Mr. Roy Gori reports

MANULIFE REPORTS FULL YEAR AND FOURTH QUARTER 2023 RESULTS

Manulife Financial Corp. has released its full year and fourth quarter results for the period ended Dec. 31, 2023, during which the company delivered double-digit growth in core EPS (earnings per share), and today declared a common share dividend increase of 9.6 per cent.

Key highlights for full year 2023 and the fourth quarter (Q4 2023) include:

• Net income attributed to shareholders of $5.1-billion in 2023, up $1.6-billion from 2022 transitional net income attributed to shareholders (transitional net income), and $1.7-billion in Q4 2023, up $400-million from transitional net income in the fourth quarter of 2022 (Q4 2022).
• Net income attributed to shareholders of $5.1-billion in 2023, up $7.0-billion from 2022, and $1.7-billion in Q4 2023, up $700-million from Q4 2022.
• Core earnings of $6.7-billion in 2023, up 13 per cent on a constant exchange rate basis from 2022. Core earnings of $1.8-billion in Q4 2023, up 15 per cent from Q4 2022.
• Core EPS (earnings per share) of $3.47 in 2023, up 17 per cent from $2.90 in 2022. Core EPS of 92 cents in Q4 2023, up 20 per cent from 77 cents in Q4 2022.
• EPS of $2.61 in 2023, up 47 per cent compared with transitional EPS of $1.69 in 2022 and up $3.76 compared with EPS of negative $1.15 in 2022. EPS of 86 cents in Q4 2023, up 43 per cent compared with transitional EPS of 60 cents in Q4 2022 and up 97 per cent compared with EPS of 43 cents in Q4 2022.
• Core ROE (return on equity) of 15.9 per cent in 2023 and 16.4 per cent in Q4 2023, and ROE of 11.9 per cent in 2023 and 15.3 per cent in Q4 2023 LICAT (life insurance capital adequacy test) ratio of 137 per cent.
• Remittances of $5.5-billion in 2023 compared with $6.9-billion in 2022.
• Entered into an agreement with Global Atlantic to reinsure four in-force blocks of legacy and low ROE business, including $6-billion of long-term care (LTC) insurance contract net liabilities, representing the largest ever LTC reinsurance transaction. The transaction is expected to close by the end of February, 2024.
• Purchased for cancellation 3.4 per cent of common shares outstanding, or more than 62 million common shares, for $1.6-billion in 2023.
• Declared a 9.6-per-cent increase in the dividend per common share today.

"Two thousand twenty-three was a milestone year for Manulife as we continued to execute on our transformation journey. We delivered strong business results of 17-per-cent and 13-per-cent growth year over year in core EPS and core earnings, respectively, as well as core ROE of 15.9 per cent in 2023. We generated core earnings growth across all insurance segments, double-digit increases in all new business metrics, and $4.5-billion of net inflows in Global WAM. We also announced a milestone reinsurance transaction, including the largest ever LTC risk transfer," stated Roy Gori, Manulife president and chief executive officer.

Mr. Gori continued: "Our strategy is grounded in making decisions easier and lives better for our customers and driving greater value for our shareholders. The dedication and passion of our team to deliver has helped us excel in uncertain market conditions and achieve positive momentum as we begin 2024."

"This year marked a smooth transition to IFRS 17 where Manulife delivered growth in earnings, book value per common share and LICAT ratio, while returning $1.6-billion to shareholders through our share buyback program. We generated $5.5-billion in remittances in 2023, and we announced a 9.6-per-cent increase in the common share dividend today. We enter 2024 well positioned to deliver business growth and cash generation to our shareholders," said Colin Simpson, Manulife chief financial officer.

Strategic highlights

The company executes its strategy to reshape its portfolio and focus on high potential growth

Manulife entered into an agreement with Global Atlantic to reinsure four in-force blocks of legacy and low ROE business, including $6-billion of LTC insurance contract net liabilities. This agreement represents the largest ever LTC reinsurance transaction and is a major milestone in the company's transformation journey to reshape its portfolio by reducing risk, improving ROE, strengthening capital, growing high-return businesses and delivering value to shareholders.

