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Invested Assets and Investment Income
 12 Months Ended
Dec. 31, 2022
Text block [abstract]  
Invested Assets and Investment Income
Note 4    Invested Assets and Investment Income
(a) Carrying values and fair values of invested assets

 
As at December 31, 2022
 
FVTPL
(1)
 
 
AFS
(2)
 
 
Other
(3)
 
 
Total carrying
value
(4)
 
 
Total fair
value
(5)
 
Cash and short-term securities
(6)
  
$
1,933
 
  
$
10,926
 
  
$
6,294
 
  
$
19,153
 
  
$
19,153
 
Debt securities
(3),(7),(8)
                                        
Canadian government and agency
  
 
14,798
 
  
 
6,468
 
  
 
–
 
  
 
21,266
 
  
 
21,266
 
U.S. government and agency
  
 
9,440
 
  
 
14,384
 
  
 
912
 
  
 
24,736
 
  
 
24,494
 
Other government and agency
  
 
22,986
 
  
 
3,487
 
  
 
–
 
  
 
26,473
 
  
 
26,473
 
Corporate
  
 
120,897
 
  
 
7,745
 
  
 
499
 
  
 
129,141
 
  
 
128,972
 
Mortgage/asset-backed securities
  
 
2,152
 
  
 
136
 
  
 
–
 
  
 
2,288
 
  
 
2,288
 
Public equities
(9)
  
 
21,989
 
  
 
1,530
 
  
 
–
 
  
 
23,519
 
  
 
23,519
 
Mortgages
  
 
–
 
  
 
–
 
  
 
54,638
 
  
 
54,638
 
  
 
51,429
 
Private placements
(8)
  
 
–
 
  
 
–
 
  
 
47,057
 
  
 
47,057
 
  
 
41,968
 
Policy loans
  
 
–
 
  
 
–
 
  
 
6,894
 
  
 
6,894
 
  
 
6,894
 
Loans to Bank clients
  
 
–
 
  
 
–
 
  
 
2,781
 
  
 
2,781
 
  
 
2,760
 
Real estate
                                        
Own use property
(10)
  
 
–
 
  
 
–
 
  
 
1,878
 
  
 
1,878
 
  
 
3,033
 
Investment property
  
 
–
 
  
 
–
 
  
 
11,394
 
  
 
11,394
 
  
 
11,394
 
Other invested assets
                                        
Alternative long-duration assets
(11)
  
 
26,348
 
  
 
79
 
  
 
12,012
 
  
 
38,439
 
  
 
39,225
 
Various other
(12)
  
 
131
 
  
 
–
 
  
 
4,213
 
  
 
4,344
 
  
 
4,344
 
Total invested assets
  
$
220,674
 
  
$
44,755
 
  
$
148,572
 
  
$
414,001
 
  
$
407,212
 
As at December 31, 2021
 
FVTPL
(1)
 
 
AFS
(2)
 
 
Other
(3)
 
 
Total carrying
value
(4)
 
 
Total fair
value
(5)
 
Cash and short-term securities
(6)
   $ 2,214     $ 14,339     $ 6,041     $ 22,594     $ 22,594  
Debt securities
(7),(8)
                                        
Canadian government and agency
     18,706       3,964       –       22,670       22,670  
U.S. government and agency
     12,607       18,792       852       32,251       32,254  
Other government and agency
     21,888       2,871       –       24,759       24,759  
Corporate
     133,763       7,332       468       141,563       141,560  
Mortgage/asset-backed securities
     2,758       138       –       2,896       2,896  
Public equities
(9)
     25,716       2,351       –       28,067       28,067  
Mortgages
     –       –       52,014       52,014       54,089  
Private placements
(8)
     –       –       42,842       42,842       47,276  
Policy loans
     –       –       6,397       6,397       6,397  
Loans to Bank clients
     –       –       2,506       2,506       2,503  
Real estate
                                        
Own use property
(10)
     –       –       1,812       1,812       3,024  
Investment property
     –       –       11,421       11,421       11,421  
Other invested assets
                                        
