
	Individual insurance					Annuities and pensions		Other insurance contract liabilities (1)		Total, net of reinsurance ceded			Total reinsurance ceded		Total, gross of reinsurance ceded
As at December 31, 2022	Participating		Non- participating			Annuities and pensions		Other insurance contract liabilities (1)		Total, net of reinsurance ceded			Total reinsurance ceded		Total, gross of reinsurance ceded

Asia	$	66,294	$	34,684		$	6,221	$	4,142	$	111,341		$	2,727	$	114,068

Canada		12,637		38,325			13,593		14,095		78,650			1,676		80,326

U.S.		7,867		67,789			11,273		46,849		133,778			43,137		176,915

Corporate and Other		–		(640	)		24		578		(38	)		134		96

Total, net of reinsurance ceded		86,798		140,158			31,111		65,664		323,731			47,674		371,405

Total reinsurance ceded		8,552		22,434			15,793		895		47,674

Total, gross of reinsurance ceded	$	95,350	$	162,592		$	46,904	$	66,559	$	371,405

	Individual insurance					Annuities and pensions		Other insurance contract liabilities (1)		Total, net of reinsurance ceded			Total reinsurance ceded		Total, gross of reinsurance ceded
As at December 31, 2021	Participating		Non- participating			Annuities and pensions		Other insurance contract liabilities (1)		Total, net of reinsurance ceded			Total reinsurance ceded		Total, gross of reinsurance ceded

Asia	$	64,586	$	36,387		$	6,869	$	3,590	$	111,432		$	2,749	$	114,181

Canada		13,518		44,320			16,554		14,981		89,373			430		89,803

U.S.		8,591		71,077			14,007		53,555		147,230			41,150		188,380

Corporate and Other		–		(676	)		22		363		(291	)		202		(89	)

Total, net of reinsurance ceded		86,695		151,108			37,452		72,489		347,744			44,531		392,275

Total reinsurance ceded		8,144		20,767			14,681		939		44,531

Total, gross of reinsurance ceded	$	94,839	$	171,875		$	52,133	$	73,428	$	392,275

(1)	Other insurance contract liabilities include group insurance and individual and group health including long-term care insurance.

Separate

sub-accounts

were established for participating policies

in-force

at the demutualization of MLI and John Hancock Mutual Life Insurance Company. These

sub-accounts

permit this participating business to be operated as separate “closed blocks” of participating policies. As at December 31, 2022, $26,289 (2021 – $29,000) of both reinsurance assets and insurance contract liabilities were related to these closed blocks of participating policies.

Assets are segmented and matched to liabilities with similar underlying characteristics by product line and major currency. The Company has established target investment strategies and asset mixes for each asset segment supporting insurance contract liabilities which consider the risk attributes of the liabilities supported by the assets and expectations of market performance. Liabilities with rate and term guarantees are predominantly backed by fixed-rate instruments on a cash flow matching basis for a targeted duration horizon. Longer duration cash flows on these liabilities as well as on adjustable products such as participating life insurance are backed by a broader range of asset classes, including equity and alternative long-duration investments. The Company’s capital is invested in a range of debt and equity investments, both public and private.

Changes in the fair value of assets backing net insurance contract liabilities, that the Company considers to be other than temporary, would have a limited impact on the Company’s net income wherever there is an effective matching of assets and liabilities, as these changes would be substantially offset by corresponding changes in the value of net insurance contract liabilities. The fair value of assets backing net insurance contract liabilities as at December 31, 2022, excluding reinsurance assets, was estimated at $317,854 (

2021 –

$354,587).

As at December 31, 2022, the fair value of assets backing capital and other liabilities was estimated at $524,297 (2021 – $571,431).

The following table presents the carrying value of assets backing net insurance contract liabilities, other liabilities and capital.


