Manulife Financial Corp. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Strong Results: Delivered record financial and operating results in Q3 2024, including core earnings, APE sales, new business CSM, new business value, and customer Net Promoter Score (NPS).
• Asia and Global WAM Growth: Asia saw broad-based growth in APE sales, new business CSM, and new business value. Global WAM had $5.2 billion net inflows and continued operating leverage.
• Digital Initiatives: Leveraging GenAI with 11 use cases in production, 13 to launch by year-end, and 16 in development. Singapore GenAI sales tool saw a 5% higher repurchase rate pilot.
• Longevity Symposium: Held second symposium in Boston, gathering industry leaders, generating positive feedback with an NPS over 92.
• Share Buybacks: Repurchased 58 million common shares year-to-date, with $2.5 billion benefit since 2021, committed to executing remaining NCIB program.

Segment Performance

• Asia: APE sales increased 64% from the prior year quarter, driving 45% growth in new business CSM and 55% growth in new business value. Core earnings grew 17%.
• Global WAM: Generated $5.2 billion of net inflows with positive flows across all business lines and regions. Core EBITDA margin expanded 90 basis points to 27.8%.
• Canada: APE sales decreased 20% year-over-year, but excluding the large affinity market sale from the prior year, grew 27%. Core earnings grew modestly.
• U.S.: APE sales rebounded due to increased demand for accumulation insurance products from affluent customers. Core earnings decreased 8% year-over-year.

Guidance

• Core EPS Growth: Expecting 10%-12% core EPS growth in medium term, reaffirmed at Investor Day.
• ROE Target: Aiming for 18%-plus ROE. Core ROE improved 0.6 points year-over-year in Q3 2024.
• Digital Benefits: On track to exceed $500 million in digital benefits in 2024, a 2.5x growth from 2023.
• Share Buybacks: Accelerated share buyback pace to fully execute current NCIB program.

Risks

• Actuarial Review Impacts: Annual review of actuarial models and assumptions resulted in a $174 million pre-tax fulfillment cash flows change, with modest net impact on income.
• Policyholder Experience Variability: Potential variability in policyholder experience, such as lapse rates, which can impact P&L.
• Market Volatility: U.S. election and market volatility could impact short-term performance, but underlying business performance expected to remain resilient.

Question and Answer

• Q: Thoughts on PE portfolio outlook and U.S. election impact? A: Trevor Kreel noted PE portfolio expected to improve towards long-term assumptions by mid-2025; Roy Gori stated U.S. election not a major factor due to diversified business.
• Q: Actuarial review impact on U.S. statutory and remittance plans? A: Steve Finch said no immediate negative impact on U.S. remittances; Marc Costantini mentioned ongoing management of legacy portfolio, including U.S. liabilities.
• Q: Asia insurance experience and lapse trends? A: Phil Witherington stated Asia insurance experience within normal variability; Steve Finch noted lapse trends normalized in Vietnam and reviewed assumptions prudently.
• Q: Hong Kong sales sustainability and CSM margin? A: Phil Witherington and Roy Gori discussed sustainable growth in Hong Kong sales with broad-based momentum, noting CSM accretion supports stable earnings; margin decline due to sales mix but strong NBV generation.
• Q: Ambition and M&A plans? A: Roy Gori mentioned pleased with current platform, well-capitalized for M&A but disciplined, focusing on building on transformed platform for sustainable growth.