C$ unless otherwise stated
TSX/NYSE/PSE: MFC
SEHK:945
Substantive progress made on growth strategies in the fourth quarter of
2013:
-
Developing our Asian opportunity to the fullest: Insurance sales1 in 2013 were below our expectation but momentum improved in the fourth
quarter of 2013 with sales up 20 per cent over the third quarter,
reflecting record quarterly results in Hong Kong and Indonesia, and
double digit growth in Japan; continued strong wealth sales; and
expansion of our wealth management business in Malaysia.
-
Growing our wealth and asset management businesses in Asia, Canada, and
the U.S.: Strong net wealth flows for asset management businesses and funds under
management1 of $599 billion, the 21st consecutive quarter of record funds under management.
-
Continuing to build our balanced Canadian franchise: Record wealth management assets under management; continued strong
growth in our group pension business; sales in Group Benefits declined,
reflecting normal variability in the group insurance market; solid
individual insurance sales, with a focus on products with more
favourable risk profiles; and double digit growth over the fourth
quarter of last year in travel insurance sales reflecting our expanded
distribution footprint.
-
Continuing to grow higher ROE, lower risk U.S. businesses: Strong wealth management sales driven by robust mutual fund sales
growth; Retirement Plan Services sales declined reflecting competitive
pressures and lower industry sales, but sales for the new mid-market
401(k) platform continued to gain traction; insurance sales slowed
reflecting a slowdown in universal life sales as we transition to new
products.
Highlights for the quarter and the year ended December 31, 2013:
-
Net income attributed to shareholders of $1.3 billion in 4Q13 and $3.1
billion in 2013
-
Core earnings1 of $685 million in 4Q13 and $2.6 billion in 2013
-
Wealth sales of $12.2 billion in 4Q13 and $49.7 billion in 2013
-
Insurance sales of $617 million in 4Q13 and $2.8 billion in 2013
-
New business embedded value1 of $316 million in 4Q13 and $1.2 billion in 2013
-
Investment-related experience of $265 million in 4Q13 and $906 million
in 2013
-
MLI's MCCSR ratio of 248 per cent, up 19 points over 3Q13 and 37 points
over year end 2012
-
21st consecutive quarter of record funds under management ending at $599
billion
-
Net income attributed to shareholders in accordance with U.S. GAAP1 of $241 million in 4Q13 and a net loss of $648 million in 2013
__________________________
|
1This item is a non-GAAP measure. See "Performance and Non-GAAP Measures"
below.
|
TORONTO, Feb. 13, 2014 /CNW/ - Manulife Financial Corporation ("MFC")
announced today net income attributed to shareholders for the fourth
quarter of 2013 and the full year of 2013 of $1,297 million and $3,130
million, respectively. This compares to $1,077 million and $1,810
million for the corresponding periods in 2012. Fourth quarter and full
year 2013 diluted earnings per common share ("EPS") were $0.68 and
$1.62, respectively, and return on common shareholders' equity ("ROE")
was 20.2 per cent and 12.8 per cent, respectively.
Core earnings for the fourth quarter of 2013 and the full year of 2013
were $685 million and $2,617 million, respectively. This compares to
$554 million and $2,249 million for the corresponding periods in 2012.
Fourth quarter and full year 2013 diluted core earnings per common
share ("Core EPS")2 were $0.35 and $1.34, respectively, and core return on common
shareholders' equity ("Core ROE")2 was 10.4 per cent and 10.6 per cent, respectively.
Donald Guloien, President and Chief Executive Officer, stated "Our 2013
results show another significant improvement in core earnings and net
income, strong capital, decreased risk and improved return on equity.
Our plan is delivering."
"Our U.S. operation has turned around nicely, and along with our very
strong Asian and Canadian businesses, leads to a very well-balanced
portfolio," added Mr. Guloien.
Mr. Guloien concluded, "Insurance sales were slightly lower than what we
would have liked, but with better margins; wealth sales were simply
outstanding, driving assets under management to the 21st consecutive quarter of growth, to $599 billion."
Steve Roder, Chief Financial Officer, said, "We generated solid
financial results for the fourth quarter and increased our new business
embedded value relative to last quarter and last year. In addition, our
Investment Division continued to deliver solid investment gains
reflecting our high quality portfolio and disciplined approach to
extending credit and other investment activities."
"We ended the quarter with a further strengthened capital position of
248 per cent, a 19 point improvement over the third quarter," added Mr.
Roder.
__________________________
|
2
|
This item is a non-GAAP measure. See "Performance and Non-GAAP Measures"
below.
|
Highlights for the Fourth Quarter of 2013 and Full Year 2013:
-
Reported net income attributed to shareholders of $1.3 billion for the
fourth quarter of 2013 and $3.1 billion for 2013, reflecting a $220
million and $1.3 billion increase, from the respective prior year
periods:
-
Fourth quarter earni
n
gs
included core earnings of $685 million, strong investment-related
experience, a gain on the sale of our Taiwan insurance business and
other one-time net favourable items.
-
Full year 2013 earnings included core earnings of $2,617 million as well
as a number of items excluded from core earnings netting to $513
million. Items excluded from core earnings comprised the same category
of items referenced above, partially offset by changes in actuarial
methods and assumptions and direct market impacts.
-
Generated core earnings of $685 million for the fourth quarter of 2013,
marginally below the third quarter of 2013 and core earnings of $2.6
billion for 2013, up $368 million over 2012:
-
Compared with the third quarter of 2013, core earnings decreased by $19
million. The less favourable impact of tax items and higher legal and
other accruals was mostly offset by improved policyholder experience in
the U.S. and lower net hedging costs.
-
Full year 2013 core earnings increased by $368 million compared with
2012. The increase was primarily attributable to higher fee income
driven by the growth of our wealth management businesses, improved new
business margins on our North American insurance businesses, and lower
amortization of deferred acquisition costs on our variable annuity
business, partially offset by higher expenses.
-
Reported insurance sales of $617 million for the fourth quarter of 2013
and $2.8 billion for 2013, reflecting a 32 per cent and 13 per cent
decline, from the respective prior year periods:
-
Compared with the fourth quarter of 2012, insurance sales decreased 32
per cent. The decrease reflects strong prior year sales in advance of
product changes in Japan and normal variability of sales in Canadian
Group Benefits. As a result, sales in Asia and Canada declined five per
cent and 59 per cent, respectively, and excluding sales in Japan and
Canadian Group Benefits, total insurance sales increased seven per cent
over the fourth quarter of 2012.
-
Full year insurance sales declined by 13 per cent. In Asia, insurance
sales declined 16 per cent with reported growth in most territories
being more than offset by lower sales in Japan as a result of product
changes. In Canada, insurance sales declined 14 per cent driven by
normal variability in our Group Benefits business. John Hancock Life
sales declined six per cent reflecting our actions to reposition our
new business mix to products with increased margins and more favourable
risk profiles.
-
Achieved strong wealth sales of $12.2 billion in the fourth quarter of
2013 and $49.7 billion for 2013, reflecting a 15 per cent and 37 per
cent increase, from the respective prior year periods:
-
Wealth sales exceeded $12 billion in the fourth quarter of 2013, an increase of 15 per cent
compared with the fourth quarter of 2012. Fourth quarter Canadian and U.S. wealth sales reported year-over-year
growth of 24 per cent and 22 per cent, respectively, driven by
continued strong mutual fund sales and a 79 per cent increase in
Canadian Group Retirement Solutions sales. In Asia, wealth sales
declined 18 per cent reflecting strong prior year sales that benefited
from a successful fund launch in Japan and the start of the Hong Kong
Mandatory Provident Fund's "Employee Choice Arrangement" in late 2012.
-
Record wealth sales of $49.7 billion in 2013 increased 37 per cent
compared to 2012. Record wealth sales in Asia increased 57 per cent,
driven by new fund launches, and strong pension sales following the
launch of the Employee Choice Arrangement in Hong Kong. In Canada,
wealth sales rose 21 per cent due to continued strong mutual fund sales
and higher Group Retirement Solutions sales. U.S. Division wealth sales
rose 39 per cent driven by strong mutual fund sales, partly offset by a
decline in pension and annuity sales.
-
Generated strong investment-related experience of $265 million in the fourth quarter of 2013, $50 million of which was included in core
earnings. The favourable investment-related experience was largely related to the
redeployment of government securities into higher yielding assets and
continued excellent credit experience.
-
Strengthened the Minimum Continuing Capital and Surplus Requirements
("MCCSR") ratio for The Manufacturers Life Insurance Company ("MLI") to
248 per cent at December 31, 2013, up by 19 points from the third quarter of 2013. The increase reflects
the contribution from fourth quarter earnings, a reduction in capital
requirements for variable annuity and segregated fund guarantees due to
the strong equity markets, the sale of our Taiwan insurance business
and a $250 million issuance of subordinated debentures.
-
Achieved 21st consecutive quarter of record funds under management ("FUM") of $599
billion as at December 31, 2013, an increase of $68 billion compared with
December 31, 2012.
-
Generated new business embedded value ("NBEV") of $316 million in the
fourth quarter of 2013 and $1.2 billion for 2013, reflecting a 27 per
cent and 16 per cent increase, from the respective prior year periods. The increase in insurance NBEV reflects management actions to improve
margins primarily in the life insurance business in North America and a
more favourable business mix. The improvement in wealth NBEV is largely
driven by higher volumes in our mutual fund business.
-
Reported net income attributed to shareholders under U.S. GAAP of $241
million in the fourth quarter of 2013 and a net loss of $648 million
for 2013. These results are inclusive of accounting losses related to our variable annuity business and macro hedges of $525
million in the fourth quarter and $2,521 million for the full year.
Financial Highlights
|
|
Quarterly Results
|
|
|
Full Year Results
|
C$ millions, unless otherwise stated
Unaudited
|
|
|
4Q 2013
|
|
|
3Q 2013
|
|
(restated)(1)
4Q 2012
|
|
|
|
2013
|
|
(restated)(1)
2012
|
Net income attributed to shareholders
|
|
$
|
1,297
|
|
$
|
1,034
|
|
$
|
1,077
|
|
|
$
|
3,130
|
|
$
|
1,810
|
Preferred share dividends
|
|
|
(34)
|
|
|
(33)
|
|
|
(29)
|
|
|
|
(131)
|
|
|
(112)
|
Common shareholders' net income
|
|
$
|
1,263
|
|
$
|
1,001
|
|
$
|
1,048
|
|
|
$
|
2,999
|
|
$
|
1,698
|
Reconciliation of core earnings to net income
attributed to shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core earnings(2)
|
|
$
|
685
|
|
$
|
704
|
|
$
|
554
|
|
|
$
|
2,617
|
|
$
|
2,249
|
|
Investment-related experience in excess of
amounts included in core earnings
|
|
|
215
|
|
|
491
|
|
|
321
|
|
|
|
706
|
|
|
949
|
Core earnings plus investment-related
experience in excess of amounts included in
core earnings
|
|
$
|
900
|
|
$
|
1,195
|
|
$
|
875
|
|
|
$
|
3,323
|
|
$
|
3,198
|
Other items to reconcile core earnings to net
income attributed to shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct impact of equity markets and interest
rates and variable annuity guarantee
liabilities that are dynamically hedged
|
|
|
(81)
|
|
|
94
|
|
|
82
|
|
|
|
(336)
|
|
|
(582)
|
|
Changes in actuarial methods and
assumptions
|
|
|
(133)
|
|
|
(252)
|
|
|
(87)
|
|
|
|
(489)
|
|
|
(1,081)
|
|
Disposition of Taiwan insurance business (3)
|
|
|
350
|
|
|
|
|
|
|
|
|
|
350
|
|
|
(50)
|
|
Other items(4)
|
|
|
261
|
|
|
(3)
|
|
|
207
|
|
|
|
282
|
|
|
325
|
Net income attributed to shareholders
|
|
$
|
1,297
|
|
$
|
1,034
|
|
$
|
1,077
|
|
|
$
|
3,130
|
|
$
|
1,810
|
Basic earnings per common share (C$)
|
|
$
|
0.69
|
|
$
|
0.54
|
|
$
|
0.57
|
|
|
$
|
1.63
|
|
$
|
0.94
|
Diluted earnings per common share (C$)
|
|
$
|
0.68
|
|
$
|
0.54
|
|
$
|
0.57
|
|
|
$
|
1.62
|
|
$
|
0.92
|
Diluted core earnings per common share (C$)(2)
|
|
$
|
0.35
|
|
$
|
0.36
|
|
$
|
0.28
|
|
|
$
|
1.34
|
|
$
|
1.15
|
Return on common shareholders' equity
("ROE") (%)
|
|
|
20.2%
|
|
|
16.8%
|
|
|
19.2%
|
|
|
|
12.8%
|
|
|
7.8%
|
Core ROE (%)(2)
|
|
|
10.4%
|
|
|
11.3%
|
|
|
9.6%
|
|
|
|
10.6%
|
|
|
9.8%
|
Funds under management (C$ billions)(2)
|
|
$
|
599
|
|
$
|
575
|
|
$
|
531
|
|
|
$
|
599
|
|
$
|
531
|
(1)
|
The 2012 results were restated to reflect the retrospective application
of new IFRS accounting standards effective January 1, 2013. For a
detailed description of the change see our first quarter 2013 report to
shareholders.
|
(2)
|
This item is a non-GAAP measure. See "Performance and Non-GAAP Measures"
below.
|
(3)
|
The $50 million charge in 2012 represents closing adjustments to the
2011 disposition of our Life Retrocession business.
|
(4)
|
The fourth quarter 2013 gain of $261 million includes the impact on the
measurement of policy liabilities of policyholder-approved changes to
the investment objectives of separate accounts that support our
Variable Annuity products in the U.S. and a recapture of a reinsurance
treaty in Asia.
|
SALES AND BUSINESS GROWTH
Asia Division
Robert Cook, Senior Executive Vice President and General Manager, Asia
Division, stated, "The insurance sales momentum we noted in the third
quarter continued in the fourth quarter, with record results in Hong
Kong and Indonesia, up 49 per cent and 48 per cent, respectively, over
the prior quarter, as well as improving momentum in Japan, with sales
up 18 per cent compared to the prior quarter. We are very pleased with
our full year wealth sales results, which grew by 57 per cent over
2012, as new products and expanded distribution contributed to
broad-based growth across most of our markets."
Insurance sales in 4Q13 were US$295 million, a decrease of five per cent compared with
4Q12, and for the full year 2013 were US$1 billion, a decrease of 16
per cent compared with full year 2012. Both 4Q12 and full year 2012
sales included non-recurring items in Japan that are described below.
With the completion of the sale of our Taiwan insurance business in
December we have restated all prior periods to exclude Taiwan's
insurance sales.
-
Japan sales in 4Q13 were US$110 million, a decrease of 28 per cent compared
with 4Q12 primarily due to the non-recurrence of the exceptionally high
level of corporate product sales in 4Q12. Compared with 3Q13, sales
increased 18 per cent, driven by our new corporate product launched in
September. Full year 2013 sales of US$400 million were 36 per cent
lower than 2012 due to the non-recurrence of strong cancer product
sales in the first half of 2012 prior to tax changes and the 4Q12
corporate product sales noted above.
-
Hong Kong sales in 4Q13 of US$88 million increased 35 per cent compared with
4Q12. The increase was due to the success of our annual agency sales
campaign and strong whole life par product sales in advance of
announced price increases. Full year sales in 2013 of US$256 million
were in line with the prior year as the favourable impact of a 12 per
cent increase in the number of professional agents during 2013 was
offset by the higher sales in 2012 related to announced pricing
actions.
-
Indonesia sales in 4Q13 of US$37 million increased 30 per cent compared with 4Q12
driven by sales through Bank Danamon and a successful year end agency
campaign. Full year 2013 sales were US$120 million, an increase of 18
per cent compared with 2012 driven by sales generated by Bank Danamon
which continue to meet our expectations set when we entered the
exclusive relationship.
-
Asia Other sales (Asia excluding Japan, Hong Kong, Indonesia and Taiwan) in 4Q13
of US$61 million decreased 10 per cent from 4Q12. Record sales in the
Philippines and Vietnam were more than offset by competitive pressures
and weakness in agency sales in Singapore. Full year 2013 sales were
US$244 million, an increase of five per cent compared with 2012.
Wealth sales in 4Q13 were US$1.6 billion, 18 per cent lower than 4Q12 sales which
included the launch of our Strategic Income Fund in Japan and the start
in the Hong Kong Mandatory Provident Fund's ("MPF") new Employee Choice
Arrangement. Full year record wealth sales in 2013 were US$8.3 billion,
an increase of 57 per cent compared with 2012.
-
Japan sales in 4Q13 of US$272 million were half of the 4Q12 level, which
included the very successful launch of the Strategic Income Fund. Full
year 2013 sales of US$1.9 billion increased 33 per cent compared with
2012, driven by strong sales of the Strategic Income Fund in the first
half of the year, along with new fund launches in the second half of
the year. Rising U.S. interest rates during the second half of 2013,
and a shift in investor preference from bonds to equities, reduced
demand for the Strategic Income Fund in the second half of the year.
-
Hong Kong sales in 4Q13 of US$282 million decreased 12 per cent compared with
sales in 4Q12 which were boosted by the start in the MPF new Employee
Choice Arrangement. Full year 2013 sales of US$1.1 billion increased 44
per cent compared with 2012, driven by continued momentum of MPF and
mutual fund sales.
-
Indonesia sales in 4Q13 of US$82 million decreased by 78 per cent compared with
4Q12 due to the impact of unfavourable markets on single premium
unit-linked and mutual fund sales. Full year 2013 sales of US$974
million were in line with last year. A significant rise in local
interest rates, a drop in the local equity market and the depreciation
of the Rupiah in the second half of 2013 caused many investors to delay
investment decisions.
-
Asia Other sales (Asia excluding Japan, Hong Kong and Indonesia) in 4Q13 of US$931
million increased 40 per cent compared with 4Q12 as a result of the
successful launch of new bond funds in China and Taiwan. Full year
2013 sales reached a record US$4.3 billion, almost double 2012 sales,
driven by new fund launches in China, higher mutual fund sales in
Taiwan and strong single premium unit-linked product sales in the
Philippines in the first half of the year.
We continue to execute on our growth strategy by expanding agency and
bank channel distribution capacity. Contracted agents were
approximately 57,500 as at December 31, 2013, seven per cent more than
at December 31, 2012, reflecting double digit growth in Hong Kong, the
Philippines, Malaysia and Vietnam. During 2013, we also entered into an
exclusive bancassurance relationship with Alliance Bank in Malaysia and
we completed the acquisition of MAAKL Mutual Bhd, greatly enhancing our
business and presence in Malaysia and complementing our wealth
management growth strategy.
Canadian Division
Marianne Harrison, Senior Executive Vice President and General Manager,
Canadian Division reported, "We made strong progress across all our
diverse businesses in 2013. Record wealth management sales reflected
strong momentum in Manulife Mutual Funds and Group Retirement
Solutions. Group Benefits continued to lead the market in sales in 2013
according to the most recently published industry information. Manulife
Bank responded to significant regulatory changes and ended the year
with record net lending assets despite an overall slowdown in the
residential mortgage market and an aggressive competitive environment.
We continued to drive our desired shift in product mix, reducing the
proportion of sales with guaranteed features in insurance and variable
annuities and we launched our innovative RetirementPlus, the next step
in the evolution of our segregated funds product3 portfolio. We continued to expand our distribution reach through
increased broker-dealer penetration, by adding new advisors and
extending existing relationships, as well as through two strategic
transactions in the mortgage creditor life and travel insurance
businesses."
Individual wealth management 4Q13 sales of $2.7 billion increased 18 per cent compared with 4Q12 and full year
2013 sales were a record $10.8 billion, an increase of 20 per cent
compared with 2012.
-
Manulife Mutual Funds 4Q13 gross sales4 were $1.6 billion, 19 per cent higher than 4Q12 and full year 2013
record gross sales of $6.6 billion were 61 per cent higher than 2012
levels. Record net sales in 2013 and market appreciation drove assets
under management to $27.6 billion at December 31, 2013, an increase of
33 per cent year-over-year, almost double the industry growth rate5. This success reflects our expanded distribution reach and strong fund
performance, leveraging our global asset management expertise across a
diverse global fund platform.
-
Manulife Bank's net lending assets ended 2013 at a record $18.9 billion, nine per cent
higher than year end 2012 and outpacing industry growth6. The impact of an industry-wide slowdown in the residential mortgage
market reduced the growth in new loan volumes. New loan volumes were
$1.0 billion in 4Q13, three per cent lower than 4Q12, and were $4.1
billion for the year, nine per cent lower than 2012.
-
Segregated Fund5 4Q13 sales of $388 million were slightly higher than 4Q12, while full
year sales of $1.5 billion were 28 per cent lower than 2012, reflecting
the evolution of our product strategy. In 4Q13 we introduced Manulife
RetirementPlus, an innovative, flexible retirement savings and income
solution which customers can personalize to meet their retirement
needs. Fixed product 4Q13 sales were $92 million and full year sales were $379 million. The
three per cent and 25 per cent increases from the 2012 comparative
periods, respectively, reflect a more competitive rate positioning.
Individual Insurance 4Q13 annualized premium equivalent basis sales7 were $67 million, 16 per cent higher than 4Q12. Full year 2013 sales
were $248 million, two per cent lower compared with 2012 due to our
actions to reposition to products with more favourable risk profiles.