	Individual insurance				Annuities and pensions		Other insurance contract liabilities (1)		Other liabilities (2)			Capital (3)		Total
As at December 31, 2022	Participating		Non- participating		Annuities and pensions		Other insurance contract liabilities (1)		Other liabilities (2)			Capital (3)		Total

Assets

Debt securities	$	42,279	$	72,706	$	15,686	$	31,998	$	9,739		$	31,496	$	203,904

Public equities		12,253		6,792		336		562		675			2,901		23,519

Mortgages		4,378		14,101		4,350		8,766		22,997			46		54,638

Private placements		6,810		19,498		8,038		10,497		2,003			211		47,057

Real estate		3,346		7,030		913		1,875		(66	)		174		13,272

Other		17,732		20,031		1,788		11,966		427,369			27,665		506,551

Total	$	86,798	$	140,158	$	31,111	$	65,664	$	462,717		$	62,493	$	848,941

	Individual insurance				Annuities and pensions		Other insurance contract liabilities (1)		Other liabilities (2)			Capital (3)		Total
As at December 31, 2021	Participating		Non- participating		Annuities and pensions		Other insurance contract liabilities (1)		Other liabilities (2)			Capital (3)		Total

Assets

Debt securities	$	43,278	$	82,050	$	19,575	$	36,207	$	10,723		$	32,306	$	224,139

Public equities		14,667		8,112		453		374		626			3,835		28,067

Mortgages		3,799		13,295		4,572		8,526		21,802			20		52,014

Private placements		6,005		17,741		7,370		9,775		1,723			228		42,842

Real estate		3,467		6,814		987		1,782		6			177		13,233

Other		15,479		23,096		4,495		15,825		469,014			29,439		557,348

Total	$	86,695	$	151,108	$	37,452	$	72,489	$	503,894		$	66,005	$	917,643

(1)	Other insurance contract liabilities include group insurance and individual and group health including long-term care insurance.

(2)	Other liabilities are non-insurance contract liabilities which include segregated funds, bank deposits, long-term debt, deferred tax liabilities, derivatives, investment contracts, embedded derivatives and other miscellaneous liabilities.

(3)	Capital is defined in note 13.

(d) Significant insurance contract liability valuation assumptions

The determi

ation of insurance contract liabilities involves the use of estimates and assumptions. Insurance contract liabilities have two major components: a best estimate amount and a provision for adverse deviation.

Best estimate assumptions

Best estimate assumptions are made with respect to mortality and morbidity, investment returns, rates of policy termination, operating expenses and certain taxes. Actual experience is monitored to ensure that assumptions remain appropriate and assumptions are changed as warranted. Assumptions are discussed in more detail in the following table.



Nature of factor and assumption methodology		Risk management
Mortality and morbidity	Mortality relates to the occurrence of death. Mortality is a key assumption for life insurance and certain forms of annuities. Mortality assumptions are based on the Company’s internal experience as well as past and emerging industry experience. Assumptions are differentiated by sex, underwriting class, policy type and geographic market. Assumptions are made for future mortality improvements. Morbidity relates to the occurrence of accidents and sickness for insured risks. Morbidity is a key assumption for long-term care insurance, disability insurance, critical illness and other forms of individual and group health benefits. Morbidity assumptions are based on the Company’s internal experience as well as past and emerging industry experience and are established for each type of morbidity risk and geographic market. Assumptions are made for future morbidity improvements.	The Company maintains underwriting standards to determine the insurability of applicants. Claim trends are monitored on an ongoing basis. Exposure to large claims is managed by establishing policy retention limits, which vary by market and geographic location. Policies in excess of the limits are reinsured with other companies. Mortality is monitored monthly and the overall 2022 experience was unfavourable (2021 – unfavourable) when compared to the Company’s assumptions. Morbidity is also monitored monthly and the overall 2022 experience was favourable (2021 – favourable) when compared to the Company’s assumptions.



