Exhibit 99.1

 

Manulife Third Quarter Report to Shareholders Three and nine months ended September 30, 2023 Manulife Financial Corporation

Manulife Financial Corporation (“Manulife” or the “Company”) reported its third quarter results for the period ended September 30, 2023, delivering double-digit growth in core earnings¹, APE sales² and new business value².

Key highlights for the third quarter of 2023 (“3Q23”) include:

 

•

Net income attributed to shareholders of $1.0 billion, up $0.2 billion from transitional net income attributed to shareholders1 in the third quarter of 2022 (“3Q22”) and up $0.5 billion compared with 3Q22 net income attributed to shareholders

 

•

Core earnings of $1.7 billion, up 28% on a constant exchange rate basis3 from 3Q22

 

•

Core EPS4 of $0.92, up 35%3 from $0.68 in 3Q22, and EPS of $0.52 in 3Q23, up 31%3 compared with transitional EPS4 of $0.38 in 3Q22 and up 104%3 compared with EPS of $0.23 in 3Q22

 

•

LICAT ratio5 of 137%

 

“Our strong operating and new business results this quarter were supported by growth in Asia with a 33% increase in core earnings and 16% increase in new business CSM3 year-over-year. We also delivered resilient results in Global WAM6 with sequential core earnings growth, improving core EBITDA margin4 and positive net flows2 of $5.8 billion over the past three quarters. We are in a position of strength to weather macroeconomic uncertainties. We continued to deploy capital through share buybacks to further enhance shareholder returns, with nearly $1.3 billion of our common shares repurchased since the start of the year.”   — Roy Gori, Manulife President & Chief Executive Officer   “We delivered core ROE4 of 16.8% in the third quarter and grew adjusted book value per share4 to $30.67, despite challenging macroeconomic conditions. Overall, higher rates have benefited, and will continue to benefit, our underlying businesses and financial performance. We remain disciplined in our capital and expense management approach, reporting a higher LICAT ratio in the quarter and improving expense efficiency ratio during 2023.”   — Colin Simpson, Manulife Chief Financial Officer

Results at a Glance

 

		Quarterly Results																				YTD Results
($ millions, unless otherwise stated)		3Q23				3Q22				Change2,3												3Q23				3Q22				Change
Net Income attributed to shareholders /		$	1,013			$	491 /				87% /											$	3,444			$	(2,848) /				nm /
Transitional						$	777				24%															$	2,270				42%
Core Earnings		$	1,743			$	1,339				28%											$	4,911			$	4,258				12%
EPS / Transitional ($)		$	0.52			$	0.23 /				104% /											$	1.76			$	(1.57) /				nm /
						$	0.38				31%															$	1.10				48%
Core EPS ($)		$	0.92			$	0.68				35%											$	2.55			$	2.13				20%
ROE / Transitional			9.5%				4.3% /				5.2 pps /												10.8%				(10.2)% /				21.0 pps /
							7.1%				2.4 pps																7.2%				3.7 pps
Core ROE			16.8%				12.7%				4.1 pps												15.7%				13.9%				1.8 pps
BV per common share ($)		$	22.42			$	21.78				3%											$	22.42			$	21.78				3%
Adjusted BV per common share ($)		$	30.67			$	29.49				4%											$	30.67			$	29.49				4%

 

 

1	Core earnings and transitional net income attributed to shareholders are non-GAAP financial measures. For more information on non-GAAP and other financial measures, see “Non-GAAP and other financial measures” in our 3Q23 Management’s Discussion and Analysis (“MD&A”).

2	For more information on annualized premium equivalent (“APE”) sales, new business value (“NBV”) and net flows, see “Non-GAAP and other financial measures” in our 3Q23 MD&A. Percentage growth / declines in APE sales, NBV and net flows are stated on a constant exchange rate basis.

3

Percentage growth / declines in core earnings, diluted core earnings per common share (“core EPS”), diluted earnings (loss) per share (“EPS”), transitional EPS, new business contractual service margin net of NCI (“new business CSM”), net income attributed to shareholders and transitional net income attributed to shareholders are stated on a constant exchange rate basis and are non-GAAP ratios.

4	Core EPS, transitional EPS, core EBITDA margin, core ROE and adjusted book value (“BV”) per common share are non-GAAP ratios.

5	Life Insurance Capital Adequacy Test (“LICAT”) ratio of The Manufacturers Life Insurance Company (“MLI”). LICAT ratio is disclosed under the Office of the Superintendent of Financial Institutions Canada’s (“OSFI’s”) Life Insurance Capital Adequacy Test Public Disclosure Requirements guideline.

6	Global Wealth and Asset Management (“Global WAM”).

 

 

Manulife Financial Corporation – Third Quarter 2023		1

Results at a Glance (continued)

 

		Quarterly Results																YTD Results
($ millions, unless otherwise stated)		3Q23						3Q22						Change				3Q23						3Q22						Change
APE sales		$			1,657			$			1,347				21%			$			4,890			$			4,365				9%
NBV		$			600			$			515				15%			$			1,694			$			1,539				6%
New business CSM		$			507			$			470				6%			$			1,541			$			1,453				3%
Global WAM net flows ($ billions)		$			(0.8)			$			3.0				nm			$			5.8			$			11.5				(51)%
Results by Segment
		Quarterly Results																YTD Results
($ millions, unless otherwise stated)		3Q23						3Q22						Change				3Q23						3Q22						Change
Asia
Net Income attributed to shareholders /		US$			63			US$			216 /				(74)% /			US$			543			US$			285 /				22% /
Transitional											134				(58)%												118				171%
Core Earnings					390						296				33%						1,104						1,027				10%
APE sales					835						699				20%						2,582						2,262				16%
NBV					310						291				7%						900						889				2%
New Business CSM					300						261				16%						845						768				12%
Canada
Net Income attributed to shareholders /		$			290			$			853 /				(66)% /			$			826			$			(430) /				nm /
Transitional											481				(40)%												1,078				(23)%
Core Earnings					408						391				4%						1,135						1,091				4%
APE sales					431						285				51%						1,046						1,009				4%
NBV					153						89				72%						351						275				28%
New Business CSM					51						44				16%						154						152				1%
U.S.
Net Income attributed to shareholders /		US$			53			US$			(342) /				nm /			US$			327			US$			(1,776	)			nm /
Transitional											241				(78)%												/ 1,218				(73)%
Core Earnings					329						335				(2)%						955						901				6%
APE sales					79						115				(31)%						275						356				(23)%
NBV					25						35				(29)%						99						95				4%
New Business CSM					40						66				(39)%						187						247				(24)%
Global WAM
Net Income attributed to shareholders		$			318			$			287				9%			$			932			$			720				27%
Core Earnings					361						354				0%						968						1,025				(8)%
Gross flows ($ billions)1					34.3						32.0				5%						108.2						104.5				0%
Average AUMA ($ billions)1					813						774				4%						812						788				(0)%
Core EBITDA margin					26.9%						28.9%				(200) bps						24.7%						28.4%				(370) bps

Profit

Net Income attributed to shareholders rose to $1.0 billion in 3Q23, $0.2 billion higher than 3Q22 transitional net income attributed to shareholders

Manulife reported net income attributed to shareholders of $1.0 billion in 3Q23, which was $0.2 billion higher than 3Q22 transitional net income attributed to shareholders, and $0.5 billion higher than 3Q22 net income attributed to shareholders.

 

 

 

1	For more information on gross flows and average asset under management and administration (“average AUMA”), see “Non-GAAP and other financial measures” in our 3Q23 MD&A. Percentage growth / declines in gross flows and average AUMA are stated on a constant exchange rate basis.

 

 

Manulife Financial Corporation – Third Quarter 2023		2

The increase in 3Q23 net income attributed to shareholders compared with 3Q22 transitional net income attributed to shareholders was driven by growth in core earnings and a one-time tax-related benefit of $290 million, partially offset by a larger net charge from market experience. The net charge from market experience in 3Q23 was primarily related to lower-than-expected returns (including fair value changes) relative to long term assumptions on alternative long duration assets mainly related to real estate, lower-than-expected returns relative to long term assumptions on public equity and a charge from derivatives and hedge accounting ineffectiveness. Net income attributed to shareholders in 3Q23 increased by $0.5 billion compared with 3Q22, driven by the factors mentioned above and $0.3 billion of transitional impacts due to the application of IFRS 9 hedge accounting and expected credit loss (“ECL”) principles. Transitional impacts are geography-related and do not impact total shareholders’ equity as the corresponding offset is in other comprehensive income.

Core earnings grew 28% to $1.7 billion compared with 3Q22

The increase from the prior year quarter was driven by the non-recurrence of a $256 million provision in our Property and Casualty Reinsurance business related to Hurricane Ian in 3Q22, the favourable impact of rising interest rates on expected investment earnings and earnings on surplus assets net of higher cost of debt financing, as well as improved insurance experience in the U.S. and in Canada. Business growth also contributed to the increase in expected earnings on investments and on insurance contracts. These were partially offset by an increase in the ECL provision primarily related to electric utility bonds and private placements, higher performance-related costs and investments in technology.

