Manulife Financial Corporation · TSX:MFC
Manulife Financial — Investor Day (September 2008)
139 slides from Manulife Financial's investor day presentation, Sep 29, 2008
Slide 1: Annual Investor Day
ANNUAL INVESTOR DAY September 29, 2008 Toronto
Slide 2: Annual Investor Day: Agenda
Annual Investor Day: Agenda Monday, September 29, 2008 8:30 a.m. 9:00 a.m. Breakfast and Registration 9:00 a.m. 9:45 a.m. Financial Review Peter Rubenovitch SEVP & CFO 9:45 a.m. 10:15 a.m. Asia Robert Cook SEVP & GM, Asia 10:15 a.m. 11:00 a.m. Actuarial Review Simon Curtis EVP & Chief Actuary 11:00
Slide 3: Legal Disclaimer
Legal Disclaimer Caution Regarding Forward-Looking Statements This document contains forward-looking statements within the meaning of the “safe harbour” provisions of Canadian provincial securities laws and the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements r
Slide 4: Note to Users
Note to Users Performance and Non-GAAP Measures We use a number of non-GAAP financial measures to measure overall performance and to assess each of our businesses. Non-GAAP measures include return on common shareholders' equity, premiums and deposits, funds under management and new business embedded
Slide 5: Peter Rubenovitch, SEVP & CFO
Peter Rubenovitch Senior Executive Vice President & Chief Financial Officer
Slide 6: MFC Highlights
MFC Highlights Exceptional track record of growth Strong and diversified earnings platform Record sales and leading market shares Profitable new business growth High quality and diversified investments Conservative balance sheet 2 Financial Financial Overview Overview Summary Highlights
Slide 7: MFC at a glance
MFC at a glance … Manulife Financial Business U.S. U.S. Wealth Canada Asia Reinsurance Inv Mgmt & Segment Insurance Management Other 2007 Earnings1 17.5% 25.6% 25.6% 20.0% 11.3% Contribution 1136 1100 1103 981 868 858 809 755 732 734 622 3 Year 614 512 1 486 Earnings (C$m) 271 2005 2006 2007 2005 20
Slide 8: Exceptional Top Line Growth
Exceptional Top Line Growth b) o sits (C$ 69 D ep & iu ms 65 m PrreCAGR 18% 61 5-y 50 31 30 2002 2003 2004 2005 2006 2007 U.S. Insurance U.S. Wealth Mgmt Canada Asia & Japan Reinsurance Corp & Other 4 Financial Financial Financial Overview Summary Highlights Highlights Strength
Slide 9: Exceptional Bottom Line Growth
Exceptional Bottom Line Growth 4,302 3,985 m) m e (C$ 3,294 n 6% c o t I e GR 2 Nyr CA 5- 2,550 1,539 1,378 2002 2003 2004 2005 2006 2007 U.S. Insurance U.S. Wealth Mgmt Canada Asia & Japan Reinsurance Corp & Other 5 Financial Financial Financial Overview Summary Highlights Highlights Strength
Slide 10: Good Growth in Funds Under Management
Good Growth in Funds Under Management C$105 billion C$400 billion (as at Sept 30, 1999) (as at June 30, 2008) 44% 40% 54% 6% 15% 41% General Fund Segregated Funds Mutual Funds & Other 6 Financial Financial Financial Overview Summary Highlights Highlights Strength
Slide 11: Industry Leading Return on Equity
Industry Leading Return on Equity 20.0% 18.4% 17.7% 16.8% Target ROE 16.1% 16.2% 16.0% 15.1% 16.1% CDN Peer Avg 14.0% 14.1% 13.6% 13.7% 12.9% US Peer 12.0% 12.4% Avg 8.0% 4.0% 0.0% 1997 1997 1998 1998 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 CDN Peer group
Slide 12: 1H08 Financial Highlights
1H08 Financial Highlights Y/Y (C$ millions, except per share data) 1H08 Y/Y Constant Currency Shareholders’ Earnings $1,877 -10% -5% Fully Diluted Earnings per Share $1.23 -8% Return on Equity1 16.0% -10bps Insurance Sales $1,155 +12% +20% Wealth Management Sales $21,895 +0% +8% New Business Embedde
Slide 13: Earnings Growth and Diversification
Earnings Growth and Diversification C$m $4,000 $3,000 Segment 5-Year CAGR US Insurance 20% $2,000 US Wealth Mgmt 49% Canada 24% Asia & Japan 18% $1,000 Other 22% Total 26% Other includes Reinsurance and Corporate & Other $0 2002 2003 2004 2005 2006 2007 1H08 9 Financial Financial Financial Overview
Slide 14: Diversified Earnings Base
Diversified Earnings Base By Type By Geography Corporate & 20% Other 26% Reinsurance 5% US Insurance 35% 38% 37% 6% 41% 40% 18% Asia & Japan 20% 80% US Wealth 74% Mgmt 65% 62% 63% 59% 60% 25% Canada 26% 2002 2003 2004 2005 2006 2007 1H08 Insurance & Other Wealth Management Based on 2007 shareholders
Slide 15: Strong Earnings Quality
Strong Earnings Quality Source of Earnings disclosure highlights strong earnings quality C$m $6,000 Experience gains Earnings on surplus $3,000 Expected profit from in-force Impact from new business $0 Management Actions & Other Income taxes 2002 2003 2004 2005 2006 2007 1H08 -$3,000 11 Financial Fi
Slide 16: Record Sales & Leading Market Shares
Record Sales & Leading Market Shares ’07 YoY ’07 Market ’07 Market ’06 Market Growth Share Rank Rank JH Life +15% 7% 1 1 JH Long Term Care +24% 25% 1 2 JH Variable Annuities +18% 8% 3 3 1 2 JH Retirement Plan Services +4% - 1 1 Canada Life Insurance +15% 18% 2 2 Canada Seg Funds +36% 30% 1 2 Canada
Slide 17: New Business Embedded Value Growth
New Business Embedded Value Growth NBEV growth highlights underlying profitability of sales & deposits C$m $2,500 $2,000 $1,500 $1,000 $500 $0 2002 2003 2004 2005 2006 2007 1H08 Insurance Wealth 13 Financial Financial Financial Overview Summary Highlights Highlights Strength
Slide 18: Returning Capital to Shareholders