Nature of factor and assumption methodology		Risk management
Investment returns	The Company segments assets to support liabilities by business segment and geographic market and establishes investment strategies for each liability segment. Projected cash flows from these assets are combined with projected cash flows from future asset purchases/sales to determine expected rates of return on these assets for future years. Investment strategies are based on the target investment policies for each segment and the reinvestment returns are derived from current and projected market rates for fixed income investments and a projected outlook for other alternative long-duration assets. Investment return assumptions include expected future credit losses on fixed income investments. Credit losses are projected based on past experience of the Company and industry as well as specific reviews of the current investment portfolio. Investment return assumptions for each asset class and geographic market also incorporate expected investment management expenses that are derived from internal cost studies. The costs are attributed to each asset class to develop unitized assumptions per dollar of asset for each asset class and geographic market.	The Company’s policy of closely matching asset cash flows with those of the corresponding liabilities is designed to mitigate the Company’s exposure to future changes in interest rates. The interest rate risk positions in business segments are monitored on an ongoing basis. Under CALM, the reinvestment rate is developed using interest rate scenario testing and reflects the interest rate risk positions. In 2022, the movement in interest rates positively (2021 – negatively) impacted the Company’s net income. This positive impact was primarily due to increase in risk-free interest rates in the U.S., Canada, and Asia. The exposure to credit losses is managed against policies that limit concentrations by issuer, corporate connections, ratings, sectors and geographic regions. On participating policies and some non-participating policies, credit loss experience is passed back to policyholders through the investment return crediting formula. For other policies, premiums and benefits reflect the Company’s assumed level of future credit losses at contract inception or most recent contract adjustment date. The Company holds explicit provisions in actuarial liabilities for credit risk including provisions for adverse deviation. In 2022, credit loss experience on debt securities and mortgages was favourable (2021 – favourable) when compared to the Company’s assumptions. Equities, real estate and other alternative long-duration assets are used to support liabilities where investment return experience is passed back to policyholders through dividends or credited investment return adjustments. Equities, real estate, and other alternative long-duration assets are also used to support long-dated obligations in the Company’s annuity and pension businesses and for long-dated insurance obligations on contracts where the investment return risk is borne by the Company. In 2022, investment experience related to alternative long-duration assets backing policyholder liabilities was favourable (2021 – favourable) primarily driven by gains in private equities, timber and agriculture properties, partially offset by losses in real estate properties. In 2022, alternative long-duration asset origination exceeded (2021 – did not exceed) valuation requirements. In 2022, for the business that is dynamically hedged, segregated fund guarantee experience on residual, non-dynamically hedged market risks were unfavourable (2021 – unfavourable). For the business that is not dynamically hedged, experience on segregated fund guarantees due to changes in the market value of assets under management was also unfavourable (2021 – unfavourable). This excludes the experience on the macro equity hedges. In 2022, investment expense experience was favourable (2021 – unfavourable) when compared to the Company’s assumptions.



Nature of factor and assumption methodology		Risk management
Policy termination and premium persistency	Policies are terminated through lapses and surrenders, where lapses represent the termination of policies due to non-payment of premiums and surrenders represent the voluntary termination of policies by policyholders. Premium persistency represents the level of ongoing deposits on contracts where there is policyholder discretion as to the amount and timing of deposits. Policy termination and premium persistency assumptions are primarily based on the Company’s recent experience adjusted for expected future conditions. Assumptions reflect differences by type of contract within each geographic market.	The Company seeks to design products that minimize financial exposure to lapse, surrender and premium persistency risk. The Company monitors lapse, surrender and persistency experience. In aggregate, 2022 policyholder termination and premium persistency experience was unfavourable (2021 – unfavourable) when compared to the Company’s assumptions used in the computation of actuarial liabilities.
Expenses and taxes	Operating expense assumptions reflect the projected costs of maintaining and servicing in-force policies, including associated overhead expenses. The expenses are derived from internal cost studies projected into the future with an allowance for inflation. For some developing businesses, there is an expectation that unit costs will decline as these businesses grow. Taxes reflect assumptions for future premium taxes and other non-income related taxes. For income taxes, policy liabilities are adjusted only for temporary tax timing and permanent tax rate differences on the cash flows available to satisfy policy obligations.	The Company prices its products to cover the expected costs of servicing and maintaining them. In addition, the Company monitors expenses monthly, including comparisons of actual expenses to expense levels allowed for in pricing and valuation. Maintenance expenses for 2022 were unfavourable (2021 – unfavourable) when compared to the Company’s assumptions used in the computation of actuarial liabilities. The Company prices its products to cover the expected cost of taxes.
Policyholder dividends, experience rating refunds, and other adjustable policy elements	The best estimate projections for policyholder dividends and experience rating refunds, and other adjustable elements of policy benefits are determined to be consistent with management’s expectation of how these elements will be managed should experience emerge consistently with the best estimate assumptions used for mortality and morbidity, investment returns, rates of policy termination, operating expenses and taxes.	The Company monitors policy experience and adjusts policy benefits and other adjustable elements to reflect this experience. Policyholder dividends are reviewed annually for all businesses under a framework of Board-approved policyholder dividend policies.
Foreign currency	Foreign currency risk results from a mismatch of the currency of liabilities and the currency of the assets designated to support these obligations. Where a currency mismatch exists, the assumed rate of return on the assets supporting the liabilities is reduced to reflect the potential for adverse movements in foreign exchange rates.	The Company generally matches the currency of its assets with the currency of the liabilities they support, with the objective of mitigating the risk of loss arising from movements in currency exchange rates.

