Exhibit 2
  Consolidated  Financial  Statements
 Sun Life Financial Inc.
 For the Year Ended December 31, 2009




---



##### 



Table of Contents
 PAGEConsolidated Financial Statements and NotesFinancial Reporting Responsibilities
    
    1Consolidated Financial StatementsConsolidated Statements of Operations
    
    2Consolidated Balance Sheets
    
    3Consolidated Statements of Equity
    
    4Consolidated Statements of Comprehensive Income
    
    4Consolidated Statements of Cash Flows
    
    5Consolidated Statements of Changes in Segregated Funds Net Assets and ConsolidatedStatements of Segregated Funds Net Assets
    
    6Notes to the Consolidated Financial StatementsNote 1. Accounting Policies
    
    7Note 2. Changes in Accounting Policies
    
    13Note 3.
Acquisitions and Dispositions
    
    15Note 4. Segmented Information
    
    16Note 5. Financial Investments and Related Net Investment Income
    
    18Note 6. Financial Instrument Risk Management
    
    24Note 7. Goodwill and Intangible Assets
    
    37Note 8. Other Assets
    
    38Note 9. Actuarial Liabilities and Other Policy Liabilities
    
    39Note 10. Capital Management
    
    46Note 11. Senior Debentures
    
    47Note 12. Other Liabilities
    
    49Note 13. Subordinated Debt
    
    51Note 14. Non-controlling Interest in Subsidiaries
    
    51Note 15. Share Capital and Shares Purchased for Cancellation
    
    52Note 16. Operating Expenses
    
    54Note 17. Earnings Per Share
    
    54Note 18. Stock-Based Compensation
    
    54Note 19. Income Taxes
    
    57Note 20. Income Taxes included in OCI
    
    59Note 21. Commitments, Guarantees and Contingencies
    
    59Note 22. Pension Plans and Other Post-Retirement Benefits
    
    62Note 23. Foreign Exchange Gain/Loss
    
    65Note 24. Related Party Transactions
    
    65Note 25. Variable Interest Entities
    
    66Note 26. Summary of Differences Between Accounting Principles Generally Accepted in Canada and in
the United States
    
    66Appointed Actuarys Report
    
    89Reports of Independent Registered Chartered Accountants
    
    90




---



##### 



Financial Reporting Responsibilities
    Internal ControlIntegrated Framework,
     
 Donald A. Stewart
 
 Colm J. Freyne
  1




---



##### 



Consolidated Statements of Operations
  2009
    
    
    2008
    
    
    2007REVENUEPremium income:Annuities
    
    $
    4,795
    
    
    $
    3,592
    
    
    $
    3,530Life insurance
    
    
    6,380
    
    
    
    5,928
    
    
    
    6,010Health insurance
    
    
    4,335
    
    
    
    4,067
    
    
    
    3,58415,510
    
    
    
    13,587
    
    
    
    13,124Net investment income (loss) (Note 5):Change in fair value of held-for-trading assets
    
    
    4,878
    
    
    
    (7,399
    )
    
    
    (1,558
    )Income (loss) from derivative investments
    
    
    (943
    )
    
    
    (220
    )
    
    
    86Net gains (losses) on available-for-sale assets
    
    
    (5
    )
    
    
    (241
    )
    
    
    101Other net investment income
    
    
    5,462
    
    
    
    6,078
    
    
    
    6,223Gain on sale of equity investment (Note 3)
    
    
    
    
    
    
    1,015
    
    
    
    9,392
    
    
    
    (767
    )
    
    
    4,852Fee income
    
    
    2,670
    
    
    
    2,743
    
    
    
    3,21227,572
    
    
    
    15,563
    
    
    
    21,188POLICY BENEFITS AND EXPENSESPayments to policyholders, beneficiaries and depositors:Maturities and surrenders
    
    
    4,566
    
    
    
    5,310
    
    
    
    6,250Annuity payments
    
    
    1,367
    
    
    
    1,380
    
    
    
    1,398Death and disability benefits
    
    
    2,997
    
    
    
    2,844
    
    
    
    2,620Health benefits
    
    
    3,210
    
    
    
    2,938
    
    
    
    2,616Policyholder dividends and interest on claims and deposits
    
    
    1,317
    
    
    
    1,303
    
    
    
    1,36013,457
    
    
    
    13,775
    
    
    
    14,244Net transfers to segregated funds
    
    
    860
    
    
    
    539
    
    
    
    952Increase (decrease) in actuarial liabilities (Note 9)
    
    
    7,697
    
    
    
    (4,429
    )
    
    
    (2,515
    )Commissions
    
    
    1,662
    
    
    
    1,545
    
    
    
    1,811Operating expenses (Note 16)
    
    
    3,176
    
    
    
    3,003
    
    
    
    3,260Premium taxes
    
    
    222
    
    
    
    227
    
    
    
    240Interest expense (Notes 11, 12 and 13)
    
    
    403
    
    
    
    366
    
    
    
    34927,477
    
    
    
    15,026
    
    
    
    18,341INCOME BEFORE INCOME TAXES ANDNON-CONTROLLING INTERESTS
    
    
    95
    
    
    
    537
    
    
    
    2,847Income taxes expense (benefit) (Note 19)
    
    
    (542
    )
    
    
    (343
    )
    
    
    522Non-controlling interests in net income of subsidiaries (Note 14)
    
    
    15
    
    
    
    23
    
    
    
    35TOTAL NET INCOME
    
    
    622
    
    
    
    857
    
    
    
    2,290Less:     Participating policyholders net income
    
    
    9
    
    
    
    2
    
    
    
    2SHAREHOLDERS NET INCOME
    
    
    613
    
    
    
    855
    
    
    
    2,288Less:     Preferred shareholder dividends
    
    
    79
    
    
    
    70
    
    
    
    69COMMON SHAREHOLDERS NET INCOME
    
    $
    534
    
    
    $
    785
    
    
    $
    2,219Average exchange rates:U.S. dollars
    
    
    1.14
    
    
    
    1.07
    
    
    
    1.07U.K. pounds
    
    
    1.78
    
    
    
    1.96
    
    
    
    2.15Earnings per shareBasic
    
    $
    0.95
    
    
    $
    1.40
    
    
    $
    3.90Diluted
    
    $
    0.94
    
    
    $
    1.37
    
    
    $
    3.85Weighted average shares outstanding in millions(Note 17)Basic
    
    
    561
    
    
    
    561
    
    
    
    569Diluted
    
    
    562
    
    
    
    562
    
    
    
    572
 The attached notes form part of these Consolidated Financial Statements.
 2




---



##### 



Consolidated Balance Sheets
  2009
    
    
    2008ASSETSBonds  held-for-trading (Note 6)
    
    $
    51,634
    
    
    $
    48,458Bonds  available-for-sale (Note 6)
    
    
    9,673
    
    
    
    10,616Mortgages and corporate loans (Note 6)
    
    
    19,449
    
    
    
    22,302Stocks  held-for-trading (Note 6)
    
    
    4,331
    
    
    
    3,440Stocks  available-for-sale (Note 6)
    
    
    635
    
    
    
    1,018Real estate (Note 5)
    
    
    4,877
    
    
    
    4,908Cash, cash equivalents and short-term securities
    
    
    11,868
    
    
    
    8,879Derivative assets (Notes 5 and 6)
    
    
    1,382
    
    
    
    2,669Policy loans and other invested assets
    
    
    3,503
    
    
    
    3,585Other invested assets  held-for-trading (Note 6)
    
    
    425
    
    
    
    380Other invested assets  available-for-sale (Note 6)
    
    
    452
    
    
    
    623Invested assets
    
    
    108,229
    
    
    
    106,878Goodwill (Note 7)
    
    
    6,419
    
    
    
    6,598Intangible assets (Note 7)
    
    
    926
    
    
    
    878Other assets (Note 8)
    
    
    4,508
    
    
    
    5,479Total general fund assets
    
    $
    120,082
    
    
    $
    119,833Segregated funds net assets
    
    $
    81,305
    
    
    $
    65,762LIABILITIES AND EQUITYActuarial liabilities and other policy liabilities (Note 9)
    
    $
    84,638
    
    
    $
    81,411Amounts on deposit
    
    
    4,181
    
    
    
    4,079Deferred net realized gains (Note 5)
    
    
    225
    
    
    
    251Senior debentures (Note 11)
    
    
    3,811
    
    
    
    3,013Derivative liabilities (Notes 5 and 6)
    
    
    1,257
    
    
    
    3,219Other liabilities (Note 12)
    
    
    5,466
    
    
    
    7,831Total general fund liabilities
    
    
    99,578
    
    
    
    99,804Subordinated debt (Note 13)
    
    
    3,048
    
    
    
    2,576Non-controlling interests in subsidiaries (Note 14)
    
    
    42
    
    
    
    44Total equity
    
    
    17,414
    
    
    
    17,409Total general fund liabilities and equity
    
    $
    120,082
    
    
    $
    119,833Segregated funds contract liabilities
    
    $
    81,305
    
    
    $
    65,762Exchange rate at balance sheet date:U.S. dollars
    
    
    1.05
    
    
    
    1.22U.K. pounds
    
    
    1.70
    
    
    
    1.78
 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
 3




---



##### 



Consolidated Statements of Equity
 YEARS ENDED DECEMBER 31 (in millions of Canadian dollars)PARTICIPATINGPOLICYHOLDERS
    
    
    SHAREHOLDERS
    
    
    2009
    
    
    2008
    
    
    2007PREFERRED SHARESBalance, beginning of year
    
    $
    
    
    
    $
    1,495
    
    
    $
    1,495
    
    
    $
    1,495
    
    
    $
    1,250Preferred shares issued (Note 15)
    
    
    
    
    
    
    250
    
    
    
    250
    
    
    
    
    
    
    
    250Issuance costs, net of taxes (Note 15)
    
    
    
    
    
    
    (4
    )
    
    
    (4
    )
    
    
    
    
    
    
    (5
    )Balance, end of year
    
    
    
    
    
    
    1,741
    
    
    
    1,741
    
    
    
    1,495
    
    
    
    1,495COMMON SHARESBalance, beginning of year
    
    
    
    
    
    
    6,983
    
    
    
    6,983
    
    
    
    7,033
    
    
    
    7,082Stock options exercised (Note 18)
    
    
    
    
    
    
    7
    
    
    
    7
    
    
    
    10
    
    
    
    66Shares issued under dividend reinvestment and share purchase plan (Note 15)
    
    
    
    
    
    
    136
    
    
    
    136
    
    
    
    
    
    
    
    Common shares purchased for cancellation (Note 15)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (60
    )
    
    
    (115
    )Balance, end of year
    
    
    
    
    
    
    7,126
    
    
    
    7,126
    
    
    
    6,983
    
    
    
    7,033CONTRIBUTED SURPLUSBalance, beginning of year
    
    
    
    
    
    
    118
    
    
    
    118
    
    
    
    62
    
    
    
    72Stock-based compensation (Note 18)
    
    
    
    
    
    
    16
    
    
    
    16
    
    
    
    58
    
    
    
    1Stock options exercised (Notes 15 and 18)
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )
    
    
    (2
    )
    
    
    (11
    )Balance, end of year
    
    
    
    
    
    
    133
    
    
    
    133
    
    
    
    118
    
    
    
    62RETAINED EARNINGSBalance, beginning of year
    
    
    111
    
    
    
    11,101
    
    
    
    11,212
    
    
    
    11,391
    
    
    
    10,309Net income
    
    
    9
    
    
    
    613
    
    
    
    622
    
    
    
    857
    
    
    
    2,290Dividends on common shares
    
    
    
    
    
    
    (796
    )
    
    
    (796
    )
    
    
    (809
    )
    
    
    (752
    )Dividends on preferred shares
    
    
    
    
    
    
    (79
    )
    
    
    (79
    )
    
    
    (70
    )
    
    
    (69
    )Common shares purchased for cancellation (Note 15)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (157
    )
    
    
    (387
    )Balance, end of year
    
    
    120
    
    
    
    10,839
    
    
    
    10,959
    
    
    
    11,212
    
    
    
    11,391ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), net of taxesBalance, beginning of year
    
    
    (5
    )
    
    
    (2,394
    )
    
    
    (2,399
    )
    
    
    (2,764
    )
    
    
    (978
    )Total other comprehensive income (loss)
    
    
    (8
    )
    
    
    (138
    )
    
    
    (146
    )
    
    
    365
    
    
    
    (1,786
    )Balance, end of year
    
    
    (13
    )
    
    
    (2,532
    )
    
    
    (2,545
    )
    
    
    (2,399
    )
    
    
    (2,764
    )Total retained earnings and accumulated other comprehensive income
    
    
    107
    
    
    
    8,307
    
    
    
    8,414
    
    
    
    8,813
    
    
    
    8,627Total equity
    
    $
    107
    
    
    $
    17,307
    
    
    $
    17,414
    
    
    $
    17,409
    
    
    $
    17,217ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), net of taxesBalance, end of year, consists of:Unrealized gains (losses) on available-for-sale assets
    
    $
    
    
    
    $
    30
    
    
    $
    30
    
    
    $
    (1,429
    )
    
    $
    25Unrealized foreign currency translation gains (losses), net of hedging activities
    
    
    (13
    )
    
    
    (2,624
    )
    
    
    (2,637
    )
    
    
    (1,049
    )
    
    
    (2,821
    )Unrealized gains (losses) on derivatives designated as cash flow hedges
    
    
    
    
    
    
    62
    
    
    
    62
    
    
    
    79
    
    
    
    32Balance, end of year
    
    $
    (13
    )
    
    $
    (2,532
    )
    
    $
    (2,545
    )
    
    $
    (2,399
    )
    
    $
    (2,764
    )
 Consolidated Statements of Comprehensive Income
 YEARS ENDED DECEMBER 31 (in millions of Canadian dollars)2009
    
    
    2008
    
    
    2007Total net income
    
    $
    622
    
    
    $
    857
    
    
    $
    2,290Other comprehensive income (loss), net of taxes (Note 20):Unrealized foreign currency translation gains (losses), excluding hedges
    
    
    (1,908
    )
    
    
    2,162
    
    
    
    (1,781
    )Unrealized foreign currency gains (losses), net investment hedges
    
    
    314
    
    
    
    (396
    )
    
    
    282Net adjustment for foreign exchange losses (Note 23)
    
    
    6
    
    
    
    6
    
    
    
    3Unrealized gains (losses) on available-for-sale assets
    
    
    1,492
    
    
    
    (1,653
    )
    
    
    (238
    )Reclassifications to net income for available-for-sale assets
    
    
    (33
    )
    
    
    199
    
    
    
    (84
    )Unrealized gains (losses) on cash flow hedging instruments
    
    
    (18
    )
    
    
    24
    
    
    
    40Reclassifications to net income (loss) for cash flow hedges
    
    
    1
    
    
    
    23
    
    
    
    (8
    )Total other comprehensive income (loss)
    
    
    (146
    )
    
    
    365
    
    
    
    (1,786
    )Total comprehensive income
    
    
    476
    
    
    
    1,222
    
    
    
    504Less: Participating policyholders net income
    
    
    9
    
    
    
    2
    
    
    
    2Participating policyholders foreign currency translation gains (losses), excluding hedges
    
    
    (8
    )
    
    
    9
    
    
    
    (5
    )Shareholders comprehensive income
    
    $
    475
    
    
    $
    1,211
    
    
    $
    507
 The attached notes form part of these Consolidated Financial Statements.
 4




---



##### 



Consolidated Statements of Cash Flows
 YEARS ENDED DECEMBER 31 (in millions of Canadian dollars)2009
    
    
    2008
    
    
    2007CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIESTotal net income
    
    $
    622
    
    
    $
    857
    
    
    $
    2,290Items not affecting cash:Increase (decrease) in actuarial and other policy-related liabilities
    
    
    7,707
    
    
    
    (4,392
    )
    
    
    (2,328
    )Unrealized (gains) losses on held-for-trading assets and derivatives
    
    
    (4,644
    )
    
    
    7,383
    
    
    
    2,447Amortization of:Net deferred realized and unrealized gains on investments
    
    
    (76
    )
    
    
    (136
    )
    
    
    (121
    )Deferred acquisition costs and intangible assets
    
    
    82
    
    
    
    74
    
    
    
    89Write-down of intangible asset
    
    
    
    
    
    
    
    
    
    
    52(Gain) loss on foreign exchange (Note 5)
    
    
    10
    
    
    
    22
    
    
    
    (37
    )Future income taxes
    
    
    (737
    )
    
    
    (489
    )
    
    
    453Provisions for losses (recoveries) on investments
    
    
    117
    
    
    
    4
    
    
    
    2Stock-based compensation (Note 18)
    
    
    96
    
    
    
    31
    
    
    
    96Accrued expenses and taxes
    
    
    86
    
    
    
    (424
    )
    
    
    (109
    )Investment income due and accrued
    
    
    26
    
    
    
    6
    
    
    
    (7
    )Other changes in other assets and liabilities
    
    
    (276
    )
    
    
    (560
    )
    
    
    (649
    )Gain on sale of equity investment (Note 3)
    
    
    
    
    
    
    (1,015
    )
    
    
    Realized (gains) losses on held-for-trading and available-for-sale assets
    
    
    618
    
    
    
    410
    
    
    
    (1,065
    )New mutual fund business acquisition costs capitalized
    
    
    (99
    )
    
    
    (56
    )
    
    
    (69
    )Redemption fees of mutual funds
    
    
    16
    
    
    
    22
    
    
    
    24Net cash provided by operating activities
    
    
    3,548
    
    
    
    1,737
    
    
    
    1,068CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIESBorrowed funds
    
    
    (5
    )
    
    
    (17
    )
    
    
    113Issuance of senior financing (Note 12)
    
    
    223
    
    
    
    118
    
    
    
    929Collateral on senior financing (Note 12)
    
    
    231
    
    
    
    (258
    )
    
    
    Issuance of senior debentures (Note 11)
    
    
    799
    
    
    
    
    
    
    
    250Redemption of senior debentures (Note 11)
    
    
    
    
    
    
    
    
    
    
    (727
    )Issuance of subordinated debt (Note 13)
    
    
    496
    
    
    
    746
    
    
    
    398Redemption and maturity of subordinated debt (Note 13)
    
    
    
    
    
    
    
    
    
    
    (28
    )Issuance of preferred shares (Note 15)
    
    
    250
    
    
    
    
    
    
    
    250Payments to underwriters (Note 15)
    
    
    (6
    )
    
    
    
    
    
    
    (9
    )Issuance of common shares on exercise of stock options
    
    
    6
    
    
    
    8
    
    
    
    55Common shares purchased for cancellation (Note 15)
    
    
    
    
    
    
    (217
    )
    
    
    (502
    )Dividends paid on common shares
    
    
    (864
    )
    
    
    (809
    )
    
    
    (752
    )Dividends paid on preferred shares
    
    
    (78
    )
    
    
    (70
    )
    
    
    (69
    )Net cash provided by (used in) financing activities
    
    
    1,052
    
    
    
    (499
    )
    
    
    (92
    )CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIESSales, maturities and repayments of:Bonds
    
    
    17,583
    
    
    
    15,697
    
    
    
    21,091Mortgages and corporate loans
    
    
    5,285
    
    
    
    5,624
    
    
    
    6,279Stocks
    
    
    1,535
    
    
    
    1,715
    
    
    
    3,456Real estate
    
    
    48
    
    
    
    109
    
    
    
    221Purchases of:Bonds
    
    
    (18,548
    )
    
    
    (15,706
    )
    
    
    (20,896
    )Mortgages and corporate loans
    
    
    (3,738
    )
    
    
    (5,746
    )
    
    
    (7,159
    )Stocks
    
    
    (1,228
    )
    
    
    (1,915
    )
    
    
    (3,298
    )Real estate
    
    
    (164
    )
    
    
    (320
    )
    
    
    (628
    )Policy loans
    
    
    (153
    )
    
    
    (162
    )
    
    
    (69
    )Short-term securities *
    
    
    (2,998
    )
    
    
    (1,530
    )
    
    
    (658
    )Cash cost of acquisition (Note 3)
    
    
    (387
    )
    
    
    
    
    
    
    (725
    )Cash and cash equivalents acquired on acquisition (Note 3)
    
    
    402
    
    
    
    
    
    
    
    132Net cash from sale of equity investment (Note 3)
    
    
    
    
    
    
    1,546
    
    
    
    Other investments
    
    
    (1,088
    )
    
    
    723
    
    
    
    244Net cash provided by (used in) investing activities
    
    
    (3,451
    )
    
