Manulife Financial Corporation

Good morning and welcome to the Manulife Financial third quarter 2020 financial results conference call. Your host for today will be Ms. Adrienne O'Neill. Please go ahead, Ms. O'Neill.

Thank you and good morning. Welcome to Manulife's earnings conference call to discuss our third quarter 2020 results. We are conducting this call virtually. Our earnings release, financial statements, and related MD&A Statistical information package and webcast slides for today's call are available on the Investor Relations section of our website at manulife.com. We'll begin today's presentation with an overview of our third quarter and an update on our strategic priorities by Roy Gorey, our President and Chief Executive Officer. Following Roy's remarks, we'll end today's presentation with Phil Witherington, our Chief Financial Officer, who will discuss the company's financial and operating results. Following the prepared remarks, which were recorded earlier this week to ensure optimal sound quality, we will move to the live question and answer portion of the call. We ask each participant to adhere to a limit of two questions. If you have additional questions, please re-queue and we'll do our best to respond to all questions. Before we start, please refer to slide two for a caution on forward-looking statements, and slide 34 for a note on the use of non-GAAP financial measures in this presentation. Note that certain material factors or assumptions are applied in making forward-looking statements, and actual results may differ materially from what is stated. With that, I'd like to turn the call over to Roy Gorey, our President and Chief Executive Officer. Roy.

