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Manulife Financial Corp
Symbol C : MFC
Shares Issued 1,827,721,539
Close 2013-02-06 C$ 14.41
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Manulife Financial earns $1.692-billion in 2012

2013-02-07 06:39 ET - News Release

Mr. Donald Guloien reports

MANULIFE FINANCIAL REPORTS 2012 NET INCOME OF $1.7 BILLION, CORE EARNINGS OF $2.2 BILLION, A STRONG REGULATORY CAPITAL RATIO OF 211 PER CENT, AND RECORD INSURANCE AND WEALTH SALES

Manulife Financial Corp. had net income attributed to shareholders of $1,057-million for the fourth quarter ended Dec. 31, 2012, accompanied by strong growth in insurance and wealth sales. Fully diluted earnings per common share was 56 cents and return on common shareholders' equity was 18.2 per cent for the fourth quarter ended Dec. 31, 2012. For the full year, Manulife reported net income attributed to shareholders of $1,736-million, diluted EPS of 88 cents and ROE of 7.1 per cent.

Substantive progress made on Manulife's strategic priorities in the fourth quarter of 2012:

  • Developing Manulife's Asian opportunity to the fullest -- achieved record wealth sales(1, 2), more than double last year. Total insurance sales increased 20 per cent compared with fourth quarter 2011, with record insurance sales in Indonesia driven by robust growth in both the agency and bank channels, and double-digit insurance sales growth in Hong Kong driven by agency growth. The company also enhanced Manulife's distribution network with additional partners in Japan;
  • Growing Manulife's wealth and asset management businesses in Asia, Canada and the United States -- Manulife Asset Management had record institutional sales, the company launched the Strategic Income Fund in Japan, contributing to record(2) wealth sales in Asia; the company achieved record mutual fund sales and assets under management in Canada; and also generated record mutual fund and 401(k) sales and assets under management in the United States, all contributing to record funds under management(1) for the company as a whole;
  • Continuing to build Manulife's balanced Canadian franchise -- maintained leading market positions in group businesses with strong sales growth in both Group Benefits and Group Retirement Solutions(3); record lending assets for Manulife Bank; and completed the acquisition of Benesure Canada in early January, 2013;
  • Continuing to grow higher ROE, lower-risk U.S. businesses -- double-digit sales growth in life insurance over the fourth quarter of 2011; two additional state approvals for long-term care in-force repricing; recorded $1.2-billion of positive net flows in mutual funds; and added new mutual funds to platforms at key firms.

Highlights for the fourth quarter of 2012(4):

  • Reported net income attributed to shareholders of $1,057-million;
  • Delivered core earnings(1) of $537-million, slightly below the third quarter of 2012 due to the impact of increased acquisition costs on higher wealth sales, higher insurance sales expenses and systems costs in Asia, and increased macro hedging costs;
  • Generated strong insurance sales growth(5) of 49 per cent to $929-million;
  • Delivered a 31-per-cent increase in wealth sales to $10.4-billion;
  • Strengthened MLI's MCCSR ratio by seven points over prior quarter;
  • Achieved record funds under management(1) of $532-billion;
  • Generated strong investment gains of $368-million, despite the fact that the impact of equity markets and interest rates was almost neutral;
  • Increased new business embedded value(1) by 71 per cent to $245-million;
  • Reported net income in accordance with U.S. generally accepted accounting principles(1) of $237-million.

In the fourth quarter of 2012 Manulife generated $537-million of core earnings. Fully diluted core earnings per common share(6) was 28 cents and core return on common shareholders' equity(6) was 9.0 per cent. For the full year, Manulife reported core earnings of $2,187-million, core EPS of $1.12 and core ROE of 9.1 per cent.

Donald Guloien, president and chief executive officer, stated: "We made significant progress towards our strategic priorities in 2012 -- we ended 2012 with record(7) annual sales in both our insurance and wealth businesses: Manulife Asset Management added significant new institutional mandates; our Asian franchise delivered strong growth by expanding our distribution networks, including growing our bancassurance partnerships; and we generated another all-time record funds under management.

