The document provides an overview of London Life's participating life insurance account for 2011. It discusses London Life's accountability, strength, and long-term performance in managing the participating account. Some key points: - London Life has distributed dividends to participating policyowners every year since 1886 and continues to have the largest participating account in Canada. - The participating account is managed separately from the shareholder account under provisions of the Insurance Companies Act (ICA) of Canada. - In 2011, dividends distributed to participating policyowners were $757 million, with the dividend scale interest rate maintained at 6.9%. - London Life has strong credit ratings and $19.8 billion in total participating account assets,

1. Accountability | Strength | Performance
2011
Financialfacts
London Life participating life insurance

3. This guide provides key financial facts about
the management, strength and performance
of the London Life participating account.
Table of contents
Financial highlights..................................................................... 4
Participating life insurance overview.............................................. 6
How participating policies perform.......................................... 6
How policyowner* dividends are allocated................................ 7
Accountability............................................................................ 8
Strength...................................................................................10
Performance for the long term....................................................12
Historical average returns.......................................................13
Stability....................................................................................14
Returns................................................................................14
Asset mix..................................................................................15
Investment guidelines.................................................................16
Prudent management.................................................................17
Need more information?.............................................................19
Appendix
London Life participating account management policy...................20
London Life participating policyholder* dividend policy..................22
*The term “policyowner” is used throughout except in the appendix.
Throughout this document numbers may be rounded to one decimal place.

4. Financial highlights 2011
for the London Life participating account
Accountability Strength
■■ The participating policyowner portion of ■■ London Life continues to have the largest
distributed surplus continued to be 97.5 per cent participating account in Canada, as measured by
– unchanged since 1966. assets.1
■■ London Life is governed under the federal ■■ The total participating account assets, including
Insurance Companies Act (ICA) of Canada, which surplus, was $19.8 billion at Dec. 31, 2011.
includes provisions for how participating accounts
■■ London Life has 1.6 million participating life
must be managed within a company with
insurance policies in force at Dec. 31, 2011.
shareholders, and includes the requirement for
a participating account management policy and ■■ London Life’s credit ratings were maintained in
a policyowner dividend policy to be established 2011. It continues to enjoy strong ratings relative
and maintained. to its North American peer group due to its
conservative risk profile and stable earnings track
■■ Participating policyowner dividends are
record.2
determined in accordance with the policyowner
dividend policy approved by the board of
directors. This policy is intended to ensure Vesting
reasonable equity among groupings of
participating policyowners. Once a dividend has been paid or
■■ In 2011, London Life participating policyowner credited to a policy, it is fully vested
death claims totaled $318.5 million.
and cannot be reduced or used for
Detailed information on the investments held
■■
in the London Life participating account is
any purpose other than as authorized
updated quarterly and can be found at by the policyowner or to pay premiums,
www.londonlife.com. as per the automatic premium loan
A c c o u n ta b i l i t y | S t r e n g t h | P e r f o r m a n c e
non-forfeiture provisions of the policy.
notes
• Performance data is provided for illustrative purposes only and 5. The participating account return is the return on the participating
represents past performance, which is not necessarily indicative of account assets backing liabilities and surplus after investment
future performance. expenses are deducted. Investment expenses may vary from year
to year due to changes in the asset mix of the total participating
• The dividend scale interest rate is used to calculate the investment
account, economies of scale and other factors. The participating
component of participating policyowner dividends and is based on the
account return is reported for the calendar year Jan. 1, 2011 to
return on the assets backing participating account liabilities. It does not
Dec. 31, 2011. The participating account return is a short-term
include the return on assets backing participating account surplus.
indicator of investment performance. This return is based on
• The dividend scale interest rate is only one of many factors that international financial reporting standards (IFRS) as issued by the
contribute to an individual policy’s performance. The actual cash value International Accounting and Standards Board (IASB), effective
growth in any policy varies based on a number of factors such as type Jan. 1, 2011, with the exception of unrealized gains and losses
of product, product features, premium-paying period, issue age, rating, on bonds, which are excluded because bonds in the participating
dividend option, the policyowner dividend scale and others. account are generally held until maturity. Common stock and real
estate returns are valued on a marked-to-market basis, i.e., not
1. Based on competitive data currently available as not all companies
smoothed, and realized gains and losses on bonds are recognized
report this information.
as incurred.
2. As last rated by A.M. Best Company, Dominion Bond Rating Service,
6. Asset values are based on IFRS as issued by the IASB effective
Fitch Ratings, Moody’s Investors Service and Standard & Poor’s
Jan. 1, 2011. With the adoption of IFRS:
Corporation Ratings Services at time of publication. For current
a. Real estate investment properties are now carried at fair value
information on London Life’s ratings and financial strength see the
with the full change in fair value recorded in net investment
corporate information section at www.londonlife.com.
income.
3. The rate shown applies to policies issued on or after Sept.16, 1968. b. There has been a reallocation of reinsurance ceded from liabilities
These policies have a variable policy loan rate provision, whereas to assets, resulting in no impact on surplus. The reinsurance asset
policies issued before this date have a fixed policy loan rate provision has been included in the other assets category.
and a different dividend scale interest rate. The 2010 asset values have been restated as a result of IFRS
changes that came into effect Jan. 1, 2011. This resulted in a
4. The 60-year average annual dividend scale interest rate is a blended
change to the real estate, and other asset values corresponding
average of the dividend scale interest rate that applies to policies with
totals, and percentages of invested assets.
a variable policy loan rate provision (1969 to 2011) and the dividend
scale interest rate that applies to policies with a fixed policy loan rate
4 provision (1952 to 1968).

