Exhibit 2
  Consolidated  Financial  Statements
 Sun Life Financial Inc.
 For the Year Ended December 31, 2008
 February 11, 2009
 Lifes brighter under the sun




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Table of Contents
 PAGEConsolidated Financial Statements and NotesFinancial Reporting Responsibilities
    
    1Managements Report on Internal Control Over Financial Reporting
    
    2Consolidated Financial StatementsConsolidated Statements of Operations
    
    3Consolidated Balance Sheets
    
    4Consolidated Statements of Equity
    
    5Consolidated Statements of Comprehensive Income
    
    5Consolidated Statements of Cash Flows
    
    6Consolidated Statements of Changes in Segregated Funds Net Assets and ConsolidatedStatements of Segregated Funds Net Assets
    
    7Notes to the Consolidated Financial StatementsNote 1. Accounting Policies
    
    8Note 2. Changes in Accounting Policies
    
    15Note 3. Acquisitions and Disposals
    
    17Note 4. Segmented Information
    
    18Note 5. Financial Investments and Related Net Investment Income
    
    21Note 6. Financial Instrument Risk Management
    
    25Note 7. Goodwill and Intangible Assets
    
    35Note 8. Other Assets
    
    36Note 9. Actuarial Liabilities and Other Policy Liabilities
    
    36Note 10. Capital Management
    
    42Note 11. Senior Debentures
    
    43Note 12. Other Liabilities
    
    44Note 13. Subordinated Debt
    
    46Note 14. Non-controlling Interest in Subsidiaries
    
    46Note 15. Share Capital and Shares Purchased for Cancellation
    
    47Note 16. Operating Expenses
    
    48Note 17. Earnings Per Share
    
    49Note 18. Stock-Based Compensation
    
    49Note 19. Income Taxes
    
    52Note 20. Income Taxes included in OCI
    
    54Note 21. Commitments, Guarantees and Contingencies
    
    54Note 22. Pension Plans and Other Post-Retirement Benefits
    
    57Note 23. Foreign Exchange Gain/Loss
    
    60Note 24. Related Party Transactions
    
    60Note 25. Variable Interest Entities
    
    61Note 26. Summary of Differences Between Accounting Principles Generally Accepted in Canada and in the United States
    
    61Appointed Actuarys Report
    
    82Reports of Independent Registered Chartered Accountants
    
    83




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Financial Reporting Responsibilities
        
 Donald A. Stewart
 
 Richard P. McKenney
  1




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Managements Report on Internal Control over Financial Reporting
   Internal ControlIntegrated Framework,
  
 Donald A. Stewart
 
 Richard P. McKenney
  2




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Consolidated Statements of Operations
 YEARS ENDED DECEMBER 31 (in millions of Canadian dollars, except for per share amounts)2008
    
    
    2007
    
    
    2006
    *REVENUEPremium income:Annuities
    
    $
    3,592
    
    
    $
    3,530
    
    
    $
    5,380Life insurance
    
    
    5,928
    
    
    
    6,010
    
    
    
    6,168Health insurance
    
    
    4,067
    
    
    
    3,584
    
    
    
    3,06113,587
    
    
    
    13,124
    
    
    
    14,609Net investment income (loss) (Note 5):Change in fair value of held-for-trading assets
    
    
    (7,399
    )
    
    
    (1,558
    )Income (loss) from derivative investments
    
    
    (220
    )
    
    
    86Net gains (losses) on available-for-sale assets
    
    
    (241
    )
    
    
    101Other net investment income
    
    
    6,078
    
    
    
    6,223
    
    
    
    6,664Gain on sale of equity investment (Note 3)
    
    
    1,015
    
    
    
    
    
    
    
    (767
    )
    
    
    4,852
    
    
    
    6,664Fee income
    
    
    2,743
    
    
    
    3,212
    
    
    
    3,01415,563
    
    
    
    21,188
    
    
    
    24,287POLICY BENEFITS AND EXPENSESPayments to policyholders, beneficiaries and depositors:Maturities and surrenders
    
    
    5,310
    
    
    
    6,250
    
    
    
    5,707Annuity payments
    
    
    1,380
    
    
    
    1,398
    
    
    
    1,388Death and disability benefits
    
    
    2,844
    
    
    
    2,620
    
    
    
    2,438Health benefits
    
    
    2,938
    
    
    
    2,616
    
    
    
    2,253Policyholder dividends and interest on claims and deposits
    
    
    1,303
    
    
    
    1,360
    
    
    
    1,10913,775
    
    
    
    14,244
    
    
    
    12,895Net transfers to (from) segregated funds
    
    
    539
    
    
    
    952
    
    
    
    835Increase (decrease) in actuarial liabilities (Note 9)
    
    
    (4,429
    )
    
    
    (2,515
    )
    
    
    2,525Commissions
    
    
    1,545
    
    
    
    1,811
    
    
    
    1,916Operating expenses (Note 16)
    
    
    3,003
    
    
    
    3,260
    
    
    
    3,028Premium taxes
    
    
    227
    
    
    
    240
    
    
    
    205Interest expense (Notes 11, 12 and 13)
    
    
    366
    
    
    
    349
    
    
    
    32315,026
    
    
    
    18,341
    
    
    
    21,727INCOME BEFORE INCOME TAXES ANDNON-CONTROLLING INTERESTS
    
    
    537
    
    
    
    2,847
    
    
    
    2,560Income taxes expense (benefit) (Note 19)
    
    
    (343
    )
    
    
    522
    
    
    
    389Non-controlling interests in net income of subsidiaries (Note 14)
    
    
    23
    
    
    
    35
    
    
    
    27TOTAL NET INCOME
    
    
    857
    
    
    
    2,290
    
    
    
    2,144Less:     Participating policyholders net income (loss)
    
    
    2
    
    
    
    2
    
    
    
    7SHAREHOLDERS NET INCOME
    
    
    855
    
    
    
    2,288
    
    
    
    2,137Less:     Preferred shareholder dividends
    
    
    70
    
    
    
    69
    
    
    
    48COMMON SHAREHOLDERS NET INCOME
    
    $
    785
    
    
    $
    2,219
    
    
    $
    2,089Average exchange rates:U.S. dollars
    
    
    1.07
    
    
    
    1.07
    
    
    
    1.13U.K. pounds
    
    
    1.96
    
    
    
    2.15
    
    
    
    2.09Earnings per shareBasic
    
    $
    1.40
    
    
    $
    3.90
    
    
    $
    3.62Diluted
    
    $
    1.37
    
    
    $
    3.85
    
    
    $
    3.58Weighted average shares outstanding in millions (Note 17)Basic
    
    
    561
    
    
    
    569
    
    
    
    577Diluted
    
    
    562
    
    
    
    572
    
    
    
    580
 *
    
    The 2006 financial statements have not been restated as a result of the changes in accounting
policies adopted in 2007 (Note 2).
 The attached notes form part of these Consolidated Financial Statements.
 3




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##### 



Consolidated Balance Sheets
 AS AT DECEMBER 31 (in millions of Canadian dollars)2008
    
    
    2007ASSETSBonds  held-for-trading (Note 6)
    
    $
    48,458
    
    
    $
    50,608Bonds  available-for-sale (Note 6)
    
    
    10,616
    
    
    
    9,148Mortgages and corporate loans (Note 6)
    
    
    22,302
    
    
    
    20,742Stocks  held-for-trading (Note 6)
    
    
    3,440
    
    
    
    4,438Stocks  available-for-sale (Note 6)
    
    
    1,018
    
    
    
    788Real estate (Note 5)
    
    
    4,908
    
    
    
    4,303Cash, cash equivalents and short-term securities
    
    
    8,879
    
    
    
    5,500Derivative assets (Notes 5 and 6)
    
    
    2,669
    
    
    
    1,947Policy loans and other invested assets
    
    
    3,585
    
    
    
    4,349Other invested assets  held-for-trading (Note 6)
    
    
    380
    
    
    
    440Other invested assets  available-for-sale (Note 6)
    
    
    623
    
    
    
    757Invested assets
    
    
    106,878
    
    
    
    103,020Goodwill (Note 7)
    
    
    6,598
    
    
    
    6,018Intangible assets (Note 7)
    
    
    878
    
    
    
    775Other assets (Note 8)
    
    
    5,479
    
    
    
    4,478Total general fund assets
    
    $
    119,833
    
    
    $
    114,291Segregated funds net assets
    
    $
    65,762
    
    
    $
    73,205LIABILITIES AND EQUITYActuarial liabilities and other policy liabilities (Note 9)
    
    $
    81,411
    
    
    $
    79,830Amounts on deposit
    
    
    4,079
    
    
    
    3,747Deferred net realized gains (Note 5)
    
    
    251
    
    
    
    276Senior debentures (Note 11)
    
    
    3,013
    
    
    
    3,014Derivative liabilities (Notes 5 and 6)
    
    
    3,219
    
    
    
    638Other liabilities (Note 12)
    
    
    7,831
    
    
    
    7,675Total general fund liabilities
    
    
    99,804
    
    
    
    95,180Subordinated debt (Note 13)
    
    
    2,576
    
    
    
    1,796Non-controlling interests in subsidiaries (Note 14)
    
    
    44
    
    
    
    98Total equity
    
    
    17,409
    
    
    
    17,217Total general fund liabilities and equity
    
    $
    119,833
    
    
    $
    114,291Segregated funds contract liabilities
    
    $
    65,762
    
    
    $
    73,205Exchange rate at balance sheet date:U.S. dollars
    
    
    1.22
    
    
    
    1.00U.K. pounds
    
    
    1.78
    
    
    
    1.98
 The attached notes form part of these Consolidated Financial Statements.
   -s- Donald A. Stewart
    
    -s- Krystyna T. HoegDonald A. Stewart
    
    Krystyna T. HoegChief Executive Officer
    
    Director
 4




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##### 



Consolidated Statements of Equity
 YEARS ENDED DECEMBER 31 (in millions of Canadian dollars)PARTICIPATINGPOLICYHOLDERS
    
    
    SHAREHOLDERS
    
    
    2008
    
    
    2007
    
    
    2006
    *PREFERRED SHARESBalance, beginning of year
    
    $
    
    
    
    $
    1,495
    
    
    $
    1,495
    
    
    $
    1,250
    
    
    $
    712Preferred shares issued (Note 15)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250
    
    
    
    550Issuance costs, net of taxes (Note 15)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    (12
    )Balance, end of year
    
    
    
    
    
    
    1,495
    
    
    
    1,495
    
    
    
    1,495
    
    
    
    1,250COMMON SHARESBalance, beginning of year
    
    
    
    
    
    
    7,033
    
    
    
    7,033
    
    
    
    7,082
    
    
    
    7,173Stock options exercised (Note 18)
    
    
    
    
    
    
    10
    
    
    
    10
    
    
    
    66
    
    
    
    73Common shares purchased for cancellation (Note 15)
    
    
    
    
    
    
    (60
    )
    
    
    (60
    )
    
    
    (115
    )
    
    
    (164
    )Balance, end of year
    
    
    
    
    
    
    6,983
    
    
    
    6,983
    
    
    
    7,033
    
    
    
    7,082CONTRIBUTED SURPLUSBalance, beginning of year
    
    
    
    
    
    
    62
    
    
    
    62
    
    
    
    72
    
    
    
    66Stock-based compensation (Note 18)
    
    
    
    
    
    
    58
    
    
    
    58
    
    
    
    1
    
    
    
    18Stock options exercised (Notes 15 and 18)
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )
    
    
    (11
    )
    
    
    (12
    )Balance, end of year
    
    
    
    
    
    
    118
    
    
    
    118
    
    
    
    62
    
    
    
    72RETAINED EARNINGSBalance, beginning of year, as previously reported
    
    
    109
    
    
    
    11,282
    
    
    
    11,391
    
    
    
    10,117
    
    
    
    9,095Adjustment for change in accounting policy (Note 2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    192
    
    
    
    Balance, beginning of year, after change in accounting policy
    
    
    109
    
    
    
    11,282
    
    
    
    11,391
    
    
    
    10,309
    
    
    
    9,095Net income
    
    
    2
    
    
    
    855
    
    
    
    857
    
    
    
    2,290
    
    
    
    2,144Dividends on common shares
    
    
    
    
    
    
    (809
    )
    
    
    (809
    )
    
    
    (752
    )
    
    
    (663
    )Dividends on preferred shares
    
    
    
    
    
    
    (70
    )
    
    
    (70
    )
    
    
    (69
    )
    
    
    (48
    )Common shares purchased for cancellation (Note 15)
    
    
    
    
    
    
    (157
    )
    
    
    (157
    )
    
    
    (387
    )
    
    
    (411
    )Balance, end of year
    
    
    111
    
    
    
    11,101
    
    
    
    11,212
    
    
    
    11,391
    
    
    
    10,117ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), net of taxesBalance, beginning of year
    
    
    (14
    )
    
    
    (2,750
    )
    
    
    (2,764
    )
    
    
    (1,337
    )
    
    
    (1,500
    )Adjustment for change in accounting policy (Note 2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    359
    
    
    
    Balance, beginning of year, after change in accounting policy
    
    
    (14
    )
    
    
    (2,750
    )
    
    
    (2,764
    )
    
    
    (978
    )
    
    
    (1,500
    )Total other comprehensive income (loss)
    
    
    9
    
    
    
    356
    
    
    
    365
    
    
    
    (1,786
    )
    
    
    163Balance, end of year
    
    
    (5
    )
    
    
    (2,394
    )
    
    
    (2,399
    )
    
    
    (2,764
    )
    
    
    (1,337
    )Total retained earnings and accumulated other comprehensive income
    
    
    106
    
    
    
    8,707
    
    
    
    8,813
    
    
    
    8,627
    
    
    
    8,780Total equity
    
    $
    106
    
    
    $
    17,303
    
    
    $
    17,409
    
    
    $
    17,217
    
    
    $
    17,184ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), net of taxesBalance, end of year, consists of:Unrealized (losses) gains on available-for-sale assets
    
    $
    
    
    
    $
    (1,429
    )
    
    $
    (1,429
    )
    
    $
    25
    
    
    $
    Unrealized foreign currency translation (losses) gains, net of hedging activities
    
    
    (5
    )
    
    
    (1,044
    )
    
    
    (1,049
    )
    
    
    (2,821
    )
    
    
    (1,337
    )Unrealized gains (losses) on derivatives designated as cash flow hedges
    
    
    
    
    
    
    79
    
    
    
    79
    
    
    
    32
    
    
    
    Balance, end of year
    
    $
    (5
    )
    
    $
    (2,394
    )
    
    $
    (2,399
    )
    
    $
    (2,764
    )
    
    $
    (1,337
    )
 Consolidated Statements of Comprehensive Income
 YEARS ENDED DECEMBER 31 (in millions of Canadian dollars)2008
    
    
    2007
    
    
    2006
    *Total net income
    
    $
    857
    
    
    $
    2,290
    
    
    $
    2,144Other comprehensive income (loss), net of taxes (Note 20):Unrealized foreign currency translation gains (losses), excluding hedges
    
    
    2,162
    
    
    
    (1,781
    )
    
    
    167Unrealized foreign currency gains (losses), net investment hedges
    
    
    (396
    )
    
    
    282Net adjustment for foreign exchange losses (gains) (Note 23)
    
    
    6
    
    
    
    3
    
    
    
    (4
    )Unrealized gains (losses) on available-for-sale assets
    
    
    (1,653
    )
    
    
    (238
    )Reclassifications to net income for available-for-sale assets
    
    
    199
    
    
    
    (84
    )Unrealized gains (losses) on cash flow hedging instruments
    
    
    24
    
    
    
    40Reclassifications to net income for cash flow hedges
    
    
    23
    
    
    
    (8
    )Total other comprehensive income (loss)
    
    
    365
    
    
    
    (1,786
    )
    
    
    163Total comprehensive income (loss)
    
    
    1,222
    
    
    
    504
    
    
    
    2,307Less: Participating policyholders net income (loss)
    
    
    2
    
    
    
    2
    
    
    
    7Participating policyholders foreign currency translation
gains (losses), excluding hedges
    
    
    9
    
    
    
    (5
    )
    
    
    Shareholders comprehensive income (loss)
    
    $
    1,211
    
    
    $
    507
    
    
    $
    2,300
 *
    
    The 2006 financial statements have not been restated as a result of the changes in accounting
policies adopted in 2007 (Note 2).
 The attached notes form part of these Consolidated Financial Statements.
 5




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##### 



Consolidated Statements of Cash Flows
 YEARS ENDED DECEMBER 31 (in millions of Canadian dollars)2008
    
    
    2007
    
    
    2006*CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIESTotal net income
    
    $
    857
    
    
    $
    2,290
    
    
    $
    2,144Items not affecting cash:Increase (decrease) in actuarial and other policy-related liabilities
    
    
    (4,392
    )
    
    
    (2,328
    )
    
    
    2,538Unrealized (gains) losses on held-for-trading assets and derivatives
    
    
    7,383
    
    
    

    2,447Amortization of:Net deferred realized and unrealized gains on investments
    
    
    (136
    )
    
    
    (121
    )
    
    
    (751
    )Deferred acquisition costs and intangible assets
    
    
    74
    
    
    
    89
    
    
    
    137Write-down of intangible asset
    
    
    
    
    
    
    52
    
    
    
    (Gain) loss on foreign exchange (Note 5)
    
    
    22
    
    
    
    (37
    )
    
    
    14Future income taxes
    
    
    (489
    )
    
    
    453
    
    
    
    (335
    )Provisions for losses (recoveries) on investments
    
    
    4
    
    
    
    2
    
    
    
    (10
    )Stock-based compensation (Note 18)
    
    
    31
    
    
    
    96
    
    
    
    80Accrued expenses and taxes
    
    
    (424
    )
    
    
    (109
    )
    
    
    129Investment income due and accrued
    
    
    6
    
    
    
    (7
    )
    
    
    (6
    )Other changes in other assets and liabilities
    
    
    (560
    )
    
    
    (649
    )
    
    
    550Gain on sale of equity investment (Note 3)
    
    
    (1,015
    )
    
    
    
    
    
    
    Realized (gains) losses on held-for-trading and available-for-sale assets
    
    
    410
    
    
    
    (1,065
    )
    
    
    New mutual fund business acquisition costs capitalized
    
    
    (56
    )
    
    
    (69
    )
    
    
    (66
    )Redemption fees of mutual funds
    
    
    22
    
    
    
    24
    
    
    
    45Net cash provided by operating activities
    
    
    1,737
    
    
    
    1,068
    
    
    
    4,469CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIESBorrowed funds
    
    
    (17
    )
    
    
    113
    
    
    
    28Issuance of senior financing (Note 12)
    
    
    118
    
    
    
    929
    
    
    
    Collateral on senior financing (Note 12)
    
    
    (258
    )
    
    
    
    
    
    
    Issuance of senior debentures (Note 11)
    
    
    
    
    
    
    250
    
    
    
    1,000Redemption of senior debentures (Note 11)
    
    
    
    
    
    
    (727
    )
    
    
    Issuance of subordinated debt (Note 13)
    
    
    746
    
    
    
    398
    
    
    
    Redemption and maturity of subordinated debt (Note 13)
    
    
    
    
    
    
    (28
    )
    
    
    Issuance of preferred shares (Note 15)
    
    
    
    
    
    
    250
    
    
    
    550Payments to underwriters (Note 15)
    
    
    
    
    
    
    (9
    )
    
    
    (18
    )Issuance of common shares on exercise of stock options
    
    
    8
    
    
    
    55
    
    
    
    61Common shares purchased for cancellation (Note 15)
    
    
    (217
    )
    
    
    (502
    )
    
    
    (575
    )Dividends paid on common shares
    
    
    (809
    )
    
    
    (752
    )
    
    
    (633
    )Dividends paid on preferred shares
    
    
    (70
    )
    
    
    (69
    )
    
    
    (57
    )Net cash provided by (used in) financing activities
    
    
    (499
    )
    
    
    (92
    )
    
    
    356CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIESSales, maturities and repayments of:Bonds
    
    
    15,697
    
    
    
    21,091
    
    
    
    29,644Mortgages and corporate loans
    
    
    5,624
    
    
    
    6,279
    
    
    
    2,590Stocks
    
    
    1,715
    
    
    
    3,456
    
    
    
    1,572Real estate
    
    
    109
    
    
    
    221
    
    
    
    204Purchases of:Bonds
    
    
    (15,706
    )
    
    
    (20,896
    )
    
    
    (31,104
    )Mortgages and corporate loans
    
    
    (5,746
    )
    
    
    (7,159
    )
    
    
    (3,938
    )Stocks
    
    
    (1,915
    )
    
    
    (3,298
    )
    
    
    (2,203
    )Real estate
    
    
    (320
    )
    
    
    (628
    )
    
    
    (523
    )Policy loans
    
    
    (162
    )
    
    
    (69
    )
    
    
    (87
    )Short-term securities
    
    
    215
    
    
    
    (658
    )
    
    
    1,120Cash cost of acquisition (Note 3)
    
    
    
    
    
    
    (725
    )
    
    
    Cash and cash equivalents acquired on acquisition (Note 3)
    
    
    
    
    
    
    132
    
    
    
    Net cash from sale of equity investment (Note 3)
    
    
    1,546
    
    
    
    
    
    
    
    Other investments
    
    
    723
    
    
    
    244
    
    
    
    78Net cash provided by (used in) investing activities
    
    
    1,780
    
    
    
    (2,010
    )
    
    
    (2,647
    )Changes due to fluctuations in exchange rates
    
    
    642
    
    
    
    (299
    )
    
    
    18Increase (decrease) in cash and cash equivalents
    
    
    3,660
    
    
    
    (1,333
    )
    
    
    2,196Cash and cash equivalents, beginning of year
    
    
    3,603
    
    
    
