Q2 2024 Manulife Financial Corp Earnings Call

August 8, 2024

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Operator: [inaudible] [music]

Speaker Change: This conference is being recorded.

Operator: This conference is being recorded. Cette conférence est enregistrée.

Operator: Please stand by; your meeting is about to begin. Please be advised that this conference call is being recorded. Good morning, ladies and gentlemen. Welcome to the Manulife Financial second quarter 2024 financial results conference call. I would like to turn the meeting over to Mr. Hung Ko. Please go ahead, Mr. Ko.

Speaker Change: Please stand by. Your meeting is about to begin. Please be advised that this conference call is being recorded. Good morning, ladies and gentlemen. Welcome to the Manulife Financial second quarter 2024 financial results conference call. I would like to turn the meeting over to Mr. Hung Ko. Please go ahead, Mr. Ko.

Operator: I would like to turn the meeting over to Mr. Hung Ko. Please go ahead, Mr. Ko.

Hung Ko: Thank you. Welcome to Manulife's earnings conference call to discuss our second quarter and year-to-date 2024 financial and operating results. Our earnings materials, including the 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 cautionary statement about foregoing statements and slide 35 for a note on non-GAAP and other financial measures used in this presentation. Note that certain material factors assumptions were applied in making four of these statements, and actual results may differ materially from what is stated.

Speaker Change: Before we start, please refer to slide 2 for a caution of forelooking statements and slide 35 for a note on a non-GAAP and other financial measures used in this presentation. Note that certain material factors assumptions applied in making forelooking statements and actual results may differ materially from what is stated.

Roy Gori: Turning to slide four, Roy Gori, our President and Chief Executive Officer, will begin today's presentation with a highlight of our second quarter and year-to-date 2024 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 their prepared remarks, we'll move to the live 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.

Speaker Change: Turning to slide 4, Roy Gori, our President and Chief Executive Officer, will begin today's presentation with a highlight of our second quarter and year-to-date 2024 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.

Speaker Change: After their prepared remarks, we'll move to the live 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. Roy. Thanks, Hung, and thank you, everyone, for joining us today.

Roy Gori: Thanks Hung, and thank you everyone for joining us today, starting on slide six. We recently hosted our Investor Days in Hong Kong and Jakarta in late June, and it was truly a pleasure to have so many of you join us to hear how we're raising the bar at Manulife. There are a few key takeaways that are worth recapping here. First, we've gone from being a high-risk, low-ROE business in 2017 to a lower-risk and high-ROE business today. Second, we remain uniquely positioned to capitalise on the megatrends that are shaping the global economy, such as the growing middle class in Asia, an expanding global retirement gap, and the dramatic digitization of the consumer.

Roy Gori: Third, as a result of our strategy and discipline execution, we announced ambitious but achievable new targets and a clear path for achieving them. These include increasing our core ROE target from 15% plus to 18% plus and introducing a cumulative remittances target of $22 billion plus both by 2027. By delivering on these targets, we will further solidify Manulife as a high-growth, high-return, and high-cash generation company. To achieve that, we know we must double down on execution, which takes me to slide 7.

Speaker Change: starting on slide six.

Speaker Change: We recently hosted our Investor Days in Hong Kong and Jakarta in late June , and it was truly a pleasure to have so many of you join us to hear how we're raising the bar at Manulife.

Hung Ko: There are a few key takeaways that are worth recapping here. First, we've gone from being a high-risk, low-ROE business in 2017 to a lower-risk and high-ROE business today. Second, we remain uniquely positioned to capitalise on the megatrends that are shaping the global economy. These include increasing our core ROE target from 15% plus to 18% plus and introducing a cumulative remittances target of $22 billion plus both by 2027. To achieve that, we know we must double down on execution, which takes me to slide 7.

Speaker Change: There are a few key takeaways that are worth recapping here. First, is that we've gone from being a high-risk, low-ROE business in 2017 to a lower-risk and high-ROE business today.

Speaker Change: Second, we remain uniquely positioned to capitalise on the megatrends that are shaping the global economy. A growing middle class in Asia, an expanding global retirement gap, and the dramatic digitisation of the consumer.

Speaker Change: Third, as a result of our strategy and discipline execution, we announced ambitious but achievable new targets and a clear path for achieving them.

Speaker Change: These include increasing our core ROE target from 15% plus to 18% plus and introducing a cumulative remittances target of $22 billion plus both by 2027.

Speaker Change: By delivering on these targets, we will further solidify Manulife as a high-growth, high-return, and high-cash generation company.

Speaker Change: To achieve that, we know we must double down on execution, which takes me to slide 7.

Roy Gori: You can see that we've maintained our momentum and delivered another set of strong results for the second quarter. APE sales increased 17%, led by strong growth in Canada and broad-based growth in Asia, with both segments contributing to new business CSM growth of 6%. Core earnings increased 6% while Asia and global WAM generated very strong growth of 40% and 23%, respectively. However, this was somewhat offset by the impacts of a higher effective tax rate related to Global Minimum Taxes or GMT as well as lower core earnings due to our recent reinsurance transactions with Global Atlantic and RGA.

Hung Ko: You can see that we've maintained our momentum and delivered another set of strong results for the second quarter. APE sales increased 17%, led by strong growth in Canada and broad-based growth in Asia, with both segments contributing to new business CSM growth of 6%. Core earnings increased 6% while Asia and global WAM generated very strong growth of 40% and 23%, respectively. However, this was somewhat offset by the impacts of a higher effective tax rate related to Global Minimum Taxes or GMT as well as lower core earnings due to our recent reinsurance transactions with Global Atlantic and RGA.

Speaker Change: You can see that we've maintained our momentum and delivered another set of strong results for the second quarter.

Speaker Change: APE sales increased 17%, led by strong growth in Canada and broad-based growth in Asia, with both segments contributing to new business CSM growth of 6%.

Speaker Change: Core earnings increased 6% while Asia and Global WAM generated very strong growth of 40% and 23% respectively.

Speaker Change: This was somewhat offset by the impacts of a higher effective tax rate related to global minimum taxes, or GMT, as well as lower core earnings due to our recent reinsurance transactions with Global Atlantic and RGA.

Roy Gori: As a reminder, these transactions will free up $2 billion of capital, which we have committed to return to shareholders through our current NCIB program. And consequently, we ramped up our share buybacks during the quarter. And I would highlight that we have now decided and plan to buy back the maximum amount of shares allowed through our current NCIB program. With the recent increase in our share price, this would represent over $3 billion that we plan to return to shareholders, which would entail a further acceleration of buybacks in the second half of the year.

Speaker Change: As a reminder, these transactions will free up $2 billion of capital, which we committed to return to shareholders through our current NCIB program, and consequently, we ramped up our share buybacks during the quarter.

Operator: This conference is being recorded. Please stand by. Your meeting is about to begin.

Hung Ko: And I would highlight that we have now decided and plan to buy back the maximum amount of shares allowed through our current NCIB program. With the recent increase in our share price, this would represent over $3 billion that we plan to return to shareholders, which would entail a further acceleration of buybacks in the second half of the year. Turning to slide 8.

Speaker Change: And I would highlight that we have now decided and plan to buy back the maximum amount of shares allowed through our current NCIB program.

Hung Ko: Please be advised that this conference call is being recorded. Good morning, ladies and gentlemen. Welcome to the Manulife Financial Second Quarter, 2024 Finance Results Conference call.

Speaker Change: With the recent increase in our share price, this would represent over $3 billion that we plan to return to shareholders, which would entail a further acceleration of buybacks in the second half of the year.

Hung Ko: I would like to share the meeting over to Mr. Hung Ko. Please go ahead, Mr. Ko. Thank you.

Roy Gori: Share buybacks have contributed to core EPS growth of 9% or 12% excluding the impact of GMT and core ROE expanding 20 basis points to 15.7%. Finally, we maintained a solid balance sheet with a strong like-hat ratio and generated double-digit book value and adjusted book value growth while returning significant capital to shareholders over the past year.

Roy Gori: Welcome to Manulife's earnings conference call to discuss our second quarter and you today's 2021 financial and operating results. Our earnings materials, including the webcast slides for today's call are available on the Investulation Session of our website at Manulife.com. Before we start, please refer to slide two for a caution of four looking statements and five thirty five for a note on a non-gab or another financial measure used in this presentation, those that certain material factors assumptions applied in making four statements and actual results, they differ materially from what is stated.

Speaker Change: Share buybacks have contributed to core EPS growth of 9%, or 12% excluding the impact of GMT, and core ROE expanding 20 basis points to 15.7%.

Speaker Change: Finally, we maintained a solid balance sheet with a strong LICAT ratio, and generated double-digit book value and adjusted book value growth while returning significant capital to shareholders over the past year.

Roy Gori: Turning to slide four, Roy Gori, our President and Chief Executive Officer, will begin today's presentation with the highlights of our second quarter and year-to-date 2024 results and a strategic update.

Roy Gori: As we highlighted at Invest Today, executing in Asia and global WAM will be critical to achieving our expanded 18% plus core ROE target by 2027. It's encouraging to see that we're delivering on our strategy and, in turn, reshaping our earnings profile. In Asia, we're driving broad-based sales growth, with the majority of our markets generating double-digit growth in year-to-date AP sales, new business CSM, and new business value.

Speaker Change: Turning to slide 8.

Speaker Change: As we highlighted at Invest Today, executing in Asia and global WAM will be critical to achieving our expanded 18% plus core ROE target by 2027.

Roy Gori: Following voice remarks, Colin Simpson, our Chief Financial Officer, will discuss the company's financial and operating results in more detail. After they prepare remarks, we'll move to the light to any portion of the call.

Speaker Change: It's encouraging to see that we're delivering on our strategy and in turn reshaping our earnings profile.

Roy Gori: With that, they'd like to turn the call over to Roy Gori, our President and Chief Executive Officer Roy. Thanks, Sun. And thank you everyone for joining us today. Starting on slide six, we recently hosted our Invested Days in Hong Kong and Jakarta in late June. And it was truly a pleasure to have so many of you join us to hear how we're raising the Bharat Manualife. There are a few key takeaways that are worth recapping here.

Speaker Change: In Asia, we're driving broad-based sales growth, with the majority of our markets generating double-digit growth in year-to-date AP sales, new business CSM, and new business value.

Hung Ko: Importantly, we're also driving margin growth, higher productivity, and efficiency improvements, all of which contribute to our ambition of delivering high quality, sustainable growth. And in Global WAM, we've seen strong asset growth, which reflects a combination of favourable market impacts, net inflows, and the CQS acquisition. Supported by Discipline Expense Management, this has contributed to a significant expansion in our core EBITDA margin, which is up 240 basis points from the prior year. I've commented before that given our scale, we can be judicious on M&A opportunities.

Roy Gori: Importantly, we're also driving margin growth, higher productivity, and efficiency improvements, all of which contribute to our ambition of delivering high quality, sustainable growth. And in Global WAM, we've seen strong asset growth, which reflects a combination of favourable market impacts, net inflows, and the CQS acquisition. Supported by Discipline Expense Management, this has contributed to a significant expansion in our core EBITDA margin, which is up 240 basis points from the prior year. I've commented before that given our scale, we can be judicious on M&A opportunities, and our recent acquisition of CQS was no exception.

Speaker Change: Importantly, we're also driving margin growth, higher productivity and efficiency improvements, all of which contribute to our ambition of delivering high-quality, sustainable growth.

Roy Gori: First is that we've gone from being a high-risk, low-ROE business in 2017 to a lower-risk and high-ROE business today. Second, we remain uniquely positioned to capitalize on the Megatrend that is shaping the global economy, a growing middle-class in Asia, an expanding global retirement gap, and the dribbling of the dramatic digitization of the consumer. Third, as a result of our strategy and discipline execution, we announced ambitious but achievable new targets and a clear path for achieving them.

Speaker Change: And in Global WAM we've seen strong asset growth which reflects a combination of favourable market impacts, net inflows and the CQS acquisition.

Speaker Change: Supported by Discipline Expense Management, this has contributed to a significant expansion in our core EBITDA margin, which is up 240 basis points from the prior year.

Roy Gori: These include increasing our core ROE target from 15% plus to 18% plus, and introducing a cumulative remittances target of $22 billion plus both by 2027. By delivering on these targets, we will further solidify Manualife as a high growth, high return, and high cash generation company.

Speaker Change: I've commented before that given our scale, we can be judicious on M&A opportunities.

Roy Gori: After closing the acquisition earlier in the quarter, we leveraged CQS's capabilities with the successful launch of a multi-asset credit fund in U.S. retail. Our focused execution is driving strong core earnings growth, and as you can see, these high-return businesses are contributing to a growing share of our core earnings.

Speaker Change: And our recent acquisition of CQS was no exception. After closing the acquisition earlier in the quarter, we leveraged CQS's capabilities with the successful launch of a multi-asset credit fund in U.S. retail.

Hung Ko: Our focused execution is driving strong core earnings growth, and as you can see, these high-return businesses are contributing to a growing share of our core earnings. On behalf of the team at Manulife, I want to thank Scott for his investment expertise, his partnership and counsel over the years, and, most importantly, his friendship. I'm sure you'll all join me in wishing Scott the best in his retirement. While Scott is on the call with us today, we're also joined by his successor, Trevor Creel, who was appointed Chief Investment Officer and Head of the General Account Organisation, effective August 1st.

Speaker Change: Our focused execution is driving strong core earnings growth, and as you can see, these high return businesses are contributing to a growing share of our core earnings.

Roy Gori: Before I pass it over to Colin, I'd like to take a moment to thank Scott Hartz, who has decided to retire in October after a 40-year career with Manulife. In that time, Scott has held a range of leadership roles, including leading the investment team since 2010 and being appointed chief investment officer in 2019. On behalf of the team at Manulife, I want to thank Scott for his investment expertise, his partnership and counsel over the years, and, most importantly, his friendship.

Roy Gori: To achieve that, we know we must double down on execution, which takes me to slide seven. You can see that we've maintained our momentum and delivered another set of strong results for the second quarter. APE sales increased 17%, led by strong growth in Canada and broad-based growth in Asia, with both segments contributing to new business CSM growth of 6%. Core earnings increased 6%, while Asia and Global Wham generated very strong growth of 40% and 23% respectively.

Speaker Change: Before I pass it over to Colin, I'd like to take a moment to thank Scott Hartz, who has decided to retire in October after a 40-year career with Manulife.

Speaker Change: In that time, Scott has held a range of leadership roles, including leading the investment team since 2010 and being appointed Chief Investment Officer in 2019.

Speaker Change: On behalf of the team at Manulife, I want to thank Scott for his investment expertise, his partnership and counsel over the years, and most importantly, his friendship. I'm sure you'll all join me in wishing him the best in his retirement.

Roy Gori: I'm sure you'll all join me in wishing Scott the best in his retirement. While Scott is on the call with us today, we're also joined by his successor, Trevor Kreel, who was appointed Chief Investment Officer and Head of the General Account Organisation, effective August 1st. In his nearly 30 years with Manulife, Trevor has held a number of leadership roles across the organization, including working closely with Scott in the General Accounts Organization over the past decade. We're fortunate to have such a strong successor ready to step in. Now, with that, I'll hand it over to Colin to review the highlights of our financial results.

Hung Ko: In his nearly 30 years with Manulife, Trevor has held a number of leadership roles across the organization, including working closely with Scott in the General Accounts Organization over the past decade. Now with that, I'll hand it over to Colin to review the highlights of our financial results.

Roy Gori: This was somewhat offset by the impacts of a higher effective tax rate related to global minimum taxes or GMT, as well as lower core earnings due to our recent re-insurance transactions with global Atlantic and RGA. As a reminder, these transactions will free up two billion dollars of capital, which we committed to return to shareholders through our current NCIB program. And consequently, we ramped up our share buybacks during the quarter. And I would highlight that we have now decided and plan to buy back the maximum amount of shares allowed through our current NCIB program.

Speaker Change: While Scott is on the call with us today, we're also joined by his successor, Trevor Creel, who was appointed Chief Investment Officer and Head of the General Account Organization effective August 1st.

Speaker Change: In his nearly 30 years with Manulife, Trevor has held a number of leadership roles across the organisation, including working closely with Scott in the General Account Organisation over the past decade. We're fortunate to have such a strong successor ready to step in.

Colin: Now, with that, I'll hand it over to Colin to review the highlights of our financial results. Colin. Thanks, Roy. The momentum in our financial performance continues. I will dive into a little more detail on the course's results before the Q&A.

Colin Simpson: Thanks, Roy. The momentum in our financial performance continues. I will dive into a little more detail on the course's results before the Q&A. I'll start with our top line on slide 10.

Roy Gori: With the recent increase in our share price, this would represent over $3 billion that we plan to return to shareholders, which would entail a further acceleration of buybacks in the second half of the year. Share buybacks have contributed to core EPS growth of 9%, or 12% excluding the impact of GMT and core RLE expanding 20 basis points to 15.7%. Finally, we maintained a solid balance sheet with a strong like at ratio and generated double digit book value and adjusted book value growth while returning significant capital to shareholders over the past year.

Colin Simpson: I'll start with our top line on slide 10. Turning to slide 11, which shows the growth in our profit metric. I should note that the newly enacted Global Minimum Tax Act in Canada reduced core earnings for the quarter, and core EPS would have grown 12% excluding this impact. During the quarter, our core ROE was 15.7%, up 20 basis points from the prior year. Execution in Asia and Global WAM, our highest return businesses, will be key levers to achieving the updated core ROE target, and I'll touch on performance in these businesses shortly.