Returning Capital to Shareholders Over 80% of 2007 earnings returned to shareholders 4,000 100% 80% 3,000 60% 2,000 40% 1,000 20% 0 0% 2003 2004 2005 2006 2007 Common Dividends Share Buybacks Capital Returned as a % of Earnings 14 Financial Financial Financial Overview Summary Highlights Highlights
Slide 19: Consistent Growth in Dividends
Consistent Growth in Dividends 2007 Dividend 2007 Dividend Payout Ratio: Payout Ratio: 31% 31% (Annualized) 1.02 ) (C$ nd 0.90 i d e D iv 0.75 a l n GR 2 u 3% n A CA 0.63 yr 0.50 5- 0.42 0.32 2002 2003 2004 2005 2006 2007 2008 C$ Dividends declared in the year 15 Financial Financial Financial Overvi
Slide 20: Strong Capital Position
Strong Capital Position Capital ratios remain well above regulatory requirements Manulife Financial John Hancock Life Insurance Manufacturer’s Life Insurance Company Company December 31/07 June 30/08 RBC Ratio 439% MCCSR 200% Regulatory Min. 100% Regulatory Min. 120% 16 Financial Financial Financial
Slide 21: Low Leverage
Low Leverage Debt to capital ratios remain at low levels C$m 2004 2005 2006 2007 2Q08 Debt1 $4,898 $4,379 $5,625 $4,830 $5,799 Total Capital2 $26,861 $27,275 $29,553 $27,527 $28,290 Debt/Capital 18.2% 16.1% 19.0% 17.5% 20.5% Significant flexibility in capital structure Strong balance sheet and o
Slide 22: Conservative Reserves
Conservative Reserves PfADs continue to grow as a percentage of Actuarial Liabilities 20% 18.4% 18% 16.9% 15.3% 15.2% 15.3% 15% 14.2% 13% 10% 8% 5% 3% 0% 2002 2003 2004 2005 2006 2007 General Account PfAD as a % of General Account Actuarial Liabilities 18 Financial Financial Financial Overview Summa
Slide 23: Diversified High Quality Investments
Diversified High Quality Investments Diversified, high quality portfolio Total Invested Assets 12% in Cash, Policy and Bank Loans C$164.4 billion 17% in high grade Mortgages Co rpo rate B o nds Go vernment 58% in high quality Bonds and Privates B o nds 27% 12% 95% of Bonds are Investment G
Slide 24: Significant Scale
Significant Scale 56 North American Life Insurers 40 31 29 28 21 16 12 11 9 MFC PRU MET HIG PFG LNC GWO AMP SLF AFL 78 72 Global Life Insurers 57 56 49 40 31 29 28 27 AXA ING MET MFC PRU AFL China Generali PRU plc GWO Life Market cap data as at September 25, 2008 in US$. Source: Thomson Reuters 20 F
Slide 25: Delivering Shareholder Value
Delivering Shareholder Value 600 MFC-T 500 MFC at C$35.66 400 up 298.4% 300 S&P/TSX Financials up 206.4% 200 S&P/TSX Composite 100 up 113.9% 0 Sep- M ar- A ug- Feb- Jul- Jan- Jun- Dec- M ay- Nov- A pr- Oct - A pr- Sep- M ar- A ug- Feb- Jul- Jan- Jun- 99 00 00 01 01 02 02 02 03 03 04 04 05 05 06 06 0
Slide 26: Summary
Summary Exceptional track record of growth Strong and diversified earnings platform Record sales and leading market shares Profitable new business growth High quality and diversified investments Conservative balance sheet 22 Financial Financial Overview Summary Summary Highlights Strengt
Slide 27: Manulife Reinsurance
[1 Manulife Financial Manulife Reinsurance & * j Bay 4 a te ‘ >
Slide 28: Manulife Reinsurance
Manulife Reinsurance 6% of Total Company Earnings Toronto 108 Brussels 21 Boston 61 Cologne 4 Japan 1 Barbados 18 Singapore 3 Worldwide staff of 216 Niche businesses Bottom line focus without chasing volumes Opportunistic deployment of capital Not many direct competitors Non-correlated risk to
Slide 29: Reporting Structure
Reporting Structure Reinsurance Life P&C Accident & Health IGP Life Retro Structured Mortality risk is primarily Retrocession Closed blocks of A&H Network of major sold on an excess over per Property & Aviation business sold by John LifeCos operating life retention basis (short-tail) Hancock an
Slide 30: Life Retrocession: Spreading of Risk
Life Retrocession: Spreading of Risk Manulife Insurance $ Retention Reinsurer Retention Insurer Retention A B C D Sample Insured Risks from an Insurer’s Portfolio 4
Slide 31: Property and Casualty: Why it works
Property and Casualty: Why it works For Manulife… For our clients… High return on capital Strength of Manulife Non-correlating risks Non-correlating risks Single event losses are capped Expertise & client relationships Expertise & client relationships MFC not seen as direct competitor Loss
Slide 32: Summary
Summary Risk management framework fully integrated into Manulife Corporate Risk Management processes Collection of industry leading niche businesses Bottom line focus without chasing volumes Excellent credit ratings and large balance sheet makes Manulife an attractive business partner 6
Slide 33: Robert Cook, SEVP & GM Asia
Robert Cook Senior Executive Vice President & General Manager - Asia
Slide 34: Consistent Growth Record
Consistent Growth Record ) $m ( US s sit ) US $ m om e( 798 po 9,797 Inc De Netr CAGR 28% 608 647 m s& iu % +8% 1 0 -y 7,522 m R 44 7,363 Pre CAG +32% - yr 5,982 376 369 398 10 5,223 306 235 3,815 3,944 196 2,992 132 2,572 102 69 53 1,665 1,274 815 795 97 98 99 00 01 02 03 04 05 06 07 07 08 19 19 19
Slide 35: Diversified Portfolio of Businesses
Diversified Portfolio of Businesses Divisional Net Income Japan 36% Key contributors: Growing wealth businesses Development of non-agency Hong Kong channels Other Asia 46% Strong margins 18% Data as at 31Dec07 in $US Divisional Sales (ANP) “Our long-term success in Asia requires strong wealth
Slide 36: Regional Footprint
Regional Footprint C h i n a Japan Hong Kong Taiwan Philippines Vietnam Thailand Malaysia Singapore I ndonesia 44 Financial Strategic Strategic Geographical Looking Performance Overview Overview Review Forward
