Manulife Financial Corporation · TSX:MFC
Manulife Financial — Investor Day (May 2015)
55 slides from Manulife Financial's investor day presentation, May 11, 2015
Slide 1: Delivering Results, Preparing for the Future
Delivering Results Preparing for the Future Monday, May 11, 2015 Caution regarding forward-looking statements From time to time, Manulife makes written and/or oral forward-looking statements, including in this presentation. In addition, our representatives may make forward-looking statements orally
Slide 2: Agenda
Agenda Time Session Donald Guloien Delivering Results | Preparing for the Future 8:30 Steve Roder Q&A Donald Guloien, Steve Roder, Paul Rooney, Cindy Forbes Break Kai Sotorp Wealth and Asset Management 10:00 Q&A Kai Sotorp, Warren Thomson, Craig Bromley Marianne Harrison Standard Life Update 10:45 Q
Slide 3: Delivering Results: We have come a long way since 2008
Delivering Results Preparing for the Future Donald Guloien President and Chief Executive Officer We have come a long way since 2008 Eliminated or de-emphasized riskier products Put equity and interest-rate hedging in place Emphasized margins over market share Strengthened our capital base, r
Slide 4: Growing Core and Net Income
Growing Core and Net Income Net Income attributed to shareholders (C$ millions) 3,130 3,501 1,810 129 (1,663) Solid growth in all four 2010 2011 2012 2013 2014 operating units Core Earnings1 (C$ millions) Far more sustainable earnings 2,617 2,888 2,169 2,249 n/c2 2010 2011 2012 2013 2014 1 Core
Slide 5: Capital allocation
Bottom line, we are delivering: i. A strong capital position ii. Strong and sustainable growth iii. Increasing dividends, and iv. The ability to invest in an exciting new future 5 Capital allocation 6
Slide 6: Core ROE for main businesses
Core ROE for main businesses Core return on equity1 (For the year ended December 31, 2014) Higher ROE Lower ROE businesses businesses 1 Non-GAAP measure. See “Note to Users – Performance and Non-GAAP Measures” below. 7 7 Wealth & Asset Management businesses Core return on equity1 (For the year ended
Slide 7: Asia businesses core ROE
Asia businesses Core return on equity1 (For the year ended December 31, 2014) Asia Other Higher ROE Lower ROE businesses businesses 1 Non-GAAP measure. See “Note to Users – Performance and Non-GAAP Measures” below. 9 9 Wealth & Asset Management and/or Asia businesses Core return on equity1 (For the
Slide 8: Growth in core earnings for main businesses
Growth in core earnings for main businesses Core earnings1 growth (2012-2014) Higher growth Lower growth businesses businesses 1 Non-GAAP measure. See “Note to Users – Performance and Non-GAAP Measures” below. 11 11 Wealth & Asset Management businesses Core earnings1 growth (2012-2014) Wealth & Asse
Slide 9: Asia businesses core earnings growth
Asia businesses Core earnings1 growth (2012-2014) Asia Other Higher growth Lower growth businesses businesses 1 Non-GAAP measure. See “Note to Users – Performance and Non-GAAP Measures” below. 13 13 Wealth & Asset Management and/or Asia businesses Core earnings1 growth (2012-2014) Wealth & Asset Man
Slide 10: Deploying capital: major presence in large, fast-growing economies
Deploying capital 15 We have a major presence in… Four of the world’s 10 largest … And some of the fastest growing economies… markets on the planet Gross Domestic Product1 Gross Domestic Product Growth1 (US$ trillion, 2015P, current prices) (10-year CAGR, 2004-2014, US$ Constant Prices) U.S.A 18.1 C
Slide 11: Strategy: The call to action
Strategy 17 The call to action The world is changing rapidly Major trends and disruptors threaten to make our industry less and less relevant But they also create opportunities… To take giant steps to lead the financial services industry in the provision of holistic solutions, far beyond any
Slide 12: Customer profiles are changing and that creates opportunities
Customer profiles are changing and that creates opportunities Rise of Asia Baby- Aging Fast growing Tech-savvy middle class boomers population/ youthful millennials in North Wealth population everywhere America transfer e.g. Vietnam e.g. Japan 19 Media and technology accelerate the sharing of ideas
Slide 13: The customer is better educated; technology is disrupting industries
The customer is better educated and gaining control 21 Technology is enabling and disrupting industries 22
Slide 14: Regulators are becoming more aggressive; customers yearn for simplicity
Regulators are becoming more aggressive consumer advocates Hong Kong Singapore Securities and Futures New balanced scorecard for Commission launches mystery financial advisors will include shopping program client feedback 23 Customers are yearning for simplicity Ameriprise 24
