XML 70 R40.htm IDEA: XBRL DOCUMENT v3.10.0.1
Financial Instrument Risk Management Financial Instrument Risk Management (Tables)
 12 Months Ended
Dec. 31, 2018
Financial Instruments [Abstract]  
Disclosure of maximum exposure to credit risk
The positive fair value of derivative assets is used to determine the credit risk exposure if the counterparties were to default. The credit risk exposure is the cost of replacing, at current market rates, all derivative contracts with a positive fair value. Additionally, we have credit exposure to items not on the Consolidated Statements of Financial Position as follows:
As at December 31,
2018
 
2017
 
Off-balance sheet items:
 
 
 
 
Loan commitments(1)
 
$
2,460

 
$
1,740

Guarantees
 
—

 
12

Total off-balance sheet items
 
$
2,460

 
$
1,752


(1) Loan commitments include commitments to extend credit under commercial and multi-family residential mortgages and private debt securities not quoted in an active market. Commitments on debt securities contain provisions that allow for withdrawal of the commitment if there is deterioration in the credit quality of the borrower.
Disclosure of right of offset and collateral
We do not offset financial instruments in our Consolidated Statements of Financial Position, as our rights of offset are conditional. The following tables present the effect of conditional netting and similar arrangements. Similar arrangements include global master repurchase agreements, security lending agreements, and any related rights to financial collateral.

As at December 31,
2018
2017
 
Financial instruments presented in the Consolidated Statements of Financial Position(1)
 
Related amounts not set off in
the Consolidated Statements of Financial Position
 
 
Financial instruments presented in the Consolidated Statements of Financial Position(1)
 
Related amounts not set off in
the Consolidated Statements of Financial Position
 
 
 
Financial instruments subject to master netting or similar agreements
 
Financial collateral (received) pledged(2)
 
 
Net amount

Financial instruments subject to master netting or similar agreements
 
Financial collateral (received) pledged(2)
 
 
Net amount

Financial assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative assets (Note 6.A.v)
 
$
1,112

 
$
(768
)
 
$
(298
)
 
$
46

 
$
1,478

 
$
(694
)
 
$
(662
)
 
$
122

Reverse repurchase agreements (Note 8)
 
17

 
(17
)
 
—

 
—

 
—

 
—

 
—

 
—

Total financial assets
 
$
1,129

 
$
(785
)

$
(298
)

$
46


$
1,478


$
(694
)

$
(662
)

$
122

Financial liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative liabilities
 
$
(2,295
)
 
$
768

 
$
1,132

 
$
(395
)
 
$
(1,756
)
 
$
694

 
$
754

 
$
(308
)
Repurchase agreements (Note 5.F.ii)
 
(1,824
)
 
17

 
1,807

 
—

 
(1,976
)
 
—

 
1,976

 
—

Total financial liabilities
 
$
(4,119
)
 
$
785


$
2,939


$
(395
)

$
(3,732
)

$
694


$
2,730


$
(308
)

(1) Net amounts of the financial instruments presented in our Consolidated Statements of Financial Position are the same as our gross recognized financial instruments, as we do not offset financial instruments in our Consolidated Statements of Financial Position.
(2) 
Financial collateral excludes overcollateralization and for exchange-traded derivatives, initial margin. Total financial collateral, including initial margin and overcollateralization, received on derivative assets was $470 ($853 as at December 31, 2017), received on reverse repurchase agreements was $17 ($nil as at December 31, 2017), pledged on derivative liabilities was $1,726 ($1,127 as at December 31, 2017), and pledged on repurchase agreements was $1,824 ($1,976 as at December 31, 2017).
Disclosure of financial assets
The following table summarizes the financial assets included in our Consolidated Statements of Financial Position and the asset classifications applicable to these assets:
Cash, cash equivalents and short-term securities
FVTPL
Debt securities
FVTPL and AFS
Equity securities
FVTPL and AFS
Mortgages and loans
Loans and receivables
Other invested assets
FVTPL and AFS
Policy loans
Loans and receivables
Cash, cash equivalents and short-term securities presented in our Consolidated Statements of Financial Position and Net cash, cash equivalents and short-term securities presented in our Consolidated Statements of Cash Flows consist of the following:
As at December 31,
2018
 
