Mr. Roy Gori reports

MANULIFE REPORTS THIRD QUARTER 2023 RESULTS

Manulife Financial Corp. has released its third quarter results for the period ended Sept. 30, 2023, delivering double-digit growth in core earnings, APE sales and new business value.

Key highlights for the third quarter of 2023 (Q3 2023) include:

• Net income attributed to shareholders of $1.0-billion, up $200-million from transitional net income attributed to shareholders in the third quarter of 2022 (Q3 2022) and up $500-million compared with Q3 2022 net income attributed to shareholders.
• Core earnings of $1.7-billion, up 28 per cent on a constant exchange rate basis from Q3 2022.
• Core EPS (earnings per share) of 92 cents, up 35 per cent from 68 cents in Q3 2022, and EPS of 52 cents in Q3 2023, up 31 per cent compared with transitional EPS of 38 cents in Q3 2022 and up 104 per cent compared with EPS of 23 cents in Q3 2022.
• LICAT ratio of 137 per cent.

"Our strong operating and new business results this quarter were supported by growth in Asia with a 33-per-cent increase in core earnings and 16-per-cent increase in new business CSM year over year. We also delivered resilient results in Global WAM with sequential core earnings growth, improving core EBITDA margin and positive net flows of $5.8-billion over the past three quarters. We are in a position of strength to weather macroeconomic uncertainties. We continued to deploy capital through share buybacks to further enhance shareholder returns, with nearly $1.3-billion of our common shares repurchased since the start of the year," said Roy Gori, Manulife president and chief executive officer.

"We delivered core ROE of 16.8 per cent in the third quarter and grew adjusted book value per share to $30.67, despite challenging macroeconomic conditions. Over all, higher rates have benefited, and will continue to benefit, our underlying businesses and financial performance. We remain disciplined in our capital and expense management approach, reporting a higher LICAT ratio in the quarter and improving expense efficiency ratio during 2023," said Colin Simpson, Manulife chief financial officer.

Profit

Net income attributed to shareholders rose to $1.0-billion in Q3 2023, $200-million higher than Q3 2022 transitional net income attributed to shareholders.

Manulife reported net income attributed to shareholders of $1.0-billion in Q3 2023, which was $200-million higher than Q3 2022 transitional net income attributed to shareholders and $500-million higher than Q3 2022 net income attributed to shareholders.

The increase in Q3 2023 net income attributed to shareholders compared with Q3 2022 transitional net income attributed to shareholders was driven by growth in core earnings and a one-time tax-related benefit of $290-million, partially offset by a larger net charge from market experience. The net charge from market experience in Q3 2023 was primarily related to lower-than-expected returns (including fair value changes) relative to long-term assumptions on alternative long-duration assets mainly related to real estate, lower-than-expected returns relative to long-term assumptions on public equity, and a charge from derivatives and hedge accounting ineffectiveness. Net income attributed to shareholders in Q3 2023 increased by $500-million compared with Q3 2022, driven by the factors mentioned above and $300-million of transitional impacts due to the application of IFRS 9 hedge accounting and expected credit loss (ECL) principles. Transitional impacts are geography-related and do not impact total shareholders' equity as the corresponding offset is in other comprehensive income.

Core earnings grew 28 per cent to $1.7-billion compared with Q3 2022

The increase from the prior-year quarter was driven by the non-recurrence of a $256-million provision in the company's property and casualty reinsurance business related to Hurricane Ian in Q3 2022, the favourable impact of rising interest rates on expected investment earnings and earnings on surplus assets net of higher cost of debt financing, as well as improved insurance experience in the United States and in Canada. Business growth also contributed to the increase in expected earnings on investments and on insurance contracts. These were partially offset by an increase in the ECL provision primarily related to electric utility bonds and private placements, higher performance-related costs, and investments in technology.

Growth

Annualized premium equivalent (APE) sales of $1.7-billion, up 21 per cent compared with Q3 2022

The company's APE sales in the third quarter were boosted by strong performance in Asia, reflecting its diverse business model. In Asia, APE sales increased 20 per cent compared with Q3 2022 as a result of growth in Hong Kong and Asia other. In Hong Kong, APE sales increased 57 per cent, driven by strong growth in the company's broker and bancassurance channels reflecting the return of demand from mainland Chinese visitor customers following the Hong Kong and mainland China border reopening in February, 2023. In Japan, APE sales decreased 6 per cent, due to lower sales in corporate-owned life insurance products. APE sales increased 14 per cent in Asia other compared with the prior year. Higher bancassurance sales in mainland China and higher broker sales in the company's international high-net-worth business and in Singapore were partially offset by lower agency and bancassurance sales in Vietnam.

In Canada, APE sales increased 51 per cent driven by a large affinity markets sale. U.S. APE sales decreased 31 per cent due to the adverse impact of higher short-term interest rates on accumulation insurance products, particularly for the company's affluent customers.

NBV of $600-million, rose 15 per cent compared with Q3 2022

In Asia, NBV increased 7 per cent from Q3 2022 driven by higher sales volumes partially offset by business mix. In Canada, NBV increased 72 per cent driven by higher sales volumes in individual insurance and higher margins in group insurance. In the United States, NBV decreased 29 per cent primarily due to lower sales volumes and product mix, partially offset by pricing actions and higher interest rates.

New business CSM of $507-million, up 6 per cent compared with Q3 2022

In Asia, new business CSM increased 16 per cent year over year primarily due to higher sales volumes partially offset by business mix. In Canada, new business CSM increased 16 per cent driven by product mix in individual insurance. Under IFRS 17, the majority of group insurance and affinity products are classified as premium allocation approach and do not generate CSM. In the U.S., new business CSM decreased 39 per cent driven by lower sales volumes and product mix.