Slide 37: Organizational Structure
Organizational Structure Asia Division Other Asia Territories Hong Kong Japan ASEAN1 China & Taiwan Craig Bromley Philip Michael Huddart Marc Sterling Hampden-Smith 1 Represents Southeast Asia Operations: Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam 55 Financial Strategic Strate
Slide 38: Market Characteristics
Market Characteristics 4 Developed markets where demographics favour wealth management growth 6 Developing markets with: Large populations Fast growing economics Low insurance penetration 66 Financial Strategic Strategic Geographical Looking Performance Overview Overview Review Forward
Slide 39: Core Strategy & Implementation
Core Strategy & Implementation Execution Growth Insurance and wealth management businesses in all markets Multiple channels in all markets Better leverage of brand and historical commitment to Asia 77 Financial Strategic Strategic Geographical Looking Performance Overview Overview Review Forward
Slide 40: Hong Kong
Hong Kong Recent Hong Kong Successes $ m) (US -11% me 402 nc o GROWTH t I R 21 % Neyr CAG 291 5- 247 210 29% 28% 62% 191 Earnings P&D FUM 156 174 155 Individual Employee Wealth Benefits Management 2002 2003 2004 2005 2006 2007 1H07 1H08 2007 vs 2006 Full year data pre-investment pooling; 1H07 and 1H
Slide 41: Japan
Japan r Unde US$m) +31% Recent Japan Successes Fund s ge m ent ( ManaGR 13% 16,729 A 15,449 GROWTH 5-yr C 12,362 12,735 11,410 9,616 8,485 8,253 117% 194% 46% Insurance VA Sales – Wealth Sales Financial FUM Institutions 2002 2003 2004 2005 2006 2007 1H07 1H08 1H08 vs 1H07 Insurance Wealth Growth in
Slide 42: ASEAN
ASEAN s osit Recent ASEAN Successes e p s &D +1% ium 2,168 m PrSe$m) GR 35% GROWTH (U A rC 5- y 1,302 1,199 1,232 41% 114% 196% 916 923 Earnings P&D FUM 635 486 Singapore Indonesia Thailand 2007 vs. 2006 2002 2003 2004 2005 2006 2007 1H07 1H08 Expanding Wealth Strategy Diversifying Distribution Banc
Slide 43: China and Taiwan
China and Taiwan s os it Recent China & Taiwan Successes p De s & +26% GROWTH ium0% emGR 3 Pryr CA 5- 26% 2,271 +11 Premiums & Deposits Agents China City Licenses 2002 2003 2004 2005 2006 2007 1H07 1H08 China Taiwan 1H08 vs 1H07 Foreign-invested (“FI”) companies in China MSL Agent Growth 30 MSL CAGR
Slide 44: Looking Forward: Sources of Growth
Looking Forward: Sources of Growth Historical Future Organic Business Development Acquisitions Territory Expansion 1212 Financial Strategic Geographical Looking Looking Performance Overview Review Forward Forward
Slide 45: Looking Forward: Keys to Winning
Looking Forward: Keys to Winning Win the “War for Talent” It’s all about Distribution It’s NOT all about top line Financial Discipline Execution Quality of Business 1313 Financial Strategic Geographical Looking Looking Performance Overview Review Forward Forward
Slide 46: Simon Curtis, EVP & Chief Actuary
Simon Curtis Executive Vice President & Chief Actuary
Slide 47: MFC Balance Sheet
MFC Balance Sheet 4Q07 Balance Sheet C$b Assets $176.5 Policy Liabilities $124.4 Other Liabilities $27.8 Capital and Surplus $24.3 $176.5 Prudent Valuation of Policy Liabilities is a key component of Balance Sheet Strength 2 Valuation Embedded Hedging Overview Overview PfADs Summary Assumptions Valu
Slide 48: Policy Liability Valuation Overview
Policy Liability Valuation Overview Liability valuation consists of Three Building Blocks Best estimate assumptions for all key determinants of future cash flows on in-force policies Margins for adverse deviation in cash flows (PfADs) Discounting for time value of money Assumptions and dis
Slide 49: Policy Liability Valuation Manulife Practices
Policy Liability Valuation Manulife Practices Manulife has maintained consistent practice of establishing policy liabilities prudently Establish PfADs at higher end of ranges permitted under professional standards, taking into account business risk profile Ensure best estimate assumptions are ap
Slide 50: Overall PfAD Levels
Overall PfAD Levels General Account PfADS 20% 18.4% 18% 16.9% Year PfAD 15.2% 15.3% (C$b) 15% 13% 2004 18.7 10% 2005 19.0 8% 2006 20.9 5% 3% 2007 21.6 0% 2004 2005 2006 2007 (% of General Account Actuarial Liabilities) PfAD levels continue to be at high end of historic ranges No PfAD practice ch
Slide 51: Overall PfAD Levels
Overall PfAD Levels General Account PfADs Par Insurance 1 Non-Par Insurance Wealth 3 Year PfAD % of Year PfAD % of Year PfAD % of Reserves Reserves Reserves 2004 3.0 9.7% 2004 11.9 32.8% 2004 3.8 6.1% 2005 3.1 9.8% 2005 12.1 32.5% 2005 3.8 6.7% 2006 3.3 10.0% 2006 14.4 35.1% 2006 3.2 6.5% 2007 3.6 1
Slide 52: Overall PfAD Levels
Overall PfAD Levels Segregated Fund Annuity Margins (C$b) 8% Non Add’l 6.8% Explicit DAC Capitalized Seg. 7% Year PfAD Margin Margin * Fund 5.7% 5.9% 6% (1) (2) (3) Margins 5.0% (2)+(3) 5% 4% 2004 0.4 4.9 0.7 5.6b 3% 2005 0.4 6.2 1.4 7.6b 2% 2006 0.4 8.0 1.8 9.8b 1% 2007 0.5 9.3 2.2 11.5b 0% 2008 Q2
Slide 53: PfADs by Component
PfADs by Component C$b 31Dec06 31Dec07 Expected Actuarial Liability 102.50 96.03 PfADs Insurance Risks (mortality/morbidity) 5.66 6.17 Policyholder Behaviour (lapse/surrender) 2.66 2.54 Expenses 0.85 0.92 Investment Risks (non-credit) 9.17 9.93 Investment Risks (credit) 1.58 1.16 Segregated Fund Gua
Slide 54: Expected Valuation Assumptions SOE Experience Gains/Losses
