Manulife Financial Corporation · TSX:MFC

Manulife Financial — Investor Day (November 2012)

66 slides from Manulife Financial's investor day presentation, Nov 15, 2012

1. Slide 1: Investor Day 2012: Growth with Discipline

   Investor Day 2012 forward- thinking Growth with Discipline trustworthy reliable strong Anthony G. Ostler Senior Vice President, Investor Relations November 15, 2012 Caution Regarding Forward-Looking Statements This presentation contains forward-looking statements within the meaning of the “safe harb

2. Slide 2: Note to users - Performance and Non-GAAP Measures

   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 for Canadian securities law purposes if it is presented other than in accordance

3. Slide 3: Growth with discipline

   Investor Day 2012 forward- thinking Growth with Discipline trustworthy reliable strong Donald A. Guloien President & Chief Executive Officer November 15, 2012 Growth with discipline forward- thinking  Accomplished our 2009 strategic objectives  Pursuing disciplined growth  Expect to see less vola

4. Slide 4: Accomplished our six objectives set in 2009

   Accomplished our six objectives that we set in 2009 Re-balance products with unfavourable risk profiles Accelerate growth Systematically hedge to reduce earnings and capital volatility Diversify our business mix Manage capital Actively manage and promote brand 3 Rebalanced products with unfavourable

5. Slide 5: Made important investments to accelerate growth of targeted businesses

   Made important investments to accelerate growth of targeted businesses Asia Division:  Invested in bancassurance relationships  Invested in expansion of agency force  Invested in wealth management capabilities through TEDA acquisition Canadian Division:  Invested in Affinity markets through acqu

6. Slide 6: Hedging reduced earnings volatility; diversified business mix

   Hedging significantly reduced the volatility of earnings Potential Impact on Net Income Due to Changes in Interest Rate & Equity Markets (C$ billions) $7.3 $1.6 billion billion 7 Diversified our business mix By Division: 3Q12 YTD Core Earnings1 Mix By Business: 3Q12 YTD Core Earnings Mix (Excludes C

7. Slide 7: Capital: Better reserved, more stable capital

   Capital: Better reserved, more stable capital, more conservative MCCSR  MLI’s MCCSR at 204% at the end of 3Q12  Equivalent of much higher ratio in prior periods  Outlook over 2013-2016 horizon for the ratio is improving  Ratio still does not include adequate credit for hedging  Having achieved

8. Slide 8: In 2010 we set financial targets for 2015

   In 2010 we set financial targets for 2015, consistent with the environment at that time Net Return Long-Term Income on Equity Leverage Ratio $4 billion 13% 25% in 2015 in 2015 11 A variety of things have changed since 2010  Lower interest rates  Volatile equity markets  Changes in regulatory and

9. Slide 9: We have refreshed our financial targets

   As a result, we have refreshed our financial targets Core Core Long-Term Earnings ROE Leverage Ratio $4 billion 13% 25% in 2016 in 2016 Note : See “Caution Regarding Forward-Looking Statements” above. 13 We have clear visions for each of our strategic priorities Build a premier (top-tier) pan-Asian

10. Slide 10: Organization re-design; growth with discipline

    Organization re-design in support of operational excellence  Paul Rooney appointed Chief Operating Officer, a new role at Manulife  Paul will report to President & CEO and will be responsible for:  Corporate Strategy, Corporate Development, Capital Solutions, Human Resources, Branding & Communica

11. Slide 11: Actuarial & Regulatory Update

    Investor Day 2012 forward- thinking Actuarial & Regulatory trustworthy Update reliable strong Cindy Forbes Executive Vice President and Chief Actuary November 15, 2012 Actuarial & Regulatory Update  Assumptions reviewed annually  Macro-economic environment impacted four years of basis changes  Re

12. Slide 12: Assumptions reviewed annually; drivers of basis changes

    Assumptions reviewed annually  Reserve assumptions are set using historical experience and an outlook of future expectations  Actuarial reserves consist of best estimate reserves plus additional margins for uncertainty:  Reflect long-term view of expected experience from all contingencies, often

13. Slide 13: Macro-economic environment impacted basis changes

    Macro-economic environment impacted four years of basis changes Historical Basis Changes - Including URR post-tax reserve impacts (C$ millions) Macro-economic related Actuarial standards Other 2,100 1,600  Objective and unbiased process of setting and reviewing appropriateness of reserves 1,300 1,2

14. Slide 14: Long-Term Care re-pricing; dialogue with OSFI

    Long-Term Care re-pricing of in-force is unfolding well State Approvals of LTC Price Increases (Cumulative number of state approvals) 41  In 2010 communicated that we would apply for material price increases on 35 approximately 80% of our in-force 32 business 29  Approvals received favourable to d