Single premium 4Q13 sales of $97 million increased 18 per cent from
4Q12 reflecting our expanded footprint in travel insurance. Single
premium sales of $319 million for the year were eight per cent higher
than in 2012.
Group Benefits led the market in sales through the first three quarters of 2013,
according to the most recently published industry information8, reflecting good growth across diverse market segments. Sales volumes
reflected the normal variability of the group market, with sales in
4Q13 of $85 million, significantly below 4Q12, and full year sales of
$845 million, 18 per cent lower than record 2012 levels. Both 2013 and
2012 benefited from strong single premium sales.
Group Retirement Solutions 4Q13 sales were $399 million, an increase of 79 per cent compared with
4Q12 and full year 2013 sales of $1.4 billion, 25 per cent higher than
2012. Successful cross-selling efforts contributed to the strong sales
in both group businesses.
__________________________
|
3
|
Segregated funds products include guarantees. These products are also
referred to as variable annuities.
|
4
|
Gross mutual fund sales in 4Q13 and full year include deposits from
segregated fund sales of $466 million and $1,854 million, respectively.
|
5
|
Based on publicly available information from Investor Economics and the
Investment Funds Institute of Canada as at December 31, 2013.
|
6
|
As per McVay and Associates, The Personal Banking Product Market Share,
November 2013.
|
7
|
This item is a non-GAAP measure. See "Performance and Non-GAAP measures"
below.
|
8
|
Based on quarterly LIMRA industry sales reports as at September 30,
2013.
|
U.S. Division
Craig Bromley, Senior Executive Vice President and General Manager, U.S.
Division stated, "We are extremely pleased with our fourth quarter and
full year results. Robust sales in John Hancock Investments contributed
to record funds under management in the Wealth Management business.
John Hancock Investments had record sales for the full year and is well
positioned for continued success. On the insurance front, we continue
to record strong sales of our repriced, lower risk insurance products
and the integration of our John Hancock Life and Long-Term Care
businesses is largely completed. The integration will expand sales
opportunities and drive operational efficiencies9."
Wealth Management sales in 4Q13 were US$7.1 billion, an increase of 22 per cent compared
with 4Q12. Full year sales in 2013 were US$28.2 billion, an increase of
39 per cent compared with 2012.
-
John Hancock Investments ("JH Investments") sales in 4Q13 were US$5.6 billion and record full
year 2013 sales were US$23.3 billion, increases of 49 per cent and 79
per cent, respectively, over comparative periods in 2012. Improved
sales force productivity, strong focus on key distribution partners and
continued strong product performance drove increases across all
distribution channels. As of December 2013, JH Investments offered 34
Four- or Five-Star Morningstar rated equity and fixed income mutual
funds representing over half of our rated funds and an increase of
eight over 3Q1310. JH Investments redemption rates remained below the industry average,
contributing to its ninth consecutive quarter of positive net sales11. Funds under management reached a record US$60.9 billion at December
31, 2013, a 44 per cent increase from the prior year end.
-
John Hancock Retirement Plan Services sales in 4Q13 were US$1.6 billion and full year 2013 sales were US$4.8
billion, representing a decrease of approximately 20 per cent compared
with the same periods in 2012. Sales were impacted by continued
competitive pressures as well as a slowdown in the industry for both
the small case market and mid-market segments. Sales of TotalCare and
Enterprise continue to gain traction in the 401(k) mid-market segment.
Funds under management reached a record US$82.0 billion as at December
31, 2013, a 15 per cent increase from December 31, 2012.
-
The John Hancock Lifestyle and Target Date funds had assets under management of US$89.7 billion as at December 31, 2013,
a 12 per cent increase over December 31, 2012. As of December 31, 2013
we were the fourth largest manager of assets in the U.S. for Lifestyle
and Target D ate funds offered through retail mutual funds and variable
insurance products12. New deposits in 4Q13 included US$568 million of JH Investments sales
and US$2.2 billion of deposits from our 401(k) products.
Insurance sales were US$137 million in 4Q13, a decrease of 21 per cent compared with
4Q12. Full year 2013 sales were US$563 million, a decrease of six per
cent compared with 2012.
-
John Hancock Life sales in 4Q13 of US$124 million were 24 per cent lower than 4Q12 and
full year sales in 2013 of US$510 million were six per cent below 2012.
The business continued to drive improvements in business mix and
profitability driven by double digit growth of targeted Protection
universal life ("UL") and Indexed UL products in 2013. In 4Q13, we saw
a slowdown in UL sales as we transition to new products.
-
John Hancock Long-Term Care sales in 4Q13 of US$13 million increased by 30 per cent compared with
4Q12, as the competitive landscape in Retail sales continued to
improve. Full year 2013 sales of US$53 million were slightly lower than
2012.
__________________________
|
9
|
See "Caution regarding forward-looking statements" below.
|
10
|
For each fund with at least a 3-year history, Morningstar calculates a
Morningstar Rating based on a Morningstar Risk-Adjusted Return that
accounts for variation in a fund's monthly performance (including
effects of sales charges, loads and redemption fees), placing more
emphasis on downward variations and rewarding consistent performance.
The top 10% of funds in each category, the next 22.5%, 35%, 22.5% and
bottom 10% receive 5, 4, 3, 2 or 1 star, respectively. The Overall
Morningstar Rating for a fund is derived from a weighted average of the
performance associated with its 3-, 5- and 10 year (if applicable)
Morningstar Rating metrics. Past performance is no guarantee of future
results. The overall rating includes the effects of sales charges,
loads and redemption fees, while the load-waived does not. Load-waived
rating for Class A shares should only be considered by investors who
are not subject to a front-end sales charge
|
11
|
Source: Strategic Insight SIMFUND. Redemption rates calculated using
retail long-term open end mutual funds for managers in the
Intermediary-Sold channel. Excludes money market and 529 share classes.
|
12
|
Source: Strategic Insight. Includes Lifestyle and Lifecycle (Target
Date) mutual fund assets and fund-of-funds variable insurance product
assets (variable annuity and variable life).
|
Investment Division
Warren Thomson, Senior Executive Vice President and Chief Investment
Officer, said, "Our strong General Fund investment results continued in
the fourth quarter of 2013 and were largely driven by the redeployment
of government securities into higher yielding corporate and project
finance bonds. In addition, our credit experience continues to
outperform expectations. During 2013, we originated well over $1
billion in alternative long-duration assets, on a net basis, across
various asset classes including real estate, infrastructure, private
equities, and farmland. Our acquisitions continue to be high quality,
good relative value alternative long-duration assets which have
enhanced our risk-adjusted returns and have diversified our portfolio."
Mr. Thomson continued, "Manulife Asset Management experienced
significant growth in 2013 across its global franchise, with external
assets under management increasing by 18 per cent to $243 billion. We
made several strategic additions to our portfolio management teams
including the purchase of MAAKL Holdings Berhad in Malaysia.
Outstanding investment performance continues to differentiate Manulife
Asset Management; with all public asset classes outperforming their
benchmarks on a 1, 3, and 5-year basis. We also announced the
expansion of our third party private asset management business,
providing investors access to Manulife's specialized private asset
investment teams that until now have primarily served its general
fund."
External assets managed by Manulife Asset Management ("MAM") were $243
billion as at December 31, 2013, an increase of $14 billion from
September 30, 2013. Including assets managed on behalf of the General
Account, MAM managed a total of $280 billion in assets as at December
31, 2013. At December 31, 2013, MAM had a total of 70 Four- and
Five-Star Morningstar rated funds, an increase of 10 funds since
September 30, 2013.
CORPORATE ITEMS
In a separate news release today, the Company announced that the Board
of Directors approved a quarterly shareholders' dividend of $[0.13] per
share on the common shares of the Company, payable on and after March
19, 2014 to shareholders of record at the close of business on February
26, 2014.
The Board of Directors approved that, in respect of the Company's March
19, 2014 common share dividend payment date, the Company will issue
common shares in connection with the reinvestment of dividends and
optional cash purchases pursuant to the Company's Canadian Dividend
Reinvestment and Share Purchase Plan and its U.S. Dividend Reinvestment
and Share Purchase Plan.
AWARDS & RECOGNITION
In Canada, Manulife was named a Greater Toronto Top Employer for the third year in
a row. The award recognizes employers in the Greater Toronto area that
lead their industries in offering exceptional places to work. The
Women's Executive Network named two of our executives, Jacqui Allard,
Head of Operations, Investments, and Sue Reibel, Senior Vice President,
Canadian Group Business Development, among its 2013 Most Powerful
Women, Corporate Executive category award winners. The award
acknowledges excellence in management, corporate performance, community
service, vision and leadership.
In Hong Kong, Manulife was designated as "Company For Financial Planning Excellence
of the Year" for the seventh year running, in the insurance category at
the SCMP/IFPHK Financial Planner Awards 2013.
In China, Manulife-Sinochem received the "2013 Professional Insurance Service
Award" from the 2013 Shanghai Insurance Industry Annual Appraisal held
by Money Weekly.
In Vietnam, Manulife Vietnam was honoured for the second time with the
"Certificate of Merit" by the Ministry of Finance for its outstanding
contribution in building and developing the Vietnamese insurance
market.
Notes:
Manulife Financial Corporation will host a Fourth Quarter Earnings
Results Conference Call at 2:00 p.m. ET on February 13, 2014. For local
and international locations, please call 416-340-8018 and toll free in
North America please call 1-866-225-0198. Please call in ten minutes
before the call starts. You will be required to provide your name and
organization to the operator. A replay of this call will be available
by 6:00 p.m. ET on February 13, 2014 through February 27, 2014 by
calling 905-694-9451 or 1-800-408-3053 (passcode: 6718073).
The conference call will also be webcast through Manulife Financial's
website at 2:00 p.m. ET on February 13, 2014. You may access the
webcast at: www.manulife.com/quarterlyreports. An archived version of the webcast will be available at 4:30 p.m. ET on
the website at the same URL as above.
The Fourth Quarter 2013 Statistical Information Package is also
available on the Manulife Financial website at: www.manulife.com/quarterlyreports. The document may be downloaded before the webcast begins.
MANAGEMENT'S DISCUSSION AND ANALYSIS
This Management's Discussion and Analysis ("MD&A") is current as of
February 13, 2014, unless otherwise noted. This MD&A should be read in
conjunction with the MD&A and audited consolidated financial statements
contained in our 2012 Annual Report.
For further information relating to our risk management practices and
risk factors affecting the Company, see "Risk Factors" in our most
recent Annual Information Form, "Risk Management and Risk Factors" and
"Critical Accounting and Actuarial Policies" in the MD&A in our 2012
Annual Report, and the "Risk Management" note to the consolidated
financial statements in our most recent annual and interim reports.
In this MD&A, the terms "Company", "Manulife Financial" and "we" mean
Manulife Financial Corporation ("MFC") and its subsidiaries.
Contents
|
|
|
A
|
OVERVIEW
|
D
|
RISK MANAGEMENT AND RISK FACTORS UPDATE
|
1.
|
Fourth quarter highlights
|
1.
|
Regulatory, actuarial and accounting risks
|
2.
|
Full year highlights
|
2.
|
Variable annuity and segregated fund guarantees
|
|
|
3.
|
Caution related to sensitivities
|
B
|
FINANCIAL HIGHLIGHTS
|
4.
|
Publicly traded equity performance risk
|
1.
|
Fourth quarter earnings analysis
|
5.
|
Interest rate and spread risk
|
2.
|
Full year earnings analysis
|
|
|
3.
|
Premiums and deposits
|
E
|
ACCOUNTING MATTERS AND CONTROLS
|
4.
|
Funds under management
|
1.
|
Critical accounting and actuarial policies
|
5.
|
Capital
|
2.
|
Sensitivity of policy liabilities to updates to assumptions
|
6.
|
Impact of fair value accounting
|
3.
|
Accounting and reporting changes
|
7.
|
U.S. GAAP results
|
|
|
|
|
|
|
C
|
PERFORMANCE BY DIVISION
|
F
|
OTHER
|
1.
|
Asia
|
1.
|
Performance and Non-GAAP measures
|
2.
|
Canadian
|
2.
|
Key planning assumptions and uncertainties
|
3.
|
U.S.
|
3.
|
Caution regarding forward-looking statements
|
4.
|
Corporate and Other
|
|
|
|
|
|
|
A OVERVIEW
A1 Fourth quarter highlights
Manulife reported fourth quarter 2013 net income attributed to
shareholders of $1.3 billion and core earnings13 of $685 million. Net income attributed to shareholders increased $220 million compared with the fourth quarter of 2012, of
which $131 million was driven by higher core earnings and $89 million
related to other items.
The $131 million increase in core earnings was driven by higher fee
income as a result of growth in our wealth management businesses,
increased new business margins in our North American insurance
businesses, lower hedging costs and net modestly favourable currency
impacts, partially offset by higher legal and variable compensation
accruals. Core earnings in the fourth quarters of both 2013 and 2012
included favourable policy related experience and favourable tax
related items.
Items excluded from core earnings in the fourth quarter of 2013 netted
to a gain of $612 million and included $215 million of favourable
investment-related experience (in excess of the $50 million included in
core earnings), a $350 million gain on the sale of our Taiwan insurance
business, and $261 million related to policyholder-approved changes to
the investment objectives of separate accounts that support our
variable annuity products in the U.S., as well as a recapture of a
reinsurance treaty in Asia. These items were partially offset by an $81
million net charge related to the direct impact of equity markets and
interest rates and variable annuity guarantee liabilities that are
dynamically hedged, and $133 million related to changes in actuarial
methods and assumptions of which $69 million resulted from our review
of our modeling of future tax cash flows for our U.S. Variable Annuity
business and the remainder from other modeling refinements. Items
excluded from core earnings in the fourth quarter of 2012 netted to a
gain of $523 million.
The Minimum Continuing Capital and Surplus Requirements ("MCCSR") ratio for The Manufacturers Life Insurance Company ("MLI") closed the year at
248 per cent, an increase of 19 points compared with the third quarter
of 2013. The increase reflects the contribution from fourth quarter
earnings, a reduction in capital requirements for variable annuity and
segregated fund guarantees due to the strong equity markets, the sale
of our Taiwan insurance business and a $250 million issuance of
subordinated debentures.
Insurance sales13 of $617 million in the fourth quarter of 2013 decreased 32 per cent14 compared with the fourth quarter of 2012. While we reported record
quarterly sales in Hong Kong and Indonesia, overall sales were lower
due to the high level of sales in Japan in the fourth quarter of 2012
in advance of product changes and normal variability of sales in
Canadian Group Benefits. As a result, sales in Asia and Canada declined
five per cent and 59 per cent, respectively. In the U.S., insurance
sales decreased 21 per cent reflecting our actions to increase margins.
Wealth sales exceeded $12 billion in the fourth quarter of 2013, an increase of 15 per cent
compared with the fourth quarter of 2012. In Asia, fourth quarter
wealth sales exceeded US$1.5 billion, a decline of 18 per cent from
sales in the fourth quarter of 2012 which benefited from a successful
fund launch in Japan and the start of Hong Kong Mandatory Provident
Fund's "Employee Choice Arrangement". Fourth quarter Canadian and U.S.
wealth sales reported growth of 24 per cent and 22 per cent,
respectively, driven by continued strong mutual fund sales and also
included a 79 per cent increase in Canadian Group Retirement Solutions
sales.
__________________________
|
13
|
This item is a non-GAAP measure. See "Performance and Non-GAAP Measures"
below.
|
14
|
Growth (declines) in sales, premiums and deposits and funds under
management are stated on a constant currency basis. Constant currency
basis is a non-GAAP measure. See "Performance and Non-GAAP Measures"
below.
|
A2 Full year highlights
Manulife reported net income attributed to shareholders of $3,130
million and core earnings of $2,617 million in 2013. Net income attributed to shareholders increased $1,320 million compared with 2012, of which $368 million was
driven by higher core earnings and $952 million related to items
excluded from core earnings.
The $368 million increase in core earnings was driven by higher fee
income as a result of growth in our wealth management businesses,
increased new business margins in our North American insurance
businesses and lower amortization of deferred acquisition costs on our
closed blocks of Variable Annuity business, partially offset by higher
expenses. The increase in expenses related to higher legal and variable
compensation accruals. While we reported overall policy experience
losses in both years of about the same amount, there was significantly
improved claims experience in the U.S. in 2013 offset by the one-time
gains reported in 2012 related to specific run-off accident and health
reinsurance business settlements and the release of excess Property and
Casualty Reinsurance provisions related to 2011 events. We also
reported net favourable tax items in both periods of about equal
amounts.
The net amount of items excluded from core earnings in 2013 was a gain
of $513 million compared to a charge of $439 million in 2012. This
$952 million improvement was driven by a $592 million reduction in
charges related to changes in actuarial methods and assumptions (2013 -
$489 million charge, 2012 - $1,081 million charge), and a $350 million
gain on the sale of our Taiwan insurance business. While
investment-related experience was strong in both years, the $706
million gain reported in 2013 (in excess of the $200 million of
investment gains included in core earnings) was $243 million lower than
in 2012. This decrease was offset by $246 million of lower charges
related to the direct impact of equity markets and interest rates and
variable annuity guarantee liabilities that are dynamically hedged.
Other items excluded from core earnings netted to a gain of $282
million in 2013 and $275 million in 2012. The 2013 amount mostly
related to policyholder-approved changes to the investment objectives
of separate accounts that support our Variable Annuity products in the
U.S. and a recapture of a reinsurance treaty in Asia. The 2012 amount
primarily related to in-force product changes, the recapture of a
reinsurance treaty in Canada and tax items, partially offset by a $200
million goodwill impairment charge.
As noted above, investment-related experience totaled $906 million in
2013 and was $243 million lower than in 2012. The investment-related
experience gains are a combination of reported investment experience as
well as the impact of investing activities on the measurement of our
policy liabilities. The investment-related experience in 2013
included: $516 million primarily related to the impact of investing
activities (both fixed income and alternative long-duration assets) on
the measurement of our policy liabilities; $228 million related to
asset allocation activities that enhanced surplus liquidity and
resulted in higher yielding assets in the respective liability
segments; and $162 million due to favourable credit experience relative
to our long-term assumptions. The investment-related experience in 2012
included: $1,117 million primarily related to the impact of investing
activities (both fixed income and alternative long-duration assets) on
the measurement of our policy liabilities; and $32 million due to
favourable credit experience relative to our long-term assumptions (see
also section B6 Impact of fair value accounting below).
Insurance sales of $2.8 billion in 2013 declined by 13 per cent compared with 2012. In
Asia, insurance sales declined by 16 per cent with the year-over-year
growth reported in most territories being offset by lower sales as a
result of product changes in Japan. In Canada, insurance sales declined
14 per cent driven by normal variability in our Group Benefits
business. JH Life sales declined six per cent reflecting our actions to
reposition our new business mix to products with increased margins and
more favourable risk profiles.
Record wealth sales of $49.7 billion in 2013, increased 37 per cent compared with 2012.
Record wealth sales in Asia increased 57 per cent driven by new fund
launches and strong pension sales following the launch of Employee
Choice Arrangement in Hong Kong. In Canada, wealth sales rose 21 per
cent due to continued strong mutual fund sales and higher pension
sales. U.S. Division wealth sales rose 39 per cent driven by strong
mutual fund sales, partly offset by a decline in pension and annuity
sales.
Our Efficiency and Effectiveness ("E&E") initiative, announced November 2012, is aimed at leveraging our global
scale and capabilities to achieve operational excellence throughout the
organization. In 2013, we achieved pre-tax run rate savings of
approximately $200 million related to operations, information services,
procurement, workplace transformation, as well as organizational
design. Our goal is to achieve pre-tax run rate savings of $400 million
in 201615.
