Manulife Financial Corp (MFC)

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Manulife Financial Corporation (MFC)

Q4 2013 Earnings Conference Call

February 13, 2014, 02:00 PM ET


Anique Asher - Investor Relations

Donald Guloien - President and Chief Executive Officer

Stephen Roder - Senior Executive Vice President and Chief Financial Officer

Robert Cook - Senior Executive Vice President and General Manager, Asia

Marianne Harrison - Senior Executive Vice President and General Manager, Canadian Division

Craig Bromley - Senior Executive Vice President, U.S. Division

Paul Rooney - Chief Operating Officer

Warren Thomson - Senior Executive Vice President and Chief Investment Officer

Scott Hartz - Executive Vice President and General Account Investments

Cindy Forbes - Executive Vice President and Chief Actuary

Rahim Hirji - Executive Vice President and Chief Risk Officer

Steven Moore - Senior Executive Vice President and Treasurer


Robert Sedran - CIBC World Markets

Tom MacKinnon - BMO Capital Markets

Mario Mendonca - TD Securities

Steve Theriault - Bank of America Merrill Lynch

Peter Routledge - National Bank Financial



Good afternoon, and welcome to the Manulife Financial fourth quarter 2013 financial results conference call for Thursday, February 13, 2014. Your host for today will be Ms. Anique Asher. Ms. Asher, please go ahead.

Anique Asher

Thank you, and good afternoon. Welcome to Manulife conference call to discuss our fourth quarter and full year 2013 financial and operating results. Today's call will reference our earnings announcement, statistical package and webcast slides, which are available in the Investor Relations section of our website at As in prior quarters, our executives will be making some remarks. We will then follow with a question-and-answer session.

Today 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 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. We've also included a note to use the slide that sets out the performance on non-GAAP measures used in today's presentation.

When we reach the question-and-answer portion of our conference call, we would ask each participant to adhere to a limit of one or two question. If you have additional questions, please re-queue, and we'll do our best to respond to all questions.

With that, I'd like to turn the call over to Donald Guloien, our President and Chief Executive Officer. Donald?

Donald Guloie

Thank you, Anique. Good afternoon, everyone and thank you for joining us today. I'm joined on the call by our Chief Financial Officer, Steve Roder; as well as several members of our senior management team, including Bob Cook, our Asian General Manager; Marianne Harrison, our Canadian General Manager; Craig Bromley, our U.S. General Manager; Chief Operating Officer, Paul Rooney; Chief Investment Officer, Warren Thomson; our Executive Vice President and General Account Investments, Scott Hartz; our Chief Actuary, Cindy Forbes; and our Chief Risk Officer, Rahim Hirji; and last but least, our Treasurer, Steven Moore. I hope you'll make maximum use of these people in the call today by directing questions to one or more of them.

This morning, we announced our fourth quarter and full year 2013 financial results. They were quite satisfactory. As you can see from the chart, we've enjoyed an impressive trajectory in net income. In 2010, we had a loss of $1.7 billion; in 2011, a small gain; 2012, earnings increased to $1.8 billion; and for full year 2013, a further improvement to $3.1 billion.

While this trajectory is impressive, I wanted to dissuade anyone from applying a straight rule to that graph to extrapolate the growth rate and net income for next year. That is because our net income in 2013 benefited from unusual items, including exceptional investment-related experience of $906 million, which we would not expect to recur at least immediately.

In addition, we realized a $350 million gain on the sale of our Taiwan business, definitely a non-recurring item. These were partially offset by other items, including updates to actuarial models and market-related factors, which netted to a $543 million charge. It is for this reason that we introduced the core earnings metric, as it is a better measure of long-term earnings capacity of our business going forward.

If you look back in terms of history, core earnings were not comparable in 2010, because at that time we did not have hedging in place. But since that time, core earnings have grown nicely, and for the full year 2013 were 16% higher than they were in the previous year. We are very proud of that.

In terms of topline, we ended 2013 with another record year for wealth management sales with contributions from each of our territories and the sub-businesses beneath major territory. Our insurance sales in 2013 were slightly lower than what we would have liked, but they were accompanied by much improved margins leading to higher profit margins overall, better operating earnings and improved new business embedded value.

In terms of capital, we ended the year with an MCCSR ratio of 248%, a 37 point increase over the prior year. We are very pleased with the balanced growth of our business over the last year, our strategy is unfolding into strong operating results and our financial performance shows that we are delivering on our long-term objectives.

In terms of progress on our major growth strategies, in terms of developing our Asian opportunities at fullest, in 2013 we achieved record wealth sales of $8.5 billion, an increase of nearly 60% from the prior year. We had new fund launches, which substantially contributed to wealth sales, and we successfully executed on the Mandatory Provident Fund's Employee Choice Arrangement in Hong Kong, where we now hold the leading position in new cash flows in that region.

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