Q4 2023 Manulife Financial Corporation Earnings Call

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Operator: Please be advised that this conference call is being recorded. Good morning, ladies and gentlemen, and welcome to the Manulife Financial 4th Quarter and Full Year 2023 Financial Results Conference. I would like to turn the meeting over to Mr. Cole. Please do so.

Please be advised that this conference call is being recorded.

Mr. Ko: Good morning, ladies and gentlemen, welcome to the Manulife financial fourth quarter and full year 2023 Finance financial results Conference call I would like to turn an email which Mr. Ko. Please go ahead Mr. Goh.

Han: Thank you. This is Manulife's earnings conference call to discuss our fourth quarter and full year 2023 financial and operating results. Our earnings materials, including a webcast slide for today's call, are available on the Investor Relations section of our website at Manulife.com. Turning to slide four, we'll begin today's presentation with a highlight of our four-year results and a strategic update by Roy Gorey, our President and Chief Executive Officer. Following Roy's remarks, Colin Simpson, our Chief Financial Officer, will discuss the company's financial and operating results in more detail. After the prepared remarks, we'll move to the live Q&A portion of the call. 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. 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 Khoury, our President and Chief Executive Officer.

Goh: Thank you welcome to many ways earnings conference call to discuss our fourth quarter and full year 2023 financial and operating results.

Earnings materials, including the webcast slides for today's call are available on the Investor Relations section of our website <unk> com.

Goh: Turning to slide four we will begin today's presentation with a highlight for your results and strategic update by Roy Gori, Our President and Chief Executive Officer.

Goh: Following remarks, Colin Simpson, our Chief Financial Officer will discuss company's financial and operating results in more detail.

Goh: Although the prepared remarks, we will move to the Q&A portion of the call before we start please refer to slide truthfully caution on forward looking statements and slides 43 for a note on a non-GAAP and other financial measures used in this presentation.

Certain material factors or assumptions are applied in making forward looking statements and actual results may differ materially from what you stated.

Goh: With that I'd like to turn the call over to Roy Gori, Our President and Chief Executive Officer right.

Roy Khoury: Thanks Han, and thank you everyone for joining us today. Yesterday, we announced our fourth quarter and full year 2023 financial results. As you can see, our strategy and discipline focus on execution are delivering, even in uncertain market conditions. We generated double-digit top-line growth with record AP sales during the year, while Global Wham delivered another year of positive net inflows despite challenges in the retail fund market. This is the 13th year of positive inflows in the past 14 years.

Roy Gori: Thanks, Sean and thank you everyone for joining us today.

Roy Gori: Yesterday, we announced our fourth quarter and full year 2023 financial results.

Roy Gori: As you can see our strategy and disciplined focus on execution are delivering even in uncertain market conditions.

Roy Gori: We generated double digit topline growth with a record IP sales during the year.

Roy Gori: While global Wan delivered another year of positive net inflows despite challenges in the retail fund market that is the 13th year of positive inflows in the past 14 years.

Roy Khoury: Core EPS grew 17%, and supported by strong core earnings growth and the impact of share buybacks, our core ROE increased to 15.9 percent, achieving our medium-term target. We delivered robust growth of 9% in adjusted book value per share, and our strong LICAT ratio of 137% and low leverage ratio provide ample financial flexibility. Turning to slide 7.

Roy Gori: Core EPS grew 17% supported by strong core earnings growth and the impact of share buybacks.

Roy Gori: Our core ROA increased to 15.9% achieving our medium term target.

Roy Gori: We delivered robust growth of 9% in adjusted book value per share and a strong why cat ratio of 137% and low leverage ratio provides ample financial flexibility.

Roy Gori: Turning to slide seven.

Roy Khoury: Today, we're a very different company from when we began our efforts to reshape our portfolio towards lower risk and higher returns, and 2023 was also a milestone year in that transformation journey. As part of that agenda, we further grew our highest potential businesses. In Asia, we saw double-digit growth across key new business metrics. We are a high growth, top three, Pan-Asian life insurer. In Global Wham, we acquired CQS, whose multi-sector alternative credit capabilities complement our existing fixed income and multi-asset solutions business and are a powerful addition to our global credit offering.

Roy Gori: Today, we're a very different company from when we began our efforts to reshape our portfolio towards lower risk and higher returns in.

Roy Gori: In 2023 was also a milestone year in that transformation journey.

Roy Gori: As part of that agenda, we further grew our highest potential businesses.

Roy Gori: In Asia, we saw double digit growth across key new business metrics.

Roy Gori: We are a high growth top three Pan Asian life insurer.

Roy Gori: And global Wham, we acquired seek U S.

Roy Gori: Whose multi sector alternative credit capabilities complement our existing fixed income and multi asset solutions business.

Roy Gori: And are a powerful addition to our global credit offering.

Roy Khoury: We also generated remittances of $5.5 billion and returned $4.3 billion of capital to shareholders through dividends and share buyback, and I'm pleased to tell you that yesterday our board approved a 9.6% increase in our common share dividend beginning in March. But first, it goes without saying that meeting our customers' needs and expectations is at the core of what we do. We've sped up our processing times, reduced costs, and improved the customer experience. As a result of these and other actions, we've seen a 22 point increase in our Net Promoter Score since 2017, and we are leading or on par with our peers across the majority of our business lines. None of this would be possible without our winning team in Kulcha. And I'm proud that for the fourth consecutive year, we achieved top quartile employee engagement results.

Roy Gori: We also generated remittances of $5.5 billion and returned $4 $3 billion of capital to shareholders through dividends and share buybacks.

Roy Gori: And I'm pleased to tell you that yesterday, our board approved a 9.6% increase in our common share dividend beginning in March.

Roy Gori: But first it goes without saying the meeting our customers' needs and expectations is at the core of what we do.

Roy Gori: We've set up our processing times reduced costs and improved the customer experience.

Roy Gori: As a result of these and other actions we've seen a 22 point increase in our net promoter score since 2017.

Roy Gori: And we are leading or on par with our peers across the majority of our business lines.

Roy Gori: And none of this would be possible without a winning team and culture.

Roy Gori: And I'm proud that for the fourth consecutive year, we achieved top quartile employee engagement results.

Roy Khoury: Finally, we ended the year with a significant milestone in our transformation journey, the announcement of the largest ever LTC reinsurance deal, which I'll touch on in the following slide. You will recall that in December, we announced the Milestone LTC transaction. We transacted at attractive terms, de-risked our business, and it will be accredited to Core EPS and Core ROE after deploying the capital released to share buybacks. The transaction, which we expect will close by the end of February, also contributes to establishing an active LTC reinsurance market. It's another example of the value we continue to unlock for shareholders as we reshape our portfolio to focus on lower risk and higher return businesses. And we aren't stopping there. We continue to work on opportunities to create shareholder value through organic and inorganic actions across our legacy and low ROE businesses. Moving to slide nine.

Roy Gori: Finally, we ended the year with a significant milestone in our transformation journey the announcement of the largest ever L. T C reinsurance deal.

Roy Gori: Which I'll touch on in the following slide.

Roy Gori: You'll remember that in December we announced the milestone L. P C transaction.

Roy Gori: We transacted at attractive terms derisked, our business and it will be accretive to core EPS and core ROA after deploying the capital released to share buybacks.

Roy Gori: The transaction, which we expect will close by the end of February also contributes to establishing enacted L. T C reinsurance market.

Roy Gori: It's another example of the value we continue to unlock for shareholders as we reshape our portfolio to focus on lower risk and higher return businesses.

And we aren't stopping here.

Roy Gori: We continue to work on opportunities to create shareholder value through organic and inorganic actions across our legacy and low our OE businesses.

Roy Gori: Moving to slide nine.

Roy Khoury: Our transformation journey began in 2018, when we started reshaping our businesses by reducing risk, improving ROE, strengthening capital, and growing high-return businesses. Thanks to disciplined execution, today, our high-return businesses represent a larger share of our earnings. These are impressive results considering that the transition to IFRS 17, which defers the recognition of new business gains into CSM, resulted in a two percentage point reduction in 2022.

Roy Gori: Our transformation journey began in 2018, when we started reshaping our businesses by reducing risk improving our OE strengthening capital and growing high return businesses.

Roy Gori: The disciplined execution today, our high return businesses represent our largest share of our earnings.

Roy Gori: These are impressive results considering that the transition to Ivar of 17, which defers the recognition of new business gains into C. S. M resulted in a two percentage point reduction in 2022 in.

Roy Khoury: In fact, Asia already represents over 60% of our CSM balance and 70% of our new business CSM, indicating its immense future earnings potential. And as we've changed our business mix over this time, we've significantly expanded our core ROE by almost five percentage points. We've also taken significant actions to reduce risk, including our U.S. variable annuity reinsurance transactions in 2022.

Roy Gori: In fact Asia already represents over 60% of our CSM balance and 70% of our new business C. S N, indicating its immense future earnings potential.

Roy Gori: And as we've changed our business mix over this time, we've significantly expanded our core ROA by almost five percentage points.

Roy Gori: We've also taken significant actions to reduce risk, including our U S variable annuity reinsurance transactions in 2022.

Roy Khoury: Our portfolio optimization actions, along with growth in our highest potential businesses, have reduced the core earnings contribution from LTC and VA significantly, from 24% in 2017, and together with December's LTC transaction, this contribution is expected to further decrease to 11%. Returning capital to shareholders remains a priority, and since 2018, we've returned $18.9 billion through dividends and share buybacks. Those buybacks have generated a benefit of more than $1.3 billion, as our average repurchase costs were well below our recent share price levels.

Roy Gori: Our portfolio optimization actions along with growth in our highest potential businesses has reduced the core earnings contribution from LTC N V. A significantly from 24% 2017, and together with Decembers L. T. C transaction. This contribution is expected to further decrease to 11%.

Roy Gori: Returning capital to shareholders remains a priority and since 2018, we've returned $18.9 billion through dividends and share buybacks.

Roy Gori: Those buybacks are generated a benefit of more than $1.3 billion as our average repurchase costs were well below our recent share price levels.

Colin: In closing, I'm excited by the progress that we've made and by our momentum heading into 2024. Our unique and diverse geographic footprint, all-weather strategy, and focused execution position us well to continue delivering superior value. Given our strong capital position and cash generation, we will continue to look at opportunities to unlock shareholder value, including inorganic opportunities to deploy capital. I'll now hand it over to Colin to review the highlights of our financial results. Colin said:

Speaker Change: In closing IMAX.

Speaker Change: I'm excited by the progress that we've made and by our momentum heading into 'twenty 'twenty four.

Speaker Change: Our unique and diverse geographic footprint, all weather strategy and focused execution position us well to continue delivering superior value.

Speaker Change: Given our strong capital position and cash generation, we will continue to look at opportunities to unlock shareholder value, including inorganic opportunities to deploy capital.

Speaker Change: I will now hand, it over to Colin to review the highlights of our financial results Colin.