Slide 15: Competitive landscape is being redefined
Competitive landscape is being redefined Traditional Emerging Insurance companies Asset management companies Banks 25 Differentiation matters! Low differentiation = High differentiation = Low return High return Name Brand Generic 26
Slide 16: Strategy consists of three major themes
Status Quo is not an option 27 Strategy consists of three major themes 1. Develop more holistic and long- lasting customer relationships 2. Build and integrate global Wealth & Asset Management businesses 3. Leverage skills and experiences across our international operations 28
Slide 17: Theme One: Develop more holistic customer relationships
Theme One Our ability to offer insurance and wealth products, and customer- needs based solutions, will competitively differentiate Develop more holistic and long- our distribution channels. lasting customer relationships 29 Theme One (continued) A. 360 degree view of the customer B. Simpler, more c
Slide 18: Theme Two: Alternative asset capability is a competitive advantage
Theme Two Build and integrate our global wealth and asset management businesses. Expand our footprint. 31 Alternative asset capability is a competitive advantage 14 12 Enhanced Efficient Frontier − Use of ALDA assets Oil and Gas provides diversification Private Equity benefits and higher 10 Infrastr
Slide 19: Theme Three: Early examples of customer centricity in action
Theme Three Leverage skills and experiences across our international operations 33 Some early examples of customer centricity in action Rolling out 360 degree view of the customer in most locations around the world by 2016 Launching Electronic Point of Sale capability across Asia Launched Cent
Slide 20: The old customer journey
35 The old customer journey Buy Life Insurance Bob, age 43 Underwriting Policy Premium Notice 36
Slide 21: The whole new customer journey (Vitality)
The whole new customer journey KNOW YOUR HEALTH Vitality Age: 46 Earn points for Bob, age 43, buys Initial Vitality Goal: Exercise 3X per biometrics from life insurance policy Status: Bronze week underwriting Bob receives his free Fitbit device from John Hancock. Receive email Earn points for Earn p
Slide 22: Summary
Summary We are delivering on objectives A strong capital position Strong and sustainable growth, well balanced by geography and line of business Increasing dividends Also making exciting investments in our future to sustain growth well beyond 2016 Exploiting our competitive advantage, an
Slide 23: Progressing as planned on core earnings and leverage objectives
Delivering Results Preparing for the Future Steve Roder SEVP and Chief Financial Officer Progressing as planned on core earnings and leverage objectives Core Earnings1 Financial Leverage Ratio Core Return on Equity1 (C$ billions) 4.0 33% 13% 31% 28% 11% 25% 10% 10% 2.9 2.6 2.2 2012 2013 2014 2016201
Slide 24: Key earnings drivers are moving in the right direction
Overall, key earnings drivers are moving in the right direction Wealth & Asset Management core earnings1 Insurance core earnings1 (C$ millions) (C$ millions) 502 109% increase 1,864 23% increase − Driven by fee income 1,513 − $119 million reduction in from higher assets new business strain 240
Slide 25: Expect continued growth in core earnings
Expect continued growth in core earnings, driven by both new business and higher margins For illustrative purposes only. Relative proportions – Not to scale. Wealth & Asset Management core earnings1 Insurance core earnings1 (C$ million) (C$ million) ~10%- Expected to be driven 20% primarily by Asia
Slide 26: On a path to generate $4+ billion in core earnings in 2016
On a path to generate $4+ billion in core earnings in 2016 For illustrative purposes only. Relative proportions – Not to scale. 2014-2016 Core Earnings1 Path (C$ billions) 4.0+ Increased amount of investment- related experience gains included in core earnings 2.9 2014 Wealth & Insurance Other E&E In
Slide 27: High financial flexibility given solid cash generation and capital position
High financial flexibility given solid cash generation, low leverage ratio and strong capital position Capital position1 Financial Leverage Ratio Remittances3 (MCCSR) (C$ billion) 248% 248% 245% 211% 32.7% 31.0% 2.5 2.4 27.7% 26.6% 2012 2013 2014 1Q15 2012 2013 2014 1Q15 2013 2014 Well capitalized
Slide 28: Appendix
Summary Delivering strong performance trajectory Progressing as planned on core earnings and leverage objectives High financial flexibility Measured deployment of capital to sustain growth and improve long- term ROE 11 Appendix 12
