Manulife Financial Corporation · TSX:MFC
Manulife Financial — Q1 2005 Earnings Presentation
28 slides from Manulife Financial's earnings presentation, May 5, 2005
Slide 1: First Quarter 2005 Financial & Operating Results
First Quarter 2005 Financial & Operating Results May 5, 2005
Slide 2: Legal Disclaimer
Legal Disclaimer Forward-Looking Statements This presentation may contain forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995. Investors are cautioned that all forward-looking statements involve risk and uncertainties and actual results may differ mater
Slide 3: CEO's Remarks
CEO’s Remarks Dominic D’Alessandro President & Chief Executive Officer
Slide 4: Q1 Financial Highlights
Q1 Financial Highlights (C$ millions, except per share data) 2Q04 3Q04 4Q04 1Q05 % vs 4Q04 Shareholders’ Earnings $656 $713 $756 $801 6% Earnings per Share $0.93 $0.88 $0.93 $0.99 6% Premiums and Deposits $12,960 $13,497 $14,172 $14,841 5% Return on Equity 14.0% 12.0% 13.0% 14.1% 110 bps 4
Slide 5: Q1 Operating Highlights
Q1 Operating Highlights • John Hancock integration on track for year-end completion • Strong wealth management sales reflecting quality and breadth of distribution platform • Received approvals to further expand operations in China • Portus guarantee communicated and in place • Increased quarterly d
Slide 6: Q1 Integration Highlights
Q1 Integration Highlights Canada • Completed integration of Canadian Pensions operations • Integrated finance and distribution functions • Significant outsourcing completed United States • Re-branding of Manulife’s US products and legal entities • Successful cross-selling with JHFN the #1 distributo
Slide 7: CFO's Remarks
CFO’s Remarks Peter Rubenovitch Senior Executive Vice President & Chief Financial Officer
Slide 8: First Quarter Earnings Results
First Quarter Earnings Results Shareholders’ Earnings (Excluding Integration Expenses) $836 $800 + Revenue synergies $735 $678 + Reduced operating expenses + Improved LTC inforce policy review $427 - Lower investment gains compared to exceptional fourth quarter - Weaker US equity markets C$ Millions
Slide 9: Q1 Unusual Items
Q1 Unusual Items (C$ millions) 1Q05 Integration Expenses 1 ($35) Portus Provision 1 (40) Residual Interest in Daihyaku 1 57 Revision to Japan Tax 20 Total Net Income Impact $2 1 Financial impact reflected in Corporate Division. 9
Slide 10: ROE Performance
ROE Performance Strong Improvement… 16.0% 14.1% Q105 13.0% 12.0% 12.0% Projected 2005 ROE 1 13.2% Reported Q1 ROE 14.1% 8.0% Unusual Items -0.0% $3B Buybacks (net of actual buybacks) 1.3% 4.0% Adjusted Q1 ROE 15.4% 0.0% 3Q04 4Q04 1Q05 … Results Exceed Initial Expectations 1 Projected at announcement
Slide 11: Invested Assets Improving Asset Quality
Invested Assets Improving Asset Quality Bonds rated BBB and below • Continue to realign consolidated investment portfolio • 1Q05 decline in below investment grade holdings offset by downgrade of the Republic of Philippines • Currency movements contributed to decline in asset values 2Q04 3Q04 4Q04 1Q
Slide 12: U.S. Protection Shareholders' Net Income
U.S. Protection Shareholders’ Net Income US$ Millions $125 + Improved inforce policy review within LTC $100 - Equity markets and investment gains down from strong fourth $75 quarter $50 $25 $0 1Q04 2Q04 3Q04 4Q04 1Q05 LTC $6 $7 $13 $26 Ind. Insurance $53 $94 $79 $109 $84 12
Slide 13: U.S. Protection Sales
U.S. Protection Sales US$ Millions $175 • Lower Individual Insurance sales $150 compared to previous quarter $125 • Seasonality of life sales $100 contributing to decline $75 • Distributors adjusting to product $50 changes $25 • LTC sales up 16% over 4Q04 $0 driven by growth in the corporate 1Q04 2Q
Slide 14: U.S. Wealth Management Shareholders' Net Income
U.S. Wealth Management Shareholders’ Net Income US$ Millions $125 + Record earnings of US$111 $100 million, up 131% year over year + Excellent performance of $75 variable annuity segment $50 + Increased fee income reflecting higher asset values $25 - Offset by lower US equity $0 markets 1Q04 2Q04 3Q
Slide 15: U.S. Wealth Management Sales
