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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First 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/ Stephen P. Sigurdson
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Name: Stephen P. Sigurdson
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Title: Executive Vice President and General Counsel
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Date: May 5, 2016
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Exhibit
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Description of Exhibit
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99.1
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First 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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Profitability:
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Growth:
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Financial Strength:
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Asia Division
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·
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Japan APE sales in 1Q16 were US$264 million, a 24% increase driven by strong sales of our other wealth products through both bank and MGA channels.
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·
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Hong Kong APE sales in 1Q16 were US$109 million, a 48% increase reflecting robust insurance sales through our agent, bank and insurance broker channels.
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·
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Asia Other (excludes Japan and Hong Kong) APE sales in 1Q16 were US$217 million, representing a 94% increase, driven by record sales in Singapore and mainland China. In Singapore, APE sales were over 5 times 1Q15 levels following the successful launch of our exclusive regional partnership with DBS. Indonesia experienced modest growth.
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1
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APE sales is a non-GAAP measure. See “Performance and Non-GAAP Measures” below. APE sales are presented to provide consistency of scope for NBV disclosures and industry practice. APE sales are presented before adjustments for non-controlling interests. APE sales consist of Insurance sales plus weighted Other Wealth sales, and exclude our Wealth and Asset Management businesses.
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2
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The 2015 earnings on assets backing capital allocated to each operating segment have been restated to align with the methodology used in 2016. Amounts are expressed in U.S. dollars, the presentation currency of the division.
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·
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Japan gross flows in 1Q16 of US$21 million decreased 88% as equity market volatility impacted consumer confidence, resulting in weaker mutual fund sales.
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·
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Hong Kong gross flows in 1Q16 of US$562 million decreased 2%, driven by lower mutual fund sales.
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·
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Asia Other gross flows of US$1.9 billion increased 1%. Strong sales in mainland China and Singapore were largely offset by lower mutual fund sales in Taiwan. Indonesia’s WAM gross flows were comparable with 1Q15.
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·
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Japan NBV in 1Q16 of US$70 million more than doubled as a result of increased sales, improved product margin and favourable product mix.
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·
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Hong Kong NBV in 1Q16 of US$49 million increased 4% as higher APE sales were offset by the impact of a change in business mix.
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·
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Asia Other NBV of US$42 million increased 189% as a result of increased sales and management actions to improve margins.
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Canadian Division
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·
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Mutual Fund gross flows of $2.4 billion in 1Q16 decreased $0.2 billion or 8% compared with 1Q15.
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·
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Group Retirement Solutions gross flows of $1.9 billion in 1Q16 were in line with 1Q15.
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·
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Segregated Fund Product2 1Q16 sales were $751 million, a decrease of 12% compared with 1Q15.
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·
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Fixed Product 1Q16 sales were $193 million, an increase of 4% compared with 1Q15, reflecting the success of product enhancements.
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2
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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 Insurance sales in 1Q16 of $41 million increased by 10% compared with 1Q15 driven by continued momentum from universal life product enhancements and large-case activity.
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·
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Institutional Markets sales in 1Q16 of $114 million decreased 36% compared with 1Q15 primarily due to normal variability in Group Benefits’ large-case sales.
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·
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JH Investments 1Q16 gross flows of US$7.1 billion increased 15% compared with 1Q15 despite significant market volatility. The increase was driven by institutional allocations and continued success across retail channels. Assets under management increased 7% from March 31, 2015 to a record US$84 billion as at March 31, 2016 and for the 18th consecutive quarter JH Investments had positive net flows. Our 12-month trailing organic growth rate through March 2016 (calculated as net new flows as a percentage of beginning assets) was 12% compared with an industry decline of 2%.2 During the quarter we expanded our ETF line up to 11 funds.
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·
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JH RPS 1Q16 gross flows of US$5.6 billion were up 57% compared with 1Q15. This was driven primarily by the mid-market acquisition in 2015 and an increase in recurring contributions.
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·
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JH Life sales of US$105 million in 1Q16 were in line with the prior year but gained momentum throughout the quarter, increasing sequentially in each month of the quarter. Term sales continued to gain momentum achieving a 68% increase compared to the prior year. The increase in Term sales was offset by lower Survivorship universal life sales.
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·
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JH Long-Term Care 1Q16 sales of US$17 million were US$6 million higher than 1Q15 and benefited from an additional US$7 million of biennial inflation purchases in the Federal LTC program. Our new innovative Performance LTC product accounted for two-thirds of total retail sales during the quarter.
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1
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The 2015 earnings on assets backing capital allocated to each operating segment have been restated to align with the methodology used in 2016. Amounts are expressed in U.S. dollars, the functional currency of the division.
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2
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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 March 2016.
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1
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The 2015 earnings on assets backing capital allocated to each operating segment has been restated to align with the methodology used in 2016.
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Contents
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||||
A
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OVERVIEW
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E
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RISK MANAGEMENT AND RISK FACTORS UPDATE
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1.
2.
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Earnings
Sales
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1.
2.
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Regulatory updates
Variable annuity and segregated fund guarantees
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3.
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Capital related items
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3.
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Caution related to sensitivities
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4.
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Publicly traded equity performance risk
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B
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FINANCIAL HIGHLIGHTS
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5.
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Interest rate and spread risk | |
1.
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First quarter earnings analysis
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6. | Alternative long-duration asset performance risk | |
2. | Revenue | |||
3.
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Premiums and deposits
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F
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ACCOUNTING MATTERS AND CONTROLS
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4
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Assets under management and administration
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1.
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Critical accounting and actuarial policies
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5
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Capital
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2. |
Sensitivity of policy liabilities to update to assumptions
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6
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Impact of fair value accounting
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3.
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Accounting and reporting changes
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7
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Impact of foreign exchange rates
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4.
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Quarterly financial information
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5.
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Other
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C
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PERFORMANCE BY DIVISION
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1.
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Asia
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G
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OTHER
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2.
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Canadian
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1.
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Quarterly dividend
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3.
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U.S.
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2. |
Outstanding shares
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4.
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Corporate and Other
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3.
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Performance and Non-GAAP Measures
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4.
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Caution regarding forward-looking statements
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|||
D
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PERFORMANCE BY BUSINESS LINE
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1.
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Wealth and Asset Management ("WAM")
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2.
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Additional information by business line
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A1
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Earnings
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A2
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Sales
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A3
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Capital related items
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2
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Growth (declines) in sales, premiums and deposits and assets 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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Quarterly Results
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||||||||||||
(C$ millions, unless otherwise stated, unaudited)
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1Q 16 | 4Q15 | 1Q15 | |||||||||
Net income attributed to shareholders
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$ | 1,045 | $ | 246 | $ | 723 | ||||||
Preferred share dividends
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(29 | ) | (29 | ) | (29 | ) | ||||||
Common shareholders’ net income
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$ | 1,016 | $ | 217 | $ | 694 | ||||||
Core earnings(1)
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$ | 905 | $ | 859 | $ | 797 | ||||||
Basic earnings per common share (C$)
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$ | 0.51 | $ | 0.11 | $ | 0.36 | ||||||
Diluted earnings per common share (C$)
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$ | 0.51 | $ | 0.11 | $ | 0.36 | ||||||
Diluted core earnings per common share (C$)(1)
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$ | 0.44 | $ | 0.42 | $ | 0.39 | ||||||
Return on common shareholders’ equity (“ROE”)
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10.8 | % | 2.3 | % | 8.4 | % | ||||||
Core ROE (1)
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9.3 | % | 8.7 | % | 9.3 | % | ||||||
Sales(1)
Insurance products
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$ | 954 | $ | 1,027 | $ | 779 | ||||||
Wealth and Asset Management gross flows(1)
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$ | 28,228 | $ | 31,089 | $ | 22,843 | ||||||
Wealth and Asset Management net flows(1)
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$ | 1,676 | $ | 8,748 | $ | 6,631 | ||||||
Other Wealth products
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$ | 2,384 | $ | 2,109 | $ | 1,767 | ||||||
Premiums and deposits(1)
Insurance products
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$ | 8,186 | $ | 7,759 | $ | 7,158 | ||||||
Wealth and Asset Management products
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$ | 28,228 | $ | 31,089 | $ | 22,843 | ||||||
Other Wealth products
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$ | 1,441 | $ | 1,963 | $ | 1,466 | ||||||
Corporate and Other
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$ | 22 | $ | 26 | $ | 19 | ||||||
Assets under management and administration (C$ billions)(1)
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$ | 904 | $ | 935 | $ | 821 | ||||||
Capital (C$ billions)(1)
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$ | 49.4 | $ | 49.9 | $ | 46.4 | ||||||
MLI’s MCCSR ratio
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233 | % | 223 | % | 245 | % |
(1)
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This item is a non-GAAP measure. See “Performance and Non-GAAP Measures” below.
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B1
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First quarter earnings analysis
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(C$ millions, unaudited)
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1Q16 | 4Q15 | 1Q15 | |||||||||
Core earnings(1)
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||||||||||||
Asia Division
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$ | 371 | $ | 334 | $ | 279 | ||||||
Canadian Division
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338 | 352 | 261 | |||||||||
U.S. Division
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389 | 332 | 374 | |||||||||
Corporate and Other (excluding expected cost of macro hedges and core investment gains)
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(107 | ) | (85 | ) | (73 | ) | ||||||
Expected cost of macro hedges(2)
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(86 | ) | (74 | ) | (44 | ) | ||||||
Investment-related experience in core earnings(3)
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- | - | - | |||||||||
Core earnings
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$ | 905 | $ | 859 | $ | 797 | ||||||
Investment-related experience outside of core earnings(3)
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(340 | ) | (361 | ) | (77 | ) | ||||||
Core earnings and investment-related experience in excess of amounts included in core earnings
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$ | 565 | $ | 498 | $ | 720 | ||||||
Direct impact of equity markets and interest rates and variable annuity guarantee liabilities (see table below)(3),(4)
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474 | (29 | ) | 13 | ||||||||
Recapture of reinsurance treaties
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- | (52 | ) | 12 | ||||||||
Changes in actuarial methods and assumptions
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12 | (97 | ) | (22 | ) | |||||||
Integration and acquisition costs
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(14 | ) | (39 | ) | (30 | ) | ||||||
Tax-related items(5)
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1 | 2 | 30 | |||||||||
Other items
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7 | (37 | ) | - | ||||||||
Net income attributed to shareholders
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$ | 1,045 | $ | 246 | $ | 723 |
(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 charge related to the estimated expected cost of the macro equity hedges is relative to our long-term valuation assumptions. The macro hedge gain (loss) from actual markets performing different than our valuation assumptions is included in the direct impact of equity markets and interest rates and variable annuity guarantee liabilities below.
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(3)
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As outlined under “Critical Accounting and Actuarial Policies” below, 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 equity markets and interest rates is separately reported. Our definition of core earnings (see section G1 - “Performance and Non-GAAP Measures”) includes up to $400 million of favourable investment-related experience reported in a single year.
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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 experience gains and losses on derivatives associated with our macro equity hedges. We also include gains and losses on derivative positions and the sale of available-for-sale (“AFS”) bonds in the Corporate and Other segment. See table below for components of this item.
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(5)
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The tax-related items in 1Q16 include a $156 million gain related to the release of tax-related contingencies and a $10 million gain related to tax rate changes, offset by an update to tax timing assumptions related to the valuation of policy liabilities of $165 million.
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(C$ millions, unaudited)
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1Q16 | 4Q 15 | 1Q 15 | |||||||||
Direct impact of equity markets and variable annuity guarantee liabilities
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$ | (150 | ) | $ | 77 | $ | 15 | |||||
Fixed income reinvestment rates assumed in the valuation of policy liabilities(1)
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407 | (97 | ) | 13 | ||||||||
Sale of AFS bonds and derivative positions in the Corporate and Other segment
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217 | (9 | ) | (15 | ) | |||||||
Direct impact of equity markets and interest rates and variable annuity guarantee liabilities
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$ | 474 | $ | (29 | ) | $ | 13 |
(1)
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The gain in 1Q16 for fixed income reinvestment assumptions was driven by the decrease in swap spreads in Canada and the favourable impact on the measurement of policy liabilities of changes in the yield curve in the U.S.
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B2
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Revenue
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Quarterly Results
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||||||||||||
(C$ millions, unaudited)
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1Q 16 | 4Q 15 | 1Q 15 | |||||||||
Net premium income
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$ | 6,728 | $ | 6,712 | $ | 5,403 | ||||||
Investment income
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3,300 | 2,899 | 2,642 | |||||||||
Other revenue
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2,829 | 2,694 | 2,426 | |||||||||
Revenue before realized and unrealized gains (losses) on assets supporting insurance and
investment contract liabilities and on macro hedging program
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$ | 12,857 | $ | 12,305 | $ | 10,471 | ||||||
Realized and unrealized gains (losses) on assets supporting insurance and investment
contract liabilities and on macro hedging program
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8,862 | (1,916 | ) | 5,343 | ||||||||
Total revenue
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$ | 21,719 | $ | 10,389 | $ | 15,814 |
B3
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Premiums and deposits
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B4
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Assets under management and administration
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B5
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Capital
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B6
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Impact of fair value accounting
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B7
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Impact of foreign exchange rates
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($ millions, unless otherwise stated)
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Quarterly results
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|||||||||||
Canadian dollars
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1Q16 | 4Q15 | 1Q15 | |||||||||
Net income attributed to shareholders(1)
|
$ | 121 | $ | 409 | $ | 282 | ||||||
Core earnings(2)
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371 | 334 | 279 | |||||||||
Revenue
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6,366 | 4,730 | 3,395 | |||||||||
Revenue before realized and unrealized investment income gains and losses(3)
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4,802 | 4,236 | 3,040 | |||||||||
Premiums and deposits
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8,031 | 7,289 | 6,188 | |||||||||
Assets under management ($ billions)
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106.3 | 106.4 | 96.0 | |||||||||
U.S. dollars
|
||||||||||||
Net income attributed to shareholders
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$ | 88 | $ | 307 | $ | 227 | ||||||
Core earnings
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270 | 250 | 225 | |||||||||
Revenue
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4,638 | 3,540 | 2,738 | |||||||||
Revenue before realized and unrealized investment income gains and losses
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3,499 | 3,171 | 2,451 | |||||||||
Premiums and deposits
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5,852 | 5,455 | 4,990 | |||||||||
Assets under management ($ billions)
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82.0 | 76.9 | 75.7 |
(1)
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The 2015 earnings on assets backing capital allocated to each operating segment have been restated to align with the methodology used in 2016.
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(2)
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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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(3)
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See B6 “Impact of fair value accounting”.
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C2
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Canadian Division
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(C$ millions, unless otherwise stated)
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Quarterly results
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|||||||||||
1Q 16 | 4Q15 | 1Q15 | ||||||||||
Net income (loss) attributed to shareholders(1)
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$ | 600 | $ | (104 | ) | $ | 118 | |||||
Core earnings(2)
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338 | 352 | 261 | |||||||||
Revenue
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4,786 | 2,458 | 4,690 | |||||||||
Revenue before realized and unrealized investment income gains and losses(3)
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2,990 | 2,693 | 2,683 | |||||||||
Premiums and deposits
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7,424 | 6,983 | 7,826 | |||||||||
Assets under management ($ billions)
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223.7 | 219.2 | 221.3 |
(1)
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The 2015 earnings on assets backing capital allocated to each operating segment have been restated to align with the methodology used in 2016.
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(2)
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See “Performance and Non-GAAP Measures” below for a reconciliation between IFRS net income attributed to shareholders and core earnings.
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(3)
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See B6 “Impact of fair value accounting”.
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C3
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U.S. Division
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($ millions, unless otherwise stated)
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Quarterly results
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|||||||||||
Canadian dollars
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1Q16 | 4Q15 | 1Q15 | |||||||||
Net income attributed to shareholders(1)
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$ | 241 | $ | 323 | $ | 464 | ||||||
Core earnings(2)
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389 | 332 | 374 | |||||||||
Revenue
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9,990 | 3,331 | 7,707 | |||||||||
Revenue before realized and unrealized investment income gains and losses(3)
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4,399 | 5,287 | 4,691 | |||||||||
Premiums and deposits
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19,186 | 20,562 | 14,428 | |||||||||
Assets under management and administration ($ billions)
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508.6 | 537.9 | 444.2 | |||||||||
U.S. dollars
|
||||||||||||
Net income attributed to shareholders
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$ | 176 | $ | 241 | $ | 375 | ||||||
Core earnings
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283 | 248 | 302 | |||||||||
Revenue
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7,279 | 2,492 | 6,216 | |||||||||
Revenue before realized and unrealized investment income gains and losses
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3,205 | 3,957 | 3,783 | |||||||||
Premiums and deposits
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13,982 | 15,388 | 11,636 | |||||||||
Assets under management and administration ($ billions)
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392.1 | 388.7 | 350.3 |
(1)
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The 2015 earnings on assets backing capital allocated to each operating segment have been restated to align with the methodology used in 2016.
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(2)
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See “Performance and Non-GAAP Measures” below for a reconciliation between IFRS net income attributed to shareholders and core earnings.
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(3)
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See B6 “Impact of fair value accounting”.
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C4
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Corporate and Other
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(C$ millions, unless otherwise stated)
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Quarterly Results
|
|||||||||||
1Q16 | 4Q15 | 1Q15 | ||||||||||
Net income (loss) attributed to shareholders(1)
|
$ | 83 | $ | (382 | ) | $ | (141 | ) | ||||
Core loss (excluding macro hedges and core investment gains)(2)
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$ | (107 | ) | $ | (85 | ) | $ | (73 | ) | |||
Expected cost of macro hedges
|
(86 | ) | (74 | ) | (44 | ) | ||||||
Investment-related experience included in core earnings
|
- | - | - | |||||||||
Total core loss
|
$ | (193 | ) | $ | (159 | ) | $ | (117 | ) | |||
Revenue
|
$ | 577 | $ | (131 | ) | $ | 22 | |||||
Premiums and deposits
|
3,235 | 6,000 | 3,043 | |||||||||
Assets under management ($ billions)
|
65.3 | 71.6 | 59.9 |
(1)
|
The 2015 earnings on assets backing capital allocated to each operating segment have been restated to align with the methodology used in 2016.
|
(2)
|
See “Performance and Non-GAAP Measures” for a reconciliation between IFRS net income attributed to shareholders and core earnings.
|
D1
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Additional information for Wealth and Asset Management
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Quarterly Results
|
||||||||||||
(C$ millions, unless otherwise stated)
|
1Q16 | 4Q15 | 1Q15 | |||||||||
Core earnings
|
$ | 140 | $ | 155 | $ | 148 | ||||||
Core EBITDA
|
285 | 302 | 296 | |||||||||
Net flows
|
1,676 | 8,748 | 6,631 | |||||||||
Gross flows
|
28,228 | 31,089 | 22,843 | |||||||||
Assets under management ("AUM") (C$ billions)
|
417 | 434 | 394 | |||||||||
Assets under management and administration ("AUMA") (C$ billions)
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488 | 510 | 394 |
D2
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Additional information by business line
|
Quarterly Results
|
||||||||||||
(C$ millions)
|
1Q16 | 4Q15 | 1Q15 | |||||||||
Wealth and Asset Management
|
$ | 140 | $ | 155 | $ | 148 | ||||||
Insurance
|
604 | 558 | 475 | |||||||||
Other Wealth
|
353 | 311 | 299 | |||||||||
Corporate and Other(1)
|
(192 | ) | (165 | ) | (125 | ) | ||||||
Total core earnings
|
$ | 905 | $ | 859 | $ | 797 |
(1)
|
Excludes Manulife Asset Management results that are included in WAM.
|
March 31,
|
December 31,
|
March 31,
|
||||||||||
(C$ billions)
|
2016
|
2015
|
2015
|
|||||||||
Wealth and Asset Management
|
$ | 487.5 | $ | 510.5 | $ | 393.8 | ||||||
Insurance
|
245.6 | 246.1 | 242.1 | |||||||||
Other Wealth
|
175.2 | 178.3 | 181.1 | |||||||||
Corporate and Other
|
(4.4 | ) | 0.3 | 4.3 | ||||||||
Total assets under management and administration
|
$ | 903.9 | $ | 935.2 | $ | 821.3 |
2
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Manulife Bank new loan volumes are no longer being reported as sales.
|
Quarterly Results
|
||||||||||||
(C$ millions)
|
1Q16 | 4Q15 | 1Q15 | |||||||||
Wealth and Asset Management(1)
|
||||||||||||
Asia
|
$ | 38 | $ | 36 | $ | 42 | ||||||
Canada
|
39 | 35 | 30 | |||||||||
U.S.
|
64 | 78 | 68 | |||||||||
Corporate and Other(2)
|
(1 | ) | 6 | 8 | ||||||||
Total Wealth and Asset Management
|
140 | 155 | 148 | |||||||||
Insurance
|
||||||||||||
Asia
|
249 | 222 | 184 | |||||||||
Canada
|
172 | 202 | 113 | |||||||||
U.S.
|
183 | 134 | 178 | |||||||||
Total Insurance
|
604 | 558 | 475 | |||||||||
Other Wealth(3)
|
||||||||||||
Asia
|
84 | 76 | 53 | |||||||||
Canada
|
||||||||||||
Manulife Bank
|
30 | 27 | 34 | |||||||||
Canada excluding Manulife Bank
|
97 | 88 | 84 | |||||||||
Total Canada
|
127 | 115 | 118 | |||||||||
U.S.
|
142 | 120 | 128 | |||||||||
Total Other Wealth
|
353 | 311 | 299 | |||||||||
Corporate and Other(4)
|
(192 | ) | (165 | ) | (125 | ) | ||||||
Total core earnings
|
$ | 905 | $ | 859 | $ | 797 |
(1)
|
Wealth and Asset Management is comprised of our fee-based global WAM businesses that do not contain material insurance risk including: mutual funds, group retirement and institutional asset management.
|
(2)
|
Corporate and Other results are net of internal allocations to other divisions.
|
(3)
|
Other Wealth includes variable and fixed annuities, single premium products sold in Asia, and Manulife Bank.
|
(4)
|
A portion of core earnings from Investment Division has been included in Wealth and Asset Management.
|
E1
|
Regulatory updates
|
E2
|
Variable annuity and segregated fund guarantees
|
As described in the MD&A in our 2015 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.