Alternative long-duration assets
(11)
     21,022       89       10,093       31,204       31,863  
Various other
(12)
     135       –       3,967       4,102       4,102  
Total invested assets
   $   238,809     $   49,876     $   138,413     $   427,098     $   435,475  
(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
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, and leveraged leases. Also includes debt securities classified as
held-to-maturity
which are accounted for at amortized cost. Refer to note 1(e).
(4)
Invested assets above include debt securities, mortgages, private placements and approximately $302 (2021 – $323) of other invested assets, which primarily have contractual cash flows that qualify as Solely Payment of Principal and Interest (“SPPI”). Invested assets which do not have SPPI qualifying cash flows as at December 31, 2022 include debt securities, private placements and other invested assets with fair values of $nil, $98 and $507, respectively (2021 – $nil, $181 and $518, respectively). The change in the fair value of these invested assets during the year was $(94) (2021 – $15).
(5)
The methodologies used in determining fair values of invested assets are described in note 1(c) and note 4(g).
(6)
Includes short-term securities with maturities of less than one year at acquisition amounting to $4,148 (2021 – $7,314) cash equivalents with maturities of less than 90 days at acquisition amounting to $8,711 (2021 – $9,239) and cash of $6,294 (2021 – $6,041).
(7)
Debt securities include securities which were acquired with maturities of less than one year and less than 90 days of $1,787 and $870, respectively (2021 – $2,196 and $347, respectively).
(8)
Floating rate invested assets above which are subject to interest rate benchmark reform, but have not yet transitioned to replacement reference rates, include debt securities benchmarked to CDOR, USD LIBOR and AUD BBSW of $173, $892 and $15 (2021 – $176, $1,002 and $nil respectively), and private placements benchmarked to USD LIBOR, AUD BBSW and NZD BKBM of $1,613, $199 and $43 (2021 – $1,984, $166 and $43, respectively). Exposures indexed to USD LIBOR represent floating rate invested assets with maturity dates beyond June 30, 2023 while exposures to CDOR represent floating rate invested assets with maturity dates beyond June 28, 2024. The interest rate benchmark reform is expected to have an impact on the valuation of invested assets whose value is tied to the affected interest rate benchmarks. The Company has assessed its exposure at the contract level, by benchmark and instrument type. The Company is monitoring market developments with respect to alternative reference rates and the time horizon during which they will evolve. As at December 31, 2022, the interest rate benchmark reform has not resulted in significant changes in the Company’s risk management strategy.
(9)
Includes $1 (2021 – $5) of public equities that are managed in conjunction with the Company’s ALDA strategy.
(10)
Includes accumulated depreciation of $411 (2021 – $407).
(11)
ALDA include investments in private equity of $14,279, infrastructure of $12,761, oil and gas of $2,221, timber and agriculture of $5,979 and various other invested assets of $3,199 (2021 – $11,598, $9,824, $1,950, $5,259 and $2,573, respectively).
(12)
Includes $3,840 (2021 – $3,457) of leveraged leases. Refer to note 1(e).
(b) Equity method accounted invested assets
Other invested assets include i
n
vestments in associates and joint ventures which are accounted for using the equity method of accounting as presented in the following table.
 
   
2022
           2021  
As at December 31,
   Carrying
value		     % of total           Carrying
value		     % of total  
Leveraged leases
  
$
 
 
3,840
 
  
 
37
 
           $ 3,457       40  
Timber and agriculture
  
 
822
 
  
 
8
 
             808       9  
Real estate
  
 
1,845
 
  
 
18
 
             1,528       17  
Other
  
 
3,785
 
  
 
37
 
             3,025       34  
Total
  
$
 
 
10,292
 
  
 
100
 
           $   8,818       100  
The Company’s share of profit and dividends from these investments for the year ended December 31, 2022 were $851 and $nil, respectively (2021 – $1,300 and $2).
 