Colin Simpson: Our APE sales increased 17% from the prior year, reflecting strong growth in our Asia and Canada segments. In Asia, we generated higher sales across multiple markets, in particular Hong Kong and Japan, although we did see lower sales in mainland China following the record-high second quarter sales in 2023, while in Canada, we had higher large-case group insurance sales. Our strong sales contributed to a solid increase in new business CSM of 6% and another quarter of double-digit growth in new business value of 23%. Global Wham saw net inflows of $0.1 billion, mainly reflecting the strength in our institutional business, offset by outflows in our retirement business.

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

Colin: Our APE sales increased 17% from the prior year, reflecting strong growth in our Asia and Canada segments.

Colin: In Asia, we generated higher sales across multiple markets, in particular Hong Kong and Japan, although we did see lower sales in mainland China following the record high second quarter sales in 2023, while in Canada, we had higher large case group insurance sales.

Colin: Our strong sales contributed to a solid increase in new business TSM of 6% and another quarter of double-digit growth in new business value of 23%.

Roy Gori: Turning to slide 8. As we highlighted at investment today, executing in Asia and global WAM will be critical to achieving our expanded 18% plus core RLE target by 2027. It's encouraging to see that we're delivering on our strategy and in turn reshaping our earnings profile. In Asia, we're driving broad base sales growth with the majority of our markets generating double digit growth in year-to-date AP sales, new business CSM and new business value.

Colin: Global WAM saw net inflows of $0.1 billion, mainly reflecting the strength in our institutional business, offset by outflows in our retirement business.

Colin Simpson: These results really demonstrate the strength of our diversified global portfolio of businesses in driving growth. Turning to slide 11, which shows the growth in our profit metric. Core EPS increased 9% as we grew core earnings and continued buying back shares. However, I should note that the newly enacted Global Minimum Tax Act in Canada reduced core earnings for the quarter, and core EPS would have grown 12% excluding this impact. During the quarter, our core ROE was 15.7%, up 20 basis points from the prior year. Execution in Asia and Global WAM, our highest return businesses, will be key levers to achieving the updated core ROE target. And I'll touch on performance in these businesses shortly.

Colin: These results really demonstrate the strength of our diversified global portfolio of businesses in driving growth.

Colin: Turning to slide 11, which shows the growth in our profit metrics.

Roy Gori: Importantly, we're also driving margin growth, higher productivity and efficiency improvements, all of which contribute to our ambition of delivering high quality sustainable growth. And in global WAM, we've seen strong asset growth which reflects a combination of favorable market impacts, net inflows and the CQS acquisition. Supported by discipline expense management, this is contributed to a significant expansion in our core EBITDA margin, which is up 240 basis points from the prior year. I've commented before that given our scale, we can be judicious on M&A opportunities, and our recent acquisition of CQS was no exception.

Colin: Core EPS increased 9% as we grew core earnings and continued buying back shares. I should note that the newly enacted Global Minimum Tax Act in Canada reduced core earnings for the quarter and core EPS would have grown 12% excluding this impact.

Colin: During the quarter, our core ROE was 15.7%, up 20 basis points from the prior year.

Colin: Execution in Asia and Global Wham, our highest return businesses, will be key levers to achieving the updated core ROE target, and I'll touch on performance in these businesses shortly.

Colin Simpson: On slide 12, you can see we grew our adjusted book value per share by 15% from the prior year quarter to $33.96, even after returning a significant amount of capital to shareholders over the past year. This continued our track record of steady growth in our book value together with our CSM, which is a store of future earnings. 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: On slide 12, you can see we grew our adjusted book value per share by 15% from the prior year quarter to $33.96, even after returning a significant amount of capital to shareholders over the past year.

Roy Gori: After closing the acquisition earlier in the quarter, we leveraged CQS's capabilities with the successful launch of a multi-asset credit fund in US retail. Our focus execution is driving strong core earnings growth, and as you can see, these high return businesses are contributing to a growing share of our core earnings.

Colin: This continued our track record of steady growth in our book value, together with our CSM, which is a store of future earnings.

Colin: 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 Simpson: The first point to highlight is that we continue to see the benefits of business growth, with strong growth in core net insurance service results in Asia and Canada, and we have also generated improved insurance experience. Secondly, our core net investment result had a modest decrease of 1% as business growth was more than offset by lower investment spreads. Our expected credit loss, or ECL, was roughly neutral this quarter, and this strong result was primarily driven by the regular update to our model parameters, reflecting the benign corporate credit environment, which largely offset staging impacts on a few bonds in our portfolio.

Colin Simpson: The first point to highlight is that we continue to see the benefits of business growth with strong growth in core net insurance service results in Asia and Canada, and we have also generated an improved insurance experience. Secondly, our core net investment result had a modest decrease of 1% as business growth was more than offset by lower investment spreads. In the bottom half of the table, you will see that Global WAM continued to be a notable contributor to the results, generating higher net fee income from average AUMA growth and expanding our margin.

Roy Gori: Before I pass it over to Colin, I'd like to take a moment to thank Scott Hartz, who has decided to retire in October after a 40-year career with Manualife. In that time, Scott has held a range of leadership roles, including leading the investment team since 2010 and being appointed Chief Investment Officer in 2019. On behalf of the team at Manualife, I want to thank Scott for his investment expertise, his partnership and council over the years, and most importantly, his friendship. I'm sure you'll all join me in wishing him the best in his retirement.

Colin: The first point to highlight is that we continue to see the benefits of business growth, with strong growth in core net insurance service results in Asia and Canada, and we also generated improved insurance experience.

Colin: Secondly, our core net investment result had a modest decrease of 1% as business growth was more than offset by lower investment spreads.

Colin: Our expected credit loss, or ECL, was roughly neutral this quarter, and this strong result was primarily driven by the regular update to our model parameters reflecting the benign corporate credit environment, which largely offset staging impacts on a few bonds in our portfolio.

Roy Gori: While Scott is on the call with us today, we're also joined by a successor, Trevor Creel, who was the point to Chief Investment Officer and Head of the General Account Organization, effective August 1st. In his nearly 30 years with Manulife, Trevor has held a number of leadership roles across the organization, including working closely with Scott in the General Account Organization over the past decade. We're fortunate to have such a strong successor ready to step in.

Colin Simpson: In the bottom half of the table, you will see that Global WAM continued to be a notable contributor to the results, generating higher net fee income from average AUMA growth and expanding our margin. However, we had a decline in other core earnings that partially offset these positive results, which included higher workforce-related costs. A growing proportion of our earnings is coming from the core net insurance service result versus the core net investment result and higher global WAM earnings.

Colin: In the bottom half of the table, you will see that Global WAM continued to be a notable contributor to the results, generating higher net fee income from average AUMA growth and expanding our margin.

Colin Simpson: Lastly, we had a decline in other core earnings that partially offset these positive results, which included higher workforce-related costs. This is part of our roadmap towards an 18% plus core ROE. The impact of GMT was a $46 million charge in our core earnings for the quarter, adding just over two percentage points to our effective tax rate. We are reporting the impact of GMT in the corporate and other segments as GMT was not enacted in all the jurisdictions in which we operate.

Colin: Lastly, we had a decline in other core earnings that partially offset these positive results, which included higher workforce-related costs.

Colin: A growing proportion of our earnings are coming from the core net insurance service result versus the core net investment result and higher global WAM earnings. This is part of our roadmap towards an 18% plus core ROE.

Colin Simpson: Now with that, I'll hand it over to Colin to review the highlights of our financial results. Colin, thanks Roy. The momentum in our financial performance continues.

Colin Simpson: This is part of our roadmap towards an 18% plus core ROE. The impact of GMT was a $46 million charge in our core earnings for the quarter, adding just over two percentage points to our effective tax rate. We are reporting the impact of GMT in the corporate and other segments as GMT has not been enacted in all the jurisdictions in which we operate. More information on the impact of GMT is available in the appendix. In addition, the recent reinsurance transaction with Global Atlantic impacted core earnings by $25 million across multiple lines of the DOE. Now on to slide 14.

Colin Simpson: I will dive into a little more detail on the course's results. Before the Q&A.

Colin: the impact of gmt was a forty-six million dollar charge in our core earnings for the quarter adding just over two percentage points to our effectiveof tax rate

Colin Simpson: I fought with our top line on slide 10. Our AP sales increased 17% from the prior year, reflecting strong growth in our Asia and Canada segments. In Asia, we generated higher sales across multiple markets, in particular Hong Kong and Japan, although we did see lower sales in mainland China following the record high second quarter sales in 2023. While in Canada, we had higher large case group insurance sales. Our strong sales contributed to a solid increase in new business CSM of 6% and another quarter of double-digit growth in new business value of 23%. Global WAM saw net inflows of $0.1 billion, mainly reflecting the strength in our institutional business, offset by outflows and our retirement business.

Colin: We are reporting the impact of GMT in the corporate and other segments as GMT was not enacted in all the jurisdictions in which we operate. More information on the impact of GMT is available in the appendix.

Colin: In addition, the recent reinsurance transaction with Global Atlantic impacted core earnings by $25 million across multiple lines of the DOE.

Colin Simpson: During the quarter, we saw a non-core charge of approximately $300 million of realized losses from assets disposed as part of the Universal Life Reinsurance Transaction in Canada with RGA, which is in line with previous disclosure. As many of you know, there was an offsetting change in OCI, neutralizing the impact on book value from this charge. While the portfolio continued to generate a positive return in the quarter, lower than expected returns on ULDA resulted in a $450 million charge. This was mainly driven by the underperformance of our private equity portfolio, in part due to the impact of higher interest rates on valuation.

Colin: On to slide 14.

Colin: During the quarter, we saw a non-core charge of approximately $300 million of realized losses from assets disposed as part of the Universal Life Reinsurance Transaction in Canada with RGA, which is in line with previous disclosure. As many of you know, there was an offsetting change in OCI, neutralizing the impact on book value from this charge.

Colin Simpson: These results really demonstrate the strength of our diversified global portfolio of businesses in driving growth. Turning to slide 11, which shows the growth in our profit metrics, core EPS increased 9% as we grew core earnings and continued buying back shares. I should note that the newly enacted Global Minimum Tax Act in Canada reduced core earnings for the quarter and core EPS would have grown 12% excluding the impact. During the quarter, our core ROE was 15.7% up to 20 basis points from the prior year.

Colin: While the portfolio continued to generate a positive return in the quarter, lower than expected returns on ULDA resulted in a $450 million charge. This was mainly driven by the underperformance of our private equity portfolio, in part due to the impact of higher interest rates on valuations.

Colin Simpson: We also saw ongoing pressure on commercial real estate, though we continue to see sequential improvement with a relatively modest loss representing the smallest charge we've reported over the past eight quarters. This was partially offset by a $143 million gain, largely due to the favorable impact of interest rate movements on derivatives outside of hedge accounting relationships. Finally, we reflected a catch-up of $44 million related to retroactive GMT impacts on our first quarter results in non-core earnings this course. Now we'll cover the segment view of our results in the next few slides, starting with Asia on slide 15.

Colin: We also saw ongoing pressure on commercial real estate, though we continue to see sequential improvement, with a relatively modest loss representing the smallest charge we have reported over the past eight quarters.

Colin: This was partially offset by a $143 million gain, largely due to the favourable impact of interest rate movements on derivatives outside of hedge accounting relationships.

Colin Simpson: Execution in Asia and Global WAM, our highest return businesses will be key levers to achieving the updated core ROE targets and our touch on performance in these businesses shortly. On slide 12, you can see we grew our adjusted book value per share by 15% from the prior quarter to $33.96 even after returning a significant amount of capital to shareholders over the past year. This continued our track record of steady growth in our book value together with our CSM, which is a store of future earnings.

Colin Simpson: Finally, we reflected a catch-up of 44 million dollars related to retroactive GMT impacts on our first quarter results in non-core earnings this course. Our Asia segment continues to generate strong growth in both top and bottom line metrics. The overall increase in sales contributed to 10% and 19% growth in our value metrics, new business, CSM, and MBV, respectively. We delivered 40% core earnings growth as we benefited from higher expected earnings on insurance contracts, favorable claims experience, and higher expected investment income.

Colin: Finally, we reflected a catch-up of $44 million related to retroactive GMT impacts on our first quarter results in non-core earnings this quarter.

Colin Simpson: Our Asia segment continues to generate strong growth in both top and bottom line metrics. APE sales increased 7% from the prior year quarter, primarily driven by growth in Japan, on the back of strong market performance generating higher sales on maturing wealth products, and Hong Kong, supported by increased sales through our agency and bank assurance channels, though these results were partially offset by lower sales in a few other markets in Asia, particularly in mainland China, following strong prior year sales, as I noted earlier.

Colin: Now we'll cover the segment view of our results in the next few slides, starting with Asia on slide 15.

Colin: Our Asia segment continues to generate strong growth in both top and bottom line metrics.

Colin: ap sales increased seven percent from the prior year quarter primarily driven by growth in japan on the back of strong market performance generating higher sales on maturing wealth products and hong kong

Colin Simpson: Bringing 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 that we continue to see the benefits of business growth with strong growth in core net insurance service results in Asia and Canada and we also generated improved insurance experience. Secondly, our core net investment result had a modest decrease of 1%, as business growth was more than offset by lower investment spreads.

Colin: supported by increased sales through our agency and bank assurance channels for these results were partially offset by low sales in a few other markets in asia particularly a mainland china following strong prior year sales as i noted earlier

Colin Simpson: The overall increase in sales contributed to 10% and 19% growth in our value metrics, new business, CSM, and MBV, respectively. We delivered 40% core earnings growth as we benefitted from higher expected earnings on insurance contracts, favorable claims experience, and higher expected investment income. We saw notable growth from our largest in-force business, Hong Kong, as well as Japan. Moving over to Global WAMS results on slide 16.

Colin: The overall increase in sales contributed to 10% and 19% growth in our value metrics, new business CSM and MBV respectively.

Colin Simpson: Our expected credit loss or ECR was roughly neutral this quarter and this strong result was primarily driven by the regular update to our model parameters reflecting the benign corporate credit environment, which largely offset staging impacts on a few bonds in our portfolio. In the bottom half of the table, you will see that global worm continued to be a notable contributor to the results, generating higher net fee income from average AUMA growth and expanding our margins.

Colin: We delivered 40% core earnings growth as we benefited from higher expected earnings on insurance contracts, favourable claims experience and higher expected investment income. We saw notable growth from our largest in-force business, Hong Kong, as well as Japan.

Colin Simpson: We saw notable growth from our largest in-force business, Hong Kong, as well as Japan. Moving over to Global WAMS results on slide 16. While net inflows were largely neutral this quarter, global WAM delivered core earnings growth of 23%, supported by higher average AUMA, which increased 13% from the prior year quarter. Core earnings grew by a strong 7% in Canada, primarily driven by business growth in group insurance and affinity markets. The decline in new business CSM was due to product mix as well as the impact of higher interest rates. Core earnings decreased 11% from the prior quarter, which reflects more unfavorable net insurance experience, as well as an unfavorable variance from the recent reinsurance transaction with Global Atlantis.

Colin Simpson: We reported $0.1 billion of net inflows for the quarter. We continue to generate strong net inflows in our institutional business, which included positive contributions from CQS, but this was largely offset by a large case plan redemption in U.S. retirement.

Colin: Moving over to Global WAMS results on slide 16.

Speaker Change: we reported point one billion dollars of net inflows for the quarter we continue to generate strong net inflows in our institutional business which included positive contributions from cqs but this was largely offset by a large case plan redemption in u s retirement

Colin Simpson: Lastly, we had a decline in other core earnings that partially offset these positive results, which included higher workforce-related costs. A growing proportion of our earnings are coming from the core net insurance service result versus the core net investment result and higher global wire earnings. This is part of our roadmap towards an 18% plus core ROE. The impact of GMT was a $46 million charge in our core earnings for the quarter, adding just over two percentage points to our effective tax rate.

Colin Simpson: While net inflows were largely neutral this quarter, global WAM delivered core earnings growth of 23%, supported by higher average AUMA, which increased 13% from the prior year quarter. We continue to generate positive operating leverage, evidenced by our strong core EBITDA margin expansion, which grew 170 basis points from the prior year quarter and drove our core earnings growth. Moving over to Canada on slide 17, we delivered another strong quarter of new business metrics.

Colin: While net inflows were largely neutral this quarter, global WAM delivered core earnings growth of 23% supported by higher average AUMA, which increased 13% from the prior year quarter.

Colin: We continue to generate positive operating leverage, evidenced by our strong core EBITDA margin expansion, which grew 170 basis points from the prior year quarter and drove our core earnings growth.

Colin Simpson: We are reporting the impact of GMT in the corporate and other segments as GMT was not enacted in all the jurisdictions in which we operate. More information on the impact of GMT is available in the appendix. In addition, the recent re-insurance transaction with global Atlantic impacted core earnings by $25 million across multiple lines of the DOE.

Colin: Bringing over to Canada on slide 17, we delivered another strong quarter of new business metrics. AP sales increased 61% from the prior quarter led by group insurance, which delivered higher sales across all markets and benefited from a large case sale.

Colin Simpson: APE sales increased 61% from the prior quarter, led by group insurance, which delivered higher sales across all markets and benefited from a large case sale. This was also the main contributor to our double-digit growth in new business value. Core earnings grew by a strong 7% in Canada, primarily driven by business growth in group insurance and affinity markets. We also saw favorable retail claims experience in individual insurance, but this was somewhat offset by lower investment spreads.

Colin: This was also the main contributor to our double-digit growth in new business value.