15. Slide 15: Summary

    Summary  Assumptions reviewed annually  Macro-economic environment impacted four years of basis changes  Reserves represent our best view in the current environment  Long-Term Care re-pricing of in-force is unfolding well  Positive dialogue with OSFI and other prudential regulators 9

16. Slide 16: Delivering on Disciplined Earnings Growth

    Investor Day 2012 forward- thinking Delivering on Disciplined trustworthy Earnings Growth reliable strong Steve Roder Senior Executive Vice President & Chief Financial Officer November 15, 2012 Delivering on disciplined earnings growth forward- thinking  Refreshed our financial targets  How will w

17. Slide 17: Refreshed 2016 financial targets by division

    We have refreshed our financial targets Core Core Long-Term Earnings ROE Leverage Ratio $4 billion 13% 25% in 2016 in 2016 Key Planning Assumptions1  Macro-economic environment:  Equity market assumptions consistent with long term assumptions  Interest rate assumptions based on forward curve as o

18. Slide 18: Four strategic priorities to generate earnings growth

    How will we get there? Core Earnings $4 billion in 2016 Investing for Driving earnings Efficiencies & growth Effectiveness Pursuing our strategic priorities 5 Pursuing our four strategic priorities to generate earnings growth Build a premier (top-tier) pan-Asian life insurance Develop our Asian fran

19. Slide 19: Investing for earnings growth; driving efficiency

    Investing for earnings growth Acquisitions New Market Expanding Existing (over $300 million): Opportunities: Businesses:  Manulife-TEDA  Cambodia  Mutual fund 401(k)  AIC Funds  Asset management chassis  Wellington West distribution in Korea  Mid-market insurance Financial Services  Health I

20. Slide 20: Business unit alignment; procurement management

    Balanced approach to leverage our scale while maintaining customer and market focus High Highly decentralized Business Dedicated Components Business Unit Alignment Manulife Target Model Centers of Expertise (COE) Shared Services Highly (Regional or Global) Low centralized Low Functional Alignment Hi

21. Slide 21: Information Services; path to 2016 earnings target

    Information Services to provide a world-class platform Case Study: Information Services Scope: Objective:  All Information Services functions  To create an efficient global information services across the organization function based on world-class standards and  Information Services represent tec

22. Slide 22: Asia drives insurance sales; U.S. key to wealth

    Asia Division driving insurance sales, while the U.S. Division is key to our wealth aspirations Insurance Sales1 Mix Wealth Sales Mix C$4.2 billion C$70.9 billion 16% 49% 24% C$2.5 billion 25% C$34.6 billion 26% 27% 57% 60% 49% 31% 24% 12% 2011 2016 2011 2016 Target Target ██ Asia Division ██ Canadi

23. Slide 23: Core earnings balanced between insurance and wealth

    Core earnings will continue to be well balanced between insurance & wealth, and by geography Core Earnings Mix Core Earnings Mix by Division C$4.0 billion C$4.0 billion 33% 44% C$2.2 billion C$2.2 billion 31% 36% 46% 56% 31% 36% 54% 33% 2011 2016 2011 2016 Target Target ██ Insurance ██ Wealth Manage

24. Slide 24: Questions & Answers; Appendix

    forward- Questions thinking & trustworthy Answers reliable strong 17 Appendix 18 18 18 18

25. Slide 25: 2012 Core Earnings (Annualized) by Division

    2012 Core Earnings (Annualized) by Division Annualized Annualized1 Allocated Core Return ($ billions) Core Earnings Equity on Equity2 Asia Division (US$) $1.0 $5.3 20% Canadian Division (C$) $0.8 $6.9 12% U.S. Division (US$) $1.1 $10.2 10% Corporate & Other (C$) $(0.4) Macro Hedge Costs (C$) $(0.5)

26. Slide 26: Asia Division: Delivering Now... More to Come

    Investor Day 2012 forward- thinking Asia Division: Delivering Now… trustworthy More to Come reliable strong Robert A. Cook Senior Executive Vice President & General Manager, Asia November 15, 2012 Delivering now… more to come  The future is now  Favourable demographics driving growth  Clear and c

27. Slide 27: Developing our Asian opportunity; Asia contribution

    Developing our Asian opportunity to the fullest Vision for Asia Core Earnings (C$ billions)  Build a premier (top-tier) pan-Asian life CAGR 12% insurance franchise that is well positioned to satisfy the protection/retirement needs of the 1.65 fast growing customer base in the region 1.04 2012 YTD 2