The Company reviews actuarial methods and assumptions on an annual basis. If changes are made to assumptions (refer to note 7(h)), the full impact is recognized in income immediately.

(e) Sensitivity of insurance contract liabilities to changes in

non-economic

assumptions

The sensitivity of net income attributed to shareholders to changes in

non-economic

assumptions underlying insurance contract liabilities is shown below, assuming a simultaneous change in the assumption across all business units. The sensitivity of net income attributed to shareholders to a deterioration or improvement in

non-economic

assumptions for Long-Term Care (“LTC”) as at December 31, 2022 is also shown below.

In practice, experience for each assumption will frequently vary by geographic market and business and assumption updates are made on a business/geographic specific basis. Actual results can differ materially from these estimates for a variety of reasons including the interaction among these factors when more than one changes; changes in actuarial and investment return and future investment activity assumptions; changes in business mix, effective tax rates and other market factors; and the general limitations of internal models.

Potential impact on net income attributed to shareholders arising from changes to

non-economic

assumptions

(1)


	Decrease in after-tax net income attributed to shareholders
As at December 31,	2022			2021
Policy related assumptions
2% adverse change in future mortality rates (2),(4)
Products where an increase in rates increases insurance contract liabilities	$	(500	)	$	(500	)
Products where a decrease in rates increases insurance contract liabilities		(500	)		(500	)
5% adverse change in future morbidity rates (incidence and termination) (3),(4),(5)		(4,500	)		(5,500	)
10% adverse change in future policy termination rates (4)		(2,200	)		(2,400	)
5% increase in future expense levels		(600	)		(600	)

(1)

The participating policy funds are largely self-supporting and generate no material impact on net income attributed to shareholders as a result of changes in

non-economic

assumptions. Experience gains or losses would generally result in changes to future dividends, with no direct impact to shareholders.

(2)	An increase in mortality rates will generally increase policy liabilities for life insurance contracts whereas a decrease in mortality rates will generally increase policy liabilities for policies with longevity risk such as payout annuities.

(3)	No amounts related to morbidity risk are included for policies where the policy liability provides only for claims costs expected over a short period, generally less than one year, such as Group Life and Health.

(4)

The impacts of the adverse sensitivities on LTC for morbidity, mortality and lapse do not assume any partial offsets from the Company’s ability to contractually raise premium rates in such events, subject to state regulatory approval. In practice, the Company would plan to file for rate increases equal to the amount of deterioration resulting from the sensitivities.

(5)	5% deterioration in incidence rates and 5% deterioration in claim termination rates.

Potential impact on net income attributed to shareholders arising from changes to

non-economic

assumptions for Long-Term Care included in the above table

(1),(2)


	Decrease in after-tax net income attributed to shareholders
As at December 31,	2022			2021
Policy related assumptions
2% adverse change in future mortality rates	$	(300	)	$	(300	)
5% adverse change in future morbidity incidence rates		(1,700	)		(2,000	)
5% adverse change in future morbidity claims termination rates		(2,400	)		(3,100	)
10% adverse change in future policy termination rates		(300	)		(400	)
5% increase in future expense levels		(100	)		(100	)

(1)

(2)	The impact of favourable changes to all the sensitivities is relatively symmetrical.