__________________________
|
15
|
See "Caution regarding forward-looking statements" below.
|
B FINANCIAL HIGHLIGHTS
|
|
Quarterly Results
|
|
|
Full Year Results
|
C$ millions, unless otherwise stated
Unaudited
|
|
|
4Q 2013
|
|
|
3Q 2013
|
|
(restated)(1)
4Q 2012
|
|
|
|
2013
|
|
(restated)(1)
2012
|
Net income attributed to shareholders
|
|
$
|
1,297
|
|
$
|
1,034
|
|
$
|
1,077
|
|
|
$
|
3,130
|
|
$
|
1,810
|
Preferred share dividends
|
|
|
(34)
|
|
|
(33)
|
|
|
(29)
|
|
|
|
(131)
|
|
|
(112)
|
Common shareholders' net income
|
|
$
|
1,263
|
|
$
|
1,001
|
|
$
|
1,048
|
|
|
$
|
2,999
|
|
$
|
1,698
|
Reconciliation of core earnings to net income
attributed to shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core earnings(2)
|
|
$
|
685
|
|
$
|
704
|
|
$
|
554
|
|
|
$
|
2,617
|
|
$
|
2,249
|
Investment-related experience in excess of
amounts included in core earnings
|
|
|
215
|
|
|
491
|
|
|
321
|
|
|
|
706
|
|
|
949
|
Core earnings plus investment-related
experience in excess of amounts included
in core earnings
|
|
$
|
900
|
|
$
|
1,195
|
|
$
|
875
|
|
|
$
|
3,323
|
|
$
|
3,198
|
Other items to reconcile core earnings to net
income attributed to shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct impact of equity markets and interest
rates and variable annuity guarantee
liabilities that are dynamically hedged
|
|
|
(81)
|
|
|
94
|
|
|
82
|
|
|
|
(336)
|
|
|
(582)
|
|
Changes in actuarial methods and
assumptions
|
|
|
(133)
|
|
|
(252)
|
|
|
(87)
|
|
|
|
(489)
|
|
|
(1,081)
|
|
Disposition of Taiwan insurance business(3)
|
|
|
350
|
|
|
-
|
|
|
-
|
|
|
|
350
|
|
|
(50)
|
|
Other items(4)
|
|
|
261
|
|
|
(3)
|
|
|
207
|
|
|
|
282
|
|
|
325
|
Net income attributed to shareholders
|
|
$
|
1,297
|
|
$
|
1,034
|
|
$
|
1,077
|
|
|
$
|
3,130
|
|
$
|
1,810
|
Basic earnings per common share (C$)
|
|
$
|
0.69
|
|
$
|
0.54
|
|
$
|
0.57
|
|
|
$
|
1.63
|
|
$
|
0.94
|
Diluted earnings per common share (C$)
|
|
$
|
0.68
|
|
$
|
0.54
|
|
$
|
0.57
|
|
|
$
|
1.62
|
|
$
|
0.92
|
Diluted core earnings per common share (C$)(2)
|
|
$
|
0.35
|
|
$
|
0.36
|
|
$
|
0.28
|
|
|
$
|
1.34
|
|
$
|
1.15
|
Return on common shareholders' equity ("ROE") (%)
|
|
|
20.2%
|
|
|
16.8%
|
|
|
19.2%
|
|
|
|
12.8%
|
|
|
7.8%
|
Core ROE (%)(2)
|
|
|
10.4%
|
|
|
11.3%
|
|
|
9.6%
|
|
|
|
10.6%
|
|
|
9.8%
|
U.S. GAAP net income (loss) attributed to
shareholders(2)
|
|
$
|
241
|
|
$
|
148
|
|
$
|
237
|
|
|
$
|
(648)
|
|
$
|
2,557
|
Sales(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance products(5)
|
|
$
|
617
|
|
$
|
601
|
|
$
|
922
|
|
|
$
|
2,757
|
|
$
|
3,279
|
|
Wealth products
|
|
$
|
12,241
|
|
$
|
11,299
|
|
$
|
10,439
|
|
|
$
|
49,681
|
|
$
|
35,940
|
Premiums and deposits(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance products
|
|
$
|
6,169
|
|
$
|
6,057
|
|
$
|
6,629
|
|
|
$
|
24,549
|
|
$
|
24,221
|
|
Wealth products
|
|
$
|
15,367
|
|
$
|
14,645
|
|
$
|
17,499
|
|
|
$
|
63,701
|
|
$
|
51,280
|
Funds under management (C$ billions)(2)
|
|
$
|
599
|
|
$
|
575
|
|
$
|
531
|
|
|
$
|
599
|
|
$
|
531
|
Capital (C$ billions)(2)
|
|
$
|
33.5
|
|
$
|
31.1
|
|
$
|
29.2
|
|
|
$
|
33.5
|
|
$
|
29.2
|
MLI's MCCSR ratio
|
|
|
248%
|
|
|
229%
|
|
|
211%
|
|
|
|
248%
|
|
|
211%
|
(1)
|
The 2012 results were restated to reflect the retrospective application
of new IFRS accounting standards effective January 1, 2013. For a
detailed description of the change see our first quarter 2013 report to
shareholders.
|
(2)
|
This item is a non-GAAP measure. See "Performance and Non-GAAP Measures"
below.
|
(3)
|
The $50 million charge in 2012 represents closing adjustments to the
2011 disposition of our Life Retrocession business.
|
(4)
|
For a more detailed description see Section B1 below.
|
(5)
|
Insurance sales have been adjusted to exclude Taiwan for all periods.
|
B1 Fourth quarter earnings analysis
The table below reconciles the fourth quarter 2013 core earnings of $685
million to the reported net income attributed to shareholders of $1,297
million.
C$ millions, unaudited
|
|
|
4Q 2013
|
|
|
3Q 2013
|
|
(restated)(1)
4Q 2012
|
Core earnings(2)
|
|
|
|
|
|
|
|
|
|
Asia Division(3)
|
|
$
|
227
|
|
$
|
242
|
|
$
|
180
|
Canadian Division(3)
|
|
|
233
|
|
|
268
|
|
|
233
|
U.S. Division(3)
|
|
|
366
|
|
|
361
|
|
|
293
|
Corporate and Other (excluding expected cost of macro hedges and core
investment gains)
|
|
|
(138)
|
|
|
(135)
|
|
|
(62)
|
Expected cost of macro hedges(3),(4)
|
|
|
(53)
|
|
|
(84)
|
|
|
(140)
|
Investment-related experience in core earnings(5)
|
|
|
50
|
|
|
52
|
|
|
50
|
Core earnings
|
|
$
|
685
|
|
$
|
704
|
|
$
|
554
|
Investment-related experience in excess of amounts included in core
earnings(5)
|
|
|
215
|
|
|
491
|
|
|
321
|
Core earnings plus investment-related experience in excess of amounts
included in core earnings
|
|
$
|
900
|
|
$
|
1,195
|
|
$
|
875
|
|
|
|
|
|
|
|
|
|
|
Direct impact of equity markets and interest rates and variable annuity
guarantee liabilities that are dynamically hedged (see table below)(5),(6)
|
|
|
(81)
|
|
|
94
|
|
|
82
|
Changes in actuarial methods and assumptions(7)
|
|
|
(133)
|
|
|
(252)
|
|
|
(87)
|
Disposition of Taiwan insurance business
|
|
|
350
|
|
|
-
|
|
|
-
|
Impact of in-force product changes and recapture of a reinsurance treaty(8)
|
|
|
261
|
|
|
-
|
|
|
-
|
Restructuring charge related to organizational design
|
|
|
-
|
|
|
-
|
|
|
(57)
|
Material and exceptional tax related items
|
|
|
-
|
|
|
(3)
|
|
|
264
|
Net income attributed to shareholders
|
|
$
|
1,297
|
|
$
|
1,034
|
|
$
|
1,077
|
(1)
|
The 2012 results were restated to reflect the retrospective application
of new IFRS accounting standards effective January 1, 2013. For a
detailed description of the change see our first quarter 2013 report to
shareholders.
|
(2)
|
This item is a non-GAAP measure. See "Performance and Non-GAAP Measures"
below.
|
(3)
|
The fourth quarter 2013 decrease in expected macro hedge costs compared
with the third quarter 2013 was partially offset by an increase in
dynamic hedging costs in the U.S. Division core earnings in the fourth
quarter and the fourth quarter 2013 decrease compared with the fourth
quarter 2012 was partially offset by increases in dynamic hedging costs
included in core earnings across all divisions.
|
(4)
|
The fourth quarter 2013 net loss from macro equity hedges was $285
million and consisted of a $53 million charge related to the estimated
expected cost of the macro equity hedges relative to our long-term
valuation assumptions and a charge of $232 million because actual
markets outperformed our valuation assumptions (included in direct
impact of equity markets and interest rates below).
|
(5)
|
As outlined under "Critical Accounting and Actuarial Policies" below,
net insurance contract liabilities under IFRS for Canadian insurers are
determined using the Canadian Asset Liability Method ("CALM"). Under
CALM, the measurement of policy liabilities includes estimates
regarding future expected investment income on assets supporting the
policies. Experience gains and losses are reported when current period
activity differs from what was assumed in the policy liabilities at the
beginning of the period. These gains and losses can relate to both the
investment returns earned in the period, as well as to the change in
our policy liabilities driven by the impact of current period investing
activities on future expected investment income assumptions. The direct
impact of markets is separately reported.
|
(6)
|
The direct impact of equity markets and interest rates is relative to
our policy liability valuation assumptions and includes changes to
interest rate assumptions, including a quarterly URR update for North
America, starting in the first quarter of 2013, and for Japan, starting
in the third quarter of 2013, as well as experience gains and losses on
derivatives associated with our macro equity hedges. We also include
gains and losses on the sale of available-for-sale ("AFS") bonds and
derivative positions in the surplus segment. See table below for
components of this item.
|
(7)
|
The fourth quarter 2013 charge of $133 million is primarily attributable
to the impact of method and modeling refinements of which $69 million
resulted from our review of our modeling of future tax cash flows for
our U.S. Variable Annuity business and the remainder from other
modeling refinements.
|
(8)
|
The fourth quarter 2013 gain of $261 million includes the impact on the
measurement of policy liabilities of policyholder-approved changes to
the investment objectives of separate accounts that support our
variable annuity products in the U.S. and a recapture of a reinsurance
treaty in Asia.
|
The gain (charge) related to the direct impact of equity markets and
interest rates and variable annuity guarantee liabilities that are
dynamically hedged in the table above is attributable to:
C$ millions, unaudited
|
|
|
4Q 2013
|
|
|
3Q 2013
|
|
|
4Q 2012
|
Variable annuity guarantee liabilities that are dynamically hedged(1)
|
|
$
|
101
|
|
$
|
160
|
|
$
|
100
|
Variable annuity guarantee liabilities that are not dynamically hedged
|
|
|
155
|
|
|
306
|
|
|
556
|
General fund equity investments supporting policy liabilities and on fee
income(2)
|
|
|
81
|
|
|
85
|
|
|
48
|
Macro equity hedges relative to expected costs(3)
|
|
|
(232)
|
|
|
(245)
|
|
|
(292)
|
Direct impact of equity markets and variable annuity guarantees that are
dynamically hedged(4)
|
|
$
|
105
|
|
$
|
306
|
|
$
|
412
|
Fixed income reinvestment rates assumed in the valuation of policy
liabilities(5)
|
|
|
(105)
|
|
|
(77)
|
|
|
(290)
|
Sale of AFS bonds and derivative positions in the Corporate and Other
segment
|
|
|
(55)
|
|
|
(72)
|
|
|
(40)
|
Charges due to lower fixed income URR assumptions used in the valuation
of
policy liabilities(6)
|
|
|
(26)
|
|
|
(63)
|
|
|
-
|
Direct impact of equity markets and interest rates and variable annuity
guarantees that are dynamically hedged
|
|
$
|
(81)
|
|
$
|
94
|
|
$
|
82
|
Direct impact of equity markets and interest rates
|
|
$
|
(182)
|
|
$
|
(66)
|
|
$
|
(18)
|
(1)
|
Our variable annuity guarantee dynamic hedging strategy is not designed
to completely offset the sensitivity of policy liabilities to all risks
associated with the guarantees embedded in these products. The gain in
the fourth quarter of 2013 was primarily due to our equity fund results
outperforming indices, and a gain on the release of provision for
adverse deviation associated with more favourable equity markets. See
"Risk Management and Risk Factors" in the MD&A in our 2012 Annual
Report.
|
(2)
|
The impact on general fund equity investments supporting policy
liabilities and on fee income includes the capitalized impact on fees
for variable universal life policies.
|
(3)
|
As described in the previous table, we incurred a charge of $232 million
because actual markets outperformed our valuation assumptions.
|
(4)
|
In the fourth quarter of 2013, gross equity exposure gains of $1,017
million were partially offset by gross equity hedging charges of $232
million from macro hedge experience and charges of $680 million from
dynamic hedging experience which resulted in a gain of $105 million.
|
(5)
|
The charge in the fourth quarter of 2013 for fixed income reinvestment
assumptions was driven by a decrease in corporate spreads in North
America.
|
(6)
|
Beginning with the first quarter of 2013 for North America and the third
quarter of 2013 for Japan, the URR impact is calculated on a quarterly
basis, whereas in 2012 it was calculated on an annual basis in the
second quarter.
|
B2 Full year earnings analysis
The table below reconciles the full year 2013 core earnings of $2,617
million to the reported net income attributed to shareholders of $3,130
million.
C$ millions, unaudited
|
|
|
|
|
|
|
For the years ended December 31,
|
|
|
2013
|
|
(restated)(1)
2012
|
Core earnings(2)
|
|
|
|
|
|
|
Asia Division(3)
|
|
$
|
921
|
|
$
|
963
|
Canadian Division(3)
|
|
|
905
|
|
|
835
|
U.S. Division(3)
|
|
|
1,510
|
|
|
1,085
|
Corporate and Other (excluding expected cost of macro hedges and core
investment
gains)
|
|
|
(506)
|
|
|
(345)
|
Expected cost of macro hedges(3),(4)
|
|
|
(413)
|
|
|
(489)
|
Investment-related experience in core earnings(5)
|
|
|
200
|
|
|
200
|
Total Core earnings
|
|
$
|
2,617
|
|
$
|
2,249
|
Investment-related experience in excess of amounts included in core
investment
gains(5)
|
|
|
706
|
|
|
949
|
Core earnings plus investment-related experience in excess of amounts
included in core earnings
|
|
$
|
3,323
|
|
$
|
3,198
|
Changes in actuarial methods and assumptions(6)
|
|
|
(489)
|
|
|
(1,081)
|
Direct impact of equity markets and interest rates and variable annuity
guarantee
liabilities that are dynamically hedged(5),(7) (see table below)
|
|
|
(336)
|
|
|
(582)
|
Disposition of Taiwan insurance business(8)
|
|
|
350
|
|
|
(50)
|
Impact of in-force product changes and recaptures of reinsurance
treaties(9)
|
|
|
261
|
|
|
260
|
Material and exceptional tax related items(10)
|
|
|
47
|
|
|
322
|
Goodwill impairment charge
|
|
|
-
|
|
|
(200)
|
Restructuring charge related to organizational design(11)
|
|
|
(26)
|
|
|
(57)
|
Net income attributed to shareholders
|
|
$
|
3,130
|
|
$
|
1,810
|
(1)
|
The 2012 results were restated to reflect the retrospective application
of new IFRS accounting standards effective January 1, 2013. For a
detailed description of the change see our first quarter 2013 report to
shareholders.
|
(2)
|
This item is a non-GAAP measure. See "Performance and Non-GAAP Measures"
below.
|
(3)
|
The decreases in expected macro hedge cost in 2013 compared with 2012
was partially offset by an increase in dynamic hedging costs included
in Asia, Canada and U.S. divisional core earnings.
|
(4)
|
The 2013 net loss from macro equity hedges was $1,851 million and
consisted of a $413 million charge related to the estimated expected
cost of the macro equity hedges relative to our long-term valuation
assumptions and a charge of $1,438 million because actual markets
outperformed our valuation assumptions (included in the direct impact
of equity markets and interest rates below).
|
(5)
|
As outlined under Critical Accounting and Actuarial Policies, net
insurance contract liabilities under IFRS for Canadian insurers are
determined using the Canadian Asset Liability Method ("CALM"). Under
CALM, the measurement of policy liabilities includes estimates
regarding future expected investment income on assets supporting the
policies. Experience gains and losses are reported when current period
activity differs from what was assumed in the policy liabilities at the
beginning of the period. These gains and losses can relate to both the
investment returns earned in the period, as well as to the change in
our policy liabilities driven by the impact of current period investing
activities on future expected investment income assumptions. The direct
impact of markets is reported separately.
|
(6)
|
Of the $489 million charge for change in actuarial methods and
assumptions in 2013, $252 million was reported in the third quarter as
part of the comprehensive annual review of valuation assumptions. Over
the full year, charges due to policyholder lapse and behavioural
assumption changes, refinements related to the projection of asset and
liability cash flows, and the John Hancock Long-Term Care triennial
review, were partially offset by benefits due to the update to the
market based parameters used in the stochastic valuation of our
segregated fund business.
|
(7)
|
The direct impact of equity markets and interest rates is relative to
our policy liability valuation assumptions and includes changes to
interest rate assumptions, as well as experience gains and losses on
derivatives associated with our macro equity hedges. We also include
gains and losses on the sale of available-for-sale ("AFS") bonds and
derivative positions in the surplus segment. See table below for
components of this item.
|
(8)
|
The $50 million charge in 2012 represents closing adjustments to the
2011 disposition of our Life Retrocession business.
|
(9)
|
The 2013 gain of $261 million includes the impact on the measurement of
policy liabilities of policyholder-approved changes to the investment
objectives of separate accounts that support our variable annuity
products in the U.S. as well as a recapture of a reinsurance treaty in
Asia. The $260 million gain in 2012 is largely related to a recapture
of a reinsurance treaty in Canada and in-force segregated funds product
changes in Canada.
|
(10)
|
The 2013 tax item primarily reflects the impact on our deferred tax
asset position of Canadian provincial tax rate changes. Included in the
2012 tax items are $264 million of material and exceptional U.S. tax
items and $58 million for changes to tax rates in Japan.
|
(11)
|
The restructuring charge is related to severance, pension and consulting
costs for the Company's Organizational Design Project, which was
completed in the second quarter of 2013.
|
The gain (loss) related to the direct impact of equity markets and
interest rates and variable annuity guarantee liabilities that are
dynamically hedged included in the table above is attributable to:
C$ millions, unaudited
|
|
|
|
|
|
|
For the years ended December 31,
|
|
|
2013
|
|
|
2012
|
Variable annuity guarantee liabilities that are dynamically hedged(1)
|
|
$
|
392
|
|
$
|
176
|
Variable annuity guarantee liabilities that are not dynamically hedged
|
|
|
1,293
|
|
|
1,078
|
General fund equity investments supporting policy liabilities and on fee
income(2)
|
|
|
211
|
|
|
108
|
Macro equity hedges relative to expected costs(3)
|
|
|
(1,438)
|
|
|
(511)
|
Direct impact of equity markets and variable annuity guarantees that
were dynamically
hedged(4)
|
|
$
|
458
|
|
$
|
851
|
Fixed income reinvestment rates assumed in the valuation of policy
liabilities(5)
|
|
|
(276)
|
|
|
(740)
|
Sale of AFS bonds and derivative positions in the Corporate and Other
segment
|
|
|
(262)
|
|
|
(16)
|
Charges due to lower fixed income URR assumptions used in the valuation
of policy
liabilities(6)
|
|
|
(256)
|
|
|
(677)
|
Direct impact of equity markets and interest rates and variable annuity
guarantees that
are dynamically hedged
|
|
$
|
(336)
|
|
$
|
(582)
|
Direct impact of equity markets and interest rates
|
|
$
|
(728)
|
|
$
|
(758)
|
(1)
|
Our variable annuity guarantee dynamic hedging strategy is not designed
to completely offset the sensitivity of policy liabilities to all risks
associated with the guarantees embedded in these products. The gain in
2013 was primarily due to our equity fund results outperforming
indices, and a gain on the release of provision for adverse deviation
associated with more favourable equity markets. See "Risk Management
and Risk Factors" in the MD&A in our 2012 Annual Report.
|
(2)
|
The impact on general fund equity investments supporting policy
liabilities includes the capitalized impact on fees for variable
universal life policies.
|
(3)
|
As described in the previous table, we incurred a charge of $1,438
million because actual markets outperformed our valuation assumptions.
|
(4)
|
In 2013, gross equity exposure gains of $4,357 million were partially
offset by gross equity hedging charges of $1,438 million from macro
hedge experience and charges of $2,461 million from dynamic hedging
experience which resulted in a gain of $458 million.
|
(5)
|
The charge in 2013 for fixed income reinvestment assumptions was driven
by the increase in swap spreads, and the decrease in corporate spreads,
partially offset by the increase in risk free rates.
|
(6)
|
Beginning with the first quarter of 2013 in North America and the third
quarter of 2013 in Japan, the URR impact is calculated on a quarterly
basis, whereas in 2012 it was calculated on an annual basis in the
second quarter.
|
B3 Premiums and deposits16
Premiums and deposits for insurance products were $6.2 billion in the
fourth quarter of 2013, a decrease of seven per cent on a constant
currency basis compared with the fourth quarter of 2012. For the full
year, insurance premiums and deposits were $24.5 billion, up two per
cent on a constant currency basis over 2012.
Premiums and deposits for wealth products were $15.4 billion in the
fourth quarter of 2013, a decrease of $2 billion, or 11 per cent on a
constant currency basis, compared with the fourth quarter of 2012. The
fourth quarter of 2012 included a $4.6 billion fixed income mandate
received by MAM, reflecting the variability in awarding of
institutional mandates. For the full year, wealth premiums and deposits
exceeded $63 billion, an increase of 24 per cent on a constant currency
basis over 2012.
B4 Funds under management16
Funds under management as at December 31, 2013 were a record $599
billion, an increase of $68 billion, or eight per cent on a constant
currency basis, compared with December 31, 2012. The increase was
largely attributable to growth in our asset management business and
favourable equity markets, partially offset by the mark-to-market
impact of the increase in interest rates on fixed income investments.
__________________________
|
16
|
This item is a non-GAAP measure. See "Performance and Non-GAAP Measures"
below.
|
B5 Capital17
MFC's total capital as at December 31, 2013 was $33.5 billion, an increase of $2.4 billion
from September 30, 2013 and $4.3 billion from December 31, 2012. The
increase from December 31, 2012 was primarily driven by net earnings of
$3.1 billion, the $1 billion impact from favourable currency movements
on translation of foreign operations and net capital issued of $0.7
billion, partially offset by cash dividends of $0.8 billion over the
period. As noted in section A1 above, MLI's MCCSR ratio closed the
quarter at 248 per cent compared with 229 per cent at the end of the
third quarter of 2013 and 211 per cent at December 31, 2012.