2017
 
Cash
 
$
2,089

 
$
1,504

Cash equivalents
 
5,209

 
4,592

Short-term securities
 
2,208

 
2,794

Cash, cash equivalents and short-term securities
 
9,506

 
8,890

Less: Bank overdraft, recorded in Other liabilities
 
104

 
140

Net cash, cash equivalents and short-term securities
 
$
9,402

 
$
8,750

The carrying values and fair values of our financial assets are shown in the following table:
As at
 
December 31, 2018
 
December 31, 2017
 
 
Carrying value

 
Fair value

 
Carrying value

 
Fair value

Assets
 
 
 
 
 
 
 
 
Cash, cash equivalents and short-term securities
 
$
9,506

 
$
9,506

 
$
8,890

 
$
8,890

Debt securities – fair value through profit or loss
 
61,402

 
61,402

 
59,967

 
59,967

Debt securities – available-for-sale
 
13,041

 
13,041

 
12,652

 
12,652

Equity securities – fair value through profit or loss
 
4,014

 
4,014

 
5,078

 
5,078

Equity securities – available-for-sale
 
620

 
620

 
942

 
942

Mortgages and loans
 
46,822

 
48,434

 
42,805

 
45,406

Derivative assets
 
1,112

 
1,112

 
1,478

 
1,478

Other invested assets – fair value through profit or loss(1)
 
2,701

 
2,701

 
2,211

 
2,211

Other invested assets – available-for-sale(1) 
 
621

 
621

 
562

 
562

Policy loans
 
3,222

 
3,222

 
3,106

 
3,106

Total financial assets(2)
 
$
143,061

 
$
144,673

 
$
137,691


$
140,292


(1) Other invested assets (FVTPL and AFS) include our investments in segregated funds, mutual funds, and limited partnerships.
(2) Invested assets on our Consolidated Statements of Financial Position of $151,726 ($146,139 as at December 31, 2017) includes Total financial assets in this table, Investment properties of $7,157 ($7,067 as at December 31, 2017), and Other invested assets – non-financial assets of $1,508 ($1,381 as at December 31, 2017).

The following table provides a reconciliation of the beginning and ending balances for assets that are categorized in Level 3:
For the year ended
Debt securities – fair value through profit or loss 
 
Debt securities – available-for-sale
 
Equity securities – fair value through profit or loss
 
Equity securities – available-for-sale
 
Other invested assets
 
Investment properties
 
Total invested assets measured at fair value
 
Investments for account of segregated fund holders
 
Total assets measured at fair value
 
December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
 
$
417

 
$
136

 
$
167

 
$
38

 
$
1,721

 
$
7,067

 
$
9,546

 
$
1,154

 
$
10,700

Included in net income(1)(3)(5)          
 
(4
)
 
—

 
9

 
—

 
69

 
441

 
515

 
29

 
544

Included in OCI(3)
 
—

 
(5
)
 
—

 
(8
)
 
(9
)
 
—

 
(22
)
 
—

 
(22
)
Purchases
 
164

 
140

 
19

 
4

 
644

 
621

 
1,592

 
430

 
2,022

Sales
 
(49
)
 
(6
)
 
—

 
(1
)
 
(227
)
 
(1,113
)
 
(1,396
)
 
(31
)
 
(1,427
)
Settlements
 
(21
)
 
(4
)
 
—

 
(1
)
 
—

 
—

 
(26
)
 
(1
)
 
(27
)
Transfers into Level 3(2)
 
12

 
1

 
—

 
1

 
—

 
—

 
14

 
4

 
18

Transfers (out) of Level 3(2)
 
