Q4 2021 Manulife Financial Corp Earnings Call
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Good morning, and welcome to the Manulife financial fourth quarter and full year 2021 financial results Conference call. Your host for today will be Mr. Hong Kong. Please go ahead Mr. <unk>.
Speaker 2: Good morning and welcome to the Manualized Financial Fourth Quarter and Full Year 2021 Results Conference.
Thank you welcome to minimize earnings conference call to discuss fourth quarter and year end 2021 financial and operating results our earnings release financial statements and DNA scope information package and webcast slides for today's call are available on the Investor Relations section of our website at dotcom shrinks.
Speaker 2: host for today will be Mr. Hung Koh. Please go ahead, Mr. Koh.
Speaker 3: Thank you. Welcome to the manualized earnings conference call to discuss our fourth quarter and year-end 2021 financial and operating results. Our earnings release financial statements and related MD&A, statistical information package, and webcast slides for today's call are available on the investor relations section of our website at www.manualized.com. Turn to slide four. We'll begin today's presentation with an overview of our fourth quarter and year-end highlights and an update on our strategic priorities by Roy Gory, our president and chief executive officer.
Slide four we will begin today's presentation with an overview of our fourth quarter and year end highlights and an update on our strategic priorities by White, our president and Chief Executive Officer.
Following remarks to Worthington partnership.
We serve will discuss the company's financial and operating results.
Speaker 3: Following voice remarks, Phil Worthington, our Chief Financial Officer, will discuss the company's financial and operating results.
After the prepared remarks, we will move onto the life question to answer this portion of the call.
Each participant to adhere to a limit of two questions, including questions you'd be happy to answer questions. Please re queue and we'll do our best to respond to all questions.
Speaker 3: After the prepared remarks, we will move on to the live question and answer portion of the call. We ask each participant to adhere to a limit of two questions, including four questions. If you have additional questions, please week you and we will do our best to respond to all questions.
Before we start please refer to slide two we caution on forward looking statements in slide 43, we note on a non-GAAP and other financial measures used in this presentation.
Speaker 3: Before we start, please refer to slide 2 for a caution on forward-looking statements and slide 43 for a note on the non-GAAP and other financial measures used in this presentation.
Certain material factors or assumptions are parking making forward looking statements and actual results may differ materially from what you stated was.
Speaker 3: Note that certain material factors or assumptions are applied in making forward-looking statements, and actual results may differ materially from what is stated. With that, I'd like to turn the call over to Roy Gorrie, our President and Chief Executive Officer. Roy. Thanks, Tom.
And I'd like to turn the call over to Roy Gori, Our President and Chief Executive Officer Roy.
Thanks, Tom Thank you everyone for joining us today.
Yesterday, we announced our fourth quarter and full year 2021 financial results and I'm incredibly proud about performance.
Speaker 4: Yesterday we announced our fourth quarter and full year 2021 financial results, and I'm incredibly proud about the performance.
You'll see on slide six we delivered record core earnings of $6 $5 billion in 2021 'twenty.
Speaker 4: You'll see on slide six, we delivered record core earnings of $6.5 billion in 2021, a 26% increase from the prior year, with double digit growth in our global WAN business.
26% increase from the prior year with double digit growth in our global land business.
We also reported record net income of $7 1 billion, an increase of $1 $2 billion over the prior year.
Speaker 4: And we also reported record net income of $7.1 billion, an increase of $1.2 billion over the prior year.
We continue to focus on growing our customer base and serving our customers evolving needs better.
It is evident.
Speaker 4: We continue to focus on growing our customer base and serving our customers evolving needs better, which is evident in our new business value increase of 31% to $2.2 billion with double-digit growth across all segments.
This value increase of 31% to $2 $2 billion with double digit growth across all segments.
This was a particularly strong result, given the COVID-19 restrictions in markets in which we operate in Asia, such as Vietnam and the Philippines.
Speaker 4: This was a particularly strong result given the COVID-19 restrictions in markets in which we operate in Asia, such as Vietnam and the Philippines.
In addition in BP margin for Asia increased by six one percentage points from the prior year, reflecting both the benefits of scale and favorable product mix.
Speaker 4: In addition, MBP margin for Asia increased by 6.1 percentage points from the prior year, reflecting both benefits of scale and favourable product mix.
And our global land business, we achieved strong net inflows of $27.9 billion triple the prior year levels, primarily reflecting continued strong growth in our retail business across all geographies.
Speaker 4: In our global wham business, we achieved strong net employees of $27.9 billion. Triple the prior year level. Primarily reflecting, continues strong growth in our retail business across all geographies.
Only 21 was a record year for our retail wealth business with net inflows of $29 $2 billion.
Speaker 4: 2021 was a record year for our retail wealth business with net inflows of $29.2 billion.
In addition, we.
We delivered very strong remittances of full point $4 billion or $2.8 billion increase from the prior year.
Speaker 4: In addition, we delivered very strong revinances of $4.4 billion, a $2.8 billion increase from the prior year.
Turning to slide seven 2021 was not without its challenges. Despite the headwinds we generated strong growth on a full year basis.
Speaker 4: Turning to slide seven. 2021 was not without its challenge.
Notably when compared to pre pandemic, our topline growth and global Wan net flows exceeded our 2019 results demonstrating the long term strength of our franchise.
Speaker 4: Despite the headwinds, we generated strong growth on a full year base.
Speaker 4: Notably, when compared to pre-pandemic, our top-line growth and global WAM net flows exceeded our 2019 results, demonstrating the long-term strength of our franchise.
The diversity of our business was a crucial factor in delivering strong financial performance in 2021.
Speaker 4: The diversity of our business was a crucial factor in delivering strong financial performance in 2021, as seen in our record core earnings and net income, as well as strong growth.
As seen in our record core earnings and net income.
As well as strong growth in new business value.
Our presence in 13 markets in Asia demonstrated the benefits of geographic diversification.
Speaker 4: Our President in 13th Market, Teneja, demonstrated the benefits of geographic diversification.
Our strong top line growth in Hong Kong, Singapore and Vietnam.
Balanced the impacts of Covid, 19, and regulatory changes in China, Japan, and other emerging markets.
Speaker 4: as strong top-line growth in Hong Kong, Singapore and Vietnam balance the impacts of COVID-19 and regulatory changes in China, Japan and other emerging markets.
We also gained share in five markets during 2021.
Our U S business drove continued sales momentum with south ahead of prior year in almost every major category and we also reported record sales in our international business.
Speaker 4: We also gain share in five markets during 2021.
Speaker 4: Our US business drove continued sales momentum with South ahead of prior year in almost every major category. And we also reported record sales in our international business.
And global wine one of our growth engines achieved double digit growth in earnings and tripled its net inflows.
Speaker 4: And Global YM, one of our growth engines, achieved double-digit growth in earnings and triple its net inflows.
In the fourth quarter, we announced a dividend increase of five cents per share, resulting in a total quarterly common shareholders' dividend of 33 cents per share or an 18% increase.
Speaker 4: In the fourth quarter, we announced the dividend increase of $5 per share, resulting in a total quarterly common share of the dividend of $0.33 per share, or an 18% increase.
This increase resumed our track record of sustained gradual dividend increases, which remains one of our top capital deployment priorities.
Speaker 4: This increase resumed our track record of sustained gradual dividend increases, which remains one about top capital deployment priorities.
We also recently launched a normal course issuer bid to repurchase up to 5% of outstanding common shares.
Speaker 4: We also recently launched a normal core issue of bid to repurchase up to 5% of outstanding common shares.
Turning to slide eight.
We are laser focused on delivering on our strategic priorities and the 2025 supplemental goes that we announced at our recent Investor day.
Speaker 4: We are laser focused on delivering on our strategic priorities and the 2025 supplemental goals that we announced at our recent investor day. Our results this year are...
Our results this year are a testament to that commitment.
Allies potential businesses accounted for 63% of total company already in 2021.
Speaker 4: Our eyes for potential businesses accounted for 63% of total company core earnings in 2021.
And we're on track to achieve our target of two thirds by 2022.
We aspire to have core earnings from the Asia region contribute 50% by 2025.
Speaker 4: and we're on track to achieve our target of two thirds by 2022. We aspire to have core earnings from the Asia region contribute 50% by 2025.
2021 would be the challenges of COVID-19 in select markets.
Core earnings from the Asia region contributed 39% of total company core earnings.
Speaker 4: In 2021, a bit of the challenges of COVID-19 in slave markets. Quarerning from the Asia region contributed 39% of total company quarantining.
We're scaling our business to grow across the diverse markets in Asia.
For example in December of 2021, we launched a 16 year exclusive bancassurance partnership with a b attend bank one of the largest financial institution in Vietnam.
Speaker 4: We're scaling our business to grow across the diverse market in Asia. For example, in December of 2021, we launched a 16-year exclusive bank assurance partnership with Via Tendek, one of the largest financial institutions in Vietnam.
This partnership significantly enhances our distribution capability in Vietnam. So offer a full suite of insurance wealth and retirement solutions to a significant percentage of the Vietnamese population.
Speaker 4: This partnership significantly enhances the distribution capability in Vietnam to offer a full suite of insurance wealth and retirement solutions to a significant percentage of the Vietnamese population.
With this transaction, we also acquired a visa Vietnam, which further enhances our scale in this important and growing market.
Speaker 4: With this transaction, we also acquired a data bit now, which further enhances our scale in its important and growing market. I will speak more on this exciting.
I'll speak more on this exciting development in a moment.
Our global land business expanded the retail product lineup beyond traditional mutual funds with new actively managed exchange traded funds in both Canada and the U S.
Speaker 4: I go over where business expensive the retail product line up beyond traditional mutual funds with new actively managed exchange traded funds in both Canada and the US.
And we furthered our separately managed accounts offering in the U S with each category generating over $1 billion in net inflows in 2021.
Speaker 4: And we furthered our separately managed accounts offering in the US with each category generating over $1 billion in net inflows in 2021.
And in the U S. We achieved record sales of products with a market, leading John Hancock vitality plus feature.
Speaker 4: And in the US, we achieved record sales of products with the market leading John Hinkoff by Tarrity Plus feature.
We believe that out vitality offering which focuses on rewarding customers for healthy living is not only the right solution that resonates with customers as they focus more on wellbeing and improving quality of life.
Speaker 4: We believe that our vitality offering, which focuses on rewarding customers for healthy living, is not only the right solution, but resonates with customers as they focus more on well-being and improving quality of life.
Our ambition is to be a leader in our industry when it comes to digital capabilities and customer experience.
Speaker 4: Our ambition is to be a leader in our industry when it comes to digital capabilities and customer experience.
We're executing on our strategy to attract engage and retain customers by delivering an outstanding experience for every interaction.
Speaker 4: And we're executing on our strategy to attract, engage, and retain customers by delivering an outstanding experience for every interaction.
During the year, we continue to make progress on our digital journey across all our operating segments.
Speaker 4: During the year, we continue to make progress on our digital journey across all our operating segments.
He's played a significant role now our ability to listen to our customers adapt and leverage our digital capabilities to better serve our customers across the globe.
Speaker 4: This played a significant role in our ability that listens to our customers, adapt and leverage our digital capabilities to better serve our customers across the globe.
Our continued investments in digital enhancements have contributed to a significant net promoter score improvements.
Speaker 4: Our continued investments in digital enhancements have contributed to our significant net promoter scoring improvement.
In 2021, we achieved a score of plus 21.
Which is a 20 point improvement from the 2017 baseline.
Speaker 4: In 2021, we achieved the score of plus 21.
And a nine point improvement from 2020.
Speaker 4: which is a 20 point improvement from the 2017 baseline. And a 9 point improvement.
In 2021, we achieved straight through processing of 82%.
Speaker 4: In 2021, we achieved straight through processing of 82%.
And we're on track to achieve our supplemental go up 88% by 2025.
Speaker 4: And we're on track to achieve our supplemental goal of 88% by 2025.
In Asia E. Pos our digital Onboarding App is supporting our agents with faster higher quality new business submissions throughout the year, 82% of applications were submitted digitally representing an increase of 22% year over year and.
Speaker 4: In Asia, E-Post, our digital onboarding app, is supporting our agents with foster, higher quality new business submissions.
Speaker 4: Throughout the year, 82% of applications were submitted digitally, representing an increase of 22% year-to-year. And 79% of these applications were auto-underwritten.
79% of these applications, where auto underwritten it.
In the U S. We completed the ice pipeline integration with the giant H brokerage yeah.
Speaker 4: In the US, we completed the iPod Line Integration with the Jane Hakes for a GGS.
This integration provides the majority of our regular distribution partners with access to next generation South tools and decreases the overall cycle time for application submitted by this preferred channel by 49% year over year.
Speaker 4: This integration provides the majority of our regular distribution partners with access to next-generation sales tools and decreases the overall cycle time for applications submitted by this preferred channel by 49% year-over-year.
It also enabled access to over 250 funds, including a new partnership with both site and its more than 11000 agents.
Speaker 4: It also enabled access to over 250 firms, including a new partnership with all states, and it's more than 11,000 agents.
These initiatives contributed to a 15 percentage point increase in overall, new business applications have been a digitally in 2020 , 1% to 71%.
Speaker 4: These initiatives contributed to a 15% percentage point increase in overall new business applications have been a digitally in 2021 to 71%.
And our golf when U S retirement business, 88% of plan participants enrolling have adopted a new digital express enrollment capability that delivers a simple fast and seamless way to enrolling that plan and benefit from access to personalized guidance.
Speaker 4: In our Golden WAN US retirement business, 88% of planned participants in rolling have adopted our new digital express enrolling capability. That delivers a simple, fast and seamless way to enrolling their plan and benefit from access to personalized guidance.
This resulted in an 11% increase in participation and six times the managed accounts conversion rate when compared to the previous enrollment process.
Speaker 4: This resulted in an 11% increase in participation and six times the managed accounts conversion rate when compared to the previous enrollment process.
Turning to slide nine.
We've now commenced our partnership with <unk> bank to establish an exclusive 16 year bancassurance partnership to better meet the growing financial and insurance needs of the Vietnam market.
Speaker 4: We've now come into our partnership with Vietnam Bank to establish an exclusive 16 year bank insurance partnership To better meet the growing financial and insurance needs of Vietnam Mark
And to make the lives of millions more Vietnamese better every day.
Beatson Bank is one of the Vietnam largest financial institutions and this partnership provides us with exclusive access to more than 14 million customers.
Speaker 4: And to make the lives of millions more of being amazed better every day.
Speaker 4: This in bank is one of Vietnam's largest financial institutions.
Through our network, although over 150 branches.
Speaker 4: And this partnership provides us with exclusive access for more than 14 million customers.
Thousand transaction offices across 63 cities and provinces.
Speaker 4: Through a network of over 150 branches and 1,000 transaction offices across 63 cities and province.
Partnering with B, it's in bank accelerate our growth trajectory in the region.
Further strengthening our leadership position in Vietnam fast growing market.
Speaker 4: Planning with Beats in Bank celebrates our growth trajectory in the region.
Solidifying our position as a leader in insurance and wealth management.
Speaker 4: So the strengthening our leadership position in Vietnam's fast growing market and solidifying our position as a leader in insurance and wealth management.
We expect the opportunities generated by this exclusive partnership so result in an immediate accretion to our earnings in the first year.
Speaker 4: We expect the opportunities generated by this exclusive partnership to resolve in an immediate accrued to our earnings in the first year.
Turning to slide 10.
I wanted to take a few minutes to highlight a tremendous success story in Vietnam, even before this exciting new partnership.
Speaker 4: I want to take a few minutes to highlight after a tremendous success story in Vietnam, even before the exciting new partnership.
Our I T cells, and new business value has grown rapidly from 2017 to 2021 at a compound annual growth rate of 27 and 51% respectively.
