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Financial Instrument Risk Management Financial Instrument Risk Management (Tables) | 12 Months Ended
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Dec. 31, 2019
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, | 2019 |  | 2018 |
Off-balance sheet item: |  |  |  |
Loan commitments(1) |  | $ | 2,175 |  |  | $ | 2,460 |
(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, | 2019 | 2018
| 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) |  | $ | 1,548 |  |  | $ | (737 | ) |  | $ | (730 | ) |  | $ | 81 |  |  | $ | 1,112 |  |  | $ | (768 | ) |  | $ | (298 | ) |  | $ | 46 |
Reverse repurchase agreements (Note 8) | 3 |  |  | (3 | ) |  | — |  |  | — |  |  | 17 |  |  | (17 | ) |  | — |  |  | — |
Total financial assets |  | $ | 1,551 |  |  | $ | (740 | ) |  | $ | (730 | ) |  | $ | 81 |  |  | $ | 1,129 |  |  | $ | (785 | ) |  | $ | (298 | ) |  | $ | 46 |
Financial liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivative liabilities |  | $ | (2,040 | ) |  | $ | 737 |  |  | $ | 937 |  |  | $ | (366 | ) |  | $ | (2,295 | ) |  | $ | 768 |  |  | $ | 1,132 |  |  | $ | (395 | )
Repurchase agreements (Note 5.F.ii) |  | (1,850 | ) |  | 3 |  |  | 1,847 |  |  | — |  |  | (1,824 | ) |  | 17 |  |  | 1,807 |  |  | — |
Total financial liabilities |  | $ | (3,890 | ) |  | $ | 740 |  |  | $ | 2,784 |  |  | $ | (366 | ) |  | $ | (4,119 | ) |  | $ | 785 |  |  | $ | 2,939 |  |  | $ | (395 | )
(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 $939 ($470 as at December 31, 2018), received on reverse repurchase agreements was $3 ($17 as at December 31, 2018), pledged on derivative liabilities was $1,706 ($1,726 as at December 31, 2018), and pledged on repurchase agreements was $1,850 ($1,824 as at December 31, 2018).
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
The following table provides a reconciliation of the beginning and ending balances for assets and liabilities 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 |  | Put option liability |
December 31, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 373 |  |  | $ | 43 |  |  | $ | 202 |  |  | $ | 36 |  |  | $ | 2,241 |  |  | $ | 7,157 |  |  | $ | 10,052 |  |  | $ | 1,596 |  |  | $ | 11,648 |  |  | $ | — |
Acquisitions |  | — |  |  | — |  |  | — |  |  | — |  |  | 13 |  |  | — |  |  | 13 |  |  | — |  |  | 13 |  |  | 951 |
Included in net income(1)(2)(3) |  | 28 |  |  | — |  |  | (2 | ) |  | (23 | ) |  | (80 | ) |  | 238 |  |  | 161 |  |  | 45 |  |  | 206 |  |  | 11 |
Included in OCI(2) |  | — |  |  | 4 |  |  | — |  |  | 2 |  |  | 13 |  |  | — |  |  | 19 |  |  | — |  |  | 19 |  |  | — |
Purchases |  | 85 |  |  | 35 |  |  | 5 |  |  | 22 |  |  | 521 |  |  | 689 |  |  | 1,357 |  |  | 152 |  |  | 1,509 |  |  | — |
Sales / Payments |  | (49 | ) |  | — |  |  | (9 | ) |  | — |  |  | (122 | ) |  | (701 | ) |  | (881 | ) |  | (59 | ) |  | (940 | ) |  | — |
Settlements |  | (40 | ) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (40 | ) |  | (1 | ) |  | (41 | ) |  | — |
Transfers into Level 3(4) |  | 15 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 15 |  |  | — |  |  | 15 |  |  | — |