(c) Investment income
 
For the year ended December 31, 2022
 
FVTPL
 
 
AFS
 
 
Other
(1)
 
 
Total
 
Cash and short-term securities
                                
Interest income
  
$
40
 
  
$
272
 
  
$
–
 
  
$
312
 
Gains (losses)
(2)
  
 
26
 
  
 
85
 
  
 
–
 
  
 
111
 
Debt securities
                                
Interest income
  
 
6,221
 
  
 
738
 
  
 
66
 
  
 
7,025
 
Gains (losses)
(2)
  
 
(32,732
) 
  
 
(549
) 
  
 
–
 
  
 
(33,281
) 
Recovery (impairment loss), net
  
 
(11
) 
  
 
–
 
  
 
–
 
  
 
(11
) 
Public equities
                                
Dividend income
  
 
500
 
  
 
45
 
  
 
–
 
  
 
545
 
Gains (losses)
(2)
  
 
(3,819
) 
  
 
201
 
  
 
–
 
  
 
(3,618
) 
Impairment loss, net
  
 
–
 
  
 
(14
) 
  
 
–
 
  
 
(14
) 
Mortgages
                                
Interest income
  
 
–
 
  
 
–
 
  
 
1,913
 
  
 
1,913
 
Gains (losses)
(2)
  
 
–
 
  
 
–
 
  
 
57
 
  
 
57
 
Provision, net
  
 
–
 
  
 
–
 
  
 
1
 
  
 
1
 
Private placements
                                
Interest income
  
 
–
 
  
 
–
 
  
 
2,021
 
  
 
2,021
 
Gains (losses)
(2)
  
 
–
 
  
 
–
 
  
 
335
 
  
 
335
 
Impairment loss, net
  
 
–
 
  
 
–
 
  
 
(4
) 
  
 
(4
) 
Policy loans
  
 
–
 
  
 
–
 
  
 
385
 
  
 
385
 
Loans to Bank clients
                                
Interest income
  
 
–
 
  
 
–
 
  
 
138
 
  
 
138
 
Provision, net
  
 
–
 
  
 
–
 
  
 
(4
) 
  
 
(4
) 
Real estate
                                
Rental income, net of depreciation
(3)
  
 
–
 
  
 
–
 
  
 
452
 
  
 
452
 
Gains (losses)
(2)
  
 
–
 
  
 
–
 
  
 
(478
) 
  
 
(478
) 
Impairment loss, net
  
 
–
 
  
 
–
 
  
 
–
 
  
 
–
 
Derivatives
                                
Interest income, net
  
 
494
 
  
 
–
 
  
 
(24
) 
  
 
470
 
Gains (losses)
(2)
  
 
(10,628
) 
  
 
–
 
  
 
(9
) 
  
 
(10,637
) 
Other invested assets
                                
Interest income
  
 
–
 
  
 
–
 
  
 
26
 
  
 
26
 
Oil and gas, timber, agriculture and other income
  
 
–
 
  
 
–
 
  
 
2,846
 
  
 
2,846
 
Gains (losses)
(2)
  
 
1,172
 
  
 
13
 
  
 
474
 
  
 
1,659
 
Impairment loss, net
  
 
–
 
  
 
(119
) 
  
 
–
 
  
 
(119
) 
Total investment income
  
$
(38,737
) 
  
$
672
 
  
$
8,195
 
  
$
(29,870
) 
Investment income
                                
Interest income
  
$
6,755
 
  
$
1,010
 
  
$
4,525
 
  
$
12,290
 
Dividend, rental and other income
  
 
500
 
  
 
45
 
  
 
3,298
 
  
 
3,843
 
Impairments, provisions and recoveries, net
  
 
(11
) 
  
 
(133
) 
  
 
(7
) 
  
 
(151
) 
Other
  
 
(794
) 
  
 
(216
) 
  
 
235
 
  
 
(775
) 
 
  
 
6,450
 
  
 
706
 
  
 
8,051
 
  
 
