Q1 2024 Manulife Financial Corp Earnings Call

Operator: Stand by. We thank you for your patience. Nous vous remercions de bienvenue.

Your patience.

Now some of that.

This conference is being recorded.

So as long as it always is.

Yeah.

Operator: This conference is being recorded. 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.

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 to the Manulife financial first quarter 2024 financial results Conference call.

Speaker Change: I would now like to find a meeting over to Mr. Cope. Please go ahead Mr. Cole.

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. Please note that certain material factors or assumptions are applied in a banking forward-looking statement, 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. However, these materials, including the webcast for today's call are available on the Investor Relations section of our website at many of the dotcom.

Cope: Before we 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 note that certain material factors or assumptions are applied in a bake any forward looking statements and actual results may differ materially from what is stated.

Hung Ko: Turning to slide 4, 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 and operating results in more detail. After the prepared remarks, we move to the slide 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.

Cope: Turning to slide four where you Cory I'll personally Chief Executive Officer will begin today's presentation with the highlights of our first quarter results and a strategic update.

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

Colin L. Simpson: After their prepared remarks, we'll move to the Q&A portion of the call.

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

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 the 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.

Colin L. Simpson: Starting on slide six.

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

Colin L. Simpson: We continue to execute against our 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 I P cells across each of our insurance segments.

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

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

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

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

Roy Gori: Growing ROE is a key priority and a key outcome of our transformation journey, which takes me to slide 7. During the quarter, we announced the largest ever universal life reinsurance deal in Canada, which is another milestone and a testament to our execution capability.

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

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 accretive 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.

Roy Gori: We once again transacted at an attractive earnings multiple ahead of where we currently trade.

Roy Gori: 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 outstanding common shares.

After accounting for buybacks the deal will be accretive to both core ROA 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.

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 ROE.

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

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

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

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% MBV 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 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.

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.

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 the $2 billion of capital release from our two recent reinsurance transactions on low ROE businesses to shareholders through a buyback. 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. Thanks, Roy.

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: 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 L. Simpson: Thanks Roy.

Colin L. Simpson: 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 volume insurance segment. 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 phone customers in the U.S.

Colin L. 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.

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

Colin L. 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. The momentum in all sales contributed to strong increases in new business here.

Colin L. 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 WAM saw strong net inflows of $6.7 billion, reflecting positive flows from each business line.

Colin L. Simpson: And new business value of 52% and 34% respectively.

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

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

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

Colin L. Simpson: 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.

Colin L. Simpson: 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.

Colin L. 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 L. 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 L. 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 our CSM, which is a store of future earnings.

Colin L. Simpson: 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 L. 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 Transaction.

Colin L. 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.

Colin L. 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 L. 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.

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

Colin L. 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 disbursement. 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.

Towards the bottom of the table you will see that global one was a notable contributor to the results supported by higher average AUR may improve margins and expense discipline. These factors were partially offset by higher workforce related expenses, reflecting strong Tia salt performance included in other core earnings.

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

Colin L. Simpson: Note that this included some favorable onetime 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 L. 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 L. Simpson: Onto 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 $1 billion of unrealized losses from assets disposed as part of this transaction, we actually saw Aloha noncore charge of approximately 750 million.

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

Colin L. 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 impact. We closed this transaction on February the 22nd and are now focused on future in force activity.

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

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

Colin L. 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 L. 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.

Colin L. 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.

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

Colin L. 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 NVV, respectively, which we refer to as our value metric. We delivered 39% core earnings growth with meaningful increases in contribution from both Hong Kong, which is our largest in-force business, and Japan. Moving over to the Global WAMS results on slide 16.

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

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

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

Colin L. Simpson: Moving over to global one's results on slide 16, we.

Colin L. 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 a competitive market. The strong net inflows this quarter were due to higher new plan sales and retirement. We also saw demand increase in our retail business, supported by strong equity markets, and we continued 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 L. 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 L. Simpson: Net inflows this quarter were due to higher 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 L. 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 L. 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. Core earnings increased 3%, primarily driven by business growth and a lower ECL provision, but these were partially offset by lower investment prices.

Colin L. Simpson: Which is much improved from 2023 results.

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

Colin L. Simpson: 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. However, this was partially offset by more adverse net insurance experience. In addition, the reinsurance transaction reduced core earnings by US$19 million.

Colin L. Simpson: Slide 18 shows our U S segment's results in the U S. We saw somewhat of a return of demand for mass affluent customers, which drove up AP sales MPV and new business CSM results.

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

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

Colin L. Simpson: On to slide 19 in our balance sheet. We started off the year with a strong LICAT ratio of 138% in the first quarter, which was $24 billion above the supervisory target ratio. Our financial leverage ratio of 24.3% remains within our target ratio of 25%, adding to our ample financial flexibility.

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

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

Colin L. Simpson: 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. 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.

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

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

Colin L. Simpson: Following our Canadian you all 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 all suite and the <unk> for the New program, which will return the freed up capital from the two transactions to shareholders.

Colin L. Simpson: As such, you will see an acceleration of our buyback activity from the $0.2 billion in the first quarter to more like $0.6 billion a quarter for the rest of the year. And finally, moving to slide 20, which summarizes how we are tracking against our medium-term target. 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%.

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

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

Colin L. Simpson: 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%.

Colin L. 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.

Colin L. 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. 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 re-queue if they have additional questions. Operator, we will now open the call to questions.

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.

Speaker Change: We will now open the call to questions.

Speaker Change: Thank you.

