Manulife reports 3Q15 core earnings of $870 million, strong top line growth, and continued positive net flows in its wealth and asset management businesses

C$ unless otherwise stated
TSX/NYSE/PSE: MFC
SEHK: 945 

Performance and strategic highlights:

  • Asia Division - Achieved record insurance sales driven by double digit growth in Japan, Hong Kong and Asia Other businesses; reported lower gross flows compared with 3Q14 in our wealth and asset management businesses due to weaker investor confidence, particularly in mainland China; announced an agreement to acquire Standard Chartered Bank's existing pension businesses in Hong Kong and to become its exclusive Mandatory Provident Fund ("MPF") distribution partner for a 15-year period; launched ManulifeMOVE in Hong Kong, a wellness initiative that rewards customers for active living; successfully launched a digital sales channel in mainland China.

  • Canadian Division - Delivered robust gross flows in our wealth and asset management businesses that were nearly double the prior year despite heightened market volatility; generated strong individual insurance sales driven by recent product launches and enhancements; launched the DrugWatch program, an innovative solution designed to ensure Group Benefits clients get value for money on higher cost drugs; enhanced our customer experience as the first company in Canada to use voice biometrics as well as natural language understanding in a single interactive voice response system offered in both English and French, allowing customers to use their voice as their password.

  • U.S. Division - Delivered record mutual fund gross flows driven by institutional allocations and continued success in alternative asset classes; generated strong organic growth in our mutual fund business while the overall industry declined1; achieved strong gross flows in Retirement Plan Services in both our small- and mid-market segments; awarded SMA "Innovation in Action" award for our Vitality product; entered the exchange traded fund ("ETF") market with the launch of six ETFs.

  • Global Wealth and Asset Management - Reported $477 billion in assets under management and administration for our wealth and asset management businesses; delivered strong net flows of $4.5 billion despite challenging equity markets, marking our 23rd consecutive quarter of positive net flows; launched a UCITS2 fund structure to support our institutional asset management expansion into the European market.
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Source:  Strategic Insight:  ICI Confidential.  Direct Sold mutual funds, fund-of-funds and ETFs are excluded. Organic sales growth rate is calculated as net new flows divided by beginning period assets. Industry data through September 2015.
2   Undertakings for Collective Investment in Transferable Securities.    
     

TORONTO, Nov. 12, 2015 /CNW/ - Manulife Financial Corporation ("MFC") today announced net income attributed to shareholders of $622 million for the third quarter of 2015 ("3Q15"), fully diluted earnings per common share of $0.30 and return on common shareholders' equity ("ROE") of 6.5%, compared with $1,100 million, $0.57, and 14.8%, respectively, for the corresponding period in 2014. The decline in net income attributed to shareholders was primarily due to fair value losses related to oil and gas investments in 3Q15 compared with overall strong investment-related experience in the third quarter of 2014 ("3Q14").  In 3Q15, MFC generated core earnings3 of $870 million, fully diluted core earnings per common share3 of $0.43 and core return on common shareholders' equity ("Core ROE")3 of 9.2%, compared with $755 million, $0.39, and 10.1%, respectively, for the corresponding period in 2014.

Donald Guloien, President and Chief Executive Officer, stated, "We delivered strong operating results in the third quarter, including double digit growth in insurance sales and positive net flows in our wealth and asset management businesses. Core earnings increased 31% from the prior year, before giving effect to investment-related impacts, and 15% including these impacts. Net income was negatively impacted by investment experience, principally oil and gas valuation changes, as well as the charges associated with our annual actuarial review."

Steve Roder, Chief Financial Officer, said, "We continue to execute on our long-term growth strategy. In the third quarter, we announced an agreement to acquire Standard Chartered's Hong Kong pension businesses and to become their exclusive Mandatory Provident Fund distribution partner. We also delivered strong insurance sales in Asia, which fueled growth in embedded value and margin expansion."

"We completed our annual review of actuarial methods and assumptions in the third quarter, resulting in a reserve strengthening of $285 million. We also strengthened our financial flexibility by significantly improving our financial leverage, while maintaining a prudently conservative capital ratio," added Mr. Roder.

Highlights for the Third Quarter of 2015:

  • Reported net income attributed to shareholders of $622 million, down $478 million from 3Q14. In 3Q15, net income attributed to shareholders included core earnings of $870 million and net charges excluded from core earnings of $248 million.  As noted above, the decline was primarily due to fair value losses related to oil and gas investments in 3Q15 compared with overall strong investment-related experience in 3Q14.  In 3Q15, we reported net charges relate
    d to changes in actuarial methods and assumptions of $285 million and a net gain of $232 million for the direct impact of equity markets and interest rates. 

  • Delivered core earnings of $870 million, up $115 million or 15% from 3Q14. Excluding investment-related experience, core earnings grew by 31% compared to 3Q14, reflecting $47 million related to our recent acquisitions, as well as strong sales and a favourable business mix, particularly in Asia, and the strengthening of the U.S. dollar compared with the Canadian dollar, partially offset by unfavourable policyholder experience in North America.  Higher than average gains on available-for-sale equities and favourable tax items also positively impacted core earnings this quarter.

  • Reported investment-related experience charges of $220 million. The investment-related experience charges were driven by fair value adjustments to our oil and gas investments, partially offset by gains related to fixed-income redeployment, favourable credit experience, and other invested assets, including private equities and real estate. Because of the oil and gas charges our year-to-date investment-related experience turned from favourable to unfavourable in the third quarter. In accordance with our definition of core earnings (see section G1 - "Performance and Non-GAAP Measures"), we included $51 million of investment-related experience charges in core earnings, which fully offset the second quarter year-to-date core investment gains.

  • Achieved insurance sales3of $803 million, an increase of 12%4 compared with 3Q14. Record Asia insurance sales increased 19%, driven by continued expansion and diversification of our distribution channels and successful product launches.  Canadian insurance sales were in line with the previous year, as strong Retail Insurance sales from product launches and enhancements were offset by normal variability in large-case Group Benefits sales. U.S. insurance sales increased 2%, and have continued to build momentum throughout the year.

  • Generated net flows5 of $4.5 billion in our wealth and asset management businesses, an increase of $2.1 billion from 3Q14 levels. This marks the 23rd consecutive quarter of positive net flows into our wealth and asset management businesses.  Driving the strong net flows were robust gross flows5 of $25.9 billion, up 53%6 from 3Q14 (up 32% excluding recently acquired businesses), and solid retention. Asia gross flows declined compared to the prior year period due to unfavourable market sentiment and the timing of fund launches which were partially offset by an increase in pension sales in Hong Kong and mutual funds sales in mainland China.  Canadian gross flows nearly doubled, driven by strong mutual fund gross flows, large-case group retirement activity and the impact of the recent Standard Life acquisition. U.S. gross flows increased 55%, driven by record quarterly gross flows at John Hancock Investments and the success of the recently acquired Retirement Plan Services business. Manulife Asset Management ("MAM") gross flows more than doubled driven by continued success in the institutional sales channel from both new and existing clients.

  • Delivered Other Wealth sales of $1.8 billion in 3Q15, an increase of 82% compared with 3Q14 (up 53% excluding recently acquired businesses). Other Wealth sales in Asia almost doubled driven by expanded distribution and recent product launches, while Canada benefited from continued momentum and the inclusion of Standard Life's segregated funds business.7

  • Generated New Business Value5 of $287 million in 3Q15, up 65% from 3Q14.  All three operating divisions contributed to the growth, reflecting higher sales volumes, improved business mix, and improved product margins most notably in Japan. In Asia, new business value increased 67% on a constant currency basis, which drove an increase in new business value margins5 to 34.3% in 3Q15, from 25.5% in the prior year.

  • Achieved assets under management and administration5 of $888 billion at September 30, 2015.  Assets under management and administration ("AUMA") increased 19%6 from the prior year. Wealth and asset management AUMA increased $179 billion from the prior year to $477 billion, driven by strong net inflows and $109 billion related to recent acquisitions.

  • Reported a Minimum Continuing Capital and Surplus Requirements ("MCCSR") ratio of 226% for The Manufacturers Life Insurance Company ("MLI") as at September 30, 2015, down 10 points from 236% as at June 30, 2015. The decline was primarily due to the maturity of $1.7 billion in debt.

  • Reduced MFC's financial leverage ratio to 22.7% at September 30, 2015 compared with 26.2% as at June 30, 2015, reflecting the maturity of $1.7 billion in debt and currency movements.

  • Strengthened reserves following the annual actuarial review, resulting in a $285 million net charge to net income. The 3Q15 charge was primarily attributable to updates to lapse rates in John Hancock Life and in Japan, partially offset by updates to morbidity assumptions in Japan.

  • Announced an agreement with Standard Chartered to enter into a 15-year distribution partnership providing Manulife the exclusive right to offer its MPF products to Standard Chartered's customers in Hong Kong. As part of the arrangement, Manulife will acquire Standard Chartered's existing MPF and Occupational Retirement Schemes Ordinance ("ORSO") businesses, and the related investment management entity.8

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3   This item is a non-GAAP measure. See "Performance and Non-GAAP Measures" below.
4   Growth (declines) in sales, gross flows and assets under management and administration are stated on a constant currency basis. Constant currency basis is a non-GAAP measure. See "Performance and Non-GAAP Measures" below.
5    This item is a non-GAAP measure.  See "Performance and Non-GAAP Measures" below.
Growth (declines) in sales, gross flows and assets under management and administration are stated on a constant currency basis. Constant currency basis is a non-GAAP measure. See "Performance and Non-GAAP Measures" below.
7   The U.S. Division does not have any products for sale in this category.
8   See "Caution regarding forward-looking statements" below.

Financial Highlights

        Quarterly Results     YTD Results
(C$ millions, unless otherwise stated, unaudited)       3Q 2015     2Q 2015     3Q 2014       2015       2014
Net income attributed to shareholders       $ 622     $ 600     $ 1,100     $ 1,945     $ 2,861
Preferred share dividends         (29)       (29)       (28)       (87)       (98)
Common shareholders' net income       $ 593     $ 571     $ 1,072     $ 1,858     $ 2,763
Reconciliation of core earnings to net income
attributed to shareholders:
                                         
Core earnings(1)       $ 870     $ 902     $ 755     $ 2,569     $ 2,175
  Investment-related experience outside of core earnings(2)         (169)       77       320       (169)       762
Core earnings and investment-related experience
outside of core earnings
      $ 701     $ 979     $ 1,075     $ 2,400     $ 2,937
                                           
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
        232       (309)       70       (64)       35
  Changes in actuarial methods and assumptions         (285)       (47)       (69)       (354)       (139)
  Other items         (26)       (23)       24       (37)       28
Net income attributed to shareholders       $ 622     $ 600     $ 1,100     $ 1,945     $ 2,861
Basic earnings per common share (C$)       $ 0.30     $ 0.29     $ 0.58     $ 0.95     $ 1.49
Diluted earnings per common share (C$)       $ 0.30     $ 0.29     $ 0.57     $ 0.94     $ 1.48
Diluted core earnings per common share (C$)(1)       $ 0.43     $ 0.44     $ 0.39     $ 1.26     $ 1.11
Return on common shareholders' equity ("ROE")         6.5%       6.4%       14.8%       7.1%       13.3%
Core ROE(1)         9.2%       9.8%       10.1%       9.5%       10.0%
Assets under management and administration (C$ billions)(1)       $ 888     $ 883     $ 663     $ 888     $ 663

(1)  This item is a non-GAAP measure. See "Performance and Non-GAAP Measures" below.
(2)  In 3Q15 we also included a $51 million charge in core earnings for investment-related experience, offsetting the $51 million of core investment gains reported in 2Q15, compared with $50 million of core investment gains in 3Q14. Total investment-related experience in 3Q15 was a net charge of $220 million.

SALES AND BUSINESS GROWTH

Asia Division

Roy Gori, Senior Executive Vice President and General Manager, Asia Division stated, "In the third quarter, we delivered another strong quarter with record insurance sales9 and significant growth in both core earnings and new business value. This performance reflects a series of customer needs-focused product initiatives and continued expansion of our distribution channels.  Wealth and asset management gross inflows were unfavourably impacted by market uncertainty which has affected a number of markets in Asia. Our key achievements in the quarter include the launch of ManulifeMOVE in Hong Kong, a wellness initiative that rewards customers for living active lifestyles;  the start of insurance sales through WeChat in mainland China, one of the country's most popular messaging apps; and the announcement of a transaction with Standard Chartered to acquire its Hong Kong pension business and enter into a 15-year exclusive distribution agreement for Mandatory Provident Fund products, to further strengthen our position as a retirement expert in Hong Kong."

Insurance sales of US$379 million in 3Q15 were 19% higher than 3Q14, with double digit growth in most territories and record sales in Asia Other. Year-to-date sales of US$1,091 million were 31% higher than the same period of 2014. (Percentages quoted below are for the period 3Q15 compared with 3Q14, unless stated otherwise.)

  • Japan insurance sales in 3Q15 were US$160 million, a 14% increase driven by the continued success of corporate products, higher retail sales and expansion of our distribution reach.
  • Hong Kong insurance sales in 3Q15 were US$97 million, a 20% increase reflecting continued momentum following product launches in 2014 and the first half of 2015, coupled with successful sales campaigns.
  • Indonesia insurance sales in 3Q15 were US$21 million, a 13% decrease as a result of a challenging economic environment.
  • Asia Other (excludes Japan, Hong Kong and Indonesia) insurance sales in 3Q15 were US$101 million, a 40% increase driven by the success of new products and continued strong growth in most markets, including Singapore, in part from our strengthened relationship with DBS Bank.

