MFC

Leadership Updates

• Announced key executive leadership changes made in May 2026: Patrick Graham as President and CEO of Manulife Canada, Jody Wallace as expanded-mandate Chief AI Officer, and broader responsibilities for Stephanie Fedoux and Shamus Weiland, strengthening the enterprise leadership team.

Core Financial Performance Highlights

• Delivered strong overall results: 21% year-over-year APE sales growth across all insurance segments, 16% year-over-year new business contract service margin (CSM) growth, 20% growth in total CSM balance, 16% core EPS growth, and solid core return on equity (ROE) of 16.3%, up 130 basis points year-over-year.
• Maintained a strong balance sheet: LICAT ratio of 136%, with $26 billion in excess capital over supervisory targets, and a 22.2% financial leverage ratio, well below the 25% medium-term target, providing significant financial flexibility for shareholder returns and growth investment.
• Returned $1.4 billion in capital to shareholders in Q2 2026, and $5.3 billion over the past 12 months via dividends and share buybacks.

Strategic Execution Progress

• Distribution and Product Innovation: In Asia, grew million-dollar roundtable agency members by 9% year-over-year (the highest increase among top 10 multinational insurers), with APE sales per active agent up over 30% year-over-year, driven by quality-focused agency training and excellence initiatives. Expanded high net worth offerings with a new combined participating life and CQS investment diversification solution. Expanded ETF offerings for North American retail WAM customers and enhanced U.S. variable universal life offerings.
• AI Capability Building: Recognized as the number one life insurer for AI maturity by Evident for the second consecutive year, and named a CELENT Model Insurer for Data, Analytics, and AI. Launched new scalable agentic AI solutions in Global WAM, and continued rolling out the enterprise AI platform to enable responsible, efficient AI development and capability reuse across the business.
• Longevity and Health Initiatives: Launched a first-of-its-kind longevity preparedness tool with MIT Age Lab for U.S. insurance and retirement customers, enhanced health and wellness offerings for Canadian group retirement and private wealth customers, and quadrupled Hong Kong's medical specialist network to over 900 providers via a Bupa partnership.

Long-Term Care Reinsurance Transaction

• Announced a third LTC reinsurance transaction with Munich Re, an 80% quota share full biometric risk transfer for a standalone LTC block with $3.2 billion in reserves. Pricing includes a modest negative seed, confirming the robustness of internal reserves and assumptions. Inclusive of prior transactions, LTC morbidity risk has been reduced by 24%, significantly improving the overall risk profile. Capital impact is expected to be largely neutral, with annual forgone core earnings of C$30 million in the first year, declining as the block runs off. The company's LTC transformation program already generates over 6% in annualized run-rate claim savings.

• Management expects overall Canada insurance experience to trend to neutral by the end of 2026, though elevated transformational investment expenses will persist through year-end.
• Manulife remains on track to hit its 2027 share repurchase target, with the current 2.5% annual share buyback pace consistent with achieving the 18%+ core ROE medium-term target, no additional capital releases from reinsurance are required to meet this goal.
• The corporate segment full-year 2026 loss is expected to be between C$300 million and C$400 million, with results trending toward the top end of that range.
• Legacy LTC and variable annuity earnings are already comfortably below 10% of total company earnings, a target achieved several years ago, and this new transaction further reduces that share.
• Management reaffirmed commitment to meeting all medium-term financial and strategic targets while continuing to improve the company's overall risk profile.