(f) Provision for adverse deviation assumptions

The assumptions made in establishing insurance contract liabilities reflect expected best estimates of future experience. To recognize the uncertainty in these best estimate assumptions, to allow for possible misestimation of and deterioration in experience and to provide a greater degree of assurance that the insurance contract liabilities are adequate to pay future benefits, the Appointed Actuary is required to include a margin in each assumption.

Margins are released into future earnings as the policy is released from risk. Margins for interest rate risk are included by testing a number of scenarios of future interest rates. The margin can be established by testing a limited number of scenarios, some of which are prescribed by the Canadian Actuarial Standards of Practice, and determining the liability based on the worst outcome. Alternatively, the margin can be set by testing many scenarios, which are developed according to actuarial guidance. Under this approach the liability would be the average of the outcomes above a percentile in the range prescribed by the Canadian Actuarial Standards of Practice.

Specific guidance is also provided for other risks such as market, credit, mortality and morbidity risks. For other risks which are not specifically addressed by the Canadian Institute of Actuaries, a range is provided of five per cent to 20 per cent of the expected experience assumption. The Company uses assumptions within the permissible ranges, with the determination of the level set considering the risk profile of the business. On occasion, in specific circumstances for additional prudence, a margin may exceed the high end of the range, which is permissible under the Canadian Actuarial Standards of Practice. This additional margin would be released if the specific circumstances which led to it being established were to change.

Each margin is reviewed annually for continued appropriateness.

(g) Change in insurance contract liabilities

The change in insurance contract liabilities was a result of the following business activities and changes in actuarial estimates.


For the year ended December 31, 2022	Net actuarial liabilities			Other insurance contract liabilities (1)			Net insurance contract liabilities			Reinsurance assets			Gross insurance contract liabilities
Balance, January 1	$	332,272		$	15,472		$	347,744		$	44,531		$	392,275
New policies (2)		5,365			–			5,365			116			5,481
Normal in-force movement (2)		(39,174	)		1,216			(37,958	)		(1,042	)		(39,000	)
Changes in methods and assumptions (2)		112			(192	)		(80	)		349			269
Reinsurance transactions (2) , (3)		(2,419	)		–			(2,419	)		950			(1,469	)
Impact of changes in foreign exchange rates		10,439			640			11,079			2,770			13,849
Balance, December 31	$	306,595		$	17,136		$	323,731		$	47,674		$	371,405

For the year ended December 31, 2021	Net actuarial liabilities			Other insurance contract liabilities (1)			Net insurance contract liabilities			Reinsurance assets			Gross insurance contract liabilities
Balance, January 1	$	325,408		$	14,377		$	339,785		$	45,769		$	385,554
New policies (4)		5,947			–			5,947			276			6,223
Normal in-force movement (4)		4,689			1,283			5,972			(1,812	)		4,160
Changes in methods and assumptions (4)		287			–			287			455			742
Reinsurance transactions		–			–			–			–			–
Impact of changes in foreign exchange rates		(4,059	)		(188	)		(4,247	)		(157	)		(4,404	)
Balance, December 31	$	332,272		$	15,472		$	347,744		$	44,531		$	392,275

(1)	Other insurance contract liabilities are comprised of benefits payable and provisions for unreported claims and policyholder amounts on deposit.

(2)

In 2022, the $34,971 decrease reported as the change in insurance contract liabilities on the 2022 Consolidated Statements of Income primarily consists of changes due to normal in-force movement, new policies, changes in methods and assumptions, and reinsurance transactions. These four items in the gross insurance contract liabilities were netted off by a decrease of $34,719, of which $35,830 is included in the Consolidated Statements of Income as a decrease in insurance contract liabilities and $1,111 increase is included in gross claims and benefits. The Consolidated Statements of Income change in insurance contract liabilities also includes the change in embedded derivatives associated with insurance contracts, however these embedded derivatives are included in other liabilities on the Consolidated Statements of Financial Position.

