Manulife Financial Corporation · TSX:MFC
Manulife Financial — Investor Day (June 2017)
69 slides from Manulife Financial's investor day presentation, Jun 21, 2017
Slide 1: Agenda
June 21, 2017 Hong Kong Agenda Time Speaker Presentation 9:05 am Donald Guloien Delivering on commitments, driving shareholder value & preparing for the future 9:20 am Roy Gori A compelling opportunity and clear priorities to win 9:40 am Steve Roder Commitment to shareholder value creation 10:10 am
Slide 2: Caution regarding forward-looking statements
Caution regarding forward-looking statements From time to time, MFC makes written and/or oral forward-looking statements, including in this presentation. In addition, our representatives may make forward-looking statements orally to analysts, investors, the media and others. All such statements are
Slide 3: Delivering on commitments, driving shareholder value & preparing for the future
Investor Day 2017 Hong Kong | Ho Chi Minh City Delivering on commitments, driving shareholder value & preparing for the future Donald A. Guloien Chief Executive Officer Key messages We have a powerful franchise with operations in both large and faster growing markets Decisive actions have been taken
Slide 4: Manulife is a leading global financial services company
Manulife is a leading global financial services company Among top 10 life insurers in the world1 C$47 billion market capitalization1 C$1 trillion in total AUMA as of Q1 2017 +28% p.a.2 growth in global Wealth and Asset Management AUMA Presence in 12 markets across fast growing Asia region Over 22 mi
Slide 5: We have a leading franchise in Asia
We have a leading franchise in Asia Pan-Asian platform, presence in 12 markets with over 8 million customers ࡱ1/3 of MFC’s core earnings, >80% of NBV Leading professional agency force and high quality bank partnerships Integrated insurance and wealth Proven digital capabilities 5 Strong Ca
Slide 6: John Hancock brand increasingly known for innovative wealth management and insurance solutions
John Hancock brand increasingly known for innovative wealth management and insurance solutions Strong brand awareness Leading small and mid case retirement provider Fast growing mutual fund business with unique managed architecture model First provider of wellness linked US life insurance 7
Slide 7: Strategic decisions taken since the financial crisis have put us in a strong financial position
Strategic decisions taken since the financial crisis have put us in a strong financial position Financial crisis 2008-2011 2012-2015 2016 onwards Dealt with the aftermath Growing Asia and Wealth and Asset Achieved $4 billion core of the global financial crisis Management businesses earnings target E
Slide 8: Balanced earnings profile by geography and businesses
Balanced earnings profile by geography and businesses Canada USA Wealth 31% 36% 44% 2016 2016 Core Earnings Core Earnings By region By line of business Insurance Asia 56% 33% 11 Achieved $1 trillion in assets under management and administration 84% 977 1,005 531 2012 2016 1Q17 All figures in CAD bil
Slide 9: Strong underlying performance driving annual dividend increases
Strong underlying performance driving annual dividend increases +58% 82.0¢/sh 74.0¢/sh 66.5¢/sh 52.0¢/sh 57.0¢/sh 2013 2014 2015 2016 2017E1 Annual Dividend: Cents per common shares in Canadian dollars. 1 Assumes no further dividend increases. 13 Exceeded Efficiency and Effectiveness target by 25%,
Slide 10: Delivered strong total returns for our shareholders
Delivered strong total returns1 for our shareholders 21.2% 18.4% 14.7% 8.2% TSX S&P 500 Peers2 MFC 1 Annualized total shareholder returns for the five years ended December 31, 2016. 2 Peers include Aflac, Ameriprise Financial, MetLife, Power Financial Corp, Principal Financial Group, Prudential Fina
Slide 11: We are delivering on our objectives
We are delivering on our objectives Delivering on commitments Achieved the $4 billion 2016 core earnings target Exceeded our Efficiency & Effectiveness target, saving $500 million Driving shareholder value Delivered strong shareholder returns; 21% over the last 5 years Raised our dividend for three
Slide 12: A compelling opportunity and clear priorities to win
Investor Day 2017 Hong Kong | Ho Chi Minh City A compelling opportunity and clear priorities to win Roy Gori President Key messages Strong foundation for continued growth Well positioned to capitalize on significant opportunities Focused on few clear priorities to drive performance 2
Slide 13: Powerful megatrends are fuelling a huge opportunity in Asia
Powerful megatrends are fuelling a huge opportunity in Asia We operate in many of the fastest Middle class emergence will drive Net household wealth in Asia is growing markets in the world demand for financial solutions expected to double by 2025 (10-year CAGR, 2006-2016, US$, current prices)1 (Midd
Slide 14: Insurers and asset managers lag in providing positive customer experiences