"Since 2010, we have enjoyed a positive progression in earnings and improved our annual net income by $1.6-billion over 2011. We believe that Manulife is well positioned to continue to deliver disciplined and sustainable growth to meet our objectives of $4-billion in core earnings and 13 per-cent-core ROE by 2016," added Mr. Guloien.

Steve Roder, chief financial officer, stated: "We generated strong financial results for the fourth quarter -- we substantially increased sales in both our insurance and wealth businesses and generated $1.1-billion of net income for the period. As a result of our robust sales, we significantly increased our new business embedded value. In addition, our investment division continued to deliver solid investment gains. We ended the quarter with a strengthened capital position of 211 per cent, a seven-point improvement over the third quarter.

"We are pleased with the strong income we generated this quarter, however investment gains, and to a lesser extent tax items, were significant contributors that cannot be counted on in the future. It is as a result of this variability that we introduced the core earnings metric. Core earnings, which this quarter were lower than net income, helps analysts and investors assess our underlying earnings capacity," added Mr. Roder.

Highlights for the fourth quarter of 2012 and full year 2012:

  • Reported net income attributed to shareholders of $1,057-million for the fourth quarter of 2012 and $1,736-million for the full year 2012:
    • Fourth-quarter earnings included strong investment gains of $368-million and $264-million of tax-related gains that were considered material and exceptional in nature. The company released $182-million of provisions related to prior-year uncertain tax positions on one item and the company reported a net release of $82-million related to interest on a tax contingency for leasing transactions;
  • Delivered core earnings of $537-million for the fourth quarter of 2012, marginally below the third quarter of 2012, and delivered core earnings of $2,187-million for the full year 2012:
    • Compared with fourth quarter 2011, core earnings increased by $164-million. The increase was driven by a combination of increased fee income on funds under management and the significant improvement in new business margins as a result of pricing actions and improvement in business mix which was partially offset by a number of items in the fourth quarter 2012 that netted to a small negative;
    • Compared with third quarter 2012, core earnings declined by $19-million, due to impact of increased acquisition costs on higher wealth sales, higher insurance sales expenses and systems costs in Asia, and increased macro hedging costs;
    • Full-year core earnings increased by $18-million compared with 2011. The increase included a number of offsetting items. Improved new business margins, increased fee income, higher scheduled release of variable annuity guarantee margins and the non-recurrence of material property and casualty reinsurance claims were mostly offset by additional macro equity hedging costs and amortization of unrealized pension losses, in addition to higher business development and project related expenses;
  • Generated strong insurance sales growth of 49 per cent over the fourth quarter of 2011 and delivered record insurance sales for 2012:
    • Insurance sales were $929-million in the fourth quarter of 2012, an increase of 49 per cent compared with fourth quarter of 2011 driven by strong single premium sales in Group Benefits; a 20-per-cent increase in Asia insurance sales; and an improvement of 13 per cent in U.S. sales, mainly driven by successful new product offerings with favourable risk characteristics;
    • Record insurance sales exceeded $3.3-billion for 2012, an increase of 33 per cent compared with 2011;
  • Delivered a 31-per-cent increase in wealth sales over the fourth quarter of 2011 and record(8) wealth sales for 2012:
    • Wealth sales of $10.4-billion in the fourth quarter of 2012 reflected record sales in Asia, which were more than double those in the fourth quarter of 2011; record mutual fund sales and increased sales in Group Retirement Solutions in Canada, which were more than offset by the decline in annuity sales and lower new loan volumes; and record quarters for both mutual funds and 401(k) businesses in the U.S.;
    • Record(8) wealth sales were almost $36-billion for full year 2012, an increase of four per cent compared with 2011, despite restrictions placed on annuity sales by the company;
  • Strengthened the Manufacturers Life Insurance Company's minimum continuing capital and surplus requirements ratio by seven points over Sept. 30, 2012, to 211 per cent:
    • The improvement in MLI's capital position from the end of the third quarter of 2012 reflects the contribution from fourth-quarter earnings, reinsurance of a portion of the Japanese life business and a $200-million preferred share issuance during the quarter;
    • Further to the 2013 MCCSR guideline, MLI's MCCSR ratio is estimated to increase by approximately four points on a pro forma basis to 215 per cent as of Jan. 1, 2013. The increase is attributable to revisions to lapse risk required capital rules;
  • Achieved record funds under management of $532-billion as at Dec. 31, 2012;
  • Continued to generate strong investment gains of $368-million during the quarter, $50-million of which is included in core earnings. Fixed-income and alternative long-duration asset investing along with excellent credit accounted for the vast majority of Manulife's investment gains for both the quarter and the full year;
  • Reported embedded value(9) of $38.0-billion as at Dec. 31, 2012, representing an increase of $1.9-billion over that reported at Dec. 31, 2011. Increases in embedded value were driven by normal operating activities including the impact of new business, offset by shareholder dividends and depreciating foreign currencies relative to the Canadian dollar;
  • Generated new business embedded value(9) of $245-million in the fourth quarter of 2012, an increase of 71 per cent over the fourth quarter of 2011;
  • Received two additional state approvals on long-term care price increases on in-force retail business during the quarter bringing Manulife's total to 43 states;
  • Reduced equity market sensitivities during the quarter by adding $250-million of equity future notional value to the macro hedging program and adding approximately $700-million of in-force guarantee value to the dynamic hedging program. A further $250-million of macro hedges were added in January, 2013, due to favourable market conditions;
  • Reported net income in accordance with U.S. generally accepted accounting principles for the fourth quarter of $237-million, or $820-million lower than Manulife's results under the Canadian version of international financial reporting standards(10), and total equity in accordance with U.S. GAAP was $16-billion higher than under IFRS. The primary driver of the quarter's lower U.S. GAAP earnings compared with IFRS earnings relates to variable annuity accounting differences. For the full year 2012, net income attributed to shareholders in accordance with U.S. GAAP was $2,557-million versus $1,736-million under IFRS.

