Q1 2024 Manulife Financial Corp Earnings Call

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Speaker Change: All participants please continue to standby the conference will begin momentarily. Once again. Please continue to standby we thank you for your patience.

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Operator: Please stand by. Your meeting is about to begin. Please be advised that this conference call is being recorded. Good morning, ladies and gentlemen, and welcome to the Manulife Financial First Quarter 2024 Financial Results Conference Call. I would now like to turn the meeting over to Mr. Ko. Please go ahead, Mr. Ko.

Speaker Change: Please standby your meeting is about to begin please be advised that this conference call is being recorded.

Speaker Change: Good morning, ladies and gentlemen, and welcome TD Manulife financial first quarter 2024 financial results Conference call I would now like to find a meeting over to Mr. Cope. Please go ahead Mr. <unk>.

Hung Ko: Thank you. Welcome to Manulife's earnings conference call to discuss our first quarter 2024 financial and operating results. Our earnings materials, including webcast slides for today's call, are available on the Investor Relations section of our website at Manulife.com. Before we start, please refer to Slide 2 for a caution on forward-looking statements and Slide 36 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 evaluating forward-looking statements, and actual results may differ materially from what is stated.

Cope: Thank you welcome to minimize earnings conference call to discuss our first quarter 'twenty 'twenty four financial and operating results our earnings materials, including the webcast for today's call are available on the Investor Relations section of our website <unk> com.

Cope:

Cope: Let me start please refer to slide two for a caution on forward looking statements and slide 36, we note on a non-GAAP and other financial measures used in this presentation.

Cope: Certain material factors or assumptions applied any forward looking statements and actual results may differ materially from what is stated.

Hung Ko: Turning to slide four, Roy Gori, our President and Chief Executive Officer, will begin today's presentation with a highlight of our first quarter results and a strategic update. Following Roy's remarks, Colin Simpson, our Chief Financial Officer, will discuss the company's financial results in more detail. After his prepared remarks, we'll move to the Q&A portion of the call. With that, I'd like to turn the call over to Roy Gori, our President and Chief Executive Officer.

Glory: Turning to slide four where glory I personally chief Executive Officer will begin today's presentation with the highlights about our first quarter results and a strategic update.

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

Speaker Change: After the prepared remarks, we will move to the Q&A portion of the call.

Speaker Change: With that I'd now like to turn the call over to Roy Gori, Our President and Chief Executive Officer Laurie.

Roy Gori: Thanks, Hung, and thank you, everyone, for joining us today. Starting on slide six. Yesterday, we announced our first quarter 2024 financial results. We continue to execute against our strategy, driving quality growth, and delivering superior results as we begin 2024. Our top-line growth was broad-based, with record levels of new insurance business results, including double-digit growth in APE sales across each of our insurance segments and $6.7 billion of global WAM net inflows, with positive contributions from each global business line. In this quarter, we closed a milestone reinsurance transaction with Global Atlantic, which included the largest ever LTC block.

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

Speaker Change: On slide six yes.

Colin Simpson: Yesterday, we announced our first quarter 2020 full financial results.

Roy Gori: We continue to execute against that strategy driving quality growth and delivering superior results as we began 2024.

Roy Gori: Topline growth was broad based with record levels of new insurance business results, including double digit growth in IP sells across each of our insurance segments.

Roy Gori: $6 $7 billion of global Wham net inflows with positive contributions from each global business line.

Roy Gori: This quarter, we closed the milestone reinsurance transaction with global Atlantic, which includes the largest ever LTC block.

Roy Gori: Despite the modest impact of the transaction, we generated 16% growth in core earnings, supported by strong contributions from Asia and global WAM. Score APS grew by 20% as we continue to return capital to shareholders, including through share buyback. Core ROE grew nearly 2 percentage points from the prior year to 16.7% and is well ahead of our medium-term target of 15% plus. And we are delivering superior returns whilst maintaining a robust balance sheet and ample financial flexibility.

Roy Gori: Despite the modest impact of the transaction, we generated 16% growth in core earnings supported by strong contributions from Asia and global win.

Roy Gori: Core EPS grew by 20% as we continue to return capital to shareholders, including through share buybacks.

Roy Gori: Who are we grew nearly two percentage points from prior year to 16, 7% and he's willing hit about medium term target of 15% plus.

And we are delivering superior returns, whilst maintaining a robust balance sheet and ample financial flexibility.

Roy Gori: Growing our OE is a key priority and a key outcome of our transformation journey, which takes me to slide seven.

Roy Gori: Growing ROE is a key priority and a key outcome of our transformation journey, which takes me to slide seven. During the quarter, we announced the largest ever universal life re-insurance deal in Canada, which is another milestone and a testament to our execution capabilities.

Roy Gori: During the quarter, we announced the largest ever Universal life reinsurance deal in Canada, which is another milestone and a testament to our execution capabilities.

Roy Gori: We once again transacted at an attractive earnings multiple ahead of where we currently trade. The transaction will release $800 million of capital, which we plan to return to shareholders through an amendment to our existing share buyback program to repurchase up to 5% of our outstanding common shares. After accounting for buybacks, the deal will be accrued to both Core ROE and Core EPS. We also expect to reduce $600 million of older debt backing the transacted block. This transaction is another example of the value that we continue to create for our shareholders and will contribute to higher returns going forward. Turning to slide 8.

We once again transacted at an attractive earnings multiples ahead of where we currently trade.

The transaction will released $800 million of capital, which we plan to return to shareholders through an amendment to our existing share buyback program to repurchase up to 5% of the outstanding common shares.

Roy Gori: After accounting for buybacks the deal will be accretive to both core are weak and core EPS.

Roy Gori: We also expect to reduce $600 million of ALDA backing the transacted block.

Roy Gori: This transaction is another example of the value that we continue to create for our shareholders and will contribute to higher returns going forward.

Roy Gori: Turning to slide eight <unk>.

Roy Gori: Expanding ROE is critical to delivering value to our shareholders. We've made tremendous progress since 2017, increasing core ROE by more than 5 percentage points, up from 11.3%. We continue to take organic and inorganic actions that drive even higher ROEs.

Roy Gori: Expanding our always critical to delivering value to our shareholders. We've.

Roy Gori: We've made tremendous progress since 2017, increasing core are we by more than five percentage points up from 11, 3%.

Roy Gori: We continue to take organic and inorganic actions that drive even higher rois.

Roy Gori: Our unique footprint and strong cash generation enable us to invest in our highest potential businesses to generate superior returns. During the quarter, we delivered 34% NBV growth, with Asia comprising approximately 70% of the balance. In addition to record top-line metrics, we've generated strong bottom-line growth, and our transformation is driving increased earnings contributions from our high-return businesses, with over two-thirds of core earnings delivered by our highest potential businesses during the quarter. This is up from 60% in the prior year.

Roy Gori: Our unique footprint and strong cash generation enable us to invest in our highest potential businesses to generate superior returns.

Roy Gori: During the quarter, we delivered 34% MBV growth with Asia, comprising approximately 70% of the balance.

Roy Gori: In addition to record topline metrics, we've generated strong bottom line growth and that transformation is driving increased earnings contributions from our high return businesses, we thought as the two thirds of core earnings delivered by our highest potential businesses during the quarter.

Roy Gori: This is up from 60% in the prior year.

Roy Gori: Inclusive of dividends, over the past year, we've returned $4.1 billion of capital to our shareholders. We continue to expand Global WAM's capabilities and footprint by closing our acquisition of CQS in April. CQS's experience in alternative credit investments not only expands our presence in Europe but also accelerates the growth of our global wealth and asset management capabilities, broadening the solutions we can offer our clients around the world. In addition, we will return the $2 billion of capital released from our two recent reinsurance transactions on low ROE businesses to shareholders through BIDAC.

Roy Gori: Inclusive of dividends over the past year, we've returned $4 $1 billion of capital to our shareholders.

Roy Gori: We continue to expand global Wayne's capabilities and footprint by closing our acquisition of <unk> in April.

Roy Gori: <unk> experience in alternative credit investments not only expands our presence in Europe, but also accelerates the growth of our global wealth and asset management capabilities broadening the solutions, we can offer our clients around the world.

Roy Gori: In addition, we will return to $2 billion of capital released from our two recent reinsurance transactions on low ROE businesses to shareholders through buybacks.

Roy Gori: All of these actions support long term ROE growth and we're focused on exploring additional opportunities to continue to generate higher returns.

Roy Gori: All of these actions support long-term ROE growth, and we're focused on exploring additional opportunities to continue to generate higher returns. I'm excited by our momentum in the first quarter and by the opportunities ahead of us to continue generating shareholder value. I'll now hand it over to Colin to review the highlights of our financial results.

Roy Gori: I'm excited by our momentum in the first quarter and by the opportunities ahead of us to continue generating shareholder value.

Roy Gori: I'll now hand, it over to Colin to review the highlights about financial results Colin.

Colin Simpson: Thanks Roy.

Colin Simpson: Thanks, Roy. 2024 started well, and I'm excited to go into a little more detail on the course's results before the Q&A. I'll start with our top line on slide 10. Our AP sales increased 21% from the prior year with double-digit growth across each of our insurance segments. This increase was supported by higher sales across several Asian businesses, higher large case group insurance sales in Canada, and an increase in demand from our firm customers in the U.S.

Colin Simpson: 'twenty 'twenty four has started well and I'm excited to go into a little more detail on the quarters results before the Q&A.

Colin Simpson: I'll start with our top line on slide 10.

Colin Simpson: Sales increased 21% from prior year with double digit growth across each of our insurance segments. This increase was supported by higher sales across several Asian businesses higher large case group insurance sales in Canada, and an increase in demand for my phone customers in the U S.

Colin Simpson: The momentum in our sales contributed to strong increases in new business CSM and new business value of 52% and 34%, respectively. Our value metrics grew by more than our volume metrics, demonstrating our focus on pricing discipline and business makeshift towards higher-margin products. Global Wham saw strong net inflows of $6.7 billion, reflecting positive flows from each business line.

Colin Simpson: Momentum in all sales contributed to strong increases in new business, CSN, and new business value of 52% and 34% respectively.

Colin Simpson: Value metrics grew by more than a volume metrics, demonstrating our focus on pricing discipline and business mix shift towards higher margin products globally.

Colin Simpson: Global Wham, so strong net inflows of $6 $7 billion, reflecting positive flows from each business line.

Colin Simpson: As you can see, there's real momentum in our global portfolio of businesses. Turning to slide 11, which shows the growth in our profit metrics. Core EPS increased 20% as we grew core earnings and continued buying back shares. During the quarter, we further improved our core ROE to 16.7%, above our medium-term target of 15% plus for the fourth consecutive quarter. We remain focused on driving up ROE and have been able to demonstrate progress through the execution of our two recent reinsurance transactions, along with business performance improvement and astute capital allocation.

Colin Simpson: As you can see there's real momentum in all global portfolio of businesses.

Colin Simpson: Turning to slide 11, which shows the gross and op profit metrics core EPS increased 20% as we grew core earnings and continued buying back shares.

Colin Simpson: During the quarter, we further improved our cool our wheat to $16, 7% above our medium term target of 15% plus for the fourth consecutive quarter.

Colin Simpson: We remain focused on driving up our OE and have been able to demonstrate progress through the execution of our two recent reinsurance transactions, along with business performance improvement and astute capital allocation.

Colin Simpson: And on Slide 12, you can see that we continued to show steady growth in our adjusted book value per share supported by an increase in our book value together with L. CSM, which is a store of future earnings.

