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Total Invested Assets and Related Net Investment Income
 12 Months Ended
Dec. 31, 2024
Fair Value Measurement [Abstract]  
Total Invested Assets and Related Net Investment Income
5. Total Invested Assets and Related Net Investment Income
5.A Fair Value of Financial Instruments
5.A.i Carrying Value and Fair Value of Financial Assets and Financial Liabilities
The carrying values and fair values of our financial assets and liabilities are shown in the following table:
As atDecember 31, 2024December 31, 2023
Carrying valueFair valueCarrying valueFair value
Financial assets
Cash, cash equivalents and short-term securities – FVTPL$13,873 $13,873 $13,173 $13,173 
Debt securities – FVTPL(1)
68,106 68,106 61,180 61,180 
Debt securities – FVOCI 13,849 13,849 14,313 14,313 
Equity securities – FVTPL9,900 9,900 7,070 7,070 
Equity securities – FVOCI74 74 68 68 
Mortgages and loans – FVTPL(2)
53,233 53,233 50,552 50,552 
Mortgages and loans – FVOCI2,525 2,525 1,948 1,948 
Mortgages and loans – Amortized cost(3)
1,861 1,814 2,100 2,006 
Derivative assets – FVTPL1,971 1,971 2,183 2,183 
Other financial invested assets (excluding CLOs) – FVTPL(4)
7,950 7,950 6,883 6,883 
Other financial invested assets (CLOs) – FVTPL(7)
5,356 5,356 3,478 3,478 
Total(5)
$178,698 $178,651 $162,948 $162,854 
Financial liabilities
Investment contract liabilities – Amortized cost$11,678 $11,678 $11,672 $11,672 
Obligations for securities borrowing – FVTPL239 239 223 223 
Derivative liabilities – FVTPL2,077 2,077 1,311 1,311 
Other financial liabilities – Amortized cost(6)
2,265 2,214 2,449 2,348 
Other financial liabilities (CLOs) – FVTPL(7)
5,028 5,028 3,247 3,247 
Total(8)
$21,287 $21,236 $18,902 $18,801 

(1)    Includes primarily debt securities that are designated at FVTPL.
(2)    Includes primarily mortgages and loans that are designated at FVTPL.
(3)    Certain mortgages and loans are carried at amortized cost. The fair value of these mortgages and loans, for disclosure purposes, is determined based on the methodology and assumptions described in Note 5.A.iii. As at December 31, 2024, $1,787 and $27 are categorized in Level 2 and Level 3, respectively, of the fair value hierarchy described in this Note (December 31, 2023 — $1,994 and $12, respectively).
(4)    Other financial invested assets include our investments in segregated funds, mutual funds, and limited partnerships.
(5)    Invested assets on our Consolidated Statements of Financial Position of $189,817 (December 31, 2023 — $174,328) includes Total financial assets in this table, Investment properties of $9,290 (December 31, 2023 — $9,723), and Other non-financial invested assets of $1,829 (December 31, 2023 — $1,657). Other non-financial invested assets consist of investment in associates, subsidiaries and joint ventures which are not consolidated.
(6)    Amount reflects the obligations to purchase outstanding shares of certain SLC Management subsidiaries.
(7)    See below for details on CLOs.
(8)    Total financial liabilities excluding Senior debentures (Note 12) and Subordinated debt (Note 13).
Collateralized Loan Obligations Structure
Crescent, a subsidiary within our Asset Management business segment, issues and manages CLOs. Each CLO is a special purpose vehicle that owns a portfolio of investments, consisting primarily of senior secured loans, and issues various tranches of senior and subordinated notes to third parties for the purpose of financing the purchase of those investments. Assets of the special purpose vehicle, the senior secured loans, are included in Other financial invested assets and the associated liabilities, the senior and subordinated notes issued to third parties, are included in Other liabilities in our Consolidated Statements of Financial Position.

As at December 31, 2024, the carrying value of the assets related to CLOs are $5,356 (December 31, 2023 — $3,478), which consists of cash and accounts receivable of $679 (December 31, 2023 — $251) and loans of $4,677 (December 31, 2023 — $3,227). These underlying loans are mainly below investment grade.