Operator: 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.

Speaker Change: We will now take questions from the telephone lines.

Speaker Change: Have a question. Please press star one on your devices keypad you make.

Speaker Change: So on your question at any time by pressing star two.

Speaker Change: First on one at this time, if you have a question.

Speaker Change: That will be we fastball participants with just thoughtful questions. We thank you for your patience.

Manny Goldman: Our first question is from many Goldman from Scotiabank.

Manny Goldman: Please go ahead.

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

Manny Goldman: Hi, good morning.

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

Philip James Witherington: 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 sort of impact the run rate going forward.

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

Manny Goldman: I guess I see the Seattle, maybe isn't very good.

Manny Goldman: Small components of that but wondering if there's anything else there that would sort of impact the run rate going forward.

Philip James Witherington: Hello, many, 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 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.

Manny Goldman: Hello. Good morning. This is Phil and thank you for the question are you 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 are probably metrics across the board. The level of earnings that you see are largely sustainable and I'll Peel the onion a bit on this.

Manny Goldman: The driver of growth in core earnings is the fact that we've grown the CSM by adding quality new business over the course of the past 12 to 18 months and you can see that through the CSM expansion in the balance sheet and we also had the impact of the favorable impact of the methodology change that took effect from Q4.

Philip James Witherington: And you can see that through the CSM expansion on the balance sheet. And we also had 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 run or 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 9 million US dollars in the first quarter from the impact of the global Atlantic reinsurance transaction.

We spoke about last quarter now in terms of items within the core earnings run on coal 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.

Manny Goldman: <unk> 9 million U S dollars in the first quarter from the impact of the global Atlantic reinsurance transaction.

Philip James Witherington: And secondly, you may recall that last year in Q1 in Asia, there was a negative policyholder experience through core earnings. This quarter, that was a modest positive of $5 million. And I would expect the policyholder experience to vary from quarter to quarter to quarter and be approximately neutral on average. So I feel that the core earnings that you're seeing are largely sustainable. That's underpinned by the fundamentals of our business, and we may see some variability from modest variability in policyholder experience and ECL. I think this is a good indication of the future. Thanks for the question, many.

Manny Goldman: 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.

Manny Goldman: $5 million and I would expect our policyholder experience to vary from quarter to quarter would be approximately neutral on average so I I feel that the core earnings that you're seeing is largely sustainable.

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

Philip James Witherington: 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 to what you're seeing in terms of the MCB sales in particular, and I'm wondering if The decline we're seeing there is just, function of the fact that you had so much growth after coming out of lockdowns, there's 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.

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

Speaker Change: The decline in Hong Kong.

Speaker Change: Just talk to what Youre seeing in terms of the MTBE 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 is there any other dynamics there that you're seeing when it comes to mainland Chinese visitors sale that.

Speaker Change: That would be impacting the result, it beyond them.

Speaker Change: You had such a strong reopening.

Speaker Change: Great. Thank you for the question follow up question. Many it's been a really strong quarter in Hong Kong and I as I said last of course, you know 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.

Philip James 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 James 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 insurance channel, we're seeing strong double-digit growth. And that's what I would expect.

Speaker Change: Earnings and new 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 with that channel is really quite fierce competition.

Speaker Change: As well 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 in Chicago, we're seeing strong double digit growth and that's what I.

Speaker Change: I would expect you know I've said many times the M. C V customer segment is Ah Ah Ah.

Philip James 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: The legitimate customer segment that we expect to grow over the medium term it reflects approximately.

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 V. In the Hong Kong market now that that core strengths are domestically is radio.

Philip James 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: Important Tonight I spoke last quarter with a 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 outlook for Hong Kong I I'm confident that we will continue.

Speaker Change: To see growth and 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 AP from quarter to quarter as a result, largely of the broker channel, but overall I feel confident about the future.

Philip James Witherington: Thanks, Phil. Thanks for the detail.

Speaker Change: Thanks, Don Thanks for the detail.

Gabriel Dechaine: Thank you. The following question is from Gabriel Dechaine from National Bank Financial. Please go ahead.

Speaker Change: Thank you our following question is from Gabriel.

Gabriel: From National Bank financial Please go ahead.

Philip James Witherington: Hey, 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 on the MCV products because of that regulatory investigation, whatever you want to call it, across the industry. I want to point that out. And then, you know, it's more of a risk to your sales numbers. The profit impact is probably pretty insignificant if the sales do decline, because it's a small portion of your sales, and I think it's a lower-margin product. Maybe you can edify me there.

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 a decline in sales.

Gabriel: On the MTV products because of that regulatory investigation.

Speaker Change: All of them across the industry are I want to point that out.

Speaker Change: And then you know is there you know it's more of a risk to your sales number is the profit the impact was probably pretty insignificant if the sell through decline because it's a small portion of your sales and I think it is lower margin product maybe you can give me there.

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

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

Philip James 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 APE. 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 has announced an investigation and conducted an investigation to unlicensed selling of insurance policies customers from mainland China. This is limited to the broker channel and has no dirt.

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

Phil: You asked where the that's.

Phil: Festination 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.

Phil: Any impact directly from that regulatory investigation, although I will highlight two things one is that we have seen a decline in the first quarter.

Philip James Witherington: One point is that we have seen a decline in the first quarter relative to last year in the broker channel. And 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: Relative to last year in the broker channel and that 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 and 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 too.

Philip James Witherington: 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 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: 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 our brokers to be reviewing that processes in light of recent regulatory developments.

