And what really matters is our long-term assumptions. And I continue to have confidence in our — in the prudence of our long-term assumptions and reserves. And some of what is informing that, that view and that expectation is looking back to another shock to the system, which we saw in the global financial crisis. And I lived through that in the U.S. Life business. And we saw a similar phenomenon, discontinuities across multiple product lines, and that experience did — it took some time, but it did revert back to pre-pandemic levels, and that’s informing my views. On the NLG, those lapse rates bottomed out in the middle of 2021, and we have seen some trend or reversion back, but not fully at this point. So I’ll stop there.
Operator: The next question is from Doug Young from Desjardins Capital Markets.
Doug Young: Phil, I wanted to go back to Slide 26 and just a few things I wanted to clarify here. You say the equity hit from transitioning to IFRS 17 was 13%, but the book value hit is 20%. Just trying to understand the difference between the moves, 15% to 20% between those 2? Why the difference in equity and the book value hit? And then can you also kind of delve into a little bit on why the impact on core earnings 2022 comp went down from roughly 10% to 5% to 10%? If you can give maybe a little bit of detail as to what drove that.
Phil Witherington: Sure. Thank you, Doug, for the question. I’m happy to elaborate there. So I’ll start with the first component of your question on the balance sheet impact. The guidance we provided; it was — along with our Q1 results in 2022 was a 20% impact to an estimated 20% impact to total equity. That’s actually what has happened. We published our opening balance sheet, along with our results yesterday, the impact is 20%. But the additional guidance we provided yesterday was over the course of 2022, what we have seen is a more stable IFRS 17 book value relative to IFRS 4. And therefore, by the end of 2022, we expect the total equity impact to be lower and approximately 15%. Your question on why the book value — common shareholder book value per share is approximately 20% impact by the end of 2022.
That’s really the — what I would describe as the denominator impact. When you strip out the preference shares as well as policy — participating policyholder impacts, the impact is approximately 20% by the end of 2022. The — your second question relating to the expected impact on 2022 core earnings. When we provided the guidance earlier last year, we were expecting 2022 to be a more normal year, a typical year, I think, is the language we used at the time. What’s actually transpired in 2022, it’s a very challenging backdrop. And for that reason, new business gains on an IFRS 4 basis were lower than we had anticipated. In fact, approximately 20% lower year-on-year. And that’s really the key driver of the reduced impact that we’re now expecting somewhere between 5% and 10%.
Doug Young: Okay. So just to clarify, the total equity includes par, includes perhaps all of those things, that’s different than the book value per share. Is that — or is that include shareholder equity?
Phil Witherington: Spot on.
Operator: The next question is from Paul Holden from CIBC.
Paul Holden: So sticking with the IFRS 17 theme. One of your peers highlighted that there’s more of an interest rate benefit under IFRS 17 versus IFRS 4, i.e., it flows through into core results faster under IFRS 17. Wondering if that’s also true in your case, you suggest that there’s less rate sensitivity. So maybe you can just address that and help us out.