    
    35
    
    
    
    (2,010
    )Changes due to fluctuations in exchange rates
    
    
    (802
    )
    
    
    642
    
    
    
    (299
    )Increase (decrease) in cash and cash equivalents
    
    
    347
    
    
    
    1,915
    
    
    
    (1,333
    )Cash and cash equivalents, beginning of year
    
    
    5,518
    
    
    
    3,603
    
    
    
    4,936Cash and cash equivalents, end of year
    
    
    5,865
    
    
    
    5,518
    
    
    
    3,603Short-term securities, end of year *
    
    
    6,003
    
    
    
    3,361
    
    
    
    1,897Cash, cash equivalents and short-term securities, end of year
    
    $
    11,868
    
    
    $
    8,879
    
    
    $
    5,500Supplementary InformationCash and cash equivalents:Cash
    
    $
    1,191
    
    
    $
    745
    
    
    $
    399Cash equivalents *
    
    
    4,674
    
    
    
    4,773
    
    
    
    3,204$
    5,865
    
    
    $
    5,518
    
    
    $
    3,603Cash disbursements made for:Interest on borrowed funds, debentures and subordinated debt
    
    $
    384
    
    
    $
    381
    
    
    $
    319Income taxes, net of refunds
    
    $
    212
    
    
    $
    467
    
    
    $
    499
 *
    
    Includes a restatement of $1,745 of short-term securities as
at December 31, 2008 that were included as cash equivalents in
error previously. As a result, cash flows provided by
(used in) investing activities have been
adjusted by $1,745 in the 2008 column above. The attached notes form part of these Consolidated Financial Statements.
 5




---



##### 



Consolidated Statements of Changes in Segregated Funds Net Assets
 YEARS ENDED DECEMBER 31 (in millions of Canadian dollars)2009
    
    
    2008
    
    
    2007ADDITIONS TO SEGREGATED FUNDSDeposits:Annuities
    
    $
    10,135
    
    
    $
    9,236
    
    
    $
    9,921Life insurance
    
    
    925
    
    
    
    1,683
    
    
    
    3,39911,060
    
    
    
    10,919
    
    
    
    13,320Net transfers (to) from general funds
    
    
    860
    
    
    
    539
    
    
    
    952Net realized and unrealized (losses) gains
    
    
    10,324
    
    
    
    (17,772
    )
    
    
    (210
    )Other investment income
    
    
    1,995
    
    
    
    2,481
    
    
    
    3,81324,239
    
    
    
    (3,833
    )
    
    
    17,875DEDUCTIONS FROM SEGREGATED FUNDSPayments to policyholders and their beneficiaries
    
    
    9,708
    
    
    
    7,843
    
    
    
    8,793Management fees
    
    
    925
    
    
    
    861
    
    
    
    867Taxes and other expenses
    
    
    268
    
    
    
    188
    
    
    
    189Effect of changes in currency exchange rates
    
    
    4,424
    
    
    
    (5,282
    )
    
    
    5,61015,325
    
    
    
    3,610
    
    
    
    15,459Net additions (reductions) to segregated funds for the year
    
    
    8,914
    
    
    
    (7,443
    )
    
    
    2,416Acquisition (Note 3)
    
    
    6,629
    
    
    
    
    
    
    
    Segregated funds net assets, beginning of year
    
    
    65,762
    
    
    
    73,205
    
    
    
    70,789Segregated funds net assets, end of year
    
    $
    81,305
    
    
    $
    65,762
    
    
    $
    73,205
 Consolidated Statements of Segregated Funds Net Assets
 AS AT DECEMBER 31(in millions of Canadian dollars)2009
    
    
    2008ASSETSSegregated and mutual fund units
    
    $
    64,265
    
    
    $
    49,392Stocks
    
    
    7,832
    
    
    
    5,178Bonds
    
    
    7,813
    
    
    
    9,771Cash, cash equivalents and short-term securities
    
    
    1,647
    
    
    
    863Real estate
    
    
    319
    
    
    
    153Mortgages
    
    
    34
    
    
    
    43Other assets
    
    
    1,905
    
    
    
    2,06883,815
    
    
    
    67,468LIABILITIES
    
    
    2,510
    
    
    
    1,706Net assets attributable to segregated funds policyholders
    
    $
    81,305
    
    
    $
    65,762
 The attached notes form part of these Consolidated Financial Statements.
 6




---



##### 



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
   7




---



##### 



1. Accounting Policies (Contd)
   MORTGAGES AND CORPORATE LOANS
    8




---



##### 



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
  9




---



##### 



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:
 CASH, CASH EQUIVALENTS AND SHORT-TERM SECURITIES
  POLICY LOANS AND OTHER INVESTED ASSETS
   10




---



##### 



1. Accounting Policies (Contd)
 OTHER INVESTED ASSETS  HELD-FOR-TRADING AND AVAILABLE-FOR-SALE
 .
 DEFERRED ACQUISITION COSTS
  GOODWILL
  INTANGIBLE ASSETS
  CAPITAL ASSETS
  SEGREGATED FUNDS
   11




---



##### 



1. Accounting Policies (Contd)
 ACTUARIAL LIABILITIES AND OTHER POLICY LIABILITIES
  SENIOR DEBENTURES AND SUBORDINATED DEBT
  INCOME TAXES
   PREMIUM AND FEE INCOME RECOGNITION
  FOREIGN CURRENCY TRANSLATION
   12




---



##### 



1. Accounting Policies (Contd)
 PENSION PLANS AND OTHER POST-RETIREMENT BENEFITS
   STOCK-BASED COMPENSATION
    2. Changes in Accounting Policies
 ADOPTED IN 2009
     13




---



##### 



2. Changes in Accounting Policies (Contd)
       FUTURE IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
 BUSINESS COMBINATIONS, CONSOLIDATED FINANCIAL STATEMENTS AND NON-CONTROLLING INTERESTS
    14




---



##### 



3. Acquisitions and Dispositions
   .
  2009Lincoln U.K.Percentage of shares acquired
    
    
    100
    %Invested assets acquired
    
    $
    1,249Other assets acquired
    
    
    88$
    1,337Actuarial liabilities and other policy liabilities acquired
    
    $
    1,058Other liabilities acquired
    
    
    72$
    1,130Net balance sheet assets acquired
    
    $
    207Consideration:Cash cost of acquisition(1)
    
    $
    380Transaction and other related costs
    
    
    7Total consideration
    
    $
    387Goodwill on acquisition
    
    $
    180Cash and cash equivalents acquired
    
    $
    402Increase in segregated fund net assets
    
    $
    6,629
 (1)
    
    Includes the cost to hedge the foreign currency exposure of the purchase price.     15




---



##### 



4. Segmented Information
     Results by segment for the years ended December 31ConsolidationSLF Canada
    
    
    SLF U.S.
    
    
    MFS
    
    
    SLF Asia
    
    
    Corporate
    
    
    Adjustments
    
    
    Total2009Revenue
    
    $
    11,407
    
    
    $
    11,714
    
    
    $
    1,251
    
    
    $
    1,813
    
    
    $
    1,579
    
    
    $
    (192
    )
    
    $
    27,572Change in actuarial liabilities
    
    $
    2,672
    
    
    $
    4,269
    
    
    $
    
    
    
    $
    800
    
    
    $
    (43
    )
    
    $
    (1
    )
    
    $
    7,697Interest expense
    
    $
    152
    
    
    $
    246
    
    
    $
    
    
    
    $
    
    
    
    $
    148
    
    
    $
    (143
    )
    
    $
    403Income taxes expense (benefit)
    
    $
    (54
    )
    
    $
    (502
    )
    
    $
    101
    
    
    $
    21
    
    
    $
    (108
    )
    
    $
    
    
    
    $
    (542
    )Total net income (loss)
    
    $
    871
    
    
    $
    (461
    )
    
    $
    152
    
    
    $
    76
    
    
    $
    (16
    )
    
    $
    
    
    
    $
    6222008Revenue
    
    $
    7,927
    
    
    $
    3,817
    
    
    $
    1,381
    
    
    $
    498
    
    
    $
    2,144
    
    
    $
    (204
    )
    
    $
    15,563Change in actuarial liabilities
    
    $
    (854
    )
    
    $
    (2,920
    )
    
    $
    
    
    
    $
    (444
    )
    
    $
    (200
    )
    
    $
    (11
    )
    
    $
    (4,429
    )Interest expense
    
    $
    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 expense
    
    $
    173
    
    
    $
    236
    
    
    $
    3
    
    
    $
    
    
    
    $
    84
    
    
    $
    (147
    )
    
    $
    349Income taxes expense (benefit)
    
    $
    200
    
    
    $
    142
    
    
    $
    185
    
    
    $
    23
    
    
    $
    (28
    )
    
    $
    
    
    
    $
    522Total net income
    
    $
    1,049
    
    
    $
    584
    
    
    $
    281
    
    
    $
    123
    
    
    $
    253
    
    
    $
    
    
    
    $
    2,290Assets by segment as at December 31ConsolidationSLF Canada
    
    
    SLF U.S.
    
    
    MFS
    
    
    SLF Asia
    
    
    Corporate
    
    
    Adjustments
    
    
    Total2009General fund assets
    
    $
    55,622
    
    
    $
    42,615
    
    
    $
    859
    
    
    $
    6,437
    
    
    $
    15,854
    
    
    $
    (1,305
    )
    
    $
    120,082Segregated funds net assets
    
    $
    41,426
    
    
    $
    26,848
    
    
    $
    
    
    
    $
    1,788
    
    
    $
    11,243
    
    
    $
    
    
    
    $
    81,3052008General 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
    
    
    $
    
    
    
    $
    65,762
 16




---



##### 



4. Segmented Information (Contd)
  2009
    
    
    2008
    
    
    2007Revenue:United States
    
    $
    555
    
    
    $
    580
    
    
    $
    720United Kingdom
    
    
    870
    
    
    
    313
    
    
    
    878Canada
    
    
    138
    
    
    
    1,235
    
    
    
    14Other countries
    
    
    16
    
    
    
    16
    
    
    
    22Total revenue
    
    $
    1,579
    
    
    $
    2,144
    
    
    $
    1,634Total net income (loss):United States
    
    $
    149
    
    
    $
    (70
    )
    
    $
    212United Kingdom
    
    
    5
    
    
    
    208
    
    
    
    207Canada
    
    
    (170
    )
    
    
    860
    
    
    
    (153
    )Other countries
    
    
    
    
    
    
    1
    
    
    
    (13
    )Total net income (loss)
    
    $
    (16
    )
    
    $
    999
    
    
    $
    253Assets:General funds:United States
    
    $
    4,592
    
    
    $
    3,647United Kingdom
    
    
    8,630
    
    
    
    7,686Canada
    
    
    2,516
    
    
    
    2,912Other countries
    
    
    116
    
    
    
    128Total general fund assets
    
    $
    15,854
    
    
    $
    14,373Segregated funds:United Kingdom
    
    $
    11,243
    
    
    $
    4,290Total general fund assets
    
    $
    11,243
    
    
    $
    4,290
 17




---



##### 



5. Financial Investments and Related Net Investment Income
  A) FAIR VALUE OF FINANCIAL INVESTMENTS
  2009
    
    
    
    
    
    
    
    
    
    2008Carrying
    
    
    Fair
    
    
    
    
    
    
    Carrying
    
    
    FairValue
    
    
    Value
    
    
    Yield %
    
    
    Value
    
    
    Value
    
    
    Yield %ASSETSBonds  held-for-trading
    
    $
    51,634
    
    
    $
    51,634
    
    
    
    5.72
    
    
    $
    48,458
    
    
    $
    48,458
    
    
    
    5.90Bonds  available-for-sale
    
    
    9,673
    
    
    
    9,673
    
    
    
    5.10
    
    
    
    10,616
    
    
    
    10,616
    
    
    
    5.50Mortgages and corporate loans
    
    
    19,449
    
    
    
    19,941
    
    
    
    5.27
    
    
    
    22,302
    
    
    
    22,485
    
    
    
    5.99Stocks  held-for-trading
    
    
    4,331
    
    
    
    4,331
    
    
    
    2.41
    
    
    
    3,440
    
    
    
    3,440
    
    
    
    2.57Stocks  available-for-sale
    
    
    635
    
    
    
    649
    
    
    
    4.34
    
    
    
    1,018
    
    
    
    1,020
    
    
    
    3.19Real estate
    
    
    4,877
    
    
    
    5,124
    
    
    
    9.01
    
    
    
    4,908
    
    
    
    5,812
    
    
    
    10.86Policy loans
    
    
    3,303
    
    
    
    3,303
    
    
    
    6.02
    
    
    
    3,401
    
    
    
    3,401
    
    
    
    6.80Cash, cash equivalents and short-term securities
    
    
    11,868
    
    
    
    11,868
    
    
    
    n/a
    
    
    
    8,879
    
    
    
    8,879
    
    
    
    n/aDerivative assets
    
    
    1,382
    
    
    
    1,382
    
    
    
    n/a
    
    
    
    2,669
    
    
    
    2,669
    
    
    
    n/aOther invested assets including held-for-trading and
available-for-sale other invested assets
    
    
    1,077
    
    
    
    1,109
    
    
    
    n/a
    
    
    
    1,187
    
    
    
    1,230
    
    
    
    n/aTotal invested assets
    
    $
    108,229
    
    
    $
    109,014
    
    
    
    4.89
    
    
    $
    106,878
    
    
    $
    108,010
    
    
    
    5.80
   i) FAIR VALUE METHODOLOGIES AND ASSUMPTIONS
    18




---



##### 



5. Financial Investments and Related Net Investment Income (Contd)
  ii) YIELD CALCULATION
  iii)
FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS:
     19




---



##### 



5. Financial Investments and Related Net Investment Income (Contd)
  Level
1(1)
    
    
    Level 2
    
    
    Level 3
    
    
    TotalAssetsBonds  held-for-tradingCanada federal government securities
    
    $
    
    
    
    $
    2,707
    
    
    $
    
    
    
    $
    2,707Canadian provincial and municipal governments
    
    
    
    
    
    
    6,677
    
    
    
    110
    
    
    
    6,787U.S. Treasury and agency securities
    
    
    1,111
    
    
    
    330
    
    
    
    
    
    
    
    1,441Other foreign government
    
    
    
    
    
    
    4,296
    
    
    
    76
    
    
    
    4,372Corporate securities
    
    
    
    
    
    
    31,872
    
    
    
    891
    
    
    
    32,763Asset-backed securitiesCommercial mortgage-backed securities
    
    
    
    
    
    
    952
    
    
    
    586
    
    
    
    1,538Residential mortgage-backed securities
    
    
    
    
    
    
    1,173
    
    
    
    163
    
    
    
    1,336Collateralized debt obligations
    
    
    
    
    
    
    27
    
    
    
    92
    
    
    
    119Other
    
    
    
    
    
    
    539
    
    
    
    32
    
    
    
    571Total bonds  held-for-trading
    
    $
    1,111
    
    
    $
    48,573
    
    
    $
    1,950
    
    
    $
    51,634Bonds  available-for-saleCanada federal government securities
    
    $
    
    
    
    $
    397
    
    
    $
    
    
    
    $
    397Canadian provincial and municipal governments
    
    
    
    
    
    
    80
    
    
    
    
    
    
    
    80U.S. Treasury and agency securities
    
    
    393
    
    
    
    77
    
    
    
    
    
    
    
    470Other foreign government
    
    
    
    
    
    
    519
    
    
    
    
    
    
    
    519Corporate securities
    
    
    
    
    
    
    7,529
    
    
    
    76
    
    
    
    7,605Asset-backed securitiesCommercial mortgage-backed securities
    
    
    
    
    
    
    194
    
    
    
    40
    
    
    
    234Residential mortgage-backed securities
    
    
    
    
    
    
    318
    
    
    
    
    
    
    
    318Collateralized debt obligations
    
    
    
    
    
    
    4
    
    
    
    46
    
    
    
    50Total bonds  available-for-sale
    
    $
    393
    
    
    $
    9,118
    
    
    $
    162
    
    
    $
    9,673Stocks  held-for-trading
    
    $
    3,983
    
    
    $
    348
    
    
    $
    
    
    
    $
    4,331Cash, cash equivalents and short-term securities
    
    $
    9,610
    
    
    $
    2,258
    
    
    $
    
    
    
    $
    11,868Derivative assets
    
    
    29
    
    
    
    1,342
    
    
    
    11
    
    
    
    1,382Other invested assets
    
    
    247
    
    
    
    195
    
    
    
    146
    
    
    
    588Total investments and cash
    
    $
    9,886
    
    
    $
    3,795
    
    
    $
    157
    
    
    $
    13,838Stocks  available-for-sale
    
    $
    627
    
    
    $
    
    
    
    $
    8
    
    
    $
    635Total Financial Instrument assets measured at fair value
    
    $
    16,000
    
    
    $
    61,834
    
    
    $
    2,277
    
    
    $
    80,111LiabilitiesAmounts on deposit
    
    $
    
    
    
    $
    82
    
    
    $
    
    
    
    $
    82Derivative
liabilities
    
    
    8
    
    
    
    1,205
    
    
    
    44
    
    
    
    1,257Total Financial Instrument liabilities measured at fair
value
    
    $
    8
    
    
    $
    1,287
    
    
    $
    44
    
    
    $
    1,339
  (1)
    
    A total of $8,564 were transferred from level 2 to level 1 due to the
improved transparency of the inputs used to measure the fair value of the financial
instruments. A total of $59,493 were transferred from level 1 to level 2 during the year due
to the decreased transparency of the inputs used to measure the fair value of the financial
instruments. 20




---



##### 



5. Financial Investments and Related Net Investment Income (Contd)
  Gains(losses)included inearningsTotal gains (losses)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    relating toIncluded
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    instrumentsIncluded
    
    
    in other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Transfers
    
    
    Transfers
    
    
    
    
    
    
    still held atBeginning
    
    
    in net
    
    
    comprehensive
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    into
    
    
    (out) of
    
    
    Ending
    
    
    the reportingbalance
    
    
    income(1)
    
    
    income
    
    
    Purchases
    
    
    Sales
    
    
    Settlements
    
    
    level 3(2)
    
    
    level 3(2)
    
    
    balance
    
    
    date(1)AssetsBonds  held-for-tradingCanada federal government
Securities
    
    $
    4
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (4
    )
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Canadian provincial and
municipal governments
    
    
    51
    
    
    
    (8
    )
    
    
    
    
    
    
    69
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    110
    
    
    
    (3
    )Other foreign government
    
    
    11
    
    
    
    (3
    )
    
    
    
    
    
    
    78
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10
    )
    
    
    76
    
    
    
    (2
    )Corporate securities
    
    
    625
    
    
    
    (43
    )
    
    
    
    
    
    
    245
    
    
    
    (40
    )
    
    
    (18
    )
    
    
    241
    
    
    
    (119
    )
    
    
    891
    
    
    
    27Asset-backed securitiesCommercial mortgage-
backed securities
    
    
    947
    
    
    
    (44
    )
    
    
    
    
    
    
    38
    
    
    
    (110
    )
    
    
    
    
    
    
    1
    
    
    
    (246
    )
    
    
    586
    
    
    
    (4
    )Residential mortgage-
Backed securities
    
    
    124
    
    
    
    (12
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20
    )
    
    
    112
    
    
    
    (41
    )
    
    
    163
    
    
    
    69Collateralized debt obligations
    
    
    56
    
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    92
    
    
    
    (4
    )Other
    
    
    82
    
    
    
    (11
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7
    )
    
    
    37
    
    
    
    (69
    )
    
    
    32
    
    
    
    4Total bonds  held-for-trading
    
    $
    1,900
    
    
    $
    (121
    )
    
    $
    
    
    
    $
    441
    
    
    $
    (150
    )
    
    $
    (49
    )
    
    $
    416
    
    
    $
    (487
    )
    
    $
    1,950
    
    
    $
    87Bonds  available-for-saleCorporate securities
    
    $
    54
    
    
    $
    (7
    )
    
    $
    13
    
    
    $
    16
    
    
    $
    (13
    )
    
    $
    (1
    )
    
    $
    20
    
    
    $
    (6
    )
    
    $
    76
    
    
    $
    Asset-backed securitiesCommercial mortgage-
backed securities
    
    
    58
    
    
    
    (3
    )
    
    
    (10
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    40
    
    
    
    Collateralized debt obligations
    
    
    30
    
    
    
    (3
    )
    
    
    14
    
    
    
    6
    
    
    
    (15
    )
    
    
    
    
    
    
    14
    
    
    