B6 Impact of fair value accounting
Fair value accounting policies affect the measurement of both our assets
and our liabilities. The impact on the measurement of both assets and
liabilities of investment activities and market movements are reported
as experience gains (losses) on investments, the direct impact of
equity markets and interest rates and variable annuity guarantees that
are dynamically hedged, each of which impacts net income (see sections
A1 and A2 above for discussion of fourth quarter and full year
experience).
Net realized and unrealized losses reported in investment income were
$17.6 billion for full year 2013 and $2.8 billion for fourth quarter
2013. These amounts were driven by the mark-to-market impact of the
increase in interest rates on our bond and fixed income derivative
holdings and the increase in equity markets on our equity futures in
our macro and dynamic hedging program as well as other items.
As outlined in the "Critical Accounting and Actuarial Policies" in our
2012 Annual Report MD&A, net insurance contract liabilities under IFRS
are determined using CALM, as required by the Canadian Institute of
Actuaries. The measurement of policy liabilities includes the estimated
value of future policyholder benefits and settlement obligations to be
paid over the term remaining on in-force policies, including the costs
of servicing the policies, reduced by the future expected policy
revenues and future expected investment income on assets supporting the
policies. Investment returns are projected using the current asset
portfolios and projected reinvestment strategies. Experience gains and
losses are reported when current period activity differs from what was
assumed in the policy liabilities at the beginning of the period. We
classify gains and losses by assumption type. For example, current
period investing activities that increase (decrease) the future
expected investment income on assets supporting the policies will
result in an investment-related experience gain (loss).
B7 U.S. GAAP results
Net income attributed to shareholders in accordance with U.S. GAAP17 for the fourth quarter of 2013 was $241 million, compared with net
income attributed to shareholders of $1,297 million under IFRS. The net
income in accordance with U.S. GAAP in the fourth quarter of 2013
included $525 million in charges with respect to our variable annuity
business and macro hedges and $2,521 million for the full year. Under
U.S. GAAP not all of the variable annuity business is accounted for on
a mark-to-market basis and therefore, when markets are favourable, the
losses on dynamic and macro hedges exceed the reduction in variable
annuity policy liabilities and other equity exposures.
As we are no longer reconciling our financial results under IFRS and
U.S. GAAP within our consolidated financial statements, net income
attributed to shareholders in accordance with U.S. GAAP is considered a
non-GAAP financial measure. The reconciliation of the major differences
between net income attributed to shareholders in accordance with IFRS
and the net income attributed to shareholders in accordance with U.S.
GAAP for the fourth quarter of 2013 follows, with major differences
expanded upon below:
C$ millions, unaudited
|
|
Quarterly Results
|
|
|
Full Year Results
|
For the periods ended December 31,
|
|
|
2013
|
|
|
2012(1)
|
|
|
|
2013
|
|
|
2012(1)
|
Net income attributed to shareholders in accordance with IFRS
|
|
$
|
1,297
|
|
$
|
1,077
|
|
|
$
|
3,130
|
|
$
|
1,810
|
Key earnings differences:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable annuity guarantee liabilities
|
|
$
|
(496)
|
|
$
|
(668)
|
|
|
$
|
(2,355)
|
|
$
|
(1,225)
|
Impact of mark-to-market accounting and investing activities
on investment income and policy liabilities
|
|
|
(265)
|
|
|
(93)
|
|
|
|
(1,276)
|
|
|
1,179
|
New business differences including acquisition costs
|
|
|
(252)
|
|
|
(161)
|
|
|
|
(858)
|
|
|
(650)
|
Changes in actuarial methods and assumptions
|
|
|
200
|
|
|
(40)
|
|
|
|
506
|
|
|
492
|
Goodwill impairment charge
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
200
|
Other differences
|
|
|
(243)
|
|
|
122
|
|
|
|
205
|
|
|
751
|
Total earnings differences
|
|
$
|
(1,056)
|
|
$
|
(840)
|
|
|
$
|
(3,778)
|
|
$
|
747
|
Net income (loss) attributed to shareholders in
accordance with U.S. GAAP
|
|
$
|
241
|
|
$
|
237
|
|
|
$
|
(648)
|
|
$
|
2,557
|
(1)
|
The 2012 IFRS results were restated to reflect the retrospective
application of new IFRS accounting standards effective January 1, 2013.
For a detailed description of the change see our first quarter 2013
report to shareholders.
|
__________________________
|
17
|
This item is a non-GAAP measure. See "Performance and Non-GAAP
Measures" below.
|
Accounting for variable annuity guarantee liabilities
IFRS follows a predominantly "mark-to-market" accounting approach to
measure variable annuity guarantee liabilities while U.S. GAAP only
uses "mark-to-market" accounting for certain benefit guarantees. The
U.S. GAAP accounting results in an accounting mismatch between the
hedge assets supporting the dynamically hedged guarantees and the
guarantees not accounted for on a mark-to-market basis. Another
difference is that U.S. GAAP reflects the Company's own credit standing
in the measurement of the liability. In the fourth quarter of 2013, we
reported a net charge of $240 million (2012 - $12 million) in our total
variable annuity businesses under U.S. GAAP compared with a gain of
$256 million under IFRS (2012 - $656 million). Under both accounting
bases we reported charges on our macro hedging program of $285 million
in the fourth quarter of 2013 (2012 - $432 million).
Investment income and policy liabilities
Under IFRS, accumulated unrealized gains and losses arising from fixed
income investments and interest rate derivatives supporting policy
liabilities are largely offset in the valuation of the policy
liabilities. The fourth quarter 2013 IFRS impacts of fixed income
reinvestment assumptions, general fund equity investments, fixed income
and alternative long-duration asset investing totaled a net gain of
$160 million (2012 - $89 million) compared with U.S. GAAP net realized
losses and other investment-related losses of $105 million (2012 - $4
million).
Differences in the treatment of acquisition costs and other new business
items
Acquisition costs that are related to and vary with the production of
new business are explicitly deferred and amortized under U.S. GAAP but
are recognized as an implicit reduction in insurance liabilities along
with other new business gains and losses under IFRS.
Changes in actuarial methods and assumptions
The charge recognized under IFRS from changes in actuarial methods and
assumptions of $133 million in the fourth quarter of 2013 (2012 - $87
million) compared to a gain of $67 million (2012 - charge of $127
million) on a U.S. GAAP basis.
Total equity in accordance with U.S. GAAP18 as at December 31, 2013 was approximately $8 billion higher than under
IFRS. Of this difference, approximately $6 billion was attributable to
the higher cumulative net income on a U.S. GAAP basis. The remaining
difference was primarily attributable to the treatment of unrealized
gains on fixed income investments and derivatives in a cash flow
hedging relationship which are reported in equity under U.S. GAAP, but
where the fixed income investments and interest rate derivatives are
supporting policy liabilities, these accumulated unrealized gains are
largely offset in the valuation of the policy liabilities under IFRS.
The majority of the difference in equity between the two accounting
bases as at December 31, 2013 arose from our U.S. businesses.
A reconciliation of the major differences in total equity is as follows:
C$ millions, unaudited
As at December 31
|
|
|
2013
|
|
(restated)(1)
2012
|
Total equity in accordance with IFRS
|
|
$
|
29,033
|
|
$
|
25,159
|
Differences in shareholders' retained earnings and participating
policyholders' equity
|
|
|
5,947
|
|
|
9,715
|
Differences in accumulated other comprehensive income attributed to:
|
|
|
|
|
|
|
|
(i) Pension and other post-employment plans
|
|
|
(80)
|
|
|
(47)
|
|
(ii) AFS securities and other
|
|
|
2,231
|
|
|
5,670
|
|
(iii) Cash flow hedges
|
|
|
1,224
|
|
|
2,575
|
|
(iv) Translation of net foreign operations(2)
|
|
|
(1,055)
|
|
|
(1,457)
|
Differences in share capital, contributed surplus and non-controlling
interests
|
|
|
136
|
|
|
240
|
Total equity in accordance with U.S. GAAP
|
|
$
|
37,436
|
|
$
|
41,855
|
(1)
|
The 2012 IFRS amounts were restated to reflect the retrospective
application of new IFRS accounting standards effective January 1, 2013.
For a detailed description of the change see our first quarter 2013
report to shareholders.
|
(2)
|
Reflects the net difference in the currency translation account after
the reset to zero through retained earnings upon adoption of IFRS at
January 1, 2010.
|
__________________________
|
18
|
This item is a non-GAAP measure. See "Performance and Non-GAAP Measures"
below.
|
C PERFORMANCE BY DIVISION
C1 Asia Division
($ millions, unless otherwise stated)
|
|
|
Quarterly results
|
|
Full year results
|
Canadian dollars
|
|
|
4Q 2013
|
|
|
3Q 2013
|
|
|
4Q 2012
|
|
|
2013
|
|
|
2012
|
Net income attributed to shareholders(1)
|
|
$
|
725
|
|
$
|
480
|
|
$
|
682
|
|
$
|
2,519
|
|
$
|
1,969
|
Core earnings(1)
|
|
|
227
|
|
|
242
|
|
|
180
|
|
|
921
|
|
|
963
|
Premiums and deposits
|
|
|
3,680
|
|
|
3,218
|
|
|
4,403
|
|
|
16,504
|
|
|
13,461
|
Funds under management (billions)
|
|
|
76.6
|
|
|
80.1
|
|
|
77.7
|
|
|
76.6
|
|
|
77.7
|
U.S. dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributed to shareholders
|
|
$
|
690
|
|
$
|
463
|
|
$
|
689
|
|
$
|
2,451
|
|
$
|
1,979
|
Core earnings
|
|
|
216
|
|
|
233
|
|
|
182
|
|
|
893
|
|
|
963
|
Premiums and deposits
|
|
|
3,509
|
|
|
3,099
|
|
|
4,441
|
|
|
16,062
|
|
|
13,477
|
Funds under management (billions)
|
|
|
72.0
|
|
|
77.9
|
|
|
78.1
|
|
|
72.0
|
|
|
78.1
|
(1)
|
See "Performance and Non-GAAP Measures" for a reconciliation between
IFRS net income attributed to shareholders and core earnings.
|
Asia Division's fourth quarter 2013 net income attributed to
shareholders was US$690 million compared with US$689 million for the fourth quarter
of 2012. The fourth quarter of 2013 included a US$334 million gain on
the sale of our Taiwan insurance business and a gain on the recapture
of a reinsurance treaty, while fourth quarter of 2012 included higher
earnings from the direct impact of equity markets and interest rates
and other investment-related items. Core earnings in the fourth quarter
of 2013 increased US$34 million compared with the fourth quarter of
2012, reflecting the growth of in-force business and improved new
business margins, partly offset by higher dynamic hedging costs,
additional tax provisions and a US$25 million currency impact.
Full year 2013 net income attributed to shareholders was US$2,451
million, an increase of US$472 million compared with US$1,979 million
for 2012. The increase was primarily driven by the gains on the sale of
our Taiwan insurance business, the recapture of a reinsurance treaty in
Hong Kong and the direct impact of equity markets and interest rates
and other investment-related items, partially offset by a US$70 million
decrease in core earnings, primarily related to changes in currency
rates. On a currency neutral basis, the favourable impact on core
earnings from the growth in in-force business was more than offset by
higher dynamic hedging costs and the non-recurrence of high new
business margins reported in the first half of 2012 in Japan. Sales of
these high margin products significantly declined as a result of tax
changes.
Premiums and deposits for the fourth quarter of 2013 were US$3.5 billion, a decrease of 13
per cent on a constant currency basis, compared with the fourth quarter
of 2012. Premiums and deposits for insurance products of US$1.6 billion
decreased 10 per cent as recurring premiums from a growing in-force
base were more than offset by the non-recurrence of the exceptionally
high level of corporate product sales prior to pricing actions in the
fourth quarter of 2012. Wealth management premiums and deposits of
US$1.9 billion decreased 15 per cent, as the fourth quarter of 2012
included the launch of our Strategic Income Fund in Japan and a very
strong start in the Mandatory Provident Fund's new Employee Choice
Arrangement.
Funds under management as at December 31, 2013 were US$72.0 billion, an increase of one per
cent on a constant currency basis compared with December 31, 2012. Net
policyholder cash inflows of US$4.8 billion and favourable investment
returns in the last twelve months were mostly offset by the sale of our
Taiwan insurance business.
C2 Canadian Division
($ millions, unless otherwise stated)
|
|
|
Quarterly results
|
|
|
Full year results
|
Canadian dollars
|
|
|
4Q 2013
|
|
|
3Q 2013
|
|
|
4Q 2012
|
|
|
2013
|
|
|
2012
|
Net income attributed to shareholders(1)
|
|
$
|
373
|
|
$
|
414
|
|
$
|
251
|
|
$
|
828
|
|
$
|
1,169
|
Core earnings(1)
|
|
|
233
|
|
|
268
|
|
|
233
|
|
|
905
|
|
|
835
|
Premiums and deposits
|
|
|
5,275
|
|
|
4,901
|
|
|
4,668
|
|
|
21,172
|
|
|
18,119
|
Funds under management (billions)
|
|
|
145.2
|
|
|
138.8
|
|
|
133.2
|
|
|
145.2
|
|
|
133.2
|
(1)
|
See "Performance and Non-GAAP Measures" for a reconciliation between
IFRS net income attributed to shareholders and core earnings.
|
Canadian Division's fourth quarter 2013 net income attributed to
shareholders of $373 million increased $122 million compared with the fourth quarter
of 2012. Market and investment-related experience increased by $122
million and core earnings of $233 million for the fourth quarter of
2013 was unchanged from the fourth quarter of 2012. Increases in core
earnings driven by growth of in-force business and higher new business
margins were offset by unfavourable policyholder experience and the
fourth quarter of 2012 benefited from the release of tax provisions on
the closure of prior years' tax filings.
Full year 2013 net income attributed to shareholders of $828 million
decreased $341 million compared with 2012. While core earnings
increased by $70 million, items excluded from core earnings decreased
by $411 million. Increases in core earnings were driven by growth of
in-force business, including higher fee income on higher assets under
management; higher new business margins, due to price increases and
higher interest rates; and improvements in operational efficiency.
These increases were partially offset by unfavourable policyholder
experience and a lower release of tax provisions related to the closure
of prior years' tax filings. In 2013, a net charge of $74 million (2012
- net gain of $75 million) due to market and investment-related
experience was excluded from core earnings. In 2012, a gain of $259
million related to the recapture of a reinsurance treaty and in-force
segregated funds product changes was included in net income but
excluded from core earnings.
Premiums and deposits in the fourth quarter of 2013 were $5.3 billion, 13 per cent higher
than fourth quarter 2012 levels. The increase was driven by strong
growth in Manulife Mutual Funds and Group Retirement Solutions.
Funds under management of $145.2 billion as at December 31, 2013 grew by $12.0 billion, or
nine per cent, from December 31, 2012 driven by growth in our wealth
management businesses.
C3 U.S. Division
($ millions, unless otherwise stated)
|
|
Quarterly results
|
|
Full year results
|
Canadian dollars
|
|
|
4Q 2013
|
|
|
3Q 2013
|
|
(restated)(1)
4Q 2012
|
|
|
2013
|
|
(restated)(1)
2012
|
Net income attributed to shareholders(2)
|
|
$
|
825
|
|
$
|
928
|
|
$
|
726
|
|
$
|
2,908
|
|
$
|
1,919
|
Core earnings(2)
|
|
|
366
|
|
|
361
|
|
|
293
|
|
|
1,510
|
|
|
1,085
|
Premiums and deposits
|
|
|
11,608
|
|
|
11,473
|
|
|
9,661
|
|
|
46,519
|
|
|
35,944
|
Funds under management (billions)
|
|
|
340.4
|
|
|
319.9
|
|
|
292.7
|
|
|
340.4
|
|
|
292.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributed to shareholders
|
|
$
|
787
|
|
$
|
894
|
|
$
|
733
|
|
$
|
2,820
|
|
$
|
1,926
|
Core earnings
|
|
|
349
|
|
|
348
|
|
|
297
|
|
|
1,469
|
|
|
1,088
|
Premiums and deposits
|
|
|
11,061
|
|
|
11,046
|
|
|
9,743
|
|
|
45,186
|
|
|
35,967
|
Funds under management (billions)
|
|
|
320.1
|
|
|
311.0
|
|
|
294.2
|
|
|
320.1
|
|
|
294.2
|
(1)
|
The 2012 results were restated to reflect the retrospective application
of new IFRS accounting standards effective January 1, 2013. For a
detailed description of the change see our first quarter 2013 report to
shareholders.
|
(2)
|
See "Performance and Non-GAAP Measures" for a reconciliation between
IFRS net income attributed to shareholders and core earnings.
|
U.S. Division's fourth quarter 2013 net income attributed to
shareholders of US$787 million and fourth quarter 2013 core earnings of US$349
million both increased approximately US$50 million compared with the
corresponding period in 2012. The increase in core earnings was driven
by higher insurance new business margins, lower amortization of
variable annuity deferred acquisition costs, improved policyholder
experience primarily in JH Life Insurance and higher fee income from
higher average assets under management, partially offset by costs
associated with the hedging of additional in-force variable annuity
guaranteed value. In addition, core earnings in the fourth quarter of
2012 benefited from the favourable impact of changes in assumptions
related to uncertain tax positions. While the total of items excluded
from core earnings was similar in both periods, the fourth quarter of
2013 items included a gain resulting from policyholder-approved changes
to the investment objectives of separate accounts that support our
Variable Annuity products and favourable investment-related experience,
and the items in Q4 2012 were primarily favourable investment-related
experience and favourable tax related items.
Full year 2013 net income attributed to shareholders of US$2,820 million
increased US$894 million compared with 2012 and core earnings of
US$1,469 million increased by US$381 million. Contributing to the
increase in core earnings were: higher insurance new business margins
resulting from product design actions, price increases and business
mix; lower amortization of variable annuity deferred acquisition costs;
improved claims experience primarily in JH Life Insurance; higher fee
income from growth in our assets under management; and the favourable
impact of changes related to uncertain tax positions; partially offset
by costs associated with dynamically hedging additional in-force
variable annuity guaranteed value. Items reconciling core earnings to
net income in 2013 include favourable market and investment-related
experience of US$1,167 million and a one-time gain of US$184 million
resulting from policyholder-approved changes to the investment
objectives of separate accounts that support our Variable Annuity
products. These items are discussed in section A1 above. In 2012, the
net reconciling items were US$513 million lower and included US$1,152
million of favourable investment-related experience as well as tax
related and other items of US$173 million, partially offset by the
unfavourable impact of equity markets and interest rates of US$487
million.
Premiums and deposits for the fourth quarter of 2013 were US$11.1 billion, an increase of 14
per cent from the fourth quarter of 2012. The increase was primarily
driven by higher mutual fund sales partially offset by lower sales of
401(k) plans.
Funds under management as at December 31, 2013 were a record US$320.1 billion, up nine per
cent from December 31, 2012. The increase was due to positive
investment returns and strong net mutual fund sales in JH Investments
partially offset by surrender and benefit payments in John Hancock
Annuities.
C4 Corporate and Other
($ millions, unless otherwise stated)
|
|
Quarterly Results
|
|
Full year results
|
Canadian dollars
|
|
|
4Q 2013
|
|
|
3Q 2013
|
|
(restated)(1)
4Q 2012
|
|
|
2013
|
|
(restated)(1)
2012
|
Net loss attributed to shareholders(2)
|
|
$
|
(626)
|
|
$
|
(788)
|
|
$
|
(582)
|
|
$
|
(3,125)
|
|
$
|
(3,247)
|
Core losses (excluding macro hedges and
core investment gains)(2)
|
|
$
|
(138)
|
|
$
|
(135)
|
|
$
|
(62)
|
|
$
|
(506)
|
|
$
|
(345)
|
Expected cost of macro hedges
|
|
|
(53)
|
|
|
(84)
|
|
|
(140)
|
|
|
(413)
|
|
|
(489)
|
Investment-related experience included in
core earnings
|
|
|
50
|
|
|
52
|
|
|
50
|
|
|
200
|
|
|
200
|
Total core losses
|
|
$
|
(141)
|
|
$
|
(167)
|
|
$
|
(152)
|
|
$
|
(719)
|
|
$
|
(634)
|
Premiums and deposits
|
|
$
|
974
|
|
$
|
1,110
|
|
$
|
5,396
|
|
$
|
4,056
|
|
$
|
7,977
|
Funds under management (billions)
|
|
|
36.7
|
|
|
35.8
|
|
|
27.6
|
|
|
36.7
|
|
|
27.6
|
(1)
|
The 2012 results were restated to reflect the retrospective application
of new IFRS accounting standards effective January 1, 2013. For a
detailed description of the change see our first quarter 2013 report to
shareholders.
|
(2)
|
See "Performance and Non-GAAP Measures" for a reconciliation between
IFRS net income attributed to shareholders and core earnings.
|
Corporate and Other is composed of: investment performance on assets backing capital, net of amounts
allocated to operating divisions and financing costs; Investment
Division's external asset management business; Property and Casualty
("P&C") Reinsurance business; as well as run-off reinsurance operations
including variable annuities and accident and health.
For segment reporting purposes, the impact of updates to actuarial
assumptions, settlement costs for macro equity hedges and other
non-operating items are included in this segment's earnings.
Corporate and Other reported a net loss attributed to shareholders of $626 million for the fourth quarter of 2013 compared to a net loss
of $582 million for the fourth quarter of 2012. Core losses were $141
million in the fourth quarter of 2013 compared with $152 million in the
fourth quarter of 2012 and $485 million of charges were excluded from
core earnings in 2013 (2012 - $430 million).
