Q1 2025 Manulife Financial Corp Earnings Call
. On participants, please continue to stand by. The conference will begin momentarily.
Once again, please continue to... [inaudible]
This conference is being recorded. This conference is being recorded. [inaudible]
Speaker Change: Please stand by, your meeting is ready to begin. Please be advised that this conference call is being recorded. Good morning, ladies and gentlemen. Welcome to the Manulife Financial First Quarter 2025 Financial Results Conference call. I would now like to turn the meeting over to Mr. Hong Kong. Please go ahead, sir. Thank you, Mr. Hong Kong.
Speaker Change: Thank you. Welcome to Manulife's earnings conference call to discuss our first quarter 2025 financial and operating results.
Speaker Change: Our earnings materials, including webcast slides of today's call, are available on the Investrelations section of our website at Manulife.com Before we start, please refer to slide two for caution on for-looking statement and slide 34, for notes on non-gab and other financial measures used in this presentation.
Speaker Change: Please note that certain material factors, assumptions applied in making poor living statements, and actual results made different materially from what is stated. Turn to slide four. We'll be in today's presentation with Roy Gori, a president and chief executive officer. We'll provide a highlight of our first quarter 20.5 results and a strategic update.
Roy Gori: Following Roy, Colin Simpson, our chief financial officer will discuss the company's financial and operating reserves in more detail before we hand it over back over to Roy for closing remarks.
Speaker Change: Before I pass over to Roy, I would like to thank the opportunity to acknowledge that this will be his last earnings card with us as CEO . I would like to thank him for his leadership and transforming Manulife during his tenure. With that, the lectern will call over to Roy.
Speaker Change: Thanks, Hung, and thank you everyone for joining us today. Yesterday we announced our first quarter 2025 financial results.
Speaker Change: We delivered strong first quarter results and maintained the momentum that we built through 2024.
Speaker Change: We generated strong growth across our top line metrics for each of our insurance segments. Of note, age or APE sales increased 50%, reflecting strong customer demand and continued execution in the region.
Speaker Change: Global WAN, once again generated positive net flows, which is a solid result given the increased market volatility.
Speaker Change: OORPS increased 3%, reflecting the continued momentum in our Asia and Global WAN businesses, as well as the impact of Shea Barbax.
Speaker Change: So you'll see, our first quarter results include a charge in our PNC re-insurance business related to the California Wall Funds, as well as a higher ECO provision reflecting market conditions in the first quarter.
Speaker Change: After normalizing to these two items, our poor EPS would have increased 9%
Speaker Change: Despite the increasingly volatile operating environment, I'm proud of our results which are a function of our discipline execution and a testament to the strength of the Manulife franchise and our team.
Speaker Change: I know this is top of mind for many of you, and while we won't be immune to the potential macroeconomic headwind brought on by the trade tensions, I'm going to spend a few moments reinforcing the work that we've done with the transformation of Manulife to put us in a position of strength.
Speaker Change: First, as expected, our results are more stable under eye for a 17 and during the quarter, we continue to steadily grow our book value while returning capital to shareholders.
Speaker Change: In addition, our balance sheet remains robust, supported by our strong likeout ratio of 137% and a leverage ratio of 23.9%, which is well below our 25% medium turn target.
Speaker Change: A robust balance sheet is a significant source of strength, which coupled with our business and geographic diversity positions us well to navigate and capitalize opportunities through times of change.
Moving to slide 7
Speaker Change: Manulife is certainly a very different company today than during the global financial crisis.
Speaker Change: We have taken meaningful actions to de-risk our business, including implementing hedging strategies and executing multiple reinsurance transactions.
Speaker Change: Together with the implementation of IFR-17, we have significantly reduced our book value sensitivity to interest rate and equity market movements, which is now similar to our Canadian peers.
Speaker Change: On slide 8, our portfolio transformation towards higher return and lower risk has been supported by our recent milestone LTC transactions and Canadian Universal Life Transaction.
Speaker Change: We also re-enchored the majority of our U.S. Variable Newty book several years ago. [inaudible]
Speaker Change: These transactions have been instrumental in reducing risk both on the asset and liability sites and have improved our return profile all off securing attractive terms.
Speaker Change: The right half of this slide further demonstrates one way that we've improved our risk profile for shareholders.
Speaker Change: Over the past eight years, we've reduced the proportion of total older with direct shareholder exposure by 24 percentage points.
Speaker Change: And now let me represent 7% about totally invested assets.
Speaker Change: This reflects the benefits of reducing older as part of our insurance transactions as well as transforming our product portfolio.
Speaker Change: Looking forward, we'd expect this trend to continue with a growing proportion of our older backing participating or pass-through business.
Where Experience is Shade, or Post-Rude Policy Holders. [inaudible]
As you can see on slide 9.
Our diversification is another key source of strength. [inaudible]
Speaker Change: First, as a fundamental need, economic uncertainty could actually spur demand for protection products in the future . . . .
Speaker Change: Second, it's important to remember that most of our products and services are sold within each market, so we don't expect any direct impact to our products or services from tariffs.
Speaker Change: While we could see second-order impacts, such as lower market returns, elevated unemployment or slowing growth, these would be industry wide impacts and not specific to Manulife
Speaker Change: Moments like this highlight the importance about transformation journey and the benefits of the diversification of our franchise. Thank you very much.
which we strengthened over the past decade.
Speaker Change: We've made significant progress growing Asia and global land to have our highest potential businesses.
