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Invested Assets and Investment Income | 12 Months Ended
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Dec. 31, 2020
Text block [abstract] |
Invested Assets and Investment Income | Note 3 Invested Assets and Investment Income (a) Carrying values and fair values of invested assets
As at December 31, 2020 |  | FVTPL (1) |  |  | AFS (2) |  |  | Other (3) |  |  | Total carrying value (4) |  |  | Total fair value (5) |
Cash and short-term securities (6) |  | $ | 2,079 |  |  | $ | 18,314 |  |  | $ | 5,774 |  |  | $ | 26,167 |  |  | $ | 26,167 |
Debt securities (7) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Canadian government and agency |  |  | 20,667 |  |  |  | 4,548 |  |  |  | – |  |  |  | 25,215 |  |  |  | 25,215 |
U.S. government and agency |  |  | 11,449 |  |  |  | 19,787 |  |  |  | – |  |  |  | 31,236 |  |  |  | 31,236 |
Other government and agency |  |  | 19,732 |  |  |  | 4,613 |  |  |  | – |  |  |  | 24,345 |  |  |  | 24,345 |
Corporate |  |  | 128,297 |  |  |  | 6,566 |  |  |  | – |  |  |  | 134,863 |  |  |  | 134,863 |
Mortgage/asset-backed securities |  |  | 2,916 |  |  |  | 149 |  |  |  | – |  |  |  | 3,065 |  |  |  | 3,065 |
Public equities (8) |  |  | 22,071 |  |  |  | 1,651 |  |  |  | – |  |  |  | 23,722 |  |  |  | 23,722 |
Mortgages |  |  | – |  |  |  | – |  |  |  | 50,207 |  |  |  | 50,207 |  |  |  | 54,230 |
Private placements |  |  | – |  |  |  | – |  |  |  | 40,756 |  |  |  | 40,756 |  |  |  | 47,890 |
Policy loans |  |  | – |  |  |  | – |  |  |  | 6,398 |  |  |  | 6,398 |  |  |  | 6,398 |
Loans to Bank clients |  |  | – |  |  |  | – |  |  |  | 1,976 |  |  |  | 1,976 |  |  |  | 1,982 |
Real estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Own use property ( 9 ) |  |  | – |  |  |  | – |  |  |  | 1,850 |  |  |  | 1,850 |  |  |  | 3,017 |
Investment property |  |  | – |  |  |  | – |  |  |  | 10,982 |  |  |  | 10,982 |  |  |  | 10,982 |
Other invested assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Alternative long-duration assets ( 10 ),(1 1 ) |  |  | 16,183 |  |  |  | 88 |  |  |  | 9,901 |  |  |  | 26,172 |  |  |  | 27,029 |
Various other (1 2 ) |  |  | 145 |  |  |  | – |  |  |  | 3,878 |  |  |  | 4,023 |  |  |  | 4,023 |
Total invested assets |  | $ | 223,539 |  |  | $ | 55,716 |  |  | $ | 131,722 |  |  | $ | 410,977 |  |  | $ | 424,164 |
As at December 31, 2019 |  | FVTPL (1) |  |  | AFS (2) |  |  | Other (3) |  |  | Total carrying value (4) |  |  | Total fair value (5) |
Cash and short-term securities (6) |  | $ | 1,859 |  |  | $ | 13,084 |  |  | $ | 5,357 |  |  | $ | 20,300 |  |  | $ | 20,300 |
Debt securities (7) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Canadian government and agency |  |  | 18,582 |  |  |  | 4,779 |  |  |  | – |  |  |  | 23,361 |  |  |  | 23,361 |
U.S. government and agency |  |  | 11,031 |  |  |  | 17,221 |  |  |  | – |  |  |  | 28,252 |  |  |  | 28,252 |
Other government and agency |  |  | 17,383 |  |  |  | 4,360 |  |  |  | – |  |  |  | 21,743 |  |  |  | 21,743 |
Corporate |  |  | 116,044 |  |  |  | 5,285 |  |  |  | – |  |  |  | 121,329 |  |  |  | 121,329 |
Mortgage/asset-backed securities |  |  | 3,267 |  |  |  | 170 |  |  |  | – |  |  |  | 3,437 |  |  |  | 3,437 |
Public equities (8) |  |  | 20,060 |  |  |  | 2,791 |  |  |  | – |  |  |  | 22,851 |  |  |  | 22,851 |
Mortgages |  |  | – |  |  |  | – |  |  |  | 49,376 |  |  |  | 49,376 |  |  |  | 51,450 |
Private placements |  |  | – |  |  |  | – |  |  |  | 37,979 |  |  |  | 37,979 |  |  |  | 41,743 |
Policy loans |  |  | – |  |  |  | – |  |  |  | 6,471 |  |  |  | 6,471 |  |  |  | 6,471 |
Loans to Bank clients |  |  | – |  |  |  | – |  |  |  | 1,740 |  |  |  | 1,740 |  |  |  | 1,742 |
Real estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Own use property (9) |  |  | – |  |  |  | – |  |  |  | 1,926 |  |  |  | 1,926 |  |  |  | 3,275 |
