Q2 2025 Manulife Financial Corp Earnings Call

We thank you for your patience.

This conference has been recorded.

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 manual Life Financial second, quarter 2025 Financial results conference call. I would now like to turn a meeting over to Mr. Coe, please go ahead Mr. Coe.

Thank you. Welcome to man life's earnings conference call to discuss our second quarter, 2025 financial and operating results. As part of today's call, we'll also discuss our acquisition of Comcast Credit partners that was announced yesterday afternoon.

our earnings materials, as well as material related to transaction, including the webcast slides for each respective, presentation are available on the investor relations section of our website at many.com

Before we start, please refer to the slides, containing a caution on 4 looking statements and a note on the non-gaap and other Financial measures used in each of the respective presentations.

please note that certain material factors assumptions are applied in making forward looking statements and actual results May differ materially from what is stated

turning to slide 4. We Begin today's presentation with field within our new president and chief executive officer who will provide a highlight of our second quarter, 2025 results and a strategic update.

Following Phil calling Simpson, our Chief Financial Officer will discuss the company's financial and operating results in more detail. Before we hand it over to Paul Lance, our President and CEO of Manulife Wealth and Asset Management, who will discuss the acquisition of Comcast Credit Partners.

After their prepared remarks, we moved to the live Q&A portion of the call. I would like to remind each participant to adhere to a limit of 2 questions including follow-ups and to reach you if you have additional questions

With that. I'd like to turn the call over to Phil.

Thanks, and thank you all for joining us today.

It is an incredible privilege to lead this great organization and a responsibility that I take very seriously,

Before we begin, I would like to take the opportunity to congratulate Stephanie fedu on her appointment as Chief Factory and welcome her to the executive leadership team.

I would also like to congratulate Steve Finch on his new role as CEO for our Asia segments.

Both Stephanie and Steve bring a wealth of experience to their new positions, and I look forward to working closely with them and the entire executive leadership team as we build on our success.

As I'm also new to my role over the past few months, I've been focused on engaging with and listening to our customers colleagues Partners analysts and investors.

I visited our offices in Waterloo, Montreal Halifax Boston, as well as spending time with Steve and our team in Asia.

This is being an informative experience, allowing me to receive their are insightful. Constructive and encouraging feedback about our organization.

Throughout I've had 1 goal in mind.

Further improving how we serve our customers, support our colleagues and the community, and generate greater value for shareholders.

Let me share a few key takeaways from these engagements.

First, our transformation efforts since 2017 have laid a solid foundation for our next chapter of growth.

We have an incredibly attractive business profile with market-leading operations. In some of the highest growth markets and significant synergies across our segments.

Our leaders around the world are excited about not only sustaining performance, but taking it to the next level.

Second, we have made and continue to make tremendous progress on our digital ambition. Reimagining the ways we interact with customers and embedding market-leading AI capabilities across our businesses.

These efforts are contributing to both growth and increased productivity.

Finally, I remain committed to investing in our businesses to deliver high-quality sustainable growth for the benefit of all stakeholders including the investor community.

Our Capital deployment priorities. Remain unchanged. And we have ample capacity, given our strong cash, generation and financial flexibility. And as we've said on previous calls, we will continue to deploy Capital strategically assessing inorganic opportunities for their ability to enhance our strategic capabilities or allow us to scale our business.

37.5 million us with a predefined path to acquiring the remaining 25% interest in 6 years.

Comvest is a highly differentiated rapidly growing Middle Market private credit manager with 14.7 billion US Dollars on its platform.

This acquisition will scale our private markets business and expand and enhance. Our existing private credit capabilities. Driving future growth across each of our Global Wham lines of business,

the acquisition will reduce our licat ratio by less than 3%, percentage points, and is expected to be immediately, accretive to our core EPS core, Roe and core ebit Dar margin

This is an example of how we're deploying Capital to enhance shareholder value and it will not impact the pace of our share buyback program.

Paul will provide additional color on this exciting update shortly.

Moving to slide 7 at our investor day in Hong. Kong last year, we demonstrated confidence in our ability to sustainably grow. The business we announced bold, but achievable targets to allow you to measure and track our progress.

I remain confident that we have a clear and credible path to achieve these targets and we're executing on our plans to reach them.

In the coming months, our leadership team will complete a review of our strategy with a view to assessing where we might refresh it to deliver on our longer-term. Ambitions, I look forward to sharing the output of those discussions with you in due course.

Moving on to our quarterly results on slide 8. Our second quarter results, reflect continued, strong momentum in our business growth while highlighting the diversity of our Global franchise.

Our continued Topline growth was particularly encouraging with each Insurance segment generating over 30% growth in new business CSM, a key indicator of future earnings growth and Global Wham once again, generated positive, net flows.

From a profitability standpoint core EPS grew 2% from the prior year which reflects strong underlying business growth, though it was dampened by elevated us mortality. And a provision, in our expected credit loss. Colin will dive into these in a few moments.

Our balance sheet remains strong and provides Financial flexibility with a strong like at ratio of 136% and a leverage ratio that is well below our 25% Target.

And we continue to grow our book value per share, which increased 5% from the prior year, while returning significant capital to shareholders.

Overall, I'm pleased with the operating results. We've delivered this quarter despite a challenging operating environment.

