Q2 2021 Manulife Financial Corp Earnings Call
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Good morning, and welcome to the Manulife second quarter 2021 financial results Conference call.
Your host for today will be Mr of Hong Kong. Please go ahead Mr. Cole.
Thank you and good morning, welcome to the main life earnings conference call to discuss our second quarter 2021 financial and operating results. We are conducting this call virtually.
The earnings for the financial statements and the MD&A Statistical information package in the webcast slides for today's call are available on the Investor Relations section of our website at many of them.
The dot com.
Turning to slide for who would be the gains today's presentation with an overview of our second quarter highlights and an update on our strategic priorities by Roy Gori, Our President and Chief Executive Officer.
But when you watch the remarks, Phil Witherington, our Chief Financial Officer will discuss the company's financial and operating results.
After the prepared remarks, which were recorded in the times to ensure optimal sound quality, we will move to the life of crushing it as a portion of the call.
We ask each participant adhere to the limit of 2 questions. You should have this vision of question. Please re queue and we will do our best to respond to all questions.
Before we start please refer to slide 2 for a caution on forward looking statements and slide 32 quick note on the use of non-GAAP financial measures in this presentation.
Note that certain material factors or assumptions on quietly making forward looking statements and actual results may differ materially from what you stated.
With that I'd like to turn the call over the Roy Gori, our President and Chief Executive Officer.
Right.
Thanks, Todd Good morning, everyone and thank you for joining us today.
Yesterday, we announced that financial results for the second quarter of 2021, and our strong momentum continued from the start of the year with double digit growth across the number of our key operating metrics compared with the prior year quarter.
Turning to slide 6 we delivered record core earnings of $1.7 billion, an 18% increase from the prior year with double digit growth across our growth engines Asia and global way.
And we reported net income of $2.6 billion.
Moving to the value increased 57% with strong contributions across all geographies, reflecting higher sales volume and more favorable margins.
Our expense efficiency ratio improved by 2.1 percentage points compared with the prior year.
<unk>, our continued focus on expense management.
And our global land business, we continue to build scale and benefited from growth in higher margin businesses.
As a result, our core EBITDA margin increased 440 basis points from the prior year.
Our N V. The margin for Asia increased by 3.6 percentage points from the prior year and this represents a tremendous growth from 5 years ago. When the margin was in the low thirty's.
Turning to slide 7 and the progress we've made executing on our 5 priorities.
As we discussed at our Investor Day in June the next phase of our strategy is focused on accelerating growth and becoming the most digital customer centric global company in our industry.
I'm very pleased with our progress and leave the areas.
Growth in the highest potential businesses has outpaced the other areas since 2019.
And that continued in the second quarter with both Asia and global way of delivering double digit growth in core earnings.
I'll ask potential businesses accounted for 61% of total company core earnings either day 2021.
And we're on track to achieve the target of 67% of total company core earnings by 2022.
In Asia, we announced the 3 year partnership with Libre, a leading global trade Association for the financial services industry in order to further recruit best in class agents across Asia.
This partnership complements our newly launched Manulife business of Academy, a region wide unified learning and development platform for a growing number of agents.
Global wind manage the <unk> totaled more than 1 trillion.
<unk> on track record of positive net flows and strong investment performance.
And we secured an alternative investment fund managers license to offer onshore private market funds in our key European markets. This.
This is a major milestone in driving the expansion and offering of a private market investment capabilities within Europe.
On the behavioral insurance front, we launched the Manulife vitality healthy mine reward program to help our individual insurance customers improve their mental and emotional well being.
Our ambition is to be a leader in our industry. When it comes to digital capabilities and customer experience and we're executing on our strategy to attract engage and retain customers by delivering an outstanding experience.
There is strong evidence that higher NPS results in increased customer retention pie of number of products per customer increased investment balances and higher referrals, leading to lower acquisition costs and agent recruiting costs.
Since 2018, we've invested $750 million in digital enhancements, which have positioned us well to better engage with our customers and has contributed to our NPS of plus 19 as of the second quarter of 2021.
This is an 18 point of improvement from our 2017 baseline and we're on track to achieve our NPS target of.
31 by 2022.
During the second quarter, we continued to make progress on our digital journey across all of our operating segments to better engage with our customers.
In Asia, we entered into a new digital collaboration with rewards our rewards the aggregator and management solution to further incentivize customers that are part of our <unk> program to be physically active.
In the U S. We continued to enhance our digital underwriting capabilities by integrating our underwriting decision engine with Oi pipeline are low.
Leading provider of no code low low code content by the digital solutions.
The accelerate the life insurance application process.
This new approach will dramatically reduce the life insurance sales cycle and offer a less intrusive way to collect medical history data with digital signatures.
And our global land business, we launched the new requirement of mobile App for all U S plan members.
The new App gives members the ability to enrolling the plan do you account details make changes to their account and use of additional financial tools that provide them with guidance on their retirement savings strategies and financial priorities.
Turning to slide 8 expense efficiency is deeply embedded in our culture and I am pleased to see the benefits reflected in our second quarter expense efficiency ratio of 46, 8%.
The ratio improved by 2.1 percentage points year over year, reflecting pretax core earnings growth of 16% the far outpaced core expense growth of 5%.
We've made significant progress towards meeting our goal of consistently achieving a ratio of less than 50%.
In the second quarter, we freed up $200 million of capital, primarily driven by our annuity guaranteed minimum withdrawal benefit off the program in the U S.
The G M. W. The Alpha program has reduced the guaranteed value of the USDA business by approximately 7% since it was launched in 2019.
It is a prime example of our organic initiatives to optimize capital and reduce risk.
On a cumulative basis, we've freed up $6.1 billion of capital through our portfolio optimization efforts across multiple legacy blocks.
Whilst we've exceeded our target of releasing $5 billion of capital our commitment to optimize manulife for legacy portfolio, especially LTC MBA remains and we continue to seek opportunities to reduce risk and unlock value.
As I announced at Investor Day, we plan to reduce the core earnings contributions from LTC M D day.
The less than 15% of total company core earnings by 2020 thoughts.
And I'll look forward to providing you with an update on our progress towards all of our 2025 supplemental goals at year end.
Our final priority is around building a high performing team.
I believe the culture will be of sustainable long term competitive advantage and that only of highly engaged high performing team can consistently exceed customer expectations and deliver superior results.
Our target is to achieve top quartile employee engagement compared to global financial services and insurance peers by 2022, and we're proud towards the achieved this ranking in 2020.
We continued to deliver against our goals of increasing women in our leadership ranks.
And then on new graduate hiring of Black indigenous and people of color talent in 2020 reached 52% more than doubling our goal.
In addition, we're continuing to develop a high performing team and winning culture through initiatives focused on wellbeing learning and recognition.
