2007 - April

1.0
Management report
Furthermore, APRIL GROUP’s portfolios do not include any
CDO or other securitization vehicles.
APRIL GROUP is also subject to a credit risk through
reinsurers, to which companies transfer part of the risks on
their insurance policies.
The Group only works with a restricted number of reinsurers
BREAKDOWN OF PREMIUMS CEDED
BY REINSURER RATING (%)
Sensitivity of the securities portfolio:
Fixed-income markets
On a regular basis, i.e. every quarter, a report presenting
the sensitivity of the portfolio and liabilities to changes in
interest rates is submitted to the supervisory authorities.
At December 31 st , 2007, the average sensitivity of APRIL
GROUP’s bond portfolio to changes in interest rates came
out at 2.79 (2.40 at December 31st, 2006). If we factor in
the entire portfolio (including equities and other assets), this
drops 1.61 (1.56 at December 31 st , 2006).
This means that if interest rates go up by 1 point in absolute
value (e.g. if they rise from 4% to 5%), APRIL GROUP’s
portfolio value would drop 1.61%.
Equity markets
The equity portfolio is sensitive to an upturn or downturn on
the financial markets for shares.
In this respect, and in light of the portfolio’s makeup, the risk
on the equity portfolio can be assimilated with the risk on
whose solvency is recognized: over 75% of reinsurance
transfers are carried out with reinsurers that are rated at
least A by Standard & Poor’s.
At December 31 st , 2007, the breakdown of reinsured
premiums by reinsurer rating was as follows:
N.D. AAA AA A+ to A-
BBB+ to
BBB-
< BBB- TOTAL
% of premiums ceded 22.7% 1.3% 52.6 % 23.0% 0.4% 100.0%
the main financial market indexes such as the EUROSTOXX
50. In this way, a 10% reduction in the EUROSTOXX 50 index
would result in a 5,251 thousand euro reduction for the
entire portfolio.
Monitoring procedures and resources in place
With a view to improving performance and building up a
clearer picture of market risks, the asset management
activities of insurance companies are delegated to a
specialized management company, accredited by the French
securities regulator (Autorité des Marchés Financiers, AMF).
Under this delegation, limits are set in terms of the
percentage of the portfolio that may be invested on
various bond and equity resources (dispersion ratios,
influence ratios, restrictions in terms of issuer ratings, etc.).
In addition, the French Insurance Code, which governs
insurance companies, also sets investment caps.
Thanks to comprehensive reports provided by the authorized
manager, notably including accounting elements (inventory,
book income, unrealized capital gains or losses, etc.) and a
summary of performances and various levels of exposure to
the markets, the financial portfolio is monitored on a monthly
basis.
The members of the Finance Committee, the APRIL GROUP’s
governance body, include the heads of the various companies
as well as representatives from the authorized manager. This
Committee meets every quarter and plays an essential role in
the monitoring and management of market risks. During its
meetings, it is responsible for analyzing the various markets
as well as the economic and financial environment, taking
stock of management over the past period, and setting the
general financial management strategies, as well as future
management restrictions.
Legal risks:
The legal policy, notably in terms of corporate law, stock
markets, tax optimization and monitoring, is overseen by the
APRIL GROUP Legal Affairs and Risk Division.
At the same time, any legal developments impacting our
business are tracked and covered by action plans drawn up
by companies’ operational legal departments. For instance,
a working group has analyzed the consequences of the new
intermediation regulations, issued recommendations for the
various business divisions, and drawn up action plans for all
of the Group’s companies.
In accordance with regulations, the operational activities of
Group companies are covered by a broker civil liability policy,
extended to include banking and financial prospecting activities.
59
Return to the contents section