Expected Valuation Assumptions SOE Experience Gains/Losses Experience Gains/Losses in SOE represent the pre-tax impact on earnings of the difference between actual experience and the assumptions used to determine the best estimate actuarial liability Experience gains have been consistently gener
Slide 55: Valuation Assumptions
Valuation Assumptions Mortality / Morbility Lapse/Surrender Expenses [Insurance Risks] [Policyholder Behaviour] [Expenses] Assumption current experience current experience adjusted current experience Methodology adjusted by margin by margin adjusted by margin cannot assume secular trend of f
Slide 56: Valuation Assumptions
Valuation Assumptions Investment Risks Investment Risks Fixed Interest Non-Fixed Interest Assumption current market rates/spreads net of total return based on long term Methodology credit loss allowance grading into experience applied to current fair long term “ultimate” assumptions value after
Slide 57: Embedded Value
Embedded Value Embedded value = is a measure of the total+shareholder economic value “embedded” in the current balance sheet Embedded Adjusted GAAP Value of Value = Shareholder Equity + In-force Business ↓ ↓ Essentially total shareholder release of In-force PfADS equity less less tax and cost of c
Slide 58: Embedded Value December 31, 2007
Embedded Value December 31, 2007 C$m Reported Shareholder Equity 23,697 Adjusted Shareholder Equity Fair Value Adjustments and Deduction of (7,699) Goodwill and Intangibles (1) Adjusted Shareholder Equity + 15,998 PfAD and Segregated Fund Margins 33,170 Taxes and Other Adjustments (12,981) Net Value
Slide 59: Changes in Embedded Value
Changes in Embedded Value C$m 2007 % Chg 2006 % Chg Em bedded Value - Jan 1 32,371 29,015 Interest on EV 2,596 8.0% 2,336 8.1% New Business 2,189 6.8% 1,914 6.6% Experience and Assumption Changes 2,826 8.7% 1,956 6.7% Em bedded Value Before Non-Operational Im pacts 39,982 23.5% 35,221 21.4% Discount
Slide 60: Historical EV Growth
Historical EV Growth C$m 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2002 2003 2004* 2005 2006 2007 Operational EV 1,219 3,000 3,592 4,425 6,206 7,611 Net Inforce EV 1,014 402 1,539 1,112 3,356 429 *2004 Returns exclude $10,948M growth due to John Hancock Acquisition Impact of currency and sha
Slide 61: Progression of New Business EV
Progression of New Business EV While 62% of NBEV is C$m Wealth, Insurance is 55% 2,500 of Total In-Force EV 2,000 1,500 1,000 500 0 2002 2003 2004 2005 2006 2007 Wealth 277 294 536 975 1,135 1,347 Insurance 387 609 571 632 779 842 Total NBEV 664 903 1,107 1,607 1,914 2,189 YoY % Chg 14.5% 36.0% 22.6
Slide 62: Extending Embedded Value to Entity Appraisal Value
Extending Embedded Value to Entity Appraisal Value Published Embedded Value $32.8b (31Dec07) Add: Future Value of Experience Gains $8.6b (10 x annualized Q2 YTD 08 after tax) Add: Value of New Business $23.0b - $34.6b (10 - 15 x annualized Q2 YTD 08) Equals: Entity Appraisal Value $64.4b - $76.0b Pe
Slide 63: Hedging Program Overview
Hedging Program Overview Commenced hedging program November 2007 Program covers about $3 billion of U.S. Variable Annuity account value Hedging first order fund performance (delta) and interest rate risk (rho) on about 85% of the account value Employ exchange traded equity and bond futures a
Slide 64: Hedging Program Effectiveness
Hedging Program Effectiveness Program operating effectively Mitigates over 80% of economic losses related to substantial market declines Cumulative Economic Profit and Loss1 60 40 20 0 -20 -40 -60 Soc Gen Bear Stern Bear Stern Fannie Fannie -80 Fredie Freddie -100 11/30 12/22 1/13 2/4 2/26 3/19
Slide 65: Summary
Summary Balance sheet makes appropriate and prudent provision for all policy related liabilities source of strength Prudent policy liability valuation results in significant unrecognized economic value in the GAAP balance sheet value captured in embedded value analysis provides strong go f
Slide 66: James Boyle
James Boyle Executive Vice-President John Hancock Financial Services
Slide 67: Reporting Structure
Reporting Structure John Hancock John DesPrez III Insurance Wealth James Boyle Hugh McHaffie Life LTC VA RPS MF FP 2 Distribution, Finance, Law, HR, Branding & Communications, Community and Government Relations Financial Strategic Insurance Wealth Mgmt 2 Performance Overview Highlights Highlights
Slide 68: Solid Track Record
Solid Track Record $b) 2% sits (US 7% o Dep 4 2 m) and $ ( US 1,742 39 me ms 37 o m iu 1,551 InRc Prer CAGR 31 t Ner CAG 1,224 5-y 24 21 5-y 832 854 845 19 13 12 301 326 2002 2003 2004 2005 2006 2007 1H07 1H08 2002 2003 2004 2005 2006 2007 1H07 1H08 Insurance Wealth Management -1% +9% Insurance Weal
Slide 69: Significant Contribution
Significant Contribution Net Income US Wealth Mgmt 26% #1 Product and Distribution Operations in All Our Businesses Gaining market share profitability Favorable pricing experience US Insurance 18% Positive net cash flows 8 million customer accounts Data as at 31Dec07 in US$ Divisional Net In
Slide 70: Market Characteristics
Market Characteristics Highly competitive market Intense regulatory oversight Consumer flight to quality Shift from Defined Benefit Plans Trend towards payout vs. accumulation products Increasing need for post-retirement solutions Increasing advisor influence with consumers 5 Financial
Slide 71: Demographic Characteristics