    
    
    
    
    46
    
    
    
    Total bonds  available-for-sale
    
    $
    142
    
    
    $
    (13
    )
    
    $
    17
    
    
    $
    22
    
    
    $
    (28
    )
    
    $
    (1
    )
    
    $
    34
    
    
    $
    (11
    )
    
    $
    162
    
    
    $
    Derivative assets
    
    $
    47
    
    
    $
    (8
    )
    
    $
    
    
    
    $
    7
    
    
    $
    (35
    )
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    11
    
    
    $
    (4
    )Other
invested assets(4)
    
    
    143
    
    
    
    (19
    )
    
    
    
    
    
    
    30
    
    
    
    (8
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    146
    
    
    
    (13
    )Total investments and cash
    
    $
    190
    
    
    $
    (27
    )
    
    $
    
    
    
    $
    37
    
    
    $
    (43
    )
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    157
    
    
    $
    (17
    )Stocks  available-for-sale
    
    $
    36
    
    
    $
    (5
    )
    
    $
    (3
    )
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (20
    )
    
    $
    8
    
    
    $
    Total Financial Instrument assets
measured at fair value
    
    $
    2,268
    
    
    $
    (166
    )
    
    $
    14
    
    
    $
    500
    
    
    $
    (221
    )
    
    $
    (50
    )
    
    $
    450
    
    
    $
    (518
    )
    
    $
    2,277
    
    
    $
    70Liabilities (3)Derivative liabilities
    
    $
    83
    
    
    $
    (39
    )
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    44
    
    
    $
    12Total Financial Instrument liabilities
measured at fair value
    
    $
    83
    
    
    $
    (39
    )
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    44
    
    
    $
    12
  (1)
    
    This amount is reported in net investment income in the consolidated statements
of operations.(2)
    
    Transfers in and/or (out) of level 3 during 2009, are primarily attributable to
changes in the transparency of inputs used to price the securities.(3)
    
    For liabilities, gains are indicated in negative numbers.(4)
    
    Certain invested assets are accounted for differently under
U.S. GAAP. 21




---



##### 



5. Financial Investments and Related Net Investment Income (Contd)
 B) REAL ESTATE INVESTMENTS
  2009
    
    
    2008Canada
    
    $
    3,246
    
    
    $
    3,090United States
    
    
    1,373
    
    
    
    1,546United Kingdom
    
    
    257
    
    
    
    271Other
    
    
    1
    
    
    
    1Total real estate
    
    $
    4,877
    
    
    $
    4,908
  2009
    
    
    2008Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairValue
    
    
    Value
    
    
    Value
    
    
    ValueReal estate held for investment
    
    $
    4,861
    
    
    $
    5,108
    
    
    $
    4,898
    
    
    $
    5,802Real estate held for sale
    
    
    16
    
    
    
    16
    
    
    
    10
    
    
    
    10Total real estate
    
    $
    4,877
    
    
    $
    5,124
    
    
    $
    4,908
    
    
    $
    5,812
   2009
    
    
    2008Balance, January 1
    
    $
    251
    
    
    $
    276Net realized gains for the year
    
    
    12
    
    
    
    12Amortization of deferred net realized gains
    
    
    (30
    )
    
    
    (33
    )Effect of changes in currency exchange rates
    
    
    (8
    )
    
    
    (4
    )Balance, December 31
    
    $
    225
    
    
    $
    251
  C) NET INVESTMENT INCOME
  2009
    
    
    2008
    
    
    2007Bonds
    
    $
    4,124
    
    
    $
    (5,852
    )
    
    $
    (1,691
    )Stocks
    
    
    705
    
    
    
    (1,432
    )
    
    
    103Other invested assets
    
    
    41
    
    
    
    (122
    )
    
    
    33Cash equivalents and short-term securities
    
    
    8
    
    
    
    7
    
    
    
    (3
    )Total changes in fair value of held-for-trading assets
    
    $
    4,878
    
    
    $
    (7,399
    )
    
    $
    (1,558
    )
  2009
    
    
    2008
    
    
    2007Changes in fair value
    
    $
    (847
    )
    
    $
    (154
    )
    
    $
    75Interest income (expense)
    
    
    (114
    )
    
    
    (70
    )
    
    
    10Other income
    
    
    18
    
    
    
    4
    
    
    
    1Total income from derivative investments
    
    $
    (943
    )
    
    $
    (220
    )
    
    $
    86
 22




---



##### 



5. Financial Investments and Related Net Investment Income (Contd)
  2009
    
    
    2008
    
    
    2007Interest income:Held-for-trading bonds
    
    $
    3,037
    
    
    $
    3,006
    
    
    $
    3,091Available-for-sale bonds
    
    
    569
    
    
    
    580
    
    
    
    531Mortgages and corporate loans
    
    
    1,253
    
    
    
    1,291
    
    
    
    1,286Policy loans
    
    
    210
    
    
    
    216
    
    
    
    212Cash, cash equivalents and short-term securities
    
    
    36
    
    
    
    147
    
    
    
    231Interest income
    
    
    5,105
    
    
    
    5,240
    
    
    
    5,351Dividends on held-for-trading stocks
    
    
    115
    
    
    
    117
    
    
    
    103Dividends on available-for-sale stocks
    
    
    35
    
    
    
    24
    
    
    
    23Real estate income (net)(1)
    
    
    327
    
    
    
    332
    
    
    
    300Amortization of deferred net realized gains and unrealized gains and losses
    
    
    76
    
    
    
    136
    
    
    
    121Foreign exchange gains (losses)
    
    
    (10
    )
    
    
    (22
    )
    
    
    37Other income (expense) (2)
    
    
    (79
    )
    
    
    354
    
    
    
    377Investment expenses and taxes
    
    
    (107
    )
    
    
    (103
    )
    
    
    (89
    )Total other net investment income
    
    $
    5,462
    
    
    $
    6,078
    
    
    $
    6,223
 
 (1)
    
    Includes operating lease rental income of $283 in 2009 ($293 and $242, in 2008 and 2007, respectively).(2)
    
    Includes equity income from CI Financial of $190 in 2008 and
$228 in 2007. The Companys investment in CI Financial was sold
in December 2008, as described in Note 3. D) DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
  2009
    
    
    2008Fair Value
    
    
    Fair ValuePositive
    
    
    Negative
    
    
    Positive
    
    
    NegativeInterest rate contracts
    
    $
    444
    
    
    $
    (910
    )
    
    $
    1,801
    
    
    $
    (2,135
    )Foreign exchange contracts
    
    
    801
    
    
    
    (119
    )
    
    
    487
    
    
    
    (917
    )Other contracts
    
    
    137
    
    
    
    (228
    )
    
    
    381
    
    
    
    (167
    )Total derivatives
    
    $
    1,382
    
    
    $
    (1,257
    )
    
    $
    2,669
    
    
    $
    (3,219
    )
  2009
    
    
    2008Total Notional
    
    
    Fair Value
    
    
    Total Notional
    
    
    Fair ValueAmount
    
    
    Positive
    
    
    Negative
    
    
    Amount
    
    
    Positive
    
    
    NegativeDerivative investments (1)
    
    $
    41,665
    
    
    $
    823
    
    
    $
    (1,138
    )
    
    $
    44,453
    
    
    $
    2,377
    
    
    $
    (2,479
    )Fair value hedges
    
    
    2,310
    
    
    
    90
    
    
    
    (50
    )
    
    
    2,983
    
    
    
    
    
    
    
    (504
    )Cash flow hedges
    
    
    92
    
    
    
    19
    
    
    
    (24
    )
    
    
    82
    
    
    
    
    
    
    
    (37
    )Net investment hedges
    
    
    3,193
    
    
    
    450
    
    
    
    (45
    )
    
    
    3,278
    
    
    
    292
    
    
    
    (199
    )Total
    
    $
    47,260
    
    
    $
    1,382
    
    
    $
    (1,257
    )
    
    $
    50,796
    
    
    $
    2,669
    
    
    $
    (3,219
    )
 
 (1)
    
    Derivative investments are derivatives that have not been designated as
hedges for accounting purposes. 23




---



##### 



5. Financial Investments and Related Net Investment Income (Contd)
  
 2009
    
    
    2008
    
    
    2007Fair value hedgesIncome (loss) arising from hedge ineffectiveness
    
    $
    6
    
    
    $
    (4
    )
    
    $
    14Cash flow hedges(1)Income (loss) due to amounts excluded from hedge effectiveness assessment
    
    $
    (3
    )
    
    $
    (6
    )
    
    
    (3
    )
 
 (1)
    
    Cash flow hedges include equity forwards hedging the variation in the
cash flows associated with the anticipated payments under certain stock-based compensation
plans expected to occur in 2010, 2011 and 2012. The amounts included in accumulated other
comprehensive income (OCI) related to the equity forwards are reclassified to net income as
the liability is accrued for the stock-based compensation plan over the vesting period. The
Company expects to reclassify a gain of $2 (loss of $5 in 2008) from accumulated OCI to net
income within the next 12 months. Foreign currency forwards hedging the variation in the cash
flows associated with the anticipated purchase of Lincoln U.K. have been settled and
reclassified to the purchase price in the fourth quarter of 2009 (Note 3). E) SECURITIES LENDING
  6. Financial Instrument Risk Management
   24




---



##### 



6. Financial Instrument Risk Management (Contd)
 A) CREDIT RISK
   
    
    Detailed credit risk management policies
    
    Specific investment diversification requirements such as investing by asset class,
geography and industry
    
    Credit portfolio, counterparty and sector exposure limits
    
    Target capital levels that exceed regulatory minimums
    
    Credit quality ratings for portfolio investments are established and reviewed regularly
    
    Comprehensive due diligence processes and ongoing credit analysis
    
    Reserve provisions are established in accordance with standards set forth by the
Canadian Institute of Actuaries
    
    Use of stress-testing techniques, such as Dynamic Capital Adequacy Testing, which
measure the effects of large and sustained adverse credit developments.
    
    Comprehensive compliance monitoring practices and procedures including reporting against
pre-established investment limits
    
    Active credit risk governance including independent monitoring and review and reporting
to senior management and the Board
 i) MAXIMUM EXPOSURE TO CREDIT RISK
  2009
    
    
    2008Cash, cash equivalents and short-term securities
    
    $
    11,868
    
    
    $
    8,879Held-for-trading bonds (1)
    
    
    51,634
    
    
    
    48,458Available-for-sale bonds
    
    
    9,673
    
    
    
    10,616Mortgages
    
    
    13,776
    
    
    
    16,267Corporate loans
    
    
    5,673
    
    
    
    6,035Derivative assets (2)
    
    
    1,382
    
    
    
    2,669Other financial assets (3)
    
    
    2,078
    
    
    
    2,704Total balance sheet maximum credit exposure
    
    $
    96,084
    
    
    $
    95,628Off-balance sheet itemsLoan commitments (4)
    
    $
    446
    
    
    $
    659Guarantees
    
    
    45
    
    
    
    51Total off-balance sheet items
    
    $
    491
    
    
    $
    710
 
 (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. 25




---



##### 



6. Financial Instrument Risk Management (Contd)
 Collateral held and other credit enhancements
   ii) CONCENTRATION RISK
    2009
    
    
    2008Held-for-Trading
    
    
    Available-for-
    
    
    Total
    
    
    Held-for-Trading
    
    
    Available-for-
    
    
    TotalBonds
    
    
    Sale Bonds
    
    
    Bonds
    
    
    Bonds
    
    
    Sale Bonds
    
    
    BondsCanada
    
    $
    20,167
    
    
    $
    980
    
    
    $
    21,147
    
    
    $
    18,184
    
    
    $
    1,380
    
    
    $
    19,564United States
    
    
    19,037
    
    
    
    6,662
    
    
    
    25,699
    
    
    
    19,533
    
    
    
    7,270
    
    
    
    26,803United Kingdom
    
    
    5,229
    
    
    
    614
    
    
    
    5,843
    
    
    
    4,397
    
    
    
    597
    
    
    
    4,994Other
    
    
    7,201
    
    
    
    1,417
    
    
    
    8,618
    
    
    
    6,344
    
    
    
    1,369
    
    
    
    7,713Total Bonds
    
    $
    51,634
    
    
    $
    9,673
    
    
    $
    61,307
    
    
    $
    48,458
    
    
    $
    10,616
    
    
    $
    59,074
 26




---



##### 



6. Financial Instrument Risk Management (Contd)
  2009
    
    
    2008Held-for-Trading
    
    
    Available-for-
    
    
    
    
    
    
    Held-for-Trading
    
    
    Available-for-Bonds
    
    
    Sale Bonds
    
    
    Total
    
    
    Bonds
    
    
    Sale Bonds
    
    
    TotalBonds issued or guaranteed by:Canadian federal government
    
    $
    2,707
    
    
    $
    397
    
    
    $
    3,104
    
    
    $
    2,354
    
    
    $
    489
    
    
    $
    2,843Canadian provincial and municipal governments
    
    
    6,787
    
    
    
    80
    
    
    
    6,867
    
    
    
    6,064
    
    
    
    262
    
    
    
    6,326U.S. Treasury and other U.S. agencies
    
    
    1,441
    
    
    
    470
    
    
    
    1,911
    
    
    
    1,462
    
    
    
    571
    
    
    
    2,033Other foreign governments
    
    
    4,372
    
    
    
    519
    
    
    
    4,891
    
    
    
    3,295
    
    
    
    467
    
    
    
    3,762Total government issued or guaranteed bonds
    
    
    15,307
    
    
    
    1,466
    
    
    
    16,773
    
    
    
    13,175
    
    
    
    1,789
    
    
    
    14,964Corporate bonds by industry sector:Financials
    
    
    11,050
    
    
    
    3,403
    
    
    
    14,453
    
    
    
    11,606
    
    
    
    3,926
    
    
    
    15,532Utilities and energy
    
    
    8,816
    
    
    
    1,050
    
    
    
    9,866
    
    
    
    7,447
    
    
    
    929
    
    
    
    8,376Telecom
    
    
    2,453
    
    
    
    797
    
    
    
    3,250
    
    
    
    2,329
    
    
    
    885
    
    
    
    3,214Consumer staples and discretionary
    
    
    5,487
    
    
    
    1,337
    
    
    
    6,824
    
    
    
    5,429
    
    
    
    1,374
    
    
    
    6,803Industrials
    
    
    2,669
    
    
    
    523
    
    
    
    3,192
    
    
    
    2,510
    
    
    
    495
    
    
    
    3,005Other
    
    
    2,288
    
    
    
    495
    
    
    
    2,783
    
    
    
    1,641
    
    
    
    451
    
    
    
    2,092Total corporate
    
    
    32,763
    
    
    
    7,605
    
    
    
    40,368
    
    
    
    30,962
    
    
    
    8,060
    
    
    
    39,022Asset-backed securities
    
    
    3,564
    
    
    
    602
    
    
    
    4,166
    
    
    
    4,321
    
    
    
    767
    
    
    
    5,088Total bonds
    
    $
    51,634
    
    
    $
    9,673
    
    
    $
    61,307
    
    
    $
    48,458
    
    
    $
    10,616
    
    
    $
    59,074
 27




---



##### 



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 6. Financial Instrument Risk Management (Contd)
  2009TotalMortgages
    
    
    Corporate
    
    
    Mortgages andNon-residential
    
    
    Residential
    
    
    Total
    
    
    Loans
    
    
    Corporate LoansCanada
    
    $
    5,193
    
    
    $
    2,341
    
    
    $
    7,534
    
    
    $
    5,175
    
    
    $
    12,709United States
    
    
    5,905
    
    
    
    280
    
    
    
    6,185
    
    
    
    246
    
    
    
    6,431United Kingdom
    
    
    57
    
    
    
    
    
    
    
    57
    
    
    
    
    
    
    
    57Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    252
    
    
    
    252Total mortgages and corporate loans
    
    $
    11,155
    
    
    $
    2,621
    
    
    $
    13,776
    
    
    $
    5,673
    
    
    $
    19,449
 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
    
    
    $
    22,302
 iii) CONTRACTUAL MATURITIES OF BONDS, MORTGAGES, CORPORATE LOANS AND DERIVATIVES
  2009Held-for-Trading
    
    
    Available-for-
    
    
    TotalBonds
    
    
    Sale Bonds
    
    
    BondsDue in 1 year or less
    
    $
    2,519
    
    
    $
    504
    
    
    $
    3,023Due in years 2-5
    
    
    12,393
    
    
    
    2,675
    
    
    
    15,068Due in years 6-10
    
    
    11,734
    
    
    
    2,790
    
    
    
    14,524Due after 10 years
    
    
    24,988
    
    
    
    3,704
    
    
    
    28,692Total bonds
    
    $
    51,634
    
    
    $
    9,673
    
    
    $
    61,307
  Mortgages
    
    
    Corporate Loans
    
    
    Total2010
    
    $
    1,276
    
    
    $
    563
    
    
    $
    1,8392011
    
    
    1,188
    
    
    
    598
    
    
    
    1,7862012
    
    
    777
    
    
    
    394
    
    
    
    1,1712013
    
    
    1,085
    
    
    
    754
    
    
    
    1,8392014
    
    
    1,227
    
    
    
    655
    
    
    
    1,882Thereafter
    
    
    8,329
    
    
    
    2,719
    
    
    
    11,048Total mortgages and corporate loans, before allowances for losses
    
    $
    13,882
    
    
    $
    5,683
    
    
    $
    19,565
 28




---



##### 



6. Financial Instrument Risk Management (Contd)
  2009
    
    
    2008Term 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
    
    $
    2,304
    
    
    $
    6,437
    
    
    $
    12,389
    
    
    $
    21,130
    
    
    $
    1,724
    
    
    $
    10,846
    
    
    $
    14,567
    
    
    $
    27,137Options purchased
    
    
    509
    
    
    
    1,440
    
    
    
    3,628
    
    
    
    5,577
    
    
    
    682
    
    
    
    669
    
    
    
    2,249
    
    
    
    3,600Options written
    
    
    425
    
    
    
    
    
    
    
    
    
    
    
    425Foreign exchange contracts:Forward contracts
    
    
    2,123
    
    
    
    65
    
    
    
    167
    
    
    
    2,355
    
    
    
    1,786
    
    
    
    77
    
    
    
    
    
    
    
    1,863Swap contracts
    
    
    432
    
    
    
    3,250
    
    
    
    4,771
    
    
    
    8,453
    
    
    
    191
    
    
    
    3,821
    
    
    
    5,123
    
    
    
    9,135Other contracts:Options purchased
    
    
    2,829
    
    
    
    425
    
    
    
    
    
    
    
    3,254
    
    
    
    1,543
    
    
    
    1,500
    
    
    
    6
    
    
    
    3,049Options written
    
    
    1,319
    
    
    
    
    
    
    
    
    
    
    
    1,319
    
    
    
    
    
    
    
    1,132
    
    
    
    
    
    
    
    1,132Forward contracts
    
    
    32
    
    
    
    64
    
    
    
    
    
    
    
    96
    
    
    
    79
    
    
    
    59
    
    
    
    
    
    
    
    138Swap contracts
    
    
    185
    
    
    
    104
    
    
    
    
    
    
    
    289
    
    
    
    150
    
    
    
    101
    
    
    
    
    
    
    
    251Credit derivatives
    
    
    
    
    
    
    116
    
    
    
    10
    
    
    
    126
    
    
    
    
    
    
    
    12
    
    
    
    134
    
    
    
    146Exchange-traded contracts:Interest rate contracts:Futures contracts
    
    
    855
    
    
    
    81
    
    
    
    
    
    
    
    936
    
    
    
    1,697
    
    
    
    45
    
    
    
    
    
    
    
    1,742Foreign exchange contracts:Futures contracts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    323
    
    
    
    
    
    
    
    
    
    
    
    323Other contracts:Futures contracts
    
    
    3,298
    
    
    
    
    
    
    
    
    
    
    
    3,298
    
    
    
    2,280
    
    
    
    
    
    
    
    
    
    
    
    2,280Options purchased
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total notional amount
    
    $
    14,313
    
    
    $
    11,982
    
    
    $
    20,965
    
    
    $
    47,260
    
    
    $
    10,455
    
    
    $
    18,262
    
    
    $
    22,079
    
    
    $
    50,796
  2009
    
    
    2008Term 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
    
    $
    176
    
    
    $
    667
    
    
    $
    539
    
    
    $
    1,382
    
    
    $
    285
    
    
    $
    886
    
    
    $
    1,498
    
    
    $
    2,669Total liability derivatives
    
    $
    (235
    )
    