Colin: Thanks, Roy. 2023 was indeed a milestone year for Manulife, marked not only by strong business performance and the announcement of a major reinsurance transaction but also by a smooth transition to IFRS 17. We continue to deliver strong growth in new business metrics, earnings, and adjusted book value, and the fourth quarter contributed to that momentum. I'll go into a little more detail on the quarter's results before the Q&A. I'll start with our top line on slide 11.

Colin Simpson: Thanks, right 2023 was indeed, a milestone year for Manulife marked not only by strong business performance and the announcement of a major reinsurance transaction, but also a smooth transition to offer a 17.

Colin Simpson: We continued to deliver strong growth in new business metrics earnings and adjusted book value in the fourth quarter contributed to that momentum.

I'll go into little more detail on the quarters results before the Q&A.

I'll start with our top line on slide 11.

Colin: Our fourth-quarter APE sales increased 20% from the prior year with double-digit growth across each of our insurance segments. This increase was supported by the ongoing benefit of the return of demand across various markets in Asia, higher large and mid-sized group insurance sales in Canada, and a rebound in demand from affluent customers in the U.S. The momentum in our sales growth contributed to strong increases in new business CSM and new business value of 41% and 20%, respectively. However, global WAM saw modest net outflows of $1.3 billion due to a large case pension plan redemption in our U.S. retirement business.

Colin Simpson: Fourth quarter, a P cells increased 20% from the prior year with double digit growth across each of our insurance segments.

Colin Simpson: This increase was supported by the ongoing benefit of the return of demand across various markets in Asia higher large and mid sized group insurance sales in Canada, and a rebound in demand from affluent customers in the U S.

Colin Simpson: The momentum in our sales growth contributed to strong increases in new business, CSM, and new business value of 41% and 20% respectively.

Colin Simpson: Global Wham, so modest net outflows of $1 $3 billion due to a large case pension plan redemption in our U S retirement business.

Colin: On a full-year basis, we generated net inflows of $4.5 billion, which is creditable in a year in which investors kept money on the sidelines, benefiting from higher short-term interest rates. I'm proud of the growth we've achieved across our new business metrics compared to 2022, despite the uncertain economic conditions, which is testament to the strength of our global and diverse portfolio of businesses. Turning to slide 12, which shows the growth in our profit metrics, core EPS increased 20% as we grew core earnings and reduced share count.

Colin Simpson: On a full year basis, we generated net inflows of $4 $5 billion, which is creditable in a year in which investors kept money on the sidelines benefiting from higher short term interest rates.

Colin Simpson: I'm proud of the growth we've achieved across our new business metrics compared to 2022, despite the uncertain economic conditions, which is testament to the strength of our global and diverse portfolio of businesses.

Colin Simpson: Turning to slide 12, which shows the growth in our profit metrics.

Colin Simpson: Core EPS increased 20% as we grew core earnings and reduced share count.

Colin: Looking at this quarter's results, we delivered a core ROE of 16.4%, above our medium-term target of 15% plus for the third consecutive quarter. Driving up ROE is a key priority, and our recent milestone reinsurance transaction did exactly that. You should expect us to continue evaluating in-force opportunities to improve our return on equity. When we transitioned to IFRS 17, we noted we expected to see more stable growth in our adjusted book value per share as a better alignment with the economics of our business, and slide 13 demonstrates just that. A 9% increase over the year, or 13% after excluding the effect of foreign exchange rate movements on adjusted book value per share to $32.19.

Looking at this quarters results, we delivered a core ROE of $16, 4% above our medium term target of 15% plus the third consecutive quarter.

Colin Simpson: Driving up our OE is a key priority and a recent milestone reinsurance transaction did exactly that you should expect us to continue evaluating and force opportunities to improve our return on equity.

Colin Simpson: When we transition time for 17, we noted we expect to see more stable growth in our adjusted book value per share as it better aligns with the economics of our business and slide 13 demonstrates just stop a 9% increase over the year or 13% after excluding the effect of foreign exchange rate movements and <unk>.

Adjusted book value per share to $32.19.

Colin: A key driver of the CSM growth this quarter was an update to actuarial methods and assumptions. We targeted a risk adjustment for non-financial risk that is calibrated to a 90-95% confidence range, which is conservative relative to peers. We have been trending towards exceeding the top end of this range, and so during the quarter, we recalibrated our risk adjustment towards the midpoint of this range. This had the impact of increasing the CSM and reducing risk adjustment, which still sits at $18.5 billion. We will continue to monitor risk adjustment target levels across the industry and expect these to converge over time. More information is available in the appendix of this presentation.

Colin Simpson: A key driver of the CSM growth. This quarter was an update to actuarial methods and assumptions, we targeted risk adjustment for nonfinancial risk that is calibrated to a 90% to 95% confidence range, which is conservative relative to peers.

Colin Simpson: We had been trending towards exceeding the top end of this range and so during the quarter, we recalibrated our risk adjustments towards the midpoint of this range.

This had the impact of increasing the CSM and reducing the risk adjustment, which still sits at $18 $5 billion.

Colin Simpson: We will continue to monitor our risk adjustment target levels across the industry and expect these to converge over time.

Colin Simpson: More information is available in the appendix of this presentation.

Colin: Bringing you back to our core earnings results on slide 14, I'd like to call out some of the highlights of the Drivers of Earnings Analysis, focusing on the quarter relative to the prior year. There were three main drivers of the increase in core net insurance service revenue. Expected earnings on insurance contracts increased across each insurance segment, led by Asia, which benefited from the impact of basis changes in the third and fourth quarters.

Colin Simpson: Bring you back to our core earnings results on slide 14, I'd like to call out some of the highlights of the drivers of earnings analysis, focusing on the quarter relative to the prior year.

Colin Simpson: There were three main drivers of the increase in core net insurance service results.

Colin Simpson: Expected earnings on insurance contracts increased across each insurance segment led by Asia, which benefited from the impact of basis changes in the third and fourth quarters.

Colin: Secondly, business growth in our group insurance and affinity markets businesses in Canada improved on their insurance results. And lastly, our insurance experience was favorable due to a nearly $60 million release of provisions held in our P&C reinsurance business for catastrophes from prior years, mainly relating to Hurricane Ian. These factors contributed to a 25% increase in core net insurance service results. In terms of our core net investment results, we continue to see the benefits of higher interest rates and business growth year on year. We reported no increase in our expected credit loss provision over the quarter, which has improved investment results somewhat.

Colin Simpson: Secondly business growth in our group insurance and affinity marketing businesses in Canada improved on that insurance results.

And lastly on insurance experience was favorable due to a nearly $60 million release of provisions. How then all P&C reinsurance business for catastrophes from prior years, mainly relating to hurricane in.

Colin Simpson: These factors contributed to a 25% increase in core net insurance service with salt.

Colin Simpson: In terms of our core net investment results, we continue to see the benefits of higher interest rates and business growth year on year, We reported no increase in our expected credit loss provision over the quarter, which has improved investment results somewhat too.

Colin: Towards the bottom of the table, you'll see that Global WAM was a notable contributor to the results, supported by higher average AUMA. However, these factors were partially offset by higher performance-related costs included in other core earnings, along with an increase in certain corporate costs. A market experience for the quarter saw offsetting impacts that resulted in a modest net charge and a $114 million gap between core earnings and net income. We reported a $381 million charge from lower-than-expected returns on ALBA, largely reflecting the ongoing pressure on commercial real estate due to increasing cap rates.

Colin Simpson: Towards the bottom of the table, you'll see that global one was a notable contributed to the results supported by higher average a U M. A.

Colin Simpson: These factors were partially offset by higher performance related costs included in other core earnings along with an increase in certain corporate costs.

Colin Simpson: Our market experience for the quarter, so offsetting impacts that resulted in a modest net charge and $114 million gap between core earnings and net income.

Colin Simpson: Posted a $381 million charge from lower than expected returns on older largely reflecting the ongoing pressure on commercial real estate due to increase in cap rates.

Colin: But this was partially offset by a $182 million gain due to higher-than-expected public equity returns during the quarter. Our multi-year track record in ALDA, as shown in the appendix, is a testament to our strong capabilities in managing these assets and supports our long-term return assumptions. You will also see a positive contribution to net income from the basis change that I mentioned on the previous slide. The next few slides will cover a segment view of our results, starting with Asia on slide 16. Both top and bottom line performance was once again strong. APE sales increased 11% from the prior year quarter as we continue to capitalize on the return on demand from MCV customers.

Colin Simpson: But this was partially offset by a $182 million gain due to higher than expected public equity returns during the quarter.

Colin Simpson: Our multi year track record in ALDA is shown in the appendix is a testament to our strong capabilities in managing these assets and supports our long term return assumptions.

Colin Simpson: You will also see a positive contribution to net income from the base has changed that I mentioned on the previous slide.

Colin Simpson: The next few slides will cover the segment view of our results starting with Asia on Slide 16.

Colin Simpson: Both top and bottom line performance were once again strong.

Colin Simpson: <unk> sales increased 11% from the prior year quarter as we continued to capitalize on the return of demand from M. C V customers the.

Phil: The increase in sales contributed to a 27% and 5% growth in new business CSM and NBV, respectively. We delivered strong core earnings growth of 14% year-on-year with a meaningful increase in the contribution from Hong Kong, our largest in-force business. We have made great progress shifting our portfolio towards our higher potential businesses of Asia and Global Lam. But the combination of the pandemic and IFRS 17, which has changed Asia's earnings profile, has led us to extend our target for the Asia region to make up 50% of total core earnings by 2025 by two years. Moving over to Global WOM's results on slide 17. We recorded modest net outflows of $1.3 billion for the quarter.

Colin Simpson: The increase in sales contributed to a 27% and 5% growth in new business CSM and <unk> respectively.

Colin Simpson: We delivered strong core earnings growth of 14% year on year with a meaningful increase in the contribution from Hong Kong, our largest enforced business.

Colin Simpson: We have made great progress shifting our portfolio towards our highest potential businesses of Asia and global EM, but.

Colin Simpson: But the combination of the pandemic and I for 17, which has changed ages earnings profile has led us to extend our target for Asia region to make up 50% of total core earnings by 2025 by two years.

Colin Simpson: Moving over to the global Am's results on slide 17.

Colin Simpson: We recorded modest net outflows of $1 3 billion for the quarter. This was due to a large client redemption of U S. Retirement, we also saw elevated retail mutual fund redemption rates in Canada, but this was offset by continued strong inflows in our institutional business.

Phil: This was due to a large client redemption in U.S. retirement. We also saw elevated retail mutual fund redemption rates in Canada, but this was offset by continued strong inflows in our institutional business. Excluding the large case redemption during the quarter, we generated net inflows of $1 billion.

Colin Simpson: Excluding the large case redemption during the quarter, we generated net inflows of $1 billion.