    4,936
    
    
    
    2,740Cash and cash equivalents, end of year
    
    
    7,263
    
    
    
    3,603
    
    
    
    4,936Short-term securities, end of year
    
    
    1,616
    
    
    
    1,897
    
    
    
    1,303Cash, cash equivalents and short-term securities, end of year
    
    $
    8,879
    
    
    $
    5,500
    
    
    $
    6,239Supplementary InformationCash and cash equivalents:Cash
    
    $
    745
    
    
    $
    399
    
    
    $
    642Cash equivalents
    
    
    6,518
    
    
    
    3,204
    
    
    
    4,294$
    7,263
    
    
    $
    3,603
    
    
    $
    4,936Cash disbursements made for:Interest on borrowed funds, debentures and subordinated debt
    
    $
    381
    
    
    $
    319
    
    
    $
    303Income taxes, net of refunds
    
    $
    467
    
    
    $
    499
    
    
    $
    567
 *
    
    The 2006 financial statements have not been restated as a result of the changes in accounting
policies adopted in 2007 (Note 2). The attached notes form part of these Consolidated Financial Statements.
 6




---



##### 



Consolidated Statements of Changes in Segregated Funds Net Assets
 YEARS ENDED DECEMBER 31 (in millions of Canadian dollars)2008
    
    
    2007
    
    
    2006ADDITIONS TO SEGREGATED FUNDSDeposits:Annuities
    
    $
    9,236
    
    
    $
    9,921
    
    
    $
    7,444Life insurance
    
    
    1,683
    
    
    
    3,399
    
    
    
    1,30910,919
    
    
    
    13,320
    
    
    
    8,753Net transfers (to) from general funds
    
    
    539
    
    
    
    952
    
    
    
    835Net realized and unrealized (losses) gains
    
    
    (17,772
    )
    
    
    (210
    )
    
    
    5,386Other investment income
    
    
    2,481
    
    
    
    3,813
    
    
    
    2,637(3,833
    )
    
    
    17,875
    
    
    
    17,611DEDUCTIONS FROM SEGREGATED FUNDSPayments to policyholders and their beneficiaries
    
    
    7,843
    
    
    
    8,793
    
    
    
    7,910Management fees
    
    
    861
    
    
    
    867
    
    
    
    747Taxes and other expenses
    
    
    188
    
    
    
    189
    
    
    
    137Effect of changes in currency exchange rates
    
    
    (5,282
    )
    
    
    5,610
    
    
    
    (988
    )3,610
    
    
    
    15,459
    
    
    
    7,806Net additions (reductions) to segregated funds for the year
    
    
    (7,443
    )
    
    
    2,416
    
    
    
    9,805Segregated funds net assets, beginning of year
    
    
    73,205
    
    
    
    70,789
    
    
    
    60,984Segregated funds net assets, end of year
    
    $
    65,762
    
    
    $
    73,205
    
    
    $
    70,789
 Consolidated Statements of Segregated Funds Net Assets
 AS AT DECEMBER 31(in millions of Canadian dollars)2008
    
    
    2007ASSETSSegregated and mutual fund units
    
    $
    49,392
    
    
    $
    58,185Stocks
    
    
    5,178
    
    
    
    7,376Bonds
    
    
    9,771
    
    
    
    7,868Cash, cash equivalents and short-term securities
    
    
    863
    
    
    
    863Real estate
    
    
    153
    
    
    
    202Mortgages
    
    
    43
    
    
    
    38Other assets
    
    
    2,068
    
    
    
    90667,468
    
    
    
    75,438LIABILITIES
    
    
    1,706
    
    
    
    2,233Net assets attributable to segregated funds policyholders
    
    $
    65,762
    
    
    $
    73,205
  The attached notes form part of these Consolidated Financial Statements.
 7




---



##### 



Notes to the Consolidated Financial Statements
  1. Accounting Policies
 DESCRIPTION OF BUSINESS
  BASIS OF PRESENTATION
   
    
    the reported amounts of assets and liabilities at the date of the financial statements
    
    the disclosure of contingent assets and liabilities at the date of the financial statements
    
    the reported amounts of revenues, policy benefits and expenses during the reporting period.
    BASIS OF CONSOLIDATION
  BONDS  HELD-FOR-TRADING AND AVAILABLE-FOR-SALE
   8




---



##### 



1. Accounting Policies (Contd)
    MORTGAGES AND CORPORATE LOANS
     9




---



##### 



1. Accounting Policies (Contd)
 STOCKS  HELD-FOR-TRADING AND AVAILABLE-FOR-SALE
      DERIVATIVE FINANCIAL INSTRUMENTS
   Derivatives not designated as accounting hedges (derivative investments) and embedded derivatives
  Derivatives designated as hedges for accounting purposes
  10




---



##### 



1. Accounting Policies (Contd)
 Fair value hedges
  Cash flow hedges
  Net investment hedges
   REAL ESTATE
  Real estate held for investment:
  Real estate held for sale:
 11




---



##### 



1. Accounting Policies (Contd)
 CASH, CASH EQUIVALENTS AND SHORT-TERM SECURITIES
  POLICY LOANS AND OTHER INVESTED ASSETS
   OTHER INVESTED ASSETS  HELD-FOR-TRADING AND AVAILABLE-FOR-SALE
 .
 DEFERRED ACQUISITION COSTS
  GOODWILL
  INTANGIBLE ASSETS
  CAPITAL ASSETS
  12




---



##### 



1. Accounting Policies (Contd)
 SEGREGATED FUNDS
   ACTUARIAL LIABILITIES AND OTHER POLICY LIABILITIES
  SENIOR DEBENTURES AND SUBORDINATED DEBT
  INCOME TAXES
   PREMIUM AND FEE INCOME RECOGNITION
  13




---



##### 



1. Accounting Policies (Contd)
 FOREIGN CURRENCY TRANSLATION
 
  PENSION PLANS AND OTHER POST-RETIREMENT BENEFITS
   STOCK-BASED COMPENSATION
    14




---



##### 



2. Changes in Accounting Policies
 ADOPTED IN 2008
       ADOPTED IN 2007
 FINANCIAL INSTRUMENTS, HEDGES AND COMPREHENSIVE INCOME:
 A) SUMMARY OF THE STANDARDS:
   15




---



##### 



2. Changes in Accounting Policies (Contd)
     B) IMPACT OF ADOPTION:
    FUTURE IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
   16




---



##### 



2. Changes in Accounting Policies (Contd)
   3. Acquisitions and Disposals
     2007Genworth EBG BusinessPercentage of shares acquired
    
    
    
    
    
    
    100
    %Invested assets acquired
    
    
    
    
    
    $
    977Other assets acquired (1)
    
    
    
    
    
    
    1291,106Actuarial liabilities and other policy liabilities
acquired
    
    
    
    
    
    
    654Amounts on deposit acquired
    
    
    
    
    
    
    49Other liabilities acquired
    
    
    
    
    
    
    38$
    741Net balance sheet assets acquired
    
    
    
    
    
    $
    365Consideration:Cash cost of acquisition
    
    
    
    
    
    $
    709Transaction and other related costs
    
    
    
    
    
    
    16Total consideration
    
    
    
    
    
    $
    725Goodwill on acquisition
    
    
    
    
    
    $
    360Cash and cash equivalents acquired
    
    
    
    
    
    $
    132
 (1)
    
    Other assets acquired includes $71 of intangible assets.
  17




---



##### 



3. Acquisitions and Disposals (Contd)
      4. Segmented Information
    18




---



##### 



4. Segmented Information (Contd)
  Results by segment for the years ended December 31United States
    
    
    
    
    
    
    
    
    
    
    ConsolidationSLF Canada
    
    
    SLF U.S.
    
    
    MFS
    
    
    SLF Asia
    
    
    Corporate
    
    
    Adjustments
    
    
    Total2008Revenue
    
    $
    7,927
    
    
    $
    3,817
    
    
    $
    1,381
    
    
    $
    498
    
    
    $
    2,144
    
    
    $
    (204
    )
    
    $
    15,563Change in actuarial liabilities
    
    $
    (854
    )
    
    $
    (2,920
    )
    
    $
    
    
    
    $
    (444
    )
    
    $
    (200
    )
    
    $
    (11
    )
    
    $
    (4,429
    )Interest expenses
    
    $
    181
    
    
    $
    263
    
    
    $
    2
    
    
    $
    
    
    
    $
    64
    
    
    $
    (144
    )
    
    $
    366Income taxes expense (benefit)
    
    $
    435
    
    
    $
    (648
    )
    
    $
    133
    
    
    $
    22
    
    
    $
    (285
    )
    
    $
    
    
    
    $
    (343
    )Total net income (loss)
    
    $
    647
    
    
    $
    (1,016
    )
    
    $
    194
    
    
    $
    33
    
    
    $
    999
    
    
    $
    
    
    
    $
    8572007Revenue
    
    $
    9,285
    
    
    $
    7,830
    
    
    $
    1,687
    
    
    $
    977
    
    
    $
    1,634
    
    
    $
    (225
    )
    
    $
    21,188Change in actuarial liabilities
    
    $
    180
    
    
    $
    (2,336
    )
    
    $
    
    
    
    $
    10
    
    
    $
    (368
    )
    
    $
    (1
    )
    
    $
    (2,515
    )Interest expenses
    
    $
    173
    
    
    $
    236
    
    
    $
    3
    
    
    $
    
    
    
    $
    84
    
    
    $
    (147
    )
    
    $
    349Income taxes expense (benefit)
    
    $
    200
    
    
    $
    142
    
    
    $
    185
    
    
    $
    23
    
    
    $
    (28
    )
    
    $
    
    
    
    $
    522Total net income
    
    $
    1,049
    
    
    $
    584
    
    
    $
    281
    
    
    $
    123
    
    
    $
    253
    
    
    $
    
    
    
    $
    2,2902006Revenue
    
    $
    9,333
    
    
    $
    10,465
    
    
    $
    1,662
    
    
    $
    1,022
    
    
    $
    2,164
    
    
    $
    (359
    )
    
    $
    24,287Change in actuarial liabilities
    
    $
    524
    
    
    $
    1,717
    
    
    $
    
    
    
    $
    244
    
    
    $
    40
    
    
    $
    
    
    
    $
    2,525Interest expenses
    
    $
    134
    
    
    $
    211
    
    
    $
    5
    
    
    $
    
    
    
    $
    199
    
    
    $
    (226
    )
    
    $
    323Income taxes expense (benefit)
    
    $
    262
    
    
    $
    21
    
    
    $
    150
    
    
    $
    17
    
    
    $
    (61
    )
    
    $
    
    
    
    $
    389Total net income
    
    $
    1,001
    
    
    $
    449
    
    
    $
    234
    
    
    $
    101
    
    
    $
    359
    
    
    $
    
    
    
    $
    2,144Assets by segment as at December 31United States
    
    
    
    
    
    
    
    
    
    
    ConsolidationSLF Canada
    
    
    SLF U.S.
    
    
    MFS
    
    
    SLF Asia
    
    
    Corporate
    
    
    Adjustments
    
    
    Total2008General fund assets
    
    $
    53,935
    
    
    $
    45,746
    
    
    $
    847
    
    
    $
    6,274
    
    
    $
    14,373
    
    
    $
    (1,342
    )
    
    $
    119,833Segregated funds net assets
    
    $
    32,333
    
    
    $
    27,443
    
    
    $
    
    
    
    $
    1,696
    
    
    $
    4,290
    
    
    $
    
    
    
    $
    65,7622007General fund assets
    
    $
    55,497
    
    
    $
    39,633
    
    
    $
    945
    
    
    $
    5,497
    
    
    $
    13,967
    
    
    $
    (1,248
    )
    
    $
    114,291Segregated funds net assets
    
    $
    36,686
    
    
    $
    27,741
    
    
    $
    
    
    
    $
    1,936
    
    
    $
    6,842
    
    
    $
    
    
    
    $
    73,205
 19




---



##### 



4. Segmented Information (Contd)
  2008
    
    
    2007
    
    
    2006Revenue:United States
    
    $
    580
    
    
    $
    720
    
    
    $
    618United Kingdom
    
    
    313
    
    
    
    878
    
    
    
    1,309Canada
    
    
    1,235
    
    
    
    14
    
    
    
    227Other countries
    
    
    16
    
    
    
    22
    
    
    
    10Total revenue
    
    $
    2,144
    
    
    $
    1,634
    
    
    $
    2,164Total net income (loss):United States
    
    $
    (70
    )
    
    $
    212
    
    
    $
    190United Kingdom
    
    
    208
    
    
    
    207
    
    
    
    193Canada
    
    
    860
    
    
    
    (153
    )
    
    
    (17
    )Other countries
    
    
    1
    
    
    
    (13
    )
    
    
    (7
    )Total net income (loss)
    
    $
    999
    
    
    $
    253
    
    
    $
    359Assets:General funds:United States
    
    $
    3,647
    
    
    $
    3,865
    
    
    $
    4,715United Kingdom
    
    
    7,686
    
    
    
    9,416
    
    
    
    10,254Canada
    
    
    2,912
    
    
    
    552
    
    
    
    1,400Other countries
    
    
    128
    
    
    
    134
    
    
    
    147Total general fund assets
    
    $
    14,373
    
    
    $
    13,967
    
    
    $
    16,516Segregated funds:United Kingdom
    
    $
    4,290
    
    
    $
    6,842
    
    
    $
    8,229Total segregated funds net assets
    
    $
    4,290
    
    
    $
    6,842
    
    
    $
    8,229
 20




---



##### 



5. Financial Investments and Related Net Investment Income
  A) FAIR VALUE OF FINANCIAL INVESTMENTS
  2008
    
    
    
    
    
    
    
    
    
    
    
    2007Carrying
    
    
    Fair
    
    
    
    
    
    
    Carrying
    
    
    FairValue
    
    
    Value
    
    
    Yield %
    
    
    Value
    
    
    Value
    
    
    Yield %ASSETSBonds  held-for-trading
    
    $
    48,458
    
    
    $
    48,458
    
    
    
    5.90
    
    
    $
    50,608
    
    
    $
    50,608
    
    
    
    5.89Bonds  available-for-sale
    
    
    10,616
    
    
    
    10,616
    
    
    
    5.50
    
    
    
    9,148
    
    
    
    9,148
    
    
    
    5.62Mortgages and corporate loans
    
    
    22,302
    
    
    
    22,485
    
    
    
    5.99
    
    
    
    20,742
    
    
    
    21,046
    
    
    
    6.18Stocks  held-for-trading
    
    
    3,440
    
    
    
    3,440
    
    
    
    2.57
    
    
    
    4,438
    
    
    
    4,438
    
    
    
    2.64Stocks  available-for-sale
    
    
    1,018
    
    
    
    1,020
    
    
    
    3.19
    
    
    
    788
    
    
    
    788
    
    
    
    3.57Real estate
    
    
    4,908
    
    
    
    5,812
    
    
    
    10.86
    
    
    
    4,303
    
    
    
    5,183
    
    
    
    10.77Policy loans
    
    
    3,401
    
    
    
    3,401
    
    
    
    6.80
    
    
    
    2,959
    
    
    
    2,959
    
    
    
    6.84Cash, cash equivalents and short-term securities
    
    
    8,879
    
    
    
    8,879
    
    
    
    n/a
    
    
    
    5,500
    
    
    
    5,500
    
    
    
    n/aDerivative assets
    
    
    2,669
    
    
    
    2,669
    
    
    
    n/a
    
    
    
    1,947
    
    
    
    1,947
    
    
    
    n/aOther invested assets including held-for-trading and
available-for-sale other invested assets
    
    
    1,187
    
    
    
    1,230
    
    
    
    n/a
    
    
    
    2,587
    
    
    
    4,295
    
    
    
    n/aTotal invested assets
    
    $
    106,878
    
    
    $
    108,010
    
    
    
    5.80
    
    
    $
    103,020
    
    
    $
    105,912
    
    
    
    6.01
   i) FAIR VALUE METHODOLOGIES AND ASSUMPTIONS
    21




---



##### 



5. Financial Investments and Related Net Investment Income (Contd)
 
  ii) YIELD CALCULATION
  B) REAL ESTATE INVESTMENTS
  2008
    
    
    2007Canada
    
    $
    3,090
    
    
    $
    2,828United States
    
    
    1,546
    
    
    
    1,168United Kingdom
    
    
    271
    
    
    
    306Other
    
    
    1
    
    
    
    1Total real estate
    
    $
    4,908
    
    
    $
    4,303
  2008
    
    
    2007Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairValue
    
    
    Value
    
    
    Value
    
    
    ValueReal estate held for investment
    
    $
    4,898
    
    
    $
    5,802
    
    
    $
    4,295
    
    
    $
    5,175Real estate held for sale
    
    
    10
    
    
    
    10
    
    
    
    8
    
    
    
    8Total real estate
    
    $
    4,908
    
    
    $
    5,812
    
    
    $
    4,303
    
    
    $
    5,183
   2008
    
    
    2007Balance, January 1
    
    $
    276
    
    
    $
    255Net realized gains for the year
    
    
    12
    
    
    
    76Amortization of deferred net realized gains
    
    
    (33
    )
    
    
    (36
    )Effect of changes in currency exchange rates
    
    
    (4
    )
    
    
    (19
    )Balance, December 31
    
    $
    251
    
    
    $
    276
  C) DEFERRED NET REALIZED GAINS
  22




---



##### 



5. Financial Investments and Related Net Investment Income (Contd)
 D) NET INVESTMENT INCOME
  2008
    
    
    2007Bonds
    
    $
    (5,852
    )
    
    $
    (1,691
    )Stocks
    
    
    (1,432
    )
    
    
    103Other invested assets
    
    
    (122
    )
    
    
    33Cash equivalents and short-term securities
    
    
    7
    
    
    
    (3
    )Total changes in fair value of held-for-trading assets
    
    $
    (7,399
    )
    
    $
    (1,558
    )
  2008
    
    
    2007Changes in fair value
    
    $
    (154
    )
    
    $
    75Interest income
    
    
    (70
    )
    
    
    10Other income
    
    
    4
    
    
    
    1Total income from derivative investments
    
    $
    (220
    )
    
    $
    86
  2008
    
    
    2007
    
    
    2006Interest income:Bonds
    
    
    
    
    
    
    
    
    
    $
    3,874Held-for-trading bonds
    
    $
    3,006
    
    
    $
    3,091Available-for-sale bonds
    
    
    580
    
    
    
    531Mortgages and corporate loans
    
    
    1,291
    
    
    
    1,286
    
    
    
    930Policy loans
    
    
    216
    
    
    
    212
    
    
    
    203Cash, cash equivalents and short-term securities
    
    
    147
    
    
    
    231
    
    
    
    170Interest income
    
    
    5,240
    
    
    
    5,351
    
    
    
    5,177Dividends from stocks
    
    
    
    
    
    
    
    
    
    
    103Dividends on held-for-trading stocks
    
    
    117
    
    
    
    103Dividends on available-for-sale stocks
    
    
    24
    
    
    
    23Real estate income (net)(1)
    
    
    332
    
    
    
    300
    
    
    
    260Amortization of deferred net realized gains and unrealized gains and losses
    
    
    136
    
    
    
    121
    
    
    
    751Derivative realized and unrealized gains and losses (2)
    
    
    
    
    
    
    
    
    
    
    116Foreign exchange gains (losses)
    
    
    (22
    )
    
    
    37
    
    
    
    (14
    )Other income (3)
    
    
    354
    
    
    
    377
    
    
    
    359Investment expenses and taxes
    
    
    (103
    )
    
    
    (89
    )
    
    
    (88
    )Total other net investment income
    
    $
    6,078
    
    
    $
    6,223
    
    
    $
    6,664
  (1)
    
    Includes operating lease rental income of $293 ($242 and $223, in 2007 and 2006,
respectively).(2)
    
    Consists of realized and unrealized gains on derivatives that are reported at fair
value in 2006. Additional derivative gains of $31 in 2006 are included in other items (net).(3)
    
    Includes equity income from CI Financial of $190 in 2008 ($228 in 2007, and $167 in
2006). 23




---



##### 



5. Financial Investments and Related Net Investment Income (Contd)
 E) DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
  2008
    
    
    2007Fair Value
    
    
    Fair ValuePositive
    
    
    Negative
    
    
    Positive
    
    
    NegativeInterest rate contracts
    
    $
    1,801
    
    
    $
    (2,135
    )
    
    $
    286
    
    
    $
    (555
    )Foreign exchange contracts
    
    
    487
    
    
    
    (917
    )
    
    
    1,281
    
    
    
    (42
    )Other contracts
    
    
    381
    
    
    
    (167
    )
    
    
    380
    
    
    
    (41
    )Total derivatives
    
    $
    2,669
    
    
    $
    (3,219
    )
    
    $
    1,947
    
    
    $
    (638
    )
  2008
    
    
    2007Total Notional
    
    
    Fair Value
    
    
    Total Notional
    
    
    Fair ValueAmount
    
    
    Positive
    
    
    Negative
    
    
    Amount
    
    
    Positive
    
    
    NegativeDerivative investments (1)
    
    $
    44,453
    
    
    $
    2,377
    
    
    $
    (2,479
    )
    
    $
    37,074
    
    
    $
    1,216
    
    
    $
    (611
    )Fair value hedges
    
    
    2,983
    
    
    
    
    
    
    
    (504
    )
    
    
    2,577
    
    
    
    237
    
    
    
    (7
    )Cash flow hedges
    
    
    82
    
    
    
    
    
    
    
    (37
    )
    
    
    77
    
    
    
    10
    
    
    
    Net investment hedges
    
    
    3,278
    
    
    
    292
    
    
    
    (199
    )
    
    
    2,914
    
    
    
    484
    
    
    