Investment property |  |  | – |  |  |  | – |  |  |  | 11,002 |  |  |  | 11,002 |  |  |  | 11,002 |
Other invested assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Alternative long-duration assets (10),(11) |  |  | 15,252 |  |  |  | 99 |  |  |  | 9,492 |  |  |  | 24,843 |  |  |  | 25,622 |
Various other (12) |  |  | 149 |  |  |  | – |  |  |  | 3,768 |  |  |  | 3,917 |  |  |  | 3,918 |
Total invested assets |  | $ | 203,627 |  |  | $ | 47,789 |  |  | $ | 127,111 |  |  | $ | 378,527 |  |  | $ | 386,496 |
(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 above include debt securities, mortgages, private placements and approximately $246 (2019 – $179) of other invested assets, which primarily have contractual cash flows that qualify as Solely Payment of Principal and Interest (“SPPI”). Fixed income invested assets which do not have SPPI qualifying cash flows as at December 31, 2020 include debt securities, private placements and other invested assets with fair values of $94, $211 and $380, respectively (2019 – $98, $257 and $373). The change in the fair value of these invested assets during the year was $44 (2019 – $71).
(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 $7,062 (2019 – $3,806), cash equivalents with maturities of less than 90 days at acquisition amounting to $13,331 (2019 – $11,136) and cash of $5,774 (2019 – $5,358).
(7) | Debt securities include securities which were acquired with maturities of less than one year and less than 90 days of $1,971 and $129, respectively (2019 – $537 and $69).
(8) | Includes $229 (2019 – $12) of public equities that are managed in conjunction with the Company’s alternative long duration asset (“ALDA”) strategy.
(9) | Includes accumulated depreciation of $376 (2019 – $414).
(10) | Includes investments in private equity of $7,954, infrastructure of $9,127, oil and gas of $2,296, timber and agriculture of $4,819 and various other invested assets of $1,976 (2019 – $6,396, $8,854, $3,245, $4,669 and $1,679, respectively). In 2019, a group of investments in hydro-electric power of $418 was sold.
(11) | In 2019, the Company sold $1,112 of North American Private Equity investments to Manulife Private Equity Partners, L.P, a closed-end pooled fund of funds. The Company provides management services to the fund.
(12) | Includes $3,371 (2019 – $3,371) 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.
|  | 2020 |  |  |  |  |  | 2019 |
As at December 31, |  | Carrying value |  |  | % of total |  |  |  |  |  | Carrying value |  |  | % of total |
Leveraged leases |  | $ | 3,371 |  |  |  | 40 |  |  |  |  |  |  | $ | 3,371 |  |  |  | 43 |
Timber and agriculture |  |  | 694 |  |  |  | 8 |  |  |  |  |  |  |  | 668 |  |  |  | 9 |
Real estate |  |  | 1,187 |  |  |  | 14 |  |  |  |  |  |  |  | 1,031 |  |  |  | 13 |
Other |  |  | 3,222 |  |  |  | 38 |  |  |  |  |  |  |  | 2,716 |  |  |  | 35 |
Total |  | $ | 8,474 |  |  |  | 100 |  |  |  |  |  |  | $ | 7,786 |  |  |  | 100 |
The Company’s share of profit and dividends from these investments for the year ended December 31, 2020 were $315 and $2, respectively (2019 – $369 and $2). (c) Investment income
For the year ended December 31, 2020 |  | FVTPL |  |  | AFS |  |  | Other (1) |  |  | Total |
Cash and short-term securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest income |  | $ | 24 |  |  | $ | 145 |  |  | $ | – |  |  | $ | 169 |
Gains (losses) (2) |  |  | (24 | ) |  |  | (112 | ) |  |  | – |  |  |  | (136 | )
Debt securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest income |  |  | 5,805 |  |  |  | 692 |  |  |  | – |  |  |  | 6,497 |
Gains (losses) (2) |  |  | 10,739 |  |  |  | 2,785 |  |  |  | – |  |  |  | 13,524 |
Impairment loss, net |  |  | (113 | ) |  |  | (6 | ) |  |  | – |  |  |  | (119 | )
Public equities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Dividend income |  |  | 517 |  |  |  | 38 |  |  |  | – |  |  |  | 555 |
Gains (losses) (2) |  |  | 2,020 |  |  |  | 21 |  |  |  | – |  |  |  | 2,041 |
