The Empire Life Insurance Company -
Annual Report 2024
Navigate life with confidence
Insurance & Investments
Table of Contents
Message from the Chairman of the Board
3
Message from the President and Chief Executive Officer
4
Management's Discussion and Analysis
6
Management's Responsibility for Financial Reporting
36
Appointed Actuary's Report
37
Independent Auditor's Report
38
Consolidated Statements of Financial Position
42
Consolidated Statements of Operations
43
Consolidated Statements of Comprehensive Income
44
Consolidated Statements of Changes in Equity
45
Consolidated Statements of Cash Flows
46
Notes to the Consolidated Financial Statements
47
1. Description of Company and Summary of Operations
47
2. Material Accounting Policies
47
3. Financial Instruments
68
4. Other Assets
72
5. Intangible Assets
73
6. Investment in Associates and Joint Venture
73
7. Segregated Funds
73
8. Accounts Payable and Other Liabilities
74
9. Insurance Contracts and Reinsurance Contracts Held Assets/Liabilities
75
10. Employee Benefit Plans
89
11. Subordinated Debt
94
12. Claims, Operating Expenses, Commissions and Interest Expense
95
13. Income Taxes
96
14. Earnings Per Share
97
15. Capital Stock
97
16. Dividends
98
17. Participating Account
99
18. Segmented Information by Product Line
99
19. Commitments and Contingencies
102
20. Related Party Transactions
102
21. Capital Management
102
22. Risk Management
103
Glossary of Terms
116
Participating Account Management Policy
118
Participating Policyholder Dividends Policy
121
Participating Account Financial Disclosure
124
Corporate Governance over Risk Management
125
Corporate Information
127
Board of Directors
128
Corporate Management
129
Empire Life - Annual Report 2024
2
Message from the Chairman of the Board
Empire Life ended 2024 as a strong, successful independently owned Canadian financial services company focused on
delivering exceptional service and innovative solutions to Canadians from coast to coast to coast. We play an important
role in helping individuals and businesses build better futures for themselves, their families and employees. I remain proud
to be the third generation behind this great company.
As one of the leading insurance companies in Canada, we support 633,000 individual customers, 6,300 group employer
customers and over 150,600 group life and health plan members. We employ 1,250 team members across the country,
and work with more than 36,000 distribution partners—professional financial advisors, brokers, managing general agents,
group producers and mutual fund dealers across Canada.
Our performance in another year of change punctuated by economic uncertainty, regulatory requirements and heightened
political and social environments demonstrated our ongoing operational resilience. The company remains focused on
continuous improvement by enhancing existing tools and investing in new and important technology to keep us ahead of
the curve.
All this is possible because of our strong foundation of executive leadership built over the last decade by Mark Sylvia,
President and CEO. The leadership team remains focused on meeting the challenges and opportunities of tomorrow with
our tried-and-true recipe for success—innovative and financially sound solutions delivered by dedicated and experienced
employees and distribution partners who are committed to helping Canadians thrive.
Good corporate governance and transparency are fundamental to what we believe in and how we conduct business at
Empire Life. We have a highly engaged and committed Board of Directors who provide careful counsel and strategic
leadership to management. In 2024, we said farewell to John Brierley who now serves as an Honorary Director. We thank
him for his dedicated 10 years of service for which we have all benefited greatly. We welcomed Peter Levitt as Director.
Peter has more than 40 years of experience in the financial services sector as an executive, consultant, and Board
Member. Our Board is well positioned for the future.
Much was accomplished in 2024 and we look forward to all that we will accomplish in the coming year. I know that by
continuing to work together, we will indeed be the industry leader for service excellence and innovation.
Chair of the Board
February 27, 2025
Duncan N. R. Jackman
Empire Life - Annual Report 2024
3
Message from the President and Chief Executive Officer
In 2024, Empire Life began its second century of operation—no small feat in today’s challenging and ever-changing
marketplace. Our team of dedicated employees and distribution partners worked together to help Canadians get the
products and solutions they need to build wealth, generate income and achieve financial security. Our continued focus on
service excellence, innovation, strategic planning and investment has helped us deliver strong financial results while
earning a reasonable return for our shareholders and securing a robust capital position.
As we’ve done for more than 100 years, we remain steadfast in our drive to incrementally improve our business by
streamlining our business processes, enhancing our product suite, and maintaining superior customer service.
Last year, we launched several new solutions to support our customers. Whether it’s saving for their first home, investing
with greater choice and flexibility, or purchasing insurance products with guaranteed premiums and death benefits, we’re
intent on providing an exceptional customer experience. While most of the change we encounter in our business is driven
by five external factors—the economy, regulation, the political and social environment, demographics and technology—if
we start with the customer in mind, we will always be successful.
We want to build on the success we achieved in 2024, so we’re not slowing down. In fact, we’re accelerating our product
expansion program and continuously adapting to change. Running a company of our size and scope is complicated and
challenging. Our roadmap for long-term success is guided by a relentless focus on five key activities:
•
Identifying, analyzing, and fixing problems in the business;
•
Improving the efficiency and capabilities of business operations and its use of capital to run the business;
•
Identifying opportunities and making the investments needed to profitably grow the business;
•
Organizing and planning our teams to ensure we are efficient and prepare for the changes that will impact the
business; and
•
Maintaining a strong culture that engages our teams in the goals of the business and values the contributions of
our employees.
Our objective is to provide customers and advisors with a compelling value proposition. We must offer well designed,
competitive products. We must utilize business processes that make the products easily accessible with short turnaround
times. We must ensure that our communication and access to our people is prompt and comprehensive. The demands for
efficient service and competitive products are unrelenting. We’re living in an age where everything is available now, and
customer expectations are increasing. As we move forward, a key to our ongoing success will be disciplined planning and
deployment of resources to execute on our project plans. We have to prioritize what we are going to do and when we are
going to do it.
Supporting this work moving into 2025 is our revitalized brand strategy, making sure it reflects current trends to drive
greater awareness of Empire Life with customers, advisors and distribution partners. We’re moving from an effective yet
utilitarian vision and mission to something that is modern, approachable and reflective of our company’s values of
integrity, care and respect in dealing with our customers and each other.
•
Empire Life’s new vision: Be the industry leader for service excellence and innovation.
•
Empire Life’s new mission: Provide expertise and intelligent solutions to help Canadians navigate life
with confidence.
Empire Life - Annual Report 2024
4
Message from the President and Chief Executive Officer
Buoyed by our commitment to intelligent solutions, renowned service, and a culture of integrity and care, our refreshed
vision and mission will better reinforce why we do what we do—keeping the customer central to our brand promise.
This important work is supported by a highly engaged Board of Directors whose members understand and endorse our
objectives. Bolstered by our superior products, advice and service, our revitalized brand will guide us in our journey to
remain competitive, create shareholder value, and ultimately, help Canadians navigate life with confidence.
President and Chief Executive Officer
February 27, 2025
Mark Sylvia
Empire Life - Annual Report 2024
5
Management's Discussion and Analysis
Dated as of February 27, 2025
This document provides Management’s Discussion and Analysis (MD&A) of the operating results and financial condition of
The Empire Life Insurance Company (Empire Life or the Company) for the years ended December 31, 2024 and 2023.
This MD&A should be read in conjunction with the Company’s Consolidated Financial Statements for the year ended
December 31, 2024,which form part of The Empire Life Insurance Company 2024 Annual Report dated February 27,
2025. Unless otherwise noted, both the Consolidated Financial Statements and this MD&A are expressed in Canadian
dollars. Some variances may not reconcile, and analysis of components may not sum to the analysis for the grouped
components due to rounding.
MD&A contains forward-looking information and involves numerous risks and uncertainties, including, but not limited to,
those described in the “Risk Factors” section of the Annual Information Form which is available at www.sedarplus.ca. No
assurance can be given that results, performance or achievement expressed in or implied by any of the forward-looking
information will occur or, if they do, that any benefits may be derived from them. Actual results may differ materially from
those expressed or implied by such forward-looking information. See the Forward-Looking Statements and Information
section in this report.
The Consolidated Financial Statements have been prepared in accordance with International Financial Reporting
Standards as issued by the International Accounting Standards Board (IASB) (IFRS Accounting Standards). This MD&A
makes reference to certain non-IFRS measures. These non-IFRS measures are not recognized measures under IFRS
Accounting Standards and do not have a standardized meaning prescribed by IFRS Accounting Standards. Therefore,
they are unlikely to be comparable to similar measures presented by other companies. Rather, these measures are
provided as additional information and complement IFRS Accounting Standards measures by providing further
understanding of the Company’s results of operations from management’s perspective. Accordingly, they should not be
considered in isolation nor as a substitute for analysis of the Company’s financial information under IFRS Accounting
Standards. Refer to the Non-IFRS Measures section of this report. Note that certain comparative amounts have been
reclassified and restated to conform with the presentation adopted in the current period.
Financial Analysis - Overview
(in millions of dollars except per share amounts)
Fourth Quarter
Year to date
2024
2023
2024
2023
Common shareholders' net income (loss)
$
16 $
111 $
281 $
156
Earnings per share - basic and diluted
$
21.95 $
112.15 $
284.77 $
158.70
Empire Life reported fourth quarter Common shareholders’ net income of $16 million, a $95 million decrease compared to
the fourth quarter of 2023, driven by substantial investment income in the fourth quarter of 2023 that did not reoccur in the
same period in 2024. Common shareholders’ net income of $281 million for the full year of 2024 represents an increase of
$125 million over the prior year. The increase was driven by favourable Net investment and insurance finance results due
to more favourable interest rate movements and the impacts of insurance contract liability assumption updates.
Empire Life - Annual Report 2024
6
Management's Discussion and Analysis
Selected Financial Information
Statement of Operations Information
(in millions of dollars)
For the years ended
December 31
2024
2023
Insurance service result
$
218
$
254
Net recovery (expense) from reinsurance contracts held
(42)
(73)
Net insurance service result
176
181
Net investment result, excluding segregated fund account balances
489
789
Net insurance finance income (expense), excluding segregated fund account balances
(183)
(653)
Segregated fund account balances net investment and insurance finance result
—
—
Net investment and insurance finance result
306
136
Total other income and expenses
(79)
(81)
Net income (loss) before taxes
403
236
Income taxes
(103)
(46)
Net income (loss) after taxes
300
190
Other comprehensive income (loss), net of income taxes:
Remeasurements of post-employment benefit liabilities
5
(1)
Total comprehensive income (loss)
305
189
Return on common shareholders’ equity
17.4 %
10.5 %
Earnings per share - basic and diluted ($)
284.77
158.70
Statement of Financial Position Information, as at
(in millions of dollars)
December 31,
2024
December 31,
2023
Assets
Cash and cash equivalents
$
219 $
348
Investments
9,386
8,917
Other assets
668
587
Segregated fund assets
9,394
8,813
Total assets
$
19,667 $
18,665
Liabilities
Insurance contract liabilities, excluding segregated fund account balances
$
6,868 $
6,708
Reinsurance contracts held liabilities
214
253
Investment contract liabilities, excluding segregated fund account balances
586
490
Subordinated debt
399
399
Insurance and investment contract liabilities for segregated fund account balances
9,394
8,813
Other liabilities(1)
156
114
Total liabilities
17,617
16,777
Total equity
2,050
1,888
Total liabilities and equity
$
19,667 $
18,665
(1) Prior year amounts have been revised from those previously presented.
Empire Life - Annual Report 2024
7
Management's Discussion and Analysis
Other Financial Information, as at
(in millions of dollars)
December 31,
2024
December 31,
2023
Assets under management(1)
General fund assets
$
10,273
$
9,852
Segregated fund assets
9,394
8,813
Total
$
19,667
$
18,665
Subordinated debt
399
399
Preferred shares and other equity
297
297
(1) See Non-IFRS Measures section.
LICAT Ratio Information
(in millions of dollars)
As at December 31
2024
2023
Available regulatory capital
Tier 1
$
2,195
$
2,135
Tier 2
726
714
Total
$
2,921
$
2,849
Surplus allowance and eligible deposits
677
651
Base solvency buffer
2,383
2,252
LICAT total ratio
151%
155%
LICAT core ratio
112%
115%
Cash dividends per share
For the years ended December 31
2024
2023
2022
Preferred shares series 3
$
1.55 $
1.55 $
1.23
Common shares
$
132.00 $
76.32 $
73.80
Empire Life - Annual Report 2024
8
Management's Discussion and Analysis
Results by Product Line
The following tables provide a summary of Empire Life results segmented by product line for the periods ended
December 31, 2024 and December 31, 2023. A discussion of results is provided in the Product Line Results sections of
the MD&A.
For the three months ended December 31, 2024
(in millions of dollars)
Wealth
Management
Group
Solutions
Individual
Insurance
Capital &
Surplus
Total
Insurance service result
Insurance revenue
$
52 $
177 $
129 $
— $
358
Insurance service expenses
(27)
(181)
(127)
—
(335)
Insurance service result
25
(4)
2
—
23
Net recovery (expense) from reinsurance contracts held
—
3
7
—
10
Net insurance service result
25
(1)
9
—
33
Investment and insurance finance result
Investment income (loss), excluding segregated fund
account balances
Investment income
15
3
11
9
38
Change in investment contracts
(4)
—
—
—
(4)
Net investment result, excluding segregated fund account
balances
11
3
11
9
34
Insurance finance income (expense), excluding segregated
fund account balances
Insurance contracts
(4)
(4)
(24)
—
(32)
Reinsurance contracts held
—
2
—
—
2
Net insurance finance income (expense), excluding
segregated fund account balances
(4)
(2)
(24)
—
(30)
Segregated fund account balances net investment and
insurance finance result
Investment income (loss) on investments for segregated fund
account balances
52
—
—
—
52
Insurance finance income (expenses) segregated fund
account balances
(52)
—
—
—
(52)
Segregated fund account balances net investment and
insurance finance result
—
—
—
—
—
Net investment and insurance finance result
7
1
(13)
9
4
Other income and expenses
Fee and other income
—
2
—
12
14
Non-insurance expenses
(4)
(6)
(7)
(11)
(28)
Interest expenses
—
—
—
(4)
(4)
Total other income and expenses
(4)
(4)
(7)
(3)
(18)
Net income (loss) before taxes
$
28 $
(4) $
(11) $
6 $
19
Income taxes
(3)
Net income (loss) after taxes
16
Less: net income (loss) attributable to the participating account
(3)
Shareholders' net income (loss)
19
Less: preferred share dividends declared and distributions on
other equity instruments
3
Common shareholders' net income (loss)
$
16
Empire Life - Annual Report 2024
9
Management's Discussion and Analysis
For the three months ended December 31, 2023
(in millions of dollars)
Wealth
Management
Group
Solutions
Individual
Insurance
Capital &
Surplus
Total
Insurance service result
Insurance revenue
$
58 $
163 $
114 $
— $
335
Insurance service expenses
(38)
(149)
(78)
—
(265)
Insurance service result
20
14
36
—
70
Net recovery (expense) from reinsurance contracts held
—
(5)
(17)
—
(22)
Net insurance service result
20
9
19
—
48
Investment and insurance finance result
Investment income (loss), excluding segregated fund account
balances
Investment income
67
17
721
158
963
Change in investment contracts
(19)
—
—
—
(19)
Net investment result, excluding segregated fund account
balances
48
17
721
158
944
Insurance finance income (expense), excluding segregated fund
account balances
Insurance contracts
(33)
(20)
(699)
—
(752)
Reinsurance contracts held
1
10
(61)
—
(50)
Net insurance finance income (expense), excluding
segregated fund account balances
(32)
(10)
(760)
—
(802)
Segregated fund account balances net investment and
insurance finance result
Investment income (loss) on investments for segregated fund
account balances
538
—
1
—
539
Insurance finance income (expenses) segregated fund
account balances
(538)
—
(1)
—
(539)
Segregated fund account balances net investment and
insurance finance result
—
—
—
—
—
Net investment and insurance finance result
16
7
(39)
158
142
Other income and expenses
Fee and other income
—
2
—
7
9
Non-insurance expenses
(8)
(4)
(5)
(11)
(28)
Interest expenses
—
—
—
2
2
Total other income and expenses
(8)
(2)
(5)
(2)
(17)
Net income (loss) before taxes
$
28 $
14 $
(25) $
156 $
173
Income taxes
(35)
Net income (loss) after taxes
138
Less: net income (loss) attributable to the participating account
20
Shareholders' net income (loss)
118
Less: preferred share dividends declared and distributions on
other equity instruments
7
Common shareholders' net income (loss)
$
111
Empire Life - Annual Report 2024
10
Management's Discussion and Analysis
For the year ended December 31, 2024
(in millions of dollars)
Wealth
Management
Group
Solutions
Individual
Insurance
Capital &
Surplus
Total
Insurance service result
Insurance revenue
$
238 $
677 $
490 $
— $
1,405
Insurance service expenses
(133)
(647)
(407)
—
(1,187)
Insurance service result
105
30
83
—
218
Net recovery (expense) from reinsurance contracts held
(1)
(15)
(26)
—
(42)
Net insurance service result
104
15
57
—
176
Investment and insurance finance result
Investment income (loss), excluding segregated fund
account balances
Investment income
94
14
315
95
518
Change in investment contracts
(29)
—
—
—
(29)
Net investment result, excluding segregated fund account
balances
65
14
315
95
489
Insurance finance income (expense), excluding segregated
fund account balances
Insurance contracts
(20)
(26)
(170)
—
(216)
Reinsurance contracts held
1
12
20
—
33
Net insurance finance income (expense), excluding
segregated fund account balances
(19)
(14)
(150)
—
(183)
Segregated fund account balances net investment and
insurance finance result
Investment income (loss) on investments for segregated fund
account balances
1,117
—
3
—
1,120
Insurance finance income (expenses) segregated fund
account balances
(1,117)
—
(3)
—
(1,120)
Segregated fund account balances net investment and
insurance finance result
—
—
—
—
—
Net investment and insurance finance result
46
—
165
95
306
Other income and expenses
Fee and other income
1
9
—
35
45
Non-insurance expenses
(30)
(22)
(27)
(30)
(109)
Interest expenses
—
—
—
(15)
(15)
Total other income and expenses
(29)
(13)
(27)
(10)
(79)
Net income (loss) before taxes
$
121 $
2 $
195 $
85 $
403
Income taxes
(103)
Net income (loss) after taxes
300
Less: net income (loss) attributable to the participating account
7
Shareholders' net income (loss)
293
Less: preferred share dividends declared and distributions on
other equity instruments
12
Common shareholders' net income (loss)
$
281
Empire Life - Annual Report 2024
11
Management's Discussion and Analysis
For the year ended December 31, 2023
(in millions of dollars)
Wealth
Management
Group
Solutions
Individual
Insurance
Capital &
Surplus
Total
Insurance service result
Insurance revenue
$
235 $
639 $
452 $
— $
1,326
Insurance service expenses
(147)
(598)
(327)
—
(1,072)
Insurance service result
88
41
125
—
254
Net recovery (expense) from reinsurance contracts held
—
(17)
(56)
—
(73)
Net insurance service result
88
24
69
—
181
Investment and insurance finance result
Investment income (loss), excluding segregated fund account
balances
Investment income
72
16
598
131
817
Change in investment contracts
(28)
—
—
—
(28)
Net investment result, excluding segregated fund account
balances
44
16
598
131
789
Insurance finance income (expense), excluding segregated fund
account balances
Insurance contracts
(34)
(22)
(557)
—
(613)
Reinsurance contracts held
1
10
(51)
—
(40)
Net insurance finance income (expense), excluding
segregated fund account balances
(33)
(12)
(608)
—
(653)
Segregated fund account balances net investment and
insurance finance result
Investment income (loss) on investments for segregated fund
account balances
734
—
2
—
736
Insurance finance income (expenses) segregated fund
account balances
(734)
—
(2)
—
(736)
Segregated fund account balances net investment and
insurance finance result
—
—
—
—
—
Net investment and insurance finance result
11
4
(10)
131
136
Other income and expenses
Fee and other income
1
8
—
22
31
Non-insurance expenses
(30)
(16)
(19)
(30)
(95)
Interest expenses
—
—
—
(17)
(17)
Total other income and expenses
(29)
(8)
(19)
(25)
(81)
Net income (loss) before taxes
$
70 $
20 $
40 $
106 $
236
Income taxes
(46)
Net income (loss) after taxes
190
Less: net income (loss) attributable to the participating account
22
Shareholders' net income (loss)
168
Less: preferred share dividends declared and distributions on
other equity instruments
12
Common shareholders' net income (loss)
$
156
Empire Life - Annual Report 2024
12
Management's Discussion and Analysis
Total Company Results - Quarter over Quarter
Empire Life reported Common shareholders’ net income (loss) of $16 million in the fourth quarter of 2024, a $95 million
decrease compared to the fourth quarter of 2023. The period over period decrease was driven by large gains in the
Company's Net investment and insurance finance results due to interest rate decreases in the fourth quarter of 2023 that
did not reoccur in the same period in 2024.
Net insurance service result decreased by $15 million in the fourth quarter, compared to the same period in 2023.
Contributing factors include adverse mortality experience in the Individual Insurance product line relative to the prior
period, and unfavourable long-term disability (LTD) claims experience in the Group Solutions product line.
Net investment and insurance finance result decreased by $138 million in the fourth quarter compared to the same period
in 2023. This was mainly due to modest interest rate movements in the fourth quarter of 2024 relative to the more
significant interest rate decrease in the fourth quarter in 2023. In addition there were favourable net investment gains from
non-fixed income assets in the fourth quarter in 2023 that did not reoccur in the fourth quarter in 2024.
Total other income and expenses was a net expense of $18 million in the fourth quarter, a $1 million increase compared to
the same period in 2023. The change is due to higher Non-insurance operating expenses related to investments in
information systems and process efficiency which were offset by gains in Fee and other income due to strategic
acquisitions during the quarter.
Total Company Results - Year over Year
Full year Common shareholders’ net income (loss) of $281 million was a $125 million increase compared to 2023. The
increase over prior year was primarily due to higher Net investment and insurance finance result driven by increases in
Net insurance finance income, related to impacts from insurance contract liability assumption updates, and interest rate
movements in 2024.
Net insurance service result decreased by $5 million in 2024 compared to the prior year, primarily due to adverse claims
experience in our Individual Insurance and Group Solutions product lines, partially offset by improved expense experience
in our Wealth Management product line.
Net investment and insurance finance result increased by $170 million in 2024 compared to 2023. This was mainly due to
more favourable impacts from interest rate movements and updates to the discount rate assumption applied in the
measurement of insurance contract liabilities.
Total other income and expenses was a net expense of $79 million in 2024, a $2 million favourable decrease compared
with the net expense of $81 million in 2023. Gains in Fee and other income in the Capital and Surplus segment related to
disposal of Property and equipment were offset by increased Non-insurance operating expenses across the Company
during the year.
Empire Life - Annual Report 2024
13
Management's Discussion and Analysis
Product Line Results - Wealth Management
(in millions of dollars)
Fourth Quarter
Year to date
2024
2023
2024
2023
Fixed annuities
Assets under management(1)
$
996 $
918
$
996 $
918
Gross sales(1)
34
79
195
242
Net sales(1)
5
51
74
140
Segregated funds
Assets under management(1), (2)
$
9,375 $
8,795
$
9,375 $
8,795
Gross sales(1)
311
189
953
751
Net sales(1)
(10)
(99)
(394)
(305)
(1) See Non-IFRS Measures section.
(2) Prior year amounts have been revised from those previously presented
(in millions of dollars)
Fourth Quarter
Year to date
2024
2023
2024
2023
Net insurance service result
$
25 $
20
$
104 $
88
Net investment and insurance finance result
7
16
46
11
Fee and other income
—
—
1
1
Non-insurance operating expenses
(4)
(8)
(30)
(30)
Net income (loss) before taxes
$
28 $
28
$
121 $
70
Fixed annuities assets under management were 8% higher relative to the same period in 2023, reflecting market gains on
deposits placed during a period of strong sales growth in 2022 and 2023. Gross sales in the fourth quarter were 57%
lower than the same period in 2023, due to the change in the interest rate environment leading to a shift in customer
demand towards segregated fund products.
Segregated fund assets under management were 7% higher relative to the same period in 2023, reflecting favourable
market movements and improvements in Gross sales in the latter half of 2024. For the fourth quarter of 2024, Gross sales
of segregated funds were 65% higher than the same period in 2023. New fund launches in 2024 contributed to the
positive variance, along with increased customer demand due to an improvement in the interest rate environment.
Net income (loss) before taxes for the fourth quarter remained consistent with the same period in 2023. The Net insurance
service result increase of $5 million was due to project expense spend in 2023 that did not reoccur in 2024. The Net
investment and insurance finance result of $7 million in the fourth quarter is a $9 million decrease relative to the same
period in the prior year, due to modest interest rate movements in the period, as well as the strong performance of non-
fixed income assets in the fourth quarter of 2023 that did not repeat in 2024.
Net income (loss) before taxes of $121 million for the full year of 2024 is a $51 million increase compared to the full year
of 2023. Project expense spend in 2023 that did not reoccur in 2024 drove the increase to the Net insurance service
result. The Net investment and insurance finance result also contributed to the positive net income variance due to gains
on the Company's non-fixed income assets and favourable interest rate movements in the full year of 2024 relative to
more modest interest rate movements over the course of 2023.
Empire Life - Annual Report 2024
14
Management's Discussion and Analysis
Product Line Results - Group Solutions
(in millions of dollars)
Fourth Quarter
Year to date
2024
2023
2024
2023
Annualized premium sales
Core
$
24 $
12 $
76 $
49
Other
8
6
38
25
Total annualized premium sales(1)
$
32 $
18 $
114 $
74
(1) See Non-IFRS Measures section.
(in millions of dollars)
Fourth Quarter
Year to date
2024
2023
2024
2023
Insurance revenue
$
177 $
163 $
677 $
639
Net insurance service result
$
(1) $
9 $
15 $
24
Net investment and insurance finance result
1
7
—
4
Fee and other income
2
2
9
8
Non-insurance operating expenses
(6)
(4)
(22)
(16)
Net income (loss) before taxes
$
(4) $
14 $
2 $
20
Total annualized premium sales increased 78% in the fourth quarter and increased 54% year to date, compared to the
same periods in 2023. This increase is primarily due to strong sales of Group Solutions' core product offerings.
Insurance revenue increased 9% in the fourth quarter and year to date, compared to the same periods in 2023, primarily
due to organic growth in specialty partnerships.
For the quarter, Net income (loss) before taxes decreased $18 million compared to the same period in 2023, due to a
decrease in both the Net insurance service result and the Net investment and insurance finance result due to favourable
interest rate movements in the fourth quarter of 2023 that were not repeated. The decrease in Net insurance service result
was primarily due to unfavourable experience on LTD claims due to longer claim duration, as well as a change in the
timing of annual insurance contract liability assumption updates. Further details on the impacts of assumption updates are
provided in the Results - Impact of Insurance Contract Liability Assumption Updates section of this MD&A.
For the year, Net income (loss) before taxes decreased by $18 million, compared to the same period in 2023. This was
primarily due to unfavourable experience on LTD claims and life claims, partially offset by improvements in extended
health and dental claims experience. Increased non-insurance operating expenses also contributed to the decrease over
the prior year, related to investments in new product lines and increased overhead costs.
Empire Life - Annual Report 2024
15
Management's Discussion and Analysis
Product Line Results - Individual Insurance
(in millions of dollars)
Fourth Quarter
Year to date
2024
2023
2024
2023
Shareholders'
Shareholders' annualized premium sales(1)
$
10 $
10 $
41 $
40
Net income (loss) before taxes
(9)
(29)
188
35
Policyholders'
Policyholders' annualized premium sales(1)
$
4 $
3 $
15 $
14
Net income (loss) before taxes
(2)
4
7
5
(1) See Non-IFRS Measures section.
(in millions of dollars)
Fourth Quarter
Year to date
2024
2023
2024
2023
Net insurance service result
$
9 $
19 $
57 $
69
Net investment and insurance finance result
(13)
(39)
165
(10)
Non-insurance operating expenses
(7)
(5)
(27)
(19)
Net income (loss) before taxes
$
(11) $
(25) $
195 $
40
Shareholders’ annualized premium sales were consistent in the fourth quarter compared to the same period in 2023. The
launch of two new products supported robust sales for the whole life portfolio in both the fourth quarter and the full year of
2024. Sales momentum was offset by the competitive price landscape in the term insurance sector.
Shareholders' net income (loss) before taxes for the fourth quarter of 2024 increased $20 million compared to 2023. Net
investment and insurance finance result improved by $26 million in the quarter due to modest interest rate movements in
the fourth quarter of 2024 relative to unfavourable interest rate movements in the same period in 2023. The favourable
Net investment and insurance finance result was partially offset by adverse mortality experience in the fourth quarter
compared to the same period in 2023.
Shareholders' net income (loss) before taxes increased $153 million in 2024 compared to 2023. Net investment and
insurance finance results improved by $175 million in 2024 compared to 2023 due to more favourable interest rate
movements and the impacts of discount rate assumption updates. These gains were slightly offset by a year over year
decline in Net insurance service result related to the adverse mortality experience in 2024.
Results - Capital and Surplus
(in millions of dollars)
Fourth Quarter
Year to date
2024
2023
2024
2023
Net investment result
$
9 $
158 $
95 $
131
Other income and expenses
(3)
(2)
(10)
(25)
Net income (loss) before taxes
$
6 $
156 $
85 $
106
Compared to the prior period, fourth quarter Net income (loss) before taxes decreased $150 million in the Capital and
Surplus segment driven by modest interest rate movements in the fourth quarter of 2024 relative to those in the fourth
quarter of 2023.
The year to date decrease in Net income (loss) before taxes of $21 million compared to prior year is primarily due to less
favourable interest rate movements in 2024 compared to 2023. The Company also realized some modest gains in Other
income and expenses related to disposal of Property and equipment, which offset increased non-insurance operating
expenses related to information systems, process improvement, and compliance costs.
Empire Life - Annual Report 2024
16
Management's Discussion and Analysis
Results - Net Contractual Service Margin
(Amounts are net of reinsurance contracts held, in millions
of dollars)
Fourth Quarter
Year to date
2024
2023
2024
2023
Net contractual service margin, beginning of period
$
1,426 $
1,567 $
1,415 $
1,544
Impact of new insurance business
18
15
63
62
Interest accretion
6
6
24
25
Insurance experience (1)
6
10
5
3
Economic experience (1)
21
(17)
170
71
Assumption updates (1)
(26)
(125)
(103)
(126)
CSM recognized for services provided
(41)
(41)
(164)
(164)
Net contractual service margin, end of period
$
1,410 $
1,415 $
1,410 $
1,415
(1) Insurance experience, Economic experience and Assumption updates are components of our Changes in estimates that adjust the CSM. Insurance experience represents the current period impacts of
insurance experience, resulting in a change in future cash flows that adjust CSM. Economic experience represents the changes in the effect of time value of money and financial risk relating to contracts
measured using the Variable Fee Approach (VFA) for our Wealth Management and Individual Insurance product lines. Assumption updates represent the future period impacts of changes in fulfilment
cash flows that adjust CSM.
The Net Contractual Service Margin (CSM) for the fourth quarter of 2024 was $1,410 million, a decrease of $16 million in
the quarter, and a decrease of $5 million from December 31, 2023, driven by:
•
New insurance business: Higher new business CSM from our segregated funds led to the overall increase in CSM
for the quarter compared to 2023. New business CSM for the full year was consistent with prior year.
•
Economic experience: The positive impact of interest rate movements and equity markets on our segregated fund
products were the drivers behind the economic experience for both the quarter and the full year.
•
Assumption updates: Insurance contract liability assumption updates for universal life completed in the fourth
quarter of 2024 drove the majority of the $26 million decrease in the CSM balance during the quarter. Further
details on the impacts of assumption updates for the full year are provided in the Results - Impact of Insurance
Contract Liability Assumption Updates section of this MD&A.
•
CSM amortization: The recognition of CSM remains relatively consistent quarter to quarter, and for the full year.
Results - Impact of Insurance Contract Liability Assumption Updates
Impacts from the update of policy liability assumptions for the year ended December 31, 2024
(Amounts are net of reinsurance contracts held, in millions of dollars)
Net income (loss)
before taxes
Net CSM
Components of insurance contract liability assumption updates
Discount rates
$
68 $
(20)
Mortality
(2)
(7)
Expense
(1)
(38)
Lapse
10
(34)
Other
11
(4)
Total change from the update of insurance contract liability assumptions
$
86 $
(103)
During the year management updated several assumptions that affect the measurement of insurance contract liabilities
and reinsurance contracts held. These updates are primarily related to discount rates, mortality rates, policy lapse, and
expenses. The impacts of these updates were favourable to Net income (loss) before tax, and unfavourable to the Net
CSM balance for the year. In 2023 management conducted the annual assumption updates in the fourth quarter.
A summary of the main assumption updates is as follows:
•
Updates to future mortality assumptions result in a CSM decrease of $14 million for the Individual Insurance
product line, and increase of $7 million for the Wealth Management product line (2023 decrease of $80 million for
Individual Insurance and Wealth Management product lines);
•
Updates to future attributable maintenance expenses result in a CSM decrease of $29 million for the Wealth
Management product line and $9 million for Individual Insurance (2023 $7 million decrease across Individual
Insurance and Wealth Management product lines);
•
Updates to lapse assumptions result in a CSM decrease of $34 million for the Individual Insurance product line
(2023 decrease of $38 million for Individual Insurance and Wealth Management product lines); and
Empire Life - Annual Report 2024
17
Management's Discussion and Analysis
•
Updates to discount rate assumptions result in a CSM decrease of $33 million for the Wealth Management
product line, primarily due to changes to the illiquidity premium, and a $13 million increase for Individual
Insurance.
In addition, updates were made to the discount rates used for business measured under the General Measurement
Model (GMM). These updates result in a gain of $68 million in Net income before taxes, primarily impacting the Individual
Insurance product line. The largest driver of this change is an update to the ultimate risk-free interest rate from 3.15%
to 3.65%.
Shareholder Dividends
The declaration and payment of common shareholder dividends and the amounts thereof are at the discretion of the
Board of Directors.
Common shareholder dividends are reviewed on a quarterly basis and depend upon various factors, including the
results of operations, the economic environment and the financial condition of Empire Life, taking into account regulatory
restrictions on the payment of shareholder dividends, as well as any other factors deemed relevant by the Board
of Directors.
On February 27, 2025, the Board of Directors declared dividends for common shareholders and series 3 preferred
shareholders. The dividend to common shareholders includes a regular quarterly dividend of $21.57 per common share
and an additional dividend of $50.76 per common share, which was enabled by the strong capital position of the
Company. The following table provides details of the amounts and dates for Empire Life’s per share dividends:
Amount of Dividend
per share
Payable Date
Record Date
Common shares
$
72.33
April 8, 2025
March 14, 2025
Non-Cumulative Rate Reset Preferred Shares, Series 3
$
0.3866875
April 17, 2025
March 18, 2025
Empire Life advises that the above-referenced dividends are eligible dividends for the purposes of the Income Tax Act,
Canada and any similar provincial tax legislation.
Total Cash Flow
(in millions of dollars)
Year to date
2024
2023
Cash provided from (used for)
Operating activities
$
371 $
632
Investing activities
$
(342)
(358)
Financing activities
(158)
(102)
Net change in cash and cash equivalents
$
(129) $
172
Cash provided from operating activities includes insurance premiums, net investment income and fee income. Cash used
for operating activities includes policy benefit payments, commissions, operating expenses and policyholder dividends.
Cash provided from investing activities primarily relates to purchases and sales of investments supporting insurance
contract liabilities and the capital and surplus accounts, as well as investments in associates or acquisitions related to
management's strategic objectives. Cash provided from (used for) financing activities include the issuance and
redemption of capital instruments, and the related dividend and interest payments.
Empire Life - Annual Report 2024
18
Management's Discussion and Analysis
Over the twelve months ended December 31, 2024 the Company's balance of Cash and cash equivalents decreased by
$129 million. Cash provided from operating activities was $371 million during the year, which is a decrease of $261 million
compared to 2023. The change relates to increased earnings from operations significantly offset by the impact of changes
in insurance contract liability assumptions and interest rate movements. Cash used for investing activities decreased by
$16 million compared to the same period in 2023, driven by lower net purchases on our portfolio investments relative to
the prior period, and increased investments in associates and joint ventures. Cash used for financing activities increased
year over year due to increased dividends paid to common shareholders.
For an analysis of liquidity for Empire Life, refer to Notes 22.5. and 22.6. of our audited Consolidated Financial Statements
for the year ended December 31, 2024.
Financial Instruments
Empire Life holds an investment portfolio that is actively managed to optimize yield, quality and liquidity while ensuring
diversification and duration-matched to our future obligations. Cash flows arising from these financial instruments are
intended to match the liquidity requirements of Empire Life’s insurance and investment contract liabilities, within the limits
prescribed by the Company. Empire Life is subject to credit and market risk on these financial instruments.
Credit risk on these financial instruments could result in a financial loss should the other party fail to discharge an
obligation. This credit risk is derived primarily from investments in bonds, debentures, preferred shares, short-term
investments, loans and mortgages. Empire Life manages credit risk by applying its investment guidelines as established
by management and approved by the Investment Committee of the Board of Directors. The investment guidelines
establish minimum credit ratings for issuers of bonds, debentures and preferred share investments, and provide for
concentration limits by issuer of such debt instruments. The investment guidelines also establish minimum underwriting
requirements and limits for debt financing of an advisor company or managing general agent. Management reviews credit
quality relative to investment purchases and monitors the credit quality of invested assets over time. Management reports
regularly to the Investment Committee of Empire Life’s Board on the credit risk to which the portfolio is exposed.
Empire Life manages market risk exposure mainly through investment limits and oversight of its in-house investment
managers and external investment firms by the Chief Investment Officer, Asset Management Committee and Investment
Committee of the Board. The Investment Committee actively monitors the portfolio and asset mix. Empire Life has
hedging programs in place as part of its approach to managing this risk.
Empire Life manages credit risk with respect to derivatives by applying limits and credit rating restrictions established by
the Investment Committee in its investment guidelines, which set out permitted derivatives and permitted uses for
derivatives, as well as limits to the use of these instruments. In particular, no leverage is permitted in the use of derivatives
and strict counterparty credit restrictions are imposed.
For additional information on our financial instruments, refer to Note 3 Financial Instruments of our Consolidated Financial
Statements for the year ended December 31, 2024.
Sources of Capital
Empire Life has issued private and public securities to strengthen its capital position and fund new business growth. The
securities outstanding are summarized in the following table.
(in millions of dollars)
As at
December 31, 2024
December 31, 2023
Subordinated debentures
$
399 $
399
Equity
Preferred shares and other equity instruments
297
297
Common shares
1
1
Total Equity
$
298 $
298
Empire Life - Annual Report 2024
19
Management's Discussion and Analysis
Details of the Company’s outstanding subordinated debentures are as follows:
(in millions of dollars)
Date Issued
Earliest
Redemption Date
Yield
As at
December 31, 2024
December 31, 2023
Subordinated debentures, Series 2021-1 (1)
September 2021 September 24, 2026
2.024%
$
200 $
199
Subordinated debentures, Series 2023-1 (2)
January 2023
January 13, 2028
5.503%
$
200 $
199
(1) Series 2021-1 Subordinated 2.024% unsecured debentures due 2031. From September 24, 2026, interest is payable at 0.67% over CORRA plus 0.32138% credit
adjustment spread
(2) Series 2023-1 Subordinated 5.503% unsecured debentures due 2033. From January 13, 2028, interest is payable at 2.26% over CORRA
Details of the Company’s outstanding preferred shares and other equity instruments are as follows.
