Segregated Funds

12 Months Ended

Dec. 31, 2022

Note 23 Segregated Funds

The Company manages a number of segregated funds on behalf of policyholders. Policyholders are provided with the opportunity to invest in different categories of segregated funds that respectively hold a range of underlying investments. The Company retains legal title to the underlying investments; however, returns from these investments belong to the policyholders. Accordingly, the Company does not bear the risk associated with these assets outside of guarantees offered on certain variable life and annuity products. The “Risk Management and Risk Factors” section of the Company’s 2022 MD&A provides information regarding the variable annuity and segregated fund guarantees.

The composition of net assets by categories of segregated funds was within the following ranges for the years ended December 31, 2022 and 2021.


	Ranges in per cent
Type of fund	2022		2021
Money market funds		2% to 3%		2% to 3%
Fixed income funds		13% to 14%		14% to 15%
Balanced funds		22% to 23%		22% to 23%
Equity funds		61% to 62%		60% to 62%

Money market funds consist of investments that have a term to maturity of less than one year. Fixed income funds primarily consist of investments in fixed grade income securities and may contain smaller investments in diversified equities or high-yield bonds. Relative to fixed income funds, balanced funds consist of fixed income securities and a larger equity investment component. The types of equity funds available to policyholders range from low volatility equity funds to aggressive equity funds. Equity funds invest in a varying mix of Canadian, U.S. and global equities.

The underlying investments of the segregated funds consist of both individual securities and mutual funds (collectively “net assets”), some of which may be structured entities. The carrying value and change in segregated funds net assets are as follows. Fair value related information of segregated funds is disclosed in note 4(g).

Segregated funds net assets


As at December 31,	2022			2021
Investments at market value
Cash and short-term securities	$	4,280		$	3,955
Debt securities		15,270			18,651
Equities		15,499			16,844
Mutual funds		308,707			354,882
Other investments		4,293			4,613
Accrued investment income		1,680			2,340
Other assets and liabilities, net		(796	)		(1,089	)
Total segregated funds net assets	$	348,933		$	400,196
Composition of segregated funds net assets
Held by policyholders	$	348,562		$	399,788
Held by the Company		371			408
Total segregated funds net assets	$	348,933		$	400,196

Changes in segregated funds net assets


For the years ended December 31,	2022			2021
Net policyholder cash flows
Deposits from policyholders	$	42,427		$	44,548
Net transfers to general fund		(1,267	)		(732	)
Payments to policyholders		(46,333	)		(52,182	)
		(5,173	)		(8,366	)
Investment related
Interest and dividends		21,900			24,092
Net realized and unrealized investment gains (losses)		(78,017	)		21,549
		(56,117	)		45,641
Other
Management and administration fees		(3,886	)		(4,115	)
Impact of changes in foreign exchange rates		13,913			(773	)
		10,027			(4,888	)
Net additions (deductions)		(51,263	)		32,387
Segregated funds net assets, beginning of year		400,196			367,809
Segregated funds net assets, end of year	$	348,933		$	400,196

Segregated funds assets may be exposed to a variety of financial and other risks. These risks are primarily mitigated by investment guidelines that are actively monitored by professional and experienced portfolio advisors. The Company is not exposed to these risks beyond the liabilities related to the guarantees associated with certain variable life and annuity products included in segregated funds. Accordingly, the Company’s exposure to loss from segregated fund products is limited to the value of these guarantees.

These guarantees are recorded within the Company’s insurance contract liabilities. Assets supporting these guarantees are recognized in invested assets according to their investment type.