Original Source: FD (FAIR DISCLOSURE) WIRE
. Patricia Kelly, Manulife Financial Corporation . Dominic D'Alessandro, Manulife Financial Corporation, CEO, President . Dennis Westfall, Merrill Lynch, Analyst . Robert Cook, Manulife Financial Corporation, Sr. EVP, General Manager Asia . Paul L. Rooney, Manulife Canada, CEO, President . Michael Goldberg, Desjardins Securities, Analyst
. Simon Curtis, Manulife Financial Corporation, EVP, Chief Actuary
. John D. DesPrez III, Manulife Financial Corporation, President,
CEO John Hancock . James Bantis, Credit Suisse, Analyst . Doug Young, TD Newcrest, Analyst . James R Boyle, Manulife Financial Corporation, EVP US Wealth Management . Jukka Lipponen, Keefe, Bruyette & Woods, Analyst . Peter Rubenovitch, Manulife Financial Corporation, CFO, Sr. Executive VP . TImothy Lazaris, GMP Securities, Analyst
. Donald A Guloien, Manulife Financial Corporation, SEVP, Chief
Investment Officer . Mario Mendonca, Genuity Capital Markets, Analyst . John Reucassel, BMO Capital Markets, Analyst . Tom MacKinnon, Scotia Capital, Analyst . Eric Burg, Lehman Brothers, Analyst
For 3Q07, MFC reported earnings of CAD1,070m and fully diluted EPS of CAD0.70.
A. Key Data From Call 1. 3Q07 earnings = CAD1,070m. 2. 3Q07 fully diluted EPS = CAD0.70. 3. YTD share buyback = 53m common shares exceeding CAD2b. 4. 3Q07 share buyback = 21.2m shares at cost of CAD849m.
S1. Business Review (D.D.) 1. 3Q07 Review: 1. Earnings, CAD1.1b.
2. Fully diluted EPS CAD0.70. 3. Compared to 3Q06: 1. Earnings increased 10%. 2. EPS grew 13%. 4. ROE, 18.9%.
1. Improvement 230 BP over 3Q06. 5. Sales were strong across the Co. with total insurance sales rising 23% over 3Q06.
1. Wealth sales increasing by 26%. 6. Strong sales growth led to a 45% increase in the new business embedded value (NBEV).
7. With the recent introduction of the new investment accounting
standards, expects to see increased volatility in investment
results as assets are mark-to-market on a quarterly basis.
1. Believes, that strategy of investing in high-quality assets
with appropriate diversification across a range of asset classes positions Co. well. 2. While Co. experienced gains in some categories and losses in others, consolidated investment results were strong.
2. Operating Highlights: 1. Pace of new product introductions has been strong and together with expanding distribution, has contributed to exceptional sales across Co. and record levels in a number of important businesses. 2. In Canada, completed the Berkshire-TWC transaction in late Aug. adding significant distribution capacity and assets to existing business. 3. Manulife Securities now has roughly 1,500 independent agents,
advisors, and a broader reach across the country. 4. In China, continued to expand operations and now has 23 city licenses.
5. In Asia, across the region Co. is introducing innovative
products and expanding and diversifying distribution reach.
1. Result is not just strong topline growth, but very favorable
retention that is contributing to good growth in in-force business.
6. Fortune magazine recently rated Co. as one of the best
companies in the Greater China region in terms of corporate
culture and quality of corporate leadership. 7. In Sept., Moody's announced that they had upgraded insurance financial strength ratings on key insurance subsidiaries to AA+. 1. This endorsement together with recent up grade to a AAA rating by Standard & Poor's reflects highly on the financial and operational strengths of the Co.
S2. Financial Review (P.R.) 1. 3Q07 Results: 1. Earnings, CAD1,070m.
1. Fully diluted EPS, CAD0.70. 2. YoverY earnings grew by 10%. 1. EPS rose by 13%. 3. Excluding the impact of currency, earnings would have risen by 16% and EPS by 18% vs. 3Q06.
4. 3Q07 earnings benefited from in-force business growth and
strong investment related gains. 1. Business growth was strong in wealth management segments where higher funds under management resulted in increased fee income. 2. Strong investment related results were driven by higher equity markets, gains on private equities, and favorable real estate performance driven by real estate appraisals.
3. This more than offset the impact of lower interest rates and
demonstrates the strength of diversified investment strategy.
5. Currency movements over 3Q06 also had a negative impact on
reported [C-dollar] results, reducing 3Q07 earnings by CAD56m
or CAD0.03 a share. 6. Expected profit on in-force was CAD820m.
1. 8% increase over 3Q06 and 13% increase on a constant currency basis. 7. Impact of new business was an origination loss of CAD68m,
consistent with previous quarters. 8. Experience gains increased by CAD104m vs. 3Q06 driven by positive investment results including the higher valuation of real estate in Canada with claims results also continuing to be favorable. 1. This was offset in part by the impact of declining interest rates particularly in US insurance operations. 9. Management actions and changes in assumptions reduced pretax earnings by CAD31m. 1. Included in the above line item are pretax charges for valuation basis changes, which increased liabilities by CAD59m primarily in discontinued John Hancock Accident and Health business. 1. Partially offset by management actions that increased margins on certain in-force business in the Japan and US insurance products. 2. New Business Embedded Value (NBEV): 1. 3Q07 NBEV was CAD556m. 1. Up a strong 45% over 3Q06. 2. Insurance segments contributed CAD194m NBEV, up 20% over 3Q06. 1. Due to strong growth in other Asia, US insurance, and Canadian group benefits. 3. Exceptional sales levels across the Co. particularly in VA franchises in US and Japan contributed wealth NBEV of CAD362m, up 63% from 3Q06. 4. On YTD basis, NBEV totaled CAD1.6b. 3. Credit Experience: 1. Remained strong with net provisions of CAD18m. 2. As anticipated, 3Q07 saw the downgrade of bearer bonds to below investment grade, which caused Co. to strength actuary reserves by CAD42m. 1. This is not included in credit provisions, but the post-tax impact is reflected in 3Q07 reported earnings. 4. Investment Income: 1. Investment income, CAD2.2b. 1. Down QoverQ due to the impact of currency movements. 2. On available for sale assets, net realized gains amounted to CAD102m, decline from CAD117m in 2Q07. 3. Other gains related to private equities and loans on assets supporting the surplus segment were CAD9m, down from CAD24m reported in 2Q07. 4. Total net impairments were CAD18m vs. net recoveries of CAD16m in 2Q07. 5. Total portfolio investment yield, excluding net realized and unrealized gains and losses on liability segment was 5.7%, unchanged from 2Q07. 6. Net gains on assets supporting liability segment moved from the loss position in 2Q07 to gain of CAD834m due to lower interest rates. 1. Gains or losses related to assets are largely offset in the account change in actuarial liabilities and therefore do not impact reported results. 5. Funds Under Management: 1. Over the last 12 months, funds under management increased by CAD18b or 5% due to strong topline growth, good …