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2008-08-07 07:57:00
Manulife Financial Corporation reports strong second quarter sales and increased shareholder dividends
TSX/NYSE/PSE: MFC; SEHK: 0945
TORONTO, Aug. 7 /EMWNews/ - Manulife Financial Corporation
today reported quarterly shareholders' net income of $1,008 million and
fully diluted earnings per share of $0.66, compared to net income of $1,102
million and fully diluted earnings per share of $0.71 for the same period
last year. Return on common shareholders' equity(1) was 17.0 per cent in
the second quarter of 2008, compared to 18.5 per cent in 2007. The Company
also announced an increase in the quarterly shareholders' dividend from
$0.24 per common share to $0.26 per common share.
"We are pleased with our performance particularly given the very
volatile and unsettled markets that prevail. This quarter we again
experienced excellent sales results with all of our businesses contributing
to a robust growth in new business embedded value," said Dominic
D'Alessandro, President and Chief Executive Officer. "Our strong balance
sheet, excellent distribution capabilities and leading market shares,
position us well to compete in all market conditions."
Premiums and deposits amounted to $17.3 billion in the second quarter
of 2008. Growth over the same quarter of 2007 was 11 per cent on a constant
currency basis, driven by strong sales and growth in recurring premiums and
deposits. Excluding currency movements, Insurance and Wealth Management
sales were up 18 and 14 per cent respectively. These strong results
generated a record second quarter new business embedded value of $562
million, a growth of 15 per cent over the prior year.
"Compared to the same quarter of last year, weak U.S. and Hong Kong
equity markets, higher strain on increased sales, the strengthening of the
Canadian dollar and tax related provisions reduced earnings by
approximately $250 million," noted Peter Rubenovitch, Senior Executive Vice
President and Chief Financial Officer. "However, operating results are
excellent, our credit experience remains quite satisfactory and our
expenses are under good control."
Total funds under management as at June 30, 2008 were $400.3 billion,
$10.3 billion lower than last year. The positive impact of net policyholder
cash flows is overshadowed by a $21 billion decline due to the turbulent
market and $10 billion due to the strengthened Canadian dollar.
(1) Return on common shareholders' equity is calculated excluding
Accumulated Other Comprehensive Income on available-for-sale
securities and cash flow hedges.
OPERATING HIGHLIGHTS
United States
- John Hancock Life ranked #1 in U.S. individual insurance sales for
the third consecutive quarter(2) and gained market share while
industry sales were flat over the same period. Sales in the second
quarter were up 22 per cent over the prior year, with significant
increases across all distribution channels and major product lines.
In particular, variable life products grew 26 per cent amid turbulent
equity markets and declining industry sales. These results were
driven by the successful execution of the business' core strategy of
product development, distribution, underwriting and new business
service.
- John Hancock Variable Annuities enhanced its top selling Income Plus
for Life rider by introducing new product features and adding new
investment options from leading independent investment managers,
including Dimensional Fund Advisors, T. Rowe Price and Wellington
Management.
- John Hancock Long Term Care maintained its industry-leading sales
market share, ranking #1 in Group and #2 in Retail long-term care
insurance sales(2). The Custom Care flagship product was enhanced to
include new caregiver support services, consumer protection
provisions and a compound inflation option linked to the Consumer
Price Index (CPI).
- John Hancock Retirement Plan Services launched a new optional rider,
called Guaranteed Income for Life, designed exclusively for the
401(k) market. The new option helps plan members protect and build
their retirement savings through a guarantee offering upside
potential, downside protection and a source of income for life.
Guaranteed Income for Life has received a very favourable market
response, with over 200 plans sold in the quarter.
- John Hancock Mutual Funds experienced its second highest quarter of
open-end fund sales on record, with sales of US$2.5 billion in the
quarter, up 31 per cent over the second quarter of 2007. Strong
performance in a number of key funds, the addition of several new
business partners and a more tenured sales force drove the increase
in sales and led the business to the highest net customer cash flows
in the last eight quarters. During the quarter, the business also
completed the refinancing and redemption of all of the outstanding
Auction Rate Preferred Securities (ARPS) on its leveraged closed-end
funds.
Canada
- Individual Life reported its second best sales quarter ever, with
sales up 14 per cent over the second quarter of 2007. All major
product lines contributed to the strong result, with good market
reception to the recently launched non-participating whole life
product, Performance Gold.
- Individual Wealth Management continued to generate strong sales
momentum, with segregated fund sales exceeding $1.1 billion in the
quarter, up 34 per cent from a year ago. Growth was driven by GIF
Select/IncomePlus, where deposits to date have surpassed $5 billion,
less than 20 months since the product's launch.