Insurers and asset managers lag in providing positive customer experiences, creating a strong opportunity in the digital space Insurance & wealth customers Customer advocates are much End-to-end digitization is key to not satisfied with the experience more profitable than detractors improving custom
Slide 15: We continue to face challenges, but they are manageable
We continue to face challenges, but they are manageable We are proactively engaged in Several secular challenges also present managing the challenges we face opportunities to differentiate Low interest rate environment Increasing customer expectations Evolving accounting/capital standards Tr
Slide 16: Commitment to shareholder value creation
Investor Day 2017 Hong Kong | Ho Chi Minh City Commitment to shareholder value creation Steve Roder Chief Financial Officer Key messages Strong progress on key financial metrics Total shareholder return has been robust over the last five years, but we are not satisfied Our Total Shareholder Return d
Slide 17: We achieved $4 billion of Core Earnings in 2016
We achieved $4 billion of Core Earnings in 2016, delivering on the target set in 2012 Core Earnings Shareholders’ Net Income (C$ billions) (C$ billions) +18% CAGR 3.5 4.0 3.4 2.9 2.9 2.2 2014 2015 2016 2014 2015 2016 3 We have delivered strong NBV growth, driven by improved margins in Japan and scal
Slide 18: Assets under management and administration have grown
Assets under management and administration have grown, driven by strong net flows, investment performance and recent acquisitions Wealth and Asset Management Wealth and Asset Management Assets Under Management and Administration1 Core EBITDA (C$ billions) (C$ millions) +31% +9% CAGR CAGR 544 1,224 1
Slide 19: Our roadmap to higher shareholder returns
We have maintained strong capital levels MCCSR1 Ratio Financial Leverage Ratio (%) (%) 248 25% 230 223 long-term leverage target 150% Regulatory Minimum 29.5 27.8 23.8 2014 2015 2016 2014 2015 2016 1 Minimum Continuing Capital and Surplus Requirements (MCCSR) of The Manufacturers Life Insurance Comp
Slide 20: Our shareholder returns over the past five years have been strong
Our shareholder returns over the past five years have been strong… Annualized Total Shareholder Returns1 (5 years ended December 31, 2016) 21.2% 18.4% 14.7% 8.2% MFC Peers2 S&P 500 TSX 1 Source: Bloomberg. 2 Peers include Aflac, Ameriprise Financial, MetLife, Power Financial Corp, Principal Financia
Slide 21: Lifeco valuations are driven by ROE, dividends, earnings growth and risk
Lifeco valuations are driven by ROE, as well as dividends, earnings growth and risk considerations While ROE is a key valuation driver… … shareholders also value… While ROE is a key valuation driver… Price to Book Dividends/Return of Capital Reasonable levels of financial risk Strong EPS growth Fore
Slide 22: Portfolio matrix categorizing each line of business
…resulting in a portfolio matrix that allowed us to categorize each line of business by their potential impact on shareholder return… Portfolio Matrix Profitability Core growth Businesses generating maximum returns given our market position Financial Core return attractiveness Businesses generating
Slide 23: U.S. Wealth and Asset Management generates favourable returns
U.S. Wealth and Asset Management generates favourable returns, with strong cash flow and low risk profile Profitability Cash Generation High return on tangible equity Stable cash flow in pension business Low capital requirements Steadily increasing mutual fund, ETF earnings Further potenti
Slide 24: Legacy businesses offer long-term cash flows
Legacy businesses offer long-term cash flows, useful for the funding growth in higher return businesses and dividends to shareholders Profitability Cash Generation ROE generally lower than average due to higher Significant cash flow can fund dividends and capital consumption investments in highe
Slide 25: Recent changes to executive compensation to drive shareholder returns
Recent changes to executive compensation to drive shareholder returns Annual Incentive Plan (AIP) measures our ability to deliver superior returns today while growing the Medium and long-term incentives directly linked to business that will deliver the greatest future returns shareholder value creat
Slide 26: Summary
Summary Strong progress on key financial metrics Total shareholder return has been robust over the last five years, but we are not satisfied Our Total Shareholder Return discipline is used to: Inform strategic decisions, allocate capital and determine executive compensation 21
Slide 27: Executing on our Asia opportunity
Investor Day 2017 Hong Kong | Ho Chi Minh City Executing on our Asia opportunity Roy Gori President, Manulife Agenda Recap from 2015 Investor day Strong presence in Asia Compelling market opportunity Consistent and clearly defined strategy Delivering in Asia Substantial growth across key
