XML 66 R37.htm IDEA: XBRL DOCUMENT v3.22.4
Derivative and Hedging Instruments (Tables)
 12 Months Ended
Dec. 31, 2022
Text block [abstract]  
Summary of Gross Notional Amount and Fair Value of Derivative Instruments
The following table presents gross notional amount and fair value of derivative instruments by the underlying risk exposure.
 
As at December 31,
 
2022
 
 
 
 
 
2021
 
 
 
 
 
Notional
amount
 
 
Fair value
 
 
 
 
 
Notional
amount
 
 
Fair value
 
Type of hedge
 
Instrument type
 
Assets
 
 
Liabilities
 
 
 
 
 
Assets
 
 
Liabilities
 
Derivatives in qualifying hedge accounting relationships
                                                        
Fair value hedges
   Foreign currency swaps  
$
48
 
  
$
5
 
  
$
–
 
          
$
57
 
  
$
1
 
  
$
1
 
Cash flow hedges
   Foreign currency swaps  
 
1,155
 
  
 
40
 
  
 
203
 
          
 
1,251
 
  
 
5
 
  
 
379
 
    Equity contracts  
 
173
 
  
 
3
 
  
 
–
 
          
 
145
 
  
 
10
 
  
 
–
 
Net investment hedges
   Forward contracts  
 
626
 
  
 
–
 
  
 
28
 
          
 
671
 
  
 
9
 
  
 
–
 
Total derivatives in qualifying hedge accounting relationships
  
 
2,002
 
  
 
48
 
  
 
231
 
             2,124       25       380  
Derivatives not designated in qualifying hedge accounting relationships
                                                        
    Interest rate swaps  
 
268,081
 
  
 
5,751
 
  
 
7,557
 
          
 
300,556
 
  
 
11,832
 
  
 
7,347
 
    Interest rate futures  
 
11,772
 
  
 
–
 
  
 
–
 
          
 
11,944
 
  
 
–
 
  
 
–
 
    Interest rate options  
 
6,090
 
  
 
98
 
  
 
–
 
          
 
10,708
 
  
 
514
 
  
 
–
 
    Foreign currency swaps  
 
39,667
 
  
 
2,029
 
  
 
1,579
 
          
 
36,405
 
  
 
790
 
  
 
1,722
 
    Currency rate futures  
 
2,319
 
  
 
–
 
  
 
–
 
          
 
3,086
 
  
 
–
 
  
 
–
 
    Forward contracts  
 
45,124
 
  
 
295
 
  
 
4,697
 
          
 
45,295
 
  
 
2,674
 
  
 
562
 
    Equity contracts  
 
16,930
 
  
 
363
 
  
 
225
 
          
 
18,577
 
  
 
1,667
 
  
 
27
 
    Credit default swaps  
 
159
 
  
 
4
 
  
 
–
 
          
 
44
 
  
 
1
 
  
 
–
 
 
   Equity futures  
 
3,813
 
  
 
–
 
  
 
–
 
          
 
11,359
 
  
 
–
 
  
 
–
 
Total derivatives not designated in qualifying hedge accounting relationships
  
 
393,955
 
  
 
8,540
 
  
 
14,058
 
             437,974       17,478       9,658  
Total derivatives
  
$
  395,957
 
  
$
  8,588
 
  
$
  14,289
 
           $   440,098     $   17,503     $   10,038  
Summary of Gross Notional Amount by Remaining Term to Maturity, Total Fair Values (Including Accrued Interest), Credit Risk Equivalent and Risk Weighted Amount by Contract Type
The following table presents the fair values of the derivative instruments by the remaining term to maturity. Fair values disclosed below do not incorporate the impact of master netting agreements (refer to note 9).
 
    Remaining term to maturity        
As at December 31, 2022
  
Less than
1 year
    
1 to 3
years
    
3 to 5
years
    
Over 5
years
     Total  
Derivative assets
  
$
580
 
  
$
556
 
  
$
556
 
  
$
6,896
 
  
$
8,588
 
Derivative liabilities
  
 
2,656
 
  
 
1,956
 
  
 
1,146
 
  
 
8,531
 
  
 
14,289
 
     
    Remaining term to maturity        
As at December 31, 2021  
Less than
1 year
    
1 to 3
years
    
3 to 5
years
    
Over 5
years
     Total  
Derivative assets
   $   2,500     $   1,803     $   1,000     $   12,200     $   17,503  
Derivative liabilities
     294       387       379       8,978       10,038  
 
The foll
o
wing table presents gross notional amount by the remaining term to maturity, total fair value (including accrued interest), credit equivalent amount and capital requirement by contract type.
 