Transfers (out) of Level 3(4)(5) |  | (159 | ) |  | (31 | ) |  | (4 | ) |  | — |  |  | (110 | ) |  | — |  |  | (304 | ) |  | (1,178 | ) |  | (1,482 | ) |  | — |
Foreign currency translation(6) |  | (5 | ) |  | (1 | ) |  | (4 | ) |  | (2 | ) |  | (31 | ) |  | (77 | ) |  | (120 | ) |  | (6 | ) |  | (126 | ) |  | (6 | )
Ending balance |  | $ | 248 |  |  | $ | 50 |  |  | $ | 188 |  |  | $ | 35 |  |  | $ | 2,445 |  |  | $ | 7,306 |  |  | $ | 10,272 |  |  | $ | 549 |  |  | $ | 10,821 |  |  | $ | 956 |
Gains (losses) included in earnings relating to instruments still held at the reporting date(1) |  | $ | 4 |  |  | $ | — |  |  | $ | (3 | ) |  | $ | — |  |  | $ | (78 | ) |  | $ | 272 |  |  | $ | 195 |  |  | $ | 25 |  |  | $ | 220 |  |  | $ | — |
December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 417 |  |  | $ | 136 |  |  | $ | 167 |  |  | $ | 38 |  |  | $ | 1,721 |  |  | $ | 7,067 |  |  | $ | 9,546 |  |  | $ | 1,154 |  |  | $ | 10,700 |  |  | $ | — |
Included in net income(1)(2)(3) |  | (4 | ) |  | — |  |  | 9 |  |  | — |  |  | 69 |  |  | 441 |  |  | 515 |  |  | 29 |  |  | 544 |  |  | — |
Included in OCI(2) |  | — |  |  | (5 | ) |  | — |  |  | (8 | ) |  | (9 | ) |  | — |  |  | (22 | ) |  | — |  |  | (22 | ) |  | — |
Purchases |  | 164 |  |  | 140 |  |  | 19 |  |  | 4 |  |  | 644 |  |  | 621 |  |  | 1,592 |  |  | 430 |  |  | 2,022 |  |  | — |
Sales / Payments |  | (49 | ) |  | (6 | ) |  | — |  |  | (1 | ) |  | (227 | ) |  | (1,113 | ) |  | (1,396 | ) |  | (31 | ) |  | (1,427 | ) |  | — |
Settlements |  | (21 | ) |  | (4 | ) |  | — |  |  | (1 | ) |  | — |  |  | — |  |  | (26 | ) |  | (1 | ) |  | (27 | ) |  | — |
Transfers into Level 3(4) |  | 12 |  |  | 1 |  |  | — |  |  | 1 |  |  | — |  |  | — |  |  | 14 |  |  | 4 |  |  | 18 |  |  | — |
Transfers (out) of Level 3(4) |  | (159 | ) |  | (221 | ) |  | — |  |  | — |  |  | — |  |  | — |  |  | (380 | ) |  | (5 | ) |  | (385 | ) |  | — |
Foreign currency translation(6) |  | 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 |  |  | $ | — |
(1) Included in Net investment income (loss) for Total invested assets measured at fair value in our Consolidated Statements of Operations. (2) 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. (3) Investment properties included in net income is comprised of fair value changes on investment properties of $305 ($529 in 2018), net of amortization of leasing commissions and tenant inducements of $67 ($88 in 2018). (4) 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. (5) An update of certain specific criteria used to determine the leveling classification of the financial instruments was made in 2019 to align with industry practice. This resulted in transfers out of Level 3, including $1,178 for Investments for account of segregated fund holders as well as $110 for Other invested assets, and transferred into Level 2 based on the availability of observable inputs and other criteria. (6) 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. The carrying values and fair values of our financial assets are shown in the following table:
As at |  | December 31, 2019 |  | December 31, 2018
|  | Carrying value |  |  | Fair value |  |  | Carrying value |  |  | Fair value |
Assets |  |  |  |  |  |  |  |
Cash, cash equivalents and short-term securities |  | $ | 9,575 |  |  | $ | 9,575 |  |  | $ | 9,506 |  |  | $ | 9,506 |