Slide 28: Recap from Investor Day 2015
Recap from Investor Day 2015 3 Compelling presence in Asia Life insurance and WAM presence across Asia 120 years 8 million 12 in Asia customers markets Japan China 70,000 leading Taiwan3 12,000 100+ Hong Kong2 professional agency employees bank partners Philippines Thailand Cambodia4 Vietnam Malaysi
Slide 29: Asian life insurance and wealth market growth outpacing North America and Europe
Asian Life Insurance and Wealth market growth significantly outpacing North America and Europe Asia Life Insurance GWP is expected to be bigger than Asia Net Household Wealth is expected North America and Western Europe combined by 2025 to more than double by 2025 Life Insurance Gross Written Premiu
Slide 30: Delivering in Asia
Delivering in Asia 7 Transforming the performance of our business and accelerating growth APE Sales New Business Value1 Core Earnings2 (US$ millions) (US$ millions) (US$ millions) +34% CAGR +45% CAGR +16% CAGR +4% CAGR APE Sales1,2 +12% CAGR 2,498 754 1,129 913 806 1,447 367 867 N/A 2009 2014 2016 2
Slide 31: Strong performance against pan-Asian peers
Strong performance against pan-Asian peers APE Sales Growth NBV Growth (CAGR 2014-16) (CAGR 2014-16) 34% 45% 22% 22% 27% 25% 10% 4% Manulife Peer 1 Peer 2 Peer 3 Manulife Peer 1 Peer 2 Peer 3 NBV Margin Uplift Earnings Growth1 (2014-16) (CAGR 2014-16) +5 pps +4 pps +4 pps 16% 16% 15% -5 pps 7% Manul
Slide 32: Scaling our insurance operations across Asia
Scaling our insurance operations across Asia APE Sales 2014 > US$ 100 million At scale Japan Hong Kong1 Indonesia < US$ 100 million Below scale Singapore China Vietnam Philippines Malaysia Thailand Cambodia Few scale businesses in 2014 1 Hong Kong and Macau. 11 Scaling our insurance operations acros
Slide 33: Diversifying across geographies and distribution channels
Diversifying across geographies and distribution channels Growing contribution from Asia Other Balanced across distribution channels APE Sales APE Sales (US$ millions) (US$ millions) +2.9x +2.9x Asia Other Other 2,498 Japan 2,498 Bancassurance Hong Kong Agency 34% 39% 1,447 1,447 29% 32% 37% 867 41%
Slide 34: Meeting multiple customer needs
Meeting multiple customer needs 1 2 3 4 5 Unsurpassed Holistic solutions and Premium Optimized Market leading customer experience integrated wealth agency bancassurance digital engagement Growing proportion of customers Successful HK pilot for agency with more than one product distribution of mutual
Slide 35: Optimizing our bancassurance relationships
Optimizing our bancassurance relationships 1 2 3 4 5 Unsurpassed Holistic solutions and Premium Optimized Market leading customer experience integrated wealth agency bancassurance digital engagement Exceptional bancassurance franchise Grown 4 fold 2014-2016 $ 6 exclusive bancassurance >100 5x APE sa
Slide 36: Executing on our Asia opportunity: In summary
In summary Asia is a core driver of growth for Manulife Compelling platform to capitalize on the opportunity – at scale and diversified Distribution is key to success – professional agency and highest quality partnerships, digital capability Clearly articulated strategy is delivering results 19 Inve
Slide 37: Financial Update
Financial Update 21 Continued strong momentum in 1Q17 APE Sales New Business Value Core Earnings1 (US$ millions) (US$ millions) (US$ millions) +34% +45% +16% CAGR +31% CAGR +53% CAGR +17% APE Sales1,2 APE Sales1,2 APE Sales1,2 2,498 771 754 246 1,129 308 270 590 913 161 1,447 367 2014 2016 1Q16 1Q17
Slide 38: Consistent delivery on new business value growth
Consistent delivery on new business value growth New Business Value (US$ millions) 3.6x 246 221 196 171 176 155 161 122 116 98 95 78 69 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 NBV 25.0% 34.7% margin 23 Volume and scale are the growth drivers of shareholder value creation New
Slide 39: Embedded Value reflects the cumulative value of in-force business and net assets
Embedded Value reflects the cumulative value of in-force business and net assets Embedded Value (‘EV’) Asia Embedded Value (US$ billions) EV consists of adjusted net worth and value of in-force Adjusted net worth +20% CAGR Value of in-force Adjusted net worth is the realizable value of sharehold
Slide 40: Solid free surplus generation net of impact from new business
Solid free surplus generation net of impact from new business Free surplus generation1 (Local Basis, US$ billions) US$0.9 billion 2.4 0.2 (1.5) (0.2) (0.2) 2.7 2.5 1.7 2014 Allocated Insurance and Insurance and Other WAM earnings Unallocated Before investment- Investment impacts 2016 Allocated free
Slide 41: New business mix and product risk management
New business mix and product risk management APE Sales Participating (par) and pass through business (2016) Passes many risks to policyholders Continues to be a significant part of our business Non-participating short term Non-participating business Participating and Short-term non-par busines