Colin Simpson: And on slide 12, you can see that we continue to show steady growth in our adjusted book value per share, supported by an increase in our book value together with our CSM, which is a store of future earnings. This resulted in growth from the prior year quarter of 11% or 13% excluding the effect of foreign exchange rate movements to $33.39.

Colin Simpson: This resulted in growth from the prior year quarter of 11% or 13%, excluding the effect of foreign exchange rate movements to $53.39.

Colin Simpson: Bringing you back to our core earnings results on slide 13, I'd like to call out some of the highlights of the drivers of earnings analysis presented relative to the prior year quarter. The first point to highlight is the 8% growth in core net insurance service results due to increases in expected earnings on insurance contracts in both our Asia and Canada segments. Secondly, an increase of 18% in our core net investment result was mainly due to a release in our expected credit loss or ECL provision over the quarter compared with provisions for certain commercial mortgages in the prior year. This reflects the benign credit environment during the quarter and the impact of reducing assets with the Global Atlantic Reinsurance Transact.

Bringing you back to our core earnings results on slide 13, I'd like to call out some of the highlights of the drivers of earnings analysis presented relative to the prior year quarter. The.

Colin Simpson: The first point to highlight is the 8% growth in core net insurance service results due to increases in expected earnings on insurance contracts in both our Asia and Canada segments.

Colin Simpson: Secondly, an increase of 18% and our core net investment result was mainly due to a release and all expected credit loss or ACL provision over the quarter compared with provisions for certain commercial mortgages in the prior year.

This reflects the benign credit environment during the quarter and the impact of reducing assets with the global Atlantic reinsurance transaction.

Colin Simpson: Towards the bottom of the table, you will see that Global Wham was a notable contributor to the results, supported by higher average AUMA, improved margins, and expense decisions. These factors were partially offset by higher workforce-related expenses, reflecting strong TSR performance included in other core earnings. I should also mention the net impact of the reinsurance transaction with Global Atlantic was an $18 million reduction in core earnings. However, note that this included some favorable one-time items during the quarter, mostly related to the release of ECL on debt instruments sold. More information on the earnings impact is available in the appendix. Now, on to slide 14.

Colin Simpson: Towards the bottom of the table you will see that global Wham was a notable contributor to the results supported by higher average AUR may improve margins and expense discipline.

Colin Simpson: These factors were partially offset by higher workforce related expenses, reflecting strong Tia saw performance included in other core earnings.

I should also mention the net impact of the reinsurance transaction with global Atlantic was an $18 million reduction in core earnings.

Colin Simpson: Note that this included some favorable one time items during the quarter, mostly related to the release of V. C. L. On debt instruments sold more information on the earnings impact is available in the appendix.

Colin Simpson: On to slide 14, when we announced the reinsurance transaction with global Atlantic back in December of last year. We had told you that we expect to recognize a net income of $1 billion of unrealized losses from assets disposed as part of this transaction, we actually saw a lower noncore charge of approximately 750 million.

Colin Simpson: When we announced the reinsurance transaction with Global Atlantic back in December of last year, we had told you that we expected to recognize a net income of $1 billion of unrealized losses from assets disposed as part of this transaction. Instead, we actually saw a lower non-core charge of approximately $750 million across several lines, although mostly related to the recognition of unrealized losses. The charge was lower than expected due to a decrease in interest rates since the end of the third quarter of last year, which was the basis of the estimated impact we announced.

Colin Simpson: Across several lines, although mostly related to the recognition of unrealized losses.

Colin Simpson: The charge was lower than expected due to a decrease in interest rates since the end of the third quarter of last year, which was the basis of the estimated impact we announced of note. There was an offsetting change in OCI neutralizing the book value impacts. We closed this transaction on February 22nd and are now focused on future enforce activity.

Colin Simpson: Of note, there was an offsetting change in OCI, neutralizing the book value impact. We closed this transaction on February 22nd and are now focused on future in-force activities. Lower than expected returns on ALDA resulted in a $255 million charge, largely reflecting the ongoing pressure on commercial real estate due to increasing cap rates.

Colin Simpson: Lower than expected returns on all of the results of the $255 million charge, largely reflecting the ongoing pressure on commercial real estate due to increase in cap rates, the 40% reduction from peak and all U S office values reflects the difficult market and it's also a demonstration of our disciplined approach to asset valuations.

Colin Simpson: The 40% reduction from peak in our U.S. office values reflects the difficult market and is also a demonstration of our disciplined approach to asset valuations, where more than 95% of our real estate portfolio is appraised by external appraisers each quarter. We're encouraged to see continued sequential improvements in our older experience compared to recent periods, and the charge was partially offset by a $216 million gain due to higher than expected public equity returns during the course.

Colin Simpson: We're more than 95% of our real estate portfolio is appraised by external appraisers each quarter.

Colin Simpson: We're encouraged to see continued sequential improvements in all of the experience compared to recent periods and the charges, partially offset by a $216 million gain due to higher than expected public equity returns during the quarter.

Colin Simpson: This meant that our net income for the quarter was $1.6 billion, much more in line with our core earnings when you exclude the impact of the reinsurance transaction. The next few slides will cover the segment view of our results, starting with Asia on slide 15.

This meant that our net income for the quarter was $1 $6 billion much more in line with our core earnings when you exclude the impact of the reinsurance transaction.

Colin Simpson: The next few slides will cover the segment view of our results starting with Asia on Slide 15.

Colin Simpson: The first quarter was another strong quarter, with double-digit growth in both top and bottom line metrics. APE sales increased 13% from the prior year quarter, largely driven by growth in bank assurance sales in mainland China, as well as growth in Singapore and Japan, partially offset by lower sales in Hong Kong and continued industry headwinds in Vietnam. The overall increase in sales contributed to a 68% and 28% growth in new business CSM and MBV, respectively, which we refer to as our value metrics. We delivered 39% core earnings growth with meaningful increases in contribution from both Hong Kong, which is our largest enforced business, and Japan. Moving over to the Global Wounds results on slide 16.

Colin Simpson: The first quarter was another strong quarter with double digit growth in both top and bottom line metrics.

Colin Simpson: A P sales increased 13% from prior year quarter, largely driven by growth in bancassurance sales in mainland China as well as growth in Singapore, and Japan, partially offset by lower sales in Hong Kong and continued industry headwinds in Vietnam.

Colin Simpson: The overall increase in sales contributed to a 68% and 28% growth in new business, CSM and N B, b, respectively, which we refer to as our value metrics.

Colin Simpson: We delivered 39% core earnings growth with meaningful increases in contribution from both Hong Kong, which is our largest enforce business in Japan.

Colin Simpson: Moving over to the global ones results on slide 16.

Colin Simpson: We reported very strong net inflows of $6.7 billion for the quarter, continuing our momentum of positive net flows in 13 of the last 14 years in competitive markets. The strong net inflows this quarter were due to high new planned sales and retirement. We also saw demand increase in our retail business, supported by strong equity markets, and we continue to generate strong inflows in our institutional business. Global WAM also delivered double-digit core earnings growth, supported by higher average AUMA, which increased 9% from the prior year quarter, along with our disciplined expense management.

Colin Simpson: We reported very strong net inflows of $6 $7 billion for the quarter continuing our momentum of positive net flows in 13 of the last 14 years in competitive markets.

Colin Simpson: Strong net inflows this quarter would you to high end new plan sales in retirement, we also saw demand increasing in our retail business supported by strong equity markets and we continued to generate strong inflows in our institutional business.

Colin Simpson: Global why I'm also delivered double digit core earnings growth supported by higher average <unk>, which increased 9% from prior year quarter, along with our disciplined expense management to that end, we are starting to see savings as a result of our restructuring efforts in the prior quarter with core expenses up only 2%.

Colin Simpson: To that end, we are starting to see savings as a result of our restructuring efforts in the prior quarter, with core expenses up only 2%, which is much improved from 2023 results. Heading over to Canada on slide 17, we delivered another strong quarter of new business metrics. APE sales increased 54% from the prior year quarter, mainly due to higher large case sales in our group insurance business, which was also the main contributor to our 71% growth in new business value.

Colin Simpson: Which is much improved from 'twenty to 'twenty three results.

Colin Simpson: Heading over to Canada on Slide 17, we delivered another strong quarter of new business metrics AP sales increased 54% from prior year quarter, mainly due to higher large case sales in our group insurance business, which was also the main contributor to a 71% growth in new business value.

Colin Simpson: Core earnings increased 3%, primarily driven by business growth and the lower ECL provision, but these were partially offset by lower investment spreads.

Colin Simpson: Core earnings increased 3%, primarily driven by business growth and a lower ECL provision, but these were partially offset by lower investment spreads. Slide 18 shows our U.S. segment's results. In the U.S., we saw somewhat of a return of demand from affluent customers, which drove up APE sales, MBV, and new business CSM results. The business delivered strong core earnings, which increased 18% from the prior year quarter, mainly reflecting a higher ECL provision in the prior year quarter, as well as the impact of higher yields and business growth. This was partially offset by more adverse net insurance experience. In addition, the reinsurance transaction reduced core earnings by $19 million.

Colin Simpson: Slide 18 shows our U S segment's results in the U S. We saw somewhat of a return of demand from our customers, which drove up a P sales M B b and new business CSM results.

Colin Simpson: The business delivered strong core earnings, which increased 18% from the prior year quarter, mainly reflecting a high ECL provision in the prior year quarter as well as the impact of high yields and business growth.

Colin Simpson: This was partially offset by more adverse net insurance experience.

Colin Simpson: In addition, the reinsurance transaction reduced core earnings by 90 million U S dollars.

Colin Simpson: Onto slide 19 in our balance sheet, we started off the year with a strong like cat ratio of 138 cents in the first quarter, which was $24 billion above the supervisory target ratio.

Colin Simpson: On to slide 19 in our balance sheet, we started off the year with a strong Likert ratio of 138% in the first quarter, which was $24 billion above the supervisory target ratio. A financial leverage ratio of 24.3% remains within our target ratio of 25%, adding to our ample financial flexibility. Through dividends and share buybacks, we returned over $0.9 billion of capital to shareholders during the course of the year. As previously announced, we launched a new buyback program in late February related to our reinsurance transaction with Global Atlantis.

Colin Simpson: Our financial leverage ratio of 24, 3% remains within our target ratio of 25%, adding tau ample financial flexibility.

Colin Simpson: Through dividends and share buybacks, we returned over $9 billion of capital to shareholders during the quarter.

Colin Simpson: As previously announced we launched a new buyback program in late February related to a reinsurance transaction with W. Atlantic.

Colin Simpson: Following our Canadian UL reinsurance transaction, we announced that we plan to amend the program to purchase up to 5% of our outstanding common shares. We have now received approvals from OSFI and the TSX for the new program, which will return the freed up capital from the two transactions to shareholders. As such, you will see an acceleration of our buyback activity from point two billion dollars in the first quarter to more like point six billion dollars a quarter on a run rate for the rest of the year.

Colin Simpson: Following our Canadian U L reinsurance transaction, we announced that we plan to amend the program to purchase up to 5% of our outstanding common shares.

Colin Simpson: We have now received approvals from all suite and the T. S X for the New program, which will return the freed up capital from the two transactions to shareholders.

Colin Simpson: As such you will see an acceleration of our buyback activity from the point $2 billion in the first quarter. Some more like point $6 billion of course, the run rates for the rest of the year.

Colin Simpson: And finally, moving to slide 20, which summarizes how we are tracking against our medium term targets in.

