency and low-rate environment has militated for a reduction of the equity risk. We have halved our equity exposures between 2011 and 2016. At the same time, we have been looking for additional returns on less liquid bond asset classes, such as loan funds. We maintain a large number of sovereign bonds in our bond portfolios.

We invest in fixed income hedging strategies when the cost of moving from fixed to floating rate is reasonable and justified in light of our market expectations...
Marie Lemarie, Director of investments at Groupama SA

Do you use hedging strategies for your portfolios via derivatives? Or do you invest directly in covered funds where the manager himself provides the hedge?

We use active strategies in terms of derivatives that we manage ourselves, in collaboration with our asset management division. Hedging strategies are only put in place if our beliefs about market outlook are sufficient to justify the cost associated with the option premium. We use bond hedging strategies to expose our portfolios to variable rates. Similarly, we invest in this type of strategy when the cost of moving from fixed to floating rate is reasonable and justified in light of our market expectations.

Debt funds, infrastructure debt or real estate are rather adequately addressed by Solvency II. Have you increased your outstanding assets for these asset classes?

We are convinced that a source of return that is entirely acceptable in terms of our management constraints is the most likely match to the illiquidity premium. We have invested up to 1 billion euros in this type of strategy, in support of company financing, real estate or infrastructure projects. Processing under S2 is not the primary driver of our investment choices in this area. Our principal objective is to select secure projects and aligning our interests with our partners.

We are also convinced that the treatment of strategic holdings (which reflects long-term ownership) can be managed favorably...
Marie Lemarie, Director of investments at Groupama SA

What should be done about Solvency II?

Solvency 2 imports market volatility in insurer coverage ratios. It is essential to retain or amplify counter-cyclical measures (calibration action, calibration of the volatility adjustment on the yield curve). We are also convinced that the treatment of strategic holdings (which reflects long-term ownership) can be managed favorably.

Paul Monthe , RF , December 2016

Article also available in : English EN | français FR

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