Colin Simpson: On to slide 14. During the quarter, we saw a non-core charge of approximately $300 million of realized losses from assets disposed as part of the universal life re-insurance transaction in Canada with RGA, which is in line with previous disclosure. As many of you know, there was an offsetting change in OCI, neutralizing the impact and book value from this charge. While the portfolio continued to generate a positive return in the quarter, lower than expected returns on Alba resulted in a $450 million charge.

Colin: Core earnings grew by a strong 7% in Canada, primarily driven by business growth in group insurance and affinity markets.

Colin: we also saw favorable retail claims experience and individual insurance but this was somewhat offset by lower investment spreads

Colin Simpson: On to slide 18, which shows our U.S. segment's results. In the U.S., we saw lower sales of protection insurance products, which modestly drove down APE sales, though this was partially offset by continued demand from affluent customers for accumulation products. The decline in new business CSM was due to product mix as well as the impact of higher interest rates. Core earnings decreased 11% from the prior quarter, which reflects more unfavorable net insurance experience, as well as an unfavorable variance from the recent reinsurance transaction with Global Atlanta.

Colin: On to slide 18, which shows our U.S. segment's results. In the U.S., we saw lower sales of protection insurance products, which modestly drove down APE sales, though this was partially offset by continued demand from affluent customers for accumulation products.

Colin Simpson: This was mainly driven by the underperformance of our private equity portfolio, in part due to the impact of higher interest rates on valuations. We also saw ongoing pressure on commercial real estate, though we continue to see sequential improvement with the relatively modest loss representing the smallest charge we've reported over the past eight quarters. This was partially offset by a $143 million gain largely due to the favourable impact of interest rate movements on deruters outside of hedge accounting relationships. Finally, we reflected a catch-up of $44 million related to retroactive GMT impacts on our first quarter results in non-core earnings this quarter.

Colin: The decline in new business CSM was due to product mix as well as the impact of higher interest rates.

Colin: Core earnings decreased 11% from the prior quarter, which reflects more unfavorable net insurance experience, as well as an unfavorable variance from the recent reinsurance transaction with Global Atlantic.

Colin Simpson: Let's now move to our balance sheet on slide 19. In the second quarter, our Likert ratio remained strong at 139%, which was $24 billion above the supervisory target ratio. Our financial leverage ratio continues to support our financial flexibility at 24.6%, or 24% including the impact of the announced redemption of subordinated debentures. This puts us comfortably below our target ratio of 25%.

Operator: Let's now move to our balance sheet on slide 19. This puts us comfortably below our target ratio of 25%. During the second quarter, we've also increased the pace of our share buybacks, and together with dividends and share buybacks, we returned approximately $1.4 billion of capital to shareholders. And, as Roy mentioned earlier, we are committed to buying the maximum 90 million common shares through the current NCIB program, representing a capital return of more than $3 billion based on the current share price.

Colin: Let's now move to our balance sheet on slide 19.

Colin: In the second quarter, our Likert Ratio remained strong at 139%, which was $24 billion above the Supervisory Target Ratio.

Colin: Our financial leverage ratio continues to support our financial flexibility at 24.6%, or 24% including the impact of the announced redemption of subordinated debentures. This puts us comfortably below our target ratio of 25%.

Colin Simpson: Now we'll cover the segment view of our results in the next few slides, starting with Asia on slide 15. Our Asia segment continued to generate strong growth in both top and bottom line metrics. AP sales increased 7% from the prior year quarter, primarily driven by growth in Japan on the back of strong market performance generating higher sales on maturing wealth products and Hong Kong supported by increased sales through our agency and bank insurance channels.

Colin Simpson: During the second quarter, we've also increased the pace of our share buybacks, and together with dividends and share buybacks, we returned approximately $1.4 billion of capital to shareholders. And, as Roy mentioned earlier, we are committed to buying the maximum 90 million common shares through the current NCIB program, representing a capital return of more than $3 billion based on the current share price. And finally, moving to slide 20, which summarizes how we're tracking against our medium-term targets, including the new and updated targets we presented at OMVEST today.

Colin: During the second quarter, we've also increased the pace of our share buybacks, and together with dividends and share buybacks, we returned approximately $1.4 billion of capital to shareholders.

Colin: And as Roy mentioned earlier, we are committed to buying the maximum 90 million common shares through the current NCIB program, representing a capital return of more than $3 billion based on the current share price.

Colin Simpson: For these results are partially offset by low sales and a few other markets in Asia, particularly in mainland China following strong prior year sales as I noted earlier. The overall increase in sales contributed to 10% and 19% growth in our value metrics, new business CSM and MBV respectively. We delivered 40% core earnings growth as we benefited from higher expected earnings on insurance contracts, favourable claims experience and higher expected investment income. We saw a notable growth from our largest in-force business, Hong Kong, as well as Japan.

Operator: And finally, moving to slide 20, which summarizes how we're tracking against our medium-term targets, including the new and updated targets we presented at OMVEST today. As you can see from our year-to-date results, we are showing momentum towards our new core ROE and expense efficiency targets and are continuing to deliver on our remaining medium-term targets. We also generated 44% of earnings from the Asia region and increased our contribution from our highest potential businesses to 70%.

Speaker Change: And finally, moving to slide 20, which summarizes how we're tracking against our medium-term targets, including the new and updated targets we presented at OMVEST today.

Colin Simpson: As you can see from our year-to-date results, we are showing momentum towards our new core ROE and expense efficiency targets and are continuing to deliver on our remaining medium-term targets. We also generated 44% of earnings from the Asia region and increased our contribution from our highest potential businesses to 70%.

Colin: As you can see from our year-to-day results, we are showing momentum towards our new core ROE and expense efficiency targets, and are continuing to deliver on our remaining medium-term targets.

Speaker Change: We also generated 44% of earnings from the Asia region and increased our contribution from our highest potential businesses to 70%.

Operator: Looking ahead, all of these factors reinforce my confidence in our ability to raise the bar on financial performance. Before we move to the Q&A session, I would like to remind each participant to adhere to a limit of two questions, including follow-ups, and to recur if they have additional questions. Operator, we will now open the call to questions.

Colin Simpson: Looking ahead, all of these factors reinforce my confidence in our ability to raise the bar on financial performance. This concludes our prepared remarks. Before we move to the Q&A session, I would like to remind each participant to adhere to a limit of two questions, including follow-ups, and to recur if they have additional questions. Operator, we will now open the call to questions.

Colin Simpson: Moving over to global whan's results on slide 16. We reported $1.1 billion of net inflows for the quarter. We continued to generate strong net inflows in our institutional business, which included positive contributions from CQS.

Colin: Looking ahead, all of these factors reinforce my confidence in our ability to raise the bar on financial performance.

Colin: This concludes our prepared remarks.

Speaker Change: 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-cue if they have additional questions. Operator, we will now open the call to questions.

Colin Simpson: But this was largely offset by a large case plan redemption in U.S, retirement. While net inflows were largely neutral this quarter, global WAM delivered core earnings growth of 23% supported by higher average AUMA, which increased 13% from the prior year quarter. We could continue to generate positive operating leverage, evidenced by our strong core EBITDA margin expansion, which drew 170 basis points from the prior quarter and drove our core earnings growth.

Operator: Thank you. 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 in the participants' register. Thank you for your patience. And the first question is from Meny Grauman from Scotiabank. Please go ahead.

Speaker Change: Thank you. 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.

Speaker Change: Please press star 1 at this time. If you have a question, there will be a brief pause. Participants register. Thank you for your patience.

Colin Simpson: Bringing over to Canada on slide 17, we delivered another strong quarter of new business metrics. AP sales increased 61% from the prior quarter, led by group insurance, which delivered higher sales across all markets, and benefited from a large case sale. This was also the main contributor to our double-digit growth in new business value.

Colin: And the first question is from Meny Grauman from Scotiabank. Please go ahead.

Unknown Speaker: Hi, good morning. We've talked about older returns in the past, but I wanted to revisit it in the context of what we saw this quarter. The older charge widened in Q2, and now we're seeing eight consecutive quarters of older charges. So I'm wondering, you know, when we look at that, should we be concerned with that and specifically the deterioration in the charge this quarter? Colin, you touched on that a little bit in terms of the composition. I'm just wondering how to view that, you know, those fact patterns in terms of where the oldest is going and over that period of basically two years.

Meny Grauman: Hi, good morning. We've talked about older returns in the past, but I wanted to revisit it in the context of what we saw this quarter. The older charge widened in Q2, and now we're seeing eight consecutive quarters of older charges. So I'm wondering, you know, when we look at that, should we be concerned with that and specifically the deterioration in the charge this quarter? Colin, you touched on that a little bit in terms of the composition. I'm just wondering how to view that, you know, those fact patterns in terms of where the oldest is going and over that period of basically two years.

Meny Grauman: Hi, good morning. We've talked about older returns in the past, but I wanted to revisit it.

Speaker Change: In the context of what we saw this quarter, the alder charge widened in Q2 and now we're seeing eight quarters in a row.

Speaker Change: of all the charges. So I'm wondering, you know, when we look at that,

Colin Simpson: Core earnings grew by strong 7% in Canada, primarily driven by business growth in group insurance and affinity markets. We also saw favorable retail claims experience and individual insurance, but this was somewhat offset by lower investment spreads.

Colin: Should we be concerned with that, and specifically the deterioration in the charge this quarter? Colin, you touched on it a little bit in terms of the composition. I was just wondering...

Colin: How to view that, you know, those fact patterns in terms of where the old is.

Colin Simpson: On to slide 18, which shows our U.S, segments results. In the U.S, we saw lower sales of protection insurance products, which modestly drove down AP sales, though this was partially offset by continued demand from affluent customers for accumulation products.

Speaker Change: is going in over that period of basically two years.

Scott Hartz: Sure, many. Hi, it's Scott Hartz.

Speaker Change: Sure, Manny. Hi, it's Scott Hartz. I'll start by...

Scott Hartz: I'll start by looking at the quarterly results for all the companies. I think the good news in the quarter was that the real estate headwinds continued to diminish. As interest rates have stabilized here, we saw in the first quarter that underperformance versus long-term assumptions come down a bit. We had about a $200 million loss on our real estate portfolio. In the second quarter, that continued to decline to less than $150 million. So that is playing out as we expected.

Unknown Speaker: I think the good news in the quarter was that the real estate headwinds continued to diminish the losses on our real estate portfolio. In the second quarter, that continued to decline down to less than $150 million. So that is playing out as we expected.

Speaker Change: Looking at the quarterly results for Alda. I think the good news in the quarter was that the real estate headwinds continued to diminish.

Colin Simpson: The decline in new business CSM was due to product mix as well as the impact of higher interest rates.

Colin Simpson: Core earnings decreased 11% from the prior quarter, which reflects more unfavorable net insurance experience, as well as an unfavorable variance from the recent re-insurance transactions with global Atlantic.

Speaker Change: You know as interest rates have stabilized here We saw in the first quarter the the underperformance versus long-term assumptions come down a bit. We had about a 200 million dollar

Speaker Change: Loss on our real estate portfolio. In the second quarter that continued to decline down to less than $150 million. So that is playing out as we expected, we would expect that to continue to improve in the out quarters.

Colin Simpson: Let's now move to our balance sheet on slide 19. In the second quarter, our like at ratio remained strong at 139%, which was $24 billion above the supervisory target ratio. Our financial leverage ratio continues to support our financial flexibility at 24.6%, or 24% including the impact of the announced redemption of subordinated debentures.

Unknown Speaker: We would expect that to continue to improve in the next quarter. You know, the rest of the ALDA portfolio was less good. You know, we have six different ALDA categories.

Scott Hartz: We would expect that to continue to improve in the next quarter. You know, the rest of the ALDA portfolio was less, less good. You know, we have six different ALDA categories, and in a normal quarter, some will exceed their long-term expectations, and some will underperform. This was a quarter where every category underperformed. For most of them, it was idiosyncratic factors on a couple of investments that didn't perform well, and none of those categories was a particularly large number, but they do add up. They don't give me cause for concern about future returns. I don't see a read-through going forward.

Speaker Change: You know, the rest of the Alda portfolio was was less, less.

Unknown Speaker: And in a normal quarter, some will exceed their long-term expectations, and some will underperform. This was a quarter where every category underperformed. For most of them, it was idiosyncratic factors on a couple of investments that didn't perform well, and none of those categories was a particularly large number, but they do add up. They don't give me cause for concern about future returns. I don't see a read-through going forward.

Speaker Change: Good. You know, we have six different ALDA categories, and in a normal quarter, some will exceed their long-term expectations and some will underperform. This was a quarter where every category underperformed.

Colin Simpson: This puts us comfortably below our target ratio of 25%. During the second quarter, we've also increased the pace of our share buybacks, and together with dividends and share buybacks, we returned approximately $1.4 billion a capital to shareholders. And as Roy mentioned earlier, we are committed to buying the maximum 90 million common shares through the current NCIB program, representing a capital return of more than $3 billion based on the current share price.

Speaker Change: For most of them, it was idiosyncratic factors on a couple of investments that didn't perform well, and you know, and none of those categories was a particularly large number, but they do add up. They don't give me concern on future returns. I don't see a read-through going forward.

Unknown Speaker: I would say the one category that did stand out where there was pressure sort of across the board was the private equity portfolio. Our private equity portfolio has historically been a very good performer over the last three, five, and 10 years. It's been the best performing category in all, and it's far exceeded its long-term expectations. So again, I think in the medium term going forward and long-term, I feel good about that portfolio. But It was a bit of a rough quarter.

Scott Hartz: I would say the one category that did stand out where there was pressure sort of across the board was the private equity portfolio. Our private equity portfolio has historically been a very good performer over the last three, five, and 10 years. It's been the best performing category in all, and it's far exceeded its long-term expectations. So again, I think in the medium term going forward and long-term, I feel good about that portfolio. But It was a bit of a rough quarter.

Speaker Change: I would say the one category that did stand out where there was a pressure sort of across the board was in the private equity portfolio.

Colin Simpson: And finally, moving to slide 20, which summarizes how we're tracking against our medium-term targets, including the new and updated targets we presented at our investor day. As you can see from our year-to-day results, we are showing momentum towards our new core ROE and expense efficiency targets, and are continuing to deliver on our remaining medium-term targets. We also generated 44% of earnings from the Asia region, and increased our contribution from our highest potential businesses to 70%.

Speaker Change: Our private equity portfolio historically has been a very good performer over the last three, five, and ten years. It's been the best performing in all the category, and it's far exceeded its long-term expectations. So again, I think in the medium term going forward and long term, I feel good about that portfolio.

Colin Simpson: Grant, Looking ahead, all of these factors reinforce my confidence in our ability to raise the bar on financial performance.

Unknown Speaker: Although the private equity portfolio did have a slightly positive return, it was well below the long-term expectation, and it's a fairly sizable portfolio, so it created the largest loss within the ALDA portfolio. Unlike real estate, where it's really long-term rates that matter, those are the discount rates that get into valuations. For private equity, the portfolio companies underlying those funds finance themselves with floating-rate debt. So short rates really matter for that portfolio, and short rates have been up for a while, and that has pressured private equity returns.

Scott Hartz: Although the private equity portfolio did have a slightly positive return, it was well below the long-term expectation, and it's a fairly sizable portfolio, so it created the largest loss within all the portfolios. Unlike real estate, where it's really long-term rates that matter, those are the discount rates that get into valuations. For private equity, companies underlying those funds finance themselves with floating rate debt. So short rates really matter for that portfolio.

Speaker Change: It was a bit of a rough quarter. Although the private equity portfolio did have a slightly positive return, it was well below the long-term expectation, and it's a fairly sizable portfolio, so it created the largest loss within the Alda portfolio. So what was going on there?

Speaker Change: Unlike real estate where it's really long-term rates that matter, those are the discount rates that get into valuations for private equity.

Colin Simpson: This concludes our prepared remarks.

Operator: 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-cue if they have additional questions.

Speaker Change: Portfolio companies underlying those funds finance themselves with floating rate debt, so short rates really matter for that portfolio, and short rates have been up for a while, and it has pressured the private equity returns, but

Scott Hartz: And short rates have been up for a while, and that has pressured private equity returns, but there had been an expectation last year, I think, that the Fed would lower rates this year quite a bit, and as you know, valuations will reflect sort of the outlook for short rates. And I think this year...

Operator: Operator, we will now open the call to questions. Thank you. We will not take questions from the telephone lines. If you have a question, please press star one on your device's keypad. You may cancel your question at any time by pressing star two. Please press star one. At this time, if you have a question, there will be a brief pause for participant's register. Thank you for your patience.

Unknown Speaker: There had been an expectation last year, I think, that the Fed would lower rates this year quite a bit, and as you know, valuations will reflect sort of the outlook for short rates. And I think this year... The economy was really strong.

Speaker Change: There had been an expectation last year I think that the Fed would would lower rates this year quite a bit and as you you know valuations will reflect sort of the outlook for for short rates, and I think this year

Unknown Speaker: Those expectations got pushed out quite a bit, and that weighed on valuations. Looking forward for the private equity portfolio, I think as short rates come down, and I think we're now in a position where we're expecting them once again to come down pretty sharply going forward, that will be positive. As you know, I think these returns on private equity are lagged a quarter, so our second-quarter results reflect first-quarter valuations.

Scott Hartz: The economy was really strong, so those expectations got pushed out quite a bit, and that weighed on valuations. Looking forward for the private equity portfolio, I think as short rates come down, and I think we're now in a position where we're expecting them once again to come down pretty sharply going forward, that will be positive. As you know, these returns on private equity are lagged a quarter, so our second-quarter results reflect first-quarter valuations.

