Slide 1: Third Quarter 2005 Financial & Operating Results
Third Quarter 2005 Financial & Operating Results November 3, 2005
Slide 2: Legal Disclaimer
Legal Disclaimer Forward-Looking Statements This presentation may contain forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 or National Policy Statement 48. Investors are cautioned that all forward-looking statements involve risk and uncertain
Slide 3: CEO's Remarks
CEO’s Remarks Dominic D’Alessandro President & Chief Executive Officer
Slide 4: Q3 Financial Highlights
Q3 Financial Highlights 3Q04 3Q05 3Q05 3Q05 Adj. (C$ millions, except per share data) (Reported) (Adjusted)* vs. 3Q04 Premiums and Deposits $13,497 $15,744 $15,744 17% Shareholders’ Earnings $713 $746 $879 23% Basic Earnings per Share $0.88 $0.93 $1.10 25% Return on Equity 12.0% 12.7% 14.9% 290 bps
Slide 5: Q3 Operating Highlights
Q3 Operating Highlights • Record Wealth Management sales, with exceptional YoY growth • U.S. Variable Annuity sales of US$2.2 billion, up 60% • Canadian wealth management sales increased 34% • Japan Segregated FUM up 129% driven by strong VA sales • Hong Kong Individual Wealth Management sales up 22
Slide 6: CFO's Remarks
CFO’s Remarks Peter Rubenovitch Senior Executive Vice President & Chief Financial Officer
Slide 7: Third Quarter Earnings Adjustments for Unusual Items
Third Quarter Earnings Adjustments for Unusual Items C$ millions $1,000 • Reported shareholders’ earnings of $746 million $800 • Charge of $198 million $600 (US$165 million) due to Hurricane Katrina $400 • Gain of $65 million due to $200 release of tax provision in Japan $0 Reported Katrina Release
Slide 8: Third Quarter Earnings
Third Quarter Earnings Shareholders’ Earnings (Note 3Q05 adjusted for unusual items) $879 YoY earnings growth driven by: $839 $801 + Strong new sales $756 $713 $746 + Growth from inforce business + Favourable investment results and strong equity markets + Emergence of expense synergies Offset by: -
Slide 9: ROE Performance
ROE Performance 14.9% 14.1% 14.3% 13.0% 12.0% + Reported ROE of 12.7% for the 12.7% third quarter + Excluding unusual items ROE would have been 14.9% + 5.7 million shares repurchased in the third quarter + Refreshed 50 million share buyback program announced today 3Q04 4Q04 1Q05 2Q05 3Q05 9
Slide 10: Funds Under Management Year over Year Movement
Funds Under Management Year over Year Movement C$ Billions $450 $31.0 $56.9 $385.8 $400 ($44.8) $359.9 $346.1 $350 ($25.9) ($3.5) $300 $250 3Q04 FUM P&D Net Inv Policy Currency Other 3Q05 FUM 3Q05 Income Payments Currency Adj. 10
Slide 11: Investment Income
Investment Income Composition of 3Q05 Total Investment Income Mortgages 17% + Increased diversification and asset mix Stocks 10% + Bond portfolio now includes public and private bonds Real Estate + Overall asset quality is improving Bonds 4% 59% and remains sound Policy Loans Other 5% 5% 11 Other in
Slide 12: Investments Improving Asset Quality
Investments Improving Asset Quality Bonds rated BBB and below $45,000 + BBB and below bonds down 19% versus one year ago + Underweight and secured on $30,000 GM and Ford + No exposure to Delphi $15,000 + Recent Northwest and Delta developments substantially anticipated and reflected in $0 aircraft v
Slide 13: U.S. Protection Shareholders' Net Income
U.S. Protection Shareholders’ Net Income US$ Millions $140 + Earnings of $119 million, 38% $120 above third quarter 2004 $100 + Positive investment performance $80 and good claims experience $60 + Favourable impact of new business $40 $20 $0 3Q04 4Q04 1Q05 2Q05 3Q05 LTC $7 $13 $26 $18 $20 Ind. Insur
Slide 14: U.S. Protection Sales
U.S. Protection Sales US$ Millions $175 + 22% YoY increase in Individual $150 Life sales resulted in record Q3 $125 + Recent sales initiatives and strength in Universal Life $100 + Growth across all distribution $75 channels, with significant $50 increase through JHFN $25 • Long Term Care sales rema
Slide 15: U.S. Wealth Management Shareholders' Net Income