Colin Simpson: And finally, moving to slide 20, which summarizes how we are tracking against our medium-term targets. In the first quarter, we exceeded all of our medium-term targets. We also generated 44% of earnings from the Asia region and increased our contribution from highest potential businesses to 67%. As you can see, Asia continues to play a pivotal role in our earnings growth, and we are looking forward to welcoming you to Asia for our in-person investor day in June.

Colin Simpson: In the first quarter, we exceeded bill about medium term targets. We also generated 44% of earnings from the Asia region and increased our contribution from highest potential businesses to 67%.

Colin Simpson: As you can see Asia continues to play a pivotal role in our earnings growth and we are looking forward to welcoming you to Asia for our in person Investor Day in June.

Speaker Change: This concludes our prepared remarks before we move to the Q&A session I would like to remind to 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.

Colin Simpson: This concludes our prepared remarks. Before we move to the Q&A session, I would like to remind each participant to adhere to a limit of two questions, including follow-ups, and to recur if they have additional questions. Operator, we will now open the call to questions.

Operator: Thank you.

Colin Simpson: We will now take questions from the telephone lines. If you have a question, please press star 1 on your device's keypad. You may cancel your question at any time by pressing star 2. Please press star 1 at this time if you have a question. There will be a brief pause while participants register for questions. We thank you for your patience. Our first question is from Meny Grauman from Scotiabank. Please go ahead.

Operator: We will now take questions from the telephone lines. If you have a question. Please press star one on your devices keypad, you'll begin filling your question at any time by pressing star too. Please.

Operator: Please press star one at this time, if you have a question.

Operator: That will be we followed for all participants with just a few questions. We thank you for your patience.

Unknown Attendee: Our first question is from many Goldman from Scotiabank.

Unknown Attendee: Please go ahead.

Unknown Attendee: Hi, good morning.

Operator: Hi, good morning. I just wanted to start off by asking a question about Asia.

Just wanted to start off asking a question about Asia, obviously very strong result.

Meny Grauman: Obviously, very strong results. If I look at the core earnings there, just wondering if there's anything that you would flag that's not sustainable. I guess I see the ECL maybe as a very small component of that, but wondering if there's anything else there that would impact the run rate going forward.

Unknown Attendee: If I look at the core earnings there I was just wondering if there's anything that you would flag that's not sustainable.

Unknown Attendee: I guess I see D C L.

Unknown Attendee: All components of that but wondering if there's anything else there that would impact the run rate going forward.

Unknown Attendee: Hello. Good morning. This is Phil and thank you for the question you're right to point out it's been a strong core earnings quarter for Asia. In fact, a strong quarter for all of them that value metrics across the board. The level of earnings that you see are largely sustainable and I'll Peel the onion a bit on this.

Philip Witherington: Hello, Meny. Good morning. This is Phil.

Unknown Attendee: The driver of growth in core earnings is the fact that we've grown the C S and by adding quality new business over the course of the past 12 to 18 months and you can see that through the CSN expansion in the balance sheets and we also have the impact of the favorable impacts of the methodology change that took effect from Q4 and we.

Unknown Attendee: Spoke about last quarter now in terms of items within the core earnings run co earnings this quarter that are I suppose not necessarily indicative of the overall run rate I'll highlight two points. One is that Asia and this is coming from Japan benefited by approximately.

Unknown Attendee: The 9 million U S dollars in the first course, it from the impacts of the global reinsurance transaction.

And secondly, you may recall that last year in Q1 in Asia that was negative policyholder experience through core earnings. This quarter that was a modest positive of $5 million and I would expect our policyholder experience to vary from quarter to quarter would be approximately neutral on average.

Philip Witherington: And thank you for the question. You're right to point out that it's been a strong core earnings quarter for Asia, in fact, a strong quarter for all of our value metrics and across the board. The level of earnings that you see is largely sustainable, and I'll peel the onion a bit on this. The driver of growth in core earnings is the fact that we've grown CSM by adding quality new business over the course of the past 12 to 18 months.

Unknown Attendee: So I I feel that the core earnings that you will see is largely sustainable.

Unknown Attendee: And that's underpinned by the fundamentals of our business and we may see some variability from modest variability from policyholder experience into E. C. L. I think this is a good indication of the future. Thanks for the question money.

Philip Witherington: And you can see that through the CSM expansion in the balance sheet. And we also have the impact, the favorable impact, of the methodology change that took effect in Q4, as we spoke about last quarter. Now, in terms of items within the core earnings, or core earnings this quarter, that are, I suppose, not necessarily indicative of the overall run rate, I'll highlight two points. One is that Asia, and this is coming from Japan, benefited from. So I feel that the core earnings that you're seeing are largely sustainable.

Speaker Change: So and then just as a follow up just focusing on sales.

Speaker Change: Typically.

Speaker Change: The decline in Hong Kong, if you could just talk to what Youre seeing in terms of the MTV sales in particular I'm wondering if.

Speaker Change: The decline we're seeing there is just.

Speaker Change: Function of the fact that you had so much growth after coming out of lockdowns or any other dynamic there that you're seeing when it comes to mainland Chinese visitor sale that would be.

Speaker Change: Packaging as a result it beyond.

Speaker Change: Just the fact that.

Speaker Change: You had such a strong reopening.

Speaker Change: Great. Thank you for the question follow up question money, it's been a really strong quarter in Hong Kong and I as I said last quarter, our focus is on value generation and value metrics and notably we've seen 15% growth in new business value in Hong Kong, but it's not just M. D V. We've seen growth in core earnings.

Philip Witherington: That's underpinned by the fundamentals of our business, and we may see some variability from, modest variability from policyholder experience and ECL, but I think this is a good indication of the future. Thanks for the question, Manny.

Meny Grauman: Thanks, Phil. And then, just as a follow-up, just focusing on sales and, specifically, the decline in Hong Kong. If you could just talk about what you're seeing in terms of the MCV sales in particular, and I'm wondering if the conversation there is just a function of the fact that you had so much growth after coming out of lockdowns. Is there any other dynamic there that you're seeing when it comes to mainland Chinese visitor sales that would be impacting the results beyond just the fact that you had such a strong reopening?

Philip Witherington: And as I said last quarter, our focus is on value generation and value metrics. And notably, we've seen 15% growth in new business value in Hong Kong. But it's not just NBV.

Philip Witherington: We've seen growth in core earnings and new business CSM as well. Now, the variability in APE is caused by variability in volume through the third-party broker channel. And that's the MCV broker channel. And what we're seeing with that channel is really quite fierce competition, as well as possibly an element of pent-up demand in the prior year period. But I think the main driver there is intense competition. And when I look at the MCV business that we're sourcing from channels outside of third-party brokers, so the agency channel and the bank assurance channel, we're seeing strong double-digit growth. And that's what I would expect.

Speaker Change: E business CSN as well now that the the variability in a P. E is caused by a variability in volume through the third party broker channel and that's M. C. The broker channel than what we're seeing with without channel is really quite fierce competition as well.

Speaker Change: L as possibly an element of pent up demand in the prior year period, but I think the the main driver there is intense competition and when I look at the <unk> business that were sourcing from channels outside of third party brokers. So the agency channel and the Bancassurance channel, we're seeing strong double digit quotes and Thats, what I, what I would.

Speaker Change: You know I've said many times the M C. The customer segment is.

Philip Witherington: I have said many times that the MCV customer segment is a legitimate customer segment that we expect to grow over the medium term. It reflects approximately 20% to 25% of our business from a new business value perspective in Hong Kong. And the other side of that is that our core business in Hong Kong is our domestic business, and that accounts for 75% to 80% of our NBV in the Hong Kong market. Now, that core strength domestically is really important.

Speaker Change: So a legitimate customer segment that we expect to grow over the medium term it reflects approximately <unk>.

Speaker Change: 20% to 25% of our business from a new business value perspective in Hong Kong and that the other side of that is that our core business in Hong Kong is our domestic business and that accounts for 75% to 80% of our N D. G. In the Hong Kong market now not that core strength domestically as radiant.

Philip Witherington: And I spoke last quarter of the very strong growth that we'd seen in the domestic business. We saw about 15% growth in the fourth quarter of last year. That level of sales has been sustained into the first quarter. Now, in terms of the outlook for Hong Kong, I'm confident that we will continue to see growth in value metrics. This is our focus, and we get the most value from our proprietary channels and exclusive bank channels. We will see some variability in APE from quarter to quarter as a result largely of the broker channel. But overall, I feel confident about the future.

Speaker Change: Portance and I spoke last quarter with a very strong growth that we'd seen in the domestic business. We saw about 15% of close in the fourth quarter of last year that level of sales has been sustained into the first quarter now in terms of outlook for Hong Kong I am confident that we will continue.

Meny Grauman: Thanks, Phil. Thanks for the detail.

Speaker Change: To see growth and value metrics. This is our focus and we get most value from our proprietary channels and exclusive bank channels, we will see some variability in AP from quarter to quarter as a result, largely of the broker channel, but overall I feel confident about the future.

Speaker Change: Thanks, Don Thanks for the detail.

Thank you. Our following question is from Gabriel <unk> from National Bank Financial. Please go ahead.

Operator: Thank you. Our next question is from Gabriel Dechaine from National Bank Financial. Please go ahead.

Gabriel Dechaine: Good morning. I'll stick with that line of questioning, and then I'll switch over to something else. But I'm wondering if you're starting to see the impact of the, you know, decline in sales.

Gabriel: Good morning, I'll stick with that a line of questioning and then I'll switch over to something else, but I'm wondering if you're starting to see the impact of the decline in sales.

Gabriel: On the M. C V products because of the regulatory investigation, whether you call it across the industry I want to point that out.

Gabriel: And is there you know it's more of a risk to your sales number is the profit.

Gabriel: Impact is probably pretty insignificant if the sell through decline because it's a small portion of your sales and I think it is.

Gabriel: Lower margin product, maybe you can get me there.

Gabriel: Yeah. Thanks Gabriel for the question. This is Phil again.

Philip Witherington: Yeah, thanks, Gabriel, for the question. This is Phil again.

Philip Witherington: You're right to highlight the regulatory investigation. This is not anything that's specific to Manulife. The regulatory authorities in Hong Kong have announced an investigation and conducted an investigation into the unlicensed selling of insurance policies to customers from mainland China. This is limited to the broker channel and has no direct impact on Manulife. Of course, at Manulife, we have robust processes in place to enable compliance with all applicable laws and regulations. You asked whether that investigation in the broker channel is driving the variability that we see in Q1 in ABE. It's not, and we're not seeing at this point any impact directly from that regulatory investigation, although I will highlight two things.

Phil: You're right to highlight the regulatory investigation. This is not anything specific to manulife. The regulatory authorities in Hong Kong have announced an investigation and conducted an investigation to unlicensed selling with insurance policies customers from mainland China. This is limited to the broker channel and has no.

Phil: Correct impact on Manulife close at Manulife, we have robust processes in place to enable compliance with all applicable laws and regulations.

Phil: You asked where the that's deduct investigation in the broker channel is driving the variability that we see in Q1 and a P. E. It's not and we're not seeing at this point any impact directly from that regulatory investigation, although I will highlight two things one is that we have seen.

Philip Witherington: One point is that we have seen a decline in the first quarter relative to last year in the broker channel. That's really driven, as I said earlier, by fierce competition in that channel. But we're seeing growth in our other MCV channels, agency, and bank assurance. So, I think that's one important point.

Phil: A decline in the first quarter.

Phil: Relative to last year in the broker channel.

Phil: That's really driven as I said earlier by see as competition in that channel, but we're seeing growth in our other M. C V channels agency.

Phil: Bancassurance. So I think that's one important point I think the second important point is that while we haven't seen it yet it's reasonable to expect that the regulatory actions will or may cause some disruption in the M. C. P broker channel in the months to come and that's really as I I would expect.