(159
)
 
(221
)
 
—

 
—

 
—

 
—

 
(380
)
 
(5
)
 
(385
)
Foreign currency translation(4) 
 
13

 
2

 
7

 
3

 
43

 
141

 
209

 
16

 
225

Ending balance
 
$
373


$
43


$
202

 
$
36


$
2,241


$
7,157


$
10,052


$
1,596

 
$
11,648

Gains (losses) included in earnings relating to instruments still held at the reporting date(1)
 
$
5

 
$
—

 
$
9

 
$
—

 
$
69

 
$
331

 
$
414

 
$
27

 
$
441

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
 
$
442

 
$
191

 
$
144

 
$
7

 
$
1,544

 
$
6,592

 
$
8,920

 
$
865

 
$
9,785

Included in net income(1)(3)(5)          
 
(3
)
 
(1
)
 
7

 
—

 
(59
)
 
158

 
102

 
60

 
162

Included in OCI(3)
 
—

 
—

 
—

 
—

 
18

 
—

 
18

 
—

 
18

Purchases
 
180

 
215

 
34

 
32

 
505

 
448

 
1,414

 
302

 
1,716

Sales
 
(41
)
 
(2
)
 
(7
)
 
—

 
(318
)
 
(277
)
 
(645
)
 
(77
)
 
(722
)
Settlements
 
(66
)
 
(5
)
 
(7
)
 
—

 
—

 
—

 
(78
)
 
(1
)
 
(79
)
Transfers into Level 3(2)(6)
 
204

 
—

 
—

 
—

 
49

 
259

 
512

 
—

 
512

Transfers (out) of Level 3(2)
 
(284
)
 
(262
)
 
—

 
—

 
—

 
—

 
(546
)
 
—

 
(546
)
Foreign currency translation(4) 
(15
)
 
—

 
(4
)
 
(1
)
 
(18
)
 
(113
)
 
(151
)
 
5

 
(146
)
Ending balance
 
$
417


$
136


$
167


$
38


$
1,721


$
7,067


$
9,546


$
1,154


$
10,700

Gains (losses) included in earnings relating to instruments still held at the reporting date(1)
 
$
—

 
$
—

 
$
8

 
$
—

 
$
(59
)
 
$
147

 
$
96

 
$
27

 
$
123

(1) Included in Net investment income (loss) for Total invested assets measured at fair value in our Consolidated Statements of Operations.
(2) Transfers into Level 3 occur when the inputs used to price the assets and liabilities lack observable market data, and as a result, no longer meet the Level 1 or 2 definitions at the reporting date. Transfers out of Level 3 occur when the pricing inputs become more transparent and satisfy the Level 1 or 2 criteria and are primarily the result of observable market data being available at the reporting date, thus removing the requirement to rely on inputs that lack observability.
(3) Total gains and losses in net income (loss) and OCI are calculated assuming transfers into or out of Level 3 occur at the beginning of the period. For an asset or liability that transfers into Level 3 during the reporting period, the entire change in fair value for the period is included in the table above. For transfers out of Level 3 during the reporting period, the change in fair value for the period is excluded from the table above.
(4) Foreign currency translation relates to the foreign exchange impact of translating Level 3 assets and liabilities of foreign subsidiaries from their functional currencies to Canadian dollars.
(5) Investment properties included in net income is comprised of fair value changes on investment properties of $529 ($211 in 2017) net of amortization of leasing commissions and tenant inducements of $88 ($53 in 2017).
(6) Transfers into Level 3 in Investment properties includes the reclassification of our former head office location in 2017, previously classified as owner-occupied with a fair value of $259 at the time of transfer from Other assets to Investment properties. The reclassification recognized a revaluation surplus of $172, which was recorded as an increase of $139 of accumulated other comprehensive income, net of taxes of $33.