As at December 31, 2024, the carrying value of the liabilities related to CLOs are $5,028 (December 31, 2023 — $3,247). Our maximum contractual exposure to loss related to the CLOs is limited to our investment of $263 (December 31, 2023 — $192) in the most subordinated tranche. The net unrealized loss incurred to date is $56.
5.A.ii Non-Financial Invested Assets
Non-financial invested assets consist of investment properties, investment in associates, subsidiaries and joint ventures which are not consolidated. As at December 31, 2024, the carrying value and fair value of investment properties was $9,290 (December 31, 2023 — $9,723) and $9,290 (December 31, 2023 — $9,723), respectively. The carrying value of other non-financial invested assets which were measured using the equity method of accounting was $1,829 as at December 31, 2024 (December 31, 2023 — $1,657).
5.A.iii Fair Value Methodologies and Assumptions
The specific inputs and valuation techniques used to determine the fair value of our invested assets and financial liabilities are noted below:
Cash, cash equivalents and short-term securities
Cash equivalents are highly liquid investments that are subject to insignificant changes in value and are readily convertible into known amounts of cash. Cash equivalents comprise financial assets with maturities of three months or less from the date of acquisition. Short-term securities comprise financial assets with maturities of greater than three months and less than one year when acquired. Cash, cash equivalents and short-term securities are classified as held for trading for the purpose of meeting short-term cash requirements and accounted for at FVTPL due to their short-term nature or because they are frequently repriced to current market rates.
Government and corporate debt securities
The fair value of government and corporate debt securities is primarily determined using unadjusted quoted prices in active markets for identical or similar securities, where available. When quoted prices in active markets are not available, fair value is determined using market standard valuation methodologies, which include a discounted cash flow method, consensus pricing from various broker dealers that are typically the market makers, or other similar techniques. The assumptions and valuation inputs in applying these market standard valuation methodologies are determined primarily using observable market inputs, which include, but are not limited to, benchmark yields, reported trades of identical or similar instruments, broker-dealer quotes, issuer spreads, bid prices, and reference data including market research publications. In limited circumstances, non-binding broker quotes are used.
Asset-backed securities
The fair value of asset-backed securities is primarily determined using unadjusted quoted prices in active markets for identical or similar securities, where available, or valuation methodologies and valuation inputs similar to those used for government and corporate debt securities. Additional valuation inputs include structural characteristics of the securities, and the underlying collateral performance, such as prepayment speeds and delinquencies. Expected prepayment speeds are based primarily on those previously experienced in the market at projected future interest rate levels. In limited circumstances where there is a lack of sufficient observable market data to value the securities, non-binding broker quotes are used.
Equity securities
The fair value of equity securities is determined using unadjusted quoted prices in active markets for identical securities or similar securities, where available. When quoted prices in active markets are not available, fair value is determined using equity valuation models, which include a discounted cash flow method and other techniques that involve benchmark comparison. Valuation inputs primarily include projected future operating cash flows and earnings, dividends, market discount rates, and earnings multiples of comparable companies. Where equity securities are less frequently traded, the most recent exchange-quoted pricing is used to determine fair value.
Mortgages and loans
The fair value of mortgages and loans is determined by discounting the expected future contractual cash flows using a current market interest rate applicable to financial instruments with a similar yield, credit quality, and maturity characteristics. Valuation inputs typically include benchmark yields and risk-adjusted spreads from current internal lending activities or loan issuances. Valuation inputs also include external lending activities or loan issuances from both public and private markets, enhancing the market observability of inputs. The risk-adjusted spreads are determined based on the borrower’s credit and liquidity, as well as term and other loan-specific features.
Derivative financial instruments
The fair value of derivative financial instruments depends upon derivative types. The fair value of exchange-traded futures and options is determined using unadjusted quoted prices in active markets, where available, while the fair value of over-the-counter ("OTC") derivatives is determined using pricing models, such as a discounted cash flow method or other market standard valuation techniques, with primarily observable market inputs. Valuation inputs used to price OTC derivatives may include swap interest rate curves, foreign exchange spot and forward rates, index prices, the value of underlying securities, projected dividends, volatility surfaces, and in limited circumstances, counterparty quotes. The fair value of OTC derivative instruments also includes credit valuation adjustments to reflect the credit risk of both the derivative counterparty and ourselves as well as the impact of contractual factors designed to reduce our credit exposure, such as collateral and legal rights of offset under master netting agreements. Inputs into determining the appropriate credit valuation adjustments are typically obtained from publicly available information and include credit default swap spreads when available, credit spreads derived from specific bond yields, or published cumulative default experience data adjusted for current trends when credit default swap spreads are not available.
Other financial invested assets
The fair value of other financial invested assets consists primarily of limited partnership investments which is based on net asset value ("NAV") provided by management of the limited partnership investments. Based on the unobservable nature of these NAVs, we do not assess whether applying reasonably possible alternative assumptions would have an impact on the fair value of the limited partnership investments.
Investment properties
The fair value of investment properties is generally determined using property valuation models that are based on expected capitalization rates and models that discount expected future net cash flows at current market interest rates reflective of the characteristics, location, and market of each property. Expected future net cash flows include contractual and projected cash flows and forecasted operating expenses, and take into account interest, rental, and occupancy rates derived from market surveys. The estimates of future cash inflows in addition to expected rental income from current leases, include projected income from future leases based on significant assumptions that are consistent with current market conditions. The future rental rates are estimated based on the location, type, and quality of the properties, and take into account market data and projections at the valuation date. The fair values are typically compared to market-based information for reasonability, including recent transactions involving comparable assets. The methodologies and inputs used in these models are in accordance with real estate industry valuation standards. Valuations are prepared externally or internally by professionally accredited real estate appraisers.
Investments for account of segregated fund holders
The fair value of investments for account of segregated fund holders is determined using unadjusted quoted prices in active markets or independent valuation information provided by investment managers. The fair value of direct investments within investments for account of segregated fund holders, such as short-term securities and government and corporate debt securities, is determined according to valuation methodologies and inputs described above in the respective asset type sections.
Investment contract liabilities
The fair value of investment contracts is measured through the use of prospective discounted cash flow method. For unit-linked contracts, the fair value is equal to the current unit fund value, plus additional non-unit liability amounts on a fair value basis if required. For non-unit-linked contracts, the fair value is equal to the present value of contractual cash flow. The fair value of the investment contract liabilities approximate their carrying values due to the nature of the contracts.
Obligations for securities borrowing
The fair values of these obligations are based on the fair value of the underlying securities, which can include debt or equity securities. The method used to determine fair value is based on the quoted market prices where available in an active market.
Other financial liabilities
The fair value of other financial liabilities is determined using the discounted contractual cash flow methodology at the incremental borrowing rate or the effective interest rate, where available. Other financial liabilities categorized as Level 3 represent the present value of the estimated price we would pay to acquire any remaining outstanding shares upon exercise of a put option and any mandatory income distributions. The fair value of the liabilities is based on the average earnings before income tax, depreciation and amortization ("EBITDA") for the preceding years before the options’ exercise dates and EBITDA multiples in accordance with the put agreements as well as the expected amount of any mandatory income distributions. A change in EBITDA would impact the fair value of other financial liabilities and our net income (loss).
Collateralized loan obligations
The fair value of underlying assets within our CLOs is determined primarily using observable market inputs, such as quoted prices for similar assets in active markets and other observable market data.

