The following table presents gross notional amount by the remaining term to maturity, total fair value (including accrued interest), credit equivalent amount and capital requirement by contract type. Remaining term to maturity (notional amounts) Fair value Credit Under 1 1to 5 Over equivalent Capital (1) (2) As at December 31, 2022 year years 5 years Total Positive Negative Net amount requirement Interest rate contracts OTC swap contracts $ 8,817 $ 19,253 $ 98,380 $ 126,450 $ 5,992 $ (8,135) $(2,143) $ 419 $ 9 Cleared swap contracts 2,494 16,823 122,314 141,631 254 (219) 35 – – Forward contracts 14,290 13,926 198 28,414 70 (4,468) (4,398) 8 – Futures 11,772 – – 11,772 – – – – – Options purchased 1,199 1,069 3,822 6,090 98 – 98 64 4 Subtotal 38,572 51,071 224,714 314,357 6,414 (12,822) (6,408) 491 13 Foreign exchange Swap contracts 2,026 10,475 28,369 40,870 2,067 (1,846) 221 1,166 23 Forward contracts 17,336 – – 17,336 226 (258) (32) 89 – Futures 2,319 – – 2,319 – – – – – Credit derivatives 15 144 – 159 4 – 4 – – Equity contracts Swap contracts 547 396 – 943 26 (7) 19 24 – Futures 3,813 – – 3,813 – – – – – Options purchased 12,634 3,526 – 16,160 335 (218) 117 232 2 Subtotal including accrued interest 77,262 65,612 253,083 395,957 9,072 (15,151) (6,079) 2,002 38 Less accrued interest – – – – 484 (862) (378) – – Total $ 77,262 $ 65,612 $ 253,083 $ 395,957 $ 8,588 $ (14,289) $(5,701) $ 2,002 $ 38 Remaining term to maturity (notional amounts) Fair value Credit Under 1 1to 5 Over equivalent Capital (1) (2) As at December 31, 2021 year years 5 years Total Positive Negative Net amount requirement Interest rate contracts OTC swap contracts $ 4,554 $ 21,884 $ 90,592 $ 117,030 $ 12,112 $ (7,717) $ 4,395 $ 1,582 $ 29 Cleared swap contracts 21,722 27,665 134,139 183,526 441 (453) (12) – – Forward contracts 14,636 15,791 741 31,168 2,625 (483) 2,142 299 5 Futures 11,944 – – 11,944 – – – – – Options purchased 1,406 2,789 6,513 10,708 515 – 515 113 9 Subtotal 54,262 68,129 231,985 354,376 15,693 (8,653) 7,040 1,994 43 Foreign exchange Swap contracts 1,941 8,869 26,903 37,713 801 (2,181) (1,380) 1,302 25 Forward contracts 14,798 – – 14,798 58 (79) (21) 85 – Futures 3,086 – – 3,086 – – – – – Credit derivatives 11 33 – 44 1 – 1 – – Equity contracts Swap contracts 669 323 – 992 57 (10) 47 29 – Futures 11,359 – – 11,359 – – – – – Options purchased 10,974 6,716 40 17,730 1,616 (17) 1,599 766 8 Subtotal including accrued interest 97,100 84,070 258,928 440,098 18,226 (10,940) 7,286 4,176 76 Less accrued interest – – – – 723 (902) (179) – – Total $ 97,100 $ 84,070 $ 258,928 $ 440,098 $ 17,503 $ (10,038) $ 7,465 $ 4,176 $ 76 (1) Credit equivalent amount is the sum of replacement cost and the potential future credit exposure less any collateral held. Replacement cost represents the current cost of replacing all contracts with a positive fair value. The amounts take into consideration legal contracts that permit offsetting of positions. The potential future credit exposure is calculated based on a formula prescribed by OSFI. (2) Capital requirement represents the credit equivalent amount, weighted according to the creditworthiness of the counterparty, as prescribed by OSFI. The total notional amount of $396 billion (2021 – $440 billion) includes $77 billion (2021 – $121 billion) related to derivatives utilized in the Company’s variable annuity guarantee dynamic hedging and macro risk hedging programs. During 2022, the Company discontinued the dynamic hedging program for the John Hancock Life Insurance Company (U.S.A.) (“JHUSA”) legacy variable annuities, reinsured with Venerable Holdings, Inc. as disclosed in note 7(k). Due to the Company’s variable annuity hedging practices, many trades are in offsetting positions, resulting in materially lower net fair value exposure to the Company than what the gross notional amount would suggest. 170 | 2022AnnualReport | NotestoConsolidatedFinancialStatements