I'm excited about the opportunities that lie ahead and I'm confident in our ability to deliver high-quality sustainable growth. Through a focus on meeting the needs and expectations of our customers, and other stakeholder groups, including the investor community.

With that, I'll hand it over to Colin to discuss our quarterly results in Greater detail Colin.

Thanks for the second quarter was a solid 1. For Manu life, where the strength and stability of our Diversified Global franchise helped us deliver resilient results, despite some short-term earnings headwinds.

I'm particularly encouraged by our continued, Topline momentum, and strong, underlying business growth, in Asia, Canada, and our wealth, and asset management business.

Let's start on slide 10.

I'll continue Topline growth reflects our strong business fundamentals. Evidenced by double-digit year-over-year growth across AP sales, new business CSM and new business value.

Our AP sales, increased 15% from the prior year, with more than 30% growth in both Asia and the US.

The strong sales supported significant growth and value metrics with 37% growth in new business CSM and 20% growth in new business value.

In fact, each Insurance segment, delivered over 30% growth in new business CSM, which bodes, well for our future earnings growth.

Global 1 delivery quarter of positive, net Flows at nearly a billion dollars, demonstrating the strength of our Diversified platform with institutional, retirement inflows, partially offset by outflows in our retail business.

I'll walk you through the key earnings drivers on slide. 11 comparing them to last year.

Insurance experience reported in earnings was mainly driven by the U.S., where we saw an elevated number of claims on large policies in our life business. Given the nature of the business, there can be variability in large claims from time to time.

Despite the magnitude of the charges quarter, we believe it as normal claim volatility rather than an unfavorable mortality trend.

Moving to our net investment result. Solid business growth in Asia was more than offset by a net charge in the expected credit loss (ECL) provision.

We continue to expect 30 to 50 million dollars of an ecl charge a quarter on average, though they can be variability.

The charges this quarter were primarily related to certain below-investment-grade loan investments in the U.S., and we do not see any extrapolation from this across the rest of our portfolio, particularly our investment-grade book, which represents 96% of our fixed income portfolio and continues to perform well.

Given the benign credit environment last year and the resulting neutral ECL impact, the year-over-year comparison was elevated.

Excluding the impact of ecl. Our core earnings growth would have been 2% compared with the prior year.

Global 1 continue to generate strong results. Achieving its seventh consecutive quarter of over 20% growth in pre-tax core earnings and highlighting the strengths of our Global platform.

Finally, I would also add that our 2 recent reinsurance transactions with RGA, reduced core earnings by 20 million dollars across multiple lines of the DOE.

Turning to slide 12, you'll note that core EPS increased 2% reflecting, the monastery in core earnings and the impact of share BuyBacks. If you were to normalize for the impact of the higher ecl, provision core EPS would have grown 7% compared to the prior year quarter.

We reported 1.8 billion dollars of net income, this quarter in increase of 747 million compared to the prior quarter, which included positive overall market experience. Largely driven by a 217 million gain from higher than expected. Public Equity returns.

This was partially offset by a charge of 172 million in our older portfolio from lower than expected. Returns while all the experience improved from the prior quarter, we continue to see headwinds from lower than expected. Returns on Commercial Real Estate and private Equity Investments, partially offset by strength in infrastructure.

Turning to the segment results.

We'll start with Asia on slide 13.

A high potential Asia segments continue to generate strong growth across all new business metrics AP increased 31% from the prior year led by broad-based growth in Hong Kong all distribution channels. Alongside strong contributions from mainland, China and Singapore, within Asia other.

The overall increase in sales contributed to significant growth and value metrics with new business CSM and new business value, increasing 34% and 28% respectively.

And while new business value margin was approximately in line with the prior year quarter, it increased 1.9 percentage points quarter on quarter, driven by expansion in Asia Other and Japan.

We also generated a 13% year-on-year growth in core earnings in Asia, reflecting continued business growth momentum and favorable claims experience, partially offset by strengthened ECL provisions.

Over to Global Wham on, slide 14.

Global Wham had another great quarter with a strong 19% growth in core earnings. This was again supported by higher average third-party AUM, higher performance fees, and our ongoing focus on expense management.

We delivered positive, net flows for the quarter of nearly $1 billion, reflecting the continued, strength and diversity of our platform.

Strong inflows and institutional and across all regions and retirement were partially offset by net. Outflows in our retail business primarily in North American intermediary.

We again generated positive operating leverage with a core i-bidder margin of 30.1% which expanded 380 basis points from the prior year or 170 basis points. Sequentially reflecting the impact of our proactive expense management.

1 of the key drivers of margin expansion, has been expense management. Some of which has been taken in advance of our upcoming transition to the new empf platform in Hong Kong later this year.

Abilities, ultimately centralizes and digitizes, all mpf schemes, reducing the fees earned.

Currently, the mpf schemes Authority is successfully. Onboarded more than half of the trustees in the market and we are expecting to commence our transition. During the fourth quarter of this year,

assuming our transition proceeds, as planned starting in the fourth quarter this year, we expect to see some impact to core earnings in our retirement business, with the full quarterly run rate impact of approximately 25 million US Dollars beginning in the first quarter of 2026,

We're committed to the market, and given our scale and unique capabilities, the MPF business continues to be an attractive business for our Global Wham franchise.

