Statutory auditors' report & consolidated financial statements 2012 - BNP Paribas Cardif

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<ul><li><p> BNP PARIBAS CARDIF Statutory auditors report on the consolidated financial statements (For the year ended 31 December 2012) </p></li><li><p> PricewaterhouseCoopers Audit 63, rue de Villiers 92208 Neuilly-sur-Seine Cedex </p><p>Deloitte &amp; Associs 185, avenue Charles de Gaulle 92524 Neuilly-sur-Seine Cedex </p><p>Statutory auditors report on the consolidated financial statements </p><p>(For the year ended 31 December 2012) </p><p> To the Shareholders BNP PARIBAS CARDIF 1, boulevard Haussmann 75009 Paris </p><p>This is a free translation into English of the statutory auditors report on the consolidated financial statements issued in French and is provided solely for the convenience of English speaking users. The statutory auditors report includes information specifically required by French law in such reports, whether modified or not. This information presented below is the audit opinion on the consolidated financial statements and includes an explanatory paragraph discussing the auditors assessments of certain significant accounting and auditing matters. These assessments were considered for the purpose of issuing an audit opinion on the consolidated financial statements taken as a whole and not to provide separate assurance on individual account balances, transactions or disclosures. </p><p>This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France. </p><p> In compliance with the assignment entrusted to us by your General Shareholders Meeting, we hereby report to you, for the year ended 31 December 2012, on: </p><p> the audit of the accompanying consolidated financial statements of BNP PARIBAS CARDIF ; </p><p> the justification of our assessments; </p><p> the specific verification required by law. These consolidated financial statements have been approved by the Board of Directors. Our role is to express an opinion on these consolidated financial statements based on our audit. I - Opinion on the consolidated financial statements We conducted our audit in accordance with professional standards applicable in France; those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit involves performing procedures, using sample techniques or other methods of selection, to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made, as well as the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. In our opinion, the consolidated financial statements give a true and fair view of the assets and liabilities and of the financial position of the Group as at 31 December 2012 and of the results of its operations for the year then ended in accordance with the accounting rules and principles applicable in France. II - Justification of our assessments The choice of underlying economic assumptions required for the preparation of financial statements of insurance companies has been made particularly complex due to the persistently challenging economic and financial conditions. In particular future trends in interest rates could differ sharply from current assumptions and give rise to varying direct and indirect effects. In this context and in accordance with Article L.823-9 of the French Commercial Code (Code de commerce) requiring statutory auditors to justify their assessments, we bring to your attention the following matters: </p></li><li><p>2 </p><p>Consolidated financial statements at December 31, 2012 </p><p> Certain technical items specific to insurance recorded under assets and liabilities in the Groups consolidated financial statements are estimated according to regulatory rules and on the basis of statistical and actuarial data, in particular technical reserves. The methods used to determine these latest are described in the note 2.2.6. to the consolidated financial statements. </p><p> We assessed the reasonableness of the assumptions used in the calculation models, based on the Groups experience, its regulatory and economic environment and the consistency of these assumptions taken as a whole. </p><p> Financial and real estate assets are valued and impaired using the principles applying to each category and described in the note 2.2.2. to the consolidated financial statements. </p><p> We verified the methods used to identify the Groups exposures and to value and impair financial instruments. We assessed the appropriateness of the resulting valuations and impairments regarding the situation of the assets and the volatility of financial markets. We also ensured that impairments were consistent with the companys intent to hold the assets. The capacity of holding the assets over a time period concordant with the intent to hold them was confirmed to us. </p><p> These assessments were made as part of our audit of the consolidated financial statements taken as a whole, and therefore contributed to the opinion we formed which is expressed in the first part of this report. III - Specific verification As required by law, we have also verified in accordance with professional standards applicable in France the information presented in the Groups management report. We have no matters to report as