Colin: The business also delivered strong core earnings supported by higher average AUMA, which increased 5% year-on-year, along with higher fee spreads and a lower effective tax rate. Also of note, severance costs related to restructuring announced during the quarter are excluded from core earnings and will generate expense savings beginning in 2024. Heading over to Canada on slide 18, we delivered another strong quarter of new business and profit metrics. APE sales increased 44% year-on-year, primarily due to higher large, and also, I might add, the highest on record, mid-case sales in our group insurance business, which were also the main contributors to our growth in new business value of 60%. Gross earnings increased 19%, mostly driven by business growth and a lower ECL provision, as well as more favorable insurance experience in our group benefits business.

Colin Simpson: The business also delivered strong core earnings supported by higher average AUR, MA, which increased 5% year on year, along with higher fee spreads and a lower effective tax rate.

Colin Simpson: Also of nodes severance costs related to restructuring announced during the quarter are excluded from core earnings and will generate expense saves beginning in 2024.

Colin Simpson: Heading over to Canada on Slide 18, we delivered another strong quarter of new business and profit metrics.

Colin Simpson: <unk> sales increased 44% year on year, primarily due to higher large and also I might add the highest on record mid case sales in our group insurance business, which were also the main contributors to our growth in new business value of 60%.

Colin Simpson: Core earnings increased 19%, mostly driven by business growth and Aloha ECL provision as well as more favorable insurance experience in our group benefits business.

Colin: Moving to slide 19 on our U.S. segment results. In the U.S., higher APE sales were driven by a rebound in demand from our affluent customers, which contributed to strong MBB and new business CSM results. Our U.S. business delivered strong core earnings, which increased 16% year-on-year, mainly reflecting higher yields and business growth, as well as improved insurance experience.

Colin Simpson: Moving to slide 19 on our U S segment's results.

Colin Simpson: In the U S high a P sales were driven by a rebound in demand from our affluent customers, which contributed to strong M. B B, a new business CSM results.

Colin Simpson: Our U S business delivered strong core earnings, which increased 16% year on year, mainly reflecting higher yields and business growth as well as improved insurance experience.

Colin: On to slide 20 of our balance sheet. We ended the year with a strong Likert ratio of 137%, which was $22 billion above the supervisory target ratio. Our financial leverage ratio declined by 0.9 percentage points from the prior quarter and is within our TOGA ratio of 25%, adding to our ample financial flexibility.

Colin Simpson: Onto slide 20 in our balance sheet.

Colin Simpson: We ended the year with a strong line cat ratio of 137%, which was $22 billion above the supervisory target ratio.

Colin Simpson: Financial leverage ratio declined by 0.9 percentage points from prior quarter and is within our target ratio of 25%, adding 12 ample financial flexibility.

Colin: Remittances of $5.5 billion in 2023 were a result of strong operating cash generation and favorable market moves. With remittances in excess of dividend and interest payments, we are able to return capital to shareholders even after organic investment in our business and bolt-on M&As such as a CQS acquisition. Over the last three years, our remittances have averaged over 85% of core earnings. While this percentage is somewhat flattered by the favorable market moves in 2023 and the U.S. variable annuity transactions in 2022, it's a testament to our ability to generate strong cash flow. In aggregate, we have returned approximately $8.7 billion of capital to shareholders through dividends and share buybacks since we resumed our buyback program in 2022. As previously announced, we plan to launch a new program in early 2024 that would allow us to purchase up to 2.8% of our common shares.

Colin Simpson: Remittances of $5 $5 billion in 2023 were results of strong operating cash generation and favorable market moves with remittances in excess of dividend and interest payments, we were able to return capital to shareholders. Even after organic investments in our business and bolt on M&A, such as a seek U S acquisition.

Colin Simpson: Over the last three years, all remittances have averaged over 85 cents of co earnings.

Colin Simpson: While this percentage is somewhat flattered by the favorable market moves in 2023, and the U S variable annuity transactions in 2022, It's testament to our ability to generate strong cash flow.

Colin Simpson: In aggregate, we have returned approximately $8 $7 billion of capital to shareholders through dividends and share buybacks since we resumed our buyback program in 2022.

Colin Simpson: As previously announced we plan to launch a new program in early 2024 that would allow us to purchase up to two 8% of our common shares.

Colin: And as Roy mentioned, yesterday, our board approved a 9.6% increase in our quarterly common share dividend. Moving to slide 21, which summarizes how we are tracking against our medium-term targets. Our new business CSM grew 12% in 2023, modestly below our target; we generated CSM balance growth of 21%. While this was flattered by the basis change, we still generated a solid 5% growth in organic CSM.

Speaker Change: And as Roy mentioned yesterday, our board approved a nine 6% increase in all quarterly common share dividend.

Speaker Change: Moving to slide 21, which summarizes how we're tracking against our medium term targets on new business CSM grew 12% in 'twenty two 'twenty three modestly below our target with.

Speaker Change: We generated CSM balanced growth of 21%. While this was flattered by the basis change, we still generated a solid 5% growth in organic CSM.

Colin: Our core EPS growth and core ROE were strong in 2023, exceeding our target ranges. All in, we're pleased with our progress and delivered strong results with focused execution. 2023 was a milestone year, and while we continue to face an uncertain macroeconomic environment, I'm confident that we are uniquely positioned to drive and execute on our transformation agenda in 2024 and beyond. And finally, turning to slide 22, we're hosting an Investor Day in Hong Kong and Jakarta from Tuesday, June 25th to Thursday, June 27th, 2024. It has been some time since we hosted an Investor Day in Asia, and we're excited to showcase our quality franchise. Please save the date.

Speaker Change: Our core EPS growth and core ROE was strong in 2023 exceeding our target ranges.

Speaker Change: All in we're pleased with our progress and delivered strong results with focused execution.

Speaker Change: <unk> 23 was a milestone year and while we continue to face an uncertain macroeconomic environment I'm confident that we are uniquely positioned to drive and execute on our transformation agenda in 2024 and beyond.

Speaker Change: And finally, turning to slide 22, we're hosting an investor day in Hong Kong and Jakarta from Tuesday June 25th to Thursday June 27th 'twenty 'twenty four it has been sometime since we hosted an investor day in Asia, and we're excited to showcase our quality franchise. Please save the date registration details will follow.

Operator: Registration details will follow shortly. This concludes our prepared remarks. Before we move to the Q&A session, I'd like to remind each participant to adhere to a limit of two questions, including follow-ups, and to re-queue if they have additional questions. Operator, we will now open the call to questions. Thank you. We will now take questions from the telephone lines. If you have a question and you're using a speakerphone, please lift your handset before making your selection. Otherwise, if you have a question, please press star one on your device's keypad. To cancel the question, please press start.

Speaker Change: Shortly.

Speaker Change: This concludes our prepared remarks before we move to the Q&A session I'd like to remind each participant to adhere to a limit of two questions, including follow ups and to re queue. If they have additional questions. Operator, we will now open the call to questions.

Speaker Change: Thank you, we'll now take questions from the telephone line. If you have a question and you are using a speakerphone. Please go handset before making your selection.

Speaker Change: A question. Please press star one on your devices keypad.

Speaker Change: Canceled a question please press star two.

Operator: Please press star 1 at this time if you have a question. There will be a brief pause while participants register. Thank you for your patience.

Speaker Change: Star one at this time, if you have a question there'll be a brief pause all participants register thank you for your patience.

Manny Grauman: And the first question is from Manny Grauman from Scotiabank. Please go ahead. Hi, good morning.

Manny Grauman: And your first question is from many grauman from Scotiabank. Please go ahead.

Manny Grauman: Hi, Good morning, I wanted to ask about the global minimum tax and whether it will have a material impact.

Colin: I wanted to ask about the global minimum tax and whether it will have a material impact on you. If you could provide us with any sort of guidance in terms of how big that impact would be, thanks. Manny. It's Colin here.

Manny Grauman: Could provide us.

Manny Grauman: Any sort of guidance in terms of how big that impact would be.

Manny Grauman: Yeah. Thanks, Manny it's Colin has so we've looked at the draft legislation in Canada and.

Colin: So we've looked at the draft legislation in Canada, and we're participating in the consultation process. There's really a lot to be done before the draft rules are fully integrated into existing Canadian tax law. But saying that, should the legislation become substantially enacted, we would expect to incur higher taxes, just from the nature of some of the jurisdictions we operate in. We think it's going to add about two to three percentage points to our effective tax rate. And we'll start incurring that cost once the legislation becomes substantially enacted, potentially Q2, maybe Q3 this year. Thanks so much.

Colin Simpson: And we are participating in the consultation progress process, there's really a lot to be done before the draft rules are fully integrated within our existing Canadian tax law, but saying that should the legislation becomes substantially and that says we would expect to incur higher taxes just from the nature of some of the jurisdictions. We operate in are we think it's going to add.

Colin Simpson: Two to three percentage points to our effective tax rates.

Colin Simpson: And we will start incurring nuts once the once the legislation becomes substantially enacted potentially Q2, maybe Q3 this year.

Speaker Change: Thanks, So much and then just on the risk adjustment.

Steve: And then just on the risk adjustment, that change that you made, just want to better understand what's driving that. So the risk adjustment is trending to exceed the upper end of the target range. And just want to understand how. What is the process that drives that?

Speaker Change: Change that you made just wanted to better understand what's driving that to the risk adjustment is trending.

Speaker Change: Typically the upper end of that target range.

Speaker Change: Just wanted to understand how what's the process that drives that is that.

Steve: Is that you're being overly conservative in terms of your assumptions? Or is there something else going on here that's making it track higher than you expect? Thanks, Manny. It's Steve here.

Speaker Change: That you're being overly conservative in terms of your.

Speaker Change: In terms of your assumptions or is there something.

Alex: Alex going on here.

Alex: Making attract higher than you expect.

Alex: Thanks, Manny it's it's Steve here, so, yes, our our disclosed confidence level range for the risk adjustment is 90 to 95, and we are trending to go higher and in fact without the change we would've reported over that confidence level range in Q4, which is really driving the decision you know we're comfortable with.

Steve: So, yes, our disclosed confidence level range for the risk adjustment is 90 to 95, and we were trending to go higher, and in fact, without the change, we would have reported over that confidence level range in Q4, which is really driving the decision. You know, we're comfortable with the range that we selected at transition, and the move was simply to move back closer to within that range. What we saw was, you know, Relative to peers, we included in the appendix, you can see some of the benchmarking versus peers, and we are more conservative than global peers here, and particularly in Asia. That's what was driving the growth above that target end of the range. So we made the adjustment primarily in Asia, which had the largest impact, and that leaves Asia actually at the high end of that disclosed 90 to 95 range. So fairly simple in terms of just moving back towards the midpoint.

Alex: The range that we selected at at transition and the mood was simply to move back closer to within that range and what we saw was I you know relative.

Alex: Relative to peers. We included in the appendix you can see some of the benchmarking versus peers and we are more conservative than that.

Alex: Global peers here and particularly in Asia that side, that's where that's what was driving the growth above that target end of the range. So we made the adjustment primarily in in Asia was the largest impact and that leaves Asia actually at.

Alex: The high end of that disclosed 90 to 95 range. So fairly simple in terms of just moving back to towards the midpoint of the range.

Steve: And then, does that have any implications for core earnings going forward, just thinking through the change and how it will impact results on a look-ahead basis in terms of the core results? Yes, a modest impact on core earnings.

