Important information for participating policyholders

How policy dividends are determined and allocated

The Standard Life Assurance Company of Canada (the Company) no longer sells with profits, or participating policies in Canada. It does however maintain a portfolio of assets (the Segmented Policies Account) in respect of all participating policies it has previously sold. Participating policyholders continue to benefit from distributions of the surplus that arise from the operation of the Segmented Policies Account. These take the form of participating bonuses that are declared by the Company from time to time, usually once per year.

Depending on the type of participating policy held, bonuses may be paid as a cash amount or as an additional coverage which is added to the base coverage amount of the policy.

Participating policy premiums were originally determined based on assumed investment returns as well as expected mortality, lapse and expense experience. As they are paid, these premiums are deposited to the Segmented Policies Account together with the premiums of all other participating policyholders. The Segmented Policies Account is charged for claims and expenses incurred, and credited for investment return.

To the extent that actual experience is better than anticipated in the policy premium calculation, surplus will develop in the Segmented Policies Account.

The Company has adopted a Policyholder Dividend Policy that defines the principles by which the Segmented Policies Account surplus is to be allocated and distributed between all participating policyholders.

The Company's Board of Directors, in accordance with the principles and requirements of the Policyholder Dividend Policy, declares participating bonuses from time to time, usually once per year.

Factors considered each year in determining the amount of surplus, if any, to be distributed include:

• past and anticipated future Segmented Policies Account experience,
• the amount of surplus to be retained to provide stability to the Segmented Policies Account, and to support the financial strength of the Account and of the Company,
• in normal circumstances, the objective of avoiding significant variations in bonuses declared from one year to the next, and
• any legal requirements.

The amount of surplus to be distributed is allocated to each participating policy based on the relative contribution of the policy to the surplus, in a manner that ensures an equitable distribution between different participating policies.

The amount of surplus distributed and the resulting bonus can vary from one year to the next.