- ManulifeOne, the home-collateralized line of credit product offered
by Manulife Bank, posted a new quarterly record, exceeding $1 billion
in new loans. This drove a 33 per cent year-over-year growth in
overall new loan volumes.
- Manulife Mutual Funds announced its alliance with Mawer Investment
Management Limited ("Mawer") for a new suite of co-branded retail
mutual funds. This exclusive distribution arrangement offers
investors access to the award-winning investment expertise and strong
investment performance of Mawer through seven new fund mandates.
- Group Savings and Retirement Solutions launched Group IncomePlus in
June, with very favourable response from advisors. Leveraging the
product design of the successful individual retail IncomePlus
product, this is the first guaranteed minimum withdrawal benefit
option specifically designed for group retirement savings plans in
Canada
Asia and Japan
- Japan reported very strong sales growth in both variable annuities
and insurance products. Variable annuity sales in the quarter more
than doubled the prior year, up 139 per cent, driven by broadening
distribution channels and continued strong sales of the new
generation product launched in mid 2007. Insurance sales in the
quarter nearly doubled versus the prior year, partially driven by new
product launches, including a new cancer insurance product which was
introduced in the quarter.
- Hong Kong individual insurance sales for the quarter were up
12 per cent while pension sales were 14 per cent higher than the
second quarter of 2007. Insurance sales growth was partially
attributable to product enhancements and marketing campaigns while
pension sales growth was driven by strong sales in the Preserved
Account market. During the quarter, the wealth business also launched
several new funds, including the first-ever sector-based MPF fund,
several emerging market funds and a Contrarian fund, providing a
wider selection of fund choices that cater to different investment
needs and objectives.
- Other Asia Territories insurance sales for the quarter were up
29 per cent over the second quarter of 2007, driven by strong
bancassurance and agency sales in Singapore and higher sales in China
stemming from newly opened sales offices.
- Manulife Financial continued to expand its operations in China and in
the second quarter received an additional license, bringing the total
number of licenses up to 31, the most of any foreign life insurance
company in China.
Corporate
- In a separate news release, the Company also announced today that the
Board of Directors approved an increase to the quarterly
shareholders' dividend to the amount of $0.26 per share on the
common shares of the Company, payable on and after September 19, 2008
to shareholders of record at the close of business on August 19,
2008.
Awards & Recognition
- Manulife Financial received recognition from several organizations in
the quarter, including the following:
- Hong Kong was awarded the Sing Tao 2007 Excellent Services Brand
Award for the 2nd consecutive year, the East Week 2008 Hong Kong
Service Award for the 3rd consecutive year, and the Reader's
Digest Trusted Brands Gold Award for the 5th consecutive year. All
awards were accolades for consumer trust, service excellence and
community involvement.
- Manulife had the distinction of being the highest ranked Canadian
company in Brand Finance's Global 500. In both Brand Finance's
Global 500 and Interbrand's Best Canadian Brand, Manulife
Financial was recognized for product innovation and cross selling,
and as a leader in brand value creation among its peer group.
(2) Based on the most recently available industry data per LIMRA
International's sales survey results for respective categories.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Financial Highlights
(unaudited)
Quarterly Results
2Q08 1Q08 2Q07
------------------------------
Shareholders' Net Income (C$ millions) 1,008 869 1,102
Diluted Earnings per Common Share (C$) 0.66 0.57 0.71
Return on Common Shareholders' Equity
(%, annualized) 17.0 15.1 18.5
Premiums & Deposits (C$ millions) 17,262 17,778 16,438
Funds under Management (C$ billions) 400.3 400.1 410.6
Capital (C$ billions) 28.3 28.4 28.6
Net Income
----------
The Company's shareholders' net income for the second quarter of 2008
was $1,008 million, down nine per cent from $1,102 million reported a year
earlier. Growth in earnings from a higher insurance in-force base, improved
claims experience and gains from higher interest rates and credit spreads
along with gains on private equity investments, were more than offset by
increased upfront charges from the growth in insurance sales, less
favourable credit and equity market experience, tax related charges on
leveraged lease investments and the strengthened Canadian dollar. The
decline in equity markets, primarily in the U.S. and Hong Kong, over the
last few quarters have resulted in lower asset driven fee income. Although
credit experience remains satisfactory, this compares to unusually strong
results in the second quarter of 2007. In addition, with approximately 70
per cent of our income denominated in foreign currencies, primarily the
U.S. dollar, the strengthened Canadian dollar reduced earnings by $41
million. Year-to-date shareholders' net income was $1,877 million compared
to $2,088 million in 2007.
