Form 20-F
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¨
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Form 40-F
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þ
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Yes
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¨
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No
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þ
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Exhibit
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Description of Exhibit
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99.1
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Third Quarter Report to Shareholders
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99.2
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Certification Chief Executive Officer
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99.3
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Certification Chief Financial Officer
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MANULIFE FINANCIAL CORPORATION
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By: /s/ Antonella Deo
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Name: Antonella Deo
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Title: Vice President and Corporate Secretary
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Date: November 14, 2014
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Exhibit
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Description of Exhibit
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99.1
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Third Quarter Report to Shareholders
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99.2
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Certification Chief Executive Officer
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99.3
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Certification Chief Financial Officer
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On target.
Delivering growth.
Manulife Financial Corporation
Third Quarter Report to Shareholders
Nine months ended September 30, 2014
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·
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Japan insurance sales of US$165 million increased 83% driven by the continued momentum of corporate product sales and the launch of new retail products.
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·
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Hong Kong insurance sales of US$81 million increased 37% driven by several product launches in the latter part of 2Q14 and a series of sales campaigns.
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·
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Indonesia insurance sales of US$28 million increased 14% driven by strong growth in our bancassurance channel and a series of sales campaigns.
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·
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Asia Other (excludes Japan, Hong Kong and Indonesia) insurance sales of US$78 million increased 16%. We delivered double digit growth in all markets, except for Singapore, where sales were at a level similar to 3Q13 but showed significant growth over 2Q14.
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·
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Japan wealth sales of US$516 million increased 140% as a result of the successful launch of a floating rate loan fund and the launch of a new single premium product.
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·
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Hong Kong wealth sales of US$366 million increased 50% driven by successful marketing campaigns in the pension and mutual fund businesses.
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·
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Indonesia wealth sales of US$239 million increased 93% reflecting the favourable impact of improved market sentiment on mutual fund sales.
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·
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Asia Other wealth sales of US$1.0 billion increased 57% driven by the increase in mutual fund sales in China, Taiwan and Thailand.
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·
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Mutual Funds’ assets under management were a record $31.8 billion at September 30, 2014, increasing 26% year-over-year and outpacing industry growth2. Gross mutual fund deposits3,4 of $1.3 billion in 3Q14 were down 10% as investor preference shifted toward equities where we continue to build our presence. In the quarter we added two global equity mandates to complement our growing suite of equity funds. Increased market volatility in September also put strain on sales.
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·
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Segregated Fund Products5 sales were $353 million in 3Q14, an increase of 13% reflecting steady growth in our repositioned new business portfolio. Fixed Products sales of $72 million in 3Q14 were down 33% reflecting our deliberate rate positioning in this market.
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·
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Group Retirement Solutions sales of $188 million in 3Q14 were 31% lower, reflecting normal variability in the large case group retirement market. Year-to-date, sales of $1.1 billion were 10% higher than the same period of 2013, reflecting continued success in the defined contribution plan market.
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·
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Manulife Bank new lending volumes continue to reflect the impact of intense rate competition driven by the slowdown in the residential mortgage market. New loan volumes for 3Q14 were $927 million, 27% below 3Q13 levels and 3% higher than 2Q14. Net lending assets increased by 4% to $19.4 billion as at September 30, 2014.
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1
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Growth (declines) in sales, premiums and deposits and funds under management are stated on a constant currency basis. Constant currency basis is a non-GAAP measure. See “Performance and Non-GAAP Measures” below.
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2
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Based on publicly available information from Investor Economics and the Investment Funds Institute of Canada as at September 30, 2014.
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4
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Gross mutual fund deposits in 3Q14 included deposits from segregated fund products of $263 million.
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5
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Segregated fund products include guarantees. These products are also referred to as variable annuities.
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·
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Retail Markets’ insurance sales of $41 million increased 11%, reflecting the success of our new Manulife UL product, a universal life solution for Canadians looking for simplified investment options combined with long-term insurance protection.
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·
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Institutional Markets’ insurance sales of $102 million decreased 32%, reflecting competitive pressures which challenged large case sales in Group Benefits. In the small and mid-sized market, Group Benefits’ sales increased 15%.
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·
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JH Investments 3Q14 sales of US$5.4 billion decreased 8% primarily due to higher mandates from large wirehouse firms in 2013, the impact of the closure to new sales of a top selling fund at the beginning of 2014 and tempered industry sales. On a year-to-date basis, sales continue to outpace the industry in the intermediary channel with an increase of 7% compared to 0.9% for the industry7. Our year-to-date results also continue to outpace the industry on organic growth (net new flows / beginning assets) with a 16% year-to-date growth rate compared to a 2% industry growth rate7.
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·
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JH RPS 3Q14 sales of US$886 million increased 2%. While sales are challenged by a very competitive environment, we are beginning to see momentum and an increased sales pipeline from initiatives launched earlier this year. This includes the Signature 2.0 product within our core market of plans under US$10 million in assets under management, as well as increased distribution capabilities and pricing actions for plans with assets over US$10 million.
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·
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John Hancock Life (“JH Life”) 3Q14 sales of US$112 million were 19% lower as overall industry sales were challenged in the estate planning market. Compared with 2Q14, sales increased by 10% driven by changes to our Protection Universal Life (“UL”) product and accumulation and indexed UL products.
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·
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John Hancock Long-Term Care 3Q14 sales of US$12 million decreased, as expected, due to recent price increases. Sales were down by US$3 million from 3Q13 and US$1 million from 2Q14.
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6
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For each fund with at least a 3-year history, Morningstar calculates a Morningstar Rating based on a Morningstar Risk-Adjusted Return that accounts for variation in a fund’s monthly performance (including effects of sales charges, loads and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each category, the next 22.5%, 35%, 22.5% and bottom 10% receive 5, 4, 3, 2 or 1 star, respectively. The Overall Morningstar Rating for a fund is derived from a weighted average of the performance associated with its 3-, 5- and 10 year (if applicable) Morningstar Rating metrics. Past performance is no guarantee of future results. The overall rating includes the effects of sales charges, loads and redemption fees, while the load-waived does not. Load-waived rating for Class A shares should only be considered by investors who are not subject to a front-end sales charge.
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7
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Source: Strategic Insight: ICI Confidential. Direct Sold mutual funds, fund-of-funds and ETF’s are excluded. Organic sales growth rate is calculated as: net new flows divided by beginning period assets. Industry data through September 2014.
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Contents
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A
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OVERVIEW
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D
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RISK MANAGEMENT AND RISK FACTORS UPDATE
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1.
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Q3 highlights
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1.
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Variable annuity and segregated fund guarantees
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2.
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Standard Life transaction
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2.
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Caution related to sensitivities
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3.
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Q4 items
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3.
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Publicly traded equity performance risk
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4.
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Future changes to non-GAAP measures
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4.
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Interest rate and spread risk
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B
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FINANCIAL HIGHLIGHTS
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E
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ACCOUNTING MATTERS AND CONTROLS
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1.
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Q3 and year-to-date earnings analysis
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1.
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Critical accounting and actuarial policies
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2.
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Premiums and deposits
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2.
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Actuarial methods and assumptions
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3.
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Funds under management
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3.
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Sensitivity of policy liabilities to updates to assumptions
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4.
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Capital
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4.
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Accounting and reporting changes
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5.
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Impact of fair value accounting
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5.
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U.S. GAAP Results
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6.
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Quarterly financial information
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C
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PERFORMANCE BY DIVISION
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7.
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Changes in internal control over financial reporting
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1.
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Asia
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8.
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Audit Committee
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2.
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Canadian
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||
3.
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U.S.
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F
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OTHER
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4.
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Corporate and Other
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1.
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Quarterly dividend
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2.
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Outstanding shares
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3.
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Performance and Non-GAAP Measures
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4.
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Key planning assumptions and uncertainties
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5.
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Caution regarding forward-looking statements
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A
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OVERVIEW
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A1
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Q3 highlights
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A2
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Agreement regarding acquisition of Canadian-based operations of Standard Life plc
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9
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Growth (declines) in sales, premiums and deposits and funds under management are stated on a constant currency basis. Constant currency basis is a non-GAAP measure. See “Performance and Non-GAAP Measures” below.
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10
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Source: Fraser Group, “Pension Universe Report”, data as of December 31, 2013, includes capital accumulation plans only.
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12
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Source: Fraser Group, “Group Universe Report”, data for the year ended December 31, 2013.
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·
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Excluding transition and integration costs, after the first year we expect the transaction to be accretive by approximately 3 cents to earnings per common share (“EPS”) per year over each of the next 3 years. It will also increase our earnings capacity beyond our 2016 core earnings objective of $4 billion.
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·
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The transaction, and the financing, maintain our strong capital position and financial flexibility, and in no way inhibit our ability to pay dividends. In fact, it will enhance our ability to increase dividends in the future.
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·
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We believe the transaction will improve core earnings, however the transition costs reported in core earnings will create a modest, temporary headwind on our core return on common shareholders’ equity (“Core ROE”) objective of 13%.
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Excluding transition and integration costs, the transaction is expected to be marginally accretive to EPS in the 1st year.
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Increases earnings contributions from less capital intensive, fee-based businesses.
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Integration costs totaling $150 million post-tax expected to be incurred in the first three years and we expect revenue synergies which will build over time.
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·
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Annual cost savings of $100 million post-tax expected to be largely achieved by the 3rd year.
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·
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Targeting MCCSR ratio in the range of 235% to 240% at close.
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·
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Targeting financial leverage ratio of approximately 28% at close.
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·
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We continue to target a 25% financial leverage ratio over the long-term.
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·
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Does not significantly impact our interest rate or equity market risk profile.
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A3
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Q4 items
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A4
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Future changes to non-GAAP measures
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13
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See “Caution regarding forward-looking statements” and “Performance and Non-GAAP Measures” below.
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B
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FINANCIAL HIGHLIGHTS
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Quarterly Results
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YTD Results
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|||||||||||||||||||
(C$ millions, unless otherwise stated, unaudited)
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3Q 2014 | 2Q 2014 | 3Q 2013 | 2014 | 2013 | |||||||||||||||
Net income attributed to shareholders
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$ | 1,100 | $ | 943 | $ | 1,034 | $ | 2,861 | $ | 1,833 | ||||||||||
Preferred share dividends
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(28 | ) | (36 | ) | (33 | ) | (98 | ) | (97 | ) | ||||||||||
Common shareholders’ net income
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$ | 1,072 | $ | 907 | $ | 1,001 | $ | 2,763 | $ | 1,736 | ||||||||||
Reconciliation of core earnings to net income attributed to shareholders:
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||||||||||||||||||||
Core earnings(1)
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$ | 755 | $ | 701 | $ | 704 | $ | 2,175 | $ | 1,932 | ||||||||||
Investment-related experience in excess of amounts
included in core earnings
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320 | 217 | 491 | 762 | 491 | |||||||||||||||
Core earnings plus investment-related experience in
excess of amounts included in core earnings
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$ | 1,075 | $ | 918 | $ | 1,195 | $ | 2,937 | $ | 2,423 | ||||||||||
Other items to reconcile core earnings to net income attributed
to shareholders:
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||||||||||||||||||||
Direct impact of equity markets and interest rates and
variable annuity guarantee liabilities
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70 | 55 | 94 | 35 | (255 | ) | ||||||||||||||
Changes in actuarial methods and assumptions
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(69 | ) | (30 | ) | (252 | ) | (139 | ) | (356 | ) | ||||||||||
Other items (see section B1)
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24 | - | (3 | ) | 28 | 21 | ||||||||||||||
Net income attributed to shareholders
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$ | 1,100 | $ | 943 | $ | 1,034 | $ | 2,861 | $ | 1,833 | ||||||||||
Basic earnings per common share (C$)
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$ | 0.58 | $ | 0.49 | $ | 0.54 | $ | 1.49 | $ | 0.95 | ||||||||||
Diluted earnings per common share (C$)
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$ | 0.57 | $ | 0.49 | $ | 0.54 | $ | 1.48 | $ | 0.94 | ||||||||||
Diluted core earnings per common share (C$)(1)
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$ | 0.39 | $ | 0.36 | $ | 0.36 | $ | 1.11 | $ | 0.99 | ||||||||||
Return on common shareholders’ equity (“ROE”) (%)
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14.8 | % | 13.1 | % | 16.8 | % | 13.3 | % | 10.1 | % | ||||||||||
Core ROE (%)(1)
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10.1 | % | 9.6 | % | 11.3 | % | 10.0 | % | 10.6 | % | ||||||||||
U.S. GAAP net income (loss) attributed to shareholders(1)
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$ | 823 | $ | 906 | $ | 148 | $ | 3,890 | $ | (889 | ) | |||||||||
Sales(1)
Insurance products(2)
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$ | 660 | $ | 587 | $ | 601 | $ | 1,784 | $ | 2,140 | ||||||||||
Wealth products
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$ | 11,742 | $ | 13,322 | $ | 11,299 | $ | 38,842 | $ | 37,440 | ||||||||||
Premiums and deposits(1)
Insurance products
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$ | 6,455 | $ | 6,007 | $ | 6,057 | $ | 18,366 | $ | 18,380 | ||||||||||
Wealth products
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$ | 15,632 | $ | 18,959 | $ | 14,645 | $ | 54,123 | $ | 48,334 | ||||||||||
Funds under management (C$ billions)(1)
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$ | 663 | $ | 637 | $ | 575 | $ | 663 | $ | 575 | ||||||||||
Capital (C$ billions)(1)
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$ | 37.7 | $ | 35.8 | $ | 31.1 | $ | 37.7 | $ | 31.1 | ||||||||||
MLI’s MCCSR ratio
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248 | % | 243 | % | 229 | % | 248 | % | 229 | % |
(1)
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This item is a non-GAAP measure. See “Performance and Non-GAAP Measures” below.
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(2)
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Insurance sales have been adjusted to exclude Taiwan business, which was sold in 4Q13, for all periods.
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B1
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Q3 and year-to-date earnings analysis
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Quarterly Results
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YTD Results
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|||||||||||||||||||
(C$ millions, unaudited)
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3Q 2014 | 2Q 2014 | 3Q 2013 | 2014 | 2013 | |||||||||||||||
Core earnings(1)
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||||||||||||||||||||
Asia Division(2)
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$ | 273 | $ | 231 | $ | 242 | $ | 748 | $ | 694 | ||||||||||
Canadian Division(2)
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243 | 232 | 268 | 703 | 672 | |||||||||||||||
U.S. Division(2)
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342 | 329 | 361 | 1,045 | 1,144 | |||||||||||||||
Corporate and Other (excluding expected cost of macro
hedges and core investment gains)
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(107 | ) | (92 | ) | (135 | ) | (334 | ) | (368 | ) | ||||||||||
Expected cost of macro hedges(2)
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(46 | ) | (49 | ) | (84 | ) | (137 | ) | (360 | ) | ||||||||||
Investment-related experience in core earnings(3)
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50 | 50 | 52 | 150 | 150 | |||||||||||||||
Core earnings
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$ | 755 | $ | 701 | $ | 704 | $ | 2,175 | $ | 1,932 | ||||||||||
Investment-related experience in excess of amounts
included in core earnings(3)
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320 | 217 | 491 | 762 | 491 | |||||||||||||||
Core earnings plus investment-related experience in
excess of amounts included in core earnings
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$ | 1,075 | $ | 918 | $ | 1,195 | $ | 2,937 | $ | 2,423 | ||||||||||
Direct impact of equity markets and interest rates and
variable annuity guarantee liabilities (see table below)(3),(4)
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70 | 55 | 94 | 35 | (255 | ) | ||||||||||||||
Changes in actuarial methods and assumptions
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(69 | ) | (30 | ) | (252 | ) | (139 | ) | (356 | ) | ||||||||||
Other items
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24 | - | (3 | ) | 28 | 21 | ||||||||||||||
Net income attributed to shareholders
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$ | 1,100 | $ | 943 | $ | 1,034 | $ | 2,861 | $ | 1,833 |
(1)
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This item is a non-GAAP measure. See “Performance and Non-GAAP Measures” below.
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(2)
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The expected cost of the macro equity hedges is relative to our long-term valuation assumptions. Of the $38 million decrease in expected macro hedging costs compared with 3Q13, approximately half was offset by an increase in dynamic hedging costs, primarily in Asia and the U.S. The difference between the actual cost and the expected cost is included in the direct impact of equity markets and interest rates.
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(3)
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Net insurance contract liabilities under IFRS for Canadian insurers are determined using the Canadian Asset Liability Method (“CALM”). Under CALM, the measurement of policy liabilities includes estimates regarding future expected investment income on assets supporting the policies. Experience gains and losses are reported when current period activity differs from what was assumed in the policy liabilities at the beginning of the period. These gains and losses can relate to both the investment returns earned in the period, as well as to the change in our policy liabilities driven by the impact of current period investing activities on future expected investment income assumptions. The direct impact of markets is separately reported.
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(4)
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The direct impact of equity markets and interest rates is relative to our policy liability valuation assumptions and includes changes to interest rate assumptions, including a quarterly ultimate reinvestment rate (“URR”) update for North America and for Japan, as well as experience gains and losses on derivatives associated with our macro equity hedges. We also include gains and losses on the sale of available-for-sale (“AFS”) bonds and derivative positions in the surplus segment. See table below for components of this item.
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(C$ millions, unaudited)
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3Q 2014 | 2Q 2014 | 3Q 2013 | |||||||||
Direct impact of equity markets and variable annuity guarantee liabilities(1)
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$ | (35 | ) | $ | 66 | $ | 306 | |||||
Fixed income reinvestment rates assumed in the valuation of policy liabilities(2)
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165 | 22 | (77 | ) | ||||||||
Sale of AFS bonds and derivative positions in the Corporate and Other segment
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(15 | ) | (8 | ) | (72 | ) | ||||||
Charges due to lower fixed income URR assumptions used in the valuation of policy liabilities
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(45 | ) | (25 | ) | (63 | ) | ||||||
Direct impact of equity markets and interest rates and variable annuity guarantee liabilities
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$ | 70 | $ | 55 | $ | 94 | ||||||
Direct impact of equity markets and interest rates
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$ | 119 | $ | 6 | $ | (66 | ) |
(1)
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In 3Q14, gross equity exposure losses of $407 million were partially offset by net hedge gains of $372 million.
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(2)
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In 3Q14, the $165 million gain for fixed income reinvestment assumptions was driven by the increase in corporate spreads in the U.S.
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B3
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Funds under management14
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B4
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Capital14
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B5 Impact of fair value accounting
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C
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PERFORMANCE BY DIVISION
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C1
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Asia Division
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($ millions, unless otherwise stated)
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Quarterly Results
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YTD Results
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||||||||||||||||||
Canadian dollars
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3Q 2014 | 2Q 2014 | 3Q 2013 | 3Q 2014 | 3Q 2013 | |||||||||||||||
Net income attributed to shareholders
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$ | 332 | $ | 337 | $ | 480 | $ | 911 | $ | 1,794 | ||||||||||
Core earnings(1)
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273 | 231 | 242 | 748 | 694 | |||||||||||||||
Premiums and deposits
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4,691 | 4,150 | 3,218 | 12,641 | 12,824 | |||||||||||||||
Funds under management (billions)
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84.5 | 81.4 | 80.1 | 84.5 | 80.1 | |||||||||||||||
U.S. dollars
|
||||||||||||||||||||
Net income attributed to shareholders
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$ | 305 | $ | 308 | $ | 463 | $ | 832 | $ | 1,761 | ||||||||||
Core earnings
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251 | 212 | 233 | 684 | 677 | |||||||||||||||
Premiums and deposits
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4,308 | 3,806 | 3,099 | 11,558 | 12,553 | |||||||||||||||
Funds under management (billions)
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75.4 | 76.2 | 77.9 | 75.4 | 77.9 |
(1)
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See “Performance and Non-GAAP Measures” for a reconciliation between IFRS net income attributed to shareholders and core earnings.
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C2
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Canadian Division
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($ millions, unless otherwise stated)
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Quarterly Results
|
YTD Results
|
||||||||||||||||||
Canadian dollars
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3Q 2014 | 2Q 2014 | 3Q 2013 | 3Q 2014 | 3Q 2013 | |||||||||||||||
Net income (loss) attributed to shareholders
|
$ | 286 | $ | 267 | $ | 414 | $ | 930 | $ | 455 | ||||||||||
Core earnings(1)
|
243 | 232 | 268 | 703 | 672 | |||||||||||||||
Premiums and deposits
|
5,073 | 5,069 | 4,901 | 16,192 | 15,897 | |||||||||||||||
Funds under management (billions)
|
156.0 | 153.4 | 138.8 | 156.0 | 138.8 |
(1)
|
See “Performance and Non-GAAP Measures” for a reconciliation between IFRS net income attributed to shareholders and core earnings.
|
C3
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U.S. Division
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($ millions, unless otherwise stated)
|
Quarterly Results
|
YTD Results
|
||||||||||||||||||
Canadian dollars
|
3Q 2014 | 2Q 2014 | 3Q 2013 | 3Q 2014 | 3Q 2013 | |||||||||||||||
Net income attributed to shareholders
|
$ | 679 | $ | 559 | $ | 928 | $ | 1,641 | $ | 2,083 | ||||||||||
Core earnings(1)
|
342 | 329 | 361 | 1,045 | 1,144 | |||||||||||||||
Premiums and deposits
|
11,342 | 12,947 | 11,473 | 37,688 | 34,911 | |||||||||||||||
Funds under management (billions)
|
376.9 | 360.5 | 319.9 | 376.9 | 319.9 | |||||||||||||||
U.S. dollars
|
||||||||||||||||||||
Net income attributed to shareholders
|
$ | 623 | $ | 513 | $ | 894 | $ | 1,502 | $ | 2,033 | ||||||||||
Core earnings
|
314 | 302 | 348 | 955 | 1,120 | |||||||||||||||
Premiums and deposits
|
10,415 | 11,873 | 11,046 | 34,434 | 34,125 | |||||||||||||||
Funds under management (billions)
|
336.3 | 337.7 | 311.0 | 336.3 | 311.0 |
(1)
|
See “Performance and Non-GAAP Measures” for a reconciliation between IFRS net income attributed to shareholders and core loss.
|
C4
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Corporate and Other
|
($ millions, unless otherwise stated)
|
Quarterly Results
|
YTD Results
|
||||||||||||||||||
Canadian dollars
|
3Q 2014 | 2Q 2014 | 3Q 2013 | 3Q 2014 | 3Q 2013 | |||||||||||||||
Net loss attributed to shareholders
|
$ | (197 | ) | $ | (220 | ) | $ | (788 | ) | $ | (621 | ) | $ | (2,499 | ) | |||||
Core loss (excl. macro hedges and core investment gains)(1)
|
$ | (107 | ) | $ | (92 | ) | $ | (135 | ) | $ | (334 | ) | $ | (368 | ) | |||||
Expected cost of macro hedges
|
(46 | ) | (49 | ) | (84 | ) | (137 | ) | (360 | ) | ||||||||||
Investment-related experience included in core earnings
|
50 | 50 | 52 | 150 | 150 | |||||||||||||||
Total core loss
|
$ | (103 | ) | $ | (91 | ) | $ | (167 | ) | $ | (321 | ) | $ | (578 | ) | |||||
Premiums and deposits
|
$ | 981 | $ | 2,800 | $ | 1,110 | $ | 5,968 | $ | 3,082 | ||||||||||
Funds under management (billions)
|
45.1 | 42.0 | 35.8 | 45.1 | 35.8 |
(1)
|
See “Performance and Non-GAAP Measures” for a reconciliation between IFRS net income attributed to shareholders and core earnings.
|
·
|
$69 million net charge for changes in actuarial methods and assumptions (3Q13 - $252 million),
|
·
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$15 million of realized losses on AFS bonds and interest rate swaps (3Q13 - $72 million), and
|
·
|
$50 million related to the total company offset included in core investment-related experience.
|
·
|
Partially offsetting these items were $29 million of net experience gains on macro hedges (3Q13 - $245 million net experience losses) and $11 million of other mark-to-market gains.
|
D.
|
RISK MANAGEMENT AND RISK FACTORS UPDATE
|
D1
|
Variable annuity and segregated fund guarantees
|
As described in the MD&A in our 2013 Annual Report, guarantees on variable products and segregated funds may include one or more of death, maturity, income and withdrawal guarantees. Variable annuity and segregated fund guarantees are contingent and only payable upon the occurrence of the relevant event, if fund values at that time are below guaranteed values. Depending on future equity market levels, liabilities on current in-force business would be due primarily in the period from 2015 to 2038.
We seek to mitigate a portion of the risks embedded in our retained (i.e. net of reinsurance) variable annuity and segregated fund guarantee business through the combination of our dynamic and macro hedging strategies (see section D3 “Publicly traded equity performance risk” below).
The table below shows selected information regarding the Company’s variable annuity and segregated fund guarantees gross and net of reinsurance.
|
As at
|
September 30, 2014
|
December 31, 2013
|
||||||||||||||||||||||
(C$ millions)
|
Guarantee
value
|
Fund
value
|
Amount at
risk(4),(5)
|
Guarantee
value
|
Fund
value
|
Amount at
risk(4),(5)
|
||||||||||||||||||
Guaranteed minimum income benefit(1)
|
$ | 5,935 | $ | 4,788 | $ | 1,174 | $ | 6,194 | $ | 5,161 | $ | 1,109 | ||||||||||||
Guaranteed minimum withdrawal benefit
|
65,956 | 63,659 | 4,112 | 66,189 | 63,849 | 4,120 | ||||||||||||||||||
Guaranteed minimum accumulation benefit
|
15,624 | 19,548 | 42 | 16,942 | 20,581 | 94 | ||||||||||||||||||
Gross living benefits(2)
|
$ | 87,515 | $ | 87,995 | $ | 5,328 | $ | 89,325 | $ | 89,591 | $ | 5,323 | ||||||||||||
Gross death benefits(3)
|
12,226 | 10,914 | 1,339 | 12,490 | 11,230 | 1,413 | ||||||||||||||||||
Total gross of reinsurance and hedging
|
$ | 99,741 | $ | 98,909 | $ | 6,667 | $ | 101,815 | $ | 100,821 | $ | 6,736 | ||||||||||||
Living benefits reinsured
|
$ | 5,171 | $ | 4,194 | $ | 994 | $ | 5,422 | $ | 4,544 | $ | 942 | ||||||||||||
Death benefits reinsured
|
3,562 | 3,349 | 559 | 3,601 | 3,465 | 564 | ||||||||||||||||||
Total reinsured
|
$ | 8,733 | $ | 7,543 | $ | 1,553 | $ | 9,023 | $ | 8,009 | $ | 1,506 | ||||||||||||
Total, net of reinsurance
|
$ | 91,008 | $ | 91,366 | $ | 5,114 | $ | 92,792 | $ | 92,812 | $ | 5,230 |
(1)
|
Contracts with guaranteed long-term care benefits are included in this category.
|
(2)
|
Where a policy includes both living and death benefits, the guarantee in excess of the living benefit is included in the death benefit category.
|
(3)
|
Death benefits include stand-alone guarantees and guarantees in excess of living benefit guarantees where both death and living benefits are provided on a policy.
|
(4)
|
Amount at risk (in-the-money amount) is the excess of guarantee values over fund values on all policies where the guarantee value exceeds the fund value. This amount is not currently payable. For guaranteed minimum death benefit, the amount at risk is defined as the current guaranteed minimum death benefit in excess of the current account balance. For guaranteed minimum income benefit, the amount at risk is defined as the excess of the current annuitization income base over the current account value. For all guarantees, the amount at risk is floored at zero at the single contract level.
|
(5)
|
The amount at risk net of reinsurance at September 30, 2014 was $5,114 million (December 31, 2013 – $5,230 million) of which: US$3,404 million (December 31, 2013 – US$3,124 million) was on our U.S. business, $757 million (December 31, 2013 – $1,248 million) was on our Canadian business, US$202 million (December 31, 2013 – US$335 million) was on our Japan business and US$282 million (December 31, 2013 – US$285 million) was related to Asia (other than Japan) and our run-off reinsurance business.
|
The amount at risk on variable annuity contracts, net of reinsurance, was $5.1 billion at September 30, 2014 compared with $5.2 billion at December 31, 2013.
|
D2
|
Caution related to sensitivities
|
D3
|
Publicly traded equity performance risk
|
The tables below show the potential impact on net income attributed to shareholders resulting from an immediate 10, 20 and 30 % change in market values of publicly traded equities followed by a return to the expected level of growth assumed in the valuation of policy liabilities. The potential impact is shown after taking into account the impact of the change in markets on the hedge assets. While we cannot reliably estimate the amount of the change in dynamically hedged variable annuity guarantee liabilities that will not be offset by the profit or loss on the dynamic hedge assets, we make certain assumptions for the purposes of estimating the impact on shareholders’ net income.
This estimate assumes that the performance of the dynamic hedging program would not completely offset the gain/loss from the dynamically hedged variable annuity guarantee liabilities. It assumes that the hedge assets are based on the actual position at the period end, and that equity hedges in the dynamic program are rebalanced at 5% intervals. In addition, we assume that the macro hedge assets are rebalanced in line with market changes.
It is also important to note that these estimates are illustrative, and that the hedging program may underperform these estimates, particularly during periods of high realized volatility and/or periods where both interest rates and equity market movements are unfavourable.