    Remaining term to maturity (notional amounts)           Fair value          
Capital
requirement
(2)
  
As at December 31, 2022
  
Under 1
year
    
1 to 5
years
    
Over
5 years
     Total            Positive     Negative     Net    
Credit
equivalent
amount
(1)
  
Interest rate contracts
                                                                                
OTC swap contracts
  
$
8,817
 
  
$
19,253
 
  
$
98,380
 
  
$
126,450
 
          
$
5,992
 
  
$
(8,135
) 
  
$
(2,143
) 
  
$
419
 
  
$
9
 
Cleared swap contracts
  
 
2,494
 
  
 
16,823
 
  
 
122,314
 
  
 
141,631
 
          
 
254
 
  
 
(219
) 
  
 
35
 
  
 
–
 
  
 
–
 
Forward contracts
  
 
14,290
 
  
 
13,926
 
  
 
198
 
  
 
28,414
 
          
 
70
 
  
 
(4,468
) 
  
 
(4,398
) 
  
 
8
 
  
 
–
 
Futures
  
 
11,772
 
  
 
–
 
  
 
–
 
  
 
11,772
 
          
 
–
 
  
 
–
 
  
 
–
 
  
 
–
 
  
 
–
 
Options purchased
  
 
1,199
 
  
 
1,069
 
  
 
3,822
 
  
 
6,090
 
  
 
 
 
  
 
98
 
  
 
–
 
  
 
98
 
  
 
64
 
  
 
4
 
Subtotal
  
 
38,572
 
  
 
51,071
 
  
 
224,714
 
  
 
314,357
 
          
 
6,414
 
  
 
(12,822
) 
  
 
(6,408
) 
  
 
491
 
  
 
13
 
Foreign exchange
                                                                                
Swap contracts
  
 
2,026
 
  
 
10,475
 
  
 
28,369
 
  
 
40,870
 
          
 
2,067
 
  
 
(1,846
) 
  
 
221
 
  
 
1,166
 
  
 
23
 
Forward contracts
  
 
17,336
 
  
 
–
 
  
 
–
 
  
 
17,336
 
          
 
226
 
  
 
(258
) 
  
 
(32
) 
  
 
89
 
  
 
–
 
Futures
  
 
2,319
 
  
 
–
 
  
 
–
 
  
 
2,319
 
          
 
–
 
  
 
–
 
  
 
–
 
  
 
–
 
  
 
–
 
Credit derivatives
  
 
15
 
  
 
144
 
  
 
–
 
  
 
159
 
          
 
4
 
  
 
–
 
  
 
4
 
  
 
–
 
  
 
–
 
Equity contracts
                                                                                
Swap contracts
  
 
547
 
  
 
396
 
  
 
–
 
  
 
943
 
          
 
26
 
  
 
(7
) 
  
 
19
 
  
 
24
 
  
 
–
 
Futures
  
 
3,813
 
  
 
–
 
  
 
–
 
  
 
3,813
 
          
 
–
 
  
 
–
 
  
 
–
 
  
 
–
 
  
 
–
 
Options purchased
  
 
12,634
 
  
 
3,526
 
  
 
–
 
  
 
16,160
 
  
 
 
 
  
 
335
 
  
 
(218
) 
  
 
117
 
  
 
232
 
  
 
2
 
Subtotal including accrued interest
  
 
77,262
 
  
 
65,612
 
  
 
253,083
 
  
 
395,957
 
          
 
9,072
 
  
 
(15,151
) 
  
 
(6,079
) 
  
 
2,002
 
  
 
38
 
Less accrued interest
  
 
–
 
  
 
–
 
  
 
–
 
  
 
–
 
  
 
 
 
  
 
484
 
  
 
(862
) 
  
 
(378
) 
  
 
–
 
  
 
–
 
Total
  
$
77,262
 
  
$
65,612
 
  
$
253,083
 
  
$
395,957
 
  
 
 
 
  
$
8,588
 
  
$
(14,289
) 
  
$
(5,701
) 
  
$
2,002
 
  
$
38
 
           
    Remaining term to maturity (notional amounts)           Fair value          
Capital
requirement
(2)
  
As at December 31, 2021  
Under 1
year
    
1 to 5
years
    
Over
5 years
     Total            Positive     Negative     Net    
Credit
equivalent
amount
(1)
  
