Critical Accounting Policies Consolidation The Company is required to consolidate the financial position and results of entities it controls. Control exists when the Company: • Has the power to govern the financial and operating policies of the entity; • Is exposed to a significant portion of the entity’s variable returns; and • Is able to use its power to influence variable returns from the entity. The Company uses the same principles to assess control over any entity it is involved with. In evaluating control, potential factors assessed include the effects of: • Substantive potential voting rights that are currently exercisable or convertible; • Contractual management relationships with the entity; • Rights and obligations resulting from policyholders to manage investments on their behalf; • The extent of other parties’ involvement in the entity, if any, the possibility for de facto control being present; and • The effect of any legal or contractual restraints on the Company from using its power to affect its variable returns from the entity. An assessment of control is based on arrangements in place and the assessed risk exposures at inception. Initial evaluations are reconsidered at a later date if: • The Company acquires or loses power over the financial and operating policies of the entity; • The Company acquires additional interests in the entity or its interests in an entity are diluted; • The contractual arrangements of the entity are amended such that the Company’s involvement with the entity changes; or • The Company’s ability to use its power to affect its variable returns from the entity changes. Subsidiaries are consolidated from the date on which control is obtained by the Company and cease to be consolidated from the date that control ceases. A change in control may lead to gains or losses on derecognition of a subsidiary when losing control, or on derecognition of previous interests in a subsidiary when gaining control. FairValueofInvestedAssets A large portion of the Company’s invested assets are recorded at fair value. Refer to note 1 of the 2022 Annual Consolidated Financial Statements for a description of the methods used in determining fair values. When quoted prices in active markets are not available for a particular investment, significant judgment is required to determine an estimated fair value based on market standard valuation methodologies including discounted cash flow methodologies, matrix pricing, consensus pricing services, or other similar techniques. The inputs to these standard valuation methodologies include: current interest rates or yields for similar instruments, credit rating of the issuer or counterparty, industry sector of the issuer, coupon rate, call provisions, sinking fund requirements, tenor (or expected tenor) of the instrument, management’s assumptions regarding liquidity, volatilities and estimated future cash flows. Accordingly, the estimated fair values are based on available market information and management’s judgments about the key market factors impacting these financial instruments. Financial markets are susceptible to severe events evidenced by rapid depreciation in asset values accompanied by a reduction in asset liquidity. The Company’s ability to sell assets, or the price ultimately realized for these assets, depends upon the demand and liquidity in the market and increases the use of judgment in determining the estimated fair value of certain assets. EvaluationofInvestedAssetImpairment AFS debt and equity securities are carried at fair market value, with changes in fair value recorded in other comprehensive income (“OCI”) with the exception of unrealized gains and losses on foreign currency translation of AFS fixed income securities which are included in net income attributed to shareholders. Securities are reviewed on a regular basis and any fair value decrement is transferred out of AOCI and recorded in net income attributed to shareholders when it is deemed probable that the Company will not be able to collect all amounts due according to the contractual terms of a debt security or when fair value of an equity security has declined significantly below cost or for a prolonged period of time. Provisions for impairments of mortgage loans and private placement loans are recorded with losses reported in earnings when there is no longer reasonable assurance as to the timely collection of the full amount of the principal and interest. Significant judgment is required in assessing whether an impairment has occurred and in assessing fair values and recoverable values. Key matters considered include economic factors, Company and industry specific developments, and specific issues with respect to single issuers and borrowers. Changes in circumstances may cause future assessments of asset impairment to be materially different from current assessments, which could require additional provisions for impairment. Additional information on the process and methodology for determining the allowance for credit losses is included in the discussion of credit risk in note 9 to the 2022 Consolidated Financial Statements. 96 | 2022AnnualReport | Management’sDiscussionandAnalysis