This disclosure has been simplified in 2014 to exclude the impact of assuming that the change in the value of dynamic hedge assets completely offsets the change in dynamically hedged variable annuity guarantees, and now shows the impact of macro and dynamic hedge assets in aggregate. |
As at September 30, 2014
|
||||||||||||||||||||||||
(C$ millions)
|
-30 | % | -20 | % | -10 | % | 10 | % | 20 | % | 30 | % | ||||||||||||
Underlying sensitivity to net income attributed to
shareholders(2)
|
||||||||||||||||||||||||
Variable annuity guarantees
|
$ | (4,620 | ) | $ | (2,660 | ) | $ | (1,110 | ) | $ | 730 | $ | 1,200 | $ | 1,490 | |||||||||
Asset based fees
|
(350 | ) | (230 | ) | (120 | ) | 120 | 230 | 350 | |||||||||||||||
General fund equity investments(3)
|
(570 | ) | (380 | ) | (180 | ) | 180 | 370 | 570 | |||||||||||||||
Total underlying sensitivity before hedging
|
$ | (5,540 | ) | $ | (3,270 | ) | $ | (1,410 | ) | $ | 1,030 | $ | 1,800 | $ | 2,410 | |||||||||
Impact of macro and dynamic hedge assets(4)
|
$ | 3,750 | $ | 2,130 | $ | 930 | $ | (800 | ) | $ | (1,380 | ) | $ | (1,830 | ) | |||||||||
Net potential impact on net income after impact of hedging
|
$ | (1,790 | ) | $ | (1,140 | ) | $ | (480 | ) | $ | 230 | $ | 420 | $ | 580 | |||||||||
As at December 31, 2013
|
||||||||||||||||||||||||
(C$ millions)
|
-30 | % | -20 | % | -10 | % | 10 | % | 20 | % | 30 | % | ||||||||||||
Underlying sensitivity to net income attributed to
shareholders(2)
|
||||||||||||||||||||||||
Variable annuity guarantees
|
$ | (4,120 | ) | $ | (2,310 | ) | $ | (960 | ) | $ | 610 | $ | 1,060 | $ | 1,380 | |||||||||
Asset based fees
|
(310 | ) | (210 | ) | (110 | ) | 110 | 210 | 310 | |||||||||||||||
General fund equity investments(3)
|
(420 | ) | (280 | ) | (130 | ) | 140 | 280 | 430 | |||||||||||||||
Total underlying sensitivity before hedging
|
$ | (4,850 | ) | $ | (2,800 | ) | $ | (1,200 | ) | $ | 860 | $ | 1,550 | $ | 2,120 | |||||||||
Impact of macro and dynamic hedge assets(4)
|
$ | 3,510 | $ | 1,880 | $ | 770 | $ | (680 | ) | $ | (1,160 | ) | $ | (1,510 | ) | |||||||||
Net potential impact on net income after impact of hedging
|
$ | (1,340 | ) | $ | (920 | ) | $ | (430 | ) | $ | 180 | $ | 390 | $ | 610 |
(1)
|
See “Caution related to sensitivities” above.
|
(2)
|
Defined as earnings sensitivity to a change in public equity markets including settlements on reinsurance contracts, but before the offset of hedge assets or other risk mitigants.
|
(3)
|
This impact for general fund equities is calculated as at a point-in-time and does not include: (i) any potential impact on public equity weightings; (ii) any gains or losses on public equities held in the Corporate and Other segment; or (iii) any gains or losses on public equity investments held in Manulife Bank. The participating policy funds are largely self-supporting and generate no material impact on net income attributed to shareholders as a result of changes in equity markets.
|
(4)
|
Includes the impact of rebalancing equity hedges in the macro and dynamic hedging program. The impact of dynamic hedge rebalancing represents the impact of rebalancing equity hedges for dynamically hedged variable annuity guarantee best estimate liabilities at 5% intervals, but does not include any impact in respect of other sources of hedge ineffectiveness e.g. fund tracking, realized volatility and equity, interest rate correlations different from expected, among other factors.
|
Impact on MLI MCCSR ratio
|
||||||||||||||||||||||||
Percentage points
|
-30 | % | -20 | % | -10 | % | 10 | % | 20 | % | 30 | % | ||||||||||||
September 30, 2014
|
(23 | ) | (12 | ) | (4 | ) | 2 | 15 | 17 | |||||||||||||||
December 31, 2013
|
(14 | ) | (8 | ) | (4 | ) | 13 | 25 | 25 |
(1)
|
See “Caution related to sensitivities” above. In addition, estimates exclude changes to the net actuarial gains/losses with respect to the Company’s pension obligations as a result of changes in equity markets, as the impact on the quoted sensitivities is not considered to be material.
|
(2)
|
The potential impact is shown assuming that the change in value of the hedge assets does not completely offset the change in the dynamically hedged variable annuity guarantee liabilities. The estimated amount that would not be completely offset relates to our practices of not hedging the provisions for adverse deviation and of rebalancing equity hedges for dynamically hedged variable annuity liabilities at 5% intervals.
|
The following table shows the notional value of shorted equity futures contracts utilized for our variable annuity guarantee dynamic hedging and our macro equity risk hedging strategies.
|
As at
|
September 30,
|
December 31,
|
||||||
(C$ millions)
|
2014
|
2013
|
||||||
For variable annuity guarantee dynamic hedging strategy
|
$ | 9,600 | $ | 7,500 | ||||
For macro equity risk hedging strategy
|
3,000 | 2,000 | ||||||
Total
|
$ | 12,600 | $ | 9,500 |
D4
|
Interest rate and spread risk
|
At September 30, 2014, we estimated the sensitivity of our net income attributed to shareholders to a 100 basis point parallel decline in interest rates to be a charge of $700 million, and to a 100 basis point increase in interest rates to be a benefit of $300 million. The $300 million increase in sensitivity to a 100 basis point decline in interest rates from December 31, 2013 was primarily attributable to interest rate movements during 2014 as well as updates to our valuation assumptions as a result of our annual review of actuarial methods and assumptions.
The 100 basis point parallel decline includes a change of one per cent in current government, swap and corporate rates for all maturities across all markets with no change in credit spreads between government, swap and corporate rates, and with a floor of zero on government rates and corporate spreads, relative to the rates assumed in the valuation of policy liabilities, including embedded derivatives. As the sensitivity to a 100 basis point change in interest rates includes any associated change in the applicable prescribed reinvestment scenario, the impact of changes to interest rates for less than, or more than, the amounts indicated are unlikely to be linear. Furthermore, the reinvestment scenario changes tend to amplify the negative effects of a decrease in interest rates, and dampen the positive effects of an increase in interest rates. For variable annuity guarantee liabilities that are dynamically hedged, it is assumed that interest rate hedges are rebalanced at 20 basis point intervals.
|
The income impact does not allow for any future potential changes to the URR assumptions or other potential impacts of lower interest rate levels, for example, increased strain on the sale of new business or lower interest earned on our surplus assets. It also does not reflect potential management actions to realize gains or losses on AFS fixed income assets held in the surplus segment in order to partially offset changes in MLI’s MCCSR ratio due to changes in interest rate levels.
|
September 30, 2014
|
December 31,2013
|
|||||||||||||||
As at
|
-100 | bp | +100 | bp | -100 | bp | +100 | bp | ||||||||
Net income attributed to shareholders (C$ millions)
|
||||||||||||||||
Excluding change in market value of AFS fixed income assets held in the surplus segment
|
$ | (700 | ) | $ | 300 | $ | (400 | ) | $ | - | ||||||
From fair value changes in AFS fixed income assets held in surplus, if realized
|
700 | (600 | ) | 600 | (600 | ) | ||||||||||
MLI's MCCSR ratio (Percentage points)
|
||||||||||||||||
Before impact of change in market value of AFS fixed income assets held in the surplus segment(5)
|
(16 | ) | 13 | (13 | ) | 18 | ||||||||||
From fair value changes in AFS fixed income assets held in surplus, if realized
|
4 | (5 | ) | 4 | (5 | ) |
(1)
|
See “Caution related to sensitivities” above. In addition, estimates exclude changes to the net actuarial gains/losses with respect to the Company’s pension obligations as a result of changes in interest rates, as the impact on the quoted sensitivities is not considered to be material.
|
(2)
|
Includes guaranteed insurance and annuity products, including variable annuity contracts as well as adjustable benefit products where benefits are generally adjusted as interest rates and investment returns change, a portion of which have minimum credited rate guarantees. For adjustable benefit products subject to minimum rate guarantees, the sensitivities are based on the assumption that credited rates will be floored at the minimum.
|
(3)
|
The amount of gain or loss that can be realized on AFS fixed income assets held in the surplus segment will depend on the aggregate amount of unrealized gain or loss.
|
(4)
|
Sensitivities are based on projected asset and liability cash flows at the beginning of the quarter adjusted for the estimated impact of new business, investment markets and asset trading during the quarter. Any true-up to these estimates, as a result of the final asset and liability cash flows to be used in the next quarter’s projection, are reflected in the next quarter’s sensitivities. Impact of realizing fair value changes in AFS fixed income assets is as of the end of the quarter.
|
(5)
|
The impact on MLI’s MCCSR ratio includes both the impact of the change in earnings on available capital as well as the change in required capital that results from a change in interest rates. The potential increase in required capital accounted for 10 of the 16 point impact of a 100 bp decline in interest rates on MLI’s MCCSR ratio this quarter.
|
The following table shows the potential impact on net income attributed to shareholders resulting from a change in credit spreads and swap spreads over government bond rates for all maturities across all markets with a floor of zero on the total interest rate, relative to the spreads assumed in the valuation of policy liabilities.
|
As at
|
||||||||
(C$ millions)
|
September 30,
2014
|
December 31,
2013
|
||||||
Corporate spreads(4)
|
||||||||
Increase 50 basis points
|
$ | 500 | $ | 400 | ||||
Decrease 50 basis points
|
(500 | ) | (400 | ) | ||||
Swap spreads
|
||||||||
Increase 20 basis points
|
$ | (500 | ) | $ | (400 | ) | ||
Decrease 20 basis points
|
500 | 400 |
(1)
|
See “Caution related to sensitivities” above.
|
(2)
|
The impact on net income attributed to shareholders assumes no gains or losses are realized on our AFS fixed income assets held in the surplus segment and excludes the impact arising from changes in off-balance sheet bond fund value arising from changes in credit spreads. The participating policy funds are largely self-supporting and generate no material impact on net income attributed to shareholders as a result of changes in corporate and swap spreads.
|
(3)
|
Sensitivities are based on projected asset and liability cash flows at the beginning of the quarter adjusted for the estimated impact of new business, investment markets and asset trading during the quarter. Any true-up to these estimates, as a result of the final asset and liability cash flows to be used in the next quarter’s projection, are reflected in the next quarter’s sensitivities.
|
(4)
|
Corporate spreads are assumed to grade to an expected long-term average over five years.
|
The following table shows the potential impact on net income attributed to shareholders resulting from changes in market values of ALDA that differ from the expected levels assumed in the valuation of policy liabilities.
Potential impact on net income attributed to shareholders arising from changes in ALDA returns(1),(2),(3),(4)
|
As at
|
September 30, 2014
|
December 31, 2013
|
||||||||||||||
(C$ millions)
|
-10 | % | 10 | % | -10 | % | 10 | % | ||||||||
Real estate, agriculture and timber assets
|
$ | (1,200 | ) | $ | 1,200 | $ | (1,000 | ) | $ | 1,000 | ||||||
Private equities and other alternative long-duration assets
|
(1,100 | ) | 1,100 | (900 | ) | 800 | ||||||||||
Alternative long-duration assets
|
$ | (2,300 | ) | $ | 2,300 | $ | (1,900 | ) | $ | 1,800 |
(1)
|
See “Caution Related to Sensitivities” above.
|
(2)
|
This impact is calculated as at a point-in-time impact and does not include: (i) any potential impact on ALDA, weightings; (ii) any gains or losses on ALDA held in the Corporate and Other segment; or (iii) any gains or losses on ALDA held in Manulife Bank.
|
(3)
|
The participating policy funds are largely self-supporting and generate no material impact on net income attributed to shareholders as a result of changes in alternative long-duration asset returns.
|
(4)
|
Net income impact does not consider any impact of the market correction on assumed future return assumptions.
|
E
|
ACCOUNTING MATTERS AND CONTROLS
|
E1
|
Critical accounting and actuarial policies
|
E2
|
Actuarial methods and assumptions
|
For the quarter ended September 30, 2014
|
Change in net insurance and investment contract liabilities
|
Change in net income attributed to shareholders
|
||||||
Assumption
(C$ millions)
|
Increase (decrease)
|
Increase (decrease)
|
||||||
Mortality and morbidity updates
|
$ | (113 | ) | $ | 99 | |||
Lapses and policyholder behaviour
|
425 | (329 | ) | |||||
Updates to actuarial standards
|
||||||||
Segregated fund bond calibration
|
217 | (157 | ) | |||||
Other updates
|
(467 | ) | 318 | |||||
Net impact
|
$ | 62 | $ | (69 | ) |
E3
|
Sensitivity of policy liabilities to updates and assumptions
|
As at
|
Increase (decrease) in after-tax income
|
|||||||||||||||
(C$ millions)
|
September 30, 2014
|
December 31, 2013
|
||||||||||||||
Asset related assumptions updated periodically in valuation basis changes
|
Increase
|
Decrease
|
Increase
|
Decrease
|
||||||||||||
100 basis point change in future annual returns for public equities(1)
|
$ | 400 | $ | (400 | ) | $ | 400 | $ | (400 | ) | ||||||
100 basis point change in future annual returns for alternative long-duration assets(2)
|
4,700 | (4,500 | ) | 3,800 | (3,700 | ) | ||||||||||
100 basis point change in equity volatility assumption for stochastic segregated fund modelling(3)
|
(200 | ) | 200 | (200 | ) | 200 |
(1)
|
The sensitivity to public equity returns above includes the impact on both segregated fund guarantee reserves and on other policy liabilities. For a 100 basis point increase in expected growth rates, the impact from segregated fund guarantee reserves is a $100 million increase (December 31, 2013 – $200 million increase). For a 100 basis point decrease in expected growth rates, the impact from segregated fund guarantee reserves is a $200 million decrease (December 31, 2013 – $200 million decrease). Expected long-term annual market growth assumptions for public equities pre-dividends for key markets are based on long-term historical observed experience and compliance with actuarial standards. The growth rates for returns in the major markets used in the stochastic valuation models for valuing segregated fund guarantees are 7.6% per annum in Canada, 7.6% per annum in the U.S. and 5.2% per annum in Japan. Growth assumptions for European equity funds are market-specific and vary between 5.8% and 7.85%.
|
(2)
|
ALDA include commercial real estate, timber and agricultural real estate, oil and gas, and private equities. The increase of $900 million in sensitivity from December 31, 2013 to September 30, 2014 is related to the impact of the decrease in risk free rates in some jurisdictions during the period, decreasing the rate at which funds can be reinvested, as well as the increase in market value of the ALDA, due to investment activities and positive investment returns.
|
(3)
|
Volatility assumptions for public equities are based on long-term historic observed experience and compliance with actuarial standards. The resulting volatility assumptions are 17.15% per annum in Canada and 17.15% per annum in the U.S. for large cap public equities, and 19% per annum in Japan. For European equity funds, the volatility assumptions vary between 16.25% and 18.4%.
|
E4
|
Accounting and reporting changes
|
Topic
|
Effective
Date
|
Recognition / Measurement /
Presentation
|
Impact / Expected
Impact
|
Future Accounting Changes
|
|||
Annual Improvements 2012-2014 cycle
|
Jan 1, 2016
|
Measurement and Presentation
|
Not significant
|
IFRS 10 "Consolidated Financial Statements" and IAS 28 "Investments in Associates and Joint Ventures"
|
Jan 1, 2016
|
Recognition
|
Not significant
|
E5
|
U.S. GAAP results
|
For the quarters ended September 30,
|
Quarterly Results
|
|||||||
(C$ millions, unaudited)
|
2014
|
2013
|
||||||
Net income attributed to shareholders in accordance with IFRS
|
$ | 1,100 | $ | 1,034 | ||||
Key earnings differences:
|
||||||||
Variable annuity guarantee liabilities and related dynamic hedges(1)
|
$ | 221 | $ | (635 | ) | |||
Impact of mark-to-market accounting and investing activities on investment income and policy liabilities(2)
|
(10 | ) | (394 | ) | ||||
New business differences including acquisition costs(3)
|
(223 | ) | (210 | ) | ||||
Changes in actuarial methods and assumptions(4)
|
(335 | ) | 175 | |||||
Other differences
|
70 | 178 | ||||||
Total earnings difference
|
$ | (277 | ) | $ | (886 | ) | ||
Net income attributed to shareholders in accordance with U.S. GAAP
|
$ | 823 | $ | 148 |
(1)
|
IFRS follows a predominantly “mark-to-market” accounting approach to measure variable annuity guarantee liabilities while U.S. GAAP only uses “mark-to-market” accounting for certain benefit guarantees. The U.S. GAAP accounting results in an accounting mismatch between the hedge assets supporting the dynamically hedged guarantees and the guarantees not accounted for on a mark-to-market basis. Another difference is that U.S. GAAP reflects the Company’s own credit standing in the measurement of the liability. In 3Q14, we reported a net gain of $178 million (3Q13 – charge of $169 million) in our total variable annuity businesses under U.S. GAAP compared with a charge of $43 million under IFRS (3Q13 – gain of $466 million). Under both accounting bases we reported charges on our macro hedging program of $17 million in 3Q14 (3Q13 – $329 million).
|
(2)
|
Under IFRS, accumulated unrealized gains and losses arising from fixed income investments and interest rate derivatives supporting policy liabilities are largely offset in the valuation of the policy liabilities. The 3Q14 IFRS impacts of fixed income reinvestment assumptions, general fund equity investments, fixed income and alternative long-duration asset investing totaled a net gain of $455 million (3Q13 – $416 million) compared with U.S. GAAP net realized gains and other investment-related gains of $445 million (3Q13 – $22 million).
|
(3)
|
Acquisition costs that are related to and vary with the production of new business are explicitly deferred and amortized under U.S. GAAP but are recognized as an implicit reduction in insurance liabilities along with other new business gains and losses under IFRS.
|
(4)
|
The charge recognized under IFRS from changes in actuarial methods and assumptions of $69 million in 3Q14 (3Q13 – $252 million) compared to a charge of $404 million (3Q13 –$77 million) on a U.S. GAAP basis.
|
16
|
This item is a non-GAAP measure. See “Performance and Non-GAAP Measures” below. See also section A4 “Future changes to non-GAAP measures” above.
|
E6
|
Quarterly financial information
|
As at and for the three months ended
|
Sept 30,
|
Jun 30,
|
Mar 31,
|
Dec 31,
|
Sept 30,
|
Jun 30,
|
Mar 31,
|
Dec 31,
|
||||||||||||||||||||||||
(C$ millions, except per share amounts
or otherwise stated, unaudited)
|
2014
|
2014
|
2014
|
2013
|
2013
|
2013
|
2013
|
2012(1)
|
||||||||||||||||||||||||
Revenue
|
||||||||||||||||||||||||||||||||
Premium income
|
||||||||||||||||||||||||||||||||
Life and health insurance
|
$ | 4,072 | $ | 3,786 | $ | 3,696 | $ | 3,956 | $ | 3,879 | $ | 3,681 | $ | 3,837 | $ | 4,335 | ||||||||||||||||
Annuities and pensions
|
569 | 446 | 465 | 592 | 490 | 495 | 580 | 488 | ||||||||||||||||||||||||
Net premium income prior to FDA
coinsurance(2)
|
$ | 4,641 | $ | 4,232 | $ | 4,161 | $ | 4,548 | $ | 4,369 | $ | 4,176 | $ | 4,417 | $ | 4,823 | ||||||||||||||||
Premiums ceded relating to FDA
coinsurance(2)
|
- | - | - | - | - | - | - | (2 | ) | |||||||||||||||||||||||
Investment income
|
2,618 | 2,825 | 2,684 | 2,637 | 2,483 | 2,345 | 2,405 | 2,520 | ||||||||||||||||||||||||
Realized and unrealized gains
(losses) on assets supporting
insurance and investment contract
liabilities(3)
|
1,561 | 4,093 | 5,256 | (2,788 | ) | (2,513 | ) | (9,355 | ) | (2,961 | ) | (2,075 | ) | |||||||||||||||||||
Other revenue
|
2,215 | 2,119 | 2,135 | 2,645 | 1,966 | 2,324 | 1,974 | 1,679 | ||||||||||||||||||||||||
Total revenue
|
$ | 11,035 | $ | 13,269 | $ | 14,236 | $ | 7,042 | $ | 6,305 | $ | (510 | ) | $ | 5,835 | $ | 6,945 | |||||||||||||||
Income (loss) before income taxes
|
$ | 1,392 | $ | 1,211 | $ | 937 | $ | 1,854 | $ | 1,118 | $ | 205 | $ | 570 | $ | 1,091 | ||||||||||||||||
Income tax (expense) recovery
|
(287 | ) | (234 | ) | (133 | ) | (497 | ) | (172 | ) | 103 | (15 | ) | 14 | ||||||||||||||||||
Net income
|
$ | 1,105 | $ | 977 | $ | 804 | $ | 1,357 | $ | 946 | $ | 308 | $ | 555 | $ | 1,105 | ||||||||||||||||
Net income attributed to shareholders
|
$ | 1,100 | $ | 943 | $ | 818 | $ | 1,297 | $ | 1,034 | $ | 259 | $ | 540 | $ | 1,077 | ||||||||||||||||
Reconciliation of core earnings to
net income attributed to shareholders
|
||||||||||||||||||||||||||||||||
Total core earnings(4)
|
$ | 755 | $ | 701 | $ | 719 | $ | 685 | $ | 704 | $ | 609 | $ | 619 | $ | 554 | ||||||||||||||||
Other items to reconcile net income
attributed to shareholders core
earnings(5):
|
||||||||||||||||||||||||||||||||
Investment-related experience in
excess of amounts included in
core earnings
|
320 | 217 | 225 | 215 | 491 | (97 | ) | 97 | 321 | |||||||||||||||||||||||
Direct impact of equity markets,
interest rates and variable annuity
guarantee liabilities
|
70 | 55 | (90 | ) | (81 | ) | 94 | (242 | ) | (107 | ) | 82 | ||||||||||||||||||||
Impact of in-force product changes
and recapture of reinsurance treaties
|
24 | - | - | 261 | - | - | - | - | ||||||||||||||||||||||||
Change in actuarial methods and
assumptions
|
(69 | ) | (30 | ) | (40 | ) | (133 | ) | (252 | ) | (35 | ) | (69 | ) | (87 | ) | ||||||||||||||||
Disposition of Taiwan insurance
business
|
- | - | - | 350 | - | - | - | - | ||||||||||||||||||||||||
Tax items and restructuring charge
related to organizational design
|
- | - | 4 | - | (3 | ) | 24 | - | 207 | |||||||||||||||||||||||
Net income attributed to shareholders
|
$ | 1,100 | $ | 943 | $ | 818 | $ | 1,297 | $ | 1,034 | $ | 259 | $ | 540 | $ | 1,077 | ||||||||||||||||
Basic earnings per common share
|
$ | 0.58 | $ | 0.49 | $ | 0.42 | $ | 0.69 | $ | 0.54 | $ | 0.12 | $ | 0.28 | $ | 0.57 | ||||||||||||||||
Diluted earnings per common share
|
$ | 0.57 | $ | 0.49 | $ | 0.42 | $ | 0.68 | $ | 0.54 | $ | 0.12 | $ | 0.28 | $ | 0.57 | ||||||||||||||||
Segregated funds deposits
|
$ | 5,509 | $ | 5,587 | $ | 6,776 | $ | 5,756 | $ | 5,321 | $ | 5,516 | $ | 6,466 | $ | 5,728 | ||||||||||||||||
Total assets (in billions)
|
$ | 555 | $ | 536 | $ | 539 | $ | 514 | $ | 498 | $ | 498 | $ | 498 | $ | 485 | ||||||||||||||||
Weighted average common shares
(in millions)
|
1,859 | 1,854 | 1,849 | 1,844 | 1,839 | 1,834 | 1,828 | 1,822 | ||||||||||||||||||||||||
Diluted weighted average common
shares (in millions)
|
1,883 | 1,878 | 1,874 | 1,869 | 1,864 | 1,860 | 1,856 | 1,854 | ||||||||||||||||||||||||
Dividends per common share
|
$ | 0.155 | $ | 0.13 | $ | 0.13 | $ | 0.13 | $ | 0.13 | $ | 0.13 | $ | 0.13 | $ | 0.13 | ||||||||||||||||
CDN$ to US$1 - Statement of
Financial Position
|
1.1208 | 1.0676 | 1.1053 | 1.0636 | 1.0285 | 1.0512 | 1.0156 | 0.9949 | ||||||||||||||||||||||||
CDN$ to US$1 - Statement of Income
|
1.0890 | 1.0905 | 1.1031 | 1.0494 | 1.0386 | 1.0230 | 1.0083 | 0.9914 |
(1)
|
The 2012 results were restated to reflect the retrospective application of new IFRS accounting standards effective January 1, 2013. For a detailed description of the change see note 2 to our 2013 Annual Consolidated Financial Statements.
|
(2)
|
On June 29, 2012 and September 25, 2012 the Company entered into coinsurance agreements to reinsure 89 per cent of its book value fixed deferred annuity (“FDA”) business. Under the terms of the agreements, the Company will maintain responsibility for servicing of the policies and managing some of the assets and has retained the remaining exposure.
|
(3)
|
For fixed income assets supporting insurance and investment contract liabilities and for equities supporting pass-through products and derivatives related to variable hedging programs, the impact of realized and unrealized gains (losses) on the assets is largely offset in the change in insurance and investment contract liabilities.
|
(4)
|
Core earnings is a non-GAAP measure. See “Performance and Non-GAAP Measures” below.
|
(5)
|
For explanations of other items, see “Q3 and year-to-date earnings analysis” table in section B “Financial Highlights” and for an operating segment split of these items see the 8 quarter trend tables in section F3 “Performance and Non-GAAP Measures” which reconcile net income attributed to shareholders to core earnings.
|
E7
|
Changes in internal control over financial reporting
|
E8
|
Audit Committee
|
17
|
This item is a non-GAAP measure. See “Performance and Non-GAAP Measures” below. See also section A4 “Future changes to non-GAAP measures” above.
|
F
|
Other
|
F1
|
Quarterly dividend
|
Class A Shares Series 1 – $0.25625 per share
|
Class 1 Shares Series 9 – $0.275 per share
|
Class A Shares Series 2 – $0.29063 per share
|
Class 1 Shares Series 11 – $0.25 per share
|
Class A Shares Series 3 – $0.28125 per share
|
Class 1 Shares Series 13 – $0.2375 per share
|
Class 1 Shares Series 3 – $0.2625 per share
|
Class 1 Shares Series 15 – $0.24375 per share
|
Class 1 Shares Series 5 – $0.275 per share
|
Class 1 Shares Series 17 - $0.336575 per share
|
Class 1 Shares Series 7 – $0.2875 per share
|
F2
|
Outstanding shares – selected information
|
F3
|
Performance and Non-GAAP Measures
|
1.
|
Expected earnings on in-force, including expected release of provisions for adverse deviation, fee income, margins on group business and spread business such as Manulife Bank and asset fund management.
|
2.
|
Macro hedging costs based on expected market returns.
|
3.
|
New business strain.
|
4.
|
Policyholder experience gains or losses.
|
5.
|
Acquisition and operating expenses compared to expense assumptions used in the measurement of insurance and investment contract liabilities.
|
6.
|
Up to $200 million of favourable investment-related experience reported in a single year which is referred to as “core investment gains”.
|
7.
|
Earnings on surplus other than mark-to-market items. Gains on available-for-sale (“AFS”) equities and seed money investments are included in core earnings.
|
8.
|
Routine or non-material legal settlements.
|
9.
|
All other items not specifically excluded.
|
10.
|
Tax on the above items.
|
11.
|
All tax related items except the impact of enacted or substantially enacted income tax rate changes.
|
1.
|
The direct impact of equity markets and interest rates and variable annuity guarantee liabilities, consisting of:
|
§
|
The earnings impact of the difference between the net increase (decrease) in variable annuity liabilities that are dynamically hedged and the performance of the related hedge assets. Our variable annuity dynamic hedging strategy is not designed to completely offset the sensitivity of insurance and investment contract liabilities to all risks or measurements associated with the guarantees embedded in these products for a number of reasons, including: provisions for adverse deviation, fund performance, the portion of the interest rate risk that is not dynamically hedged, realized equity and interest rate volatilities and changes to policyholder behaviour.
|
§
|
Gains (charges) on variable annuity guarantee liabilities that are not dynamically hedged.
|
§
|
Gains (charges) on general fund equity investments supporting insurance and investment contract liabilities and on fee income.
|
§
|
Gains (charges) on macro equity hedges relative to expected costs. The expected cost of macro hedges is calculated using the equity assumptions used in the valuation of insurance and investment contract liabilities.
|
§
|
Gains (charges) on higher (lower) fixed income reinvestment rates assumed in the valuation of insurance and investment contract liabilities, including the impact on the fixed income ultimate reinvestment rate (“URR”).
|
§
|
Gains (charges) on sale of AFS bonds and open derivatives not in hedging relationships in the Corporate and Other segment.
|
2.
|
Net favourable investment-related experience in excess of $200 million per annum or net unfavourable investment-related experience on a year-to-date basis. Investment-related experience relates to fixed income trading, alternative long-duration asset returns, credit experience and asset mix changes. This favourable and unfavourable investment-related experience is a combination of reported investment experience as well as the impact of investing activities on the measurement of our insurance and investment contract liabilities. The maximum of $200 million per annum to be reported in core earnings compares with an average of over $80 million per quarter of favourable investment-related experience reported since 1Q07.
|
3.
|
Mark-to-market gains or losses on assets held in the Corporate and Other segment other than gains on AFS equities and seed money investments in new segregated or mutual funds.
|
4.
|
Changes in actuarial methods and assumptions.
|
5.
|
The impact on the measurement of insurance and investment contract liabilities of changes in product features or new reinsurance transactions, if material.
|
6.
|
Goodwill impairment charges.
|
7.
|
Gains or losses on disposition of a business.