The carrying value of debt securities by geographic location is shown in the following table. The geographic location is based on the country of the creditor's parent.
As at December 31,
2018
2017
 
Fair value through profit or loss
 
Available-for- sale
 
Total debt securities
 
Fair value through profit or loss
 
Available-for- sale
 
Total debt securities
 
Canada
 
$
25,091

 
$
4,217

 
$
29,308

 
$
24,132

 
$
4,114

 
$
28,246

United States
 
21,329

 
5,917

 
27,246

 
20,758

 
5,719

 
26,477

United Kingdom
 
5,092

 
565

 
5,657

 
5,319

 
590

 
5,909

Other
 
9,890

 
2,342

 
12,232

 
9,758

 
2,229

 
11,987

Balance
 
$
61,402

 
$
13,041

 
$
74,443

 
$
59,967


$
12,652


$
72,619


The carrying value of debt securities by issuer and industry sector is shown in the following table:
As at December 31,
2018
2017
 
Fair value through profit or loss
 
Available-for-sale
 
Total debt securities
 
Fair value through profit or loss
 
Available-for-sale
 
Total debt securities
 
Debt securities issued or guaranteed by:
 
 
 
 
 
 
 
 
 
 
 
 
Canadian federal government
 
$
3,830

 
$
1,746

 
$
5,576

 
$
3,366

 
$
1,832

 
$
5,198

Canadian provincial and municipal government
 
11,866

 
1,199

 
13,065

 
12,158

 
1,138

 
13,296

U.S. government and agency
 
1,380

 
1,527

 
2,907

 
1,231

 
818

 
2,049

Other foreign government
 
4,929

 
717

 
5,646

 
5,361

 
752

 
6,113

Total government issued or guaranteed debt securities
 
22,005

 
5,189

 
27,194

 
22,116

 
4,540

 
26,656

Corporate debt securities by industry sector(1):
 
 
 
 
 
 
 
 
 
 
 
 
Financials
 
8,390

 
1,470

 
9,860

 
7,856

 
1,705

 
9,561

Utilities
 
6,353

 
528

 
6,881

 
6,756

 
550

 
7,306

Industrials
 
4,053

 
590

 
4,643

 
4,090

 
707

 
4,797

Energy
 
3,628

 
340

 
3,968

 
3,657

 
455

 
4,112

Communication services(2)
 
2,826

 
481

 
3,307

 
2,826

 
545

 
3,371

Real estate
 
2,640

 
376

 
3,016

 
2,213

 
366

 
2,579

Health care
 
1,734

 
299

 
2,033

 
1,256

 
323

 
1,579

Consumer staples
 
1,625

 
257

 
1,882

 
1,920

 
351

 
2,271

Consumer discretionary(2)
 
1,372

 
209

 
1,581

 
1,329

 
363

 
1,692

Materials
 
1,225

 
256

 
1,481

 
1,211

 
262

 
1,473

Information technology(2)
 
1,024

 
207

 
1,231

 
1,056

 
267

 
1,323

Total corporate debt securities
 
34,870

 
5,013

 
39,883

 
34,170

 
5,894

 
40,064

Asset-backed securities
 
4,527

 
2,839

 
7,366

 
3,681

 
2,218

 
5,899

Total debt securities
 
$
61,402

 
$
13,041

 
$
74,443

 
$
59,967

 
$
12,652

 
$
72,619


(1) Balances in 2017 have been changed to conform with current year presentation.
(2) Our grouping of debt securities by sector is based on the Global Industry Classification Standard and S&P Dow Jones Indices. During 2018, certain
Consumer discretionary and Information technology debt securities were moved to the Communication services sector.