Sales and business growth

Asia division

Robert Cook, senior executive vice-president and general manager, Asia division, stated: "I am very pleased with our full-year 2012 results -- the Asia division achieved record(11) sales for both insurance and wealth (excluding variable annuities) products. In addition, our fourth-quarter wealth sales were over $2-billion, a new record(11), and evidence that our product diversification strategy is succeeding. We continue to successfully build a diverse, multichannel distribution platform across the region. In 2012, we secured and deepened strategically important distribution agreements with key bank partners in Japan and Indonesia; achieved strong growth in our professional agency force in several key markets; and successfully expanded our presence in the managing general agent channel into the retail market in Japan. We also became the first foreign-owned life insurer to commence operations in Cambodia, and we expanded our broad geographic footprint in China with our 50th city licence."

Asia division's fourth-quarter insurance sales were $362-million (U.S.), an increase of 20 per cent compared with the same quarter of 2011. Full-year insurance sales of $1.4-billion (U.S.) were 16 per cent higher than 2011.

  • Indonesia reported record quarterly insurance sales of $34-million (U.S.), a 51-per-cent increase compared with fourth quarter 2011, driven by strong growth in both Manulife's agency and bank channels. The strong full-year growth of 46 per cent was driven by an expanded bancassurance channel which grew 140 per cent compared with 2011.
  • Japan insurance sales for the fourth quarter of $188-million (U.S.) were 36 per cent higher than fourth quarter 2011. Strong sales of Manulife's increasing term product in advance of price increases were partially offset by lower cancer product sales which were impacted by tax changes implemented in the first half of the year. Full-year sales reached a record level of $767-million (U.S.), 11 per cent higher than record sales in 2011, a result of strong cancer product sales in the first half of the year and increasing term sales in the second half of 2012.
  • Hong Kong fourth-quarter insurance sales of $65-million (U.S.) were 14 per cent higher than fourth quarter 2011. Full-year sales reached a record $257-million (U.S.), up 23 per cent over 2011. Sales growth over 2011 was primarily driven by expanded agency distribution, as well as continued strong sales throughout 2012 of Manulife's participating life product, including a run-up of sales prior to price increases in the second quarter of 2012.
  • Asia other insurance sales (excludes Hong Kong, Japan and Indonesia) for the fourth quarter were $75-million (U.S.), or 9 per cent below the same period in 2011, while full-year sales of $302-million (U.S.) were 15 per cent higher than 2011. The decline relative to the fourth quarter 2011 was due to product changes in Taiwan. The full-year sales growth over the prior year was driven primarily by expanded agency distribution.

