Sun Life 2010 Annual Report Download - page 143

The table below represents information regarding our variable annuity and unit-linked pension contracts with guarantees as at
December 31, 2010.
Benefit type
Account
Balance
Net Amount
at Risk
Weighted Average
Attained Age of
Contract Holders
Minimum death $ 39,911 $ 2,692 63
Minimum income $ 1,626 $ 1,455 54
Minimum accumulation, withdrawal and reinsured minimum income $ 27,093 $ 935 62
The following summarizes the reserves for the minimum guaranteed death benefit and income benefit as at December 31:
Minimum
Guaranteed
Death Benefit
Guaranteed
Minimum
Income Benefit Total
Balance as at December 31, 2008 $ 303 $ 193 $ 496
Benefit ratio and assumption changes (76) 23 (53)
Incurred guaranteed benefits 48 16 64
Paid guaranteed benefits (114) (23) (137)
Interest 21 (1) 20
Effect of changes in currency exchange rates (31) (10) (41)
Balance as at December 31, 2009 151 198 349
Benefit ratio and assumption changes 24 11 35
Incurred guaranteed benefits 32 1 33
Paid guaranteed benefits (42) (26) (68)
Interest 11 52 63
Effect of changes in currency exchange rates (8) (17) (25)
Balance as at December 31, 2010 $ 168 $ 219 $ 387
The liability for death and income benefit guarantees is established equal to a benefit ratio multiplied by the cumulative contract
charges earned, plus accrued interest less contract benefit payments. The benefit ratio is calculated at the date of issue as the present
value of all actual and expected contract benefit payments divided by the present value of all actual and expected contract charges.
Projected contract benefit payments and contract charges used in determining the liability for guarantees are developed using models
and stochastic scenarios that are also used in the development of estimated expected future gross profits. Underlying assumptions for
the liability related to income benefits include assumed future annuitization elections based upon factors such as eligibility conditions
and the annuitant’s attained age. The liability for guarantees will be re-evaluated periodically, and adjustments will be made to the
liability balance through a charge or credit to policy owner benefits.
Guaranteed minimum accumulation benefits and withdrawal benefits and reinsured minimum income benefits that are net settled are
considered to be derivatives under FASB ASC Topic 815, Derivative and Accounting, and are recognized at fair value through
earnings. Liabilities for the guaranteed minimum accumulation and withdrawal benefits and reinsured income benefits were $646 and
$936 as at December 31, 2010 and December 31, 2009, respectively.
26.D.xiv Disclosures relating to fair value measurements:
Please refer to Note 5Ai for fair value methodologies and assumptions. In addition, derivatives, such as guaranteed minimum
accumulation benefits (“GMABs”) and guaranteed minimum withdrawal benefits (“GMWBs”), which are embedded in certain insurance
contracts, are required to be bifurcated and reported separately at fair value under U.S. GAAP. The fair value of these embedded
instruments is determined using various valuation assumptions, including certain risk margins and our own credit standing, as well as
assumptions regarding policyholder behaviour.
Financial instruments measured at fair value as of December 31, 2010 and 2009 are categorized and presented by the hierarchy level
in Note 5Aiii. Additional financial assets and liabilities measured at fair value by the hierarchy level under FASB ASC Topic 820 are
presented in the following tables:
As at December 31, 2010 Level 1(1) Level 2 Level 3 Total
Segregated funds net assets $ 43,187 $ 46,006 $ 543 $ 89,736
Embedded derivative liabilities $ – $ – $ 786 $ 786
(1) There were no significant transfers between Level 1 and Level 2.
Notes to the Consolidated Financial Statements Sun Life Financial Inc. Annual Report 2010 139