|
8.
|
Material one-time only adjustments, including highly unusual/extraordinary and material legal settlements or other items that are material and exceptional in nature.
|
9.
|
Tax on the above items.
|
10.
|
Impact of enacted or substantially enacted income tax rate changes.
|
Quarterly Results
|
||||||||||||||||||||||||||||||||
(C$ millions, unaudited)
|
3 | Q | 2 | Q | 1 | Q | 4 | Q | 3 | Q | 2 | Q | 1 | Q | 4 | Q | ||||||||||||||||
2014 | 2014 | 2014 | 2013 | 2013 | 2013 | 2013 | 2012 | (1) | ||||||||||||||||||||||||
Core earnings (loss)
|
||||||||||||||||||||||||||||||||
Asia Division
|
$ | 273 | $ | 231 | $ | 244 | $ | 227 | $ | 242 | $ | 226 | $ | 226 | $ | 180 | ||||||||||||||||
Canadian Division
|
243 | 232 | 228 | 233 | 268 | 225 | 179 | 233 | ||||||||||||||||||||||||
U.S. Division
|
342 | 329 | 374 | 366 | 361 | 343 | 440 | 293 | ||||||||||||||||||||||||
Corporate and Other (excluding
expected cost of macro hedges
and core investment gains)
|
(107 | ) | (92 | ) | (135 | ) | (138 | ) | (135 | ) | (105 | ) | (128 | ) | (62 | ) | ||||||||||||||||
Expected cost of macro hedges
|
(46 | ) | (49 | ) | (42 | ) | (53 | ) | (84 | ) | (128 | ) | (148 | ) | (140 | ) | ||||||||||||||||
Investment-related experience
included in core earnings
|
50 | 50 | 50 | 50 | 52 | 48 | 50 | 50 | ||||||||||||||||||||||||
Total core earnings
|
$ | 755 | $ | 701 | $ | 719 | $ | 685 | $ | 704 | $ | 609 | $ | 619 | $ | 554 | ||||||||||||||||
Investment-related experience in
excess of amounts included in
core earnings
|
320 | 217 | 225 | 215 | 491 | (97 | ) | 97 | 321 | |||||||||||||||||||||||
Core earnings plus investment-
related experience in excess
of amounts included in core earnings
|
$ | 1,075 | $ | 918 | $ | 944 | $ | 900 | $ | 1,195 | $ | 512 | $ | 716 | $ | 875 | ||||||||||||||||
Other items to reconcile core
earnings to net income attributed
to shareholders:
|
||||||||||||||||||||||||||||||||
Direct impact of equity markets
and interest rates and variable
annuity guarantee liabilities
(details below)
|
70 | 55 | (90 | ) | (81 | ) | 94 | (242 | ) | (107 | ) | 82 | ||||||||||||||||||||
Impact of in-force product changes
and recapture of reinsurance
treaties
|
24 | - | - | 261 | - | - | - | - | ||||||||||||||||||||||||
Change in actuarial methods
and assumptions
|
(69 | ) | (30 | ) | (40 | ) | (133 | ) | (252 | ) | (35 | ) | (69 | ) | (87 | ) | ||||||||||||||||
Disposition of Taiwan insurance
business
|
- | - | - | 350 | - | - | - | - | ||||||||||||||||||||||||
Tax items and restructuring charge
related to organizational design
|
- | - | 4 | - | (3 | ) | 24 | - | 207 | |||||||||||||||||||||||
Net income attributed to shareholders
|
$ | 1,100 | $ | 943 | $ | 818 | $ | 1,297 | $ | 1,034 | $ | 259 | $ | 540 | $ | 1,077 | ||||||||||||||||
Other market-related factors
|
||||||||||||||||||||||||||||||||
Direct impact of equity markets
and variable annuity guarantee
liabilities
|
$ | (35 | ) | $ | 66 | $ | (71 | ) | $ | 105 | $ | 306 | $ | (196 | ) | $ | 243 | $ | 412 | |||||||||||||
Gains (charges) on higher (lower)
fixed income reinvestment rates
assumed in the valuation of
policy liabilities
|
165 | 22 | 9 | (105 | ) | (77 | ) | 151 | (245 | ) | (290 | ) | ||||||||||||||||||||
Gains (charges) on sale of AFS
bonds and derivative positions
in the Corporate segment
|
(15 | ) | (8 | ) | (3 | ) | (55 | ) | (72 | ) | (127 | ) | (8 | ) | (40 | ) | ||||||||||||||||
Charges due to lower fixed income
URR assumptions used in the
valuation of policy liabilities
|
(45 | ) | (25 | ) | (25 | ) | (26 | ) | (63 | ) | (70 | ) | (97 | ) | - | |||||||||||||||||
Direct impact of equity markets
and interest rates and variable
annuity guarantee liabilities
|
$ | 70 | $ | 55 | $ | (90 | ) | $ | (81 | ) | $ | 94 | $ | (242 | ) | $ | (107 | ) | $ | 82 |
(1)
|
The 2012 results were restated to reflect the retrospective application of new IFRS accounting standards effective January 1, 2013. For a detailed description of the change see note 2 to our 2013 Annual Consolidated Financial Statements.
|
Quarterly Results
|
||||||||||||||||||||||||||||||||
(C$ millions, unaudited)
|
3 | Q | 2 | Q | 1 | Q | 4 | Q | 3 | Q | 2 | Q | 1 | Q | 4 | Q | ||||||||||||||||
2014 | 2014 | 2014 | 2013 | 2013 | 2013 | 2013 | 2012 | |||||||||||||||||||||||||
Asia Division core earnings
|
$ | 273 | $ | 231 | $ | 244 | $ | 227 | $ | 242 | $ | 226 | $ | 226 | $ | 180 | ||||||||||||||||
Investment-related experience in
excess of amounts included in
core earnings
|
27 | 18 | 19 | (5 | ) | (4 | ) | (18 | ) | 43 | 33 | |||||||||||||||||||||
Core earnings plus investment-
related experience in excess of
amounts included in core earnings
|
$ | 300 | $ | 249 | $ | 263 | $ | 222 | $ | 238 | $ | 208 | $ | 269 | $ | 213 | ||||||||||||||||
Other items to reconcile core earnings
to net income attributable to
shareholders
|
||||||||||||||||||||||||||||||||
Direct impact of equity markets
and interest rates and variable
annuity guarantee liabilities
|
32 | 88 | (25 | ) | 85 | 242 | 178 | 659 | 469 | |||||||||||||||||||||||
Recapture of reinsurance treaty
and tax items
|
- | - | - | 68 | - | - | - | - | ||||||||||||||||||||||||
Disposition of Taiwan insurance
business
|
- | - | - | 350 | - | - | - | - | ||||||||||||||||||||||||
Tax items
|
- | - | 4 | - | - | - | - | - | ||||||||||||||||||||||||
Net income attributed to shareholders
|
$ | 332 | $ | 337 | $ | 242 | $ | 725 | $ | 480 | $ | 386 | $ | 928 | $ | 682 |
Quarterly Results
|
||||||||||||||||||||||||||||||||
(C$ millions, unaudited)
|
3 | Q | 2 | Q | 1 | Q | 4 | Q | 3 | Q | 2 | Q | 1 | Q | 4 | Q | ||||||||||||||||
2014 | 2014 | 2014 | 2013 | 2013 | 2013 | 2013 | 2012 | |||||||||||||||||||||||||
Canadian Division core earnings
|
$ | 243 | $ | 232 | $ | 228 | $ | 233 | $ | 268 | $ | 225 | $ | 179 | $ | 233 | ||||||||||||||||
Investment-related experience in
excess of amounts included in
core earnings
|
19 | 46 | 135 | 106 | 135 | (88 | ) | (187 | ) | (31 | ) | |||||||||||||||||||||
Core earnings plus investment-
related experience in excess of
amounts included in core earnings
|
$ | 262 | $ | 278 | $ | 363 | $ | 339 | $ | 403 | $ | 137 | $ | (8 | ) | $ | 202 | |||||||||||||||
Other items to reconcile core earnings
to net income (loss) attributable to shareholders
|
||||||||||||||||||||||||||||||||
Direct impact of equity markets
and interest rates and variable
annuity guarantee liabilities
|
- | (11 | ) | 14 | 34 | 14 | (34 | ) | (54 | ) | 49 | |||||||||||||||||||||
Recapture of reinsurance treaty
and tax items
|
24 | - | - | - | (3 | ) | - | - | - | |||||||||||||||||||||||
Net income (loss) attributed to shareholders
|
$ | 286 | $ | 267 | $ | 377 | $ | 373 | $ | 414 | $ | 103 | $ | (62 | ) | $ | 251 |
Quarterly Results
|
||||||||||||||||||||||||||||||||
(C$ millions, unaudited)
|
3 | Q | 2 | Q | 1 | Q | 4 | Q | 3 | Q | 2 | Q | 1 | Q | 4 | Q | ||||||||||||||||
2014 | 2014 | 2014 | 2013 | 2013 | 2013 | 2013 | 2012 | (1) | ||||||||||||||||||||||||
U.S. Division core earnings
|
$ | 342 | $ | 329 | $ | 374 | $ | 366 | $ | 361 | $ | 343 | $ | 440 | $ | 293 | ||||||||||||||||
Investment-related experience in
excess of amounts included in
core earnings
|
319 | 206 | 111 | 161 | 404 | 65 | 263 | 367 | ||||||||||||||||||||||||
Core earnings plus investment-
related experience in excess of
amounts included in core earnings
|
$ | 661 | $ | 535 | $ | 485 | $ | 527 | $ | 765 | $ | 408 | $ | 703 | $ | 660 | ||||||||||||||||
Other items to reconcile core earnings
to net income (loss) attributable to shareholders
|
||||||||||||||||||||||||||||||||
Direct impact of equity markets
and interest rates and variable
annuity guarantee liabilities
|
18 | 24 | (82 | ) | 105 | 163 | 21 | 23 | (104 | ) | ||||||||||||||||||||||
Impact of in-force product changes
and recapture of reinsurance
treaties
|
- | - | - | 193 | - | - | - | - | ||||||||||||||||||||||||
Tax items
|
- | - | - | - | - | - | - | 170 | ||||||||||||||||||||||||
Net income attributed to shareholders
|
$ | 679 | $ | 559 | $ | 403 | $ | 825 | $ | 928 | $ | 429 | $ | 726 | $ | 726 |
(1)
|
The 2012 results were restated to reflect the retrospective application of new IFRS accounting standards effective January 1, 2013. For a detailed description of the change see note 2 to our 2013 Annual Consolidated Financial Statements.
|
Quarterly Results
|
||||||||||||||||||||||||||||||||
(C$ millions, unaudited)
|
3 | Q | 2 | Q | 1 | Q | 4 | Q | 3 | Q | 2 | Q | 1 | Q | 4 | Q | ||||||||||||||||
2014 | 2014 | 2014 | 2013 | 2013 | 2013 | 2013 | 2012 | (1) | ||||||||||||||||||||||||
Corporate and Other core loss
(excluding expected cost of
macro hedges and core
investment gains)
|
$ | (107 | ) | $ | (92 | ) | $ | (135 | ) | $ | (138 | ) | $ | (135 | ) | $ | (105 | ) | $ | (128 | ) | $ | (62 | ) | ||||||||
Expected cost of macro hedges
|
(46 | ) | (49 | ) | (42 | ) | (53 | ) | (84 | ) | (128 | ) | (148 | ) | (140 | ) | ||||||||||||||||
Investment-related experience
included in core earnings
|
50 | 50 | 50 | 50 | 52 | 48 | 50 | 50 | ||||||||||||||||||||||||
Total core loss
|
$ | (103 | ) | $ | (91 | ) | $ | (127 | ) | $ | (141 | ) | $ | (167 | ) | $ | (185 | ) | $ | (226 | ) | $ | (152 | ) | ||||||||
Investment-related experience in
excess of amounts included in
core earnings
|
(45 | ) | (53 | ) | (40 | ) | (47 | ) | (44 | ) | (56 | ) | (22 | ) | (48 | ) | ||||||||||||||||
Core loss plus investment-related experience in excess of amounts
included in core earnings
|
$ | (148 | ) | $ | (144 | ) | $ | (167 | ) | $ | (188 | ) | $ | (211 | ) | $ | (241 | ) | $ | (248 | ) | $ | (200 | ) | ||||||||
Other items to reconcile core
earnings (losses) to net income
(loss) attributed to shareholders
|
||||||||||||||||||||||||||||||||
Direct impact of equity markets
and interest rates and variable
annuity guarantee liabilities
|
20 | (46 | ) | 3 | (305 | ) | (325 | ) | (407 | ) | (735 | ) | (332 | ) | ||||||||||||||||||
Changes in actuarial methods and assumptions
|
(69 | ) | (30 | ) | (40 | ) | (133 | ) | (252 | ) | (35 | ) | (69 | ) | (87 | ) | ||||||||||||||||
Tax items and restructuring charge
related to organizational design
|
- | - | - | - | - | 24 | - | 37 | ||||||||||||||||||||||||
Net loss attributed to shareholders
|
$ | (197 | ) | $ | (220 | ) | $ | (204 | ) | $ | (626 | ) | $ | (788 | ) | $ | (659 | ) | $ | (1,052 | ) | $ | (582 | ) |
(1)
|
The 2012 results were restated to reflect the retrospective application of new IFRS accounting standards effective January 1, 2013. For a detailed description of the change see note 2 to our 2013 Annual Consolidated Financial Statements.
|
Premiums and deposits
|
Quarterly Results
|
|||||||||||
(C$ millions)
|
3Q 2014 | 2Q 2014 | 3Q 2013 | |||||||||
Net premium income
|
$ | 4,641 | $ | 4,232 | $ | 4,369 | ||||||
Deposits from policyholders
|
5,509 | 5,587 | 5,321 | |||||||||
Premiums and deposits per financial statements
|
$ | 10,150 | $ | 9,819 | $ | 9,690 | ||||||
Investment contract deposits
|
15 | 9 | 9 | |||||||||
Mutual fund deposits
|
8,982 | 10,524 | 8,111 | |||||||||
Institutional advisory account deposits
|
962 | 2,743 | 1,089 | |||||||||
ASO premium equivalents
|
736 | 775 | 723 | |||||||||
Group Benefits ceded premiums
|
1,132 | 991 | 981 | |||||||||
Other fund deposits
|
110 | 105 | 99 | |||||||||
Total premiums and deposits
|
$ | 22,087 | $ | 24,966 | $ | 20,702 | ||||||
Currency impact
|
- | (38 | ) | 709 | ||||||||
Constant currency premiums and deposits
|
$ | 22,087 | $ | 24,928 | $ | 21,411 |
Funds under management
|
||||||||||||
As at
|
Quarterly Results
|
|||||||||||
(C$ millions)
|
September 30,
2014
|
June 30,
2014
|
September 30,
2013
|
|||||||||
Total invested assets
|
$ | 257,842 | $ | 244,129 | $ | 229,221 | ||||||
Segregated funds net assets
|
250,406 | 247,186 | 226,975 | |||||||||
Funds under management per financial statements
|
$ | 508,248 | $ | 491,315 | $ | 456,196 | ||||||
Mutual funds
|
111,600 | 105,147 | 81,049 | |||||||||
Institutional advisory accounts (excluding segregated funds)
|
36,498 | 35,210 | 28,686 | |||||||||
Other funds
|
6,185 | 5,588 | 8,721 | |||||||||
Total funds under management
|
$ | 662,531 | $ | 637,260 | $ | 574,652 | ||||||
Currency impact
|
- | 19,987 | 33,287 | |||||||||
Constant currency funds under management
|
$ | 662,531 | $ | 657,247 | $ | 607,939 |
Capital
|
||||||||||||||
As at
|
Quarterly Results
|
|||||||||||||
(C$ millions)
|
September 30,
2014
|
June 30,
2014
|
September 30,
2013
|
|||||||||||
Total equity
|
$ | 32,596 | $ | 30,780 | $ | 26,881 | ||||||||
Add AOCI loss on cash flow hedges
|
159 | 136 | 115 | |||||||||||
Add liabilities for preferred shares and capital instruments
|
4,909 | 4,884 | 4,119 | |||||||||||
Total capital
|
$ | 37,664 | $ | 35,800 | $ | 31,115 |
Canada
|
U.S.
|
Hong Kong
|
Japan
|
|||||||||||||
MCCSR ratio
|
150 | % | 150 | % | 150 | % | 150 | % | ||||||||
Discount rate
|
8.25 | % | 8.50 | % | 9.00 | % | 6.25 | % | ||||||||
Jurisdictional income tax rate
|
26.5 | % | 35 | % | 16.5 | % | 30.78 | % | ||||||||
Foreign exchange rate
|
n/a | 1.088969 | 0.140491 | 0.010471 | ||||||||||||
Yield on surplus assets
|
4.50 | % | 4.50 | % | 4.50 | % | 2.00 | % |
F4
|
Key planning assumptions and uncertainties
|
F5
|
Caution regarding forward-looking statements
|
Consolidated Statements of Financial Position
|
||||||||
As at
|
||||||||
(Canadian $ in millions, unaudited)
|
September 30, 2014
|
December 31, 2013
|
||||||
Assets
|
||||||||
Cash and short-term securities (note 10)
|
$ | 17,971 | $ | 13,630 | ||||
Debt securities
|
129,586 | 114,957 | ||||||
Public equities
|
14,074 | 13,075 | ||||||
Mortgages
|
38,638 | 37,558 | ||||||
Private placements
|
22,100 | 21,015 | ||||||
Policy loans
|
7,720 | 7,370 | ||||||
Loans to bank clients
|
1,786 | 1,901 | ||||||
Real estate
|
10,204 | 9,708 | ||||||
Other invested assets
|
15,763 | 13,495 | ||||||
Total invested assets (note 3)
|
$ | 257,842 | $ | 232,709 | ||||
Other assets
|
||||||||
Accrued investment income
|
$ | 1,901 | $ | 1,813 | ||||
Outstanding premiums
|
749 | 734 | ||||||
Derivatives (note 4)
|
13,385 | 9,673 | ||||||
Reinsurance assets
|
18,052 | 17,443 | ||||||
Deferred tax assets
|
3,188 | 2,763 | ||||||
Goodwill and intangible assets
|
5,393 | 5,298 | ||||||
Miscellaneous
|
4,408 | 3,324 | ||||||
Total other assets
|
$ | 47,076 | $ | 41,048 | ||||
Segregated funds net assets (note 15)
|
$ | 250,406 | $ | 239,871 | ||||
Total assets
|
$ | 555,324 | $ | 513,628 | ||||
Liabilities and Equity
|
||||||||
Liabilities
|
||||||||
Insurance contract liabilities (note 6)
|
$ | 216,683 | $ | 193,242 | ||||
Investment contract liabilities (note 6)
|
2,568 | 2,524 | ||||||
Deposits from bank clients
|
19,781 | 19,869 | ||||||
Derivatives (note 4)
|
8,367 | 8,929 | ||||||
Deferred tax liabilities
|
1,343 | 617 | ||||||
Other liabilities
|
12,614 | 10,383 | ||||||
$ | 261,356 | $ | 235,564 | |||||
Long-term debt (note 8)
|
3,843 | 4,775 | ||||||
Liabilities for preferred shares and capital instruments (note 9)
|
4,909 | 4,385 | ||||||
Liabilities for subscription receipts (note 10)
|
2,214 | - | ||||||
Segregated funds net liabilities (note 15)
|
250,406 | 239,871 | ||||||
Total liabilities
|
$ | 522,728 | $ | 484,595 | ||||
Equity
|
||||||||
Preferred shares (note 11)
|
$ | 2,447 | $ | 2,693 | ||||
Common shares (note 11)
|
20,548 | 20,234 | ||||||
Contributed surplus
|
266 | 256 | ||||||
Shareholders' retained earnings
|
7,301 | 5,294 | ||||||
Shareholders' accumulated other comprehensive income (loss) on:
|
||||||||
Pension and other post-employment plans
|
(462 | ) | (452 | ) | ||||
Available-for-sale securities
|
619 | 324 | ||||||
Cash flow hedges
|
(159 | ) | (84 | ) | ||||
Translation of foreign operations
|
1,481 | 258 | ||||||
Total shareholders' equity
|
$ | 32,041 | $ | 28,523 | ||||
Participating policyholders' equity
|
96 | 134 | ||||||
Non-controlling interests
|
459 | 376 | ||||||
Total equity
|
$ | 32,596 | $ | 29,033 | ||||
Total liabilities and equity
|
$ | 555,324 | $ | 513,628 | ||||
The accompanying notes are an integral part of these unaudited Interim Consolidated Financial Statements.
|
||||||||
|
||||||||
Donald A. Guloien
|
Richard B. DeWolfe
|
|||||||
President and Chief Executive Officer
|
Chairman of the Board of Directors
|
Consolidated Statements of Income
|
||||||||||||||||
For the
|
three months ended
September 30,
|
nine months ended
September 30,
|
||||||||||||||
(Canadian $ in millions except per share amounts, unaudited)
|
2014
|
2013
|
2014
|
2013
|
||||||||||||
Revenue
|
||||||||||||||||
Premium income
|
||||||||||||||||
Gross premiums
|
$ | 6,507 | $ | 6,130 | $ | 18,485 | $ | 18,544 | ||||||||
Premiums ceded to reinsurers
|
(1,866 | ) | (1,761 | ) | (5,451 | ) | (5,582 | ) | ||||||||
Net premiums
|
$ | 4,641 | $ | 4,369 | $ | 13,034 | $ | 12,962 | ||||||||
Investment income (note 3)
|
||||||||||||||||
Investment income
|
$ | 2,618 | $ | 2,483 | $ | 8,127 | $ | 7,233 | ||||||||
Realized and unrealized gains (losses) on assets supporting
insurance and investment contract liabilities and on the
macro hedge program
|
1,561 | (2,513 | ) | 10,910 | (14,829 | ) | ||||||||||
Net investment income (loss)
|
$ | 4,179 | $ | (30 | ) | $ | 19,037 | $ | (7,596 | ) | ||||||
Other revenue
|
$ | 2,215 | $ | 1,966 | $ | 6,469 | $ | 6,264 | ||||||||
Total revenue
|
$ | 11,035 | $ | 6,305 | $ | 38,540 | $ | 11,630 | ||||||||
Contract benefits and expenses
|
||||||||||||||||
To contract holders and beneficiaries
|
||||||||||||||||
Gross claims and benefits (note 5)
|
$ | 5,111 | $ | 4,604 | $ | 15,044 | $ | 14,029 | ||||||||
Change in insurance contract liabilities
|
2,875 | (898 | ) | 16,053 | (8,767 | ) | ||||||||||
Change in investment contract liabilities
|
40 | 52 | 80 | 121 | ||||||||||||
Benefits and expenses ceded to reinsurers
|
(1,668 | ) | (1,660 | ) | (4,979 | ) | (4,808 | ) | ||||||||
Change in reinsurance assets
|
369 | 383 | 244 | 1,001 | ||||||||||||
Net benefits and claims
|
$ | 6,727 | $ | 2,481 | $ | 26,442 | $ | 1,576 | ||||||||
General expenses
|
1,184 | 1,097 | 3,431 | 3,341 | ||||||||||||
Investment expenses
|
304 | 288 | 992 | 840 | ||||||||||||
Commissions
|
1,065 | 983 | 3,095 | 2,875 | ||||||||||||
Interest expense
|
284 | 265 | 822 | 868 | ||||||||||||
Net premium taxes
|
79 | 73 | 218 | 237 | ||||||||||||
Total contract benefits and expenses
|
$ | 9,643 | $ | 5,187 | $ | 35,000 | $ | 9,737 | ||||||||
Income before income taxes
|
$ | 1,392 | $ | 1,118 | $ | 3,540 | $ | 1,893 | ||||||||
Income tax expense
|
(287 | ) | (172 | ) | (654 | ) | (84 | ) | ||||||||
Net income
|
$ | 1,105 | $ | 946 | $ | 2,886 | $ | 1,809 | ||||||||
Net income (loss) attributed to:
|
||||||||||||||||
Non-controlling interests
|
$ | 9 | $ | 20 | $ | 64 | $ | 36 | ||||||||
Participating policyholders
|
(4 | ) | (108 | ) | (39 | ) | (60 | ) | ||||||||
Shareholders
|
1,100 | 1,034 | 2,861 | 1,833 | ||||||||||||
$ | 1,105 | $ | 946 | $ | 2,886 | $ | 1,809 | |||||||||
Net income attributed to shareholders
|
$ | 1,100 | $ | 1,034 | $ | 2,861 | $ | 1,833 | ||||||||
Preferred share dividends
|
(28 | ) | (33 | ) | (98 | ) | (97 | ) | ||||||||
Common shareholders' net income
|
$ | 1,072 | $ | 1,001 | $ | 2,763 | $ | 1,736 | ||||||||
Earnings per share:
|
||||||||||||||||
Basic earnings per common share (note 11)
|
$ | 0.58 | $ | 0.54 | $ | 1.49 | $ | 0.95 | ||||||||
Diluted earnings per common share (note 11)
|
0.57 | 0.54 | 1.48 | 0.94 | ||||||||||||
Dividends per common share
|
0.155 | 0.130 | 0.415 | 0.390 | ||||||||||||
The accompanying notes are an integral part of these unaudited Interim Consolidated Financial Statements.
|
Consolidated Statements of Comprehensive Income
|
||||||||||||||||
For the
|
three months ended
September 30,
|
nine months ended
September 30,
|
||||||||||||||
(Canadian $ in millions, unaudited)
|
2014
|
2013
|
2014
|
2013
|
||||||||||||
Net income
|
$ | 1,105 | $ | 946 | $ | 2,886 | $ | 1,809 | ||||||||
Other comprehensive income ("OCI") (loss), net of tax
|
||||||||||||||||
Items that will not be reclassified to net income:
|
||||||||||||||||
Change in pension and other post-employment plans
|
$ | (9 | ) | $ | 11 | $ | (10 | ) | $ | (12 | ) | |||||
Real estate revaluation reserve
|
- | - | 1 | - | ||||||||||||
Total items that will not be reclassified to net income
|
$ | (9 | ) | $ | 11 | $ | (9 | ) | $ | (12 | ) | |||||
Items that may be subsequently reclassified to net income:
|
||||||||||||||||
Foreign exchange gains (losses) on:
|
||||||||||||||||
Translation of foreign operations
|
$ | 1,046 | $ | (528 | ) | $ | 1,198 | $ | 382 | |||||||
Net investment hedges
|
(43 | ) | 18 | 25 | (20 | ) | ||||||||||
Available-for-sale financial securities:
|
||||||||||||||||
Unrealized gains (losses) arising during the period
|
61 | (13 | ) | 449 | (246 | ) | ||||||||||
Reclassification of net realized (gains) losses and impairments to
net income
|
(50 | ) | 41 | (154 | ) | 107 | ||||||||||
Cash flow hedges:
|
||||||||||||||||
Unrealized gains (losses) arising during the period
|
(25 | ) | 14 | (82 | ) | 64 | ||||||||||
Reclassification of realized losses to net income
|
2 | 2 | 7 | 6 | ||||||||||||
Share of other comprehensive income of associates
|
- | - | 4 | - | ||||||||||||
Total items that may be subsequently reclassified to net income
|
$ | 991 | $ | (466 | ) | $ | 1,447 | $ | 293 | |||||||
Other comprehensive income (loss), net of tax
|
$ | 982 | $ | (455 | ) | $ | 1,438 | $ | 281 | |||||||
Total comprehensive income, net of tax
|
$ | 2,087 | $ | 491 | $ | 4,324 | $ | 2,090 | ||||||||
Total comprehensive income (loss) attributed to:
|
||||||||||||||||
Non-controlling interests
|
$ | 13 | $ | 20 | $ | 68 | $ | 36 | ||||||||
Participating policyholders
|
(4 | ) | (108 | ) | (38 | ) | (60 | ) | ||||||||
Shareholders
|
2,078 | 579 | 4,294 | 2,114 |
Income Taxes included in Other Comprehensive Income
|
||||||||||||||||
For the
|
three months ended
September 30,
|
nine months ended
September 30,
|
||||||||||||||
(Canadian $ in millions, unaudited)
|
2014
|
2013
|
2014
|
2013
|
||||||||||||
Income tax (recovery) expense on
|
||||||||||||||||
Items that will not be reclassified to net income:
|
||||||||||||||||
Change in pension and other post-employment plans
|
$ | (6 | ) | $ | 3 | $ | (6 | ) | $ | (9 | ) | |||||
Real estate revaluation reserve
|
- | - | 1 | - | ||||||||||||
Total items that will not be reclassified to net income
|
$ | (6 | ) | $ | 3 | $ | (5 | ) | $ | (9 | ) | |||||
Items that may be subsequently reclassified to net income:
|
||||||||||||||||
Unrealized foreign exchange gains/losses on translation of foreign
operations
|
$ | 3 | $ | (1 | ) | $ | 7 | $ | (5 | ) | ||||||
Unrealized foreign exchange gains/losses on net investment hedges
|
(16 | ) | 7 | 9 | (6 | ) | ||||||||||
Unrealized gains/losses on available-for-sale financial securities
|
4 | (6 | ) | 113 | (57 | ) | ||||||||||
Reclassification of realized gains/losses and recoveries/impairments to
net income on available-for-sale financial securities
|
(3 | ) | - | (50 | ) | 53 | ||||||||||
Unrealized gains/losses on cash flow hedges
|
(13 | ) | 8 | (42 | ) | 34 | ||||||||||
Reclassification of realized gains/losses to net income on cash flow hedges
|
2 | 1 | 4 | 3 | ||||||||||||
Share of other comprehensive income of associates
|
- | - | 2 | - | ||||||||||||
Total items that may be subsequently reclassified to net income
|
$ | (23 | ) | $ | 9 | $ | 43 | $ | 22 | |||||||
Total income tax (recovery) expense
|
$ | (29 | ) | $ | 12 | $ | 38 | $ | 13 | |||||||
The accompanying notes are an integral part of these unaudited Interim Consolidated Financial Statements.
