Manulife Financial Corp. Q2 FY2024 earnings call

Management Statement and Operational Highlights

• Investor Days Recap: Moved from high-risk low ROE to lower risk high ROE; positioned to capitalize on global trends (growing middle class in Asia, retirement gap, digitization); announced new targets: core ROE 18%+ and $22B+ cumulative remittances by 2027.
• Financial Performance: APE sales up 17%, core EPS up 9%, core ROE 15.7%, adjusted book value per share up 15%.
• Key Segments: Asia driving broad-based sales growth; Global WAM with strong asset growth and margin expansion; Canada with group insurance growth; US with protection sales decline.
• Leadership Change: Scott Hartz retiring, Trevor Kreel succeeding as Chief Investment Officer effective August 1.

Segment Performance

• Asia: APE sales increased 7% year-over-year, driven by growth in Japan and Hong Kong (though mainland China sales declined). New business CSM grew 10%, new business value 19%, and core earnings rose 40%. Asia contributed 44% to core earnings.
• Global WAM: Net inflows of $0.1 billion, core earnings grew 23%, and core EBITDA margin expanded 240 basis points.
• Canada: APE sales jumped 61% led by group insurance, with core earnings up 7%.
• US: Lower sales of protection insurance products led to a 11% decline in core earnings due to unfavorable net insurance expense and reinsurance transaction impacts.

Guidance

• Aim to achieve core ROE 18%+ by 2027 and cumulative remittances of $22B+ by 2027.
• Committed to buying back maximum 90 million common shares through the NCIB program, representing over $3B return to shareholders based on current share price.
• Confidence in ability to raise financial performance based on year-to-date momentum towards new targets.

Risks

• ALDA Volatility: Private equity underperformance due to short rate impacts; real estate headwinds with volatility.
• GMT Impact: Uncertainty on GMT enactment in Asia, affecting effective tax rate.
• Lapse Experience: Negative lapse experience in US continuing to impact P&L and CSM.
• Non-Directly Attributable Expenses: Increase due to reclassifications and entity-sustaining expenses.

Question and Answer

Q: ALDA charge widened in Q2, what's the impact and outlook?

A: Scott Hartz and Trevor Kreel discuss ALDA volatility, private equity impact from short rates, and real estate improvement with expectations of future positive performance.

Q: How does DBS CEO succession impact Manulife's relationship?

A: Roy Gori states no impact, emphasizing the strong and ongoing partnership with DBS extends beyond Piyush.

Q: GMT allocation and Asia timeline?

A: Colin Simpson explains GMT allocation, with Hong Kong expected to adopt pillar two tax rules in 2025.

Q: Asia other APE sluggish and agent numbers?

A: Phil Witherington mentions China sales moderation, focusing on agent productivity rather than just agent numbers.

Q: ALDA PE charge quantification and reinsurance transactions?

A: Scott Hartz and Roy Gori discuss private equity charge impact, reinsurance transaction progress, and ALDA disposition plans.