Phil: You are right 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 product mix that savings oriented product mix that comes through that channel.

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

Phil: Risk adjustment and the balance sheet I would expect earnings also to be stable, regardless of what happens to a P. E. Variability I think gave you Roy here I just wanted I had 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.

Philip James Witherington: It's a lower margin business, largely because of the product mix, their savings-oriented product mix that comes through that channel. You know, 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 have to therefore be resilient to variability in that channel. And earnings, given the IFRS17 methodology, which is driven by, you know, CSM and risk adjustment in the balance sheet, I would expect earnings also to be stable regardless of what happens to APE variability. Hey Gabriel, Roy here.

Roy Gori: I just might 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 regulatory scrutiny and focus on regulatory scrutiny and focus on the MCV and the processes that are critical to, you know, 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: <unk> M C D and the processes that are critical to.

Phil: 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 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 I'm much more sustainable and profitable segments. So it's something that we've actually been quite please.

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 Mark or Colin have something to add. I know when you disposed of the LTC block last December, you isolated another $4 billion of product 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 potential buyers would want something in addition to LTC.

Phil: With.

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

Speaker Change: Just the update on the legacy process, there I don't know, if mark or or Collyn I have something to add there I know when you disposed of the LTC block last December.

Speaker Change: Isolated another 4 billion of.

Speaker Change: Product care a portfolio of similar characteristics to what you saw there if that number has maybe expanded.

Speaker Change: 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 you know potential buyers would want something in addition to a L. P C.

Speaker Change: Thanks.

Marc M. Costantini: Thank you, Gabriel. It's Marc. Good morning. Good morning. So, yes, when we announced the transaction, as you mentioned, obviously, it was a very substantial transaction for us and the industry.

Speaker Change: Thank you Gabriel is smart and good morning, good morning, So yes.

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

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

Speaker Change: 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 stand 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 as you know.

Marc M. Costantini: I'm sure you saw in our results for the last little while that 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. 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 and our experience will stand by itself.

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.

Marc M. Costantini: We've had interest in the block, and we continue to optimize, as we demonstrated in this Canadian transaction, overall legacy business, and we do so always with very favorable economics to our shareholders. So, and we can promise you that's what we continue to do on a daily basis at our end. Got it, thanks.

Speaker Change: Very favorable economics to our shareholders. So in.

Speaker Change: And we can promise you. That's why do 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.

Speaker Change: The rest of the week.

Speaker Change: Thank you.

Doug Young: 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.

Speaker Change: Yeah.

Doug Young: Hi, good morning. Just want to start with credit. And you know, there was an UCL release, as you talked about, and there was a release, even if you exclude the impact from the sale of the fixed income portfolio around the

Doug Young: Hi, Good morning, I, just wanted to start with that credit and there was an ECL releases as he talked about it then and there was a release, even if you exclude the impact from the sale of the 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 on.

Doug Young: The Atlantic Deal. And so it just seems a little counterintuitive to what I'm thinking, I guess, given the macro environment. And so what I just wanted to kind of dig into a little bit, are you not seeing any negative migration from Stage 1, 2, and 3? Did you change any forward-looking indicators or model weightings?

Doug Young: I just wanted to kind of dig into a little better you've not seen any negative migration from stage one two and three did you change any forward looking indicators our motto weightings or is there anything else unusual to think about from a credit perspective, I mean, if he can we then how you think about credit evolving that would be helpful as well.

Scott Sears 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, Doug. It's Scott.

Doug Young: Yeah, Hi, Doug It's Scott Thanks for the question and Yeah. It was a very good quarter for credit results and start with that we were not seeing much of any migration.

Scott Sears 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 addition to the ECL, and having a release is unusual. Normally, we would expect, sort of, through the cycle $30 to $50 million addition to the ECL. But, of course, it is a fairly benign credit environment.

Scott: In the portfolio.

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

Scott: Addition to the ECL.

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

Scott Sears Hartz: 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, and we disposed of a large number of bonds.

Scott: Until that situation changes.

Scott: As far as the release goes which is unusual there really two factors driving it one was a small release from the.

Scott: The reinsurance transaction, we disposed of a large number of bonds or with E. C. L tag to that in that.

Scott Sears Hartz: There was ECL tagged to that, and that led to a $16 million release. And then you're right; as part of the ECL process, they were required to model out current market conditions. And we use a Moody's model to do that. 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 the model did result in a modest release. So those were really the drivers.

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 with current market conditions, and we use the Moody's model to do that and what drives that are.

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

Scott: Those were really the drivers.

Scott Sears Hartz: And just to clarify that 30 to 50 addition, is that per quarter per year? That would be per quarter.

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

Scott: That would be per quarter.

Scott: 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.

Scott Sears Hartz: No, I appreciate that. And then just a second.

Speaker Change: No I appreciate that and then just second I guess, it's for Steve negative lapse experience again in the U S. Like Buck I assume that relates to the secondary guarantee business and just I was just wondering how you are feeling around that business around the upcoming actuarial review of that but you know as the experience progressively getting better over the last.

Doug Young: I guess this is for Steve, you know, another negative lapse experience in the U.S. lifebook. I assume that relates to the secondary guarantee business.

Steven Andrew Finch: Just wondering how you're feeling around.

Steven Andrew Finch: around that business, around the upcoming actual review of that book, you know, is the experience for me.

Steven Andrew Finch: Transcribed by https://otter.ai

Steve: It's negative is a progressively getting better over the last year as it stand about the same and if you do have to reset reserves like you have.