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 E4 “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.
|
March 31, 2016
|
December 31, 2015
|
|||||||||||||||||||||||
(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)
|
$ | 6,109 | $ | 4,423 | $ | 1,691 | $ | 6,642 | $ | 4,909 | $ | 1,740 | ||||||||||||
Guaranteed minimum withdrawal benefit
|
68,429 | 60,212 | 9,324 | 73,232 | 65,090 | 9,231 | ||||||||||||||||||
Guaranteed minimum accumulation benefit
|
20,135 | 23,669 | 84 | 19,608 | 23,231 | 72 | ||||||||||||||||||
Gross living benefits(2)
|
94,673 | 88,304 | 11,099 | 99,482 | 93,230 | 11,043 | ||||||||||||||||||
Gross death benefits(3)
|
12,764 | 12,070 | 1,630 | 13,693 | 13,158 | 1,704 | ||||||||||||||||||
Total gross of reinsurance
|
107,437 | 100,374 | 12,729 | 113,175 | 106,388 | 12,747 | ||||||||||||||||||
Living benefits reinsured
|
5,325 | 3,880 | 1,448 | 5,795 | 4,312 | 1,486 | ||||||||||||||||||
Death benefits reinsured
|
3,545 | 3,167 | 644 | 3,874 | 3,501 | 682 | ||||||||||||||||||
Total reinsured
|
8,870 | 7,047 | 2,092 | 9,669 | 7,813 | 2,168 | ||||||||||||||||||
Total, net of reinsurance
|
$ | 98,567 | $ | 93,327 | $ | 10,637 | $ | 103,506 | $ | 98,575 | $ | 10,579 |
(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 as outlined in footnote 3.
|
(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 March 31, 2016 was $10,637 million (December 31, 2015 – $10,579 million) of which: US$6,318 million (December 31, 2015 – US$6,046 million) was on our U.S. business, $1,715 million (December 31, 2015 – $1,564 million) was on our Canadian business, US$278 million (December 31, 2015 – US$190 million) was on our Japan business and US$282 million (December 31, 2015 – US$277 million) was related to Asia (other than Japan) and our run-off reinsurance business.
|
The amount at risk on variable annuity contracts and segregated fund guarantees, net of reinsurance was $10.6 billion at March 31, 2016 in line with December 31, 2015.
The policy liabilities established for variable annuity and segregated fund guarantees were $9,584 million at March 31, 2016 (December 31, 2015 - $7,469 million). For non-dynamically hedged business, policy liabilities increased from $840 million at December 31, 2015 to $918 million at March 31, 2016. For the dynamically hedged business, the policy liabilities increased from $6,629 million at December 31, 2015 to $8,666 million at March 31, 2016.
|
E3
|
Caution related to sensitivities
|
In this document, we provide sensitivities and risk exposure measures for certain risks. These include sensitivities due to specific changes in market prices and interest rate levels projected using internal models as at a specific date, and are measured relative to a starting level reflecting the Company’s assets and liabilities at that date and the actuarial factors, investment activity and investment returns assumed in the determination of policy liabilities. The risk exposures measure the impact of changing one factor at a time and assume that all other factors remain unchanged. Actual results can differ significantly from these estimates for a variety of reasons including the interaction among these factors when more than one changes; changes in actuarial and investment return and future investment activity assumptions; actual experience differing from the assumptions, changes in business mix, effective tax rates and other market factors; and the general limitations of our internal models. For these reasons, the sensitivities should only be viewed as directional estimates of the underlying sensitivities for the respective factors based on the assumptions outlined below. Given the nature of these calculations, we cannot provide assurance that the actual impact on net income attributed to shareholders will be as indicated
|
E4
|
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. If market values were to remain flat for an entire year, the potential impact would be roughly equivalent to an immediate decline in market values equal to the expected level of annual growth assumed in the valuation of policy liabilities. Further, if after market values dropped 10, 20 or 30% they continued to decline, remained flat, or grew more slowly than assumed in the valuation the potential impact on net income attributed to shareholders and on MLI’s MCCSR ratio could be considerably more than shown. Refer to section F2 “Sensitivity of policy liabilities to updates and assumptions” for more information on the level of growth assumed and on the net income sensitivity to changes in these long-term assumptions. 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.
|
As at March 31, 2016
|
||||||||||||||||||||||||
(C$ millions)
|
-30 | % | -20 | % | -10 | % | 10 | % | 20 | % | 30 | % | ||||||||||||
Underlying sensitivity to net income attributed to
shareholders(4)
|
||||||||||||||||||||||||
Variable annuity guarantees
|
$ | (5,290 | ) | $ | (3,270 | ) | $ | (1,490 | ) | $ | 1,180 | $ | 2,050 | $ | 2,670 | |||||||||
Asset based fees
|
(440 | ) | (290 | ) | (140 | ) | 140 | 290 | 440 | |||||||||||||||
General fund equity investments(5)
|
(980 | ) | (650 | ) | (330 | ) | 320 | 620 | 940 | |||||||||||||||
Total underlying sensitivity before hedging
|
(6,710 | ) | (4,210 | ) | (1,960 | ) | 1,640 | 2,960 | 4,050 | |||||||||||||||
Impact of macro and dynamic hedge assets(6)
|
4,950 | 3,050 | 1,400 | (1,290 | ) | (2,350 | ) | (3,160 | ) | |||||||||||||||
Net potential impact on net income after impact
of hedging
|
$ | (1,760 | ) | $ | (1,160 | ) | $ | (560 | ) | $ | 350 | $ | 610 | $ | 890 | |||||||||
As at December 31, 2015
|
||||||||||||||||||||||||
(C$ millions)
|
-30 | % | -20 | % | -10 | % | 10 | % | 20 | % | 30 | % | ||||||||||||
Underlying sensitivity to net income attributed to
shareholders(4)
|
||||||||||||||||||||||||
Variable annuity guarantees
|
$ | (5,180 | ) | $ | (3,140 | ) | $ | (1,410 | ) | $ | 1,080 | $ | 1,860 | $ | 2,420 | |||||||||
Asset based fees
|
(470 | ) | (310 | ) | (160 | ) | 160 | 310 | 470 | |||||||||||||||
General fund equity investments(5)
|
(1,030 | ) | (680 | ) | (340 | ) | 330 | 670 | 1,020 | |||||||||||||||
Total underlying sensitivity before hedging
|
(6,680 | ) | (4,130 | ) | (1,910 | ) | 1,570 | 2,840 | 3,910 | |||||||||||||||
Impact of macro and dynamic hedge assets(6)
|
4,750 | 2,920 | 1,360 | (1,240 | ) | (2,250 | ) | (3,090 | ) | |||||||||||||||
Net potential impact on net income after impact
of hedging
|
$ | (1,930 | ) | $ | (1,210 | ) | $ | (550 | ) | $ | 330 | $ | 590 | $ | 820 |
(1)
|
See “Caution related to sensitivities” above.
|
(2)
|
The tables above 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.
|
(3)
|
Please refer to section F2 “Sensitivity of policy liabilities to updates and assumptions” for more information on the level of growth assumed and on the net income sensitivity to changes in these long-term assumptions.
|
(4)
|
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.
|
(5)
|
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 AFS 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.
|
(6)
|
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's MCCSR ratio
|
||||||||||||||||||||||||
Percentage points
|
-30 | % | -20 | % | -10 | % | 10 | % | 20 | % | 30 | % | ||||||||||||
March 31, 2016
|
(13 | ) | (8 | ) | (5 | ) | 1 | 3 | 5 | |||||||||||||||
December 31, 2015
|
(14 | ) | (7 | ) | (4 | ) | 1 | 3 | 7 |
(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 March 31,
|
||||||||
(C$ millions)
|
2016
|
2015
|
||||||
For variable annuity guarantee dynamic hedging strategy
|
$ | 14,400 | $ | 11,400 | ||||
For macro equity risk hedging strategy
|
5,200 | 3,000 | ||||||
Total
|
$ | 19,600 | $ | 14,400 |
E5
|
Interest rate and spread risk
|
March 31, 2016
|
December 31, 2015
|
|||||||||||||||
As at
|
-50 | bp | +50 | bp | -50 | bp | +50 | bp | ||||||||
Net income attributed to shareholders (C$ millions)
|
||||||||||||||||
Excluding change in market value of AFS fixed income assets held in the surplus segment
|
$ | - | $ | - | $ | (100 | ) | $ | 100 | |||||||
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)
|
(7 | ) | 4 | (6 | ) | 4 | ||||||||||
From fair value changes in AFS fixed income assets held in surplus, if realized
|
4 | (4 | ) | 3 | (3 | ) |
(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 almost all of the 7 point impact of a 50 bp decline in interest rates on MLI’s MCCSR ratio this quarter.
|
1
|
See “Caution regarding forward-looking statements” below.
|
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)
|
March 31, 2016
|
December 31, 2015
|
||||||
Corporate spreads(4)
|
||||||||
Increase 50 basis points
|
$ | 700 | $ | 700 | ||||
Decrease 50 basis points
|
(800 | ) | (700 | ) | ||||
Swap spreads
|
||||||||
Increase 20 basis points
|
$ | (500 | ) | $ | (500 | ) | ||
Decrease 20 basis points
|
500 | 500 |
(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.
|
E6
|
Alternative long-duration asset (“ALDA”) performance risk
|
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.
|
As at
|
March 31, 2016
|
December 31, 2015
|
||||||||||||||
(C$ millions)
|
-10 | % | 10 | % | -10 | % | 10 | % | ||||||||
Real estate, agriculture and timber assets
|
$ | (1,200 | ) | $ | 1,200 | $ | (1,200 | ) | $ | 1,200 | ||||||
Private equities and other ALDA(6)
|
(1,100 | ) | 1,000 | (1,100 | ) | 1,100 | ||||||||||
Alternative long-duration assets
|
$ | (2,300 | ) | $ | 2,200 | $ | (2,300 | ) | $ | 2,300 |
(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. For some classes of ALDA, where there is not an appropriate long-term benchmark available, the return assumptions used in valuation are not permitted by the Standards of Practice and CIA guidance to result in a lower reserve than an assumption based on a historical return benchmark for public equities in the same jurisdiction.
|
(5)
|
Please refer to section F1 “Sensitivity of policy liabilities to updates and assumptions” for more information on the level of growth assumed and on the net income sensitivity to changes in these long-term assumptions.
|
(6)
|
A 10% market decline in oil and gas holdings, direct and indirect, would result in an estimated $100 million reduction in net income attributed to shareholders.
|
F1
|
Critical accounting and actuarial policies
|
F2
|
Sensitivity of policy liabilities to updates and assumptions
|
As at
|
Increase (decrease) in after-tax income
|
||||||||||||||||
(C$ millions)
|
March 31, 2016
|
December 31,2015
|
|||||||||||||||
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)
|
$ | 600 | $ | (600 | ) | $ | 600 | $ | (600 | ) | |||||||
100 basis point change in future annual returns for ALDA(2)
|
2,900 | (3,500 | ) | 3,000 | (3,400 | ) | |||||||||||
100 basis point change in equity volatility assumption for stochastic segregated fund modelling(3)
|
(200 | ) | 200 | (300 | ) | 300 |
(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 $200 million increase (December 31, 2015 – $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, 2015 – $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, direct oil and gas properties, and private equities, some of which relate to oil and gas. Expected long-term return assumptions are set in accordance with the Standards of Practice for the valuation of insurance contract liabilities and guidance published by the CIA. The guidance requires that the investment return assumption for these assets should not be higher than the historical long-term average returns of an appropriate broad based index. Where such experience is not available, investment return assumptions should not result in a lower reserve than an assumption based on a historical return benchmark for public equities in the same jurisdiction. Annual return assumptions for ALDA include market growth rates and annual income such as rent, production proceeds, dividends, etc.
|
(3)
|
Volatility assumptions for public equities are based on long-term historical observed experience and compliance with actuarial standards. The resulting volatility assumptions are 17.5% per annum in Canada and 17.5% 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%.
|
F3
|
Accounting and reporting changes
|
Topic
|
Effective date
|
Recognition/ Measurement/ Presentation
|
Impact/Expected Impact
|
IFRS 16 “Leases”
|
January 1, 2019
|
Recognition, measurement and presentation
|
Assessing the impact
|
Amendments to IAS 7 “Statement of Cash Flows”
|
January 1, 2017
|
Presentation
|
Not significant
|
Amendments to IAS 12 “Income Taxes”
|
January 1, 2017
|
Recognition
|
Not significant
|
F4
|
Quarterly financial information
|
As at and for the three months ended
|
Mar 31,
|
Dec 31,
|
Sept 30,
|
Jun 30,
|
Mar 31,
|
Dec 31,
|
Sept 30,
|
Jun 30,
|
||||||||||||||||||||||||
(C$ millions, except per share amounts or otherwise stated, unaudited)
|
2016
|
2015
|
2015
|
2015
|
2015
|
2014
|
2014
|
2014
|
||||||||||||||||||||||||
Revenue
|
||||||||||||||||||||||||||||||||
Premium income
|
||||||||||||||||||||||||||||||||
Life and health insurance
|
$ | 5,728 | $ | 5,331 | $ | 5,092 | $ | 4,708 | $ | 4,589 | $ | 4,305 | $ | 4,072 | $ | 3,786 | ||||||||||||||||
Annuities and pensions
|
1,000 | 1,381 | 1,141 | 869 | 814 | 528 | 556 | 430 | ||||||||||||||||||||||||
Premiums ceded, net of ceded commission and additional consideration relating to Closed Block reinsurance transaction
|
- | - | (7,996 | ) | - | - | - | - | - | |||||||||||||||||||||||
Net premium income
|
6,728 | 6,712 | (1,763 | ) | 5,577 | 5,403 | 4,833 | 4,628 | 4,216 | |||||||||||||||||||||||
Investment income
|
3,300 | 2,899 | 2,708 | 3,216 | 2,642 | 2,664 | 2,602 | 2,809 | ||||||||||||||||||||||||
Realized and unrealized gains (losses) on assets supporting insurance and investment contract liabilities(1)
|
8,862 | (1,916 | ) | 3,672 | (10,161 | ) | 5,343 | 6,182 | 1,561 | 4,093 | ||||||||||||||||||||||
Other revenue
|
2,829 | 2,694 | 2,487 | 2,491 | 2,426 | 2,301 | 2,207 | 2,108 | ||||||||||||||||||||||||
Total revenue
|
$ | 21,719 | $ | 10,389 | $ | 7,104 | $ | 1,123 | $ | 15,814 | $ | 15,980 | $ | 10,998 | $ | 13,226 | ||||||||||||||||
Income (loss) before income taxes
|
$ | 1,353 | $ | 136 | $ | 988 | $ | 650 | $ | 844 | $ | 724 | $ | 1,392 | $ | 1,211 | ||||||||||||||||
Income tax (expense) recovery
|
(298 | ) | 76 | (316 | ) | 28 | (116 | ) | (17 | ) | (287 | ) | (234 | ) | ||||||||||||||||||
Net income
|
$ | 1,055 | $ | 212 | $ | 672 | $ | 678 | $ | 728 | $ | 707 | $ | 1,105 | $ | 977 | ||||||||||||||||
Net income attributed to shareholders
|
$ | 1,045 | $ | 246 | $ | 622 | $ | 600 | $ | 723 | $ | 640 | $ | 1,100 | $ | 943 | ||||||||||||||||
Reconciliation of core earnings to net income attributed to shareholders
|
||||||||||||||||||||||||||||||||
Total core earnings(2)
|
$ | 905 | $ | 859 | $ | 870 | $ | 902 | $ | 797 | $ | 713 | $ | 755 | $ | 701 | ||||||||||||||||
Other items to reconcile net income attributed to shareholders to core earnings(3):
|
||||||||||||||||||||||||||||||||
Investment-related experience in excess of amounts included in core earnings
|
(340 | ) | (361 | ) | (169 | ) | 77 | (77 | ) | (403 | ) | 320 | 217 | |||||||||||||||||||
Direct impact of equity markets, interest rates and variable annuity guarantee liabilities
|
474 | (29 | ) | 232 | (309 | ) | 13 | 377 | 70 | 55 | ||||||||||||||||||||||
Impact of major reinsurance transactions, in-force product changes and recapture of reinsurance treaties
|
- | (52 | ) | - | - | 12 | - | 24 | - | |||||||||||||||||||||||
Change in actuarial methods and
assumptions
|
12 | (97 | ) | (285 | ) | (47 | ) | (22 | ) | (59 | ) | (69 | ) | (30 | ) | |||||||||||||||||
Integration and acquisition costs
|
(14 | ) | (39 | ) | (26 | ) | (54 | ) | (30 | ) | 12 | - | - | |||||||||||||||||||
Tax-related items and other
|
8 | (35 | ) | - | 31 | 30 | - | - | - | |||||||||||||||||||||||
Net income attributed to shareholders
|
$ | 1,045 | $ | 246 | $ | 622 | $ | 600 | $ | 723 | $ | 640 | $ | 1,100 | $ | 943 | ||||||||||||||||
Basic earnings per common share
|
$ | 0.51 | $ | 0.11 | $ | 0.30 | $ | 0.29 | $ | 0.36 | $ | 0.33 | $ | 0.58 | $ | 0.49 | ||||||||||||||||
Diluted earnings per common share
|
$ | 0.51 | $ | 0.11 | $ | 0.30 | $ | 0.29 | $ | 0.36 | $ | 0.33 | $ | 0.57 | $ | 0.49 | ||||||||||||||||
Segregated funds deposits
|
$ | 8,693 | $ | 8,324 | $ | 8,401 | $ | 7,790 | $ | 8,270 | $ | 6,240 | $ | 5,509 | $ | 5,587 | ||||||||||||||||
Total assets (in billions)
|
$ | 697 | $ | 705 | $ | 683 | $ | 659 | $ | 689 | $ | 579 | $ | 555 | $ | 536 | ||||||||||||||||
Weighted average common shares
(in millions)
|
1,972 | 1,972 | 1,971 | 1,971 | 1,936 | 1,864 | 1,859 | 1,854 | ||||||||||||||||||||||||
Diluted weighted average common
shares (in millions)
|
1,976 | 1,977 | 1,977 | 1,992 | 1,959 | 1,887 | 1,883 | 1,878 | ||||||||||||||||||||||||
Dividends per common share
|
$ | 0.185 | $ | 0.170 | $ | 0.170 | $ | 0.170 | $ | 0.155 | $ | 0.155 | $ | 0.155 | $ | 0.13 | ||||||||||||||||
CDN$ to US$1 - Statement of
Financial Position
|
1.2970 | 1.3841 | 1.3394 | 1.2473 | 1.2682 | 1.1601 | 1.1208 | 1.0676 | ||||||||||||||||||||||||
CDN$ to US$1 - Statement of Income
|
1.3724 | 1.3360 | 1.3089 | 1.2297 | 1.2399 | 1.1356 | 1.0890 | 1.0905 |
(1)
|
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.
|
(2)
|
Core earnings is a non-GAAP measure. See “Performance and Non-GAAP Measures” below.
|
(3)
|
For explanations of other items, see “Q1 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 G3 “Performance and Non-GAAP Measures” which reconcile net income attributed to shareholders to core earnings.