The $11 million change in core losses in 2013 as compared to the fourth
quarter 2012 was driven by an $87 million reduction in expected macro
hedging costs, the release of P&C Reinsurance claims provisions in 2012
and higher expenses in 2013. The $55 million change in items excluded
from core earnings was due to a number of items: $232 million of net
experience losses on macro hedges (2012 - $292 million); a charge of
$133 million for changes in actuarial methods and assumptions (2012 -
$87 million); $55 million of realized losses on AFS bonds and related
interest rate swaps (2012 - $40 million); and $65 million of other
charges including investment losses largely due to the impacts of
interest rate movements and the total company offset of $50 million
included in core investment-related experience (2012 - $11 million).
Corporate and Other reported a full year net loss attributed to
shareholders of $3,125 million in 2013 compared to a net loss of $3,247
million in 2012. Core losses were $719 million in 2013 compared with
$634 million in 2012 and both years included $200 million of favourable
total company investment-related experience that are reported in core
earnings. Charges excluded from core losses declined by $207 million
from $2,613 million in 2012 to $2,406 million in 2013.
The $85 million increase in core losses in 2013 as compared with 2012
relates to two gains reported in 2012: a release of excess P&C
Reinsurance provisions related to the 2011 Japan earthquake and tsunami
and commutation gains related to our run-off accident and health
reinsurance business. In addition, the reduction in expected macro
hedging costs in 2013 compared with 2012 was mostly offset by higher
expenses and tax related items. The $207 million decrease in charges
excluded from core earnings was driven by $592 million in lower charges
related to changes in actuarial methods and assumptions and the
non-recurrence of a $200 million goodwill impairment charge in 2012,
partially offset by higher charges of $557 million for the direct
impact of equity markets and interest rates and $28 million of other
items. The direct impact of equity markets and interest rates includes
the impact of the macro hedging program and realized gains and losses
on AFS bonds. In 2012, the category also included the impact of lower
fixed income URR assumptions used in the valuation of policy
liabilities (starting in 2013 the URR assumptions were updated
quarterly and reported in the operating segments).
Premiums and deposits for the fourth quarter of 2013 of $974 million decreased from $5,396
million in the fourth quarter of 2012, when Manulife Asset Management
was awarded a substantial institutional fixed income investment
mandate.
Funds under management of $36.7 billion as at December 31, 2013 (December 31, 2012 - $27.6
billion) included assets managed by Manulife Asset Management on behalf
of institutional clients of $32.5 billion (2012 - $28.8 billion) and
the Company's own funds of $4.2 billion (2012 - $(1.2) billion). The
increase in the Company's own funds primarily relates to the adjustment
made in the Corporate and Other Division to reclassify net derivative
positions from invested assets to other assets and other liabilities
and was partially offset by tax payments in the U.S. and an increase in
assets allocated to the operating divisions.
D RISK MANAGEMENT AND RISK FACTORS UPDATE
This section provides an update to our risk management practices and
risk factors outlined in the MD&A in our 2012 Annual Report.
D1 Regulatory, actuarial and accounting risks
In December 2013, the Canadian Actuarial Standards Board ("ASB") issued
its Exposure Draft updating the Standards of Practice related to
economic reinvestment assumptions used in the valuation of policy
liabilities. The new standard is expected to be effective in the fourth
quarter of 2014. We do not anticipate the impact on net income in the
quarter of implementation will be significant. However, the actual
impact will vary based on the level of prevailing interest rates at the
time of implementation, changes to the Exposure Draft between now and
the effective date of the new Standards, or changes to interpretation
of the revised Standards. In addition, the new standard will impact our
net income sensitivities to changes in interest rates. The impact on
our sensitivities could be positive or negative and the direction will
be influenced by the approach we take to modeling interest rates under
the new standard as well as any risk management actions taken. It
should be noted that although sensitivities may change, the nature of
the risks related to the business are unchanged19.
The Canadian Institute of Actuaries is also expected to publish guidance
on calibration criteria for fixed income funds with respect to the
valuation of segregated fund guarantees, which we believe will be
effective in 2014. Once effective, the new calibration criteria will
apply to the determination of segregated fund guarantee actuarial
liabilities and required capital and may result in a reduction in net
income and MLI's MCCSR ratio.
In the fall of 2013 the International Association of Insurance
Supervisors ("IAIS") committed to the completion of several capital
initiatives in the next few years that will apply to select or all
global insurance groups. These include Basic Capital Requirements, a
special Higher Loss Absorbency capital surcharge on select activities,
and International Capital Standards. It is not yet known how the
proposals could affect the Company's capital requirements and
competitive position.
__________________________
|
19
|
See "Caution regarding forward-looking statements" below.
|
D2 Variable annuity and segregated fund guarantees
As outlined in the MD&A in our 2012 Annual Report, guarantees on
variable products and segregated funds may include one or more of
death, maturity, income and withdrawal guarantees. Variable annuity and
segregated fund guarantees are contingent and only payable upon the
occurrence of the relevant event, if fund values at that time are below
guaranteed values. Depending on future equity market levels,
liabilities on current in-force business would be due primarily in the
period from 2015 to 2038.
We seek to mitigate a portion of the risks embedded in our retained
(i.e. net of reinsurance) variable annuity and segregated fund
guarantee business through the combination of our dynamic and macro
hedging strategies (see section D4 "Publicly traded equity performance
risk" below).
The table below shows selected information regarding the Company's
variable annuity and segregated fund guarantees gross and net of
reinsurance.
Variable annuity and segregated fund guarantees, net of reinsurance
As at
|
|
December 31, 2013
|
|
December 31, 2012
|
(C$ millions)
|
|
|
Guarantee
value
|
|
|
Fund
value
|
|
|
Amount
at risk(4)(5)
|
|
|
Guarantee
value
|
|
|
Fund
value
|
|
|
Amount
at risk(4)(5)
|
Guaranteed minimum income benefit(1)
|
|
$
|
6,194
|
|
$
|
5,161
|
|
$
|
1,109
|
|
$
|
6,581
|
|
$
|
4,958
|
|
$
|
1,630
|
Guaranteed minimum withdrawal benefit
|
|
|
66,189
|
|
|
63,849
|
|
|
4,120
|
|
|
65,481
|
|
|
58,659
|
|
|
7,183
|
Guaranteed minimum accumulation benefit
|
|
|
16,942
|
|
|
20,581
|
|
|
94
|
|
|
20,380
|
|
|
21,468
|
|
|
1,383
|
Gross living benefits(2)
|
|
$
|
89,325
|
|
$
|
89,591
|
|
$
|
5,323
|
|
$
|
92,442
|
|
$
|
85,085
|
|
$
|
10,196
|
Gross death benefits(3)
|
|
|
12,490
|
|
|
11,230
|
|
|
1,413
|
|
|
13,316
|
|
|
10,622
|
|
|
2,206
|
Total gross of reinsurance
|
|
$
|
101,815
|
|
$
|
100,821
|
|
$
|
6,736
|
|
$
|
105,758
|
|
$
|
95,707
|
|
$
|
12,402
|
Living benefits reinsured
|
|
$
|
5,422
|
|
$
|
4,544
|
|
$
|
942
|
|
$
|
5,780
|
|
$
|
4,358
|
|
$
|
1,427
|
Death benefits reinsured
|
|
|
3,601
|
|
|
3,465
|
|
|
564
|
|
|
3,673
|
|
|
3,140
|
|
|
709
|
Total reinsured
|
|
$
|
9,023
|
|
$
|
8,009
|
|
$
|
1,506
|
|
$
|
9,453
|
|
$
|
7,498
|
|
$
|
2,136
|
Total, net of reinsurance
|
|
$
|
92,792
|
|
$
|
92,812
|
|
$
|
5,230
|
|
$
|
96,305
|
|
$
|
88,209
|
|
$
|
10,266
|
(1)
|
Contracts with guaranteed long-term care benefits are included in this
category.
|
(2)
|
Where a policy includes both living and death benefits, the guarantee in
excess of the living benefit is included in the death benefit category.
|
(3)
|
Death benefits include stand-alone guarantees and guarantees in excess
of living benefit guarantees where both death and living benefits are
provided on a policy.
|
(4)
|
Amount at risk (in-the-money amount) is the excess of guarantee values
over fund values on all policies where the guarantee value exceeds the
fund value. This amount is not currently payable. For guaranteed
minimum death benefit, the amount at risk is defined as the current
guaranteed minimum death benefit in excess of the current account
balance. For guaranteed minimum income benefit, the amount at risk is
defined as the excess of the current annuitization income base over the
current account value. For all guarantees, the amount at risk is
floored at zero at the single contract level.
|
(5)
|
The amount at risk net of reinsurance at December 31, 2013 was $5,230
million (December 31, 2012 - $10,266 million) of which: US$3,124
million (December 31, 2012 - US$5,452 million) was on our U.S.
business, $1,248 million (December 31, 2012 - $2,354 million) was on
our Canadian business, US$335 million (December 31, 2012 - US$2,094
million) was on our Japan business and US$285 million (December 31,
2012 - US$407 million) was related to Asia (other than Japan) and our
run-off reinsurance business.
|
The amount at risk on variable annuity contracts, net of reinsurance was
$5.2 billion at December 31, 2013 compared with $10.3 billion at
December 31, 2012 and $6.5 billion at September 30, 2013. The decrease
compared to both these periods was driven by the increase in equity
markets.
The policy liabilities established for variable annuity and segregated
fund guarantees were $1,197 million at December 31, 2013 (December 31,
2012 - $7,948 million). For non-dynamically hedged business, policy
liabilities declined from $2,695 million at December 31, 2012 to $589
million at December 31, 2013. For the dynamically hedged business, the
policy liabilities declined from $5,253 million at December 31, 2012 to
$608 million at December 31, 2013. The decrease in the total policy
liabilities for variable annuity and segregated fund guarantees is
mainly due to the significant increase in equity markets in 2013, and
in the case of dynamically hedged business, is also due to the increase
in swap rates in 2013.
D3 Caution related to sensitivities
In this document, we provide sensitivities and risk exposure measures
for certain risks. These include sensitivities due to specific changes
in market prices and interest rate levels projected using internal
models as at a specific date, and are measured relative to a starting
level reflecting the Company's assets and liabilities at that date and
the actuarial factors, investment activity and investment returns
assumed in the determination of policy liabilities. The risk exposures
measure the impact of changing one factor at a time and assume that all
other factors remain unchanged. Actual results can differ significantly
from these estimates for a variety of reasons including the interaction
among these factors when more than one changes; changes in actuarial
and investment return and future investment activity assumptions;
actual experience differing from the assumptions, changes in business
mix, effective tax rates and other market factors; and the general
limitations of our internal models. For these reasons, the
sensitivities should only be viewed as directional estimates of the
underlying sensitivities for the respective factors based on the
assumptions outlined below. Given the nature of these calculations, we
cannot provide assurance that the actual impact on net income
attributed to shareholders or on MLI's MCCSR ratio will be as
indicated.
D4 Publicly traded equity performance risk
As at December 31, 2013, we estimate that approximately 64 per cent to
82 per cent of our underlying earnings sensitivity to a 10 per cent
decline in equity markets would be offset by dynamic and macro hedges,
compared with 72 per cent to 83 per cent at December 31, 2012 and 66
per cent to 78 per cent at September 30, 2013. The upper end of the
range assumes the performance of the dynamic hedging program would
completely offset the loss from the dynamically hedged variable annuity
guarantee liabilities and that the macro hedge assets are re-balanced
in line with market changes. The lower end of the range assumes that
there is not a complete offset due to our practices of not hedging the
provisions for adverse deviation and rebalancing equity hedges in the
dynamic program at five per cent intervals, and that the macro hedge
assets are rebalanced in line with market changes.
As outlined in our 2012 Annual Report, our macro hedging strategy is
designed to mitigate public equity risk arising from variable annuity
guarantees not dynamically hedged and from other products and fees. In
addition, our variable annuity guarantee dynamic hedging strategy is
not designed to completely offset the sensitivity of policy liabilities
to all risks associated with the guarantees embedded in these products
(see pages 44 and 45 of our 2012 Annual Report).
The tables below show the potential impact on net income attributed to
shareholders resulting from an immediate 10, 20 and 30 per cent change
in market values of publicly traded equities followed by a return to
the expected level of growth assumed in the valuation of policy
liabilities. The potential impact is shown after taking into account
the impact of the change in markets on the hedge assets. While we
cannot reliably estimate the amount of the change in dynamically hedged
variable annuity guarantee liabilities that will not be offset by the
profit or loss on the dynamic hedge assets, we make certain assumptions
for the purposes of estimating the impact on shareholders' net income.
The potential impact is shown assuming:
(a)
|
First that the change in value of the hedge assets completely offsets
the change in the dynamically hedged variable annuity guarantee
liabilities including the provisions for adverse deviation; and
|
|
|
(b)
|
Second that the change in value of the dynamically hedged variable
annuity guarantee liabilities is not completely offset, including the
assumption that the provision for adverse deviation is not offset and
that the hedge assets are based on the actual position at the period
end. In addition, we assume that we increase our macro equity hedges in
negative market shock scenarios and reduce macro equity hedges in
positive market shock scenarios.
|
It is also important to note that these estimates are illustrative, and
that the hedging program may underperform these estimates, particularly
during periods of high realized volatility and/or periods where both
interest rates and equity market movements are unfavourable.
Potential impact on net income attributed to shareholders arising from
changes to public equity returns(1)
As at December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(C$ millions)
|
|
|
-30%
|
|
|
-20%
|
|
|
-10%
|
|
|
10%
|
|
|
20%
|
|
|
30%
|
Underlying sensitivity to net income attributed to shareholders(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable annuity guarantees
|
|
$
|
(4,120)
|
|
$
|
(2,310)
|
|
$
|
(960)
|
|
$
|
610
|
|
$
|
1,060
|
|
$
|
1,380
|
Asset based fees
|
|
|
(310)
|
|
|
(210)
|
|
|
(110)
|
|
|
110
|
|
|
210
|
|
|
310
|
General fund equity investments(3)
|
|
|
(420)
|
|
|
(280)
|
|
|
(130)
|
|
|
140
|
|
|
280
|
|
|
430
|
Total underlying sensitivity
|
|
$
|
(4,850)
|
|
$
|
(2,800)
|
|
$
|
(1,200)
|
|
$
|
860
|
|
$
|
1,550
|
|
$
|
2,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of hedge assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of macro hedge assets(4)
|
|
$
|
1,010
|
|
$
|
510
|
|
$
|
170
|
|
$
|
(170)
|
|
$
|
(250)
|
|
$
|
(330)
|
Impact of dynamic hedge assets assuming the change in the value of
the hedge assets completely offsets the change in the dynamically
hedged variable annuity guarantee liabilities(4)
|
|
|
3,370
|
|
|
1,900
|
|
|
810
|
|
|
(550)
|
|
|
(960)
|
|
|
(1,250)
|
Total impact of hedge assets assuming the change in value of
the dynamic hedge assets completely offsets the change in the
dynamically
hedged variable annuity guarantee liabilities(4)
|
|
$
|
4,380
|
|
$
|
2,410
|
|
$
|
980
|
|
$
|
(720)
|
|
$
|
(1,210)
|
|
$
|
(1,580)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net impact assuming the change in the value of the hedged
assets completely offsets the change in the
dynamically hedged variable annuity guarantee liabilities(5)
|
|
$
|
(470)
|
|
$
|
(390)
|
|
$
|
(220)
|
|
$
|
140
|
|
$
|
340
|
|
$
|
540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net impact of assuming that the provisions for adverse deviation for
dynamically hedged liabilities are not offset and that the hedging
program rebalances at 5% market intervals(6)
|
|
|
(870)
|
|
|
(530)
|
|
|
(210)
|
|
|
40
|
|
|
50
|
|
|
70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net impact assuming the change in value of the dynamic hedge
assets does not completely offset the change in the dynamically
hedged variable annuity guarantee liabilities, as described above(6)
|
|
$
|
(1,340)
|
|
$
|
(920)
|
|
$
|
(430)
|
|
$
|
180
|
|
$
|
390
|
|
|
$ 610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of underlying earnings sensitivity to movements in
equity markets that is offset by hedges if dynamic hedge assets
completely offset the change in the dynamically hedged variable
annuity guarantee liability
|
|
|
90%
|
|
|
86%
|
|
|
82%
|
|
|
84%
|
|
|
78%
|
|
|
75%
|
Percentage of underlying earnings sensitivity to movements in
equity markets that is offset by hedge assets if dynamic hedge
assets do not completely offset the change in the dynamically
hedged variable annuity guarantee liability(6)
|
|
|
72%
|
|
|
67%
|
|
|
64%
|
|
|
79%
|
|
|
75%
|
|
|
71%
|
(1)
|
See "Caution related to sensitivities" above.
|
(2)
|
Defined as earnings sensitivity to a change in public equity markets
including settlements on reinsurance contracts, but before the offset
of hedge assets or other risk mitigants.
|
(3)
|
This impact for general fund equities is calculated as at a
point-in-time and does not include: (i) any potential impact on public
equity weightings; (ii) any gains or losses on public equities held in
the Corporate and Other segment; or (iii) any gains or losses on public
equity investments held in Manulife Bank. The participating policy
funds are largely self-supporting and generate no material impact on
net income attributed to shareholders as a result of changes in equity
markets.
|
(4)
|
Includes the impact of rebalancing equity hedges in the macro hedging
program.
|
(5)
|
Variable Annuity Guarantee Liability includes the best estimate
liabilities and associated provisions for adverse deviation.
|
(6)
|
Represents the impact of re-balancing equity hedges for dynamically
hedged variable annuity guarantee liabilities at five per cent market
intervals. Also represents the impact of changes in markets on
provisions for adverse deviation that are not hedged, but does not
include any impact in respect of other sources of hedge ineffectiveness
e.g. fund tracking, realized volatility and equity, interest rate
correlations different from expected among other factors.
|
Potential impact on net income attributed to shareholders arising from
changes to public equity returns(1)
As at December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(C$ millions)
|
|
|
-30%
|
|
|
-20%
|
|
|
-10%
|
|
|
10%
|
|
|
20%
|
|
|
30%
|
Underlying sensitivity to net income attributed to shareholders(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
restated(4)
|
|
|
restated(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable annuity guarantees
|
|
$
|
(5,640)
|
|
$
|
(3,510)
|
|
$
|
(1,580)
|
|
$
|
1,260
|
|
$
|
2,220
|
|
$
|
2,930
|
Asset based fees
|
|
|
(270)
|
|
|
(180)
|
|
|
(90)
|
|
|
90
|
|
|
180
|
|
|
270
|
General fund equity investments(3)
|
|
|
(380)
|
|
|
(260)
|
|
|
(130)
|
|
|
120
|
|
|
230
|
|
|
350
|
Total underlying sensitivity
|
|
$
|
(6,290)
|
|
$
|
(3,950)
|
|
$
|
(1,800)
|
|
$
|
1,470
|
|
$
|
2,630
|
|
$
|
3,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of hedge assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of macro hedged assets(4)
|
|
$
|
2,010
|
|
$
|
1,340
|
|
$
|
670
|
|
$
|
(670)
|
|
$
|
(1,160)
|
|
$
|
(1,580)
|
Impact of dynamic hedge assets assuming the change in the value of
the hedge assets completely offsets the change in the dynamically
hedged variable annuity guarantee liabilities(4)
|
|
|
3,070
|
|
|
1,890
|
|
|
820
|
|
|
(600)
|
|
|
(1,010)
|
|
|
(1,300)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impact of hedge assets assuming the change in value of
the dynamic hedge assets completely offsets the change in the
dynamically hedged variable annuity guarantee liabilities(4)
|
|
$
|
5,080
|
|
$
|
3,230
|
|
$
|
1,490
|
|
$
|
(1,270)
|
|
$
|
(2,170)
|
|
$
|
(2,880)
|
Net impact assuming the change in the value of the hedged
assets completely offsets the change in the dynamically hedged
variable annuity guarantee liabilities(5)
|
|
$
|
(1,210)
|
|
$
|
(720)
|
|
$
|
(310)
|
|
$
|
200
|
|
$
|
460
|
|
$
|
670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of assuming that the provisions for adverse deviation for
dynamically hedged liabilities are not offset and that the hedging
program rebalances at 5% market intervals(6)
|
|
|
(710)
|
|
|
(470)
|
|
|
(190)
|
|
|
(10)
|
|
|
(40)
|
|
|
(70)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net impact assuming the change in value of the dynamic hedge
assets does not completely offset the change in the dynamically
hedged variable annuity guarantee liabilities, as described above(6)
|
|
$
|
(1,920)
|
|
$
|
(1,190)
|
|
$
|
(500)
|
|
$
|
190
|
|
$
|
420
|
|
$
|
600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of underlying earnings sensitivitiy to movements in
equity markets that is offset by hedges if dynamic hedge assets
completely offset the change in the dynamically hedged variable
annuity guarantee liability
|
|
|
81%
|
|
|
82%
|
|
|
83%
|
|
|
86%
|
|
|
83%
|
|
|
81%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of underlying earnings sensitivity to movements in
equity markets that is offset by hedge assets if dynamic hedge
assets do not completely offset the change in the dynamically
hedged variable annuity guarantee liability(6)
|
|
|
69%
|
|
|
70%
|
|
|
72%
|
|
|
87%
|
|
|
84%
|
|
|
83%
|
(1)
|
See "Caution related to sensitivities" above.
|
(2)
|
Defined as earnings sensitivity to a change in public equity markets
including settlements on reinsurance contracts, but before the offset
of hedge assets or other risk mitigants.
|
(3)
|
This impact for general fund equities is calculated as at a
point-in-time and does not include: (i) any potential impact on public
equity weightings; (ii) any gains or losses on public equities held in
the Corporate and Other segment; or (iii) any gains or losses on public
equity investments held in Manulife Bank. The participating policy
funds are largely self-supporting and generate no material impact on
net income attributed to shareholders as a result of changes in equity
markets.
|
(4)
|
The numbers above were restated to reflect the fact that in the first
quarter of 2013, we refined our assumptions with respect to the amount
of macro hedge offsets in the above calculation. We now assume that we
reduce equity hedges in our macro hedging program under positive market
shock scenarios.
|
(5)
|
Variable Annuity Guarantee Liability includes the best estimate
liabilities and associated provisions for adverse deviation.
|
(6)
|
Represents the impact of re-balancing equity hedges for dynamically
hedged variable annuity guarantee liabilities at five per cent market
intervals. Also represents the impact of changes in markets on
provisions for adverse deviation that are not hedged, but does not
include any impact in respect of other sources of hedge ineffectiveness
e.g. fund tracking, realized volatility and equity, interest rate
correlations different from expected among other factors.
|
Potential impact on MLI's MCCSR ratio arising from public equity returns
different from the expected return for policy liability valuation(1),(2)
|
|
Impact on MLI MCCSR ratio
|
Percentage points
|
|
|
-30%
|
|
|
-20%
|
|
|
-10%
|
|
|
+10%
|
|
|
+20%
|
|
|
+30%
|
December 31, 2013
|
|
|
(14)
|
|
|
(8)
|
|
|
(4)
|
|
|
13
|
|
|
25
|
|
|
25
|
December 31, 2012
|
|
|
(17)
|
|
|
(11)
|
|
|
(5)
|
|
|
1
|
|
|
3
|
|
|
9
|
(1)
|
See "Caution related to sensitivities" above. In addition, estimates
exclude changes to the net actuarial gains/losses with respect to the
Company's pension obligations as a result of changes in equity markets,
as the impact on the quoted sensitivities is not considered to be
material.
|
(2)
|
The potential impact is shown assuming that the change in value of the
hedge assets does not completely offset the change in the dynamically
hedged variable annuity guarantee liabilities. The estimated amount
that would not be completely offset relates to our practices of not
hedging the provisions for adverse deviation and of rebalancing equity
hedges for dynamically hedged variable annuity liabilities at five per
cent intervals.
|
The favourable impact on the capital ratio to positive equity shocks at
December 31, 2013 reflects the fact that the required capital on
segregated fund guarantees is at the level at which any additional
gains can be immediately reflected in the ratio and do not need to be
brought in on a smoothed basis.
