Note 4 Invested Assets and Investment Income

(a) Carrying values and fair values of invested assets

As at December 31, 2017

FVTPL⁽¹⁾

AFS⁽²⁾

Other⁽³⁾

Total carrying
value

Total fair
value⁽⁹⁾

Cash and short-term securities⁽⁴⁾

439

11,429

4,097

15,965

Debt securities⁽⁵⁾

Canadian government and agency

17,886

4,892

–

22,778

U.S. government and agency

12,497

13,472

–

25,969

Other government and agency

16,838

2,988

–

19,826

Corporate

96,785

5,366

–

102,151

Mortgage/asset-backed securities

3,018

258

–

3,276

Public equities

18,473

3,072

–

21,545

Mortgages

–

44,742

46,065

Private placements

–

32,132

34,581

Policy loans

–

5,808

Loans to Bank clients

–

1,737

1,742

Real estate

Own use property⁽⁶⁾

–

1,281

2,448

Investment property

–

12,529

Other invested assets

Alternative long-duration assets⁽⁷⁾

12,018

8,624

20,730

21,053

Various other⁽⁸⁾

142

–

3,611

3,753

3,752

Total invested assets

178,096

41,565

114,561

334,222

339,488

As at December 31, 2016

FVTPL⁽¹⁾

AFS⁽²⁾

Other⁽³⁾

Total carrying
value

Total fair
value⁽⁹⁾

Cash and short-term securities⁽⁴⁾

269

11,705

3,177

15,151

Debt securities⁽⁵⁾

Canadian government and agency

18,030

6,715

–

24,745

U.S. government and agency

13,971

13,333

–

27,304

Other government and agency

18,629

2,312

–

20,941

Corporate

87,374

5,041

–

92,415

Mortgage/asset-backed securities

2,886

331

–

3,217

Public equities

16,531

2,965

–

19,496

Mortgages

–

44,193

45,665

Private placements

–

29,729

31,459

Policy loans

–

6,041

Loans to Bank clients

–

1,745

1,746

Real estate

Own use property⁽⁶⁾

–

1,376

2,524

Investment property

–

12,756

Other invested assets

Alternative long-duration assets⁽⁷⁾

10,707

8,048

18,851

19,193

Various other⁽⁸⁾

164

–

3,745

3,909

3,910

Total invested assets

168,561

42,498

110,810

321,869

326,563

⁽¹⁾

The FVTPL classification was elected for securities backing insurance contract liabilities to substantially reduce any accounting mismatch arising from changes in the fair value of these assets and changes in the value of the related insurance contract liabilities. If this election had not been made and instead the available-for-sale (“AFS”) classification was selected, there would be an accounting mismatch because changes in insurance contract liabilities are recognized in net income rather than in OCI.

⁽²⁾	Securities that are designated as AFS are not actively traded by the Company but sales do occur as circumstances warrant. Such sales result in a reclassification of any accumulated unrealized gain (loss) in AOCI to net income as a realized gain (loss).

⁽³⁾	Primarily includes assets classified as loans and carried at amortized cost, own use properties, investment properties, equity method accounted investments, oil and gas investments, and leveraged leases. Refer to note 1(e) for further details regarding accounting policy.

⁽⁴⁾	Includes short-term securities with maturities of less than one year at acquisition amounting to $2,737 (2016 – $3,111), cash equivalents with maturities of less than 90 days at acquisition amounting to $9,131 (2016 – $8,863) and cash of $4,097 (2016 – $3,177).

⁽⁵⁾	Debt securities include securities which were acquired with maturities of less than one year and less than 90 days of $1,768 and $161, respectively (2016 – $893 and $192, respectively).

⁽⁶⁾	Includes accumulated depreciation of $389 (2016 – $404).

⁽⁷⁾	Alternative long-duration assets (“ALDA”) include investments in private equity of $4,959, power and infrastructure of $7,355, oil and gas of $2,813, timber and agriculture of $5,033 and various other invested assets of $570 (2016 – $4,619, $6,679, $2,093, $4,972 and $488, respectively).

⁽⁸⁾	Includes $3,273 (2016 – $3,369) of leveraged leases. Refer to note 1(e) regarding accounting policy.

⁽⁹⁾	The methodologies used in determining fair values of invested assets are described in note 1 and note 4(g).