to its fair presentation and its consistency with the consolidated financial statements. </p><p>Neuilly-sur-Seine, on April 29, 2013 </p><p>The statutory auditors </p><p>PricewaterhouseCoopers Audit Deloitte &amp; Associs </p><p>Michel Laforce </p><p>Patrice Morot </p><p>Jrme Lemierre </p></li><li><p>3 </p><p>Consolidated financial statements at December 31, 2012 </p><p>BNP PARIBAS CARDIF </p><p>CONSOLIDATED FINANCIAL STATEMENTS </p><p>At December 31, 2012 </p></li><li><p>4 </p><p>Consolidated financial statements at December 31, 2012 </p><p> BNP PARIBAS CARDIF 2012 CONSOLIDATED FINANCIAL STATEMENTS </p><p>CONSOLIDATED BALANCE SHEET (before appropriation) </p><p> (in millions of euros) </p><p>References in the Notes column refer to notes in the Appendices, in which all figures are expressed in millions of euros unless indicated. </p><p>A S S E T S Note 31.12.2012 31.12.2011</p><p>Goodwill 3.1.1 135.2 139.0</p><p>Intangible assets 3.1.2 565.6 627.6</p><p>Insurance company investments 3.1.3 105,016.2 103,596.1</p><p>- Investments in real estate properties 3,610.3 3,463.5</p><p>- Investments in affiliated undertakings and participating interests 5,094.9 8,074.1</p><p>- Other investments 96,310.9 92,085.5</p><p>Investments backing unit-linked contracts 3.1.4 32,571.8 30,583.3</p><p>Investments from other companies 3.1.5 314.6 306.2</p><p>Investments in associates - Equity method 3.1.6 483.2 422.1</p><p>Reinsurers share of technical reserves 3.1.7 2,742.1 2,779.2</p><p>Receivables from direct insurance or reinsurance 3.1.8 1,537.9 1,175.1</p><p>Receivables from entities in the banking sector 3.1.9 932.5 692.1</p><p>Other receivables 3.1.10 2,192.8 1,383.8</p><p>Other assets 3.1.11 18.1 31.3</p><p>Accrued income and other assets 3.1.12 3,085.7 4,078.4</p><p>- Deferred acquisition costs 1,198.7 2,110.0</p><p>- Other 1,887.1 1,968.4</p><p>Foreign exchange differences 2.9 18.5</p><p>TOTAL ASSETS 149,598.6 145,992.7</p></li><li><p>5 </p><p>Consolidated financial statements at December 31, 2012 </p><p>(in millions of euros) </p><p>References in the Notes column refer to notes in the Appendices, in which all figures are expressed in millions of euros unless indicated. </p><p>CONSOLIDATED TABLE OF COMMITMENTS GIVEN AND RECEIVED (in millions of euros) </p><p> Commitments relating to financial instruments are detailed in a specific schedule in note 3.3.2. </p><p>L I A B I L I T I E S Note 31.12.2012 31.12.2011</p><p>Shareholders equity - Group share 3.2.1 4,190.6 4,893.0</p><p>- Share capital 151.0 999.7</p><p>- Shares premiums 3,813.3 3,813.3</p><p>- Consolidated reserves (157.1) (377.8)</p><p>- Net consolidated income 387.5 457.8</p><p>Minority interests 27.1 18.5</p><p>Subordinated debts 3.2.2 2,588.3 1,385.9</p><p>Gross technical reserves 3.2.3 95,617.9 94,811.7</p><p>- Life Technical reserves 92,350.7 91,504.2</p><p>- Non Life Technical reserves 3,267.2 3,307.5</p><p>Technical reserves related to unit-linked contracts 3.1.4 33,121.8 31,348.8</p><p>Provisions for risks and charges 3.2.4 161.2 156.6</p><p>Debts arising out of direct insurance or reinsurance 3.2.5 3,510.2 3,053.4</p><p>Debt securities - -</p><p>Liabilities due to banking sector companies 3.2.6 8,365.7 8,591.1</p><p>Other debts 3.2.7 1,699.0 1,473.6</p><p>Accrued expenses and other liabilities 3.2.8 316.7 260.1</p><p>Foreign exchange differences - -</p><p>TOTAL LIABILITIES 149,598.6 145,992.7</p><p>COMMITMENTS RECEIVED AND GIVEN Note</p><p>Commitments received 3.3 801.5 717.9</p><p>- Insurance companies 729.5 717.9</p><p>- Other companies 72.0 0.0</p><p>Commitments given 3.3 1,150.5 1,045.3</p><p>- Insurance companies 937.0 830.4</p><p>- Other companies 213.5 214.9</p><p>31.12.201131.12.2012</p></li><li><p>6 </p><p>Consolidated financial statements at December 31, 2012 </p><p>CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2012 (in millions of euros) </p><p> References in the Notes column refer to notes in the Appendices, in which all figures are expressed in millions of euros unless indicated. </p><p>NoteNon-life </p><p>insurance</p><p>Life </p><p>insuranceBanking</p><p>Other </p><p>businesses31.12.2012 31.12.2011</p><p>Gross written premiums 4.2 2,182.7 16,315.4 18,498.1 16,936.1</p><p>Change in unearned premiums (40.3) - (40.3) (158.8)</p><p>Earned premiums 2,142.4 16,315.4 - - 18,457.7 16,777.4</p><p>Produits dexploitation bancaire - -</p><p>Income from other activ ities 4.1.3 4.4 4.4 3.7</p><p>Other operating income 3.6 197.2 200.8 28.7</p><p>Net investment income 3.4.1 114.4 6,626.8 (113.5) 6,627.6 1,240.2</p><p>Operating revenues 2,260.3 23,139.5 - (109.2) 25,290.6 18,050.0</p><p>Technical charges relating to insurance activ ities (522.6) (19,964.7) (20,499.4) (13,572.8)</p><p>Net result from outward reinsurance 4.1 (45.3) 10.7 (34.6) (61.4)</p><p>Charges dexploitation bancaire - -</p><p>Expenses on other activ ities 4.1.3 (133.9) (133.9) (127.5)</p><p>Management expenses 3.4.2 (1,413.9) (2,590.8) (3.4) (4,008.1) (3,596.6)</p><p>Operating expenses (1,981.8) (22,544.9) - (137.3) (24,663.9) (17,358.3)</p><p>Net operating income 278.5 594.6 - (246.4) 626.6 691.7</p><p>Other income and exepenses 1.2 (0.1)</p><p>Exceptional result 3.4.3 5.8 (6.3)</p><p>Corporate Income