##### 



Exhibit 2
  Consolidated
 Financial
 Statements
 Sun Life Financial Inc.
 For the Year Ended December 31, 2007
 February 13, 2008
 Lifes brighter under the sun




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Table of Contents
 PAGEConsolidated
Financial Statements and NotesFinancial Reporting Responsibilities
    
    1Managements Report on Internal Control Over Financial Reporting
    
    2Consolidated Financial StatementsConsolidated Statements of Operations
    
    3Consolidated Balance Sheets
    
    4Consolidated Statements of Equity
    
    5Consolidated Statements of Comprehensive Income
    
    5Consolidated Statements of Cash Flows
    
    6Consolidated
Statements of Changes in Segregated Funds Net Assets and Consolidated

Statements of Segregated Funds Net Assets
    
    7Notes to the Consolidated Financial StatementsNote 1. Accounting Policies
    
    8Note 2. Changes in Accounting Policies
    
    17Note 3. Acquisitions and Disposals
    
    20Note 4. Segmented Information
    
    22Note 5. Financial Investments and Related Net Investment Income
    
    23Note 6. Financial Instrument Risk Management
    
    28Note 7. Goodwill and Intangible Assets
    
    35Note 8. Other Assets
    
    36Note 9. Actuarial Liabilities and Other Policy Liabilities
    
    37Note 10. Senior Debentures
    
    42Note 11. Other Liabilities
    
    43Note 12. Subordinated Debt
    
    44Note 13. Non-controlling Interest in Subsidiaries
    
    45Note 14. Share Capital and Shares Purchased for Cancellation
    
    45Note 15. Operating Expenses
    
    46Note 16. Earnings Per Share
    
    47Note 17. Stock-Based Compensation
    
    47Note 18. Income Taxes
    
    50Note 19. Income Taxes included in OCI
    
    51Note 20. Commitments, Guarantees and Contingencies
    
    51Note 21. Pension Plans and Other Post-Retirement Benefits
    
    54Note 22. Foreign Exchange Gain
    
    57Note 23. Related Party Transactions
    
    57Note 24. Variable Interest Entities
    
    57Note 25. Summary of Differences Between Accounting Principles
Generally Accepted in Canada and in the United States
    
    58Note 26. Comparative Figures
    
    74Appointed Actuarys Report
    
    75Reports of Independent Registered Chartered Accountants
    
    76




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




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##### 



Managements Report on Internal Control over Financial Reporting
   United States Securities and Exchange Act Internal
ControlIntegrated Framework,
  Donald A. Stewart
 Richard P. McKenney
  2




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##### 



Consolidated Statements of Operations
 YEARS ENDED DECEMBER 31 (in millions of Canadian dollars, except for per share amounts)2007
    
    
    2006
    *
    
    2005
    *REVENUEPremium income:Annuities
    
    $
    3,530
    
    
    $
    5,380
    
    
    $
    4,556Life insurance
    
    
    6,010
    
    
    
    6,168
    
    
    
    5,683Health insurance
    
    
    3,584
    
    
    
    3,061
    
    
    
    2,70113,124
    
    
    
    14,609
    
    
    
    12,940Net investment income (Note 5):Changes in fair value of held-for-trading assets
    
    
    (1,558
    )Income from derivative investments
    
    
    86Realized gains on sales of available-for-sale assets
    
    
    127Other net investment income
    
    
    6,197
    
    
    
    6,664
    
    
    
    6,0794,852
    
    
    
    6,664
    
    
    
    6,079Fee income
    
    
    3,212
    
    
    
    3,014
    
    
    
    2,89921,188
    
    
    
    24,287
    
    
    
    21,918POLICY BENEFITS AND EXPENSESPayments to policyholders, beneficiaries and depositors:Maturities and surrenders
    
    
    6,250
    
    
    
    5,707
    
    
    
    5,922Annuity payments
    
    
    1,398
    
    
    
    1,388
    
    
    
    1,473Death and disability benefits
    
    
    2,620
    
    
    
    2,438
    
    
    
    2,397Health benefits
    
    
    2,616
    
    
    
    2,253
    
    
    
    1,885Policyholder dividends and interest on claims and deposits
    
    
    1,360
    
    
    
    1,109
    
    
    
    1,12514,244
    
    
    
    12,895
    
    
    
    12,802Net transfers to segregated funds
    
    
    952
    
    
    
    835
    
    
    
    704Increase (decrease) in actuarial liabilities (Note 9)
    
    
    (2,515
    )
    
    
    2,525
    
    
    
    872Commissions
    
    
    1,811
    
    
    
    1,916
    
    
    
    1,726Operating expenses (Note 15)
    
    
    3,260
    
    
    
    3,028
    
    
    
    2,921Premium taxes
    
    
    240
    
    
    
    205
    
    
    
    190Interest expense (Notes 10, 11 and 12)
    
    
    349
    
    
    
    323
    
    
    
    27318,341
    
    
    
    21,727
    
    
    
    19,488INCOME BEFORE INCOME TAXES ANDNON-CONTROLLING INTERESTS
    
    
    2,847
    
    
    
    2,560
    
    
    
    2,430Income taxes expense (Note 18)
    
    
    522
    
    
    
    389
    
    
    
    531Non-controlling interests in net income of subsidiaries (Note 13)
    
    
    35
    
    
    
    27
    
    
    
    23TOTAL NET INCOME
    
    
    2,290
    
    
    
    2,144
    
    
    
    1,876Less:      Participating policyholders net income
    
    
    2
    
    
    
    7
    
    
    
    9SHAREHOLDERS NET INCOME
    
    
    2,288
    
    
    
    2,137
    
    
    
    1,867Less:      Preferred shareholder dividends
    
    
    69
    
    
    
    48
    
    
    
    24COMMON SHAREHOLDERS NET INCOME
    
    $
    2,219
    
    
    $
    2,089
    
    
    $
    1,843Average exchange rates:U.S. dollars
    
    
    1.07
    
    
    
    1.13
    
    
    
    1.21U.K. pounds
    
    
    2.15
    
    
    
    2.09
    
    
    
    2.21Earnings per shareBasic
    
    $
    3.90
    
    
    $
    3.62
    
    
    $
    3.14Diluted
    
    $
    3.85
    
    
    $
    3.58
    
    
    $
    3.12Weighted
average shares outstanding in millions (Note 16)Basic
    
    
    569
    
    
    
    577
    
    
    
    587Diluted
    
    
    572
    
    
    
    580
    
    
    
    590
 *
    
    Prior periods have not been restated as a result of the changes in accounting policies described in Note 2.
 The attached notes form part of these Consolidated Financial Statements.
 3




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##### 



Consolidated Balance Sheets
 AS AT DECEMBER 31(in millions of Canadian dollars)2007
    
    
    2006
    *ASSETSBonds
    
    
    
    
    
    $
    69,230Bonds  held-for-trading (Note 5)
    
    $
    50,608Bonds  available-for-sale (Note 5)
    
    
    9,148Mortgages and corporate loans (Note 5)
    
    
    20,742
    
    
    
    15,993Stocks
    
    
    
    
    
    
    4,899Stocks  held-for-trading (Note 5)
    
    
    4,438Stocks  available-for-sale (Note 5)
    
    
    788Real estate
    
    
    4,303
    
    
    
    3,825Cash, cash equivalents and short-term securities
    
    
    5,500
    
    
    
    6,239Derivative assets (Note 5)
    
    
    1,947Policy loans and other invested assets
    
    
    4,349
    
    
    
    6,013Other invested assets  held-for-trading (Note 5)
    
    
    440Other invested assets  available-for-sale (Note 5)
    
    
    757Invested assets
    
    
    103,020
    
    
    
    106,199Goodwill (Note 7)
    
    
    6,018
    
    
    
    5,981Intangible assets (Note 7)
    
    
    775
    
    
    
    777Other assets (Note 8)
    
    
    4,478
    
    
    
    4,874Total general fund assets
    
    $
    114,291
    
    
    $
    117,831Segregated funds net assets
    
    $
    73,205
    
    
    $
    70,789LIABILITIES AND EQUITYActuarial liabilities and other policy liabilities (Note 9)
    
    $
    79,830
    
    
    $
    81,036Amounts on deposit
    
    
    3,747
    
    
    
    3,599Deferred net realized gains (Note 5)
    
    
    276
    
    
    
    4,152Senior debentures (Note 10)
    
    
    3,014
    
    
    
    3,491Derivative liabilities (Note 5)
    
    
    638Other liabilities (Note 11)
    
    
    7,675
    
    
    
    6,834Total general fund liabilities
    
    
    95,180
    
    
    
    99,112Subordinated debt (Note 12)
    
    
    1,796
    
    
    
    1,456Non-controlling interests in subsidiaries (Note 13)
    
    
    98
    
    
    
    79Total equity
    
    
    17,217
    
    
    
    17,184Total general fund liabilities and equity
    
    $
    114,291
    
    
    $
    117,831Segregated funds contract liabilities
    
    $
    73,205
    
    
    $
    70,789Exchange
rate at balance sheet date:U.S. dollars
    
    
    1.00
    
    
    
    1.17U.K. pounds
    
    
    1.98
    
    
    
    2.28
 *
    
    Prior periods have not been restated as a result of the changes in accounting policies described in Note 2.
 The attached notes form part of these Consolidated Financial Statements.
  (-s- Donald A. Stewart)Donald A. Stewart
    

(-s- Krystyna T. Hoeg)Krystyna T. HoegChief Executive Officer
    
    Director
 4




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##### 



Consolidated Statements of Equity
 YEARS ENDED DECEMBER 31 (in millions of Canadian dollars)PARTICIPATINGPOLICYHOLDERS
    
    
    SHAREHOLDERS
    
    
    2007
    
    
    2006
    *
    
    2005
    *PREFERRED SHARESBalance, beginning of year
    
    $
    
    
    
    $
    1,250
    
    
    $
    1,250
    
    
    $
    712
    
    
    $
    Preferred shares issued (Note 14)
    
    
    
    
    
    
    250
    
    
    
    250
    
    
    
    550
    
    
    
    725Issuance costs, net of taxes (Note 14)
    
    
    
    
    
    
    (5
    )
    
    
    (5
    )
    
    
    (12
    )
    
    
    (13
    )Balance, end of year
    
    
    
    
    
    
    1,495
    
    
    
    1,495
    
    
    
    1,250
    
    
    
    712COMMON SHARESBalance, beginning of year
    
    
    
    
    
    
    7,082
    
    
    
    7,082
    
    
    
    7,173
    
    
    
    7,238Stock options exercised (Note 17)
    
    
    
    
    
    
    66
    
    
    
    66
    
    
    
    73
    
    
    
    99Common shares purchased for cancellation (Note 14)
    
    
    
    
    
    
    (115
    )
    
    
    (115
    )
    
    
    (164
    )
    
    
    (164
    )Balance, end of year
    
    
    
    
    
    
    7,033
    
    
    
    7,033
    
    
    
    7,082
    
    
    
    7,173CONTRIBUTED SURPLUSBalance, beginning of year
    
    
    
    
    
    
    72
    
    
    
    72
    
    
    
    66
    
    
    
    70Stock-based compensation (Note 17)
    
    
    
    
    
    
    1
    
    
    
    1
    
    
    
    18
    
    
    
    17Stock options exercised (Notes 14 and 17)
    
    
    
    
    
    
    (11
    )
    
    
    (11
    )
    
    
    (12
    )
    
    
    (21
    )Balance, end of year
    
    
    
    
    
    
    62
    
    
    
    62
    
    
    
    72
    
    
    
    66RETAINED EARNINGSBalance, beginning of year, as previously reported
    
    
    101
    
    
    
    10,016
    
    
    
    10,117
    
    
    
    9,095
    
    
    
    8,204Adjustment for change in accounting policy (Note 2)
    
    
    6
    
    
    
    186
    
    
    
    192
    
    
    
    
    
    
    
    Balance, beginning of year, after change in accounting policy
    
    
    107
    
    
    
    10,202
    
    
    
    10,309
    
    
    
    9,095
    
    
    
    8,204Net income
    
    
    2
    
    
    
    2,288
    
    
    
    2,290
    
    
    
    2,144
    
    
    
    1,876Dividends on common shares
    
    
    
    
    
    
    (752
    )
    
    
    (752
    )
    
    
    (663
    )
    
    
    (581
    )Dividends on preferred shares
    
    
    
    
    
    
    (69
    )
    
    
    (69
    )
    
    
    (48
    )
    
    
    (24
    )Common shares purchased for cancellation (Note 14)
    
    
    
    
    
    
    (387
    )
    
    
    (387
    )
    
    
    (411
    )
    
    
    (380
    )Balance, end of year
    
    
    109
    
    
    
    11,282
    
    
    
    11,391
    
    
    
    10,117
    
    
    
    9,095ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), net of taxesBalance, beginning of year
    
    
    (9
    )
    
    
    (1,328
    )
    
    
    (1,337
    )
    
    
    (1,500
    )
    
    
    (1,097
    )Adjustment for change in accounting policy (Note 2)
    
    
    
    
    
    
    359
    
    
    
    359
    
    
    
    
    
    
    
    Balance, beginning of year, after change in accounting policy
    
    
    (9
    )
    
    
    (969
    )
    
    
    (978
    )
    
    
    (1,500
    )
    
    
    (1,097
    )Total other comprehensive income (loss)
    
    
    (5
    )
    
    
    (1,781
    )
    
    
    (1,786
    )
    
    
    163
    
    
    
    (403
    )Balance, end of year
    
    
    (14
    )
    
    
    (2,750
    )
    
    
    (2,764
    )
    
    
    (1,337
    )
    
    
    (1,500
    )Total retained earnings and accumulated other comprehensive income
    
    
    95
    
    
    
    8,532
    
    
    
    8,627
    
    
    
    8,780
    
    
    
    7,595Total equity
    
    $
    95
    
    
    $
    17,122
    
    
    $
    17,217
    
    
    $
    17,184
    
    
    $
    15,546ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), net of taxesBalance, end of year, consists of:Unrealized gains on available-for-sale assets
    
    $
    
    
    
    $
    25
    
    
    $
    25
    
    
    $
    
    
    
    $
    Unrealized foreign currency translation gains (losses), net of hedging activities
    
    
    (14
    )
    
    
    (2,807
    )
    
    
    (2,821
    )
    
    
    (1,337
    )
    
    
    (1,500
    )Unrealized gains on derivatives designated as cash flow hedges
    
    
    
    
    
    
    32
    
    
    
    32
    
    
    
    
    
    
    
    Balance, end of year
    
    $
    (14
    )
    
    $
    (2,750
    )
    
    $
    (2,764
    )
    
    $
    (1,337
    )
    
    $
    (1,500
    )
 Consolidated Statements of Comprehensive Income
 YEARS ENDED DECEMBER 31 (in millions of Canadian dollars)2007
    
    
    2006
    *
    
    2005
    *Total net income
    
    $
    2,290
    
    
    $
    2,144
    
    
    $
    1,876Other comprehensive income (loss), net of taxes (Note 19):Unrealized foreign currency
translation gains (losses),
excluding hedges
    
    
    (1,781
    )
    
    
    167
    
    
    
    (381
    )Unrealized foreign currency gains, net investment hedges
    
    
    282Net adjustment for foreign exchange losses (gains) (Note 22)
    
    
    3
    
    
    
    (4
    )
    
    
    (22
    )Unrealized gains (losses) on available-for-sale assets
    
    
    (238
    )Reclassifications to net income for available-for-sale assets
    
    
    (84
    )Unrealized gains on cash flow hedging instruments
    
    
    40Reclassifications to net income for cash flow hedges
    
    
    (8
    )Total other comprehensive income (loss)
    
    
    (1,786
    )
    
    
    163
    
    
    
    (403
    )Total comprehensive income
    
    
    504
    
    
    
    2,307
    
    
    
    1,473Less: Participating policyholders net income
    
    
    2
    
    
    
    7
    
    
    
    9Participating policyholders foreign currency translation
gains (losses), excluding hedges
    
    
    (5
    )
    
    
    
    
    
    
    (1
    )Shareholders comprehensive income
    
    $
    507
    
    
    $
    2,300
    
    
    $
    1,465
 *
    
    Prior periods have not been restated as a result of the changes in accounting policies described in Note 2.
 The attached notes form part of these Consolidated Financial Statements.
 5




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##### 



Consolidated Statements of Cash Flows
 YEARS ENDED DECEMBER 31 (in millions of Canadian dollars)2007
    
    
    2006
    *
    
    2005
    *CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIESTotal net income
    
    $
    2,290
    
    
    $
    2,144
    
    
    $
    1,876Items not affecting cash:Increase (decrease) in actuarial and other policy-related
liabilities
    
    
    (2,328
    )
    
    
    2,538
    
    
    
    802Unrealized (gains) losses on held-for-trading assets and
derivatives
    
    
    2,447Amortization of:Net deferred realized and unrealized gains on investments
    
    
    (121
    )
    
    
    (751
    )
    
    
    (632
    )Deferred acquisition costs and intangible assets
    
    
    89
    
    
    
    137
    
    
    
    164Write-down of intangible asset
    
    
    52Loss on sale of equity investments (Note 3)
    
    
    
    
    
    
    
    
    
    
    43(Gain) loss on foreign exchange (Note 5)
    
    
    (37
    )
    
    
    14
    
    
    
    (28
    )Future income taxes
    
    
    453
    
    
    
    (335
    )
    
    
    77Provisions for losses (recoveries) on investments
    
    
    2
    
    
    
    (10
    )
    
    
    (47
    )Stock-based compensation (Note 17)
    
    
    96
    
    
    
    80
    
    
    
    68Accrued expenses and taxes
    
    
    (109
    )
    
    
    129
    
    
    
    158Investment income due and accrued
    
    
    (7
    )
    
    
    (6
    )
    
    
    (66
    )Other changes in other assets and liabilities
    
    
    (649
    )
    
    
    550
    
    
    
    417Realized (gains) losses on held-for-trading and available-for-sale assets
    
    
    (1,091
    )New mutual fund business acquisition costs capitalized
    
    
    (69
    )
    
    
    (66
    )
    
    
    (92
    )Redemption fees of mutual funds
    
    
    24
    
    
    
    45
    
    
    
    37Net cash provided by operating activities
    
    
    1,042
    
    
    
    4,469
    
    
    
    2,777CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIESBorrowed funds
    
    
    113
    
    
    
    28
    
    
    
    (77
    )Issuance of senior unsecured financing (Note 11)
    
    
    929
    
    
    
    
    
    
    
    Issuance of senior debentures (Note 10)
    
    
    250
    
    
    
    1,000
    
    
    
    600Redemption of senior debentures (Note 10)
    
    
    (727
    )
    
    
    
    
    
    
    (7
    )Issuance of subordinated debt (Note 12)
    
    
    398
    
    
    
    
    
    
    
    Redemption and maturity of subordinated debt (Note 12)
    
    
    (28
    )
    
    
    
    
    
    
    Issuance of preferred shares (Note 14)
    
    
    250
    
    
    
    550
    
    
    
    725Payments to underwriters (Note 14)
    
    
    (9
    )
    
    
    (18
    )
    
    
    (20
    )Issuance of common shares on exercise of stock options
    
    
    55
    
    
    
    61
    
    
    
    78Common shares purchased for cancellation (Note 14)
    
    
    (502
    )
    
    
    (575
    )
    
    
    (544
    )Dividends paid on common shares
    
    
    (752
    )
    
    
    (633
    )
    
    
    (450
    )Dividends paid on preferred shares
    
    
    (69
    )
    
    
    (57
    )
    
    
    (15
    )Net cash provided by (used in) financing activities
    
    
    (92
    )
    
    
    356
    
    
    
    290CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIESSales, maturities and repayments of:Bonds
    
    
    20,999
    
    
    
    29,644
    
    
    
    27,508Mortgages and corporate loans
    
    
    6,279
    
    
    
    2,590
    
    
    
    1,912Stocks
    
    
    3,459
    
    
    
    1,572
    
    
    
    1,891Real estate
    
    
    221
    
    
    
    204
    
    
    
    243Purchases of:Bonds
    
    
    (20,896
    )
    
    
    (31,104
    )
    
    
    (30,135
    )Mortgages and corporate loans
    
    
    (7,159
    )
    
    
    (3,938
    )
    
    
    (2,774
    )Stocks
    
    
    (3,298
    )
    
    
    (2,203
    )
    
    
    (1,736
    )Real estate
    
    
    (628
    )
    
    
    (523
    )
    
    
    (294
    )Policy loans
    
    
    (69
    )
    
    
    (87
    )
    
    
    (77
    )Short-term securities
    
    
    (658
    )
    
    
    1,120
    
    
    