|
F5
|
Other
|
G1
|
Quarterly dividend
|
G2
|
Outstanding shares – selected information
|
G3
|
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 $400 million of favourable investment-related experience reported in a single year which is referred to as “core investment gains”. This means up to $100 million in the first quarter, up to $200 million on a year-to-date basis in the second quarter, up to $300 million on a year-to-date basis in the third quarter and up to $400 million on a full year basis in the fourth quarter. Any investment-related experience losses reported in a quarter will be offset against the net year-to-date investment-related experience gains with the difference being included in core earnings subject to a maximum of the year-to-date core investment gains and a minimum of zero. To the extent any investment-related experience losses cannot be fully offset in a quarter they will be carried forward to be offset against investment-related experience gains in subsequent quarters in the same year, for purposes of determining 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 $400 million per annum or net unfavourable investment-related experience on a year-to-date basis. Investment-related experience relates to fixed income redeployment, alternative long-duration asset returns, credit experience and asset mix changes. This favourable and unfavourable investment-related experience is a combination of reported investment experience as well as the impact of investing activities on the measurement of our insurance and investment contract liabilities.
|
3.
|
Mark-to-market gains or losses on assets held in the Corporate and Other segment other than gains on AFS equities and seed money investments in new segregated or mutual funds.
|
4.
|
Changes in actuarial methods and assumptions.
|
5.
|
The impact on the measurement of insurance and investment contract liabilities of changes in product features or new reinsurance transactions, if material.
|
6.
|
Goodwill impairment charges.
|
7.
|
Gains or losses on disposition of a business.
|
8.
|
Material one-time only adjustments, including highly unusual/extraordinary and material legal settlements or other items that are material and exceptional in nature.
|
9.
|
Tax on the above items.
|
10.
|
Impact of enacted or substantially enacted income tax rate changes.
|
Total Company
|
Quarterly Results
|
||||||||||||||||||||||||||||||||
(C$ millions, unaudited)
|
1Q16 | 4Q15 | 3Q15 | 2Q15 | 1Q15 | 4Q14 | 3Q14 | 2Q14 | ||||||||||||||||||||||||
Core earnings (loss)
|
||||||||||||||||||||||||||||||||
Asia Division
|
$ | 371 | $ | 334 | $ | 338 | $ | 283 | $ | 279 | $ | 260 | $ | 273 | $ | 231 | ||||||||||||||||
Canadian Division
|
338 | 352 | 336 | 303 | 261 | 224 | 243 | 232 | ||||||||||||||||||||||||
U.S. Division
|
389 | 332 | 375 | 385 | 374 | 338 | 342 | 329 | ||||||||||||||||||||||||
Corporate and Other (excluding expected cost of macro hedges and core investment gains)
|
(107 | ) | (85 | ) | (66 | ) | (74 | ) | (73 | ) | (112 | ) | (107 | ) | (92 | ) | ||||||||||||||||
Expected cost of macro hedges
|
(86 | ) | (74 | ) | (62 | ) | (46 | ) | (44 | ) | (47 | ) | (46 | ) | (49 | ) | ||||||||||||||||
Investment-related experience included
in core earnings
|
- | - | (51 | ) | 51 | - | 50 | 50 | 50 | |||||||||||||||||||||||
Total core earnings
|
905 | 859 | 870 | 902 | 797 | 713 | 755 | 701 | ||||||||||||||||||||||||
Investment-related experience outside
of core earnings
|
(340 | ) | (361 | ) | (169 | ) | 77 | (77 | ) | (403 | ) | 320 | 217 | |||||||||||||||||||
Core earnings plus investment-related experience outside of core earnings
|
565 | 498 | 701 | 979 | 720 | 310 | 1,075 | 918 | ||||||||||||||||||||||||
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)
|
474 | (29 | ) | 232 | (309 | ) | 13 | 377 | 70 | 55 | ||||||||||||||||||||||
Recapture of reinsurance treaties
|
- | (52 | ) | - | - | 12 | - | 24 | - | |||||||||||||||||||||||
Change in actuarial methods and
assumptions
|
12 | (97 | ) | (285 | ) | (47 | ) | (22 | ) | (59 | ) | (69 | ) | (30 | ) | |||||||||||||||||
Integration and acquisition costs
|
(14 | ) | (39 | ) | (26 | ) | (54 | ) | (30 | ) | 12 | - | - | |||||||||||||||||||
Tax-related items
|
1 | 2 | - | 31 | 30 | - | - | - | ||||||||||||||||||||||||
Other items
|
7 | (37 | ) | - | - | - | - | - | - | |||||||||||||||||||||||
Net income attributed to shareholders
|
$ | 1,045 | $ | 246 | $ | 622 | $ | 600 | $ | 723 | $ | 640 | $ | 1,100 | $ | 943 | ||||||||||||||||
Other market-related factors
|
||||||||||||||||||||||||||||||||
Direct impact of equity markets and variable annuity guarantee liabilities
|
$ | (150 | ) | $ | 77 | $ | (419 | ) | $ | 28 | $ | 15 | $ | (142 | ) | $ | (35 | ) | $ | 66 | ||||||||||||
Gains (charges) on higher (lower) fixed income reinvestment rates assumed in the valuation of policy liabilities
|
407 | (97 | ) | 647 | (362 | ) | 13 | 533 | 165 | 22 | ||||||||||||||||||||||
Gains (charges) on sale of AFS bonds and derivative positions in the Corporate segment
|
217 | (9 | ) | 4 | 25 | (15 | ) | (14 | ) | (15 | ) | (8 | ) | |||||||||||||||||||
Charges due to lower fixed income URR assumptions used in the valuation of policy liabilities
|
- | - | - | - | - | - | (45 | ) | (25 | ) | ||||||||||||||||||||||
Direct impact of equity markets and interest rates and variable annuity guarantee liabilities
|
$ | 474 | $ | (29 | ) | $ | 232 | $ | (309 | ) | $ | 13 | $ | 377 | $ | 70 | $ | 55 |
Asia Division
|
Quarterly Results
|
||||||||||||||||||||||||||||||||
(C$ millions, unaudited)
|
1Q16 | 4Q15 | 3Q15 | 2Q15 | 1Q15 | 4Q14 | 3Q14 | 2Q14 | ||||||||||||||||||||||||
Asia Division core earnings
|
$ | 371 | $ | 334 | $ | 338 | $ | 283 | $ | 279 | $ | 260 | $ | 273 | $ | 231 | ||||||||||||||||
Investment-related experience outside
of core earnings
|
(20 | ) | (3 | ) | 21 | 7 | - | (2 | ) | 27 | 18 | |||||||||||||||||||||
Core earnings plus investment-related experience outside of core earnings
|
351 | 331 | 359 | 290 | 279 | 258 | 300 | 249 | ||||||||||||||||||||||||
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
|
(238 | ) | 76 | (248 | ) | 15 | (17 | ) | 78 | 32 | 88 | |||||||||||||||||||||
Tax-related items
|
10 | 2 | - | (2 | ) | 20 | - | - | - | |||||||||||||||||||||||
Integration and acquisition costs
|
(2 | ) | - | - | - | - | - | - | - | |||||||||||||||||||||||
Net income attributed to shareholders(1)
|
$ | 121 | $ | 409 | $ | 111 | $ | 303 | $ | 282 | $ | 336 | $ | 332 | $ | 337 |
(1)
|
The 2015 earnings on assets backing capital allocated to each operating segment have been restated to align with the methodology used in 2016.
|
Canadian Division
|
Quarterly Results
|
||||||||||||||||||||||||||||||||
(C$ millions, unaudited)
|
1Q16 | 4Q15 | 3Q15 | 2Q15 | 1Q15 | 4Q14 | 3Q14 | 2Q14 | ||||||||||||||||||||||||
Canadian Division core earnings
|
$ | 338 | $ | 352 | $ | 336 | $ | 303 | $ | 261 | $ | 224 | $ | 243 | $ | 232 | ||||||||||||||||
Investment-related experience outside
of core earnings
|
(78 | ) | (180 | ) | (144 | ) | 14 | (81 | ) | (199 | ) | 19 | 46 | |||||||||||||||||||
Core earnings plus investment-related experience outside of core earnings
|
260 | 172 | 192 | 317 | 180 | 25 | 262 | 278 | ||||||||||||||||||||||||
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
|
346 | (201 | ) | 97 | (114 | ) | (65 | ) | 48 | - | (11 | ) | ||||||||||||||||||||
Recapture of reinsurance treaty and
tax-related items
|
- | (52 | ) | - | 1 | 12 | - | 24 | - | |||||||||||||||||||||||
Integration and acquisition costs
|
(6 | ) | (23 | ) | (13 | ) | (14 | ) | (9 | ) | - | - | - | |||||||||||||||||||
Net income (loss) attributed to
shareholders(1)
|
$ | 600 | $ | (104 | ) | $ | 276 | $ | 190 | $ | 118 | $ | 73 | $ | 286 | $ | 267 |
(1)
|
The 2015 earnings on assets backing capital allocated to each operating segment have been restated to align with the methodology used in 2016.
|
U.S. Division
|
Quarterly Results
|
||||||||||||||||||||||||||||||||
(C$ millions, unaudited)
|
1Q16 | 4Q15 | 3Q15 | 2Q15 | 1Q15 | 4Q14 | 3Q14 | 2Q14 | ||||||||||||||||||||||||
U.S. Division core earnings
|
$ | 389 | $ | 332 | $ | 375 | $ | 385 | $ | 374 | $ | 338 | $ | 342 | $ | 329 | ||||||||||||||||
Investment-related experience outside
of core earnings
|
(233 | ) | (146 | ) | (34 | ) | 64 | (9 | ) | (154 | ) | 319 | 206 | |||||||||||||||||||
Core earnings plus investment-related experience outside of core earnings
|
156 | 186 | 341 | 449 | 365 | 184 | 661 | 535 | ||||||||||||||||||||||||
Other items to reconcile core earnings
to net income (loss) attributed to shareholders:
|
||||||||||||||||||||||||||||||||
Direct impact of equity markets
and interest rates and variable
annuity guarantee liabilities
|
82 | 142 | 174 | (251 | ) | 99 | 322 | 18 | 24 | |||||||||||||||||||||||
Integration and acquisition costs
|
(4 | ) | (5 | ) | (8 | ) | (32 | ) | - | - | - | - | ||||||||||||||||||||
Other items
|
7 | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Net income attributed to shareholders(1)
|
$ | 241 | $ | 323 | $ | 507 | $ | 166 | $ | 464 | $ | 506 | $ | 679 | $ | 559 |
(1)
|
The 2015 earnings on assets backing capital allocated to each operating segment have been restated to align with the methodology used in 2016.
|
Corporate and Other
|
Quarterly Results
|
||||||||||||||||||||||||||||||||
(C$ millions, unaudited)
|
1Q16 | 4Q15 | 3Q15 | 2Q15 | 1Q15 | 4Q14 | 3Q14 | 2Q14 | ||||||||||||||||||||||||
Corporate and Other core loss (excluding expected cost of macro hedges and core investment gains)
|
$ | (107 | ) | $ | (85 | ) | $ | (66 | ) | $ | (74 | ) | $ | (73 | ) | $ | (112 | ) | $ | (107 | ) | $ | (92 | ) | ||||||||
Expected cost of macro hedges
|
(86 | ) | (74 | ) | (62 | ) | (46 | ) | (44 | ) | (47 | ) | (46 | ) | (49 | ) | ||||||||||||||||
Investment-related experience included
in core earnings
|
- | - | (51 | ) | 51 | - | 50 | 50 | 50 | |||||||||||||||||||||||
Total core loss
|
(193 | ) | (159 | ) | (179 | ) | (69 | ) | (117 | ) | (109 | ) | (103 | ) | (91 | ) | ||||||||||||||||
Investment-related experience outside
of core earnings
|
(9 | ) | (32 | ) | (12 | ) | (8 | ) | 13 | (48 | ) | (45 | ) | (53 | ) | |||||||||||||||||
Core loss plus investment-related experience outside of core earnings
|
(202 | ) | (191 | ) | (191 | ) | (77 | ) | (104 | ) | (157 | ) | (148 | ) | (144 | ) | ||||||||||||||||
Other items to reconcile core earnings
(loss) to net income (loss) attributed to shareholders
|
||||||||||||||||||||||||||||||||
Direct impact of equity markets and interest rates and variable annuity guarantee liabilities
|
284 | (46 | ) | 209 | 41 | (4 | ) | (71 | ) | 20 | (46 | ) | ||||||||||||||||||||
Changes in actuarial methods and
assumptions
|
12 | (97 | ) | (285 | ) | (47 | ) | (22 | ) | (59 | ) | (69 | ) | (30 | ) | |||||||||||||||||
Integration and acquisition Costs
|
(2 | ) | (11 | ) | (5 | ) | (8 | ) | (21 | ) | 12 | - | - | |||||||||||||||||||
Tax-related items
|
(9 | ) | - | - | 32 | 10 | - | - | - | |||||||||||||||||||||||
Other items
|
- | (37 | ) | - | - | - | - | - | - | |||||||||||||||||||||||
Net income (loss) attributed to
shareholders(1)
|
$ | 83 | $ | (382 | ) | $ | (272 | ) | $ | (59 | ) | $ | (141 | ) | $ | (275 | ) | $ | (197 | ) | $ | (220 | ) |
(1)
|
The Corporate and Other segment includes earnings on assets backing capital net of amounts allocated to operating divisions. The 2015 earnings on assets backing capital allocated to each operating segment have been restated to align with the methodology used in 2016.
|
Quarterly Results
|
||||||||||||
(C$ millions)
|
1Q16 | 4Q15 | 1Q15 | |||||||||
Net premium income and investment contract deposits
|
$ | 6,768 | $ | 6,740 | $ | 5,477 | ||||||
Deposits from policyholders
|
8,038 | 7,740 | 7,621 | |||||||||
Mutual fund deposits
|
17,812 | 18,361 | 13,188 | |||||||||
Institutional advisory account deposits
|
3,213 | 5,972 | 3,024 | |||||||||
ASO premium equivalents
|
868 | 833 | 837 | |||||||||
Group Benefits ceded premiums
|
1,034 | 1,051 | 1,202 | |||||||||
Other fund deposits
|
144 | 140 | 137 | |||||||||
Total premiums and deposits
|
37,877 | 40,837 | 31,486 | |||||||||
Currency impact
|
- | 907 | 2,284 | |||||||||
Constant currency premiums and deposits
|
$ | 37,877 | $ | 41,744 | $ | 33,770 |
As at
|
||||||||||||
(C$ millions)
|
March 31, 2016
|
December 31, 2015
|
March 31, 2015
|
|||||||||
Total invested assets
|
$ | 308,450 | $ | 309,267 | $ | 308,680 | ||||||
Segregated funds net assets
|
298,684 | 313,249 | 312,302 | |||||||||
Assets under management per financial statements
|
607,134 | 622,516 | 620,982 | |||||||||
Mutual funds
|
151,087 | 160,020 | 139,750 | |||||||||
Institutional advisory accounts (excluding segregated funds)
|
67,527 | 68,940 | 52,712 | |||||||||
Other funds
|
7,674 | 7,552 | 7,901 | |||||||||
Total assets under management
|
833,422 | 859,028 | 821,345 | |||||||||
Other assets under administration
|
70,437 | 76,148 | - | |||||||||
Currency impact
|
- | (33,705 | ) | 13,878 | ||||||||
Constant currency assets under management and administration
|
$ | 903,859 | $ | 901,471 | $ | 835,223 |
As at
|
||||||||||||
(C$ millions)
|
March 31, 2016
|
December 31, 2015
|
March 31, 2015
|
|||||||||
Total equity
|
$ | 41,351 | $ | 41,938 | $ | 39,435 | ||||||
Add AOCI loss on cash flow hedges
|
380 | 264 | 280 | |||||||||
Add liabilities for preferred shares and capital instruments
|
7,653 | 7,695 | 6,647 | |||||||||
Total capital
|
$ | 49,384 | $ | 49,897 | $ | 46,362 |
Quarterly Results
|
||||||||||||||||||||||||||||||||
(C$ millions, unaudited)
|
1Q16 | 4Q15 | 3Q15 | 2Q15 | 1Q15 | 4Q14 | 3Q14 | 2Q14 | ||||||||||||||||||||||||
Core EBITDA
|
$ | 285 | $ | 302 | $ | 312 | $ | 314 | $ | 296 | $ | 255 | $ | 257 | $ | 245 | ||||||||||||||||
Amortization of deferred acquisition costs and other depreciation
|
85 | 84 | 84 | 82 | 77 | 63 | 59 | 58 | ||||||||||||||||||||||||
Amortization of deferred sales
commissions
|
29 | 22 | 27 | 27 | 30 | 22 | 21 | 23 | ||||||||||||||||||||||||
Core earnings before income taxes
|
171 | 196 | 201 | 205 | 189 | 170 | 177 | 164 | ||||||||||||||||||||||||
Core income tax (expense) recovery
|
(31 | ) | (41 | ) | (34 | ) | (45 | ) | (41 | ) | (41 | ) | (48 | ) | (35 | ) | ||||||||||||||||
Core earnings
|
$ | 140 | $ | 155 | $ | 167 | $ | 160 | $ | 148 | $ | 129 | $ | 129 | $ | 129 |
G4
|
Caution regarding forward-looking statements
|
As at
|
||||||||
(Canadian $ in millions, unaudited)
|
March 31, 2016
|
December 31, 2015
|
||||||
Assets
|
||||||||
Cash and short-term securities
|
$ | 17,864 | $ | 17,885 | ||||
Debt securities
|
161,425 | 157,827 | ||||||
Public equities
|
16,641 | 16,983 | ||||||
Mortgages
|
42,987 | 43,818 | ||||||
Private placements
|
26,224 | 27,578 | ||||||
Policy loans
|
7,298 | 7,673 | ||||||
Loans to Bank clients
|
1,822 | 1,778 | ||||||
Real estate
|
14,870 | 15,347 | ||||||
Other invested assets
|
19,319 | 20,378 | ||||||
Total invested assets (note 4)
|
308,450 | 309,267 | ||||||
Other assets
|
||||||||
Accrued investment income
|
2,138 | 2,275 | ||||||
Outstanding premiums
|
813 | 878 | ||||||
Derivatives (note 5)
|
34,432 | 24,272 | ||||||
Reinsurance assets
|
33,017 | 35,426 | ||||||
Deferred tax assets
|
3,724 | 4,067 | ||||||
Goodwill and intangible assets
|
9,624 | 9,384 | ||||||
Miscellaneous
|
6,469 | 5,825 | ||||||
Total other assets
|
90,217 | 82,127 | ||||||
Segregated funds net assets (note 14)
|
298,684 | 313,249 | ||||||
Total assets
|
$ | 697,351 | $ | 704,643 | ||||
Liabilities and Equity
|
||||||||
Liabilities
|
||||||||
Insurance contract liabilities (note 6)
|
$ | 286,514 | $ | 287,059 | ||||
Investment contract liabilities (note 6)
|
3,253 | 3,497 | ||||||
Deposits from Bank clients
|
18,135 | 18,114 | ||||||
Derivatives (note 5)
|
20,618 | 15,050 | ||||||
Deferred tax liabilities
|
1,507 | 1,235 | ||||||
Other liabilities
|
15,588 | 14,953 | ||||||
345,615 | 339,908 | |||||||
Long-term debt (note 8)
|
4,048 | 1,853 | ||||||
Capital instruments (note 9)
|
7,653 | 7,695 | ||||||
Segregated funds net liabilities (note 14)
|
298,684 | 313,249 | ||||||
Total liabilities
|
656,000 | 662,705 | ||||||
Equity
|
||||||||
Preferred shares (note 10)
|
3,110 | 2,693 | ||||||
Common shares (note 10)
|
22,804 | 22,799 | ||||||
Contributed surplus
|
286 | 277 | ||||||
Shareholders' retained earnings
|
9,074 | 8,398 | ||||||
Shareholders' accumulated other comprehensive income (loss):
|
||||||||
Pension and other post-employment plans
|
(503 | ) | (521 | ) | ||||
Available-for-sale securities
|
452 | 345 | ||||||
Cash flow hedges
|
(380 | ) | (264 | ) | ||||
Translation of foreign operations and real estate revaluation surplus
|
5,706 | 7,432 | ||||||
Total shareholders' equity
|
40,549 | 41,159 | ||||||
Participating policyholders' equity
|
171 | 187 | ||||||
Non-controlling interests
|
631 | 592 | ||||||
Total equity
|
41,351 | 41,938 | ||||||
Total liabilities and equity
|
$ | 697,351 | $ | 704,643 | ||||
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
|
For the three months ended March 31,
|
||||||||
(Canadian $ in millions except per share amounts, unaudited)
|
2016
|
2015
|
||||||
Revenue
|
||||||||
Premium income
|
||||||||
Gross premiums
|
$ | 9,118 | $ | 7,389 | ||||
Premiums ceded to reinsurers
|
(2,390 | ) | (1,986 | ) | ||||
Net premiums
|
6,728 | 5,403 | ||||||
Investment income (note 4)
|
||||||||
Investment income
|
3,300 | 2,642 | ||||||
Realized and unrealized gains (losses) on assets supporting insurance and investment
contract liabilities and on the macro hedge program
|
8,862 | 5,343 | ||||||
Net investment income
|
12,162 | 7,985 | ||||||
Other revenue
|
2,829 | 2,426 | ||||||
Total revenue
|
21,719 | 15,814 | ||||||
Contract benefits and expenses
|
||||||||
To contract holders and beneficiaries
|
||||||||
Gross claims and benefits (note 6)
|
6,498 | 6,049 | ||||||
Change in insurance contract liabilities
|
12,158 | 7,443 | ||||||
Change in investment contract liabilities
|
(57 | ) | 46 | |||||
Benefits and expenses ceded to reinsurers
|
(2,056 | ) | (1,602 | ) | ||||
Change in reinsurance assets
|
129 | (339 | ) | |||||
Net benefits and claims
|
16,672 | 11,597 | ||||||
General expenses
|
1,637 | 1,384 | ||||||
Investment expenses
|
385 | 381 | ||||||
Commissions
|
1,381 | 1,202 | ||||||
Interest expense
|
201 | 316 | ||||||
Net premium taxes
|
90 | 90 | ||||||
Total contract benefits and expenses
|
20,366 | 14,970 | ||||||
Income before income taxes
|
1,353 | 844 | ||||||
Income tax expense
|
(298 | ) | (116 | ) | ||||
Net income
|
$ | 1,055 | $ | 728 | ||||
Net income (loss) attributed to:
|
||||||||
Non-controlling interests
|
$ | 26 | $ | 23 | ||||
Participating policyholders
|
(16 | ) | (18 | ) | ||||
Shareholders
|
1,045 | 723 | ||||||
$ | 1,055 | $ | 728 | |||||
Net income attributed to shareholders
|
$ | 1,045 | $ | 723 | ||||
Preferred share dividends
|
(29 | ) | (29 | ) | ||||
Common shareholders' net income
|
$ | 1,016 | $ | 694 | ||||
Earnings per share
|
||||||||
Basic earnings per common share (note 10)
|
$ | 0.51 | $ | 0.36 | ||||
Diluted earnings per common share (note 10)
|
0.51 | 0.36 | ||||||
Dividends per common share
|
0.185 | 0.155 | ||||||
The accompanying notes are an integral part of these unaudited Interim Consolidated Financial Statements.