    $
    (338
    )
    
    $
    (684
    )
    
    $
    (1,257
    )
    
    $
    (73
    )
    
    $
    (933
    )
    
    $
    (2,213
    )
    
    $
    (3,219
    )
 iv) ASSET QUALITY
  29




---



##### 



6. Financial Instrument Risk Management (Contd)
 Bonds by Credit Rating
  2009
    
    
    2008Held-for-Trading
    
    
    Available-for-
    
    
    
    
    
    
    Held-for-Trading
    
    
    Available-for-Bonds
    
    
    Sale Bonds
    
    
    Total
    
    
    Bonds
    
    
    Sale Bonds
    
    
    TotalBonds by credit rating (1):AAA
    
    $
    8,973
    
    
    $
    1,752
    
    
    $
    10,725
    
    
    $
    9,119
    
    
    $
    2,494
    
    
    $
    11,613AA
    
    
    9,163
    
    
    
    1,046
    
    
    
    10,209
    
    
    
    9,183
    
    
    
    1,635
    
    
    
    10,818A
    
    
    16,520
    
    
    
    3,485
    
    
    
    20,005
    
    
    
    14,805
    
    
    
    3,326
    
    
    
    18,131BBB
    
    
    14,797
    
    
    
    2,860
    
    
    
    17,657
    
    
    
    13,826
    
    
    
    2,893
    
    
    
    16,719BB and lower
    
    
    2,181
    
    
    
    530
    
    
    
    2,711
    
    
    
    1,525
    
    
    
    268
    
    
    
    1,793Total bonds
    
    $
    51,634
    
    
    $
    9,673
    
    
    $
    61,307
    
    
    $
    48,458
    
    
    $
    10,616
    
    
    $
    59,074
 
 (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
   2009Gross PositiveReplacement Cost(1)
    
    
    Impact of MasterNetting Agreements(2)
    
    
    Net ReplacementCost(3)Over-the-counter contracts:AA
    
    $
    599
    
    
    $
    (166
    )
    
    $
    433A
    
    
    749
    
    
    
    (388
    )
    
    
    361Exchange-traded
    
    
    34
    
    
    
    (7
    )
    
    
    27Total
    
    $
    1,382
    
    
    $
    (561
    )
    
    $
    821
 2008Gross Positive
Replacement Cost(1)
    
    
    Impact of Master Netting Agreements(2)
    
    
    Net 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
    )
    
    $
    1,550
 
 (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
  2009Gross Carrying Value
    
    
    Allowance for LossesCorporate
    
    
    
    
    
    
    
    
    
    
    CorporateMortgages
    
    
    Loans
    
    
    Total
    
    
    Mortgages
    
    
    Loans
    
    
    TotalNot past due
    
    $
    13,600
    
    
    $
    5,649
    
    
    $
    19,249
    
    
    $
    
    
    
    $
    
    
    
    $
    Past due:Past due less than 90 days
    
    
    30
    
    
    
    
    
    
    
    30
    
    
    
    
    
    
    
    
    
    
    
    Past due 90 to 179 days
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Past due 180 days or more
    
    
    
    
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    Impaired
    
    
    252
    
    
    
    33
    
    
    
    285
    
    
    
    106
    
    
    
    10
    
    
    
    116Balance, December 31
    
    $
    13,882
    
    
    $
    5,683
    
    
    $
    19,565
    
    
    $
    106
    
    
    $
    10
    
    
    $
    116
 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
    
    
    $
    23
   Changes in Allowances for Losses
  CorporateMortgages
    
    
    Loans
    
    
    TotalBalance, 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
    
    
    $
    23Provision for losses
    
    
    96
    
    
    
    21
    
    
    
    117Write-offs, net of recoveries
    
    
    
    
    
    
    (21
    )
    
    
    (21
    )Effect of changes in currency exchange rates
    
    
    (3
    )
    
    
    
    
    
    
    (3
    )Balance, December 31, 2009
    
    $
    106
    
    
    $
    10
    
    
    $
    116
 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, 2009
    
    
    December 31, 2008Fair Value
    
    
    Unrealized Losses
    
    
    Fair Value
    
    
    Unrealized LossesAvailable-for-sale bonds
    
    $
    3,369
    
    
    $
    371
    
    
    $
    7,041
    
    
    $
    1,875Available-for-sale stocks (1)
    
    
    88
    
    
    
    14
    
    
    
    430
    
    
    
    176Available-for-sale other invested assets (2)
    
    
    135
    
    
    
    19
    
    
    
    194
    
    
    
    21Total temporarily impaired financial assets
    
    $
    3,592
    
    
    $
    404
    
    
    $
    7,665
    
    
    $
    2,072
 
 (1)
    
    These assets include available-for-sale private equities that are
accounted for at cost with a carrying value of $2 as at December 31, 2009 ($7 as at December
31, 2008).(2)
    
    These assets include available-for-sale limited partnerships and other
invested assets with a carrying value of $154 as at December 31, 2009 ($215 as at December 31,
2008). Other-Than-Temporarily Impaired Available-for-Sale Assets
    32




---



##### 



6. Financial Instrument Risk Management (Contd)
 Impairment of Held-for-Trading Assets
   Non-Income Producing Bonds
  B) LIQUIDITY RISK
       33




---



##### 



6. Financial Instrument Risk Management (Contd)
  Within
    
    
    1 Year to
    
    
    3 Years to
    
    
    Over 51 Year
    
    
    3 Years
    
    
    5 Years
    
    
    Years
    
    
    TotalGeneral fund policyholder liabilities (1)
    
    $
    12,365
    
    
    $
    11,504
    
    
    $
    11,543
    
    
    $
    161,351
    
    
    $
    196,763Senior debentures and financing (2)
    
    
    233
    
    
    
    459
    
    
    
    459
    
    
    
    9,654
    
    
    
    10,805Subordinated debt (2)
    
    
    191
    
    
    
    383
    
    
    
    383
    
    
    
    4,553
    
    
    
    5,510Bond repurchase agreements and securities
lending transactions
    
    
    1,266
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,266Accounts payable and accrued expenses
    
    
    1,927
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,927Borrowed funds (2)
    
    
    98
    
    
    
    142
    
    
    
    83
    
    
    
    62
    
    
    
    385Total liabilities
    
    $
    16,080
    
    
    $
    12,488
    
    
    $
    12,468
    
    
    $
    175,620
    
    
    $
    216,656Contractual commitments:(3)Contractual loan, equity and real estate
commitments
    
    $
    419
    
    
    $
    197
    
    
    $
    119
    
    
    $
    69
    
    
    $
    804Operating lease commitments
    
    
    90
    
    
    
    138
    
    
    
    65
    
    
    
    39
    
    
    
    332Total contractual commitments
    
    $
    509
    
    
    $
    335
    
    
    $
    184
    
    
    $
    108
    
    
    $
    1,136
 
 (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)
    
    Payments due based on maturity dates and includes expected interest payments.
Actual redemption of certain securities may occur sooner as some include an option for the
issuer to call the security at an earlier date.(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). C) MARKET RISK
      34




---



##### 



6. Financial Instrument Risk Management (Contd)
       i) CURRENCY RISK
  ii) INTEREST RATE RISK
   35




---



##### 



6. Financial Instrument Risk Management (Contd)
  Interest Rate Change
    
    2009
    
    
    20081% increase
    
    $
    (375
    )
    
    to
    
    $
    (425
    )
    
    $
    (400
    )
    
    to
    
    $
    (450
    )1% decrease
    
    $
    375
    
    
    to
    
    $
    425
    
    
    $
    400
    
    
    to
    
    $
    450
 iii) EQUITY RISK
    Equity Market Change
    
    2009
    
    
    200810% increase
    
    $
    25
    
    
    to
    
    $
    75
    
    
    $
    50
    
    
    to
    
    $
    10010% decrease
    
    $
    (25
    )
    
    to
    
    $
    (75
    )
    
    $
    (50
    )
    
    to
    
    $
    (100
    )
   2009
    
    2008Held-for-Trading
    
    
    Available-for-
    
    
    Total
    
    
    Held-for-Trading
    
    
    Available-for-
    
    
    TotalStocks
    
    
    Sale Stocks
    
    
    Stocks
    
    
    Stocks
    
    
    Sale Stocks
    
    
    StocksCanada
    
    $
    2,301
    
    
    $
    115
    
    
    $
    2,416
    
    
    $
    1,724
    
    
    $
    577
    
    
    $
    2,301United States
    
    
    1,110
    
    
    
    460
    
    
    
    1,570
    
    
    
    942
    
    
    
    396
    
    
    
    1,338United Kingdom
    
    
    495
    
    
    
    16
    
    
    
    511
    
    
    
    434
    
    
    
    6
    
    
    
    440Other
    
    
    425
    
    
    
    44
    
    
    
    469
    
    
    
    340
    
    
    
    39
    
    
    
    379Total stocks
    
    $
    4,331
    
    
    $
    635
    
    
    $
    4,966
    
    
    $
    3,440
    
    
    $
    1,018
    
    
    $
    4,458
 36




---



##### 



7. Goodwill and Intangible Assets
 A) GOODWILL
   SLF Canada
    
    
    SLF U.S.
    
    
    SLF Asia
    
    
    Corporate
    
    
    TotalBalance, January 1, 2008
    
    $
    3,841
    
    
    $
    1,544
    
    
    $
    433
    
    
    $
    577
    
    
    $
    6,395Acquisitions
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    75
    
    
    
    92Dispositions (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
    
    
    $
    6,598Acquisitions (Note 3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    216
    
    
    
    216Dispositions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8
    )
    
    
    (8
    )Effect of changes in currency exchange rates
    
    
    
    
    
    
    (257
    )
    
    
    (73
    )
    
    
    (57
    )
    
    
    (387
    )Balance, December 31, 2009
    
    $
    3,481
    
    
    $
    1,640
    
    
    $
    463
    
    
    $
    835
    
    
    $
    6,419
 37




---



##### 



7. Goodwill and Intangible Assets (Contd)
 B) INTANGIBLE ASSETS
  2009
    
    2008Gross Carrying
    
    
    Accumulated
    
    
    Net
    
    
    Gross Carrying
    
    
    Accumulated
    
    
    NetAmount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    AmountFinite-life intangible assets:Sales potential of field force
    
    $
    491
    
    
    $
    88
    
    
    $
    403
    
    
    $
    504
    
    
    $
    74
    
    
    $
    430Asset administration contracts
    
    
    228
    
    
    
    69
    
    
    
    159
    
    
    
    231
    
    
    
    58
    
    
    
    173Software and
other(1)
    
    
    144
    
    
    
    32
    
    
    
    112
    
    
    
    2
    
    
    
    2
    
    
    
    863
    
    
    
    189
    
    
    
    674
    
    
    
    737
    
    
    
    134
    
    
    
    603Indefinite-life intangible assets:Fund management contracts
    
    
    241
    
    
    
    
    
    
    
    241
    
    
    
    263
    
    
    
    
    
    
    
    263State licenses
    
    
    11
    
    
    
    
    
    
    
    11
    
    
    
    12
    
    
    
    
    
    
    
    12252
    
    
    
    
    
    
    
    252
    
    
    
    275
    
    
    
    
    
    
    
    275Total intangible assets
    
    $
    1,115
    
    
    $
    189
    
    
    $
    926
    
    
    $
    1,012
    
    
    $
    134
    
    
    $
    878
 
 (1)
    
    Increase in 2009 is due to the reclassification of $102 internally developed
software costs from other assets described in Note 2.  8. Other Assets
  2009
    
    
    2008Accounts receivable
    
    $
    978
    
    
    $
    1,496Investment income due and accrued
    
    
    1,100
    
    
    
    1,208Future income taxes (Note 19)
    
    
    1,054
    
    
    
    1,190Deferred acquisition costs
    
    
    167
    
    
    
    154Prepaid expenses
    
    
    244
    
    
    
    303Premiums receivable
    
    
    390
    
    
    
    476Accrued benefit asset (Note 22)
    
    
    405
    
    
    
    422Capital assets
    
    
    151
    
    
    
    210Other
    
    
    19
    
    
    
    20Total other assets
    
    $
    4,508
    
    
    $
    5,479
   38




---



##### 



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
   39




---



##### 



9. Actuarial Liabilities and Other Policy Liabilities (Contd)
 Provision for Policyholder Dividends
  B) COMPOSITION OF ACTUARIAL LIABILITIES AND OTHER POLICY LIABILITIES
  2009SLF Canada
    
    
    SLF U.S.
    
    
    SLF Asia
    
    
    Corporate(1)
    
    
    TotalIndividual participating life
    
    $
    14,813
    
    
    $
    5,291
    
    
    $
    3,034
    
    
    $
    2,346
    
    
    $
    25,484Individual non-participating life
    
    
    3,017
    
    
    
    9,317
    
    
    
    264
    
    
    
    988
    
    
    
    13,586Group life
    
    
    1,233
    
    
    
    215
    
    
    
    16
    
    
    
    9
    
    
    
    1,473Individual annuities
    
    
    9,323
    
    
    
    10,538
    
    
    
    
    
    
    
    4,392
    
    
    
    24,253Group annuities
    
    
    6,498
    
    
    
    3,814
    
    
    
    372
    
    
    
    
    
    
    
    10,684Health insurance
    
    
    5,938
    
    
    
    1,077
    
    
    
    1
    
    
    
    114
    
    
    
    7,130Total actuarial liabilities
    
    
    40,822
    
    
    
    30,252
    
    
    
    3,687
    
    
    
    7,849
    
    
    
    82,610Add: Other policy liabilities(2)
    
    
    641
    
    
    
    663
    
    
    
    77
    
    
    
    647
    
    
    
    2,028Actuarial liabilities and other policy liabilities
    
    $
    41,463
    
    
    $
    30,915
    
    
    $
    3,764
    
    
    $
    8,496
    
    
    $
    84,638
 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
 
 (1)
    
    Primarily business from the U.K., reinsurance and run-off reinsurance
operations. Includes SLF UK of $2,257 ($2,307 in 2008) for Individual participating life; $(5)
($(9) in 2008) for Individual non-participating life; $4,393 ($3,573 in 2008) for Individual
annuities and $121 ($67 in 2008) for other policy liabilities.(2)
    
    Consists of policy benefits payable, provisions for unreported claims, provisions
for policyholder dividends, and provisions for experience rating refunds.  40




---



##### 



9. Actuarial Liabilities and Other Policy Liabilities (Contd)
 C) TOTAL ASSETS SUPPORTING LIABILITIES AND EQUITY
  2009MortgagesBonds
    
    
    Stocks
    
    
    andHeld-for
    
    
    Available
    
    
    Held-for
    
    
    Available
    
    
    Corporate
    
    
    Real-Trading
    
    
    -for-sale
    
    
    -Trading
    
    
    -for-sale
    
    
    Loans
    
    
    Estate
    
    
    Other
    
    
    TotalIndividual participating life
    
    $
    14,062
    
    
    $
    
    
    
    $
    3,143
    
    
    $
    13
    
    
    $
    4,124
    
    
    $
    3,194
    
    
    $
    4,118
    
    
    $
    28,654Individual non-participating life
    
    
    8,321
    
    
    
    442
    
    
    
    840
    
    
    
    4
    
    
    
    2,730
    
    
    
    299
    
    
    
    5,522
    
    
    
    18,158Group life
    
    
    1,125
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    1,007
    
    
    
    23
    
    
    
    18
    
    
    
    2,176Individual annuities
    
    
    17,400
    
    
    
    55
    
    
    
    246
    
    
    
    1
    
    
    
    5,061
    
    
    
    
    
    
    
    2,978
    
    
    
    25,741Group annuities
    
    
    6,089
    
    
    
    277
    
    
    
    82
    
    
    
    4
    
    
    
    3,073
    
    
    
    155
    
    
    
    1,799
    
    
    
    11,479Health insurance
    
    
    4,503
    
    
    
    
    
    
    
    17
    
    
    
    1
    
    
    
    3,122
    
    
    
    137
    
    
    
    733
    
    
    
    8,513Equity and other
    
    
    134
    
    
    
    8,899
    
    
    
    
    
    
    
    612
    
    
    
    332
    
    
    
    1,069
    
    
    
    14,315
    
    
    
    25,361Total assets
    
    $
    51,634
    
    
    $
    9,673
    
    
    $
    4,331
    
    
    $
    635
    
    
    $
    19,449
    
    
    $
    4,877
    
    
    $
    29,483
    
    
    $
    120,082
 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
 41




---



##### 



9. Actuarial Liabilities and Other Policy Liabilities (Contd)
 D) CHANGES IN ACTUARIAL LIABILITIES
  2009
    
    
    2008Actuarial liabilities, January 1,
    
    $
    79,241
    
    
    $
    77,936Change in liabilities on in-force business(1):
    
    
    2,436
    
    
    
    (7,701
    )Liabilities arising from new policies
    
    
    4,022
    
    
    
    3,094Changes in assumptions or methodology(2):
    
    
    1,239
    
    
    
    178Increase (decrease) in actuarial liabilities
    
    
    7,697
    
    
    
    (4,429
    )Actuarial liabilities before the following:
    
    
    86,938
    
    
    
    73,507Acquisition (Note 3)
    
    
    986
    
    
    
    Effect of changes in currency exchange rates
    
    
    (5,314
    )
    
    
    5,734Actuarial liabilities, December 31
    
    
    82,610
    
    
    
    79,241Add: Other policy liabilities
    
    
    2,028
    
    
    
    2,170Actuarial liabilities and other policy liabilities, December 31
    
    $
    84,638
    
    
    $
    81,411
 
 (1)
    
    Due to the enactment of the Canadian tax rules relating to CICA Handbook
Section 3855, an increase in actuarial liabilities of $135 was recorded during the first
quarter of 2009. Prior to the enactment of these tax rules, actuarial liabilities included an
estimated adjustment to account for income taxes as if these tax rules had, at the time, been
enacted.(2)
    
    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. See table below for 2009 changes:  Assumption or methodology
    
    
    Policy liabilities increase (decrease) pre-tax
    
    
    DescriptionMortality / morbidity
    
    
    $
    (137
    )
    
    
    Improved mortality
experience on both
life insurance and
savings products.Lapses and other policyholder behaviour
    
    
    
    375
    
    
    
    Updates to
policyholder
behaviour
assumptions in the
Companys individual
insurance business.Expense
    
    
    
    119
    
    
    
    Impact of reflecting
recent experience
studies in several
of the Companys
businesses.Investment returns
    
    
    
    987
    
    
    
    Driven primarily
from negative impact
of the
implementation of
equity- and interest
rate-related
actuarial assumption
updates in the third
quarter of 2009 and
cumulative changes
in Conditional Tail
Expectation levels
related to changes
in equity market
levels experienced
during 2009.Other
    
    
    
    (105
    )Total
    
    
    $
    1,239
 42




---



##### 



9. Actuarial Liabilities and Other Policy Liabilities (Contd)
 E) FAIR VALUE OF ACTUARIAL LIABILITIES, FUTURE INCOME TAXES AND DEFERRED NET REALIZED GAINS
  F) ASSUMPTIONS AND MEASUREMENT UNCERTAINTY
  Mortality
   Morbidity
  Asset default
   Equity Market Movements
  43




---



##### 



9. Actuarial Liabilities and Other Policy Liabilities (Contd)
   Equity Market Sensitivity
    
    December 31, 2009
    
    
    December 31, 200810% increase
    
    $
    75
    
    
    to
    
    $
    125
    
    
    $
    250
    
    
    to
    
    $
    30010% decrease
    
    $
    (150
    )
    
    to
    
    $
    (200
    )
    
    $
    (275
    )
    
    to
    
    $
    (350
    )25% increase
    
    $
    150
    
    
    to
    
    $
    250
    
    
    
    
    
    
    
    Not Available25% decrease
    
    $
    (475
    )
    
    to
    
    $
    (575
    )
    
    
    
    
    
    
    Not Available
   Interest rate
      Interest Rate Sensitivity
    
    2009
    
    
    20081% increase
    
    $
    (50
    )
    
    to
    
    $
    50
    
    
    $
    100
    
    
    to
    
    $
    1501% decrease
    
    $
    (150
    )
    
    to
    
    $
    (250
    )
    
    $
    (150
    )
    
    to
    
    $
    (200
    )
 44




---



##### 



9. Actuarial Liabilities and Other Policy Liabilities (Contd)
 Policy termination rates
   Operating expenses and inflation
  G) REINSURANCE AGREEMENTS
  2009
    
