A credit linked note is a fixed income instrument the term of which, in this case, is linked to a variable surplus note. A surplus note is a subordinated debt obligation that often qualifies as surplus (the U.S. statutory equivalent of equity) by some U.S. state insurance regulators. Interest payments on surplus notes are made after all other contractual payments are made. The following table presents the effect of unconditional netting. Amounts subject to Gross amounts of an enforceable Net amounts of As at December 31, 2022 financial instruments netting arrangement financial instruments (1) Credit linked note $ 1,242 $ (1,242) $ – Variable surplus note (1,242) 1,242 – Amounts subject to Gross amounts of an enforceable Net amounts of As at December 31, 2021 financial instruments netting arrangement financial instruments (1) Credit linked note $ 1,054 $ (1,054) $ – Variable surplus note (1,054) 1,054 – (1) As at December 31, 2022 and 2021, the Company had no fixed surplus notes outstanding, refer to note 19(g). (f) Risk concentrations The Company defines enterprise-wide investment portfolio level targets and limits to ensure that portfolios are diversified across asset classes and individual investment risks. The Company monitors actual investment positions and risk exposures for concentration risk and reports its findings to the Executive Risk Committee and the Risk Committee of the Board of Directors. As at December 31, 2022 2021 (1) Debt securities and private placements rated as investment grade BBB or higher 96% 97% Government debt securities as a per cent of total debt securities 36% 36% Government private placements as a per cent of total private placements 10% 11% Highest exposure to a single non-government debt security and private placement issuer $ 1,006 $ 1,167 Largest single issuer as a per cent of the total equity portfolio 2% 2% Income producing commercial office properties (2022 – 41% of real estate, 2021 – 47%) $ 5,486 $ 6,244 (2) Largest concentration of mortgages and real estate – Ontario Canada (2022 – 27%, 2021 – 28%) $ 18,343 $ 18,253 (1) Investment grade debt securities and private placements include 39% rated A, 17% rated AA and 14% rated AAA (2021 – 39%, 17% and 15%) investments based on external ratings where available. (2) Mortgages and real estate investments are diversified geographically and by property type. The following table presents debt securities and private placements portfolio by sector and industry. 2022 2021 As at December 31, Carrying value % of total Carrying value % of total Government and agency $ 77,236 31 $ 84,244 32 Utilities 46,315 18 48,372 18 Financial 38,808 15 38,905 15 Consumer 31,556 13 32,671 12 Energy 16,314 7 19,637 7 Industrial 23,823 9 24,727 9 Other 16,909 7 18,425 7 Total $ 250,961 100 $ 266,981 100 (g) Insurancerisk Insurance risk is the risk of loss due to actual experience for mortality and morbidity claims, policyholder behaviour and expenses emerging differently than assumed when a product was designed and priced. A variety of assumptions are made related to these experience factors, for reinsurance costs, and for sales levels when products are designed and priced, as well as in the determination of policy liabilities. Assumptions for future claims are generally based on both Company and industry experience, and assumptions for future policyholder behaviour and expenses are generally based on Company experience. Such assumptions require significant professional judgment, and actual experience may be materially different than the assumptions made by the Company. Claims may be impacted unexpectedly by changes in the prevalence of diseases or illnesses, medical and technology advances, widespread lifestyle changes, natural disasters, large- scale man-made disasters and acts of terrorism. Policyholder behaviour including premium payment patterns, policy renewals, lapse rates and withdrawal and surrender activity are influenced by many factors including market and general economic conditions, and the availability and relative attractiveness of other products in the marketplace. Some reinsurance rates are not guaranteed and may be changed unexpectedly. Adjustments the Company seeks to make to Non-Guaranteed elements to reflect changing experience factors may be challenged by regulatory or legal action and the Company may be unable to implement them or may face delays in implementation. 192 | 2022AnnualReport | NotestoConsolidatedFinancialStatements