Slide 42: Updates on our key businesses in Asia
Financial Summary NBV growth is strong with improving margins In-force portfolio is a material driver of value Asia business is generating significant free surplus, $ net of new business strain on a local basis Quality of earnings is robust with 80% of core earnings from in-force business 31 Updates
Slide 43: Japan: Retirement opportunity with significant money-in-motion
Japan: Retirement opportunity with significant money-in-motion Market overview and opportunities 3rd largest economy …the bulk of which is Sizable money-in-motion projected to flow into new 2nd largest insurance market from yearly lump sum investments and savings 2nd largest pool of household
Slide 44: Japan: Financial highlights
Japan: Financial highlights APE Sales New Business Value Core Earnings1 (US$ millions) (US$ millions) (US$ millions) +25% CAGR +68% CAGR +21% CAGR APE Sales1,2 1,019 260 380 283 671 93 2014 2016 2014 2016 2014 2016 1 Core earnings growth rate reflects an adjustment for the impact of increased dynami
Slide 45: Hong Kong: Business highlights and strategy to win
Hong Kong: Business highlights and strategy to win Business highlights Strategy to win >2 million customers across life, health, wealth, retirement Build on retirement position and brand strength Leadership position in retirement space Innovative pre-retiree protection and decumulation solut
Slide 46: Singapore: Asia's leading high net worth hub
Singapore: Asia’s leading high net worth hub Market overview and opportunities High per capita income (US$87,1001) and high net worth hub Market shift to Bancassurance US$1 trillion in household net worth2 and Financial Advisors Large mortality protection gap of over US$400 billion3 Market APE
Slide 47: Singapore: Financial highlights
Singapore: Financial highlights APE Sales New Business Value Core Earnings1 (US$ millions) (US$ millions) (US$ millions) +138% CAGR +89% CAGR APE Sales1,2 374 85 64 19 71 0 2014 2016 2014 2016 2014 2016 1 Growth rate is calculated on a constant currency basis. 41 China: Fastest growing market in Asi
Slide 48: China: Business highlights and strategy to win
China: Business highlights and strategy to win Business overview Strategy to win 70 Presence in 14 provinces and 51 cities, covering >70% of GDP, Leverage strong geographic footprint >60% of population Continue to expand our agency force Best-in-class agency Continue to deliver on targeted
Slide 49: In summary
In summary Asia is a core driver of growth for Manulife Compelling platform to capitalize on the opportunity – at scale and diversified Distribution is key to success – professional agency and highest quality partnerships, digital capability Clearly articulated strategy is delivering results Proven
Slide 50: Driving Customer Centricity and Innovation
Investor Day 2017 Hong Kong | Ho Chi Minh City Driving Customer Centricity and Innovation Linda Mantia Chief Operating Officer Our strategic focus For discussion Wealth and Customer Asia Asset Innovation Centricity Management 2
Slide 51: Innovation and client-centricity is not new for us
Innovation and Client-centricity is not new for us – Manulife has been helping people for 100+ years A company of firsts: creating products and providing advice to help our customers First insurer of First Peoples 3 More important than ever given the rapidly changing world Paradigms are shifting… Pa
Slide 52: We are responding accordingly
We are responding accordingly Our Purpose: To help people achieve their dreams and aspirations, by putting customers’ needs first and providing the right advice and solutions. 5 We are building on our strengths to deliver on our Purpose 12,931 employees 72 employees Since Europe 1887 Since 1862 Sinc
Slide 53: Digitizing and reimagining client-centric solutions
Our focus is on two areas – digitizing to improve today’s products and imagining new client-centric solutions through innovative technologies DIGITIZING…for better customer REIMAGINING…for customer direct, experience & higher efficiency today digital advice, solutions, eco-systems Customer service d
Slide 54: Reimagining how we engage with customers with direct solutions
We are reimagining how we engage with customers with direct solutions that leverage relevant ecosystems Experience-based solutions From product to experience-based solutions Over 100,000 ManulifeMOVE policies sold to date High-quality and delightful experiences MOVE customers engaged digitally
Slide 55: Enhancing capabilities and networks as an innovation and data-driven enterprise
We are enhancing our capabilities and networks as we become an innovation and data-driven enterprise Enhancing our innovation network Expanding analytics expertise globally Toronto Boston Augmented actuarial and underwriting teams Singapore with specialized talent in advanced analytics Green Garag
