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Financial Instrument Risk Management (Tables)

12 Months Ended

Dec. 31, 2021

Disclosure of maximum exposure to credit risk

The positive fair value of derivative assets is used to determine the credit risk exposure if the counterparties were to default. The credit risk exposure is the cost of replacing, at current market rates, all derivative contracts with a positive fair value. Additionally, we have credit exposure to items not on the Consolidated Statements of Financial Position as follows:


As at December 31,	2021			2020
Off-balance sheet item:
Loan commitments(1)		$	2,402		$	1,890

(1) Loan commitments include commitments to extend credit under commercial and multi-family residential mortgages and private debt securities not quoted in an active market. Commitments on debt securities contain provisions that allow for withdrawal of the commitment if there is deterioration in the credit quality of the borrower.

Disclosure of right of offset and collateral

We do not offset financial instruments in our Consolidated Statements of Financial Position, as our rights of offset are conditional. The following tables present the effect of conditional netting and similar arrangements. Similar arrangements include global master repurchase agreements, security lending agreements, and any related rights to financial collateral.


As at December 31,	2021											2020
	Financial instruments presented in the Consolidated Statements of Financial Position(1)			Related amounts not set off in the Consolidated Statements of Financial Position								Financial instruments presented in the Consolidated Statements of Financial Position(1)			Related amounts not set off in the Consolidated Statements of Financial Position
				Financial instruments subject to master netting or similar agreements			Financial collateral (received) pledged(2)			Net amount					Financial instruments subject to master netting or similar agreements			Financial collateral (received) pledged(2)			Net amount
Financial assets:
Derivative assets (Note 6.A.v)		$	1,583		$	(828)		$	(558)	$	197		$	2,160		$	(883)		$	(1,139)	$	138
Reverse repurchase agreements (Note 8)		—			—			—		—			4			(4)			—		—
Total financial assets		$	1,583		$	(828)		$	(558)	$	197		$	2,164		$	(887)		$	(1,139)	$	138
Financial liabilities:
Derivative liabilities		$	(1,392)		$	828		$	550	$	(14)		$	(1,744)		$	883		$	736	$	(125)
Repurchase agreements (Note 5.F.ii)		(2,324)			—			2,324		—			(2,208)			4			2,204		—
Cash collateral on securities lent (Note 5.F.iii)		(51)			—			48		(3)			(306)			—			301		(5)
Obligations for securities borrowing		(51)			—			51		—			—			—			—		—
Total financial liabilities		$	(3,818)		$	828		$	2,973	$	(17)		$	(4,258)		$	887		$	3,241	$	(130)

(1) Net amounts of the financial instruments presented in our Consolidated Statements of Financial Position are the same as our gross recognized financial instruments, as we do not offset financial instruments in our Consolidated Statements of Financial Position.

(2) Financial collateral excludes overcollateralization and, for exchange-traded derivatives, initial margin. Total financial collateral, including initial margin and overcollateralization, received on derivative assets was $678 ($1,275 as at December 31, 2020), received on reverse repurchase agreements was $nil ($4 as at December 31, 2020), pledged on derivative liabilities was $1,616 ($1,830 as at December 31, 2020), and pledged on repurchase agreements was $2,324 ($2,208 as at December 31, 2020).

Disclosure of financial assets

The following table summarizes the financial assets included in our Consolidated Statements of Financial Position and the asset classifications applicable to these assets:


Cash, cash equivalents and short-term securities			FVTPL
Debt securities			FVTPL and AFS
Equity securities			FVTPL and AFS
Mortgages and loans			Loans and receivables
Other invested assets			FVTPL and AFS
Policy loans			Loans and receivables

The carrying values and fair values of our financial assets are shown in the following table:


As at	December 31, 2021				December 31, 2020
	Carrying value		Fair value		Carrying value		Fair value
Assets
Cash, cash equivalents and short-term securities	$	12,278	$	12,278	$	13,527	$	13,527
Debt securities - fair value through profit or loss	75,998		75,998		77,834		77,834
Debt securities - available-for-sale(1)	12,729		12,729		11,255		11,255
Equity securities - fair value through profit or loss	7,538		7,538		6,369		6,369
Equity securities - available-for-sale	1,575		1,575		262		262
Mortgages and loans(1)	51,692		55,756		49,946		56,231
Derivative assets	1,583		1,583		2,160		2,160
Other invested assets - fair value through profit or loss(2)	4,435		4,435		3,339		3,339
Other invested assets - available-for-sale(2)	781		781		828		828
Other invested assets - Collateralized Loan Obligations	1,865		1,855		—		—
Policy loans	3,261		3,261		3,265		3,265
Total financial assets(3)	$	173,735	$	177,789	$	168,785	$	175,070

(1) As at December 31, 2021, the fair value of invested assets that have contractual cash flows that qualify as SPPI include $12,604 of Debt securities - AFS ($11,159 as at December 31, 2020), $51,249 of Mortgages and loans supporting insurance contract liabilities ($51,480 as at December 31, 2020), and $4,499 of Mortgages and loans not supporting insurance contract liabilities ($4,741 as at December 31, 2020).

(2) Other invested assets (FVTPL and AFS) include our investments in segregated funds, mutual funds and limited partnerships.

(3) Invested assets on our Consolidated Statements of Financial Position of $184,522 ($177,912 as at December 31, 2020) includes Total financial assets in this table, Investment properties of $9,109 ($7,516 as at December 31, 2020), Other invested assets - non-financial assets of $1,678 ($1,611 as at
December 31, 2020).

The following table provides a reconciliation of the beginning and ending balances for assets and liabilities that are categorized in Level 3:


For the years ended	Debt securities - fair value through profit or loss			Debt securities - available-for-sale			Equity securities - fair value through profit or loss			Equity securities - available-for-sale			Other invested assets			Investment properties			Total invested assets measured at fair value			Investments for account of segregated fund holders			Total assets measured at fair value
December 31, 2021
Beginning balance		$	225		$	67		$	181		$	47		$	2,645		$	7,516		$	10,681		$	550		$	11,231

Included in net income(1)(2)(3)		(6)			—			10			5			392			1,032			1,433			23			1,456
Included in OCI(2)		—			(1)			—			33			13			—			45			—			45
Purchases		29			5			8			15			1,074			764			1,895			65			1,960
Sales / Payments		(9)			(13)			(25)			(26)			(469)			(197)			(739)			(9)			(748)
Settlements		(15)			(3)			(5)			—			—			—			(23)			(1)			(24)

Transfers (out) of Level 3(4)		(57)			(10)			(73)			—			—			—			(140)			—			(140)
Foreign currency translation(5)		(5)			(2)			—			—			(5)			(6)			(18)			(17)			(35)
Ending balance		$	162		$	43		$	96		$	74		$	3,650		$	9,109		$	13,134		$	611		$	13,745
Gains (losses) included in earnings relating to instruments still held at the reporting date(1)		$	(4)		$	—		$	11		$	5		$	382		$	1,038		$	1,432		$	27		$	1,459
December 31, 2020
Beginning balance		$	248		$	50		$	188		$	35		$	2,445		$	7,306		$	10,272		$	549		$	10,821

Included in net income(1)(2)(3)		11			—			—			—			(87)			(63)			(139)			(22)			(161)
Included in OCI(2)		—			2			—			—			19			—			21			—			21
Purchases		67			15			11			46			594			620			1,353			30			1,383
Sales / Payments		(10)			—			(2)			(33)			(304)			(325)			(674)			(14)			(688)
Settlements		(9)			(2)			(15)			—			—			—			(26)			(1)			(27)
Transfers into Level 3(4)		3			2			—			—			—			—			5			1			6
Transfers (out) of Level 3(4)		(88)			(1)			—			—			—			—			(89)			(1)			(90)
Foreign currency translation(5)		3			1			(1)			(1)			(22)			(22)			(42)			8			(34)
Ending balance		$	225		$	67		$	181		$	47		$	2,645		$	7,516		$	10,681		$	550		$	11,231
Gains (losses) included in earnings relating to instruments still held at the reporting date(1)		$	2		$	—		$	—		$	—		$	(68)		$	13		$	(53)		$	(23)		$	(76)

(1) Included in Net investment income (loss) for Total invested assets measured at fair value in our Consolidated Statements of Operation.