|
Consolidated Statements of Changes in Equity
|
||||||||
For the nine months ended September 30,
|
||||||||
(Canadian $ in millions, unaudited)
|
2014
|
2013
|
||||||
Preferred shares
|
||||||||
Balance, beginning of period
|
$ | 2,693 | $ | 2,497 | ||||
Issued during the period (note 11)
|
550 | 200 | ||||||
Redeemed during the period (note 11)
|
(784 | ) | - | |||||
Issuance costs, net of tax
|
(12 | ) | (4 | ) | ||||
Balance, end of period
|
$ | 2,447 | $ | 2,693 | ||||
Common shares
|
||||||||
Balance, beginning of period
|
$ | 20,234 | $ | 19,886 | ||||
Issued on exercise of stock options
|
35 | 5 | ||||||
Issued under dividend reinvestment and share purchase plans
|
279 | 247 | ||||||
Balance, end of period
|
$ | 20,548 | $ | 20,138 | ||||
Contributed surplus
|
||||||||
Balance, beginning of period
|
$ | 256 | $ | 257 | ||||
Exercise of stock options and deferred share units
|
(2 | ) | (1 | ) | ||||
Stock option expense
|
12 | 13 | ||||||
Balance, end of period
|
$ | 266 | $ | 269 | ||||
Shareholders' retained earnings
|
||||||||
Balance, beginning of period
|
$ | 5,294 | $ | 3,256 | ||||
Net income attributed to shareholders
|
2,861 | 1,833 | ||||||
Preferred share dividends
|
(98 | ) | (97 | ) | ||||
Par redemption value in excess of carrying value for preferred shares redeemed
|
(16 | ) | - | |||||
Common share dividends
|
(740 | ) | (720 | ) | ||||
Balance, end of period
|
$ | 7,301 | $ | 4,272 | ||||
Shareholders' accumulated other comprehensive income (loss) ("AOCI")
|
||||||||
Balance, beginning of period
|
$ | 46 | $ | (1,184 | ) | |||
Change in actuarial gains (losses) on pension and other post-employment plans
|
(10 | ) | (12 | ) | ||||
Change in unrealized foreign exchange gains (losses) of net foreign operations
|
1,223 | 362 | ||||||
Change in unrealized gains (losses) on available-for-sale financial securities
|
291 | (139 | ) | |||||
Change in unrealized gains (losses) on derivative instruments designated as cash flow hedges
|
(75 | ) | 70 | |||||
Share of other comprehensive income of associates
|
4 | - | ||||||
Balance, end of period
|
$ | 1,479 | $ | (903 | ) | |||
Total shareholders' equity, end of period
|
$ | 32,041 | $ | 26,469 | ||||
Participating policyholders' equity
|
||||||||
Balance, beginning of period
|
$ | 134 | $ | 146 | ||||
Net loss attributed to participating policyholders
|
(39 | ) | (60 | ) | ||||
Other comprehensive income attributed to policyholders
|
1 | - | ||||||
Balance, end of period
|
$ | 96 | $ | 86 | ||||
Non-controlling interests
|
||||||||
Balance, beginning of period
|
$ | 376 | $ | 301 | ||||
Net income attributed to non-controlling interests
|
64 | 36 | ||||||
Other comprehensive income attributed to non-controlling interests
|
4 | - | ||||||
Contributions (distributions), net
|
15 | (11 | ) | |||||
Balance, end of period
|
$ | 459 | $ | 326 | ||||
Total equity, end of period
|
$ | 32,596 | $ | 26,881 | ||||
The accompanying notes are an integral part of these unaudited Interim Consolidated Financial Statements.
|
Consolidated Statements of Cash Flows
|
||||||||
For the nine months ended September 30,
|
||||||||
(Canadian $ in millions, unaudited)
|
2014
|
2013
|
||||||
Operating activities
|
||||||||
Net income
|
$ | 2,886 | $ | 1,809 | ||||
Adjustments:
|
||||||||
Increase (decrease) in insurance contract liabilities
|
16,053 | (8,767 | ) | |||||
Increase (decrease) in investment contract liabilities
|
80 | 121 | ||||||
(Increase) decrease in reinsurance assets
|
244 | 1,001 | ||||||
Amortization of (premium) discount on invested assets
|
2 | 15 | ||||||
Other amortization
|
339 | 312 | ||||||
Net realized and unrealized (gains) losses on assets
|
(11,315 | ) | 14,892 | |||||
Deferred income tax expense (recovery)
|
249 | (162 | ) | |||||
Stock option expense
|
12 | 13 | ||||||
Adjusted net income
|
$ | 8,550 | $ | 9,234 | ||||
Changes in policy related and operating receivables and payables
|
(169 | ) | (1,361 | ) | ||||
Cash provided by operating activities
|
$ | 8,381 | $ | 7,873 | ||||
Investing activities
|
||||||||
Purchases and mortgage advances
|
$ | (46,535 | ) | $ | (50,447 | ) | ||
Disposals and repayments
|
41,501 | 43,359 | ||||||
Change in investment broker net receivables and payables
|
148 | (167 | ) | |||||
Net cash decrease from purchase of subsidiaries
|
(199 | ) | (73 | ) | ||||
Cash used in investing activities
|
$ | (5,085 | ) | $ | (7,328 | ) | ||
Financing activities
|
||||||||
Increase in repurchase agreements and securities sold but not yet purchased
|
$ | 193 | $ | 194 | ||||
Repayment of long-term debt (note 8)
|
(1,000 | ) | (350 | ) | ||||
Issue of capital instruments, net
|
497 | 199 | ||||||
Issue of subscription receipts
|
2,214 | - | ||||||
Net redemption of investment contract liabilities
|
(153 | ) | (178 | ) | ||||
Funds repaid, net
|
(3 | ) | (126 | ) | ||||
Secured borrowing from securitization transactions
|
- | 250 | ||||||
Changes in deposits from bank clients, net
|
(118 | ) | 455 | |||||
Shareholders dividends paid in cash
|
(593 | ) | (570 | ) | ||||
Distributions to non-controlling interests, net
|
(58 | ) | (11 | ) | ||||
Common shares issued, net
|
37 | 5 | ||||||
Preferred shares issued, net
|
538 | 196 | ||||||
Preferred shares redeemed, net
|
(800 | ) | - | |||||
Cash used in financing activities
|
$ | 754 | $ | 64 | ||||
Cash and short-term securities
|
||||||||
Increase (decrease) during the period
|
$ | 4,050 | $ | 609 | ||||
Effect of foreign exchange rate changes on cash and short-term securities
|
474 | 179 | ||||||
Balance, beginning of period
|
12,886 | 12,753 | ||||||
Balance, end of period
|
$ | 17,410 | $ | 13,541 | ||||
Cash and short-term securities
|
||||||||
Beginning of period
|
||||||||
Gross cash and short-term securities
|
$ | 13,630 | $ | 13,386 | ||||
Net payments in transit, included in other liabilities
|
(744 | ) | (633 | ) | ||||
Net cash and short-term securities, beginning of period
|
$ | 12,886 | $ | 12,753 | ||||
End of period
|
||||||||
Gross cash and short-term securities
|
$ | 17,971 | $ | 14,578 | ||||
Net payments in transit, included in other liabilities
|
(561 | ) | (1,037 | ) | ||||
Net cash and short-term securities, end of period
|
$ | 17,410 | $ | 13,541 | ||||
Supplemental disclosures on cash flow information
|
||||||||
Interest received
|
$ | 6,598 | $ | 6,410 | ||||
Interest paid
|
788 | 844 | ||||||
Income taxes paid
|
599 | 463 | ||||||
The accompanying notes are an integral part of these unaudited Interim Consolidated Financial Statements.
|
|
Note 2 Accounting and Reporting Changes
|
(i)
|
Revisions to Standards for Economic Reinvestment Assumptions
|
(ii)
|
Amendments to IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in Associates and Joint Ventures”
|
(iii)
|
Annual Improvements 2012 – 2014 Cycle
|
Note 3 Invested Assets and Investment Income
|
(a)
|
Carrying values and fair values of invested assets
|
As at September 30, 2014
|
FVTPL(1)
|
AFS(2)
|
Other
|
Total carrying
value
|
Total fair value
|
|||||||||||||||
Cash and short-term securities(3)
|
$ | 293 | $ | 13,226 | $ | 4,452 | $ | 17,971 | $ | 17,971 | ||||||||||
Debt securities(4)
|
||||||||||||||||||||
Canadian government and agency
|
13,873 | 3,153 | - | 17,026 | 17,026 | |||||||||||||||
U.S. government and agency
|
13,966 | 9,572 | - | 23,538 | 23,538 | |||||||||||||||
Other government and agency
|
13,067 | 2,236 | - | 15,303 | 15,303 | |||||||||||||||
Corporate
|
65,865 | 4,412 | - | 70,277 | 70,277 | |||||||||||||||
Mortgage/asset-backed securities
|
2,980 | 462 | - | 3,442 | 3,442 | |||||||||||||||
Public equities
|
11,871 | 2,203 | - | 14,074 | 14,074 | |||||||||||||||
Mortgages
|
- | - | 38,638 | 38,638 | 40,533 | |||||||||||||||
Private placements
|
- | - | 22,100 | 22,100 | 23,862 | |||||||||||||||
Policy loans
|
- | - | 7,720 | 7,720 | 7,720 | |||||||||||||||
Loans to bank clients
|
- | - | 1,786 | 1,786 | 1,792 | |||||||||||||||
Real estate
|
||||||||||||||||||||
Own use property
|
- | - | 808 | 808 | 1,522 | |||||||||||||||
Investment property
|
- | - | 9,396 | 9,396 | 9,396 | |||||||||||||||
Other invested assets
|
||||||||||||||||||||
Other alternative long-duration assets(5)
|
6,717 | 71 | 5,486 | 12,274 | 12,463 | |||||||||||||||
Other
|
144 | - | 3,345 | 3,489 | 3,489 | |||||||||||||||
Total invested assets
|
$ | 128,776 | $ | 35,335 | $ | 93,731 | $ | 257,842 | $ | 262,408 | ||||||||||
As at December 31, 2013
|
||||||||||||||||||||
Cash and short-term securities(3)
|
$ | 421 | $ | 10,617 | $ | 2,592 | $ | 13,630 | $ | 13,630 | ||||||||||
Debt securities(4)
|
||||||||||||||||||||
Canadian government and agency
|
13,106 | 2,844 | - | 15,950 | 15,950 | |||||||||||||||
U.S. government and agency
|
13,189 | 8,383 | - | 21,572 | 21,572 | |||||||||||||||
Other government and agency
|
10,862 | 1,962 | - | 12,824 | 12,824 | |||||||||||||||
Corporate
|
57,192 | 4,017 | - | 61,209 | 61,209 | |||||||||||||||
Mortgage/asset-backed securities
|
2,774 | 628 | - | 3,402 | 3,402 | |||||||||||||||
Public equities
|
11,011 | 2,064 | - | 13,075 | 13,075 | |||||||||||||||
Mortgages
|
- | - | 37,558 | 37,558 | 39,176 | |||||||||||||||
Private placements
|
- | - | 21,015 | 21,015 | 22,008 | |||||||||||||||
Policy loans
|
- | - | 7,370 | 7,370 | 7,370 | |||||||||||||||
Loans to bank clients
|
- | - | 1,901 | 1,901 | 1,907 | |||||||||||||||
Real estate
|
||||||||||||||||||||
Own use property
|
- | - | 804 | 804 | 1,476 | |||||||||||||||
Investment property
|
- | - | 8,904 | 8,904 | 8,904 | |||||||||||||||
Other invested assets
|
||||||||||||||||||||
Other alternative long-duration assets(5)
|
5,921 | 68 | 4,217 | 10,206 | 10,402 | |||||||||||||||
Other
|
108 | 26 | 3,155 | 3,289 | 3,289 | |||||||||||||||
Total invested assets
|
$ | 114,584 | $ | 30,609 | $ | 87,516 | $ | 232,709 | $ | 236,194 |
(1)
|
The FVTPL classification was elected for the securities backing insurance and investment contract liabilities in order to substantially reduce an accounting mismatch arising from changes in the value of these assets and changes in the value of the related insurance and investment contract liabilities. There would otherwise be a mismatch if the available-for-sale (“AFS”) classification was selected because changes in insurance and investment contract liabilities are recognized in net income rather than in OCI.
|
(2)
|
Securities that are designated as AFS are not actively traded by the Company but sales do occur as circumstances warrant. Such sales result in a reclassification of any accumulated unrealized gain (loss) in AOCI to net income as a realized gain (loss).
|
(3)
|
Includes short-term securities with maturities of less than one year at acquisition amounting to $5,857 (December 31, 2013 – $4,473) cash equivalents with maturities of less than 90 days at acquisition amounting to $7,662 (December 31, 2013 – $6,565) and cash of $4,452 (December 31, 2013 - $2,592). See also note 10.
|
(4)
|
Debt securities includes securities which were acquired with maturities of less than one year and less than 90 days of $670 and $8, respectively (December 31, 2013 – $502 and $60, respectively).
|
(5)
|
Other alternative long-duration assets include investments in private equity of $2,478, power and infrastructure of $3,934, oil and gas of $1,849, timber and agriculture sectors of $3,868 and various others of $145 (December 31, 2013 – $2,181, $3,486, $1,643, $2,770 and $126, respectively). On March 26, 2014, the Company acquired a controlling financial interest in Hancock Victoria Plantations Holdings PTY Limited (“HVPH”) which was an associate before this transaction. Upon initial consolidation of HVPH, timber properties of $807, carried at fair value, were recognized and $80 of investments in associate was derecognized. As at September 30, 2014, the NCI of $95 is included in other liabilities.
|
(b)
|
Investment income (loss)
|
three months ended
|
nine months ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
For the
|
2014
|
2013
|
2014
|
2013
|
||||||||||||
Interest income
|
$ | 2,242 | $ | 2,213 | $ | 6,721 | $ | 6,481 | ||||||||
Dividend, rental and other income
|
428 | 322 | 1,277 | 950 | ||||||||||||
Net recoveries (impairments and provisions)
|
(23 | ) | (13 | ) | (25 | ) | (15 | ) | ||||||||
Other
|
(29 | ) | (39 | ) | 154 | (183 | ) | |||||||||
$ | 2,618 | $ | 2,483 | $ | 8,127 | $ | 7,233 | |||||||||
Realized and unrealized gains (losses) on assets supporting insurance and investment contract liabilities and on the macro equity hedging program
|
||||||||||||||||
Debt securities
|
$ | 471 | $ | (1,189 | ) | $ | 5,722 | $ | (6,837 | ) | ||||||
Public equities
|
27 | 415 | 611 | 796 | ||||||||||||
Mortgages
|
17 | 7 | 48 | 37 | ||||||||||||
Private placements
|
(8 | ) | 6 | (6 | ) | (11 | ) | |||||||||
Real estate
|
56 | 14 | 187 | 68 | ||||||||||||
Other investments
|
364 | 285 | 634 | 480 | ||||||||||||
Derivatives, including macro equity hedging program
|
634 | (2,051 | ) | 3,714 | (9,362 | ) | ||||||||||
$ | 1,561 | $ | (2,513 | ) | $ | 10,910 | $ | (14,829 | ) | |||||||
Total investment income (loss)
|
$ | 4,179 | $ | (30 | ) | $ | 19,037 | $ | (7,596 | ) |
(c)
|
Mortgage securitization
|
As at September 30, 2014
|
Securitized assets
|
|||||||||||||||
Securitization program
|
Securitized mortgages
|
Restricted cash and short-term securities
|
Total
|
Secured borrowing liabilities
|
||||||||||||
HELOC securitization(1),(2)
|
$ | 2,000 | $ | 10 | $ | 2,010 | $ | 1,999 | ||||||||
CMB securitization
|
90 | 27 | 117 | 115 | ||||||||||||
Total
|
$ | 2,090 | $ | 37 | $ | 2,127 | $ | 2,114 | ||||||||
As at December 31, 2013
|
||||||||||||||||
HELOC securitization(1),(2)
|
$ | 2,000 | $ | 10 | $ | 2,010 | $ | 1,998 | ||||||||
CMB securitization
|
104 | 11 | 115 | 115 | ||||||||||||
Total
|
$ | 2,104 | $ | 21 | $ | 2,125 | $ | 2,113 |
(1)
|
The restricted cash balance for the HELOC securitization is a cash reserve fund established in relation to the transactions. The reserve will be drawn upon only in the event of insufficient cash flows from the underlying HELOCs to satisfy the secured borrowing liability.
|
(2)
|
The secured borrowing liabilities primarily comprise of Series 2010-1 and Series 2011-1 floating rate notes and are expected to mature on December 15, 2015 and December 15, 2017, respectively.
|
(d)
|
Fair value measurement
|
As at September 30, 2014
|
Total fair
value
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
Cash and short-term securities
|
||||||||||||||||
FVTPL
|
$ | 293 | $ | - | $ | 293 | $ | - | ||||||||
AFS
|
13,226 | - | 13,226 | - | ||||||||||||
Other
|
4,452 | 4,452 | - | - | ||||||||||||
Debt securities(1)
|
||||||||||||||||
FVTPL
|
||||||||||||||||
Canadian government and agency
|
13,873 | - | 13,049 | 824 | ||||||||||||
U.S. government and agency
|
13,966 | - | 13,528 | 438 | ||||||||||||
Other government and agency
|
13,067 | - | 12,647 | 420 | ||||||||||||
Corporate
|
65,865 | - | 63,561 | 2,304 | ||||||||||||
Residential mortgage/asset-backed securities
|
150 | - | 13 | 137 | ||||||||||||
Commercial mortgage/asset-backed securities
|
821 | - | 376 | 445 | ||||||||||||
Other securitized assets
|
2,009 | - | 1,942 | 67 | ||||||||||||
AFS
|
||||||||||||||||
Canadian government and agency
|
3,153 | - | 2,347 | 806 | ||||||||||||
U.S. government and agency
|
9,572 | - | 9,561 | 11 | ||||||||||||
Other government and agency
|
2,236 | - | 2,181 | 55 | ||||||||||||
Corporate
|
4,412 | - | 4,285 | 127 | ||||||||||||
Residential mortgage/asset-backed securities
|
215 | - | 187 | 28 | ||||||||||||
Commercial mortgage/asset-backed securities
|
102 | - | 18 | 84 | ||||||||||||
Other securitized assets
|
145 | - | 129 | 16 | ||||||||||||
Equities
|
||||||||||||||||
FVTPL
|
11,871 | 11,865 | 6 | - | ||||||||||||
AFS
|
2,203 | 2,202 | - | 1 | ||||||||||||
Real estate - investment property(2)
|
9,396 | - | - | 9,396 | ||||||||||||
Other invested assets(3)
|
10,468 | - | - | 10,468 | ||||||||||||
Total invested assets carried at fair value
|
$ | 181,495 | $ | 18,519 | $ | 137,349 | $ | 25,627 |
As at December 31, 2013
|
||||||||||||||||
Cash and short-term securities
|
||||||||||||||||
FVTPL
|
$ | 421 | $ | - | $ | 421 | $ | - | ||||||||
AFS
|
10,617 | - | 10,617 | - | ||||||||||||
Other
|
2,592 | 2,592 | - | - | ||||||||||||
Debt securities(1)
|
||||||||||||||||
FVTPL
|
||||||||||||||||
Canadian government and agency
|
13,106 | - | 12,377 | 729 | ||||||||||||
U.S. government and agency
|
13,189 | - | 13,029 | 160 | ||||||||||||
Other government and agency
|
10,862 | - | 10,542 | 320 | ||||||||||||
Corporate
|
57,192 | - | 55,196 | 1,996 | ||||||||||||
Residential mortgage/asset-backed securities
|
159 | - | 12 | 147 | ||||||||||||
Commercial mortgage/asset-backed securities
|
827 | - | 564 | 263 | ||||||||||||
Other securitized assets
|
1,788 | - | 1,711 | 77 | ||||||||||||
AFS
|
||||||||||||||||
Canadian government and agency
|
2,844 | - | 2,306 | 538 | ||||||||||||
U.S. government and agency
|
8,383 | - | 8,380 | 3 | ||||||||||||
Other government and agency
|
1,962 | - | 1,904 | 58 | ||||||||||||
Corporate
|
4,017 | - | 3,889 | 128 | ||||||||||||
Residential mortgage/asset-backed securities
|
368 | - | 337 | 31 | ||||||||||||
Commercial mortgage/asset-backed securities
|
90 | - | 36 | 54 | ||||||||||||
Other securitized assets
|
170 | - | 139 | 31 | ||||||||||||
Equities
|
||||||||||||||||
FVTPL
|
11,011 | 11,005 | 6 | - | ||||||||||||
AFS
|
2,064 | 2,064 | - | - | ||||||||||||
Real estate - investment property(2)
|
8,904 | - | - | 8,904 | ||||||||||||
Other invested assets(3)
|
8,508 | - | - | 8,508 | ||||||||||||
Total invested assets carried at fair value
|
$ | 159,074 | $ | 15,661 | $ | 121,466 | $ | 21,947 |
(1)
|
The assets included in Level 3 consist primarily of debt securities with maturities greater than 30 years for which the yield curve is not observable, as well as debt securities where prices are only single quoted broker prices that are not provided publicly and therefore, are not observable. Spread inputs are not applicable since public bonds are priced by third party sources. These bonds are considered Level 3 as an extrapolated Treasury rate is used to determine price.
|
(2)
|
For investment property, the significant unobservable inputs are capitalization rate (ranging from 4.0% to 10.25% during the period and ranging from 4.5% to 8.50% for the year ended December 31, 2013) and terminal capitalization rate (ranging from 4.9% to 9.25% during the period and ranging from 5.1% to 9% during the year ended December 31, 2013). Holding other factors constant, a lower capitalization or terminal capitalization rate will tend to increase the fair value of investment property. Changes in fair value based on variations in unobservable input generally cannot be extrapolated because the relationship between the directional changes of each input is not usually linear.
|
(3)
|
Other invested assets measured at fair value are held primarily in power and infrastructure and timber sectors. The significant inputs used in the valuation of the Company’s power and infrastructure investments are primarily future distributable cash flows, terminal values and discount rates. Holding other factors constant, an increase to future distributable cash flows or terminal values would tend to increase the fair value of a power and infrastructure investment, while an increase in the discount rate would have the opposite effect. Discount rates during the period ranged from 8.5% to 18% (December 31, 2013 – ranged from 10% to 18%). Disclosure of distributable cash flow and terminal value ranges are not meaningful given the disparity in estimates by project. The significant inputs used in the valuation of the Company’s investments in timberland are timber prices and discount rates. Holding other factors constant, an increase to timber prices would tend to increase the fair value of a timberland investment, while an increase in the discount rates would have the opposite effect. Discount rates during the period ranged from 5.25% to 8% (December 31, 2013 – ranged from 5.25% to 6%). A range of prices for timber is not meaningful given the disparity in estimates depending on the property type.
|
As at September 30, 2014
|
Carrying value
|
Total fair value
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||||
Mortgages
|
$ | 38,638 | $ | 40,533 | $ | - | $ | - | $ | 40,533 | ||||||||||
Private placements
|
22,100 | 23,862 | - | 19,819 | 4,043 | |||||||||||||||
Policy loans
|
7,720 | 7,720 | - | 7,720 | - | |||||||||||||||
Loans to bank clients
|
1,786 | 1,792 | - | 1,792 | - | |||||||||||||||
Real estate - own use property
|
808 | 1,522 | - | - | 1,522 | |||||||||||||||
Other invested assets(1)
|
5,295 | 5,484 | - | - | 5,484 | |||||||||||||||
Total invested assets disclosed at fair value
|
$ | 76,347 | $ | 80,913 | $ | - | $ | 29,331 | $ | 51,582 | ||||||||||
|
||||||||||||||||||||
As at December 31, 2013
|
||||||||||||||||||||
Mortgages
|
$ | 37,558 | $ | 39,176 | $ | - | $ | - | $ | 39,176 | ||||||||||
Private placements
|
21,015 | 22,008 | - | 18,619 | 3,389 | |||||||||||||||
Policy loans
|
7,370 | 7,370 | - | 7,370 | - | |||||||||||||||
Loans to bank clients
|
1,901 | 1,907 | - | 1,907 | - | |||||||||||||||
Real estate - own use property
|
804 | 1,476 | - | - | 1,476 | |||||||||||||||
Other invested assets(1)
|
4,987 | 5,183 | - | - | 5,183 | |||||||||||||||
Total invested assets disclosed at fair value
|
$ | 73,635 | $ | 77,120 | $ | - | $ | 27,896 | $ | 49,224 |
(1)
|
Other invested assets disclosed at fair value include $2,812 (December 31, 2013 - $2,629) of leveraged leases which are shown at their carrying values as fair value is not routinely calculated on these investments.