    (58
    )Cash cost of acquisition (Note 3)
    
    
    (725
    )
    
    
    
    
    
    
    (563
    )Cash and cash equivalents acquired on acquisition (Note 3)
    
    
    132
    
    
    
    
    
    
    
    77Other investments
    
    
    19
    
    
    
    78
    
    
    
    52Disposal,
net of cash disposed (Note 3)
    
    
    
    
    
    
    
    
    
    
    130Redemption of preferred shares of subsidiary (Note 13)
    
    
    
    
    
    
    
    
    
    
    (150
    )Net cash used in investing activities
    
    
    (2,324
    )
    
    
    (2,647
    )
    
    
    (3,974
    )Changes due to fluctuations in exchange rates
    
    
    41
    
    
    
    18
    
    
    
    (101
    )Increase (decrease) in cash and cash equivalents
    
    
    (1,333
    )
    
    
    2,196
    
    
    
    (1,008
    )Cash and cash equivalents, beginning of year
    
    
    4,936
    
    
    
    2,740
    
    
    
    3,748Cash and cash equivalents, end of year
    
    
    3,603
    
    
    
    4,936
    
    
    
    2,740Short-term securities, end of year
    
    
    1,897
    
    
    
    1,303
    
    
    
    2,351Cash, cash equivalents and short-term securities, end of year
    
    $
    5,500
    
    
    $
    6,239
    
    
    $
    5,091Supplementary InformationCash and cash equivalents:Cash
    
    $
    399
    
    
    $
    642
    
    
    $
    506Cash equivalents
    
    
    3,204
    
    
    
    4,294
    
    
    
    2,234$
    3,603
    
    
    $
    4,936
    
    
    $
    2,740Cash disbursements made for:Interest on borrowed funds, debentures and subordinated debt
    
    $
    319
    
    
    $
    303
    
    
    $
    268Income taxes, net of refunds
    
    $
    499
    
    
    $
    567
    
    
    $
    304
 *
    
    Prior periods have not been restated as a result of the changes in accounting policies described in Note 2.
 The attached notes form part of these Consolidated Financial Statements.
 6




---



##### 



Consolidated Statements of Changes in Segregated Funds Net Assets
 YEARS ENDED DECEMBER 31 (in millions of Canadian dollars)2007
    
    
    2006
    
    
    2005ADDITIONS TO SEGREGATED FUNDSDeposits:Annuities
    
    $
    9,921
    
    
    $
    7,444
    
    
    $
    6,788Life insurance
    
    
    3,399
    
    
    
    1,309
    
    
    
    41713,320
    
    
    
    8,753
    
    
    
    7,205Net transfers from general funds
    
    
    952
    
    
    
    835
    
    
    
    704Net realized and unrealized (losses) gains
    
    
    (210
    )
    
    
    5,386
    
    
    
    3,971Other investment income
    
    
    3,813
    
    
    
    2,637
    
    
    
    1,82617,875
    
    
    
    17,611
    
    
    
    13,706DEDUCTIONS FROM SEGREGATED FUNDSPayments to policyholders and their beneficiaries
    
    
    8,793
    
    
    
    7,910
    
    
    
    7,219Management fees
    
    
    867
    
    
    
    747
    
    
    
    664Taxes and other expenses
    
    
    189
    
    
    
    137
    
    
    
    163Effect of changes in currency exchange rates
    
    
    5,610
    
    
    
    (988
    )
    
    
    1,77215,459
    
    
    
    7,806
    
    
    
    9,818Net additions to segregated funds for the year
    
    
    2,416
    
    
    
    9,805
    
    
    
    3,888Acquisitions (Note 3)
    
    
    
    
    
    
    
    
    
    
    532Segregated funds net assets, beginning of year
    
    
    70,789
    
    
    
    60,984
    
    
    
    56,564Segregated funds net assets, end of year
    
    $
    73,205
    
    
    $
    70,789
    
    
    $
    60,984
 Consolidated Statements of Segregated Funds Net Assets
 AS AT DECEMBER 31 (in millions of Canadian dollars)2007
    
    
    2006ASSETSSegregated and mutual fund units
    
    $
    58,185
    
    
    $
    56,528Stocks
    
    
    7,376
    
    
    
    8,317Bonds
    
    
    7,868
    
    
    
    5,823Cash, cash equivalents and short-term securities
    
    
    863
    
    
    
    584Real estate
    
    
    202
    
    
    
    215Mortgages
    
    
    38
    
    
    
    42Other assets
    
    
    906
    
    
    
    72175,438
    
    
    
    72,230LIABILITIES
    
    
    2,233
    
    
    
    1,441Net assets attributable to segregated funds policyholders
    
    $
    73,205
    
    
    $
    70,789
  The attached notes form part of these Consolidated Financial Statements.
 7




---



##### 



Notes to the Consolidated Financial Statements
  1. Accounting Policies
 DESCRIPTION OF BUSINESS
  BASIS OF PRESENTATION
   
    
    the reported amounts of assets and liabilities at the date of the financial statements
    
    the disclosure of contingent assets and liabilities at the date of the financial statements
    
    the reported amounts of revenues, policy benefits and expenses during the reporting period.
    BASIS OF CONSOLIDATION
  FINANCIAL INSTRUMENTS AND INVESTMENTS
  8




---



##### 



1.
Accounting Policies (Contd)
 ADOPTED IN 2007
    
    
    2006 AND PRIORBONDS HELD-FOR-TRADING
AND AVAILABLE-FOR-SALE
    
    
    BONDSMeasurement:
Bonds are designated as
held-for-trading or
available-for-sale and
are carried at fair
value. Changes in fair
value of held-for-trading
bonds are recorded to
changes in fair value of
held-for-trading assets
in the consolidated
statements of operations.
Changes in fair value of
available-for-sale bonds
are recorded to
unrealized gains and
(losses) in other
comprehensive income
(OCI).
    
    
    Measurement:
Bonds are carried at amortized cost, net of allowances for losses.Recognition:
Purchases and sales of
bonds are recognized or
derecognized on the
consolidated balance
sheets on their trade
dates, the date that the
Company commits to
purchase or sell the
bond.
    
    
    Recognition:
Purchases and sales of bonds are recognized or derecognized on
their trade dates as in 2007.Realized
gains and losses:
Realized gains and losses
on the sale of
available-for-sale bonds
are reclassified from
accumulated OCI and
recorded as realized
gains on the consolidated
statements of operations.
Since held-for-trading
bonds are measured at
fair value, realized
gains are included with
unrealized gains in
changes in fair value of
held-for-trading assets
in the consolidated
statements of operations.
    
    
    Realized gains and losses:
Realized gains and losses on the sales of bonds are deferred and
amortized into net investment income on a constant yield basis
over the remaining period to maturity.Impairment:
Since held-for-trading
bonds are recorded at
fair value with changes
in fair value recorded to
income, they are not
tested for impairment.
Available-for-sale bonds
are tested for impairment
at least on a quarterly
basis. Objective evidence
of impairment includes
financial difficulty of
the issuer, bankruptcy or
defaults and delinquency
in payments of interest
or principal.
    
    
    Impairment:
The conditions for determining impairment are the same as
described in 2007 for available-for-sale bonds.When there is objective
evidence that an
available-for-sale bond
is impaired and the
decline in value is
considered other than
temporary, the loss
accumulated in OCI is
reclassified to other net
investment income. Once
an impairment loss is
recorded to income, it is
not reversed. Following
impairment loss
recognition, these assets
will continue to be
recorded at fair value
with changes in fair
value recorded to OCI,
and tested for further
impairment quarterly.
Interest is no longer
accrued and previous
interest accruals are
reversed.
    
    
    When an asset is classified as impaired, allowances for losses
are established to adjust the carrying value of the asset to its
net recoverable amount. Interest is no longer accrued and
previous interest accruals are reversed. Allowances for losses,
and write-offs of specific investments net of recoveries, are
charged against net investment income. Once the conditions
causing the impairment improve and future payments are reasonably
assured, allowances are reduced and the invested asset is no
longer classified as impaired. Sectoral allowances are also
established for classes of assets when there is concern about the
ultimate collection of principal or interest.Interest income:
Interest income earned on
both held-for-trading and
available-for-sale bonds
is recorded as other net
investment income on the
consolidated statements
of operations.
    
    
    Interest income:
As in 2007, interest income earned on bonds is recorded as other
net investment income on the consolidated statements of
operations.
 9




---



##### 



1.
Accounting Policies (Contd)
 ADOPTED IN 2007
    
    
    2006 AND PRIORMORTGAGES AND CORPORATE LOANS
    
    
    MORTGAGESMeasurement:
Loans previously reported as bonds
that do not meet the definition of a
debt security are classified as
corporate loans in 2007. These loans
are reported along with mortgage
loans on the consolidated balance
sheets. Mortgages and corporate loans
are accounted for at amortized cost
using the effective interest method.
    
    
    Measurement:
As in 2007, mortgages are
accounted for at amortized cost
using the effective interest
method. Corporate loans are
included with bonds and are
accounted for as described
previously for bonds.Recognition:
Purchases and sales of mortgages and
corporate loans are recognized or
derecognized on the consolidated
balance sheets on their trade dates,
the date that the Company commits to
purchase or sell the asset.
    
    
    Recognition:
Purchases and sales of mortgages
are recognized or derecognized on
their trade dates as in 2007.Realized gains and losses:
Realized gains and losses on the sale
of mortgages and corporate loans are
recorded in other net investment
income on the consolidated statements
of operations.
    
    
    Realized gains and losses:
Realized gains and losses on the
sales of mortgages are deferred
and amortized into net investment
income on a constant yield basis
over the remaining period to
maturity.Impairment:
A mortgage is classified as impaired
where payment is 90 days past due,
foreclosure or power of sale
procedures have started, or other
circumstances warrant. When an asset
is classified as impaired, allowances
for losses are established to adjust
the carrying value of the asset to
its net recoverable amount. Interest
is no longer accrued and previous
interest accruals are reversed.
Allowances for losses, and write-offs
of specific investments net of
recoveries, are charged against net
investment income. Once the
conditions causing the impairment
improve and future payments are
reasonably assured, allowances are
reduced and the invested asset is no
longer classified as impaired.
Sectoral allowances are also
established for classes of assets
when there is concern about the
ultimate collection of principal or
interest.
    
    
    Impairment:
The conditions for impairment and
the accounting for impaired
mortgages are the same as
described for 2007.Interest income:
Interest income earned is recorded as
other net investment income on the
consolidated statements of
operations.
    
    
    Interest income:
As in 2007, interest income earned
is recorded as other net
investment income on the
consolidated statements of
operations.
 10




---



##### 



1.
Accounting Policies (Contd)
 ADOPTED IN 2007
    
    
    2006 AND PRIORSTOCKS  HELD-FOR-TRADING AND
AVAILABLE-FOR-SALE
    
    
    STOCKSMeasurement:
Stocks are designated as
held-for-trading or
available-for-sale and are generally
carried at fair value. Stocks that
do not have a quoted price on an
active market and that are
designated as available-for-sale,
are carried at cost. Changes in fair
value of held-for-trading stocks are
recorded to changes in fair value of
held-for-trading assets in the
consolidated statements of
operations. Changes in fair value of
available-for-sale stocks are
recorded to unrealized gains and
(losses) in OCI.
    
    
    Measurement:
Stocks are originally recorded at
cost and the carrying value is
adjusted towards fair value at 5% of
the difference between fair value
and carrying value per quarter.Recognition:
Purchases and sales of stocks are
recognized or derecognized on the
consolidated balance sheets on their
trade dates, the date that the
Company commits to purchase or sell
the stock.
    
    
    Recognition:
Purchases and sales of stocks are
recognized or derecognized on their
trade dates as in 2007.Realized gains and losses:
Realized gains and losses on the
sale of available-for-sale stocks
are reclassified from accumulated
OCI and recorded as realized gains
on the consolidated statements of
operations. Since held-for-trading
stocks are measured at fair value,
realized gains are included with
unrealized gains in changes in fair
value of held-for-trading assets in
the consolidated statements of
operations.
    
    
    Realized gains and losses:
Realized gains and losses on sales
of stocks are deferred and amortized
into net investment income at the
rate of 5% of the unamortized
balance each quarter.Impairment:
Since held-for-trading stocks are
recorded at fair value, with changes
in fair value recorded to income,
they are not tested for impairment.
Available-for-sale stocks are tested
for impairment at least on a
quarterly basis. Objective evidence
of impairment for stocks includes a
significant or prolonged decline in
fair value of the stock below cost
or changes with adverse effects that
have taken place in the
technological, market, economic or
legal environment in which the
issuer operates that may indicate
that the carrying value will not
recover. The accounting for
other-than-temporarily impaired
available-for-sale stocks is the
same as described previously for
available-for-sale bonds.
    
    
    Impairment:
Impairment is tested on an entire
portfolio basis. The Company records
a write-down for any other than
temporary decline in the aggregate
value of the stock portfolio.Dividend income:
Dividends received on both
held-for-trading and
available-for-sale stocks are
recorded as other net investment
income on the consolidated
statements of operations.
    
    
    Dividend income:
As in 2007, dividends earned on
stocks are recorded as other net
investment income on the
consolidated statements of
operations.
 11




---



##### 



1.
Accounting Policies (Contd)
 ADOPTED IN 2007
    
    
    2006 AND PRIORDERIVATIVE FINANCIAL INSTRUMENTS
    
    
    DERIVATIVE FINANCIAL INSTRUMENTSDerivatives not designated as accounting hedges (derivative
investments)
Derivatives are required to be classified as
held-for-trading unless designated as a hedge for
accounting purposes. Derivative investments are
derivatives that have not been designated as hedges for
accounting purposes. Derivative investments are recorded
on the consolidated balance sheets at fair value with
changes in fair value recorded to income from derivative
investments in the consolidated statements of operations.
Derivatives with a positive fair value are recorded as
derivative assets while derivatives with a negative fair
value are recorded as derivative liabilities. Income
earned on these derivatives, such as interest income, is
also recorded to income from derivative investments.
    
    
    Derivatives not designated as accounting hedges
Most of the Companys derivatives are accounted for as
either fixed term portfolio investments at amortized
cost or equity portfolio investments using a moving
average market method such as is used for stocks.
Generally, derivatives accounted for at amortized cost
are off-balance sheet and the net receivables and
payables are accrued to other assets or other
liabilities with the net spread recorded to other
investment income. Realized gains or losses associated
with these derivatives are deferred and amortized to
net investment income. Option premiums are deferred in
other invested assets and amortized to net investment
income over the term of the options. Certain equity
derivative instruments that are used to manage exposure
from stock-based compensation plans and stock market
fluctuations in the actuarial liabilities are recorded
at fair value in other invested assets or other
liabilities, with changes in fair value recognized in
other net investment income.Derivatives designated as hedges for accounting purposes
Hedge accounting is applied to certain derivatives to
reduce income statement volatility. All derivatives
designated as hedges for accounting purposes are
documented at inception and hedge effectiveness is
assessed on a quarterly basis. All derivatives, including
derivatives designated as hedges for accounting purposes,
are recorded on the consolidated balance sheets at fair
value. The accounting for the change in fair value of
these derivatives depends on the type of hedge they are
designated as for accounting purposes.
Fair value hedges
Certain interest rate swaps, cross currency swaps and
equity forwards are designated as hedges of the interest
rate, foreign currency or equity exposures associated with
available-for-sale assets. Changes in fair value of the
derivatives are recorded to other net investment income.
The change in fair value of these available-for-sale
assets related to the hedged risk is recorded in other net
investment income. As a result, ineffectiveness, if any,
is recognized in other net investment income. Interest
income earned and paid on the available-for-sale assets
and swaps in the fair value hedging relationships are
recorded to other net investment income.Cash flow hedges
Certain equity forwards are designated as cash flow hedges
of the anticipated payments of awards under certain
stock-based compensation plans. The difference between the
forward price and the spot price of these forwards is
excluded from the assessment of hedge effectiveness and is
recorded in other net investment income. Changes in fair
value based on spot price changes are recorded to OCI, with
the remaining changes in fair value recorded to other net
investment income. A portion of the amount included in
accumulated OCI related to these forwards is reclassified
to operating expenses in the consolidated
    
    
    Derivatives designated as hedges for accounting purposes
As in 2007, all derivatives designated as hedges for
accounting purposes are documented at inception and
hedge effectiveness is assessed on a quarterly basis.
Generally, the accounting for the derivatives follows
the accounting for the underlying hedged item when
hedge accounting is used.

Certain cross currency interest rate swaps are
designated as hedges of the foreign currency exposure
associated with foreign currency bonds. Changes in fair
value of the swaps due to fluctuations in exchange
rates are recorded to net investment income, consistent
with the accounting for the exchange gains and losses
recorded on the bonds.

Certain equity forwards and swaps are designated as
hedges of the anticipated payments of awards under
certain stock-based compensation plans. A portion of
the fair value of these forwards is recorded in other
assets or other liabilities with the change in fair
value reported in operating expenses, consistent with
the accounting for the stock-based compensation
liabilities.

Certain currency swaps and forwards hedge foreign
exchange fluctuations associated with certain foreign
currency investment financing activities. Changes in
exchange gains or losses on these currency swaps and
forwards are included in other assets or other
liabilities and unrealized foreign currency translation
gains and losses in equity, offsetting the respective
exchange gains or losses arising from the conversion of
the underlying investment.
 12




---



##### 



1.
Accounting Policies (Contd)
 ADOPTED IN 2007
    
    
    2006 AND PRIORstatements of operations as the liability
is accrued for the stock- based compensation
awards over the vesting period. All
amounts recorded to or from OCI are
net of related taxes.Net investment hedges
The Company uses currency swaps and/or forwards to
reduce foreign exchange fluctuations associated with
certain foreign currency investment financing
activities. Changes in fair value of these swaps and
forwards, 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. All
amounts recorded to or from OCI are net of related
taxes. If the hedging relationship is terminated,
amounts deferred in accumulated OCI continue to be
deferred until there is a reduction in the Companys
net investment in the hedged foreign operation
resulting from a capital transaction, dilution or sale
of all or part of the foreign operation.
 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
   13




---



##### 



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
   14




---



##### 



1. Accounting Policies (Contd)
 ACTUARIAL LIABILITIES
  SENIOR DEBENTURES AND SUBORDINATED DEBT
  INCOME TAXES
   PREMIUM AND FEE INCOME RECOGNITION
  FOREIGN CURRENCY TRANSLATION
   15




---



##### 



1.  Accounting Policies (Contd)
 PENSION PLANS AND OTHER POST-RETIREMENT BENEFITS
     STOCK-BASED COMPENSATION
   16




---



##### 



2. Changes in Accounting Policies
 ADOPTED IN 2007
 FINANCIAL INSTRUMENTS, HEDGES AND COMPREHENSIVE INCOME:
 A)  SUMMARY OF THE NEW STANDARDS:
      B)  IMPACT OF ADOPTION:
  17




---



##### 



2. Changes in Accounting Policies (Contd)
      Investments supporting actuarial liabilities
   Investments not supporting actuarial liabilities
   18




---



##### 



2.  Changes in Accounting Policies (Contd)
    Summary of impact on retained earnings and OCI
 Opening retained earnings
 Increase due to recording held-for-trading assets at fair value (1)
    
    $
    3,392Increase due to recording derivatives at fair value, net of adjustments
relating to fair value hedges
    
    
    252Reversal of deferred net realized gains and other fair value
adjustments (2)
    
    
    3,886Decrease due to change in actuarial liabilities and other policy liabilities
    
    
    (7,245
    )Decrease due to income taxes
    
    
    (93
    )Total increase in opening retained earnings, January 1, 2007
    
    $
    192
  Opening OCI
  Increase due
to recording available-for-sale assets at fair value, net of adjustments for fair
value hedges of available-for-sale assets (3)
    
    $
    443Increase due to cash flow and net investment hedge accounting
    
    
    66Decrease due to income taxes
    
    
    (150
    )Total increase in opening OCI
    
    $
    359Reclassification of currency translation account to OCI
    
    $
    (1,337
    )Opening OCI, January 1, 2007
    
    $
    (978
    )
  (1)
    
    Consists of $3,394 related to held-for-trading bonds, stocks and other invested
assets supporting actuarial liabilities and $(2) related to held-for-trading bonds and other
invested assets not supporting actuarial liabilities.(2)
    
    Consists of $3,317 related to investments supporting actuarial liabilities and $580
related to investments not supporting actuarial liabilities. This amount also includes $(11) of
other adjustments required to record financial instruments at fair value.(3)
    
    Consists of $(2) related to available-for-sale bonds and stocks supporting actuarial
liabilities and $362 related to available-for-sale bonds and stocks not supporting actuarial
liabilities. The remaining amount of $83 consists of fair value adjustments for available-for-sale
other invested assets and fair value hedges.
     19




---



##### 



2. Changes in Accounting Policies (Contd)
   FUTURE IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
   3. Acquisitions and Disposals
     20




---



##### 



3. Acquisitions and Disposals (Contd)
  2007
    
    
    2005Genworth EBG Business
    
    
    CMG AsiaPercentage of shares acquired
    
    
    100
    %
    
    
    100
    %Invested assets acquired
    
    $
    977
    
    
    $
    1,548Other assets acquired (1)
    
    
    129
    
    
    
    1221,106
    
    
    
    1,670Actuarial liabilities and other policy liabilities acquired
    
    
    654
    
    
    
    1,453Amounts on deposit acquired
    
    
    49
    
    
    
    159Other liabilities acquired
    
    
    38
    
    
    
    40$
    741
    
    
    $
    1,652Net balance sheet assets acquired
    
    $
    365
    
    
    $
    18Consideration:Cash cost of acquisition
    
    $
    709
    
    
    $
    554
    (2)Transaction and other related costs
    
    
    16
    
    
    
    9Total consideration
    
    $
    725
    
    
    $
    563Goodwill on acquisition
    
    $
    360
    
    
    $
    545Cash and cash equivalents acquired
    
    $
    132
    
    
    $
    77
 (1)
    
    Other assets acquired includes $71 of intangible assets related to Genworth EBG
Business and $47 of intangible assets related to CMG Asia.(2)
    
    Includes the cost to hedge the foreign exchange exposure of the purchase price.
       21




---



##### 



4. Segmented Information
     Results by segment for the years ended December 31United States
    
    
    
    
    
    
    
    
    
    
    ConsolidationSLF Canada
    
    
    SLF U.S.
    