(2) Total gains and losses in net income (loss) and OCI are calculated assuming transfers into or out of Level 3 occur at the beginning of the period. For an asset or liability that transfers into Level 3 during the reporting period, the entire change in fair value for the period is included in the table above. For transfers out of Level 3 during the reporting period, the change in fair value for the period is excluded from the table above.

(3) Investment properties included in net income is comprised of fair value changes on investment properties of $1,070 ($19 in 2020), net of amortization of leasing commissions and tenant inducements of $38 ($82 in 2020). As at December 31, 2020, we have used assumptions that reflect known changes in the property values including changes in expected future cash flows.

(4) Transfers into Level 3 occur when the inputs used to price the assets and liabilities lack observable market data, and as a result, no longer meet the Level 1 or 2 definitions at the reporting date. Transfers out of Level 3 occur when the pricing inputs become more transparent and satisfy the Level 1 or 2 criteria and are primarily the result of observable market data being available at the reporting date, thus removing the requirement to rely on inputs that lack observability.

(5) Foreign currency translation relates to the foreign exchange impact of translating Level 3 assets and liabilities of foreign subsidiaries from their functional currencies to Canadian dollars.

Cash, cash equivalents and short-term securities presented in our Consolidated Statements of Financial Position and Net cash, cash equivalents and short-term securities presented in our Consolidated Statements of Cash Flows consist of the following:



As at December 31,	2021	2020
Cash		$	2,297	$	2,498
Cash equivalents		5,529		8,156
Short-term securities		4,452		2,873
Cash, cash equivalents and short-term securities		12,278		13,527
Less: Bank overdraft, recorded in Other liabilities		133		6
Net cash, cash equivalents and short-term securities		$	12,145	$	13,521

The carrying value of debt securities by geographic location is shown in the following table. The geographic location is based on the country of the creditor's parent.


As at December 31,	2021									2020
	Fair value through profit or loss			Available- for-sale			Total debt securities			Fair value through profit or loss			Available- for-sale			Total debt securities
Canada		$	33,028		$	5,135		$	38,163		$	34,005		$	4,685		$	38,690
United States		26,678			4,552			31,230			27,183			3,984			31,167
United Kingdom		4,196			562			4,758			4,592			487			5,079
Other		12,096			2,480			14,576			12,054			2,099			14,153
Total debt securities		$	75,998		$	12,729		$	88,727		$	77,834		$	11,255		$	89,089

The carrying value of debt securities by issuer and industry sector is shown in the following table:


As at December 31,	2021									2020
	Fair value through profit or loss			Available- for-sale			Total debt securities			Fair value through profit or loss			Available- for-sale			Total debt securities
Debt securities issued or guaranteed by:
Canadian federal government		$	4,798		$	2,303		$	7,101		$	4,560		$	1,929		$	6,489
Canadian provincial and municipal government		15,930			1,149			17,079			16,909			1,333			18,242
U.S. government and agency		1,642			771			2,413			1,678			797			2,475
Other foreign government		4,754			757			5,511			5,281			823			6,104
Total government issued or guaranteed debt securities		27,124			4,980			32,104			28,428			4,882			33,310
Corporate debt securities by industry sector:
Financials		10,258			1,690			11,948			10,644			1,212			11,856
Utilities		7,414			778			8,192			7,561			682			8,243
Industrials		5,791			805			6,596			5,659			567			6,226
Energy		3,992			287			4,279			4,452			350			4,802
Communication services		3,534			352			3,886			3,644			322			3,966
Real estate		2,334			354			2,688			2,438			329			2,767
Health care		2,081			346			2,427			1,986			186			2,172
Consumer staples		2,047			231			2,278			1,893			158			2,051
Consumer discretionary		1,814			306			2,120			1,606			165			1,771
Information technology		1,426			209			1,635			1,308			187			1,495
Materials		1,361			156			1,517			1,473			152			1,625
Total corporate debt securities		42,052			5,514			47,566			42,664			4,310			46,974
Asset-backed securities		6,822			2,235			9,057			6,742			2,063			8,805
Total debt securities		$	75,998		$	12,729		$	88,727		$	77,834		$	11,255		$	89,089