Next, we head over to Canada on slide 15, where we delivered solid results during the quarter ape sales, decreased 34% from the prior year, which reflects strong double digit growth in our individual insurance business. Primarily due to higher power sales, but this was more than offset by the non-recurrence of a large case sale on our group Insurance business in the prior year.

As there is no CSM on our group insurance, our individual insurance sales drove very strong new business CSM growth of 32% year-on-year.

Core earnings increased by 4%. Thanks to the continued growth in our group, Insurance business and higher investment spreads. However this was partially offset by the non-recurrence of a release and ecl provision in the prior year. And to a lesser extent, the impact of the RGA Canadian universal life, reinsurance transaction.

Lastly, our us segments, results, on slide 16.

In the US, we delivered strong AP sales growth of 40% with the demand for accumulation. Insurance products from after. And customers remaining firm we also generated strong growth in new business CSM and new business value of 59% and 12% respectively.

Poor earnings decreased 53% from a year earlier due to unfavorable mortality experience in our life business lower investment spreads as well as strengthened ecl provisions.

While the US core earnings are undoubtedly disappointing. This quarter, as I noted earlier, we view the claims experience in ecl impacts as short-term headwinds. That do not represent a trend.

We remain confident in the U.S. segment's ability to deliver steady earnings, given the strong growth in our new business metrics this year.

Bring it to our book value on slide 17. You can see, we are continuing to grow our adjusted book value per share with 7% growth from the prior quarter to 3578. Even after returning over, 6.4 billion of capital to shareholders through dividends and share BuyBacks over the past year.

On a standalone quarter basis, we returned nearly 1.4 billion of capital to shareholders, including both dividends, and share BuyBacks During the period.

You'll notice our book value per share decline modestly quarter on quarter, but the majority of this was attributed to the currency translation of foreign operations, which does not reflect the fundamental performance of our business.

It's worth noting the year-over-year impact of changes in foreign exchange is largely immaterial as a Canadian dollar of this quarter. Reversed the depreciation. We saw late last year

Slide 18 provides an overview of our robust balance sheet, or like at Capital ratio, remains strong at 136%, and our financial leverage ratio was 23.6% continuing to stay well below our 25% medium-term Target.

Despite the heightened Market volatility, we've seen this year, I'm encouraged that these metrics continue to reflect our strong financial resilience underpin by our strong balance sheet, providing ample flexibility in navigating and evolving macroeconomic environment.

And finally, on slide 19, you will see the overview of how we're tracking against our 2027 and medium-term targets.

In summary while some short-term headwinds impacted our core earnings growth. This quarter. I'm proud of our overall financial performance supported by our Topline, momentum across all of our segments demonstrating, the strength and diversity of our underlying business.

As Phil highlighted earlier, we remained focused on executing against our targets. And I'm confident that we're well positioned to continue to deliver through the economic cycle and sustainably grow our business.

I will now pass it over to Paul to discuss our acquisition of Converse credit Partners in more detail. Paul.

A continuation of our tremendous growth.

At our investor Day last year, we highlighted how scaling our Alternatives platform is 1 of our key value drivers, which is why I'm thrilled to announce our acquisition of Comas credit partners.

Let me share with you a few of the highlights.

First the transactional scale and enhance our private markets business adding highly complimentary private credit capabilities and when aligned with their existing direct Landing business results in a world-class private credit manager with 18.4 billion US Dollars on the platform.

There's significant demand for private credit products today and by leveraging our global distribution capabilities. We see a significant opportunity to provide our 19 million clients across our retail, retirement and institutional Channels with conveys best-in-class products.

Second canvas has a differentiated rapidly growing private credit platform which is delivered strong risk, adjusted returns for investors through the cycle, and is a strong strategic fit for existing credit business.

While we have primarily focused on sponsor. Back lending, almost half of Converse fee, paying AUM is deployed to non-sponsored back direct lending opportunities. Providing us with a go to market ready platform that we can offer to third-party investors.

Third conveys is a strong cultural fit and our interests are fully aligned. Convex employees will retain a 25% interest allowing them to participate in the future value creation of the firm, and their management team will continue to manage the daily operations and investment decisions.

Looking forward, we have a predetermined path to full ownership in six years.

Finally, this transaction creates value for shareholders as it is, immediately accretive to core EPS, core Roe and Court, even margin while. Providing a source of predictable. Capital light, recurring fee revenue for our Global Wham franchise.

Moving to the next slide, founded in 2006 conveys, credit Partners has a deep history of providing debt Capital to the market with a focus on non-institutional control businesses. Their product offering has resonated with the market and conveys, has a track record of achieving remarkable growth compounding fee. Pain AUM at an annual rate of 50% since 2020.

They have been able to consistently raise Flagship funds that are successively larger and their current Flagship fundraising round is on track to nearly double their previous fund.

These efforts are underpinned by a measured underwriting process. Allowing them to effectively manage downside risk. We are thrilled to have such an exceptionally talented team, join manual life and are energized to work to jointly. Grow the business together.

Which takes me to the next slide.

This deal immediately scales our private credit capabilities, creating a world-class credit manager. Resulting in nearly a hundred billion US Dollars on our private markets platform.

Canvas focus on non-sponsored back lending complements. Both our existing private credit business and the recently acquired semi-liquid credit, strategies managed by cqs allowing us to provide a broad range of credit solutions to our clients.