Slide 29: Growth in Expected Profit on In-Force negatively impacted by factors
Growth in Expected Profit on In-Force has been negatively impacted by several factors… For illustrative purposes only. Relative proportions – Not to scale. 2012-2014 Expected Profit on In-Force1 Path (C$ millions) +19.4% -8.4% 3,131 2,867 2,622 2012 EPIF Wealth & Insurance Other Wealth2 Sub-total Dy
Slide 30: Wealth and Asset Management franchise is sizable and growing
Wealth and Asset Management Kai Sotorp EVP and Global Head of Wealth and Asset Management Our Wealth and Asset Management franchise is sizable and has exhibited strong growth Assets Under Management1,2,3 Net Flows1,3 (C$ billions) (C$ billions) Institutional Mutual Funds Pensions Institutional Mutua
Slide 31: AUM well-diversified; profitability improving
Assets Under Management are well-diversified by business and region Assets Under Management1,2 (C$353 billion) By business By region Institutional Asia and Other Mutual Funds Advisory Canada 13% 13% 21% 42% 45% 66% Pensions U.S. 1 Data as at 3/31/15. Excludes Standard Life and New York Life acquisit
Slide 32: Leading operations in key markets
Consisting of leading operations in key markets… Retail Funds Retirement Services U.S. #9 in mutual fund net sales1 #2 Small Case 401(k) Market4 #1 provider of Target Risk Funds in the US2 Canada #9 in mutual funds AUM3 #2 Defined Contribution Group Pension5 Asia 9 territories with mutual
Slide 33: Considerable strength in core Retirement Services markets
We have considerable strength in core Retirement Services markets… U.S. Canada Hong Kong Converged group aiming Most comprehensive Unbundled platform to be leading retirement Mandatory Provident focused on small plans solution provider Fund platform +2,500,000 +1,500,000 +1,400,000 participants part
Slide 34: Retail Funds in U.S. and Canada displaying superior growth momentum
Our Retail Funds businesses in the U.S. and Canada are displaying superior growth momentum to the market… U.S. Canada Managed architecture platform using a Managed architecture platform “Manager of Managers” model leveraging strategic partners to fill gaps Organic Growth Rate1 Assets Under Organic G
Slide 35: Solid investment performance globally
… driven by solid investment performance globally MAM Investment Performance1 Lipper Awards & Other Accolades (% of AUM outperforming benchmark)2 Equity3 Fixed Income4 Best in 3-year Bond U.S. Dollar – High Yield Best in 3-year Bond U.S. Dollar 88 90 Best in 5-year & 3-year Equity 75 70 74 Asi
Slide 36: Four strategic initiatives to drive growth and operating leverage
… and are executing on four strategic initiatives to continue to drive growth and operating leverage Wealth & Asset Management Strategy 1 2 3 4 Develop Create a Maintain our Enhance our broader suite multi-channel differentiated global of retirement platform to local operations solutions and deliver
Slide 37: Enhancing global infrastructure; deepening Retirement Services platform
Enhancing our global infrastructure will enable and accelerate future business growth Wealth & Asset Management Strategy 2 1. Implement a Target Operating Model in Canada, Asia, and the Investment Division 2. Streamline our operating model and Enhance our platforms by digitizing core processes globa
Slide 38: Multi-channel approach to align to customer needs
Developing a multi-channel approach will help align to customer needs Wealth & Asset Management Strategy 1. Enhance our customer service through a consistent multi-channel experience 4 across our branches, call centres, online, mobile, and advisor presence Create a 2. Build industry-leading distribu
Slide 39: Standard Life Update: adds scale to core businesses
Standard Life Update Marianne Harrison President and CEO Manulife Canada Standard Life adds scale to our core businesses... Group Retirement Solutions Mutual Funds 1Q15 Assets Under Management1 Market 1Q15 Assets Under Management3 Market (C$ billions) Rank2 (C$ billions) Rank4 66 #2 43 #9 34 #3 36 #
Slide 40: Enhances presence in Quebec
…and enhances our presence in Quebec Manulife’s customer base in Quebec previously under-represented Established senior management in Quebec Charles Guay Roger Renaud EVP & GM, Institutional Markets and President for Canada, Manulife Asset President & CEO, Manulife Quebec Management Formerly: Presid
Slide 41: Greater breadth of wealth management solutions
Together we provide our customers with a greater breadth of wealth management solutions & deeper investment capabilities Group Retirement Provides a more comprehensive customer portfolio − Doubles our investment platform with broader choice of funds for investors − Expands choice and sophisticatio
