Risk Management (Tables)

12 Months Ended

Dec. 31, 2018

Summary of Gross Carrying Amount of Financial Instruments Subject to Credit Exposure

The following table presents the gross carrying amount of financial instruments subject to credit exposure, without considering any collateral held or other credit enhancements.



As at December 31,	2018		2017
Debt securities
FVTPL	$	154,737	$	147,024
AFS		30,857		26,976
Mortgages		48,363		44,742
Private placements		35,754		32,132
Policy loans		6,446		5,808
Loans to Bank clients		1,793		1,737
Derivative assets		13,703		15,569
Accrued investment income		2,427		2,182
Reinsurance assets		43,053		30,359
Other financial assets		4,800		5,253
Total	$	341,933	$	311,782

Summary of Credit Quality and Carrying Value of Commercial Mortgages and Private Placements

Credit quality of commercial mortgages and private placements.


As at December 31, 2018	AAA		AA		A		BBB		BB		B and lower		Total
Commercial mortgages
Retail	$	82	$	1,524	$	4,459	$	2,227	$	11	$	74	$	8,377
Office		56		1,495		5,454		1,650		45		6		8,706
Multi-family residential		613		1,427		2,407		839		37		–		5,323
Industrial		36		366		1,953		339		120		–		2,814
Other		289		334		1,167		1,191		–		14		2,995
Total commercial mortgages		1,076		5,146		15,440		6,246		213		94		28,215
Agricultural mortgages		–		163		–		389		–		–		552
Private placements		1,143		4,968		13,304		14,055		733		1,551		35,754
Total	$	2,219	$	10,277	$	28,744	$	20,690	$	946	$	1,645	$	64,521

As at December 31, 2017	AAA		AA		A		BBB		BB		B and lower		Total
Commercial mortgages
Retail	$	110	$	1,517	$	4,363	$	2,050	$	44	$	57	$	8,141
Office		57		1,272		4,635		1,647		70		28		7,709
Multi-family residential		523		1,395		1,805		726		–		–		4,449
Industrial		33		386		1,542		477		145		–		2,583
Other		362		331		1,012		973		14		–		2,692
Total commercial mortgages		1,085		4,901		13,357		5,873		273		85		25,574
Agricultural mortgages		–		159		–		405		25		–		589
Private placements		1,038		4,246		11,978		13,160		717		993		32,132
Total	$	2,123	$	9,306	$	25,335	$	19,438	$	1,015	$	1,078	$	58,295

Summary of Carrying Value of Past Due but Not Impaired and Impaired Financial Assets

Past due but not impaired and impaired financial assets


	Past due but not impaired
As at December 31, 2018	Less than 90 days		90 days and greater		Total		Total impaired
Debt securities
FVTPL	$	14	$	–	$	14	$	39
AFS		–		2		2		1
Private placements		15		–		15		18
Mortgages and loans to Bank clients		70		–		70		120
Other financial assets		77		26		103		1
Total	$	176	$	28	$	204	$	179

	Past due but not impaired
As at December 31, 2017	Less than 90 days		90 days and greater		Total		Total impaired
Debt securities
FVTPL	$	–	$	–	$	–	$	45
AFS		104		2		106		1
Private placements		363		–		363		40
Mortgages and loans to Bank clients		76		16		92		86
Other financial assets		46		26		72		1
Total	$	589	$	44	$	633	$	173

Summary of Company's Loans That are Considered Impaired

Impaired loans


As at December 31, 2018	Gross carrying value		Allowances for loan losses		Net carrying value
Private placements	$	61	$	43	$	18
Mortgages and loans to Bank clients		172		52		120
Total	$	233	$	95	$	138

As at December 31, 2017	Gross carrying value		Allowances for loan losses		Net carrying value
Private placements	$	79	$	39	$	40
Mortgages and loans to Bank clients		132		46		86
Total	$	211	$	85	$	126

Summary of Reconciliation of Allowance for Loan Losses

Allowance for loan losses



	2018									2017
For the years ended December 31,		Private placements			Mortgages and loans to Bank clients			Total			Private placements			Mortgages and loans to Bank clients			Total
Balance, January 1	$	39		$	46		$	85		$	92		$	26		$	118
Provisions		37			18			55			2			33			35
Recoveries		(27	)		(9	)		(36	)		(12	)		(1	)		(13	)
Write-offs⁽¹⁾		(6	)		(3	)		(9	)		(43	)		(12	)		(55	)
Balance, December 31	$	43		$	52		$	95		$	39		$	46		$	85

⁽¹⁾	Includes disposals and impact of changes in foreign exchange rates.