5. Performance
■■ London Life has distributed dividends to its ■■ In 2011, public bond holdings increased to
participating policyowners every year since 1886. 46.3 per cent of the total invested participating
account assets, from 44.1 per cent in 2010. 6
■■ In 2011, dividends distributed to participating
policyowners were $757 million. ■■ In 2011, private placement holdings increased
to 3.8 per cent of total invested participating
■■ London Life’s long-term investment strategy –
account assets, from 3.7 per cent in 2010. 6
together with its strategy of smoothing the returns
for the purpose of determining the dividend
scale interest rate – helps reduce the impact of For 2012
short-term volatility on participating life insurance
policyowner dividends. ■■ In November 2011, the board of directors
approved a reduction to the dividend scale for all
■■ On average, under the 2011 dividend scale, London Life individual participating life insurance
approximately 70 per cent of policyowner policies effective Jan. 1, 2012. Although factors
dividends was attributable to investment like mortality and taxes have improved, these
experience, and approximately 25 per cent have not been enough to offset the declines in
was attributable to positive mortality experience. investment experience on the assets backing
Five per cent was attributable to other factors liabilities in the participating account.
such as lapse, expense and tax experience.
■■ On average, based on the 2012 dividend scale,
■■ The 2011 dividend scale interest rate was approximately 65 per cent of policyowner
maintained at 6.9 per cent.3 dividends is derived from investment experience.
■■ The 10 and 20-year average annual dividend Approximately 30 per cent is derived from
scale interest rates to the end of 2011 were 7.4 positive mortality experience and five per cent
and 8.2 per cent respectively.3 from other factors such as lapse, expense and
tax experience.
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■■ The 30-year average annual dividend scale
interest rate was 9.1 per cent for the period from ■■ The 2012 dividend scale interest rate is 6.4 per
1982 to 2011. 3 cent, a decrease of 45 basis points from 2011.3
■■ The 60-year average annual dividend scale ■■ In 2012, dividends distributed to participating
interest rate was 7.2 per cent for the period from policyowners are estimated to be $760 million.
1952 to 2011.4
■■ The one-year return on total participating account
assets for 2011, after investment expenses,
was 3.7 per cent.5
■■ In 2011, participating account investment expenses
were 5.2 basis points.
■■ In 2011, the participating account holdings of
equity investments, including real estate, decreased
to 19.1 per cent of the total invested participating
account assets, from 19.8 per cent in 2010.6
■■ In 2011, mortgage holdings decreased to 27.5 per
cent of the total invested participating account
assets, from 28.5 per cent in 2010. 6
5

6. Participating life insurance
overview
How participating policies perform
Participating life insurance If the actual results in the participating account are collectively
more favourable than the long-term assumptions supporting the
policies are built on a
guaranteed values, earnings are generated and become part of the
foundation of guaranteed participating account surplus (retained earnings). Each year, London
values such as basic Life may distribute a portion of the earnings as approved by the board
premium, basic life of directors. Any amount distributed for a given year will vary up
and down depending on the actual and expected experience. The
insurance coverage, amount to be distributed is influenced by considerations such as the
guaranteed portion of cash need to retain earnings as surplus and reducing short-term volatility
values and guaranteed in dividends. Surplus is held in the participating account to maintain
strength and stability into the future.
portion of reduced paid-up
values. These guaranteed London Life reviews the policyowner dividend scale and the
participating account actuarial liabilities at least annually. This review
values are determined using involves analyzing factors such as investment returns, mortality
long-term assumptions for experience, expenses, lapses and taxes. The process is intended
factors such as investment to ensure the participating account actuarial liabilities are at an
appropriate level and to determine whether a change needs to be
returns, mortality, expenses, made to the policyowner dividend scale.
lapses and taxes.
How is a policyowner dividend different from
A c c o u n ta b i l i t y | S t r e n g t h | P e r f o r m a n c e
a shareholder dividend?
Dividends paid to shareholders are based on the overall results of
the company from all lines of business, such as non-participating
life insurance and investment products.
Participating policyowner dividends are based solely on
the experience from London Life’s participating life insurance
line of business.
6