Speaker Change: You know, the economy was really strong. Those expectations got pushed out quite a bit in that weight on valuations. So.

Meny Grauman: And the first question is from Meny Grauman from Scotia Bank. Please go ahead. Hi, good morning. We talked about older returns in the past, but I wanted to revisit it in the context of what we saw this quarter, the older charge wide in Q2, and we're seeing eight quarters in a row of older charges. So I'm wondering, when we look at that, should we be concerned with that, and specifically the deterioration in the charge this quarter?

Speaker Change: You know, looking forward for the private equity portfolio, I think as short rates come down, and I think we're now in a position where we're expecting them once again to come down pretty sharply going forward, that will be positive.

Unknown Speaker: The second quarter, I would say, which will get reflected in our third-quarter results, not much had changed in the second quarter, so that probably will continue to weigh a bit on the third-quarter results. But then I expect, as we see the cuts coming, that private equity results will resume their good performance going forward. Trevor, is there anything you'd like to add to that?

Speaker Change: as as you know these these returns on private ically are wagg to quarter so our second quarter results reflect first quarter valuations the second quarter i would say which will get reflected in our third quarter results

Scott Hartz: The second quarter, I would say, which will get reflected in our third-quarter results, not much changed in the second quarter, so that probably will continue to weigh a bit on the third-quarter results, but then I expect, as we see the cuts coming, that private equity results will resume their good performance going forward. Trevor, is there anything you'd like to add to that?

Meny Grauman: Collin, you touched on it a little bit in terms of the composition. I'm just wondering how did you that, you know, those fact patterns in terms of where the all does is going and over that period of basically two years? Sure, many hi. It's Scott Hart.

Speaker Change: You know, not much had changed in the second quarter. So that probably will continue to weigh a bit on the third quarter results. But then I expect as as we see the cuts coming, that, you know, private equity results will resume their good performance going forward.

Scott Hartz: So I'll start by looking at the quarterly results for all dot. Now, I need the good news in the quarter was that the real estate headwinds continue to diminish. You know, as is interest rates have stabilized here, we saw in the first quarter the the underperformance versus long term assumptions come down a bit. We had about a $200 million loss on our real estate portfolio. In the second quarter, that continued to decline down to less than 150 million.

Speaker Change: And Trevor, is there anything you'd like to add to that?

Trevor Creel: Yeah, thanks, Scott. Thanks, Manny.

Trevor Kreel: Yeah, thanks, Scott. Thanks, Manny.

Trevor Creel: Thanks for the question. There are just a couple of things that I would add to what Scott had said. You know, given the mark-to-market nature of Alda, I think the recovery is obviously not going to proceed, you know, in a straight line. We will have variability. There'll be positives and negatives, you know, quarter to quarter. And then I think the second thing I would say, just to remind you of something that we've said in the past, which is that the higher discount rates that are now priced into our real estate and other real estate, and other real asset valuations give us confidence, more confidence in achieving our expected returns over the medium to long term.

Trevor Kreel: Thanks for the question. There are just a couple of things that I would add to what Scott had said. You know, given the mark-to-market nature of Alda, I think the recovery is obviously not going to proceed, you know, in a straight line. We will have variability. There'll be positives and negatives, you know, quarter to quarter. And then I think the second thing I would say, just to remind you of something that we've said in the past, which is that the higher discount rates that are now priced into real estate and other real estate and real asset valuations give us confidence, more confidence in achieving our expected returns over the medium to long term.

Trevor: Yeah, thanks, Scott. Thanks, Manny. Thanks for the question. So, just a couple of things that I would add to what Scott had said, you know, given the mark-to-market nature of all the, I think, the recovery

Speaker Change: He's obviously not going to proceed in a straight line. We will have variability. There'll be positives and negatives quarter to quarter.

Speaker Change: And then I think the second thing I would say, just to remind you something that we've said in the past, which is that the higher discount rates that are now priced into our real estate and other real estate, real asset valuations, I think give us confidence, more confidence in achieving our expected returns over the medium to long term.

Scott Hartz: So that, that is playing out as we expected, we would expect that to continue to improve in the out quarters. You know, the rest of the all the portfolio was less good. You know, we have six different all the categories. And in a normal quarter, some will exceed their long term expectations and some will underperform. This was a quarter where every category underperformed. For most of them, it was idiosyncratic factors on a couple of investments that didn't perform well.

Scott Hartz: Thanks for that detail. Just as a follow-up in terms of the private equity portfolio. Have you made any, are you contemplating making any more fundamental changes to this private equity portfolio, or is it just really a function of just? you know, letting maybe rate expectations filter through and just waiting, or is there something more fundamental in the portfolio that's not working as well as you like that requires any sort of adjustments to that portfolio? No, we do expect it.

Speaker Change: Thanks for that detail. Just as a follow-up in terms of the private equity portfolio.

Unknown Speaker: Have you made any, are you contemplating making any more fundamental changes to this private equity portfolio, or is it just really a function of letting maybe rate expectations filter through and just waiting, or is there something more fundamental in the portfolio that's not working as well as you like that requires any sort of adjustments to that portfolio? No, we do expect it.

Speaker Change: Have you made any or are you contemplating making any more fundamental changes to this private equity portfolio or is it just really a function of just

Speaker Change: You know, letting maybe rate expectations.

Speaker Change: filter through and just waiting or is there something more fundamental in the portfolio that's not working and as well as you like that requires any sort of adjustments to that portfolio?

Scott Hartz: And, none of those categories was a particularly large number, but they do add up. They don't give me concern on future returns. I don't see a read through going forward. I would say the one category that did stand out where there was a pressure sort of across the board was in the private equity portfolio. Now, our private equity portfolio historically has been a very good performer over the last three, five and ten years.

Unknown Speaker: Now, we do expect as rates come down, short rates to come down, for the portfolio to perform very well. One thing I would say is that, because it has been such a strong performer over the last five years, it has grown to a fairly large size.

Scott Hartz: No, we do expect as rates come down, short rates to come down, for the portfolio to perform very well. One thing I would say is that, because it has been such a strong performer over the last five years, it has grown to a fairly large size.

Speaker Change: No, we do expect as rates to come down, short rates to come down for the portfolio to perform very well. One thing I would say is because it has been such a strong performer over the last five years,

Unknown Speaker: So we've been investing, and it takes a while to get this money invested. You make a commitment, and it gets invested over five years. A number of years ago, we really reduced our commitments there. So I think the portfolio as a percent of our ALDA will probably decline going forward.

Scott Hartz: So we've been investing, and it takes a while to get this money invested. You make a commitment, and it gets invested over five years. A number of years ago, we really reduced our commitments there. So I think the portfolio as a percent of our ALDA will probably decline going forward.

Speaker Change: It has grown to a fairly large size, so we've been investing, and it takes a while to get this money invested. You make a commitment, it gets invested over five years. A number of years ago, we really reduced our commitments there. So I think the portfolio, as a percent of our ALDA, will probably decline going forward.

Scott Hartz: It's been the best performing all the category. And it's far exceeded its long term expectations. So, again, I think in the in the medium term going forward, in long term, feel good about that portfolio. But it was it was a bit of a rough quarter. Although the private equity portfolio did have a slightly positive return, it was well below the long term expectation. And it's a fairly sizable portfolio. So it created the largest loss within the all the portfolio.

Speaker Change: Thank you.

Operator: The next question is from John Aiken from Jeffreys. Please go ahead.

Operator: The next question is from John Aiken from Jeffries. Please go ahead.

Speaker Change: Thank you.

Speaker Change: The next question is from John Aiken from Jeffries. Please go ahead.

John Aiken: Good morning.

John Aiken: Good morning, Roy. Not necessarily on the quarter, but with DBS announcing the CEO succession, I have to ask the painfully difficult question.

John Aiken: Not necessarily for the quarter, but with DBS announcing the CEO succession, I have to ask the painfully obvious, stupid question that does this have any impact on your expectations for the relationship between the two of you? And, more importantly, does Manulife have a relationship with the incoming CEO?

John Aiken: Good morning, Roy. Not necessarily on the quarter, but with DBS announcing the CEO succession, I have to ask the painfully obvious, stupid question.

Scott Hartz: So what was going on there? Chair. Unlike real estate where it's really long-term rates that matter, those are the discount rates to get into valuations for private equity, portfolio companies underlying those funds, finance themselves with floating rate debt. So short rates really matter for that portfolio. And short rates have been up for a while and it has pressured the private equity returns, but there had been an expectation last year, I think that the Fed would lower rates this year quite a bit.

John Aiken: The obvious stupid question that does this have any impact on anything?

John Aiken: Manulife Financial Corp.

John Aiken: Does this have any impact on your expectations for the relationship between the two of you? And then more importantly, does Manulife have a relationship with the incoming CEO ?

Roy Gori: of a relationship with the incoming CEO.

Roy Gori: with the incoming CEO.

Roy Gori: John, thank you for the question. We don't see this as having an impact on our relationship. We've got a deep partnership with DBS, one that we're very proud of and one that we showcased at our investor day recently that you were at. Obviously, we're also very proud of the partnership that we have with the senior leadership team, and that extends beyond Piyush. In fact, Sushant was a key part of the leadership team that signed our agreement with DBS and Manulife back in 2017.

Speaker Change: Yeah, John , thank you for the question.

Speaker Change: We don't see this as having an impact on our relationship, we've got a deep partnership with the U.S., one that we're very proud of and one that we showcased at our Investor Day recently that you were at.

Scott Hartz: And as you know, valuations will reflect sort of the outlook for short rates. And I think this year, you know, the economy was really strong, those expectations got pushed out quite a bit and that weighed on valuations. So, you know, looking forward for the private equity portfolio, I think as short rates come down, and I think we're now in a position where we're expecting them once again to come down pretty sharply going forward, that will be positive for, you know, as you know, I think these court, these returns on private equity are lagged at quarter, so our second quarter results reflect first quarter valuations.

John Aiken: Clearly, we're obviously very proud of the partnership that we have with the senior leadership team, and that extends beyond Piyush. In fact, Sushant was a key part.

Roy Gori: I personally spent a lot of time with her at that time, locking in that deal and that transaction and agreeing the way that we would move forward. We're obviously happy for Piyush and delighted that he's happy to announce his retirement, but we're equally proud of the relationship that we have with DBS, and that extends beyond Piyush to Sushant and the broader team there at DBS.

Speaker Change: of the leadership team that actually signed our agreement with DBS and Manulife back in 2017. And I personally, you know, spent a lot of time with her at that time.

John Aiken: Locking in that deal and that transaction and agreeing the way that we would move forward. So we're obviously happy for Piyush and delighted that he's happy to announce his retirement. But we're equally proud of the relationship that we have with DBS and it extends beyond Piyush to Sushant and the broader team there at DBS.

Scott Hartz: The second quarter, I would say, which will get reflected in our third quarter results, you know, not much had changed in the second quarter. So that probably will continue to weigh a bit on the third quarter results, but then I expect as we see the cuts coming that, you know, private equity results will resume their good performance going forward.

John Aiken: Fantastic. Thanks, Roy. I'll recue.

Speaker Change: Fantastic, thanks Roy. I'll recue.

Operator: The next question is from Paul Holden from CIBC. Please go ahead.

Speaker Change: Thank you.

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

Paul Holden: Hi, thanks. Good morning.

Paul Holden: Hi, thanks. Good morning. First question is related to the GMT. I mean, you mean transparent that it was totally absorbed in corporate, not the business segments. But I guess my question is, of the $46 million in GMT this quarter, how much would have been allocated to Asia, if legislation had been enacted there? And the second part of the question is, is there any visibility on timeline on when it may get enacted and key

Paul Holden: The first question is related to the GMT. I mean, you mean transparent that it was totally absorbed into corporate, not the business segments. But I guess my question is, of the $46 million in GMT this quarter, how much would have been allocated to Asia if legislation had been enacted there? And the second part of the question is, is there any visibility on a timeline on when it may get enacted in key countries in Asia? I guess that'd be Hong Kong and maybe Singapore.

Trevor Kreel: And Trevor, is there anything you'd like to add to that? Yeah, thanks, Scott. Thanks, man. Thanks for the question. So, just a couple of things that I would add to what Scott had said, you know, given the mock to market nature of older, I think the recovery is obviously not going to proceed, you know, in a straight line. We will have variability, they'll be positive as positives and negatives, you know, quarter to quarter.

Trevor Kreel: And then I think the second thing I would, I would say, just to remind you something that we've said in the past, which is that the higher to scoundrates that all now priced into real estate and other real estate, real asset valuations, I think give us confidence, more confidence in achieving our expected returns over the medium to long term.

Speaker Change: countries in Asia, I guess I'd be Hong Kong and maybe Singapore.

Colin Simpson: Hey, John. It's Colin here. Thanks for the question. So of the $46 million, $30 million is allocated to the Asia segment. So it's roughly two-thirds Asia, and one-third GWAM. We do believe Hong Kong will adopt the pillar two tax rules in 2025, so we expect that tax charge to be passed through to the segments next year. But until that happens, we'll keep it a company. So wait and see on that basis. But it's very much within our expectations.

Colin Simpson: Hey, John. It's Colin here. Thanks for the question. So of the $46 million, $30 million is allocated to the Asia segment. So it's roughly two-thirds Asia, and one-third GWAM. We do believe Hong Kong will adopt the Pillar 2 tax rules in 2025, so we expect that tax charge to be passed through to the segments next year. But until that happens, we'll keep it a company. So wait and see on that basis. But it's very much within our expectations.

Speaker Change: Hey John , it's Colin here, thanks for the question. So of the $46 million, $30 million is allocated to the Asia segment.

Scott Hartz: And thanks for that detail, just as a follow up in terms of the private equity portfolio, have you made any are you contemplating making any more fundamental changes to to this private equity portfolio, or is it just really a function of just, you know, letting maybe rate expectations filter through and just waiting, or is there something more fundamental in the portfolio that's not working as well as you like that requires any sort of adjustments to that. Now we do expect as rates to come down, short rates to come down for the portfolio to perform very well.

Speaker Change: So it's roughly two-thirds Asia segment, one-third GWAM. We do believe Hong Kong will adopt the Pillar 2 tax rules in 2025, so we expect.

Speaker Change: that tax charge to be passed through to the segments next year reporting but until that happens we' keep it a corporate so waitand see on that basis but it's very much within our expectations

Roy Gori: Paul, I might just add that Asia's contribution, year-to-date contribution to earnings as at Q2 was 44%, and that includes both insurance and wealth. When we pro rata the impact across the geographies and apportion that GMT that's attributed to Asia to Asia, it takes our contribution from 44% down to only 43%. So we don't see this as a significant and material adjustment to our earnings contribution by segment.

Colin Simpson: Paul, I might just add that Asia's contribution, year-to-date contribution to earnings, as at Q2, was 44%, and that includes both insurance and wealth. When we pro rata the impact across the geographies and apportion that GMT that's attributed to Asia to Asia, it takes our contribution from 44% down to only 43%. So we don't see this as a significant and material adjustment to our earnings contribution by segment.

Speaker Change: Paul, I might just add that Asia's contribution, year-to-date contribution to earnings, as at Q2, was 44%, and that includes both insurance and wealth.

Scott Hartz: One thing I would say is because it has been such a strong performer over the last five years, it has grown to a fairly large size. So we've been investing and it takes a while to get this money invested, you make a commitment, it gets invested over five years, a number of years ago, we really reduced our commitments there. So I think the portfolio as a percent of our all that will probably decline going forward.

Speaker Change: When we pro-rata the impact across the geographies and apportion that GMT that's attributed to Asia to Asia, it takes our contribution from 44% down to only 43%. So we don't see this as a significant and material adjustment to our earnings contribution by segment.

Scott Hartz: Thank you.

Paul Holden: Got it. Okay, thanks for that.

Paul Holden: Got it. Okay, thanks for that. And then the second question also related to Asia. If I look at insurance experience, and again, you'd be transparent about this, but if I look at total experience, including both P&L and CSM impacts, there was no year-over-year improvement. In fact, it was almost exactly the same number, I think, but how you've allocated it between P&L and CSM has changed, so maybe you can walk us through sort of what's happening with experience in Asia, if there has been any sort of improvement in those unfavorable experience items from last year, and why the allocation between P&L and CSM has changed this year. Thank you.

Speaker Change: Got it. Okay, thanks for that. And then second question also related to Asia. If I look at insurance experience, and again, you'd be transparent on this, but if I look at total experience, including both P&L and CSM impacts, there was no year-over-year improvement. In fact, it was almost exactly the same number, I think.

John Aiken: The next question is from John Aiken from Jeffries, please go ahead. Good morning, not necessarily on the quarter, but with DBS announcing the CEO succession, I have to ask the painfully obvious stupid question that does this have any impact on your expectations for the relationship between the two of you. And then more importantly, does manual life have a relationship with the incoming CEO?

Paul Holden: And then, also related to Asia, if I look at insurance experience, and again, you'd be transparent about this, but if I look at total experience, including both P&L and CSM impacts, there was no year over year improvement. In fact, it was almost exactly the same number, I think, but how you've allocated it between P&L and CSM has changed. So maybe you can walk us through sort of what's happening in experience in Asia, if there has been any sort of improvement in those unfavorable experience items from last year, and why the allocation between P&L and CSM has changed this year. Thank you.

Speaker Change: PNL and CSM has changed. So maybe you can walk us through sort of what's happening in experience in Asia, if there has been any sort of improvement in those.