Growth

Annualized premium equivalent (“APE”) sales of $1.7 billion, up 21% compared with 3Q22

Our APE sales in the third quarter were boosted by strong performance in Asia, reflecting our diverse business model. In Asia, APE sales increased 20% compared with 3Q22 as a result of growth in Hong Kong and Asia Other¹. In Hong Kong, APE sales increased 57%, driven by strong growth in our broker and bancassurance channels reflecting the return of demand from mainland Chinese visitor customers following the Hong Kong and mainland China border reopening in February 2023. In Japan, APE sales decreased 6%, due to lower sales in corporate-owned life insurance products. APE sales increased 14% in Asia Other compared with the prior year. Higher bancassurance sales in mainland China and higher broker sales in our International High Net Worth business² and in Singapore were partially offset by lower agency and bancassurance sales in Vietnam.

In Canada, APE sales increased 51% driven by a large affinity markets sale. U.S. APE sales decreased 31% due to the adverse impact of higher short-term interest rates on accumulation insurance products, particularly for our affluent customers.

NBV of $600 million, rose 15% compared with 3Q22

In Asia, NBV increased 7% from 3Q22 driven by higher sales volumes partially offset by business mix. In Canada, NBV increased 72% driven by higher sales volumes in Individual Insurance and higher margins in Group Insurance. In the U.S., NBV decreased 29% primarily due to lower sales volumes and product mix, partially offset by pricing actions and higher interest rates.

New business CSM of $507 million, up 6% compared with 3Q22

In Asia, new business CSM increased 16% year-over-year primarily due to higher sales volumes partially offset by business mix. In Canada, new business CSM increased 16% driven by product mix in Individual Insurance. Under IFRS 17, the majority of Group Insurance and affinity products are classified as premium allocation approach and do not generate CSM³. In the U.S., new business CSM decreased 39% driven by lower sales volumes and product mix.

 

 

 

1	Asia Other excludes Hong Kong and Japan.

2	Effective January 1, 2023, our International High Net Worth business was reclassified from the U.S. segment to the Asia segment. Prior period comparative information has been restated to reflect the change in segment reporting.

3	Contractual service margin (“CSM”).

 

 

Manulife Financial Corporation – Third Quarter 2023		3

Global WAM net outflows of $0.8 billion in 3Q23 compared with net inflows of $3.0 billion in 3Q22

Net outflows in Retirement were $3.4 billion in 3Q23 compared with net inflows of $1.4 billion in 3Q22, driven entirely by a large-case pension plan redemption in the U.S. Net outflows in Retail were $0.2 billion in 3Q23 compared with net inflows of $1.0 billion in 3Q22, reflecting lower demand as investors continued to favour short-term cash and money market instruments amid market volatility and higher interest rates. This was partially offset by the launch of our Global Semiconductors strategy in Japan and higher net inflows in mainland China from acquiring full ownership of Manulife Fund Management (“MFM”) in the fourth quarter of 2022. Net inflows in Institutional Asset Management were $2.8 billion in 3Q23 compared with net inflows of $0.6 billion in 3Q22, driven by higher net flows in fixed income mandates, and higher sales of equity and agriculture mandates, as well as the impact of the MFM acquisition.

Balance Sheet

CSM net of NCI¹ was $17,369 million as at September 30, 2023

CSM increased $172 million and $86 million net of NCI compared with December 31, 2022. Organic CSM movement was an increase of $629 million for the nine months ended September 30, 2023, driven by the impact of new insurance business and expected movements related to finance income or expenses, partially offset by amounts recognized for service provided in year-to-date earnings and a net reduction from insurance experience. Inorganic CSM movement was a decrease of $457 million for the same period, driven by net unfavourable impacts of equity market experience and higher interest rates on certain participating and variable annuity contracts, as well as changes in foreign currency exchange rates, partially offset by the changes from our annual review of actuarial methods and assumptions. Post-tax CSM net of NCI² was $14,992 million as at September 30, 2023.

Annual Review of Actuarial Methods and Assumptions

We completed our annual review of actuarial methods and assumptions, which resulted in a net favourable impact of $347 million³, comprised of an increase in pre-tax net income attributed to shareholders of $27 million (a decrease of $14 million post-tax), an increase in pre-tax net income attributed to participating policyholders of $58 million ($74 million post-tax), an increase in CSM net of NCI of $116 million, and an increase in pre-tax other comprehensive income of $146 million ($110 million post-tax). Assumptions reviewed this year included our Canada variable annuity assumptions, morbidity assumptions in certain Asia markets, mortality assumptions in the U.S. life insurance business, lapse assumptions in Canada and other methodology refinements.

Strategic Highlights

We are making decisions easier for our global and diverse customer base

During 3Q23 we launched a unified high net worth onboarding platform in Bermuda⁴, Hong Kong and Singapore, to our international brokers to deliver a consistent high touch experience for both distributors and customers by streamlining new business application, underwriting and compliance processes across our three high net worth markets. In Canada, we expanded our Personalized Medicine program to all Group Benefits extended healthcare plans, making this service available to more customers, while enabling them to learn about medications that best meet their needs and work with healthcare providers on customized treatment plans that can lead to better outcomes. Meanwhile, Global WAM continued to fulfill investor needs for wealth solutions through the expansion of our offerings with the launch of the Global Semiconductors strategy in Japan which garnered more than $0.7 billion in net flows during the quarter, as well as the launch of a Municipal Opportunities Separately Managed Account in U.S. Retail, built on our mutual fund of the same name.

 

 

 

1	Non-controlling interests (“NCI”).

2	Post-tax contractual service margin net of NCI (“post-tax CSM net of NCI”) is a non-GAAP financial measure. For more information on non-GAAP and other financial measures, see “Non-GAAP and other financial measures” in our 3Q23 Management’s Discussion and Analysis (“MD&A”).

3	This amount excludes the portion related to NCI.

4	This represents our International High Net Worth business.

 

 

Manulife Financial Corporation – Third Quarter 2023		4

In the U.S., we expanded our reach into the employer market by introducing a Premier Benefit Indexed Universal Life product. This permanent life insurance product, available through the workplace, offers a streamlined digital process for employees to purchase individual coverage and includes our John Hancock Vitality PLUS feature. In addition, we launched a distribution relationship with JPMorgan Chase & Co. enabling new sales of our suite of products, including our John Hancock Vitality program, through its network of more than 6,900 advisors.

We are accelerating digital initiatives to move faster and meet customers’ personalized needs

In Canada, we announced a strategic partnership with League, a leading healthcare technology provider, to offer our Group Benefits members more integrated digital healthcare experiences, enabling them to connect their benefits directly with healthcare options. This partnership continues our digitization efforts to meet growing demand for more personalized digital experiences that help customers understand their health, focus on prevention, access care, and better comprehend and optimize their benefits. In the U.S., we continued to optimize our digital capabilities to create a seamless, digital customer experience through the launch of single sign-on for John Hancock Vitality customers between John Hancock Life and Vitality websites, improvement of the website navigation of our producer portal, and enhancement of the interactive voice response authentication enabling 31% of inbound calls to be completed with no human interaction in the quarter.

In Asia, we further automated the claims-handling process in Hong Kong to improve operational efficiency and deliver a better customer experience as we continue to leverage data to enhance our auto-adjudication engine, driving an almost twofold-increase of straight-through processed claims compared with 3Q22. In Global WAM, we accelerated customer adoption of digital applications in Canada Retirement through our “Say Goodbye to Paper” campaign which contributed to a 165% increase in members converting to e-statements over the 3-month campaign period and an increase in satisfaction in their digital experience over the prior quarter.

 

 

Manulife Financial Corporation – Third Quarter 2023		5

MANAGEMENT’S DISCUSSION AND ANALYSIS

This Management’s Discussion and Analysis (“MD&A”) is current as of November 8, 2023, unless otherwise noted. This MD&A should be read in conjunction with our unaudited Interim Consolidated Financial Statements for the three and nine months ended September 30, 2023 and the MD&A and audited Consolidated Financial Statements contained in our 2022 Annual Report.

For further information relating to our risk management practices and risk factors affecting the Company, see “Risk Management and Risk Factors” and “Critical Actuarial and Accounting Policies” in the MD&A in our 2022 Annual Report and the “Risk Management” note to the Consolidated Financial Statements in our most recent annual and interim reports.

In this MD&A, the terms “Company”, “Manulife”, “we” and “our” mean Manulife Financial Corporation (“MFC”) and its subsidiaries. All amounts are reported in Canadian dollars, unless otherwise indicated. Any information contained in, or otherwise accessible through, websites mentioned in this MD&A does not form a part of this document.

