Note 3 Invested Assets and Investment Income

(a) Carrying values and fair values of invested assets

As at December 31, 2018

FVTPL⁽¹⁾

AFS⁽²⁾

Other⁽³⁾

Total carrying
value⁽⁴⁾

Total fair
value⁽⁵⁾

Cash and short-term securities⁽⁶⁾

1,080

10,163

4,972

16,215

Debt securities⁽⁷⁾

Canadian government and agency

16,445

7,342

–

23,787

U.S. government and agency

11,934

13,990

–

25,924

Other government and agency

16,159

4,101

–

20,260

Corporate

107,425

5,245

–

112,670

Mortgage/asset-backed securities

2,774

179

–

2,953

Public equities

16,721

2,458

–

19,179

Mortgages

–

48,363

48,628

Private placements

–

35,754

36,103

Policy loans

–

6,446

Loans to Bank clients

–

1,793

1,797

Real estate

Own use property⁽⁸⁾

–

2,016

3,179

Investment property

–

10,761

Other invested assets

Alternative long-duration assets^(9),(10)

14,720

101

8,617

23,438

24,211

Various other⁽¹¹⁾

151

–

3,954

4,105

4,104

Total invested assets

187,409

43,579

122,676

353,664

356,217

As at December 31, 2017

FVTPL⁽¹⁾

AFS⁽²⁾

Other⁽³⁾

Total carrying
value

Total fair
value⁽⁵⁾

Cash and short-term securities⁽⁶⁾

439

11,429

4,097

15,965

Debt securities⁽⁷⁾

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⁽⁸⁾

–

1,281

2,448

Investment property

–

12,529

Other invested assets

Alternative long-duration assets^(9),(10)

12,018

8,624

20,730

21,053

Various other⁽¹¹⁾

142

–

3,611

3,753

3,752

Total invested assets

178,096

41,565

114,561

334,222

339,488

⁽¹⁾

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 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⁾

Fixed income invested assets presented above include debt securities, mortgages, private placements and approximately $600 other invested assets, which primarily have contractual cash flows that qualify as SPPI. Fixed income invested assets which do not have SPPI qualifying cash flows as at December 31, 2018 include debt securities, private placements and other invested assets with fair values of $105, $230 and $465, respectively. The change in the fair value of these invested assets during the year amounts to $21.

⁽⁵⁾	The methodologies used in determining fair values of invested assets are described in note 1(c) and note 3(g).

⁽⁶⁾	Includes short-term securities with maturities of less than one year at acquisition amounting to $2,530 (2017 – $2,737), cash equivalents with maturities of less than 90 days at acquisition amounting to $8,713 (2017 – $9,131) and cash of $4,972 (2017 – $4,097).

⁽⁷⁾	Debt securities include securities which were acquired with maturities of less than one year and less than 90 days of $870 and $40, respectively (2017 – $1,768 and $161, respectively).

⁽⁸⁾	Includes accumulated depreciation of $391 (2017 – $389).

⁽⁹⁾

Alternative long-duration assets (“ALDA”) include investments in private equity of $6,769, power and infrastructure of $7,970, oil and gas of $3,416, timber and agriculture of $4,493 and various other invested assets of $791 (2017 – $4,959, $7,355, $2,813, $5,033 and $570, respectively). Included in power and infrastructure are a group of investments in hydro-electric power of $426 for which the Company has an approved plan of sale. Sale of these investments is expected to be completed within one year. This disposal group is classified as held for sale and measured at the lower of carrying amount and fair value less costs to sell.

⁽¹⁰⁾

During 2018, the Company sold the following invested assets to related parties: $1,422 of power and infrastructure ALDA to the John Hancock Infrastructure Master Fund L.P. in the U.S. 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 less than 1% of the ownership interest; $510 (2017 – $395) of U.S. commercial real estate 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 8.5% (2017 – 9.5%) of its units; and $1,314 of U.S. commercial real estate to three newly established joint ventures which are structured entities based on voting rights. During 2017, $619 of U.S. commercial real estate was 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.