The carrying value of mortgages and loans by geographic location and type is shown in the following tables. The geographic location for mortgages is based on location of property, while for corporate loans it is based on the country of the creditor's parent.


As at December 31, 2021	Canada			United States			United Kingdom			Other		Total
Mortgages:
Retail		$	1,765		$	1,623		$	—	$	—	$	3,388
Office		1,892			1,639			—		—		3,531
Multi-family residential		4,138			1,589			—		—		5,727
Industrial and land		1,094			941			—		—		2,035
Other		680			115			9		—		804
Total mortgages(1)		$	9,569		$	5,907		$	9	$	—	$	15,485
Loans		$	12,885		$	14,596		$	4,111	$	4,615	$	36,207
Total mortgages and loans		$	22,454		$	20,503		$	4,120	$	4,615	$	51,692

(1) $4,218 of mortgages in Canada are insured by the CMHC.


As at December 31, 2020	Canada			United States			United Kingdom			Other		Total
Mortgages:
Retail		$	1,963		$	1,747		$	—	$	—	$	3,710
Office		1,635			1,846			—		—		3,481
Multi-family residential		3,950			1,681			—		—		5,631
Industrial and land		996			949			—		—		1,945
Other		575			86			—		—		661
Total mortgages(1)		$	9,119		$	6,309		$	—	$	—	$	15,428
Loans		$	13,107		$	13,773		$	3,798	$	3,840	$	34,518
Total mortgages and loans		$	22,226		$	20,082		$	3,798	$	3,840	$	49,946

(1) $4,008 of mortgages in Canada are insured by the CMHC.

The contractual maturities of debt securities are shown in the following table. Actual maturities could differ from contractual maturities because of the borrower's right to call or extend or right to prepay obligations, with or without prepayment penalties.


As at December 31,	2021									2020
	Fair value through profit or loss			Available- for-sale			Total debt securities			Fair value through profit or loss			Available- for-sale			Total debt securities
Due in 1 year or less		$	2,505		$	1,373		$	3,878		$	3,048		$	721		$	3,769
Due in years 2-5		10,475			4,971			15,446			10,526			3,549			14,075
Due in years 6-10		11,328			3,350			14,678			10,459			3,540			13,999
Due after 10 years		51,690			3,035			54,725			53,801			3,445			57,246
Total debt securities		$	75,998		$	12,729		$	88,727		$	77,834		$	11,255		$	89,089

The carrying value of mortgages by scheduled maturity, before allowances for losses, is as follows:


As at December 31,	2021			2020
Due in 1 year or less		$	884		$	1,230
Due in years 2-5		6,172			5,465
Due in years 6-10		5,979			5,884
Due after 10 years		2,530			2,915
Total mortgages		$	15,565		$	15,494

The carrying value of loans by scheduled maturity, before allowances for losses, is as follows:


As at December 31,	2021			2020
Due in 1 year or less		$	1,772		$	2,192
Due in years 2-5		7,108			6,954
Due in years 6-10		7,393			6,670
Due after 10 years		19,986			18,751
Total loans		$	36,259		$	34,567

Disclosure of notional amounts of derivative instruments by type and maturity

Notional amounts of derivative financial instruments are the basis for calculating payments and are generally not the actual amounts exchanged. The following table provides the notional amounts of derivative instruments outstanding by type of derivative and term to maturity:


As at December 31,	2021											2020
	Term to maturity											Term to maturity
	Under 1 Year			1 to 5 Years			Over 5 Years			Total		Under 1 Year			1 to 5 Years			Over 5 Years			Total
Over-the-counter contracts:
Interest rate contracts:
Forward contracts		$	94		$	6		$	—	$	100		$	—		$	6		$	—	$	6
Swap contracts		1,273			3,434			13,042		17,749			1,010			3,363			13,302		17,675
Options purchased		878			3,297			1,674		5,849			757			3,246			2,285		6,288
Options written(1)		—			461			—		461			—			465			—		465
Foreign exchange contracts:
Forward contracts		10,824			3,097			—		13,921			12,205			31			—		12,236
Swap contracts		725			2,654			16,494		19,873			1,260			2,797			14,467		18,524
Other contracts:
Options purchased		271			8			—		279			119			8			—		127
Forward contracts		154			163			—		317			132			175			—		307
Swap contracts		446			—			—		446			170			1			—		171

Credit derivatives		322			513			—		835			175			737			—		912
Exchange-traded contracts:
Interest rate contracts:
Futures contracts		3,818			—			—		3,818			3,389			—			—		3,389


Equity contracts:
Futures contracts		2,105			—			—		2,105			2,553			—			—		2,553
Options purchased		213			—			—		213			127			—			—		127
Options written		—			—			—		—			12			—			—		12
Total notional amount		$	21,123		$	13,633		$	31,210	$	65,966		$	21,909		$	10,829		$	30,054	$	62,792

(1) These are covered short derivative positions that may include interest rate options, swaptions, or floors.

The following table provides the fair value of derivative instruments outstanding by term to maturity:


As at December 31,	2021											2020
		Term to maturity											Term to maturity
	Under 1 Year			1 to 5 Years			Over 5 Years			Total		Under 1 Year			1 to 5 Years			Over 5 Years			Total
Derivative assets		$	139		$	249		$	1,195	$	1,583		$	329		$	223		$	1,608	$	2,160
Derivative liabilities		$	(97)		$	(184)		$	(1,111)	$	(1,392)		$	(215)		$	(245)		$	(1,284)	$	(1,744)

Disclosure of debt securities, mortgages, and loans by credit quality

The following table summarizes our debt securities by credit quality:


As at December 31,	2021									2020
	Fair value through profit or loss			Available- for-sale			Total debt securities			Fair value through profit or loss			Available- for-sale			Total debt securities
Debt securities by credit rating:
AAA		$	12,811		$	5,294		$	18,105		$	12,794		$	4,810		$	17,604
AA		11,510			1,502			13,012			11,870			1,586			13,456
A		29,984			3,282			33,266			30,812			2,600			33,412
BBB		20,710			2,484			23,194			21,203			2,091			23,294
BB and lower		983			167			1,150			1,155			168			1,323
Total debt securities		$	75,998		$	12,729		$	88,727		$	77,834		$	11,255		$	89,089

The following tables summarize our mortgages and loans by credit quality indicator:


As at December 31,	2021			2020
Mortgages by credit rating:
Insured		$	4,218		$	4,008

AA		1,640			1,435
A		4,979			4,031
BBB		3,814			4,524
BB and lower		822			1,404
Impaired		12			26
Total mortgages		$	15,485		$	15,428


As at December 31,	2021			2020
Loans by credit rating:
AAA		$	192		$	212
AA		4,994			4,906
A		14,231			13,183
BBB		14,632			13,758
BB and lower		2,139			2,427
Impaired		19			32
Total loans		$	36,207		$	34,518

The following table shows the OTC derivative financial instruments with a positive fair value split by counterparty credit rating:


As at December 31,	2021									2020
	Gross positive replacement cost(2)			Impact of master netting agreements(3)			Net replacement cost(4)			Gross positive replacement cost(2)			Impact of master netting agreements(3)			Net replacement cost(4)
Over-the-counter contracts:
AA		$	402		$	(219)		$	183		$	596		$	(293)		$	303
A		1,080			(598)			482			1,430			(575)			855
BBB		74			(11)			63			98			(15)			83
Total over-the-counter derivatives(1)		$	1,556		$	(828)		$	728		$	2,124		$	(883)		$	1,241

(1) Exchange-traded derivatives with a positive fair value of $27 in 2021 ($36 in 2020) are excluded from the table above, as they are subject to daily margining requirements. Our credit exposure on these derivatives is with the exchanges and clearinghouses.