Debt securities – fair value through profit or loss |  | 67,894 |  |  | 67,894 |  |  | 61,402 |  |  | 61,402 |
Debt securities – available-for-sale(1) |  | 13,712 |  |  | 13,712 |  |  | 13,041 |  |  | 13,041 |
Equity securities – fair value through profit or loss |  | 4,474 |  |  | 4,474 |  |  | 4,014 |  |  | 4,014 |
Equity securities – available-for-sale |  | 313 |  |  | 313 |  |  | 620 |  |  | 620 |
Mortgages and loans(1) |  | 48,222 |  |  | 52,028 |  |  | 46,822 |  |  | 48,434 |
Derivative assets |  | 1,548 |  |  | 1,548 |  |  | 1,112 |  |  | 1,112 |
Other invested assets – fair value through profit or loss(2) |  | 3,016 |  |  | 3,016 |  |  | 2,701 |  |  | 2,701 |
Other invested assets – available-for-sale(2) |  | 813 |  |  | 813 |  |  | 621 |  |  | 621 |
Policy loans |  | 3,218 |  |  | 3,218 |  |  | 3,222 |  |  | 3,222 |
Total financial assets(3) |  | $ | 152,785 |  |  | $ | 156,591 |  |  | $ | 143,061 |  |  | $ | 144,673 |
(1) As at December 31, 2019, the fair value of invested assets that have contractual cash flows that qualify as SPPI include $13,602 of Debt securities – AFS ($12,914 as at December 31, 2018), $47,398 of Mortgages and loans supporting insurance contract liabilities ($43,826 as at December 31, 2018), and $4,315 of Mortgages and loans not supporting insurance contract liabilities ($4,410 as at December 31, 2018). (2) Other invested assets (FVTPL and AFS) include our investments in segregated funds, mutual funds and limited partnerships. (3) Invested assets on our Consolidated Statements of Financial Position of $161,619 ($151,726 as at December 31, 2018) includes Total financial assets in this table, Investment properties of $7,306 ($7,157 as at December 31, 2018), and Other invested assets – non-financial assets of $1,528 ($1,508 as at December 31, 2018). 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, | 2019 |  | 2018 |
Cash |  | $ | 1,656 |  |  | $ | 2,089 |
Cash equivalents |  | 5,059 |  |  | 5,209 |
Short-term securities |  | 2,860 |  |  | 2,208 |
Cash, cash equivalents and short-term securities |  | 9,575 |  |  | 9,506 |
Less: Bank overdraft, recorded in Other liabilities |  | 30 |  |  | 104 |
Net cash, cash equivalents and short-term securities |  | $ | 9,545 |  |  | $ | 9,402 |
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, 2019 | Canada |  | United States |  | United Kingdom |  |  | Other |  |  | Total |
Mortgages: |  |  |  |  |  |  |  |  |  |
Retail |  | $ | 1,981 |  |  | $ | 1,921 |  |  | $ | — |  |  | $ | — |  |  | $ | 3,902 |
Office |  | 1,854 |  |  | 2,068 |  |  | — |  |  | — |  |  | 3,922 |
Multi-family residential |  | 3,900 |  |  | 1,791 |  |  | — |  |  | — |  |  | 5,691 |
Industrial and land |  | 861 |  |  | 1,037 |  |  | — |  |  | — |  |  | 1,898 |
Other |  | 714 |  |  | 98 |  |  | — |  |  | — |  |  | 812 |
Total mortgages(1) |  | $ | 9,310 |  |  | $ | 6,915 |  |  | $ | — |  |  | $ | — |  |  | $ | 16,225 |
Loans |  | $ | 13,249 |  |  | $ | 11,994 |  |  | $ | 3,297 |  |  | $ | 3,457 |  |  | $ | 31,997 |
Total mortgages and loans | $ | 22,559 |  |  | $ | 18,909 |  |  | $ | 3,297 |  |  | $ | 3,457 |  |  | $ | 48,222 |
(1) $3,966 of mortgages in Canada are insured by the CMHC.