CONTENTS

 

 

 

 

Manulife Financial Corporation – Third Quarter 2023		6

A	TOTAL COMPANY PERFORMANCE

 

A1	Implementation of IFRS 17 and IFRS 9

Manulife adopted IFRS 17 “Insurance Contracts” and IFRS 9 “Financial Instruments” effective for years beginning on or after January 1, 2023, to be applied retrospectively. See “Future Accounting and Reporting Changes” in the MD&A in our 2022 Annual Report (“2022 MD&A”). Our quarterly and year-to-date 2022 results have been restated in accordance with IFRS 17, including the other comprehensive income option¹, and IFRS 9. Audited restated consolidated financial statements for the year ended December 31, 2022 will be included in our 2023 Annual Report.

The 2022 comparative results restated in this MD&A may not be fully representative of our market risk profile, as the transition of our general fund portfolio for asset-liability matching purposes under IFRS 17 and IFRS 9 was not completed until early 2023. Consequently, year-over-year variations between our 2023 results compared with the 2022 results should be viewed in this context.

In addition, our 2022 results are also not directly comparable with 2023 results because IFRS 9 hedge accounting and expected credit loss (“ECL”) principles are applied prospectively effective January 1, 2023. Accordingly, we have also presented comparative quarterly and year-to-date 2022 results as if IFRS had allowed such principles to be implemented for 2022 (the “IFRS 9 transitional impacts”). This presentation will only be reported in our MD&A’s for 2023 for certain 2022 comparative results.

These 2022 comparative results are non-GAAP and denoted as being “transitional” and include the financial measures noted below:

 

•

Transitional net income (loss) attributed to shareholders;

 

•

Transitional net income (loss) before income taxes;

 

•

Transitional net income (loss);

 

•

Transitional net income (loss) attributed to shareholders before income taxes;

 

•

Common shareholders’ transitional net income (loss);

 

•

Transitional return on common shareholders’ equity (“Transitional ROE”);

 

•

Transitional basic earnings (loss) per common share; and

 

•

Transitional diluted earnings (loss) per common share.

Adoption of IFRS 17 and IFRS 9 has also resulted in additional definitions and revisions to the following financial measures:

 

•

New non-GAAP financial measures: post-tax contractual service margin (“post-tax CSM”); post-tax contractual service margin net of non-controlling interests (“NCI”) (“post-tax CSM net of NCI”); Drivers of Earnings (“DOE”) line items for net investment result, other, income tax (expense) recovery and transitional net income attributed to participating policyholders and NCI; and core DOE line items for core net insurance service result, core net investment result, other core earnings, and core income tax (expense) recovery.

 

•

New non-GAAP ratios: expenditure efficiency ratio with its component non-GAAP financial measures: total expenditures and core expenditures (for 2022 and 2023 quarterly and year-to-date results only); and adjusted book value per common share.

 

•

Revised definitions of non-GAAP and other financial measures: core earnings; expense efficiency ratio with its new component non-GAAP financial measures: total expenses and core expenses; consolidated capital; and financial leverage ratio.

 

 

 

1	More information about the other comprehensive income option can be found in note 2 of the Consolidated Financial Statements contained in our 2022 Annual Report.

 

 

Manulife Financial Corporation – Third Quarter 2023		7

A2	Profitability

 

		Quarterly Results																				YTD Results
($ millions, unless otherwise stated)		3Q23				2Q23				3Q22  Transitional												2023				2022 Transitional
Net income (loss) attributed to shareholders(1)		$	1,013			$	1,025			$	777											$	3,444			$	2,270
Return on common shareholders’ equity (“ROE”)(1)			9.5%				9.3%				7.1%												10.8%				7.2%
Diluted earnings (loss) per common share ($)(1)		$	0.52			$	0.50			$	0.38											$	1.76			$	1.10
		Quarterly Results																				YTD Results
($ millions, unless otherwise stated)		3Q23				2Q23				3Q22												2023				2022
Net income (loss) attributed to shareholders(1)		$	1,013			$	1,025			$	491											$	3,444			$	(2,848)
Core earnings(2)		$	1,743			$	1,637			$	1,339											$	4,911			$	4,258
Diluted earnings (loss) per common share ($)		$	0.52			$	0.50			$	0.23											$	1.76			$	(1.57)
Diluted core earnings per common share (“Core EPS”) ($)(3)		$	0.92			$	0.83			$	0.68											$	2.55			$	2.13
ROE			9.5%				9.3%				4.3%												10.8%				(10.2)%
Core return on shareholders’ equity (“Core ROE”)(3)			16.8%				15.5%				12.7%												15.7%				13.9%
Expense efficiency ratio(3)			44.3%				45.1%				46.3%												45.5%				45.2%
Expenditure efficiency ratio(3)			50.9%				51.9%				53.6%												52.2%				52.3%
General expenses		$	1,042			$	1,022			$	914											$	3,150			$	2,729
Core expenses(2)		$	1,622			$	1,598			$	1,389											$	4,825			$	4,186
Core expenditures(2)		$	2,111			$	2,099			$	1,856											$	6,322			$	5,563

 

(1)

2022 results for transitional net income attributed to shareholders, transitional diluted earnings per common share and transitional ROE are adjusted to include IFRS 9 hedge accounting and expected credit loss principles (“IFRS 9 transitional impacts”). See section A1 “Implementation of IFRS 17 and IFRS 9” of the MD&A above for more information. For 2023, there are no IFRS 9 transitional adjustments as ECL and hedge accounting is effective January 1, 2023 and therefore the impact is included in net income attributed to shareholders.

(2)	This item is a non-GAAP financial measure. See “Non-GAAP and other financial measures” below for more information.

(3)	This item is a non-GAAP ratio. See “Non-GAAP and other financial measures” below for more information.

Quarterly profitability

Manulife’s net income attributed to shareholders was $1,013 million in the third quarter of 2023 (“3Q23”) compared with net income attributed to shareholders of $491 million and transitional net income attributed to shareholders of $777 million in the third quarter of 2022 (“3Q22”). The 3Q22 transitional net income attributed to shareholders includes $286 million of IFRS 9 transitional impacts. Net income attributed to shareholders is comprised of core earnings (consisting of items we believe reflect the underlying earnings capacity of the business), which amounted to $1,743 million in 3Q23 compared with $1,339 million in 3Q22, and items excluded from core earnings, which amounted to a net charge of $730 million in 3Q23 compared with a net charge of $848 million in 3Q22. Items excluded from core earnings in 3Q22 on a transitional basis amounted to a net charge of $562 million. The effective tax rate on net income (loss) attributed to shareholders was a recovery of 7% in 3Q23 compared with a tax expense of 10% in 3Q22, reflecting a 3Q23 one-time tax-related benefit of $290 million and differences in the jurisdictional mix of pre-tax profits and losses.

Net income attributed to shareholders in 3Q23 was $236 million higher than 3Q22 transitional net income attributed to shareholders driven by growth in core earnings and the above-noted one-time tax-related benefit, partially offset by a larger net charge from market experience. The net charge from market experience in 3Q23 was primarily related to lower-than-expected returns (including fair value changes) relative to long-term assumptions on alternative long duration assets (“ALDA”) mainly related to real estate, lower-than-expected returns relative to long-term assumptions on public equity and a charge from derivatives and hedge accounting ineffectiveness. Net income attributed to shareholders in 3Q23 increased $522 million compared with 3Q22, driven by the factors mentioned above and the $286 million of IFRS 9 transitional impacts (transitional impacts are geography-related and do not impact total shareholders’ equity as the corresponding offset is in other comprehensive income).

 

 

Manulife Financial Corporation – Third Quarter 2023		8

Core earnings increased $404 million or 28% on a constant exchange rate basis¹ compared with 3Q22. The increase in core earnings compared with 3Q22 was driven by the non-recurrence of a $256 million provision in our Property & Casualty (“P&C”) Reinsurance business related to Hurricane Ian in 3Q22, an increase in expected investment earnings resulting from higher investment yields and business growth, improved insurance experience in the U.S. and Canada, an increase in net fee income from higher average AUMA² and higher performance fees in Global Wealth and Asset Management (“Global WAM”), and higher returns on surplus assets. These were partially offset by an increase in the ECL provision primarily related to electric utility bonds and private placements, higher performance-related costs in Corporate and Other and Global WAM, investments in technology and higher cost of debt financing.

The components of the items excluded from core earnings are outlined in the table below and the annual review of actuarial methods and assumptions that flow directly through income is discussed in section D2 “Actuarial methods and assumptions” below.

Year-to-date profitability

Net income attributed to shareholders for the nine months ended September 30, 2023 was $3,444 million compared with a net loss attributed to shareholders of $2,848 million and transitional net income attributed to shareholders of $2,270 million for the nine months ended September 30, 2022. The year-to-date 2022 transitional net income attributed to shareholders includes $5,118 million of IFRS 9 transitional impacts. Year-to-date core earnings amounted to $4,911 million in 2023 compared with $4,258 million in the same period of 2022, and items excluded from year-to-date core earnings amounted to a net charge of $1,467 million in 2023 compared with a net charge of $7,106 million in the same period of 2022. Items excluded from year-to-date core earnings in the same period of 2022 on a transitional basis amounted to a net charge of $1,988 million. The effective tax rate on year-to-date net income (loss) attributed to shareholders was 12% in 2023 compared with 25% for the same period in 2022, reflecting a 2023 one-time tax-related benefit of $290 million and differences in the jurisdictional mix of pretax profits and losses.