Interest rate contracts
                                                                                
OTC swap contracts
   $ 4,554     $ 21,884     $ 90,592     $ 117,030             $ 12,112     $ (7,717 )    $ 4,395     $ 1,582     $ 29  
Cleared swap contracts
     21,722       27,665       134,139       183,526               441       (453 )      (12 )      –       –  
Forward contracts
     14,636       15,791       741       31,168               2,625       (483 )      2,142       299       5  
Futures
     11,944       –       –       11,944               –       –       –       –       –  
Options purchased
     1,406       2,789       6,513       10,708    
 
 
 
     515       –       515       113       9  
Subtotal
     54,262       68,129       231,985       354,376               15,693       (8,653 )      7,040       1,994       43  
Foreign exchange
                                                                                
Swap contracts
     1,941       8,869       26,903       37,713               801       (2,181 )      (1,380 )      1,302       25  
Forward contracts
     14,798       –       –       14,798               58       (79 )      (21 )      85       –  
Futures
     3,086       –       –       3,086               –       –       –       –       –  
Credit derivatives
     11       33       –       44               1       –       1       –       –  
Equity contracts
                                                                                
Swap contracts
     669       323       –       992               57       (10 )      47       29       –  
Futures
     11,359       –       –       11,359               –       –       –       –       –  
Options purchased
     10,974       6,716       40       17,730    
 
 
 
     1,616       (17 )      1,599       766       8  
Subtotal including accrued interest
     97,100       84,070       258,928       440,098               18,226       (10,940 )      7,286       4,176       76  
Less accrued interest
     –       –       –       –    
 
 
 
     723       (902 )      (179 )      –       –  
Total
   $   97,100     $   84,070     $   258,928     $   440,098    
 
 
 
   $   17,503     $   (10,038)     $   7,465     $   4,176     $   76  
 
(1)
 
Credit equivalent amount is the sum of replacement cost and the potential future credit exposure less any collateral held. Replacement cost represents the current cost of replacing all contracts with a positive fair value. The amounts take into consideration legal contracts that permit offsetting of positions. The potential future credit exposure is calculated based on a formula prescribed by OSFI.
(2)
 
Capital requirement represents the credit equivalent amount, weighted according to the creditworthiness of the counterparty, as prescribed by OSFI.
Summary of Fair Value and the Fair Value Hierarchy of Derivative Instruments
Fair value and the fair value hierarchy of derivative instruments

 
As at December 31, 2022
 
Fair value
 
 
Level 1
 
 
Level 2
 
 
Level 3
 
Derivative assets
 
 
 
             
 
 
 
Interest rate contracts
  
$
5,919
 
  
$
–
 
  
$
5,766
 
  
$
153
 
Foreign exchange contracts
  
 
2,299
 
  
 
–
 
  
 
2,298
 
  
 
1
 
Equity contracts
  
 
366
 
  
 
–
 
  
 
361
 
  
 
5
 
Credit default swaps
  
 
4
 
  
 
–
 
  
 
4
 
  
 
–
 
Total derivative assets
  
$
8,588
 
  
$
–
 
  
$
8,429
 
  
$
159
 
Derivative liabilities
                                
Interest rate contracts
  
$
12,025
 
  
$
–
 
  
$
8,689
 
  
$
3,336
 
Foreign exchange contracts
  
 
2,039
 
  
 
–
 
  
 
2,037
 
  
 
2
 
Equity contracts
  
 
225
 
  
 
–
 
  
 
216
 
  
 
9
 
Total derivative liabilities
  
$
14,289
 
  
$
–
 
  
$
10,942
 
  
$
3,347
 
         
As at December 31, 2021   Fair value     Level 1     Level 2     Level 3  
Derivative assets
                                
Interest rate contracts
   $ 14,971     $ –     $ 12,510     $ 2,461  
Foreign exchange contracts
     854       –       854       –  
Equity contracts
     1,677       –       1,616       61  
Credit default swaps
     1       –       1       –  
Total derivative assets
   $   17,503     $   –     $   14,981     $   2,522  
Derivative liabilities
                                
Interest rate contracts
   $ 7,829     $ –     $ 7,419     $ 410  
Foreign exchange contracts
     2,182       –       2,181       1  
Equity contracts
     27       –       17       10  
Total derivative liabilities
   $   10,038     $   –     $ 9,617     $ 421  
Summary of Recognized Gains Losses on Derivatives and Hedged Items in Fair Value Hedges in Investment Income
The Company recognizes gains and losses on derivatives and the related hedged items in fair value hedges in investment income. These investment gains (losses) are shown in the following table.
 

