Manulife Financial Corporation Reports Third Quarter Results
C$ unless otherwise stated
TSX/NYSE/PSE: MFC SEHK: 945
- Charges due to lower corporate bond yields and changes in actuarial
assumptions offset strong operational results and gains due to equity
market increases, resulting in a modest net loss for the quarter
- Margins improved through increased pricing, adjustments to sales
compensation and more favourable reinsurance terms
- Strong sales growth across most products other than variable
annuities generated a more balanced business mix
- Equity risk profile improved through hedging, pricing, product and
asset mix changes
- Excellent credit experience given challenging markets - asset quality
remains a competitive strength
- Two attractive acquisitions - AIC mutual funds and Pottruff & Smith
travel insurance
- Equity markets, interest rates and credit will continue to impact the
Company's balance sheet and earnings
- Focused on building to fortress capital levels over time - expect
benefits from merging U.S. operating subsidiaries at the end of 2009
In its second quarter earnings release, the Company included a forward-looking statement that estimated normalized earnings to be between
Chief Executive Officer Donald A. Guloien said, "Underlying earnings and performance were solid this quarter, but our results were negatively impacted by lower corporate bond rates and strengthening of reserves for changes in actuarial assumptions. We took actions to improve margins, increased our sales of products other than variable annuities, further improved our equity risk profile and continued to build toward fortress capital levels. We announced two attractive acquisitions and see numerous opportunities for strategic growth across a variety of markets. We remain highly disciplined and will continue to build upon Manulife's scale and key strengths including our superior asset quality, well recognized brands, leading products and distribution, excellence in investment management, and strong positioning in key growth markets."
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(1) Referred to in the second quarter report as normalized earnings. See
"Normalized Earnings and Adjusted Earnings from Operations -
Reconciliation with GAAP Measure" and "Performance and Non-GAAP
Measures" below.
FINANCIAL RESULTS
Chief Financial Officer Michael W. Bell said, "Continued declines in corporate bond rates required a further strengthening of actuarial reserves this quarter. We also increased reserves for changes in actuarial assumptions including those related to policyholder behaviour for variable annuity products. As a result of the decline in interest rates and changes in lapse assumptions, our interest rate sensitivity has increased. Nevertheless, Manulife's underlying business growth remains strong, and the quality of our investment portfolio remains a competitive strength. MLI's MCCSR remains strong at 229 per cent, and we continue to take focused action to improve our risk profile and strengthen our capital flexibility as we grow our Company. We anticipate that, at year end and subject to regulatory approvals, we will complete a reorganization of our U.S. subsidiaries which will deliver capital and operating efficiencies."
Increases in equity markets in
The Company reported a non cash charge of
As indicated in the prior quarter, the Company completed its annual review of all actuarial assumptions in the third quarter. This resulted in a charge to earnings of
The Company's investment portfolio continued to perform well relative to overall market conditions, with
MLI reported a MCCSR ratio of 229 per cent as at
SALES AND BUSINESS GROWTH
Chief Operating Officer John D. DesPrez III said, "This quarter we improved our margins through price increases, adjustments to compensation and more favourable reinsurance terms. We also reduced our variable annuity risk profile through pricing adjustments, changes to our product and asset mix and hedging of an additional
Insurance new business embedded value ("NBEV") was 17 per cent higher than prior year levels driven by growth across all geographies, while wealth NBEV was down 48 per cent, reflecting lower variable annuity sales, hedging costs and other product mix changes.
Insurance sales experienced sequential increases over the prior two quarters across most business segments. Total insurance sales increased by two per cent, on a constant currency basis, over the prior year as strong advances in Asia and
Total wealth sales excluding variable annuity products also experienced sequential increases over the prior two quarters. Sales excluding variable annuity products increased by four per cent over the prior year, on a constant currency basis, as fixed return wealth product sales in both the U.S. and
Premiums and deposits, excluding variable annuity products, were
Variable annuity and segregated fund deposits of
Total funds under management as at
Capitalizing on strategic opportunities, Canadian Division announced two acquisitions since the end of the second quarter. Manulife Mutual Funds announced the acquisition of AIC Limited's Canadian retail investment fund business, which added approximately
The Company continued to rebalance the risk profile of its product mix by reviewing its variable annuity product portfolio and implementing changes to its product features and pricing. With the equity market rally in the quarter, the Company also opportunistically hedged an additional
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(2) 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.
OPERATING HIGHLIGHTS
Insurance
- Insurance sales experienced sequential increases over the prior two
quarters across most business segments. Total insurance sales
increased by two per cent over the prior year, on a constant currency
basis, as strong advances in Asia and Canada were partially offset by
a decline in the U.S.
- In the U.S., overall insurance sales improved by 18 per cent from the
prior quarter, but were down six per cent from prior year levels,
with both Life and Long-Term Care experiencing significant
improvements over the prior two quarters, but falling short of prior
year levels by four and 13 per cent, respectively. Despite general
economic trends, Life sales topped US$200 million in the quarter and
Long-Term Care sales were robust compared to strong prior year
comparables. Since the end of the first quarter, Life has introduced
higher prices on its Term and Universal Life offerings while Long-
Term Care has introduced new features and increased pricing on its
group segment.
- In Canada, overall insurance sales increased by six per cent over
prior year levels, with Group Benefits sales up 12 per cent,
partially offset by a four per cent decline in Individual Insurance
sales. Subsequent to the quarter, Affinity Markets announced the
acquisition of Pottruff & Smith Travel Insurance Brokers Inc., one of
the largest travel insurance brokers and third-party administrators
in Canada. This acquisition solidifies Manulife's position as one of
Canada's largest providers of travel insurance services, with a
stronger platform for long-term growth as a travel insurer.
- In Asia, record insurance sales levels were achieved in the quarter,
with overall sales exceeding the prior year by 16 per cent on a
constant currency basis. Japan sales were up seven per cent over the
prior year while Hong Kong sales increased by 29 per cent, with
strong sales momentum bolstered by new product offerings and
distribution initiatives. Japan and Indonesia reported significant
market share gains in 2009 reflecting consumer flight to quality.
China sales also continued to grow, up 18 per cent in the quarter,
reflecting contributions from new offices opened in the prior year
and recent marketing initiatives. During the quarter, Manulife
continued to expand its operations in China receiving an additional
license in the Province of Tianjin. This brought the total number of
licenses to 38, among the most of any foreign life insurance company
in China.
Wealth Management
- Wealth sales, excluding variable annuity products, increased by four
per cent over prior year levels on a constant currency basis, driven
by fixed return product sales in the U.S. and Canada. Fixed return
product sales continued to outpace prior year levels as consumers
sought more stable investment returns.
- Variable annuity sales were less than half of prior year levels
following from the Company's on-going risk management initiatives
across all geographies and, to a lesser extent, general economic
conditions.
- In the U.S., wealth sales excluding variable annuity products
improved by 21 per cent over the prior quarter, and were in line with
prior year levels. All product segments other than variable annuity
products experienced double digit growth over prior quarter levels,
with fixed return product sales up 16 per cent, retirement plan sales
up 30 per cent and mutual fund sales up 18 over the second quarter of
2009. Compared to prior year, fixed return product sales were up 37
per cent, retirement plan sales were flat, and mutual and other fund
sales were down 12 per cent. During the quarter, John Hancock
expanded its growing relationship with Edward Jones, announcing a
distribution agreement whereby financial advisors will have access to
the John Hancock 401(k) retirement plan platform. This has further
leveraged the strong relationship that has been built with Edward
Jones by the John Hancock Long-Term Care and Variable Annuity
businesses.
- John Hancock Lifestyle Portfolios offered through mutual fund,
variable annuity and 401(k) wealth management product lines have
continued to produce very strong returns through September 30, 2009.
The Lifestyle Portfolios that underlie the mutual fund and 401(k)
products rank in the 8th, 11th, 13th, 14th and 29th percentiles of
their Morningstar peer groups year-to-date for Balanced, Aggressive,
Growth, Moderate and Conservative, respectively(3). John Hancock is
ranked as the third largest provider of lifestyle/lifecycle asset
allocation solutions in the industry as of September 30, 2009,
according to data from Strategic Insight, with over $55 billion in
assets under management.
- In Canada, wealth sales excluding variable annuity products increased
by five per cent over the prior year. Strong increases in fixed
products and group retirement sales more than offset declines in
Manulife Bank loan volumes. Fixed products sales increased by 57 per
cent while group retirement sales more than quadrupled prior year
levels, driven by record sales of group annuities. Year-to-date,
group retirement sales exceeded $1 billion reflecting strong results
in the defined contribution market.
- During the quarter, Manulife Mutual Funds announced the acquisition
of AIC Limited's Canadian retail investment fund business. This
acquisition added $3.8 billion of assets under management, an
increase of approximately 40 per cent to the Canadian Division's
mutual fund platform, increasing scale and bolstering the division's
presence in the Canadian retail investment fund market.
- In Asia, wealth sales excluding variable annuity products increased
by 59 per cent over the prior year, driven by strong growth in
Indonesia. Indonesia fund sales more than tripled, benefiting from
the equity market recovery.