|
For the three months ended March 31,
|
||||||||
(Canadian $ in millions, unaudited)
|
2016
|
2015
|
||||||
Net income
|
$ | 1,055 | $ | 728 | ||||
Other comprehensive income ("OCI"), net of tax
|
||||||||
Items that may be subsequently reclassified to net income:
|
||||||||
Foreign exchange gains (losses) on:
|
||||||||
Translation of foreign operations
|
(1,932 | ) | 2,668 | |||||
Net investment hedges
|
206 | (87 | ) | |||||
Available-for-sale financial securities:
|
||||||||
Unrealized gains arising during the period
|
355 | 413 | ||||||
Reclassification of net realized gains and impairments to net income
|
(247 | ) | (30 | ) | ||||
Cash flow hedges:
|
||||||||
Unrealized losses arising during the period
|
(119 | ) | (72 | ) | ||||
Reclassification of realized losses to net income
|
3 | 3 | ||||||
Share of other comprehensive loss of associates
|
(1 | ) | - | |||||
Total items that may be subsequently reclassified to net income
|
(1,735 | ) | 2,895 | |||||
Items that will not be reclassified to net income:
|
||||||||
Change in pension and other post-employment plans
|
18 | (19 | ) | |||||
Real estate revaluation reserve
|
- | 2 | ||||||
Total items that will not be reclassified to net income
|
18 | (17 | ) | |||||
Other comprehensive income (loss), net of tax
|
(1,717 | ) | 2,878 | |||||
Total comprehensive income (loss), net of tax
|
$ | (662 | ) | $ | 3,606 | |||
Total comprehensive income (loss) attributed to:
|
||||||||
Non-controlling interests
|
$ | 26 | $ | 25 | ||||
Participating policyholders
|
(16 | ) | (17 | ) | ||||
Shareholders
|
(672 | ) | 3,598 |
Income Taxes included in Other Comprehensive Income (Loss)
|
For the three months ended March 31,
|
||||||||
(Canadian $ in millions)
|
2016
|
2015
|
||||||
Income tax expense (recovery) on
|
||||||||
Unrealized foreign exchange gains/losses on translation of foreign operations
|
$ | (2 | ) | $ | 3 | |||
Unrealized foreign exchange gains/losses on net investment hedges
|
75 | (31 | ) | |||||
Unrealized gains/losses on available-for-sale financial securities
|
170 | 120 | ||||||
Reclassification of realized gains/losses and recoveries/impairments to net income on available-for-sale financial securities
|
(89 | ) | (7 | ) | ||||
Unrealized gains/losses on cash flow hedges
|
(44 | ) | (38 | ) | ||||
Reclassification of realized gains/losses to net income on cash flow hedges
|
2 | 1 | ||||||
Change in pension and other post-employment plans
|
10 | (11 | ) | |||||
Real estate revaluation reserve
|
- | 1 | ||||||
Total income tax expense
|
$ | 122 | $ | 38 | ||||
The accompanying notes are an integral part of these unaudited Interim Consolidated Financial Statements.
|
Consolidated Statements of Changes in Equity
|
For the three months ended March 31,
|
||||||||
(Canadian $ in millions, unaudited)
|
2016
|
2015
|
||||||
Preferred shares
|
||||||||
Balance, beginning of period
|
$ | 2,693 | $ | 2,693 | ||||
Issued during the period (note 10)
|
425 | - | ||||||
Issuance costs, net of tax
|
(8 | ) | - | |||||
Balance, end of period
|
3,110 | 2,693 | ||||||
Common shares
|
||||||||
Balance, beginning of period
|
22,799 | 20,556 | ||||||
Issued on exercise of stock options
|
5 | 6 | ||||||
Issued in exchange of subscription receipts
|
- | 2,206 | ||||||
Balance, end of period
|
22,804 | 22,768 | ||||||
Contributed surplus
|
||||||||
Balance, beginning of period
|
277 | 267 | ||||||
Exercise of stock options and deferred share units
|
(1 | ) | (1 | ) | ||||
Stock option expense
|
10 | 9 | ||||||
Balance, end of period
|
286 | 275 | ||||||
Shareholders' retained earnings
|
||||||||
Balance, beginning of period
|
8,398 | 7,624 | ||||||
Net income attributed to shareholders
|
1,045 | 723 | ||||||
Preferred share dividends
|
(29 | ) | (29 | ) | ||||
Common share dividends
|
(340 | ) | (295 | ) | ||||
Balance, end of period
|
9,074 | 8,023 | ||||||
Shareholders' accumulated other comprehensive income (loss) ("AOCI")
|
||||||||
Balance, beginning of period
|
6,992 | 2,166 | ||||||
Change in actuarial gains (losses) on pension and other post-employment plans
|
18 | (19 | ) | |||||
Change in unrealized foreign exchange gains (losses) of net foreign operations
|
(1,726 | ) | 2,581 | |||||
Change in unrealized gains (losses) on available-for-sale financial securities
|
108 | 381 | ||||||
Change in unrealized gains (losses) on derivative instruments designated as cash flow hedges
|
(116 | ) | (69 | ) | ||||
Change in real estate revaluation reserve
|
- | 1 | ||||||
Share of other comprehensive loss of associates
|
(1 | ) | - | |||||
Balance, end of period
|
5,275 | 5,041 | ||||||
Total shareholders' equity, end of period
|
40,549 | 38,800 | ||||||
Participating policyholders' equity
|
||||||||
Balance, beginning of period
|
187 | 156 | ||||||
Net loss attributed to participating policyholders
|
(16 | ) | (18 | ) | ||||
Other comprehensive income attributed to policyholders
|
- | 1 | ||||||
Balance, end of period
|
171 | 139 | ||||||
Non-controlling interests
|
||||||||
Balance, beginning of period
|
592 | 464 | ||||||
Net income attributed to non-controlling interests
|
26 | 23 | ||||||
Other comprehensive income attributed to non-controlling interests
|
- | 2 | ||||||
Contributions, net
|
13 | 7 | ||||||
Balance, end of period
|
631 | 496 | ||||||
Total equity, end of period
|
$ | 41,351 | $ | 39,435 | ||||
The accompanying notes are an integral part of these unaudited Interim Consolidated Financial Statements.
|
Consolidated Statements of Cash Flows
|
For the three months ended March 31,
|
||||||||
(Canadian $ in millions, unaudited)
|
2016
|
2015
|
||||||
Operating activities
|
||||||||
Net income
|
$ | 1,055 | $ | 728 | ||||
Adjustments:
|
||||||||
Increase in insurance contract liabilities
|
12,158 | 7,443 | ||||||
Increase (decrease) in investment contract liabilities
|
(57 | ) | 46 | |||||
(Increase) decrease in reinsurance assets
|
129 | (339 | ) | |||||
Amortization of premium/ discount on invested assets
|
21 | 13 | ||||||
Other amortization
|
137 | 132 | ||||||
Net realized and unrealized gains and impairment on assets
|
(9,914 | ) | (5,027 | ) | ||||
Deferred income tax expense
|
410 | 8 | ||||||
Stock option expense
|
10 | 9 | ||||||
Cash provided by operating activities before undernoted item
|
3,949 | 3,013 | ||||||
Changes in policy related and operating receivables and payables
|
(1,248 | ) | (947 | ) | ||||
Cash provided by operating activities
|
2,701 | 2,066 | ||||||
Investing activities
|
||||||||
Purchases and mortgage advances
|
(23,519 | ) | (18,574 | ) | ||||
Disposals and repayments
|
18,138 | 15,687 | ||||||
Change in investment broker net receivables and payables
|
160 | (192 | ) | |||||
Net cash decrease from purchase of subsidiaries and businesses
|
(11 | ) | (3,434 | ) | ||||
Cash used in investing activities
|
(5,232 | ) | (6,513 | ) | ||||
Financing activities
|
||||||||
Increase in repurchase agreements and securities sold but not yet purchased
|
820 | - | ||||||
Issue of long-term debt, net
|
2,246 | - | ||||||
Redemption of long-term debt (note 8)
|
(8 | ) | - | |||||
Issue of capital instruments, net (note 9)
|
- | 746 | ||||||
Funds repaid, net
|
(2 | ) | (2 | ) | ||||
Secured borrowing from securitization transactions
|
149 | 100 | ||||||
Changes in deposits from Bank clients, net
|
75 | 125 | ||||||
Shareholders' dividends paid in cash
|
(394 | ) | (335 | ) | ||||
Contributions from non-controlling interests, net
|
13 | 7 | ||||||
Common shares issued, net
|
5 | 6 | ||||||
Preferred shares issued, net (note 10)
|
417 | - | ||||||
Cash provided by financing activities
|
3,321 | 647 | ||||||
Cash and short-term securities
|
||||||||
Increase (decrease) during the period
|
790 | (3,800 | ) | |||||
Effect of foreign exchange rate changes on cash and short-term securities
|
(637 | ) | 1,128 | |||||
Balance, beginning of period
|
17,002 | 20,437 | ||||||
Balance, end of period
|
17,155 | 17,765 | ||||||
Cash and short-term securities
|
||||||||
Beginning of period
|
||||||||
Gross cash and short-term securities
|
17,885 | 21,079 | ||||||
Net payments in transit, included in other liabilities
|
(883 | ) | (642 | ) | ||||
Net cash and short-term securities, beginning of period
|
17,002 | 20,437 | ||||||
End of period
|
||||||||
Gross cash and short-term securities
|
17,864 | 18,589 | ||||||
Net payments in transit, included in other liabilities
|
(709 | ) | (824 | ) | ||||
Net cash and short-term securities, end of period
|
$ | 17,155 | $ | 17,765 | ||||
Supplemental disclosures on cash flow information
|
||||||||
Interest received
|
$ | 2,683 | $ | 2,218 | ||||
Interest paid
|
165 | 281 | ||||||
Income taxes paid
|
134 | 319 | ||||||
The accompanying notes are an integral part of these unaudited Interim Consolidated Financial Statements.
|
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
Note 2
|
Accounting and Reporting Changes
|
(a)
|
Changes in accounting policy
|
(I)
|
Amendments to IFRS 11 “Accounting for Acquisitions of Interests in Joint Operations”
|
(II)
|
Amendments to IAS 16 “Property, Plant and Equipment” and IAS 38 “Intangible Assets”
|
(III)
|
Amendments to IAS 41 “Agriculture” and IAS 16 “Property, Plant and Equipment”
|
(IV)
|
Amendments to IFRS 10 “Consolidated Financial Statements”, IFRS 12 “Disclosure of Interests in Other Entities”, and IAS 28 “Investments in Associates and Joint Ventures”
|
(V)
|
Annual Improvements 2012 – 2014 Cycle
|
(VI)
|
Amendments to IAS 1 “Presentation of Financial Statements”
|
(b)
|
Future accounting and reporting changes
|
(I)
|
IFRS 16 Leases
|
(II)
|
Amendments to IAS 7 “Statement of Cash Flows”
|
(III)
|
Amendments to IAS 12 “Income Taxes”
|
Note 3
|
Acquisition
|
Note 4
|
Invested Assets and Investment Income
|
(a)
|
Carrying values and fair values of invested assets
|
As at March 31, 2016
|
FVTPL(1)
|
AFS(2)
|
Other(3)
|
Total carrying
value
|
Total fair value
|
|||||||||||||||
Cash and short-term securities(4)
|
$ | 499 | $ | 14,194 | $ | 3,171 | $ | 17,864 | $ | 17,864 | ||||||||||
Debt securities(5)
|
||||||||||||||||||||
Canadian government and agency
|
17,722 | 5,400 | - | 23,122 | 23,122 | |||||||||||||||
U.S. government and agency
|
15,533 | 13,456 | - | 28,989 | 28,989 | |||||||||||||||
Other government and agency
|
19,155 | 1,728 | - | 20,883 | 20,883 | |||||||||||||||
Corporate
|
80,480 | 4,795 | - | 85,275 | 85,275 | |||||||||||||||
Mortgage/asset-backed securities
|
2,860 | 296 | - | 3,156 | 3,156 | |||||||||||||||
Public equities
|
14,454 | 2,187 | - | 16,641 | 16,641 | |||||||||||||||
Mortgages
|
- | - | 42,987 | 42,987 | 44,918 | |||||||||||||||
Private placements
|
- | - | 26,224 | 26,224 | 28,368 | |||||||||||||||
Policy loans
|
- | - | 7,298 | 7,298 | 7,298 | |||||||||||||||
Loans to Bank clients
|
- | - | 1,822 | 1,822 | 1,828 | |||||||||||||||
Real estate
|
||||||||||||||||||||
Own use property
|
- | - | 1,309 | 1,309 | 2,398 | |||||||||||||||
Investment property
|
- | - | 13,561 | 13,561 | 13,561 | |||||||||||||||
Other invested assets
|
||||||||||||||||||||
Alternative long-duration assets(6)
|
8,713 | 88 | 6,649 | 15,450 | 15,746 | |||||||||||||||
Various other
|
158 | - | 3,711 | 3,869 | 3,869 | |||||||||||||||
Total invested assets
|
$ | 159,574 | $ | 42,144 | $ | 106,732 | $ | 308,450 | $ | 313,916 |
As at December 31, 2015
|
FVTPL(1)
|
AFS(2)
|
Other(3)
|
Total carrying value
|
Total fair value
|
|||||||||||||||
Cash and short-term securities(4)
|
$ | 574 | $ | 13,548 | $ | 3,763 | $ | 17,885 | $ | 17,885 | ||||||||||
Debt securities(5)
|
||||||||||||||||||||
Canadian government and agency
|
16,965 | 4,318 | - | 21,283 | 21,283 | |||||||||||||||
U.S. government and agency
|
15,964 | 12,688 | - | 28,652 | 28,652 | |||||||||||||||
Other government and agency
|
17,895 | 1,688 | - | 19,583 | 19,583 | |||||||||||||||
Corporate
|
80,269 | 4,925 | - | 85,194 | 85,194 | |||||||||||||||
Mortgage/asset-backed securities
|
2,797 | 318 | - | 3,115 | 3,115 | |||||||||||||||
Public equities
|
14,689 | 2,294 | - | 16,983 | 16,983 | |||||||||||||||
Mortgages
|
- | - | 43,818 | 43,818 | 45,307 | |||||||||||||||
Private placements
|
- | - | 27,578 | 27,578 | 29,003 | |||||||||||||||
Policy loans
|
- | - | 7,673 | 7,673 | 7,673 | |||||||||||||||
Loans to Bank clients
|
- | - | 1,778 | 1,778 | 1,782 | |||||||||||||||
Real estate
|
||||||||||||||||||||
Own use property
|
- | - | 1,379 | 1,379 | 2,457 | |||||||||||||||
Investment property
|
- | - | 13,968 | 13,968 | 13,968 | |||||||||||||||
Other invested assets
|
||||||||||||||||||||
Alternative long-duration assets(6)
|
8,952 | 76 | 7,253 | 16,281 | 16,261 | |||||||||||||||
Various other
|
163 | - | 3,934 | 4,097 | 4,097 | |||||||||||||||
Total invested assets
|
$ | 158,268 | $ | 39,855 | $ | 111,144 | $ | 309,267 | $ | 313,243 |
(1)
|
The FVTPL classification was elected for securities backing insurance contract liabilities in order to substantially reduce any accounting mismatch arising from changes in the value of these assets and changes in the value of the related insurance contract liabilities. There would otherwise be a mismatch if the available-for-sale (“AFS”) classification was selected because changes in insurance 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)
|
Primarily includes assets classified as loans and carried at amortized cost, own use property, investment property, equity method accounted investments, oil and gas investments, and leveraged leases.
|
(4)
|
Includes short-term securities with maturities of less than one year at acquisition amounting to $4,069 (December 31, 2015 – $4,796) cash equivalents with maturities of less than 90 days at acquisition amounting to $10,624 (December 31, 2015 – $9,326) and cash of $3,171 (December 31, 2015 – $3,763).
|
(5)
|
Debt securities include securities which were acquired with maturities of less than one year and less than 90 days of $657 and $165, respectively (December 31, 2015 – $905 and $39, respectively).
|
(6)
|
Includes investments in private equity of $3,743, power and infrastructure of $5,127, oil and gas of $1,593, timber and agriculture sectors of $4,569 and various other invested assets of $418 (December 31, 2015 – $3,754, $5,260, $1,740, $5,092 and $435, respectively).
|
(b)
|
Investment income
|
For the three months ended March 31,
|
2016
|
2015
|
||||||
Interest income
|
$ | 2,658 | $ | 2,485 | ||||
Dividend, rental and other income
|
424 | 319 | ||||||
Net recoveries (impairments and provisions)
|
(131 | ) | (170 | ) | ||||
Other
|
349 | 8 | ||||||
3,300 | 2,642 | |||||||
Realized and unrealized gains (losses) on assets supporting insurance and investment contract liabilities
and on the macro equity hedging program
|
||||||||
Debt securities
|
3,979 | 2,683 | ||||||
Public equities
|
(2 | ) | 451 | |||||
Mortgages
|
27 | 27 | ||||||
Private placements
|
(25 | ) | (36 | ) | ||||
Real estate
|
32 | 429 | ||||||
Other invested assets
|
(39 | ) | 230 | |||||
Derivatives, including macro equity hedging program
|
4,890 | 1,559 | ||||||
8,862 | 5,343 | |||||||
Total investment income
|
$ | 12,162 | $ | 7,985 |
(c)
|
Mortgage securitization
|
As at March 31, 2016
|
Securitized assets
|
|||||||||||||||
Securitization program
|
Securitized
mortgages
|
Restricted cash and short-term securities
|
Total
|
Secured borrowing liabilities(2)
|
||||||||||||
HELOC securitization(1)
|
$ | 1,500 | $ | 8 | $ | 1,508 | $ | 1,500 | ||||||||
CMB securitization
|
586 | - | 586 | 585 | ||||||||||||
Total
|
$ | 2,086 | $ | 8 | $ | 2,094 | $ | 2,085 |
As at March 31, 2015
|
Securitized assets
|
|||||||||||||||
Securitization program
|
Securitized
mortgages
|
Restricted cash and short-term securities
|
Total
|
Secured borrowing liabilities(2)
|
||||||||||||
HELOC securitization(1)
|
$ | 1,500 | $ | 8 | $ | 1,508 | $ | 1,500 | ||||||||
CMB securitization
|
436 | - | 436 | 436 | ||||||||||||
Total
|
$ | 1,936 | $ | 8 | $ | 1,944 | $ | 1,936 |
(1)
|
Manulife Bank of Canada (the “Bank”), a MFC subsidiary, securitizes a portion of its HELOC receivables through Platinum Canadian Mortgage Trust, which funds the purchase of the co-ownership interests from the Bank by issuing term notes collateralized by the underlying pool of the Canada Mortgage and Housing Corporation (CMHC) insured HELOCs to institutional investors. The restricted cash balance for the HELOC securitization reflects 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 2011-1 notes with a floating rate which are expected to mature on December 15, 2021. Manulife Bank also securitizes insured amortizing mortgages under the National Housing Act Mortgage-Backed Securities (NHA MBS) program sponsored by CMHC. Manulife Bank participates in the Canada Mortgage Bond (CMB) program by selling NHA MBS securities to Canada Housing Trust (CHT), as a source of fixed rate funding.