Philip Witherington: I think the second important point is that, while we haven't seen it yet, it's reasonable to expect that regulatory actions will or may cause some disruption in the MCV broker channel in the months to come. And that's really as I would expect brokers to be reviewing their processes in light of recent regulatory developments. Now, you are right, Gabriel, to highlight that the variability in potential sales from the broker channel has much less of an impact on value metrics.

Phil: Brokers to be reviewing our processes in light of recent regulatory developments now you are rights Gabriel to highlight that the you know the variability in potential sales from the broker channel has much less of an impact on value metrics, it's lower margin business largely because of the.

Philip Witherington: It's a lower margin business largely because of the product mix, the savings-oriented product mix that comes through that channel. For example, if we look at our Hong Kong business, only 13% of new business value comes from the broker channel.

Phil: Mix the savings oriented product mix that comes through that channel.

Phil: Only if we look at our Hong Kong business, only 13% of new business value comes from the broker channel. So it's really quite modest and our results will that will be resilient to variability in that channel and earnings given the highest threat 17 methodology, which is driven by CSN.

Philip Witherington: So, it's really quite modest, and our results will therefore be resilient to variability in that channel. And earnings, given the IFRS 17 methodology, which is driven by CSM and risk adjustments in the balance sheet, I would expect earnings also to be stable regardless of what happens to APE variability. Hey Gabriel, Rory here.

Phil: And risk adjustments in the balance sheet I would expect earnings also to be stable, regardless of what happens to a b E. Variability. He gave me really here I just wanted I had a couple of quick comments.

Roy Gori: I just want to add a couple of quick comments. And I think Phil captured the essence of what's actually happening in Hong Kong and our outlook quite well. But we actually welcome the regulatory scrutiny and focus on MCV and the processes that are critical to selling and buying appropriately. We've always held a very high bar in terms of the practices that we employ, both from a compliance and from a governance perspective.

Phil: And I think Phil captured the essence of what's actually happening in Hong Kong, and our outlook quite well, but we actually welcome the regulatory scrutiny and focus on M. C D and the processes that are critical to selling and selling appropriately. We've always hold a very high bar in terms of the practices that we employ but from a compliance and from a <unk>.

Phil: Governance perspective, so actually we think this is a good thing for the industry to have the highest standard of care applied and in the long run it's going to make this segment a much more sustainable and profitable segments. So it's something that we've actually been quite pleased with.

Roy Gori: So, actually, we think this is a good thing for the industry to have a higher standard of care applied. And in the long run, it's going to make this segment a much more sustainable and profitable one. So, it's something that we've actually been quite pleased with. Gotcha.

Gabriel Dechaine: Gotcha. Thanks for the fulsome response. My next question, you know, is just an update on the legacy process there. I don't know if Marc or Colin have something to add. I know when you disposed of the LTC block last December, you isolated another $4 billion of, you know, Product Care, a portfolio of similar characteristics to what you sold, if that number may be expanded. Or if your main struggle is what would you bundle in with that sub-portfolio, if you will, because my understanding is that, you know, potential buyers would want something in addition to LTC.

Speaker Change: Gotcha. Thanks for the Fulsome response My My next question just.

Speaker Change: The update on the legacy process, there I don't know if mark or.

Speaker Change: Call it have something to add there I know when you disposed of the LTC block last December you isolated another 4 billion of yes.

Speaker Change: Product care of a portfolio of similar characteristics to what you sold if that number has maybe expanded or if your your your main struggle is what would you bundle in with with the sub portfolio. If you will because my understanding is that.

Speaker Change: Buyers would want something in addition to a L. P C.

Speaker Change: Yes.

Marc Costantini: As you mentioned, obviously, it was a very substantial transaction for us, and the industry validated, obviously, our assumptions on our balance sheet, Title TC, and really created a lot of interest in our business and Manulife. And I would say we transacted with a world-class counterparty as well.

Speaker Change: Thank you Gabriel it's smart Guy good morning Laurie.

Speaker Change: And so yes.

Speaker Change: When we announced the transaction as you mentioned, obviously it was a very.

Speaker Change: Very substantial transaction for us in the industry are validated obviously, our assumptions on our on our balance sheet titled T. C and really create a lot of interest in our business in Manulife and I would say, we transacted with a world class counterparty as well and we had as you mentioned are some.

Gabriel Dechaine: We had, as you mentioned, some significant interest in the transaction by other parties around the industry. And, as you mentioned, we do have another block of business that has the same vintage and characteristics. And as I'm sure you saw in our results for the last little while, the LTC experience is positive, right, which is another positive halo for our block and our performance overall as a firm. And, you know, we've obviously demonstrated execution capability in this space.

Significant interest in the transaction by the other parties.

Speaker Change: And around the industry and as you mentioned, we do have another block of business that has the same vintage sent characteristics and as I'm sure you saw in our results for the last little while in the LTC experience is positive right, which is another positive halo to our block and our performance overall as a firm and Oh.

Gabriel Dechaine: So we don't talk about what's forthcoming, but we do have an interest in the block. And we are optimistic that the validation of our assumptions, our experience, stand by itself, but we've had an interest in the block, and we continue to optimize, as we demonstrated in this Canadian transaction and overall legacy business. And we do so always with very favorable economics for our shareholders. So, and we can promise you that's what we continue to do on a daily basis within our sphere of influence. Got it, thanks.

Speaker Change: We've demonstrated obviously execution capability in this space so.

Speaker Change: We don't talk about what's forthcoming, but we do have an interest in the block and and we are optimistic that the validation of our assumption that our experienced standby itself, but we've had interest in the block and we continue to optimize as we demonstrated by this Canadian transaction all of our legacy business and we do so always a win.

Very favorable economics to our shareholders. So in.

Speaker Change: And we can promise you that is what you continue to do on a daily basis around our in force.

Gabriel Dechaine: Got it. Thanks. Have a good rest of the week.

Speaker Change: Got it thanks, good the rest of the week.

Speaker Change: Thank you.

Operator: Our next question is from Doug Young from Desjardins Capital Markets. Please go ahead.

Speaker Change: Following question is from Doug Young from Desjardins Capital markets. Please go ahead.

Doug Young: Hi, good morning.

Doug Young: Hi, good morning. I just want to start with credit. And you know, there was an ECL release, as you talked about, and there was a release, even if you exclude the impact of the sale of the fixed income portfolio around the global Atlantic deal. And so it seems a little counterintuitive to what I'm thinking, I guess, given the macro environment. And so, but I just wanted to kind of dig into this a little bit: are you not seeing any negative migration from stage one, two, and three? Did you change any forward-looking indicators or model weightings?

Doug Young: I wanted to start with credit and there was an ECL releases as you've talked about it then and there was a release, even if you exclude the impact from the sale of the fixed income portfolio around the global Atlantic deal and so that seems a little counterintuitive to what I'm thinking I guess, given the macro environment and so but I just wanted to kind of dig into a little better you would not see.

Doug Young: Seen any negative migration from stage, one two and three did you change any forward looking indicators are model weightings or is there anything that outside usual to think about from a credit perspective than if he can we then how you think about credit evolving that would be helpful as well.

Scott Hartz: Or is there anything else unusual to think about, from a credit perspective? And I mean, if you can weave in how you think about credit evolving, that would be helpful as well. Yeah, hi Doug. It's Scott.

Doug Young: Yeah, Hi, Doug It's Scott Thanks for the question and.

Scott Hartz: Thanks for the question. And yeah, it was a very good quarter for credit results. To start with that, we were not seeing much of any migration in the portfolio. So that led to, you know, very little in the way of additions to the ECL. And having a release is unusual.

Scott: Yeah. It was a very good quarter for credit results start with that we were not seeing much of any migration.

Scott: In the portfolio.

Scott: So that led to very little in the way of addition to the ECL in having a release is unusual normally we would expect sort of a through the cycle $30 million to $50 million addition to the ECL.

Scott Hartz: Normally, we would expect sort of through the cycle $30 to $50 million addition to the ECL. Of course, it's a fairly benign credit environment. So we would expect to do better than that until that situation changes. As far as the release goes, which is unusual, there are really two factors driving it. One was a small release from the reinsurance transaction; we disposed of a large number of bonds, and it was ECL tagged to that and that, to model out current market conditions, and we use a Moody's model to do that.

Scott: Of course, it's a it is a fairly benign credit environment. So we would expect to do better than that.

Scott: Until that situation changes.

As far as the release goes which is unusual there are really two factors driving it one was a small release from the the reinsurance transaction, we disposed of a of a large number of bonds or with E. C. L tag to that in that.

Scott: Led to a $16 million release, and then you're right. There is as part of the ECL process we're required.

Scott: It's a model out current market conditions, and we use a moody's model to do that and what drives that are are largely capital market issues, such as equity markets, which were very strong in Q1 credit spreads, which continued to tighten in Q1 as well as other factors such as unemployment, which stayed low.

Scott Hartz: And what drives that are largely capital market issues, such as equity markets, which were very strong in Q1, credit spreads, which continued to tighten in Q1, as well as other factors such as unemployment, which stayed low. So those were really the drivers.

Scott: So the model did result in a modest release.

Scott: So those were really the drivers.

Doug Young: And just to clarify that 30 to 50 percent addition, is that per quarter per year? That would be per quarter. And again, you'll see that there'll be a lot of variability in that. In benign environments like today, you should expect to do better. And then, you know, to the extent we move into a recession, we will go above that to get to that long term.

Scott: And just to clarify that 30 to 50 addition is that per quarter per year.

Scott: That would be per quarter.

And again, you'll see that there'll be a lot of variability in that and in benign environments. Like today, you should expect to do better and then you know to the extent we move into a recession, we will go above that to get to that long term average.

Doug Young: And then just second, I guess, is for Steve, you know, the negative lapse experience again in the US Life book, I assume that relates to the Secondary Guarantee Business. And just wondering how you're feeling around that business around the upcoming Actuarial Review of that book, you know, is the experience progressively getting better over the last, the most negative, is it progressively getting better over the last year? Is it staying about the same?

Speaker Change: No I appreciate that and then second I guess this is for Steve you know negative lapse experience again in the U S light Buck I assume that relates to the secondary guarantee business thing.

Steve: Wondering how you are feeling around that business around the upcoming actuarial review of that but the experience progressively getting better over the last few months negative is that progressively getting better over the last year is it staying about the same and and and if you do have to reset reserves that you have.

Doug Young: And, and, you know, if you do have to reset reserves, like you have the offsets elsewhere that you can kind of pull levers on just, just hopefully, to get some color on that. Sure, Doug, thanks for the question.

Steve: Offsets elsewhere that you can kind of pull levers on just just hopefully to get some color on that.

Speaker Change: Sure Doug Thanks for the question Yeah in terms of what we're seeing on U S. Lapses I, we have seen a continuation of some of the trends where it's coming from there's a portion that's coming from earlier duration lapses really related to the economic environment and higher interest rates that said.

Steven Finch: Yeah, in terms of what we're seeing on US lapses, we have seen a continuation of some of the trends. Where it's coming from, there's a portion that's coming from earlier duration lapses, really related to the economic environment and higher interest rates. That's, you know, certainly more of a short-term concern. In terms of the protection products, in general, I've commented a few times about how we saw a drop in discontinuity in lapse rates when the pandemic started, and we saw that across Canadian UL, and seg fund products, we've seen a trending back.

Operator: Transcribed by https://otter.ai

Speaker Change: Certainly more of a short term concern in terms of the protection products in General I've commented a few times about how we saw a drop of discontinuity in lapse rates when the pandemic started and we saw that across Canadian UL St foam products, we've seen it trending back.