The increase of $1,174 million in year-to-date net income attributed to shareholders in 2023 compared with 2022 transitional net income attributed to shareholders was driven by growth in year-to-date core earnings, the above-noted one-time tax-related benefit and a smaller charge from year-to-date market experience. The net charge from market experience in 2023 was primarily related to lower-than-expected returns (including fair value changes) relative to long-term assumptions on ALDA mainly related to energy and real estate and a net charge from derivatives and hedge accounting ineffectiveness. Year-to-date net income attributed to shareholders in 2023 increased by $6,292 million compared with the year-to-date net loss attributed to shareholders in 2022, driven by factors mentioned above and the $5,118 million of IFRS 9 transitional impacts (transitional impacts are geography-related and do not impact total shareholders’ equity as the corresponding offset is in other comprehensive income).

Year-to-date core earnings in 2023 increased $653 million or 12% compared with the same period of 2022. The increase in year-to-date core earnings compared with 2022 was driven by an increase in expected investment earnings related to higher investment yields and business growth, gains in our P&C Reinsurance business from updates to prior year hurricane provisions in 2023 compared with charges in 2022 including Hurricane Ian, more favourable insurance experience reflecting more favourable experience in Canada and improved, although unfavourable, experience in the U.S., and higher returns on surplus assets net of higher cost of debt financing. These were partially offset by an increase in the 2023 ECL provision primarily driven by commercial mortgages, electric utility bonds and private placements, lower CSM amortization reflecting both a slower amortization on certain variable fee approach (“VFA”) contracts and the impact of the 2022 U.S. variable annuity reinsurance transactions, higher performance-related costs in Corporate and Other and Global WAM, and higher investments

 

 

Manulife Financial Corporation – Third Quarter 2023		9

in technology. In addition, year-to-date Global WAM core earnings benefited from higher fee spreads and performance fees in Institutional Asset Management partially offset by lower earnings from seed capital investments due to repatriations. Actions to improve the capital efficiency of our legacy business resulted in $29 million lower year-to-date core earnings in 2023 compared with the same period of 2022.

 

 

 

1

Percentage growth / declines in core earnings, pre-tax core earnings, total expenses, core expenses, total expenditures, core expenditures, general expenses, CSM net of NCI, new business CSM, assets under management and administration, assets under management, core EBITDA, and Manulife Bank average net lending assets are stated on a constant exchange rate basis, a non-GAAP ratio. See “Non-GAAP and other financial measures” below for more information.

2	For more information on this metric, see “Non-GAAP and other financial measures” below.

Core earnings by segment is presented in the table below.

 

Core earnings by segment(1)		Quarterly Results												YTD Results
($ millions, unaudited)		3Q23				2Q23				3Q22				2023				2022
Asia		$	522			$	473			$	387			$	1,484			$	1,316
Canada			408				374				391				1,135				1,091
U.S.			442				458				437				1,285				1,158
Global Wealth and Asset Management			361				320				354				968				1,025
Corporate and Other			10				12				(230)				39				(332)
Total core earnings		$	1,743			$	1,637			$	1,339			$	4,911			$	4,258
(1)  Effective January 1, 2023, we have made a number of changes to the composition of reporting segments to better align our financial reporting with our business strategy and operations. Our international high net worth business was reclassified from the U.S. segment to the Asia segment to reflect the contributions of our Bermuda operations alongside the high net worth business that we report in our Singapore and Hong Kong operations. Our investment in the start-up capital of segregated and mutual funds, and investment-related revenue and expense were reclassified from the Corporate and Other segment to the Global WAM segment to more closely align with Global WAM’s management practices. Refinements were made to the allocations of corporate overhead and interest on surplus among segments. Prior period comparative information has been restated to reflect the changes in segment reporting.   The table below presents transitional net income attributed to shareholders and net income attributed to shareholders consisting of core earnings and items excluded from core earnings.
		Quarterly Results												YTD Results
($ millions, unaudited)		3Q23				2Q23				3Q22				2023				2022
Core earnings		$	1,743			$	1,637			$	1,339			$	4,911			$	4,258
Items excluded from core earnings:
Market experience gains (losses)(1)			(1,022)				(570)				(575)				(1,657)				(1,930)
Realized gains (losses) on debt instruments			(24)				(24)				(225)				(79)				(708)
Derivatives and hedge accounting ineffectiveness			(266)				(13)				354				(186)				449
Actual less expected long-term returns on public equity			(273)				86				(375)				(79)				(1,565)
Actual less expected long-term returns on ALDA			(400)				(478)				(113)				(1,242)				602
Other investment results			(59)				(141)				(216)				(71)				(708)
Changes in actuarial methods and assumptions that flow directly through income(2)			(14)				–				26				(14)				26
Reinsurance transactions, tax-related items and other(3)			306				(42)				(13)				204				(84)
Total items excluded from core earnings			(730)				(612)				(562)				(1,467)				(1,988)
Transitional net income attributed to shareholders			n/a				n/a			$	777				n/a			$	2,270
Less: IFRS 9 transitional impacts:
Change in expected credit loss											(9)								(8)
Hedge accounting											438								6,895
Total IFRS 9 transitional impacts (pre-tax)											429								6,887
Tax on IFRS 9 transitional impacts											(143)								(1,769)
Total IFRS 9 transitional impacts (post-tax)											286								5,118
Net income (loss) attributed to shareholders		$	1,013			$	1,025			$	491			$	3,444			$	(2,848)

 

(1)

Market experience was a net charge of $1,022 million in 3Q23 primarily driven by lower-than-expected returns (including fair value changes) relative to long-term assumptions on ALDA mainly related to real estate, lower-than-expected returns relative to long-term assumptions on public equity, a charge from derivatives and hedge accounting ineffectiveness, net realized losses from the sale of debt instruments which are classified as fair value through other comprehensive income (“FVOCI”) and a charge in other investment results. Market experience was a net charge of $575 million in 3Q22 consisting of a net loss from lower-than-expected returns relative to long-term assumptions on public equity, net realized losses from the sale of debt instruments which are classified as FVOCI, a loss from changes in foreign currency exchange rates and a net loss from lower-than-expected returns (including fair value changes) relative to long-term assumptions on ALDA mainly related to real estate. This was partially offset by losses on derivatives and hedge accounting ineffectiveness due to unusually large interest rate movements.

(2)	Refer to section D2 “Actuarial methods and assumptions” below for detail.

(3)

The 3Q23 net gain of $306 million included a one-time tax-related benefit of $290 million, additional tax-related true-ups of $11 million and a gain of $5 million related to a reinsurance transaction in Vietnam. The 3Q22 charge of $13 million is related to an increase to an existing legal provision in the U.S.

 

 

Manulife Financial Corporation – Third Quarter 2023		10

Transitional net income attributed to shareholders by segment and net income attributed to shareholders by segment are presented in the following tables.

 

Transitional net income attributed to shareholders by segment(1)		Quarterly Results												YTD Results
($ millions, unaudited)		3Q23				2Q23				3Q22   Transitional				2023				2022 Transitional
Asia		$	84			$	130			$	176			$	733			$	154
Canada			290				227				481				826				1,078
U.S.			72				183				314				441				1,554
Global Wealth and Asset Management			318				317				287				932				720
Corporate and Other			249				168				(481)				512				(1,236)
Total transitional net income attributed to shareholders		$	1,013			$	1,025			$	777			$	3,444			$	2,270
Net income attributed to shareholders by segment(1)		Quarterly Results												YTD Results
($ millions, unaudited)		3Q23				2Q23				3Q22				2023				2022
Asia		$	84			$	130			$	280			$	733			$	368
Canada			290				227				853				826				(430)
U.S.			72				183				(447)				441				(2,272)
Global Wealth and Asset Management			318				317				287				932				720
Corporate and Other			249				168				(482)				512				(1,234)
Total net income attributed to shareholders		$	1,013			$	1,025			$	491			$	3,444			$	(2,848)

 

(1)

Effective January 1, 2023, we have made a number of changes to the composition of reporting segments to better align our financial reporting with our business strategy and operations. Our international high net worth business was reclassified from the U.S. segment to the Asia segment to reflect the contributions of our Bermuda operations alongside the high net worth business that we report in our Singapore and Hong Kong operations. Our investment in the start-up capital of segregated and mutual funds, and investment-related revenue and expense were reclassified from the Corporate and Other segment to the Global WAM segment to more closely align with Global WAM’s management practices. Refinements were made to the allocations of corporate overhead and interest on surplus among segments. Prior period comparative information has been restated to reflect the changes in segment reporting.