Speaker Change: This is consistent with our strategy, but as you can see, our Canada and US businesses are material contributors to total company earnings and remain attractive businesses with large enforced books.
Speaker Change: Within Asia, we've made tremendous progress growing adverse set of markets, including Hong Kong, Singapore, mainland China, International High Net Work and several emerging markets. [inaudible]
Speaker Change: The mega trends in the region, including growth of the middle class, large protection gaps and ageing populations which are important drivers of demand for our business will persist despite current macroeconomic or geopolitical headwinds. [inaudible]
Ongoble Wynn, we're also diversified by geography.
Speaker Change: Additionally, we're not over-indexed to any particular business line, which is an asset during market volatility. For example, our retirement business includes administration fees, which are less driven by markets and AUM.
Speaker Change: Our broad business diversification provides a resilient earnings profile that is less exposed to equity market performance.
Speaker Change: Onto Slide 10, which dives deeper into Asia. The segment has been focused on execution and has delivered strong growth.
Speaker Change: We've grown from the six largest Pan-Asian life insurer in 2014 to top three today.
Speaker Change: and we are out performing our peers as you can see from the growth in MVV and this is continuing in the first quarter.
Speaker Change: This success has been supported by productivity gains as well as improving the customer experience, where our net promoter score improved from negative 2 in 2017 to positive 57 today.
Speaker Change: Manulife's substantial digital transformation has been a key contributor to both outcomes.
Speaker Change: With that, I'll hand it over to Colin to review the highlights of our first quarter-point-h results, Colin.
Colin Simpson: Thanks, Roy. Come here for strong 2024. We maintained our momentum into the first quarter, and while the macroeconomic environment has become more challenging, I'm encouraged by the strong set of results we've delivered.
Colin Simpson: Let's begin on Slide 12. We delivered strong growth of over 30% and record results across AP sales, new business CSM and new business value.
Colin Simpson: IP sales increased 37% from the prior year with contributions from all our segments in particular tremendous growth of 50% in Asia.
Colin Simpson: Fifth supported our significant growth in value metrics with 36% growth in new business value and 31% growth in new business CSM, with the latter contributing to a strong 11% annualized organic CSM growth.
Colin Simpson: The strong top-line momentum, particularly in Asia where we continue to execute, will drive earnings for many years to come, including through higher CSM amortization.
Colin Simpson: Global Wham continued to deliver positive net flows of half a billion dollars despite the challenging market environment demonstrating the resilience of our diversified business with strength in our institutional business offset by outros in our retirement business. [inaudible]
Witherington, Hung Ko, Colin Simpson, Roy Gori
Please see the complete disclaimer at https://sites.google.com
Speaker Change: Our core earnings results on slide 13 and I'd like to highlight some of the key drivers of our earnings relative to the prior year.
Speaker Change: On insurance businesses continue to grow, contributing to higher insurance service result.
Speaker Change: Improved overall insurance experience across all insurance segments also supported this increase.
Speaker Change: But this was partially offset by a PNC re-insurance charge of 35 million US dollars pre-tax related to the California wildfires which is reported in our corporate segment.
Speaker Change: Our net investment result was impacted by low investment spreads and a net charge in the expected credit loss or ECL provision which compares with an ECL release in the prior year when the credit's environment was fairly benign.
Speaker Change: While our actual credit experience was a material, the 46 million pre-tax dollar ECL charge was driven by updates to our ECR model to reflect the deteriorating economic environment through the first quarter and is still within our guidance of 30 to 50 million dollars.
Speaker Change: The impact of the PNC re-insurance charge in high ECL moderated our core earnings growth by five percentage points.
Speaker Change: You'll note that global wham remained of second largest contributor to core earnings and once again generated strong growth, achieving over 20% growth in pre-tax core earnings for the sixth consecutive quarter
Speaker Change: I would also highlight that the three-way insurance transactions with RGN Global Atlantic over the past year reduce co-earnings by $12 million across multiple lines of the DOE.
Speaker Change: Onto Slide 14, Core EPS increased 3% as the modest decline in core earnings was more than offset by the impact of share buybacks.
Speaker Change: During the quarter, we reported a non-core charge of $781 million from realized losses, mostly from fixed income asset disposal related to our LTC re-insurance transaction with RGA, which closed in the beginning of January .
Speaker Change: This impact was largely offset in OCI, resulting in a neutral impact on book value and capital
Speaker Change: We also took a $208 million charge during the quarter as public equity returns were lower than expected.
Speaker Change: And we reported a charge of $275 million in our Albert portfolio mainly due to lower than expected return on commercial real estate and private equity investments.
Speaker Change: While this disrupted the recent trend of sequential improvements in our older experience, we remain confident that we will return to our long-term return assumptions.
Speaker Change: The impact of the current challenging macroeconomic environment on our performance, however, does mean that our expected normalization will likely be delayed in the near term.
Speaker Change: Moving on to the second view of results, we'll start with Asia on slide 15.
Speaker Change: I Asia segment continue to generate very strong growth in new business metrics with record level results.
Speaker Change: AP sales increased strongly by 50% from the prior year, primarily driven by growth in Hong Kong, which delivered growth across all channels, and Japan, as well as mainland China and Singapore within Asia Other [inaudible]
Speaker Change: The overall increase in sales contributed to robust growth in new business CSM and new business value of 38% and 43% respectively.