(b) Equity method accounted invested assets

Other invested assets include investments in associates and joint ventures which are accounted for using the equity method of accounting as follows.



	2017				2016
As at December 31,	Carrying value		% of total		Carrying value		% of total
Leveraged leases	$	3,273		56	$	3,369		58
Timber and agriculture		451		8		430		8
Real estate		498		9		419		7
Other		1,535		27		1,562		27
Total	$	5,757		100	$	5,780		100

The Company’s share of profit and dividends from these investments for the year ended December 31, 2017 were $291 and $14, respectively (2016 – $252 and $17, respectively).

(c) Investment income

For the year ended December 31, 2017

FVTPL

AFS

Other⁽¹⁾

Total

Yields⁽²⁾

Cash and short-term securities

0.9%

Interest income

153

–

160

Gains (losses)⁽³⁾

(47

)

–

(25

)

Debt securities

5.4%

Interest income

5,102

577

–

5,679

Gains (losses)⁽³⁾

3,690

(205

)

–

3,485

Recovery (impairment loss), net

)

–

Public equities

16.6%

Dividend income

524

–

603

Gains⁽³⁾

2,372

226

–

2,598

Impairment loss

–

(14

)

–

(14

)

Mortgages

3.9%

Interest income

–

1,685

Gains⁽³⁾

–

Provision, net

–

(32

)

(32

)

Private placements

5.3%

Interest income

–

1,553

Gains⁽³⁾

–

Impairment loss, net

–

Policy loans

–

365

6.1%

Loans to Bank clients

4.0%

Interest income

–

Real estate

6.2%

Rental income, net of depreciation⁽⁴⁾

–

517

Gains⁽³⁾

–

341

Impairment loss

–

)

Derivatives

n/a

Interest income, net

809

–

893

Gains (losses)⁽³⁾

(1,029

)

–

(945

)

Other invested assets

10.3%

Interest income

–

174

Oil and gas, timber, agriculture and other income

–

1,690

Gains (losses)⁽³⁾

441

)

484

Impairment loss, net

–

(45

)

(45

)

Total investment income

11,954

761

6,652

19,367

6.0%

Investment income

Interest income

5,918

730

3,929

10,577

3.3%

Dividend, rental and other income

524

2,207

2,810

0.9%

Impairments, provisions and recoveries, net

(15

)

(71

)

(70

)

0.0%

Other

460

(51

)

(77

)

332

0.1%

6,918

743

5,988

13,649

Realized and unrealized gains (losses) on assets supporting insurance and investment contract liabilities and on macro equity hedges

Debt securities

3,694

)

–

3,686

1.1%

Public equities

2,200

–

2,235

0.7%

Mortgages

–

0.0%

Private placements

–

0.0%

Real estate

–

350

0.1%

Other invested assets

329

)

121

441

0.1%

Derivatives, including macro equity hedging program

(1,187

)

–

(1,103

)

(0.3%

)

5,036

664

5,718

Total investment income

11,954

761

6,652

19,367

6.0%


For the year ended December 31, 2016	FVTPL			AFS			Other⁽¹⁾			Total			Yields⁽²⁾
Cash and short-term securities														0.7%
Interest income	$	7		$	117		$	–		$	124
Gains (losses)⁽³⁾		18			(18	)		–			–
Debt securities														4.7%
Interest income		5,051			588			–			5,639
Gains⁽³⁾		1,658			548			–			2,206
Recovery (impairment loss), net		(18	)		–			–			(18	)
Public equities														10.6%
Dividend income		534			58			–			592
Gains⁽³⁾		1,008			201			–			1,209
Impairment loss		–			(48	)		–			(48	)
Mortgages														4.1%
Interest income		–			–			1,667			1,667
Gains (losses)⁽³⁾		–			–			81			81
Provision, net		–			–			(7	)		(7	)
Private placements														5.4%
Interest income		–			–			1,494			1,494
Gains⁽³⁾		–			–			17			17
Impairment loss, net		–			–			(50	)		(50	)
Policy loans		–			–			358			358			6.1%
Loans to Bank clients														3.9%
Interest income		–			–			68			68
Real estate														4.9%
Rental income, net of depreciation⁽⁴⁾		–			–			523			523
Gains⁽³⁾		–			–			160			160
Derivatives														n/a
Interest income, net		1,115			–			(33	)		1,082
Losses⁽³⁾		(2,597	)		–			–			(2,597	)
Other invested assets														10.3%
Interest income		–			–			103			103
Oil and gas, timber, agriculture and other income		–			–			1,162			1,162
Gains⁽³⁾		634			1			207			842
Impairment loss, net		–			–			(83	)		(83	)
Total investment income	$	7,410		$	1,447		$	5,667		$	14,524			4.7%
Investment income
Interest income	$	6,173		$	703		$	3,657		$	10,533			3.4%
Dividend, rental and other income		534			58			1,685			2,277			0.7%
Impairments and provisions		(18	)		(48	)		(140	)		(206	)		(0.1%	)
Other		(6	)		707			85			786			0.2%
		6,683			1,420			5,287			13,390
Realized and unrealized gains (losses) on assets supporting insurance and investment contract liabilities and on macro equity hedges
Debt securities		1,657			5			–			1,662			0.5%
Public equities		963			22			–			985			0.3%
Mortgages		–			–			80			80			0.0%
Private placements		–			–			12			12			0.0%
Real estate		–			–			128			128			0.0%
Other invested assets		688			–			160			848			0.3%
Derivatives, including macro equity hedging program		(2,581	)		–			–			(2,581	)		(0.8%	)
		727			27			380			1,134
Total investment income	$	7,410		$	1,447		$	5,667		$	14,524			4.7%