    (20
    )Total
    
    $
    50,796
    
    
    $
    2,669
    
    
    $
    (3,219
    )
    
    $
    42,642
    
    
    $
    1,947
    
    
    $
    (638
    )
 (1)
    
    Derivative investments are derivatives that have not been designated as hedges for
accounting purposes.
  i) FAIR VALUE HEDGES
   ii) CASH FLOW HEDGES
  F) SECURITIES LENDING
  24




---



##### 



5. Financial Investments and Related Net Investment Income (Contd)
 G) ASSET SECURITIZATIONS
 
 2008
    
    
    2007Carrying value of retained interests
    
    $
    70
    
    
    $
    91Fair value of retained interests
    
    $
    70
    
    
    $
    91Weighted average remaining life (in years)
    
    
    1.49-11.29
    
    
    
    1.14-14.2Discount rate
    
    
    2.5%-12.5
    %
    
    
    2.5%-12.5
    %Anticipated credit losses
    
    
    0.5
    %
    
    
    0.5
    %
   2008
    
    
    2007
    
    
    2006Mortgages
    
    
    Mortgages
    
    
    MortgagesCash flows received on retained interests and servicing fees
    
    $
    12
    
    
    $
    14
    
    
    $
    18
 6. Financial Instrument Risk Management
  .
  25




---



##### 



6. Financial Instrument Risk Management (Contd)
 A) CREDIT RISK
  i) MAXIMUM EXPOSURE TO CREDIT RISK
  2008
    
    
    2007Cash, cash equivalents and short-term securities
    
    $
    8,879
    
    
    $
    5,500Held-for-trading bonds (1)
    
    
    48,458
    
    
    
    50,608Available-for-sale bonds
    
    
    10,616
    
    
    
    9,148Mortgages
    
    
    16,267
    
    
    
    15,468Corporate loans
    
    
    6,035
    
    
    
    5,274Derivative assets (2)
    
    
    2,669
    
    
    
    1,947Other financial assets (3)
    
    
    2,704
    
    
    
    2,722Total balance sheet maximum credit exposure
    
    $
    95,628
    
    
    $
    90,667Off-balance sheet itemsLoan commitments (4)
    
    $
    659
    
    
    $
    1,332Guarantees
    
    
    51
    
    
    
    98Total off-balance sheet items
    
    $
    710
    
    
    $
    1,430
 (1)
    
    In addition to the carrying value, credit exposure may be increased to the extent
that the amounts recovered from default are insufficient to satisfy the actuarial liability cash
flows that the assets are intended to support.(2)
    
    The positive market value 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 contracts with a positive fair value.(3)
    
    Other financial assets include accounts receivable and investment income due and
accrued as shown in Note 8.(4)
    
    Loan commitments include commitments to extend credit under commercial and
residential mortgage loans and private bonds. Private bond commitments contain provisions that
allow for withdrawal of the commitment if there is a deterioration in the credit quality of the
borrower. Collateral held and other credit enhancements
   26




---



##### 



6. Financial Instrument Risk Management (Contd)
 ii) CONCENTRATION RISK
    2008
    
    
    2007Held-for-Trading
    
    
    Available-for-
    
    
    Total
    
    
    Held-for-Trading
    
    
    Available-for-
    
    
    TotalBonds
    
    
    Sale Bonds
    
    
    Bonds
    
    
    Bonds
    
    
    Sale Bonds
    
    
    BondsCanada
    
    $
    18,184
    
    
    $
    1,380
    
    
    $
    19,564
    
    
    $
    18,457
    
    
    $
    1,567
    
    
    $
    20,024United States
    
    
    19,533
    
    
    
    7,270
    
    
    
    26,803
    
    
    
    20,452
    
    
    
    5,865
    
    
    
    26,317United Kingdom
    
    
    4,397
    
    
    
    597
    
    
    
    4,994
    
    
    
    5,704
    
    
    
    600
    
    
    
    6,304Other
    
    
    6,344
    
    
    
    1,369
    
    
    
    7,713
    
    
    
    5,995
    
    
    
    1,116
    
    
    
    7,111Total Bonds
    
    $
    48,458
    
    
    $
    10,616
    
    
    $
    59,074
    
    
    $
    50,608
    
    
    $
    9,148
    
    
    $
    59,756
  2008
    
    
    2007Held-for-Trading
    
    
    Available-for-
    
    
    
    
    
    
    Held-for-Trading
    
    
    Available-for-Bonds
    
    
    Sale Bonds
    
    
    Total
    
    
    Bonds
    
    
    Sale Bonds
    
    
    TotalBonds issued or guaranteed by:Canadian federal government
    
    $
    2,354
    
    
    $
    489
    
    
    $
    2,843
    
    
    $
    2,320
    
    
    $
    567
    
    
    $
    2,887Canadian provincial and municipal governments
    
    
    6,064
    
    
    
    262
    
    
    
    6,326
    
    
    
    5,849
    
    
    
    336
    
    
    
    6,185U.S. Treasury and other U.S. agencies
    
    
    1,462
    
    
    
    571
    
    
    
    2,033
    
    
    
    1,055
    
    
    
    372
    
    
    
    1,427Other foreign governments
    
    
    3,295
    
    
    
    467
    
    
    
    3,762
    
    
    
    3,195
    
    
    
    521
    
    
    
    3,716Total government issued or guaranteed bonds
    
    
    13,175
    
    
    
    1,789
    
    
    
    14,964
    
    
    
    12,419
    
    
    
    1,796
    
    
    
    14,215Corporate bonds by industry sector:Financials
    
    
    11,606
    
    
    
    3,926
    
    
    
    15,532
    
    
    
    13,062
    
    
    
    3,497
    
    
    
    16,559Utilities and energy
    
    
    7,447
    
    
    
    929
    
    
    
    8,376
    
    
    
    7,475
    
    
    
    752
    
    
    
    8,227Telecom
    
    
    2,329
    
    
    
    885
    
    
    
    3,214
    
    
    
    2,136
    
    
    
    666
    
    
    
    2,802Consumer staples and discretionary
    
    
    5,429
    
    
    
    1,374
    
    
    
    6,803
    
    
    
    5,185
    
    
    
    952
    
    
    
    6,137Industrials
    
    
    2,510
    
    
    
    495
    
    
    
    3,005
    
    
    
    2,665
    
    
    
    374
    
    
    
    3,039Other
    
    
    1,641
    
    
    
    451
    
    
    
    2,092
    
    
    
    1,730
    
    
    
    429
    
    
    
    2,159Total corporate
    
    
    30,962
    
    
    
    8,060
    
    
    
    39,022
    
    
    
    32,253
    
    
    
    6,670
    
    
    
    38,923Asset-backed securities
    
    
    4,321
    
    
    
    767
    
    
    
    5,088
    
    
    
    5,936
    
    
    
    682
    
    
    
    6,618Total bonds
    
    $
    48,458
    
    
    $
    10,616
    
    
    $
    59,074
    
    
    $
    50,608
    
    
    $
    9,148
    
    
    $
    59,756
 27




---



##### 



6. Financial Instrument Risk Management (Contd)
  2008TotalMortgages
    
    
    Corporate
    
    
    Mortgages andNon-residential
    
    
    Residential
    
    
    Total
    
    
    Loans
    
    
    Corporate LoansCanada
    
    $
    5,896
    
    
    $
    2,620
    
    
    $
    8,516
    
    
    $
    5,518
    
    
    $
    14,034United States
    
    
    7,338
    
    
    
    342
    
    
    
    7,680
    
    
    
    254
    
    
    
    7,934United Kingdom
    
    
    71
    
    
    
    
    
    
    
    71
    
    
    
    
    
    
    
    71Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    263
    
    
    
    263Total mortgages and corporate loans
    
    $
    13,305
    
    
    $
    2,962
    
    
    $
    16,267
    
    
    $
    6,035
    
    
    $
    22,3022007TotalMortgages
    
    
    Corporate
    
    
    Mortgages andNon-residential
    
    
    Residential
    
    
    Total
    
    
    Loans
    
    
    Corporate LoansCanada
    
    $
    6,382
    
    
    $
    2,723
    
    
    $
    9,105
    
    
    $
    4,818
    
    
    $
    13,923United States
    
    
    6,005
    
    
    
    274
    
    
    
    6,279
    
    
    
    258
    
    
    
    6,537United Kingdom
    
    
    84
    
    
    
    
    
    
    
    84
    
    
    
    
    
    
    
    84Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    198
    
    
    
    198Total mortgages and corporate loans
    
    $
    12,471
    
    
    $
    2,997
    
    
    $
    15,468
    
    
    $
    5,274
    
    
    $
    20,742
 iii) CONTRACTUAL MATURITIES OF BONDS, MORTGAGES, CORPORATE LOANS AND DERIVATIVES
  2008Held-for-Trading
    
    
    Available-for-
    
    
    TotalBonds
    
    
    Sale Bonds
    
    
    BondsDue in 1 year or less
    
    $
    2,920
    
    
    $
    1,043
    
    
    $
    3,963Due in years 2-5
    
    
    12,253
    
    
    
    2,874
    
    
    
    15,127Due in years 6-10
    
    
    10,897
    
    
    
    2,869
    
    
    
    13,766Due after 10 years
    
    
    22,388
    
    
    
    3,830
    
    
    
    26,218Total bonds
    
    $
    48,458
    
    
    $
    10,616
    
    
    $
    59,074
  Mortgages
    
    
    Corporate Loans
    
    
    Total2009
    
    $
    1,360
    
    
    $
    661
    
    
    $
    2,0212010
    
    
    991
    
    
    
    380
    
    
    
    1,3712011
    
    
    1,275
    
    
    
    608
    
    
    
    1,8832012
    
    
    846
    
    
    
    553
    
    
    
    1,3992013
    
    
    1,141
    
    
    
    945
    
    
    
    2,086Thereafter
    
    
    10,667
    
    
    
    2,898
    
    
    
    13,565Total mortgages and corporate loans, before allowances for losses
    
    $
    16,280
    
    
    $
    6,045
    
    
    $
    22,325
 28




---



##### 



6. Financial Instrument Risk Management (Contd)
  2008
    
    
    2007Term to Maturity
    
    
    Term to MaturityUnder
    
    
    1 to
    
    
    Over
    
    
    
    
    
    
    Under
    
    
    1 to
    
    
    Over1 Year
    
    
    5 Years
    
    
    5 Years
    
    
    Total
    
    
    1 Year
    
    
    5 Years
    
    
    5 Years
    
    
    TotalOver-the-counter contracts:Interest rate contracts:Swap contracts
    
    $
    1,724
    
    
    $
    10,846
    
    
    $
    14,567
    
    
    $
    27,137
    
    
    $
    625
    
    
    $
    7,453
    
    
    $
    12,116
    
    
    $
    20,194Options purchased
    
    
    682
    
    
    
    669
    
    
    
    2,249
    
    
    
    3,600
    
    
    
    60
    
    
    
    283
    
    
    
    1,841
    
    
    
    2,184Foreign exchange contracts:Forward contracts
    
    
    1,786
    
    
    
    77
    
    
    
    
    
    
    
    1,863
    
    
    
    1,849
    
    
    
    105
    
    
    
    
    
    
    
    1,954Swap contracts
    
    
    191
    
    
    
    3,821
    
    
    
    5,123
    
    
    
    9,135
    
    
    
    222
    
    
    
    3,157
    
    
    
    5,351
    
    
    
    8,730Other contracts:Options purchased
    
    
    1,543
    
    
    
    1,500
    
    
    
    6
    
    
    
    3,049
    
    
    
    2,245
    
    
    
    3,814
    
    
    
    49
    
    
    
    6,108Options written
    
    
    
    
    
    
    1,132
    
    
    
    
    
    
    
    1,132
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forward contracts
    
    
    79
    
    
    
    59
    
    
    
    
    
    
    
    138
    
    
    
    648
    
    
    
    53
    
    
    
    
    
    
    
    701Swap contracts
    
    
    150
    
    
    
    101
    
    
    
    
    
    
    
    251
    
    
    
    230
    
    
    
    95
    
    
    
    13
    
    
    
    338Credit derivatives
    
    
    
    
    
    
    12
    
    
    
    134
    
    
    
    146
    
    
    
    
    
    
    
    
    
    
    
    90
    
    
    
    90Exchange-traded contracts:Interest rate contracts:Futures contracts
    
    
    1,697
    
    
    
    45
    
    
    
    
    
    
    
    1,742
    
    
    
    1,182
    
    
    
    85
    
    
    
    
    
    
    
    1,267Foreign exchange contracts:Futures contracts
    
    
    323
    
    
    
    
    
    
    
    
    
    
    
    323
    
    
    
    34
    
    
    
    
    
    
    
    
    
    
    
    34Other contracts:Futures contracts
    
    
    2,280
    
    
    
    
    
    
    
    
    
    
    
    2,280
    
    
    
    1,042
    
    
    
    
    
    
    
    
    
    
    
    1,042Total notional amount
    
    $
    10,455
    
    
    $
    18,262
    
    
    $
    22,079
    
    
    $
    50,796
    
    
    $
    8,137
    
    
    $
    15,045
    
    
    $
    19,460
    
    
    $
    42,642
  2008
    
    
    2007Term to Maturity
    
    
    Term to MaturityUnder
    
    
    1 to
    
    
    Over
    
    
    
    
    
    
    Under
    
    
    1 to
    
    
    Over1 Year
    
    
    5 Years
    
    
    5 Years
    
    
    Total
    
    
    1 Year
    
    
    5 Years
    
    
    5 Years
    
    
    TotalTotal asset derivatives
    
    $
    285
    
    
    $
    886
    
    
    $
    1,498
    
    
    $
    2,669
    
    
    $
    202
    
    
    $
    1,034
    
    
    $
    711
    
    
    $
    1,947Total liability derivatives
    
    $
    (73
    )
    
    $
    (933
    )
    
    $
    (2,213
    )
    
    $
    (3,219
    )
    
    $
    (54
    )
    
    $
    (101
    )
    
    $
    (483
    )
    
    $
    (638
    )
 iv) ASSET QUALITY
  29




---



##### 



6. Financial Instrument Risk Management (Contd)
 Bonds by Credit Rating
  2008
    
    
    2007Held-for-Trading
    
    
    Available-for-
    
    
    
    
    
    
    Held-for-Trading
    
    
    Available-for-Bonds
    
    
    Sale Bonds
    
    
    Total
    
    
    Bonds
    
    
    Sale Bonds
    
    
    TotalBonds by credit rating (1):AAA
    
    $
    9,119
    
    
    $
    2,494
    
    
    $
    11,613
    
    
    $
    9,896
    
    
    $
    2,214
    
    
    $
    12,110AA
    
    
    9,183
    
    
    
    1,635
    
    
    
    10,818
    
    
    
    9,567
    
    
    
    1,501
    
    
    
    11,068A
    
    
    14,805
    
    
    
    3,326
    
    
    
    18,131
    
    
    
    15,443
    
    
    
    2,538
    
    
    
    17,981BBB
    
    
    13,826
    
    
    
    2,893
    
    
    
    16,719
    
    
    
    14,382
    
    
    
    2,773
    
    
    
    17,155BB and lower
    
    
    1,525
    
    
    
    268
    
    
    
    1,793
    
    
    
    1,320
    
    
    
    122
    
    
    
    1,442Total bonds
    
    $
    48,458
    
    
    $
    10,616
    
    
    $
    59,074
    
    
    $
    50,608
    
    
    $
    9,148
    
    
    $
    59,756
 (1)
    
    Local currency denominated sovereign debts of certain developing countries, used in
backing the local liabilities, have been classified as investment grade. Derivative Financial Instruments by Counterparty Credit Rating
   2008Gross positive
    
    
    Impact of
    
    
    NetReplacement Cost(1)
    
    
    Master Netting Agreements(2)
    
    
    Replacement Cost(3)Over-the-counter contracts:AAA
    
    $
    120
    
    
    $
    (4
    )
    
    $
    116AA
    
    
    865
    
    
    
    (330
    )
    
    
    535A
    
    
    1,666
    
    
    
    (780
    )
    
    
    886Exchange-traded
    
    
    18
    
    
    
    (5
    )
    
    
    13Total
    
    $
    2,669
    
    
    $
    (1,119
    )
    
    $
    1,5502007Gross positive
    
    
    Impact of
    
    
    NetReplacement Cost(1)
    
    
    Master Netting Agreements(2)
    
    
    Replacement Cost(3)Over-the-counter contracts:AAA
    
    $
    260
    
    
    $
    (10
    )
    
    $
    250AA
    
    
    1,407
    
    
    
    (216
    )
    
    
    1,191A
    
    
    272
    
    
    
    (79
    )
    
    
    193Exchange-traded
    
    
    8
    
    
    
    
    
    
    
    8Total
    
    $
    1,947
    
    
    $
    (305
    )
    
    $
    1,642
 (1)
    
    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.(2)
    
    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. The Companys 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.(3)
    
    Gross positive replacement cost after netting agreements. 30




---



##### 



6. Financial Instrument Risk Management (Contd)
 Mortgages and Corporate Loans Past Due or Impaired
  2008Gross Carrying Value
    
    
    Allowance for LossesCorporate
    
    
    
    
    
    
    
    
    
    
    CorporateMortgages
    
    
    Loans
    
    
    Total
    
    
    Mortgages
    
    
    Loans
    
    
    TotalNot past due
    
    $
    16,171
    
    
    $
    5,946
    
    
    $
    22,117
    
    
    $
    
    
    
    $
    
    
    
    $
    Past due:Past due less than 90 days
    
    
    17
    
    
    
    17
    
    
    
    34
    
    
    
    
    
    
    
    
    
    
    
    Past due 90 to 179 days
    
    
    
    
    
    
    14
    
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    Past due 180 days or more
    
    
    1
    
    
    
    9
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    Impaired
    
    
    91
    
    
    
    59
    
    
    
    150
    
    
    
    13
    
    
    
    10
    
    
    
    23Balance, December 31
    
    $
    16,280
    
    
    $
    6,045
    
    
    $
    22,325
    
    
    $
    13
    
    
    $
    10
    
    
    $
    232007Gross Carrying Value
    
    
    Allowance for LossesCorporate
    
    
    
    
    
    
    
    
    
    
    CorporateMortgages
    
    
    Loans
    
    
    Total
    
    
    Mortgages
    
    
    Loans
    
    
    TotalNot past due
    
    $
    15,400
    
    
    $
    5,200
    
    
    $
    20,600
    
    
    $
    7
    
    
    $
    
    
    
    $
    7Past due:Past due less than 90 days
    
    
    58
    
    
    
    33
    
    
    
    91
    
    
    
    
    
    
    
    
    
    
    
    Past due 90 to 179 days
    
    
    1
    
    
    
    3
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    Impaired
    
    
    26
    
    
    
    52
    
    
    
    78
    
    
    
    10
    
    
    
    14
    
    
    
    24Balance, December 31
    
    $
    15,485
    
    
    $
    5,288
    
    
    $
    20,773
    
    
    $
    17
    
    
    $
    14
    
    
    $
    31
   Changes in Allowances for Losses
  CorporateBonds
    
    
    Mortgages
    
    
    Loans
    
    
    Other
    
    
    TotalBalance, December 31, 2006
    
    $
    54
    
    
    $
    27
    
    
    $
    
    
    
    $
    15
    
    
    $
    96Adjustment for change in accounting policy (Note 2)
    
    
    (54
    )
    
    
    
    
    
    
    13
    
    
    
    (15
    )
    
    
    (56
    )Provision for losses
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    2Write-offs, net of recoveries
    
    
    
    
    
    
    (7
    )
    
    
    (1
    )
    
    
    
    
    
    
    (8
    )Effect of changes in currency exchange rates
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    (3
    )Balance, December 31, 2007
    
    $
    
    
    
    $
    17
    
    
    $
    14
    
    
    $
    
    
    
    $
    31Provision for losses
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    4Write-offs, net of recoveries
    
    
    
    
    
    
    (6
    )
    
    
    (8
    )
    
    
    
    
    
    
    (14
    )Effect of changes in currency exchange rates
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    2Balance, December 31, 2008
    
    $
    
    
    
    $
    13
    
    
    $
    10
    
    
    $
    
    
    
    $
    23
 Restructured Mortgages and Corporate Loans
  31




---



##### 



6. Financial Instrument Risk Management (Contd)
 Possession of Collateral/Foreclosed Assets
  Temporarily Impaired Available-for-Sale Assets
  December 31, 2008
    
    
    December 31, 2007Fair Value
    
    
    Unrealized Losses
    
    
    Fair Value
    
    
    Unrealized LossesAvailable-for-sale bonds
    
    $
    7,041
    
    
    $
    1,875
    
    
    $
    4,895
    
    
    $
    273Available-for-sale stocks (1)
    
    
    430
    
    
    
    176
    
    
    
    238
    
    
    
    34Available-for-sale other invested assets (2)
    
    
    194
    
    
    
    21
    
    
    
    108
    
    
    
    12Total temporarily impaired financial assets
    
    $
    7,665
    
    
    $
    2,072
    
    
    $
    5,241
    
    
    $
    319
 (1)
    
    This includes available-for-sale private equities that are accounted for at cost
with a carrying value of $7 ($13 in 2007).(2)
    
    This pertains to available-for-sale limited partnerships that are accounted for at
cost with a carrying value of $215 ($120 in 2007).
 Other-Than-Temporarily Impaired Available-for-Sale Assets
  Impairment of Held-for-Trading Assets
   Non-Income Producing Bonds
  32




---



##### 



6. Financial Instrument Risk Management (Contd)
 B) LIQUIDITY RISK
      Within
    
    
    1 Year to
    
    
    3 Years to
    
    
    Over 51 Year
    
    
    3 Years
    
    
    5 Years
    
    
    Years
    
    
    TotalGeneral fund policyholder liabilities (1)
    