Speaker Change: We also generated record core earnings in Asia this quarter with a solid 7% growth year-on-year, reflecting continued business growth momentum, partially offset by an increase in the ECL provision and the impact of four gone earnings from the global Atlantic re-entrance transaction that closed in early 2024.
Speaker Change: In addition, we generated strong sequential growth of eight percent in core earnings and delivered another quarter of favorable insurance experience in both core earnings and CSM. [inaudible]
Speaker Change: Moving to one of our other high potential businesses, Global Wham, on slide 16. [inaudible]
Speaker Change: Global Wab had another strong quarter with 24% growth and core earnings. This was again supported by higher average third party AUMA, higher performance fees, and our ongoing focus on expense management.
Speaker Change: We delivered positive net flows for the quarter of half a billion dollars, driven my inflows from our institutional business, but these were largely offset by net outflows from our retirement business due to pension plan redemptions, and member withdrawals in North America.
Speaker Change: We again generated positive operating leverage with a core Eva-Dar margin of 28.4%, which expanded 290 basis points from the prior year.
Speaker Change: Next, we come to Canada on slide 17, where we delivered strong new business results during the quarter AP sales increased 9% from a year earlier with contributions from all business lines, which supported the double digit growth in new business CSM and new business value.
Speaker Change: Coilings increased by 3%, thanks to another quarter of favourable overall insurance experience and continued group insurance business growth.
Speaker Change: But this was partially offset by an increase in the ECL provision, as well as lower Manulife bank earnings, with the latter impacted by a reduction in net interest margin following the bank of Canada's recent interest rate cuts.
Lastly, our U.S. segments results on Slide 18.
Speaker Change: In the US, we once again delivered solid AP sales growth of 6%, demand for accumulation insurance products from the math and customers has remained firm, contributing to the growth in new business value of 30%.
Speaker Change: Coinings decreased 25% from a year earlier due to unfavorable net claims experience recorded in earnings lower investment spreads in increasing the ECL provision as well as the net impact of the basis change last year partially offset by favorable lapse experience. [inaudible]
Speaker Change: A U.S. earnings have been declining over the last few quarters due to a few factors, including the impact of the LTC reinsurance transactions, but this was offset in core EPS through share by banks.
Haia, ECL provision, given the current macroeconomic challenges.
Speaker Change: Lower investment spreads and last year's basis change, which reduced the CSM. [inaudible]
Speaker Change: Despite these recent headlines, we remain confident in the U.S. segment's ability to deliver steady earnings given the growth in profitable new business.
Speaker Change: Even after returning nearly $6.4 billion a capital to shareholders through dividends and share buybacks over the past year.
Speaker Change: As previously announced, we launched a new buyback program in late February 2025, allowing us to return freed up capital from our recent LTC reinsurance transaction to shareholders.
Speaker Change: And together with dividends and share mybacks, we returned over $1.2 billion a capital to shareholders during the course of.
onto our robust balance sheet on slide 20. [inaudible]
Speaker Change: These metrics reflect our strong financial resilience. Together with our significantly lower risk profile, they reinforce my confidence in our ability to operate from a position of strength in today's uncertain economic environment.
Speaker Change: While we have observed heightened market volatility in the second quarter, our robust balance sheet management and regular monitoring suggests a very little impact to these metrics as we stand today.
Speaker Change: And finally, on Slide 21, you will see the summary of how we're tracking against our 2027 and medium-term targets.
Speaker Change: To conclude, while we saw an impact on our bottom line due to a few factors that I noted earlier, we are pleased that our top-line results continue to exhibit strong momentum, and I'm proud of the results we've achieved this quarter.
Roy Gori: We remain focused on executing against our targets, and I'm confident that we're well-positioned to navigate through the economic cycle and capitalize on growth opportunities as their rise. Without our turn it back over to Roy for some closing remarks.
Roy Gori: Thanks, Colin. In closing, I want to say that it's truly been an honor to serve the CEO of Manulife.
Roy Gori: Today marks my 41st and final quarterly earnings call and it is bittersweet for me.
Roy Gori: I'm incredibly proud of our transformation, our achievements and of the momentum that we've created. We've become a digital customer leader, growing our highest potential businesses and reduce our risk profile and volatility, while significantly improving shareholder returns.
You also have a strong capital in financial position.
Roy Gori: Our high performing leadership team and our diverse business and geographic footprint will allow us to continue delivering profitable growth, outpacing our peers while delivering superior returns to our shareholders.
Roy Gori: Our strong business momentum, particularly in a challenging environment, is a testament to the strength of our franchise of our franchise.
Phil: While I will miss the incredible team and culture that we've built, looking forward, I know the company is in grey hands with Phil.
Roy Gori: We've worked together for many years and he has a tremendous track record of execution and delivery.
Roy Gori: I couldn't be more excited to watch him take Manulife to even greater heights. [inaudible]
Roy Gori: Before moving to Q&A, I'd like to thank our customers, without whom we wouldn't have a business.
Roy Gori: Thank you to our outstanding global team. Your dedication and engagement has been inspiring and I continue to believe that our culture remains a real source of differentiation.
Roy Gori: And thank you to our analysts and shareholders. You haven't tried away from holding us accountable, but have also recognized our progress and accomplishments when deserved.
Roy Gori: With that, this concludes our prepared remarks. Operator, we will now open the call to questions.
Thank you.
Speaker Change: We will not take questions from the telephone lines. If you have a question, please press star one. You may can solve your question at any time by pressing star two.