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(3) The Morningstar percentile ranking compares a Fund's Morningstar risk
and return scores with all the Funds in the same Category, where
1= Best and 100= Worst. The rankings above are
based on the period from 1/1/09 to 9/30/09 for John Hancock Lifestyle
Portfolios, Class A. Lifestyle Aggressive was ranked 208 out of
2,028 funds in the Large Cap Blend category, Lifestyle Growth was
ranked 251 out of 2,028 funds in the Large Cap Blend category,
Lifestyle Balanced was ranked 97 out of 1,218 funds in the Moderate
Allocation category, Lifestyle Moderate was ranked 91 out of 647
funds in the Conservative Allocation category, and Lifestyle
Conservative was ranked 189 out of 647 funds in the Conservative
Allocation category.
Corporate
- During the quarter, the Company raised $1 billion through the
issuance of Innovative Tier 1 Notes. The notes pay 7.405 per cent per
annum until December 30, 2019, with 5 year resets thereafter equal to
5-year Government of Canada bonds plus 5 per cent. The notes may be
redeemed in whole or in part on or after December 31, 2014, with
regulatory (OSFI) approval.
- In a separate news release, the Company also announced today that the
Board of Directors approved a quarterly shareholders' dividend of
$0.13 per share on the common shares of the Company, payable on and
after December 21, 2009 to shareholders of record at the close of
business on November 17, 2009.
- The Company is proud to have recently appointed two highly qualified
and distinguished Directors to its Board:
- Linda Bammann was appointed to the Board of Directors of Manulife
Financial Corporation and The Manufacturers Life Insurance Company
effective August 5, 2009. Ms. Bammann joins Manulife's Board
possessing strong risk management expertise and first hand management
experience from her senior executive risk management positions with
several large U.S. banks, including JPMorgan Chase and Bank One.
- John Palmer was appointed to the Board of Directors of Manulife
Financial Corporation and The Manufacturers Life Insurance Company
effective November 4, 2009. Mr. Palmer brings extensive financial
institution experience to Manulife's Board, including seven years as
Superintendent of Financial Institutions of Canada. Mr. Palmer was
the Deputy Managing Director of the Monetary Authority of Singapore
and has advised other regulators including the Australian Prudential
Regulation Authority. He is a chartered accountant and previously was
Canadian Managing Partner and Deputy Chairman of KPMG LLP (Canada).
Awards & Recognition
Manulife Financial received recognition from several organizations in the quarter, including the following:
- In Canada, Individual Wealth Management operations received Level
Four certification and the prestigious gold award for outstanding
achievement in quality from the National Quality Institute ("NQI").
This is the highest level of achievement under NQI's Progressive
Excellence program which measures excellence in multiple categories,
including Customer, People, Process management, Partnerships,
Responsibility to society, and Owner/shareholder.
- In the U.S., John Hancock Long-Term Care was voted No. 1 in all 11
categories of Agent's Sales Journal magazine's 2009 LTCI Carrier
Report Card. Categories included products and features, marketing and
sales materials, product and sales training, and meeting the overall
needs of the market segment.
- In Indonesia, Manulife was awarded "Best Life Insurance Company 2009"
by Bisnis Indonesia Daily, the first national business newspaper of
Indonesia. The awards theme for judging the 129 entrants this year
was "Survival and Profitability." Despite the global financial
crisis, Manulife Indonesia experienced strong growth and was
acknowledged with this prestigious award as the best company in the
life insurance category. This is the first time Manulife has been
awarded this honour.
- MFC Global Investment Management ("GIM") earned new Five Star
Morningstar Ratings for three of its managed John Hancock funds
including the Large Cap Equity, Global Opportunities and Strategic
Income funds in Morningstar's September 2009 U.S. mutual fund
rankings. Morningstar's Five Star Rating is the highest rating
achievable, and awarded to the top 10 per cent of funds in a given
category, based on past returns and volatility.
Notes:
Manulife Financial Corporation will host a Third Quarter Earnings Results Conference Call at
The conference call will also be webcast through Manulife Financial's website at
The Third Quarter 2009 Financial Statements and Statistical Information Package are also available on the Manulife website at: www.manulife.com/quarterlyreports. Each of these documents may be downloaded before the webcast begins.
MANAGEMENT'S DISCUSSION AND ANALYSIS ("MD&A")
FINANCIAL HIGHLIGHTS
(unaudited)
Quarterly Results
3Q09 2Q09 3Q08
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Net Income (Loss) Attributed to Shareholders
(C$ millions) (172) 1,774 510
Net Income (Loss) Available to Common
Shareholders (C$ millions) (193) 1,758 503
Diluted Earnings (Loss) per Common Share (C$) (0.12) 1.09 0.33
Return on Common Shareholders' Equity(1)
(%, annualized) (3.0) 26.9 8.2
Premiums & Deposits(1) (C$ millions) 16,238 19,196 18,090
Funds under Management(1) (C$ billions) 436.5 420.9 385.3
Capital(1) (C$ billions) 30.7 31.1 28.3
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(1) This item is a non-GAAP financial measure. For a discussion of our
use of non-GAAP financial measures, see "Performance and Non-GAAP
Measures" below.
Net Income (Loss)
The Company's net loss attributed to shareholders for the third quarter was
During the quarter, North American equity markets increased (the S&P 500 increased 15 per cent and the TSX was up 10 per cent), and the Japanese TOPIX index was down two per cent. The overall positive market performance generated non cash gains of
During the quarter, interest rates on corporate bonds declined by approximately 15 to 35 basis points in
Impairments recorded in the quarter reduced earnings by
Market conditions also reduced the value of real estate appraisals and reduced private equity returns. These charges were mostly offset by the favourable impact of tax items and gains related to the recapture of reinsurance treaties.
The post tax charge of
In addition to the tax items referred to above, a portion of the equity related gains as well as some interest related gains were subject to lower tax rates than were the other interest and investment related losses. The effective tax rate, in the quarter, adjusted for these tax items was similar to that in the prior year.
In the third quarter of 2008, market turmoil including unprecedented equity market volatility and financial sector credit related defaults reduced earnings by approximately
Year-to-date net income attributed to shareholders was
Normalized Earnings and Adjusted Earnings from Operations
In our second quarter report in the section entitled "Normalized Earnings", we provided forward-looking information for "normalized earnings", which is a non-GAAP measure. In this report we have compared our estimate at
Comparison with Third Quarter Actual Adjusted Earnings from Operations
Our estimate of adjusted earnings from operations for the financial quarter ended
Reconciliation with GAAP Measure
The following table reconciles adjusted earnings from operations to our reported net loss for the third quarter:
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C$ millions
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Adjusted earnings from operations 803
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Adjusting items:
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Equity market gains(1) 1,201
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Interest rate charges(2) (1,222)
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Credit and other impairments (111)
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Changes in actuarial methods and assumptions (783)
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Currency rates(3) (27)
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Other items(4) (33)
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Net Loss reported (172)
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(1) Adjusted earnings from operations excludes equity market changes that
differ from our best estimate assumptions of 7.25% per annum in
Canada, 8.0% per annum in the U.S., 5.0% per annum in Japan and 9.5%
per annum in Hong Kong and excluding realized gains on our AFS
portfolio. For actuarial valuation purposes, these returns are
reduced by margins for adverse deviation to determine net yields used
in valuation.
(2) Changes in interest rates impact the actuarial valuation of in-force
policies by changing the future returns assumed on the investment of
net future cash flows. This impact is excluded when calculating
adjusted earnings from operations.
(3) Adjusted earnings from operations excludes the impact of changes in
currency exchange rates from those in effect at June 30, 2009 when we
originally provided our estimate of this amount. Since that time, the
Canadian dollar has strengthened and the Canadian dollar equivalent
of one U.S. dollar has declined from $1.1625 as at June 30, 2009 to
$1.0722 as at September 30, 2009. The average daily exchange rate for
the quarter was $1.098. This decline has reduced net income by $27
million during the quarter but did not reduce adjusted earnings from
operations.
(4) Adjusted earnings from operations excludes certain other items: the
impact of the reduced value of real estate appraisals and reduced
private equity returns partially offset by the favourable impact of
closing uncertain tax positions, changes in tax methodology related
to certain permanent differences, gains related to the recapture of
reinsurance treaties and a small amount of policyholder experience
gains.
Included in the adjusted earnings from operations for the third quarter of
Estimated Adjusted Earnings from Operations for remainder of 2009 and 2010
Given the current economic conditions including the volatility of equity markets, interest rates, the impact of current economic conditions on credit and other factors, we are providing forward-looking information for financial periods for the fourth quarter of 2009 and for all quarters in 2010 for what we refer to as adjusted earnings from operations. The information in this section is forward-looking information and should be read in conjunction with the section below entitled "Caution Regarding Forward-Looking Statements". This discussion should not be considered earnings guidance, particularly as it is not possible to predict near term market conditions and because adjusted earnings from operations excludes items that are included in GAAP net income or loss. Estimated adjusted earnings from operations are based on assumptions that include our book of business, equity market growth as described in footnote 1 to the "Reconciliation with GAAP Measure" table above, foreign currency rates that are consistent with levels as at
We estimate adjusted earnings from operations to be between
Loss per Share and Return on Common Shareholders' Equity
Third quarter loss per common share was
Premiums and Deposits(4)
Premiums and deposits excluding variable annuities amounted to
Premiums and premium equivalents(4) related to the insurance businesses were
Annuity and pension premiums excluding variable annuities were
Deposits excluding variable annuities were
Variable annuity and segregated fund deposits of
Funds under Management(4)
Total funds under management as at
Capital(4)
Total capital was
Regulatory capital adequacy is primarily managed at the operating insurance company level (MLI and
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(4) Premiums and deposits, premiums and premium equivalents, funds under
management and capital are all non-GAAP measures. See "Performance
and Non-GAAP Measures" below.