|
(d)
|
Fair value measurement
|
As at March 31, 2016
|
Total fair value
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
Cash and short-term securities
|
||||||||||||||||
FVTPL
|
$ | 499 | $ | - | $ | 499 | $ | - | ||||||||
AFS
|
14,194 | - | 14,194 | - | ||||||||||||
Other
|
3,171 | 3,171 | - | - | ||||||||||||
Debt securities(1)
|
||||||||||||||||
FVTPL
|
||||||||||||||||
Canadian government and agency
|
17,722 | - | 15,962 | 1,760 | ||||||||||||
U.S. government and agency
|
15,533 | - | 14,653 | 880 | ||||||||||||
Other government and agency
|
19,155 | - | 18,734 | 421 | ||||||||||||
Corporate
|
80,480 | 2 | 76,732 | 3,746 | ||||||||||||
Residential mortgage/asset-backed securities
|
20 | - | 10 | 10 | ||||||||||||
Commercial mortgage/asset-backed securities
|
686 | - | 239 | 447 | ||||||||||||
Other securitized assets
|
2,154 | - | 2,099 | 55 | ||||||||||||
AFS
|
||||||||||||||||
Canadian government and agency
|
5,400 | - | 5,238 | 162 | ||||||||||||
U.S. government and agency
|
13,456 | - | 13,443 | 13 | ||||||||||||
Other government and agency
|
1,728 | - | 1,681 | 47 | ||||||||||||
Corporate
|
4,795 | - | 4,506 | 289 | ||||||||||||
Residential mortgage/asset-backed securities
|
43 | - | 37 | 6 | ||||||||||||
Commercial mortgage/asset-backed securities
|
114 | - | 43 | 71 | ||||||||||||
Other securitized assets
|
139 | - | 134 | 5 | ||||||||||||
Public equities
|
||||||||||||||||
FVTPL
|
14,454 | 14,452 | 1 | 1 | ||||||||||||
AFS
|
2,187 | 2,185 | 2 | - | ||||||||||||
Real estate - investment property(2)
|
13,561 | - | - | 13,561 | ||||||||||||
Other invested assets(3)
|
12,582 | - | - | 12,582 | ||||||||||||
Segregated funds net assets(4)
|
298,684 | 262,954 | 31,046 | 4,684 | ||||||||||||
Total
|
$ | 520,757 | $ | 282,764 | $ | 199,253 | $ | 38,740 |
As at December 31, 2015
|
Total fair value
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
Cash and short-term securities
|
||||||||||||||||
FVTPL
|
$ | 574 | $ | - | $ | 574 | $ | - | ||||||||
AFS
|
13,548 | - | 13,548 | - | ||||||||||||
Other
|
3,763 | 3,763 | - | - | ||||||||||||
Debt securities(1)
|
||||||||||||||||
FVTPL
|
||||||||||||||||
Canadian government and agency
|
16,965 | - | 15,299 | 1,666 | ||||||||||||
U.S. government and agency
|
15,964 | - | 15,119 | 845 | ||||||||||||
Other government and agency
|
17,895 | - | 17,483 | 412 | ||||||||||||
Corporate
|
80,269 | 2 | 76,296 | 3,971 | ||||||||||||
Residential mortgage/asset-backed securities
|
27 | - | 12 | 15 | ||||||||||||
Commercial mortgage/asset-backed securities
|
718 | - | 207 | 511 | ||||||||||||
Other securitized assets
|
2,052 | - | 2,004 | 48 | ||||||||||||
AFS
|
||||||||||||||||
Canadian government and agency
|
4,318 | - | 4,165 | 153 | ||||||||||||
U.S. government and agency
|
12,688 | - | 12,675 | 13 | ||||||||||||
Other government and agency
|
1,688 | - | 1,645 | 43 | ||||||||||||
Corporate
|
4,925 | - | 4,607 | 318 | ||||||||||||
Residential mortgage/asset-backed securities
|
49 | - | 41 | 8 | ||||||||||||
Commercial mortgage/asset-backed securities
|
123 | - | 27 | 96 | ||||||||||||
Other securitized assets
|
146 | - | 141 | 5 | ||||||||||||
Public equities
|
||||||||||||||||
FVTPL
|
14,689 | 14,686 | 2 | 1 | ||||||||||||
AFS
|
2,294 | 2,292 | 2 | - | ||||||||||||
Real estate - investment property(2)
|
13,968 | - | - | 13,968 | ||||||||||||
Other invested assets(3)
|
12,977 | - | - | 12,977 | ||||||||||||
Segregated funds net assets(4)
|
313,249 | 277,779 | 30,814 | 4,656 | ||||||||||||
Total
|
$ | 532,889 | $ | 298,522 | $ | 194,661 | $ | 39,706 |
(1)
|
The debt securities included in Level 3 consist primarily of maturities greater than 30 years for which the Treasury yield curve is not observable and is extrapolated, as well as debt securities where only unobservable single quoted broker prices are provided.
|
(2)
|
For investment property, the significant unobservable inputs are capitalization rates (ranging from 3.75% to 9.4% during the period and ranging from 3.8% to 9.50% for the year 2015) and terminal capitalization rates (ranging from 4.2% to 9.25% during the period and ranging from 4.5% to 9.75% during the year 2015). Holding other factors constant, a lower capitalization or terminal capitalization rate will tend to increase the fair value of an investment property. Changes in fair value based on variations in unobservable inputs 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 the 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 9.63% to 16.0% (for the year ended December 31, 2015 – ranged from 10.0% to 16.0%). 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 5.0% to 7.5% (for the year ended December 31, 2015 – ranged from 5.00% to 7.5%). A range of prices for timber is not meaningful as the market price depends on factors such as property location and proximity to markets and export yards.
|
(4)
|
Segregated funds net assets are measured at fair value. The Company’s Level 3 segregated funds assets are predominantly invested in timberland properties valued as described above.
|
As at March 31, 2016
|
Carrying
value
|
Total fair
value
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||||
Mortgages
|
$ | 42,987 | $ | 44,918 | $ | - | $ | - | $ | 44,918 | ||||||||||
Private placements
|
26,224 | 28,368 | - | 23,094 | 5,274 | |||||||||||||||
Policy loans
|
7,298 | 7,298 | - | 7,298 | - | |||||||||||||||
Loans to Bank clients
|
1,822 | 1,828 | - | 1,828 | - | |||||||||||||||
Real estate - own use property
|
1,309 | 2,398 | - | - | 2,398 | |||||||||||||||
Other invested assets(1)
|
6,737 | 7,033 | - | - | 7,033 | |||||||||||||||
Total invested assets disclosed at fair value
|
$ | 86,377 | $ | 91,843 | $ | - | $ | 32,220 | $ | 59,623 |
As at December 31, 2015
|
Carrying
value
|
Total fair
value
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||||
Mortgages
|
$ | 43,818 | $ | 45,307 | $ | - | $ | - | $ | 45,307 | ||||||||||
Private placements
|
27,578 | 29,003 | - | 23,629 | 5,374 | |||||||||||||||
Policy loans
|
7,673 | 7,673 | - | 7,673 | - | |||||||||||||||
Loans to Bank clients
|
1,778 | 1,782 | - | 1,782 | - | |||||||||||||||
Real estate - own use property
|
1,379 | 2,457 | - | - | 2,457 | |||||||||||||||
Other invested assets(1)
|
7,401 | 7,381 | - | - | 7,381 | |||||||||||||||
Total invested assets disclosed at fair value
|
$ | 89,627 | $ | 93,603 | $ | - | $ | 33,084 | $ | 60,519 |
(1)
|
Other invested assets disclosed at fair value include $3,353 (December 31, 2015 - $3,549) of leveraged leases which are shown at their carrying values as fair value is not routinely calculated on these investments.
|
Transfers between Level 1 and Level 2
|
For the three months ended March 31, 2016
|
Balance as
at January 1, 2016
|
Net
realized / unrealized
gains
(losses) included in
net income(1)
|
Net
realized / unrealized gains (losses) included in AOCI(2)
|
Purchases(3)
/issuances
|
Sales
|
Settlements
|
Transfer
into
Level 3(4)
|
Transfer
out of
Level 3(4)
|
Currency movement
|
Balance as
at March 31, 2016
|
Change in unrealized gains (losses) on assets still held
|
|||||||||||||||||||||||||||||||||
Debt securities
|
||||||||||||||||||||||||||||||||||||||||||||
FVTPL
|
||||||||||||||||||||||||||||||||||||||||||||
Canadian government
& agency
|
$ | 1,666 | $ | 70 | $ | - | $ | 42 | $ | - | $ | - | $ | - | $ | (17 | ) | $ | (1 | ) | $ | 1,760 | $ | 59 | ||||||||||||||||||||
U.S. government
& agency
|
845 | 51 | - | 39 | - | - | - | - | (55 | ) | 880 | 52 | ||||||||||||||||||||||||||||||||
Other government
& agency
|
412 | 17 | - | 2 | (6 | ) | (4 | ) | - | (1 | ) | 1 | 421 | 17 | ||||||||||||||||||||||||||||||
Corporate
|
3,971 | 106 | - | 109 | (75 | ) | (4 | ) | - | (281 | ) | (80 | ) | 3,746 | 102 | |||||||||||||||||||||||||||||
Residential mortgage/
asset-backed securities
|
15 | - | - | - | (3 | ) | (1 | ) | - | - | (1 | ) | 10 | - | ||||||||||||||||||||||||||||||
Commercial mortgage/
asset-backed securities
|
511 | 3 | - | 37 | (14 | ) | (2 | ) | - | (61 | ) | (27 | ) | 447 | 2 | |||||||||||||||||||||||||||||
Other securitized assets
|
48 | 1 | - | 10 | - | (2 | ) | - | - | (2 | ) | 55 | 1 | |||||||||||||||||||||||||||||||
7,468 | 248 | - | 239 | (98 | ) | (13 | ) | - | (360 | ) | (165 | ) | 7,319 | 233 | ||||||||||||||||||||||||||||||
AFS
|
||||||||||||||||||||||||||||||||||||||||||||
Canadian government
& agency
|
153 | 17 | (9 | ) | - | - | - | - | - | 1 | 162 | - | ||||||||||||||||||||||||||||||||
U.S. government
& agency
|
13 | - | 1 | - | - | - | - | - | (1 | ) | 13 | - | ||||||||||||||||||||||||||||||||
Other government
& agency
|
43 | - | 2 | 2 | (1 | ) | - | - | - | 1 | 47 | - | ||||||||||||||||||||||||||||||||
Corporate
|
318 | 2 | (1 | ) | 7 | (5 | ) | (2 | ) | - | (29 | ) | (1 | ) | 289 | - | ||||||||||||||||||||||||||||
Residential mortgage/
asset-backed securities
|
8 | - | - | - | (1 | ) | - | - | - | (1 | ) | 6 | - | |||||||||||||||||||||||||||||||
Commercial mortgage/
asset-backed securities
|
96 | - | 1 | 1 | - | - | - | (23 | ) | (4 | ) | 71 | - | |||||||||||||||||||||||||||||||
Other securitized assets
|
5 | 1 | 1 | - | - | (2 | ) | - | - | - | 5 | - | ||||||||||||||||||||||||||||||||
636 | 20 | (5 | ) | 10 | (7 | ) | (4 | ) | - | (52 | ) | (5 | ) | 593 | - | |||||||||||||||||||||||||||||
Public equities
|
||||||||||||||||||||||||||||||||||||||||||||
FVTPL
|
1 | - | - | - | - | - | - | - | - | 1 | - | |||||||||||||||||||||||||||||||||
1 | - | - | - | - | - | - | - | - | 1 | - | ||||||||||||||||||||||||||||||||||
Real estate - investment property
|
13,968 | 23 | - | 150 | (7 | ) | - | - | - | (573 | ) | 13,561 | 22 | |||||||||||||||||||||||||||||||
Other invested assets
|
12,977 | (19 | ) | 1 | 458 | (19 | ) | (147 | ) | - | - | (669 | ) | 12,582 | (3 | ) | ||||||||||||||||||||||||||||
26,945 | 4 | 1 | 608 | (26 | ) | (147 | ) | - | - | (1,242 | ) | 26,143 | 19 | |||||||||||||||||||||||||||||||
Segregated funds
net assets
|
4,656 | - | - | 211 | (46 | ) | (10 | ) | 43 | (4 | ) | (166 | ) | 4,684 | 4 | |||||||||||||||||||||||||||||
Total
|
$ | 39,706 | $ | 272 | $ | (4 | ) | $ | 1,068 | $ | (177 | ) | $ | (174 | ) | $ | 43 | $ | (416 | ) | $ | (1,578 | ) | $ | 38,740 | $ | 256 |
For the three months ended March 31, 2015
|
Balance as at January 1,
2015
|
Net
realized / unrealized
gains
(losses)
included in
net income(1)
|
Net
realized / unrealized gains
(losses) included in AOCI(2)
|
Purchases(3)
/issuances
|
Sales
|
Settlements
|
Transfer
into
Level 3(4)
|
Transfer
out of
Level 3(4)
|
Currency movement
|
Balance as
at March 31, 2015
|
Change in unrealized gains (losses) on assets still held
|
|||||||||||||||||||||||||||||||||
Debt securities
|
||||||||||||||||||||||||||||||||||||||||||||
FVTPL
|
||||||||||||||||||||||||||||||||||||||||||||
Canadian government
& agency
|
$ | 1,006 | $ | 71 | $ | - | $ | 97 | $ | (169 | ) | $ | - | $ | - | $ | (97 | ) | $ | 4 | $ | 912 | $ | 56 | ||||||||||||||||||||
U.S. government
& agency
|
808 | 19 | - | - | - | - | - | - | 78 | 905 | 20 | |||||||||||||||||||||||||||||||||
Other government
& agency
|
437 | 5 | - | 6 | (32 | ) | (7 | ) | - | (6 | ) | 21 | 424 | 5 | ||||||||||||||||||||||||||||||
Corporate
|
3,150 | 88 | - | 89 | (8 | ) | (8 | ) | 53 | (127 | ) | 168 | 3,405 | 99 | ||||||||||||||||||||||||||||||
Residential mortgage/
asset-backed securities
|
133 | 2 | - | - | - | (6 | ) | - | - | 13 | 142 | 3 | ||||||||||||||||||||||||||||||||
Commercial mortgage/
asset-backed securities
|
577 | 7 | - | - | - | (40 | ) | - | (31 | ) | 52 | 565 | 7 | |||||||||||||||||||||||||||||||
Other securitized assets
|
61 | 1 | - | - | - | (2 | ) | - | - | 6 | 66 | 1 | ||||||||||||||||||||||||||||||||
6,172 | 193 | - | 192 | (209 | ) | (63 | ) | 53 | (261 | ) | 342 | 6,419 | 191 | |||||||||||||||||||||||||||||||
AFS
|
||||||||||||||||||||||||||||||||||||||||||||
Canadian government
& agency
|
884 | 13 | 55 | 365 | - | - | - | - | - | 1,317 | - | |||||||||||||||||||||||||||||||||
U.S. government
& agency
|
12 | - | - | - | - | - | - | - | 2 | 14 | - | |||||||||||||||||||||||||||||||||
Other government
& agency
|
54 | - | 1 | 1 | (5 | ) | (1 | ) | - | (1 | ) | 1 | 50 | - | ||||||||||||||||||||||||||||||
Corporate
|
234 | 1 | 3 | 2 | (7 | ) | (4 | ) | 16 | - | 9 | 254 | - | |||||||||||||||||||||||||||||||
Residential mortgage/
asset-backed securities
|
28 | 1 | - | - | - | (2 | ) | - | - | 2 | 29 | - | ||||||||||||||||||||||||||||||||
Commercial mortgage/
asset-backed securities
|
83 | - | 3 | - | - | (3 | ) | - | - | 7 | 90 | - | ||||||||||||||||||||||||||||||||
Other securitized assets
|
13 | - | - | - | - | - | - | - | 1 | 14 | - | |||||||||||||||||||||||||||||||||
1,308 | 15 | 62 | 368 | (12 | ) | (10 | ) | 16 | (1 | ) | 22 | 1,768 | - | |||||||||||||||||||||||||||||||
Public equities
|
||||||||||||||||||||||||||||||||||||||||||||
FVTPL
|
2 | (1 | ) | - | - | - | - | - | - | (1 | ) | - | (1 | ) | ||||||||||||||||||||||||||||||
AFS
|
- | - | - | 2 | - | - | - | - | - | 2 | - | |||||||||||||||||||||||||||||||||
2 | (1 | ) | - | 2 | - | - | - | - | (1 | ) | 2 | (1 | ) | |||||||||||||||||||||||||||||||
Real estate - investment property
|
9,270 | 437 | - | 1,169 | - | - | - | - | 559 | 11,435 | 437 | |||||||||||||||||||||||||||||||||
Other invested assets
|
10,231 | 82 | 3 | 534 | (211 | ) | (183 | ) | - | - | 810 | 11,266 | (17 | ) | ||||||||||||||||||||||||||||||
19,501 | 519 | 3 | 1,703 | (211 | ) | (183 | ) | - | - | 1,369 | 22,701 | 420 | ||||||||||||||||||||||||||||||||
Segregated funds net
assets
|
2,591 | 22 | - | 1,909 | (130 | ) | - | - | - | 239 | 4,631 | 21 | ||||||||||||||||||||||||||||||||
Total
|
$ | 29,574 | $ | 748 | $ | 65 | $ | 4,174 | $ | (562 | ) | $ | (256 | ) | $ | 69 | $ | (262 | ) | $ | 1,971 | $ | 35,521 | $ | 631 |
(1)
|
These amounts, except for the amount related to segregated funds net assets, are included in net investment income on the Consolidated Statements of Income.
|
(2)
|
These amounts are included in AOCI on the Consolidated Statements of Financial Position.
|
(3)
|
Purchases in 2015 include assets acquired with the Canadian-based operations of Standard Life plc (“Standard Life”).
|
(4)
|
For assets that are transferred into and/or out of Level 3, the Company uses fair value of the assets at the beginning of the period.