    $
    13,078
    
    
    $
    14,216
    
    
    $
    11,536
    
    
    $
    168,003
    
    
    $
    206,833Senior debentures and financing (2)
    
    
    200
    
    
    
    1,661
    
    
    
    239
    
    
    
    4,245
    
    
    
    6,345Subordinated debt (2)
    
    
    154
    
    
    
    307
    
    
    
    1,375
    
    
    
    2,225
    
    
    
    4,061Bond repurchase agreements and securities
lending transactions
    
    
    2,376
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,376Accounts payable and accrued expenses
    
    
    2,787
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,787Borrowed funds (2)
    
    
    66
    
    
    
    158
    
    
    
    145
    
    
    
    66
    
    
    
    435Total liabilities
    
    $
    18,661
    
    
    $
    16,342
    
    
    $
    13,295
    
    
    $
    174,539
    
    
    $
    222,837Contractual commitments (3):Contractual loan, equity and real estate
commitments
    
    $
    444
    
    
    $
    551
    
    
    $
    27
    
    
    $
    50
    
    
    $
    1,072Operating lease commitments
    
    
    102
    
    
    
    161
    
    
    
    104
    
    
    
    58
    
    
    
    425Total contractual commitments
    
    $
    546
    
    
    $
    712
    
    
    $
    131
    
    
    $
    108
    
    
    $
    1,497
 (1)
    
    General fund policyholder 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, amounts on deposit, commissions and premium taxes offset by contractual
future premiums and fees on in-force contracts. These estimated cash flows are based on the best
estimate assumptions used in the determination of policy liabilities. These amounts are
undiscounted and do not reflect recoveries from reinsurance agreements. The actuarial and other
policy liability amounts included in the consolidated financial statements are based on the present
value of the estimated cash flows and are net of reinsured amounts.
Due to the use of assumptions, actual cash flows will
differ from these estimates.(2)
    
    Includes expected interest payments.(3)
    
    Contractual commitments and operating lease commitments are not reported on the
consolidated balance sheets. A further description of the commitments is included in Note 21A) and
B).
 33




---



##### 



6. Financial Instrument Risk Management (Contd)
 C) MARKET RISK
  i) CURRENCY RISK
  ii) INTEREST RATE RISK
   iii) EQUITY RISK
     2008
    
    
    2007Held-for-Trading
    
    
    Available-for-
    
    
    Total
    
    
    Held-for-Trading
    
    
    Available-for-
    
    
    TotalStocks
    
    
    Sale Stocks
    
    
    Stocks
    
    
    Stocks
    
    
    Sale Stocks
    
    
    StocksCanada
    
    $
    1,724
    
    
    $
    577
    
    
    $
    2,301
    
    
    $
    2,016
    
    
    $
    222
    
    
    $
    2,238United States
    
    
    942
    
    
    
    396
    
    
    
    1,338
    
    
    
    1,141
    
    
    
    566
    
    
    
    1,707United Kingdom
    
    
    434
    
    
    
    6
    
    
    
    440
    
    
    
    893
    
    
    
    
    
    
    
    893Other
    
    
    340
    
    
    
    39
    
    
    
    379
    
    
    
    388
    
    
    
    
    
    
    
    388Total stocks
    
    $
    3,440
    
    
    $
    1,018
    
    
    $
    4,458
    
    
    $
    4,438
    
    
    $
    788
    
    
    $
    5,226
 34




---



##### 



7. Goodwill and Intangible Assets
 A) GOODWILL
   SLF Canada
    
    
    SLF U.S.
    
    
    SLF Asia
    
    
    Corporate
    
    
    TotalBalance, January 1, 2007
    
    $
    3,768
    
    
    $
    1,453
    
    
    $
    508
    
    
    $
    571
    
    
    $
    6,300Acquisitions (Note 3)
    
    
    75
    
    
    
    360
    
    
    
    
    
    
    
    52
    
    
    
    487Disposals
    
    
    (2
    )
    
    
    (32
    )
    
    
    
    
    
    
    (7
    )
    
    
    (41
    )Effect of changes in currency exchange rates
    
    
    
    
    
    
    (237
    )
    
    
    (75
    )
    
    
    (39
    )
    
    
    (351
    )Balance, December 31, 2007
    
    $
    3,841
    
    
    $
    1,544
    
    
    $
    433
    
    
    $
    577
    
    
    $
    6,395Acquisitions (Note 3)
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    75
    
    
    
    92Disposals
(Note 3)
    
    
    (377
    )
    
    
    (16
    )
    
    
    
    
    
    
    (5
    )
    
    
    (398
    )Effect of changes in currency exchange rates
    
    
    
    
    
    
    369
    
    
    
    103
    
    
    
    37
    
    
    
    509Balance, December 31, 2008
    
    $
    3,481
    
    
    $
    1,897
    
    
    $
    536
    
    
    $
    684
    
    
    $
    6,598
 B)
INTANGIBLE ASSETS
    2008
    
    
    2007Gross Carrying
    
    
    Accumulated
    
    
    Net
    
    
    Gross Carrying
    
    
    Accumulated
    
    
    NetAmount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    AmountFinite-life intangible assets:Sales potential of field force
    
    $
    504
    
    
    $
    74
    
    
    $
    430
    
    
    $
    486
    
    
    $
    60
    
    
    $
    426Asset administration contracts
    
    
    231
    
    
    
    58
    
    
    
    173
    
    
    
    224
    
    
    
    49
    
    
    
    175Other (1)
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    2
    
    
    
    737
    
    
    
    134
    
    
    
    603
    
    
    
    712
    
    
    
    111
    
    
    
    601Indefinite-life intangible assets:Fund management contracts (2)
    
    
    263
    
    
    
    
    
    
    
    263
    
    
    
    930
    
    
    
    
    
    
    
    930State licenses
    
    
    12
    
    
    
    
    
    
    
    12
    
    
    
    10
    
    
    
    
    
    
    
    10275
    
    
    
    
    
    
    
    275
    
    
    
    940
    
    
    
    
    
    
    
    940Total intangible assets
    
    $
    1,012
    
    
    $
    134
    
    
    $
    878
    
    
    $
    1,652
    
    
    $
    111
    
    
    $
    1,541
 (1)
    
    The asset has been fully amortized as at December 31, 2008.(2)
    
    Decrease in 2008 is due to the sale of CI Financial described in Note 3.
 35




---



##### 



8. Other Assets
  2008
    
    
    2007Accounts receivable
    
    $
    1,496
    
    
    $
    1,629Investment income due and accrued
    
    
    1,208
    
    
    
    1,093Future income taxes (Note 19)
    
    
    1,190
    
    
    
    382Deferred acquisition costs
    
    
    154
    
    
    
    139Prepaid expenses
    
    
    303
    
    
    
    231Premiums receivable
    
    
    476
    
    
    
    395Accrued benefit asset (Note 22)
    
    
    422
    
    
    
    422Capital assets
    
    
    210
    
    
    
    171Other
    
    
    20
    
    
    
    16Total other assets
    
    $
    5,479
    
    
    $
    4,478
   9. Actuarial Liabilities and Other Policy Liabilities
 A)
ACTUARIAL POLICIES
     
    
    when taken one at a time, each provision is reasonable with respect to the
underlying best estimate assumption, and the extent of uncertainty present in making that
assumption
    
    in total, the cumulative effect of all provisions is reasonable with
respect to the total actuarial liabilities
   36




---



##### 



9. Actuarial Liabilities and Other Policy Liabilities (Contd)
 Provision for Policyholder Dividends
  B) COMPOSITION OF ACTUARIAL LIABILITIES AND OTHER POLICY LIABILITIES
  2008SLF Canada
    
    
    SLF U.S.
    
    
    SLF Asia
    
    
    Corporate(1)
    
    
    TotalIndividual participating life
    
    $
    13,548
    
    
    $
    5,776
    
    
    $
    2,722
    
    
    $
    2,408
    
    
    $
    24,454Individual non-participating life
    
    
    2,692
    
    
    
    8,946
    
    
    
    195
    
    
    
    1,261
    
    
    
    13,094Group life
    
    
    1,212
    
    
    
    206
    
    
    
    15
    
    
    
    13
    
    
    
    1,446Individual annuities
    
    
    9,192
    
    
    
    10,468
    
    
    
    
    
    
    
    3,572
    
    
    
    23,232Group annuities
    
    
    6,011
    
    
    
    3,854
    
    
    
    426
    
    
    
    
    
    
    
    10,291Health insurance
    
    
    5,497
    
    
    
    1,127
    
    
    
    1
    
    
    
    99
    
    
    
    6,724Total actuarial liabilities
    
    
    38,152
    
    
    
    30,377
    
    
    
    3,359
    
    
    
    7,353
    
    
    
    79,241Add: Other policy liabilities(2)
    
    
    587
    
    
    
    801
    
    
    
    76
    
    
    
    706
    
    
    
    2,170Actuarial liabilities and other policy liabilities
    
    $
    38,739
    
    
    $
    31,178
    
    
    $
    3,435
    
    
    $
    8,059
    
    
    $
    81,411
 2007SLF Canada
    
    
    SLF U.S.
    
    
    SLF Asia
    
    
    Corporate(1)
    
    
    TotalIndividual participating life
    
    $
    14,388
    
    
    $
    4,945
    
    
    $
    2,671
    
    
    $
    3,282
    
    
    $
    25,286Individual non-participating life
    
    
    2,670
    
    
    
    7,175
    
    
    
    217
    
    
    
    528
    
    
    
    10,590Group life
    
    
    1,294
    
    
    
    224
    
    
    
    9
    
    
    
    5
    
    
    
    1,532Individual annuities
    
    
    9,272
    
    
    
    10,404
    
    
    
    
    
    
    
    4,163
    
    
    
    23,839Group annuities
    
    
    5,963
    
    
    
    4,024
    
    
    
    323
    
    
    
    
    
    
    
    10,310Health insurance
    
    
    5,392
    
    
    
    901
    
    
    
    
    
    
    
    86
    
    
    
    6,379Total actuarial liabilities
    
    
    38,979
    
    
    
    27,673
    
    
    
    3,220
    
    
    
    8,064
    
    
    
    77,936Add: Other policy liabilities(2)
    
    
    591
    
    
    
    621
    
    
    
    63
    
    
    
    619
    
    
    
    1,894Actuarial liabilities and other policy liabilities
    
    $
    39,570
    
    
    $
    28,294
    
    
    $
    3,283
    
    
    $
    8,683
    
    
    $
    79,830
 (1)
    
    Primarily business from the U.K., reinsurance and run-off reinsurance operations.(2)
    
    Consists of policy benefits payable, provisions for unreported claims, provisions
for policyholder dividends, and provisions for experience rating refunds.
 37




---



##### 



9. Actuarial Liabilities and Other Policy Liabilities (Contd)
 C) TOTAL ASSETS SUPPORTING LIABILITIES AND EQUITY
  2008MortgagesBonds
    
    
    Stocks
    
    
    andHeld-for
    
    
    Available
    
    
    Held-for
    
    
    Available
    
    
    Corporate
    
    
    Real-Trading
    
    
    -for-sale
    
    
    -Trading
    
    
    -for-sale
    
    
    Loans
    
    
    Estate
    
    
    Other
    
    
    TotalIndividual participating life
    
    $
    13,253
    
    
    $
    
    
    
    $
    2,505
    
    
    $
    10
    
    
    $
    4,732
    
    
    $
    3,312
    
    
    $
    4,022
    
    
    $
    27,834Individual non-participating life
    
    
    7,218
    
    
    
    402
    
    
    
    611
    
    
    
    2
    
    
    
    3,373
    
    
    
    231
    
    
    
    6,177
    
    
    
    18,014Group life
    
    
    1,077
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    1,122
    
    
    
    26
    
    
    
    10
    
    
    
    2,237Individual annuities
    
    
    16,280
    
    
    
    60
    
    
    
    11
    
    
    
    
    
    
    
    5,761
    
    
    
    
    
    
    
    3,854
    
    
    
    25,966Group annuities
    
    
    6,750
    
    
    
    307
    
    
    
    60
    
    
    
    5
    
    
    
    3,145
    
    
    
    150
    
    
    
    1,025
    
    
    
    11,442Health insurance
    
    
    3,872
    
    
    
    
    
    
    
    1
    
    
    
    1
    
    
    
    3,255
    
    
    
    106
    
    
    
    681
    
    
    
    7,916Equity and other
    
    
    8
    
    
    
    9,847
    
    
    
    250
    
    
    
    1,000
    
    
    
    914
    
    
    
    1,083
    
    
    
    13,322
    
    
    
    26,424Total assets
    
    $
    48,458
    
    
    $
    10,616
    
    
    $
    3,440
    
    
    $
    1,018
    
    
    $
    22,302
    
    
    $
    4,908
    
    
    $
    29,091
    
    
    $
    119,833
 2007MortgagesBonds
    
    
    Stocks
    
    
    andHeld-for
    
    
    Available
    
    
    Held-for
    
    
    Available
    
    
    Corporate
    
    
    Real-Trading
    
    
    -for-sale
    
    
    -Trading
    
    
    -for-sale
    
    
    Loans
    
    
    Estate
    
    
    Other
    
    
    TotalIndividual participating life
    
    $
    13,827
    
    
    $
    
    
    
    $
    3,667
    
    
    $
    13
    
    
    $
    4,493
    
    
    $
    2,947
    
    
    $
    3,700
    
    
    $
    28,647Individual non-participating life
    
    
    6,468
    
    
    
    425
    
    
    
    691
    
    
    
    3
    
    
    
    2,738
    
    
    
    200
    
    
    
    4,223
    
    
    
    14,748Group life
    
    
    1,147
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    1,106
    
    
    
    19
    
    
    
    (32
    )
    
    
    2,243Individual annuities
    
    
    18,392
    
    
    
    57
    
    
    
    18
    
    
    
    
    
    
    
    5,724
    
    
    
    
    
    
    
    1,081
    
    
    
    25,272Group annuities
    
    
    6,722
    
    
    
    
    
    
    
    58
    
    
    
    5
    
    
    
    2,831
    
    
    
    122
    
    
    
    866
    
    
    
    10,604Health insurance
    
    
    4,048
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    2,908
    
    
    
    66
    
    
    
    398
    
    
    
    7,421Equity and other
    
    
    4
    
    
    
    8,666
    
    
    
    
    
    
    
    767
    
    
    
    942
    
    
    
    949
    
    
    
    14,028
    
    
    
    25,356Total assets
    
    $
    50,608
    
    
    $
    9,148
    
    
    $
    4,438
    
    
    $
    788
    
    
    $
    20,742
    
    
    $
    4,303
    
    
    $
    24,264
    
    
    $
    114,291
 38




---



##### 



9. Actuarial Liabilities and Other Policy Liabilities (Contd)
 D) CHANGES IN ACTUARIAL LIABILITIES
  2008
    
    
    2007Actuarial liabilities, January 1, before change in accounting policy
    
    $
    77,936
    
    
    $
    79,286Adjustment for change in accounting policy (Note 2)
    
    
    
    
    
    
    7,129Actuarial liabilities, January 1, after change in accounting policy
    
    
    77,936
    
    
    
    86,415Change in liabilities on in-force business
    
    
    (7,777
    )
    
    
    (5,201
    )Liabilities arising from new policies
    
    
    3,094
    
    
    
    2,803Significant changes in assumptions or methodology (1):Gross increases
    
    
    405
    
    
    
    380Gross decreases
    
    
    (151
    )
    
    
    (497
    )Increase (decrease) in actuarial liabilities
    
    
    (4,429
    )
    
    
    (2,515
    )Actuarial liabilities before the following:
    
    
    73,507
    
    
    
    83,900Acquisition (Note 3)
    
    
    
    
    
    
    536Effect of changes in currency exchange rates
    
    
    5,734
    
    
    
    (6,500
    )Actuarial liabilities, December 31
    
    
    79,241
    
    
    
    77,936Add: Other policy liabilities
    
    
    2,170
    
    
    
    1,894Actuarial liabilities and other policy liabilities, December 31
    
    $
    81,411
    
    
    $
    79,830
 (1)
    
    The increase in actuarial liabilities in 2008 included $296 from strengthening
default assumptions on bonds and mortgages, and $109 from the receipt of more comprehensive
information on liabilities accepted on our retrocession business. The decrease in 2008 included
$151 for taking account of investment synergies between business units within SLF Canada and within
SLF U.S. The increase in actuarial liabilities in 2007 included $123 from changes to the economic
scenarios used in the calculation of actuarial liabilities, $107 for strengthening of longevity
assumptions, and $150 for reductions in the long-term lapse rates for universal life policies
written in Canada and the United States. The decrease in 2007 included $215 for reductions in
mortality assumptions on life insurance liabilities and $282 for the recapture of reinsurance ceded
to a Barbados subsidiary.
 E) FAIR VALUE OF ACTUARIAL LIABILITIES, FUTURE INCOME TAXES AND DEFERRED NET REALIZED GAINS
  F) ASSUMPTIONS AND MEASUREMENT UNCERTAINTY
 Mortality
   39




---



##### 



9. Actuarial Liabilities and Other Policy Liabilities (Contd)
 Morbidity
  Asset default
   Equity Market Movements
      Interest rate
    40




---



##### 



9. Actuarial Liabilities and Other Policy Liabilities (Contd)
   Policy termination rates
   Operating expenses and inflation
  G) REINSURANCE AGREEMENTS
  2008
    
    
    2007
    
    
    2006Premiums:Direct premiums
    
    $
    14,124
    
    
    $
    13,550
    
    
    $
    14,947Reinsurance assumed
    
    
    585
    
    
    
    564
    
    
    
    574Reinsurance ceded
    
    
    (1,122
    )
    
    
    (990
    )
    
    
    (912
    )$
    13,587
    
    
    $
    13,124
    
    
    $
    14,609Payments to policyholders, beneficiaries and depositors:Direct payments
    
    $
    13,863
    
    
    $
    14,292
    
    
    $
    12,987Reinsurance assumed
    
    
    657
    
    
    
    526
    
    
    
    419Reinsurance ceded
    
    
    (745
    )
    
    
    (574
    )
    
    
    (511
    )$
    13,775
    
    
    $
    14,244
    
    
    $
    12,895
  41




---



##### 



9. Actuarial Liabilities and Other Policy Liabilities (Contd)
 H) ROLE OF THE APPOINTED ACTUARY
    10. Capital Management
       42




---



##### 



10. Capital Management (Contd)
   As atDecember 31
    
    
    December 312008
    
    
    2007Equity:Participating policyholders equity
    
    $
    106
    
    
    $
    95Preferred shareholders equity
    
    
    1,495
    
    
    
    1,495Common shareholders equity
    
    
    15,808
    
    
    
    15,627Total equity
    
    
    17,409
    
    
    
    17,217Other capital securities:Subordinated debt
    
    
    2,576
    
    
    
    1,796Sun Life Assurance debentures, Series A, B (1)
    
    
    1,150
    
    
    
    1,150Total other capital securities
    
    
    3,726
    
    
    
    2,946Total capital
    
    $
    21,135
    
    
    $
    20,163
 (1)
    
    The Sun Life Assurance debentures qualify as regulatory capital up to the amount of
$1,150 of Sun Life ExchangEable Capital Securities issued by Sun Life Capital Trust, a former
subsidiary of the Company that was deconsolidated upon the adoption of CICA Handbook Accounting
Guideline 15, Consolidation of Variable Interest Entities, in 2005.
  11. Senior Debentures
  Currency of Borrowing
    
    
    Interest Rate
    
    
    Maturity
    
    
    2008
    
    
    2007Sun Life Assurance debenturesSeries A debenture
    
    
    Cdn. dollars
    
    
    
    6.87
    %
    
    
    2031
    
    
    $
    960
    
    
    $
    960Series B debenture
    
    
    Cdn. dollars
    
    
    
    7.09
    %
    
    
    2052
    
    
    
    200
    
    
    
    200SLF Inc. senior unsecured debenturesSeries A
    
    
    Cdn. dollars
    
    
    
    4.80
    %
    
    
    2035
    
    
    
    600
    
    
    
    600Series B
    
    
    Cdn. dollars
    
    
    
    4.95
    %
    
    
    2036
    
    
    
    953
    
    
    
    954Series C
    
    
    Cdn. dollars
    
    
    
    5.00
    %
    
    
    2031
    
    
    
    300
    
    
    
    300$
    3,013
    
    
    $
    3,014Fair value
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,768
    
    
    $
    3,068
  Partnership capital securities
  43




---



##### 



11. Senior Debentures (Contd)
 Sun Life Assurance debentures
  SLF Inc. senior unsecured debentures
     12. Other Liabilities
 A) COMPOSITION OF OTHER LIABILITIES
  2008
    
    
    2007Accounts payable
    
    $
    2,599
    
    
    $
    1,762Bank overdrafts
    
    
    314
    
    
    
    303Bond repurchase agreements
    
    
    1,406
    
    
    
    1,982Accrued expenses and taxes
    
    
    534
    
    
    
    1,012Borrowed funds
    
    
    348
    
    
    
    335Senior financing
    
    
    1,356
    
    
    
    996Future income taxes (Note 19)
    
    
    477
    
    
    
    582Accrued benefit liability (Note 22)
    
    
    501
    
    
    
    479Other
    
    
    296
    
    
    
    224Total other liabilities
    
    $
    7,831
    
    
    $
    7,675
 B) BOND REPURCHASE AGREEMENTS
  44




---



##### 



12. Other Liabilities (Contd)
 C) BORROWED FUNDS
  Currency of Borrowing
    
    
    Maturity
    
    
    2008
    
    
    2007Encumbrances on real estate
    
    
    Cdn. dollars
    
    
    
    2009-2018
    
    
    $
    187
    
    
    $
    188U.S. dollars
    
    
    
    2009-2015
    
    
    
    161
    
    
    
    147Total borrowed funds
    
    
    
    
    
    
    
    
    
    $
    348
    
    
    $
    335
    D) SENIOR FINANCING
     45




---



##### 



13. Subordinated Debt
  InterestCurrency
    
    
    Rate
    
    
    Maturity
    
    
    2008
    
    
    2007Subordinated debentures(1)
    
    
    Cdn. dollars
    
    
    
    6.65
    %
    
    
    2015
    
    
    $
    300
    
    
    $
    300Subordinated debentures(2)
    
    
    Cdn. dollars
    
    
    
    6.15
    %
    
    
    2022
    
    
    
    799
    
    
    
    799Subordinated debentures(3)
    
    
    Cdn. dollars
    
    
    
    6.30
    %
    
    
    2028
    
    
    
    150
    
    
    
    150Subordinated debentures(4)
    
    
    Cdn. dollars
    
    
    
    5.40
    %
    
    
    2042
    
    
    
    398
    
    
    
    398Subordinated debentures(5)
    
    
    Cdn. dollars
    
    
    
    5.59
    %
    
    
    2023
    
    
    
    398
    
    
    
    Subordinated debentures(6)
    
    
    Cdn. dollars
    
    
    
    5.12
    %
    
    
    2018
    
    
    
    348
    
    
    
    Subordinated notes
    
    
    U.S. dollars
    
    
    
    7.25
    %
    
    
    2015
    
    
    
    183
    
    
    
    149Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,576
    
    
    $
    1,796Fair value
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,397
    
    
    $
    1,849
 (1)
    
    After October 12, 2010, interest is payable at 1% over the 90-day Bankers
Acceptance Rate. Redeemable in whole or in part at any time prior to October 12, 2010. On or after
October 12, 2010, redeemable in whole on interest payment date.(2)
    
    After June 30, 2012, interest is payable at 1.54% over the 90-day Bankers
Acceptance Rate. Redeemable in whole or in part at any time.(3)
    
    Redeemable in whole or in part at any time.(4)
    
    After May 29, 2037, until maturity of the debentures interest rate is payable at 1%
over the 90-day Bankers Acceptance Rate. Redeemable in whole on
the maturity date.(5)
    
    After January 30, 2018, until maturity of the debentures interest rate is payable
at 2.1% over the 90-day Bankers Acceptance Rate. Redeemable in
whole on the maturity date.(6)
    
    After June 26, 2013, until maturity of the debentures interest rate is payable
at 2% over the 90-day Bankers Acceptance Rate. Redeemable in whole on the maturity date.
    14. Non-controlling Interests in Subsidiaries
  46




---



##### 



15. Share Capital and Shares Purchased for Cancellation
 A) SHARE CAPITAL
  
    
    An unlimited number of common shares without nominal or par value. Each common share is
entitled to one vote at meetings of the shareholders of SLF Inc. There are no pre-emptive,
redemption, purchase or conversion rights attached to the common shares.
    