The fair value of underlying liabilities within our CLOs is determined by discounting expected future contractual cash flows using a current market interest rate applicable to financial instruments with a similar yield, credit quality, maturity characteristics, and structural credit protections. The valuation technique maximizes the use of observable inputs that incorporates comparable securities’ prices and other market intelligence.
5.A.iv Fair Value Hierarchy
We categorize our assets and liabilities carried at fair value based on the priority of the inputs to the valuation techniques used to measure fair value, into a three-level fair value hierarchy as follows:

Level 1: Fair value based on the unadjusted quoted prices for identical instruments in active markets represents a Level 1 valuation. Where possible, valuations are based on quoted prices or observable inputs obtained from active markets. The types of assets and liabilities classified as Level 1 generally include cash and cash equivalents, certain U.S. government and agency securities, exchange-traded equity securities, and certain segregated and mutual fund units held for account of segregated fund holders.

Level 2: Fair value is based on quoted prices for similar assets or liabilities traded in active markets, or prices from valuation techniques that use significant observable inputs, or inputs that are derived principally from or corroborated with observable market data through correlation or other means. When a fair value is based on all significant market observable inputs, the valuation is classified as Level 2. Financial instruments traded in a less active market are valued using indicative market prices, the present value of cash flows or other valuation methods. The types of assets and liabilities classified as Level 2 generally include Canadian federal, provincial and municipal government, other foreign government and corporate debt securities, certain asset-backed securities, repurchase agreements, OTC derivatives, and certain segregated and mutual fund units held for account of segregated fund holders.

Level 3: Fair value is based on valuation techniques that require one or more significant inputs that are not based on observable market inputs. These unobservable inputs reflect our expectations about the assumptions market participants would use in pricing the asset or liability. Where financial instruments trade in inactive markets or when using models where observable parameters do not exist, significant management judgment is required for valuation methodologies and model inputs. The types of assets and liabilities classified as Level 3 generally include certain corporate bonds, certain asset-backed securities, certain other financial invested assets, investment properties, and certain segregated and mutual fund units held for account of segregated fund holders.
Our assets and liabilities that are carried at fair value on a recurring basis by hierarchy level are as follows:
As atDecember 31, 2024December 31, 2023
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Assets
Cash, cash equivalents and short-term securities – FVTPL$13,243 $630 $— $13,873 $12,316 $857 $— $13,173 
Debt securities – FVTPL463 67,126 517 68,106 564 60,214 402 61,180 
Debt securities – FVOCI505 13,193 151 13,849 651 13,475 187 14,313 
Equity securities – FVTPL6,331 3,358 211 9,900 4,220 2,737 113 7,070 
Equity securities – FVOCI— — 74 74 — — 68 68 
Mortgages and loans – FVTPL— 50,933 2,300 53,233 — 48,496 2,056 50,552 
Mortgages and loans – FVOCI— 2,512 13 2,525 — 1,948 — 1,948 
Derivative assets – FVTPL28 1,943 — 1,971 23 2,160 — 2,183 
Other financial invested assets (excluding CLOs) – FVTPL(1)
859 211 6,880 7,950 608 201 6,074 6,883 
Other financial invested assets (CLOs) – FVTPL(2)
— 5,356 — 5,356 — 3,478 — 3,478 
Investment properties – FVTPL— — 9,290 9,290 — — 9,723 9,723 
Total invested assets measured at fair value$21,429 $145,262 $19,436 $186,127 $18,382 $133,566 $18,623 $170,571 
Investments for account of segregated fund holders – FVTPL17,253 131,074 459 148,786 16,614 111,497 341 128,452 
Total assets measured at fair value$38,682 $276,336 $19,895 $334,913 $34,996 $245,063 $18,964 $299,023 
Liabilities
Obligations for securities borrowing – FVTPL$4 $235 $— $239 $3 $220 $— $223 
Derivative liabilities – FVTPL28 2,049 — 2,077 10 1,301 — 1,311 
Other financial liabilities (CLOs) – FVTPL(2)
— 5,028 — 5,028 — 3,247 — 3,247 
Investment contract liabilities for account of segregated fund holders – FVTPL— — 128,689 128,689 — — 109,411 109,411 
Total liabilities measured at fair value$32 $7,312 $128,689 $136,033 $13 $4,768 $109,411 $114,192 

(1)    Other financial invested assets (excluding CLOs) – FVTPL include our investments in segregated funds, mutual funds, and limited partnerships.
(2)    For details on CLOs, refer to Note 5.A.i.