7. How policyowner dividends are allocated
Each year, the board of Participating policyowner dividends are allocated in a way
intended to ensure reasonable equity among groupings of
directors declares what
participating policyowners. London Life participating policies
portion of the participating are grouped for the purpose of allocating policyowner dividends
account earnings for according to factors such as:
that financial year will ■■ Year the policy was issued and by eras where premiums or
be distributed from the guarantees are similar
participating account. ■■ Plan type
Currently, 97.5 per cent ■■ Basic risk classification – male/female/smoker/non-smoker
of the distribution is ■■ Issue age
credited to participating Dividends are allocated to each grouping following the contribution
policyowners and 2.5 per principle: earnings to be distributed are divided among policyowners
cent is distributed to the over the long term in proportion to their policy contribution to those
earnings. When applying the contribution principle, attention is paid
shareholder account under to achieving reasonable equity between dividend classes and between
section 461 of the federal generations of policies taking into account practical considerations
Insurance Companies Act and limits, legal and regulatory requirements, professional guidelines
and industry practices.
(ICA). The 97.5 and 2.5 per
cent split for London Life Dividends are credited to policies based on the amount of basic
A c c o u n ta b i l i t y | S t r e n g t h | P e r f o r m a n c e
coverage and the terms of each policy. Dividend options involving
has remained unchanged paid-up additional coverage also generate dividends based on
since 1966. See the this coverage and these dividends are allocated using the
accountability section for contribution principle.
more details. Dividends credited to a policy have a cash value associated with them.
This cash value, once credited to the policy, is vested and cannot be
reduced or used in any way without the policyowner’s authorization,
other than to pay premiums, as per the automatic premium loan non-
forfeiture provisions of the policy.
The premium due on the first policy anniversary must be paid before
the first dividend will be credited.
A policy loan on a specific policy, including any premium loan, does
not reduce the policy’s dividend. The policy continues to receive
dividends as though the policy loan did not exist. Any outstanding
loan, including interest, is repaid from either the cash value in the
event of a cash surrender of the policy, or the death benefit in the
event of the death of the life insured.
7

8. Accountability
Participating life insurance ICA provisions and references
policies are managed in
Subject to the ICA, the directors of a company shall manage or supervise
the participating account. the management of business affairs of the company, which includes
In Canada, in the case establishing and maintaining a policy for dividends to be distributed to
participating policyowners, as well as a policy for the management of
of shareholder-owned
participating accounts. The ICA contains a number of provisions that
companies, the participating include certain duties required of directors, and reporting requirements
account must be maintained regarding the use of fair and equitable actuarial practices.
separately from the 1. Investment income and expenses are to be allocated to the
shareholder account. This participating account in accordance with a method that in
the opinion of the company’s actuary, is fair and equitable to
facilitates the measurement
participating policyowners. Once this allocation method is approved
of earnings attributable to by the board of directors, it is sent to OSFI (sections 457-460).
the participating account.
2. The board of directors is required to establish and maintain a policy
The philosophy behind for determining the dividends to be distributed to participating
participating policies is policyowners and to send a copy of the policy to OSFI (section 165
(2) (e.1)).
to provide participating
policyowners with life 3. The board of directors is required to establish and maintain a policy
respecting the management of the participating account and to send
insurance at a cost that
a copy of the policy to OSFI (section 165 (2) (e.1)).
takes into account the long-
4. At least annually, the company’s actuary shall review the participating
term performance of the
policyowner dividend policy and provide a written report to
participating account. the board of directors on its continuing fairness to participating
policyowners (section 165 (3.1) Report of the Actuary).
A c c o u n ta b i l i t y | S t r e n g t h | P e r f o r m a n c e
London Life’s activities are 5. Prior to the declaration of policyowner dividends by the board of
regulated federally by the directors, the company’s actuary must provide his or her opinion
Office of the Superintendent to the board on the fairness to participating policyowners of the
proposed policyowner dividends and on the company’s compliance
of Financial Institutions (OSFI) with the policyowner dividend policy (section 464).
and within each province
by the relevant provincial
insurance regulatory
authorities.
In addition, the federal
Insurance Companies Act
(ICA) contains a number
of provisions that govern
how a participating account
must be managed within a
company with shareholders.
8