Impairment loss, net |  |  | – |  |  |  | (54 | ) |  |  | – |  |  |  | (54 | )
Mortgages |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest income |  |  | – |  |  |  | – |  |  |  | 1,837 |  |  |  | 1,837 |
Gains (losses) (2) |  |  | – |  |  |  | – |  |  |  | 86 |  |  |  | 86 |
Provision, net |  |  | – |  |  |  | – |  |  |  | (18 | ) |  |  | (18 | )
Private placements |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest income |  |  | – |  |  |  | – |  |  |  | 1,883 |  |  |  | 1,883 |
Gains (losses) (2) |  |  | – |  |  |  | – |  |  |  | (18 | ) |  |  | (18 | )
Impairment loss, net |  |  | – |  |  |  | – |  |  |  | (88 | ) |  |  | (88 | )
Policy loans |  |  | – |  |  |  | – |  |  |  | 390 |  |  |  | 390 |
Loans to Bank clients |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest income |  |  | – |  |  |  | – |  |  |  | 72 |  |  |  | 72 |
Provision, net |  |  | – |  |  |  | – |  |  |  | (2 | ) |  |  | (2 | )
Real estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Rental income, net of depreciation (3) |  |  | – |  |  |  | – |  |  |  | 468 |  |  |  | 468 |
Gains (losses) (2) |  |  | – |  |  |  | – |  |  |  | (18 | ) |  |  | (18 | )
Derivatives |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest income, net |  |  | 924 |  |  |  | – |  |  |  | (31 | ) |  |  | 893 |
Gains (losses) (2) |  |  | 6,501 |  |  |  | – |  |  |  | 28 |  |  |  | 6,529 |
Other invested assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest income |  |  | – |  |  |  | – |  |  |  | 72 |  |  |  | 72 |
Oil and gas, timber, agriculture and other income |  |  | – |  |  |  | – |  |  |  | 1,435 |  |  |  | 1,435 |
Gains (losses) (2) |  |  | (210 | ) |  |  | 1 |  |  |  | 32 |  |  |  | (177 | )
Impairment loss, net |  |  | (9 | ) |  |  | (16 | ) |  |  | (396 | ) |  |  | (421 | )
Total investment income |  | $ | 26,174 |  |  | $ | 3,494 |  |  | $ | 5,732 |  |  | $ | 35,400 |
Investment income |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest income |  | $ | 6,753 |  |  | $ | 837 |  |  | $ | 4,223 |  |  | $ | 11,813 |
Dividend, rental and other income |  |  | 517 |  |  |  | 38 |  |  |  | 1,903 |  |  |  | 2,458 |
Impairments, provisions and recoveries, net |  |  | (123 | ) |  |  | (76 | ) |  |  | (504 | ) |  |  | (703 | )
Other |  |  | 241 |  |  |  | 2,685 |  |  |  | (61 | ) |  |  | 2,865 |
|  |  | 7,388 |  |  |  | 3,484 |  |  |  | 5,561 |  |  |  | 16,433 |
Realized and unrealized gains (losses) on assets supporting insurance and investment contract liabilities and on macro equity hedges |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Debt securities |  |  | 10,747 |  |  |  | 1 |  |  |  | – |  |  |  | 10,748 |
Public equities |  |  | 1,908 |  |  |  | 9 |  |  |  | – |  |  |  | 1,917 |
Mortgages |  |  | – |  |  |  | – |  |  |  | 86 |  |  |  | 86 |
Private placements |  |  | – |  |  |  | – |  |  |  | (47 | ) |  |  | (47 | )
Real estate |  |  | – |  |  |  | – |  |  |  | 1 |  |  |  | 1 |
Other invested assets |  |  | (318 | ) |  |  | – |  |  |  | 103 |  |  |  | (215 | )
Derivatives, including macro equity hedging program |  |  | 6,449 |  |  |  | – |  |  |  | 28 |  |  |  | 6,477 |
|  |  | 18,786 |  |  |  | 10 |  |  |  | 171 |  |  |  | 18,967 |
Total investment income |  | $ | 26,174 |  |  | $ | 3,494 |  |  | $ | 5,732 |  |  | $ | 35,400 |
For the year ended December 31, 2019 |  | FVTPL |  |  | AFS |  |  | Other (1) |  |  | Total |
Cash and short-term securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest income |  | $ | 32 |  |  | $ | 281 |  |  | $ | – |  |  | $ | 313 |
Gains (losses) (2) |  |  | 11 |  |  |  | (29 | ) |  |  | – |  |  |  | (18 | )
Debt securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest income |  |  | 5,557 |  |  |  | 783 |  |  |  | – |  |  |  | 6,340 |
Gains (losses) (2) |  |  | 11,525 |  |  |  | 472 |  |  |  | – |  |  |  | 11,997 |
Recovery (impairment loss), net |  |  | (9 | ) |  |  | 1 |  |  |  | – |  |  |  | (8 | )