With minimal investor overlap on the Align platform and given conveys has been primary focused on North America. When raising capitals, our scale distribution globally and strong presence in Asia. Create meaningful upside for our private markets business.

On to the next slide.

This transaction offers extensive benefits to both Global Wham and manual life on the asset management side. The transaction instantly strengthens our platform by offering access to deal origination underwriting infrastructure and a more Diversified set of Client Solutions.

Which will allow us to track both new clients and potential strategic Partners going forward.

We will also be able to leverage our distribution to offer Credit Solutions across our retail, retirement, institutional and Insurance, affiliate channels globally.

In closing, I'm incredibly excited about this opportunity and look forward to welcoming the convest team.

We believe that combining Comments existing offerings, investment, expertise, and strong track record with Manulife's extensive PE-sponsored network, operating presence, and financial resources will create significant value for both firms.

We are seeing growing demand for private Assets in our uniquely positioned to meet our customers needs and with the transaction being immediately accretive to core EPS, core Roe and core. Even to margin, we are supporting our growth ambition, and delivering value for shareholders.

More details on the transaction are available on our website.

With that, this concludes our prepared remarks operator. We will now open the call to questions.

Thank you for your patience.

The first question is from John, Aiken from Jeffrey. Please go ahead.

Good morning, Paul. Um, I guess congratulations on the contest. Acquisition looks. It looks very intriguing. Can you, uh, just remind me? Um, what other areas you may want to bulk up, in, in your operations that you, you know, whether it's organically organically like you've done with convest what, what other, uh, areas, or, or strategies, do you want to, uh, increase or improve upon?

Yeah, thanks John. Uh, it's Paul here. Uh, yeah, thanks for the congratulations. We're super excited about the transaction. Just think there's a tremendous fit as we as we outlined on the call in terms of capabilities. I guess, I'd start with um, where where what I shared at investor day is we feel really good. Just about the organic opportunities of what we have today. We've got a very broad platform across, you know, liquids, public privates. Uh, we're, we're 1 of the few firms that have on the ground people in terms of a lot of the Asia specific strategies, which differentiates us and then with cqs and canvas, it really builds out some of the, the credit side of our our private platform and Alternatives platform. In addition, we already have strong capabilities within that private markets platform. Whether it's our Timber business, whether it's our infrastructure business, we've got a real estate team. So we feel like we have a lot of the capabilities and our focus is on our organic, but we are continuing to look at where are their opportunities? That could accelerate that where opportunities where we can add, uh, aspects to our business?

To accelerate the organic growth. And I think this is a good example. This is a firm that has been self-sufficient. They're raising third-party Capital without, you know, the need of of, um, of a large company like ourselves. And when we bring the 2 together, it not only enhances our platform, we have expanded distribution, uh, but there's real synergies between the businesses and and, and more importantly, a culture in alignment that so we're very excited about the opportunities here. Um, and really just look forward to to moving to close and seeing the value we can create for and investors

That's fantastic. Thanks, Paul. And just 1 quick. Follow on calling, um, your commentary around the impact of the M MPS. Uh, you said 25 million US Dollars. Was that annual or was that quarterly?

Hey, John. Yeah, it's 25 million US dollars a quarter.

Thank you very much. I'll reach you.

Thank you.

The next question is from.

From BMO Capital Markets, please go ahead.

Yeah. Thanks very much and good morning um with respect to gwam margins. Uh, I think Colony has said that they will Decline and then increase, I think you have a

30% Target for 2027. Um, maybe you can give us a little bit more color as to what you see the gwan margins.

Uh, declining 2 and then increasing.

To hey, Tom. It's Paul here. I'll take that 1. So in terms of the the margins um the the transition to empf, while we didn't have the exact timing was considered in terms of the targets we shared at investor day so we've always kind of anticipated this drop and then growing back forward and I think the fact we've achieved the 30% this quarter. Hopefully, you know, for us gives us a lot of confidence that we're on the right track in terms of the the impact. Um, as we shift to the centralized provider, we would expect an impact on margin about 150 basis points approximately and then we would expect to grow from there. But if you just look at how much we've grown the margin just over the last year, just in terms of market growth, positive flows and then prudent expense management. We feel very confident that we can we can achieve those objectives. We set out

Okay thanks and um also it looks like you're going to change the core definition. You're going to have amortization of intangibles acquired in business combinations. Now excluded from the core um

I assume this is because of the Comvest acquisition, and we'll have some of that. But what is the current amortization of intangibles?

From.

Acquired business combinations.

That what was the impact of that in a quarter?

This quarter.

Hey Tom. Yeah so you're you're right we are moving. The amortization of a quiet intangibles below core earnings and that's consistent with others in the sector and even broader outside the sector. Um, we don't have much at all, uh, right now of amortization required intangibles going through core earnings, and that's why you're not going to see my impact. The conversation is probably going to, uh, add 30 million to that number. And that's you're going to start seeing that in non-core, uh, after close.

That's 30 million.

Annually.

30 million annually. Yes.

You talked about the cam best deal being immediately A Creative? Can you share with us? Uh, any other metrics, um, a dollar amount or percent or anything like that uh, for 2026 or 2027 or

Yeah, I think the best way to look at this is that the acquisition is in line with industry multiples at a mid-teen IBAA multiple. That translates to roughly 2 to 3 cents of core EPS accretion.

