Manulife Financial Corporation - Special Call - SEHK:945

SEHK:945

Hung Ko, Vice President of Group Investor Relations, welcomed participants to the special call and introduced the purpose of the meeting, which was to discuss Manulife's reinsurance transaction with RGA. He directed attendees to the webcast slides available on the Investor Relations section of Manulife's website and reminded them to refer to Slide 2 for forward-looking statements and Slide 14 for non-GAAP financial measures. Ko then introduced Roy Gori, President and CEO, to provide opening remarks.

**- Roy Gori announced his retirement after serving as CEO since 2017 and with Manulife for 10 years

• He highlighted the company's transformation, expanding core ROE by more than 5 percentage points to almost 17% in Q3 and raising the target to 18%+

• Manulife has released $12 billion of capital since 2018 and is on track to return $9 billion to shareholders through share buybacks

• Core earnings contribution from high-potential businesses increased to 70% from 54% in 2017

• The company has delivered top-quartile total shareholder return over the last 7 years

• Announced a second historic LTC transaction with RGA, reinsuring $5.4 billion of reserves, including $2.4 billion from a younger LTC block

• The transaction is expected to reduce LTC reserves by 18% and ALDA by $1.5 billion

• Manulife plans to return $800 million of freed-up capital to shareholders through share buybacks

• The company remains focused on further unlocking shareholder value through organic LTC initiatives and is open to inorganic opportunities at the right price**

**- Marc M. Costantini discussed the details of the LTC (Long-Term Care) component of the reinsurance transaction with RGA, highlighting that it covers U.S. LTC and structured settlements.

• The transaction reinsures 75% of a cohort of products sold between 2007 and 2011, with an average issue age of 2008.

• The transacted LTC block has younger characteristics compared to the previously reinsured block, with an average attained age of 75 and a higher proportion of active life reserves (88% vs. 65%).

• The transaction further reduces Manulife's LTC reserves by 6%, bringing the cumulative reduction to 18% upon closing.

• Manulife will continue to administer both transacted blocks and is committed to providing excellent customer service.

• The company is leveraging digital capabilities to eliminate fraud, waste, and abuse, aiming to achieve nearly 3% of claims savings in 2024.

• Manulife is developing a preferred provider network to offer high-quality services at discounted rates and helping customers live at home longer through health interventions and incentives.

• The company has a strong track record of securing premium increase approvals, with a total of USD 12 billion on a present value basis since 2008.

• Manulife offers landing spot options and cash buyout options to policyholders as alternatives to premium increases.

• The company is exploring the feasibility of exchange programs where customers can leverage the value in their standalone LTC policy and transfer it to a life product with an LTC rider.

• Marc emphasized that Manulife is in a privileged position to be patient and will only transact with the right counterparty at the right price for the right reasons.**

**- The growth in reserves is primarily driven by the change in interest rates, with 3 quarters or more of the increase due to the drop in long corporate A rates between 10 and 30 years since Q3 last year. Some natural growth occurs as the block matures.

• The risk margin under IFRS 4 was higher because it included explicit margins for economic assumptions like interest rates. Under IFRS 17, these are now implicit in the reserves, and the risk adjustment is purely for noneconomic assumptions. The overall margin remains unchanged.

• The risk adjustment will unwind as the risk leaves the books, becoming proportionately smaller relative to the best estimate liability as the block ages.

• On the U.S. statutory basis, the negative cede for the LTC part of the transaction is about 10% after normalizing for the move to book value.

• Manulife's portfolio is well balanced between mortality and longevity risk, and the transaction does not significantly affect this balance. The reinsurer may want to balance mortality risk on their book with longevity risk, making the packaged blocks a win-win.**