Highlights include our second annual global Thank you day for all colleagues as well as our bespoke elevate wellbeing program.
The global initiative to encourage and help our teams focus on there will be.
And we're on the part of building a culture of sustainability to better our planet.
In May we announced our commitment to net zero emissions to support climate goals worldwide recognizing the important role of about 37000 employees 119000 agents and over a trillion dollars.
And I can play in global climate solutions.
Note I am proud to share that we're already net zero in our operations due to the carbon removals from our substantial owned and operated force in farmland.
The net zero focuses on 3 key areas.
Through our operations will substantially reduce the mission to lessen our footprint.
We will actively invest for sustainable future with our products and services will develop innovative solutions the contribute to climate change mitigation and resilience.
To conclude we continue to demonstrate great progress against our strategic priorities.
We're executing on the next phase of our strategy with a greater focus on accelerating growth in our highest potential businesses.
Our strong results in the second quarter of 2021 showcased the strength of our Asia and global web businesses and I'm pleased with our progress towards delivering on our goals.
Our commitment to continue to optimize the legacy businesses, especially LTC MVA is as strong as ever.
We continue to invest in our digital capabilities to both improve customer experience and deliver on our efficiency target.
The challenging and uneven operating environment continues across many markets globally. We're pleased to see a path for reopening in many of the world's largest economies.
We continue to believe the menu of life is uniquely positioned to win as the global economy positions the recovery and are optimistic about the future of our franchise.
Thank you and I'll hand over to Phil Witherington, who will review the highlights of our financial results Phil.
Thank you Roy and good morning, everyone.
Turning to slide 11, and our financial performance for the second quarter of 2021.
As Roy mentioned, our strong momentum continued in the second quarter.
We delivered double digit growth in Asia, and global land, resulting in record core earnings of $1.7 billion on.
Total company net income of $2.6 billion.
Strong customer demand combined with favorable market sentiment during the quarter contributed to double digit a b E sales of new business volume growth across all the insurance segments as well as an increase in net flows and average of UMH and our global line business.
And our line capture ratio of 137% and leverage ratio of 25, 9% provides us with financial flexibility to deliver on our strategic priorities.
We will complete our annual review of actuarial message and assumptions during the third quarter of 2021 and while this review is not yet complete preliminary indications suggest the impact will be roughly neutral.
Separately in June 2021, the Canadian actuarial standards Board issued new guidance with reductions for the ultimate reinvestment rate and updates to the calibration criteria for stochastic risk free rates.
These updated standards include a reduction of 15 basis points in the U R. R and the corresponding change to the stochastic risk free rate modeling and it will be effective from October 15.2021.
We expect to adopt the standard in the third quarter of 2021 and consistent with our disclosed sensitivities, we estimate that it will reduce net income attributed to shareholders by approximately $550 million post tax.
The impact of this change will be reported in the items excluded from core earnings as part of the direct impact of markets.
I will highlight the key drivers of our second quarter performance with reference to the next few slides.
Turning to slide 12.
We generated core earnings of $1.7 billion in the second quarter of 2021 up 18% from the prior year on a constant exchange rate basis.
This was driven by higher new business gains across all insurance segments.
Hi on net fee income from higher average of UMH and our global land business the.
The recognition of core investment gains in the quarter.
And in force business growth in Asia and Canada.
These items were partially offset by modestly on the favorable net policyholder experience compared with net favorable COVID-19 impacts from the prior year quarter, and low and net gains on seed money investments and segregated and mutual funds.
Net income attributed to shareholders was $2.6 billion in the second quarter, reflecting growth in core earnings gains from investment related experience compared with losses in the prior year quarter and the launch of gains from the direct impact of equity markets and interest rates.
Of note, we delivered investment related experience gains of $839 million in the quarter, reflecting higher than expected returns on older primarily driven by fair value gains on private equity the favorable impact of fixed income reinvestment activities and favorable credit to.
Experience.
$100 million of these investment related experience gains were reported in core earnings with the remaining $739 million reported outside of core earnings.
The direct impact of markets in the quarter was the gain of $177 million, reflecting strong equity market performance.
The gain of $40 million from the direct impact of interest rates was the result of lower risk free rates on flattening of the yield curve, partially offset by a charge from the sale of assets bonds.
Our year to date 2021, net income attributed to shareholders of $3.4 billion was above core earnings of $3.3 billion.
Despite market volatility throughout the year.
This reflects the transitory nature of market impacts on our income period over period, and our ability to manage market risks effectively over time.
Slide 13 shows our source of earnings analysis.
Expected profit on in force increased by 8% on a constant exchange rate basis, driven by growth in Hong Kong, Japan, Vietnam, and Canada Group insurance.
New business nearly doubled compared with the prior year quarter with growth across all insurance segments, driven by high of sales improved margins and the more favorable product mix in the U S.
Favorable product mix and strong sales in Hong Kong as well as Asia other.
And higher sales in Canada retail insurance.
Net policyholder experience in the second quarter was modestly unfavorable primarily driven by adverse claims experience in the U S life, partially offset by favorable claims experience in Canada group insurance.
Long term care of policyholder experience was approximately neutral.
Core earnings on surplus decreased compared with the prior year quarter, largely due to the net impact of lower yields on the fixed income investments and lower net gains on seed money investments in segregated funds on mutual funds, partially offset by gains on the sale of assets equities.
Turning to slide 14, we.
We delivered core earnings growth of 62% and our global <unk> business, reflecting growth in net fee income driven by higher on average of U M. E. Some of the favorable impacts of markets of net inflows I just wanted to favorable business mix.
Core earnings in Asia increased by 20% driven by higher new business volumes, reflecting the lessening of the impact of COVID-19 on sales favorable product mix and in force business growth, partially offset by modestly unfavorable policyholder experience and lower investment income on.
The capital.
Core earnings in Canada decreased by 7%, primarily driven by a lower level of favorable policyholder experience compared with the impact of COVID-19 containment measures on claims in the prior year quarter and lower investment income on allocated capital, partially offset by higher in for.
The earnings and higher sales in our retail insurance business.
Core earnings in the U S decreased by 10%, primarily driven by a less favorable impacts from COVID-19 on lumps in cash policyholder experience and lower investment income on allocated capital, partially offset by higher new business volumes.
Core losses in corporate and other improved by $114 million, primarily driven by core investment gains partially offset by the net impact of low yields on fixed income investments lower net gains on seed money investments and segregated funds of mutual funds.
<unk> on sales of assets equities on.
The lower interest on allocators of capital 2 operating segments.
Slide 15 shows on new business value generation and APE sales.
Our insurance business delivered very strong new business value of $550 million in the second quarter of 2021, an increase of 57% versus the prior year quarter with double digit growth across all of insurance segments.