⁽¹¹⁾	Includes $3,575 (2017 – $3,273) of leveraged leases. Refer to note 1(e) regarding accounting policy.

(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 presented in the following table.



	2018				2017
As at December 31,	Carrying value		% of total		Carrying value		% of total
Leveraged leases	$	3,575		51	$	3,273		56
Timber and agriculture		599		9		451		8
Real estate		725		11		498		9
Other		1,959		29		1,535		27
Total	$	6,858		100	$	5,757		100

The Company’s share of profit and dividends from these investments for the year ended December 31, 2018 were $369 and $13, respectively (2017 – $291 and $14, respectively).

(c) Investment income

For the year ended December 31, 2018

FVTPL

AFS

Other⁽¹⁾

Total

Cash and short-term securities

Interest income

250

–

268

Gains (losses)⁽²⁾

(74

)

–

(12

)

Debt securities

Interest income

5,432

646

–

6,078

Gains (losses)⁽²⁾

(5,993

)

(310

)

–

(6,303

)

Recovery (impairment loss), net

–

Public equities

Dividend income

484

–

556

Gains (losses)⁽²⁾

(1,596

)

330

–

(1,266

)

Impairment loss

–

(43

)

–

(43

)

Mortgages

Interest income

–

1,824

Gains (losses)⁽²⁾

–

Provision, net

–

)

Private placements

Interest income

–

1,729

Gains (losses)⁽²⁾

–

(83

)

(83

)

Impairment loss, net

–

(10

)

(10

)

Policy loans

–

371

Loans to Bank clients

Interest income

–

Provision, net

–

)

Real estate

Rental income, net of depreciation⁽³⁾

–

515

Gains (losses)⁽²⁾

–

445

Impairment loss

–

Derivatives

Interest income, net

689

–

(33

)

656

Gains (losses)⁽²⁾

(2,251

)

–

(2,224

)

Other invested assets

Interest income

–

Oil and gas, timber, agriculture and other income

–

1,758

Gains (losses)⁽²⁾

283

–

(110

)

173

Impairment loss, net

)

(114

)

(120

)

Total investment income

(2,992

)

1,003

6,521

4,532

Investment income

Interest income

6,139

896

4,046

11,081

Dividend, rental and other income

484

2,273

2,829

Impairments, provisions and recoveries, net

(47

)

(133

)

(164

)

Other

(271

)

(186

)

6,368

979

6,213

13,560

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

Debt securities

(6,012

)

–

(5,994

)

Public equities

(1,454

)

–

(1,444

)

Mortgages

–

Private placements

–

(83

)

(83

)

Real estate

–

449

Other invested assets

357

)

(140

)

213

Derivatives, including macro equity hedging program

(2,251

)

–

(2,224

)

(9,360

)

308

(9,028

)

Total investment income

(2,992

)