28. Slide 28: A leading pan-Asian platform; Why Asia?

    A leading pan-Asian platform MANULIFE 115 years and 11 territories OPERATIONS  2nd largest insurance market in the world  High growth opportunities for nimble players Japan Japan  115 years of operations  Diversified business in an excellent market China Hong Kong Taiwan  Huge emerging middle-c

29. Slide 29: Clear and consistent strategy; priorities

    Clear and consistent strategy Distribution Managing and expanding distribution channels Diversified Business & Geographic Portfolio Core Business Expansion Strategy Product New Market Entry Selling wealth and insurance M&A Brand products Investing in and promoting the “Manulife” brand 7 Executing on

30. Slide 30: Growing distribution; record agent network growth

    Successfully growing and expanding distribution Insurance APE Sales1 by Channel (%) 2008 2011 (US$582 million) (US$1.2 billion) 32% 21% CAGR 23%2 50% 8% 69% 16% Agency Bancassurance Managing General Agency Brokers & Others  Historical focus on a tied professional agency  Increasing success with le

31. Slide 31: Bank partnerships delivering results

    Bank partnerships delivering results Indonesia Case Study Bancassuance Insurance APE Sales1 Other Bancassurance Initiatives (US$ millions)  Established - recruitment, IT infrastructure and training 223%2 Bank  Establishing - key points of presence at Danamon branches and outlets CAGR 23%2 31  Net

32. Slide 32: Pension and retirement markets; brand promotion

    Exploiting emerging pension and retirement markets Hong Kong Case Study Manulife MPF AUM1 Manulife MPF AUM Market Share1 (US$ millions) Rank #2 Maintaining Market Leading Ranking #2 CAGR 21%2 17.1% 17.5% 17.2% 8,227 16.6% 7,896 6,832 4,484 2008 2009 2010 2011 2008 2009 2010 2011  Market leading pos

33. Slide 33: Disciplined investments supporting growth

    Disciplined investments supporting growth New Market Entry – Cambodia  Manulife the first 100% foreign-owned life insurance company  Fast execution - license application in August 2011 and operations started in June 2012  Growing operations - already established more than 300 agents and 50 employ

34. Slide 34: Summary

    Summary  The future is now  Favourable demographics driving growth  Clear and consistent strategy  Executing on key strategic priorities 17

35. Slide 35: Canadian Division: Building a Broad-based Diversified Financial Services Company

    Investor Day 2012 forward- thinking Canadian Division: Building a Broad-based, Diversified trustworthy Financial Services Company reliable strong Paul L. Rooney Senior Executive Vice President & General Manager, Canada November 15, 2012 In Canada, we will…  Build upon our broad-based, diversified f

36. Slide 36: Canadian Division snapshot

    Canadian Division snapshot Vision for Canada Core Earnings (C$ billions) Build a broad-based, diversified financial CAGR services company in Canada, that develops 16% and delivers integrated solutions to address our customers’ protection and retirement 1.45 needs 0.80 2012 YTD 2016 Annualized Target

37. Slide 37: Focus on higher return, lower risk businesses

    Focused on growing higher return, lower risk, less capital intensive businesses & increasing diversification Diversify Continue Focus  Enhance customer on Risk focus Pursue Focused  Leverage large in-  Focus on low capital force Growth high return  Leverage and Maintain  Continue reduced expand

38. Slide 38: Individual Insurance focus; Manulife Bank

    Disciplined focus on more profitable, less risky Individual Insurance business Individual Insurance Sales1 Mix 2010 3Q12 YTD $211 million $130 million 20% 39% 61% 80% Long duration guarantees Other products  Focus on growth in Individual Insurance:  Improve top 3 sales share rank  Expand in mid-m

39. Slide 39: Grow Manulife Mutual Funds

    Grow Manulife Mutual Funds into a leading mutual fund complex Manulife Mutual Funds Gross Retail Sales by Channel 2008 2011 3Q12 YTD $515 million $2 billion $1.3 billion 22% 26% 28% 38% 41% CAGR 57% 47% 34% 31% 33% Funds on Recommended Lists1 7 17 29 Funds with 4/5 Star Ratings1 7 17 15 Manulife Sec

40. Slide 40: Affinity Markets growth; new markets

    Direct-to-consumer & travel insurance are key sources of growth in Affinity Markets Direct-to-Consumer Sales (C$ millions, regular and 100% single premium sales) 28 25 19 21 24  Maintain and leverage market leadership in Affinity Markets 2008 2009 2010 2011 3Q12  Strong sales growth driven by incr