    
    2008
    
    
    2007Premiums:Direct premiums
    
    $
    16,193
    
    
    $
    14,124
    
    
    $
    13,550Reinsurance assumed
    
    
    797
    
    
    
    585
    
    
    
    564Reinsurance ceded
    
    
    (1,480
    )
    
    
    (1,122
    )
    
    
    (990
    )$
    15,510
    
    
    $
    13,587
    
    
    $
    13,124Payments to policyholders, beneficiaries and depositors:Direct payments
    
    $
    14,112
    
    
    $
    13,863
    
    
    $
    14,292Reinsurance assumed
    
    
    689
    
    
    
    657
    
    
    
    526Reinsurance ceded
    
    
    (1,344
    )
    
    
    (745
    )
    
    
    (574
    )$
    13,457
    
    
    
    13,775
    
    
    $
    14,244
  H) ROLE OF THE APPOINTED ACTUARY
   45




---



##### 



9. Actuarial Liabilities and Other Policy Liabilities (Contd)
  10. Capital Management
       46




---



##### 



10. Capital Management (Contd)
  As atDecember 31
    
    
    December 312009
    
    
    2008Equity:Participating policyholders equity
    
    $
    107
    
    
    $
    106Preferred shareholders equity
    
    
    1,741
    
    
    
    1,495Common shareholders equity(1)
    
    
    15,566
    
    
    
    15,808Total equity
    
    $
    17,414
    
    
    
    17,409Other capital securities:Subordinated debt
    
    $
    3,048
    
    
    $
    2,576Sun Life Assurance debentures, Series A, B and C (2)
    
    
    1,644
    
    
    
    1,150Total other capital securities
    
    
    4,692
    
    
    
    3,726Total capital
    
    $
    22,106
    
    
    $
    21,135
 (1)
    
    Certain components of accumulated other comprehensive income, namely
unrealized gains and losses on cash flow hedges and available-for-sale debt securities
(effective 2008) are excluded from regulatory capital.(2)
    
    The Sun Life Assurance debentures qualify as regulatory capital up to the
amount of $1,644 of Sun Life ExchangEable Capital Securities issued by Sun Life Capital Trust,
I and II (Note 11). These trusts are variable interest entities that are not consolidated by
the Company.  11. Senior Debentures
  Currency of Borrowing
    
    
    Interest Rate
    
    
    Earliest Par Call Date (1)
    
    Maturity
    
    
    2009
    
    
    2008Sun Life Assurance debentures (2)Issued to Sun Life Capital Trust (SLCT I)Series A issued October 19, 2001(3)
    
    Cdn. dollars
    
    
    6.87
    %
    
    December 31, 2011
    
    
    2031
    
    
    $
    960
    
    
    $
    960Series B issued June 25, 2002
    
    Cdn. dollars
    
    
    7.09
    %
    
    June 30, 2032
    
    
    2052
    
    
    
    200
    
    
    
    200Issued to Sun Life Capital Trust II (SLCT II)Series C issued November 20, 2009(4)
    
    Cdn. dollars
    
    
    6.06
    %
    
    December 31, 2019
    
    
    2108
    
    
    
    500
    
    
    
    SLF Inc. senior unsecured debenturesSeries A issued November 23, 2005(5)
    
    Cdn. dollars
    
    
    4.80
    %
    
    November 23, 2015
    
    
    2035
    
    
    
    600
    
    
    
    600Series B issued March 13, 2006(6)
    
    Cdn. dollars
    
    
    4.95
    %
    
    June 1, 2016
    
    
    2036
    
    
    
    700
    
    
    
    700Series B issued February 26, 2007(6)
    
    Cdn. dollars
    
    
    4.95
    %
    
    June 1, 2016
    
    
    2036
    
    
    
    251
    
    
    
    253Series C issued July 11, 2006(7)
    
    Cdn. dollars
    
    
    5.00
    %
    
    July 11, 2011
    
    
    2031
    
    
    
    300
    
    
    
    300Series D issued June 30, 2009
    
    Cdn. dollars
    
    
    5.70
    %
    
    
    
    
    
    2019
    
    
    
    300
    
    
    
    $
    3,811
    
    
    $
    3,013Fair value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    3,987
    
    
    $
    2,768
 (1)
    
    From and after the dates noted, the relevant debentures may be redeemed, at the
option of the issuer, at par, if redemption occurs on an interest payment date or an interest
rate reset date, or at the greater of the Canada yield price or par if redeemed prior to these
dates. Early redemption of the debentures issued by Sun Life Assurance is subject to
regulatory approval.(2)
    
    The Sun Life Assurance debentures were issued to SLCT I and SLCT II (the SL Capital
Trusts), which are variable interest entities that are not consolidated by the Company. SLCT I and SLCT II issued innovative capital securities and purchased the Sun Life Assurance
debentures with the proceeds from the issuances, which qualify as regulatory capital, and are
described in further detail in the following section of this note.(3)
    
    On September 7, 2007, Sun Life Assurance repurchased $30 principal amount of the
$990 debenture outstanding at that time. Redemption premiums of $1 (net of taxes of $1) were
recorded in the third quarter of 2007.(4)
    
    After December 31, 2019, and every fifth anniversary thereafter, the interest rate
will reset to an annual rate equal to the Government of Canada yield plus 3.60%.(5)
    
    After November 23, 2015, interest is payable at 1% over the 90-day Bankers
Acceptances Rate.(6)
    
    After June 1, 2016, interest is payable at 1% over the 90-day Bankers Acceptances
Rate.(7)
    
    After July 11, 2011, interest is payable at 1% over the 90-day Bankers Acceptances
Rate. 47




---



##### 



11. Senior Debentures (Contd)
    TRUST CAPITAL SECURITIES
       48




---



##### 



11. Senior Debentures (Contd)
  Distribution or
    
    
    
    
    
    
    Redemption date
    
    
    Conversion date
    
    
    2009
    
    
    2008
    
    
    2007interest payment
    
    
    Annual
    
    
    At the issuers
    
    
    At the holders
    
    
    Principal
    
    
    Principal
    
    
    PrincipalIssuer
    
    Issuance date
    
    
    dates
    
    
    yield
    
    
    option
    
    
    option
    
    
    amount
    
    
    amount
    
    
    amountSun Life Capital Trust (1),(2),(3),(4)950 SLEECS A
    
    October 19, 2001
    
    June 30, December 31
    
    
    6.865
    %
    
    December 31, 2006
    
    Any time
    
    $
    950
    
    
    $
    950
    
    
    $
    950200 SLEECS B
    
    June 25, 2002
    
    June 30, December 31
    
    
    7.093
    %
    
    June 30, 2007
    
    Any time
    
    $
    200
    
    
    $
    200
    
    
    $
    200$
    1,150
    
    
    $
    1,150
    
    
    $
    1,150Sun Life Capital Trust II (1) ,(2)500 SLEECS 2009-1
    
    November 20, 2009
    
    June 30, December 31
    
    
    5.863
    %  (5)
    
    December 31, 2014
    
    No conversion option
    
    $
    500
    
    
    
    
    
    
    
    
 
 (1)
    
    Subject to the approval of OSFI, (i) the SL Capital Trusts may, in whole or in part,
on the redemption date specified above or on any distribution date thereafter, or in the case
of SLCT II, on any date thereafter, redeem any outstanding SLEECS without the consent of the
holders, and (ii) upon occurrence of a regulatory event or a tax event (as defined), prior to
the redemption date specified above, the SL Capital Trusts may redeem all, but not part of,
any class of SLEECS without the consent of the holders.(2)
    
    The SLEECS A may be redeemed for cash equivalent to (i) the greater of the Early
Redemption Price or the Redemption Price if the redemption occurs prior to December 31, 2011
or (ii) the Redemption Price if the redemption occurs on or after December 31, 2011. The
SLEECS B may be redeemed for cash equivalent to (i) the greater of the Early Redemption Price
or the Redemption Price if the redemption occurs prior to June 30, 2032 or (ii) the Redemption
Price if the redemption occurs on or after June 30, 2032. Redemption Price refers to an amount
equal to $1,000 plus the unpaid distributions, other than unpaid distributions resulting from
a Missed Dividend Event, to the redemption date. Early Redemption Price refers to the price
calculated to provide an annual yield, equal to the yield on a GOC bond issued on the
redemption date that (i) in the case of the SLEECS A, has a maturity date of December 31,
2011, plus 37 basis points, or (ii) in the case of the SLEECS B, has a maturity date of June
30, 2032, plus 32 basis points, and in each case plus the unpaid distributions, other than
unpaid distributions resulting from a Missed Dividend Event, to the redemption date. The
SLEECS 2009-1 may be redeemed for cash equivalent to, on any day that is not an Interest Rate
Reset Date, accrued and unpaid interest on the SLEECS 2009-1 plus the greater of par and a
price calculated to provide an annual yield equal to the yield of a GOC bond maturing on the
next Interest Reset Date plus (i) 0.60% if the redemption date is prior to December 31, 2019
or (ii) 1.20% if the redemption date is any time after December 31, 2019. On an Interest Rate
Reset Date, the redemption price is equal to par plus accrued and unpaid interest on the
SLEECS 20091.(3)
    
    The non-cumulative perpetual preferred shares of Sun Life Assurance issued upon an
Automatic Exchange Event in respect of the SLEECS A and SLEECS B will become convertible, at
the option of the holder, into a variable number of common shares of SLF Inc. on distribution
dates on or after June 30, 2012 in respect of the SLEECS A and on distribution dates on or
after December 31, 2032 in respect of the SLEECS B.(4)
    
    Holders of SLEECS A and SLEECS B may exchange, at any time, all or part of their
holdings of SLEECS A or SLEECS B at a price for each SLEECS of 40 non-cumulative perpetual
preferred shares of Sun Life Assurance. SLCT I will have the right, at any time before the
exchange is completed, to arrange for a substituted purchaser to purchase SLEECS tendered for
surrender to SLCT I so long as the holder of the SLEECS so tendered has not withheld consent
to the purchase of its SLEECS. Any non-cumulative perpetual preferred shares issued in respect
of an exchange by the holders of SLEECS A or SLEECS B will become convertible, at the option
of the holder, into a variable number of common shares of SLF Inc. on distribution dates on or
after June 30, 2012 in respect of the SLEECS A and on distribution dates on or after December
31, 2032 in respect of the SLEECS B.(5)
    
    Holders of SLEECS 2009-1 are eligible to receive semi-annual interest payments at a
fixed rate until December 31, 2019. The interest rate on the SLEECS 2009-1 will reset on
December 31, 2019 and every fifth anniversary thereafter to equal the GOC yield plus 3.40%. 12. Other Liabilities
 A) COMPOSITION OF OTHER LIABILITIES
  2009
    
    
    2008Accounts payable
    
    $
    1,313
    
    
    $
    2,599Bank overdrafts
    
    
    20
    
    
    
    314Bond repurchase agreements
    
    
    1,006
    
    
    
    1,406Accrued expenses and taxes
    
    
    566
    
    
    
    534Borrowed funds
    
    
    321
    
    
    
    348Senior financing
    
    
    1,383
    
    
    
    1,356Future income taxes (Note 19)
    
    
    92
    
    
    
    477Accrued benefit liability (Note 22)
    
    
    473
    
    
    
    501Other
    
    
    292
    
    
    
    296Total other liabilities
    
    $
    5,466
    
    
    $
    7,831
 49




---



##### 



12. Other Liabilities (Contd)
 B) BOND REPURCHASE AGREEMENTS
  C) BORROWED FUNDS
  Currency of Borrowing
    
    
    Maturity
    
    
    2009
    
    
    2008Encumbrances on real estate
    
    Cdn. dollars
    
    
    2010-2018
    
    
    $
    184
    
    
    $
    187U.S. dollars
    
    
    2010-2015
    
    
    
    137
    
    
    
    161Total borrowed funds
    
    
    
    
    
    
    
    
    
    $
    321
    
    
    $
    348
   D) SENIOR FINANCING
     50




---



##### 



13. Subordinated Debt
  Interest
    
    
    Earliest ParCurrency

    
    Rate
    
    
    Call date (1)
    
    
    Maturity
    
    
    2009
    
    
    2008Sun Life Assurance:Issued October 12, 2000(2)
    
    Cdn. dollars
    
    
    6.65
    %
    
    October 12, 2010
    
    
    2015
    
    
    $
    300
    
    
    $
    300Issued May 15, 1998(3)
    
    Cdn. dollars
    
    
    6.30
    %
    
    
    
    
    
    
    2028
    
    
    
    150
    
    
    
    150Issued June 25, 2002(4)
    
    Cdn. dollars
    
    
    6.15
    %
    
    June 30, 2012
    
    
    2022
    
    
    
    800
    
    
    
    799Sun Life Financial:Issued May 29, 2007(5)
    
    Cdn. dollars
    
    
    5.40
    %
    
    May 29, 2037
    
    
    2042
    
    
    
    398
    
    
    
    398Issued January 20, 2008(6)
    
    Cdn. dollars
    
    
    5.59
    %
    
    January 30, 2018
    
    
    2023
    
    
    
    398
    
    
    
    398Issued June 26, 2008(7)
    
    Cdn. Dollars
    
    
    5.12
    %
    
    June 26, 2013
    
    
    2018
    
    
    
    348
    
    
    
    348Issued March 31, 2009(8)
    
    Cdn. Dollars
    
    
    7.90
    %
    
    March 31, 2014
    
    
    2019
    
    
    
    496
    
    
    
    Sun Canada Financial:Issued December 15, 1995
    
    U.S. dollars
    
    
    7.25
    %
    
    
    
    
    
    
    2015
    
    
    
    158
    
    
    
    183Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    3,048
    
    
    $
    2,576Fair value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    3,202
    
    
    $
    2,397
 
 (1)
    
    From and after the dates noted, the relevant debt may be redeemed, at
the option of the issuer, at par if redemption occurs on an interest payment date, or at the
greater of the Canada yield price or par if redeemed prior to these dates. Early redemption of
all the subordinated debentures is subject to regulatory approval. The debt issued by Sun
Canada Financial is not redeemable prior to maturity.(2)
    
    Issued by Clarica. After October 12, 2010, interest is payable at 1% over the 90-day
Bankers Acceptance Rate.(3)
    
    Issued by Clarica.(4)
    
    After June 30, 2012, interest is payable at 1.54% over the 90-day Bankers
Acceptance Rate.(5)
    
    After May 29, 2037, until maturity of the debentures interest rate is
payable at 1% over the 90-day Bankers Acceptance Rate.(6)
    
    After January 30, 2018, until maturity of the debentures interest rate is
payable at 2.1% over the 90-day Bankers Acceptance Rate.(7)
    
    After June 26, 2013, until maturity of the debentures interest rate is
payable at 2% over the 90-day Bankers Acceptance Rate.(8)
    
    After March 31, 2014, until maturity of the debentures interest rate is
payable at 7.15% over the 90-day Bankers Acceptance Rate.  14. Non-controlling Interests in Subsidiaries
  51




---



##### 



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.
  2009
    
    
    2008
    
    
    2007Number
    
    
    
    
    
    
    Number
    
    
    
    
    
    
    Numberof Shares
    
    
    Amount
    
    
    of Shares
    
    
    Amount
    
    
    of Shares
    
    
    AmountPreferred shares(in millions of shares)Balance, January 1:
    
    
    61
    
    
    $
    1,495
    
    
    
    61
    
    
    $
    1,495
    
    
    
    51
    
    
    $
    1,250Preferred shares issued, Class A, Series 3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Preferred shares issued, Class A, Series 4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Preferred shares issued, Class A, Series 5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    250Preferred shares issued, Class A, Series 6R
    
    
    10
    
    
    
    250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance costs, net of taxes
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )Balance, December 31
    
    
    71
    
    
    $
    1,741
    
    
    
    61
    
    
    $
    1,495
    
    
    
    61
    
    
    $
    1,495Common shares (in millions of shares)Balance, January 1
    
    
    560
    
    
    $
    6,983
    
    
    
    564
    
    
    $
    7,033
    
    
    
    572
    
    
    
    7,082Stock options exercised (Note 18)
    
    
    
    
    
    
    7
    
    
    
    1
    
    
    
    10
    
    
    
    2
    
    
    
    66Common shares purchased for cancellation
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    (60
    )
    
    
    (10
    )
    
    
    (115
    )Shares issued under dividend reinvestment
and share purchase plan
    
    
    4
    
    
    
    136
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance, December 31
    
    
    564
    
    
    $
    7,126
    
    
    
    560
    
    
    $
    6,983
    
    
    
    564
    
    
    $
    7,033
  Issue Date
    
    
    Dividend rate
    
    
    Earliest Redemption
    
    
    Number of
    
    
    Face
    
    
    Net(2)Date (1)
    
    
    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
    
    
    
    245Preferred shares issued, Class A, Series 6R(3)
    
    May 20, 2009
    
    
    6.00
    %
    
    June 30, 2014
    
    
    10
    
    
    
    250
    
    
    
    246Total preferred shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71
    
    
    $
    1,775
    
    
    $
    1,741
 
 (1)
    
    On or after the earliest redemption date, SLF Inc. may redeem these shares in
whole or in part at a declining premium with the exception of the Class A, Series 6R preferred
shares. The Series 6R shares are redeemable in whole or in part at par on the earliest
redemption date and on June 30 every five years thereafter. Early redemption of all preferred
shares is subject to regulatory approval.(2)
    
    Net of after-tax issuance costs(3)
    
    On June 30, 2014, and every five years thereafter, the annual dividend rate will
reset to an annual rate equal to the 5-year Government of Canada bond yield plus 3.79%.
Holders of the Series 6R Shares will have the right, at their option, to convert their Series
6R Shares into Class A Non-Cumulative Floating Rate Preferred Shares Series 7QR (Series 7QR
Shares) on June 30, 2014 and on June 30 every five years thereafter. Holders of Series 7QR
Shares will be entitled to receive fixed non-cumulative quarterly dividends at an annual rate
equal to the then 3-month Government of Canada treasury bill yield plus 3.79%.  52




---



##### 



15. Share Capital and Shares Purchased for Cancellation (Contd)
 B) SHARES PURCHASED FOR CANCELLATION
  Period Covered
    
    Maximum Shares Authorized for PurchaseJanuary 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
    
    
    2007Number of shares repurchased (in millions)
    
    
    4.8
    
    
    
    9.8Amount (1)
    
    $
    217
    
    
    $
    502Average price per share
    
    $
    45.30
    
    
    $
    51.18
 
 (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. C) DIVIDEND REINVESTMENT AND SHARE PURCHASE PLAN
  53




---



##### 



16. Operating Expenses
  2009
    
    
    2008
    
    
    2007Compensation costs
    
    $
    1,885
    
    
    $
    1,789
    
    
    $
    1,898Premises and equipment costs
    
    
    257
    
    
    
    247
    
    
    
    265Capital asset depreciation and amortization (Note 8)
    
    
    60
    
    
    
    63
    
    
    
    62Other (1)
    
    
    974
    
    
    
    904
    
    
    
    1,035Total operating expenses
    
    $
    3,176
    
    
    $
    3,003
    
    
    $
    3,260
 (1)
    
    2007 includes the write-down of the brand name intangible asset of $52 as
described in Note 7.
 17. Earnings Per Share
  2009
    
    
    2008
    
    
    2007Common shareholders net income
    
    $
    534
    
    
    $
    785
    
    
    $
    2,219Less: Effect of stock awards of subsidiaries(1)
    
    
    6
    
    
    
    14
    
    
    
    20Common shareholders net income on a diluted basis
    
    $
    528
    
    
    $
    771
    
    
    $
    2,199Weighted average number of shares outstanding for basic earnings per share (in millions)
    
    
    561
    
    
    
    561
    
    
    
    569Add: Adjustments relating to the dilutive impact of stock options (2)
    
    
    1
    
    
    
    1
    
    
    
    3Weighted average number of shares outstanding on a diluted basis (in millions)
    
    
    562
    
    
    
    562
    
    
    
    572
 (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
   2009
    
    
    2008
    
    
    2007Number 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
    
    
    10,030
    
    
    $
    37.81
    
    
    
    8,168
    
    
    $
    35.98
    
    
    
    9,138
    
    
    $
    32.58Granted
    
    
    4,291
    
    
    
    20.44
    
    
    
    2,355
    
    
    
    40.47
    
    
    
    1,261
    
    
    
    52.55Exercised
    
    
    (255
    )
    
    
    23.30
    
    
    
    (306
    )
    
    
    24.99
    
    
    
    (2,075
    )
    
    
    27.45Forfeited
    
    
    (875
    )
    
    
    34.85
    
    
    