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. 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, | 2019 | 2018
| 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 |  | $ | 28,221 |  |  | $ | 5,031 |  |  | $ | 33,252 |  |  | $ | 25,091 |  |  | $ | 4,217 |  |  | $ | 29,308 |
United States |  | 24,224 |  |  | 5,822 |  |  | 30,046 |  |  | 21,329 |  |  | 5,917 |  |  | 27,246 |
United Kingdom |  | 4,874 |  |  | 528 |  |  | 5,402 |  |  | 5,092 |  |  | 565 |  |  | 5,657 |
Other |  | 10,575 |  |  | 2,331 |  |  | 12,906 |  |  | 9,890 |  |  | 2,342 |  |  | 12,232 |
Balance |  | $ | 67,894 |  |  | $ | 13,712 |  |  | $ | 81,606 |  |  | $ | 61,402 |  |  | $ | 13,041 |  |  | $ | 74,443 |
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, | 2019 | 2018
| 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 |  | $ | 2,094 |  |  | $ | 2,025 |  |  | $ | 4,119 |  |  | $ | 2,189 |  |  | $ | 1,175 |  |  | $ | 3,364 |
Due in years 2-5 |  | 9,692 |  |  | 3,954 |  |  | 13,646 |  |  | 9,307 |  |  | 4,865 |  |  | 14,172 |
Due in years 6-10 |  | 9,655 |  |  | 3,301 |  |  | 12,956 |  |  | 10,080 |  |  | 2,580 |  |  | 12,660 |
Due after 10 years |  | 46,453 |  |  | 4,432 |  |  | 50,885 |  |  | 39,826 |  |  | 4,421 |  |  | 44,247 |
Total debt securities |  | $ | 67,894 |  |  | $ | 13,712 |  |  | $ | 81,606 |  |  | $ | 61,402 |  |  | $ | 13,041 |  |  | $ | 74,443 |
The carrying value of mortgages by scheduled maturity, before allowances for losses, is as follows:
As at December 31, | 2019 |  | 2018 |
Due in 1 year or less |  | $ | 1,099 |  |  | $ | 968 |
Due in years 2-5 |  | 5,255 |  |  | 5,118 |
Due in years 6-10 |  | 6,787 |  |  | 7,351 |
Due after 10 years |  | 3,154 |  |  | 3,021 |
Total mortgages |  | $ | 16,295 |  |  | $ | 16,458 |
The carrying value of loans by scheduled maturity, before allowances for losses, is as follows:
As at December 31, | 2019 |  | 2018 |
Due in 1 year or less |  | $ | 1,834 |  |  | $ | 1,425 |
Due in years 2-5 |  | 6,872 |  |  | 6,968 |
Due in years 6-10 |  | 5,449 |  |  | 5,183 |
Due after 10 years |  | 17,889 |  |  | 16,863 |
Total loans |  | $ | 32,044 |  |  | $ | 30,439 |
The carrying value of debt securities by issuer and industry sector is shown in the following table:
As at December 31, | 2019 | 2018
| 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 |  | $ | 3,890 |  |  | $ | 2,556 |  |  | $ | 6,446 |  |  | $ | 3,830 |  |  | $ | 1,746 |  |  | $ | 5,576 |
Canadian provincial and municipal government |  | 13,826 |  |  | 1,139 |  |  | 14,965 |  |  | 11,866 |  |  | 1,199 |  |  | 13,065 |
U.S. government and agency |  | 1,748 |  |  | 1,363 |  |  | 3,111 |  |  | 1,380 |  |  | 1,527 |  |  | 2,907 |
Other foreign government |  | 5,181 |  |  | 736 |  |  | 5,917 |  |  | 4,929 |  |  | 717 |  |  | 5,646 |
Total government issued or guaranteed debt securities |  | 24,645 |  |  | 5,794 |  |  | 30,439 |  |  | 22,005 |  |  | 5,189 |  |  | 27,194 |
Corporate debt securities by industry sector: |  |  |  |  |  |  |  |  |  |  |  |
Financials |  | 9,341 |  |  | 1,585 |  |  | 10,926 |  |  | 8,390 |  |  | 1,470 |  |  | 9,860 |
Utilities |  | 6,693 |  |  | 565 |  |  | 7,258 |  |  | 6,353 |  |  | 528 |  |  | 6,881 |
Industrials |  | 4,800 |  |  | 629 |  |  | 5,429 |  |  | 4,053 |  |  | 590 |  |  | 4,643 |
Energy |  | 3,867 |  |  | 365 |  |  | 4,232 |  |  | 3,628 |  |  | 340 |  |  | 3,968 |
Communication services(1) |  | 3,075 |  |  | 471 |  |  | 3,546 |  |  | 2,826 |  |  | 481 |  |  | 3,307 |
Real estate |  | 2,595 |  |  | 368 |  |  | 2,963 |  |  | 2,640 |  |  | 376 |  |  | 3,016 |
Health care |  | 1,886 |  |  | 236 |  |  | 2,122 |  |  | 1,734 |  |  | 299 |  |  | 2,033 |
Consumer staples |  | 1,703 |  |  | 221 |  |  | 1,924 |  |  | 1,625 |  |  | 257 |  |  | 1,882 |
Materials |  | 1,331 |  |  | 212 |  |  | 1,543 |  |  | 1,225 |  |  | 256 |  |  | 1,481 |
Consumer discretionary(1) |  | 1,268 |  |  | 219 |  |  | 1,487 |  |  | 1,372 |  |  | 209 |  |  | 1,581 |
Information technology(1) |  | 1,122 |  |  | 213 |  |  | 1,335 |  |  | 1,024 |  |  | 207 |  |  | 1,231 |
Total corporate debt securities |  | 37,681 |  |  | 5,084 |  |  | 42,765 |  |  | 34,870 |  |  | 5,013 |  |  | 39,883 |
Asset-backed securities |  | 5,568 |  |  | 2,834 |  |  | 8,402 |  |  | 4,527 |  |  | 2,839 |  |  | 7,366 |
Total debt securities |  | $ | 67,894 |  |  | $ | 13,712 |  |  | $ | 81,606 |  |  | $ | 61,402 |  |  | $ | 13,041 |  |  | $ | 74,443 |
(1) 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.