Speaker Change: Please press star one at this time if you have a question. That will be a brief part of our participants' register for questions. We thank you for your patience.
Speaker Change: The first question is from John Aiken from Jeffries. Let's go ahead. Let's go ahead.
John Aitken: Good morning, you know, obviously highlighted the strong sales we saw in Asia, was wanting to give us a sense in terms of what you're seeing on the ground and what that may translate for the review of the year.
John Aitken: General World Transfer Needs, and this is across Hong Kong, Singapore, China, and we're also seeing strong growth in Japan as well where we had launched last year. It's always the end of last year, a new product that has proved to be very successful in financial institution channels.
John Aitken: You ask about the outlook on sales and I will draw your attention to last year across Q2 and Q3. We did have a step up in sales momentum and so I would expect as we go through the course of 2025.
to see the growth rate normalized to more typical levels. [inaudible]
John Aitken: But I think the run rate that you see in cells is something that I feel good about. Now of course we are operating in an environment of
some macroeconomic uncertainty and while that doesn't have...
John Aitken: I suppose a direct impact on us, what I would draw your attention to is that an uncertain external environment can impact consumer sentiment and cause them to defer buying decisions, but at this point, I remain cautiously optimistic about the year ahead.
Speaker Change: Thanks, Scott. I just wanted to pass on my congratulations to Royal, all the best in your retirement.
Much appreciated. Thank you, John.
Speaker Change: Thank you. The following question is from Doug Young from the Jordan Capital Markets. Please go ahead.
Speaker Change: Good morning. Maybe I can dig a little further into the sales bill in Asia. I mean, Japan sales were strong as you talked about. I'm just curious how much of your Japan sales are linked to US dollar denominated products? [inaudible]
Speaker Change: You know, is there an anticipation of a shift in demand for this product in light of everything and something to fill the void and then...
Speaker Change: So that's in the Japan side, and then Hong Kong sales were strong, you know, the business value growth was strong. Can you talk a bit about the drivers there and, you know, any, you know, any kind of sense, like it was a step forward, this quarter, but the drivers were, thanks.
Phil: Great. Thank you, Doug. This is Phil. So I'll tackle the Japan.
Phil: Sales Question First, and you're right to highlight that one of our differentiators in Japan is the fact that we bring international capabilities to the Japan market and quite a large proportion of our overall business, something in the order of...
80% of our business is US Dollar Denominated.
Phil: for our customers, as well as the yield differential between US dollars and the Japanese yen, and both of those drivers of demand remain in place. So I think while we may see fluctuations in currency exchange rates, I don't see the exchange rate itself as the main driver of demand for foreign currency denominated products.
Phil: So I think when we look at Japan business...
A driving map. [inaudible]
Phil: Moving on to your question of Hong Kong, the drivers. So in Hong Kong, we continue to see
Really strong customer demand, and this is visible in all.
Phil: as well as broker channels. Notably, broker channels are going faster than other channels, but all channels are going strongly.
Phil: Predominantly driven by demand for saving solutions, although we are in the process of we have recently launched a couple of critical illness protection products that we expect.
Phil: To sort of drive higher demand, to fulfill the health and protection needs of both our domestic and mainland Chinese visitor customers. So I feel good about the growth in Hong Kong. Clearly there is some uncertainty in the external environment that may impact.
Customer Sentiment, of course.
So it could cause some customers to defer their buying decisions.
Phil: And again, similar to my earlier comments in the context of Japan from the second quarter of last year and into the third quarter we saw quite a step change in our South volumes in Hong Kong. So I would expect the growth rate to normalize as we go through the course of this year.
Okay, just a second question.
Phil: I'm sorry, Phil, I'm going to pick on you again here, but...
Phil: Yeah, this quarter Japan was down and I think I understand why that was and other was flat. You know, Hong Kong was obviously the big driver of the beat. Now there's lots going on in the region right now, so I'm just trying to get it, you got the GMC. So I'm just trying to get a sense of how you're feeling about that target as we look at 2025 and 2026.
Speaker Change: Okay, thanks, thanks, Doug. So our earnings guidance really applies at the total company level, 10 to 12 percent.
Speaker Change: When I look at the momentum that we've had in Asia, clearly very strong earnings growth through 2024, it's been a little lower in the first quarter of 2025.
Speaker Change: A big chunk of which related to Japan, so normalizing to that, actually the growth in Asia would have been about 11%.
Speaker Change: My expectations for the full year is that you know the run rate that you see in the first quarter is a good run rate.
Speaker Change: And first quarter of 2025, the organic growth rate, normalized organic growth rates in the CSM was 12%. So I think they're encouraging science.
Appreciate the color and, Roy, thanks for everything and all the best. Thank you.
Thank you, Doug.
Thank you [inaudible]
Speaker Change: The following question is from Gabriel Dechaine, from National Bank Financial. Please go ahead.
Speaker Change: You know, what the outlook for that, the trend particularly looks like, and follow up.
Speaker Change: Okay, thanks, Gabriel, this is Phil. You are right over the course of the past year. We've seen...
Speaker Change: Strong demand for saving solutions, and that's been across Hong Kong, it's been in Singapore, it's been in China, and these are all big markets that are driving some of the key trends in the numbers.
Speaker Change: We're really focused on fulfilling customer needs and we have a range of different solutions on the shelf as we look forward.
I do see the potential for...
Speaker Change: supplementing the savings demand with the fulfillment of other customer needs, health and protection needs. I referenced earlier the launchers and critical illness products in Hong Kong, I expect that to generate.