Public equities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Dividend income |  |  | 551 |  |  |  | 69 |  |  |  | – |  |  |  | 620 |
Gains (losses) (2) |  |  | 3,079 |  |  |  | 109 |  |  |  | – |  |  |  | 3,188 |
Impairment loss, net |  |  | – |  |  |  | (24 | ) |  |  | – |  |  |  | (24 | )
Mortgages |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest income |  |  | – |  |  |  | – |  |  |  | 1,951 |  |  |  | 1,951 |
Gains (losses) (2) |  |  | – |  |  |  | – |  |  |  | 26 |  |  |  | 26 |
Provision, net |  |  | – |  |  |  | – |  |  |  | 31 |  |  |  | 31 |
Private placements |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest income |  |  | – |  |  |  | – |  |  |  | 1,782 |  |  |  | 1,782 |
Gains (losses) (2) |  |  | – |  |  |  | – |  |  |  | (62 | ) |  |  | (62 | )
Impairment loss, net |  |  | – |  |  |  | – |  |  |  | (35 | ) |  |  | (35 | )
Policy loans |  |  | – |  |  |  | – |  |  |  | 391 |  |  |  | 391 |
Loans to Bank clients |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest income |  |  | – |  |  |  | – |  |  |  | 87 |  |  |  | 87 |
Provision, net |  |  | – |  |  |  | – |  |  |  | (1 | ) |  |  | (1 | )
Real estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Rental income, net of depreciation (3) |  |  | – |  |  |  | – |  |  |  | 505 |  |  |  | 505 |
Gains (losses) (2) |  |  | – |  |  |  | – |  |  |  | 508 |  |  |  | 508 |
Derivatives |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest income, net |  |  | 579 |  |  |  | – |  |  |  | (24 | ) |  |  | 555 |
Gains (losses) (2) |  |  | 2,653 |  |  |  | – |  |  |  | (6 | ) |  |  | 2,647 |
Other invested assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest income |  |  | – |  |  |  | – |  |  |  | 69 |  |  |  | 69 |
Oil and gas, timber, agriculture and other income |  |  | – |  |  |  | – |  |  |  | 1,862 |  |  |  | 1,862 |
Gains (losses) (2) |  |  | 742 |  |  |  | (1 | ) |  |  | 35 |  |  |  | 776 |
Recovery, net |  |  | – |  |  |  | – |  |  |  | 93 |  |  |  | 93 |
Total investment income |  | $ | 24,720 |  |  | $ | 1,661 |  |  | $ | 7,212 |  |  | $ | 33,593 |
Investment income |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest income |  | $ | 6,168 |  |  | $ | 1,064 |  |  | $ | 4,256 |  |  | $ | 11,488 |
Dividend, rental and other income |  |  | 552 |  |  |  | 69 |  |  |  | 2,367 |  |  |  | 2,988 |
Impairments, provisions and recoveries, net |  |  | (9 | ) |  |  | (23 | ) |  |  | 88 |  |  |  | 56 |
Other |  |  | 265 |  |  |  | 539 |  |  |  | 57 |  |  |  | 861 |
|  |  | 6,976 |  |  |  | 1,649 |  |  |  | 6,768 |  |  |  | 15,393 |
Realized and unrealized gains (losses) on assets supporting insurance and investment contract liabilities and on macro equity hedges |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Debt securities |  |  | 11,521 |  |  |  | 7 |  |  |  | – |  |  |  | 11,528 |
Public equities |  |  | 2,865 |  |  |  | 5 |  |  |  | – |  |  |  | 2,870 |
Mortgages |  |  | – |  |  |  | – |  |  |  | 26 |  |  |  | 26 |
Private placements |  |  | – |  |  |  | – |  |  |  | (62 | ) |  |  | (62 | )
Real estate |  |  | – |  |  |  | – |  |  |  | 514 |  |  |  | 514 |
Other invested assets |  |  | 776 |  |  |  | – |  |  |  | (28 | ) |  |  | 748 |
Derivatives, including macro equity hedging program |  |  | 2,582 |  |  |  | – |  |  |  | (6 | ) |  |  | 2,576 |
|  |  | 17,744 |  |  |  | 12 |  |  |  | 444 |  |  |  | 18,200 |
Total investment income |  | $ | 24,720 |  |  | $ | 1,661 |  |  | $ | 7,212 |  |  | $ | 33,593 |
(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 total investment expenses.
For the years ended December 31, |  | 2020 |  |  | 2019 |
Related to invested assets |  | $ | 649 |  |  | $ | 617 |
Related to segregated, mutual and other funds |  |  | 1,138 |  |  |  | 1,131 |
Total investment expenses |  | $ | 1,787 |  |  | $ | 1,748 |
(e) Investment properties The following table presents the rental income and direct operating expenses of investment properties.