The contractual maturities of debt securities are shown in the following table. Actual maturities could differ from contractual maturities because of the borrower's right to call or extend or right to prepay obligations, with or without prepayment penalties.
As at December 31,
2018
2017
 
Fair value through profit or loss
 
Available-for- sale
 
Total debt securities
 
Fair value through profit or loss
 
Available-for- sale
 
Total debt securities
 
Due in 1 year or less
 
$
2,189

 
$
1,175

 
$
3,364

 
$
1,432

 
$
1,053

 
$
2,485

Due in years 2-5
 
9,307

 
4,865

 
14,172

 
7,903

 
3,465

 
11,368

Due in years 6-10
 
10,080

 
2,580

 
12,660

 
10,148

 
3,177

 
13,325

Due after 10 years
 
39,826

 
4,421

 
44,247

 
40,484

 
4,957

 
45,441

Total debt securities
 
$
61,402

 
$
13,041

 
$
74,443

 
$
59,967

 
$
12,652

 
$
72,619


The carrying value of mortgages by scheduled maturity, before allowances for losses, is as follows:
As at December 31,
2018
 
2017
 
Due in 1 year or less
 
$
968

 
$
931

Due in years 2-5
 
5,118

 
4,829

Due in years 6-10
 
7,351

 
6,963

Due after 10 years
 
3,021

 
2,792

Total mortgages
 
$
16,458

 
$
15,515


The carrying value of loans by scheduled maturity, before allowances for losses, is as follows:
As at December 31,
2018
 
2017
 
Due in 1 year or less
 
$
1,425

 
$
1,806

Due in years 2-5
 
6,968

 
6,350

Due in years 6-10
 
5,183

 
4,968

Due after 10 years
 
16,863

 
14,216

Total loans
 
$
30,439

 
$
27,340

The carrying value of mortgages and loans by geographic location and type is shown in the following tables. The geographic location for mortgages is based on location of property, while for corporate loans it is based on the country of the creditor's parent.
As at December 31, 2018
Canada
 
United States
 
 
United Kingdom

 
Other

 
Total

Mortgages
 
 
 
 
 
 
 
 
 
 
  Retail
 
$
1,921

 
$
2,281

 
$
—

 
$
—

 
$
4,202

  Office
 
1,811

 
2,417

 
—

 
—

 
4,228

  Multi-family residential
 
3,455

 
1,920

 
—

 
—

 
5,375

  Industrial and land
 
752

 
1,154

 
—

 
—

 
1,906

  Other
 
618

 
104

 
—

 
—

 
722

Total mortgages(1)
 
$
8,557

 
$
7,876

 
$
—

 
$
—

 
$
16,433

Loans
 
$
13,238

 
$
11,458

 
$
2,547

 
$
3,146

 
$
30,389

Total mortgages and loans
$
21,795

 
$
19,334

 
$
2,547

 
$
3,146

 
$
46,822


(1) $3,537 of mortgages in Canada are insured by the CMHC.
As at December 31, 2017
Canada
 
United States
 
 
United Kingdom

 
Other

 
Total

Mortgages
 
 
 
 
 
 
 
 
 
 
  Retail
 
$
2,027

 
$
2,264

 
$
—

 
$
—

 
$
4,291

  Office
 
1,898

 
2,363

 
—

 
—

 
4,261

  Multi-family residential
 
3,214

 
1,368

 
—

 
—

 
4,582

  Industrial and land
 
670

 
990

 
—

 
—

 
1,660

  Other
 
581

 
118

 
—

 
—

 
699

Total mortgages(1)
 
$
8,390

 
$
7,103

 
$
—

 
$
—

 
$
15,493

Loans
 
$
13,265

 
$
9,542

 
$
1,678

 
$
2,827

 
$
27,312

Total mortgages and loans
$
21,655

 
$
16,645

 
$
1,678

 
$
2,827

 
$
42,805


(1) $3,171 of mortgages in Canada are insured by the CMHC.
Disclosure of notional amounts of derivative instruments by type and maturity
Notional amounts of derivative financial instruments are the basis for calculating payments and are generally not the actual amounts exchanged. The following table provides the notional amounts of derivative instruments outstanding by type of derivative and term to maturity:
As at December 31,
2018
2017
 