    
    MFS
    
    
    SLF Asia
    
    
    Corporate
    
    
    Adjustments
    
    
    Total2007Revenue
    
    $
    9,285
    
    
    $
    7,830
    
    
    $
    1,687
    
    
    $
    977
    
    
    $
    1,634
    
    
    $
    (225
    )
    
    $
    21,188Change in actuarial liabilities
    
    $
    180
    
    
    $
    (2,336
    )
    
    $
    
    
    
    $
    10
    
    
    $
    (368
    )
    
    $
    (1
    )
    
    $
    (2,515
    )Interest expenses
    
    $
    173
    
    
    $
    236
    
    
    $
    3
    
    
    $
    
    
    
    $
    84
    
    
    $
    (147
    )
    
    $
    349Income taxes expense (benefit)
    
    $
    200
    
    
    $
    142
    
    
    $
    185
    
    
    $
    23
    
    
    $
    (28
    )
    
    $
    
    
    
    $
    522Total net income
    
    $
    1,049
    
    
    $
    584
    
    
    $
    281
    
    
    $
    123
    
    
    $
    253
    
    
    $
    
    
    
    $
    2,2902006Revenue
    
    $
    9,333
    
    
    $
    10,465
    
    
    $
    1,662
    
    
    $
    1,022
    
    
    $
    2,164
    
    
    $
    (359
    )
    
    $
    24,287Change in actuarial liabilities
    
    $
    524
    
    
    $
    1,717
    
    
    $
    
    
    
    $
    244
    
    
    $
    40
    
    
    $
    
    
    
    $
    2,525Interest expenses
    
    $
    134
    
    
    $
    211
    
    
    $
    5
    
    
    $
    
    
    
    $
    199
    
    
    $
    (226
    )
    
    $
    323Income taxes expense (benefit)
    
    $
    262
    
    
    $
    21
    
    
    $
    150
    
    
    $
    17
    
    
    $
    (61
    )
    
    $
    
    
    
    $
    389Total net income
    
    $
    1,001
    
    
    $
    449
    
    
    $
    234
    
    
    $
    101
    
    
    $
    359
    
    
    $
    
    
    
    $
    2,1442005Revenue
    
    $
    8,658
    
    
    $
    9,161
    
    
    $
    1,648
    
    
    $
    759
    
    
    $
    1,995
    
    
    $
    (303
    )
    
    $
    21,918Change in actuarial liabilities
    
    $
    (240
    )
    
    $
    769
    
    
    $
    
    
    
    $
    253
    
    
    $
    90
    
    
    $
    
    
    
    $
    872Interest expenses
    
    $
    122
    
    
    $
    151
    
    
    $
    8
    
    
    $
    
    
    
    $
    217
    
    
    $
    (225
    )
    
    $
    273Income taxes expense (benefit)
    
    $
    385
    
    
    $
    113
    
    
    $
    110
    
    
    $
    17
    
    
    $
    (94
    )
    
    $
    
    
    
    $
    531Total net income
    
    $
    971
    
    
    $
    496
    
    
    $
    179
    
    
    $
    42
    
    
    $
    188
    
    
    $
    
    
    
    $
    1,876
 Assets by segment as at December 31United States
    
    
    
    
    
    
    
    
    
    
    ConsolidationSLF Canada
    
    
    SLF U.S.
    
    
    MFS
    
    
    SLF Asia
    
    
    Corporate
    
    
    Adjustments
    
    
    Total2007General fund assets
    
    $
    55,497
    
    
    $
    39,633
    
    
    $
    945
    
    
    $
    5,497
    
    
    $
    13,967
    
    
    $
    (1,248
    )
    
    $
    114,291Segregated funds net assets
    
    $
    36,686
    
    
    $
    27,741
    
    
    $
    
    
    
    $
    1,936
    
    
    $
    6,842
    
    
    $
    
    
    
    $
    73,2052006General fund assets
    
    $
    52,702
    
    
    $
    44,172
    
    
    $
    981
    
    
    $
    5,334
    
    
    $
    16,516
    
    
    $
    (1,874
    )
    
    $
    117,831Segregated funds net assets
    
    $
    33,806
    
    
    $
    27,522
    
    
    $
    
    
    
    $
    1,232
    
    
    $
    8,229
    
    
    $
    
    
    
    $
    70,789
 22




---



##### 



4.
Segmented Information (Contd)
  2007
    
    
    2006
    
    
    2005Revenue:United States
    
    $
    720
    
    
    $
    618
    
    
    $
    453United Kingdom
    
    
    878
    
    
    
    1,309
    
    
    
    1,264Canada
    
    
    14
    
    
    
    227
    
    
    
    294Other countries
    
    
    22
    
    
    
    10
    
    
    
    (16
    )Total revenue
    
    $
    1,634
    
    
    $
    2,164
    
    
    $
    1,995Total net income (loss):United States
    
    $
    212
    
    
    $
    190
    
    
    $
    91United Kingdom
    
    
    207
    
    
    
    193
    
    
    
    179Canada
    
    
    (153
    )
    
    
    (17
    )
    
    
    (44
    )Other countries
    
    
    (13
    )
    
    
    (7
    )
    
    
    (38
    )Total net income (loss)
    
    $
    253
    
    
    $
    359
    
    
    $
    188Assets:General funds:United States
    
    $
    3,865
    
    
    $
    4,715United Kingdom
    
    
    9,416
    
    
    
    10,254Canada
    
    
    552
    
    
    
    1,400Other countries
    
    
    134
    
    
    
    147Total general fund assets
    
    $
    13,967
    
    
    $
    16,516Segregated funds:United Kingdom
    
    $
    6,842
    
    
    $
    8,229Total segregated funds net assets
    
    $
    6,842
    
    
    $
    8,229
 5. Financial Investments and Related Net Investment Income
  A) FAIR
VALUE OF FINANCIAL INVESTMENTS
  2007
    
    
    
    
    
    
    
    
    
    
    
    2006Carrying
    
    
    Fair
    
    
    
    
    
    
    Carrying
    
    
    FairValue
    
    
    Value
    
    
    Yield %
    
    
    Value
    
    
    Value
    
    
    Yield %ASSETSBonds
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    69,230
    
    
    $
    72,524
    
    
    
    6.31Bonds  held-for-trading
    
    $
    50,608
    
    
    $
    50,608
    
    
    
    5.89Bonds  available-for-sale
    
    
    9,148
    
    
    
    9,148
    
    
    
    5.62Mortgages and corporate loans
    
    
    20,742
    
    
    
    21,046
    
    
    
    6.18
    
    
    
    15,993
    
    
    
    16,322
    
    
    
    6.44Stocks
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,899
    
    
    
    5,544
    
    
    
    11.24Stocks  held-for-trading
    
    
    4,438
    
    
    
    4,438
    
    
    
    2.64Stocks  available-for-sale
    
    
    788
    
    
    
    788
    
    
    
    3.57Real estate
    
    
    4,303
    
    
    
    5,183
    
    
    
    10.77
    
    
    
    3,825
    
    
    
    4,549
    
    
    
    12.02Policy loans
    
    
    2,959
    
    
    
    2,959
    
    
    
    6.84
    
    
    
    3,105
    
    
    
    3,105
    
    
    
    6.35Cash, cash equivalents and short-term securities
    
    
    5,500
    
    
    
    5,500
    
    
    
    n/a
    
    
    
    6,239
    
    
    
    6,239
    
    
    
    n/aDerivative assets
    
    
    1,947
    
    
    
    1,947
    
    
    
    n/aOther invested assets including held-for-trading and
Available-for-sale other invested assets
    
    
    2,587
    
    
    
    4,295
    
    
    
    n/a
    
    
    
    2,908
    
    
    
    4,605
    
    
    
    n/aTotal invested assets
    
    $
    103,020
    
    
    $
    105,912
    
    
    
    6.01
    
    
    $
    106,199
    
    
    $
    112,888
    
    
    
    6.79
 23




---



##### 



5. Financial Investments and Related Net Investment Income (Contd)
   i) FAIR VALUE METHODOLOGY AND ASSUMPTIONS
    ii)
YIELD CALCULATION
  B)
REAL ESTATE INVESTMENTS
  2007
    
    
    2006Canada
    
    $
    2,828
    
    
    $
    2,372United States
    
    
    1,168
    
    
    
    1,091United Kingdom
    
    
    306
    
    
    
    361Other
    
    
    1
    
    
    
    1Total real estate
    
    $
    4,303
    
    
    $
    3,825
  2007
    
    
    2006Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairValue
    
    
    Value
    
    
    Value
    
    
    ValueReal estate held for investment
    
    $
    4,295
    
    
    $
    5,175
    
    
    $
    3,822
    
    
    $
    4,546Real estate held for sale
    
    
    8
    
    
    
    8
    
    
    
    3
    
    
    
    3Total real estate
    
    $
    4,303
    
    
    $
    5,183
    
    
    $
    3,825
    
    
    $
    4,549
  24




---



##### 



5. Financial Investments and Related Net Investment Income (Contd)
  2007
    
    
    2006Balance, January 1
    
    $
    255
    
    
    $
    215Net realized gains for the year
    
    
    76
    
    
    
    59Amortization of deferred net realized gains
    
    
    (36
    )
    
    
    (28
    )Effect of changes in currency exchange rates
    
    
    (19
    )
    
    
    9Balance, December 31
    
    $
    276
    
    
    $
    255
 C)
DEFERRED NET REALIZED GAINS
  Bonds
    
    
    Mortgages
    
    
    Stocks
    
    
    Derivatives
    
    
    TotalBalance, January 1, 2006
    
    $
    2,291
    
    
    $
    158
    
    
    $
    980
    
    
    $
    215
    
    
    $
    3,644Net realized gains for the year
    
    
    146
    
    
    
    49
    
    
    
    169
    
    
    
    243
    
    
    
    607Amortization of deferred net realized gains
    
    
    (258
    )
    
    
    (35
    )
    
    
    (203
    )
    
    
    (53
    )
    
    
    (549
    )Effect of changes in currency exchange rates
    
    
    114
    
    
    
    2
    
    
    
    80
    
    
    
    (1
    )
    
    
    195Balance, December 31, 2006
    
    $
    2,293
    
    
    $
    174
    
    
    $
    1,026
    
    
    $
    404
    
    
    $
    3,897
 D) NET
INVESTMENT INCOME
  2007Bonds
    
    $
    (1,691
    )Stocks
    
    
    103Other invested assets
    
    
    33Cash equivalents and short-term securities
    
    
    (3
    )Total changes in fair value of held-for-trading assets
    
    $
    (1,558
    )
  2007Changes in fair value
    
    $
    75Interest income
    
    
    10Other income
    
    
    1Total income from derivative investments
    
    $
    86
 25




---



##### 



5. Financial Investments and Related Net Investment Income (Contd)
  2007
    
    
    2006
    
    
    2005Interest income:Bonds
    
    
    
    
    
    $
    3,874
    
    
    $
    3,720Held-for-trading bonds
    
    $
    3,091Available-for-sale bonds
    
    
    531Mortgages and corporate loans
    
    
    1,286
    
    
    
    930
    
    
    
    889Policy loans
    
    
    212
    
    
    
    203
    
    
    
    184Cash, cash equivalents and short-term securities
    
    
    231
    
    
    
    170
    
    
    
    155Interest income
    
    
    5,351
    
    
    
    5,177
    
    
    
    4,948Dividends from stocks
    
    
    
    
    
    
    103
    
    
    
    118Dividends on held-for-trading stocks
    
    
    103Dividends on available-for-sale stocks
    
    
    23Real estate income (net)(1)
    
    
    300
    
    
    
    260
    
    
    
    252Amortization of deferred net realized gains and unrealized gains and losses
    
    
    121
    
    
    
    751
    
    
    
    632Derivative realized and unrealized gains and losses (2)
    
    
    
    
    
    
    116
    
    
    
    (22
    )Foreign exchange gains (losses)
    
    
    37
    
    
    
    (14
    )
    
    
    28Other income (3)
    
    
    351
    
    
    
    359
    
    
    
    215Investment expenses and taxes
    
    
    (89
    )
    
    
    (88
    )
    
    
    (92
    )Total other net investment income
    
    $
    6,197
    
    
    $
    6,664
    
    
    $
    6,079
 (1)
    
    Includes operating lease rental income of $316 ($275 and $271, respectively, in 2006 and 2005).(2)
    
    Consists of realized and unrealized gains on derivatives that are reported at fair
value in 2006 and 2005. Additional derivative gains of $31 in 2006 and $(66) in 2005 are included
in other items (net).(3)
    
    Includes equity income from CI Financial of $228 in 2007 ($167 in 2006, and $119 in
2005). 2005 also includes the loss on sale of Cuprum of $43 as described in Note 3. In 2007, this
includes write-downs of available-for-sale assets as described in Note 6 and the effect of hedge
accounting described in section E of this note. E) DERIVATIVE FINANCIAL INSTRUMENTS
   2007
    
    
    2006Fair Value
    
    
    Fair ValuePositive
    
    
    Negative
    
    
    Positive
    
    
    NegativeInterest rate contracts
    
    $
    286
    
    
    $
    (555
    )
    
    $
    189
    
    
    $
    (240
    )Foreign exchange contracts
    
    
    1,281
    
    
    
    (42
    )
    
    
    704
    
    
    
    (105
    )Other contracts
    
    
    380
    
    
    
    (41
    )
    
    
    585
    
    
    
    (11
    )Total derivatives
    
    $
    1,947
    
    
    $
    (638
    )
    
    $
    1,478
    
    
    $
    (356
    )
  2007Total Notional
    
    
    Fair ValueAmount
    
    
    Positive
    
    
    NegativeDerivative investments (1)
    
    $
    37,074
    
    
    $
    1,216
    
    
    $
    (611
    )Fair value hedges
    
    
    2,577
    
    
    
    237
    
    
    
    (7
    )Cash flow hedges
    
    
    77
    
    
    
    10
    
    
    
    -Net investment hedges
    
    
    2,914
    
    
    
    484
    
    
    
    (20
    )Total
    
    $
    42,642
    
    
    $
    1,947
    
    
    $
    (638
    )
 (1)
    
    Derivative investments are derivatives that have not been designated as hedges
for accounting purposes. 26




---



##### 



5. Financial Investments and Related Net Investment Income (Contd)
  i) FAIR VALUE HEDGES
  ii) CASH FLOW HEDGES
  F) SECURITIES LENDING
  G) ASSET SECURITIZATIONS
   2007
    
    
    2006Carrying value of retained interests
    
    $
    91
    
    
    $
    103Fair value of retained interests
    
    $
    91
    
    
    $
    111Weighted average remaining life (in years)
    
    
    1.14-14.2
    
    
    
    0.7-13.3Discount rate
    
    
    2.5%-12.5
    %
    
    
    2.5%-12.5
    %Anticipated credit losses
    
    
    0.5
    %
    
    
    0.6
    %
   2007
    
    
    2006
    
    
    2005Mortgages
    
    
    Mortgages
    
    
    MortgagesCash flows received on retained interests and servicing fees
    
    $
    14
    
    
    $
    18
    
    
    $
    33
 27




---



##### 



6. Financial Instrument Risk Management
  .
  A) CREDIT RISK
  i) MAXIMUM EXPOSURE TO CREDIT RISK
  2007
    
    
    2006Cash, cash equivalents and short-term securities
    
    $
    5,500
    
    
    $
    6,239Bonds
    
    
    
    
    
    
    69,230Held-for-trading bonds
    
    
    50,608Available-for-sale bonds
    
    
    9,148Mortgages
    
    
    15,468
    
    
    
    15,993Corporate loans
    
    
    5,274Derivative assets (1)
    
    
    1,947
    
    
    
    1,478Other financial assets (2)
    
    
    2,722
    
    
    
    2,591Total balance sheet maximum credit exposure
    
    $
    90,667
    
    
    $
    95,531Off-balance sheet itemsLoan commitments (3)
    
    $
    1,332
    
    
    $
    1,171Guarantees
    
    
    98
    
    
    
    106Total off-balance sheet items
    
    $
    1,430
    
    
    $
    1,277
 (1)
    
    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.(2)
    
    Other financial assets include accounts receivable and investment income due and
accrued as shown in Note 8.(3)
    
    Loan commitments include commitments to extend credit under commercial and
residential mortgage loans and private bonds. Private bond commitments contain provisions that
allow for withdrawal of the commitment if there is a deterioration in the credit quality of the
borrower. Collateral held and other credit enhancements
  28




---



##### 



6. Financial Instrument Risk Management (Contd)
 ii) CONCENTRATION RISK
    2007
    
    
    2006Held-for-Trading
    
    
    Available-for-
    
    
    Total
    
    
    TotalBonds
    
    
    Sale Bonds
    
    
    Bonds
    
    
    BondsCanada
    
    $
    18,457
    
    
    $
    1,567
    
    
    $
    20,024
    
    
    $
    24,131United States
    
    
    20,452
    
    
    
    5,865
    
    
    
    26,317
    
    
    
    31,025United Kingdom
    
    
    5,704
    
    
    
    600
    
    
    
    6,304
    
    
    
    6,818Other
    
    
    5,995
    
    
    
    1,116
    
    
    
    7,111
    
    
    
    7,256Balance, December 31
    
    $
    50,608
    
    
    $
    9,148
    
    
    $
    59,756
    
    
    $
    69,230
  2007
    
    
    2006Held-for-Trading
    
    
    Available-for-
    
    
    
    
    
    
    Carrying
    
    
    FairBonds
    
    
    Sale Bonds
    
    
    Total
    
    
    Value
    
    
    Value(1)Bonds issued or guaranteed by:Canadian federal government
    
    $
    2,320
    
    
    $
    567
    
    
    $
    2,887
    
    
    $
    2,797
    
    
    $
    2,927Canadian provincial and municipal governments
    
    
    5,849
    
    
    
    336
    
    
    
    6,185
    
    
    
    6,062
    
    
    
    7,089U.S. Treasury and other U.S. agencies
    
    
    1,055
    
    
    
    372
    
    
    
    1,427
    
    
    
    1,515
    
    
    
    1,549Other foreign governments
    
    
    3,195
    
    
    
    521
    
    
    
    3,716
    
    
    
    3,122
    
    
    
    3,576Total government issued or guaranteed bonds
    
    
    12,419
    
    
    
    1,796
    
    
    
    14,215
    
    
    
    13,496
    
    
    
    15,141Corporate bonds by industry sector:Financials
    
    
    13,062
    
    
    
    3,497
    
    
    
    16,559
    
    
    
    20,249
    
    
    
    20,793Utilities and energy
    
    
    7,475
    
    
    
    752
    
    
    
    8,227
    
    
    
    9,697
    
    
    
    10,285Telecom
    
    
    2,136
    
    
    
    666
    
    
    
    2,802
    
    
    
    3,227
    
    
    
    3,284Consumer staples and discretionary
    
    
    5,185
    
    
    