⁽¹⁾	Primarily includes loans carried at amortized cost, own use properties, investment properties, derivative and hedging instruments in cash flow hedging relationships, equity method accounted investments, oil and gas investments, and leveraged leases.

⁽²⁾	Yields are based on income and are calculated using the geometric average of the carrying value of assets held during the reporting year.

⁽³⁾

Includes net realized gains (losses) as well as net unrealized gains (losses) for financial instruments at FVTPL, real estate investment properties, and other invested assets measured at fair value. Also includes net realized gains (losses) for financial instruments at AFS and other invested assets carried at amortized cost.

⁽⁴⁾	Rental income from investment properties is net of direct operating expenses.

(d) Investment expenses

The following table presents the Company’s total investment expenses.



For the years ended December 31,	2017		2016
Related to invested assets	$	625	$	581
Related to segregated, mutual and other funds		1,048		1,065
Total investment expenses	$	1,673	$	1,646

(e) Investment properties

The following table presents rental income and direct operating expenses of investment properties.



For the years ended December 31,	2017			2016
Rental income from investment properties	$	1,120		$	1,204
Direct operating expenses of investment properties that generated rental income		(694	)		(764	)
Total	$	426		$	440

(f) Mortgage securitization

The Company securitizes certain insured and uninsured fixed and variable rate residential mortgages and Home Equity Lines of Credit (“HELOC”) through creation of mortgage-backed securities under the Canadian Mortgage Bond Program (“CMB”), and the HELOC securitization program.

Benefits received from the securitization include interest spread between the asset and associated liability. There are no expected credit losses on securitized mortgages under the Canada Mortgage and Housing Corporation (“CMHC”) sponsored CMB and the Platinum Canadian Mortgage Trust (“PCMT”) HELOC securitization programs as they are insured by CMHC and other third-party insurance programs against borrowers’ default. Mortgages securitized in the Platinum Canadian Mortgage Trust II (“PCMT II”) program are uninsured.

Cash flows received from the underlying securitized assets/mortgages are used to settle the related secured borrowing liability. For CMB transactions, receipts of principal are deposited into a trust account for settlement of the liability at time of maturity. These transferred assets and related cash flows cannot be transferred or used for other purposes. For the HELOC transactions, investors are entitled to periodic interest payments, and the remaining cash receipts of principal are allocated to the Company (the “Seller”) during the revolving period of the deal and are accumulated for settlement during an accumulation period, or repaid to the investor monthly during a reduction period, based on the terms of the note.

The following table presents the carrying amount of securitized assets and secured borrowing liabilities.