Demographic Characteristics Increasing life expectancy Baby boomers nearing retirement Growth of affluent / high net worth Insufficient retirement savings Unaddressed LTC needs Retirees with assets but limited income 6 Financial Strategic Insurance Wealth Mgmt 6 Performance Overview High
Slide 72: Core Strategy & Implementation
Core Strategy & Implementation Market leader in all product lines Strengthen distribution Continue product innovation Cross-selling and collaboration Superior execution 7 Financial Strategic Insurance Wealth Mgmt 7 Performance Overview Highlights Highlights
Slide 73: Industry-leading Product Portfolio
Industry-leading Product Portfolio Category 1H08 2007 Universal Life 1 2 Variable Life 1 1 Survivorship 1 1 Retail Long Term Care 2 2 Group Long Term Care 2 1 Small Case 401(k) 1 1 Variable Annuities (non-proprietary) 3 3 Mutual Funds (non-proprietary) 14 20 8 Based on various independent market sur
Slide 74: Our Competitive Edge
Our Competitive Edge 9 15 new product introductions 2007-2008 9 Proprietary underwriting manual 9 Large case expertise Life 9 Product innovation – CPI based benefit 9 Simple and lower cost offering 9 Over 20% of Retail sales and growing 9 Expands distribution reach LTC - Leading Edge 9 Leverages suc
Slide 75: Life Insurance
Life Insurance Broad Based Distribution Operating in the Best Part of Market NFP Super 1H08 10% BGA's Industry leading shelf space at top distributors 37% Diversified multi-channel distribution M Group 11% Aging population and changing needs Strength in independent distribution continues JHF
Slide 76: Life Insurance: Strategy
Life Insurance: Strategy Product Development Core Strong Multi-channel Distribution Underwriting expertise & service Continuous stream of new products Growth Develop and expand distribution relationships Leverage core competencies in new markets 11 To grow sales to $1 billion per annum Financial Str
Slide 77: Long-Term Care
Long-Term Care Sales by Segment ($m) Operational Highlights 197 • Client base of over 500 companies and largest 159 block in Fortune 500 Companies 119 • Opportunity for growth in all segments of the 104 86 market including the Fortune 500 • In-force rate increase announced in 2008 and lapse assumpti
Slide 78: Long-Term Care: Strategy
Long-Term Care: Strategy Product leadership in all market segments Core Distribution strength Service excellence & industry influence Strategic alliances & business partnering Growth Next generation of products Group business expansion, focus on small group market 13 To achieve a #1 share position i
Slide 79: Our Distribution Partners: Insurance
Our Distribution Partners: Insurance 14 Financial Strategic Insurance Wealth Mgmt 14 Performance Overview Highlights Highlights
Slide 80: Looking Forward: Insurance and LTC
Looking Forward: Insurance and LTC Strong brand and superior ratings Continuous product innovation Strengths Best shelf space in the industry Sophisticated underwriting expertise Maintaining sales momentum given competitive environment Challenges Challenging economic environment Negati
Slide 81: Hugh McHaffie
Hugh McHaffie Executive Vice-President John Hancock Financial Services
Slide 82: Mutual Funds
Mutual Funds Total Sales and Business Consultant Growth Products That Drive Top Line Growth $8 7.6 7.6 Sales ($b) 80 MS Stars # of Business Consultants $7 BCs 70 Core Product MS Category Manager (Load Waived) $6 60 Large Cap Equity Large Growth MFC 5.2 5.1 $5 50 Balanced Moderate Allocation MFC 3.9
Slide 83: Mutual Funds: Strategy
Mutual Funds: Strategy Maximize potential of product line Core Mature distribution capabilities Consistent investment performance Drive further sales productivity of BC’s Growth Secure additional distribution outlets Acquisitions & fund adoptions 18 To achieve Tier 1 status in next 3 years Financial
Slide 84: Fixed Products
Fixed Products Business Segments and Products Sales by Product US$ millions Payout Fixed Spread Fee Based Business Annuities Deferred Based Products Annuities Products 2,500 2,151 2,099 1,866 TOHI 2,000 Structured Signature Settlements Notes Stable Value 1,500 791 823 Defined GPA Plus Fund 1,000 Pro
Slide 85: Fixed Products: Strategy
Fixed Products: Strategy Continue to grow core earnings Core Maintain strong presence at JHFN Capitalize on Small Pension Close Outs opportunities Grow Structured Settlements and Pension Close Outs Growth Focus on bank channel wholesaling Leverage brand recognition To achieve a top 5 market rank in
Slide 86: Retirement Plan Services
Retirement Plan Services Sales by Segment and P&D Maintenance Unit Cost $B Sales $B P&D bps 6 14 80 5-Yr Sales CAGR 20% +3M, 9% Total 70 5 12 60 10 50 4 8 40 3 6 30 2 20 4 10 1 2 0 0 0 2002 2003 2004 2005 2006 2007 1H08 2002 2003 2004 2005 2006 2007 1H07 1H08 Annualized Mid-Market Small Plan Market
Slide 87: Retirement Plan Services: Strategy
Retirement Plan Services: Strategy Maintain dominance in small plan market Core Retain clients Enhance Service Guaranteed Income for Life Growth Grow mid-market – JH Signature Build distribution breadth & depth 22 To achieve growth by leading in small plan market Financial Strategic Insurance Wealth
Slide 88: Variable Annuities
Variable Annuities John Hancock vs. Industry Sales ($b) Q2 08 YTD Market Share – Non Proprietary* Rank Peer Market Share $280 $12 1 Lincoln 10.6% $240 $10 2 ING 10.5% Industry Sales $200 $8 JH Sales $160 3 John Hancock 8.6% $6 $120 $4 $80 $40 $2 4 Hartford 8.2% $0 $0 5 Prudential/Skandia 8.1% 2002 2