(3)

In 2022, we completed two transactions to reinsure blocks of legacy U.S. variable annuity (“VA”) policies. Under the terms of the transactions, the Company will retain responsibility for the maintenance of the policies with no intended impact to VA policyholders. The transactions were structured as coinsurance for the general fund liabilities and modified coinsurance for the segregated fund liabilities.

(4)

In 2021, the $10,719 increase reported as the change in insurance contract liabilities on the Consolidated Statements of Income primarily consists of changes due to normal

in-force

movement, new policies and changes in methods and assumptions. These three items in the gross insurance contract liabilities were netted off by an increase of $11,125, of which $9,868 is included in the Consolidated Statements of Income increase in insurance contract liabilities and $1,257 is included in gross claims and benefits. The Consolidated Statements of Income change in insurance contract liabilities also includes the change in embedded derivatives associated with insurance contracts.

(h) Actuarial methods and assumptions

A comprehensive review of actuarial methods and assumptions is performed annually. The review is designed to reduce the Company’s exposure to uncertainty by ensuring assumptions for both asset and liability related risks remain appropriate. This is accomplished by monitoring experience and selecting assumptions which represent a current best estimate view of expected future experience, and margins for adverse deviations that are appropriate for the risks assumed. While the assumptions selected represent the Company’s current best estimates and assessment of risk, the ongoing monitoring of experience and changes in the economic environment are likely to result in future changes to the actuarial assumptions, which could materially impact the measurement of insurance contract liabilities.

2022 Review of Actuarial Methods and Assumptions

The completion of the 2022 annual review of actuarial methods and assumptions resulted in a decrease in insurance contract liabilities, net of reinsurance, of $80, and a net gain to net income attributed to shareholders of $36

post-tax.


	Change in insurance contract liabilities, net of reinsurance
For the year ended December 31, 2022	Total			Attributed to participating policyholders’ account (1)			Attributed to shareholders’ account			Change in net income attributed to shareholders (post-tax)
Long-term care triennial review	$	19		$	–		$	19		$	(15	)
Mortality and morbidity updates		157			(5	)		162			(126	)
Lapses and policyholder behaviour updates		317			74			243			(192	)
Investment related updates		(210	)		(1	)		(209	)		157
Other updates		(363	)		(145	)		(218	)		212
Net impact	$	(80	)	$	(77	)	$	(3	)	$	36

(1)

The change in insurance contract liabilities, net of reinsurance, attributable to the participating policyholders’ account was primarily driven by an increase in expected long-term interest rates within the valuation models to reflect the higher interest rate environment, partially offset by the lapse assumption update in Canada.

Long-term care triennial review

U.S. Insurance completed a comprehensive long-term care (“LTC”) experience study. The review included all aspects of claim assumptions, as well as the progress on future premium rate increases. The impact of the LTC review resulted in a net $15

post-tax

charge to net income attributed to shareholders.

The experience study showed that claim costs established in the last triennial review remain appropriate in aggregate for the older blocks of business

supported by robust claims data on this mature block. Insurance contract liabilities were strengthened for claim costs on the newer block of business

. This was driven by lower active life mortality

supported by Company experience and a recent industry study, as well as higher utilization of benefits, which included the impact of reflecting higher inflation in the

cost-of-care

up to the current year. The Company also reviewed and updated incidence and claim termination assumptions which, on a net basis, provided a partial offset to the increase in insurance contract liabilities on active life mortality and utilization. In addition, some policyholders are electing to reduce their benefits in lieu of paying increased premiums which resulted in a reduction in insurance contract liabilities. The overall claims experience review led to a

post-tax

charge to net income attributed to shareholders of approximately $2.3 billion (US$1.7 billion).

Experience continues to support the assumptions of both future morbidity and mortality improvement, resulting in no changes to these assumptions.