Expenditure efficiency ratio and expense efficiency ratio

In 2018 we introduced our strategic priority of expense efficiency. The expense efficiency ratio is a financial measure which we use to measure progress on this priority. The expense efficiency ratio reflects only those expenses that flow directly through core earnings (“core expenses”). Due to changes introduced by IFRS 17, certain costs that are directly attributable to acquire new business are capitalized into the CSM instead of directly flowing through core earnings and are now excluded from the ratio.

To provide a reference point to our expense efficiency ratio prior to the adoption of IFRS 17, we are temporarily introducing an additional efficiency ratio, the expenditure efficiency ratio, for 2022 and 2023 only, which captures all expenses, including costs that are directly attributable to the acquisition of new business (“core expenditures”).

Quarterly expenditure efficiency ratio and expense efficiency ratio

The expenditure efficiency ratio was 50.9% in 3Q23, compared with 53.6% in 3Q22. The 2.7 percentage point decrease in the ratio compared with 3Q22 was driven by a 25% increase in pre-tax core earnings partially offset by a 12% increase in core expenditures. 3Q23 core expenditures increased as a result of higher performance-related costs, investments in technology and additional expenses related to the impact of now consolidating 100% of Manulife Fund Management (“MFM”). Costs directly attributable to the acquisition of new business represented approximately 23% and 25% of total core expenditures in 3Q23 and 3Q22, respectively.

 

 

Manulife Financial Corporation – Third Quarter 2023		11

The expense efficiency ratio was 44.3% in 3Q23, compared with 46.3% in 3Q22. The 2.0 percentage point decrease in the ratio compared with 3Q22 was driven by the items noted above related to the decrease in the expenditure efficiency ratio excluding those costs that are directly attributable to the acquisition of new business which are reflected in the CSM under IFRS 17.

Total 3Q23 general expenses increased 14% on an actual exchange rate basis and 12% on a constant exchange rate basis compared with 3Q22 driven by the items noted above related to the decrease in the expenditure efficiency ratio and items outside of core earnings, which were not material in 3Q23. However, general expenses are also net of directly attributable maintenance expenses and directly attributable acquisition expenses for products measured using the premium allocation approach (“PAA”) which are included in insurance service expenses on our financial statements. Directly attributable maintenance expenses and directly attributable acquisition expenses for products measured using the PAA increased 12% on a constant exchange rate basis and 13% on an actual exchange rate basis in 3Q23 compared with 3Q22.

Year-to-date expenditure efficiency ratio and expense efficiency ratio

On a year-to-date basis, the expenditure efficiency ratio was 52.2% in 2023 compared with 52.3% in the same period of 2022. The 0.1 percentage point decrease in the year-to-date ratio compared with 2022 was driven by an 11% increase in year-to-date pre-tax core earnings, partially offset by an 11% increase in year-to-date core expenditures. 2023 year-to-date core expenditures increased as a result of higher performance-related costs, investments in technology, higher distribution costs reflecting stronger top-line growth, additional expenses related to the impact of now consolidating 100% of MFM and higher travel and return to pre-pandemic activities. Year-to-date costs directly attributable to the acquisition of new business represented approximately 24% and 25% of total year-to-date core expenditures in 2023 and 2022, respectively.

The year-to-date expense efficiency ratio was 45.5% in 2023, compared with 45.2% in the same period of 2022. The 0.3 percentage point increase in the year-to-date ratio compared with 2022 was driven by the items noted above related to the decrease in the year-to-date expenditure efficiency ratio excluding those costs that are directly attributable to the acquisition of new business which are reflected in the CSM under IFRS 17.

Total year-to-date general expenses in 2023 increased 15% on an actual exchange rate basis and 12% on a constant exchange rate basis compared with 2022 driven by the items noted above related to the decrease in the expenditure efficiency ratio and items outside of core earnings. However, general expenses are also net of directly attributable maintenance expenses and directly attributable acquisition expenses for products measured using the PAA which are included in insurance service expenses on our financial statements. Directly attributable maintenance expenses and directly attributable acquisition expenses for products measured using the PAA increased 14% on a constant exchange rate basis and 16% on an actual exchange rate basis in 2023 compared with 2022.

 

 

Manulife Financial Corporation – Third Quarter 2023		12

A3	Business performance1

 

		Quarterly Results												YTD Results
($ millions, unless otherwise stated) (unaudited)		3Q23				2Q23				3Q22				2023				2022
Asia APE sales		$	1,120			$	1,181			$	913			$	3,474			$	2,900
Canada APE sales			431				322				285				1,046				1,009
U.S. APE sales			106				130				149				370				456
Total APE sales(1)			1,657				1,633				1,347				4,890				4,365
Asia new business value			414				424				380				1,210				1,142
Canada new business value			153				106				89				351				275
U.S. new business value			33				55				46				133				122
Total new business value(1),(2)			600				585				515				1,694				1,539
Asia new business CSM(3)			402				432				340				1,135				985
Canada new business CSM			51				57				44				154				152
U.S. new business CSM			54				103				86				252				316
Total new business CSM(3)			507				592				470				1,541				1,453
Asia CSM net of NCI			10,030				9,630				9,309				10,030				9,309
Canada CSM			3,662				3,656				3,558				3,662				3,558
U.S. CSM			3,651				4,106				4,185				3,651				4,185
Corporate and Other CSM			26				31				34				26				34
Total CSM net of NCI			17,369				17,423				17,086				17,369				17,086
Post-tax CSM net of NCI(4)			14,992				14,877				14,560				14,992				14,560
Global WAM gross flows ($ billions)(1)			34.3				35.2				32.0				108.2				104.5
Global WAM net flows ($ billions)(1)			(0.8	)			2.2				3.0				5.8				11.5
Global WAM assets under management and administration ($ billions)(4)			806.7				819.6				751.3				806.7				751.3
Global WAM total invested assets ($ billions)			6.7				5.5				5.6				6.7				5.6
Global WAM segregated funds net assets ($ billions)			233.9				238.7				214.5				233.9				214.5
Total assets under management and administration ($ billions)(4),(5)			1,321.7				1,344.8				1,263.1				1,321.7				1,263.1
Total invested assets ($ billions)(5)			398.7				403.4				396.6				398.7				396.6
Total segregated funds net assets ($ billions)(5)			356.9				366.0				335.2				356.9				335.2

 

(1)	For more information on this metric, see “Non-GAAP and other financial measures” below.

(2)	Quarterly and year-to-date 2022 NBV has not been restated as a result of the adoption of IFRS 17. The impact of not restating 2022 is not material.

(3)	New business CSM is net of NCI.

(4)	This item is a non-GAAP financial measure. See “Non-GAAP and other financial measures” below for more information.

(5)	See section A5 below for more information.

Annualized premium equivalent (“APE”) sales were $1.7 billion in 3Q23, an increase of 21%² compared with 3Q22. Our APE sales in the third quarter were boosted by strong performance in Asia, reflecting our diverse business model. In Asia, APE sales increased 20% compared with 3Q22 as a result of growth in Hong Kong and Asia Other³. In Hong Kong, APE sales increased 57% compared with 3Q22 driven by strong growth in our broker and bancassurance channels reflecting the return of demand from mainland Chinese visitor (“MCV”) customers following the Hong Kong and mainland China border reopening in February 2023. In Japan, APE sales decreased 6% compared with 3Q22, due to lower sales in corporate-owned life insurance (“COLI”) products. APE sales increased 14% in Asia Other compared with 3Q22. Higher bancassurance sales in mainland China and higher broker sales in our International High Net Worth business and in Singapore were partially offset by lower agency and bancassurance sales in Vietnam. In Canada, APE sales increased 51% compared with 3Q22 driven by a large affinity markets sale. U.S. APE sales decreased 31% compared with 3Q22 due to the adverse impact of higher short-term interest rates on accumulation insurance products, particularly for our affluent customers.

 

 

 

1

Effective January 1, 2023, our international high net worth business was reclassified from the U.S. segment to the Asia segment to reflect the contributions of our Bermuda operations alongside the high net worth business that we report in our Singapore and Hong Kong operations. Prior period comparative information has been restated to reflect the reclassification.

2	Percentage growth / declines in APE sales is stated on a constant exchange rate basis.

3	Asia Other excludes Hong Kong and Japan.

 

 

Manulife Financial Corporation – Third Quarter 2023		13

Year-to-date APE sales of $4.9 billion in 2023 were 9% higher than the same period of 2022, driven by higher year-to-date sales in Asia and Canada partially offset by lower year-to-date sales in the U.S.

New business value (“NBV”) was $600 million in 3Q23, an increase of 15%¹ compared with 3Q22. In Asia, NBV increased 7% compared with 3Q22 driven by higher sales volumes partially offset by business mix. In Canada, NBV increased 72% compared with 3Q22 driven by higher sales volumes in Individual Insurance and higher margins in Group Insurance. In the U.S., NBV decreased 29% compared with 3Q22 primarily due to lower sales volumes and product mix, partially offset by pricing actions and higher interest rates.