PERFORMANCE BY DIVISION
U.S. Insurance
Quarterly Results
Canadian dollars 3Q09 2Q09 3Q08
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Net Income (Loss) Attributed to Shareholders
(millions) (601) (631) 311
Premiums & Deposits (millions) 2,020 1,962 1,842
Funds under Management (billions) 66.3 67.7 59.9
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Quarterly Results
U.S. dollars 3Q09 2Q09 3Q08
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Net Income (Loss) Attributed to Shareholders
(millions) (547) (541) 298
Premiums & Deposits (millions) 1,838 1,682 1,769
Funds under Management (billions) 61.8 58.2 56.5
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U.S. Insurance recorded a net loss attributed to shareholders of US$547 million for the third quarter of 2009, compared with net income of US$298 million reported a year earlier. The results in the third quarter of 2009 were driven by investment related losses on in-force business. Other earnings components were also affected by the financial markets - the decline in interest rates also adversely impacted investment returns assumed for new business written in the quarter and was partially offset by the favourable impact on actuarial liabilities of the increase in equity markets on variable universal life products. Adverse long-term care claims experience also contributed to the loss in the third quarter of 2009. The results in the third quarter of 2008 included favourable investment related results. On a Canadian dollar basis, the net loss attributed to shareholders for the third quarter was
Premiums and deposits for the quarter were US$1.8 billion, up four per cent from the third quarter of 2008 primarily due to higher universal life premiums, dampened by lower variable life deposits.
Funds under management were US$61.8 billion, up nine per cent from
U.S. Wealth Management
Quarterly Results
Canadian dollars 3Q09 2Q09 3Q08
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Net Income (Loss) Attributed to Shareholders
(millions) 593 1,551 (27)
Premiums & Deposits (millions) 7,169 7,956 8,367
Funds under Management (billions) 176.5 170.6 164.1
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Quarterly Results
U.S. dollars 3Q09 2Q09 3Q08
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Net Income (Loss) Attributed to Shareholders
(millions) 541 1,329 (25)
Premiums & Deposits (millions) 6,531 6,817 8,037
Funds under Management (billions) 164.6 146.7 154.8
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U.S. Wealth Management's net income attributed to shareholders for the third quarter of 2009 was US$541 million, compared with a net loss of US$25 million reported a year earlier. Earnings in the third quarter of 2009 benefited from the impact of the favourable equity market performance on segregated fund guarantee reserves, partially offset by unfavourable movement in interest rates and other investment related results. A loss was reported in the third quarter of 2008 as a result of the decline in equity markets and unfavourable investment related results, partially offset by the successful outcome of certain tax appeals. On a Canadian dollar basis, net income attributed to shareholders for the third quarter was
Premiums and deposits, excluding variable annuities, for the quarter were US$5.7 billion, down three per cent from US$5.9 billion for the third quarter of 2008 as a result of the impact of equity market volatility and the economic downturn on premiums and deposits in
Funds under management were US$164.6 billion, up US$9.8 billion or six per cent from
Canadian Division
Quarterly Results
Canadian dollars 3Q09 2Q09 3Q08
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Net Income Attributed to Shareholders (millions) 113 336 113
Premiums & Deposits (millions) 4,075 4,316 3,794
Funds under Management (billions) 101.1 91.2 84.2
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Canadian Division's net income attributed to shareholders for the third quarter of 2009 was
Premiums and deposits, excluding variable annuities, for the quarter were
Funds under management grew by 20 per cent, or
Asia and Japan Division
Quarterly Results
Canadian dollars 3Q09 2Q09 3Q08
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Net Income Attributed to Shareholders (millions) 417 885 216
Premiums & Deposits (millions) 1,949 2,477 2,169
Funds under Management (billions) 58.4 56.5 42.6
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Quarterly Results
U.S. dollars 3Q09 2Q09 3Q08
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Net Income Attributed to Shareholders (millions) 380 758 208
Premiums & Deposits (millions) 1,775 2,122 2,084
Funds under Management (billions) 54.5 48.6 40.2
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Asia and
Premiums and deposits excluding variable annuity products for the quarter were US$1.5 billion, up 20 per cent from US$1.3 billion for the third quarter of 2008. Driving the result was the 13 per cent insurance premium growth from in-force business in
Funds under management were US$54.5 billion, up 35 per cent from
Reinsurance Division
Quarterly Results
Canadian dollars 3Q09 2Q09 3Q08
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Net Income Attributed to Shareholders (millions) 65 45 49
Premiums (millions) 267 292 272
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Quarterly Results
U.S. dollars 3Q09 2Q09 3Q08
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Net Income Attributed to Shareholders (millions) 59 38 47
Premiums (millions) 243 250 261
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Reinsurance Division's net income attributed to shareholders for the third quarter of 2009 was US$59 million, compared to US$47 million reported a year earlier. During the third quarter of 2009, favourable claims experience in Life Reinsurance and the favourable impact of the increase in the U.S. equity markets on segregated fund guarantee reserves were largely offset by investment related losses. In the third quarter of 2008, the losses related to segregated fund guarantees were offset by investment related gains. On a Canadian dollar basis, net income attributed to shareholders for the third quarter was
Premiums for the quarter were US$243 million, down US$18 million or seven per cent from US$261 million for the third quarter of 2008. The decline was due to lower Life Reinsurance premiums as a result of higher experience refunds and reduced International Group Program premiums due to the impact of the weakened Euro against the U.S. dollar. Partly offsetting these declines were higher Property and Casualty premiums largely due to increased volumes. On a Canadian dollar basis, premiums for the quarter were
Corporate and Other
Quarterly Results
Canadian dollars 3Q09 2Q09 3Q08
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Net Loss Attributed to Shareholders (millions) (759) (412) (152)
Funds under Management (billions) 31.5 32.2 31.8
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Corporate and Other is comprised of the earnings on excess residual capital (assets backing capital, net of amounts allocated to operating divisions), changes in actuarial methods and assumptions, Investment Division's external asset management business and the
Corporate and Other recorded a net loss attributed to shareholders of
Funds under management were
RISK MANAGEMENT
The significant disruption of financial markets and severe deterioration of the economy during 2008 and early 2009 presented extraordinary challenges for the risk management function at the Company. The Company's balance sheet and earnings are sensitive to equity market performance, as well as changes in interest rates and credit deterioration. As a result of the deterioration of the economy, these three factors have an increased impact, heightening the importance of managing risk and capital.
Under our equity and interest rate risk policies, we previously delegated authority to management to operate within enterprise-wide economic capital and earnings-at-risk limits related to equity and interest rate risks and required management to report to and seek authority from the Audit and Risk Management Committee of the Board of Directors when the exposure exceeded those limits. During the fiscal quarter ended
There can be no assurance that the Company's exposure to publicly-traded equity performance and movements in interest rates will be reduced to within established targets. Depending on market conditions, including a sustained increase in equity market volatility or decline in interest rates, the costs of hedging the benefit guarantees provided in variable annuities may increase or become uneconomic, in which case we may reduce or discontinue sales of certain of these products. In addition, there can be no assurance that the Company's capital market hedging strategy will fully reduce the risks related to the guaranteed products being hedged. Please see "Variable Annuity and Segregated Fund Investment Related Guarantees" below.
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 "Critical Accounting and Actuarial Policies" in Management's Discussion and Analysis in our most recent annual and interim reports and the "Risk Management" note to consolidated financial statements in our most recent annual and interim reports.
Market Price and Interest Rate Risk
Due to the nature of the insurance business, invested assets and insurance liabilities as well as revenues and expenses are impacted by movements in capital markets and interest rates. Accordingly, the Company considers these risks together to ensure that the risks in its asset and liability positions are properly managed. These risks are referred to collectively as market price and interest rate risk - the risk of loss resulting from adverse movements in market price, risk-free interest rates and credit spreads.
Interest rate risk arises within the Company's general fund primarily due to the uncertainty of future returns on investments to be made as recurring premiums are received and as assets mature and must be reinvested to support longer dated liabilities. Changes in interest rates impact cash flows over a very long period of time, and it is only over the lifetime of the Company's liabilities that the ultimate profit or loss related to changes in interest rates will be known. In the interim, changes in interest rates impact the value of the Company's assets and liabilities. Market price risk arises within our general fund as a result of investing in public equities, private equities, real estate, timber and agriculture, oil and gas and other assets.
Market price risk arises from the Company's off-balance sheet products due mainly to the guarantees provided on variable annuity and insurance products, as well as the uncertainty of future levels of asset-based fees. Guarantees include minimum levels of death, maturity, income and withdrawal benefits on variable products. The Company mitigates its market price and interest rate risk arising from off-balance sheet products through benefit guarantee design, limitations on fund offerings and the use of capital market hedging strategies for new business, and, for a portion of our in-force business, reinsurance and capital market hedging strategies.