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, | 2019 | 2018
| 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 |  | $ | 50 |  |  | $ | — |  |  | $ | — |  |  | $ | 50 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Swap contracts |  | 1,906 |  |  | 3,052 |  |  | 14,649 |  |  | 19,607 |  |  | 1,101 |  |  | 3,506 |  |  | 16,685 |  |  | 21,292 |
Options purchased |  | 617 |  |  | 3,279 |  |  | 2,850 |  |  | 6,746 |  |  | 1,198 |  |  | 2,898 |  |  | 3,737 |  |  | 7,833 |
Options written(1) |  | 357 |  |  | 474 |  |  | — |  |  | 831 |  |  | 477 |  |  | 648 |  |  | 225 |  |  | 1,350 |
Foreign exchange contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Forward contracts |  | 5,289 |  |  | 4,137 |  |  | — |  |  | 9,426 |  |  | 6,529 |  |  | 15 |  |  | — |  |  | 6,544 |
Swap contracts |  | 867 |  |  | 3,723 |  |  | 12,366 |  |  | 16,956 |  |  | 532 |  |  | 4,451 |  |  | 9,210 |  |  | 14,193 |
Other contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Options purchased |  | 1,164 |  |  | — |  |  | — |  |  | 1,164 |  |  | — |  |  | — |  |  | — |  |  | — |
Forward contracts |  | 128 |  |  | 176 |  |  | — |  |  | 304 |  |  | 127 |  |  | 158 |  |  | — |  |  | 285 |
Swap contracts |  | 178 |  |  | 1 |  |  | — |  |  | 179 |  |  | 112 |  |  | 1 |  |  | — |  |  | 113 |
Credit derivatives |  | 343 |  |  | 878 |  |  | 6 |  |  | 1,227 |  |  | — |  |  | 1,329 |  |  | 27 |  |  | 1,356 |
Exchange-traded contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Futures contracts |  | 2,917 |  |  | — |  |  | — |  |  | 2,917 |  |  | 3,669 |  |  | — |  |  | — |  |  | 3,669 |
Equity contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Futures contracts |  | 2,507 |  |  | — |  |  | — |  |  | 2,507 |  |  | 2,377 |  |  | — |  |  | — |  |  | 2,377 |
Options purchased |  | 200 |  |  | — |  |  | — |  |  | 200 |  |  | 186 |  |  | — |  |  | — |  |  | 186 |
Options written |  | 17 |  |  | — |  |  | — |  |  | 17 |  |  | — |  |  | — |  |  | — |  |  | — |
Total notional amount |  | $ | 16,540 |  |  | $ | 15,720 |  |  | $ | 29,871 |  |  | $ | 62,131 |  |  | $ | 16,308 |  |  | $ | 13,006 |  |  | $ | 29,884 |  |  | $ | 59,198 |
(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, | 2019 | 2018
|  | 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 |  | $ | 180 |  |  | $ | 231 |  |  | $ | 1,137 |  |  | $ | 1,548 |  |  | $ | 100 |  |  | $ | 150 |  |  | $ | 862 |  |  | $ | 1,112 |
Derivative liabilities |  | $ | (73 | ) |  | $ | (377 | ) |  | $ | (1,590 | ) |  | $ | (2,040 | ) |  | $ | (240 | ) |  | $ | (555 | ) |  | $ | (1,500 | ) |  | $ | (2,295 | )
Disclosure of debt securities, mortgages, and loans by credit quality | The following table summarizes our debt securities by credit quality:
As at December 31, | 2019 | 2018
| 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 |  | $ | 11,097 |  |  | $ | 6,630 |  |  | $ | 17,727 |  |  | $ | 9,728 |  |  | $ | 5,919 |  |  | $ | 15,647 |
