

22. Segregated Funds

We have segregated fund products, including variable annuities, unit-linked products and universal life insurance policies, in Canada, the U.S., the UK, and Asia. Under these contracts, the benefit amount is contractually linked to the fair value of the investments in the particular segregated fund. Policyholders can select from a variety of categories of segregated fund investments. Although the underlying assets are registered in our name and the segregated fund contract holder has no direct access to the specific assets, the contractual arrangements are such that the segregated fund policyholder bears the risk and rewards of the funds’ investment performance. Therefore, net realized gains and losses, other net investment income earned, and expenses incurred on the segregated funds are attributable to policyholders and not to us. However, certain contracts include guarantees from us. We are exposed to equity market risk and interest rate risk as a result of these guarantees. Further details on these guarantees and our risk management activities related to these guarantees are included in the Risk Management section of the MD&A.

We derive fee income from segregated funds. Market value movements in the investments held for segregated fund holders impact the management fees earned on these funds.

The segregated fund types offered, by percentage of total investments for account of segregated fund holders, were within the following ranges as at December 31, 2019 and 2018:



Type of fund	%
Money market	1 to 5
Fixed income	10 to 15
Balanced	40 to 45
Equity	40 to 45

Money market funds include investments that have a term to maturity of less than one year. Fixed income funds are funds that invest primarily in investment grade fixed income securities and where less than 25% can be invested in diversified equities or high-yield bonds. Balanced funds are a combination of fixed income securities with a larger equity component. The fixed income component is greater than 25% of the portfolio. Equity consists primarily of broad-based diversified funds that invest in a well-diversified mix of Canadian, U.S. or global equities. Other funds in this category include low volatility funds, intermediate volatility funds, and high volatility funds.

22.A Investments for Account of Segregated Fund Holders

The carrying value of investments held for segregated fund holders are as follows:



As at December 31,	2019			2018
Segregated and mutual fund units		$	102,071		$	89,049
Equity securities		10,565			9,771
Debt securities		3,825			3,448
Cash, cash equivalents and short-term securities		589			711
Investment properties		403			400
Mortgages		21			23
Other assets		146			156
Total assets		$	117,620		$	103,558
Less: Liabilities arising from investing activities		647			496
Total investments for account of segregated fund holders		$	116,973		$	103,062

22.B Changes in Insurance Contracts and Investment Contracts for Account of Segregated Fund Holders

Changes in insurance contracts and investment contracts for account of segregated fund holders are as follows:



	Insurance contracts								Investment contracts
For the years ended December 31,	2019				2018				2019			2018
Balance as at January 1		$	96,663			$	99,121			$	6,399		$	7,271
Additions to segregated funds:
Deposits		11,874				11,468				84			85
Net transfer (to) from general funds		(437		)		(308		)		—			—
Net realized and unrealized gains (losses)		10,700				(7,123		)		844			(658		)
Other investment income		4,522				4,576				143			178
Total additions		$	26,659			$	8,613			$	1,071		$	(395	)
Deductions from segregated funds:
Payments to policyholders and their beneficiaries		11,420				10,224				604			614
Management fees		1,053				1,004				56			57
Taxes and other expenses		371				256				14			—
Foreign exchange rate movements		209				(413		)		92			(194		)
Total deductions		$	13,053			$	11,071			$	766		$	477
Net additions (deductions)		$	13,606			$	(2,458	)		$	305		$	(872	)
Balance as at December 31		$	110,269			$	96,663			$	6,704		$	6,399