The impact on shareholders' economic value and on net income attributed to shareholders for interest rate and market prices are based on a starting point and business and asset mix in place at that date, and assume that all other variables stay constant. Actual results can differ materially from these estimates for a variety of reasons including differences in the interaction between these factors, changes in actuarial assumptions, changes in business mix, effective tax rates, and other market variables.
Impact on Shareholders' Economic Value Arising from General Fund Interest Rate Risk
In order to manage the exposure to market price and interest rate risk, the Company monitors invested assets and the liabilities which they support under three broad categories: liabilities supported with matching mandates, liabilities supported with target return mandates, and exposures arising from variable products and other managed assets. Liabilities supported with matching mandates generally include insurance and wealth guaranteed benefit obligations falling within the terms for which fixed income assets are generally available in the market, and are supported by fixed income assets with generally matching term profiles. Liabilities supported with target return mandates include guaranteed benefit obligations falling beyond the term for which fixed income assets are generally available in the market, as well as obligations related to products that generally pass through investment returns to policyholders. Assets supporting the shareholders' equity account are generally managed under a target return mandate.
The impact on shareholders' economic value arising from general fund interest rate risk is calculated as the change in the net present value of future cash flows related to existing assets, policy premiums, benefits and expenses, all discounted at market yields and adjusted for tax. The table below shows the potential impact on shareholders' economic value of an immediate change of one per cent in government, swap and corporate rates for all maturities across all markets.
As at As at
1% change in interest September 30, 2009 December 31, 2008
rates ---------------------- ---------------------
(Canadian $ in millions) Increase Decrease Increase Decrease
-------------------------------------------------------------------------
Matching mandates
Insurance $ 200 $ (290) $ 30 $ (90)
Wealth Management - 10 (10) 10
-------------------------------------------------------------------------
Total matching mandates $ 200 $ (280) $ 20 $ (80)
-------------------------------------------------------------------------
Target return mandates
Insurance $ 1,060 $ (1,700) $ 730 $ (1,130)
Wealth Management 110 (240) 10 (110)
Shareholders' equity
account (290) 390 (370) 470
-------------------------------------------------------------------------
Total target return
mandates $ 880 $ (1,550) $ 370 $ (770)
-------------------------------------------------------------------------
Guarantees
Variable annuity and
segregated fund
guarantees $ 120 $ (170) $ 210 $ (250)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total $ 1,200 $ (2,000) $ 600 $ (1,100)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Variable Annuity and Segregated Fund Investment Related Guarantees
The table below shows selected information regarding the Company's variable annuity and segregated fund investment related guarantees:
As at September 30, 2009 December 31, 2008
-------------------------------------------------------
Amount Amount
(Canadian $ Guarantee Fund at Guarantee Fund at
in millions) value value risk(4) value value risk(4)
-------------------------------------------------------------------------
Gross living
benefits(1) $ 92,789 $ 83,014 $ 14,112 $ 95,297 $ 71,391 $ 25,086
Gross death
benefits(2) 19,317 13,526 5,100 22,937 14,099 8,975
-------------------------------------------------------------------------
Total gross of
reinsurance &
hedging $112,106 $ 96,540 $ 19,212 $118,234 $ 85,490 $ 34,061
-------------------------------------------------------------------------
Living benefits
reinsured $ 8,326 $ 5,878 $ 2,454 $ 10,049 $ 5,934 $ 4,115
Death benefits
reinsured 6,321 4,767 1,796 7,960 5,134 3,137
-------------------------------------------------------------------------
Total reinsured $ 14,647 $ 10,645 $ 4,250 $ 18,009 $ 11,068 $ 7,252
-------------------------------------------------------------------------
Total, net of
reinsurance $ 97,459 $ 85,895 $ 14,962 $100,225 $ 74,422 $ 26,809
-------------------------------------------------------------------------
Living benefits
hedged(3) $ 19,492 $ 19,474 $ 1,626 $ 5,731 $ 4,237 $ 1,494
-------------------------------------------------------------------------
Living benefits
retained $ 64,971 $ 57,662 $ 10,032 $ 79,517 $ 61,220 $ 19,477
Death benefits
retained 12,996 8,759 3,304 14,977 8,965 5,838
-------------------------------------------------------------------------
Total, net of
reinsurance and
hedging $ 77,967 $ 66,421 $ 13,336 $ 94,494 $ 70,185 $ 25,315
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Living benefits include maturity/income/withdrawal/long-term care
("LTC") benefits.
(2) Death benefits include stand-alone guarantees and guarantees in
excess of maturity/income/withdrawal/LTC guarantees where both death
and living benefits are provided on a policy.
(3) Gains on hedge instruments may not fully offset cost of guarantees on
business hedged, as a result of (i) a small portion of fund value not
being hedged and (ii) differences in performance of hedge instruments
and underlying funds being hedged.
(4) Amount at risk is the excess of guaranteed values over fund values on
all policies where the guaranteed value exceeds the fund value. This
amount is not currently payable.
The Company expanded its capital market hedging strategies program during 2009. The total amount of guarantee value hedged has increased to
Since Canadian GAAP guarantee liabilities are determined using long-term forward looking estimates of volatility and not current implied market volatility, Canadian GAAP guarantee liabilities, and consequently MCCSR Available Capital, have no sensitivity to changes in implied market volatility. Long-term forward-looking volatilities assumed for Canadian GAAP are approved by the Office of the Superintendant of Financial Institutions ("OSFI") and meet the Canadian Institute of Actuaries calibration standards. To the extent that realized volatility exceeds the assumed long-term volatilities in any one period, there is a risk that rebalancing will be greater and more frequent, resulting in higher hedging costs in that period.
The level of guarantee claims ultimately paid will be impacted by policyholder longevity and policyholder activity including the timing and amount of withdrawals, lapses and fund transfers. The Company's hedging program, utilizing capital markets hedge instruments, assumes long-term assumptions for longevity and policyholder behaviour. The risk related to longevity and policyholder behaviour cannot be hedged using capital markets instruments and therefore is not hedged. The Company's capital market hedging strategies are not intended to completely or fully eliminate the risks associated with the guarantees embedded in these products and the strategies expose the Company to additional risks. The program relies on the execution of derivative transactions in a timely manner and therefore hedging costs and the effectiveness of the program may be negatively impacted if markets for these instruments become illiquid. The Company is also subject to counterparty risks arising from the derivative instruments and to the risk of increased funding and collateral demands which may become material as markets and rates move. The hedging program is also highly dependant on complex systems and mathematical models that are subject to error, which rely on assumptions that may prove inaccurate, and which rely on sophisticated infrastructure and personnel which may fail or be unavailable at critical times.
Impact on Shareholders' Economic Value from Variable Products and Other Managed Assets
Shareholders' economic value arising from variable products, mutual funds and institutional asset management operations is calculated as the present value of expected after-tax cash flows related to managing these assets and/or providing guarantees, discounted at market yields. The present value of expected after-tax cash flows related to guarantees is the average, across all investment return scenarios, of the present value of projected future guaranteed benefit payments, net of reinsurance and fee income allocated to support the guarantees. The table below shows the potential impact on shareholders' economic value of an immediate ten per cent decline in the market value of equity funds.
10% decrease in market As at As at
value of equity funds September 30, 2009 December 31, 2008
-------------------------------------------
Market-based fees $ (450) $ (380)
Variable product guarantees (410) (710)
-------------------------------------------------------------------------
Total $ (860) $ (1,090)
-------------------------------------------------------------------------
Net Income Sensitivity to Interest Rate and Market Price Risk
The potential impact on net income attributed to shareholders as a result of a change in policy liabilities for a one per cent increase in government, swap and corporate rates at all maturities across all markets was estimated to be a gain of approximately
The net income sensitivity is based on a change to the current market interest rates, but assumes that long-term fixed income interest rates for new investments made or assets sold 20 or more years into the future assumed in the calculation of policy liabilities are unchanged. For the first 20 years re-investment rates grade between current market rates and the rates assumed after 20 years. It also assumes no gain or loss is realized on the fixed income investments that are designated as AFS in the Corporate and Other segment.
The potential annual impact on net income attributed to shareholders arising from variable products and general fund assets supporting policy liabilities, including the impact on segregated fund fee income, of an immediate ten per cent decline in equity market values followed by a return to normal market growth was a decrease of approximately
Variable annuity and segregated fund investment-related guarantees are contingent and only payable upon death, maturity, withdrawal or annuitization, if fund values remain below guaranteed values. If markets do not recover, liabilities on current in-force business would be due primarily in the period from 2015 to 2038. The policy liability established for these benefits was
Letters of Credit
In the normal course of business, third party relationship banks issue letters of credit on our behalf. Our businesses utilize letters of credit for which third parties are the beneficiaries, as well as for affiliate reinsurance transactions between subsidiaries of MFC. Letters of credit must be renewed periodically with renewal periods ranging from one year to 20 years. At time of renewal, the Company is exposed to repricing risk and under adverse conditions increases in costs will be realized. In the most extreme scenarios, letters of credit capacity could become constrained due to non-renewals. The Company did not experience any material change in capacity during the financial crisis of the past two years. There were no assets pledged against these outstanding letters of credit as at
Ratings
The Company has received security ratings from approved rating organizations on its outstanding medium-term notes, outstanding Tier 1 hybrid capital and its outstanding series of preferred shares. In addition, the Company and its primary insurance operating subsidiaries have received financial strength/claims paying ratings. The issuance of additional debt, hybrid or preferred share financing could put pressure on these ratings. If, in the view of the rating organizations, there is deterioration in capital flexibility, operating performance, or the risk profile of the Company, this could also put pressure on these ratings.