Wealth and Asset Management ("WAM") gross flows of US$1.9 billion in 3Q15 were 8% lower than 3Q14. Year-to-date gross flows of US$9.7 billion were 79% higher than the same period of 2014. (Percentages quoted below are for the period 3Q15 compared with 3Q14, unless stated otherwise.)

  • Japan gross flows in 3Q15 of US$68 million decreased 71% reflecting the timing of fund launches.
  • Hong Kong gross flows in 3Q15 of US$660 million increased 14%, driven by the continued growth of our pension business, reflecting our position as a market leader10.
  • Indonesia gross flows in 3Q15 of US$111 million decreased 41%. Weaker mutual fund sales as a result of unfavourable market conditions were partially offset by increased pension business sales.
  • Asia Other gross flows of US$1.0 billion were comparable to last year. While unfavourable market conditions resulted in net outflows of US$2.6 billion in the quarter, year-to-date 2015 net flows remained positive.

Other Wealth sales of US$813 million in 3Q15 were 93% higher compared with 3Q14. Year-to-date sales of US$2.1 billion were 106% higher than the same period of 2014. Other wealth sales growth was mainly driven by Japan where both single and regular premium sales increased as a result of recent product launches and expanded distribution.

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9   Record insurance sales were on a constant currency basis. Constant currency basis is a non-GAAP measure. See "Performance and Non-GAAP Measures" below.
10   As per Gadbury Group MPF Market Shares Report, Manulife is ranked 1st in net cashflows, for the 3 months ended June 30, 2015 and ranked 2nd in MPF assets, as at June 30, 2015.

Canadian Division 

Marianne Harrison, Senior Executive Vice President and General Manager, Canadian Division stated, "During the quarter we introduced new technology to enable a customer's voice to act as their password and better direct their inquiries, providing a faster, more secure and better overall experience. We are proud to be the first company in Canada to introduce voice biometrics as well as natural language understanding in a single interactive voice response system offered in both English and French. We also launched the DrugWatch program, which is an innovative solution designed to ensure Group Benefits clients get value for money on higher cost drugs. In addition, we continued to make steady progress on the Standard Life integration."

Ms. Harrison added, "Wealth and Asset Management flows nearly doubled from prior year due to higher large-case sales in Group Retirement Solutions, the contribution from Standard Life products and strong mutual fund sales. Our Retail Insurance business delivered strong sales driven by recent product launches and enhancements to our universal life and critical illness products."

Wealth and Asset Management gross flows in 3Q15 were $4.2 billion, an increase of 96% compared with 3Q14 (55% excluding acquired  business). This increase was driven by large-case sales in Group Retirement Solutions and strong mutual fund sales. Year-to-date gross flows were $12.5 billion, an increase of $4.8 billion over the same period in 2014.

  • Mutual Funds assets under management ("MF AUM")11 and other funds assets under management were $43.2 billion at September 30, 2015, an increase of 36% compared with September 30, 2014 (15% excluding acquired business). Gross flows of $2.0 billion in 3Q15 increased $0.7 billion or 51% compared with 3Q14 (34% excluding acquired business).
  • Group Retirement Solutions gross flows of $2.2 billion in 3Q15 increased by 170% compared with 3Q14 (91% excluding acquired business). The increase was primarily due to large-case sales. 

Other Wealth sales of $781 million in 3Q15 were $321 million higher than 3Q14 driven by growth in segregated fund sales. On a year-to-date basis, other wealth sales were $2.7 billion, an increase of 81% over the same period in 2014 (8% excluding acquired business). 

  • Segregated Fund Products12 sales were $629 million in 3Q15, an increase of 78% compared with 3Q14 (19% excluding acquired business).
  • Fixed Products sales were $152 million in 3Q15, an increase of 42% compared with 3Q14 (down 38% excluding acquired business).  Our deliberate rate positioning continued to constrain fixed product sales in the current low interest rate environment.

Manulife Bank net lending assets were $19.4 billion as at September 30, 2015, in line with prior year levels. Growth continues to be impacted by intense competition in the residential mortgage market and the cumulative impact of economic uncertainty.

Insurance sales of $142 million in 3Q15 were in line with 3Q14 as strong Retail Insurance sales were offset by normal variability in large-case Group Benefits sales.  Year-to-date sales were $522 million, 29% above the prior year period due to improved competitive positioning in Group Benefits.

  • Retail insurance sales of $47 million in 3Q15 increased by 15% over 3Q14 driven by strong universal life, term product and living benefits sales due to product launches and enhancements.
  • Institutional Markets sales of $95 million in 3Q15 decreased 7% from 3Q14 on normal variability in large-case Group Benefits sales.  Based on recent industry data13, Group Benefits increased its market share to 18%, up 2 points from the prior year, and maintained its 2nd place ranking. The increase reflects actions taken to enhance our competitive positioning.

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11  This item is a non-GAAP measure. See "Performance and Non-GAAP Measures" below.
12  Segregated fund products include guarantees. These products are also referred to as variable annuities.
13   As per LIMRA Canadian Group Life and Health Insurance sales report as of June 30, 2015.

U.S. Division

Craig Bromley, Senior Executive Vice President and General Manager, U.S. Division stated, "John Hancock Investments enjoyed its best quarter of gross flows and reported robust net flows in an industry which has experienced net outflows this year16.  On September 29th, John Hancock Investments entered the Exchange Traded Funds ("ETF") market by launching six multifactor ETF products in one of the fastest-growing investor markets in the U.S. This new line of business has the potential to greatly extend the reach of our manager-of-managers approach, complementing existing capabilities across asset classes and investment vehicles14."

"With respect to other recent initiatives, John Hancock Retirement Plan Services achieved strong flows in its newly acquired business and John Hancock Insurance continues to receive positive feedback on its Vitality product." added Mr. Bromley.

Wealth and Asset Management gross flows in 3Q15 were US$13.0 billion, an increase of 55% compared with 3Q14 (32% excluding acquired business), driven by record sales in John Hancock ("JH") Investments and the recent acquisition in JH Retirement Plan Services.  Year-to-date gross flows of US$33.8 billion increased 18% compared with the prior year period.

  • JH Investments had record gross flows of US$7.8 billion in 3Q15 that were US$2.4 billion or 45% above 3Q14 despite increased market volatility and a challenging economic environment for active management.  Gross flows continued to be driven by a strong product line, including 34 Four- or Five-Star Morningstar rated funds15, and broad placement of our funds on firms' recommended lists and models.  Our alternative asset offerings, which have a low correlation to equity and fixed income markets, performed well in the current environment.  Assets under management increased 10% from September 30, 2014 to US$79.3 billion as at September 30, 2015 and for the 16th consecutive quarter JH Investments had positive net flows. Our 12-month trailing organic growth rate through September 2015 (calculated as net new flows as a percentage of beginning assets) was 14% compared with an industry decline of one percent.16
  • JH Retirement Plan Services had gross flows of US$5.3 billion in 3Q15, an increase of 73% compared with 3Q14 (8% excluding acquired business). Gross flows for both our core small-case market and mid-market segments were strong from ongoing contributions and new business sales.

Insurance sales in 3Q15 of US$126 million increased 2% over 3Q14. Year-to-date sales of US$361 million increased 4% compared with the same period of 2014, driven by several product enhancements made last year that continued to generate strong sales momentum.

  • JH Life sales of US$114 million in 3Q15 increased 2% compared with 3Q14, driven by continued momentum in our protection-based universal life ("UL") and variable universal life product lines, strong international UL sales, and growth in our revamped term product.  Momentum and market acceptance of our Vitality product continued to grow in 3Q15, with steadily increasing application counts and additional state approvals.
  • JH Long-Term Care ("JH LTC") sales of US$12 million in 3Q15 were consistent with 3Q14 as we continued to execute on transitioning sales to our new innovative Performance LTC product.

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14 See "Caution regarding forward-looking statements" below.
15 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.
16   Source: Strategic Insight:  ICI Confidential.  Direct Sold mutual funds, fund-of-funds and ETFs are excluded. Organic sales growth rate is calculated as net new flows divided by beginning period assets. Industry data through September 2015.

Investment Division

Warren Thomson, Senior Executive Vice President and Chief Investment Officer, said, "For the General Fund, we reported an investment-related experience charge of $220 million driven by the impact of further declines in commodity prices on our oil and gas related investments. We continue to be pleased with our credit experience, asset origination, and the overall performance of our well diversified general account portfolio. Despite weak oil and gas performance throughout 2015, we remain committed to this sector and it is our view that oil prices are currently below the economic level required to meet demand on a long-term basis. We believe that $400 million per year in investment-related experience continues to be a reasonable estimate of our long-term through-the-cycle investment experience."

Kai Sotorp, President and CEO, Manulife Asset Management ("MAM") & Executive Vice President and Global Head of Wealth and Asset Management, said, "Despite ongoing volatility in global capital markets and challenges in the China market, we continued to experience strong growth in our overall WAM businesses in the third quarter with net flows of $4.5 billion. We also continued to deliver earnings growth, generating core EBITDA17 of $315 million, up 23% from the prior year."

Mr. Sotorp continued, "Our institutional business continued to perform well, with assets under management in this segment reaching $66 billion at September 30, 2015, 68% higher than the prior year. Long-term investment performance continues to be a differentiator for Manulife Asset Management, with the majority of public asset classes outperforming their benchmarks on a 3- and 5-year basis. During the quarter we also continued our efforts to expand our distribution footprint beyond where we have historically had insurance operations, with Manulife Asset Management creating a Dublin-based "Undertakings for the Collective Investment of Transferable Securities" ("UCITS") fund structure to support expansion into the European market."

As at September 30, 2015, total assets managed by MAM were $393 billion, up 28% from a year ago, including $341 billion managed for external clients. At September 30, 2015, MAM had a total of 88 Four- or Five-Star Morningstar rated funds.

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17 This item is a non-GAAP measure. See "Performance and Non-GAAP Measures" below.

CORPORATE ITEMS

In a separate news release today, the Company announced that the Board of Directors approved a quarterly shareholders' dividend of 17 cents per share on the common shares of MFC, payable on and after December 21, 2015 to shareholders of record at the close of business on November 24, 2015.

The Board of Directors also approved that, in respect of MFC's December 21, 2015 common share dividend payment date, and pursuant to MFC's Canadian Dividend Reinvestment and Share Purchase Plan and its U.S. Dividend Reinvestment and Share Purchase Plan, the required common shares be purchased on the open market. The purchase price of such shares will be based on the average of the actual cost to purchase such common shares. There are no applicable discounts because the common shares are being purchased on the open market and are not being issued from treasury.

Awards & Recognition

In China, Manulife-Sinochem was named the "Most Reputable Brand" at the 2015 China Finance Summit, held in Beijing. The Company was honored for its excellent public appraisals and brand reputation.

In Singapore, Manulife Singapore has received the "BCA Green Mark" certification for its office buildings in recognition of its sustainability efforts. Awarded by the Building and Construction Authority ("BCA") in Singapore, the "BCA Green Mark" promotes the use of sustainable design, construction and operations practices for buildings in Singapore.

In Vietnam, Manulife Vietnam was awarded a "Certificate of Merit" by the Ho Chi Minh City People's Committee - the city's council - for the role it plays in developing the country's life insurance industry. The accolade also recognizes the Company's efforts to support local communities and charities.

In the U.S., John Hancock Insurance's commitment to develop innovative life insurance solutions that engage the customer was recognized with an "Innovation in Action" award presented by Strategy Meets Action, a leading insurance advisory firm.

Notes:

Manulife Financial Corporation will host a Third Quarter Earnings Results Conference Call at 2:00 p.m. ET on November 12, 2015. For local and international locations, please call 416-340-8530 and toll free in North America please call 1-800-769-8320. 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 November 12, 2015 through November 26, 2015 by calling 905-694-9451 or 1-800-408-3053 (passcode: 6718073).

The conference call will also be webcast through Manulife's website at 2:00 p.m. ET on November 12, 2015. You may access the webcast at: www.manulife.com/quarterlyreports. An archived version of the webcast will be available at 6:00 p.m. ET on the website at the same URL as above.

The Third Quarter 2015 Statistical Information Package is also available on the Manulife website at: www.manulife.com/quarterlyreports.

MANAGEMENT'S DISCUSSION AND ANALYSIS

This Management's Discussion and Analysis ("MD&A") is current as of November 12, 2015, unless otherwise noted. This MD&A should be read in conjunction with the MD&A and audited consolidated financial statements contained in our 2014 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 2014 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", "we", "our" and "us" mean Manulife Financial Corporation ("MFC") and its subsidiaries.