Diluted Earnings per Share and Return on Common Shareholders' Equity
--------------------------------------------------------------------
Second quarter diluted earnings per common share was $0.66, down seven
per cent from $0.71 in 2007. Return on common shareholders' equity was 17.0
per cent for the three months ended June 30, 2008, a decrease of 150 basis
points from 18.5 per cent for the three months ended June 30, 2007. Return
on common shareholders' equity is calculated excluding Accumulated Other
Comprehensive Income on available-for-sale securities and cash flow hedges.
(See page 9 for discussion of non-GAAP measures).
Premiums and Deposits
---------------------
On a constant currency basis, premiums and deposits grew 11 per cent
due to higher sales by the Japan Variable Annuity, John Hancock Mutual
Funds and Canadian Individual Wealth Management businesses along with
growth in all the insurance businesses. Premiums and deposits as reported
in Canadian dollars for the quarter were $17.3 billion, an increase of five
per cent from $16.4 billion reported a year earlier.
Funds under Management
----------------------
On a constant currency basis, funds under management was unchanged from
last year, as business growth was offset by the effects of unfavourable
equity market performance and scheduled maturities of John Hancock Fixed
institutional products. At current exchange rates, funds under management
were $400.3 billion as at June 30, 2008, $10.3 billion or three per cent
lower than 2007.
Capital
-------
Total capital was $28.3 billion as at June 30, 2008, $0.3 billion lower
than $28.6 billion as at June 30, 2007. Of the $4.0 billion of net income
reported over the past twelve months, $2.7 billion was returned to
shareholders through the $1.3 billion repurchase of 32 million shares and
the payment of shareholder dividends in the amount of $1.4 billion. Capital
was further reduced by $1.8 billion as a result of unrealized losses on
foreign exchange and on available-for-sale securities charged to Other
Comprehensive Income.
PERFORMANCE BY DIVISION
Effective January 1, 2008 we changed our approach for allocating
investment gains and losses to be more aligned with how we manage the
assets and related risk positions. Investment gains and losses are now
accumulated in two pools - insurance and wealth management, and then
allocated to the business units based on their respective policy
liabilities. Prior to 2008, gains and losses were reported in the business
units where the specific assets giving rise to the gains and losses were
located, and credit gains and losses were reported in the Corporate and
Other segment. Investment gains and losses related to product features,
such as segregated fund guarantees and future fees assumed in variable
universal life and equity-linked policy liabilities, as well as investment
gains and losses on full pass through products, such as par insurance, are
not included in the pools. Prior periods have been restated to conform to
this new presentation.
U.S. Insurance
Quarterly Results
Canadian dollars 2Q08 1Q08 2Q07
------------------------------
Shareholders' Net Income (millions) 223 209 196
Premiums & Deposits (millions) 1,647 1,554 1,585
Funds under Management (billions) 58.5 58.7 58.4
------------------------------
Quarterly Results
U.S. dollars 2Q08 1Q08 2Q07
------------------------------
Shareholders' Net Income (millions) 221 208 179
Premiums & Deposits (millions) 1,630 1,548 1,444
Funds under Management (billions) 57.4 57.1 55.0
------------------------------
Earnings for the second quarter of 2008 were U.S.$221 million, up 23
per cent from U.S.$179 million reported a year earlier. Improved claims
experience and solid in-force business growth, drove the increase in
earnings over the prior year. These results were partially offset by higher
new business strain. On a Canadian dollar basis, earnings for the second
quarter were $223 million, up $27 million from $196 million reported a year
earlier. Year-to-date earnings were $432 million compared to $378 million
in 2007.
Premiums and deposits for the quarter were U.S.$1.6 billion, up 13 per
cent from U.S.$1.4 billion reported in the second quarter of 2007. Sales
increases of 22 per cent in John Hancock Life along with growth in renewal
premiums from both John Hancock Life and John Hancock Long Term Care
contributed to the increase. On a Canadian dollar basis, premiums and
deposits for the quarter were $1.6 billion, up four per cent from the
second quarter of 2007.
On a U.S. dollar basis, funds under management grew by four per cent or
U.S.$2.4 billion to U.S.$57.4 billion. The increase from strong business
growth was partially offset by equity market declines on John Hancock
Life's segregated funds. Funds under management on a Canadian dollar basis
were $58.5 billion, consistent with the amount reported as at June 30,
2007, which reflects the impact of the change in foreign exchange rates
offsetting the net gains noted above.