Capital
MFC is a holding company with no significant operations and its principal asset is the shares of its regulated insurance subsidiaries. These subsidiaries are subject to a wide variety of insurance and other laws and regulations intended to protect policyholders and beneficiaries rather than investors, including regulatory restrictions which may limit their ability to pay dividends or make distributions to MFC. As a result of the global financial crisis, there is increasing co-operation between international financial authorities and regulators in many countries are reviewing their requirements and considering potential changes. While the impact of these changes is uncertain, the Company anticipates that regulators, rating agencies and investors will expect higher levels of capital going forward. These changes could further limit the ability of the insurance subsidiaries to pay dividends or make distributions and have a material adverse effect on MFC's liquidity, including its ability to pay dividends to shareholders and service its debt.
In
Currency Translation Risk
A substantial portion of our business is transacted in currencies other than Canadian dollars, mainly U.S. dollars,
CRITICAL ACCOUNTING AND ACTUARIAL POLICIES
Accounting Policies
Our significant accounting policies are described in note 1 of the annual consolidated financial statements on pages 58 to 61 of our 2008 Annual Report. Certain of these policies are recognized as critical as they determine the accounting in core areas of the business, require the use of estimates and assumptions about matters that are inherently uncertain and because actual results could differ from those estimates. Significant estimation processes relate to the determination of policy liabilities, evaluation of invested asset impairment, assessment of variable interest entities ("VIEs"), determination of pension and other post-employment obligations and expenses, income taxes and impairment testing of goodwill and intangible assets as described in pages 37 to 43 of our 2008 Annual Report. In addition, in the determination of the fair values of financial instruments, where observable market data is not available, management applies judgment in the selection of valuation models. Updates to the determination of sensitivity of policy liabilities to changes in asset related assumptions and the results of the 2009 changes in actuarial policy liabilities are discussed below.
Sensitivity of Policy Liabilities to Changes in Assumptions
When the assumptions underlying our determination of policy liabilities are updated to reflect recent and emerging experience or change in outlook, the result is a change in the value of policy liabilities which in turn affects income. The sensitivity of after tax income to changes in asset return assumptions underlying policy liabilities is shown below, assuming that there is a simultaneous change in the assumption across all business units. For changes in asset related assumptions, the sensitivity is shown net of the corresponding impact on income of the change in the value of the assets supporting liabilities. Sensitivity of after tax income to changes in other policy liability assumptions has not changed materially from previous disclosure.
The impact on net income attributed to shareholders for these sensitivities is based on a starting point and business mix in place at that date, and assume that all other variables stay constant. Actual results can differ materially from these estimates for a variety of reasons including differences in the interaction between these factors, changes in actuarial assumptions, changes in business mix, effective tax rates, currency and other market variables.
Sensitivity of Policy Liabilities to Changes in Asset Related Assumptions
-------------------------------------------------------------------------
Increase (Decrease) in After-Tax Income
-------------------------------------------------------------------------
2009 2008
---- ----
September 30 December 31
------------ -----------
(Canadian $ in millions) increase decrease increase decrease
-------------------------------------------
Asset Related Assumptions
Updated Quarterly
-------------------------------------------
100 basis point parallel
change in market interest
rates(2) 1,600 (2,000) 1,100 (1,300)
-------------------------------------------
10% change in public equity
market values (1) (1,300) (1) (1,500)
-------------------------------------------
10% change in other non fixed
income market values (1) (700) (1) (600)
-------------------------------------------
-------------------------------------------
Asset Related Assumptions
Updated Periodically in
Valuation Basis Changes
-------------------------------------------
100 basis point change in
ultimate fixed income
re-investment rates(3) 1,200 (1,700) 1,000 (1,300)
-------------------------------------------
100 basis point change in
future annual returns for
equities(4) 800 (900) 1,100 (1,200)
-------------------------------------------
100 basis point change in
future annual returns for
other non fixed income
assets(5) 2,700 (2,900) 2,100 (2,300)
-------------------------------------------
100 basis point change in
equity volatility assumption
for stochastic segregated
fund modeling(6) (300) (1) (1) (1)
-------------------------------------------------------------------------
(1) Sensitivities not provided.
(2) Changes in market interest rates reflect a change to the current
market interest rates, but assume that ultimate long-term fixed
income re-investment rates ("URRs") for new investments are
unchanged. All interest rates are assumed to move in parallel (i.e.,
government bond rates, swap rates, corporate bond rates and other
debt rates).
(3) The long-term URRs are assumed to be changed, however starting
interest rates are assumed to be current. Current URRs for risk free
bonds in Canada are 2.4% per annum and 4.0% per annum for short and
long-term bonds respectively, and in the U.S. are 2.2% per annum and
4.2% per annum for short and long-tem bonds respectively.
(4) Expected long-term annual market growth assumptions for public
equities pre-dividends for key markets are based on long-term
historic observed experience and are 7.25% per annum in Canada, 8.0%
per annum in the U.S., 5.0% per annum in Japan and 9.5% per annum in
Hong Kong. These returns are then reduced by margins for adverse
deviation to determine net yields used in the valuation.
(5) Other non fixed income assets include commercial real estate, timber
and agricultural real estate, oil and gas, and private equities.
(6) Volatility assumptions for public equities are based on long-term
historic observed experience and are 16.55% per annum in Canada,
15.55% per annum in the U.S., 18.35% per annum in Japan and 34.3% per
annum in Hong Kong.
The increase in the sensitivity to changes in market interest rates is primarily due to the impact of the current lower market interest rates on liabilities with minimum interest guarantees and changes in lapse assumptions. Under Canadian GAAP, we must test a number of prescribed interest scenarios. The interest scenario we have adopted uses the structure of the prescribed scenario that currently produces the highest policy liability, which is a gradual decline in market interest rates from current market levels to lower assumed ultimate re-investment rates over 20 years, with additional prudence introduced through use of lower ultimate re-investment rates than the maximum levels permitted. The decrease in sensitivity to public equity market values reflects the impact of significantly improved equity markets in 2009, which has both reduced the liability for existing segregated fund guarantees and reduced the sensitivity of this liability to changes in equity market levels. Additional sensitivity reduction resulted from the increase in the amount of business that is hedged. Sensitivity to other non fixed income assets has increased from 2008 due to additional acquisitions of non fixed income assets in 2009 in support of the Company's long-term investment strategy and the inclusion of the impact of future income taxes.
Review of Actuarial Methods and Assumptions
The comprehensive 2009 review of valuation methods and assumptions was completed in the third quarter of 2009. In previous years, the review was completed in the fourth quarter.
The 2009 review of the actuarial methods and assumptions underlying policy liabilities produced a net increase in the policy liabilities of
Impact of 2009 Q3 Changes in Assumptions and Methodology (by category)
(Canadian $ in millions)
-------------------------------------------------------------------------
Assumption Post-tax Description
Policy Shareholders' (pre-tax reserve impact)
Liabilities Income
Increase Increase
(Decrease) (Decrease)
-------------------------------------------------------------------------
Mortality / $392 $(260) Driven by increases due to
morbidity impact from higher projected
net long-term care claims
costs. Partially offsetting
these increases were
reductions from mortality
releases in Japan and the
Reinsurance Division.
-------------------------------------------------------------------------
Lapses and 1,245 (829) Pre-tax $624 (post tax $469)
other policy- of the increase is attributed
holder to the lapse modeling for
behaviour variable annuities in the
U.S. and Japan to better
reflect emerging recent
surrender experience on
policies that are in-the-
money. The balance is due to
strengthening of policy
liabilities for lowering of
expected termination rates
for a number of long duration
protection businesses, most
notably life insurance in
Japan, U.S. and Canada, and
U.S. Group Long-Term Care.
-------------------------------------------------------------------------
Expense (119) 87 This is attributed to
reductions in investment
related expenses across most
business units, partially
offset by a net increase in
projected business maint-
enance expenses primarily in
U.S. Fixed Annuities.
-------------------------------------------------------------------------
Investment (314) 126 There was a material release
returns from the refinement to the
modeling of future investment
and re-investment strategies
in a number of businesses,
most materially Long-Term
Care. Offsetting these
releases were increases in
policy liabilities to reflect
a net reduction in ultimate
re-investment rates for
shorter term investments and
updating equity assumptions
in the stochastic parameters
for variable annuity
business.
-------------------------------------------------------------------------
Other valuation (140) 93 A number of business specific
model method- modeling refinements were
ology and model made to improve the pro-
refinements jection of future cash flows
on in-force business,
resulting in a net decrease
in policy liabilities. These
were partially offset by a
net increase from harmonizing
the modeling of certain asset
related items across
businesses.