9. 6. The ICA limits the amount that may be distributed to the shareholder
account from any annual distribution of the profits of the
participating account for a financial year (section 461). This annual
limit is set as a maximum percentage of the amount determined
by the board of directors to be distributed from the profits of the
participating account for that financial year. This total amount is
distributed between the shareholders and participating policyowners.
The maximum percentage of the total distribution that can be
distributed to the shareholder account depends on the size of the
participating account. The maximum percentage decreases from 10
per cent, for a small participating account, to just over 2.5 per cent
as the size of the participating account increases. London Life has the
largest participating account in Canada, as measured by assets, and
currently 2.5 per cent of the distributed total goes to the shareholder
account. In 2011, this distribution to the shareholder account was
$19.4 million, representing approximately 0.1 per cent of total assets
in the participating account.
7. Each participating policyowner and shareholder is entitled to
receive notice to attend the annual meeting of policyowners and
shareholders, receive copies of documents (for example, the annual
statement) and has certain voting rights (Sections 331 and 334).
For more information on London Life’s
participating account management policy
A c c o u n ta b i l i t y | S t r e n g t h | P e r f o r m a n c e
and the policyowner dividend policy,
see the appendix.
9

10. Strength
A London Life participating life insurance policy London Life’s participating account’s strong surplus
provides a foundation of guaranteed values. It position helps provide stability and strength to the
also offers the opportunity for growth based on participating account and can help smooth the
participation in a pool with 1.6 million other impact of fluctuations in experience on dividends.
participating policies (at Dec. 31, 2011). A London
London Life’s credit ratings were maintained in 2011.
Life participating policy offers both stability and
It continues to enjoy strong ratings relative to its
flexibility in a permanent life insurance solution.
North American peer group due to its conservative
London Life’s participating account has $19.8 billion risk profile and stable earnings track record.*
in assets, including $1.6 billion in surplus (at Dec. *As last rated by A.M. Best Company, Dominion Bond Rating Service,
31, 2011). London Life has the largest participating Fitch Ratings, Moody’s Investors Service and Standard & Poor’s
Corporation Ratings Services at time of publication. For current
account in Canada, as measured by assets. information on London Life’s ratings and financial strength see the
corporate information section at www.londonlife.com.
London Life has distributed dividends to its
participating policyowners every year since 1886.
Participating account ($ millions)
Summary of participating account Participating account
operations in 2011 balance sheet
Participating policyowner premiums $1,757.5 Assets $19,817.9
+ nvestment income
I 966.8 – Liabilities 18,166.8
– Benefits paid 721.3 – Other comprehensive income (loss) 53.5
– Changes in actuarial liabilities 968.0 = Closing balance for participating
account surplus at Dec. 31, 2011 $1,597.6
– Expenses and taxes 188.8
Participating account surplus
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– Distribution to policyowners and shareholders 779.2
Opening balance Dec. 31, 2010 $1,537.2
Policyowner dividends 757.0
+ Surplus adjustment for international
Change in dividend liability 1.1 financial reporting standards (6.6)
Shareholder portion = Adjusted opening balance Dec. 31, 2010 $1,530.6
Cash payment 19.4 + articipating account net income
P 67.0
Accrual 1.7
= Closing balance for participating
= articipating account net income
P 67.0 account surplus $1,597.6
Notes
1. Investment income is based on international financial reporting investment gains and losses, which may be temporary. If and
standards (IFRS) as issued by the International Accounting and when these unrealized gains and losses are realized, they are
Standards Board (IASB) effective Jan. 1, 2011. Certain assets such as recognized in participating account net income and become
public bonds, common stocks and real estate are marked to market part of participating account surplus.
(not smoothed). Investment income is reported for the calendar
5. Asset values are based on IFRS as issued by the IASB effective
year Jan. 1, 2011 to Dec. 31, 2011 and includes assets backing
Jan. 1, 2011. The participating account assets at Dec. 31,
participating account liabilities and surplus.
2010 have been restated for the adoption of IFRS. This
2. Changes in actuarial liabilities are based on IFRS as issued by the resulted in a change in the participating account surplus
IASB effective Jan. 1, 2011. A change in actuarial liabilities is made to resulting from differences in reporting standards between
ensure the total amount of actuarial liabilities is sufficient to meet all IFRS and the previous accounting provisions.
policyowner obligations.
6. The accrual account represents a portion of shareholder
3. The dividend liability represents dividends earned but not paid at the surplus, held within the participating account, that has been
calendar year-end. recognized but not paid and is dependent on future payment
of dividends to participating policyowners. In 2011, the
4. The participating account surplus excludes other comprehensive
accrual account balance increased by $1.7 million.
income. Other comprehensive income includes specific unrealized
10