|
Note 5
|
Derivative and Hedging Instruments
|
March 31, 2016
|
December 31, 2015
|
||||||||||||||||||||||||
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
|
$ | 2,501 | $ | 1 | $ | 735 | $ | 2,077 | $ | 1 | $ | 553 | ||||||||||||
Foreign currency swaps
|
88 | - | 8 | 95 | 1 | 3 | |||||||||||||||||||
Cash flow hedges
|
Foreign currency swaps
|
815 | - | 472 | 826 | - | 476 | ||||||||||||||||||
Forward contracts
|
327 | - | 20 | 351 | - | 43 | |||||||||||||||||||
Equity contracts
|
221 | 3 | 10 | 98 | - | 3 | |||||||||||||||||||
Total derivatives in qualifying hedge
accounting relationships
|
3,952 | 4 | 1,245 | 3,447 | 2 | 1,078 | |||||||||||||||||||
Derivatives not designated in qualifying hedge accounting relationships
|
|||||||||||||||||||||||||
Interest rate swaps
|
308,947 | 32,166 | 17,866 | 315,230 | 22,771 | 11,935 | |||||||||||||||||||
Interest rate futures
|
12,643 | - | - | 9,455 | - | - | |||||||||||||||||||
Interest rate options
|
6,153 | 310 | - | 5,887 | 200 | - | |||||||||||||||||||
Foreign currency swaps
|
9,760 | 339 | 1,418 | 9,382 | 331 | 1,758 | |||||||||||||||||||
Currency rate futures
|
6,084 | - | - | 5,746 | - | - | |||||||||||||||||||
Forward contracts
|
13,228 | 1,222 | 42 | 13,393 | 520 | 241 | |||||||||||||||||||
Equity contracts
|
10,610 | 381 | 47 | 11,251 | 438 | 38 | |||||||||||||||||||
Credit default swaps
|
761 | 10 | - | 748 | 10 | - | |||||||||||||||||||
Equity futures
|
19,886 | - | - | 19,553 | - | - | |||||||||||||||||||
Total derivatives not designated in qualifying
hedge accounting relationships
|
388,072 | 34,428 | 19,373 | 390,645 | 24,270 | 13,972 | |||||||||||||||||||
Total derivatives
|
$ | 392,024 | $ | 34,432 | $ | 20,618 | $ | 394,092 | $ | 24,272 | $ | 15,050 |
Remaining term to maturity
|
||||||||||||||||||||
As at March 31, 2016
|
Less than
1 year
|
1 to 3
years
|
3 to 5
years
|
Over 5
years
|
Total
|
|||||||||||||||
Derivative assets
|
$ | 670 | $ | 909 | $ | 883 | $ | 31,970 | $ | 34,432 | ||||||||||
Derivative liabilities
|
226 | 518 | 607 | 19,267 | 20,618 |
Remaining term to maturity
|
||||||||||||||||||||
As at March 31, 2015
|
Less than
1 year
|
1 to 3
years
|
3 to 5
years
|
Over 5
years
|
Total
|
|||||||||||||||
Derivative assets
|
$ | 362 | $ | 689 | $ | 593 | $ | 22,628 | $ | 24,272 | ||||||||||
Derivative liabilities
|
298 | 676 | 632 | 13,444 | 15,050 |
As at March 31, 2016
|
Total fair value
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
Derivative assets
|
||||||||||||||||
Interest rate contracts
|
$ | 33,672 | $ | - | $ | 32,326 | $ | 1,346 | ||||||||
Foreign exchange contracts
|
366 | - | 365 | 1 | ||||||||||||
Equity contracts
|
384 | - | 88 | 296 | ||||||||||||
Credit default swaps
|
10 | - | 10 | - | ||||||||||||
Total derivative assets
|
$ | 34,432 | $ | - | $ | 32,789 | $ | 1,643 | ||||||||
Derivative liabilities
|
||||||||||||||||
Interest rate contracts
|
$ | 18,638 | $ | - | $ | 18,053 | $ | 585 | ||||||||
Foreign exchange contracts
|
1,923 | - | 1,920 | 3 | ||||||||||||
Equity contracts
|
57 | - | 14 | 43 | ||||||||||||
Total derivative liabilities
|
$ | 20,618 | $ | - | $ | 19,987 | $ | 631 |
As at December 31, 2015
|
Total fair value
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
Derivative assets
|
||||||||||||||||
Interest rate contracts
|
$ | 23,475 | $ | - | $ | 22,767 | $ | 708 | ||||||||
Foreign exchange contracts
|
349 | - | 339 | 10 | ||||||||||||
Equity contracts
|
438 | - | 79 | 359 | ||||||||||||
Credit default swaps
|
10 | - | 10 | - | ||||||||||||
Total derivative assets
|
$ | 24,272 | $ | - | $ | 23,195 | $ | 1,077 | ||||||||
Derivative liabilities
|
||||||||||||||||
Interest rate contracts
|
$ | 12,700 | $ | - | $ | 11,997 | $ | 703 | ||||||||
Foreign exchange contracts
|
2,309 | - | 2,309 | - | ||||||||||||
Equity contracts
|
41 | - | 17 | 24 | ||||||||||||
Total derivative liabilities
|
$ | 15,050 | $ | - | $ | 14,323 | $ | 727 |
For the three months ended March 31,
|
2016
|
2015
|
||||||
Balance as at January 1,
|
$ | 350 | $ | 1,105 | ||||
Net realized / unrealized gains (losses) included in:
|
||||||||
Net income(1)
|
805 | 203 | ||||||
OCI(2)
|
(2 | ) | (8 | ) | ||||
Purchases
|
34 | 37 | ||||||
Sales
|
13 | 7 | ||||||
Transfers
|
||||||||
Into Level 3(3)
|
- | - | ||||||
Out of Level 3(3)
|
(125 | ) | (183 | ) | ||||
Currency movement
|
(63 | ) | 86 | |||||
Balance as at March 31
|
$ | 1,012 | $ | 1,247 | ||||
Change in unrealized gains (losses) on instruments still held
|
$ | 858 | $ | 249 |
(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 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.
|
Note 6
|
Insurance and Investment Contract Liabilities
|
(a)
|
Insurance and investment contracts
|
(b)
|
Investment contracts – Fair value measurement
|
(c)
|
Gross claims and benefits
|
For the three months ended March 31,
|
2016
|
2015
|
||||||
Death, disability and other claims
|
$ | 3,476 | $ | 3,322 | ||||
Maturity and surrender benefits
|
1,703 | 1,577 | ||||||
Annuity payments
|
1,098 | 1,010 | ||||||
Policyholder dividends and experience rating refunds
|
242 | 329 | ||||||
Net transfers from segregated funds
|
(21 | ) | (189 | ) | ||||
Total
|
$ | 6,498 | $ | 6,049 |
Note 7
|
Risk Management
|
(a)
|
Risk disclosures included in first quarter’s MD&A
|
(b)
|
Credit risk
|
(i)
|
Credit quality
|
As at March 31, 2016
|
AAA
|
AA
|
A |
BBB
|
BB
|
B and lower
|
Total
|
|||||||||||||||||||||
Commercial mortgages
|
||||||||||||||||||||||||||||
Retail
|
$ | 97 | $ | 1,335 | $ | 3,983 | $ | 2,280 | $ | 17 | $ | 4 | $ | 7,716 | ||||||||||||||
Office
|
84 | 936 | 3,210 | 2,426 | 221 | 25 | 6,902 | |||||||||||||||||||||
Multi-family residential
|
828 | 1,132 | 1,658 | 812 | - | - | 4,430 | |||||||||||||||||||||
Industrial
|
26 | 272 | 1,378 | 1,016 | 179 | - | 2,871 | |||||||||||||||||||||
Other
|
469 | 258 | 989 | 830 | 64 | - | 2,610 | |||||||||||||||||||||
Total commercial mortgages
|
1,504 | 3,933 | 11,218 | 7,364 | 481 | 29 | 24,529 | |||||||||||||||||||||
Agricultural mortgages
|
- | - | 207 | 499 | 155 | - | 861 | |||||||||||||||||||||
Private placements
|
961 | 3,579 | 9,309 | 10,395 | 1,150 | 830 | 26,224 | |||||||||||||||||||||
Total
|
$ | 2,465 | $ | 7,512 | $ | 20,734 | $ | 18,258 | $ | 1,786 | $ | 859 | $ | 51,614 | ||||||||||||||
As at December 31, 2015
|
AAA
|
AA
|
A |
BBB
|
BB
|
B and lower
|
Total
|
|||||||||||||||||||||
Commercial mortgages
|
||||||||||||||||||||||||||||
Retail
|
$ | 109 | $ | 1,307 | $ | 4,419 | $ | 2,135 | $ | 10 | $ | 5 | $ | 7,985 | ||||||||||||||
Office
|
112 | 944 | 3,301 | 2,444 | 286 | 50 | 7,137 | |||||||||||||||||||||
Multi-family residential
|
862 | 1,227 | 1,630 | 905 | - | - | 4,624 | |||||||||||||||||||||
Industrial
|
30 | 303 | 1,213 | 1,262 | 23 | - | 2,831 | |||||||||||||||||||||
Other
|
487 | 270 | 1,083 | 870 | 70 | - | 2,780 | |||||||||||||||||||||
Total commercial mortgages
|
1,600 | 4,051 | 11,646 | 7,616 | 389 | 55 | 25,357 | |||||||||||||||||||||
Agricultural mortgages
|
- | - | 230 | 540 | 168 | - | 938 | |||||||||||||||||||||
Private placements
|
1,030 | 3,886 | 9,813 | 10,791 | 1,113 | 945 | 27,578 | |||||||||||||||||||||
Total
|
$ | 2,630 | $ | 7,937 | $ | 21,689 | $ | 18,947 | $ | 1,670 | $ | 1,000 | $ | 53,873 |
As at
|
March 31, 2016
|
December 31, 2015
|
||||||||||||||||||||||
Insured
|
Uninsured
|
Total
|
Insured
|
Uninsured
|
Total
|
|||||||||||||||||||
Residential mortgages
|
||||||||||||||||||||||||
Performing
|
$ | 7,943 | $ | 9,636 | $ | 17,579 | $ | 8,027 | $ | 9,478 | $ | 17,505 | ||||||||||||
Non-performing(1)
|
5 | 13 | 18 | 7 | 11 | 18 | ||||||||||||||||||
Loans to Bank clients
|
||||||||||||||||||||||||
Performing
|
n/a | 1,822 | 1,822 | n/a | 1,778 | 1,778 | ||||||||||||||||||
Non-performing(1)
|
n/a | - | - | n/a | - | - | ||||||||||||||||||
Total
|
$ | 7,948 | $ | 11,471 | $ | 19,419 | $ | 8,034 | $ | 11,267 | $ | 19,301 |
(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 March 31, 2016
|
Less than 90
days
|
90 days and
greater
|
Total
|
Total impaired
|
Allowance for
loan losses
|
|||||||||||||||
Debt securities
|
||||||||||||||||||||
FVTPL
|
$ | - | $ | - | $ | - | $ | 12 | $ | - | ||||||||||
AFS
|
- | 3 | 3 | - | - | |||||||||||||||
Private placements
|
126 | 11 | 137 | 112 | 109 | |||||||||||||||
Mortgages and loans to Bank clients
|
41 | 28 | 69 | 29 | 29 | |||||||||||||||
Other financial assets
|
12 | 28 | 40 | 1 | - | |||||||||||||||
Total
|
$ | 179 | $ | 70 | $ | 249 | $ | 154 | $ | 138 |
Past due but not impaired
|
||||||||||||||||||||
As at March 31, 2015
|
Less than 90
days
|
90 days and
greater
|
Total
|
Total impaired
|
Allowance for
loan losses
|
|||||||||||||||
Debt securities
|
||||||||||||||||||||
FVTPL
|
$ | 92 | $ | - | $ | 92 | $ | 15 | $ | - | ||||||||||
AFS
|
3 | 1 | 4 | - | - | |||||||||||||||
Private placements
|
214 | - | 214 | 114 | 72 | |||||||||||||||
Mortgages and loans to Bank clients
|
51 | 23 | 74 | 31 | 29 | |||||||||||||||
Other financial assets
|
12 | 26 | 38 | 1 | - | |||||||||||||||
Total
|
$ | 372 | $ | 50 | $ | 422 | $ | 161 | $ | 101 |
(c)
|
Securities lending, repurchase and reverse repurchase transactions
|
(d)
|
Credit default swaps
|
As at March 31, 2016
|
Notional
amount(2)
|
Fair value
|
Weighted
average maturity
(in years)(3)
|
|||||||||
Single name CDSs(1)
|
||||||||||||
Corporate debt
|
||||||||||||
AAA
|
$ | 46 | $ | - | 1 | |||||||
AA
|
146 | 2 | 1 | |||||||||
A
|
425 | 6 | 4 | |||||||||
BBB
|
144 | 2 | 4 | |||||||||
Total single name CDSs
|
$ | 761 | $ | 10 | 3 | |||||||
Total CDS protection sold
|
$ | 761 | $ | 10 | 3 |
As at December 31, 2015
|
Notional
amount(2)
|
Fair value
|
Weighted
average maturity
(in years)(3)
|
|||||||||
Single name CDSs(1)
|
||||||||||||
Corporate debt
|
||||||||||||
AAA
|
$ | 49 | $ | 1 | 2 | |||||||
AA
|
131 | 1 | 1 | |||||||||
A
|
424 | 7 | 3 | |||||||||
BBB
|
144 | 1 | 4 | |||||||||
Total single name CDSs
|
$ | 748 | $ | 10 | 3 | |||||||
Total CDS protection sold
|
$ | 748 | $ | 10 | 3 |
(1)
|
Rating agency designations are based on S&P where available followed by Moody’s, DBRS and Fitch. If no rating is available from a rating agency, then 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 offset in the Consolidated Statements of Financial Position
|
||||||||||||||||||||
As at March 31, 2016
|
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
|
$ | 35,420 | $ | (18,848 | ) | $ | (16,526 | ) | $ | 46 | $ | 46 | ||||||||
Securities lending
|
1,010 | - | (1,010 | ) | - | - | ||||||||||||||
Reverse repurchase agreements
|
1,058 | (126 | ) | (932 | ) | - | - | |||||||||||||
Total financial assets
|
$ | 37,488 | $ | (18,974 | ) | $ | (18,468 | ) | $ | 46 | $ | 46 | ||||||||
Financial liabilities
|
||||||||||||||||||||
Derivative liabilities
|
$ | (21,730 | ) | $ | 18,848 | $ | 2,545 | $ | (337 | ) | $ | (34 | ) | |||||||
Repurchase agreements
|
(1,062 | ) | 126 | 936 | - | - | ||||||||||||||
Total financial liabilities
|
$ | (22,792 | ) | $ | 18,974 | $ | 3,481 | $ | (337 | ) | $ | (34 | ) |
Related amounts not offset in the Consolidated Statements of Financial Position
|
||||||||||||||||||||
As at March 31, 2015
|
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
|
$ | 25,332 | $ | (13,004 | ) | $ | (12,260 | ) | $ | 68 | $ | 68 | ||||||||
Securities lending
|
648 | - | (648 | ) | - | - | ||||||||||||||
Reverse repurchase agreements
|
547 | (33 | ) | (514 | ) | - | - | |||||||||||||
Total financial assets
|
$ | 26,527 | $ | (13,037 | ) | $ | (13,422 | ) | $ | 68 | $ | 68 | ||||||||
Financial liabilities
|
||||||||||||||||||||
Derivative liabilities
|
$ | (16,003 | ) | $ | 13,004 | $ | 2,711 | $ | (288 | ) | $ | (49 | ) | |||||||
Repurchase agreements
|
(269 | ) | 33 | 236 | - | - | ||||||||||||||
Total financial liabilities
|
$ | (16,272 | ) | $ | 13,037 | $ | 2,947 | $ | (288 | ) | $ | (49 | ) |
(1)
|
Financial assets and liabilities in the above table include accrued interest of $992 and $1,112, respectively (December 31, 2015 – $1,062 and $953, respectively).
|
(2)
|
Financial and cash collateral excludes over-collateralization. As at March 31, 2016 the Company was over-collateralized on derivative assets, derivative liabilities, securities lending and reverse purchase agreements, and repurchase agreements in the amounts of $1,016, $567, $67 and nil respectively (December 31, 2015 – $680, $498, $43 and nil respectively). As at March 31, 2016, collateral pledged (received) does not include collateral in transit on OTC instruments or include initial margin on exchange traded contracts or cleared 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 derivative contracts entered into with these trusts.
|
Note 8
|
Long-Term Debt
|
(a)
|
Carrying value of long-term debt instruments
|
March 31,
|
December 31,
|
|||||||||||||||||||
As at
|
Issue date
|
Maturity date
|
Par value
|
2016
|
2015
|
|||||||||||||||
5.375% Senior notes(1)
|
March 4, 2016
|
March 4, 2046
|
US$750
|
$ | 960 | $ | - | |||||||||||||
4.150% Senior notes(1)
|
March 4, 2016
|
March 4, 2026
|
US$1,000
|
1,286 | - | |||||||||||||||
4.90% Senior notes
|
September 17, 2010
|
September 17, 2020
|
US$500
|
646 | 689 | |||||||||||||||
7.768% Medium-term notes
|
April 8, 2009
|
April 8, 2019
|
$ | 600 | 599 | 599 | ||||||||||||||
5.505% Medium-term notes
|
June 26, 2008
|
June 26, 2018
|
$ | 400 | 399 | 399 | ||||||||||||||
Promissory note to Manulife Finance (Delaware), L.P. ("MFLP")
|
November 30, 2010
|
December 15, 2016
|
$ | 150 | 150 | 150 | ||||||||||||||
Other notes payable
|
n/a | n/a | n/a | 8 | 16 | |||||||||||||||
Total
|
$ | 4,048 | $ | 1,853 |
(1)
|
Issued by MFC during the quarter. These U.S. dollar senior notes have been designated as hedges of the Company’s net investment in its U.S. operations which reduces the earnings volatility that would otherwise arise from the translation of these senior notes into Canadian dollars. The senior notes may be redeemed in whole or in part at the option of MFC at any time, at a redemption price equal to the greater of par and a price based on the yield of a corresponding U.S. Treasury bond plus a specified number of basis points. The numbers of basis points for the 5.375% and 4.150% senior notes are 40 and 35, respectively.
|
(b)
|
Fair value measurement
|
Note 9
|
Capital Instruments
|
(a)
|
Carrying value of capital instruments
|
March 31,
|
December 31,
|
|||||||||||||
As at
|
Issue date
|
Maturity date
|
Par value
|
2016
|
2015
|
|||||||||
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 | 646 | ||||||||
Subordinated debentures - 3.181% fixed/floating
|
November 20, 2015
|
November 22, 2027
|
$ | 1,000 | 996 | 995 | ||||||||
Subordinated debentures - 2.389% fixed/floating
|
June 1, 2015
|
January 5, 2026
|
$ | 350 | 348 | 348 | ||||||||
Subordinated debentures - 2.10% fixed/floating
|
March 10, 2015
|
June 1, 2025
|
$ | 750 | 747 | 747 | ||||||||
Subordinated debentures - 2.64% fixed/floating
|
December 1, 2014
|
January 15, 2025
|
$ | 500 | 498 | 498 | ||||||||
Subordinated debentures - 2.811% fixed/floating
|
February 21, 2014
|
February 21, 2024
|
$ | 500 | 499 | 498 | ||||||||
Surplus notes - 7.375% U.S. dollar
|
February 25, 1994
|
February 15, 2024
|
US$450
|
607 | 649 | |||||||||
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 | 200 | 200 | ||||||||
Subordinated debentures - 3.938% fixed/floating
|
September 21, 2012
|
September 21, 2022
|
$ | 400 | 414 | 417 | ||||||||
Subordinated debentures - 4.165% fixed/floating
|
February 17, 2012
|
June 1, 2022
|
$ | 500 | 499 | 499 | ||||||||
Subordinated note - floating
|
December 14, 2006
|
December 15, 2021
|
$ | 400 | 400 | 400 | ||||||||
Subordinated debentures - 4.21% fixed/floating
|
November 18, 2011
|
November 18, 2021
|
$ | 550 | 550 | 549 | ||||||||
Total
|
$ | 7,653 | $ | 7,695 |
(b)
|
Fair value measurement
|
Note 10
|
Share Capital and Earnings Per Share
|
(a)
|
Preferred shares
|
2016
|
2015
|
|||||||||||||||
For the period ended March 31,
|
Number of shares
(in millions)
|
Amount
|
Number of shares
(in millions)
|
Amount
|
||||||||||||
Balance, January 1
|
110 | $ | 2,693 | 110 | $ | 2,693 | ||||||||||
Issued, Class 1 shares, Series 21
|
17 | 425 | - | - | ||||||||||||
Issuance costs, net of tax
|
- | (8 | ) | - | - | |||||||||||
Balance, March 31
|
127 | $ | 3,110 | 110 | $ | 2,693 |
As at March 31, 2016
|
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 | % | n/a | 12 | 300 | 294 | ||||||||||||||
Class 1 preferred shares
|
|||||||||||||||||||||
Series 3(3),(4)
|
March 11, 2011
|
4.20 | % |
June 19, 2016
|
8 | 200 | 196 | ||||||||||||||
Series 5(3),(4)
|
December 6, 2011
|
4.40 | % |
December 19, 2016
|
8 | 200 | 195 | ||||||||||||||
Series 7(3),(4)
|
February 22, 2012
|
4.60 | % |
March 19, 2017
|
10 | 250 | 244 | ||||||||||||||
Series 9(3),(4)
|
May 24, 2012
|
4.40 | % |
September 19, 2017
|
10 | 250 | 244 | ||||||||||||||
Series 11(3),(4)
|
December 4, 2012
|
4.00 | % |
March 19, 2018
|
8 | 200 | 196 | ||||||||||||||
Series 13(3),(4)
|
June 21, 2013
|
3.80 | % |
September 19, 2018
|
8 | 200 | 196 | ||||||||||||||
Series 15(3),(4)
|
February 25, 2014
|
3.90 | % |
June 19, 2019
|
8 | 200 | 195 | ||||||||||||||
Series 17(3),(4)
|
August 15, 2014
|
3.90 | % |
December 19, 2019
|
14 | 350 | 343 | ||||||||||||||
Series 19(3),(4)
|
December 3, 2014
|
3.80 | % |
March 19, 2020
|
10 | 250 | 246 | ||||||||||||||
Series 21(4),(5)
|
February 25, 2016
|
5.60 | % |
June 19, 2021
|
17 | 425 | 417 | ||||||||||||||
Total
|
127 | $ | 3,175 | $ | 3,110 |
(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 preferred shares are past their respective earliest redemption date and MFC may redeem these shares in whole or in part at par at any time, subject to regulatory approval, as noted.