U.S. Wealth Management
Quarterly Results
Canadian dollars 2Q08 1Q08 2Q07
------------------------------
Shareholders' Net Income (millions) 271 149 257
Premiums & Deposits (millions) 8,648 9,180 8,839
Funds under Management (billions) 172.7 173.8 190.5
------------------------------
Quarterly Results
U.S. dollars 2Q08 1Q08 2Q07
------------------------------
Shareholders' Net Income (millions) 268 148 235
Premiums & Deposits (millions) 8,561 9,142 8,054
Funds under Management (billions) 169.5 169.1 179.2
------------------------------
Earnings for the second quarter of 2008 were U.S. $268 million, up 14
per cent from U.S. $235 million reported a year earlier. The favourable
pooled investment results were partially offset by the non recurrence of
gains on segregated fund guarantee reserves reported in the prior year. On
a Canadian dollar basis, earnings for the second quarter were $271 million,
up $14 million from $257 million reported a year earlier. Year-to-date
earnings were $420 million compared to $592 million in 2007.
Premiums and deposits for the quarter were U.S. $8.6 billion, up six
per cent from U.S. $8.1 billion reported in the second quarter of 2007.
John Hancock Mutual Funds achieved a 31 per cent growth in sales from
improved investment performance in several key funds and from expanded
distribution. John Hancock Variable Annuities experienced lower sales due
to volatile equity markets and strong product competition in the variable
annuities market. On a Canadian dollar basis, premiums and deposits for the
quarter were $8.6 billion, down two per cent from $8.8 billion reported in
the second quarter of 2007.
On a U.S. dollar basis, funds under management declined by five per
cent, or U.S. $9.7 billion, to U.S. $169.5 billion as at June 30, 2008. The
impact of unfavourable equity markets and scheduled maturities in John
Hancock Fixed Products over the last twelve months were largely offset by
business growth. Funds under management on a Canadian dollar basis
decreased by nine per cent, or $17.8 billion, to $172.7 billion as at June
30, 2008.
Canadian Division
Quarterly Results
Canadian dollars 2Q08 1Q08 2Q07
------------------------------
Shareholders' Net Income (millions) 302 254 297
Premiums & Deposits (millions) 4,090 3,990 3,569
Funds under Management (billions) 87.6 85.8 82.6
------------------------------
Canadian Division's shareholders' net income for the second quarter of
2008 was $302 million, up $5 million from $297 million reported a year
earlier. Earnings reflected favourable investment returns and business
growth dampened by strain from continued strong sales in Individual
Insurance. Year-to-date shareholders' net income was $556 million compared
to $535 million in 2007.
Premiums and deposits for the quarter were $4.1 billion, up 15 per cent
from the second quarter of 2007. Segregated fund deposits rose 27 per cent
led by the sales success of GIF Select/IncomePlus, Individual Wealth
Management's guaranteed withdrawal benefit product. Growth in general fund
premiums was driven by sales in Individual Insurance and competitive
positioning of guaranteed wealth management products.
Funds under management grew by six per cent, or $5 billion, to $87.6
billion as at June 30, 2008. The growth was driven by Manulife Bank's
continued success in mortgage lending products, which contributed over half
of the increase, and growth in segregated funds assets from strong net
sales offset by the impact of market volatility over the past twelve
months.
Asia and Japan Division
Quarterly Results
Canadian dollars 2Q08 1Q08 2Q07
------------------------------
Shareholders' Net Income (millions) 215 186 236
Premiums & Deposits (millions) 2,590 2,670 2,182
Funds under Management (billions) 43.7 44.6 39.2
------------------------------
Quarterly Results
U.S. dollars 2Q08 1Q08 2Q07
------------------------------
Shareholders' Net Income (millions) 212 186 215
Premiums & Deposits (millions) 2,565 2,658 1,989
Funds under Management (billions) 42.9 43.4 36.9
------------------------------
Asia and Japan Division's shareholders' net income for the second
quarter of 2008 was U.S. $212 million, down U.S. $3 million from U.S.$215
million reported a year earlier. Higher earnings from the 46 per cent
growth in the Japan variable annuity business was more than offset by lower
fee income as a result of declining equity markets in Asia and Hong Kong.
On a Canadian dollar basis, net income for the second quarter was $215
million, $21 million lower than $236 million reported a year earlier.
Year-to-date shareholders' net income was $401 million compared to $419
million in 2007.
Premiums and deposits for the quarter were U.S. $2.6 billion, up 29 per
cent from U.S. $2.0 billion reported in the second quarter of 2007 due to
strong variable annuity and insurance sales in Japan and increased pension
sales in Hong Kong. These increases were offset by lower mutual fund sales
in Indonesia and lower wealth management sales in Hong Kong reflecting the
turbulent equity markets. On a Canadian dollar basis, premiums and deposits
for the quarter were $2.6 billion, up 19 per cent from $2.2 billion
reported in the second quarter of 2007.