Summary of Credit Default Swap Protection Sold

The following table presents details of the credit default swap protection sold by type of contract and external agency rating for the underlying reference security.


As at December 31, 2018	Notional amount⁽¹⁾		Fair value		Weighted average maturity (in years)⁽²⁾
Single name CDSs⁽³⁾– Corporate debt
AA	$	25	$	–		2
A		447		7		2
BBB		180		2		2
Total single name CDSs	$	652	$	9		2
Total CDS protection sold	$	652	$	9		2

As at December 31, 2017	Notional amount⁽¹⁾		Fair value		Weighted average maturity (in years)⁽²⁾
Single name CDSs⁽³⁾– Corporate debt
AAA	$	13	$	–		1
AA		35		1		2
A		408		10		3
BBB		150		3		2
Total single name CDSs	$	606	$	14		3
Total CDS protection sold	$	606	$	14		3

⁽¹⁾	Notional amounts represent the maximum future payments the Company would have to pay its counterparties assuming a default of the underlying credit and zero recovery on the underlying issuer obligation.

⁽²⁾	The weighted average maturity of the CDS is weighted based on notional amounts.

⁽³⁾	Rating agency designations are based on S&P where available followed by Moody’s, DBRS, and Fitch. If no rating is available from a rating agency, an internally developed rating is used.

Summary of Effect of Conditional Master Netting and Similar Arrangements

The following table presents the effect of conditional master netting and similar arrangements. Similar arrangements may include global master repurchase agreements, global master securities lending agreements, and any related rights to financial collateral.


				Related amounts not set off in the Consolidated Statements of Financial Position
As at December 31, 2018	Gross amounts of financial instruments⁽¹⁾			Amounts subject to an enforceable master netting arrangement or similar agreements			Financial and cash collateral pledged (received)⁽²⁾			Net amount including financing trusts⁽³⁾			Net amounts excluding financing trusts
Financial assets
Derivative assets	$	14,320		$	(6,644	)	$	(7,431	)	$	245		$	245
Securities lending		1,518			–			(1,518	)		–			–
Reverse repurchase agreements		63			(63	)		–			–			–
Total financial assets	$	15,901		$	(6,707	)	$	(8,949	)	$	245		$	245
Financial liabilities
Derivative liabilities	$	(8,716	)	$	6,644		$	1,868		$	(204	)	$	(33	)
Repurchase agreements		(64	)		63			1			–			–
Total financial liabilities	$	(8,780	)	$	6,707		$	1,869		$	(204	)	$	(33	)



				Related amounts not set off in the Consolidated Statements of Financial Position
As at December 31, 2017	Gross amounts of financial instruments⁽¹⁾			Amounts subject to an enforceable master netting arrangement or similar agreements			Financial and cash collateral pledged (received)⁽²⁾			Net amount including financing trusts⁽³⁾			Net amounts excluding financing trusts
Financial assets
Derivative assets	$	16,204		$	(6,714	)	$	(9,395	)	$	95		$	95
Securities lending		1,563			–			(1,563	)		–			–
Reverse repurchase agreements		230			(46	)		(184	)		–			–
Total financial assets	$	17,997		$	(6,760	)	$	(11,142	)	$	95		$	95
Financial liabilities
Derivative liabilities	$	(8,649	)	$	6,714		$	1,718		$	(217	)	$	(30	)
Repurchase agreements		(228	)		46			182			–			–
Total financial liabilities	$	(8,877	)	$	6,760		$	1,900		$	(217	)	$	(30	)

⁽¹⁾	Financial assets and liabilities include accrued interest of $621 and $913, respectively (2017 – $638 and $827, respectively).

⁽²⁾

Financial and cash collateral exclude over-collateralization. As at December 31, 2018, the Company was over-collateralized on OTC derivative assets, OTC derivative liabilities, securities lending and reverse purchase agreements and repurchase agreements in the amounts of $417, $405, $80 and $nil, respectively (2017 – $743, $382, $79 and $nil, respectively). As at December 31, 2018, collateral pledged (received) does not include collateral-in-transit on OTC instruments or initial margin on exchange traded contracts or cleared contracts.

⁽³⁾	Includes derivative contracts entered between the Company and its financing trusts which it does not consolidate. The Company does not exchange collateral on derivative contracts entered with these trusts. Refer to note 17.

Summary of the Effect of Unconditional Netting

The following table presents the effect of unconditional netting.