As at December 31, 2017	Securitized assets
Securitization program	Securitized mortgages		Restricted cash and short-term securities		Total		Secured borrowing liabilities⁽²⁾
HELOC securitization⁽¹⁾	$	2,024	$	8	$	2,032	$	2,000
CMB securitization		1,480		–		1,480		1,523
Total	$	3,504	$	8	$	3,512	$	3,523

As at December 31, 2016	Securitized assets
Securitization program	Securitized mortgages		Restricted cash and short-term securities		Total		Secured borrowing liabilities⁽²⁾
HELOC securitization⁽¹⁾	$	1,762	$	8	$	1,770	$	1,750
CMB securitization		1,018		–		1,018		1,032
Total	$	2,780	$	8	$	2,788	$	2,782

⁽¹⁾

Manulife Bank, a MFC subsidiary, securitizes a portion of its HELOC receivables through Platinum Canadian Mortgage Trust (“PCMT”), and Platinum Canadian Mortgage Trust II (“PCMT II”). PCMT funds the purchase of the co-ownership interests from Manulife Bank by issuing term notes collateralized by an underlying pool of CMHC insured HELOCs to institutional investors. PCMT II funds the purchase of the co-ownership interests from Manulife Bank by issuing term notes collateralized by an underlying pool of uninsured HELOCs to institutional investors. The restricted cash balance for the HELOC securitization reflects a cash reserve fund established in relation to the transactions. The reserve will be drawn upon only in the event of insufficient cash flows from the underlying HELOCs to satisfy the secured borrowing liability.

⁽²⁾

Secured borrowing liabilities primarily comprise of Series 2011-1 notes with a floating rate which are expected to mature on December 15, 2021, and the Series 2016-1 notes with a floating rate which are expected to mature on May 15, 2022. Manulife Bank also securitizes insured amortizing mortgages under the National Housing Act Mortgage-Backed Securities (“NHA MBS”) program sponsored by CMHC. Manulife Bank participates in CMB programs by selling NHA MBS securities to Canada Housing Trust (“CHT”), as a source of fixed rate funding.

Fair value of the securitized assets as at December 31, 2017 was $3,533 (2016 – $2,821) and the fair value of the associated liabilities was $3,503 (2016 – $2,776).

(g) Fair value measurement

The following table presents fair values and the fair value hierarchy of invested assets and segregated funds net assets measured at fair value in the Consolidated Statements of Financial Position.