In Asia, Manulife continued to enhance its mainland Chinese visitor (MCV) capabilities to complement its prominent domestic franchise in Hong Kong with support from the launch of an expanded hospital network covering more than 3,000 hospitals in mainland China and the opening of the company's second prestige service centre in Hong Kong. Manulife's continued investments in MCV capabilities have contributed to robust MCV APE sales in 2023, more than double that of its 2019 prepandemic levels.

In addition, the company launched a unified on-boarding platform in Manulife's global high-net-worth business in Bermuda, Hong Kong and Singapore. The new platform makes new business application, underwriting and compliance processes simpler and faster, enabling more streamlined interactions and an overall enhanced experience for both the company's brokers and customers.

In Global WAM, Manulife entered into an agreement to acquire multisector alternative credit manager CQS11, headquartered in London. The acquisition will give Manulife Investment Management and CQS clients enhanced access to the company's combined global investment solutions.

In Canada, Manulife partnered with League, a leading health care technology provider, to offer its group benefits members more personalized and integrated digital health care experiences, enabling them to connect their benefits directly with health care options.

Manulife is helping its customers live longer, healthier and better lives

In the United States, Manulife enhanced its John Hancock vitality program by extending eligibility to access GRAIL's Galleri multicancer early detection test to additional members, expanding eligibility for preventative care and early detection behaviours through annual skin cancer screenings, and introducing a personalized way to incentivize members to be more physically active through a new active rewards feature.

In addition, Manulife differentiated itself from other U.S. life insurance carriers by hosting the first longevity symposium in the industry that brought together 250 life insurance brokers, leadership from reinsurance companies, media and local government officials to give them a first-hand look at the innovations and science shaping the future of longevity.

In Canada, Manulife 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.

The company continues to progress on its ambition to be the most digital, customer-centric company in its industry

In Global WAM, the company continued to enhance and broaden its wealth planning and advice business in Canada retail through strategic agreements with Fidelity Clearing Canada and Envestnet that will provide access to leading advisory technology and portfolio management platforms, which when combined will deliver an enhanced digital client experience and improved adviser productivity.

In Asia, the company completed phase 1 of the policy administration system modernization in mainland China, launching new business and underwriting modules on the new cloud-native solution, with the seamless data migration of more than three million customers. This enables scale and efficiency, and lays the foundation for improved customer, distributor and partner experience.

Furthermore, the company optimized the customer registration experience across its customer websites in the U.S., resulting in a 26-per-cent increase in on-line registrations in 2023, contributing to a 19-per-cent improvement in unique website traffic. In Canada, the company grew its annual Manulife mobile app downloads by 18 per cent, supported by upgrades designed to enhance its customers' digital experience and a successful communication campaign highlighting the ease and speed of on-line claims submissions.

Strong earnings growth supported by rising interest rates and improved insurance experience

Core earnings of $6.7-billion in 2023, up 13 per cent from 2022, and $1.8-billion in Q4 2023, up 15 per cent from Q4 2022

The increase from 2022 was driven by improved insurance experience, the net impact of rising interest rates and business growth. These were partially offset by a higher expected credit loss (ECL) provision, higher performance-related costs and investments in technology. Insurance experience in the company's property and casualty (P&C) reinsurance business improved significantly in 2023 due to updates to prior-year hurricane provisions compared with charges in 2022.

In the fourth quarter, core earnings increased by double digits year over year across all four operating segments.

• In Asia, higher net insurance results reflected the net impact of updates to actuarial methods and assumptions, which along with the impact of higher interest rates and business growth, contributed to a 14-per-cent increase in Q4 2023 core earnings.
• Q4 2023 core earnings in Global WAM were up 29 per cent as a result of higher average AUMA (assets under management and administration) and fee spreads, benefiting from favourable market impacts.
• In Canada, growth in short-term insurance, primarily group insurance, as well as a decline in the ECL provision, led to a 19-per-cent growth in Q4 2023 core earnings.
• Q4 2023 core earnings in the U.S. increased 16 per cent, in part due to the net impact of higher yields and improved insurance experience.
• In corporate and other, core earnings decreased by $39-million as improved insurance experience in the company's P&C reinsurance business was more than offset by higher performance-related costs and higher cost of debt financing.