    952
    
    
    
    6,137
    
    
    
    8,175
    
    
    
    8,315Industrials
    
    
    2,665
    
    
    
    374
    
    
    
    3,039
    
    
    
    3,541
    
    
    
    3,722Other
    
    
    1,730
    
    
    
    429
    
    
    
    2,159
    
    
    
    2,603
    
    
    
    2,676Total corporate
    
    
    32,253
    
    
    
    6,670
    
    
    
    38,923
    
    
    
    47,492
    
    
    
    49,075Asset-backed securities
    
    
    5,936
    
    
    
    682
    
    
    
    6,618
    
    
    
    8,242
    
    
    
    8,308Total bonds
    
    $
    50,608
    
    
    $
    9,148
    
    
    $
    59,756
    
    
    $
    69,230
    
    
    $
    72,524
 
 (1)
    
    2006 includes $5,127 of bonds that were designated as
corporate loans on January 1, 2007, as described in Note 2. 29




---



##### 



6. Financial Instrument Risk Management (Contd)
  2007TotalMortgages
    
    
    Corporate
    
    
    Mortgages andNon-residential
    
    
    Residential
    
    
    Total
    
    
    Loans
    
    
    Corporate LoansCanada
    
    $
    6,382
    
    
    $
    2,723
    
    
    $
    9,105
    
    
    $
    4,818
    
    
    $
    13,923United States
    
    
    6,005
    
    
    
    274
    
    
    
    6,279
    
    
    
    258
    
    
    
    6,537United Kingdom
    
    
    84
    
    
    
    
    
    
    
    84
    
    
    
    
    
    
    
    84Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    198
    
    
    
    198Total mortgages and corporate loans
    
    $
    12,471
    
    
    $
    2,997
    
    
    $
    15,468
    
    
    $
    5,274
    
    
    $
    20,742
  2006Non-residential
    
    
    Residential
    
    
    TotalCanada
    
    $
    6,347
    
    
    $
    2,794
    
    
    $
    9,141United States
    
    
    6,404
    
    
    
    306
    
    
    
    6,710United Kingdom
    
    
    142
    
    
    
    
    
    
    
    142Total mortgages
    
    $
    12,893
    
    
    $
    3,100
    
    
    $
    15,993
 iii) CONTRACTUAL MATURITIES OF BONDS, MORTGAGES, CORPORATE LOANS AND DERIVATIVES
  2007Held-for-Trading
    
    
    Available-for-
    
    
    TotalBonds
    
    
    Sale Bonds
    
    
    BondsDue in 1 year or less
    
    $
    1,521
    
    
    $
    337
    
    
    $
    1,858Due in years 2-5
    
    
    10,320
    
    
    
    2,532
    
    
    
    12,852Due in years 6-10
    
    
    12,660
    
    
    
    3,291
    
    
    
    15,951Due after 10 years
    
    
    26,107
    
    
    
    2,988
    
    
    
    29,095Total bonds
    
    $
    50,608
    
    
    $
    9,148
    
    
    $
    59,756
  Mortgages
    
    
    Corporate Loans
    
    
    Total2008
    
    $
    1,506
    
    
    $
    474
    
    
    $
    1,9802009
    
    
    1,050
    
    
    
    367
    
    
    
    1,4172010
    
    
    914
    
    
    
    370
    
    
    
    1,2842011
    
    
    1,219
    
    
    
    725
    
    
    
    1,9442012
    
    
    826
    
    
    
    751
    
    
    
    1,577Thereafter
    
    
    9,970
    
    
    
    2,601
    
    
    
    12,571Total mortgages and corporate loans, before allowances for losses
    
    $
    15,485
    
    
    $
    5,288
    
    
    $
    20,773
 30




---



##### 



6. Financial Instrument Risk Management (Contd)
  2007
    
    
    2006Term 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
    
    $
    625
    
    
    $
    7,453
    
    
    $
    12,116
    
    
    $
    20,194
    
    
    $
    876
    
    
    $
    6,615
    
    
    $
    11,976
    
    
    $
    19,467Options purchased
    
    
    60
    
    
    
    283
    
    
    
    1,841
    
    
    
    2,184
    
    
    
    1,385
    
    
    
    898
    
    
    
    1,629
    
    
    
    3,912Foreign exchange contracts:Forward contracts
    
    
    1,849
    
    
    
    105
    
    
    
    
    
    
    
    1,954
    
    
    
    2,529
    
    
    
    98
    
    
    
    
    
    
    
    2,627Swap contracts
    
    
    222
    
    
    
    3,157
    
    
    
    5,351
    
    
    
    8,730
    
    
    
    333
    
    
    
    1,681
    
    
    
    4,668
    
    
    
    6,682Other contracts:Options purchased
    
    
    2,245
    
    
    
    3,814
    
    
    
    49
    
    
    
    6,108
    
    
    
    3,313
    
    
    
    5,550
    
    
    
    270
    
    
    
    9,133Forward contracts
    
    
    648
    
    
    
    53
    
    
    
    
    
    
    
    701
    
    
    
    556
    
    
    
    42
    
    
    
    
    
    
    
    598Swap contracts
    
    
    230
    
    
    
    95
    
    
    
    13
    
    
    
    338
    
    
    
    261
    
    
    
    147
    
    
    
    13
    
    
    
    421Credit derivatives
    
    
    
    
    
    
    
    
    
    
    90
    
    
    
    90
    
    
    
    
    
    
    
    
    
    
    
    23
    
    
    
    23Exchange-traded contracts:Interest rate contracts:Futures contracts
    
    
    1,182
    
    
    
    85
    
    
    
    
    
    
    
    1,267
    
    
    
    373
    
    
    
    37
    
    
    
    
    
    
    
    410Foreign exchange contracts:Futures contracts
    
    
    34
    
    
    
    
    
    
    
    
    
    
    
    34
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other contracts:Futures contracts
    
    
    1,042
    
    
    
    
    
    
    
    
    
    
    
    1,042
    
    
    
    867
    
    
    
    
    
    
    
    
    
    
    
    867Total notional amount
    
    $
    8,137
    
    
    $
    15,045
    
    
    $
    19,460
    
    
    $
    42,642
    
    
    $
    10,493
    
    
    $
    15,068
    
    
    $
    18,579
    
    
    $
    44,140
 iv) ASSET QUALITY
  Bonds by Credit Rating
  2007
    
    
    2006Held-for-Trading
    
    
    Available-for-
    
    
    
    
    
    
    Carrying
    
    
    FairBonds
    
    
    Sale Bonds
    
    
    Total
    
    
    Value
    
    
    ValueBonds by credit rating (1):AAA
    
    $
    9,896
    
    
    $
    2,214
    
    
    $
    12,110
    
    
    $
    13,432
    
    
    $
    13,805AA
    
    
    9,567
    
    
    
    1,501
    
    
    
    11,068
    
    
    
    12,042
    
    
    
    12,888A
    
    
    15,443
    
    
    
    2,538
    
    
    
    17,981
    
    
    
    22,175
    
    
    
    23,492BBB
    
    
    14,382
    
    
    
    2,773
    
    
    
    17,155
    
    
    
    19,849
    
    
    
    20,522BB and lower
    
    
    1,320
    
    
    
    122
    
    
    
    1,442
    
    
    
    1,732
    
    
    
    1,817Total bonds
    
    $
    50,608
    
    
    $
    9,148
    
    
    $
    59,756
    
    
    $
    69,230
    
    
    $
    72,524
 
 (1)
    
    Local currency denominated sovereign debts of certain developing countries, used in
backing the local liabilities, have been classified as investment grade. 31




---



##### 



6. Financial Instrument Risk Management (Contd)
 Derivative Financial Instruments by Counterparty Credit Rating
   2007Gross positive
    
    
    Impact of
    
    NetReplacementCost(1)
    
    Master NettingAgreements(2)
    
    
    ReplacementCost(3)Over-the-counter contracts:AAA
    
    $
    260
    
    
    $
    (10
    )
    
    $
    250AA
    
    
    1,407
    
    
    
    (216
    )
    
    
    1,191A
    
    
    272
    
    
    
    (79
    )
    
    
    193Exchange-traded
    
    
    8
    
    
    
    
    
    
    
    8Total
    
    $
    1,947
    
    
    $
    (305
    )
    
    $
    1,642
 2006Gross positive
    
    
    Impact of
    
    NetReplacementCost (1)
    
    Master NettingAgreements (2)
    
    
    ReplacementCost (3)Over-the-counter contracts:AAA
    
    $
    140
    
    
    $
    
    
    
    $
    140AA
    
    
    1,142
    
    
    
    (226
    )
    
    
    916A
    
    
    190
    
    
    
    (7
    )
    
    
    183Exchange-traded
    
    
    6
    
    
    
    (2
    )
    
    
    4Total
    
    $
    1,478
    
    
    $
    (235
    )
    
    $
    1,243
 
 (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. Mortgages and Corporate Loans Past Due or Impaired
  2007
    
    
    2006Gross Carrying Value
    
    
    Allowance for Losses
    
    
    MortgagesCorporate
    
    
    
    
    
    
    
    
    
    
    Corporate
    
    
    
    
    
    
    Gross Carrying
    
    
    AllowanceMortgages
    
    
    Loans
    
    
    Total
    
    
    Mortgages
    
    
    Loans
    
    
    Total
    
    
    Value
    
    
    For LossesNeither past due nor impaired
    
    $
    15,400
    
    
    $
    5,200
    
    
    $
    20,600
    
    
    $
    7
    
    
    $
    
    
    
    $
    7
    
    
    $
    15,883
    
    
    $
    11Past due but not impaired:Past due less than 90 days
    
    
    58
    
    
    
    33
    
    
    
    91
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    74
    
    
    
    Past due 90 to 179 days
    
    
    1
    
    
    
    3
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Impaired
    
    
    26
    
    
    
    52
    
    
    
    78
    
    
    
    10
    
    
    
    14
    
    
    
    24
    
    
    
    63
    
    
    
    16Balance, December 31
    
    $
    15,485
    
    
    $
    5,288
    
    
    $
    20,773
    
    
    $
    17
    
    
    $
    14
    
    
    $
    31
    
    
    $
    16,020
    
    
    $
    27
  32




---



##### 



6. Financial Instrument Risk Management (Contd)
  Changes in Allowances for Losses
  CorporateBonds
    
    
    Mortgages
    
    
    Loans
    
    
    Other
    
    
    TotalBalance, December 31, 2005
    
    $
    97
    
    
    $
    29
    
    
    $
    
    
    
    $
    14
    
    
    $
    140Provision for losses (recoveries)
    
    
    (9
    )
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    (10
    )Write-offs, net of recoveries
    
    
    (29
    )
    
    
    (1
    )
    
    
    
    
    
    
    1
    
    
    
    (29
    )Effect of changes in currency exchange rates
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )Balance, December 31, 2006
    
    $
    54
    
    
    $
    27
    
    
    $
    
    
    
    $
    15
    
    
    $
    96Adjustment for change in accounting policy (Note 2)
    
    
    (54
    )
    
    
    
    
    
    
    13
    
    
    
    (15
    )
    
    
    (56
    )Provision for losses
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    2Write-offs, net of recoveries
    
    
    
    
    
    
    (7
    )
    
    
    (1
    )
    
    
    
    
    
    
    (8
    )Effect of changes in currency exchange rates
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    (3
    )Balance, December 31, 2007
    
    $
    
    
    
    $
    17
    
    
    $
    14
    
    
    $
    
    
    
    $
    31
 Restructured Mortgages and Corporate Loans
  Possession of Collateral/Foreclosed Assets
  Temporarily Impaired Available-for-Sale Assets
  December 31, 2007Fair Value
    
    
    Unrealized LossesAvailable-for-sale bonds
    
    $
    4,895
    
    
    $
    273Available-for-sale stocks (1)
    
    
    238
    
    
    
    34Available-for-sale other invested assets (2)
    
    
    108
    
    
    
    12Total temporarily impaired financial assets
    
    $
    5,241
    
    
    $
    319
 
 (1)
    
    This includes available-for-sale private equities that are accounted for at cost with a carrying value of $13.(2)
    
    This pertains to available-for-sale limited partnerships that are accounted for at cost with a
carrying value of $120.  33




---



##### 



6. Financial Instrument Risk Management (Contd)
 Impaired Available-for-Sale Assets and Non-Income Producing Bonds
   2006Impaired
    
    
    AllowanceCarrying Value
    
    
    for LossesBonds
    
    $
    113
    
    
    $
    54Other
    
    
    22
    
    
    
    15Total
    
    $
    135
    
    
    $
    69
  B) LIQUIDITY RISK
     C) MARKET RISK
  i) CURRENCY RISK
 
 34




---



##### 



6. Financial Instrument Risk Management (Contd)
 ii) INTEREST RATE RISK
  iii) EQUITY RISK
    2007
    
    
    2006Held-for-Trading
    
    
    Available-for-
    
    
    Total
    
    
    TotalStocks
    
    
    Sale Stocks
    
    
    Stocks
    
    
    StocksCanada
    
    $
    2,016
    
    
    $
    222
    
    
    $
    2,238
    
    
    $
    1,762United States
    
    
    1,141
    
    
    
    566
    
    
    
    1,707
    
    
    
    1,601United Kingdom
    
    
    893
    
    
    
    
    
    
    
    893
    
    
    
    1,274Other
    
    
    388
    
    
    
    
    
    
    
    388
    
    
    
    262Total stocks
    
    $
    4,438
    
    
    $
    788
    
    
    $
    5,226
    
    
    $
    4,899
 7. Goodwill and Intangible Assets
 A) GOODWILL
   SLF Canada
    
    
    SLF U.S.
    
    
    SLF Asia
    
    
    Corporate
    
    
    TotalBalance, January 1, 2006
    
    $
    3,732
    
    
    $
    1,454
    
    
    $
    519
    
    
    $
    568
    
    
    $
    6,273Adjustment to purchase equation of CMG Asia (Note 3)
    
    
    
    
    
    
    
    
    
    
    19
    
    
    
    
    
    
    
    19Acquisitions (Note 3)
    
    
    36
    
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    46Disposals
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7
    )
    
    
    (7
    )Effect of changes in currency exchange rates
    
    
    
    
    
    
    (1
    )
    
    
    (3
    )
    
    
    
    
    
    
    (4
    )Balance, December 31, 2006
    
    $
    3,768
    
    
    $
    1,453
    
    
    $
    535
    
    
    $
    571
    
    
    $
    6,327Acquisitions (Note 3)
    
    
    75
    
    
    
    360
    
    
    
    
    
    
    
    52
    
    
    
    487Disposals
    
    
    (2
    )
    
    
    (32
    )
    
    
    
    
    
    
    (7
    )
    
    
    (41
    )Effect of changes in currency exchange rates
    
    
    
    
    
    
    (237
    )
    
    
    (75
    )
    
    
    (39
    )
    
    
    (351
    )Balance, December 31, 2007
    
    $
    3,841
    
    
    $
    1,544
    
    
    $
    460
    
    
    $
    577
    
    
    $
    6,422 35




---



##### 



7. Goodwill and Intangible Assets (Contd)
 B) INTANGIBLE ASSETS
  2007
    
    
    2006Gross Carrying
    
    
    Accumulated
    
    
    Net
    
    
    Gross Carrying
    
    
    Accumulated
    
    
    NetAmount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    AmountFinite-life intangible assets:Sales potential of field force (1)
    
    $
    486
    
    
    $
    60
    
    
    $
    426
    
    
    $
    423
    
    
    $
    48
    
    
    $
    375Asset administration contracts
    
    
    224
    
    
    
    49
    
    
    
    175
    
    
    
    224
    
    
    
    38
    
    
    
    186Distribution channels
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32
    
    
    
    16
    
    
    
    16Brand name (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54
    
    
    
    2
    
    
    
    52Other
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    2
    
    
    
    712
    
    
    
    111
    
    
    
    601
    
    
    
    735
    
    
    
    106
    
    
    
    629Indefinite-life intangible assets:Fund management contracts
    
    
    930
    
    
    
    
    
    
    
    930
    
    
    
    895
    
    
    
    
    
    
    
    895State licenses
    
    
    10
    
    
    
    
    
    
    
    10
    
    
    
    12
    
    
    
    
    
    
    
    12940
    
    
    
    
    
    
    
    940
    
    
    
    907
    
    
    
    
    
    
    
    907Total intangible assets
    
    $
    1,652
    
    
    $
    111
    
    
    $
    1,541
    
    
    $
    1,642
    
    
    $
    106
    
    
    $
    1,536
 (1)
    
    Increase in 2007 is due to the acquisition of the Genworth EBG Business as described in Note 3.(2)
    
    On March 26, 2007, the Company announced the retirement of the Clarica brand as
part of its integrated brand strategy in Canada. The write-down of the brand name of $52 was
recorded to operating expenses in the first quarter ($43, net of the related taxes of $9). 8. Other Assets
  2007
    
    
    2006Accounts receivable
    
    $
    1,629
    
    
    $
    1,401Investment income due and accrued
    
    
    1,093
    
    
    
    1,190Future income taxes (Note 18)
    
    
    382
    
    
    
    747Deferred acquisition costs
    
    
    139
    
    
    
    185Prepaid expenses
    
    
    231
    
    
    
    207Premiums receivable
    
    
    395
    
    
    
    323Accrued benefit asset (Note 21)
    
    
    422
    
    
    
    454Capital assets
    
    
    171
    
    
    
    179Other
    
    
    16
    
    
    
    188Total other assets
    
    $
    4,478
    
    
    $
    4,874
   36




---



##### 



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
   Provision for Policyholder Dividends
  37




---



##### 



9. Actuarial Liabilities and Other Policy Liabilities (Contd)
 B) COMPOSITION OF ACTUARIAL LIABILITIES AND OTHER POLICY LIABILITIES
  2007UnitedCanada
    
    
    States
    
    
    Asia
    
    
    Corporate(1)
    
    
    TotalIndividual participating life
    
    $
    14,388
    
    
    $
    4,945
    
    
    $
    2,671
    
    
    $
    3,282
    
    
    $
    25,286Individual non-participating life
    
    
    2,670
    
    
    
    7,175
    
    
    
    217
    
    
    
    528
    
    
    
    10,590Group life
    
    
    1,294
    
    
    
    224
    
    
    
    9
    
    
    
    5
    
    
    
    1,532Individual annuities
    
    
    9,272
    
    
    
    10,404
    
    
    
    
    
    
    
    4,163
    
    
    
    23,839Group annuities
    
    
    5,963
    
    
    
    4,024
    
    
    
    323
    
    
    
    
    
    
    
    10,310Health insurance
    
    
    5,392
    
    
    
    901
    
    
    
    
    
    
    
    86
    
    
    
    6,379Total actuarial liabilities
    
    
    38,979
    
    
    
    27,673
    
    
    
    3,220
    
    
    
    8,064
    
    
    
    77,936Add: Other policy liabilities(2)
    
    
    591
    
    
    
    621
    
    
    
    63
    
    
    
    619
    
    
    
    1,894Actuarial liabilities and other policy liabilities
    
    $
    39,570
    
    
    $
    28,294
    
    
    $
    3,283
    
    
    $
    8,683
    
    
    $
    79,830
 2006UnitedCanada
    
    
    States
    
    
    Asia
    
    
    Corporate(1)
    
    
    TotalIndividual participating life
    
    $
    12,213
    
    
    $
    5,362
    
    
    $
    2,508
    
    
    $
    3,296
    
    
    $
    23,379Individual non-participating life
    
    
    2,013
    
    
    
    7,723
    
    
    
    333
    
    
    
    487
    
    
    
    10,556Group life
    
    
    1,216
    
    
    
    127
    
    
    
    8
    
    
    
    3
    
    
    
    1,354Individual annuities
    
    
    8,977
    
    
    
    14,486
    
    
    
    
    
    
    
    3,883
    
    
    
    27,346Group annuities
    
    
    5,538
    
    
    
    5,277
    
    
    
    353
    
    
    
    
    
    
    
    11,168Health insurance
    
    
    4,850
    
    
    
    527
    
    
    
    (1
    )
    
    
    107
    
    
    
    5,483Total actuarial liabilities
    
    
    34,807
    
    
    
    33,502
    
    
    
    3,201
    
    
    
    7,776
    
    
    
    79,286Add: Other policy liabilities(2)
    
    
    464
    
    
    
    541
    
    
    
    62
    
    
    
    683
    
    
    
    1,750Actuarial liabilities and other policy liabilities
    
    $
    35,271
    
    
    $
    34,043
    
    
    $
    3,263
    
    
    $
    8,459
    
    
    $
    81,036
 (1)
    
    Primarily business from the U.K., reinsurance and run-off reinsurance operations.(2)
    