Speaker Change: unfavorable experience items from last year and why the allocation between P&L and CSM has changed this year. Thank you.

Roy Gori: John, thank you for the question. We don't see this as having an impact on our relationship. We've got a deep partnership with the US one that we're very proud of and one that we showcase that are invested a recently that you are at. Clearly, we're obviously very proud of the partnership that we have with the senior leadership team. And that extends beyond Piyush. In fact, Sushen was a key part of the leadership team that actually signed our agreement with DBS and manualized back in 2017.

Steve: Sure, thanks. It's Steve here.

Speaker Change: Sure, thanks. It's Steve here. I'll take that. So the drivers of the experience in Asia were the quarter and then relative to prior year. In the quarter, we saw some claims gains in both Vietnam and in Japan, and that's what you're seeing in the P&L.

Steve: I'll take that. So the drivers of the experience in Asia were the quarter and then relative to the prior year. In the quarter, we saw some claims gains in both Vietnam and in Japan, and that's what you're seeing in the P&L. And then what's going through the CSM primarily is a continuation of some adverse persistency results, primarily in Vietnam, and to a smaller degree, some lapse impacts in Singapore. In Vietnam, this resulted from some of the broader-based industry macro challenges.

Speaker Change: and then the what's going through the CSM primarily is a continuation of some adverse persistency results primarily in in Vietnam to a smaller degree some lapse

Roy Gori: And I personally, you know, spent a lot of time with her at that time locking in that deal and that transaction and agreeing the way that we would move forward. So we're obviously happy that for Piyush and delighted that he's happy to announce his retirement. But we're equally proud of the relationship that we have with DBS and that extends beyond Piyush to Sushen and the broader team there at DBS. Fantastic. Thanks. Right. I'll recap. Thank you.

Steve: We saw modest improvement in Q2 on Vietnam persistency, and we do have a clear line of sight to improvement over the second half of the year on that front as things have stabilized and begun to move in a positive direction there. So we feel pretty good about the outlook.

Speaker Change: In Vietnam, this resulted from some of the broader-based industry macro challenges. We saw modest improvement in Q2 on the Vietnam persistency.

Speaker Change: And we do have clear line of sight to improvement over the second half of the year on that front as, you know, as things have stabilized and begin to move in a positive direction there. So we feel pretty good about the outlook.

Steve: And so, if I remember correctly, wasn't that persistency issue in Vietnam, didn't that flow through P&L in the year-ago period? No, it would have been.

Paul Holden: The next question is from Paul Holden from C.I.B.C. Please go ahead. Hi. Thanks. Good morning. First question is related to the GMT. I mean, you can't parent that it was totally absorbed in corporate, not the business segments. But I guess my question is of the 46 million in GMT this quarter. How much would have been allocated to Asia if legislation had been enacted there? And the second part of the question is, is there any visibility on timeline on when it may get enacted in key countries in Asia?

Speaker Change: And so if I remember correctly, wasn't that persistency issue in Vietnam, didn't that flow through P&L in the year ago period?

Steve: No, it would have been through CSO. Okay.

Unknown Speaker: No, it would have been.

Unknown Speaker: No, it would have been through CSM. Okay. Okay.

Speaker Change: No, it would have been through CSM. Okay, okay. Thank you for that.

Operator: The next question is from Gabriel Dechaine from National Bank Financial. Please go ahead.

Speaker Change: Thank you.

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

Gabriel Dechaine: In the wealth flows, I saw Canada had big outflows in the retail business. Is that tied to the higher capital gains inclusion rate that became effective at the end of the quarter? Getting out of their funds before that change?

Gabriel Dechaine: Good morning. Nothing too complicated here.

Gabriel Dechaine: I'm apologies if I've already mentioned it in your opening remarks, but I saw Canada had big outflows in the retail business. Is that tied to the higher capital gains inclusion rate that became effective at the end of the quarter?

Paul Holden: I guess I'd be Hong Kong and maybe Singapore? Hey, John. It's Colin. Thanks for the question. So of the $46 million, $30 million is allocated to the Asia segment. So it's roughly two thirds Asia segment, one third GM. We do believe Hong Kong will adopt the tax rules in 2025. So we expect that tax charge to be passed through to the segments next year reporting, but until that happens, we'll keep it a corporate.

Gabriel Dechaine: Yeah, thanks, Gabriel. It's Paul Lorentz here.

Paul Lorentz: Yeah, thanks, Gabriel. It's Paul Lorentz here.

Speaker Change: People getting out of their funds before before that change

Paul Lorentz: Yeah, that was an impact for the industry. We did see elevated redemptions coming through the Canada retail business ahead of that capital gains inclusion rate, but it wasn't unique to us.

Paul Lorentz: Yeah, that had an impact on the industry. We did see elevated redemptions coming through the Canada retail business ahead of that capital gains inclusion rate. It was unique to us. We have since seen those redemption rates moderate, so we would expect that to kind of moderate going forward. And then just looking at the Canada region, there was also a large case redemption in there that skews the results for the quarter. That was a remaining redemption from a large client announced in Q1, but that was quite material. It was $1.8 billion for the quarter.

Speaker Change: Yeah, thanks Gabriel. It's Paul Lorentz here. Yeah, that was an impact for the industry. We did see elevated redemptions coming through the Canada

Paul Lorentz: We have since seen those redemption rates moderate, so we would expect that to kind of moderate going forward. And then, just looking at the Canada region, there was also a large case redemption in there that skews the results for the quarter. That was a remaining redemption from a large client announced in Q1, but that was quite material. It was $1.8 billion for the quarter.

Speaker Change: Retail Business ahead of that capital gains inclusion rate. It was unique to us. We have since seen those redemption rates moderate, so we would expect that to kind of moderate go forward.

Paul Holden: So wait and see on that basis, but it's very much in within our expectations. Paul, I might just add that Asia's contribution is a contribution of earnings as that Q2 was 44% and that includes both insurance and wealth. When we pro rider the impact across the geographies and a portion that GMT that's attributed to Asia to Asia, it takes our contribution from 44% down to only 43%. And so we don't see this as a significant and material adjustment to our earnings contribution by segment.

Speaker Change: And then just looking at the Canada region, there was also a large case redemption in there that is skewing the results for the quarter. That was a remaining redemption from a large client announced in Q1, but that was quite material. It was 1.8.

Paul Lorentz: So when you factor those two in, we're quite optimistic. The other thing I would say, just in terms of Canada specifically, is we're seeing a lot of new advisor interest in our wealth platform. We made an investment earlier this year, and the pipeline for advisors that are interested in joining in the second half of the year is quite strong. So we're quite optimistic as we look forward to the Canadian market.

Speaker Change: A billion for the quarter, so when you actually factor those two in, we're quite optimistic. The other thing I would say, just in terms of Canada specifically...

Speaker Change: is we're seen a lot of advisor new advisor interest in our wealth pot form we made an investment earlier this year and the ipeline feranilizes that are interested in joining in the second half of year is quitestrong so we're quite optimistic as we look forward for the canadian market

Gabriel Dechaine: Okay, great. Thanks, Paul.

Gabriel Dechaine: Question on the tax rate guidance, so the 17% to 23% is a very wide range, so wherever you end up on that spectrum could have a pretty meaningful impact on the quarter, any given quarter. I mean, I can come up with my own answers here as to how you end up at the low end or high end, you know, more growth in Canada and US versus Asia. I mean, is there anything else that could cause that to swing around a lot? And I guess, if Asia is going to continue to grow at maybe not the rates we saw this quarter but higher than anywhere else, should we be biased towards the low end as we're forecasting?

Speaker Change: Okay, great. Thanks, Paul.

Paul Holden: Okay. Thanks for that. And then second question also related to Asia. If I look at insurance experience and again, you'd be transparent on this, but if I look at total experience, including both, you know, and CSM impacts, there was no year over year improvement. In fact, it was almost exactly the same number, I think, but how you've allocated it between PNL and CSM has changed. So maybe you can walk us through sort of what's happening in experience in Asia. If there has been any sort of improvement in those unfavorable experience items from last year and why the allocation between PNL and CSM has changed this year. Thank you.

Speaker Change: Question on the tax rate guidance, so the 17-23%, it's a very wide range, so wherever you end up on that spectrum could have a pretty meaningful impact on the quarter, any given quarter.

Speaker Change: I mean, I can come up with my own answers here as to how you end up at the low end or high end. You know, more growth in Canada and US versus Asia. I mean, is there anything else that could cause that to swing around a lot?

Speaker Change: I guess if Asia is going to continue to grow at maybe not the rates we saw this quarter, but higher than anywhere else, should we be biased towards the low end as we're forecasting?

Colin Simpson: Hey Gabe, it's Colin again. Yeah, you've, I think you've nailed it really. As Asia becomes a bigger proportion of our earnings, we will see some of the lower tax jurisdictions contribute to a lower overall tax rate. And as you would expect, and as has been noted already, we are at the low end of the range. Actually, we're below the 17 to 23% this quarter, but we're up 2% from the 14% we reported last quarter. So we are staying close to the low end, and we expect to continue that way. But, as you noted, if Canada and the US grow earnings more, you would expect to see that rate.

Colin Simpson: Hey, Gabe. It's Colin again. Yeah, I think you've nailed it, really. As Asia becomes a bigger proportion of our earnings, we will see some of the lower tax jurisdictions contribute to a lower overall tax rate. And, as has been noted already, we are at the low end of the range. Actually, we're below the 17 to 23% range this quarter, but we're up 2% from the 14% we reported last quarter. So we are staying close to the low end, and we expect to continue that way. But, as you noted, if Canada and the U.S. grow earnings more, you would expect to see that.

Colin Simpson: Sure, thanks. It's Steve here. I'll take that.

Steven Finch: So the drivers of the experience in Asia were the quarter and then relative to prior year. In the quarter, we saw some claims gains in both Vietnam and in Japan. And that's what you're seeing in the PNL. And then the what's going through the CSM primarily is a continuation of some adverse persistency results. Primarily, in Vietnam, to a smaller degree, some lapse impacts in Singapore. In Vietnam, this resulted from some of the broader based industry macro challenges.

Speaker Change: okay gave ' common again yet i think you've nailed at earli as asia becomes a bigger proportion of our earnings we would see some of the lower tax jurisdictions

Speaker Change: Contribute to a lower overall tax rate.

Speaker Change: and as has been noted already, we are at the low end of the range, actually we're below the 17-23% this quarter, but we're up 2% from the 14% we reported last quarter. So we are staying close to the low end and we expect to continue that way, but as you noted, if Canada and the U.S. grow earnings more, you would expect to see that rate go up.

Colin Simpson: Any technical, I mean, I don't know if there are any other factors at play other than geography and the amount of... It really isn't, Gabe. Okay. No, it's quite straightforward. Okay, great. Enjoy the rest of your summer.

Speaker Change: i mean technical i coming out and up is and the other factors the play other geography the amount of theirreally on gate okay not right it's quite a quite straightforward okay great dreadther of their summer

Steven Finch: We have, we saw modest improvement in Q2 on the Vietnam persistency. And we do have clear line of sight to improvement over the second half of the year on that front as, you know, as things have stabilized and begin to to move in a positive direction there. So we feel pretty good about the outlook. And so if I remember correctly, was that persistency issue in Vietnam? Didn't that flow through PNL in the year ago? Period. No, it would have been through CSM. Okay. Thank you for that.

Colin Simpson: The amount of... It really isn't, Gabe. Okay. No, it's quite, it's quite straightforward. Okay, great. Enjoy the rest of your summer.

Operator: Thank you. The next question is from Tom MacKinnon from BMO Capital Markets. Please go ahead.

Speaker Change: You too.

tom mchinning: thank you the next question is from tom mchinning from bo capital markets please goahead

Tom Mackinnon: Yeah, thanks. Good morning.

Tom McHinning: Yeah, thanks. Good morning.

Tom McHinning: Question with respect to Asia, looking at APE for Asia Other, continues to be kind of sluggish down 5% and I think year-to-date may be up just modestly. One thing I did note though is the number of Asians you have in Asia Other, kind of running flat for

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

Gabriel Dechaine: I am good morning. Nothing too complicated here in the wealth flows. I'm apologies if you've already mentioned it in your opening remarks. But I saw Canada had big outflows in the retail business that tied to the higher capital gains inclusion rate that became effective at the end of the quarter. People are getting out of their funds before before that change. Yeah, thanks, Gabriel. It's a tolerance here. Yeah, that wasn't impact for the industry.

Speaker Change: Several quarters in a row, and then up 9% quarter over quarter in the second quarter of this year.

Tom Mackinnon: Question with respect to Asia, looking at APE for Asia other continues to be kind of sluggish, down 5% and, I think, year to date, maybe up just modestly. One thing I did note, though, is the number of agents you have in Asia other kind of running flat for several quarters in a row and then up 9% quarter over quarter, that helped rebound some. Some of the other Asian APE. How should we be thinking about those sales going forward? And how should we be thinking about them in light of this increase in the number of APEs?

Speaker Change: you help rebound some of these some of that asia other a e how should we be thinking about those sales going forward and how should we be thinking about them inlight of this increase in the number of agents

Tom Mackinnon: Question with respect to Asia Looking at APE for Asia other, it continues to be kind of sluggish, down 5% and, I think, year to date, maybe up just modestly. One thing I did note, though, is the number of agents you have in Asia other kind of running flat for several quarters in a row and then up 9% quarter over quarter in the second quarter of this year. So what's happening there?

Gabriel Dechaine: We did see elevated redemptions coming through the Canada retail business ahead of that capital gains inclusion rate. It wasn't unique to us. We have since seen those redemption rates moderate. So we would expect that to kind of moderate go forward. And then just looking at the Canada region, there was also a large case redemption in there that is giving the results for the quarter. That was remaining redemption from a large client announced in Q1.

Speaker Change: great thank you for those questions on this is still so i'll start actually by highlighting that it's been a really strong quarter for our asia business your core earnings are up forty percent

Tom Mackinnon: Are you beefing up the Salesforce here in Asia other to try to that helped rebound some of the other APE? How should we be thinking about those sales going forward? And how should we be thinking about them in light of this increase in the number of APEs?

Speaker Change: We've seen growth in NBV of 19% and that comes from a mix of both.

Phil: Great. Thank you for the questions, Tom. This is Phil.

Speaker Change: Volume growth with 7% growth in APE sales and margin enhancements across multiple markets.

Gabriel Dechaine: But that was quite material. It was 1.8 billion for the quarter. So when you actually factor those two and were quite optimistic. The other thing I would say just in terms of Canada specifically, is we're seeing a lot of advisor, new advisor interest in our wealth platform. We made an investment earlier this year and the pipeline for advises that are interested in joining in the second half of the year is quite strong. So we're quite optimistic as we look forward for the Canadian market.

Gabriel Dechaine: Okay, great. Thanks, Paul.

Phil: So I'll start by highlighting that it's been a really strong quarter for our Asia business. Our core earnings are up 40%. We've seen growth in NBV of 19%, and that comes from a mix of both volume growth with 7% growth in APE sales and margin enhancements across multiple markets. Now, Tom, you picked up in your question the modest decline in APE sales in our other Asia segment. And Colin touched on this briefly in his opening remarks.

Speaker Change: Now, Tom, you picked up in your question on the modest decline in APE sales in our Asia other segment.

Phil: But what's happening there is that we've seen strong growth across multiple markets in the other emerging Asian subregions. But what's happened is that we've seen a moderation of sales growth in China. And recall the history here: in the second quarter of 2023, we saw a tripling of sales in mainland China as the borders with the rest of the world reopened, and consumer sentiment was very strong. This year, we've seen a slight pullback from that, a 20% decline in sales in China. And that's had the effect of moderating other Asian sales. But I do remain confident in the prospects for our other Asian markets individually and collectively. You also touched on our agent numbers, Tom.

Speaker Change: and it touch on this briefly in his opening remarks but what's happening there is that we've seen strong growth across multiple markets in other emerging the other emerging asia subregion but what's happened is that we'veseen a moderation of sales growth in china and recordcall the history here is in the second quarter of two thousand and twenty three would a tripling of sales in mainland china as the borders with the rest of the world we openened and consumer sentiment was very strong this year we've seen ite pull back in that twenty percent decline in sal inchina and that's had the effect of

Gabriel Dechaine: Question on the tax rate guidance. So the 17 to 23% is very wide range. So, you know, wherever you end up on that spectrum could have a pretty meaningful impact on the quarter any given quarter. I mean, I can come up with my own answers here through how you end up at the low end or high end, you know, more growth in Canada and US versus Asia. I mean, is there anything else that could cause that to swing around a lot? And I guess if Asia is going to continue to grow it, maybe not the rates we saw this quarter, but higher than anywhere else, should we be biased towards the low end as we're forecast.

Speaker Change: moderating the asia other sales but do remain confidence in the prospects for our other asia markets individually and collectively

Phil: And we have seen an improvement, an increase in agent numbers, particularly from our emerging markets during the second quarter. But I do want to highlight our focus is not really on the number of agents. It's about the quality and the productivity of agents. So I won't dwell too much on the sort of the 9% quarter-on-quarter increase that you referenced. Our focus is really on driving productivity of agents, driving value for both customers and manual life.

Speaker Change: you also touched to on our agent numbers and we have seen an improvements an increase in agent numbers particularly

Speaker Change: from our emerging markets during the second quarter but i do want to highlight our focus is not really on the number of agents it's on the quality and the productivity of agents so i won't dwell too much on sort of the nine percent quarter on quarter increase that you referenced

Colin Simpson: Hey, Gabe, it's common again. Yeah, I think you've nailed it really. As Asia becomes a bigger proportion of our earnings, we would see some of the lower tax jurisdictions contribute to a lower overall tax rate. And as you would, and as has been noted already, we are at the low end of the range. Actually, we're below the 17 to 23% this quarter, but that's we're up 2% from the 14% we reported last quarter.