Contents        
A OVERVIEW     D PERFORMANCE BY BUSINESS LINE
1. Earnings     1. Additional information - Wealth and Asset Management
2. Sales     2. Additional information by business line
3. MCCSR and financial leverage ratio        
4. Distribution agreements     E RISK MANAGEMENT AND RISK FACTORS UPDATE
           
B FINANCIAL HIGHLIGHTS     1. Potential impact of recent deployments of capital and current macro environment
1. Q3 and year-to-date earnings analysis     2. Variable annuity and segregated fund guarantees
2. Revenue     3. Caution related to sensitivities
3. Premiums and deposits     4. Publicly traded equity performance risk
4. Assets under management and administration     5. Interest rate and spread risk
5. Capital     6. Alternative long-duration asset performance risk
6. Impact of fair value accounting        
7. Impact of foreign exchange rates     F ACCOUNTING MATTERS AND CONTROLS
        1. Critical accounting and actuarial policies
C PERFORMANCE BY DIVISION     2. Actuarial methods and assumptions
1. Asia     3. Accounting and reporting changes
2. Canadian        
3. U.S.     G OTHER
4. Corporate and Other     1. Performance and Non-GAAP Measures
        2. Key planning assumptions and uncertainties
        3. Caution regarding forward-looking statements
           

A OVERVIEW

A1   Earnings 

Manulife reported net income attributed to shareholders of $622 million for the third quarter of 2015 ("3Q15"), fully diluted earnings per common share of $0.30 and return on common shareholders' equity ("ROE") of 6.5%, compared with $1,100 million, $0.57, and 14.8%, respectively, for the corresponding period in 2014. The decline in net income attributed to shareholders was primarily due to fair value losses related to oil and gas investments in 3Q15 compared with overall strong investment-related experience in 3Q14.

Net income attributed to shareholders is comprised of core earnings18 (consisting of items we believe reflect the underlying earnings capacity of the business), which amounted to $870 million in 3Q15 compared with $755 million in 3Q14, and items excluded from core earnings, which netted to charges of $248 million in 3Q15 compared with gains of $345 million in 3Q14 for a period-over-period $593 million variance.

The $115 million increase in core earnings included $47 million related to our recent acquisitions, as well as higher sales volumes and margins, particularly in Asia, and a $107 million positive impact of foreign exchange rates, partially offset by a $101 million change in investment-related experience included in core earnings and a $71 million variance in policyholder experience in North America.  Higher than average realized gains on available-for-sale equities and favourable tax items also positively impacted core earnings this quarter. Because of the oil and gas charges our year-to-date investment experience turned from favourable to unfavourable in the quarter and therefore, in accordance with our definition of core earnings (see section G1 - "Performance and Non-GAAP Measures"), we included $51 million of investment-related experience charges in core earnings which fully offset the second quarter core investment gains.

The $593 million unfavourable variance in items excluded from core earnings noted above was primarily due to fair value losses related to oil and gas investments in 3Q15 compared with overall strong investment-related experience in 3Q14.  In 3Q15, we reported net charges related to changes in actuarial methods and assumption of $285 million (3Q14 - $69 million) and a net gain of $232 million (3Q14 - $70 million) for the direct impact of equity markets and interest rates (gains related to interest rates and spreads were partially offset by charges related to the decline in equity markets).

Net income attributed to shareholders for the 9 months ended September 30, 2015 was $1,945 million compared with $2,861 million for the 9 months ended September 30, 2014.  Core earnings for the 9 months amounted to $2,569 million compared with $2,175 million in 2014 and items excluded from core earnings were net charges of $624 million in 2015 compared with gains of $686 million in 2014.

The $394 million increase in year-to-date core earnings included $103 million related to recent acquisitions, the impact of new business growth and $231 million related to changes in foreign exchange rates, partially offset by $150 million of core investment gains reported in the first 9 months of 2014.

The $1,310 million unfavourable change in items excluded from core earnings was primarily due to  investment-related experience - we reported charges of $169 million for the first 9 months of 2015 compared to gains of $762 million (in addition to the $150 million included in core earnings) for the corresponding period in 2014. The 2015 year-to-date experience consisted of $626 million of fair value losses related to oil and gas holdings largely offset by $457 million of gains from other invested assets, including private equities and real estate, and fixed-income reinvestment activities. To the extent we report investment-related experience gains during the balance of the year in excess of the year-to-date charges, they would be included in core earnings up to a maximum of $400 million. We believe that $400 million per year in investment-related experience continues to be a reasonable estimate of our long-term through-the-cycle investment experience, but some variability quarter-over-quarter is expected.19

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18 This item is a non-GAAP measure. See "Performance and Non-GAAP Measures" below.
19 See "Caution regarding forward-looking statements" below.

A2   Sales

Insurance sales20 were $803 million, an increase of 12%21 compared with 3Q14. Record Asia insurance sales increased 19%, driven by continued expansion and diversification of our distribution channels and successful product launches.  Canadian insurance sales were in line with the previous year, as strong Retail Insurance sales from product launches and enhancements were offset by normal variability in large-case Group Benefits sales. U.S. insurance sales increased 2%, and have continued to build momentum throughout the year.

Wealth and Asset Management net flows20 of $4.5 billion were almost double 3Q14 levels and gross flows of $25.9 billion increased 53%21 compared with 3Q14 (32% excluding recently acquired businesses). This marks the 23rd consecutive quarter of positive net flows in our Wealth and asset management businesses. Asia gross flows declined compared to the prior year period due to unfavourable market sentiment in other Asian countries and the timing of fund launches which were partially offset by the increase in pension sales in Hong Kong and mutual fund sales in mainland China. Canadian gross flows nearly doubled, driven by strong mutual fund gross flows, large-case group retirement activity and the impact of the recent Standard Life acquisition. U.S. gross flows increased 55%, driven by record quarterly gross flows at John Hancock Investments and the success of the recently acquired Retirement Plan Services business. Manulife Asset Management ("MAM") gross flows more than doubled driven by continued success in the institutional sales channel from both new and existing clients.

Other Wealth sales were $1.8 billion in 3Q15, an increase of 82% over prior year levels (an increase of 53% excluding recent acquisitions). Other Wealth sales in Asia almost doubled driven by expanded distribution and recent product launches, while Canada benefited from continued momentum and the inclusion of Standard Life's segregated funds business.22

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20   This item is a non-GAAP measure. See "Performance and Non-GAAP Measures" below.
21   Growth (declines) in sales, gross flows and assets under management and administration are stated on a constant currency basis. Constant currency basis is a non-GAAP measure. See "Performance and Non-GAAP Measures" below.
22  The U.S. Division does not have any products for sale in this category.

A3   MCCSR and financial leverage ratio

The Minimum Continuing Capital and Surplus Requirements ("MCCSR") ratio was 226% for The Manufacturers Life Insurance Company ("MLI") as at September 30, 2015, down 10 points from 236% as at June 30, 2015. The decline was primarily due to the maturity of $1.7 billion in debt.  MFC's financial leverage ratio was 22.7% at September 30, 2015 compared with 26.2% as at June 30, 2015, reflecting the maturity of $1.7 billion in debt and currency movements.

A4   Distribution agreements

On September 10, 2015, Manulife entered into an agreement with Standard Chartered under which Manulife will acquire Standard Chartered's Mandatory Provident Fund ("MPF") and Occupational Retirement Schemes Ordinance ("ORSO") businesses in Hong Kong, and the related investment management entity.  Manulife and Standard Chartered also agreed on a 15-year distribution partnership providing Manulife the exclusive right to offer its MPF products to Standard Chartered's customers in Hong Kong. These arrangements will significantly expand Manulife's retirement business in Hong Kong. Subject to the receipt of all necessary approvals and other customary closing conditions, the transaction is anticipated to close in the first half of 2016.23

In our first quarter report we announced that we had signed a 15-year regional distribution agreement with DBS and were selected as the exclusive provider of bancassurance solutions to DBS customers in Singapore, Hong Kong, Indonesia and mainland China effective January 1, 2016.  We have updated our estimate of the impact of the initial payment for this distribution agreement on Manulife's regulatory capital ratio to be 3 points in January 2016.23

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23  See "Caution regarding forward-looking statements" below.

B FINANCIAL HIGHLIGHTS

        Quarterly Results     YTD Results
(C$ millions, unless otherwise stated, unaudited)       3Q 2015     2Q 2015     3Q 2014       2015       2014
Net income attributed to shareholders       $ 622     $ 600     $ 1,100     $ 1,945     $ 2,861
Preferred share dividends         (29)       (29)       (28)       (87)       (98)
Common shareholders' net income       $ 593     $ 571     $ 1,072     $ 1,858       2,763
Reconciliation of core earnings to net income attributed
to shareholders:
                                         
Core earnings(1)       $ 870     $ 902     $ 755     $ 2,569     $ 2,175
  Investment-related experience outside of core earnings(2)         (169)       77       320       (169)        762
Core earnings and investment-related experience
outside of core earnings
      $ 701     $ 979     $ 1,075     $ 2,400     $ 2,937
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
        232       (309)       70       (64)       35
  Changes in actuarial methods and assumptions         (285)       (47)       (69)       (354)       (139)
  Other items         (26)       (23)       24        (37)       28
Net income attributed to shareholders       $ 622     $ 600     $ 1,100     $ 1,945     $ 2,861
Basic earnings per common share (C$)       $ 0.30     $ 0.29     $ 0.58     $ 0.95     $ 1.49
Diluted earnings per common share (C$)       $ 0.30     $ 0.29     $ 0.57     $ 0.94     $ 1.48
Diluted core earnings per common share (C$)(1)       $ 0.43     $ 0.44     $ 0.39     $ 1.26     $ 1.11
Return on common shareholders' equity ("ROE")         6.5%       6.4%       14.8%       7.1%       13.3%
Core ROE (1)         9.2%       9.8%       10.1%       9.5%       10.0%
Sales(1)                                          
  Insurance products       $ 803     $ 771     $ 660     $ 2,353     $ 1,784
  Wealth and Asset Management gross flows       $ 25,862     $ 34,892     $ 14,594     $ 83.597     $ 51,279
  Wealth and Asset Management net flows       $ 4,514     $ 14,494     $ 2,382     $ 25,639     $ 15,529
  Other Wealth products       $ 1,845     $ 1,773     $ 978     $ 5,385     $ 2,757
Premiums and deposits(1)                                          
  Insurance products       $ 7,476     $ 7,116     $ 6,436     $ 21,750     $ 18,307
  Wealth and Asset Management products       $ 25,862     $ 34,892     $ 14,594     $ 83,597     $ 51,279
  Other Wealth products       $ 1,595     $ 1,694     $ 1,025     $ 4,755     $ 2,790
  Corporate and Other       $ 24     $ 21     $ 19     $ 64     $ 59
Assets under management and administration (C$ billions)(1)       $ 888     $ 883     $ 663     $ 888     $ 663
Capital (C$ billions)(1)       $ 47.9      $ 45.5     $ 37.7     $ 47.9     $ 37.7
MLI's MCCSR ratio         226%       236%       248%       226%       248%

(1)  This item is a non-GAAP measure. See "Performance and Non-GAAP Measures" below.
(2)  In 3Q15 we also included a $51 million charge in core earnings for investment-related experience, offsetting the $51 million of core investment gains reported in 2Q15, compared with $50 million of core investment gains in 3Q14. Total investment- related experience in 3Q15 was a net charge of $220 million.

B1  Q3 and year-to-date earnings analysis

The table below reconciles reported net income attributed to shareholders to core earnings.

        Quarterly Results     YTD Results
(C$ millions, unaudited)       3Q 2015     2Q 2015     3Q 2014       2015       2014
Core earnings(1)                                          
Asia Division       $ 356     $ 300     $ 273     $ 952     $ 748
Canadian Division         338       304       243       904       703
U.S. Division         393       402       342       1,187       1,045
Corporate and Other (excluding expected cost of macro hedges
and core investment gains)
        (104)       (109)       (107)       (322)       (334)
Expected cost of macro hedges(2)         (62)       (46)       (46)       (152)       (137)
Investment-related experience in core earnings(3)         (51)       51       50       -       150
Core earnings       $ 870     $ 902     $ 755     $ 2,569     $ 2,175
Investment-related experience outside of core earnings(3)         (169)       77       320       (169)       762
Core earnings and investment-related experience
outside of core earnings
      $ 701     $ 979     $ 1,075     $ 2,400     $ 2,937
Direct impact of equity markets and interest rates and
variable annuity guarantee liabilities (see table below)(3),(4)
        232       (309)       70       (64)       35
Changes in actuarial methods and assumptions         (285)       (47)       (69)       (354)       (139)
Net impact of acquisitions and divestitures(5)         (26)       (54)       -       (110)       -
Other items excluded from core earnings         -       31       24       73       28
Net income attributed to shareholders       $ 622     $ 600     $ 1,100     $ 1,945     $ 2,861

(1)   This item is a non-GAAP measure. See "Performance and Non-GAAP Measures" below.
(2)   The 3Q15 net gain from macro equity hedges was $181 million and consisted of a $62 million charge related to the estimated expected cost of the macro equity hedges relative to our long-term valuation assumptions and a benefit of $243 million because actual markets underperformed our valuation assumptions (included in direct impact of equity markets and interest rates and variable annuity guarantee liabilities below).
(3)   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 equity markets and interest rates is separately reported. Our definition of core earnings (see section G1  - "Performance and Non-GAAP Measures") includes up to $400 million (2014 - $200 million) of favourable investment-related experience reported in a single year.
(4)   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 experience gains and losses on derivatives associated with our macro equity hedges. We also include gains and losses on derivative positions and the sale of available-for-sale ("AFS") bonds in the Corporate and Other segment. See table below for components of this item. Until 3Q14 this also included a quarterly ultimate reinvestment rate ("URR") update.
(5)   The 3Q15 charge of $26 million included integration costs of $18 million and $8 million for the Standard Life transaction and Closed Block reinsurance transaction, respectively.