Slide 89: Variable Annuities: Strategy
Variable Annuities: Strategy Distribution Excellence Core Product Innovation Risk Management Favorable Demographics Growth Bank & Other New Distribution Solutions Based Approach 24 To achieve a #1 market rank Financial Strategic Insurance Wealth Mgmt 24 Performance Overview Highlights Highlights
Slide 90: Our Distribution Partners: Wealth
Our Distribution Partners: Wealth 25 Financial Strategic Insurance Wealth Mgmt 25 Performance Overview Highlights Highlights
Slide 91: Looking Forward: Wealth
Looking Forward: Wealth … Strong Core Franchise Businesses Distribution Excellence Strengths Product and Service Excellence Brand Name Recognition Difficult economic environment Challenges Scale in mutual fund business Scale in 401(k) business Financial solutions for retirement needs
Slide 92: Donald A. Guloien, SEVP & CIO
Donald A. Guloien Senior Executive Vice President & Chief Investment Officer
Slide 93: Reporting Structure
Reporting Structure Chief Investment Officer MFC Global International Canadian Investment US Investments Investment Investments Management Offices Warren Thomson Scott Hartz Alex Macdonald John Shed Finance, Operations, Middle Office, Information Systems, Risk Management, Compliance, Legal & Human R
Slide 94: Core Strategy & Implementation
Core Strategy & Implementation Investment Philosophy… Two synergistic mandates Bottom-up development of asset mix to match needs of individual product segments Derive superior return and risk reduction using a blend of assets Strategic Asset Strategic General Fund 3 Markets Management Summary Overvi
Slide 95: Strong Risk Management Culture
Strong Risk Management Culture Risk Management Philosophy… Centralized control & monitoring of all investment & ALM functions Corporate oversight by Credit Committee Strong asset management skills including but not limited to credit Strategic Asset Strategic General Fund 4 Markets Management Summary
Slide 96: Alternative Assets Enhance Risk-Return
Alternative Assets Enhance Risk-Return… 14 Oil & Gas 12 Enhanced Efficient Frontier Private Equity Expected Return (%) 10 MFC Mix Timber Public Equity Agriculture Infrastructure Real Estate 8 High yield Mortgages Fixed Income Efficient Frontier 6 US Bonds Canada Bonds Typical U.S. Insurer 4 2 4 6 8
Slide 97: Why Invest in Alternative Assets?
Why Invest in Alternative Assets? Alternative Assets as Competitive Advantage Diversification Strong Good fit for benefits historical long duration through low returns liabilities correlation Leads to higher risk adjusted returns Eliminates need to pursue riskier fixed income strategies Strategic As
Slide 98: Why Invest in Alternative Assets?
Why Invest in Alternative Assets? Alternative Assets as Competitive Advantage Diversification Strong Good fit for benefits historical long duration through low returns liabilities correlation Leads to higher risk adjusted returns Eliminates need to pursue riskier fixed income strategies Strategic As
Slide 99: Since Our Last Meeting in June 2007
Since Our Last Meeting in June 2007… Subprime meltdown led to: • Demise of US’ fifth largest investment bank (Bear Stearns) • Bankruptcy of US’ fourth largest investment bank (Lehman) • US Government rescue of world’s largest insurer (AIG) • US Government bailout of two Government Sponsored Enterp
Slide 100: Our Investment Approach Served Us Well
Our Investment Approach Served Us Well Overall credit quality remains high despite tough market • 95% of bond portfolio BBB or higher Minimal credit losses to date, but Lehman and AIG exposures representing less than 0.5% of total invested assets will have an impact in Q3 Avoided sophisticated
Slide 101: Major Credit Accidents Avoided
Major Credit Accidents Avoided We did not: Buy Canadian non-bank Asset Backed Commercial Paper (ABCP) Buy Structured Investment Vehicles (SIVs) Buy risky assets for money market funds Buy low quality securitizations of Subprime Residential Mortgage Backed Securities (RMBS) Buy Collateraliz
Slide 102: Minimal Impact from "In the News" Items
Minimal Impact from “In the News” Items Type Holdings Comments Residential Mortgage Backed C$1.1B 83% of RMBS rated A or higher Securities (C$0.5B subprime RMBS) 81% in 2005 or prior vintage Commercial Mortgage Backed 96% of CMBS rated A or higher C$5.8B Securities 88% of CMBS rated AAA Collateraliz
Slide 103: Bond Quality Remains High
Bond Quality Remains High Modest increase in Below Investment Grade due to: • Purchases at higher spreads • Slight credit deterioration in some sectors Percentage of Total Bond Portfolio 31.7% 31.1% JHF Acquisition 26.3% 25.3% 23.2% 23.5% 23.9% 6.9% 6.1% 5.6% 4.4% 4.8% 4.3% 4.4% Q2/04 Q4/04 Q4/05
Slide 104: Bond Portfolio Performing Better Relative to Market
Bond Portfolio Performing Better Relative to Market Downgrades as % of Total Issues 9.4% 5.4% 4.6% 4.6% 4.5% 4.5% 3.0% 3.1% Q3/07 Q4/07 Q1/08 Q2/08 MFC S&P Universe Strategic Asset General General Fund Fund 13 Markets Management Summary Overview Assets Assets Business
Slide 105: Credit Provisions Increasing Slightly
Credit Provisions Increasing Slightly Well Under Long Term Expected Level History from credit rating agencies have shown that credit losses are double their long term 900 averages during recessions 700 Long term expected level 500 based on Moody’s default C$ Million studies applied to our aggregate