Asia division's fourth-quarter wealth sales were $2.1-billion (U.S.), more than double sales in the fourth quarter of 2011. On a full-year basis, wealth sales of $5.7-billion (U.S.) increased 36 per cent over 2011.

  • Japan fourth-quarter wealth sales of $694-million (U.S.) were three times the same period a year ago, and on a full-year basis, sales of $1.7-billion were more than double those of the prior year. Growth was fuelled by the successful launch of the Strategic Income Fund, which reported sales of over $550-million (U.S.) in the fourth quarter, and continued strong sales of the Australian-dollar-denominated fixed-annuity product.
  • Indonesia achieved record wealth sales of $449-million (U.S.) in the fourth quarter, four times higher than fourth quarter 2011, and full-year 2012 sales surpassed the $1-billion (U.S.) milestone. Strong performance was recorded in all product lines, with mutual fund sales seven times higher than in 2011 and unit linked sales through Manulife's bank partners up 157 per cent.
  • Hong Kong fourth-quarter wealth sales of $321-million (U.S.) were 74 per cent higher than the same period a year ago and included a successful start in capturing transfer cases following the November launch of the Mandatory Provident Fund's new employee choice arrangement. Full-year results of $792-million (U.S.) were down 15 per cent from 2011, primarily as a result of a change in client preferences for bond funds over equity funds in 2012.
  • Asia other wealth sales (excludes Hong Kong, Japan and Indonesia) for the fourth quarter were $668-million (U.S.), 78 per cent higher than the same period a year ago, and full year sales of $2.2-billion (U.S.) were up 13 per cent over 2011. Strong mutual fund sales in Taiwan as well as unit linked sales in the Philippines were the key contributors to the growth.

Asia division continues to execute on Manulife's longer-term growth strategy by expanding agency and bank channel distribution capacity.

  • Contracted agents ended the year at 53,700, a 7-per-cent increase from the end of 2011 with significant growth in Hong Kong, Indonesia, the Philippines and China.
  • Bank channel total insurance and wealth sales, on an annualized premium equivalent basis, were $159-million (U.S.) in the fourth quarter. This increase of 73 per cent compared with the same period in 2011 was attributed to the expanded distribution in Indonesia, particularly Manulife's exclusive agreement with Bank Danamon. In Japan, sales of mutual funds through the bank channel picked up considerably as a result of the successful launch of the Strategic Income Fund.

Canadian division

"In 2012, we continued to successfully build our diversified Canadian franchise," said Marianne Harrison, senior executive vice-president and general manager, Canadian division. "We achieved record full-year sales in several business lines, namely: Group Benefits, Manulife Mutual Funds and Affinity Markets, and Group Retirement Solutions once again led the defined contribution market in sales(12). We continued to drive our desired shift in product mix, reducing the proportion of insurance and variable annuity sales with guaranteed features. We expanded our distribution reach: welcoming new advisers, extending existing relationships and enhancing support to our distribution partners. On Jan. 4, 2013, we completed our acquisition of Benesure Canada Inc., strategically positioning us as the leading provider of mortgage creditor insurance through mortgage brokers in Canada."

Group Benefits and Group Retirement Solutions both led the Canadian industry in sales in 2012(12). Group Benefits' full-year sales exceeded $1-billion, an industry record, benefiting from strong single premium sales and good growth across diverse market segments. Fourth-quarter Group Benefits sales of $333-million were more than three times higher than the fourth quarter of 2011. GRS's full-year sales of $1.1-billion increased 17 per cent from 2011 levels, while fourth-quarter sales of $223-million were 45 per cent higher than the fourth quarter of 2011. Successful cross-selling efforts contributed to the strong sales growth in both group businesses.