(in millions of dollars)
Date Issued
Earliest
Redemption Date
Yield
As at
December 31, 2024
December 31, 2023
Preferred shares, Series 3
November 2017
January 17, 2028
6.187%
$
100 $
100
Limited Recourse Capital Notes, Series 1
February 2021
April 17, 2026
3.625%
$
197 $
197
Securities Rating
The securities issued by Empire Life are rated by DBRS Limited (Morningstar DBRS). Morningstar DBRS completed its
annual rating review of the Company in the second quarter of 2024. Morningstar DBRS confirmed all credit ratings, and
updated the Company's trend rating to Positive from Stable.
Evaluation type
Rating
Trend
Date of last rating action
Financial strength rating
A
Positive
May 24, 2024
Issuer rating
A
Positive
May 24, 2024
Subordinated debt
A (low)
Positive
May 24, 2024
Preferred shares
Pfd-2
Positive
May 24, 2024
Limited Recourse Capital Notes
BBB (high)
Positive
May 24, 2024
Regulatory Capital
The Life Insurance Capital Adequacy Test (LICAT) measures the capital adequacy of an insurer and is one of several
indicators used by the Office of the Superintendent of Financial Institutions, Canada (OSFI) to assess an insurer’s
financial condition1. The Company continues to have a strong capital position under the LICAT framework. Empire Life is
required to maintain a minimum Core Ratio of 55% and a Total Ratio of 90%. OSFI has established supervisory target
levels of 70% for Core and 100% for Total ratio.
LICAT
(in millions of dollars)
Dec 31
2024
Sep 30
2024
Jun 30
2024
Mar 31
2024
Dec 31
2023
Available capital
Tier 1
(A) $
2,195
$
2,206
$
2,091
$
2,222
$
2,135
Tier 2
(B)
726
737
705
683
714
Total
(C) $
2,921
$
2,943
$
2,796
$
2,905
$
2,849
Surplus allowance and eligible deposits
(D)
677
654
645
638
651
Base solvency buffer
(E)
2,383
2,334
2,261
2,254
2,252
LICAT total ratio
((C+D)/E * 100)
151%
154%
152%
157%
155%
LICAT core ratio
((A+70%D)/E * 100)
112%
114%
112%
118%
115%
Empire Life maintained a strong LICAT position that is well above target levels over the course of 2024. The Company's
Total and Core LICAT ratios decreased slightly in the fourth quarter compared to the previous quarter, primarily driven by
organic increases in required capital and modest earnings in the period. The reduction in the Total and Core LICAT ratios
in 2024 was mainly driven by acquisition activity and the payment of an additional dividend to common shareholders.
1 Available from OSFI at: https://www.osfi-bsif.gc.ca/en/guidance/guidance-library/life-insurance-capital-adequacy-test-guideline-2024
Empire Life - Annual Report 2024
20
Management's Discussion and Analysis
Industry Dynamics and Management’s Strategy
Empire Life’s operations are organized by product line with each line of business having responsibility for product
development, product pricing, marketing, distribution and customer service within their particular markets. This structure
recognizes that there are distinct marketplace dynamics in each of the three major product lines. Management believes
this structure enables each line of business to develop strategies to achieve the enterprise-wide objectives of business
growth and expense management while recognizing the unique business environment in which each operates. The lines
of business are supported by corporate units that provide administrative and technology services to the lines of business,
manage invested assets and oversee enterprise risk management policies.
Based on Total assets, Empire Life is among the 10 largest life insurance companies in Canada2. Empire Life has
approximately 6% market share of segregated funds3, 6% market share for group benefits4, and 3% market share for new
life insurance premiums5. Empire Life focuses exclusively on the Canadian marketplace and, within it, on particular market
segments where management feels there are opportunities to build solid, long-term relationships with its distribution
partners. The Company offers competitively priced products and more personal service, while also providing long-term
value to our shareholders. Empire Life, as a mid-sized company, must continue to be cost competitive with the larger
companies that may have the advantage of economies of scale. By focusing on particular market segments and providing
competitive product offerings for our independent advisors, management believes these solid relationships will enable
profitable growth. Across all business lines, Empire Life is focused on growth and diversification of distribution as well
digital enablement and adoption, all while maintaining personalized service.
Empire Life has invested in distribution companies, such as TruStone Financial (an MGA subsidiary), whose leadership
teams are respected in the industry and have a proven track record of generating business growth. These investments
support the Company’s commitment to facilitating access to independent financial advice for Canadians.
The Wealth Management product line at Empire Life consists of segregated fund products and guaranteed interest
products. These products compete against products offered by a variety of financial institutions. A key element of any
competitive strategy in this market is providing a competitive rate of return to customers. Empire Life has focused on
developing long-term investment performance through the diversification of the investment styles and strategies of its
segregated funds. Management will continue to improve competitiveness by focusing on delivering consistent long-term
performance, providing new and differentiated products to customers along with broadening distribution reach. Empire Life
continues to achieve strong growth in assets under management from its segregated fund business as a result of net new
sales and equity market appreciation. Empire Life is continuing to monitor and manage guaranteed minimum withdrawal
benefit (GMWB) risk exposure and the competitive landscape for this product.
Within the broader group benefits marketplace in Canada, Empire Life continues to focus on the small and medium-sized
group employer market, representing the majority of Canadian companies. This niche strategy, coupled with an ongoing
focus on balancing growth and profit, has enabled Empire Life to be cost competitive within this market segment and is
expected to enable this product line to grow its market share while generating acceptable returns.
Empire Life offers both traditional non-participating and participating individual insurance products, with a range of terms
to suit the needs of Canadians. Long-term mortality trends continue to be favourable for life insurance products. Because
of the reasonable long-term returns of this product line, management continues to focus on steady growth, technology
development and process improvement to continue to have a cost structure that allows the Company to compete while
generating an acceptable long-term financial contribution. Individual Insurance products are very long-term in nature and
consequently are subject to long-term reserve and capital requirements. Empire Life is continuously reviewing its
Individual Insurance product mix to improve profitability, reduce interest rate risk, and reduce required regulatory capital.
2 Source: Detailed historical OSFI data, available online at: https://osfi.beyond2020.com/
3 Source: Insurance Advisory Service Canada: Assets in Segregated Funds by Complex, Investor Economics (Jan 2025) as of Dec 2024
4 Source: 2023 Group Universe Report, Fraser Group (July 2024)
5 Source: LIMRA Canadian Individual Life Insurance Sales Survey, LIMRA (Sep 2024). Critical illness premiums were excluded.
Empire Life - Annual Report 2024
21
Management's Discussion and Analysis
Risk Management
Empire Life is a financial institution offering wealth management, group solutions and individual insurance products. The
Company is exposed to a number of risks as a result of its business activities. Effective risk management is critical to the
overall profitability, competitive market positioning and long-term financial viability of the Company. While all risks cannot
necessarily be eliminated or known with certainty, the goal of the Company’s risk management program is to ensure that
risk-taking activities are aligned with its strategy, in order to achieve business goals and deliver acceptable shareholder
returns, without compromising the Company's ability to pay claims and fulfil policyholder commitments.
When making decisions about risk taking and risk management, Empire Life considers:
•
The need to meet the expectations of its customers, employees, shareholders and creditors and to protect the
commitments that have been made to them;
•
The needs of its customers, embedding fair treatment throughout the product life cycle, from the design and
promotion of its products to satisfying its obligations to its customer;
•
The need to be adequately compensated for the capital it deploys to support business activities and strategic
objectives;
•
The need to protect its brand, which includes building and maintaining trust, consideration of corporate social
responsibility, and embedding sustainability into its strategic plans; and
•
The need to maintain (or improve) its external financial strength rating.
Empire Life’s risk appetite defines the aggregate level of risk the Company accepts to achieve its business strategies. The
risk appetite supports the pursuit of sustainable shareholder value but does not compromise the Company’s ability to pay
claims and fulfil policyholder commitments.
Empire Life’s risk management framework is structured based on a number of guiding principles:
•
Due to the long-term nature of the majority of its commitments, the Company accepts capital market risk provided
it is managed within specific risk tolerances and limits. The Company takes a diversified approach to managing its
investments - it accepts credit and alternative asset risk provided it is rewarded through appropriately enhanced
returns;
•
The Company manages liquidity across the business to provide a high level of confidence that all obligations (to
customers, employees, creditors and shareholders) will be met when they fall due;
•
The Company accepts risks related to its products provided they are properly designed, priced and managed in
order to achieve fair treatment, and add value to its customers and shareholders;
•
The Company is forward-looking in its business planning and takes a prudent approach to capital management. It
strives to have a high level of confidence that capital is sufficient to support planned future activities;
•
Management is active in industry committees and, through a network of oversight functions, monitors the
landscape so that the Company is appropriately positioned to manage regulatory, tax, accounting and actuarial
changes;
•
The Company accepts that operational risks are a part of doing business and knows that risk management is a
key part of decision-making. It protects its business and customers' assets by engaging in mitigation strategies
that contribute to its financial stability and the security of data, both its and its customers; and
•
The Company expects ethical conduct by all of its employees, and it acts with integrity at all times.
The Board of Directors oversees and monitors Empire Life’s risk management framework, processes and practices, and
reviews and approves the Company’s Enterprise Risk Management Framework and overall risk appetite. The Company's
risk appetite is the primary mechanism to operationalize the guiding principles outlined above and includes a wide array of
qualitative and quantitative standards.
Empire Life - Annual Report 2024
22
Management's Discussion and Analysis
Senior management shares responsibility and accountability for risk management across the organization. This enables a
cross-functional perspective on risk management, enhanced by the frequency of contact across the management team.
The Company has an Asset Management Committee with responsibility for overseeing the management of corporate
policies established by both the Investment Committee and Risk and Capital Committee of the Board, with specific focus
on market, credit and liquidity risk including asset/liability management as well as capital management. The Product
Management Review Committee is responsible for overseeing management of corporate policy established by the Risk
and Capital Committee of the Board, with specific focus on product risk. Activities not delegated to one of these two
committees remain under the oversight of senior management. More information related to governance can be found
under the Corporate Governance over Risk Management section of Empire Life’s 2024 Annual Report. The Chief Risk
Officer is a member of the Asset Management Committee and Product Management Review Committee and has Board
reporting responsibility with respect to risk and capital management, the latter of which is shared with the Chief Actuary. All
risk management policies and procedures are regularly reviewed for relevance and changes in the risk environment.
Accountability, application, day-to-day management and procedural elements are the responsibility of area management,
supported by business unit compliance officers, security champions and the risk management department. There is senior
management representation and oversight on various interdisciplinary risk committees. The Company formally establishes
and documents its values and risk tolerances through several company-wide policies including a code of business
conduct, corporate disclosure principles, enterprise risk management, capital management and whistleblower policies.
The Company’s strategic risk management policies (including those related to product design and pricing, investment and
capital management) are also approved by its Board, or a Board committee. Subsidiaries have adopted practices for risks
to which they are exposed, appropriate to their business plan, strategy and risk appetite.
Caution Related to Sensitivities
In the sections that follow, the Company provides sensitivities and risk exposure measures for certain risks. These include
sensitivities due to specific changes in market prices and interest rates, based on the market prices, interest rates, assets,
liabilities and business mix in place as at the respective calculation dates. The sensitivities are calculated independently
for each risk variable, generally assuming that all other risk variables remain constant. The sensitivities do not take into
account indirect effects such as potential impacts on goodwill impairments or valuation allowances on Deferred tax assets.
The sensitivities are provided for the consolidated entity. Actual results can differ materially from these estimates for a
variety of reasons, including differences in the pattern or distribution of market shocks, the interaction between these risk
factors, model errors, or changes in other assumptions such as business mix, effective tax rates, policyholder behaviour
and other market variables relative to those underlying the calculation of the sensitivities. Changes due to new sales or
maturities, asset purchases/sales, or other management actions could also result in material changes to these reported
sensitivities. For these reasons, the sensitivities should only be viewed as directional estimates of the underlying
sensitivities for the respective factors based on the assumptions outlined and should not be viewed as predictors for the
Company’s future Net income, CSM, Equity and capital sensitivities. Given the nature of these calculations, the Company
cannot provide assurance that the actual impact will be consistent with the estimates provided. Changes in risk variables
in excess of the ranges illustrated may result in other than proportionate impacts.
Market Risk
Empire Life has equity market risk related to its segregated fund products and from equity assets backing life insurance
contract liabilities and surplus. Empire Life maintains a semi-static hedging program. The objective of the hedging
program is to partially protect the Company from regulatory capital (LICAT) ratio declines that might result from adverse
stock market price changes. The hedging program may employ derivatives positions including put options and futures.
The extent of derivatives used is monitored and managed on an ongoing basis, giving consideration to equity market risk
and the level of available capital.
There is income statement volatility from this hedging program. Based on current equity market levels, Empire Life has
required capital for LICAT purposes as well as liabilities on the Consolidated Statements of Financial Position related to
segregated fund guarantees. Some net income volatility can result from the hedging instruments, as gains or losses are
not directly offset by changes in the value of other assets and liabilities exposed to equity risk. For the year ended
December 31, 2024, Empire Life experienced a loss of $8 million pre-tax on the hedging program, compared to a hedge
loss of $14 million pre-tax over the same period in 2023. The improved outcome over the prior year is due to gains in
market movement in the year, compared to losses from market movement in 2023.
Empire Life - Annual Report 2024
23
Management's Discussion and Analysis
Empire Life’s LICAT ratio is also sensitive to stock market volatility, primarily due to liability and capital requirements
related to segregated fund guarantees. As of December 31, 2024, Empire Life had $9.4 billion of segregated fund assets
and liabilities. Of this amount, approximately $9.1 billion have guarantees. The following table provides a percentage
breakdown by type of guarantee.
December 31
2024
December 31
2023
Percentage of segregated fund liabilities with:
75% maturity guarantee and a 75% death benefit guarantee
12%
9%
75% maturity guarantee and a 100% death benefit guarantee
44%
43%
100% maturity and death benefit guarantee (with a minimum of 15 years between deposit and maturity date)
6%
7%
Guaranteed minimum withdrawal benefit
38%
41%
Total
100%
100%
All Empire Life segregated fund guarantees are policy-based (not deposit-based), thereby generally lowering Empire Life’s
stock market sensitivity relative to products with deposit-based guarantees. Policy-based guarantees consider all the
deposits in the customer’s policy (whether the fund value is below or above the guaranteed amount) to arrive at an overall
net guarantee payment, whereas deposit-based guarantees consider only the deposits where the fund value is below the
guaranteed amount and ignore all the deposits in the customer’s policy where the fund value is above the guaranteed
amount. Therefore, policy-based guarantees generally pay less than deposit-based guarantees. For segregated fund
guarantee insurance contract liabilities, the level of sensitivity is highly dependent on the level of the stock market at the
time of performing the sensitivity test. If period-end stock markets are high relative to market levels at the time that
segregated fund policies are issued, the sensitivity is reduced. If period-end stock markets are low relative to market
levels at the time that segregated fund policies are issued, the sensitivity is increased.
The segregated fund regulatory capital framework includes the use of various constraints that provide a partial cushion
against impacts. As a result, the sensitivity impacts are often non-linear or asymmetric. In addition, the CSM provides a
significant offset to potential impacts in the segregated fund guarantee liability. This significantly reduces the net income
impacts from changes in interest rates or stock market levels.
Empire Life also has equity market risk related to its equity assets backing life insurance contract liabilities and surplus. In
the first quarter of 2024, we updated our asset mix, reducing exposure to equity risk. As at December 31, 2024 and
December 31, 2023, the sensitivity of Empire Life shareholders’ net income resulting from changes in equity market prices
is provided in the following table.:
Sensitivity to equity risk:
(in millions of dollars)
Increase
Decrease
20%
10%
10%
20%
As at December 31, 2024
Net Income and Equity
$
17 $
8 $
— $
15
CSM
186
98
(114)
(246)
As at December 31, 2023
Net Income and Equity
$
43 $
21 $
(19) $
(32)
CSM
187
100
(116)
(254)
Empire Life - Annual Report 2024
24
Management's Discussion and Analysis
Based on equity market prices as at December 31, 2024 and December 31, 2023, the sensitivity of Empire Life's LICAT
Total ratio resulting from increases and decreases on equity market prices is provided in the following table.
Sensitivity to equity risk:
Impact on LICAT Total ratio
Increase
Decrease
20%
10%
10%
20%
Segregated fund guarantees
16%
8%
—%
(4)%
Other equity risk
1%
—%
—%
—%
Equity hedge
—%
—%
—%
(1)%
As at December 31, 2024
17%
8%
—%
(5)%
Segregated fund guarantees
13%
5%
(1)%
(11)%
Other equity risk
1%
—%
—%
(1)%
Equity hedge
(2)%
(1)%
1%
1%
As at December 31, 2023
12%
4%
—%
(11)%
The amount at risk related to segregated fund maturity guarantees and segregated fund death benefit guarantees, and the
resulting insurance contract liabilities and LICAT base solvency buffer for Empire Life’s segregated funds is provided in the
following table.
Withdrawal benefit >
fund value
Maturity guarantee >
fund value
Death benefit >
fund value
Insurance
Contract
Liabilities
LICAT
capital
Segregated funds
(in millions of dollars)
Fund value
Amount
at risk Fund value
Amount
at risk Fund value
Amount
at risk
December 31, 2024
$
2,331 $
741 $
28 $
1 $
699 $
8 $
119 $
388
December 31, 2023
$
2,557 $
952 $
44 $
2 $
1,101 $
12 $
102 $
422
The first six columns of the above table show amounts associated with all segregated fund policies where the future
withdrawal benefit, future maturity guarantee, or future death benefit guarantee is greater than the fund value. The amount
at risk represents the excess of the future withdrawal benefit, future maturity guarantee or future death benefit guarantee
amount over the fund value for these policies. The withdrawal benefit amounts in the above table relate to GMWB
products. The GMWB withdrawal benefit amount at risk represents the amount that could be paid by Empire Life to
GMWB policyholders if the net return on each GMWB policyholder’s assets is zero for the remainder of each GMWB
policyholder’s life, based on life expectancy. At December 31, 2024, the aggregate amount at risk for all three categories
of risk was $750 million. At December 31, 2023, the aggregate amount at risk for these three categories of risk was $966
million. For these three categories of risk, the amount at risk is not currently payable, as payment is contingent on future
outcomes, including fund performance, deaths, deposits, withdrawals and maturity dates.
The level of insurance contract liabilities and required regulatory capital in the above table is calculated based on the
probability that Empire Life will ultimately have to make payment to the segregated fund policyholders for any fund value
deficiency that may exist on future payments to GMWB policyholders, or upon future maturity of the segregated fund
policies, or upon future death of the segregated fund policyholders.
In addition, Empire Life considers the sensitivity of its LICAT ratio to changes in market interest rates. The impact of a 50
basis point parallel shift in interest rates for December 31, 2024 and December 31, 2023, is shown in the table below. No
change to credit spreads is assumed.
Sensitivity to market interest rates - LICAT
Impact of
50 bps Decrease
December 31, 2024 LICAT total ratio
5%
December 31, 2023 LICAT total ratio
2%
Operational Risk
Operational risk is broadly defined as the risk of loss resulting from human error, decisions, actions or failure to act,
inadequate or failed internal processes and systems, or from external events that affect business operations. Operational
risk is naturally present in all of Empire Life’s business activities, as well as those of its subsidiaries. Effective
management of operational risk contributes to and influences the operational resilience of the Company. The following is a
further description of some operational risks and their associated risk management strategies.
Empire Life - Annual Report 2024
25
Management's Discussion and Analysis
(1) Legal and Regulatory Compliance Risk
Empire Life is governed by the Insurance Companies Act and supervised by OSFI and is also subject to extensive
requirements imposed by legislation and regulation in each of the provinces and territories of Canada applicable to
insurance companies and companies providing other financial services. Material changes in the regulatory framework
could have an adverse effect on Empire Life. Failure to comply with regulatory requirements or public expectations could
adversely impact Empire Life’s reputation and ability to conduct business. Empire Life is subject to litigation from time to
time, in the normal course of business, and currently has outstanding lawsuits. There can be no assurance that the
present or any future litigation will not have a material adverse effect on Empire Life.
Empire Life’s corporate compliance department, headed by the Chief Compliance Officer, oversees the regulatory
compliance framework. This framework promotes risk-based management of regulatory compliance risk and includes
Company-wide policies, operating guidelines, programs to promote awareness of laws and regulations impacting Empire
Life, ongoing monitoring of emerging compliance issues and regulatory changes and employee education programs that
include anti-money laundering and anti-terrorist financing, privacy, information/cyber security and Empire Life’s code of
business conduct. The framework is supported by a network of business unit compliance officers as well as the corporate
legal services department. Subsidiaries maintain regulatory compliance frameworks for their respective operations with
regular reporting to Empire Life’s Chief Compliance Officer. The Chief Compliance Officer reports regularly to the Conduct
Review Committee of the Board on the state of compliance, key compliance risks and emerging regulatory trends. The
General Counsel reports regularly to the Audit Committee of the Board on litigation activity and trends for both the
Company and the industry.
(2) Model Risk
Empire Life uses models to support many business functions including product development and pricing, valuation of
insurance contract liabilities, financial planning, asset/liability management, capital management, project management,
investment analysis, valuation of investments in subsidiaries and affiliates, risk management and advanced analytics
(such as artificial intelligence, predictive modeling and decision-making algorithms). The risk of inappropriate use or
interpretation of Empire Life’s models or their output, or the use of deficient models, data or assumptions could result in
financial losses or inappropriate business decisions. Empire Life has developed management and mitigation processes
related to model use and oversight of models to limit financial, operational and strategic impacts from misinterpretation or
misuse of models and their results. Senior management has overall responsibility and accountability for models in use to
support activities within their business area. The Chief Risk Officer reports regularly to senior management and the Risk
and Capital Committee of the Board on model use and related oversight activities.
(3) Human Resources Risk
Competition for qualified employees, including executives, is intense both in the financial services industry and non-
financial services industries. If Empire Life is unable to retain and attract qualified employees and executives, and is
unable to maintain and effectively deploy resources with the in-depth knowledge and necessary skills needed to support
business activities, the results of its operations and financial condition, including its competitive position, could be
adversely affected. To mitigate this risk, Empire Life has human resources policies, processes and practices in place.
Management reports regularly to the Human Resources Committee of the Board on recruitment, workforce and
succession planning, employee development, diversity, equity and inclusion, health and wellness, and compensation
practices and programs, all of which are designed to attract, motivate and retain a highly skilled workforce whose
differences, stories, experiences and ideas contribute to high-performing, high-potential employees. Empire Life is
committed to cultivating a diverse, engaged and sustainable organization while building an inclusive community.
(4) Third-Party Risk
Empire Life obtains different types of goods and/or services through a number of third-party arrangements. Should these
third parties fail to deliver systems, services and/or other obligations in compliance with contractual or other service
arrangements, Empire Life’s business may be adversely impacted. To mitigate this risk, Empire Life has established
policies and guidelines that set out requirements to identify, assess, manage, monitor, and report on third-party risks
commensurate with the risks associated with the service provider and the nature of the arrangement. Quarterly reporting
is provided to the Risk and Capital Committee of the Board.
Empire Life - Annual Report 2024
26
Management's Discussion and Analysis
(5) Technology and Cyber Risk
Empire Life relies on technology in virtually all aspects of its business and operations, including the creation and support
of new products and services, and the nature of life insurance business necessitates a substantial investment in
technology. The Chief Technology Officer is responsible for the digital and data technology strategy for the Company and
oversees technology initiatives and transformation projects and reports regularly to the IT Oversight Committee of the
Board on strategic information technology-related projects, initiatives and technology architecture. Operational integrity,
data integrity and security of information and systems infrastructure are all relied upon for normal business operations.
Disruptions due to system failure, information security breaches, privacy breaches, cyber-attacks, human errors, criminal
activity, fraud or the loss of certain software licensing agreements could have a material adverse impact on Empire Life.
Information security breaches, including various forms of cyber-attacks, are occurring at an increasing pace across
industry sectors, governments and individuals. These malicious activities pose a significant risk to Empire Life and may
result in inappropriate disclosure or use of personal or confidential information. To mitigate this risk, Empire Life has an
information security program overseen by the Chief Information Security Officer, who reports regularly to the IT Oversight
Committee of the Board and at least annually to the Risk and Capital Committee of the Board. This program is comprised
of standards, procedures and guidelines focused on management of cybersecurity risk and maintenance of the security
and integrity of the data entrusted to Empire Life. An incident management process is in place for monitoring and
managing security events. The Company continues to invest in people, processes and technology to strengthen its
abilities to respond to the evolving landscape.
Privacy breaches could occur and may result in unauthorized disclosure or use of private and confidential information. To
manage this risk, Empire Life has a privacy program overseen by the Chief Privacy Officer. The program includes policies
and standards, ongoing monitoring of emerging privacy legislation and a network of business unit privacy officers.
Processes have been established to provide guidance to employees on the handling of personal information and the
reporting of privacy incidents and issues to appropriate management for response and resolution. The Chief Privacy
Officer reports regularly to the Conduct Review Committee of the Board on privacy and data security risks and emerging
trends.
(6) Business Continuity Risk
Empire Life has an enterprise-wide business continuity, incident management and disaster recovery program overseen by
the Business Continuity Management Committee and senior management. The program includes policies, plans and
procedures designed so that, to the extent practically possible, key business functions can continue and normal
operations can resume effectively and efficiently should a major disruption of key business functions occur as a result of
unanticipated events, including pandemics. Such a disruption could impact the availability of trained employees, physical
locations to conduct operations and/or access to technology. Each business unit is accountable for preparing and
maintaining detailed business continuity plans and processes. Empire Life establishes and regularly tests business
continuity and disaster recovery plans and maintains services and failover capability designed to minimize downtime and
accelerate system recovery. The Business Continuity Management Committee Chair reports at least annually to the Risk
and Capital Committee of the Board on business continuity preparedness and operational resiliency.
Business and Strategic Risk
Business and strategic risk includes risks associated with the Company's potential inability to implement appropriate
business plans and strategies; business opportunity risk and risks associated with the Company's potential inability to
adapt to changes in economic, political or business environment; commercial practices risk; capital adequacy risk; risks
associated with our credit and financial strength ratings and the strength of our brand; and environmental and social risks.
Empire Life and its subsidiaries regularly review and adapt business strategies and plans in consideration of changes in
the external business environment, economic, political and regulatory environment. Empire Life’s financial performance is
dependent upon its ability to implement and execute business strategies and plans for growth.
There is alignment across the Company's business strategies and plans and its risk appetite, capital position and financial
performance objectives. Empire Life periodically reassesses risk appetite taking into consideration the economic,
regulatory and competitive environments in which it operates. The current environment requires Empire Life to adapt
rapidly to new opportunities and challenges and to refine its strategies accordingly. If Empire Life fails to revise its
strategies on a timely basis or adapt to the changing environment, it may not be able to achieve its growth objectives.
Empire Life - Annual Report 2024
27
Management's Discussion and Analysis
Empire Life’s business strategies and plans are dependent on the successful execution of organizational and strategic
initiatives designed to support the growth of its business. The ability to effectively manage these changes and prioritize
initiatives directly affects Empire Life’s ability to execute these strategies. Identifying and implementing the right set of
initiatives is critical to achieving Empire Life’s business plan targets. Failure to implement these initiatives could also lead
to cost structure challenges.
Successful execution of Empire Life’s business strategies and plans depends on a number of factors including its ability to
(i) generate sufficient earnings to maintain an adequate level of capital; (ii) generate sustained investment performance;
(iii) meet regulatory requirements; (iv) manage risk exposures effectively; (v) attract and retain customers, employees and
distributors; (vi) have the right set of products; and (vii) reduce operating expenses while maintaining the ability to hire,
retain and motivate key personnel.
Empire Life’s business and strategic plans are reviewed and discussed by its senior management team who also monitors
results against plans, reviews project management activities and key initiatives against expectations and oversees
commercial practices so that products and services meet the needs of its customers. Business and strategic plans are
subject to approval by the Board of Directors, which also receives regular updates on implementation progress against
key business plan objectives. The Board and its subcommittees receive regular updates on key risks.
Environmental and Social Risk
Empire Life’s business strategies are influenced by attitudes towards societal issues. Factors such as diversity, equity and
inclusion and climate change are considered as part of the strategic planning process and are reflected in Empire Life’s
risk management program and associated policies. Collectively referred to as “ESG” (environmental, social, governance),
these risks are not a stand-alone risk category, but rather underlie all risk categories (credit, market, liquidity, product,
operational and business and strategic). As such, they are integrated into our enterprise risk management framework and
the processes for managing them are embedded in the processes for managing each risk category.
As a long-term oriented underwriter and investor, Empire Life’s financial performance, operations and reputation may be
adversely affected if it does not adequately prepare for the direct or indirect negative impacts of environmental and social
risks. Environmental and social risks include but are not limited to events and developments related to impacts of climate
change and the transition to a lower-carbon economy, emerging regulatory and public policy developments, public health
issues and issues of inequality. These risks may occur in the Company's direct operations, investment activities or other
areas, such as through third party arrangements.
Empire Life’s investment management team integrates ESG considerations in their investment decision-making for
Company and customer assets. The Company is committed to diversity and inclusion and has reviewed its policies and
practices to ensure equity and clarity. The Company is actively monitoring environmental, social and sustainability
developments and has initiated efforts to embed ESG practices in all aspects of its business. Management reports
regularly to the Board on emerging issues and related progress, recognizing that its strategy will evolve over time, building
on experience and external developments. Additional information may be found in the Company’s annual Public
Accountability Statement, available at www.empire.ca/about-us/community.
In addition to the discussion of risks included in this MD&A, a comprehensive discussion of the material risks that impact
Empire Life is included in Empire Life’s Annual Information Form available at www.sedarplus.ca. Additional disclosures of
Empire Life’s sensitivity to risks are included in Note 22 of the Consolidated Financial Statements.
Disclosure Controls and Procedures
Empire Life’s disclosure controls and procedures are designed to provide reasonable assurance that information required
to be disclosed by Empire Life under Canadian securities laws is recorded, processed, summarized and reported within
the specified time periods, and include controls and procedures that are designed to ensure that information is
accumulated and communicated to management on a timely basis to allow appropriate decisions regarding public
disclosure. Under the supervision of management, an evaluation was carried out on the effectiveness of Empire Life’s
disclosure controls and procedures as of December 31, 2024. Based on that evaluation, management concluded that
Empire Life’s disclosure controls and procedures were effective as at December 31, 2024.
Empire Life - Annual Report 2024
28
Management's Discussion and Analysis
Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of the Consolidated Financial
Statements for external purposes in accordance with IFRS Accounting Standards. Under the supervision of management,
an evaluation of Empire Life’s internal control over financial reporting was carried out as at December 31, 2024. Based on
that evaluation, management concluded that Empire Life’s internal control over financial reporting was effective as at
December 31, 2024.
Outlook
Across all business lines, Empire Life is focused on growth and diversification of distribution as well digital enablement
and adoption, all while maintaining exceptional personalized service. The Company is well-positioned following
investments made in product development, digital capabilities and operational improvements throughout 2024. While the
Canadian financial services regulatory landscape continues to evolve, Empire Life is proud to continue serving Canadian
individuals and small business owners.
In 2024 inflation continued to be a concern for economies globally. However as inflation rates gradually declined, many
central banks started to cut interest rates to support economic growth and avoid a recession. The Bank of Canada made a
series of rate cuts throughout the year, reducing its target for the overnight rate from 5.0% to 3.25% by the end of 2024, a
total cut of 1.75%. The U.S. Federal Reserve likewise also lowered rates through the year.
Out-sized enthusiasm surrounding the technology sector was a key performance driver of the S&P 500 in 2024. A handful
of technology stocks dubbed the “Magnificent Seven” accounted for more than half of the index’s return in 2024. The S&P/
TSX Composite achieved an impressive 18.5% gain, largely driven by the energy sector, marking its best performance
since 2021. The Nasdaq surged nearly 30% and the Dow Jones Industrial Average was up 13% for the year 2024.
Heading into 2025, the Company's outlook remains one that recognizes the complexity of socioeconomic and geopolitical
trends in recent years. With inflation on the decline and interest rates easing, consumer spending is expected to rise,
contributing to an economic growth forecast for Canada of 1.8%. However, several significant challenges remain,
including the looming proposed tariffs from the new U.S. administration, which could negatively impact trade relations and
economic stability. Additionally, changes to Canada’s immigration policy, leading to near-zero population growth, may
tighten the labor market and create short-term job challenges, although conditions are expected to stabilize by late 2025.
While some relief is anticipated as interest rates stabilize, consumer debt levels and housing affordability will continue to
be ongoing pressures in 2025.
The life insurance market continues to grow modestly. Empire Life has increased its emphasis on long-term life insurance
products while continuing to maintain its position in shorter-term products, such as 10-year renewable term life insurance.
Long-term interest rates, product mix and product pricing are expected to continue to be challenges for Empire Life’s
Individual Insurance product line. The Wealth Management product line saw a significant increase in gross sales of
segregated funds, due to a market shift toward equity and fixed income segregated fund products, away from guaranteed
interest products in the second half of 2024; increased competition and fee pressures may impact this line going forward.
Empire Life will continue to develop low-cost, efficient products and new digital services to satisfy consumer needs and
attract new customer segments.
Empire Life maintained market share for group solutions for small to medium-sized employers amid a challenging
environment with inflationary headwinds and competitive pricing pressures from increased rate guarantees and renewal
caps. Across the industry, the previous upward trajectory on long-term disability claims, particularly mental health claims,
has leveled off. Plan flexibility and sustainability remains a key focus, balancing access with affordability for plan
sponsors. Empire Life will continue to closely manage drug costs via transition to biosimilars, use of prior authorization,
agreements negotiated with pharmaceutical manufacturers and other cost managing levers.
In 2024, digital capabilities were strengthened,including upgraded customer, plan member and advisor portals and new
security protocols, as well as continued emphasis on connectivity with distribution partners. Heading into 2025, Empire
Life is focused on profitable growth and service excellence with our distribution partners.
Empire Life - Annual Report 2024
29
Management's Discussion and Analysis
On the product expansion side, Empire Life has introduced twelve new segregated funds, the First Home Savings
Account, and improvements to participating and non-participating whole life products. The Group Solutions line of
business refined the Group Benefit and Group Retirement Savings plans and digital sales solutions to enable plan
sponsors to facilitate physical, mental and financial well-being for their employees.
In March 2023, OSFI released its final Guideline B-15 - Climate Risk Management, which will require disclosure of Empire
Life’s management of climate-related risks, effective fiscal year-end 2025. In March 2024, OSFI released updates to its
Guideline along with its final Climate Risk Returns. In July 2024, the Quebec regulator, the Autorité des marchés
financiers (AMF) released its final Climate Risk Management Guideline, with broader requirements than OSFI’s Guideline
B-15, including consideration of product design and marketing, and underwriting processes. The Company has initiated
work to comply with these regulatory requirements and continues to monitor requirements related to climate risk.
In August 2024, OSFI released its final updated Guideline E-21: Operational Risk Management and Resilience providing
enhanced expectations for operational risk management and new expectations for operational resilience with a phased
implementation timeline.
OSFI released a new framework for determining capital requirements for segregated fund guarantees in November 2024.
Changes to the capital required for products with guaranteed income may ultimately impact the industry’s ability to offer
some of these products at reasonable prices to the consumer. The new requirements will become effective in January
2025.
The Company has existing risk management programs in place covering a broad range of risks. The program is
continually reviewed for relevance and in response to emerging regulatory guidance. In addition, the Company continues
to manage the cost of increasing regulatory requirements. The insurance industry faces increasing consumer and financial
solvency regulation which the Company must absorb. Empire Life must continue to grow its business and improve
operating efficiency to absorb these costs while creating shareholder value.
Selected Financial Information
The following table summarizes various financial results on a quarterly basis for the most recent eight quarters.
Selected quarterly financial results
(in millions of dollars, except per share
amounts)
Dec 31
2024
Sep 30
2024
Jun 30
2024
Mar 31
2024
Dec 31
2023
Sep 30
2023
Jun 30
2023
Mar 31
2023
Insurance revenue - Gross
$
358 $
357 $
351 $
339 $
335 $
337 $
328 $
326
Common shareholders’ net income (loss) $
16 $
177 $
35 $
52 $
111 $
(5) $
(1) $
52
Earnings per share - basic and diluted
$
21.95 $
179.88 $
35.94 $
52.86 $
112.15 $
(5.25) $
(0.86) $
52.66
The following table summarizes various financial results on an annual basis for the most recent three years.
Selected annual financial information
(in millions of dollars, except per share amounts)
For the years ended December 31
2024
2023
2022 restated
Insurance revenue
$
1,405 $
1,326 $
1,255
Investment income
518
817
(1,664)
Fee and other income
45
31
24
Common shareholders’ net income (loss)
281
156
55
Earnings per share - basic and diluted ($)
284.77
158.70
55.72
Total assets
19,667
18,665
17,558
Critical Accounting Estimates
Empire Life’s significant accounting policies are described in Note 2 of the Consolidated Financial Statements. Certain of
these policies require management to make estimates, assumptions and judgments that affect the application of
accounting policies and the reported amounts of assets and liabilities as at the date of the Consolidated Financial
Statements, and the reported amounts of revenue and expenses during the period. On an on-going basis, management
evaluates its critical judgments, estimates, and assumptions in relation to assets, liabilities, revenue and expenses.
Empire Life - Annual Report 2024
30
Management's Discussion and Analysis
Insurance and reinsurance contracts held
Key assumptions and sources of estimation can result in a material adjustment to the carrying amounts of assets and
liabilities. The Company bases assumptions and estimates on parameters available when the insurance and reinsurance
contracts held are measured. Actuarial assumptions relate to events that are anticipated to occur, however, these may not
be realized due to market changes, developing experience or circumstances arising that are unpredictable. Management
applied judgment in determining the level of aggregation of information in which the disclosures are presented in Note 9 of
the Consolidated Financial Statements.
The methods used to measure insurance contracts
The Company uses the probability weighted average of cash flows to estimate the present value of expected future cash
flows. Product guarantees for universal life, participating products and segregated funds are valued using stochastic
models. Assumptions relating to mortality rates, morbidity rates, longevity, expenses, and policyholder behavior are
discussed further in Note 2 of the Consolidated Financial Statements.
Discount rates
Observable period
Top-down approach
For products measured under the GMM or the Premium Allocation Approach (PAA), cash flows are discounted using the
interest rates implied by a reference portfolio of assets that reflects the characteristics of the insurance contracts, adjusted
to remove the credit risk premium of the assets and to reflect the illiquidity premium of the insurance contracts. For the
observable period (30 years), the interest rates implied by the reference portfolio are based on a weighted average of a
subset of the Company’s fixed income investments. The credit risk adjustment is determined based on historical
experience and current market conditions, and varies by asset class, credit rating, and term.
Prior to 2024, these cash flows were discounted using interest rates determined by applying the bottom-up approach,
described in further detail below. This change in estimate did not have a material impact on the Company’s financial
statements.