Debt securities at FVTPL consist of the following:
As atDecember 31, 2024December 31, 2023
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Canadian federal government$— $6,790 $13 $6,803 $— $5,147 $14 $5,161 
Canadian provincial and municipal government— 15,302 — 15,302 — 13,694 — 13,694 
U.S. government and agency463 163 — 626 564 148 — 712 
Other foreign government— 3,762 34 3,796 — 3,329 — 3,329 
Corporate— 32,929 465 33,394 — 31,809 340 32,149 
Asset-backed securities:
Commercial mortgage-backed securities— 2,163 — 2,163 — 2,029 5 2,034 
Residential mortgage-backed securities— 3,539 — 3,539 — 2,335 — 2,335 
Collateralized debt obligations— 352 1 353 — 188 — 188 
Other— 2,126 4 2,130 — 1,535 43 1,578 
Total debt securities at FVTPL$463 $67,126 $517 $68,106 $564 $60,214 $402 $61,180 
Debt securities at FVOCI consist of the following:
As atDecember 31, 2024December 31, 2023
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Canadian federal government$— $734 $— $734 $— $849 $— $849 
Canadian provincial and municipal government— 353 — 353 — 557 — 557 
U.S. government and agency501 8 — 509 651 7 — 658 
Other foreign government4 397 12 413 — 462 11 473 
Corporate— 7,529 90 7,619 — 7,905 75 7,980 
Asset-backed securities:
Commercial mortgage-backed securities— 1,084 — 1,084 — 1,017 — 1,017 
Residential mortgage-backed securities— 1,159 11 1,170 — 944 — 944 
Collateralized debt obligations— 673 38 711 — 767 13 780 
Other— 1,256 — 1,256 — 967 88 1,055 
Total debt securities at FVOCI$505 $13,193 $151 $13,849 $651 $13,475 $187 $14,313 

Mortgages and loans at FVTPL consist of the following:
As atDecember 31, 2024December 31, 2023
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Mortgages:
Retail$— $2,472 $12 $2,484 $— $2,524 $12 $2,536 
Office— 2,602 12 2,614 — 2,717 — 2,717 
Multi-family residential— 2,887 — 2,887 — 2,986 — 2,986 
Industrial— 3,447 — 3,447 — 2,804 — 2,804 
Other— 1,034 — 1,034 — 1,017 — 1,017 
Corporate loans— 38,491 2,276 40,767 — 36,448 2,044 38,492 
Total mortgages and loans at FVTPL$— $50,933 $2,300 $53,233 $— $48,496 $2,056 $50,552 

Mortgages and loans at FVOCI consist of the following:
As atDecember 31, 2024December 31, 2023
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Mortgages:
Retail
$— $83 $— $83 $— $22 $— $22 
Office— 19 — 19 — 37 — 37 
Multi-family residential— 79 — 79 — 83 — 83 
Industrial— 236 — 236 — 149 — 149 
Corporate loans— 2,095 13 2,108 — 1,657 — 1,657 
Total mortgages and loans at FVOCI$— $2,512 $13 $2,525 $— $1,948 $— $1,948 

There were no significant transfers between Level 1 and Level 2 for the years ended December 31, 2024 and December 31, 2023.
The following table provides a reconciliation of the beginning and ending balances for assets that are categorized in Level 3:
For the years ended
Debt
securities at FVTPL
Debt
securities at FVOCI		Equity
securities at FVTPL		Equity Securities at FVOCIMortgages and loans at FVTPLMortgages and loans at FVOCIOther financial invested assets at FVTPLInvestment properties at FVTPLTotal invested assets measured at fair valueInvestments for account of segregated fund holdersTotal assets measured at fair value
December 31, 2024
Beginning balance $402 $187 $113 $68 $2,056 $— $6,074 $9,723 $18,623 $341 $18,964 
Included in net income(1)(2)(3)
2 — 20 — 33 — 251 (455)(149)(8)(157)
Included in OCI(2)
— 5 — — — — — — 5 — 5 
Purchases / Issuances436 335 77 — 240 22 825 146 2,081 173 2,254 
Sales / Payments(48)(47)(1)— (133)— (389)(255)(873)(62)(935)
Settlements(37)(50)— — (21)— — — (108)(1)(109)
Transfers into Level 3(4)
117 62 — — 439 6 — — 624 — 624 
Transfers (out) of Level 3(4)
(367)(341)— — (320)(15)(15)— (1,058)— (1,058)
Foreign currency translation(5)
12 — 2 6 6 — 134 131 291 16 307 
Ending balance$517 $151 $211 $74 $2,300 $13 $6,880 $9,290 $19,436 $459 $19,895 
Unrealized gains (losses) included in earnings relating to instruments still held(1)
$(6)$— $19 $— $30 $— $247 $(369)$(79)$— $(79)
December 31, 2023
Beginning balance $394 $52 $101 $70 $2,054 $16 $5,555 $10,102 $18,344 $631 $18,975 
Included in net income(1)(2)(3)
9 — 13 — 119 (8)(169)(520)(556)(15)(571)
Included in OCI(2)
— 3 — — — 1 — — 4 — 4 
Purchases / Issuances211 153 18 — 293 8 984 391 2,058 173 2,231 
Sales / Payments(8)(6)(19)(1)(75)(17)(261)(220)(607)(444)(1,051)
Settlements(6)(6)— — (7)— — — (19)(1)(20)
Transfers into Level 3(4)
8 — — — 382 — — — 390 — 390 
Transfers (out) of Level 3(4)
(200)(8)— — (710)— — — (918)— (918)
Foreign currency translation(5)
(6)(1)— (1)— — (35)(30)(73)(3)(76)
Ending balance$402 $187 $113 $68 $2,056 $— $6,074 $9,723 $18,623 $341 $18,964 
Unrealized gains (losses) included in earnings relating to instruments still held(1)
$5 $— $9 $— $112 $(8)$(170)$(522)$(574)$(18)$(592)
(1)    Included in Net investment income (loss) in our Consolidated Statements of Operations for Total invested assets measured at fair value.
(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 $(383) (2023 — $(486)), net of amortization of leasing commissions and tenant inducements of $72 (2023 — $34). As at December 31, 2024, we have used assumptions that reflect known changes in the property values including changes in expected future cash flows.
(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)    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.
Unobservable Inputs and Sensitivity for Level 3 Assets
Our assets categorized in Level 3 of the fair value hierarchy are primarily Investment properties, Mortgages and loans, Debt securities and Other invested assets (financial and non-financial).

