7. Investments Our investment philosophy for the general fund is to invest in an asset mix that optimizes our risk adjusted returns and matches the characteristics of our underlying liabilities. We follow a bottom-up approach which combines our strong asset management skills with an in-depth understanding of the characteristics of each investment. We invest in a diversified mix of assets and our diversification strategy has historically produced superior risk adjusted returns while reducing overall risk. We use a disciplined approach across all asset classes. Our risk management strategy is outlined in the “Risk Management and Risk Factors” section below. General Fund Assets As at December 31, 2022, our general fund invested assets totaled $414.0 billion compared with $427.1 billion at the end of 2021. The following table shows the asset class composition as at December 31, 2022 and December 31, 2021. 2022 2021 As at December 31, ($ billions) Carrying value % of total Fair value Carrying value % of total Fair value Cash and short-term securities $19.2 5$19.2 $22.6 5 $22.6 Debt Securities and Private Placement Debt Government bonds 72.4 17 72.2 79.7 19 79.7 Corporate bonds 129.1 32 129.0 141.6 33 141.6 Securitized/asset-backed securities 2.3 1 2.3 2.9 1 2.9 Private placement debt 47.1 11 42.0 42.8 10 47.3 Mortgages 54.6 13 51.4 52.0 12 54.1 Policy loans and loans to bank clients 9.7 2 9.7 8.9 2 8.9 Public equities 23.5 6 23.5 28.1 7 28.1 Alternative Long-Duration Assets (“ALDA”) Real Estate 13.3 3 14.4 13.2 3 14.4 Infrastructure 12.8 3 13.0 9.8 2 10.0 Timberland and Farmland 6.0 1 6.5 5.3 1 5.7 Private Equity 14.3 3 14.3 11.6 3 11.6 Oil & Gas 2.2 1 2.2 1.9 0 1.9 Other ALDA 3.2 1 3.2 2.6 1 2.6 Leveraged Leases and Other 4.3 1 4.3 4.1 1 4.1 Total general fund invested assets $ 414.0 100 $ 407.2 $ 427.1 100 $ 435.5 The carrying values for invested assets are generally equal to their fair values, however, mortgages and private placement debt are carried at amortized cost; loans to bank clients are carried at unpaid principal balances less allowance for credit losses; real estate held for own use is carried at cost less accumulated depreciation and any accumulated impairment losses; and private equity investments, including power and infrastructure, oil and gas, and timber, are accounted for as associates using the equity method, or at fair value. Certain government and corporate bonds and public equities are classified as AFS, with the remaining classified as “fair value through profit or loss”. As at December 31, 2022, the carrying value of renewable energy assets, including energy efficiency projects, was $13.6 billion (2021 – $13.1 billion). Shareholders’ accumulated other comprehensive pre-tax income (loss) at December 31, 2022 consisted of a $7.3 billion loss for bonds (2021 – gain of $873 million) and an $84 million loss for public equities (2021 – gain of $288 million). Included in the $7.3 billion loss for bonds was a $276 million loss related to the fair value hedge basis adjustments attributable to the hedged risk of certain AFS bonds that are in a gain position (2021 – loss of $293 million). Debt Securities and Private Placement Debt We manage our high-quality fixed income portfolio to optimize yield and quality while ensuring that asset portfolios remain diversified by sector, industry, issuer, and geography. As at December 31, 2022, our fixed income portfolio of $251.0 billion (2021 – $267.0 billion) was 96% investment grade (rated BBB or better) and 71% was rated A or higher (2021 – 97% and 72%, respectively). Our private placement debt holdings provide diversification benefits (issuer, industry, and geography) and, because they often have stronger protective covenants and collateral than debt securities, they typically provide better credit protection and potentially higher recoveries in the event of default. Geographically, 22% is invested in Canada (2021 – 23%), 48% is invested in the U.S. (2021 – 49%), 5% is invested in Europe (2021 – 4%) and the remaining 25% is invested in Asia and other geographic areas (2021 – 24%). 38 | 2022AnnualReport | Management’sDiscussionandAnalysis