    Consists of policy benefits payable, provisions for unreported claims, provisions
for policyholder dividends, and provisions for experience rating refunds. C) TOTAL ASSETS SUPPORTING LIABILITIES AND EQUITY
  2007MortgagesBonds
    
    
    Stocks
    
    
    andHeld-for
    
    
    Available
    
    
    Held-for
    
    
    Available
    
    
    Corporate
    
    
    Real-Trading
    
    
    -for-sale
    
    
    -Trading
    
    
    -for-sale
    
    
    Loans
    
    
    Estate
    
    
    Other
    
    
    TotalIndividual participating life
    
    $
    13,827
    
    
    $
    
    
    
    $
    3,667
    
    
    $
    13
    
    
    $
    4,493
    
    
    $
    2,947
    
    
    $
    3,700
    
    
    $
    28,647Individual non-participating life
    
    
    6,468
    
    
    
    425
    
    
    
    691
    
    
    
    3
    
    
    
    2,738
    
    
    
    200
    
    
    
    4,223
    
    
    
    14,748Group life
    
    
    1,147
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    1,106
    
    
    
    19
    
    
    
    (32
    )
    
    
    2,243Individual annuities
    
    
    18,392
    
    
    
    57
    
    
    
    18
    
    
    
    
    
    
    
    5,724
    
    
    
    
    
    
    
    1,081
    
    
    
    25,272Group annuities
    
    
    6,722
    
    
    
    
    
    
    
    58
    
    
    
    5
    
    
    
    2,831
    
    
    
    122
    
    
    
    866
    
    
    
    10,604Health insurance
    
    
    4,048
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    2,908
    
    
    
    66
    
    
    
    398
    
    
    
    7,421Equity and other
    
    
    4
    
    
    
    8,666
    
    
    
    
    
    
    
    767
    
    
    
    942
    
    
    
    949
    
    
    
    14,028
    
    
    
    25,356Total assets
    
    $
    50,608
    
    
    $
    9,148
    
    
    $
    4,438
    
    
    $
    788
    
    
    $
    20,742
    
    
    $
    4,303
    
    
    $
    24,264
    
    
    $
    114,291
 38




---



##### 



9. Actuarial Liabilities and Other Policy Liabilities (Contd)
 2006Bonds
    
    
    Mortgages
    
    
    Stocks
    
    
    Real Estate
    
    
    Other
    
    
    TotalIndividual participating life
    
    $
    14,591
    
    
    $
    4,034
    
    
    $
    3,542
    
    
    $
    2,632
    
    
    $
    4,382
    
    
    $
    29,181Individual non-participating life
    
    
    9,542
    
    
    
    2,233
    
    
    
    500
    
    
    
    117
    
    
    
    2,505
    
    
    
    14,897Group life
    
    
    1,394
    
    
    
    675
    
    
    
    5
    
    
    
    22
    
    
    
    99
    
    
    
    2,195Individual annuities
    
    
    23,574
    
    
    
    4,897
    
    
    
    60
    
    
    
    30
    
    
    
    2,124
    
    
    
    30,685Group annuities
    
    
    9,607
    
    
    
    2,151
    
    
    
    45
    
    
    
    147
    
    
    
    892
    
    
    
    12,842Health insurance
    
    
    4,704
    
    
    
    1,723
    
    
    
    14
    
    
    
    48
    
    
    
    579
    
    
    
    7,068Equity and other
    
    
    5,818
    
    
    
    280
    
    
    
    733
    
    
    
    829
    
    
    
    13,303
    
    
    
    20,963Total assets
    
    $
    69,230
    
    
    $
    15,993
    
    
    $
    4,899
    
    
    $
    3,825
    
    
    $
    23,884
    
    
    $
    117,831
 D) CHANGES IN ACTUARIAL LIABILITIES
  2007
    
    
    2006Actuarial liabilities, January 1, before change in accounting policy
    
    $
    79,286
    
    
    $
    75,777Adjustment for change in accounting policy (Note 2)
    
    
    7,129
    
    
    
    Actuarial liabilities, January 1, after change in accounting policy
    
    
    86,415
    
    
    
    75,777Change in liabilities on in-force business
    
    
    (5,201
    )
    
    
    (2,942
    )Liabilities arising from new policies
    
    
    2,803
    
    
    
    5,415Significant changes in assumptions or methodology (1):Gross increases
    
    
    380
    
    
    
    149Gross decreases
    
    
    (497
    )
    
    
    (97
    )Increase (decrease) in actuarial liabilities (2)
    
    
    (2,515
    )
    
    
    2,525Actuarial liabilities before the following:
    
    
    83,900
    
    
    
    78,302Acquisition (Note 3)
    
    
    536
    
    
    
    Effect of changes in currency exchange rates
    
    
    (6,500
    )
    
    
    984Actuarial liabilities, December 31
    
    
    77,936
    
    
    
    79,286Add: Other policy liabilities
    
    
    1,894
    
    
    
    1,750Actuarial liabilities and other policy liabilities, December 31
    
    $
    79,830
    
    
    $
    81,036
 (1)
    
    The increase in actuarial liabilities in 2007 included $123 from changes to the
economic scenarios used in the calculation of actuarial liabilities, $107 for strengthening of
longevity assumptions, and $150 for reductions in the long-term lapse rates for universal life
policies written in Canada and the United States. The decrease
in 2007 included $215 for reductions in mortality assumptions on life insurance
liabilities and $282 for the recapture of reinsurance ceded to a Barbados subsidiary. The
increase in actuarial liabilities in 2006 resulted from strengthening of longevity assumption in
Canada and the U.K. The decreases in 2006 arose from changes in assumptions as a result of
changes in pension legislation in the U.K.(2)
    
    The change in fair value of held-for-trading assets caused by the change in
interest rates is offset by the change in actuarial liabilities. E) FAIR VALUE OF ACTUARIAL LIABILITIES, FUTURE INCOME TAXES AND DEFERRED NET REALIZED GAINS
  F) ASSUMPTIONS AND MEASUREMENT UNCERTAINTY
 Mortality
  39




---



##### 



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




---



##### 



9. Actuarial Liabilities and Other Policy Liabilities (Contd)
  Policy termination rates
   Operating expenses and inflation
  G) REINSURANCE AGREEMENTS
  2007
    
    
    2006
    
    
    2005Premiums:Direct premiums
    
    $
    13,550
    
    
    $
    14,947
    
    
    $
    13,305Reinsurance assumed
    
    
    564
    
    
    
    574
    
    
    
    530Reinsurance ceded
    
    
    (990
    )
    
    
    (912
    )
    
    
    (895
    )$
    13,124
    
    
    $
    14,609
    
    
    $
    12,940Payments to policyholders, beneficiaries and depositors:Direct payments
    
    $
    14,292
    
    
    $
    12,987
    
    
    $
    12,961Reinsurance assumed
    
    
    526
    
    
    
    419
    
    
    
    453Reinsurance ceded
    
    
    (574
    )
    
    
    (511
    )
    
    
    (612
    )$
    14,244
    
    
    $
    12,895
    
    
    $
    12,802
  41




---



##### 



9. Actuarial Liabilities and Other Policy Liabilities (Contd)
 H) ROLE OF THE APPOINTED ACTUARY
    10. Senior Debentures
  Currency of Borrowing
    
    
    Interest Rate
    
    
    Maturity
    
    
    2007
    
    
    2006Partnership capital securities
    
    U.S. dollars
    
    
    8.53
    %
    
    
    
    
    
    $
    
    
    
    $
    698Sun Life Assurance debenturesSeries A debenture
    
    Cdn. dollars
    
    
    6.87
    %
    
    
    2031
    
    
    
    960
    
    
    
    990Series B debenture
    
    Cdn. dollars
    
    
    7.09
    %
    
    
    2052
    
    
    
    200
    
    
    
    200Funding debenture
    
    Cdn. dollars
    
    
    7.09
    %
    
    
    2052
    
    
    
    
    
    
    
    3SLF Inc. senior unsecured debenturesSeries A
    
    Cdn. dollars
    
    
    4.80
    %
    
    
    2035
    
    
    
    600
    
    
    
    600Series B
    
    Cdn. dollars
    
    
    4.95
    %
    
    
    2036
    
    
    
    954
    
    
    
    700Series C
    
    Cdn. dollars
    
    
    5.00
    %
    
    
    2031
    
    
    
    300
    
    
    
    300$
    3,014
    
    
    $
    3,491Fair value
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    3,068
    
    
    $
    3,704
  Partnership capital securities
  Sun Life Assurance debentures
  SLF Inc. senior unsecured debentures
   42




---



##### 



10. Senior Debentures (Contd)
    11. Other Liabilities
 A) COMPOSITION OF OTHER LIABILITIES
  2007
    
    
    2006Accounts payable
    
    $
    1,762
    
    
    $
    1,811Bank overdrafts
    
    
    303
    
    
    
    281Bond repurchase agreements
    
    
    1,982
    
    
    
    2,151Accrued expenses and taxes
    
    
    1,012
    
    
    
    1,211Borrowed funds
    
    
    335
    
    
    
    214Senior unsecured financing
    
    
    996
    
    
    
    Future income taxes (Note 18)
    
    
    582
    
    
    
    226Accrued benefit liability (Note 21)
    
    
    479
    
    
    
    505Other
    
    
    224
    
    
    
    435Total other liabilities
    
    $
    7,675
    
    
    $
    6,834
 B) BOND REPURCHASE AGREEMENTS
  C) BORROWED FUNDS
  Currency of Borrowing
    
    Maturity
    
    2007
    
    
    2006Encumbrances on real estate
    
    Cdn. dollars
    
    2008-2016
    
    $
    188
    
    
    $
    112U.S. dollars
    
    2008-2014
    
    
    147
    
    
    
    102Total borrowed funds
    
    
    
    
    
    $
    335
    
    
    $
    214
  Year
    
    Amount2008
    
    $
    382009
    
    
    172010
    
    
    632011
    
    
    672012
    
    
    72Thereafter
    
    
    78Total
    
    $
    335
  43




---



##### 



11. Other Liabilities (Contd)
 D) SENIOR UNSECURED FINANCING
     12. Subordinated Debt
  InterestCurrency
    
    
    Rate
    
    
    Maturity
    
    
    2007
    
    
    2006Subordinated debentures(1)
    
    Cdn. dollars
    
    
    6.65
    %
    
    
    2015
    
    
    $
    300
    
    
    $
    300Subordinated debentures (2)
    
    Cdn. dollars
    
    
    6.15
    %
    
    
    2022
    
    
    
    799
    
    
    
    799Subordinated
debentures (3)
    
    Cdn. dollars
    
    
    6.30
    %
    
    
    2028
    
    
    
    150
    
    
    
    150Subordinated debentures
    
    Cdn. dollars
    
    
    5.40
    %
    
    
    2042
    
    
    
    398
    
    
    
    Subordinated notes(4)
    
    U.S. dollars
    
    
    6.63
    %
    
    
    2007
    
    
    
    
    
    
    
    32Subordinated notes
    
    U.S. dollars
    
    
    7.25
    %
    
    
    2015
    
    
    
    149
    
    
    
    175Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,796
    
    
    $
    1,456Fair value
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,849
    
    
    $
    1,591
 (1)
    
    After October 12, 2010, interest is payable at 1% over the 90-day Bankers
Acceptance Rate. Redeemable in whole or in part at any time prior to October 12, 2010. On or after
October 12, 2010, redeemable in whole on interest payment date.(2)
    
    After June 30, 2012, interest is payable at 1.54% over the 90-day Bankers
Acceptance Rate. Redeemable in whole or in part at any time.(3)
    
    Redeemable in whole or in part at any time.(4)
    
    Matured on December 15, 2007.
   SUBSEQUENT
EVENT
  44




---



##### 



13. Non-controlling Interests in Subsidiaries
  14. 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.
  2007
    
    
    2006
    
    
    2005Number
    
    
    
    
    
    
    Number
    
    
    
    
    
    
    Numberof Shares
    
    
    Amount
    
    
    of Shares
    
    
    Amount
    
    
    of Shares
    
    
    AmountPreferred shares(in millions of shares)Balance, January 1
    
    
    51
    
    
    $
    1,250
    
    
    
    29
    
    
    $
    712
    
    
    
    
    
    
    $
    Preferred shares issued, Class A, Series 1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    400Preferred shares issued, Class A, Series 2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    325Preferred shares issued, Class A, Series 3
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    250
    
    
    
    
    
    
    
    Preferred shares issued, Class A, Series 4
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    300
    
    
    
    
    
    
    
    Preferred shares issued, Class A, Series 5
    
    
    10
    
    
    
    250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance costs, net of taxes
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    (12
    )
    
    
    
    
    
    
    (13
    )Balance, December 31
    
    
    61
    
    
    $
    1,495
    
    
    
    51
    
    
    $
    1,250
    
    
    
    29
    
    
    $
    712Common shares(in millions of shares)Balance, January 1
    
    
    572
    
    
    $
    7,082
    
    
    
    582
    
    
    $
    7,173
    
    
    
    592
    
    
    $
    7,238Stock options exercised (Note 17)
    
    
    2
    
    
    
    66
    
    
    
    2
    
    
    
    73
    
    
    
    3
    
    
    
    99Common shares purchased for cancellation
    
    
    (10
    )
    
    
    (115
    )
    
    
    (12
    )
    
    
    (164
    )
    
    
    (13
    )
    
    
    (164
    )Balance, December 31
    
    
    564
    
    
    $
    7,033
    
    
    
    572
    
    
    $
    7,082
    
    
    
    582
    
    
    $
    7,173
   45




---



##### 



14. Share Capital and Shares Purchased for Cancellation (Contd)
  B) SHARES PURCHASED FOR CANCELLATION
  Period Covered
    
    Maximum Shares Authorized for PurchaseJanuary 12, 2004 to January 11, 2005
    
    30 millionJanuary 12, 2005 to January 11, 2006
    
    30 millionJanuary 12, 2006 to January 11, 2007
    
    29 millionJanuary 12, 2007 to January 11, 2008
    
    29 million
   2007
    
    
    2006
    
    
    2005Number of shares repurchased (in millions)
    
    
    10
    
    
    
    12
    
    
    
    13Amount (1)
    
    $
    502
    
    
    $
    575
    
    
    $
    544Average price per share
    
    $
    51.18
    
    
    $
    46.31
    
    
    $
    41.10
 (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.
 SUBSEQUENT EVENT
  15. Operating Expenses
  2007
    
    
    2006
    
    
    2005Compensation costs
    
    $
    1,898
    
    
    $
    1,851
    
    
    $
    1,769Premises and equipment costs
    
    
    265
    
    
    
    259
    
    
    
    287Restructuring and other related charges
    
    
    
    
    
    
    1
    
    
    
    10Capital asset depreciation and amortization (Note 8)
    
    
    62
    
    
    
    67
    
    
    
    63Other (1)
    
    
    1,035
    
    
    
    850
    
    
    
    792Total operating expenses
    
    $
    3,260
    
    
    $
    3,028
    
    
    $
    2,921
 (1)
    
    Includes the write-down of the brand name intangible asset of $52 as described in Note 7.
 46




---



##### 



16. Earnings Per Share
  2007
    
    
    2006
    
    
    2005Common shareholders net income
    
    $
    2,219
    
    
    $
    2,089
    
    
    $
    1,843Less: Effect of stock options of subsidiaries (1)
    
    
    20
    
    
    
    11
    
    
    
    5Common shareholders net income on a diluted basis
    
    $
    2,199
    
    
    $
    2,078
    
    
    $
    1,838Weighted average number of shares outstanding for basic earnings per share (in millions)
    
    
    569
    
    
    
    577
    
    
    
    587Add: Adjustments relating to the dilutive impact of stock options (2)
    
    
    3
    
    
    
    3
    
    
    
    3Weighted average number of shares outstanding on a diluted basis (in millions)
    
    
    572
    
    
    
    580
    
    
    
    590
 (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.
 17. Stock-Based Compensation
 A) STOCK OPTION PLANS
   2007
    
    
    2006
    
    
    2005Number 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
    
    
    9,138
    
    
    $
    32.58
    
    
    
    10,049
    
    
    $
    28.95
    
    
    
    12,457
    
    
    $
    26.90Granted
    
    
    1,261
    
    
    
    52.55
    
    
    
    1,460
    
    
    
    49.29
    
    
    
    1,339
    
    
    
    40.80Exercised
    
    
    (2,075
    )
    
    
    27.45
    
    
    
    (2,228
    )
    
    
    26.57
    
    
    
    (2,999
    )
    
    
    26.11Forfeited
    
    
    (156
    )
    
    
    46.04
    
    
    
    (143
    )
    
    
    37.47
    
    
    
    (748
    )
    
    
    25.61Balance, December 31
    
    
    8,168
    
    
    $
    35.98
    
    
    
    9,138
    
    
    $
    32.58
    
    
    
    10,049
    
    
    $
    28.95Exercisable, December 31
    
    
    5,333
    
    
    $
    29.19
    
    
    
    5,909
    
    
    $
    28.39
    
    
    
    5,750
    
    
    $
    27.59
   47




---



##### 



17. Stock-Based Compensation (Contd)
 2007
    
    
    2006
    
    
    2005Compensation expense recorded
    
    $
    10
    
    
    $
    13
    
    
    $
    9Income tax benefit on expense recorded
    
    $
    1
    
    
    $
    1
    
    
    $
    1Income tax benefit realized on exercised options
    
    $
    4
    
    
    $
    6
    
    
    $
    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$17.00 to $24.00
    
    
    1,626
    
    
    
    4.23
    
    
    $
    19.25
    
    
    
    1,626
    
    
    
    4.23
    
    
    $
    19.25$25.00 to $30.00
    
    
    1,640
    
    
    
    4.26
    
    
    
    28.31
    
    
    
    1,622
    
    
    
    4.22
    
    
    
    28.32$31.00 to $35.00
    
    
    1,141
    
    
    
    4.12
    
    
    
    32.85
    
    
    
    1,138
    
    
    
    4.11
    
    
    
    32.84$36.00 to $45.00
    
    
    1,228
    
    
    
    7.00
    
    
    
    40.47
    
    
    
    622
    
    
    
    6.83
    
    
    
    40.23$46.00 to $53.00
    
    
    2,533
    
    
    
    8.64
    
    
    
    50.91
    
    
    
    325
    
    
    
    8.05
    
    
    
    48.798,168
    
    
    
    6.00
    
    
    $
    35.98
    
    
    
    5,333
    
    
    
    4.75
    
    
    $
    29.19
  Weighted average assumptions
    
    2007
    
    
    2006
    
    
    2005Risk-free interest rate
    
    
    4.1
    %
    
    
    4.1
    %
    
    
    4.3
    %Expected volatility
    
    
    16.0
    %
    
    
    16.0
    %
    
    
    20.0
    %Expected dividend yield
    
    
    2.4
    %
    
    
    2.2
    %
    
    
    2.4
    %Expected life of the option (in years)
    
    
    5.6
    
    
    
    5.6
    
    
    
    5.6
  B) EMPLOYEE SHARE OWNERSHIP PLAN
  C) OTHER STOCK-BASED COMPENSATION PLANS
  Details of these plans are as follows:
 Senior Executives Deferred Share Unit (DSU) Plan:
 48




---



##### 



17. Stock-Based Compensation (Contd)
  Restricted Share Unit (RSU) Plan:
 Performance Share Unit (PSU) Plan:
 Additional information for other stock-based compensation plans
 Number of units (in thousands)
    
    DSUs
    
    
    RSUs
    
    
    PSUs
    
    
    TotalUnits outstanding December 31, 2005
    
    
    587
    
    
    
    2,080
    
    
    
    461
    
    
    
    3,128Units outstanding December 31, 2006
    
    
    588
    
    
    
    2,138
    
    
    
    611
    
    
    
    3,337Units outstanding December 31, 2007
    
    
    554
    
    
    
    1,809
    
    
    
    515
    
    
    
    2,878Liability accrued as at December 31, 2007
    
    $
    30
    
    
    $
    62
    
    
    $
    18
    
    
    $
    110
  2007
    
    
    2006
    
    
    2005Compensation expense recorded
    
    $
    49
    
    
    $
    50
    
    
    $
    46Income tax benefit on expense recorded
    
    $
    17
    
    
    $
    17
    
    
    $
    16
  D) STOCK-BASED COMPENSATION PLANS OF A SUBSIDIARY
  2007
    
    
    2006
    
    
    2005Awards outstanding (in thousands)
    
    
    151
    
    
    
    172
    
    
    