|
Net realized /
unrealized gains
(losses) included in:
|
Transfers
|
Change in unrealized | ||||||||||||||||||||||||||||||||||||||||||
Balance as
at July 1,
2014
|
Net
income(1)
|
OCI(2)
|
Purchases
|
Sales
|
Settlements
|
Into
Level 3(3)
|
Out of
Level 3(3)
|
Currency movement
|
Balance as
at September 30, 2014
|
gains (losses) on instruments still held
|
||||||||||||||||||||||||||||||||||
Debt securities
|
||||||||||||||||||||||||||||||||||||||||||||
FVTPL
|
||||||||||||||||||||||||||||||||||||||||||||
Canadian government & agency
|
$ | 820 | $ | 15 | $ | - | $ | 186 | $ | (199 | ) | $ | - | $ | - | $ | - | $ | 2 | $ | 824 | $ | 16 | |||||||||||||||||||||
U.S. government & agency
|
330 | 5 | - | 86 | - | - | - | - | 17 | 438 | 5 | |||||||||||||||||||||||||||||||||
Other government & agency
|
401 | 2 | - | 16 | (12 | ) | - | - | - | 13 | 420 | 1 | ||||||||||||||||||||||||||||||||
Corporate
|
2,101 | 16 | - | 173 | (27 | ) | (33 | ) | 31 | (10 | ) | 53 | 2,304 | 13 | ||||||||||||||||||||||||||||||
Residential mortgage/
asset-backed securities
|
138 | 2 | - | - | - | (10 | ) | - | - | 7 | 137 | 2 | ||||||||||||||||||||||||||||||||
Commercial mortgage/
asset-backed securities
|
413 | (3 | ) | - | 39 | (7 | ) | (17 | ) | - | - | 20 | 445 | (2 | ) | |||||||||||||||||||||||||||||
Other securitized assets
|
63 | 3 | - | - | - | (6 | ) | 4 | - | 3 | 67 | 3 | ||||||||||||||||||||||||||||||||
$ | 4,266 | $ | 40 | $ | - | $ | 500 | $ | (245 | ) | $ | (66 | ) | $ | 35 | $ | (10 | ) | $ | 115 | $ | 4,635 | $ | 38 | ||||||||||||||||||||
AFS
|
||||||||||||||||||||||||||||||||||||||||||||
Canadian government & agency
|
$ | 844 | $ | 3 | $ | 14 | $ | - | $ | (56 | ) | $ | - | $ | - | $ | - | $ | 1 | $ | 806 | $ | - | |||||||||||||||||||||
U.S. government & agency
|
5 | - | - | 6 | - | - | - | - | - | 11 | - | |||||||||||||||||||||||||||||||||
Other government & agency
|
64 | - | - | 3 | (15 | ) | - | - | - | 3 | 55 | - | ||||||||||||||||||||||||||||||||
Corporate
|
114 | - | - | 4 | (1 | ) | (2 | ) | 9 | - | 3 | 127 | - | |||||||||||||||||||||||||||||||
Residential mortgage/
asset-backed securities
|
29 | - | 1 | - | - | (4 | ) | - | - | 2 | 28 | - | ||||||||||||||||||||||||||||||||
Commercial mortgage/
asset-backed securities
|
77 | 1 | - | 7 | (3 | ) | (1 | ) | - | - | 3 | 84 | - | |||||||||||||||||||||||||||||||
Other securitized assets
|
19 | - | - | - | - | (4 | ) | - | - | 1 | 16 | - | ||||||||||||||||||||||||||||||||
$ | 1,152 | $ | 4 | $ | 15 | $ | 20 | $ | (75 | ) | $ | (11 | ) | $ | 9 | $ | - | $ | 13 | $ | 1,127 | $ | - | |||||||||||||||||||||
Equities
|
||||||||||||||||||||||||||||||||||||||||||||
FVTPL
|
$ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||||||
AFS
|
- | - | - | 1 | - | - | - | - | - | 1 | - | |||||||||||||||||||||||||||||||||
$ | - | $ | - | $ | - | $ | 1 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 1 | $ | - | |||||||||||||||||||||||
Real estate - investment property
|
$ | 8,757 | $ | 63 | $ | - | $ | 336 | $ | (28 | ) | $ | - | $ | - | $ | - | $ | 268 | $ | 9,396 | $ | 62 | |||||||||||||||||||||
Other invested assets
|
9,853 | 279 | (26 | ) | 381 | (159 | ) | (227 | ) | - | - | 367 | 10,468 | 196 | ||||||||||||||||||||||||||||||
$ | 18,610 | $ | 342 | $ | (26 | ) | $ | 717 | $ | (187 | ) | $ | (227 | ) | $ | - | $ | - | $ | 635 | $ | 19,864 | $ | 258 | ||||||||||||||||||||
$ | 24,028 | $ | 386 | $ | (11 | ) | $ | 1,238 | $ | (507 | ) | $ | (304 | ) | $ | 44 | $ | (10 | ) | $ | 763 | $ | 25,627 | $ | 296 |
Net realized /
unrealized gains
(losses) included in:
|
Transfers
|
Change in unrealized | ||||||||||||||||||||||||||||||||||||||||||
Balance as
at July 1, 2013
|
Net
income(1)
|
OCI(2)
|
Purchases
|
Sales
|
Settlements
|
Into
Level 3(3)
|
Out of
Level 3(3)
|
Currency movement
|
Balance as
at September 30, 2013
|
gains (losses) on instruments still held
|
||||||||||||||||||||||||||||||||||
Debt securities
|
||||||||||||||||||||||||||||||||||||||||||||
FVTPL
|
||||||||||||||||||||||||||||||||||||||||||||
Canadian government & agency
|
$ | 473 | $ | (7 | ) | $ | - | $ | 278 | $ | (4 | ) | $ | - | $ | - | $ | - | $ | - | $ | 740 | $ | (7 | ) | |||||||||||||||||||
U.S. government & agency
|
166 | (5 | ) | - | - | - | - | - | - | (3 | ) | 158 | (5 | ) | ||||||||||||||||||||||||||||||
Other government & agency
|
850 | (6 | ) | - | 18 | (8 | ) | (4 | ) | - | - | (18 | ) | 832 | (6 | ) | ||||||||||||||||||||||||||||
Corporate
|
2,021 | (11 | ) | - | 152 | (9 | ) | - | - | - | (37 | ) | 2,116 | (12 | ) | |||||||||||||||||||||||||||||
Residential mortgage/
asset-backed securities
|
157 | 2 | - | - | - | (11 | ) | - | - | (1 | ) | 147 | - | |||||||||||||||||||||||||||||||
Commercial mortgage/
asset-backed securities
|
195 | 5 | - | 35 | - | (10 | ) | - | (1 | ) | (6 | ) | 218 | 11 | ||||||||||||||||||||||||||||||
Other securitized assets
|
108 | 2 | - | - | (1 | ) | (9 | ) | - | - | (4 | ) | 96 | 3 | ||||||||||||||||||||||||||||||
$ | 3,970 | $ | (20 | ) | $ | - | $ | 483 | $ | (22 | ) | $ | (34 | ) | $ | - | $ | (1 | ) | $ | (69 | ) | $ | 4,307 | $ | (16 | ) | |||||||||||||||||
AFS
|
||||||||||||||||||||||||||||||||||||||||||||
Canadian government & agency
|
$ | 263 | $ | (7 | ) | $ | (3 | ) | $ | (1 | ) | $ | - | $ | - | $ | - | $ | - | $ | 1 | $ | 253 | $ | - | |||||||||||||||||||
U.S. government & agency
|
3 | - | - | - | - | - | - | - | - | 3 | - | |||||||||||||||||||||||||||||||||
Other government & agency
|
81 | - | 5 | 3 | (4 | ) | (2 | ) | - | - | (10 | ) | 73 | - | ||||||||||||||||||||||||||||||
Corporate
|
189 | (1 | ) | (7 | ) | 2 | - | (5 | ) | - | - | (7 | ) | 171 | - | |||||||||||||||||||||||||||||
Residential mortgage/ asset-backed securities
|
34 | 2 | (1 | ) | - | - | (5 | ) | - | - | 2 | 32 | - | |||||||||||||||||||||||||||||||
Commercial mortgage/
asset-backed securities
|
38 | (3 | ) | (1 | ) | 8 | - | - | - | (1 | ) | 1 | 42 | - | ||||||||||||||||||||||||||||||
Other securitized assets
|
34 | - | - | - | - | (2 | ) | - | - | 1 | 33 | - | ||||||||||||||||||||||||||||||||
$ | 642 | $ | (9 | ) | $ | (7 | ) | $ | 12 | $ | (4 | ) | $ | (14 | ) | $ | - | $ | (1 | ) | $ | (12 | ) | $ | 607 | $ | - | |||||||||||||||||
Equities
|
||||||||||||||||||||||||||||||||||||||||||||
FVTPL
|
$ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||||||
AFS
|
- | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||
$ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||||||||||||
Real estate - investment property
|
$ | 7,878 | $ | 14 | $ | - | $ | 234 | $ | (3 | ) | $ | - | $ | - | $ | - | $ | (102 | ) | $ | 8,021 | $ | 13 | ||||||||||||||||||||
Other invested assets
|
7,603 | 277 | - | 245 | (145 | ) | (112 | ) | - | - | (138 | ) | 7,730 | 165 | ||||||||||||||||||||||||||||||
$ | 15,481 | $ | 291 | $ | - | $ | 479 | $ | (148 | ) | $ | (112 | ) | $ | - | $ | - | $ | (240 | ) | $ | 15,751 | $ | 178 | ||||||||||||||||||||
$ | 20,093 | $ | 262 | $ | (7 | ) | $ | 974 | $ | (174 | ) | $ | (160 | ) | $ | - | $ | (2 | ) | $ | (321 | ) | $ | 20,665 | $ | 162 |
(1)
|
These amounts are included in investment income on the Consolidated Statements of Income.
|
(2)
|
These amounts are included in AOCI on the Consolidated Statements of Financial Position.
|
(3)
|
For assets that are transferred into and/or out of Level 3, the Company uses the fair value of the assets at the beginning of the period.
|
Net realized /
unrealized gains
(losses) included in:
|
Transfers
|
Change in unrealized | ||||||||||||||||||||||||||||||||||||||||||
Balance as
at January 1, 2014
|
Net
income(1)
|
OCI(2)
|
Purchases(3)
|
Sales
|
Settlements
|
Into
Level 3(4)
|
Out of
Level 3(4)
|
Currency movement
|
Balance as
at September 30, 2014
|
gains (losses) on instruments still held
|
||||||||||||||||||||||||||||||||||
Debt securities
|
||||||||||||||||||||||||||||||||||||||||||||
FVTPL
|
||||||||||||||||||||||||||||||||||||||||||||
Canadian government & agency
|
$ | 729 | $ | 73 | $ | - | $ | 599 | $ | (382 | ) | $ | - | $ | - | $ | (197 | ) | $ | 2 | $ | 824 | $ | 75 | ||||||||||||||||||||
U.S. government & agency
|
160 | 52 | - | 86 | - | - | 122 | - | 18 | 438 | 52 | |||||||||||||||||||||||||||||||||
Other government & agency
|
320 | 59 | - | 67 | (24 | ) | (1 | ) | - | (22 | ) | 21 | 420 | 58 | ||||||||||||||||||||||||||||||
Corporate
|
1,996 | 82 | - | 391 | (87 | ) | (81 | ) | 124 | (200 | ) | 79 | 2,304 | 64 | ||||||||||||||||||||||||||||||
Residential mortgage/
asset-backed securities
|
147 | 5 | - | - | - | (23 | ) | - | - | 8 | 137 | 4 | ||||||||||||||||||||||||||||||||
Commercial mortgage/asset-
backed securities
|
263 | 7 | - | 188 | (7 | ) | (24 | ) | - | - | 18 | 445 | 10 | |||||||||||||||||||||||||||||||
Other securitized assets
|
77 | 6 | - | - | - | (23 | ) | 4 | (1 | ) | 4 | 67 | 6 | |||||||||||||||||||||||||||||||
$ | 3,692 | $ | 284 | $ | - | $ | 1,331 | $ | (500 | ) | $ | (152 | ) | $ | 250 | $ | (420 | ) | $ | 150 | $ | 4,635 | $ | 269 | ||||||||||||||||||||
AFS
|
||||||||||||||||||||||||||||||||||||||||||||
Canadian government & agency
|
$ | 538 | $ | 20 | $ | 51 | $ | 638 | $ | (430 | ) | $ | - | $ | - | $ | (11 | ) | $ | - | $ | 806 | $ | - | ||||||||||||||||||||
U.S. government & agency
|
3 | - | 1 | 6 | - | - | 1 | - | - | 11 | - | |||||||||||||||||||||||||||||||||
Other government & agency
|
58 | - | 2 | 19 | (26 | ) | (1 | ) | - | (1 | ) | 4 | 55 | - | ||||||||||||||||||||||||||||||
Corporate
|
128 | - | 3 | 16 | (3 | ) | (18 | ) | 12 | (16 | ) | 5 | 127 | - | ||||||||||||||||||||||||||||||
Residential mortgage/
asset-backed securities
|
31 | 1 | 1 | - | - | (7 | ) | - | - | 2 | 28 | - | ||||||||||||||||||||||||||||||||
Commercial mortgage/asset-
backed securities
|
54 | - | 3 | 28 | (3 | ) | (1 | ) | - | - | 3 | 84 | - | |||||||||||||||||||||||||||||||
Other securitized assets
|
31 | - | 1 | - | - | (17 | ) | - | (1 | ) | 2 | 16 | - | |||||||||||||||||||||||||||||||
$ | 843 | $ | 21 | $ | 62 | $ | 707 | $ | (462 | ) | $ | (44 | ) | $ | 13 | $ | (29 | ) | $ | 16 | $ | 1,127 | $ | - | ||||||||||||||||||||
Equities
|
||||||||||||||||||||||||||||||||||||||||||||
FVTPL
|
$ | - | $ | (1 | ) | $ | - | $ | - | $ | - | $ | - | $ | 1 | $ | - | $ | - | $ | - | $ | (1 | ) | ||||||||||||||||||||
AFS
|
- | - | - | 1 | - | - | - | - | - | 1 | - | |||||||||||||||||||||||||||||||||
$ | - | $ | (1 | ) | $ | - | $ | 1 | $ | - | $ | - | $ | 1 | $ | - | $ | - | $ | 1 | $ | (1 | ) | |||||||||||||||||||||
Real estate - investment property
|
$ | 8,904 | $ | 191 | $ | - | $ | 561 | $ | (559 | ) | $ | - | $ | - | $ | - | $ | 299 | $ | 9,396 | $ | 179 | |||||||||||||||||||||
Other invested assets
|
8,508 | 622 | (25 | ) | 1,711 | (266 | ) | (482 | ) | - | - | 400 | 10,468 | 514 | ||||||||||||||||||||||||||||||
$ | 17,412 | $ | 813 | $ | (25 | ) | $ | 2,272 | $ | (825 | ) | $ | (482 | ) | $ | - | $ | - | $ | 699 | $ | 19,864 | $ | 693 | ||||||||||||||||||||
$ | 21,947 | $ | 1,117 | $ | 37 | $ | 4,311 | $ | (1,787 | ) | $ | (678 | ) | $ | 264 | $ | (449 | ) | $ | 865 | $ | 25,627 | $ | 961 |
(1)
|
These amounts are included in investment income on the Consolidated Statements of Income.
|
(2)
|
These amounts are included in AOCI on the Consolidated Statements of Financial Position.
|
(3)
|
Purchases of other invested assets include timber properties recognized upon initial consolidation of HVPH. Refer to footnote 5 to note 3a above.
|
(4)
|
For assets that are transferred into and/or out of Level 3, the Company uses the fair value of the assets at the beginning of the period.
|
Net realized /
unrealized gains
(losses) included in:
|
Transfers
|
Change in unrealized | ||||||||||||||||||||||||||||||||||||||||||
Balance as
at January 1, 2013
|
Net
income(1)
|
OCI(2)
|
Purchases
|
Sales
|
Settlements
|
Into
Level 3(3)
|
Out of
Level 3(3)
|
Currency movement
|
Balance as
at September 30, 2013
|
gains (losses) on instruments still held
|
||||||||||||||||||||||||||||||||||
Debt securities
|
||||||||||||||||||||||||||||||||||||||||||||
FVTPL
|
||||||||||||||||||||||||||||||||||||||||||||
Canadian government & agency
|
$ | 396 | $ | (53 | ) | $ | - | $ | 401 | $ | (4 | ) | $ | - | $ | - | $ | - | $ | - | $ | 740 | $ | (53 | ) | |||||||||||||||||||
U.S. government & agency
|
180 | (28 | ) | - | - | - | - | - | - | 6 | 158 | (28 | ) | |||||||||||||||||||||||||||||||
Other government & agency
|
800 | (32 | ) | - | 107 | (51 | ) | (9 | ) | - | - | 17 | 832 | (33 | ) | |||||||||||||||||||||||||||||
Corporate
|
2,094 | (91 | ) | - | 445 | (53 | ) | (59 | ) | 30 | (237 | ) | (13 | ) | 2,116 | (84 | ) | |||||||||||||||||||||||||||
Residential mortgage/asset-backed securities
|
194 | 26 | - | - | (41 | ) | (42 | ) | - | - | 10 | 147 | 17 | |||||||||||||||||||||||||||||||
Commercial mortgage/asset-backed securities
|
203 | 16 | - | 35 | (11 | ) | (30 | ) | - | (1 | ) | 6 | 218 | 29 | ||||||||||||||||||||||||||||||
Other securitized assets
|
135 | 30 | - | - | (29 | ) | (45 | ) | - | - | 5 | 96 | 2 | |||||||||||||||||||||||||||||||
$ | 4,002 | $ | (132 | ) | $ | - | $ | 988 | $ | (189 | ) | $ | (185 | ) | $ | 30 | $ | (238 | ) | $ | 31 | $ | 4,307 | $ | (150 | ) | ||||||||||||||||||
AFS
|
||||||||||||||||||||||||||||||||||||||||||||
Canadian government & agency
|
$ | 210 | $ | (9 | ) | $ | (24 | ) | $ | 274 | $ | (198 | ) | $ | - | $ | - | $ | - | $ | - | $ | 253 | $ | - | |||||||||||||||||||
U.S. government & agency
|
3 | - | - | - | - | - | - | - | - | 3 | - | |||||||||||||||||||||||||||||||||
Other government & agency
|
69 | 1 | 4 | 34 | (24 | ) | (2 | ) | - | - | (9 | ) | 73 | - | ||||||||||||||||||||||||||||||
Corporate
|
151 | - | (16 | ) | 27 | (19 | ) | (12 | ) | 49 | - | (9 | ) | 171 | - | |||||||||||||||||||||||||||||
Residential mortgage/
asset-backed
securities
|
49 | 9 | 4 | - | (16 | ) | (19 | ) | - | - | 5 | 32 | - | |||||||||||||||||||||||||||||||
Commercial mortgage/
asset-backed
securities
|
40 | (6 | ) | 3 | 8 | (2 | ) | (3 | ) | - | (1 | ) | 3 | 42 | - | |||||||||||||||||||||||||||||
Other securitized assets
|
41 | 2 | 1 | - | (8 | ) | (6 | ) | - | - | 3 | 33 | - | |||||||||||||||||||||||||||||||
$ | 563 | $ | (3 | ) | $ | (28 | ) | $ | 343 | $ | (267 | ) | $ | (42 | ) | $ | 49 | $ | (1 | ) | $ | (7 | ) | $ | 607 | $ | - | |||||||||||||||||
Equities
|
||||||||||||||||||||||||||||||||||||||||||||
FVTPL
|
$ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||||||
AFS
|
- | - | - | 2 | - | - | - | (2 | ) | - | - | - | ||||||||||||||||||||||||||||||||
$ | - | $ | - | $ | - | $ | 2 | $ | - | $ | - | $ | - | $ | (2 | ) | $ | - | $ | - | $ | - | ||||||||||||||||||||||
Real estate - investment property
|
$ | 7,724 | $ | 67 | $ | - | $ | 345 | $ | (234 | ) | $ | - | $ | - | $ | - | $ | 119 | $ | 8,021 | $ | 63 | |||||||||||||||||||||
Other invested assets
|
6,836 | 425 | (8 | ) | 688 | (164 | ) | (242 | ) | 5 | (1 | ) | 191 | 7,730 | 318 | |||||||||||||||||||||||||||||
$ | 14,560 | $ | 492 | $ | (8 | ) | $ | 1,033 | $ | (398 | ) | $ | (242 | ) | $ | 5 | $ | (1 | ) | $ | 310 | $ | 15,751 | $ | 381 | |||||||||||||||||||
$ | 19,125 | $ | 357 | $ | (36 | ) | $ | 2,366 | $ | (854 | ) | $ | (469 | ) | $ | 84 | $ | (242 | ) | $ | 334 | $ | 20,665 | $ | 231 |
(1)
|
These amounts are included in investment income on the Consolidated Statements of Income.
|
(2)
|
These amounts are included in AOCI on the Consolidated Statements of Financial Position.
|
(3)
|
For assets that are transferred into and/or out of Level 3, the Company uses the fair value of the assets at the beginning of the period.
|
Note 4 Derivative and Hedging Instruments
|
(a)
|
Fair value of derivatives
|
September 30, 2014
|
December 31, 2013
|
||||||||||||||||||||||||
As at
|
Fair value
|
Fair value
|
|||||||||||||||||||||||
Type of hedge
|
Instrument type
|
Notional
amount
|
Assets
|
Liabilities
|
Notional
amount
|
Assets
|
Liabilities
|
||||||||||||||||||
Qualifying hedge accounting relationships
|
|||||||||||||||||||||||||
Fair value hedges
|
Interest rate swaps
|
$ | 6,827 | $ | 107 | $ | 854 | $ | 5,768 | $ | 185 | $ | 395 | ||||||||||||
Foreign currency swaps
|
77 | - | 16 | 73 | - | 16 | |||||||||||||||||||
Cash flow hedges
|
Interest rate swaps
|
22 | - | 1 | 64 | - | - | ||||||||||||||||||
Foreign currency swaps
|
792 | - | 190 | 785 | - | 59 | |||||||||||||||||||
Forward contracts
|
92 | - | 4 | 132 | - | 1 | |||||||||||||||||||
Equity contracts
|
120 | 12 | 2 | 101 | 21 | - | |||||||||||||||||||
Total derivatives in qualifying hedge accounting relationships
|
$ | 7,930 | $ | 119 | $ | 1,067 | $ | 6,923 | $ | 206 | $ | 471 | |||||||||||||
Non-qualifying hedge accounting relationships
|
|||||||||||||||||||||||||
Interest rate swaps
|
$ | 218,285 | $ | 12,038 | $ | 6,588 | $ | 192,236 | $ | 8,989 | $ | 7,535 | |||||||||||||
Interest rate futures
|
5,701 | - | - | 4,836 | - | - | |||||||||||||||||||
Interest rate options
|
3,527 | 62 | - | 2,854 | 23 | - | |||||||||||||||||||
Foreign currency swaps
|
6,676 | 121 | 684 | 6,663 | 130 | 506 | |||||||||||||||||||
Currency rate futures
|
4,162 | - | - | 3,760 | - | - | |||||||||||||||||||
Forward contracts
|
7,475 | 579 | 16 | 6,921 | 14 | 417 | |||||||||||||||||||
Equity contracts
|
7,759 | 457 | 12 | 4,761 | 302 | - | |||||||||||||||||||
Equity swaps
|
- | - | - | - | - | - | |||||||||||||||||||
Credit default swaps
|
409 | 9 | - | 335 | 9 | - | |||||||||||||||||||
Equity futures
|
12,807 | - | - | 9,894 | - | - | |||||||||||||||||||
Total derivatives in non-qualifying hedge accounting relationships
|
$ | 266,801 | $ | 13,266 | $ | 7,300 | $ | 232,260 | $ | 9,467 | $ | 8,458 | |||||||||||||
Total derivatives
|
$ | 274,731 | $ | 13,385 | $ | 8,367 | $ | 239,183 | $ | 9,673 | $ | 8,929 |
Term to maturity
|
||||||||||||||||||||
As at September 30, 2014
|
Less than
1 year
|
1 to 3
years
|
3 to 5
years
|
Over 5
years
|
Total
|
|||||||||||||||
Derivative assets
|
$ | 555 | $ | 527 | $ | 431 | $ | 11,872 | $ | 13,385 | ||||||||||
Derivative liabilities
|
87 | 269 | 336 | 7,675 | 8,367 | |||||||||||||||
As at December 31, 2013
|
||||||||||||||||||||
Derivative assets
|
$ | 103 | $ | 442 | $ | 316 | $ | 8,812 | $ | 9,673 | ||||||||||
Derivative liabilities
|
484 | 357 | 328 | 7,760 | 8,929 |
As at September 30, 2014
|
Total fair value
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
Derivative assets
|
||||||||||||||||
Interest rate contracts
|
$ | 12,782 | $ | - | $ | 12,289 | $ | 493 | ||||||||
Foreign exchange contracts
|
125 | - | 123 | 2 | ||||||||||||
Equity contracts
|
469 | - | 59 | 410 | ||||||||||||
Credit default swaps
|
9 | - | 9 | - | ||||||||||||
Total derivative assets
|
$ | 13,385 | $ | - | $ | 12,480 | $ | 905 | ||||||||
Derivative liabilities
|
||||||||||||||||
Interest rate contracts
|
$ | 7,445 | $ | - | $ | 7,245 | $ | 200 | ||||||||
Foreign exchange contracts
|
908 | - | 898 | 10 | ||||||||||||
Equity contracts
|
14 | - | 1 | 13 | ||||||||||||
Total derivative liabilities
|
$ | 8,367 | $ | - | $ | 8,144 | $ | 223 | ||||||||
|
||||||||||||||||
As at December 31, 2013
|
||||||||||||||||
Derivative assets
|
||||||||||||||||
Interest rate contracts
|
$ | 9,208 | $ | - | $ | 9,177 | $ | 31 | ||||||||
Foreign exchange contracts
|
133 | - | 132 | 1 | ||||||||||||
Equity contracts
|
323 | - | 30 | 293 | ||||||||||||
Credit default swaps
|
9 | - | 9 | - | ||||||||||||
Total derivative assets
|
$ | 9,673 | $ | - | $ | 9,348 | $ | 325 | ||||||||
Derivative liabilities
|
||||||||||||||||
Interest rate contracts
|
$ | 8,340 | $ | - | $ | 7,888 | $ | 452 | ||||||||
Foreign exchange contracts
|
589 | - | 569 | 20 | ||||||||||||
Total derivative liabilities
|
$ | 8,929 | $ | - | $ | 8,457 | $ | 472 |
three months ended
|
nine months ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
For the
|
2014
|
2013
|
2014
|
2013
|
||||||||||||
Balance at the beginning of the period
|
$ | 602 | $ | 96 | $ | (147 | ) | $ | (6 | ) | ||||||
Net realized / unrealized gains (losses) included in:
|
||||||||||||||||
Net income(1)
|
116 | (2 | ) | 835 | (6 | ) | ||||||||||
OCI(2)
|
(7 | ) | (12 | ) | (18 | ) | 13 | |||||||||
Purchases(3)
|
83 | 79 | 182 | 170 | ||||||||||||
Issuances
|
- | - | - | - | ||||||||||||
Sales
|
(19 | ) | (13 | ) | (28 | ) | (56 | ) | ||||||||
Transfers
|
||||||||||||||||
Into Level 3(4)
|
- | - | (138 | ) | - | |||||||||||
Out of Level 3(4)
|
(120 | ) | - | (17 | ) | 15 | ||||||||||
Currency movement
|
27 | (9 | ) | 13 | 9 | |||||||||||
Balance at the end of the period
|
$ | 682 | $ | 139 | $ | 682 | $ | 139 | ||||||||
Change in unrealized gains (losses) on instruments still held
|
$ | 182 | $ | 59 | $ | 485 | $ | 115 |
(1)
|
These amounts are included in investment income on the Consolidated Statements of Income.
|
(2)
|
These amounts are included in AOCI on the Consolidated Statements of Financial Position.
|
(3)
|
Purchases include derivatives recognized upon initial consolidation of HVPH. Refer to note 3.
|
(4)
|
For items that are transferred into and out of Level 3, the Company uses the fair value of the items at the end and beginning of the period, respectively. Transfers into Level 3 occur when the inputs used to price the assets and liabilities lack observable market data (versus the previous period). Transfers out of Level 3 occur when the inputs used to price the assets and liabilities become available from observable market data.
