Manulife Financial Corp (MFC)

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Manulife Financial (MFC)

Q4 2012 Earnings Call

February 07, 2013 2:00 pm ET


Anique Asher

Donald A. Guloien - Chief Executive Officer, President and Director

Stephen Bernard Roder - Chief Financial Officer and Senior Executive Vice President

Paul L. Rooney - Chief Operating Officer, Senior Executive Vice President, Chief Executive Officer of Manulife Canada Ltd. and President of Manulife Canada Ltd.

Cindy L. Forbes - Chief Actuary and Executive Vice President

Robert Allen Cook - Senior Executive Vice President and General Manager of Asia

Scott Sears Hartz - Executive Vice President of General Account Investments

Craig Richard Bromley - Executive Vice President of Japan Operations and General Manager of Japan Operations


Peter D. Routledge - National Bank Financial, Inc., Research Division

Mario Mendonca - Canaccord Genuity, Research Division

Gabriel Dechaine - Crédit Suisse AG, Research Division

Tom MacKinnon - BMO Capital Markets Canada

Joanne A. Smith - Scotiabank Global Banking and Markets, Research Division

Darko Mihelic - Cormark Securities Inc., Research Division

John Aiken - Barclays Capital, Research Division

Michael Goldberg - Desjardins Securities Inc., Research Division

Sumit Malhotra - Macquarie Research



Please be advised that this conference call is being recorded. Good afternoon, and welcome to the Manulife Financial Corporation 4Q '12 and 2012 Earnings Conference Call for Thursday, February 7, 2013. Your host for today will be Ms. Anique Asher. Ms. Asher, please go ahead.

Anique Asher

Thank you, and good afternoon. Welcome to Manulife's conference call to discuss our fourth quarter and full year 2012 financial and operating results.

Today's call will reference our earnings announcement, statistical package and webcast slides, which are available in the Investors Relations section of our website at As in prior quarters, our executives will be making some introductory comments. We will then follow with a question-and-answer session. Available to answer questions about their businesses are the heads of our U.S., Canada, Investments and General Account Investments.

Today's speakers may make forward-looking statements within the meaning of securities legislation. Certain material factors or assumptions are implied in making forward-looking statements, and actual results may differ materially from those expressed or implied.

For additional information about the material factors or assumptions applied and about the important factors that may actual -- that may cause actual results to differ, please consult the slide presentation for this conference call and webcast available on our website, as well as the securities filings referred to in the slide entitled Caution Regarding Forward-Looking Statements.

[Operator Instructions] With that, I would like to turn it over to Donald Guloien, our President and Chief Executive Officer. Donald?

Donald A. Guloien

Thank you, Anique. Good afternoon, everyone, and thank you for joining us today. I'm joined on the call by our CFO, Steve Roder, as well as several members of our senior management team, including our Asia General Manager, Bob Cook; our U.S. General Manager, Craig Bromley; our Canadian General Manager, Marianne Harrison; our Chief Operating Officer, Paul Rooney; our Chief Investment Officer, Warren Thomson; our Executive Vice President, General Account Investments, Scott Hartz; our Chief Actuary, Cindy Forbes; our Chief Risk Officer, Rahim Hirji; and our Treasurer and Head of Investor Relations, Steve Moore.

Let us start the call today with some highlights of the progress that we made on our strategic priorities in 2012. We continued to develop our Asian opportunity to the fullest. And in the past year, we had record insurance sales of $1.4 billion and record wealth sales of $5.7 billion. We expanded our distribution platform across the region, securing and deepening strategically important distribution agreements with key partners in Japan and Indonesia, which contributed to record sales for the year. We became the first foreign-owned life insurer to commence operation in Cambodia. And we achieved strong growth in our professional agency force in several key markets ending the year with a record number of agents of over 53,000, representing an increase of more than 3,000 agents.

We also continued to grow our wealth and asset management businesses in Asia, Canada and the United States. Manulife asset management added significant new institutional mandates totaling over $7.8 billion, and gross fund flows of $33 billion into retail accounts. We ended 2012 with a total of 65, 4- and 5-star Morningstar-rated funds, an increase of 7 funds from 2011. In addition, we ended the year with an all-time record funds under management of $532 billion.

We continue to grow our balanced Canadian franchise. And in 2012, we lead the market in group business sales for most of the year. We set records in Group Benefits, with sales of over $1 billion, Affinity Markets with sales of over $100 million and Manulife Kansas mutual funds, recorded a deposit of $2.1 billion and assets under management of over $20 billion. Manulife Bank reported record-lending assets of $21 billion during 2012, and we expanded our distribution reach of welcoming new advisors, extending existing relationships and enhancing support to our distribution partners.

In the United States, we continued to grow our higher ROE, lower risk business. We achieved record sales in Retirement Plan Services of $6 billion, and mutual fund deposits of $13 billion, which contributed to record funds under management in both businesses of $72 billion and $42 billion, respectively, a total of $114 billion in these 2 businesses alone.

Life insurance sales increased 12% over 2011, largely driven by innovative new product offerings with a more attractive risk-reward profile for our shareholders. And we had significant success in gaining additional state approvals for in-force price increases on our long-term care business, bringing our total now to 43 states.

These successes are the result of both good execution and the considerable investment that we have made in distribution and branding. This morning, we announced our fourth quarter and full year 2012 financial results. Let me share some of the highlights with you.

As you can see on the chart, we've enjoyed a positive progression in our earnings. In 2010, we had a loss of $1.7 billion, a small gain in 2011, and we ended 2012 with net income of $1.7 billion, hopefully, this bodes very well for future years.

The net income of $1.7 billion was achieved despite basis changes of $1.1 billion and goodwill charges of $200 million. Core earnings in 2012 were $2.2 billion despite the increased expenses associated with additional hedging, specific investments in growth initiatives and significant additional strain caused by lower interest rates. And finally, on the top line, we ended 2012 with record sales in both our wealth and our insurance businesses.

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