The fair value of Investment properties is determined by using the discounted cash flow methodology as described in Note 5.A.iii. The key unobservable inputs used in the valuation of investment properties as at December 31, 2024 include the following:
•Estimated rental value: The estimated rental value is based on contractual rent and other local market lease transactions, net of reimbursable operating expenses. An increase (decrease) in the estimated rental value would result in a higher (lower) fair value. The estimated rental value varies depending on the property types, which include retail, office, and industrial properties. The estimated rental value (in dollars, per square foot, per annum) ranges from $12.00 to $76.00 for retail and office properties and from $3.00 to $23.00 for industrial properties.
•Rental growth rate: The rental growth rate is typically estimated based on expected market behaviour, which is influenced by the type of property and geographic region of the property. An increase (decrease) in the rental growth rate would result in a higher (lower) fair
value. The rental growth rate (per annum) ranges from 0.00% to 3.20%, however the one- to two-year short-term rent curve is either below or above this range for select properties.
•Long-term vacancy rate: The long-term vacancy rate is typically estimated based on expected market behaviour, which is influenced by the type of property and geographic region of the property. An increase (decrease) in the long-term vacancy rate would result in a lower (higher) fair value. The long-term vacancy rate ranges from 0.00% to 25.00%.
•Discount rate: The discount rate is derived from market activity across various property types and geographic regions and is a reflection of the expected rate of return to be realized on the investment over the next 10 years. An increase (decrease) in the discount rate would result in a lower (higher) fair value. The discount rate ranges from 5.50% to 9.50%.
•Terminal capitalization rate: The terminal capitalization rate is derived from market activity across various property types and geographic regions and is a reflection of the expected rate of return to be realized on the investment over the remainder of its life after the 10-year period. An increase (decrease) in the terminal capitalization rate would result in a lower (higher) fair value. The terminal capitalization rate ranges from 4.50% to 8.75%.

Changes in the estimated rental value are positively correlated with changes in the rental growth rate. Changes in the estimated rental value are negatively correlated with changes in the long-term vacancy rate, the discount rate, and the terminal capitalization rate.
Our Mortgages and loans, categorized in Level 3, are included in Mortgages and loans – FVTPL and Mortgages and loans – FVOCI in the Level 3 roll forward table, and Mortgages and loans – Amortized cost in Note 5.A.i. The fair value of these mortgages and loans is determined by using the discounted cash flow methodology. The key unobservable inputs used in the valuation of mortgages and loans as at December 31, 2024 include credit spreads and liquidity adjustments. The credit spread is the difference between the instrument yield and the benchmark yield. The benchmark yield is determined by matching each asset by geography, sector, rating and maturity to a matrix comprised of spreads of publicly available corporate bonds. In some cases, a liquidity premium or discount may be applied if recent private spreads differ from public spreads. The credit spreads range from 0.99% to 3.57%. The liquidity adjustment is a premium of 2.05%. Changes in the fair value of mortgages and loans are negatively correlated with changes in credit spread and liquidity adjustments.

Our Debt securities categorized in Level 3, which are included in Debt securities – FVTPL and Debt securities – FVOCI in the Level 3 roll forward table, consist primarily of corporate bonds. The fair value of these corporate bonds is generally determined using broker quotes that cannot be corroborated with observable market transactions. Significant unobservable inputs for these corporate bonds would include issuer spreads, which are comprised of credit, liquidity, and other security-specific features of the bonds. A decrease (increase) in these issuer spreads would result in a higher (lower) fair value. Due to the unobservable nature of these broker quotes, we do not assess whether applying reasonably possible alternative assumptions would have an impact on the fair value of the Level 3 corporate bonds. The majority of our debt securities categorized in Level 3 are FVTPL assets supporting insurance contract liabilities. Changes in the fair value of these assets supporting insurance contract liabilities are largely offset by changes in the corresponding insurance contract liabilities. As a result, though using reasonably possible alternative assumptions may have an impact on the fair value of the Level 3 debt securities, it would not have a significant impact on our Consolidated Financial Statements.

The Other financial invested assets categorized in Level 3, which are included in Other financial invested assets – FVTPL and Other financial invested assets – FVOCI in the Level 3 roll forward table, consists primarily of limited partnership investments. The fair value of our limited partnership investments is based on NAV provided by management of the limited partnership investments. Based on the unobservable nature of these NAVs, we do not assess whether applying reasonably possible alternative assumptions would have an impact on the fair value of the Level 3 limited partnership investments.
Valuation Process for Level 3 Assets
Our assets categorized in Level 3 of the fair value hierarchy are primarily Investment properties, Debt securities (including asset-backed securities), Mortgages and loans and limited partnership investments included in Other financial invested assets. Our valuation processes for these assets are as follows:

The fair value of investment properties are based on the results of appraisals performed quarterly and reviewed for material changes. The valuation methodology used to determine the fair value is in accordance with the standards of the Appraisal Institute of Canada, the U.S., and the UK. Investment properties are appraised externally at least once every three years. Investment properties not appraised externally in a given year are reviewed by qualified appraisers. A management committee, including investment professionals, reviews the fair value of investment properties for overall reasonability.