Steven Andrew Finch: And, you know, if you do have to reset reserves, like you have offsets elsewhere that you can kind of pull levers on, just hopefully, to get some color.

Steve: Offsets elsewhere that you can kind of thought leaders on just it's just too late to get some color on that.

Steven Andrew Finch: Sure, Doug, thanks for the question. Yeah, in terms of what we're seeing in U.S. 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 certainly more of a short-term concern. In terms of protection products in general, I've commented a few times about how we saw a drop, a 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, you know, fully trended back in Canadian UL, which is a similar product, trended back in CEDCFON products.

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.

Doug Young: 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 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 the discontinuity in lapse.

Doug Young: <unk> when the pandemic started we saw that across Canadian UL, I think fund products, we've seen youre trending back.

Doug Young: Fully trended back in Canadian U L, which is a similar product kind of back end sang funds.

Steven Andrew Finch: Transcripts provided by Transcription Outsourcing, LLC.

Doug Young: But it is not totally trying to back.

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

Steven Andrew Finch: Emerge over time. And then, you know, what I tell you about how we're thinking.

Steven Andrew Finch: about the Actuarial Assumption Review here. Just a little bit of context.

Doug Young: [noise] assumption review here, just a little bit of context.

Steven Andrew Finch: You know, 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, and that fully reflected pre-pandemic experience.

Doug Young: You know, we update assumptions very regularly and we have a reviewed lapse assumptions over the years. The last U S. Lapse review is in 2021.

Doug Young: <unk>.

Doug Young: Fully reflected pre pandemic experience. So we are up to date.

Doug Young: So we were up to date. And, you know, as a result of those reviews, our long-term assumptions are, you know, they're low; they're below 1%. So, you know, we're taking all this information into consideration as we do our review, and it's too early to update you at this point, but we will update you as we get through that review later this year. Appreciate the color. Thank you.

Doug Young: And as a result of those reviews, our long term assumptions are.

Doug Young: You know theres, a lot with or below 1% so.

Doug Young: Taking all this information into consideration as we do our review and too early to update you at this point, but we will update you as we get through that review later this year.

Speaker Change: I appreciate the color. Thank you.

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

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

Paul David Holden: Thank you. Good morning. I want to ask about the strength in Asia.

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

Philip James Witherington: https://www.larryweaver.com

Philip James Witherington: Unavailable? That may be.

Philip James Witherington: Great, thank you, Paul, and good morning, this is Phil. 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. Excuse me, what we have seen in 2024 as we go and 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.

Paul David Holden: 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, where the markets are a P growth of 20% in our higher growth and value metrics relative to that [noise] excuse me.

Paul David Holden: We have seen in 2024 as we go.

Phil: 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, we've seen some evening out and stopped recovery in 2024, notably with seven out of nine.

Philip James Witherington: We've seen some evening out of that recovery in 2024, notably with seven out of nine of our Asia and 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 has been particularly strong, and that's particularly coming from the Bank Assurance Channel.

Phil: As your other markets delivering double digit growth in sales.

Phil: We deep dive so it was peel the onion into what's going on within Asia, We've seen a record quarter in mainland China and you know what.

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

Philip James Witherington: 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 our other emerging markets, Indonesia has been particularly important, and it's delivering very strong growth. And I look forward to sharing more about that as part of our upcoming investor day.

Phil: It's about the future over the medium term now in other emerging markets, Indonesia has been particularly important 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 had a really strong start to the year and that's a very.

Philip James Witherington: And we should not forget about Singapore as well. Singapore 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 or other markets, and notably Singapore in recent years, we have diversified our portfolio and really developed a strong footprint within ASEAN.

Phil: <unk> market to us and a P times its not very similar to Hong Kong in terms of volumes. 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.

Phil: Within ASEAN.

Paul David Holden: Okay, that's great. And then my second question is just:

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

Paul David Holden: Higher for longer interest rate scenario seems increasingly probable. The way I view it for manual, there's probably some puts and take. So where I'd like to particularly focus on is what that means for the net investment result, right? It didn't increase as much as I would have 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 all the experience? Does that mean maybe a period of, you know, underperformance?

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

Speaker Change: The way I view it for 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 all try it and 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 halt experienced does that mean, maybe a period of <unk>.

Paul David Holden: Underperformance relative to long-term assumed returns for a little bit longer. So those two components, please.

Speaker Change: Underperformance relative to long term some zoomed 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. Like, we've said this in the past, and quite frankly, it's a function of the fact that it needs more attractive propositions for our customers in terms of the products that we offer, but it also relates 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.

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: 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. 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: 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.

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

Speaker Change: 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 all the the big impact that we saw in the big uplift that we saw in 'twenty three.

Speaker Change: And largely you know, we have hedged out portfolio and reduce the volatility and the reliance on movements in rates or quite frankly, even in 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, 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, you know, where you 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.

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

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

Speaker Change: 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.

Roy Gori: 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. Steve?

Speaker Change: And if you think about this from a multi decade perspective.

Speaker Change: <unk> 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.

Speaker Change: Equally importantly from the perspective of the attractiveness of our products in the market see yes, I'll just emphasize a couple of things.

Steven Andrew Finch: Yeah, I'll just emphasize a couple of things. Roy commented on where we saw the benefit of higher rates coming through. That's largely in the surplus portfolio. We do have, you know, very robust hedging programs, so we don't like to take interest rate risk, and so you won't see it coming through the segment so much.