41. Slide 41: Increase customer focus and cross sell

    Increase customer focus to the benefit of consumers, advisors & Manulife’s business Retail Households Cross Sell (Percentage of Total Sales) In-Force New Business  Significant cross sell opportunity as we 8% 15% serve 1 in 5 Canadians 36%  Cross selling success:  Retail households increasing thei

42. Slide 42: In summary, we will...

    In summary, we will…  Build upon our broad-based, diversified financial services company  Continue our disciplined approach to taking and managing risk  Focus on growing higher return, lower risk, less capital intensive businesses  Launch and grow new businesses, leveraging our strong track-reco

43. Slide 43: U.S. Division: The Way Forward for John Hancock

    Investor Day 2012 forward- thinking U.S. Division: The Way Forward for trustworthy John Hancock reliable strong Craig Bromley President, John Hancock Financial Services November 15, 2012 The way forward for John Hancock  We are committed to the U.S. market  We have successfully executed on risk re

44. Slide 44: Growing higher-ROE, lower risk U.S. businesses

    Continuing to grow higher-ROE, lower risk U.S. businesses Vision for U.S. Core Earnings (C$ billions)  Build a leading company in the U.S. that helps Americans with their retirement, long- CAGR term care and estate planning needs 9% 1.50 1.06 2012 YTD 2016 Annualized Target Key Drivers to Earnings

45. Slide 45: John Hancock brand; top distributors

    The John Hancock brand is a strategic enabler Strength, Stability & Innovation  Established 1862  Brand attributes:  89 % awareness among U.S.  Human and real consumers  Empathetic and have customer’s  One of the 100 Most Powerful Brands best interests at heart of the 20th Century (New York Ti

46. Slide 46: Leading position in asset allocation; mutual funds

    Industry leading position in Asset Allocation to enable wealth management growth… Lifestyle and Target Date Funds under Management1 (US$ billion) Fidelity 172 Vanguard 132 John Hancock 76 T. Rowe Price 75 Columbia Management 52 Prudential 36 MetLife Advisors 36 AXA 35 Principal Financial Group 31 Tr

47. Slide 47: Mutual fund sales; small-case 401(k) market

    Mutual fund sales are well diversified by product and distribution channel 3Q12 YTD Mutual Fund Sales by Product 3Q12 YTD Mutual Fund Sales by Channel (US$9.3 billion) (US$9.3 billion) 6% 15% 8% 34% 11% 14% 9% 65% 15% 22% #1 Selling fund #3 Selling fund Financial Planner DC Investment Only Other #2

48. Slide 48: Expanding into mid-case 401(k); JH Life repositioned

    … while investing to expand into the mid-case 401(k) market 401(k) Industry Sales by Plan Size & Type (US$ billions) Current Initial Project Focus Focus  Current product offering (unbundled Group Annuity) accesses less than 20% of the addressable 401(k) market 23  Moving up market and offering a b

49. Slide 49: Long-Term Care market rationalizing

    The Long-Term Care market is rationalizing Long-Term Care Insurance Retail Sales (US$ millions) 2Q12 YTD Market Sales Share Genworth Financial $ 98 37.3% Northwestern Long Term Care 36 13.7%  We are bolstering the profitability of in-force business through continued execution of in-force Mutual of

50. Slide 50: Key initiatives; the way forward for John Hancock

    Key Initiatives to drive disciplined earnings growth John Hancock Initiatives Driving profitable mutual funds + asset under management 2016 Targets Expanding into mid-market + in Retirement Plan Services Core earnings of $1.5 billion Growing de-risked insurance + business and improving margins and c

51. Slide 51: Thank you

    Thank you 17 ifr, 1S© Promises Kept BS2eee 1M Manulife Financial For your future

52. Slide 52: Investment Division: Diversified, High Quality Investment Portfolio

    Investor Day 2012 forward- thinking Investment Division: Delivering a Diversified, High trustworthy Quality and High Performing Investment Portfolio reliable strong Warren A. Thomson Senior Executive Vice President & Chief Investment Officer November 15, 2012 Our investment philosophy is not depende

53. Slide 53: Risk management culture; diversified asset mix

    Manulife has a strong risk management culture Centralized control & monitoring of all Strong Risk Approximately 99% investment & Asset Management of assets managed Liability Management Culture internally functions Strong corporate oversight by “arms Strong asset length” credit management skills comm