Year-to-date NBV was $1,694 million in 2023, an increase of 6% compared with the same period of 2022. In Asia, year-to-date NBV in 2023 increased 2% compared with 2022 driven by higher sales volumes partially offset by business mix. In Canada, year-to-date NBV increased 28% compared with 2022 driven by higher sales volumes in Individual Insurance, partially offset by lower Annuities margins largely due to product mix, and lower segregated fund sales volumes. In the U.S., year-to-date NBV increased 4% compared with 2022 due to pricing actions, higher interest rates and product mix, partially offset by lower sales volumes.

New business contractual service margin (“New Business CSM”) was $507 million in 3Q23, an increase of 6% compared with 3Q22. In Asia, new business CSM increased 16% compared with 3Q22 primarily due to higher sales volumes partially offset by business mix. In Canada, new business CSM increased 16% compared with 3Q22 driven by product mix in Individual Insurance. Under IFRS 17, the majority of Group Insurance and affinity products are classified as PAA and do not generate CSM. In the U.S., new business CSM decreased 39% compared with 3Q22 driven by lower sales volumes and product mix.

Year-to-date new business CSM was $1,541 million in 2023, an increase of 3% compared with the same period of 2022. In Asia, year-to-date new business CSM in 2023 increased 12% compared with 2022, primarily due to higher sales volumes partially offset by business mix. In Canada, year-to-date new business CSM increased 1% compared with 2022 due to product mix in Individual Insurance. As noted above, under IFRS 17, the majority of group insurance and affinity products are classified as PAA and do not generate CSM. In the U.S., year-to-date new business CSM decreased 24% compared with 2022 driven primarily by lower sales volumes and product mix.

The contractual service margin (“CSM”) net of NCI was $17,369 million as at September 30, 2023, an increase of $86 million compared with December 31, 2022. The increase in CSM net of NCI reflects an increase in total CSM movement of $172 million, net of an increase in NCI of $86 million. Organic CSM movement was an increase of $629 million for the nine months ended September 30, 2023, driven by the impact of new insurance business and expected movements related to finance income or expenses, partially offset by amounts recognized for service provided in year-to-date earnings and a net reduction from insurance experience. Inorganic CSM movement was a decrease of $457 million for the same period, driven by net unfavourable impacts of equity market experience and higher interest rates on certain participating and variable annuity contracts, as well as changes in foreign currency exchange rates, partially offset by the changes from our annual review of actuarial methods and assumptions. Post-tax CSM net of NCI was $14,992 million as at September 30, 2023.

Global WAM reported net outflows were $0.8 billion in 3Q23 compared with net inflows of $3.0 billion in 3Q22. Net outflows in Retirement were $3.4 billion in 3Q23 compared with net inflows of $1.4 billion in 3Q22, driven entirely by a large-case pension plan redemption in the U.S. Net outflows in Retail were $0.2 billion in 3Q23 compared with net inflows of $1.0 billion in 3Q22, reflecting lower demand as investors continued to favour short-term cash and money market instruments amid market volatility and higher interest rates. This was partially offset by the launch of our Global Semiconductors strategy in Japan and higher net inflows in mainland China from acquiring full ownership of MFM in the fourth quarter of 2022 (“4Q22”). Net inflows in Institutional Asset Management were $2.8 billion in 3Q23 compared with net inflows of $0.6 billion in 3Q22, driven by higher net flows in fixed income mandates, and higher sales of equity and agriculture mandates, as well as the impact of the MFM acquisition.

 

 

 

1	Percentage growth / declines in NBV is stated on a constant exchange rate basis.

 

 

Manulife Financial Corporation – Third Quarter 2023		14

Year-to-date net inflows were $5.8 billion in 2023, compared with $11.5 billion in the same period of 2022. The decrease was primarily due to higher pension plan redemptions in Retirement, and lower Retail sales from lower investor demand. This was partially offset by lower mutual fund redemption rates, and the launch of new products in Institutional Asset Management in 2023 as well as the impact of the MFM acquisition as mentioned above.

 

A4	Financial strength

 

		Quarterly Results												YTD Results
(unaudited)		3Q23				2Q23				3Q22				2023				2022
MLI’s LICAT ratio(1)			137%				136%				136%				137%				136%
Financial leverage ratio(2)			25.2%				25.8%				25.8%				25.2%				25.8%
Consolidated capital ($ billions)(3)		$	71.4			$	69.3			$	71.5			$	71.4			$	71.5
Book value per common share ($)		$	22.42			$	21.30			$	21.78			$	22.42			$	21.78
Adjusted book value per common share ($)(2)		$	30.67			$	29.42			$	29.49			$	30.67			$	29.49

 

(1)	This item is disclosed under OSFI’s Life Insurance Capital Adequacy Test Public Disclosure Requirements guideline. Comparative LICAT ratios for 2022 are as reported in 2022 and have not been restated for the implementation of IFRS 17.

(2)	This item is a non-GAAP ratio. See “Non-GAAP and other financial measures” below for more information.

(3)	This item is a capital management measure. For more information on this metric, see “Non-GAAP and other financial measures” below.

The Life Insurance Capital Adequacy Test (“LICAT”) ratio for The Manufacturers Life Insurance Company (“MLI”) as at September 30, 2023 was 137% compared with 136% as at June 30, 2023. The one percentage point increase reflects the impact of core earnings and market movements in the quarter, partly offset by shareholders’ dividends and common share buybacks.

MFC’s LICAT ratio was 124% as at September 30, 2023 compared with 123% as at June 30, 2023 with the increase driven by similar factors that impacted the movement in MLI’s LICAT ratio. The difference between the MLI and MFC ratios as at September 30, 2023 was largely due to the $6.2 billion of MFC senior debt outstanding that does not qualify as available capital at the MFC level but, based on the form it was down-streamed, qualifies as regulatory capital for MLI.

MFC’s financial leverage ratio¹ as at September 30, 2023 was 25.2%, a decrease of 0.6 percentage points from 25.8% as at June 30, 2023. The decrease in the ratio was driven by the increase in total equity due to net accumulated other comprehensive income (“AOCI”) gains from higher interest rates, growth in retained earnings and the impact of weaker Canadian dollar.

MFC’s consolidated capital¹ was $71.4 billion as at September 30, 2023, an increase of $1.8 billion compared with $69.6 billion as at December 31, 2022. The increase was primarily driven by net issuance of subordinated debt², an increase in total equity and higher post-tax CSM³. The increase in total equity was due to net AOCI gains from higher interest rates, and growth in retained earnings, partially offset by common share buybacks and the impact of stronger Canadian dollar.

Cash and cash equivalents and marketable securities⁴ was $237.7 billion as at September 30, 2023 compared with $241.0 billion as at December 31, 2022. The decrease was primarily driven by the lower market value of debt instruments due to higher interest rates.

Book value per common share as at September 30, 2023 was $22.42, a 4% increase compared with $21.56 as at December 31, 2022. The number of common shares outstanding was 1,818 million as at September 30, 2023, a decrease of 47 million shares from 1,865 million as at December 31, 2022, due to common share buybacks.

 

 

 

1	Effective January 1, 2022, the calculation of financial leverage ratio and consolidated capital now includes the impact of post-tax CSM. See “Non-GAAP and other financial measures below” for more information.

2	The net issuance of subordinated debt consists of the issuance of $1.2 billion in the first quarter of 2023 and the redemption of $0.6 billion in the second quarter of 2023.

3	This item is a non-GAAP financial measure. See “Non-GAAP and other financial measures” below for more information.

4

Includes cash & cash equivalents, comprised of cash on deposit, Canadian and U.S. Treasury Bills and high quality short-term investments, and marketable assets, comprised of investment grade government and agency bonds, investment grade corporate bonds, investment grade securitized instruments, publicly traded common stocks and preferred shares.

 

 

Manulife Financial Corporation – Third Quarter 2023		15

Adjusted book value per common share as at September 30, 2023 was $30.67, a 4% increase compared with $29.42 as at December 31, 2022 driven by an increase in adjusted book value¹ and a lower number of common shares outstanding. The adjusted book value increased $0.9 billion due to growth in total common shareholder’s equity and an increase in post-tax CSM. The increase in common shareholder’s equity reflects the impact of net AOCI gains from higher interest rates, and growth in retained earnings partially offset by a stronger Canadian dollar and common share buybacks.

 

A5	Assets under management and administration (“AUMA”)

AUMA as at September 30, 2023 was $1.3 trillion, an increase of 2% compared with December 31, 2022, primarily due to the favourable impact of markets and net inflows. Segregated funds net assets increased 2% primarily due to the favourable impact of markets and total invested assets were in line with December 31, 2022, on an actual exchange rate basis.

 

A6	Impact of foreign currency exchange rates

Changes in foreign currency exchange rates from 3Q22 to 3Q23 increased core earnings by $29 million in 3Q23, primarily due to a weaker Canadian dollar compared with the U.S. dollar. Changes in foreign currency exchange rates increased year-to-date core earnings by $136 million in 2023 compared with the same period of 2022 primarily due to a weaker Canadian dollar compared with the U.S. dollar. The impact of foreign currency exchange rates on items excluded from core earnings does not provide relevant information given the nature of those items.