Speaker Change: A little bit of excitement and when you look at the actually the quarter on quarter margin trends particularly for Hong Kong, what you'll see is there has been a bit of an uplift a bit of a pick up in Q1 relative to Q4. So I think what you what you see in terms of sales and business value momentum in the first quarter I think that's a good. . . .
Speaker Change: Anthony Baumann And all the women out there, thanks for taking the time out of your busy time to tune in to this great conversation in the name of women on peer versus peer tools. Welcome, again, to the Delaware Public Library's States of the Union International Today. I'm Joy McGowan, your host, and this is the Wellbeing Radio Union Store. Welcome to the Solar이즈 Her quebec.
Speaker Change: It's sort of plausible that, you know, the sales numbers will still be good. But with this macro environment, maybe the shift to the more higher margin mix might be deferred or delayed. Thank you very much.
Speaker Change: It's hard to be specific about what scenario might play out. I think in the near term, I expect the demand for savings to continue. A big portion of our business, particularly in Hong Kong, for example, is US dollars enominated and the yield on US dollar businesses attractive relative to other currencies.
Speaker Change: Yeah, everyone, I just add that our savings products are still very good margins, so I really want to...
Speaker Change: to spell the myth that the savings products are a low margin, we've got quite profitable savings products across the geographies in Asia and it's still said, I think one of the unique aspects of our franchise is the diversification not just from a product perspective but also from a channel perspective. So having a strong agency force, strong banker capabilities and then now broker which is now a much more important part of our distribution, it allows us to continue that story of margin improvement and it's still said, at the end of the day we're going to sell products that
of Consumers, and again, we're delighted to have strong savings production does that.
Speaker Change: God, and then the US, quickly, you mentioned some of the headwinds of the room. [inaudible]
Resolved in the trend line and profits going down.
Speaker Change: Expenses picked up quite a bit this quarter. I forget what it was last quarter there, but I'm just wondering what the story is there. You're investing to reposition the business or what because of our consolidated level as well. It contributed to the...
The only efficiency ratio popping up over your 45% target.
Speaker Change: Yeah, thanks, Gabriel. It's a Brooks Tingle. I appreciate the question. I would look at Q1 expenses is very much an aberration tied to some unique and important investments and things like Genai.
Speaker Change: Digital things that will yield further efficiency gains in the future, if you look over multiple years now.
Speaker Change: The US has been extremely focused on efficiency ratios, taking out a lot of expense and we intend to continue to operate with extreme expense discipline.
Speaker Change: Okay, great, and Roy, I think I wish you had the retirement or next phase last quarter, I'll do it again. So, anyway, not a good one. I'll take it to watch, Gabriel, thank you.
Speaker Change: Thank you. I'm following questions from Tom MacKinnon, from BMO Capital Markets. Please go ahead.
Tom McKinnon: Yeah, thanks just before I ask a question, just want to say congratulations to Roy and thanks for all your help and all the best as you move on to your next adventures.
Speaker Change: Appreciate that Tom. Yeah, so I guess the first question would be maybe for Marc. If you can talk about, you know, appetite for further legacy transactions. Thank you very much.
Speaker Change: What percent is legacy of your earnings now? And you're generating a lot of capital, your life has been flat for the last 12 months despite, I don't know, like...
Speaker Change: $3.5 billion in buybacks here, so you need to really do another transaction here.
Or, so in any comments with respect to that, thanks.
Yeah, good morning, Tom. That's smart.
Speaker Change: Thanks for the question, I appreciate it. So there's a there's a few few words.
Speaker Change: thinks that you mentioned to Ron Pack, so he talked with our transactions and I think I'd be remiss if I didn't say that as Roy mentioned in his opening remarks that you know we've done three transactions over the last I'll say 18 months.
Speaker Change: That resulted basically in 2.8 billion dollars of capital, the least as you imply as well in terms of what we've done in terms of returning that to shareholders, but more importantly,
Reinsured, over 18% of the risk.
Speaker Change: At the same time, as both Lorentz and Colin mentioned, we sold off $3.8 billion of all their assets tied to these things.
Speaker Change: And we traded the whole thing at book value and long-term care itself was traded inside 5% negative seats at our book value, right? And so we feel quite confident that we accomplished what we wanted and it's been demonstrated obviously by the results that I've ensued.
Speaker Change: More importantly, when you combine that with the Verbal Neutransaction we did in 2022 and you combine it with these transactions are long-term care and VA earnings.
Mary Pazza, Results,
Speaker Change: And actually, you can see in the quarterly results, this quarter, the overall long-term care experience was modestly positive. And it's been the case for a few quarters when we look at the experience. So we feel quite confident that there is actually no need to do another transaction. Having said so, the mandate of the enforced group is to actively manage organically and organically and optimize the risk for trade-offs of the balance sheet. So, we will continue to do so. Our first mandate is to do so organically. We will continue to do so organically.
and others.
Speaker Change: Hey Thomas, Colin Reigh, if I could just... Oh yeah, sorry, I hate Colin. No, I was just going to jump in on the buyback points. You know, you reference our capital position incredibly strong, 137 cent like that ratio. So we don't need to re-insurance strong action to do buybacks, but I will, you know, emphasize buybacks don't rank ahead of investing in the business. That's on number one priority. But the good news about our capital base is that we can do both quite comfortably as well as look at inorganic opportunities. Thank you. Thank you.