Okay.

Annually. I assume that again.

Again, annually and forward forward from 2026 onwards.

All right.

Okay, thanks.

Thank you. The next question is from Gabrielle de Chene, National Banks. Please go ahead.

The um yeah, let's stick with that acquisition. So you I was going to ask along those lines, the 2 to 3 cents of accretion per year, that's the number

Yep. So okay, I mean that's a a small percentage, I mean, what's the justification? My real question here is you can just use that money to buy back stock and you know, get substantially more uh creation. That way. I'm just wondering what the future uh

Outlook is like for that, uh, that figure

Gabriel. This is Phil, thanks for the question. And, you know, on the acquisition of Khan convest, I think.

It's really important to highlight that strategic and intentional allocation of capital towards our highest opportunity. Growth businesses is critical and that's exactly what we're doing with with this acquisition. For many years, we have identified gwam as a high opportunity, growth business. And then, as Paul said in his remarks at investor Day, last year, we had identified private markets as a sweet spot within Global Wham and then within private markets, private credit, excuse me. Private credit is a fast growing and in high demand excuse me in high demand strategy from our clients and so this is not only about the the accretion that occurs in year 1 which is robust but then it's the growth that will arise over time. And I I feel very optimistic about the impact that comvest will have in scaling our existing successful private credit platform

Into something that is relevant to each of our Global Wham lines of business, um, in terms of, uh, other comments on the transaction, I might hand over to Paul actually to find out his perspective. Yeah. Maybe just 2 things to add. Um, the first would be if you just look at the market, this is a market that's expected to double in the next 4 to 5 years in terms of potential opportunity to Phil's point. And if you just look at the track record of convest, they've grown their fee earning AUM by a kegger of 50% since 2020. So this is a very fast growing business. I think point in time versus future value and and making the platform stronger for investors is really what you need to look at here.

Okay, well, I'm sure we can talk about it some more in the future. But in the meantime, uh, your Asia segment had another very strong quarter for, uh, sales. Uh, and, uh, just wondering about the, you know, there will be some tougher comps going ahead, uh, forward, which will, uh, affect that. But, um, the Hong Kong regulator put in some caps on, uh, return illustrations or, uh, or or illustration of returns. I'm wondering. You know what manual life's approach has been Visa V, those new caps and if there's maybe a potential impact on your sales going forward,

Uh, thanks Gabe. It's Steve here. Um, yes we're really pleased to see the uh the broad-based uh, sales momentum continued in Asia in in Q2 uh, ape up 31% nbv and and NBCS. I'm up 28 and 34% respectively. Um, you would you noted the tougher comps going forward? Uh, indeed. Yes. Uh, we did see a step up in, uh, in sales in starting in Q2 last year, but really in Q3 of last year. So, the year-over-year comparative growth, uh, does get significantly tougher going forward.

On the, um, on the Hong Kong rag that you mentioned.

There is an illustration sales cap on Power Products that was implemented. Uh July 1st of this year, what that is, that's a time of sale. It doesn't impact how much uh,

Does the sales cap and we we have seen this type of regulation in other markets around uh around the world. Frankly.

okay, so we don't have to suddenly

Show. I I mean the way I look at it is uh the illustrations aren't as promising or or uh, exciting for for sales. Uh, there's not like a big Delta between what you were advertising and what you can advertise going forward.

That's correct. All right. Thank you.

Sure, the next question is from Dogg Young.

Good morning. Just back to the acquisition of Comcast.

Um yeah I guess the comments when I originally saw it in the comments that I've heard is that you know, strategically looks like it makes sense but the valuation you know looks rich.

And you've given some good statistics here but what? Maybe Paul what how would you defend the valuation that you paid valuation multiple, whether it's on a percentage of AUM or how would you defend that in terms of, um, what you paid for this business?

Yeah, thanks for the question, dog. You know, it really speaks to the future value. We expect to create from this and the alignment of interests. And I would say that's a shared belief of ourselves and canvas at the 2 f is coming together. We'll be able to create tremendous value and if you if you just think about it, they've been able to scale this platform um, at a very fast pace without us. And that's mostly just in the US market. So it's obviously they're offering

They're offering strong returns through the cycle for investors that investors. Want if you just look at that growing and you look at the footprint and reach, we have across our our platform, with our Asia, our Asia business, um, there's tremendous opportunity for us to take these capabilities to Asia. You've also heard a lot of discussion around alts within the retail, and even in the retirement side of things, and we've got a global platform there that we believe will be future distribution. Not just for these for other capabilities. We have that will ultimately be good.

For investors there. And then we're also aligning our senior loans business. When you combine the 2, you, you get a bigger business that allow these, these teams to take down bigger, bigger deals in the market with the same resource base that will drive efficiencies. So we just continue to see more and more opportunities and there's very little overlap in terms of the the base between our business and and what they have. So there's it really is an opportunity from a revenue Synergy as we look forward and just capitalizing on on those opportunities and Doug this. This is Phil, if I, if I could just add as well, that our ba when it comes to inorganic, Capital deployment is high. And, you know, as well as the Strategic relevance that we had called out earlier. The bar is high when it comes to the value generation criteria, as well as our ability to execute.