|
(2)
|
Net of after-tax issuance costs.
|
(3)
|
For all Class 1 preferred shares, on the earliest redemption date and every five years thereafter, the annual dividend rate will be reset to the five year Government of Canada bond yield plus a yield specified for each series. The specified yield for Class 1 shares is: Series 3 – 1.41%, Series 5 – 2.90%, Series 7 – 3.13%, Series 9 – 2.86%, Series 11 – 2.61%, Series 13 – 2.22%, Series 15 – 2.16%, Series 17 – 2.36%, Series 19 – 2.30% and Series 21 – 4.97%.
|
(4)
|
On the earliest date and every five years thereafter, Class 1 preferred shares are convertible at the option of the holder into a new series that is one number higher than their existing series, and the holders are entitled to non-cumulative preferential cash dividends, payable quarterly if and when declared by the Board of Directors, at a rate equal to the three month Government of Canada treasury bill yield plus the rate specified in footnote 3 above.
|
(5)
|
On February 25, 2016, MFC issued 16 million of Non-cumulative Rate Reset Class 1 Shares Series 21 (the “Series 21 Preferred Shares”) at a price of $25 per share to raise gross proceeds of $400 and, on March 3, 2016, MFC issued an additional 1 million Series 21 Preferred Shares pursuant to the exercise in full by the underwriters of their option to purchase additional Series 21 Preferred Shares, for total gross proceeds of $425.
|
(b)
|
Common shares
|
For the
|
three months ended
|
year ended
|
||||||
Number of common shares (in millions)
|
March 31, 2016
|
December 31, 2015
|
||||||
Balance, beginning of period
|
1,972 | 1,864 | ||||||
Issued on exercise of stock options and deferred share units
|
- | 2 | ||||||
Issued in exchange for subscription receipts
|
- | 106 | ||||||
Balance, end of period
|
1,972 | 1,972 |
For the three months ended March 31,
|
2016
|
2015
|
||||||
Weighted average number of common shares (in millions)
|
1,972 | 1,936 | ||||||
Dilutive stock-based awards(1) (in millions)
|
4 | 6 | ||||||
Dilutive convertible instruments (in millions)
|
- | 17 | ||||||
Weighted average number of diluted common shares (in millions)
|
1,976 | 1,959 |
(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.
|
(c)
|
Earnings per share
|
For the three months ended March 31,
|
2016
|
2015
|
||||||
Basic earnings per common share
|
$ | 0.51 | $ | 0.36 | ||||
Diluted earnings per common share
|
0.51 | 0.36 |
Note 11
|
Employee Future Benefits
|
Pension plans
|
Retiree welfare plans
|
|||||||||||||||
For the three months ended March 31,
|
2016
|
2015
|
2016
|
2015
|
||||||||||||
Defined benefit current service cost
|
$ | 13 | $ | 11 | $ | - | $ | - | ||||||||
Defined benefit administrative expenses
|
1 | 1 | 1 | - | ||||||||||||
Service cost
|
14 | 12 | 1 | - | ||||||||||||
Interest on net defined benefit (asset) liability
|
7 | 6 | 1 | 1 | ||||||||||||
Defined benefit cost
|
21 | 18 | 2 | 1 | ||||||||||||
Defined contribution cost
|
19 | 19 | - | - | ||||||||||||
Net benefit cost
|
$ | 40 | $ | 37 | $ | 2 | $ | 1 |
Note 12
|
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 Statements of Income Information
|
For the three months ended March 31, 2016
|
MFC
(Guarantor)
|
MFLP(1)
|
MLI
consolidated
|
Other subsidiaries
of MFC on a
combined basis
|
Consolidating
adjustments(1)
|
Total
consolidated
amounts(1)
|
||||||||||||||||||
Total revenue
|
$ | 42 | $ | (3 | ) | $ | 21,308 | $ | 1,706 | $ | (1,334 | ) | $ | 21,719 | ||||||||||
Net income (loss) attributed to shareholders
|
1,045 | (10 | ) | 790 | 159 | (939 | ) | 1,045 |
For the three months ended March 31, 2015
|
MFC
(Guarantor)
|
MFLP(1)
|
MLI
consolidated
|
Other subsidiaries
of MFC on a
combined basis
|
Consolidating
adjustments(1)
|
Total
consolidated
amounts(1)
|
||||||||||||||||||
Total revenue
|
$ | 21 | $ | 30 | $ | 15,573 | $ | 1,048 | $ | (858 | ) | $ | 15,814 | |||||||||||
Net income (loss) attributed to shareholders
|
723 | 10 | 718 | 37 | (765 | ) | 723 |
(1)
|
Since MFLP is not consolidated, its results have been eliminated in the consolidating adjustments column.
|
Condensed Consolidated Statements of Financial Position Information
|
As at March 31, 2016
|
MFC
(Guarantor)
|
MFLP(1)
|
MLI
consolidated
|
Other subsidiaries
of MFC on a
combined basis
|
Consolidating
adjustments(1)
|
Total
consolidated
amounts(1)
|
||||||||||||||||||
Invested assets
|
$ | 145 | $ | 7 | $ | 302,405 | $ | 5,899 | $ | (6 | ) | $ | 308,450 | |||||||||||
Total other assets
|
45,218 | 1,705 | 106,696 | 15,434 | (78,836 | ) | 90,217 | |||||||||||||||||
Segregated funds net assets
|
- | - | 298,684 | - | - | 298,684 | ||||||||||||||||||
Insurance contract liabilities
|
- | - | 285,752 | 18,210 | (17,448 | ) | 286,514 | |||||||||||||||||
Investment contract liabilities
|
- | - | 3,253 | - | - | 3,253 | ||||||||||||||||||
Segregated funds net liabilities
|
- | - | 298,684 | - | - | 298,684 | ||||||||||||||||||
Total other liabilities
|
4,814 | 1,512 | 76,072 | 1,468 | (16,317 | ) | 67,549 |
As at December 31, 2015
|
MFC
(Guarantor)
|
MFLP(1)
|
MLI
consolidated
|
Other subsidiaries
of MFC on a
combined basis
|
Consolidating
adjustments(1)
|
Total
consolidated
amounts(1)
|
||||||||||||||||||
Invested assets
|
$ | 122 | $ | 5 | $ | 303,406 | $ | 5,739 | $ | (5 | ) | $ | 309,267 | |||||||||||
Total other assets
|
43,248 | 1,651 | 97,936 | 15,491 | (76,199 | ) | 82,127 | |||||||||||||||||
Segregated funds net assets
|
- | - | 313,249 | - | - | 313,249 | ||||||||||||||||||
Insurance contract liabilities
|
- | - | 286,418 | 18,197 | (17,556 | ) | 287,059 | |||||||||||||||||
Investment contract liabilities
|
- | - | 3,497 | - | - | 3,497 | ||||||||||||||||||
Segregated funds net liabilities
|
- | - | 313,249 | - | - | 313,249 | ||||||||||||||||||
Total other liabilities
|
2,211 | 1,447 | 69,334 | 1,445 | (15,537 | ) | 58,900 |
(1)
|
Since MFLP is not consolidated, its results have been eliminated in the consolidating adjustments column.
|
(iii)
|
Guarantees regarding John Hancock Life Insurance Company (U.S.A.) (“JHUSA”)
|
Note 13
|
Segmented Information
|
By Segment
As at and for the three months ended
March 31, 2016
|
Asia
Division
|
Canadian
Division
|
U.S.
Division
|
Corporate
and Other
|
Total
|
|||||||||||||||
Revenue
|
||||||||||||||||||||
Premium income
|
||||||||||||||||||||
Life and health insurance
|
$ | 3,012 | $ | 1,068 | $ | 1,626 | $ | 22 | $ | 5,728 | ||||||||||
Annuities and pensions
|
1,153 | 166 | (319 | ) | - | 1,000 | ||||||||||||||
Net premium income
|
4,165 | 1,234 | 1,307 | 22 | 6,728 | |||||||||||||||
Net investment income
|
1,959 | 2,732 | 7,219 | 252 | 12,162 | |||||||||||||||
Other revenue
|
242 | 820 | 1,464 | 303 | 2,829 | |||||||||||||||
Total revenue
|
6,366 | 4,786 | 9,990 | 577 | 21,719 | |||||||||||||||
Contract benefits and expenses
|
||||||||||||||||||||
Life and health insurance
|
3,979 | 1,393 | 5,827 | 225 | 11,424 | |||||||||||||||
Annuities and pensions
|
1,188 | 1,557 | 2,503 | - | 5,248 | |||||||||||||||
Net benefits and claims
|
5,167 | 2,950 | 8,330 | 225 | 16,672 | |||||||||||||||
Interest expense
|
35 | 48 | 6 | 112 | 201 | |||||||||||||||
Other expenses
|
973 | 1,007 | 1,333 | 180 | 3,493 | |||||||||||||||
Total contract benefits and expenses
|
6,175 | 4,005 | 9,669 | 517 | 20,366 | |||||||||||||||
Income (loss) before income taxes
|
191 | 781 | 321 | 60 | 1,353 | |||||||||||||||
Income tax recovery (expense)
|
(40 | ) | (194 | ) | (80 | ) | 16 | (298 | ) | |||||||||||
Net income (loss)
|
151 | 587 | 241 | 76 | 1,055 | |||||||||||||||
Less net income (loss) attributed to:
|
||||||||||||||||||||
Non-controlling interests
|
29 | - | - | (3 | ) | 26 | ||||||||||||||
Participating policyholders
|
1 | (13 | ) | - | (4 | ) | (16 | ) | ||||||||||||
Net income attributed to shareholders
|
$ | 121 | $ | 600 | $ | 241 | $ | 83 | $ | 1,045 | ||||||||||
Total assets
|
$ | 84,610 | $ | 206,529 | $ | 367,573 | $ | 38,639 | $ | 697,351 |
By Segment
As at and for the three months ended
March 31, 2015
|
Asia
Division
|
Canadian
Division
|
U.S.
Division
|
Corporate
and Other
|
Total
|
|||||||||||||||
Revenue
|
||||||||||||||||||||
Premium income
|
||||||||||||||||||||
Life and health insurance
|
$ | 1,922 | $ | 987 | $ | 1,661 | $ | 19 | $ | 4,589 | ||||||||||
Annuities and pensions
|
473 | 125 | 216 | - | 814 | |||||||||||||||
Net premium income
|
2,395 | 1,112 | 1,877 | 19 | 5,403 | |||||||||||||||
Net investment income (loss)
|
679 | 2,745 | 4,593 | (32 | ) | 7,985 | ||||||||||||||
Other revenue
|
321 | 833 | 1,237 | 35 | 2,426 | |||||||||||||||
Total revenue
|
3,395 | 4,690 | 7,707 | 22 | 15,814 | |||||||||||||||
Contract benefits and expenses
|
||||||||||||||||||||
Life and health insurance
|
1,920 | 1,707 | 4,050 | 53 | 7,730 | |||||||||||||||
Annuities and pensions
|
407 | 1,681 | 1,779 | - | 3,867 | |||||||||||||||
Net benefits and claims
|
2,327 | 3,388 | 5,829 | 53 | 11,597 | |||||||||||||||
Interest expense
|
28 | 152 | 15 | 121 | 316 | |||||||||||||||
Other expenses
|
696 | 992 | 1,206 | 163 | 3,057 | |||||||||||||||
Total contract benefits and expenses
|
3,051 | 4,532 | 7,050 | 337 | 14,970 | |||||||||||||||
Income (loss) before income taxes
|
344 | 158 | 657 | (315 | ) | 844 | ||||||||||||||
Income tax recovery (expense)
|
(23 | ) | (74 | ) | (193 | ) | 174 | (116 | ) | |||||||||||
Net income (loss)
|
321 | 84 | 464 | (141 | ) | 728 | ||||||||||||||
Less net income (loss) attributed to:
|
||||||||||||||||||||
Non-controlling interests
|
23 | - | - | - | 23 | |||||||||||||||
Participating policyholders
|
16 | (34 | ) | - | - | (18 | ) | |||||||||||||
Net income (loss) attributed to shareholders
|
$ | 282 | $ | 118 | $ | 464 | $ | (141 | ) | $ | 723 | |||||||||
Total assets
|
$ | 72,799 | $ | 206,886 | $ | 369,899 | $ | 39,305 | $ | 688,889 |
By geographic location
|
||||||||||||||||||||
For the three months ended
|
||||||||||||||||||||
March 31, 2016
|
Asia
|
Canada
|
U.S.
|
Other
|
Total
|
|||||||||||||||
Revenue
|
||||||||||||||||||||
Premium income
|
||||||||||||||||||||
Life and health insurance
|
$ | 3,031 | $ | 947 | $ | 1,627 | $ | 123 | $ | 5,728 | ||||||||||
Annuities and pensions
|
1,153 | 166 | (319 | ) | - | 1,000 | ||||||||||||||
Net premium income
|
4,184 | 1,113 | 1,308 | 123 | 6,728 | |||||||||||||||
Net investment income
|
2,127 | 2,704 | 7,301 | 30 | 12,162 | |||||||||||||||
Other revenue
|
257 | 845 | 1,721 | 6 | 2,829 | |||||||||||||||
Total revenue
|
$ | 6,568 | $ | 4,662 | $ | 10,330 | $ | 159 | $ | 21,719 |
By geographic location
|
||||||||||||||||||||
For the three months ended
|
||||||||||||||||||||
March 31, 2015
|
Asia
|
Canada
|
U.S.
|
Other
|
Total
|
|||||||||||||||
Revenue
|
||||||||||||||||||||
Premium income
|
||||||||||||||||||||
Life and health insurance
|
$ | 1,939 | $ | 872 | $ | 1,661 | $ | 117 | $ | 4,589 | ||||||||||
Annuities and pensions
|
473 | 125 | 216 | - | 814 | |||||||||||||||
Net premium income
|
2,412 | 997 | 1,877 | 117 | 5,403 | |||||||||||||||
Net investment income
|
711 | 2,821 | 4,427 | 26 | 7,985 | |||||||||||||||
Other revenue
|
317 | 755 | 1,354 | - | 2,426 | |||||||||||||||
Total revenue
|
$ | 3,440 | $ | 4,573 | $ | 7,658 | $ | 143 | $ | 15,814 |
Note 14
|
Segregated Funds
|
Segregated funds net assets
|
As at
|
March 31, 2016
|
December 31, 2015
|
||||||
Investments at market value
|
||||||||
Cash and short-term securities
|
$ | 3,292 | $ | 4,370 | ||||
Debt securities
|
15,175 | 15,269 | ||||||
Equities
|
12,591 | 13,079 | ||||||
Mutual funds
|
264,026 | 277,015 | ||||||
Other investments
|
4,556 | 4,538 | ||||||
Accrued investment income
|
210 | 205 | ||||||
Other assets and liabilities, net
|
(675 | ) | (729 | ) | ||||
Total segregated funds net assets
|
$ | 299,175 | $ | 313,747 | ||||
Composition of segregated funds net assets
|
||||||||
Held by policyholders
|
$ | 298,684 | $ | 313,249 | ||||
Held by the Company
|
491 | 498 | ||||||
Total segregated funds net assets
|
$ | 299,175 | $ | 313,747 |
Changes in segregated funds net assets
|
For the three months ended March 31,
|
2016
|
2015
|
||||||
Net policyholder cash flow
|
||||||||
Deposits from policyholders
|
$ | 8,693 | $ | 8,270 | ||||
Net transfers to general fund
|
(21 | ) | (137 | ) | ||||
Payments to policyholders
|
(9,233 | ) | (10,277 | ) | ||||
(561 | ) | (2,144 | ) | |||||
Investment related
|
||||||||
Interest and dividends
|
863 | 745 | ||||||
Net realized and unrealized investment gains (losses)
|
(690 | ) | 8,099 | |||||
173 | 8,844 | |||||||
Other
|
||||||||
Management and administration fees
|
(1,234 | ) | (1,191 | ) | ||||
Acquired through Standard Life
|
- | 32,171 | ||||||
Impact of changes in foreign exchange rates
|
(12,950 | ) | 18,440 | |||||
(14,184 | ) | 49,420 | ||||||
Net additions (deductions)
|
(14,572 | ) | 56,120 | |||||
Segregated funds net assets, beginning of period
|
313,747 | 256,734 | ||||||
Segregated funds net assets, end of period
|
$ | 299,175 | $ | 312,854 |
Note 15
|
Information Provided in Connection with Investments in Deferred Annuity Contracts and
SignatureNotes Issued or Assumed by John Hancock Life Insurance Company (U.S.A.)