-------------------------------------------------------------------------
Total $1,064 $(783)
-------------------------------------------------------------------------
Impact of 2009 Q1 and Q2 Changes in Assumptions and Methodology (by
category)
(Canadian $ in millions)
-------------------------------------------------------------------------
Assumption Post-tax Description
Policy Shareholders' (pre-tax reserve impact)
Liabilities Income
Increase Increase
(Decrease) (Decrease)
-------------------------------------------------------------------------
Mortality / $80 $(52) Increase related to impact
morbidity of assumed future Long-Term
Care experience.
-------------------------------------------------------------------------
Lapses and 178 (178) Pre-tax $182 increase from
other policy- updates to Japan variable
holder annuity partial withdrawal
behaviour assumption.
-------------------------------------------------------------------------
Expense (19) 13
-------------------------------------------------------------------------
Investment
returns (12) 9
-------------------------------------------------------------------------
Other valuation 271 (148) Pre-tax $221 increase from
model method- refinements to segregated
ology and model fund guarantee reserve
refinements methodology.
-------------------------------------------------------------------------
Total $498 $(356)
-------------------------------------------------------------------------
Goodwill
Goodwill is tested at least annually for impairment. Goodwill impairment testing will reflect the plans related to the repositioning of our variable annuity business. Any potential impairment of goodwill, which could be material, is identified by comparing the estimated fair value of a reporting unit to its carrying value.
Accounting Adjustment
During the first quarter of 2009, the Company identified errors originating primarily from periods prior to our purchase of
Accounting Changes
There have not been any significant changes to our accounting policies in 2009.
Future Changes in Accounting Policy
Transition to International Financial Reporting Standards ("IFRS")
Publicly accountable enterprises in
The Company is currently assessing the first time adoption and transitional options under IFRS. No IFRS accounting policy decisions or elections have been finalized to date and, until this process is complete, the impact of adopting IFRS on the Company's future financial position and future results cannot be reasonably determined.
The international financial reporting standard that addresses the measurement of insurance contracts is currently being developed and is not expected to be in place by
Our transition status is currently on-track in accordance with our overall implementation plan.
Based on the analysis performed to date, we do not expect significant impacts to the financial statements upon adoption of IFRS in 2011. Some presentation differences will arise as we expect additional assets and liabilities from off-balance sheet investments to be consolidated and reinsurance balances will be presented on a gross basis. Minor measurement differences are expected to arise for: products that do not meet the definition of insurance; certain invested assets including real estate, agricultural assets and leveraged leases; and for certain hedge relationships. In addition, certain changes to tax accounting, including the tax effects of the above noted changes, are expected to arise. We are currently evaluating the potential financial statement impact of these and other accounting differences.
As mentioned above, the IFRS standard for insurance contracts is currently being developed. We do not expect that it will become effective, and therefore adopted, until at least 2013. Depending on the requirements of the final standard, its adoption could have a material adverse effect on the Company's reported financial results or on its position relative to that of other Canadian and international financial institutions with which it competes for business and capital.
Disclosure about Financial Instruments
In
Impairment and Classification of Financial Assets
In
Transactions with Related Parties
In its capacities as an investor and as an investment manager, the Company has relationships with various types of entities, some of which are VIEs. Note 18 of the annual consolidated financial statements on pages 89 to 91 of our 2008 Annual Report describes the entities with which the Company has significant relationships. There were no significant changes to these relationships during the nine months ended
COMMITMENTS AND CONTINGENCIES
Legal Proceedings
The Company is regularly involved in legal actions, both as a defendant and as a plaintiff. The legal actions naming the Company as a defendant ordinarily involve its activities as a provider of insurance protection and wealth management products, as well as an investment adviser, employer and taxpayer. In addition, government and regulatory bodies in
The Company announced on
The Company may become subject to regulatory or other action by regulatory authorities in other jurisdictions based on similar allegations. The Company is not currently aware that any other regulatory body is considering commencing proceedings based on the Company's disclosure obligations. However, there can be no assurance that additional regulatory proceedings will not be commenced in the future.
Proposed class action law suits against the Company have been filed in
The Company believes that its disclosure satisfied applicable disclosure requirements and intends to vigorously defend itself against any claims based on these allegations.
Plaintiffs in class action and other lawsuits against the Company may seek very large or indeterminate amounts, including punitive and treble damages, and the damages claimed and the amount of any probable and estimable liability, if any, may remain unknown for substantial periods of time. A substantial legal liability or a significant regulatory action could have a material adverse effect on the Company's business, results of operations, financial condition and capital position and adversely affect its reputation. Even if the Company ultimately prevails in the litigation, regulatory action or investigation, it could suffer reputational harm, which could have an adverse effect on its business, results of operations, financial condition and capital position, including its ability to attract new customers, retain current customers and recruit and retain employees.
Tax Related Contingency
The Company is an investor in leveraged leases and has established provisions for possible disallowance of the tax treatment and for interest on past due taxes. During the nine months ended
Changes in Internal Control over Financial Reporting
During the nine months ended
Quarterly Financial Information (unaudited)
The following table provides summary information related to our eight most recently completed quarters:
As at and for the
three months ended
(Canadian $ in
millions, except Sept 30, June 30, Mar. 31, Dec. 31, Sept 30,
per share amounts) 2009 2009 2009 2008 2008
-------------------------------------------------------------------------
Revenue
Premium income
Life and health insurance(1) $3,601 $3,591 $4,278 $4,460 $4,017
Annuities and pensions 1,922 2,129 2,694 2,562 1,841
-------------------------------------------------------------------------
Total premium income $5,523 $5,720 $6,972 $7,022 $5,858
Investment income 2,082 2,061 1,837 1,786 1,750
Realized and unrealized
(losses) gains on assets
supporting policy liabilities
and consumer notes(2) 4,661 2,145 (2,103) 1,519 (3,150)
Other revenue 1,486 1,459 1,293 1,323 1,369
-------------------------------------------------------------------------
Total revenue $13,752 $11,385 $7,999 $11,650 $5,827
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Income (loss) before income
taxes $(701) $1,695 $(2,127) $(2,596) $677
Income tax recovery (expense) 563 89 1,056 727 (170)
-------------------------------------------------------------------------
Net income (loss) $(138) $1,784 $(1,071) $(1,869) $507
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net income (loss) available
to shareholders $(172) $1,774 $(1,068) $(1,870) $510
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic earnings (loss) per
common share $(0.12) $1.09 $(0.67) $(1.24) $0.34
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Diluted earnings (loss) per
common share $(0.12) $1.09 $(0.67) $(1.24) $0.33
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Segregated funds deposits $6,091 $7,391 $8,259 $8,847 $7,689
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total assets - general fund $208,075 $207,768 $214,055 $211,025 $181,914
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Segregated funds net assets $188,148 $178,161 $164,464 $165,380 $166,098
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Weighted average common
shares (in millions) 1,615 1,611 1,610 1,519 1,492
-------------------------------------------------------------------------
Diluted weighted average
common shares (in millions) 1,615 1,616 1,610 1,519 1,503
-------------------------------------------------------------------------
Dividends per common share $0.13 $0.26 $0.26 $0.26 $0.26
-------------------------------------------------------------------------
CDN$ to $1US - Balance Sheet 1.0722 1.1625 1.2602 1.2246 1.0599
-------------------------------------------------------------------------
CDN$ to $1US - Statement of
Operations 1.0979 1.1668 1.2456 1.2118 1.0411
-------------------------------------------------------------------------
June 30, Mar. 31, Dec. 31,
2008 2008 2007
-------------------------------------------------------
Revenue
Premium income
Life and health insurance(1) $3,865 $3,679 $3,795
Annuities and pensions 1,507 1,321 1,504
-------------------------------------------------------
Total premium income $5,372 $5,000 $5,299
Investment income 2,230 2,328 2,412
Realized and unrealized
(losses) gains on assets
supporting policy liabilities
and consumer notes(2) (1,462) (703) 1,163
Other revenue 1,418 1,343 1,404
-------------------------------------------------------
Total revenue $7,558 $7,968 $10,278
-------------------------------------------------------
-------------------------------------------------------
Income (loss) before income
taxes $1,345 $1,151 $1,358
Income tax recovery (expense) (347) (290) (284)
-------------------------------------------------------
Net income (loss) $998 $861 $1,074
-------------------------------------------------------
-------------------------------------------------------
Net income (loss) available
to shareholders $1,008 $869 $1,144
-------------------------------------------------------
-------------------------------------------------------
Basic earnings (loss) per
common share $0.67 $0.57 $0.76
-------------------------------------------------------
-------------------------------------------------------
Diluted earnings (loss) per
common share $0.66 $0.57 $0.75
-------------------------------------------------------
-------------------------------------------------------
Segregated funds deposits $8,472 $9,197 $9,043
-------------------------------------------------------
-------------------------------------------------------
Total assets - general fund $180,071 $182,153 $176,458
-------------------------------------------------------
-------------------------------------------------------
Segregated funds net assets $176,395 $175,248 $175,544
-------------------------------------------------------
-------------------------------------------------------
Weighted average common
shares (in millions) 1,497 1,498 1,502
-------------------------------------------------------
Diluted weighted average
common shares (in millions) 1,508 1,509 1,515
-------------------------------------------------------
Dividends per common share $0.24 $0.24 $0.24
-------------------------------------------------------
CDN$ to $1US - Balance Sheet 1.0186 1.0279 0.9881
-------------------------------------------------------
CDN$ to $1US - Statement of
Operations 1.0101 1.0042 0.9810
-------------------------------------------------------
(1) At the end of the first quarter of 2009, Canadian Group Benefits
entered into an external reinsurance agreement which resulted in a
substantial reduction in net premium revenue reported on the income
statement.