Individual Wealth Management's fourth-quarter sales of $2.3-billion increased 9 per cent from third quarter 2012 levels, reflecting record quarterly deposits in Manulife Mutual Funds. Sales were 8 per cent below the fourth quarter of 2011, and full-year sales were 7 per cent below 2011 levels, reflecting Manulife's actions to moderate variable annuity sales in the current macroeconomic environment.

  • Record quarterly MMF sales of $738-million in the fourth quarter of 2012 increased 61 per cent from the third quarter of 2012 and were more than twice fourth-quarter 2011 levels, driving full-year sales to a record $2.1-billion. This strong momentum reflects Manulife's expanded distribution reach, continued strong performance in balanced and fixed-income fund categories, and success of a number of funds launched in 2012. Year over year, MMF was the fastest-growing mutual fund franchise of the top-10 fund companies in Canada(13). Record MMF assets under management of over $20-billion at Dec. 31, 2012, increased 17 per cent over Dec. 31, 2011, while the industry grew 10 per cent according to IFIC(13).
  • Manulife Bank had record assets of over $21-billion at Dec. 31, 2012, 7 per cent higher than at the end of 2011, driven by strong client retention and stable new lending volumes of $4.6-billion in 2012, modestly below 2011 levels. New lending volumes of $1.1-billion for the fourth quarter were consistent with third-quarter 2012 levels and 10 per cent below the same period last year, reflecting the impact of the current regulatory and competitive environment.
  • Sales of variable annuity products of $379-million in the fourth quarter and $2-billion for the year were significantly below the comparative 2011 levels, reflecting the anticipated impact of product changes throughout the year. Fixed-rate product sales also continued at lower levels, reflecting the continued low-interest-rate environment.

Individual insurance sales in 2012 continued to align with Manulife's strategy to reduce new business risk, with a significantly lower proportion of sales with guaranteed long-duration features compared with 2011. Manulife has led the industry with changes to guaranteed long-duration products, the anticipated impact of which was reflected in the year-over-year sales result. Fourth-quarter sales of recurring premium products of $58-million were 22 per cent lower than the fourth quarter of 2011; full-year sales declined by 8 per cent from 2011 levels. Fourth-quarter single premium sales of $82-million were modestly ahead of fourth quarter 2011 levels. Record full-year single premium product sales increased 16 per cent from 2011 levels, driven by continued expansion in travel insurance.

U.S. division

Craig Bromley, senior executive vice-president and general manager, U.S. division, reported: "We are extremely pleased with our full-year results, as record fourth-quarter and full-year sales in retirement plan services and mutual funds contributed to record funds under management in both businesses. We are entering 2013 with strong momentum and sales potential in these businesses. In addition, fourth-quarter insurance sales increased 13 per cent over the fourth quarter of 2011, and included an increase in sales of products with reduced risk and higher return potential."

Wealth management full-year sales were $20.2-billion (U.S.), an increase of 3 per cent compared with the prior year. The sales increases of 28 per cent in John Hancock Retirement Plan Services and 8 per cent in John Hancock Mutual Funds were partially offset by lower annuity product sales. Sales in the fourth quarter of 2012 were $5.9-billion (U.S.), an increase of 31 per cent compared with the fourth quarter of 2011.

  • JH RPS sales of $2.0-billion (U.S.) in the fourth quarter of 2012 were a record quarterly result and represented an increase of 44 per cent compared with the fourth quarter 2011. JH RPS capitalized on the high plan turnover in the market including the exit of a key competitor. For the full year, JH RPS achieved record sales of $6.0-billion (U.S.), an increase of 28 per cent over 2011. Together with favourable equity markets this helped drive funds under management to a record $72-billion (U.S.) as of Dec. 31, 2012, a 14-per-cent increase from Dec. 31, 2011. In addition, JH RPS's TotalCare product, a full-service group annuity launched in the third quarter of 2012, has started to gain traction in the 401(k) market.
  • JH Funds achieved record quarterly sales of $3.7-billion (U.S.) in the fourth quarter of 2012, a 54-per-cent increase from fourth quarter 2011 and record full-year sales of $13-billion (U.S.) with increases across all channels. These results propelled funds under management as of Dec. 31, 2012, to a record $42-billion (U.S.), a 24-per-cent increase from Dec. 31, 2011. A strong product line and success in adding Manulife's funds to strategic partner recommended lists, as well as a focused sales and marketing campaign, helped to drive these results. As of Dec. 31, 2012, JH Funds offered 23 four- or five-star Morningstar(14) rated equity and fixed income mutual funds.
  • The John Hancock lifestyle and target date portfolios offered through Manulife's mutual fund, 401(k), variable annuity and variable life products had assets under management of $80.0-billion (U.S.) as of Dec. 31, 2012, a 13-per-cent increase over Dec. 31, 2011. As of Dec. 31, 2012, John Hancock was the fourth-largest manager of assets in the U.S. for lifestyle and target date funds offered through retail mutual funds and variable insurance products(15).