In Asia, and B, the increased 48% from the prior year quarter, driven by higher sales volumes in Asia or other markets favorable interest rates higher sales volumes and product management actions in Hong Kong and expense management actions and favorable product mix in Japan due to a shift away from low.
Sure margin coli products.
In Canada, NPV increased 65% from the prior year quarter due to the impact of higher sales volumes and more favorable margins.
In the U S N V. The double the level of the prior year quarter, primarily driven by higher sales volumes and more favorable margins.
In the second quarter of 2021, we delivered 8 the E sales of $1.4 billion.
30% increase from the prior year quarter.
While COVID-19 impacts on sales of moderated the pandemic continued to have varying degrees of adverse impacts across the markets in which we operate.
In the Asia sales increased by 34%, reflecting double digit growth in both bancassurance and agency channels in Asia, other markets and Hong Kong, which benefited from continued strong domestic demand and emerging demand from the mainland Chinese visitors, partially offset by lower <unk>.
The product sales in Japan.
In Canada a day.
Sales increased by 15%, primarily driven by high on sales of lower risk segregated fund products higher retail insurance sales and high of small and mid sized group insurance sales, partially offset by the non recurrence of a launch of synergy market sale in the prior year and lower large case group.
Insurance sales.
In the U S. <unk> sales increased by 40% due to higher customer demand across all product lines.
<unk> sales of products with the John Hancock vitality, plus feature increased by 27% as the Ctrip continues to be a differentiator in the market.
Turning to slide 16.
Our global wealth and asset management business delivered net inflows of $8.6 billion with gross flows of nearly $34 billion. During the second quarter and also benefited from the favorable impact of markets.
In retail net inflows were $7.3 billion compared.
Compared with net outflows of $1 billion in the prior year quarter.
The increase was driven by double digit growth in gross flows across all geographies and low a mutual fund redemptions in the U S.
Institutional asset management net inflows were $1.9 billion.
Compared with net inflows of $6.5 billion in the prior year quarter.
The year over year change was driven by Canada from the non recurrence of a $6.9 billion dollar sale in the prior yet and the $1 billion of sale to an existing client in the second quarter of 2021.
In retirement net outflows were <unk> $6 billion compared with net outflows of <unk> $3 billion in the prior year quarter, reflecting higher member withdrawals, partially offset by growth in new plan sales and member contributions.
Overall global ones average of UMH increased by 26% compared with the prior year quarter, driven by the favorable impact of markets and higher net inflows.
As part of the expanded disclosures introduced at our recent Investor Day I'm pleased to highlight the net fee income yield metric.
Global <unk> net fee income yield of $44.4 basis points increased by 8 basis points from the prior year quarter, reflecting favorable business mix, which benefited from growth in retail net inflows.
And core EBIT margin increased by 440 basis points driven by a combination of high on net fee income operational benefits from increased scale and disciplined expense management.
The strong growth in average of U M E on core EBIT margin expansion contributed to core earnings growth of 62% over the prior year quarter.
Turning to slide 17.
Strategic expense management program is mature and deficiency is embedded in our culture.
We delivered an expense efficiency ratio of 46, 8% in the second quarter of 2021 with an improvement of 2.1 percentage points compared with the prior year quarter.
This improvement was driven by a 16% increase in pretax core earnings, which far outpaced the 5 percentage increase and general expenses included in core earnings.
We remain committed to our goal of consistently achieving a ratio of less than 50%.
As I mentioned of Tau recent Investor day, we set our sights on achieving positive jaws in 2023 and beyond meaning that we will endeavor to have our top line growth the denominator of our efficiency ratio exceeds our core general expenses growth rate.
Turning to slide 18, we continue to maintain a strong balance sheet and capital position.
We have $23 billion of capital above the supervisory target and on like half the ratio of 137 percentage is strong.
The ratio is in line with the prior quarter as favorable impacts from market movements, mainly from lower risk free rates and all the gains were offset by the impact of capital redemptions of $2.1 billion.
Our financial leverage decreased 3.6 percentage points from the prior quarter to 25, 9% driven by the redemption of debt and capital instruments of $2.1 billion.
Growth in retained earnings and the favorable impact of lower interest rates on the value of assets debt securities, partially offset by the unfavorable impact of a stronger Canadian dollar.
We remain committed to achieving our 25% medium term leverage target, but would note that the ratio is subject to variation period over period due to the timing of financing activities.
Slide 19 outlines our medium term financial targets and recent performance.
Core ROE and the expense sufficiency ratio net our medium term targets in the second quarter of 2021, and our dividend payout ratio remains within our target range.
We remain confident in delivering 10% to 12% core EPS growth over the medium term.
Of note core EPS growth of 6% in the second quarter of 2021 reflects the impact of currency translation.
On a constant exchange rate basis second quarter of 2021 core EPS grew 17% compared with the prior year quarter.
This concludes our prepared remarks, operator, we will now open the call to questions.
Thank you we will now take questions from the telephone lines. If you have a question in your increasing of speaker phone. Please lift your handset before making your selection.
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There will be a brief pause of all the participants of registers for questions and we thank you for your patience.
The first question is from Humphrey Lee of Dowling <unk> Partners. Your line is open. Please go ahead.
Good morning, and thank you for taking my question.
My first question is related to new business gains in Asia.
While its show good year over year growth, but it's a little bit softer compared to the levels, we've seen over the past several quarters.
I believe the sales makes it makes hasn't had an impact on that but I was just wondering if you can elaborate on some of the moving pieces flow of new business gains that we've seen in the quarter and what is your outlook for that coming from from Asia in the coming quarters.
Yeah.
Thanks Humphrey. Thanks for the question. This is the Aneel itself.
As you rightly pointed out.
Our growth.
For new business gain in quarter, 2 has been very strong of you're very pleased for the 51% growth that we've seen year on year on a constant exchange rate basis, and that's on account of a few factors 1.
Its been aided on account of the strong new business sales and.
The illustrated during the Investor day, as well is that we continue to expand our distribution continue to improve our digital and technology capabilities of zelle as upscale and upgrade our talent and we have a very well position as we entered 2021 started the year of strongly in the.
On kind of backed it up with the with a strong quarter 2 performance.
Is that in addition to that we have been taking a number of steps on driving product makes the we've taken a number of repricing actions of the last 12 to 18 months as well as.
As you would've heard Phil illustrate the very disciplined around our expenses. So a combination of these factors have resulted into the growth that you're witnessing on the new business gain line the new business growth.
We believe it's quite consistent with our sales volume so as.
From time to time across market do have an impact on the mobility of our distribute the them customers that could present a challenge on momentum in the short term, but beat him and very confident about a medium to long term targets that we had recently shared with you during the Investor day. Thanks for the question.