For the years ended December 31, |  | 2020 |  |  | 2019 |
Rental income from investment properties |  | $ | 874 |  |  | $ | 864 |
Direct operating expenses of rental investment properties |  |  | (491 | ) |  |  | (464 | )
Total |  | $ | 383 |  |  | $ | 400 |
(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, 2020 |  | Securitized assets |  |  |  |
Securitization program |  | Securitized mortgages |  |  | Restricted cash and short-term securities |  |  | Total |  |  | Secured borrowing liabilities (2) |
HELOC securitization (1) |  | $ | 2,356 |  |  | $ | – |  |  | $ | 2,356 |  |  | $ | 2,250 |
CMB securitization |  |  | 2,273 |  |  |  | – |  |  |  | 2,273 |  |  |  | 2,332 |
Total |  | $ | 4,629 |  |  | $ | – |  |  | $ | 4,629 |  |  | $ | 4,582 |
As at December 31, 2019 |  | 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 |  |  | 1,620 |  |  |  | – |  |  |  | 1,620 |  |  |  | 1,632 |
Total |  | $ | 3,905 |  |  | $ | 8 |  |  | $ | 3,913 |  |  | $ | 3,882 |
(1) | Manulife Bank, a 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, 2020, the fair value of securitized assets and associated liabilities were $4,679 and $4,661, respectively (2019 – $3,950 and $3,879). (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, 2020 |  | Total fair value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Cash and short-term securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
FVTPL |  | $ | 2,079 |  |  | $ | – |  |  | $ | 2,079 |  |  | $ | – |
AFS |  |  | 18,314 |  |  |  | – |  |  |  | 18,314 |  |  |  | – |
Other |  |  | 5,774 |  |  |  | 5,774 |  |  |  | – |  |  |  | – |
Debt securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
FVTPL |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Canadian government and agency |  |  | 20,667 |  |  |  | – |  |  |  | 20,667 |  |  |  | – |
U.S. government and agency |  |  | 11,449 |  |  |  | – |  |  |  | 11,449 |  |  |  | – |
Other government and agency |  |  | 19,732 |  |  |  | – |  |  |  | 19,732 |  |  |  | – |
Corporate |  |  | 128,297 |  |  |  | – |  |  |  | 127,787 |  |  |  | 510 |
Residential mortgage-backed securities |  |  | 9 |  |  |  | – |  |  |  | 9 |  |  |  | – |
Commercial mortgage-backed securities |  |  | 1,172 |  |  |  | – |  |  |  | 1,172 |  |  |  | – |
Other asset-backed securities |  |  | 1,735 |  |  |  | – |  |  |  | 1,690 |  |  |  | 45 |
AFS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Canadian government and agency |  |  | 4,548 |  |  |  | – |  |  |  | 4,548 |  |  |  | – |
U.S. government and agency |  |  | 19,787 |  |  |  | – |  |  |  | 19,787 |  |  |  | – |
Other government and agency |  |  | 4,613 |  |  |  | – |  |  |  | 4,613 |  |  |  | – |
Corporate |  |  | 6,566 |  |  |  | – |  |  |  | 6,563 |  |  |  | 3 |
Residential mortgage-backed securities |  |  | 1 |  |  |  | – |  |  |  | 1 |  |  |  | – |
Commercial mortgage-backed securities |  |  | 93 |  |  |  | – |  |  |  | 93 |  |  |  | – |
Other asset-backed securities |  |  | 55 |  |  |  | – |  |  |  | 55 |  |  |  | – |
Public equities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
FVTPL |  |  | 22,071 |  |  |  | 22,071 |  |  |  | – |  |  |  | – |
AFS |  |  | 1,651 |  |  |  | 1,651 |  |  |  | – |  |  |  | – |
Real estate – investment property (1) |  |  | 10,982 |  |  |  | – |  |  |  | – |  |  |  | 10,982 |
Other invested assets (2) |  |  | 19,149 |  |  |  | 100 |  |  |  | – |  |  |  | 19,049 |
Segregated funds net assets (3) |  |  | 367,436 |  |  |  | 327,437 |  |  |  | 35,797 |  |  |  | 4,202 |
Total |  | $ | 666,180 |  |  | $ | 357,033 |  |  | $ | 274,356 |  |  | $ | 34,791 |
As at December 31, 2019 |  | Total fair value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Cash and short-term securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
FVTPL |  | $ | 1,859 |  |  | $ | – |  |  | $ | 1,859 |  |  | $ | – |
AFS |  |  | 13,084 |  |  |  | – |  |  |  | 13,084 |  |  |  | – |
Other |  |  | 5,357 |  |  |  | 5,357 |  |  |  | – |  |  |  | – |
Debt securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
FVTPL |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Canadian government and agency |  |  | 18,582 |  |  |  | – |  |  |  | 18,582 |  |  |  | – |
U.S. government and agency |  |  | 11,031 |  |  |  | – |  |  |  | 11,031 |  |  |  | – |
Other government and agency |  |  | 17,383 |  |  |  | – |  |  |  | 17,383 |  |  |  | – |