Components of the direct impact of equity markets and interest rates and variable annuity guarantee liabilities in the table above:

        Quarterly Results     YTD Results
C$ millions, unaudited       3Q 2015     2Q 2015     3Q 2014       2015         2014
Direct impact of equity markets and variable annuity guarantee
liabilities(1)
      $ (419)     $ 28     $ (35)     $ (376)     $   (40)
Fixed income reinvestment rates assumed in the valuation of
policy liabilities(2)
        647       (362)       165       298         196
Sale of AFS bonds and derivative positions in the Corporate
and Other segment
        4       25       (15)       14         (26)
Charges due to lower fixed income URR assumptions used in
the valuation of policy liabilities(3)
        -       -       (45)       -         (95)
Direct impact of equity markets and interest rates and
variable annuity guarantee liabilities
      $ 232     $ (309)     $ 70     $ (64)     $   35

(1)   In 3Q15, gains of $1,713 million from dynamic hedging experience and $243 million from macro hedge experience were more than offset by losses of $2,375 million from gross equity exposure, which resulted in a charge of $419 million.
(2)   The gain in 3Q15 for fixed income reinvestment assumptions was driven by a decrease in swap spreads and an increase in corporate spreads in the U.S. and Canada.
(3)   The periodic URR charges ceased effective 4Q14 due to revisions to the Canadian Actuarial Standards of Practice related to economic reinvestment assumptions.

B2   Revenue

        Quarterly Results     YTD Results
(C$ millions, unaudited)       3Q 2015     2Q 2015     3Q 2014       2015       2014
Net premium income(1)       $ 6,233     $ 5,577     $ 4,628     $ 17,213     $ 12,980
Investment income         2,708       3,216       2,602       8,566       8,080 
Other revenue(1)         2,487       2,491       2,207       7,404       6,438
                                           
Revenue before items noted below       $ 11,428     $ 11,284     $ 9,437     $ 33,183     $ 27,498
Realized and unrealized gains (losses) on assets supporting
insurance and investment contract liabilities and on macro
hedging program
        3,672       (10,161)       1,561       (1,146)       10,910
Premiums ceded, net of ceded commissions and additional
consideration relating to Closed Block reinsurance transaction
        (7,996)       -       -       (7,996)       -
Total revenue       $ 7,104     $ 1,123     $ 10,998     $ 24,041     $ 38,408

(1)  Excludes impact of the Closed Block reinsurance transaction, which is shown separately.

For 3Q15, total revenue was $7.1 billion compared with $11.0 billion in 3Q14.  The impact of fair value accounting materially impacts the reported realized and unrealized gains or losses on assets supporting insurance and investment contract liabilities, a component of revenue (see section B6 - "Impact of fair value accounting") below. Accordingly, we discuss specific divisional drivers of revenue before unrealized gains and losses in section C - "Performance by Division". In 3Q15, total revenue was also impacted by the completion of the reinsurance of John Hancock's closed block of participating policies ("Closed Block"), where we reported a net reinsurance premium of $8.0 billion.  (The net reinsurance premium was fully offset by an increase in the change in reinsurance assets on the Statement of Income).  For 3Q15, revenue before realized and unrealized gains and premiums ceded under the Closed Block reinsurance transaction was $11.4 billion compared with $9.4 billion in 3Q14. This increase was driven by business growth and the impact of recent acquisitions as well as the impact of foreign exchange rates.

The net realized and unrealized gains on assets supporting insurance and investment contract liabilities and on the macro hedging program were $3.7 billion, primarily driven by a decrease in North American swap and interest rates, and partially offset by the impact of lower equity markets.

On a year-to-date basis, revenue before realized and unrealized losses and premiums ceded under the Closed Block reinsurance transaction was $33.2 billion in 2015 compared with $27.5 billion in 2014, driven by the same factors as noted above.  Net premium income, excluding the impact of the Closed Block reinsurance transaction, was $17.2 billion in the first 9 months of 2015 compared with $13.0 billion in 2014. Net realized and unrealized losses on assets supporting insurance and investment contract liabilities and on the macro hedging program were $1.1 billion for the first 9 months of 2015 compared with a gain of $10.9 billion in 2014.  The impact of higher interest rates in 2Q15 more than offset gains from the general decline in interest rates in both 3Q15 and 1Q15. The $10.9 billion gain in the first 9 months of 2014 was due to general declines in interest rates during that period.

Please see discussion below in section B6 - "Impact of fair value accounting".

B3   Premiums and deposits24

Premiums and deposits is an additional measure of our top line growth.  It includes all new policyholder cash flows and, unlike total revenue, is not impacted by the volatility created by fair value accounting.  Premiums and deposits for insurance products were $7.5 billion in 3Q15, which exclude the impact of the Closed Block reinsurance transaction, an increase of 6% on a constant currency basis compared with 3Q14.

Premiums and deposits for Wealth and Asset Management ("WAM") products were $25.9 billion in 3Q15, an increase of $11.3 billion, or 53% on a constant currency basis, compared with 3Q14 (32% excluding recently acquired businesses). Premiums and deposits for Other Wealth products were $1.6 billion in 3Q15, an increase of $0.6 billion, or 42% on a constant currency basis (28% excluding recently acquired businesses).

B4   Assets under management and administration24

Assets under management and administration as at September 30, 2015 were $888 billion, an increase of $225 billion compared with September 30, 2014. Excluding the net $118 billion from recent acquisitions and the Closed Block reinsurance transaction, the increase was 3%. We transferred $14.0 billion of invested assets to New York Life as part of the reinsurance ceded portion of the reinsurance transaction. These assets support 100% of the insurance contract liabilities. We also recorded a reinsurance receivable for the 60% of the block that was ceded and a reinsurance receivable for funds withheld for the 40% of the block that has been retained. The reinsurance receivables are not included in AUMA.

B5   Capital24

MFC's total capital as at September 30, 2015 was $47.9 billion, an increase of $10.2 billion from September 30, 2014. The increase from September 30, 2014 was primarily driven by net income of $2.6 billion, favourable currency impacts of $4.8 billion, the Standard Life acquisition ($2.2 billion issuance of MFC common shares and assumption of $0.4 billion of outstanding Standard Life debt), and other net capital issued of $1.5 billion, partially offset by cash dividends of $1.4 billion over the period.

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24   This item is a non-GAAP measure. See "Performance and Non-GAAP Measures" below.

 

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, each of which impacts net income (see section A1 above for a discussion of third quarter experience).

Net realized and unrealized gains reported in investment income were $3.7 billion for 3Q15.  This amount was driven by the mark-to-market impact of decreases in interest rates on our bond and fixed-income derivative holdings.

As outlined in the "Critical Accounting and Actuarial Policies" in the MD&A in our 2014 Annual Report, 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 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 policies will result in an investment-related experience gain (loss).

B7   Impact of foreign exchange rates

Changes in foreign exchange rates, primarily due to the strengthening of the U.S. dollar compared with the Canadian dollar, increased core earnings by approximately $107 million in 3Q15 compared with 3Q14 and $231 million on a year-to-date basis.  The impact of foreign currency on items excluded from core earnings is not relevant given the nature of these items. Each line item on our financial statements has been impacted by changes in foreign exchange rates.

C PERFORMANCE BY DIVISION

C1   Asia Division

($ millions, unless otherwise stated)       Quarterly results     YTD Results
Canadian dollars       3Q 2015     2Q 2015     3Q 2014       2015       2014
Net income attributed to shareholders       $ 129     $ 320     $ 332     $ 748     $ 911
Core earnings(1)         356       300       273       952       748
Revenue(2)         3,250       2,665       2,726       9,328       8,300
Revenue before realized and unrealized investment
income gains and losses(2)
        3,885       3,324       2,577       10,268       7,203
Premiums and deposits         5,965       9,358       4,691       21,511       12,641
Assets under management ($ billions)         98.0       99.3       84.5       98.0       84.5
                                           
U.S. dollars                                          
Net income attributed to shareholders       $ 98     $ 261     $ 305     $ 600     $ 832
Core earnings         272       244       251       755       684
Revenue(2)         2,482       2,167       2,504       7,402       7,586
Revenue before realized and unrealized investment
income gains and losses(2)
        2,968       2,702       2,366       8,136       6,583
Premiums and deposits         4,558       7,609       4,308       17,157       11,558
Assets under management ($ billions)         73.2       79.6       75.4       73.2       75.4

(1)   See "Performance and Non-GAAP Measures" below for a reconciliation between IFRS net income attributed to shareholders and core earnings.
(2)   See section "B6 - Impact of fair value accounting".

Asia Division's net income attributed to shareholders was $129 million in 3Q15 compared with $332 million in 3Q14. Net income attributed to shareholders is comprised of core earnings, which was $356 million in 3Q15 compared with $273 million in 3Q14, and items excluded from core earnings, which amounted to a $227 million loss in 3Q15 compared with a $59 million gain in 3Q14. Year-to-date net income attributed to shareholders and core earnings were $748 million and $952 million, respectively, in 2015 compared with $911 million and $748 million, respectively, for the same period of 2014.

Expressed in U.S. dollars, the presentation currency of the division, net income attributed to shareholders was US$98 million in 3Q15 compared with US$305 million for 3Q14 and core earnings were US$272 million in 3Q15 compared with US$251 million in 3Q14. Items excluded from core earnings amounted to a loss of US$174 million for 3Q15 compared with a gain of US$54 million in 3Q14.

Core earnings increased US$37 million, or 16%, compared with 3Q14 after adjusting for the US$16 million impact of changes in currency rates. This increase was driven by strong growth in new business volumes, improvement in product margins, favourable product mix and more favourable policyholder experience, partially offset by expenses related to growth initiatives. On a Canadian dollar basis, core earnings increased by $83 million to $356 million due to the factors above, and reflect a net $40 million favourable impact of changes in currency rates.

Items excluded from core earnings in 3Q15 primarily related to the direct impact of the decline in equity markets and in 3Q14 to the direct impact of the increase in equity markets.

Year-to-date net income attributed to shareholders was US$600 million in 2015 compared with US$832 million for the same period of 2014. The US$232 million decrease was driven by a US$278 million change in the direct impact of equity markets and interest rates, partially offset by a US$112 million increase in core earnings after adjusting for the impact of changes in currency rates.  On a Canadian dollar basis year-to-date core earnings increased by $204 million to $952 million due to the factors above, and reflect a net $76 million favourable impact due to changes in currency rates in territories where we operate versus the Canadian dollar.

Revenue before unrealized and realized investment gains was US$3.0 billion in 3Q15 compared with US$2.4 billion in 3Q14, an increase of 25% driven by sales growth over the past 12 months.

Premiums and deposits of US$4.6 billion in 3Q15 increased 14% on a constant currency basis compared with 3Q14. Premiums and deposits for insurance products of US$1.9 billion increased 23% reflecting strong double digit insurance sales growth in most territories and solid recurring premium growth from in-force business. Wealth and asset management premiums and deposits of US$1.9 billion in 3Q15 decreased by 8%, due to lower mutual fund deposits reflecting unfavourable market conditions and timing of fund launches, partly offset by continued growth in pension deposits.

Assets under management were US$73.2 billion as at September 30, 2015, an increase of 3% on a constant currency basis compared with September 30, 2014, reflecting net policyholder cash inflows of US$4.4 billion and the impact of lower interest rates on fixed-income asset values over the last 12 months.

C2 Canadian Division

($ millions, unless otherwise stated)       Quarterly results     YTD Results
Canadian dollars       3Q 2015     2Q 2015     3Q 2014       2015       2014
Net income attributed to shareholders       $ 278     $ 191     $ 286     $ 588     $ 930
Core earnings(1)         338       304       243       904       703
Revenue(2)         2,691       230       2,974       7,613       10,099
Revenue before realized and unrealized investment
income gains and losses(2)
        2,615       2,814       2,540       8,114       7,340
Premiums and deposits         7,285       7,250       5,073       22,361       16,192
Assets under management ($ billions)         215.6       217.5       156.0       215.6        156.0

(1)   See "Performance and Non-GAAP Measures" below for a reconciliation between IFRS net income attributed to shareholders and core earnings.
(2)   See section "B6 - Impact of fair value accounting".

Canadian Division's 3Q15 net income attributed to shareholders was $278 million compared with $286 million in 3Q14.  Net income attributed to shareholders is comprised of core earnings, which was $338 million in 3Q15 compared with $243 million in 3Q14, and items excluded from core earnings, which amounted to a loss of $60 million in 3Q15 compared with a gain of $43 million in 3Q14.

Core earnings increased $95 million of which $41 million related to the Standard Life business. The favourable impact from in-force business growth and the methodology change for attributing expected investment income on assets supporting provisions for adverse deviation was partially offset by unfavourable policyholder experience. The 3Q15 loss in items excluded from core earnings related to unfavourable market and investment-related experience and, to a lesser extent, integration costs related to the recently acquired business.

Year-to-date net income attributed to shareholders was $588 million compared with $930 million for the same period of 2014. Year-to-date core earnings of $904 million were $201 million higher than 2014 and included $94 million related to Standard Life. Year-to-date items excluded from core earnings were a charge of $316 million compared with a gain of $227 million in 2014.

Revenue before net realized and unrealized gains was $2.6 billion in 3Q15 compared with $2.5 billion in 3Q14, with the increase driven by higher fee income on higher asset levels.