As at December 31, 2017

Total fair
value

Level 1

Level 2

Level 3

Cash and short-term securities

FVTPL

439

–

439

–

AFS

11,429

–

11,429

–

Other

4,097

–

Debt securities

FVTPL

Canadian government and agency

17,886

–

17,886

–

U.S. government and agency

12,497

–

12,497

–

Other government and agency

16,838

–

16,599

239

Corporate

96,785

96,073

710

Residential mortgage/asset-backed securities

–

Commercial mortgage/asset-backed securities

1,099

–

1,099

–

Other securitized assets

1,911

–

1,886

AFS

Canadian government and agency

4,892

–

4,892

–

U.S. government and agency

13,472

–

13,472

–

Other government and agency

2,988

–

2,941

Corporate

5,366

–

5,278

Residential mortgage/asset-backed securities

–

Commercial mortgage/asset-backed securities

138

–

138

–

Other securitized assets

–

Public equities

FVTPL

18,473

18,470

–

AFS

3,072

3,069

–

Real estate – investment property⁽¹⁾

12,529

–

12,529

Other invested assets⁽²⁾

16,203

–

16,203

Segregated funds net assets⁽³⁾

324,307

286,490

33,562

4,255

Total

564,549

312,128

218,320

34,101

As at December 31, 2016

Total fair
value

Level 1

Level 2

Level 3

Cash and short-term securities

FVTPL

269

–

269

–

AFS

11,705

–

11,705

–

Other

3,177

–

Debt securities

FVTPL

Canadian government and agency

18,030

–

18,030

–

U.S. government and agency

13,971

–

13,971

–

Other government and agency

18,629

–

18,357

272

Corporate

87,374

86,721

651

Residential mortgage/asset-backed securities

–

Commercial mortgage/asset-backed securities

680

–

674

Other securitized assets

2,196

–

2,161

AFS

Canadian government and agency

6,715

–

6,715

–

U.S. government and agency

13,333

–

13,333

–

Other government and agency

2,312

–

2,261

Corporate

5,041

–

4,967

Residential mortgage/asset-backed securities

–

Commercial mortgage/asset-backed securities

123

–

121

Other securitized assets

143

–

141

Public equities

FVTPL

16,531

16,524

–

AFS

2,965

2,963

–

Real estate – investment property⁽¹⁾

12,756

–

12,756

Other invested assets⁽²⁾

14,849

–

14,849

Segregated funds net assets⁽³⁾

315,177

278,066

32,537

4,574

Total

546,051

300,732

212,037

33,282

⁽¹⁾

For investment properties, the significant unobservable inputs are capitalization rates (ranging from 3.50% to 9.00% during the year and ranging from 3.75% to 9.75% during the year 2016) and terminal capitalization rates (ranging from 4.0% to 9.25% during the year and ranging from 4.1% to 10.0% during the year 2016). Holding other factors constant, a lower capitalization or terminal capitalization rate will tend to increase the fair value of an investment property. Changes in fair value based on variations in unobservable inputs generally cannot be extrapolated because the relationship between the directional changes of each input is not usually linear.

⁽²⁾

Other invested assets measured at fair value are held primarily in power and infrastructure and timber sectors. The significant inputs used in the valuation of the Company’s power and infrastructure investments are primarily future distributable cash flows, terminal values and discount rates. Holding other factors constant, an increase to future distributable cash flows or terminal values would tend to increase the fair value of a power and infrastructure investment, while an increase in the discount rate would have the opposite effect. Discount rates during the year ranged from 9.20% to 16.5% (2016 – ranged from 9.63% to 16.0%). Disclosure of distributable cash flow and terminal value ranges are not meaningful given the disparity in estimates by project. The significant inputs used in the valuation of the Company’s investments in timberland are timber prices and discount rates. Holding other factors constant, an increase to timber prices would tend to increase the fair value of a timberland investment, while an increase in the discount rates would have the opposite effect. Discount rates during the year ranged from 5.0% to 7.5% (2016 – ranged from 5.0% to 7.5%). A range of prices for timber is not meaningful as the market price depends on factors such as property location and proximity to markets and export yards.

⁽³⁾	Segregated funds net assets are measured at fair value. The Company’s Level 3 segregated funds assets are predominantly invested in timberland properties valued as described above.

For invested assets not measured at fair value in the Consolidated Statements of Financial Position, the following table presents their fair values categorized by the fair value hierarchy.


As at December 31, 2017	Carrying value		Fair value		Level 1		Level 2		Level 3
Mortgages⁽¹⁾	$	44,742	$	46,065	$	–	$	–	$	46,065
Private placements⁽²⁾		32,132		34,581		–		28,514		6,067
Policy loans⁽³⁾		5,808		5,808		–		5,808		–
Loans to Bank clients⁽⁴⁾		1,737		1,742		–		1,742		–
Real estate – own use property⁽⁵⁾		1,281		2,448		–		–		2,448
Other invested assets⁽⁶⁾		8,280		8,602		88		–		8,514
Total invested assets disclosed at fair value	$	93,980	$	99,246	$	88	$	36,064	$	63,094

As at December 31, 2016		Carrying value		Fair value		Level 1		Level 2		Level 3
Mortgages⁽¹⁾	$	44,193	$	45,665	$	–	$	–	$	45,665
Private placements⁽²⁾		29,729		31,459		–		26,073		5,386
Policy loans⁽³⁾		6,041		6,041		–		6,041		–
Loans to Bank clients⁽⁴⁾		1,745		1,746		–		1,746		–
Real estate – own use property⁽⁵⁾		1,376		2,524		–		–		2,524
Other invested assets⁽⁶⁾		7,911		8,254		54		–		8,200
Total invested assets disclosed at fair value	$	90,995	$	95,689	$	54	$	33,860	$	61,775

⁽¹⁾

Fair value of commercial mortgages is determined through an internal valuation methodology using both observable and unobservable inputs. Unobservable inputs include credit assumptions and liquidity spread adjustments. Fair value of fixed-rate residential mortgages is determined using the discounted cash flow method. Inputs used for valuation are primarily comprised of prevailing interest rates and prepayment rates, if applicable. Fair value of variable-rate residential mortgages is assumed to be their carrying value.

⁽²⁾

Fair value of private placements is determined through an internal valuation methodology using both observable and unobservable inputs. Unobservable inputs include credit assumptions and liquidity spread adjustments. Private placements are classified within Level 2 unless the liquidity adjustment constitutes a significant price impact, in which case the securities are classified as Level 3.

⁽³⁾	Fair value of policy loans is equal to their unpaid principal balances.