    192Expense recorded
    
    $
    37
    
    
    $
    17
    
    
    $
    13Income tax benefit recorded
    
    $
    14
    
    
    $
    6
    
    
    $
    5
 49




---



##### 



18. Income Taxes
  2007
    
    
    2006
    
    
    2005Canadian income tax expense (benefit):Current
    
    $
    (89
    )
    
    $
    418
    
    
    $
    127Future
    
    
    135
    
    
    
    (271
    )
    
    
    151Total
    
    
    46
    
    
    
    147
    
    
    
    278Foreign income tax expense (benefit):Current
    
    
    158
    
    
    
    306
    
    
    
    327Future
    
    
    318
    
    
    
    (64
    )
    
    
    (74
    )Total
    
    
    476
    
    
    
    242
    
    
    
    253Total income taxes expense
    
    $
    522
    
    
    $
    389
    
    
    $
    531
   2007
    
    
    
    
    
    
    2006
    
    
    
    
    
    
    2005%
    
    
    
    
    
    %
    
    
    
    
    
    %Total net income
    
    $
    2,290
    
    
    
    
    
    
    $
    2,144
    
    
    
    
    
    
    $
    1,876Add: Income taxes expense
    
    
    522
    
    
    
    
    
    
    
    389
    
    
    
    
    
    
    
    531Non-controlling interests in net income of subsidiaries
    
    
    35
    
    
    
    
    
    
    
    27
    
    
    
    
    
    
    
    23Total net income before income taxes
and non-controlling interests in net income of subsidiaries
    
    $
    2,847
    
    
    
    
    
    
    $
    2,560
    
    
    
    
    
    
    $
    2,430Taxes at the combined Canadian federal
and provincial statutory income tax rate
    
    $
    996
    
    
    
    35.0
    
    
    $
    896
    
    
    
    35.0
    
    
    $
    850
    
    
    
    35.0Increase (decrease) in rate
resulting from:Higher (lower) effective rates on income
subject to taxation in foreign jurisdictions
    
    
    (250
    )
    
    
    (8.8
    )
    
    
    (239
    )
    
    
    (9.3
    )
    
    
    (148
    )
    
    
    (6.1
    )Tax (benefit) cost of unrecognized losses
    
    
    19
    
    
    
    0.6
    
    
    
    (41
    )
    
    
    (1.6
    )
    
    
    (35
    )
    
    
    (1.5
    )Tax exempt investment income
    
    
    (155
    )
    
    
    (5.4
    )
    
    
    (179
    )
    
    
    (7.0
    )
    
    
    (116
    )
    
    
    (4.8
    )Changes to statutory income tax rates
    
    
    (86
    )
    
    
    (3.0
    )
    
    
    (41
    )
    
    
    (1.6
    )
    
    
    
    
    
    
    Other
    
    
    (2
    )
    
    
    (0.1
    )
    
    
    (7
    )
    
    
    (0.3
    )
    
    
    (20
    )
    
    
    (0.7
    )Companys effective worldwide income taxes
    
    $
    522
    
    
    
    18.3
    
    
    $
    389
    
    
    
    15.2
    
    
    $
    531
    
    
    
    21.9
   50




---



##### 



18. Income Taxes (Contd)
  2007
    
    
    2006Assets
    
    
    Liabilities
    
    
    Assets
    
    
    LiabilitiesInvestments
    
    $
    (27
    )
    
    $
    1,257
    
    
    $
    61
    
    
    $
    272Actuarial liabilities
    
    
    261
    
    
    
    (464
    )
    
    
    123
    
    
    
    (7
    )Deferred acquisition costs
    
    
    144
    
    
    
    (199
    )
    
    
    325
    
    
    
    Losses available for carry forward
    
    
    6
    
    
    
    (111
    )
    
    
    216
    
    
    
    (15
    )Other
    
    
    3
    
    
    
    82
    
    
    
    99
    
    
    
    (24
    )387
    
    
    
    565
    
    
    
    824
    
    
    
    226Valuation allowance
    
    
    (5
    )
    
    
    17
    
    
    
    (77
    )
    
    
    Total
    
    $
    382
    
    
    $
    582
    
    
    $
    747
    
    
    $
    226
  2007
    
    
    2006
    
    
    2005Investments
    
    $
    (524
    )
    
    $
    14
    
    
    $
    (107
    )Actuarial liabilities
    
    
    883
    
    
    
    (101
    )
    
    
    68Deferred acquisition costs
    
    
    (67
    )
    
    
    (45
    )
    
    
    2Losses (incurred) utilized
    
    
    (3
    )
    
    
    (75
    )
    
    
    10Other
    
    
    164
    
    
    
    (128
    )
    
    
    104Future income tax expense (benefit)
    
    $
    453
    
    
    $
    (335
    )
    
    $
    77
 19. Income Taxes Included in OCI
  2007Unrealized foreign currency gains and losses on net investment hedges
    
    $
    13Unrealized gains and losses on available-for-sale assets
    
    
    21Reclassifications to net income for available-for-sale assets
    
    
    29Unrealized gains and losses on cash flow hedging instruments
    
    
    28Reclassifications to net income for cash flow hedges
    
    
    4Total income taxes benefit (expense) included in OCI
    
    $
    95
 20. Commitments, Guarantees and Contingencies
 A) LEASE COMMITMENTS
  2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    ThereafterFuture rental payments
    
    $
    88
    
    
    $
    79
    
    
    $
    68
    
    
    $
    52
    
    
    $
    46
    
    
    $
    75
 51




---



##### 



20. Commitments, Guarantees and Contingencies (Contd)
 B) CONTRACTUAL COMMITMENTS
  30 Days
    
    
    31 to 366 Days
    
    
    2009 or Later
    
    
    TotalContractual commitments
    
    $
    285
    
    
    $
    800
    
    
    $
    724
    
    
    $
    1,809
  C) LETTERS OF CREDIT
  D) INDEMNITIES
    E)
GUARANTEES OF SUN LIFE ASSURANCE PREFERRED SHARES AND SUBORDINATED DEBENTURES
  52




---



##### 



20. Commitments, Guarantees and Contingencies (Contd)
  OtherSun Life
    
    
    Subsidiaries ofSLF Inc.
    
    
    Assurance
    
    
    SLF Inc.
    
    
    Consolidation
    
    
    SLF Inc.(Unconsolidated)
    
    
    (Consolidated)
    
    
    (Combined)
    
    
    Adjustments
    
    
    (Consolidated)2007Revenue
    
    $
    217
    
    
    $
    15,154
    
    
    $
    6,445
    
    
    $
    (628
    )
    
    $
    21,188Shareholders net income
    
    $
    2,288
    
    
    $
    1,389
    
    
    $
    858
    
    
    $
    (2,247
    )
    
    $
    2,2882006Revenue
    
    $
    112
    
    
    $
    16,424
    
    
    $
    8,347
    
    
    $
    (596
    )
    
    $
    24,287Shareholders net income
    
    $
    2,137
    
    
    $
    1,411
    
    
    $
    728
    
    
    $
    (2,139
    )
    
    $
    2,1372005Revenue
    
    $
    17
    
    
    $
    15,071
    
    
    $
    7,203
    
    
    $
    (373
    )
    
    $
    21,918Shareholders net income
    
    $
    1,867
    
    
    $
    1,319
    
    
    $
    567
    
    
    $
    (1,886
    )
    
    $
    1,867
 OtherSun Life
    
    
    Subsidiaries ofSLF Inc.
    
    
    Assurance
    
    
    SLF Inc.
    
    
    Consolidation
    
    
    SLF Inc.(Unconsolidated)
    
    
    (Consolidated)
    
    
    (Combined)
    
    
    Adjustments
    
    
    (Consolidated)2007Invested assets
    
    $
    20,352
    
    
    $
    77,928
    
    
    $
    23,586
    
    
    $
    (18,846
    )
    
    $
    103,020Total other assets
    
    $
    5,798
    
    
    $
    9,505
    
    
    $
    10,925
    
    
    $
    (14,957
    )
    
    $
    11,271Actuarial and other policy liabilities
    
    $
    
    
    
    $
    64,502
    
    
    $
    15,175
    
    
    $
    153
    
    
    $
    79,830Total other liabilities
    
    $
    9,028
    
    
    $
    13,049
    
    
    $
    13,359
    
    
    $
    (18,192
    )
    
    $
    17,2442006Invested assets
    
    $
    20,303
    
    
    $
    76,211
    
    
    $
    28,130
    
    
    $
    (18,445
    )
    
    $
    106,199Total other assets
    
    $
    3,257
    
    
    $
    10,865
    
    
    $
    9,439
    
    
    $
    (11,929
    )
    
    $
    11,632Actuarial and other policy liabilities
    
    $
    
    
    
    $
    60,182
    
    
    $
    19,877
    
    
    $
    977
    
    
    $
    81,036Total other liabilities
    
    $
    6,468
    
    
    $
    17,138
    
    
    $
    11,701
    
    
    $
    (15,696
    )
    
    $
    19,611
 F) LEGAL AND REGULATORY PROCEEDINGS
   G) PROVISIONS IN THE UNITED KINGDOM
  53




---



##### 



21. Pension Plans and Other Post-Retirement Benefits
  Pension
    
    
    Post-Retirement2007
    
    
    2006
    
    
    2007
    
    
    2006Change in projected benefit obligation:Projected benefit obligation, January 1
    
    $
    2,643
    
    
    $
    2,490
    
    
    $
    328
    
    
    $
    338Change in January 1 balance due to acquisition
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    Service cost
    
    
    53
    
    
    
    56
    
    
    
    7
    
    
    
    9Interest cost
    
    
    128
    
    
    
    124
    
    
    
    15
    
    
    
    17Actuarial losses (gains)
    
    
    (159
    )
    
    
    (25
    )
    
    
    (23
    )
    
    
    (27
    )Benefits paid
    
    
    (104
    )
    
    
    (100
    )
    
    
    (10
    )
    
    
    (9
    )Curtailments, settlements and plan amendments
    
    
    4
    
    
    
    7
    
    
    
    (64
    )
    
    
    Effect of changes in currency exchange rates
    
    
    (139
    )
    
    
    91
    
    
    
    (9
    )
    
    
    Projected benefit obligation, December 31(1), (2)
    
    $
    2,426
    
    
    $
    2,643
    
    
    $
    249
    
    
    $
    328Accumulated benefit obligation, December 31(3)
    
    $
    2,213
    
    
    $
    2,387Change in plan assets:Fair value of plan assets, January 1
    
    $
    2,502
    
    
    $
    2,264
    
    
    $
    
    
    
    $
    Net actual return on plan assets
    
    
    122
    
    
    
    242
    
    
    
    
    
    
    
    Employer contributions
    
    
    16
    
    
    
    17
    
    
    
    11
    
    
    
    11Benefits paid
    
    
    (104
    )
    
    
    (100
    )
    
    
    (11
    )
    
    
    (11
    )Effect of changes in currency exchange rates
    
    
    (143
    )
    
    
    79
    
    
    
    
    
    
    
    Fair value of plan assets, December 31(1)
    
    $
    2,393
    
    
    $
    2,502
    
    
    $
    
    
    
    $
    Net funded status, December 31
    
    $
    (33
    )
    
    $
    (141
    )
    
    $
    (249
    )
    
    $
    (328
    )Unamortized net actuarial loss
    
    
    319
    
    
    
    474
    
    
    
    22
    
    
    
    49Unamortized past service cost
    
    
    12
    
    
    
    14
    
    
    
    (50
    )
    
    
    (20
    )Unamortized transition asset
    
    
    (72
    )
    
    
    (92
    )
    
    
    (6
    )
    
    
    (7
    )Contributions (transfers), October 1 to December 31(1)
    
    
    (1
    )
    
    
    (1
    )
    
    
    1
    
    
    
    1Accrued benefit asset (liability), December 31(1)
    
    $
    225
    
    
    $
    254
    
    
    $
    (282
    )
    
    $
    (305
    )Balance sheet classification of accrued benefit asset (liability), December 31:Other assets
    
    $
    422
    
    
    $
    454
    
    
    $
    
    
    
    $
    Other liabilities
    
    $
    197
    
    
    $
    200
    
    
    $
    282
    
    
    $
    305Pension plans with projected benefit obligations in excess of plan assets:Projected benefit obligations
    
    $
    778
    
    
    $
    1,539Plan assets
    
    $
    553
    
    
    $
    1,264
 Weighted average assumptions:
 Pensions
    
    
    Post-retirementTo measure benefit
    
    
    To measure the net
    
    
    To measure benefit
    
    
    To measure the netobligation as of the plans
    
    
    benefit costs or
    
    
    obligation as of the plans
    
    
    benefit costs ormeasurement date(1)
    
    
    income for the period
    
    
    measurement date(1)
    
    
    income for the periodDiscount rate
    
    
    5.5
    %
    
    
    5.2
    %
    
    
    5.4
    %
    
    
    5.1
    %Expected
long-term rate of return on plan assets
    
    
    7.0
    %
    
    
    7.5
    %Rate of compensation
increase
    
    
    3.7
    %
    
    
    3.7
    %
 (1)
    
    The measurement date for most of the plans in the United States is September 30. For
all other defined benefit plans, the measurement date is December 31. For plans with a September 30
measurement date, contributions from October 1 to December 31 are reflected in the balance sheet
for the current year but excluded from the September 30 plan asset balance.(2)
    
    The date of the most recent actuarial valuation for funding purposes was January 1,
2007. The date of the next required actuarial valuation for funding purposes is January 1, 2008 for
the plans in the United States and Philippines. The required date for
the United Kingdom
plans is December 31, 2008, and January 1, 2010 for the
Canadian plans.(3)
    
    The accumulated benefit obligation is smaller than the projected benefit obligation
since it does not recognize projected future compensation increases.
 54




---



##### 



21. Pension Plans and Other Post-Retirement Benefits (Contd)
 Discount rate, return on plan assets and rate of compensation increase:
     Pension
    
    
    Post-Retirement(1)2007
    
    
    2006
    
    
    2005
    
    
    2007
    
    
    2006
    
    
    2005Components of defined benefit cost recognized:Service cost, curtailments and settlements
    
    $
    53
    
    
    $
    56
    
    
    $
    56
    
    
    $
    (7
    )
    
    $
    9
    
    
    $
    7Plan amendments
    
    
    4
    
    
    
    8
    
    
    
    
    
    
    
    (64
    )
    
    
    
    
    
    
    (4
    )Interest cost
    
    
    128
    
    
    
    124
    
    
    
    123
    
    
    
    15
    
    
    
    17
    
    
    
    17Actual return on plan assets
    
    
    (122
    )
    
    
    (242
    )
    
    
    (231
    )
    
    
    
    
    
    
    
    
    
    
    Actuarial losses (gains)
    
    
    (159
    )
    
    
    (25
    )
    
    
    341
    
    
    
    (23
    )
    
    
    (27
    )
    
    
    39Benefit cost before adjustments to recognize the
long-term nature of defined benefit plans
    
    $
    (96
    )
    
    $
    (79
    )
    
    $
    289
    
    
    $
    (79
    )
    
    $
    (1
    )
    
    $
    59Adjustments to recognize the long-term nature of
defined benefit plans:Difference between expected and actual
return on plan assets for year
    
    $
    (41
    )
    
    $
    73
    
    
    $
    71
    
    
    $
    
    
    
    $
    
    
    
    $
    Difference between actuarial losses
(gains) recognized and actual
actuarial losses (gains) on accrued benefit obligation for year
    
    
    189
    
    
    
    55
    
    
    
    (342
    )
    
    
    25
    
    
    
    31
    
    
    
    (37
    )Difference between amortization of past service costs
for year and actual plan amendments for year
    
    
    1
    
    
    
    (7
    )
    
    
    1
    
    
    
    45
    
    
    
    (2
    )
    
    
    2Amortization of transition obligation (asset)
    
    
    (18
    )
    
    
    (17
    )
    
    
    (19
    )
    
    
    (2
    )
    
    
    (2
    )
    
    
    (2
    )Total adjustments to defer costs to future periods
    
    $
    131
    
    
    $
    104
    
    
    $
    (289
    )
    
    $
    68
    
    
    $
    27
    
    
    $
    (37
    )Total benefit cost recognized
    
    $
    35
    
    
    $
    25
    
    
    $
    
    
    
    $
    (11
    )
    
    $
    26
    
    
    $
    22
 (1)
    
    The assumed medical cost trend rate used in measuring the accumulated
post-retirement benefits obligation in Canada in 2007 was 10%, decreasing by 0.5% each year to an
ultimate rate of 5.5% per year. In the United States in 2007, the assumed rate was 9%, decreasing
evenly to 5% by 2013, and remaining at that level thereafter. The assumed dental cost trend rate is
4.5% in Canada and 5% in the United States.
 55




---



##### 



21. Pension Plans and Other Post-Retirement Benefits (Contd)
  1%Increase
    
    
    DecreaseEffect on post-retirement benefit obligations
    
    $
    23
    
    
    $
    (21
    )Effect on aggregated service and interest costs
    
    $
    2
    
    
    $
    (2
    )
 Composition of fair value of plan assets, December 31:
 2007
    
    
    2006Equity investments
    
    
    43
    %
    
    
    51
    %Fixed income investments
    
    
    44
    %
    
    
    41
    %Real estate investments
    
    
    4
    %
    
    
    3
    %Other
    
    
    9
    %
    
    
    5
    %Total composition of fair value of plan assets
    
    
    100
    %
    
    
    100
    %
 Target allocation of plan assets, December 31:
 2007
    
    
    2006Equity investments
    
    
    42
    %
    
    
    46
    %Fixed income investments
    
    
    45
    %
    
    
    45
    %Real estate investments
    
    
    5
    %
    
    
    5
    %Other
    
    
    8
    %
    
    
    4
    %Total
    
    
    100
    %
    
    
    100
    %
    Post-Pension
    
    
    Retirement
    
    
    TotalExpected contributions for the next 12 months
    
    $
    21
    
    
    $
    13
    
    
    $
    34
 Expected future benefit payments20132008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    -2017Pension
    
    $
    85
    
    
    $
    91
    
    
    $
    95
    
    
    $
    99
    
    
    $
    108
    
    
    $
    631Post-retirement
    
    
    13
    
    
    
    13
    
    
    
    14
    
    
    
    15
    
    
    
    15
    
    
    
    84Total
    
    $
    98
    
    
    $
    104
    
    
    $
    109
    
    
    $
    114
    
    
    $
    123
    
    
    $
    715
  56




---



##### 



22. Foreign Exchange Gain (Loss)
  23. Related Party Transactions
   24. Variable Interest Entities
   57




---



##### 



25.
    
    Summary of Differences Between Accounting Principles Generally Accepted
in Canada and in the United States
  A) RECONCILIATION
OF SELECTED CDN. GAAP FINANCIAL STATEMENT INFORMATION TO U.S. GAAP
 i) Consolidated statements of operations:
 2007
    
    
    2006
    
    
    2005Cdn.
    
    
    U.S.
    
    
    Cdn.
    
    
    U.S.
    
    
    Cdn.
    