Premiums and deposits in 3Q15 were $7.3 billion, $2.2 billion higher than in 3Q14 of which $2.1 billion relates to our wealth and asset management businesses.

Assets under management were $215.6 billion as at September 30, 2015, an increase of $59.6 billion from September 30, 2014, including $50.7 billion related to Standard Life. Excluding Standard Life, AUM increased by $8.9 billion, or 6%, driven by growth in our wealth and asset management businesses despite market volatility.

C3   U.S. Division

($ millions, unless otherwise stated)       Quarterly Results     YTD Results
Canadian dollars       3Q 2015     2Q 2015     3Q 2014       2015       2014
Net income attributed to shareholders       $ 525     $ 183     $ 679     $ 1,190     $ 1,641
Core earnings(1)         393       402       342       1,187       1,045
Revenue(2)         923       (1,959)       5,360       6,698       20,050
Revenue before realized and unrealized investment income
gains and losses and excluding the Closed Blockreinsurance
transaction(2),(3)
        4,950       4,955       4,367       14,621       12,736
Premiums and deposits         19,520       16,108       11,329       50,056       37,634
Assets under management and administration ($ billions)         508.4       499.1       376.9       508.4       376.9
                                           
U.S. dollars                                          
Net income attributed to shareholders       $ 401     $ 149     $ 623     $ 939     $ 1,502
Core earnings         300       327       314       943       955
Revenue(2)         707       (1,593)       4,923       5,351       18,313
Revenue before realized and unrealized investment income
gains and losses and excluding the Closed Block reinsurance
transaction(2),(3)
        3,783       4,029       4,011       11,616       11,642
Premiums and deposits         14,913       13,101       10,403       39,650       34,385
Assets under management and administration ($ billions)         379.5       400.1       336.3       379.5       336.3

(1)  See "Performance and Non-GAAP Measures" below for a reconciliation between IFRS net income attributed to shareholders and core earnings.
(2)  See section "B6 - Impact of fair value accounting".
(3)   For the purposes of comparable period-over-period reporting the impact of Closed Block reinsurance transaction is excluded from revenue before realized and unrealized investment income gains in this table. This transaction resulted in a net ceded premium, including ceded commissions and additional consideration of approximately US$6.1 billion. 

U.S. Division's 3Q15 net income attributed to shareholders was $525 million compared with $679 million in 3Q14. Net income attributed to shareholders is comprised of core earnings, which amounted to $393 million in 3Q15 compared with $342 million in 3Q14, and items excluded from core earnings, which amounted to a gain of $132 million in 3Q15 compared with a gain of $337 million in 3Q14. The strengthening U.S. dollar compared to the Canadian dollar accounted for $66 million of the increase in core earnings.

The U.S. Division's year-to-date net income attributed to shareholders was $1,190 million compared with $1,641 in 2014.  The U.S. Division's year-to-date core earnings was $1,187 million compared with $1,045 million in the prior year, and items excluded from core earnings were a gain of $3 million compared with a gain of $596 million in year-to-date 2014.  The change in items excluded from core earnings relates to the non-recurrence of strong investment-related experience reported in 2014. The strengthening of the U.S. dollar compared to the Canadian dollar accounted for $155 million of the increase in year-to-date core earnings.

Expressed in U.S. dollars, the functional currency of the division, 3Q15 net income attributed to shareholders was US$401 million compared with US$623 million in 3Q14, core earnings was US$300 million compared with US$314 million in 3Q14, and items excluded from core earnings amounted to a gain of US$101 million in 3Q15 compared with a gain of US$309 million in 3Q14. The US$14 million decrease in core earnings was driven by unfavourable policyholder experience in JH Insurance and JH Annuities, partially offset by one-time tax benefits arising from finalizing a tax filing. The unfavourable policyholder experience in JH Insurance was primarily due to JH LTC and large claims in JH Life.

Expressed in U.S. dollars, year-to-date net income attributed to shareholders was US$939 million compared with US$1,502 million for the same period in 2014 and included core earnings of US$943 million, a US$12 million decrease compared with the same period in 2014.  The decrease in year-to-date core earnings was driven by unfavourable policyholder experience in JH Insurance and JH Annuities and lower tax benefits relative to the prior year, partially offset by lower amortization of deferred acquisition costs due to the run-off of the in-force variable annuity business and higher wealth and asset management fee income reflecting increased asset levels. The unfavourable policyholder experience in JH Insurance was primarily due to large claims in JH Life and losses in JH LTC. The US$551 million unfavourable variance in items excluded from core earnings is largely attributable to the non-recurrence of favourable investment-related experience reported in 2014.

Revenue before unrealized and realized investment gains and the net activity associated with the Closed Block reinsurance transaction was US$3.8 billion in 3Q15 compared with US$4.0 billion in 3Q14.  The decrease was primarily driven by lower investment income and premiums in JH Insurance resulting from the ongoing cession of the Closed Block, partially offset by higher fee income on higher WAM assets.

Premiums and deposits for 3Q15 were US$14.9 billion, an increase of 43% compared with 3Q14.  The increase was primarily due to record deposits in JH Investments, and strong mid-market deposits in JH RPS, driven by the 2Q15 acquisition.

Assets under management and administration as at September 30, 2015 were US$379.5 billion and increased US$43.2 billion from September 30, 2014. The increase was driven by the recently acquired Retirement Plan Services business, which contributed US$56.6 billion, and strong net mutual fund sales over the past 12 months, which contributed US$9.2 billion. These increases were partially offset by the continued run-off of the in-force variable annuity business and US$11.2 billion of invested assets transferred as part of the Closed Block reinsurance transaction. The accounting for this transaction resulted in invested assets, representing 100% of the insurance contract liabilities that we will continue to report, being replaced by a reinsurance receivable for the 60% of the block that has been ceded and a reinsurance receivable for funds withheld representing the 40% of the block that has been retained.  The reinsurance receivables are not included in AUMA.

C4   Corporate and Other

($ millions, unless otherwise stated)       Quarterly Results     YTD Results
Canadian dollars       3Q 2015     2Q 2015     3Q 2014       2015         2014
Net loss attributed to shareholders       $ (310)     $ (94)     $ (197)     $ (581)     $   (621)
  Core loss (excluding core investment gains)(1)       $ (166)     $ (155)     $ (153)     $ (474)     $   (471)
  Investment-related experience included in core earnings         (51)       51       50       -         150
Total core loss       $ (217)     $ (104)     $ (103)     $ (474)     $   (321)
Revenue       $ 240     $ 187     $ (62)     $ 402     $   (41)
Premiums and deposits         2,189       11,008       981       16,240         5,968
Assets under management ($ billions)         66.0       66.9       45.1       66.0         45.1

(1)  See "Performance and Non-GAAP Measures" below 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 methods and assumptions, settlement costs for macro equity hedges and other non-operating items are included in this segment's earnings. This segment is also where we reclassify favourable investment-related experience to core earnings from items excluded from core earnings, subject to certain limits (see section G1 - "Performance and Non-GAAP measures" below).  In each of the other segments, we report all investment-related experience in items excluded from core earnings.

Corporate and Other reported a net loss attributed to shareholders of $310 million in 3Q15 and a net loss of $197 million in 3Q14.  The net loss is comprised of core loss and items excluded from core loss.  The core loss was $217 million in 3Q15 and $103 million in 3Q14; items excluded from core loss amounted to charges of $93 million in 3Q15 compared with charges of $94 million in 3Q14.

The $114 million increase in core loss is primarily related to the $101 million change in investment-related experience. The remaining variance of $13 million reflects the currency impact on the interest allocated to the U.S. and Asia divisions when expressed in Canadian dollars and higher macro hedging costs from increased hedging activity, partially offset by higher realized gains on AFS equities.

Items excluded from core loss compared with 3Q14 include the favourable variance reflecting the direct impact of equity markets and interest rates, primarily driven by macro hedging experience gains, and the reclassification of investment-related experience in core earnings, largely offset by unfavourable variances related to changes in actuarial methods and assumptions and the impact of mark-to-market accounting.

On a year-to-date basis the net loss attributed to shareholders was $581 million in 2015 compared with a net loss of $621 million for the same period of 2014. The net favourable variance of $40 million includes an unfavourable variance in core losses of $153 million, more than offset by a favourable variance of $193 million in items excluded from core loss.

The unfavourable year-to-date variance in core loss was due to the non-recurrence of $150 million of core investment gains reported in 2014. Other items netted to a small variance, consistent with the items described in the third quarter. Of the $193 million favourable variance in items excluded from core loss, the primary driver was the non-recurrence of the $150 million reclassification of favourable investment-related experience in 2014.

Revenue was $240 million in 3Q15 compared with a loss of $62 million in 3Q14. The increase in revenue was primarily driven by higher macro hedging gains. These gains were reported in items excluded from core loss.

Premiums and deposits, primarily related to the Investment Division's external asset management business, were $2.2 billion in 3Q15, compared with the $1.0 billion reported in 3Q14. The increase reflects the impact of inflows from institutional asset management clients. Institutional advisory sales for our public markets' investment teams were driven by a series of sizable mandates that were balanced across regions and asset classes.

Assets under management of $66.0 billion as at September 30, 2015 (September 30, 2014 - $45.1 billion) included assets managed by Manulife Asset Management on behalf of third-party institutional clients of $65.5 billion (September 30, 2014 - $39.0 billion).

D PERFORMANCE BY BUSINESS LINE

D1   Additional information for Wealth and Asset Management

Manulife has a globally diversified wealth and asset management franchise spanning mutual funds, group retirement and savings products, and institutional asset management capabilities across all major asset classes.  We have achieved strong growth through expanding our broad-based extensive distribution platforms in the U.S., Canada and Asia, and leveraging our global asset management expertise.  With investment professionals on the ground in 17 countries, our deep local knowledge, and expertise in sought after asset classes such as alternative long-duration assets, positions us well for continued success. In addition to mutual fund businesses in 11 markets, we have leading retirement platforms in Canada, the U.S. and Hong Kong, and a growing presence in Indonesia and Malaysia.  We continue to invest in these businesses with recent acquisitions of the Canadian-based operations of Standard Life plc ("Standard Life") and New York Life's Retirement Plan Services business and the announcement of a transaction to acquire Standard Chartered's MPF and ORSO businesses in Hong Kong. WAM businesses are among our fastest growing earnings contributors.

We provide additional financial information by line of business, to supplement our existing primary disclosure based on geographic segmentation. This information should help facilitate a better assessment of the financial performance of our WAM businesses and relevant comparisons to be made with global asset management peers. The supplemental information for WAM businesses includes an income statement, core earnings, core earnings before interest, taxes, depreciation and amortization ("core EBITDA"), net flows, gross flows and assets under management and administration25. Core EBITDA was selected as a key performance indicator for WAM businesses, as EBITDA is widely used among asset management peers, and core earnings is a primary profitability metric for the Company overall.

___________________________
25   Core earnings, core EBITDA, net flows, gross flows and assets under management and administration are non-GAAP measures. See "Performance and Non-GAAP measures" below.

 

Wealth and Asset Management highlights

            Quarterly Results     YTD Results
(C$ millions, unless otherwise stated)           3Q 2015     2Q 2015     3Q 2014       2015       2014
Core earnings           $ 169     $ 162     $ 129     $ 482     $ 373
Core EBITDA             315       317       257       932       725
Net flows             4,514       14,494       2,382       25,639       15,529
Gross flows             25,862       34,892       14,594       83,597       51,279
Assets under management ("AUM") (C$ billions)             406       406       298       406       298
Assets under management and administration
("AUMA") (C$ billions)
            477       475       298       477       298

In 3Q15, we generated solid net flows despite challenging equity markets.  Core EBITDA in 3Q15 and the first nine months of 2015 increased 23% and 29%, respectively, compared with the same periods in the prior year.

D2   Additional information by business line

In addition to the WAM businesses, the following two tables include core earnings and assets under management and administration for our Other Wealth and Insurance business lines.  Other Wealth consists of variable and fixed annuities, single premium products sold in Asia, and Manulife Bank in Canada26 and Insurance includes all individual and group insurance businesses.

Wealth and Asset Management - Our global WAM businesses contributed $169 million to core earnings in 3Q15, an increase of 31% compared with 3Q14. The increase was a result of higher fee income from higher asset levels, reflecting strong net flows and recent acquisitions and the favourable impact of the strengthening of the U.S. dollar compared to the Canadian dollar, partially offset by higher non-deferrable acquisition costs.  On a year-to-date basis, WAM contributed $482 million to core earnings in 2015, up 29% from $373 million in 2014.

Insurance - Our insurance businesses contributed $590 million to core earnings in 3Q15, an increase of 20% compared with 3Q14. The increase was primarily a result of strong insurance sales in Asia, in-force growth and the strengthening of the U.S. dollar. Year-to-date core earnings of $1,629 million in 2015 were up 15% from 2014.

Other Wealth - Our other wealth businesses contributed $327 million to core earnings in 3Q15, an increase of 34% compared with 3Q14. The increase was primarily related to strong sales in Asia, the contribution of a recent acquisition in Canada, lower amortization of deferred acquisition costs in the U.S. and the strengthening of the U.S. dollar. Year-to-date core earnings of $947 million in 2015 were up 33% from 2014.