[noise] once again hungry.
That's helpful, but I I guess the week looking back of the past several quarters.
Probably around 170 million of new business gazing quarter Street in quarter for and then obviously Q1 of us very strong because of the door opening in China and then this quarter's kind of of.
Around 160, so it seems a little bit later than like I guess, the the second half of last year, where you're if he sales were kind of comparable like just how the thing about that kind of the the change.
Yes, I think as as of pointed out I think from of your on your perspective on growth has been pretty solid as as you would have seen from a disclosures I guess you will always have some level of variability depending upon the jogger fixed Ah geography mix as well as sort of.
As you highlighted in your question bought a day.
Said the correlation between a new business sales and new business. Good in our reckoning, it's been pretty consistent.
If you do normalize Ah for for the 1 seasonality it should kind of gives you a good indication of a new business gain estimate.
[noise] Oh first of all just ahead.
Hotmail.
I think of new covenant quite well, but I would just say the seasonality isn't just affecting necessarily out total styles of the local affect the sales by geography and as you highlight Q3 Q for isn't radically of what you saw in queue to.
From the results of perspective, but the make up all of our results does vary based on seasonality. It's obviously more pronounced with Q1 in China, but there is a bit of of a mix of cross the different markets and Q2 isn't radically different to Q3 Q for US you highlighted I wouldn't look at that as a big difference in.
And again, it really goes to the floor of the geographic diversity, that's really very helpful. For us and has allowed us to continue to deliver strong results and quite frankly gain market share across so many market teenage of not only in 2020, but in 21 as well.
Thank you I appreciate that my second question is it related to global Wham.
You saw very strong retail net flows in the quarter and as you pointed out strong gross sales across geographies and low redemption can you just talk about where are you seeing traction in terms of kind of.
Geography is getting stronger inflows and then also what type of ethics clauses are getting the the the the the inflows.
Yeah. Thanks on free it's Paul here and I'll answer the question Yeah. As you mentioned, we had a very strong quarter of the corner of in terms of growth closed the net pose the retail was the primary driver there until mentioned in the opening remarks, we did see double digit growth across all 3 regions and growth flows I think that just speak to the the.
The underlying quality of of the French fries on the diversification. It's also worth noting that and are you out there was the fourth grade consecutive quarter of positive net flows and are you a business. That's all for contributing here we've seen continued momentum.
In that business building up the last 3 quarters. The other thing helping us here as in terms of your question on mix.
Back to maybe the start of 2020, we were selling quite a bit of fixed income we were seeing a much more balance mixed of of sales now, particularly within the the retail channel to equity and to balance mandates. So that's all for helping.
Drive the overall flows in the profile of the business, but also of support that the net yield that we're now disclosing the the.
Of the business are very strong and I would say they're off the thrown on the other channels as well just thought it's pronounced as the retail we're we're we're seeing the big impact.
Got it thank you.
Thank you the.
The next question is from Tom Mckennon of BMO capital markets. Please go ahead.
[noise] yeah. Thanks, very much on good morning, Wanna talk a little bit about the policyholder experience losses in the quarter and if we look at.
For all of the.
Parents came from losses on of core basis worse 30 for seem to be in line with what we were looking for despite probably higher policyholder experienced losses. So.
Maybe you can kind of the.
Explain what other extreme gains or losses might've been in there. So I guess to summarize it would just be a little bit more color on the policyholder experienced the losses by geography, and what were the other core experienced the gains or losses that.
Tribute to the -30 for that you reported thanks.
Thanks, Tom It's it's Steve here and I'll I'll be happy to answer that question is still is still noted our overall policyholder experience was slightly unfavorable at $15 million loss and the big the drivers there. The so called out U S life claims experience.
The the 1 piece of color or that there is the the bulk of what we saw in terms of coming through as of loss of occurred at the start of the quarter in April.
I think we're seeing some some COVID-19 trends in those results, but it got better over the course of the quarter [noise] the.
Those were offset by gains in our Canadian Group group.
A group of insurance business, primarily in our long term disability business, where we saw a strong recovery.
And then it.
Asia was close the neutral some modest claims games and some.
Some laps losses that were across a number of of Geography's not concentrated in any 1 area.
And then in terms of of what else goes into core experience.
What goes in there as well is our expenses related experiencing reminder, that that includes our regional overhead costs in Asia and then what we see is we do see some variability in the in that line from reinsurance related items, and we had some a number of the small positives there.
And and it's quarter. So those are the the key drivers of of what we're seeing in the policyholder experience and the core experience line.
[noise] [noise] [noise], Okay, and what about did you mentioned longterm care, how what was that was neutral in the quarter is there and you and I think you mentioned.
That there's been the sort of a COVID-19 impact that's been progressing from April and I guess, improving maybe in your U S life.
Maybe you can shed how that sort of COVID-19 impact has.
Impacted longterm care and what you would expect going forward with respect the longterm care of experience.
[noise] [noise] sure in long term care of what we what we saw on the quarter of it was a small positive resolve close to neutral, but small positive and.
For context remind people that the the vaccination effort in the U S for the.
The population over 65, the vaccination program has been very successful with 80% of that population fully vaccinated and 90% with at least 1.1 dose so he.
The how that's translating we saw.
In long term care of reversion back towards more normal trends.
We had reported in the past that we had seen the customers suspending care and not seeking care and we provided for that in our in our Ivy in our what we saw this quarter is that we saw a greater trend to resumption of care, where care of had stopped and we saw a trend to more nor.
The more initiation of care and then in terms of the the impact on the claim terminations. We we saw that because of those vaccine that hurts. The the rate of claimed termination so deaths of of our insurance on claim that came back down more towards more on and on.
The levels as well and while it's it's difficult to predict exactly how this plays out of the course of the year.
Our expectation is that we will continue to see a trend back to more than normal experience.
[noise] [noise], okay, and any update on the U S. A variable annuity legacy transaction that you flagged to your Investor day.
[noise] Hi time, it's in the feet here, what I can say is certainly a robust market for V. A there's lots of buyers with interest and variable annuities in the U S. We are continuing discussion and engaging with the prospective buyers and we continue to believe for the deal as possible in 2021.
[noise] Okay. Thank you.
Thank you. The next question is from Doug of young of digital day in capital markets. Please go ahead.
Hi, Good morning, I guess, it's back to of Neil on on Asia, and specifically on new business value margins, just hoping to get some color on 1 side of you did see a decline of for 3 points in other Asia and on the flip side, we did see Hong Kong New business.
The emergence of 75, 8% of the that's the highest I can recall and so I'm just trying to get a sense of is there. Some unusual items of your what's really kind of of flexing. The you said these 2 margins in different directions.
Uh-huh.
Thanks for the question and let me start the Hong Kong for so.