Speaker Change: Big, great. And the second question or the final question is with respect to the insurance experience gains we're seeing in Asia. Pretty solid 17.
Speaker Change: Million US, kind of the best we've seen in a while.
Forward, thanks.
Speaker Change: Yeah, thanks, Thomas. Steve here. And as you know, we had, you know, if we set aside the P and C provision, if we look at our other insurance segments, we had positive experience again in each of our insurance segments in terms of total insurance experience. Thanks.
Speaker Change: You mentioned Asia, so Asia we saw favorable claims experience both mortality and morbidity across a number of markets.
in the region.
Speaker Change: In U.S., overall positive, Marc mentioned a net positive in terms of LTC experience, which was continued the trends we've largely seen both through and then after the pandemic.
Speaker Change: Oh, sorry, life we saw modest claims losses which were normal seasonality and in terms of outlook there are experience has been in line or slightly better than assumption since COVID so we feel good about that.
Speaker Change: Vietnam, those issues are behind us. We had gains in Vietnam for the quarter. And those that headwind, as expected, was alleviated in the second half of last year and we've seen continued.
Speaker Change: Favourable. So overall, while there can of course be variability, you know, we're in the large case market particularly in US life business, we feel pretty good about the outlook.
Please see the complete disclaimer at http://sites.google.com
Okay, thanks for the color. [inaudible]
Thank you.
A following question is from Paul Holden from CIBC.
Paul Holden: Please go ahead. Thank you. Good morning. First question is with respect to the negative all-to-experience with quarter unexpected. We just want to drill down a little bit in terms of maybe give us some color and what troves the negative experience. Thank you very much.
Speaker Change: specifically in just confirmation that it's lower assumed, lower than assumed returns versus necessarily any impairments.
Thank you for watching!
Speaker Change: Hi, Paul. It's Trevor. Thanks for the question. So just let me start by saying we still like the strategy. It's a good match for our long-term liabilities and it produces strong returns with low volatility, but it is not going to be immune from the broader economic environment. As you noted, we did see weaker all the experience in the quarter, similar to some peers and consistent with slower public markets in Q4. Thank you very much.
and a little bit of increased economic uncertainty in Q1. [inaudible]
Speaker Change: Just to note, even in this environment, the portfolio continues to provide positive total returns.
Speaker Change: To your question, the main driver of the non-call-offs was again real estate. It does continue to improve slowly.
Speaker Change: While energy art performed quite substantially, private equity though, which given some lumpy gains had been quite strong in Q3 and Q4 of last year was a little bit below target in Q1.
Speaker Change: and then in terms of the outlook, we do expect to get back to our long-term assumptions.
Speaker Change: I think given the current uncertainty that timing is probably a little bit deferred from our prior expectations and you may see performance from quarter to quarter being a little bit dependent on the broader economic environment, but we do still expect to get back to our long term assumptions.
Thanks for the question.
Speaker Change: Thank you. So maybe just to follow up question on that because it's been I don't know if all those negative returns or negative experiences should say not negative returns, but negative experience this year I think it makes it four years and four years in a row if I'm not mistaken.
Speaker Change: What point again do you need to, I know it's questions come up in past calls, but what point do you kind of need to revise those return assumption then?
Speaker Change: What would it take, like, how many periods in a row underperformed relative to current assumptions? Is it sort of a change in, you know, the best value like more impairments versus just other performance? What would it take to change the all the return assumption? What would it take to change the all the return assumption?
Speaker Change: Hi, Paul Trevor again, thanks for the follow up. So I think we've said this before, but I guess the first thing I would say I think we have underperformed our targets for two years.
Speaker Change: Two years, nothing one quarter, but in any event these are very long term assumptions, so they're not said for any specific. We do have a structured process to update them. It's not as mechanical I think as you sort of describe. I experience over time has actually been similar to our assumptions that they have been periods of over and under performance as we've seen over the last couple of years. And I think it's a little different from what we've seen over the last couple of years.
Speaker Change: In terms of our process, they are reviewed annually by both Steven and my teams.
Speaker Change: We do look at our own and benchmark experience, we look at market expectations, we also look at
Speaker Change: Current transactions that were actually underwriting, including transactions where expected yields are actually above our long term assumptions. So I think for 2025 we'll obviously pick up the sort of recent week of experience and we'll also be considering
Excuse me, the outlook for potentially slow longer-term growth.
Speaker Change: But we do still feel that the assumptions are appropriate. So while we do recognize the uncertainty that's out there, I do remain confident in the strategy and in achieving a long-term target returns.
Speaker Change: Steve, I'll just add that while not getting the specific what would it take to change, if we look back when we reduce the return assumptions back in 2017, one of the factors that drove that was interest rates had come down significantly, that was impacting cap rates and expectations of future return on our real estate portfolio. So that was one example, obviously interest rates are materially higher than at that point.
But it's helpful. Thank you very much. Thank you.
Speaker Change: Thank you. A following question is on Meny Grauman from Scotiabank.
Please go ahead, thank you.
Manny Grohmann: Hi, good morning. Well, first, Roy, I want to join my peers in congratulating you, and we should do the best.
and I wanted to ask about...
Speaker Change: I wanted a little bit more detail on what drove the DCL line this quarter. Is this specifically economic assumptions or scenarios? Just want to get more detail really in the spirit of trying to understand the evolution of this DCL line as we think about it going forward?