As of September 30, 2022, the Company has received actual premium increase approvals of $2.5 billion

pre-tax

(US$1.9 billion

pre-tax)

on a present value basis since the last triennial review in 2019. This aligns with the full amount assumed in the Company’s insurance contract liabilities at that time and demonstrates the Company’s continued strong track record of progress in securing premium rate increases

In 2022, the review of future premium increases assumed in insurance contract liabilities resulted in a

post-tax

gain to net income attributed to shareholders of approximately $2.1 billion (US$1.6 billion). This reflects expected future premium increases that are due to the Company’s 2022 review of morbidity, mortality, and lapse assumptions, as well as outstanding amounts from prior state filings. Premium increases averaging approximately 30% will be sought on about

one-half

of the business, excluding the carryover of 2019 amounts requested. The Company’s assumptions reflect the estimated timing and amount of state approved premium increases.

Other refinements to LTC valuation resulted in a

post-tax

gain of approximately $0.2 billion (US$0.2 billion) to net income attributed to shareholders.

Mortality and morbidity updates

Mortality and morbidity updates resulted in a $126

post-tax

charge to net income attributed to shareholders, driven by a detailed review of the mortality and morbidity assumptions for the Company’s Canada insurance business, and by updates to morbidity assumptions in Vietnam to align with experience.

Lapses and policyholder behaviour updates

Updates to lapses and policyholder behaviour assumptions resulted in a $192

post-tax

charge to net income attributed to shareholders.

The Company completed a detailed review of lapse assumptions for Singapore, and increased lapse rates to align with experience on index-linked products, which reduced projected future fee income to be received on these products.

The Company also increased lapse rates on Canada’s term insurance products for policies approaching their renewal date, reflecting emerging experience in the Company’s study.

Investment-related updates

Updates to investment return assumptions resulted in a $157

post-tax

gain to net income attributed to shareholders, primarily driven by annual updates to the Company’s valuation models to reflect market movements during the year. No changes were made to the Company’s long-term assumed returns.

Other updates

Other updates resulted in a $212

post-tax

gain to net income attributed to shareholders, which included refinements to the projection of the Company’s tax and liability cash flows, as well as various other modelling updates.

1	First generation policies issued prior to 2002.

2	Second generation policies with an average issue date of 2007 and Group policies with an average issue date of 2003.

3	The mortality rate of LTC policyholders who are currently not on claim.

4	Actual experience obtaining premium increases could be materially different than what the Company has assumed, resulting in further increases or decreases in insurance contract liabilities, which could be material.

2021 Review of Actuarial Methods and Assumptions

The completion of the 2021 annual review of actuarial methods and assumptions resulted in an increase in insurance contract liabilities of $287, net of reinsurance, and a decrease in net income attributed to shareholders of $41

post-tax.


	Change in insurance contract liabilities, net of reinsurance
For the year ended December 31, 2021	Total			Attributed to participating policyholders’ account (1)			Attributed to shareholders’ account			Change in net income attributed to shareholders (post-tax)
U.S. variable annuity product review	$	51		$	–		$	51		$	(40	)
Mortality and morbidity updates		350			–			350			(257	)
Lapses and policyholder behaviour updates		686			18			668			(534	)
Expense updates		(653	)		(25	)		(628	)		503
Investment related updates		(257	)		(2	)		(255	)		168
Other updates		110			231			(121	)		119
Net impact	$	287		$	222		$	65		$	(41	)

(1)	The change in insurance contract liabilities, net of reinsurance, attributable to the participating policyholders’ account was primarily driven by a reduction in the expected long-term interest rates within the valuation models to reflect the low interest rate environment.

U.S. variable annuity product review

The review of the Company’s variable annuity products in the U.S. resulted in a $40

post-tax

charge to net income attributed to shareholders.

The charge was primarily driven by updates to lapse assumptions to reflect emerging experience, partially offset by refinements to the Company’s segregated fund guaranteed minimum withdrawal benefit valuation models.

Mortality and morbidity updates

Mortality and morbidity updates resulted in a $257

post-tax

charge to net income attributed to shareholders.

The charge was driven by updates to older age mortality on certain products in the Company’s U.S. life insurance business, mortality assumption updates in Indonesia to reflect recent experience, as well as from refining assumptions on several reinsurance arrangements in Canada.

Lapses and policyholder behaviour updates

Updates to lapses and policyholder behaviour assumptions resulted in a $534

post-tax

charge to net income attributed to shareholders.