Slide 42: Maximizing value for customers and shareholders
We are focused on maximizing value for our customers and shareholders… EPS of $0.03 accretive per year from 2016 to 2018 $100 million annual expense synergies by third year $150 million integration costs across first three years Core earnings of $19 million in the first two months Revenue synergies
Slide 43: Lifetime financial partnership; expense synergies
… as we develop a lifetime financial partnership with our customers Group Retirement Key Touch Points We retain Enrollment 50% of assets Drive participation when members leave their plans Maximize contributions Our members age 50+ represent Changing Employers Retirement ~50% of assets Retain o
Slide 44: Combining talent; Summary
We are combining our talent through thoughtful organizational design review Strong talent base across both organizations Reviewed our combined organization using structured process − Leveraging experience from our 2013 enterprise-wide organizational re-design Identification of high performing
Slide 45: Manulife Asia: Growth and Value Creation
Manulife Asia: Growth and Value Creation Roy Gori President and CEO Manulife Asia Manulife has a well positioned insurance and wealth management platform in Asia Strong presence in Asia 118 years in Asia 7 million customers Macau Leading professional agency +100 bancassurance partners Over
Slide 46: Significant, well diversified Asia business
Significant business that is well diversified Total (APE) Sales1 (US$2,214 million) By channel By geography By product Others Alternative Professional Japan Indonesia Term, A&H And Mutual funds, & Others Agency Critical Illness pensions 5% 12% Japan 37% 29% 33% 30% 35% Other Asia 44% 35% Hong Kong 3
Slide 47: Asian life insurance and wealth markets set to outgrow North America and Europe
Asian Life Insurance and Wealth markets will be significantly bigger than North America and Europe by 2025 Life Insurance Gross Written Premiums1 Household Wealth2 (US$ billions) (US$ trillions) 2013 2025F 2013 2025F 2.0x 2.7x 1.6x 1.3x 1.3x 1,591 1.1x 174 121 834 97 795 82 715 77 625 623 65 Asia No
Slide 48: Strategic growth priorities; bancassurance investments
Focused strategic growth priorities to capture the Asia opportunity Analytics Customer Simplification Experience Needs based solutions Diversified Bancassurance Distribution Financial Advisor Agency Electronic point-of-sale (ePOS) Digital Direct to customer engagement Integrated Wealth
Slide 49: DBS partnership provides scale in Singapore
DBS is a leading financial services group in Asia, with 6 million customers Leading branch network in Singapore and Hong Kong1 Amongst the largest regional banks in Asia2 (US$ billions, customer deposits in Asia) 2011-2014 CAGR (%) 137 577 5.7% 116 100 97 79 64 30 3 293 2.3% 239 12.1% China 185 16.7
Slide 50: Comprehensive digital strategy; Summary
Significant investments to deliver a comprehensive digital strategy Case Study: ePOS China 1. Launched July 2014 2. Agent adoption rate of 68% within the first 9 months of implementation1 High adoption rate and improved productivity China % of policies issued in the same date ePOS adoption rate Insu
Slide 51: New Asia EV/NBV Disclosures
New Asia EV/NBV Disclosures Philip Witherington EVP & CFO Manulife Asia New Business Value1 (NBV) is a key metric we use internally Reasons Enhancements Responsive to business Clearer scope – exclude Wealth & performance Asset Management business Volumes Use local statutory balance sheet,
Slide 52: Embedded Value; continued momentum in NBV
Embedded Value consists of adjusted net worth and value in force Adjusted net worth Increases from: (C$4.5 billion)2 New Business Value Interest on Embedded Value Other movements: Embedded Value1 Assumptions changes and (C$10.5 billion2) Value experience variances in force Changes in capital
Slide 53: Volume and scale drive 1Q15 growth
Volume and scale are key drivers of 1Q15 growth 1Q15 performance analysis NBV C$ millions +45% Delivering Volume Successful product launches +15 -14 Marketing campaigns Expense Management Scale efficiency +41 Expense discipline 118 Product Management Product management actions to mitigate
Slide 54: 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. A financial measure is considered a non-GAAP measure for Canadian securities law purposes if it is presented other than in accordance wi
Slide 55: Website citations (continued)
Website citations (continued) Khan Academy. https://www.khanacademy.org/ edX. https://www.edx.org/ Stanford Online. http://online.stanford.edu/ HarvardX. http://harvardx.harvard.edu/ Trip Advisor. http://www.tripadvisor.ca/ FutureAdvisor. https://www.futureadvisor.com/ Oriental Daily N