11. London Life – serving
our clients since 1874
Founded in London, Ontario in 1874, London Life Insurance Company
has been helping Canadians meet their financial security needs for 138
years and has almost two million clients. London Life offers financial
security advice and planning through its more than 3,150-member
Freedom 55 Financial™ division. Freedom 55 Financial offers London Life’s
own brand of investments, savings and retirement income, annuities,
life insurance and mortgage products.
In addition to its domestic operations, London Life participates in
international reinsurance markets through London Reinsurance Group
Inc., a supplier of reinsurance in the United States and Europe.
London Life is a subsidiary of The Great-West Life Assurance Company.
Together, Great-West Life and its subsidiaries, London Life and Canada
A c c o u n ta b i l i t y | S t r e n g t h | P e r f o r m a n c e
Life, serve the financial security needs of more than 12 million people
across Canada and have more than $204 billion in consolidated
assets under administration (at Dec. 31, 2011). Great-West Life and
its subsidiaries reported a minimum continuing capital and surplus
requirements ratio of 204 per cent at Dec. 31, 2011.*
Together, Great-West Life, London Life and Canada Life have in excess of
three million individual life insurance policies in force (at Dec. 31, 2011)
and are a leading provider of individual life insurance in Canada.
Great-West Life, London Life and Canada Life are members of the Power
Financial Corporation group of companies.
*In Canada, the Office of the Superintendent of Financial Institutions (OSFI) has established a capital
adequacy measurement for life insurance companies incorporated under the Insurance Companies Act
and their subsidiaries, known as the minimum continuing capital and surplus requirements (MCCSR)
ratio. For Canadian regulatory purposes, capital is defined by OSFI in its MCCSR guideline.
The company’s practice is to maintain the capitalization of its regulated operating subsidiaries at a level
that will exceed the relevant minimum regulatory capital requirements in the jurisdictions in which
they operate.
11

12. Performance for the long term
The investment performance Dividend scale interest rate
of the London Life The dividend scale interest rate is the interest rate used in determining
participating account is the investment component of the dividend scale. This rate incorporates
an important component the smoothed investment experience of assets backing participating
account liabilities for the most recent 12-month period from July 1 to
in determining the long- June 30 and also includes the smoothed gains and losses from prior
term value of participating periods, and other factors. It does not include the return on assets
policies. backing surplus. London Life’s long-term investment strategy – together
with its strategy of smoothing – helps reduce the impact of short-term
volatility on the investment component of dividends received
The participating account by participating life insurance policyowners. Smoothing works by
assets are managed by bringing gains and losses into the dividend scale interest rate over a
London Life’s investment period of time.
division. The company’s The dividend scale interest rate is only one factor that contributes to
asset/liability management an individual policy’s performance. The actual cash value growth in
any policy varies based on a number of factors such as type of product,
group monitors the overall product features, premium-paying period, issue age, rating, dividend
asset mix and guides option, the policyowner dividend scale and others.
investment activity within As with any financial product, over the long term, a change in
the parameters of the investment returns can have a significant impact on dividend values
investment policy, which is and related features in a policy. To better understand this sensitivity
for a specific policy, clients and policyowners should refer to the
approved by the board of reduced dividend example in the policy illustration. It may be useful to
directors. The managers of periodically request an updated copy of the illustration.
the specific asset classes, Past results should not be considered indicative of the participating
A c c o u n ta b i l i t y | S t r e n g t h | P e r f o r m a n c e
such as bonds, mortgages account’s future performance.
and equities (including real
Surplus, and income generated by it, is used to help
estate), manage the buying
ensure financial strength and stability. It can also
and selling of the actual
assets in the portfolio within
be used for other purposes such as financing new
the parameters specified. business growth within the participating account,
providing for transitions during periods of major
change, or smoothing the impact of fluctuations
in experience on dividends related to investment
volatility, mortality and expenses.
12