Speaker 4: Our AT&E sales and your business value have grown rapidly from 2017 to 2021 at a compound annual growth rate of 27 and 51% respectively.
These are impressive results considering the impact of COVID-19 restrictions during 2020 and 2021.
Speaker 4: These are impressive results, considering the impact of COVID-19 restrictions during 2020 and 2021.
This tremendous growth was powered by our professional agency force and a market leading bancassurance distribution channel.
Speaker 4: This from in the scroll with powered by a professional agency force and a market leading bank assurance distribution channel.
That propelled our market ranking from number four in 2017, so the number one position, which we've held since 2019.
Speaker 4: that propelled our market ranking from number four in 2017 to the number one position, which we've held since 2019.
Our bancassurance channel is anchored by our exclusive partnerships with cycle in commercial bank.
Speaker 4: Our bank insurance channel is anchored by our exclusive partnerships with SIGON Commercial Bank, TIGON Bank, and now, FIAZEN Bank.
Bank and now see it in bank.
Which gives us access to 24 million bank customers.
Vietnam has significant growth potential with one of Asia's highest GDP growth rates, a high proportion of working age population and life insurance penetration rates that are well below other emerging and developed markets in Asia.
Speaker 4: which gives us access to 24 million bank accounts.
Speaker 4: Vietnam has significant growth potential. With one of Asia's highest GDP growth rates, a high proportion of working age population, and life insurance penetration rates that are well below other emerging and developed markets in Asia.
Looking forward, our focus will be on further expanding and Professionalizing Our agency plan.
Speaker 4: Looking forward, our focus will be on further expanding and professionalizing our agency platform. So you can customer penetration with our bank partnerships, enhancing digital capabilities for key customer and distributor touch points, and finally, further automated processes to harness the benefits of our scale.
Seeking customer penetration without bank partnerships enhancing digital capabilities for key customer and distributor touch points and finally further automating processes to harness the benefits about scale.
Turning to slide 11 expense.
Expense efficiency is deeply embedded in our culture.
Speaker 4: 20th of flight alert, expensive efficiency is deeply embedded in our cold.
In 2021, our expense efficiency ratio improved by four percentage points, and we've achieved our target of less than 50%.
Speaker 4: In 2021, our Expensity Racial improves by 4 percentage points.
We remain focused on driving efficient growth and are committed to consistently achieving an expense efficiency ratio of less than 50% going forward.
Speaker 4: and we have achieved our target of less than 50%.
Speaker 4: We remain focused on driving efficient growth and are committed to consistently achieving an expensive efficiency ratio of less than 50% going forward.
While ensuring scalable growth out.
Standing customer experience and digital ways of working.
Speaker 4: while ensuring scalable growth, outstanding customer experience, and digital ways of working. Still will discuss...
Bill will discuss our progress in more detail.
Turning to portfolio optimization on accumulative basis, we've freed up $6 $3 billion of capital through various methods across multiple legacy blocks.
Speaker 4: Turning to portfolio optimization. On a cumulative basis, we've freed up $6.3 billion of capital through various methods across multiple legacy blocks.
Our commitment and focus on optimizing our long term care and variable annuity businesses is as strong as ever.
Speaker 4: And our commitment and focus on optimizing our long-term care, and durable and duty businesses is as strong as ever.
And we aim to achieve our 2025 supplemental goal of reducing core earnings contributions from these businesses for less than 15% of total core earnings and we'd like to see this decline further the less than 10% with inorganic actions.
Speaker 4: And we aim to achieve our 2025 supplemental goal of reducing core range contributions from these businesses to less than 15% of total core earnings. And would like to see this decline further to less than 10% with inorganic action.
I'm pleased to report that in 2020 , one we reduced the core earnings contribution from our long term care and variable annuity businesses so 20%.
Speaker 4: I'm pleased to report that in 2021, we reduce the core earnings contributions from our long-term care and variable and new-witty businesses to 20% supported by the increasing contributions from our highest potential business.
Supported by the increasing contributions from our highest potential businesses.
In addition, we entered into an agreement in the fourth quarter to reinsure, a significant portion of our legacy U S variable annuity block with Venerable Holdings, Inc.
Speaker 4: In addition, we enter into an agreement in the fourth quarter to re-insure a significant portion of our legacy U.S. durable and newly-demoq with federal bulls holding the...
I am pleased to confirm the transaction closed on February 1st.
<unk> is expected to result in approximately $2 billion of capital released in 2022.
Speaker 4: Complets confirmed the transaction close on February 1st.
Speaker 4: and is expected to result in approximately $2 billion of capital released in 2022.
This transaction positions us well to achieve our 2025 supplemental golf.
I'll go into more detail on this transaction in a minute.
Speaker 4: This transaction positions us well to achieve our 2025 supplemental goal. I will go into a bit more detail.
Our fifth priority is focused on a high performing team.
We recently completed our 2021 employee engagement survey and maintained top quartile position ranking in the 86 percentile amongst global financial services and insurance piece.
Speaker 4: This priority is focused on our high performing scene.
Speaker 4: We recently completed our 2021 employee engagement survey and maintained a top quarter of position, ranking in the 86% of among global financial services and insurance peers.
Also in October Manulife was named a world's best employer by Forbes for the second year in a row.
Speaker 4: Fourth of October , Manulite was named a world's best employer by Forbes for the second year in the rock.
Turning to slide 12, I am pleased with the successful completion of the U S. D. A reinsurance transaction on February one.
Speaker 4: Turning the 512, I'm pleased with the successful completion of the USTA re-inturance transaction on February 1st.
This transaction represents a significant milestone for manual greatly.
Greatly lowering our go forward risk profile, while reducing our exposure to the USDA guarantee value and net amount at risk in.
Speaker 4: This transaction represents a significant milestone for manuals. Greatly lowering a GoFood risk profile while reducing our exposure to the USDA guaranteed value and net amount of risk.
And it reduces our equity market sensitivity from our variable annuity guarantee by roughly 54%.
Speaker 4: And it reduces our equity market sensitivity from our variable annuity guarantee by roughly 54%.
We have unlock significant shareholder value with an estimated $2 billion of expected capital release.
Speaker 4: We have unlocked significant shareholder value with an estimated $2 billion of expected capital relief.
Which includes an after tax gain of approximately 750 million adults validating the conservatism of our reserves.
Speaker 4: which includes an arthetax game of approximately 750 million dollars, validating the conservatism of our reserve.
This represents a strong multiple of more than 10 times earnings.
We plan to deploy a significant portion of the capital released to buy back common shares to neutralize the impact of the transaction on core EPS.
Speaker 4: This represents a strong multiple of more than 10 times early.
Speaker 4: We plan to deploy a significant portion of the capital released to buy back common shares to utilize the impact of the transaction on core APS.
We remain committed to optimizing our legacy portfolio, especially L. T. C. N V and we will continue to seek opportunities to reduce risk and unlock value.
Turning to slide 13.
I'm incredibly proud of the way our colleagues around the world have continued to make decisions easier and lives better for our customers throughout 2021.
Speaker 4: I'm incredibly proud of the way our colleagues around the world have continued to make decisions easier in life better for our customers throughout 2021.
We delivered record results in 2021 underpinned by double digit growth in Asia and global win.
Speaker 4: We delivered record results in 2021, underpin by double digit growth in Asia and double land.
We've commenced the 16 year Bancassurance partnership with <unk> bank, and a quite a bit of Vietnam.
Speaker 4: We've commenced the 16-year bank insurance partnership with Pearson Bank and acquired a Vida Vignor, which further accelerates our growth in one of the most exciting markets in Asia.
Which further accelerates our growth.
One of the most exciting markets in Asia.
While we've achieved our expense efficiency ratio target of less than 50%.
We remain focused on driving efficient growth as we look forward.
Speaker 4: While we achieve our expense efficiency ratio target of less than 50%, we remain focused on driving efficient growth as we look forward.
We executed on optimizing our legacy business by completing the U S D a reinsurance transaction.
Speaker 4: We executed on optimizing our legacy business by completing the USDA re-insurance transaction, which unlock value for shareholders and reduce risks.
Which unlock value for shareholders and reduce risks.
And we continue to deploy capital by increasing the quarterly dividend by 18% in the fourth quarter and commence share buybacks under the recently launched NCI program.
Speaker 4: and we continue to deploy capital by increasing the quarterly dividend by 18% in the fourth quarter and commensurate buybacks under the recently launched NCIB progress.
Our solid foundation global presence diverse business and continued strong execution.
Speaker 4: A solid foundation global presence, diverse business, and continued strong execution uniquely positioned in thus to succeed and deliver on our growth target.
Uniquely positions us to succeed and deliver on our growth targets.
Thank you I'll hand over to Phil Witherington, who will review the highlights of our financial results Phil.
Speaker 4: Thank you. I'll hand out a bit of Phil Witherington, who will review the highlights of our financial results. Phil.
Thanks Troy.
Throughout 2021, we continued to execute on our strategic priorities and we delivered strong operating and financial results with record core earnings and net income.
Speaker 5: Thanks, Roy. Throughout 2021, we continued to execute on our strategic priorities, and we delivered strong operating and financial results with record core earnings and net income.
Our fourth quarter metrics was similarly impressive I will highlight the key drivers of both our fourth quarter and full year performance with reference to the next few slides.
Speaker 5: Our fourth quarter metrics were similarly impressive. I will highlight the key drivers of both our fourth quarter and full year performance with reference to the next few slides.
I'll start on slide 15.
Generated strong core earnings of $1 $7 billion in the fourth quarter of 2021 up 20% from the prior year quarter.
Speaker 5: I'll start on slide 15. We generated strong core earnings at $1.7 billion in the fourth quarter of 2021, up 20% from the prior year quarter. This growth was driven by a number of factors.
This growth was driven by a number of factors.
The recognition of core investment gains in the quarter.
Net fee income from higher average AUR, many in our global land business.
Speaker 5: the recognition of core investment gains in the quarter.
And new business gains in the U S and Canada.
Speaker 5: Higher-nept-sea income from higher average AUNA in our global whand business.
A decrease in the corporate and other core loss, which benefited from a lower cost of debt and higher investment income and.
Speaker 5: High-end new business gains in the US and Canada.
Speaker 5: a decrease in the corporate and other core loss, which benefited from a lower cost of debt and higher investment income, and double digit enforced business growth in Canada and Asia.
And double digit in force business growth in Canada and Asia.
These items were partially offset by unfavorable policyholder experience and lower net gains on seed money investments.
Speaker 5: These items were partially offset by unfavorable policyholder experience and lower net gains on seed money investment.
Net income attributed to shareholders of $2 $1 billion in the fourth quarter was up 19% from the prior year quarter.
Speaker 5: Net income attributed to shareholders of $2.1 billion in the fourth quarter was up 19% from the prior year quarter, reflecting growth in core earnings and gains from the direct impact of interest rates compared with losses in the prior year, partially offset by lower investment-related experience gains and lower gains from the direct impact of equity market.
Flexion growth in core earnings and gains from the direct impact of interest rates compared with losses in the prior year, partially offset by lower investment related experience gains and lower gains from the direct impact of equity markets.
Of note, we recognized the gain of $226 million from investment related experience in the fourth quarter of 2021, reflecting higher than expected returns on older primarily driven by fair value gains on private equity and infrastructure as well as strong credit experience.
Speaker 5: of note, we recognize the gain of $226 million from investment-related experience in the fourth quarter of 2021, reflecting higher than expected returns on older, primarily driven by fair value gains on private equity and infrastructure, as well as strong credit experience.
These items were partially offset by the unfavorable impact of fixed income reinvestment activities, primarily driven by the acquisition of U S Treasury bills.
Speaker 5: These items were partially offset by the unfavorable impact of fixed income reinvestment activities primarily driven by the acquisition of US Treasury bills.
$100 million of these gains were reported in core earnings as core investment gains with the remaining $126 million reported outside of core earnings.
Speaker 5: $100 million of these gains were reported in core earnings as core investment gains with the remaining $126 million reported outside of core earnings.
The gain of $274 million from the direct impact of interest rates was due to the flattening of the yield curve in Canada, and the U S as well as gains from widening corporate spreads in the U S. Partially offset by the realization of losses from the sale of a S. S bonds.
Speaker 5: The gain of $274 million from the direct impact of interest rates was due to the flattening of the yield curve in Canada and the US, as well as gains from widening corporate spreads in the US, partially offset by the realization of losses from the sale of AFS bonds.
The impact of equity markets in the quarter was a gain of $124 million.
Speaker 5: The impact of equity markets in the course, it was the gain of $124 million.
Slide 16 shows the performance of our ultra portfolio by asset class since the acquisition of John Hancock 17 years ago.
Speaker 5: Slide 16 shows the performance of our ultra portfolio by asset class since the acquisition of John Hancock 17 years ago.
The average return of the overall portfolio. During this period was nine 4% outperforming our current best estimate long term return assumption of nine 2%.
Speaker 5: The average return of the overall portfolio during this period was 9.4%, outperforming our current best estimate long-term return assumption of 9.2%.
We're pleased with the strong performance of the portfolio in 2021 that not only recovered from prior year losses, but also contributed to the $1 billion to $5 billion of total investment related experience gains over the past two years, which exceeded our core investment gains of up to $400 million per year.
Speaker 5: We're pleased with the strong performance of the portfolio in 2021 that not only recovered from prior year losses, but also contributed to the $1.25 billion of total investment-related experience gains over the past two years, which exceeded our core investment gains of up to $400 million per year, or $800 million over two years.
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$800 million over two years.
Slide 17 shows our source of earnings analysis for the fourth quarter of 2021 compared to the prior year quarter.
Speaker 5: Slide 17 shows our source of learnings analysis for the fourth quarter of 2021 compared to the prior year quarter.
Expected profit on in force increased 8% driven by in force business growth in Canada and Asia.
Speaker 5: expected profit on Inforce increased 8% driven by Inforce Business Growth in Canada and Asia.
New business gains increased 21% from the prior year period, driven by higher sales volumes and improved margins in the U S segment from our domestic and international high net worth businesses.
Speaker 5: New business gains increased 21% from the prior year period driven by higher sales volumes and improved margins in the US segment from our domestic and international high net worth businesses.
Higher sales volumes and favorable product mix in individual insurance in Canada.
Speaker 5: Higher sales, volumes and favorable product mix in individual insurance in Canada.
And higher sales volumes and the favorable impact of product repricing in Hong Kong.
Speaker 5: and higher sales volumes and the favourable impact of product repricing in Hong Kong.
Yeah.
This was partially offset by lower critical illness sales and margins in China.
Speaker 5: This was partially offset by lower critical illness sales and margins in China, lower sales amid continuing COVID-19 restrictions and unfavorable product mix in Vietnam, lower-colleys sales in Japan, as well as lower sales volumes in several emerging markets that were impacted by COVID-19 containment measures.
Lowest sales amid continuing COVID-19 restrictions and unfavorable product mix in Vietnam.
Coli sales in Japan, as well as lower sales volumes in several emerging markets that were impacted by COVID-19 containment measures.
The experience loss in the quarter was primarily driven by unfavorable policyholder experience due to elevated mortality levels, particularly in U S life.
Speaker 5: The experience loss in the quarter was primarily driven by unfavorable policyholder experience due to elevated mortality levels, particularly in US life.
Continued low lapse rates on North American protection products.
The modest charge in Asia, driven by unfavorable claims partly due to COVID-19, and persistency losses.
Speaker 5: continued low lapse rates on North American protection products.
Speaker 5: and a modest charge in Asia, driven by unfavorable claims, partly due to COVID-19 and persistency losses.
Canadian Group insurance was neutral.
And long term care policyholder experience was a modest gain.
Speaker 5: Canadian group insurance was neutral and long-term care policy holder experience was a modest game.
Slide 18 shows the history of our policyholder experience, excluding the charges related to hurricane Ida and the European floods in 2021.