Bottom-up approach
Segregated funds, which are measured under the Variable Fee Approach (VFA), are discounted using risk-free interest
rates, plus an illiquidity premium. For the observable period, risk-free interest rates were determined by reference to the
yields of highly liquid AAA-rated Canadian sovereign securities.
Unobservable period
Under both the top-down and bottom-up approach, the ultimate (year 70) interest rate is based on an ultimate risk-free
interest rate of 3.65% (2023 3.15%). The discount rates between the observable and the ultimate periods are derived
using linear interpolation.
Illiquidity premium
Under both approaches, the illiquidity premium references observable market interest rates for corporate debt. Empire Life
applies the same illiquidity premium to all groups of insurance contracts where the GMM or PAA applies. It was
determined that these insurance contracts were very illiquid, which is reflected in the illiquidity premium used. A lower
illiquidity premium is applied to segregated fund guarantees. During the year, the Company made changes to the illiquidity
premium used in discounting segregated fund cash flows resulting in a CSM decrease of $33 million.
Empire Life - Annual Report 2024
31
Management's Discussion and Analysis
Risk adjustment for non-financial risk
The risk adjustment for non-financial risk represents the compensation that the Company requires for bearing the
uncertainty about the amount and timing of the cash flows that arise from non-financial risk as the entity fulfills insurance
contracts. The risk adjustment for non-financial risk reflects an amount that an insurer would rationally pay to remove the
uncertainty that future cash flows will exceed the current estimated amount.
The Company derives risk adjustment for non-financial risk using a margin for adverse deviation approach. The approach
adds a margin (conservatism) to each non-financial risk (mortality, morbidity, longevity, expenses, policyholder behaviour)
assumption.
Amortization of the CSM
CSM is a component of the carrying amount of the asset or liability for a group of insurance contracts representing the
expected future profits the Company will recognize as it provides insurance contract services under the insurance
contracts in the group. An amount of the CSM for a given group of insurance contracts is amortized into insurance service
revenue in each period based on coverage units, which reflect the insurance services provided.
For universal life contracts, the coverage units are defined as the total current death benefit. Empire Life's position is that
universal life products contain investment return services, whereas products with fixed Cash Surrender Values (CSVs) do
not contain investment return services. Hence, the coverage units for individual non-participating contracts with fixed or no
CSVs, are the sum insured less the CSVs. Coverage units for fixed life contingent payout annuities (immediate annuities)
are the expected annualized payment amounts.
For contracts measured using the GMM, coverage units are discounted at locked-in rates in order to determine the CSM
amortization.
For participating products, coverage units are the total face amount which approximates the benefits provided under the
insurance and investment service. Amortization of the segregated funds CSM's use fund values as the coverage units and
incorporates adjustments that reflect the impact of economic returns.
The total coverage units of each group of insurance contracts are reassessed at the end of each reporting period to adjust
for the reduction of remaining coverage for claims paid, expectations of lapses and cancellation of contracts in the period.
For reinsurance contracts held, the CSM amortization reflects the expected pattern of underwriting of the underlying
contracts because the level of service provided depends on the number of underlying contracts in-force.
Accounting model eligibility
IFRS 17 Insurance Contracts (IFRS 17) requires the application of one of three models to groups of insurance contracts:
•
General Measurement Model;
•
Variable Fee Approach; or
•
Premium Allocation Approach.
For further details on the application of each model, refer to Note 2.3.1 of the Consolidated Financial Statements.
Fair value of financial instruments
In measuring the fair value of financial instruments, management exercises judgment in the selection of fair value inputs
and in determining their significance to the fair value estimate. Judgment is also required in the classification of fair value
measurements within the levels of the fair value hierarchy, in particular those items categorized within Level 3 of the
hierarchy. Additional information regarding the fair value of financial instruments in Note 3 of the Consolidated Financial
Statements.
Empire Life - Annual Report 2024
32
Management's Discussion and Analysis
Pension and other post-employment benefits
Pension and other employee future benefits expense is calculated by independent actuaries using assumptions that have
been reviewed by management. The assumptions affect the pension and other employee future benefits expense
included in the Statements of Operations. If actual experience differs from the assumptions used, the resulting experience
gain or loss is recorded in Other Comprehensive Income (OCI). Additional information regarding Pension and other post-
employment benefits is included in Notes 2.18 and 10 of the Consolidated Financial Statements.
Changes in Accounting Policies
In the year ended December 31, 2024 the Company has not adopted any new or amended accounting standards that
would have resulted in a material impact on our Consolidated Financial Statements.
The Company is currently evaluating the following upcoming accounting policy changes:
IAS 21 Amendments – Lack of exchangeability
In August 2023, the IASB issued narrow-scope amendments to IAS 21 The Effects of Changes in Foreign Exchange
Rates, which address determination of the exchange rate when there is a long-term lack of exchangeability, and introduce
additional disclosure requirements when a currency is not exchangeable. The amendments are effective for annual
reporting periods beginning on or after January 1, 2025, to be recognized as an adjustment to opening retained earnings
on the date of initial adoption.
IFRS 18 – Presentation and Disclosures in Financial Statements
In April 2024, the IASB issued IFRS 18 Presentation and Disclosures in Financial Statements (IFRS 18), which will
replace IAS 1. IFRS 18 introduces changes to the structure of the statement of operations, and provides enhanced
principles for aggregation and disaggregation. The standard also requires disclosures in the financial statements for
certain performance measures reported outside of an entity's financial statements (Management-defined Performance
Measures). IFRS 18 is effective for annual reporting periods beginning on or after January 1, 2027, and must be applied
retrospectively.
IFRS 9 and IFRS 7 Amendments – Classification and measurement of financial instruments
In May 2024, the IASB issued amendments to IFRS 9 Financial Instruments and IFRS 7 Financial Instruments:
Disclosures relating to classification and measurement of financial instruments. The amendments clarify certain concepts
relating to classification of financial assets, and introduce the option for entities to derecognize financial liabilities settled
using an electronic payment system before the settlement date when certain criteria are met. These amendments are
effective for annual reporting periods beginning on or after January 1, 2026, and must be applied retrospectively.
The Company is currently evaluating the impact that these amendments and the new standard will have on its
Consolidated Financial Statements.
Empire Life - Annual Report 2024
33
Management's Discussion and Analysis
Forward-Looking Statements and Information
Certain statements in this MD&A about Empire Life’s current and future plans, expectations and intentions, results, market
share growth and profitability, strategic objectives or any other future events or developments constitute forward-looking
statements and information within the meaning of applicable securities laws. The words “may”, “will”, “would”, “should”,
“could”, “expects”, “plans”, “intends”, “trends”, “indications”, “anticipates”, “believes”, “estimates”, “predicts”, “likely” or
“potential” or the negative or other variations of these words or other comparable words or phrases, are intended to
identify forward-looking statements and information. Although management anticipates that the expectations and
assumptions on which such forward-looking statements and information are based are reasonable, undue reliance should
not be placed on the forward-looking statements and information because there can be no assurance that they will prove
to be correct. By their nature, such forward-looking statements and information are subject to various risks and
uncertainties, which could cause the actual results and expectations to differ materially from the anticipated results or
expectations expressed. These risks and uncertainties include, but are not limited to: investment risk, including market risk
(including equity risk, interest rate risk, and foreign exchange rate risk), liquidity risk, credit risk (including counterparty
risk), and hedging risk; product risk, including product design and pricing risk, underwriting and claims risk, and
reinsurance risk; operational risk, including legal and regulatory compliance risk, model risk, human resources risk, third-
party risk, technology and cyber security risk, and business continuity risk; pension risk, and risk with respect to risk
management policies; business and strategic risk, including environmental and social risk, risk with respect to financial
strength, capital adequacy risk, risk with respect to competition, risk with respect to distribution channels, risk with respect
to changes to applicable income tax legislation, risk with respect to brand, risk with respect to intellectual property and risk
with respect to significant ownership of common shares; risk relating to the securities of Empire Life, including risk with
respect to market value, and risk with respect to regulatory constraints. Please see the section titled “Risk Factors” in
Empire Life’s Annual Information Form available at www.sedarplus.ca for more details on these risks.
Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward-
looking statements and information include that the general economy remains stable; assumptions on interest rates,
mortality rates and insurance contract liabilities; and that capital markets continue to provide access to capital. These
factors are not intended to represent a complete list of the factors that could affect Empire Life; however, these factors
should be considered carefully, and readers should not place undue reliance on forward-looking statements made herein
or in the documents reproduced herein.
To the extent any forward-looking information in this MD&A constitutes future-oriented financial information or financial
outlooks within the meaning of securities laws, such information is being provided to demonstrate potential benefits and
readers are cautioned that this information may not be appropriate for any other purpose. Future-oriented financial
information and financial outlooks are, without limitation, based on the assumptions and subject to the risks set out above.
The forward-looking information contained herein is expressly qualified in its entirety by this cautionary statement. When
relying on Empire Life’s forward-looking statements and information to make decisions, investors and others should
carefully consider the foregoing factors, assumptions and other uncertainties and potential events. Readers are cautioned
not to place undue reliance on this forward-looking information, which is given as of the date hereof or the date indicated,
and to not use such forward-looking information for anything other than its intended purpose. Empire Life undertakes no
obligation to update publicly or revise any forward-looking statements and information, whether as a result of new
information, future events or otherwise after the date of this document, except as required by law.
Non-IFRS Measures
Empire Life uses non-IFRS measures including return on common shareholders’ equity, assets under management,
annualized premium sales, gross and net sales for segregated funds and fixed annuities to provide investors with
supplemental measures of its operating performance and to highlight trends in its core business that may not otherwise be
apparent when relying solely on financial measures as defined in IFRS Accounting Standards. Empire Life also believes
that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of
issuers. Empire Life’s management also uses non-IFRS measures to facilitate operating performance comparisons from
period to period, to prepare annual operating budgets and to determine components of management compensation.
Empire Life believes that these measures provide information useful to its shareholders and policyholders in evaluating
the Company's underlying financial results.
Empire Life - Annual Report 2024
34
Management's Discussion and Analysis
Return on common shareholders’ equity is a profitability measure that is not prescribed under IFRS Accounting
Standards and a comparable measure under IFRS Accounting Standards is not available. Empire Life calculates this
measure as the net income available to common shareholders as a percentage of the average capital deployed to earn
the income, on a trailing 4-quarters basis.
Annualized premium sales is used as a method of measuring sales volume. It is equal to the premium expected to be
received in the first 12 months for all new individual insurance and employee benefit policies sold during the period. For
segregated funds and annuity contracts, sales include new and renewal deposits to policy contracts.
Net sales in the Wealth Management line reflect the gross sales (deposits) less the effect of redemptions and surrenders.
Assets under management is a non-IFRS measure of the assets managed by Empire Life, which includes general fund
assets and segregated fund assets. It represents the total assets of Empire Life and the assets its customers invest in.
The following table provides a reconciliation of assets under management to total assets in Empire Life’s financial
statements.
Reconciliation of Assets Under Management
As at
(in millions of dollars)
December 31, 2024
December 31, 2023
Assets Under Management
General fund assets(1)
$
10,273 $
9,852
Segregated fund assets
9,394
8,813
Total assets per financial statements
$
19,667 $
18,665
(1) Prior year amounts have been revised from those previously presented.
The previous table includes the following amounts held by Empire Life’s defined benefit (DB) pension plans. For more
information on movements in the DB pension plan assets, refer to Note 10. Employee Benefit Plans of the Company’s
Consolidated Financial Statements for the year ended December 31, 2024.
As at
(in millions of dollars)
December 31, 2024 December 31, 2023
Defined benefit (DB) plan assets
Segregated fund assets
$
149 $
227
Empire Life - Annual Report 2024
35
Management's Responsibility for Financial Reporting
The Consolidated Financial Statements in this annual report have been prepared by management, who is responsible for
their integrity, objectivity and reliability. This responsibility includes selecting and applying appropriate accounting policies,
making judgments and estimates, and ensuring information contained throughout the annual report is consistent with
these statements. The Consolidated Financial Statements are prepared in accordance with International Financial
Reporting Standards as issued by the International Accounting Standards Board (IASB) (IFRS Accounting Standards).
The Company maintains a system of internal control over financial reporting which is designed to provide reasonable
assurance that assets are safeguarded, expenditures are made in accordance with authorizations of management and
directors, transactions are properly recorded, and the financial records are reliable for preparing the Consolidated
Financial Statements in accordance with IFRS Accounting Standards. Under the supervision of management, an
evaluation of the effectiveness of the Company’s internal control over financial reporting was carried out as at
December 31, 2024. Based on that evaluation, management concluded that the Company’s internal control over financial
reporting was effective as at December 31, 2024.
The Board of Directors, acting through the Audit Committee which is comprised of directors who are not officers or
employees of the Company, oversees management’s responsibility for financial reporting and for internal control systems.
The Audit Committee is responsible for reviewing the Consolidated Financial Statements and annual report and
recommending them to the Board of Directors for approval. The Audit Committee meets with management, internal audit
and the external auditors to discuss audit plans, internal controls over accounting and financial reporting processes,
auditing matters, and financial reporting issues.
The Appointed Actuary is appointed by the Board of Directors and is responsible for ensuring that the assumptions and
methods used in the valuation of the insurance contract liabilities are in accordance with accepted actuarial practice and
regulatory requirements. The Appointed Actuary is required to provide an opinion regarding the appropriateness of the
insurance contract liabilities at the Consolidated Statement of Financial Position date and are appropriate for its purpose.
Examination of supporting data for accuracy and completeness and analysis of Company assets for their ability to support
the amount of insurance contract liabilities are important elements of the work required to form this opinion. The Appointed
Actuary is also required each year to analyze the financial condition of the Company and prepare a report for the Board of
Directors. The analysis tests the capital adequacy of the Company under adverse economic and business conditions for
the current year and the next four years.
PricewaterhouseCoopers’ responsibility as external auditor is to report to the policyholders and shareholders regarding
the fairness of presentation of the Company’s annual Consolidated Financial Statements. The external auditors have full
and free access to, and meet periodically with, the Audit Committee to discuss their audit. The Independent Auditor’s
Report outlines the scope of their examination and their opinion.
President and Chief Executive Officer
Kingston, Ontario
Senior Vice-President and Chief Financial Officer
Kingston, Ontario
Mark Sylvia
Rebecca Rycroft
Empire Life - Annual Report 2024
36
Appointed Actuary's Report
To the policyholders and shareholders of The Empire Life Insurance Company
I have valued the policy liabilities of Empire Life for its Consolidated Financial Statements prepared in accordance with
International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB) (IFRS
Accounting Standards) for the year ended December 31, 2024.
In my opinion, the amount of policy liabilities is appropriate for its purpose. The valuation conforms to accepted actuarial
practice in Canada and the Consolidated Financial Statements fairly present the results of the valuation.
Kingston, Ontario
February 27, 2025
Will Featherstonhaugh, FSA, FCIA
Empire Life - Annual Report 2024
37
Independent Auditor's Report
To the Policyholders and Shareholders of The Empire Life Insurance Company
Our opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial
position of The Empire Life Insurance Company and its subsidiaries (together, the Company) as at December 31, 2024
and 2023, and its financial performance and its cash flows for the years then ended in accordance with International
Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS Accounting Standards).
What we have audited
The Company’s consolidated financial statements comprise:
•
the consolidated statements of financial position as at December 31, 2024 and 2023;
•
the consolidated statements of operations for the years then ended;
•
the consolidated statements of comprehensive income for the years then ended;
•
the consolidated statements of changes in equity for the years then ended;
•
the consolidated statements of cash flows for the years then ended; and
•
the notes to the consolidated financial statements, comprising material accounting policy information and other
explanatory information.
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements
section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the
consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities in accordance with these
requirements.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
consolidated financial statements for the year ended December 31, 2024. These matters were addressed in the context of
our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
Empire Life - Annual Report 2024
38
Independent Auditor's Report
Key audit matter
How our audit addressed the key audit matter
Valuation of insurance contract liabilities – Estimation
of fulfilment cash flows
Refer to note 2 – Material accounting policies and note 9 –
Insurance contracts and reinsurance contracts held to the
consolidated financial statements.
The Company has insurance contract liabilities of
$16.0 billion, reinsurance contracts held liabilities of
$0.2 billion and reinsurance contracts held assets of $0.3
billion as at December 31, 2024. Insurance contract
liabilities consist of:
•
fulfilment cash flows (FCFs) comprising unbiased and
probability weighted estimates of future cash flows,
discounted to present value to reflect the time value of
money and financial risks, plus a risk adjustment for
non-financial risk (risk adjustment); and
•
contractual service margin (CSM) representing the
unearned profit in the group of insurance contracts.
Reinsurance contracts held consist of FCFs ceded to
reinsurers and a CSM representing the net cost or net gain
deferred in the group of reinsurance contracts.
Measurement of the FCFs requires management
judgments in estimating the probability weighted mean of
future cash flows on a present value basis, in addition to
applying a risk adjustment. Estimates of expected cash
flows incorporate assumptions used in the stochastic
modelling of guarantees for segregated funds and best-
estimate assumptions for mortality, morbidity, longevity,
expenses, and policyholder behaviour, as well as
assumptions for discount rates and the risk adjustment.
These assumptions are reviewed and updated at least
annually by the Company’s Appointed Actuary.
We considered this a key audit matter due to the judgment
applied by management when determining the FCFs, which
in turn led to a high degree of auditor judgment and effort in
evaluating specifically the significant best-estimate
assumptions for mortality, policyholder behaviour, discount
rates, the assumptions used in the stochastic modelling of
guarantees for segregated funds, and the risk adjustment.
Professionals with specialized skill and knowledge in the
field of actuarial sciences assisted us in performing our
procedures.
Our approach to addressing the matter included the
following procedures, among others:
•
Tested how management determined the FCFs, which
included the following:
–
Tested the operating effectiveness of certain
controls over the actuarial models used in
management’s determination of FCFs and certain
controls related to the completeness and accuracy
of data used in the calculation of FCFs.
–
Tested accuracy and completeness of data used in
the estimates of future cash flows.
–
With the assistance of professionals with
specialized skill and knowledge in the field of
actuarial science, assessed the reasonableness of
management’s best- estimate assumptions for
mortality, policyholder behaviour, discount rates,
assumptions used in the stochastic modelling of
guarantees for segregated funds, and the risk
adjustment by:
•
Evaluating these assumptions in accordance
with the requirements of the Canadian Institute
of Actuaries (CIA).
•
Evaluating the Company’s internal experience
studies for appropriateness and considering the
relationship of the results with recent CIA
industry experience and observable market
information.
–
With the assistance of professionals with
specialized skill and knowledge in the field of
actuarial science, evaluated a sample of actuarial
models used in management’s determination of the
FCFs, by:
•
Assessing the appropriateness of the modelling
of product features.
•
Assessing the appropriateness of the
application of best-estimate assumptions for
mortality, policyholder behaviour, discount
rates, assumptions used in the stochastic
modelling of guarantees for segregated funds
and the risk adjustment.
•
Assessed the disclosures made in the consolidated
financial statements, particularly on the sensitivity of
best-estimate assumptions on insurance contract
liabilities.
Empire Life - Annual Report 2024
39
Independent Auditor's Report
Other information
Management is responsible for the other information. The other information comprises the Management’s Discussion and
Analysis, which we obtained prior to the date of this auditor’s report and the information, other than the consolidated
financial statements and our auditor’s report thereon, included in the annual report, which is expected to be made
available to us after that date.
Our opinion on the consolidated financial statements does not cover the other information and we do not and will not
express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated
financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s
report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We
have nothing to report in this regard. When we read the information, other than the consolidated financial statements and
our auditor’s report thereon, included in the annual report, if we conclude that there is a material misstatement therein, we
are required to communicate the matter to those charged with governance.
Responsibilities of management and those charged with governance for the consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in
accordance with IFRS Accounting Standards, and for such internal control as management determines is necessary to
enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic
alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional
judgment and maintain professional skepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient
and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from
fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
•
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by management.
•
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant
doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we
are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements
or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease
to continue as a going concern.
Empire Life - Annual Report 2024
40
Independent Auditor's Report
•
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the
disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
•
Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial information of
the entities or business units within the Company as a basis for forming an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and review of the audit work performed for purposes of
the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our
audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the
matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report
because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of
such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Owen Thomas.
Chartered Professional Accountants, Licensed Public Accountants
Toronto, Ontario
February 27, 2025
PricewaterhouseCoopers LLP
Empire Life - Annual Report 2024
41
Consolidated Statements of Financial Position
(in thousands of Canadian dollars)
As at
Notes
December 31, 2024
December 31, 2023
Assets
Cash and cash equivalents
3
$
219,196 $
347,707
Investments
3
9,386,398
8,916,945
Accrued investment income
52,827
49,068
Current tax asset
13
984
—
Other assets
4
45,550
32,193
Reinsurance contracts held assets
9
296,071
281,359
Property and equipment
3,361
13,751
Deferred tax asset
13
92,283
89,444
Investment in associates and joint venture
6
92,475
34,891
Intangible assets
5
58,752
61,511
Goodwill
24,986
24,950
Segregated fund assets
7
9,393,738
8,812,724
Total assets
$
19,666,621 $
18,664,543
Liabilities
Insurance contract liabilities, excluding segregated fund account balances
9
$
6,868,436 $
6,708,434
Reinsurance contracts held liabilities
9
213,849
253,230
Investment contract liabilities, excluding segregated fund account balances
3
585,521
490,020
Accounts payable and other liabilities
8
98,147
97,318
Subordinated debt
11
399,234
398,897
Current tax liability
13
53,237
15,780
Deferred tax liability
13
3,986
—
Total liabilities, excluding segregated fund account balances
8,222,410
7,963,679
Insurance contract liabilities for segregated fund account balances
7,9
9,140,742
8,507,285
Investment contract liabilities for segregated fund account balances
7
252,996
305,439
Insurance and investment contract liabilities for segregated fund account balances
9,393,738
8,812,724
Total liabilities
17,616,148
16,776,403
Equity
Preferred shares
15
100,000
100,000
Common shares
15
985
985
Other equity instruments
15
196,664
196,664
Contributed surplus
19,387
19,387
Retained earnings
1,649,221
1,498,732
Accumulated other comprehensive income
31,071
26,215
Total shareholders' equity
1,997,328
1,841,983
Participating account surplus
17
53,145
46,157
Total equity
2,050,473
1,888,140
Total liabilities and equity
$
19,666,621 $
18,664,543
Chairman of the Board
President and Chief Executive Officer
Duncan N. R. Jackman
Mark Sylvia
Empire Life - Annual Report 2024
42
Consolidated Statements of Operations
(in thousands of Canadian dollars except per share amounts)
For the year ended
Notes
December 31, 2024
December 31, 2023
Insurance service result
Insurance revenue
9
$
1,405,292 $
1,325,508
Insurance service expenses
12
(1,187,042)
(1,071,549)
Insurance service result
218,250
253,959
Net recovery (expense) from reinsurance contracts held
9
(42,659)
(72,637)
Net insurance service result
175,591
181,322
Investment and insurance finance result
Investment income (loss), excluding segregated fund account balances
Investment income
3
518,338
816,789
Change in investment contracts
3
(29,266)
(28,171)
Net investment result, excluding segregated fund account balances
3
489,072
788,618
Insurance finance income (expense), excluding segregated fund account balances
Insurance contracts
3
(216,193)
(613,392)
Reinsurance contracts held
3
32,938
(39,503)
Net insurance finance income (expense), excluding segregated fund account balances
(183,255)
(652,895)
Segregated fund account balances net investment and insurance finance result
Investment income (loss) on investments for segregated fund account balances
3
1,119,709
735,834
Insurance finance income (expenses) segregated fund account balances
3
(1,119,709)
(735,834)
Segregated fund account balances net investment and insurance finance result
—
—
Net investment and insurance finance result
3
305,817
135,723
Other income and expenses
Fee and other income
45,157
30,701
Non-insurance expenses
12
(108,863)
(95,525)
Interest expenses
(15,429)
(16,615)
Total other income and expenses
(79,135)
(81,439)
Net income (loss) before taxes
402,273
235,606
Income taxes
(103,241)
(45,650)
Net income (loss) after taxes
299,032
189,956
Less: net income (loss) attributable to the participating account
6,988
22,102
Shareholders' net income (loss)
292,044
167,854
Less: preferred share dividends declared and distributions on other equity instruments
16
11,525
11,525
Common shareholders' net income (loss)
$
280,519 $
156,329
Earnings per share - basic and diluted
(2,000,000 shares authorized; 985,076 shares outstanding)
14
$
284.77 $
158.70
Empire Life - Annual Report 2024
43
Consolidated Statements of Comprehensive Income
(in thousands of Canadian dollars)
For the year ended
Notes
December 31, 2024
December 31, 2023
Net income (loss) after taxes
$
299,032 $
189,956
Other comprehensive income (loss), net of income taxes:
Items that will not be reclassified to net income:
Remeasurements of post-employment benefit liabilities
13
4,856
(572)
Total other comprehensive income (loss)
4,856
(572)
Total comprehensive income (loss)
$
303,888 $
189,384
Comprehensive income (loss) attributable to:
Participating account
$
6,988 $
22,102
Shareholders
296,900
167,282
Total comprehensive income (loss)
$
303,888 $
189,384
Empire Life - Annual Report 2024
44
Consolidated Statements of Changes in Equity
(in thousands of Canadian dollars)
Preferred
Shares
Common
Shares
Other
Equity
Instruments
Contributed
Surplus
Retained
Earnings
AOCI
(AOCL)
Total
Shareholders'
Equity
Participating
Account
Surplus
Total Equity
Balance as at January 1, 2023
$
100,000 $
985 $
196,664 $
19,387 $ 1,417,584 $
26,787 $
1,761,407 $
24,055 $ 1,785,462
For the year ended December 31, 2023
Comprehensive income (loss)
167,854
(572)
167,282
22,102
189,384
Preferred share dividends and
distributions on other equity
instruments
(11,525)
(11,525)
(11,525)
Common share dividends
(75,181)
(75,181)
(75,181)
Balance as at December 31, 2023
100,000
985
196,664
19,387
1,498,732
26,215
1,841,983
46,157
1,888,140
Balance as at January 1, 2024
100,000
985
196,664
19,387
1,498,732
26,215
1,841,983
46,157
1,888,140
For the year ended December 31, 2024
Comprehensive income (loss)
292,044
4,856
296,900
6,988
303,888
Preferred share dividends and
distributions on other equity
instruments
(11,525)
(11,525)
(11,525)
Common share dividends
(130,030)
(130,030)
(130,030)
Balance as at December 31, 2024 $
100,000 $
985 $
196,664 $
19,387 $ 1,649,221 $
31,071 $
1,997,328 $
53,145 $ 2,050,473
Empire Life - Annual Report 2024
45
Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
For the year ended
Notes
December 31, 2024
December 31, 2023
Operating activities
Net income before tax
$
402,273 $
235,606
Adjustments for:
Accrued investment income
(3,759)
(423)
Depreciation of right-of-use assets
1,320
1,386
Depreciation and amortization related to property and equipment and intangible assets
18,366
16,137
Accrued interest on lease liabilities
159
176
Net realized and unrealized loss (gain) on invested assets
3
(184,187)
(424,337)
Amortization of subordinated debt issuance costs
337
468
Interest on subordinated debts
15,092
7,667
Share of loss (income) of associates and joint venture
3,420
(1,300)
Changes in:
Other assets
(5,809)
(320)
Accounts payable and other liabilities
(10,182)
(4,219)
Insurance contracts liabilities
9
160,002
544,344
Reinsurance contracts held
9
(54,093)
62,950
Investment contract liabilities
95,501
174,068
Cash generated from (used for) operating activities
438,440
612,203
Income taxes (paid), net of refunds
(67,360)
19,310
Cash provided from (used for) operating activities
371,080
631,513
Investing activities
Portfolio investments
Purchases and advances
(1,885,863)
(2,022,167)
Sales and maturities
1,612,786
1,685,826
Sale (purchase) of property and equipment and intangible assets
(7,422)
(16,682)
Dividends from associates and joint venture
1,022
985
Investment in associates and joint venture
6
(62,026)
(4,760)
Payments for acquisition of subsidiary, net of cash acquired
—
(988)
Cash provided from (used for) investing activities
(341,503)
(357,786)
Financing activities
Dividends paid to common shareholders
16
(130,030)
(75,181)
Dividends paid to preferred shareholders and distributions from other equity instruments
(11,525)
(11,204)
Redemption of subordinated debt
—
(200,000)
Issuance of subordinated debt
—
199,300
Payment of lease liabilities
(1,478)
(1,243)
Interest paid on subordinated debt
(15,055)
(13,215)
Cash provided from (used for) financing activities
(158,088)
(101,543)
Net change in cash and cash equivalents
(128,511)
172,184
Cash and cash equivalents - beginning of year
3
347,707
175,523
Cash and cash equivalents - end of year
3
$
219,196 $
347,707
Supplementary cash flow information related to operating activities:
Interest income received
284,360
256,610
Dividend income received
52,764
56,724
Empire Life - Annual Report 2024
46
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
1. Description of Company and Summary of Operations
The Empire Life Insurance Company (the Company or Empire Life) was founded in 1923 when it was organized under a
provincial charter in Toronto, Ontario. Authorization to continue as a federal corporation was obtained in 1987. The
Company underwrites life and health insurance policies and provides segregated funds and annuity products for
individuals and groups across Canada. The Company is a 98.3% owned subsidiary of E-L Financial Services Limited
(ELFS), which in turn is a 100.0% owned subsidiary of E-L Financial Corporation Limited (E-L). E-L owns, directly and
indirectly through ELFS, 99.5% of the common shares of Empire Life. The head office, principal address and registered
office of the Company are located at 259 King Street East, Kingston, Ontario, K7L 3A8. Empire Life is a Federally
Regulated Financial Institution, regulated by the Office of the Superintendent of Financial Institutions, Canada (OSFI) and
subject to regulations in all of the provinces in which it conducts business. Empire Life became a public company on
August 5, 2015 and registered as a reporting issuer with the Ontario Securities Commission.
The Company owns 100% of the voting shares and maintains control of its subsidiary, Empire Life Investments Inc. (ELII),
which was established in 2011. ELII became a registered Investment Funds Manager on January 5, 2012. The head office
for ELII is located at 165 University Avenue, Toronto, Ontario, M5H 3B8.
TruStone Financial Inc. (TSFI), an Empire Life subsidiary, was established in 2022. Empire Life owns 100% of the voting
shares and maintains control of its subsidiary. The head office for TSFI is located at 259 King Street East, Kingston,
Ontario, K7L 3A8.
These Consolidated Financial Statements were approved by the Company’s Board of Directors (the Board) on
February 27, 2025.
2. Material Accounting Policies
2.1. Basis of preparation
The Consolidated Financial Statements of the Company for the year ended December 31, 2024 have been prepared
in accordance with International Financial Reporting Standards as issued by the International Accounting Standards
Board (IASB) (IFRS Accounting Standards).
All amounts included in the Consolidated Financial Statements are presented in thousands of Canadian dollars except for
per share amounts and where otherwise stated.
2.2. Basis of consolidation
The Company's Consolidated Financial Statements include the assets, liabilities, results of operations and cash flows of
the Company and its subsidiaries. The Company controls an entity when the Company is exposed to, or has rights to,
variable returns from its involvement with the entity and has the ability to affect those returns through its power over the
entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are
deconsolidated from the date that control ceases. The financial statements of subsidiaries are prepared for the same
reporting period as the Company, using consistent accounting policies. Inter-company transactions and balances are
eliminated on consolidation.
Empire Life - Annual Report 2024
47
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
2.3. Estimates, assumptions and judgments
The preparation of the Consolidated Financial Statements, in accordance with IFRS Accounting Standards, requires
management to make estimates, assumptions and judgments that affect the application of accounting policies and the
reported amounts of assets and liabilities as at the date of the Consolidated Financial Statements, and the reported
amounts of revenue and expenses during the period. On an on-going basis, management evaluates its critical judgments,
estimates, and assumptions in relation to assets, liabilities, revenue and expenses. Actual results may differ from the
Company's estimates thereby impacting the Consolidated Financial Statements.
2.3.1. Insurance and reinsurance contracts held
Key assumptions and sources of estimation that can result in a material adjustment to the carrying amounts of assets and
liabilities are discussed below. The Company bases assumptions and estimates on parameters available when the
insurance and reinsurance contracts held are measured. Actuarial assumptions relate to events that are anticipated to
occur, however, these may not be realized due to market changes, developing experience or circumstances arising that
are unpredictable. Management applied judgment in determining the level of aggregation of information in which the
disclosures are presented in Note 9 of the Consolidated Financial Statements.
Product guarantees for universal life, participating products and segregated funds are valued using stochastic models.
Assumptions are discussed in more detail below and in Note 22.
Mortality rates (life insurance business)
Current estimates are based on a combination of Company and industry experience. Mortality projections are further
adjusted for expected future mortality improvements. Assumptions are differentiated by policyholder sex at birth,
underwriting class and contract size.
Morbidity rates (health insurance business)
Morbidity rates relate to insurance contracts that have health risks. Morbidity refers to both the rates of accident or
sickness and the rates of recovery from the accident or sickness. Assumptions are based on a combination of Company
and industry experience, and are differentiated by policyholder sex at birth and underwriting class.
Longevity (immediate annuity business)
Current estimates are based on a combination of Company and industry experience. Longevity projections are further
adjusted for expected future mortality improvements. Assumptions are differentiated by policyholder sex at birth.
Expenses
Expenses that are directly attributable to the fulfilment of insurance contracts are within the contract boundary (defined in
Note 2.4.4) and included in the measurement of the group of insurance contracts. These expenses include costs of
administering policies in-force, renewal commissions, acquisition costs, general expenses, transactional taxes, investment
income tax and an allocation of fixed and variable overhead expenses. Overhead expenses are allocated to groups of
insurance contracts based on internal expense studies and using methods that are systematic and rational. The current
level of expenses is taken as an appropriate expense base, and projections are adjusted for expected inflation. Expected
inflation rates are based on management current estimates.
Policyholder behaviour
Policy lapse, surrender and premium payment assumptions (collectively, policyholder behaviour) are based on Company
and industry experience, and are differentiated by product.
Empire Life - Annual Report 2024
48
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
Discount rates
Observable period
Top-down approach
For products measured under the General Measurement Model (GMM) or the Premium Allocation Approach (PAA), cash
flows are discounted using the interest rates implied by a reference portfolio of assets that reflects the characteristics of
the insurance contracts, adjusted to remove the credit risk premium of the assets and to reflect the illiquidity premium of
the insurance contracts. For the observable period (30 years), the interest rates implied by the reference portfolio are
based on a weighted average of a subset of the Company’s fixed income investments. The credit risk adjustment is
determined based on historical experience and current market conditions, and varies by asset class, credit rating, and
term.
Prior to 2024, these cash flows were discounted using interest rates determined by applying the bottom-up approach,
described in further detail below. This change in estimate did not have a material impact on the Company’s financial
statements.
Bottom-up approach
Segregated funds, which are measured under the Variable Fee Approach (VFA), are discounted using risk-free interest
rates, plus an illiquidity premium. For the observable period, risk-free interest rates were determined by reference to the
yields of highly liquid AAA-rated Canadian sovereign securities.
Unobservable period
Under both the top-down and bottom-up approach, the ultimate (year 70) interest rate is based on an ultimate risk-free
interest rate of 3.65% (2023 3.15%). The discount rates between the observable and the ultimate periods are derived
using linear interpolation.
Illiquidity premium
Under both approaches, the illiquidity premium references observable market interest rates for corporate debt. Empire Life
applies the same illiquidity premium to all groups of insurance contracts where the GMM or PAA applies. It was
determined that these insurance contracts were very illiquid, which is reflected in the illiquidity premium used. A lower
illiquidity premium is applied to segregated fund guarantees. During the year, the Company made changes to the illiquidity
premium used in discounting segregated fund cash flows resulting in a CSM decrease of $33 million.
The following table presents the upper and lower end of the range of rates used to discount expected future cash flows
from insurance and reinsurance contracts.
Portfolio duration
December 31, 2024
December 31, 2023
Upper
Lower
1 year
4.02 %
3.59 %
5.36 %
3 years
4.08 %
3.63 %
4.76 %
5 years
4.19 %
3.83 %
4.55 %
10 years
4.75 %
4.42 %
4.74 %
20 years
5.15 %
4.83 %
4.83 %
30 years
5.00 %
4.72 %
4.89 %
Ultimate (year 70)
5.15 %
4.65 %
4.65 %
Empire Life - Annual Report 2024
49
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
Risk adjustment for non-financial risk
The risk adjustment for non-financial risk represents the compensation that the Company requires for bearing the
uncertainty about the amount and timing of the cash flows that arise from non-financial risk as the entity fulfills insurance
contracts. The risk adjustment for non-financial risk reflects an amount that an insurer would rationally pay to remove the
uncertainty that future cash flows will exceed the current estimated amount.
The Company derives risk adjustment for non-financial risk using a Margin for Adverse Deviation (MfAD) approach. The
approach adds a margin (conservatism) to each non-financial risk (mortality, morbidity, longevity, expenses, policyholder
behaviour) assumption. These MfADs are aggregated to derive the Company’s total risk adjustment for non-financial risk.
The total risk adjustment for non-financial risk recognizes the benefits of diversification and is further adjusted to achieve
the target confidence level.
The net direct and ceded risk adjustment for non-financial risk for the Company corresponds to a confidence level target
range of 80% to 85% as at December 31, 2024 and December 31, 2023.
Amortization of the CSM
The Contractual Service Margin (CSM) is a component of the carrying amount of the asset or liability for a group of
insurance contracts representing the expected future profits the Company will recognize as it provides insurance contract
services under the insurance contracts in the group. An amount of the CSM for a given group of insurance contracts is
amortized into insurance service revenue in each period based on coverage units, which reflect the insurance services
provided.
For universal life contracts, the coverage units are defined as the total current death benefit. Empire Life's position is that
universal life products contain investment return services, whereas products with fixed Cash Surrender Values (CSVs) do
not contain investment return services. Hence, the coverage units for individual non-participating contracts with fixed or no
CSVs, are the sum insured less the CSVs. Coverage units for fixed life contingent payout annuities (immediate annuities)
are the expected annualized payment amounts.
For contracts measured using the GMM, coverage units are discounted at locked-in rates in order to determine the CSM
amortization.
For participating products, coverage units are the total face amount which approximates the benefits provided under the
insurance and investment service. Amortization of the segregated funds CSM's use fund values as the coverage units and
incorporates adjustments that reflect the impact of economic returns.
The total coverage units of each group of insurance contracts are reassessed at the end of each reporting period to adjust
for the reduction of remaining coverage for claims paid, expectations of lapses and cancellation of contracts in the period.
For reinsurance contracts held, the CSM amortization reflects the expected pattern of underwriting of the underlying
contracts because the level of service provided depends on the number of underlying contracts in-force.
Accounting model eligibility
IFRS 17 Insurance Contracts (IFRS 17) requires the application of one of three measurement models to groups of
insurance contracts:
•
General Measurement Model;
•
Variable Fee Approach; or
•
Premium Allocation Approach.
Empire Life - Annual Report 2024
50
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
The GMM is the default measurement model under IFRS 17. The GMM applies to all individual non-participating business
including fixed life-contingent annuities and universal life insurance contracts. The universal life business contains some
features of risk pass through where the VFA model might apply, however, the Company determined that there is not a link
to a clearly identified pool of underlying items; therefore the GMM applies.