Corporate |  |  | 116,044 |  |  |  | – |  |  |  | 115,411 |  |  |  | 633 |
Residential mortgage-backed securities |  |  | 13 |  |  |  | – |  |  |  | 13 |  |  |  | – |
Commercial mortgage-backed securities |  |  | 1,271 |  |  |  | – |  |  |  | 1,271 |  |  |  | – |
Other asset-backed securities |  |  | 1,983 |  |  |  | – |  |  |  | 1,983 |  |  |  | – |
AFS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Canadian government and agency |  |  | 4,779 |  |  |  | – |  |  |  | 4,779 |  |  |  | – |
U.S. government and agency |  |  | 17,221 |  |  |  | – |  |  |  | 17,221 |  |  |  | – |
Other government and agency |  |  | 4,360 |  |  |  | – |  |  |  | 4,360 |  |  |  | – |
Corporate |  |  | 5,285 |  |  |  | – |  |  |  | 5,270 |  |  |  | 15 |
Residential mortgage-backed securities |  |  | 1 |  |  |  | – |  |  |  | 1 |  |  |  | – |
Commercial mortgage-backed securities |  |  | 102 |  |  |  | – |  |  |  | 102 |  |  |  | – |
Other asset-backed securities |  |  | 67 |  |  |  | – |  |  |  | 67 |  |  |  | – |
Public equities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
FVTPL |  |  | 20,060 |  |  |  | 20,060 |  |  |  | – |  |  |  | – |
AFS |  |  | 2,791 |  |  |  | 2,788 |  |  |  | 3 |  |  |  | – |
Real estate – investment property (1) |  |  | 11,002 |  |  |  | – |  |  |  | – |  |  |  | 11,002 |
Other invested assets (2) |  |  | 18,194 |  |  |  | 91 |  |  |  | – |  |  |  | 18,103 |
Segregated funds net assets (3) |  |  | 343,108 |  |  |  | 303,567 |  |  |  | 35,029 |  |  |  | 4,512 |
Total |  | $ | 613,577 |  |  | $ | 331,863 |  |  | $ | 247,449 |  |  | $ | 34,265 |
(1) | For investment properties, the significant unobservable inputs are capitalization rates (ranging from 2.75% to 8.50% during the year and ranging from 2.75% to 8.75% during 2019) and terminal capitalization rates (ranging from 3.25% to 9.25% during the year and ranging from 3.80% to 9.25% during 2019). 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 infrastructure and timber sectors. The significant inputs used in the valuation of the Company’s 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 an infrastructure investment, while an increase in the discount rate would have the opposite effect. Discount rates during the year ranged from 7.00% to 15.6% (2019 – ranged from 7.00% 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% (2019 – ranged from 5.0% to 7.0%). 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 in investment properties and timberland properties valued as described above.
The following table presents fair value of invested assets not measured at fair value by the fair value hierarchy.
As at December 31, 2020 |  | Carrying value |  |  | Fair value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Mortgages (1) |  | $ | 50,207 |  |  | $ | 54,230 |  |  | $ | – |  |  | $ | – |  |  | $ | 54,230 |
Private placements (2) |  |  | 40,756 |  |  |  | 47,890 |  |  |  | – |  |  |  | 41,398 |  |  |  | 6,492 |
Policy loans (3) |  |  | 6,398 |  |  |  | 6,398 |  |  |  | – |  |  |  | 6,398 |  |  |  | – |
Loans to Bank clients (4) |  |  | 1,976 |  |  |  | 1,982 |  |  |  | – |  |  |  | 1,982 |  |  |  | – |
Real estate–own use property (5) |  |  | 1,850 |  |  |  | 3,017 |  |  |  | – |  |  |  | – |  |  |  | 3,017 |
Other invested assets (6) |  |  | 11,046 |  |  |  | 11,903 |  |  |  | 128 |  |  |  | – |  |  |  | 11,775 |
Total invested assets disclosed at fair value |  | $ | 112,233 |  |  | $ | 125,420 |  |  | $ | 128 |  |  | $ | 49,778 |  |  | $ | 75,514 |
As at December 31, 2019 |  | Carrying value |  |  | Fair value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Mortgages (1) |  | $ | 49,376 |  |  | $ | 51,450 |  |  | $ | – |  |  | $ | – |  |  | $ | 51,450 |
Private placements (2) |  |  | 37,979 |  |  |  | 41,743 |  |  |  | – |  |  |  | 36,234 |  |  |  | 5,509 |
Policy loans (3) |  |  | 6,471 |  |  |  | 6,471 |  |  |  | – |  |  |  | 6,471 |  |  |  | – |
Loans to Bank clients (4) |  |  | 1,740 |  |  |  | 1,742 |  |  |  | – |  |  |  | 1,742 |  |  |  | – |
Real estate–own use property (5) |  |  | 1,926 |  |  |  | 3,275 |  |  |  | – |  |  |  | – |  |  |  | 3,275 |
Other invested assets (6) |  |  | 10,566 |  |  |  | 11,346 |  |  |  | 165 |  |  |  | – |  |  |  | 11,181 |
Total invested assets disclosed at fair value |  | $ | 108,058 |  |  | $ | 116,027 |  |  | $ | 165 |  |  | $ | 44,447 |  |  | $ | 71,415 |
(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.