The following table shows the notional value of shorted equity futures
contracts utilized for our variable annuity guarantee dynamic hedging
and our macro equity risk hedging strategies.
As at
|
|
|
|
(C$ millions)
|
December 31,
2013
|
|
September 30,
2013
|
|
December 31,
2012
|
For variable annuity guarantee dynamic hedging strategy
|
$ 7,500
|
|
$ 7,900
|
|
$ 9,500
|
For macro equity risk hedging strategy
|
2,000
|
|
3,400
|
|
7,800
|
Total
|
$ 9,500
|
|
$ 11,300
|
|
$ 17,300
|
During the fourth quarter of 2013, the derivative notional value in our
dynamic hedging program decreased by $0.4 billion as normal rebalancing
activities responding to favourable markets was partially offset by
dynamically hedging additional in-force business. On a full year basis,
the dynamic hedging equity notional value decreased by $2 billion.
During the fourth quarter of 2013, the equity futures notional value
required for the macro hedging program decreased by $1.4 billion due to
normal rebalancing based on market performance to maintain our desired
equity market risk position, and to incorporate transfers to the
dynamic hedging program. For the full year, the macro hedging program
equity futures notional value decreased by $5.8 billion.
D5 Interest rate and spread risk
At December 31, 2013, we estimated the sensitivity of our net income
attributed to shareholders to a 100 basis point parallel decline in
interest rates to be a charge of $400 million, and to a 100 basis point
increase in interest rates to be close to nil.
The 100 basis point parallel decline includes a change of one per cent
in current government, swap and corporate rates for all maturities
across all markets with no change in credit spreads between government,
swap and corporate rates, and with a floor of zero on government rates
and corporate spreads, relative to the rates assumed in the valuation
of policy liabilities, including embedded derivatives. As the
sensitivity to a 100 basis point change in interest rates includes any
associated change in the applicable prescribed reinvestment scenario,
the impact of changes to interest rates for less than, or more than,
the amounts indicated are unlikely to be linear. Furthermore, the
reinvestment scenario changes tend to amplify the negative effects of a
decrease in interest rates, and dampen the positive effects of an
increase in interest rates. For variable annuity guarantee liabilities
that are dynamically hedged, it is assumed that interest rate hedges
are rebalanced at 20 basis point intervals.
The income impact does not allow for any future potential changes to the
URR assumptions or other potential impacts of lower interest rate
levels, for example, increased strain on the sale of new business or
lower interest earned on our surplus assets. It also does not reflect
potential management actions to realize gains or losses on AFS fixed
income assets held in the surplus segment in order to partially offset
changes in MLI's MCCSR ratio due to changes in interest rate levels.
Potential impact on net income attributed to shareholders and MLI's
MCCSR ratio of an immediate one per cent parallel change in interest
rates relative to rates assumed in the valuation of policy liabilities(1),(2),(3),(4)
As at
|
|
|
December 31, 2013
|
|
December 31, 2012
|
|
|
|
|
-100bp
|
|
|
+100bp
|
|
|
-100bp
|
|
|
+100bp
|
Net income attributed to shareholders (C$ millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excluding change in market value of AFS fixed income assets held
in the surplus segment
|
|
|
$
|
(400)
|
|
$
|
-
|
|
$
|
(400)
|
|
$
|
200
|
From fair value changes in AFS assets held in surplus, if realized
|
|
|
|
600
|
|
|
(600)
|
|
|
800
|
|
|
(700)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MLI's MCCSR ratio (Percentage points)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before impact of change in market value of AFS fixed income assets
held in the surplus segment(5)
|
|
|
|
(13)
|
|
|
18
|
|
|
(16)
|
|
|
10
|
From fair value changes in AFS assets held in surplus, if realized
|
|
|
|
4
|
|
|
(5)
|
|
|
5
|
|
|
(5)
|
(1)
|
See "Caution related to sensitivities" above. In addition, estimates
exclude changes to the net actuarial gains/losses with respect to the
Company's pension obligations as a result of changes in interest rates,
as the impact on the quoted sensitivities is not considered to be
material.
|
(2)
|
Includes guaranteed insurance and annuity products, including variable
annuity contracts as well as adjustable benefit products where benefits
are generally adjusted as interest rates and investment returns change,
a portion of which have minimum credited rate guarantees. For
adjustable benefit products subject to minimum rate guarantees, the
sensitivities are based on the assumption that credited rates will be
floored at the minimum.
|
(3)
|
The amount of gain or loss that can be realized on AFS fixed income
assets held in the surplus segment will depend on the aggregate amount
of unrealized gain or loss.
|
(4)
|
Sensitivities are based on projected asset and liability cash flows at
the beginning of the quarter adjusted for the estimated impact of new
business, investment markets and asset trading during the quarter. Any
true-up to these estimates, as a result of the final asset and
liability cash flows to be used in the next quarter's projection, are
reflected in the next quarter's sensitivities. Impact of realizing 100%
of market value of AFS fixed income is as of the end of the quarter.
|
(5)
|
The impact on MLI's MCCSR ratio includes both the impact of the change
in earnings on available capital as well as the change in required
capital that results from a change in interest rates. The potential
increase in required capital accounted for 9 of the 13 point impact of
a 100 bp decline in interest rates on MLI's MCCSR ratio this quarter.
|
The following table shows the potential impact on net income attributed
to shareholders resulting from a change in credit spreads and swap
spreads over government bond rates for all maturities across all
markets with a floor of zero on the total interest rate, relative to
the spreads assumed in the valuation of policy liabilities.
Potential impact on net income attributed to shareholders arising from
changes to corporate spreads and swap spreads(1),(2),(3)
C$ millions
As at
|
|
|
|
|
|
|
December 31,
2013
|
|
|
December 31,
2012
|
Corporate spreads(4)
|
|
|
|
|
|
|
|
|
|
|
Increase 50 basis points
|
|
|
|
|
|
$
|
400
|
|
$
|
500
|
Decrease 50 basis points
|
|
|
|
|
|
|
(400)
|
|
|
(1,000)
|
Swap spreads
|
|
|
|
|
|
|
|
|
|
|
Increase 20 basis points
|
|
|
|
|
|
$
|
(400)
|
|
$
|
(600)
|
Decrease 20 basis points
|
|
|
|
|
|
|
400
|
|
|
600
|
(1)
|
See "Caution related to sensitivities" above.
|
(2)
|
The impact on net income attributed to shareholders assumes no gains or
losses are realized on our AFS fixed income assets held in the surplus
segment and excludes the impact arising from changes in off-balance
sheet bond fund value arising from changes in credit spreads. The
participating policy funds are largely self-supporting and generate no
material impact on net income attributed to shareholders as a result of
changes in corporate and swap spreads.
|
(3)
|
Sensitivities are based on projected asset and liability cash flows at
the beginning of the quarter adjusted for the estimated impact of new
business, investment markets and asset trading during the quarter. Any
true-up to these estimates, as a result of the final asset and
liability cash flows to be used in the next quarter's projection, are
reflected in the next quarter's sensitivities.
|
(4)
|
Corporate spreads are assumed to grade to an expected long-term average
over five years.
|
As the sensitivity to a 50 basis point decline in corporate spreads
includes the impact of a change in prescribed reinvestment scenarios
where applicable, the impact of changes to corporate spreads for less
than, or more than, the amounts indicated are unlikely to be linear.
The potential earnings impact of a 50 basis point decline in corporate
spreads related to the impact of the scenario change was not
significant at December 31, 2013 and was $400 million at December 31,
2012, with the difference being the key reason for the decrease in the
sensitivity during 2013. The sensitivity to a 20 bps decline in swap
spreads decreased over the year due to changes in the amount of
interest rate swaps being held.
E ACCOUNTING MATTERS AND CONTROLS
E1 Critical accounting and actuarial policies
Our significant accounting policies under IFRS are described in note 1
to our Consolidated Financial Statements for the year ended December
31, 2012. The critical accounting policies and the estimation processes
related to the determination of insurance contract liabilities, fair
values of financial instruments, the application of derivative and
hedge accounting, the determination of pension and other
post-employment benefit obligations and expenses, and accounting for
income taxes and uncertain tax positions are described on pages 63 to
71 of our 2012 Annual Report.
E2 Sensitivity of policy liabilities to updates to assumptions
When the assumptions underlying our determination of policy liabilities
are updated to reflect recent and emerging experience or change in
outlook, the result is a change in the value of policy liabilities
which in turn affects income. The sensitivity of after-tax income to
updates to asset related assumptions underlying policy liabilities is
shown below, assuming that there is a simultaneous update to the
assumption across all business units.
For updates to asset related assumptions, the sensitivity is shown net
of the corresponding impact on income of the change in the value of the
assets supporting policy liabilities. In practice, experience for each
assumption will frequently vary by geographic market and business and
assumption updates are made on a business/geographic specific basis.
Actual results can differ materially from these estimates for a variety
of reasons including the interaction among these factors when more than
one changes; changes in actuarial and investment return and future
investment activity assumptions; actual experience differing from the
assumptions; changes in business mix, effective tax rates and other
market factors; and the general limitations of our internal models.
Most participating business is excluded from this analysis because of
the ability to pass both favourable and adverse experience to the
policyholders through the participating dividend adjustment.
Potential impact on accumulated next five years and the following five
years net income attributed to shareholders arising from potential
changes to the fixed income ultimate reinvestment rates ("URR")(1),(2)
C$ millions
As at
|
|
December 31, 2013
|
|
December 31, 2012
|
For the periods
|
|
|
Q4 2013 -
Q3 2018
|
|
|
Q4 2018 -
Q3 2023
|
|
|
2013 -
2017
|
|
|
2018 -
2022
|
Risk free rates remain at December 31, 2013 and December 31, 2012
levels,
respectively
|
|
$
|
(600)
|
|
$
|
(100)
|
|
$
|
(1,600)
|
|
$
|
(300)
|
Risk free rates rise 50 bp immediately from their December 31, 2013 or
December 31,
2012 levels, respectively, and then remain at those new levels
thereafter
|
|
$
|
(100)
|
|
$
|
100
|
|
$
|
(900)
|
|
$
|
-
|
Risk free rates fall 50 bp immediately from their December 31, 2013 or
December 31,
2012 levels, respectively, and then remain at those new levels
thereafter
|
|
$
|
(1,000)
|
|
$
|
(100)
|
|
$
|
(2,200)
|
|
$
|
(500)
|
(1)
|
Current URRs in Canada are 0.7% per annum and 2.7% per annum for short
and long-term bonds, respectively, and in the U.S. are 0.7% per annum
and 3.4% per annum for short and long-term bonds, respectively. Since
the URRs are based upon a five and ten year rolling average of
government bond rates, continuation of current rates or a further
decline could have a material impact on net income.
|
(2)
|
These impacts assume that the URR changes implied by these shocks do not
change which reinvestment scenario produces the largest reserve.
|
Under Canadian IFRS, we must test a number of prescribed interest rate
scenarios. The scenario that produces the largest policy liabilities is
used and is called the booking scenario. The resulting interest
scenario for most of our business is a gradual grading of market
interest rates from current market levels to assumed ultimate
reinvestment rates over 20 years.
The sensitivity of net income attributed to shareholders to further
updates to the ultimate reinvestment rates at December 31, 2013 has
decreased from December 31, 2012 due to the increase in risk free
interest rates during that time.
Potential impact on net income attributed to shareholders arising from
changes to asset related assumptions supporting actuarial liabilities,
excluding the fixed income ultimate reinvestment rate discussed above
C$ millions
|
|
Increase (decrease) in after-tax income
|
As at
|
|
December 31, 2013
|
|
December 31, 2012
|
Asset related assumptions updated periodically in valuation basis
changes
|
|
|
Increase
|
|
|
Decrease
|
|
|
Increase
|
|
|
Decrease
|
100 basis point change in future annual returns for public equities(1),(2)
|
|
$
|
400
|
|
$
|
(400)
|
|
$
|
800
|
|
$
|
(900)
|
100 basis point change in future annual returns for alternative
long-duration assets(3)
|
|
|
3,800
|
|
|
(3,700)
|
|
|
3,900
|
|
|
(4,000)
|
100 basis point change in equity volatility assumption for stochastic
segregated fund modeling(4)
|
|
|
(200)
|
|
|
200
|
|
|
(300)
|
|
|
300
|
(1)
|
The sensitivity to public equity returns above includes the impact on
both segregated fund guarantee reserves and on other policy
liabilities. For a 100 basis point increase in expected growth rates,
the impact from segregated fund guarantee reserves is a $200 million
increase (December 31, 2012 - $500 million increase). For a 100 basis
point decrease in expected growth rates, the impact from segregated
fund guarantee reserves is a $(200) million decrease (December 31, 2012
- $(600) million decrease). Expected long-term annual market growth
assumptions for public equities pre-dividends for key markets are based
on long-term historical observed experience and compliance with
actuarial standards. The growth rates for returns in the major markets
used in the stochastic valuation models for valuing segregated fund
guarantees are 7.6% per annum in Canada, 7.6% per annum in the U.S. and
5.2% per annum in Japan. Growth assumptions for European equity funds
are market-specific and vary between 5.8% and 7.85%.
|
(2)
|
For future annual returns on public equity, the decrease of $500 million
in sensitivity from December 31, 2012 to December 31, 2013 is primarily
due to strong returns from public equities during the year which lower
the sensitivity for our segregated fund guarantee liabilities, and the
shift of some of our variable annuity guaranteed value from our
macro-hedging program to our dynamic hedging program.
|
(3)
|
Alternative long-duration assets include commercial real estate, timber
and agricultural real estate, oil and gas, and private equities. The
decrease of $300 million in sensitivity from December 31, 2012 to
December 31, 2013 is primarily related to the impact of the increase in
risk free rates in some jurisdictions during the period, increasing the
rate at which funds can be reinvested.
|
(4)
|
Volatility assumptions for public equities are based on long-term
historic observed experience and compliance with actuarial standards.
The resulting volatility assumptions are 17.15% per annum in Canada and
17.15% per annum in the U.S. for large cap public equities, and 19% per
annum in Japan. For European equity funds, the volatility assumptions
vary between 16.15% and 18.4%.
|
E3 Accounting and reporting changes
Effective January 1, 2013, the Company adopted several new and amended
accounting pronouncements. The amendments to IAS 19 "Employee Benefits"
and IFRS 10 "Consolidated Financial Statements" were adopted
retrospectively. As a result of these adoptions, net income attributed
to shareholders for the full year ended December 31, 2012 increased by
$74 million.
There are a number of new accounting and reporting changes issued under
IFRS including those still under development by the International
Accounting Standards Board ("IASB") that will impact the Company
beginning in 2014 and subsequently.
|
|
|
|
|
|
|
|
|
|
|
|
|
Topic
|
|
|
|
Effective date
|
|
|
|
Measurement /
Presentation
|
|
|
|
Expected impact
|
IFRS 9 "Financial Instruments"
|
|
|
|
Not finalized(1)
|
|
|
|
Measurement
|
|
|
|
Currently assessing
|
Amendments to IAS 32 "Financial Instruments:
Presentation"
|
|
|
|
Jan 1, 2014
|
|
|
|
Presentation
|
|
|
|
Not expected to have
a significant impact
|
Amendments to IFRS 10, IFRS 12 and IAS 27
"Investment Entities"
|
|
|
|
Jan 1, 2014
|
|
|
|
Measurement
and disclosure
|
|
|
|
Not expected to have
a significant impact
|
IFRIC 21 "Levies"
|
|
|
|
Jan 1, 2014
|
|
|
|
Measurement
|
|
|
|
Not expected to have
a significant impact
|
Amendments to IAS 39 "Financial Instruments:
Recognition and Measurement"
|
|
|
|
Jan 1, 2014
|
|
|
|
Measurement
|
|
|
|
Not expected to have
a significant impact
|
Amendments to IAS 19 "Employee Benefits"
|
|
|
|
Jan 1, 2015
|
|
|
|
Measurement
|
|
|
|
Not expected to have
a significant impact
|
(1)
|
|
In November 2013, the IASB removed the mandatory effective date of
January 1, 2015. The IASB has stated that a new effective date will be
determined when all three phases of the IFRS 9 project are closer to
completion.
|
F Other
F1 Performance and Non-GAAP Measures
We use a number of non-GAAP financial measures to measure overall
performance and to assess each of our businesses. A financial measure
is considered a non-GAAP measure for Canadian securities law purposes
if it is presented other than in accordance with generally accepted
accounting principles used for the Company's audited financial
statements. Non-GAAP measures include: Core Earnings; Net Income
Attributed to Shareholders in Accordance with U.S. GAAP; Total Equity
in Accordance with U.S. GAAP; Core ROE; Diluted Core Earnings Per
Common Share; Constant Currency Basis; Premiums and Deposits; Funds
under Management; Capital; New Business Embedded Value; Sales and Total
Annualized Insurance and Wealth Premium Equivalent Basis Sales.
Non-GAAP financial measures are not defined terms under GAAP and,
therefore, with the exception of Net Income Attributed to Shareholders
in Accordance with U.S. GAAP and Total Equity in Accordance with U.S.
GAAP (which are comparable to the equivalent measures of issuers whose
financial statements are prepared in accordance with U.S. GAAP), are
unlikely to be comparable to similar terms used by other issuers.
Therefore, they should not be considered in isolation or as a
substitute for any other financial information prepared in accordance
with GAAP.
Core earnings (losses) is a non-GAAP measure which we use to better understand the long-term
earnings capacity and valuation of the business. Core earnings excludes
the direct impact of changes in equity markets and interest rates as
well as a number of other items, outlined below, that are considered
material and exceptional in nature. While this metric is relevant to
how we manage our business and offers a consistent methodology, it is
not insulated from macro-economic factors, which can have a significant
impact.
Any future changes to the core earnings definition referred to below,
will be disclosed.
Items that are included in core earnings are:
-
Expected earnings on in-force, including expected release of provisions
for adverse deviation, fee income, margins on group business and spread
business such as Manulife Bank and asset fund management.
-
Macro hedging costs based on expected market returns.
-
New business strain.
-
Policyholder experience gains or losses.
-
Acquisition and operating expenses compared to expense assumptions used
in the measurement of policy liabilities.
-
Up to $200 million of favourable investment-related experience reported
in a single year which is referred to as "core investment gains".
-
Earnings on surplus other than mark-to-market items. Gains on
available-for-sale ("AFS") equities and seed money investments are
included in core earnings.
-
Routine or non-material legal settlements.
-
All other items not specifically excluded.
-
Tax on the above items.
-
All tax related items except the impact of enacted or substantially
enacted income tax rate changes.