___________________________
26   Manulife Bank new loan volumes are no longer being reported as sales.

 

Core earnings by line of business

            Quarterly Results     YTD Results
(C$ millions)           3Q15     2Q15     3Q14       2015       2014
Wealth and Asset Management           $ 169     $ 162     $ 129     $ 482     $ 373
Insurance             590       535       490       1,629       1,419
Other Wealth             327       317       244       947       710
Corporate and Other(1)             (216)       (112)       (108)       (489)       (327)
Total core earnings           $ 870     $ 902     $ 755     $ 2,569     $ 2,175

(1)   Excludes Manulife Asset Management results that are included in WAM.

Assets under management and administration by line of business

                             
As at       September 30,           June 30,       September 30,
(C$ millions)       2015           2015       2014
Wealth and Asset Management       $ 476.8     $     474.5       $ 297.9
Insurance         235.1           235.6         202.1
Other Wealth         175.7           170.4         156.5
Corporate and Other         0.4           2.2         6.0
Total assets under management and administration       $ 888.0     $     882.7       $ 662.5

The following table shows the core earnings of the WAM, Insurance and Other Wealth business lines by division.

Core earnings by line of business by division

            Quarterly Results     YTD Results
(C$ millions)           3Q 2015     2Q 2015     3Q 2014       2015       2014
Wealth and Asset Management(1)                                              
  Asia           $ 38     $ 43     $ 34     $ 124     $ 95
  Canada             40       36       25       106       74
  U.S.             92       75       65       237       198
  Corporate and Other(2)             (1)       8       5       15       6
Total Wealth and Asset Management             169       162       129       482       373
Insurance                                              
  Asia             245       195       183       640       489
  Canada             166       142       132       422       375
  U.S.             179       198       175       567        555
Total Insurance             590       535       490       1,629       1,419
Other Wealth(3)                                              
  Asia             73       62       56       188       164
  Canada                                              
    Manulife Bank             26       36       27       96       84
    Canada excluding Manulife Bank             106       90       59       280       170
  Total Canada             132       126       86       376       254
  U.S.             122       129       102       383       292
Total Other Wealth             327       317       244       947       710
Corporate and Other(4)             (216)       (112)       (108)       (489)       (327)
Total core earnings           $ 870     $ 902     $ 755     $ 2,569     $ 2,175

(1)   Wealth and Asset Management is comprised of our fee-based global WAM businesses that do not contain material insurance risk including: mutual funds, group retirement and institutional asset management.
(2)   Corporate and Other results are net of internal allocations to other divisions.
(3)   Other Wealth includes variable and fixed annuities, single premium products sold in Asia and Manulife Bank.
(4)   A portion of core earnings from Investment Division has been included in Wealth and Asset Management.

E 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 2014 Annual Report. The shaded text and tables in this section of the MD&A represent our disclosure on market and liquidity risk in accordance with IFRS7, "Financial Instruments - Disclosures". Accordingly, the following shaded text and tables represent an integral part of our unaudited Interim Consolidated Financial Statements.

E1   Potential impact of recent deployments of capital and current macro environment

In our 2014 MD&A we noted macro-economic and other risk factors that may result in our inability to achieve our 2016 objective of core ROE of 13%.  Core ROE was 9.2% in 3Q15 and  9.5% for the first nine months of 2015. As previously communicated, given the recent deployments of capital to pursue long-term growth, along with the impact on equity of the strengthening U.S. dollar compared with the Canadian dollar, we no longer believe our core ROE objective of 13% is achievable in 2016.

E2   Variable annuity and segregated fund guarantees

As described in the MD&A in our 2014 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 E4 "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       September 30, 2015     December 31, 2014
(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)       $ 6,539     $ 4,762     $ 1,782     $ 6,014     $ 4,846     $ 1,203
Guaranteed minimum withdrawal benefit         71,880       63,907       9,023       66,950       64,016       4,570
Guaranteed minimum accumulation benefit         19,416       22,729       113       14,514       18,670       23
Gross living benefits(2)       $ 97,835     $ 91,398     $ 10,918     $ 87,478     $ 87,532     $ 5,796
Gross death benefits(3)         13,633       12,731       1,879       12,178       11,036       1,312
Total gross of reinsurance       $ 111,468     $ 104,129     $ 12,797     $ 99,656     $ 98,568     $ 7,108
Living benefits reinsured       $ 5,701     $ 4,177     $ 1,525     $ 5,242     $ 4,249     $ 1,020
Death benefits reinsured         3,856       3,397       732       3,598       3,398       560
Total reinsured       $ 9,557     $ 7,574     $ 2,257     $ 8,840     $ 7,647     $ 1,580
Total, net of reinsurance       $ 101,911     $ 96,555     $ 10,540     $ 90,816     $ 90,921     $ 5,528

(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 as outlined in footnote 3.
(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 September 30, 2015 was $10,540 million (December 31, 2014 - $5,528 million) of which: US$6,296 million (December 31, 2014 - US$3,616 million) was on our U.S. business, $1,314 million (December 31, 2014 - $912 million) was on our Canadian business, US$288 million (December 31, 2014 - US$99 million) was on our Japan business and US$304 million (December 31, 2014 - US$264 million)  was related to Asia (other than Japan) and our run-off reinsurance business.

The amount at risk on variable annuity contracts and segregated fund guarantees, net of reinsurance was $10.5 billion at September 30, 2015 compared with $5.5 billion at December 31, 2014.

The policy liabilities established for variable annuity and segregated fund guarantees were $8,199 million at September 30, 2015 (December 31, 2014 - $4,862 million).  For non-dynamically hedged business, policy liabilities increased from $684 million at December 31, 2014 to $890 million at September 30, 2015. For the dynamically hedged business, the policy liabilities increased from $4,178 million at December 31, 2014 to $7,309 million at September 30, 2015.

The increase in the total policy liabilities for variable annuity and segregated fund guarantees since December 31, 2014 is primarily due to the decline in equity markets, the strengthening of the U.S. dollar relative to the Canadian dollar and, in the case of dynamically hedged business, is also due to the decrease in swap rates in North America.

E3   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 will be as indicated or on MLI's MCCSR ratio will be as indicated.

E4   Publicly traded equity performance risk

As outlined in our 2014 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 52 and 53 of our 2014 Annual Report).

The tables below show the potential impact on net income attributed to shareholders resulting from an immediate 10, 20 and 30 % 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.

This estimate assumes that the performance of the dynamic hedging program would not completely offset the gain/loss from the dynamically hedged variable annuity guarantee liabilities.  It assumes that the hedge assets are based on the actual position at the period end, and that equity hedges in the dynamic program are rebalanced at 5% intervals. In addition, we assume that the macro hedge assets are rebalanced in line with market changes.

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 September 30, 2015                                    
(C$ millions)     -30%     -20%     -10%     10%     20%     30%
Underlying sensitivity to net income attributed to
 shareholders(2)
                                   
Variable annuity guarantees   $  (4,840)   $  (2,970)   $ (1,360)   $ 1,060   $ 1,830   $ 2,390
Asset based fees       (450)      (300)      (150)     150     300     450
General fund equity investments(3)     (990)     (650)     (330)     310     630     960
Total underlying sensitivity before hedging   $  (6,280)   $  (3,920)   $  (1,840)   $  1,520   $ 2,760   $  3,800
Impact of macro and dynamic hedge assets(4)     4,260     2,610     1,210     (1,110)     (2,030)     (2,780)
Net potential impact on net income after
 impact of hedging
  $  (2,020)   $  (1,310)   $ (630)   $  410   $  730   $  1,020
                                     
As at December 31, 2014                                    
(C$ millions)     -30%     -20%     -10%     10%     20%     30%
Underlying sensitivity to net income attributed to
 shareholders(2)
                                   
Variable annuity guarantees   $  (4,480)   $  (2,570)   $  (1,100)   $  740   $  1,210   $  1,510
Asset based fees     (360)     (240)     (120)     120     240     360
General fund equity investments(3)     (650)     (440)     (210)     220     450     680
Total underlying sensitivity before hedging   $  (5,490)   $  (3,250)   $  (1,430)   $  1,080   $  1,900   $  2,550
Impact of macro and dynamic hedge assets(4)   $  3,770      2,150      950   $  (850)   $  (1,460)   $  (1,940)
Net potential impact on net income after
 impact of hedging
  $  (1,720)   $  (1,100)   $  (480)   $  230   $  440   $  610

(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 AFS 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 and dynamic hedging program.  The impact of dynamic hedge rebalancing represents the impact of rebalancing equity hedges for dynamically hedged variable annuity guarantee best estimate liabilities at 5% intervals, 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's MCCSR ratio
Percentage points       -30%     -20%     -10%     10%     20%     30%
September 30, 2015             (18)           (11)           (5)           1           4           6
December 31, 2014             (20)           (10)           (4)           1           7           11

(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 5% intervals.

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 September 30,                
(C$ millions)       2015       2014
For variable annuity guarantee dynamic hedging strategy     $        11,800     $        10,700
For macro equity risk hedging strategy                   4,400                   3,000
Total     $        16,200     $        13,700

E5   Interest rate and spread risk

At September 30, 2015, we estimated the sensitivity of our net income attributed to shareholders to a 50 basis point parallel decline in interest rates to be nil, and to a 50 basis point increase in interest rates to be nil, after rounding results to the nearest $100 million. The $100 million decrease in sensitivity to a 50 basis point change in interest rates from December 31, 2014 was primarily attributable to normal rebalancing a part of our interest risk hedging program.

The 50 basis point parallel decline includes a change of 50 basis points 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, relative to the rates assumed in the valuation of policy liabilities, including embedded derivatives. For variable annuity guarantee liabilities that are dynamically hedged, it is assumed that interest rate hedges are rebalanced at 20 basis point intervals.

As the sensitivity to a 50 basis point change in interest rates includes any associated change in the applicable reinvestment scenario used in the reserve, the impact of changes to interest rates for less than, or more than 50 basis points is unlikely to be linear. 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. Furthermore, the actual impact on net income attributed to shareholders of non-parallel interest rate movements may differ from the estimated impact of parallel movements because our exposure to interest rate movements is not uniform across all durations.

The income impact does not include any potential changes to the URR assumptions which are promulgated periodically by the Actuarial Standards Board ("ASB"), 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. Interest rates are currently lower than they were when the current URR assumptions were promulgated, and therefore there may be a downward bias if the ASB were to update rates27.  The impact 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.

___________________________
27   See "Caution regarding forward-looking statements" below.

 

Potential impact on net income attributed to shareholders and MLI's MCCSR ratio of an immediate 50 basis point parallel change in interest rates relative to rates assumed in the valuation of policy liabilities(1),(2),(3),(4)

  September 30, 2015     December 31, 2014
As at       -50bp       +50bp       -50bp       +50bp
Net income attributed to shareholders (C$ millions)                                
Excluding change in market value of AFS fixed income assets held in the
 surplus segment
    $        -     $        -     $        (100)     $        100
From fair value changes in AFS fixed income assets held in surplus, if realized                   500                   (400)                   500                   (400)
MLI's MCCSR ratio (Percentage points)                                
Before impact of change in market value of AFS fixed income assets held in
 the surplus segment(5)
                  (5)                   3                   (7)                   5
From fair value changes in AFS fixed income assets held in surplus, if realized                   2                   (2)                   3                   (3)

(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 fair value changes in AFS fixed income assets 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 almost all of the 5 point impact of a 50 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)

As at                
(C$ millions)       September 30,
2015
      December 31,
2014
Corporate spreads(4)                
     Increase 50 basis points     $ 700     $ 500
     Decrease 50 basis points       (700)       (500)
Swap spreads                
     Increase 20 basis points     $ (600)     $ (500)
     Decrease 20 basis points       600       500

(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.

The increased sensitivity to a 50 basis point change to corporate spreads from December 31, 2014 to September 30, 2015 is primarily due to investment related activities and updates to our valuation assumptions as a result of our annual review of actuarial methods and assumptions. The increased sensitivity to a 20 basis point change to swap spreads from December 31, 2014 to September 30, 2015 is primarily due to the decrease in swap rates over the period and normal rebalancing as part of our interest risk hedging program.

E6   Alternative Long-Duration Asset ("ALDA") Performance Risk

The following table shows the potential impact on net income attributed to shareholders resulting from changes in market values of ALDA that differ from the expected levels assumed in the valuation of policy liabilities.

Potential impact on net income attributed to shareholders arising from changes in ALDA returns(1),(2),(3),(4)

As at September 30, 2015   December 31, 2014
(C$ millions)       -10%       +10%       -10%       +10%
Real estate, agriculture and timber assets     $  (1,200)     $  1,100     $  (1,000)     $  1,000
Private equities and other ALDA       (1,000)       1,100       (1,000)       900
Alternative long-duration assets     $  (2,200)     $  2,200     $  (2,000)     $  1,900

(1)  See "Caution Related to Sensitivities" above.
(2)  This impact is calculated as at a point-in-time impact and does not include: (i) any potential impact on ALDA, weightings; (ii) any gains or losses on ALDA  held in the Corporate and Other segment; or (iii) any gains or losses on ALDA held in Manulife Bank.
(3)  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 alternative long-duration asset returns.
(4)  Net income impact does not consider any impact of the market correction on assumed future return assumptions.

The increased sensitivity from December 31, 2014 to September 30, 2015 is primarily due to the strengthening of the U.S. dollar relative to the Canadian dollar during the period which increased the sensitivity of our U.S. business as measured in Canadian dollars as well as the acquisition of Standard Life.