Speaker 5: Slide 18 shows the history of our policyholder experience excluding the charges related to Hurricane Ida and the European floods in 2021.
The pandemic and related macroeconomic environment impacted our policyholder experience differently across product lines.
Speaker 5: The pandemic and related macroeconomic environment impacted our policy holder experience differently across product lines.
The diversity of our businesses and our use of reinsurance provided an offset between these experiences and on accumulative basis over 2020 in 2021 reduce the impacts to our net charge of less than $30 million post tax.
Speaker 5: the diversity of our businesses and our use of re-insurance provided an offset between these experiences and on a cumulative basis over 2020 and 2021 reduce the impacts to a net charge of less than $30 million post-tack.
Slides 19, and 20 show our earnings by segment and return on equity.
Speaker 5: Sides 19 and 20 show our earnings by segment and return on equity.
I will comment on the fourth quarter results compared with the prior year quarter.
We delivered core earnings growth of 30% and a global one business, reflecting growth in net fee income driven by higher average <unk> that benefited from the favorable impact of markets and net inflows as well as favorable business mix and higher tax benefits.
Speaker 5: I will comment on the fourth quarter results compared with the prior quarter.
Speaker 5: We delivered core earnings growth of 30% in our global wham business, reflecting growth in net-fee income driven by higher average AUMA that benefited from the favorable impact of markets and net inflows, as well as favorable business mix and higher tax benefit.
Core earnings in Asia was consistent with the prior year as in force business growth was offset by modestly unfavorable policyholder experience, which included COVID-19 related claims losses.
Speaker 5: Core earnings in Asia was consistent with the prior year as in-force business growth was offset by modestly unfavorable policyholder experience, which included COVID-19 related claims losses, lower new business gains, and lower investment income on allocated capital.
Our new business gains and lower investment income on allocated capital.
Core earnings in Canada decreased by 9% as less favorable policyholder experience in group insurance lower investment income on allocated capital in the non recurrence of a release of tax provision in the fourth quarter of 2020 were partially offset by higher expected earnings across all businesses.
Speaker 5: Core earnings in Canada decreased by 9% as less favorable policyholder experience in group insurance. Lower investment income on allocated capital and the non-recurrence of a release of tax provision in the fourth quarter of 2020 were partially offset by higher expected earnings across all businesses and higher individual insurance sales.
And higher individual insurance sales.
Core earnings in the U S increased by 1%, reflecting new business gains from higher sales and improved margins, partially offset by lower investment income on allocated capital lower but still favorable long term care policyholder experience and lower tax benefits.
Speaker 5: Core earnings in the US increased by 1% reflecting new business gains from higher sales and improved margins, partially offset by lower investment income on allocated capital, lower but still favorable long-term care policy holder experience and lower tax benefits.
The core loss in corporate and other improved by $217 million, primarily driven by the recognition of core investment gains in the quarter compared with nil core investment gains in the prior year quarter lower interest on allocated capital to operating segments.
Speaker 5: The call-os in corpus and other improved by $217 million, primarily driven by the recognition of core investment gains in the quarter compared with NIL core investment gains in the prior year quarter, lower interest on allocated capital to operating segments.
Lower interest on external debt and higher investment income and gains on sales of a F. S equities.
Speaker 5: lower interest on external debt and higher investment income and gains on sales of AFS equities.
These gains were partially offset by the unfavorable impact of market some seed money investments compared with gains in the prior year.
Speaker 5: These gains were partially offset by the unfavorable impact at markets on seed money investments compared with gains in the prior year.
We delivered core ROE of 12, 7% in the fourth quarter and 13% for 2021.
Speaker 5: We delivered core ROE of 12.7% in the fourth quarter and 13% for 2021.
Turning to slide 21, which shows our new business value generation.
Speaker 5: Turning to slides 21, which shows new business value generation.
In this uncertain environment, we have adapted to better serve our customers across the globe, resulting in the double digit growth in our NBC in 2021.
Speaker 5: In this uncertain environment, we have adapted to better serve our customers across the globe, resulting in the double-digit growth in our NBV in 2021.
In the fourth quarter of 2021, we delivered new business value of $555 million up 17% from the prior year quarter.
Speaker 5: In the fourth quarter of 2021, we delivered new business value of $555 million, up 17% from the prior year quarter.
In Asia, and DZ increased 11% from the prior year quarter, reflecting higher sales volumes favorable interest rates and disciplined expense management in Hong Kong.
Speaker 5: In Asia, NBV increased 11% from the prior year quarter, reflecting higher sales volumes, favorable interest rates, and disciplined expense management in Hong Kong, as well as favorable product mix in Asia other, partially offset by lower sales in Japan and China.
As well as favorable product mix in Asia, other partially offset by lower sales in Japan and China.
In Canada, NBC increased 26% from the prior year quarter, primarily due to higher margins in annuities and higher volumes in individual insurance.
Speaker 5: In Canada, NBV increased 26% from the prior year quarter, primarily due to higher margins in annuities and higher volumes in individual insurance.
In the U S N BZ increased 51% from the prior year quarter, primarily driven by higher sales volumes and favorable product mix, notably from our international business, which is reported as parts of the U S segment.
Speaker 5: In the US, NBV increased 51% from the prior year quarter, primarily driven by higher sales volumes and favourable product mix, notably from our international business, which is reported as part of the US segment.
And on a full year basis NBC grew at a double digit rate compared with both the prior year and the pre pandemic level in 2019.
Speaker 5: And on a full year basis, NBC grew as a double-digit rape compared with both the prior year and the pre-pandemic level in 2019.
Our Asia business generated the majority of total NPV of the company and delivered a growth of 27% in 2021 compared with the prior year, reflecting the diversity and distribution strength of our franchise, which also allowed us to gain share in various markets across the region.
Speaker 5: Our Asia business generated the majority of total NBV of the company and delivered a growth of 27% in 2021 compared with the prior year, reflecting the diversity and distribution strength of our franchise, which also allowed us to gain share in various markets across the region. Slide 22.
Slide 22 shows our <unk> sales in.
In the fourth quarter of 2021, we delivered APE sales of $1 4 billion, a 5% increase from the prior year quarter.
Speaker 5: In the fourth quarter of 2021, we delivered AP eSales of $1.4 billion, a 5% increase from the prior year quarter.
Asia, a P E sales declined by 6%.
In Hong Kong, a P E sales increased 11%. Despite the effect of COVID-19 containment measures continued to constrain cross border travel between Hong Kong and mainland China.
Speaker 5: Asia, AP, eSales declined by 6%.
Speaker 5: In Hong Kong, APE sales increased 11%, despite the effect of COVID-19 containment measures that continued to constrain cross-border travel between Hong Kong and mainland China.
The increase in a P. E sales reflects strong growth in our bank channel and demand from mainland Chinese visitors through a Macau brunch.
Speaker 5: The increase in APE sales reflects strong growth in our bank channel and demand from mainland Chinese visitors through our Macau brand.
Asia other eight T cells were in line with the prior year quarter as expansion in the Bancassurance channel was offset by lower agency sales, which were adversely impacted by COVID-19 containment measures in markets, such as Vietnam and the Philippines.
Speaker 5: Asia other APE sales were in line with the prior year quarter, as expansion in the Bank of Florence channel was offset by lower agency sales, which were adversely impacted by COVID-19 containment measures in markets such as Vietnam and the Philippines.
The growth in Hong Kong, and overall stability of Asia. Other markets was more than offset by a 44% decline in Japan coli sales, reflecting a continuation of the trend seen in previous quarters.
Speaker 5: The growth in Hong Kong and overall stability of Asia other markets was more than offset by a 44% decline in Japan Coli sales reflecting a continuation of the trend seen in previous quarters.
In Canada, <unk> sales increased by 20%, primarily driven by increased customer demand for our lower risk segregated fund products and higher individual insurance sales.
Speaker 5: In Canada, APE sales increased by 20%, primarily driven by increased customer demand for our lower risk-secnegated fund products and higher individual insurance sales.
In the U S segment, <unk> sales increased by 41% due to strong customer demand for our international high net worth solutions and differentiated domestic product offerings, which include the John Hancock vitality feature.
Speaker 5: In the US segment, APE sales increased by 41% due to strong customer demand for our international high net worth solutions and our differentiated domestic product offerings, which include the John Hancock Vitality feature.
For 2021 overall AP sales grew at a double digit rate compared with the prior year and also exceeded the pre pandemic level in 2019.
Speaker 5: For 2021, overall AP sales grew at a double digit rate compared with the prior year and also exceeded the pre-pandemic level in 2019.
Turning to slide 23.
Our global <unk> business continued to benefit from our geographic and line of business diversification as evidenced by strong net inflows of $8 1 billion and gross flows of $36 billion in the fourth quarter.
Speaker 5: Turning to slide 23, our global whan business continued to benefit from our geographic and line of business diversification as evidenced by strong net inflows of $8.1 billion and gross flows of $36 billion in the fourth quarter.
In retail net inflows was seven 5 billion compared with net inflows of $3 $6 billion in the prior year quarter.
Speaker 5: In retail, net inflows were $7.5 billion compared with net inflows of $3.6 billion in the prior year quarter.
The increase reflects strong intermediary sales and higher institutional model allocations in the U S as well as higher gross flows in Japan and China.
Speaker 5: The increase reflects strong, infamy-du-resales and higher institutional model allocations in the US, as well as higher gross flows in Japan and China.
Institutional asset management net inflows were $1 $6 billion compared with net inflows of $1 billion in the prior year quarter.
Speaker 5: Institutional asset management net inflows were $1.6 billion compared with net inflows of $1 billion in the prior year quarter.
The increase was driven by lower redemptions in timberland and real estate mandates, partially offset by lower gross flows in fixed income mandates.
Speaker 5: The increase was driven by lower redemptions in Timberland and real estate mandates, partially offset by lower gross flows in fixed income mandates.
During the fourth quarter, we continued building out our private markets business with the successful fund raising of approximately $7 billion on two funds with commitments from both third party investors and Manulife General account.
Speaker 5: During the fourth quarter, we continued building out our private markets business with the successful fundraising of approximately $7 billion on two funds with commitments from both third-party investors and manualised general account.
Approximately one quarter of the fund raising from third party investors, who is being deployed and reflected in our <unk> with the remainder to be deployed over the next several years.
Speaker 5: approximately one quarter of the fundraising from third-party investors has been deployed and reflected in our AUM with the remainder to be deployed over the next several years.
In retirement net outflows were $1 billion compared.
Compared with net outflows of $1 $8 billion in the prior year quarter.
Speaker 5: In retirement net outflows were $1 billion compared with net outflows of $1.8 billion in the prior year quarter. The reduction in net outflows was driven by higher gross flows across all geographies, reflecting higher growth in new plant sales and member contributions, partially offset by higher plant redemption.
The reduction in net outflows was driven by higher gross flows across all geographies, reflecting higher growth in new pump sales and member contributions partially offset by higher upon redemptions.
Close to <unk> $6 billion of the retirement outflows were captured in our retail net inflows as we rolled over plan participants to our retail platforms.
Speaker 5: close to $0.6 billion of the retirement ad flows were captured in our retail net inflows as we rolled over planned participants to our retail platform.
We continued to see strong net inflows in the Hong Kong N P F business, retaining our number one market rank by assets under management and net flows.
Speaker 5: We continue to see strong net inflows in the Hong Kong MPF business, retaining our number one market rank by assets under management and net flows.
Overall global ones average <unk> increased by 17% in the fourth quarter compared with the prior year quarter, driven by the favorable impact of markets and higher net inflows.
Speaker 5: Overall, global wham's average AUMA increased by 17% in the fourth quarter, compared with the prior year quarter driven by the favourable impact of markets and higher net inflows.
Turning to slides 24.
Net fee income yield remains resilient, reflecting our diversified business mix and our.
Speaker 5: Turning to slide 24, net fee income yield remains resilient, reflecting our diversified business mix, and our core EBITDA margin increased 70 basis points driven by a combination of high net fee income, operational benefits from increased scale, and continued disciplined expense management.
Our core EBIT margin increased 70 basis points, driven by a combination of higher net fee income operational benefits from increased scale and continued disciplined expense management.
Turning to slide 25 in.
In 2021, we achieved annual savings of $100 million, resulting from the restructuring announced in the first half of the year.
Speaker 5: Turning to slide 25. In 2021, we achieved annual savings of $100 million, resulting from the restructuring announced in the first half of the year.
Our culture of expense sufficiency has resulted in a modest growth of 5% and core general expenses in 2021, which was far outpaced by the 25% increase in pretax core earnings.
Speaker 5: Our culture of expense efficiency has resulted in a modest growth of 5% in core general expenses in 2021, which was far outpaced by the 25% increase in pre-tax core earnings.
This contributed to a full percentage point decrease in our expense efficiency ratio to 48, 9% in 2021 and as Roy mentioned, we have achieved our target of less than 50%.
Speaker 5: This contributed to a 4%-percentage point decrease in our expense efficiency ratio to 48.9% in 2021. And as Roy mentioned, we have achieved our target of less than 50%.
We remain focused on driving efficient growth and are committed to consistently achieving an expense efficiency ratio of less than 50% with scalable operations to support growth and digital tools to provide an outstanding customer experience.
Speaker 5: We remain focused on driving efficient growth and are committed to consistently achieving an expense efficiency ratio of less than 50 percent with scalable operations to support growth and digital tools to provide an outstanding customer experience.
Turning to slide 26, we continue to maintain a strong balance sheet and capital position.
Speaker 5: Turning to slide 26, we continue to maintain a strong balance sheet and capital position.
We have $27 billion of capital above the supervisory target and our line count ratio of 142% is strong.
Speaker 5: We have $27 billion of capital above the supervisory target, and our likeact ratio of 142% is strong.
The four percentage point increase compared with the third quarter was driven by a net capital issuance and favorable market movements, primarily from lower risk free rates.
Speaker 5: The 4% point increase compared with the third quarter was driven by a net capital issuance and favorable market movements primarily from lower risk free rates.
Our financial leverage ratio increased <unk> three percentage points driven by the net capital issuance largely offset by growth in retained earnings and an increase in the value of <unk> debt securities.
Speaker 5: Our financial leverage ratio increased 0.3 percentage points driven by the net capital issuance, largely offset by growth and retained earnings, and an increase in the value of AFS step securities.
I would note that we have recently announced our intention to redeem $725 million of preferred shares.
Speaker 5: I would note that we have recently announced our intention to redeem $725 million of preferred shares. The impact of these reductions will be reflected in the like at and leverage ratios for the first quarter of 2022.
The impact of these redemptions will be reflected in the light cat and leverage ratios for the first quarter of 2022.
Adjusted for these redemptions, the pro forma like cat and leverage ratios would be 141% and 25% respectively.
Speaker 5: adjusted for these redemptions, the proformer likeat and leverage ratios would be 141% and 25% respectively.
Turning to slide 27, and our financial performance for the fourth quarter and full year 2021.
Speaker 5: Turning to slide 27 and our financial performance for the fourth quarter and four year 2021.
As mentioned in 2021, we delivered double digit net income core earnings NBC and <unk> sales growth and achieved strong net inflows in our global lab business.
Speaker 5: As mentioned, in 2021, we deliver double-digit net income, core earnings, NBV and APE sales growth, and achieved strong net inflows in out global wham business.
Our strong balance sheet as evidenced by a light cat and leverage ratios provides us with financial flexibility to deliver on our strategic and capital deployment priorities.
Speaker 5: Our strong balance sheet, adevidence by our like at and leverage ratios, provides us with financial flexibility to deliver on our strategic and capital deployment priorities.
Remittances increased by $2 $8 billion to a total of $4 4 billion in 2021 with positive contributions across all geographies.
Speaker 5: remittances increased by $2.8 billion to a total $4.4 billion in 2021 with positive contributions across all geographies.