Alex: And then does that have any implications for core earnings going going forward just thinking through.

The change how it will impact results.

Alex: Look ahead basis in terms of the corporate bank.

Speaker Change: Yes modest impact in course, so while we reduced the risk adjustment by just over $2 8 billion Canadian that I.

Steve: So while we reduced the risk adjustment by just over $2.8 billion Canadian, that largely went to an increase in the CSM. And because the CSM amortizes slightly faster than the risk adjustment releases, we see a modest, just a hair under $20 million benefit to run-rate core earnings, and that was in our Q4 results. Thanks so much.

Speaker Change: Mostly largely went today an increase in the C. S M and because the C. S. M. I amortize is slightly faster than the risk adjustment releases, we see a modest just a hair under $20 million.

Speaker Change: Benefit to run rate core earnings and that was in our Q4 results as well.

Speaker Change: Got it thanks, so much.

Steve: Thank you. Well actually, that was the question I was going to ask, that $20 million, is that quarter, annual, or what? It's a quarter, $20 million per quarter. Okay, great. And just to really dumb it down, I mean, just throwing out that we're exceeding our 99.9% to 95% range. What does that mean? What's going on?

Speaker Change: Thank you.

Speaker Change: The next question is from Gabriel <unk> from National Bank Financial. Please go ahead.

Gabriel: Well actually that was the question I was going to have that $20 million at the quarter end.

Gabriel: Right.

Gabriel: It's a quarter 20 million per quarter Gabe.

Gabriel: Okay, great and that's the really dumb it down I mean, just throwing out we're exceeding our 90, 990% to 95%.

Gabriel: There are a range what does that mean, what's going on what was going on in the business in the Asia business in particular that created the variation and caused the reshuffling of one liability category to another because you know.

Steve: What was going on in the business, in the Asia business in particular, that created this variation and then caused the reshuffling of one liability category to another because, you know, it could happen again, right? Yeah, and if we back up, the risk adjustment, you can think of it as the non-economics or the non-investment PFADs under the old IFRS 4, that's what it is. Under IFRS 17, we calibrate, and we're required to disclose the confidence level range of that, and we base it on LICAT shocks and then calibrate from there.

Gabriel: It could happen again right.

Gabriel: Yeah, and if we if we back up the risk adjustment you can think of it as the nine economics of the non investment piece adds under the old IRS for that's what it is under IRS teen we calibrate and we're required to disclose the confidence level range path and we base it off.

Gabriel: Like Cat shocks and then calibrate from there so it's fairly fairly straightforward process. What was driving it was you know for Asia, we were actually above that top end of the range and as you know we write a lot of a profitable business in Asia that was driving because Asia was higher than the high end of the range that was the total.

Steve: So it's a fairly straightforward process. What was driving it was that for Asia, we were actually above that top end of the range. And as you know, we write a lot of profitable business in Asia, which was driving up the total company because Asia was higher than the high end of the range. So we've calibrated down, as I said, primarily in Asia, and we would expect more stability going forward in terms of where we sit within the range. Gabriel Roy here.

Gabriel: So we've calibrated down as I said, primarily in Asia, and we would expect more stability going going forward in terms of where we sit within the range Gabriel Roy here I might just add that obviously with the transition I for 17, we had to make a whole lot of assumptions as did everyone else in the industry and it's only through 'twenty.

Gabriel Roy: I might just add that, obviously, with the transition to IFRS 17, we had to make a whole lot of assumptions, as did everyone else in the industry, and it's only through 2023 that we started to see where the industry started to land with its risk adjustment, confidence levels, and so on. We're quite pleased that we were very conservative relative to our peers, and the calibration that Steve talks about was just to bring it back into the range, which was, as he highlights and is articulated in the document that we published, very conservative relative to others. We're happy that that's where we typically land, on the conservative end. No, I get that.

Gabriel: 23 that we started to see where the industry started to land with their risk adjustment confidence levels and so on we were quite pleased that we were very conservative relative to our peers and the calibration that Steve talked to was just to bring it back into the range, which was as he highlights and as articulated in the document that we published you know.

Very conservative relative to Talbot, we're happy that that's where we typically land at the conservative end.

I get that.

Steve: I'm just trying to conceptualize this thing. So, non-economic risk. Like mortality was exceeding your worst-case assumptions or something like that. In Asia, it might be something else. It probably is something else.

Gabriel: Try to conceptualize a thing so non economic risks.

Gabriel: Like mortality.

Gabriel: Was exceeding your.

Gabriel: Worst case assumptions or something like that in Asia, it might be something else, probably or something else. So you moved it from risk adjustment the CSM youre able to release those.

Steve: So you moved it from risk adjustment to CSM. You're able to release those reserves sooner because it's, I guess, more confident in that assumption. I know this sounds hugely convoluted, but I'm trying to explain it for the layman, like a, do you know what I mean?

Reserves sooner because it.

Gabriel: I guess a more confident.

Gabriel: Assumption I know that it's usually.

Gabriel: Usually convoluted, but I'm trying to get this for the volume and like.

Gabriel: You know what I mean.

Gabriel: Yeah.

Gabriel: You know what I, what I explained is we we hold the risk adjustment, which is like the old P. Fads and bill we've calibrated it based on the standard to say Hey. This is at the 90 to 95 percentile in terms of confidence I. You know, we think that should the takeaways are I think that should give you a high confidence in the quality of the C. F N b.

Steve: Yeah, what I explained to you is we hold the risk adjustment, which is like the old PFAS, and we've calibrated it based on the standard to say, hey, this is at the 90 to 95th percentile in terms of confidence. We think that should, the takeaways are, I think that should give you high confidence in the quality of the CSM because you set up CSM after you set up all the risk adjustment. And this is a fairly modest shift. Risk adjustment releases into income as well, which is why you see a modest impact on core earnings. So this is just a fairly simple recalibration. All right.

Because he set ups, yes, you're set up C. S. M. After you set up.

Gabriel: All of the you know the risk adjustment and this is a fairly modest shift. It you know risk adjustment releases into income as well, which is why you see a modest impact on core earnings. So this is just a fairly simple recalibration.

Steve: Well, thanks. Thank you. The next question is from Doug Young from DeJarvin Capital Markets. Please go ahead.

Speaker Change: Alright, well thanks.

Speaker Change: Thank you.

Speaker Change: The next question is from Doug Young from de Sal Bank capital markets. Please go ahead.

Doug Young: I apologize, but I do have to kind of just dig into the risk adjustment. And maybe Steve, what I'm more wondering is, you know, why was it set originally at 90 to 95? Because it does seem high as a confidence interval. And there must have been a reason that it was set in that range. And why would it differ versus peers?

Doug Young: I apologize, but I do have to kind of just dig into the risk adjustment and maybe Steve.

Doug Young: More wondering is why was it sat originally at $90 to 95.

Doug Young:

Doug Young: Because it does seem high and as a confidence interval in.

Doug Young: The rest would be the reason that it was set in that range and why would it differ versus peers is this just an interplay between capital and risk adjustment is this mix of business related like I know, it's easy enough just to compare manulife relative to the peers as you did on the slide but I'm just trying to dig a little deeper like why was that sat there why would there be differences.

Steve: Is this just an interplay between capital and risk adjustment? Is this a mix of business? Like, I know it's easy enough just to compare Manulife relative to the peers, as you did on the slide, but I'm just trying to dig a little deeper. Like, why was it set there?

Steve: Why would there be differences? Yeah, I think under the standard, it's principles-based, so you've got a range of judgments, and Manulife has typically been conservative in terms of setting our risk margins. I should be really clear. If you look at Asia Peers, because we hold a higher risk adjustment does not mean we take more risk. We write very, very similar profiles of businesses, so you should actually look at it as we're holding higher risk adjustment for similar risk. The other thing is, it's such a significant change in accounting, right, and there are a lot of policy decisions, there's a lot of disclosure under IFRS 17. So I would expect, over time, you might see a convergence of practice on this subject and perhaps other policy decisions as, you know, the results are digested and analyzed. Yeah, I guess maybe this is more of a statement. I'm just surprised that there is such a variance or that such a variance is allowed between players, but I'll move on.

Doug Young: Yeah.

Doug Young: Under the standard its principles base, so you've got a range of judgments and Manulife has typically been conservative in terms of setting our risk margins I should be really clear. If you look at Asia peers, because we hold a higher risk adjustment does not mean, we take more risk we write very very similar profile of business. So you should actually look at it.

Doug Young: We're holding higher risk adjustment for similar risks the the other thing is such a significant change in accounting right and there's a lot of policy decisions. There's a lot of disclosure under Ifr 17, I. So I would expect over time.

Doug Young: You might see a convergence of practice on this subject and perhaps other policy decisions as you know the results are digested it and analyzed.

Yeah I guess this is more of a statement I'm just surprised that there is such a variance are at such a variances allowed between between players.

Doug Young: But I'll move on right, maybe and maybe I'm just sensitive this morning, but any of your comments you seem to emphasize looking at all options for capital deployment, including inorganic I mean has has M&A M&A.

Roy Khoury: Roy, maybe I'm just uber sensitive this morning, but in any of your comments, you seem to emphasize looking at all options for capital deployment, including inorganic. I mean, has M&A moved up your priority list when you think of the capital position? You've got IFRS 17 mostly done.

Doug Young: Move your priority last one when you think of capital.

Doug Young: Capital position, you've got after a 17, mostly done you've got the excess capital you Youre doing reinsurance transactions.

Doug Young: You've got the excess capital. You're doing reinsurance transactions. Is M&A now moving up their priority list, and not just smaller deals like you did, but bigger types of transactions? Yeah, Doug, thanks for the question.

Doug Young:

Doug Young: Is M&A and now moving up the priority list and not just smaller deals like you did but more bigger type of transactions.

Speaker Change: Yeah, Doug Thanks for the question and Youre right you know we have been.

Roy Khoury: And you're right, we have been, you know, very focused on our capital. Our capital position is very strong. Our LICAT ratio is 137.

Speaker Change: Very focused on our capital our capital position is very strong I like cat ratios of 137, and obviously as we transition to <unk> 17, you know, we'll still trying to figure out as was the industry, how like Atwood move and how the transition would work. So it was obviously very sensible for us to be prudent in that environment, but without like a ratio of 137%.

Roy Khoury: And obviously, as we transitioned to IFRS 17, you know, we were still trying to figure out, as was the industry, how LICAT would move and how the transition would work. So it was obviously very sensible for us to be prudent in that environment. But with a LICAT ratio of 137%, you know, we have $22 billion above our supervisory minimum, $10 billion above our internal operating range, and we have been very actively buying back shares, in fact, since 2018, actually $5.5 billion, which has generated $1.5 billion of shareholder value. When we talk about our priorities for capital, obviously, number one for us has always been dividends and organic growth.

Speaker Change: You know, we had 22 billion above our supervisory minimum 10, bill above our internal operating range and we have been very actively buying back shares in fact since 2018 in fact $5.5 billion, which has generated 1.5 billion of shareholder value. When we talk about our priorities for capital obviously number one.