Of the Hong Kong, a new business value was driven on account of the few reasons is 1 of the sore of growth of 7% on sales, but importantly, we have been focusing on driving value of cross all our geographies on obviously Hong Kong being of.
Flagship and scale of business, it's most evident.
Of the scale as the better at some of the initiators that'd be odd driving in Hong Kong. The market clearly product makes the has been of keep driver of it it's been aided by some of the repricing actions that we've taken in Hong Kong now for.
Simple Cortes VAT of <expletive>, despite the growth that'd be of bitterness in Hong Kong not far multiple years, we have been exceedingly discipline about on expenses. So a combination of that has kind of resulted into the strong growth that'd be of bitterness on the new business value module.
In in in Hong Kong.
With respect to Asia. Other then again I do want the kind of highlight the fact that Ah Asia. Other of continues to perform exceedingly strongly the new business value growth you're on your of stood at 59% of it again that should not surprised the given the constitution of Asia. The we have markets like China.
For in.
In the knees, yeah, Vietnam, that's kind of constitute Asia. Other so and not only provides diversification strength to Asia, but it also provides diversification strength to the Asia on those.
Segment of the.
The new business value of margin largely from of your on the basis on a quarter on quarter basis has been impacted on account of against some of the Ah market makes of the geography mix.
That the witness that could change from quarter on quarter.
As well as some of the product makes that could drive the new impact on new business value margin, but suffice to say just kind of give us given the diversity of strength as well as a significant market position in many of our geographies in Asia other combined with the independent.
Creation that exist in many of these market. We believe that we are very well positioned to be able to capture the growth the opportunity in the Asia other segment.
And just the follow up on the Hong Kong is that it sounds like you'd think that 75% is sustainable given I mean, there's gotta be seasonality, obviously, but you feel that sustainable of level.
Yeah of people.
As I said.
It is also represented the representation of the fact that Hong Kong is our flagship business as in and the scale of operation you have been gaining.
Market share now for multiple quarters in Hong Kong and again for the 1 of this year has been no exception of Hong Kong. However, does tend to be a little bit sensitive to interest rates. So.
That's something that I'll be will have to take an account of quarter on quarter, but again I think what we are focused on odd the for drivers of what drives and the week and that is as I said, the higher volume of product mix as the.
Well as the some of the repricing actions combined with on expense disciplined so Ah the feel good about the opportunity in Hong Kong and again the scale of nature of Hong Kong should be able to help us deliver the growth at very healthy margins going forward.
Okay, and just second in Japan, there was a 5% quarter over quarter dropping the agents and I think you talked a bit about repositioning that business following the shift with coley and.
Was this just part of normal turnover or if there was some colleen or was there something a little bit more deliberate and what you're doing in Japan.
Yeah, I think the have been emphasizing in Japan in light of some of the changes that the odd witnessing in the call the market.
Our emphasis as the have mentioned on previous calls Ah has been in terms of driving in force as well as expenses efficiency and the number of initiatives that the have taken on both of these accounts have resulted in too.
Positive attribution brought on court earnings in Japan that for you at 8% a year on year as well as new business value that view by 13% a year on year of the wood.
As I said see some level of fluctuation quarter on quarter from an agent headcount growth.
As I said the the market in Japan is in transition and the are adapting to some of these transition by focusing on enforce focusing on driving the right product mix.
L as driving a much more higher the expense efficiency.
I would just add the 5% of our agent base in Japan is not a really significant number. Unlike in other markets, where we have very significant agent count in Japan, we have a smaller agency force and quite the sand isn't really a huge number of of agents that would be in the normal course of of movement from quarter to quarter of but as the new highly.
Our focus on agency across the ear has been stronger we've seen significant increase is not just over the last few years, but certainly in the quarter on the last year as well.
Thank you.
[noise]. Thank you. The next question is from Gabrielle This Shane of National Bank Financial. Please go ahead.
And the C O 2 questions 1 of.
Of the 10 your drop effect of the you know transaction of activity in the the you know the legacy books.
Potential there of 2 more importantly could you give us a sense of the duration of the product you're selling in Asia I know, there's going to be from variability there, but trying to get a sense of you know what kind of amortization schedule, we're going to be facing when these new business games or or you know transition daughter for the 17th.
Very.
Yeah, I'll I'll start this isn't the beach.
In terms of the interest rates and potential of transactions, we do stay close the connected to the potential buyers investment bankers really of the finger on the pulse of the market. We were seeing externally the pricing was previous the improving as into the street cuts on up and yield opportunities I got up and we haven't really seen of big pulled.
Dark yet so we do see a lot of activity in the market at a lot of capital of continuing to safe deals and so you know from our end, where you know continue to regularly test potential opportunities right knocked evaluate the berdache spread for every block and and you certainly will transaction for generates value.
Right.
Thank you and gave it it's it's.
Steve I can touch on your second question I.
We don't disclose product by product the duration of.
Mhm, 1.1 thing I would point you to an R embedded value of disclosure do disclose their the emergence of our free surplus generation and when we get tie for a 17.1 of the disclosures that are required is illustrating how that CSM will amortize over time so right.
In the meantime, I direct you to the the embedded value of disclosure. We've got products that are shorter term. We've got products that are longer term, but I think the EBIT disclosure of gifts.
Some indication of how it evolves now and then will provide that information when we when we transition diet for a 17.
Very little of follow up on on have a good summer.
Thank you. The next question is from the menu groman of the Scotiabank. Please go ahead.
Hi, good morning in the.
Other question on a new business games, we're seeing that it's a big driver of for Corp. Yes, gross the this quarter and and for some time and I'm trying to think through you know what that means in the ninth 17 world.
In terms of you know if new business games are amortized of that impact is more muted in terms of the overall contribution to Corp, Yes, hi.
Now what what steps into the breach in terms of the S. So we line to to keep the growth of going I was just wondering if you could help for me kind of think through that from of growth from according schools the perspective [noise].
[noise] Hey, many of his fur well thanks for the question on the you're absolutely right. It's a.
The new business games on treated differently on the line for a 17 basis. So as we transition from I for us for the current basis twice for 17, what you'll see is the the equivalent of the new business screens on the third.
Or of liability is established in the balance sheet of contractual service margin on so I think that will be a really important metrical movement in the contractual service module will be a really important metric in terms of measuring growth and wallets too early to be specific about the impact of fire for of <unk>.
<unk> on our financials and that's really the because the guidance of interpretations do continue to evolve what I can confidently say is the whether you're looking at the plan for US 17 earnings or movements in CSM or a combination of the 2 I think the underlying growth power of all the insurance businesses will be clear.
On the on line for a 17.
Sort of in terms of sort of assessing the sort of the the the earnings growth power is it going to be important to kind of look at both like we're not just be able to look at.
