Universal Registration Document 2020

16.1.2 Actuarial assumptions and sensitivity analyses

The following actuarial assumptions are used:

(1) The interest income generated by assets is calculated using the discount rate. The difference between this interest income and the return on assets is recorded in equity.
(2) Average wage increase rate, including inflation and projected over a full career.

In France, the discount rate used for employee benefit obligations is determined by applying the yield rate on high-quality corporate bonds of appropriate duration to maturities corresponding to the future disbursements resulting from these obligations. For longer durations, the calculation also takes into consideration data from a wider selection of corporate bonds adjusted for comparability with the high-quality bonds, given the smaller panel of bonds with these durations since 2017. The decrease in the discount rate essentially relates to the decrease in risk-free rates observed over 2020.

Changes in the economic and market parameters used have led the Group to set the discount rate at 0.90% at 31 December 2020 (1.30% at 31 December 2019).

The inflation assumption is based on an inflation curve constructed from economic forecasts and inflation-indexed market products.

As a result of changes in the economic and market parameters, the assumed average inflation rate used as the Group’s benchmark for Euro zone countries is 1.2% at 31 December 2020 (1.3% at 31 December 2019).

The wage law used to calculate obligations refers to wage increases observed over the period 2015-2018 (adjusted for non-recurring effects).

The mortality table used to calculate obligations is based on the INSEE 2013-2070 generation table (produced by the French statistics office), corrected for differences in mortality between the general French population and the population covered by the IEG regime.

In the United Kingdom, the discount rate used for employee benefit obligations is determined by applying the yield rate on high-quality corporate bonds of appropriate duration to maturities corresponding to the future disbursements resulting from these obligations.