Speaker Change: For us as always being dividends and organic growth, we announced the dividend increase.

Roy Khoury: We announced the dividend increase yesterday, which again further consolidates our position that, you know, dividends should be a way that we create value for shareholders. But, you know, given our unique footprint, organic growth, for us, is a huge priority. And it's an area for significant growth. The second tier of priorities for us from a capital deployment perspective has always been buybacks and M&A, and we have been judicious about M&A and will continue to be. So for us, you know, the focus areas that we would look at when it comes to M&A are A, is it strategic? And B, is it financially valuable for the franchise? We don't want to do anything that obviously doesn't create value.

Speaker Change: Yesterday, which again are further consolidates our position that no dividend should be a way that we create value for shareholders, but you know given our unique footprint the organic growth for us is a huge priority and it's it's an area for significant growth the second tier priorities for us from a capital deployment perspective as always.

Speaker Change: Zane buybacks and M&A.

Speaker Change: And we had thing judicious about M&A and we will continue to be so for US you know the the focus areas that we would look at when it comes to M&A is I is it strategic and B is it financially valuable for the franchise, we don't want to do anything that obviously doesn't create value.

Roy Khoury: And, you know, as we see the uncertainty start to decrease, then obviously, our appetite for M&A will increase as well. So we're pretty optimistic about the outlook organically to grow our franchise. And having the financial flexibility through our strong capital ratio and low leverage, I think really makes the M&A option one that's available to us. But we're going to be disciplined.

Speaker Change: And you know as we see the uncertainty start to decrease then obviously our appetite for M&A will increase as well so we're pretty optimistic about the outlook organically to grow our franchise and having the financial flexibility through our strong capital ratio and low leverage.

Speaker Change: Really makes the M&A option, one that's available to us, but we're gonna be disciplined so I just want to again reassure you that we would not be reckless.

Roy Khoury: So I just want to, again, reassure you that we would not be reckless. Are you seeing more opportunities these days? Look, again, we've got a good scan of what is available, and, you know, I think in the higher rate environment, it has put some pressure on certain businesses. But I think we obviously stand to benefit in a higher rate environment. Again, we don't think that necessarily we're going to see a massive increase on the longer end of the curve, but it does present opportunities for us, and we'll continue to look at them. So, yeah, I think that the opportunities have perhaps increased in recent years, which means it's perhaps more interesting for us to focus on this space. I appreciate the color.

Speaker Change: Yes, maybe a follow up are you seeing more opportunities these days.

Speaker Change: Okay again, we've got a good scan of what is available and you know I think in the higher rate environment. You know it has put some pressure on certain businesses I think we obviously stand to benefit in a higher pyrite environment again, we don't think that necessarily we're going to see a massive increase in the longer end of the curve but.

Speaker Change: It does place opportunities for us and we will continue to look at them. So yeah, I think that the opportunities have put perhaps increased in recent years, which means it's a it's perhaps more interesting for us to focus in this space.

Speaker Change: I appreciate the color. Thank you.

Roy Khoury: Thank you. Thank you. The next question is from Paul Holden from CIBC. Please go ahead.

Speaker Change: Thank you. The next question is from Paul Holden from CIBC. Please go ahead.

Paul Holden: Thank you, good morning. Going back to the risk adjustment discussion, I just want to understand if there are any potential implications for insurance experience going forward. Is there now the potential for more negative experience because of the lower risk adjustment? Paulette Steve, no, this does not impact insurance experience at all. You shouldn't expect any.

Paul Holden: Thank you good morning, I'm going back to the risk adjustment discussion I just wanted to understand if there are any potential implications for insurance experience.

Paul Holden: Going forward is there now.

Paul Holden: Potential for more.

Paul Holden: Negative experience because of the lower risk adjustment.

Paul Holden: Paul It's Steve No. This does not impact the insurance experience going forward.

Steve: At all you shouldn't expect any any impact there okay got it thanks for that and then second question is related to.

Steve: Okay, I got it. Thanks for that. And then the second question is related to Asia. You know, obviously, they're doing extremely well in Hong Kong, but if I look at sales and earnings ex-Hong Kong, they're down slightly year over year. Two-part question to that. One is, what do you think is required to turn that around and get back to targeted growth in Asia outside of Hong Kong? And two, did that trend over the last year influence at all the change in earnings contribution target from 25 to 27? Paul, this is Phil.

Steve: Asia.

Speaker Change: Obviously doing extremely well and in Hong Kong, but if I look at sales and earnings ex Hong Kong, they're down slightly year over year.

Two part question to that one is what do you think is required to turn that around and get back to targeted growth in Asia.

Outside of Hong Kong, and two did that trend over the last year influence at all the change in earnings contribution target from 25 to 27.

Phil: Thanks for the question. And it has been a strong year for our results in Asia, and in the fourth quarter, that continued double-digit growth in sales. And as you highlight, Hong Kong has been particularly important in that.

Speaker Change: Paul This is Phil Thanks for the question and you know it has been a strong year for our results in Asia and we you know in the fourth quarter that continued double digit growth in sales and as you highlight Hong Kong has been particularly important in that but for us it's not.

Phil: But for us, it's not just about the volume of sales; it's about the quality of those sales as well. And that's something that we've made substantial progress on as we've moved through 2023. And you can see that in the improvements in value metrics that we've reported. So the 14% growth in earnings, the 27% growth in new business CSM. And you rightly point out that Hong Kong was a very important driver.

Phil: About the volume of sales, it's about the quality of those sales as well and that's something that we've made substantial progress on as we've moved through 2023 and you can see that in the improvements and value metrics that we've reported so the 14% growth in earnings the 27% growth in new business C. S M.

Phil: And you rightly points out that Hong Kong is a very important driver that was in 2023, we saw the reemergence of the MTV customer segment. It's.

Phil: That was in 2023. We saw the reemergence of the MCV customer segment. But it's not just the MCV customer segment that's driving the Hong Kong results. We saw a notable growth in the core business, in the domestic business in Hong Kong in the fourth quarter, as well as a four-year improvement in the domestic business. But what I have said throughout 2023 is that the recovery from the pandemic has been uneven across Asia.

Phil: It's not just the <unk> customer segment, that's driving the Hong Kong results. We saw notable growth in the coal business and the domestic business in Hong Kong in the fourth quarter as well as we sort of full year improvement in the domestic business, but what I have said throughout 2023 is that the recovery for.

Phil: The pandemic has been uneven across Asia that have been some markets that have grown and we've seen improved momentum.

Phil: There have been some markets that have grown, and we've seen improved momentum in some key markets, especially in the fourth quarter. We've seen improvements in new business momentum in Indonesia, in Vietnam, and in Malaysia, for example. And Singapore, it's been a record year for AP sales as well as mainland China.

Phil: In some key markets, especially in the fourth quarter, we've seen improvements in new business momentum in Indonesia, and Vietnam and Malaysia. For example in Singapore, It's been a record year for AP sales as well as mainland China now as we look forward into 2000.

Phil: Now, as we look forward into 2024, I am encouraged by a number of tailwinds that exist, and we do expect the continuation of the MCV customer segment. I think we'll see a normalized rate of growth as we go into 2024, one year after the reopening of the borders. But I'm also optimistic that the domestic segment in Hong Kong will continue to grow. We saw economic GDP growth of above 4% in the second half of 2023 in Hong Kong. In the first half, it was about 2%.

Phil: 24, I'm encouraged by a number of tail winds that exists.

Phil: We do expect the continuation of the M CV customer segments, I think we will see.

Phil: Our normalized rates of growth as we go into 2020 for one year. After the reopening of the borders that I'm I'm also optimistic that the domestic segments and Hong Kong will continue to grow we saw economic GDP growth in the second half of 2023 in Hong Kong above 4% in the first half it was about <unk>.

Phil: So I think that bodes well for 2024. And then, outside of Asia, that uneven recovery means that there's further to go as we go into 2024. And our focus is very much on driving quality new business.

Phil: 2%, so I think that bodes well for 2024.

Phil: And then outside of Asia that uneven recovery means that you know the there's further to go as we go into 2024 and our focus is very much on driving quality, new business and so I'm really keen to look at the value metrics, new business CSM, new business value and earnings.

Phil: And so I'm really keen to look at the value metrics of new business CSM, new business value, and earnings, and less so at APE sales. But we do expect APE sales to grow in 2024 as well. I might take the second part of your question, Paul.

Phil: And less so at a P E sales, but we do we do expect a P cells to grow in 2024 as well.

Speaker Change: Got it and I'm going to take the second part of your question I'm going to take the second part of your question Paul I'll, just add to Bill's comments that despite that uneven recovery that Phil mentioned in other Asia. We did grow core earnings for the full year by 18% in other Asia, which again just talks to the strength of our diverse franchise. So really proud of our Asia performance.

Roy Khoury: I'll just add to Phil's comments that despite that uneven recovery that Phil mentioned in Other Asia, we did grow core earnings for the full year by 18% in Other Asia, which again just talks to the strength of our diverse franchise. So really proud of our Asian performance despite the short-term challenges that we've seen there. And to your second question, obviously, we are really proud of our Asia franchise. We've been in Asia for 127 years, and we are a top three Pan-Asian player, actually up from number six in 2014.

Speaker Change: Spot the the short term challenges that we've seen there and to your second question. Obviously, we are really proud of our Asia franchise, we've been in Asia for 127 years, and we are the top we are a top three Pan Asian player actually up from number six in 2014, and what differentiates US is that we do have a very diverse.

Roy Khoury: And what differentiates us is that we do have a very diverse business across the various markets. And we've also got an enviable GWAM business that really spans retail, retirement, and institutional and has actually great synergies with our insurance business. We'll talk a bit more about that when we get you out to Asia for our Investor Day, but the delay in our goal of getting to 50% is a function of three things. Firstly, it is the short-term headwinds related to COVID that Phil sort of highlighted. The second factor was IFRS 17.

Business across the various markets and we've also got an enviable G. Wham business that really spans retail retirement and institutional and has actually great synergies with our insurance business will talk a bit more about that when we get you out to Asia for our Investor day, but the delay in out.

Speaker Change: All of getting to the 50% is a function of three things. Firstly. It is the short term headwinds related to COVID-19 that Phil sort of highlighted the second factor was I for a 17, obviously the transitional FY 17 means that new business gains that were in core earnings and now no longer reported in earnings and go to CSM instead in that.

Roy Khoury: Obviously, the transition to IFRS 17 means that new business gains that were in core earnings are now no longer reported in earnings and go to CSM instead. And that obviously is a bit of a headwind in the short term. But the third factor is that we've had tremendous growth in North America. So that's really a good problem to have.

Speaker Change: Obviously is a bit of a headwind in the short term.

Speaker Change: But the third factor is we've had tremendous growth in North America. So that's really a good problem to have so again, we're we're very committed to our 50% goal and target and we feel very confident that that's the direction, we're going in and we will get there again I'll just remind everyone that Asia represents 60% about CFM in more than 72.