Colin Simpson: So we are staying close to the low end. And we expect to continue that way. But as you as you noted, if Canada and the US go earnings more, you would expect to see that rate go up any technical. I mean, I don't know if there's any other factors that play in other other geography. The amount of it really on. Okay.

Speaker Change: our focus is really on driving productivity of agents

Colin Simpson: No, it's quite it's quite straightforward. Okay, great.

Speaker Change: driving value for both customers and Manulife. And when I look at the results in the second quarter, I believe it supports the messages that we delivered at Investor Day with high quality, sustainable growth, 19% improvement.

Phil: And when I look at the results in the second quarter, I believe they support the messages that we delivered at Investor Day, with high quality, sustainable growth and a 19% improvement in new business value. And when I think about the future, the quarters ahead, I also remain confident about the prospects. We saw very strong performance across multiple markets in Asia in the second quarter.

Speaker Change: New Business Value. And when I think about the future, the quarters ahead, I also remain confident about the prospects. We've seen very strong performance across multiple markets in Asia in the second quarter.

Tom Mackinnon: Okay, thanks. And then a quick follow-up here with respect to the LAPS experience in the U.S. continuing to be a negative here. How should we be thinking about that going forward, especially as we move into your third quarter?

Gabriel Dechaine: Enjoy the rest of your summer. You too. Thank you.

Speaker Change: okay thanks and then a quick fall up here with respect to the lapse

Tom Mackinnon: The next question is from Tom McKinnon from BMO Capital Markets. Please go ahead. Yeah, thanks. Good morning. Question with respect to Asia. Looking at APE for Asia. Other continues to be kind of sluggish down 5% and I think you're the date. Maybe up just modestly. One thing I did note, though, is the number of agents you have in Asia. Other kind of running flat for several quarters in a row. And then up 9% quarter over quarter in the second quarter of this year.

Speaker Change: experience in the u us continuing to be a negiative here how should we be thinking about that going forward especially as we move into your third quarter

Tom Mackinnon: So is what's happening there? Are you beefing up the sales force here in Asia? Other to try to help rebound some of these. Some of the Asia other APE. How should we be thinking about those sales going forward? And how should we be thinking about them in light of this increase in the number of agents?

Steve: So, as you noted, we did see a continuation of lapse losses in the US. That's been, you know, since the pandemic, as I've noted before, we saw a drop in lapse rates across many product lines. In similar product lines in Canada, those lapse rates have trended back to pre-pandemic levels, but it's been a much slower process in the U.S. We've seen some trending back, but not on all products and not all the way.

Steve: Yeah, thanks, Tom. It's Steve. I'll, I'll take that one.

Speaker Change: Reserve Review with respect to that aspect.

Steve: yes thanks tom it's steve all i'll take that one so as you noted we did see a continuation of lapse losses in the u s that's been you know since the the pandemic as i've noted before we saw a drop in lapse rates across many product lines

Steve: I've also commented before, you know, with respect to how you think about the Q3 assumption review. I'll note that when we transitioned to IFRS 17, last year, we stopped providing detailed guidance at Q2, so you'll get the full disclosure at Q3. But in terms of thinking about how we're looking at this, we're very comfortable with the ultimate lapse rates. Those are very low, and that's not what's causing the issues here.

Philip Witherington: Great. Thank you for the questions, Tom. This is Phil. So I'll start actually by highlighting that it's been a really strong quarter for our Asia business. Our core earnings are up 40%. We've seen growth in NBV of 19% and that comes from a mix of both volume growth with 7% growth in APE sales and margin enhancement across multiple markets. Now, Tom, you picked up in your question on the modest decline in APE sales in our Asia.

Philip Witherington: Other segment. And consumer sentiment was very strong. This year we've seen a slight pullback in that 20% decline in sales in China. And that's had the effect of moderating the Asia other sales. But I do remain confident in the prospects for our other Asia markets individually and collectively. You also touched Tom on our agent numbers. And we have seen an improvement in increase in agent numbers, particularly from our emerging markets during the second quarter.

Speaker Change: But in terms of thinking about how we're looking at this.

Speaker Change: Yeah.

Speaker Change: We're very comfortable with the ultimate lapse rate. So those are very low and that's not what's causing the issues here is that it's more of the intermediate durations on protection products and some higher lapse rates in early durations from the economic environment, We will take all of that.

Steve: It's more the intermediate durations on protection products and some higher lapse rates in early durations due to the economic environment. You know, we'll take all the data, you know, into account as we review the lapse rates. But what I can say is, you know, on the overall review, you can expect, as usual, some pluses and minuses. So that's how I think you should be thinking about that right now.

Steve: It's more the intermediate durations on protection products and some higher lapse rates in early durations due to the economic environment. You know, we'll take all the data, you know, into account as we review the lapse rates, but what I can say is, you know, on the overall review, you can expect, as usual, some pluses and minuses. So that's how I think you should be thinking about that right now.

Speaker Change: All the data.

Speaker Change: To account as we review the lapse rates.

Speaker Change: But what I can say is you know on the overall review you can expect as usual some pluses and minuses. So that's that's how I think you should be thinking about that right now.

Speaker Change: Okay. Thank you.

Speaker Change: Thank you.

Operator: The next question is from Mario Mendonca from TD Securities. Please go ahead.

Nigel Mendonca: The next question is some narrow mendonca from TD Securities. Please go ahead.

Mario Mendonca: Just one quick clarification on that last question from Tom. It's always very unclear for me on what assumptions go through earnings and what goes through the CSM. Would an update to the intermediate lapse assumptions...

Speaker Change: Just one quick clarification on that last question from Tom.

Samara Mendonca: It's always it's very unclear for me on.

Speaker Change: What assumptions go through earnings and what goes through the <unk>.

Speaker Change: Sam.

Speaker Change: What an update to intermediate lapse assumptions in the U S D earnings issue or CSM issue.

Unknown Speaker: Thanks, Mario. So specifically in U.S. life, those lapses, they would go through primarily CSM unless CSM were depleted, and then it would go through P&L. And there is one nuance in terms of the discount rates. You know, there's a little bit that would go through OCI based on what interest rates were when we locked them in at the time of transition versus current interest rates. So it's a little bit complicated, but CSM, if depleted, is recovered through P&L.

Steve: Thanks, Mario. So specifically in U.S. life, those lapses, they would go through primarily CSM unless CSM were depleted, and then it would go through P&L. And there is one nuance in terms of the discount rates. You know, there's a little bit that would go through OCI based on what interest rates were when we locked them in at the time of transition versus current interest rates. So it's a little bit complicated, but CSM, if depleted, is recovered through P&L. Yeah, I was questioning that.

Mario: Thanks, Mario so forward for specifically on U S life those lapses they would.

Speaker Change: They would go through primarily C. S M unless CSM were depleted and then it would go through.

Speaker Change: P&L.

Speaker Change: And there is one nuance in terms of the discount rates.

Philip Witherington: But I do want to highlight our focus is not really on the number of agents. It's on the quality and the productivity of agents. So I I won't dwell too much on sort of the 9% quarter on quarter increase that you referenced. Our focus is really on driving productivity of agents driving value for both customers and manual life. And when I look at the results in the second quarter, I believe it supports the messages that we delivered at investor day with high quality sustainable growth 19% improvement in new business value. And when I think about the future that the quarters ahead, I also remain confident about the prospects we've seen very strong performance across multiple markets in Asia in the second quarter.

Speaker Change: There's a little bit that would go through OCI based on what interest rates were when we locked them in a time of transition versus current interest rates. So it's a little bit complicated, but our CSM if depleted through to P&L. There's question minutes to CSM been depleted.

Philip Witherington: Okay, thanks.

Steve: The obvious question then is, has the CSM been depleted?

Unknown Speaker: The obvious question then is, has the CSM been depleted?

Unknown Speaker: At this point, on some products in the U.S., as you can see in the quarter in the U.S., we've got some lifelapse losses going through P&L. So some cohorts have been depleted, but not all of the cohorts. Okay, my second question:

Steve: At this point, on some products in the U.S., as you can see in the quarter in the U.S., we've got some lifelapse losses going through P&L. So some cohorts have been depleted, but not all of the cohorts. Okay, my second question:

Speaker Change: At this point, we on some products in the U S.

Speaker Change: As you can see in the quarter in U S. We've got some life lapse losses going through P&L. So some cohorts have been depleted.

Speaker Change: But not all of the cohorts.

Mario Mendonca: Okay, my second question, this might be for Colin. Go to page 29 of your presentation, so deep into your appendix, and this is, I appreciate, sort of in the weeds, but it matters to book value growth. That net impact is $732 million. It's positive this quarter, so that's fine.

Speaker Change: Second question this might be for column go to page 29 of your presentation. So deep into your appendix I says I appreciate sort of in the weeds, but it matters to book value growth.

Mario Mendonca: But I'm surprised to see that kind of that size of a contribution from changes in corporate spreads and interest rates. It was my understanding that with the implementation of IFRS 17, those two lines, the fair value of the liabilities relative to the fair value of the assets, would be fairly well matched, and we wouldn't see big changes. So maybe talk me through why it was big this quarter and whether we could see big swings to the negative if interest rates go up. I'm surprised you moved the other way.

Unknown Speaker: That net impact is $732 million. It's positive this quarter, so that's fine.

Speaker Change: That net impact of $732 million positive this quarter. So that's fine, but I'm surprised to see that kind of that size of a contribution from changes and corporate spreads and interest rates. It was my understanding that with the implementation of <unk> 17.

Tom Mackinnon: And then a quick follow up here with respect to the LAPS experience in the US, continuing to be a negative here.

Steven Finch: How should we be thinking about that going forward, especially as we move into your third quarter, reserve review with respect to that aspect? Yeah, thanks, Tom, it's Steve. I'll take that one. So, as you noted, we did see a continuation of LAPS losses in the US. That's been, since the pandemic, as I've noted before, we saw a drop in LAPS rates across many product lines. In similar product lines in Canada, those LAPS rates have trended back to pre-pandemic levels, but it's been a much slower process in the US.

Speaker Change: That those two lines the fair value of the liabilities relative fair value of the assets would be fairly well matched I wouldn't see big changes. So maybe talk me through why it was big this quarter and could we see big swings to the negative if rates and spreads moved the other way.

Colin Simpson: Yes, thanks, Mario. You addressed it to me, so I'll start, and I'm sure Scott's got quite a bit to say on this topic. So effectively, our sensitivities don't capture the spread environment. And what we saw during the quarter was a steeping of the spread curve, and that drove big gains. Obviously, if that reverses, then the opposite could happen. But we've done a lot of work to make sure that our interest rate exposure is really minimized through extensive hedging. But what you're seeing here is really the spread impact, Scott.

Unknown Speaker: Yes, thanks, Mario. You addressed it to me, so I'll start, and I'm sure Scott's got quite a bit to say on this topic. So effectively, our sensitivities don't capture the spread environment, and what we saw during the quarter was a steeping of the spread curve, which drove big gains. Obviously, if that reverses, then the opposite could happen. But we've done a lot of work to make sure that our interest rate exposure is really minimized through extensive hedging. But what you're seeing here is really just the spread impact, Scott.

Speaker Change: Yes, Thanks, Mario I mean, you addressed it to me so I'll start and I'm sure <unk> got quite a bit to say on this topic. So effectively our sensitivities don't necessarily don't capture the spread environment and what we saw during the quarter was a steepening of the spread curve and.

Speaker Change: That drove big gains obviously, if that reverses then.

Steven Finch: We've seen some trending back, but not on all products and not all the way. I've also commented before, you know, with respect to our you think about the Q3 Assumption Review, which I'll note, when we transitioned to IFRS 17, last year we stopped providing detailed guidance at Q2, so you'll get the full disclosure at Q3, but in terms of thinking about how we're looking at this, you know, we're very comfortable with the ultimate LAPS rates.

Speaker Change: The opposite could happen, but we've done a lot of work to make sure that all interest rate exposures has really minimized through extensive hedging.

Speaker Change: But what you're seeing is really the spread impact Scott.

Scott Hartz: Yeah, and to explain that a little bit more, Mario, so if you think of our liabilities, they're very long, and we can't get the asset portfolio long enough to match them. So we use derivatives to get the matching on the interest rate and immunize ourselves against that. But what that means is the derivatives do not have a spread component, whereas the liabilities and the assets have a spread component.

Scott Hartz: Yeah and to explain that a little bit more Mario So if you think of our liabilities are very long.

Mario: And we can't get the asset portfolio long enough to match them. So we use derivatives to get the matching on the interest rate and an immunized yourselves against that but what that means is the derivatives do not have any spread component, whereas the liabilities and the assets have a spread components. So.

Scott Hartz: But what that means is the derivatives do not have a spread component, whereas the liabilities and the assets have a spread component. So we have an overall spread risk called spread duration. The spread duration on our assets is shorter than the spread duration on our liabilities. So overall, you know, higher spreads decrease the liabilities more than they decrease the assets. And then the steepness matters a lot, too, because the liabilities are pretty long.

Steven Finch: Those are very low, and that's not what's causing the issues here. It's more the intermediate durations on protection products. And some higher LAPS rates in early durations from the economic environment. We'll take all the data into account as we review the LAPS rates, but what I can say is, you know, on the overall review, you can expect, as usual, some pluses and minuses. So that's how I think you should be thinking about that right now.

Steven Finch: Okay, thank you.

Speaker Change: So we have overall spread risk called spread duration that spread duration on our assets with shorter spread duration on our liabilities. So overall.

Operator: Thank you.

Speaker Change: Higher spreads.

Speaker Change: Decrease the liabilities more than they decrease the assets and then the steepness matters a lot too because liabilities are pretty long and where the mismatches as we don't have assets as long as our liabilities so really spreads at the long end.

Scott Hartz: And where the mismatch is, is we don't have assets as long as our liabilities. So really, spreads at the long end versus the intermediate part of the curve where a lot of our assets are stacked up matters. So bottom line, wider spreads create positive here, and a steepening of the spread curve creates a positive. And that's really what happened in the second.

Speaker Change: <unk>.

Merrill Mandolko: The next question is some Merrill Mandolk from TV Securities. Please go ahead. Thank you. Just one quick clarification on that last question from Tom. It's always, it's very unclear for me on what assumptions go through earnings and what go through the CSM. Would an update to intermediate LAPS assumptions in the US, the earnings issue or CSM issue? Thanks, Merrill. So for specifically on US life, those LAPSs, they would go through primarily CSM, unless CSM were depleted, and then it would go through P&L.

Speaker Change: Intermediate part of the curve, where a lot of our assets are stacked up matters. So bottom line why wider spreads creates positive here and a steepening of the spread curve creates a positive and that's really what happened in the second quarter right.

Scott Hartz: And that's, by the way, I should say that's part of the reason we chose to go fair value through OCI. I mean, that's noise that won't really affect cash flows or anything till many, many years in the future. And so much will change between now and then. It really is an artifice of the PV of all of this. And so it's noise that really does not belong in the P&L.

Scott Hartz: And that's, by the way, I should say that's part of the reason we chose to go fair value through OCI. I mean, that's noise that won't really affect cash flows or anything till many, many years in the future, and so much will change between now and then. It really is an artifice of the PV of all of this, and so it's noise that really does not belong in the P&L, from my perspective.

Speaker Change: Great Scott and that's by the way I should say that's part of the reason we chose to go fair value through OCI I mean, that's noise that.

Speaker Change: That won't really affect cash flows or anything to many many years in the future and so much will change between now and then it really is an artifice of the PV of all of this and so it it's noise that really does not belong in the P&L from my perspective.

Mario Mendonca: Enjoy your retirement, and thank you for tolerating me. Hey, well, thank you, Mario. And I will say, you know, I'll miss a lot about this place. And this exercise is something I'll miss.

Speaker Change: Enjoy your retirement and thank you for tolerating us over the years.

Mario Mendonca: Well, thank you, Mario. And I will say, you know, I'll miss a lot about this place. And this exercise is something I'll miss.

Speaker Change: Well, thank you Mario and I will say I will Miss a lot about this place in this exercise is something I'll Miss you all keep us on our toes I feel very good about our investment portfolio and investment team and I enjoy talking about it so I've enjoyed I've enjoyed our.

Merrill Mandolko: And there is one nuance in terms of the discount rates. You know, there's a little bit that would go through OCI based on what interest rates were when we locked them in at time of transition versus current interest rates. So it's a little bit complicated, but CSM if depleted through through P&L. Yeah, there's a question. Then is the CSM been depleted? At this point, we on some products in the US, as you can see in the in the quarter in US, we've got some life LAPS losses going through P&L. So some cohorts have been depleted, but not all of the cohorts.

Scott Hartz: You all keep us on our toes. I feel very good about our investment portfolio and investment team, and I enjoy talking about it. So I've enjoyed our conversations. Thank you.

Merrill Mandolko: Okay, my second question.

Scott Hartz: You all keep us on our toes. I feel very good about our investment portfolio and investment team, and I enjoy talking about it. So I've enjoyed our conversations. Thank you.

Speaker Change: Conversations thank you.

Speaker Change: Yeah.

Operator: Thank you. The next question is from Doug Young from Desjardins Capital Markets. Please go ahead.

Speaker Change: Thank you.