1,003

6,521

4,532


For the year ended December 31, 2017	FVTPL			AFS			Other⁽¹⁾			Total
Cash and short-term securities
Interest income	$	7		$	153		$	–		$	160
Gains (losses)⁽²⁾		22			(47	)		–			(25	)
Debt securities
Interest income		5,102			577			–			5,679
Gains (losses)⁽²⁾		3,690			(205	)		–			3,485
Recovery (impairment loss), net		16			(1	)		–			15
Public equities
Dividend income		524			79			–			603
Gains (losses)⁽²⁾		2,372			226			–			2,598
Impairment loss		–			(14	)		–			(14	)
Mortgages
Interest income		–			–			1,685			1,685
Gains (losses)⁽²⁾		–			–			69			69
Provision, net		–			–			(32	)		(32	)
Private placements
Interest income		–			–			1,553			1,553
Gains (losses)⁽²⁾		–			–			43			43
Impairment loss, net		–			–			10			10
Policy loans		–			–			365			365
Loans to Bank clients
Interest income		–			–			68			68
Real estate
Rental income, net of depreciation⁽³⁾		–			–			517			517
Gains (losses)⁽²⁾		–			–			341			341
Impairment loss		–			–			(4	)		(4	)
Derivatives
Interest income, net		809			–			84			893
Gains (losses)⁽²⁾		(1,029	)		–			84			(945	)
Other invested assets
Interest income		–			–			174			174
Oil and gas, timber, agriculture and other income		–			–			1,690			1,690
Gains (losses)⁽²⁾		441			(7	)		50			484
Impairment loss, net		–			–			(45	)		(45	)
Total investment income	$	11,954		$	761		$	6,652		$	19,367
Investment income
Interest income	$	5,918		$	730		$	3,929		$	10,577
Dividend, rental and other income		524			79			2,207			2,810
Impairments, provisions and recoveries, net		16			(15	)		(71	)		(70	)
Other		460			(51	)		(77	)		332
		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			(8	)		–			3,686
Public equities		2,200			35			–			2,235
Mortgages		–			–			69			69
Private placements		–			–			40			40
Real estate		–			–			350			350
Other invested assets		329			(9	)		121			441
Derivatives, including macro equity hedging program		(1,187	)		–			84			(1,103	)
		5,036			18			664			5,718
Total investment income	$	11,954		$	761		$	6,652		$	19,367

⁽¹⁾	Primarily includes investment income on 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⁾

Includes net realized and 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.

⁽³⁾	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,	2018		2017
Related to invested assets	$	638	$	625
Related to segregated, mutual and other funds		1,070		1,048
Total investment expenses	$	1,708	$	1,673

(e) Investment properties

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



For the years ended December 31,	2018			2017
Rental income from investment properties	$	1,013		$	1,120
Direct operating expenses of rental investment properties		(582	)		(694	)
Total	$	431		$	426

(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.

Securitized assets and secured borrowing liabilities

As at December 31, 2018

Securitized assets

Securitization program

Securitized
mortgages

Restricted cash and
short-term securities

Total

Secured borrowing
liabilities⁽²⁾

HELOC securitization⁽¹⁾

2,285

$ 8

2,293

$ 2,250

CMB securitization

1,525

–

1,525

1,524

Total

3,810

$ 8

3,818

$ 3,774

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

⁽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.

As at December 31, 2018, the fair value of the securitized assets was $3,843 (2017 – $3,533) and the associated liabilities was $3,756 (2017 – $3,503).

(g) Fair value measurement

The following table presents the fair values of invested assets and segregated funds net assets measured at fair value categorized by the fair value hierarchy.

As at December 31, 2018

Total fair
value

Level 1

Level 2

Level 3

Cash and short-term securities

FVTPL

1,080

–

1,080

–

AFS

10,163

–

10,163

–

Other

4,972

–

Debt securities

FVTPL

Canadian government and agency

16,445

–

16,445

–

U.S. government and agency

11,934

–

11,934

–

Other government and agency

16,159

–

15,979

180

Corporate

107,425

–

106,641

784

Residential mortgage/asset-backed securities

–

Commercial mortgage/asset-backed securities

1,344

–

1,344

–

Other securitized assets

1,417

–

1,417

–

AFS

Canadian government and agency

7,342

–

7,342

–

U.S. government and agency

13,990

–

13,990

–

Other government and agency

4,101

–

4,064

Corporate

5,245

–

5,125

120

Residential mortgage/asset-backed securities

–

Commercial mortgage/asset-backed securities

128

–

128

–

Other securitized assets

–

Public equities

FVTPL

16,721

16,718

–

AFS

2,458

2,456

–

Real estate – investment property⁽¹⁾

10,761

–

10,761

Other invested assets⁽²⁾

17,562

–

17,562

Segregated funds net assets⁽³⁾

313,209

276,178

32,584

4,447

Total

562,520

300,324

228,293

33,903

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

⁽¹⁾

For investment properties, the significant unobservable inputs are capitalization rates (ranging from 2.75% to 8.75% during the year and ranging from 3.50% to 9.00% during 2017) and terminal capitalization rates (ranging from 3.65% to 9.25% during the year and ranging from 4.0% to 9.25% during 2017). 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 8.95% to 16.5% (2017 – ranged from 9.20% to 16.5%). 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 7.0% (2017 – 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 investment properties and timberland properties valued as described above.