Items excluded from core earnings are:
-
The direct impact of equity markets and interest rates, consisting of:
-
Gains (charges) on variable annuity guarantee liabilities not
dynamically hedged.
-
Gains (charges) on general fund equity investments supporting policy
liabilities and on fee income.
-
Gains (charges) on macro equity hedges relative to expected costs. The
expected cost of macro hedges is calculated using the equity
assumptions used in the valuation of policy liabilities.
-
Gains (charges) on higher (lower) fixed income reinvestment rates
assumed in the valuation of policy liabilities, including the impact on
the fixed income ultimate reinvestment rate ("URR").
-
Gains (charges) on sale of AFS bonds and open derivatives not in hedging
relationships in the Corporate and Other segment.
-
The earnings impact of the difference between the net increase
(decrease) in variable annuity liabilities that are dynamically hedged
and the performance of the related hedge assets. Our variable annuity
dynamic hedging strategy is not designed to completely offset the
sensitivity of policy liabilities to all risks or measurements
associated with the guarantees embedded in these products for a number
of reasons, including: provisions for adverse deviation, fund
performance, the portion of the interest rate risk that is not
dynamically hedged, realized equity and interest rate volatilities and
changes to policyholder behaviour.
-
Net favourable investment-related experience in excess of $200 million
per annum or net unfavourable investment-related experience on a
year-to-date basis. Investment-related experience relates to fixed
income trading, alternative long-duration asset returns, credit
experience and asset mix changes. This favourable and unfavourable
investment-related experience is a combination of reported investment
experience as well as the impact of investing activities on the
measurement of our policy liabilities. The maximum of $200 million per
annum to be reported in core earnings compares with an average of over
$80 million per quarter of favourable investment-related experience
reported since first quarter 2007.
-
Mark-to-market gains or losses on assets held in the Corporate and Other
segment other than gains on AFS equities and seed money investments in
new segregated or mutual funds.
-
Changes in actuarial methods and assumptions, excluding URR.
-
The impact on the measurement of policy liabilities of changes in
product features or new reinsurance transactions, if material.
-
Goodwill impairment charges.
-
Gains or losses on disposition of a business.
-
Material one-time only adjustments, including highly
unusual/extraordinary and material legal settlements or other items
that are material and exceptional in nature.
-
Tax on the above items.
-
Impact of enacted or substantially enacted income tax rate changes.
The following table summarizes for the past eight quarters core earnings
and net income (loss) attributed to shareholders.
Total Company
|
|
|
Quarterly Results
|
C$ millions, unaudited
|
|
|
2013
|
|
|
2012 (restated)(1)
|
|
|
|
4Q
|
|
|
3Q
|
|
|
2Q
|
|
|
1Q
|
|
|
4Q
|
|
|
3Q
|
|
|
2Q
|
|
|
1Q
|
Core earnings (losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia Division
|
|
$
|
227
|
|
$
|
242
|
|
$
|
226
|
|
$
|
226
|
|
$
|
180
|
|
$
|
230
|
|
$
|
286
|
|
$
|
267
|
Canadian Division
|
|
|
233
|
|
|
268
|
|
|
225
|
|
|
179
|
|
|
233
|
|
|
229
|
|
|
201
|
|
|
172
|
U.S. Division
|
|
|
366
|
|
|
361
|
|
|
343
|
|
|
440
|
|
|
293
|
|
|
288
|
|
|
247
|
|
|
257
|
Corporate and Other (excluding expected cost of macro
hedges and core investment gains)
|
|
|
(138)
|
|
|
(135)
|
|
|
(105)
|
|
|
(128)
|
|
|
(62)
|
|
|
(103)
|
|
|
(67)
|
|
|
(113)
|
Expected cost of macro hedges
|
|
|
(53)
|
|
|
(84)
|
|
|
(128)
|
|
|
(148)
|
|
|
(140)
|
|
|
(124)
|
|
|
(118)
|
|
|
(107)
|
Investment-related experience included in core earnings
|
|
|
50
|
|
|
52
|
|
|
48
|
|
|
50
|
|
|
50
|
|
|
50
|
|
|
50
|
|
|
50
|
Total core earnings
|
|
$
|
685
|
|
$
|
704
|
|
$
|
609
|
|
$
|
619
|
|
$
|
554
|
|
$
|
570
|
|
$
|
599
|
|
$
|
526
|
Investment-related experience in excess of amounts included
in core earnings
|
|
|
215
|
|
|
491
|
|
|
(97)
|
|
|
97
|
|
|
321
|
|
|
365
|
|
|
54
|
|
|
209
|
Core earnings plus investment-related experience in
excess of amounts included in core earnings
|
|
$
|
900
|
|
$
|
1,195
|
|
$
|
512
|
|
$
|
716
|
|
$
|
875
|
|
$
|
935
|
|
$
|
653
|
|
$
|
735
|
Other items to reconcile core earnings to net income (loss)
attributed to shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct impact of equity markets and interest rates and variable
annuity guarantee liabilities that are dynamically hedged
|
|
|
(81)
|
|
|
94
|
|
|
(242)
|
|
|
(107)
|
|
|
82
|
|
|
34
|
|
|
(996)
|
|
|
298
|
|
Impact of in-force product changes and recapture of reinsurance treaties
|
|
|
261
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
26
|
|
|
112
|
|
|
122
|
|
Change in actuarial methods and assumptions, excluding URR
|
|
|
(133)
|
|
|
(252)
|
|
|
(35)
|
|
|
(69)
|
|
|
(87)
|
|
|
(1,006)
|
|
|
-
|
|
|
12
|
|
Goodwill impairment charge
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(200)
|
|
|
-
|
|
|
-
|
|
Disposition of Taiwan insurance business(2)
|
|
|
350
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(50)
|
|
|
-
|
|
Tax items and restructuring charge related to organizational
design
|
|
|
-
|
|
|
(3)
|
|
|
24
|
|
|
-
|
|
|
207
|
|
|
-
|
|
|
-
|
|
|
58
|
Net income (loss) attributed to shareholders
|
|
$
|
1,297
|
|
$
|
1,034
|
|
$
|
259
|
|
$
|
540
|
|
$
|
1,077
|
|
$
|
(211)
|
|
$
|
(281)
|
|
$
|
1,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct impact of equity markets and interest rates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable annuity guarantee liabilities that are dynamically
hedged
|
|
$
|
101
|
|
$
|
160
|
|
$
|
30
|
|
$
|
101
|
|
$
|
100
|
|
$
|
122
|
|
$
|
(269)
|
|
$
|
223
|
Gains (charges) on variable annuity liabilities that are not
dynamically hedged
|
|
|
155
|
|
|
306
|
|
|
75
|
|
|
757
|
|
|
556
|
|
|
298
|
|
|
(758)
|
|
|
982
|
Gains (charges) on general fund equity investments
supporting policy liabilities and on fee income
|
|
|
81
|
|
|
85
|
|
|
(70)
|
|
|
115
|
|
|
48
|
|
|
55
|
|
|
(116)
|
|
|
121
|
Gains (charges) on macro equity hedges relative to expected
costs
|
|
|
(232)
|
|
|
(245)
|
|
|
(231)
|
|
|
(730)
|
|
|
(292)
|
|
|
(86)
|
|
|
423
|
|
|
(556)
|
Gains (charges) on higher (lower) fixed income reinvestment
rates assumed in the valuation of policy liabilities
|
|
|
(105)
|
|
|
(77)
|
|
|
151
|
|
|
(245)
|
|
|
(290)
|
|
|
(330)
|
|
|
305
|
|
|
(425)
|
Gains (charges) on sale of AFS bonds and derivative positions
in the Corporate segment
|
|
|
(55)
|
|
|
(72)
|
|
|
(127)
|
|
|
(8)
|
|
|
(40)
|
|
|
(25)
|
|
|
96
|
|
|
(47)
|
Charges due to lower fixed income URR assumptions used in
the valuation of policy liabilities
|
|
|
(26)
|
|
|
(63)
|
|
|
(70)
|
|
|
(97)
|
|
|
-
|
|
|
-
|
|
|
(677)
|
|
|
-
|
Direct impact of equity markets and interest rates
|
|
$
|
(81)
|
|
$
|
94
|
|
$
|
(242)
|
|
$
|
(107)
|
|
$
|
82
|
|
$
|
34
|
|
$
|
(996)
|
|
$
|
298
|
(1)
|
The 2012 results were restated to reflect the retrospective application
of new IFRS accounting standards effective January 1, 2013. For a
detailed description of
the change see our first quarter 2013 report to shareholders.
|
(2)
|
The $50 million charge in 2012 represents closing adjustments to the
2011 disposition of our Life Retrocession business.
|
Asia Division
|
|
|
Quarterly Results
|
C$ millions, unaudited
|
|
|
2013
|
|
2012
|
|
|
|
|
4Q
|
|
|
|
3Q
|
|
|
|
2Q
|
|
|
1Q
|
|
|
|
4Q
|
|
|
|
3Q
|
|
|
2Q
|
|
|
1Q
|
Asia Division core earnings
|
|
$
|
|
227
|
|
$
|
|
242
|
|
$
|
|
226
|
|
$
|
226
|
|
$
|
|
180
|
|
$
|
|
230
|
|
$
|
286
|
|
$
|
267
|
Investment-related experience in excess of amounts included in core
earnings
|
|
|
|
(5)
|
|
|
|
(4)
|
|
|
|
(18)
|
|
|
43
|
|
|
|
33
|
|
|
|
12
|
|
|
28
|
|
|
(18)
|
Core earnings plus investment-related experience in
excess of amounts included in core earnings
|
|
$
|
|
222
|
|
$
|
|
238
|
|
$
|
|
208
|
|
$
|
269
|
|
$
|
|
213
|
|
$
|
|
242
|
|
$
|
314
|
|
$
|
249
|
Other items to reconcile core earnings to net income (loss) attributed
to
shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct impact of equity markets and interest rates and variable
annuity guarantee liabilities that are dynamically hedged
|
|
|
|
85
|
|
|
|
242
|
|
|
|
178
|
|
|
659
|
|
|
|
469
|
|
|
|
249
|
|
|
(629)
|
|
|
822
|
|
Recapture of reinsurance treaty and tax items
|
|
|
|
68
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
40
|
|
Disposition of Taiwan insurance business
|
|
|
|
350
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
Net income (loss) attributed to shareholders
|
|
$
|
|
725
|
|
$
|
|
480
|
|
$
|
|
386
|
|
$
|
928
|
|
$
|
|
682
|
|
$
|
|
491
|
|
$
|
(315)
|
|
$
|
1,111
|
Canadian Division
|
|
Quarterly Results
|
C$ millions, unaudited
|
|
2013
|
|
2012
|
|
|
|
|
4Q
|
|
|
|
3Q
|
|
|
|
2Q
|
|
|
1Q
|
|
|
|
4Q
|
|
|
|
3Q
|
|
|
2Q
|
|
|
|
1Q
|
Canadian Division core earnings
|
|
$
|
|
233
|
|
$
|
|
268
|
|
$
|
|
225
|
|
$
|
179
|
|
$
|
|
233
|
|
$
|
|
229
|
|
$
|
201
|
|
$
|
|
172
|
Investment-related experience in excess of amounts included in core
earnings
|
|
|
|
106
|
|
|
|
135
|
|
|
|
(88)
|
|
|
(187)
|
|
|
|
(31)
|
|
|
|
20
|
|
|
(115)
|
|
|
|
116
|
Core earnings plus investment-related experience in excess
of amounts included in core earnings
|
|
$
|
|
339
|
|
$
|
|
403
|
|
$
|
|
137
|
|
$
|
(8)
|
|
$
|
|
202
|
|
$
|
|
249
|
|
$
|
86
|
|
$
|
|
288
|
Other items to reconcile core earnings to net income (loss) attributed
to
shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct impact of equity markets and interest rates and variable
annuity guarantee liabilities that are dynamically hedged
|
|
|
|
34
|
|
|
|
14
|
|
|
|
(34)
|
|
|
(54)
|
|
|
|
49
|
|
|
|
129
|
|
|
-
|
|
|
|
(93)
|
|
Recapture of reinsurance treaty, segregated fund product changes and
impact of tax related changes
|
|
|
|
-
|
|
|
|
(3)
|
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
137
|
|
|
|
122
|
Net income (loss) attributed to shareholders
|
|
$
|
|
373
|
|
$
|
|
414
|
|
$
|
|
103
|
|
$
|
(62)
|
|
$
|
|
251
|
|
$
|
|
378
|
|
$
|
223
|
|
$
|
|
317
|
U.S. Division
|
|
Quarterly Results
|
C$ millions, unaudited
|
|
2013
|
|
2012 (restated)(1)
|
|
|
|
|
4Q
|
|
|
|
3Q
|
|
|
|
2Q
|
|
|
|
1Q
|
|
|
4Q
|
|
|
3Q
|
|
|
2Q
|
|
|
|
1Q
|
U.S. Division core earnings
|
|
$
|
|
366
|
|
$
|
|
361
|
|
$
|
|
343
|
|
$
|
|
440
|
|
$
|
293
|
|
$
|
288
|
|
$
|
247
|
|
$
|
|
257
|
Investment-related experience in excess of amounts included in core
earnings
|
|
|
|
161
|
|
|
|
404
|
|
|
|
65
|
|
|
|
263
|
|
|
367
|
|
|
348
|
|
|
156
|
|
|
|
155
|
Core earnings plus investment-related experience in excess of
amounts included in core earnings
|
|
$
|
|
527
|
|
$
|
|
765
|
|
$
|
|
408
|
|
$
|
|
703
|
|
$
|
660
|
|
$
|
636
|
|
$
|
403
|
|
$
|
|
412
|
Other items to reconcile core earnings to net income (loss) attributed
to
shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct impact of equity markets and interest rates and variable
annuity guarantee liabilities that are dynamically hedged
|
|
|
|
105
|
|
|
|
163
|
|
|
|
21
|
|
|
|
23
|
|
|
(104)
|
|
|
(224)
|
|
|
(199)
|
|
|
|
164
|
|
Impact of in-force product changes and recapture of reinsurance treaties
|
|
|
|
193
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
26
|
|
|
(25)
|
|
|
|
-
|
|
Tax items
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
170
|
|
|
-
|
|
|
-
|
|
|
|
-
|
Net income (loss) attributed to shareholders
|
|
$
|
|
825
|
|
$
|
|
928
|
|
$
|
|
429
|
|
$
|
|
726
|
|
$
|
726
|
|
$
|
438
|
|
$
|
179
|
|
$
|
|
576
|
(1)
|
The 2012 results were restated to reflect the retrospective application
of new IFRS accounting standards effective January 1, 2013. For a
detailed description of the change see our first quarter 2013 report to
shareholders.
|
Corporate and Other
|
|
Quarterly Results
|
C$ millions, unaudited
|
|
2013
|
|
2012 (restated)(1)
|
|
|
|
4Q
|
|
|
3Q
|
|
|
2Q
|
|
|
1Q
|
|
|
4Q
|
|
|
3Q
|
|
|
2Q
|
|
|
1Q
|
Corporate and Other core losses
(excluding expected cost of macro hedges and core investment
gains)
|
|
$
|
(138)
|
|
$
|
(135)
|
|
$
|
(105)
|
|
$
|
(128)
|
|
$
|
(62)
|
|
$
|
(103)
|
|
$
|
(67)
|
|
$
|
(113)
|
Expected cost of macro hedges
|
|
|
(53)
|
|
|
(84)
|
|
|
(128)
|
|
|
(148)
|
|
|
(140)
|
|
|
(124)
|
|
|
(118)
|
|
|
(107)
|
Investment-related experience included in core earnings
|
|
|
50
|
|
|
52
|
|
|
48
|
|
|
50
|
|
|
50
|
|
|
50
|
|
|
50
|
|
|
50
|
Total core losses
|
|
$
|
(141)
|
|
$
|
(167)
|
|
$
|
(185)
|
|
$
|
(226)
|
|
$
|
(152)
|
|
$
|
(177)
|
|
$
|
(135)
|
|
$
|
(170)
|
Investment-related experience in excess of amounts included in core
earnings
|
|
|
(47)
|
|
|
(44)
|
|
|
(56)
|
|
|
(22)
|
|
|
(48)
|
|
|
(15)
|
|
|
(15)
|
|
|
(44)
|
Core losses plus investment-related experience in excess of
amounts included in core earnings
|
|
$
|
(188)
|
|
$
|
(211)
|
|
$
|
(241)
|
|
$
|
(248)
|
|
$
|
(200)
|
|
$
|
(192)
|
|
$
|
(150)
|
|
$
|
(214)
|
Other items to reconcile core earnings to net income (loss) attributed
to
shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct impact of equity markets and interest rates
|
|
|
(305)
|
|
|
(325)
|
|
|
(407)
|
|
|
(735)
|
|
|
(332)
|
|
|
(120)
|
|
|
(168)
|
|
|
(595)
|
|
Changes in actuarial methods and assumptions, excluding URR
|
|
|
(133)
|
|
|
(252)
|
|
|
(35)
|
|
|
(69)
|
|
|
(87)
|
|
|
(1,006)
|
|
|
-
|
|
|
12
|
|
Goodwill impairment charge
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(200)
|
|
|
-
|
|
|
-
|
|
Closing adjustments on 2011 disposition of Life Retrocession Business
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(50)
|
|
|
-
|
|
Tax items and restructuring charge related to organizational design
|
|
|
-
|
|
|
-
|
|
|
24
|
|
|
-
|
|
|
37
|
|
|
-
|
|
|
-
|
|
|
18
|
Net loss attributed to shareholders
|
|
$
|
(626)
|
|
$
|
(788)
|
|
$
|
(659)
|
|
$
|
(1,052)
|
|
$
|
(582)
|
|
$
|
(1,518)
|
|
$
|
(368)
|
|
$
|
(779)
|
(1)
|
The 2012 results were restated to reflect the retrospective application
of new IFRS accounting standards effective January 1, 2013. For a
detailed description of the change see our first quarter 2013 report
to shareholders.
|
Net income (loss) attributed to shareholders in accordance with U.S.
GAAP is a non-GAAP profitability measure. It shows what the net income would
have been if the Company had applied U.S. GAAP as its primary financial
reporting basis. We consider this to be a relevant profitability
measure given our large U.S. domiciled investor base and for
comparability to our U.S. peers who report under U.S. GAAP.
Total equity in accordance with U.S. GAAP is a non-GAAP measure. It shows what the total equity would have been if
the Company had applied U.S. GAAP as its primary financial reporting
basis. We consider this to be a relevant measure given our large U.S.
domiciled investor base and for comparability to our U.S. peers who
report under U.S. GAAP.
Core return on common shareholders' equity ("Core ROE") is a non-GAAP profitability measure that presents core
earnings available to common shareholders as a percentage of the
capital deployed to earn the core earnings. The Company calculates Core
ROE using average common shareholders' equity.
Diluted core earnings per common share is core earnings available to common shareholders expressed per diluted
weighted average common share outstanding.
The Company also uses financial performance measures that are prepared
on a constant currency basis, which exclude the impact of currency fluctuations and which are
non-GAAP measures. Quarterly amounts stated on a constant currency
basis in this report are calculated, as appropriate, using the income
statement and balance sheet exchange rates effective for the fourth
quarter of 2013.
Premiums and deposits is a non-GAAP measure of top line growth. The Company calculates
premiums and deposits as the aggregate of (i) general fund premiums,
net of reinsurance, reported as premiums on the Consolidated Statements
of Income, (ii) segregated fund deposits, excluding seed money,
("deposits from policyholders"), (iii) adding back the premiums ceded
related to FDA coinsurance, (iv) investment contract deposits, (v)
mutual fund deposits, (vi) deposits into institutional advisory
accounts, (vii) premium equivalents for "administration services only"
group benefit contracts ("ASO premium equivalents"), (viii) premiums in
the Canadian Group Benefits reinsurance ceded agreement, and (ix) other
deposits in other managed funds.
Premiums and deposits
|
|
Quarterly Results
|
|
Full Year Results
|
C$ millions
|
|
|
4Q 2013
|
|
|
3Q 2013
|
|
|
4Q 2012
|
|
|
2013
|
|
|
2012
|
Net premium income
|
|
$
|
4,548
|
|
$
|
4,369
|
|
$
|
4,821
|
|
$
|
17,510
|
|
$
|
10,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits from policyholders
|
|
|
5,756
|
|
|
5,321
|
|
|
5,728
|
|
|
23,059
|
|
|
23,533
|
Premiums and deposits per financial statements
|
|
$
|
10,304
|
|
$
|
9,690
|
|
$
|
10,549
|
|
$
|
40,569
|
|
$
|
33,727
|
Add back premiums ceded relating to FDA coinsurance
|
|
|
-
|
|
|
-
|
|
|
2
|
|
|
-
|
|
|
7,229
|
Investment contract deposits
|
|
|
15
|
|
|
9
|
|
|
59
|
|
|
59
|
|
|
212
|
Mutual fund deposits
|
|
|
8,400
|
|
|
8,111
|
|
|
6,117
|
|
|
35,890
|
|
|
18,843
|
Institutional advisory account deposits
|
|
|
957
|
|
|
1,089
|
|
|
5,376
|
|
|
3,974
|
|
|
7,744
|
ASO premium equivalents
|
|
|
746
|
|
|
723
|
|
|
706
|
|
|
2,935
|
|
|
2,819
|
Group benefits ceded premiums
|
|
|
1,000
|
|
|
981
|
|
|
1,180
|
|
|
4,404
|
|
|
4,430
|
Other fund deposits
|
|
|
114
|
|
|
99
|
|
|
139
|
|
|
419
|
|
|
497
|
Total premiums and deposits
|
|
$
|
21,536
|
|
$
|
20,702
|
|
$
|
24,128
|
|
$
|
88,250
|
|
$
|
75,501
|
Currency impact
|
|
|
-
|
|
|
145
|
|
|
(229)
|
|
|
1,025
|
|
|
798
|
Constant currency premiums and deposits
|
|
$
|
21,536
|
|
$
|
20,847
|
|
$
|
23,899
|
|
$
|
89,275
|
|
$
|
76,299
|
Funds under management is a non-GAAP measure of the size of the Company. It represents the
total of the invested asset base that the Company and its customers
invest in.