(2) Used to determine the credit risk exposure if the counterparties were to default. The credit risk exposure is the cost of replacing, at current market rates, all contracts with a positive fair value.

(3) The credit risk associated with derivative assets subject to master netting arrangements is reduced by derivative liabilities due to the same counterparty in the event of default or early termination. Our overall exposure to credit risk reduced through master netting arrangements may change substantially following the reporting date as the exposure is affected by each transaction subject to the arrangement.

(4) Net replacement cost is positive replacement cost less the impact of master netting agreements.

The following table provides a summary of the credit default swap protection sold by credit rating of the underlying reference security:


As at December 31,	2021						2020
	Notional amount			Fair value			Notional amount			Fair value
Single name credit default swap contracts:
AA		$	38		$	1		$	38		$	1
A		347			4			325			4
BBB		431			9			530			12
BB		19			—			19			—
Total single name credit default swap contracts		$	835		$	14		$	912		$	17

Total credit default swap contracts sold		$	835		$	14		$	912		$	17

The table below presents the distribution of Reinsurance assets by credit rating:


As at December 31,	2021									2020
	Gross exposure			Collateral			Net exposure			Gross exposure			Collateral			Net exposure
Reinsurance assets by credit rating:
AA		$	2,170		$	—		$	2,170		$	2,222		$	8		$	2,214
A		928			28			900			1,156			73			1,083
BBB		139			117			22			213			127			86
BB		1,861			1,825			36			1,779			1,740			39

CCC		197			194			3			168			164			4
Not rated		136			131			5			90			75			15
Total		$	5,431		$	2,295		$	3,136		$	5,628		$	2,187		$	3,441
Less: Negative reinsurance assets		1,748									1,785
Total Reinsurance assets		$	3,683								$	3,843

Disclosure of mortgages and loans past due or impaired

The distribution of mortgages and loans past due or impaired is shown in the following tables:


		Gross carrying value									Allowance for losses
As at December 31, 2021	Mortgages				Loans			Total		Mortgages				Loans		Total
Not past due			$	15,473		$	36,188	$	51,661			$	—	$	—	$	—



Impaired			92			71		163				80		52		132
Total			$	15,565		$	36,259	$	51,824			$	80	$	52	$	132

		Gross carrying value									Allowance for losses
As at December 31, 2020	Mortgages				Loans			Total		Mortgages				Loans		Total
Not past due			$	15,402		$	34,486	$	49,888			$	—	$	—	$	—



Impaired			92			81		173				66		49		115
Total			$	15,494		$	34,567	$	50,061			$	66	$	49	$	115

Disclosure of changes in allowance for losses

The changes in the allowances for losses are as follows:


	Mortgages			Loans		Total
Balance, January 1, 2020		$	70	$	47	$	117
Provision for (reversal of) losses		6		17		23
Write-offs, net of recoveries, and other adjustments		(9)		(15)		(24)
Foreign exchange rate movements		(1)		—		(1)
Balance, December 31, 2020		$	66	$	49	$	115
Provision for (reversal of) losses		15		5		20
Write-offs, net of recoveries, and other adjustments		—		(2)		(2)
Foreign exchange rate movements		(1)		—		(1)
Balance, December 31, 2021		$	80	$	52	$	132

Disclosure of equities by issue country

The carrying value of equities by issuer country is shown in the following table:


As at December 31,	2021									2020
	Fair value through profit or loss			Available- for-sale			Total equities			Fair value through profit or loss			Available- for-sale			Total equities
Canada		$	3,301		$	62		$	3,363		$	3,064		$	15		$	3,079
United States		2,010			1,405			3,415			1,046			148			1,194
United Kingdom		186			6			192			163			6			169
Other		2,041			102			2,143			2,096			93			2,189
Total equities		$	7,538		$	1,575		$	9,113		$	6,369		$	262		$	6,631