Manulife Financial Corp. Scotiabank’s 27th Annual Financials Summit

Thank you for hosting us. It is great to be back a year on.

Wow, the ups and downs. It has been an action-packed year. A year ago we were here, I was three months into the role. Reflecting back on what we have achieved since then, one of the milestones was the release of a refreshed enterprise strategy, and that was very deliberate. It's a strategy that is right up to date with what's happening in the external environment, where Manulife is today, and it really emphasizes priorities such as being AI-powered, empowering customer health, wealth, and longevity. So right up to date. A year in from the release of that strategy, we are already seeing the emergence of strong financial and operating results. Just look at this year, for example. Year to date, core EPS up 14%. Year to date, contractual service margin, the value we generate from new insurance sales, up 16%.

This year, we've already returned CAD 2.6 billion of capital to shareholders through dividends and share buybacks. So really strong financial performance. The strategic milestones alongside that have been really important. We announced the entry into the India life insurance market through a joint venture with Mahindra. That's a really important, big strategic milestone. We announced and completed our largest acquisition in a decade with the acquisition of Comvest Credit Partners, and that's already accretive to our earnings and a material contributor to net flows of the organization. More recently, the list could go on, but I'll just give one more example. Last month when we released our second quarter results, we announced our third long-term care transaction, and that was an innovative transaction. It's good for shareholders, it's good for Manulife, and actually a very limited impact on ongoing future earnings. So that's all positive. I think you were asking me to be balanced in my perspective, and what's gone right, what's not gone to expectations.

One area that, in the interest of balance, that I will call out and own, is that relative to where I was a year ago when I sat on this stage, I am less, or we are as an organization, less far down the line on our progress towards 18% plus core ROE than I would like to have been at this stage. Our base scenario is still that we get to ROE of 18% in 2027. But there are certain things, certain headwinds that we had not anticipated when we set that target. We've had some long-term disability experience in our Canada segment.

We've seen a weakening of the Canadian dollar relative to the USD, and we have more capital in USD, so that's increased the denominator. And we've seen some variability in U.S. life experience as well. But to get to 18% over the course of the next 12-18 months, it's reasonable. I believe we can get there. It's a base scenario, and we essentially need Asia and Global Wealth and Asset Management to continue to grow at mid-teens growth rates. We need to see a normalization of disability experience in Canada, and we need to continue our deployment of capital, which share buybacks alongside dividends are important elements of that.

Yeah. We've seen very strong performance in our Asia business, and it's coming from multiple markets, and it's driving strong double-digit earnings growth, actually above 20%. I would expect typically mid-teens for our Asia segment. So that's been very strong. That's been supported by consistent new business growth, again, across multiple markets. The trends in the region, I think, are important in contributing to that growth. When I reflect on the trends, maybe I'll just highlight three. The first is the aging populations of Asia and the impact that that has in driving demand for the products and services that we offer. So driving demand for protection, driving demand for retirement solutions, driving demand for health solutions, wealth management solutions. So that demand is really important, that aging population dynamic.

The second trend that I will call out is the rise of Asia regional financial centers on the world stage. So Hong Kong and Singapore, and the role that they play in global wealth management, in capturing wealth flows is incredible. Actually, just this year, Hong Kong has overtaken Switzerland as the largest cross-border wealth hub in the world. That's an incredible milestone. The third trend that I will highlight that we are seeing across Asia is the emergence of third-party distribution channels more strongly than we have seen before. So we have, as an organization, very well-established channels in proprietary agency, in exclusive bancassurance. We've seen third-party channels become more relevant, and that's built, if you like, a third leg of the stool. That we have balanced distribution across agency, bancassurance, and third-party channels.

That actually creates more opportunity because it provides more access to a wider range of customer segments. So I actually see that as a positive and a strategic opportunity. So they're the key trends that I will highlight. When I think about what's happening in some of the key markets, Hong Kong is doing incredibly well. There's strong domestic demand, and that's the majority of our business in Hong Kong. The strong demand from mainland Chinese visitors to Hong Kong, it's about 25% of our business. That's a stat that we gave on our recent earnings call. But Hong Kong remains a very attractive market because it has become this global financial hub on the world stage. If we think about Japan, we have a big business in Japan. Hugely successful. The Japan outlook has become more positive over the course of the last year.

The macro factors from interest rate, yield curve to equity markets, public policy encouraging the people of Japan to not just hold cash, but invest for the long term. That's favorable to our business. We doubled new business in Japan. You look at our Q2 results, doubled over the course of the past year. Mainland China, an interesting market. Huge potential in mainland China. I referenced earlier the emergence of third-party distribution channels. We have expanded over the course of the past five years from agency distribution channels into non-exclusive bank channels. That's a big opportunity, can create some variability in new business from quarter to quarter, but the long-term trends remain intact. Singapore, really important financial hub in Asia. We're a market leader in Singapore, generate significant value.