We continued to execute on our capital deployment priorities, including a strong track record of delivering progressive dividend increases.
Speaker 5: We continue to execute on our capital deployment priorities, including a strong track record of delivering progressive dividend increases.
We're pleased to have made an 18% increase in our quarterly common share dividend in the fourth quarter, which combined the annual increase for 2021 with an accelerated annual increase for 2022.
Speaker 5: We're pleased to have made an 18% increase in our quarterly common shared dividend in the fourth quarter, which combined the annual increase for 2021 with an accelerated annual increase for 2022.
In addition, we will be deploying capital to buying back shares under the recently launched in CIB program of up to 5% of outstanding common shares to generate shareholder value and to neutralize the impact on core EPS from the U S VA reinsurance transaction.
Speaker 5: In addition, we will be deploying capital to buyback shares under the recently launched NCID program of up to 5% of outstanding common shares to generate shareholder value and to neutralize the impact on core EPS from the US VA Reinsurance Transaction.
Slide 28 outlines our medium term financial targets and recent performance. We're pleased with our strong results in 2021, which met or exceeded most of our medium term targets.
Speaker 5: Slide 28 outlines our medium term financial targets and recent performance.
Speaker 5: We're pleased with our strong results in 2021, which met or exceeded most of our medium-term target.
Core EPS growth of 18% exceeded our target while core ROE was in line with target and the dividend payout ratio remains within our target range.
Speaker 5: Core EPS growth of 18% exceeded our target, while Core ROE was in line with target, and the dividend payout ratio remains within our target range.
The leverage ratio was modestly above target, but it would be at 25% after adjusting for the announced preferred share redemptions.
Speaker 5: The leverage ratio is modestly above target, but would be at 25% after adjusting for the announced preferred share redemption.
This concludes our prepared remarks, operator, we will now open the call to questions.
Speaker 5: This concludes our prepared remarks. Operator, we will now open the call to questions.
Thank you we.
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And the first question is from Scott Chan from Canaccord Genuity. Please go ahead.
Speaker 2: The first question is from Scott Chan from Canacor Genuity. Please go ahead.
Oh, Thank you very much good morning.
So first on just on the rate environment, a lot has changed over the last two three months in terms of the futures market pricing.
Speaker 6: So just on the weight environment, a lot of streams over the last two, three months in terms of the features, market pricing, both in the U.S. and Canada. I think five weight hikes for both in 2022 is consensus. And like outside of the negative impact for YCAP ratio, can you kind of talk about, and remind us kind of the puts and takes or positives on the changing weight environment that we could see this year?
Both in U S and Canada, I think five to eight hikes for both in 2022.
As consensus.
The negative impact of a lifetime ratio can you kind of talk about remind us kind of the puts and takes are positives on the changing rate environment that we could see this year.
Yeah. Thanks for that question, Scott Roy Gori here, I'll start and I'll ask bill to chime in but some thoughts from his perspective.
Speaker 4: Thanks for that question. It's got Roy Gourig here. I'll start and I'll ask Phil to chime in with some tools from his perspective. Obviously higher inflation and often translates into higher interest rates and that is generally a positive for our organization. I remind everyone that a 50 basis point increase in fixed income market yields translates into a positive PV improvement of $1.85 billion in embedded value.
Obviously higher inflation, often translates into higher interest rates and that is generally a positive for our organization and I'll remind everyone that a 50 basis point increase in fixed income market yields translate into a positive PD improvement of $1 $8 billion and embedded value.
Clearly there are some puts and takes in the negatives of higher inflation is that you have higher costs and expenses, but for our organization. We've been very focused on driving the benefits of scale and digitizing our business, which has translated into Boston proving our efficiency quite significantly over the last few years and achieving our lessons.
Speaker 4: Now, clearly there are some puts and takers and the negatives of higher inflation is that you have higher costs and expenses. But for our organization, we've been very focused on driving the benefits of scale and digitizing our business, which is translated into asking for improving our efficiency quite significantly over the last few years and achieving our less than 50% efficiency target in 2021, which we believe again will be a tailwind for us as we look to 22 and beyond.
50% efficiency target in 2021, which we believe the game will be.
I always for us as we look to 'twenty two and beyond.
So again, there are puts and takes but I would just generally conclude that fire Reits are a positive for us there were a bit of a tailwind there are some aspects of our business where higher rights.
Speaker 4: So again, there are puts and takes, but I would just generally conclude that higher rates are a positive for us. There are a bit of a tailwind. There are some aspects of our business where higher rates will create some headwinds, but we have flexibility as it relates to driving scale through expenses or price changes to offset those. And generally we think that that's a positive for us. But you may want to supplement.
Will create some headwinds, but we have flexibility as it relates to driving scale through expenses or price changes to offset those and generally we think that that's that's our.
It's a positive for us, but bill you may want to supplement.
Sure. Thanks, Troy and thanks for the question Scott the other point that I would supplement that is that when rates go up we will go down much of our portfolio is now either participating or pass through and what that means is that we are to some extent insulated.
Speaker 5: Sure, thanks, Roy. And thanks for the question, Scott. The other point that I would supplement there is that, whether a grade scope will go down, much of our portfolio is now either participating or pass through. And what that means is that we are, to some extent, insulated from the liability impact where we're able to share that with.
From the liability liability impact, where we're able to share that with our policyholders and in some cases. The same is true with inflation as well and we do see that that correlation between interest rates and inflation, that's what's playing out in the current environment.
Speaker 5: policyholders and in some cases the same is true with inflation as well and we do see that Colleulation between interest rates and inflation. That's what's playing out in the current environment
Okay and just my second question, if I look at Manulife Bank core earnings.
Speaker 6: Okay, and just my second question, if I look at manualized bank core earnings, it was down for the first time in a while, I think it was down quarter of a quarter and so we can present year over year where we see all bank earnings being positive in this environment. So I see the assets were up quarter of a quarter but just wondering if there was any drivers at that and then they come to client that you can call out.
It was down for the first time in a while I think it was down quarter over quarter and 17% year over year, while we see all bank earnings positive in this environment. So I see the assets were up quarter over quarter, but just wondering if there was any.
Or is the thought.
Some decline that you can call out.
Yeah, Hi, Scott, It's Mike Doughty on the bank there was in the Q in Q4 of last year, there was a accounting policy change.
Speaker 7: Hi Scott, it's Mike Doudy. On the bank, there was in the queue, in queue four of last year, there was a accounting policy chain.
Didn't reoccur this year, so that was primarily the drop in the fourth quarter over the course of the of the year. The bank actually did grow that was largely driven by the release of credit provisions that we had set up in the previous year. Some equity gains that we got off of good markets and then <unk>.
Speaker 7: which didn't recur this year. So that was primarily the drop in the fourth quarter. Over the course of the year, the bank actually did grow. That was largely driven by the release of credit provisions that we had set up in the previous year. Some equity gains that we got off of good markets. And then offset by the net interest compression that we experienced during 2021.
Set by the <unk>.
Net interest compression that we experienced during 2021.
Got it thanks for that.
Thank you. The next question is from many Raman from Scotia Capital. Please go ahead.
Hi, good morning, a little bit of a bigger picture question Theres been a lot of ink spilled over the last little while on <unk>.
Speaker 2: The next question is from many ramen from Scotiacapital. Please go ahead.
Speaker 3: Hi, good morning. A little bit of a bigger picture question. There's been a lot of spill over the last few while on Hong Kong population declines there, brain drains, ex-patch leaving locals fleeing. I'm just wondering, obviously, this market very, very well to an important market for you. What's your perspective there and the impact, the potential impact on your business?
Hong Kong population declines there brain drain expats, leaving local fleeing I'm. Just wondering obviously you know this market very very well, it's an important market for you what's your perspective there.
And the impact.
The potential impact on your business there.
Thanks for the question Manny This is another advantage.
If you look at our Hong Kong.
Speaker 8: Thanks for the question, Marie. This is Anil Vaadban here. So.
It has been exceedingly resilient and strong despite some of the challenges and you can go back to 2019.
Speaker 8: If you look at our Hong Kong business, it has been exceedingly resilient and strong.
And if you look at our last 17 quarters, we have been able to deliver positive core earnings growth in Hong Kong Johan here for the last 17 quarters and even if you want to kind of simply look at our quarter four earnings.
Speaker 8: despite some of the challenges and we can go back to 2019. And if you look at our last 17 quarters, we have been able to deliver positive co-learnings growth in Hong Kong.
Speaker 8: You're on here for the last 17 quarters and even if you were to kind of simply look at our quarter four earnings in Hong Kong or for that matter, fully your earnings in Hong Kong
In Hong Kong, all product might affiliate earnings in Hong Kong, we were able to deliver 17% growth on the back of a 32% new business value growth in that market. This pretty much got it underscores a few things one.
Speaker 8: We were able to deliver 17% growth on the back of a 32% new business value growth in that market.
Underscores the quality of our franchise and the baby has been investing in expanding our distribution, our digital and our people capability. It also kind of underscores our execution capabilities and as a consequence of that and Phil.
Speaker 8: This pretty much kind of underscores a few things. One.
Speaker 8: It underscores the quality of a franchise and the way we have an investing in expanding our distribution, our digital and our people capabilities.
Speaker 8: It also kind of underscores our execution capabilities and our consequence of that end.
Phil mentioned that in his opening remarks, we have been able to gain market share.
Speaker 8: Phil mentioned that in his opening remarks, we have been able to gain market share.
Four consecutive years.
This important market our drivers beat our agency now stands at $11 six over 11600, a partnership with DBS and brokers have never been stronger and we feel very confident that Hong Kong is well positioned to be able to navigate some of the headwinds as we have.
Speaker 8: for consecutive years in this important market. Our drivers beat our agency now stands at 11,600 our partnership with DBS and brokers have never been stronger. And we feel very confident that Hong Kong is well positioned to be able to navigate some of the headwinds as we have demonstrated now for a few years.
<unk> demonstrated now for quite a few years.
Additionally, Hong Kong will benefit from the opening of borders and with a greater velocity of mainland Chinese visitor customer.
Speaker 8: Additionally, Hong Kong will benefit from the opening of borders and with the greater velocity of mainland Chinese visitor customers, as well as initiators like GBA, that's going to result into further acceleration of the movement of resources and capital and Hong Kong and Macau, where we have a very strong distribution. We are likely to benefit from from from that.
As well as initiatives like GBA. That's dollar results into further acceleration of the movement of resources and capital in Hong Kong and Macau <unk> have a very strong.
Distribution.
Are likely to benefit from from that.
Thanks for that and then maybe just as a related question just if you could update us on.
The COVID-19 environment.
Speaker 3: Thanks for that. And then maybe just as a related question, just if you could update us on the COVID environment, in the Asia region, how you're seeing that play out in terms of your business, we're seeing obviously lockdowns in Hong Kong intensify. I'm just wanna get you go across your key markets. Are there any areas where we should expect an improvement in Q1 in particular?
In the Asia region, how youre seeing that play out in terms of your business.
We're seeing obviously lockdowns in Hong Kong intensify I'm just wondering if you go across your key markets are there any areas, where we should expect an improvement in Q1 in particular.
Sure. Thanks for the question once again 90 so.
As I said, our results have been quite resilient and we have been booking with the backdrop of Covid and I'll put a couple of years and in light of that a result bought in quarter four as well as for the full year to anybody one has been quite resilient now obviously.
Speaker 8: So thanks for the question once again, Nani. So as I said, our results have been quite resilient and we have been working with the backdrop of COVID now for a couple of years. And in light of that, our results both in quarter four as well as for the full year 2021 have been quite resilient.
The onset of Omicron C H.
Speaker 8: Now, obviously, the onset of Omicron can have reached a bit of uncertainty. And that makes it a little bit hard for us to predict, given the fact that it's unknown as to how the spread, as well as the containment measures, I'm going to pan out in the different geographies.
A bit of uncertainty and that makes it a little bit hard for us to kind of predict given the fact that it's unknown as to how the spread as well as the containment measures are going to pan out in the different geography, but what our strength has been is the diversified nature of our markets. That's really been a source of strength for us.
Speaker 8: But what our strength has been is the diversified nature of our markets that really been a source of strength for us and a key contributor to the way we've been able to navigate some of the headwinds over the last couple of years.
And a key contributor to the way, we have been able to navigate some of the headwinds over the last.
Over the last couple of years, so that Mike and our board of Canada to put us in the short term, but given the secular trends given the underpenetrated in Asia the demand for protection and retirement products is quite undeniable and again, given our market leading positions in many of the significant geography, we are very well positioned to be able.
Speaker 8: So that might can oppose a challenge or two for us in the short term, but given the secular trends, given the under penetration in Asia, the demand for protection and retirement products is quite undeniable. And again, given our market leading positions in many of the significant geographies, we are very well positioned to be able to address that opportunity.
To address that opportunity.
Hey, Manny its tolerance here I just I just wanted to add a couple of comments from the global wealth and asset management side, because while Neil comment from an insurance perspective, our platforms that we have in Asia have really been able to kind of weather through the COVID-19 impact we haven't seen a material impact on our wealth and asset management business and the flows have been quite quite strong even with.
Speaker 7: Hey, many of you. It's Paul Lorenz here. I just wanted to add a couple comments from the Global Welfare Management side because while annealed comment from an insurance perspective, our platforms that we have in Asia have really been able to kind of weather through the COVID impact. We haven't seen a material impact on our Welfare Management business and the flows have been quite strong, even with just because of the digital platforms we have there in the reach.
Just because of the digital platform, we have there and the reach.
And to your first question from a retirement perspective, we haven't seen a material impact at all from the immigration concerns that you mentioned, nor do we expect it to have an impact on our retirement business. In fact 2021 was our best year ever our flows and AUM increased year to date versus prior year. They were both faster than the market our net flow market share was 48%.
Speaker 7: And to your first question from our retirement perspective, we haven't seen a material impact at all from the immigration concerns that you mentioned, nor do we expect it to have an impact on our retirement business. In fact, 2021 was our best year ever. Our flows in AUM increase.
Speaker 7: Year to date versus prior year they were both faster than the market or net flow market share was 48 percent
And our markets are AUM market share was 27%, which was up from $24 six the year before so we actually think we're really well positioned particularly as immigration picks.
Speaker 3: and our market, our AUM market here was 27% which was up from 24.6 the year before. So we actually think we're really well positioned, particularly as immigration picks up.
<unk>.
Nothing comes back Kong that we've got such a great franchise, there that will benefit over time.
Speaker 9: that comes back, Kong, that we've got just such a great franchise there that will benefit over time.
Got it thank you Paul.
Thank you. The next question is from Humphrey Lee from Dowling and partners. Please go ahead.
Speaker 2: The next question is from Humphrey Lee from Dowling and Partners. Please go ahead.
Good morning, and thank you for taking my questions to stay with the question with Paul.
Looking at the global Wham retail for US were really strong. This is actually surprising given many of your asset manager peers have sizable outflows due to rebalancing I was just hoping if you can provide a little bit more color in terms of the geographies and the products that youre getting the inflows.
Speaker 4: Good morning and thank you for taking my questions. To stay with a question with Paul, looking at the global wham retail flows were really strong. This is actually surprising, given many of your SM manager peers have sizable outflows due to rebalancing. I was just hoping if you can provide a little more color in terms of the geographies and the products that you're getting to inflows and how should we think about the outlook for 2022.
How should we think about the outlook for 2022.
Yeah. Thanks Humphrey, it's Paul here, Yeah, we're really pleased with the flows of the continued momentum we had been driven for the business and you mentioned retail I'll start with that we had $7 5 billion inflows in retail a lot of that growth was driven by pretty much all regions contributed to the strength I'll start with the U S. So the U S definitely.