Term to maturity
Term to maturity
 
Under
1 Year
 
1 to 5
Years
 
Over 5
Years
 
 
Total

Under
1 Year
 
1 to 5
Years
 
Over 5
Years
 
 
Total

Over-the-counter contracts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Forward contracts
 
$
—

 
$
—

 
$
—

 
$
—

 
$
469

 
$
—

 
$
—

 
$
469

Swap contracts
 
1,101

 
3,506

 
16,685

 
21,292

 
1,348

 
3,486

 
16,053

 
20,887

Options purchased
 
1,198

 
2,898

 
3,737

 
7,833

 
1,062

 
2,266

 
2,451

 
5,779

Options written(1)
 
477

 
648

 
225

 
1,350

 
—

 
786

 
459

 
1,245

Foreign exchange contracts:
 
 
 
 
 
 
 

 
 
 
 
 
 
 

Forward contracts
 
6,529

 
15

 
—

 
6,544

 
6,305

 
42

 
—

 
6,347

Swap contracts
 
532

 
4,451

 
9,210

 
14,193

 
332

 
4,198

 
7,214

 
11,744

Other contracts:
 
 
 
 
 
 
 

 
 
 
 
 
 
 

Forward contracts
 
127

 
158

 
—

 
285

 
109

 
150

 
—

 
259

Swap contracts
 
112

 
1

 
—

 
113

 
126

 
1

 
—

 
127

Credit derivatives
 
—

 
1,329

 
27

 
1,356

 
48

 
903

 
170

 
1,121

Exchange-traded contracts:
 
 
 
 
 
 
 

 
 
 
 
 
 
 

Interest rate contracts:
 
 
 
 
 
 
 

 
 
 
 
 
 
 

Futures contracts
 
3,669

 
—

 
—

 
3,669

 
3,415

 
—

 
—

 
3,415

Equity contracts:
 
 
 
 
 
 
 

 
 
 
 
 
 
 

Futures contracts
 
2,377

 
—

 
—

 
2,377

 
2,216

 
—

 
—

 
2,216

Options purchased
 
186

 
—

 
—

 
186

 
465

 
47

 
—

 
512

Total notional amount
 
$
16,308


$
13,006


$
29,884


$
59,198

 
$
15,895

 
$
11,879

 
$
26,347

 
$
54,121


(1)  
These are covered short derivative positions that may include interest rate options, swaptions, or floors.

The following table provides the fair value of derivative instruments outstanding by term to maturity:
As at December 31,
2018
2017
 
 
Term to maturity
 
Term to maturity
 
Under
1 Year
 
1 to 5
 Years
 
Over 5
 Years
 
 
Total

Under
1 Year
 
1 to 5
 Years
 
Over 5
 Years
 
 
Total

Derivative assets
 
$
100

 
$
150

 
$
862

 
$
1,112

 
$
97

 
$
226

 
$
1,155

 
$
1,478

Derivative liabilities
 
$
(240
)
 
$
(555
)
 
$
(1,500
)
 
$
(2,295
)
 
$
(90
)
 
$
(347
)
 
$
(1,319
)
 
$
(1,756
)
Disclosure of debt securities, mortgages, and loans by credit quality
The table below presents the distribution of Reinsurance assets by credit rating:
As at December 31,
2018
2017
 
Gross exposure
 
Collateral
 
Net exposure
 
Gross exposure
 
Collateral
 
Net exposure
 
Reinsurance assets by credit rating:
 
 
 
 
 
 
 
 
 
 
 
 
AA
 
$
1,442

 
$
6

 
$
1,436

 
$
1,241

 
$
4

 
$
1,237

A
 
1,760

 
83

 
1,677

 
1,632

 
99

 
1,533

BBB
 
203

 
132

 
71

 
157

 
116

 
41

BB
 
1,677

 
1,617

 
60

 
1,539

 
1,455

 
84

B
 
—

 
—

 
—

 
257

 
74

 
183

CCC
 
252

 
72

 
180

 
—

 
—

 
—

Not rated
 
79

 
75

 
4

 
76

 
72

 
4

Total
 
$
5,413

 
$
1,985

 
$
3,428

 
$
4,902

 
$
1,820

 
$
3,082

Less: negative reinsurance assets
 
1,272

 
 
