Sun Life 2012 Annual Report Download - page 55

Mortgages and Loans
As at December 31, 2012, we held $27.2 billion in mortgages and loans compared to $27.8 billion in 2011. Our mortgage portfolio,
which consists almost entirely of first mortgages, was $12.0 billion. Our loan portfolio, which consists of private placement assets, was
$15.3 billion. The carrying value of mortgages and loans by geographic location is set out in the following table. The geographic
location for mortgages is based on location of the property, while for loans it is based on the country of the creditor’s parent.
Mortgages and Loans by Geography
December 31, 2012(1) December 31, 2011(1)
($ millions) Mortgages Loans Total Mortgages Loans Total
Canada 7,457 9,946 17,403 7,500 9,154 16,654
United States 4,515 3,399 7,914 5,831 3,135 8,966
United Kingdom 22 420 442 24 253 277
Other – 1,489 1,489 – 1,858 1,858
Total 11,994 15,254 27,248 13,355 14,400 27,755
(1) Amounts as at December 31, 2012 do not include assets of the Discontinued Operations which are separately disclosed in Assets of disposal group classified as held for
sale. Comparative 2011 amounts have not been restated to reflect this presentation.
As at December 31, 2012, our mortgage portfolio of $12.0 billion consisted mainly of commercial mortgages spread across
approximately 3,200 loans. Commercial mortgages include retail, office, multi-family, industrial and land properties. Our commercial
portfolio has a weighted average loan-to-value ratio of approximately 60%. While we generally require a maximum loan-to-value ratio of
75% at issuance, we may invest in mortgages with a higher loan-to-value ratio in Canada if the mortgage is insured. The estimated
weighted average debt service coverage is 1.6 times, consistent with prior year-end levels. The Canada Mortgage and Housing
Corporation insures 20.8% of the Canadian commercial mortgage portfolio. As at December 31, 2012, the mix of the mortgage portfolio
was 81.8% non-residential and 18.2% residential, and approximately 50% of mortgage loans will mature within the next five years.
In the United States, core markets have stabilized for institutional quality assets. However, lower quality properties in secondary and
tertiary markets continue to struggle. We have witnessed increased secondary market demand for stressed loans, and we have
capitalized on this by selling a number of our distressed commercial mortgages. Many of our properties continue to face weak demand,
as office tenants are generally utilizing less space and vacant large box retail space is challenging to lease. A prolonged improvement
in real estate fundamentals will be largely dependent on job creation, which continues to lag.
The following table sets out mortgages and loans past due or impaired.
December 31, 2012(1)
Gross Carrying Value Allowance for losses
($ millions) Mortgages Loans Total Mortgages Loans Total
Not past due 11,865 15,230 27,095 – – –
Past due:
Past due less than 90 days 7–7 –––
Past due 90 to 179 days ––– –––
Past due 180 days or more ––– –––
Impaired 201 40 241 79(2) 16 95
Balance, December 31, 2012(1) 12,073 15,270 27,343 79 16 95
December 31, 2011(1)
Gross carrying value Allowance for losses
($ millions) Mortgages Loans Total Mortgages Loans Total
Not past due 13,001 14,358 27,359 – – –
Past due:
Past due less than 90 days 10 – 10 – – –
Past due 90 to 179 days – – – – – –
Past due 180 days or more – – – – – –
Impaired 540 69 609 196(2) 27 223
Balance, December 31, 2011(1) 13,551 14,427 27,978 196 27 223
(1) Amounts as at December 31, 2012 do not include assets of the Discontinued Operations which are separately disclosed in Assets of disposal group classified as held for
sale. Comparative 2011 amounts have not been restated to reflect this presentation.
(2) Includes $42 million of sectoral provisions as at December 31, 2012 and $68 million of sectoral provisions as at December 31, 2011.
Impaired mortgages and loans, net of allowance for losses, amounted to $146 million as at December 31, 2012, $240 million lower
than the December 31, 2011 level for these assets. The net carrying value of impaired mortgages amounted to $122 million as at
December 31, 2012, $222 million lower than December 31, 2011. The allowance for losses related to impaired mortgages amounted to
$79 million as at December 31, 2012, $117 million lower than December 31, 2011. A significant portion of the decline in all these
balances is due to mortgages that are separately disclosed in Assets of disposal group held for sale. Included in the Assets of disposal
Management’s Discussion and Analysis Sun Life Financial Inc. Annual Report 2012 53