|
Condensed Consolidating Statement of Financial Position
|
As at March 31, 2016
|
MFC
(Guarantor)
|
JHUSA
(Issuer)
|
Other
subsidiaries
|
Consolidation adjustments
|
Consolidated
MFC
|
|||||||||||||||
Assets
|
||||||||||||||||||||
Invested assets
|
$ | 145 | $ | 104,798 | $ | 203,875 | $ | (368 | ) | $ | 308,450 | |||||||||
Investments in unconsolidated subsidiaries
|
44,895 | 6,451 | 16,668 | (68,014 | ) | - | ||||||||||||||
Reinsurance assets
|
- | 51,149 | 8,428 | (26,560 | ) | 33,017 | ||||||||||||||
Other assets
|
323 | 36,484 | 44,950 | (24,557 | ) | 57,200 | ||||||||||||||
Segregated funds net assets
|
- | 166,089 | 134,514 | (1,919 | ) | 298,684 | ||||||||||||||
Total assets
|
$ | 45,363 | $ | 364,971 | $ | 408,435 | $ | (121,418 | ) | $ | 697,351 | |||||||||
Liabilities and equity
|
||||||||||||||||||||
Insurance contract liabilities
|
$ | - | $ | 144,561 | $ | 169,332 | $ | (27,379 | ) | $ | 286,514 | |||||||||
Investment contract liabilities
|
- | 1,232 | 2,025 | (4 | ) | 3,253 | ||||||||||||||
Other liabilities
|
923 | 35,288 | 43,533 | (23,896 | ) | 55,848 | ||||||||||||||
Long-term debt
|
3,891 | - | 7 | 150 | 4,048 | |||||||||||||||
Capital instruments
|
- | 1,133 | 7,176 | (656 | ) | 7,653 | ||||||||||||||
Segregated funds net liabilities
|
- | 166,089 | 134,514 | (1,919 | ) | 298,684 | ||||||||||||||
Shareholders' equity
|
40,549 | 16,668 | 51,047 | (67,715 | ) | 40,549 | ||||||||||||||
Participating policyholders' equity
|
- | - | 171 | - | 171 | |||||||||||||||
Non-controlling interests
|
- | - | 630 | 1 | 631 | |||||||||||||||
Total liabilities and equity
|
$ | 45,363 | $ | 364,971 | $ | 408,435 | $ | (121,418 | ) | $ | 697,351 |
Condensed Consolidating Statement of Financial Position
|
As at December 31, 2015
|
MFC
(Guarantor)
|
JHUSA
(Issuer)
|
Other
subsidiaries
|
Consolidation adjustments
|
Consolidated
MFC
|
|||||||||||||||
Assets
|
||||||||||||||||||||
Invested assets
|
$ | 122 | $ | 110,404 | $ | 199,124 | $ | (383 | ) | $ | 309,267 | |||||||||
Investments in unconsolidated subsidiaries
|
42,919 | 6,684 | 17,653 | (67,256 | ) | - | ||||||||||||||
Reinsurance assets
|
- | 52,027 | 9,579 | (26,180 | ) | 35,426 | ||||||||||||||
Other assets
|
329 | 30,282 | 39,026 | (22,936 | ) | 46,701 | ||||||||||||||
Segregated funds net assets
|
- | 178,421 | 136,753 | (1,925 | ) | 313,249 | ||||||||||||||
Total assets
|
$ | 43,370 | $ | 377,818 | $ | 402,135 | $ | (118,680 | ) | $ | 704,643 | |||||||||
Liabilities and equity
|
||||||||||||||||||||
Insurance contract liabilities
|
$ | - | $ | 149,079 | $ | 165,021 | $ | (27,041 | ) | $ | 287,059 | |||||||||
Investment contract liabilities
|
- | 1,324 | 2,177 | (4 | ) | 3,497 | ||||||||||||||
Other liabilities
|
524 | 30,132 | 40,939 | (22,243 | ) | 49,352 | ||||||||||||||
Long-term debt
|
1,687 | - | 16 | 150 | 1,853 | |||||||||||||||
Capital instruments
|
- | 1,209 | 7,185 | (699 | ) | 7,695 | ||||||||||||||
Segregated funds net liabilities
|
- | 178,421 | 136,753 | (1,925 | ) | 313,249 | ||||||||||||||
Shareholders' equity
|
41,159 | 17,653 | 49,266 | (66,919 | ) | 41,159 | ||||||||||||||
Participating policyholders' equity
|
- | - | 187 | - | 187 | |||||||||||||||
Non-controlling interests
|
- | - | 591 | 1 | 592 | |||||||||||||||
Total liabilities and equity
|
$ | 43,370 | $ | 377,818 | $ | 402,135 | $ | (118,680 | ) | $ | 704,643 |
Condensed Consolidating Statement of Income
|
For the three months ended
March 31, 2016
|
MFC
(Guarantor)
|
JHUSA
(Issuer)
|
Other
subsidiaries
|
Consolidation adjustments
|
Consolidated
MFC
|
|||||||||||||||
Revenue
|
||||||||||||||||||||
Net premium income
|
$ | - | $ | 838 | $ | 5,890 | $ | - | $ | 6,728 | ||||||||||
Net investment income (loss)
|
- | 6,067 | 6,232 | (137 | ) | 12,162 | ||||||||||||||
Net other revenue
|
42 | 938 | 4,907 | (3,058 | ) | 2,829 | ||||||||||||||
Total revenue
|
42 | 7,843 | 17,029 | (3,195 | ) | 21,719 | ||||||||||||||
Contract benefits and expenses
|
||||||||||||||||||||
Net benefits and claims
|
- | 7,269 | 12,012 | (2,609 | ) | 16,672 | ||||||||||||||
Commissions, investment and general expenses
|
- | 783 | 3,082 | (462 | ) | 3,403 | ||||||||||||||
Other expenses
|
38 | 67 | 310 | (124 | ) | 291 | ||||||||||||||
Total contract benefits and expenses
|
38 | 8,119 | 15,404 | (3,195 | ) | 20,366 | ||||||||||||||
Income (loss) before income taxes
|
4 | (276 | ) | 1,625 | - | 1,353 | ||||||||||||||
Income tax (expense) recovery
|
93 | 94 | (485 | ) | - | (298 | ) | |||||||||||||
Income (loss) after income taxes
|
97 | (182 | ) | 1,140 | - | 1,055 | ||||||||||||||
Equity in net income (loss) of unconsolidated subsidiaries
|
948 | 125 | (57 | ) | (1,016 | ) | - | |||||||||||||
Net income (loss)
|
$ | 1,045 | $ | (57 | ) | $ | 1,083 | $ | (1,016 | ) | $ | 1,055 | ||||||||
Net income (loss) attributed to:
|
||||||||||||||||||||
Non-controlling interests
|
$ | - | $ | - | $ | 26 | $ | - | $ | 26 | ||||||||||
Participating policyholders
|
- | (19 | ) | (16 | ) | 19 | (16 | ) | ||||||||||||
Shareholders
|
1,045 | (38 | ) | 1,073 | (1,035 | ) | 1,045 | |||||||||||||
$ | 1,045 | $ | (57 | ) | $ | 1,083 | $ | (1,016 | ) | $ | 1,055 |
Condensed Consolidating Statement of Income
|
For the three months ended
March 31, 2015
|
MFC
(Guarantor)
|
JHUSA
(Issuer)
|
Other
subsidiaries
|
Consolidation adjustments
|
Consolidated
MFC
|
|||||||||||||||
Revenue
|
||||||||||||||||||||
Net premium income
|
$ | - | $ | 1,380 | $ | 4,023 | $ | - | $ | 5,403 | ||||||||||
Net investment income (loss)
|
33 | 3,894 | 4,194 | (136 | ) | 7,985 | ||||||||||||||
Net other revenue
|
(12 | ) | 579 | 3,622 | (1,763 | ) | 2,426 | |||||||||||||
Total revenue
|
21 | 5,853 | 11,839 | (1,899 | ) | 15,814 | ||||||||||||||
Contract benefits and expenses
|
||||||||||||||||||||
Net benefits and claims
|
- | 4,821 | 8,076 | (1,300 | ) | 11,597 | ||||||||||||||
Commissions, investment and general expenses
|
8 | 774 | 2,690 | (505 | ) | 2,967 | ||||||||||||||
Other expenses
|
63 | 68 | 369 | (94 | ) | 406 | ||||||||||||||
Total contract benefits and expenses
|
71 | 5,663 | 11,135 | (1,899 | ) | 14,970 | ||||||||||||||
Income (loss) before income taxes
|
(50 | ) | 190 | 704 | - | 844 | ||||||||||||||
Income tax (expense) recovery
|
12 | (2 | ) | (126 | ) | - | (116 | ) | ||||||||||||
Income (loss) after income taxes
|
(38 | ) | 188 | 578 | - | 728 | ||||||||||||||
Equity in net income (loss) of unconsolidated subsidiaries
|
761 | 39 | 227 | (1,027 | ) | - | ||||||||||||||
Net income (loss)
|
$ | 723 | $ | 227 | $ | 805 | $ | (1,027 | ) | $ | 728 | |||||||||
Net income (loss) attributed to:
|
||||||||||||||||||||
Non-controlling interests
|
$ | - | $ | - | $ | 23 | $ | - | $ | 23 | ||||||||||
Participating policyholders
|
- | (14 | ) | (18 | ) | 14 | (18 | ) | ||||||||||||
Shareholders
|
723 | 241 | 800 | (1,041 | ) | 723 | ||||||||||||||
$ | 723 | $ | 227 | $ | 805 | $ | (1,027 | ) | $ | 728 |
Consolidating Statement of Cash Flows
|
For the three months ended March 31, 2016
|
MFC
(Guarantor)
|
JHUSA
(Issuer)
|
Other
subsidiaries
|
Consolidation
adjustments
|
Consolidated
MFC
|
|||||||||||||||
Operating activities
|
||||||||||||||||||||
Net income (loss)
|
$ | 1,045 | $ | (57 | ) | $ | 1,083 | $ | (1,016 | ) | $ | 1,055 | ||||||||
Adjustments
|
||||||||||||||||||||
Equity in net income of unconsolidated subsidiaries
|
(948 | ) | (125 | ) | 57 | 1,016 | - | |||||||||||||
Increase (decrease) in insurance contract liabilities
|
- | 5,775 | 6,383 | - | 12,158 | |||||||||||||||
Increase (decrease) in investment contract liabilities
|
- | 15 | (72 | ) | - | (57 | ) | |||||||||||||
(Increase) decrease in reinsurance assets
|
- | (2,097 | ) | 2,226 | - | 129 | ||||||||||||||
Amortization of premium/discount on invested assets
|
- | (2 | ) | 23 | - | 21 | ||||||||||||||
Other amortization
|
- | 35 | 102 | - | 137 | |||||||||||||||
Net realized and unrealized (gains) losses and impairment on assets
|
- | (4,668 | ) | (5,246 | ) | - | (9,914 | ) | ||||||||||||
Deferred income tax expense (recovery)
|
(8 | ) | 295 | 123 | - | 410 | ||||||||||||||
Stock option expense
|
- | 2 | 8 | - | 10 | |||||||||||||||
Cash provided by (used in) operating activities before undernoted items
|
89 | (827 | ) | 4,687 | - | 3,949 | ||||||||||||||
Dividends from unconsolidated subsidiary
|
- | 39 | - | (39 | ) | - | ||||||||||||||
Changes in policy related and operating receivables and payables
|
10 | 565 | (1,823 | ) | - | (1,248 | ) | |||||||||||||
Cash provided by (used in) operating activities
|
99 | (223 | ) | 2,864 | (39 | ) | 2,701 | |||||||||||||
Investing activities
|
||||||||||||||||||||
Purchases and mortgage advances
|
(20 | ) | (6,715 | ) | (16,784 | ) | - | (23,519 | ) | |||||||||||
Disposals and repayments
|
- | 6,111 | 12,027 | - | 18,138 | |||||||||||||||
Changes in investment broker net receivables and payables
|
- | 10 | 150 | - | 160 | |||||||||||||||
Investment in common shares of subsidiaries
|
(2,740 | ) | - | - | 2,740 | - | ||||||||||||||
Net cash decrease from purchase of subsidiaries and business
|
- | - | (11 | ) | - | (11 | ) | |||||||||||||
Capital contribution to unconsolidated subsidiaries
|
- | (102 | ) | - | 102 | - | ||||||||||||||
Notes receivable from parent
|
- | - | (568 | ) | 568 | - | ||||||||||||||
Notes receivable from subsidiaries
|
(156 | ) | - | - | 156 | - | ||||||||||||||
Cash provided by (used in) by investing activities
|
(2,916 | ) | (696 | ) | (5,186 | ) | 3,566 | (5,232 | ) | |||||||||||
Financing activities
|
||||||||||||||||||||
Increase (decrease) in repurchase agreements and securities
sold but not yet purchased
|
- | - | 820 | - | 820 | |||||||||||||||
Issue of long-term debt
|
2,246 | - | - | - | 2,246 | |||||||||||||||
Redemption of long-term debt
|
- | - | (8 | ) | - | (8 | ) | |||||||||||||
Funds repaid, net
|
- | - | (2 | ) | - | (2 | ) | |||||||||||||
Secured borrowings from securitization transactions
|
- | - | 149 | - | 149 | |||||||||||||||
Changes in deposits from bank clients, net
|
- | - | 75 | - | 75 | |||||||||||||||
Shareholders' dividends paid in cash
|
(394 | ) | - | - | - | (394 | ) | |||||||||||||
Dividends paid to parent
|
- | - | (39 | ) | 39 | - | ||||||||||||||
Contributions from (distributions to) non-controlling interests, net
|
- | - | 13 | - | 13 | |||||||||||||||
Common shares issued, net
|
5 | - | 2,740 | (2,740 | ) | 5 | ||||||||||||||
Preferred shares issued, net
|
417 | - | - | - | 417 | |||||||||||||||
Capital contributions by parent
|
- | - | 102 | (102 | ) | - | ||||||||||||||
Notes payable to parent
|
- | - | 156 | (156 | ) | - | ||||||||||||||
Notes payable to subsidiaries
|
568 | - | - | (568 | ) | - | ||||||||||||||
Cash provided by (used in) financing activities
|
2,842 | - | 4,006 | (3,527 | ) | 3,321 | ||||||||||||||
Cash and short-term securities
|
||||||||||||||||||||
Increase (decrease) during the period
|
25 | (919 | ) | 1,684 | - | 790 | ||||||||||||||
Effect of foreign exchange rate changes on cash and short-term securities
|
(2 | ) | (278 | ) | (357 | ) | - | (637 | ) | |||||||||||
Balance, beginning of period
|
122 | 4,444 | 12,436 | - | 17,002 | |||||||||||||||
Balance, end of period
|
145 | 3,247 | 13,763 | - | 17,155 | |||||||||||||||
Cash and short-term securities
|
||||||||||||||||||||
Beginning of period
|
||||||||||||||||||||
Gross cash and short-term securities
|
122 | 4,938 | 12,825 | - | 17,885 | |||||||||||||||
Net payments in transit, included in other liabilities
|
- | (494 | ) | (389 | ) | - | (883 | ) | ||||||||||||
Net cash and short-term securities, beginning of period
|
122 | 4,444 | 12,436 | - | 17,002 | |||||||||||||||
End of period
|
||||||||||||||||||||
Gross cash and short-term securities
|
145 | 3,651 | 14,068 | - | 17,864 | |||||||||||||||
Net payments in transit, included in other liabilities
|
- | (404 | ) | (305 | ) | - | (709 | ) | ||||||||||||
Net cash and short-term securities, end of period
|
$ | 145 | $ | 3,247 | $ | 13,763 | $ | - | $ | 17,155 | ||||||||||
Supplemental disclosures on cash flow information:
|
||||||||||||||||||||
Interest received
|
$ | 3 | $ | 1,215 | $ | 1,471 | $ | (6 | ) | $ | 2,683 | |||||||||
Interest paid
|
22 | 68 | 81 | (6 | ) | 165 | ||||||||||||||
Income taxes paid
|
20 | - | 114 | - | 134 |
Consolidating Statement of Cash Flows
|
For the three months ended March 31, 2015
|
MFC
(Guarantor)
|
JHUSA
(Issuer)
|
Other
subsidiaries
|
Consolidation
adjustments
|
Consolidated
MFC
|
|||||||||||||||
Operating activities
|
||||||||||||||||||||
Net income (loss)
|
$ | 723 | $ | 227 | $ | 805 | $ | (1,027 | ) | $ | 728 | |||||||||
Adjustments
|
||||||||||||||||||||
Equity in net income of unconsolidated subsidiaries
|
(761 | ) | (39 | ) | (227 | ) | 1,027 | - | ||||||||||||
Increase (decrease) in insurance contract liabilities
|
- | 3,256 | 4,187 | - | 7,443 | |||||||||||||||
Increase (decrease) in investment contract liabilities
|
- | 16 | 30 | - | 46 | |||||||||||||||
(Increase) decrease in reinsurance assets
|
- | (1,102 | ) | 763 | - | (339 | ) | |||||||||||||
Amortization of premium/discount on invested assets
|
- | 3 | 10 | - | 13 | |||||||||||||||
Other amortization
|
- | 26 | 106 | - | 132 | |||||||||||||||
Net realized and unrealized (gains) losses and impairment on assets
|
(1 | ) | (2,863 | ) | (2,163 | ) | - | (5,027 | ) | |||||||||||
Deferred income tax expense (recovery)
|
(12 | ) | 72 | (52 | ) | - | 8 | |||||||||||||
Stock option expense
|
- | - | 9 | - | 9 | |||||||||||||||
Cash provided by (used in) operating activities before undernoted item
|
(51 | ) | (404 | ) | 3,468 | - | 3,013 | |||||||||||||
Changes in policy related and operating receivables and payables
|
(86 | ) | 657 | (1,518 | ) | - | (947 | ) | ||||||||||||
Cash provided by (used in) operating activities
|
(137 | ) | 253 | 1,950 | - | 2,066 | ||||||||||||||
Investing activities
|
||||||||||||||||||||
Purchases and mortgage advances
|
- | (6,781 | ) | (11,793 | ) | - | (18,574 | ) | ||||||||||||
Disposals and repayments
|
- | 7,349 | 8,338 | - | 15,687 | |||||||||||||||
Changes in investment broker net receivables and payables
|
- | 25 | (217 | ) | - | (192 | ) | |||||||||||||
Investment in common shares of subsidiaries
|
(2,196 | ) | - | - | 2,196 | - | ||||||||||||||
Net cash decrease from purchase of subsidiaries and business
|
- | - | (3,434 | ) | - | (3,434 | ) | |||||||||||||
Return of capital from unconsolidated subsidiaries
|
- | 6 | - | (6 | ) | - | ||||||||||||||
Notes receivable from parent
|
- | - | (10,575 | ) | 10,575 | - | ||||||||||||||
Notes receivable from subsidiaries
|
(10,123 | ) | - | - | 10,123 | - | ||||||||||||||
Cash provided by (used in) investing activities
|
(12,319 | ) | 599 | (17,681 | ) | 22,888 | (6,513 | ) | ||||||||||||
Financing activities
|
||||||||||||||||||||
Issue of capital instruments, net
|
- | - | 746 | - | 746 | |||||||||||||||
Funds repaid, net
|
- | (1 | ) | (1 | ) | - | (2 | ) | ||||||||||||
Secured borrowings from securitization transactions
|
- | - | 100 | - | 100 | |||||||||||||||
Changes in deposits from bank clients, net
|
- | - | 125 | - | 125 | |||||||||||||||
Shareholders' dividends paid in cash
|
(335 | ) | - | - | - | (335 | ) | |||||||||||||
Contributions from (distributions to) non-controlling interests, net
|
- | - | 7 | - | 7 | |||||||||||||||
Common shares issued, net
|
6 | - | 2,196 | (2,196 | ) | 6 | ||||||||||||||
Return of capital to parent
|
- | - | (6 | ) | 6 | - | ||||||||||||||
Notes payable to parent
|
- | - | 10,123 | (10,123 | ) | - | ||||||||||||||
Notes payable to subsidiaries
|
10,575 | - | - | (10,575 | ) | - | ||||||||||||||
Cash provided by (used in) financing activities
|
10,246 | (1 | ) | 13,290 | (22,888 | ) | 647 | |||||||||||||
Cash and short-term securities
|
||||||||||||||||||||
Increase (decrease) during the period
|
(2,210 | ) | 851 | (2,441 | ) | - | (3,800 | ) | ||||||||||||
Effect of foreign exchange rate changes on cash and short-term securities
|
1 | 470 | 657 | - | 1,128 | |||||||||||||||
Balance, beginning of period
|
2,260 | 5,918 | 12,259 | - | 20,437 | |||||||||||||||
Balance, end of period
|
51 | 7,239 | 10,475 | - | 17,765 | |||||||||||||||
Cash and short-term securities
|
||||||||||||||||||||
Beginning of period
|
||||||||||||||||||||
Gross cash and short-term securities
|
2,260 | 6,311 | 12,508 | - | 21,079 | |||||||||||||||
Net payments in transit, included in other liabilities
|
- | (393 | ) | (249 | ) | - | (642 | ) | ||||||||||||
Net cash and short-term securities, beginning of period
|
2,260 | 5,918 | 12,259 | - | 20,437 | |||||||||||||||
End of period
|
||||||||||||||||||||
Gross cash and short-term securities
|
51 | 7,727 | 10,811 | - | 18,589 | |||||||||||||||
Net payments in transit, included in other liabilities
|
- | (488 | ) | (336 | ) | - | (824 | ) | ||||||||||||
Net cash and short-term securities, end of period
|
$ | 51 | $ | 7,239 | $ | 10,475 | $ | - | $ | 17,765 | ||||||||||
Supplemental disclosures on cash flow information:
|
||||||||||||||||||||
Interest received
|
$ | 15 | $ | 1,089 | $ | 1,121 | $ | (7 | ) | $ | 2,218 | |||||||||
Interest paid
|
73 | 22 | 216 | (30 | ) | 281 | ||||||||||||||
Income taxes paid
|
- | - | 319 | - | 319 |
Note 16
|
Comparatives
|
SHAREHOLDER INFORMATION
|
MANULIFE
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: 416 926-6285
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, 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
Computershare Hong Kong Investor
Services Limited
17M Floor, Hopewell Centre
183 Queen’s Road East
Wan Chai, Hong Kong
Telephone: 852 2862–8555
E-mail: hkinfo@computershare.com.hk
Online: www.computershare.com/investor
|
Philippines
Rizal Commercial Banking Corporation
Ground Floor, West Wing
GPL (Grepalife) Building
221 Senator Gil Puyat Avenue
Makati City, Philippines
Telephone: 632 892-9362 or 632 892-7566
E-mail: rcbcstocktransfer@rcbc.com
Online: www.rcbc.com
AUDITORS
Ernst & Young LLP
Chartered Professional Accountants
Licensed Public Accountants
Toronto, Canada
|
The following Manulife 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 March 31, 2016, Manulife had total capital of C$49.4 billion, including C$40.5 billion of total shareholders’ equity. The Manufacturers Life Insurance Company’s financial strength and claims paying ability ratings are among the strongest in the insurance industry.
|
||||
Rating Agency
Standard & Poor’s
|
Rating
AA-
|
Rank
(4th of 21 ratings)
|
||
Moody’s
|
A1
|
(5th of 21 ratings)
|
||
Fitch Ratings
|
AA-
|
(4th of 19 ratings)
|
||
DBRS
|
AA (low)
|
(4th of 22 ratings)
|
||
A.M. Best
|
A+ (Superior)
|
(2nd of 13 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 first quarter. The common stock symbol is MFC on all exchanges except Hong Kong where it is 945.
|
As at March 31, 2016, there were 1,972 million common shares outstanding.
|
|||||
January 1 –
March 31,
2016
|
Toronto
Canadian $
|
U.S.
Composite
United States $
|
Hong Kong
Hong Kong $
|
Philippines
Philippine
Pesos
|
||
High
|
$ 20.53
|
$ 14.73
|
$ 117.00
|
P 700
|
||
Low
|
$ 15.32
|
$ 10.99
|
$ 94.00
|
P 560
|
||
Close
|
$ 18.38
|
$ 14.13
|
$ 109.60
|
P 640
|
||
Average Daily
Volume (000)
|
4,716
|
2,956
|
58
|
0.11
|
Consent to receive documents electronically
|
Electronic documents available from Manulife
Manulife is pleased to offer Electronic Documents. Access the
information when you want, no more waiting for the mail.
The Manulife 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 Web site at www.manulife.com
|
To receive documents electronically when they are available through
Manulife’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 documents listed in the
manner described. I acknowledge that I have the computer requirements
to access the documents that are made available on Manulife’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 March 31, 2016.
|
|
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 (2013) 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 January 1, 2016 and ended on March 31, 2016 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 March 31, 2016.
|
|
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 (2013) 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 January 1, 2016 and ended on March 31, 2016 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
|
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