FRR 2016 ANNUAL REPORT18

The FRR s estimated liabilities and assets (EUR billion)

0

2

4

6

8

10

12

14

16

18

20

22

CADES annual payment Estimated net assed value in 2024

2017 2018 2019 2020 2021 2022 2023 2024

In line with this initial objective, a second aim consists in maximising the value of the surplus over time. In particular, the FRR must create value for the State, by delivering a performance in excess of the cost of the French debt.

Main objective: to service the FRR s liabilities

Compliance with this objective is assessed by means of several risk metrics applied to the surplus.

Interest rate risk is linked to the hedging of lia- bilities. The hedging assets enable the FRR to ensure that it is in a position to fully honour its annual liability payments. To that end, even in an extremely low interest rate environment, they must represent a substantial proportion of liabilities. The hedging assets include «OAT» (French Treasury Bonds)4 delivering an income stream (from maturing issues and coupons), in proportion to the amount of the FRR s liabilities, as well as euro or dollar-denominated invest- ment grade corporate bonds (rated at least BBB-).

4 Held until maturity.

SURPLUS EUR 14.23

billion

LIABILITIES EUR 16.91

billion

LIABILITY HEDGING ASSETS

EUR 15.26 billion

PERFORMANCE SEEKING ASSETS

EUR 15.88 billion