    
    U.S.GAAP
    
    
    GAAP
    
    
    GAAP
    
    
    GAAP
    
    
    GAAP
    
    
    GAAPREVENUEPremiums
    
    $
    13,124
    
    
    $
    8,517
    
    
    $
    14,609
    
    
    $
    7,791
    
    
    $
    12,940
    
    
    $
    7,135Total net investment income
    
    
    4,684
    
    
    
    5,738
    
    
    
    6,664
    
    
    
    6,022
    
    
    
    6,079
    
    
    
    6,030Net realized gains
    
    
    168
    
    
    
    376
    
    
    
    
    
    
    
    337
    
    
    
    
    
    
    
    788Fee income
    
    
    3,212
    
    
    
    3,343
    
    
    
    3,014
    
    
    
    3,077
    
    
    
    2,899
    
    
    
    2,96521,188
    
    
    
    17,974
    
    
    
    24,287
    
    
    
    17,227
    
    
    
    21,918
    
    
    
    16,918POLICY BENEFITS AND EXPENSESPayments to policyholders, beneficiaries and depositors
    
    
    15,196
    
    
    
    9,813
    
    
    
    13,730
    
    
    
    8,860
    
    
    
    13,506
    
    
    
    8,920Increase (decrease) in actuarial liabilities
    
    
    (2,515
    )
    
    
    1,262
    
    
    
    2,525
    
    
    
    1,602
    
    
    
    872
    
    
    
    1,274Acquisition expense amortization
    
    
    64
    
    
    
    337
    
    
    
    112
    
    
    
    779
    
    
    
    142
    
    
    
    443Other expenses
    
    
    5,596
    
    
    
    4,504
    
    
    
    5,360
    
    
    
    4,159
    
    
    
    4,968
    
    
    
    3,97518,341
    
    
    
    15,916
    
    
    
    21,727
    
    
    
    15,400
    
    
    
    19,488
    
    
    
    14,612INCOME BEFORE INCOME TAXES AND
NON-CONTROLLING INTERESTS
    
    
    2,847
    
    
    
    2,058
    
    
    
    2,560
    
    
    
    1,827
    
    
    
    2,430
    
    
    
    2,306Income taxes expense
    
    
    522
    
    
    
    308
    
    
    
    389
    
    
    
    243
    
    
    
    531
    
    
    
    445Non-controlling interests in net income of subsidiaries
    
    
    35
    
    
    
    35
    
    
    
    27
    
    
    
    27
    
    
    
    23
    
    
    
    23INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING
CHANGES
    
    
    2,290
    
    
    
    1,715
    
    
    
    2,144
    
    
    
    1,557
    
    
    
    1,876
    
    
    
    1,838Cumulative effect of accounting changes, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    TOTAL NET INCOME
    
    
    2,290
    
    
    
    1,715
    
    
    
    2,144
    
    
    
    1,561
    
    
    
    1,876
    
    
    
    1,838Less participating policyholders net income
    
    
    2
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    9
    
    
    
    SHAREHOLDERS NET INCOME
    
    
    2,288
    
    
    
    1,715
    
    
    
    2,137
    
    
    
    1,561
    
    
    
    1,867
    
    
    
    1,838Less preferred shareholder dividends
    
    
    69
    
    
    
    69
    
    
    
    48
    
    
    
    48
    
    
    
    24
    
    
    
    24COMMON SHAREHOLDERS NET INCOME
    
    $
    2,219
    
    
    $
    1,646
    
    
    $
    2,089
    
    
    $
    1,513
    
    
    $
    1,843
    
    
    $
    1,814Earnings per shareBasicCommon shareholders net income excluding cumulative
effect of accounting changes
    
    $
    3.90
    
    
    $
    2.89
    
    
    $
    3.62
    
    
    $
    2.61
    
    
    $
    3.14
    
    
    $
    3.09Cumulative effect of accounting changes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.01
    
    
    
    
    
    
    
    Common shareholders net income
    
    $
    3.90
    
    
    $
    2.89
    
    
    $
    3.62
    
    
    $
    2.62
    
    
    $
    3.14
    
    
    $
    3.09DilutedCommon shareholders net income excluding cumulative
effect of accounting changes
    
    $
    3.85
    
    
    $
    2.84
    
    
    $
    3.58
    
    
    $
    2.58
    
    
    $
    3.12
    
    
    $
    3.07Cumulative effect of accounting changes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.01
    
    
    
    
    
    
    
    Common shareholders net income
    
    $
    3.85
    
    
    $
    2.84
    
    
    $
    3.58
    
    
    $
    2.59
    
    
    $
    3.12
    
    
    $
    3.07Weighted average shares outstanding in millionsBasic
    
    
    569
    
    
    
    569
    
    
    
    577
    
    
    
    577
    
    
    
    587
    
    
    
    587Diluted
    
    
    572
    
    
    
    572
    
    
    
    580
    
    
    
    580
    
    
    
    590
    
    
    
    590
 58




---



##### 



25.
    
    Summary of Differences Between Accounting Principles Generally Accepted in
Canada and in the United States (Contd)
 ii) Consolidated balance sheets:
 2007
    
    2006Cdn.
    
    
    U.S.
    
    
    Cdn.
    
    
    U.S.GAAP
    
    
    GAAP
    
    
    GAAP
    
    
    GAAPASSETSBonds
    
    
    
    
    
    
    
    
    
    $
    69,230Bonds  held-for-trading
    
    $
    50,608
    
    
    $
    5,781
    
    
    
    
    
    
    $
    6,668Bonds  available-for-sale
    
    
    9,148
    
    
    
    53,962
    
    
    
    
    
    
    
    60,872Mortgages and corporate loans
    
    
    20,742
    
    
    
    20,742
    
    
    
    15,993
    
    
    
    20,793Stocks
    
    
    
    
    
    
    
    
    
    
    4,899Stocks  held-for-trading
    
    
    4,438
    
    
    
    1,463
    
    
    
    
    
    
    
    1,665Stocks  available-for-sale
    
    
    788
    
    
    
    3,763
    
    
    
    
    
    
    
    3,879Real estate, net of accumulated depreciation (accumulated
depreciation: 2007  $441 ;2006$409)
    
    
    4,303
    
    
    
    2,961
    
    
    
    3,825
    
    
    
    2,611Cash and cash equivalents
    
    
    3,603
    
    
    
    3,740
    
    
    
    4,936
    
    
    
    4,926Short-term securities (1)
    
    
    1,897
    
    
    
    1,882
    
    
    
    1,303
    
    
    
    1,299Derivative assets
    
    
    1,947
    
    
    
    1,931
    
    
    
    
    
    
    
    1,487Policy loans and other invested assets
    
    
    4,349
    
    
    
    6,157
    
    
    
    6,013
    
    
    
    7,086Other invested assets  held-for-trading
    
    
    440
    
    
    
    264
    
    
    
    
    
    
    
    740Other invested assets  available-for-sale
    
    
    757
    
    
    
    954
    
    
    
    
    
    
    
    431Invested assets
    
    
    103,020
    
    
    
    103,600
    
    
    
    106,199
    
    
    
    112,457Goodwill
    
    
    6,018
    
    
    
    4,565
    
    
    
    5,981
    
    
    
    4,664Intangible assets
    
    
    775
    
    
    
    770
    
    
    
    777
    
    
    
    771Deferred acquisition costs
    
    
    139
    
    
    
    6,677
    
    
    
    185
    
    
    
    6,495Future income taxes (2)
    
    
    382
    
    
    
    233
    
    
    
    747
    
    
    
    240Other assets
    
    
    3,957
    
    
    
    8,287
    
    
    
    3,942
    
    
    
    6,622Total other assets
    
    
    11,271
    
    
    
    20,532
    
    
    
    11,632
    
    
    
    18,792Segregated funds assets (3)
    
    
    
    
    
    
    72,834
    
    
    
    
    
    
    
    70,559Total consolidated assets
    
    $
    114,291
    
    
    $
    196,966
    
    
    $
    117,831
    
    
    $
    201,808Segregated funds net assets (3)
    
    $
    73,205
    
    
    
    
    
    
    $
    70,789LIABILITIES AND EQUITYActuarial
liabilities and other policy liabilities
    
    $
    79,830
    
    
    $
    53,920
    
    
    $
    81,036
    
    
    $
    54,195Contract holder deposits
    
    
    
    
    
    
    32,706
    
    
    
    
    
    
    
    38,666Amounts on deposit
    
    
    3,747
    
    
    
    3,616
    
    
    
    3,599
    
    
    
    3,588Derivative liabilities
    
    
    638
    
    
    
    642
    
    
    
    
    
    
    
    364Deferred net realized gains
    
    
    276
    
    
    
    
    
    
    
    4,152Senior debentures
    
    
    3,014
    
    
    
    3,014
    
    
    
    3,491
    
    
    
    3,491Future income taxes (2)
    
    
    582
    
    
    
    545
    
    
    
    226
    
    
    
    598Other liabilities
    
    
    7,093
    
    
    
    10,625
    
    
    
    6,608
    
    
    
    10,301Total general fund liabilities
    
    
    95,180
    
    
    
    105,068
    
    
    
    99,112
    
    
    
    111,203Subordinated debt
    
    
    1,796
    
    
    
    1,796
    
    
    
    1,456
    
    
    
    1,456Non-controlling interests in subsidiaries
    
    
    98
    
    
    
    98
    
    
    
    79
    
    
    
    79Segregated funds liabilities (3)
    
    
    
    
    
    
    72,834
    
    
    
    
    
    
    
    70,559Equity
    
    
    17,217
    
    
    
    17,170
    
    
    
    17,184
    
    
    
    18,511Total consolidated liabilities and equity
    
    $
    114,291
    
    
    $
    196,966
    
    
    $
    117,831
    
    
    $
    201,808Segregated funds contract liabilities (3)
    
    $
    73,205
    
    
    
    
    
    
    $
    70,789
 (1)
    
    U.S. GAAP
terminology is
short-term
investments.(2)
    
    U.S. GAAP
terminology is
deferred income
tax.(3)
    
    U.S. GAAP
terminology is
separate accounts.
 59




---



##### 



25.
    
    Summary of Differences Between Accounting Principles Generally Accepted in
Canada and in the United States (Contd)
 iii) Consolidated statements of equity:
 2007
    
    2006Cdn.
    
    
    U.S.
    
    
    Cdn.
    
    
    U.S.GAAP
    
    
    GAAP
    
    
    GAAP
    
    
    GAAPPARTICIPATING POLICYHOLDERS CAPITAL ACCOUNT:Balance, January 1
    
    $
    92
    
    
    $
    
    
    
    $
    85
    
    
    $Adjustment for change in accounting policy
    
    
    6Net income attributed to participating policyholders
    
    
    2
    
    
    
    
    
    
    
    7Total other comprehensive income (loss)
    
    
    (5
    )Balance, December 31
    
    
    95
    
    
    
    
    
    
    
    92SHAREHOLDERS EQUITY:PREFERRED SHARESBalance, January 1
    
    
    1,250
    
    
    
    1,250
    
    
    
    712
    
    
    
    712Shares issued, net of issuance costs
    
    
    245
    
    
    
    245
    
    
    
    538
    
    
    
    538Balance, December 31
    
    
    1,495
    
    
    
    1,495
    
    
    
    1,250
    
    
    
    1,250PAID IN CAPITALBalance, January 1
    
    
    7,154
    
    
    
    12,981
    
    
    
    7,239
    
    
    
    13,148Stock options exercised (2)
    
    
    55
    
    
    
    55
    
    
    
    61
    
    
    
    61Common shares purchased for cancellation (1)
    
    
    (115
    )
    
    
    (211
    )
    
    
    (164
    )
    
    
    (278
    )Stock option compensation (3)
    
    
    1
    
    
    
    55
    
    
    
    18
    
    
    
    16Subsidiary equity transaction
    
    
    
    
    
    
    32
    
    
    
    
    
    
    
    34Balance, December 31
    
    
    7,095
    
    
    
    12,912
    
    
    
    7,154
    
    
    
    12,981RETAINED EARNINGSBalance, January 1, as previously reported
    
    
    10,016
    
    
    
    4,450
    
    
    
    9,001
    
    
    
    3,897Adjustment for changes in accounting policies
(Note 2 and Section D of this note)
    
    
    186
    
    
    
    (1
    )
    
    
    
    
    
    
    Balance, January 1, after change in accounting policy
    
    
    10,202
    
    
    
    4,449
    
    
    
    9,001
    
    
    
    3,897Net income for the year attributed to shareholders
    
    
    2,288
    
    
    
    1,715
    
    
    
    2,137
    
    
    
    1,561Dividends on common shares
    
    
    (752
    )
    
    
    (752
    )
    
    
    (663
    )
    
    
    (663
    )Dividends on preferred shares
    
    
    (69
    )
    
    
    (69
    )
    
    
    (48
    )
    
    
    (48
    )Common shares purchased for cancellation
    
    
    (387
    )
    
    
    (291
    )
    
    
    (411
    )
    
    
    (297
    )Balance, December 31
    
    
    11,282
    
    
    
    5,052
    
    
    
    10,016
    
    
    
    4,450ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS),net of taxesBalance, January 1, as previously reported
    
    
    (1,328
    )
    
    
    (170
    )
    
    
    (1,491
    )
    
    
    (569
    )Adjustment for change in accounting policy (Note 2)
    
    
    359
    
    
    
    
    
    
    
    
    
    
    
    Balance, January 1, after changes in accounting policies
    
    
    (969
    )
    
    
    (170
    )
    
    
    (1,491
    )
    
    
    (569
    )Total other comprehensive income (loss)
    
    
    (1,781
    )
    
    
    (2,119
    )
    
    
    163
    
    
    
    625(2,750
    )
    
    
    (2,289
    )
    
    
    (1,328
    )
    
    
    56Impact of adopting SFAS 158
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (226
    )Balance, December 31
    
    
    (2,750
    )
    
    
    (2,289
    )
    
    
    (1,328
    )
    
    
    (170
    )Total retained earnings and accumulated other comprehensive income
    
    
    8,532
    
    
    
    2,763
    
    
    
    8,688
    
    
    
    4,280TOTAL EQUITY
    
    $
    17,217
    
    
    $
    17,170
    
    
    $
    17,184
    
    
    $
    18,511ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS),net of taxesBalance, end of year, consists of:Unamortized net actuarial loss (4)
    
    
    
    
    
    
    (126
    )
    
    
    
    
    
    
    (240
    )Unamortized past service cost (4)
    
    
    
    
    
    
    29
    
    
    
    
    
    
    
    7Unamortized transition asset (4)
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    7Unrealized gains on available-for-sale assets
    
    
    25
    
    
    
    1,316
    
    
    
    
    
    
    
    2,744Unrealized foreign currency translation gains (losses),
net of hedging activities
    
    
    (2,821
    )
    
    
    (2,866
    )
    
    
    (1,337
    )
    
    
    (1,402
    )Unrealized gains on derivatives designated as cash flow hedges
    
    
    32
    
    
    
    3
    
    
    
    
    
    
    
    3Deferred acquisition costs and other liabilities
    
    
    
    
    
    
    (650
    )
    
    
    
    
    
    
    (1,289
    )Balance, December 31
    
    $
    (2,764
    )
    
    $
    (2,289
    )
    
    $
    (1,337
    )
    
    $
    (170
    )
 (1)
    
    Shown as share capital under Cdn. GAAP.(2)
    
    Shown as share capital and contributed surplus under Cdn. GAAP.(3)
    
    Shown as contributed surplus under Cdn. GAAP.(4)
    
    Included in other assets and other liabilities for plans with
surpluses and deficits respectively under Cdn. GAAP.
 60




---



##### 



25.
    
    Summary of Differences Between Accounting Principles Generally Accepted in
Canada and in the United States (Contd)
 iv) Comprehensive income:
  2007
    
    2006
    
    2005Cdn. GAAP
    
    
    U.S. GAAP
    
    
    U.S. GAAP
    
    
    U.S. GAAPTotal net income
    
    $
    2,290
    
    
    $
    1,715
    
    
    $
    1,561
    
    
    $
    1,838Other comprehensive income (loss), net of taxes:Unrealized foreign currency translation gains (losses), excluding hedges
    
    
    (1,781
    )
    
    
    (1,807
    )
    
    
    236
    
    
    
    (354
    )Unrealized
foreign currency gains (losses), net investment hedges
    
    
    282
    
    
    
    343
    
    
    
    (60
    )
    
    
    46Net adjustment for foreign exchange losses
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    Unrealized gains (losses) on available-for-sale assets
    
    
    (238
    )
    
    
    (1,140
    )
    
    
    78
    
    
    
    494Reclassifications to net income for available-for-sale assets
    
    
    (84
    )
    
    
    (288
    )
    
    
    (30
    )
    
    
    (492
    )Unrealized gains on cash flow hedging instruments
    
    
    40
    
    
    
    7
    
    
    
    5
    
    
    
    11Reclassifications to net income for cash flow hedges
    
    
    (8
    )
    
    
    (7
    )
    
    
    (8
    )
    
    
    (6
    )Changes to deferred acquisition costs and other liabilities
    
    
    
    
    
    
    639
    
    
    
    268
    
    
    
    58Changes in unamortized net actuarial loss
    
    
    
    
    
    
    114
    
    
    
    
    
    
    
    Changes in past service cost
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    Changes in transition asset
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    Additional minimum pension liability (1)
    
    
    
    
    
    
    
    
    
    
    136
    
    
    
    (66
    )Total other comprehensive income (loss)
    
    
    (1,786
    )
    
    
    (2,119
    )
    
    
    625
    
    
    
    (309
    )Less:Participating policyholders net income
    
    
    2Participating policyholders foreign currency
    
    
    (5
    )translation gains (losses) excluding hedgesShareholders comprehensive income (loss)
    
    $
    507
    
    
    $
    (404
    )
    
    $
    2,186
    
    
    $
    1,529
 (1)
    
    The additional minimum pension liability includes the impact of adopting FASB
Statement No. 158  Employers Accounting for Defined Benefit Pension and Other Postretirement
Plans (SFAS 158).
 61




---



##### 



25.
    
    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:
  2007
    
    
    2006
    
    
    2005Total net income in accordance with Cdn. GAAP
    
    $
    2,290
    
    
    $
    2,144
    
    
    $
    1,876Adjustments related to:InvestmentsBonds(1)
    
    
    1,459
    
    
    
    (217
    )
    
    
    208Stocks and segregated fund units(1)
    
    
    114
    
    
    
    75
    
    
    
    265Derivative instruments
    
    
    (96
    )
    
    
    (65
    )
    
    
    493Real estate
    
    
    (125
    )
    
    
    (95
    )
    
    
    (54
    )Total investments
    
    
    1,352
    
    
    
    (302
    )
    
    
    912Deferred acquisition costsDeferred acquisition costs  deferred
    
    
    723
    
    
    
    897
    
    
    
    720Deferred acquisition costs  amortization and interest
    
    
    (273
    )
    
    
    (665
    )
    
    
    (301
    )Total deferred acquisition costs
    
    
    450
    
    
    
    232
    
    
    
    419Actuarial liabilities and other policyholder revenues and expensesPremium and fees revenue
    
    
    (4,167
    )
    
    
    (6,466
    )
    
    
    (5,448
    )Payments to policyholders, beneficiaries and depositors
    
    
    5,383
    
    
    
    4,870
    
    
    
    4,586Actuarial liabilities
    
    
    (3,777
    )
    
    
    923
    
    
    
    (402
    )Total actuarial liabilities and other policyholder revenues and expenses
    
    
    (2,561
    )
    
    
    (673
    )
    
    
    (1,264
    )Other
    
    
    (30
    )
    
    
    10
    
    
    
    (191
    )Income tax effect of above adjustments
    
    
    214
    
    
    
    146
    
    
    
    86Change in accounting policy
    
    
    
    
    
    
    4
    
    
    
    Total net income in accordance with U.S. GAAP
    
    $
    1,715
    
    
    $
    1,561
    
    
    $
    1,838
 (1)
    
    In 2007, differences in net income are attributable to different asset designations.
Under Cdn. GAAP, assets are designated as held-for-trading for investments supporting actuarial
liabilities, and available-for-sale for assets not supporting actuarial liabilities (as described
in more detail in Note 2). For U.S. GAAP, most of the Companys assets are designated as
available-for-sale.
 62




---



##### 



25.
    
    Summary of Differences Between Accounting Principles Generally 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. GAAPHeld-for-
trading 
Designation
    
    
    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.
    
    
    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.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 value of
specific properties
result in a
write-down charged to
income.Deferred acquisition 
costs
    
    
    Costs of acquiring
new insurance and
annuity business,
primarily
commissions;
underwriting; issue
expenses and agency
expenses are
implicitly recognized
in actuarial
liabilities for most
of the policies.
    
    
    Acquisition costs are
deferred and recorded
as an asset. 
Amortization of such
costs is dependent on
the product to which
the costs relate. For
participating life
insurance contracts,
except for
participating
policies in the
United Kingdom,
amortization is based
on a constant
percentage of gross
margin. For universal
life and
investment-type
contracts,
amortization is based
on a constant
percentage of gross
profit. For other
non-participating
products, including
term, group and
disability insurance,
amortization is based
on a constant
percentage of
premium. Amortization for participating policies in the United
Kingdom is based on the change in the sum assured. In cases
where amortization is
based on gross profit
or margin, and
available- for-sale
bonds or stocks are
used to support the
underlying contract
liability or
actuarial reserve, a
portion of the
unrealized gains and
losses balance is
removed from equity
and netted against
the deferred
acquisition cost
balance.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.
 63




---



##### 



25.
    
    Summary of Differences Between Accounting Principles Generally Accepted in
Canada and in the United States (Contd)
 Cdn. GAAP
    
    
    U.S. GAAPDeferred 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.Unrealized foreign 
currency 
translation gains
(losses)
    
    
    A proportionate amount of the exchange gain or loss accumulated in OCI is
reflected in net income when there is a reduction in the Companys net
investment in a foreign operation resulting from a capital transaction,
dilution, or sale of all or part of the foreign operation.
    
    
    A proportionate
amount of exchange
gains or losses
accumulated in OCI
is reflected in net
income only when
there is a
reduction in the
Companys net
investment in the
foreign operation
resulting from the
sale of all or part
of the foreign
operation.Future income tax
asset and
liability(1)
    
    
    Future income tax liabilities and assets are recognized based on the
differences between the accounting values of assets and liabilities and
their related tax bases using income tax rates of enacted or substantially
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 C
viii) of this note.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, are 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 as
derivative assets
or liabilities,
with changes in
fair value recorded
in income.
 64




---



##### 



25.
    