Net income attributed to shareholders rose to $5.1-billion in 2023, $1.6-billion higher than 2022 transitional net income, and $1.7-billion in Q4 2023, $400-million higher than Q4 2022 transitional net income

The $1.6-billion increase compared with 2022 transitional net income reflected growth in core earnings and a smaller net charge from market experience. The net charge from market experience in 2023 was primarily related to lower-than-expected returns on alternative long-duration assets (ALDA) and the net impact of interest rate movements. The $7.0-billion increase compared with 2022 net income attributed to shareholders was driven by the factors noted herein and $5.4-billion of transitional impacts due to the application of IFRS 9 (international financial reporting standards) hedge accounting and ECL principles.

The $400-million increase compared with Q4 2022 transitional net income was primarily driven by a smaller net charge from market experience, growth in core earnings, and the impact of updates to actuarial methods and assumptions in Q4 2023. In addition, Q4 2022 included the impact of an increase in the Canadian corporate tax rate on the company's deferred tax assets. The net charge from market experience in Q4 2023 was primarily related to lower-than-expected returns on ALDA, partially offset by higher-than-expected returns on public equity. The $700-million increase compared with Q4 2022 net income attributed to shareholders was driven by the factors noted above and $300-million of transitional impacts due to the application of IFRS 9 hedge accounting and ECL principles.

Double-digit growth in new business results and $4.5-billion of net inflows in Global WAM

The company's 2023 new business results were boosted by strong performance in Asia and Canada. Over all, Manulife's APE sales, NBV and new business CSM increased 12 per cent, 10 per cent and 12 per cent, respectively, from 2022

In Asia, higher demand across various markets in the region after the lifting of all COVID-19 containment measures in early 2023 contributed to 15-per-cent, 3-per-cent and 16-per-cent growth in APE sales, NBV and new business CSM, respectively. Hong Kong APE sales, NBV and new business CSM increased 58 per cent, 20 per cent and 49 per cent, respectively, primarily driven by a return of demand from MCV customers.

In Canada, APE sales increased 12 per cent, driven by a large affinity markets sale, higher sales in all group benefits markets, partially offset by lower segregated fund sales. Higher sales volumes and higher margins in group insurance and annuities led to a 35-per-cent increase year over year in NBV. New business CSM also increased 13 per cent.

In the U.S., APE sales and new business CSM were down 10 per cent and 2 per cent, respectively, due to the adverse impact of higher short-term interest rates on accumulation insurance products for most of 2023, particularly for the company's affluent customers. However, NBV increased 21 per cent, driven by pricing actions, product mix and higher interest rates, which more than offset the impact of lower sales volumes.

Manulife's Q4 2023 new business results demonstrated momentum with year-over-year growth across all insurance segments, with increases of 20 per cent, 20 per cent and 41 per cent in APE sales, NBV and new business CSM, respectively

• Asia generated year-over-year growth of 11 per cent, 5 per cent and 27 per cent in APE sales, NBV and new business CSM, respectively, primarily driven by strong growth in Hong Kong due to a return of demand from MCV customers as noted herein.
• In Canada, APE sales increased 44 per cent from Q4 2022, primarily due to higher large-case and mid-size sales in group insurance and higher fixed annuity sales, partially offset by lower travel sales. Combined with higher margins, this resulted in a 60-per-cent and 49-per-cent increase in NBV and new business CSM, respectively.
• In the U.S., APE sales increased 34 per cent compared with Q4 2022, reflecting a rebound in demand from affluent customers. Combined with product mix and pricing actions, this led to a 74-per-cent and 102-per-cent increase in NBV and new business CSM, respectively.