 

A7	Business highlights

We are making decisions easier for our global and diverse customer base

During 3Q23 we launched a unified high net worth onboarding platform in Bermuda², Hong Kong and Singapore, to our international brokers to deliver a consistent high touch experience for both distributors and customers by streamlining new business application, underwriting and compliance processes across our three high net worth markets. In Canada, we expanded our Personalized Medicine program to all Group Benefits extended healthcare plans, making this service available to more customers, while enabling them to learn about medications that best meet their needs and work with healthcare providers on customized treatment plans that can lead to better outcomes. Meanwhile, Global WAM continued to fulfill investor needs for wealth solutions through the expansion of our offerings with the launch of the Global Semiconductors strategy in Japan which garnered more than $0.7 billion in net flows during the quarter, as well as the launch of a Municipal Opportunities Separately Managed Account in U.S. Retail, built on our mutual fund of the same name.

In the U.S., we expanded our reach into the employer market by introducing a Premier Benefit Indexed Universal Life product. This permanent life insurance product, available through the workplace, offers a streamlined digital process for employees to purchase individual coverage and includes our John Hancock Vitality PLUS feature. In addition, we launched a distribution relationship with JPMorgan Chase & Co. enabling new sales of our suite of products, including our John Hancock Vitality program, through its network of more than 6,900 advisors.

 

 

 

1	This item is a non-GAAP financial measure. See “Non-GAAP and other financial measures” below for more information.

2	This represents our International High Net Worth business.

 

 

Manulife Financial Corporation – Third Quarter 2023		16

We are accelerating digital initiatives to move faster and meet customers’ personalized needs

In Canada, we announced a strategic partnership with League, a leading healthcare technology provider, to offer our Group Benefits members more integrated digital healthcare experiences, enabling them to connect their benefits directly with healthcare options. This partnership continues our digitization efforts to meet growing demand for more personalized digital experiences that help customers understand their health, focus on prevention, access care, and better comprehend and optimize their benefits. In the U.S., we continued to optimize our digital capabilities to create a seamless, digital customer experience through the launch of single sign-on for John Hancock Vitality customers between John Hancock Life and Vitality websites, improvement of the website navigation of our producer portal, and enhancement of the interactive voice response authentication enabling 31% of inbound calls to be completed with no human interaction in the quarter.

In Asia, we further automated the claims-handling process in Hong Kong to improve operational efficiency and deliver a better customer experience as we continue to leverage data to enhance our auto-adjudication engine, driving an almost twofold-increase of straight-through processed claims compared with 3Q22. In Global WAM, we accelerated customer adoption of digital applications in Canada Retirement through our “Say Goodbye to Paper” campaign which contributed to a 165% increase in members converting to e-statements over the 3-month campaign period and an increase in satisfaction in their digital experience over the prior quarter.

 

 

Manulife Financial Corporation – Third Quarter 2023		17

B	PERFORMANCE BY SEGMENT

 

B1

Asia1

 

		Quarterly Results																		YTD Results
($ millions, unless otherwise stated)				3Q23						2Q23						3Q22 Transitional						2023						2022 Transitional
Canadian dollars
Net income attributed to shareholders(1)		$			84			$			130			$			176			$			733			$			154
U.S. dollars
Net income attributed to shareholders(1)		US$			63			US$			96			US$			134			US$			543			US$			118
($ millions, unless otherwise stated)		Quarterly Results																		YTD Results
Canadian dollars				3Q23						2Q23						3Q22						2023						2022
Profitability:
Net income attributed to shareholders(1)		$			84			$			130			$			280			$			733			$			368
Core earnings(1)					522						473						387						1,484						1,316
Business performance:
Annualized premium equivalent sales					1,120						1,181						913						3,474						2,900
New business value					414						424						380						1,210						1,142
New business contractual service margin net of NCI					402						432						340						1,135						985
Contractual service margin net of NCI					10,030						9,630						9,309						10,030						9,309
Assets under management ($ billions)(2)					159.6						159.3						149.7						159.6						149.7
Total invested assets ($ billions)					135.8						135.2						127.6						135.8						127.6
Total segregated funds net assets ($ billions)					23.8						24.1						22.0						23.8						22.0
U.S. dollars
Profitability:
Net income attributed to shareholders(1)		US$			63			US$			96			US$			216			US$			543			US$			285
Core earnings(1)					390						353						296						1,104						1,027
Business performance:
Annualized premium equivalent sales					835						879						699						2,582						2,262
New business value					310						315						291						900						889
New business contractual service margin net of NCI					300						323						261						845						768
Contractual service margin net of NCI					7,414						7,273						6,772						7,414						6,772
Assets under management ($ billions)(2)					118.0						120.3						108.9						118.0						108.9
Total invested assets ($ billions)					100.4						102.1						92.9						100.4						92.9
Total segregated funds net assets ($ billions)					17.6						18.2						16.0						17.6						16.0

 

(1)

See “Non-GAAP and other financial measures” below for a reconciliation of quarterly core earnings to net income (loss) attributed to shareholders for 2023 and quarterly core earnings and transitional net income (loss) attributed to shareholders to net income (loss) attributed to shareholders for 2022.

(2)	This item is a non-GAAP financial measure. See “Non-GAAP and other financial measures” below for more information.

Asia’s net income attributed to shareholders was $84 million in 3Q23 compared with net income attributed to shareholders of $280 million and transitional net income attributed to shareholders of $176 million in 3Q22. The 3Q22 transitional net income attributed to shareholders includes a charge of $104 million from IFRS 9 transitional impacts. Net income attributed to shareholders is comprised of core earnings, which were $522 million in 3Q23 compared with $387 million in 3Q22, and items excluded from core earnings, which amounted to a net charge of $438 million in 3Q23 compared with a net charge of $107 million in 3Q22. Items excluded from core earnings in 3Q22 on a transitional basis amounted to a net charge of $211 million. See section E3 “Non-GAAP and other financial measures” below, for a reconciliation of quarterly core earnings to net income (loss) attributed to shareholders for 3Q23 and quarterly core earnings and transitional net income (loss) attributed to shareholders to net income (loss) attributed to shareholders for 3Q22. See section A2 “Profitability” above, for explanations of the items excluded from core earnings. The changes in core earnings expressed in Canadian dollars were due to the factors described below and additionally, reflected a net $9 million favourable impact due to changes in various foreign currency exchange rates versus the Canadian dollar.

 

 

1

Effective January 1, 2023, we have made a change to the composition of reporting segments to better align our financial reporting with our business strategy and operations. Our international high net worth business was reclassified from the U.S. segment to the Asia segment (in Asia Other) to reflect the contributions of our Bermuda operations alongside the high net worth business that we report in our Singapore and Hong Kong operations. Refinements were made to the allocations of corporate overhead and interest on surplus among segments. Prior period comparative information has been restated to reflect the changes in segment reporting.

 

 

Manulife Financial Corporation – Third Quarter 2023		18

Expressed in U.S. dollars, the presentation currency of the segment, net income attributed to shareholders was US$63 million in 3Q23 compared with net income attributed to shareholders of US$216 million and transitional net income attributed to shareholders of US$134 million in 3Q22. Core earnings were US$390 million in 3Q23 compared with US$296 million in 3Q22 and items excluded from core earnings were a net charge of US$327 million in 3Q23 compared with a net charge of US$80 million in 3Q22. Items excluded from core earnings in 3Q22 on a transitional basis were a net charge of US$162 million.

Core earnings in 3Q23 increased 33% compared with 3Q22 driven by higher expected investment income due to higher investment yields and business growth, an increase in CSM amortization in Hong Kong, reflecting the impact of the annual review of actuarial methods and assumptions, and improved new business results on onerous contracts as a result of product actions.

Year-to-date net income attributed to shareholders was US$543 million in 2023 compared with net income attributable to shareholders of US$285 million and transitional net income attributed to shareholders of US$118 million in the same period of 2022. The 2022 year-to-date transitional net income attributed to shareholders includes a charge of US$167 million from IFRS 9 transitional adjustments. Year-to-date core earnings were US$1,104 million in 2023 compared with US$1,027 million in 2022 driven by higher expected investment income due to higher investment yields and business growth, improved new business results on onerous contracts as a result of product actions, and a neutral provision for ECL in 2023 compared with a charge in 2022, partially offset by a slower CSM amortization and less favourable claims experience. Items excluded from year-to-date core earnings were a net charge of US$561 million in 2023 compared with a net charge of US$742 million for the same period of 2022. Items excluded from core earnings in 2022 on a transitional basis amounted to a net charge of US$909 million. See section E3 “Non-GAAP and other financial measures” below, for a reconciliation of year-to-date core earnings to year-to-date net income (loss) attributed to shareholders for 2023, and year-to-date core earnings and year-to-date transitional net income (loss) attributed to shareholders to year-to-date net income (loss) attributed to shareholders for 2022. Expressed in Canadian dollars, year-to-date core earnings reflected a net $40 million favourable impact of changes in various foreign currency exchange rates versus the Canadian dollar.