|
(b)
|
Fair value hedges
|
For the three months ended September 30, 2014
|
Hedged items in qualifying fair
value hedging relationships
|
Gains (losses) recognized on derivatives
|
Gains (losses) recognized for
hedged items
|
Ineffectiveness recognized in investment income
|
|||||||||
Interest rate swaps
|
Fixed rate assets
|
$ | (112 | ) | $ | 90 | $ | (22 | ) | ||||
Fixed rate liabilities
|
(3 | ) | 3 | - | |||||||||
Foreign currency swaps
|
Fixed rate assets
|
4 | - | 4 | |||||||||
Total
|
$ | (111 | ) | $ | 93 | $ | (18 | ) | |||||
For the three months ended September 30, 2013
|
|||||||||||||
Interest rate swaps
|
Fixed rate assets
|
$ | 156 | $ | (183 | ) | $ | (27 | ) | ||||
Fixed rate liabilities
|
1 | (1 | ) | - | |||||||||
Foreign currency swaps
|
Fixed rate assets
|
(1 | ) | - | (1 | ) | |||||||
Total
|
$ | 156 | $ | (184 | ) | $ | (28 | ) | |||||
For the nine months ended September 30, 2014
|
|||||||||||||
Interest rate swaps
|
Fixed rate assets
|
$ | (631 | ) | $ | 552 | $ | (79 | ) | ||||
Fixed rate liabilities
|
(8 | ) | 8 | - | |||||||||
Foreign currency swaps
|
Fixed rate assets
|
1 | 3 | 4 | |||||||||
Total
|
$ | (638 | ) | $ | 563 | $ | (75 | ) | |||||
For the nine months ended September 30, 2013
|
|||||||||||||
Interest rate swaps
|
Fixed rate assets
|
$ | 764 | $ | (823 | ) | $ | (59 | ) | ||||
Fixed rate liabilities
|
(15 | ) | 15 | - | |||||||||
Foreign currency swaps
|
Fixed rate assets
|
9 | (5 | ) | 4 | ||||||||
Total
|
$ | 758 | $ | (813 | ) | $ | (55 | ) |
(c)
|
Cash flow hedges
|
For the three months ended September 30, 2014
|
Hedged items in qualifying cash
flow hedging relationships
|
Gains (losses)
deferred in AOCI on derivatives
|
Gains (losses) reclassified from
AOCI into investment income
|
Ineffectiveness recognized in investment income
|
|||||||||
Interest rate swaps
|
Forecasted liabilities
|
$ | (4 | ) | $ | (4 | ) | $ | - | ||||
Foreign currency swaps
|
Fixed rate assets
|
(1 | ) | - | - | ||||||||
Floating rate liabilities
|
(21 | ) | - | - | |||||||||
Forward contracts
|
Forecasted expenses
|
(4 | ) | - | - | ||||||||
Equity contracts
|
Stock-based compensation
|
(6 | ) | - | - | ||||||||
Total
|
$ | (36 | ) | $ | (4 | ) | $ | - | |||||
For the three months ended September 30, 2013
|
|||||||||||||
Interest rate swaps
|
Forecasted liabilities
|
$ | 1 | $ | (3 | ) | $ | - | |||||
Foreign currency swaps
|
Fixed rate assets
|
- | - | - | |||||||||
Floating rate liabilities
|
17 | - | - | ||||||||||
Forward contracts
|
Forecasted expenses
|
4 | - | - | |||||||||
Equity contracts
|
Stock-based compensation
|
(2 | ) | - | - | ||||||||
Total
|
$ | 20 | $ | (3 | ) | $ | - |
For the nine months ended September 30, 2014
|
Hedged items in qualifying cash
flow hedging relationships
|
Gains (losses)
deferred in AOCI on derivatives
|
Gains (losses)
reclassified from
AOCI into
investment income
|
Ineffectiveness recognized in investment income
|
|||||||||
Interest rate swaps
|
Forecasted liabilities
|
$ | (5 | ) | $ | (12 | ) | $ | - | ||||
Foreign currency swaps
|
Fixed rate assets
|
(2 | ) | - | - | ||||||||
Floating rate liabilities
|
(94 | ) | - | - | |||||||||
Forward contracts
|
Forecasted expenses
|
(4 | ) | (2 | ) | - | |||||||
Equity contracts
|
Stock-based compensation
|
(19 | ) | - | - | ||||||||
Total
|
$ | (124 | ) | $ | (14 | ) | $ | - | |||||
For the nine months ended September 30, 2013
|
|||||||||||||
Interest rate swaps
|
Forecasted liabilities
|
$ | (8 | ) | $ | (9 | ) | $ | - | ||||
Foreign currency swaps
|
Fixed rate assets
|
(1 | ) | - | - | ||||||||
Floating rate liabilities
|
102 | - | - | ||||||||||
Forward contracts
|
Forecasted expenses
|
(6 | ) | - | - | ||||||||
Equity contracts
|
Stock-based compensation
|
13 | - | - | |||||||||
Total
|
$ | 100 | $ | (9 | ) | $ | - |
(d)
|
Hedges of net investments in net foreign operations
|
For the three months ended September 30, 2014
|
Gains (losses)
deferred in AOCI on derivatives
|
Gains (losses) reclassified from
AOCI into
investment income
|
Ineffectiveness recognized in investment income
|
|||||||||
Non-functional currency denominated debt
|
$ | (59 | ) | $ | - | $ | - | |||||
Total
|
$ | (59 | ) | $ | - | $ | - | |||||
For the three months ended September 30, 2013
|
||||||||||||
Non-functional currency denominated debt
|
$ | 25 | $ | - | $ | - | ||||||
Total
|
$ | 25 | $ | - | $ | - | ||||||
For the nine months ended September 30, 2014
|
||||||||||||
Non-functional currency denominated debt
|
$ | (63 | ) | $ | - | $ | - | |||||
Total
|
$ | (63 | ) | $ | - | $ | - | |||||
For the nine months ended September 30, 2013
|
||||||||||||
Currency swaps and interest rate swaps
|
$ | 23 | $ | - | $ | - | ||||||
Non-functional currency denominated debt
|
(37 | ) | - | - | ||||||||
Total
|
$ | (14 | ) | $ | - | $ | - |
(e)
|
Derivatives not designated in qualifying hedge accounting relationships
|
three months ended
|
nine months ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
For the
|
2014
|
2013
|
2014
|
2013
|
||||||||||||
Investment income (loss)
|
||||||||||||||||
Interest rate swaps
|
$ | 607 | $ | (1,022 | ) | $ | 3,901 | $ | (5,974 | ) | ||||||
Interest rate futures
|
(20 | ) | (16 | ) | (162 | ) | 113 | |||||||||
Interest rate options
|
11 | (9 | ) | 34 | (8 | ) | ||||||||||
Foreign currency swaps
|
(190 | ) | 15 | (196 | ) | (171 | ) | |||||||||
Currency rate futures
|
52 | (50 | ) | 67 | (112 | ) | ||||||||||
Forward contracts
|
212 | (98 | ) | 927 | (314 | ) | ||||||||||
Equity contracts
|
4 | (9 | ) | (61 | ) | 67 | ||||||||||
Credit default swaps
|
(1 | ) | - | (1 | ) | - | ||||||||||
Equity futures
|
(78 | ) | (859 | ) | (876 | ) | (2,966 | ) | ||||||||
Total investment income (loss) from derivatives in non-qualifying
hedge accounting relationships
|
$ | 597 | $ | (2,048 | ) | $ | 3,633 | $ | (9,365 | ) |
Note 5 Gross Claims and Benefits
|
three months ended
September 30,
|
nine months ended
September 30,
|
|||||||||||||||
For the
|
2014
|
2013
|
2014
|
2013
|
||||||||||||
Death, disability and other claims
|
$ | 2,687 | $ | 2,525 | $ | 8,028 | $ | 7,624 | ||||||||
Maturity and surrender benefits
|
1,459 | 1,089 | 4,250 | 3,449 | ||||||||||||
Annuity payments
|
831 | 850 | 2,534 | 2,556 | ||||||||||||
Policyholder dividends and experience rating refunds
|
293 | 321 | 751 | 842 | ||||||||||||
Net transfers from segregated funds
|
(159 | ) | (181 | ) | (519 | ) | (442 | ) | ||||||||
$ | 5,111 | $ | 4,604 | $ | 15,044 | $ | 14,029 |
Note 6 Insurance and Investment Contract Liabilities
|
(a)
|
Insurance and investment contracts
|
three months ended
|
nine months ended
|
|||||||||||||||
For the
|
September 30, 2014
|
September 30, 2014
|
||||||||||||||
Assumption
|
Change in net insurance and investment contract liabilities
|
Change in net
income attributed to shareholders
|
Change in net insurance and investment contract liabilities
|
Change in net
income attributed to shareholders
|
||||||||||||
Mortality and morbidity updates
|
$ | (113 | ) | $ | 99 | $ | (113 | ) | $ | 99 | ||||||
Lapses and policyholder behaviour
|
425 | (329 | ) | 425 | (329 | ) | ||||||||||
Updates to actuarial standards
|
||||||||||||||||
Segregated fund bond calibration
|
217 | (157 | ) | 217 | (157 | ) | ||||||||||
Other updates
|
(467 | ) | 318 | (370 | ) | 247 | ||||||||||
Net impact
|
$ | 62 | $ | (69 | ) | $ | 159 | $ | (140 | ) |
three months ended
|
nine months ended
|
|||||||||||||||
For the
|
September 30, 2013
|
September 30, 2013
|
||||||||||||||
Assumption
|
Change in net insurance and investment contract liabilities
|
Change in net
income attributed to shareholders
|
Change in net insurance and investment contract liabilities
|
Change in net
income attributed to shareholders
|
||||||||||||
Lapses and policyholder behaviour
|
||||||||||||||||
U.S. Insurance premium persistency update
|
$ | 320 | $ | (208 | ) | $ | 320 | $ | (208 | ) | ||||||
Insurance lapse updates
|
483 | (242 | ) | 483 | (242 | ) | ||||||||||
Variable annuity lapse update
|
101 | (80 | ) | 101 | (80 | ) | ||||||||||
U.S. Long-Term Care triennial review
|
18 | (12 | ) | 18 | (12 | ) | ||||||||||
Segregated fund parameters update
|
(220 | ) | 203 | (220 | ) | 203 | ||||||||||
Other annual updates
|
(142 | ) | 87 | 11 | (17 | ) | ||||||||||
Net impact
|
$ | 560 | $ | (252 | ) | $ | 713 | $ | (356 | ) |
(b)
|
Investment contracts – Fair value measurement
|
Note 7 Risk Management
|
(a)
|
Risk disclosures included in the Third Quarter’s MD&A
|
(b)
|
Credit risk
|
(i)
|
Credit quality
|
As at September 30, 2014
|
AAA
|
AA
|
A |
BBB
|
BB
|
B and lower
|
Total
|
|||||||||||||||||||||
Commercial Mortgages
|
||||||||||||||||||||||||||||
Multi-family residential
|
$ | 1,159 | $ | 659 | $ | 1,003 | $ | 891 | $ | - | $ | - | $ | 3,712 | ||||||||||||||
Retail
|
117 | 773 | 3,184 | 1,992 | 6 | 11 | 6,083 | |||||||||||||||||||||
Office
|
66 | 687 | 2,367 | 2,308 | 184 | 139 | 5,751 | |||||||||||||||||||||
Industrial
|
42 | 267 | 683 | 1,097 | 30 | 22 | 2,141 | |||||||||||||||||||||
Other
|
528 | 219 | 585 | 816 | 43 | - | 2,191 | |||||||||||||||||||||
Total commercial mortgages
|
$ | 1,912 | $ | 2,605 | $ | 7,822 | $ | 7,104 | $ | 263 | $ | 172 | $ | 19,878 | ||||||||||||||
Agricultural mortgages
|
$ | - | $ | 187 | $ | 230 | $ | 498 | $ | 241 | $ | - | $ | 1,156 | ||||||||||||||
Private placements
|
958 | 3,085 | 6,126 | 9,902 | 1,102 | 927 | 22,100 | |||||||||||||||||||||
Total
|
$ | 2,870 | $ | 5,877 | $ | 14,178 | $ | 17,504 | $ | 1,606 | $ | 1,099 | $ | 43,134 | ||||||||||||||
|
||||||||||||||||||||||||||||
As at December 31, 2013
|
||||||||||||||||||||||||||||
Commercial Mortgages
|
||||||||||||||||||||||||||||
Multi-family residential
|
$ | 1,159 | $ | 594 | $ | 747 | $ | 1,033 | $ | - | $ | - | $ | 3,533 | ||||||||||||||
Retail
|
136 | 704 | 2,744 | 2,277 | 29 | 11 | 5,901 | |||||||||||||||||||||
Office
|
90 | 628 | 2,204 | 2,376 | 221 | 128 | 5,647 | |||||||||||||||||||||
Industrial
|
52 | 269 | 645 | 1,059 | 55 | 23 | 2,103 | |||||||||||||||||||||
Other
|
582 | 198 | 425 | 894 | 42 | 2 | 2,143 | |||||||||||||||||||||
Total commercial mortgages
|
$ | 2,019 | $ | 2,393 | $ | 6,765 | $ | 7,639 | $ | 347 | $ | 164 | $ | 19,327 | ||||||||||||||
Agricultural mortgages
|
$ | - | $ | 170 | $ | 253 | $ | 657 | $ | 153 | $ | - | $ | 1,233 | ||||||||||||||
Private placements
|
791 | 3,200 | 5,845 | 8,949 | 1,112 | 1,118 | 21,015 | |||||||||||||||||||||
Total
|
$ | 2,810 | $ | 5,763 | $ | 12,863 | $ | 17,245 | $ | 1,612 | $ | 1,282 | $ | 41,575 |
As at
|
September 30, 2014
|
December 31, 2013
|
||||||||||||||||||||||
Insured
|
Uninsured
|
Total
|
Insured
|
Uninsured
|
Total
|
|||||||||||||||||||
Residential mortgages
|
||||||||||||||||||||||||
Performing
|
$ | 8,817 | $ | 8,773 | $ | 17,590 | $ | 9,139 | $ | 7,828 | $ | 16,967 | ||||||||||||
Non-performing(1)
|
4 | 10 | 14 | 17 | 14 | 31 | ||||||||||||||||||
Loans to bank clients
|
||||||||||||||||||||||||
Performing
|
n/a | 1,785 | 1,785 | n/a | 1,901 | 1,901 | ||||||||||||||||||
Non-performing(1)
|
n/a | 1 | 1 | n/a | - | - | ||||||||||||||||||
Total
|
$ | 8,821 | $ | 10,569 | $ | 19,390 | $ | 9,156 | $ | 9,743 | $ | 18,899 |
(1)
|
Non-performing refers to assets that are 90 days or more past due if uninsured and 365 days or more if insured.
|
(ii)
|
Past due or credit impaired financial assets
|
Past due but not impaired
|
||||||||||||||||||||
As at September 30, 2014
|
Less than 90
days
|
90 days and
greater
|
Total
|
Total impaired
|
Allowance for
loan losses
|
|||||||||||||||
Debt securities
|
||||||||||||||||||||
FVTPL
|
$ | - | $ | 4 | $ | 4 | $ | 56 | $ | - | ||||||||||
AFS
|
6 | 1 | 7 | 24 | - | |||||||||||||||
Private placements
|
28 | 49 | 77 | 122 | 84 | |||||||||||||||
Mortgages and loans to bank clients
|
47 | 23 | 70 | 46 | 40 | |||||||||||||||
Other financial assets
|
29 | 20 | 49 | 1 | - | |||||||||||||||
Total
|
$ | 110 | $ | 97 | $ | 207 | $ | 249 | $ | 124 | ||||||||||
As at December 31, 2013
|
||||||||||||||||||||
Debt securities
|
||||||||||||||||||||
FVTPL
|
$ | - | $ | - | $ | - | $ | 127 | $ | - | ||||||||||
AFS
|
- | - | - | 12 | - | |||||||||||||||
Private placements
|
53 | - | 53 | 115 | 81 | |||||||||||||||
Mortgages and loans to bank clients
|
55 | 31 | 86 | 53 | 25 | |||||||||||||||
Other financial assets
|
7 | 31 | 38 | - | - | |||||||||||||||
Total
|
$ | 115 | $ | 62 | $ | 177 | $ | 307 | $ | 106 |
(c)
|
Securities lending, repurchase and reverse repurchase transactions
|
(d)
|
Credit default swaps
|
As at September 30, 2014
|
Notional
amount(2)
|
Fair value
|
Weighted average maturity
(in years)(3)
|
|||||||||
Single name CDSs(1)
|
||||||||||||
Corporate debt
|
||||||||||||
AAA
|
$ | 39 | $ | 1 | 3 | |||||||
AA
|
106 | 2 | 2 | |||||||||
A
|
223 | 5 | 3 | |||||||||
BBB
|
41 | 1 | 5 | |||||||||
Total single name CDSs
|
$ | 409 | $ | 9 | 3 | |||||||
Total CDS protection sold
|
$ | 409 | $ | 9 | 3 | |||||||
As at December 31, 2013
|
||||||||||||
Single name CDSs(1)
|
||||||||||||
Corporate debt
|
||||||||||||
AAA
|
$ | 37 | $ | 1 | 3 | |||||||
AA
|
101 | 3 | 3 | |||||||||
A
|
197 | 5 | 3 | |||||||||
Total single name CDSs
|
$ | 335 | $ | 9 | 3 | |||||||
Total CDS protection sold
|
$ | 335 | $ | 9 | 3 |
(1)
|
The ratings are based on S&P where available followed by Moody’s, DBRS and Fitch. If no rating is available from a rating agency, an internally developed rating is used.
|
(2)
|
Notional amounts represent the maximum future payments the Company would have to pay its counterparties assuming a default of the underlying credit and zero recovery on the underlying issuer obligation.
|
(3)
|
The weighted average maturity of the CDS is weighted based on notional amounts.
|
(e)
|
Derivatives
|
(f)
|
Offsetting financial assets and financial liabilities
|
Related amounts not set off in the
Consolidated Statements of Financial Position
|
||||||||||||||||||||
As at September 30, 2014
|
Gross amounts of financial instruments presented in the Consolidated Statements of Financial Position(1)
|
Amounts subject to an enforceable master netting arrangement or similar agreements
|
Financial and cash collateral pledged (received)(2)
|
Net amount
including
financing trusts(3)
|
Net amounts
excluding
financing trusts
|
|||||||||||||||
Financial assets
|
||||||||||||||||||||
Derivative assets
|
$ | 13,917 | $ | (6,962 | ) | $ | (6,917 | ) | $ | 38 | $ | 38 | ||||||||
Securities lending
|
1,324 | - | (1,324 | ) | - | 75 | ||||||||||||||
Total financial assets
|
$ | 15,241 | $ | (6,962 | ) | $ | (8,241 | ) | $ | 38 | $ | 113 | ||||||||
Financial liabilities
|
||||||||||||||||||||
Derivative liabilities
|
$ | (8,930 | ) | $ | 6,962 | $ | 1,739 | $ | (229 | ) | $ | (34 | ) | |||||||
Repurchase agreements
|
(401 | ) | - | 401 | - | - | ||||||||||||||
Total financial liabilities
|
$ | (9,331 | ) | $ | 6,962 | $ | 2,140 | $ | (229 | ) | $ | (34 | ) | |||||||
As at December 31, 2013
|
||||||||||||||||||||
Financial assets
|
||||||||||||||||||||
Derivative assets
|
$ | 10,021 | $ | (6,734 | ) | $ | (3,267 | ) | $ | 20 | $ | 20 | ||||||||
Securities lending
|
1,422 | - | (1,422 | ) | - | - | ||||||||||||||
Reverse repurchase agreements
|
6 | - | (6 | ) | - | - | ||||||||||||||
Total financial assets
|
$ | 11,449 | $ | (6,734 | ) | $ | (4,695 | ) | $ | 20 | $ | 20 | ||||||||
Financial liabilities
|
||||||||||||||||||||
Derivative liabilities
|
$ | (9,162 | ) | $ | 6,734 | $ | 2,250 | $ | (178 | ) | $ | (39 | ) | |||||||
Repurchase agreements
|
(200 | ) | - | 200 | - | - | ||||||||||||||
Total financial liabilities
|
$ | (9,362 | ) | $ | 6,734 | $ | 2,450 | $ | (178 | ) | $ | (39 | ) |
(1)
|
The Company does not offset financial instruments. Financial assets and liabilities in the table above include accrued interest of $540 and $568, respectively (December 31, 2013 – $352 and $233, respectively).
|
(2)
|
Financial and cash collateral excludes over-collateralization. As at September 30, 2014 the Company was over-collateralized on OTC derivative assets, OTC derivative liabilities, securities lending and reverse repurchase agreements and repurchase agreements in the amounts of $264, $198, $75 and nil, respectively (December 31, 2013 – $390, $297, $75 and nil, respectively). As at September 30, 2014, collateral pledged (received) does not include collateral in transit on OTC instruments or include initial margin on exchange traded contracts.
|
(3)
|
The net amount includes derivative contracts entered into between the Company and its financing trusts which it does not consolidate. The Company does not exchange collateral on derivatives contracts entered into with these trusts.
|
Note 8 Long-Term Debt
|
(a)
|
The following obligations are included in long-term debt
|
September 30,
|
December 31,
|
||||||||||||
As at
|
Maturity date
|
Par value
|
2014
|
2013
|
|||||||||
4.90% Senior notes
|
September 17, 2020
|
US$500
|
$ | 558 | $ | 529 | |||||||
7.768% Medium term notes
|
April 8, 2019
|
$600 | 598 | 598 | |||||||||
5.505% Medium term notes
|
June 26, 2018
|
$400 | 399 | 399 | |||||||||
Promissory note to Manulife Finance (Delaware), L.P. ("MFLP")
|
December 15, 2016
|
$150 | 150 | 150 | |||||||||
3.40% Senior notes
|
September 17, 2015
|
US$600
|
672 | 637 | |||||||||
4.079% Medium term notes
|
August 20, 2015
|
$900 | 899 | 899 | |||||||||
5.161% Medium term notes
|
June 26, 2015
|
$550 | 550 | 549 | |||||||||
4.896% Medium term notes(1)
|
June 2, 2014
|
$1,000 | - | 999 | |||||||||
Other notes payable
|
n/a
|
n/a | 17 | 15 | |||||||||
Total
|
$ | 3,843 | $ | 4,775 |
(1)
|
On June 2, 2014, MFC redeemed $1,000 of medium term notes which were issued on June 2, 2009.
|
(b)
|
Fair value measurement
|
Note 9 Liabilities for Preferred Shares and Capital Instruments
|
(a)
|
Carrying value of liabilities for preferred shares and capital instruments
|
As at
|
Issuance date
|
Maturity date
|
Par value
|
September 30,
2014
|
December 31,
2013
|
|||||||||
Senior debenture notes - 7.535% fixed/floating
|
July 10, 2009
|
December 31, 2108
|
$ | 1,000 | $ | 1,000 | $ | 1,000 | ||||||
Subordinated note - floating
|
December 14, 2006
|
December 15, 2036
|
$ | 650 | 646 | 647 | ||||||||
Subordinated debentures - 2.811% fixed/floating(1)
|
February 21, 2014
|
February 21, 2024
|
$ | 500 | 498 | - | ||||||||
Surplus notes - 7.375% U.S. dollar
|
February 25, 1994
|
February 15, 2024
|
US$450
|
527 | 501 | |||||||||
Subordinated debentures - 2.926% fixed/floating
|
November 29, 2013
|
November 29, 2023
|
$ | 250 | 249 | 249 | ||||||||
Subordinated debentures - 2.819% fixed/floating
|
February 25, 2013
|
February 26, 2023
|
$ | 200 | 199 | 199 | ||||||||
Subordinated debentures - 4.165% fixed/floating
|
February 17, 2012
|
June 1, 2022
|
$ | 500 | 498 | 498 | ||||||||
Subordinated note - floating(2)
|
December 14, 2006
|
December 15, 2021
|
$ | 400 | 399 | 399 | ||||||||
Subordinated debentures - 4.21% fixed/floating
|
November 18, 2011
|
November 18, 2021
|
$ | 550 | 549 | 548 | ||||||||
Preferred shares - Class A Shares, Series 1
|
June 19, 2003
|
n/a
|
$ | 350 | 344 | 344 | ||||||||
Total
|
$ | 4,909 | $ | 4,385 |
(1)
|
On February 21, 2014, MLI issued $500 in subordinated fixed/floating debentures, which mature February 21, 2024. The debentures are guaranteed by MFC on a subordinated basis. The debentures bear interest at a fixed rate of 2.811% per annum, payable semi-annually for five years and thereafter at the 3-month Bankers’ Acceptance rate plus 0.80% payable quarterly. With regulatory approval, MLI may redeem the debentures, in whole or in part, on or after February 21, 2019, at par, together with accrued and unpaid interest. The subordinated debentures form part of the Company’s Tier 2B regulatory capital.
|
(2)
|
Manulife Holdings (Delaware) LLC (“MHDLL”), now John Hancock Financial Corporation (“JHFC”), a wholly owned subsidiary of MFC, issued the note to Manulife Finance (Delaware) LLC (“MFLLC”), a subsidiary of Manulife Financial (Delaware) L.P. (“MFLP”). MFLP and its subsidiaries are related parties to the Company. On March 28, 2014, the parties agreed to extend the maturity of the $400 subordinated note from January 15, 2019 to December 15, 2021. The extension resulted in an increase in the floating rate to 3-month Banker’s Acceptance rate plus 0.74% from 3-month Banker’s Acceptance rate plus 0.552%.
|
(b)
|
Fair value measurement
|
September 30,
|
December 31,
|
|||||||
As at
|
2014
|
2013
|
||||||
Valuation hierarchy:
|
||||||||
Level 1
|
$ | 355 | $ | 358 | ||||
Level 2
|
4,882 | 4,367 | ||||||
Total fair value
|
$ | 5,237 | $ | 4,725 |
Note 10 Liabilities for Subscription Receipts
|
As at September 30, 2014
|
Public offering
|
Private
placement
|
Total
|
|||||||||
Subscription receipts (number outstanding)
|
81,860,464 | 23,786,870 | 105,647,334 | |||||||||
Gross proceeds
|
$ | 1,760 | $ | 500 | $ | 2,260 | ||||||
Interest earned on escrowed proceeds
|
1 | - | 1 | |||||||||
Less issuance costs, net of tax
|
(47 | ) | - | (47 | ) | |||||||
Liabilities for subscription receipts
|
$ | 1,714 | $ | 500 | $ | 2,214 |
(a)
|
Preferred shares
|
2014
|
2013
|
|||||||||||||||
For the nine months ended September 30,
|
Number of shares
(in millions)
|
Amount
|
Number of shares
(in millions)
|
Amount
|
||||||||||||
Balance, January 1
|
110 | $ | 2,693 | 102 | $ | 2,497 | ||||||||||
Issued, Class 1 shares, Series 13
|
- | - | 8 | 200 | ||||||||||||
Issued, Class 1 shares, Series 15
|
8 | 200 | - | - | ||||||||||||
Issued, Class 1 shares, Series 17
|
14 | 350 | - | - | ||||||||||||
Redeemed, Class A, Series 4(1)
|
(18 | ) | (450 | ) | - | - | ||||||||||
Redeemed, Class 1, Series 1(2)
|
(14 | ) | (350 | ) | - | - | ||||||||||
Par redemption value in excess of carrying value for preferred shares redeemed
|
- | 16 | - | - | ||||||||||||
Issuance costs, net of tax
|
- | (12 | ) | - | (4 | ) | ||||||||||
Balance, September 30
|
100 | $ | 2,447 | 110 | $ | 2,693 |
(1)
|
On June 19, 2014, MFC redeemed in full the $450 of Class A Shares Series 4 at par.
|
(2)
|
On September 19, 2014, MFC redeemed in full the $350 of Class 1 shares Series 1 at par.
|
As at September 30, 2014
|
Issue date
|
Annual dividend
rate
|
Earliest redemption date(1)
|
Number of
shares
(in millions)
|
Face amount
|
Net amount(2)
|
|||||||||||||||
Class A preferred shares
|
|||||||||||||||||||||
Series 2
|
February 18, 2005
|
4.65 | % | n/a | 14 | $ | 350 | $ | 344 | ||||||||||||
Series 3
|
January 3, 2006
|
4.50 | % |
March 19, 2015
|
12 | 300 | 294 | ||||||||||||||
Class 1 preferred shares
|
|||||||||||||||||||||
Series 3
|
March 11, 2011
|
4.20 | % |
June 19, 2016
|
8 | 200 | 196 | ||||||||||||||
Series 5
|
December 6, 2011
|
4.40 | % |
December 19, 2016
|
8 | 200 | 195 | ||||||||||||||
Series 7
|
February 22, 2012
|
4.60 | % |
March 19, 2017
|
10 | 250 | 244 | ||||||||||||||
Series 9
|
May 24, 2012
|
4.40 | % |
September 19, 2017
|
10 | 250 | 244 | ||||||||||||||
Series 11
|
December 4, 2012
|
4.00 | % |
March 19, 2018
|
8 | 200 | 196 | ||||||||||||||
Series 13
|
June 21, 2013
|
3.80 | % |
September 19, 2018
|
8 | 200 | 196 | ||||||||||||||
Series 15(3)
|
February 25, 2014
|
3.90 | % |
June 19, 2019
|
8 | 200 | 195 | ||||||||||||||
Series 17(4)
|
August 15, 2014
|
3.90 | % |
December 19, 2019
|
14 | 350 | 343 | ||||||||||||||
Total
|
100 | $ | 2,447 |
(1)
|
Redemption of all preferred shares is subject to regulatory approval. With the exception of Class A Series 2 and Series 3 preferred shares, MFC may redeem each series in whole or in part at par, on the earliest redemption date or every five years thereafter. Class A Series 2 and Series 3 may be redeemed on or any time after the earliest redemption date in whole or in part for cash at declining premiums that range from $1.00 to nil per share.
|
(2)
|
Net of after-tax issuance costs.
|
(3)
|
On February 25, 2014, MFC issued eight million of Class 1 Shares Series 15 (“Class 1 Series 15 Preferred Shares”) at a price of $25 per share for an aggregate amount of $200.
|
(4)
|
On August 15, 2014, MFC issued 14 million of Class 1 Shares Series 17 (“Class 1 Series 17 Preferred Shares”) at a price of $25 per share for an aggregate amount of $350.
|
(b)
|
Common shares
|
For the
|
nine months ended
|
year ended
|
||||||
Number of common shares (in millions)
|
September 30, 2014
|
December 31, 2013
|
||||||
Balance, beginning of period
|
1,848 | 1,828 | ||||||
Issued on exercise of stock options and deferred share units
|
3 | 1 | ||||||
Issued under dividend reinvestment and share purchase plans
|
13 | 19 | ||||||
Balance, end of period
|
1,864 | 1,848 |
three months ended
|
nine months ended
|
|||||||||||||||
For the
|
September 30,
|
September 30,
|
||||||||||||||
(in millions)
|
2014
|
2013
|
2014
|
2013
|
||||||||||||
Weighted average number of common shares
|
1,859 | 1,839 | 1,854 | 1,834 | ||||||||||||
Dilutive stock-based awards(1)
|
7 | 4 | 7 | 3 | ||||||||||||
Dilutive convertible instruments(2)
|
17 | 21 | 17 | 23 | ||||||||||||
Weighted average number of diluted common shares
|
1,883 | 1,864 | 1,878 | 1,860 |
(1)
|
The dilutive effect of stock-based awards was calculated using the treasury stock method. This method calculates the number of incremental shares by assuming the outstanding stock-based awards are (i) exercised and (ii) then reduced by the number of shares assumed to be repurchased from the issuance proceeds, using the average market price of MFC common shares for the period.
|
(2)
|
The holders of the convertible preferred shares have the right to redeem these instruments for MFC shares prior to the conversion date.
|
(c)
|
Earnings per share
|
three months ended
|
nine months ended
|
|||||||||||||||
For the
|
September 30,
|
September 30,
|
||||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||||
Basic earnings per common share
|
$ | 0.58 | $ | 0.54 | $ | 1.49 | $ | 0.95 | ||||||||
Diluted earnings per common share
|
0.57 | 0.54 | 1.48 | 0.94 |
Note 12 Employee Future Benefits
|
Pension plans
|
Retiree welfare plans
|
|||||||||||||||
For the three months ended September 30,
|
2014
|
2013
|
2014
|
2013
|
||||||||||||
Defined benefit current service cost
|
$ | 7 | $ | 7 | $ | - | $ | - | ||||||||
Defined benefit administrative expenses
|
1 | 1 | - | - | ||||||||||||
Service cost
|
$ | 8 | $ | 8 | $ | - | $ | - | ||||||||
Interest on net defined benefit (asset) liability
|
7 | 8 | 1 | 2 | ||||||||||||
Defined benefit cost
|
$ | 15 | $ | 16 | $ | 1 | $ | 2 | ||||||||
Defined contribution cost
|
13 | 12 | - | - | ||||||||||||
Net benefit cost
|
$ | 28 | $ | 28 | $ | 1 | $ | 2 |
For the nine months ended September 30,
|
||||||||||||||||
Defined benefit current service cost
|
$ | 24 | $ | 24 | $ | 1 | $ | 2 | ||||||||
Defined benefit administrative expenses
|
3 | 3 | - | - | ||||||||||||
Past service cost - plan amendments
|
- | - | - | 3 | ||||||||||||
Past service cost - curtailments
|
- | 8 | - | - | ||||||||||||
Service cost
|
$ | 27 | $ | 35 | $ | 1 | $ | 5 | ||||||||
Interest on net defined benefit (asset) liability
|
19 | 23 | 4 | 6 | ||||||||||||
Defined benefit cost
|
$ | 46 | $ | 58 | $ | 5 | $ | 11 | ||||||||
Defined contribution cost
|
43 | 41 | - | - | ||||||||||||
Net benefit cost
|
$ | 89 | $ | 99 | $ | 5 | $ | 11 |
Note 13 Commitments and Contingencies
|
(a)
|
Legal proceedings
|
(b)
|
Guarantees
|
(i)
|
Guarantees regarding Manulife Finance (Delaware), L.P. (“MFLP”)
|
(ii)
|
Guarantees regarding The Manufacturers Life Insurance Company
|
Condensed Consolidated Statement of Income Information
|
||||||||||||||||||||||||
For the three months ended
September 30, 2014
|
MFC (Guarantor)
|
MFLP
|
MLI consolidated
|
Other subsidiaries
of MFC on a
combined basis
|
Consolidating
adjustments
|
Total
consolidated
amounts(1)
|
||||||||||||||||||
Total revenue
|
$ | 95 | $ | 24 | $ | 10,871 | $ | 577 | $ | (532 | ) | $ | 11,035 | |||||||||||
Net income (loss) attributed to shareholders
|
1,100 | 6 | 1,293 | (240 | ) | (1,059 | ) | 1,100 | ||||||||||||||||
For the three months ended
September 30, 2013
|
||||||||||||||||||||||||
Total revenue
|
$ | 71 | $ | 14 | $ | 6,239 | $ | 217 | $ | (236 | ) | $ | 6,305 | |||||||||||
Net income (loss) attributed to shareholders
|
1,034 | - | 1,119 | (100 | ) | (1,019 | ) | 1,034 | ||||||||||||||||
For the nine months ended
September 30, 2014
|
||||||||||||||||||||||||
Total revenue
|
$ | 261 | $ | 56 | $ | 37,809 | $ | 2,962 | $ | (2,548 | ) | $ | 38,540 | |||||||||||
Net income (loss) attributed to shareholders
|
2,861 | 8 | 3,027 | (271 | ) | (2,764 | ) | 2,861 | ||||||||||||||||
For the nine months ended
September 30, 2013
|
||||||||||||||||||||||||
Total revenue
|
$ | 191 | $ | 61 | $ | 11,616 | $ | (560 | ) | $ | 322 | $ | 11,630 | |||||||||||
Net income (loss) attributed to shareholders
|
1,833 | 12 | 2,254 | (439 | ) | (1,827 | ) | 1,833 | ||||||||||||||||
(1) Since MFLP is not consolidated into the results of MFC consolidated, the results of MFLP have been eliminated in the consolidating adjustments column.