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

Speaker Change: That's largely largely in the surplus portfolio, we do have very robust hedging program. So we don't like to take a interest large amounts of interest rate risk and debt. So you won't see it coming through the segments. 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.

Steven Andrew Finch: 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, we have URRs that are...

Speaker Change: Above where the long term rates are high.

Speaker Change: 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.

Steven Andrew Finch: are now lower,

Steven Andrew Finch: generally, then the current long-term rate. Great.

Speaker Change: Great.

Speaker Change: <unk>.

Paul David Holden: Sorry, I'll just follow up on how it affects all the portfolios. So interest rates do have an impact, you know; small moving rates won't really matter, but when we see pretty significant rate moves, they will have an impact. And, you know, we saw this when rates came down. When rates came down, that did provide a bit of a tailwind to current valuations, but you may recall at that point in time, we actually reduced future expected returns because, if it's simply interest rates coming down, that means you get it today, but then the prospective returns are going to be lower.

Speaker Change: I had a follow up on the on how it affects the ALDA portfolio. So some interest rates do have an impact.

Speaker Change: Small move in 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 to current valuations, but you may recall.

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

Speaker Change: If it's simply discount rates coming down.

Speaker Change: 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 liabilities, we intend to hold these and we will.

Paul David Holden: 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 these, and we'll get that back in higher future returns. Now, it affects different asset classes a little bit differently within the whole portfolio. Private equity's not much affected by long-term rates. Actually, short-term rates matter more there because that's how the underlying companies finance themselves.

Speaker Change: Get that back in higher future returns now it affects different different asset classes, a little bit differently within our ALDA portfolio.

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

Speaker Change: How the 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 more affect the real estate portfolio. Those are the discount rates that are being used and we we are not really expecting those.

Paul David Holden: 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. 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.

Speaker Change: 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.

Paul David Holden: Got it. That's helpful. Thank you very much.

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

Speaker Change: Thank you.

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

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

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

Mario Mendonca: So 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.

Colin L. Simpson: 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. That's right.

Mario Mendonca: Hey, Mark it's good to hear from you, yes, Youre right. It all depends on when GMT is substantially not just in Canada, and so our expectation is Q2 and our effective 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.

Mario Mendonca: I mean, you can see from our effective tax rate 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 rate range is about 17 to 22%.

Mark: That's right I mean, you can see from our effective tax rate 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%.

Colin L. Simpson: It's a slightly different question for two quarters. In the last quarter, we saw the change in CSM, the 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 Asia and wealth management. Is this something that's happened before? Or is this like the first time?

Mark: Get a slightly different question for two quarters.

Mark: In the last quarter, we saw that the change in CSM the methodology change.

Mark: This quarter or seeing a greater allocation of investment income.

Mark: I believe to Asia and wealth management.

Mark: Maybe what I'm trying to get at here is that the outlet greater allocation of investment going into Asia and wealth management is this something that's happened before or is this like a first time thing.

Colin L. Simpson: Yeah, you're right. And just to be clear, what you're talking about is the allocation of surplus across the businesses. So we carry out an exercise every once in a year.

Mark: Yeah.

Speaker Change: You're right and just to be clear, what you're talking about is the allocation of surplus across the businesses. So we take we carried out some exercise every once a year and we look at overall surplus surplus and we allocated to each of the segments. Accordingly, now because yields have increased and actually certain businesses as it got bigger.

Colin L. Simpson: 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. So you won't obviously notice it in Q2, Q3, Q4. But so Q1, it seems a little more outsized, but it really reflects the yield environment and the change in size.

Speaker Change: Some businesses are getting bigger 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 one obviously in the 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 deal cycle basis change that happened.

Colin L. Simpson: Although completely unrelated to the CSM, the off-cycle basis change that happened last, Yeah, I appreciate that they're not related, but I connect them because, in both cases, they actually put Manuilife 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 averageization or anything else of that nature? An interesting question, Mario.

Speaker Change: This quarter, yeah, 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.

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

Colin L. Simpson: I mean, 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 view it as a way for us to, you know, improve the Manulife performance, but we're very proud of our Asia and our GWAM 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: Interesting question, Larry I mean, I I wouldn't argue that a heinz manulife and a particularly that are 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 methodologies. 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 all our Asia and all G band.

Speaker Change: Four months in terms of the outward looking perspective, there's nothing on the horizon that you would expect of this nature or magnitude.

Speaker Change: Thank you.

Speaker Change: Thank you.

Lemar Persaud: Our next question is from Lamar Persaud, from Comar Securities. Please go ahead.

Speaker Change: Our following question is from Tomorrow Prasad from <unk> Securities. Please go ahead.

Lemar Persaud: Thanks, bigger picture question here.

Speaker Change: Thanks.

Tomorrow Prasad: Bigger picture question here for my first one.

Roy Gori: for my first one. Probably from running the investor day, but the core ROE has been a head of year target for the past kind of four quarters.

Tomorrow Prasad: Finally, if I'm running the Investor day about the car or we havent been hitting your target for the past four quarters.

Roy Gori: Is there some specific factor that you expect to cause Manulife to move forward?

Tomorrow Prasad: 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 and appropriate way to think about this company now.

Lemar Persaud: , , , , ,

Lemar Persaud: way to think about this company now.

Roy Gori: Yeah, any thoughts would be helpful.

Roy Gori: to be helpful on that one.

Speaker Change: Yeah, any thoughts would be helpful on that one.

Roy Gori: Yeah, Lemar, Roy here. Let me tackle that. And you are, to some extent, fronting 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. You know, 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 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.