The fair value of mortgages and loans is based on an internal discounted cash flow model, subject to detailed review and validation to ensure overall reasonability.

The fair value of debt securities is generally obtained by external pricing services. We obtain an understanding of inputs and valuation methods used by external pricing services. When fair value cannot be obtained from external pricing services, broker quotes, or internal models subject to detailed review and validation processes are used. The fair value of debt securities is subject to price validation and review procedures to ensure overall reasonability.

The fair value of limited partnership investments, included in Other financial invested assets, is based on NAV. The financial statements used in calculating the NAV are generally audited annually. We review the NAV of the limited partnership investments and perform analytical and other procedures to ensure the fair value is reasonable.

Investment contracts for account of segregated funds can be surrendered and units in the segregated funds can be redeemed by the holder at any time. Accordingly, the fair values of investment contract liability and the liability for investment contracts for account of segregated fund holders are not less than the amount payable on demand. Their fair values are based on the fair value of the underlying items less any accrued fees and surrender charges and approximate their carrying values.
5.B Net Investment Income (Loss)
For the years ended
December 31, 2024
December 31, 2023
Financial Instruments at FVOCIFinancial Instruments at FVTPL
Other(1)
Total
Financial Instruments at FVOCIFinancial Instruments at FVTPL
Other(1)
Total
Interest income (expense):
Cash, cash equivalents and short-term investments$— $537 $— $537 $— $473 $— $473 
Debt securities604 2,894 — 3,498 563 2,663 — 3,226 
Mortgages and loans138 2,661 64 2,863 103 2,503 74 2,680 
Derivative investments— (38)— (38)— 69 — 69 
Other financial invested assets1 362 — 363 1 247 — 248 
Other financial liabilities— (299)(165)(464)— (217)(154)(371)
Total interest income (expense)743 6,117 (101)6,759 667 5,738 (80)6,325 
Dividend and other investment income:
Equity securities— 254 — 254 — 212 — 212 
Other financial invested assets— 313 — 313 — 226 — 226 
Total dividend and other investment income— 567 — 567 — 438 — 438 
Net realized and unrealized gains (losses):
Cash, cash equivalents and short-term investments— 8 — 8 — — — — 
Debt securities162 (824)— (662)463 2,555 — 3,018 
Equity securities— 1,218 — 1,218 (1)397 — 396 
Mortgages and loans30 650 — 680 40 1,573 — 1,613 
Derivative investments— (1,347)— (1,347)— 933 — 933 
Other financial invested assets1 406 — 407 160 (249)— (89)
Other financial liabilities— (44)— (44)— 25 — 25 
Total net realized and unrealized gains (losses)193 67 — 260 662 5,234 — 5,896 
Provision for credit losses3 — (7)(4)(12)— (2)(14)
Net investment income (loss) from financial instruments$939 $6,751 $(108)$7,582 $1,317 $11,410 $(82)$12,645 
Net Investment income (loss) from non-financial instruments:
Investment properties rental income$— $— $664 $664 $— $— $649 $649 
Investment properties expenses— — (265)(265)— — (270)(270)
Investment expenses and taxes— — (278)(278)— — (283)(283)
Fair value changes on investment properties— — (383)(383)— — (486)(486)
Other investment income (loss)— — 323 323 — — 49 49 
Foreign exchange gains (losses)— — 116 116 — — (126)(126)
Net investment income (loss) from non-financial instruments$— $— $177 $177 $— $— $(467)$(467)
Total Net investment income (loss)(2)
$939 $6,751 $69 $7,759 $1,317 $11,410 $(549)$12,178 

(1)    Primarily includes investment income (loss) on financial instruments carried at amortized cost, investment properties, and equity method investments.
(2)    Net investment income (loss) recognized in income is $7,415 (December 31, 2023 — $11,586) and net investment income (loss) recognized in OCI is $344 (December 31, 2023 — $592)
5.C Explanation of Investment Result
Net investment result excluding result for account of segregated fund holders consists of the following:
For the year ended December 31, 2024
Insurance contracts Issued
Reinsurance
contracts
held		Total insurance
Non-insurance (all other)
Total
Net investment income (loss):
Net investment income (loss) recognized in net income
$— $— $5,894 $1,521 $7,415 
Net investment income (loss) recognized in OCI
— — 12 332 344 
Total net investment income (loss)
— — 5,906 1,853 7,759 
Total insurance finance income (expenses) recognized in net income:
Effect of time value of money (Interest on carrying value) including interest on policy loans and interest on amounts on deposit(4,474)190 (4,284)— (4,284)
Impact of change in discount rate on fulfilment cash flows excluding where measured at locked-in rates and effect of changes in financial risk1,683 (135)1,548 — 1,548 
Application of risk mitigation option(1)
225 — 225 — 225 
Changes in fair value of underlying items for contracts with direct participation features (excluding segregated funds)(2,642)— (2,642)— (2,642)
Foreign exchange gains (losses)49 — 49 — 49 
Other20 (4)16 — 16 
Total insurance finance income (expenses) recognized in income(5,139)51 (5,088)— (5,088)
Decrease (increase) in investment contract liabilities
— — — (393)(393)
Net investment result$— $— $818 $1,460 $2,278 
Net investment result recognized in net income$— $— $806 $1,128 $1,934 
Net investment result recognized in OCI$— $— $12 $332 $344 
For the year ended December 31, 2023
Insurance contracts IssuedReinsurance
 contracts held		Total insurance
Non-insurance (all other)
Total
Net investment income (loss):
Net investment income (loss) recognized in net income
$— $— $10,211 $1,375 $11,586 
Net investment income (loss) recognized in OCI
— — 171 421 592 
Total net investment income (loss)
— — 10,382 1,796 12,178 
Total insurance finance income (expenses) recognized in net income:
Effect of time value of money (Interest on carrying value) including interest on policy loans and interest on amounts on deposit(4,484)156 (4,328)— (4,328)
Impact of change in discount rate on fulfilment cash flows excluding where measured at locked-in rates and effect of changes in financial risk(1,985)(91)(2,076)— (2,076)
Application of risk mitigation option(1)
104 — 104 — 104 
Changes in fair value of underlying items for contracts with direct participation features (excluding segregated funds)(3,425)— (3,425)— (3,425)
Foreign exchange gains (losses)(22)(1)(23)— (23)
Other137 (5)132 — 132 
Total insurance finance income (expenses) recognized in income(9,675)59 (9,616)— (9,616)
Decrease (increase) in investment contract liabilities
— — — (331)(331)
Net investment result$— $— $766 $1,465 $2,231 
Net investment result recognized in net income$— $— $595 $1,044 $1,639 
Net investment result recognized in OCI$— $— $171 $421 $592 