    Summary of Differences Between Accounting Principles Generally Accepted in
Canada and in the United States (Contd)
 (ii) The following additional significant accounting policy differences between Cdn. GAAP and U.S.
GAAP existed prior to 2007:
 Cdn. GAAP
    
    
    U.S. GAAPBonds
    
    
    Bonds are carried at
amortized cost. Realized
gains and losses are
deferred and amortized to
income using the constant
yield method over the
remaining period to
maturity.
    
    
    Bonds are carried at fair
value. The bonds are
classified as
available-for-sale or
trading. Unrealized gains
and losses are included in
OCI if classified as
available-for-sale, and
included in net income if
classified as trading.
Realized gains and losses
are included in net income
immediately. Certain
instruments, included with
bonds under Cdn. GAAP, are
reclassified to mortgages
and corporate loans under
U.S. GAAP, as they do not
meet the definition of a
security.Stocks
    
    
    Stocks are originally
recorded at cost. The
carrying value is adjusted
towards the fair value at
5% of the difference
between fair value and
carrying value per quarter.
Realized gains and losses
are deferred and amortized
into net investment income
at the rate of 5% of the
unamortized balance each
quarter. The Company
records a write-down for
any other than temporary
decline in the value of the
entire stock portfolio.
    
    
    Stocks are carried at fair
value. The stocks are
classified as
available-for-sale or
trading. Unrealized gains
and losses are included in
OCI if classified as
available-for-sale, and
included in net income if
classified as trading.
Other than temporary
declines in the value of
stock result in a
write-down charged to
income.Derivatives
    
    
    Most of the Companys
derivatives are accounted
for as either fixed term
portfolio investments or
equity portfolio
investments. Fixed term
portfolio investment
accounting reports
investments at amortized
cost. Equity portfolio
investments are carried at
a value calculated using a
moving average market
method. Realized gains and
losses on the derivatives
are deferred and amortized
into net investment income.
Certain derivative
instruments are used for
risk management purposes
and either accounted for
using hedge accounting or
fair value accounting.
Under hedge accounting, the
accounting for the
derivative follows the
underlying asset or
liability that is being
hedged. Under fair value
accounting, the derivative
instrument is recorded at
fair value on the balance
sheet with increases or
decreases recorded to net
investment income.
    
    
    Derivative instruments are
carried at their fair
values. Changes in fair
values of derivatives that
are not hedges are recorded
in income as they arise.
For fair value hedges, the
gain or loss on the
derivative as well as the
adjustment to the carrying
value of the hedged item
are recognized in income.
For cash flow hedges, the
effective portion of the
changes in the fair value
of the derivatives is
recorded in OCI and the
ineffective portion is
recognized in income.
Embedded derivatives are
separately accounted for as
stand-alone derivatives
and carried at fair values
with the changes in fair
value recorded in income
when they are not clearly
and closely related to
their host instruments.
This requirement includes
insurance policies issued
by the Company. Foreign
exchange exposure of an
anticipated purchase
transaction would not
qualify for hedge
accounting.
 65




---



##### 



25.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted
in Canada and in the United States (Contd)
 Cdn. GAAP
    
    
    U.S. GAAPThere is no
requirement to
separately account
for embedded
derivatives prior
to 2007. Foreign
exchange exposure
of an anticipated
purchase
transaction may
qualify for hedge
accounting.Deferred net
realized gains
    
    
    Realized gains and
losses on sales of
invested assets are
deferred and
amortized.
    
    
    Realized gains and losses are recognized in income immediately.
 (1)
    
    U.S. GAAP terminology is deferred income tax.
 C) 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:
 2007
    
    
    2006
    
    
    2005Bonds:Gross realized gains
    
    $
    276
    
    
    $
    383
    
    
    $
    618Gross realized losses
    
    $
    (183
    )
    
    $
    (256
    )
    
    $
    (122
    )Stocks:Gross realized gains
    
    $
    412
    
    
    $
    193
    
    
    $
    217Gross realized losses
    
    $
    (170
    )
    
    $
    (78
    )
    
    $
    (65
    )
 ii)
    
    Change in net gains (losses) included in net investment income for securities classified as
trading:
 2007
    
    
    2006
    
    
    2005Bonds
    
    $
    (182
    )
    
    $
    (80
    )
    
    $
    12Stocks
    
    $
    59
    
    
    $
    301
    
    
    $
    348
 iii)
    
    Gross unrealized gains (losses) on available-for-sale bonds:
 2007Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    (Losses)
    
    
    ValueIssued or guaranteed by:Canadian federal government
    
    $
    2,721
    
    
    $
    118
    
    
    $
    (6
    )
    
    $
    2,833Canadian provincial and municipal governments
    
    
    5,429
    
    
    
    828
    
    
    
    (73
    )
    
    
    6,184U.S. Treasury and other U.S. agencies
    
    
    1,234
    
    
    
    79
    
    
    
    (15
    )
    
    
    1,298Other governments
    
    
    2,458
    
    
    
    376
    
    
    
    (11
    )
    
    
    2,823Corporate
    
    
    34,637
    
    
    
    1,000
    
    
    
    (961
    )
    
    
    34,676Asset-backed securities
    
    
    6,375
    
    
    
    109
    
    
    
    (336
    )
    
    
    6,148Total bonds
    
    $
    52,854
    
    
    $
    2,510
    
    
    $
    (1,402
    )
    
    $
    53,962
 2006Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    (Losses)
    
    
    ValueIssued or guaranteed by:Canadian federal government
    
    $
    3,174
    
    
    $
    161
    
    
    $
    (3
    )
    
    $
    3,332Canadian provincial and municipal governments
    
    
    5,581
    
    
    
    958
    
    
    
    (4
    )
    
    
    6,535U.S. Treasury and other U.S. agencies
    
    
    1,236
    
    
    
    34
    
    
    
    (11
    )
    
    
    1,259Other governments
    
    
    2,031
    
    
    
    402
    
    
    
    (6
    )
    
    
    2,427Corporate
    
    
    37,586
    
    
    
    1,783
    
    
    
    (347
    )
    
    
    39,022Asset-backed securities
    
    
    8,230
    
    
    
    163
    
    
    
    (96
    )
    
    
    8,297Total bonds
    
    $
    57,838
    
    
    $
    3,501
    
    
    $
    (467
    )
    
    $
    60,872
 66




---



##### 



25.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted in
Canada and in the United States (Contd)
 (iv)
    
    Gross unrealized gains (losses) on available-for-sale stocks:
 Gross
    
    
    Gross
    
    
    EstimatedOriginal
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    (Losses)
    
    
    ValueTotal 2007
    
    $
    3,139
    
    
    $
    730
    
    
    $
    (106
    )
    
    $
    3,763Total 2006
    
    $
    3,037
    
    
    $
    863
    
    
    $
    (21
    )
    
    $
    3,879
 v)
    
    Real estate
  2007
    
    
    2006
    
    
    2005Depreciation expense
    
    $
    61
    
    
    $
    56
    
    
    $
    56
 vi)
    
    Derivatives
  Fair value hedge
 Cash flow hedge
  Net investment hedges
 vii)
    
    Unrealized loss positions for which an other than temporary impairment has not been recognized
  Less than 12 months
    12 months or more
    
    
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedDescription of securities
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    LossesBonds
    
    $
    14,150
    
    
    $
    853
    
    
    $
    7,463
    
    
    $
    549
    
    
    $
    21,613
    
    
    $
    1,402Stocks
    
    
    1,136
    
    
    
    106
    
    
    
    1
    
    
    
    
    
    
    
    1,137
    
    
    
    106Total temporarily impaired securities
    
    $
    15,286
    
    
    $
    959
    
    
    $
    7,464
    
    
    $
    549
    
    
    $
    22,750
    
    
    $
    1,508
 67




---



##### 



25.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted in Canada and in the United States (Contd)
    viii) Future income tax asset and liability (1) :
 2007Future Income Tax Asset
    (1)
    
    Future Income Tax Liability
    (1)Cdn.
    
    
    U.S.
    
    
    Cdn.
    
    
    U.S.GAAP
    
    
    GAAP
    
    
    GAAP
    
    
    GAAPInvestments
    
    $
    (27
    )
    
    $
    (12
    )
    
    $
    1,257
    
    
    $
    1,041Actuarial liabilities
    
    
    261
    
    
    
    932
    
    
    
    (464
    )
    
    
    (899
    )Deferred acquisition costs
    
    
    144
    
    
    
    (789
    )
    
    
    (199
    )
    
    
    578Losses available for carry forward
    
    
    6
    
    
    
    8
    
    
    
    (111
    )
    
    
    (109
    )Other
    
    
    3
    
    
    
    99
    
    
    
    82
    
    
    
    (66
    )Future tax asset/liability before valuation allowance
    
    
    387
    
    
    
    238
    
    
    
    565
    
    
    
    545Valuation allowance
    
    
    (5
    )
    
    
    (5
    )
    
    
    17
    
    
    
    Total
    
    $
    382
    
    
    $
    233
    
    
    $
    582
    
    
    $
    545
 2006Future Income Tax Asset
    (1)
    
    Future Income Tax Liability
    (1)Cdn.
    
    
    U.S.
    
    
    Cdn.
    
    
    U.S.GAAP
    
    
    GAAP
    
    
    GAAP
    
    
    GAAPInvestments
    
    $
    61
    
    
    $
    (52
    )
    
    $
    272
    
    
    $
    1,550Actuarial liabilities
    
    
    123
    
    
    
    1,343
    
    
    
    (7
    )
    
    
    (1,639
    )Deferred acquisition costs
    
    
    325
    
    
    
    (933
    )
    
    
    
    
    
    
    635Losses available for carry forward
    
    
    216
    
    
    
    16
    
    
    
    (15
    )
    
    
    (215
    )Other
    
    
    99
    
    
    
    (130
    )
    
    
    (24
    )
    
    
    202Future tax asset/liability before valuation allowance
    
    
    824
    
    
    
    244
    
    
    
    226
    
    
    
    533Valuation allowance
    
    
    (77
    )
    
    
    (4
    )
    
    
    
    
    
    
    65Total
    
    $
    747
    
    
    $
    240
    
    
    $
    226
    
    
    $
    598
 (1)
    
    U.S. GAAP terminology is deferred income tax.
 68www.sunlife.com Annual Report 2007




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##### 



25.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted in Canada and in the United States (Contd)
 ix) Acquisition:
 Genworth EBG Business
    
    
    CMG AsiaCdn. GAAP
    
    
    U.S. GAAP
    
    
    Cdn. GAAP
    
    
    U.S. GAAPInvested assets acquired
    
    $
    977
    
    
    $
    977
    
    
    $
    1,548
    
    
    $
    1,548Other assets acquired (1)
    
    
    129
    
    
    
    353
    
    
    
    122
    
    
    
    422Segregated funds assets acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5321,106
    
    
    
    1,330
    
    
    
    1,670
    
    
    
    2,502Actuarial liabilities and other policy liabilities acquired
    
    
    654
    
    
    
    545
    
    
    
    1,453
    
    
    
    1,344Amounts on deposit acquired
    
    
    49
    
    
    
    51
    
    
    
    159
    
    
    
    159Other liabilities acquired
    
    
    38
    
    
    
    50
    
    
    
    40
    
    
    
    38Segregated funds liabilities acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    532741
    
    
    
    646
    
    
    
    1,652
    
    
    
    2,073Net balance sheet assets acquired
    
    $
    365
    
    
    $
    684
    
    
    $
    18
    
    
    $
    429Consideration:Cash cost of acquisition
    
    $
    709
    
    
    $
    709
    
    
    $
    554
    (2)
    
    $
    532Transaction and other related costs
    
    
    16
    
    
    
    16
    
    
    
    9
    
    
    
    9$
    725
    
    
    $
    725
    
    
    $
    563
    
    
    $
    541Goodwill on acquisition
    
    $
    360
    
    
    $
    41
    
    
    $
    545
    
    
    $
    112
 (1)
    
    Other assets acquired included value of business acquired of $248 for Genworth EBG
Business and $287 for CMG Asia under U.S. GAAP.(2)
    
    Includes the cost to hedge the foreign exchange exposure of
the purchase price.
   Genworth EBG Business
    
    
    CMG Asia2007
    
    
    2006
    
    
    2005Revenue
    
    $
    18,335
    
    
    $
    18,071
    
    
    $
    17,136Total common shareholders net income before realized gains
    
    $
    1,275
    
    
    $
    1,132
    
    
    $
    1,034Net realized gains
    
    
    376
    
    
    
    337
    
    
    
    791Common shareholders net income
    
    $
    1,651
    
    
    $
    1,469
    
    
    $
    1,825Weighted average number of shares outstanding (in millions)
    
    
    569
    
    
    
    577
    
    
    
    587Basic earnings per share
    
    $
    2.90
    
    
    $
    2.55
    
    
    $
    3.11Common shareholders net income on a diluted basis
    
    $
    1,631
    
    
    $
    1,458
    
    
    $
    1,820Weighted average number of shares outstanding on a diluted basis (in millions)
    
    
    572
    
    
    
    580
    
    
    
    590Diluted earnings per share
    
    $
    2.85
    
    
    $
    2.51
    
    
    $
    3.08
 69Sun Life Financial Inc.




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##### 



25.
    
    Summary of Differences Between Accounting PrinciplesGenerally Accepted in Canada and in the United States (Contd)
 x) Earnings per share:
  2007
    
    
    2006
    
    
    2005Cdn.
    
    
    U.S.
    
    
    Cdn.
    
    
    U.S.
    
    
    Cdn.
    
    
    U.S.GAAP
    
    
    GAAP
    
    
    GAAP
    
    
    GAAP
    
    
    GAAP
    
    
    GAAPCommon shareholders net income excluding cumulative
effect of accounting changes
    
    $
    2,219
    
    
    $
    1,646
    
    
    $
    2,089
    
    
    $
    1,509
    
    
    $
    1,843
    
    
    $
    1,814Cumulative effect of accounting changes, net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    Common shareholders net income
    
    
    2,219
    
    
    
    1,646
    
    
    
    2,089
    
    
    
    1,513
    
    
    
    1,843
    
    
    
    1,814Less: Effect of stock options of subsidiaries
    
    
    20
    
    
    
    20
    
    
    
    11
    
    
    
    11
    
    
    
    5
    
    
    
    5Common shareholders net income on a diluted basis
    
    $
    2,199
    
    
    $
    1,626
    
    
    $
    2,078
    
    
    $
    1,502
    
    
    $
    1,838
    
    
    $
    1,809Weighted average number of shares outstanding (in millions)
    
    
    569
    
    
    
    569
    
    
    
    577
    
    
    
    577
    
    
    
    587
    
    
    
    587Add: Adjustments relating to the dilutive impact of stock options
    
    
    3
    
    
    
    3
    
    
    
    3
    
    
    
    3
    
    
    
    3
    
    
    
    3Weighted average number of shares outstanding
on a diluted basis (in millions)
    
    
    572
    
    
    
    572
    
    
    
    580
    
    
    
    580
    
    
    
    590
    
    
    
    590
 xi) Statements of cash flows:
 2007
    
    
    2006
    
    
    2005Deposits and withdrawals reclassified to financing activities:Deposits to policyholders accounts
    
    $
    4,141
    
    
    $
    6,417
    
    
    $
    6,401Withdrawals from policyholders accounts
    
    $
    7,090
    
    
    $
    6,510
    
    
    $
    6,021
 xii) Liabilities for contract guarantees:
  70www.sunlife.com Annual Report 2007




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##### 



25.
    
    Summary of Differences Between Accounting Principles Generally Accepted in Canada and in the United States (Contd)
  Weighted Average AttainedBenefit type
    
    Account Balance
    
    
    Net Amount at Risk
    
    
    Age of Contract HoldersMinimum death
    
    $
    30,646
    
    
    $
    1,895
    
    
    
    66Minimum income
    
    $
    2,476
    
    
    $
    2,177
    
    
    
    60Minimum accumulation or withdrawal
    
    $
    5,300
    
    
    $
    4
    
    
    
    62
  Minimum
    
    
    GuaranteedGuaranteed Death
    
    
    Minimum IncomeBenefit
    
    
    Benefit
    
    
    TotalBalance as at January 1, 2006
    
    $
    68
    
    
    $
    194
    
    
    $
    262Benefit ratio and assumption changes
    
    
    (7
    )
    
    
    1
    
    
    
    (6
    )Incurred guaranteed benefits
    
    
    69
    
    
    
    1
    
    
    
    70Paid guaranteed benefits
    
    
    (69
    )
    
    
    (33
    )
    
    
    (102
    )Interest
    
    
    4
    
    
    
    (26
    )
    
    
    (22
    )Effect of changes in currency exchange rates
    
    
    
    
    
    
    20
    
    
    
    20Balance as at December 31, 2006
    
    
    65
    
    
    
    157
    
    
    
    222Benefit ratio and assumption changes
    
    
    5
    
    
    
    10
    
    
    
    15Incurred guaranteed benefits
    
    
    28
    
    
    
    1
    
    
    
    29Paid guaranteed benefits
    
    
    (36
    )
    
    
    (35
    )
    
    
    (71
    )Interest
    
    
    3
    
    
    
    28
    
    
    
    31Effect of changes in currency exchange rates
    
    
    (12
    )
    
    
    (23
    )
    
    
    (35
    )Balance as at December 31, 2007
    
    $
    53
    
    
    $
    138
    
    
    $
    191
    71




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##### 



25.
    
    Summary of Differences Between Accounting Principles Generally Accepted in Canada and in the United States (Contd)
 D) U.S.
GENERALLY ACCEPTED ACCOUNTING STANDARDS ADOPTED BY THE COMPANY IN
2007
 i) FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes  An Interpretation of
FASB Statement No. 109 (FIN 48):
    UTB balance as at January 1, 2007
    
    $
    624Increase (decrease) related to tax positions in prior year
    
    
    24Increase (decrease) related to tax positions in current year
    
    
    20Increase (decrease) related to foreign exchange movement
    
    
    (51
    )UTB balance as at December 31, 2007
    
    $
    617
    Tax Jurisdiction
    
    Years Subject to ExaminationCanada
    
    2003  forwardU.S.
    
    2001  forwardU.K.
    
    2003  forward
 ii)
FASB Statement No. 155, Accounting for Certain Hybrid Financial Instruments (SFAS 155)  An
amendment of FASB Statements No. 133 and 140:
 72




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##### 



25.
    
    Summary of Differences Between Accounting Principles Generally Accepted in Canada and in the United States (Contd)
 iii) Derivative Implementation Group Statement 133 Implementation Issue No. B40, Embedded
Derivatives: Application of Paragraph 13(b) to Securitized Interests in Prepayable Financial Assets
(DIG B40)
 iv) FASB Statement No. 156, Accounting for Servicing of Financial Assets (SFAS 156):
 v) American Institute of Certified Public Accountants (AICPA) Statement of Position 05-1,
Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications
or Exchanges of Insurance Contracts (SOP 05-1):
 E) U.S.
GENERALLY ACCEPTED ACCOUNTING STANDARDS NOT YET ADOPTED BY THE
COMPANY
 i) FASB Statement No. 141(R), Business Combinations (SFAS 141(R)):
 ii) FASB Statement No. 157, Fair Value Measurements (SFAS 157):
 73




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##### 



25.
    
    Summary of Differences Between Accounting Principles Generally Accepted in Canada and in the United States (Contd)
 iii) FASB Statement No. 158  Employers Accounting for Defined Benefit Pension and Other
Postretirement Plans (SFAS 158):
 iv) FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities
(SFAS 159
   v) FASB Statement No. 160, Non-controlling Interests in Consolidated Financial Statements (SFAS
160):
 26.
    
    Comparative Figures
  74




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##### 



Appointed Actuarys Report
    Robert W. Wilson
 
 75




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##### 



Report of Independent Registered Chartered Accountants
 TO
THE BOARD OF DIRECTORS AND SHAREHOLDERS OF SUN LIFE FINANCIAL INC.
    Internal Control  Integrated Framework
 
 
 76




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##### 



Comments by Independent Registered
Chartered Accountants on Canada- United States of America Reporting Difference
  
 
 77




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##### 



Report of Independent Registered Chartered Accountants
 TO
THE BOARD OF DIRECTORS AND SHAREHOLDERS OF SUN LIFE FINANCIAL INC.
 Internal
ControlIntegrated Framework
    Internal
ControlIntegrated Framework
  
 
 78