 
 
 
874

 
 
 
 
Total Reinsurance assets
 
$
4,141

 
 
 
 
 
$
4,028

 
 
 
 
The following tables summarize our mortgages and loans by credit quality indicator:
As at December 31,
2018
 
2017
 
Mortgages by credit rating:
 
 
 
 
Insured
 
$
3,537

 
$
3,171

AAA
 
3

 
4

AA
 
2,209

 
1,716

A
 
4,841

 
4,304

BBB
 
4,925

 
5,060

BB and lower
 
912

 
1,227

Impaired
 
6

 
11

Total mortgages
 
$
16,433

 
$
15,493

As at December 31,
2018
 
2017
 
Loans by credit rating:
 
 
 
 
AAA
 
$
341

 
$
400

AA
 
4,659

 
3,670

A
 
11,483

 
11,626

BBB
 
12,766

 
10,745

BB and lower
 
1,097

 
810

Impaired
 
43

 
61

Total loans
 
$
30,389

 
$
27,312


The following table shows the OTC derivative financial instruments with a positive fair value split by counterparty credit rating:
As at December 31,
2018
2017
 
Gross positive replacement cost(2)
 
Impact of master netting agreements(3)
 
  Net replacement cost(4)
 
Gross positive replacement cost(2)
 
Impact of master netting agreements(3)
 
  Net replacement cost(4)
 
Over-the-counter contracts:
 
 
 
 
 
 
 
 
 
 
 
 
AA
 
$
289

 
$
(252
)
 
$
37

 
$
113

 
$
(95
)
 
$
18

A
 
750

 
(507
)
 
243

 
872

 
(589
)
 
283

BBB
 
46

 
(9
)
 
37

 
466

 
(10
)
 
456

Total over-the-counter derivatives(1)
 
$
1,085

 
$
(768
)
 
$
317

 
$
1,451

 
$
(694
)
 
$
757


(1) Exchange-traded derivatives with a positive fair value of $27 in 2018 ($27 in 2017) are excluded from the table above, as they are subject to daily margining requirements. Our credit exposure on these derivatives is with the exchanges and clearinghouses.
(2) Used to determine the credit risk exposure if the counterparties were to default. The credit risk exposure is the cost of replacing, at current market rates, all contracts with a positive fair value.
(3) The credit risk associated with derivative assets subject to master netting arrangements is reduced by derivative liabilities due to the same counterparty in the event of default or early termination. Our overall exposure to credit risk reduced through master netting arrangements may change substantially following the reporting date as the exposure is affected by each transaction subject to the arrangement.
(4) Net replacement cost is positive replacement cost less the impact of master netting agreements.

The following table provides a summary of the credit default swap protection sold by credit rating of the underlying reference security:
As at December 31,
2018
2017
 
Notional amount
 
Fair value
 
Notional amount
 
Fair value
 
Single name CDS contracts
 
 
 
 
 
 
 
 
AA
 
$
48

 
$
1

 
$
67

 
$
1

A
 
611

 
9

 
584

 
15

BBB
 
674

 
13

 
446

 
9

Total single name CDS contracts
 
$
1,333

 
$
23

 
$
1,097

 
$
25

CDS index contracts
 
$
23

 
$
—

 
$
24

 
$
—

Total credit default swap contracts
 
$
1,356

 
$
23

 
$
1,121

 
$
25

The following table summarizes our debt securities by credit quality:
As at December 31,
2018
2017
 
Fair value through profit or loss
 
Available-for-sale
 
Total debt securities
 
Fair value through profit or loss
 
Available-for-sale
 
Total debt securities
 
Debt securities by credit rating:
 