Slide 106: Mortgage Portfolio High Quality and Diversified
Mortgage Portfolio High Quality and Diversified Total mortgage portfolio C$27.6B • 72% Commercial, 20% Manulife Bank single residential, 8% Agriculture Commercial mortgages market remains stable • Absorption rates exceed available supply in major markets • Borrowers are not relying on unusual te
Slide 107: Commercial Mortgage Portfolio Diversified by Sector
Commercial Mortgage Portfolio Diversified by Sector Selective sector mix: Commercial Mortgages by Property Type • Largest concentrations are in (C$19.8B) retail and office properties Insured • Very low exposure to the hotel 12% Office sector 27% Other • Multi-family exposure comparable 4% to US an
Slide 108: No Appreciable Increase in Watchlists
No Appreciable Increase in Watchlists Canadian Commercial Mortgages US Commercial Mortgages (C$8.7B) (C$11.1B) 99.4% 98.2% 97.3% 97.0% 0.4% 0.2% 1.7% 0.1% 1.1% 1.6% 1.7% 1.3% Q2/07 Q2/08 Q2/07 Q2/08 Satisfactory Especially Mentioned Watchlist As at June 30, 2008, based on Principal Balance Outstandi
Slide 109: Mortgage Portfolio Quality Remains High
Mortgage Portfolio Quality Remains High Canadian Commercial Mortgages US Commercial Mortgages (C$8.7B) (C$11.1B) 61.5% 59.5% 51.8% 48.2% 36.6% 34.9% 33.2% 30.3% 17.3% 16.8% 1.8% 2.8% 3.0% 0.6% 0.8% 0.9% Q2/07 Q2/08 Q2/07 Q2/08 AAA AA & A BBB BB & Lower As at June 30, 2008, based on Principal Balance
Slide 110: Few Mortgages in Arrears
Few Mortgages in Arrears Canadian Commercial Mortgages US Commercial Mortgages 2.5% 2.0% Has since been Both CMHC Insured brought current 2.0% 1.5% 1.5% 2 out of 2,381 loans 1 out of 1,290 loans in in arrears 1.0% arrears 1.0% 0.5% 0.5% 0.0% 0.0% 1996 1998 2000 2002 2004 2006 Q1/08 1996 1998 2000 20
Slide 111: General Fund Less Risky Than US Peers
General Fund Less Risky Than US Peers Subprime CMBS CDO Monoline Credit Below Exposure % of % of Total % of Total Exposure % Q2 2008 Impairments % Investment Grade Total Invested Invested Invested of Total of Total Bonds % of Total Bonds Assets Assets Assets Bonds US Peer 1 0.1% 0.5% 5.3% 0.4% 2.7%
Slide 112: General Fund Portfolio Diversified, High Quality Asset Mix
General Fund Portfolio Diversified, High Quality Asset Mix Total invested assets C$164B General fund portfolio is 87% fixed income, 13% stocks & alternative assets Roughly 40% of stocks (or 3% of total portfolio) are passed-thru to policy holders not to the shareholder’s account Stocks & Alter
Slide 113: Growth Across All Alternative Assets
Growth Across All Alternative Assets 14 12 Market Value (C$ billions) 10 8 6 4 2 0 (1) 2003 2004 2005 2006 2007 Q2 2008 Commercial Real Estate Timber Private Equity & Mezzanine Agriculture Power & Infrastructure Oil & Gas (1)MFC Pre-merger Strategic Asset General General Fund Fund 22 Markets Managem
Slide 114: Our Growing Investment Business
Our Growing Investment Business C$96B in AUM for external clients C$65B in asset allocation services Broad spectrum of investment management Sub Advisory / Manulife / services: Institutional Separately John Hancock • Equities Clients Managed Retail Accounts Products • Bonds • Asset allocation
Slide 115: Diverse Clients & Asset Classes
Diverse Clients & Asset Classes Distribution of AUM Distribution of AUM (C$96B) by Client Type (C$96B) by Asset Class Canadian US Money Money Market Market Individual Institutions 1% 10% Separately 43% International Managed Fixed Income 4% US Equity Accounts 27% 2% Balanced 5% Closed End Trusts Glob
Slide 116: MFC Global Investment Management Around the Globe
MFC Global Investment Management Around the Globe JAPAN CANADA U.K. 13 Investment 84 Investment 9 Investment Professionals Professionals Professionals U.S.A. 145 Investment HONG KONG & Professionals ASIA 51 Investment Professionals AUSTRALIA & NEW ZEALAND 4 Investment Professionals TOTAL Investment
Slide 117: Growth Approaching C$100B and Beyond
Growth Approaching C$100B and Beyond 12.7% 120 CAGR Combined FX Neutral 100 8.4% Market Value (C$ billions) CAGR 80 Combined 60 John Hancock 18.1% 40 CAGR Manulife Manulife 20 0 Dec '01 Dec '02 Dec '03 Dec '04 Dec '05 Dec '06 Dec '07 Jun '08 Manulife Hancock Currency-neutral AUM Dec ’04, ’05, and ’0
Slide 118: Performance Recognition
Performance Recognition Rated John Hancock Large Cap Equity Manulife Canadian Growth Manulife S&P 500 Index John Hancock Global Opportunities Manulife Global Pooled Balanced MFC Global Pooled Short-Term Rated JHF Greater China Opportunities JHT Mid Cap Index Fund Manulife Simplicit
Slide 119: More Awards & Accolades
More Awards & Accolades John Hancock Large Cap Equity (#3) and John Hancock Small Cap Intrinsic Value (#11) appeared among the top-20 in Barron's 2007 mutual fund ranking of top-performing funds. Canadian Pooled Balanced Fund ranks 1st out of 653 competing funds managed in its class over the las
Slide 120: Summary
Summary Strong credit and risk management culture with centralized controls Diversification achieved through increasing use of alternative assets not credit High quality, high performing portfolio Balanced, stable general account asset mix 2008 marks another year where Manulife avoided mos
Slide 121: Paul L. Rooney, SEVP & GM Canada
Paul L. Rooney Senior Executive Vice President & General Manager - Canada
Slide 122: Solid Track Record