And while we look at a good, a good number of potential acquisition opportunities. We walk away from many of them. And the the situation with convest is that it satisfied, all of those criteria and there were multiple intangible factors as well such as the, you know, the talent within the team, the cultural fit with the organization. The Synergy with our existing private markets capability and the opportunity to create further synergies uh through the deployment of of these strategies, in our gwam lines of business around the world.

So I I wouldn't just look to accretion in year 1 to see the financial significance of this 1. I think it's highly relevant, uh, to GM's future performance. And its secretive to, uh, you know, to, to the targets that we had laid out.

So can you remind us what some of those hard targets are when you, um, analyze these types of transactions?

Well, you know, I I I won't specifically comment on what our hurdles are. But um, what I would point to is at investor Day, last year, we set out, uh, a go forward Target, a 20 2027, Roe Target for the group of 18% plus, and if I look at our business case for Comcast, it's uh, it achieves an exceeds that Target, you know, and that's over the medium term naturally. But we feel very confident about uh, the impact that comvest will have and it will be a creative to our overall financial performance.

Okay and then I just like just maybe a final detail. Are you buying carried interest on the existing or just the new funds or just it's just trying to think of the economics here.

Yeah so it's Paul here uh Doug. So just on that uh Carrie carried interest is excluded from from the from the uh incentives and and most of if you actually look at earnings go forward, most of it is from uh management fees and annual incentive fees. Um, in terms of carry, it's not as material in this business as it is in some of the other, okay. Um businesses you may be familiar with

Uh, you know, definitely in Japan, like a good quarter for sure across the board, Steve, but Japan, you thought the client in sales and new business value and and in margins. Um, I know Japan is, you know, less of a a driver than it was 10 15, 20 years ago. But can you talk a bit about what you're seeing in that Marketplace? Um, what's driving this and uh maybe a bit of the Outlook.

Yeah, thanks Doug for the question. Um, you know, we continue to see opportunity for growth in Japan and uh, I'll, I'll first comment on, you know what, the drivers in the in the quarter were that you commented on and the, the decline in sales, it was really driven by an unusually strong Q2 of last year. We had a, a product that was significantly benefited from macro Tailwinds, including FX and and interest rate and and Equity market conditions. So we're, we're quite satisfied with the the sales that we're seeing and we've been diversifying both our product offering and distribution channel to increase the growth potential of the business, really capitalizing on the, uh, significant opportunity in, uh, in retirement saving and, and, and Building Wealth with the Aging population and and uh, funding gaps. So, uh, we're quite optimistic, uh, there over the medium term. And the other thing I'd point out any variability in sales, that we see, uh,

Doesn't impact ifs earnings as the CSM comes in over time and uh as was pointed out by Colin really broad-based sales success. So the benefits of of

You know, a strong diversified platform in Asia for the quarter. Thanks.

Maybe I'll take this moment to speak 1, quick 1, the I get the E, mpf Impact. Is there anything you can do to offset that 25 million drag quarterly?

Yeah, it's Paul here. Um that's some of the actions we've been taking as we've been leading up to it. I mean we're still running the platform so you've noticed the improvement in our efficiency ratio and just the management of expenses. Some of that was to get get ahead of this, we will be able to eliminate some expenses, you know, once the transition comp completes. But that is the net impact, we would expect, you know, as as once we're fully transitioned and then we would expect to grow from there and, you know, just to put in context, you know, the impact. It's it's worth a couple years growth for us. So we would expect to to get that back as this business grows. And then you know, that's just with regular growth just looking at the global Trends and the the the massive retirement funding Gap. Our leadership position, The Leverage, we get with Steve's business with the Agents of providing the holistic solution here. We we still feel this opportunity for growth for us here.

Appreciate it. Thank you.

Thank you. Next question. Is from Paul Holden CIBC please. Go ahead.

Thank you. Good morning. Uh, another question on uh on convest. So I get the EPs accretion and maybe the Roe hurling over the medium term. We also stated that are we accretions expected to be positive immediately and just kind of wondering if you could help me. Um wrap my head around uh around that math.

Hey Paul, it's Colin. Uh yeah it's quite simple really we're using existing resources currently our Surplus earns about 2.8% so if you take surplus of you know roughly a billion US Dollars and 2.8% and we swap that for an acquisition or Converse which will earn more than that, you can see that. It's immediately accretive.

Okay, okay, so you're talking about, okay, Roe versus versus Roi on the investment itself.

Yeah, we're talking about Roe as a comp company basis. Not talking about the ROI of the lifetime of the business, got it. Yeah, and this, this is Phil just to supplement. Paul comvest is an existing at scale platform, that is profitable. So we're actually buying into an earning stream and it it's not just accounting earnings its cash generative fee income, that generates remittances. So I, I think there are multiple uh, Financial angles that the transaction satisfies

Try to got it, and then sort of sticking with the Roe theme, given the, the, the change in the Hong Kong mpf. Maybe you can sort of talk about the margins and really, I guess the Roe in that business. You know, it's still an attractive business, from an Roe perspective.

Rise and transition to empf. We didn't know what the timing would be. There wasn't uncertainty about that. And while we're still not sure about the timing. We now have great greater Clarity. That it will be later this year. Hence, why we we're talking about it today and included, um, an estimated quantification in our results. So while there may be, you know, a 25% sort of notable impact that comes into the Run rate from 2026 when you sort of step back and look at it over the couple of years prior and the couple of years post it's a bit of a non-event because we've been taking actions to mitigate the impact of over the past couple of years, there are still some actions that we can take but as Paul said the the the attractiveness of the platform because we're at scale we we are profitable, it's growing fast. It only takes a couple of years for us to grow out of the, the sort of 25.