Speaker Change: Hi, many. It's Trevor. Thanks for the questions. Yes, in terms of the ECL, as you noted, the ECL charge was larger, less quarter than in Q4, but to your point, the underlying investment credit experience remained actually quite the nine. And so just to remind people, the ECL charge is broadly made up of two components. The first one is the impact of defaults and rating changes. And the second is this modeled impact that reflects changes in the broader economic environment. [inaudible]
Speaker Change: ECL and I for Usman is actually similar to the Lodge Canadian Banks and we include
Both of those components in core earnings. So,
Speaker Change: With the ECL increase that you see, largely model driven due to the volatility in investment markets in Q1. So it really was basically...
Speaker Change: The broader economic environment, as well as some changes to the scenario weights, we increased the weights of the adverse scenarios within the model.
Speaker Change: In terms of the outlook, I think Q2 has actually been quite volatile today, so it's probably too early to say...
Speaker Change: where it's actually going to end up at the portfolio. I think it's still in, you know, is in pretty good shape. It's 96% investment grade.
Speaker Change: And so we do still feel at the 30 to 50 million, a quarter that we've I think guided to isn't appropriate around rate, I think for normal conditions.
Speaker Change: David, and then second question on agent, Phil, just want to clarify in terms of your commentary.
Speaker Change: in terms of the impact of tariffs on consumer behavior in the business and gem.
You won't be surprised if you see some...
Speaker Change: If you will see in the future some changes to behavior, so just want to check if there's anything now that you can point to where tariffs are actually impacting anything in the business in terms of how consumers are behaving and consumer demand more specifically.
Speaker Change: Hey, many. This is Phil. Thank you. Thank you for that follow-up question and you've interpreted my comments right that we're not seeing anything right now that suggests any notable change in consumer sentiment.
Our souls within each of our markets.
Speaker Change: That could start to impact customer sentiment and cause customers to defer some decisions around
Speaker Change: particularly long-term financial product commitments. So we're not seeing it yet, but it's just on the radar or something that could emerge in the quarters ahead. We'll keep you posted on that. I mean, just to the broader question of the impact of tariffs beyond Asia sales, you know, I think what we've said, you know, many times in the past is the trade wars aren't going to be good for GDP inflation or unemployment.
Speaker Change: And as Phil said, we haven't seen it yet in tax sentiment though it could. [inaudible]
Speaker Change: And I think that that's largely a function of the fact that our products are typically needs not wants. And I think that's true for not just us but the entire industry, which is so far meant that we've been somewhat more immune to the impact of the uncertainty. However, you know, who knows how that transpires over the course of the coming quarter. So I think it's important to be cautious there.
I think the biggest impact is relates to...
Speaker Change: Our interest in equity, market sensitivity is a fraction of what it used to be, and under eye for a 17, the amortization of our earnings is really a function of our backbook. So again, I don't want to paint two rows of your picture, but there is certainly a lot of resilience in our business that will put us in good fed.
God, thank you so much.
Thank you [inaudible]
Speaker Change: The following question is from Mario Mendonca from TD Securities. Please go ahead.
Speaker Change: Martin, so there's been a lot of, I think. [inaudible]
Speaker Change: Good questions on Asia, insurance, health, and momentum. Sorry, Mario, we have a bit of a static here. Do you mind just, we start again? Thank you.
Is that any better?
Speaker Change: Yes, yes, I love it. Yeah. So I've been some good questions on Asian insurance and momentum and the insurance sales. What I want to get to is more like a very practical question.
Speaker Change: That's the obvious bit. The part that I'm not clear on is if there's anything I'm not thinking about. Is there any other impact on Asian, the Asia drivers of earnings like expense loads, reserve adjustments, if sales were to decline and stay low for an extended period.
and the rest of us. Thank you. Thank you.
Speaker Change: Hey Mario, this is Phil, thanks for the question. I'm happy to make a start and then Steve Finch can supplement from a technical perspective.
Speaker Change: So if we were to see a sustained decline in sales over a long period of time, naturally what would happen is you'd see a...
That flow through to the CSM, the CSM.
Speaker Change: would then, you know, would remain stable and then starts decline. However, that would require...
Speaker Change: Everything that I've seen today doesn't suggest that that's on the horizon and when I look at the longer-term drivers of demand across Asia, they remain very strong and it's partly the demographic mega trends. [inaudible]
Speaker Change: But also the growing relevance of some of the key markets in Asia from a global perspective, Hong Kong and Singapore as emerging international wealth centers.
Speaker Change: and the increased interest in generational wealth transfer, given that the wealth that's been generated in the region over the course of the past three to four decades.
Speaker Change: Steve, you have any comments from a technical perspective? Yeah, I just add that Mario asked about sort of the, you know, how does it impact the view on. [inaudible]
Speaker Change: Assumptions were expensive assumptions in particular and that tends to play out over a long period of time and we actually saw some of that during COVID when sales across the industry were impacted in different markets and different times.
and we looked at that through the expense studies but...
Speaker Change: You know, certainly the business takes actions if there's a very prolonged period of contraction, which we're not expecting here, but that would play out over a long period of time.
of
Speaker Change: Trade Wars in the tariff situation and how it could unfold. Fold.
Speaker Change: from a risk management perspective. You know, what we think is a source of strength for our franchise is that we've got a very diverse business and
Speaker Change: Where this trade will may create more pain is specifically one or two countries who are maybe more impacted and the fact that we have such a diverse business globally, we think is a source of strength again. We don't want to paint two rows of your picture, but that is something just to keep in the back of the mind as well. Thank you very much.