F ACCOUNTING MATTERS AND CONTROLS

F1   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, 2014. The critical accounting policies and the estimation processes related to the determination of insurance and investment contract liabilities, assessment of relationships with other entities for consolidation, fair value of certain financial instruments, derivatives and hedge accounting, provisioning for asset impairment, determination of pension and other post-employment benefit obligations and expenses, income taxes and uncertain tax positions, valuation and impairment of goodwill and intangible assets and the measurement and disclosure of contingent liabilities are described on pages 70 to 77 of our 2014 Annual Report.

F2   Actuarial methods and assumptions

A comprehensive review of actuarial methods and assumptions is performed annually. The review is designed to reduce the Company's exposure to uncertainty by ensuring assumptions for both asset-related and liability-related risks remain appropriate. This is accomplished by monitoring experience and selecting assumptions which represent a current best estimate view of expected future experience, and margins that are appropriate for the risks assumed. While the assumptions selected represent the Company's current best estimates and assessment of risk, the ongoing monitoring of experience and changes in the economic environment are likely to result in future changes to the actuarial assumptions, which could be material.

The quantification of the impact of the 2015 comprehensive review of valuation methods and assumptions is as of July 1, 2015 for all lines of business.

In the third quarter of 2015, the completion of the annual review of actuarial methods and assumptions resulted in an increase in insurance and investment contract liabilities of $334 million, net of reinsurance, and net income attributed to shareholders decreased by $285 million.

For the quarter ended September 30, 2015

Assumption
    Change in
gross insurance
and investment
contract
liabilities
      Change in
insurance and
investment
contract
liabilities net of
reinsurance
      Change in
net income
attributed to
shareholders
Mortality and morbidity updates   $        (191)     $        (146)     $        168
Lapses and policyholder behavior                 968                   586                   (456)
Other updates                 (499)                   (106)                   3
Net impact   $        278     $        334     $        (285)

Updates to mortality and morbidity

Assumptions were updated across several business units to reflect recent experience. In Japan, a reduction to the margin for adverse deviations applied to our best estimate morbidity assumptions for certain medical insurance products resulted in a $237 million benefit to net income attributed to shareholders. The reduction in this margin is a result of emerging experience being aligned with expectations leading to a decrease in the level of conservatism required for this assumption.

Other mortality and morbidity updates led to a $69 million charge to net income attributed to shareholders.  This included a refinement to our modelling of mortality improvement on a portion of our Canadian retail insurance business that led to a benefit to net income attributed to shareholders. This was more than offset by a review of our mortality assumption for some of our JH Annuities business and a number of other updates across several business units.

Updates to lapses and policyholder behaviour

Lapse rates were updated across several business units to reflect recent experience. Lapse rates for JH universal life and variable universal life products were updated which led to a net $245 million charge to net income attributed to shareholders. Lapse rates for our low cost universal life products were reduced which led to a charge to net income attributed to shareholders and was partially offset by a reduction in lapse rates for our variable universal life products which led to a benefit to net income attributed to shareholders.

Other updates to lapse and policyholder behavior assumptions were made across several product lines including term and whole life insurance products in Japan, which led to a $211 million charge to net income attributed to shareholders.

Other updates

The company implemented a refinement to the modelling of asset and liability cash flows associated with inflation-linked benefit options in our long-term care business, which led to a $232 million benefit to net income attributed to shareholders.

The Company implemented a refinement to the projection of the term policy conversion options in Canadian retail insurance which led to a $200 million charge to net income attributed to shareholders.

Other model refinements related to the projection of both asset and liability cash flows across several business units led to a $29 million charge to net income attributed to shareholders. This included several offsetting items such as a refinement to the modelling of reinsurance contracts for Canadian Individual Insurance, updates to our future investment expense assumptions, updates to our future ALDA investment return assumptions and updates to certain future expense assumptions in JH Insurance.

F3   Accounting and reporting changes

OSFI recently issued the 2016 MCCSR guidelines for public comment. The guidelines include the requirement to disclose the MCCSR ratio for MFC and other federally regulated holding companies.

G OTHER  

G1   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 Consolidated Financial Statements. Non-GAAP measures include: Core Earnings (Loss); Core ROE; Diluted Core Earnings Per Common Share; Core Earnings Before Income Taxes, Depreciation and Amortization ("Core EBITDA"); Constant Currency Basis; Mutual Funds Assets under Management; Premiums and Deposits; Assets under Management and Administration; Assets under Management; Assets under Administration; Capital; Embedded Value; New Business Value; New Business Value Margin; Sales; Gross Flows and Net Flows. Non-GAAP financial measures are not defined terms under GAAP and, therefore, 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 (loss) 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: 

  1. 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.
  2. Macro hedging costs based on expected market returns.
  3. New business strain.
  4. Policyholder experience gains or losses.
  5. Acquisition and operating expenses compared to expense assumptions used in the measurement of insurance and investment contract liabilities.
  6. Up to $400 million of favourable investment-related experience reported in a single year which is referred to as "core investment gains".  This means up to $100 million in the first quarter, up to $200 million on a year-to-date basis in the second quarter, up to $300 million on a year-to-date basis in the third quarter and up to $400 million on a full year basis in the fourth quarter. Any investment-related experience losses reported in a quarter will be offset against the net year-to-date investment-related experience gains with the difference being included in core earnings subject to a maximum of the year-to-date core investment gains and a minimum of zero. To the extent any investment-related experience losses cannot be fully offset in a quarter they will be carried forward to be offset against investment-related experience gains in subsequent quarters in the same year, for purposes of determining core investment gains.
  7. 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.
  8. Routine or non-material legal settlements.
  9. All other items not specifically excluded. 
  10. Tax on the above items.
  11. All tax related items except the impact of enacted or substantially enacted income tax rate changes.

Items excluded from core earnings are:

  1. The direct impact of equity markets and interest rates and variable annuity guarantee liabilities, consisting of:
    • 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 insurance and investment contract 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.
    • Gains (charges) on variable annuity guarantee liabilities that are not dynamically hedged.
    • Gains (charges) on general fund equity investments supporting insurance and investment contract 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 insurance and investment contract liabilities.
    • Gains (charges) on higher (lower) fixed income reinvestment rates assumed in the valuation of insurance and investment contract 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.
  2. Net favourable investment-related experience in excess of $400 million per annum or net unfavourable investment-related experience on a year-to-date basis. Investment-related experience relates to fixed income redeployment, 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 insurance and investment contract liabilities.
  3. 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.
  4. Changes in actuarial methods and assumptions.
  5. The impact on the measurement of insurance and investment contract liabilities of changes in product features or new reinsurance transactions, if material.
  6. Goodwill impairment charges.
  7. Gains or losses on disposition of a business.
  8. Material one-time only adjustments, including highly unusual/extraordinary and material legal settlements or other items that are material and exceptional in nature.
  9. Tax on the above items.
  10. 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)       3Q       2Q       1Q       4Q       3Q       2Q       1Q       4Q
        2015       2015       2015       2014       2014       2014       2014       2013
Core earnings (loss)                                                                
Asia Division     $ 356     $ 300     $ 296     $ 260     $ 273     $ 231     $  244     $  227
Canadian Division       338       304       262       224       243       232       228       233
U.S. Division       393       402       392       338       342       329       374       366
Corporate and Other (excluding expected cost of
 macro hedges and core investment gains)
      (104)       (109)       (109)       (112)       (107)       (92)       (135)       (138)
Expected cost of macro hedges       (62)       (46)       (44)       (47)       (46)       (49)       (42)       (53)
Investment-related experience included in
 core earnings
      (51)       51       -       50       50       50       50       50
Total core earnings       870       902       797       713       755       701       719       685
Investment-related experience outside of core earnings       (169)       77       (77)       (403)       320       217       225       215
Core earnings plus investment-related
 experience outside of core earnings
      701       979       720       310       1,075       918       944       900
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 (details below)
      232       (309)       13       377       70       55       (90)       (81)
Impact of major reinsurance transactions, in-force
 product changes and recapture of
 reinsurance treaties
      -       -       12       -       24       -       -       261
  Change in actuarial methods and assumptions       (285)       (47)       (22)       (59)       (69)       (30)       (40)       (133)
  Net impact of acquisitions and divestitures       (26)       (54)       (30)       12       -       -       -       350
  Tax items and restructuring charge related to
 organizational design
      -       31       30       -       -       -       4       -
Net income attributed to shareholders     $ 622     $ 600     $ 723     $ 640     $ 1,100     $ 943     $ 818     $  1,297
                                                                 
Other market-related factors                                                                
Direct impact of equity markets and variable annuity
 guarantee liabilities
    $ (419)     $ 28     $ 15     $ (142)     $ (35)     $ 66     $  (71)     $  105
Gains (charges) on higher (lower) fixed income
 reinvestment rates assumed in the valuation of
 policy liabilities
      647       (362)       13       533       165       22       9       (105)
Gains (charges) on sale of AFS bonds and derivative
 positions in the Corporate segment
      4       25       (15)       (14)       (15)       (8)       (3)       (55)
Charges due to lower fixed income URR assumptions
 used in the valuation of policy liabilities
      -       -       -       -       (45)       (25)       (25)       (26)
Direct impact of equity markets and interest
 rates and variable annuity guarantee liabilities
    $ 232     $ (309)     $ 13     $ 377     $ 70     $ 55     $ (90)     $ (81)
                                                                   
                                                                   
Asia Division                                                                
      Quarterly Results
(C$ millions, unaudited)       3Q       2Q       1Q       4Q       3Q       2Q       1Q       4Q
        2015       2015       2015       2014       2014       2014       2014       2013
Asia Division core earnings     $  356     $  300     $  296     $  260     $  273     $  231     $  244     $  227
Investment-related experience outside of core
 earnings
      21       7       -       (2)       27       18       19       (5)
Core earnings plus investment-related
 experience outside of core earnings
      377       307       296       258       300       249       263       222
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
      (248)       15       (17)       78       32       88       (25)       85
  Recapture of reinsurance treaty and tax items       -       (2)       20       -       -       -       4       68
  Disposition of Taiwan insurance business       -       -       -       -       -       -       -       350
Net income attributed to shareholders     $ 129     $  320     $  299     $  336     $  332     $  337     $  242     $  725
                                                                   
                                                                   
Canadian Division                                                                
      Quarterly Results
(C$ millions, unaudited)       3Q       2Q       1Q       4Q       3Q       2Q       1Q       4Q
        2015       2015       2015       2014       2014       2014       2014       2013
Canadian Division core earnings     $  338     $  304     $  262     $  224     $  243     $  232     $  228     $  233
Investment-related experience outside of core earnings       (144)       14       (81)       (199)       19       46       135       106
Core earnings plus investment-related
 experience outside of core earnings
      194       318       181       25       262       278       363       339
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
      97       (114)       (65)       48       -       (11)       14       34
  Recapture of reinsurance treaty and tax items       -       1       12       -       24       -       -       -
  Net impact of acquisitions and divestitures       (13)       (14)       (9)       -       -       -       -       -
Net income attributed to shareholders     $  278     $  191     $  119     $  73     $  286     $  267     $  377     $  373
                                                                   
                                                                   
U.S. Division                                                                
      Quarterly Results
(C$ millions, unaudited)       3Q       2Q       1Q       4Q       3Q       2Q       1Q       4Q
        2015       2015       2015       2014       2014       2014       2014       2013
U.S. Division core earnings     $  393     $  402     $  392     $  338     $  342     $  329   $    374     $  366
Investment-related experience outside of core
 earnings
      (34)       64       (9)       (154)       319       206       111       161
Core earnings plus investment-related experience
 outside of core earnings
      359       466       383       184       661       535       485       527
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
      174       (251)       99       322       18       24       (82)       105
  Impact of in-force product changes and
 recapture of  reinsurance treaties
      (8)       (32)       -       -       -       -       -       193
Net income attributed to shareholders     $ 525     $ 183     $ 482     $  506     $  679     $  559     $  403     $  825
                                                                   
                                                                   
Corporate and Other                                                                
      Quarterly Results
(C$ millions, unaudited)       3Q       2Q       1Q       4Q       3Q       2Q       1Q       4Q
        2015       2015       2015       2014       2014       2014       2014       2013
Corporate and Other core loss
 (excluding expected cost of macro hedges
 and core investment gains)
    $  (104)     $ (109)     $ (109)     $ (112)     $ (107)     $ (92)     $  (135)     $ (138)
Expected cost of macro hedges       (62)       (46)       (44)       (47)       (46)       (49)       (42)       (53)
Investment-related experience included in core
 earnings
      (51)       51       -       50       50       50       50       50
Total core loss       (217)       (104)       (153)       (109)       (103)       (91)       (127)       (141)
Investment-related experience outside of core
 earnings
      (12)       (8)       13       (48)       (45)       (53)       (40)       (47)
Core loss plus investment-related experience
 outside of core earnings
      (229)       (112)       (140)       (157)       (148)       (144)       (167)       (188)
Other items to reconcile core earnings (loss) to
 net income (loss) attributed to shareholders
                                                               
  Direct impact of equity markets and interest
 rates and variable annuity guarantee liabilities
      209       41       (4)       (71)       20       (46)       3       (305)
  Changes in actuarial methods and assumptions       (285)       (47)       (22)       (59)       (69)       (30)       (40)       (133)
  Goodwill impairment charge and other       -       -       -       -       -       -       -       -
  Net impact of acquisitions and divestitures       (5)       (8)       (21)       12       -       -       -       -
  Tax items and restructuring charge related to
 organizational design
      -       32       10       -       -       -       -       -
Net loss attributed to shareholders     $  (310)     $  (94)     $  (177)     $  (275)     $  (197)     $  (220)     $  (204)     $  (626)

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 are non-GAAP measures that exclude the impact of currency fluctuations (from local currency to Canadian dollars at a total company level and from local currency to U.S. dollars in Asia). 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 3Q15.