Speaker Change: Fully turned it back in Canadian U L, which is a similar product trying to back in saying funds.

Speaker Change: But it is not fully trying to back.

Speaker Change: In U S life, we do expect that trend to emerge over time, and then you know what I'd tell you about how we're thinking about the.

Speaker Change: The actuarial assumption review here, just a little bit of context.

Steven Finch: Thank you very much. As you know, we update assumptions very regularly, and we have reviewed lapse assumptions over the years. The last US lapse review was in 2021. That fully reflected pre-pandemic experience. We're up to date. And as a result of those reviews, our long-term assumptions are

Speaker Change: You know, we update assumptions very regularly and we have a reviewed lapse assumptions over the years the last U S lapse reviews in 2021.

Speaker Change: <unk>.

Speaker Change: Fully reflected pre pandemic experience. So we are up to date.

Speaker Change: And as a result of those reviews, our long term assumptions are.

Steven Finch: , , , , ,

Speaker Change: You know, they're lower they're below 1%. So we're taking all this information into consideration as we do a review and too early to update you at this point, but we will update you as we get through that review later this year.

Doug Young: We are taking all this information into consideration as we do our review. I appreciate the color. Thank you.

Speaker Change: I appreciate the color. Thank you.

Speaker Change: Thank you. Our following question is from Paul Holden from CIBC. Please go ahead.

Operator: Thank you. Our next question is from Paul Holden from CIBC. Please go ahead.

Paul Holden: Thank you. Good morning. I want to ask about the strength in Asia, other sales, maybe a few more details behind what drove that strength, and maybe, more importantly, how sustainable that may be.

Paul Holden: Thank you good morning wanted to ask about key strengths in Asia other sales might be a few more details behind what drove that strength.

Paul Holden: Maybe more importantly, how sustainable that may be.

Paul Holden: Great. Thank you Paul and good morning. This is Phil.

Philip Witherington: Great. Thank you, Paul. And good morning. This is Phil.

Phil: You're right to highlight that we had a very strong performance in Asia other markets <unk> growth of 20% and higher growth and value metrics relative to that [noise] excuse me, but what we have seen in 2024 as we go.

Philip Witherington: You're right to highlight that we've had a very strong performance in Asia Other Markets, APE growth of 20% and higher growth in value metrics relative to that. What we have seen in 2024 as we start the year and get through Q1 is a broadening of the recovery across multiple markets in Asia Other. And you may recall that I said a few times last year that the emergence from the pandemic was uneven across Asia.

Phil: The year and get through Q1 is a broadening of the recovery across multiple markets in Asia. Other and you may recall that I said, a few times last year that the emergence from the pandemic was uneven across Asia. We've seen some evening apps, that's not recovery in 2024, notably with seven out of nine.

Philip Witherington: We've seen some evening out of that recovery in 2024, notably with seven out of nine of our Asia Other Markets delivering double-digit growth in sales. Now, when we deep dive, peel the onion into what's going on within Asia, we've seen a record quarter in mainland China. And, you know, we often see seasonality of sales in China, but this first quarter, it's been particularly strong, and that's particularly coming from the bank insurance channel.

Phil: The issue of the markets delivering double digit growth in sales.

Phil: Now when we deep dive Peel, the onion and so what's going on within Asia, we've seen a record quarter in mainland China and.

Phil: We often see seasonality of sales in China, but this first quarter, it's been particularly strong that's a.

Phil: Coming from the Bancassurance channel and while we may see some variability quarter to quarter in mainland China. As a result of typical seasonality and other factors I do feel confident about the future over the medium term now in other emerging markets, Indonesia has been particularly.

Philip Witherington: And while we may see some variability, a quarter to a quarter in mainland China, as a result of typical seasonality and other factors, I do feel confident about the future over the medium term. Now, in our other emerging markets, Indonesia has been particularly important and is, you know, delivering very strong growth. And I look forward to sharing more about that as part of our upcoming investor day.

Phil: Importance and is delivering very strong growth and I look forward to sharing more about that as part of our upcoming Investor day, and we should not forget about Singapore as well as Singapore has had a really strong start to the year and that's a very important market to us and a P times its not very similar to Hong Kong in terms of volume so we've.

Philip Witherington: And we should not forget about Singapore as well. Singapore has had a really strong start to the year, and that's a very important market to us. In APE terms, it's now very similar to Hong Kong in terms of volume. So we've, you know, through the consistent growth in Asia, other markets, and notably Singapore in recent years, we have diversified our portfolio and really developed a strong footprint within ASEAN.

Phil: It is through the consistent growth in Asia other markets, notably Singapore in recent years, we have diversified our portfolio and really.

Phil: <unk> developed a strong footprint within SCN.

Paul Holden: Okay, that's great. And then my second question is just about the bigger picture, you know, the higher for longer interest rate scenario seems increasingly probable. You know, the way I view it for manual life, there's probably some puts and takes. So where I'd like to particularly focus on is what does that mean for the net investment result, right? It didn't increase as much as I would have expected this year. So maybe you could be.

Speaker Change: Okay. That's great and then my second question is just bigger picture.

Speaker Change: Higher for longer interest rate scenario seems increasingly probable.

Speaker Change: The way I view it from Manulife, there's probably some puts and takes so.

Speaker Change: I'd like to particularly focus on is what does that mean for the <unk>.

Speaker Change: Net investment, whereas I'll try it didn't it didn't increase as much as I would've expected. This year. So maybe you can address that as well, but kind of what we should expect for that line with higher for longer and then two what does that mean for the hall. The experience does that mean, maybe a period of you know.

Roy Gori: address that as well, but kind of what we should expect for that line with higher returns for longer. And then two, what does that mean for the HALDA experience? Does that mean maybe a period of underperformance relative to long-term assumed returns, excuse me, for a little bit longer. So those two components, please.

Speaker Change: Underperformance relative to long term of some seemed retirement returns excuse me for a little bit longer so those two components. Please.

Roy Gori: Yeah, Paul, that's a great question. And let me start, and I'll sort of provide some high-level comments, and then I'll hand over to Steve, and then Scott might want to chime in as well, because there's a lot to unpack with your question. And I think the first comment I'd make is that higher rates are positive for manual. If we've said this in the past, and quite frankly, it's a function of the fact that it means more attractive propositions for our customers in terms of the products that we offer.

Speaker Change: Yes, Paul that's a great question, and let me start and I'll sort of provide some high level comments and I'll hand over to Steve and then Scott might want to chime in as well because there's a.

Roy Gori: But it also talks to the fact that our surplus portfolio obviously benefits from the repricing of our fixed income portfolio, and that just, you know, simply flows through. If you look at 2023, we saw about a $200 million pre-tax year-on-year benefit from higher rates. This year, if rates stay where they are currently, it's probably about a $40 million benefit in 24 versus 23, so it moderates a little bit because of the big impact that we saw and the big uplift that we saw in 23.

Steve: Lot to unpack with your question and I think the first comment I'd make is that higher rates are a positive for Manulife. We've said this in the past and quite frankly, it's a function of the fact that it means more attractive proposition for our customers in terms of the products that we offer but it also talks to the fact that our surplus portfolio, obviously benefits from the repricing.

Steve: Thing about things fixed income.

Steve: Portfolio and and that just simply flows through if you look at 2023, we saw about a $200 million pre tax year on year benefit from higher rates.

Steve: This year if rates stay where they are currently it's probably about a 40 million benefiting 24 versus 23, so it moderates a little bit because of the big impact that we saw in the big uplift that we saw in 'twenty three.

Roy Gori: And largely, you know, we have hedged our portfolio and reduced the volatility and the reliance on movements in rates or, quite frankly, even equity markets. But it still is a very big positive for us as we look forward.

Steve: And largely you know, we have hedged out portfolio and reduce the volatility and the reliance on movements in rates or quite frankly, even equity markets, but it still is a very big positive for us as we look forward and that doesn't include any of the benefits from our U R. A which is a long term assumption, which again.

Roy Gori: And that doesn't include any of the benefits from our URR, which is our long-term assumption, which, again, you know, where we stand today in terms of the 30-year, is significantly higher, at least in some jurisdictions, versus the ultimate reinvestment rate. So in summary, what I'd leave you with is that you know where we are a beneficiary of higher rates. We're not expecting that rates are going to go much higher from here. We think that possibly the short end of the curve will come down a little bit, but the long end of the curve may be a little bit more sticky.

Steve: You know, where we stand today in terms of the 30 year.

Steve: It's significantly higher at least in some jurisdictions versus the ultimate reinvestment rate. So in summary, what I'd leave you with this.

Steve: You know where.

Steve: A beneficiary of higher rates were not expecting that rates are going to go much higher from here, we think that possibly the short end of the Cook will come down a little bit, but the long end of the curve may be a little bit more sticky.

Steve: And if you think about this from a multi decade perspective rights at the at the long end, whilst a little bit higher than where they've been for the last couple of decades I still from a historic perspective quite reasonable. So we think that that again will be a bit of a tailwind for our business. Both in terms of the earnings but.

Scott Hartz: And if you think about this from a multi-decade perspective, rates at the long end, whilst a little bit higher than where they've been for the last couple of decades, are still, from a historic perspective, quite reasonable. So, you know, we think that that again will be a bit of a tailwind for our business, both in terms of earnings and, equally importantly, from the perspective of the attractiveness of our products in the market. Yeah, I'll just emphasize a couple of things.

Steve: Equally importantly from the perspective of the attractiveness of our products in the market state, Yes, I'll just emphasize a couple of things.

Scott Hartz: Roy commented on where we saw the benefit of higher rates coming through, and that was largely in the surplus portfolio. We do have, you know, very robust hedging programs, so we don't like to take on interest rate risk, and so you won't see it coming through the segments so much. But one other emphasis is the URR. I used to get questions all the time because our URR was above where the long-term rates were, and that, you know, was a potential headwind for the company. Now it's a potential tailwind if rates stay where they are because, in our major geographies,

Steve: Roy commented on where we saw the benefit of higher rates coming through.

Steve: <unk> largely in the surplus portfolio. We do have you know very robust hedging program. So we don't like to take that.

Steve: Interest large amounts of interest rate risk and that so you won't see it coming through the segment so much but that one other emphasis is the is the U R. R. I used to get questions. All the time, because our U R. R was above where the long term rates are.

Scott Hartz: We have URRs that are now generally lower than the current long-term rates.

Steve: And that was a potential headwind for the company now it's a potential tailwind if rates stay where they are because in our major geographies. We have you are ours that are now lower generally than the current long term rates.

Steve: Great.

Speaker Change: Not at all.

Paul Holden: Unknown Speaker Paul Mendonca, Darko Mihelic, Tom MacKinnon, Meny Grauman, Doug Young, Gabriel Dechaine, If it's simply discount rates coming down, that means you get it today, but then the prospective returns are going to be lower. And we're seeing the opposite result today with higher rates. We're seeing some valuations come down, but our expected future returns are now higher, and these assets are backing very long-term liabilities. We intend to hold them, and we'll get that back in higher future returns.

Speaker Change: Capital had follow up on the on how it affects the ALDA portfolio. So it was all interest rates do have an impact.

Speaker Change: Moving rates won't really matter, but when we see pretty significant rate moves it will have an impact and we saw this when rates came down when rates came down that did provide a bit of a tailwind into current valuations, but you may recall.

Speaker Change: At that point in time, we we actually reduced the future expected returns because.

Steve: If it's simply discount rates coming down.

Steve: It means you get it today, but then the prospective returns are going to be lower and we're seeing the opposite result today.