On a U.S. dollar basis, funds under management grew by 16 per cent, or
U.S. $6.0 billion, to U.S. $42.9 billion as at June 30, 2008. Growth was
driven by strong net policyholder cash flows, most notably from continued
strong variable annuity sales in Japan. Funds under management on a
Canadian dollar basis increased by 11 per cent, or $4.5 billion, to $43.7
billion as at June 30, 2008.
Reinsurance Division
Quarterly Results
Canadian dollars 2Q08 1Q08 2Q07
------------------------------
Shareholders' Net Income (millions) 46 73 68
Premiums (millions) 287 259 262
------------------------------
Quarterly Results
U.S. dollars 2Q08 1Q08 2Q07
------------------------------
Shareholders' Net Income (millions) 45 73 62
Premiums (millions) 284 258 238
------------------------------
Earnings for the second quarter of 2008 were U.S. $45 million, down
U.S. $17 million from U.S. $62 million reported a year earlier. The
decrease in earnings was mainly due to a few large claims in the Life
Reinsurance business and the non-recurrence of 2007 gains on segregated
fund guarantees. Improved Property and Casualty claims experience partially
offset these reductions. On a Canadian dollar basis, earnings for the
second quarter were $46 million, down $22 million from $68 million reported
a year earlier. Year-to-date earnings were $119 million compared to $137
million in 2007.
On a U.S. dollar basis, premiums for the quarter were U.S. $284
million, up 19 per cent from U.S. $238 million reported in the second
quarter of 2007. The increase was largely due to a 21 per cent growth in
Life Reinsurance premiums partially due to lower experience refunds as well
as the impact of the strengthened Euro against the U.S. dollar on
International Group Program premiums. On a Canadian dollar basis, premiums
for the quarter were $287 million, up 10 per cent from $262 million
reported in the second quarter of 2007.
Corporate and Other
Quarterly Results
Canadian dollars 2Q08 1Q08 2Q07
------------------------------
Shareholders' Net Income (Loss) (millions) (49) (2) 48
Funds under Management (billions) 35.3 34.7 37.2
------------------------------
Corporate and Other is comprised of the Investment Division's external
asset management business, earnings on excess capital (assets backing
capital, net of amount allocated to operating divisions), changes in
actuarial methods and assumptions and other non-operating events. Also
included in Corporate and Other is the John Hancock Accident and Health
operation, which consists primarily of contracts in dispute. Funds under
management include externally managed assets and assets backing the
Company's capital.
Corporate and Other recorded a loss of $49 million for the second
quarter of 2008, a decline of $97 million from net income of $48 million
reported a year earlier. The primary drivers of the decline were lower
gains realized on available-for-sale assets and private equity holdings and
a tax related charge of $33 million on leveraged lease investments.
Improved claims experience in our John Hancock Accident and Health
operations partially offset these items. Year-to-date shareholders' net
loss was $51 million compared to net income of $27 million in 2007.
Funds under management declined by five per cent, or $1.9 billion, to
$35.3 billion at June 30, 2008. Both the equity market performance over the
last 12 months and the strengthened Canadian dollar contributed to the
decrease in funds managed for third party clients.
Contingencies
-------------
Certain elements of the Company's tax positions are contingent upon the
final resolution of tax authority audits or on the substantial enactment of
tax regulations which have currently only been issued in draft. There are
three significant tax related contingencies as at June 30, 2008.
The Canadian tax authorities have released draft tax regulations
changing the treatment of unrealized gains and losses and the deductibility
of certain actuarial reserves. If the changes are enacted as announced, the
Company will record an increase to net income of an estimated $169 million.
In the United States, audits concluded by the tax authorities are at
various stages of the appeals process. Should the Company be successful in
these proceedings, benefits of an estimated $107 million will accrue to the
Company.
Also in the United States, several court cases related to the tax
treatment of leveraged leases have recently concluded in favour of the tax
authorities. The Company is an investor in leveraged leases and previously
established provisions in the amount of $178 million after tax for possible
disallowance of the tax treatment and for interest on past due taxes.
During the quarter, we increased this provision by $33 million after tax.
We continue to believe that deductions originally claimed in relation to
these arrangements are appropriate. Although not expected to occur, should
the tax attributes of our leveraged leases be fully denied, the maximum
after tax exposure including interest would be an additional estimated $382
million as at June 30, 2008.
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
return on common shareholders' equity, premiums and deposits and funds
under management. Non-GAAP financial measures are not defined terms under
GAAP and, therefore, are unlikely to be comparable to similar terms used by
other issuers.