    (187
    )
    
    
    47.40
    
    
    
    (156
    )
    
    
    46.04Balance, December 31
    
    
    13,191
    
    
    $
    32.27
    
    
    
    10,030
    
    
    $
    37.81
    
    
    
    8,168
    
    
    $
    35.98Exercisable,
December 31
    
    
    6,644
    
    
    $
    35.14
    
    
    
    5,911
    
    
    $
    33.24
    
    
    
    5,333
    
    
    $
    29.19
 54




---



##### 



18. Stock-Based Compensation (Contd)
   2009
    
    
    2008
    
    
    2007Compensation expense recorded
    
    $
    16
    
    
    $
    10
    
    
    $
    10Income tax benefit on expense recorded
    
    $
    2
    
    
    $
    1
    
    
    $
    1Income tax benefit realized on exercised options
    
    $
    
    
    
    $
    1
    
    
    $
    4
   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$18.00 to $24.00
    
    
    5,084
    
    
    
    7.50
    
    
    $
    20.14
    
    
    
    1,205
    
    
    
    2.17
    
    
    $
    20.36$24.01 to $30.00
    
    
    2,422
    
    
    
    5.06
    
    
    
    28.34
    
    
    
    1,634
    
    
    
    3.17
    
    
    
    28.35$30.01 to $35.00
    
    
    1,085
    
    
    
    2.52
    
    
    
    32.81
    
    
    
    1,025
    
    
    
    2.11
    
    
    
    32.90$35.01 to $45.00
    
    
    1,071
    
    
    
    4.72
    
    
    
    40.42
    
    
    
    1,070
    
    
    
    4.72
    
    
    
    40.41$45.01 to $53.00
    
    
    3,529
    
    
    
    7.09
    
    
    
    49.81
    
    
    
    1,710
    
    
    
    6.72
    
    
    
    50.0813,191
    
    
    
    6.31
    
    
    $
    32.27
    
    
    
    6,644
    
    
    
    3.99
    
    
    $
    35.14
  Weighted average assumptions
    
    2009
    
    
    2008
    
    
    2007Risk-free interest rate
    
    
    2.3
    %
    
    
    3.4
    %
    
    
    4.1
    %Expected volatility
    
    
    32.7
    %
    
    
    23.8
    %
    
    
    16.0
    %Expected dividend yield
    
    
    4.0
    %
    
    
    3.8
    %
    
    
    2.4
    %Expected life of the option (in years)
    
    
    5.9
    
    
    
    5.6
    
    
    
    5.6
  B) EMPLOYEE SHARE OWNERSHIP PLAN
  55




---



##### 



18. Stock-Based Compensation (Contd)
 C) OTHER STOCK-BASED COMPENSATION PLANS
  Details of these plans are as follows:
 Senior Executives Deferred Share Unit (DSU) Plan:
 Restricted Share Unit (RSU) Plan:
 Performance Share Unit (PSU) Plan/Incentive Share Unit (ISU) Plan:
 Additional information for other stock-based compensation plans
 Number of units (in thousands)
    
    DSUs
    
    
    RSUs
    
    
    PSUs/ISUs
    
    
    TotalUnits outstanding December 31, 2007
    
    
    554
    
    
    
    1,809
    
    
    
    515
    
    
    
    2,878Units outstanding December 31, 2008
    
    
    771
    
    
    
    2,171
    
    
    
    523
    
    
    
    3,465Units outstanding December 31, 2009
    
    
    826
    
    
    
    3,889
    
    
    
    1,004
    
    
    
    5,719Liability accrued as at December 31, 2009
    
    $
    21
    
    
    $
    53
    
    
    $
    8
    
    
    $
    82
  2009
    
    
    2008
    
    
    2007Compensation expense recorded
    
    $
    44
    
    
    $
    (16
    )
    
    $
    49Income tax expense (benefit) on expense recorded
    
    $
    (14
    )
    
    $
    6
    
    
    $
    (17
    )
  56




---



##### 



18. Stock-Based Compensation (Contd)
 D) STOCK-BASED COMPENSATION PLANS OF A SUBSIDIARY
   2009
    
    
    2008
    
    
    2007Awards outstanding (in thousands)
    
    
    155
    
    
    
    143
    
    
    
    151Expense recorded in operating expenses
    
    $
    36
    
    
    $
    37
    
    
    $
    37Income tax benefit recorded
    
    $
    14
    
    
    $
    16
    
    
    $
    14
 19. Income Taxes
  2009
    
    
    2008
    
    
    2007Canadian income tax expense (benefit):Current
    
    $
    240
    
    
    $
    252
    
    
    $
    (89
    )Future
    
    
    (392
    )
    
    
    98
    
    
    
    135Total
    
    
    (152
    )
    
    
    350
    
    
    
    46Foreign income tax expense (benefit):Current
    
    
    (45
    )
    
    
    (106
    )
    
    
    158Future
    
    
    (345
    )
    
    
    (587
    )
    
    
    318Total
    
    
    (390
    )
    
    
    (693
    )
    
    
    476Total income taxes expense (benefit)
    
    $
    (542
    )
    
    $
    (343
    )
    
    $
    522
  57




---



##### 



19. Income Taxes (Contd)
  2009
    
    
    
    
    
    
    2008
    
    
    
    
    
    
    2007%
    
    
    
    
    
    
    %
    
    
    
    
    
    
    %Total net income
    
    $
    622
    
    
    
    
    
    
    $
    857
    
    
    
    
    
    
    $
    2,290Add: Income taxes expense (benefit)
    
    
    (542
    )
    
    
    
    
    
    
    (343
    )
    
    
    
    
    
    
    522Non-controlling interests in net income of subsidiaries
    
    
    15
    
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    35Total net income before income taxes
and non-controlling interests in net income of subsidiaries
    
    $
    95
    
    
    
    
    
    
    $
    537
    
    
    
    
    
    
    $
    2,847Taxes at the combined Canadian federal
and provincial statutory income tax rate
    
    $
    30
    
    
    
    32.0
    
    
    $
    175
    
    
    
    32.5
    
    
    $
    996
    
    
    
    35.0Increase (decrease) in rate resulting from:Higher (lower) effective rates on income
subject to taxation in foreign jurisdictions
    
    
    (161
    )
    
    
    (169.4
    )
    
    
    (441
    )
    
    
    (82.1
    )
    
    
    (250
    )
    
    
    (8.8
    )Tax (benefit) cost of unrecognized losses
    
    
    (99
    )
    
    
    (104.2
    )
    
    
    20
    
    
    
    3.7
    
    
    
    19
    
    
    
    0.6Tax exempt investment income
    
    
    (294
    )
    
    
    (309.9
    )
    
    
    (49
    )
    
    
    (9.1
    )
    
    
    (155
    )
    
    
    (5.4
    )Changes to statutory income tax rates
    
    
    (18
    )
    
    
    (19.0
    )
    
    
    (30
    )
    
    
    (5.6
    )
    
    
    (86
    )
    
    
    (3.0
    )Other
    
    
    
    
    
    
    
    
    
    
    (18
    )
    
    
    (3.3
    )
    
    
    (2
    )
    
    
    (0.1
    )Companys effective worldwide income taxes
    
    $
    (542
    )
    
    
    (570.5
    )
    
    $
    (343
    )
    
    
    (63.9
    )
    
    $
    522
    
    
    
    18.3
   58




---



##### 



19. Income Taxes (Contd)
  2009
    
    
    2008Assets
    
    
    Liabilities
    
    
    Assets
    
    
    LiabilitiesInvestments
    
    $
    319
    
    
    $
    742
    
    
    $
    1,927
    
    
    $
    809Actuarial liabilities
    
    
    (70
    )
    
    
    (442
    )
    
    
    (1,323
    )
    
    
    (245
    )Deferred acquisition costs
    
    
    381
    
    
    
    (5
    )
    
    
    464
    
    
    
    Losses available for carry forward
    
    
    372
    
    
    
    (249
    )
    
    
    62
    
    
    
    (128
    )Other
    
    
    77
    
    
    
    (33
    )
    
    
    203
    
    
    
    131,079
    
    
    
    13
    
    
    
    1,333
    
    
    
    449Valuation allowance
    
    
    (25
    )
    
    
    79
    
    
    
    (143
    )
    
    
    28Total
    
    $
    1,054
    
    
    $
    92
    
    
    $
    1,190
    
    
    $
    477
  2009
    
    
    2008
    
    
    2007Investments
    
    $
    1,033
    
    
    $
    (2,070
    )
    
    $
    (524
    )Actuarial liabilities
    
    
    (1,383
    )
    
    
    1,851
    
    
    
    883Deferred acquisition costs
    
    
    42
    
    
    
    (46
    )
    
    
    (67
    )Losses (incurred) utilized
    
    
    (525
    )
    
    
    71
    
    
    
    (3
    )Other
    
    
    96
    
    
    
    (295
    )
    
    
    164Future income tax expense (benefit)
    
    $
    (737
    )
    
    $
    (489
    )
    
    $
    453
 20. Income Taxes Included in OCI
  2009
    
    
    2008Unrealized foreign currency gains and losses on net investment hedges
    
    $
    (9
    )
    
    $
    (5
    )Unrealized gains and losses on available-for-sale assets
    
    
    (323
    )
    
    
    376Reclassifications to net income for available-for-sale assets
    
    
    13
    
    
    
    (48
    )Unrealized gains and losses on cash flow hedging instruments
    
    
    (38
    )
    
    
    62Total income taxes benefit (expense) included in OCI
    
    $
    (357
    )
    
    $
    385
 21. Commitments, Guarantees and Contingencies
 A) LEASE COMMITMENTS
  B) CONTRACTUAL COMMITMENTS
  59




---



##### 



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
  60




---



##### 



21. Commitments, Guarantees and Contingencies (Contd)
  OtherSun Life
    
    
    Subsidiaries ofSLF Inc.
    
    
    Assurance
    
    
    SLF Inc.
    
    
    Consolidation
    
    
    SLF Inc.(Unconsolidated)
    
    
    (Consolidated)
    
    
    (Combined)
    
    
    Adjustments
    
    
    (Consolidated)2009Revenue
    
    $
    146
    
    
    $
    19,883
    
    
    $
    7,694
    
    
    $
    (151
    )
    
    $
    27,572Shareholders net income
    
    $
    613
    
    
    $
    715
    
    
    $
    (65
    )
    
    $
    (650
    )
    
    $
    6132008Revenue
    
    $
    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
    )
    
    $
    2,288
 OtherSun Life
    
    
    Subsidiaries ofSLF Inc.
    
    
    Assurance
    
    
    SLF Inc.
    
    
    Consolidation
    
    
    SLF Inc.(Unconsolidated)
    
    
    (Consolidated)
    
    
    (Combined)
    
    
    Adjustments
    
    
    (Consolidated)2009Invested assets
    
    $
    21,401
    
    
    $
    82,930
    
    
    $
    23,766
    
    
    $
    (19,868
    )
    
    $
    108,229Total other assets
    
    $
    4,319
    
    
    $
    10,215
    
    
    $
    10,373
    
    
    $
    (13,054
    )
    
    $
    11,853Actuarial and other policy liabilities
    
    $
    
    
    
    $
    68,923
    
    
    $
    15,629
    
    
    $
    86
    
    
    $
    84,638Total other liabilities
    
    $
    8,413
    
    
    $
    13,710
    
    
    $
    12,234
    
    
    $
    (16,327
    )
    
    $
    18,0302008Invested 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
    )
    
    $
    21,013
 F) LEGAL AND REGULATORY PROCEEDINGS
  61




---



##### 



22. Pension Plans and Other Post-Retirement Benefits
      Pension
    
    
    Post-Retirement2009
    
    
    2008
    
    
    2009
    
    
    2008Change in projected benefit obligation:Projected benefit obligation, January 1
    
    $
    2,186
    
    
    $
    2,426
    
    
    $
    233
    
    
    $
    249Change in January 1 balance due to acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Service cost
    
    
    35
    
    
    
    50
    
    
    
    4
    
    
    
    5Interest cost
    
    
    132
    
    
    
    129
    
    
    
    15
    
    
    
    14Adjustment for change in measurement date
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    Actuarial losses (gains)
    
    
    181
    
    
    
    (331
    )
    
    
    34
    
    
    
    (34
    )Benefits paid
    
    
    (169
    )
    
    
    (112
    )
    
    
    (11
    )
    
    
    (11
    )Curtailments, settlements and plan amendments
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )Effect of changes in currency exchange rates
    
    
    (81
    )
    
    
    22
    
    
    
    (8
    )
    
    
    11Projected benefit obligation, December 31(1), (2)
    
    
    2,284
    
    
    $
    2,186
    
    
    
    266
    
    
    $
    233Accumulated benefit obligation, December 31(3)
    
    
    2,154
    
    
    $
    2,005Change in plan assets:Fair value of plan assets, January 1
    
    $
    1,995
    
    
    $
    2,393
    
    
    $
    
    
    
    $
    Net actual return on plan assets
    
    
    252
    
    
    
    (307
    )
    
    
    
    
    
    
    Employer contributions
    
    
    36
    
    
    
    14
    
    
    
    11
    
    
    
    11Adjustment for change in measurement date
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    Benefits paid
    
    
    (169
    )
    
    
    (112
    )
    
    
    (11
    )
    
    
    (11
    )Effect of changes in currency exchange rates
    
    
    (67
    )
    
    
    5
    
    
    
    
    
    
    
    Fair value of plan assets, December 31(1)
    
    
    2,047
    
    
    $
    1,995
    
    
    
    
    
    
    $
    Net funded status, December 31
    
    $
    (237
    )
    
    $
    (191
    )
    
    $
    (266
    )
    
    $
    (233
    )Unamortized net actuarial loss (gain)
    
    
    456
    
    
    
    436
    
    
    
    20
    
    
    
    (18
    )Unamortized past service cost
    
    
    9
    
    
    
    11
    
    
    
    (14
    )
    
    
    (28
    )Unamortized transition asset
    
    
    (33
    )
    
    
    (52
    )
    
    
    (3
    )
    
    
    (4
    )Contributions (transfers), October 1 to December 31(1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accrued benefit asset (liability), December 31(1)
    
    $
    195
    
    
    $
    204
    
    
    $
    (263
    )
    
    $
    (283
    )Balance sheet classification of accrued benefit asset (liability), December 31:Other assets
    
    $
    405
    
    
    $
    422
    
    
    $
    
    
    
    $
    Other liabilities
    
    $
    210
    
    
    $
    218
    
    
    $
    263
    
    
    $
    283Pension plans with projected benefit obligations in excess of plan assets:Projected benefit obligations
    
    $
    1,503
    
    
    $
    1,027Plan assets
    
    $
    1,251
    
    
    $
    756
 62




---



##### 



22. Pension Plans and Other Post-Retirement Benefits (Contd)
  Pension
    
    
    Post-Retirement2009
    
    
    2008
    
    
    2007
    
    
    2009
    
    
    2008
    
    
    2007Components of defined benefit cost recognized:Service cost, curtailments and settlements
    
    $
    35
    
    
    $
    50
    
    
    $
    53
    
    
    $
    4
    
    
    $
    5
    
    
    
    (7
    )Plan amendments
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    (1
    )
    
    
    (1
    )
    
    
    (64
    )Interest cost
    
    
    132
    
    
    
    129
    
    
    
    128
    
    
    
    15
    
    
    
    14
    
    
    
    15Actual return on plan assets
    
    
    (252
    )
    
    
    307
    
    
    
    (122
    )
    
    
    
    
    
    
    
    
    
    
    Actuarial losses (gains)
    
    
    181
    
    
    
    (331
    )
    
    
    (159
    )
    
    
    34
    
    
    
    (34
    )
    
    
    (23
    )Benefit cost before adjustments to recognize the
long-term nature of defined benefit plans
    
    $
    96
    
    
    $
    155
    
    
    $
    (96
    )
    
    $
    52
    
    
    $
    (16
    )
    
    $
    (79
    )Adjustments to recognize the long-term nature of
defined benefit plans:Difference between expected and actual
return on plan assets for year
    
    $
    118
    
    
    $
    (462
    )
    
    $
    (41
    )
    
    $
    
    
    
    $
    
    
    
    $
    Difference between actuarial losses (gains) recognized and actual
actuarial losses (gains) on accrued benefit obligation for year
    
    
    (155
    )
    
    
    363
    
    
    
    189
    
    
    
    (38
    )
    
    
    35
    
    
    
    25Difference between amortization of past service costs
for year and actual plan amendments for year
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    (13
    )
    
    
    (23
    )
    
    
    45Amortization of transition obligation (asset)
    
    
    (18
    )
    
    
    (18
    )
    
    
    (18
    )
    
    
    (2
    )
    
    
    (2
    )
    
    
    (2
    )Total adjustments to defer costs to future periods
    
    $
    (54
    )
    
    $
    (116
    )
    
    $
    131
    
    
    $
    (53
    )
    
    $
    10
    
    
    $
    68Total benefit cost recognized
    
    $
    42
    
    
    $
    39
    
    
    $
    35
    
    
    $
    (1
    )
    
    $
    (6
    )
    
    $
    (11
    )
 Key weighted average assumptions:
 Pensions
    
    
    Post-Retirement2009
    
    
    2008
    
    
    2009
    
    
    2008To measure benefit obligation at end of year(1)Discount rate
    
    
    6.0
    %
    
    
    6.5
    %
    
    
    5.8
    %
    
    
    6.5
    %Rate of compensation increase
    
    
    3.8
    %
    
    
    3.6
    %
    
    
    
    
    
    
    Initial health care cost trend rate(4)
    
    
    
    
    
    
    
    
    
    
    8.1
    %
    
    
    9.4
    %To determine benefit costs or income for the periodDiscount rate
    
    
    6.5
    %
    
    
    5.5
    %
    
    
    6.5
    %
    
    
    5.4
    %Expected long-term rate of return on plan assets
    
    
    6.8
    %
    
    
    7.0
    %
    
    
    
    
    
    
    Rate of compensation increase
    
    
    3.6
    %
    
    
    3.7
    %
    
    
    
    
    
    
    Initial health care cost trend rate(4)
    
    
    
    
    
    
    
    
    
    
    9.4
    %
    
    
    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,
2008 for the plans in Canada, and January 1, 2009 for all other plans. The next required
funding valuation is January 1, 2011 for the plans in Canada, January 1, 2012 for the United
Kingdom, and January 1, 2010 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 at the end of the year for Canada in 2009 was 8.0% per
year until 2015, then decreasing gradually to an ultimate rate of 5.0% per year in 2030 (in
2008 it was 9.5%, decreasing by 0.5% each year to an ultimate rate of 5.5% per year). For the
United States in 2009, the assumed rate was 8.5%, decreasing gradually to an ultimate rate of
5.0% in 2017 (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.
 63




---



##### 



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
    
    $
    23
    
    
    $
    (21
    )Effect on aggregated service and interest costs
    
    $
    2
    
    
    $
    (1
    )Composition of fair value of plan assets, December 31:2009
    
    
    2008Equity investments
    
    
    44
    %
    
    
    37
    %Fixed income investments
    
    
    43
    %
    
    
    47
    %Real estate investments
    
    
    4
    %
    
    
    5
    %Other
    
    
    9
    %
    
    
    11
    %Total composition of fair value of plan assets
    
    
    100
    %
    
    
    100
    %
 Target allocation of plan assets, December 31:
 2009
    
    
    2008Equity investments
    
    
    43
    %
    
    
    42
    %Fixed income investments
    
    
    43
    %
    
    
    45
    %Real estate investments
    
    
    5
    %
    
    
    4
    %Other
    
    
    9
    %
    
    
    9
    %Total
    
    
    100
    %
    
    
    100
    %
 64




---



##### 



22. Pension Plans and Other Post-Retirement Benefits (Contd)
    Post-Pension
    
    
    Retirement
    
    
    TotalExpected contributions for the next 12 months
    
    $
    58
    
    
    $
    14
    
    
    $
    72Expected future benefit payments20152010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    -2019Pension
    
    $
    95
    
    
    $
    100
    
    
    $
    109
    
    
    $
    114
    
    
    $
    120
    
    
    $
    717Post-retirement
    
    
    14
    
    
    
    14
    
    
    
    15
    
    
    
    16
    
    
    
    16
    
    
    
    91Total
    
    $
    109
    
    
    $
    114
    
    
    $
    124
    
    
    $
    130
    
    
    $
    136
    
    
    $
    808
  23. Foreign Exchange Gain/Loss
  24. Related Party Transactions
   65




---



##### 



25. Variable Interest Entities
   26.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted in Canada and in the United States
  66




---



##### 



26.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted in Canada and in the United States (Contd)
  i) Consolidated statements of operations:
 2009
    
    
    2008
    
    
    2007Cdn.
    