|
||||||||||||||||||||||||
Condensed Consolidated Statement of Financial Position Information
|
||||||||||||||||||||||||
As at September 30, 2014
|
MFC (Guarantor)
|
MFLP
|
MLI consolidated
|
Other subsidiaries
of MFC on a
combined basis
|
Consolidating
adjustments
|
Total
consolidated
amounts(1)
|
||||||||||||||||||
Invested assets
|
$ | 2,248 | $ | 5 | $ | 251,475 | $ | 4,119 | $ | (5 | ) | $ | 257,842 | |||||||||||
Total other assets
|
49,290 | 1,561 | 62,687 | 32,471 | (98,933 | ) | 47,076 | |||||||||||||||||
Segregated funds net assets
|
- | - | 250,406 | - | - | 250,406 | ||||||||||||||||||
Insurance contract liabilities
|
- | - | 216,399 | 14,090 | (13,806 | ) | 216,683 | |||||||||||||||||
Investment contract liabilities
|
- | - | 2,568 | - | - | 2,568 | ||||||||||||||||||
Segregated funds net liabilities
|
- | - | 250,406 | - | - | 250,406 | ||||||||||||||||||
Total other liabilities
|
19,497 | 1,389 | 57,389 | 21,746 | (46,950 | ) | 53,071 | |||||||||||||||||
As at December 31, 2013
|
||||||||||||||||||||||||
Invested assets
|
$ | 28 | $ | 2 | $ | 228,933 | $ | 3,748 | $ | (2 | ) | $ | 232,709 | |||||||||||
Total other assets
|
34,023 | 1,480 | 51,853 | 9,603 | (55,911 | ) | 41,048 | |||||||||||||||||
Segregated funds net assets
|
- | - | 239,871 | - | - | 239,871 | ||||||||||||||||||
Insurance contract liabilities
|
- | - | 192,824 | 11,923 | (11,505 | ) | 193,242 | |||||||||||||||||
Investment contract liabilities
|
- | - | 2,524 | - | - | 2,524 | ||||||||||||||||||
Segregated funds net liabilities
|
- | - | 239,871 | - | - | 239,871 | ||||||||||||||||||
Total other liabilities
|
5,528 | 1,313 | 52,078 | 461 | (10,422 | ) | 48,958 |
(1)
|
Since MFLP is not consolidated into the results of MFC consolidated, the results of MFLP have been eliminated in the consolidating adjustments column.
|
(iii)
|
Guarantees regarding John Hancock Life Insurance Company (U.S.A.)
|
Note 14 Segmented Information
|
By segment
|
||||||||||||||||||||
For the three months ended
|
Asia
|
Canadian
|
U.S.
|
Corporate
|
||||||||||||||||
September 30, 2014
|
Division
|
Division
|
Division
|
and Other
|
Total
|
|||||||||||||||
Revenue
|
||||||||||||||||||||
Premium income
|
||||||||||||||||||||
Life and health insurance
|
$ | 1,669 | $ | 850 | $ | 1,534 | $ | 19 | $ | 4,072 | ||||||||||
Annuities and pensions
|
239 | 109 | 221 | - | 569 | |||||||||||||||
Net premium income
|
$ | 1,908 | $ | 959 | $ | 1,755 | $ | 19 | $ | 4,641 | ||||||||||
Net investment income (loss)
|
481 | 1,290 | 2,521 | (113 | ) | 4,179 | ||||||||||||||
Other revenue
|
332 | 725 | 1,127 | 31 | 2,215 | |||||||||||||||
Total revenue
|
$ | 2,721 | $ | 2,974 | $ | 5,403 | $ | (63 | ) | $ | 11,035 | |||||||||
Contract benefits and expenses
|
||||||||||||||||||||
Life and health insurance
|
$ | 1,456 | $ | 1,045 | $ | 2,178 | $ | 64 | $ | 4,743 | ||||||||||
Annuities and pensions
|
213 | 630 | 1,141 | - | 1,984 | |||||||||||||||
Net benefits and claims
|
$ | 1,669 | $ | 1,675 | $ | 3,319 | $ | 64 | $ | 6,727 | ||||||||||
Interest expense
|
25 | 139 | 12 | 108 | 284 | |||||||||||||||
Other expenses
|
608 | 840 | 1,095 | 89 | 2,632 | |||||||||||||||
Total contract benefits and expenses
|
$ | 2,302 | $ | 2,654 | $ | 4,426 | $ | 261 | $ | 9,643 | ||||||||||
Income (loss) before income taxes
|
$ | 419 | $ | 320 | $ | 977 | $ | (324 | ) | $ | 1,392 | |||||||||
Income tax recovery (expense)
|
(39 | ) | (70 | ) | (298 | ) | 120 | (287 | ) | |||||||||||
Net income (loss)
|
$ | 380 | $ | 250 | $ | 679 | $ | (204 | ) | $ | 1,105 | |||||||||
Less net income (loss) attributed to:
|
||||||||||||||||||||
Non-controlling interests
|
15 | - | - | (6 | ) | 9 | ||||||||||||||
Participating policyholders
|
33 | (36 | ) | - | (1 | ) | (4 | ) | ||||||||||||
Net income (loss) attributed to shareholders
|
$ | 332 | $ | 286 | $ | 679 | $ | (197 | ) | $ | 1,100 |
For the three months ended
|
||||||||||||||||||||
September 30, 2013
|
||||||||||||||||||||
Revenue
|
||||||||||||||||||||
Premium income
|
||||||||||||||||||||
Life and health insurance
|
$ | 1,431 | $ | 799 | $ | 1,628 | $ | 21 | $ | 3,879 | ||||||||||
Annuities and pensions
|
131 | 149 | 210 | - | 490 | |||||||||||||||
Net premium income
|
$ | 1,562 | $ | 948 | $ | 1,838 | $ | 21 | $ | 4,369 | ||||||||||
Net investment income (loss)
|
443 | 150 | (159 | ) | (464 | ) | (30 | ) | ||||||||||||
Other revenue
|
390 | 498 | 1,033 | 45 | 1,966 | |||||||||||||||
Total revenue
|
$ | 2,395 | $ | 1,596 | $ | 2,712 | $ | (398 | ) | $ | 6,305 | |||||||||
Contract benefits and expenses
|
||||||||||||||||||||
Life and health insurance
|
$ | 1,321 | $ | 573 | $ | 680 | $ | 397 | $ | 2,971 | ||||||||||
Annuities and pensions
|
17 | (153 | ) | (354 | ) | - | (490 | ) | ||||||||||||
Net benefits and claims
|
$ | 1,338 | $ | 420 | $ | 326 | $ | 397 | $ | 2,481 | ||||||||||
Interest expense
|
20 | 87 | 8 | 150 | 265 | |||||||||||||||
Other expenses
|
520 | 765 | 1,025 | 131 | 2,441 | |||||||||||||||
Total contract benefits and expenses
|
$ | 1,878 | $ | 1,272 | $ | 1,359 | $ | 678 | $ | 5,187 | ||||||||||
Income (loss) before income taxes
|
$ | 517 | $ | 324 | $ | 1,353 | $ | (1,076 | ) | $ | 1,118 | |||||||||
Income tax recovery (expense)
|
(28 | ) | (23 | ) | (425 | ) | 304 | (172 | ) | |||||||||||
Net income (loss)
|
$ | 489 | $ | 301 | $ | 928 | $ | (772 | ) | $ | 946 | |||||||||
Less net income (loss) attributed to:
|
||||||||||||||||||||
Non-controlling interests
|
4 | - | - | 16 | 20 | |||||||||||||||
Participating policyholders
|
5 | (113 | ) | - | - | (108 | ) | |||||||||||||
Net income (loss) attributed to shareholders
|
$ | 480 | $ | 414 | $ | 928 | $ | (788 | ) | $ | 1,034 |
By segment
|
||||||||||||||||||||
As at and for the nine months ended
|
Asia
|
Canadian
|
U.S.
|
Corporate
|
||||||||||||||||
September 30, 2014
|
Division
|
Division
|
Division
|
and Other
|
Total
|
|||||||||||||||
Revenue
|
||||||||||||||||||||
Premium income
|
||||||||||||||||||||
Life and health insurance
|
$ | 4,773 | $ | 2,475 | $ | 4,247 | $ | 59 | $ | 11,554 | ||||||||||
Annuities and pensions
|
495 | 361 | 624 | - | 1,480 | |||||||||||||||
Net premium income
|
$ | 5,268 | $ | 2,836 | $ | 4,871 | $ | 59 | $ | 13,034 | ||||||||||
Net investment income (loss)
|
2,056 | 5,321 | 11,913 | (253 | ) | 19,037 | ||||||||||||||
Other revenue
|
977 | 1,942 | 3,398 | 152 | 6,469 | |||||||||||||||
Total revenue
|
$ | 8,301 | $ | 10,099 | $ | 20,182 | $ | (42 | ) | $ | 38,540 | |||||||||
Contract benefits and expenses
|
||||||||||||||||||||
Life and health insurance
|
$ | 4,797 | $ | 3,895 | $ | 10,328 | $ | 186 | $ | 19,206 | ||||||||||
Annuities and pensions
|
646 | 2,299 | 4,291 | - | 7,236 | |||||||||||||||
Net benefits and claims
|
$ | 5,443 | $ | 6,194 | $ | 14,619 | $ | 186 | $ | 26,442 | ||||||||||
Interest expense
|
69 | 360 | 38 | 355 | 822 | |||||||||||||||
Other expenses
|
1,690 | 2,482 | 3,244 | 320 | 7,736 | |||||||||||||||
Total contract benefits and expenses
|
$ | 7,202 | $ | 9,036 | $ | 17,901 | $ | 861 | $ | 35,000 | ||||||||||
Income (loss) before income taxes
|
$ | 1,099 | $ | 1,063 | $ | 2,281 | $ | (903 | ) | $ | 3,540 | |||||||||
Income tax recovery (expense)
|
(96 | ) | (214 | ) | (640 | ) | 296 | (654 | ) | |||||||||||
Net income (loss)
|
$ | 1,003 | $ | 849 | $ | 1,641 | $ | (607 | ) | $ | 2,886 | |||||||||
Less net income (loss) attributed to:
|
||||||||||||||||||||
Non-controlling interests
|
49 | - | - | 15 | 64 | |||||||||||||||
Participating policyholders
|
43 | (81 | ) | - | (1 | ) | (39 | ) | ||||||||||||
Net income (loss) attributed to shareholders
|
$ | 911 | $ | 930 | $ | 1,641 | $ | (621 | ) | $ | 2,861 | |||||||||
Total assets
|
$ | 66,336 | $ | 144,365 | $ | 318,097 | $ | 26,526 | $ | 555,324 |
As at and for the nine months ended
|
||||||||||||||||||||
September 30, 2013
|
||||||||||||||||||||
Revenue
|
||||||||||||||||||||
Premium income
|
||||||||||||||||||||
Life and health insurance
|
$ | 4,255 | $ | 2,382 | $ | 4,695 | $ | 65 | $ | 11,397 | ||||||||||
Annuities and pensions
|
429 | 426 | 710 | - | 1,565 | |||||||||||||||
Net premium income
|
$ | 4,684 | $ | 2,808 | $ | 5,405 | $ | 65 | $ | 12,962 | ||||||||||
Net investment income (loss)
|
446 | (871 | ) | (5,176 | ) | (1,995 | ) | (7,596 | ) | |||||||||||
Other revenue
|
1,102 | 2,019 | 2,981 | 162 | 6,264 | |||||||||||||||
Total revenue
|
$ | 6,232 | $ | 3,956 | $ | 3,210 | $ | (1,768 | ) | $ | 11,630 | |||||||||
Contract benefits and expenses
|
||||||||||||||||||||
Life and health insurance
|
$ | 3,139 | $ | 1,756 | $ | (589 | ) | $ | 596 | $ | 4,902 | |||||||||
Annuities and pensions
|
(409 | ) | (777 | ) | (2,139 | ) | (1 | ) | (3,326 | ) | ||||||||||
Net benefits and claims (recovery)
|
$ | 2,730 | $ | 979 | $ | (2,728 | ) | $ | 595 | $ | 1,576 | |||||||||
Interest expense
|
57 | 328 | 34 | 449 | 868 | |||||||||||||||
Other expenses
|
1,533 | 2,317 | 2,990 | 453 | 7,293 | |||||||||||||||
Total contract benefits and expenses
|
$ | 4,320 | $ | 3,624 | $ | 296 | $ | 1,497 | $ | 9,737 | ||||||||||
Income (loss) before income taxes
|
$ | 1,912 | $ | 332 | $ | 2,914 | $ | (3,265 | ) | $ | 1,893 | |||||||||
Income tax recovery (expense)
|
(87 | ) | 55 | (831 | ) | 779 | (84 | ) | ||||||||||||
Net income (loss)
|
$ | 1,825 | $ | 387 | $ | 2,083 | $ | (2,486 | ) | $ | 1,809 | |||||||||
Less net income (loss) attributed to:
|
||||||||||||||||||||
Non-controlling interests
|
23 | - | - | 13 | 36 | |||||||||||||||
Participating policyholders
|
8 | (68 | ) | - | - | (60 | ) | |||||||||||||
Net income (loss) attributed to shareholders
|
$ | 1,794 | $ | 455 | $ | 2,083 | $ | (2,499 | ) | $ | 1,833 | |||||||||
Total assets
|
$ | 61,949 | $ | 132,645 | $ | 282,838 | $ | 20,584 | $ | 498,016 |
By geographic location
|
||||||||||||||||||||
For the three months ended
|
||||||||||||||||||||
September 30, 2014
|
Asia
|
Canada
|
U.S.
|
Other
|
Total
|
|||||||||||||||
Revenue
|
||||||||||||||||||||
Premium income
|
||||||||||||||||||||
Life and health insurance
|
$ | 1,686 | $ | 736 | $ | 1,535 | $ | 115 | $ | 4,072 | ||||||||||
Annuities and pensions
|
239 | 109 | 221 | - | 569 | |||||||||||||||
Net premium income
|
$ | 1,925 | $ | 845 | $ | 1,756 | $ | 115 | $ | 4,641 | ||||||||||
Net investment income (loss)
|
461 | 1,312 | 2,393 | 13 | 4,179 | |||||||||||||||
Other revenue
|
316 | 691 | 1,206 | 2 | 2,215 | |||||||||||||||
Total revenue
|
$ | 2,702 | $ | 2,848 | $ | 5,355 | $ | 130 | $ | 11,035 | ||||||||||
For the three months ended
|
||||||||||||||||||||
September 30, 2013
|
||||||||||||||||||||
Revenue
|
||||||||||||||||||||
Premium income
|
||||||||||||||||||||
Life and health insurance
|
$ | 1,446 | $ | 680 | $ | 1,628 | $ | 125 | $ | 3,879 | ||||||||||
Annuities and pensions
|
131 | 149 | 210 | - | 490 | |||||||||||||||
Net premium income
|
$ | 1,577 | $ | 829 | $ | 1,838 | $ | 125 | $ | 4,369 | ||||||||||
Net investment income (loss)
|
191 | 111 | (337 | ) | 5 | (30 | ) | |||||||||||||
Other revenue
|
387 | 499 | 1,078 | 2 | 1,966 | |||||||||||||||
Total revenue
|
$ | 2,155 | $ | 1,439 | $ | 2,579 | $ | 132 | $ | 6,305 |
For the nine months ended
|
||||||||||||||||||||
September 30, 2014
|
||||||||||||||||||||
Revenue
|
||||||||||||||||||||
Premium income
|
||||||||||||||||||||
Life and health insurance
|
$ | 4,822 | $ | 2,123 | $ | 4,249 | $ | 360 | $ | 11,554 | ||||||||||
Annuities and pensions
|
495 | 361 | 624 | - | 1,480 | |||||||||||||||
Net premium income
|
$ | 5,317 | $ | 2,484 | $ | 4,873 | $ | 360 | $ | 13,034 | ||||||||||
Net investment income (loss)
|
2,058 | 5,401 | 11,430 | 148 | 19,037 | |||||||||||||||
Other revenue
|
982 | 1,882 | 3,600 | 5 | 6,469 | |||||||||||||||
Total revenue
|
$ | 8,357 | $ | 9,767 | $ | 19,903 | $ | 513 | $ | 38,540 | ||||||||||
For the nine months ended
|
||||||||||||||||||||
September 30, 2013
|
||||||||||||||||||||
Revenue
|
||||||||||||||||||||
Premium income
|
||||||||||||||||||||
Life and health insurance
|
$ | 4,299 | $ | 2,019 | $ | 4,696 | $ | 383 | $ | 11,397 | ||||||||||
Annuities and pensions
|
429 | 426 | 710 | - | 1,565 | |||||||||||||||
Net premium income
|
$ | 4,728 | $ | 2,445 | $ | 5,406 | $ | 383 | $ | 12,962 | ||||||||||
Net investment income (loss)
|
(804 | ) | (823 | ) | (5,979 | ) | 10 | (7,596 | ) | |||||||||||
Other revenue
|
1,095 | 1,990 | 3,149 | 30 | 6,264 | |||||||||||||||
Total revenue
|
$ | 5,019 | $ | 3,612 | $ | 2,576 | $ | 423 | $ | 11,630 |
Note 15 Segregated Funds
|
(a)
|
Carrying value and change in segregated funds net assets are as follows:
|
As at
|
September 30, 2014
|
December 31, 2013
|
||||||
Investments at market value
|
||||||||
Cash and short-term securities
|
$ | 1,865 | $ | 2,540 | ||||
Debt securities
|
6,771 | 7,472 | ||||||
Equities
|
7,078 | 6,615 | ||||||
Mutual funds
|
232,454 | 220,936 | ||||||
Other investments
|
2,649 | 2,596 | ||||||
Accrued investment income
|
114 | 89 | ||||||
Other liabilities, net
|
(331 | ) | (202 | ) | ||||
Total segregated funds net assets
|
$ | 250,600 | $ | 240,046 | ||||
Composition of segregated funds net assets
|
||||||||
Held by policyholders
|
$ | 250,406 | $ | 239,871 | ||||
Held by Company (seed money reported in other invested assets)
|
194 | 175 | ||||||
Total segregated funds net assets
|
$ | 250,600 | $ | 240,046 |
three months ended
|
nine months ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
For the
|
2014
|
2013
|
2014
|
2013
|
||||||||||||
Net policyholder cash flow
|
||||||||||||||||
Deposits from policyholders
|
$ | 5,509 | $ | 5,320 | $ | 17,872 | $ | 17,302 | ||||||||
Net transfers to general fund
|
(159 | ) | (181 | ) | (519 | ) | (442 | ) | ||||||||
Payments to policyholders
|
(8,439 | ) | (7,036 | ) | (25,876 | ) | (21,006 | ) | ||||||||
$ | (3,089 | ) | $ | (1,897 | ) | $ | (8,523 | ) | $ | (4,146 | ) | |||||
Investment related
|
||||||||||||||||
Interest and dividends
|
$ | 1,833 | $ | 375 | $ | 2,835 | $ | 1,209 | ||||||||
Net realized and unrealized investment gains (losses)
|
(2,912 | ) | 9,993 | 9,405 | 20,179 | |||||||||||
$ | (1,079 | ) | $ | 10,368 | $ | 12,240 | $ | 21,388 | ||||||||
Other
|
||||||||||||||||
Management and administration fees
|
$ | (922 | ) | $ | (886 | ) | $ | (2,949 | ) | $ | (2,763 | ) | ||||
Impact of changes in foreign exchange rates
|
8,321 | (4,020 | ) | 9,786 | 3,295 | |||||||||||
$ | 7,399 | $ | (4,906 | ) | $ | 6,837 | $ | 532 | ||||||||
Net additions (deductions)
|
$ | 3,231 | $ | 3,565 | $ | 10,554 | $ | 17,774 | ||||||||
Segregated funds net assets, beginning of period
|
247,369 | 223,572 | 240,046 | 209,363 | ||||||||||||
Segregated funds net assets, end of period
|
$ | 250,600 | $ | 227,137 | $ | 250,600 | $ | 227,137 |
(b)
|
Fair value measurement
|
September 30,
|
December 31,
|
|||||||
As at
|
2014
|
2013
|
||||||
Valuation hierarchy
|
||||||||
Level 1
|
$ | 228,731 | $ | 219,538 | ||||
Level 2
|
19,165 | 17,972 | ||||||
Level 3
|
2,510 | 2,361 | ||||||
Total fair value
|
$ | 250,406 | $ | 239,871 |
three months ended
|
nine months ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
For the
|
2014
|
2013
|
2014
|
2013
|
||||||||||||
Balance at the beginning of the period
|
$ | 2,429 | $ | 2,232 | $ | 2,360 | $ | 2,212 | ||||||||
Net realized / unrealized gains (losses) included in:
|
||||||||||||||||
Net income(1)
|
(5 | ) | 4 | 20 | (81 | ) | ||||||||||
OCI
|
- | - | - | - | ||||||||||||
Purchases
|
5 | (1 | ) | 69 | 28 | |||||||||||
Issuances
|
- | - | - | - | ||||||||||||
Sales
|
(40 | ) | (3 | ) | (124 | ) | (47 | ) | ||||||||
Transfers
|
||||||||||||||||
Into Level 3(2)
|
(1 | ) | - | 54 | (1 | ) | ||||||||||
Out of Level 3(2)
|
1 | (1 | ) | - | - | |||||||||||
Currency movement
|
120 | (46 | ) | 130 | 74 | |||||||||||
Balance at the end of the period
|
$ | 2,509 | $ | 2,185 | $ | 2,509 | $ | 2,185 | ||||||||
Change in unrealized gains (losses) on instruments still held
|
$ | (18 | ) | $ | 14 | $ | 13 | $ | 80 |
(1)
|
This amount is included in the investment related section of the changes in net assets for segregated funds.
|
(2)
|
For assets that are transferred into and/or out of Level 3, the Company uses the fair value of the assets at the beginning of the period. Transfers into Level 3 occur when the inputs used to price the assets and liabilities lack observable market data (versus the previous period). Transfers out of Level 3 occur when the inputs used to price the assets and liabilities become available from observable market data.
|
Note 16 Information Provided in Connection with Investments in Deferred Annuity Contracts and SignatureNotes Issued or Assumed by John Hancock Life Insurance Company (U.S.A.)