Roy Khoury: So again, we're very committed to our 50% goal and target, and we feel very confident that that's the direction we're going in and we'll get there. Again, I'll just remind everyone that Asia represents 60% of our CSM and more than 70% of our new business CSM. All right. Thanks, Roy.

Speaker Change: Santa venue business CSM.

Speaker Change: Alright, Thanks, Roy Thanks Bill.

Speaker Change: Thank you. The next question is from Lamar Prasad from <unk> Securities. Please go ahead.

Phil: Thanks, Phil. Thank you. Hi, I want to go to this basic change start there.

Lamar Prasad: Uh huh.

Lamar Prasad: The state's sustainable start there if that's creep above the risk adjustment target range something that could reoccur it sounds like it is.

Lamar: Is this creep above the risk adjustment target range something that could reoccur? It sounds like it is, or should we kind of think of this as a one and done? And then at what frequency could we see this kind of adjustment? Like, could this potentially be an annual thing? Any thoughts would be helpful.

Lamar Prasad: Or should we kind of think of this as a one and done and then.

Lamar Prasad: At what frequency could we see this kind of adjustment like is it kept us potentially an annual thing.

Speaker Change: Thoughts would be helpful.

Steve: Yeah, thanks, Lamar. Less likely to creep above again given the changes that we just made to bring Asia down to at the top end of that range. Going forward, we would typically look at this, just along with other assumption changes, you know, as part of Q3 basis changes. But, like I said, Q4 was when we saw that we would have exceeded the top end of the range. So we decided to make that recalibration this quarter. Okay, that's helpful.

Speaker Change: Yeah. Thanks, Lamar is less likely to creep above again, given the changes that we just made to bring Asia down towards at the top end of that range going forward. We would look at this typically.

Speaker Change: Just along with other assumption changes I, you know as part of Q3 and basis changes, but like I said Q4 was you know when we saw that we would've exceeded the top end of the range. So we decided to make that recalibration not in this quarter.

Speaker Change: Okay. That's helpful and then.

Lamar: And then, I want to come back to a comment made on the industry converging over time. Do you think the industry is going to come up to your 90-95% level, or is Manulife more likely to move down to, I don't know, the Canadian peers at 80-85 or 85-90? How should we think about the convergence there?

Speaker Change: I'll come back to a comment made on the industry converging over time.

Speaker Change: Do you think the industry is going to come up to your 995% level or is manulife more likely to move down to I don't know the Canadian tiers at 80 to 85 or 85 to 90 like how should we think about the convergence therein.

Steve: And if you guys do move down, what impact would that have on the shift from risk adjustment to CSM? So any numbers would be helpful. Yeah, I'd start with, you know, significant accounting changes. It's not uncommon for industries to converge over time on that. We're talking about one specific topic, but on any number of policy decisions, especially when it's a principles-based standard. So, you know, we'll see, but it would not be unreasonable to expect that. You know, we don't have any plans to recalibrate now. We'll just continue to watch.

Speaker Change: You guys do move down and what impact would that have on the shift from a risk.

Speaker Change: Risk adjustment to Csn's any numbers would be helpful.

Speaker Change: Yeah, I'd start with you know with with significant accounting changes its not uncommon for industries to converge over time on we're talking about one specific topic, but on any number of policy decisions, especially when it's a principles based standard. So you know, we'll see but it would not be unreasonable to expect that.

Speaker Change: We don't have any plans to recalibrate now I will just continue to watch.

Greg Phillips: If we were to make a change, you would see the same type of thing. For example, if we were to reduce the risk adjustment, it would show up in CSM. And, you know, it would look similar to what you're seeing this quarter in terms of knock-on impacts, which are quite modest. Greg Phillips Lamar, I'd just add that, obviously, as a result of IFRS 17 and the assumptions that were required as part of that conversion, I think we're going to see much more reporting and benchmarking across the industry and more transparency. I think that's a good thing. Again, we typically want to be more conservative and prudent. That has worked to our advantage in the past and will continue to do so.

Speaker Change: If we were to make a change you would see same type of thing if we were to reduce the risk adjustment. It would show up in C. S M and that it.

Speaker Change: It would look similar to what you're seeing this quarter in terms of knock on impacts which are quite modest Lamar I'd just add that I do think obviously you know as a result of vie for 17 and the assumptions that were required as part of that conversion I think we're going to see much more reporting and benchmarking across the industry.

Speaker Change: And more transparency I think that's a good thing again, we typically want to be more conservative and prudent that has worked to our advantage in the past and we'll continue to but and in this kind of reporting and benchmarking I think is going to continue to step up and I think that's again not necessarily a bad thing I think it's a good thing and it won't just be on risk adjustment it'll be on.

Steve: But, and this kind of reporting and benchmarking, I think, is going to continue to step up. And I think that's, again, not necessarily a bad thing. I think it's a good thing.

Lamar: And it won't just be risk adjustment. It'll be on discount rates, for example, and so on and so forth. Okay, that's helpful.

Speaker Change: Discount rates for example, and so on and so forth.

Speaker Change: Okay, that's helpful but.

Lamar: But like, I guess the way that I'm kind of thinking about this is, If you guys were going to exceed the upper end of your target range, let's say, pick a number, let's say it would have been 97%. So you brought it down to probably the midpoint of this 90-95, so 92.5%, let's say, so 5%. And you had a $2.8 billion rebalancing here. Well, if I look at where your Canadian peers are at, if you guys were to converge down there, that would be a very big number if you were to go to 82.5%. So is there any way that I can kind of think about how the industry... Or is it not reasonable that this is going to happen in the next couple of years? Is this something that is going to happen over the next 25 years? Is there anything else that could be helped?

Speaker Change: I guess, the way that I'm kind of thinking about that says.

Speaker Change: If you guys are going to exceed the upper end of your target range, let's say pick a number lets say it would have been 97%. So yet you brought it down to probably the midpoint of this 90, 95% to 92.5% lets say, so 5% and you had a 2.8 billion rebalancing as well.

Speaker Change: If I look at our.

Speaker Change: I'm aware of your Canadian peers are at if you guys made a converged down there that would be a very big number. If you were to go to like 82, 5%. So is there any way that I can kind of think about how the industry.

Speaker Change: Or is there or is it just not reasonable that this is going to happen.

Speaker Change: And they are in the next couple of years is that something that's going to happen over the next 25 years anything around that would be would be helpful. Any thoughts.

Steve: That's kind of where it all started. Yeah, and just a reminder that this, you know, it's a liability on the balance sheet. So it's geography, and there are some knock-on impacts. But, you know, at the end of the day, if, you know, if we were to move, you know, five points in the range, It's about three and a half, Mark Rubin estimated. Okay, thanks. And then one quick one, if I may, what should we think about the core tax rate for modeling purposes for 2021 and 2020? Yeah, thanks, Lamar.

Speaker Change: That's kind of our posture.

Speaker Change: Yeah, and I just just a reminder, that this you know it it's a liability on the balance sheet. So it's it's geography and there is some knock on impacts.

Speaker Change: But that at the end at the end of the day.

Speaker Change: If we were to move you know five points in the range.

Speaker Change: It's about $3 5 billion in terms of further impact you could see I won't predict how this would trend over time or you know it's it's.

Speaker Change: It's not knowable now, but to <unk> point I think you know ongoing benchmarking you know will.

Speaker Change: It'd be interesting to see what that are.

Speaker Change: Drives the industry to do.

Speaker Change: Okay. Thanks, and then one quick one if I may how should we think about the core tax rate for modeling purposes for 25 clinical sites.

Steve: In the past, we've guided to an effective tax rate of between 15% to 20%. I would expect if a global minimum tax is enacted as the legislation suggests, that this range of 15 to 20 goes to 17 to 22%. Thank you, that's all.

Speaker Change: Yeah, Thanks, Lamont and the posture you guided to a tax rate effective tax rate of between 15% to 20% I would expect if global minimum tax.

Speaker Change: Is enacted as as the legislation suggests that this range of 15 to 20 goes goes to 17% to 22%.

Speaker Change: Thank you that's helpful.

Nigel D'Souza: Thank you. The next question is from Nigel D'Souza from Veritas Investment Research. Please go ahead.

Speaker Change: Thank you.

Speaker Change: The next question is from Nigel D'souza from very talented investment research. Please go ahead.

Steve: Thank you. Good morning. This wasn't one of my questions, but I think it's an important point of clarification on risk adjustment. Would it be right to think of it as that the profitability of the license or the insurance policy does not change over the lifetime of the policyholder? of that contract, what this does do, the recalibration, is changing the timing of the recognition of those profits by having more fits in the CSM balance. And the fact that your confidence level is higher than peers is just the difference in the recognition and the timing of that profit. And the fact that you're at a higher level is conservative because the reduction would just improve the run rate of profitability. So I think it's just an important distinction. Is that the right way to think about it?

Nigel D'Souza: Thank you. Good morning. This wasn't one of my questions, but I think it's an important point of clarification on on the risk adjustment.

Nigel D'Souza: Would it be right to think of it as the best the profitability of the licensure or the insurance policy does not change over the lifetime of.

Nigel D'Souza: That contract what this does do the calibration.

Nigel D'Souza: Changing the timing of the recognition of those profits by having a more.

Nigel D'Souza: More of a sit in the CSM Val and.

Nigel D'Souza: Talk about your confidence level is higher than peers.

Nigel D'Souza: Just the difference in the recognition and the timing of that process and the fact that you are at a higher level.

Nigel D'Souza: Is it conservative because the reduction would just improve the run rate of profitability.

Nigel D'Souza: It's just an important distinction is that the right way to think about it.

Steve: Yeah, I think you're largely right, Nigel. It just... modestly changes the run rate of profitability, and yeah, I think that's a good way to think about it. Nigel, I think you hit the nail on the head to be perfectly frank, and I would say that our peers who have got perhaps a lower confidence level and therefore less risk adjustment are benefiting from that slightly faster amortization. Okay, good. Yeah, that's how I thought of it.

Speaker Change: Yeah, I think you're largely right Nigel it it's just.

Speaker Change: It it modestly changes the the run rate of profitability and yeah. That's I think that's a good way to think about it and Nigel I think you hit the nail on the head to be perfectly Frank and I would say that all of our peers who have got.

Speaker Change: Perhaps a lower confidence level and therefore less risk adjustment are benefiting from that slightly foster amortization.

Colin: So my first question was, on expected investment earnings, I noticed that it was lower quarter over quarter. And I assume that's related to this impact from short-term rates, but I'm surprised that it outweighed the benefit on, I guess, your longer duration assets, given that cash and short-term interest instruments are only about 5% of your invested asset portfolio. So could you kind of, provide more color on the sensitivity to changes in the yield curve on the run rate of that number? Yeah, Nigel. It's Colin here.

Speaker Change: Okay, Yeah, that's how I thought so my first question was.

Speaker Change: Expected investment earnings I noticed that was lower quarter over quarter and I assume that's related to the.