The VFA applies to all groups of insurance contracts that are substantially investment-related service contracts under
which the policyholder receives a substantial share of the investment returns on the linked underlying items. The VFA
applies to the segregated fund business and eligible participating policies. There is judgment involved in applying the VFA
measurement model to the Company's participating business. Empire Life’s approach is to define the underlying as the
entire participating account, including any surplus. The policyholders benefit from a substantial share of the return on
these assets.
The PAA measurement model is applied to the Company's short-term group insurance business. Renewals of group
insurance contracts are eligible to apply the PAA as the coverage period is one year or less. New contracts are eligible as
the Company reasonably expects that the resulting measurement of the Liability for Remaining Coverage (LRC) would not
differ materially from that of applying the GMM. The Company does not adjust the LRC to reflect the time value of money
and effect of financial risk if at initial recognition it does not expect that the time between providing each part of the
services and the related premium due date will be more than one year.
For reinsurance contracts held, groups are measured in a manner consistent with the underlying insurance contract and
the terms of the reinsurance contract. The PAA model is applied to reinsurance on the Company's short-term group
business, and for all other reinsurance contracts held, the GMM applies. The VFA model cannot be applied to reinsurance
contracts held.
2.3.2. Pension and other post-employment benefits
Pension and other employee future benefits expense is calculated by independent actuaries using assumptions that have
been reviewed by management. The assumptions affect the pension and other employee future benefits expense
included in the Statements of Operations. If actual experience differs from the assumptions used, the resulting experience
gain or loss is recorded in Other Comprehensive Income (OCI).
Additional information regarding pension and other post-employment benefits is included in Notes 2.18 and 10.
2.3.3. Fair value of financial instruments
In measuring the fair value of financial instruments, management exercises judgment in the selection of fair value inputs
and in determining their significance to the fair value estimate. Judgment is also required in the classification of fair value
measurements within the levels of the fair value hierarchy, in particular those items categorized within Level 3 of the
hierarchy.
Additional information regarding the fair value of financial instruments is included in Note 3.
2.4. Insurance contracts and reinsurance contracts held
The Company issues insurance contracts in the normal course of business, under which it accepts significant insurance
risk from its policyholders by agreeing to compensate the policyholder if a specified uncertain future event adversely
affects the policyholder. The Company determines whether it has significant insurance risk by comparing benefits payable
after an insured event with benefits payable if the insured event had not occurred. The Company issues a broad suite of
insurance contracts including life, health, wealth and group benefits solutions. IFRS 17 requires one of three accounting
measurement models to be applied to insurance contracts. Accounting model eligibility is discussed in Note 2.3.1.
Empire Life - Annual Report 2024
51
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
2.4.1. Separation of components
The Company has assessed its insurance contracts and reinsurance contracts held to determine whether they contain
distinct components which must be accounted for under another IFRS Accounting Standard rather than IFRS 17. After
separating any distinct components, an entity must apply IFRS 17 to all remaining components of the host insurance
contract.
Some insurance contracts issued by the Company include a surrender option under which the surrender value is paid to
the policyholder on maturity or lapse of the contract. These surrender options have been assessed to meet the definition
of a non-distinct investment component under IFRS 17. IFRS 17 defines investment components as the amounts that an
insurance contract requires an insurer to repay to a policyholder in all circumstances. Investment components which are
highly interrelated with the insurance contract of which they form a part are considered non-distinct and are not separately
accounted for. For participating contracts, the non-distinct investment component includes the CSV (including dividends
on deposit) and the policyholder dividends. The policyholder account value is the non-distinct component for segregated
fund contracts. Receipts and payments of non-distinct investment components are excluded from insurance service
revenue and insurance service expenses. Differences between expected and actual non-distinct investment component
cash flows adjust the CSM and, as such, impact future profitability.
2.4.2. Level of aggregation
IFRS 17 requires an entity to determine the level of aggregation for applying its requirements. The level of aggregation for
the Company is determined by dividing business written into portfolios of contracts which have similar risks and are
managed together. Portfolios are further divided into groups based on each contract’s expected profitability at inception,
with no group containing contracts issued more than one year apart.
The direct insurance portfolios are divided into groups of insurance contracts:
•
That are onerous at initial recognition;
•
That at initial recognition have no significant possibility of becoming onerous subsequently; and
•
All other remaining contracts in the portfolio.
The Company evaluates the expected profitability of each new contract issued by comparing its specific policy
characteristics, including coverage, age, sex at birth, amount and smoker status to a pre-defined modeled profitability of a
similar contract. The Company has identified portfolios of insurance contracts issued based on products that are subject to
similar risks and managed together. For financial reporting, the Company has assigned portfolios to one of three reporting
segments, namely, Individual Insurance, Wealth Management and Group Solutions.
For PAA business, groups of insurance contracts are assumed not to be onerous unless the facts and circumstances
indicate otherwise.
The reinsurance contracts held portfolios are divided into similar groups as the direct insurance contracts, and follow the
underlying direct contracts that they support:
•
A group of insurance contracts on which there is a net gain on initial recognition;
•
A group of insurance contracts that have no significant possibility of a net gain arising subsequent to initial recognition;
•
A group of the remaining contracts in the portfolio.
The Company has identified portfolios and groups of reinsurance contracts held, and assigned these portfolios to
reporting segments, in a manner consistent with direct insurance contracts.
Empire Life - Annual Report 2024
52
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
2.4.3. Recognition
The Company recognizes groups of insurance contracts that it issues from the earliest of the following:
•
The beginning of the coverage period of the group of insurance contracts;
•
The date when the first payment from a policyholder in the group becomes due; and
•
For a group of onerous contracts, when a group becomes onerous.
The Company recognizes a group of reinsurance contracts held from the earliest of the following:
•
The beginning of the coverage period of the group of reinsurance contracts or, for proportionate reinsurance, when
the first underlying direct contract is recognized; and
•
The date of recognition of an onerous group of underlying insurance contracts.
The Company adds new contracts to the group when they are issued or initiated.
2.4.4. Contract boundary
The Company includes in the measurement of a group of insurance contracts all the expected future cash flows within the
boundary of each contract in the group. Cash flows are within the boundary of an insurance contract (or a reinsurance
contract held) if they arise from substantive rights and obligations that exist during the reporting period in which the
Company can compel the policyholder to pay the premiums (or is compelled to pay amounts to a reinsurer), or in which
the Company has a substantive obligation to provide the policyholder with services (or a substantive right to receive
services from a reinsurer).
For insurance contracts with renewal periods, the Company assesses whether premiums and related cash flows that arise
from the renewed contract are within the contract boundary. The Company reassesses contract boundary of each group at
the end of each reporting period.
For reinsurance contracts held, a substantive right to receive services ends when the reinsurer has the practical ability to
reassess the risk transferred to it and can set a new price or level of benefits that fully reflects those risks, or the reinsurer
can terminate the coverage.
2.4.5. Measurement models
Insurance contracts – initial measurement
Insurance contract liabilities under IFRS 17 include two components: an LRC and a Liability for Incurred Claims (LIC). The
LRC reflects the Company’s obligation to pay valid claims for insured events that have not yet occurred.
The LIC reflects the Company’s obligation to pay claims for insured events that have already occurred, including events
that have occurred but for which claims have not been reported, and other incurred insurance expenses. At initial
recognition of a group of insurance contracts, the LIC is nil as no insured events have occurred.
Outlined below are the requirements for initial measurement of the LRC for the three measurement models included in
IFRS 17.
Empire Life - Annual Report 2024
53
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
◦
◦
GMM and VFA
For non-onerous GMM and VFA insurance contracts, the LRC of a group of insurance contracts is the total of:
•
Fulfilment Cash Flows (FCFs) which represent the present value of the expected future cash flows, and
•
CSM representing the unearned profit the Company will recognize as it provides service to the insurance contracts in
the group.
FCFs comprise unbiased and probability-weighted estimates of future cash flows, discounted to present value to reflect
the time value of money and financial risks, plus a risk adjustment for non-financial risk. The CSM on initial recognition is
an amount that, unless the group of insurance contracts is onerous, results in no net income arising from initial recognition
of the FCFs.
The Company’s objective in estimating expected future cash flows is to determine the expected value, or the probability-
weighted mean, of the full range of possible outcomes, considering all reasonable and supportable information available
at the reporting date without undue cost or effort. The Company estimates expected future cash flows considering a range
of scenarios which have commercial substance and give a good representation of possible outcomes. The cash flows
from each scenario are probability-weighted and discounted using current assumptions.
When estimating expected future cash flows, the Company includes all cash flows that are within the contract boundary
including:
•
Premiums and related cash flows;
•
Claims and benefits including reported claims not yet paid, incurred claims not yet reported and expected future
claims:
Payments to policyholders resulting from embedded surrender value options;
An allocation of insurance acquisition cash flows attributable to the portfolio to which the contract belongs.
•
Claims handling costs;
•
Acquisition costs;
•
Policy administration and maintenance costs, including recurring commissions that are expected to be paid to
intermediaries;
•
An allocation of fixed and variable overheads directly attributable to fulfilling insurance contracts; and
•
Investment and premium taxes.
The Company estimates the probabilities and amounts of future payments under existing contracts based on information
obtained, including:
•
Information about claims already reported by policyholders;
•
Other information about the known or estimated characteristics of the insurance contracts;
•
Historical data about the Company’s own experience, supplemented, when necessary, with data from other sources
and adjusted to reflect current conditions; and
•
Current pricing information.
Insurance acquisition cash flows arise from selling and underwriting activities required to initiate a group of contracts. The
measurement of fulfilment cash flows includes insurance acquisition cash flows which are allocated as a portion of
premium to profit or loss (through insurance service revenue) over the period of the contract in a systematic and rational
way based on the passage of time. For policies accounted for under the GMM and VFA, acquisition costs are deferred
and amortized into income based on coverage units.
A loss component represents a notional record within the LRC of the losses attributable to each group of onerous
insurance contracts (or contracts profitable at inception that have become onerous). For groups of contracts assessed as
onerous on initial recognition, the Company recognizes a loss in Insurance service expenses in the Consolidated
Statements of Operations for the net outflow, resulting in the carrying amount of the liability for the group being equal to
the FCFs and the CSM of the group being zero.
Empire Life - Annual Report 2024
54
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
◦
◦
PAA
Measurement on initial recognition under the PAA consist of premiums received. If a group of PAA contracts is onerous on
initial recognition, the Company recognizes a loss in Insurance service expenses and increases the LRC for the difference
between the current estimates of the FCFs that relate to remaining coverage and the carrying amount of the LRC. The
Company has selected the accounting policy option to expense acquisition costs as incurred when applying the PAA.
Insurance contracts – subsequent measurement
Subsequent measurement of the LRC included in the insurance contract liability is different depending on the
measurement model being applied to the group of insurance contracts. Outlined below are the requirements for
subsequent measurement of the LRC for the three IFRS 17 measurement models.
For all measurement models, the LIC is measured as expected cash flows for claims and expenses that relate to past
service and have not yet been paid, including a risk adjustment for non-financial risk and an adjustment to reflect the time
value of money.
GMM
For a group of insurance contracts where the GMM applies, the carrying amount of the CSM of the group at the end of the
reporting period equals the carrying amount at the beginning of the reporting period adjusted for the following:
•
The effect of any new contracts added to the group;
•
Interest accreted on the carrying amount of the CSM during the reporting period, measured at the discount rates at
initial recognition;
•
The changes in FCFs relating to future service, except to the extent that:
Such increases in the FCFs exceed the carrying amount of the CSM, giving rise to a loss; or
Such decreases in the FCFs are allocated to the loss component of the LRC.
•
The amount recognized as insurance service revenue because of the transfer of services in the period, determined by
the allocation of the CSM remaining at the end of the reporting period (before any allocation) over the current and
remaining coverage period.
The locked-in discount rate is set at the date of initial recognition for contracts that joined a group over a 12-month period.
The discount rate used for accretion of interest on the CSM is determined using a top-down approach (Note 2.3.1) at
inception (2023 bottom-up approach).
The changes in FCFs relating to future service that adjust the CSM comprise:
•
Experience adjustments that arise from the difference between the premium receipts (and any related cash flows such
as insurance acquisition cash flows and insurance premium taxes) and the estimate, at the beginning of the period, of
the amounts expected. Differences in premiums received (or due) related to current or past services are recognized
immediately in profit or loss while differences related to premiums received (or due) for future services are adjusted
against the CSM;
•
Changes in estimates of the present value of expected future cash flows in the LRC, except those relating to the time
value of money and changes in financial risk (recognized in the Consolidated Statements of Operations rather than
adjusting the CSM);
•
Differences between any investment component expected to become payable in the period and the actual investment
component that becomes payable in the period;
•
Differences between any loan to a policyholder expected to become repayable in the period and the actual amount
repaid in the period; and
•
Changes in the risk adjustment for non-financial risk that relate to future service.
Adjustments to the CSM noted above are measured at the locked-in discount rates.
Empire Life - Annual Report 2024
55
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
◦
◦
◦
The Company chose an accounting policy to assess accounting estimates impacting the measurement of insurance and
reinsurance contracts on a period-to-date basis rather than a year-to-date basis, meaning that the accounting estimates
made in previous interim financial statements will not be changed. This choice applies to all groups of insurance contracts
and reinsurance contracts.
For onerous groups of contracts, the loss component is released based on a systematic allocation of the subsequent
changes in the FCFs to: (i) the loss component; and (ii) the LRC excluding the loss component. The loss component is
also updated for subsequent changes in estimates of the FCFs related to future service. The systematic allocation of
subsequent changes to the loss component results in the total amounts allocated to the loss component being equal to
zero by the end of the coverage period of a group of contracts (since the loss component will have been materialized in
the form of incurred claims).
VFA
For a group of insurance contracts where the VFA applies, subsequent measurement of the LRC is consistent with the
GMM, except as outlined below.
The carrying amount of the CSM of the group at the end of the reporting period equals the carrying amount at the
beginning of the reporting period adjusted for the following:
•
The effect of any new contracts added to the group;
•
The change in the entity's share of the fair value of underlying items, except to the extent a decrease exceeds the
carrying amount of the CSM, or if the risk mitigation option applies;
•
The changes in FCFs relating to future service, except to the extent that:
Such increases in the FCFs exceed the carrying amount of the CSM, giving rise to a loss;
Such decreases in the FCFs are allocated to the loss component of the LRC; or
The risk mitigation option applies.
•
The amount recognized as insurance service revenue because of the transfer of services in the period, determined by
the allocation of the CSM remaining at the end of the reporting period (before any allocation) over the current and
remaining coverage period.
Adjustments to the CSM noted above are measured using current discount rates.
The Company uses interest rate swaps to mitigate interest rate risk arising from segregated fund contracts measured
under the VFA. The Company has elected to apply the risk mitigation option whereby the hedged portion of changes in
FCFs relating to future service arising from changes in interest rates are recognized in insurance finance income or
expense instead of adjusting the CSM.
PAA
For subsequent measurement of insurance contracts measured applying the PAA, the LRC is increased for any additional
premiums received and decreased by amounts recognized as insurance service revenue for services provided during the
period.
For onerous PAA groups of contracts, the LRC is adjusted to reflect reversals or increases in the loss component by
comparing the current estimates of the FCFs that relate to remaining coverage and the carrying amount of the LRC. If a
loss component did not exist on initial recognition but there are indications that a group of contracts is onerous on
subsequent measurement, the Company establishes the loss component using the same methodology as on initial
recognition.
Empire Life - Annual Report 2024
56
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
Reinsurance contracts held
Outlined below are the requirements for measurement of reinsurance contracts held.
GMM
The initial measurement of reinsurance contracts held follows the same principles as those for insurance contracts issued,
with the exception of the following:
•
Measurement of the cash flows include an allowance on a probability-weighted basis for the effect of any non-
performance by the reinsurers, including the effects of collateral and losses from disputes;
•
The Company determines the risk adjustment for non-financial risk so that it represents the amount of risk being
transferred to the reinsurer; and
•
The Company defers both profits and losses at initial recognition in the Consolidated Statements of Financial Position
as a CSM and releases this to profit or loss as the reinsurer renders services.
For subsequent measurement of reinsurance contracts held, the carrying amount of the CSM of the group at the end of
the reporting period equals the carrying amount at the beginning of the reporting period adjusted for the following:
•
The effect of any new contracts added to the group;
•
Interest accretion on the carrying amount of the CSM;
•
Income recognized in profit or loss in the period for the recovery of losses recognized on initial recognition of onerous
underlying contracts (see below);
•
Reversals of loss recovery components to the extent that the reversals are not changes in FCFs of the reinsurance
contract held (see below);
•
The changes in FCFs relating to future service, except to the extent that the change results from a change in the
FCFs allocated to a group of underlying insurance contracts that does not adjust its CSM; and
•
The amount recognized in income due to services rendered in the period.
When a loss component is recognized on underlying insurance contracts, the CSM of the reinsurance contract held is
adjusted to establish a loss-recovery component and a recovery is simultaneously recognized in profit or loss relating to
the recovery of that loss. The Company calculates the loss-recovery component by multiplying the loss recognized on the
underlying insurance contracts and the percentage of claims on the underlying insurance contracts the Company expects
to recover from the group of reinsurance contracts held. Where only some contracts in the onerous underlying group are
covered by the group of reinsurance contracts held, the Company uses a systematic and rational method to determine the
portion of losses recognized on the underlying group of insurance contracts to insurance contracts covered by the group
of reinsurance contracts held.
The loss-recovery component determines the amount that is subsequently presented in the Consolidated Statements of
Operations within Net recovery (expense) from reinsurance contracts held, representing reversal of recoveries of losses
from reinsurance contracts. The loss-recovery component is adjusted on subsequent measurement to reflect changes in
the loss component of the onerous group of underlying contracts, however it cannot exceed the portion of the loss
component of the onerous group of underlying contracts that the Company expects to recover from the reinsurance
contracts held. On this basis, the loss-recovery component recognized at initial recognition is reduced to zero in line with
reductions in the onerous group of underlying insurance contracts and is nil when the loss component of the onerous
group of underlying insurance contracts is nil.
PAA
Groups of reinsurance contracts held to which the PAA is applied are measured on the same basis as insurance contracts
to which the PAA applies, adapted to reflect the features that differ from those of insurance contracts. If a loss-recovery
component is created for a group of reinsurance contracts held measured under the PAA, the Company adjusts the
carrying amount of the reinsurance liability or asset for remaining coverage.
Empire Life - Annual Report 2024
57
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
2.4.6. Modification and derecognition
The Company derecognizes insurance contracts when the rights and obligations relating to the contract are extinguished
(discharged, cancelled or expired), or the contract is modified such that the modification would result in a different
insurance contract or a change in measurement model.
Reinsurance assets and liabilities held are derecognized when the contractual rights and obligations are extinguished or
expire or when the contract is transferred to another party.
2.4.7. Presentation and disclosure
The Company has presented separately in the Consolidated Statements of Financial Position the carrying amount of
portfolios of insurance contracts issued that are assets, portfolios of insurance contracts issued that are liabilities, liabilities
for segregated fund account balances, portfolios of reinsurance contracts held that are assets and portfolios of
reinsurance contracts held that are liabilities.
The Company disaggregates the amounts recognized in the Consolidated Statements of Operations into Insurance
revenue, Insurance service expenses, Insurance finance income (expense) and Net recovery (expense) from reinsurance
contracts held. The Company chooses not to disaggregate Insurance finance income (expense) between profit or loss and
OCI and instead presents the total amount within Net investment and insurance finance result. Insurance finance income
(expense) related to segregated fund account liabilities and the corresponding income on segregated fund assets are
separately presented in the Consolidated Statements of Operations.
The Company disaggregates the change in risk adjustment for non-financial risk between Insurance finance income
(expense) and Insurance service result.
The Company separately presents income and expenses from reinsurance contracts held from the expenses or income
from insurance contracts issued.
Insurance service revenue
Insurance service revenue from a group of insurance contracts is the amount that is earned in the period arising from:
•
Expected future cash outflows in the period, including claims and directly attributable expenses expected to be
incurred;
•
Release of the risk adjustment for non-financial risk as risk expires throughout the term of the contract;
•
CSM earned over the service period, based on coverage units for each period of service;
•
Allocation of expected premium receipts from PAA contracts;
•
Amortization of insurance acquisition cash flows;
•
Revenue excludes non-distinct investment components described in Note 2.4.1.
For approaches applied to the amortization of CSM, refer to Note 2.3.1.
Insurance finance income or expense
For insurance contracts issued and reinsurance contracts held measured not using the VFA, insurance finance income or
expense comprise the change in the carrying amount of the group of insurance contracts arising from:
•
The effect of the time value of money and changes in the time value of money; and
•
The effect of financial risk and changes in financial risk.
For insurance contracts issued that are measured using the VFA, insurance finance income or expense includes the
changes in the fair value of underlying items and changes not recognized in the CSM when the risk mitigation option is
applied.
Empire Life - Annual Report 2024
58
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
Net recovery (expense) from reinsurance contracts held
The Company presents Net recovery (expense) from reinsurance contracts held on the face of the Consolidated
Statements of Operations as the amounts expected to be recovered from reinsurers, and an allocation of the reinsurance
premiums paid. The Company treats reinsurance cash flows that are contingent on claims on the underlying contracts as
part of the claims that are expected to be reimbursed under the reinsurance contracts held and excludes investment
components and commissions from an allocation of reinsurance premiums presented on the face of the Consolidated
Statements of Operations. Amounts relating to the recovery of losses relating to reinsurance of onerous direct contracts
are included as amounts recoverable from the reinsurer.
2.4.8. Participating insurance policies
The Company maintains an account in respect of participating policies (participating account), separate from those
maintained in respect of other policies, as required by sections 456-464 of the Insurance Companies Act (Canada) (ICA).
The participating account includes all policies issued by the Company that entitle its policyholders to participate in the
profits of the participating account. The Company has discretion as to the amount and timing of dividend payments which
take into consideration the continuing solvency of the participating account. Dividends are paid annually, with certain older
plans paying dividends every five years as per contractual provisions. Participating policyholder dividends are projected in
the FCFs of the insurance contract liabilities and are excluded from insurance service revenue and insurance service
expenses.
All participating insurance contract liabilities, both guaranteed and discretionary, are presented within insurance contract
liabilities. Related participating policy reinsurance contracts held at the end of the reporting period are presented within
Reinsurance contracts held assets or Reinsurance contracts held liabilities. Net income attributable to the participating
account and comprehensive income attributable to the participating account is shown on the Consolidated Statements of
Operations and the Consolidated Statements of Comprehensive Income, respectively.
2.4.9. Fair value approach
Upon adoption of IFRS 17, for all in-force insurance and reinsurance contracts within the Wealth Management and
Individual Insurance product lines as of January 1, 2022, the transition date, the Company applied the fair value transition
approach. Under this approach, CSM at transition is calculated as the difference between the fair value of a group of
insurance contracts and the FCFs measured at that date.
As permitted under the fair value approach, for each portfolio, the Company grouped insurance contracts from multiple
cohorts into a single group for measurement purposes.
In determining FCFs, the Company used reasonable and supportable information available at the transition date to
determine appropriate assumptions and project them into the future. In determining fair value, the Company applied the
principles of IFRS 13 Fair Value Measurement. The Company used an income approach to calculate the fair value of the
insurance contract liabilities at the transition date. CSM balances were derived separately for non-participating life, health,
universal life, fixed life-contingent annuities, segregated funds and participating business.
The weighted average cost of capital, Life Insurance Capital Adequacy Test (LICAT) targets and underlying insurance
assumptions used in applying the fair value approach were determined using market rates for a company of Empire Life’s
size and capital sources as at January 1, 2022, which were considered to be consistent with those of a market participant
in Canada. The fair value calculations were based on actuarial assumptions, including discount rates, and involved
consideration of reasonable and appropriate assumptions for use by a market participant. Empire assumed that the
market participant would have the same characteristics (size, market, risk appetite) as itself.
The CSM determined by applying the fair value approach at transition is subsequently measured as described in Note
2.4.5. The Company separately discloses the effect of insurance contracts measured at the transition date applying the
fair value approach on the CSM and insurance service revenue in Note 9.
Empire Life - Annual Report 2024
59
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
2.5. Financial instruments
Financial assets and liabilities are recognized when the Company becomes a party to the contractual provision of the
financial instrument.
Financial assets are classified and measured based on three categories: amortized cost, Fair Value through OCI (FVOCI)
and Fair Value Through Profit or Loss (FVTPL). Financial liabilities are classified and measured based on two categories:
amortized cost or FVTPL.
The classification and measurement of financial assets is based on the business model for managing these financial
assets and their contractual cash flow characteristics:
•
Assets held for the purpose of collecting contractual cash flows that represent Solely Payments of Principal and
Interest (SPPI) are measured at amortized cost;
•
Assets held within a business model where assets are held for both the purpose of collecting contractual cash flows
and selling financial assets prior to maturity, and the contractual cash flows represent SPPI, are measured at FVOCI;
and
•
Assets held within another business model or assets that do not have contractual cash flow characteristics that are
SPPI are measured at FVTPL.
Financial assets are not reclassified subsequent to their initial recognition, unless there is a change in the business model
in managing the financial asset that would cause the Company to reassess the classification of financial assets. Financial
liabilities are measured subsequently at amortized cost using the effective interest method or at FVTPL. Refer to Note 2.6
Investment contracts for additional details on the classification and measurement of the Company's investment contract
liabilities.
Financial assets that would otherwise fall into a different category are permitted to be voluntarily designated at FVTPL.
This designation is irrevocable and can only be applied if reliable fair values are available and when doing so eliminates or
significantly reduces a measurement inconsistency that would otherwise arise from measuring assets and liabilities on
different bases. Financial liabilities may also be designated at FVTPL when they are part of a portfolio which is managed
on a fair value basis in accordance with the Company's risk management strategy and are reported internally on that
basis.
These assets may be comprised of cash and cash equivalents, short-term investments, bonds, common and preferred
shares, derivatives, mortgages, and loans. Changes in the fair value of these financial assets are recorded in Investment
income in the Consolidated Statements of Operations in the period in which they occur.
All transactions are recorded on the trade date. Transaction costs are expensed for FVTPL instruments and capitalized for
all others.
2.5.1. Fair value
Fair value is the amount of consideration that would be agreed upon in an arm’s length transaction between
knowledgeable, willing parties who are under no compulsion to act. When a financial instrument is initially recognized, its
fair value is generally the value of the consideration paid or received. Subsequent to initial recognition, the fair value of a
financial asset or liability quoted in an active market is generally the closing price.
2.5.2. Cash and cash equivalents
Cash and cash equivalents are short-term, highly liquid investments that are subject to insignificant changes in value and
are readily convertible into known amounts of cash. Cash equivalents comprise financial assets with maturities of three
months or less from the date of acquisition. Short-term investments comprise financial assets with maturities of greater
than three months and less than one year when acquired.
Empire Life - Annual Report 2024
60
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
2.5.3. Derivative financial instruments
The Company uses derivative financial instruments to manage exposure to foreign currency, equity, interest and other
market risks associated with certain assets and liabilities. Derivative financial assets and liabilities are classified as
FVTPL. Therefore, they are initially recorded at fair value on the acquisition date and subsequently revalued at their fair
value at each reporting date. Derivative financial instruments with a positive fair value are disclosed as derivative assets
within Investments, while derivative financial instruments with a negative fair value are included in the reported balance of
Accounts payable and other liabilities. Changes in fair value are recorded in Investment income in the Consolidated
Statements of Operations.
2.5.4. Other
Trade accounts receivables are measured at amortized cost and presented as Other assets. The simplified approach is
used when calculating the expected credit loss for trade accounts receivables, which represents the lifetime expected
credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point
during the life of the financial instrument. Historical experience, external indicators and forward-looking information is used
to calculate the expected credit losses.
Accounts payable and other liabilities (excluding derivative liabilities) are measured at amortized cost. For these financial
instruments, carrying value approximates fair value due to their short-term nature.
2.5.5. Derecognition
A financial asset is derecognized when the contractual rights to its cash flows expire, or the Company has transferred its
economic rights to the asset and substantially all risks and rewards. In instances where substantially all risks and rewards
have neither been transferred nor retained, the assets are derecognized if the asset is not controlled through rights to sell
or pledge the asset.
2.5.6. Securities lending
The Company engages in securities lending through its custodian as lending agent. Loaned securities are
not derecognized and continue to be reported within Investments in the Consolidated Statements of Financial Position, as
the Company retains substantial risks and rewards and economic benefits related to the loaned securities. For further
details, refer to Note 3.4.
2.6. Investment contracts
Investment contracts include products that do not involve the transfer of significant insurance risk, either at inception or
during the life of the investment contract. For the Company, these products are limited to certain segregated funds,
deferred annuities and term certain annuities that provide for income payments for a specified period of time.
Investment contract liabilities are designated at FVTPL. As the Company's segregated fund products have fair values
dependent on the fair value of underlying financial assets, the designation at FVTPL will eliminate the accounting
mismatch that would otherwise arise from measuring the assets or liabilities or recognizing the gains or losses on them on
different bases. Deferred annuity products are designated at FVTPL as they are managed on a fair value basis, in
accordance with the Company's risk management strategy, and are reported internally on that basis. Similarly, the
Company's term certain annuity products are designated at FVTPL.
Empire Life - Annual Report 2024
61
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
2.7. Foreign currency translation
The Company uses the Canadian dollar as both its functional and presentational currency.
Foreign currency transactions are accounted for at the exchange rates prevailing at the date of the transactions. Gains
and losses resulting from the settlement of such transactions, and from the translation of monetary assets and liabilities
denominated in foreign currencies, are recognized in the Consolidated Statements of Operations.
For monetary and non-monetary financial assets classified as FVTPL and amortized cost, translation differences are
recognized in the Consolidated Statements of Operations.
2.8. Comprehensive income
Comprehensive income consists of net income and OCI. OCI includes remeasurements of post-employment benefit
liabilities, which will not be reclassified to net income. All OCI amounts are presented after taxes.
2.9. Segregated funds
Certain insurance and investment contracts allow the policyholder to invest in segregated investment funds managed by
the Company for the benefit of these policyholders. Although the underlying assets are registered in the Company's name
and the policyholder has no direct access to the specific assets, the contractual arrangements are such that the
segregated fund policyholder bears the risk and rewards of the segregated fund's investment performance. Segregated
fund assets are not available to pay liabilities of the Company's general fund. The assets of these segregated funds are
carried at their period-end fair values based on quoted market prices or, where quoted market prices are not readily
available, on prevailing market prices for instruments with similar characteristics and risk profiles or by using internal or
external valuation models with observable market-based inputs. The Company provides minimum guarantees on certain
segregated fund contracts, these include death, maturity and withdrawal benefit guarantees. The Company presents
Insurance contract liabilities for account of segregated fund holders equal to the fair value of the assets, and any benefit
guarantees are presented as a separate line on the Consolidated Statements of Financial Position within Insurance
contract liabilities, excluding segregated fund account balances. Investment contract liabilities for segregated fund account
balances are presented separately from insurance contracts in the Consolidated Statements of Financial Position.
The Company earns a fee for the management of these segregated funds which is included in the determination of
expected future cash flows for segregated funds which are insurance contracts. For segregated funds which are
investment contracts, these fees are presented in Fee and other income in the Consolidated Statements of Financial
Performance.
2.10. Fee income
Fee income, earned from policy administration and distribution service, is recognized on an accrual basis for investment
contracts issued.
2.11. Investment income
Changes in the fair value of financial assets are recorded in Investment income (loss), excluding segregated fund account
balances in the Consolidated Statements of Operations in the period in which they occur.
Interest income is recognized using the effective interest rate method. Fees that are an integral part of the effective yield
of the financial asset are recognized as an adjustment to the effective interest rate of the instrument.
Dividend income is recognized when the right to receive payment is established, which is usually the ex-dividend date.
Interest income and dividend income, excluding amounts from segregated funds, are included in Investment income in the
Consolidated Statements of Operations for all financial assets.
Empire Life - Annual Report 2024
62
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
2.12. Income taxes
Income tax expense for the period is comprised of current and deferred tax. Tax is recognized in the Consolidated
Statements of Operations except to the extent that it relates to items recognized in OCI or directly in equity.
Current tax assets and liabilities for the current and prior periods are measured as the amount expected to be recovered
from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted
or substantively enacted at the end of each reporting period.
Deferred income tax assets and liabilities are recorded for the expected future income tax consequences of events that
have been reflected in the Consolidated Financial Statements. Deferred income taxes are provided for using the liability
method. Under the liability method, deferred income taxes are recognized for all significant temporary differences between
tax and financial statement bases for assets and liabilities and for certain carry-forward items.
Deferred income tax assets are recognized only to the extent that, in the opinion of management, it is probable that the
deferred income tax assets will be realized. Deferred income tax assets and liabilities are adjusted for the effects of
changes in tax laws and rates, on the date of their substantive enactment.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets
and they relate to income taxes levied by the same tax authority on the same taxable entity.
2.13. Property and equipment
Property and equipment comprises own use land, buildings, leasehold improvements and furniture and equipment. All
classes of assets are carried at cost less accumulated amortization including any impairment losses, except for land,
which is not subject to amortization. Cost includes all expenditures that are directly attributable to the acquisition of an
asset. Subsequent costs are included in the asset’s carrying amount only when it is probable that future economic benefits
associated with the item will flow to the Company and the cost can be measured reliably. Gains and losses on disposal
are reflected in the Consolidated Statements of Operations.
Amortization is calculated to write down the cost of property and equipment to their residual values over their estimated
useful lives as follows:
Land
No amortization
Building
Five percent (declining balance)
Furniture and equipment
Three to five years (straight-line)
Leasehold improvements
Remaining lease term (straight-line)
Amortization is allocated between Insurance service expenses and Non-insurance expenses in the Consolidated
Statements of Operations.
The estimated useful lives, residual values and amortization methods are reviewed at each year-end, with the effect of
any changes in estimate accounted for on a prospective basis. Impairment reviews are performed when there are
indicators that the carrying value may not be recoverable. An impairment loss is recognized for the amount by which the
carrying value of the asset exceeds its expected recoverable amount. The recoverable amount is the higher of fair value
less costs to sell and value in use. Impairment losses are recognized in the Consolidated Statements of Operations.
Empire Life - Annual Report 2024
63
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
2.14. Intangible assets
Intangible assets include customer and distributor relationships, computer software, related licenses and software
development costs, which are carried at cost less accumulated amortization and any impairment losses. Amortization of
intangible assets is calculated using the straight-line method to allocate the costs over their estimated useful lives, which
are generally between three and fifteen years. Amortization is allocated between Insurance service expenses and Non-
insurance expenses in the Consolidated Statements of Operations. For intangible assets under development, amortization
begins when the asset is available for use. The Company does not have intangible assets with indefinite useful lives.
Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the
asset are accounted for by changing the amortization period or method, as appropriate, and are treated as changes in
accounting estimates.
Impairment reviews are performed when there are indicators that the carrying value may not be recoverable. An
impairment loss is recognized for the amount by which the carrying value of the asset exceeds its expected recoverable
amount. The recoverable amount is the higher of fair value less costs to sell and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows.
Impairment losses are recognized in the Consolidated Statements of Operations.
2.15. Goodwill
Goodwill represents the portion of purchase price that is in excess of the net fair value assigned to assets purchased and
liabilities assumed in a business acquisition. It is initially recorded at cost and subsequently measured at cost less any
impairment charges incurred.
For the purpose of impairment assessment, goodwill is allocated to the lowest level within the Company at which goodwill
is monitored by internal management. An impairment assessment is conducted at least annually or when circumstances
indicate possible presence of goodwill impairment, which is when there is evidence that the carrying amount exceeds the
recoverable amount. The recoverable amount is the higher of fair value less costs to sell and value in use. Impairment
losses are recognized in the Consolidated Statements of Operations during the period in which they occur and cannot be
reversed in future periods.
Impairment assessment involves judgment and use of a variety of forward-looking inputs, estimates, and assumptions,
including but not limited to factors such as discount rates, projected cash flow patterns, expenses, and external market
and competitive environment. Due to these uncertainties, the actual experience may differ materially from the results
obtained from impairment assessment modelling.
Empire Life - Annual Report 2024
64
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
2.16. Investment in associates and joint venture
Associates are entities over which the Company has significant influence, which is generally presumed to exist when the
Company holds over 20% of the voting rights but does not have control. Joint ventures are joint arrangements in which the
Company has joint control, and has rights to the net assets of the arrangement. Joint control is the contractual sharing of
control, and exists when the decisions about relevant activities require unanimous consent of the parties sharing control.
Investments in associates and joint ventures are accounted for using the equity method of accounting. Under the equity
method, the investment is initially recognized at cost, and the carrying amount is increased or decreased to recognize the
Company’s share of the income or loss of the investee after the date of acquisition. The Company's share of the
investee's profit or loss is adjusted for amortization of intangible assets based on their fair values at the acquisition date.
The Company’s share of post-acquisition income or loss is recognized in the Consolidated Statements of Operations, and
its share of OCI is recognized in the Consolidated Statements of Comprehensive Income. The Company determines at
each reporting date whether there is any objective evidence that each investment in associate or joint venture is impaired.
The Company calculates the amount of impairment as the difference between the recoverable amount of the investment
and its carrying value and recognizes the amount as share of income (loss) of associates and joint venture in the
Consolidated Statements of Operations. Income and losses resulting from transactions between the Company and its
associates and joint venture are recognized in the Company’s Consolidated Financial Statements only to the extent of
unrelated investor’s interests in the associates and joint venture. Unrealized losses are eliminated unless the transaction
provides evidence of an impairment of the asset transferred. Accounting policies of associates and joint venture have
been changed where necessary to ensure consistency with the policies adopted by the Company.
2.17. Subordinated debt
Subordinated debt is recorded at amortized cost using the effective interest rate method. Interest on subordinated debt is
reported as Interest expense in the Consolidated Statements of Operations.
2.18. Employee benefits
The Company provides employee pension benefits through either a defined benefit or a defined contribution component of
its pension plan. The Company discontinued new enrolments in the defined benefit component effective October 1, 2011
and introduced a defined contribution component effective January 1, 2012 for new enrolments and for any existing
employees who chose to transfer from the defined benefit component. The Company also provides other post-
employment benefits.
Pension benefits
The defined benefit plan defines an amount of pension benefit that an employee will receive on retirement, dependent on
factors such as age, years of service and compensation. The liability recognized in the balance sheet in respect of the
defined benefit component is the present value of the defined benefit obligation at the end of the reporting period less the
fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the
projected unit credit method. The present value of the defined benefit obligation is determined by discounting the
estimated future cash outflows using current interest rates of high-quality corporate bonds.
Defined benefit expense includes the net interest on the net defined benefit liability (asset) calculated using a discount
rate based on market yields on high quality bonds as of prior-year end. Actuarial gains and losses arising from experience
adjustments and changes in actuarial assumptions are charged or credited to OCI in the period in which they arise, and
remain in Accumulated other comprehensive income (AOCI). Past-service costs are recognized immediately in net
income. A settlement gain or loss is recognized in the Consolidated Statements of Operations on settlement date,
calculated as the difference between the settlement date present value of the defined benefit obligation being settled and
the settlement amount.
Empire Life - Annual Report 2024
65
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
The defined contribution component of the Plan is a component under which the Company pays fixed contributions into a
separate entity. The Company has no legal or constructive obligations to pay further contributions if the fund does not hold
sufficient assets to pay employees the benefits relating to employee service in the current and prior periods. The
contributions are recognized as employee benefit expense when they are due.