    An unlimited number of Class A and Class B non-voting preferred shares, issuable in
series. The Board is authorized before issuing the shares, to fix the number, the
consideration per share, the designation of, and the rights and restrictions of the Class A
and Class B shares of each series, subject to the special rights and restrictions attached
to all the Class A and Class B shares. The Board has authorized five series of Class A
non-voting preferred shares.
  2008
    
    
    2007
    
    
    2006Number
    
    
    
    
    
    
    Number
    
    
    
    
    
    
    Numberof Shares
    
    
    Amount
    
    
    of Shares
    
    
    Amount
    
    
    of Shares
    
    
    AmountPreferred shares(in millions of shares)Balance, January 1:
    
    
    61
    
    
    $
    1,495
    
    
    
    51
    
    
    $
    1,250
    
    
    
    29
    
    
    $
    712Preferred shares issued, Class A, Series 3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    250Preferred shares issued, Class A, Series 4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    300Preferred shares issued, Class A, Series 5
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    250
    
    
    
    
    
    
    
    Issuance costs, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    (12
    )Balance, December 31
    
    
    61
    
    
    $
    1,495
    
    
    
    61
    
    
    $
    1,495
    
    
    
    51
    
    
    $
    1,250Common shares (in millions of shares)Balance, January 1
    
    
    564
    
    
    $
    7,033
    
    
    
    572
    
    
    $
    7,082
    
    
    
    582
    
    
    $
    7,173Stock options exercised (Note 18)
    
    
    1
    
    
    
    10
    
    
    
    2
    
    
    
    66
    
    
    
    2
    
    
    
    73Common shares purchased for cancellation
    
    
    (5
    )
    
    
    (60
    )
    
    
    (10
    )
    
    
    (115
    )
    
    
    (12
    )
    
    
    (164
    )Balance, December 31
    
    
    560
    
    
    $
    6,983
    
    
    
    564
    
    
    $
    7,033
    
    
    
    572
    
    
    $
    7,082
  Earliest Redemption
    
    Number of
    
    
    Face
    
    
    Net *Issue Date
    
    Dividend rate
    
    
    Date
    
    Shares
    
    
    amount
    
    
    AmountPreferred shares (in millions of shares)Preferred shares issued, Class A, Series 1
    
    February 25, 2005
    
    
    4.75
    %
    
    March 31, 2010
    
    
    16
    
    
    $
    400
    
    
    $
    394Preferred shares issued, Class A, Series 2
    
    July 15, 2005
    
    
    4.80
    %
    
    September 30, 2010
    
    
    13
    
    
    
    325
    
    
    
    318Preferred shares issued, Class A, Series 3
    
    January 13, 2006
    
    
    4.45
    %
    
    March 31, 2011
    
    
    10
    
    
    
    250
    
    
    
    245Preferred shares issued, Class A, Series 4
    
    October 10, 2006
    
    
    4.45
    %
    
    December 31, 2011
    
    
    12
    
    
    
    300
    
    
    
    293Preferred shares issued, Class A, Series 5
    
    February 2, 2007
    
    
    4.50
    %
    
    March 31, 2012
    
    
    10
    
    
    
    250
    
    
    
    245Total preferred shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61
    
    
    $
    1,525
    
    
    $
    1,495
    47




---



##### 



15. Share Capital and Shares Purchased for Cancellation (Contd)
 B) SHARES PURCHASED FOR CANCELLATION
  Period Covered
    
    Maximum Shares Authorized for PurchaseJanuary 12, 2005 to January 11, 2006
    
    30 millionJanuary 12, 2006 to January 11, 2007
    
    29 millionJanuary 12, 2007 to January 11, 2008
    
    29 millionJanuary 12, 2008 to January 11, 2009
    
    20 million
   2008
    
    
    2007
    
    
    2006Number of shares repurchased (in millions)
    
    
    4.8
    
    
    
    9.8
    
    
    
    12.2Amount (1)
    
    $
    217
    
    
    $
    502
    
    
    $
    575Average price per share
    
    $
    45.30
    
    
    $
    51.18
    
    
    $
    46.31
 (1)
    
    The total amount repurchased is allocated to common shares and retained earnings in
the consolidated statements of equity. The amount recorded to common shares is based on the average
cost per common share.
 16. Operating Expenses
  2008
    
    
    2007
    
    
    2006Compensation costs
    
    $
    1,789
    
    
    $
    1,898
    
    
    $
    1,851Premises and equipment costs
    
    
    247
    
    
    
    265
    
    
    
    259Capital asset depreciation and amortization (Note 8)
    
    
    63
    
    
    
    62
    
    
    
    67Other (1)
    
    
    904
    
    
    
    1,035
    
    
    
    851Total operating expenses
    
    $
    3,003
    
    
    $
    3,260
    
    
    $
    3,028
 (1)
    
    2007 includes the write-down of the brand name intangible asset of $52 as described
in Note 7.
 48




---



##### 



17. Earnings Per Share
  2008
    
    
    2007
    
    
    2006Common shareholders net income
    
    $
    785
    
    
    $
    2,219
    
    
    $
    2,089Less: Effect
of stock awards of subsidiaries (1)
    
    
    14
    
    
    
    20
    
    
    
    11Common shareholders net income on a diluted basis
    
    $
    771
    
    
    $
    2,199
    
    
    $
    2,078Weighted average number of shares outstanding for basic earnings per share (in millions)
    
    
    561
    
    
    
    569
    
    
    
    577Add: Adjustments relating to the dilutive impact of stock options (2)
    
    
    1
    
    
    
    3
    
    
    
    3Weighted average number of shares outstanding on a diluted basis (in millions)
    
    
    562
    
    
    
    572
    
    
    
    580
 (1)
    
    A subsidiary of SLF Inc. grants stock options exercisable for shares of the
subsidiary and restricted stock awards of the subsidiary. If these outstanding stock options were
exercised and the restricted stock awards were fully vested, the Company would record an increase
in non-controlling interests, and therefore, a reduction in common shareholders net income.(2)
    
    The effect of stock options is calculated based on the treasury stock method
requirements, which assume that unrecognized compensation as well as any proceeds from the exercise
of the options would be used to purchase common shares at the average market prices during the
period. Only stock options exercisable for shares of SLF Inc. are included in the adjustment
relating to the dilutive impact of stock options.
 18. Stock-Based Compensation
 A) STOCK OPTION PLANS
   2008
    
    
    2007
    
    
    2006Number of
    
    
    Weighted
    
    
    Number of
    
    
    Weighted
    
    
    Number of
    
    
    WeightedStock Options
    
    
    Average
    
    
    Stock Options
    
    
    Average
    
    
    Stock Options
    
    
    Average(Thousands)
    
    
    Exercise Price
    
    
    (Thousands)
    
    
    Exercise Price
    
    
    (Thousands)
    
    
    Exercise PriceBalance, January 1
    
    
    8,168
    
    
    $
    35.98
    
    
    
    9,138
    
    
    $
    32.58
    
    
    
    10,049
    
    
    $
    28.95Granted
    
    
    2,355
    
    
    
    40.47
    
    
    
    1,261
    
    
    
    52.55
    
    
    
    1,460
    
    
    
    49.29Exercised
    
    
    (306
    )
    
    
    24.99
    
    
    
    (2,075
    )
    
    
    27.45
    
    
    
    (2,228
    )
    
    
    26.57Forfeited
    
    
    (187
    )
    
    
    47.40
    
    
    
    (156
    )
    
    
    46.04
    
    
    
    (143
    )
    
    
    37.47Balance, December 31
    
    
    10,030
    
    
    $
    37.81
    
    
    
    8,168
    
    
    $
    35.98
    
    
    
    9,138
    
    
    $
    32.58Exercisable, December 31
    
    
    5,911
    
    
    $
    33.24
    
    
    
    5,333
    
    
    $
    29.19
    
    
    
    5,909
    
    
    $
    28.39
  49




---



##### 



18. Stock-Based Compensation (Contd)
  2008
    
    
    2007
    
    
    2006Compensation expense recorded
    
    $
    10
    
    
    $
    10
    
    
    $
    13Income tax benefit on expense recorded
    
    $
    1
    
    
    $
    1
    
    
    $
    1Income tax benefit realized on exercised options
    
    $
    1
    
    
    $
    4
    
    
    $
    6
   Options Outstanding
    
    
    Options ExercisableWeighted Average
    
    
    
    
    
    
    
    
    
    
    Weighted AverageNumber of
    
    
    Remaining
    
    
    Weighted
    
    
    Number of
    
    
    Remaining
    
    
    WeightedRange of
    
    Stock Options
    
    
    Contractual
    
    
    Average
    
    
    Stock Options
    
    
    Contractual
    
    
    Averageexercise prices
    
    (Thousands)
    
    
    Life (Years)
    
    
    Exercise Price
    
    
    (Thousands)
    
    
    Life (Years)
    
    
    Exercise Price$17.00 to $24.00
    
    
    942
    
    
    
    3.33
    
    
    $
    22.38
    
    
    
    942
    
    
    
    3.33
    
    
    $
    22.38$25.00 to $30.00
    
    
    2,918
    
    
    
    5.21
    
    
    
    27.84
    
    
    
    2,018
    
    
    
    3.18
    
    
    
    27.58$31.00 to $35.00
    
    
    1,132
    
    
    
    3.17
    
    
    
    32.88
    
    
    
    1,132
    
    
    
    3.17
    
    
    
    32.88$36.00 to $45.00
    
    
    1,196
    
    
    
    5.97
    
    
    
    40.43
    
    
    
    907
    
    
    
    5.91
    
    
    
    40.31$46.00 to $53.00
    
    
    3,842
    
    
    
    8.21
    
    
    
    49.83
    
    
    
    912
    
    
    
    7.46
    
    
    
    50.3710,030
    
    
    
    6.04
    
    
    $
    37.81
    
    
    
    5,911
    
    
    
    4.28
    
    
    $
    33.24
  Weighted average assumptions
    
    2008
    
    
    2007
    
    
    2006Risk-free interest rate
    
    
    3.4
    %
    
    
    4.1
    %
    
    
    4.1
    %Expected volatility
    
    
    23.8
    %
    
    
    16.0
    %
    
    
    16.0
    %Expected dividend yield
    
    
    3.8
    %
    
    
    2.4
    %
    
    
    2.2
    %Expected life of the option (in years)
    
    
    5.6
    
    
    
    5.6
    
    
    
    5.6
  B) EMPLOYEE SHARE OWNERSHIP PLAN
  C) OTHER STOCK-BASED COMPENSATION PLANS
  50




---



##### 



18. Stock-Based Compensation (Contd)
 Details of these plans are as follows:
 Senior Executives Deferred Share Unit (DSU) Plan:
 Restricted Share Unit (RSU) Plan:
 Performance Share Unit (PSU) Plan:
 Additional information for other stock-based compensation plans
 Number of units (in thousands)
    
    DSUs
    
    
    RSUs
    
    
    PSUs
    
    
    TotalUnits outstanding December 31, 2006
    
    
    588
    
    
    
    2,138
    
    
    
    611
    
    
    
    3,337Units outstanding December 31, 2007
    
    
    554
    
    
    
    1,809
    
    
    
    515
    
    
    
    2,878Units outstanding December 31, 2008
    
    
    771
    
    
    
    2,171
    
    
    
    523
    
    
    
    3,465Liability accrued as at December 31, 2008
    
    $
    17
    
    
    $
    31
    
    
    $
    7
    
    
    $
    55
  2008
    
    
    2007
    
    
    2006Compensation expense recorded
    
    $
    (16
    )
    
    $
    49
    
    
    $
    50Income tax expense (benefit) on expense recorded
    
    $
    6
    
    
    $
    (17
    )
    
    $
    (17
    )
  51




---



##### 



18. Stock-Based Compensation (Contd)
 D) STOCK-BASED COMPENSATION PLANS OF A SUBSIDIARY
   2008
    
    
    2007
    
    
    2006Awards outstanding (in thousands)
    
    
    143
    
    
    
    151
    
    
    
    172Expense
recorded in operating expenses
    
    $
    37
    
    
    $
    37
    
    
    $
    17Income tax benefit recorded
    
    $
    16
    
    
    $
    14
    
    
    $
    6
 19. Income Taxes
  2008
    
    
    2007
    
    
    2006Canadian income tax expense (benefit):Current
    
    $
    252
    
    
    $
    (89
    )
    
    $
    418Future
    
    
    98
    
    
    
    135
    
    
    
    (271
    )Total
    
    
    350
    
    
    
    46
    
    
    
    147Foreign income tax expense (benefit):Current
    
    
    (106
    )
    
    
    158
    
    
    
    306Future
    
    
    (587
    )
    
    
    318
    
    
    
    (64
    )Total
    
    
    (693
    )
    
    
    476
    
    
    
    242Total income taxes expense (benefit)
    
    $
    (343
    )
    
    $
    522
    
    
    $
    389
  52




---



##### 



19. Income Taxes (Contd)
  2008
    
    
    
    
    
    
    2007
    
    
    
    
    
    
    2006%
    
    
    
    
    
    
    %
    
    
    
    
    
    
    %Total net income
    
    $
    857
    
    
    
    
    
    
    $
    2,290
    
    
    
    
    
    
    $
    2,144Add: Income taxes expense (benefit)
    
    
    (343
    )
    
    
    
    
    
    
    522
    
    
    
    
    
    
    
    389Non-controlling interests in net income of subsidiaries
    
    
    23
    
    
    
    
    
    
    
    35
    
    
    
    
    
    
    
    27Total net income before income taxes
and non-controlling interests in net income of subsidiaries
    
    $
    537
    
    
    
    
    
    
    $
    2,847
    
    
    
    
    
    
    $
    2,560Taxes at the combined Canadian federal
and provincial statutory income tax rate
    
    $
    175
    
    
    
    32.5
    
    
    $
    996
    
    
    
    35.0
    
    
    $
    896
    
    
    
    35.0Increase (decrease) in rate resulting from:Higher (lower) effective rates on income
subject to taxation in foreign jurisdictions
    
    
    (441
    )
    
    
    (82.1
    )
    
    
    (250
    )
    
    
    (8.8
    )
    
    
    (239
    )
    
    
    (9.3
    )Tax (benefit) cost of unrecognized losses
    
    
    20
    
    
    
    3.7
    
    
    
    19
    
    
    
    0.6
    
    
    
    (41
    )
    
    
    (1.6
    )Tax exempt investment income
    
    
    (49
    )
    
    
    (9.1
    )
    
    
    (155
    )
    
    
    (5.4
    )
    
    
    (179
    )
    
    
    (7.0
    )Changes to statutory income tax rates
    
    
    (30
    )
    
    
    (5.6
    )
    
    
    (86
    )
    
    
    (3.0
    )
    
    
    (41
    )
    
    
    (1.6
    )Other
    
    
    (18
    )
    
    
    (3.3
    )
    
    
    (2
    )
    
    
    (0.1
    )
    
    
    (7
    )
    
    
    (0.3
    )Companys effective worldwide income taxes
    
    $
    (343
    )
    
    
    (63.9
    )
    
    $
    522
    
    
    
    18.3
    
    
    $
    389
    
    
    
    15.2
   53




---



##### 



19. Income Taxes (Contd)
  2008
    
    
    2007Assets
    
    
    Liabilities
    
    
    Assets
    
    
    LiabilitiesInvestments
    
    $
    1,927
    
    
    $
    809
    
    
    $
    (27
    )
    
    $
    1,257Actuarial liabilities
    
    
    (1,323
    )
    
    
    (245
    )
    
    
    261
    
    
    
    (464
    )Deferred acquisition costs
    
    
    464
    
    
    
    
    
    
    
    144
    
    
    
    (199
    )Losses available for carry forward
    
    
    62
    
    
    
    (128
    )
    
    
    6
    
    
    
    (111
    )Other
    
    
    203
    
    
    
    13
    
    
    
    3
    
    
    
    821,333
    
    
    
    449
    
    
    
    387
    
    
    
    565Valuation allowance
    
    
    (143
    )
    
    
    28
    
    
    
    (5
    )
    
    
    17Total
    
    $
    1,190
    
    
    $
    477
    
    
    $
    382
    
    
    $
    582
  2008
    
    
    2007
    
    
    2006Investments
    
    $
    (2,070
    )
    
    $
    (524
    )
    
    $
    14Actuarial liabilities
    
    
    1,851
    
    
    
    883
    
    
    
    (101
    )Deferred acquisition costs
    
    
    (46
    )
    
    
    (67
    )
    
    
    (45
    )Losses (incurred) utilized
    
    
    71
    
    
    
    (3
    )
    
    
    (75
    )Other
    
    
    (295
    )
    
    
    164
    
    
    
    (128
    )Future income tax expense (benefit)
    
    $
    (489
    )
    
    $
    453
    
    
    $
    (335
    )
 20. Income Taxes Included in OCI
  2008
    
    
    2007Unrealized foreign currency gains and losses on net investment hedges
    
    $
    (5
    )
    
    $
    13Unrealized gains and losses on available-for-sale assets
    
    
    376
    
    
    
    21Reclassifications to net income for available-for-sale assets
    
    
    (48
    )
    
    
    29Unrealized gains and losses on cash flow hedging instruments
    
    
    62
    
    
    
    28Reclassifications to net income for cash flow hedges
    
    
    
    
    
    
    4Total income taxes benefit (expense) included in OCI
    
    $
    385
    
    
    $
    95
 21. Commitments, Guarantees and Contingencies
 A) LEASE COMMITMENTS
  B) CONTRACTUAL COMMITMENTS
  54




---



##### 



21. Commitments, Guarantees and Contingencies (Contd)
 C) LETTERS OF CREDIT
  D) INDEMNITIES AND GUARANTEES
    E) GUARANTEES OF SUN LIFE ASSURANCE PREFERRED SHARES AND SUBORDINATED DEBENTURES
  55




---



##### 



21. Commitments, Guarantees and Contingencies (Contd)
  OtherSun Life
    
    
    Subsidiaries ofSLF Inc.
    
    
    Assurance
    
    
    SLF Inc.
    
    
    Consolidation
    
    
    SLF Inc.(Unconsolidated)
    
    
    (Consolidated)
    
    
    (Combined)
    
    
    Adjustments
    
    
    (Consolidated)2008Revenue
    
    $
    518
    
    
    $
    13,290
    
    
    $
    2,689
    
    
    $
    (934
    )
    
    $
    15,563Shareholders net income
    
    $
    855
    
    
    $
    1,506
    
    
    $
    (814
    )
    
    $
    (692
    )
    
    $
    8552007Revenue
    
    $
    217
    
    
    $
    15,154
    
    
    $
    6,445
    
    
    $
    (628
    )
    
    $
    21,188Shareholders net income
    
    $
    2,288
    
    
    $
    1,389
    
    
    $
    858
    
    
    $
    (2,247
    )
    
    $
    2,2882006Revenue
    
    $
    112
    
    
    $
    16,424
    
    
    $
    8,347
    
    
    $
    (596
    )
    
    $
    24,287Shareholders net income
    
    $
    2,137
    
    
    $
    1,411
    
    
    $
    728
    
    
    $
    (2,139
    )
    
    $
    2,137
 OtherSun Life
    
    
    Subsidiaries ofSLF Inc.
    