Courtyard gross but we'll have to look at that sort of underlying the servicing margin as well is that.
Kind of of what you're suggesting in terms of thinking about that issue of absolutely I think both earnings and movement and CSM will be really important metrics to look at on the eye of for 17.
I think you hit the nail on the head of many.
To be a key measure of through which to assess insurance companies going forward on the right for a 17 and the growth of CSM will be a good leading indicator for future profitability of the obviously get amortized. So I think you are on the right train as it relates to stay at them and looking at growth of the key driver of of value in the future. This is of topics that were.
Spend a lot more time discussing with you all so we're looking forward to that as we are able to provide much more clarity in the coming quarters.
Thanks for them.
Thank you for the next question is from Lamar per side of of Cormac Securities. Please go ahead.
Yeah. Thanks for my questions on the court EBITDA margin of improvement in wealth management.
Certainly I think it's possible for the according to the margin to move higher but my question is more so on the sustainability of the rate of improvement. So could you really could you talk to me about what's the outlook for the core EBITDA margin improvement over time like usually when I think of these businesses and margin of improvements I think of it as being a little.
Bit more gradual, but we're seeing quite the step up so far this year. Thanks.
Yeah. Thanks for the question of the bar, it's Paul here, Yeah, you know as you mentioned in terms of the EBIT margin, we have seen a pretty big pick up over the last year and we're now for consecutive quarters being above.
30, which was the previous guidance of of trying to get the that Mark which is obviously of a.
The new threshold reached the passenger feeling quite comfortable where we are what I would say is you know as we've.
The highlighted previously we try and target expense growth of about half of revenue growth from the genome business, but you do need to look at this over a longer term time price, we will need to invest in the business expenses will move around a little bit quarter to quarter. So it's not gonna be you know straight.
The straight trajectory on the way up we're going to have to invest in a lot of is dependent on markets, but we're focused on of what we can control and I think as you look at our franchise and the diversification and frankly of the strategic choices, we have by region, where margins are different, particularly in Asia, and Canada and by channel would just put the strength of of our retail franchise again, where we tend to see her.
<unk> margin, we're feeling really good just about our ability to consistently deliver positive that flows over the long term.
And our ability of drive efficiencies out of the global franchise, you know 1 of our milestones of quarters with the popcorn trolling and assets under management and administration for total G. U M that gives us tremendous scale for the business. So we do believe we can continue to drive margin improvement as we go forward, but you know that's going to be dependent on on market levels.
Mix of business investor preferences, et cetera, but overall I would say fundamentals of the business they're good.
We feel we can continue to drive this margin higher over the long term.
The Laura I would just add as well all of highlight but this was the out for straight quarter, where out of Cory abdominal region wall of greater the 30% that was a huge most of it for us to continue to demonstrate success in growing up for EBITDA margin and we've consistently done that notwithstanding pulls comments that we are going to see from variability to be factors that of helping us.
R I, a global scale, which is really coming to the for when you are able to pray or the.
Leverage your expense price across multiple markets. That's certainly an advantage for us on margin. The second is pull highlighted is that we have tremendous growth opportunity the geography's, which have very high margins and whilst we may see some competitive pressures on fees in certain geographies. The fact that way of growing in other geographies that are.
Higher margin is certainly a towering for us and something that we're very excited about which is why I missed the day, we highlighted the global Wham was the key opportunity for us as we look forward to not just the next couple of years, the quite frankly to the next decade.
Yeah.
Great. Thank you and then my second question is on unexpected. So so it's maybe more appropriate for Phil. So so far of 2021 of the efficiency ratio has been meaningfully below there are less than 50% target. What the seems to suggest to me is 1 of 2 things either we're likely to see the the target move down to something lower.
Or a higher Nick's ratios. So can you talk to me about which of those 2 or more likely in your view and if of higher next ratio is more likely what's gonna drive that thank you.
Hey, Lamar Thanks for the question and.
Your observation is absolutely right, we've been notably below the 50%.
Benchmark the target that we've set ourselves for 2022 and that it's been below it for a couple of courses now.
What I would highlight though is the when we talk about of 50% cost efficiency ratio. We're looking at consistently delivering that over a period of time and the always is some seasonality with expenses and I not yet satisfied that we are consistently delivering a and efficiency ratio of below 50%. So.
So that's something that I think we need to observe over a number of the more quarters. The there is a tailwind at the moment and the.
The pretax cool runnings has been growing very strongly in the first half of the year on that is favorable.
For the efficiency ratio of but I I want to emphasize from an expense management perspective.
Ah priority of is very much strategic expense management strategic cost management. So it's not about belt tightening our program is mature and we're looking to link efficiency with other elements of our strategy in particular, the digital on customer elements of our strategy.
And our ability to deliver scalable gross on this touches on the earlier question to pull the there's a real link between our ability to scale the organization on to our efficiency program because with unable to grow the business in an efficient manner, which is why both on the insurance side.
On on the wealth and asset management side, you see the operating leverage emerge.
You touched on the future on 1 of the things that [noise] I commented on on its Investor day is what happens beyond the beyond the consistently delivering of 50% the cost efficiency ratio and what we said there is the we really target to deliver positive tools, which means we expect.
The the gross pretax pre expenses cool runnings to outpace the gross.
And our expenses I think back does speak to ongoing operating leverage that would take the ratio below 50% be on 2022.
Alright, thank you.
Thank you. The next question is from of Nigel the Sousa from the very tests of investment research. Please go ahead.
Thank you good morning, I wanted to follow up on you a slice of experience in this quarter and you know with the emergence of the Delta there and you were seeing called the trends.
Diverge on the state by state basis, with some states, having more adverse experience.
I was wondering if you could refreshes on your U S life policyholder mixed geographically are there certain states that you were more concentrated in in the U S for less concentrated in and how do you expect that to translate into claim experience on on the life side of the near term.
Thanks, Nigel it it seems I can start and Marianne can add.
The comments, if if she would like 2 as well.
The reminder of the some of what we saw during the the pandemic last year for once we saw of diversity in terms of our mortality and our longevity risk. So we saw what we saw losses on our mortality business in U S. Like we saw gains in long term care now.
And those trends can.
Deviate a bit quarter to quarter, but the diversification is there.
My expectation is that we.
The predict how the variance the ball, but if we if we watch the trends right now the the rates of mortality have come down substantially and I mentioned earlier, the the protection that the the population over 65 has received I think of as a positive sign.
So depending how this emerges I would still expect to see offsets I think it is difficult to predict right now what the variance might do I do.
Marianne watched the to comment on the on geographic Max.
Yeah, having to see thank you from the geographic Miss we are across the entire you ask that of we are concentrated definitely more so than the day states like California and in the past New York, Florida, and the New England States. We have we have actually stopped selling them in New York any new business day. So.