Other post-employment benefits
The Company also provides other post-employment benefits to their retirees. The entitlement to these benefits is
conditional on the employee remaining in service up to retirement age and the completion of a minimum service period.
The expected costs of these benefits are accrued over the period of employment using the same accounting methodology
as used for defined benefit pension plans. Actuarial gains and losses arising from experience adjustments and changes in
actuarial assumptions are charged or credited to OCI in the period in which they arise and remain in AOCI. These
obligations are valued annually by independent actuaries and are not funded.
Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement date or whenever an
employee accepts voluntary redundancy in exchange for these benefits. The Company recognizes termination benefits
when it is demonstrably committed to either terminating the employment of current employees according to a detailed
formal plan without realistic possibility of withdrawal or providing termination benefits as a result of an offer made to
encourage voluntary redundancy.
2.19. Provisions
Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events, it is
probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. If
the outflow of economic benefits is not probable, a contingent liability is disclosed unless the possibility of an outflow of
economic benefits is remote. Any change in estimate of a provision is recorded in Net income. Provisions are not
recognized for future operating losses. Provisions are measured as the present value of the expected expenditures to
settle the obligation using a discount rate that reflects current market assessments of the time value of money and the
risks specific to the obligation.
2.20. Leases
The Company leases certain property and equipment. When the Company enters into a lease as a lessee, a right-of-use
asset and a lease liability is recognized in the Statements of Financial Position. The initial lease liability is computed based
on the present value of the lease payments, discounted at the Company's incremental borrowing rate. Subsequent to the
initial recognition the lease liability is measured at the amortized cost using the effective interest rate method and is
included in Accounts payable and other liabilities. The interest expense on the liability and the depreciation on the
corresponding right-of-use asset are allocated between insurance service expenses and non-insurance expenses.
The Company has elected to apply the option to recognize lease payments for short-term and low value assets on a
straight-line basis over the lease term.
Empire Life - Annual Report 2024
66
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
2.21. New and amended standards and interpretations
2.21.1. New and amended standards adopted in 2024
Effective January 1, 2024, the Company adopted the following new and amended accounting standards:
IAS 1 Amendments – Classification of liabilities as current or non-current and non-current liabilities with
covenants
Narrow-scope amendments to IAS 1 Presentation of Financial Statements (IAS 1) were issued in January 2020 to provide
clarification over the classification of debt and other liabilities as current or non-current. The amendments aim to promote
consistency in the application of the classification requirements when the settlement date is uncertain. In October 2022,
the IASB issued a further amendment to clarify that classification of liabilities as current or non-current is only impacted by
covenants with which an entity is required to comply on or before the reporting date. This amendment also introduced
disclosure requirements for covenants with which an entity must comply after the reporting date. These amendments are
effective for annual reporting periods beginning on or after January 1, 2024, and must be applied retrospectively. There
were no material impacts to the Company’s Consolidated Financial Statements resulting from these amendments, or
changes to loan agreements.
IFRS 16 Amendments – Lease liability in a sale and leaseback
In September 2022, the IASB issued amendments to IFRS 16 Leases (IFRS 16) to specify how a seller-lessee should
apply the subsequent measurement requirements in IFRS 16 to the lease liabilities that arise in a sale and leaseback
transaction, to ensure the seller-lessee does not recognize any amount of the gain or loss that relates to the right of use it
retains. The amendments are effective for annual reporting periods beginning on or after January 1, 2024, and must be
applied retrospectively to sale and leaseback transactions entered into after the date of initial application of IFRS 16.
There was no material impact to the Company’s Consolidated Financial Statements resulting from these amendments
2.21.2. Standards issued but not yet applied
IAS 21 Amendments – Lack of exchangeability
In August 2023, the IASB issued narrow-scope amendments to IAS 21 The Effects of Changes in Foreign Exchange
Rates, which address determination of the exchange rate when there is a long-term lack of exchangeability, and introduce
additional disclosure requirements when a currency is not exchangeable. The amendments are effective for annual
reporting periods beginning on or after January 1, 2025, to be recognized as an adjustment to opening retained earnings
on the date of initial adoption. The Company is currently evaluating the impact that this amendment will have on its
Consolidated Financial Statements.
IFRS 18 – Presentation and Disclosures in Financial Statements
In April 2024, the IASB issued IFRS 18 Presentation and Disclosures in Financial Statements (IFRS 18), which will
replace IAS 1. IFRS 18 introduces changes to the structure of the statement of operations, and provides enhanced
principles for aggregation and disaggregation. The standard also requires disclosures in the financial statements for
certain performance measures reported outside of an entity's financial statements (Management-defined Performance
Measures). IFRS 18 is effective for annual reporting periods beginning on or after January 1, 2027, and must be applied
retrospectively. The Company is currently evaluating the impact that this standard will have on its Consolidated Financial
Statements.
Empire Life - Annual Report 2024
67
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
IFRS 9 and IFRS 7 Amendments – Classification and measurement of financial instruments
In May 2024, the IASB issued amendments to IFRS 9 Financial Instruments and IFRS 7 Financial Instruments:
Disclosures relating to classification and measurement of financial instruments. The amendments clarify certain concepts
relating to classification of financial assets, and introduce the option for entities to derecognize financial liabilities settled
using an electronic payment system before the settlement date when certain criteria are met. The amendments also
introduce certain new disclosure requirements for financial instruments measured at FVOCI and amortized cost. These
amendments are effective for annual reporting periods beginning on or after January 1, 2026, and must be applied
retrospectively. The Company is currently evaluating the impact that this amendment will have on its Consolidated
Financial Statements.
3. Financial Instruments
The carrying values of the Company's financial assets and liabilities, excluding subordinated debt (Note 11), are shown in
the following table:
As at
December 31, 2024
December 31, 2023
Mandatory
Designated
Total
Mandatory
Designated
Total
Assets
Cash and cash equivalents
FVTPL
$
4,088 $
215,108 $
219,196 $
6,897 $
340,810 $
347,707
Short-term investments
FVTPL
840
—
840
—
4,957
4,957
Bonds
FVTPL
783,586
7,179,895
7,963,481
696,084
6,760,099
7,456,183
Preferred shares
FVTPL
623,791
—
623,791
519,359
—
519,359
Common shares
FVTPL
641,684
—
641,684
776,777
—
776,777
Derivative assets
FVTPL
14,815
—
14,815
13,825
—
13,825
Mortgages
FVTPL
—
78,866
78,866
—
98,679
98,679
Loans
FVTPL
—
62,921
62,921
—
47,165
47,165
2,068,804
7,536,790
9,605,594
2,012,942
7,251,710
9,264,652
Segregated funds
FVTPL
9,393,738
—
9,393,738 $
8,812,724 $
—
8,812,724
11,462,542
7,536,790
18,999,332
10,825,666
7,251,710
18,077,376
Liabilities
Investment contract liabilities,
excluding segregated fund account
balances
FVTPL
—
585,521
585,521
—
490,020
490,020
Investment contract liabilities for
account of segregated fund holders
FVTPL
—
252,996
252,996
—
305,439
305,439
Derivative liabilities
FVTPL
12,860 $
—
12,860
672
—
672
$
12,860 $
838,517 $
851,377 $
672 $
795,459 $
796,131
Empire Life - Annual Report 2024
68
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
3.1. Fair value of financial assets and liabilities
The following table presents the fair value and the fair value hierarchy of financial assets and liabilities, excluding
segregated funds, as disclosed in Note 7.2.
As at
December 31, 2024
December 31, 2023
Level 1
Level 2
Level 3
Total FVTPL
Level 1
Level 2
Level 3
Total FVTPL
Assets
Cash and cash equivalents
$
31,625 $
187,571 $
— $
219,196 $
68,486 $
279,221
$
347,707
Short-term investments
—
840
—
840
—
4,957
4,957
Bonds
—
7,937,273
26,208
7,963,481
—
7,427,458
28,725
7,456,183
Preferred shares
623,791
—
—
623,791
519,359
—
519,359
Common shares
561,378
70,026
10,280
641,684
686,225
79,260
11,292
776,777
Derivative assets
6,502
8,206
107
14,815
2,641
11,184
13,825
Mortgages
—
78,866
—
78,866
—
98,679
98,679
Loans
—
62,921
—
62,921
—
47,165
47,165
1,223,296
8,345,703
36,595
9,605,594
1,276,711
7,947,924
40,017
9,264,652
Liabilities
Investment contract liabilities,
excluding segregated fund account
balances
—
585,521
—
585,521
—
490,020
—
490,020
Investment contract liabilities for
segregated fund account balances
—
252,996
—
252,996
—
305,439
—
305,439
Derivative liabilities
—
12,860
12,860
—
672
—
672
$
— $
851,377 $
— $
851,377 $
— $
796,131 $
— $
796,131
Fair value measurements used in these Consolidated Financial Statements have been classified using a fair value
hierarchy based upon the transparency of the inputs used in making the measurements. The three levels of the hierarchy
are:
Level 1 - Fair value is based on unadjusted quoted prices for identical assets or liabilities in an active market. Where
possible, valuations are based on quoted prices or observable inputs obtained from active markets.
Level 2 - Fair value is based on inputs other than quoted prices included within Level 1 that are observable, either directly
or indirectly. These include quoted prices for similar assets or liabilities in active markets, valuation that is based on
significant observable inputs, or inputs that are derived principally from or corroborated with observable market data
through correlation or other means. Financial instruments traded in a less active market are valued using indicative market
prices, the present value of cash flows or other valuation methods. The fair value of mortgages and loans have been
calculated by discounting cash flows of each mortgage or loan at a discount rate appropriate to its remaining term to
maturity. The discount rates are determined based on regular competitive rate surveys. The valuation of investment
contract liabilities is determined based on a present value discounted cash flow approach, using current market rates.
Level 3 - Fair value is based on valuation techniques that require one or more significant inputs that are not based on
observable market inputs. These unobservable inputs reflect the Company’s expectations about the assumptions market
participants would use in pricing the asset or liability. The fair value of limited partnership investments are based on fair
values determined and reported by the respective investment managers, which are principally based on Net Asset Value
(NAV). The financial statements used in calculating the NAV are generally audited annually. The Company reviews the
NAV of the limited partnership investments and performs analysis to ensure the fair value is reasonable.
The classification of a financial instrument into a level is based on the lowest level of input that is significant to the
determination of the fair value. There were no transfers between Level 1, Level 2 and Level 3 during the year ended
December 31, 2024. During the year ended December 31, 2023, there were transfers of $40,666 from Level 2 to Level 3.
Empire Life - Annual Report 2024
69
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
A summary of changes in Level 3 financial instruments measured at FVTPL for the year is as follows:
As at
December 31, 2024
December 31, 2023
Balance beginning of year
$
40,017 $
—
Transfer-in
—
40,666
Purchases
608
536
Sales
(4,527)
(72)
Net realized and unrealized gain (loss)
497
(1,113)
Balance end of year
$
36,595 $
40,017
For additional information on the composition of the Company’s invested assets and analysis of the Company’s risks
arising from financial instruments refer to Note 22 Risk Management.
3.2. Investment income
Net investment result recognized in net income
For the year ended
December 31, 2024 December 31, 2023
Net investment result, excluding segregated fund account balances
Interest and other investment income
$
449,899 $
397,297
Change in fair value of investments
68,439
419,492
Investment income (loss), excluding segregated fund account balances
518,338
816,789
Change in investment contracts
(29,266)
(28,171)
Net investment result, excluding segregated fund account balances
489,072
788,618
Insurance finance income (expense) from insurance contracts, excluding segregated fund account balances
Interest accreted(1)
(194,187)
(179,411)
Effect of changes in interest rates and other financial assumptions
52,046
(364,332)
Changes in fair value of underlying items in insurance contracts with direct participation features
(74,808)
(69,649)
Effects of risk mitigation option
756
—
Insurance finance income (expense) from insurance contracts, excluding segregated fund account balances
(216,193)
(613,392)
Finance income (expense) from reinsurance contracts held
Interest accreted(1)
3,311
4,409
Effect of changes in interest rates and other financial assumptions
29,627
(43,912)
Reinsurance finance income (expense) from reinsurance contracts held
32,938
(39,503)
Investment income (loss) related to segregated fund net assets
Investment income (loss) on investments related to segregated fund net assets, insurance contracts
1,089,553
711,118
Investment income (loss) on investments related to segregated fund net assets, investment contracts
30,156
24,716
Investment income (loss) related to segregated fund net assets
1,119,709
735,834
Changes in underlying items of the segregated funds
Insurance finance income (expenses), insurance contracts segregated fund account balances
(1,089,553)
(711,118)
Change in investment contracts, segregated fund account balances
(30,156)
(24,716)
Changes in underlying items of the segregated funds
(1,119,709)
(735,834)
Net investment and insurance finance result
$
305,817 $
135,723
(1) Interest accretion based on the locked-in rate.
With regards to general fund assets and liabilities, the duration of insurance contract liability cash flows is greater than the
assets supporting them. Hence, the liabilities are generally more sensitive to interest rate changes than the assets.
Changes in equity values and other non-fixed income assets that are not passed through to policyholders generally have
an impact on investment income with no offsetting change in insurance finance income (expense).
Amounts related to Change in investment contracts, which includes deferred annuities and guaranteed annuities, arise
from discount rates that include a provision to reflect the Company's own credit risk and an illiquidity adjustment.
Empire Life - Annual Report 2024
70
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
With regards to insurance contracts measured using the VFA, the change in the underlying items is recognized both as
Insurance finance income (expense) and Investment income (loss), with offsetting impacts. For these contracts, changes
in the effect of time value of money and financial risk not arising from underlying items adjust the CSM and are not
included in the Insurance finance income (expense) amounts presented in the table above, except to the extent that the
risk mitigation option applies.
Investment income, excluding segregated fund account balances
For the year ended
December 31, 2024
December 31, 2023
Investment income (loss), excluding segregated fund account balances
Interest and other investment income
Interest income(1)
$
400,237 $
339,199
Dividend income(2)
52,764
56,724
Income from investments in associates and joint venture
(3,420)
1,300
Other
318
74
Total interest and other investment income
449,899
397,297
Net realized and unrealized gain (loss)
68,439
419,492
Total investment income (loss), excluding segregated fund account balances
$
518,338 $
816,789
(1) Primarily from financial assets designated as fair value through profit or loss.
(2) Primarily from financial assets mandatorily classified as fair value through profit or loss.
Net realized and unrealized gains (losses) from financial instruments classified and designated as FVTPL
Financial instruments classified and designated as FVTPL are measured at fair value with realized and unrealized gains
and losses recognized in Investment income.
For the year ended
December 31, 2024
December 31, 2023
Net realized and unrealized gain (loss)
Mandatorily classified as fair value through profit or loss
$
107,376 $
57,969
Designated as fair value through profit or loss
(38,937)
361,523
Total net realized and unrealized gain (loss)
$
68,439 $
419,492
3.3. Derivative financial instruments
The values of derivative instruments are set out in the following table. Notional amounts serve as the basis for payments
calculated under derivative contracts and are generally not exchanged.
As at
Maturity
December 31, 2024
December 31, 2023
Notional
principal
Fair value
assets
Fair value
liabilities
Notional
principal
Fair value
assets
Fair value
liabilities
Foreign currency forwards
Within 1 year $
197,593 $
310 $
5,937 $
204,756 $
6,243 $
—
Equity options(1)
Within 5 years
1,348,924
6,609
—
790,894
2,835
—
Interest rate swaps
Over 5 years
520,000
3,747
4,502
—
—
—
Cross currency swaps
Over 5 years
134,754
4,149
2,421
66,484
4,747
672
Total
$
2,201,271 $
14,815 $
12,860 $
1,062,134 $
13,825 $
672
(1) Notional principal of exchange traded equity options is calculated using the current index price. Notional principal calculated using historical index price on entering the
option is equal to $1,032,500 (December 31, 2023 - $765,152).
Derivative instruments classified as Level 1 are valued in accordance with quoted prices on active markets. Derivative
instruments classified as Level 2 are valued using market standard techniques such as discounted cash flow pricing
models. Valuation inputs may include foreign exchange spot and forward rates, swap interest rate curves, and implied
market volatility. For analysis of the Company’s risks arising from financial instruments, refer to Note 22.
Empire Life - Annual Report 2024
71
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
3.4. Securities lending
The Company has a securities lending agreement with its custodian. Under this agreement, the custodian may lend
securities from the Company’s portfolio to other institutions, as approved by the Company, for periods of time. In addition
to a fee, the Company receives collateral which exceeds the market value of the loaned securities, which is retained by
the Company until the underlying security has been returned to the Company. In the event that any of the loaned
securities are not returned to the custodian, at its option the custodian may either restore to the Company securities
identical to the loaned securities or it will pay to the Company the value of the collateral up to but not exceeding the
market value of the loaned securities on the date on which the loaned securities were to have been returned (Valuation
Date) to the custodian. If the collateral is not sufficient to allow the custodian to pay such market value to the Company,
the custodian shall indemnify the Company only for the difference between the market value of the securities and the
value of such collateral on the Valuation Date. As a result, there is no significant exposure to credit risk associated with
this securities lending agreement.
As at December 31, 2024 and December 31, 2023, the aggregate fair values of the Company's securities loaned and the
collateral received were as follows:
As at
December 31, 2024
December 31, 2023
General Funds Segregated Funds
Total
General Funds Segregated Funds
Total
Value of securities loaned
$
1,596,676 $
1,802,781 $
3,399,457 $
1,421,820 $
1,479,136 $
2,900,956
Value of collateral received
$
1,628,630 $
1,838,898 $
3,467,528 $
1,450,283 $
1,510,186 $
2,960,469
Income recognized from securities lending activities was as follows:
For the year ended
December 31, 2024
December 31, 2023
General funds
$
1,542 $
2,055
Segregated funds
1,660
2,012
Total
$
3,202 $
4,067
4. Other Assets
Other assets consist of the following:
As at
December 31, 2024
December 31, 2023
Other assets
Trade accounts receivable
$
4,038 $
4,423
Prepaid expenses
10,177
9,288
Right-of-use assets
3,648
4,009
Net post-employment benefit asset (Note 10)
27,687
14,473
Total other assets
$
45,550 $
32,193
Of the above total, $31,335 (2023 $18,482) is expected to be settled more than one year after the Consolidated
Statements of Financial Position date. Trade accounts receivable are short-term in nature and their fair values
approximate carrying value. In the absence of an active market for post-employment benefit assets, the actuarial
determined value provides a reasonable approximation of fair value.
Empire Life - Annual Report 2024
72
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
5. Intangible Assets
The following table presents movements in Intangible assets during the year.
Intangible assets
Cost
As at January 1, 2023
$
146,435
Additions
15,178
Disposals
—
As at December 31, 2023
161,613
Additions
14,246
Disposals
(478)
As at December 31, 2024
$
175,381
Amortization
As at January 1, 2023
$
(85,864)
Charge for the year
(14,238)
Disposals
—
As at December 31, 2023
(100,102)
Charge for the year
(16,527)
Disposals
—
As at December 31, 2024
$
(116,629)
Carrying amount
December 31, 2024
$
58,752
December 31, 2023
$
61,511
There were no asset impairments during 2024 or 2023.
6. Investment in Associates and Joint Venture
The Company holds interests in associates and joint venture who principally operate in Canada ranging from 33% to 90%
(2023 33% to 49%). The carrying value of these investments is $92,475 (2023 $34,891). The Company recognized its
share of net loss of $3,420 (2023 income of $1,300), and received dividends of $1,022 (2023 $985).
On June 24, 2024, the Company acquired 39% equity ownership in a distribution agency for cash consideration of
$38,250. The investment is accounted for using the equity method. This transaction supports the Company’s commitment
to facilitating access to independent financial advice for Canadians.
7. Segregated Funds
7.1. Segregated fund assets by category of asset
The following table presents segregated fund assets by category of asset.
As at
December 31, 2024
December 31, 2023
Insurance
contracts
Investment
contracts
Total
Insurance
contracts
Investment
contracts
Total
Cash
$
5,771 $
49 $
5,820 $
9,897 $
402 $
10,299
Short-term investments
554,631
14,594
569,225
627,676
14,345
642,021
Bonds
1,853,375
101,854
1,955,229
1,690,358
131,286
1,821,644
Common and preferred shares
6,714,958
240,608
6,955,566
6,157,983
253,647
6,411,630
9,128,735
357,105
9,485,840
8,485,914
399,680
8,885,594
Add other assets
20,911
1,725
22,636
28,734
216
28,950
Less segregated funds held within general fund
investments
(8,904)
(105,834)
(114,738)
(7,363)
(94,457)
(101,820)
Total
$
9,140,742 $
252,996 $
9,393,738 $
8,507,285 $
305,439 $
8,812,724
Empire Life - Annual Report 2024
73
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
7.2. Fair value of investments of the segregated funds
The following table presents the investments of the segregated funds measured on a recurring basis at fair value
classified by the fair value hierarchy.
As at
December 31, 2024
December 31, 2023
Level 1
Level 2
Total
Level 1
Level 2
Total
Cash
$
5,820 $
— $
5,820 $
10,299 $
— $
10,299
Short-term investments
—
569,225
569,225
—
642,021
642,021
Bonds
—
1,955,229
1,955,229
—
1,821,644
1,821,644
Common and preferred shares(1)
6,955,566
—
6,955,566
6,411,630
—
6,411,630
Total
$
6,961,386 $
2,524,454 $
9,485,840 $
6,421,929 $
2,463,665 $
8,885,594
(1) Included within common and preferred shares are $1,031,812 (2023: $1,043,989) in holdings of Empire Life Mutual Funds where the Company can directly access the
observable quoted prices.
There were no transfers between Level 1 and Level 2 during the years ended December 31, 2024 and December 31,
2023. There were no Level 3 investments as at December 31, 2024 or December 31, 2023.
7.3. Change in segregated fund assets
The following table presents the change in segregated fund assets during the year.
December 31, 2024
December 31, 2023
Segregated fund assets at beginning of year
$
8,812,724 $
8,565,675
Additions to segregated funds:
Amount received from policyholders
1,180,891
887,284
Interest
102,348
88,396
Dividends
226,087
196,582
Other income and (expense)
25,082
28,349
Net realized gains on sale of investments
302,720
238,020
Net unrealized increase in fair value of investments
463,472
184,487
Total
2,300,600
1,623,118
Deductions from segregated funds:
Amounts withdrawn or transferred by policyholders
1,445,592
1,117,282
Management fees and other operating costs
261,076
249,302
Total
1,706,668
1,366,584
Net change in segregated funds held within general fund investments
(12,918)
(9,485)
Segregated fund assets at end of year
$
9,393,738 $
8,812,724
8. Accounts Payable and Other Liabilities
Accounts payable and other liabilities consist of the following:
As at
December 31, 2024
December 31, 2023
Accounts payable
$
73,560 $
84,597
Accrued interest on subordinated debt
7,704
7,667
Derivative liabilities (Note 3.3)
12,860
672
Lease liabilities
4,023
4,382
Accounts payable and other liabilities
$
98,147 $
97,318
Of the above total, $2,941 (2023 $3,300) is expected to be settled more than one year after the Consolidated Statements
of Financial Position date. Derivative liabilities are carried at fair value, as disclosed in Note 3.3. All other amounts are
short-term in nature and their fair value approximates carrying value.
Empire Life - Annual Report 2024
74
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
9. Insurance Contracts and Reinsurance Contracts Held Assets/Liabilities
Assets and liabilities
The breakdown of portfolios of insurance contracts and reinsurance contracts held, that are in an asset position and those
in a liability position is set out in the table below.
As at
December 31, 2024
December 31, 2023
(Assets)
Liabilities
Total
(Assets)
Liabilities
Total
Insurance contracts
Insurance contracts not measured under PAA,
excluding segregated fund account balances
$
— $
6,432,269 $
6,432,269 $
— $
6,311,068 $
6,311,068
Insurance contracts measured under PAA
—
436,167
436,167
—
397,366
397,366
Insurance contracts, excluding segregated fund
account balances
—
6,868,436
6,868,436
—
6,708,434
6,708,434
Insurance contracts for segregated fund account
balances
—
9,140,742
9,140,742
—
8,507,285
8,507,285
Total insurance contracts
—
16,009,178
16,009,178
—
15,215,719
15,215,719
Less insurance contracts measured under PAA
—
(436,167)
(436,167)
—
(397,366)
(397,366)
Total insurance contracts not measured under PAA
$
— $
15,573,011 $
15,573,011 $
— $
14,818,353 $
14,818,353
Reinsurance contracts held
Reinsurance contracts held not measured under PAA
$
(115,042) $
218,745 $
103,703 $
(113,071) $
253,230 $
140,159
Reinsurance contracts held measured under PAA
(181,029)
(4,896)
(185,925)
(168,288)
—
(168,288)
Total reinsurance contracts held
$
(296,071) $
213,849 $
(82,222) $
(281,359) $
253,230 $
(28,129)
9.1. Effect on measurement components of insurance contracts initially recognized in the period
The components of new business for insurance contracts issued applying the VFA or the GMM are disclosed in the table
below. There were no insurance contracts acquired in a business combination or portfolio transfer in 2024 or 2023.
As at
December 31, 2024
December 31, 2023
Non-onerous
contracts
issued
Onerous
contracts
issued
Total
Non-onerous
contracts issued
Onerous
contracts issued
Total
Insurance contracts initially recognized in the year
Insurance acquisition cash outflows
$
114,291 $
74,722 $
189,013 $
94,724 $
67,368 $
162,092
Claims and other cash outflows
283,793
161,669
445,462
262,938
151,487
414,425
Estimates of the present value of future cash outflows
398,084
236,391
634,475
357,662
218,855
576,517
Estimates of the present value of future cash inflows
(486,026)
(279,226)
(765,252)
(434,162)
(255,842)
(690,004)
Risk adjustment for non-financial risk
49,601
52,459
102,060
39,392
56,572
95,964
Contractual service margin
38,341
—
38,341
37,108
—
37,108
Increase in insurance contract liabilities from
contracts recognized in the year
$
— $
9,624 $
9,624 $
— $
19,585 $
19,585
Empire Life - Annual Report 2024
75
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
9.2. Analysis by measurement component for insurance contracts
The tables below present the net asset or liability for insurance contracts issued showing estimates of the present value of
expected future cash flows, risk adjustment for non-financial risk and CSM by product line.
For the year ended December 31, 2024
Estimates of
present value of
future cash
flows
Risk adjustment
for non-
financial risk
Contractual service margin
Total
Fair value
approach
Post transition
Insurance contracts
Insurance contracts not measured under PAA, excluding segregated
fund account balances
Wealth Management
$
(386,590) $
90,808 $
719,507 $
66,106 $
489,831
Group Solutions
4,788
222
—
—
5,010
Individual Insurance
4,178,334
1,029,129
645,385
84,580
5,937,428
Total
3,796,532
1,120,159
1,364,892
150,686
6,432,269
Insurance contracts for segregated fund account balances
Wealth Management
9,122,044
—
—
—
9,122,044
Individual Insurance
18,698
—
—
—
18,698
Total
9,140,742
—
—
—
9,140,742
Total Insurance contracts not measured under PAA
$
12,937,274 $
1,120,159 $
1,364,892 $
150,686 $
15,573,011
For the year ended December 31, 2023
Estimates of
present value of
future cash flows
Risk adjustment
for non-financial
risk
Contractual service margin
Total
Empire Life - Annual Report 2024
76
Fair value
approach
Post transition
Insurance contracts
Insurance contracts not measured under PAA, excluding segregated fund
account balances
Wealth Management
$
(316,719) $
81,186 $
718,604 $
40,162 $
523,233
Group Solutions
4,580
227
—
—
4,807
Individual Insurance
4,052,159
1,025,096
658,104
47,669
5,783,028
Total
3,740,020
1,106,509
1,376,708
87,831
6,311,068
Insurance contracts for segregated fund account balances
Wealth Management
8,489,371
—
—
—
8,489,371
Individual Insurance
17,914
—
—
—
17,914
Total
8,507,285
—
—
—
8,507,285
Total Insurance contracts not measured under PAA
$
12,247,305 $
1,106,509 $
1,376,708 $
87,831 $
14,818,353
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
The tables below present a roll-forward of the net asset or liability for insurance contracts issued showing estimates of the
present value of expected future cash flows, risk adjustment for non-financial risk and CSM. These tables exclude
insurance contracts measured using the PAA.
For the year ended December 31, 2024
Estimates of
present value of
future cash
flows
Risk adjustment
for non-
financial risk
Contractual service margin
Total
Fair value
approach
Post
transition
Insurance contracts at beginning of year
Insurance contract liabilities, excluding segregated fund account balances $
3,740,020 $
1,106,509 $
1,376,708 $
87,831 $
6,311,068
Insurance contract liabilities for segregated fund account balances
8,507,285
—
—
—
8,507,285
Total insurance contracts at beginning of year
12,247,305
1,106,509
1,376,708
87,831
14,818,353
Changes that relate to current services
CSM recognized for services provided
(163,731)
(12,898)
(176,629)
Change in risk adjustment for non-financial risk for risk expired
(59,481)
(59,481)
Experience adjustments
37,607
37,607
Changes that relate to future services
Contracts initially recognized in the period
(130,777)
102,060
—
38,341
9,624
Changes in estimates that adjust the CSM
(115,764)
(48,479)
130,237
34,006
—
Changes in estimates that do not adjust the CSM
18,838
(22,960)
(4,122)
Changes that relate to past services
Adjustments to liabilities for incurred claims
2,183
(5)
—
—
2,178
Insurance service result
(187,913)
(28,865)
(33,494)
59,449
(190,823)
Insurance finance (income) expense, excluding segregated fund account
balances
122,346
42,515
21,678
3,406
189,945
Insurance finance (income) expenses segregated fund account balances
1,089,553
1,089,553
Total changes in the Consolidated Statement of Operations
1,023,986
13,650
(11,816)
62,855
1,088,675
Cash flows
Premiums received
901,066
901,066
Claims and other expenses paid
(600,698)
(600,698)
Insurance acquisition cash flows
(178,289)
(178,289)
Total cash flows
122,079
122,079
Movements related to insurance contract liabilities for segregated fund
account balances
(456,096)
(456,096)
Total insurance contracts at end of year
$
12,937,274 $
1,120,159 $
1,364,892 $
150,686 $
15,573,011
Insurance contracts at end of year
Insurance contract liabilities, excluding segregated fund account balances $
3,796,532 $
1,120,159 $
1,364,892 $
150,686 $
6,432,269
Insurance contract liabilities for segregated fund account balances
9,140,742
—
—
—
9,140,742
Total insurance contracts at end of year
$
12,937,274 $
1,120,159 $
1,364,892 $
150,686 $
15,573,011
Empire Life - Annual Report 2024
77
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
For the year ended December 31, 2023
Estimates of
present value of
future cash flows
Risk adjustment
for non-financial
risk
Contractual service margin
Total
Fair value
approach
Post
transition
Insurance contracts at beginning of year
Insurance contract liabilities, excluding segregated fund account balances $
3,119,542 $
935,603 $
1,689,215 $
47,376 $
5,791,736
Insurance contract liabilities for segregated fund account balances
8,278,948
—
—
—
8,278,948
Total insurance contracts at beginning of year
11,398,490
935,603
1,689,215
47,376
14,070,684
Changes that relate to current services
CSM recognized for services provided
(176,342)
(6,505)
(182,847)
Change in risk adjustment for non-financial risk for risk expired
(53,408)
(53,408)
Experience adjustments
13,568
13,568
Changes that relate to future services
Contracts initially recognized in the period
(113,487)
95,964
—
37,108
19,585
Changes in estimates that adjust the CSM
116,231
39,324
(163,681)
8,126
—
Changes in estimates that do not adjust the CSM
3,383
(19,951)
(16,568)
Changes that relate to past services
Adjustments to liabilities for incurred claims
(802)
43
—
—
(759)
Insurance service result
18,893
61,972
(340,023)
38,729
(220,429)
Insurance finance (income) expense, excluding segregated fund account
balances
453,336
108,934
27,516
1,726
591,512
Insurance finance (income) expenses segregated fund account balances
711,118
711,118
Total changes in the Consolidated Statement of Operations
1,183,347
170,906
(312,507)
40,455
1,082,201
Cash flows
Premiums received
872,649
872,649
Claims and other expenses paid
(547,837)
(547,837)
Insurance acquisition cash flows
(176,563)
(176,563)
Total cash flows
148,249
148,249
Movements related to insurance contract liabilities for segregated fund
account balances
(482,781)
(482,781)
Total insurance contracts at end of year
$
12,247,305 $
1,106,509 $
1,376,708 $
87,831 $
14,818,353
Insurance contracts at end of year
Insurance contract liabilities, excluding segregated fund account balances $
3,740,020 $
1,106,509 $
1,376,708 $
87,831 $
6,311,068
Insurance contract liabilities for segregated fund account balances
8,507,285
—
—
—
8,507,285
Total insurance contracts at end of year
$
12,247,305 $
1,106,509 $
1,376,708 $
87,831 $
14,818,353
Empire Life - Annual Report 2024
78
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
Analysis of contractual service margin for insurance contracts by product line
For the year ended
December 31, 2024
December 31, 2023
Wealth
Management
Individual
Insurance
Total
Wealth
Management
Individual
Insurance
Total
Contractual service margin at beginning of year
$
758,766 $
705,773 $
1,464,539 $
791,254 $
945,337 $
1,736,591
CSM recognized for services provided
(104,825)
(71,804)
(176,629)
(100,360)
(82,487)
(182,847)
Contracts initially recognized in the period
12,303
26,038
38,341
13,920
23,188
37,108
Changes in estimates that adjust the CSM
118,438
45,805
164,243
53,223
(208,778)
(155,555)
Insurance finance (income) expense(1)
931
24,153
25,084
729
28,513
29,242
Contractual service margin at end of year
$
785,613 $
729,965 $
1,515,578 $
758,766 $
705,773 $
1,464,539
(1)Interest accretion.
9.3. Analysis by remaining coverage and incurred claims for insurance contracts
The tables below present the net asset or liability for all insurance contracts issued showing liabilities for remaining
coverage and liability for incurred claims by product line. These tables include insurance contracts measured using the
PAA.
As at December 31, 2024
Remaining coverage
Incurred claims
Total
Contracts not
using PAA
Contracts using PAA
Excluding
loss
component
Loss
component
Estimate of
PV of future
cash flows
Risk
adjustment
Insurance contracts
Wealth Management
$
9,606,130 $
— $
5,745 $
— $
— $
9,611,875
Group Solutions
(8,847)
—
—
409,871
40,153
441,177
Individual Insurance
5,782,548
11,487
162,091
—
—
5,956,126
Total insurance contracts
$ 15,379,831 $
11,487 $
167,836 $
409,871 $
40,153 $ 16,009,178
As at December 31, 2023
Remaining coverage
Incurred claims
Total
Contracts not
using PAA
Contracts using PAA
Excluding loss
component
Loss
component
Estimate of PV
of future cash
flows
Risk
adjustment
Insurance contracts
Wealth Management
$
8,981,914 $
1,448 $
29,242 $
— $
— $
9,012,604
Group Solutions
(7,685)
—
—
375,077
34,781
402,173
Individual Insurance
5,666,506
5,629
128,807
—
—
5,800,942
Total insurance contracts
$ 14,640,735 $
7,077 $
158,049 $
375,077 $
34,781 $ 15,215,719
Empire Life - Annual Report 2024
79
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
The tables below present a roll-forward of the net asset or liability for all insurance contracts issued showing liabilities for
remaining coverage and liability for incurred claims. These tables include insurance contracts measured using the PAA.
For the year ended ended December 31, 2024
Remaining coverage
Incurred claims
Total
Contracts
not using
PAA
Contracts using PAA
Excluding
loss
component
Loss
component
Estimate of
PV of future
cash flows
Risk
adjustment
Insurance contracts at beginning of year
Insurance contract liabilities, excluding segregated fund account balances $
6,133,450 $
7,077 $
158,049 $
375,077 $
34,781 $
6,708,434
Insurance contract liabilities for segregated fund account balances
8,507,285
—
—
—
—
8,507,285
Total insurance contracts at beginning of year
14,640,735
7,077
158,049
375,077
34,781
15,215,719
Insurance service revenue
Contracts under fair value approach
(635,101)
(635,101)
Contracts post transition
(770,191)
(770,191)
Insurance service expenses
Incurred claims and other expenses
(1,427)
491,674
632,334
—
1,122,581
Amortization of insurance acquisition cash flows
41,577
41,577
Losses and reversal of losses on onerous contracts
5,502
—
—
—
5,502
Adjustments to liabilities for incurred claims
—
2,178
12,249
2,955
17,382
Investment components
(116,633)
116,633
—
Insurance service result
(1,480,348)
4,075
610,485
644,583
2,955
(218,250)
Insurance finance (income) expense from insurance contracts, excluding
segregated fund account balances
189,642
335
—
23,799
2,417
216,193
Insurance finance (income) expenses, insurance contracts segregated
fund account balances
1,089,553
1,089,553
Total changes in the Consolidated Statement of Operations
(201,153)
4,410
610,485
668,382
5,372
1,087,496
Cash flows
Premiums received
1,574,634
1,574,634
Claims and other expenses paid
(600,698)
(633,588)
(1,234,286)
Insurance acquisition cash flows
(178,289)
(178,289)
Total cash flows
1,396,345
(600,698)
(633,588)
162,059
Movements related to insurance contract liabilities for segregated
fund account balances
(456,096)
—
(456,096)
Total insurance contracts at end of year
$ 15,379,831 $
11,487 $
167,836 $
409,871 $
40,153 $ 16,009,178
Insurance contracts at end of year
Insurance contract liabilities, excluding segregated fund account balances $
6,239,089 $
11,487 $
167,836 $
409,871 $
40,153 $
6,868,436
Insurance contract liabilities for segregated fund account balances
9,140,742
—
—
—
—
9,140,742
Total insurance contracts at end of year
$ 15,379,831 $
11,487 $
167,836 $
409,871 $
40,153 $ 16,009,178
Empire Life - Annual Report 2024
80
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
For the year ended December 31, 2023
Remaining coverage
Incurred claims
Total
Contracts not
using PAA
Contracts using PAA
Excluding loss
component
Loss
component
Estimate of
PV of future
cash flows
Risk
adjustment
Insurance contracts at beginning of year
Insurance contract liabilities
$
5,611,224 $
3,794 $
164,380 $
332,098 $
33,882 $
6,145,378
Insurance contract liabilities for segregated fund account balances
8,278,948
—
—
—
—
8,278,948
Total insurance contracts at beginning of year
13,890,172
3,794
164,380
332,098
33,882
14,424,326
Insurance service revenue
Contracts under fair value approach
(634,813)
(634,813)
Contracts post transition
(690,695)
(690,695)
Insurance service expenses
Incurred claims and other expenses
(334)
434,736
601,482
—
1,035,884
Amortization of insurance acquisition cash flows
35,524
35,524
Losses and reversal of losses on onerous contracts
3,016
—
—
—
3,016
Adjustments to liabilities for incurred claims
—
—
(1,651)
(1,224)
(2,875)
Investment components
(106,770)
106,770
—
Insurance service result
(1,396,754)
2,682
541,506
599,831
(1,224)
(253,959)
Insurance finance (income) expenses, excluding segregated funds
590,951
601
—
19,717
2,123
613,392
Insurance finance (income) expenses, segregated funds
711,118
711,118
Total changes in the Consolidated Statement of Operations
(94,685)
3,283
541,506
619,548
899
1,070,551
Cash flows
Premiums received
1,504,592
1,504,592
Claims and other expenses paid
(547,837)
(576,569)
(1,124,406)
Insurance acquisition cash flows
(176,563)
(176,563)
Total cash flows
1,328,029
(547,837)
(576,569)
203,623
Movements related to insurance contract liabilities for segregated fund
account balances
(482,781)
—
(482,781)
Total insurance contracts at end of year
$ 14,640,735 $
7,077 $
158,049 $
375,077 $
34,781 $ 15,215,719
Insurance contracts at end of year
Insurance contract liabilities
$
6,133,450 $
7,077 $
158,049 $
375,077 $
34,781 $
6,708,434
Insurance contract liabilities for segregated fund account balances
8,507,285
—
—
—
—
8,507,285
Total insurance contracts at end of year
$ 14,640,735 $
7,077 $
158,049 $
375,077 $
34,781 $ 15,215,719
Empire Life - Annual Report 2024
81
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
9.4. Insurance service revenue
For the year ended
December 31, 2024
December 31, 2023
Contracts not measured under the PAA
CSM recognized for services provided
$
176,629 $
182,848
Change in risk adjustment for non-financial risk for risk expired
59,327
53,284
Expected claims and other insurance service expenses
450,381
415,177
Recovery of insurance acquisition cash flows
41,577
35,524
Total
727,914
686,833
Contracts measured under the PAA
677,378
638,675
Total insurance service revenue
$
1,405,292 $
1,325,508
9.5. Expected remaining CSM recognition for insurance contracts
Less than 1
year
1 - 2 years
2 - 3 years
3 - 4 years
4 - 5 years
5 - 10 years
More than 10
years
Total
December 31, 2024
$
162,717 $
147,219 $
132,660 $
118,346 $
106,165 $
381,477 $
466,994 $
1,515,578
December 31, 2023
$
150,637 $
136,156 $
123,865 $
111,999 $
101,043 $
366,474 $
474,365 $
1,464,539
9.6.