Mutual Funds assets under management ("MF AUM") is a non-GAAP measure of the size of the Company's Canadian mutual fund business.  It represents the assets managed by the Company, on behalf of mutual fund clients, on a discretionary basis for which the Company earns investment management fees.

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) investment contract deposits, (iv) mutual fund deposits, (v) deposits into institutional advisory accounts, (vi) premium equivalents for "administration services only" group benefits contracts ("ASO premium equivalents"), (vii) premiums in the Canadian Group Benefits reinsurance ceded agreement, and (viii) other deposits in other managed funds.

Premiums and deposits Quarterly Results
(C$ millions)       3Q 2015       2Q 2015       3Q 2014
Net premium income and investment contract deposits     $  6,238     $  5,670     $  4,643
Deposits from policyholders             7,854             7,280             5,257
Mutual fund deposits             16,768             17,787             9,234
Institutional advisory account deposits             2,165             10,987             962
ASO premium equivalents             804             851             736
Group Benefits ceded premiums             1,012             1,031             1,132
Other fund deposits             116             117             110
Total premiums and deposits             34,957             43,723             22,074
Currency impact             -             1,684             2,994
Constant currency premiums and deposits     $  34,957     $  45,407     $  25,068

Assets under management and administration ("AUMA") is a non-GAAP measure of the size of the Company.  It is comprised of the non-gaap measures assets under management ("AUM"), which includes both assets of general account and external client assets for which we provide investment management services, and assets under administration ("AUA"), which includes assets for which we provide administrative services only. Assets under management and administration is a common industry metric for WAM businesses.

Assets under management and administration                        
As at                        
(C$ millions)     September 30,
2015
    June 30,
2015
    September 30,
2014
Total invested assets     $  299,595     $  295,393     $ 257,842
Segregated funds net assets             301,276             303,589             250,406
Assets under management per financial statements             600,871             598,982             508,248
Mutual funds             147,185             144,663             111,600
Institutional advisory accounts (excluding segregated funds)             62,931             61,855             36,498
Other funds             6,549             8,303             6,185
Total assets under management             817,536             813,803             662,531
Other assets under administration             70,447             68,924             -
Currency impact             -             38,515             86,637
Constant currency assets under management and administration     $  887,983     $  921,242     $  749,168

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 accumulated other comprehensive income ("AOCI") on cash flow hedges and (ii) liabilities for preferred shares and capital instruments.

Capital                        
As at                        
(C$ millions)     September 30,
2015
    June 30,
2015
    September 30,
2014
Total equity     $  40,890     $  38,677     $  32,596
Add AOCI loss on cash flow hedges             309             205             159
Add liabilities for preferred shares and capital instruments             6,681             6,639             4,909
Total capital     $  47,880     $  45,521     $  37,664

Core EBITDA is a non-GAAP measure which Manulife uses to better understand the long-term earnings capacity and valuation of the business on a more comparable basis to how global asset managers are measured.  Core EBITDA presents core earnings before the impact of interest, taxes, depreciation, and amortization. Core EBITDA was selected as a key performance indicator for WAM businesses, as EBITDA is widely used among asset management peers, and core earnings is a primary profitability metric for the Company overall.

  Quarterly Results
Wealth and Asset Management       3Q       2Q       1Q       4Q       3Q       2Q       1Q       4Q
(C$ millions, unaudited)       2015       2015       2015       2014       2014       2014       2014       2013
Core EBITDA     $  315     $  317     $  300     $  255     $ 257     $  245     $  223     $  195
Amortization of deferred acquisition costs and
 other depreciation
      84       82       77       63       59       58       57       54
Amortization of deferred sales commissions       27       27       30       22       21       23       24       21
Core earnings before income taxes       204       208       193       170       177       164       142       120
Core income tax (expense) recovery       (35)       (46)       (42)       (41)       (48)       (35)       (27)       (23)
Core earnings     $  169     $  162     $  151     $  129     $  129     $  129     $  115     $  97

Embedded value ("EV") is a measure of the present value of shareholders' interests in the expected future distributable earnings on in-force business reflected in the Consolidated Statement of Financial Position of Manulife, excluding any value associated with future new business. The adjusted net worth is the IFRS shareholders' equity adjusted for goodwill and intangibles, fair value of surplus assets, third party debt, and pension liabilities, and local statutory balance sheet, regulatory reserve, and capital for Manulife's Asian business. The value of in-force business in Canada and the U.S. is the present value of expected future IFRS earnings on in-force business less the present value of the cost of holding capital to support the in-force business under the MCCSR framework. The value of in-force business in Asia reflects local statutory earnings and capital requirements. The value of in-force excludes businesses without material insurance risks, such as Manulife's WAM businesses and Manulife Bank. EV is calculated as the sum of the adjusted net worth and the value of in-force business.

New business value ("NBV") is the change in embedded value as a result of sales in the reporting period. NBV is calculated as the present value of shareholders' interests in expected future distributable earnings, after the cost of capital, on actual new business sold in the period using assumptions that are consistent with the assumptions used in the calculation of embedded value. NBV excludes businesses with immaterial insurance risks, such as Manulife's wealth and asset management businesses and Manulife Bank. NBV is a useful metric to evaluate the value created by the Company's new business franchise.

New business value margin is calculated as NBV divided by annualized premium equivalents ("APE") excluding non-controlling interests. APE is calculated as 100% of annualized first year premiums for recurring premium products, and as 10% of single premiums for single premium products.  Both NBV and APE used in the NBV margin calculation are after non-controlling interests and exclude wealth and asset management businesses and Manulife Bank. The NBV margin is a useful metric to help understand the profitability of our new business.

Sales are measured according to product type:

For individual insurance, sales include 100% of new annualized premiums and 10% 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. Single premium is the lump sum premium from the sale of a single premium product, e.g. travel insurance.  Sales are reported gross before the impact of reinsurance.

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.

Other Wealth sales include all new deposits into variable and fixed annuity contracts and single premium products in Asia.  As we discontinued sales of new Variable Annuity contracts in the U.S. in 1Q13, subsequent deposits into existing U.S. Variable Annuity contracts are not reported as sales.

Bank new lending volumes include bank loans and mortgages authorized in the period.

Gross flows is a new business measure for Manulife's WAM businesses and includes all deposits into the Company's mutual funds, college savings 529 plans, group pension/retirement savings products, private wealth and institutional asset management products. Gross flows are a common industry metric for WAM businesses as it provides a measure of how successful the businesses are at attracting assets.

Net flows is presented for our WAM businesses and includes gross flows less redemptions for our mutual funds, college savings 529 plans, group pension/retirement savings products, private wealth and institutional asset management products. Net flows are a common industry metric for WAM businesses as it provides a measure of how successful the businesses are at attracting and retaining assets.

G2   Key planning assumptions and uncertainties

Manulife's 2016 management objectives28 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.

___________________________
28   See "Caution regarding forward-looking statements" below.

 

G3   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 the acquisition of Standard Chartered's MPF and ORSO businesses and the related 15-year distribution agreement in Hong Kong, the regional distribution agreement with DBS in Asia and its impact on the MCCSR ratio, the impact of John Hancock launching ETFs in the U.S., the reasonableness of Manulife's investment-related experience estimate, and the anticipated impact of an update to ASB's URR assumptions.  

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 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: 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 applicable in any of the territories in which we operate; changes in regulatory capital requirements; 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, actuarial methods and embedded value 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, including through our collaboration arrangements with Standard Life plc, bancassurance partnership with DBS Bank Ltd and distribution agreement with Standard Chartered; unforeseen liabilities or asset impairments arising from acquisitions and dispositions of businesses, including with respect to the acquisitions of Standard Life, New York Life's Retirement Plan Services business and Standard Chartered's MPF and ORSO 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 failure to realize some or all of the expected benefits of the acquisitions of Standard Life, New York Life's Retirement Plan Services business and Standard Chartered's MPF and ORSO businesses; the disruption of or changes to key elements of the Company's or public infrastructure systems; environmental concerns; our ability to protect our intellectual property and exposure to claims of infringement; and our inability to withdraw cash from subsidiaries.

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 this document under "Risk Management and Risk Factors Update" and "Critical Accounting and Actuarial Policies" 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, 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, our future 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                    
                     
For the three months ended September 30,                    
(Canadian $ in millions except per share amounts, unaudited)         2015         2014
Revenue                    
Premium income                    
  Gross premiums     $   8,198       $   6,494
  Premiums ceded to reinsurers         (1,965)         (1,866)
  Premiums ceded, net of ceded commissions and additional
consideration relating to the Closed Block reinsurance transaction (1)
        (7,996)         -
Net premium income         (1,763)         4,628
Investment income                    
Investment income         2,708         2,602
Realized and unrealized gains (losses) on assets
supporting insurance and investment contract liabilities
and on the macro hedge program (2)
        3,672         1,561
Net investment income         6,380         4,163
Other revenue         2,487         2,207
Total revenue         7,104         10,998
Contract benefits and expenses                    
To contract holders and beneficiaries                    
  Gross claims and benefits         5,741         5,082
  Change in insurance contract liabilities         5,741         2,884
  Change in investment contract liabilities         56         40
  Benefits and expenses ceded to reinsurers         (1,868)         (1,668)
  Change in reinsurance assets         (7,160)         369
Net benefits and claims         2,510         6,707
General expenses         1,519         1,183
Investment expenses         402         290
Commissions         1,314         1,063
Interest expense         282         284
Premium taxes         89         79
Total contract benefits and expenses         6,116         9,606
Income before income taxes         988         1,392
Income tax expense         (316)         (287)
Net income     $   672     $   1,105
Net income (loss) attributed to:                    
  Non-controlling interests     $   24     $   9
  Participating policyholders         26         (4)
  Shareholders         622         1,100
      $   672     $   1,105
Net income attributed to shareholders     $   622     $   1,100
Preferred share dividends         (29)         (28)
Common shareholders' net income     $   593     $   1,072
Earnings per share:                    
       Basic earnings per common share     $   0.30     $   0.58
       Diluted earnings per common share         0.30         0.57

(1)  Effective July 1, 2015, U.S division's RPS business included the assumption by New York Life ("NYL") of the Company's in-force participating life insurance closed block ("Closed Block") through net 60% reinsurance agreements. The Closed Block transaction with NYL resulted in a net ceded premium of approximately $8.0 billion, reported as a reduction in premiums net of commissions received and additional consideration received relating to New York Life retirement plan services business.
(2)   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    
                 
As at                
(Canadian $ in millions, unaudited)     September 30, 2015     December 31, 2014
Assets                
Cash and short-term securities     $ 19,005     $ 21,079
Debt securities       150,788       134,446
Public equities       16,068       14,543
Mortgages       43,864       39,458
Private placements       26,043       23,284
Policy loans       7,481       7,876
Loans to bank clients       1,761       1,772
Real estate       14,848       10,101
Other invested assets       19,737       16,751
Total invested assets       299,595       269,310
Other assets                
Accrued investment income       2,068       2,003
Outstanding premiums       840       737
Derivatives       25,615       19,315
Reinsurance assets       34,503       18,525
Deferred tax assets       3,766       3,329
Goodwill and intangible assets       9,127       5,461
Miscellaneous       6,159       4,194
Total other assets       82,078       53,564
Segregated funds net assets       301,276       256,532
Total assets     $ 682,949     $ 579,406
Liabilities and Equity                
Liabilities                
Insurance contract liabilities     $ 278,208     $ 229,513
Investment contract liabilities       3,472       2,644
Deposits from bank clients       18,222       18,384
Derivatives       16,581       11,283
Deferred tax liabilities       1,274       1,228
Other liabilities       14,516       14,365
        333,273       277,417
Long-term debt       1,829       3,885
Liabilities for preferred shares and capital instruments       6,681       5,426
Liabilities for subscription receipts       -       2,220
Segregated funds net liabilities       301,276       256,532
Total liabilities       642,059       545,480
Equity                
Preferred shares     $ 2,693     $ 2,693
Common shares       22,790       20,556
Contributed surplus       276       267
Shareholders' retained earnings       8,517       7,624
Shareholders' accumulated other comprehensive income (loss) on:                
  Pension and other post-employment plans       (561)       (529)
  Available-for-sale securities       422       794
  Cash flow hedges       (309)       (211)
  Translation of foreign operations and real estate revaluation surplus       6,271       2,112
Total shareholders' equity       40,099       33,306
Participating policyholders' equity       214       156
Non-controlling interests       577       464
Total equity       40,890       33,926
Total liabilities and equity     $ 682,949     $ 579,406

 

 

 

SOURCE Manulife Financial Corporation

For further information:

Media Inquiries:
Sean B. Pasternak
(416) 852-2745
sean_pasternak@manulife.com

Investor Relations:
Robert Veloso
(416) 852-8982
robert_veloso@manulife.com


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