    
    Assurance
    
    
    SLF Inc.
    
    
    Consolidation
    
    
    SLF Inc.(Unconsolidated)
    
    
    (Consolidated)
    
    
    (Combined)
    
    
    Adjustments
    
    
    (Consolidated)2008Invested assets
    
    $
    20,393
    
    
    $
    81,169
    
    
    $
    24,103
    
    
    $
    (18,787
    )
    
    $
    106,878Total other assets
    
    $
    4,844
    
    
    $
    10,912
    
    
    $
    8,942
    
    
    $
    (11,743
    )
    
    $
    12,955Actuarial and other policy liabilities
    
    $
    
    
    
    $
    65,954
    
    
    $
    15,484
    
    
    $
    (27
    )
    
    $
    81,411Total other liabilities
    
    $
    7,934
    
    
    $
    15,729
    
    
    $
    12,242
    
    
    $
    (14,892
    )
    
    $
    21,0132007Invested assets
    
    $
    20,352
    
    
    $
    77,928
    
    
    $
    23,586
    
    
    $
    (18,846
    )
    
    $
    103,020Total other assets
    
    $
    5,798
    
    
    $
    9,505
    
    
    $
    10,925
    
    
    $
    (14,957
    )
    
    $
    11,271Actuarial and other policy liabilities
    
    $
    
    
    
    $
    64,502
    
    
    $
    15,175
    
    
    $
    153
    
    
    $
    79,830Total other liabilities
    
    $
    9,028
    
    
    $
    13,049
    
    
    $
    13,359
    
    
    $
    (18,192
    )
    
    $
    17,244
 F) LEGAL AND REGULATORY PROCEEDINGS
   56




---



##### 



22. Pension Plans and Other Post-Retirement Benefits
     Pension
    
    
    Post-Retirement2008
    
    
    2007
    
    
    2008
    
    
    2007Change in projected benefit obligation:Projected benefit obligation, January 1
    
    $
    2,426
    
    
    $
    2,643
    
    
    $
    249
    
    
    $
    328Change in January 1 balance due to acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5Service cost
    
    
    50
    
    
    
    53
    
    
    
    5
    
    
    
    7Interest cost
    
    
    129
    
    
    
    128
    
    
    
    14
    
    
    
    15Adjustment for change in measurement date
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    Actuarial losses (gains)
    
    
    (331
    )
    
    
    (159
    )
    
    
    (34
    )
    
    
    (23
    )Benefits paid
    
    
    (112
    )
    
    
    (104
    )
    
    
    (11
    )
    
    
    (10
    )Curtailments, settlements and plan amendments
    
    
    
    
    
    
    4
    
    
    
    (1
    )
    
    
    (64
    )Effect of changes in currency exchange rates
    
    
    22
    
    
    
    (139
    )
    
    
    11
    
    
    
    (9
    )Projected benefit obligation, December 31(1), (2)
    
    $
    2,186
    
    
    $
    2,426
    
    
    $
    233
    
    
    $
    249Accumulated benefit obligation, December 31(3)
    
    $
    2,005
    
    
    $
    2,213Change in plan assets:Fair value of plan assets, January 1
    
    $
    2,393
    
    
    $
    2,502
    
    
    $
    
    
    
    $
    Net actual return on plan assets
    
    
    (307
    )
    
    
    122
    
    
    
    
    
    
    
    Employer contributions
    
    
    14
    
    
    
    16
    
    
    
    11
    
    
    
    11Adjustment for change in measurement date
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    Benefits paid
    
    
    (112
    )
    
    
    (104
    )
    
    
    (11
    )
    
    
    (11
    )Effect of changes in currency exchange rates
    
    
    5
    
    
    
    (143
    )
    
    
    
    
    
    
    Fair value of plan assets, December 31(1)
    
    $
    1,995
    
    
    $
    2,393
    
    
    $
    
    
    
    $
    Net funded status, December 31
    
    $
    (191
    )
    
    $
    (33
    )
    
    $
    (233
    )
    
    $
    (249
    )Unamortized net actuarial loss
    
    
    436
    
    
    
    319
    
    
    
    (18
    )
    
    
    22Unamortized past service cost
    
    
    11
    
    
    
    12
    
    
    
    (28
    )
    
    
    (50
    )Unamortized transition asset
    
    
    (52
    )
    
    
    (72
    )
    
    
    (4
    )
    
    
    (6
    )Contributions (transfers), October 1 to December 31(1)
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    1Accrued benefit asset (liability), December 31(1)
    
    $
    204
    
    
    $
    225
    
    
    $
    (283
    )
    
    $
    (282
    )Balance sheet classification of accrued benefit asset (liability), December 31:Other assets
    
    $
    422
    
    
    $
    422
    
    
    $
    
    
    
    $
    Other liabilities
    
    $
    218
    
    
    $
    197
    
    
    $
    283
    
    
    $
    282Pension plans with projected benefit obligations in excess of plan assets:Projected benefit obligations
    
    $
    1,027
    
    
    $
    778Plan assets
    
    $
    756
    
    
    $
    553
 57




---



##### 



22. Pension Plans and Other Post-Retirement Benefits (Contd)
  Pension
    
    
    Post-Retirement2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006Components of defined benefit cost recognized:Service cost, curtailments and settlements
    
    $
    50
    
    
    $
    53
    
    
    $
    56
    
    
    $
    5
    
    
    $
    (7
    )
    
    $
    9Plan amendments
    
    
    
    
    
    
    4
    
    
    
    8
    
    
    
    (1
    )
    
    
    (64
    )
    
    
    Interest cost
    
    
    129
    
    
    
    128
    
    
    
    124
    
    
    
    14
    
    
    
    15
    
    
    
    17Actual return on plan assets
    
    
    307
    
    
    
    (122
    )
    
    
    (242
    )
    
    
    
    
    
    
    
    
    
    
    Actuarial losses (gains)
    
    
    (331
    )
    
    
    (159
    )
    
    
    (25
    )
    
    
    (34
    )
    
    
    (23
    )
    
    
    (27
    )Benefit cost before adjustments to recognize the
long-term nature of defined benefit plans
    
    $
    155
    
    
    $
    (96
    )
    
    $
    (79
    )
    
    $
    (16
    )
    
    $
    (79
    )
    
    $
    (1
    )Adjustments to recognize the long-term nature of
defined benefit plans:Difference between expected and actual
return on plan assets for year
    
    $
    (462
    )
    
    $
    (41
    )
    
    $
    73
    
    
    $
    
    
    
    $
    
    
    
    $
    Difference between actuarial losses (gains) recognized and actual
actuarial losses (gains) on accrued benefit obligation for year
    
    
    363
    
    
    
    189
    
    
    
    55
    
    
    
    35
    
    
    
    25
    
    
    
    31Difference between amortization of past service costs
for year and actual plan amendments for year
    
    
    1
    
    
    
    1
    
    
    
    (7
    )
    
    
    (23
    )
    
    
    45
    
    
    
    (2
    )Amortization of transition obligation (asset)
    
    
    (18
    )
    
    
    (18
    )
    
    
    (17
    )
    
    
    (2
    )
    
    
    (2
    )
    
    
    (2
    )Total adjustments to defer costs to future periods
    
    $
    (116
    )
    
    $
    131
    
    
    $
    104
    
    
    $
    10
    
    
    $
    68
    
    
    $
    27Total benefit cost recognized
    
    $
    39
    
    
    $
    35
    
    
    $
    25
    
    
    $
    (6
    )
    
    $
    (11
    )
    
    $
    26
 Key weighted average assumptions:
 Pensions
    
    
    Post-Retirement2008
    
    
    2007
    
    
    2008
    
    
    2007To measure benefit obligation at end of year(1)Discount rate
    
    
    6.5
    %
    
    
    5.5
    %
    
    
    6.5
    %
    
    
    5.4
    %Rate of compensation increase
    
    
    3.6
    %
    
    
    3.7
    %
    
    
    
    
    
    
    Initial health care cost trend rate(4)
    
    
    
    
    
    
    
    
    
    
    9.4
    %
    
    
    9.8
    %To determine benefit costs or income for the periodDiscount rate
    
    
    5.5
    %
    
    
    5.2
    %
    
    
    5.4
    %
    
    
    5.1
    %Expected long-term rate of return on plan assets
    
    
    7.0
    %
    
    
    7.5
    %
    
    
    
    
    
    
    Rate of compensation increase
    
    
    3.7
    %
    
    
    3.7
    %
    
    
    
    
    
    
    Initial health care cost trend rate(4)
    
    
    
    
    
    
    
    
    
    
    9.8
    %
    
    
    9.8
    %
 (1)
    
    The measurement date for the plans in the United States has changed from September
30 to December 31 in 2008. All other defined benefit plans have the measurement date as December
31.(2)
    
    The date of the most recent actuarial valuation for funding purposes was January 1,
2006 for the United Kingdom, and January 1, 2008 for all other plans. The next required funding
valuation is January 1, 2011 for the plans in Canada, and January 1, 2009 for all other plans.(3)
    
    The accumulated benefit obligation is smaller than the projected benefit obligation
since it does not recognize projected future compensation increases.(4)
    
    The assumed medical cost trend rate used in measuring the accumulated
post-retirement benefits obligation in Canada in 2008 was 9.5%, decreasing by 0.5% each year to an
ultimate rate of 5.5% per year. In the United States in 2008, the assumed rate was 9%, decreasing
gradually to an ultimate rate of 5.0% per year in 2014. The assumed dental cost trend rate is 4.5%
in Canada and 5% in the United States.
 58




---



##### 



22. Pension Plans and Other Post-Retirement Benefits (Contd)
 Discount rate, return on plan assets and rate of compensation increase:
     1%Increase
    
    
    DecreaseEffect on post-retirement benefit obligations
    
    $
    19
    
    
    $
    (17
    )Effect on aggregated service and interest costs
    
    $
    2
    
    
    $
    (2
    )Composition of fair value of plan assets, December 31:2008
    
    
    2007Equity investments
    
    
    37
    %
    
    
    43
    %Fixed income investments
    
    
    47
    %
    
    
    44
    %Real estate investments
    
    
    5
    %
    
    
    4
    %Other
    
    
    11
    %
    
    
    9
    %Total composition of fair value of plan assets
    
    
    100
    %
    
    
    100
    %
 Target allocation of plan assets, December 31:
 2008
    
    
    2007Equity investments
    
    
    42
    %
    
    
    42
    %Fixed income investments
    
    
    45
    %
    
    
    45
    %Real estate investments
    
    
    4
    %
    
    
    5
    %Other
    
    
    9
    %
    
    
    8
    %Total
    
    
    100
    %
    
    
    100
    %
 59




---



##### 



22. Pension Plans and Other Post-Retirement Benefits (Contd)
    Post-Pension
    
    
    Retirement
    
    
    TotalExpected contributions for the next 12 months
        
        
        
    $
    31
    
    
    $
    8
    
    
    $
    39Expected future benefit payments20142009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    -2018Pension
    
    $
    91
    
    
    $
    96
    
    
    $
    100
    
    
    $
    108
    
    
    $
    112
    
    
    $
    660Post-retirement
    
    
    14
    
    
    
    14
    
    
    
    15
    
    
    
    16
    
    
    
    16
    
    
    
    93Total
    
    $
    105
    
    
    $
    110
    
    
    $
    115
    
    
    $
    124
    
    
    $
    128
    
    
    $
    753
  23. Foreign Exchange Gain/Loss
  24. Related Party Transactions
   60




---



##### 



25. Variable Interest Entities
   26.
    
    Summary of Differences Between Accounting Principles Generally Accepted in Canada and in the United States
  61




---



##### 



26.
    
    Summary of Differences Between Accounting Principles 
Generally Accepted in Canada and in the United States (Contd)
  i) Consolidated statements of operations:
 2008


    


    2007
    
    

    2006Cdn.
    
    
    U.S.
    
    
    Cdn.
    
    
    U.S.
    
    
    Cdn.
    
    
    U.S.GAAP
    
    
    GAAP
    
    
    GAAP
    
    
    GAAP
    
    
    GAAP
    
    
    GAAPREVENUEPremiums
    
    $
    13,587
    
    
    $
    8,979
    
    
    $
    13,124
    
    
    $
    8,517
    
    
    $
    14,609
    
    
    $
    7,791Total net investment income (loss)
    
    
    (526
    )
    
    
    2,401
    
    
    
    4,748
    
    
    
    5,823
    
    
    
    6,664
    
    
    
    6,022Net realized gains (losses)
    
    
    (241
    )
    
    
    (951
    )
    
    
    104
    
    
    
    291
    
    
    
    
    
    
    
    337Fee income
    
    
    2,743
    
    
    
    3,335
    
    
    
    3,212
    
    
    
    3,343
    
    
    
    3,014
    
    
    
    3,07715,563
    
    
    
    13,764
    
    
    
    21,188
    
    
    
    17,974
    
    
    
    24,287
    
    
    
    17,227POLICY BENEFITS AND EXPENSESPayments to policyholders, beneficiaries and depositors
    
    
    14,314
    
    
    
    9,847
    
    
    
    15,196
    
    
    
    9,813
    
    
    
    13,730
    
    
    
    8,860Increase (decrease) in actuarial liabilities
    
    
    (4,429
    )
    
    
    2,085
    
    
    
    (2,515
    )
    
    
    1,262
    
    
    
    2,525
    
    
    
    1,602Acquisition expense amortization
    
    
    50
    
    
    
    (394
    )
    
    
    64
    
    
    
    337
    
    
    
    112
    
    
    
    779Other expenses
    
    
    5,091
    
    
    
    3,970
    
    
    
    5,596
    
    
    
    4,504
    
    
    
    5,360
    
    
    
    4,15915,026
    
    
    
    15,508
    
    
    
    18,341
    
    
    
    15,916
    
    
    
    21,727
    
    
    
    15,400INCOME (LOSS) BEFORE INCOME TAXES AND
NON-CONTROLLING INTERESTS
    
    
    537
    
    
    
    (1,744
    )
    
    
    2,847
    
    
    
    2,058
    
    
    
    2,560
    
    
    
    1,827Income taxes expense (benefit)
    
    
    (343
    )
    
    
    (1,088
    )
    
    
    522
    
    
    
    308
    
    
    
    389
    
    
    
    243Non-controlling interests in net income of subsidiaries
    
    
    23
    
    
    
    23
    
    
    
    35
    
    
    
    35
    
    
    
    27
    
    
    
    27INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING
CHANGES
    
    
    857
    
    
    
    (679
    )
    
    
    2,290
    
    
    
    1,715
    
    
    
    2,144
    
    
    
    1,557Cumulative effect of accounting changes, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4TOTAL NET INCOME (LOSS)
    
    
    857
    
    
    
    (679
    )
    
    
    2,290
    
    
    
    1,715
    
    
    
    2,144
    
    
    
    1,561Less participating policyholders net income
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    7
    
    
    
    SHAREHOLDERS NET INCOME (LOSS)
    
    
    855
    
    
    
    (679
    )
    
    
    2,288
    
    
    
    1,715
    
    
    
    2,137
    
    
    
    1,561Less preferred shareholder dividends
    
    
    70
    
    
    
    70
    
    
    
    69
    
    
    
    69
    
    
    
    48
    
    
    
    48COMMON SHAREHOLDERS NET INCOME (LOSS)
    
    $
    785
    
    
    $
    (749
    )
    
    $
    2,219
    
    
    $
    1,646
    
    
    $
    2,089
    
    
    $
    1,513Earnings (loss) per shareBasicCommon shareholders net income (loss) excluding
cumulative
effect of accounting changes
    
    $
    1.40
    
    
    $
    (1.34
    )
    
    $
    3.90
    
    
    $
    2.89
    
    
    $
    3.62
    
    
    $
    2.61Cumulative effect of accounting changes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.01Common shareholders net income (loss)
    
    $
    1.40
    
    
    $
    (1.34
    )
    
    $
    3.90
    
    
    $
    2.89
    
    
    $
    3.62
    
    
    $
    2.62DilutedCommon shareholders net income (loss) excluding
cumulative
effect of accounting changes
    
    $
    1.37
    
    
    $
    (1.36
    )
    
    $
    3.85
    
    
    $
    2.84
    
    
    $
    3.58
    
    
    $
    2.58Cumulative effect of accounting changes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.01Common shareholders net income (loss)
    
    $
    1.37
    
    
    $
    (1.36
    )
    
    $
    3.85
    
    
    $
    2.84
    
    
    $
    3.58
    
    
    $
    2.59Weighted average shares outstanding in millionsBasic
    
    
    561
    
    
    
    561
    
    
    
    569
    
    
    
    569
    
    
    
    577
    
    
    
    577Diluted
    
    
    562
    
    
    
    561
    
    
    
    572
    
    
    
    572
    
    
    
    580
    
    
    
    580
 62




---



##### 



26.
    
    Summary of Differences Between Accounting Principles
 Generally Accepted in
Canada and in the United States (Contd)ii)
    
    Consolidated balance sheets:
 2008
    
    
    2007Cdn.
    
    
    U.S.
    
    
    Cdn.
    
    
    U.S.GAAP
    
    
    GAAP
    
    
    GAAP
    
    
    GAAPASSETSBonds  held-for-trading
    
    $
    48,458
    
    
    $
    15,915
    
    
    $
    50,608
    
    
    $
    5,781Bonds  available-for-sale
    
    
    10,616
    
    
    
    42,810
    
    
    
    9,148
    
    
    
    53,962Mortgages and corporate loans
    
    
    22,302
    
    
    
    22,302
    
    
    
    20,742
    
    
    
    20,742Stocks  held-for-trading
    
    
    3,440
    
    
    
    1,062
    
    
    
    4,438
    
    
    
    1,463Stocks  available-for-sale
    
    
    1,018
    
    
    
    3,396
    
    
    
    788
    
    
    
    3,763Real estate, net of accumulated depreciation (accumulated
depreciation: 2008  $528; 2007  $441)
    
    
    4,908
    
    
    
    3,346
    
    
    
    4,303
    
    
    
    2,961Cash and cash equivalents
    
    
    7,263
    
    
    
    7,098
    
    
    
    3,603
    
    
    
    3,740Short-term securities (1)
    
    
    1,616
    
    
    
    1,584
    
    
    
    1,897
    
    
    
    1,882Derivative assets
    
    
    2,669
    
    
    
    2,673
    
    
    
    1,947
    
    
    
    1,931Policy loans and other invested assets
    
    
    3,585
    
    
    
    4,648
    
    
    
    4,349
    
    
    
    6,157Other invested assets  held-for-trading
    
    
    380
    
    
    
    204
    
    
    
    440
    
    
    
    264Other invested assets  available-for-sale
    
    
    623
    
    
    
    793
    
    
    
    757
    
    
    
    954Invested assets
    
    
    106,878
    
    
    
    105,831
    
    
    
    103,020
    
    
    
    103,600Goodwill
    
    
    6,598
    
    
    
    4,854
    
    
    
    6,018
    
    
    
    4,565Intangible assets
    
    
    878
    
    
    
    872
    
    
    
    775
    
    
    
    770Deferred acquisition costs
    
    
    154
    
    
    
    9,384
    
    
    
    139
    
    
    
    6,677Future income taxes (2)
    
    
    1,190
    
    
    
    1,673
    
    
    
    382
    
    
    
    233Other assets
    
    
    4,135
    
    
    
    9,292
    
    
    
    3,957
    
    
    
    8,287Total other assets
    
    
    12,955
    
    
    
    26,075
    
    
    
    11,271
    
    
    
    20,532Segregated funds assets (3)
    
    
    
    
    
    
    65,362
    
    
    
    
    
    
    
    72,834Total consolidated assets
    
    $
    119,833
    
    
    $
    197,268
    
    
    $
    114,291
    
    
    $
    196,966Segregated funds net assets (3)
    
    $
    65,762
    
    
    
    
    
    
    $
    73,205LIABILITIES AND EQUITYActuarial liabilities and other policy liabilities
    
    $
    81,411
    
    
    $
    57,082
    
    
    $
    79,830
    
    
    $
    53,920Contract holder deposits
    
    
    
    
    
    
    37,268
    
    
    
    
    
    
    
    32,706Amounts on deposit
    
    
    4,079
    
    
    
    4,403
    
    
    
    3,747
    
    
    
    3,616Derivative liabilities
    
    
    3,219
    
    
    
    3,271
    
    
    
    638
    
    
    
    642Deferred net realized gains
    
    
    251
    
    
    
    
    
    
    
    276Senior debentures
    
    
    3,013
    
    
    
    3,013
    
    
    
    3,014
    
    
    
    3,014Future income taxes (2)
    
    
    477
    
    
    
    236
    
    
    
    582
    
    
    
    545Other liabilities
    
    
    7,354
    
    
    
    9,718
    
    
    
    7,093
    
    
    
    10,625Total general fund liabilities
    
    
    99,804
    
    
    
    114,991
    
    
    
    95,180
    
    
    
    105,068Subordinated debt
    
    
    2,576
    
    
    
    2,576
    
    
    
    1,796
    
    
    
    1,796Non-controlling interests in subsidiaries
    
    
    44
    
    
    
    44
    
    
    
    98
    
    
    
    98Segregated funds liabilities (3)
    
    
    
    
    
    
    65,362
    
    
    
    
    
    
    
    72,834Equity
    
    
    17,409
    
    
    
    14,295
    
    
    
    17,217
    
    
    
    17,170Total consolidated liabilities and equity
    
    $
    119,833
    
    
    $
    197,268
    
    
    $
    114,291
    
    
    $
    196,966Segregated funds contract liabilities (3)
    
    $
    65,762
    
    
    
    
    
    
    $
    73,205
 
 (1)
    
    U.S. GAAP terminology is short-term investments.(2)
    
    U.S. GAAP terminology is deferred income tax.(3)
    
    U.S. GAAP terminology is separate accounts. 63




---



##### 



26.
    