Global WAM net outflows of $800-million in Q3 2023 compared with net inflows of $3.0-billion in Q3 2022

Net outflows in retirement were $3.4-billion in Q3 2023 compared with net inflows of $1.4-billion in Q3 2022, driven entirely by a large-case pension plan redemption in the U.S. Net outflows in retail were $200-million in Q3 2023 compared with net inflows of $1.0-billion in Q3 2022, reflecting lower demand as investors continued to favour short-term cash and money market instruments amid market volatility and higher interest rates. This was partially offset by the launch of the company's global semiconductors strategy in Japan and higher net inflows in mainland China from acquiring full ownership of Manulife Fund Management (MFM) in the fourth quarter of 2022. Net inflows in Institutional Asset Management were $2.8-billion in Q3 2023 compared with net inflows of $600-million in Q3 2022, driven by higher net flows in fixed income mandates, and higher sales of equity and agriculture mandates, as well as the impact of the MFM acquisition.

Balance sheet

CSM net of NCI was $17,369-million as at Sept. 30, 2023

CSM increased $172-million and $86-million net of NCI compared with Dec. 31, 2022. Organic CSM movement was an increase of $629-million for the nine months ended Sept. 30, 2023, driven by the impact of new insurance business and expected movements related to finance income or expenses, partially offset by amounts recognized for service provided in year-to-date earnings and a net reduction from insurance experience. Inorganic CSM movement was a decrease of $457-million for the same period, driven by net unfavourable impacts of equity market experience and higher interest rates on certain participating and variable annuity contracts, as well as changes in foreign currency exchange rates, partially offset by the changes from the company's annual review of actuarial methods and assumptions. Post-tax CSM net of NCI was $14,992-million as at Sept. 30, 2023.

Annual review of actuarial methods and assumptions

The company completed its annual review of actuarial methods and assumptions, which resulted in a net favourable impact of $347-million, comprising an increase in pretax net income attributed to shareholders of $27-million (a decrease of $14-million post-tax), an increase in pretax net income attributed to participating policyholders of $58-million ($74-million post-tax), an increase in CSM net of NCI of $116-million, and an increase in pretax other comprehensive income of $146-million ($110-million post-tax). Assumptions reviewed this year included the company's Canada variable annuity assumptions, morbidity assumptions in certain Asia markets, mortality assumptions in the U.S. life insurance business, lapse assumptions in Canada and other methodology refinements.

Strategic highlights

The company is making decisions easier for its global and diverse customer base

During Q3 2023 Manulife launched a unified high-net-worth onboarding platform in Bermuda 12 Hong Kong and Singapore, to the company's international brokers to deliver a consistent high-touch experience for both distributors and customers by streamlining new business application, underwriting and compliance processes across its three high-net-worth markets. In Canada, the company expanded its personalized medicine program to all group benefits extended health care plans, making this service available to more customers, while enabling them to learn about medications that best meet their needs and work with health care providers on customized treatment plans that can lead to better outcomes. Meanwhile, Global WAM continued to fulfill investor needs for wealth solutions through the expansion of the company's offerings with the launch of the global semiconductors strategy in Japan which garnered more than $700-million in net flows during the quarter, as well as the launch of a municipal opportunities separately managed account in U.S. retail, built on the company's mutual fund of the same name.

In the U.S., Manulife expanded its reach into the employer market by introducing a premier benefit indexed universal life product. This permanent life insurance product, available through the workplace, offers a streamlined digital process for employees to purchase individual coverage and includes the company's John Hancock Vitality PLUS feature. In addition, Manulife launched a distribution relationship with JPMorgan Chase & Co. enabling new sales of the company's suite of products, including its John Hancock Vitality program, through its network of more than 6,900 advisers.

The company is accelerating digital initiatives to move faster and meet customers' personalized needs

In Canada, Manulife announced a strategic partnership with League, a leading health care technology provider, to offer the company's group benefits members more integrated digital health care experiences, enabling them to connect their benefits directly with health care options. This partnership continues the company's digitization efforts to meet growing demand for more personalized digital experiences that help customers understand their health, focus on prevention, access care, and better comprehend and optimize their benefits. In the U.S., the company continued to optimize its digital capabilities to create a seamless, digital customer experience through the launch of single sign-on for John Hancock Vitality customers between John Hancock Life and Vitality websites, improvement of the website navigation of the company's producer portal, and enhancement of the interactive voice response authentication enabling 31 per cent of inbound calls to be completed with no human interaction in the quarter.

In Asia, the company further automated the claims-handling process in Hong Kong to improve operational efficiency and deliver a better customer experience as the company continues to leverage data to enhance its auto-adjudication engine, driving an almost twofold-increase of straight-through processed claims compared with Q3 2022. In Global WAM, the company accelerated customer adoption of digital applications in Canada Retirement through its "Say Goodbye to Paper" campaign which contributed to a 165-per-cent increase in members converting to e-statements over the three-month campaign period and an increase in satisfaction in their digital experience over the prior quarter.

Quarterly earnings results conference call

Manulife Financial will host a third quarter 2023 earnings results conference call at 8 a.m. ET on Nov. 9, 2023. For local and international locations, please call 1-416-340-2217 or toll-free, North America 1-800-806-5484 (pass code: 1815155 followed by the pound key). Please call in 15 minutes before the scheduled start time. You will be required to provide your name and organization to the operator. A replay of this call will be available until Dec. 9, 2023, by dialling 1-905-694-9451 or 1-800-408-3053 (pass code: 5296863 followed by the pound key).

The conference call will also be webcast through Manulife's website at 8 a.m. ET on Nov. 9, 2023. You may access the webcast through the company's website.

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