    
    U.S.
    
    
    Cdn.
    
    
    U.S.
    
    
    Cdn.
    
    
    U.S.GAAP
    
    
    GAAP
    
    
    GAAP
    
    
    GAAP
    
    
    GAAP
    
    
    GAAPREVENUEPremiums
    
    $
    15,510
    
    
    $
    9,703
    
    
    $
    13,587
    
    
    $
    8,979
    
    
    $
    13,124
    
    
    $
    8,517Total net investment income (loss)
    
    
    9,397
    
    
    
    7,730
    
    
    
    (526
    )
    
    
    2,401
    
    
    
    4,748
    
    
    
    5,823Net realized gains (losses)
    
    
    (5
    )
    
    
    (149
    )
    
    
    (241
    )
    
    
    (951
    )
    
    
    104
    
    
    
    291Fee income
    
    
    2,670
    
    
    
    2,654
    
    
    
    2,743
    
    
    
    3,335
    
    
    
    3,212
    
    
    
    3,34327,572
    
    
    
    19,938
    
    
    
    15,563
    
    
    
    13,764
    
    
    
    21,188
    
    
    
    17,974POLICY BENEFITS AND EXPENSESPayments to policyholders, beneficiaries and depositors
    
    
    14,317
    
    
    
    10,560
    
    
    
    14,314
    
    
    
    9,847
    
    
    
    15,196
    
    
    
    9,813Increase (decrease) in actuarial liabilities
    
    
    7,697
    
    
    
    1,104
    
    
    
    (4,429
    )
    
    
    2,085
    
    
    
    (2,515
    )
    
    
    1,262Acquisition expense amortization
    
    
    48
    
    
    
    1,135
    
    
    
    50
    
    
    
    (394
    )
    
    
    64
    
    
    
    337Other expenses
    
    
    5,415
    
    
    
    4,359
    
    
    
    5,091
    
    
    
    3,970
    
    
    
    5,596
    
    
    
    4,50427,477
    
    
    
    17,158
    
    
    
    15,026
    
    
    
    15,508
    
    
    
    18,341
    
    
    
    15,916INCOME (LOSS) BEFORE INCOME TAXES AND
NON-CONTROLLING INTERESTS
    
    
    95
    
    
    
    2,780
    
    
    
    537
    
    
    
    (1,744
    )
    
    
    2,847
    
    
    
    2,058Income taxes expense (benefit)
    
    
    (542
    )
    
    
    362
    
    
    
    (343
    )
    
    
    (1,088
    )
    
    
    522
    
    
    
    308Non-controlling interests in net income of subsidiaries
    
    
    15
    
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    35
    
    
    
    TOTAL NET INCOME (LOSS)
    
    
    622
    
    
    
    2,418
    
    
    
    857
    
    
    
    (656
    )
    
    
    2,290
    
    
    
    1,750Less non-controlling interests net income
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    35Less participating policyholders net income
    
    
    9
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    SHAREHOLDERS NET INCOME (LOSS)
    
    
    613
    
    
    
    2,403
    
    
    
    855
    
    
    
    (679
    )
    
    
    2,288
    
    
    
    1,715Less preferred shareholder dividends
    
    
    79
    
    
    
    79
    
    
    
    70
    
    
    
    70
    
    
    
    69
    
    
    
    69COMMON SHAREHOLDERS NET INCOME (LOSS)
    
    $
    534
    
    
    $
    2,324
    
    
    $
    785
    
    
    $
    (749
    )
    
    $
    2,219
    
    
    $
    1,646Earnings (loss) per shareBasic
    
    $
    0.95
    
    
    $
    4.14
    
    
    $
    1.40
    
    
    $
    (1.34
    )
    
    $
    3.90
    
    
    $
    2.89Diluted
    
    $
    0.94
    
    
    $
    4.12
    
    
    $
    1.37
    
    
    $
    (1.36
    )
    
    $
    3.85
    
    
    $
    2.84Weighted average shares outstanding in millionsBasic
    
    
    561
    
    
    
    561
    
    
    
    561
    
    
    
    561
    
    
    
    569
    
    
    
    569Diluted
    
    
    562
    
    
    
    562
    
    
    
    562
    
    
    
    561
    
    
    
    572
    
    
    
    572
 67




---



##### 



26.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted in Canada and in the United States (Contd)
 ii)
    
    Consolidated balance sheets:
 2009
    
    
    2008Cdn.
    
    
    U.S.
    
    
    Cdn.
    
    
    U.S.GAAP
    
    
    GAAP
    
    
    GAAP
    
    
    GAAPASSETSBonds  held-for-trading
    
    $
    51,634
    
    
    $
    14,835
    
    
    $
    48,458
    
    
    $
    15,915Bonds  available-for-sale
    
    
    9,673
    
    
    
    46,433
    
    
    
    10,616
    
    
    
    42,810Mortgages and corporate loans
    
    
    19,449
    
    
    
    19,449
    
    
    
    22,302
    
    
    
    22,302Stocks  held-for-trading
    
    
    4,331
    
    
    
    1,331
    
    
    
    3,440
    
    
    
    1,062Stocks  available-for-sale
    
    
    635
    
    
    
    3,636
    
    
    
    1,018
    
    
    
    3,396Real estate, net of accumulated depreciation (accumulated
depreciation: 2009  $561; 2008  $528)
    
    
    4,877
    
    
    
    3,190
    
    
    
    4,908
    
    
    
    3,346Cash and cash equivalents (1)
    
    
    5,865
    
    
    
    5,845
    
    
    
    5,518
    
    
    
    5,353Short-term
securities (1)(2)
    
    
    6,003
    
    
    
    5,963
    
    
    
    3,361
    
    
    
    3,329Derivative assets
    
    
    1,382
    
    
    
    1,357
    
    
    
    2,669
    
    
    
    2,673Policy loans and other invested assets
    
    
    3,503
    
    
    
    4,073
    
    
    
    3,585
    
    
    
    4,648Other invested assets  held-for-trading
    
    
    425
    
    
    
    206
    
    
    
    380
    
    
    
    204Other invested assets  available-for-sale
    
    
    452
    
    
    
    689
    
    
    
    623
    
    
    
    793Invested assets
    
    
    108,229
    
    
    
    107,007
    
    
    
    106,878
    
    
    
    105,831Goodwill
    
    
    6,419
    
    
    
    4,678
    
    
    
    6,598
    
    
    
    4,854Intangible assets
    
    
    926
    
    
    
    907
    
    
    
    878
    
    
    
    872Deferred acquisition costs
    
    
    167
    
    
    
    7,763
    
    
    
    154
    
    
    
    9,384Future income taxes (3)
    
    
    1,054
    
    
    
    681
    
    
    
    1,190
    
    
    
    1,673Other assets
    
    
    3,287
    
    
    
    7,881
    
    
    
    4,135
    
    
    
    9,292Total other assets
    
    
    11,853
    
    
    
    21,910
    
    
    
    12,955
    
    
    
    26,075Segregated funds assets (4)
    
    
    
    
    
    
    80,551
    
    
    
    
    
    
    
    65,362Total consolidated assets
    
    $
    120,082
    
    
    $
    209,468
    
    
    $
    119,833
    
    
    $
    197,268Segregated funds net assets (4)
    
    $
    81,305
    
    
    
    
    
    
    $
    65,762LIABILITIES AND EQUITYActuarial liabilities and other policy liabilities
    
    $
    84,638
    
    
    $
    56,443
    
    
    $
    81,411
    
    
    $
    57,082Contract holder deposits
    
    
    
    
    
    
    34,101
    
    
    
    
    
    
    
    37,268Amounts on deposit
    
    
    4,181
    
    
    
    4,390
    
    
    
    4,079
    
    
    
    4,403Derivative liabilities
    
    
    1,257
    
    
    
    1,196
    
    
    
    3,219
    
    
    
    3,271Deferred net realized gains
    
    
    225
    
    
    
    
    
    
    
    251Senior debentures
    
    
    3,811
    
    
    
    3,811
    
    
    
    3,013
    
    
    
    3,013Future income taxes (3)
    
    
    92
    
    
    
    162
    
    
    
    477
    
    
    
    236Other liabilities
    
    
    5,374
    
    
    
    8,301
    
    
    
    7,354
    
    
    
    9,718Total general fund liabilities
    
    
    99,578
    
    
    
    108,404
    
    
    
    99,804
    
    
    
    114,991Subordinated debt
    
    
    3,048
    
    
    
    3,048
    
    
    
    2,576
    
    
    
    2,576Non-controlling interests in subsidiaries (5)
    
    
    42
    
    
    
    
    
    
    
    44Segregated funds liabilities (4)
    
    
    
    
    
    
    80,551
    
    
    
    
    
    
    
    65,362Equity
    
    
    17,414
    
    
    
    17,465
    
    
    
    17,409
    
    
    
    14,339Total consolidated liabilities and equity
    
    $
    120,082
    
    
    $
    209,468
    
    
    $
    119,833
    
    
    $
    197,268Segregated funds contract liabilities (4)
    
    $
    81,305
    
    
    
    
    
    
    $
    65,762
 
 (1)
    
    Includes a restatement of $1,745 of short-term securities as at December 31,
2008 that were included as cash and cash equivalents in error
previously. As a result, cash and cash equivalents and short term
securities have been adjusted in the 2008 column above.(2)
    
    U.S. GAAP terminology is short-term investments.(3)
    
    U.S. GAAP terminology is deferred income tax.(4)
    
    U.S. GAAP terminology is separate accounts.(5)
    
    Included in equity in U.S. GAAP. 68




---



##### 



26.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted in Canada and in the United States (Contd)
 iii)
    
    Consolidated statements of equity:
 2009
    
    
    2008Cdn.
    
    
    U.S.
    
    
    Cdn.
    
    
    U.S.GAAP
    
    
    GAAP
    
    
    GAAP
    
    
    GAAPPARTICIPATING POLICYHOLDERS CAPITAL ACCOUNT:Balance, January 1
    
    $
    106
    
    
    $
    
    
    
    $
    95
    
    
    $
    Net income attributed to participating policyholders
    
    
    9
    
    
    
    
    
    
    
    2
    
    
    
    Total other comprehensive income (loss)
    
    
    (8
    )
    
    
    
    
    
    
    9
    
    
    
    Balance, December 31
    
    
    107
    
    
    
    
    
    
    
    106
    
    
    $
    SHAREHOLDERS EQUITY:PREFERRED SHARESBalance, January 1
    
    
    1,495
    
    
    
    1,495
    
    
    
    1,495
    
    
    
    1,495Shares issued, net of issuance costs
    
    
    246
    
    
    
    246
    
    
    
    
    
    
    
    Balance, December 31
    
    
    1,741
    
    
    
    1,741
    
    
    
    1,495
    
    
    
    1,495PAID IN CAPITALBalance, January 1
    
    
    7,101
    
    
    
    12,903
    
    
    
    7,095
    
    
    
    12,912Common shares issued under dividend reinvestment and share purchase plan
    
    
    136
    
    
    
    136
    
    
    
    
    
    
    
    Stock options exercised (2)
    
    
    6
    
    
    
    6
    
    
    
    8
    
    
    
    8Common shares purchased for cancellation (1)
    
    
    
    
    
    
    
    
    
    
    (60
    )
    
    
    (108
    )Stock option compensation (3)
    
    
    16
    
    
    
    14
    
    
    
    58
    
    
    
    71Subsidiary equity transaction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20Change due to transactions with non-controlling interests
    
    
     
    
    
    
    (10
    )Balance, December 31
    
    
    7,259
    
    
    
    13,049
    
    
    
    7,101
    
    
    
    12,903RETAINED EARNINGSBalance, January 1, as previously reported
    
    
    11,101
    
    
    
    3,298
    
    
    
    11,282
    
    
    
    4,965Adjustment for changes in accounting policies (Section C of this note)
    
    
    
    
    
    
    408
    
    
    
    
    
    
    
    Balance, January 1, after change in accounting policy
    
    
    11,101
    
    
    
    3,706
    
    
    
    11,282
    
    
    
    4,965Net income (loss) for the year attributed to shareholders
    
    
    613
    
    
    
    2,403
    
    
    
    855
    
    
    
    (679
    )Dividends on common shares
    
    
    (796
    )
    
    
    (796
    )
    
    
    (809
    )
    
    
    (809
    )Dividends on preferred shares
    
    
    (79
    )
    
    
    (79
    )
    
    
    (70
    )
    
    
    (70
    )Common shares purchased for cancellation
    
    
    
    
    
    
    
    
    
    
    (157
    )
    
    
    (109
    )Balance, December 31
    
    
    10,839
    
    
    
    5,234
    
    
    
    11,101
    
    
    
    3,298ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS),net of taxesBalance, January 1, as previously reported
    
    
    (2,394
    )
    
    
    (3,401
    )
    
    
    (2,750
    )
    
    
    (2,202
    )Adjustment for change in accounting policy (Section C of this note)
    
    
    
    
    
    
    (421
    )
    
    
    
    
    
    
    Balance, January 1, after change in accounting policy
    
    
    (2,394
    )
    
    
    (3,822
    )
    
    
    (2,750
    )
    
    
    (2,202
    )Total other comprehensive income (loss)
    
    
    (138
    )
    
    
    1,221
    
    
    
    356
    
    
    
    (1,199
    )Balance, December 31
    
    
    (2,532
    )
    
    
    (2,601
    )
    
    
    (2,394
    )
    
    
    (3,401
    )Total retained earnings and accumulated other comprehensive income (loss)
    
    
    8,307
    
    
    
    2,633
    
    
    
    8,707
    
    
    
    (103
    )TOTAL SHAREHOLDERS EQUITY
    
    $
    17,307
    
    
    $
    17,423
    
    
    $
    17,303
    
    
    $
    14,295NON-CONTROLLING INTERESTS(4)Balance, January 1
    
    
    
    
    
    $
    44
    
    
    
    
    
    
    $
    98Net Income
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    23Other changes in non-controlling interests
    
    
    
    
    
    
    (17
    )
    
    
    
    
    
    
    (77
    )Balance, December 31
    
    
    
    
    
    $
    42
    
    
    
    
    
    
    $
    44TOTAL EQUITY
    
    $
    17,414
    
    
    $
    17,465
    
    
    $
    17,409
    
    
    $
    14,339
 
 (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 equity in U.S. GAAP. 69




---



##### 



26.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted in Canada and in the United States (Contd)iii)
    
    Consolidated statements of equity: (Contd)
 2009
    
    
    2008Cdn.
    
    
    U.S.
    
    
    Cdn.
    
    
    U.S.GAAP
    
    
    GAAP
    
    
    GAAP
    
    
    GAAPACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS),net of taxesBalance, end of year, consists of:Unamortized net actuarial loss (1)
    
    $
    
    
    
    $
    (209
    )
    
    $
    
    
    
    $
    (173
    )Unamortized past service cost (1)
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    13Unamortized transition asset (1)
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    Unrealized gains (losses) on available-for-sale assets
    
    
    30
    
    
    
    814
    
    
    
    (1,429
    )
    
    
    (2,371
    )Unrealized foreign currency translation gains (losses), net of hedging activities
    
    
    (2,637
    )
    
    
    (2,844
    )
    
    
    (1,049
    )
    
    
    (1,362
    )Unrealized gains (losses) on derivatives designated as cash flow hedges
    
    
    62
    
    
    
    8
    
    
    
    79
    
    
    
    (7
    )Deferred acquisition costs and other liabilities
    
    
    
    
    
    
    (377
    )
    
    
    
    
    
    
    499Balance, December 31
    
    $
    (2,545
    )
    
    $
    (2,601
    )
    
    $
    (2,399
    )
    
    $
    (3,401
    )
 
 (1)
    
    Included in other assets and other liabilities for plans with surpluses
and deficits respectively under Cdn. GAAP. iv)
    
    Comprehensive income:
  2009
    
    
    2008
    
    
    2007Cdn. GAAP
    
    
    U.S. GAAP
    
    
    Cdn. GAAP
    
    
    U.S. GAAP
    
    
    Cdn. GAAP
    
    
    U.S. GAAPTotal net income (loss)
    
    $
    622
    
    
    $
    2,418
    
    
    $
    857
    
    
    $
    (656
    )
    
    $
    2,290
    
    
    $
    1,750Other comprehensive income (loss), net of taxes:Unrealized foreign currency translation gains (losses),
excluding hedges
    
    
    (1,908
    )
    
    
    (1,816
    )
    
    
    2,162
    
    
    
    1,955
    
    
    
    (1,781
    )
    
    
    (1,807
    )Unrealized foreign currency gains (losses), net investment hedges
    
    
    314
    
    
    
    335
    
    
    
    (396
    )
    
    
    (451
    )
    
    
    282
    
    
    
    343Net adjustment for foreign exchange losses
    
    
    6
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    3
    
    
    
    Unrealized gains (losses) on available-for-sale assets
    
    
    1,492
    
    
    
    3,429
    
    
    
    (1,653
    )
    
    
    (4,763
    )
    
    
    (238
    )
    
    
    (1,140
    )Reclassifications to net income (loss) for available-for-sale assets
    
    
    (33
    )
    
    
    177
    
    
    
    199
    
    
    
    885
    
    
    
    (84
    )
    
    
    (288
    )Unrealized gains (losses) on cash flow hedging instruments
    
    
    (18
    )
    
    
    14
    
    
    
    24
    
    
    
    (34
    )
    
    
    40
    
    
    
    7Reclassifications to net income (loss) for cash flow hedges
    
    
    1
    
    
    
    1
    
    
    
    23
    
    
    
    24
    
    
    
    (8
    )
    
    
    (7
    )Changes to deferred acquisition costs and other liabilities
    
    
    
    
    
    
    (877
    )
    
    
    
    
    
    
    1,253
    
    
    
    
    
    
    
    639Changes in unamortized net actuarial loss
    
    
    
    
    
    
    (36
    )
    
    
    
    
    
    
    (47
    )
    
    
    
    
    
    
    114Changes in past service cost
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    (16
    )
    
    
    
    
    
    
    22Changes in transition asset
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    (2
    )Total other comprehensive income (loss)
    
    
    (146
    )
    
    
    1,221
    
    
    
    365
    
    
    
    (1,199
    )
    
    
    (1,786
    )
    
    
    (2,119
    )Less:Participating policyholders net income
    
    
    9
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    Participating policyholders foreign currency
translation gains (losses) excluding hedges
    
    
    (8
    )
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    (5
    )
    
    
    Non-controlling interests net income
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    35Shareholders comprehensive income (loss)
    
    $
    475
    
    
    $
    3,624
    
    
    $
    1,211
    
    
    $
    (1,878
    )
    
    $
    507
    
    
    $
    (404
    )
 70




---



##### 



26.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted in Canada and in the United States (Contd)v)
    
    Effect of differences between Cdn. GAAP and U.S. GAAP net income:
  2009
    
    
    2008
    
    
    2007Total net income in accordance with Cdn. GAAP
    
    $
    622
    
    
    $
    857
    
    
    $
    2,290Adjustments related to:InvestmentsBonds(1)
    
    
    (1,893
    )
    
    
    1,632
    
    
    
    1,459Stocks and segregated fund units(1)
    
    
    (716
    )
    
    
    980
    
    
    
    114Derivative instruments
    
    
    1,005
    
    
    
    (136
    )
    
    
    (96
    )Real estate
    
    
    (121
    )
    
    
    (214
    )
    
    
    (125
    )Total investments
    
    
    (1,725
    )
    
    
    2,262
    
    
    
    1,352Deferred acquisition costsDeferred acquisition costs  deferred
    
    
    925
    
    
    
    793
    
    
    
    723Deferred acquisition costs  amortization and interest
    
    
    (1,229
    )
    
    
    444
    
    
    
    (273
    )Total deferred acquisition costs
    
    
    (304
    )
    
    
    1,237
    
    
    
    450Actuarial liabilities and other policyholder revenues and expensesPremium and fees revenue
    
    
    (5,610
    )
    
    
    (3,766
    )
    
    
    (4,167
    )Payments to policyholders, beneficiaries and depositors
    
    
    3,757
    
    
    
    4,467
    
    
    
    5,383Actuarial liabilities
    
    
    6,593
    
    
    
    (6,514
    )
    
    
    (3,777
    )Total actuarial liabilities and other policyholder revenues and expenses
    
    
    4,740
    
    
    
    (5,813
    )
    
    
    (2,561
    )Other
    
    
    (26
    )
    
    
    33
    
    
    
    (30
    )Income tax effect of above adjustments
    
    
    (904
    )
    
    
    745
    
    
    
    214Non-controlling interests net income
    
    
    15
    
    
    
    23
    
    
    
    35Total net income (loss) in accordance with U.S. GAAP
    
    $
    2,418
    
    
    $
    (656
    )
    
    $
    1,750
 
 (1)
    
    Differences in net income are attributable to different asset designations.
Under Cdn. GAAP, assets are generally designated as held-for-trading for investments
supporting actuarial liabilities, and available-for-sale for assets generally not supporting
actuarial liabilities (as described in more detail in Note 1). For U.S. GAAP, most of the
Companys assets are designated as available-for-sale. 71




---



##### 



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, subject
to certain conditions
imposed by OSFI.
As a result of the adoption
of the amendments to CICA
Handbook Section 3855 in
2009, which are described
in Note 2, if the fair
value of a debt security
increases after an
impairment loss was
recognized and the
increase can be
objectively related to an
event occurring after the
impairment loss was
recognized, the
impairment loss is
reversed into income.
Prior to these
amendments, once an
impairment loss was
recorded to income, it
could not be reversed.
    