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

Doug Young: Hi, good morning. Hopefully, these will be relatively quick, but

Doug Young: Hi, good morning. Hopefully, these will be relatively quick. But

Doug Young: Hi, good morning, hopefully diesel relatively quick but the non attributable expenses were up a little more than I had expected sequentially. I think there are some reclassification of expenses for maintenance expense into this bucket. So I'm, just hoping to get a little bit of quantification of what that was and how to think about.

Doug Young: The non-attributable expenses were up a little more than I had expected.

Doug Young: Transcripts provided by Transcription Outsourcing, LLC.

Colin Simpson: I think there was some reclassification of expenses from maintenance expenses into this bucket, so I'm just hoping to get a little bit of quantification of what that was and how to think about that line item and whether there's future kinds of reclassifications that potentially could be coming.

Scott Hartz: This might be for column. Go to page 29 here presentation. So deep into your appendix. And I just appreciate it, sort of in the wheat, but it matters to book value growth. That net impact of 732 million is positive that's quarter sets, that's fine, but I'm surprised to see that kind of that size of a contribution from changes in corporate spread and interest rates. It was my understanding that with the implementation of IFRS 17, that those two lines, the fair value of the liabilities relative to fair value assets, would be fairly well matched and wouldn't see big changes.

Speaker Change: That line item and whether there's future kind of.

Speaker Change: Reclassifications that potentially could be coming.

Colin Simpson: Hey Doug, it's Colin here. You're right to point out an increase in NDA, Non-Directly Attributable Expenses. They're up 37 percent, $37 million quarter on quarter. Now some of that's due to higher expenses in items that we classify as non-directly attributable, things like a build-out of generative AI or some entity-sustaining expenses. So you would expect a bit of an increase on that. The other part, as you've mentioned, was the reclassification. And what's going on here is that we just completed our expense experience exercise.

Colin Simpson: Hey Doug, it's Colin here. You're right to point out an increase in NDA, Non-Directly Attributable Expenses. They're up 37%, $37 million quarter on quarter. Now, some of that's due to higher expenses in items that we classify as non-directly attributable, things like our build out of generative AI or some entity-sustaining expenses. So you would expect a bit of an increase on that. The other part, as you mentioned, was the reclassification. And what's going on here is that we just completed our expense experience exercise.

Speaker Change: Hey, Doug it's Colin how are you.

Doug: Right two points increase in NDA and non directly attributable expenses. They were up 37% 37 million quarter on quarter now some of that is due to higher expenses and expense items that we classify as non directly attributable things like a buildup of generative AI or some entity sustaining.

Speaker Change: Expenses. So you would expect a bit of an increase on that the other part as you mentioned was a reclassification and what's going on here is that we completed all expense experience exercise. This is the first one we've done since I first 17, so we wouldn't really deep into our expense experience and this did involve a little bit of reclassification between maintenance.

Scott Hartz: So maybe talk me through why it was big this quarter and could we see big swings to the negative if rates and spreads move the other way? Yes, thanks Mary, I mean you addressed it to me, so I'll start and I'm sure Scott's got quite a bit to say on this topic. So effectively our sensitivities don't necessarily, don't capture the spread environment and what we saw during the quarter was a steepening of the spread curve and that drove big gains.

Colin Simpson: This is the first one we've done since IFRS 17, so we went really deep into our expense experience. And this did involve a little bit of reclassification between maintenance and NDA. I would consider this quarter's NDA as a good run rate to use going forward. And I would remind everyone, we really focus on total expenses and total efficiency ratio and are very committed to improving that efficiency ratio. Hey, Doug, I might just add

Colin Simpson: This is the first one we've done since IFRS 17, so we went really deep into our expense experience, and this did involve a little bit of reclassification between maintenance and NDA. I would consider this quarter's NDA as a good run rate to use going forward. And I would remind everyone, we really focus on total expenses and total efficiency ratio and are very committed to improving that efficiency ratio.

Speaker Change: An NDA I would consider this quarter's NDA as a good run rate to use going forward and I would remind everyone. We really focus on total expenses and total efficiency ratio and very committed to.

Scott Hartz: Obviously, if that reverses, then the opposite could happen, but we've done a lot of work to make sure that our interest rate exposure is really minimized through extensive hedging, but what you see is really the spread impact. Yeah, and to explain that a little bit more, Mario, so if you think of our liabilities, they're very long and we can't get the asset portfolio long enough to match them, so we use derivatives to get the matching on the interest rate and immunize ourselves against that, but what that means is the derivatives do not have a spread component, whereas the liabilities and the assets have a spread component.

Doug Young: Two improving to improving that efficiency ratio, hey, Doug I might just add to <unk> comments that whilst as Colin mentioned, obviously, we got through our process to re really assess and evaluate our non directly attributable expenses and make sure that they're as accurate as possible. We also benchmark ourselves versus our peers and we believe that actually we're well positioned.

Unknown Speaker: Hey Doug, I might just add to Colin's comments that, as Colin mentioned, we go through a process to really assess and evaluate our non-directly attributable expenses and make sure that they're as accurate as possible. We also benchmark ourselves versus our peers, and we believe that we're actually well positioned on that front as well as quite conservative, which is where we want to be.

Roy Gori: I might just add to Colin's comments that, as Colin mentioned, obviously, we go through a process to really assess and evaluate our non-directly attributable expenses and make sure that they're as accurate as possible. We also benchmark ourselves versus our peers, and we believe that we're actually well positioned on that front as well as quite conservative, which is where we want to be.

Speaker Change: On that front as well is quite conservative, which is why we want to be.

Speaker Change: Perfect and then maybe Steve.

Unknown Speaker: and then maybe Steve. Can you refresh us on what you're seeing in the long-term care insurance book?

Doug Young: and then maybe Steve. Can you refresh us on what you're seeing in the long-term care insurance book and, you know,

Speaker Change: Can you refresh us on what Youre seeing in the long term care insurance book and just the negative P&L experience the offset by the experience and the CSM this quarter.

Scott Hartz: So we have overall spread risk, called spread duration, the spread duration on our assets is shorter than the spread duration of liabilities, so overall higher spreads decrease the liabilities more than they decrease the assets, and then the steepness matters a lot too, because liabilities are pretty long and where the mismatch is is we don't have assets as long as our liabilities, so really spreads at the long end versus the intermediate part of the curve where a lot of our assets are stacked up matters. So bottom line, wider spreads creates positive here and a steepening of the spread curve creates a positive, and that's really what happened in the second quarter.

Unknown Executive: Unknown Executive, Jodie Wallis, Manulife Financial Corp

Brooks Tingle: Unknown Executive, Brooks Tingle, Manulife Financial Corp. Thanks. Sure, Doug. Thanks. Yes.

Steve: Wasn't a full offset so the impact was not negative I think the numbers are fairly small.

Jodie Wallis: Transcripts provided by Transcription Outsourcing, LLC. Sure, Doug. Thanks. Yes.

Speaker Change: I was just hoping maybe you can flush that out and what impacted the reinsurance transaction you'll have on these patterns, yeah, if anything what cologuard.

Speaker Change: You've seen the negative experience in the P&L versus like machine and the CSM, just hoping to get some color on those items.

Brooks Tingle: Sure, Doug. Thanks. Yes.

Jodie Wallis: Sure, Doug. Thanks. Yes, and you're correct. Q2 was a modest negative, all in, combined P&L and CSM, which is really how we look at the overall experience. And you notice as well, that this is the first time in nine quarters that we've had any negative in LTC. So certainly not the beginning of a trend, but what we have seen a continuation of trends is that for those on claim, the cost of providing care is higher than the valuation assumptions. And that's what's going through the P&L. But that has been offset, more than offset over time by less people going on claims. So, favorable incidents.

Brooks Tingle: And you're correct. Q2 was a modest negative, all in combined P&L and CSM, which is really how we look at the overall experience. And you notice as well, that this is the first time in nine quarters that we've had any negative in LTC in the experience, so certainly not the beginning of a trend. But what we have seen is a continuation of trends is that for those on claim, the cost of providing care is higher than the valuation assumptions, and that's what's going through the P&L.

Speaker Change: Sure Doug Thanks, Yes, and Youre correct Q2 was a modest negative all in combined P&L in CSM, which is really how we look at the overall experience and you noticed as well that.

Scott Hartz: And that's by the way, I should say that's part of the reason we chose to go fair value through OCI. I mean, that's noise that won't really affect cash flows or anything until many, many years in the future and so much will change between now and then, it really is an out of this of the PV of all of this, and so it's noise that really does not belong in the P&L from my perspective.

Speaker Change: That is the first time in nine quarters that we've had at <unk>.

Speaker Change: Any negative in LTC any any experience so certainly not the beginning of a trend, but what we have seen a continuation of.

Brooks Tingle: But that has been offset, more than offset over time, by less people going on claim, so favorable incidents. And we believe these two are related in terms of some of the dynamics. In the quarter specifically, you know, we had been seeing claim termination gains, but, you know, Q2 wasn't, we didn't see those gains coming through. There were some losses on claim termination. But again, those can vary from quarter to quarter. So those are the dynamics of what we've seen. We've seen, you know, overall mortality levels, including in long-term care, trend back to normal levels, but we do see this continued higher cost of care offset by significantly lower incidents.

Speaker Change: Of trends is that are there for those on claim the cost of providing care is higher than the valuation assumptions and that's what's going through the P&L, but that has been offset more than offset over time by less people going on claim so favorable incidents and we believe these two are are related in terms of some of the dynamics.

Scott Hartz: I enjoy your retirement and thank you for tolerating us over the years. Well, thank you, Mario, and I will say, you know, I'll miss a lot about this place, and this exercise is something I'll miss. You all keep us on our toes. I feel very good about our investment portfolio and investment team and I enjoy talking about it, so I've enjoyed our conversations. Thank you.

Jodie Wallis: And we believe these two are related in terms of some of the dynamics. In the quarter specifically, you know, we had been seeing claim termination gains. But, you know, Q2 wasn't, we didn't see those gains coming through. There were some losses on claim termination. But again, that those can vary quarter to quarter. So those are the dynamics of what we've seen. We've seen, you know, overall mortality levels, including in long-term care, trending back to normal levels. But we do see this continued higher cost of care offset by significantly lower income.

Speaker Change: In the quarter, specifically, we had been seeing.

Speaker Change: Claim termination gains, but Q2 was we didn't see those those gains coming through there were some losses on claim termination, but again those can vary quarter to quarter. So those are the dynamics of what we've seen we've seen overall mortality levels, including in long term care trend back to normal levels, but we do see that.

Doug Young: The next question is from Doug Young, from Desjardins Capital Markets. Please go ahead. Good morning. Hopefully these will be relatively quick, but the non-attributable expenses were up a little more than I'd expected sequentially. I think there was some reclassification of expenses from making expense into this bucket, so I'm just hoping to get a little bit of quantification of what that was and how to think about that line item and whether those future kind of reclassifications that potentially could be.

Speaker Change: Continued higher cost of care offset by significantly lower incidents.

Speaker Change: I appreciate the color. Thank you.

Speaker Change: Thank you.

Operator: The next question is from Lemar Persaud from Cormark Securities. Please go ahead.

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

Lemar Persaud: Yeah, just a quick one here, maybe for Scott or Trevor. Can you guys quantify all the charges related to PE? I mean, you gave the real estate at around $150 million, and then there's the PE piece, and then some other idiosyncratic issues. Just wondering if you could give that component, specifically. Sure, Lemar, it's Scott.

Lemar Persaud: Yeah, hopefully, just a quick one here maybe for Scott or Trevor. Can you guys quantify all the charges related to PE? I mean, you gave the real estate at around $150 million, and then there's the PE piece and then some other idiosyncratic issues. Just wondering if you could give that component, specifically. Sure, Lemar, it's Scott.

Lamar Prasad: Yeah, hopefully just a quick one here maybe for Scott or Trevor.

Doug Young: Carlton. Hey Doug, it's Colin here. You write to point out increase in NDA and non-Durakia Tributable Expenses. They're up 37%, 37 million, quarter on quarter. Now some of that's due to higher expenses in items that we classify as non-Durakia Tributable things like a build out of generative AI or some entity sustaining expenses. So you would expect a bit of an increase in that. The other part, as you mentioned, was a reclassification.

Lamar Prasad: Can you guys quantify the all the charge related to P. I mean, he gave the real estate at around $150 million and then there is the a.

Speaker Change: The P P sand that some other idiosyncratic issues I'm just wondering if you could give that component.

Speaker Change: B piece specifically.

Scott Hartz: The real estate loss was a bit less than $150 million, and the P.E. loss was a bit more than $150 million. Okay, and then how much do we need to see short rates come down to provide relief on that portfolio? Like, is it, are we talking about 50 basis points? So Q3 might be a tough quarter, as you kind of alluded to, but how much do we need to see rates come down in the US to provide relief on that portfolio?

Lamar Prasad: Sure Omar it's Scott the the real estate, well I, suppose a bit less than $150 million and the <unk> was a bit more than $150 million.

Doug Young: And what's going on here is that we completed our expense experience exercise. This is the first one we've done since IFRS 17. So we weren't really deep into our expense experience. And this did involve a little bit of reclassification between maintenance and NDA. I would consider this course as NDA as a good run rate to use going forward. And I would remind everyone, you know, we really focus on total expenses and total efficiency ratio.

Lamar Prasad: Okay and then.

Speaker Change: How much do we need to see short rates come down to provide relief on that portfolio. Like is there is it like are we talking like 50 basis, So Q3 might be a tough quarter as you kind of alluded to but how much do we need to see rates come down in the U S to provide relief on that portfolio.

Doug Young: And very committed to our to improving that to improve. And improving that efficiency ratio. Hey Doug, I might just add to Colin's comments that whilst as Colin mentioned, you know, obviously we go through a process to really assess and evaluate our non-Durakia Tributable Expenses and make sure that there is accurate as possible. We also benchmark ourselves versus our peers. And we believe that actually we're well positioned on that front as well as quite conservative, which is where we want to be.

Scott Hartz: Yeah, I think any amount of decrease will be helpful, and I don't think we need short rates to get down close to zero the way they were before to start meeting our long-term assumptions. But, you know, it's difficult to quantify that exactly. I think if we get the, you know, markets are now expecting 7500 basis points of drop in short rates by the end of the year. If we get something like that, that'll be, you know, very positive for that portfolio.

Speaker Change: Yeah, I think any amount of decrease will be helpful and I don't think we need short rates to get down close to zero. The way they were before to start meeting our long term assumptions, but.

Colin Simpson: Perfect.

Speaker Change: It's it's difficult to quantify that exactly I think if you know if we get the.

Speaker Change: You know markets now expecting 75 to 100 basis points of drop in short rates by the end of the year, if we get something like that that'll be very positive for that portfolio.

Doug Young: And then maybe Steve, I can refresh us on what you're seeing in the long-term care insurance book and, you know, just the negative P&L experience, you know, the offset by the experience in the CSM. This quarter, you know, the CSM wasn't a full offset. So, you know, the impact was negative.

Lemar Persaud: Okay, thanks. That's it for me.

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

Speaker Change: Thank you.

Operator: And the next question is from Nigel D'Souza from Veritas Investment Research. Please go ahead.

Speaker Change: And the next question is from Nigel D'souza from dairy cows investment research. Please go ahead.

Lemar Persaud: Thank you. Good morning.

Nigel D'Souza: Thank you. Good morning.

Nigel D'Souza: Thank you and good morning, I wanted to circle back on all the.

Steven Finch: I think the numbers are fairly small. But just hoping to maybe can close that out. And what impacted the reinsurance, you know, transaction, you know, have on these patterns. If, if any, you know, what cohort are you seeing the negative experience and the P&L versus what you're seeing in the CSM, just hoping to get some color on those items. Thanks.

Nigel D'Souza: So that the weaker than expected performance in our private equity wondering how that ties into the recent reinsurance transactions I believe the intention is to <unk>.

Unknown Speaker: I wanted to circle back on ALDA, that weaker than expected performance in private equity. I'm wondering how that ties into the recent reinsurance transactions. I believe the intention is to have dispositions in ALDA, specifically private equity assets. Does this make it more difficult to transact, or is there any change in, I guess, your intentions or timing of those ALDA dispositions?

Nigel D'Souza: I wanted to circle back on ALDA, that weaker than expected performance in private equity. I'm wondering how that ties into the recent reinsurance transactions. I believe the intention is to have dispositions in ALDA, specifically private equity assets. Does this make it more difficult to transact, or is there any change in, I guess, your intentions or timing of those ALDA dispositions?

Speaker Change: Dispositions and all the specifically private equity assets does this make it more difficult to transact or is there any change in.

Steven Finch: Sure, Doug. Thanks. Yes. And your correct Q2 was a modest negative all in combined P&L and CSM, which is, you know, really how we look at the overall experience.

Speaker Change: I guess your intentions or timing, if the salt of dispositions.

Scott Hartz: Sure. Thanks, Nigel.

Speaker Change: Sure. Thanks, Nigel you know I'll start by saying for the long term care transaction, we closed in the first quarter, we've pretty much completed the ALDA dispositions. We were intended to sell $1 7 billion of all that we've sold $1 $6.500 billion of that was private.

Steven Finch: And you notice as well, that is the first time in nine quarters that we've had any any negative in LTC in the experience. So certainly not the beginning of a trend. But what we have seen a continuation of trends is that for those on claim that cost of providing care is higher than the valuation assumptions. And that's what's going through the P&L. But that has been offset more than offset over time by less people going on claim.