(1)    Changes in our share of the fair value of underlying items and FCF arising from changes in the effect of financial risk that are mitigated by the use of derivatives and non-derivative financial instruments are recognized in income rather than adjusting the CSM. These amounts are offset by changes in the fair value of the derivatives and non-derivative financial instruments included in Investment income. The amount above would have resulted in an adjustment to the CSM if it was recorded to the CSM.
5.D Cash, Cash Equivalents and Short-Term Securities
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 31,20242023
Cash$2,294 $2,001 
Cash equivalents7,835 9,169 
Short-term securities3,744 2,003 
Cash, cash equivalents and short-term securities13,873 13,173 
Less: Bank overdraft, recorded in Other liabilities175 — 
Net cash, cash equivalents and short-term securities$13,698 $13,173 
5.E Derivative Financial Instruments and Hedging Activities
We apply hedge accounting to minimize volatility in income and equity caused by changes in interest rates or foreign exchange rates. Interest rate and currency fluctuations will either cause assets and liabilities to appreciate or depreciate in market value or cause variability in forecasted cash flows. When a hedging relationship is effective, gains, losses, revenue and expenses of the hedging instrument will offset the gains, losses, revenue and expenses of the hedged item. Derivatives used in hedging relationships are recorded in Derivative assets or Derivative liabilities on the Consolidated Statements of Financial Position.
5.E.i Derivatives Held for Risk Management
We use other derivatives, not designated in a qualifying hedging relationship ("Derivatives investments"), to manage exposure to foreign currency, interest rate, and equity market. The instruments used include principally interest rate swaps, cross-currency swaps, forward contracts, interest rate futures, interest rate options, credit and swaps and equity swaps.

The following table describes the fair value of derivatives held for risk management purposes by type of risk exposure.
As at December 31,20242023
AssetsLiabilitiesAssetsLiabilities
Interest rate contracts:
Derivative investments$392 $(822)$418 $(667)
Total interest rate derivatives$392 $(822)$418 $(667)
Foreign exchange contracts:
Designated as cash flow hedges$8 $(3)$2 $(19)
Derivative investments1,403 (1,195)1,674 (614)
Total foreign exchange derivatives$1,411 $(1,198)$1,676 $(633)
Other contracts:
Designated as cash flow hedges$43 $— $17 $— 
Derivative investments125 (57)72 (11)
Total other contracts$168 $(57)$89 $(11)
Total derivative contracts$1,971 $(2,077)$2,183 $(1,311)

The maturity analysis of the notional amounts and the average rates (or weighted average rates, if applicable) and prices of the hedging instruments are disclosed in Note 6.A.iv.
5.E.ii Hedge Accounting
Cash flow hedges
We use pay fixed/receive floating interest rate and cross-currency interest rate swaps to hedge the interest rate risks in respect of the benchmark interest rate (mainly sterling and Euribor or Sterling Overnight Index Average ("SONIA"), SOFR) and foreign currency risks (mainly U.S. dollar and sterling or SONIA, SOFR) from its issuance of floating-rate notes denominated in foreign currencies. We hedge interest rate risk to the extent of benchmark interest rate exposure on its floating-rate notes to mitigate variability in its cash flows. Hedge accounting is applied where economic hedging relationships meet the hedge accounting criteria.

We also hedge the variability of cash payments associated with changes in SLF Inc.'s common share prices using total return forwards. This is related to our Sun Share Unit ("Sun Share") Plan as a long-term incentive award to executive employees.

Our exposure to market risk and our approach to managing market risk, including interest rate risk and foreign currency risk, are discussed in Note 6.

We determine the amount of the exposure to which it applies hedge accounting by assessing the potential impact of changes in interest rates and foreign currency exchange rates on the future cash flows from its issuance of floating-rate notes denominated in foreign currencies. This assessment is performed using analytical techniques, such as cash flow sensitivity analysis.
We manage our exposure to credit risk of the counterparties to the derivatives, which is not offset by the hedged items, in a similar manner as described above for the fair value hedges.