Steve: With higher rates, we're seeing some valuations come down, but our expected future returns are now higher and these assets are backing very long liabilities, we intend to hold these and we'll get that back in higher future returns.

Paul Holden: Now, it affects different asset classes a little bit differently within the whole portfolio. Private equities, for example, are not much affected by long-term rates. Actually, short-term rates matter more there because that's how the underlying companies finance themselves. And so I do think, as Roy mentioned, we would expect short rates to come down in the future, and that will be a bit of a tailwind for private equity, whereas the longer term rates affect the real estate portfolio more.

Steve: Acts different different asset classes, a little bit differently within our ALDA portfolio.

Steve: Private equities not much affected by long term rates actually short term rates matter more there because that's.

Steve: How the the underlying companies finance themselves and so I do think as Rory mentioned, we would expect short rates to come down in the future and that will be a bit of a tailwind for private equity, whereas the longer term rates more affect the real estate portfolio. Those are the discount rates that are being used and we we are not really expecting those.

Paul Holden: Those are the discount rates that are being used, and we are not really expecting those to come down much going forward. In fact, they've gone up by 50-plus basis points so far this year, and that represents a little bit of a continuing headwind on the real estate portfolio for the remainder of the year.

Steve: They come down much going forward in fact, they've gone up by 50 plus basis points. So far this year and that represents a little bit of a continuing headwind on the real estate portfolio for the remainder of the year.

Operator: Got it. That's helpful. Thank you very much.

Roy Gori: All right.

Speaker Change: Got it that's helpful. Thank you very much.

Speaker Change: Thank you.

Mario Mendonca: Our next question is from Mariel Mendonca from TD Securities. Please go ahead.

Speaker Change: Following question is from Mario Mendonca from TD Securities. Please go ahead.

Colin Simpson: First on the global minimum tax, Colin, would it be fair to say that we'll start to see the increase in the Asia and wealth management tax rates as early as next quarter, and should we be sort of budgeting for something like a 15% tax rate in Asia? Hey, Mario.

Mario Mendonca: First on the global minimum tax.

Mario Mendonca: Would it be fair to say that we'll start to see the increase in the Asia and wealth management tax rates as early as next quarter and should we be sort of budgeting for something like 15% tax rate in Asia.

Mario Mendonca: Hey, Mark it's a good to hear from you, yes, youre right. It all depends on when G. M. T is substantially not just in Canada, and so our expectation is Q2 and the effect of one 124. So if that happens we will have a catch up in the second quarter for both the first quarter in the second quarter you highlighted Asia.

Colin Simpson: Good to hear from you. Yes, you're right. It all depends on when GMT is substantially enacted in Canada. And so our expectation is Q2 and effective 1-1-24. So if that happens, we'll have a catch-up in the second quarter for both the first quarter and the second quarter. You highlighted Asia.

Colin Simpson: That's right. I mean, you can see from our effective tax rates that we pay a little lower than average tax in our Asian businesses, and that's predominantly in Hong Kong. So you would expect those rates to creep up. As we said before, actually on the last call, a good guide for our future effective tax rates ranges about 17 to 22%. A slightly different question.

Mark: That's right I mean, you can see from our effective tax rates that we pay a little lower than average tax in our Asian businesses and that's predominantly in Hong Kong. So you would expect those rates to creep up as we said before and actually on the last call.

Mark: Good guide for our future effective tax rates range is about 17% to 22%.

Speaker Change: Okay slightly different question for two quarters.

Colin Simpson: For two quarters, last quarter, we saw the change in CSM methodology change. This quarter, we're seeing a greater allocation of investment income, I believe, to Asia and wealth management. Now, maybe what I'm trying to get at here is the greater allocation of investment income into Asian wealth management. Is this something that's happened before? Or is this like a first time thing?

Speaker Change: Last quarter, we saw that the change in CSM methodology change.

Mario Mendonca: This quarter, we're seeing a greater allocation of investment income.

Mario Mendonca: I believe to Asia and wealth management.

Mario Mendonca: Now maybe that's what I'm trying to get at here is the outward greater allocation investment into Asia and wealth management is this something that's happened before or as a sector are first time thing.

Mario Mendonca: Yeah.

Colin Simpson: Yeah, you're right. And just to be clear, what you're talking about is the allocation of surplus across businesses. So we carry out an exercise every year, once a year, and we look at the overall surplus, and we allocate it to each of the segments accordingly. Now, because yields have increased, and actually certain businesses have got bigger, some businesses are getting bigger allocations than others. Because we do it at the start of the year, there is a bit of a lag.

Speaker Change: Youre right and just to be clear, what you're talking about is the allocation of surplus across the businesses. So we take we carry on some exercise every once a year.

Speaker Change: Look at overall surplus surplus and we allocated to each of the segments. Accordingly, now because yields have increased and actually you said some businesses it feel bigger.

Speaker Change: Some businesses are getting big allocations than others.

Speaker Change: Because we do it at the start of the year, we sort of there is a bit of a lag. So you want obviously notices in Q2, Q3, Q4, but Q1, it seems a little more outsized, but it really reflects the yield environment and the change in size of the businesses completely unrelated to the CSM a deal cycle basis change that happened.

Colin Simpson: So you won't obviously notice it in Q2, Q3, Q4. But in Q1, it seems a little more outsized. But it really reflects the yield environment and the change in size of the businesses, completely unrelated to the CSM, the off-cycle basis change that happened last quarter. Yeah, I appreciate that they're not related, but I connect them because, in both cases, they actually put Manulife in a better light. So what I'm asking is, do you expect any other changes of this nature that either maybe allocate more income to the high-growth segments or speed up the pace of CSM amortization or anything else of that nature?

Speaker Change: Last quarter, yes, I appreciate that they're not related but they connect them because in both cases.

Speaker Change: They they actually put manulife in a better light so what I'm asking is do you expect any other changes of this nature that either maybe allocate more income to the high growth segments or <unk>.

Speaker Change: Speed up the pace of CSI amortization or anything else of that nature.

Speaker Change: But interesting question, Larry I mean I.

Colin Simpson: An interesting question, but I wouldn't argue that it paints Manulife in a particularly better light, because when I look at everyone's valuation models, you know, no one really looks at us on a sum of the parts valuation methodology. So I don't I don't view it as a way for us to improve the Manulife performance, but we're very proud of our Asia and our GRAM performance. In terms of an outward-looking perspective, there's nothing on the horizon that you would expect of this nature or magnitude.

Speaker Change: I wouldn't argue that Haynes, manulife, and a particularly better light because when I look at everyone's valuation models no one really looks at us on a sum of the parts valuation methodologies. So I don't I don't view it as a as a way for us to improve the menu like performance, but we're very proud about how Asia and all G brand performance in terms of the outward looking prospect.

Speaker Change: There's nothing on the horizon that you would expect of this nature or magnitude.

Speaker Change: Thank you.

Speaker Change: Thank you.

Operator: Thank you. Our next question is from Lemar Persaud from ComRock Securities. Please go ahead.

Speaker Change: Our following question is from Linda My first thought from <unk> Securities. Please go ahead.

Lemar Persaud: Thanks. Bigger picture question here for my first one. Probably from running investor day, but the core ROE has been ahead of your target for the past kind of four quarters.

Linda: Thanks Becca.

Linda: Bigger picture question here for my first one.

Linda: Probably from running the Investor day about the car or we.

Linda: Has it been ahead on your target for the past four quarters.

Lemar Persaud: Is there some?

Linda: Is there some specific factor that you expect to cause manulife to move back down to that target or is the kind of mid 16% Roe or inappropriate way to think about this company now.

Lemar Persaud: What specific factor do you expect to cause Manulife to move back?

Lemar Persaud: Is this the year you expect to cause Manulife to move back down to that target? Or is the mid-16% ROE an appropriate way to think about this company now? Any thoughts would be helpful on that. Yeah, Lemar, and Roy here.

Linda: Any thoughts would be helpful on that one.

Roy Gori: Let me tackle that. And you are, to some extent, front running our investor day. So I certainly welcome everyone, A, to join that, but B, you know, to highlight that we're going to be talking about core ROE and our outlook for that in the future. ROE and the improvement of our returns have been a huge focus for us over the last six years. And I've mentioned this on prior calls, but we've been very deliberate about reducing the risk profile of our franchise and improving the returns. Our ROE back in 2017 was circa 11%, and we took that up to almost 16% at the end of 23. That story has continued into 24 on the back of really solid momentum and good results.

Linda: Yeah Lamar Roy here, let me, let me tackle that and you are to some extent front running our investor day, So I had some suddenly.

Speaker Change: Welcome everyone to join that the B to.

Lemar Persaud: I'll highlight that we're gonna be talking about a core ROE in our outlook for that in the in the future.

Linda: And the improvement all about returns has been a huge focus for us over the last six years and I've mentioned this on prior calls, but we've been very deliberate about reducing the risk profile of our franchise and improving the returns there or are we back in 2017 was circa 11% and we took that up to almost 16% at the end of 'twenty three that stories continue.

Roy Gori: We delivered a core ROE in Q1 of 16.7%, 2% up on the prior year. We're really pleased with that progress, and it's been a function of a couple of things. The first is that we've divested low ROE businesses. We freed up $11 billion worth of capital over the last six years, and that is capital that was being dedicated to low ROE franchises, and, obviously, deploying that capital towards buybacks. In fact, we've bought back $5 billion worth of shares over the last five years, and this has obviously been a tailwind to our ROE story.

Linda: You'd into 'twenty four off the back of really solid momentum and good results. We delivered a core ROE in Q1 of 16, 7%, 2% up on prior year, we're really pleased with that progress and it's been a function of a couple of things. The first is that we've divested low ROE businesses, we freed up $11 billion worth of capital over the last six years and that is capital that was.

Linda: Being dedicated towards low or a low ROE franchises, and obviously deploying that capital.

Linda: Towards buybacks when in fact, we bought back $5 $5 billion worth of shares over the last five years.

Roy Gori: At the same time, we've increased our capital buffers. So, you know, that's something that we're very proud of, and it gives us ammunition for future actions in the future. The second big focus for us is that we've improved the ROI on our new business across the board. Every segment has improved the lifetime return on capital of all of our new business, which means that as we write new business, it's going to improve our earnings and our return outlook for the future.

Linda: Has been obviously, a tailwind to our ROE story at the same time, we've increased our capital buffers. So.

Linda: That's been something that again, we're very proud of and it gives us ammunition for future actions in the future. The second big focus for US is that we've improved the ROE in our new business across the board every segment has improved the lifetime return on capital of all of our new business, which means that as we write new business.

Linda: To improve our earnings and now return outlook for the future as we grow those higher ROE businesses as you've seen in Hood Asia and one in particular that changes the portfolio mix of our franchise and has been again another big positive. The final thing I'd say is done on the expense front, we've driven a much greater focus on efficiency.

Roy Gori: As we grow those higher ROE businesses, as you've seen and heard, Asia and WAM in particular, that changes the portfolio mix of our franchise and has been, again, another big positive. The final thing I'd say is that on the expense front, we've driven a much greater focus on efficiency, which again is reflected in ROE. So, in summary, I wouldn't say that we should expect to go backwards from where we are to the 15 plus percent guidance.

Linda: Again is accretive to ROA.

Roy Gori: So in summary, I wouldn't say that we would expect to go backwards from where we are through the 15 plus percent guidance. We think that what we were able to delivering 23 is a is a baseline and we see further upside for improvement.

Roy Gori: We think that what we were able to deliver in 23 is a baseline, and we see further upside for improvement. I'm going to have to ask you to sort of wait to hear more about that at our investor day.