⁽⁴⁾	Fair value of fixed-rate loans to Bank clients is determined using the discounted cash flow method. Inputs used for valuation are primarily comprised of current interest rates. Fair value of variable-rate loans is assumed to be their carrying value.

⁽⁵⁾	Fair value of own use real estate and the fair value hierarchy are determined in accordance with the methodologies described for real estate – investment property in note 1.

⁽⁶⁾

Primarily include leveraged leases, oil and gas properties and equity method accounted other invested assets. Fair value of leveraged leases is disclosed at their carrying values as fair value is not routinely calculated on these investments. Fair value for oil and gas properties is determined using external appraisals based on discounted cash flow methodology. Inputs used in valuation are primarily comprised of forecasted price curves, planned production, as well as capital expenditures, and operating costs. Fair value of equity method accounted other invested assets is determined using a variety of valuation techniques including discounted cash flows and market comparable approaches. Inputs vary based on the specific investment.

Transfers between Level 1 and Level 2

The Company records transfers of assets and liabilities between Level 1 and Level 2 at their fair values as at the end of each reporting period. Assets are transferred out of Level 1 when they are no longer transacted with sufficient frequency and volume in an active market. During the year ended December 31, 2017, the Company transferred $nil (2016 – $nil) of assets measured at fair value from Level 1 to Level 2. Conversely, assets are transferred from Level 2 to Level 1 when transaction volume and frequency are indicative of an active market. The Company transferred $nil (2016 – $nil) of assets from Level 2 to Level 1 during the year ended December 31, 2017.

For segregated funds net assets, the Company had $nil transfers from Level 1 to Level 2 for the year ended December 31, 2017 (2016 – $8). The Company had $5 transfers from Level 2 to Level 1 for the year ended December 31, 2017 (2016 – $nil).

Invested assets and segregated funds net assets measured at fair value using significant unobservable inputs (Level 3)

The Company classifies fair values of the invested assets and segregated funds net assets as Level 3 if there are no observable markets for these assets or, in the absence of active markets, the majority of the inputs used to determine fair value are based on the Company’s own assumptions about market participant assumptions. The Company prioritizes the use of market-based inputs over entity-based assumptions in determining Level 3 fair values and, therefore, the gains and losses in the tables below include changes in fair value due to both observable and unobservable factors.

The following table presents a roll forward of invested assets and segregated funds net assets measured at fair value using significant unobservable inputs (Level 3) for the years ended December 31, 2017 and 2016.


For the year ended December 31, 2017	Balance, January 1, 2017		Net realized/ unrealized gains (losses) included in net income⁽¹⁾			Net realized/ unrealized gains (losses) included in AOCI⁽²⁾			Purchases		Sales⁽³⁾			Settlements			Transfer into Level 3⁽⁴⁾		Transfer out of Level 3⁽⁴⁾			Currency movement			Balance, December 31, 2017		Change in unrealized gains (losses) on assets still held
Debt securities
FVTPL
Other government & agency	$	272	$	(3	)	$	–		$	26	$	(58	)	$	(6	)	$	–	$	–		$	8		$	239	$	(3	)
Corporate		651		19			–			105		(34	)		(29	)		24		(21	)		(5	)		710		10
Residential mortgage/asset-backed securities		2		–			–			–		–			–			–		–			(1	)		1		(1	)
Commercial mortgage/asset-backed securities		6		–			–			–		(5	)		(1	)		–		–			–			–		–
Other securitized assets		35		(1	)		–			–		–			(7	)		–		–			(2	)		25		(1	)
		966		15			–			131		(97	)		(43	)		24		(21	)		–			975		5
AFS
Other government & agency		51		(1	)		(2	)		14		(15	)		(2	)		1		–			1			47		–
Corporate		74		–			4			22		(10	)		(4	)		–		–			2			88		–
Residential mortgage/asset-backed securities		1		–			(1	)		–		–			–			–		–			–			–		–
Commercial mortgage/asset-backed securities		2		–			–			–		(1	)		(1	)		–		–			–			–		–
Other securitized assets		2		–			–			–		–			(1	)		–		–			–			1		–
		130		(1	)		1			36		(26	)		(8	)		1		–			3			136		–
Public equities
FVTPL		7		–			–			–		(4	)		–			–		–			–			3		–
		7		–			–			–		(4	)		–			–		–			–			3		–
Real estate – investment property		12,756		301			–			1,257		(1,267	)		–			–		–			(518	)		12,529		264
Other invested assets		14,849		395			–			3,022		(435	)		(837	)		–		–			(791	)		16,203		244
		27,605		696			–			4,279		(1,702	)		(837	)		–		–			(1,309	)		28,732		508
Segregated funds net assets		4,574		60			–			261		(248	)		(54	)		–		(184	)		(154	)		4,255		45
Total	$	33,282	$	770		$	1		$	4,707	$	(2,077	)	$	(942	)	$	25	$	(205	)	$	(1,460	)	$	34,101	$	558