U.S. Wealth Management Shareholders’ Net Income US$ Millions $140 + Exceptional Q3 earnings of $136 $120 million, up 49% YoY $100 + Annuities earnings increased 73% $80 over last year $60 + Good investment experience including favourable equity, credit $40 and interest rate markets $20 + Increasing
Slide 16: U.S. Wealth Management Net Flows
U.S. Wealth Management Net Flows US$ Millions $3,000 $2,500 + Strong VA net flows driven by new $2,000 product features and expanded $1,500 distribution $1,000 + Consistently strong net flows in $500 JHRPS drove 30% YoY increase in FUM $0 ($500) + Positive net flows from fixed 3Q04 4Q04 1Q05 2Q05 3Q
Slide 17: Guaranteed & Structured Financial Products
Guaranteed & Structured Financial Products Shareholders’ Net Income $91 - Year over year decline in earnings driven by less favourable investment $67 results $56 $56 - Significant variance from 2Q05 as: i. 2Q05 gains related to hybrid assets and interest rate $30 movements contrast with 3Q05 losses
Slide 18: Canada Shareholders' Net Income
Canada Shareholders’ Net Income C$ Millions $250 $200 + Earnings of $235 million up 42% over last year $150 + Good growth of inforce earnings $100 + Individual Wealth Management $50 up 75% due to strong sales, investment results and $0 favourable equity 3Q04 4Q04 1Q05 2Q05 3Q05 Group $67 $56 $69 $71
Slide 19: Canada Sales
Canada Sales Individual Insurance $75 • Individual sales down from $50 strong third quarter 2004 $25 $0 3Q04 4Q04 1Q05 2Q05 3Q05 Ind. Insurance $63 $63 $59 $57 $54 Group Businesses $400 • Strong Group Benefits sales down from exceptional third quarter in 2004 $200 • Group Pensions sales up 42% and e
Slide 20: Canada Net Flows
Canada Net Flows Individual Wealth Management C$ Millions $500 + Segregated net flows up 72% from one year ago $250 + Strong Mutual Fund net flows resulting in market share gains and 43% YoY growth in FUM $0 - Net reductions in GICs and fixed annuities due to low interest rate environment ($250) 3Q0
Slide 21: Asia and Japan Shareholders' Net Income
Asia and Japan Shareholders’ Net Income US$ Millions $200 + Division earnings, excluding Japan tax provision release, up $150 27% YoY + Hong Kong earnings up 7% $100 YoY due to increased volumes, good expense control and $50 favourable investment experience $0 3Q04 4Q04 1Q05 2Q05 3Q05 + Other Asia e
Slide 22: Asia and Japan Sales
Asia and Japan Sales Insurance • Japan and Hong Kong showing good growth over previous year • Other Asia showing improved sales momentum in several 3Q04 4Q04 1Q05 2Q05 3Q05 markets Japan $28 $32 $31 $31 $32 Other Asia $35 $31 $25 $29 $32 Hong Kong $33 $37 $27 $30 $35 Wealth Management • Bancassuranc
Slide 23: Reinsurance Adjusted Shareholders' Net Income
Reinsurance Adjusted Shareholders’ Net Income 3Q05 earnings adjusted for impact of Hurricane Katrina $53 $49 - Reported loss of $127 million in $38 third quarter $35 - Excluding the $165 million Katrina charge, earnings would have been $24 $38 million + Premiums rose due to catastrophe property rein
Slide 24: Source of Earnings
Source of Earnings Source of Earnings 3Q04 4Q04 1Q05 2Q05 3Q05 Expected profit on inforce $627 $638 $637 $650 $700 Impact of new business (110) (93) (95) (80) (80) Experience gains 197 198 175 243 (70) Mgt actions and changes in assumptions (27) (67) (61) 17 (12) Seg fund guarantees 41 51 27 40 74 E
Slide 25: USGAAP vs. CGAAP
USGAAP vs. CGAAP 3Q04 4Q04 1Q05 2Q05 3Q05 CGAAP Net Income $713 $756 $801 $839 $746 Investment income (37) 225 168 126 230 DAC and VOBA offsets to inv't income (48) (44) (14) (25) (37) Seg fund guarantees (51) (49) 51 72 (61) Other actuarial related items 50 (6) 38 47 30 Total pre-tax earnings im pa
Slide 26: In Conclusion
In Conclusion • Revenue synergies contributing to record sales results • Benefits of diversification and scale increasingly evident in earnings and expense base • Capital position remains very strong • Refreshed normal course issuer bid indicates commitment to continued buybacks • Well-positioned fo
Slide 27: Question and Answer Session
Question and Answer Session 27