15,207
 
Realized and unrealized gains (losses) on assets supporting insurance and investment contract liabilities and on the macro hedge program
                                
Debt securities
  
 
(32,599
) 
  
 
(76
) 
  
 
–
 
  
 
(32,675
) 
Public equities
  
 
(3,626
) 
  
 
24
 
  
 
–
 
  
 
(3,602
) 
Mortgages
  
 
–
 
  
 
–
 
  
 
58
 
  
 
58
 
Private placements
  
 
–
 
  
 
–
 
  
 
336
 
  
 
336
 
Real estate
  
 
–
 
  
 
–
 
  
 
(471
) 
  
 
(471
) 
Other invested assets
  
 
1,572
 
  
 
18
 
  
 
230
 
  
 
1,820
 
Derivatives, including macro hedge program
  
 
(10,534
) 
  
 
–
 
  
 
(9
) 
  
 
(10,543
) 
 
  
 
(45,187
) 
  
 
(34
) 
  
 
144
 
  
 
(45,077
) 
Total investment income
  
$
(38,737
) 
  
$
672
 
  
$
8,195
 
  
$
(29,870
) 
 
For the year ended December 31, 2021   FVTPL     AFS     Other
(1)
     Total  
Cash and short-term securities
                                
Interest income
   $ 12     $ 84     $ –     $ 96  
Gains (losses)
(2)
     85       (22 )      –       63  
Debt securities
                                
Interest income
     5,645       576       9       6,230  
Gains (losses)
(2)
     (5,600 )      (266 )      –       (5,866 ) 
Impairment loss, net
     28       1       –       29  
Public equities
                                
Dividend income
     670       61       –       731  
Gains (losses)
(2)
     3,221       250       –       3,471  
Impairment loss, net
     –       (3 )      –       (3 ) 
Mortgages
                                
Interest income
     –       –       1,709       1,709  
Gains (losses)
(2)
     –       –       133       133  
Provision, net
     –       –       1       1  
Private placements
                                
Interest income
     –       –       1,931       1,931  
Gains (losses)
(2)
     –       –       270       270  
Impairment loss, net
     –       –       45       45  
Policy loans
     –       –       366       366  
Loans to Bank clients
                                
Interest income
     –       –       77       77  
Provision, net
     –       –       (2 )      (2 ) 
Real estate
                                
Rental income, net of depreciation
(3)
     –       –       453       453  
Gains (losses)
(2)
     –       –       677       677  
Derivatives
                                
Interest income, net
     1,085       –       (35 )      1,050  
Gains (losses)
(2)
     (5,925 )      –       (14 )      (5,939 ) 
Other invested assets
                                
Interest income
     –       –       57       57  
Oil and gas, timber, agriculture and other income
     –       –       2,996       2,996  
Gains (losses)
(2)
     2,554       23       527       3,104  
Impairment loss, net
     –       –       (55 )      (55 ) 
Total investment income
   $ 1,775     $ 704     $ 9,145     $ 11,624  
Investment income
                                
Interest income
   $ 6,742     $ 661     $ 4,114     $ 11,517  
Dividend, rental and other income
     670       61       3,449       4,180  
Impairments, provisions and recoveries, net
     28       (2 )      (11 )      15  
Other
     (76 )      (66 )      57       (85 ) 
 
     7,364          654       7,609       15,627  
Realized and unrealized gains (losses) on assets supporting insurance and investment contract liabilities and on the macro hedge program
                                
Debt securities
     (5,605 )      20       –       (5,585 ) 
Public equities
     3,187       33       –       3,220  
Mortgages
     –       –       133       133  
Private placements
     –       –       270       270  
Real estate
     –       –       696       696  
Other invested assets
     2,628       (3 )      451       3,076  
Derivatives, including macro hedge program
     (5,799 )      –       (14 )      (5,813 ) 
 
     (5,589 )      50       1,536       (4,003 ) 
Total investment income
   $     1,775     $        704     $     9,145     $   11,624  
 
(1)
Primarily includes investment income on loans carried at amortized cost, own use real estate 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, 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,
 
2022
 
 
2021
 
Related to invested assets
  
$
718
 
   $ 633  
Related to segregated, mutual and other funds
  
 
1,145
 
     1,347  
Total investment expenses
  
$
 
 
1,863
 
   $   1,980  
(e) Investment properties
The following table presents the rental income and direct operating expenses of investment properties.
 