For the year ended December 31, 2016	Balance, January 1, 2016		Net realized/ unrealized gains (losses) included in net income⁽¹⁾			Net realized/ unrealized gains (losses) included in AOCI⁽²⁾			Purchases		Sales⁽³⁾			Settlements			Transfer into Level 3⁽⁴⁾			Transfer out of Level 3⁽⁴⁾			Currency movement			Balance, December 31, 2016		Change in unrealized gains (losses) on assets still held
Debt securities
FVTPL
Other government & agency	$	310	$	3		$	–		$	50	$	(41	)	$	(30	)	$	–		$	–		$	(20	)	$	272	$	1
Corporate		903		(29	)		–			83		(84	)		(134	)		58			(124	)		(22	)		651		(4	)
Residential mortgage/asset-backed securities		15		–			–			–		(11	)		(1	)		–			–			(1	)		2		1
Commercial mortgage/asset-backed securities		70		–			–			–		(56	)		(4	)		–			–			(4	)		6		(3	)
Other securitized assets		48		–			–			–		(1	)		(7	)		–			(4	)		(1	)		35		–
		1,346		(26	)		–			133		(193	)		(176	)		58			(128	)		(48	)		966		(5	)
AFS
Other government & agency		42		–			–			18		(6	)		–			–			–			(3	)		51		–
Corporate		90		–			(2	)		29		(32	)		(3	)		–			(5	)		(3	)		74		–
Residential mortgage/asset-backed securities		8		(1	)		1			–		(6	)		–			–			–			(1	)		1		–
Commercial mortgage/asset-backed securities		4		–			–			–		–			(1	)		–			–			(1	)		2		–
Other securitized assets		5		–			2			–		–			(1	)		–			(4	)		–			2		–
		149		(1	)		1			47		(44	)		(5	)		–			(9	)		(8	)		130		–
Public equities
FVTPL		–		–			–			7		–			–			–			–			–			7		–
		–		–			–			7		–			–			–			–			–			7		–
Real estate –investment property		13,968		163			–			681		(1,782	)		–			–			–			(274	)		12,756		197
Other invested assets		12,977		786			9			2,171		(76	)		(685	)		–			–			(333	)		14,849		847
		26,945		949			9			2,852		(1,858	)		(685	)		–			–			(607	)		27,605		1,044
Segregated funds net assets		4,656		92			–			356		(312	)		(19	)		(12	)		(105	)		(82	)		4,574		93
Total	$	33,096	$	1,014		$	10		$	3,395	$	(2,407	)	$	(885	)	$	46		$	(242	)	$	(745	)	$	33,282	$	1,132

⁽¹⁾	These amounts, except for the amount related to segregated funds net assets, are included in net investment income on the Consolidated Statements of Income.

⁽²⁾	These amounts are included in AOCI on the Consolidated Statements of Financial Position.

⁽³⁾

Sales in 2017 include $619 of U.S. commercial real estate sold to the Hancock US Real Estate Fund, L.P., an associate of the Company which is a structured entity based on partnership voting rights. The Company provides management services to the fund and owns approximately 11.7% of its partnership interests. Also in 2017, sales include US$313 (2016 – $1,011) of U.S. commercial real estate sold to the Manulife US Real Estate Investment Trust in Singapore, an associate of the Company which is a structured entity based on unitholder voting rights. The Company provides management services to the trust and owns approximately 9.5% of its units.

⁽⁴⁾	For assets transferred into and out of Level 3, the Company uses fair values of the assets at the beginning of the year.

Transfers into Level 3 primarily result from securities that were impaired during the year or securities where a lack of observable market data (versus the previous period) resulted in reclassifying assets into Level 3. Transfers from Level 3 primarily result from observable market data now being available for the entire term structure of the debt security.