    Summary of Differences Between Accounting Principles Generally
 Accepted in
Canada and in the United States (Contd)iii)
    
    Consolidated statements of equity:
 2008
    
    
    2007Cdn.
    
    
    U.S.
    
    
    Cdn.
    
    
    U.S.GAAP
    
    
    GAAP
    
    
    GAAP
    
    
    GAAPPARTICIPATING POLICYHOLDERS CAPITAL ACCOUNT:Balance, January 1
    
    $
    95
    
    
    $
    
    
    
    $
    92
    
    
    $Adjustment for change in accounting policy (Note 2)
    
    
    
    
    
    
    
    
    
    
    6Net income attributed to participating policyholders
    
    
    2
    
    
    
    
    
    
    
    2Total other comprehensive income (loss)
    
    
    9
    
    
    
    
    
    
    
    (5
    )Balance, December 31
    
    
    106
    
    
    
    
    
    
    
    95SHAREHOLDERS EQUITY:PREFERRED SHARESBalance, January 1
    
    
    1,495
    
    
    
    1,495
    
    
    
    1,250
    
    
    
    1,250Shares issued, net of issuance costs
    
    
    
    
    
    
    
    
    
    
    245
    
    
    
    245Balance, December 31
    
    
    1,495
    
    
    
    1,495
    
    
    
    1,495
    
    
    
    1,495PAID IN CAPITALBalance, January 1
    
    
    7,095
    
    
    
    12,912
    
    
    
    7,154
    
    
    
    12,981Stock options exercised (2)
    
    
    8
    
    
    
    8
    
    
    
    55
    
    
    
    55Common shares purchased for cancellation (1)
    
    
    (60
    )
    
    
    (108
    )
    
    
    (115
    )
    
    
    (211
    )Stock option compensation (3)
    
    
    58
    
    
    
    71
    
    
    
    1
    
    
    
    55Subsidiary equity transaction
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    32Balance, December 31
    
    
    7,101
    
    
    
    12,903
    
    
    
    7,095
    
    
    
    12,912RETAINED EARNINGSBalance, January 1, as previously reported
    
    
    11,282
    
    
    
    5,052
    
    
    
    10,016
    
    
    
    4,450Adjustment for changes in accounting policies (Note 2 and Section C of
this note)
    
    
    
    
    
    
    (87
    )
    
    
    186
    
    
    
    (1
    )Balance, January 1, after change in accounting policy
    
    
    11,282
    
    
    
    4,965
    
    
    
    10,202
    
    
    
    4,449Net income (loss) for the year attributed to shareholders
    
    
    855
    
    
    
    (679
    )
    
    
    2,288
    
    
    
    1,715Dividends on common shares
    
    
    (809
    )
    
    
    (809
    )
    
    
    (752
    )
    
    
    (752
    )Dividends on preferred shares
    
    
    (70
    )
    
    
    (70
    )
    
    
    (69
    )
    
    
    (69
    )Common shares purchased for cancellation
    
    
    (157
    )
    
    
    (109
    )
    
    
    (387
    )
    
    
    (291
    )Balance, December 31
    
    
    11,101
    
    
    
    3,298
    
    
    
    11,282
    
    
    
    5,052ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), net of taxesBalance, January 1, as previously reported
    
    
    (2,750
    )
    
    
    (2,289
    )
    
    
    (1,328
    )
    
    
    (170
    )Adjustment for change in accounting policy (Note 2 and Section C of
this note)
    
    
    
    
    
    
    87
    
    
    
    359
    
    
    
    Balance, January 1, after changes in accounting policies
    
    
    (2,750
    )
    
    
    (2,202
    )
    
    
    (969
    )
    
    
    (170
    )Total other comprehensive income (loss)
    
    
    356
    
    
    
    (1,199
    )
    
    
    (1,781
    )
    
    
    (2,119
    )Balance, December 31
    
    
    (2,394
    )
    
    
    (3,401
    )
    
    
    (2,750
    )
    
    
    (2,289
    )Total
retained earnings and accumulated other comprehensive income (loss)
    
    
    8,707
    
    
    
    (103
    )
    
    
    8,532
    
    
    
    2,763TOTAL EQUITY
    
    $
    17,409
    
    
    $
    14,295
    
    
    $
    17,217
    
    
    $
    17,170ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), net of taxesBalance, end of year, consists of:Unamortized net actuarial loss (4)
    
    
    
    
    
    
    (173
    )
    
    
    
    
    
    
    (126
    )Unamortized past service cost (4)
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    29Unamortized transition asset (4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5Unrealized gains (losses) on available-for-sale assets
    
    
    (1,429
    )
    
    
    (2,371
    )
    
    
    25
    
    
    
    1,316Unrealized foreign currency translation gains (losses), net of hedging
activities
    
    
    (1,049
    )
    
    
    (1,362
    )
    
    
    (2,821
    )
    
    
    (2,866
    )Unrealized gains (losses) on derivatives designated as cash flow hedges
    
    
    79
    
    
    
    (7
    )
    
    
    32
    
    
    
    3Deferred acquisition costs and other liabilities
    
    
    
    
    
    
    499
    
    
    
    
    
    
    
    (650
    )Balance, December 31
    
    $
    (2,399
    )
    
    $
    (3,401
    )
    
    $
    (2,764
    )
    
    $
    (2,289
    )
 
 (1)
    
    Shown as share capital under Cdn. GAAP.(2)
    
    Shown as share capital and contributed surplus under Cdn. GAAP.(3)
    
    Shown as contributed surplus under Cdn. GAAP.(4)
    
    Included in other assets and other liabilities for plans with surpluses and deficits respectively under Cdn. GAAP. 64




---



##### 



26.
    
    Summary of Differences Between Accounting Principles
 Generally Accepted in
Canada and in the United States (Contd)iv)
    
    Comprehensive income:
  2008
    
    
    2007
    
    
    2006Cdn. GAAP
    
    
    U.S. GAAP
    
    
    Cdn. GAAP
    
    
    U.S. GAAP
    
    
    U.S. GAAPTotal net income (loss)
    
    $
    857
    
    
    $
    (679
    )
    
    $
    2,290
    
    
    $
    1,715
    
    
    $
    1,561Other comprehensive income (loss), net of taxes:Unrealized foreign currency translation gains
(losses), excluding hedges
    
    
    2,162
    
    
    
    1,955
    
    
    
    (1,781
    )
    
    
    (1,807
    )
    
    
    236Unrealized foreign currency gains (losses), net
investment hedges
    
    
    (396
    )
    
    
    (451
    )
    
    
    282
    
    
    
    343
    
    
    
    (60
    )Net adjustment for foreign exchange losses
    
    
    6
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    Unrealized gains (losses) on available-for-sale
assets
    
    
    (1,653
    )
    
    
    (4,763
    )
    
    
    (238
    )
    
    
    (1,140
    )
    
    
    78Reclassifications to net income (loss) for
available-for-sale assets
    
    
    199
    
    
    
    885
    
    
    
    (84
    )
    
    
    (288
    )
    
    
    (30
    )Unrealized gains (losses) on cash flow hedging
instruments
    
    
    24
    
    
    
    (34
    )
    
    
    40
    
    
    
    7
    
    
    
    5Reclassifications to net income (loss) for cash
flow hedges
    
    
    23
    
    
    
    24
    
    
    
    (8
    )
    
    
    (7
    )
    
    
    (8
    )Changes to deferred acquisition costs and other
liabilities
    
    
    
    
    
    
    1,253
    
    
    
    
    
    
    
    639
    
    
    
    268Changes in unamortized net actuarial loss
    
    
    
    
    
    
    (47
    )
    
    
    
    
    
    
    114
    
    
    
    Changes in past service cost
    
    
    
    
    
    
    (16
    )
    
    
    
    
    
    
    22
    
    
    
    Changes in transition asset
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    (2
    )
    
    
    Additional minimum pension liability (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    136Total other comprehensive income (loss)
    
    
    365
    
    
    
    (1,199
    )
    
    
    (1,786
    )
    
    
    (2,119
    )
    
    
    625Less:Participating policyholders net income
    
    
    2
    
    
    
    
    
    
    
    2Participating policyholders foreign currency
translation gains (losses) excluding hedges
    
    
    9
    
    
    
    
    
    
    
    (5
    )Shareholders comprehensive income (loss)
    
    $
    1,211
    
    
    $
    (1,878
    )
    
    $
    507
    
    
    $
    (404
    )
    
    $
    2,186
 
 (1)
    
    The additional minimum pension liability includes the impact of adopting FASB
Statement No. 158  Employers Accounting for Defined Benefit Pension and Other Postretirement
Plans (SFAS 158). 65




---



##### 



26.
    
    Summary of Differences Between Accounting Principles
 Generally Accepted in
Canada and in the United States (Contd)v)
    
    Effect of differences between Cdn. GAAP and U.S. GAAP net income:
  2008
    
    
    2007
    
    
    2006Total net income in accordance with Cdn. GAAP
    
    $
    857
    
    
    $
    2,290
    
    
    $
    2,144Adjustments related to:InvestmentsBonds(1) excluding interest rate related impairment
    
    
    2,314
    
    
    
    1,559
    
    
    
    (217
    )Interest rate related impairment
    
    
    (682
    )
    
    
    (100
    )
    
    
    Stocks and segregated fund units(1)
    
    
    980
    
    
    
    114
    
    
    
    75Derivative instruments
    
    
    (136
    )
    
    
    (96
    )
    
    
    (65
    )Real estate
    
    
    (214
    )
    
    
    (125
    )
    
    
    (95
    )Total investments
    
    
    2,262
    
    
    
    1,352
    
    
    
    (302
    )Deferred acquisition costsDeferred acquisition costs  deferred
    
    
    793
    
    
    
    723
    
    
    
    897Deferred acquisition costs  amortization and interest
    
    
    444
    
    
    
    (273
    )
    
    
    (665
    )Total deferred acquisition costs
    
    
    1,237
    
    
    
    450
    
    
    
    232Actuarial liabilities and other policyholder revenues and expensesPremium and fees revenue
    
    
    (3,766
    )
    
    
    (4,167
    )
    
    
    (6,466
    )Payments to policyholders, beneficiaries and depositors
    
    
    4,467
    
    
    
    5,383
    
    
    
    4,870Actuarial liabilities
    
    
    (6,514
    )
    
    
    (3,777
    )
    
    
    923Total actuarial liabilities and other policyholder revenues and expenses
    
    
    (5,813
    )
    
    
    (2,561
    )
    
    
    (673
    )Other
    
    
    33
    
    
    
    (30
    )
    
    
    10Income tax effect of above adjustments
    
    
    745
    
    
    
    214
    
    
    
    146Change in accounting policy
    
    
    
    
    
    
    
    
    
    
    4Total net income (loss) in accordance with U.S. GAAP
    
    $
    (679
    )
    
    $
    1,715
    
    
    $
    1,561
 
 (1)
    
    In 2007 and 2008, differences in net income are attributable to different asset
designations. Under Cdn. GAAP, assets are designated as held-for-trading for investments supporting
actuarial liabilities, and available-for-sale for assets not supporting actuarial liabilities (as
described in more detail in Note 2). For U.S. GAAP, most of the Companys assets are designated as
available-for-sale. 66




---



##### 



26.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted in Canada and in the United States (Contd)
 B)
    
    SIGNIFICANT ACCOUNTING POLICY DIFFERENCES BETWEEN CDN. GAAP AND U.S. GAAP APPLICABLE TO THE
COMPANY
 (i) The following table shows the significant accounting policy differences between Cdn. GAAP
and U.S. GAAP:
 Cdn. GAAP
    
    U.S. GAAPBonds and
Stocks
    
    Any financial asset that is not a loan or a receivable
and whose fair value can be reliably measured can
be designated as held-for-trading.
    
    Commencing January 1, 2008, as a result of issuance of FAS
159, certain financial assets and liabilities can be designated
as held-for-trading under certain conditions. Prior to 2008,
only debt and equity securities that have reliably
determinable fair values and are bought and held principally
for the purpose of selling them in the near term are classified
as held-for-trading.In addition to other-than-temporary impairment due to issuer
credit, other-than-temporary impairment charges are
recorded for declines in fair values of available-for-sale bonds
due to changes in prevailing interest rates when the Company
does not have the intent and ability to hold to recovery.Real estate
    
    Real estate held for investment is originally
recorded at cost.
    
    Real estate held for investment is carried at depreciated cost.The carrying value is adjusted towards the fair value
at 3% of the difference between fair value and
carrying value per quarter. Realized gains and losses
on sales are deferred and amortized into net
investment income at the rate of 3% of the
unamortized balance each quarter.
    
    Realized gains and losses on sales are reflected in income
immediately.
Other than temporary declines in value of specific properties
result in a write-down charged to income.The Company records a write-down for any other
than temporary decline in the value of the entire
real estate portfolio.Deferred 
acquisition 
costs
    
    Costs of acquiring new insurance and annuity
business, primarily commissions; underwriting; issue
expenses and agency expenses are implicitly
recognized in actuarial liabilities for most of the
policies.
    
    Acquisition costs are deferred and recorded as an asset.
Amortization of such costs is dependent on the product to
which the costs relate. For participating life insurance
contracts, except for participating policies in the United
Kingdom, amortization is based on a constant percentage of
gross margin. For universal life and investment-type
contracts, amortization is based on a constant percentage of
gross profit. For other non-participating products, including
term, group and disability insurance, amortization is based on
a constant percentage of premium. Amortization for
participating policies in the United Kingdom is based on the
change in the sum assured. In cases where amortization is
based on gross profit or margin, and available-for-sale bonds
or stocks are used to support the underlying contract liability
or actuarial reserve, a portion of the unrealized gains and
losses balance is removed from equity and netted against the
deferred acquisition cost balance.
 67




---



##### 



26.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted in Canada and in the United States (Contd)
 Cdn. GAAP
    
    U.S. GAAPActuarial
liabilities and
contract
holder
deposits
    
    Actuarial liabilities are calculated in accordance with
Canadian generally accepted actuarial practice. This
method uses best estimate assumptions for future
experience factors adjusted to provide modest
margins for adverse deviation in each experience
factor.
    
    The actuarial liabilities for participating life policies, except
those in the United Kingdom, are computed using a net level
premium reserve method with interest and mortality
assumptions based primarily upon those assumptions used for
establishing the cash surrender values in the contract. For
universal life-type and investment contracts, contract holder
deposits represent account balances and U.S. GAAP liabilities
primarily equal account value balances. The account values
represent an accumulation of gross deposits received plus
credited interest less withdrawals, expenses and mortality
charges. Other non-participating products include term,
group and disability insurance. For these products, as well as
participating contracts in the United Kingdom, a net level
premium method is used with assumptions locked in at time
of issue, unless the business is in a loss recognition position, in
which case a best estimate gross premium valuation is used.Deferred net 
realized gains
    
    Realized gains and losses on sales of real estate are
deferred and amortized.
    
    Realized gains and losses on sales of real estate are
recognized in income immediately.Premium
revenue, fee
income,
maturities and
surrenders, and
interest on
claims and
deposits
    
    Premiums for universal life and other investment-type contracts are recorded as revenue, and a
liability for future policy benefits is established as a
charge to income.
Interest accrued on contracts is shown as an
increase in actuarial liabilities.
    
    Amounts received for universal life and investment-type
contracts are not included in the income statement but are
reported as deposits to contract holder account balances.
Revenues from these contracts are limited to amounts
assessed against policyholders account balances for
mortality, policy administration and surrender charges, and
are included in fee income when earned.Payments to contract holders upon maturity are
reflected as an expense with an offsetting reduction
to the increase in actuarial liabilities.
    
    Interest accrued on contracts is included in interest on claims
and deposits.Payments upon maturity or surrender are reflected as
reductions to the contract holder deposits on the balance
sheet.Other payments in excess of the account value, such as death
claims, are reflected as an expense.Unrealized 
foreign 
currency 
translation 
gains (losses)
    
    A proportionate amount of the exchange gain or
loss accumulated in OCI is reflected in net income
when there is a reduction in the Companys net
investment in a foreign operation resulting from a
capital transaction, dilution, or sale of all or part of
the foreign operation.
    
    A proportionate amount of exchange gains or losses
accumulated in OCI is reflected in net income only when
there is a reduction in the Companys net investment in the
foreign operation resulting from the sale of all or part of the
foreign operation.Future income
tax asset and
liability(1)
    
    Future income tax liabilities and assets are
recognized based on the differences between the
accounting values of assets and liabilities and their
related tax bases using income tax rates of enacted
or substantively enacted tax law.
    
    Future income tax liabilities and assets are recorded based on
income tax rates of currently enacted tax law. Differences in
the provisions for income taxes arise from differing
accounting policies for assets and liabilities, and differences in
the recognition of tax rate changes are disclosed in part E viii)
of this note. Part E xiv) of this note provides other disclosure
differences.
 68




---



##### 



26.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted in Canada and in the United States (Contd)
 Cdn. GAAP
    
    U.S. GAAPDerivatives
    
    For net investment hedges, changes in fair value of
these hedging derivatives, along with interest earned
and paid on the swaps are recorded to the foreign
exchange gains and losses in OCI, offsetting the
respective exchange gains or losses arising from the
underlying investments.
    
    For net investment hedges, spot rate changes on the hedging
derivatives are recorded to the foreign exchange gains and
losses in OCI to offset the respective exchange gains or losses
arising from the underlying investments. The remainder of the
changes in fair value, along with interest earned and paid, are
recorded in net income.There is no requirement to bifurcate embedded
derivatives from actuarial liabilities for insurance
contracts. As a result, they are included as part of
actuarial liabilities.
    
    Embedded derivatives in insurance contracts are separately
accounted for as stand-alone derivatives when they are not
clearly and closely related to their host instruments. They are
recorded at fair value with changes in fair value recorded in
income.Non-cash 
collateral
    
    Non-cash collateral received in securities lending
transactions is not recognized on the Consolidated
Financial Statements.
    
    If the Company has the ability to sell or repledge non-cash
collateral received in securities lending transactions, the
Company recognizes an asset on the balance sheet and a
corresponding liability for the obligation to return it.
 (ii) The
following additional significant accounting policy differences
between Cdn. GAAP and U.S. GAAP existed prior to 2007:
 Cdn. GAAP
    
    U.S. GAAPBonds
    
    Bonds were carried at amortized cost.
    
    Bonds were carried at fair value. The bonds were classified as
available-for-sale or trading.Realized gains and losses were deferred and 

amortized to income using the constant yield 

method over the remaining period to maturity.
    
    Unrealized gains and losses were included in OCI if classified
as available-for-sale, and included in net income if classified
as trading. Realized gains and losses were included in net
income immediately.Certain instruments, included with bonds under Cdn. GAAP,
were reclassified to mortgages and corporate loans under U.S.
GAAP, as they did not meet the definition of a security.Stocks
    
    Stocks were originally recorded at cost.
    
    Stocks were carried at fair value. The stocks were classified as
available-for-sale or trading.The carrying value was adjusted towards the fair
value at 5% of the difference between fair value and
carrying value per quarter. Realized gains and losses
were deferred and amortized into net investment
income at the rate of 5% of the unamortized
balance each quarter.
    
    Unrealized gains and losses were included in OCI if classified
as available-for-sale, and included in net income if classified
as trading.
Other than temporary declines in the value of stock resulted
in a write-down charged to income.The Company recorded a write-down for any other
than temporary decline in the value of the entire
stock portfolio.
 69




---



##### 



26.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted in Canada and in the United States (Contd)
 Cdn. GAAP
    
    U.S. GAAPDerivatives
    
    Most of the Companys derivatives were accounted
for as either fixed term portfolio investments or
equity portfolio investments. Fixed term portfolio
investment accounting reported investments at
amortized cost. Equity portfolio investments were
carried at a value calculated using a moving average
market method.
Realized gains and losses on the derivatives were
deferred and amortized into net investment income.
    
    Derivative instruments were carried at their fair values.
Changes in fair values of derivatives that were not hedges
were recorded in income as they arise. For fair value hedges,
the gain or loss on the derivative as well as the adjustment to
the carrying value of the hedged item was recognized in
income. For cash flow hedges, the effective portion of the
changes in the fair value of the derivatives was recorded in
OCI and the ineffective portion was recognized in income.Certain derivative instruments were used for risk
management purposes and either accounted for
using hedge accounting or fair value accounting.
Under hedge accounting, the accounting for the
derivative followed the underlying asset or liability
that is being hedged. Under fair value accounting,
the derivative instrument was recorded at fair value
on the balance sheet with increases or decreases
recorded to net investment income.
    
    Embedded derivatives were separately accounted for as
stand-alone derivatives and carried at fair values with the
changes in fair value recorded in income when they were not
clearly and closely related to their host instruments. This
requirement included insurance policies issued by the
Company.
Foreign exchange exposure of an anticipated purchase
transaction did not qualify for hedge accounting.There was no requirement to separately account for
embedded derivatives prior to 2007.Foreign exchange exposure of an anticipated
purchase transaction might have qualified for hedge
accounting.Deferred net 
realized gains
    
    Realized gains and losses on sales of invested assets
are deferred and amortized.
    
    Realized gains and losses were recognized in income
immediately.
 