Effect on measurement components of reinsurance contracts held initially recognized in the period
For the year ended
December 31, 2024
December 31, 2023
New business reinsurance contracts held
Estimates of present value of cash outflows
$
205,712 $
203,826
Estimates of present value of cash inflows
(192,195)
(192,384)
Risk adjustment for non-financial risk
(44,657)
(45,207)
Contractual service margin
24,928
25,000
Amount included in reinsurance contracts held (assets) liabilities for the year
$
(6,212) $
(8,765)
Empire Life - Annual Report 2024
82
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
9.7. Analysis by measurement component for reinsurance contracts held
The tables below present the net asset or liability for reinsurance contracts held showing estimates of the present value of
future cash flows, risk adjustment for non-financial risk and CSM by product line.
As at December 31, 2024
Estimates of
present value of
future cash
flows
Risk adjustment
for non-
financial risk
Contractual service margin
Total
Fair value
approach
Post transition
Reinsurance contracts held
Reinsurance contracts held not measured under PAA
Wealth Management
$
(9,822) $
(605) $
2,211 $
— $
(8,216)
Individual Insurance
601,332
(382,072)
(172,119)
64,778
111,919
Total
$
591,510 $
(382,677) $
(169,908) $
64,778 $
103,703
As at December 31, 2023
Estimates of
present value of
future cash flows
Risk adjustment
for non-financial
risk
Contractual service margin
Total
Empire Life - Annual Report 2024
83
Fair value
approach
Post transition
Reinsurance contracts held
Reinsurance contracts held not measured under PAA
Wealth Management
$
(12,364) $
(603) $
945 $
— $
(12,022)
Individual Insurance
602,699
(400,031)
(95,529)
45,042
152,181
Total
$
590,335 $
(400,634) $
(94,584) $
45,042 $
140,159
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
The tables below present a roll-forward of the net asset or liability for reinsurance contracts held showing estimates of the
present value of future cash flows, risk adjustment for non-financial risk and CSM. These tables exclude reinsurance
contracts held measured using the PAA.
For the year ended December 31, 2024
Estimates of
present
value of
future cash
flows
Risk
adjustment
for non-
financial risk
Contractual service margin
Total
Fair value
approach
Post
transition
Reinsurance contracts held at beginning of year
Reinsurance contracts held (assets)
$
338,565 $
(318,235) $
(178,218) $
44,817 $
(113,071)
Reinsurance contracts held liabilities
251,770
(82,399)
83,634
225
253,230
Net reinsurance contracts held at beginning of year
590,335
(400,634)
(94,584)
45,042
140,159
Changes that relate to current services
CSM recognized for services received
18,608
(6,620)
11,988
Risk adjustment recognized for non-financial risk expired
23,905
23,905
Experience adjustments
(5,249)
(5,249)
Changes that relate to future services
Contracts initially recognized in the period
13,517
(44,657)
—
24,928
(6,212)
Changes in estimates that adjust the CSM
37,567
57,668
(90,168)
(5,067)
—
Changes in estimates that adjust recoveries of losses on onerous underlying contracts
(3,103)
1,888
(1,215)
Changes in recoveries of losses on onerous underlying contracts that adjust the CSM
878
3,449
4,327
Changes that relate to past services
Changes in amounts recoverable arising from changes in liability for incurred claims
378
—
378
Reinsurance service result
43,110
38,804
(70,682)
16,690
27,922
Reinsurance finance (income) expenses
1,523
(20,847)
(4,642)
3,046
(20,920)
Total changes in the Consolidated Statement of Operations
44,633
17,957
(75,324)
19,736
7,002
Cash flows
Premiums paid
(145,836)
(145,836)
Amounts received
102,378
102,378
Total cash flows
(43,458)
(43,458)
Net reinsurance contracts held at end of year
$
591,510 $
(382,677) $
(169,908) $
64,778 $
103,703
Reinsurance contracts held at end of year
Reinsurance contracts held (assets)
$
328,320 $
(312,915) $
(195,362) $
64,915 $
(115,042)
Reinsurance contracts held liabilities
263,190
(69,762)
25,454
(137)
218,745
Net reinsurance contracts held at end of year
$
591,510 $
(382,677) $
(169,908) $
64,778 $
103,703
Empire Life - Annual Report 2024
84
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
For the year ended December 31, 2023
Estimates of
present value
of future cash
flows
Risk
adjustment for
non-financial
risk
Contractual service margin
Total
Fair value
approach
Post
transition
Reinsurance contracts held at beginning of year
Reinsurance contracts held (assets)
$
343,690 $
(264,761) $
(249,563) $
20,466 $
(150,168)
Reinsurance contracts held liabilities
260,297
(79,781)
36,398
142
217,056
Net reinsurance contracts held at beginning of year
603,987
(344,542)
(213,165)
20,608
66,888
Changes that relate to current services
CSM recognized for services received
22,797
(3,721)
19,076
Risk adjustment recognized for non-financial risk expired
21,510
21,510
Experience adjustments
16,491
16,491
Changes that relate to future services
Contracts initially recognized in the period
11,442
(45,207)
—
25,000
(8,765)
Changes in estimates that adjust the CSM
(109,634)
10,346
100,461
(1,173)
—
Changes in estimates that adjust recoveries of losses on onerous underlying contracts
4,147
(295)
3,852
Changes in recoveries of losses on onerous underlying contracts that adjust the CSM
1,448
2,568
4,016
Changes that relate to past services
Changes in amounts recoverable arising from changes in liability for incurred claims
3,781
—
3,781
Reinsurance service result
(73,773)
(13,646)
124,706
22,674
59,961
Reinsurance finance (income) expenses
96,785
(42,446)
(6,125)
1,760
49,974
Total changes in the Consolidated Statement of Operations
23,012
(56,092)
118,581
24,434
109,935
Cash flows
Premiums paid
(127,090)
(127,090)
Amounts received
90,426
90,426
Total cash flows
(36,664)
(36,664)
Net reinsurance contracts held at end of year
$
590,335 $
(400,634) $
(94,584) $
45,042 $
140,159
Reinsurance contracts held at end of year
Reinsurance contracts held (assets)
$
338,565 $
(318,235) $
(178,218) $
44,817 $
(113,071)
Reinsurance contracts held liabilities
251,770
(82,399)
83,634
225
253,230
Net reinsurance contracts held at end of year
$
590,335 $
(400,634) $
(94,584) $
45,042 $
140,159
Empire Life - Annual Report 2024
85
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
9.8. Analysis by remaining coverage and incurred claims for reinsurance contracts held
The tables below present the net asset or liability for all reinsurance contracts held showing (assets) liabilities for
remaining coverage and amounts recoverable on incurred claims by product line.
As at December 31, 2024
Remaining coverage
Incurred claims
Total
Contracts not
using PAA
Contracts using PAA
Excluding
loss recovery
component
Loss
recovery
component
Estimate of
PV of future
cash flows
Risk
adjustment
Reinsurance contracts held
Wealth Management
$
(13,034) $
— $
4,818 $
— $
— $
(8,216)
Group Solutions
631
—
—
(170,963)
(15,593)
(185,925)
Individual Insurance
164,117
(4,268)
(47,930)
—
—
111,919
Total reinsurance contracts held
$
151,714 $
(4,268) $
(43,112) $
(170,963) $
(15,593) $
(82,222)
As at December 31, 2023
Remaining coverage
Incurred claims
Total
Contracts not
using PAA(1)
Contracts using PAA
Excluding loss
recovery
component(1)
Loss recovery
component
Estimate of PV
of future cash
flows(1)
Risk
adjustment
Reinsurance contracts
Wealth Management
$
(16,608) $
— $
4,586 $
— $
— $
(12,022)
Group Solutions
1,581
—
—
(160,148)
(14,096)
(172,663)
Individual Insurance
184,908
(2,539)
(25,813)
—
—
156,556
Total reinsurance contracts
$
169,881 $
(2,539) $
(21,227) $
(160,148) $
(14,096) $
(28,129)
(1) Amounts have been revised from those previously presented.
Empire Life - Annual Report 2024
86
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
The tables below present a roll-forward of the net asset or liability for all reinsurance contracts held showing (assets)
liabilities for remaining coverage and amounts recoverable on incurred claims. These tables include reinsurance contracts
held measured using the PAA.
For the year ended December 31, 2024
Remaining coverage
Incurred claims
Total
Contracts
not using
PAA
Contracts using PAA
Excluding
loss
recovery
component
Loss
recovery
component
Estimate of
PV of future
cash flows
Risk
adjustment
Reinsurance contracts held (assets) liabilities at beginning of year
Reinsurance contracts held (assets)
$
(114,315) $
(2,539) $
3,783 $
(154,192) $
(14,096) $
(281,359)
Reinsurance contracts held liabilities
284,196
—
(25,010)
(5,956)
—
253,230
Net reinsurance contracts held (assets) liabilities at beginning of
year
169,881
(2,539)
(21,227)
(160,148)
(14,096)
(28,129)
Allocation of premiums paid
Contracts under fair value approach
141,679
141,679
Contracts post transition
185,972
185,972
Amounts recoverable from reinsurers
Amounts recoverable for claims and other expenses incurred in the period
1,636
(124,641)
(158,544)
—
(281,549)
Changes in amounts recoverable from changes in liability for incurred
claims
378
(207)
(514)
(343)
Changes in fulfilment cash flows which relate to onerous underlying
contracts
(3,100)
(3,100)
Net income or expense from reinsurance contracts held
327,651
(1,464)
(124,263)
(158,751)
(514)
42,659
Reinsurance finance (income) expenses
(20,655)
(265)
—
(11,035)
(983)
(32,938)
Total changes in the Consolidated Statement of Operations
306,996
(1,729)
(124,263)
(169,786)
(1,497)
9,721
Cash flows
Premiums paid
(325,163)
(325,163)
Amounts received
102,378
158,971
261,349
Total cash flows
(325,163)
102,378
158,971
(63,814)
Net reinsurance contracts held (assets) liabilities at end of year
$
151,714 $
(4,268) $
(43,112) $
(170,963) $
(15,593) $
(82,222)
Reinsurance contracts held (assets) liabilities at end of year
Reinsurance contracts held (assets)
$
(114,934) $
(4,268) $
4,159 $
(165,435) $
(15,593)
(296,071)
Reinsurance contracts held liabilities
266,648
—
(47,271)
(5,528)
—
213,849
Net reinsurance contracts held (assets) liabilities at end of year
$
151,714 $
(4,268) $
(43,112) $
(170,963) $
(15,593)
(82,222)
Empire Life - Annual Report 2024
87
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
For the year ended December 31, 2023
Remaining coverage
Incurred claims
Total
Contracts not
using PAA(1)
Contracts using PAA
Excluding loss
recovery
component(1)
Loss recovery
component
Estimate of
PV of future
cash flows(1)
Risk
adjustment
Reinsurance contracts held (assets) liabilities at beginning of year
Reinsurance contracts held (assets)
$
(147,379) $
(2,789) $
— $
(145,837) $
(14,039) $
(310,044)
Reinsurance contracts held liabilities
265,171
—
(48,115)
—
—
217,056
Net reinsurance contracts held (assets) liabilities at beginning of year
117,792
(2,789)
(48,115)
(145,837)
(14,039)
(92,988)
Allocation of premiums paid
Contracts under fair value approach
141,464
141,464
Contracts post transition
157,089
157,089
Amounts recoverable from reinsurers
Amounts recoverable for claims and other expenses incurred in the period
1,408
(95,943)
(136,325)
—
(230,860)
Changes in amounts recoverable from changes in liability for incurred
claims
3,781
1,177
882
5,840
Changes in fulfilment cash flows which relate to onerous underlying
contracts
(896)
(896)
Net income or expense from reinsurance contracts held
298,553
512
(92,162)
(135,148)
882
72,637
Reinsurance finance (income) expenses
50,236
(262)
—
(9,532)
(939)
39,503
Total changes in the Consolidated Statement of Operations
348,789
250
(92,162)
(144,680)
(57)
112,140
Cash flows
Premiums paid
(296,700)
(296,700)
Amounts received
119,050
130,369
249,419
Total cash flows
(296,700)
119,050
130,369
(47,281)
Net reinsurance contracts held (assets) liabilities at end of year
$
169,881 $
(2,539) $
(21,227) $
(160,148) $
(14,096) $
(28,129)
Reinsurance contracts held (assets) liabilities at end of year
Reinsurance contracts held (assets)
$
(114,315) $
(2,539) $
3,783 $
(154,192) $
(14,096) $
(281,359)
Reinsurance contracts held liabilities
284,196
—
(25,010)
(5,956)
—
253,230
Net reinsurance contracts held (assets) liabilities at end of year
$
169,881 $
(2,539) $
(21,227) $
(160,148) $
(14,096) $
(28,129)
(1) Amounts have been revised from those previously presented.
9.9. Expected remaining CSM recognition for reinsurance contracts held
Less than 1
year
1 - 2 years
2 - 3 years
3 - 4 years
4 - 5 years
5 - 10 years
More than 10
years
Total
December 31, 2024
$
(13,860) $
(12,445) $
(11,039) $
(9,712) $
(8,462) $
(27,070) $
(22,542) $
(105,130)
December 31, 2023
$
(9,277) $
(8,223) $
(7,244) $
(6,311) $
(5,424) $
(15,374) $
2,311 $
(49,542)
Empire Life - Annual Report 2024
88
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
9.10. Management assumption updates
Changes in estimates that adjust the CSM related to direct insurance contracts (Note 9.2) result in an increase to CSM of
$164 million (2023 decrease of $156 million). Net of reinsurance contracts held (Note 9.7), the CSM impact is an increase
of $69 million (2023 decrease of $56 million). Included in changes in estimates that adjust the CSM is a $103 million CSM
decrease from assumption updates and model refinements during the year (2023 decrease of $126 million). Other drivers
are economic experience and insurance experience, which increased CSM in both 2024 and 2023 as a result of impacts
from interest rate and equity market changes on segregated fund products within the Wealth Management product line.
The following table presents a summary of the impact to CSM from assumption updates and model refinements, net of
reinsurance contracts held, in millions of dollars.
For the year ended
December 31, 2024
December 31, 2023
Components of insurance contracts and reinsurance contracts held assumption updates and model refinements
Discount rates
$
(20) $
—
Mortality
(7)
(80)
Expense
(38)
(7)
Lapse
(34)
(38)
Other
(4)
(1)
Total impact to net CSM from assumption updates and model refinements
$
(103) $
(126)
A summary of the main assumption updates is as follows:
•
Updates to future mortality assumptions result in a CSM decrease of $14 million for the Individual Insurance
product line, and increase of $7 million for the Wealth Management product line (2023 decrease of $80 million for
Individual Insurance and Wealth Management product lines);
•
Updates to future attributable maintenance expenses result in a CSM decrease of $29 million for the Wealth
Management product line and $9 million for Individual Insurance (2023 $7 million decrease across Individual
Insurance and Wealth Management product lines);
•
Updates to lapse assumptions result in a CSM decrease of $34 million for the Individual Insurance product line
(2023 decrease of $38 million for Individual Insurance and Wealth Management product lines); and
•
Updates to discount rate assumptions result in a CSM decrease of $33 million for the Wealth Management
product line, primarily due to changes to the illiquidity premium, and a $13 million increase for Individual
Insurance.
In addition, updates were made to the discount rates used for business measured under the GMM. These updates result
in a gain of $68 million in Net income before taxes, primarily impacting the Individual Insurance product line. The largest
driver of this change is an update to the ultimate risk-free interest rate from 3.15% to 3.65%.
10. Employee Benefit Plans
Empire Life sponsors pension and other post-employment benefit plans for eligible employees. The Empire Life Insurance
Company Staff Pension Plan (the Plan) consists of a defined benefit component and a defined contribution component.
The Company discontinued enrolments in the defined benefit component effective October 1, 2011. The Company has
supplemental arrangements that provide defined pension benefits in excess of statutory limits. In addition to pension
benefits, the Company also provides for post-employment health and dental care coverage and other future benefits to
qualifying employees and retirees.
The defined benefit component of the Plan is a final average salary pension plan, which provides benefits to members in
the form of a guaranteed level of pension payable for life. The level of benefits provided depends on members’ age, length
of service and their salary in the final years leading up to retirement. Pensions generally do not receive inflationary
increases once in payment. In the past, however, the Company has provided ad-hoc pension increases on its defined
benefit staff pension plan. Increases take place at the discretion of the Board. The pension benefit payments are from
trustee-administered funds.
Empire Life - Annual Report 2024
89
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
The Plan is governed by the Pension Benefits Act of the Province of Ontario, as amended, which requires that the plan
sponsor fund the defined benefits determined under the plan. The Company’s supplemental employee retirement benefit
plan is governed by provisions of the plan, which requires that the plan sponsor fund the defined benefits determined
under the plan. The amount of funds contributed to these defined benefit pension plans is determined by an actuarial
valuation of the Plans.
Under the defined contribution component, contributions are made in accordance with the provisions of the Plan
documents.
A Pension Committee, composed of selected senior members of management and that of its parent, E-L Financial
Corporation, oversees the Pension Plan of the Company. The Pension Committee reports to the Human Resources
Committee of the Board at least three times each year. The Audit Committee of the Board approves the audited annual
financial statements of the Pension Plan.
The other post-employment benefit plan provides for health, dental care, and other future defined benefits to qualifying
employees and retirees. It is unfunded and the Company meets the benefit payment obligation as it falls due.
The following tables present financial information for the Company’s defined benefit plans.
Pension benefits
Other post-employment benefits
As at
December 31, 2024
December 31, 2023 December 31, 2024
December 31, 2023
Present value of obligations
$
125,023 $
212,182 $
6,327 $
7,006
Fair value of plan assets
163,466
236,215
—
—
Post-employment benefit asset (liability)
38,443
24,033
(6,327)
(7,006)
Effect of asset limit
(4,429)
(2,554)
—
—
Net post-employment benefit asset (liability)
$
34,014 $
21,479 $
(6,327) $
(7,006)
The post-employment benefit asset (liability), net of the cumulative impact of the asset ceiling, is included in the
Consolidated Statements of Financial Position in Other assets (Note 4).
The movement in the present value of the defined benefit obligations over the year is as follows:
Pension benefits
Other post-employment benefits
As at
December 31, 2024
December 31, 2023 December 31, 2024 December 31, 2023
Present value of defined benefit obligation - beginning of year
$
212,182 $
197,258 $
7,006 $
6,785
Current service cost
3,028
3,215
—
—
Gain on settlement
(2,064)
—
—
—
Interest expense
6,434
10,011
313
341
Decrease (increase) in net income before tax
7,398
13,226
313
341
Remeasurements
(Gain)/loss from changes in demographic assumptions
2,840
—
(176)
—
(Gain) loss from changes in financial assumptions
1,660
9,994
25
454
Actuarial (gain) loss from member experience
1,045
59
(461)
(222)
Decrease (increase) in OCI before tax
5,545
10,053
(612)
232
Plan transfers / curtailments
(92,292)
—
—
—
Employee contributions
1,190
1,192
—
—
Benefits paid
(9,000)
(9,547)
(380)
(352)
Present value of defined benefit obligation - end of year
$
125,023 $
212,182 $
6,327 $
7,006
Empire Life - Annual Report 2024
90
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
The movement in the fair value of the Plan’s defined benefit assets over the year is as follows:
Pension benefits
As at
December 31, 2024
December 31, 2023
Fair value of defined benefit assets - at beginning of year
$
236,215 $
218,165
Interest income
8,067
11,292
Administrative expense
(385)
(385)
Increase (decrease) in net income before tax
7,682
10,907
Remeasurements
Return on plan assets, excluding amounts included in interest income
13,234
9,181
Increase (decrease) in OCI before tax
13,234
9,181
Plan transfers / curtailments
(92,292)
—
Employer contributions
6,437
6,317
Employee contributions
1,190
1,192
Benefits paid
(9,000)
(9,547)
Fair value of defined benefit assets - end of year
$
163,466 $
236,215
The change in the asset ceiling/onerous liability over the year is as follows:
Pension benefits
As at
December 31, 2024
December 31, 2023
Asset ceiling/onerous liability - beginning year
$
2,554 $
2,736
Interest income
170
144
Change in asset ceiling/onerous liability (excluding interest income)
1,705
(326)
Asset ceiling/onerous liability - end of year
$
4,429 $
2,554
The actual return on defined benefit assets net of administrative expense, for the year ended December 31, 2024 was a
gain of $20,916 (2023 gain of $20,088).
Defined benefit plan expense is recognized and allocated between Insurance service expenses and Non-insurance
expenses. Remeasurements in the defined benefit plan are included in OCI. Allocated between Insurance service
expenses and Non-insurance expenses is $4,773 (2023 $4,014) of employer contributions related to the defined
contribution component of the Plan.
Expected contributions (including both employer and employee amounts) to the Company’s defined benefit pension plans
for the year ending December 31, 2025 are approximately $5,436.
During the year, the Company entered into an arrangement to settle certain of its defined benefit obligations by purchasing
annuities using plan assets. The agreement transfers the pension obligations of immediate (retired) and deferred
annuitants to a financial institution. Obligations relating to active employees are outside the scope of this arrangement,
and the Company continues to recognize a net post-employment benefit asset for these plan participants. As a result of
the settlement, the Company recognized $2,064 as a reduction of service costs in Non-insurance expenses. As at
December 31, 2024, the Company has settled all obligations related to the transferred plans, and the transferee is the
pension obligator in all material respects.
In February 2023, the Plan withdrew 100% of its investment in Empire Life Aggressive Growth Mutual Fund. The proceeds
were reinvested in Exchange-Traded Funds (ETFs) with exposure to Canadian (30%), US (35%) and International (35%)
markets.
Empire Life - Annual Report 2024
91
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
The Plan invests primarily in Empire Life segregated funds and ETFs. The fair value of the underlying assets of the funds
and other investments are included in the following table:
As at
December 31, 2024
December 31, 2023
Equity
Canadian
$
25,008
15 % $
35,385
15 %
Foreign
59,806
37 %
82,623
35 %
Equity ETFs
Canadian
3,153
2 %
3,010
1 %
Foreign
7,394
4 %
6,758
3 %
Total equity
95,361
58 %
127,776
54 %
Debt
Canadian
56,747
34 %
94,923
40 %
Foreign
1,065
1 %
2,134
1 %
Total debt
57,812
35 %
97,057
41 %
Cash, cash equivalent, accruals
1,225
1 %
3,313
1 %
Other
9,068
6 %
8,069
4 %
Total fair value of assets
$
163,466
100 % $
236,215
100 %
Fair value is determined based on Level 1 inputs for equities and Level 2 inputs for debt.
The following weighted average assumptions were used in actuarial calculations:
Pension benefits
Other post-employment benefits
As at
December 31, 2024
December 31, 2023
December 31, 2024
December 31, 2023
Defined benefit obligation assumptions:
Discount rate - defined benefit obligation
4.70 %
4.65 %
4.60 %
4.65 %
Discount rate - defined benefit cost
4.65% January to March;
4.85% April to December
5.25 %
4.65 %
5.25 %
Rate of compensation increase
4.00% in 2024
and 3.00% thereafter
4.00% in 2023
and 3.00% thereafter
n/a
n/a
Assumed health care cost trend rates
Initial health care cost trend rate
n/a
n/a
5.7 %
5.3 %
Cost trend rate declines to
n/a
n/a
4.0 %
4.0 %
Year ultimate health care cost trend rate is reached
n/a
n/a
2040
2040
Assumptions (in number of years) relating to future mortality, to determine the defined benefit obligation and the net
benefit cost for the defined benefit pension plans are as follows:
As at
December 31, 2024
December 31, 2023
Assumed life expectancy for males currently at age 65
23.67
22.29
Assumed life expectancy for females currently at age 65
25.41
24.95
Assumed life expectancy at 65 for males currently at age 40
25.46
23.40
Assumed life expectancy at 65 for females currently at age 40
27.04
25.96
Empire Life - Annual Report 2024
92
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
The following table provides the sensitivity of the defined benefit pension and other post-employment benefit obligations to
changes in significant actuarial assumptions. For each sensitivity test, the impact of a reasonably possible change in a
single factor is shown with other assumptions left unchanged. In practice, this is unlikely to occur, and changes in some of
the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant
actuarial assumptions the same method has been applied as when calculating the Post-employment benefit liability
recognized within the Consolidated Statements of Financial Position.
Impact on Pension Benefit Obligation
Impact on Other Post Employment
Benefit Obligations
As at December 31, 2024
Change in
assumption
Increase
Decrease
Increase
Decrease
Discount rate
1 % $
(12,546) $
16,156 $
(563) $
541
Rate of compensation increase
1 % $
8,838 $
(7,325)
n/a
n/a
Health care cost increase
1 %
n/a
n/a $
502 $
(538)
Life expectancy
1 year $
1,530 $
(1,109) $
268 $
(365)
Impact on Pension Benefit Obligation
Impact on Other Post Employment
Benefit Obligations
As at December 31, 2023
Change in
assumption
Increase
Decrease
Increase
Decrease
Discount rate
1 % $
(17,754) $
22,025 $
(651) $
574
Rate of compensation increase
1 % $
7,398 $
(6,493)
n/a
n/a
Health care cost increase
1 %
n/a
n/a
577
(658)
Life expectancy
1 year $
3,589 $
(3,732) $
591 $
(761)
The weighted average duration, in number of years, of the defined benefit obligations are:
As at
December 31, 2024
December 31, 2023
Staff pension plan
12
10
Supplemental employee retirement plan
7
7
Other post-employment benefits
9
9
Risks
Through its defined benefit pension plan and the other post-employment benefit plan, the Company is exposed to a
number of risks, the most significant of which are detailed below:
Asset volatility
The Plan obligations are calculated using a discount rate set with reference to corporate bond yields. If Plan assets
underperform against this yield, this will create a deficit. The Plan holds a significant proportion of equities, which are
expected to outperform corporate bonds in the long-term while producing volatility and risk in the short-term.
Empire Life - Annual Report 2024
93
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
Longevity risk
The majority of the Plans’ obligations are to provide benefits for the life of the member, so increases in life expectancy will
result in an increase in the Plans’ liabilities. In case of the funded plans, the Pension Committee ensures that the
investment positions are managed in accordance with the investment philosophy outlined in the investment policy
approved by the Human Resources Committee of the Board. The fundamental philosophy is to achieve acceptably high
investment return over the long term without jeopardizing the level of security of the members’ benefits and without
introducing too much volatility into the Company’s future expense. The Company's objective is to match assets to the
pension obligations by investing in equities as well as fixed income securities. The Company monitors how the duration
and the expected yield of the investments are matching the expected cash outflows arising from the pension obligations.
The Plan has not changed the processes used to manage its risks from previous periods. Investments are well diversified,
such that the failure of any single investment would not have a material impact on the overall level of assets.
Interest rate risk
A decrease in corporate bond yields will increase Plan obligations, although this will be partially offset by an increase in
the value of the Plans’ bond holdings.
The last triennial valuation on the Staff Pension Plan was completed in August 2022, as at December 31, 2021. The next
triennial valuation will be completed in 2025, as at December 31, 2024.
11. Subordinated Debt
The table below presents the obligations included in Subordinated debt.
As at
December 31, 2024
December 31, 2023
Interest rate
Earliest par call or
redemption date
Maturity
Carrying value
Carrying
value
Series 2021-1(1)
2.024 % September 24, 2026
2031
199,659
199,435
Series 2023-1(2)
5.503 %
January 13, 2028
2033
199,575
199,462
Total Subordinated Debt
$
399,234 $
398,897
Fair Value
$
402,940 $
385,674
(1) Series 2021-1 Subordinated 2.024% unsecured debentures due 2031. From September 24, 2026, interest is payable at 0.67% over CORRA plus 0.32138% credit
adjustment spread
(2) Series 2023-1 Subordinated 5.503% unsecured debentures due 2033. From January 13, 2028, interest is payable at 2.26% over CORRA
Empire Life - Annual Report 2024
94
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
12. Claims, Operating Expenses and Commissions
Claims, operating expenses and commissions expense include the following:
For the year ended
December 31, 2024
December 31, 2023
Insurance contracts claims and benefits(1)
$
831,975 $
733,534
Salary and benefit expenses
152,290
134,883
Professional services
29,873
33,951
Rent, maintenance, system costs and amortization of right-of-use assets
29,452
26,833
Amortization of property and equipment and intangibles
18,366
16,028
Miscellaneous insurance and non-insurance operating expenses
7,012
31,679
Commissions
335,538
304,142
Premium and other taxes
28,111
27,063
Subtotal
1,432,617
1,308,113
Amounts attributed to insurance contracts acquisition cash flows
(178,289)
(176,563)
Amortization of insurance contracts acquisition cash flows
41,577
35,524
Total
$
1,295,905 $
1,167,074
Represented by:
Insurance service expenses
$
1,187,042 $
1,071,549
Non-insurance expenses
108,863
95,525
Total
$
1,295,905 $
1,167,074
(1) Including risk adjustment for non-financial risk and impacts from onerous contracts.
Empire Life - Annual Report 2024
95
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
13. Income Taxes
13.1. Income tax expense
The Company’s income tax expense includes provisions for current and deferred taxes as follows:
For the year ended
December 31, 2024
December 31, 2023
Current income tax expense
$
103,834 $
44,774
Deferred income tax expense (recovery)
(593)
876
Income tax expense
$
103,241 $
45,650
During 2024, the Company's net income tax paid (recovered) totaled $65,866 (2023 recovery of $19,310).
13.2. Variance from statutory provision
Income taxes provided vary from the expected statutory provision as follows:
For the year ended
December 31, 2024
December 31, 2023
Net income before income taxes
$
402,273 $
235,606
Income tax provision at statutory rates
106,092
62,153
Increase (decrease) resulting from:
Tax paid on dividends
(12,543)
(13,562)
Miscellaneous
9,692 $
(2,941)
Income tax expense
$
103,241 $
45,650
The current enacted corporate tax rates as they impact the Company in 2024 stand at 26.37% (2023 26.38%). Expected
future tax rates are as follows:
2025
26.37 %
2026
26.37 %
2027
26.37 %
2028
26.37 %
2029
26.37 %
The impact of future enacted corporate tax rates has been taken into consideration in the deferred tax calculation.
13.3. Deferred income taxes
In certain instances the tax basis of assets and liabilities differs from the carrying amount. These differences will give
rise to deferred income taxes, which are reflected on the Consolidated Statements of Financial Position. These
differences arise in the following items:
As at
December 31, 2024
December 31, 2023
Insurance contracts
$
102,272 $
91,150
Portfolio investments
1,295
973
Post-employment benefit plans
(7,282)
(3,798)
Other, net
(7,988)
1,119
Net deferred income tax asset
$
88,297 $
89,444
The deferred tax asset on $1,650 of deductible temporary differences with respect to investments in associates have
not been recognized in the Consolidated Financial Statements due to the fact that it is not probable that these
temporary differences will reverse in the foreseeable future.
Of the above total, $88,297 is expected to be paid (2023 $89,444 paid) more than one year after the Consolidated
Statements of Financial Position date.
Empire Life - Annual Report 2024
96
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
The net movement on the deferred income tax account is as follows:
For the year ended
December 31, 2024
December 31, 2023
Net deferred income tax asset - beginning of year
$
89,444 $
89,623
Recognized in Consolidated Statements of Operations
593
(876)
Recognized in Consolidated Statements of Comprehensive Income
(1,740)
206
Other adjustments
—
491
Net deferred income tax asset - end of year
$
88,297 $
89,444
13.4. Income taxes included in other comprehensive income
Other comprehensive income (loss) is presented net of income taxes and includes the following income tax amounts.
For the year ended
December 31, 2024
December 31, 2023
Before tax
Tax (provision)
recovery
After tax
Before tax
Tax (provision)
recovery
After tax
Remeasurements of post-employment benefit liabilities
$
6,596 $
(1,740) $
4,856 $
(778) $
206 $
(572)
Total other comprehensive income (loss)
$
6,596 $
(1,740) $
4,856 $
(778) $
206 $
(572)
14. Earnings Per Share
Earnings Per Share (EPS) is calculated by dividing Common shareholders' net income by the weighted average number
of common shares outstanding. The preferred shares issued (refer to Note 15) do not dilute EPS as the preferred shares
are not convertible into common shares. As a result, diluted EPS are the same as basic EPS.
Details of the calculation of the net income and the weighted average number of shares used in the EPS computations are
as follows:
For the year ended
December 31, 2024
December 31, 2023
Basic and diluted EPS
Shareholders' net income (loss)
$
292,044 $
167,854
Less: preferred share dividends declared and distributions on other equity instruments
11,525
11,525
Common shareholders' net income
280,519
156,329
Weighted average number of common shares outstanding
985,076
985,076
Basic and diluted EPS
$
284.77 $
158.70
15. Capital Stock
As at
December 31, 2024
December 31, 2023
Shares
authorized
Shares issued
and outstanding
Amount
Shares
authorized
Shares issued
and outstanding
Amount
Preferred shares - series 3
unlimited
4,000,000 $
100,000
unlimited
4,000,000 $
100,000
Limited recourse capital notes(1)
200,000 $
196,664
200,000 $
196,664
Common shares
2,000,000
985,076 $
985
2,000,000
985,076 $
985
(1) Amounts represent total proceeds of $200,000 from issuance of limited recourse capital notes, less issuance costs of $3,336.
In the fourth quarter of 2017, Empire Life issued to E-L Financial Corporation Limited 4,000,000 Non-Cumulative Rate
Reset Preferred Shares, Series 3 (Series 3 Preferred Shares) at $25 per share. Holders of Series 3 Preferred Shares
were entitled to receive fixed non-cumulative quarterly dividends yielding 4.90% annually, as and when declared by the
Board of Empire Life, for the initial period ending on and including January 17, 2023. Thereafter, the dividend rate will be
reset every five years at a rate equal to the 5-year Government of Canada bond yield plus 3.24%. Holders of Series 3
Preferred Shares will have the right, at their option, to convert their shares into Non-Cumulative Floating Rate Preferred
Shares, Series 4 (Series 4 Preferred Shares), subject to certain conditions, on January 17, 2023 and on January 17 every
five years thereafter. Holders of the Series 4 Preferred Shares will be entitled to receive non-cumulative quarterly floating
dividends, as and when declared by the Board of Empire Life, at a rate equal to the 3-month Government of Canada
Treasury Bill yield plus 3.24%.
Empire Life - Annual Report 2024
97
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
Empire Life provided notice to E-L Financial Corporation Limited that it did not intend to exercise its right to redeem all or
any part of the currently outstanding 4,000,000 Series 3 Preferred Shares of Empire Life on January 17, 2023 and, as a
result and subject to certain conditions, the holders of the Series 3 Preferred Shares had the right, at their option, on the
Series 3 Conversion Date, to convert all or part of their Series 3 Preferred Shares on a one-for-one basis into Series 4
Preferred Shares. In early 2023, E-L Financial irrevocably elected not to exercise this right. Effective January 18, 2023,
holders of Series 3 Preferred Shares are entitled to receive fixed non-cumulative quarterly dividends yielding 6.187%
annually, as and when declared by the Board of Empire Life, for the renewal period ending on and including January 17,
2028.
On February 17, 2021, the Company issued $200 million of Limited Recourse Capital Notes Series 1 (LRCN Series 1)
with recourse limited to assets held by a third party trustee in a trust which is consolidated in these Consolidated Financial
Statements. Payments of interest and principal in cash on the LRCN Series 1 are made at the discretion of the Company
and non-payment of interest and principal in cash does not constitute an event of default. In the event of a non-payment of
interest or principal at the discretion of the Company, or in the event of bankruptcy, insolvency or liquidation of the
Company, the sole remedy of note holders shall be the delivery of the holders’ proportionate share of the trust assets. In
such an event, the delivery of the trust assets will represent the full and complete extinguishment of the Company’s
obligations under the LRCN Series 1.
The Empire Life Non-Cumulative 5-year Fixed Rate Reset Preferred Shares, Series 5 were issued to a trust to be held as
trust assets in connection with the LRCN Series 1 at a rate of $1,000 per Series 5 totaling $200 million. Holders of the
LRCN Series 1 are entitled to receive semi-annual payments at a rate of 3.625% per annum until April 17, 2026.
Thereafter, the yield will reset every five years at a rate equal to the 5-year Government of Canada bond yield plus
3.082%.
16. Dividends
Dividend
declaration date
Shares issued
and outstanding
Dividend rate
per share
Total dividend
($ 000's)
Dividend
payment date
Common shareholder dividends
Common shares
October 30, 2024
985,076 $
20.310000 $
20,007
December 5, 2024
July 31, 2024
985,076 $
20.310000 $
20,007 September 10, 2024
May 3, 2024
985,076 $
71.070000 $
70,009
June 11, 2024
February 28, 2024
985,076 $
20.310000 $
20,007
April 9, 2024
October 26, 2023
985,076 $
19.290000 $
19,002
December 5, 2023
August 4, 2023
985,076 $
19.290000 $
19,002 September 13, 2023
May 9, 2023
985,076 $
19.290000 $
19,002
June 14, 2023
February 23, 2023
985,076 $
18.450000 $
18,175
April 4, 2023
Preferred shareholder dividends
Series 3
October 30, 2024
4,000,000 $
0.3866875 $
1,547
January 17, 2025
July 31, 2024
4,000,000 $
0.3866875 $
1,547
October 17, 2024
May 3, 2024
4,000,000 $
0.3866875 $
1,547
July 17, 2024
February 28, 2024
4,000,000 $
0.3866875 $
1,547
April 17, 2024
October 26, 2023
4,000,000 $
0.3866875 $
1,547
January 17, 2024
August 4, 2023
4,000,000 $
0.3866875 $
1,547
October 17, 2023
May 9, 2023
4,000,000 $
0.3866875 $
1,547
July 17, 2023
February 23, 2023
4,000,000 $
0.3866875 $
1,547
April 17, 2023
On February 27, 2025, the Board approved the following cash dividends:
•
$71,250 ($72.3294446 per share) on the issued and outstanding Common Shares, payable on April 8, 2025.