25 million US dollar run rate, adjustment that you're seeing per quarter that you will see per quarter from 2026.

Okay. Okay. I'll uh, I'll leave it there at my 2 questions. Thank you.

Thanks Paul.

Thank you. Next question is from Tom Gallagher from evercore isi, please. Go ahead.

Good morning. Um, just a few us questions. F first, I just wanted to confirm your triangle, uh, review coming in 32. Is that on long-term care? Will that be included us. Long-term care in that review.

Hi Tom, it's Stephanie. Um, you are right that in the third quarter this year we will have the trial review of our long-term care business. Um, maybe just to recap what we've seen in the past few quarters: we have seen a trend of utilization losses that was more than offset by lower incidents and higher claims termination. And the experience overall since the prior review has been largely in line with expectations, to a small positive.

Gotcha, so underlying. Yeah, I guess we've had 2, offsetting Trends. You've had better terminations, but higher

Higher claim frequency. I believe if I was to generalize what's happened, um, is it fair to say that you could

Sorry, I was just going to ask if that's the case, would you say that's probably something you could extrapolate?

Um, I think just to clarify what we've seen is uh, utilizations losses. So higher claim cost we had lower incidents, so lower frequency of claims and higher termination of claims and in total, um, on average largely in line, with expectation to small positive.

Gotcha and how how have ratings been since 2022? Have those been trending positive, or in line?

Hey Tom, it's Mark costantini here. Maybe I'll answer that 1. Uh, so as you mentioned, uh, when we do our triangle, we put, uh, a provision in for future rate increases. And we're pretty, uh, uh, prudent when we do so, to remind you, uh, the last cycle in 22, we put around 2 billion out of a total of 6 billion uh that we had. Uh so um and and as we sit here today, uh, we can tell you that we've uh, achieved well over 90% of those rate increases and you'll get further details once Stephanie updates, our assumptions, next quarter,

Great. Thanks for that. Just 1 other quick 1. If I could the it's not so it sounds like the elevated. Us mortality claims follow utility is what you would view. As normal volatility, there were 2, reinsurers RG and unintelligible, this quarter being pretty unusual. Um, do you feel pretty confident that there won't be a knock-on effect? Meaning you might uh that you won't get hit by reinsurance price increases based on the trends that are out there or there aren't any indications on that. I guess would be my question. Thanks.

Tom, it's Mark here again. Maybe I'll take that 1 as well. Given the my interactions with that market on an ongoing basis. Uh, I would tell you that what you saw, and I'm sure you heard this from the 2 companies. You mentioned was uh uh an aberration in the claim but not something unusual. Uh, you see when you deal in the large case markets. So I wouldn't say this is a trend. It's uh, it's something that happens once in a while. And when you deal in those markets, I wouldn't say it has any impact on future, uh, approach to, uh, pricing this Market.

Great. Thank you.

Thank you. Next question. Is from Lamar PA.

Yeah, thanks. Um, I wonder I want to come back to the uh, the credit losses and the, the spike, this this quarter from the, the below investment grade loans was there a specific sector that drove this loss. What was special about Q2 that caused these losses in the quarter, it's just a bit peculiar, given some of the large banks are talking about how, you know, kind of credit is evolving more positively than expected relative to expectations. So to see, deterioration from you guys, this quarter kind of begs the question as to, to why

Hello more. It's uh, it's Trevor. Thanks for the question. So as you noted, um, the 82 million post tax charge in the quarter was larger than we've seen. Um, we saw in q1 and we've seen recently, we have 2 point had strong credit experience for many years in the portfolio does remain uh 96% investment grade, but I think credit losses are by their nature, quite variable, and so it's no surprise to see. Quarterly volatility, particularly in, uh, Abalone investment grade portfolio, which is quite small

I think even with the Q2 results um over the last 3 years, we aren't the low end of our guidance uh of 30 to 50 million a quarter of the week. So we have mentioned in the past so more specifically to to Q2 I think the majority of the additional impact was from us credit experience, but really only on a few below investment, grade loans and mortgages. Um, in addition to that there was I think fairly substantial growth in the overall, uh, balance sheet invested assets, and that also led to a reasonable increase in, in, in the ecl. Um,

Throwing down a little bit into into the source of those those charges they were in a handful of names. Um really no no common seems to sort of talk about so we're seeing some some Legacy office mortgage exposures that you you know we wrote down a little bit and also some business specific issues. But again nothing really to sort of point to and certainly no read across to the broader portfolio which is actually performing well, so

In terms of sort of the Outlook, which I guess is the, the core of your question. I mean, quoted today has been quite volatile. Um, sorry has been less volatile, but it is, I think a little bit too early to say how, how it's going to play out, but the portfolio isn't good shape. It does remain 96%, investment rate and so we do still feel, I think 30 to 50 million. A quarter is an appropriate uh run rate. So no, no real concern from from my side. Thanks for the question.

Thanks so it'd be appropriate to stick to that, kind of 30 to 50 with volatility. That's kind of the bottom line.

Yes. Yes. Exactly.