For the years ended December 31,
  
2022
     2021  
Rental income from investment properties
  
$
825
 
   $
 
 
 837  
Direct operating expenses of rental investment properties
  
 
(458
) 
     (464 ) 
Total
  
$
 
 
 
367
 
   $
 
 
   373  
(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 is no credit exposure from securitized mortgages under the Canada Mortgage and Housing Corporation (“CMHC”) sponsored CMB securitization program 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.
C
a
sh 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, 2022
    Securitized assets         
Securitization program    Securitized
mortgages		      Restricted cash and
short-term securities
      Total      Secured borrowing
liabilities
(2)
  
HELOC securitization
(1)
   
$
2,880
 
   
$
44
 
   
$
2,924
 
   
$
2,750
 
CMB securitization
   
 
2,318
 
   
 
–
 
   
 
2,318
 
   
 
2,273
 
Total
   
$
5,198
 
   
$
  44
 
   
$
5,242
 
   
$
5,023
 
     
As at December 31, 2021    Securitized assets         
Securitization program    Securitized
mortgages		      Restricted cash and
short-term securities
      Total      Secured borrowing
liabilities
(2)
  
HELOC securitization
(1)
    $ 2,618      $ 1      $ 2,619      $ 2,500  
CMB securitization
      2,075        –        2,075        2,098  
Total
    $   4,693      $   1      $  4,694      $   4,598  
 
(1)
 
Manulife Bank, a subsidiary, securitizes a portion of its HELOC receivables through Platinum Canadian Mortgage Trust II (“PCMT II”). 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)
 
The PCMT II notes payable have floating rates of interest and are secured by the PCMT II assets. Under the terms of the agreements, no principal is expected to be repaid within one year, $1,209 within
1-3
years, $1,049 within
3-5
years and $492 beyond 5 years. There is no specific maturity date for the contractual agreements. Under the terms of the notes, additional collateral must be provided to the series as added credit protection and the Series Purchase Agreements govern the amount of over-collateralization for each of the term notes outstanding. 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, 2022, the fair value of securitized assets and associated liabilities were $5,167 and $4,865, respectively (2021 – $4,725 and $4,601
).
(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, 2022
 
Total fair value
 
 
Level 1
 
 
Level 2
 
 
Level 3
 
Cash and short-term securities
                                
FVTPL
  
$
1,933
 
  
$
–
 
  
$
1,933
 
  
$
–
 
AFS
  
 
10,926
 
  
 
–
 
  
 
10,926
 
  
 
–
 
Other
  
 
6,294
 
  
 
6,294
 
  
 
–
 
  
 
–
 
Debt securities
                                
FVTPL
                                
Canadian government and agency
  
 
14,798
 
  
 
–
 
  
 
14,798
 
  
 
–
 
U.S. government and agency
  
 
9,440
 
  
 
–
 
  
 
9,440
 
  
 
–
 
Other government and agency
  
 
22,986
 
  
 
–
 
  
 
22,986
 
  
 
–
 
Corporate
  
 
120,897
 
  
 
–
 
  
 
120,865
 
  
 
32
 
Residential mortgage-backed securities
  
 
7
 
  
 
–
 
  
 
7
 
  
 
–
 
Commercial mortgage-backed securities
  
 
570
 
  
 
–
 
  
 
570
 
  
 
–
 
Other asset-backed securities
  
 
1,575
 
  
 
–
 
  
 
1,549
 
  
 
26
 
AFS
                                
Canadian government and agency
  
 
6,468
 
  
 
–
 
  
 
6,468
 
  
 
–
 
U.S. government and agency
  
 
14,384
 
  
 