Maybe for Phil as the incoming CEO . So.
I'm interested in your philosophical view on share buybacks in a period of…
Speaker Change: Stress, and what I'm getting at this is, you know, the banks, you can see a change in their share by back activity, pretty abruptly, when things turn sour.
Speaker Change: For you and for Manulife, is there a similar philosophy around buybacks that despite having plenty of excess capital, you shut it down in periods of extreme volatility? So perhaps it's a little unfair because you haven't really seen it yet, but how do you look at that? Well, it's a little unfair, but how do you look at that?
Speaker Change: Mario, thank you for the question and it's a very fair question and I firstly I'd just like to say how excited I am to be
Speaker Change: Taking on the role, that's an incredible privilege that I take very seriously but with specific reference to your buyback question. [inaudible]
Speaker Change: I do note that we're in a very strong capital position, Colin referenced that earlier, and it's not just that we're in a strong capital position now.
Speaker Change: The capital generation from our businesses and that translating to remittance flows.
Speaker Change: Or is also very strong and that continues to be the case. [inaudible]
Speaker Change: We also have a track record of delivering on share by back programs when we've announced them. And so Colin referenced the 2025 program that we announced in February .
Roy Gori: As I transition with Roy, there is absolutely no change to our intent with respect to that program. And of course, as is always the case with shared buybacks, we will be responsible, we'll keep an eye on what's happening in the external environment.
Roy Gori: But, you know, the strength of our capital position provides us to be resilient and actually sort of dollar cost average if you like consistency over time will serve as well with the share by pack with respect to decisions on future. Thank you.
Speaker Change: Future Share Buyback programs, those decisions will be made at the appropriate time, taking into account the facts and circumstances internally, externally, including alternative opportunities to deploy capital. And as Colin said, our number one capital deployment. [inaudible]
Speaker Change: Preferences, investing in our business and it's really the excess capital deployment that then gets given back to shareholders by way of five banks.
Speaker Change: Okay, and Roy is the outgoing CEO , I have no question for you, just my best wishes to you in retirement.
Appreciate that Mario, thank you.
Thank you.
Speaker Change: The following question is from Lemar Persaud, from Carmack. Please go ahead. Let's go ahead.
Namar Prasad: Yeah, thanks for excusing me in here, and I'll start off by saying, Roy, congratulations on your retirement.
Namar Prasad: And then, you know, maybe I'm reading too much into it here and there's been a lot of discussion about the outlook for Asia, but...
Namar Prasad: Or your comments to remind us about the contribution of Canada and the U.S. to earning sounds like...
Namar Prasad: You're setting us up for a potential weakness in Asia. Obviously, that's not the way this Congress doll has gone, but tell me why I'm perhaps reading too much into it. But maybe there's something there, like maybe the singling out of tariffs on China. Yeah.
Namar Prasad: and the impact that could have on the broader Asia businesses while you're reminding us about the contributions of
Namar Prasad: Yeah, well thanks, Lemar. Firstly, thank you for your best wishes, appreciate that, and appreciate engaging with you and your fellow analysts, and obviously the shareholders as well over the last ten years, it's been an absolute pleasure. I would say you've misread maybe my comments, if you've interpreted us signaling for maybe weakness in Asia. The thing that I really want to emphasize is that one of the greatest strengths of our franchise is that we have a very diverse business.
Namar Prasad: I think that makes us more resilient, to be perfectly honest, if you think about the last decade.
Namar Prasad: Uncertainty, both macroeconomically and geopolitically, having a diverse business that's not reliant on any one particular market. I think it's a massive source of strength. That's true for our insurance business, that it's equally true for our global when business, which again is demonstrated phenomenal resilience. [inaudible]
Namar Prasad: And we talked about the fact that we've had 14 years of positive net flows where, again, others have seen massive outflows. So, the message that I was certainly trying to deliver...
is that, you know, we will.
Namar Prasad: C, challenges from time to time in one market or another it could relate to trade and tariffs or quite frankly it could relate to other factors and having a business that is as diverse as ours. I think really puts us in a position of strength and resilience that will allow us to navigate the challenges. We saw that in 24 we had as we've described the ban a year in 24 and that was again a year where there was lots of uncertainty and volatility but I think we demonstrated the resonance of our franchise but Phil you should probably comment a little bit more specifically as a
Delight to the Outlook for Asia.
Phil: Yeah, thanks, Roy, I agree with everything you've said. And when I look at the first quarter earnings, one rate for Asia, I think it's a good indication of what to expect in coming quarters, of course, plus or minus the impacts of ETL and routine policyholder experience, variations from quarter to quarter. And that stability in earnings is one of the advantages of IFRS 17. So I'm not too worried about the impact of...
Phil: Changes in tariffs and what we've seen in that environment is continued sustained demand reflecting the sort of demographic drivers that we've talked about on so many occasions so I continue to remain. [inaudible] I'm sorry, I'm sorry, I'm sorry
Optimistic about opportunities in Asia, and if there are variations over the short-term and sales volumes, earnings will be stable.
Appreciate it, thank you.
Thank you.
Phil: We have no further questions registered at this time. I would not like to turn the meeting back over to Mr. Cole.
Phil: Thank you, Operator. We'll be available at the call if there are any questions. Have a good day everyone.
Thank you.
Speaker Change: The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.
This conference is no longer being recorded, this conference is no longer being recorded [inaudible]