Manulife Financial Corporation

Good morning and welcome to the Manulife second quarter 2021 financial results conference call. Your host for today will be Mr. Hong Koh. Please go ahead, Mr. Koh.

Thank you and good morning. Welcome to Manulife earnings conference call to discuss our second quarter 2021 financial and operating results. We are conducting this call virtually. The earnings release, financial statement, 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 manylife.com. Turning to slide four, we will begin today's presentation with an overview of our second quarter highlights and an update on our strategic priorities by Roy Gorey, our President and Chief Executive Officer. Following Roy's remarks, Phil Riffington, our Chief Financial Officer will discuss the company's financial and operating results. After the prepared remarks, which were recorded in advance 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 will 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 32 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, Hanh. Good morning, everyone, and thank you for joining us today. Yesterday, we announced our financial results for the second quarter of 2021. and our strong momentum continued from the start of the year, with double-digit growth across a number of our key operating metrics compared with the prior year quarter. Turning to slide six, we delivered record core earnings of $1.7 billion, an 18% increase from the prior year, with double-digit growth across our growth engines, Asia, and global WAM. And we reported net income of $2.6 billion. New business value increased 57% with strong contributions across all geographies, reflecting higher sales volume and more favorable margins. Our expense efficiency ratio improved by 2.1 percentage points compared with the prior year, demonstrating our continued focus on expense management. In our global WAM business, we continue to build scale and benefited from growth in higher margin businesses. As a result, our core EBITDA margin increased 440 basis points from the prior year. Our MBV margin for Asia increased by 3.6 percentage points from the prior year. And this represents a tremendous growth from five years ago when the margin was in the low 30s. Turning to slide seven and the progress that we've made executing on our five priorities. As we discussed at our investor day in June, The next phase of our strategy is focused on accelerating growth and becoming the most digital, customer-centric global company in our industry. I'm very pleased with our progress in these areas. Growth in our highest potential businesses has outpaced other areas since 2019, and that continued in the second quarter, with both Asia and Global WAM delivering double-digit growth in core earnings. Our highest potential businesses accounted for 61% of total company core earnings year-to-date 2021, and we're on track to achieve our target of 67% of total company core earnings by 2022. In Asia, we announced a three-year partnership with LIMRA, a leading global trade association for the financial services industry, in order to further recruit best-in-class agents across Asia. This partnership complements our newly launched Manulife Business Academy, our region-wide unified learning and development platform for our growing number of agents. Global WAM's managed AUMA totaled more than $1 trillion, reflecting our track record of positive net flows and strong investment performance. And we secured an Alternate Investment Fund Manager's license to offer onshore private market funds in our key European markets. This is a major milestone in driving the expansion and offering of our private market investment capabilities within Europe. On the behavioral insurance front, we launched the Manulife Vitality Healthy Mind Reward Program to help our individual insurance customers improve their mental and emotional wellbeing. Our ambition is to be a leader in our industry when it comes to digital capabilities and customer experience. And we're executing on our strategy to attract, engage and retain customers by delivering an outstanding experience. There is strong evidence that higher NPS results in increased customer retention, higher number of products per customer, increased investment balances, and higher referrals, leading to lower acquisition costs and agent recruiting costs. Since 2018, we've invested $750 million in digital enhancements, which have positioned us well to better engage with our customers and has contributed to our NPS of plus 19. as of the second quarter of 2021. This is an 18-point improvement from our 2017 baseline, and we're on track to achieve our NPS target of plus 31 by 2022. During the second quarter, we continue to make progress on our digital journey across all our operating segments to better engage with our customers. In Asia, we entered into a new digital collaboration with Rewards, a rewards aggregator and management solution. to further incentivize customers that are part of our move program to be physically active. In the US, we continue to enhance our digital underwriting capabilities by integrating our underwriting decision engine with iPipeline, a leading provider of no-code or low-code content-based digital solutions to accelerate the life insurance application process. This new approach will dramatically reduce the life insurance sales cycle and offer a less intrusive way to collect medical history data with digital signatures. In our global WAM business, we launched a new retirement mobile app for all US plan members. The new app gives members the ability to enroll in their plan, view account details, make changes to their account, and use additional financial tools that provide them with guidance on their retirement savings strategies and financial priorities. Turning to slide eight, expense efficiency is deeply embedded in our culture, and I'm pleased to see the benefits reflected in our second quarter expense efficiency ratio of 46.8%. The ratio improved by 2.1 percentage points year over year, reflecting pre-tax core earnings growth of 16%, that far outpaced core expense growth of 5%. We've made significant progress towards meeting our goal of consistently achieving a ratio of less than 50%. In the second quarter, we freed up $200 million of capital, primarily driven by our annuity guaranteed minimum withdrawal benefit offer program in the U.S. The GMWD offer program has reduced the guaranteed value of the USDA business by approximately 7% since it was launched in 2019. It's a prime example of our organic initiatives to optimize capital and reduce risk. On a cumulative basis, we've freed up $6.1 billion of capital through our portfolio optimization efforts across multiple legacy blocks. Whilst we've exceeded our target of releasing $5 billion of capital, our commitment to optimize manualized legacy portfolio, especially LTC and VA, remains. And we continue to seek opportunities to reduce risk and unlock value. As I announced at Investor Day, we plan to reduce the core earnings contributions from LTC and VA to less than 15% of total company core earnings by 2025. And I look forward to providing you with an update on our progress towards all of our 2025 supplemental goals at year end. Our final priority is around building a high-performing team. I believe that culture will be a sustainable long-term competitive advantage and that only a highly engaged, high-performing team can consistently exceed customer expectations and deliver superior results. Our target is to achieve top quartile employee engagement compared to global financial services and insurance peers by 2022. And we're proud to have achieved this ranking in 2020. We continue to deliver against our goals of increasing women in our leadership ranks. And our new graduate hiring of black, indigenous, and people of color talent in 2020 reached 52%, more than doubling our goal. In addition, We're continuing to develop our high-performing team and winning culture through initiatives focused on wellbeing, learning, and recognition. Highlights include our second annual Global Thank You Day for all colleagues, as well as our bespoke Elevate Wellbeing program, a global initiative to encourage and help our teams focus on their wellbeing. And we're on the path to building a culture of sustainability to better our planet. In May, we announced our commitment to net zero emissions to support climate goals worldwide, recognising the important role that 37,000 employees, 118,000 agents and over a trillion dollars in AUMA can play in global climate solutions. Of note, I'm proud to share that we're already net zero in our operations due to the carbon removals from our substantial owned and operated forest and farmland. Our journey to net zero focuses on three key areas. Through our operations, we'll substantially reduce emissions to lessen our footprint. We'll actively invest for a sustainable future. With our products and services, we'll develop innovative solutions that contribute to climate change mitigation and resilience. To conclude, we continue to demonstrate great progress against our strategic priorities. We're executing on the next phase of our strategy with a greater focus on accelerating growth in our highest potential businesses. Our strong results in the second quarter of 2021 showcase the strength of our Asia and global WAM businesses. And I'm pleased with our progress towards delivering on our goals. Our commitment to continue to optimize our legacy businesses, especially LTC and VA, is as strong as ever. We continue to invest in our digital capabilities to both improve customer experience and deliver on our efficiency target. While the challenging and uneven operating environment continues across many markets globally, we're pleased to see a path to reopening in many of the world's largest economies. We continue to believe that Manulife is uniquely positioned to win as the global economy positions the recovery and are optimistic about the future of our franchise. Thank you. And I'll hand over to Phil Witherington, who will review the highlights of our financial results. Phil.