Speaker Change: Yeah, well I'm not really here, let me, let me tackle that and you are to some extent front running at our Investor day, So I suddenly.

Speaker Change: Welcome everyone to join that but b to.

Speaker Change: A highlight that we're gonna be talking about a core ROE in our outlook for that in the in the future.

Speaker Change: Or are we in the improvement of our 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 our ROE back in 2017 was circa 11% and we took that up to almost 16% at the end of 'twenty three that stories.

Speaker Change: We need 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've freed up $11 billion worth of capital over the last six years and that is capital that was.

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. Obviously, deploying that capital into the investor portfolio mix of our franchise has been another big positive.

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

Speaker Change: Towards buybacks when in fact, we bought back $5 $5 billion worth of shares over the last five years has been obviously a tailwind to our ROE story at the same time, we've increased our capital buffers. So you know that's that's been something that again, we're very proud of and it keeps us ammunition for future actions in the future.

Speaker Change: The second big focus for US is that we've improved the Roe.

Speaker Change: 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, that's going 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.

Speaker Change: 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, which again is accretive to Roe.

Roy Gori: The final thing I'd say is that on the expense front, we've driven a much greater focus on efficiency, which again is accretive to ROE. So, in summary, I wouldn't say that we would expect to go backwards from where we are to the 15 plus percent guidance. We think that what we were able to deliver in 23 is a baseline, and we see further upside for improvement.

Speaker Change: 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 deliver in 'twenty. Three as is a is a baseline and we see further upside for improvement.

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

Lemar Persaud: Oh, that's fair. Thanks. And then 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.

Speaker Change: The credit losses from an earlier question you guys mentioned.

Lemar Persaud: $30 to $50 million bill being kind of normal.

Speaker Change: 30 to 50 million dollar bill being kind of normal and explain the reasoning for the release 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.

Scott Sears Hartz: Does Manulife 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? Hi Lemar, it's Scott.

Speaker Change: What makes its way into the dock. So we should expect kind of more volatility in the ECL aligned.

Speaker Change: Hi, Omar it's Scott so.

Scott Sears 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: 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 Sears 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.

Scott Sears Hartz: 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 and you know we were a bit concerned given what was going on with Silicon Valley Bank.

Scott Sears Hartz: And so forth. So we overrode the model not to do that so so.

Scott Sears 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.

Tom MacKinnon: Our next question is from Tom McKinnon, from BMO Capital Markets. Please go ahead.

Scott Sears Hartz: Our 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

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

Tom MacKinnon: Rates are positive in the surplus portfolio, and it's benefiting from this repriced. If I look at expected earnings on surplus, though, at $253 in the quarter, it's down over the last five quarters. Help me understand that.

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

Tom MacKinnon: That's down over the last five quarters so.

Tom MacKinnon:

Tom MacKinnon: Help me understand that and.

Colin L. Simpson: Obviously, your surplus portfolio must be growing, your LIHTCAT is growing, and your remittances are increasing as well. So help me understand why earnings on surpluses are falling sequentially and has fallen over the last four quarters. And how should we be thinking about earnings on surplus going forward? Thanks. Hey, Tom, it's Colin. You're right. Earnings on surplus fell 11 million quarter and quarter and actually 30 million year on year. There are two things going on here.

Tom MacKinnon: Obviously your surplus portfolio must be growing your light cats growing.

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

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

Colin: Four quarters.

Colin: And how long should we be thinking about earnings on surplus going forward. Thanks.

Colin L. 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 G-WAM business. And so, as part of the surplus allocation exercise that I talked to Mario Bart about, GWM got a little bit more surplus allocated to that, so that's reduced the line item that you're referring to.

Colin L. Simpson: Hey, Tom as Colin your rights are 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 L. 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 L. Simpson: This is the line item that you referred to it doesn't capture the earnings on surplus G. One business and so.

Colin L. Simpson: Part of the the surplus allocation exercise that I talked a moment about Gee why it got a little bit more surface allocated to that so that's reduced the line item that you're referring to but you're right in terms of the yields going up yields went up two eight to $2 nine during the quarter, but because of all the allocation and into account balance settlements the actual surface.

Colin L. Simpson: But you're right, 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 surface amount fell from 39 billion to 38 billion.

Colin L. Simpson: Mount fell from 39 billion to 38 billion.

Tom MacKinnon: So, should we be thinking that this number should...

Colin L. Simpson: So should we be thinking that this number should.

Colin L. Simpson: with increases in buybacks, that it 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? 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 there are no great movements there.

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

Colin L. Simpson: You're losing the buyback is offset by what you are getting from just apparently having more surplus how should we be thinking about that going forward.

Colin L. Simpson: I think well first point and I'm, sorry, I didn't know 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.

Colin L. Simpson: And just to remind you, for every 50 basis points increase in interest rates, we will see 25 million of earnings coming through this line. So those numbers are also quite modest relative to movements in interest rates.

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

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

Tom MacKinnon: And then to follow up with the expected investment earnings, that's flat year after year now, which you end up having.

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

Tom MacKinnon: 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.

Tom MacKinnon: https://www.larryweaver.com

Tom MacKinnon: The discount 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.

Steven Andrew Finch: 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.

Steven Andrew Finch: 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 IFRS 17 last year, there were a couple of methodology and refinements, which is a bit of a headwind on that investment.

Steven Andrew Finch: Yeah, Hi, Tom It's Steve.