Global WAM net inflows of $4.5-billion in 2023, $1.3-billion higher compared with net inflows of $3.2-billion in 2022

• Growth in member contributions in retirement were more than offset by large case pension plan redemptions by a U.S. sponsor in the second half of the year, resulting in increased net outflows of $4.0-billion in 2023, compared with $100-million in the prior year.
• Retail net outflows of $500-million in 2023 improved from $1.6-billion in the prior year, driven by lower mutual fund redemption rates and the launch of the company's global semiconductors strategy in Japan. This was partially offset by lower demand as investors continued to favour short-term cash and money market instruments amid market volatility and higher interest rates.
• Institutional asset management generated increased net inflows of $9.0-billion in 2023, compared with $4.9-billion in the prior year, driven by higher net inflows in alternative asset mandates, the impact of acquiring full ownership of Manulife Fund Management in China and new institutional product launches.

Global WAM net outflows of $1.3-billion in Q4 2023, a $7.1-billion improvement compared with net outflows of $8.4-billion in Q4 2022

• Retirement net outflows of $2.5-billion improved from $4.6-billion in the prior-year quarter, driven by lower pension plan redemptions in the U.S. and growth in new pension plan sales and member contributions.
• Retail net outflows of $1.0-billion in Q4 2023 improved from $4.7-billion in Q4 2022, driven by lower mutual fund redemption rates.
• Institutional asset management generated higher net inflows of $2.1-billion, compared with $900-million in Q4 2022, driven by higher sales of real estate, private equity and credit mandates.

CSM balance increased 21 per cent with contribution from organic CSM movement of 5 per cent and the impact from changes in actuarial methods and assumptions

CSM net of NCI was $20,440-million as at Dec. 31, 2023

CSM net of NCI increased $3,157-million compared with Dec. 31, 2022, representing growth of 21 per cent. Organic CSM movement was an increase of $890-million or 5 per cent in 2023, driven by the impact of new business and interest accretion, partially offset by amortization recognized in core earnings and a net reduction from insurance experience. Inorganic CSM movement was an increase of $2,434-million in 2023, primarily driven by the impact from changes in actuarial methods and assumptions, partially offset by changes in foreign currency exchange rates. In addition, NCI CSM increased $167-million compared with Dec. 31, 2022. Posttax CSM net of NCI was $17,748-million as at Dec. 31, 2023.

Q4 2023 update of actuarial methods and assumptions

The company updated its actuarial methods and assumptions which decreased the overall level of the risk adjustment for non-financial risk in the fourth quarter. This change moves the risk adjustment to approximately the middle of its existing 90- to 95-per-cent confidence level range. The risk adjustment would have exceeded the 95-per-cent confidence level in Q4 2023 without making the change. This change led to a decrease in pretax fulfilment cash flows of $2,850-million, an increase in pretax net income attributed to shareholders of $144-million (an increase of $119-million posttax), an increase in pretax net income attributed to participating policyholders of $115-million ($91-million posttax), an increase in CSM of $2,638-million and a decrease in pretax other comprehensive income of $47-million ($37-million posttax).

Earnings results conference call

Manulife will host a conference call and live webcast on its fourth quarter and full year 2023 results on Feb. 15, 2024, at 8 a.m. ET. To access the conference call, dial 1-800-806-5484 or 1-416-340-2217 (pass code: 7713937 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. You may access the webcast at the Manulife website.

The archived webcast will be available following the call at the same website. A replay of the call will also be available until March 16, 2024, by dialling 1-800-408-3053 or 1-905-694-9451 (pass code: 1481706 followed by the pound key).

The fourth quarter 2023 statistical information package is also available on the Manulife website.

This earnings news release should be read in conjunction with the company's 2023 MD&A (management's discussion and analysis) and consolidated financial statements for the year and the quarter ended Dec. 31, 2023, prepared in accordance with international financial reporting standards (IFRS) as issued by the International Accounting Standards Board, which is available on the company's website. The company's 2023 MD&A and additional information relating to the company is available on the SEDAR+ website and on the United States Securities and Exchange Commission's (SEC) website.

Any information contained in, or otherwise accessible through, websites mentioned in this news release does not form a part of this document unless it is expressly incorporated by reference.

Earnings

The attached table presents net income attributed to shareholders for Q4 2023, Q3 2023 and full year 2023 results, as well as transitional net income for Q4 2022 and full year 2022 results, consisting of core earnings and details of the items excluded from core earnings.

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