Have some product offerings that are there we have pulled out of New York temporarily but we are generally all across the U S.
Okay, and how would I go by for longterm care as well so.
I was just adding the that would apply for the longterm care of as well so the the comment around the the diversification benefit I expect to continue to exist.
Okay that makes sense of and if I could tie that together with your you know longer term strategy of reducing the contribution to core earnings from L. T. C N V a.
Tanya previous columns together, if we have you know variants that are more vaccine resistant or skip the vaccine in COVID-19 becomes more endemic instead of a pandemic can you explain or just probably more color on how that fits with you of long term strategy to reduce the L. T. C. N V. A exposure wouldn't you want.
The the longevity exposure offset the.
To exist or to be substantially for mortality risk of elevated an endemic COVID-19 scenario, how do you think about the long term.
Sure I you know what we've seen through the the pandemic is that while we've taken some losses on the mortality side.
Relative to a balance sheet position they've not the not that material. So you know in terms of the overall mortality risks that the company has quite comfortable with that and the focus that we've got on the optimizing legacy we believe that that is a very desirable.
Desirable prudent approach.
The approach to take even if we did end up with a little bit less diversification on the mortality side, but the that we don't think that would be material for the company.
Or just chiming in the head I think Steve answered the question correctly. The diversification of certainly helped us and we saw that not just in the last couple of quarters, but quite frankly over the course of 2020, but the gross the impact on both sides of those equations of that significant any of the scheme of things and again, we see a lot of value in continuing to focus on reducing on legacy busy.
Mrs and as we mentioned that he missed the day LCC in VA will come on March great of folks for us on that certainly isn't going to change.
Okay I appreciate the color of thank you.
Thank you for the next question is from Barco Mihelich of of the RV scandal of of markets. Please go ahead.
Hi, Thank you good morning, I have the 3 questions, but all of adhere to the to question of limit.
The first question is an easy 1 I think in the U S.
Very good sales and very good new business gains.
1 of them interested in knowing is is what was the biggest driver of.
Of the increase in the new business gains and how sustainable do you think this new level is.
Thanks to Erica for the question is Marianne certainly in the in the first half of 2021, we certainly benefited from higher customer demand really across the all of our product lines and your business growth rates continue to be quite strong the the new business game, specifically for a combination of our strong sales as well as favorable margin.
And the margin increase as you can imagine with the strong sales you know we get efficiencies of scale, but it's also is the result of some of our continued discipline that we have in our pricing of our products.
A new product development as well as significant expense management that total is talking about earlier, which for all part of our strategic plan that we had set back in 2018, and so we've been really working on the profitability of the overall business. So we're quite pleased with where we have land. If we also tend to play and the portions of the market that have the highest margins as well.
And I do think that makes the difference and just a reminder of that are high net worth international business. That's ran out of Bermuda is also part of our U S segment as well on the margins on that business are very very high and we do see of competitive advantage with vitality and as we continue to go forward.
All of these factors together, we think the fundamentals of strong and there will be variability similar to what I knew I was talking about in terms of games, but I think we still feel good about the future as well.
Okay. Thank you and so.
Just to further Emphasise, you think I mean, obviously, there's variability, but we've hit sort of of new run right level give or take a few.
Give or take 10 of 20 million [laughter].
Yeah, I think that we're feeling pretty good about where we are again based on some of their ability I don't want to commit to a new line right. Obviously, the the sales gross cause of significant factor to this but on the margin side, we feel good about where the margins are and a lot of the work that we've done in order to get the profitability and it gets fine.
Okay. Thank you very much for that and my second question is probably for Steve but May also include you Marianne. So we were reading today about massive changes in Canada with respect to long term care, possibly resulting in the significantly higher costs to run on long term care homes and <unk>.
Canada clearly of different paradigm in the U S. But I know next year, you're going into the the large assumption review. So the question is.
Is this something that's on your radar screen.
How sensitive and how big of magnitude is there, possibly for a change to the expense assumptions in the long term care of blocks.
And then in the Denver instead of that is.
How quickly can you adjust premium rates based on significantly higher expenses for for a long term care I realize that a lot of parts of the the question [laughter], but any any kind of insight there would be would be interesting and helpful. Thank you.
Thanks Dark of it it's Steve I can start and Marianne may may wish to add on.
You know, we're watching closely all of the potential implications over time from from from the pandemic and that would include what the trends are in long term care, you know will there be a shift and care setting where more low more care of be delivered at home what might the cost of.
Long term care services B and the short answer is right now we don't know the I think what we saw on the second quarter as customers are just starting to feel comfortable resuming care of some kind of but in terms of the longer term trends, we're going to have to study that really really closely.
In terms of how you know if we if there were trends that emerged the question around adjusting premiums that has been the lever that we have been able to use giving customers options, we disclosed that investor day that we've achieved 9 billion of the premium increases.
Over time and continue to make progress against our our.
Our filings with the state. So it has been a very effective labor if there are clear.
Currently defined trends those are things that you know.
We we can file of poor rate increases the ones that are very clear trends, we can and will it take action. So Marianne at all past you have do you have anything to add.
Yeah, I think I think you covered it very well stated I really don't have anything to add on to that.
This is so just a quick follow up on that Steve. So the suspicion that I have brewing is you'll do your work.
And you as a company may decide to get ahead of that expense curve and possibly results and a large reserve build and then only afterwards once there was clear evidence of an increase in costs can you go back and ask for premium rate increases is that.
Is that a possible low come here.
For a likely outcome.
No lettuce, no let me be clear.
On the reserve inside given that we're talking about the long term exposure for sure I would not adjusted reserves until there were very.
Very very clear trends, that's either positive or negative by the way so the the the reserving.
My expectation of the reserving would line up with.
We need to have confidence in the trends before we would change the premium's, we need confidence in the trends before we change assumptions and then longterm care of of there are there's a variety of different things going on as I mentioned, you you've talked about the potential for higher cost I don't know if that will occur I I have not settled on that.
Other trends that could be positive would be more homecare, which tends to be less expensive. So I think we need to watch the the trends and there won't be any knee jerk reactions.
Okay. That's very helpful. Thank you for Ya.
Thank you. The next question is from Paul holding of CIBC. Please go ahead.
Thank you good morning, so [noise] for.
First question is related to premium rate increases and longterm care, while we're on the topic. It seems like we've been waiting for some of those additional rate increases to come through are there any updates there.
The the pipe off the end of each here I'll take that question. So.
We're continuing to make progress of seating rate increases in line with our original expectation we.
We you know we had recent favorable LTC pulse of their experience, but we don't think that would be detrimental to our for us are being increases.