APE sales in 3Q23 were US$835 million, an increase of 20% compared with 3Q22, driven by growth in Hong Kong and Asia Other. NBV in 3Q23 was US$310 million, an increase of 7% compared with 3Q22 driven by higher sales volumes partially offset by business mix. New business CSM in 3Q23 was US$300 million, an increase of 16% compared with 3Q22, primarily due to higher sales volumes partially offset by business mix. New business value margin (“NBV margin”)¹ was 41.9% in 3Q23 compared with 44.9% in 3Q22. Year-to-date APE sales were US$2,582 million in 2023, an increase of 16% compared with the same period of 2022, driven by strong growth in our broker and bancassurance channels in Hong Kong and higher bancassurance sales in Asia Other. Year-to-date NBV and new business CSM in 2023 were US$900 million and US$845 million, an increase of 2% and 12%, respectively, compared with 3Q22, driven by similar reasons noted above for the quarter.

 

•

Hong Kong APE sales in 3Q23 were US$209 million, an increase of 57% compared with 3Q22. The increase reflected strong growth in our broker and bancassurance channels, primarily driven by a return of demand from MCV customers following the reopening of the border between Hong Kong and mainland China since February 2023. Hong Kong NBV and new business CSM in 3Q23 were US$132 million and US$125 million, an increase of 20% and 29%, respectively, compared with 3Q22 due to higher sales volumes, partially offset by higher proportion of lower margin savings products. Hong Kong NBV margin was 63.0% in 3Q23, a decrease of 19.7 percentage points compared with 3Q22.

 

•

Japan APE sales in 3Q23 were US$67 million, a decrease of 6% compared with 3Q22 reflecting lower sales in COLI products. Japan NBV was US$32 million in 3Q23, an increase of 21% compared with 3Q22 due to product management actions, partially offset by lower sales volume. Japan NBV margin was 47.2% in 3Q23, an increase of 10.5 percentage points compared with 3Q22. Japan new business CSM was US$22 million in 3Q23, a decrease of 21% compared with 3Q22 due to lower sales volume and model refinements.

 

 

 

1	For more information on this metric, see “Non-GAAP and other financial measures” below.

 

 

 

Manulife Financial Corporation – Third Quarter 2023		19

•

Asia Other APE sales in 3Q23 were US$559 million, an increase of 14% compared with 3Q22. Higher bancassurance sales in mainland China and higher broker sales in our International High Net Worth business and in Singapore were partially offset by lower agency and bancassurance sales in Vietnam. Asia Other NBV in 3Q23 was US$146 million, a decrease of 5% compared with 3Q22 due to product mix, partially offset by higher sales volumes. Asia Other NBV margin was 31.6% in 3Q23, a decrease of 3.3 percentage points compared with 3Q22. Asia Other new business CSM in 3Q23 was US$153 million in 3Q23, an increase of 13% compared with 3Q22, driven by higher sales volumes, partially offset by product mix.

CSM net of NCI was US$7,414 million as at September 30, 2023, an increase of US$463 million, net of a US$64 million increase attributed to NCI compared with December 31, 2022. Organic CSM movement was an increase of US$441 million for the nine months ended September 30, 2023 driven by the impact of new insurance business and expected movements related to finance income or expenses, partially offset by amounts recognized for service provided in year-to-date earnings and a net reduction from insurance experience. Inorganic CSM movement was an increase of US$86 million for the nine months ended September 30, 2023 largely due to changes in actuarial methods and assumptions that adjust the CSM, partially offset by the impact of markets from an increase in interest rates and unfavourable equity market performance on certain participating and variable annuity contracts, and strengthening of the U.S. dollar against Asian currencies.

Assets under management were US$118.0 billion as at September 30, 2023, an increase of US$2.9 billion or 5% compared with December 31, 2022, driven by the impact of positive equity market performance in 2023 on invested assets and segregated funds net assets, and business growth.

Business highlights – In 3Q23, we:

 

•

launched a unified high net worth onboarding platform in Bermuda1, Hong Kong, and Singapore, to our international brokers to deliver a consistent high touch experience for both distributors and customers by streamlining new business application, underwriting and compliance processes across our three high net worth operations;

 

•

further automated the claims-handling process in Hong Kong to improve operational efficiency and deliver a better customer experience as we continue to leverage data to enhance our auto-adjudication engine, driving an almost twofold increase of straight-through processed claims compared with 3Q22; and

 

•

completed the seamless data migration of more than 3 million customers in mainland China as a part of policy administration system modernization. This cloud-native solution enables scale and efficiency, and lays the foundation for improved customer, distributor and partner experience; this milestone will enable faster speed to market through collaborative product development and easier integration with our digital partners’ ecosystems.

 

 

1	This represents our International High Net Worth business.

 

 

Manulife Financial Corporation – Third Quarter 2023		20

B2

Canada1

 

		Quarterly Results												YTD Results
($ millions, unless otherwise stated)		3Q23				2Q23				3Q22 Transitional				2023				2022 Transitional
Net income attributed to shareholders(1)		$	290			$	227			$	481			$	826			$	1,078
		Quarterly Results												YTD Results
($ millions, unless otherwise stated)		3Q23				2Q23				3Q22				2023				2022
Profitability:
Net income attributed to shareholders(1)		$	290			$	227			$	853			$	826			$	(430	)
Core earnings(1)			408				374				391				1,135				1,091
Business performance:
Annualized premium equivalent sales			431				322				285				1,046				1,009
Contractual service margin			3,662				3,656				3,558				3,662				3,558
Manulife Bank average net lending assets ($ billions)(2)			25.1				24.9				24.6				25.0				24.0
Assets under management ($ billions)(2)			137.9				144.0				141.2				137.9				141.2
Total invested assets ($ billions)			103.5				108.0				106.4				103.5				106.4
Segregated funds net assets ($ billions)			34.4				36.0				34.8				34.4				34.8

 

(1)

See “Non-GAAP and other financial measures” below for a reconciliation of quarterly core earnings to net income (loss) attributed to shareholders for 2023 and quarterly core earnings and transitional net income (loss) attributed to shareholders to net income (loss) attributed to shareholders for 2022.

(2)	This item is a non-GAAP financial measure. See “Non-GAAP and other financial measures” below for more information.

Canada’s net income attributed to shareholders was $290 million in 3Q23 compared with net income attributed to shareholders of $853 million and transitional net income attributed to shareholders of $481 million in 3Q22. The 3Q22 transitional net income attributed to shareholders includes a charge of $372 million from IFRS 9 transitional impacts. Net income attributed to shareholders is comprised of core earnings, which were $408 million in 3Q23 compared with $391 million in 3Q22, and items excluded from core earnings, which amounted to a net charge of $118 million in 3Q23 compared with a net gain of $462 million in 3Q22. Items excluded from core earnings in 3Q22 on a transitional basis amounted to a net gain of $90 million. See section E3 “Non-GAAP and other financial measures” below, for a reconciliation of quarterly core earnings to net income (loss) attributed to shareholders for 3Q23 and quarterly core earnings and transitional net income (loss) attributed to shareholders to net income (loss) attributed to shareholders for 3Q22. See section A2 “Profitability” above, for explanations of the items excluded from core earnings.

Core earnings in 3Q23 increased $17 million or 4% compared with 3Q22, reflecting more favourable insurance experience, business growth in Group Insurance and higher expected investment earnings due to higher yields and business growth, partially offset by an increase in the ECL provision, and an increase in the corporate tax rate enacted in 4Q22.

Year-to-date net income attributed to shareholders was $826 million in 2023 compared with a year-to-date net loss attributable to shareholders of $430 million and year-to-date transitional net income attributed to shareholders of $1,078 million in the same period of 2022. The 2022 year-to-date transitional net income includes a gain of $1,508 million from IFRS 9 transitional adjustments. Year-to-date core earnings were $1,135 million in 2023 compared with $1,091 million in the same period of 2022. The increase in year-to-date core earnings of $44 million or 4% reflected higher expected investment earnings from higher yields, more favourable insurance experience, and business growth in Group Insurance, partially offset by slower amortization of CSM on certain VFA contracts, an increase in the ECL provision and the increase in the corporate tax rate enacted in 4Q22. Items excluded from year-to-date core earnings were a net charge of $309 million in 2023 compared with a net charge of $1,521 million for the same period of 2022. Items excluded from year-to-date core earnings in 2022 on a transitional basis amounted to a net charge of $13 million. See section E3 “Non-GAAP and other financial measures” below, for a reconciliation of year-to-date core earnings to year-to-date net income (loss) attributed to shareholders for 2023, and year-to-date core earnings and year-to-date transitional net income (loss) attributed to shareholders to year-to-date net income (loss) attributed to shareholders for 2022.

 

 

1	Effective January 1, 2023, refinements were made to the allocations of corporate overhead and interest on surplus among segments. Prior period comparative information has been restated to reflect the changes in segment reporting.

 

 

 

Manulife Financial Corporation – Third Quarter 2023		21