Fair value and the fair value hierarchy of invested assets not measured at fair value.

As at December 31, 2018

Carrying
value

Fair value

Level 1

Level 2

Level 3

Mortgages⁽¹⁾

48,363

48,628

–

48,628

Private placements⁽²⁾

35,754

36,103

–

30,325

5,778

Policy loans⁽³⁾

6,446

–

6,446

–

Loans to Bank clients⁽⁴⁾

1,793

1,797

–

1,797

–

Real estate – own use property⁽⁵⁾

2,016

3,179

–

3,179

Other invested assets⁽⁶⁾

9,981

10,753

121

–

10,632

Total invested assets disclosed at fair value

104,353

106,906

121

38,568

68,217

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

–

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

–

8,514

Total invested assets disclosed at fair value

93,980

99,246

36,064

63,094

⁽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. Conversely, assets are transferred from Level 2 to Level 1 when transaction volume and frequency are indicative of an active market. The Company had $nil of assets transferred between Level 1 and Level 2 during the years ended December 31, 2018 and 2017.

For segregated funds net assets, the Company had $nil transfers from Level 1 to Level 2 for the year ended December 31, 2018 (2017 – $nil). The Company had $2 transfers from Level 2 to Level 1 for the year ended December 31, 2018 (2017 – $5).

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

The Company classifies fair values of 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, most 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. The gains and losses in the tables below include the changes in fair value due to both observable and unobservable factors.

The following tables present a roll forward for invested assets and segregated funds net assets measured at fair value using significant unobservable inputs (Level 3) for the years ended December 31, 2018 and 2017.

For the year ended
December 31, 2018

Balance,
January 1,
2018

Net
realized/
unrealized
gains
(losses)
included
in net
income⁽¹⁾

Net
realized/
unrealized
gains
(losses)
included
in AOCI⁽²⁾

Purchases

Sales

Settlements

Transfer

into

Level 3⁽³⁾

Transfer

out of

Level 3⁽³⁾

Currency
movement

Balance,
December 31,
2018

Change in
unrealized
gains
(losses) on
assets still
held

Debt securities

FVTPL

Other government & agency

239

)

–

(85

)

(14

)

–

180

)

Corporate

710

–

190

(61

)

(18

)

–

(93

)

784

(10

)

Residential mortgage/asset-backed securities

–

Other securitized assets

–

(56

)

–

975

–

248

(146

)

(32

)

–

(149

)

971

)

AFS

Other government & agency

–

(15

)

–

Corporate

–

(12

)

–

)

120

–

Residential mortgage/asset-backed securities

–

Other securitized assets

–

)

–

136

–

(27

)

–

)

159

–

Public equities

FVTPL

–

Real estate – investment property

12,529

291

–

615

(2,578

)

–

(706

)

610

10,761

244

Other invested assets

16,203

(1,168

)

3,926

(1,636

)

(841

)

–

(35

)

1,112

17,562

(434

)

28,732

(877

)

4,541

(4,214

)

(841

)

–

(741

)

1,722

28,323

(190

)

Segregated funds net assets

4,255

226

–

155

(367

)

(17

)

191

4,447

161

Total

34,101

(644

)

4,999

(4,754

)

(880

)

(915

)

1,991

33,903

(36

)


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			Settlements			Transfer into Level 3⁽³⁾		Transfer out of Level 3⁽³⁾			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

⁽¹⁾	These amounts are included in net investment income on the Consolidated Statements of Income except for the amount related to segregated funds net assets, where the amount is recorded in changes in segregated funds net assets, refer to note 22.

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

⁽³⁾	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.