•
$1,547 ($0.3866875 per share) on the issued and outstanding Series 3 Preferred Shares, payable on April 17, 2025.
Empire Life - Annual Report 2024
98
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
17. Participating Account
The participating account surplus balance is considered to be equity of the Company; however, its distribution is restricted
by the Insurance Companies Act. Transfers from the participating account to the shareholders account are contingent
upon future payment of dividends to participating policyholders.
Participating policyholders share in the returns of the underlying items. The entire participating fund is considered as the
underlying. The fair value of the underlying items as at December 31, 2024 is $1,183,535 (December 31, 2023
$1,040,923).
The following table sets out the composition and fair value of the underlying assets supporting the Company's
participating account at the reporting date.
As at
December 31, 2024
December 31, 2023
Underlying assets supporting the participating account
Cash and cash equivalents
$
55,157 $
53,337
Bonds
744,430
660,889
Preferred shares
127,452
107,777
Common shares
196,146
170,313
Derivative assets
276
1,676
Mortgages
12,413
14,997
Other
47,660
31,934
Total underlying assets supporting the participating account
$
1,183,535 $
1,040,923
Components of participating account
Insurance contracts and reinsurance contracts held net assets (liabilities)
$
1,130,390 $
994,766
Participating account surplus
53,145
46,157
Total
$
1,183,535 $
1,040,923
18. Segmented Information
The Company operates in the Canadian life insurance industry and follows a product line management approach for
internal reporting and decision making. A description of the reporting segments is as follows:
•
The Wealth Management product line includes segregated funds, guaranteed interest rate annuities and annuities
providing income for life.
•
The Group Solutions product line offers group benefit plans to employers for medical, dental, disability, and life
insurance coverage of their employees.
•
The Individual Insurance product line includes both non-participating and participating individual life and health
insurance products.
•
Capital and Surplus is made up of assets held in the shareholders’ equity, the participating account surplus, and
other corporate items not allocated to other segments.
Empire Life - Annual Report 2024
99
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
Operating results are segmented into three product lines along with the Company’s capital and surplus as follows:
For the year ended December 31, 2024
Wealth
Management
Group
Solutions
Individual
Insurance
Capital &
Surplus
Total
Insurance service result
Insurance revenue
$
238,002 $
677,378 $
489,912 $
— $
1,405,292
Insurance service expenses
(132,937)
(647,539)
(406,566)
—
(1,187,042)
Insurance service result
105,065
29,839
83,346
—
218,250
Net recovery (expense) from reinsurance contracts held
(694)
(14,735)
(27,230)
—
(42,659)
Net insurance service result
104,371
15,104
56,116
—
175,591
Investment and insurance finance result
Investment income (loss), excluding segregated fund account balances
Investment income
94,503
13,704
315,261
94,870
518,338
Change in investment contracts
(29,266)
—
—
—
(29,266)
Net investment result, excluding segregated fund account balances
65,237
13,704
315,261
94,870
489,072
Insurance finance income (expense), excluding segregated fund account
balances
Insurance contracts
(19,768)
(26,246)
(170,179)
—
(216,193)
Reinsurance contracts held
645
12,018
20,275
—
32,938
Net insurance finance income (expense), excluding segregated fund
account balances
(19,123)
(14,228)
(149,904)
—
(183,255)
Segregated fund account balances net investment and insurance finance
result
Investment income (loss) on investments for segregated fund account balances
1,116,319
—
3,390
—
1,119,709
Insurance finance income (expenses) segregated fund account balances
(1,116,319)
—
(3,390)
—
(1,119,709)
Segregated fund account balances net investment and insurance finance
result
—
—
—
—
—
Net investment and insurance finance result
46,114
(524)
165,357
94,870
305,817
Other income and expenses
Fee and other income
1,191
8,520
214
35,232
45,157
Non-insurance expenses
(30,629)
(21,122)
(27,080)
(30,032)
(108,863)
Interest expenses
—
—
—
(15,429)
(15,429)
Total other income and expenses
(29,438)
(12,602)
(26,866)
(10,229)
(79,135)
Net income (loss) before taxes
$
121,047 $
1,978 $
194,607 $
84,641 $
402,273
Income taxes
(103,241)
Net income (loss) after taxes
$
299,032
Empire Life - Annual Report 2024
100
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
For the year ended December 31, 2023
Wealth
Management
Group
Solutions
Individual
Insurance
Capital &
Surplus
Total
Insurance service result
Insurance revenue
$
234,762 $
638,675 $
452,071 $
— $
1,325,508
Insurance service expenses
(147,080)
(598,019)
(326,450)
—
(1,071,549)
Insurance service result
87,682
40,656
125,621
—
253,959
Net recovery (expense) from reinsurance contracts held
340
(17,234)
(55,743)
—
(72,637)
Net insurance service result
88,022
23,422
69,878
—
181,322
Investment and insurance finance result
Investment income (loss), excluding segregated fund account balances
Investment income
72,285
16,001
597,946
130,557
816,789
Change in investment contracts
(28,171)
—
—
—
(28,171)
Net investment result, excluding segregated fund account balances
44,114
16,001
597,946
130,557
788,618
Insurance finance income (expense), excluding segregated fund account balances
Insurance contracts
(34,335)
(21,879)
(557,178)
—
(613,392)
Reinsurance contracts held
964
10,473
(50,940)
—
(39,503)
Net insurance finance income (expense), excluding segregated fund account
balances
(33,371)
(11,406)
(608,118)
—
(652,895)
Segregated fund account balances net investment and insurance finance result
Investment income (loss) on investments for segregated fund account balances
734,263
—
1,571
—
735,834
Insurance finance income (expenses) segregated fund account balances
(734,263)
—
(1,571)
—
(735,834)
Segregated fund account balances net investment and insurance finance result
—
—
—
—
—
Net investment and insurance finance result
10,743
4,595
(10,172)
130,557
135,723
Other income and expenses
Fee and other income
1,076
7,549
317
21,759
30,701
Non-insurance expenses
(29,685)
(15,739)
(21,154)
(28,947)
(95,525)
Interest expenses
—
—
—
(16,615)
(16,615)
Total other income and expenses
(28,609)
(8,190)
(20,837)
(23,803)
(81,439)
Net income (loss) before taxes
$
70,156 $
19,827 $
38,869 $
106,754 $
235,606
Income taxes
(45,650)
Net income (loss) after taxes
$
189,956
Assets are segmented into three product lines along with the Company’s capital and surplus as follows:
As at December 31, 2024
Wealth
Management
Group
Solutions
Individual
Insurance
Capital &
Surplus
Total
Assets excluding segregated funds
$
973,123 $
412,178 $
6,136,810 $
2,750,772 $
10,272,883
Segregated funds
9,375,040
—
18,698
—
9,393,738
Total assets
$
10,348,163 $
412,178 $
6,155,508 $
2,750,772 $
19,666,621
As at December 31, 2023
Wealth
Management
Group Solutions
Individual
Insurance
Capital &
Surplus
Total
Assets excluding segregated funds
$
996,530 $
388,145 $
5,976,494 $
2,490,650 $
9,851,819
Segregated funds
8,794,810
—
17,914
—
8,812,724
Total assets
$
9,791,340 $
388,145 $
5,994,408 $
2,490,650 $
18,664,543
While specific general fund assets are nominally matched against specific types of general fund liabilities or held in the
shareholders’ equity and participating account surplus, all general fund assets are available to pay all general fund
liabilities, if required. Segregated fund assets are not available to pay liabilities of the general fund.
Empire Life - Annual Report 2024
101
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
19. Commitments and Contingencies
19.1. Investment commitments
In the normal course of business, outstanding investment commitments are not reflected in the Consolidated Financial
Statements. There were $75,472 (December 31, 2023, $4,141) of outstanding commitments as at December 31,
2024. The outstanding commitments are payable at any time up to and including December 31, 2029.
19.2. Other contingencies
The Company operates in the insurance industry and is subject to legal proceedings in the normal course of business.
While it is not practicable to forecast or determine the final results of all pending or threatened legal proceedings,
management does not believe that such proceedings (including litigation) will have a material effect on its results and
financial position.
The Company by-laws provide indemnification to its current and former directors, officers and employees to the extent
permitted by law, against contractual indemnities and liabilities arising from their service to the Company. The broad
general nature of these indemnification by-laws does not permit a reasonable estimate of the maximum potential amount
of any liability.
In certain cases, the Company would have recourse against third parties with respect to the foregoing items and the
Company also maintains insurance policies that may provide coverage against certain of these items.
20. Related Party Transactions
In the normal course of business, the Company enters into transactions with E-L and other companies under common
control or common influence involving the leasing of office property, investment management services and
miscellaneous office services. The amounts earned and expensed were not significant. Some directors and officers
have insurance and investment policies underwritten by the Company.
Compensation of key management personnel
Key management personnel are comprised of directors and executive officers of the Company. The remuneration of key
management personnel is as follows:
For the year ended
December 31, 2024
December 31, 2023
Salaries and other short-term and long-term employee benefits
$
9,160 $
8,033
Post-employment benefits
168
392
Total
$
9,328 $
8,425
Post-employment benefits are comprised of employer current service costs for pension and other post-employment
benefits.
21. Capital Management
The Company manages its capital in order to meet the requirements of the LICAT guideline, the capital framework issued
by the OSFI. Under this framework, the Company’s capital adequacy is measured as a ratio of available capital plus
surplus allowance and eligible deposits divided by a base solvency buffer. OSFI has established a Supervisory Target
Total Ratio of 100% and a Supervisory Target Core Ratio of 70%. As at December 31, 2023 and December 31, 2024, the
Company was in compliance with the applicable regulatory capital ratios.
Empire Life - Annual Report 2024
102
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
22. Risk Management
The Company is exposed to risks arising from its investing activities and its insurance operations. The following sections
describe the Company’s enterprise risk management framework including the principal risks and associated risk
management strategies for the risks that management considers to be most significant in terms of likelihood, and the
potential adverse impact on the Company: market, product, credit and liquidity.
22.1. Caution related to sensitivities
In the sections that follow, the Company provides sensitivities and risk exposure measures for certain risks. These include
sensitivities due to specific changes in market prices and interest rates, based on the market prices, interest rates, assets,
liabilities and business mix in place as at the calculation dates. The sensitivities are calculated independently for each risk
variable, assuming that all other risk variables remain constant. The sensitivities do not take into account indirect effects
such as potential impacts on goodwill impairments or valuation allowances on deferred tax assets. Actual results can differ
materially from these estimates for a variety of reasons, including differences in the pattern or distribution of market
shocks, the interaction among these factors when more than one factor changes; changes in actuarial and investment
return and future investment activity assumptions; actual experience differing from the assumptions; changes in business
mix, effective tax rates and other market factors; and the general limitations of the Company’s internal models used for
purposes of these calculations. Changes due to new sales or maturities, asset purchases/sales, or other management
actions could also result in material changes to these reported sensitivities. For these reasons, the sensitivities should
only be viewed as directional estimates of the underlying sensitivities for the respective factors based on the assumptions
outlined and should not be viewed as predictors for the Company’s future Net income, CSM, Equity and capital
sensitivities. Given the nature of these calculations, the Company cannot provide assurance that the actual impact will be
consistent with the estimates provided. Changes in risk variables in excess of the ranges illustrated may result in other
than proportionate impacts.
22.2. Market risk
Market risk is the risk of loss arising from adverse changes in market rates and prices such as interest rates, prices of
equities, real estate and other securities, credit spreads, foreign exchange rates and inflation.
Market risk is directly influenced by the volatility and liquidity in the markets in which the related financial instruments are
traded, expectations of future price and yield movements and the composition of the Company’s investment portfolio.
Under the Canadian insurance accounting and regulatory regime, the Company’s results for any period reflect equity
market values and interest rates at the end of the period through mark-to-market accounting. Consequently, a decline in
public equity market values or changes in interest rates or spreads could result in material changes to net income
attributed to shareholders, increases to regulatory capital requirements and reduction in the Company’s capital adequacy
ratios. The Company buys investment quality bonds to support, to a very large extent, the liabilities under the insurance
and annuity policies of the Company. The Company’s investment strategy also includes the use of publicly-listed common
stocks or ETFs to support the liabilities under its insurance policies. However, if the Company does not achieve the
expected returns underlying the pricing of its products, its net income may be adversely affected.
Furthermore, a decrease in the fair value of the Company's common stock portfolio results in reduced shareholders’
equity, reduced participating account surplus and a reduced LICAT ratio. Regulatory pressure to increase capital escalates
as the LICAT ratio approaches OSFI’s supervisory minimum. Net income would also be reduced if the declines in value
are realized through dispositions.
The Company manages this risk exposure mainly through investment limits and oversight of its investment managers by
the Chief Investment Officer, Chief Actuary, the Asset Management Committee, and the Investment Committee of the
Board. The Investment Committee actively monitors the investment portfolio and asset mix.
Empire Life - Annual Report 2024
103
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
The Company’s general fund investments are subject to limits established by the Insurance Companies Act and to
investment guidelines established by management and approved by the Investment Committee of the Board. The
investment guidelines are designed to manage overall market risk by defining investment objectives, eligible investments,
diversification criteria, exposure, concentration and asset quality limits for eligible investments by product line. On at least
a quarterly basis, management and the Company’s investment managers report to the Investment Committee, and
through the Investment Committee to the Board, on the performance of general and segregated funds and compliance
with the investment guidelines.
The Company has an Asset Management Committee, which meets regularly and reports at least quarterly to the
Investment Committee of the Board. The mandate of the Asset Management Committee includes monitoring the position
of Empire Life’s investments in relation to its liabilities within the Company's various product lines. The process is
designed so that assets supporting insurance contract liabilities align with the timing and amount of policy obligations, and
to plan for the appropriate amount of liquidity in order to meet its financial obligations as they fall due. Investments and
asset/liability management guidelines, which are reviewed regularly with the Investment Committee, have been
established to govern these activities.
The Company has established a Capital Management Policy, capital management levels that exceed regulatory
minimums and Financial Condition Testing (FCT) that takes into account the potential effect of adverse risk scenarios
(including adverse market conditions and adverse interest rates) on the Company’s capital position and liquidity.
Management monitors its LICAT ratio on a regular basis and reports at least quarterly to the Board on the Company’s
LICAT ratio.
For the Company, the most significant market risks are equity risk, interest rate risk and to a lesser extent foreign
exchange risk.
Equity risk
The Company’s investment portfolio consists primarily of bonds and equity securities and the fair value of its investments
varies according to changes in general economic and securities market conditions, including volatility and declines in
equity markets. Equity market volatility could occur as a result of general market volatility or as a result of specific social,
political or economic events. A decline in securities markets could have an adverse impact on the return on assets backing
capital, capital adequacy, and the management fees collected on segregated fund contracts and on index funds within
universal life contracts and insurance contract liabilities and capital requirements, particularly in respect of segregated
fund guarantees.
The risk of fluctuation of the market value of the Company’s segregated funds is generally assumed by the policyholders.
Market value variations of such assets will result in variations in the income of the Company to the extent management
fees are determined in relation to the value of such funds. A significant and steady decline of the securities markets may
adversely affect net income, CSM and capital. Additionally, the majority of the Company’s segregated fund products
contain guarantees upon death, maturity or withdrawal, where the guarantee may be triggered by the market performance
of the underlying funds. If a significant market decline is experienced, the resulting increased cost of providing these
guarantees could have an adverse effect on the Company’s financial position, LICAT ratio and results of operations. The
Company has reinsured a portion of its segregated fund death benefit guarantee. The Company also has a semi-static,
economic hedging program. The objective of the economic hedging program is to partially protect the Company from
possible future LICAT ratio declines that might result from adverse stock market price changes. The program employs put
options on key equity indices. Improper use of these instruments could have an adverse impact on net income. The
Company manages this risk by applying limits established by the Investment Committee in its investment guidelines,
which set out permitted derivatives and permitted uses for derivatives, as well as limits to the use of these instruments. In
particular, no leverage is permitted in the use of derivatives and strict counterparty credit restrictions are imposed.
The Company has an Equity Risk Hedging Policy to support general fund economic hedging programs. The policy
outlines objectives, risk limits and authorities associated with its economic hedging activities. Management monitors its
economic hedging activities on a regular basis and reports, at least quarterly, to the Risk and Capital Committee of the
Board on the status of the economic hedging program.
Empire Life - Annual Report 2024
104
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
The Company uses stochastic models to monitor and manage risk associated with segregated fund guarantees and
establishes insurance contract liabilities in accordance with IFRS 17 and the CIA Standards of Practice. Product
development and pricing policies also require consideration of portfolio risk and capital requirements in the design,
development and pricing of the products. Senior management reports quarterly to the Risk and Capital Committee of the
Board on the nature and value of the Company’s segregated fund guarantee liabilities, including capital requirements.
The following table summarizes the estimated potential impact on the Company of a change in global equity markets. The
Company uses a 10% increase or decrease in equity markets as a reasonably possible change in equity markets. The
Company has also disclosed the impact of a 20% increase or decrease in its equity market sensitivity. The amounts in the
following table include the effect of Empire Life’s general fund equity risk economic hedging program (described above).
For segregated fund guarantees the level of sensitivity is highly dependent on the level of the stock market at the time of
performing the sensitivity test. If period end equity markets are high relative to market levels at the time that segregated
fund policies were issued, the sensitivity is reduced. If period end equity markets are low relative to market levels at the
time that segregated fund policies were issued, the sensitivity is increased. CSM sensitivity included in the following table
relates to insurance contracts measured applying the VFA.
The impacts of one-time changes in equity markets are found below:
As at December 31, 2024
CSM
Profit or loss and Equity
(in millions of Canadian dollars)
10%
Increase
10%
Decrease
20%
Increase
20%
Decrease
10%
Increase
10%
Decrease
20%
Increase
20%
Decrease
Insurance and reinsurance contracts held
$
98 $
(114) $
186 $
(246) $
(31) $
32 $
(63) $
64
Financial assets (equities)
—
—
—
—
39
(32)
80
(49)
Total
$
98 $
(114) $
186 $
(246) $
8 $
— $
17 $
15
As at December 31, 2023
CSM
Profit or loss and Equity
(in millions of Canadian dollars)
10%
Increase
10%
Decrease
20%
Increase
20%
Decrease
10%
Increase
10%
Decrease
20%
Increase
20%
Decrease
Insurance and reinsurance contracts held
$
100 $
(116) $
187 $
(254) $
(28) $
26 $
(56) $
49
Financial assets (equities)
—
—
—
—
49
(45)
99
(81)
Total
$
100 $
(116) $
187 $
(254) $
21 $
(19) $
43 $
(32)
The following table identifies the concentration of the Company's common equity holdings in Empire Life's investment
portfolios (excluding segregated funds).
As at
December 31, 2024
December 31, 2023
Holdings of common equities in the 10 issuers to which the Company had the greatest exposure
$
271,444 $
439,222
Percentage of total cash and investments
2.8 %
4.7 %
Exposure to the largest single issuer of common equities
$
70,054 $
244,095
Percentage of total cash and investments
0.7 %
2.6 %
Interest rate risk
Interest rate risk is the risk of loss resulting from adverse changes in yield curves. Economic losses are incurred due to
the need to reinvest or divest during periods of changing interest rates. Changes in interest rates, as a result of the
general market volatility or as a result of specific social, political or economic events, could have an adverse effect on the
Company’s business and profitability.
Rapid declines in interest rates may result in, among other things, increased asset calls and mortgage prepayments and
require reinvestment at significantly lower yields, which could adversely affect earnings. Rapid increases in interest rates
may result in, among other things, increased surrenders.
Fluctuations in interest rates may cause losses to the Company due to the need to reinvest or divest during periods of
changing interest rates, which may force the Company to sell investment assets at a loss. In addition, an interest rate
sensitivity mismatch between assets and the liabilities that they are designated to support could have an adverse effect on
the Company’s financial position and net income.
Empire Life - Annual Report 2024
105
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
The products offered within the Company's Individual Insurance product line and Segregated Funds included in the
Wealth Management product line are more exposed to interest rate risk due to the longer term nature of the products.
Products offered in the Group product line are less sensitive to interest rates due to their short term nature.
The following table outlines the impact on the Company’s CSM, Profit and Equity resulting from specific changes in
interest rates as at December 31, 2024 and December 31, 2023 assuming all other variables remain constant.
As at December 31, 2024
CSM
Profit or loss and Equity
(in millions of Canadian dollars)
50 bps
Increase
50 bps
Decrease
100 bps
Increase
100 bps
Decrease
50 bps
Increase
50 bps
Decrease
100 bps
Increase
100 bps
Decrease
Insurance and reinsurance contracts held
$
26 $
(35) $
44 $
(78) $
290 $
(328) $
547 $
(699)
Financial assets (debt instruments)
—
—
—
—
(347)
387
(658)
818
Total
$
26 $
(35) $
44 $
(78) $
(57) $
59 $
(111) $
119
As at December 31, 2023
CSM
Profit or loss and Equity
(in millions of Canadian dollars)
50 bps
Increase
50 bps
Decrease
100 bps
Increase
100 bps
Decrease
50 bps
Increase
50 bps
Decrease
100 bps
Increase
100 bps
Decrease
Insurance and reinsurance contracts held
$
64 $
(78) $
117 $
(168) $
303 $
(342) $
569 $
(729)
Financial assets (debt instruments)
—
—
—
—
(323)
360
(612)
760
Total
$
64 $
(78) $
117 $
(168) $
(20) $
18 $
(43) $
31
For insurance contracts with a fund component, the computation of insurance contract liabilities takes into account
projected investment income net of investment expenses from the assets supporting insurance contract liabilities, and
investment income expected to be earned on reinvestments.
In order to match the savings component of insurance contract liabilities that vary with a variety of indices and currencies,
the Company maintains certain equity, bond and currency financial instruments as part of its general fund assets. Asset-
liability mismatch risk for these liabilities is monitored regularly.
Interest rate risk in Empire Life's investment portfolio is managed through Investment Committee established limits and
regular reporting by management to the Investment Committee and the Board. The Company’s investment guidelines
establish investment objectives and eligible interest rate sensitive investments, as well as diversification criteria, exposure,
concentration and asset quality limits for these investments. The Asset Management Committee oversees sensitivity to
interest rates. The objective is to maximize investment yields while managing the default, liquidity and reinvestment risks
at acceptable levels and within risk tolerances. Product development and pricing policies and practices also require
consideration of interest rate risk in the design, development and pricing of the products.
The Company has an interest rate hedging program, the objective of which is to partially protect the Company from
possible future LICAT ratio declines that might result from adverse interest rate changes. The program employs swaps.
Improper use of these instruments could have an adverse impact on earnings. The Company has an Interest Rate Risk
Hedging Policy to support general fund interest rate hedging programs. The policy outlines objectives, risk limits and
authorities associated with these activities. Management monitors its hedging activities on a regular basis and reports, at
least quarterly, to the Risk and Capital Committee of the Board on the status of the interest rate hedging program.
Foreign exchange risk
Foreign exchange rate risk arises when the fair value of cash flows of a financial instrument fluctuate due to changes in
exchange rates. This can create an adverse effect on earnings and equity when measured in the Company’s functional
currency. As at December 31, 2024 and December 31, 2023, the Company has minimal exposure to currency risk.
The Company uses derivative instruments, including foreign currency forward contracts, to manage foreign exchange
risks. Improper use of these instruments could have an adverse impact on earnings. The Company manages this risk by
applying limits established by the Investment Committee in its investment guidelines, which set out permitted derivatives
and permitted uses for derivatives, as well as limits to the use of these instruments. In particular no leverage is permitted
in the use of derivatives and strict counterparty credit restrictions are imposed.
Empire Life - Annual Report 2024
106
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
The Company has a Foreign Exchange Risk Management Policy which outlines objectives, risk limits and authority
associated with any foreign exchange rate exposure. Oversight and management of this policy falls under the
responsibility of the Asset Management Committee, which reports exposures and any breaches to the Risk and Capital
Committee of the Board.
22.3. Product risk
The Company provides a broad range of life insurance, health insurance and wealth management products, group
insurance and employee benefit plans, and financial services that are concentrated by product line as follows:
(millions of dollars)
Wealth
Management
Group Solutions
Individual
Insurance
Capital
& Surplus
Total
For the year ended December 31
2024
2023
2024
2023
2024
2023
2024
2023
2024
2023
Insurance service revenue
$
238.0 $
234.8 $
677.4 $
638.7 $
489.9 $
452.0 $
— $
— $ 1,405.3 $ 1,325.5
Net expense from reinsurance
(0.7)
0.3
(14.7)
(17.2)
(27.3)
(55.7)
—
—
(42.7)
(72.6)
Total
$
237.3 $
235.1 $
662.7 $
621.5 $
462.6 $
396.3 $
— $
— $ 1,362.6 $ 1,252.9
Product risk is the risk that actual experience related to claims, benefit payments, expenses, cost of embedded product
options and cost of guarantees associated with products, does not emerge as expected. The Company is exposed to
various categories of product risk as a result of the business it writes, including: mortality, policyholder behaviour
(termination/surrender or lapse), expenses, morbidity, longevity (collectively also referred to as non-financial risk), and
product design and pricing risk, underwriting and claims adjudication risk and the interplay of those activities with fair
treatment of customer practices, as well as reinsurance risk.
Economic and environmental events, such as natural disasters, human-made disasters as well as pandemics, could occur
in regions where Empire Life has significant insurance coverage, impacting financial results. The Company regularly
evaluates its exposure to foreseeable risks through stress testing techniques including FCT analysis.
The principal risk the Company faces under insurance contracts is the risk that future claims, policy lapses and expenses
will not emerge as expected. To the extent that emerging experience is more favourable than assumed in the valuation,
income will emerge in addition to increases in the net CSM. If emerging experience is less favourable, losses will result in
addition to decreases in the net CSM. Therefore, the objective of the Company is to establish sufficient insurance contract
liabilities to cover these obligations with reasonable certainty.
The tables below provide sensitivities to changes in non-financial variables impacting shareholders' net income (loss),
shareholders' equity and CSM both gross and net of reinsurance. The products offered within the Company's Individual
Insurance product lines are most exposed to non-financial risk.
As at December 31, 2024
(in millions of Canadian dollars)
Change in
assumptions
Impact on shareholders'
net income (loss) and
shareholders' equity
gross of reinsurance
Impact on shareholders'
net income (loss) and
shareholders' equity net
of reinsurance
Impact on CSM gross of
reinsurance
Impact on ceded CSM
Mortality
+2% $
5 $
(1) $
(82) $
55
Morbidity
+5% $
(5) $
(3) $
(16) $
7
Longevity
+2% $
— $
— $
(6) $
—
Expenses
+5% $
1 $
1 $
(16) $
—
Lapse and surrenders rate
+/-10% $
3 $
(7) $
(215) $
51
Empire Life - Annual Report 2024
107
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
As at December 31, 2023
(in millions of Canadian dollars)
Change in
assumptions
Impact on shareholders'
net income (loss) and
shareholders' equity gross
of reinsurance
Impact on shareholders'
net income (loss) and
shareholders' equity net
of reinsurance
Impact on CSM gross of
reinsurance
Impact on ceded CSM
Mortality
+2% $
5 $
— $
(79) $
50
Morbidity
+5% $
(3) $
(2) $
(15) $
7
Longevity
+2% $
— $
— $
(6) $
—
Expenses
+5% $
1 $
1 $
(12) $
—
Lapse and surrenders rate
+/-10% $
5 $
2 $
(194) $
39
The computation of insurance contract liabilities and related reinsurance contracts held requires “probability weighted
current estimate” assumptions covering the remaining life of the policies. Assumptions in use are based on past
experience, current internal data, external market indices and benchmarks which reflect current observable market trends
and other published information. These assumptions are made for mortality, morbidity, longevity, lapse, expenses, inflation
and premium taxes. Due to the long-term risks and measurement uncertainties inherent in the life insurance business, a
risk adjustment for non-financial risk is calculated separately for each variable and included in insurance contract
liabilities. The effect of the risk adjustment for non-financial risk is to increase insurance contract liabilities over the
probability weighted current estimate assumptions.
Insurance contract liability assumptions are reviewed at least annually by the Company’s Appointed Actuary, and updated
as appropriate. Details related to the changes in assumptions are discussed with the Audit Committee of the Board. The
methods for arriving at the most material of these assumptions are outlined below.
Mortality assumptions
The Company carries out an annual mortality study. The valuation mortality assumptions are based on a combination of
Company and industry experience. An increase in the rate of mortality will lead to a larger number of claims (and claims
could occur sooner than anticipated), which for life insurance, will increase expenditures and reduce profits for the
shareholders. For non-participating insurance business, an increase in the probability weighted current estimate mortality
assumption would increase insurance contract benefits thereby decreasing the net CSM. For annuity business, lower
mortality (or higher longevity) is financially adverse so a decrease in the current estimate mortality assumption would
increase insurance contract benefits thereby decreasing the net CSM.
Policyholder behaviour (termination or lapse)
Policy termination (lapse) and surrender assumptions are based on a combination of the Company's own internal
termination studies and recent industry experience. Separate policy termination assumptions are used for permanent
cash-value business, for renewable term insurance, term insurance to age 100 and for universal life insurance. In setting
policy termination rates for renewable term insurance, it is assumed that extra lapses will occur at each renewal point and
that healthy policyholders are more likely to lapse at that time than those who have become uninsurable. Acquisition costs
may not be recovered fully if lapses in the early policy years exceed the expected lapse assumptions. An increase in
policy termination rates early in the life of the policy would tend to reduce profits for shareholders. An increase in policy
termination rates later in the life of the policy would tend to increase profits for shareholders if the product is lapse
supported (such as term insurance to age 100) but decrease shareholder profits for other types of policies. For non-
participating insurance and annuity business, an adverse change in the lapse assumption would result in an increase to
insurance contract benefits thereby decreasing the net CSM. For products where fewer terminations would be financially
adverse to the Company, the change is applied as a decrease to the lapse assumption. Alternatively, for products where
more terminations would be financially adverse to the Company, the change is applied as an increase to the lapse
assumption.
Empire Life - Annual Report 2024
108
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
Expenses
Insurance contract liabilities provide for the future expense of administering policies in-force, renewal commissions,
general expenses and premium taxes. The future expense assumption is derived from internal cost studies and includes
an assumption for inflation. An increase in the level of expenses would result in an increase in expenditure thereby
reducing profits for the shareholders.
For non-participating insurance business and annuity business, an increase in the maintenance expense assumption
would result in reducing the net CSM.
Morbidity
The Company carries out annual internal studies of its own morbidity experience where morbidity refers to both the rates
of accident or sickness and the rates of recovery from the accident or sickness. The valuation assumptions are based on
a combination of Company and industry experience.
For individual and group critical illness business, the incidence rates (or rates of accident or sickness) are the key
assumption related to morbidity. An increase in incidence rates would result in an increase in the number of claims which
increases expenditures and reduces shareholders’ profits. For group long-term disability business the termination rates (or
rates of recovery) are the key assumption related to morbidity. A decrease in termination rates would result in disability
claims persisting longer which increases expenditures.
For non-participating insurance business where morbidity is a significant assumption, an adverse change in the
assumption would result in an increase to policyholder benefits thereby reducing the net CSM.
Product design and pricing risk
The Company is subject to the risk of financial loss resulting from transacting insurance business where the costs and
liabilities assumed in respect of a product exceed the expectations reflected in the pricing of the product. This risk may be
due to an inadequate assessment of market needs, a poor estimate of the future experience of several factors, such as
mortality, morbidity, lapse, future returns on investments, expenses and taxes, as well as the introduction of new products
that could adversely impact the future behaviour of policyholders.
For certain types of contracts, all or part of this risk may be shared with or transferred to the policyholder through
dividends and experience rating refunds or through the fact that the Company can adjust the premiums or future benefits if
experience turns out to be different than expected. For other types of contracts, the Company assumes the entire risk and
thus must carry out a full valuation of the commitments in this regard. Empire Life may transfer some of this risk through a
reinsurance arrangement.
The Company manages product design and pricing risk through a variety of enterprise-wide programs and controls. The
key programs and controls are described as follows. The Company has established insurance contract liabilities in
accordance with standards set forth by the IASB and CIA Standards of Practice. Experience studies (both Company-
specific and industry level) are factored into ongoing valuation, renewal and new business processes so that insurance
contract liabilities, as well as product design and pricing, take into account emerging experience. The Company has
established an active capital management process that includes a Capital Management Policy and capital management
levels that exceed regulatory minimums. As prescribed by regulatory authorities, the Appointed Actuary conducts FCT and
reports annually to the Audit Committee on the Company’s financial condition, outlining the impact on capital levels should
future experience be adverse. The Company has a Product Design and Pricing Risk Management Policy governing all of
its major product lines. This policy, which is established by the Product Management Review Committee (PMRC) and
approved by the Risk and Capital Committee of the Board, defines the Company’s product design and pricing risk
management philosophy. The policy sets out principles for prudent product design and pricing, fair treatment of
customers, approval authorities, product concentration limits, and required product development monitoring processes
and controls.
Empire Life - Annual Report 2024
109
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
Underwriting and claims risk
The Company is subject to the risk of financial loss resulting from the selection and underwriting of risks to be insured and
from the adjudication and settlement of claims. Many of the Company’s individual insurance and group disability products
provide benefits over the policyholder’s lifetime. Actual claims experience may differ from the mortality and morbidity
assumptions used to calculate the related premiums. Catastrophic events such as earthquakes, acts of terrorism or a
pandemic in Canada could result in adverse claims experience.
In addition to the risk management controls described above under Product design and pricing risk, the Company also
manages underwriting and claims risk through its Underwriting and Liability Risk Management Policy which governs each
of its major product lines. This policy is established by the PMRC and approved by the Risk and Capital Committee of the
Board. It defines the Company’s underwriting and claims management philosophy and sets out principles for prudent
underwriting and claims management including, underwriting classification, claims requirements, fair treatment of
customers, approval authorities and limits, and ongoing risk monitoring. The Company uses reinsurance to mitigate
excessive exposure to adverse mortality and morbidity experience. The PMRC reviews and establishes retention limits for
its various product lines and the Risk and Capital Committee of the Board recommends changes to these retention limits
for approval by the Board.
Reinsurance held risk
The Company is subject to the risk of financial loss due to inadequate reinsurance coverage or a default of a reinsurer.
Amounts reinsured per life vary according to the type of protection and the product. The Company also maintains a
catastrophe reinsurance program, which provides protection in the event that multiple insured lives perish in a common
accident or catastrophic event. Although the Company relies on reinsurance to mitigate excessive exposure to adverse
mortality and morbidity experience, reinsurance does not release it from its primary commitments to its policyholders and
it is exposed to the credit risk associated with the amounts ceded to reinsurers. The availability and cost of reinsurance
are subject to prevailing reinsurance market conditions, both in terms of price and availability, which can also affect
earnings.
The Reinsurance Risk Management Policy establishes reinsurance objectives and limits and requires ongoing evaluation
of reinsurers for financial soundness. As reinsurance does not release a company from its primary commitments to its
policyholders, an ongoing oversight process is critical. The PMRC reports annually to the Risk and Capital Committee of
the Board on reinsurance activities. Most of Empire Life’s reinsurance is on an excess basis, meaning Empire retains
100% of the risk up to its retention level. Effective April 1, 2020, Empire Life updated its single life retention limit for new
business to $1,500 in face amount (previously $500). For some product categories, retention levels below this maximum
are applied. Reinsurance is used to limit losses, minimize exposure to significant risks and to provide capacity for growth.
As a result of the retention limit increase, recapture provisions of all eligible reinsurance treaties were exercised
commencing April 1, 2020. These activities result in an increase in product risk for Empire Life, which it deems acceptable.
The Company does not have any assumed reinsurance business.
Segregated fund guarantee risk
Segregated fund products issued by Empire Life contain minimum death, maturity, and withdrawal benefit guarantees.
Market price fluctuations impact the Company's estimated liability for those guarantees.
22.4. Credit risk
Credit risk is the possibility of loss from amounts either owed by financial counterparties, such as debtors, reinsurers and
other financial institutions, or in connection with issuers of securities held in an asset portfolio. The Company is subject to
credit risk which arises from debtors or counterparties who are unable to meet their obligations under debt or derivative
instruments. This credit risk is derived primarily from investments in bonds, debentures, preferred shares, cash and cash
equivalents, mortgages, loans and from reinsurers under reinsurance agreements.
Empire Life - Annual Report 2024
110
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
The Company manages this risk by applying its investment guidelines and reinsurance risk management policy
established by the Investment Committee and Risk and Capital Committee of the Board respectively. The investment
guidelines establish minimum credit ratings for issuers of bonds, debentures and preferred share investments, and
provide for concentration limits by issuer of such debt instruments. The investment guidelines also establish underwriting
requirements and limits for debt financing of the advisor company or managing general agent. Management and Board
Committees review credit quality relative to investment purchases and also monitor the credit quality of invested assets
over time. Management reports regularly to the Investment Committee of the Board on the credit risk to which the portfolio
is exposed. The Reinsurance Risk Management Policy (along with supporting material in the Product Design and Pricing
Risk Management Policy) establishes reinsurance objectives and limits and requires ongoing evaluation of reinsurers for
financial soundness.
Credit risk analysis includes the consideration of credit spreads. The Company is guided by two principles when
assessing investments subject to credit risk; first that there is a high likelihood of return of principal and second that there
is an acceptable return on investment. The Company looks to obtain a risk/reward balance that aligns with its objectives
and risk philosophy.
The Company has the following assets that are exposed to credit risk:
As at
December 31, 2024
December 31, 2023
Cash and cash equivalents
$
219,196 $
347,707
Short-term investments
840
4,957
Bonds
7,963,481
7,456,183
Preferred shares
623,791
519,359
Derivative assets
14,815
13,825
Mortgages
78,866
98,679
Loans
62,921
47,165
Accrued investment income
52,827
49,068
Trade accounts receivable
4,038
4,423
Total
$
9,020,775 $
8,541,366
In addition to the assets disclosed above, the Company is exposed to credit risk for loans on policies and insurance
receivables which are presented within insurance contract liabilities in the amount of $65,488 (2023 $63,770) and $39,171
(2023 $35,305) respectively, as well as reinsurance receivables which are presented within reinsurance contract liabilities
in the amount of $52,399 (2023 $30,966). Mortgages, loans on policies and loans are fully or partially secured.
Concentration of credit risk for financial instruments
Concentration of credit risk arises from exposures to a single debtor, a group of related debtors or groups of debtors that
have similar credit risk characteristics, such as groups of debtors in the same economic or geographic regions or in similar
industries. The following tables provide the carrying values of bonds and debentures by industry sector.