Insurance sales in the U.S. for the fourth quarter of 2012 increased 13 per cent compared with the same period in the prior year, mainly driven by successful new product offerings with favourable risk characteristics. Full-year sales were 4 per cent lower than 2011. Manulife continued to execute on strategies to reduce risk and increase margins.

  • John Hancock Life fourth-quarter 2012 sales of $163-million (U.S.) were up 18 per cent over fourth quarter 2011. Newly launched products continued to contribute to the sales success, with Protection UL sales of $65-million (U.S.) and Indexed UL sales of $15-million (U.S.). Full-year sales of $543-million (U.S.) outpaced the prior year by 12 per cent, and the business successfully executed its transition to lower-risk products.
  • John Hancock Long-Term Care sales of $10-million (U.S.) in the fourth quarter declined 33 per cent compared with the same period in 2011, reflecting the impact of price increases. Manulife's new product, launched in 43 states as of December, 2012, offers an innovative alternative to traditional inflation options and is gaining traction in the market. Full-year sales of $56-million (U.S.) were 61 per cent lower than 2011 due to the non-recurrence of the 2011 Federal Long Term Care plan open enrolment period and the price increases referred to above.

Investment division

Warren Thomson, senior executive vice-president and chief investment officer, said: "For the general fund, we continued to deliver strong investment gains driven by credit experience which reflects the strength of our underwriting, the positive impact of fixed-income trading which included the redeployment of treasuries into spread products, and the purchase of alternative long-duration assets. The alternative long-duration assets originated during 2012 further diversified our portfolio and continue to enhance our risk-adjusted returns. The acquisitions were across various asset classes including real estate, timberland, private equities and infrastructure. We continue to focus our acquisitions on high-quality, good relative-value assets.

"Manulife Asset Management experienced significant growth in 2012 across its global franchise, with assets under management increasing by 12 per cent to $237.6-billion," said Mr. Thomson. "Our strong investment performance is yielding tangible results across many asset classes. We successfully launched several new products which have enabled us to meet our retail clients' needs, and we have been awarded new institutional mandates in North America and Asia which have contributed to significant growth in institutional AUM. In the fourth quarter we were awarded a substantial institutional fixed income investment mandate."

Assets managed by Manulife Asset Management increased by $26.2-billion to $237.6-billion as at Dec. 31, 2012, from $211.4-billion as at Dec. 31, 2011. At Dec. 31, 2012, Manulife Asset Management had a total of 65 four- and five-star Morningstar-rated funds, an increase of seven funds from Dec. 31, 2011. A broad array of investment awards were garnered in 2012 in recognition of Manulife's strong investment performance that is being driven by its continuing investment in portfolio management talent across the company's global platform.

Corporate items

In a separate news release today, the company announced that the board of directors approved a quarterly shareholders' dividend of 13 cents per share on the common shares of the company, payable on and after March 19, 2013, to shareholders of record at the close of business on Feb. 20, 2013.

The board of directors approved that in respect of the company's March 19, 2013, common share dividend payment date, the company will issue common shares in connection with the reinvestment of dividends and optional cash purchases pursuant to the company's Canadian dividend reinvestment and share purchase plan and its U.S. dividend reinvestment and share purchase plan.

Awards and recognition

In New York, Manulife Financial was recognized by leading U.S. governance and compliance publication, Corporate Secretary, as having the Best Overall Corporate Governance in the International category at the annual Corporate Governance Awards.

