Issue link: http://clhia.uberflip.com/i/563156
28 Segregated funds Since 1961, life insurers have been permitted to establish segregated funds on behalf of their policyholders. The assets in each fund are managed separately (i.e., segregated) from the general fund and other assets. Segregated fund contracts provide consumers with the growth potential of investment funds combined with unique guarantee features that provide downside risk protection. Historically, common stocks have constituted the largest asset category. However, since 1999, investments in mutual funds have surpassed direct stock holdings and are now in top place with more than two- thirds of total segregated fund assets. Segregated funds are used for the investment of contributions to group pension plans and to a wide range of variable annuity contracts for individual policyholders. Under variable annuity contracts, the benefits are not fixed but vary with the market value of the assets in the fund. However, individual variable contracts guarantee to return, on death of the policyholder or maturity of the contract, at least 75 per cent of premiums that have been paid. By the end of 2014, segregated fund assets of life insurers and fraternals in Canada totalled $272.8 billion, up 10.5 per cent over the previous year's level and more than double the level of 10 years ago. Over the past decade, segregated fund assets for group annuity products have been slowly gaining ground to account Sources: OSFI, CLHIA *Includes all segregated funds held for the benefit of policyholders Actuarial Liabilities in Canada End of 2014 Health insurance 7.4% Group 0.9% Group 35.4% Individual 29.4% Individual 26.9% Life insurance 30.3% Annuities* 62.3% Sources: OSFI, CLHIA *Includes individual life insurance and annuities Segregated Fund Operations in Canada – 2014 (billions) Assets Premiums Individual contracts* $109.2 Individual contracts* $12.0 Group contracts $163.6 Group contracts $23.8 Total: $573.7 billion Total: $272.8 billion Total: $35.8 billion