(2) For fixed income assets supporting policy liabilities, equities
supporting pass through products and derivatives related to variable
annuity hedging programs, the impact of realized and unrealized
(losses) gains on the assets is largely offset in the change in
actuarial liabilities.
Quarterly Dividend
Our Board of Directors approved a quarterly shareholders' dividend of
The Board also declared dividends on the following non-cumulative preferred shares, payable on or after
- Class A Shares Series 1 - $0.25625 per share
- Class A Shares Series 2 - $0.29063 per share
- Class A Shares Series 3 - $0.28125 per share
- Class A Shares Series 4 - $0.4125 per share
- Class 1 Shares Series 1 - $0.35 per share
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. Non-GAAP measures include: Normalized Earnings, Adjusted Earnings from Operations, Return on Common Shareholders' Equity; Premiums and Deposits; Premiums and Premium Equivalents; Funds under Management; Capital and Sales. 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.
In our second quarter report in the section entitled "Normalized Earnings", the Company estimated Normalized Earnings for the third and fourth quarters in 2009 and all quarters in 2010, which constitutes forward-looking information, in accordance with the methods outlined under "Financial Highlights - Normalized Earnings and Adjusted Earnings from Operations" above. In this report, we have compared our estimate of normalized earnings with the adjusted earnings from operations for the third quarter excluding specified items that were excluded in arriving at our estimate of normalized earnings. The Company believes these measures are useful to investors given the current economic conditions including the volatility of equity markets, interest rates and other factors.
Return on common shareholders' equity is a profitability measure that presents the net income available to common shareholders as a percentage of the capital deployed to earn the income. The Company calculates return on common shareholders' equity using average common shareholders' equity excluding Accumulated Other Comprehensive Income (Loss) on available-for-sale securities and cash flow hedges.
Premiums and deposits is a measure of top line growth. The Company calculates premiums and deposits as the aggregate of (i) premiums and premium equivalents (see below), (ii) segregated fund deposits, excluding seed money, (iii) mutual fund deposits, (iv) deposits into institutional advisory accounts, and (v) other deposits in other managed funds.
Premiums and premium equivalents are part of premiums and deposits. The Company calculates premiums and premium equivalents as the aggregate of (i) general fund premiums net of reinsurance, reported as premiums on the Statement of Operations, (ii) premium equivalents for administration only group benefit contracts and (iii) premiums in the Canadian Group Benefit's reinsurance ceded agreement.
Funds under management is a measure of the size of the Company. It represents the total of the invested asset base that the Company and its customers invest in.
The definition we use for capital 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: total equity excluding Accumulated Other Comprehensive Income (Loss) on cash flow hedges; non-controlling interest in subsidiaries; and liabilities for preferred shares and capital instruments excluding
Sales are measured according to product type.
(i) For total individual insurance, sales include 100 per cent of new annualized premiums and 10 percent of both excess and single premiums. For individual insurance, new annualized premiums reflect the annualized premium expected in the first year of a policy that requires premium payments for more than one year. Sales are reported gross before the impact of reinsurance. Single premium is the lump sum premium from the sale of a single premium product, e.g. travel insurance.
(ii) 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.
(iii) For individual wealth management contracts, all new deposits are reported as sales. This includes individual annuities, both fixed and variable; segregated fund products; mutual funds; college savings 529 plans; and authorized bank loans and mortgages.
(iv) For group pensions/retirement savings, sales of new regular premiums and deposits reflect an estimate of expected deposits in the first year of the plan with the Company. Single premium sales reflect the assets transferred from the previous plan provider. Sales include the impact of the addition of a new division or of a new product to an existing client. Total sales include both new regular and single premiums and deposits.
The Company also uses financial performance measures that are prepared on a constant currency basis, which exclude the impact of currency fluctuations. Quarterly amounts stated on a constant currency basis in this report are calculated, as appropriate, using the income statement and balance sheet exchange rates effective for the third quarter of 2008.
Caution Regarding Forward-Looking Statements
This document contains forward-looking statements within the meaning of the "safe harbour" provisions of Canadian provincial securities laws and the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements with respect of our estimated adjusted earnings from operations referred to above under "Financial Highlights - Normalized Earnings and Adjusted Earnings from Operations". 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", "continue", "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 performance of equity markets, interest rate fluctuations and movements in credit spreads, currency rates, investment losses and defaults, market liquidity and creditworthiness of guarantors, reinsurers and counterparties); Company liquidity, including the availability of financing to satisfy existing financial liabilities on their expected maturity dates when required; changes in laws and regulations; accuracy of information received from counterparties and the ability of counterparties to meet their obligations; accuracy of estimates used in applying accounting policies and actuarial methods used by the Company; the ability to implement effective hedging strategies; the ability to maintain the Company's reputation; legal and regulatory proceedings; level of competition and consolidation; the ability to adapt products and services to the changing market; the ability to attract and retain key executives; acquisitions and the ability to complete acquisitions including the availability of equity and debt financing for this purpose; the ability to execute strategic plans and changes to strategic plans; the disruption of or changes to key elements of the Company's or public infrastructure systems; and environmental concerns. Additional information about material factors that could cause actual results to differ materially from expectations and about material factors or assumptions applied in making forward-looking statements may be found in the body of this document as well as under "Risk Factors" in our most recent Annual Information Form, under "Risk Management" and "Critical Accounting and Actuarial Policies" in the Management's Discussion and Analysis in our most recent annual and interim reports, 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. We do not undertake to update any forward-looking statements except as required by law.
About Manulife Financial
Manulife Financial is a leading Canadian-based financial services group serving millions of customers in 22 countries and territories worldwide. Operating as Manulife Financial in
Attachments: Financial Highlights, Consolidated Statements of Operations, Consolidated Balance Sheets, Divisional Information.
Financial Highlights
(Canadian $ in millions unless otherwise stated and per share
information, unaudited)
As at and for the three months ended
September 30
2009 2008 % Change
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Net income (loss) $ (138) $ 507 -
Net income (loss) attributed to
participating policyholders 34 (3) -
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Net income (loss) attributed to
shareholders $ (172) $ 510 -
Preferred share dividends (21) (7) 200
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Net income (loss) available to common
shareholders $ (193) $ 503 -
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Premiums and deposits:
Life and health insurance premiums(1) $ 3,601 $ 4,017 (10)
Annuity and pension premiums excluding
variable annuities 1,758 1,157 52
Segregated fund deposits excluding
variable annuities 4,370 4,367 -
Mutual fund deposits 2,118 2,173 (3)
Institutional advisory account
deposits 758 1,646 (54)
ASO premium equivalents 635 601 6
Group Benefits ceded(1) 909 - -
Other fund deposits 204 123 66
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Premiums and deposits excluding
variable annuities $ 14,353 $ 14,084 2
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Variable annuities premium and deposits 1,885 4,006 (53)
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Total premiums and deposits $ 16,238 $ 18,090 (10)
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Funds under management:
General fund $188,465 $165,163 14
Segregated funds 187,582 165,488 13
Mutual funds 32,310 28,213 15
Institutional advisory accounts 21,235 20,304 5
Other funds 6,952 6,112 14
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Total funds under management $436,544 $385,280 13
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Capital
Liabilities for preferred shares and
qualifying capital instruments $ 4,043 $ 3,043 33
Non-controlling interest in
subsidiaries 216 167 29
Equity
Participating policyholders' equity 103 61 69
Shareholders' equity
Preferred shares 1,419 638 122
Common shares 16,444 13,943 18
Contributed surplus 176 156 13
Retained earnings(2) 12,289 15,116 (19)
Accumulated other comprehensive
income (loss) on AFS securities
and translation of net foreign
operations (3,950) (4,868) (19)
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Total capital $ 30,740 $ 28,256 9
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Selected key performance measures:
Basic earnings (loss) per common share $ (0.12) $ 0.34
Diluted earnings (loss) per common
share $ (0.12) $ 0.33
Return on common shareholders' equity
(annualized)(3) (3.0)% 8.2%
Book value per common share $ 15.30 $ 16.26
Common shares outstanding (in millions)
End of period 1,623 1,492
Weighted average - basic 1,615 1,492
Weighted average - diluted 1,615 1,503
(1) At the end of the first quarter of 2009, Canadian Group Benefits
entered into an external reinsurance agreement which resulted in a
substantial reduction in net premium revenue reported in the income
statement. The Company continues to retain certain benefits and
certain risks on this business and the associated direct premiums
continue to be included in the overall premiums and deposits metric
as "Group Benefits ceded".
(2) Opening retained earnings at January 1, 2008 have been reduced by
$229 relating to an understatement of policy liabilities and an
understatement of future income tax liabilities relating primarily to
periods prior to the merger with John Hancock Financial Services,
Inc. in April 2004.