13. Historical average returns (at Dec. 31, 2011)
Standard
30-year
Number of years 1 5 10 20 30 60 deviation
(2011) (2007 – 2011) (2002 – 2011) (1992 – 2011) (1982 – 2011) (1952 – 2011) (since 1982)
London Life dividend scale
6.9 7.1 7.4 8.2 9.1 7.2 1.5
interest rate (%)
S&P/TSX composite total
-8.7 1.3 7.0 8.7 9.1 9.6 16.6
return index (%)
Five-year GICs (%) 1.9 2.4 2.8 4.2 6.3 n/a 3.5
Government of Canada
2.5 3.2 3.8 5.2 7.0 6.7 3.1
5 to 10–year bonds (%)
Consumer price index (%) 2.3 1.9 2.1 1.9 2.8 3.6 1.8
All historical average annual returns are geometric means.
A low standard deviation means the range of performance has been
narrow, indicating there has been less volatility.
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Notes
1. The historical average annual dividend scale interest rate for 30 years or less applies to policies issued on or after Sept. 16, 1968, which have a
variable policy loan rate provision. Policies issued before this date have a fixed policy loan rate provision and a different dividend scale interest
rate. The 60-year average annual rate is a blended average of the dividend scale interest rate that applies to policies with a variable policy loan rate
provision (1969 to 2011) and the dividend scale interest rate that applies to policies that have a fixed policy loan rate provision (1952 to 1968).
2. The dividend scale interest rate is used to calculate the investment component of participating policyowner dividends and is based on assets
backing participating account liabilities. It does not include the returns on assets backing participating account surplus. The dividend scale interest
rate for policies issued on or after Sept. 16, 1968 for 2012 is 6.4 per cent.
3. S&P/TSX composite total return index includes the reinvestment of dividends. TSX © Copyright 2012 TSX Inc. All rights reserved.
4. Five-year guaranteed investment certificate (GIC) returns are based on the nominal yields to maturity taken from Statistics Canada, CANSIM table
176-0043, series V122526 (Statistics Canada website), Feb. 2, 2012. For each calendar year, the average of the monthly GIC rates was used.
5. Government of Canada five to 10-year bond returns are taken from Statistics Canada, CANSIM table 176-0043, series V122486
(Statistics Canada website), Feb. 2, 2012. For each calendar year, the average of the monthly values was used.
6. Consumer price index inflation rates are based on the change from December to December, taken from Statistics Canada,
CANSIM table 326-0020, series V41690973 (Statistics Canada website), Feb. 2, 2012.
13

14. Stability
London Life’s participating account’s strong surplus position helps provide stability
and strength to the participating account and can help smooth the impact of fluctuations
in experience on dividends.
During times of economic change, the London Life dividend scale interest rate has been relatively stable
compared with many financial instruments. The graph below shows how the longer-term focus for participating
account investments and smoothing of returns has had a stabilizing effect on the London Life dividend scale
interest rate.
Returns (at Dec. 31, 2011)
40%
30%
Lo
20% sc
10% S&
to
0% 5-
in
-10% (G
Go
-20% 5
-30%
-40%
A c c o u n ta b i l i t y | S t r e n g t h | P e r f o r m a n c e
1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
London Life dividend scale interest rate
S&P/TSX composite total return index
5-year guaranteed investment certificates (GICs)
Government of Canada 5 to 10-year bonds
Notes
1. The dividend scale interest rate is used to calculate the investment component of participating policyowner dividends. The rate shown applies to
policies issued on or after Sept. 16, 1968. These policies have a variable policy loan rate provision whereas policies issued before this date have a
fixed policy loan rate provision and a different dividend scale interest rate.
2. The S&P/TSX composite total return index includes the reinvestment of dividends. TSX © Copyright 2012 TSX Inc. All rights reserved.
3. Five-year guaranteed investment certificate (GIC) returns are the nominal yields to maturity taken from Statistics Canada, CANSIM table
176-0043, series V122526 (Statistics Canada website), Feb. 2, 2012. For each calendar year, the average of the monthly GIC rates was used.
4. Government of Canada five to 10-year bond returns are taken from Statistics Canada, CANSIM table 176-0043, series V122486
(Statistics Canada website), Feb. 2, 2012. For each calendar year, the average of the monthly values was used.
14

15. Asset mix
The London Life participating account assets are invested for the long term. The account is
broadly diversified and is generally managed as a fixed-income account with a goal to have
approximately 80 per cent of invested assets in fixed-income investments and 20 per cent of
invested assets in common stock and real estate investments.
London Life participating account assets at 2010 and 2011 year-ends
($ millions)
% of total
% of total % of total
Dec. 31, Dec. 31, Investment participating
invested invested
2010 2011 guidelines account
assets assets
assets
$ % $ % %
Short term
Cash and equivalents $658.6 3.9% $589.4 3.3% 0% to 5% 3.0%
Fixed income
Public bonds
}
Government bonds 2,853.2 17.0 3,409.9 19.2 17.2
Corporate bonds 4,561.4 27.1 4,816.9 27.1 40% to 75% 24.3
Private placements 623.6 3.7 679.8 3.8 3.4
Mortgages
Residential
Commercial
563.8
4,235.8
3.4
25.2
502.9
4,384.3
2.8
24.7 } 10% to 40%
2.5
22.1
Total fixed income 12,837.9 76.3 13,793.7 77.6 69.6
A c c o u n ta b i l i t y | S t r e n g t h | P e r f o r m a n c e
Equity
Real estate
Common stock
286.0
2,900.7
1.7
17.2
352.3
2,910.6
2.0
16.4 } 0% to 20%
1.8
14.7
Preferred stock 137.1 0.8 128.8 0.7 0% to 5% 0.7
Total equities 3,323.8 19.8 3,391.7 19.1 17.1
Total invested assets 16,820.3 100.0% 17,774.9 100.0% 89.7
Policy loans 1,698.2 1,740.0 8.8
Other assets* 697.6 303.0 1.5
Total participating assets 19,216.0 19,817.9 100.0%
*Other assets are composed primarily of investment income due and accrued, outstanding premiums (receivables), future income tax assets and
reinsurance assets.
Notes
1. London Life has guidelines in place to manage the level of invested assets by asset class. These ranges do not include policy loans or other assets.
Any change to the investment guidelines must be approved by the board of directors.
2. Asset values are based on international financial reporting standards (IFRS) as issued by the International Accounting and Standards Board (IASB)
effective Jan. 1, 2011. With the adoption of IFRS:
a. Real estate investment properties are now carried at fair value with the full change in fair value recorded in net investment income.
b. There has been a reallocation of reinsurance ceded from liabilities to assets, resulting in no impact on surplus. The reinsurance asset has been
included in the other assets category.
The 2010 asset values have been restated as a result of IFRS changes that came into effect Jan. 1, 2011. This resulted in a change to the real estate
and other asset values corresponding totals, and the percentages of invested assets.
15