Roy Gori: I'm going to have to ask you to sort of wait to hear more about that at our investor day.

Lemar Persaud: That's fair. Thanks. And then there is my second question.

Speaker Change: Oh, that's fair Thanks, and then my second question.

Lemar Persaud: Just continuing on the credit losses from an earlier question you guys mentioned,

Speaker Change: Just continuing on the theme.

Scott Hartz: The credit losses from an earlier question you guys mentioned.

Lemar Persaud: 30 to $50 million bill being kind of normal and explaining the reasoning for the release this quarter. But I'm

Lemar Persaud: 30 to 50 million dollar bill being kind of normal and explain the reasoning for the relief this quarter, but I'm wondering does manulife, making some expert credit judgment to smooth out credit loss provisioning or is it simply whatever the model spits out.

Lemar Persaud: for the release this quarter. But I'm wondering, does Manuilike make use of expert credit judgment to smooth out credit loss provisioning, or is it simply whatever the model spits out is what makes its way into the DOE, so we should expect some kind of more volatility in the ECL line, thanks. Hi Lamar, it's Scott.

Scott Hartz: What makes its way into the D. O E. So we should expect kind of more volatility in the ECL aligned.

Scott Hartz: Hi, Scott.

Lemar Persaud: <unk>.

Scott Hartz: There is a model, which is formulaic, which is from Moody's that we and a number of other people use. But we also have a process to go through it and apply judgment on top of that. And, you know, we have applied that judgment in the past; we tend to apply it in a more conservative nature, I would say. Particularly if things are happening after the end of the quarter. If you looked at the first quarter of last year, I believe the model suggested we should have a release.

Scott Hartz: There is a model, which is formulaic, which which is from Moody's that we and a number of other people use but we also have a process to go through it and apply judgment on top of that and.

Scott Hartz: You know we have applied that judgment in the past we tend to apply it in a more conservative nature I would say.

Scott Hartz: Particularly if things are happening after the end of the quarter. If you looked at the first quarter of last year I believe the model suggested we should have a release and.

Scott Hartz: And, you know, we were a bit concerned given what was going on with Silicon Valley Bank and so forth. So we overrode the model not to do that. So, yes, we do have a governance process and apply expert judgment on top of that.

Scott Hartz: We were a bit concerned given what was going on with Silicon Valley Bank and so forth. So we overrode the model not to do that so so.

Scott Hartz: So yes, we do have a governance process and apply our expert judgment on top of the model.

Speaker Change: Thanks, that's it for me.

Speaker Change: Thank you.

Operator: Our next question is from Tom MacKinnon from BMO Capital Markets; please go ahead.

Scott Hartz: I'll. Following question is from Tom Mackinnon from BMO capital markets. Please go ahead.

Tom Mackinnon: Yeah, Thanks, very much and good morning, I think Roy you mentioned higher rates are positive in the surplus portfolio is benefiting from this repricing.

Tom Mackinnon: Yeah, thanks very much, and good morning.

Colin Simpson: I think, Roy, you mentioned higher rates are positive in the surplus portfolios benefiting from this repriced. If I look at expected earnings on surplus, though, at $2.53 in the quarter, it's down over the last five quarters. Help me understand that. Douglas Goldstein, CFP®, Financial Planners & Investments Advisor, and how should we be thinking about earnings on surplus going forward. Hey, Tom, it's Colin. You're right. Earnings on surplus fell $11 million quarter on quarter and actually $30 million year on year. There are two things going on here.

Colin Simpson: If I look at expected earnings on surplus, though at $2 53 in the quarter.

Colin Simpson: That's down over the last five quarters so.

Colin Simpson: Uh huh.

Colin Simpson: Help me understand that.

Colin Simpson: Obviously your surplus portfolio must be growing your lie cats growing.

Colin Simpson: Remittances are increasing as well so help me understand why that earnings on surplus is is falling.

Colin Simpson: You know sequentially and that's fallen over the last four.

Colin Simpson: Four quarters, and how long should we be thinking about earnings on surplus going forward. Thanks.

Colin Simpson: The first is the share buyback is reducing surplus, and that had a $20 million impact throughout the entire year. The second item, you'll see this in the last quarter, the line item that you referred to doesn't capture the earnings on surplus for our GWAM business. And so, as part of the surplus allocation exercise that I talked to Mario about, GWAM got a little bit more surplus allocated to that, so that's reduced the line item that you're referring to. But you're right.

Colin Simpson: Hey, Tom as Colin your rights earnings on surplus fell 11 million quarter on quarter, and actually $30 million a year on year, there's two things happening here. The first is the share buyback.

Colin Simpson: As reducing surplus and that had a $20 million impact throughout the entire year. The second item you'll see this in our in the last quarter.

Colin Simpson: This this is the line item that you referred to it doesn't capture the earnings on surplus for a <unk> business and so as part of the the surplus allocation exercise that I talked a moment about gee why them got a little bit more surface allocated to that so thats reduced the line item that you're referring to but you're right in terms of the yields going up yields went up $2 eight to $2 nine.

Tom Mackinnon: In terms of yields going up, yields went up 2.8 to 2.9 during the quarter. But because of all the allocation and balance settlements, the actual surplus amount fell from $39 billion to $38 billion. So should we be thinking that this number should, with increases in buybacks, should continue to decline going forward or just stabilize? What you lose in the buyback is offset by what you're gaining from just generally having more surplus. How should we be thinking about that?

Tom Mackinnon: During the quarter.

Tom Mackinnon: Because of all the allocation and into account balance settlements. The actual surface amount fell from 39 billion to 38 billion.

Tom Mackinnon: So should we be thinking that this number should we.

Tom Mackinnon: With increases in buybacks that it should continue to decline going forward or is it just stabilize the what.

Tom Mackinnon: You're losing the buyback is offset by what you are gaining from just generally having more surplus how shall we be thinking about that going forward.

Colin Simpson: I think the first point, and sorry, you did ask this in the first part of the question, is Q1 is a good run rate to consider for the rest of the year. Yes, as we make money and we're returning capital through dividends and buybacks, you would expect a fairly stable surplus balance, so no great movements there. And, you know, just to remind you, for every 50 basis points increase in interest rates, we will see $25 million of earnings coming through this line.

Speaker Change: I think well first point and I'm, sorry, I didn't you did ask this in the first part of the question is Q1 is a good run rate to consider for the rest of the year, yes, as we make money and we're returning capital through dividends and buybacks you would expect a fairly stable surplus balance so no great movements, there and just as a as a to remind you for it.

Colin Simpson: Every 50 basis points increase in interest rates, we will see $25 million or.

Colin Simpson: Earnings coming through this line. So those numbers are also quite modest relative to movements in interest rates.

Colin Simpson: And then a follow up with the expected investment earnings.

Colin Simpson: That's flat year over year, now, which you end up having here is you've got higher rates. So I think this is kind of net.

Colin Simpson: So those numbers are also quite modest relative to movements in interest rates, and then to follow up with the expected investment earnings, which is flat year over year. Now what you end up having here is you've got higher rates. So I think this is kind of the net of the discount on the reserves. But still, you would assume that that spread is probably, if anything, picked up. How should we be thinking about that expected investment earnings line going forward? and why it's just relatively flat year over year. Yeah, hi, Tom, it's Steve.

Steve: The discount.

Steve: On the reserves, but still you would assume that that spread is probably if anything has picked up how should we be thinking about that expected investment earnings line going forward and why it's relatively flat year over year.

Colin Simpson: Yeah, Hi, Tom It's Steve.

Tom Mackinnon: There are a couple of things going on in this quarter. One is we do see a reduction from the Global Atlantic transaction of about $20 million in the quarter. And then, as we implemented IFR 17 last year, there were a couple of methodology and refinements, which is a bit of a headwind on that investment earnings. But there is a partial offset where a portion got moved, actually, up into the insurance service result in the short-term insurance business. The Q1 of this year is a good run rate that we expect to grow as the business grows over time. Okay, thanks so much.

Tom Mackinnon: Theres a couple of things going on in this quarter. One is we do see a reduction from the peak.

Tom Mackinnon: The global Atlantic transaction of about $20 million in the quarter and then as we implemented <unk> 17 last year.

Tom Mackinnon: A couple of methodology and refinements.

Tom Mackinnon: Which is a bit of a headwind on that investment.

Tom Mackinnon: Earnings are there is a partial offset where portion got moved actually up into the insurance service result in.

Tom Mackinnon: In the short short term insurance business.

Tom Mackinnon: The Q1 of this year is a good run rate that we expect to grow as that business grows over time.

Tom Mackinnon: Okay. Thanks, so much.

Speaker Change: Thank you.

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

Tom Mackinnon: Following question is from Nigel D'souza from Veritas investment research. Please go ahead.

Nigel D'Souza: Thank you. Good morning. I wanted to touch on all of your business for this quarter. I noticed that the sale of all assets, [inaudible]

Nigel D'Souza: Thank you good morning, I wanted to touch on here all the disposition.

Nigel D'Souza: This quarter I noticed that the <unk>.

Nigel D'Souza: Dale a halt assets.

Nigel D'Souza: Comprised of private equity timberland and infrastructure.

Nigel D'Souza: Proportional to your card.

Scott Hartz: All the portfolio, and what I'm getting at here is just that continues as you go through more of the distribution. It's actually going to result in all the portfolio becoming more indexed to real estate, and does that have any implications for... [inaudible] for volatility of all the experience? Sure, Nigel. It's Scott.

Nigel D'Souza: All of that portfolio and what.

Scott Hartz: Thanks for the question. Um, so yeah, we, as you point out, we've largely covered off the amount of all the sales we need for the Global Atlantic transaction. And I'll point out, we did it at values a bit above where we had last valued those investments. And a couple of thoughts went into what parts of the portfolio to sell. One was that we really did want to lean into private equity. It is the most volatile part of the portfolio, and it has grown over the years given the good sort of a proactive move to reduce the size of that portfolio.

Scott Hartz: Our proactive move to reduce the size of that portfolio.

Scott Hartz: As you would expect, we did not do anything in real estate given that the bid offer in that market is wider than anywhere else, and we do expect that bid offer to narrow. We have seen it start to narrow already.

Scott Hartz: As you would expect we did not do anything in real estate given that though.

Scott Hartz: And we certainly would have plans to continue to rebalance the portfolio away from these transactions based on the sizes we want. And I would expect over the next couple of years, while we didn't do anything in the really short term given the kind of disruption in that market, that we would, you know, rebalance the portfolio to where we want it. So I do not see real estate becoming a really bigger proportion of all the portfolio. Nigel, Roy here.

Roy Gori: I just want to chime in and add a couple of thoughts. The first is that the 1.7 billion sell-down of older that relates to the GA reinsurance transaction reduces our older by about 6%. And we have, through Scott's leadership, worked very hard to diversify our older portfolio over the years. It comprised about 50% real estate and commercial real estate some 10 years ago, and now it represents approximately 30% or slightly less than that.

Roy Gori: The real estate commercial real estate, some 10 years ago and now it represents approximately 30% of slightly less than that so actually <unk> is actually quite diverse and actually that's what we like we like to see the vessel portfolio because it allows us to weather all sorts of economic environments, which I think puts us in a in a very strong position.

Roy Gori: So actually, our portfolio is quite diverse. And actually, that's what we like. We like to see a diverse portfolio because it allows us to weather all sorts of economic environments, which I think puts us in a very strong position.

Speaker Change: Okay that makes sense and if I could just have some general questions about Asia. That's phone broke out of it for you you want that I believe you get this.