Return on 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 2007 implementation of Canadian Institute
of Chartered Accountants ("CICA") Handbook Section 3855 resulted in certain
unrealized gains and losses, which do not have an impact on reported income
for the period, being reflected in a new component of shareholders' equity
called Accumulated Other Comprehensive Income. Accordingly, the Company
calculates return on equity using average common shareholders' equity
excluding Accumulated Other Comprehensive Income on available-for-sale
securities and cash flow hedges.
About Manulife Financial
------------------------
Manulife Financial is a leading Canadian-based financial services group
serving millions of customers in 19 countries and territories worldwide.
Operating as Manulife Financial in Canada and Asia, and primarily through
John Hancock in the United States, the Company offers clients a diverse
range of financial protection products and wealth management services
through its extensive network of employees, agents and distribution
partners. Funds under management by Manulife Financial and its subsidiaries
were Cdn $400 billion (US$393 billion) as at June 30, 2008. Manulife
Financial Corporation trades as 'MFC' on the TSX, NYSE and PSE, and under
'0945' on the SEHK. Manulife Financial can be found on the Internet at
http://www.manulife.com.
Attachments: Financial Highlights, Consolidated Statements of
Operations,
Consolidated Balance Sheets, Divisional Information.
Notes:
Manulife Financial Corporation will host a Second Quarter Earnings
Results Conference Call at 2:00 p.m. ET on August 7, 2008. For local and
international locations, please call (416) 340-2216 and toll free in North
America please call (866) 898-9626. Please call in ten minutes before the
call starts. You will be required to provide your name and organization to
the operator. A playback of this call will be available by 6:00 p.m. ET on
August 7, 2008 until August 14, 2008 by calling (416) 695-5800 (passcode
#3248036).
The conference call will also be webcast through Manulife Financial's
website at 2:00 p.m. ET on August 7, 2008. You may access the webcast at:
http://www.manulife.com/quarterlyreports. An archived version of the webcast will
be available later on the website at the same URL as above.
The Second Quarter 2008 Financial Statements and Statistical
Information Package are also available on the Manulife website at:
http://www.manulife.com/quarterlyreports. Each of these documents may be
downloaded before the webcast begins.
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 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", "suspect", "outlook", "expect", "intend",
"estimate", "anticipate", "believe", "plan", "forecast", "objective" and
"continue" (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. 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: level of competition and consolidation, changes in laws and
regulations, general business and economic conditions, currency rates and
Company liquidity, accuracy of information received from counterparties and
the ability of counterparties to meet their obligations, accuracy of
accounting policies and actuarial methods used by the Company, ability to
maintain the Company's reputation, legal and regulatory proceedings, the
disruption of or changes to key elements of the Company's or to public
infrastructure systems, the ability to attract and retain key executives,
environmental concerns, the ability to complete acquisitions and execute
strategic plans, and the ability to adapt products and services to the
changing market. Additional information about material factors that could
cause actual result 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 Report, and
elsewhere in our filings with Canadian and U.S. securities regulators. We
do not undertake to update any forward-looking statements.
Financial Highlights
(Canadian $ in millions unless otherwise stated and per share
information, unaudited)
As at and for the three
months ended June 30
2008 2007 % Change
-------------------------------------------------------------------------
Net income $ 998 $ 1,099 (9)
Loss attributed to participating
policyholders (10) (3) 233
-------------------------------------------------------------------------
Net income attributed to shareholders $ 1,008 $ 1,102 (9)
Preferred share dividends (8) (7) -
-------------------------------------------------------------------------
Net income available to common
shareholders $ 1,000 $ 1,095 (9)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Premiums and deposits
Life and health insurance premiums $ 3,865 $ 3,692 5
Annuity and pension premiums 1,507 1,140 32
Segregated fund deposits 8,472 8,545 (1)
Mutual fund deposits 2,664 2,305 16
ASO premium equivalents 621 584 6
Other fund deposits 133 172 (23)
-------------------------------------------------------------------------
Total premiums and deposits $ 17,262 $ 16,438 5
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Funds under management
General fund $ 164,445 $ 163,675 -
Segregated funds 175,746 176,842 (1)
Mutual funds 32,094 38,810 (17)
Other funds 28,013 31,240 (10)
-------------------------------------------------------------------------
Total funds under management $ 400,298 $ 410,567 (3)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Capital
Liabilities for preferred shares and
capital instruments $ 3,024 $ 3,046 (1)
Non-controlling interest in
subsidiaries 167 202 (17)
Equity
Participating policyholders' equity 64 153 (58)
Shareholders' equity
Preferred shares 638 638 -
Common shares 13,958 14,043 (1)
Contributed surplus 152 130 17
Retained earnings 15,312 13,632 12
Accumulated other comprehensive loss
on AFS securities and translation
of net foreign operations (5,025) (3,224) 56
-------------------------------------------------------------------------
Total capital $ 28,290 $ 28,620 (1)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Selected key performance measures
Basic earnings per common share $ 0.67 $ 0.72
Diluted earnings per common share $ 0.66 $ 0.71
Return on common shareholders'
equity (annualized)(1) 17.0% 18.5%
Book value per common share $ 16.29 $ 16.21
Common shares outstanding (in millions)
End of period 1,495 1,519
Weighted average - basic 1,497 1,532
Weighted average - diluted 1,508 1,546
(1) Return on common shareholders' equity is net income available to
common shareholders divided by average common shareholders' equity
excluding accumulated other comprehensive income on AFS securities
and cash flow hedges.