In Canada, the Women's Executive Network named Dr. Gail Cook-Bennett, board chairman, and Lynda Sullivan, group chief accounting officer, among its 2012 Canada's Most Powerful Women: Top 100 award winners. Dr. Cook-Bennett was also recognized by Women of Influence Inc. as a 2012 Canadian Diversity Champion.

In Hong Kong, Manulife (International) Ltd. was designated Hong Kong's "Company For Financial Planning Excellence of the Year" in the insurance category at the South China Morning Post/Institute of Financial Planners Hong Kong Financial Planner Awards 2012 for the sixth consecutive year.

In Thailand, Manulife Asset Management (Thailand) Co. Ltd. earned "Outstanding Asset Management Company Award" at the Stock Exchange of Thailand Awards 2012.

In Asia, five Manulife Asset Management fixed-income fund managers (two based in Hong Kong, two in the Philippines and one in Indonesia), were named among the "most astute investors in Asian currency bonds" in the Asset's Benchmark research survey for 2012.

Manulife Financial will host a fourth-quarter earnings results conference call at 2 p.m. ET on Feb. 7, 2013. For local and international locations, please call 416-340-2216 and toll-free in North America please call 1-866-898-9626. Please call in 10 minutes before the call starts. You will be required to provide your name and organization to the operator. A playback of this call will be available by 6 p.m. ET on Feb. 7, 2013, until Feb. 21, 2013, by calling 905-694-9451 or 1-800-408-3053 (passcode: 6718073 then the pound sign).

The conference call will also be webcast through Manulife Financial's website at 2 p.m. ET on Feb. 7, 2013. An archived version of the webcast will be available at 4:30 p.m. ET.

The fourth-quarter 2012 statistical information package is also available on the Manulife Financial website. The document may be downloaded before the webcast begins.

                                  CONSOLIDATED STATEMENTS OF INCOME (LOSS)
                              (in millions of dollars, except per share amounts)                                     

                                                                       For the three months ended   For the years ended
                                                                                          Dec. 31,              Dec. 31,
                                                                                 2012        2011        2012      2011
Revenue
Net premium income(1)                                                      $    5,012   $   4,540   $  10,734  $ 17,504
Investment income
Investment income                                                               2,095       2,034       8,792    10,367
Realized/unrealized gains (losses) on assets supporting
insurance and investment contract liabilities(2)                               (1,600)      1,360       3,050    15,870
Other revenue                                                                   1,690       1,765       7,356     7,242
                                                                           -----------  ----------  ---------- ---------
Total revenue                                                                   7,197       9,699      29,932    50,983
                                                                           -----------  ----------  ---------- ---------
Contract benefits and expenses
To contractholders and beneficiaries
Death, disability and other claims                                              2,282       2,224       9,527     9,213
Maturity and surrender benefits                                                 1,472       1,375       5,058     5,403
Annuity payments                                                                  838         802       3,244     3,164
Policyholder dividends and experience rating refunds                              257         302       1,092     1,080
Net transfers from segregated funds                                              (185)       (130)       (718)     (299)
Change in insurance contract liabilities(2)                                        39       4,364      13,442    27,934
Change in investment contract liabilities                                          26          35          87        64
Ceded benefits and expenses                                                    (1,526)     (1,325)     (5,924)   (4,918)
Change in reinsurance assets(1)                                                   154      (1,486)     (8,065)   (1,852)
                                                                           -----------  ----------  ---------- ---------
Net benefits and claims                                                         3,357       6,161      17,743    39,789
                                                                           -----------  ----------  ---------- ---------
General expenses                                                                1,277       1,134       4,531     4,061
Investment expenses                                                               297         273       1,091     1,001
Commissions                                                                     1,012         987       3,932     3,813
Interest expense(3)                                                               119         288         967     1,249
Net premium taxes                                                                  78          72         299       257
Goodwill impairment                                                                 -         665         200       665
                                                                           -----------  ----------  ---------- ---------
Total contract benefits and expenses                                            6,140       9,580      28,763    50,835
                                                                           -----------  ----------  ---------- ---------
Income before income taxes                                                      1,057         119       1,169       148
Income tax recovery (expense)                                                      22        (174)        523        97
                                                                           -----------  ----------  ---------- ---------
Net income (loss)                                                          $    1,079   $     (55)  $   1,692  $    245
                                                                           ===========  ==========  ========== =========
Less: net income attributed to non-controlling interest in subsidiaries             2          14          59        27
Net income (loss) attributed to participating policyholders                        20           -        (103)       89
                                                                           -----------  ----------  ---------- ---------
Net income (loss) attributed to shareholders                                    1,057         (69)      1,736       129
Preferred share dividends                                                         (29)        (21)       (112)      (85)
                                                                           -----------  ----------  ---------- ---------
Common shareholders' net income (loss)                                          1,028         (90)      1,624        44
Basic earnings (loss) per common share                                     $     0.56   $   (0.05)  $    0.90  $   0.02
Diluted earnings (loss) per common share                                         0.56       (0.05)       0.88      0.02