Speaker 9: Yeah, thank you for your name Paul here. Yeah, we're really pleased with the flows of the continuum momentum we've been driven for the business. And you mentioned retail. I'll start with that. We had 7.5 billion in flows in retail. A lot of that growth was driven by pretty much all regions contributed to the strength. I'll start with the US. So the US definitely was the biggest contributor. Was there six consecutive quarter of Pog the net flows?
The biggest contributor was our sixth consecutive quarter of positive net flows what we're seeing there is continued strength into our fixed income franchise, particularly core fixed income. We also saw rotation to value last year, and we have a very strong lineup as it relates to some of our value value focused equity funds and so we're benefiting from that Canada continues to drive.
Speaker 9: What we're seeing there is continued strength into our fixed income franchise, particularly core fixed income. We also saw a rotation to value last year, and we have a very strong lineup as it relates to some of our value focused equity funds, and so we're benefiting from that.
Strong net flows for the franchise, we've got a very strong performing platform. There I think we've been recognized three years in a row with the top performing fund platform and in Asia. We saw very strong growth as I just mentioned, particularly in the retail platform relative to our size last year are flows that are net flows in Asia relative to our AUM I think we're close to 40%. So we.
Speaker 9: Canada continues to drive strong net flows for the franchise. We've got a very strong performing platform there. I think we've been recognized three years in a row with the top performing fun platform.
Speaker 9: And in Asia, we saw very strong growth, as I just mentioned, particularly in the retail platform relative to our size last year, our net close in Asia relative to our AUM, I think we're close to 40%. So we saw very strong close in Asia across the board. Just in terms of what's selling in some of those outside of the US, we've got pretty, pretty balanced franchise in Canada. So you would have seen in the asset mix, we have seen, started to see more equity flows and balance flows.
So very strong flows in Asia across the board just in terms of what's selling and some of those outside of the U S. We've got pretty pretty balanced franchise in Canada.
So as you would've seen in the asset mix, we have seen started to see more equity flows in balance flows and you would see that through the change in our asset mix from from about a year ago. So we feel really good about just the strength of the retail franchise. Our overall performance in our distribution reach and then the fact that the contributions coming from all three.
Speaker 9: and you would see that through the change in our asset mix from about a year ago. So if you really get a vote.
Speaker 9: just the strength of the retail franchise, their overall performance in our distribution reach, and then the fact that the contributions coming from all three.
<unk> the only other comment worth, noting and Phil mentioned, that's because we shared this at Investor Day is we also had saw some success in our private markets business on our institutional channel in the fourth quarter with with the closing of two funds are annualized infrastructure fund to private equity many life co investment partners fund too.
Speaker 9: Regent, feel me other comment worth noting and feel mentioned this because we shared this with investor days. We also had saw some success in our private markets business on our institutional channel in port cordwood.
Speaker 9: with the closing of two funds, our manualized infrastructure fund to, and our private act, we manualized a co-investment partners fund to.
And again not all of those flows are reflected about a quarter of that is reflected in AUM. So we do expect as that money gets invested in the coming years that will also show up. So we're really feeling really good just about the diversification of our business by channel by platform. The broad base of what we have to offer to investors in the overall quality of the investment performance that the teams deliver.
Speaker 9: And again, not all of those flows are reflected about a quarter that is reflected in the AOM. So we do expect is that money gets invested in the coming years that will also show up. So we're really feeling really good just about the diversification of our business by channel, my platform, the broad base of what we have to offer to investors and the overall quality of the investment performance of the team's deliver.
Oh the 40%.
Of AUM inflows in Asia was really really impressive I guess.
Speaker 4: The 40% of AUM inflows in Asia was really, really impressive. I guess the results of adding distribution on channel or what's the driver for getting that level in?
Is it a result of adding distributional channel or what what's the driver for getting that level of inflows.
Yes. So it's a combination of just continued expansion in terms of the types of products and distribution reach that we have but we are seeing really strong progress through our digital platforms. We launched a digital platform called <unk> funds in Asia in a number of markets and Thats leveraging our insurance segment distribution, our life agents, but it is a complete end to end digital.
Speaker 9: Yes, so it's a combination of just continued expansion in terms of the types of products and distribution rates that we have, but we are seeing really strong progress through our digital platforms. We launched a digital platform called I Funds in Asia and a number of markets. And that's leveraging our insurance segment distribution, our life agents, but it's a complete end-to-end digital platform for consumers to access.
Platform for consumers to access.
Sure.
Lineup, there and it integrates the advisor into that process and we're seeing some really solid growth in a number of markets in an area. We continue to invest in.
Speaker 9: Our line up there and it integrates the advisor into that process and we're seeing some really solid growth in a number of markets in an area we continue to invest in.
Got it thank you.
Thank you. The next question is from Doug Young from Deutsche Bank Capital markets. Please go ahead.
Speaker 2: Thank you. The next question is from Doug Young from Desjardins Capital Market. Please go ahead.
Hi, Good morning, just back to Neal I think two areas, where you've had some weakness in Asia, Japan, and China, and I think both related to regulatory changes that have occurred over the last little while so what I'm, hoping to get a sense just an update.
Speaker 4: Hi, good morning. Just back to Neil, I think two areas where you've had some weakness in Asia is Japan and China. And I think both related to regulatory changes that have occurred over the last little while. So what I'm hoping to get is and just an update.
In terms of the launch of new products in Japan as a result of the change around the coli product.
Speaker 4: in terms of the launch of new products in Japan as a result of the change around the co-lead product.
In China, just some of the changes that have made around the regulatory side that have impacted sales and core earnings can you give us a bit of an update where you stand like what inning are we.
Speaker 4: And in China, just some of the changes that have made around the regulatory side that have impacted sales and core earnings, can you give us a bit of an update where you stand? Like, what any there are we in in terms of turning the...
And in terms of turning those around.
Great question, and I'll be happy to answer that and thanks for that let me start with Japan, but as we have indicated in the past our primary focus in Japan has been on imports and on expense efficiency and you've got a theme that translated to a 9% core earnings.
Speaker 8: Great question and I'll be happy to answer that and thanks for that. Let me start with Japan for it.
Speaker 8: As we have indicated in the past, our primary focus in Japan has been on imports and on expense efficiency. And you've got to steam that translated.
Growth in quarter, four in Japan and for the full year a growth of 7%. We have directed our resources to some of our high growth markets. For example in Asia Other and Asia other.
Speaker 8: to a 9% core earnings growth in Korea, Japan and for the full year, a growth of 7%. We have directed other sources to some of our high growth markets, for example, in Asia and Asia, other today contributes to 36% of our core earnings as opposed to 16% of our core earnings back in 2015.
It contributes to 36% of our core earnings as opposed to 16% of our quarter. Our names back in 2015 on an ongoing basis, our emphasis in Japan will be a value maximization through our focused on enforced and expense efficiency enabled finally also.
Speaker 8: On an ongoing basis, our emphasis in Japan will be value maximization through our focus on enforced and expense efficiency. And we will parallel also, we are making efforts to change our product mix away from Kohli to a better product mix on other wells and retail. And again, we are starting to see a significant progress on that in Japan.
We are making efforts to change our product mix away from quarterly or.
To drive better and better product mix on other balance at retail and again, we are starting to see significant progress on that in the back.
With respect to China, So China, we delivered 12% growth on sales and 14% on new business value and given the backdrop of what you've mentioned regulatory changes as well as Covid, we thought that was a very creditable.
Speaker 8: With respect to China, so China, we delivered 12% growth on sales and 14% on new business value.
Speaker 8: And given the backdrop of what you mentioned, the regulatory changes as well as COVID, we thought that was a very credible performance. There are a few things going on in China. And again, on regulatory front, there are a couple of things that we are obviously navigating. So firstly,
Creditable performance there are a few things going on in China, and again on regulatory front. There are a couple of things that we had obviously navigating to firstly on account of the regulatory changes that impacted the critical illness product that was announced in quarter one of last year.
Speaker 8: On account of the regulatory changes that impacted the critical illness product that was announced in Codewon last year, the industry has seen a contraction of demand on critical illness and that has led to a different product mix.
Industry has seen a contraction of demand on critical illness, and that has led to a different product mix.
Which obviously has a knock on impact been on new business gain as well as on our new business value and why we believe that these changes are.
Speaker 8: which obviously has a knock on impact then on new business gain as well as on a new business value. And while we believe that these changes are good for the sustainable growth, they do require a bit of an adjustment in the shorter term. What we are also witnessing in China is a very strong growth on retirement needs that will go and sit on top of some of the protection needs that we believe will rebound in the medium in the medium term.
Good for the sustainable growth they do require a bit of an adjustment in the in the shorter term. What we are also witnessing in China is a very strong both on regard mcneese that will go and sit on top of some of the protection need that we believe will rebound in the medium.
In the medium term the second piece of change that we see in China is the.
The regulators are getting increasingly focused on driving quality agency distribution and that is squarely in line with the way we would like to grow our distributions. So just to kind of give you a stat. The industry is seeing a decline of roughly about 30% to 35% on agency.
Speaker 8: The second piece of change that we are seeing in China is the regulators are getting increasing the focus on driving quality agency distribution.
Speaker 8: And that is squarely in line with the way we would like to go or distribution. So just to kind of give you a stat, the industry is witnessing a decline of roughly about 30 to 35% on agency.
In contrast to that we are witnessing a 15% decline and I think as the market. It was and we make the necessary adjustment I think quality distribution is going to afford us.
Speaker 8: in contrast to that we are witnessing a 15% decline.
Speaker 8: And I think as the market evolves and we make the necessary adjustment, I think quality distribution is going to hold us in good stead for quality growth in China. Now we have access to 52 cities across 15 provinces.
In good stead.
Our quality growth.
In China, we have access to <unk> 52 cities across 13 provinces, we have a very strong joint venture partner the under penetration in China, and the secular trends will be positive to drive growth. So yes in the medium term, we believe that China will still remain an accelerator of growth for us as we transition to the new.
Speaker 8: We have a very strong joint venture partner. The under penetration in China and the secular trends will be positive to drive growth. So yes, in the medium term, we believe that China will still remain an accelerator of growth for us as we transition to the new landscape in that market.
Landscape in that market.
So it sounds like China has kind of hit the inflection point, maybe my question around Japan is Japan, turning into a closed block is that the way to think of it I don't know if thats for you aneel or for.
Speaker 4: So it sounds like China has kind of hit the inflection point. Maybe my question around Japan is Japan turning into a closed block? Is that the way to think of it? I don't know if that's for you and Nile or for Roy.
Right.
So I'm going to start off and then I.
I'll ask Roy to add his comments, we believe that our focus is.
Speaker 8: So I'm going to start off and then I allow Swoi to add his comments. So we believe that our focus is going to be, as I said, on driving a different product mix. So if you were to kind of go a year back, Koli was 50% of the sales.
Going to be as I said on driving a different product mix.
So if you wanted to kind of buoy your back all at about 50% of the sales mix Cali is now less than 10% of our sales mix. I wanted. This does is it also helps us improve our new business value margin, but you can see in our quarter four results.
Speaker 8: Coley is now less than 10% of our sales mix. Now, what this does is it also helps us improve our new business value margin, which you can see in our protocol results in Japan.
And get back on top of that as I said, our efforts all import management as well as expense efficiency is resulting into the core earnings growth that we are witnessing but we feel that in Japan. We also have an opportunity to drive our product mix with a higher margin of error from fully adopt.
Speaker 8: Now on top of that, as we said, our efforts of imports management as well as expense efficiency is resulting into the core earnings growth that we are witnessing. But we feel that in Japan, we also have an opportunity to drive a product mix with a higher margin away from Koli as opposed to what we have been doing in the past.
Most of what we have been doing in the past right. Yes, I would just add Doug that Japan is clearly still a very important market for us in the market that provides a lot of opportunities third largest insurance market in the world. We have operating in the market for a long period of time, which has allowed us to establish a really strong incredible brain and over the years we've.
Speaker 4: Yeah, I just said that Japan is clearly still a very important market for us. And a market that provides a lot of opportunities for the third largest insurance market in the world. We've operating the market for a long period of time, which has allowed us to establish a really strong, incredible brand. And over the years, we've improved our margins.
Proved our margins quite considerably as Aneel highlighted there are some regulatory pivots that we're navigating we see them as short term from a headwind perspective.
Speaker 4: quite considerably. As the Neil Highlight, there are some regulatory pivots that we're navigating. We see them as short term from a headwind perspective. And in the mediums, along the term, we still feel very positive about the opportunities that Japan represents. And as the Neil Highlight.
I mean, the medium to longer term, we still feel very positive about the opportunities that Japan represents then as aneel highlighted.
We're going to continue to focus on driving maximum value, which is focused on profitability, we still see lots of upside in new business and we're making some pivots given the coli changes that we think are going to help us actually navigate the situation quite well.
Speaker 4: You know, we're going to continue to focus on driving maximum value, which is focused on profitability. But we feel see lots of upside in new business. And we're making some pivots given the call he changes.
Just one point on China, I think until we hit the nail on the head we do feel good about the changes the regulatory changes that are being implemented there. We think that they will enable a more sustainable growth in the future. We've been very focused on quality of our products and quality of our distributors.
Speaker 4: that we think are going to help us actually navigate the situation quite well.
Speaker 4: And I just, just one point on China, I think, a nail on the head. You know, we do feel good about the changes, the regulatory changes that are being implemented there. We think that they will enable a more sustainable growth in the future. We've been very focused on quality of our products and quality of our distributors.
So this is a good thing some short term headwinds there, but in the medium to longer term, we feel again very positive and you've seen that despite the challenges of Covid and regulation change in 2021 Asia through its diversity has still been able to demonstrate outperformance and we quite frankly growing share in most of our markets, which I think is a hallmark.
Speaker 4: So this is a good thing. Some short-term headwinds there, but in the medium to long-term, we feel again very positive. And then you've seen that despite...
Speaker 4: The challenges of COVID and regulation change in 2021, Asia through its diversity is still being able to demonstrate out performance and we've quite frankly grown sharing most of our markets, which I think is a little like to highlight the strength of our business. Thank you.
To highlight the strength of our business.
Okay. Thank you.
Thank you. The next question is from Tom Mackinnon from BMO capital markets. Please go ahead.
Yeah, just a question with respect to the remittances.
Considerably in 2021.
Speaker 10: Yeah, just question with respect to the remittances. Up considerably in 2021, versus the 2020, and you know, versus the trends we saw even prior to 2020, kind of maybe comments us to what drove that.
Versus the 2020 and versus the trend we saw even prior to 2020.
Kind of maybe comment as to what drove that.
Geographies any.
Any details there and how we might see that continuing especially given that interest rates continue to rise. Thanks.
Speaker 10: geographies and any details there and how we might see that continuing, especially given that interest rates continue to rise. Thanks.
Great. Thank you Tom this is Phil.
You're right, it's certainly a strong year for our businesses for $4 million and what that reflects is really strong underlying business performance combined with a favorable macroeconomic environment.
Speaker 5: Great, thank you Tom, this is Phil and you're right, it's certainly a strong year for a metancise, $4.4 billion. And what that reflects is really strong underlying business performance, combined with a favourable macroeconomic environment.
You asked about the sources of remittances.
Do come from all of our geographies and material contributions from all of our geographies and I think what's particularly topical is if we reflect back on a year ago go back to 2020, that's a period when we had injected capital into Asia, what we've seen in 2021.
Speaker 5: You asked about the sources of remittances. They do come from all of our geographies and material contributions from all of our geographies. I think what's particularly topical is if we reflect back.
Speaker 5: on a year ago, go back to 2020. That's a period when we had injected capital into Asia. What we've seen in 2021 is that trend reverse where Asia continues its historic trend of being a net remitter to the group. And just to put a number on that given your question, the remittances.
Is that trend reverse where Asia continues its historic trend of being a net limiter to the group and just to put a number on that given your question. The remittances that came from Asia in 2021, we're at.