1. Asia: APE sales increased 21% year-over-year, driven by double-digit growth in Hong Kong, Singapore, and Japan, partially offset by lower sales in mainland China and other markets. Core earnings grew 21% year-over-year to a record level, driven by continued business growth and net favorable impact of prior year basis changes, partially offset by less favorable insurance experience. Revenue contribution from Asia to core earnings was the primary driver of overall company growth.
2. Global Wealth and Asset Management (WAM): Net inflows of $0.4 billion, with record gross flows, driven by strength in institutional business including CQS and Comvest contributions, partially offset by outflows in North American retirement and retail segments. Core earnings grew 9% year-over-year, driven by higher average AUMA and contributions from the Convest acquisition, partially offset by EMPF transition impacts in Hong Kong and higher business growth expenses. Core EBITDA margin expanded 110 basis points year-over-year to 31.2%.
3. Canada: APE sales increased 23% year-over-year, with growth across all lines of business led by large-case group insurance sales and strong participating individual life sales. New business CSM grew 29% year-over-year, while new business value was flat due to lower margins and product mix changes in group benefits. Core earnings declined 10% year-over-year, primarily due to unfavorable claims and expense experience in group insurance and normal claims variability in individual insurance.
4. U.S.: APE sales grew 12% year-over-year, supported by product enhancements and distribution expansion. Core earnings rebounded year-over-year, reflecting improved claims experience in both life and long-term care (LTC), and a lower expected credit loss provision charge, partially offset by lower investment spreads. LTC experience was favorable across both P&L and CSM.

• Unfavorable insurance claims experience in Canada: Group insurance faces adverse morbidity (disability) experience, with roughly one-third of new disability claims coming from longer-duration mental health claims, exacerbated by broader economic weakness and higher unemployment; core earnings in Canada declined 10% year-over-year due to this experience.
• Chinese regulatory and tax enforcement changes for cross-border insurance sales in Hong Kong: Mainland Chinese tax authorities are increasing enforcement of existing tax rules for offshore insurance and investment, which could create short-term headwinds for the cross-border business, which makes up ~10% of total Asia segment sales.
• Global WAM faces continued outflows in North American retirement and retail segments, driven by plan sponsor redemptions and higher member withdrawals from market-appreciated account balances, and active mutual fund redemptions through third-party intermediaries in Canada.
• Alternative asset class valuations and returns continue to be weighed down by market conditions, creating pressure on overall investment results.
• Fee compression is expected for Mandatory Providence Fund management in Singapore, though this is already built into company planning and expected to be manageable.

Q: What impact will new Chinese tax enforcement on offshore insurance policies have on Manulife's Hong Kong business?

A: Manulife Hong Kong's core domestic franchise makes up 75% of year-to-date sales, with cross-border sales from mainland China (MCV) accounting for only 25% of Hong Kong sales. The new actions are enforcement of existing rules, not new tax laws, and could ultimately reduce ambiguity and support long-term business development. The structural trend of mainland customers accessing Hong Kong for product diversification and services remains intact, with tax benefits not a primary driver of this business. Management does not expect sales to go to zero, and any short-term impacts will be manageable.

A: The new LTC transaction uses an innovative structure where only biometric risk is transferred, while Manulife retains asset management of the backing portfolio. This allows Manulife to keep the earnings yield and ongoing capital generation from the assets as the block matures, supporting the strategic goal of sustaining U.S. business scale. On a U.S. NAIC statutory basis, the negative seed is 6-7%, compared to 5% on an IFRS basis.

Q: Does the lack of capital release from this biometric-only LTC transaction mean the share buyback pace will slow, making the 18% ROE target harder to hit?

A: The 2.5% annual share buyback pace in Q2 2026 is consistent with hitting the 18% ROE target even without additional capital releases from reinsurance. While prior transactions generated large capital releases that supported buybacks, those transactions also came with forfeited earnings that had to be offset. This structure preserves ongoing earnings from the retained asset portfolio, so no additional buybacks are needed to offset earnings impacts. Capital generation remains strong, and the company is on track to hit its 2027 targets.

Q: What is driving unfavorable disability claims experience in Canadian group insurance, and why do you expect it to return to neutral by year-end?

A: Adverse experience is an industry-wide trend, correlated with weaker economic conditions and higher unemployment, with one-third of new claims coming from longer-duration mental health claims. Manulife is making targeted investments in early intervention, enhanced treatment access, and specialized case management to improve customer health outcomes and reduce claim durations. The business is annually repricable, so if adverse experience persists, the company will implement appropriate price increases. Modest improvements were already seen in Q2 vs Q1, and management is confident experience will trend to neutral by end-2026.