Speaker Change: This impact from short term rates, but I'm surprised that it outweighed the benefit on I guess for a longer duration asset given that <unk>.

Speaker Change: Cash in short term interest instrument, there's only about 5% of your invested asset portfolio. So could you kind of.

Speaker Change: To provide more color on the sensitivity to changes in the yield curve on the run rate of that number.

Speaker Change: Yeah, Nigel it's it's Colin Yeah, you're right. It did go down by about 30 million quarter on quarter, I think I'd point more to the year on year change, which shows quite a decent increase and that's driven by the increase in interest rates you pointed out short term interest short term interest rates being soft quarter on quarter, There's a lot that go.

Colin: You're right, it did go down by about $30 million quarter-on-quarter. But I think I'd point you more to the year-on-year change, which shows quite a decent increase, and that's driven by the increase in interest rates. You pointed out short-term interest rates being soft quarter-on-quarter. There's a lot that goes into that number, to be honest, especially after a basis change. So while we are down quarter-on-quarter by $30 million, I would expect business growth to push that number back up closer to where we were in the third quarter and to go from there onwards. Okay, any comments on how the yield curve impacts its deepening versus parallel shifts, flattening, inversion, any comment on sensitivities to changes in the yield curve? You really wouldn't expect to see that in that line, but clearly, the steepening of the yield curve in Canada has benefited us and other parts of the P&L and balance sheet. Okay. And my second question was on non-directly attributable expenses in the corporate segment that seems to be trending higher. Any color on, you know, is there just noise this quarter?

Speaker Change: Into that number to be honest, especially after a basis change. So while we are down quarter on quarter by $30 million I would expect business growth to push that number back up closer towards where we were in the third quarter.

Speaker Change: And to go from there onward.

Speaker Change: Okay.

Speaker Change: Okay any comments on how the yield curve impact that steepening versus parallel shifts flattening.

Speaker Change: Any any comment on that.

Speaker Change: The yoga.

Speaker Change: You really wouldnt expect to see that in that line, but clearly the steepening of the yield curve in Canada benefited us.

Speaker Change: Other parts of the P&L and balance sheet.

Speaker Change: Okay got it and my second question was on.

Speaker Change: On non directly attributable expenses in the corporate segment that seems to be trending higher any color on it.

Speaker Change: Is there just some noise this quarter.

Colin: What's the run rate effect going forward? And why is that moving higher? Yeah, Nigel Cullen again.

Speaker Change: What's the run rate effect going forward and why why stop moving higher.

Colin Simpson: Yeah, Nigel Colin again.

Colin: A little bit of both, actually. Last year, there was a $42 million favorable pension true-up that benefited last Q4's non-attributable expenses. And in this quarter, we had increased performance-related costs, as well as a couple of IT projects, and just a bit more expenses in the center. When you put all that together, you do see quite a jump in corporate costs. If you had to look at expenses overall, actually, the segment expenses are going great. And as a whole, we were running at 12% in Q2 and Q3. We're down to 7%, but GWAM took action.

Speaker Change: A little bit of both actually last year, there was a $42 million favorable pension true up that benefited last.

Colin Simpson: Last Q4's, non attributable expenses and in this quarter, we had increased performance related costs and as well as a couple of projects and just a bit more expenses in the sense of when you put all that together you do see quite a jump up in corporate costs.

Colin Simpson: If you had to look at expenses overall actually the segment expenses are going great and we were running it and as a whole we were running at 12% in Q2 and Q3, we're down to 7% G ramp took action and so really impressive segment growth and it is it is something that happened in Q4 related to sensor and performance rather carsten.

Colin: And so, really impressive segment growth. And that was something that happened in Q4 related to center and performance-related costs. And we're set up for good expense discipline in 2024. And if you look at our ratio as well, down to 45.5% from 60% five years ago, the story is good, and it's really important for us to be producing these types of numbers. Okay, that's it for me.

Colin Simpson: And we're set up for for a good expense discipline in 2024, and if you look at our ratios well down to $45 five from 60% five years ago. You know the story is good and it's really important for us to be producing these types of numbers.

Speaker Change: Okay. That's it for me thank you.

Speaker Change: Thank you. The next question is from Mario Mendonca from TD Securities. Please go ahead.

Mario Mandonca: Thank you. Thank you. The next question is from Mario Mandonca from TD Securities. Please go ahead.

Colin: Good morning, Colin. I hate to go back to this tax thing, but I want to clarify something. Your guidance, or the outlook of 15 to 20% previously, is the benefit of looking at Manulife over the long term. I don't think I've ever seen a tax rate approaching 20%. So is there something in your mind when you talk about 20% or possibly even 22%? What would cause it to be that high? Again, I've just never seen it.

Mario Mendonca: Good morning, Collyn I hate to go back to this tax thing, but I want to clarify something your guidance or the outlook of 15%, 20% previously.

Mario Mendonca: So the benefit of looking at Manulife over the long term.

Mario Mendonca: I don't think I've ever seen the tax rate approaching 20%. So is there something in your in your mind, there when you talk about 'twenty or possibly even 22%.

Mario Mendonca: What would cause it to be that high again, I've just never seen it.

Speaker Change: Yeah, Matt I mean.

Colin: Yeah, Mario, I think it's a wide range for a reason. It depends on where the investment positives or negatives land, which could cause volatility in the number. But really, I think the point to note is take this year's tax rate, add two to three percentage points, and that's a good go-forward piece. We give ourselves lots of wiggle room with a broad range. Please don't think that the current 14% is going to go to 22% overnight. Yeah, that's okay.

Speaker Change: I think it's a wide range for a reason it depends on where the investment positives or negatives land could cause volatility in the numbers, but really I think the point to note is take this year's tax rate add two to three percentage points and that's a good go forward piece.

Speaker Change: We give us lots of wiggle room with a broad range. Please don't think that the current 14% is going to go to 22% overnight.

Colin: The other thing I wanted to follow up on this global minimum tax, the 2-3%. Presumably, it would affect the segments of the company with the lowest effective tax rate, which would be Asia and GM. Is that correct? To be specific, Hong Kong and also we operate the high net worth business part of Bermuda, so that would also be affected in Singapore as well. So yeah, broadly correct. So, Asia and GM might see the, because Canada and the U.S. look like they're pretty heavy tax rates anyway. And then the final...

Speaker Change: That's okay. The other thing I wanted to follow up on this global minimum tax the 2% to 3%, presumably it would affect the segments of the company with the lowest effective tax rate, which would be Asia and <unk> is that correct.

Speaker Change: To be specific Hong Kong and also we operate the high net worth business out of Bermuda. So that would also be impacted Singapore as well so yes broadly correct.

Speaker Change: The Gen G.

Speaker Change: <unk> might see the mic because of Canada, and the U S look like they're pretty heavy tax rates anyway, and then the final outlet in Japan.

Roy Khoury: Absolutely, yeah, and Japan, and Japan, right. And Roy, the final question is for you. This comment about the reinsurance transaction sort of reopening or establishing a reinsurance market for long-term care. I want to make sure I understand what you mean by this. Are you seeing activity in the market? And I'm not asking about Manulife, but you're closer to this than I am.

Speaker Change: Pat.

Speaker Change: The final question is for you.

Speaker Change: This comment about the reinsurance transaction.

Pat: Sort of reopening or establishing.

Pat: Reinsurance market for a long term care I want to make sure I understand what you mean by this.

Pat: Are you seeing activity in the market and I'm not asking about manulife, but you are closer to this than I am are you seeing activity like new players coming in insurance companies.

Roy Khoury: Are you seeing activity like new players coming in, insurance companies, the other side of the reinsurance transaction, private equity? What's happening that would make you believe this is an established or starting to establish a reinsurance market for long-term care? Yeah, thanks for the question, Mario. I'm going to start and then hand it to Mark.

Pat: The other side of the reinsurance reinsurance transaction private equity what's happening.

Pat: That would make you believe this is established are starting to establish a reinsurance market for long term care.

Speaker Change: Yeah. Thanks for the question Mario I'm going to start and then hand it to Mark.

Mark: What I would say is we obviously have a very close finger on the pulse of what's happening in the reinsurance market, and we've been constantly looking at our portfolio and, specifically, the assets where the returns are, quite frankly, lower than what we would expect to be generating from our capital. And we've been very active there. We've, as you know, freed up $10 billion worth of capital since 2017. And in February 22, we did the variable annuity transaction. And again, in that space, two or three years earlier, there was very little chance of a VA transaction actually taking place.

Mark: What I would say is we're obviously you know we have a very close finger to the pulse on what's happening in the reinsurance market and we've been constantly looking at our portfolio and specifically the assets where the returns quite frankly are lower than what we would expect to be generating from our capital.

And we've been very active there we've as you know freed up timberland also of the capital since 2017 and in 'twenty. Two we did the variable annuity transaction and again in that space two or three years earlier, there was very little chance of a V. A transaction actually taking place and we sold a bid offer spread narrow and we also saw many new players.

Mark: And we saw the bid-offer spread narrow. And we also saw many new players enter the market and actually want to engage with us in a conversation there. And we've seen the same, I guess, trend on the LTC front. I think we've seen new players looking at that portfolio. The fact that we've got more credible data and as data matures, we're able to have greater confidence around the assumptions.

Into the market and actually want to engage with us in a conversation there and we've seen the same.

Mark: I guess a trend on the L. T C front I think we've seen new players looking at that portfolio. The fact that we've got more credible data and as data matures, we're able to have greater confidence around the assumptions. That's made it more interesting to different stakeholders will different third parties reinsure.

Mark: That's made it more interesting to different stakeholders or different third parties, reinsurers in particular. So that trend line, I think, is a good trend. I'll be honest, the higher rate environment isn't hurting either on that front.

As in particular, so that trend line I think is a good trend I'll be honest the higher rate environment isn't hurting either on that front, but so we do feel that that that's been the trend line completing our transaction. We think was a milestone for our company, but also we think it does open up an opportunity to have conversations.

Mark: So we do feel that that's been the trend line. Completing our transaction was, we think, a milestone for our company. But also, we think it does open up an opportunity to have conversations. And quite frankly, since doing the transaction, we've had a lot of folks want to come and talk to us about LTC and other parts of our portfolio. But let me quickly hand it to Mark, who can provide a little bit more color. Thank you. Good morning, Mario.

Mark: <unk> and quite frankly since doing the transaction. We've had a lot of folks are want to come and talk to us about L. T C and other parts of our portfolio, but let me quickly handsome mark who can provide a little bit more color.

Mark: Thank you and good morning Mario.

Mark: I guess I'll take us back a few months, when our objective was to reset the dialogue with respect to our balance sheet, how we're provisioned, how we've kept our assumptions current on this block of business, and to demonstrate that we could trade the block at very close to book value given that. And I'll remind you that the negative seat on it was the risk return profile of the buyer, and the actual underlying expected assumptions were pretty much lined up. And, as you mentioned, we had a great partner there in Global Atlantic in the transaction. And I would say following the transaction, which was, as you say, a bit of a surprise and tied to everything that Roy just mentioned, we've had a lot of activity inbound about the transaction from various players. There were other companies that were involved in the process, as we discussed, and we're re-engaging with some of those players. And we feel that this block is representative of the rest of the business we have. And as we discussed, there were over 65% of the lives that were active lives.