(3) Return on common shareholders' equity is net income (loss) available
to common shareholders divided by average common shareholders' equity
excluding accumulated other comprehensive income (loss) on AFS
securities and cash flow hedges.
Summary Consolidated Financial Statements
Consolidated Statements of Operations
(Canadian $ in millions except per share information, unaudited)
For the three
months ended
September 30
2009 2008
-------------------------------------------------------------------------
Revenue
Premium income(1) $ 5,523 $ 5,858
Investment income
Investment income 2,082 1,750
Realized/ unrealized gain (losses) on assets
supporting policy liabilities and consumer
notes 4,661 (3,150)
Other revenue 1,486 1,369
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Total revenue $ 13,752 $ 5,827
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Policy benefits and expenses
To policyholders and beneficiaries
Death, disability and other claims(1) $ 1,026 $ 1,653
Maturity and surrender benefits 1,339 1,841
Annuity payments 749 744
Policyholder dividends and experience rating
refunds 344 392
Net transfers to segregated funds 449 377
Change in actuarial liabilities(2) 8,094 (2,303)
General expenses 883 899
Investment expenses 236 231
Commissions 999 1,008
Interest expense 279 237
Premium taxes 71 68
Non-controlling interest in subsidiaries (16) 3
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Total policy benefits and expenses $ 14,453 $ 5,150
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Income (loss) before income taxes $ (701) $ 677
Income tax recovery (expense) 563 (170)
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Net income (loss) $ (138) $ 507
Net income (loss) attributed to participating
policyholders 34 (3)
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Net income (loss) attributed to shareholders $ (172) $ 510
Preferred share dividends (21) (7)
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Net income (loss) available to common shareholders $ (193) $ 503
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Basic earnings (loss) per common share $ (0.12) $ 0.34
Diluted earnings (loss) per common share $ (0.12) $ 0.33
(1) At the end of the first quarter of 2009, Canadian Group Benefits
entered into an external reinsurance agreement which resulted in a
substantial reduction in net premium revenue reported in the income
statement. The Company continues to retain certain benefits and
certain risks on this business.
(2) Includes impact of scheduled maturities in John Hancock Fixed
Products institutional annuity contracts of $0.2 billion in Q3 2009
and $0.6 billion in Q3 2008.
Consolidated Balance Sheets
(Canadian $ in millions, unaudited)
As at September 30
Assets 2009(1) 2008(1)
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Invested assets
Cash and short-term securities $ 19,462 $ 11,626
Securities
Bonds 84,053 72,101
Stocks 10,437 9,431
Loans
Mortgages 30,718 28,948
Private placements 23,149 23,489
Policy loans 6,666 6,408
Bank loans 2,470 2,285
Real estate 5,989 5,628
Other investments 5,521 5,247
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Total invested assets $188,465 $165,163
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Other assets
Accrued investment income $ 1,628 $ 1,590
Outstanding premiums 753 763
Goodwill 7,252 7,078
Intangible assets 2,036 1,869
Derivatives 4,388 2,379
Miscellaneous 3,553 3,072
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Total other assets $ 19,610 $ 16,751
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Total assets $208,075 $181,914
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Segregated funds net assets $188,148 $166,098
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Liabilities and equity
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Policy liabilities $144,201 $126,653
Deferred realized net gains 108 106
Bank deposits 15,295 11,030
Consumer notes 1,345 1,690
Long-term debt 4,303 2,247
Future income tax liability 989 2,527
Derivatives 3,274 2,264
Other liabilities 7,396 6,696
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$176,911 $153,213
Liabilities for preferred shares and capital
instruments 4,593 3,578
Non-controlling interest in subsidiaries 216 167
Equity
Participating policyholders' equity 103 61
Shareholders' equity
Preferred shares 1,419 638
Common shares 16,444 13,943
Contributed surplus 176 156
Retained earnings 12,289 15,116
Accumulated other comprehensive loss (4,076) (4,958)
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Total equity $ 26,355 $ 24,956
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Total liabilities and equity $208,075 $181,914
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Segregated funds net liabilities $188,148 $166,098
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(1) Opening retained earnings at January 1, 2008 have been reduced by
$229 relating to an understatement of policy liabilities and an
understatement of future income tax liabilities relating primarily to
periods prior to the merger with John Hancock Financial Services,
Inc. in April 2004.
Notes to Summary Consolidated Financial Statements
(Canadian $ in millions, unaudited)
Note 1: Divisional Information
For the quarter ended September 30, 2009
---------------------------------------------
U.S.
U.S. Wealth Asia and
Premiums and deposits Insurance Management Canadian Japan
-------------------------------------------------------------------------
General fund premiums
excluding variable
annuities(1) $ 1,722 $ 1,200 $ 1,135 $ 1,035
Segregated fund deposits
excluding variable
annuities 298 3,111 515 446
Mutual fund deposits - 1,807 114 197
Institutional advisory account
deposits - - - -
ASO premium equivalents - - 635 -
Group Benefits ceded(1) - - 909 -
Other fund deposits - 204 - -
Variable annuities premiums
and deposits - 847 767 271
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Total $ 2,020 $ 7,169 $ 4,075 $ 1,949
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Net income (loss) $ (601) $ 593 $ 141 $ 423
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Funds under management As at September 30, 2009
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General fund $ 55,748 $ 36,844 $ 59,639 $ 25,775
Segregated funds 10,548 112,213 34,869 27,409
Mutual funds - 24,028 6,571 1,711
Institutional advisory
accounts - - - -
Other funds - 3,447 - 3,505
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Total $ 66,296 $176,532 $101,079 $ 58,400
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For the quarter ended September 30, 2009
---------------------------------------------
Corporate
and
Premiums and deposits Reinsurance Other Total
--------------------------------------------------------------
General fund premiums
excluding variable
annuities(1) $ 267 $ - $ 5,359
Segregated fund deposits
excluding variable
annuities - - 4,370
Mutual fund deposits - - 2,118
Institutional advisory account
deposits - 758 758
ASO premium equivalents - - 635
Group Benefits ceded(1) - - 909
Other fund deposits - - 204
Variable annuities premiums
and deposits - - 1,885
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Total $ 267 $ 758 $ 16,238
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Net income (loss) $ 65 $ (759) $ (138)
--------------------------------------------------------------
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Funds under management As at September 30, 2009
--------------------------------------------------------------
General fund $ 2,745 $ 7,714 $ 188,465
Segregated funds - 2,543 187,582
Mutual funds - - 32,310
Institutional advisory
accounts - 21,235 21,235
Other funds - - 6,952
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Total $ 2,745 $ 31,492 $ 436,544
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For the quarter ended September 30, 2008
---------------------------------------------
U.S.
U.S. Wealth Asia and
Premiums and deposits Insurance Management Canadian Japan
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General fund premiums
excluding variable annuities $ 1,479 $ 911 $ 1,669 $ 843
Segregated fund deposits
excluding variable annuities 363 3,117 432 455
Mutual fund deposits - 2,042 104 27
Institutional advisory account
deposits - - - -
ASO premium equivalents - - 601 -
Other fund deposits - 123 - -
Variable annuities premiums
and deposits - 2,174 988 844
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Total $ 1,842 $ 8,367 $ 3,794 $ 2,169
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Net income (loss) $ 311 $ (27) $ 112 $ 214
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Funds under management As at September 30, 2008
-------------------------------------------------------------------------
General fund $ 49,462 $ 35,156 $ 51,563 $ 17,469
Segregated funds 10,439 101,301 29,851 21,260
Institutional advisory accounts - - - -
Mutual funds - 24,152 2,786 1,275
Other funds - 3,482 - 2,630
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Total $ 59,901 $164,091 $ 84,200 $ 42,634
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For the quarter ended September 30, 2008
---------------------------------------------
Corporate
and
Premiums and deposits Reinsurance Other Total
--------------------------------------------------------------
General fund premiums
excluding variable annuities $ 272 $ - $ 5,174
Segregated fund deposits
excluding variable annuities - - 4,367
Mutual fund deposits - - 2,173
Institutional advisory account
deposits - 1,646 1,646
ASO premium equivalents - - 601
Other fund deposits - - 123
Variable annuities premiums
and deposits - - 4,006
--------------------------------------------------------------
Total $ 272 $ 1,646 $ 18,090
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Net income (loss) $ 49 $ (152) $ 507
--------------------------------------------------------------
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Funds under management As at September 30, 2008
--------------------------------------------------------------
General fund $ 2,623 $ 8,890 $165,163
Segregated funds - 2,637 165,488
Institutional advisory account - 20,304 20,304
Mutual funds - - 28,213
Other funds - - 6,112
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Total $ 2,623 $ 31,831 $385,280
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(1) At the end of the first quarter of 2009, Canadian Group Benefits
entered into an external reinsurance agreement which resulted in a
substantial reduction in net premium revenue reported in the income
statement. The Company continues to retain certain benefits and
certain risks on this business and the associated direct premiums
continue to be included in the overall premiums and deposits metric
as "Group Benefits ceded".
Note 2: Comparatives
Certain comparative amounts have been reclassified to conform with the
current period's presentation.
For further information: Media inquiries: David Paterson, (416) 852-8899, [email protected]; Laurie Lupton, (416) 852-7792, [email protected]; Investor Relations: Amir Gorgi, 1-800-795-9767, [email protected]
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