The Company completed a detailed review of lapse assumptions for

non-participating

policies within the Company’s U.S. life insurance business including those for universal life, variable universal life, and term products. The Company observed a trend of low lapse rates on the protection-focused universal life insurance products as consumers continue to value the product guarantees in the prolonged low interest rate environment. The Company lowered the overall lapse assumptions for these products to reflect actual experience, which resulted in a

post-tax

charge to net income attributed to shareholders.

Other updates to lapse and policyholder behaviour assumptions were made across several products in Canada and Japan to reflect recent experience, resulting in a modest

post-tax

charge to net income attributed to shareholders.

Expense updates

Updates to expense assumptions resulted in a $503

post-tax

gain to net income attributed to shareholders

The Company completed a detailed review of the investment expense assumptions across the Company. This resulted in a $263

post-tax

gain to net income attributed to shareholders, primarily driven by scale benefits.

The Company also completed a global expense study, which resulted in a $256

post-tax

gain to net income attributed to shareholders. The favourable result primarily reflects a reallocation of expenses across certain business lines to align with actual experience, as well as from expense savings related to various expense efficiency initiatives.

Investment-related updates

Updates to investment return assumptions resulted in a $168

post-tax

gain to net income attributed to shareholders.

The primary driver of the gain was an update to the Company’s corporate bond default rates to reflect recent experience; the Company reduced default assumptions for certain credit ratings in Canada, the U.S., and Japan. This was partially offset by a reduction to the Company’s Canadian real estate investment return assumptions.

Other updates

Other updates resulted in a $119

post-tax

gain to net income attributed to shareholders.

This was primarily driven by Japan, whereby investment fees for certain mandates in the general account provided by affiliate investment managers were reviewed and updated to align with broader market levels.

(i) Insurance contracts contractual obligations

Insurance contracts give rise to obligations fixed by agreement. As at December 31, 2022, the Company’s contractual obligations and commitments relating to insurance contracts are as follows.


Payments due by period	Less than 1 year		1 to 3 years		3 to 5 years		Over 5 years		Total
Insurance contract liabilities (1)	$	11,498	$	12,365	$	18,496	$	1,012,611	$	1,054,970

(1)

Insurance contract liability cash flows include estimates related to the timing and payment of death and disability claims, policy surrenders, policy maturities, annuity payments, minimum guarantees on segregated fund products, policyholder dividends, commissions and premium taxes offset by contractual future premiums on

in-force

contracts. These estimated cash flows are based on the best estimate assumptions used in the determination of insurance contract liabilities. These amounts are undiscounted and reflect recoveries from reinsurance agreements. Due to the use of assumptions, actual cash flows may differ from these estimates. Cash flows include embedded derivatives measured separately at fair value.

(j) Gross claims and benefits

The following table presents a breakdown of gross claims and benefits.


For the years ended December 31,	2022			2021
Death, disability and other claims	$	19,404		$	18,583
Maturity and surrender benefits		10,662			8,728
Annuity payments		3,242			3,276
Policyholder dividends and experience rating refunds		1,279			1,255
Net transfers from segregated funds		(1,267	)		(732	)
Total	$	33,320		$	31,110

(k) Reinsurance transaction

On November 15, 2021 and October 3, 2022, the Company, through its subsidiaries John Hancock Life Insurance Company (U.S.A.) (“JHUSA”) and John Hancock Life Insurance Company of New York (“JHNY”) entered into reinsurance agreements with Venerable Holdings, Inc. to reinsure blocks of legacy U.S. variable annuity (“VA”) policies. Under the terms of the transactions, the Company will retain responsibility for the maintenance of the policies with no intended impact to VA policyholders. The transactions were structured as coinsurance for the general fund liabilities and modified coinsurance for the segregated fund liabilities.

The transactions closed on February 1, 2022 and October 3, 2022, respectively, resulting in a cumulative

after-tax

gain of $806, comprising a cumulative

after-tax

gain of $846 recognized in 2022, and a

one-time

after-tax

loss of $40 recognized in the fourth quarter 2021.