Nigel D'Souza: Okay, that makes sense, and if I could just have some general questions about Asia,

Nigel D'Souza: Asia and you'll also get 50 per cent of <unk>.

Speaker Change: So just two questions circus reminders.

Nigel D'Souza: On the number of agents that's <unk>, what's what's the trend that's driving that getting into growth and then the second aspect is this more recent market volatility.

Nigel D'Souza: Prior to the Japanese yen are there any implications for your.

Nigel D'Souza: The franchise in Japan from <unk> other than currency translation.

Nigel D'Souza: Well. Thank you <unk> for the questions. This is Phil I'll start with you you'll Christian an agent numbers and what we've seen in the first quarter is actually stability you. It's the fourth quarter year on year, you'll see a decline in that's being driven by Vietnam and mainland China, but I think what's more important than.

Nigel D'Souza: Absolute agent numbers is actually the productivity of agents and this is consistent with our strategic focus and we've been talking about this for many years professionalism fulltime agents that are equipped with digital tools.

Nigel D'Souza: Order to be highly productive and we see that as being consistent with the the notion of helping customers identify more complex financial planning needs that may have which we believe is good for customers, but it's also good from Ah for us in terms of the quality of business that we rice and the quality of the patients that we attract so.

Nigel D'Souza: <unk> business savvy, you proactive agent is actually up by 41% year on year. Despite the year on year decline in number of agents.

Nigel D'Souza: The second thing that you asked about Japan, and the impact of the week again now as you May know most about business in Japan is foreign currency denominated business philosophy U S dollars from Australia, and dollars as well and what we see as as the UN declines that should be there is.

Nigel D'Souza: More interest in diversification within investment portfolios of our customers in Japan now we're not sure the very cautious when it comes to a sales process here thoughts. We you know we have launched some new products in Japan over the course of the last quarter that has driven quite strong you know quite strong.

Nigel D'Souza: Rebound in sales and value metrics as well so I I do feel optimistic about the prospects for Japan, but just to remind us when we think about Japan I've strategy is one of the value Maximisation, we're seeing that strategy uhm being very successful in terms of earnings generation and value metric.

Nigel D'Souza: Generation and I expect that to continue and a medium term expectations for Japan, a high single digit growth and can you value metrics and cool runnings and and nausea, while we might have some earnings currency translation.

Nigel D'Souza: And by the way you know the the lodge a pot on that is that the U S appreciation, which is it's obviously a positive for us from account currency transaction was Becky and in each of the market to be operating we typically match our asset currency with that liability currency. So we we don't like to take foreign currency risk in terms of matching a liability.

Nigel D'Souza: The assets in the market the Royal Brighton.

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

Speaker Change: Thank you once again, please press down when that this time. He if you had a question.

Nigel D'Souza: [inaudible]

Philip Witherington: you know, Asia and wealth to get 50% of your core earnings. So just two questions, two reminders. On the number of agents that's declining, what's the trend that's driving that given the growth? And then the second aspect is just recent market volatility with regard to the Japanese yen. Are there any implications for... Franchise in Japan from Yen Paul Tsoi, other than currency translations? Well, thank you, Nigel, for the questions. This is Phil.

Speaker Change: Following question you sometime Danica Evercore ISI. Please go ahead.

Philip Witherington: I'll start with your question on agent numbers. And what we've seen in the first quarter is actually stability with the fourth quarter. Year on year, you'll see a decline, and that's been driven by Vietnam and mainland China. But I think what's more important than absolute agent numbers is actually the productivity of agents. And this is consistent with our strategic focus. And we've been talking about this for many years: professionalism, full-time agents that are equipped with digital tools in order to be highly productive.

Philip Witherington: And we see that as being consistent with the notion of helping customers identify more complex financial planning needs that they have, which we believe is good for customers. But it's also good for us in terms of the quality of business that we write and the quality of agents that we attract. So new business value per active agent is actually up by 41% year on year, despite the year on year decline in the number of agents.

Speaker Change: Thanks, Uhm, just a few questions U S life insurance Steve.

Philip Witherington: The second thing that you asked about was Japan and the impact of the weak yen. Now, as you may know, most of our business in Japan is foreign currency denominated business, largely U.S. dollars, and some Australian dollars as well. And what we see is that as the yen declines, there is more interest in diversification within investment portfolios of our customers in Japan. Now, we're naturally very cautious when it comes to our

Philip Witherington: process here, but we have launched some new products in Japan over the course of the last quarter that have driven quite a strong, quite strong rebound in sales and value metrics as well, so I do feel optimistic about the prospects for Japan, but just a reminder, when we think about Japan, our strategy is one of value maximization, and we're seeing that strategy being very successful in terms of earnings generation and value metric generation. And I expect that to continue, and our medium-term expectations for Japan are for high single-digit growth in key value metrics and core earnings.

Philip Witherington: And Nigel, while we might have some earnings currency translation, and by the way, you know, the larger part of that is the U.S. appreciation, which is obviously a positive for us from a current currency translation perspective. In each of the markets we operate in, we typically match our assets. currency with our liability currency. So we don't like to take foreign currency risk in terms of matching our liabilities with the assets in the market that we're operating in.

Nigel D'Souza: Okay, that's very helpful. That's it for me. Thank you.

Speaker Change: Just to follow up on the S. G. Well lastly question I know you mentioned that your ultimate lapse rate assumption is below 1%.

Nigel D'Souza: Can you can you be a little more specific and the reason I ask is if it's around 90 basis points I think that would still probably be at a level above.

Nigel D'Souza: The industry study that was conducted a few years ago.

Speaker Change: From what I understand the average lapse rate that they were implying was about 40 to 50 basis points.

Speaker Change: And if you are on the higher end like above the 40 to 50 would that still apply you made an impact if if the originally set made with the actuarial review.

Nigel D'Souza: Yeah sure Tom Thanks, Uhm and that as I'm sure you can imagine b, it's not as simple as one laps right, which is why I refer to less than one it varies by single survivorship.

Operator: Thank you. Once again, please press one at this time if you have a question. The following question is from Tom Gallagher from EvoCor, ISI. Please go ahead.

Tom Gallagher: You know size of policy et cetera. So there there's a variety in there you know in terms of our ultimate latch rates you know when I look at it I think we're in line with with what the industry's God. Overall, you know I think what we're seeing more right now is what's happening in the current environment with the.

Tom Gallagher: Respect to the pandemic and how does that turned out over time.

Tom Gallagher: Gotcha see so you'd be more in line with we'll say that industry study that that would come out and the implication there you'd be.

Tom Gallagher: Least directionally close to that level is that is that fair to say.

Tom Gallagher: That's my view again.

Tom Gallagher: Okay, Great and then the second question is this last quarter, we've seen kind of a number of reinsurance and litigation charges for the U S life insurance business some insurance <unk>.

Tom Gallagher: Charges for cost of insurance litigation, others do the arbitrations with ringing charged for rate increases curious if you have either one going on and if so whether you're provision for these.

Tom Gallagher: Yeah. Thanks, Tom.

Tom Gallagher: Thanks. Just a few questions on U.S. life insurance. Steve?

Tom Gallagher: Just to follow up on the SGL lapse rate question, I know you mentioned that your ultimate lapse rate assumption is below 1%. Can you be a little more specific? And the reason I ask is that if it's around 90 basis points, I think that would still probably be at a level above The Industry Study that was conducted a few years ago. From what I understand, the average lapse rate that they were implying was about 40 to 50 basis points.

Tom Gallagher: In terms of of reinsurance you know, we've got ongoing relationships with with a reinsurance partners and that's a pretty comprehensive relationship, including you know looking at new business future opportunities in a variety of in forest management initiatives to drive the alignment of interest on performance of the Bill.

Tom Gallagher: <unk>.

Tom Gallagher: Over the years part of that in Forest management has at certain times resulted in rate increase requests from from reinsurers. You know we work with them constructively on that it's you know an ongoing part of of managing this business you know in certain situations we dispute those.

Tom Gallagher: Right to rate increases, but look at it really is part of the ongoing relationship management, what I, what I would tell you is that when we look at our reserves in aggregate and that's how we manage the balance sheet. When we look at reserves and accurate in aggregate.

Tom Gallagher: I'm confident in saying that their overall adequate and prudent including the ongoing management of these these reinsurance relationships.

Tom Gallagher: Got it and then C L.

Speaker Change: Y litigation I'll I'll pasta Brooks on that one.

Speaker Change: Yeah. Thanks, Toms Brooke single, so we did undertake see Hawaii increase on a block of you all policies in 2018 as is the case in the industry. When those events occur litigation and shows we have now settled all federal and state litigation regarding that.

Tom Gallagher: And if you are on the higher end, like above the 40 to 50, would that still imply you made an impact if there was a reset made with the actual error of you? Yeah, sure, Tom, thanks. And as I'm sure you can imagine, the lag rate is not as simple as one lapse rate, which is why I refer to less than one. It varies by single survivorship,

Steven Finch: And when I look at it, I think we're in line with what the industry has overall.

Steven Finch: you know, I think what we're seeing more right now is what's happening in the current environment with respect to the pandemic, and how that trend is evolving.

Operator: Transcripts by Transcription Outsourcing, LLC. Transcription Outsourcing, LLC.

Tom Gallagher: Gotcha, see, so you'd be more in line with, we'll say, that industry study that came out and the implications there. You'd be, you know, at least directionally close to that level, is that fair to say? That's my Okay, great.

Tom Gallagher: And then the second question is, this last quarter, we've seen kind of a number of reinsurance and litigation charges for the U.S. life insurance business. Some insurers took charges for the cost of insurance litigation, others due to arbitrations with re-insurers for rate increases. Curious if you have either one going on, and if so, whether your provision could be. Yeah, thanks, Tom.

Steven Finch: You know, in terms of reinsurance, we've got ongoing relationships with our reinsurance partners, and that's a pretty comprehensive relationship, including, you know, looking at new business, future opportunities, and a variety of force management initiatives to drive alignment of interest in performance of the business. Over the years, part of that in force management has, at certain times, resulted in rate increase requests from reinsurers. You know, we work with them constructively on that.

Brooks Tingle: So we did undertake a COI increase on a block of UL policies in 2018. As is the case in the industry, when those events occur, litigation ensues. We have now settled all federal and state litigation regarding 100% of the disputes have been resolved. We made certain payments, but importantly, the increases stay in effect going forward.

Steven Finch: It's, you know, an ongoing part of managing this business. You know, in certain situations, we dispute those right-to-rate increases but look at it really as part of the ongoing relationship management. What I would tell you is that when we look at our reserves in aggregate, And that's how we, you know, manage

Steven Finch: [inaudible]

Brooks Tingle: I'll pass to Brooks on that one. Yeah, thanks, Tom. It's Brooks Tingle.

Brooks Tingle: 100 per cent of the disputes have been resolved.

Brooks Tingle: We made certain payments, but importantly, the increases stay in effect going forward.

Brooks Tingle: Great. Thanks for your eyes.

Brooks Tingle: Thank you.

Operator: Thank you. We have no further questions. Registration at this time. I would now like to turn the meeting back over to Mr. Koh.

Speaker Change: We have no further questions to register at this time I would now like to turn the meeting back over to Mister <unk>.

Hung Ko: Thank you, Operator. We will be available after the call if there are any follow-up questions. Have a good day, everyone.

Brooks Tingle: Thank you operator will be available after the call. If there are any follow up questions have a good day everyone.

Speaker Change: Thank you.

Operator: The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.

Hung Ko: <unk>.

Operator: Please disconnect your lines at this time and we thank you for your participation.

Speaker Change: Please stand by.

Operator: [noise].