<unk> $900 million and that's very much within the range of what I've seen happen in recent years from Asia and of course, it is a wide range because of the sensitivity of.
Speaker 5: that came from Asia in 2021, were $900 million. And that's very much within the range of what I've seen happen in recent years from Asia. And of course it is a wide range because of the sensitivity of a number of Asia local bases to interest rates. But I think that...
A number of.
Asia local bases to interest rates, but I think that's more of a normalized environment for Asia. The remainder of the remittances are really coming from a balance of our U S and Canadian geographies.
Speaker 5: more of a normalized environment for Asia. The remainder of the remittances are really come from the balance of the U.S. and Canadian geographies.
When I think about that $4 4 billion in the future.
Although it's a great result, it's not out of line with the range that we've seen in previous years I think it was 2018 I recall, we delivered $4 billion of remittances.
Speaker 5: When I think about that $4.4 billion and the future.
Speaker 5: Although it's a great result, it's not out of line with the range that we've seen in previous years. I think it was 2018, I recall. We delivered four billion dollars offer of metancers.
To remain somewhat optimistic about remittances in the in the medium term and a couple of reasons for that one is that we know higher interest rates are a tailwind for us.
Speaker 5: But I do remain somewhat optimistic about remissances in the medium term and a couple of reasons for that. One is that we know higher interest rates are a tailwind for remissances from Asia. But then also as we spoke about as investor day, when we...
<unk> from Asia, but then also as we spoke about at Investor day, when we look at our embedded value and in particular, the <unk> within all the embedded value in the translation of that PPI F. Two.
Speaker 5: are embedded value and in particular the PVIF within all of that is value and the translation of that PVIF to net us.
Net assets to cash there is.
A really favorable trend that we're looking at that looking at about half about <unk> being realized as cash over the next 10 years. So that that provides confidence in our remittance power in the medium term and therefore, the progressive dividend policy.
Speaker 5: There is a really favorable trend that we're looking at there. We're looking at about half of our PVIF being realized as cash over the next 10 years. So that provides confidence in our emissions power and the medium term and therefore the progressive dividend policy.
Okay. Thanks.
Thank you. The next question is from Gabriel to Shane from National Bank Financial. Please go ahead.
Hi, Good morning first question on the buyback I'm not sure the technical reason probably tied to the B.
Speaker 2: Thank you. The next question is from Gabriel DeShane from National Bank Financial. Please go ahead.
Speaker 11: Good morning. First question on the buyback. I'm sure the technical reason probably tied to the VA transaction there, but you know, it's a little bit delayed in terms of getting approval for the buyback. And you know, having said that, are you having any January data, but you're committed to doing the full 3%, maybe not the full 5% of the capacity of buybacks this year?
Transaction, there, but the.
There's a little bit delayed in terms of getting approval for the buyback and having.
Having said that.
Our U I haven't seen any January data, but you are committed to doing the full 3% maybe not the full 5%.
Of your capacity for buybacks this year.
Thanks, Gabriel this is Phil So we were really pleased to announced on the first of February the completion of the FAA transaction and on the same day, we announced the approval of.
Speaker 5: Thanks, Gabriel. This is Phil. So we were really pleased to announce on the first of February the completion of the VA transaction. And on the same day, we announced the approval of overlaunch of the NCIB following the approvals for that. So I think that's all very much routine. And we were very,
The launch of the NCI be following the approvals for that so I think that's all very much routine.
Got it.
Really happy to have.
They have approval for our 5% program of up to 5% program.
Speaker 5: I'm really happy to have approval for a 5% program or up to 5% program.
As is normal with buybacks then Cib's, we will report our progress as we go through this.
Speaker 5: As is normal with by-backs and NCIDs, we will report our progress as we go through this in a routine manner, but also, and, accordingly, as a quarterly process, we'll transparently share with this group in this forum what our progress is. But I just highlight that when we...
And a routine manner, but also also on a quarterly as a quarterly process, we will transparently share with this group in this forum, what our progresses, but I'll just highlight that when we announced the VA transaction 15th of November one is.
Speaker 5: Announce the VA transaction 15th of November .
Very important priorities was to neutralize the EPS impact from that transaction and I think that's a very important baseline for the NCI b. So that we know to neutralize the EPS impact of that transaction it would be approximately 3% of the of the <unk>.
Speaker 5: One of our very important priorities was to neutralize the EPS impact from that transaction. And I think that's...
Speaker 5: a very important baseline for the NCIB so that we, you know, to neutralize the EPS impact of that transaction, it would be approximately 3%.
The dollar cost of that of course will depend upon what the price of the shares are at the time that we purchased them right.
Speaker 5: of the NCIB. The dollar cost of that, of course, will depend upon what the price of the shares are at the time that we repurchase them.
Alright.
And then on the expenses.
Congrats on the progress of our tours that efficiency ratio target 49%.
Speaker 11: Then on the expense of, you know, congrats on the progress of towards that efficiency ratio target 49%. But you're still, and I look at the notes to financials here, you're running it an expense over on for a number of years now. A, can you quantify, you know, how much that represents as a drag on your earnings, the expense experience loss, I suppose. And then.
But you still look at the notes of the financials here Youre running at a an expense overrun for a number of years now.
Could you quantify how much.
That represents a drag on your earnings.
Expense.
Experienced loss I suppose.
And then what do you need to do to eliminate it.
The longer term.
The ratio target when does that go away.
Speaker 11: You need to do to eliminate it. And is that the longer term efficiency ratio target, when does that go away?
And health.
Thanks, Gabriel this is Phil again.
You're right to call out the favorable outcome on expense efficiency ratio, we have hit that 50% threshold. The target that we set ourselves earlier in 2018, but it doesn't mean that we've done with respect to expense sufficiency, you do highlight maintenance expenses and the overrun there.
Speaker 5: Thanks Gabriel, this is Phil again and you're right to call out the favourable outcome on expense efficiency ratio. We have hit that 50% threshold to target that we set ourselves.
Speaker 5: early in 2018, but it doesn't mean that we're done with respect to expense efficiency. You do highlight maintenance expenses and the over on now. I look contacted.
I will point out that within maintenance expenses. We do include in that classification entity sustaining costs, which are not necessarily cost that should be allocated to our underlying businesses as well as the.
Speaker 5: Within maintenance expenses, we do include in that classification entity sustaining costs, which are not necessarily costs that should be allocated.
The cost of certain components of our Asia Regional office, which doesn't necessarily again flow through too.
Speaker 5: to our underlying businesses, as well as the
Speaker 5: cost of certain components of our Asia regional office, which doesn't necessarily again flow through to to each of our businesses. Many of those costs some of those costs are strategic in nature. Over the course of the coming years we will continue to focus on expense efficiency and I do think there is further opportunity for us. When you look at the the jaws that we're being able to create the jaws between cost growth.
To each of our businesses many of those costs. So some of those costs us strategic in nature, but over the course of the coming years, we will continue to focus on expense efficiency and I do think there is further opportunity for us and when you look at the the jaws that we're being able to create that jaws between cost growth.
<unk>.
<unk> core earnings.
A substantial.
And that I think it does speak to the discipline that we've exercised in recent years. So there's certainly more value to be generated there.
Speaker 5: and core earnings. It there is a substantial gap. And that I think does speak to the discipline that we've exercised in recent years. So there's certainly more value to be generated there.
The book.
Expense overrun figure or something you can quantify that they'll just look about overhead allocation.
Speaker 11: This is the expensive run figure or something you can quantify. So I just look at that overhead allocation.
Allocation.
Or is it smaller.
That's something I'll have to takeaway and get back to you on Gabriel.
Well thank you.
Speaker 5: That's something I have to take away and get back to you on Gabriel. Okay, well, thank you. I'll be in here. Thank you.
Yeah.
Thank you.
The next question is from powerful Lin from CIBC. Please go ahead.
Thank you good morning.
So I want to go back a little bit to the discussion on potential risks related to inflation I guess in.
In particular, what that might mean for the long term care.
Business some of your competitors in that business have flagged.
Cost inflation of the potential risk to.
Assumptions and reserving so just wondering how youre thinking about that.
Thanks, Paul Steve Finch here, and I'd start by saying that overall I've got confidence that our LTC reserves remain appropriate in aggregate with sufficient levels of conservatism.
Speaker 10: Thanks Paul, Steve Finch here. And I'd start by saying that overall, I've got confidence that our LPC reserves remain appropriate in aggregate with sufficient levels of conservatism.
We've seen through the pandemic, we've actually booked gains Youre question is more on what trends might we see in the future.
Speaker 10: you know we've seen through the pandemic we've actually booked gains your question is more on what trends might we see in the future and you know certainly inflation is in the news in the in a you know broadly and cost of care inflation is a question out there
And certainly inflation is in the news.
Broadly and cost of care inflation has a question out there. So what we do reflect inflation of cost of care in our long term assumptions and this is this is one of the trends trends that could impact long term care over time. So if we saw higher cost of care.
Speaker 10: So we do reflect inflation of cost of care in our long-term assumptions. And this is one of the trends that could impact long-term care over time. So if we saw higher cost of care, that would result.
That would result in.
Higher cost if it's higher than our assumptions.
We would and we could.
Speaker 10: higher cost of the tire than our assumptions. We would and we could request appropriate rate increases to offset that.
Request appropriate rate increases to offset that.
And as you've seen we have.
Really strong track record of achieving rate increases as of Investor day Middle of last year, we disclosed that we had achieved 9 billion U S dollars at present value of rate increases. So we feel good about that the other thing I'd point out is that there are I think there's the potential for headwinds.
Speaker 10: And as you've seen, we have a really strong track record of achieving rate increases as of investor day, middle of last year we disclosed that we had achieved nine billion US dollars of present value of rate increases, so we feel good about that. The other thing I'd point out is that
Headwinds like inflation, but there is the potential for tailwind as well from some of the other trends that we're seeing in long term care for.
Speaker 10: There are, I think there's the potential for headwinds like inflation, but there's the potential for tailwinds as well from some of the other trends that we're seeing in long-term care. For instance, what we've seen through the pandemic is...
For instance, what we've seen through the pandemic as well why.
One a hesitancy to receive care, but what we've seen is a shift in site of care from.
Speaker 10: Well, one has a tendency to receive care, but what we've seen is a shift in side of care from
From facility care towards home care and home care is on average about 30% less expensive than facility care.
Speaker 10: from facility care towards home care. And home care is on average about 30% less expensive than facility care.
So if that trend were to continue that would be a tailwind. So I'm just sort of flagging the fact that they're.
Speaker 10: So if that trend were to continue, that would be a tailwind. So I'm just sort of flagging the fact that there, you know, uncertainty around what trends will see post pandemic, but I think there could be pluses and minuses along with our ability to re-rate. Understood, that's a helpful context, thanks for that. And then fact.
Uncertainty around what trends, we'll see post pandemic, but I think there could be pluses and minuses, along with our ability to re rate.
Understood.
For context, thanks for that.
And then.
Second question.
It's related to interest rate impacts I think you've made it clear that you are.
Effectively immunized on enforce.
And then I think you've suggested that on new business because of the proportion of par and pass through also largely.
Agnostic to rates, but my question would be related to earnings on surplus. That's maybe one one area of the P&L. It's still great sensitive maybe you can just give us.
Color there in terms of what higher rates Mike.
For run rate earnings on surplus.
Thanks for the question, Paul maybe I'll start on that one and hand over to Scott who manages the portfolio.
Speaker 5: Thanks to the question for maybe I start on that one and hand over to Scott who manages the portfolio.
So as you've probably seen in the results.
2020, compared to 2021, we've seen a decline in earnings on surplus and really what that is triggered by is the lower rate environment that we've seen in 2020, giving rise to a reset.
Speaker 5: So as you've probably seen in the results, 2020 compared to 2021, we've seen a decline in earnings on surplus. And really what that is triggered by is the low rate environment that we've seen in 2020, giving rise to a reset of our IRS allocations to segment.
S allocations to segments.
It takes place at the beginning of each year and that's why that's why you see the run rate that's allocated to segments go down year on year 2020, compared to 2021, because we set those rates at the beginning of the year and the decline in rates happened during 2020, now the extent to which.
Speaker 5: that takes place at the beginning of each year. And that's why you see the run rate that's allocated to segments go down year on year 2020 compared to 2021, because we set those rates at the beginning of the year and the decline in rates happened during 2020. Now the extent to which the lower interest rates actually flow through to a lower yield depends upon how much turnover there is in the portfolio.
The.
Lower interest rates actually flow through to a lower yield dependent upon how much turnover there is in the portfolio.
And in 2020, we had realized some gains on the <unk> portfolio that sits in surplus and that lowered the yield for 2021.
Speaker 5: And in 2020, we had realized some gains on the AFS portfolio that sits in surplus and that lower the yield for 2021. So I think where we look from here in terms of how that very stable portfolio, how much of the higher rate environment flows through to yield? It would really depend upon how much turnover there is in that portfolio. But Scott, I don't know whether you would like to comment further on that.
So I think when we look from here in terms of how that very stable portfolio now how much of the at the higher rates environment that flows through to yield that would really depend upon how much turnover. There is in that portfolio, but Scott I don't know, whether you would like to comment further on that.
Sure just briefly I think that's that's all correct Phil.
Our surplus portfolio is fairly long.
Speaker 10: just briefly. I think that's all correct, Phil.
And as you pointed out Paul R.
Speaker 9: You know, our surplus portfolio is fairly long. And as you point out, Paul, our, you know, accounting earnings are pretty well hedge to higher rates going forward.
Accounting earnings are pretty well hedged to higher rates going forward.
But we do have a fairly long bond portfolio to hedge the economics beyond the accounting and since it's fairly long it doesn't on its own turnover very rapidly. So yes higher rates will ultimately increase surplus earnings, but unless we're actively turning over the portfolio in the <unk>.
Speaker 12: But we do have a fairly long IFS bond portfolio to hedge.
Speaker 12: the economics beyond the accounting. And since it's fairly long, it doesn't, on its own, turn over very rapidly. So yes, higher rates will ultimately increase surplus earnings, but unless we're actively turning over the portfolio, in the short term, you're not gonna, you're not gonna.
Short term youre, not youre not going to see much.
Got it thank you.
Thank you. The next question is from David <unk> from Evercore ISI. Please go ahead.
Speaker 2: Next question is from David Motomaden from Ereport ISS.
Hi, good morning.
Just a question Phil you talked about within the $4 4 billion of remittances $900 million of that came from Asia.
Speaker 9: Hi, good morning. Just a question Phil, you talked about within the 4.4 billion of remittances, 900 million of that came from Asia. Could you just share the other pieces of that, how much came from the US, and how much of that came from Canada?
Could you just share the other pieces of that how much came from the U S and how much of that came from Canada.
Yes, David this is Phil.
Broadly speaking $2 billion was Canada and that was supported by a favorable macroeconomic environment. The balance was the U S.
Speaker 5: Yep, David, this is Phil. So broadly speaking, $2 billion was Canada, and that was supported by a favorable macroeconomic environment. The balance was the US.
Got it thanks, and how much of that from the U S was coming from the VA book that has since been reinsured.
Speaker 4: Got it, thanks. And how much of that from the US was coming from the VA book that has since been re-insured?
So roughly speaking it was equivalent to the level of profitability. So.
Speaker 5: Roughly speaking, it was equivalent to the level of profitability. So, you know, in the order of $130, $140 million as a ballpark.
The order of 100.
30, 140 million U S dollars as a ballpark.
Okay, Great that's helpful.
And then maybe a bigger picture question for Roy.
Obviously, good to see the VA transaction.
Speaker 13: And then maybe a bigger picture question for Roy.
Speaker 13: You know, obviously good to see the VA transaction and, you know, good to see the offsetting the delusion from that or neutralizing the impact of the loss earnings from that.
