Segregated Funds

12 Months Ended

Dec. 31, 2023

Separate Accounts Disclosure 1 [Abstract]

21. Segregated Funds

We have segregated fund products, including variable annuities, unit-linked products and variable universal life insurance policies, in Canada, the U.S., the UK, and Asia. Effective the second quarter of 2023, we completed the sale of our UK Business unit. See Note 3. 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 and other net investment income earned 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 and sometimes insurance risk as a result of these guarantees. Further details on these guarantees and our risk management activities related to these guarantees are included in Notes 6 and 7.

Segregated fund contracts are classified as insurance contracts or investment contracts depending on whether there is significant insurance risk in the guarantees we provide. Segregated funds that are classified as insurance contracts are insurance contracts with direct participation features, and therefore measured using the VFA.

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. Fees from segregated fund contracts that are classified as investment contracts are reported as Fee Income on the Consolidated Statements of Operations. Fees from segregated fund contracts that are classified as insurance contracts are reflected in the measurement of CSM of those contracts, which is reported as revenue as insurance contract services are provided.

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, 2023 and 2022:


Type of fund			%
Money market			1 to 5
Fixed income			5 to 10
Balanced			40 to 45
Equity			45 to 50

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.

21.A Segregated Funds Classified as Investment Contracts

21.A.i Investments for Account of Segregated Fund Holders — Investment Contracts

The carrying value of investments for account of segregated fund holders for contracts classified as investment contracts are as follows:


As at	December 31, 2023			December 31, 2022			January 1, 2022
Segregated and mutual fund units		$	107,239		$	97,347		$	107,277
Equity securities		1,280			3,801			4,317
Debt securities		862			1,441			1,753
Cash, cash equivalents and short-term securities		4			181			264
Investment properties		—			271			226
Mortgages		—			—			1
Other assets		30			75			98
Total assets		109,415			103,116			113,936
Less: Liabilities arising from investing activities		4			963			19
Total investments for account of segregated fund holders		$	109,411		$	102,153		$	113,917

21.A.ii Changes in Account of Segregated Fund Holders — Investment Contracts



For the years ended and as at December 31,	2023			2022
				(restated, see Note 2)
Balance, beginning of year		$	102,153		$	113,917
Additions to segregated funds:
Deposits		11,510			11,542

Net realized and unrealized gains (losses)		3,995			(15,359)
Other investment income		7,854			4,029
Total additions		23,359			212
Deductions from segregated funds:
Payments to policyholders and their beneficiaries		10,793			11,049
Management fees		687			697
Taxes and other expenses		49			43
Foreign exchange rate movements		(76)			187
Total deductions		11,453			11,976
Net additions (deductions)		11,906			(11,764)

Dispositions (Note 3)		(4,648)			—
Balance, end of year		$	109,411		$	102,153

21.B Segregated Funds Classified as Insurance Contracts

21.B.i Investments for Account of Segregated Fund Holders — Insurance Contracts

The carrying value of investments for account of segregated fund holders for contracts classified as insurance contracts, which are the underlying items for the insurance contracts, are as follows:



As at	December 31, 2023	December 31, 2022		January 1, 2022
Segregated and mutual fund units		$	14,240	$	15,723	$	18,667
Equity securities		2,908		4,450		5,646
Debt securities		1,427		1,417		1,657
Cash, cash equivalents and short-term securities		483		624		514
Investment properties		—		167		220
Mortgages		16		17		18
Other assets		45		55		43
Total assets		19,119		22,453		26,765
Less: Liabilities arising from investing activities		78		(686)		686
Total investments for account of segregated fund holders		$	19,041	$	23,139	$	26,079

21.B.ii Changes in Account of Segregated Fund Holders — Insurance Contracts

Changes by Measurement Component

The following reconciliations illustrate the insurance contract liabilities for account of segregated fund holders by measurement component. For insurance contract liabilities for account of segregated fund holders, the entire amount is included in the present value of estimates of future cash flows. Reconciliations for the net liabilities of segregated fund insurance contracts that are not backed by investments for account of segregated fund holders are included as part of the insurance contract liabilities in Note 10.B.i.



For the years ended and as at December 31,	2023			2022
Balance, beginning of year		$	23,139		$	26,079
Insurance finance (income) expenses		1,793			(2,353)
Foreign currency translation		(201)			(163)
Cash flows:
Premiums received		1,969			2,725
Amounts paid to policyholders and other insurance service expenses paid		(2,583)			(2,310)
Management fees, taxes and other expenses		(822)			(839)
Total cash flows		(1,436)			(424)

Dispositions (Note 3)		(4,254)			—
Balance, end of year		$	19,041		$	23,139

Changes by Remaining Coverage and Incurred Claims

The following tables show the changes in the liabilities for insurance contracts for account of segregated fund holders by LRC and LIC. Reconciliations for the remainder of liabilities for segregated funds that are classified as insurance contracts are in Note 10.B.i.



For the years ended and as at December 31,	2023	2022
Net liabilities for remaining coverage:
Balances, beginning of year					$	23,139			$	26,079
Insurance finance (income) expenses					1,793				(2,353)
Foreign currency translation					(201)				(163)
Total changes					1,592				(2,516)
Cash flows:
Premiums received					1,969				2,725

Management fees, taxes and other expenses					(822)				(839)
Total cash flows					1,147				1,886
Expected investment component excluded from insurance revenue					(2,583)				(2,310)
Dispositions (Note 3)					(4,254)				—
Balances, liability for remaining coverage, end of year					$	19,041			$	23,139
Liability for incurred claims:
Balances, beginning of year					$	—			$	—

Cash flows:
Amounts paid to policyholders and other insurance service expenses paid					(2,583)				(2,310)
Total cash flows					(2,583)				(2,310)
Actual investment component excluded from insurance service expense					2,583				2,310
Balances, liability for incurred claims, end of year					$	—			$	—
Total net insurance contract liability:
Balances, beginning of year					$	23,139			$	26,079
Insurance finance (income) expenses					1,793				(2,353)
Foreign currency translation					(201)				(163)
Total changes					1,592				(2,516)
Cash flows:
Premiums received					1,969				2,725
Amounts paid to policyholders and other insurance service expenses paid					(2,583)				(2,310)
Management fees, taxes and other expenses					(822)				(839)
Total cash flows					(1,436)				(424)


Dispositions (Note 3)					(4,254)				—
Balances, total net insurance contract liability, end of year			$	19,041			$	23,139