Steven Andrew Finch: Theres a couple of things going on in this quarter. One is we do see a reduction from the <unk> the.

Steven Andrew Finch: The global Atlantic transaction of about $20 million in the quarter and then as we implemented <unk> 17 last year, there were a couple of methodology and refinements.

Steven Andrew Finch: Which is a bit of a headwind on that investment.

Steven Andrew Finch: earnings. There is a partial offset where

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

Steven Andrew Finch: 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.

Steven Andrew Finch: In the short short term insurance business.

Steven Andrew Finch: The Q1 of this year is a good run rate that we expect to grow as the business grows over time.

Tom MacKinnon: Okay, thanks so much.

Speaker Change: Okay. Thanks, so much.

Speaker Change: Thank you.

Nigel D'Souza: Our following 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 the deals this quarter. I noticed that the sale of all assets is mainly comprised of private equity.

Nigel D'Souza: Yeah.

Nigel D'Souza: All the portfolios and

Nigel D'Souza: What I'm getting at here is that that continues as you go through more of all those positions.

Nigel D'Souza: It's actually going to result in all the portfolio that...

Nigel D'Souza: Values a bit above where we had last valued those those investments and a couple of thoughts went into what parts of the portfolio to sell one was 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 performance there so that was.

Nigel D'Souza: that becomes more indexed to real estate, and that will have any implications for Respected Investment Returner?

Nigel D'Souza: for the volatility of all the experience going forward.

Nigel D'Souza: Sort of a proactive move to reduce the size of that portfolio.

Nigel D'Souza: As 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 bit offer too narrow we have seen it started start to narrow already and we certainly would have plans to continue to rebalance the portfolio.

Nigel D'Souza: Go away from these transactions based on the size as we want and I would expect over the next couple of years, while we didn't do anything and they're really short term given that kind of disruption in that market that we will you know rebalanced the portfolio to where we want it. So I do not see real estate, becoming really a bigger proportion of the all of the portfolio.

Scott Sears Hartz: Sure, Nigel. It's Scott.

Speaker Change: Going forward nausea, really here I, just want chime in and add a couple of thoughts of first is that the 1.7 Bill fell down of all though that relates a G. I reinsurance transaction bridges are older by about 6%.

Scott Sears Hartz: Thanks for the question. 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. 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.

Scott Sears Hartz: And we had through Scott's leadership worked very hard to diversify our old a portfolio over the years older Ah comprised of about 50% real estate commercial real estate. Some 10 years ago and now it represents approximately 30% of slightly less than that so actually portfolio is is actually quite the.

Scott Sears Hartz: It is the most volatile part of the portfolio, and it has grown over the years given that, 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, 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 will, you know, rebalance the portfolio to where we want it. So I do not see real estate becoming a bigger proportion 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. The older comprised of about 50% real estate, commercial real estate, some 10 years ago, and now it represents approximately 30% or slightly less than that.

Roy Gori: So actually, our portfolio is quite diverse, and that's actually 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.

Roy Gori: <unk> and actually that's what we like we like to say the best portfolio because it allows us to weather all sorts of economic environments, which I think puts us in a in a very strong position.

Nigel D'Souza: Okay, that makes sense. And if I could just have

Speaker Change: Okay that makes sense and if I could just have to.

Nigel D'Souza: Some general questions about Asia and about the strong growth.

Nigel D'Souza: General questions about Asia, a strong <unk>.

Nigel D'Souza: You want that I believe you get the.

Nigel D'Souza: Asia Walton 50 per cent off your <unk>. So just a few questions. So could you remind us.

Nigel D'Souza: of Asia and wealth to get 50% of your core earnings. So just two questions. Could you remind me, on the number of agents that's declining in Asia, what's the trend that's driving that given the growth? And then the second aspect is just recent market volatility in regards to the Japanese yen.

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

Nigel D'Souza: Are there any implications for your franchise?

Nigel D'Souza: The Japanese yen are there any implications for.

Nigel D'Souza: You're franchised in Japan from Yen Paul Foley, other than currency translation.

Nigel D'Souza: The franchise in Japan from Yeah, and also the other than currency translation.

Philip James Witherington: Well, thank you, Nigel, for the question. This is Phil.

Nigel D'Souza: Well. Thank you nausea for the questions. This is Phil I'll start with your your question an 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 in that's being driven by Vietnam and mainland China, but I I think what's more important than.

Philip James 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 James Witherington: 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.

Philip James Witherington: Fulltime agents that are equipped with digital tools in 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 they have which we believe is good for customers, but it's also good from a four oh.

Philip James 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.

Philip James Witherington: In terms of the quality of business that we rice and the quality of agents that we attract so new business value proactive agent is actually up by 41% year on year. Despite the year on year decline in number of agents.

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

Philip James Witherington: The second thing that you asked about Japan, and the impact of the week again now as you May know most of our business in Japan is foreign currency denominated business philosophy U S dollars, some Australian dollars as well and what we see as as the UN declines that should be there.

Philip James Witherington: There is more interest in diversification within investment portfolios of our customers in Japan now, we're not truly very cautious when it comes to our sales process here, but 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.

Philip James Witherington: But we have launched some new products in Japan over the course of the last quarter that have driven a 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.

Philip James Witherington: Quite strong 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 or strategy as one of its value Maximisation, we're seeing that strategy uhm being very successful in terms of earnings generation in volume.

Philip James Witherington: Metric generation and I expect that to continue in our medium term expectations for Japan, a high single digits growth and Keith volumetric, some core earnings and and nausea, while we might have some earnings currency translation.