 (1)
    
    U.S. GAAP terminology is deferred income tax. C)
    
    U.S. GENERALLY ACCEPTED ACCOUNTING STANDARDS ADOPTED BY THE COMPANY IN 2008
 i) FASB Statement No. 157, Fair Value Measurements (SFAS 157):
   70




---



##### 



26.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted in Canada and in the United States (Contd)
  ii) FASB Statement No. 158  Employers Accounting for Defined Benefit Pension and Other
Postretirement Plans (SFAS 158):
 iii) FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities
(SFAS 159):
   iv)
FASB Staff Position FAS133-1 and FASB Interpretation 45-4, Disclosures about Credit Derivatives
and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and
Clarification of the Effective Date of FASB Statement No. 161 (FSP FAS 133-1 and FIN 45-4): Accounting for Derivative Instruments and Hedging Activities Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others Disclosures about Derivative
Instruments and Hedging Activities  an amendment of FASB Statement No. 133.
 v) Derivative Implementation Group Statement 133 Implementation Issue No. E.23: Issues Involving
the Application of the Shortcut Method under paragraph 68 (DIG E23):
 vi) FASB Staff Position No. FAS 140-4 and FIN 46(R)-8, Disclosures by Public Entities (Enterprises)
about Transfers of Financial Assets and Interests in Variable Interest Entities (FSP FAS 140-4 and
FIN46(R)-8):
 71




---



##### 



26.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted in Canada and in the United States (Contd)
 vii) FASB Staff Position No. EITF 99-20-1, Amendments to the Impairment Guidance of EITF Issue No.
99-20 (EITF 99-20-1):
 D)
U.S. GENERALLY ACCEPTED ACCOUNTING STANDARDS NOT YET ADOPTED BY THE COMPANY
 i) FASB Statement No. 141(R), Business Combinations (SFAS 141(R)):
 ii) FASB Statement No. 160, Non-controlling Interests in Consolidated Financial Statements (SFAS
160):
 iii) FASB Statement No. 161, Disclosures about Derivative Instruments and Hedging Activitiesan
amendment of FASB Statement No. 133 (SFAS 161):
 E) ADDITIONAL INFORMATION REQUIRED TO BE REPORTED UNDER U.S. GAAP
 i) Realized gains (losses) on sales of available-for-sale securities included in net realized
gains:
 2008
    
    
    2007
    
    
    2006Bonds:Gross realized gains
    
    $
    264
    
    
    $
    287
    
    
    $
    383Gross realized losses
    
    $
    (1,161
    )
    
    $
    (278
    )
    
    $
    (256
    )Stocks:Gross realized gains
    
    $
    116
    
    
    $
    416
    
    
    $
    193Gross realized losses
    
    $
    (229
    )
    
    $
    (171
    )
    
    $
    (78
    )
 ii) Change in net gains (losses) included in net investment income for securities classified as
trading:
 2008
    
    
    2007
    
    
    2006Bonds
    
    $
    (3,492
    )
    
    $
    (182
    )
    
    $
    (80
    )Stocks
    
    $
    (465
    )
    
    $
    59
    
    
    $
    301
 72




---



##### 



26.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted in Canada and in the United States (Contd)
 iii) Gross unrealized gains (losses) on available-for-sale bonds:
 2008Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    (Losses)
    
    
    ValueIssued or guaranteed by:Canadian federal government
    
    $
    2,561
    
    
    $
    232
    
    
    $
    (1
    )
    
    $
    2,792Canadian provincial and municipal governments
    
    
    5,602
    
    
    
    719
    
    
    
    (16
    )
    
    
    6,305U.S. Treasury and other U.S. agencies
    
    
    1,196
    
    
    
    262
    
    
    
    (4
    )
    
    
    1,454Other governments
    
    
    2,337
    
    
    
    336
    
    
    
    (55
    )
    
    
    2,618Corporate
    
    
    30,661
    
    
    
    402
    
    
    
    (3,780
    )
    
    
    27,283Asset-backed securities
    
    
    2,623
    
    
    
    71
    
    
    
    (336
    )
    
    
    2,358Total bonds
    
    $
    44,980
    
    
    $
    2,022
    
    
    $
    (4,192
    )
    
    $
    42,810
 2007Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    (Losses)
    
    
    ValueIssued or guaranteed by:Canadian federal government
    
    $
    2,721
    
    
    $
    118
    
    
    $
    (6
    )
    
    $
    2,833Canadian provincial and municipal governments
    
    
    5,429
    
    
    
    828
    
    
    
    (73
    )
    
    
    6,184U.S. Treasury and other U.S. agencies
    
    
    1,234
    
    
    
    79
    
    
    
    (15
    )
    
    
    1,298Other governments
    
    
    2,458
    
    
    
    376
    
    
    
    (11
    )
    
    
    2,823Corporate
    
    
    34,637
    
    
    
    1,000
    
    
    
    (961
    )
    
    
    34,676Asset-backed securities
    
    
    6,375
    
    
    
    109
    
    
    
    (336
    )
    
    
    6,148Total bonds
    
    $
    52,854
    
    
    $
    2,510
    
    
    $
    (1,402
    )
    
    $
    53,962
 (iv) Gross unrealized gains (losses) on available-for-sale stocks:
 Gross
    
    
    Gross
    
    
    EstimatedOriginal
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    (Losses)
    
    
    ValueTotal 2008
    
    $
    3,901
    
    
    $
    135
    
    
    $
    (640
    )
    
    $
    3,396Total 2007
    
    $
    3,139
    
    
    $
    730
    
    
    $
    (106
    )
    
    $
    3,763
 v) Real estate
  2008
    
    
    2007
    
    
    2006Depreciation expense
    
    $
    67
    
    
    $
    61
    
    
    $
    56
 vi) Derivatives
  73




---



##### 



26.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted in Canada and in the United States (Contd)
 Fair value hedge
  Cash flow hedge
   Net investment hedges
  vii) Unrealized loss positions for which an other than temporary impairment has not been recognized
  Less than 12 months
    
    
    12 months or more
    
    
    
    
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedDescription of securities
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    LossesBonds
    
    $
    13,214
    
    
    $
    (1,499
    )
    
    $
    7,746
    
    
    $
    (2,693
    )
    
    $
    20,960
    
    
    $
    (4,192
    )Stocks
    
    
    1,559
    
    
    
    (302
    )
    
    
    769
    
    
    
    (338
    )
    
    
    2,328
    
    
    
    (640
    )Total temporarily impaired securities
    
    $
    14,773
    
    
    $
    (1,801
    )
    
    $
    8,515
    
    
    $
    (3,031
    )
    
    $
    23,288
    
    
    $
    (4,832
    )
    74




---



##### 



26.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted in Canada and in the United States (Contd)
 viii) Future income tax asset and liability (1) :
 2008Future Income Tax Asset(1)
    
    
    Future Income Tax Liability(1)Cdn.
    
    
    U.S.
    
    
    Cdn.
    
    
    U.S.GAAP
    
    
    GAAP
    
    
    GAAP
    
    
    GAAPInvestments
    
    $
    1,927
    
    
    $
    2,017
    
    
    $
    809
    
    
    $
    630Actuarial liabilities
    
    
    (1,323
    )
    
    
    856
    
    
    
    (245
    )
    
    
    (889
    )Deferred acquisition costs
    
    
    464
    
    
    
    (1,461
    )
    
    
    
    
    
    
    598Losses available for carry forward
    
    
    62
    
    
    
    62
    
    
    
    (128
    )
    
    
    (128
    )Other
    
    
    203
    
    
    
    341
    
    
    
    13
    
    
    
    (4
    )Future tax asset/liability before valuation allowance
    
    
    1,333
    
    
    
    1,815
    
    
    
    449
    
    
    
    207Valuation allowance
    
    
    (143
    )
    
    
    (142
    )
    
    
    28
    
    
    
    29Total
    
    $
    1,190
    
    
    $
    1,673
    
    
    $
    477
    
    
    $
    236
 2007Future Income Tax Asset(1)
    
    
    Future Income Tax Liability(1)Cdn.
    
    
    U.S.
    
    
    Cdn.
    
    
    U.S.GAAP
    
    
    GAAP
    
    
    GAAP
    
    
    GAAPInvestments
    
    $
    (27
    )
    
    $
    (12
    )
    
    $
    1,257
    
    
    $
    1,041Actuarial liabilities
    
    
    261
    
    
    
    932
    
    
    
    (464
    )
    
    
    (899
    )Deferred acquisition costs
    
    
    144
    
    
    
    (789
    )
    
    
    (199
    )
    
    
    578Losses available for carry forward
    
    
    6
    
    
    
    8
    
    
    
    (111
    )
    
    
    (109
    )Other
    
    
    3
    
    
    
    99
    
    
    
    82
    
    
    
    (66
    )Future tax asset/liability before valuation allowance
    
    
    387
    
    
    
    238
    
    
    
    565
    
    
    
    545Valuation allowance
    
    
    (5
    )
    
    
    (5
    )
    
    
    17
    
    
    
    Total
    
    $
    382
    
    
    $
    233
    
    
    $
    582
    
    
    $
    545
 
 (1)
    
    U.S. GAAP terminology is deferred income tax. 75




---



##### 



26.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted in Canada and in the United States (Contd)
 ix) Acquisition:
 Genworth EBG BusinessCdn. GAAP
    
    
    U.S. GAAPInvested assets acquired
    
    $
    977
    
    
    $
    977Other assets acquired(1)
    
    
    129
    
    
    
    353Segregated funds assets acquired
    
    
    
    
    
    
    1,106
    
    
    
    1,330Actuarial liabilities and other policy liabilities acquired
    
    
    654
    
    
    
    545Amounts on deposit acquired
    
    
    49
    
    
    
    51Other liabilities acquired
    
    
    38
    
    
    
    50Segregated funds liabilities acquired
    
    
    
    
    
    
    741
    
    
    
    646Net balance sheet assets acquired
    
    $
    365
    
    
    $
    684Consideration:Cash cost of acquisition
    
    $
    709
    
    
    $
    709Transaction and other related costs
    
    
    16
    
    
    
    16$
    725
    
    
    $
    725Goodwill on acquisition
    
    $
    360
    
    
    $
    41
 
 (1)
    
    Other assets acquired included value of business acquired of $248 for Genworth EBG
Business under U.S. GAAP.   Genworth EBG Business2007
    
    
    2006Revenue
    
    $
    18,335
    
    
    $
    18,071Total common shareholders net income before realized gains
    
    $
    1,275
    
    
    $
    1,132Net realized gains
    
    
    376
    
    
    
    337Common shareholders net income
    
    $
    1,651
    
    
    $
    1,469Weighted average number of shares outstanding (in millions)
    
    
    569
    
    
    
    577Basic earnings per share
    
    $
    2.90
    
    
    $
    2.55Common shareholders net income on a diluted basis
    
    $
    1,631
    
    
    $
    1,458Weighted average number of shares outstanding on a diluted basis (in millions)
    
    
    572
    
    
    
    580Diluted earnings per share
    
    $
    2.85
    
    
    $
    2.51
 76




---



##### 



26.
    
    Summary of Differences Between Accounting Principles 
Generally Accepted in Canada and in the United States (Contd)
 x) Earnings per share:
  2008
    
    
    2007
    
    
    2006Cdn.
    
    
    U.S.
    
    
    Cdn.
    
    
    U.S.
    
    
    Cdn.
    
    
    U.S.GAAP
    
    
    GAAP
    
    
    GAAP
    
    
    GAAP
    
    
    GAAP
    
    
    GAAPCommon shareholders net income (loss) excluding cumulative
effect of accounting changes
    
    $
    785
    
    
    $
    (749
    )
    
    $
    2,219
    
    
    $
    1,646
    
    
    $
    2,089
    
    
    $
    1,509Cumulative effect of accounting changes, net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4Common shareholders net income (loss)
    
    
    785
    
    
    
    (749
    )
    
    
    2,219
    
    
    
    1,646
    
    
    
    2,089
    
    
    
    1,513Less: Effect of stock awards of subsidiaries
    
    
    14
    
    
    
    14
    
    
    
    20
    
    
    
    20
    
    
    
    11
    
    
    
    11Common shareholders net income (loss) on a diluted basis
    
    $
    771
    
    
    $
    (763
    )
    
    $
    2,199
    
    
    $
    1,626
    
    
    $
    2,078
    
    
    $
    1,502Weighted average number of shares outstanding (in millions)
    
    
    561
    
    
    
    561
    
    
    
    569
    
    
    
    569
    
    
    
    577
    
    
    
    577Add: Adjustments relating to the dilutive impact of stock options
    
    
    1
    
    
    
    
    (1)
    
    
    3
    
    
    
    3
    
    
    
    3
    
    
    
    3Weighted average number of shares outstanding
on a diluted basis (in millions)
    
    
    562
    
    
    
    561
    
    
    
    572
    
    
    
    572
    
    
    
    580
    
    
    
    580
 
 (1)
    
    For the year ended December 31, 2008, an adjustment of 1 million common shares
related to the potential dilutive impact of stock options was excluded from the calculation of
diluted earnings per share since their effect is anti-dilutive when a loss is reported. xi) Statements of cash flows:
 2008
    
    
    2007
    
    
    2006Deposits and withdrawals reclassified to financing activities:Deposits to policyholders accounts
    
    $
    5,020
    
    
    $
    4,141
    
    
    $
    6,417Withdrawals from policyholders accounts
    
    $
    7,076
    
    
    $
    7,090
    
    
    $
    6,510
 xii) Liabilities for contract guarantees:
   Weighted Average AttainedBenefit type
    
    Account Balance
    
    
    Net Amount at Risk
    
    
    Age of Contract HoldersMinimum death
    
    $
    27,141
    
    
    $
    7,574
    
    
    
    67Minimum income
    
    $
    2,289
    
    
    $
    2,332
    
    
    
    66Minimum accumulation or withdrawal
    
    $
    6,053
    
    
    $
    1,046
    
    
    
    63
 77




---



##### 



26.
    
    Summary of Differences Between Accounting Principles 
Generally Accepted in Canada and in the United States (Contd)
  Minimum
    
    
    GuaranteedGuaranteed Death
    
    
    Minimum IncomeBenefit
    
    
    Benefit
    
    
    TotalBalance as at January 1, 2007
    
    $
    65
    
    
    $
    157
    
    
    $
    222Benefit ratio and assumption changes
    
    
    5
    
    
    
    10
    
    
    
    15Incurred guaranteed benefits
    
    
    28
    
    
    
    1
    
    
    
    29Paid guaranteed benefits
    
    
    (36
    )
    
    
    (35
    )
    
    
    (71
    )Interest
    
    
    3
    
    
    
    28
    
    
    
    31Effect of changes in currency exchange rates
    
    
    (12
    )
    
    
    (23
    )
    
    
    (35
    )Balance as at December 31, 2007
    
    
    53
    
    
    
    138
    
    
    
    191Benefit ratio and assumption changes
    
    
    207
    
    
    
    36
    
    
    
    243Incurred guaranteed benefits
    
    
    58
    
    
    
    1
    
    
    
    59Paid guaranteed benefits
    
    
    (63
    )
    
    
    (20
    )
    
    
    (83
    )Interest
    
    
    9
    
    
    
    53
    
    
    
    62Effect of changes in currency exchange rates
    
    
    39
    
    
    
    (15
    )
    
    
    24Balance as at December 31, 2008
    
    $
    303
    
    
    $
    193
    
    
    $
    496
    xiii) Disclosures relating to fair value measurements:
   78




---



##### 



26.
    
    Summary of Differences Between Accounting Principles 
Generally Accepted in Canada and in the United States (Contd)
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalAssetsBonds  held-for-trading
    
    $
    597
    
    
    $
    14,534
    
    
    $
    784
    
    
    $
    15,915Bonds  available-for-sale
    
    
    1,015
    
    
    
    40,537
    
    
    
    1,258
    
    
    
    42,810Stocks  held-for-trading
    
    
    959
    
    
    
    103
    
    
    
    
    
    
    
    1,062Stocks  available-for-sale
    
    
    3,162
    
    
    
    177
    
    
    
    36
    
    
    
    3,375Cash, cash equivalents and short-term securities
    
    
    5,481
    
    
    
    3,201
    
    
    
    
    
    
    
    8,682Derivative assets
    
    
    16
    
    
    
    2,610
    
    
    
    47
    
    
    
    2,673Other invested assets  held-for-trading
    
    
    151
    
    
    
    52
    
    
    
    1
    
    
    
    204Other invested assets  available-for-sale
    
    
    269
    
    
    
    385
    
    
    
    6
    
    
    
    660Total general fund assets recorded at fair value
    
    $
    11,650
    
    
    $
    61,599
    
    
    $
    2,132
    
    
    $
    75,381Segregated funds net assets
    
    
    9,889
    
    
    
    53,740
    
    
    
    1,187
    
    
    
    64,816Total assets measured at fair value on a recurring basis
    
    $
    21,539
    
    
    $
    115,339
    
    
    $
    3,319
    
    
    $
    140,197LiabilitiesAmounts on deposit
    
    $
    
    
    
    $
    78
    
    
    $
    
    
    
    $
    78Derivative liabilities
    
    
    42
    
    
    
    3,146
    
    
    
    83
    
    
    
    3,271Embedded derivatives
    
    
    
    
    
    
    
    
    
    
    2,469
    
    
    
    2,469Total liabilities measured at fair value on a recurring basis
    
    $
    42
    
    
    $
    3,224
    
    
    $
    2,552
    
    
    $
    5,818
 79




---



##### 



26.
    
    Summary of Differences Between Accounting Principles 
Generally Accepted in Canada and in the United States (Contd)
  Total realized and unrealizedgains (losses) (1)Change in unrealizedIncluded in
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    gains (losses) included inother
    
    
    Purchases,
    
    
    Transfers in
    
    
    
    
    
    
    earnings relating toBeginning
    
    
    Included in
    
    
    comprehensive
    
    
    issuances, and
    
    
    and/or out of
    
    
    Ending
    
    
    instruments still held atbalance
    
    
    earnings
    
    
    income
    
    
    settlements (net)
    
    
    level 3
    
    
    balance
    
    
    the reporting date (1)AssetsBonds  held-for-trading
    
    $
    1,288
    
    
    $
    (661
    )
    
    $
    
    
    
    $
    41
    
    
    $
    116
    
    
    $
    784
    
    
    $
    (538
    )Bonds  available-for-sale
    
    
    1,346
    
    
    
    (132
    )
    
    
    (119
    )
    
    
    (78
    )
    
    
    241
    
    
    
    1,258
    
    
    
    (17
    )Stocks  available-for-sale
    
    
    19
    
    
    
    (10
    )
    
    
    5
    
    
    
    22
    
    
    
    
    
    
    
    36
    
    
    
    Derivative assets
    
    
    32
    
    
    
    40
    
    
    
    
    
    
    
    (25
    )
    
    
    
    
    
    
    47
    
    
    
    41Other invested assets 
held-for-trading
    
    
    3
    
    
    
    (8
    )
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    1
    
    
    
    (8
    )Other invested assets 
available-for-sale
    
    
    7
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    Total general fund assets
recorded at fair value
    
    $
    2,695
    
    
    $
    (772
    )
    
    $
    (114
    )
    
    $
    (34
    )
    
    $
    357
    
    
    $
    2,132
    
    
    $
    (522
    )Segregated funds net assets
    
    
    1,994
    
    
    
    (39
    )
    
    
    
    
    
    
    236
    
    
    
    (1,004
    )
    
    
    1,187
    
    
    
    (29
    )Total assets measured at fair
value on a recurring basis
    
    $
    4,689
    
    
    $
    (811
    )
    
    $
    (114
    )
    
    $
    202
    
    
    $
    (647
    )
    
    $
    3,319
    
    
    $
    (551
    )LiabilitiesDerivative liabilities
    
    $
    16
    
    
    $
    67
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    83
    
    
    $
    71Embedded derivatives
    
    
    651
    
    
    
    1,835
    
    
    
    
    
    
    
    (17
    )
    
    
    
    
    
    
    2,469
    
    
    
    1,860Total
liabilities measured at fair value on a recurring
basis
    
    $
    667
    
    
    $
    1,902
    
    
    $
    
    
    
    $
    (17
    )
    
    $
    
    
    
    $
    2,552
    
    
    $
    1,931
 
 (1)
    
    For liabilities, losses are indicated in positive numbers. Valuation techniques
  80




---



##### 



26.
    
    Summary of Differences Between Accounting Principles 
Generally Accepted in Canada and in the United States (Contd)
 xiv) Accounting for uncertainty in income taxes
    UTB balance as at January 1, 2007
    
    $
    624Increase (decrease) related to tax positions in prior year
    
    
    24Increase (decrease) related to tax positions in current year
    
    
    20Increase (decrease) related to foreign exchange movement
    
    
    (51
    )UTB balance as at December 31, 2007
    
    $
    617Increase (decrease) related to tax positions in prior year
    
    
    (191
    )Increase (decrease) related to tax positions in current year
    
    
    107Increase (decrease) related to foreign exchange movement
    
    
    17UTB balance as at December 31, 2008
    
    $
    550
    Tax Jurisdiction
    
    Years Subject to ExaminationCanada
    
    2004 - forwardU.S.
    
    2001 - forwardU.K.
    
    2003 - forward
 xv) Disclosures about Transfers of Financial Assets and Interests in Variable Interest Entities
  
  81




---



##### 



Appointed Actuarys Report
    
 Robert W. Wilson
 
 82




---



##### 



Report of Independent Registered Chartered Accountants
     Internal Control 
Integrated Framework
 
 
 
 83




---



##### 



Comments
by Independent Registered Chartered Accountants on Canada- United States of America
Reporting Difference
  
 
 
 84




---



##### 



Report of Independent Registered Chartered Accountants
  Internal
ControlIntegrated Framework
    Internal
ControlIntegrated Framework
  
 
 
 85