Solid Track Record ) $b (C s (C$ m) osit p c o me De 16 t In 24% s& 1,103 Ner CAGR ium22% 981 + 4% 14 13 5- y 809 e m R Pryr CAG 11 - 5% 614 556 5- 535 8 497 8 378 7 6 2002 2003 2004 2005 2006 2007 1H07 1H08 Individual Insurance IWM Group Businesses 2002 2003 2004 2005 2006 2007 1H07 1H08 Full year
Slide 123: Significant Contribution
Significant Contribution Insurance Net Income 10% IWM 9% 12% YoY earnings growth Group Key contributors: Seg Funds 8% Manulife Bank Strong investment gains Divisional Net Income GSRS 6% “We delivered our best year Group ever with earnings exceeding Benefits 23% Individual Insurance $1 bill
Slide 124: Market Characteristics
Market Characteristics Mature and consolidated market Strong competition with concentrated market shares Sound regulatory and compliance regime Financially stable industry Banks increasingly competitive 4 Financial Strategic Strategic Product Distribution Looking Performance Overview Overv
Slide 125: Demographic Characteristics
Demographic Characteristics Large, growing baby-boomer population Growing affluent and high net worth market Increasing longevity Increased stress on public health and retirement plans 5 Financial Strategic Strategic Product Distribution Looking Performance Overview Overview Innovation Excel
Slide 126: Reporting Structure
Reporting Structure Canadian Division Individual Individual Wealth Group Insurance Management Businesses Michael Doughty Roy Firth Rick Brunet Finance, Information Systems, Human Resources & Legal 6 Financial Strategic Strategic Product Distribution Looking Performance Overview Overview Innovation E
Slide 127: Core Strategy & Implementation
Core Strategy & Implementation Sound financial strength. Build on past successes. Anticipate future needs. Distribution excellence Innovative products and services Customer service focus Strategic integration opportunities 7 Financial Strategic Strategic Product Distribution Looking Performance Over
Slide 128: Strategic Approach to Product Introduction
Strategic Approach to Product Introduction Vision Opportunity Innovation Trend Need Outcome Aging population Safeguard Income Permanent insurance Wealth increasing Transfer wealth IncomePlus Prolonged living Business succession Group IncomePlus Estate planning Deteriorating hea
Slide 129: Introducing "Industry Firsts"
Introducing “Industry Firsts” Topped $6 billion in deposits “Best New Initiative” IncomePlus Group IncomePlus Non-par whole life Hybrid Whole Life/Universal Life features Building sales momentum One of a kind product offering Lending volumes up 45% in 1H’08 Manulife Bank 9 Financial
Slide 130: Another "Industry First": Introducing Retirement Solutions
Another “Industry First” Introducing Retirement Solutions Traditional Enhanced Approach Approach ADD Asset Allocation Product Allocation The evolution of retirement income planning http://www.RetirementSolutionsCentre.ca Canada’s first and exclusive product allocation tool Helps determine th
Slide 131: Independent Distribution Focus
Independent Distribution Focus Corporate National Independent Accounts (MGA’s) Accounts Advisors 23,000 18,000 8,000 Top 3 market share Life market share: Life market share: 55% 35% Significant growth opportunity IncomePlus strong Berkshire acq’n sales • + 600 advisors • IIROC platform 11 Financial
Slide 132: Distribution Diversification
Distribution Diversification Total Life & Living Benefits Premium In 2000…. In 2007… 24% 7% 30% Sales CAGR 13% 48% 63% 28% Corporate Accts National Accts Ind. Advisors Individual Wealth Management Deposits In 2000…. In 2007… 5% 31% 27% 46% Sales CAGR 17% 68% Corporate Accts National Accts Ind. Advis
Slide 133: Market Targets
Market Targets High growth potential Low market shares Affluent market Mutual fund franchise Small businesses Manulife Bank GSRS 13 Financial Strategic Product Distribution Looking Looking Performance Overview Innovation Excellence Forward Forward
Slide 134: Leveraging Relationships
Leveraging Relationships Individual Individual Group Wealth Mgmt Life Benefits More than 1 million 1.6 million More than 3 million in-force contracts in-force policies in-force certificates We serve 1 in 5 Canadians Affinity Group Savings Markets & Retirement More than 600,000 Almost 600,000 in-forc
Slide 135: Well positioned for future growth
Well positioned for future growth Continued focus on Increased emphasis on: core strengths: Distribution High growth-potential markets Product innovation Areas with low Service excellence market share Strategic Leveraging acquisitions relationships 15 Financial Strategic Product Distri
Slide 136: Dominic D'Alessandro, President & CEO
Dominic D’Alessandro President & Chief Executive Officer
Slide 137: Vision and Strengths
Vision and Strengths Vision To be the most professional life insurance company in the world: providing the very best financial protection and investment management services tailored to customers in every market where we do business. Strengths Strong Well-suited to Recognized Diversified Diversified
Slide 138: Strong & Diversified Businesses
Strong & Diversified Businesses Asia Canada Hong Kong, Philippines, Singapore, • Individual Insurance Indonesia, Vietnam, Malaysia, Thailand, • Individual Wealth Management Taiwan, China • Group Benefits • Individual Life Insurance • Group Pensions • Group Life & Health Insurance • Pension Products
Slide 139: Significant Growth Prospects
Significant Growth Prospects Organic Growth M&A Primary Focus Opportunistic 4