As at December 31, 2018

Gross amounts of
financial instruments

Amounts subject to
an enforceable
netting arrangement

Net amounts of
financial instruments

Credit linked note⁽¹⁾

679

(679

)

–

Variable surplus note

(679

)

679

–


As at December 31, 2017	Gross amounts of financial instruments			Amounts subject to an enforceable netting arrangement			Net amounts of financial instruments
Credit linked note⁽¹⁾	$	461		$	(461	)	$	–
Variable surplus note		(461	)		461			–

⁽¹⁾

In 2017, the Company entered into a twenty-year financing facility with a third party, agreeing to issue variable surplus notes in exchange for an equal amount of credit linked notes. These notes are held to support JHUSA excess reserves under U.S. National Association of Insurance Commissioners’ Model Regulation XXX. In certain scenarios, the credit linked note will be drawn upon by the Company which will issue fixed surplus notes equal to the draw payment received. The third party has agreed to fund any such payment under the credit-linked notes in return for a fee. As at December 31, 2018, the Company had no fixed surplus notes outstanding.

Schedule of Distribution of Debt Securities and Private Placements Portfolio by Sector and Industry

Debt securities and private placements portfolio by sector and industry.



	2018				2017
As at December 31,	Carrying value		% of total		Carrying value		% of total
Government and agency	$	73,858		33	$	71,888		35
Utilities		41,929		19		40,568		20
Financial		31,340		14		27,923		13
Energy		17,685		8		16,428		8
Industrial		17,508		8		14,691		7
Consumer (non-cyclical)		16,483		7		14,009		7
Consumer (cyclical)		7,707		3		5,916		3
Securitized		3,300		2		3,577		2
Telecommunications		3,716		2		3,324		2
Basic materials		3,539		2		3,248		2
Technology		2,352		1		2,475		1
Media and internet		1,112		1		1,136		–
Diversified and miscellaneous		819		–		949		–
Total	$	221,348		100	$	206,132		100

Schedule of Geographic Concentration of Insurance and Investment Contract Liabilities, Including Embedded Derivatives

The geographic concentration of the Company’s insurance and investment contract liabilities, including embedded derivatives, is shown below. The disclosure is based on the countries in which the business is written.


As at December 31, 2018	Gross liabilities		Reinsurance assets			Net liabilities
U.S. and Canada	$	246,255	$	(42,634	)	$	203,621
Asia and Other		85,830		(419	)		85,411
Total	$	332,085	$	(43,053	)	$	289,032

As at December 31, 2017	Gross liabilities		Reinsurance assets			Net liabilities
U.S. and Canada	$	237,434	$	(30,225	)	$	207,209
Asia and Other		70,521		(134	)		70,387
Total	$	307,955	$	(30,359	)	$	277,596

Asset classes and individual investment risks [Member]

Statement [LineItems]

Schedule of Risk Concentrations



As at December 31,	2018		2017
Debt securities and private placements rated as investment grade BBB or higher⁽¹⁾		98%		98%
Government debt securities as a per cent of total debt securities		38%		39%
Government private placements as a per cent of total private placements		11%		10%
Highest exposure to a single non-government debt security and private placement issuer	$	1,013	$	1,044
Largest single issuer as a per cent of the total equity portfolio		2%		2%
Income producing commercial office properties (2018 – 55% of real estate, 2017 – 64%)	$	7,065	$	8,836
Largest concentration of mortgages and real estate⁽²⁾ – Ontario Canada (2018 – 26%, 2017 – 25%)	$	16,092	$	14,779

⁽¹⁾	Investment grade debt securities and private placements include 41% rated A, 17% rated AA and 17% rated AAA (2017 – 42%, 16% and 17%) investments based on external ratings where available.

⁽²⁾	Mortgages and real estate investments are diversified geographically and by property type.

Residential mortgages and loans to bank clients [Member]

Statement [LineItems]

Summary of Carrying Value of Residential Mortgages and Loans to Bank Clients

Credit quality of residential mortgages and loans to Bank clients.



	2018⁽¹⁾						2017
As at December 31,		Insured		Uninsured		Total		Insured		Uninsured		Total
Residential mortgages
Performing	$	6,854	$	12,696	$	19,550	$	7,256	$	11,310	$	18,566
Non-performing		19		27		46		4		9		13
Loans to Bank clients
Performing		n/a		1,787		1,787		n/a		1,734		1,734
Non-performing		n/a		6		6		n/a		3		3
Total	$	6,873	$	14,516	$	21,389	$	7,260	$	13,056	$	20,316

⁽¹⁾	Non-performing refers to assets that are 90 days or more past due.