Funds under management
(C$ millions)
|
|
|
|
|
|
|
|
|
|
|
|
As at
|
|
|
|
|
Dec 31, 2013
|
|
|
Sept 30, 2013
|
|
|
(restated)(1)
Dec 31, 2012
|
Total invested assets
|
|
|
|
$
|
232,709
|
|
$
|
229,221
|
|
$
|
227,932
|
Segregated funds net assets
|
|
|
|
|
239,871
|
|
|
226,975
|
|
|
209,197
|
Funds under management per financial statements
|
|
|
|
$
|
472,580
|
|
$
|
456,196
|
|
$
|
437,129
|
Mutual funds
|
|
|
|
|
91,118
|
|
|
81,049
|
|
|
59,979
|
Institutional advisory accounts (excluding segregated funds)
|
|
|
|
|
30,284
|
|
|
28,686
|
|
|
26,692
|
Other funds
|
|
|
|
|
4,951
|
|
|
8,721
|
|
|
7,358
|
Total fund under management
|
|
|
|
$
|
598,933
|
|
$
|
574,652
|
|
$
|
531,158
|
Currency impact
|
|
|
|
|
-
|
|
|
12,551
|
|
|
20,876
|
Constant currency funds under management
|
|
|
|
$
|
598,933
|
|
$
|
587,203
|
|
$
|
552,034
|
(1)
|
The 2012 results were restated to reflect the retrospective application
of new IFRS accounting standards effective January 1, 2013. For a
detailed description of the change see our first quarter 2013 report to
shareholders.
|
Capital The definition we use for capital, a non-GAAP measure, serves as a
foundation of our capital management activities at the MFC level. For
regulatory reporting purposes, the numbers are further adjusted for
various additions or deductions to capital as mandated by the
guidelines used by OSFI. Capital is calculated as the sum of (i) total
equity excluding AOCI on cash flow hedges and (ii) liabilities for
preferred shares and capital instruments.
Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(C$ millions)
As at
|
|
|
|
|
|
|
Dec 31, 2013
|
|
|
Sept 30, 2013
|
|
|
(restated)(1)
Dec 31, 2012
|
Total equity
|
|
|
|
|
|
$
|
29,033
|
|
$
|
26,881
|
|
$
|
25,159
|
Add AOCI loss on cash flow hedges
|
|
|
|
|
|
|
84
|
|
|
115
|
|
|
185
|
Add liabilities for preferred shares and capital instruments
|
|
|
|
|
|
|
4,385
|
|
|
4,119
|
|
|
3,903
|
Total capital
|
|
|
|
|
|
$
|
33,502
|
|
$
|
31,115
|
|
$
|
29,247
|
(1)
|
The 2012 results were restated to reflect the retrospective application
of new IFRS accounting standards effective January 1, 2013. For a
detailed description of the change see our first quarter 2013 report to
shareholders.
|
New business embedded value ("NBEV") is the change in shareholders' economic value as a result of
sales in the reporting period. NBEV is calculated as the present value
of expected future earnings, after the cost of capital, on actual new
business sold in the period using future mortality, morbidity,
policyholder behaviour, expense and investment assumptions that are
consistent with the assumptions used in the valuation of our policy
liabilities.
The principal economic assumptions used in the NBEV calculations in the
fourth quarter were as follows:
|
|
|
|
|
|
|
|
|
Canada
|
|
|
|
U.S.
|
|
|
|
Hong Kong
|
|
|
|
Japan
|
MCCSR ratio
|
|
|
|
|
|
|
|
|
150%
|
|
|
|
150%
|
|
|
|
150%
|
|
|
|
150%
|
Discount rate
|
|
|
|
|
|
|
|
|
8.25%
|
|
|
|
8.50%
|
|
|
|
9.00%
|
|
|
|
6.25%
|
Jurisdictional income tax rate
|
|
|
|
|
|
|
|
|
26.5%
|
|
|
|
35%
|
|
|
|
16.5%
|
|
|
|
31%
|
Foreign exchange rate
|
|
|
|
|
|
|
|
|
n/a
|
|
|
|
1.049386
|
|
|
|
0.135347
|
|
|
|
0.010461
|
Yield on surplus assets
|
|
|
|
|
|
|
|
|
4.50%
|
|
|
|
4.50%
|
|
|
|
4.50%
|
|
|
|
2.00%
|
Sales are measured according to product type:
For total individual insurance, sales include 100 per cent of new
annualized premiums and 10 per cent of both excess and single premiums.
For individual insurance, new annualized premiums reflect the
annualized premium expected in the first year of a policy that requires
premium payments for more than one year. Sales are reported gross
before the impact of reinsurance. Single premium is the lump sum
premium from the sale of a single premium product, e.g. travel
insurance.
For group insurance, sales include new annualized premiums and
administrative services only premium equivalents on new cases, as well
as the addition of new coverages and amendments to contracts, excluding
rate increases.
For individual wealth management contracts, all new deposits are
reported as sales. This includes individual annuities, both fixed and
variable; mutual funds; college savings 529 plans; and authorized bank
loans and mortgages. As we have discontinued sales of new VA contracts
in the U.S., beginning in the first quarter of 2013, subsequent
deposits into existing U.S. VA contracts will not be considered sales.
For group pensions/retirement savings, sales of new regular premiums and
deposits reflect an estimate of expected deposits in the first year of
the plan with the Company. Single premium sales reflect the assets
transferred from the previous plan provider. Sales include the impact
of the addition of a new division or of a new product to an existing
client. Total sales include both new regular and single premiums and
deposits.
Total Annualized Insurance and Wealth Premium Equivalent ("APE") Basis
Sales are sales that comprise 100 per cent of regular premium/deposit sales
and 10 per cent of single premium/deposit sales for both insurance and
wealth management products.
F2 Key Planning assumptions and uncertainties
Manulife's 2016 management objectives20 do not constitute guidance and are based on certain key planning
assumptions, including: current accounting and regulatory capital
standards; no acquisitions; equity market and interest rate assumptions
consistent with our long term assumptions, and favourable
investment-related experience included in core earnings.
__________________________
20 See "Caution regarding forward-looking statements" below.
F3 Caution regarding forward-looking statements
From time to time, MFC makes written and/or oral forward-looking
statements, including in this document. In addition, our
representatives may make forward-looking statements orally to analysts,
investors, the media and others. All such statements are made pursuant
to the "safe harbour" provisions of Canadian provincial securities laws
and the U.S. Private Securities Litigation Reform Act of 1995. The
forward-looking statements in this document include, but are not
limited to, statements with respect to our 2016 management objectives
for core earnings and core ROE, the integration of our John Hancock
Life and Long-term Care businesses, our 2016 goal for pre-tax run rate
savings related to our Efficiency & Effectiveness initiative, and the
potential impact of a new Canadian Actuarial Standards Board standard
related to economic reinvestment assumptions used in the valuation of
policy liabilities.
The forward-looking statements in this document also relate to, among
other things, our objectives, goals, strategies, intentions, plans,
beliefs, expectations and estimates, and can generally be identified by
the use of words such as "may", "will", "could", "should", "would",
"likely", "suspect", "outlook", "expect", "intend", "estimate",
"anticipate", "believe", "plan", "forecast", "objective", "seek",
"aim", "continue", "goal", "restore", "embark" and "endeavour" (or the
negative thereof) and words and expressions of similar import, and
include statements concerning possible or assumed future results.
Although we believe that the expectations reflected in such
forward-looking statements are reasonable, such statements involve
risks and uncertainties, and undue reliance should not be placed on
such statements and they should not be interpreted as confirming market
or analysts' expectations in any way.
Certain material factors or assumptions are applied in making
forward-looking statements, including in the case of our 2016
management objectives for core earnings and core ROE, the assumptions
described under "Key Planning Assumptions and Uncertainties" in our
2012 Annual Report and in this document, and actual results may differ
materially from those expressed or implied in such statements.
Important factors that could cause actual results to differ materially
from expectations include but are not limited to: the factors
identified in "Key Planning Assumptions and Uncertainties" in our 2012
Annual Report and in this document; general business and economic
conditions (including but not limited to the performance, volatility
and correlation of equity markets, interest rates, credit and swap
spreads, currency rates, investment losses and defaults, market
liquidity and creditworthiness of guarantors, reinsurers and
counterparties); changes in laws and regulations; changes in accounting
standards; our ability to execute strategic plans and changes to
strategic plans; downgrades in our financial strength or credit
ratings; our ability to maintain our reputation; impairments of
goodwill or intangible assets or the establishment of provisions
against future tax assets; the accuracy of estimates relating to
morbidity, mortality and policyholder behaviour; the accuracy of other
estimates used in applying accounting policies and actuarial methods;
our ability to implement effective hedging strategies and unforeseen
consequences arising from such strategies; our ability to source
appropriate assets to back our long dated liabilities; level of
competition and consolidation; our ability to market and distribute
products through current and future distribution channels; unforeseen
liabilities or asset impairments arising from acquisitions and
dispositions of businesses; the realization of losses arising from the
sale of investments classified as available-for-sale; our liquidity,
including the availability of financing to satisfy existing financial
liabilities on expected maturity dates when required; obligations to
pledge additional collateral; the availability of letters of credit to
provide capital management flexibility; accuracy of information
received from counterparties and the ability of counterparties to meet
their obligations; the availability, affordability and adequacy of
reinsurance; legal and regulatory proceedings, including tax audits,
tax litigation or similar proceedings; our ability to adapt products
and services to the changing market; our ability to attract and retain
key executives, employees and agents; the appropriate use and
interpretation of complex models or deficiencies in models used;
political, legal, operational and other risks associated with our
non-North American operations; acquisitions and our ability to complete
acquisitions including the availability of equity and debt financing
for this purpose; the disruption of or changes to key elements of the
Company's or public infrastructure systems; environmental concerns; and
our ability to protect our intellectual property and exposure to claims
of infringement. Additional information about material risk factors
that could cause actual results to differ materially from expectations
and about material factors or assumptions applied in making
forward-looking statements may be found in the body of this document as
well as under "Risk Factors" in our most recent Annual Information
Form, under "Risk Management", "Risk Management and Risk Factors" and
"Critical Accounting and Actuarial Policies" in the Management's
Discussion and Analysis in our most recent annual report, under "Risk
Management and Risk Factors Update" and "Critical Accounting and
Actuarial Policies" in the Management's Discussion and Analysis in our
most recent interim report, in the "Risk Management" note to
consolidated financial statements in our most recent annual and interim
reports and elsewhere in our filings with Canadian and U.S. securities
regulators. The forward-looking statements in this document are, unless
otherwise indicated, stated as of the date hereof and are presented for
the purpose of assisting investors and others in understanding our
financial position and results of operations as well as our objectives
and strategic priorities, and may not be appropriate for other
purposes. We do not undertake to update any forward-looking statements,
except as required by law.
Consolidated Statements of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Canadian $ in millions except per share information, unaudited)
|
|
|
|
For the years ended
|
|
|
|
|
December 31
|
|
|
|
|
|
|
|
(restated)(1)
|
|
|
|
|
|
2013
|
|
|
2012
|
Revenue
|
|
|
|
|
|
|
|
|
Net premium income prior to FDA coinsurance(2)
|
|
|
|
$
|
17,510
|
|
$
|
17,423
|
Premiums ceded relating to FDA coinsurance
|
|
|
|
|
-
|
|
|
(7,229)
|
Investment income
|
|
|
|
|
|
|
|
|
|
Investment income
|
|
|
|
|
9,870
|
|
|
9,802
|
|
Realized/unrealized gains (losses) on assets supporting insurance and
investment
contract liabilities and macro hedge program(3)
|
|
|
|
|
(17,617)
|
|
|
1,825
|
Other revenue
|
|
|
|
|
8,909
|
|
|
7,289
|
Total revenue
|
|
|
|
$
|
18,672
|
|
$
|
29,110
|
Contract benefits and expenses
|
|
|
|
|
|
|
|
|
To contractholders and beneficiaries
|
|
|
|
|
|
|
|
|
|
Death, disability and other claims
|
|
|
|
$
|
10,005
|
|
$
|
9,527
|
|
Maturity and surrender benefits
|
|
|
|
|
4,683
|
|
|
4,786
|
|
Annuity payments
|
|
|
|
|
3,504
|
|
|
3,244
|
|
Policyholder dividends and experience rating refunds
|
|
|
|
|
1,103
|
|
|
1,092
|
|
Net transfers from segregated funds
|
|
|
|
|
(624)
|
|
|
(718)
|
|
Change in insurance contract liabilities(3)
|
|
|
|
|
(10,130)
|
|
|
13,040
|
|
Change in investment contract liabilities
|
|
|
|
|
162
|
|
|
71
|
|
Ceded benefits and expenses
|
|
|
|
|
(6,376)
|
|
|
(5,924)
|
|
Change in reinsurance assets
|
|
|
|
|
1,526
|
|
|
(8,065)
|
Net benefits and claims
|
|
|
|
$
|
3,853
|
|
$
|
17,053
|
|
General expenses
|
|
|
|
|
4,624
|
|
|
4,415
|
|
Investment expenses
|
|
|
|
|
1,172
|
|
|
1,034
|
|
Commissions
|
|
|
|
|
3,920
|
|
|
3,932
|
|
Interest expense
|
|
|
|
|
1,045
|
|
|
934
|
|
Net premium taxes
|
|
|
|
|
311
|
|
|
299
|
|
Goodwill impairment
|
|
|
|
|
-
|
|
|
200
|
Total contract benefits and expenses
|
|
|
|
$
|
14,925
|
|
$
|
27,867
|
Income (loss) before income taxes
|
|
|
|
$
|
3,747
|
|
$
|
1,243
|
Income tax (expense) recovery
|
|
|
|
|
(581)
|
|
|
492
|
Net income
|
|
|
|
$
|
3,166
|
|
$
|
1,735
|
|
Less:
|
Net income attributed to non-controlling interests
|
|
|
|
|
48
|
|
|
28
|
|
|
Net loss attributed to participating policyholders
|
|
|
|
|
(12)
|
|
|
(103)
|
Net income attributed to shareholders
|
|
|
|
$
|
3,130
|
|
$
|
1,810
|
|
Preferred share dividends
|
|
|
|
|
(131)
|
|
|
(112)
|
Common shareholders' net income
|
|
|
|
$
|
2,999
|
|
$
|
1,698
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share
|
|
|
|
$
|
1.63
|
|
$
|
0.94
|
Diluted earnings per common share
|
|
|
|
$
|
1.62
|
|
$
|
0.92
|
(1)
|
The 2012 results have been restated to reflect the retrospective
application of new IFRS accounting standards effective January 1, 2013.
For a detailed description of the change see our first quarter 2013
report to shareholders.
|
(2)
|
In 2012, the Company entered into a coinsurance agreement, effective
April 1, 2012, to reinsure 89 per cent of its book value fixed deferred
annuity business from John Hancock Life Insurance Company (U.S.A.) and
a separate agreement, effective July 1, 2012, to reinsure 90 per cent
of its book value fixed deferred annuity business from John Hancock
Life Insurance Company of New York. Under the terms of both of these
agreements, the Company will maintain the responsibility for servicing
of the policies.
|
(3)
|
The realized and unrealized gains (losses) on assets supporting
insurance and investment contract liabilities are mostly offset by
changes in the measurement of our policy obligations. For fixed income
assets supporting insurance and investment contracts, equities
supporting pass through products and derivatives related to variable
annuity hedging programs, the impact of realized/unrealized gains
(losses) on the assets is largely offset in the change in insurance and
investment contract liabilities. The realized/unrealized gains (losses)
on assets supporting insurance and investment contract liabilities
related primarily to the impact of interest rate changes on bond and
fixed income derivative positions as well as interest rate swaps
supporting the dynamic hedge program. See Section B6 above.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statements of Financial Position
|
|
|
|
|
|
|
|
|
|
|
|
|
(Canadian $ in millions, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(restated)1
|
As at December 31
|
|
|
|
|
|
|
|
2013
|
|
|
|
2012
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Invested assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and short-term securities
|
|
|
|
|
|
$
|
|
13,630
|
|
$
|
|
13,386
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonds
|
|
|
|
|
|
|
|
114,957
|
|
|
|
119,159
|
|
|
Equities
|
|
|
|
|
|
|
|
13,075
|
|
|
|
11,035
|
|
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgages
|
|
|
|
|
|
|
|
37,558
|
|
|
|
35,082
|
|
|
Private placements
|
|
|
|
|
|
|
|
21,015
|
|
|
|
20,275
|
|
|
Policy loans
|
|
|
|
|
|
|
|
7,370
|
|
|
|
6,793
|
|
|
Bank loans
|
|
|
|
|
|
|
|
1,901
|
|
|
|
2,142
|
|
Real estate
|
|
|
|
|
|
|
|
9,708
|
|
|
|
8,513
|
|
Other invested assets
|
|
|
|
|
|
|
|
13,495
|
|
|
|
11,547
|
Total invested assets
|
|
|
|
|
|
$
|
|
232,709
|
|
$
|
|
227,932
|
Other assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued investment income
|
|
|
|
|
|
$
|
|
1,813
|
|
$
|
|
1,792
|
|
Outstanding premiums
|
|
|
|
|
|
|
|
734
|
|
|
|
1,009
|
|
Derivatives
|
|
|
|
|
|
|
|
9,673
|
|
|
|
14,707
|
|
Goodwill and intangible assets
|
|
|
|
|
|
|
|
5,298
|
|
|
|
5,113
|
|
Reinsurance assets
|
|
|
|
|
|
|
|
17,443
|
|
|
|
18,681
|
|
Deferred tax asset
|
|
|
|
|
|
|
|
2,763
|
|
|
|
3,177
|
|
Miscellaneous
|
|
|
|
|
|
|
|
3,324
|
|
|
|
3,390
|
Total other assets
|
|
|
|
|
|
$
|
|
41,048
|
|
$
|
|
47,869
|
Segregated funds net assets
|
|
|
|
|
|
$
|
|
239,871
|
|
$
|
|
209,197
|
Total assets
|
|
|
|
|
|
$
|
|
513,628
|
|
$
|
|
484,998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Policy liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance contract liabilities
|
|
|
|
|
|
$
|
|
193,242
|
|
$
|
|
198,395
|
|
Investment contract liabilities
|
|
|
|
|
|
|
|
2,524
|
|
|
|
2,420
|
Bank deposits
|
|
|
|
|
|
|
|
19,869
|
|
|
|
18,857
|
Deferred tax liability
|
|
|
|
|
|
|
|
617
|
|
|
|
603
|
Derivatives
|
|
|
|
|
|
|
|
8,929
|
|
|
|
7,500
|
Other liabilities
|
|
|
|
|
|
|
|
10,383
|
|
|
|
13,918
|
|
|
|
|
|
|
$
|
|
235,564
|
|
$
|
|
241,693
|
Long-term debt
|
|
|
|
|
|
|
|
4,775
|
|
|
|
5,046
|
Liabilities for preferred shares and capital instruments
|
|
|
|
|
|
|
|
4,385
|
|
|
|
3,903
|
Segregated funds net liabilities
|
|
|
|
|
|
|
|
239,871
|
|
|
|
209,197
|
Total liabilities
|
|
|
|
|
|
$
|
|
484,595
|
|
$
|
|
459,839
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued share capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred shares
|
|
|
|
|
|
$
|
|
2,693
|
|
$
|
|
2,497
|
|
Common shares
|
|
|
|
|
|
|
|
20,234
|
|
|
|
19,886
|
Contributed surplus
|
|
|
|
|
|
|
|
256
|
|
|
|
257
|
Shareholders' retained earnings
|
|
|
|
|
|
|
|
5,294
|
|
|
|
3,256
|
Shareholders' accumulated other comprehensive income (loss)
|
|
|
|
|
|
|
|
46
|
|
|
|
(1,184)
|
Total shareholders' equity
|
|
|
|
|
|
$
|
|
28,523
|
|
$
|
|
24,712
|
Participating policyholders' equity
|
|
|
|
|
|
|
|
134
|
|
|
|
146
|
Non-controlling interests
|
|
|
|
|
|
|
|
376
|
|
|
|
301
|
Total equity
|
|
|
|
|
|
$
|
|
29,033
|
|
$
|
|
25,159
|
Total liabilities and equity
|
|
|
|
|
|
$
|
|
513,628
|
|
$
|
|
484,998
|
(1)
|
The December 31, 2012 amounts have been restated to reflect the
retrospective application of new IFRS accounting standards effective
January 1, 2013. For a detailed description of the change see our first
quarter 2013 report to shareholders.
|
|
|
SOURCE Manulife Financial Corporation