Roy Gori: You know, I'll start by saying for the long-term care transaction we closed in the first quarter, we've pretty much completed the ALDA dispositions. We were intended to sell $1.7 billion of ALDA, and we sold $1.6 billion. $500 million of that was private equity. And in total, we achieved a higher value than our last value on our books, so we feel very good about that, and that's pretty much done. For the Canadian reinsurance transaction, we closed it in the second quarter.

Nigel D'Souza: Equity and in total we achieved.

Nigel D'Souza: A higher value than than are our last value on our books. So we felt feel very good about that and that's pretty much done for the Canadian <unk>.

Nigel D'Souza: Reinsurance transaction, we closed in the second quarter.

Steven Finch: So favorable incidents. And we believe these two are related in terms of some of the dynamics. In the quarter specifically, you know, we had been seeing claim termination gains, but you know, Q2 was, we didn't see those those gains coming through. There were some losses on claim termination. But again, that those can vary quarter to quarter.

Nigel D'Souza: We sold the roughly $600 million of public equity that was backing that block in the second quarter, and we have $600 million of all the to sell.

Roy Gori: We sold the roughly $600 million of public equity that was backing that block in the second quarter, and we have $600 million of ALDA to sell in Canada. We expect to complete that during the balance of the year. Probably not much of that will come out of private equity. So, no, bottom line, I don't think the underperformance we've seen recently in public equity will affect Dark Nigel.

Nigel D'Souza: In Canada, we expect to complete that during the balance of the year, probably not much of that will come out of private equity. So no bottom line I don't think the.

Steven Finch: So those are the dynamics of what we've seen. We've seen, you know, overall mortality levels, including in long term care trend back to normal levels. But we do see this continued higher cost of care offset by significantly lower incidents. Appreciate the color.

Nigel D'Souza: <unk>.

Speaker Change: The underperformance, we've seen recently in public equity will affect any of that Nigel really here I might just add some strategic thoughts as it relates to older because there's been some really good questions on older and rightfully so.

Operator: Thank you.

Roy Gori: Nigel, Roy here. I might just add some strategic thoughts as it relates to Alder, because there have been some really good questions about Alder, and rightfully so. I would say a couple of things. First, Alder has been a really good asset class for us. It's great for our business because we've got long-duration liabilities, and to match that with great long-term assets from a tenure perspective but also with an asset class that's delivered superior returns with lower volatility than equities is, we believe, a source of strength.

Roy Gori: Nigel, Roy here. I might just add some strategic thoughts as it relates to Alder, because there have been some really good questions about Alder, and rightfully so. I would say a couple of things. First, Alder has been a really good asset class for us. It's great for our business because we've got long-duration liabilities, and to match that with great long-term assets from a tenure perspective, but also with an asset class that's delivered superior returns with lower volatility and equities is, we believe, a source of strength.

Speaker Change: I would say a couple of things first is the oldest being a really good asset class for us it's great for our business because we've got long duration liabilities and to match that with great long term assets from a tenure perspective, but also with an asset class that's delivered superior returns with lower volatility than equities.

Lemar Persaud: The next question is from Lemar Persaud, from Quarmark Securities. Please, go ahead. Yeah, we just a quick one here. Maybe for Scott or Trevor. Can you guys quantify all the charge related to PE? I mean, he gave the real estate at around 150 million, and then there's the PEP, some other idiosyncratic issues. Just wondering if you could give that component the PEP specifically. Sure, Lemar, Scott. The real estate was a bit less than 150 million, and the PE was a bit more than 150 million.

Nigel D'Souza: We believe a source of strength and it's something that we've got a lot of experience and in fact more than 20 years and we can now see on the retail and on the institutional side a lot more interest in this asset class and we're well positioned to even provide value there.

Roy Gori: And it's something that we've had a lot of experience in, in fact, more than 20 years, and we can now see on the retail and on the institutional side a lot more interest in this asset class, and we're well positioned to even provide value there. We are going to see some volatility from time to time. What we've seen, though, is in historic times when we've underperformed our long-term assumptions, we've typically seen periods of outperformance that follow.

Nigel D'Souza: We are going to see some volatility from time to time, what we've seen though is in historic times, where we've underperformed our long term assumptions. We've typically seen periods of outperformance that follow in 2020, you'll remember that we had a $1 4 billion negative versus that long term assumption.

Roy Gori: In 2020, you'll remember that we had a $1.4 billion negative versus our long-term assumption, and the following year, in 2021, we saw a $1.6 billion outperformance. So, yes, we are seeing some volatility there, and that's a function of the current market environment, and certainly rates are a factor there, but much more so is the uncertainty from a markets perspective. But we still have a lot of conviction as it relates to this asset class and believe it's a source of strength for our business.

Roy Gori: In 2020, you will remember that we had a $1.4 billion negative versus our long-term assumption, and the following year, in 2021, we saw a $1.6 billion outperformance. So, yes, we are seeing some volatility there, and that's a function of the current market environment, and certainly rates are a factor there, but much more so is the uncertainty from a markets perspective. But we still have a lot of conviction as it relates to this asset class and believe it's a source of strength for our business.

Scott Hartz: Okay, and then, how much do we need to see short rates come down to provide relief on that portfolio? Is it like, are we talking like 50 basis? So 2, 3 might be a tough quarter as you kind of alluded to. But how much do we need to see rates come down in the U.S, to provide relief on that portfolio? Yeah, I think any amount of decrease will be helpful. And I don't think we need short rates to get down close to zero the way they were before to start meeting our long term assumptions.

Speaker Change: And in the following year in 'twenty, one we saw a $1 6 billion outperformance. So yeah. We are seeing some volatility there and that's a function of the current market environment and suddenly rights is a factor there but.

Nigel D'Souza: But much more so is the uncertainty from a market perspective, but we still have a lot of conviction as it relates to this asset class and believe it's a source of strength for our business.

Roy Gori: Great, that's helpful. And then on the NCIB, I believe that it has been increased now from $2 billion to $3 billion in terms of the capital that was freed up from your transactions. I was wondering if you could expand on, is there an impact of the LICAT here from upsizing the NCIB? And is it also going to result in a reduction in surplus assets or earnings on the surplus run rate? And wondering if, you know, the math and arithmetic on those deals is still, you know, net accretive to core EPS.

Speaker Change: Great. That's helpful and then on the NCI would be I believe that's upsized from $2 billion.

Scott Hartz: But, you know, it's difficult to quantify that exactly. I think if we get the markets now expecting 7,500 basis points of drop in short rates by the end of the year, if we get something like that, that will be very positive for that portfolio. Okay, thanks.

Speaker Change: Two 3 billion in terms of the capital that was freed up from your transactions I was wondering if you could expand on what is there an impact of like catch here from.

Speaker Change: Upsizing that NCI is also going to result in a reduction in surplus assets earnings on surplus.

Speaker Change: Run rate I'm wondering if the math in Arrhythmic arithmetic on that those deals if it still.

Lemar Persaud: That's it for me. Thank you.

Nigel D'Souza: And the next question is from Nigel D'Souza from Variety House Investment Research. Please go ahead. Thank you.

Speaker Change: Net accretive to core EPS.

Colin Simpson: Let me start on that, and I'll ask Colin to chime in if he would like. You're right, we are upsizing our NCIB, and it's a function of a few things. The first is that we're in a very strong capital position, as highlighted by Colin earlier. We have $24 billion of capital in excess of our supervisory minimum, and $10 billion in excess of our upper operating range. So we feel really good about our capital position.

Speaker Change: Yeah, let me start on that and I'll ask Colin to chime in if he if he would like.

Nigel D'Souza: Good morning. I wanted to circle back on Alda. That weaker than expected performance in private equity, wondering how that ties into the recent reinsurance transactions. I believe the intention is to have this position in Alda, specifically private equity assets. Does this make it more difficult to transact, or is there any change in, I guess, your intentions or timing of those Alda decisions? Sure. Thanks, Nigel. You know, I'll start by saying for the long term care transaction, we closed in the first quarter.

Speaker Change: Youre right, we are upsizing, our in CIB and it's a function of a few things.

Colin: First is that we're in a very strong capital position is highlighted by calling earlier, we have $24 billion of capital in excess of that supervisory minimum $10 billion in excess of our upper operating range. So we feel really good about our capital position I'll also note that our leverage ratio is now lower than 25% on a pro forma basis actually 24%.

Colin Simpson: I'll also note that our leverage ratio is now lower than 25% on a pro forma basis, actually 24%. At Investor Day, we articulated some pretty ambitious plans for the franchise to deliver an 18 plus percent ROE, 10 to 12% coreings for share growth, and strong cumulative remittances of about $22 billion. So while we previously articulated that we would at least deploy the capital that we freed up from the transactions to buybacks, now we believe and are confident and have conviction that we will actually deploy the full amount of our buyback, which will be in excess of $3 billion.

Colin: At Investor Day, we articulated some pretty ambitious plans for the franchise to deliver an 18 plus percent Roe a.

Colin: 10% to 12% core earnings per share growth and strong cumulative remittances of about $22 billion.

Nigel D'Souza: We've pretty much completed the Alda dispositions. We were intended to sell 1.7 billion of Alda. We sold 1.6 billion. 500 million of that was private equity. And in total, we achieved, you know, a higher value than our last value on our books. So we felt, feel very good about that.

Speaker Change: So while we previously you had articulated that we would at least.

Colin: Deploy the capital that we've freed up from the transactions to buybacks now we believe and are confident and have conviction that we will actually.

Roy Gori: And that's pretty much done. For the Canadian reinsurance transaction, we closed in the second quarter. We sold the roughly 600 million of public equity that was backing that block in the second quarter, and we have 600 million of Alda to sell in Canada. We expect to complete that during the balance of the year, probably not much of that will come out of private equity.

Colin: But deploy the full amount of our buyback, which will be in excess of $3 billion.

Colin Simpson: It should not impact our like-hat ratio because as we free up capital from the sale and disposal of older ones, that will translate into the capital that we're deploying. But Colin, you may want to chime in with some perspectives as well. Yeah, Nigel, the only thing to add is that we're currently earning a blended rate of 2.9% on our surplus. So when we're using our surplus to buy back stock, you can see the sort of value enhancement from this type of capital allocation activity.

Collyn: It should not impact out like cat ratio, because as we free up capital from the sale and disposal of older that will translate into the capital that we're deploying but collyn you might want to chime in with some perspectives as well yeah. Nigel the only thing to add is that we're currently earning a blended rate of two 9% on all surplus so when we're using our surplus too.

Roy Gori: So no bottom line, I don't think the underperformance we've seen recently in public equity will affect any of that. Nigel, Roy here, I might just add some strategic thoughts as it relates to Alda because there's been some really good questions on Alda and rightfully so. I would say a couple of things. First is that Alda's been a really good asset class for us. It's great for our business because we've got long duration liabilities and to match that with great long term assets from a tenure perspective.

Collyn: Buy back stock you can see the sort of value enhancement from this type of capital allocation activity.

Roy Gori: But also with an asset class that's delivered superior returns with lower volatility than equities is we believe a source of strength. And it's something that we've got a lot of experience in in fact more than 20 years. And we see now see on the retail and on the institutional side a lot more interesting this asset class and we're well positioned to even provide value there. We are going to see some volatility from time to time.

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

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

Speaker Change: Thank you.

Operator: The next question is from Mario Mendonca from TV Securities. Please go ahead.

Speaker Change: The next question is female Mendonca TD Securities. Please go ahead.

Mario Mendonca: I have to be quick. Have you seen any impact in Japan from the recent volatility? I know the market's sort of stabilized since, but that was quite a shock to the system, and rates are changing there. Is there any change in behavior that you would point us to, probably from Thanks, Mario.

Unknown Speaker: I have to be quick. Have you seen any impact in Japan from the recent volatility? I know the market's sort of stabilized since, but that was quite a shock to the system, and rates are changing there. Is there any change in behavior that you would point us to, probably from

Speaker Change: Quick.

mendonca: Have you seen any impact in Japan from the recent volatility I know the markets sort of stabilize sense, but that was quite a shock to the system and rates are changing there is there any change in behavior that you would point us to probably fulfill.

Speaker Change: Yeah.

Phil: It's very early days, but what I do expect is the very strong sales growth that we've seen in recent quarters in Japan and, notably, in the second quarter. I do expect that to moderate in future quarters as macro conditions normalize. It has been boosted by current, I say current, but foreign exchange rate levels in the second quarter as well as equity market conditions. But I think it's really important to highlight from a macro perspective that the movements we're currently seeing in the macro environment in Japan don't really impact us materially from a balance sheet perspective.

Phil: Thanks, Mario, for the question. The simple answer is no.

Speaker Change: Thanks, Mario for the question. So simple answer is no. It's very early days, what I do expect us.

Speaker Change: The very strong sales growth that we've seen in recent quarters in Japan, and notably in the second quarter I do expect that to moderate in future quarters as macro conditions normalize. It has been boosted by current Fargo I say current but foreign exchange rate levels in the second quarter as well as equity market conditions.

Roy Gori: What we've seen though is in historic times where we've under performed our long term assumptions. We've typically seen periods of out performance that follow in 2020. You will remember that we had a $1.4 billion negative versus that long term assumption. And in the following year in 21 we saw a 1.6 billion out performance. So yeah, we are seeing some volatility there. And that's a function of the current market environment and certainly rates is a factor there. But but much more so is the uncertainty from a markets perspective.

Speaker Change: But I think it's really important to highlight from a macro perspective. The movements. We are currently seeing in the macro environment in Japan don't really impact us materially from a balance sheet perspective, we're well matched from an <unk> point of view and naturally we it's something we manage very carefully more broadly on the topic of Japan I do run.

Phil: We're well-matched from an ALM point of view, and naturally, it's something we manage very carefully. More broadly, on the topic of Japan, I do remain optimistic. You know, the environment is favorable in terms of government policy, encouraging customers to provide for their own retirement needs and long-term saving needs. So I think this is something that will sustain growth, albeit at more normal levels in the years to come.

Speaker Change: Main optimistic.

Roy Gori: But we still have a lot of conviction as a relates to this asset class and believe it's a source of strength for our business. Chris, great, that's helpful. And then on the NCIB, I believe that's up size now from $2 billion to $3 billion in terms of the capital that was freed up from your transactions. It's wondering if you could expand on, is there an impact of the light catch here from upsizing that NCIB?

Speaker Change: The environment is favorable in terms of a government policy encouraging customers to provide for their own retirement needs and long term saving needs. So I think this is something that will sustain growth, albeit at more normal levels in the quarters to come.

Speaker Change: Thank you.

Operator: There are no further questions registered at this time. I'd like to turn the meeting back over to Mr. Ko.

Speaker Change: There are no further questions registered at this time I'd like to turn the meeting back over to Mr. Cola.

Roy Gori: And is it also going to result in a reduction in surplus assets or earnings on surplus run rate and wondering if, you know, the math and arithmetic, arithmetic on those deals if it's still, you know, net accreted to Cory PS? Yeah, let me start on that and I'll ask Colin to chime in if he would like. You're right. We are upsizing our NCIB and it's a function of a few things. First is that we're in a very strong capital position as highlighted by Colin earlier.

Hung Ko: Thank you, operator. We will be available after the call if there are any follow-up questions.

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

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

Roy Gori: We have $24 billion of capital in excess of our supervisory minimum, $10 billion in excess of our operating range. So we feel really good about our capital position. I'll also note that our leverage ratio is now lower than 25% on a pro form of basis, actually 24%. At investor day, we articulated some pretty ambitious plans for the franchise to deliver an 18 plus percent ROE, 10 to 12 percent courings for share growth, and strong cumulative remittances of about $22 billion.

Roy Gori: So while we previously had articulated that we would at least deploy the capital that we freed up from the transactions, the buybacks, now we believe and are confident and have conviction that we will actually deploy the full amount of our buyback, which will be in excess of $3 billion. It should not impact our like at ratio because as we free up capital from the sale and disposal of older, that will translate into the capital that we're deploying.

Roy Gori: But Colin, you may want to chime in with some perspectives as well. Yeah, and I do the only thing to add is that we're currently earning a blended rate of 2.9 percent on our surplus. So when we're using our surplus to buy back stock, you can see the sort of value enhancement from this type of capital allocation activity.

Colin Simpson: Okay, that's it from me.

Mario Mandolko: Thank you.

Philip Witherington: The next question is from Mario Mandolko from TV Securities. Please, go ahead. Be quick. Have you seen any impact in Japan from the recent volatility? I know the market sort of stabilized since, but that was quite a shock to the system and rates are changing there. Is there any change in behavior that you would point us to? Probably for Phil. Thanks, Mario, for the question.

Philip Witherington: The simple answer is no, it's very early days. What I do expect is the very strong sales growth that we've seen in recent courses in Japan and notably in the second quarter. I do expect that to moderate in future courses as macro conditions normalize. It has been boosted by current, I say current, but foreign exchange rate levels in the second quarter as well as equity market conditions. But I think it's really important to highlight from a macro perspective, the movements we're currently seeing in the macro environment in Japan, don't really impact as materially from a balance sheet perspective.

Philip Witherington: We're well matched from an ALM point of view and naturally we have something we manage very carefully. More broadly on the topic of Japan, I do remain optimistic. The environment is favorable in terms of government policy, encouraging customers to provide for their own retirement needs and long term saving needs. I think this is something that will sustain growth, albeit at more normal levels in the courses to come. Thank you.

Operator: There are no further questions. You're registered at this time.

Hung Ko: I'd like to turn the meeting back over to Mr. Cole. Thank you, operator. We'll be available after the call if there are any questions. Have a good day, everyone. Thank you very much.

Q2 2024 Manulife Financial Corp Earnings Call

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