54. Slide 54: Public bonds and private placement debt; mortgage portfolio

    Public bonds & private placement debt highly diversified by industry Public Bonds & Private Placement Debt (C$139.3 billion, Carrying Value as at September 30, 2012) $60.1 Private Placements 1.5% Public Bonds $20.9 5.1% 41.7% $10.3 $10.0 0.2% $9.3 1.2% 1.2% $7.1 $6.9 9.9% 1.7% 1.2% $4.8 7.2% 0.2% $4

55. Slide 55: Credit provisions and impairments declined

    Credit provisions & impairments significantly declined since the height of the financial crisis Credit Provisions & Impairments (C$ millions, Pre-tax) 455 189 Long term expected level based on Moody's 173 default studies applied to our aggregated credit 150 exposure: ~ C$80 million per quarter 59 24

56. Slide 56: Diversified alternative asset portfolio

    Well diversified alternative asset portfolio Alternative Assets (C$20.6 billion, Carrying Value as at September 30, 2012) Power & Infrastructure 14% Commercial Leases Real Estate 12% 41% Timberland 10% Private Equity & Mezzanine 8% Affordable Housing 2% Oil & Gas 7% Farmland Other 4% 2% Representing

57. Slide 57: Stable alternative asset returns; investment gains

    Stable alternative asset returns 10-year average of approximately 11% Annualized Returns by Asset class (2002 – 2011)1 19.2% 14.9% 11.7% 10.0% 10.7% 9.2% 7.8% 2.9% 2 Real Estate Private Power & Timberland Farmland Oil & Gas Average S&P 500 Equity Infrastructure Return Return 1 10-year annualized ret

58. Slide 58: Conclusion

    Conclusion  Diversified, high quality, high performing, stable General Fund asset mix  Strong credit and risk management culture with centralized controls that delivers strong risk-adjusted returns  Alternative assets enhance returns in lieu of increasing credit risk  Strong historical investmen

59. Slide 59: Manulife Asset Management: Growing the Wealth Foundation

    Investor Day 2012 forward- thinking Manulife Asset Management: Growing the Wealth Foundation trustworthy reliable strong J-F Courville President & CEO, Manulife Asset Management November 15, 2012 Growing the wealth foundation Manulife Asset Management has developed significantly since 2001, emerging

60. Slide 60: Global footprint; full spectrum of investment capabilities

    Our global footprint U.K. CANADA 8 Investment JAPAN 57 Investment Professionals Professionals 13 Investment Professionals U.S. 123 Investment HONG KONG & ASIA Professionals 125 Investment Professionals* United States Canada Brazil Uruguay United Kingdom Hong Kong China Thailand Vietnam Indonesia Mal

61. Slide 61: Asset diversification; evolution

    Asset diversification AUM by Asset Class AUM by Product AUM by Geography Asset Fixed Income & Group Annuities & Allocation & Money Market Pension & Long-term Asia & Japan Balanced Retirement Care 20% 32% 35% 27% 28% Canada 16% 10% 63% 19% U.S. 15% 6% Institutional 1% 12% Mutual 16% Europe Equities A

62. Slide 62: Converting opportunities to results

    Converting opportunities to results 2010 – 2011 Equity Team Leveraging Global Strengthening Market Lift-outs & Builds Footprint Leadership  U.S. Large Cap Core Value  Global operating platform  Real Assets  International Value Equity  Strong advances in Asia  Asset Allocation Solutions  U.S.

63. Slide 63: Improving investment performance; global recognition

    Improving investment performance 4 & 5-star Morningstar Funds1 61 16 Sept 30, 2012 Region 5-star Funds 4-star Funds 28 U.S. 8 18 5-star 4 45 Canada 4 11 4-star 24 Asia 4 16 2008 Sept 30, 2012 Source: Morningstar as at September 30, 2012. 1) For each fund with at least a 3-year history, Morningstar c

64. Slide 64: Summary

    Summary Manulife Asset Management has developed significantly since 2001, emerging as a Top 40 global asset manager1 and rising:  We have built a globally scalable investment and operating platform  Our leading Asset Allocation capabilities are being leveraged across our businesses  We have enhan

65. Slide 65: Growth with Discipline: Closing Remarks

    Investor Day 2012 forward- thinking Growth with Discipline: trustworthy Closing Remarks reliable strong Donald A. Guloien President & Chief Executive Officer November 15, 2012 We have clear visions for each of our strategic priorities Build a premier (top-tier) pan-Asian life insurance Develop our A

66. Slide 66: Questions & Answers

    Growth with discipline We expect this to result in: forward-  $4 billion in core earnings in 20161 thinking  Less volatile earnings  More sustainable earnings trustworthy  Lower risk product suite  Core ROE of 13% in 20161  Leverage ratio of 25% over the long-term reliable strong Note: See “Ca

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