Bonds and debentures
The concentration of the Company’s bond portfolio by investment grade is as follows:
As at
December 31, 2024
December 31, 2023
Fair value
% of Fair value
Fair value
% of Fair value
AAA
$
362,395
5 % $
303,418
4 %
AA
3,101,397
39 %
1,967,382
26 %
A
2,120,634
26 %
3,048,351
41 %
BBB
2,334,989
29 %
2,081,353
28 %
BB (and lower ratings)
44,066
1 %
55,679
1 %
Total
$
7,963,481
100 % $
7,456,183
100 %
Empire Life - Annual Report 2024
111
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
Credit ratings are normally obtained from Standard & Poor's and DBRS Limited. In the event of a split rating, the lower
rating is used. Issues not rated by a recognized rating agency are rated internally by the Investment Department. The
internal rating assessment is documented referencing suitable comparable investments rated by recognized rating
agencies and/or methodologies used by recognized rating agencies.
Provincial bonds represent the largest concentration in the bond portfolio, as follows:
As at
December 31, 2024
December 31, 2023
Provincial bond holdings
$
3,396,453
$
3,148,856
Percentage of total bond holdings
42.7 %
42.2 %
The following table profiles the bond portfolio by contractual maturity, using the earliest contractual maturity date.
As at
December 31, 2024
December 31, 2023
Fair value
% of Fair value
Fair value
% of Fair value
1 year or less
$
187,530
2 % $
54,742
1 %
1 - 5 years
1,056,925
13 %
334,167
4 %
5 - 10 years
685,743
9 %
248,349
3 %
Over 10 years
6,033,283
76 %
6,818,925
92 %
Total
$
7,963,481
100 % $
7,456,183
100 %
The following table discloses the Company's holdings of fixed income securities in the 10 issuers (excluding the federal
government) to which the Company has the greatest exposure, as well as exposure to the largest single issuer of
corporate bonds.
As at
December 31, 2024
December 31, 2023
Holdings of fixed income securities(1) in the 10 issuers (excluding federal governments) to which the Company had the
greatest exposure
$
4,141,252 $
3,992,543
Percentage of total cash and investments
43.1 %
43.1 %
Exposure to the largest single issuer of corporate bonds
$
231,271 $
367,246
Percentage of total cash and investments
2.4 %
4.0 %
(1) Fixed income securities include bonds, debentures, preferred shares and short-term investments.
Derivative financial instruments by counterparty credit rating
Credit risk from derivative transactions is generated by the potential for the counterparty to default on its contractual
obligations when one or more transactions have a positive market value to the Company. Therefore, derivative-related
credit risk is represented by the positive fair value of the instrument and is normally a small fraction of the contract’s
notional amount.
The following table summarizes derivative financial instruments with a positive fair value by counterparty rating.
As at
December 31, 2024
December 31, 2023
Credit rating
AA
$
14,272 $
6,151
AA-
$
131 $
—
A+
$
305 $
—
BBB+
—
4,228
Total
14,708
10,379
Derivatives without counterparty credit risk
107
3,446
Total derivative assets
$
14,815 $
13,825
Empire Life - Annual Report 2024
112
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
Credit risk for reinsurance
The Company reinsures excess risks with Canadian reinsurance companies. The Company enters into reinsurance
agreements only with reinsurance companies that have an independent credit rating of A- or better at the inception of the
treaty. Subsequently, credit worthiness of reinsurers is monitored on an ongoing basis. At December 31, 2024, the
Company holds $82,222 (2023 $28,129) of reinsurance contract assets, of which 100% (2023 100%) are ceded to
reinsurers with an AM Best rating of A- or above. Exposure to credit risk of reinsurers is mitigated by $5,315 (2023 - $0)
fair value of collateral held as security as at December 31, 2024. Exposure to credit risk of reinsurers net of collateral held
is $76,907 (2023 $28,129).
Concentration risk for preferred shares
The Company’s preferred share investments are all issued by Canadian companies, with 0% (2023 1%) rated as P1 and
100% rated as P2 (2023 99%).
Concentration risk for mortgages
Mortgages in the Province of Ontario represent 100% (2023 100%) of the Company's total mortgage portfolio.
22.5. Liquidity risk
Liquidity risk is the risk that the Company will not be able to fund all cash outflow commitments or obligations as they fall
due or that, in order to fund commitments, an entity may have to sell assets at depressed prices resulting in losses at time
of sale. Cash outflows could be in the form of benefit payments to policyholders, expenses, asset purchases and interest
on debt. The majority of the Company’s obligations relate to its insurance contract liabilities, the duration of which varies
by product line and expectations relating to key policyholder actions or events (cash withdrawal, mortality, and morbidity).
The remaining obligations of the Company relate to the subordinated debt (refer to Note 11 Subordinated Debt) and the
Limited Recourse Capital Notes (refer to Note 15 Capital Stock), and to ongoing operating expenses as they fall due,
which are expected to settle in a very short period of time.
The Company maintains a liquidity policy requiring an assessment of the Company’s liquidity risk and specific procedures
so that liquidity needs are met in order to support all financial commitments and obligations as they become due.
Compliance with the policy is monitored by the Asset Management Committee and exposures and breaches are reported
to the Investment Committee of the Board. The Company's current liquidity positions as at December 31, 2024 and
December 31, 2023 is noted below. Based on the Company’s historical cash flows and current financial performance,
management believes that the cash flows from the Company’s operating activities will continue to provide sufficient
liquidity for the Company to satisfy policyholder commitments, debt service obligations and to pay other expenses.
Empire Life - Annual Report 2024
113
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
The following tables show details of the expected maturity profile of the Company's undiscounted obligations with respect
to its financial liabilities and estimated cash flows of insurance contract liabilities. Subordinated debt that are not due at a
single maturity date are included in the tables in the year of final maturity. Actual maturities could differ from contractual
maturities because of the borrower’s right to call or extend prepay obligations, with or without prepayment penalties.
Insurance contract liability cash flows include estimates related to the timing and payment of death and disability claims,
policy maturities, annuity payments, policyholder dividends, amounts on deposit, commission and premium taxes offset by
contractual future premiums and fees on in-force business. These estimated cash flows are based on the probability
weighted current estimate assumptions used in the determination of insurance contract liabilities. Due to the use of
assumptions, actual cash flows will differ from these estimates. Cash flows from Reinsurance contracts held liabilities are
presented net of cash flows from Reinsurance contracts held assets. Liability for remaining coverage for groups measured
under the PAA, and Liabilities for account of segregated fund holders have been excluded from this analysis.
As at
December 31, 2024
Less than 1
year
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
Over 5
years
Total
Insurance contract liabilities, excluding segregated fund
account balances
$
(200,201) $
(188,311) $
(132,910) $
(87,647) $
(43,668) $ 38,346,985 $ 37,694,248
Net reinsurance contracts held liabilities
(10,638)
11,901
15,549
18,325
19,790
1,199,975
1,254,902
Total
$
(210,839) $
(176,410) $
(117,361) $
(69,322) $
(23,878) $ 39,546,960 $ 38,949,150
As at
December 31, 2023
Less than 1
year
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
Over 5 years
Total
Insurance contract liabilities, excluding segregated fund
account balances(1)
$
(227,180) $
(209,684) $
(155,548) $
(99,928) $
(54,561) $ 31,057,620 $ 30,310,719
Net reinsurance contracts held liabilities(1)
(1,826)
17,475
21,086
22,289
23,793
934,214
1,017,031
Total
$
(229,006) $
(192,209) $
(134,462) $
(77,639) $
(30,768) $ 31,991,834 $ 31,327,750
(1) Amounts have been revised from those previously presented.
The following tables summarize the contractual maturities of financial liabilities.
As at
December 31, 2024
Less than 1
year
1 - 5 years
5 - 10 years
Over 10 years
Total
Investment contract liabilities
$
166,580 $
443,379 $
37,311 $
8,982 $
656,252
Subordinated debt
15,054
73,708
447,202
—
535,964
Preferred shares
6,200
112,689
—
—
118,889
Limited recourse capital notes
7,250
46,919 $
215,626
—
269,795
Accounts payable and other liabilities
125,813
—
—
—
125,813
Total
$
320,897 $
676,695 $
700,139 $
8,982 $
1,706,713
As at
December 31, 2023
Less than 1 year
1 - 5 years
5 - 10 years
Over 10 years
Total
Investment contract liabilities
$
181,283 $
335,277 $
31,557 $
8,932 $
557,049
Subordinated debt
17,188
274,937
231,405
—
523,530
Preferred shares
6,187
120,108
—
—
126,295
Limited recourse capital notes
7,250
43,449
234,386
—
285,085
Accounts payable and other liabilities
133,661
—
—
—
133,661
Total
$
345,569 $
773,771 $
497,348 $
8,932 $
1,625,620
The Company maintains a portion of its investments in cash, cash equivalents and short-term investments to meet its
short-term funding requirements. As at December 31, 2024, 2.3% (2023 3.7%) of cash and investments were held in
these shorter duration investments.
Empire Life - Annual Report 2024
114
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars except for per share amounts, shares authorized and outstanding and where otherwise stated)
22.6. Liquidity position
The Company maintains a high level of liquid assets so that cash demands can be readily met. The Company’s liquidity
position is as follows:
As at
December 31, 2024
December 31, 2023
Assets
Cash and cash equivalents & Short-term investments
$
220,036 $
352,664
Canadian federal and provincial bonds
3,652,097
3,345,471
Other readily marketable bonds and stocks
5,576,859
5,406,848
Total liquid assets
9,448,992
9,104,983
Liabilities
Demand liabilities(1) with fixed values
1,200,670
1,038,114
Demand liabilities with market value adjustments
1,508,636
1,376,074
Total liquidity needs
$
2,709,306 $
2,414,188
(1) Demand liabilities consist of CSVs plus funds on deposit less policy loans.
Empire Life - Annual Report 2024
115
Glossary of Terms (unaudited)
Accumulated Other Comprehensive Income (AOCI)
A separate component of shareholders’ equity and policyholders’ account which includes remeasurement of post-
employment benefit liabilities. These items have been recognized in comprehensive income but excluded from net
income.
Active Market
An active market is a market in which the items traded are homogeneous, willing buyers and sellers can normally be
found at any time and prices are available to the public.
Canadian Institute of Actuaries (CIA)
The CIA is the qualifying and governing body of the actuarial profession in Canada. The CIA develops and upholds
rigorous standards, shares its risk management expertise, and advances actuarial science to improve lives in Canada and
around the world. Its more than 6,000 members apply their knowledge of math, statistics, data analytics, and business in
providing services and advice of the highest quality to help Canadian people and organizations face the future with
confidence.
Canadian Life and Health Insurance Association (CLHIA)
The Canadian Life and Health Insurance Association (CLHIA) is an organization representing life insurance and health
insurance providers in Canada. The association develops guidelines, voluntarily and proactively, to respond to emerging
issues and to ensure consumer interests are protected.
Chartered Professional Accountants of Canada (CPA Canada)
Canada's not-for-profit association for Chartered Professional Accountants (CPA) provides information and guidance to its
members, students and capital markets. Working in collaboration with its provincial member organizations, CPA Canada
supports the setting of accounting, auditing and assurance standards for business, not-for-profit organizations and
government, and develops and delivers education programs.
Contractual Service Margin (CSM)
A component of the carrying amount of the asset or liability for a group of insurance contracts representing the unearned
profit the entity will recognize as it provides insurance contract services under the insurance contracts in the group.
Effective Interest Method
The effective interest method is a method of calculating the amortized cost of a financial asset or a financial liability and of
allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that
exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when
appropriate, a shorter period to the net carrying amount of the financial asset or financial liability.
Expected Credit Loss (ECL)
An expected loss amount as a result of credit deterioration of the party that has been issued the credit.
Fair Value Through Profit or Loss (FVTPL)
Invested assets are classified as financial instruments at FVTPL if they are held for trading, or if they are designated by
management under the fair value option.
Fulfilment Cash Flows (FCFs)
An explicit, unbiased and probability-weighted estimate (ie expected value) of the present value of the future cash
outflows minus the present value of the future cash inflows that will arise as the entity fulfils insurance contracts, including
a risk adjustment for non-financial risk.
Empire Life - Annual Report 2024
116
Glossary of Terms (unaudited)
International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB)
(IFRS Accounting Standards)
Refers to the international accounting standards that were adopted in Canada, effective January 1, 2011; these are now
Canadian Generally Accepted Accounting Principles (CGAAP) for publicly accountable enterprises.
Life Insurance Capital Adequacy Test (LICAT)
The LICAT measures the capital adequacy of an insurer and is one of several indicators used by OSFI to assess an
insurer's financial condition. The LICAT Ratio is the ratio of eligible capital to the base solvency buffer, each as calculated
under OSFI's published guidelines.
Other Comprehensive Income (OCI), Other Comprehensive Loss (OCL)
Remeasurements of post-employment benefit liabilities are recorded as OCI or OCL. These remeasurements will not be
reclassified to net income and will remain in AOCI.
Office of the Superintendent of Financial Institutions Canada (OSFI)
The mandate of OSFI is to regulate and supervise federally regulated financial institutions and pension plans in Canada to
contribute to public confidence in the financial system.
Participating Policies
The participating account includes all policies issued by the Company that entitle its policyholders to participate in the
profits of the participating account. The Company has discretion as to the amount and timing of dividend payments which
take into consideration the continuing solvency of the participating account.
Return on Common Shareholders' Equity (ROE)
A profitability measure that presents the net income available to common shareholders as a percentage of the average
capital deployed to earn the income.
Risk Adjustment
The compensation an entity requires for bearing the uncertainty about the amount and timing of the cash flows that arises
from non-financial risk as the entity fulfills insurance contracts.
Empire Life - Annual Report 2024
117
Participating Account Management Policy (unaudited)
Purpose
The Participating Account Management Policy sets out the management objectives for oversight of the participating
account of The Empire Life Insurance Company (“Empire Life” or the “Company”).
Scope
This policy applies to all policies issued in the participating account of Empire Life that entitle its policyholder to participate
in the profits of the participating account. Most policies are credited with dividends annually, while a few older plans
receive the dividends every five years as per contractual provisions.
Policy
Description of the participating account and its policies
Empire Life maintains an account in respect of participating policies (“participating account”), separate from those
maintained in respect of other policies, in the form and manner determined by the Office of the Superintendent of
Financial Institutions under section 456 of the Insurance Companies Act. The participating account includes all policies
issued by Empire Life that entitle its policyholders to participate in the profits of the participating account.
Experience for the participating account is measured by comparing policy factors and experience factors. Policy factors
are elements that reflect the assumptions against which experience is to be measured, while experience factors are
elements that reflect actual experience and are consistent with the underlying experience of the participating account.
These factors encompass a variety of elements, including investment income, mortality, expenses, and policyholder
behaviour.
Empire Life does not maintain sub-accounts within the participating account for life, disability and annuity plans, other
funds, or blocks of business acquired from other companies. Empire Life does not have any closed blocks of participating
business established as part of the demutualization of a mutual company into a shareholder company.
Although the participating account is open to new business, many dividend classes within the participating account are
closed to new business. Being in a dividend class that is closed to new business has no material implications to
policyholders.
Investment policy
The general fund investments in the participating account are subject to limits established by the Insurance Companies
Act and to investment guidelines established by the Investment Committee of Empire Life’s Board of Directors (the
“Board”). The investment guidelines are designed to limit overall investment risk by defining investment objectives, eligible
investments, diversification criteria, exposure, concentration and asset quality limits for eligible investments. The objective
is to maximize tax-adjusted investment yields while managing the default, liquidity and reinvestment risks at acceptable
and measurable low levels.
The investment guidelines allow investments in the following asset classes for the participating fund: short-term securities,
bonds (including private debt and limited recourse capital notes), preferred shares, mortgages, equities, real estate,
commercial loans, and alternative assets (including private equity, infrastructure, and high yield mortgages). Various
criteria apply to each asset class with respect to diversification, minimum credit quality, and liquidity. The investment
guidelines permit the use of derivatives in the participating account to hedge certain exposures (e.g., foreign exchange
risk, interest rate risk, etc.) or to create effective exposures to certain markets.
Within the participating account, Empire Life has established two asset segments to nominally match the investments to
the specific type of liabilities or surplus as follows: Protection Par and Policyholders’ Surplus. Each asset segment is
assigned specific assets in an amount approximately equal to its total liabilities or surplus.
Empire Life - Annual Report 2024
118
Participating Account Management Policy (unaudited)
The Investment Committee receives monthly reporting on general fund asset mix and performance and investment
transactions for all funds by asset segment. In addition, on at least a quarterly basis, management and the Company’s
investment managers report to the Investment Committee, and through the Investment Committee to the Board of
Directors, on portfolio content, asset mix, the Company’s matched position, the performance of general and segregated
funds, and compliance with the investment guidelines. The investment guidelines are reviewed at least annually by the
Board.
Investment income allocation
Investment income is recorded directly to each asset segment. A portion of investment income is allocated to or from the
Shareholders’ Capital and Surplus segment from or to the participating account’s asset segments in proportion to the
deficiency or excess of funds over assets of each segment.
The Company has minimal reliance on income generated by assets that support both the participating and non-
participating accounts, as these assets are limited to non-financial assets which make up a small portion of the
Company’s balance sheet.
The investment income allocation methodology can be changed at the discretion of the Board. This could occur if the
Company’s asset segmentation approach were fundamentally changed.
Expense allocation
General expenses are allocated to the participating account using cost centre methods. Expenses associated directly with
the participating account are so charged. Expenses arising from or varying directly with various functional activities are
charged to the participating account in proportion to statistics appropriate to each cost centre. Expenses incurred by
overhead cost centres are charged to the participating account in proportion to expenses directly charged.
Investment expenses are allocated to the participating account in proportion to the Company’s total funds.
Premium taxes are allocated in proportion to taxable premiums. Other taxes, licenses, and fees are allocated to lines of
business using cost centre methods.
The Company could elect to charge expenses to the participating account at an amount other than the allocated cost in
circumstances where doing so would improve fairness to the participating policyholders.
Income tax allocation
Income taxes are allocated to the participating account in proportion to total taxable income for the Company. Deferred tax
assets and liabilities are treated consistently between participating and non-participating accounts.
Surplus management
The Company manages the level of surplus in the participating account taking into consideration the continuing solvency
of the participating account, the participating account’s ability to fulfill its contractual obligations and the extent to which
existing participating business is financing new participating business. The participating account surplus is funded by
contributions from participating account income.
Transfers to shareholder accounts
Empire Life intends to transfer the full permitted percentage of distributable participating profits to the shareholder
accounts as allowed by section 461 of the Insurance Companies Act.
Empire Life - Annual Report 2024
119
Participating Account Management Policy (unaudited)
Roles and Responsibilities
Board of Directors
The Company’s Board of Directors is responsible for approving the Participating Account Management Policy. The Board
should be satisfied that the policy is being carried out in an approved manner.
CEO and Executive Leadership Team
The Board has delegated primary responsibility and accountability for the dividend policy to the Company’s CEO. The
CEO shares this responsibility and accountability with the Executive Leadership Team (ELT). The CEO and ELT carry out
their responsibilities by delegating responsibility to members of their management team. Members of the ELT are
responsible for establishing the appropriate management framework to carry out the objectives of this policy within their
business area.
Appointed Actuary
Annually, the Board will consider the Appointed Actuary’s opinion on the continuing fairness of this policy to participating
policyholders.
Process to Approve (and Frequency)
This policy is reviewed annually by the Vice President & Product Actuary. All non-material amendments must be approved
by the Product Management Review Committee. Material amendments must be approved by the Product Management
Review Committee and the Board. The principal factors that would be expected to prompt changes to the policy include
changes in legislation, regulation of participating accounts, accepted actuarial practice, capital requirements, taxation and
accounting rules or fundamental changes to the circumstances of the Company.
This policy will also be reviewed if the Company decides to stop accepting new business in the participating account.
Monitoring, Controls and Procedures
The Vice President & Product Actuary oversees the operation of this policy. Management is responsible for ensuring
procedures are in place to support compliance with this policy and for periodically reviewing these procedures for ongoing
compliance with this policy. This policy is audited by Audit Services on a periodic basis at the discretion of Audit Services
and in accordance with its audit plan.
Empire Life - Annual Report 2024
120
Participating Policyholder Dividends Policy
Purpose
The Participating Policyholder Dividends Policy (the “dividend policy”) sets out the process for determining,
recommending, and declaring dividends for policies issued in the participating account of The Empire Life Insurance
Company (“Empire Life” or the “Company”).
Scope
This dividend policy applies to each policy issued in the participating account of Empire Life that entitles its policyholder to
participate in the profits of the participating account. Most policies are credited with dividends annually, while a few older
plans receive the dividends every five years as per contractual provisions.
Policy
Principles used to determine the policy respecting participating policyholder dividends
The Company has determined this policy using the following principles: fairness to policyholders, consistency with
policyholder reasonable expectations, and compliance with applicable laws, regulations, actuarial standards of practice,
and contractual obligations.
Dividends are declared at the discretion of the Board
The aggregate amount of dividend and allocation of the dividend to the different classes of participating policies is
declared annually at the discretion of the Board of Directors (the “Board”) of Empire Life under section 464(1) of the
Insurance Companies Act. Before declaring the aggregate amount of dividend, the Board will consider Company
management’s recommendations for policyholder dividends and the Appointed Actuary’s opinion on the conformity of
these recommendations to this policy, their fairness to participating policyholders, and that the recommendations were
prepared in compliance with the Standards of Practice of the Canadian Institute of Actuaries. Company management’s
recommendations and the Appointed Actuary’s opinions shall be prepared in compliance with applicable legislative and
regulatory requirements, and generally accepted actuarial practice with such changes as determined by the Office of the
Superintendent of Financial Institutions. Generally, the actual distribution of dividends will be aligned with these
recommendations, but if the actual distribution of dividends differs materially from these recommendations, this shall be
disclosed and explained. Furthermore, if the Appointed Actuary were to make a recommendation for policyholder
dividends, and the actual distribution of dividends differs materially from that recommendation, then this would be
disclosed and explained.
Principal factors that affect the aggregate amount of dividends
Policyholders participate in the experience of the Company through policyholder dividends, which are based on the results
of the participating account to which their policy belongs.
The aggregate amount of dividends will reflect operating income on all participating life, annuity and disability coverages,
dividends on deposit, participating paid-up additions and participating term additions, as well as income attributable to
surplus in the participating account. The aggregate amount of dividends will also be influenced by considerations such as,
solvency of the participating account, its ability to fulfill all contractual obligations, the extent to which surplus in
participating account is financing new business, changes in legislation, regulation of the participating account, taxation,
accounting rules or fundamental changes in the circumstances of the Company.
Empire Life - Annual Report 2024
121
Participating Policyholder Dividends Policy
Principal sources of income
The principal sources of income considered for determining the aggregate amount of dividends are investment income,
asset defaults, mortality, lapses, expenses and taxes. Policyholder dividends are affected by the differences between
actual experience and assumed levels of experience for these factors. The actual experience of the participating account
will be reviewed annually by Company management. The sources of income may be adjusted to smooth fluctuations in
experience and provide for transitions during periods of major change over a period not to exceed five years for the
purpose of avoiding undue yearly fluctuations in the dividend scales. The Company does not apply smoothing
differently by dividend class. While an internal guideline to govern the practices of dividend smoothing has not been
established, the Company relies on established practice that is guided by fairness to policyholders and policyholder
reasonable expectations, and is compliant with applicable laws, regulations, and standards of practice. The experience
factors to determine policyholder dividends can be changed post-issue. The objective of such changes to the experience
factors would be to improve the accuracy and equity of the experience measurement methodology. Changes to the
experience factors would be made in accordance with the contractual terms of the policy, and do not contravene any laws,
regulations, standards of practice, or other restrictions.
Participating policyholders benefit from the ongoing strength of the participating account surplus, which has been funded
by contributions from past and current policyholders. Contributions from participating account earnings to participating
account surplus are employed by the Company to ensure the continuing solvency of the participating account, to fulfill its
contractual obligations, and to finance new business. Contributions to surplus made over the lifetime of a policy remain in
the participating account surplus after the policy terminates. Further detail on the management of the participating account
surplus is included in the Participating Account Management Policy.
Since actual experience cannot be known in advance, the aggregate amount of dividends and allocation of the dividends
cannot be guaranteed. As a result, dividends will increase or decrease depending on actual experience.
Dividend allocation
Policyholders participate in this distribution through the setting of dividend scales, which allocate the aggregate amount of
dividends among different dividend classes. The Company establishes dividend classes for participating policyholders
based on the original pricing assumptions used when setting the guaranteed values provided by the policies. The
Company uses a combination of factor-based and pricing methods when setting the dividend scale to allocate the
aggregate amount of dividends among different dividend classes. The basic concept of this method is to allocate the
aggregate amounts of dividends among dividend classes in the same proportion as the policies are considered to have
contributed to the aggregate amount of dividends over the long term. The fundamental objective in the allocation of
dividends is the maintenance of reasonable equity between dividend classes and between generations of policyholders,
taking into account practical considerations and limits.
Company management will review the underlying experience, assumptions and procedures for participating dividend
scales annually. Material changes in actual experience will be passed through to participating policyholders within two
years of the experience change to the extent that they are not anticipated in the current dividend scale, any additional
reserves or other similar experience leveling mechanisms. Company management will prepare a written report which
describes the underlying experience, assumptions and procedures for the proposed dividend scale recommendations.
The dividend scales may also be adjusted to reflect specific policyholder behaviour, such as experience for lapses or for
policy loans taken at guaranteed rates.
For certain blocks of policies, the policyholder dividend scale may be determined using methods which are designed to
approximate the contribution to income of those blocks.
Termination dividends are not payable under any participating policies issued by Empire Life.
Empire Life - Annual Report 2024
122
Participating Policyholder Dividends Policy
Roles and Responsibilities
Board of Directors
The Company’s Board of Directors is responsible for approving the dividend policy. The Board should be satisfied that the
policy is being carried out in an approved manner.
CEO and Executive Leadership Team
The Board has delegated primary responsibility and accountability for the dividend policy to the Company’s CEO. The
CEO shares this responsibility and accountability with the Executive Leadership Team (ELT). The CEO and ELT carry out
their responsibilities by delegating responsibility to members of their management team. Members of the ELT are
responsible for establishing the appropriate management framework to carry out the objectives of this policy within their
business area.
Appointed Actuary
Annually and each time a policy amendment is recommended, the Board will consider the Appointed Actuary’s opinion on
the continuing fairness of this policy to participating policyholders.
Process to Approve (and Frequency)
This policy is reviewed annually by the Vice President & Product Actuary. All amendments must be approved by the
Product Management Review Committee and the Board. The principal factors that would be expected to prompt changes
to the policy include changes in legislation, regulation of participating account, accepted actuarial practice, capital
requirements, taxation and accounting rules or fundamental changes to the circumstances of the Company.
This policy will also be reviewed if the Company decides to stop accepting new business in the participating account.
Monitoring, Controls and Procedures
The Vice President & Product Actuary oversees the operation of this policy. Management is responsible for ensuring
procedures are in place to support compliance with this policy and for periodically reviewing these procedures for ongoing
compliance with this policy. This policy is audited by Audit Services on a periodic basis at the discretion of Audit Services
and in accordance with its audit plan.
Empire Life - Annual Report 2024
123
Participating Account Financial Disclosure
As at December 31, 2024
Current year
Historical average annual rate
5 years
10 years
20 years
Dividend scale interest rate(1)
6.25 %
6.05 %
6.24 %
6.56 %
Investment rate of return - assets supporting participating account insurance
contracts and reinsurance contracts held(2)
8.89 %
3.37 %
4.05 %
5.15 %
Investment rate of return - participating account surplus assets(2)
7.06 %
1.95 %
3.54 %
3.93 %
(1)The 20 year average dividend scale interest rate reflects estimated dividend scale interest rates for 2010 and earlier.
(2)These investment rates of return represent market yields without smoothing and are net of investment expenses. The 20 year historical averages reflect estimated
returns for 2006 and earlier.
For the year ended
December 31, 2024
December 31, 2023
Participating account surplus at beginning of year
$
46,157
$
24,055
Net income (loss) (before amounts transferred to shareholders)
10,241
21,155
Amounts transferred to shareholders per S.462(a) of the ICA (included in net income)
(3,253)
(3,014)
Adjustments to previous amounts transferred to shareholders
—
3,961
Net income (loss)
6,988
22,102
Participating account surplus at end of year
$
53,145
$
46,157
Policyholder dividends (excluding experience rating refunds)
$
44,657
$
39,800
Section 462 transfer as a % of Distributable Profits
6.79 %
7.04 %
Approximately 30% of policyholder dividends are based on investment experience while the remaining 70% of
policyholder dividends are based on other factors. Investment returns from the participating account surplus are
considered in the determination of dividends.
The following table sets out the target and actual composition of the underlying assets supporting the Company's
participating account at the reporting date.
As at December 31, 2024
Target
Actual
Underlying assets supporting participating account
Cash and cash equivalents
1.0 %
4.7 %
Bonds
65.0 %
62.9 %
Preferred shares
9.5 %
10.8 %
Common shares
22.5 %
16.6 %
Derivative assets
— %
— %
Mortgages
2.0 %
1.0 %
Other
— %
4.0 %
Total underlying assets supporting participating account
100.0 %
100.0 %
The Participating Account Management Policy and Participating Policyholder Dividends Policy are available upon request.
Empire Life - Annual Report 2024
124
Corporate Governance over Risk Management
The Empire Life Insurance Company (the “Company”) is a stock company that has both shareholders and participating
policyholders.
Pursuant to the Insurance Companies Act (Canada) (the “Act”) each holder of one or more participating policies is entitled
to one vote in the election of policyholders’ directors, and each shareholder is entitled to one vote per share held in the
election of shareholders’ directors. At least one-third of directors are elected as policyholder directors and the balance are
elected as shareholder directors. The Company is governed by the Act, which contains provisions concerning corporate
governance. The Company’s governance system is supported by internal audit, internal risk management, corporate
compliance, external audit by an independent chartered professional accountants firm, and examination by the Office of
the Superintendent of Financial Institutions Canada (“OSFI”).
Management is responsible for identifying risks and determining their impact upon the Company. Management is also
responsible for establishing appropriate policies, procedures, and controls to mitigate risks. The Company has an
executive committee, which reports to the Board of Directors and/or its Committees and an internal risk management
department, led by the Chief Risk Officer, which supports enterprise risk management activities across the Company. An
internal audit function is responsible for assessing the adequacy and effectiveness of the Company's processes for
controlling its activities and managing its risks. The results of internal audit’s reviews are reported to management and to
the Audit Committee of the Board of Directors regularly throughout the year.
Management is supervised in the completion of these responsibilities by the Board of Directors and its Committees.
Senior management of the Company reports regularly to the Board on its risk management policies and procedures.
The Board of Directors has plenary power. The Board’s responsibility is to oversee the conduct of the business and affairs
of the Company including oversight and monitoring of the Company’s risk management. The Board discharges these
responsibilities directly and through delegation to Board Committees and management. The Board met eight times in
2024 and is scheduled to meet at least six times in 2025.
The risk management functions overseen by the Board include those relating to investment risk, including market risk
(including equity risk, interest rate risk, and foreign exchange rate risk), liquidity risk, credit risk (including counterparty
risk), and hedging risk; product risk, including product design and pricing risk, underwriting and claims risk, and
reinsurance risk; operational risk, including legal and regulatory compliance risk, model risk, human resources risk, third-
party risk, technology and cyber risk, business continuity risk, pension risk, and risk with respect to risk management
policies; business and strategic risk, including environmental and social risk, risk with respect to credit and financial
strength, capital adequacy risk, risk with respect to competition, risk with respect to distribution channels, risk with respect
to changes to applicable income tax legislation, risk with respect to brand, risk with respect to intellectual property, and
risk with respect to significant ownership of common shares; risk relating to securities of Empire Life, including risk with
respect to market value, and risk with respect to regulatory constraints. Please see the section titled “Risk Factors” in the
Company’s Annual Information Form available at www.sedarplus.ca for more details on these risks. Primary responsibility
for oversight of some of these risks is delegated to six standing Committees of the Board, whose roles and responsibilities
are specifically defined. Those not delegated to a standing Committee remain with the Board. The following is a brief
summary of some of the key responsibilities of the six standing Committees.
The Audit Committee has statutory responsibility under the Act to oversee, on behalf of the Board, the Company’s
financial reporting, accounting and financial reporting systems and internal controls. The Committee also oversees work
related to stress testing.
The Conduct Review Committee is responsible for oversight of procedures established to identify material related party
transactions pursuant to the Act. The Committee is also responsible for oversight of certain corporate policies and
procedures with respect to the Company’s Code of Business Conduct, conflicts of interest, personal trading, confidentiality
of information, consumer complaints, privacy, regulatory compliance and fair treatment of customers (FTC). The
Committee is supported by the Risk and Capital Committee for FTC risks related to product development, underwriting
and claims.
Empire Life - Annual Report 2024
125
Corporate Governance over Risk Management
The Human Resources Committee is responsible for reviewing and monitoring the Company’s human resources
practices, including employee and executive compensation, workforce and succession planning, employee development,
diversity, equity and inclusion programs, health and wellness, and pension and benefit plans.
The Investment Committee assists the Board in monitoring the Company’s investment and lending policies, standards and
procedures and in monitoring the Company’s investment activities and portfolios. Some of the activities of the Investment
Committee are prescribed by the Company’s Investment Guidelines, which reflect the requirements of the Act. The
Committee also monitors the Company’s asset/liability management activities.
The IT Oversight Committee assists the Board with oversight of technology and information security related risks, as well
as management efforts to mitigate those risks. As part of its responsibilities, the IT Oversight Committee assesses the
effectiveness of the Company's IT strategy in supporting the Company's business objectives and strategic direction,
including reviewing strategic information technology-related project, initiatives and technology architecture.
The Risk and Capital Committee is responsible for oversight of the Company’s risk and capital management activities.
The Committee assists the Board in its oversight role with respect to the management of the Company’s enterprise risk
management framework and risk appetite framework; the identification, review and assessment of the Company’s
principal risks; the review and assessment of the Company’s risk management strategies; and the deployment and use of
capital. The Committee also oversees activities related to product development, underwriting and claims, third party,
models, and business continuity and operational resilience.
.
Empire Life - Annual Report 2024
126
Corporate Information
Corporate Head Office
259 King Street East
Kingston, Ontario
Canada K7L 3A8
1 877 548-1881
info@empire.ca
www.empire.ca
The Empire Life Insurance Company is a member of Assuris. Assuris is the not-for-profit
organization that protects Canadian policyholders in the unlikely event that their life and health
insurance company fails.
Details about Assuris’ protection are available at www.assuris.ca.
RETAIL SALES OFFICES
ONTARIO
Burlington Retail Sales Office
108-1100 Burloak Drive
Burlington, Ontario L7L 6B2
905 335-6558
1 888 548-4729
Toronto Retail Sales Office
200 -36 York Mills Road
Toronto, Ontario M2P 2E9
416 494-0900
1 888 548-4729
QUEBEC
Montréal Retail Sales Office
1600-600 de Maisonneuve Boulevard W.
Montréal, Quebec H3A 3J2
514 842-9151
1 800 371-9151
Québec Retail Sales Office
100-1220 Lebourgneuf Boulevard
Québec, Quebec G2K 2G4
418 628-1220
1 888 816-1220
WESTERN CANADA
Vancouver Retail Sales Office
707-1177 West Hastings Street
Vancouver, British Columbia, V6E 2K3
604 232-5557
1 888 627-3591
GROUP SALES OFFICES
ONTARIO
Burlington Group Sales Office
108-1100 Burloak Drive
Burlington, Ontario L7L 6B2
905 335-6558
1 800 663-9984
Toronto Group Sales Office
200-36 York Mills Road
Toronto, Ontario M2P 2E9
416 494-6834
1 800 361-7980
Empire Life - Annual Report 2024
127
QUEBEC
Montréal Group Sales Office
1600-600 boul. de Maisonneuve
Montréal, Quebec H3A 3J2
514 842-0003
1 800 561-3738
WESTERN CANADA
Vancouver Group Sales Office
707-1177 West Hastings Street
Vancouver, British Columbia, V6E 2K3
604 232-5558
1 888 547-0628
Board of Directors
SHAREHOLDERS' DIRECTORS
Scott F. Ewert 1, 4, 6
Vice President and Chief Financial Officer
E-L Financial Corporation Limited
Edward M. Iacobucci 1, 2, 3, 5
Professor of Law
University of Toronto
Duncan N.R. Jackman 4, 6
Chair of the Board
The Empire Life Insurance Company
Peter J. Levitt 1, 4, 6
Corporate Director
Clive P. Rowe 4, 6
Corporate Director
Patricia M. Volker 1, 2, 3, 6
Corporate Director
Empire Life - Annual Report 2024
128
POLICYHOLDERS' DIRECTORS
Stephanie A. Bowman 3, 4, 5, 6
Corporate Director
Mark J. Fuller 2, 3, 5, 6
Special Advisor of Ontario Pension Board
Mark Sylvia
President and Chief Executive Officer
The Empire Life Insurance Company
Jacques Tremblay 3, 5, 6
Partner
Oliver Wyman Actuarial Consulting
1 Member of Audit Committee
2 Member of Conduct Review Committee
3 Member of Human Resources Committee
4 Member of Investment Committee
5 Member of IT Oversight Committee
6 Member of Risk and Capital Committee
HONORARY CHAIR
The Honourable Henry N.R. Jackman
Honorary Chair
The Empire Life Insurance Company
HONORARY DIRECTOR
John F. Brierley
Corporate Management
Mark Sylvia
President and Chief Executive Officer
Richard Carty
Senior Vice-President, Human Resources
Paul Holba
Senior Vice-President and Chief Investment Officer
Erik Kalin
Senior Vice-President, Operations, Retail and Group Solutions
Steve Pong
Senior Vice-President and Chief Operating Officer, Insurance and Investments
Mark Rogers
Senior Vice-President, Corporate Development
Rebecca Rycroft
Senior Vice-President and Chief Financial Officer
Kathy Thompson
Senior Vice-President and Chief Risk Officer
Chris Volk
Senior Vice-President and Chief Technology Officer
Empire Life - Annual Report 2024
129
EMPIRE LIFE ANNUAL REPORT 2024
The Empire Life Insurance Company (Empire Life) is a proud Canadian company that has been in business
since 1923. We offer individual and group life and health insurance, investment and retirement products.
Our mission is to provide expertise and intelligent solutions to help Canadians navigate life with confidence.
Follow us on social media @EmpireLife or visit empire.ca for more information, including current ratings and
financial results.
Transfer Agent and Registrar
TSX Trust Company
301-100 Adelaide Street West
Toronto, Ontario M5H 4H1
Phone 416 682-3860
Toll Free 800 387-0825
www.tsxtrust.com
Reporting Procedure for Accounting and Auditing Matters
If you have a complaint regarding accounting, internal controls or auditing matters or a concern regarding
questionable accounting or auditing matters, you should submit your written complaint or concern to:
Mr. Peter Levitt
The Empire Life Insurance Company
259 King Street East
Kingston, ON, K7L 3A8
Email: peter@levittadvisory.ca
Phone: 647 236-1064
You may submit your complaint or concern anonymously. Your submission will be kept confidential and will
be treated in accordance with the Company’s policy for reporting accounting and auditing matters.
® Registered trademark of The Empire Life Insurance Company. ™ Trademark of The Empire Life Insurance Company.
Policies are issued by The Empire Life Insurance Company.
Navigate life with confidence – Insurance & Investments
empire.ca info@empire.ca 1 877 548-1881
A-0004-EN-03/25