AA |  | 10,503 |  |  | 1,670 |  |  | 12,173 |  |  | 14,208 |  |  | 2,044 |  |  | 16,252 |
A |  | 27,341 |  |  | 3,037 |  |  | 30,378 |  |  | 19,089 |  |  | 2,447 |  |  | 21,536 |
BBB |  | 18,339 |  |  | 2,248 |  |  | 20,587 |  |  | 17,646 |  |  | 2,483 |  |  | 20,129 |
BB and lower |  | 614 |  |  | 127 |  |  | 741 |  |  | 731 |  |  | 148 |  |  | 879 |
Total debt securities |  | $ | 67,894 |  |  | $ | 13,712 |  |  | $ | 81,606 |  |  | $ | 61,402 |  |  | $ | 13,041 |  |  | $ | 74,443 |
The table below presents the distribution of Reinsurance assets by credit rating:
As at December 31, | 2019 | 2018
| Gross exposure |  | Collateral |  | Net exposure |  | Gross exposure |  | Collateral |  | Net exposure |
Reinsurance assets by credit rating: |  |  |  |  |  |  |  |  |  |  |  |
AA |  | $ | 2,131 |  |  | $ | 5 |  |  | $ | 2,126 |  |  | $ | 1,442 |  |  | $ | 6 |  |  | $ | 1,436 |
A |  | 1,170 |  |  | 68 |  |  | 1,102 |  |  | 1,760 |  |  | 83 |  |  | 1,677 |
BBB |  | 200 |  |  | 128 |  |  | 72 |  |  | 203 |  |  | 132 |  |  | 71 |
BB |  | 1,707 |  |  | 1,663 |  |  | 44 |  |  | 1,677 |  |  | 1,617 |  |  | 60 |
CCC |  | 181 |  |  | 168 |  |  | 13 |  |  | 252 |  |  | 72 |  |  | 180 |
Not rated |  | 78 |  |  | 67 |  |  | 11 |  |  | 79 |  |  | 75 |  |  | 4 |
Total |  | $ | 5,467 |  |  | $ | 2,099 |  |  | $ | 3,368 |  |  | $ | 5,413 |  |  | $ | 1,985 |  |  | $ | 3,428 |
Less: Negative reinsurance assets |  | 1,443 |  |  |  |  |  |  | 1,272 |  |  |  |  |
Total Reinsurance assets |  | $ | 4,024 |  |  |  |  |  |  | $ | 4,141 |  |  |  |  |
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, | 2019 | 2018
| Notional amount |  | Fair value |  | Notional amount |  | Fair value |
Single name credit default swap contracts: |  |  |  |  |  |  |  |
AA |  | $ | 45 |  |  | $ | 1 |  |  | $ | 48 |  |  | $ | 1 |
A |  | 574 |  |  | 9 |  |  | 611 |  |  | 9 |
BBB |  | 608 |  |  | 19 |  |  | 674 |  |  | 13 |
Total single name credit default swap contracts |  | $ | 1,227 |  |  | $ | 29 |  |  | $ | 1,333 |  |  | $ | 23 |
Credit default swap index contracts |  | $ | — |  |  | $ | — |  |  | $ | 23 |  |  | $ | — |
Total credit default swap contracts sold |  | $ | 1,227 |  |  | $ | 29 |  |  | $ | 1,356 |  |  | $ | 23 |
The following table shows the OTC derivative financial instruments with a positive fair value split by counterparty credit rating:
As at December 31, | 2019 | 2018
| 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 |  | $ | 439 |  |  | $ | (210 | ) |  | $ | 229 |  |  | $ | 289 |  |  | $ | (252 | ) |  | $ | 37 |
A |  | 1,008 |  |  | (517 | ) |  | 491 |  |  | 750 |  |  | (507 | ) |  | 243 |
BBB |  | 82 |  |  | (10 | ) |  | 72 |  |  | 46 |  |  | (9 | ) |  | 37 |
Total over-the-counter derivatives(1) |  | $ | 1,529 |  |  | $ | (737 | ) |  | $ | 792 |  |  | $ | 1,085 |  |  | $ | (768 | ) |  | $ | 317 |