Thanks, Adrian. Good morning, everyone, and thank you for joining us today. Turning to slide five. I'm very pleased with the third quarter financial results that we announced yesterday. I want to start with a few opening remarks about how the diversity of our business has been a crucial factor in delivering strong financial performance since the onset of the global pandemic. Despite operating in a challenging environment for most of the year, we've delivered over $4 billion of core earnings year to date. and our net income is comparable at $4.1 billion. This is a testament to the diversity and resilience of our business model, as well as to the importance of the investments that we've made in our digital transformation over the last few years. In Asia, we rank as the top three Pan-Asian player. We have insurance operations in 11 markets with over 115,000 agents. We have more than 100 bank assurance partnerships of which eight are exclusive and provide us with access to over 14 million customers. In Azure Other, which includes emerging markets, agent count has grown 30% in the last 12 months, and MBV is up 8% year-to-date. We are at scale in most markets where we have operations, and the breadth and depth of our franchise in Asia has played an important role in delivering the strong performance that I referenced. In the U.S., We're a leader in innovative behavioral insurance products, and our John Hancock Vitality Plus offering has continued to be a key sales differentiator for us. In addition, the U.S. is a solid contributor to core earnings, led by stable contributions from our enforced U.S. business. In Canada, we're number one in group benefits new business year-to-date, offering top-tier plans and support to more than 3 million Canadians and their families. Our Canadian business is a significant contributor to sales and MBV, as well as to core earnings. And finally, in our global WAM business, we're a leading provider of investment and administration solutions to retirement plans, with nearly 8 million participants globally. In Hong Kong, the Manulife Mandatory Providence Fund is the largest MPF scheme sponsor, with a market share of nearly 25% in terms of AUMs. and we've been ranked number one in this market since the fourth quarter of 2016. In terms of sales, we also ranked number one in Canada retirement and number two and three in US retirement small case and mid-case respectively. We view the diversity of our global WAM-AUMA as a source of strength and a factor in reaching $715 billion at the end of the third quarter. Turning to slide six and our financial highlights for the third quarter of 2020. We delivered core earnings of $1.5 billion and net income attributed to shareholders of $2.1 billion, which included a gain on a reinsurance transaction that improved the capital efficiency of our legacy business and a charge related to the annual actuarial review. Our AP sales were $1.4 billion, down a modest 2% from the prior year, which reflects the strength of our product shelf, the maturity of our digital capabilities, and the tenacity and resourcefulness of our distribution channels. Our capital position remains strong, with a like-out ratio of 155%. Book value per share rose to $25.49, up 8% from the prior year. Turning to slide seven. As I've said on various occasions in recent months, the focus on our five strategic priorities has not changed, nor have the three macro demographic trends that underpin them, Namely, one, the emergence and growth of the middle class in Asia, two, the impact of aging global demographics on the retirement gap and wealth transfer, and three, increasing trends towards digitization of the customer experience. While we've already achieved our portfolio optimization target, I'm very pleased to report that we released $485 million of incremental capital from our legacy businesses in the third quarter. This was largely as a result of executing a reinsurance agreement related to our US bank-owned life insurance block. We have a mature expense efficiency program with processes in place that enable us to be responsive to headwinds such as those encountered throughout the pandemic. Core expenses declined by 5% in the third quarter of 2020 versus the prior year quarter, and we achieved an expense efficiency ratio of 51.2%. a modest decrease of 0.2 percentage points from the prior year quarter. And we continue to expect to achieve our target of $1 billion of expense efficiencies by the end of 2020, two years ahead of schedule. Our third priority is to accelerate growth in our highest potential businesses. And we aspire to have these businesses generate two-thirds of total company core earnings by 2022. Our highest potential businesses accounted for 65% of total company core earnings here to date. However, it's worth noting that this figure benefits from the absence of core investment gains in the denominator. Normalizing for this item, our highest potential businesses would have contributed 61% of total company core earnings, which is a five percentage point increase since 2019. In Asia, we sold our first policy in Myanmar, a digitally savvy market with one of the lowest insurance penetration rates in Asia. And we entered into a new partnership with Quang Dong Bao, a community with more than 5 million members across Vietnam that improves access to financial advice and solutions for expectant and new mothers. In Global WAM, Manulife Investment Management was included in the Principles for Responsible Investing Leaders Group 2020. as one of only 36 organizations globally recognized for being at the cutting edge of responsible investment and demonstrating a strategic commitment to climate change reporting. This highlights our commitment to being a leader in sustainable and responsible investing. Our fourth priority is about our customers and how we're using technology to attract, engage, and retain customers by delivering an outstanding experience. We remain focused on our digital transformation And we've invested over $600 million in digital capabilities since 2018. In Asia, our relationship MPS score increased by 11 points this quarter compared with the third quarter of 2019. This reflects the quality of the digital solutions that we've rolled out and our commitment to continue to provide outstanding service to customers during the pandemic. Our final priority is building a high performing team. Our target is to achieve top quartile employee engagement compared to global financial services and insurance peers by 2022. We recently completed our 2020 Employee Engagement Survey and ranked in the 80th percentile amongst global financial services and insurance peers, a top quartile position and a significant improvement compared to 2019. In addition, Manulife was recognized by Forbes on its 2020 World's Best Employers list. putting Manulife in the top 100 best employers globally and making us one of only three financial services companies globally to make the top 100. Turning to slide eight, we embarked on a digital transformation journey several years ago and have invested over $600 million in digital capabilities since 2018. These metrics reflect the impact of those investments. The vast majority of our products are available to prospective customers through virtual face-to-face solutions. And, given our success in this area, we expect these figures to remain fairly stable over time. Turning to slide nine, we remain committed to proactive and continuous investment in digital capabilities to reorient the customer experience over the long term. This quarter, Canadian Group Benefits launched Health by Design, a proactive approach using the latest science, technology, and predictive analytics to help each member with their unique health journey. In the US, we added the Amazon Halo Wellness Band to devices supported by John Hancock's Vitality program. In mainland China, we introduced facial and video recognition and intelligent guide script into the sales process. And in our global WAM business, we launched several online tools and automations supporting our advisor community. Overall, the acceleration and expansion of our digital tools have greatly enabled us to engage more effectively with our customers. Moving to slide 10. To conclude, I'm pleased with our third quarter and year-to-date performance, and I'm confident that Manulife is well positioned for the future. We entered 2020 in a position of strength, thanks to actions taken over the past decade to de-risk our business and reduce our company's sensitivity to market movements. Our financial performance has been solid, and we've continued to execute against our strategy. And we have the financial flexibility to navigate the downturn and to capitalize on opportunities as they emerge, both organic and inorganic. We will continue to take a disciplined approach to deploying capital and will only do so if it's in the best interest of our shareholders. Finally, we remain committed to both our dividend and medium-term financial targets. given our consistent track record of execution and the fact that the demographics and economic fundamentals underpinning our strategy have not changed. Thank you. And I'll hand over to Phil Witherington, who will review the highlights of our financial results. Phil.