Okay perfect. And then maybe just going to the Comcast acquisition, just continue along the lines of the questioning on the on this call. Sounds like there's a big growth in Cross sell opportunity, Paul. I'm wondering if there's anything, you could do to quantify those Revenue synergies, just to wrap our, our heads around the price because it seems like that's really the bottom line, big opportunity here. So anything you could offer just to put some numbers to, that would be helpful.

Yeah, thanks for the question, Lamar. Um, I I don't have any numbers I'm going to share today, but I would say that we're we're very optimistic. We're not going to wait for the the transaction to close to start thinking of those opportunities and getting the teams together so that we can hit the ground running but you know once it closes and we start reporting on results, we can share how that progress is is uh, working and how that's comparing to our expectations.

Well thanks, that's it for me.

Thank you. Next question is from Mario manga. TD security, please go ahead.

Good morning. Uh, can we just go to 1?

Sort of a specific question around the US uh, because of the reinsurance transactions, the risk adjustment release, the CSM, the uh, expected investment names of all trended down. I think I understand why where I'm going with this now, is at Q2 255, this current quarter. Are we pretty much now steady state or should we see further declines in those 3 Lines going forward?

Hi Mario. It's Brooks. Thanks for the question. I I would look at um q1 of this year uh, for a general frame on steady state post. All of that activity, that you mentioned, uh, and Frank. And frankly, if you look at the difference between q1 and Q2 the the big drivers were this unusual variability in in large claims in ecl. So I would I would point to q125 in that regard.

To those 3 lines that have historically been impacted by the reinsurance transactions.

Were done. Unless of course you do. More reinsurance transactions.

Yeah, this is sorry, Mario. It's Colin here, just to bear in mind, we still have the impact of the latest RGA LTC transaction to come through. But that was very modest, at $17 million for the full year.

That makes sense. Okay, so

The next sort of and sticking with the US now. So clearly this was a challenge in quarter.

And I I appreciate the reinsurance. Transactions are having some effect there.

Do you have an outlook for us on?

How this business should grow over time and it's clearly not Global land. It's not, it's not Asia growth, but could it be like Canada, uh, like a single digit?

Mid single digit grower over time.

Yeah, I'll start. Um, it's Brooks again. Thanks Mario we're we're really bullish on our, our prospects in the US. If you look at the top line for Q2, you see very strong year-over-year growth in ape 40% and and notably with respect to Future earnings power, the franchise of 59% uh year-over-year growth in new business CSM, we have a highly differentiated franchise. There are some some uh, unique things with our living benefits and vitality and so forth. So uh, you know, most of the, you know, the somewhat lengthy period of of what we've been trying to do in the US and we've done it successfully, de-risk free up Capital, improve Roe. Um where we feel very satisfied for largely having an accomplished. And now we're focused on growing uh from here and and and contributing uh reliably and significantly to the earnings power manual. Life overall

And this is Phil, if I could just add to that because I think it's very relevant as as I look at the portfolio as as CEO and the US without doubt provides, you know, it is it plays a very important role in our overall Global portfolio. It when I look at our us business, it has many positives, we've got a really strong brand with John Hancock. We've differentiated our new business proposition through the 10 year, partnership with vitality and to what Brooks was getting at. In recent years, we've completely transformed the new business portfolio into 1 that is within risk, appetite and generating High, margins and profitability. That's not incredibly visible. When you look at the overall results because of the impact of some of the de-risking transactions that have created, a lot of value, but resulted in uh, lower CSM amortization, and risk adjustment as you highlighted Mario. But there's also 1 other very important role that the US

Plays and that is in the generation of capital and remittances. That's been true in the past and I expect that to continue to be true in the years to come and having that balance of capital generation strong Capital generation in the portfolio is really important to us and something that we value

And then so another question for you. Um, we can all play with numbers. Everybody on this call is pretty good at that. And and when I try to come up with the 18% plus um Roe the sort of growth and buyback assumptions, you need to make are

Are meaningful, the EPS growth, the BuyBacks are meaningful, but the question is this?

Can you describe your level of confidence in a 18% are 18% Plus in 2027?

That's a great question, Mario, and when I looked year to date at our Roe core, Roe 15.3%, that's some way off the 18% plus Target that we've laid out for 2027. And I think that's what you're getting at. Yeah, I was, uh, you know, I've been on the leadership team for, you know, since 2017. I've been very involved in the development of the the, the Roe Target along with our other investor day targets. I fully believe that the Roe Target along with the other targets that we've laid out are achievable that we have a credible path, the tangible path of actions to get there and to to put some substance behind that. You know, the, the 15 15.3%, core Roe that we've delivered year to date in 2025 is after some highly unusual items the elevated level of ecl and Q2 the

Elevated mortality that that we've just touched on in the US as well as if you recall in the first quarter, we recognized PNC, reinsurance charged in connection with the California wildfires. And since we had set the 18% plus core Roe, there's been some, uh, movements in foreign exchange rates that you know, foreign exchange rates move from time to time. So I, you know, I'm not necessarily believing that necessarily locked in for the long term.

So if I adjust for those items actually our core Roe in 20 2025 year to date would be 17% around 17%. So I think that puts us on a credible path to getting to the 18% and the underlying business performance, you know, look at the performance of Asia and gwam that remains strong. So I'm encouraged by that.

All right, thank you, Paul.

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