|
As at September 30, 2014
|
MFC
(Guarantor)
|
JHUSA (Issuer)
|
Other
Subsidiaries
|
Consolidation Adjustments
|
Consolidated
MFC
|
|||||||||||||||
Assets
|
||||||||||||||||||||
Invested assets
|
$ | 2,248 | $ | 99,246 | $ | 156,723 | $ | (375 | ) | $ | 257,842 | |||||||||
Investments in unconsolidated subsidiaries
|
38,090 | 5,168 | 25,143 | (68,401 | ) | - | ||||||||||||||
Reinsurance assets
|
- | 31,297 | 5,773 | (19,018 | ) | 18,052 | ||||||||||||||
Other assets
|
11,200 | 22,832 | 41,550 | (46,558 | ) | 29,024 | ||||||||||||||
Segregated funds net assets
|
- | 156,358 | 95,465 | (1,417 | ) | 250,406 | ||||||||||||||
Total assets
|
$ | 51,538 | $ | 314,901 | $ | 324,654 | $ | (135,769 | ) | $ | 555,324 | |||||||||
Liabilities and equity
|
||||||||||||||||||||
Insurance contract liabilities
|
$ | - | $ | 118,774 | $ | 117,630 | $ | (19,721 | ) | $ | 216,683 | |||||||||
Investment contract liabilities and deposits
|
- | 1,451 | 1,122 | (5 | ) | 2,568 | ||||||||||||||
Other liabilities
|
13,263 | 22,079 | 52,380 | (45,617 | ) | 42,105 | ||||||||||||||
Long-term debt
|
3,676 | - | 17 | 150 | 3,843 | |||||||||||||||
Liabilities for preferred shares and capital instruments
|
344 | 1,133 | 14,150 | (10,718 | ) | 4,909 | ||||||||||||||
Liabilities for subscription receipts
|
2,214 | - | - | - | 2,214 | |||||||||||||||
Segregated funds net liabilities
|
- | 156,358 | 95,465 | (1,417 | ) | 250,406 | ||||||||||||||
Shareholders' equity
|
32,041 | 15,106 | 43,336 | (58,442 | ) | 32,041 | ||||||||||||||
Participating policyholders' equity
|
- | - | 96 | - | 96 | |||||||||||||||
Non-controlling interests
|
- | - | 458 | 1 | 459 | |||||||||||||||
Total liabilities and equity
|
$ | 51,538 | $ | 314,901 | $ | 324,654 | $ | (135,769 | ) | $ | 555,324 |
Condensed Consolidating Statement of Financial Position
|
||||||||||||||||||||
As at December 31, 2013
|
MFC
(Guarantor)
|
JHUSA (Issuer)
|
Other
Subsidiaries
|
Consolidation Adjustments
|
Consolidated
MFC
|
|||||||||||||||
Assets
|
||||||||||||||||||||
Invested assets
|
$ | 28 | $ | 89,552 | $ | 143,184 | $ | (55 | ) | $ | 232,709 | |||||||||
Investments in unconsolidated subsidiaries
|
33,831 | 4,561 | 13,269 | (51,661 | ) | - | ||||||||||||||
Reinsurance assets
|
- | 25,891 | 6,454 | (14,902 | ) | 17,443 | ||||||||||||||
Other assets
|
192 | 19,258 | 23,547 | (19,392 | ) | 23,605 | ||||||||||||||
Segregated funds net assets
|
- | 150,448 | 90,812 | (1,389 | ) | 239,871 | ||||||||||||||
Total assets
|
$ | 34,051 | $ | 289,710 | $ | 277,266 | $ | (87,399 | ) | $ | 513,628 | |||||||||
Liabilities and equity
|
||||||||||||||||||||
Insurance contract liabilities
|
$ | - | $ | 103,945 | $ | 104,847 | $ | (15,550 | ) | $ | 193,242 | |||||||||
Investment contract liabilities and deposits
|
- | 1,444 | 1,085 | (5 | ) | 2,524 | ||||||||||||||
Other liabilities
|
574 | 19,561 | 37,974 | (18,311 | ) | 39,798 | ||||||||||||||
Long-term debt
|
4,610 | - | 15 | 150 | 4,775 | |||||||||||||||
Liabilities for preferred shares and capital instruments
|
344 | 1,077 | 3,645 | (681 | ) | 4,385 | ||||||||||||||
Liabilities for subscription receipts
|
- | - | - | - | - | |||||||||||||||
Segregated funds net liabilities
|
- | 150,448 | 90,812 | (1,389 | ) | 239,871 | ||||||||||||||
Shareholders' equity
|
28,523 | 13,235 | 38,379 | (51,614 | ) | 28,523 | ||||||||||||||
Participating policyholders' equity
|
- | - | 134 | - | 134 | |||||||||||||||
Non-controlling interests
|
- | - | 375 | 1 | 376 | |||||||||||||||
Total liabilities and equity
|
$ | 34,051 | $ | 289,710 | $ | 277,266 | $ | (87,399 | ) | $ | 513,628 |
Condensed Consolidating Statement of Income
|
||||||||||||||||||||
For the three months ended
|
MFC
(Guarantor)
|
JHUSA (Issuer)
|
Other
Subsidiaries
|
Consolidation
Adjustments
|
Consolidated
MFC
|
|||||||||||||||
September 30, 2014
|
||||||||||||||||||||
Revenue
|
||||||||||||||||||||
Net premium income
|
$ | - | $ | 1,244 | $ | 3,397 | $ | - | $ | 4,641 | ||||||||||
Net investment income (loss)
|
98 | 2,150 | 2,225 | (294 | ) | 4,179 | ||||||||||||||
Net other revenue
|
(3 | ) | 468 | 2,803 | (1,053 | ) | 2,215 | |||||||||||||
Total revenue
|
$ | 95 | $ | 3,862 | $ | 8,425 | $ | (1,347 | ) | $ | 11,035 | |||||||||
Policy benefits and expenses
|
||||||||||||||||||||
Net benefits and claims
|
$ | - | $ | 2,472 | $ | 4,856 | $ | (601 | ) | $ | 6,727 | |||||||||
Commissions, investment and general expenses
|
3 | 699 | 2,311 | (460 | ) | 2,553 | ||||||||||||||
Other expenses
|
62 | 60 | 527 | (286 | ) | 363 | ||||||||||||||
Total policy benefits and expenses
|
$ | 65 | $ | 3,231 | $ | 7,694 | $ | (1,347 | ) | $ | 9,643 | |||||||||
Income (loss) before income taxes
|
$ | 30 | $ | 631 | $ | 731 | $ | - | $ | 1,392 | ||||||||||
Income tax (expense) recovery
|
(9 | ) | (155 | ) | (123 | ) | - | (287 | ) | |||||||||||
Income (loss) after income taxes
|
$ | 21 | $ | 476 | $ | 608 | $ | - | $ | 1,105 | ||||||||||
Equity in net income (loss) of unconsolidated subsidiaries
|
1,079 | 118 | 594 | (1,791 | ) | - | ||||||||||||||
Net income (loss)
|
$ | 1,100 | $ | 594 | $ | 1,202 | $ | (1,791 | ) | $ | 1,105 | |||||||||
Net income (loss) attributed to:
|
||||||||||||||||||||
Non-controlling interests
|
$ | - | $ | - | $ | 9 | $ | - | $ | 9 | ||||||||||
Participating policyholders
|
- | (23 | ) | (4 | ) | 23 | (4 | ) | ||||||||||||
Shareholders
|
1,100 | 617 | 1,197 | (1,814 | ) | 1,100 | ||||||||||||||
$ | 1,100 | $ | 594 | $ | 1,202 | $ | (1,791 | ) | $ | 1,105 |
Condensed Consolidating Statement of Income
|
||||||||||||||||||||
For the three months ended
|
MFC
(Guarantor)
|
JHUSA (Issuer)
|
Other
Subsidiaries
|
Consolidation Adjustments
|
Consolidated
MFC
|
|||||||||||||||
September 30, 2013
|
||||||||||||||||||||
Revenue
|
||||||||||||||||||||
Net premium income
|
$ | - | $ | 1,277 | $ | 3,091 | $ | 1 | $ | 4,369 | ||||||||||
Net investment income (loss)
|
69 | (222 | ) | 450 | (327 | ) | (30 | ) | ||||||||||||
Net other revenue
|
2 | 412 | 1,431 | 121 | 1,966 | |||||||||||||||
Total revenue
|
$ | 71 | $ | 1,467 | $ | 4,972 | $ | (205 | ) | $ | 6,305 | |||||||||
Policy benefits and expenses
|
||||||||||||||||||||
Net benefits and claims
|
$ | - | $ | 731 | $ | 1,313 | $ | 437 | $ | 2,481 | ||||||||||
Commissions, investment and general expenses
|
2 | 690 | 1,988 | (312 | ) | 2,368 | ||||||||||||||
Other expenses
|
70 | 84 | 514 | (330 | ) | 338 | ||||||||||||||
Total policy benefits and expenses
|
$ | 72 | $ | 1,505 | $ | 3,815 | $ | (205 | ) | $ | 5,187 | |||||||||
Income (loss) before income taxes
|
$ | (1 | ) | $ | (38 | ) | $ | 1,157 | $ | - | $ | 1,118 | ||||||||
Income tax (expense) recovery
|
(1 | ) | 58 | (229 | ) | - | (172 | ) | ||||||||||||
Income (loss) after income taxes
|
$ | (2 | ) | $ | 20 | $ | 928 | $ | - | $ | 946 | |||||||||
Equity in net income (loss) of unconsolidated subsidiaries
|
1,036 | 262 | 282 | (1,580 | ) | - | ||||||||||||||
Net income (loss)
|
$ | 1,034 | $ | 282 | $ | 1,210 | $ | (1,580 | ) | $ | 946 | |||||||||
Net income (loss) attributed to:
|
||||||||||||||||||||
Non-controlling interests
|
$ | - | $ | - | $ | 20 | $ | - | $ | 20 | ||||||||||
Participating policyholders
|
- | (7 | ) | (108 | ) | 7 | (108 | ) | ||||||||||||
Shareholders
|
1,034 | 289 | 1,298 | (1,587 | ) | 1,034 | ||||||||||||||
$ | 1,034 | $ | 282 | $ | 1,210 | $ | (1,580 | ) | $ | 946 |
Condensed Consolidating Statement of Income
|
||||||||||||||||||||
For the nine months ended
|
MFC
(Guarantor)
|
JHUSA (Issuer)
|
Other
Subsidiaries
|
Consolidation Adjustments
|
Consolidated
MFC
|
|||||||||||||||
September 30, 2014
|
||||||||||||||||||||
Revenue
|
||||||||||||||||||||
Net premium income
|
$ | - | $ | 3,622 | $ | 9,412 | $ | - | $ | 13,034 | ||||||||||
Net investment income (loss)
|
263 | 9,663 | 9,954 | (843 | ) | 19,037 | ||||||||||||||
Net other revenue
|
(2 | ) | 1,637 | 9,209 | (4,375 | ) | 6,469 | |||||||||||||
Total revenue
|
$ | 261 | $ | 14,922 | $ | 28,575 | $ | (5,218 | ) | $ | 38,540 | |||||||||
Policy benefits and expenses
|
||||||||||||||||||||
Net benefits and claims
|
$ | - | $ | 11,844 | $ | 17,649 | $ | (3,051 | ) | $ | 26,442 | |||||||||
Commissions, investment and general expenses
|
11 | 2,054 | 6,800 | (1,347 | ) | 7,518 | ||||||||||||||
Other expenses
|
200 | 185 | 1,475 | (820 | ) | 1,040 | ||||||||||||||
Total policy benefits and expenses
|
$ | 211 | $ | 14,083 | $ | 25,924 | $ | (5,218 | ) | $ | 35,000 | |||||||||
Income (loss) before income taxes
|
$ | 50 | $ | 839 | $ | 2,651 | $ | - | $ | 3,540 | ||||||||||
Income tax (expense) recovery
|
(16 | ) | (72 | ) | (566 | ) | - | (654 | ) | |||||||||||
Income (loss) after income taxes
|
$ | 34 | $ | 767 | $ | 2,085 | $ | - | $ | 2,886 | ||||||||||
Equity in net income (loss) of unconsolidated subsidiaries
|
2,827 | 382 | 1,149 | (4,358 | ) | - | ||||||||||||||
Net income (loss)
|
$ | 2,861 | $ | 1,149 | $ | 3,234 | $ | (4,358 | ) | $ | 2,886 | |||||||||
Net income (loss) attributed to:
|
||||||||||||||||||||
Non-controlling interests
|
$ | - | $ | - | $ | 64 | $ | - | $ | 64 | ||||||||||
Participating policyholders
|
- | (55 | ) | (39 | ) | 55 | (39 | ) | ||||||||||||
Shareholders
|
2,861 | 1,204 | 3,209 | (4,413 | ) | 2,861 | ||||||||||||||
$ | 2,861 | $ | 1,149 | $ | 3,234 | $ | (4,358 | ) | $ | 2,886 |
Condensed Consolidating Statement of Income
|
||||||||||||||||||||
For the nine months ended
|
MFC
(Guarantor)
|
JHUSA (Issuer)
|
Other
Subsidiaries
|
Consolidation Adjustments
|
Consolidated
MFC
|
|||||||||||||||
September 30, 2013
|
||||||||||||||||||||
Revenue
|
||||||||||||||||||||
Net premium income
|
$ | - | $ | 3,772 | $ | 9,056 | $ | 134 | $ | 12,962 | ||||||||||
Net investment income (loss)
|
194 | (4,728 | ) | (2,119 | ) | (943 | ) | (7,596 | ) | |||||||||||
Net other revenue
|
(3 | ) | 1,095 | 3,156 | 2,016 | 6,264 | ||||||||||||||
Total revenue
|
$ | 191 | $ | 139 | $ | 10,093 | $ | 1,207 | $ | 11,630 | ||||||||||
Policy benefits and expenses
|
||||||||||||||||||||
Net benefits and claims
|
$ | - | $ | (2,717 | ) | $ | 1,199 | $ | 3,094 | $ | 1,576 | |||||||||
Commissions, investment and general expenses
|
18 | 2,058 | 5,912 | (932 | ) | 7,056 | ||||||||||||||
Other expenses
|
211 | 263 | 1,586 | (955 | ) | 1,105 | ||||||||||||||
Total policy benefits and expenses
|
$ | 229 | $ | (396 | ) | $ | 8,697 | $ | 1,207 | $ | 9,737 | |||||||||
Income (loss) before income taxes
|
$ | (38 | ) | $ | 535 | $ | 1,396 | $ | - | $ | 1,893 | |||||||||
Income tax (expense) recovery
|
8 | (10 | ) | (82 | ) | - | (84 | ) | ||||||||||||
Income (loss) after income taxes
|
$ | (30 | ) | $ | 525 | $ | 1,314 | $ | - | $ | 1,809 | |||||||||
Equity in net income (loss) of unconsolidated subsidiaries
|
1,863 | 425 | 950 | (3,238 | ) | - | ||||||||||||||
Net income (loss)
|
$ | 1,833 | $ | 950 | $ | 2,264 | $ | (3,238 | ) | $ | 1,809 | |||||||||
Net income (loss) attributed to:
|
||||||||||||||||||||
Non-controlling interests
|
$ | - | $ | - | $ | 37 | $ | (1 | ) | $ | 36 | |||||||||
Participating policyholders
|
- | (3 | ) | (62 | ) | 5 | (60 | ) | ||||||||||||
Shareholders
|
1,833 | 953 | 2,289 | (3,242 | ) | 1,833 | ||||||||||||||
$ | 1,833 | $ | 950 | $ | 2,264 | $ | (3,238 | ) | $ | 1,809 |
Consolidating Statement of Cash Flows
|
||||||||||||||||||||
For the nine months ended September 30, 2014
|
MFC
(Guarantor)
|
JHUSA
(Issuer)
|
Other
Subsidiaries
|
Consolidation
Adjustments
|
Consolidated
MFC
|
|||||||||||||||
Operating activities
|
||||||||||||||||||||
Net income (loss)
|
$ | 2,861 | $ | 1,149 | $ | 3,234 | $ | (4,358 | ) | $ | 2,886 | |||||||||
Adjustments:
|
||||||||||||||||||||
Equity in net income of unconsolidated subsidiaries
|
(2,827 | ) | (382 | ) | (1,149 | ) | 4,358 | - | ||||||||||||
Increase (decrease) in insurance contract liabilities
|
- | 8,613 | 7,440 | - | 16,053 | |||||||||||||||
Increase (decrease) in investment contract liabilities
|
- | 39 | 41 | - | 80 | |||||||||||||||
(Increase) decrease in reinsurance assets
|
- | (4,030 | ) | 4,274 | - | 244 | ||||||||||||||
Amortization of (premium) discount on invested assets
|
- | 8 | (6 | ) | - | 2 | ||||||||||||||
Other amortization
|
2 | 75 | 262 | - | 339 | |||||||||||||||
Net realized and unrealized (gains) losses on assets
|
2 | (6,212 | ) | (5,105 | ) | - | (11,315 | ) | ||||||||||||
Deferred income tax expense (recovery)
|
12 | 650 | (413 | ) | - | 249 | ||||||||||||||
Stock option expense
|
- | (2 | ) | 14 | - | 12 | ||||||||||||||
Adjusted net income (loss)
|
$ | 50 | $ | (92 | ) | $ | 8,592 | $ | - | $ | 8,550 | |||||||||
Changes in policy related and operating receivables and payables
|
(263 | ) | 1,792 | (1,698 | ) | - | (169 | ) | ||||||||||||
Cash provided by (used in) operating activities
|
$ | (213 | ) | $ | 1,700 | $ | 6,894 | $ | - | $ | 8,381 | |||||||||
Investing activities
|
||||||||||||||||||||
Purchases and mortgage advances
|
$ | - | $ | (19,300 | ) | $ | (27,235 | ) | $ | - | $ | (46,535 | ) | |||||||
Disposals and repayments
|
- | 18,953 | 22,548 | - | 41,501 | |||||||||||||||
Changes in investment broker net receivables and payables
|
- | (16 | ) | 164 | - | 148 | ||||||||||||||
Net cash decrease from purchase of subsidiary
|
- | - | (199 | ) | - | (199 | ) | |||||||||||||
Capital contribution to unconsolidated subsidiaries
|
- | (33 | ) | - | 33 | - | ||||||||||||||
Return of capital from unconsolidated subsidiaries
|
- | 68 | - | (68 | ) | - | ||||||||||||||
Notes receivable from parent
|
- | - | (12,998 | ) | 12,998 | - | ||||||||||||||
Notes receivable from subsidiaries
|
(10,960 | ) | 3 | - | 10,957 | - | ||||||||||||||
Cash provided by (used in) by investing activities
|
$ | (10,960 | ) | $ | (325 | ) | $ | (17,720 | ) | $ | 23,920 | $ | (5,085 | ) | ||||||
Financing activities
|
||||||||||||||||||||
Increase (decrease) in repurchase agreements and securities
sold but not yet purchased
|
$ | - | $ | - | $ | 193 | $ | - | $ | 193 | ||||||||||
Reinsurance treaty settlement
|
- | (39 | ) | 39 | - | - | ||||||||||||||
Repayment of long-term debt
|
(1,000 | ) | - | - | - | (1,000 | ) | |||||||||||||
Issue of capital instruments, net
|
- | - | 497 | - | 497 | |||||||||||||||
Issue of subscription receipts
|
2,214 | - | - | - | 2,214 | |||||||||||||||
Net redemption of investment contract liabilities
|
- | (109 | ) | (44 | ) | - | (153 | ) | ||||||||||||
Funds repaid, net
|
- | (1 | ) | (2 | ) | - | (3 | ) | ||||||||||||
Changes in deposits from bank clients, net
|
- | - | (118 | ) | - | (118 | ) | |||||||||||||
Shareholder dividends paid in cash
|
(593 | ) | - | - | - | (593 | ) | |||||||||||||
Contributions from (distributions to) non-controlling interests, net
|
- | - | (58 | ) | - | (58 | ) | |||||||||||||
Common shares issued, net
|
35 | - | 2 | - | 37 | |||||||||||||||
Preferred shares issues, net
|
(261 | ) | - | 799 | - | 538 | ||||||||||||||
Capital contributions by parent
|
- | - | 33 | (33 | ) | - | ||||||||||||||
Return of capital to parent
|
- | - | (68 | ) | 68 | - | ||||||||||||||
Notes payable to parent
|
- | - | 10,957 | (10,957 | ) | - | ||||||||||||||
Notes payable to subsidiaries
|
12,998 | - | - | (12,998 | ) | - | ||||||||||||||
Preferred shares redeemed, net
|
- | - | (800 | ) | - | (800 | ) | |||||||||||||
Cash provided by (used in) financing activities
|
$ | 13,393 | $ | (149 | ) | $ | 11,430 | $ | (23,920 | ) | $ | 754 | ||||||||
Cash and short-term securities
|
||||||||||||||||||||
Increase (decrease) during the period
|
$ | 2,220 | $ | 1,226 | $ | 604 | $ | - | $ | 4,050 | ||||||||||
Effect of foreign exchange rate changes on cash and short-term securities
|
1 | 194 | 279 | - | 474 | |||||||||||||||
Balance, beginning of period
|
27 | 3,643 | 9,216 | - | 12,886 | |||||||||||||||
Balance, end of period
|
$ | 2,248 | $ | 5,063 | $ | 10,099 | $ | - | $ | 17,410 | ||||||||||
Cash and short-term securities
|
||||||||||||||||||||
Beginning of period
|
||||||||||||||||||||
Gross cash and short-term securities
|
$ | 28 | $ | 4,091 | $ | 9,511 | $ | - | $ | 13,630 | ||||||||||
Net payments in transit, included in other liabilities
|
(1 | ) | (448 | ) | (295 | ) | - | (744 | ) | |||||||||||
Net cash and short-term securities, beginning of period
|
$ | 27 | $ | 3,643 | $ | 9,216 | $ | - | $ | 12,886 | ||||||||||
End of period
|
||||||||||||||||||||
Gross cash and short-term securities
|
$ | 2,248 | $ | 5,398 | $ | 10,325 | $ | - | $ | 17,971 | ||||||||||
Net payments in transit, included in other liabilities
|
- | (335 | ) | (226 | ) | - | (561 | ) | ||||||||||||
Net cash and short-term securities, end of period
|
$ | 2,248 | $ | 5,063 | $ | 10,099 | $ | - | $ | 17,410 | ||||||||||
Supplemental disclosures on cash flow information:
|
||||||||||||||||||||
Interest received
|
$ | 8 | $ | 3,125 | $ | 3,478 | $ | (13 | ) | $ | 6,598 | |||||||||
Interest paid
|
213 | 94 | 1,040 | (559 | ) | 788 | ||||||||||||||
Income taxes paid
|
- | 201 | 398 | - | 599 |
Consolidating Statement of Cash Flows
|
||||||||||||||||||||
For the nine months ended September 30, 2013
|
MFC
(Guarantor)
|
JHUSA
(Issuer)
|
Other
Subsidiaries
|
Consolidation
Adjustments
|
Consolidated
MFC
|
|||||||||||||||
Operating activities
|
||||||||||||||||||||
Net income (loss)
|
$ | 1,833 | $ | 950 | $ | 2,264 | $ | (3,238 | ) | $ | 1,809 | |||||||||
Adjustments:
|
||||||||||||||||||||
Equity in net income of unconsolidated subsidiaries
|
(1,863 | ) | (425 | ) | (950 | ) | 3,238 | - | ||||||||||||
Increase (decrease) in insurance contract liabilities
|
- | (6,489 | ) | (2,278 | ) | - | (8,767 | ) | ||||||||||||
Increase (decrease) in investment contract liabilities
|
- | 40 | 81 | - | 121 | |||||||||||||||
(Increase) decrease in reinsurance assets
|
- | 2,056 | (1,055 | ) | - | 1,001 | ||||||||||||||
Amortization of (premium) discount on invested assets
|
- | (2 | ) | 17 | - | 15 | ||||||||||||||
Other amortization
|
(1 | ) | 66 | 247 | - | 312 | ||||||||||||||
Net realized and unrealized (gains) losses on assets
|
6 | 8,023 | 6,863 | - | 14,892 | |||||||||||||||
Deferred income tax expense (recovery)
|
(8 | ) | (80 | ) | (74 | ) | - | (162 | ) | |||||||||||
Stock option expense
|
- | 3 | 10 | - | 13 | |||||||||||||||
Adjusted net income (loss)
|
$ | (33 | ) | $ | 4,142 | $ | 5,125 | $ | - | $ | 9,234 | |||||||||
Changes in policy related and operating receivables and payables
|
(170 | ) | (2,921 | ) | 1,730 | - | (1,361 | ) | ||||||||||||
Cash provided by (used in) operating activities
|
$ | (203 | ) | $ | 1,221 | $ | 6,855 | $ | - | $ | 7,873 | |||||||||
Investing activities
|
||||||||||||||||||||
Purchases and mortgage advances
|
$ | - | $ | (15,186 | ) | $ | (35,261 | ) | $ | - | $ | (50,447 | ) | |||||||
Disposals and repayments
|
- | 15,055 | 28,304 | - | 43,359 | |||||||||||||||
Changes in investment broker net receivables and payables
|
- | (34 | ) | (133 | ) | - | (167 | ) | ||||||||||||
Investment in common shares of subsidiaries
|
(206 | ) | - | - | 206 | - | ||||||||||||||
Net cash decrease from purchase of subsidiary
|
- | - | (73 | ) | - | (73 | ) | |||||||||||||
Redemption of preferred shares of subsidiaries
|
80 | - | - | (80 | ) | - | ||||||||||||||
Capital contribution to unconsolidated subsidiaries
|
- | (93 | ) | - | 93 | - | ||||||||||||||
Return of capital from unconsolidated subsidiaries
|
- | 216 | - | (216 | ) | - | ||||||||||||||
Notes receivable from parent
|
- | - | (11,314 | ) | 11,314 | - | ||||||||||||||
Notes receivable from subsidiaries
|
(10,287 | ) | 3 | - | 10,284 | - | ||||||||||||||
Cash provided by (used in) investing activities
|
$ | (10,413 | ) | $ | (39 | ) | $ | (18,477 | ) | $ | 21,601 | $ | (7,328 | ) | ||||||
Financing activities
|
||||||||||||||||||||
Increase (decrease) in repurchase agreements and securities
sold but not yet purchased
|
$ | - | $ | (398 | ) | $ | 592 | $ | - | $ | 194 | |||||||||
Repayment of long-term debt
|
(350 | ) | - | - | - | (350 | ) | |||||||||||||
Issue of capital instruments, net
|
- | - | 199 | - | 199 | |||||||||||||||
Net redemption of investment contract liabilities
|
- | (103 | ) | (75 | ) | - | (178 | ) | ||||||||||||
Funds repaid, net
|
- | (4 | ) | (122 | ) | - | (126 | ) | ||||||||||||
Secured borrowings from securitization transactions
|
- | - | 250 | - | 250 | |||||||||||||||
Changes in deposits from bank clients, net
|
- | - | 455 | - | 455 | |||||||||||||||
Shareholder dividends paid in cash
|
(570 | ) | - | - | - | (570 | ) | |||||||||||||
Contributions from (distributions to) non-controlling interests, net
|
- | - | (11 | ) | - | (11 | ) | |||||||||||||
Common shares issued, net
|
5 | - | 206 | (206 | ) | 5 | ||||||||||||||
Preferred shares issues, net
|
196 | - | (80 | ) | 80 | 196 | ||||||||||||||
Gain (loss) on intercompany transaction
|
- | 28 | (28 | ) | - | - | ||||||||||||||
Capital contributions by parent
|
- | - | 93 | (93 | ) | - | ||||||||||||||
Return of capital to parent
|
- | - | (216 | ) | 216 | - | ||||||||||||||
Notes payable to parent
|
- | - | 10,284 | (10,284 | ) | - | ||||||||||||||
Notes payable to subsidiaries
|
11,314 | - | - | (11,314 | ) | - | ||||||||||||||
Cash provided by (used in) financing activities
|
$ | 10,595 | $ | (477 | ) | $ | 11,547 | $ | (21,601 | ) | $ | 64 | ||||||||
Cash and short-term securities
|
||||||||||||||||||||
Increase (decrease) during the period
|
(21 | ) | 705 | (75 | ) | - | 609 | |||||||||||||
Effect of foreign exchange rate changes on cash and short-term securities
|
- | 127 | 52 | - | 179 | |||||||||||||||
Balance, beginning of period
|
22 | 3,747 | 8,984 | - | 12,753 | |||||||||||||||
Balance, end of period
|
$ | 1 | $ | 4,579 | $ | 8,961 | $ | - | $ | 13,541 | ||||||||||
Cash and short-term securities
|
||||||||||||||||||||
Beginning of period
|
||||||||||||||||||||
Gross cash and short-term securities
|
22 | 4,122 | 9,242 | - | 13,386 | |||||||||||||||
Net payments in transit, included in other liabilities
|
- | (375 | ) | (258 | ) | - | (633 | ) | ||||||||||||
Net cash and short-term securities, beginning of period
|
$ | 22 | $ | 3,747 | $ | 8,984 | $ | - | $ | 12,753 | ||||||||||
End of period
|
||||||||||||||||||||
Gross cash and short-term securities
|
1 | 4,906 | 9,671 | - | 14,578 | |||||||||||||||
Net payments in transit, included in other liabilities
|
- | (327 | ) | (710 | ) | - | (1,037 | ) | ||||||||||||
Net cash and short-term securities, end of period
|
$ | 1 | $ | 4,579 | $ | 8,961 | $ | - | $ | 13,541 | ||||||||||
Supplemental disclosures on cash flow information:
|
||||||||||||||||||||
Interest received
|
$ | 4 | $ | 3,037 | $ | 3,382 | $ | (13 | ) | $ | 6,410 | |||||||||
Interest paid
|
212 | 186 | 828 | (382 | ) | 844 | ||||||||||||||
Income taxes paid
|
- | 233 | 230 | - | 463 |
Note 17 Comparatives
|
SHAREHOLDER INFORMATION
|
MANULIFE FINANCIAL
CORPORATION HEAD OFFICE
200 Bloor Street East
Toronto, ON Canada M4W 1E5
Telephone 416 926-3000
Fax: 416 926-5454
Web site: www.manulife.com
INVESTOR RELATIONS
Financial analysts, portfolio managers and other investors requiring financial information may contact our Investor Relations Department or access our Web site at www.manulife.com
Fax: 416 926-3503
E-mail: investor_relations@manulife.com
SHAREHOLDER SERVICES
For information or assistance regarding your share account, including dividends, changes of address or ownership, lost certificates, to eliminate duplicate mailings or to receive shareholder material electronically, please contact our Transfer Agents in Canada, the United States, Hong Kong or the Philippines. If you live outside one of these countries please contact our Canadian Transfer Agent.
|
TRANSFER AGENTS
Canada
CST Trust Company
P.O. Box 700, Station B
Montreal, QC Canada H3B 3K3
Toll Free: 1 800 783-9495
Collect: 416 682-3864
E-mail: inquiries@canstockta.com
Online: www.canstockta.com
CST Trust Company offices are also located
in Toronto, Halifax, Vancouver and Calgary.
United States
Computershare Inc.
P.O. Box 30170
College Station, TX 77842-3170
Toll Free: 1 800 249-7702
Collect: 201 680-6578
E-mail: web.queries@computershare.com
Online: www.computershare.com/investor
Hong Kong
Registered Holders:
Computershare Hong Kong
Investor Services Limited
17M Floor, Hopewell Centre
183 Queen’s Road East,
Wan Chai, Hong Kong
Telephone: 852 2862–8555
Ownership Statement Holders:
The Hongkong and Shanghai
Banking Corporation Limited
Sub-Custody and Clearing,
Hong Kong Office
GPO Box 64 Hong Kong
Telephone: 852 2288-8355
|
Philippines
The Hongkong and Shanghai
Banking Corporation Limited
HSBC Stock Transfer Unit
7th Floor, HSBC Centre
3058 Fifth Avenue West
Bonifacio Global City
Taguig City, 1634
Philippines
Telephone: PLDT 632 581-7595
GLOBE 632 976-7595
AUDITORS
Ernst & Young LLP
Chartered Accountants
Licensed Public Accountants
Toronto, Canada
|
The following Manulife Financial documents are
available online at www.manulife.com
· Annual Report and Proxy Circular
· Notice of Annual Meeting
· Shareholders Reports
· Public Accountability Statement
· Corporate Governance material
|
RATING
Financial strength is a key factor in generating new business, maintaining and expanding distribution relations and providing a base for expansion, acquisitions and growth. As at September 30, 2014, Manulife Financial had total capital of C$37.7 billion, including C$32.0 billion of total shareholders’ equity. The Manufacturers Life Insurance Company’s financial strength and claims paying ratings are among the strongest in the insurance industry.
|
|||
Standard & Poor’s
|
AA-
|
(4th of 21 ratings)
|
|
Moody’s
|
A1
|
(5th of 21 ratings)
|
|
Fitch Ratings
|
AA-
|
(4th of 19 ratings)
|
|
DBRS
|
IC-1
|
(1st of 6 ratings)
|
|
A.M. Best
|
A+
|
(2nd of 15 ratings)
|
COMMON STOCK TRADING DATA
The following values are the high, low and close prices plus the average daily trading volume for Manulife Financial Corporation’s common stock on the Toronto Stock Exchange, the U.S. exchanges, The Stock Exchange of Hong Kong and the Philippine Stock Exchange for the third quarter. The common stock symbol is MFC on all exchanges except Hong Kong where it is 945.
|
As at September 30, 2014, there were 1,864 million common shares outstanding.
|
||||
July 1 –
September 30, 2014
|
Toronto
Canadian $
|
U.S.
Composite
United States $
|
Hong Kong
Hong Kong $
|
Philippines
Philippine
Pesos
|
|
High
|
$ 22.73
|
$ 20.77
|
$ 159.40
|
P 852
|
|
Low
|
$ 21.24
|
$ 19.14
|
$ 149.50
|
P 740
|
|
Close
|
$ 21.54
|
$ 19.25
|
$ 150.00
|
P 838
|
|
Average Daily Volume (000)
|
2,936
|
1,415
|
72
|
0.31
|
Consent to receive documents electronically
|
Electronic documents available from Manulife Financial
Manulife Financial is pleased to offer Electronic Documents. Access the information when you want,
no more waiting for the mail.
The Manulife Financial documents available electronically are:
· Annual Report and Proxy Circular
· Notice of Annual Meeting
· Shareholder Reports
· Public Accountability Statement
· Corporate Governance material
|
These documents will be available to you on our Web site at www.manulife.com at the same time as they are mailed to other shareholders. Documents relating to the annual meeting, including annual reports will be available on the Web site at least until the next version is available.
We will notify you when documents will be available on the Web site and confirm the instructions for accessing the documents at the same time. In the event that the documents are not available on our Web site, paper copies will be mailed to you.
This information is also available for viewing or download under quarterly reports from the Investor Relations section of our website at www.manulife.com
|
To receive documents electronically when they are available through Manulife Financial’s electronic delivery service, complete this form and return it as indicated.
I have read and understand the statement on the reverse and consent to receive electronically the Manulife Financial documents listed in the manner described. I acknowledge that I have the computer requirements to access the documents that are made available on Manulife Financial’s Web site. I understand that I am not required to consent to electronic delivery and that I may revoke my consent at any time.
Please note: We will contact you by phone only if there is a problem with your email address.
The information provided is confidential and will not be used for any purpose other than that described.
|
Please Print:
_________________________________________________________
Shareholder Name
_________________________________________________________
Contact Phone Number
_________________________________________________________
Shareholder email Address
_________________________________________________________
Shareholder Signature
_________________________________________________________
Date
|
|
1.
|
Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Manulife Financial Corporation (the “issuer”) for the interim period ended September 30, 2014.
|
|
2.
|
No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
|
|
3.
|
Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
|
|
4.
|
Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuer’s Annual and Interim Filings, for the issuer.
|
|
5.
|
Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings
|
|
(a)
|
designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
|
|
(i)
|
material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
|
|
(ii)
|
information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
|
|
(b)
|
designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.
|
|
5.1
|
Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is Internal Control – Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
|
|
5.2
|
N/A
|
|
5.3
|
N/A
|
|
6.
|
Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on July 1, 2014 and ended on September 30, 2014 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
|
|
1.
|
Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Manulife Financial Corporation (the “issuer”) for the interim period ended September 30, 2014.
|
|
2.
|
No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
|
|
3.
|
Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
|
|
4.
|
Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuer’s Annual and Interim Filings, for the issuer.
|
|
5.
|
Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings
|
|
(a)
|
designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
|
|
(i)
|
material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
|
|
(ii)
|
information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
|
|
(b)
|
designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.
|
|
5.1
|
Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is Internal Control – Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
|
|
5.2
|
N/A
|
|
5.3
|
N/A
|
|
6.
|
Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on July 1, 2014 and ended on September 30, 2014 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
|
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