Summary Consolidated Financial Statements
Consolidated Statements of Operations
(Canadian $ in millions except per share data, unaudited)
For the three
months ended
June 30
2008 2007
-------------------------------------------------------------------------
Revenue
Premium income $ 5,372 $ 4,832
Investment income
Investment income 2,230 2,408
Realized/unrealized losses on assets supporting
policy liabilities and consumer notes (1,462) (1,308)
Other revenue 1,418 1,367
-------------------------------------------------------------------------
Total revenue $ 7,558 $ 7,299
-------------------------------------------------------------------------
Policy benefits and expenses
To policyholders and beneficiaries
Death, disability and other claims $ 1,606 $ 1,569
Maturity and surrender benefits 1,903 1,857
Annuity payments 723 727
Policyholder dividends and experience
rating refunds 353 391
Net transfers to segregated funds 443 158
Change in actuarial liabilities(1) (1,368) (1,154)
General expenses 876 842
Investment expenses 233 257
Commissions 1,100 955
Interest expense 273 182
Premium taxes 66 66
Non-controlling interest in subsidiaries 5 9
-------------------------------------------------------------------------
Total policy benefits and expenses $ 6,213 $ 5,859
-------------------------------------------------------------------------
Income before income taxes $ 1,345 $ 1,440
Income taxes (347) (341)
-------------------------------------------------------------------------
Net income $ 998 $ 1,099
Loss attributed to participating policyholders (10) (3)
-------------------------------------------------------------------------
Net income attributed to shareholders $ 1,008 $ 1,102
Preferred share dividends (8) (7)
-------------------------------------------------------------------------
Net income available to common shareholders $ 1,000 $ 1,095
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic earnings per common share $ 0.67 $ 0.72
Diluted earnings per common share $ 0.66 $ 0.71
(1) Includes impact of net redemptions in John Hancock Fixed Products
institutional products of $0.5 billion in Q2 2008 and $0.2 billion in
Q2 2007.
Consolidated Balance Sheets
(Canadian $ in millions, unaudited)
As at June 30
Assets 2008 2007
-------------------------------------------------------------------------
Invested assets
Cash and short-term securities $ 12,196 $ 10,511
Securities
Bonds 72,195 74,453
Stocks 11,303 11,930
Loans
Mortgages 27,637 26,350
Private placements 22,670 22,937
Policy loans 6,133 6,052
Bank loans 2,257 2,106
Real estate 6,029 5,826
Other investments 4,025 3,510
-------------------------------------------------------------------------
Total invested assets $ 164,445 $ 163,675
-------------------------------------------------------------------------
Other assets
Accrued investment income $ 1,420 $ 1,488
Outstanding premiums 691 670
Goodwill 6,882 6,977
Intangible assets 1,602 1,561
Derivatives 2,227 1,923
Miscellaneous 2,804 3,013
-------------------------------------------------------------------------
Total other assets $ 15,626 $ 15,632
-------------------------------------------------------------------------
Total assets $ 180,071 $ 179,307
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Segregated funds net assets $ 176,395 $ 177,509
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities and equity
-------------------------------------------------------------------------
Policy liabilities $ 125,388 $ 128,368
Deferred realized net gains 106 115
Bank deposits 10,704 8,107
Consumer notes 1,894 2,382
Long-term debt 2,775 1,867
Future income tax liability, net 3,068 2,611
Derivatives 2,053 1,802
Other liabilities 5,844 5,396
-------------------------------------------------------------------------
$ 151,832 $ 150,648
Liabilities for preferred shares and capital
instruments 3,024 3,046
Non-controlling interest in subsidiaries 167 202
Equity
Participating policyholders' equity 64 153
Shareholders' equity
Preferred shares 638 638
Common shares 13,958 14,043
Contributed surplus 152 130
Retained earnings 15,312 13,632
Accumulated other comprehensive loss (5,076) (3,185)
-------------------------------------------------------------------------
Total equity $ 25,048 $ 25,411
-------------------------------------------------------------------------
Total liabilities and equity $ 180,071 $ 179,307
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Segregated funds net liabilities $ 176,395 $ 177,509
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Notes to Summary Consolidated Financial Statements
(Canadian $ in millions, unaudited)
Note 1: Divisional Information
For the quarter ended June 30, 2008
-------------------------------------------
U.S.