 
 
 
 
 
 
 
 
 
 
 
AAA
 
$
9,728

 
$
5,919

 
$
15,647

 
$
8,579

 
$
4,870

 
$
13,449

AA
 
14,208

 
2,044

 
16,252

 
14,006

 
1,809

 
15,815

A
 
19,089

 
2,447

 
21,536

 
19,603

 
3,000

 
22,603

BBB
 
17,646

 
2,483

 
20,129

 
16,894

 
2,674

 
19,568

BB and lower
 
731

 
148

 
879

 
885

 
299

 
1,184

Total debt securities
 
$
61,402

 
$
13,041

 
$
74,443

 
$
59,967

 
$
12,652

 
$
72,619
Disclosure of mortgages and loans past due or impaired
The distribution of mortgages and loans past due or impaired is shown in the following tables:
 
 
Gross carrying value
 
Allowance for losses
As at December 31, 2018
Mortgages
 
Loans
 
 
Total

Mortgages
 
 
Loans

 
Total

Not past due
 
 
$
16,427

 
$
30,332

 
$
46,759

 
 
$
—

 
$
—

 
$
—

Past due:
 
 
 
 
 
 

 
 
 
 
 
 

Past due less than 90 days
 
 
—

 
14

 
14

 
 
—

 
—

 
—

Past due 90 days or more
 
 
—

 
—

 
—

 
 
—

 
—

 
—

Impaired
 
 
31

 
93

 
124

 
 
25

 
50

 
75

Total
 
 
$
16,458

 
$
30,439

 
$
46,897

 
 
$
25

 
$
50

 
$
75

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross carrying value
 
Allowance for losses
As at December 31, 2017
Mortgages
 
 
Loans

 
Total

Mortgages
 
 
Loans

 
Total

Not past due
 
 
$
15,482

 
$
27,180

 
$
42,662

 
 
$
—

 
$
—

 
$
—

Past due:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Past due less than 90 days
 
 
—

 
71

 
71

 
 
—

 
—

 
—

Past due 90 days or more
 
 
—

 
—

 
—

 
 
—

 
—

 
—

Impaired
 
 
33

 
89

 
122

 
 
22

 
28

 
50

Total
 
 
$
15,515

 
$
27,340

 
$
42,855

 
 
$
22

 
$
28

 
$
50
Disclosure of changes in allowance for losses
The changes in the allowances for losses are as follows:
 
Mortgages
 
 
Loans

 
Total

Balance, January 1, 2017
 
$
23

 
$
7

 
$
30

Provision for (reversal of) losses
 
—

 
22

 
22

Write-offs, net of recoveries, and other adjustments
 
—

 
—

 
—

Foreign exchange rate movements
 
(1
)
 
(1
)
 
(2
)
Balance, December 31, 2017
 
$
22

 
$
28

 
$
50

Provision for (reversal of) losses
 
3

 
19

 
22

Write-offs, net of recoveries, and other adjustments
 
(2
)
 
—

 
(2
)
Foreign exchange rate movements
 
2

 
3

 
5

Balance, December 31, 2018
 
$
25

 
$
50

 
$
75
Disclosure of equities by issue country
The carrying value of equities by issuer country is shown in the following table:
As at December 31,
2018
2017
 
Fair value through profit or loss
 
Available-for-sale
 
   Total equities
 
Fair value through profit or loss
 
Available-for-sale
 
     Total equities
 
Canada
 
$
2,651

 
$
15

 
$
2,666

 
$
3,282

 
$
53

 
$
3,335

United States
 
508

 
388

 
896

 
765

 
671

 
1,436

United Kingdom
 
121

 
5

 
126

 
130

 
5

 
135

Other
 
734

 
212

 
946

 
901

 
213

 
1,114

Total equities
 
$
4,014

 
$
620

 
$
4,634

 
$
5,078

 
$
942

 
$
6,020