Manulife Financial Corporation Q3 FY2025 earnings call

• Phil Witherington highlighted transformation efforts since 2017, digital ambition, and capital deployment priorities, including the acquisition of Comvest Credit Partners. - Colin Simpson discussed financial results, earnings drivers, ECL provisions, and segment results, noting core EPS growth and impact of various factors like ECL and reinsurance transactions. - Paul Lorentz discussed the acquisition of Comvest Credit Partners, its benefits in scaling private markets business, complementary capabilities, and strategic fit with Manulife's platform.

Asia: APE increased 31% from the prior year, with new business CSM and new business value increasing 34% and 28% respectively. Core earnings grew 13% year-on-year. Global WAM: Generated strong results with 19% growth in pretax core earnings for the seventh consecutive quarter and positive net flows of nearly $1 billion. Canada: APE decreased 34% due to nonrecurrence of a large case sale in group insurance, but individual insurance drove 32% new business CSM growth. Core earnings increased 4%. U.S.: APE grew 40%, new business CSM and new business value grew 59% and 12% respectively, but core earnings decreased 53% due to unfavorable mortality experience and strengthened ECL provisions.

• Acquisition of Comvest is immediately accretive to core EPS, core ROE, and core EBITDA margin. - Expect $25 million quarterly drag from eMPF transition but expect to grow out of it. - Target to achieve core ROE of 18% plus by 2027.

• Elevated U.S. mortality and ECL provisions as short-term headwinds. - Impact of eMPF transition on margins. - Volatility in credit losses with ECL charges ranging from $30 million to $50 million quarterly with variability.

Q: John Aiken from Jefferies asked about other areas to bulk up operations organically or inorganically like Comvest.

A: Paul Lorentz said they feel good about organic opportunities but continue to look for accretion opportunities that accelerate growth and have strategic fit.

Q: John Aiken followed up on eMPF impact.

A: Colin Simpson said eMPF transition will have $25 million quarterly drag but they are managing expenses to get ahead of it.

Q: Tom MacKinnon from BMO Capital Markets asked about core definition change and Comvest acquisition impact.

A: Colin Simpson said moving amortization of acquired intangibles below core earnings, Comvest acquisition will add $30 million annually to amortization.

Q: Gabriel Dechaine from National Bank Financial asked about Comvest accretion and Asia segment sales with Hong Kong regulator caps.

A: Colin Simpson said $0.02 to $0.03 core EPS accretion annually; Steve Finch said Hong Kong regulator caps on return illustrations won't materially impact Manulife's sales.

Q: Doug Young from Desjardins Capital Markets asked about defending Comvest acquisition valuation.

A: Paul Lorentz and Phil Witherington discussed strategic relevance, talent, cultural fit, and future growth opportunities from the acquisition.

Q: Doug Young followed up on Asia's Japan segment and eMPF impact.

A: Steven Finch said Japan sales variability doesn't impact IFRS earnings; Paul Lorentz said eMPF impact is offset by expense management and expected growth after transition.

Q: Paul Holden from CIBC asked about ROE accretion math.

A: Colin Simpson said it's immediately accretive as surplus earns about 2.8% and Comvest earns more.

Q: Tom Gallagher from Evercore ISI asked about U.S. long-term care triennial review and reinsurance.

A: Stephanie Fadous and Marc Costantini discussed long-term care experience and reinsurance rate increases.

Q: Lemar Persaud from Cormark Securities asked about credit losses and Comvest cross-sell.

A: Trevor Kreel said credit losses are variable with $30 million to $50 million quarterly range; Paul Lorentz said cross-sell opportunities are optimistic but no specific numbers shared.

Q: Mario Mendonca from TD Securities asked about U.S. business outlook and core ROE target.

A: Brooks Tingle and Phil Witherington discussed bullish outlook for U.S. business and path to achieving 18% plus core ROE by 2027.