Roy Gori: And our medium-term expectations for Japan are high single-digit growth in key value metrics and core earnings. And Nigel, while we might have some earnings currency translation, and by the way, the larger part of that is the US appreciation, which is, it's obviously a positive for us from a currency translation perspective. In each of the markets that we operate in, we typically match our asset 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 operate in.

Roy Gori: And by the way you know the the lodge a pot on that is that the U S appreciation, which is it's obviously have a positive for us from account currency translation. Just thank you in in each of the market should we operate in we typically match our asset currency without liability currency. So we we don't like to take foreign currency risk in terms of matching our liabilities.

Roy Gori: The assets in the market that we operate in.

Philip James Witherington: Okay, that's very helpful. That's it for me.

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

Thomas George Gallagher: Thank you. Once again, please press star 1 at this time if you have a question. The following question is from Tom Gallagher from Evercore ISI; please go ahead.

Speaker Change: Thank you once again the first stone one at this time have you had a question.

Thomas George Gallagher: Following question you some <unk> some evercore ISI. Please go ahead.

Thomas George Gallagher: Thanks. Just a few questions on U.S. life insurance. Steve

Thomas George Gallagher: Thanks, just a few questions U S life insurance Steve.

Steven Andrew Finch: 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, if it's around 90 basis points, I think that would still probably be 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.

Thomas George Gallagher: Just a follow up on the S. G well laps for a question I know you mentioned that your ultimate lapse rate assumption is below 1%.

Steven Andrew Finch: Can you can you be a little more specific and the reason I ask is if it's around 90 basis point I think that would still probably be at a level above.

Steven Andrew Finch: The industry study that was conducted a few years ago.

Steven Andrew Finch: And if you are on the higher end, like above the 40 to 50, would that still imply you made an impact? If there is a reset made with the actuarial review? Yeah, sure, Tom. Thanks. And as I'm sure you can imagine, it's not as simple as one lapse rate, which is why I

Steven Andrew Finch: [inaudible]

Steven Andrew Finch: 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 original reset made with the actuarial review.

Speaker Change: Yeah sure Tom Thanks, and that as I'm sure you can imagine the it's not as simple as one laughs right, which is why I refer to less than one it varies by single survivorship.

Speaker Change: You know size of policy et cetera. So there there's a variety in there you know in terms of our ultimate lapse rates you know when.

Speaker Change: 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 respect to the pandemic and how does that trend out over time.

Steven Andrew Finch: Gotcha. See, you'd be more in line with, we'll say that industry study that had come out and the implication there, you'd be, you know, at least directionally close to that level. Is that fair to say? That's my Okay, great.

Speaker Change: Gotcha see so you'd be more in line with Ah they'll say that industry study that that had come out and and the implication there you'd be at least directionally close to that level is that is that fair to say.

Speaker Change: That's my view yeah.

Steven Andrew Finch: 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, and others due to arbitrations with reinsurers for rate increases. Curious if you have either one going on, and if so, whether you have any provision for these. Yeah, thanks, Tom.

Speaker Change: Okay, Great and then the second question is this last quarter, we'd seen kind of a number of reinsurance and litigation charges for the U S life insurance business some insurers charged.

Speaker Change: Charges for cost of insurance litigation, others data arbitrations with ringing charged for rate increases.

Speaker Change: Curious if you have either one going on and if so whether you're provision for these.

Steven Andrew 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 in-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 re-insurers. We work with them constructively on that. It's an ongoing part of managing this business.

Steven Andrew Finch: Yeah. Thanks, Tom you know in terms of of reinsurance you know, we've got ongoing relationships with with our reinsurance partners and that's a pretty comprehensive relationship, including looking at new business at future opportunities and a V.

Steven Andrew Finch: Variety of enforce management initiatives to drive alignment of interest on performance of the business.

Steven Andrew Finch: Over the years part of that in Forest management has at certain times resulted in rate increase requests from from reinsurers, we work with them constructively on that it's an ongoing part of of managing this business.

Steven Andrew Finch: In certain situations, we dispute those right-to-right increases but look at them 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 manage the balance sheet, when we look at our reserves in aggregate, I'm confident in saying they're overall adequate and prudent, including the ongoing management of these re-insurance requests.

Steven Andrew Finch: In certain situations, we dispute those 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 I'm confident in saying we.

Steven Andrew Finch: Their overall adequate and prudent including the ongoing management of these these reinsurance relationships.

Steven Andrew Finch: I'll pass that on to Brooks on that. Yeah, thanks, Thomas.

Steven Andrew Finch: Got it and.

Steven Andrew Finch: Hi litigation I'll I'll pass to Brooks on that one.

Brooks Eric Tingle: Yeah, thanks, Tom. It's Brooks Tingle.

Brooks: Yeah. Thanks, Toms Brooke single, so we did undertake COI increase on a block of you all policies in 2018.

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

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

Brooks Eric Tingle: We made certain payments, but importantly, the increases.

Brooks Eric Tingle: Stay in effect going forward.

Speaker Change: Alright, thanks, guys.

Thomas George Gallagher: Thank you. We have no further questions to raise at this time. I would now like to turn the meeting back over to Mr. Ko. Thank you.

Speaker Change: Thank you.

Speaker Change: Have no further questions to register at this time I would not like to attend a 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.

Hung Ko: Thank you operator will be available after the call. If there were 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: The conference Staten Island. It pays disconnect your lines at this time and we thank you for your participation.

Operator: The standby.