U.S. Wealth Management Sales US$ Millions $4,500 • Variable annuities sales up 16% year over year • Open-end funds sales up 48% $3,000 over prior year • Fixed annuities market remains challenging $1,500 $0 1Q04 2Q04 3Q04 4Q04 1Q05 Mutual Fund $1,009 $901 $1,339 $1,333 Grp Pensions $1,080 $782 $919 $
Slide 16: Guaranteed & Structured Financial Products
Guaranteed & Structured Financial Products Shareholders’ Net Income $67 + Now reporting into US Wealth Management $56 $56 - Lower investment gains compared to fourth quarter $42 • Funds under management continue to decline 2Q04 3Q04 4Q04 1Q05 16 US$ Millions
Slide 17: Canada Shareholders' Net Income
Canada Shareholders’ Net Income C$ Millions $200 + Strong growth of inforce business $150 + Expense gains reflect benefits of integration $100 - Poor claims experience in Individual Insurance $50 $0 1Q04 2Q04 3Q04 4Q04 1Q05 Group $44 $41 $67 $56 $69 Wealth Mgt $46 $59 $51 $53 $60 Ind. Ins $40 $44 $4
Slide 18: Canada Sales
Canada Sales Insurance • Individual Insurance sales remain solid in typically soft first quarter • Group Benefits sales up 74% over 4Q04, but down from an exceptional 1Q04 which benefited from a few large 1Q04 2Q04 3Q04 4Q04 1Q05 corporate cases Grp Benefits $180 $93 $109 $47 $82 Individual $37 $61
Slide 19: Asia Shareholders' Net Income
Asia Shareholders’ Net Income US$ Millions $80 • Shareholders’ earnings up 20% over previous year $60 • Good growth from Other Asia Territories $40 $20 $0 1Q04 2Q04 3Q04 4Q04 1Q05 Other Asia $9 $8 $13 $10 $16 Hong Kong $47 $52 $55 $56 $51 19
Slide 20: Asia Sales
Asia Sales Insurance • Shift in consumer preference to shorter term investment products • New product launches to appeal to target market 1Q04 2Q04 3Q04 4Q04 1Q05 Other Asia $25 $25 $35 $31 $25 Hong Kong $30 $31 $33 $37 $27 Wealth Management • Sales up 12% over strong fourth quarter 1Q04 2Q04 3Q04 4
Slide 21: Japan Shareholders' Net Income
Japan Shareholders’ Net Income $77 + Exceptional Q1 results $44 + Ongoing business growth, $42 $39 $40 tight expense control and positive investment results + Release of $20 million net tax asset contributed to earnings growth 1Q04 2Q04 3Q04 4Q04 1Q05 21 C$ Millions
Slide 22: Japan Sales
Japan Sales Wealth Management • Variable annuity sales up almost $1,053 $1,036 50% over previous quarter $696 • Beginning to see impact of UFJ $510 distribution agreement $135 1Q04 2Q04 3Q04 4Q04 1Q05 Individual Insurance • Agency force increased 14% $41 $38 $39 year over year to 4,080 $37 $38 • Ini
Slide 23: Reinsurance Shareholders' Net Income
Reinsurance Shareholders’ Net Income $54 $51 + Shareholders’ earnings up 29% $46 year over year $36 + Sales remain strong $28 - Seasonality of P&C business negatively impacted results - Poor claims experience 1Q04 2Q04 3Q04 4Q04 1Q05 23 US$ Millions
Slide 24: Source of Earnings
Source of Earnings Source of Earnings 1Q04 2Q04 3Q04 4Q04 1Q05 Expected profit on inforce $318 $506 $627 $638 $631 Impact of new business (46) (75) (110) (93) (95) Experience gains 86 234 197 198 181 Mgt actions and changes in assumptions (18) (45) (27) (67) (61) Seg fund guarantees 51 57 41 51 27 E
Slide 25: USGAAP vs. CGAAP
USGAAP vs. CGAAP 1Q04 2Q04 3Q04 4Q04 1Q05 CGAAP Net Income $425 $656 $713 $756 $801 Investment income 198 (90) (37) 225 168 DAC and VOBA offsets to inv't income (77) (8) (48) (44) (14) Seg fund guarantees (47) (54) (47) (17) 52 Other actuarial related items 84 31 46 (38) 37 Total pre-tax earnings im
Slide 26: Capital Management
Capital Management • Preferred Shares • Issued $350 million of attractively priced perpetual preferred shares • Share Buybacks • Repurchased 6.7 million shares in Q1 ($382 million) • April repurchases totaled 2.5 million shares ($141 million) • Excess Capital • More than $3 billion of excess capital
Slide 27: In Conclusion
In Conclusion • Integration progressing well • Life sales lower in typically soft first quarter • Strength of diversified distribution system driving strong wealth management sales • Some one-time items, but earnings remain strong • Continued deployment of excess capital • Strong improvement in ROE
Slide 28: Question and Answer Session
Question and Answer Session 28