16. Investment guidelines
The investment guidelines for each asset category Asset quality is very important
recognize the business objectives, liability
At Dec. 31, 2011
characteristics, liquidity requirements, tax
considerations and interest rate risk tolerance Asset quality Public bonds Private placements
unique to that category. Any change to the
AAA........................ 48.4%.............................. 0.6%
investment guidelines must be approved by
London Life’s board of directors. AA ......................... 15.6%............................. 21.3%
A ........................... 23.0%............................. 40.9%
A large portion of the total participating account BBB........................ 12.3%............................. 37.3%
assets is invested in bonds and mortgages to support
BB or less.................. 0.7%.............................. 0.0%
long-term stable growth and core guarantees within
Total..................... 100.0%........................... 100.0%
the participating policies.
99.4 per cent of total bonds held are investment grade
London Life’s investment strategy helps stabilize or higher, i.e., BBB or higher – an investment industry
the variation in the investment returns used to measure of quality.
determine dividends.
Private placements are internally rated.
Private placements
Years to maturity by fixed-income
asset type Private placements are bond investments made through
private agreements with various borrowers. They are
Based on book values at Dec. 31, 2011
grouped into three main categories:
■■ Lease finance
Years to maturity 0 to 5 years Over 5 years
■■ Mid-market and other corporate credit
Public bonds 40.9% 59.1% ■■ Infrastructure
Private placements 38.5% 61.5% These investments have the potential to provide
Residential mortgages 99.7% 0.3% higher returns in the participating account than can
be found in other types of fixed-income investments.
A c c o u n ta b i l i t y | S t r e n g t h | P e r f o r m a n c e
Commercial mortgages 41.5% 58.5% All private placements go through a disciplined credit
Total fixed income 43.1% 56.9% process. Each arrangement undergoes due diligence
and is thoroughly researched, underwritten and
actively managed by the specialized private placement
About 10 per cent of the total fixed-income portfolio investment management team.
of bonds and mortgages will be invested each year at
then-current market rates. The majority of this is due In today’s market, private placements can provide
to the maturity of bonds and mortgages. 1.5 to three per cent higher yields than federal
A portion of the new premiums and investment government bonds.*
income is also invested at the current market rates *
Performance data is provided for illustrative purposes only and
represents past performance, which is not necessarily indicative
each year. of future performance.
The asset returns available in the marketplace in Mortgages
January and February 2012 for new participating (commercial and residential) Percentage
account investments in bonds and mortgages
were about 3.3 per cent. This is approximately Insured...........................................................31.8%
160 basis points below the average return for Uninsured.......................................................68.2%
similar participating account assets maturing Total.............................................................100.0%
throughout 2012.
■■ Principal and interest to the date of default are
guaranteed for insured mortgages.
■■ At 0.024 per cent, residential and commercial
mortgage arrears (90+ days) are below the 0.20
per cent average for the industry at Dec. 31, 2011.
16