And good to see the offsetting the dilution from that are neutralizing the impact of the lost earnings from that.
With the NCI B I guess I'm wondering I'm.
Just overall, how youre thinking of M&A and specifically.
Speaker 13: with the NCIB. I guess I'm wondering just overall how you're thinking of M&A and specifically the JV in China and if that's something you're considering taking up your share in. A few of your peers, HSBC and Allianz, they got approval to go up to 100%.
The the JV in China, and if that's something you are considering taking up your share in a.
If you have a few of your peers are HSBC and Allianz Se got approval to go up to 100% of their China JV is in the last few months and Chubb also said theyre going to buy up to close to 90% of their China JV.
Speaker 13: of their China JVs in the last few months in trouble. So said they're gonna buy up to close to 90% of their China JV. So I'm wondering is that something you guys are thinking about as well?
So I'm wondering is that something that you guys are thinking about as well.
Yes. Thanks for the question, David I think firstly, you're right in highlighting USPA transaction, it's something that we're very proud of executing and completing that deal.
Speaker 4: Yeah, thanks for the question, David. I think firstly, you're right in highlighting our USDA transaction. It's something that we're very proud of executing and completing that deal. We think it's a great transaction. Freeze up two billion dollars worth of capital. And the aftertax gain of $750 million or 10 ex earnings.
We think it's a great transaction freed up $2 billion worth of capital and the after tax gain of $750 million or 10 X earnings I think really goes to the heart of demonstrating the conservatism of our assumptions. So we really feel very proud of that transaction and perhaps the <unk> was about ensuring that we could dips.
Speaker 4: I think really goes to the heart of demonstrating the conservatism of our assumption. So we really feel very proud of that transaction. And across the NCIB was about ensuring that we could deploy the capital that we freed up there to make sure that we're driving value for shareholders.
Floyd the capital that we've freed up there to make sure that we are driving value for shareholders. We're in a very strong capital position, Phil highlighted that earlier in the presentation and that puts us in a position where we have significant flexibility at the same time, we don't need M&A to deliver against our medium term goals as it relates to Ernie.
Speaker 4: We're in a very strong capital position filled highlighted that earlier in the presentation, and that puts us in a position where we have significant flexibility.
Which is I think an enviable position to been having said that we will opportunistically look to deploy capital where it can make sense beyond buybacks and obviously, increasing our dividends we did that through the acquisition of the Aveva booking Vietnam. We did it through the Bancassurance agreement with <unk> Bank in Vietnam.
Speaker 4: At the same time, we don't need M&A to deliver against our medium-term goals. It relates to earnings, which is, I think, an enviable position to be in. Having said that, we will opportunistically look to deploy capital where it can make sense. Beyond buybacks and obviously increasing our...
Speaker 4: We did that through the acquisition of the available can Vietnam. We did it through the bank insurance agreement with Viet and Bank in Vietnam. The extension of our bank partnership with Donomon, as well as another good example of that. And clearly for us, Azure and WAM are areas where, it organically, we would continue to look to deploy capital. It's the opportunity is right. And if we can demonstrate.
Extension about bank to partnership with <unk> as well as another good example of that and clearly for US Asia and Wham are areas, where Inorganically. We would continue to look to deploy capital if the opportunity is right and if we can demonstrate the value accretion its easy to announce a transaction. It's another thing to make sure you're creating.
Value from it that specifically to China, we've been in China for a long period of time, both throughout JV with Sino Kim on the insurance side and with tighter on the wealth and asset management front.
Speaker 4: the value accretion. It's easy to announce a transaction. It's another thing to make sure you're creating value from it. That's specifically to chime up. We've been in China for a long period of time, both throughout J.D. with Sinecam on the insurance side and with TIDER on the wealth and asset management front. As Anil highlighted earlier, we feel very optimistic about the opportunity to China represents. And we would look to continue to grow.
And Neil highlighted earlier, we feel very optimistic about the opportunity that China represents and we would look to continue to grow our business our businesses organically there and if the opportunity is present to grow Inorganically, we would definitely look at that at the same time.
Speaker 4: our businesses organically there. And if the opportunity is present to grow in organically, we would definitely look at that. At the same time, I would not underestimate the power and value of having a strong partner. Like we do with SIDA Kim in China, it's an incredibly valuable asset for us. As we navigate, obviously, the local changes and regulatory, you will see.
I would not underestimate the power and value of having a strong partner like we do with cider King in China, It's an incredibly valuable asset for us as we navigate obviously.
The local changes in regulatory nuances, so that's a valuable asset and again the partnership we have with Sun. It can be tremendous wanted contributed to the success we've had in China over the year.
Speaker 4: So that's a valuable asset. And again, the partnership we have with Sona came in a tremendous one. It's contributed to the success you've had in China over the years. But if there was an opportunity to increase our stake, we definitely look at that. And yeah, I'll probably leave it at that. But thank you for the question, Doug.
There was an opportunity to increase.
We definitely look at that and.
I'll probably leave it at that but thank you for the question Doug.
Thank you.
Thank you. The next question is from narrow mendonca from TD Securities. Please go ahead Marc.
Good morning, I want to go back to the.
The interest rate discussion youll recall that in Q1, 'twenty, one annualized book value per share was down sequentially over 6% in the Leichhardt came under pressure when the yield curve steepened and rates moved higher now.
Speaker 12: Morning. I want to go back to the interest rate discussion. You'll recall that in Q121, manualized book value for share was down sequentially over 6%, and the like I came under pressure when the yield curve steepened and rates moved higher. Now, a big portion of that related to your AFS portfolio.
A big portion of that related to your <unk> portfolio is there.
Anything that the company has done since Q1, 'twenty, one that would mitigate that effect going forward, specifically, if we do get a big move in the long end again.
Speaker 12: Is there anything that the company's done since Q121 that would mitigate that effect going forward?
Interest rate increases of the shorthand, if we get that sort of parallel shift could we be facing that same predicament, where MCC sorry, the leichhardt comes down fairly meaningfully and book value per share declined sharply is that is that scenario still possible for aon.
Speaker 12: Specifically, if we do get a big move in the long end again.
Speaker 12: because of interest rate increases of the short end if we get that sort of parallel shift.
Speaker 12: Could we be facing that same predicament where MCC, sorry, the like at comes down fairly meaningfully and book value for share declined sharply? Is that scenario still possible for anyone?
Hey, Mary.
This is Phil maybe I start by touching on the <unk> portfolio, and then hand over to Steve to talk about.
Speaker 5: Hey, Mary, this is Phil. Maybe I may start by touching on the AFS portfolio and then hand over to Steve to talk about the speed and in flattening of the curve. And from the AFS portfolio, we haven't made any significant changes to that portfolio since, during the course of 2021, about 80%.
The statement and flattening of the curve.
Yeah, <unk> portfolio, we haven't made any significant changes to that portfolio since <unk> during the course of 2021.
About 80%.
All of our sectors portfolio is held in long bonds, Scott touched on that earlier.
Speaker 5: All power circuits portfolio is held in long NFS bonds got touched on that earlier.
We like that for a couple of reasons one is that the investing in U S. Treasuries allows us to go long in that portfolio of course without credit risk, but we also like the liquidity of that portfolio.
Speaker 5: And we like that for a couple of reasons. One is that the investing in US Treasury that allows us to go along in that portfolio, of course, without credit risk.
It does form an important part of our overall risk management program.
Speaker 5: but we also like the liquidity of that portfolio. And it does form an important part of our overall risk management program.
The the movement in value of that portfolio is the inverse of what the impact of rates on our liabilities.
Speaker 5: The movement in value of that portfolio is the inverse of the impact of rates on our liabilities.
It doesn't create income statement.
Let's see in itself.
Speaker 5: and it doesn't create income statement.
<unk> closest in Iff's portfolio, so it would be upon realization of gains and losses flow through but where it does create some.
Speaker 5: volatility in itself, because of course it's an AFS portfolio, so it would be upon realisation games and losses flow through, but where it does create some...
Volatility has.
As you saw as book value per share, but also in the capital ratio.
Speaker 5: volatility as you saw, it's book value per share, but also in the capital ratio.
However, when we do look forward to.
My first 17 implement implementation one thing that we do expect is that we'll see less variability in the capital ratio as a result of this factor.
Speaker 5: However, when we do look forward to IFAZC and clean implementation, one thing that we do expect is that we'll see less variability in the capital ratio as a result of this factor. So we clearly there's a lot of moving parts, there's more to come on IFAZC for our sprint team, but we think that that is something that will be less less accused in the future. Steve, would you like to comment further?
Clearly, there's a lot of moving parts there is more to come on <unk>, but we think that that is something that will be less.
Less acute in the future as Steve would you like to comment further.
Yes, Thanks, Phil I think that last point because it was a key one the other is that the sensitivity that we had in the light cat ratio to a rise in interest rates.
Speaker 10: Yeah, thanks Phil. I think that that last point was a key one. The other is that the sensitivity that we had in the like at ratio to a rise in interest rates back in terms of what we saw in Q1, that was a 7% change in the like at ratio sensitivity back in Q1 2021. That has dropped due to rates and due to
Back in terms of what we saw in Q1 and that was a 7% change in the light cat ratio sensitivity back in Q1, 2021 that has dropped due to rates in Q2.
Moderate changes and hedging program to only 4% now so almost a 50% reduction in the sensitivity is.
Speaker 10: you know, moderate change is an hedging program to only 4% now. So almost a 50% reduction in the sensitivity is something I wanted to highlight.
I wanted to highlight as well.
Okay. If I could just follow up on that one thing about the available for sale portfolio. Phil you said that they offer.
Speaker 12: If I could just follow up on that one thing about the available for sale portfolio, Phil, you said that they offer like a good offset or maybe let's call it a hedge against changes in the value of the liabilities or the reserves. The reason I found that explanation, it was odd to me, is that these available for sale security support surplus. They're in surplus.
Like I did offset or maybe let's call. It a hedge against changes in the value of the liability or the reserves. The reason I found that one that that explanation. It was odd to me is that these available for sale securities support surplus they are in surplus so.
Why are they relevant then to the liabilities I would've thought that the liabilities have their own assets matched against them. So what was that reference to.
Speaker 12: Why are they relevant then to the liabilities? I would have thought that the liabilities have their own assets matched against them. So what was that reference to the FS portfolio offsetting changes in the value of the liability?
Portfolio offsetting changes in the value of the liability.
Thanks, Mario I'll make a start Scott may wish to comment on this but to the extent we have various options in terms of how we manage interest rate risk one option is.
Speaker 5: Thanks, Mario. I'll make a start. Scott, I wish to comment on this, but to the extent we have various options in terms of how we manage interest rate risk. One option is
The assets directly backing the liabilities, including the extent to which we hedge the other option is how we utilize the surplus portfolio and we have chosen to utilize the surplus portfolio to manage overall interest rate risk within the entity. Another option would of course be to do more hedging.
Speaker 5: the assets directly backing the liability, using including the extent to which we hedge. The other option is how we utilize the surplus portfolio. And we have chosen to utilize the surplus portfolio to manage overall interest rate risk within the entity. Another option would of course be to do more hedging within the liability segment, but this is currently where we are in Scott. I don't know whether you'd like to comment further.
Within the liability segment, but this is currently where we are and Scott I don't know whether you'd like to comment further.
Sure I, just point out that hedging interest rate risk at a life insurance company is pretty complicated there's a lot of competing objectives.
Speaker 9: Sure, I just point out that, you know, hedging interest rate risk at a life insurance company is pretty complicated. There's a lot of competing objectives. You know, we're trying to...
We're trying to.
Reduce the accounting the quarterly accounting noise and as I think you know the accounting is very sensitive to interest rates and current iron ore, but not completely we have you are out there which is an indication that there.
Speaker 9: Reducing the accounting, the quarterly accounting noise. And as I think you know, the accounting is very sensitive to interest rates in current IFRS 4, but not completely. You know, we have the URR out there, which is an indication that there is more sensitivity to interest rates.
There is more sensitivity to interest rates. So if we put all our hedges are economic hedges and the liability segments and we do use both cash instruments and derivative instruments there.
Speaker 9: If we put all our hedges, our economic hedges in the liability segment.
That would flow through to the accounting and we would really be over hedged from an accounting perspective, so as Joe pointed out.
Speaker 9: And we do use both gash instruments and derivative instruments there. That would flow through to the accounting and we would really be overhead from an accounting perspective. So as Phil pointed out, by putting those hedges in surplus and AFF.
Putting those hedges in surplus and <unk>.
That's.
<unk>.
Does not flow through to the accounting results, but what is the economic hedges that were looking for which is which is frankly really important I mean, we saw this in a pandemic when rates went way down.
Speaker 9: that does not flow through to the accounting results, but is the economic hedge that we're looking for, which is frankly really important. I mean, we saw this in the pandemic when rates went way down. Currently people are talking about rates going up, but bad things happen in the world, rates go down. We feel it's very important part of our risk management exercise to be as economically hedge-dose.
Currently people are talking about rates going up but bad things happen in the world rates go down we feel it's very important part of our risk management exercise too to be as economically hedged as we can be.
Okay. My second question is about <unk> 17, I think there've been a number of occasions on calls like this where I think Phil and Roy you folks have said Hey, This <unk> 17, it's accounting you don't say just accounting, but you do highlight that it really it affects the timing and the emergence of profitability, but it really doesn't affect us.
Speaker 12: Okay, my second question is about IFRS 17. I think there have been a number of occasions on calls like this where I think Phil and Roy, you folks have said, hey, this IFRS 17 is accounting. You don't say just accounting, but you do highlight that. It really affects the timing and the emergence of profitability, but it really doesn't affect the value or the economics of the company. Now,
Value or the economics of the company now.
I always sort of not in agreement when I hear that except now that I've read what you've included in your MD&A about <unk> 17, specifically the company makes reference to things like possibly changing reinsurance what else do you say reinsurance hedging strategies investment portfolio now if you start making.
Speaker 12: I always sort of nodded, Rima, when I hear that, except now that I've read what you've included in your MDNA about IFR-17 specifically, the company makes reference to things like possibly changing reinsurance.
Speaker 12: What else do you say? Re-insurance, hedging strategies, investment portfolio. Now if you start making changes of that nature, then it really does have a meaningful economic effect on the company. So help me reconcile those two messages. One, it's accounting versus two, it's going to change the way you operate your business.
Any changes of that nature, then it really does have a meaningful economic effect on the company. So help me reconcile those two messages one its accounting versus two it's going to change the way you operate your business.
Thanks, Mario for raising the <unk> topic. This is Phil again, I I will specifically address address your question in a moment, but given that we've raised iff's 17, I would like to acknowledge the interest that you and the broader analyst community and shareholders.
Speaker 5: Thanks Mario, for raising the IFRS simultaneous topic. This is still a game. I will specifically address your question in a moment.
Speaker 5: Given that we've raised our first 17, I would like to acknowledge the interest that you and the broader analyst community and shareholder group have and the demand for more information. We do continue to work through the implementation. We're making good progress and we look forward to sharing more directional information with you later this year. Now specifically on your point, but you picked up on our risk management that the squashes in the MDNA.
Group have and the demand for more information, we do continue to work through the implementation, we're making good progress and we look forward to sharing more directional information with you later this year.
Specifically on your point that you picked up on our risk management disclosures in the MD&A.
The.
<unk> is a significant accounting change and while that doesn't directly impact the economics of our business. So the way in which we manage the business I think it does highlight areas, where there may be opportunities to.
Speaker 5: The, I first have something that is as significant accounting change. And I, well, that doesn't directly impact the economics about business or the way in which we manage the business. I think it does highlight areas that, whether maybe opportunities to optimize under a particular framework. And, you know, the...
Optimize under a particular framework.
There is the potential greater flexibility to make changes.
Certain certain areas, but that doesn't mean, we plan to do so it just highlights that.