    Commencing January 1,
2008, as a result of
issuance of Financial
Accounting Standards
Board (FASB) ASC Topic
825, formerly 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.
Commencing April 1, 2009,
as a result of adoption
of FASB ASC Topic 320,
losses on debt securities
which are
other-than-temporarily
impaired are separated
into two categories, the
portion of loss which is
considered credit loss
(credit loss) and the
portion of loss which is
due to other factors
(non-credit loss). The
credit loss portion is
charged to earnings,
while the non-credit loss
is charged to other
comprehensive income
(loss) if the Company
does not intend to sell
the debt security, or if
it is not more likely
than not that it will be
required to sell the debt
security. Prior to April,
2009, in addition to
other-than-temporary
impairment due to issuer
credit,
other-than-temporary
impairment charges were
also recorded in income
for declines in fair
values of
available-for-sale bonds
due to changes in
prevailing interest rates
when the Company did not
have the intent and
ability to hold to
recovery.Real estate
    
    Real estate held for
investment is originally
recorded at 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.
The Company records a
write-down for any other
than temporary decline in
the value of the entire
real estate portfolio.
    
    Real estate held for
investment is carried at
depreciated cost.
Realized gains and losses
on sales are reflected in
income immediately.
Other than temporary
declines in the value of
specific properties
results in a write-down
charged to income.
 72




---



##### 



26.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted in Canada and in the United States (Contd)
 Cdn. GAAP
    
    U.S. GAAPDeferred 
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.Actuarial
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.
Payments to
contract holders
upon maturity are
reflected as an
expense with an
offsetting
reduction to the
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.
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.
 73




---



##### 



26.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted in Canada and in the United States (Contd)
 Cdn. GAAP
    
    U.S. GAAPUnrealized 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.Derivatives
    
    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.
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.
    
    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, is recorded in
net income.
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.Non-controlling interests
    
    Non-controlling
interests is
presented outside of
liabilities and
equity. Transactions
with non-controlling
interests are
accounted for as
step-acquisitions or
disposals.
    
    Non-controlling
interests is included
as part of equity,
separate from
shareholders equity.
Effective in 2009,
transactions with
non-controlling
interests are
accounted for as
equity transactions
rather than
step-acquisitions or
disposals.Business combinations
    
    Transaction and other
costs directly
related to an
acquisition are
capitalized as part
of the purchase.
    
    As a result of the
adoption of the
amended section on
business combinations
in ASC Topic 805 in
2009 (originally
issued as FAS 141(R),
transaction costs
related to an
acquisition are
recognized as an
expense through
income.
 
 (1)
    
    U.S. GAAP terminology is deferred income tax. 74




---



##### 



26.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted in Canada and in the United States (Contd)
 C) U.S. GENERALLY ACCEPTED ACCOUNTING STANDARDS ADOPTED BY THE COMPANY IN 2009
       75




---



##### 



26.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted in Canada and in the United States (Contd)
    D) U.S. GENERALLY ACCEPTED ACCOUNTING STANDARDS NOT YET ADOPTED BY THE COMPANY
   76




---



##### 



26.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted in Canada and in the United States (Contd)
 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:
 2009
    
    
    2008
    
    
    2007Bonds:Gross realized gains
    
    $
    353
    
    
    $
    264
    
    
    $
    287Gross realized losses
    
    $
    (348
    )
    
    $
    (1,161
    )
    
    $
    (278
    )Stocks:Gross realized gains
    
    $
    230
    
    
    $
    116
    
    
    $
    416Gross realized losses
    
    $
    (410
    )
    
    $
    (229
    )
    
    $
    (171
    )
 ii) Change in net gains (losses) included in net investment income for securities classified as trading:
 2009
    
    
    2008
    
    
    2007Bonds
    
    $
    2,150
    
    
    $
    (3,492
    )
    
    $
    (182
    )Stocks
    
    $
    219
    
    
    $
    (465
    )
    
    $
    59
 iii) Real estate
  2009
    
    
    2008
    
    
    2007Depreciation expense
    
    $
    61
    
    
    $
    67
    
    
    $
    61
 iv) Derivatives
  Net investment hedges
  77




---



##### 



26.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted in Canada and in the United States (Contd)
 E) ADDITIONAL INFORMATION REQUIRED TO BE REPORTED UNDER U.S. GAAP
 v) Other-Than-Temporary-Impairment
 Bonds
      78




---



##### 



26.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted in Canada and in the United States (Contd)
 E) ADDITIONAL INFORMATION REQUIRED TO BE REPORTED UNDER U.S. GAAP
     The other-than-temporary impairment recognized for the year ended December 31, 2009 on
available-for-sale bonds:
 Total other-than-temporary impairment recognized under Canadian GAAP
    
    $
    46Total other-than-temporary impairment recognized under U.S. GAAP
    
    
    474Additional other-than-temporary impairment taken under U.S. GAAP
    
    
    428Less: non-credit portion of other-than-temporary impairment recognized in other comprehensive income
    
    
    308Additional net impairment losses recognized in the U.S. GAAP Consolidated Statement of Operations
    
    $
    120
  Cumulative other-than-temporary impairment credit losses of available-for-sale debt securities
 Credit losses of other-than-temporarily impaired debt securities upon the
adoption of Topic 320 (FSP FAS115-2 and 124-2) as at April 1, 2009
    
    $
    512Credit losses recognized in income on debt securities not previously impaired
    
    
    119Credit losses recognized in income on debt securities that have previously been impaired
    
    
    2Reductions due to securities sold
    
    
    (253
    )Balance at end of the year
    
    $
    380
 79




---



##### 



26.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted in Canada and in the United States (Contd)
 E) ADDITIONAL INFORMATION REQUIRED TO BE REPORTED UNDER U.S. GAAP
 Stocks
   
    
    Fair value less than cost for longer than 12 months;
    
    Fair value less than cost for longer than 6 months and fair value less than 60% of cost; or
    
    Fair value less than 50% of cost
   vi) Gross unrealized gains (losses) on available-for-sale bonds and stocks
 2009Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    (Losses)(1)
    
    
    ValueIssued or guaranteed by:Canadian federal government
    
    $
    2,894
    
    
    $
    78
    
    
    $
    (20
    )
    
    $
    2,952Canadian provincial and municipal governments
    
    
    6,362
    
    
    
    570
    
    
    
    (101
    )
    
    
    6,831U.S. Treasury and other U.S. agencies
    
    
    1,051
    
    
    
    58
    
    
    
    (18
    )
    
    
    1,091Other governments
    
    
    2,562
    
    
    
    252
    
    
    
    (32
    )
    
    
    2,782Corporate
    
    
    30,301
    
    
    
    1,568
    
    
    
    (1,001
    )
    
    
    30,868Asset-backed securitiesCommercial mortgage-backed securities
    
    
    1,158
    
    
    
    40
    
    
    
    (115
    )
    
    
    1,083Residential mortgage-backed securities
    
    
    552
    
    
    
    23
    
    
    
    (20
    )
    
    
    555Collateralized debt obligations
    
    
    222
    
    
    
    2
    
    
    
    (31
    )
    
    
    193Other
    
    
    86
    
    
    
    2
    
    
    
    (10
    )
    
    
    78Total bonds
    
    $
    45,188
    
    
    $
    2,593
    
    
    $
    (1,348
    )
    
    $
    46,433
 (1)
    
    The gross unrealized losses include the before tax non-credit OTTI loss of $617, that is
recorded as a component of accumulated other comprehensive loss (AOCI) for assets still held at the
reporting date.
 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
 80




---



##### 



26.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted in Canada and in the United States (Contd)
 E) ADDITIONAL INFORMATION REQUIRED TO BE REPORTED UNDER U.S. GAAP
  Gross
    
    
    Gross
    
    
    EstimatedOriginal
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    (Losses)
    
    
    ValueTotal 2009
    
    $
    3,253
    
    
    $
    393
    
    
    $
    (10
    )
    
    $
    3,636Total 2008
    
    $
    3,901
    
    
    $
    135
    
    
    $
    (640
    )
    
    $
    3,396
 vii) Unrealized loss positions for which an OTTI 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
    
    
    LossesBondsIssued or guaranteed by:Canadian federal government
    
    $
    1,128
    
    
    $
    (17
    )
    
    $
    19
    
    
    $
    (3
    )
    
    $
    1,147
    
    
    $
    (20
    )Canadian provincial and municipal
Governments
    
    
    1,945
    
    
    
    (98
    )
    
    
    71
    
    
    
    (3
    )
    
    
    2,016
    
    
    
    (101
    )U.S. Treasury and other U.S. agencies
    
    
    283
    
    
    
    (12
    )
    
    
    24
    
    
    
    (6
    )
    
    
    307
    
    
    
    (18
    )Other governments
    
    
    1,111
    
    
    
    (27
    )
    
    
    143
    
    
    
    (5
    )
    
    
    1,254
    
    
    
    (32
    )Corporate
    
    
    3,581
    
    
    
    (190
    )
    
    
    4,935
    
    
    
    (811
    )
    
    
    8,516
    
    
    
    (1,001
    )Asset-backed securitiesCommercial mortgage-backed obligations
    
    
    111
    
    
    
    (2
    )
    
    
    322
    
    
    
    (113
    )
    
    
    433
    
    
    
    (115
    )Residential mortgage-backed securities
    
    
    42
    
    
    
    
    
    
    
    26
    
    
    
    (20
    )
    
    
    68
    
    
    
    (20
    )Collateralized debt obligations
    
    
    75
    
    
    
    (14
    )
    
    
    16
    
    
    
    (17
    )
    
    
    91
    
    
    
    (31
    )Other
    
    
    4
    
    
    
    
    
    
    
    21
    
    
    
    (10
    )
    
    
    25
    
    
    
    (10
    )Stocks
    
    
    211
    
    
    
    (10
    )
    
    
    
    
    
    
    
    
    
    
    211
    
    
    
    (10
    )Total temporarily impaired securities
    
    $
    8,491
    
    
    $
    (370
    )
    
    $
    5,577
    
    
    $
    (988
    )
    
    $
    14,068
    
    
    $
    (1,358
    )
  81




---



##### 



26.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted in Canada and in the United States (Contd)
  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
    )
  viii) Future income tax asset and liability (1) :
 2009Future
Income Tax Asset (1)
    
    

Future Income Tax Liability (1)Cdn.
    
    
    U.S.
    
    
    Cdn.
    
    
    U.S.GAAP
    
    
    GAAP
    
    
    GAAP
    
    
    GAAPInvestments
    
    $
    319
    
    
    $
    (127
    )
    
    $
    742
    
    
    $
    23Actuarial liabilities
    
    
    (70
    )
    
    
    1,471
    
    
    
    (442
    )
    
    
    104Deferred acquisition costs
    
    
    381
    
    
    
    (1,674
    )
    
    
    (5
    )
    
    
    (39
    )Losses available for carry forward
    
    
    372
    
    
    
    448
    
    
    
    (249
    )
    
    
    (173
    )Other
    
    
    77
    
    
    
    588
    
    
    
    (33
    )
    
    
    156Future tax asset/liability before valuation allowance
    
    
    1,079
    
    
    
    706
    
    
    
    13
    
    
    
    71Valuation allowance
    
    
    (25
    )
    
    
    (25
    )
    
    
    79
    
    
    
    91Total
    
    $
    1,054
    
    
    $
    681
    
    
    $
    92
    
    
    $
    1622008Future 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
 
 (1)
    
    U.S. GAAP terminology is deferred income tax. 82




---



##### 



26.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted in Canada and in the United States (Contd)
 ix) Acquisition:
 Lincoln U.K.Cdn. GAAP
    
    
    U.S. GAAPInvested assets acquired
    
    $
    1,249
    
    
    $
    1,249Other assets
acquired (1)
    
    
    88
    
    
    
    276Segregated funds assets acquired
    
    
    
    
    
    
    6,6291,337
    
    
    
    8,154Actuarial liabilities and other policy liabilities acquired
    
    
    1,058
    
    
    
    1,100Other liabilities acquired
    
    
    72
    
    
    
    58Segregated funds liabilities acquired
    
    
    
    
    
    
    6,6291,130
    
    
    
    7,787Net balance sheet assets acquired
    
    $
    207
    
    
    $
    367Consideration:Cash cost of acquisition
    
    $
    380
    (2)
    
    $
    361Transaction and other related costs
    
    
    7
    
    
    
    $
    387
    
    
    $
    361Goodwill on acquisition
    
    $
    180
    
    
    $
    (6
    )(3)
 
 (1)
    
    Other assets acquired included value of business acquired of $190 under U.S. GAAP.(2)
    
    Includes the cost to hedge the foreign currency exposure of the purchase price.(3)
    
    Negative goodwill has been recognized in net investment income.  2009
    
    
    2008Revenue
    
    $
    20,138
    
    
    $
    14,090Total common shareholders net income before realized gains
    
    
    2,541
    
    
    $
    206Net realized gains/(losses)
    
    
    (154
    )
    
    
    (954
    )Common shareholders net income
    
    $
    2,387
    
    
    $
    ( 748
    )Weighted average number of shares outstanding (in millions)
    
    
    561
    
    
    
    561Basic earnings per share
    
    $
    4.25
    
    
    $
    (1.33
    )Common shareholders net income on a diluted basis
    
    
    2,381
    
    
    
    (762
    )Weighted average number of shares outstanding on a diluted basis (in millions)
    
    
    562
    
    
    
    561Diluted earnings (loss) per share
    
    $
    4.24
    
    
    $
    (1.36
    )
  83




---



##### 



26.
    
    Summary of Differences Between Accounting Principles
Generally Accepted in Canada and in the United States (Contd)
 x) Earnings per share:
  2009
    
    
    2008
    
    
    2007Cdn.
    
    
    U.S.
    
    
    Cdn.
    
    
    U.S.
    
    
    Cdn.
    
    
    U.S.GAAP
    
    
    GAAP
    
    
    GAAP
    
    
    GAAP
    
    
    GAAP
    
    
    GAAPCommon shareholders net income (loss)
    
    $
    534
    
    
    $
    2,324
    
    
    
    785
    
    
    
    (749
    )
    
    
    2,219
    
    
    
    1,646Less: Effect of stock awards of subsidiaries
    
    
    6
    
    
    
    6
    
    
    
    14
    
    
    
    14
    
    
    
    20
    
    
    
    20Common shareholders net income (loss) on a diluted basis
    
    $
    528
    
    
    $
    2,318
    
    
    $
    771
    
    
    $
    (763
    )
    
    $
    2,199
    
    
    $
    1,626Weighted average number of shares outstanding (in millions)
    
    
    561
    
    
    
    561
    
    
    
    561
    
    
    
    561
    
    
    
    569
    
    
    
    569Add: Adjustments relating to the dilutive impact of stock options
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    
    (1)
    
    
    3
    
    
    
    3Weighted average number of shares outstanding
on a diluted basis (in millions)
    
    
    562
    
    
    
    562
    
    
    
    562
    
    
    
    561
    
    
    
    572
    
    
    
    572
 
 (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:
 2009
    
    
    2008
    
    
    2007Deposits and withdrawals reclassified to financing activities:Deposits to policyholders accounts
    
    $
    5,519
    
    
    $
    5,020
    
    
    $
    4,141Withdrawals from policyholders accounts
    
    $
    5,693
    
    
    $
    7,076
    
    
    $
    7,090
 xii) Liabilities for contract guarantees:
   Weighted Average AttainedBenefit type
    
    Account Balance
    
    
    Net Amount at Risk
    
    
    Age of Contract HoldersMinimum death
    
    $
    35,372
    
    
    $
    4,099
    
    
    
    63Minimum income
    
    $
    1,640
    
    
    $
    1,498
    
    
    
    53Minimum
accumulation, withdrawal and reinsured minimum income
    
    $
    22,335
    
    
    $
    1,104
    
    
    
    61
 84




---



##### 



26.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted in Canada and in the United States (Contd)
  Minimum
    
    
    GuaranteedGuaranteed Death
    
    
    Minimum IncomeBenefit
    
    
    Benefit
    
    
    TotalBalance 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
    
    
    
    496Benefit ratio and assumption changes
    
    
    (76
    )
    
    
    23
    
    
    
    (53
    )Incurred guaranteed benefits
    
    
    48
    
    
    
    16
    
    
    
    64Paid guaranteed benefits
    
    
    (114
    )
    
    
    (23
    )
    
    
    (137
    )Interest
    
    
    21
    
    
    
    (1
    )
    
    
    20Effect of changes in currency exchange rates
    
    
    (31
    )
    
    
    (10
    )
    
    
    (41
    )Balance as at December 31, 2009
    
    $
    151
    
    
    $
    198
    
    
    $
    349
    xiii) Disclosures relating to fair value measurements:
    85




---



##### 



26.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted in Canada and in the United States (Contd)
   Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalSegregated funds net assets
    
    $
    38,303
    
    
    $
    41,448
    
    
    $
    787
    
    
    $
    80,538Embedded derivative liabilities
    
    $
    
    
    
    $
    
    
    
    $
    1,093
    
    
    $
    1,093
  Total realized and
unrealizedgains
(losses) (2)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
    
    
    net income
    
    
    income
    
    
    settlements (net)
    
    
    level 3(1)
    
    
    balance
    
    
    the reporting date
(2)Segregated funds net assets
    
    $
    1,187
    
    
    $
    (81
    )
    
    $
    
    
    
    $
    (277
    )
    
    $
    (42
    )
    
    $
    787
    
    
    $
    167Embedded derivative
liabilities
    
    $
    2,469
    
    
    $
    (1,620
    )
    
    $
    
    
    
    $
    244
    
    
    $
    
    
    
    $
    1,093
    
    
    $
    (1,346
    )
 
 (1)
    
    Transfers in and/or (out) of level 3 during 2009 are primarily attributable to changes in
the transparency of inputs used to price the securities.(2)
    
    For liabilities, gains are indicated in negative numbers.  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
    
    
    $
    140,197
 86




---



##### 



26.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted in Canada and in the United States (Contd)
 Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalLiabilitiesAmounts 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
  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
  87




---



##### 



26.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted in Canada and in the United States (Contd)xiv)
    
    Accounting for uncertainty in income taxes:
   UTB balance as at January 1, 2008
    
    $
    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
    
    $
    550Increase (decrease) related to tax positions in prior year
    
    
    (81
    )Increase (decrease) related to tax positions in current year
    
    
    281Increase (decrease) related to foreign exchange movement
    
    
    (43
    )UTB balance as at December 31, 2009
    
    $
    707
    Tax Jurisdiction
    
    Years Subject to ExaminationCanada
    
    2005 - forwardU.S.
    
    2001 - forwardU.K.
    
    2003 - forward
 xv)
    
    Disclosures about Transfers of Financial Assets and Interests in Variable Interest
Entities
   88




---



##### 



Appointed Actuarys Report
    
 Lesley Thomson
 
 89




---



##### 



Report of Independent Registered Chartered Accountants
     Internal Control  Integrated Framework
 
 
 
 90




---



##### 



Comments by Independent Registered Chartered Accountants on Canada-United States of
America Reporting Differences
  
 
 
 91




---



##### 



Report of Independent Registered Chartered Accountants
  Internal
ControlIntegrated Framework
    Internal
ControlIntegrated Framework
  
 
 
 92