U.S. Wealth Asia
Premiums and deposits Insurance Management Canadian and Japan
-------------------------------------------------------------------------
General fund premiums $ 1,339 $ 1,315 $ 1,668 $ 763
Segregated fund deposits 308 4,799 1,644 1,721
Mutual fund deposits - 2,401 157 106
ASO premium equivalents - - 621 -
Other fund deposits - 133 - -
-------------------------------------------------------------------------
Total $ 1,647 $ 8,648 $ 4,090 $ 2,590
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net income (loss) $ 223 $ 271 $ 297 $ 210
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Funds under management As at June 30, 2008
-------------------------------------------------------------------------
General fund $ 47,611 $ 34,404 $ 51,898 $ 16,656
Segregated funds 10,869 107,438 32,524 22,294
Mutual funds - 27,198 3,219 1,677
Other funds - 3,642 - 3,083
-------------------------------------------------------------------------
Total $ 58,480 $ 172,682 $ 87,641 $ 43,710
-------------------------------------------------------------------------
-------------------------------------------------------------------------
For the quarter ended June 30, 2008
-------------------------------------
Corporate
and
Premiums and deposits Reinsurance Other Total
--------------------------------------------------------------
General fund premiums $ 287 $ - $ 5,372
Segregated fund deposits - - 8,472
Mutual fund deposits - - 2,664
ASO premium equivalents - - 621
Other fund deposits - - 133
--------------------------------------------------------------
Total $ 287 $ - $ 17,262
--------------------------------------------------------------
--------------------------------------------------------------
Net income (loss) $ 46 $ (49) $ 998
--------------------------------------------------------------
--------------------------------------------------------------
Funds under management As at June 30, 2008
--------------------------------------------------------------
General fund $ 2,532 $ 11,344 $ 164,445
Segregated funds - 2,621 175,746
Mutual funds - - 32,094
Other funds - 21,288 28,013
--------------------------------------------------------------
Total $ 2,532 $ 35,253 $ 400,298
--------------------------------------------------------------
--------------------------------------------------------------
For the quarter ended June 30, 2007
-------------------------------------------
U.S.
U.S. Wealth Asia
Premiums and deposits Insurance Management Canadian and Japan
-------------------------------------------------------------------------
General fund premiums $ 1,300 $ 987 $ 1,556 $ 727
Segregated fund deposits 285 5,741 1,299 1,219
Mutual fund deposits - 1,939 130 236
ASO premium equivalents - - 584 -
Other fund deposits - 172 - -
-------------------------------------------------------------------------
Total $ 1,585 $ 8,839 $ 3,569 $ 2,182
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net income $ 196 $ 257 $ 294 $ 236
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Funds under management As at June 30, 2007
-------------------------------------------------------------------------
General fund $ 46,266 $ 39,401 $ 48,496 $ 16,335
Segregated funds 12,171 113,526 30,692 17,894
Mutual funds - 33,608 3,451 1,751
Other funds - 3,993 - 3,224
-------------------------------------------------------------------------
Total $ 58,437 $ 190,528 $ 82,639 $ 39,204
-------------------------------------------------------------------------
-------------------------------------------------------------------------
For the quarter ended June 30, 2007
-------------------------------------
Corporate
and
Premiums and deposits Reinsurance Other Total
--------------------------------------------------------------
General fund premiums $ 262 $ - $ 4,832
Segregated fund deposits - 1 8,545
Mutual fund deposits - - 2,305
ASO premium equivalents - - 584
Other fund deposits - - 172
--------------------------------------------------------------
Total $ 262 $ 1 $ 16,438
--------------------------------------------------------------
--------------------------------------------------------------
Net income $ 68 $ 48 $ 1,099
--------------------------------------------------------------
--------------------------------------------------------------
Funds under management As at June 30, 2007
--------------------------------------------------------------
General fund $ 2,601 $ 10,576 $ 163,675
Segregated funds - 2,559 176,842
Mutual funds - - 38,810
Other funds - 24,023 31,240
--------------------------------------------------------------
Total $ 2,601 $ 37,158 $ 410,567
--------------------------------------------------------------
--------------------------------------------------------------
Note 2: Comparatives
Certain comparative amounts have been reclassified to conform with the
current period's presentation.
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