Speaker 5: potentially great flexibility to make changes in certain areas. But that doesn't mean we plan to do so. It just highlights that this different accounting regime may provide a different perspective in certain elements of how we manage the business. But I don't see those as material changes to our business.
Different accounting regime may provide.
It provides a different perspective in certain certain elements of how we manage the business, but I don't see those as material changes to our business.
When I think about.
Earnings in our first 17 environment, one thing that.
Speaker 5: When I think about...
We do highlight in those risk management disclosures is the potential for variability, but I do want to be balanced and say that as well as the potential for variability. There's also potential for greater stability and then I have 117 environment and that comes from the fact that for example, new business gains won't be a feature.
Speaker 5: earnings in an IF-17 environment. One thing that...
Speaker 5: you know, that we do highlight in those risk management disclosures is the potential for variability, but I do want to be balanced and say that as well as the potential for variability, there's also potential for greatest stability in an IFRS 17 environment. And that comes from the fact that, for example, new business gains won't be a feature of earnings. They'll be outside of earnings and also changes in non economic assumptions will be recorded.
Earnings that'll be outside of earnings and also changes in noneconomic assumptions will be recorded.
Not that where the bulk of which would be recorded in the CSM to the extent there is CSM available and interest rate movements would be recorded.
Speaker 5: Not at well, a bulk of which would be recorded in the CSM to the extent there is CSM available. And interest rate movements would be recorded principally within OCI or CSM.
Principally in the.
Okay.
OCI or CSM.
Reflecting the fact that we are considering adopting the OCI option. So I don't think <unk> 17 is old news, but we will have to provide an update more of an update as we go through the course of 2022.
Speaker 5: reflecting the fact that we are considering adopting the OCI option. So I don't think IFR-17 is all bad news but we'll have to provide an update, more of an update as we go through the course of 2022.
I mean as well Mario.
Definitely.
Belvieu that economic fundamentals of the business don't change our offer an accounting true.
Speaker 4: I might just chime in as well Mario. We definitely stand by our view that you can like fundamental about business. Don't change our offer and accounting transition like this. It is a huge accounting change, though, for our industry and it's one that's been making for many, many years. And it would be silly to assume that there wouldn't be tweaks and modifications to the way we execute as a result of it. But there would be a significant in my mind.
<unk> like this it is a huge accounting change, though for our industry and it's one that's maybe been making for many many years and it would be silly to assume that there wouldn't be tweaks and modifications to the way we execute as a result of it but that would be a significant in <unk>.
My mind.
And I do feel that there are a lot of positives that will come from <unk> 17, because we focus on new business on CSM and the growth of CSA for our fast growing insurance company like ALS is a really big positive. The fact that new business gains are going to be capitalized into earnings, but rather capitalized in CSM and then amortize we.
Speaker 4: And if I do steal that there are a lot of positives that will come from I for a certain people who could be
Speaker 4: focus on your business, on CSM and the growth of CSM. For a fast growing insurance company like ours is a really big positive. The fact that new business gains aren't gonna be capitalized into earnings, but rather capitalized into CSM and then amortize. We think that is a positive, like investment in it.
That is the positive like investment earnings. So we will in due course provide much more information around the implications of <unk> of our business and the outlook.
Speaker 4: So we will, in due course, provide much more information around the implications of IFRS 17 to our business and the outlook. But we feel that there are many holidays that come with IFRS 17 that we'll be able to share and we'll be following at a future point in time. Okay, thank you.
But we feel that.
There are many positives that come with <unk> for 17 that will be able to share in more detail.
Point in time.
Okay. Thank you very much for that appreciate it.
Thank you. The next question is from Nomura shocks from Cormack Securities. Please go ahead.
Speaker 2: The next question is from the more person from Cornmark Securities. Please go ahead.
Yeah. Thanks, good morning.
Just thinking about Roe.
<unk> core earnings targets on the highest potential businesses, 75% and Asia, 50%, what could that what could the ROE looked like in that scenario up to.
Speaker 12: Yeah, thanks. Good morning. Just thinking about ROE, if you get to your core earnings targets from the highest potential business, it's 75%, an age of 50%. What could the ROE look like in that scenario of the 2025? I guess more I'm going with business.
2025, I guess, where I'm going with this is if.
If I look at all your target efficiency portfolio optimization and growth in high potential businesses altogether.
Speaker 12: So I look at all your targets, efficiency, portfolio optimization, and growth in high potential businesses all together, at 13% for $20,000 a lot. It's not the first time I'm going to like to hit that ROE level. And I get the bottom line messaging that you're trying to convey isn't that you're going through all this effort to just end up at 13%. So anything you could speak to breaking out of that 13% range would be helpful.
At 13% for 2021, it's not the first time annualized.
Roe level.
The bottom line messaging that you're trying to convey isn't it and you're going through all this effort just end up 13%. So anything you could speak to breaking out of that 13% range would be helpful. Thanks.
Yes.
Yes.
As Roy let me start and I'll ask bill to chime in with any supplementing supplementary both but youre absolutely right as we focused on portfolio optimization and freeing up capital.
Speaker 4: Yeah, well, this was Roy. Let me start in the last bit, try me with any supplementary source, but you're absolutely right. As we've focused on portfolio optimization and bring up capital of those businesses that are generating returns that are less than the company average, that is the tailwind to our elite.
Those businesses that are generating returns that are less than the company average that is a tailwind to our elite for us and as you highlight is we continue to grow Wham in Asia, where the ROE.
Significantly higher than our average we're going to start to see an improvement in our consistent improvement in the ROE of our company.
Speaker 4: And as you highlight, as we continue to grow WAM and Asia, where the ROEs are significantly higher than our average, we're going to start to see an improvement, a consistent improvement in the ROE of our company. So yes, we feel really very optimistic about outlook as it relates to return on equity, both through the combination of growth and acceleration of our fast growing businesses.
So yes, we feel really very optimistic about the outlook as it relates to return on equity.
Through the combination of growth and acceleration of bell fast growing businesses.
Is that generate high Roe.
But also through the inorganic actions that we've been driving.
Speaker 4: as they generate higher RLE, but also through the inorganic actions that we've been driving to reduce the capital that's being allocated towards lower RLE businesses. And that's only reinforced throughout portfolio optimization and early in force and.
<unk> reduced the capital.
That's being allocated towards.
Lower ROE businesses, and that's only reinforced throughout portfolio optimization and in force ethics.
So we are optimistic at this point in time, we're really not prepared to provide new targets as it relates to our ROE.
Speaker 4: So we are optimistic at this point in time, we're really not prepared to provide new targets as it relates to ROE, but in due course, that's something that we'll certainly consider. Yeah, this is...
In <unk>, that's something that we'll certainly consider.
Yes. This is Phil just to add we did suddenly change.
13% target. So we introduced the 13% target in the beginning of 2018, but we did make the subtle change to that to put a plus onto it. Since then reflecting the fact that there is upside and when we think about <unk> in particular.
Speaker 5: We did subtly change our 13% target. So we introduced the 13% target in the beginning of 2018, but we did make a subtle change to back to put a plus onto it since then, reflecting the fact that there is upside. And when we think about
Roy talked about Asia, and <unk>, but when you look at the.
Speaker 5: In particular, you know, Roy talked about Asia and G1, but we look at the expected returns on new business in Asia. It's in excess of 20%. So that's certainly a tailwind to ROE over the long terminus, upside to that 13% figure.
The expected returns on new business in Asia.
In excess of 20%. So that's certainly a tailwind to ROE over the long term and there's upside to that 13% figure.
Okay. Thanks, and then would it be fair to suggest that.
As you guys move through the <unk> 17 implementation youre going to revise these targets.
Speaker 12: Okay, thanks, and would it be fair to suggest that as you guys move through the IF-RES 17 implementation, you're going to revise these targets?
This is silica and Lamar that's a great question as we proceed through the <unk> 17 implementation and share more directional information with you what we intend to do as part of that is really look at.
Speaker 5: This is Feligaine Lamar. That's a great question. As we proceed through the IFRS-17 implementation and share more directional information with you, what we intend to do as part of that is really look at the chemetics.
The key metrics.
Of.
Core earnings in other Kpis that are relevant in an eye for a 17 environment share with you how we look at defining those metrics and.
Speaker 5: You call rannings and other KPIs that are relevant in an IFRS 17 environment. Share with you how we look at defining those metrics and also indicate what we think that would mean in terms of medium term financial operating guidance.
Also indicate what we think that would mean in terms of medium term financial operating guidance.
And I think this is ROE is one that's very relevant.
For 2017, so we will provide updates on that more to come.
Speaker 5: And I think this is ROE is one that's very relevant under IFRS 17, so we will provide updates on that more to come.
Great. Thanks.
Thank you. The next question is from Nigel D'souza from Veritas investment Research. Please go ahead.
Speaker 2: The next question is from Nigel D'Souza from Veritas Investment Research.
Thank you good morning, I have a few questions for you on policyholder experience. If you could bear with me. The first was on the lapse rates in the quarter. You noted lower lapse rates in North America, and I was wondering if that could perhaps signal a structural shift in lapse rates have your customers changed how they value.
Speaker 12: Thank you. Good morning. I have a few questions for you on policyholder experience. If you could bear with me the first was on the lapse rates in the quarter you noted lower lapse rates in North America
Speaker 12: I was wondering if that could perhaps signal a structural shift in lapse rates? Have your customers changed how they value?
Insurance benefits provided by policies given the experience with the COVID-19, pandemic and lap if lower lapse rates are a possibility how.
Speaker 12: insurance benefits provided by policies given the experience of the COVID-19 pandemic. And if low elapsed rates are a possibility.
Or would that translate into policyholder experience and the potential impact.
The cat ratio.
Speaker 10: How would that translate into policy holder experience and the potential impact to like at race?
Thanks Lamar.
Steve Finch here. So you are right what we saw when the pandemic started was we see we saw customers valuing their insurance benefits and we saw a.
Speaker 10: Thanks Lamar, it's a defense here. So you're right, what we saw when the pandemic started was we saw customers valuing their insurance benefits and we saw a reduction in lapse rates on protection products in North America by about 20...
Reduction in lapse rates on <unk>.
Protection products in North America by about 20%.
It is my expectation that over time these lapse rates will trend back to pre pandemic levels. We we.
Speaker 10: It is my expectation that over time, these lapse rates will trend back to pre-pandemic levels. We saw, it's a different shock to the system, but we saw in the global financial crisis a similar phenomenon where customers sort of rethought what their priorities were, but lapse rates did trend back to pre-pandemic.
We saw it as a different shock to the system, but we saw in the global financial crisis, a similar phenomenon, where customers sort of rethought, what their priorities were but lapse rates did trend back to pre pandemic levels. So that that's certainly the expectation I think we'll need the pandemic to be more in the.
Speaker 10: So that's certainly the expectation. I think we'll need the pandemic to be more in the rear view mirror, not in the news every day. You know, we can't say when that'll be, but that's clearly the expectation. We'll monitor the trends.
In the rearview mirror not in the news every day.
We.
We can't say when that'll be but that's that's clearly the expectation we'll monitor the trends closely.
That's helpful and the second question experience was long term care I believe that was a modest gain this quarter.
Speaker 12: That's helpful. The second question experience was long-term care. I believe that was a modest game this quarter. So the question really is on mortality and the head of long-term care. Are they different levels of vaccination rates in your long-term care policy block versus your US life policy block? So in other words, long-term care can be an effective hedge on...
So the question really is on mortality in the hedge of long term care are they different levels of vaccination rates in your long term care policy block versus your U S life policy block. So in other words will long term care continues to be an effective hedge on.
Mortality experience due to COVID-19, and how do you see that playing out over the longer term.
Speaker 12: mortality experience to the COVID-19 and how you see that playing out over.
Yes, Thanks Lamar.
Short answer is yes, we do expect the diversification benefits.
Speaker 10: Yeah, thanks Lamar. The short answer is yes, we do expect the diversification benefits to continue.
Two to continue to continue.
Hi.
And.
So what we've seen over the course of the pandemic, we saw significant gains in <unk>.
In.
Speaker 10: So what we've seen over the course of the pandemic, we saw significant gains in
LTC at the start of the pandemic as the older age population was was adversely impacted.
Speaker 10: LTC at the start of the pandemic as the older age population was, was adversely impacted. And we've seen that kind of come back a little bit over time. But the expectation is that we will continue to see those mortality diversification benefits. We've seen it, if you look at our MDNA, we actually provide a mortality sensitivity. And that clearly demonstrates the mortality benefits.
And we've seen that kind of come back a little bit over time.
But the expectation is that we will continue to see those mortality diversification benefits.
We've seen if you look at our MD&A, we actually provide a mortality sensitivity and that clearly demonstrates the mortality benefit set.
Diversification benefits that we see over overtime and Nigel Myer My apologies.
Speaker 10: diversification benefits that we see over time. And Nigel, my apologies. I was responding to the wrong name. My...
Hi, Yes, I was responding to the wrong name my apologies.
No problem ours larger smart guys I'll take that as a compliment.
The last question is morbidity and.
Speaker 12: No problem, the law is a smart guy, so I think that is a compliment. The last question is morbidity and...
<unk>.
Could you maybe shed some light on how morbidity might play out because of the COVID-19 pandemic, there's growing evidence of long COVID-19 and increased morbidity in the U S, especially Indian vaccinated population and how does that play out for you because when I look at your disclosures you are more sensitive to morbidity assumption.
Speaker 12: Could you maybe shed some light on how morbidity might play out because of the COVID-19 pandemic? There's growing.
Speaker 12: evidence of long COVID and increase more bitty in the US, especially in the unvaccinated population.
Speaker 12: And how does that play out for you? Because when I look at your disclosure, you are more sensitive to morbidity, assumption changes, but it's that due to long-term care policy old exposure, is that for your overall policy older exposure.
Changes changes, but is that due to long term care policyholder exposure or is that for your overall policy holder exposure.
That exposure that you are flagging is too that exposure is to long term care.
When I think about sort of long COVID-19 .
Speaker 10: that exposure is too long-term care. When I think about sort of long COVID,
Ed.
We're certainly tracking what the impacts could be over time on mortality and as we just discussed we have that.
Speaker 10: You know, we're certainly tracking what the impacts could be over time on mortality. And as we just discussed, we have seen those benefits of diversification is still flagged. You know, since the pandemic started, you know, policyholder experience has varied quarter to quarter. But those diversification benefits have been there 27 million post-tax charge over the course of two years.
We have seen those those benefits of diversification is still flagged since the pandemic started.
Policyholder experience has varied quarter to quarter, but those diversification benefits have been there $27 million post tax.
<unk> over the course of two years.
And then we talked to earlier in the call about what we might see in terms of long term trends its really two or is it too early to say what morbidity trends might be in the long term there could be some tailwind. So it could be some headwinds and we will have to track that carefully over time.
Speaker 10: And then we talked earlier in the call about what we might see in terms of long-term trends. It's really too early to say what morbidity trends might be in the long-term, there could be some tailwinds, there could be some headwinds, and we'll have to track that carefully over time.
Okay. That's it for me thank you.
Thank you.
There are no further questions registered at this time I would like to turn the meeting back over to Mr. Carl.
Speaker 2: There are no further questions registered at this time. I'd like to turn the meeting back over to Mr.
Thank you operator.
We'll be available after the call. If there are any follow up questions have a good day everyone.
Speaker 3: Thank you, operator. We will be available after the call if there are any full questions. Have a good day, everyone.
Thank you. The conference has now ended please disconnect your lines at this time and thank you for your participation.
Speaker 2: Thank you. The conference has now ended. Please disconnect your lines at this time. And thank you for your participation.
Yeah.
Okay.
Yes.
But.
This conference is no longer being recall.
Sure.
<unk> please.
Speaker 1: This conference is no longer being recorded. This conference is no longer registered.