tax 3.4.4 (286.7) (289.8)</p><p>NET INCOME FROM CONSOLIDATED </p><p>COMPANIES347.1 395.5</p><p>Shares in earnings of associates 42.0 11.8</p><p>Amortization of goodwill 3.1.1 (4.9) 49.6</p><p>NET CONSOLIDATED INCOME AFTER TAX 384.2 456.9</p><p>Minority interests (0.8) 0.9</p><p>NET CONSOLIDATED INCOME - GROUP </p><p>SHARE383.5 457.8</p><p>Earnings per share (in euros) 6.14 7.33</p><p>Diluted earnings per share (in euros) 6.14 7.33</p></li><li><p>7 </p><p>Consolidated financial statements at December 31, 2012 </p><p>NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS </p><p>1. CONSISTENCY OF ACCOUNTING PRINCIPLES </p><p>1.1. Basis for preparation The consolidated financial statements of BNP PARIBAS CARDIF are prepared in compliance with the rules on consolidation and presentation set out in regulation n2000-05 dated 7 December 2000 of the Comit de la Rglementation Comptable (CRC) for companies governed by the French Insurance Code (Code des assurances), including any modification introduced subsequently by other CRC regulations. The consolidated financial statements present the Groups business activities by segment. These categorise business activities into Life Insurance, Non-Life Insurance and other businesses. Each segment follows its own chart of accounts, respectively the insurance company chart of accounts (as defined in Decree n94-481 of 8 June 1994 and its implementing order of 20 June 1994) and the general chart of accounts (for other businesses), subject to specific provisions regarding to consolidation and presentation rules of consolidated financial statements mentioned above. </p><p>1.2. Changes in accounting standards </p><p>The accounting rules and methods used for the financial year were unchanged from those used in the preparation of consolidated financial </p><p>statements for 2011. </p><p>1.3. Highlights </p><p> Exposure to sovereign risk </p><p>From May 2011, the euro zone member countries in association with the International Monetary Fund (IMF) defined a European solidarity policy of </p><p>110 billions of euros in return of a reduction in the Greek budget deficit. </p><p>On July 21st, 2011, the 17 euro zone members agreed on putting in place support arrangements, leading to the formulation and implementation of a </p><p>second plan for Greece. This plan was confirmed in a new meeting of euro zone members on October 26th, 2011 and was based on private-sector </p><p>creditors waiving 50% of amounts owed to them </p><p>Since the arrangements for implementing this agreement had not been definitively settled at 31 December 2011 by all of the international institutions </p><p>concerned, the BNP Paribas Cardif Group determined the impairment loss on all the securities it held on the basis of the most recent proposal put </p><p>forward by private-sector creditors represented by the Institute of International Finance (IIF). </p><p>On the basis of (1) a 50% haircut, (2) the immediate repayment of 15% of amounts owed through securities of the European Financial Stability Facility </p><p>(EFSF) with a maturity of two years and paying market interest rates, (3) the payment of accrued interest through EFSF securities with a maturity of </p><p>six months and paying market interest rates, (4) a coupon of 3% until 2020 and 3.75% subsequently on securities maturing between 2023 and 2042 </p><p>received in exchange for existing securities and (5) a discount rate of 12% on future cash flows, the group estimated the likely loss on existing </p><p>securities as 75%, which is almost identical to that priced in by the market through the average discount on these securities at 31 December 2011. A </p><p>provision for Greek credit risk was then recognized in the consolidated financial statements to adjust the net book value of sovereign greek bonds to </p><p>25% of nominal value. </p><p>On February 21st, 2012, the agreement was refined and supplemented between the representatives of the Greek government, private-sector </p><p>investors (PSI) and the Eurogroup. This agreement was designed to enable Greece to achieve a debt ratio of 120.5% in 2020 compared to 160% in </p><p>2011. It also aims to achieve the financial stability sought through the plan.. This agreement led private-sector investors to waive 53.5% of the </p><p>nominal value of their Greek bonds, reducing Greece's debt by around EUR 107 billion, in return for a public-sector contribution of EUR 30 billion. </p><p>On 12 March 2012, the exchange of Greek sovereign debt securities was realised, with the following main characteristics: </p><p>- 53.5% of the principal of previous securities was waived; </p></li><li><p>8 </p><p>Consolidated financial statements at December 31, 2012 </p><p>- 31.5% of the principal of previous securities were exchanged for 20 bonds issued by Greece with maturities of between 11 and 30 </p><p>years. The coupon on new bonds will be 2% from 2012 to 2015, rising to 3% from 2015 to 2020, 3.6% in 2021 and 4.3% until 2042. </p><p>These securities are accounted for as Available-for-sale assets; </p><p>- - 15% of the principal of previous securities has been redeemed immediately in th...</p></li></ul>

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