For the year ended December 31, 2022
 
Hedged items in qualifying
fair value hedging
relationships
 
Gains (losses)
recognized on
derivatives
 
 
Gains (losses)
recognized for
hedged items
 
 
Ineffectiveness
recognized in
investment
income
 
Foreign currency swaps
  
Fixed rate assets
  
$
7
 
    
$  (5
)
  
$
2
 
Total
  
 
  
$
7
 
    
$  (5
) 
  
$
2
 
         
For the year ended December 31, 2021  
Hedged items in qualifying
fair value hedging
relationships
   Gains (losses)
recognized on
derivatives		     Gains (losses)
recognized for
hedged items		     Ineffectiveness
recognized in
investment
income		  
Foreign currency swaps
  
Fixed rate assets
   $ 4       $  (2 )    $ 2  
Total
  
 
   $   4       $  (2 )    $   2  
 
Summary of Effects of Derivatives in Cash Flow Hedging Relationships
The effects of derivatives in cash flow hedging relationships on the Consolidated Statements of Income and the Consolidated Statements of Comprehensive Income are shown in the following table.
 
For the year ended December 31, 2022
   Hedged items in qualifying
cash flow hedging
relationships		   Gains (losses)
deferred in
AOCI on
derivatives		     Gains (losses)
reclassified
from AOCI into
investment
income		     Ineffectiveness
recognized in
investment
income		  
Foreign currency swaps
  
Fixed rate assets
  
$
(1
) 
  
$
(1
) 
  
$
–
 
   
Floating rate liabilities
  
 
175
 
  
 
(49
) 
  
 
–
 
   
Fixed rate liabilities
  
 
34
 
  
 
35
 
  
 
–
 
Equity contracts
  
Stock-based compensation
  
 
2
 
  
 
6
 
  
 
–
 
Total
  
 
  
$
210
 
  
$
(9)
 
  
$
–
 
         
For the year ended December 31, 2021   Hedged items in qualifying
cash flow hedging
relationships		   Gains (losses)
deferred in
AOCI on
derivatives		     Gains (losses)
reclassified
from AOCI into
investment
income		     Ineffectiveness
recognized in
investment
income		  
Foreign currency swaps
  
Fixed rate assets
   $ (1 )    $ (1 )    $ –  
   
Floating rate liabilities
     89            3       –  
   
Fixed rate liabilities
     (19 )      (21 )      –  
Equity contracts
  
Stock-based compensation
     5       5       –  
Total
  
 
   $   74     $ (14 )    $   –  
Summary of Effects of Net Investment Hedging Relationships
The effects of net investment hedging relationships on the Consolidated Statements of Income and the Consolidated Statements of Other Comprehensive Income are shown in the following table.
 
For the year ended December 31, 2022
   Gains (losses)
deferred in AOCI		     Gains (losses)
reclassified from
AOCI into
investment income		     Ineffectiveness
recognized in
investment
income		  
Non-functional
currency denominated debt
  
$
(458
) 
  
$
–
 
  
$
–
 
Forward contracts
  
 
14
 
  
 
–
 
  
 
–
 
Total
  
$
(444
) 
  
$
–
 
  
$
–
 
For the year ended December 31, 2021   Gains (losses)
deferred in AOCI		     Gains (losses)
reclassified from
AOCI into
investment income		     Ineffectiveness
recognized in
investment
income		  
Non-functional
currency denominated debt
   $ 61     $ –     $ –  
Forward contracts
     59       –       –  
Total
   $   120     $   –     $   –  
 
Summary of Investment Income on Derivatives Not Designated in Qualifying Hedge Accounting Relationships
Investment income on derivatives not designated in qualifying hedge accounting relationships
 
For the years ended December 31,
  
2022
     2021  
Interest rate swaps
  
$
(3,428
) 
   $ (1,986 ) 
Interest rate futures
  
 
(431
) 
     (687 ) 
Interest rate options
  
 
(258
) 
     (133 ) 
Foreign currency swaps
  
 
1,171
 
     (166 ) 
Currency rate futures
  
 
(103
) 
     66  
Forward contracts
  
 
(7,561
) 
     (1,751 ) 
Equity futures
  
 
794
 
     (2,140 ) 
Equity contracts
  
 
(818
) 
           871  
Credit default swaps
  
 
–
 
     (2 ) 
Total
  
$
(10,634
)
   $ (5,928 )