Notes:
1. On June 29, 2012, and Sept. 25, 2012, the company entered into coinsurance agreements to reinsure 89 per cent of its 
book value fixed deferred annuity business.  Under the terms of the agreements, the company will maintain responsibility
for servicing of the policies and some of the assets and has retained the remaining exposure. The premiums ceded 
relating to FDA coinsurance were $2-miliion and $7,229-million for Q4 2012 and full year 2012, respectively.
2. The volatility in realized/unrealized gains on assets supporting insurance and investment contract liabilities 
relates primarily to the impact of interest rates changes on bond and fixed-income derivative positions as well as 
interest rate swaps supporting the dynamic hedge program. These items are mostly offset by changes in the measurement of
Manulife's policy obligations. For fixed-income assets supporting insurance and investment contracts, equities 
supporting pass through products and derivatives related to variable annuity hedging programs, the impact of realized/
unrealized gains on the assets is largely offset in the change in insurance and investment contract liabilities.
3. Q4 2012 includes the release of interest provision related to tax contigency.

Notes:

  1. This item is a non-GAAP measure.
  2. Wealth sales were a record excluding sales of variable annuities.
  3. Based on quarterly LIMRA industry sales report as at Sept. 30, 2012.
  4. Unless otherwise indicated, comparatives refer to the three-month period ended Dec. 31, 2012, versus the three-month period ended Dec. 31, 2011.
  5. Sales, premiums and deposits and funds under management growth (decline) rates are quoted on a constant currency basis. Constant currency is a non-GAAP measure.
  6. This item is a non-GAAP measure.
  7. Wealth sales were a record excluding sales of variable annuities.
  8. Wealth sales were a record excluding sales of variable annuities.
  9. This item is a non-GAAP measure.
  10. The Canadian version of IFRS uses IFRS as issued by the International Accounting Standards Board. However because IFRS does not have an insurance contract measurement standard, Manulife continues to use the Canadian Asset Liability Method (CALM).
  11. Wealth sales were a record excluding sales of variable annuities.
  12. Based on quarterly LIMRA industry sales report as at Sept. 30, 2012.
  13. Based on reporting from the Investment Funds Institute of Canada (IFIC) as at Dec. 31, 2012.
  14. For each fund with at least a three-year history, Morningstar calculates a Morningstar rating based on a Morningstar risk-adjusted return that accounts for variation in a fund's monthly performance (including effects of sales charges, loads and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10 per cent of funds in each category, the next 22.5 per cent, 35 per cent, 22.5 per cent and bottom 10 per cent receive five, four, three, two or one, respectively. The overall Morningstar rating for a fund is derived from a weighted average of the performance associated with its three-, five- and 10-year (if applicable) Morningstar rating metrics. Past performance is no guarantee of future results. The overall rating includes the effects of sales charges, loads and redemption fees, while the load-waived does not. Load-waived rating for Class A shares should only be considered by investors who are not subject to a front-end sales charge.
  15. Source: Strategic Insight. Includes lifestyle and life cycle (target date) mutual fund assets and fund-of-funds variable insurance product assets (variable annuity and variable life).

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