–
 
  
 
14,384
 
  
 
–
 
Other government and agency
  
 
3,487
 
  
 
–
 
  
 
3,478
 
  
 
9
 
Corporate
  
 
7,745
 
  
 
–
 
  
 
7,745
 
  
 
–
 
Residential mortgage-backed securities
  
 
1
 
  
 
–
 
  
 
1
 
  
 
–
 
Commercial mortgage-backed securities
  
 
24
 
  
 
–
 
  
 
24
 
  
 
–
 
Other asset-backed securities
  
 
111
 
  
 
–
 
  
 
111
 
  
 
–
 
Public equities
                                
FVTPL
  
 
21,989
 
  
 
21,918
 
  
 
–
 
  
 
71
 
AFS
  
 
1,530
 
  
 
1,530
 
  
 
–
 
  
 
–
 
Real estate – investment property
(1)
  
 
11,394
 
  
 
–
 
  
 
–
 
  
 
11,394
 
Other invested assets
(2)
  
 
30,256
 
  
 
26
 
  
 
–
 
  
 
30,230
 
Segregated funds net assets
(3)
  
 
348,562
 
  
 
314,436
 
  
 
30,141
 
  
 
3,985
 
Total
  
$
635,377
 
  
$
344,204
 
  
$
245,426
 
  
$
45,747
 
         
As at December 31, 2021   Total fair value     Level 1     Level 2     Level 3  
Cash and short-term securities
                                
FVTPL
   $ 2,214     $ –     $ 2,214     $ –  
AFS
     14,339       –       14,339       –  
Other
     6,041       6,041       –       –  
Debt securities
                                
FVTPL
                                
Canadian government and agency
     18,706       –       18,706       –  
U.S. government and agency
     12,607       –       12,607       –  
Other government and agency
     21,888       –       21,888       –  
Corporate
     133,763       –       133,723       40  
Residential mortgage-backed securities
     8       –       8       –  
Commercial mortgage-backed securities
     1,103       –       1,103       –  
Other asset-backed securities
     1,647       –       1,619       28  
AFS
                                
Canadian government and agency
     3,964       –       3,964       –  
U.S. government and agency
     18,792       –       18,792       –  
Other government and agency
     2,871       –       2,871       –  
Corporate
     7,332       –       7,331       1  
Residential mortgage-backed securities
     1       –       1       –  
Commercial mortgage-backed securities
     79       –       79       –  
Other asset-backed securities
     58       –       58       –  
Public equities
                                
FVTPL
     25,716       25,716       –       –  
AFS
     2,351       2,349       2       –  
Real estate – investment property
(1)
     11,421       –       –       11,421  
Other invested assets
(2)
     24,300       257       –       24,043  
Segregated funds net assets
(3)
     399,788       361,447       34,060       4,281  
Total
   $   708,989     $   395,810     $   273,365     $   39,814  
(1)
 
For investment properties, the significant unobservable inputs are capitalization rates (ranging from 2.25% to 9.00% during the year and ranging from 2.25% to 9.00% during 2021), terminal capitalization rates (ranging from 3.25% to 9.50% during the year and ranging from 3.25% to 9.25% during 2021) and discount rates (ranging from 3.30% to 11.00% during the year and ranging from 3.80% to 10.50% during 2021). Holding other factors constant, a higher capitalization, terminal capitalization, and/or discount rate will decrease the fair value of an investment property; while decreases in these rates would have the opposite effect. 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 7.15% to 15.6% (2021 – ranged from 7.25% to 20.0%). 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 4.25% to 7.0% (2021 – ranged from 4.5% 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, 2022
   Carrying value     Total fair value     Level 1     Level 2     Level 3  
Mortgages
(1)
  
$
54,638
 
  
$
51,429
 
  
$
–
 
  
$
–
 
  
$
51,429
 
Private placements
(2)
  
 
47,057
 
  
 
41,968
 
  
 
–
 
  
 
34,110
 
  
 
7,858
 
Policy loans
(3)
  