(1) Exchange-traded derivatives with a positive fair value of $19 in 2019 ($27 in 2018) 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 tables summarize our mortgages and loans by credit quality indicator:
As at December 31, | 2019 |  | 2018 |
Mortgages by credit rating: |  |  |  |
Insured |  | $ | 3,966 |  |  | $ | 3,537 |
AAA |  | 1 |  |  | 3 |
AA |  | 2,087 |  |  | 2,209 |
A |  | 5,481 |  |  | 4,841 |
BBB |  | 3,943 |  |  | 4,925 |
BB and lower |  | 670 |  |  | 912 |
Impaired |  | 77 |  |  | 6 |
Total mortgages |  | $ | 16,225 |  |  | $ | 16,433 |
As at December 31, | 2019 |  | 2018 |
Loans by credit rating: |  |  |  |
AAA |  | $ | 224 |  |  | $ | 341 |
AA |  | 5,044 |  |  | 4,659 |
A |  | 12,516 |  |  | 11,483 |
BBB |  | 12,920 |  |  | 12,766 |
BB and lower |  | 1,207 |  |  | 1,097 |
Impaired |  | 86 |  |  | 43 |
Total loans |  | $ | 31,997 |  |  | $ | 30,389 |
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, 2019 | Mortgages |  | Loans |  |  | Total |  | Mortgages |  |  | Loans |  |  | Total |
Not past due |  |  | $ | 16,148 |  |  | $ | 31,911 |  |  | $ | 48,059 |  |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Impaired |  |  | 147 |  |  | 133 |  |  | 280 |  |  |  | 70 |  |  | 47 |  |  | 117 |
Total |  |  | $ | 16,295 |  |  | $ | 32,044 |  |  | $ | 48,339 |  |  |  | $ | 70 |  |  | $ | 47 |  |  | $ | 117 |
|  | 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 |  |  |  | — |  |  | — |  |  | — |
Impaired |  |  | 31 |  |  | 93 |  |  | 124 |  |  |  | 25 |  |  | 50 |  |  | 75 |
Total |  |  | $ | 16,458 |  |  | $ | 30,439 |  |  | $ | 46,897 |  |  |  | $ | 25 |  |  | $ | 50 |  |  | $ | 75 |
Disclosure of changes in allowance for losses | The changes in the allowances for losses are as follows:
| Mortgages |  |  | Loans |  |  | Total |
Balance, January 1, 2018 |  | $ | 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 |
Provision for (reversal of) losses |  | 46 |  |  | (1 | ) |  | 45 |
Foreign exchange rate movements |  | (1 | ) |  | (2 | ) |  | (3 | )
Balance, December 31, 2019 |  | $ | 70 |  |  | $ | 47 |  |  | $ | 117 |
Disclosure of equities by issue country | The carrying value of equities by issuer country is shown in the following table:
As at December 31, | 2019 | 2018
| Fair value through profit or loss |  | Available- for-sale |  | Total equities |  | Fair value through profit or loss |  | Available- for-sale |  | Total equities |
Canada |  | $ | 2,813 |  |  | $ | 22 |  |  | $ | 2,835 |  |  | $ | 2,651 |  |  | $ | 15 |  |  | $ | 2,666 |
United States |  | 550 |  |  | 137 |  |  | 687 |  |  | 508 |  |  | 388 |  |  | 896 |
United Kingdom |  | 132 |  |  | 5 |  |  | 137 |  |  | 121 |  |  | 5 |  |  | 126 |
Other |  | 979 |  |  | 149 |  |  | 1,128 |  |  | 734 |  |  | 212 |  |  | 946 |
Total equities |  | $ | 4,474 |  |  | $ | 313 |  |  | $ | 4,787 |  |  | $ | 4,014 |  |  | $ | 620 |  |  | $ | 4,634 |

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