Laid out of our based on longterm of expectations on protecting and our long term expectation haven't changed we actually also haven't seen any material impact on responsiveness on from the states on contractually permitted rate increases the pace of approval as the actually is stable and overall is consistent with the last few years.
Continued to get approvals and Q2, and we're tracking well relative to our plans and what's embedded in the reserve.
On Investor Day, we <unk>, we announced that we used to keep the over a billion dollars of the the assumed 1.9 billion embedded in our padded of reserves.
And of the 6 billion that we have actuarial justification for and we're still for cooking.
The 5 billion still outstanding and actively working on and as the steps that overall, that's $9 billion of approval on the program to date, so really of track record of execution.
Okay got it yeah I went through the reason on my <expletive> cause it's a it's a large number so the second question I had and coming back to Nevada.
Part of your answer around V. A again was you'll transact if of generates value for shareholders and I think I tried the office I'm a I'm on the last conference call [noise], but again I think it's important to set the table for everyone. In terms of you know what is the crack lens for viewing creation of of sure.
Their value on a V. A transaction just so you know the day of press release comes out everyone can kind of look at it and understand what lands, we should be viewing it in terms of Ah.
Shareholder value of creation.
Yeah, So I would say the the focus on any potential of the gate drive back then is risk reduction such.
Such as the contingent capital of risk on V. A N.
And as the playoffs transacting at a price point, that's in the best interests of the holders.
I guess, you're trying to get at how how we determined that I was just a lot of factors I mean, the risks risk reduction is a factor in that we know that earnings on variable annuities are discounted.
Different analysts do different some of the parts of analysis and you know value of of it being in a different way, but we know there's a range there and we look at that range. We look at what the pricing on the V. A transaction would be in terms of the after the release of birth the dot.
Range of multiples and that's sort of how we determine whether of transactions and the best Bang for the thrill of <unk>, along with off the seat the risk reduction of benefits.
And then maybe a follow up on on that 1 is it also fair to assume that you know what you're going to free up some capital obviously with a V. A transaction on there for the potential redeployment of the capital also goes into that value of creation of equation is the is that a fair assumption.
Yes, that's the for assumption.
Okay. Thank you.
[noise] [noise] [noise] [noise] and cute. The next question is from Microsoft Migraines Zenovich of of Crazy Suisse. Please go ahead.
A good morning question for a Neil wants to go back to the age of business and I'm just looking at the 20 per cent growth rate that you've talked about a year of your basis, and and you had a pretty big of.
Sequential step function up in Q3 of 2020, so it looks like you're coming up against the very tough comp year over year next quarter. So I'm just wondering what is it the changes in the business in the near term that's gonna get you there and keep you on that you know 15.15.
50% plus targeted growth rate because when I do look at the last 4 quarters, you haven't really had much movement, even on the C. R basis in terms of your core are we in U S dollars.
Thanks for the question. So in terms of the baby kind of think about the business is through a lens of Halloween fanning on on drivers and towards that I had to emphasize the fact that we continue to expand on.
A R. R distribution, we now have 117000 agents in Asia and excuse the bank partnerships and of course bought the agency growth as well as penetrating.
For the our bank partner base of B have significant opportunity to be able to drive and momentum on an ongoing.
Basis.
You do want to kind of highlight the fact that we have made significant investments of continued to do so in improving our digital experiencing the and specifically when it comes to Ah how distributor's interact with our customers and that had a couple of knock on impact 1 it allows us greater expense efficiency, but also it.
Loves is greater productive at the end of higher customer experience on account of the the investments that'd be on making on on Digitization of.
1 of the other points that'd be the last fit in the past on drawing alluded to that as a matter of 1 of the key strength bidding on Asia of franchise is the diversity of out of operation and from time to time, you would have noticed that if we do face the had been in 1 of marketed that's kind of been get compensated by a tale of in in the other and that is something that.
At the of would continue to kind of amplify as the kind of think about all of our reported segments of going forward. So in the short term b might have some momentum challenges on account of the the diligence of Covid on that's something that I mentioned earlier as well specifically impacting on southeast Asian markets like Vietnam.
[noise] Ah, Philippines, Indonesia, Malaysia, they have kind of seen a significant increase in COVID-19.
But as I said, we've also of gain experience of of the last 18 months to operate in the Norfolk over the environment. So we're watching that very closely but from a medium to longer Don perspective, just the second of trends in Asia, given a significant market positions in many of the geography that'd be all for it and as well as that of ongoing investment in dry.
I've on the momentum and digitization be feel pretty good about capturing the both the growth opportunity in Asia.
Okay. Thanks for the end. So you you would expect most of that growth to come into the expect the profit line going forward correct.
I would not I would say on both dry beef kind of and I again mentioned that we have been applying specific emphasis on enforced and you can see the robust growth that'd be have been able to deliver in quarter to 16% in quantity of all of this year, but you would also have.
The combine that the new business gain momentum as well because you know it's going to be highly correlated to the new business sales volumes added of as I alluded earlier as well and that's the you know the importance on ensuring that the distribution is kind of line you know your growth the drivers cannot is pretty much in order.
Is is gonna be at the emphasis for us. So I guess, that's gonna be bought the cross E. P. I S as well as the new business again.
Okay. Thanks for that and then just 1 quick 1 maybe best for Phil just wanted to ask about the 328 million new business gains, which is of course. The net number can you provide any color on the how much screen there might be in that number I'm trying to get a sense of what the actual new business.
Gains were.
On a gross basis, which would be reduced by any negative strained do you have <expletive> street in some products that you sell and the positive and others, but what what what what would be the mix more broadly.
Thanks, Mike for the question on this is Phil So the 328 million the business games, but that is on that number that does include certain products. The generate strain I don't have the specifics in front of me of how much straight news embedded within not Steve I don't know, whether you have any additional comment to make the.
Thanks, Phil.
I don't have the.
Right in front of of me, but as you can imagine we.
Given that the U it's a drag on the earnings and we do focus on on where we see.
The main coming through we're constantly overstocking at how we can improve profitability et cetera, So where we do have it at the man.
Ashton to drive marching them credit for Monday.
So the third assume that it's a it's a small number of the stream of course, it would be a small number to get to that net 328.
Hi, it's.
Certainly smaller than.
Sort of sort of the cities go other than the gross number but I don't want the.
Certainly smaller than the gross number but I like I said I don't have that handy, we could we could follow up with you, but I think that's.
Yeah, maybe we can fall prey. Thanks, so much for the color I appreciate it thanks.
Thanks, Mike.
Thank you there are no further questions that are registered at this time, a couple of all like to turn everything over to Mr call.
Thank you operator will be available after the call is there any follow up questions from a nice morning, everyone.
Thank you to call on for instance, now ended please disconnect Caroline's at this time and we thank you for your participation.