We determine whether an economic relationship exists between the cash flows of the hedged item and hedging instrument based on an evaluation of the qualitative characteristics of these items and the hedged risk that is supported by quantitative analysis. We consider whether the critical terms of the hedged item and hedging instrument closely align when assessing the presence of an economic relationship. We evaluate whether the cash flows of the hedged item and the hedging instrument respond similarly to the hedged risk, such as the benchmark interest rate or foreign currency. For cash flow hedging relationships directly impacted by IBOR ("Interbank Offered Rate") reform (i.e. hedges of U.S. dollar LIBOR and sterling LIBOR), the cash flows of the hedged item and hedging instrument will not be altered as a result of IBOR reform. We further support this qualitative assessment by using regression analysis to assess whether the hedging instrument is expected to be and has been highly effective in offsetting changes in the present value of the hedged item. We assess hedge effectiveness using the hypothetical derivative method, which creates a derivative instrument to serve as a proxy for the hedged transaction. The terms of the hypothetical derivative match the critical terms of the hedged item and it has a fair value of zero at inception. We assess whether the derivative designated in each hedging relationship is expected to be and has been highly effective in offsetting changes in cash flows of the hedged item (prospectively and retrospectively) using this regression analysis.

Potential sources of hedge ineffectiveness can be attributed to differences between hedging instruments and hedge items:
•The effect of the counterparty and our own credit risk on the fair value of the interest rate swap, which is not reflected in the fair value of the hedged item attributable to the change in interest rate.
•Differences in maturities of the interest rate swap and the loans or debt securities.
•Mismatches in the frequency and timing of when interest rates are reset and frequency of payment.
•Differences in the discounting factors between the hedged item and hedging instrument.

There were no other sources of ineffectiveness in these hedging relationships.

The maturity analysis of the notional amounts and the average rates (or weighted average rates, if applicable) and prices of the hedging instruments are disclosed in Note 6.A.iv.
5.F Transfers of Financial Assets
We enter into transactions, including mortgage securitization, repurchase agreements and securities lending, where we transfer financial assets while retaining the risks and rewards of ownership of the assets. These transferred financial assets are not derecognized and remain on our Consolidated Statements of Financial Position. The carrying value of the transferred assets and the associated liabilities are described in the sections below.
5.F.i Mortgage Securitization
We securitize certain insured fixed-rate commercial mortgages through the creation of mortgage-backed securities under the National Housing Act Mortgage-Backed Securities ("NHA MBS") Program sponsored by the Canada Mortgage and Housing Corporation ("CMHC"). The NHA MBS are then sold to Canada Housing Trust, a government-sponsored security trust that issues securities to third-party investors under the Canadian Mortgage Bond ("CMB") program. The securitization of these assets does not qualify for derecognition as we have not transferred substantially all of the risks and rewards of ownership. Specifically, we continue to be exposed to pre-payment and interest rate risk associated with these assets. There is no ECL on the securitized mortgages, as the mortgages were already insured by the CMHC prior to securitization. These assets continue to be recognized as Mortgages and loans in our Consolidated Statements of Financial Position. Proceeds from securitization transactions are recognized as secured borrowings and included in Other liabilities in our Consolidated Statements of Financial Position.

Receipts of principal on the securitized mortgages are deposited into a principal reinvestment account ("PRA") to meet our repayment obligation upon maturity under the CMB program. The assets in the PRA are typically comprised of cash and cash equivalents and certain asset-backed securities. We are exposed to reinvestment risk due to the amortizing nature of the securitized mortgages relative to our repayment obligation for the full principal amount due at maturity. We mitigate this reinvestment risk using interest rate swaps.
The carrying value and fair value of the securitized mortgages as at December 31, 2024 are $1,555 and $1,505, respectively (December 31, 2023 — $1,792 and $1,697, respectively). The carrying value and fair value of the associated liabilities as at December 31, 2024 are $1,854 and $1,807, respectively (December 31, 2023 — $2,119 and $2,021, respectively). The carrying value of securities in the PRA as at December 31, 2024 is $302 (December 31, 2023 — $335). There are $nil cash and cash equivalents in the PRA as at December 31, 2024 (December 31, 2023 — $57).
The fair value of the secured borrowings from mortgage securitization is based on the methodologies and assumptions for asset-backed securities described in Note 5.A.iii. The fair value of these liabilities is categorized in Level 2 of the fair value hierarchy as at December 31, 2024 and December 31, 2023.
5.F.ii Repurchase Agreements
We enter into repurchase agreements for operational funding and liquidity purposes. Repurchase agreements have maturities ranging from 6 to 365 days, averaging 91 days, and bear interest at an average rate of 3.52% as at December 31, 2024 (December 31, 2023 — 4.86%). The carrying values of the transferred assets and the obligations related to their repurchase, which approximate their fair values, are $2,840 as at December 31, 2024 (December 31, 2023 — $2,705). These liabilities are categorized in Level 2 of the fair value hierarchy. Collateral primarily consists of cash and cash equivalents as well as government guaranteed securities. Details on the collateral pledged are included in Note 6.A.ii.
5.F.iii Securities Lending
The Company engages in securities lending to generate additional income. Certain securities from its portfolio are lent to other institutions for short periods. Collateral exceeding the fair value of the securities lent is deposited by the borrower with a lending agent, usually a securities custodian, and maintained by the lending agent until the underlying security has been returned to us. The fair value of the securities lent is monitored on a daily basis with additional collateral obtained or refunded as the fair values fluctuate. Collateral primarily consists of Canadian federal and provincial government securities and cash and cash equivalents. Certain arrangements allow us to invest the cash collateral received for the securities lent. The carrying values of the securities lent approximate their fair values. The carrying values of the securities lent and the related collateral held are $2,377 and $2,506, respectively, as at December 31, 2024 (December 31, 2023 — $2,044 and $2,158, respectively). Of the collateral held, we held cash collateral of $194 as at December 31, 2024 (December 31, 2023 — $187), which is recognized on our Consolidated Statements of Financial Position.