Mark: I guess I'll take us back a few months, where our objective was to.

Mark: Reset the dialogue with respect to our balance sheet, how we're provision how we've kept our assumptions current on this block of business.

Mark: And to demonstrate that we could trade to the block at a very close to book value given that and I'll remind.

Mark: Everybody that had a negative seat on it was the risk return profile of the buyer and the actual underlying expected assumptions, we're pretty much lined up and as you mentioned, we had a great partner there in global Atlantic in the transaction.

Mark: And our I would say following a transaction, which was as you say a bit of a surprise and tied to everything that the ROI just mentioned we've had a lot of.

Mark: Activity inbound about the transaction from various players and there were other companies that were involved in the process as we had discussed in there and we're re engaging with our with some of those players and and we feel that this block and is representative of the rest of the business, we have and as we had.

Mark: You know there was over 65% of the lives that were active lives and we have other blocks of business that have very similar profile.

Mark: We have other blocks of business that have a very similar profile. However, some of the components of the benefits were relatively more aggressive than the rest of our block. And this has spawned a lot of curiosity, I would say, in the market, a lot of curiosity as to how we went about what we did. And we feel quite confident that it's reshaped the profile of our business, and it's reshaped the profile of our balance sheet and the ability of Manulife to execute a first-of-its-kind transaction in this space. So, you know, we're hoping that that obviously spawns very good things for the future.

Mark: Some of the components of the benefits were relatively more aggressive than the rest of our block and.

This is spun a lot of curiosity I would say in the market a lot of curiosity as to how we went about what we did and we feel.

Mark: Quite confident that its restated the profile of our business and its restated the profile of our balance sheet and the ability to manulife to execute and the first of its kind transaction in this space. So.

Mark: So we're hoping that that are obviously in response to very good things to come so thank you.

Mark: So, thank you. Thank you. Thank you. Once again, please press star 1 if you have a question, and the next question is from Darko Mihelic from RBC Capital Markets. Please go ahead. Hi, thank you. Good morning.

Speaker Change: Thank you.

Speaker Change: Thank you once again, please press star one if you have a question and the next question is from Darko <unk> from RBC capital markets. Please go ahead.

Speaker Change: Yes.

Darko: Alright, Thank you and good morning, just a couple of questions there modeling ones and I'm, sorry to get into deep into the weeds here probably for Steve.

Darko Mihelic: Just a couple of questions. They're modeling ones, and I'm sorry to get deep into the weeds here, probably for Steve. With respect to some of the disclosures we get on an annual basis, one of the things that we can see is the sort of roll forward for the contractual service market, and I am curious about how I should look at it because if I look at that annual disclosure, It would have suggested, for example, that you would have had about 1.6 billion CSM in 2023. And, in fact, you had almost $2 billion. Now, we just heard about the $40 million, presumably new business, CSM added to that. Is there anything else that helped this year's CSM?

Darko: With respect to some of the disclosures we get on an annual basis, one of the things that we can see is the sort of roll forward or the contractual service margin.

Darko: And I am curious about how I should look at it because if I look at.

Darko: That annual disclosure.

Darko: It would've suggested for example that you would've had about $1 6 billion of CSN.

Darko: In 2023 and in fact you had.

Darko: Almost $2 billion.

Darko: Now, we just heard about the 40 million, presumably new business CSM added to that but.

Speaker Change: Is there anything else.

Speaker Change: That helped this year CSM.

Steve: relative to the sort of, I suppose, guidance we get out of the annual disclosure. Yeah, thanks, Darko. I know which disclosure you're talking about and what that really is. I think of it like our embedded value disclosure, where we show the runoff of the in-force, like when will that embedded value emerge? That's how I think about that CSM disclosure. So it gives you buckets of years as to when the in-force CSM will amortize into income. It does not include any new business, and it doesn't include interest on the CSM as well. So I'd be happy to walk you through it in more detail, but I think, broadly speaking, use it to look at when our existing in-force CSM will show up. Okay, all right, fair enough.

Speaker Change: Relative to the sort of.

Speaker Change: I suppose guidance, we get out of the annual disclosure.

Speaker Change: Yeah, Thanks, Darko, I know, which disclosure you're talking about and what that really is I think of it like our embedded value disclosure, where we show the run off of the enforced like when will that are embedded value emerge. That's how I'd think about that CSM disclosure. So it gives your buckets of years as to when the Infor C. N C. S M, where we'll amortize it.

Speaker Change: The income it does not include any new business and it doesn't include the interest.

Speaker Change: Interest on the C. S M as well so I'd be happy to walk you through it in more detail, but I think broadly speaking use it to look at when will our existing enforced CSM show up in earnings.

Speaker Change: Okay, Alright fair enough. The second question is with respect to the.

Scott Russell: The second question is with respect to commercial real estate and, you know, clearly another mark. But what was interesting to me was that typically, when I've been listening to commentary on commercial real estate, the suggestion is that... We have high-quality real estate. We don't dislike real estate. We're in it for the long term.

Speaker Change: The commercial real estate.

Speaker Change: And clearly another mark, but what was interesting to me.

Speaker Change: Typically when I've been listening to commentary on commercial real estate the suggestion is that.

Speaker Change: We have high quality real estate, we don't we don't that's like real estate. We're in it for the long term all of these things that suggest these are just marks.

Scott Russell: All these things that suggest these are just marks and you're holding the commercial real estate possibly for decades. It's a cash flow thing and so on. But one thing also in the annual statements is that it does show that you've lowered your risk appetite for commercial office space. I wonder if you can provide any commentary on that because I would have thought, and I have heard from some others, that there might be opportunities in the office space to pick up properties. But in your case, you actually lowered your risk appetite for office commercial real estate. I wonder if you can just provide some commentary on that. Thank you. Sure, Darko. Thanks for the question. It's Scott.

Speaker Change: You're holding the commercial real estate, possibly for decades, it's a cash flow thing and so on but one thing also in the annual report in the annual statements as it does show that you've lowered.

Your risk appetite for commercial office space I Wonder if you can provide any commentary on that because I would've thought and I have heard from some others.

Speaker Change: That there might be opportunities in the office space to pick up properties.

Speaker Change: And in your case, you actually lowered your risk appetite for office commercial real estate I Wonder if you can just provide some commentary around that thank you.

Speaker Change: Sure Darko Thanks for the question it's Scott.

Scott Russell: Yeah, I think what we've seen happen to real estate over the last year or two is a couple of things. One has been sort of the secular headwinds, office in the North, and the second has been rising interest rates and rising discount rates, which have hit all properties. And that second part is, you know, it reduces values, but it increases perspective returns. So, you know, with the long-term hold, we don't see that as value-destroying at all.

Speaker Change: And.

Scott: Yeah, I think what we've seen happen to real estate over the last year or two as a couple of things one has been sort of the secular headwinds in in office and in North America in particular.

And the second has been rising interest rates and the rising discount rates, which has hit all property types.

Scott: And then that second part is you know it reduces values, but it increases prospective returns. So you know with a long term hold we don't see that as value destroying at all.

Scott Russell: Within the office, and you're right, we have reduced our office. Ten years ago, it used to represent 40% of our overall Alda portfolio, North American office, and currently, it's down to. So we've reduced it significantly as a percent. Part of that is growing other parts of the Alda portfolio, but we have sold a lot of offices over that time period as well. And I remain, you know, if I look across the portfolio, where do I have the most concerns going forward? You know, it's probably a North American office. We've, you know, it's still unclear on the return to office. I do think there are other secular headwinds,

Scott: Within office and and you're right, we have reduced our office 810 years ago. It used to represent 40% of our overall all the portfolio with North American office and currently it's down to 10%.

Scott: So we've reduced it significantly as a percent part of that is is growing other parts of the all the portfolio, but we have sold a lot of office over that time period, as well and and I remain you know if I look across the portfolio, where do I have the most concerns going forward you know it is probably north American office.

Scott: We've you know it is still unclear on the return to office I do think there are other secular headwinds.

Scott Russell: AI will probably reduce, you know, white-collar jobs that sit in offices. So I think there are areas in offices that still work, you know, brand new offices in certain locations in cities have done pretty well, but overall, as an asset class, I think we will continue to sort of de-emphasize the North.

Scott: I will probably reduce white collar jobs that sit in offices so.

Scott: I think there are areas in office that still work you know brand new offices in certain locations in cities.

Scott: Have done pretty well.

Scott: But overall as an asset class I think we will continue to sort of deemphasize office going North American office going forward.

Scott Russell: And to be clear, that's irrespective of what rates do and cap rates and so on. Yeah, I think cap rates are that secondary impact. It's all real estate, and that just is sort of cyclical. And if rates decline, those values will increase. If rates don't decline, we'll get that back over time in the run rate earnings. I don't worry as much about interest rates.

Scott: And to be clear, that's irrespective of what rates do and cap rates and so on.

Scott: Yeah, I think cap rates is that secondary impact hits, all real estate and that's just is sort of cyclical.

Scott: And if rates decline those values will increase if rates don't decline will get get that back over time in the run rate earnings I don't worry as much about interest rates office is really what is the future of the office, it's very unclear.

Scott Russell: What is really the future of the office? It's very unclear. And so it feels like certainly a riskier Darko, I just want to add a couple of quick comments to Scott's. I would say that one of the big focuses for us, not only across our older portfolio but certainly across our real estate portfolio, is the diversity of our portfolio. And 38% of our real estate portfolio is in the US, but 32% is Canada, and 26% is Asia. And 30% of our office portfolio is also in Asia, which again provides us with good diversification. So we feel that having a diverse portfolio is a really important part of our strategy and a way that we can reduce volatility but also optimize returns.

Speaker Change: And so it feels like certainly a riskier segment of the real estate market. So I just wanted to add a couple of quick comments to Scott. So I would say that you know one of the big focuses for us not only across our older portfolio, but certainly across our real estate portfolio is the diversity of our portfolio and.

Speaker Change: 38% of our real estate portfolio is U S, but 32 percentage, Canada at 26% of that is Asia and 30% of our office portfolio is also Asia, which again provides us good diversification. So so we feel that having a diverse portfolio is a really important part of our strategy.

Speaker Change: And why do we can I reduce volatility, but also optimize returns.

Scott Russell: Okay, great. Thank you very much. I appreciate that. Thank you. There are no further questions registered at this time. I'd like to turn the call back over to Mr. Coe. Thank you, Operator. We will be available after the call if there are any follow-up questions. Have a good day, everyone. Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.

Speaker Change: Okay, great. Thank you very much I appreciate that.

Thank you no further questions registered at this time I'd like to turn the call back over to Mr. <unk>.

Speaker Change: Thank you operator, who will be available after the call. If there are any follow up questions have a good day everyone.

Speaker Change: Thank you. The conference has now ended please disconnect your lines at this time and we thank you for your participation.