As a result of COVID-19 and the recent economic downturn, significant measurement uncertainty exists in determining the fair value of real estate and other invested assets. For the year ended December 31, 2020, the Company has recognized a reduction in the carrying value of oil and gas investments of $837 based on reasonable estimates and assumptions reflecting both the nature of the assets and currently available information which was subject to significant judgment. For the methodologies used in determining carrying values of the invested assets, refer to note 1. 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, 2020 and 2019. For segregated funds net assets, the Company had $nil transfers from Level 1 to Level 2 for the year ended December 31, 2020 (2019 – $nil). The Company had $15 transfers from Level 2 to Level 1 for the year ended December 31, 2020 (2019 – $nil). 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 table below includes the changes in fair value due to both observable and unobservable factors. The following table presents a roll forward for invested assets, derivatives and segregated funds net assets measured at fair value using significant unobservable inputs (Level 3) for the years ended December 31, 2020 and 2019.
For the year ended December 31, 2020 |  | Balance, January 1, 2020 |  |  | Total gains (losses) included in net income (1) |  |  | Total gains (losses) included in AOCI (2) |  |  | Purchases |  |  | Sales |  |  | Settlements |  |  | Transfer in (3),(4) |  |  | Transfer out (3),(4) |  |  | Currency movement |  |  | Balance, December 31, 2020 |  |  | Change in unrealized gains (losses) on assets still held |
Debt securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
FVTPL |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate |  | $ | 633 |  |  | $ | 4 |  |  | $ | – |  |  | $ | 54 |  |  | $ | (272 | ) |  | $ | (1 | ) |  | $ | 151 |  |  | $ | (50 | ) |  | $ | (9 | ) |  | $ | 510 |  |  | $ | 105 |
Other securitized assets |  |  | – |  |  |  | (8) |  |  |  | – |  |  |  | – |  |  |  | – |  |  |  | (1) |  |  |  | 55 |  |  |  | – |  |  |  | (1) |  |  |  | 45 |  |  |  | – |
AFS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate |  |  | 15 |  |  |  | (6 | ) |  |  | 2 |  |  |  | – |  |  |  | – |  |  |  | – |  |  |  | 5 |  |  |  | (13 | ) |  |  | – |  |  |  | 3 |  |  |  | – |
Real estate – investment property |  |  | 11,002 |  |  |  | (255 | ) |  |  | – |  |  |  | 572 |  |  |  | (318 | ) |  |  | – |  |  |  | 47 |  |  |  | – |  |  |  | (66 | ) |  |  | 10,982 |  |  |  | (300 | )
Other invested assets |  |  | 18,103 |  |  |  | (401 | ) |  |  | (49 | ) |  |  | 3,162 |  |  |  | (1,076 | ) |  |  | (638 | ) |  |  | 92 |  |  |  | (3 | ) |  |  | (141 | ) |  |  | 19,049 |  |  |  | (902 | )
Total invested assets |  |  | 29,753 |  |  |  | (666 | ) |  |  | (47 | ) |  |  | 3,788 |  |  |  | (1,666 | ) |  |  | (640 | ) |  |  | 350 |  |  |  | (66 | ) |  |  | (217 | ) |  |  | 30,589 |  |  |  | (1,097 | )
Derivatives |  |  | 1,456 |  |  |  | 2,953 |  |  |  | (18 | ) |  |  | 12 |  |  |  | – |  |  |  | (1,165 | ) |  |  | – |  |  |  | 342 |  |  |  | (137 | ) |  |  | 3,443 |  |  |  | 2,033 |
Segregated funds net assets |  |  | 4,512 |  |  |  | (6 | ) |  |  | – |  |  |  | (84 | ) |  |  | (149 | ) |  |  | (26 | ) |  |  | 2 |  |  |  | (3 | ) |  |  | (44 | ) |  |  | 4,202 |  |  |  | 45 |
Total |  | $ | 35,721 |  |  | $ | 2,281 |  |  | $ | (65 | ) |  | $ | 3,716 |  |  | $ | (1,815 | ) |  | $ | (1,831 | ) |  | $ | 352 |  |  | $ | 273 |  |  | $ | (398 | ) |  | $ | 38,234 |  |  | $ | 981 |
