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The following table provides a reconciliation of the beginning and ending balances for financial instruments that are categorized in
Level 3 for the year ended December 31, 2011:
Beginning
balance
Included
in net
income(1)(3)
Included
in OCI(3) Purchases(7) Sales Settlements
Transfers
into level 3(2)
Transfers
(out) of
level 3(2)
Foreign
currency
translation(4)
Ending
balance
Gains (losses)
included in
earnings
relating to
instruments still
held at the
reporting date(1)
Assets
Debt securities – fair
value through profit
or loss $ 1,443 $ (6) $ – $ 202 $ (146) $ (142) $ 345 $ (194) $ 19 $ 1,521 $ 29
Debt securities –
available-for-sale 91 (1) (1) 43 (15) (7) 13 (6) 1 118 (1)
Equity securities – fair
value through profit
or loss 94 18 – 35 (2) – – (21) 2 126 18
Equity securities –
available-for-sale 41 – – – – (2) – (39) – – –
Derivative assets 18 4 – 5 – (14) – – – 13 –
Other invested assets 601 (10) (3) 97 (92) – – – 2 595 (3)
Total invested assets $ 2,288 $ 5 $ (4) $ 382 $ (255) $ (165) $ 358 $ (260) $ 24 $ 2,373 $ 43
Investments for account of
segregated fund holders $ 571 $ (7) $ – $ 770 $ (685) $ (34) $ 63 $ (34) $ 12 $ 656 $ (9)
Total Financial instrument
assets measured at fair
value $ 2,859 $ (2) $ (4) $ 1,152 $ (940) $ (199) $ 421 $ (294) $ 36 $ 3,029 $ 34
Liabilities(5)
Investment contract
liabilities $ 2,112 $ – $ – $ – $ – $ (1,172)(6) $ – $ – $ (28) $ 912 $ –
Derivative liabilities 50 (5) – 19 – (13) – (3) 1 49 (7)
Investment contracts for
account of
segregated fund-
holders 17 (2) – 4 (5) – 5 – – 19 –
Total financial instrument
liabilities measured at
fair value $ 2,179 $ (7) $ – $ 23 $ (5) $ (1,185) $ 5 $ (3) $ (27) $ 980 $ (7)
(1) Included within Net investment income (loss) in our Consolidated Statements of Operations.
(2) Transfers into Level 3 occur when the inputs used to price the financial instrument lack observable market data and as a result, no longer meet the Level 1 or 2 definitions at
the reporting date. In addition, transfers out of Level 3 occur when the pricing inputs become more transparent and satisfy the Level 1 or 2 criteria and are primarily the result
of observable market data being available at the reporting date, thus removing the requirement to rely on inputs that lack observability. If a financial instrument is transferred
into and out of Level 3 during the same period, it is not included in the above table.
(3) Total gains and losses in net income (loss) and OCI are calculated assuming transfers into or out of Level 3 occur at the beginning of the period. For a financial instrument
that transfers into Level 3 during the reporting period, the entire change in fair value for the period is included in the table above. For transfers out of Level 3 during the
reporting period, the change in fair value for the period is excluded from the table above.
(4) Foreign currency translation relates to the foreign exchange impact of translating from functional currencies of Level 3 financial instruments in foreign subsidiaries to
Canadian dollars.
(5) For liabilities, gains are indicated in negative numbers.
(6) Some of our medium-term notes matured during the period.
(7) Purchases of investments for account of segregated fund holders and Derivative liabilities include issuances of $4 and $19 respectively.
5.B Interest and Other Investment Income
Interest and other investment income consist of the following:
For the years ended December 31, 2012 2011
Interest income:
Cash, cash equivalents and short-term securities $44$50
Debt securities – fair value through profit or loss 1,903 1,909
Debt securities – available-for-sale 315 338
Mortgages and loans 1,524 1,421
Derivative investments 103 72
Policy loans 151 147
Interest income 4,040 3,937
Equity securities – dividends on fair value through profit or loss 124 114
Equity securities – dividends on available-for-sale 19 17
Investment properties rental income(1) 577 529
Investment properties expenses (273) (253)
Foreign exchange gains (losses) (58) 74
Other income 123 86
Investment expenses and taxes (122) (116)
Total interest and other investment income $ 4,430 $ 4,388
(1) Comprised of operating lease rental income.
Notes to Consolidated Financial Statements Sun Life Financial Inc. Annual Report 2012 113