 
6,894
 
  
 
6,894
 
  
 
–
 
  
 
6,894
 
  
 
–
 
Loans to Bank clients
(4)
  
 
2,781
 
  
 
2,760
 
  
 
–
 
  
 
2,760
 
  
 
–
 
Real estate – own use property
(5)
  
 
1,878
 
  
 
3,033
 
  
 
–
 
  
 
–
 
  
 
3,033
 
Public Bonds HTM
  
 
1,411
 
  
 
1,000
 
  
 
–
 
  
 
1,000
 
  
 
–
 
Other invested assets
(6)
  
 
12,527
 
  
 
13,313
 
  
 
72
 
  
 
–
 
  
 
13,241
 
Total invested assets disclosed at fair value
  
$
  127,186
 
  
$
  120,397
 
  
$
  72
 
  
$
  44,764
 
  
$
  75,561
 
           
As at December 31, 2021   Carrying value     Total fair value     Level 1     Level 2     Level 3  
Mortgages
(1)
   $ 52,014     $ 54,089     $ –     $ –     $ 54,089  
Private placements
(2)
     42,842       47,276       –       42,110       5,166  
Policy loans
(3)
     6,397       6,397       –       6,397       –  
Loans to Bank clients
(4)
     2,506       2,503       –       2,503       –  
Real estate – own use property
(5)
     1,812       3,024       –       –       3,024  
Public Bonds HTM
     1,320       1,320       –       1,320       –  
Other invested assets
(6)
     11,006       11,665       120       –       11,545  
Total invested assets disclosed at fair value
   $   117,897     $   126,274     $   120     $   52,330     $   73,824  
 
(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 investment property in note 1.
(6)
Primarily include leveraged leases, oil and gas properties (disposed of during 2021) 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, consistent with the date of the determination of fair value. 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, 2022 (
2021 – 
$5).
For segregated funds net assets, the Company had $nil transfers from Level 1 to Level 2 for the year ended December 31, 2022 (2021 – $5). The Company had $nil transfers from Level 2 to Level 1 for the year ended December 31, 2022 (
2021 – 
$249).
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 follo
w
ing table presents a roll forward for invested assets, net derivatives and segregated funds net assets measured at fair value using significant unobservable inputs (Level 3) for the years ended December 31, 2022 and 2021.
 
For the year ended
December 31, 2022
   Balance,
January 1,
2022		     Total
gains
(losses)
included
in net
income
(1)
     Total
gains
(losses)
included
in AOCI
(2)
     Purchases     Sales     Settlements    
Transfer
in
(3)
    
Transfer
out
(3)
     Currency
movement		    
Balance,
December 31,
2022
     Change in
unrealized
gains
(losses) on
assets still
held		  
Debt securities
                                                                                        
FVTPL
                                                                                        
Corporate
  
$
40
 
  
$
(1
) 
  
$
–
 
  
$
27
 
  
$
–
 
  
$
(1
) 
  
$
6
 
  
$
(40
) 
  
$
1
 
  
$
32
 
  
$
(1
) 
Other securitized assets
  
 
28
 
  
 
2
 
  
 
–
 
  
 
–
 
  
 
–
 
  
 
(4
) 
  
 
–
 
  
 
–
 
  
 
–
 
  
 
26
 
  
 
2
 
AFS
                                                                                        
Other government & agency
  
 
–
 
  
 
–
 
  
 
–
 
  
 
–
 
  
 
–
 
  
 
–
 
  
 
10
 
  
 
–
 
  
 
(1
) 
  
 
9
 
  
 
–
 
Corporate
  
 
1
 
  
 
–
 
  
 
–
 
  
 
–
 
  
 
–
 
  
 
–
 
  
 
–
 
  
 
(1
) 
  
 
–
 
  
 
–
 
  
 
–
 
Public equities
                                                                                        
FVTPL
  
 
–
 
  
 
(6
) 
  
 
–
 
  
 
69
 
  
 
(84
) 
  