Slide 56: Three phases to our Transformation journey
We have three phases to our Transformation journey Set our Strategic Themes Customer-centricity Innovation Asia WAM Simpler, end-to-end customer experience 1 Direct channels and advice offerings Effective tools for our agents and distributors Gain conviction Establish proof points: Vitality/MOV
Slide 57: A global wealth and asset management platform with solid growth momentum
Investor Day 2017 Hong Kong | Ho Chi Minh City A global wealth and asset management platform with solid growth momentum Kai Sotorp Global Head of Wealth and Asset Management Key Messages Well positioned to capitalize on areas of growth within global wealth and asset management Continued focus on
Slide 58: Strong and diversified global wealth and asset management business
Manulife has a strong and diversified global wealth and asset management business 29 [80%] CONSECUTIVE QUARTERS OF C$565 billion Institutional Client GLOBAL AUMA1 POSITIVE NET FLOWS1 satisfaction 16 COUNTRY FOOTPRINT 154 4/5 STAR MORNINGSTAR RATED FUNDS2 1 As at March 31, 2017. 2 As at December 31,
Slide 59: Active management will remain highly relevant
We believe active management will remain highly relevant Majority of global AUM Shift to passive management has Active-to-active fund flows are 2.5x is actively managed been a U.S. phenomenon greater than active-to-passive Fund net flows1 Active 2.5x (US$ billions) Passive Passive 5% Management (201
Slide 60: Our client-centric strategy provides holistic differentiated solutions
Our client-centric strategy is focused on providing holistic differentiated solutions in order to enhance the customer experience Our strengths enable our We have taken significant client-centric strategy actions since 2015 Expecting these positive outcomes Managed Launched strategic beta products
Slide 61: Strong investment performance and differentiated capabilities
…supported …anchored byby deep strong investment investment management performance capabilitiescapabilities and differentiated that span the asset class spectrum PRIVATE COMMERCIAL PUBLIC EQUITY PUBLIC DEBT PLACEMENT DEBT MORTGAGE LOANS REAL ESTATE Boutique teams focusing on delivering A long track
Slide 62: Superior growth momentum across retail investments platforms
We have translated this performance into superior growth momentum across our retail investments platforms… Retail investments gross flows (C$ billions) +30% CAGR 58 #3 in AUM growth 29 consecutive 13 Asia quarters of mutual fund 10 over the past 5-years1 Canada net flows3 20 3 35 4 U.S. 13 2012 2016
Slide 63: Growing multi-segment retirement platforms in key markets
As a major retirement player around the world, we operate growing multi-segment platforms in key markets Retirement platforms gross flows (C$ billions) +22% CAGR 42 Serving over 6 million Over C$100 billion 4 7 Asia participants world-wide in assets acquired in 19 Canada past 2 years 2 3 31 U.S. 14
Slide 64: Continuing to make investments for future growth
…and we continue to make investments for future growth Global operations Building out Focus on Expansion into initiative advice decumulation Europe 9 Enhance back and middle 9 Enrich customer experience 9 Retirement decumulation 9 Expanding into geographies office capabilities for scale-up thought l
Slide 65: Retirement platforms delivering asset growth and earnings
Our retirement platforms have been delivering significant asset growth and earnings generation Assets under Management and Administration1 Core Earnings (C$ billions) (C$ millions) +23% CAGR +13% CAGR 282 371 356 268 299 272 143 195 125 101 2012 2013 2014 20151 2016 2012 2013 2014 2015 2016 1 Includ
Slide 66: A major player with solid retirement platforms in four markets
We are a major player in the business, with solid retirement platforms in Canada, the U.S., Hong Kong and Indonesia… United States Canada Hong Kong Indonesia A proven leader Leading provider Most diversified Strong presence focused on small & of group retirement Mandatory Provident to capture a grow
Slide 67: Reimagining the retirement experience
We are reimagining the retirement experience to service the client throughout their lifetime and provide a best-in-class customer journey Decumulation opportunity is sizable Tailored goal-based goal b advice Digital & holistic financial planning Over US$2 trillion Personalized Innovative will rollov
Slide 68: Summary
Summary Well positioned to capitalize on areas of growth within global wealth and asset management Continued focus on client-centric strategy to execute on opportunity Diversified and complementary portfolio of wealth and asset management businesses Differentiated capabilities, matched by strong inv
Slide 69: Thank you
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. A financial measure is considered a non-GAAP measure if it is presented other than in accordance with generally accepted accounting prin