17. Prudent management
The historical performance of London Life’s participating account is due not only to strong investment results,
but also to prudent selection of underwriting risks and favourable mortality and expense management results.
On average, under the 2011 dividend scale, approximately 70 per cent of policyowner dividends was
attributable to investment experience and approximately 25 per cent was attributable to positive mortality
experience. Five per cent of policyowner dividends was attributable to other factors such as lapse, expense and
tax experience.
Mortality
People are living longer and participating policyowners have benefited.
This is a unique feature of participating life insurance. As people live longer, this positive mortality experience
is passed to policyowners through dividends. Every decade of the last century has shown continuous mortality
improvement.
Statistics Canada remaining life expectancy for females: average number of years expected to live
Age 1930 – 1932 1950 – 1952 1970 – 1972 1980 – 1982 1990 – 1992 2000 – 2002
table table table table table table
0 62 71 76 79 81 82
35 37 40 44 46 47 48
55 21 23 26 27 28 29
65 14 15 18 19 20 21
Statistics Canada remaining life expectancy for males: average number of years expected to live
A c c o u n ta b i l i t y | S t r e n g t h | P e r f o r m a n c e
Age 1930 – 1932 1950 – 1952 1970 – 1972 1980 – 1982 1990 – 1992 2000 – 2002
table table table table table table
0 60 66 69 72 75 77
35 36 37 38 39 41 43
55 20 20 21 22 23 25
65 13 13 14 15 16 17
Source of information
Statistics Canada Longevity and Historical Life Tables (1921-1981 Abridged), catalogue number 89-506-XPB
• 1930 – 1932 tables, page 99
• 1950 – 1952 tables, page 139
• 1970 – 1972 tables, page 183
• 1980 – 1982 tables, page 205
1990 – 1992 tables: Statistics Canada Life Tables, Canada and Provinces (1990 – 1992), catalogue number 84-537, pages 2-5.
2000 – 2002 tables: Statistics Canada Life Tables, Canada, Provinces and Territories (2000-2002), catalogue number 84-537-XIE, pages 3-8.
17

18. The protective value of underwriting Expenses
These mortality statistics reflect life expectancy for the entire London Life has the largest
population. Individuals who have been underwritten and approved participating account in Canada,
for life insurance, on average, have even longer life expectancies. as measured by assets, with
People considered a higher risk because of health, lifestyle or $19.8 billion including surplus (at
occupational concerns may pay more for life insurance coverage or Dec. 31, 2011), which provides
may be declined coverage. considerable opportunities when
it comes to achieving expense
efficiencies.
Mortality results for London Life
Expenses and taxes incurred
Mortality experience is reviewed annually and changes are taken into
by London Life are allocated
account in the review of dividends. Mortality improvements can help
to the participating account in
to partially offset the impact of declining interest rates. The 2012
accordance with a method that
dividend scale change reflects the benefit of additional mortality
in the opinion of the company’s
improvement experienced by London Life participating policyowners
actuary is fair and equitable to
since the last dividend scale change in 2010. The reduction in the
participating policyowners, and
2012 dividend scale would have been on average 0.5 per cent more
has been approved by the board
had there been no mortality improvement.
of directors after considering
Even if mortality improvements slow over time, current mortality the actuary’s opinion. Each
levels are still better than those used in pricing participating life year the actuary reviews the
insurance products. This is due to the level of conservatism built into method used by the company
London Life’s long-term pricing assumptions used when developing for allocating expenses and taxes
the guarantees associated with its participating life insurance to the participating account
products, and London Life’s process for selection of risk. and reports to the board of
directors on its continuing
fairness and equitableness.
A c c o u n ta b i l i t y | S t r e n g t h | P e r f o r m a n c e
Expense-management policies
focus on controlling expenses
for the benefit of participating
policyowners and shareholders.
Historically, expense experience
has been a relatively small
component of the total dividend
compared to the investment and
mortality components.
18

19. Need more information?
For more information You can find out more about participating life insurance and
London Life’s other products and services by calling your financial
about how participating
security advisor or local office. Each year on the policy’s anniversary,
life insurance policies work, policyowners receive an annual statement updating them on the
ask your financial security current status of their policy. It is often useful to ask your financial
advisor for: security advisor for an updated policy illustration.
Look for London Life at www.londonlife.com or call 1-877-566-5433
■■ Your guide to London Life if you have a question about a specific policy.
participating life insurance
booklet Your policy contains important definitions of certain terms used
in this guide.
■■ Understanding how
London Life participating life This guide should be kept with your London Life illustration and
insurance works policy contract.
■■ The value of London Life The information provided is based on current laws, regulations and
participating life insurance other rules applicable to the company and to Canadian residents.
■■ London Life participating life Every reasonable effort has been made to ensure its accuracy as of
insurance – Looking back at the date of publication. Rules and their interpretation may change,
historical returns affecting the accuracy of the information. The information provided
is general in nature, and should not be relied on as a substitute for
■■ Smoothed returns help reduce
advice in any specific situation. For specific situations, advice should
volatility – How London Life
be obtained from the appropriate professional advisors.
participating life insurance uses
smoothing to reduce volatility London Life is a member of Assuris, formerly known as the Canadian
of policyowner dividends Life and Health Insurance Compensation Corporation (CompCorp),
which administers the Consumer Protection Plan for policyowners of
member companies.
A c c o u n ta b i l i t y | S t r e n g t h | P e r f o r m a n c e
19