 
–
 
  
 
87
 
  
 
–
 
  
 
5
 
  
 
71
 
  
 
(15
) 
AFS
  
 
–
 
  
 
(1
) 
  
 
1
 
  
 
–
 
  
 
–
 
  
 
–
 
  
 
–
 
  
 
–
 
  
 
–
 
  
 
–
 
  
 
–
 
Investment property
  
 
11,421
 
  
 
(443
) 
  
 
–
 
  
 
312
 
  
 
(237
) 
  
 
–
 
  
 
15
 
  
 
–
 
  
 
326
 
  
 
11,394
 
  
 
(446
) 
Other invested assets
  
 
24,043
 
  
 
1,922
 
  
 
7
 
  
 
4,934
 
  
 
(666
) 
  
 
(1,474
) 
  
 
248
 
  
 
–
 
  
 
1,216
 
  
 
30,230
 
  
 
2,046
 
Total invested assets
  
 
35,533
 
  
 
1,473
 
  
 
8
 
  
 
5,342
 
  
 
(987
) 
  
 
(1,479
) 
  
 
366
 
  
 
(41
) 
  
 
1,547
 
  
 
41,762
 
  
 
1,586
 
Derivatives, net
  
 
2,101
 
  
 
(5,413
) 
  
 
(7
) 
  
 
(109
) 
  
 
–
 
  
 
775
 
  
 
–
 
  
 
(356
) 
  
 
(163
) 
  
 
(3,172
) 
  
 
(3,511
) 
Segregated funds net assets
  
 
4,281
 
  
 
475
 
  
 
–
 
  
 
246
 
  
 
(1,113
) 
  
 
(46
) 
  
 
–
 
  
 
(1
) 
  
 
143
 
  
 
3,985
 
  
 
79
 
Total
  
$
  41,915
 
  
$
(3,465
) 
  
$
  1
 
  
$
  5,479
 
  
$
(2,100
) 
  
$
(750
) 
  
$
  366
 
  
$
(398
) 
  
$
  1,527
 
  
$
  42,575
 
  
$
(1,846
) 
                       
For the year ended
December 31, 2021
   Balance,
January 1,
2021		     Total
gains
(losses)
included
in net
income
(1)
     Total
gains
(losses)
included
in AOCI
(2)
     Purchases     Sales     Settlements    
Transfer
in
(3)
    
Transfer
out
(3)
     Currency
movement		    
Balance,
December 31,
2021
     Change in
unrealized
gains
(losses) on
assets still
held		  
Debt securities
                                                                                        
FVTPL
                                                                                        
Corporate
   $ 510     $ 11     $ –     $ 11     $ (93 )    $ –     $ 11     $ (409 )    $ (1 )    $ 40     $ (8 ) 
Other securitized assets
     45       3       –       –       (9 )      (39 )      28       –       –       28       (4 ) 
AFS
                                                                                        
Corporate
     3       1       –       –       (3 )      –       –       –       –       1       –  
Public equities
                                                                                        
FVTPL
     –       –       –       62       (62 )      –       –       –       –       –       –  
Investment property
     10,982       702       –       186       (376 )      –       –       –       (73 )      11,421       626  
Other invested assets
     19,049       2,731       2       5,058       (1,131 )      (1,453 )      5       –       (218 )      24,043       2,569  
Total invested assets
     30,589       3,448       2       5,317       (1,674 )      (1,492 )      44       (409 )      (292 )      35,533       3,183  
Derivatives, net
     3,443       (897 )      –       14       –       (182 )      –       (309 )      32       2,101       (547 ) 
Segregated funds net assets
     4,202       350       –       68       (303 )      (28 )      –       –       (8 )      4,281       116  
Total
   $   38,234     $   2,901     $   2     $   5,399     $   (1,977 )    $   (1,702 )    $   44     $   (718 )    $   (268 )    $   41,915     $   2,752  
 
(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 notes 1(h) and 23.
(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, where 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 becoming available for the entire term structure of the debt security.