For the year ended December 31, 2019 |  | Balance, January 1, 2019 |  |  | Total gains (losses) included in net income (1) |  |  | Total gains (losses) included in AOCI (2) |  |  | Purchases |  |  | Sales |  |  | Settlements |  |  | Transfer in (3),(4) |  |  | Transfer out (3),(4) |  |  | Currency movement |  |  | Balance, December 31, 2019 |  |  | Change in unrealized gains (losses) on assets still held |
Debt securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
FVTPL |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other government & agency |  | $ | 180 |  |  | $ | 1 |  |  | $ | – |  |  | $ | 16 |  |  | $ | (18 | ) |  | $ | – |  |  | $ | – |  |  | $ | (178 | ) |  | $ | (1 | ) |  | $ | – |  |  | $ | – |
Corporate |  |  | 784 |  |  |  | 35 |  |  |  | – |  |  |  | 43 |  |  |  | (88 | ) |  |  | (18 | ) |  |  | 514 |  |  |  | (604 | ) |  |  | (33 | ) |  |  | 633 |  |  |  | 47 |
Residential mortgage-backed securities |  |  | 7 |  |  |  | – |  |  |  | – |  |  |  | – |  |  |  | (1 | ) |  |  | – |  |  |  | – |  |  |  | (6 | ) |  |  | – |  |  |  | – |  |  |  | – |
AFS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other government & agency |  |  | 37 |  |  |  | 1 |  |  |  | – |  |  |  | 5 |  |  |  | (12 | ) |  |  | – |  |  |  | – |  |  |  | (31 | ) |  |  | – |  |  |  | – |  |  |  | – |
Corporate |  |  | 122 |  |  |  | 1 |  |  |  | – |  |  |  | 13 |  |  |  | (21 | ) |  |  | (4 | ) |  |  | – |  |  |  | (94 | ) |  |  | (2 | ) |  |  | 15 |  |  |  | – |
Commercial mortgage-backed securities |  |  | – |  |  |  | – |  |  |  | – |  |  |  | 37 |  |  |  | – |  |  |  | – |  |  |  | – |  |  |  | (37 | ) |  |  | – |  |  |  | – |  |  |  | – |
Public equities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
FVTPL |  |  | 3 |  |  |  | 1,739 |  |  |  | – |  |  |  | – |  |  |  | (1,679 | ) |  |  | – |  |  |  | – |  |  |  | – |  |  |  | (63 | ) |  |  | – |  |  |  | 1,510 |
Real estate – investment property |  |  | 10,761 |  |  |  | 506 |  |  |  | – |  |  |  | 440 |  |  |  | (457 | ) |  |  | – |  |  |  | 15 |  |  |  | – |  |  |  | (263 | ) |  |  | 11,002 |  |  |  | 468 |
Other invested assets |  |  | 17,562 |  |  |  | (1,028 | ) |  |  | 2 |  |  |  | 3,401 |  |  |  | (144 | ) |  |  | (1,031 | ) |  |  | 2 |  |  |  | – |  |  |  | (661 | ) |  |  | 18,103 |  |  |  | (923 | )
Total invested assets |  |  | 29,456 |  |  |  | 1,255 |  |  |  | 2 |  |  |  | 3,955 |  |  |  | (2,420 | ) |  |  | (1,053 | ) |  |  | 531 |  |  |  | (950 | ) |  |  | (1,023 | ) |  |  | 29,753 |  |  |  | 1,102 |
Derivatives |  |  | 106 |  |  |  | 1,884 |  |  |  | 44 |  |  |  | 42 |  |  |  | – |  |  |  | (685 | ) |  |  | 135 |  |  |  | (34 | ) |  |  | (36 | ) |  |  | 1,456 |  |  |  | 1,423 |
Segregated funds net assets |  |  | 4,447 |  |  |  | 148 |  |  |  | – |  |  |  | 193 |  |  |  | (140 | ) |  |  | (30 | ) |  |  | – |  |  |  | – |  |  |  | (106 | ) |  |  | 4,512 |  |  |  | 111 |
Total |  | $ | 34,009 |  |  | $ | 3,287 |  |  | $ | 46 |  |  | $ | 4,190 |  |  | $ | (2,560 | ) |  | $ | (1,768 | ) |  | $ | 666 |  |  | $ | (984 | ) |  | $ | (1,165 | ) |  | $ | 35,721 |  |  | $ | 2,636 |
(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) | The Company uses fair values of the assets at the beginning of the year for assets transferred into and out of Level 3 except for derivatives, refer to footnote 4 below.
(4) | For derivatives transfer into or out of Level 3, the Company uses fair value at the end of the year and at the beginning of the year, respectively.
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.

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